<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACTS OF 1934
Commission File No. 33-9030
MAGNAVISION CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 22-2741313
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
1725 ROUTE 35, WALL, NEW JERSEY 07719
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (732) 449-1200
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant is not available due to the unavailability of price quotations for
the Registrant's securities.
The number of shares of Registrant's Common Stock outstanding on November 9,
1998 was 1,154,390.
Documents Incorporated by Reference: None.
<PAGE>
INDEX
PART I. Financial Information
---------------------
Item 1. Financial Statements
--------------------
Condensed Consolidated Balance Sheets - September 30, 1998 and December 31, 1997
Condensed Consolidated Statements of Operations - Three and Nine months ended
September 30, 1998 and 1997.
Condensed Consolidated Statements of Stockholders' Deficiency - Period December
31, 1997 to September 30, 1998.
Condensed Consolidated Statements of Cash Flows - Nine months ended September
30, 1998 and 1997.
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
---------------------------------------------------------------------
PART II. Other Information
-----------------
Item 6. Exhibits and Reports
--------------------
<PAGE>
ITEM 1. FINANCIAL INFORMATION
MAGNAVISION CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
ASSETS 1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash 159,409 141,546
Trade Accounts and Other Receivables 686,487 236,375
Prepaid Expenses 5,167 8,516
------------- ---------
Total Current Assets 851,062 386,437
------------- ---------
PROPERTY AND EQUIPMENT
Property and Equipment at Cost 3,063,486 1,944,558
Less: Accumulated Depreciation (1,038,075) (748,375)
------------- ----------
Net Property and Equipment 2,025,411 1,196,183
OTHER ASSETS
Shareholder Loans Receivable 43,810 43,810
Notes Receivable from Customer 834,000 --
Prepaid lease expense 570,458 650,684
Deferred financing cost, net of accumulated amortization -- 145,496
Deposits 11,329 4,553
------------- ---------
TOTAL ASSETS 4,336,070 2,427,163
============= =========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses 606,202 443,717
Deferred Revenues 296,694 214,490
Current Portion of Long-Term Debt 4,225 4,225
Income Taxes Payable 741 741
Current Portion of 5 Year Term Loan 616,000 --
Term Loan 105,468 105,468
------------- ---------
Total Current Liabilities 1,629,331 768,641
LONG-TERM LIABILITIES
Line of Credit -- 405,295
Security Deposits 170,313 152,065
Long-Term Debt 3,724 6,041
5 Year Term Loan 1,884,000 --
Commitments and contingencies
Series A Preferred Stock 9,850,000
shares authorized; issued and outstanding, 5,000,000 4,567,901 4,498,456
shares, net of unamortized discount.
SHAREHOLDERS' DEFICIENCY
Series B Preferred Stock, 150,000 shares 131,889 131,889
authorized; issued and outstanding, 131,889 shares.
Common Stock, $0.08 par value - 10,000,000 shares
authorized; issued and outstanding, 1,154,390 shares
at September 30,1998 and 1,152,510 shares at December 31,1997 92,350 92,200
Additional Paid-In Capital 3,880,601 3,876,991
Accumulated Deficit (8,024,039) (7,504,415)
------------- ---------
Total Shareholder's Deficiency (3,919,199) (3,403,335)
------------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 4,336,070 2,427,163
============= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-2
<PAGE>
MAGNAVISION CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30 Three months ended September 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Gross Revenues 2,871,617 1,078,901 1,911,062 351,440
Cost of Sales 1,533,423 362,619 1,169,563 113,815
--------- ---------- --------- ---------
GROSS PROFIT 1,338,194 716,282 741,499 237,625
OPERATING EXPENSES
Salaries 476,093 464,401 177,152 155,627
Depreciation 289,700 176,875 104,700 64,271
General and Administrative Expenses 748,335 667,729 258,196 196,659
--------- ---------- --------- ---------
TOTAL OPERATING EXPENSES 1,514,128 1,309,005 540,048 416,557
OPERATING INCOME (LOSS) (175,934) (592,723) 201,451 (178,932)
OTHER INCOME (expense)
Interest expense (126,818) (184,953) (52,013) (3,107)
Interest Income 22,532 25,082 7,499 9,690
--------- ---------- --------- ---------
Total other income (expense) (104,286) (159,871) (44,514) 6,583
LOSS BEFORE PROVISION FOR INCOME TAXES AND
EXTRAORDINARY ITEM (280,219) (752,594) 156,937 (172,349)
PROVISION FOR INCOME TAX 4,181 3,989 -- 100
--------- ---------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (284,400) (756,583) 156,937 (172,449)
--------- ---------- --------- ---------
EXTRAORDINARY ITEM-LOSS ON EXTINGUISHMENT
OF DEBT 165,779 275,844 165,779 --
--------- ---------- --------- ---------
NET LOSS (450,180) (1,032,427) (8,842) (172,449)
--------- ---------- --------- ---------
Preferred Stockholders Dividend Requirement 300,000 157,778 100,000 100,000
--------- ---------- --------- ---------
Net loss to Common Stockholders (750,180) (1,190,205) (108,842) (272,449)
--------- ---------- --------- ---------
Net Loss per Common Share Basic:
Income (Loss) before extraordinary item (0.51) (0.79) 0.05 (0.24)
Extraordinary item (0.14) (0.24) (0.14) --
Net loss (0.65) (1.03) (0.09) (0.24)
Weighted Average Shares use to Compute net loss
per share:
Basic 1,154,342 1,152,513 1,154,390 1,152,576
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-3
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
For the period December 31, 1997 to September 30,1998
(UNAUDITED)
<TABLE>
<CAPTION>
Series B Common Common Additional
Preferred Stock Stock Stock Paid in Accumulated Total
Shares Amount Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,1997 131,889 131,889 1,152,510 92,200 3,876,991 (7,504,415) (3,403,335)
Common Stock Issued
Jan 1,1998 to September 30,1998 -- -- 1,880 150 3,610 -- 3,760
Accretion of Warrants (69,444) (69,444)
Net loss (450,180) (450,180)
-------- ------- --------- ------ --------- ----------- -----------
Balance, September 30, 1998 131,889 131,889 1,154,390 92,350 3,880,601 (8,024,039) (3,919,199)
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-4
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (450,180) (1,032,427)
Adjustments to Reconcile Net Loss to Net Cash used in operating activities
Extraordinary item 165,779 275,844
Depreciation and Amortization 289,700 176,875
Amortization of deferred financing costs 31,121 --
Amortization of channel lease prepayments 80,226 80,226
Changes in Assets and Liabilities:
Increase in Trade Accounts and
Other Receivable (450,112) (122,996)
Decrease (increase) in Prepaid Expenses 3,350 (954)
Increase in Deposits (6,776) (50)
Increase in Accounts Payable and
Accrued Expenses 162,485 281,819
Increase in Security Deposits 18,248 38,631
Increase (decrease) in Deferred Revenues 82,204 43,823
Increase in notes receivable from customer (834,000) --
----------- -----------
Net cash used in operating activities (907,956) (259,209)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loan to shareholders -- 483
Purchase of property and equipment (1,118,928) (571,547)
----------- -----------
Net cash used in investing activities (1,118,928) (571,064)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of Long term debt (2,317) (1,742)
Payment of Access Capital line of credit, including penalty (456,696) --
Decrease in Due to Shareholders -- (8,000)
Proceeds of Issuance of Preferred Stock, net -- 863,811
Proceeds from Issuance of Common Stock 3,760 707
Proceeds from Issuance of 5 Year Term Loan 2,500,000 --
----------- -----------
Net cash provided by financing activities 2,044,747 854,776
Net increase in cash 17,863 24,503
----------- -----------
Cash beginning of period 141,546 164,296
Cash end of period 159,409 188,799
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
1. Summary of Significant Accounting Policies:
- -----------------------------------------------
The accompanying Condensed Financial Statements include the accounts of
Magnavision Corporation ("the Parent") and its wholly owned subsidiaries,
(collectively the "Company"), the most significant of which are Magnavision
Corporation (New Jersey), Magnavision Private Cable, Inc. and Magnavision
Wireless Cable, Inc. In the opinion of management, all adjustments necessary for
a fair presentation of financial statements have been included. Such adjustments
consisted only of normal reoccurring items. The condensed financial statements
for the quarters ending September 30, 1998 and September 30, 1997 are unaudited
and should be read in conjunction with the Company's consolidated annual
financial statements and notes thereto for the year ending December 31, 1997.
Effective at the end of June 1998, the Company merged Accu-Trek, Inc. and
University Connection, Inc. into Magnavision Corporation (New Jersey). These
subsidiaries had no assets, liabilities or operations therefore, the transaction
had no impact on the Company's financial statements.
2. Exchange of Senior Subordinated Notes into Redeemable Preferred Stock
- -------------------------------------------------------------------------
On May 8, 1997, the Company agreed with its lenders to exchange its senior
subordinated notes into redeemable preferred stock. Under the terms thereof, the
Company's outstanding subordinated notes, aggregating approximately $4.1
million, together with accrued interest and detachable warrants, were exchanged
for $5 million of 8% redeemable preferred stock due December 31, 2002. In
connection with the exchange the note holders received 1,826,932 warrants to
purchase up to 58% of the common stock on a fully diluted basis at an exercise
price of $2.00 per share after the Company effected a 1-for-20 reverse stock
split, and have the right, which they have exercised, to elect the majority of
the Board of Directors. This resulted in a change in control of the Company. The
agreement also requires the warrant holders to surrender up to 10% of their
stock on a fully diluted basis, if, as and when certain liquidity events occur.
In addition, warrant holders have the right to require the Company to repurchase
the warrants under certain conditions. The value of the warrants was estimated
at $555,556 and represents a discount to the face value of the redeemable
preferred stock. The cost of the put can not be determined at this time since it
is based upon the value of a sale of a significant asset which cannot be
assured.
In connection with the exchange, the lenders agreed to issue one year unsecured
notes totaling $105,468 with interest at 10% payable at maturity. The Company
and the Preferred Stockholders further agreed to extend the maturity of the
unsecured notes to May 8, 1999. The Company wrote off the unamortized deferred
finance costs related to the subordinated notes, which has been classified as an
extraordinary item in the accompanying financial statement.
3. Line of Credit
- ------------------
In September 1997 the Company and Access Capital, Inc. agreed to a $1,250,000
three-year revolving line of credit to be used to expand the Company's private
cable business. Interest was payable currently under the line of credit at prime
rate plus five and one-half percent (the contract rate) and all outstanding
amounts were payable in September 2000. The line is secured with the lender by a
pledge of private cable contracts and all other Company assets. In addition the
lender received 138,536 warrants at an exercise price of $2.00 per share to
purchase approximately 4% of the Company's stock on a fully diluted
<PAGE>
basis. The warrants contain a put and call option in the event that the Company
sells a significant asset. The put option requires the Company to purchase a
percentage of the lenders' warrants as required by a formula outlined in the
amended agreement. This option can only be exercised upon the sale of a
significant asset of the Company or change of control. Conversely, the call
option allows the Company to purchase all the outstanding warrants at a price
set by the formula stated above. The cost of either the put or call option can
not be determined at this time since it is based upon the value of a sale of a
significant asset which cannot be assured. The agreement with Access Capital,
Inc. has been terminated, however the warrant and it's related terms remain
outstanding.
Subsequent to fiscal year ended December 31, 1997, the Company had not met
certain non-monetary working capital covenants under the Agreement and the
lender instituted the default interest rate, such rate is two and one-half
percent over the contract rate. The lender had continued to lend funds under the
Agreement. The Company requested a waiver thereof together with a separate
working capital advance.
On July 3, 1998 the Company and BSB Bank and Trust Company entered into an
agreement to refinance the Company's existing credit line and supply working
capital. Pursuant thereto, Magnavision borrowed the sum of $2.5 million dollars
which bears interest at a fixed rate of 10% per annum and has a 5 year term. For
the next 12 months, monthly installments of interest, plus 9 consecutive monthly
payments of $24,000 of principal, payable in arrears, will be made in accordance
with the agreed upon schedule starting October 1998 and one principal payment of
$400,000 due June 15, 1999. The loan was utilized to refinance existing debt and
the remaining approximately $1.9 million will be used to finance the completion
of outstanding contracts for private cable television service at various
locations and to complete the Fordham University Internet distribution system
currently under contract. BSB Bank & Trust Company also granted the Company a
$500,000 line of credit, to be used for future installations of private cable
systems and general corporate purposes. This line of credit will be at an
interest rate of prime plus 1.5% payable monthly and will mature in 2 years. In
connection with the above transaction BSB Bank & Trust Company received 146,176
warrants to purchase approximately 4% of Magnavision's issued and outstanding
capital stock on a fully diluted basis at an exercise price of $2.00 per share.
4. Equity Transaction
- ----------------------
During the first quarter of 1998 warrant holders exercised warrants to purchase
1,880 shares of common stock at $2.00 per share.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
All of the Company's current revenues are derived from its private cable
operations. The wireless channel capacity operations have not commenced;
therefore, no revenue has been derived from the wireless operation.
<PAGE>
The Registrant and its wholly owned subsidiary, Magnavision Private Cable, Inc.,
began service in February 1992 to various colleges and senior living centers
facilities in the New York/New Jersey area utilizing direct satellite
technology. This involves the use of antennas, which are installed at the
facility and then separately wired on a room-by-room basis. As of September 30,
1998, the Company has long-term agreements with 37 facilities under which it is
currently providing service to students and patients through outlets in rooms
and common areas at such institutional facilities. In May 1998, the Company
entered into an Agreement with Fordham University pursuant to which the Company
agreed to service approximately 3,000 students with a data delivery system using
the existing cable television distribution system located at certain facilities.
The agreement calls for the purchase and sale of equipment that was installed by
Magnavision Corporation at a sale price of $1.4 million. The Company has also
entered into a 5 year Service Agreement to provide Network Support and related
equipment for Network Management. This service commenced in the fall of 1998.
The Company expects additional contracts to be signed in the near future and is
in the process of installing additional outlets, which it intends to complete by
year end. The majority of the facilities using the Company's private cable
service are in New Jersey and New York, but the Company's market area currently
reaches from North Carolina to Massachusetts and west to Wisconsin.
Many colleges and senior living centers in the United States do not have cable
television, but the current trend is for these institutions to install cable
television. Management believes that this trend, coupled with the fact that the
Company can offer cable services normally not provided by the traditional wired
cable companies, should result in significant subscriber expansion in the
future. Each installation is comprised of a number of billing outlets. A billing
outlet represents a hookup for a television. The Company collects revenue from
each television on-line. For the most part, the colleges are on a nine-month
billing cycle starting in September and ending in June of the subsequent year.
The nursing homes and hospitals are on a 12-month billing cycle.
Nine Months Ending September 30, 1998 Compared to Nine Months Ending September
30, 1997
For the nine months ending September 30, 1998 gross profit increased $621,912
over the nine months ending September 30, 1997. The increase was primarily a
result of increased outlets on line in September 1998, the increase related to
the data contract at Fordham and non-reoccurring revenue from the sale of
installed equipment at various sites.
Total operating expenses increased $205,123 in the nine months ending September
30, 1998 when compared to the nine months ending September 30, 1997.
Depreciation represented $112,825 of the increase and relates to the purchase of
additional equipment. General and administrative expenses account for the
majority of the remaining increase and includes increased consulting fees
related to the Wireless assets and the Data Contract in 1998.
Interest expense decreased $58,135 in the first nine months of 1998 when
compared to the first nine months of 1997. This decrease is due to the exchange
of senior debt for
<PAGE>
redeemable preferred stock in 1997 partially offset somewhat by the interest on
the line of credit in 1998.
The extraordinary item for 1997 was for the write off of deferred financing
costs upon the extinguishment of debt after the conversion to redeemable
preferred stock in the second quarter of 1997.
The extraordinary item for 1998 was the write off of deferred financing costs
and a prepayment penalty after the pay off of the Access Capital line of credit.
Third Quarter 1998 Compared to Third Quarter 1997
- -------------------------------------------------
For the third quarter 1998, gross profits increased $503,874 over the third
quarter of 1997. The increase was a result of the television outlets that went
on line in September 1998 and the increase from the data contract at Fordham and
non-reoccurring revenue from the sale of installed equipment at various sites.
Total operating expenses increased $123,491 in the third quarter of 1998 when
compared to the third quarter 1997. Depreciation accounted for $40,429 of the
increase and relates to the purchase of additional property and equipment.
General and administrative expenses account for the remaining increase and
includes increased consulting fees in 1998 related to the Wireless assets and
the Data Contract.
Interest expense increased $48,906 in the third quarter of 1998. This increase
is due to the interest due on the term loan in 1998.
The extraordinary item was for the write off of deferred financing costs and a
prepayment penalty upon the extinguishment of Access Capital line of credit
after the Company obtained the new term loan.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
For the nine months ending September 30, 1998, total cash increased by $17,863.
The cash used by operating activities was $907,956 mainly due to an increase in
trade accounts and other receivables related to the data system being built at
Fordham University and other cable television builds and the notes from Fordham
University for the purchase of equipment.
Cash used in investing activities was $1,118,928 and was used to purchase cable
television and equipment to increase the outlet count and data system equipment
for Fordham.
Cash flows from financing activities was $2,044,747 and primarily represents
proceeds from the term loan less the pay off of the Access Capital line of
credit.
For the nine months ending September 30, 1997 total cash increased by $24,503.
The net cash used in operating activities was $259,209 primarily due to
operating losses.
<PAGE>
Cash used in investing activities in the nine months September 30, 1997 was
$571,064, and was related to the purchases of cable equipment to increase the
outlet count of the private cable business.
Cash flows provided by financing activities in the nine months ending September
30, 1997 was $854,776 primarily representing the net proceeds received in
connection with the conversion from debt to Redeemable Preferred Stock.
Since the inception of its cable service in 1992, the Company has experienced
operating losses and negative cash flows. In addition, at September 30, 1998 the
Company had a shareholder deficit.
The Company's capital commitments at September 30, 1998 include capital to
construct a wireless facility at the Department of Education of the Archdiocese
of New York (the "Archdiocese") and capital to place private cable systems on
line at institutions the company has contracts with. The Company has also signed
a long-term agreement with Fordham University to supply a data distribution
system for the University. In connection with this contract the University has
issued notes for the purchase of part of this system. The Company borrowed the
funds under its term loan to complete the project. The Company has not commenced
operation of a wireless system, and will require substantial additional funding
to do so.
In addition, the Company is exploring various strategic alternatives relating to
its Channel Lease Agreement with the Archdiocese including potential strategic
alliances, joint ventures or a sale or other disposition of the Company's rights
under such agreement. Also, management believes that the continued expansion of
the Company's private cable operations should produce positive cash flows in the
future. However, no assurances can be given that the Company will successfully
accomplish any strategic alternative related to the Channel Lease Agreement, or
expand the private cable operations to produce positive cash flows, on a timely
basis or at all.
In September 1997, the Company and Access Capital, Inc. agreed to a $1,250,000
three-year revolving line of credit to be used to expand the Company's private
cable business. Interest was payable currently at the default rate of prime plus
8%. The line was secured by a pledge of private cable contracts and all other
Company assets. The lender received warrants at an exercise price of $2.00 per
share to purchase approximately 4% of the Company's common stock on a fully
diluted basis.
At June 30, 1998, the Company was not in compliance with certain covenants under
the line of credit and such defaults continue through the date hereof. In
connection therewith, the Company requested a waiver thereof together with a
separate working capital advance. By letter dated May 8, 1998 Access Capital
proposed a restructuring of the financial covenants, an increase in the line of
credit to $3 million dollars and an increase in its warrant ownership of the
Company, which the Company did not accept.
<PAGE>
On July 3, 1998 the company and BSB Bank and Trust Company entered into an
agreement to refinance its existing credit line and supply working capital.
Pursuant thereto, Magnavision borrowed the sum of $2.5 million dollars which
bears interest at a fixed rate of 10% per annum and has a 5 year term.
Installments of principal plus interest, payable in arrears, will be made in
accordance with an agreed upon schedule. The loan was utilized to refinance
existing debt and the remaining approximately $1.9 million was used to finance
the completion of outstanding contracts for private cable television service at
various locations and to complete the Fordham University Internet distribution
system. BSB Bank & Trust Company also granted the Company a $500,000 line of
credit, to be used for future installations of private cable systems and general
corporate purposes. This line of credit is at an interest rate of prime plus
1.5% payable monthly and will mature in 2 years. In connection with the above
transaction BSB Bank & Trust Company received warrants to purchase 146,176
shares of MagnaVision's issued and outstanding capital stock on a fully diluted
basis at an exercise price of $2.00 per share.
Management believes that inflation and changing prices will have a minimal
effect on operations.
The above should be read in conjunction with the Company's condensed
consolidated financial statements included elsewhere herein.
The Company recognizes the potential problems that may arise if its systems and
operations are adversely impacted by problems related to "year 2000" system and
software failures which can arise when dates go beyond the year 1999. The
Company is in the process of assuring that its purchased software will be year
2000 compliant. In addition, the Company is surveying all it's major suppliers
to determine the status and schedule for their year 2000 compliance. Where it
believes that a particular supplier's situation poses unacceptable risk, the
Company plans to find alternate sources during 1999. There can be no assurance,
however, that there will not be a delay in, or increased cost associated with,
the implementation of such changes which could have a material adverse effect on
future operations.
Certain statements under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward- looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements of the
Company, or industry results expressed or implied by such forward-looking
statements. Such factors include among others, general economic and business
conditions, which will, among other things, impact demand for the Company's
services; changes in public taste, trends and demographic changes; competition
from other SMATV and/or cable companies, which may affect the Company's ability
to generate revenues; political, social and economic conditions and laws, rules
and regulations, which may affect the Company's results of operations; timely
completion of construction projects
<PAGE>
for new systems; changes in business strategy or development plans; the
significant indebtedness of the Company; quality of management; availability of
qualified personnel; changes in, or the failure to comply with, government
regulations; and other factors.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the Quarter
ending September 30, 1998
Pursuant to the Requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 12, 1998 /s/ Jeffrey Haertlein
--------------------------
Jeffrey Haertlein
Principal Financial Officer
a Duly Authorized Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 159,409
<SECURITIES> 0
<RECEIVABLES> 686,487
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 851,062
<PP&E> 3,063,486
<DEPRECIATION> 1,038,075
<TOTAL-ASSETS> 4,336,070
<CURRENT-LIABILITIES> 1,629,331
<BONDS> 0
4,567,901
131,889
<COMMON> (3,919,199)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,336,070
<SALES> 0
<TOTAL-REVENUES> 2,871,617
<CGS> 1,533,423
<TOTAL-COSTS> 1,338,194
<OTHER-EXPENSES> 1,514,128
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,818
<INCOME-PRETAX> (280,219)
<INCOME-TAX> 4,181
<INCOME-CONTINUING> (284,400)
<DISCONTINUED> 0
<EXTRAORDINARY> (165,779)
<CHANGES> 0
<NET-INCOME> (450,180)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)
</TABLE>
