SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal year ended: December 31, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from: to
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Commission file number: 33-5902-NY
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 22-2774460
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
210 South Main Street, Suite 900
Salt Lake City, Utah 84111
- --------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 595-0104
Micro-Lite Television 9 Exchange Place, Suite 210 Salt Lake City, Utah 84111
(Former Name and address of Issuer)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001
Class A Preferred Stock, Par Value $0.001
(Title of Each Class)
Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best or registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
The aggregate market value of voting stock held by non-affiliates of
the registrant on February 16, 1999 was $527,698 based on an average bid and ask
price of $0.125.
The number of shares outstanding of the registrant's Preferred Class A
Stock on February 16, 1999 was 6,729,166.
DOCUMENTS INCORPORATED BY REFERENCE
Form 8-K dated November 1, 1996.
<PAGE>
INDEX
Page
Number
PART I.
Item 1. Business. 3
Item 2. Properties. 11
Item 3. Legal Proceedings. 11
Item 4. Submission of Matters to a Vote of Security Holders. 11
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters. 11
Item 6. Selected Financial Data. 13
Item 7. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations.
Item 8. Financial Statements and Supplementary Data. 15
Item 9. Changes in and Disagreements with Accountants on 15
Accounting and Financial Disclosure.
PART III.
Item 10. Directors and Executive Officers of the Registrant. 15
Item 11. Executive Compensation. 16
Item 12. Security Ownership of Certain Beneficial
Owners and Management. 16
Item 13. Certain Relationships and Related Transactions. 16
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 17
<PAGE>
PART I.
All statements contained herein that are not historical facts, including but not
limited to, statements regarding the Company's plans for future development and
operation of its business, are based on current expectations. These statements
are forward-looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that could cause actual
results to differ materially are the following: a lack of sufficient capital to
finance the Company's business plan on terms satisfactory to the Company;
pricing pressures which could affect demand for the Company's service; changes
in labor, equipment and capital costs; the Company's inability to develop and
implement new services such as high-speed Internet access, two-way multi-media
services and digital video; the Company's inability to obtain the necessary
authorizations from the Federal Communications Commission ("FCC") for such new
services; competitive factors, such as the introduction of new technologies and
competitors into the wireless communications business; a failure by the Company
to attract strategic partners; general business and economic conditions; and the
other risk factors described from time to time in the Company's reports filed
with the Securities and Exchange Commission ("SEC"). The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which statements are made pursuant to the Private Securities
Litigation Reform Act of 1995, and as such, speak only as of the date made.
ITEM 1. BUSINESS
THE COMPANY
Superior Wireless Communications, Inc. (hereinafter referred to as the
"Company" or "Superior") is engaged in the business of accumulating wireless
cable licenses. This business includes the accumulation of certain Multipoint
Distribution Service (hereinafter referred to as "MDS"), Multichannel Multipoint
Distribution Service (hereinafter referred to as "MMDS"), Instructional
Television Fixed Service (hereinafter referred to as "ITFS") and Low-Power
Television Station (hereinafter referred to as "LPTV") rights (collectively MDS,
MMDS, ITFS and LPTV are sometimes hereinafter referred to as "Wireless Cable
Rights" or "Wireless Cable Channels"). The Company has wireless cable channel
rights in 7 domestic markets representing approximately 1.0 million households,
approximately .8 million of which the Company believes can be served by
line-of-sight ("LOS") transmissions (which generally require a direct,
unobstructed transmission path from the central transmitting antenna to the
antenna located on the subscriber's premises). The Company has obtained these
rights through purchases, leases and lease-purchase agreements in the following
domestic markets: Erie, Pennsylvania; Farmington, Missouri; Harrison, Arkansas;
Marshalltown and Cedar Rapids, Iowa; Columbia, Kentucky; and Lewiston, Idaho.
The Company intends to construct wireless cable systems or wireless Internet
systems in some of these markets and may lease and/or sell its rights in some of
these markets.
Background
On December 12, 1991, Marrco Communications, Inc. (hereinafter referred to
as "Marrco") was founded for purposes of accumulating Wireless Cable Rights in
domestic markets.
On March 14, 1994 in accordance with the terms and provisions of a
certain Purchase Agreement dated as of March 14, 1994 by and between the Company
and Marrco, 6,500,000 shares of the Company's Common Stock, $.001 par value per
share, were issued to Marrco or its nominees in consideration of Marrco's sale,
assignment and transfer to the Company of all rights, title and interest of
Marrco in and to all inventory, contract rights, license rights, accounts,
furniture, equipment, goods, documents, instruments, money, marketable
securities and all intangible assets of every kind and description of Marrco,
without exception, subject to the assumption by the Company of all debts and
liabilities of Marrco. Pursuant to the Agreement, the business of the Company
that existed on March 13, 1994 was distributed to Monroe Arndt, the President
and a director of the Company, prior to his resignation on March 14, 1994.
On October 25, 1996 the name of the Company was changed to Superior
Wireless Communications, Inc. and each of the 6,004,836 shares of then issued
and outstanding common stock of the Corporation were exchanged for one share of
preferred stock designated as Class A Convertible Cumulative Preferred Stock
(the
<PAGE>
"Class A Preferred Stock"), par value of $.001 per share. The Class A Preferred
Stock carries a ten percent (10%) dividend, which may be paid in common stock,
and is convertible into Common Stock of the Company as of October 25, 1998 (the
"Conversion Date"). The rate of this conversion is dependent on the price of the
Company's Common Stock prior to the Conversion Date. Currently, the Company has
no common stock outstanding, therefore the conversion price will most likely be
based upon a price of $1.25 per share.
Overview
The Company had originally targeted small to mid-size markets with
significant numbers of LOS households that do not have access to traditional
hard-wire cable. It was the Company's intention to construct wireless cable
systems within those markets. Currently, the Company does not believe that the
financing of wireless cable is feasible, as such, the focus has been switched to
the larger markets of the Company, like Erie, Farmington and Cedar Rapids. In
these markets the Company believes that it can successfully launch high-speed
wireless Internet systems. Currently, there are a number of different equipment
operators offering equipment to transmit high-speed data signals over the
Wireless Cable Channels.
High-Speed Internet Access Service
Asymmetrical Internet Access. The Company's high-speed Internet access strategy
is to initially launch commercial operations in a small number of markets in
order to evaluate the long-term viability and financial returns of the business.
This technology will initially utilize a high-speed wireless cable modem for
downstream Internet access, while relying on a telephone line for upstream
Internet access.
Two-Way Internet Access. During 1996, various industry participants successfully
tested a two-way wireless Internet technology using existing transmission and
reception equipment. This test confirmed that wireless cable frequencies are
capable of delivering two-way Internet access at speeds that are significantly
faster than speeds commonly available using conventional telephone lines.
However, before the Company may begin offering two-way Internet access on a
commercial basis, it must secure certain regulatory approvals from the FCC.
Various other wireless cable operators petitioned the FCC in March 1997 to
expand its digital authorizations to permit two-way transmission. The FCC issued
a Notice of Proposed Rule Making in October of 1997 soliciting comments on the
proposal. The comment period closed in February 1998. The final ruling on the
proposed rule making is currently pending at the FCC. See "Regulation."
CERTAIN REQUIREMENTS AND UNCERTAINTIES
The Company has begun planning, it has not introduced high-speed Internet access
service in any of its markets. The Company's ability to introduce these services
on a broad commercial basis will depend on a number of factors, including the
availability of sufficient capital, the success of the Company's development
efforts, competitive factors (such as the introduction of new technologies or
the entry of competitors with significantly greater resources than the Company
and increased competition for the renewal of programming and channel lease
agreements), the availability of appropriate transmission and reception
equipment on satisfactory terms, the expertise of the Company's management, and
the Company's ability to obtain the necessary regulatory changes and approvals
in a timely fashion. There is also uncertainty regarding the degree of
subscriber demand for these services, especially at pricing levels at which the
Company can achieve an attractive return on investment. Moreover, the Company
expects that the market for any such services will be extremely competitive. See
"Competition."
INDUSTRY OVERVIEW
Industry Overview
The Internet, a network of hundreds of interconnected, separately administered
public and commercial networks, has emerged as a global communications medium
enabling millions of people to share information and conduct business
electronically. During the past few years, the number of Internet users,
advertisers and content developers and businesses online has grown dramatically.
With readily available, low-cost Internet access, consumers and businesses are
making increased use of Web browsers, electronic mail, corporate
<PAGE>
intranets, telecommuting, online advertising and electronic commerce. According
to Wireless Broadcasting Magazine, there are over 12 million Internet users in
the United States. According to Jupiter Communications, the number of Internet
households worldwide will grow from an estimated 23.4 million in 1996 to 66.6
million by 2000. The Company believes that this growth in the number of users
will drive more substantial increases in both Internet advertising, which
International Data Corporation ("IDC") estimates will grow from $181 million in
1996 to $2.9 billion in 2000, and Internet commerce, which IDC estimates will
grow from $318 million in 1995 to $95 billion in 2000.
Internet usage continues to be stimulated by a number of factors, including the
emergence of the World Wide Web, the increasing sophistication of Internet
browsers and Web-enabled software, the availability of low-cost, flat-rate
pricing for Internet access and online services, and the wealth of increasingly
useful information published on the Internet. Increased Internet usage and the
availability of powerful new tools for the development and distribution of
Internet content have led to a proliferation of Internet-based services, such as
advertising, online magazines, specialized news feeds, interactive games and
educational and entertainment applications, that are increasingly incorporating
multimedia information such as video and near-CD-quality audio clips. The
Internet has the potential to become a platform through which consumers and
businesses easily access rich multimedia information and entertainment, creating
new sources of revenue for advertisers, content providers and businesses. The
growth of Internet advertising and commerce depends, in part, on the ability of
advertisers and online merchants to deliver a compelling multimedia message to
attract viewers and potential customers.
It is estimated that approximately 40% of US households have personal computers
and that 60% of businesses already have Internet access or will have access
within one year. Almost all of the access is provided over local telephone
company circuits, most of which are limited by current technology to providing
56 KBPS access. Many telephone companies also offer ISDN telephone service, with
128 KBPS or T-1 lines, with 1.4 MBPS, but such lines are not available in every
area and are more expensive. Currently, the typical Internet user uses a modem
with 14.4 KBPS to 33.6 KBPS capabilities. In early 1997, dial-up modems offering
a peak data transmission speed of 56 KBPS were introduced for use with ISP/OSPs
over existing telephone lines, although many ISP/OSPs do not yet support this
transmission speed. The lack of a universal standard has slowed the rate of
adoption of faster modems. Integrated Services Digital Network ("ISDN")
technology enables a peak data transmission speed of 128 KBPS between the user
and the ISP/OSP over specially conditioned telephone lines. Although ISDN
technology has been available for several years, it has not been widely deployed
due primarily to its high costs. Asymmetric Digital Subscriber Line ("ADSL") is
currently the most prominent implementation of Digital Subscriber Line ("xDSL")
technology, an emerging telecommunications protocol originally developed to
deliver video on demand. ADSL enables peak data transmission speeds of 8.4 MBPS
downstream from the ISP/OSP to the user and 640 KBPS upstream from the user to
the ISP/OSP; however, typical implementations realize substantially lower data
transmission speeds. ADSL access is priced significantly above other access
services and is not expected to be widely available in the near term. Cable
modem technology offers data transmission at speeds of 10 MBPS downstream and 10
MBPS upstream, with speeds comparable to wireless available only in those
metropolitan areas where hybrid fiber-coaxial ("HFC") cable is installed at
significant cost. The perceived advantage of cable modem access to the Internet
is the availability of current infrastructure. However, businesses, which are
the heaviest users of Internet services, are not typically wired for cable, and
cable companies are already laden with debt and are burdened with a negative
consumer perception.
Satellite-delivered approaches such as direct broadcast satellite ("DBS")
currently provide a peak data transmission speed of approximately 400 KBPS
downstream and rely on dial-up modems and the telephony network for upstream
transmission ("telephone return"). These approaches have scaling limitations due
to the necessity of dividing a finite amount of satellite bandwidth among
subscribers in a broad geographic area. Other wireless offerings rely on
ground-based radios instead of satellites. Such offerings include multichannel
multipoint distribution service ("MMDS"), low power television stations in the
VHF bandwidth ("LPTV") and local multipoint distribution service ("LMDS"), which
are one-way and two-way high-bandwidth wireless digital broadcasting systems,
respectively. MMDS and LMDS are not yet widely available, require unobstructed
"line-of-sight" transmission paths and may require additional radio frequency
spectrum allocations, an entirely new distribution infrastructure and new
equipment (including specialized radio modems).
<PAGE>
Competition
The markets for consumer and business Internet services are extremely
competitive, and the Company expects that competition will intensify in the
future. The Company's most direct competitors in these markets are ISPs,
national long distance carriers and local exchange carriers, wireless service
providers, OSPs and Internet content aggregators. Many of these competitors are
offering (or may soon offer) technologies that will attempt to compete with some
or all of the Company's high-speed data service offerings. Such technologies
include Integrated Services Digital Network ("ISDN") and Digital Subscriber Line
("xDSL"). The Company also competes with other wireless, telephone or
cable-based data services. The bases of competition include transmission speed,
reliability of service, ease of access, price/performance, ease-of-use, content
quality, quality of presentation, timeliness of content, customer support, brand
recognition and operating experience. ISPs, such as BBN Corporation ("BBN"),
Earthlink Network, Inc. ("Earthlink"), MindSpring Enterprises, Inc.
("MindSpring"), Netcom On-Line Communications Services, Inc. ("Netcom") and
PSInet Inc. ("PSInet"), provide basic Internet access to residential consumers
and businesses, generally using existing telephone network infrastructures. This
method is widely available and inexpensive. Barriers to entry are low, resulting
in a highly competitive and fragmented market. Long distance inter-exchange
carriers, such as AT&T Corp. ("AT&T"), MCI Communications Corporation ("MCI"),
Sprint Corporation ("Sprint") and WorldCom, Inc. ("WorldCom"), have deployed
large-scale Internet access networks and sell connectivity to business and
residential customers. The regional Bell operating companies ("RBOCs") and other
local exchange carriers have also entered this field and are providing price
competitive services, and cable television companies are also offering Internet
access. Many of such carriers are offering diversified packages of
telecommunications services, including Internet access service, to residential
customers and could bundle such services together, which could place the Company
at a competitive disadvantage.
Wireless service providers, including AT&T and Hughes Network Systems, are
developing wireless Internet connectivity, such as multichannel multipoint
distribution service, local multipoint distribution service and digital
broadcast satellite. OSPs include companies such as America Online, Inc.
("America Online"), CompuServe Corporation ("CompuServe"), Microsoft's Microsoft
Network ("MSN"), Prodigy, Inc. ("Prodigy") and WebTV Networks Inc. ("WebTV")
(which has agreed to be acquired by Microsoft) that provide, over the Internet
and on proprietary online services, content and applications ranging from news
and sports to consumer video conferencing. These services are designed for broad
consumer access over telecommunications-based transmission media, which enables
the provision of data services to the large group of consumers who have personal
computers with modems. In addition, they provide basic Internet connectivity,
ease-of-use and consistency of environment. In addition to developing their own
content or supporting proprietary third-party content developers, online
services often establish relationships with traditional broadcast and print
media outlets to bundle their content into the service, such as the relationship
of Microsoft with NBC to provide multimedia news and information programming
over both cable television and MSN.
Content aggregators seek to provide a "one-stop" shop for Internet and online
users. Their success depends on capturing audience flow, providing ease-of-use
and offering a range of content that appeals to a broad audience. Their business
models are predicated on attracting and retaining an audience for their set of
offerings. Leading companies in this area include America Online, CompuServe,
Excite, Inc. ("Excite"), Microsoft and Yahoo! Inc. ("Yahoo!"). In this market,
competition occurs in acquiring both content providers and subscribers. The
principal bases of competition in attracting content providers include quality
of demographics, audience size, cost- effectiveness of the medium and ability to
create differentiated experiences using aggregator tools. The principal bases of
competition in attracting subscribers include richness and variety of content
and ease of access to the desired content. The proprietary online services such
as America Online, CompuServe and MSN have the advantage of a large customer
base, industry experience, many content partnerships and significant resources.
Many cable system operators have developed their own cable-based services and
market those services to unaffiliated cable system operators that are planning
to deploy data services. Several cable system operators, including Time Warner
Inc. ("Time Warner") and the Continental Cablevision subsidiary of U S WEST,
Inc. ("US West"), have deployed high-speed Internet access services over their
existing local HFC cable networks. Specifically, Time Warner, which is the
second largest cable company in the United States, has established its own
cable-based ISP with proprietary content, called Road Runner, which features a
variety of Time Warner
<PAGE>
publications and services. Time Warner plans to market the RoadRunner service
through Time Warner's own cable systems as well as to other cable system
operators nationwide. Continental Cablevision has developed another service
called Highway One, which offers high-speed Internet services to its existing
customers. Others that have publicly announced limited-area trials for their own
cable-based Internet services include Adelphia, BellSouth Corporation
("BellSouth") and Jones Intercable, Inc. ("Jones Intercable"). Some of these
companies such as Time Warner have their own substantial libraries of multimedia
content and the other competitors could establish strategic relationships with
content providers, which could provide them with a significant competitive
advantage.
Many of the Company's competitors and potential competitors have substantially
greater financial, technical and marketing resources, larger subscriber bases,
longer operating histories, greater name recognition and more established
relationships with advertisers and content and application providers than the
Company. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and devote substantially more
resources to developing Internet services or online content than the Company.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect the Company's business, operating
results or financial condition. Further, as a strategic response to changes in
the competitive environment, the Company may make certain pricing, service or
marketing decisions or enter into acquisitions or new ventures that could have a
material adverse effect on the Company's business, operating results or
financial condition.
Regulatory Environment
The Company's services are subject to current regulations of the Federal
Communications Commission (the "FCC") with respect to the use of its wireless
access. In addition, changes in the regulatory environment relating to the
Internet connectivity market, including regulatory changes that, directly or
indirectly, affect telecommunications costs, limit usage of subscriber-related
information or increase the likelihood or scope of competition from the RBOCs or
other telecommunications companies, could affect the prices at which the Company
may sell its services. For example, regulations recently adopted by the FCC are
intended to subsidize Internet connectivity rates for schools and libraries,
which could affect demand for the Company's services. The Company cannot predict
the impact, if any, that future regulation or regulatory changes might have on
its business.
Business Strategy
The Company plans on offering wireless applications to access the Internet. The
opportunity for this application over a wide area became available in 1996 when
a wireless downstream application for Internet access was announced. This
technology is built around a headend (Point of Presence or "POP") that is then
connected to a microwave transmitter located in the 2.5-2.7 GHz-bandwidth range.
Although the one-way system works well, it is a "downstream" only transmission.
A customer is still tethered to a phone line through an ISP to transmit
information onto the Internet backbone. The return information is then obtained
by high-speed return. Recently, however, newer technology has provided wireless
two-way applications. With wireless two-way a customer eliminates the phone
companies altogether and is provided high-speed up and down the pipe. The
customer's computer is always on the Internet with virtually no delays in
downloading any file. The two-way system also opens the door to telephone,
videoconferences, and a wide- range of other applications.
In the Company's view:
; There is a huge and rapidly growing market demand for high-speed Internet
access that will be satisfied by the Company's wireless products.
; Two-way wireless solutions provide a high growth-potential.
; The Company's wireless approach has a potentially national and global
application.
; Wireless applications can cut infrastructure cost by as much
as 50%, thus reducing equipment cost dramatically.
<PAGE>
; The market focus of the Company will be small to mid-size businesses and
high-end Internet users.
Wireless Network Solutions
The Company plans on providing high-speed wireless Internet access to businesses
and high-end individual users. Such primary targets are Multiple Dwelling Units
(apartments, condominiums), commercial buildings, and telecommuters. The
application of each of these units is better shown by example than discussion.
A large apartment complex or condo will be linked to the Company's wireless
two-way headend and ISP rather inexpensively. Then cable is run to each unit
within the building, similar to phone or cable wiring. Each of those units is
now ready to receive the Company's signal and an individual secure link to the
Internet. As the Company will become the customer's ISP as well as their
high-speed access provider and Web host, the customer eliminates second phone
line charges, ISP fees and the necessity to purchase a traditional phone modem.
For about the same cost per month, that user can receive high-speed access with
savings that the Company contends can't be matched by any other service
available today.
Another example of high-end Internet use is the growing telecommuting
industry--the home-office user that must have high-speed access.
Internet Service Provider
Wireless Internet access solutions will be the core of the Company's business.
The sales forecasts made by the Company made it clear, however, that most
business executives want a full service provider. The Company believes that
businesses generally want an Internet provider that has the ability to address
all Internet needs in full. The Company plans on offering the full array of
Internet services to its customers.
The Company believes that the dial-up subscribers are important. They may
eventually want to upgrade as they become more active on the Internet and as the
price of wireless modems fall.
Marketing
Although the Company expects the bulk of its new subscribers will come from
acquisition, local sales and marketing are also an integral part of the
Company's growth plan. Local marketing will give the Company brand name
recognition that will lead to wireless system sales.
The Company's ISP marketing strategy is built around local activity with local
radio, TV, newspapers, and retail computer stores.
Web Development, Design, and Hosting
Web sites are business tools that can dramatically improve customer service,
expand marketing efforts, and reduce marketing and support cost. It is a
relatively low maintenance and profitable business.
Product and Services
The Company will provide a wide array of Internet and data services ranging from
basic single-user dial-up accounts to web hosting and design to elaborate
corporate data transfer solutions. In basic terms, the Company will provide a
connection to the Internet and various related services to help companies
promote their business on the Internet.
The Company's quality and reliable service begins with its connection to the
Internet. In each of its operating markets, a high-speed connection to a major
Internet backbone provider will be part of the Company's system.
The Point-of-Presence ("POP") is where the data is routed between the Internet
and local users. The Company's POPs will use the latest in technology and
equipment from manufacturers which include Unix and
<PAGE>
NT servers, Cisco routers, digital modems by Ascend and Lucent Technologies, and
computer hardware by Sun Microsystems, Dell Computer, and other reputable
manufacturers.
Dial-Up Connections
The simplest connection to the Internet is the dial-up account. This method of
service connects the user to the Internet through the use of a modem and
standard telephone line. Currently, users can connect via dial-up at speeds up
to 56 KBPS. The Company will support these users through the use of
sophisticated modem banks at the POP that send data through a router and out to
the Internet. The Company will support the higher speed 56K and ISDN connections
with state-of-the-art digital modems. With a dial-up connection, a user can gain
access to the Internet for e-mail, World Wide Web ("WWW"), FTP, newsgroups, and
a variety of other useful applications.
User-to-Modem Ratio
A dial-up connection requires the use of a modem on the customer side and a
modem at the POP. The customer normally owns his or her modem. The modem at the
POP side of the connection is owned and maintained by the ISP. These modems come
in a chassis, or "bank," that holds multiple modems, such as the Ascend 4000 or
Portmaster PM3. Each time a dial-up customer connects, he or she uses one of the
limited number of modems at the POP. Once all the modems are in use, subsequent
users will get busy signals. Most ISPs maintain a user-to-modem ratio of 8-to-1
to 12-to-1. ISPs using a higher ratio will most likely have users that, at
times, cannot connect to the POP or must wait for modems to become available for
use. The Company plans to maintain a user-to-modem ratio that is below the
industry average of 10-to-1.
Dedicated Dial-up Connections
For the user who needs to be connected immediately to the Internet 100% of the
time, the Company will offer dedicated dial-up connections. This service
basically sets aside one dial-up modem for the customer, guaranteeing that the
customer can always get a connection when needed.
Web Hosting Services
Web hosting is in essence the rental of space on a server that has a full-time
connection to the Internet. The Company will host a customer's Web space,
allowing access to it by customers, employees, suppliers, etc. 24- hours per
day, seven days a week. As part of the service, the Company will apply for a
virtual domain (www.yourcompany.com) for its customers through InterNIC, a
company that registers and verifies domain names. The application process takes
24 to 48 hours to complete. When the domain name is registered, the Company
reserves a portion of hard disk space on one of its servers where the customer
can upload the web page. The page has its own address and can be reached by
anyone on the Internet at any time. Virtual hosting also allows companies to
assign e-mail addresses with their own domain name.
The Market
The Internet and Internet Access. The growth of the Internet is well documented
and perhaps the greatest growth industry in the history of the World.
; Growth in the Internet is about 10% per month.
; Every two seconds the Internet has a new subscriber.
; Use of the Internet file search and retrieving tool is currently growing
at 1,000 percent annually.
; There are more than 10 million host computer
systems connected to the Internet.
; Transactional commerce on the Internet is estimated at $2 billion today,
and by the year 2002 will be at $300 billion.
; User population of the Internet is approaching over 100 million people.
Business Integration in a World of Wireless E-Commerce. Global villages, virtual
communities, information superhighways, and gigabit networks have been used to
describe the world where teleconferencing, interactive television, traditional
on-line information services, and public telephone systems converge. The
<PAGE>
U.S. information services market is huge, and its shift toward digital media is
a change of monumental proportions. Today's communication networks are not ready
to meet the demands being placed upon them. The trend towards digital delivery
will require improvements to the underlying communication infrastructure.
Telecommuting, Telephony, and Video Conferencing. Integration is not confined to
interconnecting a corporation's major locations. With the use of laptop,
palmtop, and notebook computers on the rise, there is an increasing demand to
provide access to corporate networks while employees are at home and on the
road. Demand for remote access will continue to grow and increase the demand for
modems, routers, and cellular communications software and hardware.
A conservative estimate by the Rochester Institute of Technology's Office of
Distance Learning shows that 5.5 million people are presently working from
remote offices. According to the Gartner Group, telecommuting and in-band video
conferencing is expected to expand from such base to approximately 30 million
users in the USA by the year 2000. Additionally, the U.S. Department of
Transportation estimates that fifteen percent (15%) of the USA workforce will be
utilizing telecommuting and in-band conferencing by the year 2002. Therefore,
the growth in that marketplace is expected to be dramatic as corporations
understand the benefits to management through the increase in employees' (1)
morale, (2) flexibility, (3) reduced office costs and (4) compliance with
federal standards. The Telecommunications Act, recently passed by Congress, will
clear the way for telecommuting to become commonplace.
The World Wide Web. The World Wide Web is the multimedia part of the Internet.
It is the primary system used on the Internet to find and transfer information.
It has, moreover, become (with the exception of e-mail) the most popular and the
most promising and active source for business use.
The Web offers incredible diversity for business, education, communication, and
entertainment. Web pages are available on the Internet in tens of thousands of
styles and subjects, with almost as many reasons for posting them on the Web.
For example, there are thousands of sites in each of these subject areas:
; Commercial, Shareware, Freeware software
; Business, marketing, commerce
; Finance, stock market, corporate information
; K-12 education
; Online books
; Online magazines
; Government sites and information
; Legal information
; Health and medical information
; Daily and categorized news
; Travel/booking/ticketing information and purchase
; Reference books
; Scientific sites covering archeology through zoology
; History
; Museums and libraries
Virtually all knowledge in the history of mankind may someday soon be on the
Web. For example, the Vatican has started to download images of 150,000 original
documents dating from as early as the second century A.D. on the Internet. The
Securities and Exchange Commission maintains free Internet access to its library
of corporate records.
Last year Web-based transactions came to nearly $20 billion and online retail to
$2.74 billion in sales. By 2003 the U.S. Department of Commerce estimates that
figure could reach $115 billion.
Market Strategy
The Company views market share within the delivery of high-speed Internet access
as extremely fragmented. Competitive firms and industry view Internet access as
a by-product of their core business. Cable and Satellite's primary mission is,
of course, television delivery; RBOC's mission is the delivery of long distance
<PAGE>
and local phone service. Wireless cable companies (whose frequencies may be used
for Internet access) are awash in debt and unable to add product value.
The Company believes that it has immense opportunities for acquisition in the
ISP area, thus providing an expanded subscriber base, local phone lines,
equipment, offices, and technicians. ISPs are available now because most were
started several years ago by technically oriented people who had little or no
marketing or sales skills.
Employees
The Company currently has only one employee.
ITEM 2. PROPERTIES
The Company currently rents approximately 300 square feet of office
space for its offices in Utah, under a rental arrangement with the Company's
Vice President. The rent is accrued at a rate of $500 per month and will be
converted into stock of the Company at the time that the Company receives
adequate financing to move forward with its development plans.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is trading on the Over-the-Counter Bulletin
Board under the symbol "SUWL". As of February 17, 1999, the Company had 748
holders of record. The following table sets forth, on a per share basis for the
period shown as adjusted for a thirty-for-one reverse stock split enacted on
March 13, 1994, the high and low bid and prices of the Common Stock as reported
on the OTC Bulletin Board.
Closing
Bid Price
High Low
Fiscal Year Ended December 31, 1994
First Quarter (1) . . . . . . . $2.00 $2.00
Second Quarter . . . . . . . $2.00 $2.00
Third Quarter . . . . . . . . $2.00 $0.75
Fourth Quarter . . . . . . . . $1.00 $0.75
Fiscal Year Ended December 31, 1995
First Quarter . . . . . . . . $0.875 $0.75
Second Quarter . . . . . . . $0.875 $0.75
Third Quarter . . . . . . . . $0.75 $0.50
Fourth Quarter . . . . . . . $0.75 $0.25
Fiscal Year Ended December 31, 1996
First Quarter . . . . . . . . $0.75 $0.375
Second Quarter. . . . . . . . $0.375 $0.375
Third Quarter . . . . . . . . $0.375 $0.25
Fourth Quarter . . . . . . . $0.25 $0.25
<PAGE>
Closing
Bid Price
High Low
Fiscal Year Ended December 31, 1997
First Quarter . . . . . . . . .$0.25 $0.0625
Second Quarter. . . . . . . . .$0.0625 $0.0625
Third Quarter . . . . . . . . $0.0625 $0.0625
Fourth Quarter . . . . . . . .$0.0625 $0.03125
Fiscal Year Ended December 31, 1998
First Quarter . . . . . . . . .$0.0625 $0.03125
Second Quarter. . . . . . . . .$0.0625 $0.03125
Third Quarter . . . . . . . . $0.0625 $0.03125
Fourth Quarter . . . . . . . .$0.0625 $0.03125
Fiscal Year Ended December 31, 1994
First Quarter (1) . . . . . . . $6.50 $6.50
Second Quarter . . . . . . . . $6.50 $3.00
Third Quarter . . . . . . . . $5.00 $1.75
Fourth Quarter . . . . . . . . .$1.75 $1.50
Fiscal Year Ended December 31, 1995
First Quarter . . . . . . . . . $1.75 $1.50
Second Quarter . . . . . . . . $1.75 $1.50
Third Quarter . . . . . . . . $1.75 $1.00
Fourth Quarter . . . . . . . . .$1.75 $1.00
Fiscal Year Ended December 31, 1996
First Quarter . . . . . . . . . . . $1.001.75
Second Quarter (through April 30, 1996) $1.00 $1.00
Third Quarter . . . . . . . . $1.00 $0.75
Fourth Quarter . . . . . . . . .$0.75 $0.50
Fiscal Year Ended December 31, 1997
First Quarter . . . . . . . . . $0.50 $0.25
Second Quarter. . . . . . . . . $0.25 $0.25
Third Quarter . . . . . . . . .$0.25 $0.25
Fourth Quarter . . . . . . . . $0.25 $0.25
Fiscal Year Ended December 31, 1998
First Quarter . . . . . . . . . $0.25 $0.25
Second Quarter. . . . . . . . . $0.25 $0.10
Third Quarter . . . . . . . . .$0.25 $0.10
Fourth Quarter . . . . . . . . $0.25 $0.10
(1) Adjusted for a thirty-for-one reverse common stock split effective March 13,
1994.
The Company has never declared or paid any cash dividends on the Common
Stock and does not presently intend to pay cash dividends on the Common Stock in
the foreseeable future. The Company intends to retain any future earnings for
reinvestment in its business.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data presented below as of December
31, 1995 and 1996 and for the years ended December 31, 1995 and 1996 were
derived from the consolidated financial statements of the Company, which were
audited by Smith & Company, independent certified public accountants, and which
are included elsewhere in this Form 10-KSB. This selected consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's consolidated
financial statements (including the notes thereto) included elsewhere in this
Form 10-KSB.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company has wireless cable channel rights in 8 small to mid-sized
wireless cable markets. The Company has obtained these rights through purchases,
leases and lease-purchase agreements in the following domestic markets: Erie,
PA; Bowling Green, KY; Columbia, KY; Cedar Rapids, IA; Marshalltown, IA; Idaho
Falls, ID; Farmington, MO; and Harrison, AR.
The Company was incorporated on July 24, 1984 in Nevada as Diversified
Ventures, Ltd. On March 27, 1987 the name was changed to M.V.I.D. International
Corporation. On April 6, 1994 the name was changed to Micro-Lite Television.
Prior to March 14, 1994 the Company sold an automobile anti-theft protection
system to customers through an arrangement with dealerships, principally in New
Jersey. On March 16, 1994 the Company acquired the assets and liabilities of
Marrco Communications, Inc. ("Marrco") and is continuing the business activities
of Marrco. Prior business operations were assumed by the former President of the
Company. Marrco was founded on December 12, 1991 for purposes of accumulating
Wireless Cable Rights in domestic markets.
Results of Operations for the Two Years Ended December 31, 1996
Revenues
The Company currently does not have any ordinary and significant source
of revenues. However, the Company occasionally sells some of its wireless cable
channels rights. The Company recorded revenues of $300,00 for the year ended
December 31, 1996, compared with sales of $542,692 for the year ended December
31, 1995. The 1996 revenue was derived from one sale to Wireless One, Inc.
Nearly all of the 1995 revenue was the result of sales of wireless cable license
rights, specifically the sale of the Des Moines market channel rights to
Heartland Wireless Systems, Inc. accounted for over 90% of this revenue. The
gross revenues decreased by 44.7% from 1995 to 1996.
Cost of Sales
The cost of sales for the period ended December 31, 1996 was equal to
$107,394 that represented the book value of the licenses sold in the year. This
is compared to cost of sales of $18,759 in the year ended December 31, 1995.
Selling, General and Administrative Expenses
The Company incurred total selling, general and administrative expenses
("SG&A") of $759,775 for the year ended December 31, 1996. This represents an
increase of 4% of SG&A from the period ended December 31, 1995 of $732,481. The
SG&A in the year ended December 31, 1994 was equal to $910,429. The decrease
from 1994 to 1995 is attributable to reduction in staff sizing and the closing
of the Company's office in California.
<PAGE>
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 1996 was
equal to $146,008, an increase of 7% from the prior year. The depreciation was
equal to $40,965 and amortization was equal to $95,460 for the year ended
December 31, 1995. The amortization for the year was attributable to the cost of
certain leases that are being amortized over the life of the lease.
Interest Expense
The Company incurred interest expense of $94,452 in the year ended
December 31, 1996. This is an increase of 47% from the interest expense of
$64,394 in the year ended December 31, 1995. The interest expense for the year
ended December 31, 1995 is primarily attributable to the loan from Heartland
(See "Business - Recent Transactions and Acquisitions - Heartland") and interest
on the amount due to a related party detailed below.
Income Tax Benefit
The Company currently has net operating loss carryforwards equal to
approximately $3,000,000. Approximately $1,000,000 of this net operating loss
was carried forward from the business of Marrco and is limited under Internal
Revenue Code Section 381. This limits the use of this portion of the Company's
net operating loss carryforward to approximately $70,000 per year. The Company
has not recognized any of this tax benefit as an asset due to uncertainty of
future income.
Net Loss
During 1996, the Company recorded a net loss of $(1,216,364). For the
year ended December 31, 1995, the Company posted a net loss of $(705,312).
Liquidity and Capital Resources
The Company had a working capital deficit of $2,508,822 as of December
31, 1996 compared to a working capital deficit of $1,605,917 as of December 31,
1995. Approximately $621,798 of the current liabilities represent amounts owed
to related parties, in particular to the Company's President and wholly owned
corporations of the President of the Company. The Company currently has few
sources of working capital other than related parties and asset sales
Certain Indebtedness
Convertible Notes. On December 21, 1994, the Company began a private
placement of certain Convertible Notes which entitled the purchasers to convert
the notes into common stock of the Company at a conversion price of $.875. As of
December 31, 1994, the Company had received gross proceeds of $51,000 from one
individual. During the first quarter of 1995, the Company received an additional
$150,000 from four other individuals in exchange for Convertible Notes. The
Notes have terms varying from six months to one year and bear an interest rate
of ten percent (10%). The Company is delinquent on the payment of these loans.
Income Tax Matters
The Company files a separate tax return for its subsidiaries which are
partnerships all of which have been liquidated as of December 31, 1995. The
Company has had no material state or Federal income tax since its inception. As
of December 31, 1995, the Company had approximately $2.75 million in net
operating loss carryforwards for tax purposes, expiring in years 2006 through
2010. The Internal Revenue Code of 1986, as amended (the "Code"), limits the
amount of loss carryforwards that a company can use to offset future income upon
the occurrence of certain changes in ownership. As a result of the purchase of
Marrco and the subsequent issuance of shares of the Company's common stock, the
Company has undergone more than a 50% change in ownership and will therefore be
limited in its utilization of its tax loss carryforwards. About $1 million of
the net operating loss carryforward is subject to this limitation.
<PAGE>
Inflation
The Company's Management does not believe that inflation has had or is
likely to have any significant impact on the Company's operations. Management
believes that the Company will be able to increase subscriber rates after its
wireless systems are launched, if necessary, to keep pace with inflationary
increases in costs.
Other
The Company does not provide post-retirement or post-employment
benefits requiring charges under Statements of Financial Accounting Standards
Nos. 106 and 112.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
PAGE
Independent Auditors Report . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . F-2
Consolidated Statements of Operations for the three years ended
December 31, 1996 . . . . . . . . . . . . . . F-3
Consolidated Statements of Changes in Stockholders Equity
for the three years ended December 31, 1996 . . . . . . . F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1996 . . . . . . . . . . .. . F-5
Consolidated Notes to the Financial Statements . . . . . . . . F-6
Consolidated General and Administrative Expenses
for the three years ended December 31, 1996. . . . . . . F-13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
Jon R. Marple 30 Interim Chairman and President.
Vice President, Chief Financial Officer
and Director since October 16, 1996.
Brooks M. Freeman 53 Director since October 16, 1996.
Dr. Charles Bartell 73 Director since March 14, 1994. Director
of Marrco since its inception in 1991.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
All
Annual Other
Name and Principal Position Compensation Compensation
Jon Richard Marple $ 72,000 (1) none
(1) $38,000 of this annual compensation was accrued and not paid as of February
17, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owners Beneficial Ownership of Class
Preferred Series A Jon H. Marple &
Mary E. Blake
3419 Via Lido, Suite 619
Newport Beach, CA 92663 2,892,354 (1)(2) 42.3%
Security Ownership of Management
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owners Beneficial Ownership of Class
Preferred Series A Jon Richard Marple
1405 Crescent Road
Park City, UT 84060 254,250 3.8%
Preferred Series A Brooks M. Freeman
634 Cribbs Drive
Coppell, TX 75019 115,500 1.7%
Preferred Series A Charles Bartell
43 Canyon Drive
Newport Beach, CA 92663 28,000 0.4%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of the Report
1. Financial Statements
The following financial statements are filed as part of this Form 10-K:
PAGE
Independent Auditors Report . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of December 31, 1996, 1995 and 1994 . . . F-2
Consolidated Statements of Operations for the three years ended
December 31, 1996 . . . . . . . . . . . . . . . F-3
Consolidated Statements of Changes in Stockholders Equity
for the three years ended December 31, 1996 . . . . . . . F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1996 . . . . . . . . . . . . . F-5
Consolidated Notes to the Financial Statements . . . . . . . . . F-6
Consolidated General and Administrative Expenses
for the three years ended December 31, 1996. . . . . . . F-13
2. Financial Statement Schedules
None
3. Exhibits
None
(b) Reports on Form 8-K
Dated November 1, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 17th day of
February, 1999.
Superior Wireless Communications, Inc.
By:
Jon Richard Marple
Vice President,
Chief Financial Officer,
Treasurer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the 17th day of February 1999, by the following
persons in the capacities indicated:
Signature Title
Chairman of the Board,
Jon Richard Marple Director and President
(Principal Executive Officer
and Principal Financial Officer)
Director
Brooks M. Freeman
Director
Charles Bartell
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
Board of Directors
Superior Wireless Communications, Inc.
Salt Lake City, Utah
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of Superior
Wireless Communications, Inc. (a development stage company) and subsidiaries as
of December 31, 1996 and 1995, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the years ended
December 31, 1996, 1995, and 1994, and for the period of April 1, 1994 (date
Company re-entered development stage) to December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Superior Wireless
Communications, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations, changes in stockholders' equity, and their cash
flows for years ended December 31, 1996, 1995, and 1994, and for the period of
April 1, 1994 (date Company re-entered development stage) to December 31, 1996
in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The information in Schedule 1 is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole..
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
January 22, 1998
F-1
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------- ----------------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 1,197 $ 7,019
Receivable - employee 0 500
Marketable securities (Note 16) 0 906
Prepaid expenses 417 334
--------------- ----------------
TOTAL CURRENT ASSETS 1,614 8,759
PROPERTY AND EQUIPMENT (Notes 1 and 7) 105,803 254,571
OTHER ASSETS
Organization costs (Note 1) 0 450
Notes receivable - other (Note 8) 0 0
Deposits 2,825 7,824
Licenses and other (Note 14) 1,250,263 1,360,138
--------------- ----------------
TOTAL OTHER ASSETS 1,253,088 1,368,412
--------------- ----------------
$ 1,360,505 $ 1,631,742
=============== ================
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 152,419 $ 84,870
Accrued liabilities 814,992 768,762
Notes payable (Note 15) 907,800 176,000
Income taxes payable 1,800 800
Deferred income taxes (Note 10) 0 0
Current maturities of capital leases (Note 11) 11,627 12,684
Payable - related parties (Note 4) 621,798 571,560
--------------- ----------------
TOTAL CURRENT LIABILITIES 2,510,436 1,614,676
Contingent liabilities (Note 17) 0 0
LONG-TERM DEBT (Note 11) 0 11,627
--------------- ----------------
TOTAL LIABILITIES 2,510,436 1,626,303
Minority interest in
subsidiaries (Note 6) 0 0
SHAREHOLDERS' EQUITY (Note 18)
Common stock, $.001 par value;
Authorized 50,000,000 shares;
Issued and outstanding 0 shares,
5,816,427 in 1995 0 5,816
Class A Convertible Cumulative Preferred Stock,
$.001 par value:
Authorized 15,000,000 shares;
Issued and outstanding 6,004,836 shares, 0 in 1995 6,005 0
Additional paid-in capital 2,110,925 2,050,120
Retained earnings (deficit) (3,266,861) (2,050,497)
--------------- ----------------
TOTAL STOCKHOLDERS' EQUITY (1,149,931) 5,439
--------------- ----------------
$ 1,360,505 $ 1,631,742
=============== ================
</TABLE>
See Notes to the Consolidated Financial Statements.
F-2
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
Years ended December 31, 4-1-94 to
1996 1995 1994A 12-31-96B
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Sales $ 300,600 $ 542,692 $ 17,229 $ 860,521
Cost of sales 107,394 18,759 0 126,153
------------- ------------- -------------- -------------
GROSS PROFIT 193,206 523,933 17,229 734,368
Costs associated with abandoned projects 273,849 207,700 90,025 571,574
Loss on investments 0 21,695 103,994 125,689
Unrealized (increase) decline in value of securities 0 (68,422) 68,422 0
Bad debt (Note 8) 133,686 134,172 0 267,858
General and administrative expenses (Schedule 1) 759,775 732,481 910,429 2,402,685
Depreciation and amortization (Note 13) 146,008 136,425 141,474 423,907
Interest and bank charges (net of interest income) 94,452 64,394 49,769 208,615
------------- ------------- -------------- -------------
1,407,770 1,228,445 1,364,113 4,000,328
------------- ------------- -------------- -------------
Net (loss) before other items (1,214,564) (704,512) (1,346,884) (3,265,960)
DISCONTINUED OPERATIONS
Income from discontinued operations 0 0 15,020 0
------------- ------------- -------------- -------------
Net (loss) before income taxes (1,214,564) (704,512) (1,331,864) (3,265,960)
Income tax expense (benefit) (Note 10) 1,800 800 (26,800) (24,200)
------------- ------------- -------------- -------------
Net (loss) before minority interest (1,216,364) (705,312) (1,305,064) (3,241,760)
Minority interest in partnership losses 0 0 110,000 110,000
------------- ------------- -------------- -------------
NET (LOSS) $ (1,216,364) $ (705,312) $ (1,195,064) $ (3,131,760)
============= ============= ============== =============
EARNINGS (LOSS) PER COMMON SHARE
(Loss) before other items $ (.20) $ (.13) $ (.31)
Income from discontinued operations .00 .00 .00
Minority interest in losses .00 .00 .03
------------- ------------- --------------
Net (loss) $ (.20) $ (.13) $ (.28)
============= ============= ==============
Weighted average number of common shares used to
compute net (loss) per weighted average share 5,935,128 5,486,985 4,281,672
============= ============= ==============
</TABLE>
A Consists of development stage operation except for income from discontinued
operations in the amount of $15,020.
B Date company re-entered the development stage.
See Notes to the Consolidated Financial Statements.
F-3
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock Cumulative Preferred Additional Retained
Par Value $.001 Par Value $.001 Paid-in earnings
Shares Amount Shares Amount Capital (deficit)
---------- ---------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Balances at 12/31/93 1,075,807 $ 1,076 $ $ 78,924 $ (106,670)
Net liabilities assumed by former officer 11,650
Issuance of common stock for new
business at $.26 per share (Note 5) 4,033,310 4,033 1,101,863 (43,451)
Issuance of common stock to settle
debt at $4.00 per share (Note 15) 100,000 100 399,900
Issuance of common stock for services at
$.001 per share 45,000 45
Sale of common stock at $2.00 per share 216,763 217 433,309
Issuance of common stock for stock
subscription(1) 1,000,000 1,000 1,939,000
Issuance of common stock for prepaid
expense(1) 70,000 70 99,930
Minority interest transactions 2,844,259
Net partnership distributions (3,134,180)
Stock canceled (1) (1,070,000) (1,070) (2,038,930)
Stock canceled (58,459) (59) (79,774)
Net loss for year (1,195,064)
---------- ---------- ---------- ---------- -------------- -------------
Balances at 12/31/94 5,412,421 5,412 1,655,951 (1,345,185)
Stock canceled (6,750) (7) (4,272)
Issuance of common stock for expenses
at $.009 per share 75,565 76 624
Issuance of common stock to settle debt
at $1.19 per share 335,191 335 397,738
Minority interest transactions 200,000
Net partnership distributions (199,921)
Net loss for year (705,312)
---------- ---------- ---------- ---------- -------------- -------------
Balances at 12/31/95 5,816,427 5,816 2,050,120 (2,050,497)
Correction to number of shares issued
in 1994 for new business 64,038 64 (64)
Issuance of common stock for services
at $.03 per share 75,000 75 2,175
Issuance of common stock for assets
at $.75 per share 25,333 25 18,975
Issuance of common stock for assets
at $.75 per share 6,667 7 4,994
Issuance of common stock for assets
at $2.00 per share 17,371 18 34,725
Exchanged common stock for
Cumulative preferred 10/25/96 (6,004,836) (6,005) 6,004,836 6,005
Net loss for year (1,216,364)
---------- ---------- ---------- ---------- -------------- -------------
Balances at 12/31/96 0 $ 0 6,004,836 $ 6,005 $ 2,110,925 $ (3,266,861)
========== ========== ========== ========== ============== =============
</TABLE>
See Notes to the Consolidated Financial Statements.
F-4
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Years ended December 31, 4-1-94 to
1996 1995 1994 12-31-96A
------------- ------------- -------------- -------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net (loss) $ (1,216,364) $ (705,312) $ (1,195,064) $ (3,131,760)
Adjustments to reconcile net (loss) to net cash
(required) by operating activities:
Cash remaining with prior business 0 0 (72,632) 0
Stock issued for expenses 2,200 700 45 2,945
Stock issued to retire partnership debt 0 198,920 0 198,920
Deferred tax (decrease) 0 0 (7,200) (19,600)
Bad debt 133,686 134,172 0 267,858
Depreciation and amortization 146,008 136,425 143,473 423,907
Unrealized (gain) loss on securities 0 (68,422) 68,422 0
Book value of abandoned assets 0 0 90,025 90,025
Minority interest items 0 79 (110,000) (109,921)
Changes in assets and liabilities:
Prepaid expenses (83) 4,292 (1,196) 2,013
Accounts receivable 500 (500) (293) 0
Notes receivable - other 0 0 12,047 12,047
Related party receivables 0 0 344,142 344,142
Deposits 4,999 (5,000) 6,038 6,761
Accounts payable 67,549 (21,513) 82,158 116,003
Accrued liabilities 46,230 (120,987) 528,617 451,615
Income taxes 1,000 (2,400) (2,400) (3,800)
------------- ------------- --------------- -------------
NET CASH (REQUIRED) BY
OPERATING ACTIVITIES (814,275) (449,546) (113,818) (1,348,845)
INVESTING ACTIVITIES
Purchase of securities 0 0 (207,625) (207,625)
Sale of securities 906 206,719 0 207,625
Acquisition of licenses 0 (55,097) 0 (55,097)
Disposition (purchase) of property, plant and equipment 38,193 (25,270) (57,196) (43,723)
------------- ------------- -------------- -------------
NET CASH PROVIDED (REQUIRED) BY
INVESTING ACTIVITIES 39,099 126,352 (264,821) (98,820)
FINANCING ACTIVITIES
Loans - other 731,800 165,000 51,000 947,800
Loans - related parties 50,238 565,920 302,060 918,218
Loan repayments - other (12,684) (52,685) (9,113) (74,482)
Loan repayments - related parties 0 (375,131) (62,935) (416,643)
Sale of common stock (refunds) 0 (4,279) 29,526 25,247
Cash of business acquired 0 0 121,135 121,135
Net partnership distributions 0 0 (72,413) (72,413)
------------- ------------- -------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 769,354 298,825 359,260 1,448,862
------------- ------------- -------------- -------------
(DECREASE) IN CASH AND
CASH EQUIVALENTS (5,822) (24,369) (19,379) 1,197
Cash and cash equivalents at beginning of year 7,019 31,388 50,767 0
------------- ------------- -------------- -------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 1,197 $ 7,019 $ 31,388 $ 1,197
============= ============= ============== =============
A Date Company re-entered development stage
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ 79,778 $ 52,657 $ 41,869 $ 174,304
Income taxes 800 2,400 2,400 5,600
</TABLE>
Noncash Investing and Financing Activities
During 1993, Marrco acquired equipment under capital leases in the amount of
$50,737 and acquired channel licenses by issuing a note payable for $400,000.
During 1994, the note was paid by issuing 100,000 shares of the Company's
common stock and 25,000 warrants to purchase the Company's common stock at
$4.00 per share. During 1994, the Company acquired $600,000 of channel rights
by issuing a note payable to a related party. During 1995, the Company issued
62,500 shares of its restricted common stock to retire a liability associated
with the acquisition of $125,000 of licenses. The Company also acquired an
additional $319,850 of licenses and other assets by incurring accrued
liabilities of the same amount. The Company expects to retire most of the
$319,850 of liabilities with common stock.
See Notes to the Consolidated Financial Statements.
F-5
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity:
The Company was incorporated on July 24, 1984 in Nevada as Ventures
Diversified, Ltd. On March 27, 1987 the name was changed to
M.V.I.D. International Corporation. On April 6, 1994 the name was
changed to Micro-Lite Television. Prior to March 14, 1994 the
Company sold an automobile anti-theft protection system to
customers through an arrangement with dealerships, principally in
New Jersey. On March 16, 1994 the Company acquired the assets and
liabilities of Marrco Communications, Inc. ("Marrco") and is
continuing the business activities of Marrco. Prior business
operations were assumed by the former President of the Company.
Since Marrco is a development stage company, the Company is once
again in the development stage effective April 1, 1994 when it
began continuing the operations of Marrco. On October 25, 1996 the
name was changed to Superior Wireless Communications, Inc.
Financial Statement Presentation
The statements of operations for the year ended December 31, 1994
include the activities of the Company through March 31, 1994
(listed as income from discontinued operations) and the activity of
Marrco and subsidiaries for the period of April 1, 1994 through
December 31, 1994.
Accounting Methods:
The Company recognizes income and expenses based on the accrual
method of accounting.
Revenue Recognition:
Revenue is recognized when cash or other value is actually
received. In the case of revenue recognition on the sale of
licenses or leases (See Note 8) revenue is recognized when the FCC
grants licenses and the Company has the right to receive the
revenue. Until the FCC approval is received, the Company reflects
the transaction as deferred revenue.
Principles of Consolidation:
The consolidated financial statements include the accounts of the
Company and the following partnerships in which the Company was the
general partner: Boston Wireless Cable Television Partners, L.P.,
Worcester Wireless Cable Television Partners, L.P., and Micro-Lite
Television of Des Moines. All significant intercompany balances and
transactions have been eliminated in consolidation. All
partnerships were dissolved prior to December 31, 1995.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are calculated based on the
weighted average number of shares outstanding during the periods.
Organization costs:
Organization costs were amortized over a five year period.
Property and Equipment
Property and equipment are depreciated over their estimated useful
lives. Assets financed under capital leases are amortized over
their estimated useful lives, or the lease term, whichever is
shorter. Depreciation and amortization are computed using
straight-line methods over an estimated life of five to seven
years.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or
less when purchased to be cash equivalents.
Income Taxes:
The Company records the income tax effect of transactions in the
same year that the transactions enter into the determination of
income, regardless of when the transactions are recognized for tax
purposes.
Tax credits are recorded in the year realized.
The Company utilizes the liability method of accounting for income
taxes as set forth in Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109). Under the
liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not
that such tax benefits will not be realized.
F-6
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
NOTE 2: DEVELOPMENT STAGE COMPANY - MANAGEMENT'S PLANS
The Company has been in the development stage since the acquisition
of Marrco as described above. The Company intends, subject to
adequate financing, to engage primarily in one line of business: to
acquire, construct and/or operate one or more wireless cable
television systems. Subject to adequate financing and the existence
of suitable opportunities, the Company may also become involved in
the business of acquiring, constructing, consulting with and/or
operating, low power television broadcast stations ("LPTV") or
other communications related businesses.
Management feels that sales of a portion of the licenses and
rights, and loans from related parties and others will provide
sufficient working capital to enable the Company to continue as a
going concern and develop its intended operations.
NOTE 3: CAPITALIZATION
On March 16, 1994 the Company effected a 1 share for 30 share
reverse stock split. The split reduced outstanding shares from
32,272,000 to 1,075,807. At May 31, 1994 the Company was owed
$2,000,000 for 1,000,000 shares of its common stock. An investment
certificate bearing interest at 5 and 3/4% due in April, 1999 had
been received to pay for the stock. The certificate was treated as
a stock subscription.
The stock subscription was canceled prior to December 31, 1994.
The Company is negotiating for the return of the 1,000,000
shares. The 1,000,000 shares have been treated as canceled for
accounting purposes as of December 31, 1994. The Company
recovered 650,000 of the 1,000,000 shares and is prepared to take
legal action if necessary to recover the other 350,000 shares.
The Company has had its stock transfer agent place stop orders on
the share certificates in question and does not treat the stock
as outstanding.
On October 25, 1996, each of the 6,004,836 shares of then issued
and outstanding common stock of the Corporation were exchanged for
one share of preferred stock designated as Class A Convertible
Cumulative Preferred Stock, par value $.001 per share, 10%
dividend, which may be paid in common stock.
NOTE 4: RELATED PARTY TRANSACTIONS
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in
other business opportunities. If a specific business opportunity
becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
At December 31, 1996 the Company owed $621,798 to related parties
($571,560 at December 31, 1995) for loans and sales to and payments
made on behalf of the Company and accrued salaries. During the
period ended December 31, 1994 the Company purchased certain
channel lease agreements from a related party for $600,000. The
Company considers the transaction to be an arms-length transaction.
NOTE 5: ACQUISITION OF NEW BUSINESS
On March 16, 1994 the Company issued 4,000,000 shares to acquire
all of the assets and liabilities of Marrco as well as Marrco's
general partnership interest in the Boston, Worchester and Des
Moines limited partnerships. The Company also reserved 2,500,000
shares of its common stock for an employee stock option plan. Later
an additional 33,310 shares related to making the distribution even
to the Boston partners were issued. The transaction has been
treated as a purchase for accounting purposes.
NOTE 6: MINORITY INTEREST IN SUBSIDIARIES
The Company was the general partner in several limited
partnerships, one of which was still active as of December 31,
1994. The ownership interests vary. As general partner, the Company
controlled the partnerships. All subsidiaries were dissolved prior
to December 31, 1995.
F-7
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
NOTE 7: PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1996 and December 31,
1995 are detailed in the following summary:
<TABLE>
<CAPTION>
Net Book Value
Cost Depreciation 1996 1995
---------- ---------------- ---------- ---------
<S> <C> <C> <C> <C>
Furniture $ 29,601 $ 16,151 $ 13,450 $ 39,147
Equipment 63,473 40,635 22,838 56,676
Vehicles 50,737 38,585 12,152 24,836
Other 14,333 1,230 13,103 22,242
Transmission Equipment 74,190 29,930 44,260 111,670
---------- ---------------- ---------- ---------
$ 232,334 $ 126,531 $ 105,803 $ 254,571
========== ================ ========== =========
</TABLE>
Depreciation expense for the period ended December 31, 1996 was $44,511
($40,965 in 1995 and $33,360 in 1994). The Company currently has excess
office equipment and furniture stored until it needs it. The assets are
currently not being depreciated. The stored assets represent 10% of the
net book value of all property and equipment.
NOTE 8: NOTES RECEIVABLE - OTHER
At December 31, 1994, the Company was owed $860,000 for the sale of the
MMDS (wireless cable) licenses and the assignment of ITFS leases for
Baton Rouge, Louisiana. Deferred revenue associated with this receivable
was $725,828 at December 31, 1994. The collection of this note is
contingent upon certain action by the Federal Communications Commission
("FCC"). During 1995, the FCC did not take the necessary action required
for collection of the note. The receivable and deferred revenue were
charged to operations in 1995 as a bad debt. The Company will recognize
revenue if the receivable is collected in future years.
NOTE 9: SALES CONCENTRATION AND REVENUE
During 1996, sales of licenses to one entity accounted for 99% of total
sales (92% in 1995).
NOTE 10: INCOME TAXES
Components of income tax expense (benefit) for the years ended December
31, 1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
12/31/96 12/31/95 12/31/94
Current Deferred Total Total Total
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Federal $ 0 $ 0 $ 0 $ 0 $ 0
State 1,800 0 1,800 800 (26,800)
------------- ------------ ------------- ------------- -------------
$ 1,800 $ 0 $ 1,800 $ 800 $ (26,800)
============= ============ ============= ============= =============
</TABLE>
The actual tax expense differs from the "expected" tax expense computed
by applying the federal and state corporate tax rates as follows:
Computed "expected" tax $ 0
State income tax expense (net of federal tax benefit) 1,800
------------
$ 1,800
Deferred income taxes result from timing differences in the recognition
of revenue and expense items for income tax and financial statement
purposes and also from differences between tax basis and fair market
value of various assets.
F-8
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
NOTE 10: INCOME TAXES (continued)
At December 31, 1996, the Company has the following approximate net
operating loss amounts which expire as follows:
<TABLE>
<CAPTION>
Expiration Date Amount
Year of Loss Federal California Utah Federal California Utah
------------- ----------- ---------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/91 12/31/2006 12/31/98* $ 1,500 $ 750 $ 0
12/31/92 12/31/2007 12/31/97 291,200 145,600 0
12/31/93 12/31/2008 12/31/98 316,700 158,350 0
03/31/94 12/31/2009 12/31/99 390,100 195,050 0
06/30/92 06/30/2007 126,100 0 0
06/30/94 06/30/2009 06/30/99 342,400 171,200 0
06/30/95 06/30/2010 06/30/2000 06/30/2015 766,800 111,200 544,400
12/31/95 12/31/2015 12/31/2000 12/31/2015 454,800 68,200 318,400
12/31/96 12/31/2016 12/31/2001 12/31/2016 1,198,000 179,700 838,600
---------- --------- ---------
$ 3,887,600 $ 1,030,050 $ 1,701,400
=========== ============= ===========
</TABLE>
*California has recently reinstated NOL carryovers and extended
expiration dates for certain years.
The net operating loss amounts for 1991 through 3/31/94 were acquired
from Marrco. The Internal Revenue Code of 1986, as amended, limits the
amount of this loss carryforward that the Company can use in any one
year to offset future income. The Company has resumed filing on a
calendar year basis.
The Company also has a capital loss carryforward of $112,141 which
expires 6/30/2000 and a capital loss carryforward of $13,548 which
expires 12/31/2000.
At December 31, 1996, the Company has a deferred tax asset in the amount
of $0. There is a potential asset of approximately $562,000 calculated
on future reduction of income taxes based on using the net operating
loss carryforward. This amount has been reserved 100% due to the
Company's history of losses. Management of the Company believes that the
Company will realize sufficient income in the future to utilize the net
operating loss carryforwards. However, since future income can only be
estimated, there is not sufficient basis for recognition of any deferred
tax asset at this time.
NOTE 11: CAPITAL LEASES
Leases payable at December 31, 1996 are detailed in the following
summary:
Interest Principal Balances
Rate Current Long-term
Southwest Leasing 0% $ 7,064 $ 0
Southwest Leasing 0% 4,563 0
------------ ---------------
$ 11,627 $ 0
============ ===============
Scheduled principal reductions of leases payable are as follows:
1997 $ 11,627
-----------
$ 11,627
The leases relate to two vehicles. Included in property and equipment is
$50,737 of equipment under capital leases. The related accumulated
depreciation is $38,585 at December 31, 1996.
F-9
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
NOTE 12: OPERATING LEASES
The Company has various operating leases. The Company conducts its
operations at facilities under a lease which expired April, 1997. The
Company leases equipment and licenses under noncancelable operating
leases expiring through 2005. Several of the leases have renewal
options. The scheduled lease payments below do not include the renewal
periods. Rent expense for the year ended December 31, 1996 was $70,953
and was $62,694 in 1995 and $58,091 in 1994.
Scheduled lease payments are as follows:
1997 $ 69,819
1998 60,930
1999 51,975
2000 49,650
Thereafter 36,400
-----------
Net lease payments $ 268,774
===========
NOTE 13: AMORTIZATION EXPENSE
Included in amortization expense for 1994 was $105,960 related to the
Boston partnership that was charged to expense when the partnership was
terminated.
NOTE 14: LICENSES AND OTHER
The Company owns and leases various MMDS, ITFS and LPTV (wireless cable)
licenses to operate in various cities. A summary is as follows:
1996 1995
------------- -----------
License acquisition costs $ 397,053 $ 797,562
Engineering costs 4,950 9,141
Tower deposit 0 1,800
Commercial channel licenses 253,945 56,320
ITFS licenses 19,315 20,315
LPTV rights and licenses 575,000 475,000
------------- -----------
$ 1,250,263 $ 1,360,138
============= ===========
The above amounts are net of amortization of $178,452 ($95,010 for
1995).
NOTE 15: NOTES PAYABLE
At December 31,1995, $176,000 is owed to five entities. One loan in the
amount of $10,000 is past-due as of August, 1995. It bears interest at
10% and was convertible to shares of the Company's common stock at
$.875 per share prior to February 20, 1996. (The loan was not converted
to stock). A loan for $25,000 is past-due as of October, 1995. It bears
interest at 10% and was convertible to common shares of the Company at
$.875 per share but was not converted. A loan for $25,000 bears
interest at 10%, is due May 1996 and is convertible to the Company's
common stock at $.875 per share. One loan for $15,000 bears interest at
10% and is due October, 1996. The loan may be converted into $30,000 of
stock in another entity currently held in escrow for the Company or
into the Company's common stock at $.875 per share. The conversion
period expires in October, 1996. A note in the amount of $51,000 bears
interest at 10%. It matured December 30, 1995, but remains unpaid. The
note and any accrued interest was convertible to shares of the
Company's common stock at a price of $.875 per share any time prior to
December 20, 1995, at the option of the lender. The note was not
converted. Another $50,000 was loaned to the Company by the same entity
that loaned the $51,000. The $50,000 was due January, 1996 and remains
unpaid. The Company issued 50,000 shares to the entity for interest and
late-fees. Additional notes in the amount of 731,800 were issued during
1996, bearing interest at 12%.
F-10
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
NOTE 16: MARKETABLE SECURITIES
18,775 shares of the common stock of CAI Wireless Systems, Inc. ("CAI")
were sold in 1995. After such sale, the Company held 100 shares (18,875
at December 31,1994). Cost and market value of the stock at December
31, 1995 was $906. The market value of the CAI stock at December 31,
1994 was $139,203. Cost was $207,625. The investment is carried at
market value in accordance with FAS #115. At December 31, 1994 the
carrying value was reduced by $68,422 which was charged to expense.
NOTE 17: CONTINGENT LIABILITIES
Marrco, since the acquisition of its assets and liabilities by the
Company, had a judgment levied against it for a total sum of
approximately $34,000. The Company has not accrued any liability with
respect to this judgment as it disclaims any responsibility to this
judgment since it was levied after the purchase of the assets and
liabilities of Marrco. The Company may have some exposure to this
liability should it be pursued to pay this judgment.
As mentioned in Note 3, the Company may have to take legal action to
recover 350,000 shares of its common stock. A shareholder has
threatened to initiate legal action to retain the 350,000 shares. The
Company believes the action has no merit since the transaction did not
provide any benefit to the Company as represented. The Company has had
its stock transfer agent place stop orders on the share certificates
in question and does not treat the stock as outstanding.
NOTE 18: STOCK OPTION PLAN AND WARRANTS
At December 31, 1996, the Company has set aside 2,500,000 shares of its
common stock for an incentive stock option plan established by Marrco
in 1993. These options were fully vested as of the date of the
Company's acquisition of Marrco. The exercise price is $.88 per share.
None of the stock options have been exercised. The options expire
December 28, 1998. At December 31, 1996, there are outstanding 66,667
warrants to purchase 66,667 shares of common stock at $4.50 per share.
The warrants expire on July 16, 1997. There are also outstanding
300,000 redeemable Class "B" common stock purchase warrants to purchase
common stock at a price of $2.00 per share and 25,000 redeemable Class
"C" common stock purchase warrants with a price of $4.00 per share.
These warrants expire March 31, 1999 and couldn't be exercised prior to
June 16, 1994.
NOTE 19: SUBSEQUENT EVENTS
Debt Settled with Common Stock
During March of 1996, the Company amended two lease agreements. One
agreement will allow the Company to settle $190,000 of obligations
associated with its Farmington, Missouri lease by issuing 25,333 shares
of its common stock and 17,417 share of Series "C" Cumulative
Convertible Preferred Stock of WIN-TV by December 7, 1996. If the stock
is not issued by that date, the Company is obligated to pay cash in the
amount of the greater of $190,000 or the market value of the above
described stock on the date of default. The second agreement allows the
Company to settle $50,000 of obligations related to its Harrison lease
by issuing 6,667 shares of its common stock and 4,583 shares of Series
"C" Cumulative Convertible Preferred Stock of WIN-TV by December 7,
1996. If the stock is not issued by that date, the Company is obligated
to pay cash in the amount of the greater of $50,000 or the market value
of the above described stock on the date of default. In both
situations, the Company issued the required number of its shares.
However, the planned acquisition of WIN-TV shares was never realized.
The Company is in negotiations with the parties involved to settle the
obligations by other means.
F-11
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
NOTE 19: SUBSEQUENT EVENTS (continued)
Beaumont Transaction
On April 17, 1996, the Company entered into an agreement with Beaumont
Broadcasting Corporation ("BBC") whereby the Company and BBC agreed to
form a Texas limited liability company, Micro-Lite Television of
Beaumont, LLC (the "LLC"), for purposes of owning and operating a
wireless cable system in the Beaumont, Texas market. The Company has
paid $5,000 for a .1% interest in the LLC and BBC has contributed the
licenses and leases for 23 wireless cable channels in the market as
well as a significant amount of assets, including transmission
equipment, for the remaining 99.9% of the LLC. BBC has granted the
Company an option to purchase 79.9% of the LLC for a purchase price of
$4,000,000, and a second purchase option for the remaining 20% of the
LLC for an additional $1,000,000. If the Company exercises the first
option, BBC has an option exercisable after one year from the exercise
of the first option to obligate the Company to purchase the remaining
20% of the LLC for the $1,000,000 discussed above. BBC and the Company
are currently finalizing a management contract by which the Company
would be responsible for the launching and management of the wireless
cable system in Beaumont.
F-12
<PAGE>
SCHEDULE 1
SUPERIOR WIRELESS, INC.
(A DEVELOPMENT STAGE COMPANY)
GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
Period from
Years ended December 31, 4-1-94 to
1996 1995 1994 12-31-96A
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Accounting $ 16,792 $ 17,320 $ 17,923 $ 52,035
Automobile expense 5,156 4,718 9,633 19,507
Bad debts 0 0 9,527 9,527
Debt forgiveness -
related party 0 0 (25,000) (25,000)
Dues and subscriptions 3,764 3,864 2,507 10,135
Fees and commissions 19,829 20,347 29,967 70,143
Insurance 7,443 7,301 5,790 20,534
Legal 119,590 33,824 117,689 271,103
Marketing and advertising 2,704 606 16,571 19,881
Meals and entertainment 3,008 4,677 823 8,508
Office expense 10,918 13,637 15,172 39,727
Outside services 3,842 2,556 8,739 15,137
Payroll taxes and benefits 25,010 52,044 47,757 124,811
Postage 17,417 14,583 22,937 54,937
Professional 65,300 46,250 24,125 135,675
Relocation expense 0 0 19,091 19,091
Rent expense 85,580 62,694 58,091 206,365
Repairs and maintenance 411 3,048 1,627 5,086
Salaries 382,317 371,183 426,025 1,179,525
Taxes and licenses 2,015 1,396 5,190 8,601
Telephone 39,297 35,601 34,978 109,876
Travel 47,506 35,873 58,354 141,733
Miscellaneous 1,876 959 2,913 5,748
Overhead reimbursement (100,000) 0 0 (100,000)
------------- ------------- -------------- -------------
$ 759,775 $ 732,481 $ 910,429 $ 2,402,685
============= ============= ============== =============
</TABLE>
A Date Company re-entered the development stage.
F-13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Superior Wireless Communications, Inc. December 31, 1996
financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000793986
<NAME> Superior Wireless Communications, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,197
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,614
<PP&E> 232,334
<DEPRECIATION> (126,531)
<TOTAL-ASSETS> 1,360,905
<CURRENT-LIABILITIES> 2,510,436
<BONDS> 0
6,005
0
<COMMON> 0
<OTHER-SE> (1,155,936)
<TOTAL-LIABILITY-AND-EQUITY> 1,360,905
<SALES> 300,600
<TOTAL-REVENUES> 300,600
<CGS> 107,394
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,407,770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,452
<INCOME-PRETAX> (1,214,564)
<INCOME-TAX> 1,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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