CONFORMED COPY
__________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 1996
Commission File Number 0-28348
DBS INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-1124675
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
495 Miller Avenue, Mill Valley, California 94941
(Address of principal executive offices) (Zip Code)
(415) 380-8055
(Registrant's telephone number, including area code)
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:[ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares Outstanding
Class of Securities (as of September 30, 1996)
Common stock, $.0004 Par Value 5,821,003
Transitional Small Business Disclosure Format:
Yes: [ ] NO: [X]
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements PAGE
Condensed Consolidated Balance Sheets:
As of September 30, 1996 (unaudited) and December 31, 1995
(audited) 3
Condensed Consolidated Statements of Operations (unaudited): 4
For the Three months ended September 30, 1996 and September 30,
1995, for the Nine months ended September 30, 1996 and September
30, 1995 and for the period from April 25, 1990 (Inception) to
September 30,1996
Condensed Consolidated Statements of Cash Flows (unaudited): 5
For the Three months ended September 30, 1996 for the Three months
period ended September 30, 1995, and for the period from April
25, 1990(Inception) to September 30, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 8
of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30,
1996 December 31,
(Unaudited) 1995
------------ ------------
Current assets:
Cash and cash equivalents $ 34,914 $ 3,743
Restricted cash 300,000 300,000
Accounts receivable 100,000 -
Prepaid and other current assets 21,283 52,155
---------- ----------
Total current assets 456,197 355,898
---------- ----------
Furniture and equipment (at cost) 73,277 52,778
Less accumulated depreciation 29,941 21,371
---------- ----------
43,336 31,407
---------- ----------
Other assets:
Investments in and advances to affiliated
companies 1,510,250 1,349,312
Goodwill, net of accumulated amortization
of $65,193 and $51,543 respectively 25,797 39,447
Other assets 2,301,631 62,996
---------- ----------
3,837,678 1,451,755
---------- ----------
Total assets $ 4,337,211 $ 1,839,060
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 801,945 $ 273,713
Unearned revenue 300,000 -
Line of credit 295,000 300,000
Accrued liabilities 412,843 54,815
---------- ----------
Total current liabilities 1,809,788 628,528
Convertible debentures 4,000,000 1,000,000
---------- ----------
Total liabilities 5,809,788 1,628,528
---------- ----------
Stockholders' equity (deficit):
Preferred stock - -
Common stock 2,341 2,232
Capital in excess of par value 4,555,713 3,448,763
Deficit accumulated during the
development stage (5,945,631) (3,155,463)
Treasury stock (85,000) (85,000)
---------- ----------
Total stockholders' equity
(deficit) (1,472,577) 210,532
---------- ----------
Total liabilities and
stockholders' equity
(deficit) $ 4,337,211 $ 1,839,060
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
4/25/90
Three Months Three Months Nine Months Nine Months (Inception)
Ended Ended Ended Ended To
9/30/96 9/30/95 9/30/96 9/30/95 9/30/96
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $ 11,420 $ - $ 11,420 $ - $ 161,420
---------- --------- ---------- ---------- ----------
Cost and operating expenses:
Cost of revenue - - - - 116,730
General and administrative 506,408 234,222 1,653,415 519,120 4,398,653
Research and development 109,329 40,743 846,208 380,834 1,726,917
---------- --------- ---------- ---------- ----------
615,737 274,965 2,499,623 899,954 6,242,300
---------- --------- ---------- ---------- ----------
Loss from operations (604,317) (274,965) (2,488,203) (899,954) (6,080,880)
---------- --------- ---------- ---------- ----------
Other income (expense):
Interest, net (85,119) (2,551) (295,215) 8,073 (333,703)
Equity in loss of
investees, net - - - - (299,882)
Gain on sale of investment - - - - 836,478
Other, net - - - - (56,634)
---------- --------- ---------- ---------- ----------
(85,119) (2,551) (295,215) 8,073 146,259
---------- --------- ---------- ---------- ----------
Loss before provision for
income taxes and
minority interests (689,436) (277,516) (2,783,418) (891,881) (5,934,621)
Provision for income taxes 2,250 689 6,750 2,400 19,585
---------- --------- ---------- ---------- ----------
Loss before minority
interests (691,686) (278,205) (2,790,168) (894,281) (5,954,206)
Minority interests in income (loss)
of consolidated subsidiaries - - - - 8,575
---------- ---------- ---------- ---------- ----------
Net loss $ (691,686) $ (278,205) $(2,790,168) $ (894,281) $(5,945,631)
========== ========== ========== ========== ==========
Net loss per share $ (.12) $ (.05) $ (.49) $ (.17)
========== =========== ========== ==========
Weighted average number of
shares of common stock 5,806,935 5,349,432 5,722,050 5,337,057
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Nine Months 4/25/90
Ended Ended (Inception)
9/30/96 9/30/95 To 9/30/96
----------- ------------ -----------
<S> <C> <C> <C>
Net cash used in operating activities $(1,489,939) $ (674,628) $(4,664,614)
---------- ----------- ----------
Cash flows from investing activities:
Proceeds from sale of investment - - 900,000
Purchase of fixed assets (20,499) (15,586) (105,524)
Organization costs - - (28,526)
Advances to affiliates - - (157,754)
Proceeds from affiliate advances - - 152,500
Advances to officer - - (31,187)
Purchase of investments (2,453,347) (97,581) (3,123,129)
Net assets of purchased subsidiaries - - (147,500)
Cash transferred from Fi-Tek IV, Inc.
pursuant to the merger and
reorganization - - 156,648
Cash of divested subsidiary - - (277)
Purchase of patents - - (18,251)
---------- ----------- ----------
Net cash used by investing activities (2,473,846) (113,167) (2,403,000)
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from credit line 295,000 - 595,000
Restricted cash on credit line - - (300,000)
Payment on credit line (300,000) (60,000) (300,000)
Issuance of debentures 3,000,000 1,000,000 4,070,000
Issuance of common stock 999,956 - 3,153,470
Redemption of common stock warrants - - (19,490)
Stock issue costs - - (57,235)
Purchase of shares - - (5,000)
Payment of debentures - - (125,000)
Proceeds from stockholders' loans - - 293,000
Payment of stockholders' loans - (55,000) (202,217)
---------- ----------- ----------
Net cash provided by financing activities 3,994,956 885,000 7,102,528
---------- ----------- ----------
Net increase (decrease)in cash 31,171 97,205 34,914
Cash and cash equivalents,
beginning of period 3,743 464,353 -
---------- ----------- ----------
Cash and cash equivalents,
end of period $ 34,914 $ 561,558 $ 34,914
========== =========== ==========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
</TABLE>
<PAGE>
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 1 UNAUDITED INTERIM FINANCIAL STATEMENTS
--------------------------------------
The information presented in these condensed consolidated
financial statements of DBS Industries, Inc. (DBSI or the
Company) and its wholly owned subsidiary, Global Energy Metering
Services, Inc., (the subsidiary) is unaudited. The financial
statements include all adjustments consisting of only normal
recurring adjustments which are, in the opinion of management,
necessary to present fairly the condensed consolidated financial
position of DBSI at September 30, 1996, and condensed consolidated
results of operations and cash flows for the interim periods
reported, except as discussed in Note 2. The results of operations
for the interim period presented are not necessarily indicative of
expected results for the full fiscal year.
Certain information and footnote disclosures normally contained in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The condensed
consolidated financial statements should be read in conjunction with
the financial statements and notes contained in DBSI's 1995 Annual
Report to Shareholders.
NOTE 2 EQUITY IN INCOME & LOSSES OF INVESTEES
--------------------------------------
The financial statements of the Company for the nine months ended
September 30, 1996 and 1995 do not reflect the Company's equity in
income or losses of Direct Broadcasting Satellite Corporation, ESAT
Corporation, or Seimac Limited. Interim financial information of
the investees is not currently available.
NOTE 3 CHANGE IN FISCAL YEAR
---------------------
The Company changed its fiscal year from July 31 to December 31,
effective January 1, 1996. The comparative condensed income
statement for the nine months ended September 30, 1995, is
presented within the Company's financial statement.
NOTE 4 OTHER ASSETS
------------
On January 12, 1996, the Company acquired 72,030 shares of the
common stock of Continental Satellite Corporation (Continental)
for approximately $2.3 million from the seller of the shares.
On January 22, 1996, a Continental shareholder filed a lawsuit
in the Superior Court in and for the County of Santa Clara,
State of California, alleging that the shares issued to the
seller and acquired by the Company should be voided as they
were invalidly issued. On May 16, 1996, the court ruled that
the Continental shares issued to the seller and purchased by
the Company were invalidly issued. However, the court ruled
that trial must be held to determine the Company's equitable
ownership interest, if any, based upon the evidence presented
at trial. The trial is currently scheduled for November 1996,
but may be continued at the court's discretion.
Based upon the evidence developed in the case, at this time, the
Company believes that it is entitled to an equitable ownership
interest in Continental commensurate with its original investment
in 72,030 shares of Continental common stock. Until the trial is
completed, and a decision is rendered by the court, the Company is
not able to definitely determine the nature and extent of its
ownership interest in Continental. However, pursuant to the stock
purchase agreement, the seller agreed to defend and indemnify the
Company in the event that there was a breach or inaccuracy of any
representation made by the seller in the stock purchase agreement.
In the event that the Company's interest in Continental is not
recognized, the Company may seek indemnity and damages from the
seller pursuant to their stock purchase agreement because the
seller indicated that it had good and marketable title to the
72,030 shares of Continental.
The ultimate outcome of this matter cannot presently be determined.
The Company has reflected the purchase price of the shares of
Continental in other assets on the condensed consolidated balance
sheet at September 30, 1996.
NOTE 5 UNEARNED REVENUE
----------------
The Company's wholly owned subsidiary, Global Energy Metering
Services, Inc. (GEMS), is party to a contract to deliver 10,000
satellite radio units. The purchase order is for $1.2 million
and under the terms of the purchase order, GEMS would receive a
total of $500,000 in advance payments on the contract, based
on certain milestone achievements. These milestone payments
are refundable if the contractee does not qualify GEMS'
automatic meter reading system, tentatively scheduled for the
third quarter, 1997. As of September 30, 1996, the $300,000
in milestone payments received and receivable are reported as
unearned revenue on the accompanying balance sheets.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
On December 21, 1995, EchoStar Communications Corporation ("EchoStar") and
Direct Broadcasting Satellite Corporation ("DBSC") entered into a Plan and
Agreement of Merger (" the merger"), whereupon EchoStar filed a transfer
of control request with the Federal Communications Commission ("FCC").
The Company owns approximately 24% of DBSC. The FCC approved EchoStar's
request to transfer control of the DBS license on August 30, 1996.
However, the merger involves the issuance of shares of EchoStar common stock
to the current shareholders of DBSC and the shares must be registered with
the Securities and Exchange Commission ("SEC"). Although EchoStar filed its
Form S-4 registration statement with the SEC on April 16, 1996, and updated
it on September 19, 1996, as of September 30, 1996 it has not received SEC
approval. The Board of Directors for each company has approved the merger,
the necessary shareholders consent has been obtained, and all other
regulatory approvals (including the Federal Trade Commission's consideration
of the transaction under the Hart-Scott-Rodino Antitrust Improvements Act)
are believed to have been obtained. Until the SEC declares EchoStar's
registration statement effective, the parties are legally unable to complete
the merger. The Company expects to receive approximately 270,414 shares of
common stock of EchoStar in exchange for its ownership interest in DBSC.
Shares of EchoStar common stock trade on the Nasdaq National Market System
under the trading symbol "DISH". As of September 30, 1996 shares of
EchoStar traded at price equal to $28.75 per share, resulting in a potential
value to the Company of $7,774,403. However, no assurances can be given if
or when the merger will be effective.
Liquidity and Capital Resources
The Company has been in the development stage since its inception and has not
recognized any significant revenues or capital resources other than the
receipt, of (i) a minimal amount of inside capitalization funds at its
inception, (ii) net proceeds in the amount of $166,175 from its public
offering, (iii) gross proceeds of $70,000 from a sale of debentures,
(iv) subscriptions representing gross proceeds of $2,024,588 in connection
with five private placements of common stock, (v) gross proceeds of $293,000
from bridge loans made by the Company's president and shareholders,
(vi) gross proceeds of $1,056,500 from the sale of the Company's interest in
the stock of a company holding a DBS license, and (vii) gross proceeds of
$4,000,000 from the sale of two convertible debentures. Additionally, the
Company has an established line of credit for $300,000 from The Pacific
Bank, Burlingame, California, collateralized by a restricted cash deposit
in the amount of $300,000. As of September 30, 1996, $295,000 has been
drawn from the credit line.
Stockholders' deficit at September 30, 1996 was -$1,472,577 compared to
stockholders' equity of $210,532 at December 31, 1995. This decrease
occurred despite the sale of $1 million of common stock during the quarter
ended March 31, 1996. The Company continues to incur approximately $300,000
to $400,000 of monthly operating costs which will likely continue for the
forseeable future.
The consolidated balance sheet as of September 30, 1996 reflects cash and
cash equivalents of $34,914 compared to $3,743 as of December 31, 1995.
Cash will continue to be used by the Company for the ongoing development of
GEMS' automatic meter reading ("AMR") business and the Company's operating
activities. The Company anticipates monthly expenses of approximately
$300,000 to $400,000 to continue for the balance of the year. This includes
approximately $50,000 per month for operating expenses, $150,000 per month
for legal and consulting expenses, and $150,000 per month for GEMS' research
& development. Accordingly, cash resources presently available to the
Company are not sufficient to continue operations at their projected level,
and additional capital will be necessary to expand operations or continue
current operations for the balance of the year. In addition to the ongoing
legal costs necessary to defend its interest in Continental and legal and
consulting costs deemed advisable to maintain its interest in FCC licenses
and pursue pending FCC applications, the Company expects the development of
a low earth orbit satellite transmitter scheduled for completion in 1996 to
cost approximately $650,000, of which approximately $390,000 has already
been expended as of September 30, 1996. Although the Company earned revenue
of approximately $11,420 from the sale of satellite radio units during the
quarter ended September 30, 1996, it does not expect its automated meter
reading operations to produce any other significant revenue in 1996 or
become profitable until 1999 at the earliest, if at all. Beginning in July
1996, the Company began to receive milestone payments under the terms of a
$1.2 million purchase order for 10,000 satellite radio units. Under this
agreement, the Company is eligible to receive up to $500,000 towards
development costs upon meeting the milestone requirements of the contract.
As of September 30, 1996, the Company has met the first three milestones
of the contract and has received $200,000 in cash. These funds are currently
classified as unearned revenue, and all such milestone payments are subject
to refund if the Company fails to meet certain development and delivery
milestones. Unless and until the Company is able to raise additional funds
or become profitable through its subsidiary's automated meter reading
operations, the Company's liquidity and capital resources will continue to
be depleted. Historically, the Company has funded its operations and
obligations through the private placement of equity securities and
convertible debentures. The Company may continue to fund its commitments
through these financing methods, however, no assurances can be given that
the Company will be able to raise the necessary capital to meet its
commitments. In the event the Company is unable to raise the necessary
capital, its business objectives will be adversely affected. The Company
has an approximate 24% ownership in DBSC which is currently undergoing
merger proceedings with EchoStar, as described above (see: Item 2. Section
General), that could provide the Company with marketable securities
which the Company anticipates would be sufficient to meet its financial
requirements for the year. As of September 30, 1996 shares of EchoStar
common stock traded on the Nasdaq National Market System under the trading
symbol "DISH", at a price equal to $28.75 per share. Upon completion of
the merger, 219,105 shares of EchoStar common stock are expected to be
pledged to secure the Company's debentures and 51,309 shares of EchoStar
common stock are expected to be available for re-sale or margin borrowings.
Total assets at September 30, 1996 were $4,337,211 compared to $1,839,060 at
December 31, 1995. The largest components of total assets represent
investments in and advances to affiliated companies of $1,510,250 compared
to $1,349,312 at December 31, 1995, and other assets of $2,301,631 at
September 30, 1996 compared to $62,996 at December 31, 1995. Other assets
increased by $2.2 million which represents the purchase price of the
Continental common shares. (See note 4 to the condensed consolidated
financial statements.) Total current assets increased from $355,898 at
December 31, 1995 to $456,197 at September 30, 1996.
Results of Operations
The Company remains in the development stage and did not generate any
significant revenues other than $11,420 earned by GEMS, nor any net interest
earnings for the quarter ended September 30, 1996. There were no revenues
or net interest earnings for the quarter ended September 30, 1995.
The Company's net loss for the quarter ended September 30, 1996 was $691,686
and $2,790,168 for the nine month period ended September 30, 1996, compared
to a net loss for the quarter ended September 30, 1995 of $278,205 and
$894,281 for the nine month period ended September 30, 1995. General and
administrative costs were $506,408 for the quarter ended September 30, 1996
and $1,653,415 for the nine month period ended September 30, 1996, compared
to $234,222 for the quarter ended September 30, 1995 and $519,120 for the
nine months ended September 30, 1995. Research and development costs
associated with GEMS were $109,329 for the quarter ended September 30, 1996
and $846,208 for the nine month period ended September 30, 1996, compared to
$40,743 for the quarter ended September 30, 1995 and $380,834 for
the nine months ended September 30, 1995. Loss from operations was $604,317
for the quarter ended September 30, 1996 and $2,488,203 for the nine month
period ended September 30, 1996 compared to $274,965 for the quarter ended
September 30, 1995 and $899,954 for the nine month period ended September
30, 1995.
The Company's accumulated deficit at September 30, 1996 rose to $5,945,631
from $3,155,463 at December 31, 1995 and it is believed will continue to
increase unless and until the Company generates revenues from the operations
of GEMS in such amounts so as to cover the Company's expenses or until the
Company completes the DBSC merger and subsequently receives its EchoStar
shares. If the DBSC merger with EchoStar, subject to SEC approval, is
completed, the Company expects to receive approximately 270,414 shares of
common stock of EchoStar in exchange for its ownership interest in DBSC.
Based on the market price of the stock, such an exchange would result in
the Company holding marketable securities, potentially valued at $7,774,403
as of September 30, 1996, which may allow the Company to secure additional
funding through the sale of, or use as collateral of, the EchoStar stock.
Upon completion of the merger, 219,105 shares of EchoStar common stock will
be pledged to secure the Company's debentures and 51,309 shares are expected
to be available for re-sale or margin borrowings. However, no assurances
can be given if or when the merger will be completed. Revenues substantial
enough to make the Company profitable are not expected to be generated
until 1999, and no assurances can be given as to that estimate. The
Company has been devoting a substantial amount of its financial and
personnel resources toward developing the Company's AMR business.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes In Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
With the exception of historical facts stated herein, the
matters discussed in this report are "forward looking"
statements that involve risks and uncertainties that could
cause actual results to differ materially from projected
results. Such "forward looking" statements include, but are
not necessarily limited to, statements regarding anticipated
levels of future revenue and earnings from the operations of
the Company, and its wholly owned subsidiary Global Energy
Metering Service, Inc.(collectively the "Company"), projected
costs and expenditures relating to the Company's interest in
direct broadcasting satellite ("DBS") technology and
development of its automated meter reading ("AMR") business,
and the availability of future debt and equity capital on
commercially reasonable terms. Factors that could cause
actual results to differ materially, include, in addition to
other factors identified in this report, the completion of a
commercially viable AMR service, the dependence and
uncertainty of utility companies to utilize such an AMR
service, the reliance on third parties for the advancement of
the design, manufacturing and marketing of the service,
challenges to the Company's investments in DBS licensees and
permitees, the availability of qualified personnel and
equipment, delays in the receipt of, or failure to receive
necessary governmental approvals, permits, and licenses
or renewals thereof, risks and uncertainties relating to
general economic and political conditions, both domestically
and internationally, changes in the law and regulations
governing the Company's activities in both AMR and DBS
technology, results of the Company's financing efforts and
marketing conditions, and other risk factors related to the
Company's AMR business and DBS investments. Readers of this
report are cautioned not to put undue reliance on "Forward
looking statements which are, by their nature, uncertain as
reliable indicators of future performance. The Company
disclaims any intent or obligation to publicly update these
"forward looking" statements, whether as a result of new
information, future events, or otherwise.
Item 6. Exhibits and Reports on Form 8-K
On July 16, 1996, the Company filed an 8K/A revising its
earlier filing from January 12, 1996,
(a) Exhibits
The following exhibit is filed with this report:
Exhibit Number
10.29 Letter dated November 8, 1996, to Donald H. Gips, Chief,
International Bureau, Federal Communication Commission,
from William L. Fishman, corporate counsel to Direct
Broadcasting Satellite Corporation.
SIGNATURES
Pursuant to the requirements 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.
DBS INDUSTRIES, INC.
Date: November 18, 1996 By: Fred W. Thompson
- ------------------------- ---------------------
Fred W. Thompson
Chief Executive Officer, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-QSB FOR DBS INDUSTRIES, INC. FOR THE QUARTER ENDED SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 34,914
<SECURITIES> 0
<RECEIVABLES> 100,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 456,197
<PP&E> 73,277
<DEPRECIATION> 29,941
<TOTAL-ASSETS> 4,337,211
<CURRENT-LIABILITIES> 1,809,788
<BONDS> 0
0
0
<COMMON> 2,341
<OTHER-SE> (1,474,918)
<TOTAL-LIABILITY-AND-EQUITY> 4,337,211
<SALES> 0
<TOTAL-REVENUES> 11,420
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 615,737
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,119
<INCOME-PRETAX> (689,436)
<INCOME-TAX> 0
<INCOME-CONTINUING> (604,317)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (691,686)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
November 8, 1996
BY HAND DELIVERY
- ----------------
Donald H. Gips
Chief, International Bureau
Federal Communications Commission
2000 M Street, N.W.
Washington, D.C. 20554
Re: DBSC Assignment Transaction, File Nos. 55-SAT-AL-96 and DBS 87-01
Dear Mr. Gips:
As you know, on August 30, 1996, the International Bureau granted the
application of Direct Broadcasting Satellite Corporation ("DBSC") for
authorization to merge with a wholly owned subsidiary of EchoStar
Communications Corporation ("EchoStar"), Direct Broadcasting Satellite
Corporation of Colorado ("DBSC-CO"). Unfortunately, the parties have not yet
been able to consummate the transaction for reasons beyond their control. The
only remaining hurdle to consummation is approval by the Securities and
Exchange Commission of a pending Form S-4 registration statement.
Accordingly, the parties request an extension until ten days after receipt
of the SEC approval in which to consummate the transaction. Because the SEC
approval could come at any moment, we ask that this extension be granted
immediately.
As explained in the original assignment application, part of the merger
transaction involves issuing shares of EchoStar to the current shareholders of
DBSC. In order to issue those shares, they must first be registered with the
SEC. Although EchoStar filed its Form S-4 registration statement with the SEC
on April 16, 1996, and updated that statement on September 19, 1996, it has
not yet received SEC approval. Consideration of the Form S-4 was originally
delayed pending FCC authorization for the proposed merger. Since that
authorization was granted on August 30, the SEC has not completed its
processing procedures even though it has not expressed any concern to either
DBSC or EchoStar with repect to the transaction or requested any material
additional information.
Both DBSC and EchoStar have done everything necessary at the corporate
level to effectuate the merger. The Board of Directors for each company has
approved the transaction, the necessary consent of the shareholders has been
obtained, and all other regulatory approvals (including the FTC's
consideration of the transaction under the Hart-Scott-Rodino Antitrust
Improvements Act) have been secured. The parties remain committed to
providing high quality DBS service to American comsumers, and intend to
consummate the assignment transactions as soon as the SEC declares the
registration statment effective. Unfortunately, they are unable to control
that date and are legally unable to complete the tranaction without this one
last regulatory approval. Accordingly, the parties request an extension that
would allow them to consummate the transaction within ten days of receiving
the necessary SEC approval.
The Commission will be notified promptly as soon as the merger has
occurred. Any questions in connection with the foregoing may be directed to
either of the undersigned.
Sincerely,
William L. Fishman William M. Wiltshire
Sullivan & Worcester LLP Gibson, Dunn & Crutcher LLP
1025 Connecticut Avenue, N.W. 1050 Connecticut Avenue, N.W.
Washington, D.C. 20036 Washington, D.C. 20036
(202) 775-8190 (202) 955-8500
Counsel for DBSC Counsel for EchoStar
cc: Fern J. Jarmulnek
Suzanne Hutchings
