<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
Commission File Number 0-18663
TESCORP, INC.
(Exact name of registrant 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
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) 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.
Class Shares Outstanding at November 3, 1997
Common Stock, $.02 par value 13,217,450
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<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
TESCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets March 31, 1997 September 30, 1997
------ -------------- ------------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,623,375 $ 4,176,415
Accounts receivable-subscribers, net 2,208,417 2,288,067
Prepaid expenses and other assets 1,306,904 1,192,706
Plant and equipment, net 11,639,281 11,054,289
Franchise costs, net of amortization 32,848,985 32,120,230
------------ ------------
Total assets $ 49,626,962 $ 50,831,707
============ ============
Liabilities and Stockholders' Equity
Accounts payable $ 1,435,522 $ 2,341,297
Accrued license and copyright fees 1,795,300 1,494,994
Income taxes payable 1,384,833 1,785,937
Other liabilities 3,241,110 2,100,551
Contingent payment under stock purchase and merger agreement -- 5,000,000
Debt 7,262,237 7,193,613
------------ ------------
Total liabilities 15,119,002 19,916,392
------------ ------------
Minority Interest 887,303 812,478
------------ ------------
Stockholders' Equity:
Preferred stock, $1 par value, 5,000,000 shares authorized: Series 1990
Convertible preferred stock, $5 redemption value per share, 704,684
shares authorized, 693,864 and 691,300 shares issued and outstanding with
an aggregate preference on liquidation of $3,469,320 and $3,456,500, at
March 31 and September 30, 1997, respectively. 693,864 691,300
Series 1995 Convertible preferred stock, 200,000 shares authorized,
139,250 shares issued and outstanding with an
aggregate preference on liquidation of $13,925,000. 139,250 139,250
Common stock, $.02 par value, 50,000,000 shares authorized, 13,178,007 and
13,206,515 shares issued and outstanding at
March 31 and September 30, 1997, respectively 263,560 264,130
Additional paid-in capital 66,508,484 66,599,852
Accumulated deficit (33,984,501) (37,591,695)
------------ ------------
Total stockholders' equity 33,620,657 30,102,837
------------ ------------
Commitments and contingencies -- --
------------ ------------
Total liabilities and stockholders' equity $ 49,626,962 $ 50,831,707
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
TESCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended September 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Revenues $ 5,527,433 $ 7,208,487
----------- -----------
Operating costs and expenses:
Operating costs 3,922,088 5,184,748
General and administrative expenses 1,052,541 1,451,452
Depreciation 890,888 1,268,600
Amortization of franchise costs 338,335 446,338
----------- -----------
Total operating costs and expenses 6,203,852 8,351,138
----------- -----------
Operating loss (676,419) (1,142,651)
----------- -----------
Other income (expense):
Interest income 71,691 14,857
Other income 2,834 14,543
Interest expense (57,925) (334,670)
----------- -----------
Total other income (expense), net 16,600 (305,270)
----------- -----------
Loss before provision for income taxes and minority interests (659,819) (1,447,921)
Income tax expense 129,014 330,108
----------- -----------
Loss before minority interests (788,833) (1,778,029)
Minority interest in the loss of consolidated subsidiaries .. 8,859 23,528
----------- -----------
Net loss (779,974) (1,754,501)
Preferred stock dividends (378,858) (365,171)
----------- -----------
Net loss applicable to common stock $(1,158,832) $(2,119,672)
=========== ===========
Loss per share applicable to common stock $ (0.09) $ (0.16)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
TESCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Six Months Ended September 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Revenues $ 10,929,345 $ 14,337,250
------------ ------------
Operating costs and expenses:
Operating costs 7,837,453 10,387,106
General and administrative expenses 1,930,994 2,313,232
Depreciation 1,696,403 2,598,678
Amortization of franchise costs 671,055 889,934
------------ ------------
Total operating costs and expenses 12,135,905 16,188,950
------------ ------------
Operating loss (1,206,560) (1,851,700)
------------ ------------
Other income (expense):
Interest income 159,236 17,115
Other income 9,582 17,562
Interest expense (96,723) (654,544)
------------ ------------
Total other income (expense), net 72,095 (619,867)
------------ ------------
Loss before provision for income taxes and minority interests (1,134,465) (2,471,567)
Income tax expense 242,377 444,340
------------ ------------
Loss before minority interests (1,376,842) (2,915,907)
Minority interest in the loss of consolidated subsidiaries 23,155 39,118
------------ ------------
Net loss (1,353,687) (2,876,789)
Preferred stock dividends (762,592) (730,405)
------------ ------------
Net loss applicable to common stock $ (2,116,279) $ (3,607,194)
============ ============
Loss per share applicable to common stock $ (0.17) $ (0.27)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
TESCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended September 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,353,687) $(2,876,789)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation expense 1,696,403 2,598,678
Amortization of franchise costs 671,055 889,934
Amortization of debt issuance costs -- 69,075
Deferred income tax expense (77,030) (168,083)
Minority interest in the loss of consolidated subsidiaries (23,155) (39,118)
Changes in operating assets and liabilities excluding effects of acquired
businesses:
Accounts receivable from subscribers (92,970) (79,650)
Prepaid expenses and other assets 488,973 (158,343)
Accounts payable 182,200 905,775
Accrued expenses and other liabilities (715,175) (712,805)
----------- -----------
Net cash provided by operating activities 776,614 428,674
----------- -----------
Cash flows from investing activities:
Property additions (1,550,734) (2,013,686)
Proceeds from principal repayment on mortgage receivable 5,608 17,241
Acquisition of cable television systems, net of cash acquired (2,548,025) (133,827)
----------- -----------
Net cash used in investing activities (4,093,151) (2,130,272)
----------- -----------
Cash flows from financing activities:
Borrowings under credit facilities -- 500,000
Principal payments on debt (189,365) (568,624)
Dividends paid on preferred stock (660,611) (641,031)
Contingent payment under stock purchase and merger agreement -- 5,000,000
Distributions to minority shareholder of subsidiary -- (35,707)
Exercise of warrants 490,286 --
----------- -----------
Net cash provided by (used in) financing activities (359,690) 4,254,638
----------- -----------
Net increase (decrease) in cash and cash equivalents (3,676,227) 2,553,040
Cash and cash equivalents at beginning of period 8,529,100 1,623,375
----------- -----------
Cash and cash equivalents at end of period $ 4,852,873 $ 4,176,415
=========== ===========
Significant non-cash financing activities are as follows:
Acquisition of Company's common stock in satisfaction of an
outstanding obligation $ 80,876 $ --
----------- -----------
Distribution of common stock to holders of Series 1995 preferred
stock electing to receive dividends in the form of common stock $ 101,980 $ 89,374
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
TESCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1997
NOTE 1 -STOCK PURCHASE AND MERGER AGREEMENT:
On September 16, 1997 Tescorp, Inc. ("Tescorp" or the "Company")
entered into a Stock Purchase and Merger Agreement (the "Agreement") with a
wholly-owned subsidiary of Supercanal Holdings, S. A. ("Supercanal"), an
Argentine corporation. The Agreement provides for Supercanal's acquisition of
Tescorp through a series of transactions which would ultimately involve paying
Tescorp's shareholders $4.50 per share of Common Stock and $144 per share of
Series 1995 8% Preferred Stock. In accordance with the terms of the Agreement,
Supercanal paid to the Company a deposit of $5.0 million at the execution of the
Agreement.
In October 1997, the Company and Supercanal made the filings required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act").
Immediately following the expiration or termination of the waiting period under
the HSR Act, the Agreement provides for Supercanal to purchase 10,970,000 newly
issued shares of Common Stock and 60,750 newly issued shares of Series 1995 8%
Preferred Stock from Tescorp for a purchase price of $3.33 per share and $100
per share, respectively. The $5 million deposit made by Supercanal at the
execution of the Agreement will be credited against the purchase price.
On November 6, 1997, Supercanal and Tescorp received notification of
early termination of the waiting period under the HSR Act for consummation of
the transaction. However, Supercanal has proposed to modify the Agreement to
provide for its acquisition of 4,504,504 shares of Common Stock at a purchase
price of $3.33 per share. The parties are presently in negotiations regarding
the possible amendment of the Agreement concerning this and certain other
provisions. It is presently anticipated that any such amendment would not
otherwise alter the terms upon which Supercanal would purchase the outstanding
shares of capital stock of Tescorp from Tescorp's shareholders. No assurance
can be given, however, that any such amendment will be reached.
Under the terms of the Agreement, the Company must initiate the
redemption of its Series 1990 10% Preferred Stock at a price of $5.00 per share,
plus accrued and unpaid dividends, no later than the date in which Supercanal
purchases the newly issued shares. Holders of the Series 1990 10% Preferred
Stock will retain the option to convert each share into approximately 1.2531
shares of common stock through the record date for the redemption.
In the final stage of the acquisition, the Agreement provides for
Supercanal to submit a public tender offer to acquire 100% of Tescorp's
outstanding Common Stock and Series 1995 Preferred Stock at a purchase price of
$4.50 per share and $144 per share, respectively. Supercanal's obligation to
consummate the tender offer will be subject to its receipt of the tender of
two-thirds of the total outstanding shares of Tescorp's Series 1995 Preferred
Stock and Common Stock.
In addition to the minimum tender requirements, Supercanal's
acquisition of Tescorp stock is subject to the absence of any material changes
in Tescorp's business and certain other conditions.
NOTE 2 - ORGANIZATION AND BASIS OF PRESENTATION:
Business and principles of consolidation
Tescorp is a Texas corporation that was organized in 1980. The
accompanying consolidated financial statements include the accounts of Tescorp,
its subsidiaries and companies in which it holds majority joint venture
interests (referred to herein collectively as the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
6
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The Company is engaged in the business of acquiring and developing
cable television systems and communications properties in Latin America. The
Company continues to concentrate its operations in Argentina. The Company
presently provides cable television service to eleven Argentine cities in six
provinces.
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 September 30,
1997, 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,
1997. Please note that certain amounts have been reclassified for comparability
with the current period presentation.
NOTE 3 - LOSS PER COMMON AND COMMON EQUIVALENT SHARE:
Loss per common and common equivalent share attributable to common
shareholders was computed by dividing net loss attributable to common
shareholders by the weighted average number of common and common equivalent
shares outstanding (12,800,764 and 13,190,873 for the three months and
12,702,826 and 13,196,066 for the six months ended September 30, 1996 and 1997,
respectively). For the periods ended September 30, 1996 and 1997, common stock
equivalents were not included in the computation of weighted average shares
outstanding because their inclusion would cause an antidilutive effect.
Fully diluted earnings per share amounts are not presented for the
periods ending September 30, 1996 and 1997, because they do not materially
differ from primary earnings per share or they are antidilutive.
NOTE 4 - SUBSEQUENT EVENTS:
On October 23, 1997, the Company acquired the stock of San Martin de
los Andes Televisora Color S.A., a company that provides cable television
service to approximately 3,500 subscribers in the Argentine city of San Martin
de los Andes, Neuquen Province. The purchase price was approximately $2.6
million , subject to certain adjustments. The Company anticipates that it will
incur approximately $100,000 of closing costs in addition to the purchase
price.
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<PAGE> 8
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. The consolidated financial statements provide
additional information regarding the Company's financial activities and
condition. Moreover, this discussion contains forward looking statements that
include risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward looking statements.
RESULTS OF OPERATIONS.
During the three- and six-month periods ended September 30, 1997, the
Company operated cable television systems serving 11 cities, principally in
southern Argentina. During the same periods of the prior year the Company
provided cable television service to eight Argentine cities. The Company
acquired a competing cable television system serving Reconquista and Avellaneda,
Santa Fe Province in August 1996, acquired another system serving Comodoro
Rivadavia, Chubut Province in December 1996 and acquired two companies operating
cable television systems serving the adjoining cities of Viedma, Rio Negro
Province and Carmen de Patagones, Buenos Aires Province in February 1997. In
March 1997, the Company also acquired a company operating an ultra high
frequency system competing with the Company in San Carlos de Bariloche, Rio
Negro Province. The results of the operations of these acquired systems are
included in the Company's consolidated financial statements for the periods
ended in 1997 and from the dates of their respective acquisition for the periods
ended in 1996.
THREE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1997
Revenues. Revenues increased 30.4% from $5.5 million for the period
ending in 1996 to $7.2 million for the period ending in 1997 primarily as a
result of the acquisitions described above. Aggregate subscriber revenue from
the cable television systems in operation during both periods (excluding
acquisitions) increased by approximately 2.0% over the same period in 1996
primarily as a result of an increase in the number of basic subscribers served.
Operating Costs. Operating costs increased 32.2% from $3.9 million for
the period ending in 1996 to $5.2 million for the period ending in 1997
primarily as a result of the acquisitions described above. As a percentage of
revenues, Argentine cable television system operating costs increased from 71.0%
in the period ending in 1996 to 71.9% in the period ending in 1997. Franchise
taxes in Rio Gallegos and Ushuaia increased as a result of the expiration during
fiscal 1997 of the Company's exemption from franchise fees payable to COMFER
(the Argentine governmental agency that licenses and regulates cable television
operations). The Company has requested extensions of the franchise fee
exemptions retroactive to the original expiration dates from COMFER. However,
the Company is not able to predict whether the extensions will be granted. Also
in late fiscal 1997, the Province of Tierra del Fuego implemented a gross
receipts tax equal to 3% of revenues. Operating costs for the cable television
systems in operation during
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<PAGE> 9
both periods declined in 1997 when compared to 1996 as a result of savings in
personnel, bad debts and other expenses achieved under the Company's management
which more than offset increased programming costs, franchise fees and gross
receipts taxes. One of the newly acquired systems incurred operating losses
before depreciation and amortization which reduced the Company's overall
operating margins in 1997. The Company expects the financial performance of this
system to improve significantly as restructuring and rebuilding measures are
implemented.
General and Administrative Expenses. General and administrative
expenses increased 37.9% from $1.1 million for the period ending in 1996 to $1.5
million for the period ending in 1997. As a percentage of revenues, general and
administrative expenses increased from 19.0% for the period ending in 1996 to
20.1% for the period ending in 1997. This increase is primarily attributable to
expenses incurred in connection with the negotiation of the Agreement with
Supercanal and various fund raising activities, including but not limited to a
proposed secondary offering of the Company's common stock. Efforts pertaining to
the proposed secondary offering were discontinued when Tescorp entered into the
Agreement with Supercanal.
Depreciation and Amortization. Depreciation and amortization increased
39.5% from $1.2 million for the period ending in 1996 to $1.7 million for the
corresponding period in 1997 due primarily to the amortization of franchise
costs of the acquisitions described above and the depreciation of capital
expenditures in existing cable television systems and the additional cable
television plant of the newly acquired companies.
Other Income (Expense). The Company had net other income of $17,000 for
the period ending in 1996, while it had net other expense of $305,000 for the
corresponding period in 1997. This change was due primarily to a $57,000
decrease in interest income and a $277,000 increase in interest expense
associated with debt incurred in the last quarter of the fiscal year ended March
31, 1997.
Income Tax Expense. The Company recorded income tax expense of
approximately $129,000 for the period ending in 1996 compared to $330,000 for
the period ending in 1997. The Company experienced a net loss before provision
for income taxes and minority interests for both periods. However, it incurred
income tax expense primarily due to Argentine income tax regulations that
prohibit the deduction of losses from one subsidiary against income from another
subsidiary in a consolidated return.
Preferred Stock Dividends. Preferred stock dividends decreased by 3.6%
from $379,000 for the period ending in 1996 to $365,000 for the period ending in
1997 primarily due to the conversion of certain shares of Series 1995 Preferred
Stock in fiscal 1997.
SIX MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 1997
Revenues. Revenues increased 31.2% from $10.9 million in 1996 to $14.3
million in 1997 primarily as a result of the acquisitions described above.
Aggregate subscriber revenue from the cable television systems in operation
during both periods (excluding acquisitions) increased by approximately 2.0%
over the same period in 1996 primarily as a result of a rate increase
implemented in the Reconquista/Avellaneda market and from an increase in the
number of basic subscribers served during the current period. The number of
basic subscribers at September 30, 1997 is approximately 5.0% above the
subscriber level at the beginning of the current fiscal year.
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<PAGE> 10
Operating Costs. Operating costs increased 32.5% from $7.8 million for
the period ending in 1996 to $10.4 million for the period ending in 1997
primarily as a result of the acquisitions described above. As a percentage of
revenues, Argentine cable television system operating costs increased from 71.7%
in the period ending in 1996 to 72.4% in the period ending in 1997. The analysis
of operating costs for the current quarter discussed above is also applicable to
the six-month periods.
General and Administrative Expenses. General and administrative
expenses increased 19.8% from $1.9 million for the period ending in 1996 to $2.3
million for the period ending in 1997. As a percentage of revenues, general and
administrative expenses decreased from 17.7% for the period ending in 1996 to
16.1% for the period ending in 1997.
Depreciation and Amortization. Depreciation and amortization increased
47.4% from $2.4 million for the period ending in 1996 to $3.5 million for the
corresponding period in 1997 due primarily to the amortization of franchise
costs of the acquisitions described above and the depreciation of capital
expenditures in existing cable television systems and the additional cable
television plant of the newly acquired companies.
Other Income (Expense). The Company had net other income of $72,000 for
the period ending in 1996, while it had net other expense of $620,000 for the
corresponding period in 1997. This change was due primarily to a $142,000
decrease in interest income and a $558,000 increase in interest expense
associated with debt incurred in the last quarter of the fiscal year ended March
31, 1997.
Income Tax Expense. The Company recorded income tax expense of
approximately $242,000 for the period ending in 1996 compared to $444,000 for
the period ending in 1997. The Company experienced a net loss before provision
for income taxes and minority interests for both periods. However, it incurred
income tax expense primarily due to Argentine income tax regulations that
prohibit the deduction of losses from one subsidiary against income from another
subsidiary in a consolidated return.
Preferred Stock Dividends. Preferred stock dividends decreased by 4.2%
from $763,000 for the period ending in 1996 to $730,000 for the period ending in
1997 primarily due to the conversion of certain shares of Series 1995 Preferred
Stock in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
On September 16, 1997 the Company entered into an agreement with
Supercanal which provides for the acquisition of Tescorp through a series of
transactions which would ultimately involve paying Tescorp's shareholders $4.50
per share of Common Stock and $144 per share of Series 1995 8% Preferred Stock.
See Note 1 to the Consolidated Financial Statements for the terms and conditions
of the agreement.
10
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At September 30, 1997, the Company held $4.2 million of cash and cash
equivalents, $1.0 million of which are held in accounts outside of the United
States. Cash and cash equivalents 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 funds held in
accounts outside of the United States may be subject to diminution in value
because of foreign currency devaluation or governmental action.
The Company's primary source of liquidity is cash provided by
operations. Cash provided by operations for the first two quarters of fiscal
1998 was $429,000. The Company anticipates that cash provided by operations will
increase during the year as operating efficiencies are attained in the most
recently acquired cable television systems.
Cash used in investing activities for the six-month period ending
September 30, 1997 was $2.1 million. Cash used in investing activities related
primarily to capital expenditures to connect additional subscribers and to
upgrade the cable television systems.
Cash provided by financing activities in 1997 was $4.3 million. The
Company received a $5,000,000 deposit in connection with the execution of the
agreement with Supercanal. Cash used in financing activities related primarily
to the repayment of debt and payment of dividends on preferred stock in the
amount of $641,000. 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 addition, the Agreement with
Supercanal restricts Tescorp with regards to the level of capital expenditures,
acquisitions and certain other activities. In the opinion of management, the
Company has adequate cash flow from operations to meet the on-going operating
requirements of the existing cable television systems until the completion of
the pending sale of the Company.
The Agreement with Supercanal restricts the Company from certain
activities. In accordance with the terms of the Agreement, the Company curtailed
or reduced certain efforts with regards to the acquisition and development of
cable television and communications properties in Latin America and the pursuit
of capital to finance such endeavors. In the event that the anticipated sale of
the Company is not completed, the Company would be required to obtain additional
equity or debt financing to fund the cost of its future projects and the
retirement of the Senior Debt at its February 1998 maturity date. The Company is
unable to predict with any degree of certainty, whether it will be able to
obtain sufficient debt or equity financing on acceptable terms, prior to the
February 1998 maturity date, should it be required to do so in the absence of
the transaction with Supercanal.
11
<PAGE> 12
IMPACT OF INFLATION; EXCHANGE RATES
Inflation has not had a material impact on the operations of the
Company. In the opinion of management, inflation should not have a material
impact on the results of operations in fiscal 1998. However, management is
unable to predict with any degree of certainty the future rate of inflation or
its financial impact on the Company.
While management will monitor the exchange rates and take appropriate
measures in response to perceived risks, the Company has no plan to implement a
policy of hedge transactions to reduce the Company's exposure to foreign
currency exchange rate risks. Accordingly, the Company could experience losses
and a negative impact on earnings with respect to its holdings solely as a
result of devaluation against the dollar. Argentina does not restrict the
removal or conversion of local or foreign currency. However, there can be no
assurance that such policies will not be adopted in the future in reaction to a
sustained deterioration of their financial markets.
FOREIGN INVESTMENT RISK
The Company's Argentine subsidiaries 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 of operations
have not been adversely affected by these factors to date. However, the Company
cannot 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 effect on the Company.
With the assistance of its Argentine joint venture partners and legal
counsel, management is currently seeking licensure of the Company or its
subsidiaries to own and operate cable television systems in Argentina. 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. A decision by COMFER to deny the
licensure of the Company or its affiliated entities could have a material
adverse impact on the operations and value of the Company.
12
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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.
1. Form 8-K, for an event dated September 17, 1997
13
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SIGNATURE
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.
TESCORP, INC.
By: /s/ Jack S. Gray, Jr.
----------------------------
Jack S. Gray, Jr.
President and Chief
Operating Officer
By: /s/ Neil R. Austrian, Jr.
----------------------------
Neil R. Austrian, Jr.
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Austin, Texas
November 12, 1997
14
<PAGE> 15
INDEX TO EXHIBIT
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FILED AS PART OF THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,176,415
<SECURITIES> 0
<RECEIVABLES> 2,679,015
<ALLOWANCES> 390,948
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 19,159,402
<DEPRECIATION> 8,105,113
<TOTAL-ASSETS> 50,831,707
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
830,550
<COMMON> 264,130
<OTHER-SE> 29,008,157
<TOTAL-LIABILITY-AND-EQUITY> 50,831,707
<SALES> 0
<TOTAL-REVENUES> 14,337,250
<CGS> 0
<TOTAL-COSTS> 10,387,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 260,722
<INTEREST-EXPENSE> 654,544
<INCOME-PRETAX> (2,471,567)
<INCOME-TAX> 444,340
<INCOME-CONTINUING> (2,915,907)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,876,789)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> 0
<FN>
<F1>THE COMPANY DOES NOT PRESENT A CLASSIFIED BALANCE SHEET.
</FN>
</TABLE>
