<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 SEPTEMBER 30, 1996
------------------
[ ] 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.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer As Specified In Its Charter)
GEORGIA 58-1489017
- --------------------------------------------------------------------------------
(State Or Other Jurisdiction Of (I.R.S. Employer Identification
Incorporation Or Organization) Number)
3100 MEDLOCK BRIDGE ROAD, SUITE 340, NORCROSS, GEORGIA 30071
- --------------------------------------------------------------------------------
(Address of Principal Executive Office and Zip Code)
(Issuer's Telephone Number, Including Area Code): (770) 409-3570
--------------
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: 1,772,450 SHARES OF COMMON
STOCK, PAR VALUE $1.00 PER SHARE, AS OF OCTOBER 31, 1996.
<PAGE> 2
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
CONDENSED CONSOLIDATED BALANCE SHEETS -
September 30, 1996 and December 31, 1995 ...........................................................3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
For the periods ended September 30, 1996 and 1995...................................................4
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY -
For the period ended September 30, 1996.............................................................4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
For the periods ended September 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:
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
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 125,743 $ 133,000
Accounts receivable 127,205 69,039
Other current assets 193,595 188,035
---------- ----------
Total current assets 446,543 390,074
---------- ----------
Property and equipment:
Cable systems and equipment 7,071,614 5,930,531
Furniture and office equipment 566,626 473,551
---------- ----------
7,638,240 6,404,082
Less accumulated depreciation (3,069,827) (2,516,327)
---------- ----------
4,568,413 3,887,755
---------- ----------
Other assets:
Deferred licensing costs 153,000 204,000
Deferred tax benefit 1,169,929 969,941
Other 116,928 192,392
---------- ----------
1,439,857 1,366,333
---------- ----------
Total assets $6,454,813 $5,644,162
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
---- ----
Current liabilitites:
Accounts payable $ 241,495 $ 184,832
Accrued expenses and liabilities 59,160 229,889
---------- ----------
Total current liabilities 300,655 414,721
---------- ----------
Series A preferred stock 3,733,156 2,121,214
---------- ----------
Common stockholders' equity:
Common stock of $1 par, authorized
10,000,000 shares, issued and
outstanding: 1,772,450 shares 1,772,450 1,770,000
Paid-in capital 3,515,582 3,494,457
Accumulated deficit (2,867,030) (2,156,230)
---------- ----------
2,421,002 3,108,227
---------- ----------
Total liabilities and stockholders' equity $6,454,813 $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. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 921,400 $ 829,644 $2,643,745 $2,465,532
Costs and Expenses:
Service Costs 591,924 581,003 1,706,501 1,550,334
Selling, general and administrative 346,016 415,322 952,361 1,185,321
Depreciation and amortization 201,500 160,000 604,500 509,000
---------- ---------- ---------- ----------
1,139,440 1,156,325 3,263,362 3,244,655
---------- ---------- ---------- ----------
Income (loss) from operations (218,040) (326,681) (619,617) (779,123)
Interest income 4,429 6,606 27,759 35,328
---------- ---------- ---------- ----------
Net (loss) before income taxes (213,611) (320,075) (591,858) (743,795)
Deferred income tax benefits 75,200 105,000 200,000 243,000
---------- ---------- ---------- ----------
Net (loss) (138,411) (215,075) (391,858) (500,795)
Preferred dividend requirements (111,023) (45,900) (318,942) (105,900)
---------- ---------- ---------- ----------
Net (loss) applicable to common shares $ (249,434) $ (260,975) $ (710,800) $ (606,695)
========== ========== ========== ==========
Weighted average number of common shares
outstanding 1,772,200 1,730,000 1,771,000 1,730,000
Net (loss) per common share
outstanding $ (.14) $ (.15) $ (.40) $ (.35)
========== ========== ========== ==========
</TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
------------
NUMBER OF $1 PAR PAID-IN ACCUMULATED
SHARES VALUE CAPITAL DEFICIT TOTAL
------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
1,770,000 $1,770,000 $3,494,457 $(2,156,230) $3,108,227
Balance, December 31, 1995
Exercise of stock options 2,450 2,450 21,125 - 23,575
Net (loss) - - - (710,800) (710,800)
--------- ---------- ---------- ----------- ----------
Balance, September 30, 1996 1,772,450 $1,772,450 $3,515,582 $(2,867,030) $2,421,002
========= ========== ========== =========== ==========
</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 SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Cash flows provided by (used for) operating activities:
Net income (loss) $ (710,800) $ (606,695)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization 604,500 509,000
Decrease (increase) in receivables (58,166) (9,205)
Decrease (increase) in prepaid expenses
and deposits 60,603 (111,559)
Decrease (increase) in deferred taxes (200,000) (243,000)
Increase (decrease) in accounts payable
and accrued expenses (114,066) (234,954)
---------- ----------
Net cash provided by operating activities (417,929) (226,505)
---------- ----------
Cash flows (used for) investing activities:
Purchase of equipment (1,234,158) (1,435,894)
---------- ----------
Cash flows provided by financing activities:
Sale of common stock 23,575 81,250
Sale of preferred stock 1,747,200 1,590,000
Cost of preferred stock issue (125,945) (144,731)
---------- ----------
Net cash provided by financing activities 1,644,830 1,526,519
---------- ----------
Net increase (decrease) in cash (7,257) (135,880)
Cash and cash equivalents, beginning of period 133,000 367,4030
---------- ----------
Cash and cash equivalents, end of period $ 125,743 $ 231,523
========== ==========
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
--------------------------------------------------
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
SEPTEMBER 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 nine month periods ended
September 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 $200,000 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 before
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 September 30, 1996, there were 39,372 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
September 30, 1996, there were options granted to purchase an aggregate of
72,050 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 nine months ended September
30:
<TABLE>
<CAPTION>
PERCENT
-------
1996 1995
---- ----
<S> <C> <C>
Revenue 100% 100%
Service costs 64.50 62.90
Selling, general and administrative expense 36.0 48.10
Depreciation and amortization 22.90 20.60
</TABLE>
The Company's revenue increased 7% to $2,643,745 in 1996. This
increase was due to an increase in the number of subscribers from 8,500 to
9,100.
Service costs for 1996 increased by 1.6% of revenue. This increase
was due primarily to 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 12.1% of
revenue. This 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 contracts 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 1996. In addition, $347,200 of preferred stock dividends were
paid in preferred stock in 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. The Company has entered into a letter of
intent with BellSouth Corporation for the acquisition by Bell South Corporation
of the outstanding stock of the Company. If this transaction should fail to
close, it is anticipated that these additional funds will be available through
either the debt or equity market.
Page 7 of 8
<PAGE> 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 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: November 8, 1996 C. HANEY
PRESIDENT
/s/Allan H.Rudder
-------------------------------
Date: November 8, 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 THE
CONDENSED FINANCIAL STATEMENTS OF WIRELESS CABLE OF ATLANTA FOR THE PERIOD
ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 125,743
<SECURITIES> 0
<RECEIVABLES> 127,205
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 446,543
<PP&E> 7,638,240
<DEPRECIATION> 3,069,827
<TOTAL-ASSETS> 6,454,813
<CURRENT-LIABILITIES> 300,655
<BONDS> 0
3,733,156
0
<COMMON> 1,772,450
<OTHER-SE> 648,552
<TOTAL-LIABILITY-AND-EQUITY> 6,454,813
<SALES> 2,643,745
<TOTAL-REVENUES> 2,643,745
<CGS> 0
<TOTAL-COSTS> 3,263,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (591,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (710,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (710,800)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> 0
</TABLE>
