<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Mark One:
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-22322
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WIRELESS CABLE OF ATLANTA, INC.
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(Exact Name of Small Business Issuer As Specified In Its Charter)
GEORGIA 58-1489017
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(State Or Other Jurisdiction Of (I.R.S. Employer Identification
Incorporation Or Organization) Number)
3100 MEDLOCK BRIDGE ROAD, SUITE 340, NORCROSS, GEORGIA 30071
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(Address of Principal Executive Office and Zip Code)
(Issuer's Telephone Number, Including Area Code): (770) 409-3570
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Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter periods 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 equity, as of the latest practicable date: 1,772,200 SHARES OF COMMON
STOCK, PAR VALUE $1.00 PER SHARE, AS OF JULY 31, 1996.
<PAGE> 2
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
CONDENSED CONSOLIDATED BALANCE SHEETS -
June 30, 1996 and December 31, 1995.................................................................... 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
For the periods ended June 30, 1996 and 1995........................................................... 4
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY -
For the period ended June 30, 1996..................................................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
For the periods ended June 30, 1996 and 1995........................................................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS........................................................ 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................................................... 7
PART II. OTHER INFORMATION:
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................................... 8
EXHIBITS AND REPORTS ON FORM 8-K............................................................................ 8
SIGNATURES.................................................................................................. 8
</TABLE>
Page 2 of 8
<PAGE> 3
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 723,566 $ 133,000
Accounts receivable 16,125 69,039
Other current assets 169,091 188,035
----------- -----------
Total current assets 908,782 390,074
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Property and equipment:
Cable systems and equipment 6,738,377 5,930,531
Furniture and office equipment 512,137 473,551
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7,250,514 6,404,082
Less accumulated depreciation (2,885,327) (2,516,327)
----------- -----------
4,365,187 3,887,755
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Other assets:
Deferred licensing costs 170,000 204,000
Deferred tax benefit 1,094,741 969,941
Other 121,029 192,392
----------- -----------
1,385,770 1,366,333
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Total assets $ 6,659,739 $ 5,644,162
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current liabilitites:
Accounts payable $ 290,013 $ 184,832
Accrued expenses and liabilities 181,846 229,889
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Total current liabilities 471,859 414,721
----------- -----------
Series A preferred stock 3,519,569 2,121,214
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Common stockholders' equity:
Common stock of $1 par, authorized
10,000,000 shares, issued and
outstanding: 1,772,200 shares and
1,770,000 1,772,200 1,770,000
Paid-in capital 3,513,707 3,494,457
Accumulated deficit (2,617,596) (2,156,230)
----------- -----------
2,668,311 3,108,227
----------- -----------
Total liabilities and stockholders' equity $ 6,659,739 $ 5,644,162
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 8
<PAGE> 4
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 875,583 $ 824,170 $1,722,345 $1,635,888
Costs and Expenses:
Service Costs 566,514 499,923 1,114,577 969,331
Selling, general and administrative 308,799 393,299 606,345 769,999
Depreciation and amortization 201,500 182,000 403,000 349,000
---------- ---------- ---------- ----------
1,076,813 1,075,222 2,123,922 2,088,330
---------- ---------- ---------- ----------
Income (loss) from operations (201,230) (251,052) (401,577) (452,442)
Interest income 11,134 19,650 23,330 28,722
---------- ---------- ---------- ----------
Net (loss) before income taxes (190,096) (231,402) (378,247) (423,720)
Deferred income tax benefits 61,800 74,000 124,800 138,000
---------- ---------- ---------- ----------
Net (loss) (128,296) (157,402) (253,447) (285,720)
Preferred dividend requirements (110,079) (45,000) (207,919) (60,000)
---------- ---------- ---------- ---------
Net (loss) applicable to common shares $ (238,375) $ (202,402) $ (461,366) $(345,720)
========== ========== ========== =========
Weighted average number of common
shares outstanding 1,771,100 1,729,000 1,770,500 1,729,000
Net (loss) per common share
outstanding $ (.13) $ (.12) $ (.26) $ (.20)
========== ========== ========== =========
</TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE PERIOD ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
------------
Number of $1 Par Paid-In Accumulated
Shares Value Capital Deficit Total
------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,770,000 $1,770,000 $3,494,457 $(2,156,230) $3,108,227
Exercise of stock options 2,200 2,200 19,250 - 21,450
Preferred stock dividends - - - (207,919) (207,919)
Net (loss) - - - (253,447) (253,447)
--------- ---------- ---------- ----------- ----------
Balance, June 30, 1996 1,772,200 $1,772,200 $3,513,707 $(2,617,596) $2,668,311
========= ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 8
<PAGE> 5
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows provided by (used for) operating activities:
Net income (loss) $ (461,366) $ (345,720)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization 403,000 349,000
Decrease (increase) in receivables 52,914 (18,024)
Decrease (increase) in prepaid expenses and deposits 111,757 45,580
Decrease (increase) in deferred taxes (124,800) (138,000)
Increase (decrease) in accounts payable
and accrued expenses 57,138 320,699
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Net cash provided by operating activities 38,643 213,535
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Cash flows (used for) investing activities:
Purchase of equipment (846,432) (1,080,687)
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Cash flows provided by financing activities:
Sale of preferred stock 1,524,300 1,500,000
Cost of preferred stock issue (125,945) (144,731)
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Net cash provided by financing activities 1,398,355 1,355,269
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Net increase in cash 590,566 488,117
Cash and cash equivalents, beginning of period 133,000 367,403
---------- ----------
Cash and cash equivalents, end of period $ 723,566 $ 855,520
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash paid during the period for:
Interest $ -0- $ -0-
----- -----
Income taxes $ -0- $ -0-
----- -----
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 8
<PAGE> 6
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments considered necessary for a fair presentation, have been included.
The results of the operations for the six month periods ended June 30, 1996 and
1995 are not necessarily indicative of the results to be expected for the full
year.
2. DEFERRED TAX BENEFIT
The deferred tax benefit increased by $124,800 during 1996. The basis for
deferring tax benefits is an excess of appreciated asset value over the tax
basis of the Company's net assets in an amount sufficient to realize the
deferred tax asset and projected future profitable operations. Management
forecasts that at a level of approximately 50,000 subscribers, the current net
operating loss carryforward could be utilized in one year. Management
anticipates that the 50,000 subscriber level will be attained prior to the year
2000, and the first net operating loss expires in 2002.
3. PREFERRED STOCK:
The Company has 5,000,000 shares of Preferred Stock authorized. At
December 31, 1995, there were 21,900 shares of Preferred Stock issued. At June
30, 1996, there were 37,143 shares of Series A Preferred Stock issued. The
Series A Preferred Stock is convertible into Common Stock at $11.00 per share.
The outstanding Series A Preferred Stock has not been included in the weighted
average number of Common Shares outstanding as they would be anti-dilutive.
4. STOCK OPTIONS AND WARRANTS:
In 1992, the shareholders approved the formation of a Stock Option Plan
for key employees to be implemented by the Board of Directors. Under the
approved terms of the plan, options to purchase shares of the Company's common
stock will be granted at a price not less than the fair market value of the
stock at the date of the grant. Options may be exercised for a five year
period not to exceed 20% per year on a cumulative basis. At June 30, 1996,
there were options granted to purchase an aggregate of 72,300 shares at prices
ranging from $6.25 to $14.00 per share and there were 24,500 shares available
for future grants under the plan. These stock options have not been included in
the weighted average number of shares outstanding as they would be
anti-dilutive.
Page 6 of 8
<PAGE> 7
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth items from the Company's Statement of
Operations as percentages of net revenues for the six months ended June 30:
<TABLE>
<CAPTION>
PERCENT
-------
1996 1995
---- ----
<S> <C> <C>
Revenue 100% 100%
Service costs 64.7 59.3
Selling, general and administrative expense 35.2 47.1
Depreciation and amortization 23.4 21.3
</TABLE>
The Company's revenue increased 5% to $1,722,345 in 1996. This increase
was due to an increase in the number of subscribers from 8,200 to 8,800.
Service costs for 1996 increased by 5.4% of revenue. This increase was
due primarily to increased programming costs resulting from an increase in the
number of channels offered in the basic package and increased premium channel
costs. There was also an increase in tower rental and channel lease costs due
to the addition of 16 new wireless channels during the fourth quarter of 1995.
Selling, general and administrative expense decreased by 11.9% of revenue.
The decrease was due to a reduction in marketing, selling and administrative
salaries and benefits due to the elimination of the advertising sales
department and single family home marketing costs. The Company has deferred
single family home expansion to study the improvements associated with digital
signal transmission.
Currently, most of the Company's subscribers result from contracts, which
typically have an initial term of ten years, with over 40 apartment complexes.
Upon expiration of the initial term, these contracts automatically convert to
month to month contracts unless they are extended or canceled. Capital costs
related to these contracts are written off during the initial term. The
Company continues to add new contracts and has not had a significant amount of
contracts canceled. Any future contract cancellations should not have a
material impact on operations since the Company is adding new contracts and
should not have a significant number of cancellations in any one year.
The Company currently has agreements to provide a competitive lineup of 38
channels of programming to its customers. The lineup consists of 28 microwave
delivered channels and 10 locally broadcast channels.
On March 1, 1995, the Company executed an agreement with Applied Video
Technologies, Inc. for the purchase of $3,500,000 of convertible preferred
equity. Under the terms of the agreement, $2,100,000 was invested in 1995 and
$1,400,000 in January 1996. In addition, $124,300 of preferred stock dividends
were paid in preferred stock in March 1996.
As soon as is practical, the Company plans to offer a digital package with
70-100 channels. A basic digital package will be priced comparable to the
price of the basic package of the Company's primary franchise cable competitor.
As with the franchise cable operator, the Company will offer premium channels,
pay-per-view and other services at an additional charge to subscribers. The
Company believes it will be able to provide a higher quality, comparably priced
product than similar franchise cable service packages. These development plans
will require significant funds in addition to funds provided from operations.
The Company will have to secure these additional funds to cover the capital
needs of additional growth after 1996. It is anticipated that these additional
funds will be available through either the debt or equity market.
Page 7 of 8
<PAGE> 8
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of the Company was held on Tuesday, May
14, 1996.
(b) Matters voted upon at the meeting were as follows:
1. Election of Directors:
<TABLE>
<CAPTION>
FOR AGAINST WITHHOLD ABSTENTIONS BROKER NON
--- ------- -------- ----------- ----------
VOTES
-----
<S> <C> <C> <C> <C> <C>
Common Votes-
Ricky C. Haney 1,291,995 0 0 500 0
Richard L. Kendrick 1,291,995 0 0 500 0
Allan H. Rudder 1,291,995 0 0 500 0
Preferred Votes-
R. Stanley Allen 37,143 0 0 0 0
R. Ted Weschler 37,143 0 0 0 0
2. Ratify Appointment
of Auditors: 1,626,782 0 0 0 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27 Financial Data Schedule (for SEC use only)
(b) No Form 8-K's were filed during this quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WIRELESS CABLE OF ATLANTA, INC.
-------------------------------------
(Registrant)
/s/ Ricky C. Haney
-------------------------------------
Date: August 5, 1996 RICKY C. HANEY
PRESIDENT
/s/ Allan H. Rudder
-------------------------------------
Date: August 5, 1996 ALLAN H. RUDDER
EXECUTIVE VICE PRESIDENT/CFO
Page 8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
FINANCIAL STATEMENTS OF WIRELESS CABLE OF ATLANTA, INC. FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
10QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 723,566
<SECURITIES> 0
<RECEIVABLES> 16,125
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 908,782
<PP&E> 7,250,514
<DEPRECIATION> 2,885,327
<TOTAL-ASSETS> 6,659,739
<CURRENT-LIABILITIES> 471,859
<BONDS> 0
3,519,569
0
<COMMON> 1,772,200
<OTHER-SE> 896,111
<TOTAL-LIABILITY-AND-EQUITY> 6,659,739
<SALES> 1,722,345
<TOTAL-REVENUES> 1,722,345
<CGS> 0
<TOTAL-COSTS> 2,123,922
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (378,247)
<INCOME-TAX> 0
<INCOME-CONTINUING> (461,366)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (461,366)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> 0
</TABLE>
