<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 MARCH 31, 1997
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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
- --------------------------------------------------------------------------------
(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: 1,773,400 SHARES OF COMMON
STOCK, PAR VALUE $1.00 PER SHARE, AS OF APRIL 30, 1997.
<PAGE> 2
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
CONDENSED CONSOLIDATED BALANCE SHEETS -
December 31, 1996 and March 31, 1997 ........................... 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
For the periods ended March 31, 1996 and 1997 .................. 4
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY -
For the period ended March 31, 1997 ............................ 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
For the periods ended March 31, 1996 and 1997 .................. 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
DECEMBER 31, 1996 AND MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
1996 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 147,471 $ 1,016,263
Accounts receivable 35,212 85,960
Other current assets 171,515 193,031
----------- -----------
Total current assets 354,198 1,295,254
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Property and equipment:
Cable systems and equipment 7,181,822 7,290,819
Furniture and office equipment 601,199 608,097
----------- -----------
7,783,021 7,898,916
Less accumulated depreciation (3,316,238) (3,509,238)
----------- -----------
4,466,783 4,389,678
----------- -----------
Other assets:
Deferred licensing costs 136,000 119,000
Deferred tax benefit 1,267,754 1,365,254
Other 107,488 98,489
----------- -----------
1,511,242 1,582,743
----------- -----------
Total assets $ 6,332,223 $ 7,267,675
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Current liabilitites:
Accounts payable $ 339,893 $ 343,974
Accrued expenses and liabilities 265,850 265,703
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Total current liabilities 605,743 609,677
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Note Payable-Long Term - 1,000,000
----------- -----------
Series A preferred stock 3,733,155 3,969,356
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Common stockholders' equity:
Common stock of $1 par, authorized
10,000,000 shares, issued and
outstanding: 1,772,600 and 1,773,400
shares 1,772,600 1,773,400
Paid-in capital 3,516,707 3,520,907
Accumulated deficit (3,295,982) (3,605,665)
----------- -----------
1,993,325 1,688,642
----------- -----------
Total liabilities and stockholders' equity $ 6,332,223 $ 7,267,675
=========== ===========
</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 MARCH 31, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Revenue $ 846,762 $ 888,871
Costs and Expenses:
Service Costs 548,063 616,042
Selling, general and administrative 297,546 355,264
Depreciation and amortization 201,500 210,000
----------- -----------
1,047,109 1,181,306
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Income (loss) from operations (200,347) (292,435)
Interest income 12,196 5,695
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Loss before income taxes (188,151) (286,740)
Deferred income tax benefits 63,000 97,500
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Net loss (125,151) (189,240)
Preferred dividend requirements (97,840) (120,443)
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Net loss applicable to common
shares $ (222,991) $ (309,683)
=========== ===========
Weighted average number of common
shares outstanding 1,770,000 1,773,000
Net loss per common share
outstanding $ (.13) $ (.17)
=========== ===========
</TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE
PERIOD ENDED MARCH 31, 1997
(UNAUDITED)
Common Stock
------------
<TABLE>
<CAPTION>
Number of $1 Par Paid-In Accumulated
Shares Value Capital Deficit Total
------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 1,772,600 $ 1,772,600 $ 3,516,707 $(3,295,982) $ 1,993,325
Stock Options 800 800 4,200 - 5,000
Preferred stock dividends - - - (120,443) (120,443)
Net loss - - - (189,240) (189,240)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 1,773,400 $ 1,773,400 $ 3,520,907 $(3,605,665) $ 1,688,642
=========== =========== =========== =========== ===========
</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 MARCH 31, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Cash flows provided by (used for) operating activities:
Net (loss) $ (222,991) $ (309,683)
Adjustments to reconcile net (loss) to net
cash used by operating activities:
Depreciation and amortization 201,500 210,000
(Increase) in receivables (8,803) (50,748)
Decrease (increase) in prepaid expenses
and deposits 110,718 (12,516)
(Increase) in deferred taxes (63,000) (97,500)
Increase (decrease) in accounts payable
and accrued expenses (3,241) 3,934
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Net cash provided by (used for) operating activities 14,183 (256,513)
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Cash flows (used for) investing activities:
Purchase of equipment (441,669) (115,895)
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Cash flows provided by financing activities:
Long term debt - 1,000,000
Stock options - 5,000
Sale of preferred stock 1,524,300 236,200
Cost of preferred stock issue (125,945) -
----------- -----------
Net cash provided by financing activities 1,398,355 1,241,200
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Net increase in cash 970,869 868,792
Cash and cash equivalents, beginning of period 133,000 147,471
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Cash and cash equivalents, end of period $ 1,103,869 $ 1,016,263
=========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1996 1997
---- ----
<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
MARCH 31, 1997
(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 three month periods ended March
31, 1997 and 1996 are not necessarily indicative of the results to be expected
for the full year.
2. DEFERRED TAX BENEFIT:
The deferred tax benefit increased by $97,500 during 1997. 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. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized.
3. PREFERRED STOCK:
The Company has 5,000,000 shares of Preferred Stock
authorized. 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 March 31, 1997,
there were options granted to purchase an aggregate of 71,100 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 three months ended March 31:
<TABLE>
<CAPTION>
Percent
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1996 1997
---- ----
<S> <C> <C>
Revenue 100% 100%
Service costs 64.7 69.3
Selling, general and administrative expense 35.1 40.0
Depreciation and amortization 23.8 23.6
</TABLE>
The Company's revenue increased 5% to $888,871 in 1997. This increase
was due to an increase in the number of subscribers from 8,600 to 9,000.
Service costs for 1997 increased by 4.6% of revenue. This increase was
due to salaries and related costs of new personnel which were added in
engineering, customer service and technical staff.
Selling, general and administrative expense increased by 4.9% of
revenue. The increase was due to professional fees related to the proposed
merger of the Company with a subsidiary of BellSouth Corporation.
GENERAL
Currently, most of the Company's subscribers result from contracts,
which typically have an initial term of ten years, with 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.
LIQUIDITY AND CAPITAL RESOURCES
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.
As soon as is practical, the Company plans to offer a digital package
with 100-150 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.
Page 7 of 8
<PAGE> 8
On February 11, 1997, the Company entered into a definitive agreement
with BellSouth Corporation for a merger with BellSouth. Upon signing, BellSouth
made a $1,000,000 non-interest bearing advance to the Company which is repayable
on December 31, 1998. If this transaction should fail to close, it is
anticipated that additional funds for the Company's expansion plans will be
available through either the debt or equity market.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Ex-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
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Date: May 9, 1997 RICKY C. HANEY
PRESIDENT
/s/ Allan H. Rudder
-------------------------------
Date: May 9, 1997 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 MARCH 31,
1997 CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,016,263
<SECURITIES> 0
<RECEIVABLES> 85,960
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,295,254
<PP&E> 7,898,916
<DEPRECIATION> 3,509,238
<TOTAL-ASSETS> 7,267,675
<CURRENT-LIABILITIES> 609,677
<BONDS> 1,000,000
3,969,356
0
<COMMON> 1,773,400
<OTHER-SE> 3,520,907
<TOTAL-LIABILITY-AND-EQUITY> 7,267,675
<SALES> 888,871
<TOTAL-REVENUES> 888,871
<CGS> 0
<TOTAL-COSTS> 1,181,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (286,740)
<INCOME-TAX> 0
<INCOME-CONTINUING> (309,683)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (309,683)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
