As filed with the Securities and Exchange Commission on June 26, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
BAL/RIVGAM WIRELESS, INC.
(Exact Name of Small Business Issuer in Its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 4813 Applied for
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
941 Danbury Road
Wilton, Connecticut 06897
(203) 544-8855
(Address and Telephone Number,
of Principal Executive Offices)
James Balitsos
Chairman of the Board and Chief Executive Officer
Bal/Rivgam Wireless, Inc.
941 Danbury Road
Wilton, Connecticut 06897
(203) 544-8855
(Name, Address and Telephone Number
of Agent for Service)
------------------------------------
Copy to:
David J. Adler, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
(212) 935-1787 (Facsimile)
------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Each Class of Maximum Maximum Amount of
Securities Amount to be Offering Price Aggregate Registration
to Be Registered Registered Per Share(1) Offering Price Fee
---------------- ---------- ------------ -------------- ---
<S> <C> <C> <C> <C>
Class A Common Stock, par 2,000,000 $5.00 $10,000,000.00 $2,640.00
value $___ per share
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f) or the Securities Act, based on an assumed initial
public offering price range of $4 to $6 per share.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the 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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
We will amend and complete the information in this prospectus. Although we are
permitted by US federal securities laws to offer these securities using this
prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities had been declared
effective by the SEC. This prospectus is not an offer to sell these securities
or our solicitation of your offer to buy these securities in any jurisdiction
where that would not be permitted or legal.
SUBJECT TO COMPLETION, DATED JUNE 26, 2000
PROSPECTUS
2,000,000 Shares
BAL/RIVGAM WIRELESS, INC.
Class A Common Stock
All of the 2,000,000 shares of class A common stock, $___ par value,
offered in this prospectus are being sold by Bal/Rivgam Wireless, Inc.
Prior to this offering, there has been no public market for our class A
common stock and there is no assurance that a market will develop.
Under NASD rules, we are an affiliate of Gabelli & Company, Inc., an
NASD member. Under Rule 2720 of the National Association of Securities Dealers,
Inc., Conduct Rules, the initial public offering price for the class A common
stock has been determined by negotiation between us and ____________, who is
serving as a qualified independent underwriter in this offering, and does not
necessarily bear any direct relationship to our assets, operations, book or
other established criteria of value. ________ will act as manager of this
offering and will be paid a fee of _____ and receive __________ in consideration
for its services and expenses.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. CONSIDER
CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
-----------------
Neither the Securities and Exchange Commission nor any State securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense
-----------------
<TABLE>
<CAPTION>
Price Underwriting Proceeds
to Discounts and to
Public Commissions(1) Company
------ -------------- -------
<S> <C> <C> <C>
Per Share................. $ $ $
Total..................... $ $ $
</TABLE>
The shares are being offered by the underwriters on a firm commitment basis
subject to prior sale, when, as, and if delivered to and accepted by the
underwriters and subject to the approval of certain legal matters by counsel and
certain other conditions. The underwriters reserve the right to withdraw, cancel
or modify the offering and to reject any order in whole or in part. It is
expected that delivery of certificates representing the shares will made against
payment therefor at the offices of __________ in _________________ on or about
________, 2000.
The date of this prospectus is ______, 2000.
GABELLI & COMPANY, INC.
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY...........................................................3
RISK FACTORS.................................................................6
USE OF PROCEEDS.............................................................14
DIVIDEND POLICY ............................................................14
DETERMINATION OF OFFERING PRICE.............................................14
DILUTION ...................................................................15
CAPITALIZATION..............................................................16
SELECTED FINANCIAL INFORMATION..............................................17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION.................19
THE COMPANY.................................................................21
THE WIRELESS COMMUNICATIONS INDUSTRY........................................22
LEGISLATION AND GOVERNMENT REGULATION.......................................24
MANAGEMENT..................................................................28
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................30
PRINCIPAL STOCKHOLDERS......................................................31
DESCRIPTION OF CAPITAL STOCK................................................32
UNDERWRITING................................................................36
EXPERTS AND LEGAL MATTERS...................................................36
FINANCIALS..................................................................F-1
INFORMATION NOT REQUIRED IN PROSPECTUS......................................II-1
-2-
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. It is not complete and may not contain all of the information that
you should consider before investing in the class A common stock. You should
read the entire prospectus carefully, including the "Risk Factors" section and
the financial statements and notes thereto. Unless otherwise indicated, all
information in this prospectus gives effect to: (i) our conversion from a
limited liability company to a corporation under the name Bal/Rivgam Wireless,
Inc.; (ii) the conversion of all Bal/Rivgam debt as of August 1, 2000 into 618
shares of series A redeemable preferred stock and the issuance of 3,992,000
shares of class A common stock and 4,008,000 shares of class B common stock to
the former members of the limited liability company; and (iii) the issuance of
2,000,000 shares of class C common stock in consideration of the cancellation of
profit participation obligations of Bal/Rivgam. Some of the statements contained
in this summary, as well as the sections entitled "Risk Factors," "Management's
Discussion and Analysis of Financial Condition" and "The Wireless Communications
Industry" are forward-looking. These forward-looking statements include those
concerning strategy, liquidity and capital expenditures, debt levels and the
ability to obtain financing and service debt, competitive pressure in the
industry, legal proceedings, regulatory matters and general economic conditions.
Actual results may differ materially from those suggested by the forward-looking
statements for various reasons, including those discussed under "Risk Factors."
All references to "Bal/Rivgam," "we," "our," or "us" include the operations of
the company both while a corporation and a limited liability company.
Bal/Rivgam
We believe that there are significant growth opportunities in the
wireless telecommunications industry and that our WCS licenses have substantial
potential. We hold five 10 megahertz A-and B- Block WCS licenses, which have the
potential to serve a population of approximately 42 million.
<TABLE>
<CAPTION>
Cost (after 35%
Block Area Population Gross Cost Bidding Credit)
----- ---- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
A Los Angeles - San Diego, CA 19,333,536 $686,001 $445,900
B Boston, MA 8,672,944 $217,000 $141,050
A Minneapolis-St. Paul, MN 6,018,051 $ 1 $ 1
A Milwaukee, WI 4,634,011 $ 1 $ 1
B Phoenix, AZ 3,458,935 $101,000 $ 65,653
</TABLE>
We believe that the consumer market for wireless telecommunications
will continue to grow as a result of anticipated declines in costs of service,
increased functional versatility, and increased awareness of the productivity,
convenience and privacy benefits associated with the services provided by
wireless providers. Although we have not yet adopted a business plan or
determined what to do with our WCS licenses, we expect to continually review
these factors and adopt a plan once the financing regulatory and marketing
aspects of WCS are less uncertain.
Our address is c/o Diray Communication Corp., 941 Danbury Road, Wilton,
Connecticut 06897. Our telephone number is (203) 544-8855.
-3-
<PAGE>
The Offering
Class A Common Stock................................. 2,000,000 shares
Class A Common Stock Outstanding Prior to this
Offering.......................................... 3,992,000 shares
Class A Common Stock to be Outstanding after the
Offering.......................................... 5,992,000 shares
Use of Proceeds...................................... Working capital and
general corporate
purposes. See "Use of
Proceeds."
Risk Factors
An investment in the shares offered in this prospectus involves a high
degree of risk. The risk includes without limitation (1) our accumulated
deficit, historical and projected future operating losses; (2) dependence upon
new products and uncertain market acceptance of our products; (3) lack of
revenue and limited operating history; (4) working capital deficiency; and (5)
dependence upon proceeds of this offering. An investment in the shares offered
in this prospectus should be considered only by investors who can afford the
loss of their entire investment. See "Risk Factors."
-4-
<PAGE>
Summary Financial Data
The summary financial data presented below were derived from the
financial statements of Bal/Rivgam and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition" and the financial
statements and notes thereto included elsewhere in this prospectus. Bal/Rivgam
has no operating history. The summary financial data as of December 31, 1999,
for the years ended December 31, 1998 and 1999 and the period from March 25,
1997 (inception) to December 31, 1999 were derived from the audited financial
statements of Bal/Rivgam included elsewhere herein. The summary financial data
for the three months ended March 31, 1999 and March 31, 2000 and the period from
March 25, 1997 (inception) to March 31, 2000 were derived from unaudited
financial statements of Bal/Rivgam included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months Ended Twelve Months March 25, 1997
March 31, December 31, (Inception) to March 25, 1997
-------------------- -------------------- December 31, (Inception) to
1999 2000 1998 1999 1999 March 31, 2000
---- ---- ---- ---- ---- --------------
(unaudited) (unaudited)
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C>
Interest income $ - $ - $ - $ - $ 2,019 $ 2,019
Interest expense (36,111) (42,236) (125,136) (144,956) (500,148) (542,384)
Commitment fees (40,135) (40,135) (160,540) (160,540) (656,717) (696,852)
Other expenses - - (6,364) (4,000) (17,437) (17,437)
------------- -------------- ----------- ----------- --------------- ---------------
Net loss $ (76,246) $ (82,371) $ (292,040) $ (309,496) $ (1,172,283) $ (1,254,654)
============== =============== =========== =========== ============== ===============
Net loss allocated to:
Managing member $ (762) $ (824) $ (6,045) $ (5,059) $ (19,293) $ (20,116)
============== =============== =========== ============ ============== ================
Rivgam Communicators,
L.L.C. $ (75,484) $ (81,547) (285,995) $ (304,437) $ (1,152,990) $ (1,234,538)
============== =============== ============ ============ ============== ================
</TABLE>
<TABLE>
<CAPTION>
March 31, 2000
--------------
Actual Pro Forma As Adjusted(1)
------ ------------------------
(Unaudited)
Balance Sheet Data:
<S> <C> <C>
Total assets $ 652,605 $ 652,605
----------- -------------
Total liabilities $ 1,857,359 $ -
----------- -------------
Redeemable preferred stock $ - $ 507,359
----------- -------------
Members' contributions $ 49,900 $ -
Class A Common Stock - 599
Class B Common Stock - 401
Class C Common Stock - 200
Additional paid in capital - 1,398,900
Deficit accumulated during development stage (1,254,654) (1,254,654)
----------- --------------
Total equity $(1,204,754) $ 145,446
============ =============
</TABLE>
(1) Gives effect on a pro forma as adjusted basis effective (i) as of March
31, 2000, (ii) pro forma to give effect to the conversion of the company
from a limited liability company to a corporation and the conversion of
indebtedness and profit participations into redeemable preferred stock;
and (iii) pro forma as adjusted to give effect to the consummation of the
sale of 2,000,000 shares of class A common stock offered hereby at the
assumed initial public offering price of $_____ per share and the initial
application of the net proceeds therefrom. See "Use of Proceeds."
-5-
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. In
addition to the other information contained in this prospectus, you should
carefully consider the following risk factors and other information in the
prospectus before investing in our common stock.
Risks Related to Business
We are a development stage company with historical and expected future operating
losses and we do not know if we ever will be profitable.
We are at an early stage of our development and have no operating
history. As a limited liability company, Bal/Rivgam L.L.C., we had cumulative
net losses through March 31, 2000 of $1,254,654. These losses arose primarily
from interest expense and commitment fees on loans for the acquisition of WCS
licenses in the FCC auction of 10 MHz Spectrum in the 2.3 GHz band, which
concluded April 25, 1997. We are subject to all of the risks typically
associated with a start-up entity. The report of our independent auditors with
respect to our financial statements for the years ended December 31, 1998 and
1999 and the period from March 25, 1997 (inception) to December 31, 1999
contains a paragraph indicating that substantial doubt exists as to our ability
to continue as a going concern.
There is uncertainty as to the extent of customer demand for WCS
networks. We have not had any revenue from operations to date and do not know
when, if ever, we may have positive cash flow or net profits.
We may need to incur more debt in the future if we decide to build out our
licenses or if we are required to redeem our preferred stock.
If we determine to develop and build out the licenses, we will require
substantial additional funds. Any borrowings from third parties are likely to
contain restrictions that may significantly limit or prohibit future actions and
would allow a lender to accelerate the maturity of the debt upon a default. We
cannot assure you that our WCS networks can be completed or that, once
completed, we will generate sufficient cash flow from operating activities to
repay our debt and provide working capital.
In addition, we must redeem our preferred stock at a cost of $1,000 per
share (plus accrued and unpaid dividends) on the earliest of (1) _______ __,
2010, (2) upon a change of control of our class A common stock or class B common
stock, and (3) upon a public offering by us subsequent to this offering of
$10,000,000 or more. In addition, upon the sale of 25% or more of the POPs
served by our licenses, we must redeem that proportion of our preferred stock
that corresponds to the proportion of the number of persons covered by the sale
compared to the total persons covered by our five initial WCS licenses.
We have not yet decided how best to utilize our WCS licenses, and there exist
inherent risks if we choose to sell, joint venture or otherwise build out our
licenses.
We have not yet determined what to do with our WCS licenses. If we
decide to sell our WCS licenses, there are various FCC restrictions that may be
applicable. In addition, if a license is sold for cash, we may need to redeem a
corresponding proportion of our preferred stock.
Many of the risks relating to the development of WCS licenses may also
apply if we decide to joint venture our WCS licenses. In addition, other joint
venturers or purchasers may already operate wireless telephone or other
telecommunications operations or have greater background and experience in
developing wireless telephony and possess greater organizational, management
and/or financial resources. If we decide to joint venture our WCS licenses or
sell our licenses other than for cash, we may be at risk with respect to the
other operations of the joint venturer or purchaser.
If we decide to develop our WCS licenses, we would have to develop and
implement a business plan, which would require attracting and retaining
qualified individuals as managers and employees and developing a business
infrastructure. The FCC has proposed that WCS providers be permitted to offer a
broad range of fixed mobile radio location and satellite broadcast services. The
spectrum is considered most adaptable for fixed wireless, wireless local-loop
access and wireless Internet connectivity, although we do not believe that any
equipment has been widely
-6-
<PAGE>
commercialized for these applications. We cannot assure you as to the timing and
extent of revenues and expenses, or our ability to successfully manage all the
tasks associated with developing and maintaining a successful enterprise. Any
failure by management to guide and control growth effectively, which includes
implementing adequate systems, procedures and controls in a timely manner, could
have a material adverse effect on our business, financial condition and results
of operations. In addition, we will incur significant operating losses and
generate negative cash flow from operating activities during the next several
years if we seek to develop and construct our WCS networks and build a customer
base. These losses and negative cash flows could be substantial and increase
during the initial years of the build-out and operation of our WCS networks. We
cannot assure you that we can successfully launch our services, or that we will
achieve or sustain profitability or positive cash flow from operating activities
in the future. If we cannot achieve operating profitability or positive cash
flow from operating activities, we may not be able to meet our debt service or
working capital requirements and, consequently, the class A common stock may
have little or no value.
Should we determine to develop or joint venture our WCS licenses, we
will likely rely significantly upon third parties to provide equipment and
services to distribute our products and services and to provide functions such
as customer billing. We cannot assure you that such third parties will provide
acceptable equipment and services on a timely basis. Furthermore, it will take
substantial funds to complete the buildout of our WCS network and to market and
distribute our WCS products and services.
The technology we choose may become obsolete, which would adversely affect our
ability to be competitive and may result in increased costs to adopt a new
technology.
The wireless telecommunications industry is experiencing significant
technological changes:
o the increasing pace of digital installations in existing
analog cellular systems,
o evolving industry standards, ongoing improvements in the
capacity and quality of digital technology,
o shorter development cycles for new products and enhancements,
and
o changes in consumer requirements and preferences.
If we build out our licenses, alternative technological and service
advancements could materialize in the future and prove viable, which could
render the technology employed by us obsolete and, as a result, could have a
material adverse effect on our business and operating results. To remain
competitive, we must develop or gain access to new technologies in order to
increase product performance and functionality and to increase
cost-effectiveness.
The limited capacity and spectrum range of our licenses may put us at a
disadvantage.
Each of our A- (2305-2310 MHz paired with 2350-2355 MHz) and B-
(2310-2315 MHz paired with 2355-2360 MHz) Block WCS licenses has only 10 MHz of
spectrum. While we believe that 10 MHz of spectrum can be used to offer many
types of robust services, other types of mobile and fixed wireless providers
have significantly larger spectrum licenses with which to offer service. For
example, cellular providers provide service using 25 MHz licenses, many personal
communications service, or PCS, providers use 30 MHz licenses, and 39 GHz
licensees use 100 MHz licenses. To the extent our licenses may be used for fixed
wireless broadband services and connectivity, we may also be competing against
terrestrial wireline providers, which include telephone companies and cable
companies, with vast amounts of capacity. Therefore, our licenses have less
capacity with which to provide service relative to many of our potential
competitors. This may eventually limit growth opportunities as demand increases
in the future. Our potential lenders may also require that we arrange for
additional spectrum to supplement our 10 MHz licenses. As a result, we may
either initially, or at a later time, have to joint venture or make other
arrangements with holders of additional spectrum in order to provide the amount
or breadth of service to be or remain competitive. We cannot assure you that we
will be able to enter into these arrangements on favorable terms or at all.
-7-
<PAGE>
If we decide to develop our WCS network, our success will depend on our ability
to implement our plans, as well as our ability to meet regulatory requirements.
If we develop the WCS licenses, the construction and implementation of
our WCS networks would involve a high degree of risk. Our future operating
results over both the short and long term would be affected by:
o the significant cost of building a WCS network,
o the cost and availability of WCS infrastructure and subscriber
equipment,
o network design, construction and integration of our hardware,
o possible delays in introducing our services,
o fluctuating market demand and prices for our services,
o pricing strategies for competitive services,
o new offerings of competitive services,
o changes in federal, state and local legislation and regulations,
o the potential allocation by the FCC of additional WCS licenses or
other wireless licenses in our markets,
o technological changes, and
o general economic conditions.
In addition, each of our WCS licenses is subject to a FCC requirement
that we construct WCS networks that provide substantial service to their service
area within 10 years. For a WCS licensee who offers fixed, point-to-point
services, substantial service constitutes the construction of four permanent
links per one million people in its licensed service area. For a WCS licensee
who offers mobile services, substantial service is demonstrated by the licensee
covering a minimum of 20 percent of the population of its licensed service area.
We cannot assure you that this required coverage will be achieved in accordance
with FCC requirements, and failure to comply with these requirements in any
market could cause revocation of our WCS licenses or the imposition of fines or
other sanctions by the FCC.
Our construction and operation of radio facilities could be affected by or could
interfere with non-U.S. broadcasts on the same frequencies.
Our FCC authorization to construct and operate radio transmitting
facilities is subject to the requirement that we coordinate our base station
transmitters to eliminate any harmful interference to operations in adjacent
foreign territories, which in the case of our WCS licenses are Canada and
Mexico, and to ensure equal access to the frequencies by both countries.
Mexico has indicated its desire to establish a new satellite digital
audio radio service, known as DARS, that would operate in the spectrum used by
WCS licensees and the United States and Mexico have agreed to Mexico's use of
the 2310-2360 MHz band to provide DARS, both via satellite stations and
terrestrial repeaters, and to provide other terrestrial services.
Although Mexico initially proposed that its digital audio radio
services system would need to use most of the spectrum within the 2310-2320 and
2345-2360 MHz bands, which is licensed in the United States for WCS, the FCC has
reached an understanding with Mexico whereby use of these bands would be limited
to only six megahertz. A
-8-
<PAGE>
portion of the total spectrum for the Mexican DARS system(s) would consist of
two 3-megahertz blocks at 2317-2320 MHz and 2350-2353 MHz. DARS transmissions
would be offered from two Mexican satellites. In addition, Mexico may decide to
place terrestrial repeaters in these two frequency blocks. The Mexican DARS
usage of the two 3- megahertz blocks could thus affect U.S. WCS operations,
especially in areas near the U.S. - Mexican border.
We face competition from other technologies as well as WCS providers with
greater access to capital, financial, technical, marketing, sales and
distribution resources and significantly more experience than us in providing
wireless services.
WCS is a new technology and service and, as a result, the level and
timing of development of a customer base for WCS applications, on which our
future revenues depend significantly, is uncertain. In the development of the
WCS market, we will be competing with more established wireless industry
competitors. These competitors may include mobile wireless providers, including
cellular, PCS and SMR providers, as well as fixed wireless broadband providers
using 39 GHz, 24 GHz, LMDS or other frequencies, and other emerging wireless
technologies, existing and future. To the extent we offer broadband services, we
will also compete with wireline telephone, cable and digital subscriber line,
known as DSL, companies. Many of our WCS competitors have substantially greater
access to capital than us, substantially greater financial, technical,
marketing, sales and distribution resources than ours, and significantly more
experience than us in providing wireless and broadband services. Additionally,
continuing technological advances in telecommunications, the availability of
more spectrum and FCC policies that encourage the development of new
spectrum-based technologies make it impossible to accurately predict the extent
of future competition.
If we develop our WCS licenses, third-party fraud will likely cause us to incur
increased operating costs.
As do most companies in the wireless industry, we will likely incur
costs associated with the unauthorized use of our network, including
administrative and capital costs associated with detecting, monitoring and
reducing the incidence of fraud if we choose to build up or develop our
licenses. Fraud impacts interconnection costs, capacity costs, administrative
costs, fraud prevention costs and payments to other carriers for unbillable
fraudulent roaming.
Our licenses offer limited territorial coverage and scope of services.
If we were to develop our WCS licenses, the territory served by our
licenses and the scope of services we would be able to provide would be
relatively limited. We would need to enter into joint ventures or other
affiliation arrangements with other service providers to give our customers a
broader area of signal coverage, as well as a broader range of wireless
services, and would require those other providers to have compatible technology.
We may be unable to enter into such joint ventures or other arrangements on
favorable terms or at all, which would have a material adverse affect on our
ability to develop our licenses.
If we develop our WCS licenses, our ability to hire an effective management team
will have a large impact on our ability to manage our operations.
If we develop our WCS licenses, such development would place
substantial demands on executive resources. We have no employees, and our
directors and officers only provide a limited amount of time to our affairs. If
we are to develop the licenses, we will need to hire a significant number of
employees. We cannot assure you that such employees will be able to effectively
manage the development of our operations and facilities, fully exploit our
wireless communications assets. Any inability to manage growth could have a
material adverse effect on our business, results of operations and financial
condition.
We are limited in our ability to gain vendor support for a device that will
operate on the WCS frequency.
Equipment that uses WCS spectrum has not been widely developed
commercially. We would need to locate vendors willing to invest in the
development of WCS hardware before we can successfully use our WCS licenses.
Vendors may be unwilling to invest in an undeveloped and uncertain hardware
market and devices that can use WCS frequencies may never be developed.
-9-
<PAGE>
We are subject to substantial government regulation.
The spectrum licensing, construction, operation, sale and
interconnection arrangements of our wireless communications networks, among
other activities, are regulated to varying degrees by state regulatory agencies,
the FCC, Congress, the courts and other governmental bodies. We cannot assure
you that any of these governmental bodies having jurisdiction over us will not
adopt or change regulations or take other actions that would materially
adversely affect our business, financial condition or results of operations.
The regulation of the wireless industry is subject to constant change.
New rules and regulations may be adopted pursuant to the Communications Act of
1934, as amended. The Telecommunications Act of 1996 provided for significant
deregulation of the U.S. telecommunications industry and such legislation
remains subject to judicial review and additional FCC rulemaking. As a result,
we cannot predict the effect that the legislation and any FCC rulemaking may
have on our future operations. We must comply with all applicable regulations to
preserve our licenses, and eventually, to conduct our business. Modifications of
our business plans or operations to comply with changing regulations or action
taken by regulatory authorities could increase our costs of providing service
and adversely affect our financial condition. We anticipate FCC regulation or
Congressional action that will license additional existing spectrum or create
additional spectrum allocations that may also have the effect of adding new
entrants to the wireless marketplace.
The FCC has the right to revoke licenses at any time for cause,
including for failure to comply with the terms of the licenses, failure to
continue to qualify for the licenses, malfeasance or other misconduct. In
addition, at the end of a ten-year license term, we will have to apply to the
FCC for renewal of our licenses, and we cannot assure you that the licenses will
be renewed.
Our licenses may be revoked under certain circumstances, and the loss of any FCC
licenses could adversely affect our business and our ability to provide WCS
service in certain markets.
Our principal assets are WCS licenses issued by the FCC. The FCC has
imposed certain requirements on its licensees, including WCS operators. For
example, WCS licenses may be revoked by the FCC at any time for cause, including
failure to comply with the terms of the licenses, a violation of FCC
regulations, failure to continue to qualify for the licenses, malfeasance or
other misconduct. The loss of any license, or an action that threatens the loss
of any license, would have a material adverse effect on our business and our
operating results.
When the FCC assigned spectrum licenses by public auction for WCS it
allowed for small business applicants to receive bidding credits in the auction.
A small business bidder with average gross revenue of not more than $40 million
received a 25 percent discount, and a very small business bidder with average
gross annual revenues of not more than $15 million received a 35 percent
discount on its winning bid for WCS licenses.
We qualified as a very small business under FCC rules governing the WCS
auction, and intend to diligently maintain our qualification as a very small
business. We have structured our class A common stock and class B common stock
in a manner intended to ensure compliance with the applicable FCC rules.
However, we cannot assure you that our investors or we will continue to satisfy
these requirements during the term of any WCS license or that we will be able to
successfully implement divestiture or other mechanisms included in our
certificate of incorporation which are designed to ensure compliance with FCC
rules. Any non-compliance with FCC rules could subject us to serious penalties,
including fines, unjust enrichment penalties or revocation of our WCS licenses.
All WCS licenses are subject to the FCC's buildout requirements. If
there are delays in implementing our network buildout, the FCC could reassess
our authorized service area or, in extreme cases, it may revoke our licenses or
impose fines.
Our initial investors have interests in other wireless companies, and conflicts
of interest may arise from these investments and from other directorships held
by our directors.
-10-
<PAGE>
Our initial investors have significant investments in wireless
communications services companies other than us. Our interests may conflict with
the interests of these companies and any conflicts may not be resolved in our
favor.
In addition, Rivgam Communicators, LLC and its affiliated companies
have acquired wireless licenses in various markets. These relationships may
result in conflicts of interest between us and Rivgam Communicators, LLC, and
its affiliated companies, and these conflicts may not be resolved in our favor.
There are potential health and safety risks involved with wireless handsets.
Media reports have suggested that, and studies are currently being
undertaken to determine whether, radio frequency emissions from wireless
handsets may be linked to various health risks, including cancer, and may
interfere with various electronic medical devices, including hearing aids and
pacemakers. Although management does not believe RF emissions raise health
concerns, the actual or perceived risks concerning RF emissions may have the
effect of discouraging the use of wireless handsets, reducing subscriber growth
rate, reducing the availability of financing, or exposing us to potential
litigation which could have an adverse effect on our financial condition and
results of operations. Concerns about radiofrequency emissions may affect our
ability to obtain licenses from government entities necessary to construct
microwave sites in certain locations.
In addition, the FCC requires that certain transmitters, facilities,
operations, and mobile and portable transmitting devices that may be used in
connection with WCS handsets meet specific radiofrequency emission standards.
Compliance with any new restrictions could materially increase our costs.
Separately, measures that would require hands free use of mobile phones
while operating motor vehicles have been proposed or are being considered in
legislatures in Connecticut, Hawaii, Illinois, Maryland, New York and Ohio,
among other states. We cannot predict the success of the proposed laws
concerning hands free car phone use or the effect on usage of mobile phones as a
result of the publicity surrounding the consideration or passage or such laws.
In addition, more restrictive measures or measures aimed at wireless services
companies as opposed to users may be proposed or passed in state legislatures in
the future. The proliferation of such legislation could materially adversely
affect us by requiring us to modify our operations or business plans in response
to such restrictions.
Other Risks Relating to Bal/Rivgam
A limited number of stockholders control us, and their interests may be
different than yours.
After this offering, executive officers, directors and holders of 5% or
more of the outstanding class A common stock will, in the aggregate,
beneficially own approximately 66.6% of our outstanding class A common stock. In
addition, Mr. Balitsos will continue to control at least 77% of our total voting
power after the offering through his ownership of the voting class B common
stock and, as a result of their stock ownership, this stockholder and our
management will have the ability to control our future operations and strategy.
They will also be able to effect or prevent a sale or merger or other change of
control of us. In addition, by virtue of his ownership of the voting class B
common stock, Mr. Balitsos can control the outcome of any matter that requires a
vote of a majority of the common stock and can prevent the approval of any
matter that requires a supermajority vote of the common stock.
In addition, the interests of our initial investors and other existing
stockholders regarding any proposed merger or sale may differ from the interests
of our new public stockholders, especially if the consideration to be paid for
the class A common stock is less than the price paid by public stockholders in
this offering.
We depend on key directors and officers because we have no employees.
We have no employees. Accordingly, our future performance depends in
substantial part upon the continued contributions of our key directors and
officers. The loss of the services of these directors and/or officers, who have
no obligation to continue as such, could have a material adverse effect upon our
business, results or operations and financial condition. We believe there is and
will continue to be intense competition of personnel with experience in
-11-
<PAGE>
the wireless industry as the emerging WCS market develops. There can be no
assurance that we can attract, assimilate or retain other highly qualified
personnel in the future.
A substantial number of our shares is eligible for future sale.
The market price of our shares could drop as a result of sales of
substantial amounts of our shares in the public market following this offering
or the perception that such sales may occur. These factors could also make it
more difficult for us to raise funds through future offerings of stock.
The shares that we are offering will be freely tradable without
restriction except for any shares purchased by our "affiliates" as defined in
Rule 144 under the Securities Act.
You will experience immediate dilution of your investment.
Purchasers of our class A common stock will incur an immediate and
substantial dilution of approximately ___% of their investment in the common
stock because the pro forma net tangible book value of our class A common stock
after this offering will be approximately $__________ per share as compared with
the initial public offering price of $___________ per share of class A common
stock.
We have provisions in our charter that make it difficult for a change of control
in the company to occur.
Pursuant to our certificate of incorporation, we have an authorized
class of 5,000 shares of preferred stock which may be issued by the board of
directors on such terms and with rights, preferences and designations,
including, without limitation, restricting dividends on the common stock,
dilution of the voting power of the common stock and impairing the liquidation
rights of the holders of common stock, as the board may determine without any
vote of the stockholders. Issuance of such preferred stock, depending upon the
rights, preferences and designations thereof, may have the effect of delaying,
deterring or preventing a change in control of the company. In addition,
"anti-takeover" provisions of the Delaware General Corporation Law may restrict
the ability of the stockholders to authorize a merger, business combination or
change of control of the company.
We indemnify our directors against liability to the company and our
stockholders.
Our certificate of incorporation provides that a director of the
company shall not be personally liable to the company or our stockholders for
monetary damages for breach of fiduciary duty as a director, except as
prescribed by Delaware law. This may discourage stockholders from bringing suit
against a director for breach of fiduciary duty and may reduce the likelihood of
derivative litigation brought by stockholders on behalf of the company against a
director. In addition, our by-laws and indemnification agreements to be entered
into with our directors and officers will provide for mandatory indemnification
to the fullest extent permitted by Delaware law.
We did not have a trading market for our common stock until now, and we cannot
be sure that our stock price will be stable.
There has been no prior market for the class A common stock and there
can be no assurance that a public market for the class A common stock will
develop or be sustained after the offering. We intend to apply to have our class
A common stock listed on the Nasdaq SmallCap Market. Under Nasdaq rules, in
order for the company to remain eligible for listing on the Nasdaq SmallCap
Market, (i) our common stock must have a minimum bid price of $1.00, (ii) we
must have minimum tangible net assets of $2,000,000 or a market capitalization
of $35,000,000 or net income of $500,000 in two of the three prior years, (iii)
we must have a public float of at least 500,000 shares with a market value of at
least $1,000,000 and our common stock must have at least two market makers and
be held of record by at least 300 stockholders.
-12-
<PAGE>
While we expect to satisfy the Nasdaq SmallCap Market listing and
maintenance standards upon completion of the offering, the failure to meet the
maintenance criteria in the future may result in our common stock no longer
being eligible for quotation on Nasdaq. Trading, if any, of our common stock
would thereafter be conducted on the OTC Bulletin Board. As a result, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of our common stock.
In the event we do not qualify for Nasdaq listing or qualify for
listing and subsequently are delisted from Nasdaq, the common stock may be
regulated as a penny stock. SEC regulations require additional disclosure
relating to the market for penny stocks. These regulations generally define a
penny stock to be an equity security not listed on Nasdaq or a national
securities exchange that has a market price of less than $5.00 per share. A
disclosure schedule explaining the penny stock market and the risks associated
therewith is required to be delivered to a purchaser and various sales practice
requirements are imposed on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors, which generally
consist of institutions. In addition, the broker-dealer 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 and
monthly account statements showing the market value of each penny stock held in
the customer's account. If our securities become subject to the regulations
applicable to penny stock, the market liquidity for our securities could be
severely affected. In this event, the regulations on penny stocks could limit
the ability of broker-dealers to sell our securities and thus the ability of
purchasers of our securities to sell their securities in the secondary market.
In the absence of an active trading market, you may experience substantial
difficulty in selling your securities.
The public offering price of the common stock being offered by this
prospectus was established by negotiation between us and _______, who served as
a qualified independent underwriter in this offering, and may not be indicative
of prices that will prevail in the trading market. In the absence of an active
trading market, purchasers of the common stock may experience substantial
difficulty in selling their securities. The trading price of our common stock is
expected to be subject to significant fluctuations in response to variations in
quarterly operating results, changes in analysts' earnings estimates, general
conditions in the computer software industry and other factors. In addition, the
stock market is subject to price and volume fluctuation that affect the market
prices for companies and that are often unrelated to operating performance.
We have never paid and do not intend to pay dividends.
We have never paid any cash dividends and currently do not intend to
pay any dividends for the foreseeable future. To the extent we require
additional funding currently not provided for in our financing plan, our funding
sources may likely prohibit the payment of dividends.
-13-
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the company from the sale of the
shares of class A common stock in the offering are expected to be approximately
$___ million. We intend to use the net proceeds from the offering for working
capital and general corporate purposes until we determine whether to develop our
licenses, joint venture them or sell all or a portion of them. Pending such
uses, the net proceeds of this offering will be invested in United States
government securities, bank certificates of deposit, money market funds and
other interest-bearing instruments and in corporate securities.
DIVIDEND POLICY
We have not declared any cash dividend on our class A common stock
since inception. We do not anticipate that we will pay cash dividends in the
foreseeable future. We currently plan to retain any earnings to provide for our
development and growth.
DETERMINATION OF OFFERING PRICE
Under NASD rules we are an affiliate of Gabelli & Company, Inc., an
NASD member. Therefore, this offering is being made in conformity with certain
applicable provisions of Rule 2720 of the NASD. The initial public offering
price of the shares of class A common stock may not be higher than as
recommended by an independent investment banking firm that qualifies as a
"qualified independent underwriter" and "which shall also participate in the
preparation of the registration statement and prospectus . . . and which shall
exercise the usual standards of due diligence." ____________ is acting as a
"qualified independent underwriter" and will be paid a fee of $_____ in
consideration for its services and expenses.
The price of the shares of class A common stock offered hereby has been
determined by negotiations between the company and the qualified independent
underwriter while taking into consideration anticipated book values and use of
proceeds and without any relation to the company's assets, historical operating
income or trading price (there being no operating income or trading market for
our securities before this offering) or other generally accepted criteria of
value. Consideration has also been given to valuations made in offerings of
other companies with a similar business plan.
Under Rule 2720 of the NASD, _________________, a member of the NASD,
is required, in acting as a "qualified independent underwriter," to undertake to
the NASD the legal responsibilities and liabilities of an underwriter under the
Securities Act, specifically including those inherent in Section 11 thereof. We
will indemnify ___________ against such liabilities, if any, to the extent
permitted by law.
The offering price set forth on the cover page of this prospectus
should not be considered an indication of the actual value of our class A common
stock. After completion of this offering, such price will vary as a result of
market conditions and other factors.
-14-
<PAGE>
DILUTION
At March 31, 2000, we had a deficit in net tangible book value of
$1,857,359, or $0.19 per share. The deficit in net tangible book value per share
represents the amount of total tangible assets (total assets less intangible
assets) less total liabilities, divided by the number of shares of common stock
outstanding. After giving effect to the sale of the 2,000,000 shares of class A
common stock and after deducting the estimated offering expenses, our deficit in
pro forma net tangible book value as of March 31, 2000 would have been
approximately $______________, or $____ per share, representing an immediate and
substantial dilution of $____ per share in respect of shares of class A common
stock purchased in this offering. The following table illustrates this per share
dilution:
Assumed initial public offering price per share............................
Pro forma deficit in net tangible book value per
share before offering................................................
Increase per share attributable to offering..............................
Pro forma net tangible book value
per share after offering.................................................
Dilution per share to new investors(1).....................................
(1) Dilution is determined by subtracting the deficit in pro forma net
tangible book value per share from the offering price paid by an
investor for a share of class A common stock in the offering.
The following table summarizes, on a pro forma basis, as of
_______________, after giving effect to the number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by existing stockholders and by new investors purchasing the shares
offered hereby (before deducting underwriting discounts and commissions and
estimated offering expenses payable by us):
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price per
-------------------------- -----------------------------
Number Percent Amount Percent Share
------------ -------- --------------- -------- -------------
<S> <C> <C> <C> <C>
Existing stockholders..........
New investors..................
------------ -------- --------------- --------
Total................. 100.0% 100.0%
============ ======== =============== ========
</TABLE>
-15-
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma capitalization of the
company effective (i) as of March 31, 2000; (ii) pro forma to give effect to the
conversion of the company from a limited liability company to a corporation and
the conversion of indebtedness and profit participations into redeemable
preferred stock; and (iii) pro forma as adjusted to give effect to the
consummation of the offering at an assumed initial public offering price of
$____ per share and the application of the estimated net proceeds therefrom.
This table should be read in conjunction with the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 31, 2000
-------------------------------------------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
------ --------- -----------
<S> <C> <C> <C>
Redeemable Preferred Stock(1) $ - $ 507,359 $ 507,359
----------- --------- -----------
Members' capital $49,900 _ _
Class A Common Stock(2) _ 399 599
Class B Common Stock(2) _ 401 401
Class C Common Stock(2) _ 200 200
Additional Paid in Capital _ 1,398,900
Cumulative Losses (1,254,654) (1,254,654) (1,254,654)
---------- ---------- -----------
Total Members' Capital/Shareholders' Deficit $(1,204,754) $ 145,246 $
=========== ========= ===========
</TABLE>
(1) See "Description of Capital Stock - Preferred Stock"
(2) See "Description of Capital Stock - Common Stock"
-16-
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth the Company's selected historical
financial data as of December 31, 1999, for the years ended December 31, 1998
and December 31, 1999, the three months ended March 31, 1999 and 2000 and the
period from March 25, 1997 (inception) to December 31, 1999. The selected
financial data as of December 31, 1999, for the years ended December 31, 1998
and December 31, 1999 and for the period March 25, 1997 (inception) through
December 31, 1999 are derived from the financial statements of the company which
have been audited by Anchin, Block & Anchin LLP. The selected financial data for
the three months ended March 31, 1999 and 2000 and for the period March 25, 1997
(inception) through March 31, 2000, and the balance sheet data at March 31, 2000
are unaudited and are derived from the company's unaudited quarterly financial
statements. In the opinion of management, the three month financial data reflect
all of the adjustments necessary for a fair presentation of such data. The
results of operations for the first three months of fiscal 1999 are not
necessarily indicative of the results to be expected for the full year. The
following financial information should be read in conjunction with the Financial
Statements and related notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 25,
Three Months Ended Twelve Months Ended March 25, 1997 1997
March 31, December 31, (Inception) to (Inception) to
-------------------- -------------------- December 31, March 31,
1999 2000 1998 1999 1999 2000
------ ---- ---- ---- ---- ----
(unaudited) (unaudited)
Operations Data:
<S> <C> <C> <C> <C> <C> <C>
Interest income $ - $ - $ - $ - $ 2,019 $ 2,019
Interest expense (36,111) (42,236) (125,136) (144,956) (500,148) (542,384)
Commitment fees (40,135) (40,135) (160,540) (160,540) (656,717) (696,852)
Other expenses - - (6,364) (4,000) (17,437) (17,437)
---------------- ------------ ------------ ----------- ------------ --------------
Net loss $ (76,246) $ (82,371) $ (292,040) $ (309,496) $(1,172,283) $ (1,254,654)
================= ============= ============ =========== ============ ==============
Net loss allocated to:
Managing member $ (762) $ (824) $ (6,045) $ (5,059) (19,293) $ (20,116)
================ ============= ============ =========== ============ ==============
Rivgam Communicators,
L.L.C. $ (75,484) $ (81,547) $ (285,995) $ (304,437) $(1,152,990) $ (1,234,538)
================= ============== ============ =========== ============ ==============
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
December 31, March 31,
------------ ---------
1998 1999 2000
---- ---- ----
(unaudited)
Balance Sheet Data:
<S> <C> <C> <C>
WCS licenses $ 652,605 $ 652,605 $ 652,605
----------- ----------- -----------
Total assets $ 652,605 $ 652,605 $ 652,605
=========== =========== ===========
Current liabilities:
Accounts payable and accrued expenses $ 685,606 $ 989,102 $ 1,071,473
Loans from Rivgam 779,886 785,886 785,886
-------------- ------------- -------------
Total current liabilities $ 1,465,492 $ 1,774,988 $ 1,857,359
============== ============= ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, March 31,
------------ ---------
1998 1999 2000
---- ---- ----
Equity Data:
<S> <C> <C> <C>
Members' contributions $ 49,900 $ 49,900 $ 49,900
Class A common stock - - -
Class B common stock - - -
Class C common stock - - -
Additional paid in capital - - -
Deficit accumulated during development stage (862,787) (1,172,283) (1,254,654)
--------- ---------- ----------
Total equity $ (812,887) $(1,122,383) $(1,204,754)
======== ========== ==========
</TABLE>
-18-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following discussion should be read in conjunction with our
consolidated financial statements, including the notes thereto, appearing
elsewhere in this prospectus. The discussions of results, causes and trends
should not be construed to imply any conclusion that these results or trends
will necessarily continue into the future.
Overview
We were formed as a limited liability company in March 1997 to
participate in the FCC's auction of WCS Licenses in April 1997 as a designated
entity and very small business, as defined by the FCC. In August 2000, we
converted into a "C" corporation. We are a development stage company with no
significant results of operations to date. We hold five 10 MHz WCS licenses, to
serve a population of approximately 42 million, three in Block A (with 2305-2310
MHz paired with 2350-2355 MHz) and two in Block B with 2310-2315 MHz paired with
2355-2360 MHz. Our Block A licenses serve the FCC-designated major economic
areas, known as MEAs, designated as Los Angeles and San Diego, California,
Minneapolis and St. Paul, Minnesota, and Milwaukee, Wisconsin, and our Block B
licenses serve the MEAs designated as Boston, Massachusetts and Phoenix,
Arizona. The total cost of these licenses was approximately $653,000, after a 35
percent bidding credit granted by the FCC to very small businesses with revenues
of not more than $15 million.
We believe that our WCS licenses have substantial potential. However,
we have not yet adopted a business plan or determined how to finance our
operations because of uncertainties relating to WCS, which makes evaluation
difficult, including without limitation the newness of WCS, financing,
affiliation and technology issues. Therefore, we have not yet determined whether
to develop our WCS licenses on our own, joint venture our licenses with other
WCS wireless telephone licenses holders or operators or others, or sell some or
all of our licenses. We expect to continually evaluate these factors and to
adopt a plan or plans once the financing, regulatory and market aspects of WCS
are less uncertain. Our principal expense to date has been interest, including
commitment fees, plus minor administrative expenses.
Results of Operations
Interest Expense
For the period from March 25, 1997 (inception) to December 31, 1999,
the years ended December 31, 1998 and 1999, and the three months ended March 25,
1999 and 2000, interest expense consisted of amounts accrued on the indebtedness
of the Company to Rivgam Communicators, LLC used to acquire certain WCS
licenses.
Net Loss
The net loss for all periods from March 25, 1997 (inception) through
March 31, 2000, resulted primarily from interest charges and commitment fees
related to its loan from Rivgam Communicators.
Liquidity and Capital Resources
The principal amount of indebtedness at December 31, 1998 and 1999, and
March 31, 2000 was $779,886, $785,886 and $785,886, excluding accrued interest
and commitment fees, compared to accumulated deficits of $(862,787),
$(1,172,283) and $(1,254,654), respectively. During such periods the Company had
no revenues or operating profit and cannot predict when it may have any revenues
or operating profits. A portion of the indebtedness (including accrued interest
and commitment fees) of the Company to Rivgam Communicators ($1,857,359 at March
31, 2000) is expected to be converted into a like principal amount of redeemable
Preferred Stock, with a dividend payable in additional Preferred Stock. The
Company is also expected to convert certain profit participation interests, held
by a member and an affiliated company, into members' capital and the remaining
into like amounts of Redeemable
-19-
<PAGE>
Preferred Stock. The Company is required by the FCC to develop and build out a
portion of these licenses within ten years from the date of acquisition (July
1997). Unless we sell our WCS licenses or joint venture our WCS licenses with an
entity that has the capacity to provide substantial funds, we will need to raise
substantial additional capital to build out our WCS licenses. There can be no
assurance the Company will be able to raise the necessary capital to complete
its obligation to build out these licenses (see "Risk Factors").
-20-
<PAGE>
THE COMPANY
We hold five 10 megahertz A-and B- Block WCS licenses, which have the
potential to serve a population of approximately 42 million.
<TABLE>
<CAPTION>
Cost (after 35%
Block Area Population Gross Cost Bidding Credit)
----- ---- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
A Los Angeles - San Diego, CA 19,333,536 $686,001 $445,900
B Boston, MA 8,672,944 $217,000 $141,050
A Minneapolis-St. Paul, MN 6,018,051 $ 1 $ 1
A Milwaukee, WI 4,634,011 $ 1 $ 1
B Phoenix, AZ 3,458,935 $101,000 $ 65,653
</TABLE>
The aggregate number of persons located in each area covered by one of
our WCS licenses is commonly referred to as a "POP." The total cost of these
licenses was approximately $653,000, after a 35% bidding credit provided by the
Federal Communications Commission.
We believe that there are significant growth opportunities in the
wireless telecommunications industry and that our WCS licenses have substantial
potential. According to the Cellular Telecommunications Industry Association,
there were 86 million wireless telephone subscribers in the United States as of
December 31, 1999. We believe that a significant portion of the predicted growth
in the consumer market for wireless telecommunications will result from
anticipated declines in costs of service, increased functional versatility, and
increased awareness of the productivity, convenience and privacy benefits
associated with the services provided by wireless providers. We also believe
that the rapid growth of notebook computers and personal digital assistants,
combined with emerging software applications for delivery of electronic mail,
fax and database searching, will contribute to the growing demand for wireless
service.
We have not yet adopted a business plan or determined how to finance
our operations, due in part to uncertainties relating to WCS, which makes
evaluation difficult, including the newness of WCS, financing, affiliation and
technology issues. We have not yet determined whether to develop our WCS
licenses on our own, joint venture our licenses with other WCS or wireless
telephone licenses holders or operators or others, or sell some or all of our
licenses. We expect to continually review these factors and to adopt a plan once
the financing, regulatory and market aspects of WCS are less uncertain.
-21-
<PAGE>
THE WIRELESS COMMUNICATIONS INDUSTRY
Growing Demand for Wireless Services
Demand for wireless communications has grown rapidly over the past
decade and has been driven by technological advancements and increased
competition. Wireless communication products and services have evolved from
basic tone-only paging services to mass-market cellular technology services and
are now entering the next generation of development with the evolution of
wireless communication technology. Each new generation of wireless communication
products and services has generally been characterized by improved product
quality, broader service offerings and enhanced features.
International Data Corporation projects that users accessing the web
through handheld devices will increase from 7.4 million in 1999 to 61.5 million
by 2003. Forrester Research projects that the total domestic market for data
networking services and Internet access will grow from $6.2 billion in 1997 to
approximately $49.7 billion by 2002. Bal/Rivgam believes that a significant
portion of the predicted growth in the consumer market for wireless
telecommunications will result from anticipated declines in costs of service,
increased functional versatility, and increased awareness of the productivity
and convenience. Bal/Rivgam also believes that the rapid growth of notebook
computers and personal digital assistants and new wireless devices and
appliances, combined with emerging software applications for delivery of
electronic mail, fax and database searching, will contribute to the growing
demand for wireless service.
Industry Overview
General. Wireless communications networks use a variety of radio
frequencies to transmit voice and data signals. Wireless communications
technologies include one-way radio applications, such as paging or beeper
services, and two-way mobile radio applications, including cellular telephone,
SMR networks, PCS services and fixed wireless services, including emerging WCS,
LMDS, DEMs, 39 GHz and other wireless services. Each application operates on a
distinct portion of radio frequency spectrum.
Wireless Communications Service. The Wireless Communications Service
was created by the FCC in 1997, and is intended to be used by licensees to
provide a vast array of fixed, mobile, radiolocation of satellite services to
individuals and businesses within assigned spectrum block and geographical
areas. Although there as yet is no equipment commercially deployed in these
bands, it is expected that WCS spectrum may be used to provide a variety of
fixed terrestrial services using new communications devices that will utilize
very small, lightweight, multi-function portable phones and advanced devices
with two-way data capabilities.
Industry Outlook
Industry sources expect the wireless telecommunications market in
general to grow at a rapid rate in the United States. International Data
Corporation projects that users accessing the web through handheld devices will
increase from 7.4 million in 1999 to 61.5 million by 2003. Forester Research
projects that the total domestic market for data networking services and
Internet access will grow from $6.12 billion in 1997 to approximately $49.7
billion by 2002. We believe that a significant portion of the predicted growth
in the consumer market for wireless telecommunications will result from
anticipated declines in costs of service, increased functional versatility, and
increased awareness of the productivity, convenience and privacy benefits
associated with the services provided by wireless providers. We also believe
that the rapid growth of notebook computers and personal digital assistants, and
new wireless devices and appliances combined with emerging software applications
for delivery of electronic mail, fax and database searching, will contribute to
the growing demand for wireless service.
-22-
<PAGE>
Competition
The wireless communications market in the United States is highly
competitive. Wireless services providers are already exploiting existing
wireless technology and have established and continue to augment wireless
telecommunications networks. Many wireless providers have substantially greater
access to capital, substantially greater financial, technical, marketing, sales
and distribution sources and significantly more experience than we do in
providing wireless services.
The FCC's general policy in recent years has been to promote flexible
use of the radio spectrum, which has resulted in rules authorizing a number of
additional spectrum-based services that may offer competitive wireless mobile
and fixed services. For example, among other actions, the FCC has (i) authorized
the use of the 37 and 39 GHz bands for the provision of fixed and mobile
communications services; (ii) created rules and assigned licenses to permit WCS
providers to provide a broad range of fixed, mobile, radio location and
satellite broadcasting services; (iii) created rules and assigned licenses to
permit LMDS providers to provide fixed and mobile broadband services; and
authorized MMDS, or wireless cable, providers to use their spectrum to provide
two-way broadband wireless services. The FCC is expected to continue making new
spectrum available, and to allow for existing allocated spectrum to be
developed, in a fashion that will continue to expand competition in the wireless
marketplace. The FCC has also modified its rules to permit the partitioning and
disaggregation of broadband PCS licenses into licenses to serve smaller service
areas, and/or use smaller spectrum blocks.
In addition, as a result of the enactment of the 1996 Act, regional
energy utility companies are expected to enter the wireless and wireline
telecommunications markets by leveraging their significant capital assets,
brand-name value, existing customer base and infrastructure advantages in their
geographical areas of operation. Similarly, the 1996 Act also eliminates
barriers for cable television system operators to provide wireline local loop
services over their existing wireline infrastructure.
The market for data communications and Internet access is also
extremely competitive. In addition to wireless companies, existing
telecommunications companies, cable companies, and new emerging providers
compete to offer data and Internet services. There are no substantial barriers
to entry, and we expect that competition will intensify in the future.
-23-
<PAGE>
LEGISLATION AND GOVERNMENT REGULATION
As a recipient of licenses acquired through the WCS Auction, our
ownership structure and operations are and will be subject to substantial FCC
regulation.
Overview
FCC Authority. The Communications Act of 1934 grants the FCC the
authority to regulate the licensing and operation of all non-federal government
radio-based services in the United States. The scope of the FCC's authority
includes (i) allocating radio frequencies, or spectrum, for specific services,
(ii) establishing qualifications for applicants seeking authority to operate
such services, including WCS applicants, (iii) approving initial licenses,
modifications thereto, license renewals, and the transfer or assignment of such
licenses, (iv) promulgating and enforcing rules and policies that govern the
operation of spectrum licensees, (v) the technical operation of wireless
services, interconnection responsibilities between and among wireless services
and landline carriers, and (vi) imposing fines and forfeitures for any
violations of those rules and regulations. Under its broad oversight authority
with respect to market entry and the promotion of a competitive marketplace for
wireless providers, the FCC regularly conducts rulemaking and adjudicatory
proceedings to determine and enforce rules and policies.
Other FCC Requirements. The FCC had been conducting rulemakings to
address interconnection issues among wireless carriers and between mobile
wireless carriers and LECs. These proceedings were significantly affected by the
1996 Act and FCC rulemakings conducted pursuant to the 1996 Act. See "--1996
Act" and "--FCC Interconnection Proceedings."
In addition, the Communications Assistance for Law Enforcement Act of
1994 requires all telecommunications carriers, including wireless carriers, as
of June 30, 2000, to ensure that their equipment is capable of permitting the
government, pursuant to a court order or other lawful authorization, to
intercept any wire and electronic communications carried by the carried to or
from its subscribers and to access certain cell-identifying information that is
reasonably available to carriers. Although final standards have yet to be
promulgated, compliance with the requirements of CALEA could impose significant
additional direct and/or indirect costs on wireless carriers.
Other Federal Regulations. Wireless networks are subject to certain
Federal Aviation Administration and FCC guidelines regarding the location,
lighting and construction of transmitter towers and antennas. In addition, the
FCC has authority to enforce certain provisions of the National Environmental
Policy Act as they would apply to Bal/Rivgam's facilities.
Wireless providers also must satisfy a variety of FCC requirements
relating to technical and reporting matters. One such requirement is the
coordination of proposed frequency usage with adjacent wireless users,
permittees and licensees in order to avoid electrical interference between
adjacent networks. In addition, the height and power of base station
transmitting facilities and the type of signals they emit must fall within
specified parameters.
State and Local Regulation. The scope of state regulatory authority
covers such matters as the terms and conditions of interconnection between LECs
and wireless carriers under FCC oversight, customer billing information and
practices, billing disputes, other consumer protection matters, certain
facilities construction issues, transfers of control, the bundling of services
and equipment and requirements relating to making capacity available to third
party carriers on a wholesale basis. In these areas, particularly the terms and
conditions of interconnection between LECs and wireless providers, the FCC and
state regulatory authorities share regulatory responsibilities with respect to
interstate and intrastate issues, respectively. Municipalities and other local
government agencies may require telecommunications services providers to obtain
licenses or franchises regulating use of public rights of way necessary to
install and operate their networks. While the powers of state and local
governments to regulate wireless carriers are limited to some extent by federal
law, we may have to devote substantial resources to comply with state and local
requirements. In addition, under the Communications Act, state and local
authorities maintain authority over the zoning of wireless antenna sites.
-24-
<PAGE>
Many of the regulations issued by federal, state and local regulatory
bodies may change and are the subject of various judicial proceedings,
legislative hearings and administrative proposals. We cannot predict what
impact, if any, these proceedings or changes will have on our business or
results of operations.
General WCS Regulations
The WCS auction, held April 15 to April 25, 1997, awarded 128 licenses
consisting of two licenses in frequency Blocks A and B in 52 MEAs authorizing
service on 10 MHz of spectrum, and two licenses in frequency Blocks C and D in
each of 12 regional economic area groupings at 5 MHz of spectrum, as follows:
Frequency Block A: 2305-2310 MHz paired with 2350-2355 MHz
Frequency Block B: 2310-2315 MHz paired with 2355-2360 MHz
Frequency Block C: 2315-2320 MHz
Frequency Block D: 2345-2350 MHz
The rules for the Wireless Communication Services were promulgated
under the provisions of the Communications Act of 1934, as amended, that vest
authority in the Federal Communications Commission to regulate radio
transmissions and to issue licenses for radio stations.
WCS licensees are permitted to provide fixed, mobile, radio locations,
or broadcast-satellite use consistent with the allocation table and associated
international agreements concerning spectrum allocations. The spectrum is
considered most adaptable for fixed wireless, wireless local-loop access and
wireless Internet connectivity.
Satellite digital audio radio service may be provided using 2310-2320
and 2345-2360 MHz bands. WCS authorizations for systems operating near the
Canadian and Mexican borders are subject to the condition that future
coordination of base station transmitters is required to eliminate harmful
interference to operations in the adjacent foreign territories and to ensure
continued equal access to the frequencies by both countries. Satellite DARS
operations in WCS spectrum are also subject to international satellite
coordination procedures.
Within ten years, WCS license holders must meet an FCC requirement of
providing "substantial services" to subscribers. For a WCS licensee who offers
fixed, point-to-point services, substantial service constitutes the construction
of four permanent links per one million people in its licensed service area. For
a WCS licensee who offers mobile service, substantial service is demonstrated by
the licensee covering a minimum of 20 percent of the population of its licensed
service area.
Fixed, land and radiolocation land stations transmitting in the
2305-2320 MHz and 2345-2360 MHz bands are limited to 2000 watts peak equivalent
isotropically radiated power. Mobile and radiolocation mobile stations are
limited to 20 watts in these band ranges.
Structural Requirements
When the FCC assigned WCS licenses at public auction, it allowed for
small business applicants to be eligible for special bidding credits. A winning
bidder that qualified as a small business was granted a 25 percent bidding
credit to lower the cost of a winning bid. A small business is an entity that
together with its affiliates and controlling principals has average annual gross
revenue of not more than $40 million for the preceding three years. A winning
bidder that qualified as a very small business was awarded a bidding credit of
35 percent. A very small business is defined as an entity that together with its
affiliates and controlling principals has average annual gross revenue of not
more than $15 million for the preceding three years.
Unjust Enrichment. In the event a small business or a very small
business that used a bidding credit transfer wants to control or assigns an
authorization to an entity that does not qualify as a small business or makes a
change in ownership that results in the licensee losing eligibility as a small
business, the licensee must seek Commission approval. In addition, the licensee
is required to reimburse the U.S. Government for the bidding credit plus
interest on the rate for
-25-
<PAGE>
ten year U.S. Treasury obligations as of the date the licenses were granted. A
transfer from a very small business to a small business within the first five
years results in a forfeiture of 100 percent of the value of the difference
between the higher (35%) and lower (25%) bidding credit. The forfeiture
percentage decreases by 20 percent per year in years six to nine and there is no
assessment in year ten. Interest on any forfeited amounts would be determined by
the rate for ten year U.S. Treasury obligations as of the date the licenses were
granted.
Partitioning. WCS licensees may apply to partition or disaggregate
their licensed spectrum any time following the grant of the licenses. The
Commission will consider requests for assignment of licenses that propose both
partitioning and disaggregation within the same proposal.
Substantial Service. WCS licensees must make a showing of "substantial
service" to their areas within ten years of being awarded the licenses.
"Substantial" service is defined as service that is sound, favorable and
substantially above a level of mediocre service which just might warrant
renewal. Failure of the licensee to provide substantial service will result in
forfeiture of the license.
Telecommunications Act of 1996
On February 8, 1996, the President signed the Telecommunications Act of
1996, which effected a sweeping overhaul of the Communications Act of 1934. In
particular, the 1996 Act substantially amended Title II of the Communications
Act, which governs telecommunications common carriers. The policy underlying
this legislative reform was the opening of the telephone exchange service
markets to full competition. The 1996 Act makes all state and local barriers to
competition unlawful, whether they are direct or indirect. It directs the FCC to
initiate rulemaking proceedings on local competition matters and to preempt all
inconsistent state and local laws and regulations. The 1996 Act requires
incumbent wireline LECs to open their networks to competition through
interconnection and access to unbundled network elements and prohibits state and
local barriers to the provision of interstate and intrastate telecommunications
services.
The 1996 Act prohibits state and local governments from enforcing any
law, rule or legal requirement that prohibits or has the effect of prohibiting
any person from providing interstate or intrastate telecommunications services.
States retain jurisdiction under the 1996 Act to adopt laws necessary to
preserve universal service, protect public safety and welfare, ensure the
continued quality of telecommunications services and safeguard the rights of
consumers.
Some specific provisions of the 1996 Act which are expected to affect
wireless providers are summarized below:
Expanded Interconnection Obligations: The 1996 Act establishes a
general duty of all telecommunications carriers, to interconnect with other
carriers, directly or indirectly. The 1996 Act also contains a detailed list of
requirements with respect to the interconnection obligations of LECs. These
"interconnect" obligations include resale, number portability, dialing parity,
access to rights-of-way and reciprocal compensation.
LECs designated as "incumbents" (i.e., those providing landline local
exchange telephone service at the time the 1996 Act was adopted) have additional
obligations including: to negotiate in good faith; to interconnect on terms that
are reasonable and non-discriminatory at any technically feasible point at
cost-based rates (plus a reasonable profit); to provide non- discriminatory
access to facilities and network elements on an unbundled basis; to offer for
resale at wholesale rates any service that LECs provide on a retail basis; and
to provide actual co-location of equipment necessary for interconnection or
access.
The 1996 Act established a framework for state commissions to mediate
and arbitrate negotiations between incumbent LECs and carriers requesting
interconnection, services or network elements. The 1996 Act establishes
deadlines, policy guidelines for state commission decision making and federal
preemption in the event a state commission fails to act.
-26-
<PAGE>
Review of Universal Service Requirements. The 1996 Act contemplates
that interstate telecommunications providers, including CMRS providers, will
"make an equitable and non-discriminatory contribution" to support the cost of
providing universal service. Telecommunications providers are to base their
contributions on end user interstate and for certain programs intrastate
end-user revenues.
Prohibition Against Subsidized Telemessaging Services. The 1996 Act
prohibits incumbent LECs from subsidizing telemessaging services (i.e., voice
mail, voice storage/retrieval, live operator services and related ancillary
services) from their telephone exchange service or exchange access and from
discriminating in favor of its own telemessaging operations.
Conditions on RBOC Provision of In-Region InterLATA Services. The 1996
Act generally requires that before engaging in landline long distance services
in the states in which they provide landline local exchange service referred to
as in-region interLATA services, the Regional Bell Operating Companies must (1)
provide access and interconnection to one or more unaffiliated competing
facilities-based providers of telephone exchange service, or after 10 months
after enactment of the 1996 Act, no such provider requested such access and
interconnection more than three months before the RBOCs has applied for
authority and (2) demonstrate to the FCC its satisfaction of the 1996 Act's
"competitive checklist."
The specific interconnection requirements contained in the competitive
checklist, which the RBOCs must offer on a non-discriminatory basis, include
interconnection and unbundled access; access to poles, ducts, conduits and
rights-of-way owned or controlled by the RBOCs; unbundled local loops, unbundled
transport and unbundled switching; access to emergency 911, directory
assistance, operator call completion and white pages; access to telephone
numbers, databases and signaling for call routing and completion; number
portability; local dialing parity; reciprocal compensation; and resale.
RBOC Commercial Mobile Joint Marketing. The RBOCs are permitted to
market jointly and sell wireless services in conjunction with telephone exchange
service, exchange access, intraLATA and interLATA telecommunications and
information services.
Equal Access. The 1996 Act provides that wireless providers are not
required to provide equal access to common carriers for toll services. The FCC
is authorized to require unblocked access subject to certain conditions.
Foreign Ownership
The FCC must determine that it is in the public interest for no more
than 25% of the capital contribution of the parent of a WCS licensee to be
owned, directly or indirectly, or voted by non-U.S. citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. The restrictions on foreign ownership could also adversely affect
our ability to attract additional equity financing from entities that are, or
are owned by, non-U.S. entities. The FCC Form 600 we filed with the FCC after
the completion of the A- and B-Block auction indicates that our foreign
ownership does not exceed 25%. However, if our foreign ownership were to exceed
25% in the future, the FCC could revoke our WCS licenses. The restrictions on
foreign ownership could adversely affect the ability to attract additional
equity financing from entities that are, or are owned by, non-U.S. entities.
-27-
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following sets forth the name, business address, present principal
occupation, employment and material occupations, positions, offices or
employments for the past five years and ages as of March 31, 2000 for the
executive officers and directors of Bal/Rivgam. Members of the board are elected
and serve for one year terms or until their successors are duly elected and
shall have qualified.
Name Age Position(1)(3)
---- --- --------------
James T. Balitsos(2) 47 Class B Director, Chairman and Chief Executive
Officer
Marie G. Balitsos(2) 45 Class B Director
Mario J. Gabelli 58 Class A Director
James E. McKee 37 Secretary
(1) Under Bal/Rivgam's certificate of incorporation, collectively
the class B directors have three votes and the class A
directors collectively have two votes on all matters properly
brought before the board of directors.
(2) James T. Balitsos and Marie Balitsos are husband and wife.
(3) One of the two class A director positions and one of the three
class B director positions are currently vacant
James T. Balitsos, is an entrepreneur and investor. He is the owner and
Chief Executive Officer of Diray Communication Corporation, a direct response
media buying agency, which he co-founded in 1987. Prior to establishing Diray,
Mr. Balitsos worked for 15 years for various direct marketing companies in
television media. Mr. Balitsos is on the board of directors of the Electronic
Media Marketing Association and is a member of the Electronic Retail
Association. Mr. Balitsos served as the managing member of Bal/Rivgam L.L.C.
from March 1997 until its conversion into a "C" corporation in ___2000, at which
time he became a director and Chairman and Chief Executive Officer of Bal/Rivgam
Wireless, Inc., the successor corporation.
Marie G. Balitsos, is Vice President and Secretary of Diray, which she
co-founded in 1987. From 1973 to 1987, Ms. Balitsos was a promotions manager in
the consumer products division of Richardson-Vicks, Inc. Upon the conversion of
Bal/Rivgam L.L.C. into a "C" corporation in ____ 2000, Ms. Balitsos became a
director of Bal/Rivgam Wireless, Inc., the successor corporation.
Mario J. Gabelli, has served as Chairman, Chief Executive Officer,
Chief Investment Officer and a director of Gabelli Group Capital Partners, Inc.
and its predecessors since November 1976. In connection with those
responsibilities, he serves as director or trustee and/or an officer of
registered investment companies managed by the Company and its affiliates. Mr.
Gabelli serves as Chairman of Lynch Corporation, a public company engaged in
manufacturing; Chairman and Chief Executive Officer of Lynch Interactive
Corporation, a public company engaged in multimedia and other services; and a
director and member of the Office of the Chairman of Spinnaker Industries, Inc.,
a public company engaged in manufacturing. Mr. Gabelli also serves as a Governor
of the American Stock Exchange; Overseer of Columbia University Graduate School
of Business; Trustee of Fairfield University, Roger Williams University, Bruce
Museum, Winston Churchill Foundation and E.I. Weigand Foundation; and Chairman,
Patron's Committee of Immaculate Conception School. In addition, Mr. Gabelli is
the Chairman of MJG Associates, Inc., which
-28-
<PAGE>
sets as a general partner or investment manager of various investment funds and
other accounts. Upon the conversion of Bal/Rivgam L.L.C. into a "C" corporation
in ____ 2000, Mr. Gabelli became a director of Bal/Rivgam Wireless, Inc., the
successor corporation.
James E. McKee, has served as Vice President, General Counsel and
Secretary of Gabelli Group Capital Partners, Inc. or its predecessor since
August 1995 and as Vice President, General Counsel and Secretary of GAMCO
Investors, Inc. since December 1993. Mr. McKee also serves as Secretary of Group
Capital's subsidiaries and most of the Gabelli Funds. Prior to joining the
Company, he was with the Securities and Exchange Commission in New York as a
Branch Chief from 1992 to 1993 and as a Staff Attorney from 1989 through 1992.
Upon the conversion of Bal/Rivgam L.L.C. into a "C" corporation in ____, 2000,
Mr. McKee became Secretary of Bal/Rivgam Wireless, Inc., the successor
corporation
Compensation of Directors
We are not compensating our directors at the present time, although we
may do so in the future. We do indemnify directors pursuant to Delaware law and
may reimburse them for certain out-of-pocket costs in connection with serving as
directors.
Executive Compensation
We have no employees and have paid no employee or executive
compensation, although we may do so in the future.
Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, we have
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
Our Certificate of Incorporation provides that our directors and officers shall
be indemnified to the fullest extent of Delaware law.
Delaware law provides that a corporation may limit the liability of
each director to the corporation or its stockholders for monetary damages except
for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases and (iv) for any transaction which the director derives an improper
personal benefit. Our Certificate of Incorporation provides for the elimination
and limitation of the personal liability of directors for monetary damages to
the fullest extent permitted by Delaware law. In addition, our Certificate of
Incorporation provides that if Delaware law is amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
the directors shall be eliminated or limited to the fullest extent permitted by
Delaware law, as so amended. The effect of this provision is to eliminate our
rights and the rights of our stockholders to recover monetary damages against a
director for breach of the fiduciary duty of care as a director except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate our rights or the rights of any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. Our Certificate of Incorporation also provides
that we shall, to the full extent permitted by Delaware law, indemnify and
advance expenses to each of its currently acting and former directors, officers,
employees and agents.
We have no directors and officers liability insurance at this time.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent where indemnification will be required or
permitted.
-29-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Rivgam Communicators LLC, a subsidiary of Gabelli Group Capital
Partners, Inc., and James Balitsos organized the company as a Delaware limited
liability company in March 1997 for the purpose of bidding for WCS licenses in
the A- and B-Block Auction. Mr. Balitsos, the managing member, contributed
$25,000 to the LLC for a 50.1% equity interest and Rivgam Communicators
contributed $24,900 to the LLC for a 49.9% equity interest.
On April 4, 1997, we entered into a loan agreement with Rivgam
Communicators under which Rivgam Communicators agreed to loan us up to
$12,150,l00 to purchase our WCS licenses. On May 7, 1997, we repaid $11,899,369
of the loan amount, which repayment amount equaled that portion of the original
loan not required by us to pay for the down payment on our original five WCS
licenses. Our repayment reduced Rivgam Communicators's commitment to make loans
to the cost of the WCS licenses, net of any bidding credits and equity
contributions to the limited liability company, plus $200,000, for a total
commitment of approximately $803,000. The interest payable on outstanding
borrowing was 15% per annum, compounded annually. The interest and principal
were due and payable on April 4, 2002. In addition, we were obligated to pay
Rivgam an annual commitment fee of 20% per annum on the total loan commitment
amount of approximately $803,000 and a special fee equal to 15% of any net
profits we realized. At March 31, 2000, there was $785,886, excluding accrued
interest and commitment fees, outstanding under the loan agreement.
Prior to the reorganization, Rivgam Communicators contributed
approximately $1,350,000 of its outstanding loan, including accrued interest and
commitment fees, to Members' Capital.
At the time of the reorganization, our remaining indebtedness to Rivgam
Communicators under the loan agreement of approximately $_________ was converted
into 618 shares of our preferred stock. Our obligation to pay Rivgam
Communicators a portion of our net profits was terminated in exchange for the
issuance to Rivgam of 1,500,000 shares of class C common stock and the
obligation of Rivgam Communicators to make additional loans to us terminated.
On March 25, 1997, we entered into an expense agreement with each of
James Balitsos and Rivgam Communicators, pursuant to which all out of pocket
expenses incurred by each in the organization of Bal/Rivgam L.L.C. and in
connection with the license auction would be treated as a loan to us, up to a
maximum of $5,000 by the Managing Member and additional expenses up to $75,000
were treated as supplemental loans by Rivgam Communicators. The interest payable
on any such amount was 15% per annum, compounded annually, and was due, together
with the principal, on April 4, 2002. The expense agreements with Mr. Balitsos
and Rivgam Communicators were terminated on ______, 2000 in connection with the
conversion of our existing indebtedness into preferred stock.
On March 25, 1997, we entered into an agreement with Lynch PCS
Corporation G, whereby Lynch agreed to provide consulting services relating to
FCC auctions for WCS licenses in exchange for 5% of our net profits and
reimbursement of related expenses. On _____, 2000, our obligation to pay Lynch
such portion of our net profits was terminated in exchange for the issuance to
Lynch of 500,000 shares of class C common stock.
On February 1, 2000, we entered into a one year Finder's Agreement with
Gabelli Group Capital Partners in which Gabelli Group Capital Partners agreed to
act as a finder to help us realize the value of our WCS licenses. As
compensation, Gabelli Group Capital Partners will receive six percent of any
amount we receive for the sale of our five initial WCS licenses to any party
contacted on our behalf by Gabelli Group Capital Partners. Such compensation is
also payable in connection with such a sale consummated within one year after
termination of the Finder's Agreement.
-30-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock effective as of _________, 2000 by (i) each person
who is known by us to own beneficially more than five percent of our common
stock, (ii) each of our officers and directors and (iii) all current executive
officers and directors as a group.
<TABLE>
<CAPTION>
Class A Beneficially Class B Beneficially Class C Beneficially
Owned Owned Owned
------------------------ ----------------------- ----------------------
Shares Percent Shares Percent Shares Percent
---------- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
James Balitsos (1) - - 4,008,000 100% 0 0%
Marie Balitsos (1) - - 4,008,000 100% 0 0%
Rivgam Communicators, LLC (2) 3,992,000 100% 0 0% 1,500,000 75%
Mario J. Gabelli (2) 3,992,000 100% 0 0% 1,500,000 75%
Lynch PCS Corporation G - - 0 0% 500,000 25%
All Directors and Executive 3,992,000 100% 4,008,000 100% 0 0%
Officers as a Group (4 in total)
</TABLE>
<TABLE>
<CAPTION>
Percent of Total
Economic Interest Percent of Total Voting
Beneficially Owned Power (3)
------------------------ -----------------------
Before the After the Before the After the
Offering Offering Offering Offering
---------- ----------- ---------- ----------
<S> <C> <C>
James Balitsos (1) 50.1% 83.4%
Marie Balitsos (1) 50.1% 83.4%
Rivgam Communicators, LLC (2) 49.9% 16.6%
Mario J. Gabelli (2) 49.9% 16.6%
Lynch PCS Corporation G 0 0
All Directors and Executive 100% 100%
Officers as a Group (4 in total)
</TABLE>
-31-
<PAGE>
(1) Marie Balitsos is the wife of James Balitsos and therefore shares owned
by James Balitsos are also set forth as owned by Marie Balitsos. Marie
Balitsos disclaims ownership of the shares. The address of James
Balitsos and Marie Balitsos is 941 Danbury Road, Wilton, Connecticut
06897.
(2) Mario J. Gabelli is the Chairman and Chief Executive Officer and the
principal stockholder of Gabelli Group Capital Partners, Inc. Rivgam
Communicators, LLC is a wholly owned subsidiary of Gabelli Group
Capital Partners, Inc. and consequently, Mario J. Gabelli may be deemed
to beneficially own these shares.
(3) Each share of class A common stock is entitled to one vote and each
share of class B common stock is entitled to five votes, except that
the class B common stock, voting together as a class, may elect up to a
majority of the board. The shares of class C common stock do not have
any voting rights.
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 35,000,000 shares of common stock, $.0001
par value, and 5,000 shares of preferred stock, $1,000 par value. The following
description of our capital stock does not purport to be complete and is subject
to and qualified in its entirety by our Certificate of Incorporation and Bylaws
and by the provisions of applicable Delaware law.
Common Stock
Our authorized common stock of consists of 20,000,000 shares of class A
common stock, 10,000,000 shares of class B common stock and 5,000,000 shares of
class C common stock. At ______, 2000, there were (1) 3,992,000 shares of class
A common stock outstanding; (2) 4,008,000 shares of class B common stock
outstanding, all of which were held by James Balitsos; and (3) 2,000,000 shares
of class C common stock outstanding, 1,500,000 of which were held by Rivgam and
500,000 of which were held by Lynch. In the event of the liquidation,
dissolution or winding up, the holders of the three classes of common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
if any, then outstanding.
Voting Rights
Collectively, the shares of class A common stock represent not more
than 49.9% of our voting interest, with each share of class A common stock
issued and outstanding having one vote per share (subject to downward adjustment
if necessary to comply with the 49.9% maximum class vote) on all matters except
the election of directors or as otherwise provided by law. With respect to the
election of directors, the holders of the class A common stock as a class are
entitled to elect members to the Board of Directors who collectively represent
two of the five votes of our Board of Directors.
Collectively, the shares of class B common stock represent at least
50.1% of our voting interest, with each share of class B common stock issued and
outstanding having five votes per share (subject to upward adjustment, if
necessary, to comply with the 50.1% minimum class vote), on all matters except
the election of directors or as otherwise provided by law. With respect to the
election of directors, the class B common stock, voting together as a class, may
elect up a majority of the Board of Directors.
The shares of class C common stock do not have voting rights.
Transfer Restriction
The class B and class C common stock cannot be transferred, sold or
otherwise disposed of to any third party, directly or indirectly, except (1) to
family members, or by will or by operation of the laws of descent and devise (in
-32-
<PAGE>
which case the transferees will continue to be bound by these restrictions), (2)
such number of shares which does not exceed 10% of the class B or class C common
stock outstanding when originally issued, or (3) pursuant to a transaction or
series of transactions on terms and conditions which are substantially identical
in the opinion of counsel to the terms and conditions made available to all
holders of the class A common stock, including form, type and amount of
consideration per share, the availability of such consideration and the timing
of payment. To the extent it deems necessary, such counsel may rely on the
opinion of a nationally recognized investment banking firm in evaluating the
terms of any securities or other consideration being offered.
Preferred Stock
We have 5,000 shares of preferred stock authorized, which shares of
preferred stock may be issued in one or more series, and our board of directors
is authorized, without further action by the stockholders, to designate the
rights, preferences, limitations and restrictions of and upon shares of each
series, including dividend, voting, redemption and conversion rights.
Series A Redeemable Preferred Stock
As of August 1, 2000, we had outstanding 618 shares of series A
redeemable preferred stock, par value $1,000 per share.
Stated Value. Each share of preferred stock has a stated value equal to
$1,000.
Liquidation Preference. Upon a liquidation of the company (including a
sale by us of all or substantially all of our assets or our merger or
consolidation with another company where we are not the surviving entity), the
assets of the company available for distribution to the stockholders of the
company (after payment or provision for liabilities of the company), whether
from capital, surplus or earnings, shall be distributed in the following order
of priority: (i) the holders of the preferred stock, including any preferred
stock issued as a dividend on originally issued preferred stock, shall be
entitled to receive, prior and in preference to any distribution to the holders
of any junior securities of the company, an amount equal to the stated value for
each share of preferred stock then outstanding and (ii) the remaining assets of
the company available for distribution, if any, to our stockholders shall be
distributed pro rata to the holders of issued and outstanding shares of common
stock.
Ranking. The preferred stock ranks senior to all classes and series of
capital stock of the company now existing or hereinafter authorized, issued or
outstanding, including, without limitation, the common stock, and any other
classes and series of capital stock of the company now or hereinafter
authorized, issued or outstanding. So long as any preferred stock is
outstanding, we will not issue any class or series of any class of capital stock
that ranks pari passu with the preferred stock with respect to rights on
liquidation, dissolution or winding up of the company.
Dividends. The holders of the preferred stock are entitled to receive
dividends at an annual rate of ____ shares of additional preferred stock for
each one hundred shares of preferred stock outstanding.
Conversion. The holders of the preferred stock do not have any
conversion rights.
Redemption. Each share of preferred stock is entitled to be redeemed at
$1,000 per share (plus accrued and unpaid dividends) on the earlier of (a)
_______, 2010, (b) upon a change of control of the Class A or Class B common
stock or (c) upon the sale of one or more WCS licenses for cash or a non-cash
sale which is subsequently converted into or redeemed for cash in an amount
proportional to that number of persons covered by the sale of such licenses for
cash, or that portion of a non-cash sale subsequently converted into or redeemed
for cash, compared to the total persons covered by our five initial WCS
licenses, in each case based on the 1996 or most recent subsequent estimate by
the United States Bureau of Census. Therefore, the number of shares redeemed
shall be computed by dividing the number of persons covered by the sale by the
total number of persons covered by the five initial WCS licenses owned by
Bal/Rivgam.
-33-
<PAGE>
Voting. The holders of the Preferred Stock are not entitled to vote on
any matters submitted for a vote to the stockholders of the Company.
Options and Warrants
There are currently no outstanding options or warrants to purchase
shares of common stock.
Antitakeover Effects of Provisions of the Certificate of Incorporation, Bylaws,
Delaware Law and Control Group Requirements
Certificate of Incorporation and Bylaws
Several provisions of our certificate of incorporation and bylaws could
deter or delay unsolicited changes in control.
Delaware Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless: (1) prior to such date, the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder; (2) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
Control Group Requirements
In order to meet the control group requirements, our certificate of
incorporation provides that the class B common stock, as a class, must
constitute 50.1% of the voting power. The structure that we have adopted to
ensure compliance with the control group requirements will likely deter and
delay unsolicited changes in control. See "Risk Factors--Government
Regulation--Control Group Requirements" and "--Effect of Control by Certain
Stockholders."
Transfer Agent and Registrar
The transfer agent and registrar for the class A common stock is
___________________.
-34-
<PAGE>
UNDERWRITING
The following is a summary of all of the material terms of the
Underwriting Agreement and does not purport to be complete. A copy of the
Underwriting Agreement has been filed as an exhibit to the Registration
Statement of which this prospectus is a part.
The underwriters named herein for whom Gabelli & Company, Inc. and
___________ are acting as representatives have severally agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from us a total
of 2,000,000 shares of class A common stock. The number of shares that each such
underwriter has agreed to purchase is set forth opposite its name:
Underwriter Shares
Gabelli & Company, Inc. . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . 2,000,000
The Underwriting Agreement provides that the obligations of the
underwriters are subject to approval of certain legal matters by counsel to the
underwriters and various other conditions precedent, and that the underwriters
are obligated to purchase all shares of class A common stock offered in this
prospectus if any are purchased. The representatives have advised us that they
do not intend to sell to discretionary accounts.
The representatives have advised us that the underwriters propose to
offer the shares of class A common stock to the public at the price set forth on
the cover page of this prospectus and to certain dealers at those prices less a
concession not in excess of $_____ per share. The underwriters may allow, and
such dealers may reallow, a concession not in excess of $____ per share to
certain other dealers. After the offering, the offering prices and other terms
may be changed by the representatives.
We have agreed to indemnify the Underwriters against certain civil
liabilities in connection with this Offering, including liabilities under the
Securities Act of 1933. We have agreed to pay the representatives an expense
allowance on a nonaccountable basis equal to __% of the gross proceeds derived
from the sale of the shares of class A common stock underwritten, $______ of
which has been paid to date.
Pursuant to the Underwriting Agreement, the directors and executive
officers and stockholders of the Company holding, in the aggregate, _______
shares of class A common stock, have agreed not to sell or otherwise dispose of
any of such shares for _____ months from the date of this prospectus without the
prior written consent of the representatives. The representatives may, in their
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. In addition, the Underwriting
Agreement provides that, for a period of _________ from the date of this
prospectus, the representatives will have the right to send a representative to
observe each meeting of our board of directors. The representatives have not yet
selected a representative.
Prior to the offering, there has been no public market for the class A
common stock. The initial public offering price will be determined through
negotiations between us and the representatives. Among the factors considered in
determining the initial public offering price, in addition to prevailing market
conditions, are price-earnings ratios of publicly trades companies that the
representatives believe to be comparable to us, certain financial information of
the company, the history of, and the prospects for, the company and the industry
in which we compete and assessment of our management, our past and present
operations, the prospects for, and the timing of, our future revenues, the
present state of our development and the above factors in relation to market
values and various valuation measures of other companies engaged in activities
similar to us. There can be no assurance that an active trading market will
develop to the class A common stock or that the class A common stock will trade
in the public market subsequent to the offering at or above the initial public
offering price.
-35-
<PAGE>
Application will be made to list the Common Stock on the Nasdaq
SmallCap Market. In order to meet the requirements for listing the class A
common stock on the Nasdaq SmallCap Market, the underwriters have undertaken to
sell lots of ___ or more shares to a minimum of _____ beneficial owners.
The Underwriters do not intend to confirm sales of the Common Stock
offered hereby to any accounts over which they exercise discretionary authority.
The underwriters may engage in stabilizing transactions, syndicate
short covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934. Stabilizing transactions permit bids
to purchase the shares of class A common stock so long as the stabilizing bids
do not exceed a specified maximum. Syndicate short covering transactions involve
purchases of the shares of class A common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
selling group member when the shares of class A common stock originally sold by
such selling group member are repurchased in the open market by the
underwriters. Any of these activities may stabilize or maintain the market price
of the class A common stock above independent market levels. The underwriters
are not required to engage in these activities, and may discontinue these
activities at any time.
Under Rule 2720 of the Conduct Rules of the NASD ("Rule 2720"), we are
considered an affiliate of Gabelli & Company, Inc. This offering is being
conducted in accordance with Rule 2720, which provides that among other things,
when an NASD member participates in the underwriting of an affiliate's equity
securities the public offering price per share can be no lower than that
recommended by a "Qualified Independent Underwriter" meeting certain standards.
In accordance with this requirement, _______________ has assumed the
responsibilities of acting as QIU and will recommend a public offering price for
the common stock in compliance with the requirements of Rule 2720. In connection
with this offering, ____________ is performing due diligence investigations and
reviewing and participating in the preparation of this prospectus and the
registration statement of which this prospectus forms a part. As compensation
for the services of ____________ as QIU, we have agreed to pay ___________
customary QIU fees.
EXPERTS
The financial statements of Bal/Rivgam L.L.C. at December 31, 1999 and
for the years ended December 31, 1998 and 1999 and the period from March 25,
1997 (inception) to December 31, 1999 appearing in this prospectus and
Registration Statement have been audited by Anchin, Block & Anchin LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
Bal/Rivgam's ability to continue as a going concern as described in Note 1 to
the financial statements) appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be
passed upon for the company by Olshan Grundman Frome Rosenzweig & Wolosky LLP,
New York, New York.
-36-
<PAGE>
Index
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Report of Independent Auditors .............................................F-2
Audited Financial Statements
Balance Sheet at December 31, 1999..........................................F-3
Statements of Operations for the Years Ended December 31, 1998 and 1999
and the period from March 25, 1997 (inception) to December 31, 1999.........F-4
Statements of Changes in Members' Capital (Deficit) for the period from
March 25, 1997 (inception) to December 31, 1999.............................F-5
Statements of Cash Flows for the Years Ended December 31, 1998 and 1999
and the period from March 25, 1997 (inception) to December 31, 1999.........F-6
Notes to Financial Statements...............................................F-7
Unaudited Financial Statements
Balance Sheet at March 31, 2000.............................................F-14
Statements of Operations for the Three Months Ended March 31, 1999
and March 31, 2000 and the period from March 25, 1997 (inception)
to March 31, 2000.........................................................F-15
Statements of Changes in Members' Capital (Deficit) for the period from
March 25, 1997 (inception) to March 31, 2000................................F-16
Statements of Cash Flows for the Three Months Ended March 31, 1999 and
March 31, 2000 and the period from March 25, 1997 (inception) to March 31,
2000........................................................................F-17
Notes to Financial Statements...............................................F-18
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or applicable and therefore have been omitted.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Members and Board of Directors
Bal/Rivgam L.L.C.
We have audited the accompanying balance sheet of Bal/Rivgam L.L.C. (the
"Company") a development stage enterprise as of December 31, 1999, and the
related statements of operations, changes in members' capital (deficit), and
cash flows for the years ended December 31, 1998 and 1999 and the period from
March 25, 1997 (inception) to December 31, 1999. 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 Bal/Rivgam L.L.C. at December
31, 1999, and the results of its operations and its cash flows for the years
ended December 31, 1998 and 1999 and the period from March 25, 1997 (inception)
to December 31, 1999, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming Bal/Rivgam
L.L.C. will continue as a going concern. As more fully described in Note 1, the
Company has incurred losses since inception and has not yet adopted a business
plan or determined how to finance its operations and will need to obtain capital
in order to fund its interest and principal payment obligations and for working
capital and general corporate purposes. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
/s/ Anchin, Block & Anchin LLP
New York, New York
May 31, 2000
F-2
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Balance Sheet
December 31,
1999
----
Assets
WCS licenses $ 652,605
------------
Total non-current assets $ 652,605
============
Liabilities and Members' Capital (Deficit)
Accounts payable and accrued expenses $ 989,102
Loans from Rivgam 785,886
------------
Total non-current liabilities 1,774,988
Members' capital (deficit):
Capital contributions 49,900
Deficit accumulated during development stage (1,172,283)
------------
Total members' capital (deficit) (1,122,383)
------------
Total liabilities and members' capital (deficit) $ 652,605
============
See accompanying notes to the financial statements.
F-3
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Statements of Operations
<TABLE>
<CAPTION>
March 25, 1997 Twelve Months Ended
(Inception) to December 31,
December 31, 1999 1998 1999
----------------- ---- ----
<S> <C> <C> <C>
Interest income $ 2,019 $ - $ -
Interest expense (500,148) (125,136) (144,956)
Commitment fees (656,717) (160,540) (160,540)
Other expenses (17,437) (6,364) (4,000)
----------------- --------------- ---------------
Net loss $ (1,172,283) $ (292,040) $ (309,496)
================= =============== ================
Net loss allocated to:
Managing member $ (19,293) $ (6,045) $ (5,059)
=================== =============== ===============
Rivgam Communicators, L.L.C. $ (1,152,990) $ (285,995) $ (304,437)
================= =============== ===============
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Statement of Changes in Members' Capital (Deficit)
For the period from March 25, 1997 (Inception) through December 31, 1999
<TABLE>
<CAPTION>
Deficit Total
Accumulated During Members'
Capital Development Capital
Contributions Stage (Deficit)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital contributions $ 49,900 $ - $ 49,900
Net loss - (570,747) (570,747)
-------- -------------- ------------
Balance at December 31, 1997 49,900 (570,747) (520,847)
Net loss - (292,040) (292,040)
-------- -------------- ------------
Balance at December 31, 1998 49,900 (862,787) (812,887)
Net loss - (309,496) (309,496)
-------- -------------- ------------
Balance at December 31, 1999 $ 49,900 $ (1,172,283) $ (1,122,383)
======== ============== ============
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Statements of Cash Flows
<TABLE>
<CAPTION>
March 25, 1997 Twelve Months Ended
(Inception) to December 31,
December 31, 1999 1998 1999
----------------- ---- ----
Operating activities:
<S> <C> <C> <C>
Net loss $ (1,172,283) $ (292,040) $ (309,496)
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase in accounts payable and accrued expenses 989,102 284,967 303,496
----------------- ------------- --------------
Net cash used in operating activities (183,181) (7,073) (6,000)
Investing activities:
Purchase of WCS licenses (652,605) 0 0
----------------- -------------- --------------
Net cash used in investing activities (652,605) 0 0
Financing activities:
Proceeds from loans from Rivgam 12,685,254 7,073 6,000
Repayment of loans from Rivgam (11,899,368) 0 0
Capital contributions 49,900 0 0
----------------- -------------- -------------------
Net cash provided by financing activities 835,786 7,073 6,000
Net change in cash 0 0 0
Cash, beginning of period 0 0 0
----------------- -------------- -------------------
Cash, end of period $ 0 $ 0 $ 0
================= ============== ==================
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 1 Summary of Significant Accounting Policies
Description of Business:
Bal/Rivgam L.L.C. ("the Company") was formed in March 1997 to acquire,
develop and manage wireless communications services ("WCS") licenses
obtained in the Federal Communications Commission's ("FCC") WCS A- and
B-Block auction. The Company won five licenses in 1997 to provide
wireless communications services over 10Mhz of spectrum to a population
of approximately 42 million, including Los Angeles, CA and Boston, MA.
James Balitsos is the Managing Member of the Company with a 50.1%
equity interest. Rivgam Communicators, L.L.C. ("Rivgam"), an indirect
wholly owned subsidiary of Gabelli Group Capital Partners, Inc.
("GGCP"), owns a 49.9% interest in the Company.
The LLC will continue through December 31, 2044 unless otherwise
extended as provided for in the Limited Liability Company Agreement.
Basis of Presentation:
The financial statements are prepared in conformity with generally
accepted accounting principles applicable to a development stage
enterprise.
The Company's financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business and do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets and the amount and
classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
The Company believes that its WCS licenses have substantial potential.
However, the Company has not yet adopted a business plan or determined
how to finance its operations because of uncertainties relating to WCS,
which makes evaluation difficult, including without limitation the
newness of WCS, financing, affiliation and technology issues.
Therefore, the Company has not yet determined whether to develop it WCS
licenses on its own, to joint venture its licenses with other WCS or
wireless telephone licensees or operators, or to sell some or all of
its licenses. The Company expects to continually evaluate these factors
and to adopt a business plan once the financing, regulatory and market
aspects of WCS are less uncertain.
F-7
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 1 Summary of Significant Accounting Policies (continued):
Basis of Presentation (continued):
The Company has incurred losses since inception and will need to obtain
capital in order to fund its interest and principal payment obligations
and for working capital and general corporate purposes. There can be no
assurance that the Company can raise sufficient capital to fund its
obligations and finance the construction of its networks.
Accordingly, these conditions raise substantial doubt about the
Company's ability to continue as a going concern.
Administrative Services:
The Company has never had any paid employees. GGCP provided the
Company, at its request, with certain services in connection with the
Company's bidding for WCS licenses in the FCC auction in early 1997.
Aside from that matter, neither member provided the Company with a
substantial amount of services. Neither member charged the Company for
the services provided, as such amounts are not significant.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the carrying amounts of assets and
liabilities and disclosures at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual
results could differ from those estimates.
Amortization of Licenses:
The cost of WCS licenses will be amortized over a period, consistent
with the industry standard, which will begin when operations commence.
Pursuant to FCC regulations, license holders are required to provide
"substantial service" to their service area within ten years from the
date of award. For a WCS licensee who offers fixed point-to-point
services, substantial service constitutes the construction of four
permanent links per one million people in its licensed area. For a WCS
licensee who offers mobile services, substantial service is
demonstrated by the licensee covering a minimum of 20% of the
population of its licensed service area.
F-8
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 1 Summary of Significant Accounting Policies (continued):
Income Taxes:
No Federal, state or local income tax expense (benefit) has been
provided on net income (loss) of the Company since the members were
required to report their allocable share of income or loss on their
respective income tax returns.
Earnings per Share:
The Company has not presented historical earnings per share because the
Company has operated as a limited liability company and because of the
significant changes in its capital structure which are not reflected in
the historical financial statements (see Note 6). The Company
prospectively will apply Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share."
Note 2 Limited Liability Company ("LLC") Agreement:
The Company was formed as an LLC in March 1997 to bid for WCS licenses
in the "A- and B-Block" auction. The Managing Member originally
contributed $25,000 to the LLC for a 50.1% equity interest and Rivgam
contributed $24,900 to the LLC for a 49.9% equity interest. Under the
terms of the LLC Agreement all deductions with respect to interest
expense and commitment fees are allocated 99% to Rivgam and 1% to the
Managing Member. All profits of the LLC are allocated 99% to Rivgam and
1% to the Managing Member until the aggregate amount of all profits
allocated to Rivgam and the Managing Member are equal to deductions
with respect to interest expense and commitment fees. Losses prior to
that time and all subsequent profits and losses are to be allocated to
the Managing Member and to Rivgam in proportion to their respective
interests.
F-9
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 3: Loans from Rivgam:
Loans from Rivgam at December 31, 1999 consists of financing for the
WCS licenses awarded in the following markets and matures on April 4,
2002.
Los Angeles - San Diego, CA $ 445,900
Boston, MA 141,050
Minneapolis - St. Paul, MN 1
Milwaukee, WI 1
Phoenix, AZ 65,653
---------
$ 652,605
Less amounts due within one year 0
---------
$ 652,605
=========
The acquisition of the licenses was financed by Rivgam under a Loan
Agreement ("Agreement") dated April 4, 1997. Under the Agreement the
loan will mature on April 4, 2002. The interest rate on the unpaid
principal balance is fixed at 15% per annum and due at maturity;
additionally, a commitment fee of 20% per annum shall be due and
payable, without interest charged thereon, on the earlier of the
maturity date or the payment in full of the loan. The Agreement further
stipulates that a special fee equal to 15% of the net profits (as
defined) of the Company be paid to Rivgam from time to time as and when
realized.
The Agreement also permits the Company to borrow additional funds
("Supplemental Loans") under the same terms and conditions set forth to
make the initial loan. The maximum amount which may be borrowed on
Supplemental Loans is equal to the cost of the licenses (net of equity
contributions at the time of grant of the licenses) plus $200,000. At
December 31, 1999 the maximum amount which may be borrowed as
Supplemental Loans was $802,705.
The Agreement is collateralized by all of the assets of the Company.
Additionally, under the terms of the Agreement, the Company may not,
among other things, incur additional indebtedness, enter into related
party transactions, make distributions and is limited in the amount of
capital expenditures it can make.
At December 31, 1999, interest and commitment fees of $984,738 have
been accrued and included in accounts payable and accrued expenses.
F-10
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 4: Commitments and Contingencies
The Company entered into an agreement with an affiliate, Lynch PCS
Corporation G ("Lynch"), whereby Lynch agreed to provide consulting
services relating to FCC auctions for WCS licenses in exchange for 5%
of the Company's net profits and reimbursement of related expenses.
The Company entered into an expense agreement with each of the Managing
Member and Rivgam, pursuant to which all out of pocket expenses
incurred by each in the organization of Bal/Rivgam LLC and in
connection with the license auction will be treated as a loan to the
Company, up to a maximum of $5,000 by the managing member and
additional expenses up to $75,000 will be treated as supplemental loans
by Rivgam. The interest payable on any such amount is 15% per annum,
compounded annually, and is due, together with the principal, on April
4, 2002.
Note 5: Subsequent Event
On February 1, 2000, the Company entered into a one year Finder's
Agreement with GGCP in which GGCP agreed to act as a finder to help the
Company realize the value of its WCS licenses. As compensation, GGCP
will receive six percent of any amount received for the sale of the WCS
licenses to any party contacted on the Company's behalf by GGCP. Such
compensation is payable in connection with a sale consummated within
one year after the expiration of the Finder's Agreement.
Note 6: Reorganization (unaudited)
Management contemplates the following transactions will take place
prior to its initial public offering ("Offering"). The Company will
convert from its status as an LLC to a C corporation and be renamed
Bal/Rivgam Wireless, Inc. (the "Reorganization"). As a result of the
Reorganization the Company will have three classes of Common Stock
authorized. The authorized capital stock of the company will consist of
20 million shares of Class A Common Stock; 10 million shares of Class B
Common Stock and 5 million shares of Class C Common Stock.
F-11
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 6 Reorganization (unaudited) (continued):
Under the plan of Reorganization the Managing Member will receive
4,008,000 shares of the Company's class B Common Stock and Rivgam will
receive 3,992,000 shares of the Company's class A Common Stock, each
representing all of the Company's class A and class B Common Stock
outstanding at that time. The Company will also issue 2,000,000 shares
of its non-voting class C Common Stock in exchange for the termination
of certain profit participation obligations to both Rivgam and an
affiliate, Lynch PCS Corporation G ("Lynch"). Rivgam and Lynch will
receive 1,500,000 shares and 500,000 shares of the Company's class C
Common Stock, respectively.
Collectively, the shares of Class A Common Stock represent not more
than 49.9% of the Company's voting interest, with each share of Class A
Common Stock issued and outstanding having one vote per share on all
matters, except the election of directors or as otherwise provided by
law. The holders of the Class A Common Stock as a class will be
entitled to elect up to two of the five members of the Company's Board
of Directors.
Collectively, the shares of Class B Common Stock represent at least
50.1% of the Company's voting interest, with each share of Class B
Common stock issued and outstanding having 5 votes per share on all
matters, except the election of directors or as otherwise provided by
law. With respect to the election of directors, the Class B Common
Stock, voting together as a class, may elect up to three of the five
members of the Company's Board of Directors.
The shares of Class C Common Stock do not have voting rights. The class
B and class C common stock cannot be transferred, sold or otherwise
disposed of to any third party, directly or indirectly, except (i) to
family members, (in which case the transferees will continue to be
bound by these restrictions), (ii) such number of shares does not
exceed 10% of the class B or class C common stock outstanding when
originally issued, or (iii) pursuant to a transaction or series of
transactions on terms and conditions which are substantially identical
in the opinion of counsel to the terms and conditions made available to
all holders of the class A common stock.
The holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available. In the event of the
liquidation, dissolution, or winding up of Bal/Rivgam, the holders of
Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, if any, then outstanding.
F-12
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 6 Reorganization (unaudited) (continued):
Prior to the conversion Rivgam will contribute approximately $1,350,000
of its outstanding loan, including accrued interest and commitment fees
to the Members' Capital. Subsequently, Rivgam will convert the
remaining principal amount of its loan, including accrued interest and
commitment fees, to the LLC which is expected to approximate $618,000,
into a redeemable preferred stock of the Company with a liquidation
value expected to approximate $1,968,000 (see below). Under the terms
of this conversion Rivgam's prior obligation to make further loans to
the Company will be terminated.
Series A Redeemable Preferred Stock:
The Company is authorized to issue 5,000 shares of Series A Preferred
Stock, par value $1,000 per share. The preferred stock (a) is entitled
to preferred dividends at an annual rate of 5 shares of additional
preferred stock for each one hundred shares of preferred stock
outstanding, (b) has no voting rights except as provided by law, and
(c) is entitled to be redeemed at $1,000 per share (plus accrued and
unpaid dividends) on the earlier of (i) x/x/2010, (ii) a change of
control of the Class A or Class B Common Stock or (iii) upon the sale
of one or more WCS licenses for cash or a non-cash sale under certain
circumstances. The difference between the carrying value of such shares
(which approximates fair value) and the redemption price will be
amortized using the effective interest method.
F-13
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Balance Sheet
<TABLE>
<CAPTION>
Pro Forma
March 31, March 31,
2000 2000
---- ----
Assets (unaudited)
<S> <C> <C>
WCS licenses $ 652,605 $ 652,605
------------ ---------
Total non-current assets $ 652,605 $ 652,605
============ =========
Liabilities and members'/stockholders'
capital (deficit)
Accounts payable and accrued expenses $ 1,071,473 $ -
Loans from Rivgam 785,886 -
------------ ---------
Total non-current liabilities 1,857,359 -
------------ ---------
Redeemable preferred stock - 507,359
------------ ---------
Class A common stock 399
Class B common stock 401
Class C common stock 200
Additional paid in capital 1,398,900
Accumulated deficit (1,254,654)
Capital contributions 49,900 -
Deficit accumulated during development stage (1,254,654) -
------------ ----------
Total members'/stockholders' capital (deficit) (1,204,754) 145,246
------------ ----------
Total liabilities and members' capital (deficit) $ 652,605 $ 652,605
============ ==========
</TABLE>
See accompanying notes to the financial statements.
F-14
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
March 25, 1997 Three Months Ended
(Inception) to March 31,
March 31, 2000 1999 2000
-------------- ---- ----
<S> <C> <C> <C>
Interest income $ 2,019 $ - $ -
Interest expense (542,384) (36,111) (42,236)
Commitment fees (696,852) (40,135) (40,135)
Other expenses (17,437) - -
----------------- --------------- -------------
Net loss $ (1,254,654) $ (76,246) $ (82,371)
================= =============== =============
Net loss allocated to:
Managing member $ (20,116) $ (762) $ (824)
================= =============== =============
Rivgam Communicators, L.L.C. $ (1,234,538) $ (75,484) $ (81,547)
================= =============== =============
</TABLE>
See accompanying notes to the financial statements.
F-15
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Statement of Changes in Members' Capital (Deficit)
For the period from March 25, 1997 (Inception) through March 31, 2000
(unaudited)
<TABLE>
<CAPTION>
Deficit Total
Accumulated During Members'
Capital Development Capital
Contributions Stage (Deficit)
----------------------------------------------------------------
<S> <C> <C> <C>
Capital contributions $ 49,900 $ - $ 49,900
Net loss - (570,747) (570,747)
------------ ----------------- -------------
Balance at December 31, 1997 49,900 (570,747) (520,847)
Net loss - (292,040) (292,040)
------------ ----------------- -------------
Balance at December 31, 1998 49,900 (862,787) (812,887)
Net loss - (309,496) (309,496)
------------ ----------------- -------------
Balance at December 31, 1999 49,900 (1,172,283) (1,122,383)
Net loss - (82,371) (82,371)
------------ ----------------- -------------
Balance at March 31, 2000 $ 49,900 $ (1,254,654) $(1,204,754)
============ ================= =============
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
March 25, 1997 Three Months Ended
(Inception) to March 31,
March 31, 2000 1999 2000
-------------- ---- ----
Operating activities:
<S> <C> <C> <C>
Net loss $ (1,254,654) $ (76,246) $ (82,371)
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase in accounts payable and accrued expenses 1,071,473 76,246 82,371
-------------- ----------- ----------
Net cash used in operating activities (183,181) 0 0
Investing activities:
Purchase of WCS licenses (652,605) 0 0
-------------- ----------- ----------
Net cash used in investing activities (652,605) 0 0
Financing activities:
Proceeds from loans from Rivgam 12,685,254 0 0
Repayment of loans from Rivgam (11,899,368) 0 0
Capital contributions 49,900 0 0
-------------- ----------- ----------
Net cash provided by financing activities 835,786 0 0
Net change in cash 0 0 0
Cash, beginning of period 0 0 0
-------------- ----------- ----------
Cash, end of period $ 0 $ 0 $ 0
============== =========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-17
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
March 31, 2000
(unaudited)
Note 1 Basis of Presentation
These unaudited interim financial statements of Bal/Rivgam L.L.C. have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not
include all of the information and the footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, which are of a normal
recurring nature, necessary for a fair presentation have been included.
Operating results of interim periods are not necessarily indicative of
the results that may be expected for the full year.
In preparing the unaudited interim financial statements, management is
required to make estimates and assumptions that affect the amounts
reported in the financial statements. Actual results could differ from
these estimates.
These financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31,
1999, and appearing elsewhere in this prospectus.
The Company has incurred losses since inception and will need to obtain
capital in order to fund its interest and principal payment obligations
and for working capital and general corporate purposes. There can be no
assurance that the Company can raise sufficient capital to fund its
obligations and finance the construction of its networks. Accordingly,
these conditions raise substantial doubt about the Company's ability to
continue as a going concern.
Note 2: Subsequent Event
On February 1, 2000, the Company entered into a one year Finder's
Agreement with GGCP in which GGCP agreed to act as a finder to help the
Company realize the value of its WCS licenses. As compensation, GGCP
will receive six percent of any amount received for the sale of the WCS
licenses to any party contacted on the Company's behalf by GGCP. Such
compensation is payable in connection with a sale consummated within
one year after the expiration of the Finder's Agreement.
F-18
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
March 31, 2000
(unaudited)
Note 3 Reorganization
Management contemplates the following transactions will take place
prior to its initial public offering (the "Offering"). The Company will
convert from its status as an LLC to a C corporation and be renamed
Bal/Rivgam Wireless, Inc. (the "Reorganization"). As a result of the
Reorganization the Company will have three classes of Common Stock
authorized. The authorized capital stock of the company will consist of
20 million shares of Class A Common Stock; 10 million shares of Class B
Common Stock and 5 million shares of Class C Common Stock.
Under the plan of Reorganization the Managing Member will receive
4,008,000 shares of the Company's class B Common Stock and Rivgam will
receive 3,992,000 shares of the Company's class A Common Stock, each
representing all of the Company's class A and class B Common Stock
outstanding at that time. The Company will also issue 2,000,000 shares
of its non-voting class C Common Stock in exchange for the termination
of certain profit participation obligations to both Rivgam and an
affiliate, Lynch PCS Corporation G ("Lynch"). Rivgam and Lynch will
receive 1,500,000 shares and 500,000 shares of the Company's class C
Common Stock, respectively.
Collectively, the shares of Class A Common Stock represent not more
than 49.9% of the Company's voting interest, with each share of Class A
Common Stock issued and outstanding having one vote per share on all
matters, except the election of directors or as otherwise provided by
law. The holders of the Class A Common Stock as a class will be
entitled to elect up to two of the five members of the Company's Board
of Directors.
Collectively, the shares of Class B Common Stock represent at least
50.1% of the Company's voting interest, with each share of Class B
Common stock issued and outstanding having 5 votes per share on all
matters, except the election of directors or as otherwise provided by
law. With respect to the election of directors, the Class B Common
Stock, voting together as a class, may elect up to three of the five
members of the Company's Board of Directors.
The shares of Class C Common Stock do not have voting rights. The class
B and class C common stock cannot be transferred, sold or otherwise
disposed of to any third party, directly or indirectly, except (i) to
family members, (in which case the transferees will continue to be
bound by these restrictions), (ii) such number of shares does not
exceed 10% of the class B or class C common stock outstanding when
originally issued, or (iii) pursuant to a transaction or series of
transactions on terms and conditions which are
F-19
<PAGE>
Bal/Rivgam L.L.C.
(A Development Stage Enterprise)
Notes to Financial Statements
March 31, 2000
(unaudited)
Note 3 Reorganization (continued):
substantially identical in the opinion of counsel to the terms and
conditions made available to all holders of the class A common stock.
The holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available. In the event of the
liquidation, dissolution, or winding up of Bal/Rivgam, the holders of
Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, if any, then outstanding.
Prior to the conversion Rivgam will contribute approximately $1,350,000
of its outstanding loan, including accrued interest and commitment fees
to the Members' Capital. Subsequently, Rivgam will convert the
remaining principal amount of its loan, including accrued interest and
commitment fees, to the LLC which is expected to approximate $618,000,
into a redeemable preferred stock of the Company with a liquidation
value expected to approximate $1,968,000 (see below). Under the terms
of this conversion Rivgam's prior obligation to make further loans to
the Company will be terminated.
Series A Redeemable Preferred Stock:
The Company is authorized to issue 5,000 shares of Series A Preferred
Stock, par value $1,000 per share. The preferred stock (a) is entitled
to preferred dividends at an annual rate of 5 shares of additional
preferred stock for each one hundred shares of preferred stock
outstanding, (b) has no voting rights except as provided by law, and
(c) is entitled to be redeemed at $1,000 per share (plus accrued and
unpaid dividends) on the earlier of (i) x/x/2010, (ii) a change of
control of the Class A or Class B Common Stock or (iii) upon the sale
of one or more WCS licenses for cash or a non-cash sale under certain
circumstances. The difference between the carrying value of such shares
(which approximates fair value) and the redemption price will be
amortized using the effective interest method.
F-20
<PAGE>
No dealer, salesman or any other person is authorized to give any information or
to make any representations in connection with this offering not contained in
this Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or any other person.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the Securities offered by this Prospectus
or an offer by any person in any jurisdiction where such an offer or
solicitation is not authorized or is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that information herein is correct as of any time subsequent to
its date.
BAL/RIVGAM WIRELESS, INC.
2,000,000 Shares of Class A
Common Stock
PROSPECTUS
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
As permitted by the Delaware General Corporation Law ("DGCL"),
Bal/Rivgam's Certificate of Incorporation, as amended, limits the personal
liability of a director or officer to Bal/Rivgam for monetary damages for breach
of fiduciary duty of care as a director. Liability is not eliminated for (i) any
breach of the director's duty of loyalty to Bal/Rivgam or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payment of dividends or stock purchases
or redemptions pursuant to Section 174 of the DGCL, or (iv) any transaction from
which the director derived an improper personal benefit.
Bal/Rivgam's by-laws provide that Bal/Rivgam shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he is
or was a director, officer, employee or an agent of Bal/Rivgam or is or was
serving at the request of Bal/Rivgam as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
the defense or settlement of such action, suit or proceeding, to the fullest
extent and in the manner set forth in and permitted by the General Corporation
Law of the State of Delaware, as from time to time in effect, and any other
applicable law, as from time to time in effect. Such right of indemnification is
not be deemed exclusive of any other rights to which such director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of each such person.
Bal/Rivgam has entered into indemnity agreements with its directors and
executive officers. The indemnity agreements provide that Bal/Rivgam shall
indemnify such directors and executive officers from and against any and all
liabilities, costs and expenses, amounts of judgments, fines, penalties and
amounts paid in settlement of or incurred in defense of any settlement in
connection with any threatened, pending or completed claim, action, suit or
proceeding in which such persons are a party (other than a proceeding or action
by or in the right of Bal/Rivgam to procure a judgment in its favor), or which
may be asserted against them by reason of their being or having been an officer
or director of Bal/Rivgam (the "Losses"), unless it is determined that such
directors and executive officers did not act in good faith and for a purpose
which they reasonably believed to be in, or in the case of service to an entity
related to Bal/Rivgam, not opposed to, the best interests of Bal/Rivgam and, in
the case of a criminal proceeding or action, that they had reasonable cause to
believe that their conduct was unlawful. The indemnity agreements also provide
that Bal/Rivgam shall indemnify such directors and executive officers from and
against any and all Losses that they may incur if they are a party to or
threatened to be made a party to any proceeding or action by or in the right of
Bal/Rivgam to procure a judgment in its favor, unless it is determined that they
did not act in good faith and for a purpose that they reasonably believed to be
in, or, in the case of service to an entity related to Bal/Rivgam, not opposed
to, the best interests of Bal/Rivgam, except that no indemnification for Losses
shall be made in respect of (i) any claim, issue or matter as to which they
shall have been adjudged to be liable to Bal/Rivgam or (ii) any threatened or
pending action to which they are a party or are threatened to be made a party
that is settled or otherwise disposed of, unless and only to the extent that any
court in which such action or proceeding was brought determines upon application
that, in view of all the circumstances of the matter, they are fairly and
reasonably entitled to indemnity for such expenses as such court shall deem
proper. Such indemnification is in addition to any other rights to which such
officers or directors may be entitled under any law, charter provision, by-law,
agreement, vote of shareholders or otherwise.
ITEM 25. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses (other than
underwriting discounts and commissions) which will be paid by Bal/Rivgam in
connection with the issuance and distribution of the securities being
registered. With the exception of the SEC registration fee, all amounts shown
are estimates.
SEC Registration Fee $2,640.00
NASD filing fee
Blue Sky Fees and Expenses
Printing and Engraving
II-1
<PAGE>
Accounting Fees and Expenses
Legal Fees and Expenses
Miscellaneous expenses
Total
Item 26. Recent Sales of Unregistered Securities
The following securities were issued by Bal/Rivgam within the past
three years and are not registered under the Securities Act of 1933, as amended
(the "Act"). Each of the transactions is claimed to be exempt from registration
with the Securities and Exchange Commission pursuant to Section 4(2) of the Act
as transactions by an issuer not involving a public offering. All of such
securities are deemed to be restricted securities for the purposes of the Act.
All certificates representing such issued and outstanding restricted securities
of Bal/Rivgam have been properly legended. No underwriter was involved in any of
the below transactions.
On ________, 2000, 3,992,000 shares of class A common stock were issued
to Rivgam Communicators, LLC and 4,008,000 shares of class B common stock were
issued to James T. Balitsos upon the conversion of the membership interests in
the limited liability company. On ________, 2000, 1,500,000 shares of class C
common stock were issued to Rivgam Communicators, LLC and 500,000 shares of
class C common stock were issued to Lynch PCS Corporation G upon the
cancellation of Bal/Rivgam's obligation to pay a portion of its net profits to
each under the loan agreement and the Lynch agreement, respectively.
On ____, 2000, [ ] shares of series A preferred stock were issued to
Rivgam Communicators, LLC upon cancellation of Bal/Rivgam's outstanding
indebtedness under the loan agreement.
Item 27. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit Number Description
*3.1 Certificate of Incorporation of the Registrant
*3.2 By-laws of the Registrant
*5.1 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky
LLP
**10.1 Finders Agreement dated February 1, 2000 between
Bal/Rivgam L.L.C. and Gabelli Group Capital Partners,
Inc.
**10.2 Limited Liability Company Agreement dated March 25,
1997 by and between James Balitsos and Rivgam
Communicators, LLC.
**10.3 Loan Agreement dated April 4, 1997 by and between
Bal/Rivgam L.L.C. and Rivgam Communicators, LLC.
**10.4 Expense Agreement dated March 25, 1997 between
Bal/Rivgam L.L.C., James Balitsos and Rivgam
Communicators, LLC
**10.5 Lynch Agreement dated March 25, 1997 between Lynch
PCS Corporation G and Bal/Rivgam, L.L.C.
**23.1 Consent of Anchin, Block & Anchin LLP
*23.2 Consent of Olshan Grundman Frome Rosenzweig & Wolosky
LLP (contained in Exhibit 5.1)
--------------
* To be filed by amendment
** Filed herewith
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
II-2
<PAGE>
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(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;
(iii) To include any additional or changed material information on
the plan of distribution.
(2) For the purpose of determining liability under the Securities
Act of 1933, to treat each post-effective amendment as a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time as
the initial bona fide offering thereof.
(3) 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 Securities Act of 1933 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 Securities Act of
1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on the 21st day of
June, 2000.
BAL/RIVGAM WIRELESS, INC.
By: /s/ James T. Balitsos
-----------------------------------------
James T. Balitsos
Chairman of the Board
(Chief Executive Officer and
Chief Financial Officer)
SIGNATORIES
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature
appears below constitutes and appoints James T. Balitsos and Marie G. Balitsos,
and each one of them individually, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and to file
the same with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ James T. Balitsos
---------------------------- Chairman of the Board, Chief June 21, 2000
James T. Balitsos Executive Officer and Director
(Principal Financial Officer,
Chief Accounting Officer)
/s/ Marie G. Balitsos Director June 21, 2000
----------------------------
Marie G. Balitsos
/s/ Mario J. Gabelli Director June 23, 2000
----------------------------
Mario J. Gabelli
II-4
<PAGE>
Exhibit Index
Exhibit Number Description
*3.1 Certificate of Incorporation of the Registrant
*3.2 By-laws of the Registrant
*5.1 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky
LLP
**10.1 Finders Agreement dated February 1, 2000 between
Bal/Rivgam L.L.C. and Gabelli Group Capital Partners,
Inc.
**10.2 Limited Liability Company Agreement dated March 25,
1997 by and between James Balitsos and Rivgam
Communicators, LLC.
**10.3 Loan Agreement dated April 4, 1997 by and between
Bal/Rivgam L.L.C. and Rivgam Communicators, LLC.
**10.4 Expense Agreement dated March 25, 1997 between
Bal/Rivgam L.L.C., James Balitsos and Rivgam
Communicators, LLC
**10.5 Lynch Agreement dated March 25, 1997 between Lynch
PCS Corporation G and Bal/Rivgam L.L.C.
**23.1 Consent of Anchin, Block & Anchin LLP
*23.2 Consent of Olshan Grundman Frome Rosenzweig & Wolosky
LLP (contained in Exhibit 5.1)
--------------
* To be filed by amendment
** Filed herewith
II-5
