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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
Commission File Number 0-18663
TESCORP, INC.
(Exact name of small business issuer as specified in its charter)
TEXAS 74-2129403
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
327 Congress Avenue, Suite 200
Austin, Texas 78701
(Address of principal executive offices)
(512) 476-2995
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
----- -----
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at August 9, 1996
Common Stock, $ .02 par value 12,798,737
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Information
TESCORP, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 1996
Assets (Unaudited) March 31, 1996
------ -------------- ---------------
<S> <C> <C>
Cash and cash equivalents $ 6,885,418 $ 8,529,100
Accounts receivable-subscribers, net 1,780,251 1,596,676
Prepaid expenses and other assets 1,857,016 2,348,648
Plant and equipment, net 8,260,642 7,132,938
Franchise costs, net of amortization 25,127,424 24,949,470
-------------- ---------------
Total assets $ 43,910,751 $ 44,556,832
============== ===============
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 1,126,287 $ 1,311,578
Accrued license and copyright fees 1,867,705 1,840,526
Accrued taxes 632,085 661,176
Income taxes payable 634,790 492,687
Accrued payroll and social charges 546,979 422,734
Other liabilities 810,288 938,821
Long-term debt 362,618 447,651
-------------- ---------------
Total liabilities 5,980,752 6,115,173
-------------- ---------------
Minority Interest 1,004,090 1,018,702
-------------- ---------------
Stockholders' Equity:
Series 1990 Convertible preferred stock, $1 par value, $5 redemption
value per share, 704,684 shares authorized and 693,864 shares
issued and outstanding with an aggregate preference on
liquidation of $3,469,320 693,864 693,864
Series 1995 Convertible preferred stock, $1 par value, $100
redemption value per share, 200,000 shares authorized and
146,062 and 148,500 shares outstanding at June 30 and March 31,
1996, respectively, with an aggregate preference on liquidation of
$14,062,000 and $14,850,000, respectively. 146,062 148,500
Common stock, $.02 par value, 50,000,000 shares authorized
and 12,798,737 and 12,495,091 issued and outstanding at
June 30, and March 31, 1996, respectively. 255,975 249,902
Additional paid-in capital 65,894,836 65,359,628
Accumulated deficit (30,064,828) (28,959,437)
-------------- ---------------
36,925,909 37,492,457
Less treasury stock, 100,000 shares of common, at cost - (69,500)
-------------- ---------------
Total stockholders' equity 36,925,909 37,422,957
Commitments and contingencies - -
-------------- ---------------
Total liabilities and stockholders' equity $ 43,910,751 $ 44,556,832
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
TESCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Revenues $ 5,401,912 $ 2,727,709
-------------- --------------
Operating costs and expenses
Operating costs 3,915,365 1,837,787
General and administrative expenses 878,453 517,157
Depreciation and amortization 1,138,235 414,469
-------------- --------------
Total operating costs and expenses 5,932,053 2,769,413
-------------- --------------
Operating loss (530,141) (41,704)
-------------- --------------
Other income
Interest income 87,545 100,334
Other income 6,748 85,983
Interest expense (38,798) (74,052)
-------------- --------------
Total other income 55,495 112,265
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Income (loss) before provision for income taxes (474,646) 70,561
Income tax expense 113,363 27,000
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Net income (loss) before minority interests (588,009) 43,561
Minority interests, in the income (loss) of
consolidated subsidiaries 14,296 (21,599)
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Net income (loss) (573,713) 21,962
Preferred stock dividends (383,734) (86,734)
-------------- --------------
Net loss applicable to
common stock $ (957,447) $ (64,772)
============== ==============
Loss per share applicable to common stock $ (0.08) $ -
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TESCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1996 1995
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($573,713) $21,962
------------- --------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities, net of assets and
liabilities of acquired businesses:
Minority interest in the income (loss) of consolidated
subsidiaries (14,296) 21,599
Depreciation and amortization 1,138,925 414,469
(Increase) decrease in accounts and notes receivable, net 212,536 (190,297)
(Increase) decrease in prepaid expenses and other assets 44,828 (82,808)
Increase (decrease) in accounts payable and other liabilities (240,475) 285,850
------------- --------------
1,140,828 448,813
------------- --------------
Net cash provided by operating activities 567,115 470,775
------------- --------------
Cash flows from investing activities:
Proceeds from sale of assets - 3,092
Property additions (454,030) (698,635)
Proceeds from principal repayment on mortgages 2,655 19,074
Loans to Joint Venture Partners - (2,317,560)
Acquisition of Cable Systems, net of cash acquired (1,831,930) -
------------- --------------
Net cash used in investing activities (2,283,305) (2,994,029)
------------- --------------
Cash flows from financing activities:
Principal payments on long-term debt, net (85,033) (840,668)
Dividends paid on preferred stock (332,745) (86,734)
Proceeds from the exercise of stock purchase warrants
and options 490,286 -
Private placement proceeds, net of issuance costs - 8,540,000
------------- --------------
Net cash provided by financing activities 72,508 7,612,598
------------- --------------
Net increase in cash and cash equivalents (1,643,682) 5,089,344
Cash and cash equivalents:
Beginning of period 8,529,100 2,778,564
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End of period $6,885,418 $7,867,908
============= ==============
Significant non-cash investing activities are as follows:
Distribution of common stock to holders of Series 1995 Preferred
Stock electing to receive dividends in the form of common stock. $ 50,989 $ -
============= ==============
Retirement of treasury stock $ 150,376 $ -
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
TESCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
- -----------------------------------------------
Tescorp, Inc. (referred to herein collectively with its subsidiaries as
"Tescorp" or the "Company") is a Texas corporation that was organized in 1980.
The Company is engaged in the business of acquiring and developing cable
television systems and communication properties in Latin America.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) have been made that are considered necessary for a fair
presentation of the financial condition of the Company as of June 30, 1996, and
of the results of its operations for the three month period then ended. These
consolidated statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Form 10-KSB which
includes audited financial statements for the fiscal year ended March 31, 1996.
Please note that certain amounts have been reclassified for comparability with
the current year presentation.
Effective as of April 1994, the Company entered into a contractual Joint
Venture (the "Joint Venture") to acquire cable television and communications
properties in Latin America. To facilitate the Company's participation in the
Joint Venture, the Company organized two new subsidiaries: Austral
Communications Corp. ("Austral"), a Texas corporation which is a wholly owned
subsidiary of the Company, and Comunicaciones Austral S.A. ("CASA"), an
Argentine Sociedad Anonima which is a 97 percent owned subsidiary of Austral.
To facilitate the activities of the Joint Venture in Argentina, the Company and
its partners in the Joint Venture (the "Joint Venture Partners") have organized
two new Argentine Sociedades Anonimas each of which is or will be 97 percent
owned by Austral: CableDifusion S.A. ("CableDifusion") and SMR S.A. ("SMR").
(CableDifusion and SMR are collectively referred to herein as the "Argentine
Joint Venture Companies").
CableDifusion is responsible for the management of the Argentine Cable
Companies (as defined below). SMR, which was originally organized to pursue
licenses to own and operate businesses deploying Enhanced Specialized Mobile
Radio and/or related technologies in Argentina, has been utilized to facilitate
Austral's acquisition of direct ownership interests in certain Argentine cable
companies.
5
<PAGE>
For the two fiscal years ended March 31, 1996, the Company loaned or
committed to loan to the Joint Venture Partners, CASA and SMR an aggregate of
$29.1 million (the "Partner Loans") for the purpose of acquiring, pursuant to
the Joint Venture, the following eight Argentine companies which own and operate
cable television systems in Argentina: Televisora Austral S.A. ("Televisora"),
CableMax S.A. which was formerly known as Canal 2 TV Austral S.A. ("CableMax"),
Reconquista Televisora Color S.A. ("RTC"), Avellaneda Video Cable S.A. ("AVC"),
Cable Vision Gallegos S.R.L. ("CVG"), Teveca S.R.L. ("Teveca"), CablePlus S.A.
("CablePlus"), and SIR TV S.R.L. ("SIR TV"). In the first quarter of fiscal
1997, Televisora acquired substantially all of the outstanding equity of TV
Nieve, S.A. ("TV Nieve"). Additionally, during this quarter the Company and the
Joint Venture Partners formed Transcable, S.A. ("Transcable" which is
effectively 97 percent owned by the Company) to acquire substantially all of the
assets of a cable television system in Rawson, Chubut Province, Argentina (see
Note 2). During the period ended June 30, 1996, the Company made additional
loans in the amount of approximately $1.8 million to Televisora and Transcable
to finance these acquisitions. TV Nieve, Transcable and the eight cable
companies are hereinafter referred to as the Argentine Cable Companies. The
location of the cable television systems operated by the Argentine Cable
Companies follows below.
Name of Company Location (City-Province)
--------------- ------------------------
Televisora/TV Nieve Ushuaia-Tierra Del Fuego Province
CableMax Rio Gallegos-Santa Cruz Province
RTC Reconquista-Santa Fe Province
AVC Avellaneda-Santa Fe Province
CVG Rio Gallegos-Santa Cruz Province
Teveca San Carlos de Bariloche-Rio Negro Province
CablePlus San Carlos de Bariloche-Rio Negro Province
SIR TV Trelew, Rawson and Puerto Madryn-Chubut Province
Transcable Rawson-Chubut Province
Ownership of the Argentine Joint Venture Companies and Argentine Cable
Companies (other than Transcable) is held subject to the Joint Venture Agreement
by the Joint Venture Partners or nominees of the Company. Pursuant to the Joint
Venture Agreement, the Company owns 97 percent of the economic interests held by
the Joint Venture Partners and nominees in the Argentine Cable Companies,
subject to a one percent profits interest granted by the Company to an
individual. The Joint Venture structure was adopted to comply with Argentine
regulatory policies in effect prior to March 31, 1995. In response to changes in
regulatory conditions, the Company has undertaken a reorganization of its
interests in the Argentine Joint Venture Companies and Argentine Cable
Companies. Austral will acquire or has acquired direct record ownership of 97
percent of each of the Argentine Joint Venture Companies and 99 percent of the
record ownership interests in Televisora, CableMax, RTC, AVC, CVG and SIR TV,
and 80 percent of Teveca and CablePlus.
The Joint Venture will continue to hold the equitable, or economic
interests in the Argentine Cable Companies (other than Transcable). Through the
Joint Venture, and after giving effect to the one percent contractual profits
interest in Austral granted by the Company, the Company will hold approximately
96 percent of the economic interests in Televisora Austral, CableMax, RTC, AVC,
CVG and SIR TV, and approximately 77 percent of Teveca and CablePlus.
6
<PAGE>
NOTE 2 - ACQUISITIONS
- ---------------------
On April 1, 1996, the Company agreed to transfer to Televisora Austral,
S.A., an option (the "TV Nieve Option") to purchase for approximately $174,000 a
minority interest in the equity of TV Nieve, S. A. ("TV Nieve") which provides
MMDS television service in the city of Ushuaia, Argentina. On the same day,
Televisora purchased the remaining majority interest in the equity of TV Nieve
for approximately $1.15 million less the outstanding balance of the TV Nieve
liabilities pursuant to an agreement (the "Purchase Agreement"). Concurrent
with the execution of the Purchase Agreement, Televisora made a downpayment to
the sellers in the amount of $450,000 which was advanced to Televisora by the
Company on February 27, 1996. Accordingly, Televisora now owns or effectively
controls all of the outstanding equity of TV Nieve and the Company holds a 96
percent Joint Venture interest in Televisora.
The aggregate purchase price for TV Nieve was approximately $1.3 million
including the price paid for the TV Nieve Option and downpayment made concurrent
with the execution of the Purchase Agreement, which was applied against the
purchase price. The Company advanced to Televisora the additional funds
necessary to consummate the acquisition of TV Nieve contemplated in the Purchase
Agreement. In addition to the purchase price, the Company anticipates that
Televisora will incur approximately $50,000 to $100,000 of closing costs
relating primarily to the payment of legal and accounting fees. It is
anticipated that the funds needed to pay such fees will be advanced to
Televisora by the Company.
The acquisition of TV Nieve was accounted for using the purchase method of
accounting. Accordingly, the acquired assets and assumed liabilities were
recorded at their estimated fair values, which resulted in franchise costs of
approximately $510,000 that will be amortized over 20 years. The allocation of
the purchase price below is, in certain instances, based on preliminary
information and is therefore subject to revision when additional information
concerning asset and liability valuations is obtained. In the opinion of the
Company's Management, the asset and liability valuations for the purchases
discussed above should not be materially different than the allocations shown
below. A summary of the purchase price allocation is as follows:
<TABLE>
<S> <C>
Accounts receivable and other assets $ 50,000
Property and equipment 973,000
Franchise costs 510,000
Accounts payable and other liabilities (191,000)
----------
$1,342,000
==========
</TABLE>
Transcable acquired substantially all of the assets of Canal 4 Rawson Video
Cable ("Canal 4") for approximately $500,000 on May 31, 1996. Canal 4 provides
cable television service to the city of Rawson in the Chubut Province in
Argentina. The Company currently provides cable television services to the
tri-city area of Trelew, Rawson and Puerto Madryn. In addition to the purchase
price, the Company anticipates that Transcable will incur approximately $15,000
of closing costs in connection with this transaction.
7
<PAGE>
NOTE 3 - EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
- ---------------------------------------------------------------
Earnings (loss) per common and common equivalent share attributable to
common shareholders was computed by dividing net earnings attributable to common
shareholders by the weighted average number of common and common equivalent
shares outstanding (12,603,811 and 10,254,411 for the three months ended June
30, 1996 and 1995, respectively). For the period ended June 30, 1996 and 1995,
common stock equivalents were not included in the computation of weighted
average shares outstanding because their inclusion would be antidilutive.
Fully diluted earnings per share amounts are not presented for the periods
ending June 30, 1996 and 1995, because they do not materially differ from
primary earnings per share or they are antidilutive.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS.
- --------------
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto, included
elsewhere herein, and the Company's annual report on Form 10-KSB for the fiscal
year ended March 31, 1996. The annual report and the consolidated financial
statements provide additional information regarding the Company's financial
activities and condition.
RESULTS OF OPERATIONS.
- ----------------------
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
For the three month periods ended June 30, 1996 and 1995, the operations of
the Argentine Cable Companies and Argentine Joint Venture Companies
(collectively referred to as the "Latin American Operations") were included in
the Company's consolidated statement of operations. For the three month period
ended June 30, 1996, the Latin American Operations consisted of the ten
Argentine Cable Companies operating cable TV systems in five markets and the two
Argentine Joint Venture Companies. The results of operations for the three month
period ended June 30, 1995 included five Argentine Cable Companies operating
cable TV systems in three markets. Four companies were acquired after June 30,
1995; one of which, TV Nieve, S.A. ("TV Nieve") was acquired after the fiscal
year ended March 31, 1996. In addition, during the quarter ended June 30,1996,
Transcable acquired substantially all of the assets of Canal 4 (See Note 2 to
the financial statements.
Revenue. In the fiscal quarter ended June 30, 1996, the Company reported
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revenues of $5.4 million. During the same period of the prior year, the Company
reported revenues of $2.7 million. The increase in the amount of $2.7 million
was primariy a result of revenues from the acquired companies: SIR TV - $1.2
million; Teveca - $1.1 million; and TV Nieve - approximately $180,000. Also the
acquisition in May 1996 of the assets of a competing cable TV system in Rawson
contributed approximately $70,000 to the increase. The current quarter also
included approximately $180,000 of revenues from a premium service offering
exclusive soccer coverage which was not provided in the quarter ended June,
1995. Revenues from the companies serving Reconquista and Avellaneda declined
approximately $110,000 due to the loss of subscribers which Management believes
can be attributed to price competition from another cable TV operation in those
markets. The Company has entered into an agreement to acquire substantially all
the assets of that competing cable TV operation.
9
<PAGE>
Operating Costs. In the fiscal quarter ended June 30, 1996, the Company
---------------
incurred $3.9 million of operating costs in connection with the operation of the
Argentine Cable Companies, while for the same period of the prior year the
Company incurred $1.8 million of operating costs. Of the $2.1 million increase,
approximately $1.8 million of costs can be attributed to the operations of SIR
TV and Teveca in the amount of approximately $950,000 and $870,000,
respectively. These companies were acquired after June, 1995. When compared to
the same period of the prior year, the expenses of Cablemax and RTC/AVC declined
in the current period by approximately $85,000 and $50,000, respectively. The
principal reductions in costs were in bad debts, programming and contract labor.
However, the operating costs of Televisora Austral increased by approximately
$390,000 over the same period of the prior year. A portion of the increase
resulted from the additional programming cost, personnel, bad debts and other
expenses directly related to the acquisition of TV Nieve. The operations of TV
Nieve are being merged into the operations of Televisora Austral and a
significant portion of the increased expenses is not expected to recur in future
periods. Also the operating expenses in 1995 reflected a negotiated one-time
reduction of license fees in Televisora Austral in the amount of approximately
$65,000 which distorts comparison of the expenses for the two periods.
General and Administrative Expenses. In the fiscal quarter ended
-----------------------------------
June 30, 1996, general and administrative expenses increased to approximately
$878,000 from approximately $517,000. Expenses of the Argentine Joint Venture
Companies increased by approximately $250,000 as a result of expanded operations
and acquisition activity in Argentina. Increases in expenditures at the
Company's corporate offices also contributed to the increase in overall general
and administrative expenses. This increase resulted primarily from increases in
costs relating to insurance, salaries of additional personnel, shareholder
relations and travel and entertainment expenditures primarily associated with
financing and operational activities.
Depreciation and Amortization. In the fiscal quarter ended June 30, 1996
-----------------------------
depreciation and amortization increased to $1.1 million from approximately
$414,000 primarily due to (i) the amortization of franchise costs of the new
acquisitions of SIR TV, Teveca and TV Nieve, and (ii) the depreciation of
capital expenditures in existing cable TV systems and the additional cable TV
plant of the acquired companies.
Other Income (Expense). In the fiscal quarter ended June 30, 1996, other
----------------------
income declined from approximately $112,000 to approximately $56,000 primarily
as a result of a decline in other income. During the fiscal quarter ended June
30, 1995, the Company reported other income in the amount of approximately
$80,000 as a result of a reduction in the liability of certain of the Argentine
Cable Companies achieved by the payment of such liability with government
securities purchased at a discount to face value but honored for payment
purposes at face value, which did not recur in the quarter ended June 30, 1996.
Interest expense declined from approximately $74,000 to approximately $39,000 as
a result of the reduction of the outstanding debt of the Argentine Cable
Companies.
Income taxes. For the quarter ended June 30, 1996, the Company recorded
------------
income tax expense of $113,363 compare to $27,000 for the quarter ended June 30,
1995. Period to period comparability is distorted because certain foreign
subsidiaries are not subject to tax.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30 and March 31, 1996, the balance sheets of the Argentine Cable
Companies and the Argentine Joint Venture Companies were consolidated in the
Company's balance sheet and the Company held $6.9 million and $8.5 million of
cash and cash equivalents, respectively. The $1.6 million decrease related
primarily to the acquisition of TV Nieve and the assets of Canal 4
(approximately $1.32 million and $506,000, respectively). The cash and cash
equivalents consisted of securities offering a high degree of principal safety.
These securities are generally not subject to or impacted by changes in
conditions or trends in any single industry. However, they may be subject to
significant changes in overall economic conditions, and the funds held in
accounts outside of the United States (approximately $1.33 million at June 30,
1996) may be subject to diminution in value caused by foreign currency
devaluation or governmental action.
At June 30, and March 31, 1996 working capital balances totaled
approximately $4.3 million and $6.1 million respectively. The ratio of current
assets to current liabilities was approximately 1.7 times and 2.0 times,
respectively. The ratio of long-term debt to total assets was negligible. The
decrease in working capital balances was primarily a result of the decrease in
cash and cash equivalents resulting from the acquisition of TV Nieve and the
payment of the dividends on the Series 1995 and Series 1990 preferred stock.
In the first quarter of fiscal 1997, the Company used $1.6 million of cash
and cash equivalents. During this period approximately $567,000 was provided by
operating activities, $2.3 million was used in investing activities and
approximately $73,000 was provided by financing activities.
The operating activities of the Company consist primarily of the operations
of the Latin American Operations which are involved in the ownership, operation
and management of cable television and communication properties in Argentina.
Management believes that the Company has substantially all of the resources
necessary to effectively implement the business plans of the existing Latin
American Operations in the present economic, political and regulatory
environments.
On April 1, 1996, the Company agreed to transfer to Televisora Austral,
S.A., an option (the "TV Nieve Option") to purchase for approximately $174,000 a
minority interest in the equity of TV Nieve, S. A. ("TV Nieve") which provides
MMDS television service in the city of Ushuaia, Argentina. On the same day,
Televisora purchased the remaining majority interest in the equity of TV Nieve
for approximately $1.15 million less the outstanding balance of the TV Nieve
liabilities pursuant to an agreement (the "Purchase Agreement"). Concurrent
with the execution of the Purchase Agreement, Televisora made a downpayment to
the sellers in the amount of $450,000 which was advanced to Televisora by the
Company on February 27, 1996. Accordingly, Televisora now owns or effectively
controls all of the outstanding equity of TV Nieve and the Company holds a 96
percent Joint Venture interest in Televisora.
11
<PAGE>
The aggregate purchase price for TV Nieve was approximately $1.3 million
including the price paid for the TV Nieve Option and downpayment made concurrent
with the execution of the Purchase Agreement, which was applied against the
purchase price. The Company advanced to Televisora the additional funds
necessary to consummate the acquisition of TV Nieve contemplated in the Purchase
Agreement. In addition to the purchase price, the Company anticipates that
Televisora will incur approximately $50,000 to $100,000 of closing costs
relating primarily to the payment of legal and accounting fees. It is
anticipated that the funds needed to pay such fees will be advanced to
Televisora by the Company.
Transcable acquired substantially all of the assets of Canal 4 Rawson Video
Cable ("Canal 4") for approximately $500,000 on May 31, 1996. Canal 4 provides
cable television service to the city of Rawson in the Chubut Province in
Argentina. The Company currently provides cable television services to the
tri-city area of Trelew, Rawson and Puerto Madryn. In addition to the purchase
price, the Company anticipates that Transcable will incur approximately $15,000
of closing costs in connection with this transaction.
The Company's Series 1995 Convertible Preferred Stock provides for
cumulative, annual dividends in the amount of $8.00 per share payable on a
quarterly basis. The Company's Series 1990 Convertible Preferred Stock provides
for cumulative, annual dividends in the amount of $.50 per share payable on a
quarterly basis. The Company has not paid dividends on its Common Stock, and it
has no plans to make any such payments in the future.
Working capital requirements vary with business conditions and the nature
of the business being conducted. Management minimizes working capital
requirements to the extent practicable. In the opinion of management, the
Company possesses adequate cash flow from operations and working capital to meet
the on-going operating requirements of the existing Latin American Operations
through the current fiscal year which will end on March 31, 1997. Management
anticipates that additional financings will be required to expand the Company
via acquisition.
The Company continues to be actively involved in the acquisition and
development of cable television and communications properties in Latin America,
and it incurs expenses in identifying and pursuing opportunities before any
acquisition decision is made. The Company anticipates attempting to obtain
additional debt and equity financing to fund its participation in future
projects. The Company is unable to predict with any degree of certainty the cost
of its future projects or the amount of funds which will be available to fund
those projects. Therefore, the Company is unable to determine with any degree of
certainty its future funding requirements in connection with any potential
acquisitions.
12
<PAGE>
The operating characteristics of Latin American cable television and
communications businesses are significantly different than the businesses which
the Company previously operated. Additionally, changes in the business,
political and economic conditions of Latin America could materially impact the
financial performance of the Company. In light of the recent and potential
acquisitions of cable television systems in Argentina, investors should consider
that the historical performance of the Company is not necessarily indicative of
its future prospects or performance.
FOREIGN INVESTMENT RISK
The Argentina Cable Companies and the Argentina Joint Venture Companies are
directly affected by Argentina's government, economic and fiscal policy and
other political factors. The Company believes that its financial condition and
its results from operations have not been adversely affected by these factors.
However, the Company can not predict with any degree of certainty the likelihood
that these elements will remain stable. Policy changes imposed by the Argentine
government in any of these areas could have a material adverse affect on the
Company.
Based on advise it has received, management is of the opinion that U. S.
Companies will be licensed to own and operate Argentine cable television
systems. To date and to the best knowledge of the management of the Company,
COMFER has formally approved or licensed two U. S. companies; however, the
Company has no assurance that COMFER will approve its licensure. Management is
currently seeking licensure of the Company or its subsidiaries with the
assistance of the Joint Venture Partners and legal counsel. A decision by
COMFER to deny the licensure of the Company or its affiliated entities to own
and operate cable television systems in Argentina could have a material adverse
impact on the operations and value of the Company.
13
<PAGE>
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
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.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
No. Description
------- -----------
27.1 Financial Data Schedule
(b) Reports filed on Form 8-K filed during this quarter.
(i) Form 8-K for an event dated May 31, 1996
(ii) Form 8-K/A for an event dated February 27, 1996
14
<PAGE>
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
TESCORP, INC.
By: /s/ Jack S. Gray, Jr.
-----------------------------------
Jack S. Gray, Jr.
President and Chief Operating
Officer
By: /s/ John D. Becker
-----------------------------------
John D. Becker
Controller and
Principal Accounting Officer
Austin, Texas
August 12, 1996
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATION FILED AS PART OF THE
INTERIM REPORT ON FORM 10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,885,418
<SECURITIES> 0
<RECEIVABLES> 2,200,454
<ALLOWANCES> 420,203
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,989,361
<DEPRECIATION> 2,728,719
<TOTAL-ASSETS> 43,910,751
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
839,926
<COMMON> 255,975
<OTHER-SE> 35,830,008
<TOTAL-LIABILITY-AND-EQUITY> 43,910,751
<SALES> 5,401,912
<TOTAL-REVENUES> 5,401,912
<CGS> 0
<TOTAL-COSTS> 3,915,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 281,796
<INTEREST-EXPENSE> 38,798
<INCOME-PRETAX> (474,646)
<INCOME-TAX> 113,363
<INCOME-CONTINUING> (588,009)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (573,713)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> 0
<FN>
<F1> THE COMPANY DOES NOT HAVE A CLASSIFIED BALANCE SHEET.
</FN>
</TABLE>
