<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
June 27, 1997
NATIONAL WIRELESS HOLDINGS INC.
(Exact name of registrant as specified in its charter
DELAWARE 0-23598 13-3735316
- --------------------------------- -------------------- ----------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
249 ROYAL PALM WAY, SUITE 301, PALM BEACH, FLORIDA 33480
(Address of principal executive offices and zip code)
(407) 832-0981
(Registrant's telephone number, including area code)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 27, 1997, the registrant completed the sale of its subsidiary, South
Florida Television Inc., which holds its rights to provide wireless cable TV
service in Miami, to BellSouth Corporation (NYSE: BLS) for 1,048,321 shares
of BellSouth common stock, based on a $48 million purchase price.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNT
Not applicable.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Not applicable.
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
NATIONAL WIRELESS HOLDINGS INC.
Index to Financial Statements
Page(s)
-------
National Wireless Holdings Inc. - Proforma condensed consolidated
financial statements (unaudited):
Pro forma condensed consolidated balance sheet as of
April 30, 1997 F-2
Pro forma condensed consolidated statements of operations
for the six months ended April 30, 1997 and the year
ended October 31, 1996 F-3
South Florida Television Inc. (a wholly-owned subsidiary of National
Wireless Holdings Inc.) - historical financial statements:
Report of Independent Accountants F-6
Balance Sheets as of April 30, 1997 (unaudited) and F-7
October 31, 1996 and 1995
Statements of Operations and Accumulated Deficit for the
six months ended April 30, 1997 (unaudited) and the
years ended October 31, 1996 and 1995 F-8
Statements of Cash Flows for the six months ended April 30, 1997
(unaudited) and the years ended October 31, 1996 and 1995 F-9
F-1
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
April 30, 1997
The following pro forma condensed consolidated balance sheet is presented as if
the sale of South Florida Television Inc. ("SFTV") to BellSouth Corporation had
occurred on April 30, 1997. This pro forma consolidated balance sheet should be
read in conjunction with the financial statements of National Wireless Holdings
Inc. (the "Company") included in its quarterly filing on Form 10-Q as of April
30, 1997 and the accompanying financial statements of SFTV listed on the index
on page F-1. In management's opinion, all adjustments necessary to reflect the
effects of the above transaction have been made.
The following pro forma consolidated balance sheet is not necessarily indicative
of what the actual financial position would have been assuming the above
transaction had been consummated on April 30, 1997, nor does it purport to
represent the future financial position of the Company.
<TABLE>
<CAPTION>
(a)
Company Pro-forma Company
ASSETS: Historical Adjustments Pro-forma
------------- --------------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 492,767 -- $ 492,767
U.S. treasury securities 11,791,914 -- 11,791,914
Trade and other receivables 509,005 -- 509,005
Prepaid expenses and other current assets 42,551 $ (1,500)(c) 41,051
------------ ------------ -----------
Total current assets 12,836,237 (1,500) 12,834,737
------------ ------------ -----------
Marketable securities - BellSouth Corporation common stock -- 48,000,000 (b) 48,000,000
Wireless frequency license and acquisition costs, net 2,798,618 (2,503,986)(c) 294,632
Transmission and related equipment, net 1,117,001 (184,912)(c) 932,089
Leasehold improvements, office equipment and
service vehicles, net 480,975 (39,781)(c) 441,194
Intangible assets, net 3,483,872 -- 3,483,872
Investments 420,827 -- 420,827
Deposits and other assets 450,789 (25,790)(c) 424,999
------------ ------------ -----------
Total assets $ 21,588,319 $ 45,244,031 $66,832,350
============ ============ ===========
LIABILITIES and STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 1,360,094 $ (205,000)(c) $ 1,155,094
Accrued expenses related to sale of SFTV 1,300,000(g) 1,300,000
Due to related parties 93,390 -- 93,390
Current maturities of long-term debt 442,520 -- 442,520
------------ ------------ -----------
Total current liabilities 1,896,004 1,095,000 2,991,004
------------ ------------ -----------
Long-term debt 47,000 -- 47,000
Due to related parties 321,907 -- 321,907
Deferred income taxes -- 16,800,000 16,800,000
Stockholders' equity:
Preferred stock -- -- --
Common stock,$.01 par value: 20,000,000 shares
authorized; 3,253,000 shares issued and outstanding 32,530 -- 32,530
Additional paid-in capital 22,421,173 -- 22,421,173
Accumulated deficit (3,130,295) 27,349,031(d) 24,218,736
------------ ------------ -----------
Total stockholders' equity 19,323,408 27,349,031 46,672,439
------------ ------------ -----------
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total liabilities and stockholders' equity $ 21,588,319 $ 45,244,031 $66,832,350
============ ============ ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
F-3
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
Pro Forma Condensed Consolidated Statements of Operations
(unaudited)
April 30, 1997
The following pro forma condensed consolidated statements of operations are
presented as if the sale of SFTV to BellSouth Corporation had occurred on
November 1, 1995. The pro forma consolidated statements of operations should be
read in conjunction with the financial statements of National Wireless Holdings,
Inc. included in its quarterly filing on Form 10-Q as of April 30, 1997 and the
financial statements of SFTV as listed on the index on page F-1. In management's
opinion, all adjustments necessary to reflect the effects of the above
transaction have been made.
The following pro forma consolidated statements of operations are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the above transactions had been consummated as of
November 1, 1995, nor does it purport to represent the results of operations for
future periods.
<TABLE>
<CAPTION>
(a)
Company Pro-forma Company
Six months ended April 30, 1997 Historical Adjustments Pro-forma
- --------------------------------------------------------- ------------- --------------- -----------
<S> <C> <C> <C>
Revenue:
Service income $ 1,345,398 $ -- $ 1,345,398
Interest income 352,625 (11,897)(e) 340,728
Dividend income -- 754,791 (f) 754,791
------------ ------------ -----------
Total revenue 1,698,023 742,894 2,440,917
------------ ------------ -----------
Expenses:
Cost of services 681,864 -- 681,864
Market development 325,970 (287,781)(e) 38,189
Professional fees 267,846 -- 267,846
General and administrative 853,850 (12,289)(e) 841,561
Depreciation and amortization 405,346 (104,550)(e) 300,796
Interest 32,227 -- 32,227
------------ ------------ -----------
Total expenses 2,567,103 (404,620) 2,162,483
------------ ------------ -----------
Income (loss) before provision for
income taxes (869,080) 1,147,514 278,434
Provision for income taxes -- 40,000 (h) 40,000
------------ ------------ -----------
Net income (loss) $ (869,080) $ 1,107,514 $ 238,434
============ ============ ===========
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net income (loss) per common share $ (0.27) -- $ 0.07
============ ===========
Weighted average number of common shares
outstanding 3,253,000 -- 3,253,000
============ ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
F-5
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
Pro Forma Condensed Consolidated Statements of Operations,
(unaudited), Continued
<TABLE>
<CAPTION>
(a)
Company Pro-forma Company
Year ended October 31, 1996 Historical Adjustments Pro-forma
- --------------------------------------------------------- ------------- --------------- -----------
<S> <C> <C> <C>
Revenue:
Service revenue $ 1,223,561 $ (78,000)(e) $ 1,145,561
Interest income 1,094,173 (44,969)(e) 1,049,204
Dividend income 1,509,582 (f) 1,509,582
------------ ------------ -----------
Total revenue 2,317,734 1,386,613 3,704,347
------------ ------------ -----------
Expenses:
Cost of services 799,045 -- 799,045
Market development 798,870 (639,579)(e) 159,291
Technology development 35,370 (35,370)(e)
Professional fees 273,234 (69,159)(e) 204,075
General and administrative 790,511 -- 790,511
Depreciation and amortization 564,139 (196,981)(e) 367,158
Interest 73,389 -- 73,389
------------ ------------ -----------
Total expenses 3,334,558 (941,089) 2,393,469
------------ ------------ -----------
Gain on sale of SFTV 44,149,031 (g) 44,149,031
------------ ------------ -----------
Income (loss) before provision
for income taxes (1,016,824) 46,476,733 45,459,909
Provision for income deferred taxes -- 16,800,000 (h) 16,800,000
------------ ------------ -----------
$ (1,016,824) $ 29,676,733 $28,659,909
============ ============ ===========
Net income (loss) per common share $ (0.31) $ 8.81
============ ===========
Weighted average number of common shares
outstanding 3,253,000 3,253,000
============ ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
F-6
<PAGE>
See accompanying notes to pro forma condensed consolidated financial statements.
F-7
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
Notes to Pro Forma Condensed Consolidated Financial Statements
(a) The Company historical financial information has been derived from the
Company's quarterly report on Form 10-Q as of April 30, 1997.
(b) Represents the value of the common stock of BellSouth Corporation as of
the date of sale of SFTV (June 27, 1997).
(c) Represents the assets and liabilities of SFTV transferred to BellSouth
Corporation as of the date of sale as derived from the accompanying
balance sheet of SFTV as of April 30, 1997. The principal assets and
liabilities excluded from the sale were cash and cash equivalents and the
amount due to parent.
(d) Represents gain on sale of SFTV (see (g) below), net of deferred income
taxes of $16,800,000. For income tax purposes, the transaction
constitutes a tax-free exchange, and the gain will be recognized only
when the BellSouth common stock is sold.
(e) Represents the income and expenses of SFTV as derived from the
accompanying statements of operations of SFTV for the six months ended
April 30, 1997 and the year ended October 31, 1996.
(f) Represents dividends on BellSouth Corporation common stock at an annual
rate of $1.44 per share.
(g) Represents the gain on sale of SFTV computed as follows:
Common stock of BellSouth Corporation - 1,048,321 shares $ 48,000,000
Estimated fees and expenses (1,300,000)
Net assets transferred (2,550,969)
------------
Gain $ 44,149,031
============
(h) Represents the tax effect of proforma adjustments.
F-8
<PAGE>
Report of Independent Accountants
To the Stockholder of
South Florida Television Inc.:
We have audited the accompanying balance sheets of SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company which is a wholly owned subsidiary of National
Wireless Holdings Inc.) as of October 31, 1996 and 1995, and the related
statements of operations and accumulated deficit and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted audited standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Florida Television Inc.
as of October 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
New York, New York
December 24, 1996, except as
to Note 7 for which the date is
June 27, 1997
F-9
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
Years ended
(unaudited) December 31,
April 30, -------------------------
ASSETS: 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 398,026 $ 658,924 $ 1,188,617
Prepaid expenses and other current assets 1,500 16,424 28,421
----------- ----------- -----------
Total current assets 399,526 675,348 1,217,038
Wireless frequency license and acquisition costs,
net of accumulated amortization of $316,392,$243,804 and
$107,166, respectively 2,503,986 2,406,384 2,155,377
Transmission and related equipment, net of accumulated
depreciation of $79,352, $56,498 and $14,367, respectively 184,912 207,766 110,976
Office equipment and service vehicles, net of accumulated
depreciation of $37,681, $28,572 and $10,361 as of
October 31, 1996 and 1995, respectively 39,781 48,889 67,100
Deposits and other assets 25,790 25,790 315,235
----------- ----------- -----------
Total assets $ 3,153,995 $ 3,364,177 $ 3,865,726
=========== =========== ===========
LIABILITIES and STOCKHOLDER'S EQUITY:
Current liabilities:
Accounts payable and accrued expenses $ 5,000 $ 4,900 $ 21,130
Due to related party (Note 6) 80,000 50,000 --
Payable to PNI (Note 3) 362,000 307,000 200,000
Due to Parent 2,519,588 2,422,147 2,246,346
----------- ----------- -----------
Total current liabilities 2,966,588 2,784,047 2,467,476
----------- ----------- -----------
Stockholder's equity:
Common stock ,$.10 par value: 1,000 shares authorized,
issued and outstanding 10 10 10
Additional paid-in capital 2,000,000 2,000,000 2,000,000
Accumulated deficit (1,812,603) (1,419,880) (601,760)
----------- ----------- -----------
Total stockholder's equity 187,407 580,130 1,398,250
----------- ----------- -----------
Total liabilities and stockholder's equity $ 3,153,995 $ 3,364,177 $ 3,865,726
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company)
Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
(Unaudited) Cumulative
Six months period April 24,
ended Years ended October 31, 1994 (date of
April 30, ----------------------- inception) to
1997 1996 1995 April 30, 1997
----------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
Interest income $ 11,897 $ 44,969 $ 52,428 $ 109,294
Service revenue -- 78,000 52,575 130,575
----------- ----------- --------- -----------
11,897 122,969 105,003 239,869
----------- ----------- --------- -----------
Expenses:
Market development 287,781 639,579 560,082 1,487,519
Technology development -- 35,370 13,336 48,706
Professional fees 12,289 69,159 2,232 83,680
Depreciation and amortization 104,550 196,981 131,036 432,567
----------- ----------- --------- -----------
Total expenses 404,620 941,089 706,686 2,052,472
----------- ----------- --------- -----------
Net loss (392,723) (818,120) (601,683) (1,812,603)
Accumulated deficit:
Beginning of period (1,419,880) (601,760) (77) --
----------- ----------- --------- -----------
End of period $(1,812,603) $(1,419,880) $(601,760) $(1,812,603)
=========== =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
Six months Cumulative
ended period April 24,
April 30, Years ended October 31, 1994 (date of
----------------------- inception) to
1997 1996 1995 April 30, 1997
--------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(392,723) $ (818,120) $ (601,683) $(1,812,603)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 104,550 196,981 131,036 432,567
Changes in assets and liabilities:
Prepaid expenses and other current assets 14,924 297,618 (28,421) 284,121
Deposits and other assets -- 3,824 (315,235) (311,411)
Accounts payable, accrued expenses
and other liabilities 85,100 140,770 221,130 447,000
--------- ----------- ----------- -----------
Net cash used in operating activities (188,149) (178,927) (593,173) (960,326)
--------- ----------- ----------- -----------
Cash flows from investing activities:
Wireless frequency license and acquisition costs (170,190) (387,646) (2,261,943) (2,819,779)
Acquisition of transmission and related equipment -- (138,921) (125,085) (264,006)
Acquisition of office equipment and service vehicles -- -- (77,461) (77,461)
--------- ----------- ----------- -----------
Net cash used in investing activities (170,190) (526,567) (2,464,489) (3,161,246)
--------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock -- -- 1,990,000 2,000,010
Due to Parent 97,441 175,801 2,246,346 2,519,588
--------- ----------- ----------- -----------
Net cash provided by financing activities 97,441 175,801 4,236,346 4,519,598
--------- ----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (260,898) (529,693) 1,178,684 398,026
Cash and cash equivalents, beginning of year 658,924 1,188,617 9,933 --
--------- ----------- ----------- -----------
Cash and cash equivalents,
end of year $ 398,026 $ 658,924 $ 1,188,617 $ 398,026
========= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company), Continued
1. Formation of the Company and Basis of Presentation:
South Florida Television Inc. (the "Company"), a development stage
company, was formed on April 24, 1994 (date of inception) by National
Wireless Holdings Inc. (the "Parent" or "National") as a wholly owned
subsidiary to develop the Miami market (See Note 3). The accompanying
financial statements have been prepared on the going-concern basis of
accounting, which assumes the realization of assets and liquidation of
liabilities in the ordinary course of business. The Company has incurred
operating losses since inception, and such operations and development
activities have been funded entirely by its Parent. The ability of the
Company to continue its development activities is dependent upon the
continued funding of such activities by its Parent. The Parent has
committed to the Company that it will continue to provide the funding
necessary to meet its development activities through October 31, 1997 and
beyond (see Note 7).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
2. Summary of Significant Accounting Policies:
Cash Equivalents:
The Company considers all highly liquid investments purchased with
maturities, when purchased, of three months or less to be cash
equivalents. Cash equivalents consist primarily of investments in various
money market funds whose carrying amounts approximate fair values because
of the short-term maturities of the investments.
Wireless Frequency License and Acquisition Costs:
Wireless frequency license and acquisition costs are capitalized and, when
placed in service, amortized on the straight-line method over the
remaining lives of the related agreements, which range from 5 to 10 years.
License and acquisition costs are expensed when management determines that
the related market will not be developed and the costs cannot be recovered
through resale. If the market proceeds to development, the Company's
policy is to annually assess any impairment in value based upon a
comparison of projected operating cash flows from such market over its
expected period of operation, on an undiscounted basis, to the carrying
amount of license and acquisition costs, as well as other capitalized
costs related to that market.
Continued
F-13
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company), Continued
Transmission and Related Equipment:
Transmission and related equipment are recorded at cost and depreciation
expense is provided when the assets are placed in service under the
straight-line method over the estimated useful lives of the related assets
(5 to 10 years).
Office Equipment and Service Vehicles:
Office equipment and service vehicles are recorded at cost, and
depreciation expense is provided when the assets are placed in service
under the straight-line method over the estimated useful lives of the
related assets (3 to 10 years).
Income Taxes:
The Company is included in the consolidated federal, state and local
income tax returns filed by National.
The Company accounts for income taxes on a separate company basis under
the liability method of accounting. Under the liability method, deferred
taxes are determined on the basis of differences between the financial
statement and tax bases of assets and liabilities at enacted tax rates in
effect in the years in which the differences are expected to reverse.
Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amounts expected to be realized.
Due to Parent:
This amount represents non-interest-bearing advances made by the Parent to
support the market development and the operations of the Company. The
advances have no fixed payment terms or maturity date.
3. Development of Miami Market:
On January 30, 1995, National and the Company entered into an agreement
(the "WLRN Agreement") with Friends of WLRN, Inc. ("Friends of WLRN")
pursuant to which the Company will lease excess capacity on up to 20
Instructional Television Fixed Service ("ITFS") channels licensed to
Friends of WLRN, the School Board of Dade County (the "School Board") and
Southern Florida Instructional Television, Inc. upon the Company's
successful testing and implementation of digital compression technology.
National and the Company are obliged to invest approximately $2,000,000 to
develop these frequencies and will pay license fees based on the number of
subscribers to its wireless cable system. License fees are subject to
certain minimum amounts upon commencement of commercial service, initially
$10,000 per month with escalations over the term of the agreement.
Commencing in August, 1995 and ending when the Company starts paying
license fees, the Company is obligated to pay a system management fee of
$10,000 per month. The Company has incurred $150,000 of system management
fees through October 31, 1996. The Company's utilization of such excess
Continued
F-14
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company), Continued
capacity on the ITFS channels in Dade County for the transmission of
commercial programming to subscribers is subject to FCC consent to the
relocation of the ITFS stations to the Company's transmission facility,
use of digital compression technology and the use by the Company of all of
the excess capacity on the channels after 32 virtual channels are created
for use by Friends of WLRN, the School Board and Southern Florida
Instructional Television, Inc. Requests for the necessary FCC consent are
pending, but have been opposed by a company that is attempting to develop
a wireless cable system in the adjacent West Palm Beach market and by an
ITFS licensees some of whom are leasing excess capacity to that system
developer. The Company and National have entered into a letter agreement
with that developer providing that the parties will use their best efforts
to settle the dispute, including causing affiliated licensees to agree to
the execution of a formal settlement agreement by all of the ITFS and
Multipoint Distribution Service ("MDS") licensees and applicants that will
provide transmission capacity to the proposed Miami and West Palm Beach
wireless cable systems. There can be no assurance that such formal
settlement agreement will be entered into, nor can there be any assurance
that the FCC will consent to the WLRN Agreement and the facilities
contemplated therein, or that the Company will be able to implement
adequate digital compression technology. Although the Company believes
compression technology, when developed, will expand the capacity of ITFS
channels to make these channels more useful for educational purposes while
at the same time making them available to the Company for commercial uses,
there can be no assurance that the Company will be able to use any of the
Miami ITFS channels to carry out its business plan. Accordingly, there can
be no assurance that the Company will develop the Miami market.
On December 28, 1994, the Parent entered into an MDS Agreement with
Private Networks, Inc. ("PNI") to lease, for an initial ten-year term and
three additional renewal terms of five years each, four MDS wireless
frequencies in the Miami, Florida, area and the right to lease four such
frequencies in each of the following markets: Decatur, Illinois; Ithaca,
New York; and, Glens Falls, New York. The lease, which was assigned to the
Company shortly after December 29, 1994, provides for aggregate payments
comprising an initial payment of $550,000 ($350,000 had been paid as of
October 31, 1996), a monthly fee of $.50 per subscriber (subject to
certain minimum payments which escalate over time and aggregated $107,000
through October 31, 1996) and the costs of constructing (estimated to be
$260,000) transmitting stations for PNI in Miami, Decatur, Ithaca and
Glens Falls. The Company will retain ownership of the transmitting
equipment in those stations and will lease the equipment for a nominal
consideration over its estimated useful life to PNI. If the Company is not
the operator of the frequencies in any of the markets, PNI will either
purchase the equipment in such market at its original cost less
depreciation or return it. The Company has decided not to exercise its
right to lease the frequencies in Decatur, Ithaca and Glens Falls.
F-15
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company), Continued
On July 8, 1994, the Parent entered into an Asset Purchase and Sale
Agreement and related MDS Service Order with Microband Corporation to
purchase the license for MDS Channel 1 in Miami, Florida, for $700,000.
The FCC granted its consent to the assignment on December 28, 1994. The
Parent has agreed to lease this channel to the Company.
On August 30, 1994, the Parent entered into an MDS Airtime Agreement with
Via Net Companies for a lease, with an initial five-year term and an
option for two additional five-year terms, of the MDS H-1 Channel for
wireless cable broadcasting in Miami, Florida. Under the terms of this
agreement, which was assigned to the Company shortly after August 30,
1994, the Company will pay a minimum monthly transmission fee of $1,000
plus a connection fee of $.10 per subscriber, as defined in the agreement.
The Company has paid $5,000 as a deposit under this agreement as of
October 31, 1996.
On November 7, 1994, the Parent entered into an agreement with People's
Choice TV Corporation ("PCTV") and another party for the purchase of MDS
H-2 Channel, including all related transmission equipment in Miami,
Florida, for $10,000, plus certain acquisition costs of $25,000. As a
condition of the purchase, PCTV negotiated a second right of first
refusal, subordinate to the right of first refusal held by Preferred
Entertainment, Inc. ("PEI"), to enter into operating agreements for the
Miami wireless system in the event the Company determines not to operate
the system in Miami. The Parent has agreed to lease this business to the
Company.
Before the Company can make full use of the channels it will own or lease
in the Miami market, it must relocate the transmitting stations to a
common site. The Company has identified the site at which it will locate
its transmission facilities, and applications are pending before the FCC
seeking consent to the relocation. As set forth above, applications filed
by the Company's ITFS affiliates have been objected to. There can be no
assurance that the FCC will permit the Company to relocate all of the
transmitting stations to the site selected or to permit the Company to
implement digital compression technology.
The Company believes that development of a wireless cable system in Miami
depends upon the acquisition of at least 20 frequencies, and, while the
Company has obtained rights to an aggregate of more than 20 frequencies in
Miami, assuming use of compression technology, there can be no assurance
that the Company will be able to complete developments in technology or to
resolve certain regulatory issues required to launch such a system. The
Company has capitalized the costs of obtaining the rights to wireless
frequencies in the Miami market. The recoverability of such costs is
dependent upon the successful development of a system in Miami or through
the resale of such frequency rights (see Note 7). Management estimates
that it will recover the carrying amount of these costs from cash flows
generated by the system once it has been developed. However, it is
reasonably possible that such estimate will change in the near time as a
result of frequency availability, technology, regulatory or other changes.
Continued
F-16
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company), Continued
4. Lease and Purchase Commitments:
The Company leases administrative facilities and office equipment under
operating leases that expire between July 1997 and November 1999. Certain
of the leases contain escalation clauses providing for increased rentals
based on operating expenses or the consumer price index. Rent expense
under operating leases was approximately $29,000 and $26,000 for the years
ended October 31, 1996 and 1995, respectively.
Future annual minimum rental payments as of October 31, 1996 under
noncancellable operating leases are:
1997 $ 6,000
1998 3,000
1999 200
-------------
$ 9,200
=============
Commitments relating to wireless frequency rights and technology
development as of October 31, 1996 are described in Note 3.
The Company also has commitments under antenna and tower leases. The
Company is obligated under a month-to-month antenna site license agreement
for approximately $500 per month. In addition, the Company's tower space
lease, which expires on September 19, 1997, requires the Company to pay
$2,000 a month adjusted annually by the greater of 5% or the CPI.
The Company also entered into a consulting agreement with an individual
which provides for an annual fee of $60,000 and reimbursement of certain
expenses. This agreement expired in June 1996 and has been verbally
extended on a month-to-month basis.
5. Income Taxes:
As of October 31, 1996, the Company has net operating loss carryforwards
for income tax purposes of approximately $1,400,000, which will expire
between October 31, 2008 and 2010.
As of October 31, 1996, deferred tax assets, principally comprising the
net operating loss carryforwards, have been offset in full by a valuation
allowance.
Continued
F-17
<PAGE>
SOUTH FLORIDA TELEVISION INC.
(A Development Stage Company), Continued
6. Related-Party Transactions:
In fiscal 1995, the Company purchased new service vehicles for
approximately $20,400 from an automobile dealership which is owned by the
Chairman of the Company.
In fiscal 1995, the Company purchased transmission equipment for $23,000
from an affiliate of the Parent.
Two of the directors of the Parent were principal stockholders of PEI (see
Note 3), which was acquired by PCTV, until May, 1994 and were directors of
PEI until January, 1995. Until May 1994, the Chairman of the Parent was
also the Chairman of PEI. The Chairman also currently beneficially owns
approximately 3.8% of PCTV.
Payments made to another subsidiary for services in connection with the
development of the Miami market amounted to $45,000 and $220,000 for the
years ended October 31, 1996 and 1995, respectively. Of such amounts,
$45,000 and 93,000 are included in market development costs, and the
balance is included in wireless frequency license and acquisition costs,
respectively. At October 31, 1996, wireless frequency license and
acquisition costs include an aggregate amount of $127,000 paid to such
subsidiary.
Included in wireless frequency license and acquisition costs at October
31, 1996 is $100,000 ($50,000 of which has not been paid) relating to
services provided by a law firm, a partner of which is a officer of the
Parent.
The Parent allocates salary and consulting service expenses to the Company
based upon an estimate of time incurred by personnel in performing Company
related duties. The allocated expenses for the years ended October 31,
1996 and 1995 approximated $280,000 and $378,000, respectively. No other
corporate expenses of the Parent are allocated to the Company.
7. Sale of SFTV (Unaudited):
The Parent completed the sale of the Company to BellSouth Corporation on
June 27, 1997 (see Note 3), with all of its wireless cable assets in the
Miami area, for $48 million in stock.
Continued
F-18
<PAGE>
(c) EXHIBITS
Not applicable.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
<PAGE>
SIGNATURES
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.
NATIONAL WIRELESS HOLDINGS INC.
-------------------------------
(Registrant)
Date: July 11, 1997 By: /s/ Terrence S. Cassidy
-----------------------------
Terrence S. Cassidy, Principal
Executive Officer,
Principal Financial Officer and
Principal Accounting Officer
