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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1997
Commission file number 0-23598
NATIONAL WIRELESS HOLDINGS INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3735316
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation)
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249 ROYAL PALM WAY, SUITE 301, PALM BEACH, FLORIDA 33480
(Address of principal executive offices and zip code)
(407) 822-9933
(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock, $.01
Par Value
Indicate by check mark whether the registrant (1) has 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $34,500,000 as of January 26, 1998 based upon the
last sales price per share of the Registrant's Common Stock, as reported on the
Nasdaq Small Cap Market on such date. As of January 26, 1998, 3,283,000 shares
of Common Stock, $.01 par value, of the Registrant were outstanding.
Portions of Registrant's Proxy Statement for use in connection with the
Annual Meeting of Stockholders scheduled to be held April 17, 1998 are
incorporated by reference into Part III of this report, to the extent set forth
therein, if such Proxy Statement is filed with the Securities and Exchange
Commission or before February 28, 1998. If such Proxy Statement is not filed by
such date, the information required to be presented in Part III will be filed as
an amendment to this report. The exhibits for this Form 10-K are listed on Page
.
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NATIONAL WIRELESS HOLDINGS INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
TABLE OF CONTENTS
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Part I
Item 1. Business 1
Item 2. Properties 19
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 20
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 20
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of 22
Operations
Item 8. Consolidated Financial Statements 25
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure 25
Part III
Item 10. Directors and Executive Officers of the Registrant 26
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners and Management 26
Item 13. Certain Relations and Related Transactions 26
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 27
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PART I
ITEM 1. BUSINESS
THE COMPANY
National Wireless Holdings Inc. ("NWH" or the "Company"), a Delaware
corporation organized on August 31, 1993, is a holding and strategic resource
company for telecommunications and other businesses. The Company currently
operates an electronic data interchange company, providing links between
healthcare providers and third party payors. In addition, the Company operates a
satellite programming uplink facility, an educational programming distribution
company and other early stage businesses. The Company also seeks to support,
finance and acquire new businesses and technologies in the telecommunications
and other industries. The Company recently acquired an interest in a company
organized to purchase a British telecommunications company, and may acquire or
invest in other businesses.
In June 1997, the Company sold its wireless cable assets in Miami Florida in
exchange for $48 million of common stock of BellSouth Corporation.
On September 10, 1997, the Company acquired additional shares of Electronic
Data Submission Systems, Inc. ("EDSS") from a stockholder, which when combined
with its existing share ownership represents 55% of the outstanding common stock
and control of EDSS. The Company acquired its interest in EDSS first as a lender
and then through exercise of a warrant and an option to purchase shares of EDSS
common stock.
The Company's executive offices are located at 249 Royal Palm Way, Suite
301, Palm Beach, Florida 33480, telephone: (407) 822-9933.
ELECTRONIC DATA INTERCHANGE
-- GENERAL
NWH owns 55% of the capital stock of and manages EDSS. EDSS provides
electronic data interchange ("EDI") services and healthcare information
management services to the healthcare market. The market includes physicians,
hospitals, clinics, billing services, commercial insurance companies, managed
care organizations, preferred provider organizations, state and federal
governmental agencies and others (collectively, "Payors"). EDSS provides
healthcare EDI services on a real-time and batch-processing basis by utilizing
its proprietary software HECET Systems-Registered Trademark-. This software
allows medical providers and Payors to communicate electronically the
information needed to process and expedite the payment of insurance claims,
physician referrals and insurance authorizations. HECET
Systems-Registered Trademark- will also check patient eligibility and provide
comprehensive reporting on those claims. The EDSS private transaction network is
directly connected to over 4,000 physicians, and has direct or gateway access to
540 Payors.
EDSS was incorporated in Colorado on January 7, 1991 and was reincorporated
in Delaware on September 10, 1997.
-- INDUSTRY BACKGROUND
The rapid expansion of the healthcare industry over the last decades led to
a significant increase in the number of claims and the complexity of the
processing of claims for reimbursement by Payors. These claims are still largely
processed on paper, a cumbersome, costly and inaccurate method. Recent advances
in computer software, telecommunications and microprocessor technology
facilitate the development of on-line, real-time systems that electronically
capture and transmit information, replacing the recording and processing of
transaction information on paper. In addition to offering greater convenience,
these electronic systems reduce processing costs, settlement delays and losses
from fraudulent transactions.
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Health care providers initiate electronic transaction processing through
dedicated point-of-service terminals, stand-alone software or software
integrated with the provider's management information system. The submission of
claims occurs by providers aggregating and editing claims throughout the day at
the provider's office and submitting them electronically to EDSS or its
competitors in batch. Claims are sorted, formatted and edited a second time by
EDSS or its competitors and are then forwarded electronically to the Payor. The
claim is processed by the Payor and the adjudicated response is transmitted back
to the provider. To the extent required, the Payor then sends a check to the
provider or, in certain circumstances, initiates an electronic funds transfer to
the provider's account.
EDSS believes EDI transaction processing offers a number of benefits to
Payors and providers. The elimination or reduction of paper-based transactions
significantly lowers claims processing costs of Payors, and on-line encounter
and referral information provides more efficient medical cost management for
managed care organizations. In addition, Payors are able to more easily detect
fraud and screen for unusual utilization trends. Errors in transcriptions by
Payor examiners are virtually eliminated. From the health care providers'
standpoint, information pertaining to authorization and reimbursement can be
more easily accessed and transmitted. By processing claims electronically,
providers also reduce overhead costs and staff time and improve accounts
receivable management.
The recent growth of managed care and governmental health care cost
containment efforts have increased the use of real time transaction processing
by hospitals and physicians. Certain state Medicaid programs permit providers to
electronically verify Medicaid eligibility on a real-time basis, and certain
managed care companies have encouraged their provider networks to utilize
real-time EDI for authorizations, encounter reports and referrals. EDSS believes
that there are significant opportunities for further expansion of EDI
transactions to the health care market, for claims processing, as performed
currently, for managed care client identification, for clinical and for other
purposes.
-- BUSINESS STRATEGY
EDSS's strategy is to grow as a provider of EDI services in the healthcare
market by expanding the number of markets it serves and broadening the EDI
services provided. The key elements of this strategy include:
- CONTINUE TO DEVELOP MARKETING AT THE PROVIDER LEVEL. EDSS intends to
expand business through aggressive marketing at the provider level with
its user friendly HECET Systems-Registered Trademark-. By installing its
own software product, HECET Systems-Registered Trademark-, EDSS maintains
a competitive advantage via direct relationships with each individual
physician or other health service provider's office. The vast majority of
present market connectivity emanates from systems vendors that forward the
transactions to a clearinghouse. The direct site connectivity created by
HECET Systems-Registered Trademark- affords EDSS a quick and easy way to
add EDI functionality to its client's offices while also providing
technical interfaces to its installed system environment. HECET
Systems-Registered Trademark- provides an installed proprietary software
presence for EDSS, thereby reducing the likelihood that its services will
be replaced with a competing product or service. EDSS provides flexible
formatting and mapping capabilities matching current hardware and software
used by or available to providers. With a broader base of providers, EDSS
expects to expand its network of Payers serviced.
- EXPAND INTO ADDITIONAL MARKETS. In pursuit of greater market share, EDSS
plans to expand beyond its current operations in Colorado, Florida, Texas,
and Illinois by opening offices in the tri-state area of New York/New
Jersey/Connecticut and other densely populated areas throughout the
country. In addition, EDSS will pursue an aggressive program to capture
high transaction volume systems vendors, billing services and the new
breed of internet claims aggregators. Both the current claims mining and
after-market sales activities will also be expanded to maximize revenues,
from each installed site.
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- PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. EDSS will seek acquisitions
of or alliances with other EDI businesses in order to achieve greater
economies of scale and to remain a cost effective provider of transaction
processing services. EDSS will target for acquisition or alliances
companies with profitable transaction volumes and revenue producing
technologies.
- INCREASE THE SERVICES PROVIDED ELECTRONICALLY TO HEALTH CARE INDUSTRY
PARTICIPANTS. The Company believes that much of the information that flows
from and among each of the various participants in the health care market
can be transmitted electronically with greater efficiency and cost
effectiveness. EDSS plans to expand its services to include more
adjudication capabilities and eventually eligibility and benefits
verification, referrals, authorizations, enrollment capabilities,
electronic remittance advice and electronic funds transfer, in addition to
existing eligibility and referral capabilities Expanded real-time capacity
will be necessary in order to report on the status of claims, gather and
link clinical data with claims processing, and provide comparative data
for providers who wish to subscribe to these optional services.
-- COMPANY SERVICES
EDSS' EDI services for third-party Payors, providers and billing services
include: electronic submission of claims, encounters, patient eligibility,
referrals and authorizations, claims status inquiry and remittance advice, and
customized reporting capabilities.
TRANSACTION PROCESSING. EDSS is a substantial processor of commercial
third-party Payor claims and plans to enhance its electronic network by
increasing connections with health care providers and Payors across the United
States. Network transactions are predominantly used to process reimbursement
claims in traditional fee-for-service commercial or government Payor systems and
to process encounter data in capitated environments. To submit claims, providers
collect data throughout the day using software provided by EDSS and then
electronically forward these claims in bulk to EDSS. EDSS electronically
collects and verifies receipt of the claims, performs Payor specific edits and
reformatting required to conform to a particular Payor's specifications,
aggregates daily transactions by Payor and transmits claims to Payors based upon
each Payor's chosen communications protocols. EDSS processed an aggregate of
approximately 8 million commercial third-party Payor claims in the fiscal year
ended September 30, 1997. EDSS' transaction network is connected with 540 of the
approximately 1,500 commercial third-party Payors, including all of the top 20
commercial Payors (based upon the number of members covered by such third-party
Payors).
EDI INTERFACES. EDSS has developed a range of hardware and software
interfaces to facilitate the adoption of EDI by providers and Payors.
HECET SYSTEMS.-REGISTERED TRADEMARK- HECET Systems-Registered Trademark-, a
proprietary PC-based software product, was developed by EDSS in 1993 and is
designed with open Application Program Interfaces ("APIs"). The APIs are
established at the operating system level and enable EDSS software to run on a
wide variety of operating systems including DOS, UNIX and Windows. HECET
Systems-Registered Trademark- functions as stand alone edit, formatting and
communications software for providers and Payors. The stand alone version of
HECET Systems-Registered Trademark- is offered directly to providers for a
nominal price.
PAYOR GATEWAY. EDSS has recently developed software to enable Payor
organizations to participate in EDI without requiring the Payor to develop
interface technology. EDSS' "Payor Gateway" software is designed to facilitate
the movement of transactions to and from the Payors' software. The Payor Gateway
manages telecommunications access, security and the retrieval of data and allows
the Payor to participate in EDI with EDSS assuming the responsibility for
interfacing the Payor Gateway software to the Payor's system.
CUSTOMER SERVICE. As an adjunct to its transaction processing services,
EDSS maintains customer service facilities with help desks for real-time
customer inquiries. Client support employs a modern call
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tracking and response system which is directly connected to the processing
center. Customer support services, available via telephone, are frequently
included in the contract price for transaction processing services, but may also
be billed separately, depending upon the specific contract terms. EDSS also
offers other services, such as on-site product training and installation.
-- SALES AND MARKETING
EDSS develops and maintains Payor, provider and vendor relationships through
its sales and marketing personnel located in five geographic regions. EDSS'
primary sales and marketing strategy focuses on selling its services to
organizations that have relationships with or access to a large number of
providers. EDSS' services are also sold directly to providers.
To market its claims processing services, EDSS develops relationships with
third-party Payors and large submitters of claims. In addition, EDSS works
closely with practice management system vendors to provide an integrated
solution to providers. Real-time managed care EDI services are offered to
providers either directly by EDSS' sales force or indirectly through commercial
managed care organizations.
-- CUSTOMERS
The Company's principal customers consist of health care providers, such as
physicians, hospitals, clinics and billing services, and third-party Payors,
such as indemnity insurers, managed care organizations and state and federal
governmental agencies. No customer accounted for 10% or more of the Company's
revenues during fiscal 1997 or 1996.
EDSS typically provides real-time services to customers under contracts that
are not exclusive and generally do not guarantee a specific transaction volume
or revenue stream. The pricing of EDSS' services is set under contracts
typically having terms of one to three years, subject to a variety of early
cancellation arrangements.
EDSS' transactions include contracts with both Payors and claim submitters,
including providers, practice management system vendors, clearinghouses, billing
services and others. Submitter contracts with EDSS often contain exclusivity
provisions whereby the submitter agrees to process the claim through EDSS if
EDSS has network access to the Payor.
-- OPERATIONS
EDSS delivers its real-time services through an integrated electronic
transaction processing system, which includes EDSS-designed software, host
computer hardware, network management, switching services and the ability to
interact with the customers' personal computers and a variety of
point-of-service devices, most of which were originally designed by EDSS.
EDSS' real-time host computer system consists of advanced computer networks
designed and configured to operate 24 hours a day, seven days a week. These
networks are configured to expand to meet increased transaction volume. The
networks are designed and manufactured to accommodate a fault-tolerant, nonstop
environment by maintaining on-line standby computers. The data center is further
protected by uninterruptible power supply systems. The software and related data
files are backed up nightly and stored off-site.
EDSS' communications network consists of dedicated circuits, T-l facilities
and dial modem ports, which facilitate electronic real-time communication among
Payors, providers and other users of time-sensitive health care information.
This communications network is designed to provide a low cost, multipath host
access from a computer modem or point of service device with minimal delays and
a high degree of accuracy and integrity. EDSS uses a number of different
nationwide public communications networks to provide access to substantially all
potential domestic customers.
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-- PROPRIETARY RIGHTS
EDSS owns certain of the software and systems designs that it uses and has a
limited, perpetual, nonexclusive, royalty-free license to use other software and
systems designs, such as the point-of-service device designs. The Company also
licenses certain other software from third parties.
EDSS' success is dependent in part upon electronic transaction processing
technology developed by EDSS. A combination of trade secret, copyright,
trademark and contract protection is used to establish and protect that
technology. There can be no assurance these legal protections and the
precautions taken by EDSS will be adequate to prevent misappropriation of
technology used by EDSS. In addition, the legal protections do not prevent
independent third-party development of competitive technology.
-- COMPETITION
EDSS faces potential competition in the healthcare EDI market not only from
other companies that are similarly specialized, but also from companies involved
in other, more highly developed sectors of the electronic transaction processing
market. Such companies could enter into, or focus more attention on, the
healthcare transaction processing market as it develops. In addition, EDSS faces
competition by selected providers bypassing EDSS' electronic network and going
directly to the Payor. Many of EDSS' existing and potential competitors have
greater financial, marketing and technological resources. EDSS' principal
competitors include Envoy/NEIC, QuadraMed, HBO&Co, EDI USA and National Data
Corp. There is no assurance that EDSS can continue to compete successfully with
its existing and potential competitors in the health care EDI market.
Factors influencing competition in the health care market include (i)
compatibility with the provider's software and inclusion in practice management
products, (ii) relationships with third-party Payors and managed care
organizations and (iii) price and quality of service.
-- GOVERNMENT REGULATION AND HEALTH CARE REFORM
The United States Food and Drug Administration (the "FDA") is responsible
for assuring the safety and effectiveness of medical devices under the Federal
Food, Drug and Cosmetic Act. Computer products are subject to regulation when
they are used or are intended to be used in the diagnosis of disease or other
conditions, or in the cure, mitigation, treatment or prevention of disease, or
are intended to affect the structure or function of the body. The FDA could
determine in the future that any predictive aspects of EDSS' products make them
clinical decision tools subject to FDA regulation. Compliance with these
regulations could be burdensome, time consuming and expensive. EDSS also could
become subject to future legislation and regulations concerning the development
and marketing of health care software systems. These could increase the cost and
time necessary to market new products and could affect EDSS in other respects
not presently foreseeable. EDSS cannot predict the effect of possible future
legislation and regulation.
The confidentiality of patient records and the circumstances under which
such records may be released for inclusion in EDSS' databases are subject to
substantial regulation by state governments. These state laws and regulations
govern both the disclosure and the use of confidential patient medical record
information. Although compliance with these laws and regulations is at present
principally the responsibility of the hospital, physician or other health care
provider, regulations governing patient confidentiality rights are evolving
rapidly. Additional legislation governing the dissemination of medical record
information has been proposed at both the state and federal level. This
legislation may require holders of such information to implement security
measures that may require substantial expenditures by EDSS. There can be no
assurance that changes to state or federal laws will not materially restrict the
ability of health care providers to submit information from patient records
using EDSS' products.
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The health care industry is highly regulated and subject to changing
political, economic and regulatory influences that may affect the procurement
practices and operation of health care organizations. EDSS' products are
designed to function within the structure of the health care financing and
reimbursement system currently being used in the United States. Changes in the
current health care financing and reimbursement systems could result in the need
for unplanned product enhancements, delays or cancellations of product orders or
shipments, or the revocation of endorsement of EDSS' products by hospital
associations or other customers. Any of such occurrences could have a material
adverse effect on EDSS' business, financial condition and results of operations.
During the past several years, the United States health care industry has been
subject to an increase in governmental regulation of, among other things,
reimbursement rates. Certain proposals to reform the U.S. health care system are
periodically considered by Congress and certain state legislatures. These
programs may contain proposals to increase governmental involvement in health
care and otherwise change the operating environment for EDSS' customers and
potential customers. Health care organizations may react to these proposals and
the uncertainty surrounding such proposals by curtailing or deferring
investments, including those for EDSS' products. On the other hand, changes in
the regulatory environment have increased and may continue to increase the needs
of health care organizations for cost-effective information management and
thereby enhance the marketability of EDSS' products and services. EDSS cannot
predict with any certainty what impact, if any, such proposals or health care
reforms might have on EDSS' business, results of operations and financial
condition. In addition, many health care providers are consolidating to create
integrated health care delivery systems with greater regional market power. As a
result, these emerging systems could have greater bargaining power, which may
lead to price erosion of EDSS' products. The failure of EDSS to maintain
adequate price levels would have a material adverse effect on EDSS' business,
financial condition and results of operations. Other legislative or
market-driven reforms could have unpredictable effects on EDSS' business,
financial condition and results of operations.
-- FACILITIES
EDSS' executive and corporate offices are located in Colorado Springs,
Colorado in approximately 6,500 square feet of office space under a lease that
expires April 30, 1998. EDSS also maintains offices at Ft. Lauderdale, FL,
Orlando, FL, Tampa, FL, and Dallas, TX. EDSS believes that its facilities are
adequate for its current operations.
-- EMPLOYEES
As of January 15, 1998 EDSS had approximately 44 employees, including
approximately 29 salaried and 15 hourly employees (including temporary
employees). None of these employees is represented by a union or other
collective bargaining group. EDSS believes its relationship with the employees
is good.
-- LITIGATION
EDSS is not currently party to any litigation.
WIRELESS CABLE BUSINESS
-- GENERAL
Wireless cable television is provided to subscribers by transmitting
microwave frequencies over the air on a direct "line-of-sight" from the
transmission facility to a small receiving antenna at each subscriber's
location. Local off-air VHF/UHF broadcasts can be provided to a subscriber by
retransmission of the broadcast over a wireless frequency or by installation of
an off-air antenna in conjunction with the wireless antenna located on the
subscriber's home or building.
Wireless cable technology eliminates the need for large networks of cable
and amplifiers utilized by hard-wire cable television operators. To the
subscriber a wireless cable system generally operates in the
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same fashion as a hard-wire cable system. Like the hard-wire cable systems,
wireless cable systems, in exchange for monthly fees, typically offer local
off-air broadcast channels, as well as programming such as HBO, ESPN, CNN, USA,
WGN, WTBS, A&E, Nickelodeon, Discovery, Disney, MTV and other programming
services. A wireless cable system utilizes microwave frequencies licensed by the
FCC to transmit multiple channels of video programming over the airwaves to
small receiving antennas mounted at the subscribers' locations. Additional
pay-per-view programming, such as recent movie releases and special sports
events, is generally available for a supplemental charge.
The Company does not currently own any wireless cable systems or channels,
and, while the Company continues to seek and review opportunities in this area,
it has no specific agreements or understandings to acquire any such assets.
-- SALE OF SOUTH FLORIDA TELEVISION
In June 27, 1997, the Company completed the sale of its subsidiary, South
Florida Television Inc., which held 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.
-- STRATEGIC ALLIANCES AND INVESTMENTS
SPIKE TECHNOLOGIES. On June 20, 1996, the Company entered into an agreement
with Spike Technologies, Inc. ("Spike") for testing of Spike's bidirectional
multipoint microwave antenna technology. The Company expects to invest up to
$500,000 in such testing but has not yet done so. The Company will have the
exclusive right to use Spike's technology in Florida, subject to certain
royalties to Spike. The Company will have the exclusive right to market Spike's
technology to wireless cable operators, including telephone companies, with a
royalty of 5% payable to the Company. In addition, the Company shall receive a
warrant to purchase 5% of Spike's common stock.
DEVELOPING TECHNOLOGY. The Company is reviewing on a preliminary basis
investments in or acquisitions of telecommunications technology companies
OTHER OPERATIONS
LANDTEL COMMUNICATIONS, INC. In December 1997 the Company acquired a 24%
interest in Landtel Communications, Inc. ("Landtel"), a company organized to
purchase a U.K. telecommunications company, for $240,000 plus a commitment to
provide up to $9,600,000 in the event Landtel completes the proposed
acquisition. There can be no assurance that Landtel will complete the proposed
acquisition or otherwise carry on any business.
ANAGRAM INTERNATIONAL COMMUNICATIONS LTD. In September 1995 the Company
acquired shares of Class A Convertible Preferred Stock of Anagram International
Communications Ltd. ("Anagram"), convertible into 70% of all issued and
outstanding shares of Common Stock on a fully diluted basis for $250,000.
Anagram was organized in Delaware on August 22, 1995 to engage in, among other
things, the business of acquiring European television programming for U.S.
distribution via wireless cable transmission. The Company has invested an
additional $322,173 in Anagram. The majority of Anagram's programming consists
of educational series relating to science and technology, natural history,
history and world cultures and "how to" programs. The Company believes that
Anagram will provide valuable programming for educational television, including
ITFS wireless cable channel owners.
TLC PRODUCTIONS. On August 22, 1995, the Company completed the acquisition
of all of the outstanding capital stock of TLC Productions, Inc. ("TLC"), from
its sole shareholder. TLC is a full-service teleport and uplink facility located
in North Miami, Florida, that provides satellite uplink services to clients who
then are able to rebroadcast signals to video programming distributors.
Additionally, TLC's
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fully-equipped television studio is used for live teleconferencing and special
interviews for such networks as CNN and ESPN.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K, including,
without limitation, statements containing the words "believes," "anticipates,"
"expects" and words of similar import, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
the limited nature of the Company's operations and its history of losses; the
uncertain acceptance of EDI; competition; the risk of the Company's failure to
acquire additional businesses; existing government regulations and changes in,
or the failure to comply with, government regulations; the ability of the
Company to sustain, manage or forecast its growth; dependence on significant
suppliers and marketers and the potential loss thereof; the ability to attract
and retain qualified personnel; retention of earnings; and other factors
referenced in this Annual Report on Form 10-K. Certain of these factors are
discussed in more detail elsewhere in this Annual Report on Form 10-K,
including, without limitation, under the captions "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" Given these uncertainties, undue reliance should not
be placed on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained or incorporated by
reference herein to reflect future events or developments.
ITEM 2. PROPERTIES
The Company generally leases the real estate where its business, offices and
wireless cable transmitters are located. The Company leases space for its
executive offices in Palm Beach, Florida at $680 a month pursuant to a lease
terminating May 31, 1998. In June 1994, a subsidiary of the Company entered into
an 8-year operating lease of office space for its offices in New York. The
Company and certain subsidiaries lease office space in Rantoul, Illinois from a
company which is owned by the Chairman of the Board of the Company, at an
aggregate rental of $2,050 per month. The lease agreement is on a month-to-month
basis based on the needs of the Company. The Company's subsidiary, EDSS, leases
approximately 6,500 square feet of office space under a lease that expires April
30, 1998. EDSS also maintains offices at Ft. Lauderdale, FL, Orlando, FL, Tampa,
FL, and Dallas, TX. The Company's subsidiary, TLC, leases approximately 6,500
square feet of office space under a lease that expires April 30, 1998. The
Company's subsidiary, Anagram, leases offices in News York, New York, expiring
October 1, 1998. The total lease payments for the year ended October 31, 1997
were approximately $243,000, as compared to approximately $200,000 for the year
ended October 31, 1996. The Company believes its properties are adequate for its
current needs.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value, is traded on the Nasdaq Small
Cap Market ("Nasdaq") under the symbol "NWIR". The following table sets forth
the range of high and low bid information for the Common Stock for each full
fiscal quarterly period for the last two years as reported by Nasdaq.
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1996 1997
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QUARTER HIGH LOW HIGH LOW
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First........................................................ 16- 1/4 12- 3/4 16- 1/4 12
Second....................................................... 18 13- 1/4 16- 1/4 11- 1/4
Third........................................................ 19- 1/2 13- 1/4 17- 3/8 14- 1/8
Fourth....................................................... 16- 1/4 11- 1/2 15- 1/8 13- 1/4
</TABLE>
As of January 26, 1998, there were approximately 1,000 beneficial holders of
Common Stock.
The Company paid a cash dividend of $1.30 on the Common Stock in fiscal
1997; however, the Company does not anticipate paying cash dividends on the
Common Stock in the foreseeable future. The payment of cash dividends on shares
of Common Stock will be within the discretion of the Company's Board of
Directors and will depend upon the earnings of the Company, the Company's
capital requirements and other financial factors which are considered relevant
by the Company's Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data for the Company presented below under
the captions "Operating Data" and "Balance Sheet Data" as of October 31, 1993,
1994, 1995, 1996 and 1997 for the period August 31, 1993 (date of inception) to
October 31, 1993, and for the years ended October 31, 1994, 1995, 1996 and 1997
are derived from the Company's consolidated financial statements. The selected
financial data should be read in conjunction with "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
11
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 31, 1993
(DATE OF
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED INCEPTION)
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER31, TO OCTOBER 31,
1997 1996 1995 1994 1993(1)
------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenue........................ $ 4,717,681 $ 2,317,734 $ 2,100,289 $ 605,035 $ --
Expenses....................... 6,055,033 3,334,558 2,740,370 1,055,679 153,666
Gain on Sale of SFTV(3)........ 44,196,516 -- -- -- --
Net Income (Loss).............. 25,969,164 (1,016,824) (640,081) (450,644) (153,666)
Net Income (Loss) per common
share(2)..................... 7.96 (0.31) (0.20) (0.19) (0.12)
Weighted average number of
common shares outstanding
(2).......................... 3,259,923 3,253,000 3,222,863 2,407,794 1,258,760
Balance Sheet Data:
Cash and cash equivalents...... $ 21,256,356 $ 4,788,765 $ 4,888,240 $ 911,266 $ 464,530
Marketable securities.......... 49,598,687 0 11,964,634 19,782,512 0
Total assets................... 79,085,656 21,583,552 22,981,237 22,245,332 522,353
Total liabilities.............. 36,016,130 1,391,064 1,771,925 395,939 177,989
Total stockholders' equity..... 43,069,526 20,192,488 21,209,312 21,849,393 344,364
</TABLE>
- ------------------------
(1) The Company was organized on August 31, 1993 to act as a holding and
strategic resource company for wireless cable systems.
(2) See Note 2 to Consolidated Financial Statements
(3) See Note 3 to Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
National Wireless Holdings Inc. ("NWH" or the "Company") is a holding and
strategic resource company for telecommunications and other businesses. The
Company currently operates an electronic data interchange company, providing
links between healthcare providers and third party payors. In addition, the
Company operates a satellite programming uplink facility, an educational
programming distribution company and other early stage businesses. The Company
also seeks to support, finance and acquire new businesses and technologies in
the telecommunications and other industries. The Company recently acquired an
interest in a company organized to purchase a British telecommunications
company, and may acquire or invest in other businesses. In June 1997, the
Company sold its wireless cable assets in Miami, Florida in exchange for common
stock of BellSouth Corporation.
National Wireless Holdings Inc. (the "Company") was incorporated in Delaware
on August 31, 1993. The Company's fiscal year ends on October 31.
Certain statements contained in this Annual Report on Form 10-K constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking
12
<PAGE>
statements. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements. See
"Business--Special Note Regarding Forward-Looking Statements" and the Financial
Statements.
RESULTS OF OPERATIONS
1997 AS COMPARED TO 1996
Gain on Sale of SFTV:
During 1997, the Company realized a pre-tax gain of $44,196,516 from the
sale in a tax-free reorganization of the Company's wireless cable subsidiary
("SFTV") in Miami, Florida in exchange for $48,000,000 of BellSouth common
stock. The Company recorded $16,900,000 of deferred income taxes on such gain.
In addition, the Company had a net unrealized gain of $959,275 as of October 31,
1997 on its positions in BellSouth common stock.
Service Revenue:
Service revenue increased from $1,223,561 in 1996 to $3,308,080 in 1997 as a
result primarily of increased revenues of TLC in 1996 and the addition of
revenues from the acquisition of a controlling interest in EDSS in December
1996.
Interest and Dividend Income:
Interest income decreased from $1,094,173 in 1996 to $870,810 in 1997 as a
result of a reduction in funds invested in interest bearing instruments.
Dividend income increased from $0 in 1996 to $538,791 in 1997, reflecting net
dividends on the BellSouth common stock.
Cost of Services:
Cost of services increased from $799,045 in 1996 to $1,626,661 in 1997 as a
result of increased costs of operation of TLC and costs associated with the
operations of EDSS.
Wireless Market and Technology Development:
Market development expenses decreased from $798,870 in 1996 to $455,422 in
1997 as a result of lower activity in the development of the Miami market and
the sale of the related assets in June 1997. Technology development expenses
increased from $35,370 in 1996 to $100,000 in 1997.
Professional Fees:
Professional fees increased from $273,234 in 1996 to $473,430 in 1997 as a
result of increased activity relating to various transactions in 1997.
General and Administrative:
General and administrative expense increased from $790,511 in 1996 to
$2,459,347 in 1997 as the Company incurred additional costs in connection with
selling its wireless cable assets in the Miami market and increased costs
relating to the operations of EDSS.
Depreciation and Amortization:
Depreciation and amortization increased from $564,139 in 1996 to $832,413 in
1997 as a result of the effect during 1997 of the acquisition of EDSS and
increased amounts of equipment placed in service during 1996 at TLC.
Net Income (Loss):
As a result of each of the foregoing events, net income amounted to
$25,959,164 in 1997 as compared to a loss of ($1,016,824) in 1996.
13
<PAGE>
1996 AS COMPARED TO 1995:
Service Revenue:
Service revenue increased from $945,616 in 1995 to $1,223,561 in 1996 as a
result primarily of increased revenues of TLC in 1996.
Interest Income:
Interest income decreased from $1,154,673 in 1995 to $1,094,173 in 1996 as a
result of a reduction in funds invested in interest bearing instruments due to
investments in affiliates and subsidiaries and acquisitions of transmission
equipment.
Cost of Services:
Cost of services increased from $512,449 in 1995 to $799,045 in 1996 as a
result of increased costs of operation of TLC.
Wireless Market and Technology Development:
Market development expenses decreased from $835,560 in 1995 to $798,870 in
1996 as a result of lower activity in the development of the Miami market.
Technology development expenses decreased from $39,776 in 1995 to $35,370 in
1996 as a result of lower activity in technology development in 1996.
Professional Fees:
Professional fees decreased from $294,547 in 1995 to $273,234 in 1996 as a
result of less acquisition activity in 1996.
General and Administrative:
General and administrative expense increased from $641,737 in 1995 to
$790,511 in 1996 as the Company incurred additional costs while developing the
Miami market.
Depreciation and Amortization:
Depreciation and amortization increased from $363,232 in 1995 to $564,139 in
1996 as a result of certain equipment being placed in service during 1996 which
resulted in the commencement of depreciation and amortization.
Net Loss:
As a result of each of the foregoing events, net loss increased from
$640,081 in 1995 to $1,016,824 in 1996.
EDSS RESULTS OF OPERATIONS:
EDSS has incurred operating losses of $1,580,183 on a cumulative basis through
September 30, 1997, including $297,508 in 1997, $501,334 in 1996 and $771,545 in
1995. Such losses have been financed principally through a $400,000 loan from
EDSS' President and a $1,000,000 line of credit from the Company pursuant to a
loan agreement, which has been substantially utilized as of October 31, 1997.
Based upon existing contracts with physicians and providers and current expense
levels, management believes that EDSS would achieve positive cash flow from
operations for fiscal 1998 without the need to obtain additional financing.
EDSS, however, may seek to obtain additional financing, and the Company may
provide additional funds, to accelerate EDSS' strategic business plan.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its operations with the net proceeds from its initial
public offering in 1994 of 2,000,000 shares of Common Stock aggregating, after
payment of offering costs, approximately $22,000,000 and the recent sale of its
South Florida wireless cable subsidiary for $48 million in BellSouth common
stock. The proceeds have been used for, and are currently reserved to fund
acquisitions of, additional EDI (electronic data interchange) investments,
wireless telecommunications assets, media businesses, development of its other
businesses and development and acquisition of new technologies and businesses in
other areas. Such amount, with interest thereon, is expected to be sufficient to
implement this business plan through October 1999, or for a shorter period if
the Company determines to invest a substantial portion of its assets in major
acquisitions or equity investments. Following completion of the sale of its
South Florida wireless cable assets, the Company has allocated its capital to
development of its other businesses and to acquisitions.
As of October 31, 1997, the Company had approximately $54 million in cash
and net marketable BellSouth common stock as well as its interest in EDSS, its
full-service teleport and satellite uplink facility in Miami, its investment in
an educational video programming distributor, its investment in Landtel, and
investments in other early stage companies.
Prior to completion of the merger of its South Florida subsidiary with a
BellSouth subsidiary, the Company sold 300,000 shares of BellSouth common stock
short, and, prior to the end of fiscal 1997, sold 50,000 additional shares of
BellSouth common stock short, and received an aggregate of approximately
$15,920,000 in cash proceeds from such sales. Subsequent to year-end, the
Company settled 150,000 shares of its short position outstanding as of October
31, 1997. While the Company continues to review its position in BellSouth common
stock and from time to time since year-end has sold and purchased shares and
options on the position, it has not yet determined whether it will sell or hedge
its remaining BellSouth securities in the near future or how it will invest the
proceeds of any such sale.
In October 1997, the Company paid an aggregate of $4,267,900 as a $1.30 per
share dividend to common stockholders of record on September 12, 1997.
On September 10, 1997, the Company purchased for $750,000 from a stockholder
an additional 5% of the common stock of Electronic Data Submission Systems, Inc.
("EDSS"), which when combined with its existing share ownership represents 55%
of the outstanding common stock and control of EDSS. In addition, pursuant to a
loan agreement between EDSS and the Company, dated June 19, 1995, the Company
has outstanding loans to EDSS of $988,000, which have been eliminated from the
balance sheet in consolidation. The Company may invest additional amounts in
EDSS to finance its sales growth.
The Company may, when and if the opportunity arises, acquire or invest in
other businesses in the wireless telecommunications industry, media businesses
or in unrelated areas. If such an opportunity arises, the Company may use a
portion of its funds for that purpose. For instance, the Company has invested
$240,000 in Landtel, and may invest up to an additional $9,600,000 in Landtel to
fund a possible acquisition of a British telecommunications company. Other than
Landtel, the Company has no specific arrangements with respect to any such
acquisitions or investments at the present time and is not currently involved in
any negotiations with respect to any such acquisition. There can be no assurance
that any such acquisitions or investments will be made.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
Information with respect to this item is contained in the financial
statements appearing in Item 14 of this report. Such information is incorporated
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
15
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. The financial statements:
The consolidated financial statements included in this item are indexed
on page F-1. "Index to Financial Statements".
2. Financial Statement schedules:
None
3. Exhibit list.
The following exhibits were previously filed as indicated or are filed
herewith.
<TABLE>
<S> <C>
3.1(1) Certificate of Incorporation and By-laws of Registrant. See Exhibit 4-3-Exhibit A.
3.1(a)(12) Amendment, dated June 29, 1995, to the Company's By-Laws.
3.1(a)(18) Amendment to Certificate of Incorporation, dated June 10, 1997.
3.1(b)(18) Amendment to By Laws, dated June 10, 1997.
4(15) Rights Agreement, dated as of December 12, 1996, between National Wireless
Holdings Inc. and Continental Stock Transfer and Trust Company, as Rights Agent,
which includes as Exhibit A the Form of Certificate of Designations designating
the relative rights, preferences and limitations of the Series A Junior Preferred
Stock, as Exhibit B the Form of Right Certificate, and as Exhibit C the Summary of
Rights to Purchase Preferred Shares.
4.1(4) Specimen of Common Stock Certificate.
4.2(1) Form of Representative Warrant Agreement with form of Representative's Warrant
attached.
4.3(15) Rights Agreement, dated as of December 12, 1996, between National Wireless
Holdings Inc. and Continental Stock Transfer and Trust Company, as Rights Agent,
including:
-- Exhibit A -- Form of Certificate of Designations designating the relative
rights, preferences and limitations of the Series A Junior Preferred Stock of
National Wireless Holdings Inc.,
-- Exhibit B -- Form of Right Certificate, and
-- Exhibit C -- Summary of Rights to Purchase Preferred Shares.
10.1(1) Terrence S. Cassidy Employment Agreement, dated September 22, 1993.
10.2(1) Michael J. Specchio Consulting Agreement, dated September 22, 1993.
10.3(1) Paul Sinderbrand Consulting and Employment Agreement, dated September 22, 1993.
10.4(1) Registrant's 1993 Stock Option Plan.
10.6(1) Strategic Alliance Agreement with Preferred Entertainment, Inc., dated November
11, 1993.
10.7(1) Form of Stock Option Agreement for Directors.
10.18 Withdrawn.
10.19 Withdrawn.
10.20 Withdrawn.
10.21 Withdrawn.
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
10.22 Withdrawn.
10.25 Withdrawn.
10.26 Withdrawn.
10.27 Withdrawn.
10.28(9) Stock Purchase Agreement dated April 6, 1995 by and among the Registrant and E.
Vernon Oliver.
10.29(9) $1,100,000 Promissory Note dated April 21, 1995 made by Registrant in favor of E.
Vernon Oliver.
10.30(9) Security Agreement dated April, 1995 by and among the Registrant and TLC
Productions, Inc.
10.31 Withdrawn.
10.32 Withdrawn.
10.33A(10) Commitment Letter, Note, Security Agreement and guaranty relating to the Company's
loan to EDSS.
10.33(11) Loan documentation relating to the EDSS credit facility, all dated June 9, 1995.
(a) Loan Agreement.
(b) Borrower Security Agreement.
(c) Form of Note.
(d) Stock Option Agreement with Joseph Truscelli.
(e) Common Stock Purchase Warrant.
10.34(13) Documentation relating to Acquisition of Anagram International Communications Ltd.
("Anagram").
(a) Certificate of Incorporation of Anagram.
(b) By-laws of Anagram.
(c) Subscription Agreement re: Class A Convertible Preferred Stock.
(d) Employment Agreement with Andrea Traubner.
(e) Shareholders Agreement dated October 1, 1995 among the Company, Leonard
Giarraputo, Andrea Traubner and Anagram International Communications Ltd.
10.35(13) Agreement dated November 8, 1995 between Registrant and Wireless Broadcasting
Systems of America, Inc.
10.36(14) Agreement with Spike Technologies.
10.37(a)(15) Severance Benefit Agreement, dated December 12, 1996, with Terrence S. Cassidy.
10.37(b)(15) Severance Benefit Agreement, dated December 12, 1996, with Michael J. Specchio.
10.38(16) Press Release, dated February 27, 1997.
10.38(17) Consulting Agreement, dated February 28, 1997, with Michael J. Specchio, Inc.
10.39(18) Consulting Agreement, dated April 1, 1997, between the registrant and BellSouth
Wireless Cable, Inc.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
10.40(19) Form of Director Indemnification Agreement.
10.41(a)(19) Secured Term Note.
10.41(b)(19) Pledge Agreement, dated July 9, 1997.
10.42(19) 1997 Equity Incentive Plan.
10.43(19) Restated Stockholders Agreement, dated September 10, 1997, between the Company,
Joseph D. Truscelli and Electronic Data Submission Systems, Inc.
10.44(20) Landtel Communications, Inc. Subscription Agreement, dated December 9, 1997.
11-1(20) Computation of Earnings per Share.
21(20) Subsidiaries of Registrant.
(b) Reports on Form 8-K: Not applicable.
</TABLE>
A Definitive Proxy Statement for the Annual Meeting of Stockholders to be
held April 17, 1998 will be filed by amendment.
- ------------------------
(1) --Filed with the initial filing of the Registrant's Registration Statement
on Form S-1, File No. 33-7914.
(2) --Filed with Amendment No. 1 to the Registrant's Registration Statement.
(3) --Filed with Amendment No. 2 to the Registrant's Registration Statement.
(4) --Filed with Amendment No. 3 to the Registrant's Registration Statement.
(5) --Filed with Form 10-Q for the Quarter ended January 31, 1994.
(6) --Filed with Form 10-Q for the Quarter ended April 30, 1994.
(7) --Filed with Form 10-Q for the Quarter ended July 31, 1994.
(8) --Filed with Form 10-K for the Fiscal Year ended October 31, 1994.
(9) --Filed with Form 8-K dated April 13, 1995.
(1)(0) --Filed with Form 10-Q for the Quarter ended January 31, 1995 as Exhibit
10-28.
(1)(1) --Filed with Form 10-Q for the Quarter ended April 30, 1995.
(1)(2) --Filed with Form 10-Q for the Quarter ended July 31, 1995.
(1)(3) --Filed with Form 10-K for the Fiscal Year ended October 31, 1995.
(1)(4) --Filed with Form 10-Q for the Quarter ended July 31, 1996.
(1)(5) --Filed with Form 8-K dated December 12, 1996.
(1)(6) --Filed with Form 8-K dated February 26, 1997.
(1)(7) --Filed with Form 10-Q for the Quarter ended January 31, 1997.
(1)(8) --Filed with Form 10-Q for the Quarter ended April 30, 1997.
(1)(9) --Filed with Form 10-Q for the Quarter ended July 31, 1997.
(2)(0) --Filed herewith
18
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets as of October 31, 1997 and 1996................................................ F-3
Consolidated Statements of Operations for the years ended October 31, 1997, 1996 and 1995.................. F-4
Consolidated Statements of Stockholders' Equity for the years ended October 31, 1997, 1996 and 1995........ F-5
Consolidated Statements of Cash Flows for the years ended October 31, 1997, 1996 and 1995.................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
National Wireless Holdings Inc.:
We have audited the accompanying consolidated balance sheets of NATIONAL
WIRELESS HOLDINGS INC. as of October 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three year period ended October 31, 1997. 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 auditing
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 consolidated financial position of National
Wireless Holdings Inc. as of October 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the years in the
three year period ended October 31, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
December 18, 1997
F-2
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents........................................................ $ 21,256,356 $ 4,788,765
Marketable securities............................................................ 49,598,687 --
Trade and other receivables...................................................... 893,498 119,707
Due from related parties......................................................... 1,178,093 73,000
Prepaid expenses and other current assets........................................ 52,447 47,777
------------- -------------
Total current assets......................................................... 72,979,081 15,029,249
Notes receivable from EDSS......................................................... -- 988,000
Wireless frequency license and acquisition costs, net of accumulated amortization
of $106,165 and $311,797 in 1997 and 1996, respectively.......................... 275,546 2,720,102
Transmission and related equipment, net of accumulated depreciation of $328,899 and
$226,577 in 1997 and 1996, respectively.......................................... 853,629 1,175,521
Leasehold improvements, office equipment and service vehicles, net of accumulated
depreciation of $434,372 and $282,813 in 1997 and 1996, respectively............. 364,113 394,088
Intangible assets, net of accumulated amortization of $419,086 and $102,251 in 1997
and 1996, respectively........................................................... 3,983,956 398,096
Investments and other assets....................................................... 629,331 878,496
------------- -------------
Total assets................................................................. $ 79,085,656 $ 21,583,552
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses............................................ $ 1,890,734 $ 715,448
Current maturities of long-term debt............................................. 241,673 443,369
Marketable securities--short sale................................................ 16,559,375 --
Deferred income taxes............................................................ 16,900,000 --
------------- -------------
Total current liabilities.................................................... 35,591,782 1,158,817
Note payable to related party...................................................... 400,000
Long-term debt..................................................................... 24,348 232,247
------------- -------------
Total liabilities............................................................ 36,016,130 1,391,064
------------- -------------
Commitments
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued or
outstanding -- --
Common stock, $.01 par value; 20,000,000 shares authorized; 3,283,000 and
3,253,000 shares issued and outstanding at October 31, 1997 and 1996,
respectively................................................................... 32,830 32,530
Additional paid-in capital......................................................... 22,647,372 22,421,173
Retained earnings (accumulated deficit)............................................ 19,430,049 (2,261,215)
Unrealized gain on marketable securities, net...................................... 959,275 --
------------- -------------
Total stockholders' equity................................................... 43,069,526 20,192,488
------------- -------------
Total liabilities and stockholders' equity................................... $ 79,085,656 $ 21,583,552
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Revenue:
Service revenue..................................................... $ 3,308,080 $ 1,223,561 $ 945,616
Interest income..................................................... 870,810 1,094,173 1,154,673
Dividend income..................................................... 538,791 -- --
------------- ------------- ------------
Total revenue................................................... 4,717,681 2,317,734 2,100,289
------------- ------------- ------------
Expenses:
Cost of services.................................................... 1,626,661 799,045 512,449
Wireless market and technology development.......................... 555,422 834,240 875,336
Professional fees................................................... 473,430 273,234 294,547
General and administrative.......................................... 2,459,347 790,511 641,737
Depreciation and amortization....................................... 832,413 564,139 363,232
Interest............................................................ 107,760 73,389 53,069
------------- ------------- ------------
Total expenses.................................................. 6,055,033 3,334,558 2,740,370
------------- ------------- ------------
Loss from operations.................................................. (1,337,352) (1,016,824) (640,081)
Gain on sale of SFTV.................................................. 44,196,516 -- --
------------- ------------- ------------
Income (loss) before provision for income taxes................. 42,859,164 (1,016,824) (640,081)
Provision for income taxes--deferred.................................. 16,900,000 -- --
------------- ------------- ------------
Net income (loss)............................................... $ 25,959,164 $ (1,016,824) $ (640,081)
------------- ------------- ------------
------------- ------------- ------------
Net income (loss) per common share.................................... $ 7.96 $ (0.31) $ (0.20)
------------- ------------- ------------
------------- ------------- ------------
Weighted average number of common shares outstanding.................. 3,259,923 3,253,000 3,222,863
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
SERIES A RETAINED GAIN ON
CONVERTIBLE ADDITIONAL EARNINGS MARKETABLE
PREFERRED COMMON PAID-IN (ACCUMULATED SECURITIES,
STOCK STOCK CAPITAL DEFICIT) NET TOTAL
----------- --------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 1, 1994............... $ 1,000 $ 31,530 $ 22,421,173 $ (604,310) -- $ 21,849,393
Conversion of preferred stock to 100,000
shares of common stock................ (1,000) 1,000 -- -- -- --
Net loss................................ -- -- -- (640,081) -- (640,081)
----------- --------- ------------- ------------- ----------- -------------
Balance, October 31, 1995........... -- 32,530 22,421,173 (1,244,391) -- 21,209,312
Net loss................................ -- -- -- (1,016,824) -- (1,016,824)
----------- --------- ------------- ------------- ----------- -------------
Balance, October 31, 1996........... -- 32,530 22,421,173 (2,261,215) -- 20,192,488
Options exercised to acquire 30,000
shares of common stock................ -- 300 226,199 -- -- 226,499
Dividends paid.......................... -- -- -- (4,267,900) -- (4,267,900)
Unrealized gain on marketable
securities, net....................... -- -- -- -- $ 959,275 959,275
Net income.............................. -- -- -- 25,959,164 -- 25,959,164
----------- --------- ------------- ------------- ----------- -------------
Balance, October 31, 1997........... $ -- $ 32,830 $ 22,647,372 $ 19,430,049 $ 959,275 $ 43,069,526
----------- --------- ------------- ------------- ----------- -------------
----------- --------- ------------- ------------- ----------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ 25,959,164 $ (1,016,824) $ (640,081)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization.................................. 832,413 564,139 363,232
Accretion of interest income................................... (306,100) -- --
Gain on sale of SFTV........................................... (44,196,516) -- --
Deferred income taxes.......................................... 16,900,000 -- --
Change in assets and liabilities:
Receivables.................................................... (574,656) 109,867 (111,998)
Prepaid expenses and other current assets...................... 4,749 36,279 (19,754)
Deposits and other assets...................................... 187,635 88,767 (63,174)
Accounts payable and accrued expenses.......................... (43,846) 65,374 (2,825)
-------------- -------------- ------------
Net cash used in operating activities........................ (1,237,157) (152,398) (474,600)
-------------- -------------- ------------
Cash flows from investing activities:
Wireless frequency license and acquisition costs................. (170,190) (364,625) (1,414,121)
Acquisition of transmission and related equipment................ (40,900) (294,889) (307,000)
Acquisition of leasehold improvements, office equipment and
service vehicles............................................... (183,261) (17,528) (204,651)
Purchases of U.S. treasury securities............................ (15,693,040) -- --
Proceeds from redemption of U.S. treasury securities............. 15,999,140 12,000,000 7,817,878
Proceeds of marketable securities--short sale.................... 15,919,961 -- --
Acquisition of non-cash assets of TLC............................ -- -- (330,201)
Increase in notes receivable from EDSS........................... -- (215,000) (773,000)
Investments...................................................... (277,173) (608,800) --
Acquisition of EDSS.............................................. (2,293,700) -- --
Advances to related party........................................ (1,105,093) -- (74,600)
-------------- -------------- ------------
Net cash provided by investing activities.................... 12,155,744 10,499,158 4,714,305
-------------- -------------- ------------
Cash flows from financing activities:
Dividends paid................................................... (4,267,900) -- --
Exercise of stock options........................................ 226,499 -- --
Principal payments of long-term debt............................. (509,595) (446,235) (262,731)
Proceeds of long term debt....................................... 100,000 -- --
-------------- -------------- ------------
Net cash used in financing activities........................ (4,450,996) (446,235) (262,731)
-------------- -------------- ------------
Net increase in cash and cash equivalents.................... 6,467,591 9,900,525 3,976,974
Cash and cash equivalents, beginning of year....................... 14,788,765 4,888,240 911,266
-------------- -------------- ------------
Cash and cash equivalents, end of year....................... $ 21,256,356 $ 14,788,765 $ 4,888,240
-------------- -------------- ------------
-------------- -------------- ------------
Supplemental disclosure of cash flow information:
Cash paid for interest........................................... $ 107,760 $ 73,389 $ 53,069
</TABLE>
Non-cash financing and investing activities:
In 1997, the Company sold South Florida Television Inc. for $48,000,000 in
BellSouth Common Stock.
In 1995, the Company acquired the common stock of TLC through the issuance
of a $1,100,000 note, $300,000 in cash and approximately $144,000 in capitalized
closing costs. Net assets of TLC acquired included cash of $113,520.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY OPERATIONS AND BASIS OF PRESENTATION:
National Wireless Holdings Inc. (the "Company"), a Delaware corporation
organized on August 31, 1993, is a holding and strategic resource company
generally for telecommunications and other businesses. The Company currently
operates an electronic data interchange company, providing links between
healthcare providers and third party payors. In addition, the Company operates a
satellite programming uplink facility, an educational programming distribution
company and other early stage businesses. The Company also seeks to support,
finance and acquire new businesses and technologies in the telecommunications
and other industries. The Company recently acquired an interest in a company
organized to purchase a British telecommunications company, and may acquire or
invest in other businesses. In June 1997, the Company sold its wireless cable
assets in Miami Florida in exchange for common stock of BellSouth Corporation
(see Note 3).
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH EQUIVALENTS:
The Company considers all highly liquid investments with maturities, when
purchased, of three months or less to be cash equivalents. Cash equivalents
consist primarily of investments in various money market funds.
MARKETABLE SECURITIES:
The Company's marketable securities consist of an investment in BellSouth
Corporation common stock. The Company's marketable equity securities have been
classified as available for sale. Available for sale securities are carried at
fair value, with unrealized gains and losses, net of tax effects, reported as a
separate component of stockholders' equity, until realized.
WIRELESS FREQUENCY LICENSE AND ACQUISITION COSTS:
Wireless frequency license and acquisition costs are capitalized and
amortized on the straight-line method over the life 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.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment is recorded at cost and depreciation expense is provided under the
straight-line method over the estimated useful lives of the related assets,
which range from 5 to 10 years; leasehold improvements are amortized over the
shorter of the life of the improvements or the related lease term.
INTANGIBLE ASSETS:
Intangible assets consist primarily of goodwill. Goodwill represents the
excess of the purchase price over the net assets of acquired companies and is
being amortized on the straight-line method over 10 to 15 years.
F-7
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH EQUIVALENTS: (CONTINUED)
LONG-LIVED ASSETS:
Based upon events or changes in circumstances, the Company assesses any
impairment in value of its long-lived assets, including intangible assets, by
making a comparison of the current and projected operating cash flows of each of
its assets over its remaining useful life, on an undiscounted basis, to the
carrying amount of the related assets. Such carrying amounts would be adjusted,
if necessary, to reflect any impairment in value.
INCOME TAXES:
The Company accounts for income taxes under the liability method of
accounting. Under the liability method, deferred taxes are determined based on
differences between the financial statement and tax bases of assets and
liabilities at enacted tax rates in effect in the year 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.
NET INCOME (LOSS) PER SHARE DATA:
Net income (loss) per share is computed based on net income (loss) for the
period divided by the weighted average number of common shares and common share
equivalents outstanding during the period.
ESTIMATES:
The presentation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
RECENTLY ISSUED PRONOUNCEMENTS:
The Company has adopted the disclosure only provisions of SFAS No. 123
"Accounting for Stock Based Compensation." The Company has considered the impact
of SFAS Nos. 128, 129, 130 and 131 will have on the Company's financial position
and results of operations when adopted and does not believe it to be material.
3. SALE OF SFTV:
On February 26, 1997, the Company and its wholly-owned subsidiary, South
Florida Television, Inc. ("SFTV") entered into an Agreement and Plan of
Reorganization, as amended, (the "Merger Agreement") which became effective on
June 27, 1997 with BellSouth Corporation ("BellSouth") and its wholly-owned
subsidiary, Bell South South Florida Merger Subsidiary, Inc. ("BellSouth Sub"),
pursuant to which BellSouth Sub merged into SFTV. SFTV became a wholly-owned
subsidiary of BellSouth and the Company received an aggregate of $48,000,000 in
BellSouth common stock (the "Merger") which resulted in a pre-tax gain of
approximately $44,200,000 The Merger has been treated as a tax-free
reorganization.
F-8
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SALE OF SFTV: (CONTINUED)
The BellSouth common stock is reflected as available for sale marketable
securities in the accompanying consolidated balance sheet as of October 31,
1997.
4. ACQUISITION OF EDSS:
In August 1996, the Company completed a partial exercise of its option to
acquire a 50% interest in Electronic Data Submission Systems, Inc. ("EDSS") by
purchasing 11% of EDSS voting common stock for $343,800 in cash. The investment
is carried at cost in the accompanying consolidated balance sheet as of October
31, 1996.
On December 13, 1996, the Company exercised a warrant and an option to
purchase additional shares of the common stock of EDSS, which when combined with
its existing share ownership represents 50% of the outstanding common stock and,
pursuant to the EDSS Shareholders Agreement, dated as of July 25, 1996, control
of EDSS. The aggregate purchase price for the EDSS shares was $1,887,500, of
which an aggregate of $887,500 was paid to EDSS and $1,000,000 was paid to the
principal stockholder of EDSS.
The acquisition has been accounted for under the purchase method of
accounting and the results of operations from the date of purchase have been
reflected in the consolidated statement of operations. On September 10, 1997,
the Company purchased an additional 5% of the common stock of EDSS from the
president of EDSS for $750,000. The purchase price has been allocated
principally to intangible assets (goodwill) and is being amortized over 15
years.
The consolidated statement of operations includes the following relating to
EDSS:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----- -----
<S> <C> <C> <C>
Service revenue....................................................................... $ 1,864,000 -- --
Cost of services...................................................................... $ 840,000 -- --
General and administration............................................................ $ 840,000 -- --
</TABLE>
The unaudited consolidated results of operations on a pro forma basis as
though the interest in EDSS had been acquired as of the beginning of fiscal year
1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Revenues.............................................................................. $ 4,973,000 $ 3,287,000
Net income (loss)..................................................................... 25,909,000 (1,614,000)
Net income (loss) per weighted average number of common shares outstanding............ 7.95 (0.50)
</TABLE>
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisition been consummated as of the above date, nor are they
necessarily indicative of future operating results.
EDSS has developed a comprehensive software system, referred to as HECET
SystemsTM, that enables physicians, clinics, managed care organizations, HMO's,
PPOs, major insurance companies including Blue Cross/Blue Shield, Medicare,
Medicaid, and commercial payors to communicate electronically the information
needed to process and pay insurance claims, check patient eligibility, make
claim status inquiries, and provide comprehensive reporting on those claims.
HECET SystemsTM enables health
F-9
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITION OF EDSS: (CONTINUED)
care professionals throughout the country to reduce the need for paper claims
processing while enhancing the payment process. The Company has entered has
entered into various service agreements with health care providers including
FHS, Inc., FHP Health Care, Metra Health Insurance Company, Mutual of Omaha and
Prudential Insurance Company.
EDSS has incurred operating losses of $1,580,183 on a cumulative basis
through September 30, 1997. Such losses have been financed principally through a
$400,000 loan from the Company's president and a $1,000,000 line of credit from
the Company. Based upon existing contracts with physicians and providers and
current expense levels, management of EDSS believes that it will achieve
positive cash flow from operations for fiscal 1998 without the need to obtain
additional financing. The Company, however, may seek to obtain additional
financing to accelerate its strategic business plan.
5. LEASE AND PURCHASE COMMITMENTS:
The Company leases administrative facilities and office equipment under
operating leases that expire between 1999 and 2002. Certain of the leases
contain escalation clauses providing for increased rentals based on operating
expenses or the consumer price index. Rent expense, net of rental income under
operating leases was approximately $243,000, $200,000 and $188,000 for the years
ended October 31, 1997, 1996 and 1995, respectively.
Future annual minimum rental payments as of October 31, 1997 under
noncancellable operating leases for the next five years and thereafter are:
<TABLE>
<S> <C>
1998.............................................................. $160,000
1999.............................................................. 105,000
2000.............................................................. 102,000
2001.............................................................. 102,000
2002.............................................................. 26,000
</TABLE>
6. CONSULTING AND EMPLOYMENT AGREEMENTS:
On April 1, 1997, the Company entered into a one year consulting agreement
with BellSouth to provide expertise in the wireless communications industry for
a monthly fee of $50,000.
On February 28, 1997, the Company entered into a consulting agreement with
Michael J. Specchio, Inc. ("MJS Inc.") which is owned and managed by Michael J.
Specchio, Chairman of the Company, and simultaneously terminated its employment
agreement with Mr. Specchio. Under the consulting agreement, MJS Inc. is
retained as a consultant and is obliged to provide the services of Mr. Specchio
on substantially a full-time basis for a term ending September 2001 for annual
compensation of $180,000, on substantially the same terms as Mr. Specchio was
previously employed under the employment agreement. Under the consulting
agreement, MJS Inc. also has the same severance benefits as previously provided
to Mr. Specchio.
The Company has entered into employment agreements, as amended in December
1996, with other executive officers and directors which expire between 2000 and
2001, aggregating approximately $262,000 annually.
F-10
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. CONSULTING AND EMPLOYMENT AGREEMENTS: (CONTINUED)
During the years ended October 31, 1997, 1996 and 1995, salaries and
consulting fees of approximately $1,087,000, $629,000 and $629,000,
respectively, were incurred under these contracts.
EDSS has entered into an employment agreement with the president of EDSS for
a period of five years with an initial annual base salary of $180,000 for years
one and two and increasing to $220,000 in years three through five.
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Long-term debt comprises:
8% note payable due in monthly principal and interest installments of $34,470, which
matures on April 21, 1998............................................................. $ 202,078 $ 582,851
Various loans bearing interest at rates ranging from 7.95% to 14% with maturities in
1998 and 1999......................................................................... 30,597 92,765
Obligations under capital leases........................................................ 33,346
---------- ----------
266,021 675,616
Less, current maturities.............................................................. 241,673 443,369
---------- ----------
$ 24,348 $ 232,247
---------- ----------
---------- ----------
</TABLE>
8. INCOME TAXES:
As of October 31, 1997, the deferred income tax liability relates to the
gain on sale of SFTV. As of October 31, 1996, deferred tax assets, principally
$1,800,000 of net operating loss carryforwards, were offset by a 100% valuation
allowance. During 1997 these NOL's were either utilized to reduce taxable income
or were transferred to BellSouth as part of the sale of SFTV.
The difference between the actual provision for income taxes and the
provision for income taxes computed by applying the statutory federal rate to
income before provision for income taxes is attributable to the following:
<TABLE>
<S> <C>
Provision at statutory rate.................................... $15,022,000
State, net of federal benefit.................................. 1,534,000
Other.......................................................... 344,000
----------
$16,900,000
----------
----------
</TABLE>
9. CAPITAL STOCK:
In connection with the its initial public offering in March, 1994, the
Company issued and sold to the underwriter warrants for five years to purchase
200,000 shares of Common Stock at a price of $.001 per warrant (the "Warrants").
The Warrants are exercisable at any time during a period of four years
commencing at the beginning of the second year after their issuance at a price
of $20.625 (165% of the initial public offering price).
The Company is authorized to issue 1,000,000 shares of Serial Preferred
Stock, par value $.01 per share with dividend and liquidation preferences over
the Common Stock. The Company issued 100,000
F-11
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. CAPITAL STOCK: (CONTINUED)
shares of the Serial Preferred Stock, designated as Series A Convertible
Preferred Stock (the "Series A Preferred"), in a private placement on October
21, 1993. Each share of Series A Preferred was convertible, at the option of the
holder, into one share of Common Stock, subject to certain anti-dilution
provisions. On April 20, 1995, all the outstanding Series A Preferred were
converted to Common Stock.
The Company granted to a third party a right, which expires on March 17,
1999, to purchase 300,000 shares of Common Stock at $15 per share (120% of the
Company's initial public offering price). PEI may exercise its right to purchase
the shares of Common Stock for cash or to receive a reduced number of shares,
without payment of cash, equivalent to the value of the Common Stock at the
exercise date in excess of the exercise price.
10. STOCK OPTION PLAN:
The 1993 Stock Option Plan, as amended, and the 1997 Equity Incentive Plan
(the "Plans") have participants which include key employees (including
officers), directors, advisors, and independent consultants to the Company or to
any of its subsidiaries. The Company has reserved 80,000 and 200,000 shares of
Common Stock for issuance under the 1993 and 1997 Plans, respectively. Options
granted to employees may be designated as incentive stock options ("ISO's") or
non-qualified stock options ("NQSO's"), as defined by the Internal Revenue
Service. Options granted to independent consultants and other non-employees may
only be designated NQSO's. Options granted pursuant to the Plans which are ISO's
will enjoy the attendant tax benefits provided under Sections 421 and 422 of the
Internal Revenue Code of 1986, as amended.
The exercise price of options granted under the Plans may not be less than
100% of the fair market value of the Common Stock on the date of grant.
Generally, options will be exercisable for a term that will not exceed ten years
from the date of grant.
During fiscal 1997, the Company granted 100,000 five-year options under the
Plans, one third of which vested immediately while the remaining vest ratably
over two years.
Information with respect to shares under option is summarized below:
<TABLE>
<CAPTION>
EXERCISE PRICE
ISO'S NQSO'S PER SHARE
--------- --------- --------------
<S> <C> <C> <C>
Balance, October 31, 1994.................................................... -- 12,000 $ 6.50
Granted.................................................................... 11,750 56,250 $ 8.25-$8.50
--------- ---------
Balance, October 31, 1995.................................................... 11,750 68,250 $ 6.50-$8.50
Granted.................................................................... -- --
Exercised.................................................................. -- --
--------- ---------
Balance, October, 31, 1996................................................... 11,750 68,250 $ 6.50-$8.50
Granted.................................................................... 11,730 88,270 $ 17.05
Exercised.................................................................. -- (30,000) $ 6.50-$8.25
--------- ---------
Balance, October 31, 1997.................................................... 23,480 126,520 $ 8.25-$17.05
--------- ---------
--------- ---------
Exercisable, October 31, 1997.............................................. 13,310 60,024 $ 8.25-$17.05
--------- ---------
--------- ---------
</TABLE>
F-12
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK OPTION PLAN: (CONTINUED)
No options were forfeited or expired during any period presented. The
remaining weighted average contractual life of options outstanding at October
31, 1997 was 4.15 years.
The Company has elected to adopt the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation". Accordingly, no compensation cost has been recognized with regard
to options granted under the Plan in the accompanying financial statements. If
stock-based compensation costs had been recognized based on the estimated fair
values at the dates of grant for options awarded during 1997, net income and net
income per common share for 1997 would have been reduced by approximately
$125,000, or $.04 per share.
These pro forma adjustments to net income and net income per common share
assume fair values of each option grant estimated using the Black-Scholes option
pricing formula. The more significant assumptions underlying the determination
of such fair value for options granted during 1997 include: (i) weighted average
risk-free interest rates of 5.92%; (ii) weighted average expected option life of
5 years; (iii) an expected volatility of 41%, and (iv) an expected dividend
yield of 0%. The per share weighted average fair value at the dates of grant for
options awarded during 1997 was $4.67.
11. RELATED-PARTY TRANSACTIONS:
On July 9, 1997 the Company loaned $1,100,000 to an officer of the Company
under a note receivable which bears interest at 8% and is due on July 9, 1998.
The officer pledged 100,000 shares of the Company's common stock as collateral.
The balance, including accrued interest, is $1,178,093 as of October 31, 1997.
The note payable to related party of $400,000 as of October 31, 1997
represents a loan by EDSS to the president of EDSS. The note bears interest at
the bank's prime rate plus 2% (10.5% at October 31, 1997) and is due on demand
after the full payment of an intercompany loan of $998,000 due from EDSS to the
Company.
In fiscal 1997, 1996 and 1995, the Company purchased new service vehicles
from an automobile dealership which is owned by the Chairman of the Company for
approximately $29,000, $33,000 and $76,000, respectively.
The Company leases office space in Rantoul, Illinois from a company which is
owned jointly by the Chairman and an officer of the Company, for $1,750 per
month. The lease agreement is on a month-to-month basis based on the needs of
the Company. The Company also subleases office space in New York to a company
owned by a director of the Company for $800 per month. The sublease, which
commenced December 1, 1994, is on a month-to-month basis based on the needs of
the Company.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each category of financial instruments:
CASH AND CASH EQUIVALENTS:
Cash equivalents comprise money market funds whose carrying amounts
approximate fair value due to the short-term maturity of the instruments.
F-13
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
LONG-TERM DEBT AND NOTE PAYABLE:
Long-term debt relates principally to service vehicle loans payable and a
note payable to a related party. Interest rates on the loans approximate the
rates available at October 31, 1997 and the Company believes that their carrying
value of debt at October 31, 1997 approximates fair value.
MARKETABLE SECURITIES:
Marketable securities are reflected at fair value in the accompanying
consolidated balance sheet at October 31, 1997.
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Quarterly information for 1997, 1996 and 1995 is set forth in the table
below:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
<S> <C> <C> <C> <C>
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
----------- ----------- ------------- ------------
1997:
Revenue................................................. $ 701,760 $ 996,263 $ 1,429,088 $ 1,590,570
Net (loss) income....................................... (540,558) (328,522) 27,085,670 (257,426)
Net (loss) income per common share...................... (0.17) (0.10) 8.33 (0.08)
1996:
Revenue................................................. $ 560,218 $ 590,838 $ 624,068 $ 542,610
Net loss................................................ (225,600) (227,961) (264,657) (298,606)
Net loss per common share............................... (0.08) (0.07) (0.08) (0.08)
1995:
Revenue................................................. $ 363,977 $ 413,813 $ 380,654 $ 941,845
Net loss................................................ (142,243) (221,852) (100,917) (175,069)
Net loss per common share............................... (0.05) (0.07) (0.03) (0.05)
</TABLE>
The sum of the quarterly net income (loss) per common share amounts for 1997
are not equal to the full year amount primarily because the computations of the
weighted average number of common shares outstanding for each quarter and the
full year are made independently.
14. SUBSEQUENT EVENTS (UNAUDITED):
Subsequent to year end, the Company settled 150,000 shares of its short
position outstanding as of October 31, 1997 which resulted in a realized loss of
approximately $960,000, net of a deferred tax benefit of $640,000.
In December 1997 the Company acquired a 24% interest in Landtel
Communications, Inc. ("Landtel"), a company organized to purchase a U.K.
telecommunications company, for $240,000 plus a commitment to provide up to
$9,600,000 in the event Landtel completes the proposed acquisition. There can be
no assurance that Landtel will complete the proposed acquisition or otherwise
carry on any business.
F-14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: January , 1998
Terrence S. Cassidy, Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------- ---------------------------
<S> <C> <C>
- ------------------------------------------- Director January , 1998
Terrence S. Cassidy
- ------------------------------------------- Director January , 1998
Thomas R. DiBenedetto
- ------------------------------------------- Director January , 1998
Louis B. Lloyd
- ------------------------------------------- Director January , 1998
Michael A. McManus, Jr.
- ------------------------------------------- Director January , 1998
Michael J. Specchio
</TABLE>
19
<PAGE>
EXHIBIT 10.44
LANDTEL COMMUNICATIONS, INC.
SUBSCRIPTION AGREEMENT, DATED DECEMBER 9, 1997
<PAGE>
LANDTEL COMMUNICATIONS, INC.
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (the "Agreement") dated as of December 9, 1997,
among LANDTEL COMMUNICATIONS, INC., a Delaware corporation (the "Company"),
and the persons who execute this Agreement as investors (the "Investors").
R E C I T A L
- - - - - - -
WHEREAS, the Company plans to carry out the business and financings
substantially as set forth on the Term Sheet attached hereto as Exhibit A
(the "Term Sheet");
WHEREAS, the Company is planning to acquire "Prince", a code-named Great
Britain telecommunications company (the "Major Transaction");
WHEREAS, in order to finance the Major Transaction, the Company desires to
sell to the Investors, and the Investors desire to purchase, shares of the
Company's Series A Convertible Redeemable Preferred Stock, $.001 par value
("Series A Preferred Stock"), having the terms set forth in the Certificate
of Designation of Terms, Preferences and Rights annexed to this Agreement as
Exhibit B (the "Certificate of Designation"), and the conversion price at
which shares of Common Stock of the Company, $.001 par value (the "Common
Stock") will be issuable upon conversion of the Series A Preferred Stock
shall initially be $.20, subject to the Certificate of Designation and the
terms and conditions set forth in this Agreement; and
WHEREAS, the Investors have reviewed this Agreement carefully, including
all Exhibits (collectively, the "Disclosure Material");
THE PARTIES AGREE AS FOLLOWS
1. Purchase and Sale of Stock
1.1. Sale and Issuance of Series A Preferred Stock. The Company shall
sell to the Investors and the Investors shall purchase from the Company, at a
price of $10.00 per share, a total of 100,000 shares of Series A Preferred
Stock. The shares of Series A Preferred Stock to be sold by the Company
pursuant to this Agreement are referred to herein as the "Purchased Shares".
The number of Purchased Shares to be purchased by each Investor from the
Company is set forth opposite the name of such Investor on Schedule A hereof
subject to acceptance, in whole or in part, by the Company.
1.2. Closing. The closing of the purchase and sale of the Purchased
Shares hereunder (the "Preferred Stock Closing") shall take place promptly
after subscriptions for all the Series A Preferred are delivered and the
conditions set forth in Section 6 are satisfied or waived. At the Preferred
Stock Closing:
(a) The Investors shall deliver to the Company or its designees
(i) by wire transfer or check, or such other method of payment as the Company
shall approve, the amount set forth for cash payment on Schedule A, (ii) an
executed 8% note (the "Note") in the form
<PAGE>
attached hereto as Exhibit C for the balance of the purchase price, and (iii)
an executed pledge agreement in the form attached hereto as Exhibit D; and
(b) the Company shall issue and deliver to the account of each
Investor a certificate or certificates in form satisfactory to such Investor
for the portion of the Purchased Shares to be issued by the Company and
purchased by such Investor set forth opposite such Investor's name on the
signature page hereof.
All certificates shall have all necessary stock transfer tax stamps
(purchased at the expense of the Company) affixed.
2. Series B Preferred Commitment
(a) Upon the request of the Company setting forth an aggregate
number of shares (the "Series B Aggregate Number") of Series B Preferred
Stock (as defined below) to be issued by the Company (the "Series B Request")
for purposes of financing the Major Transaction, each Investor shall be
obliged to purchase, itself or through designees, a number of shares (the
"Holder's Number") of Series B Preferred Stock determined by multiplying (A)
the Series B Aggregate Number by (B) the quotient of (x) the number of shares
of Series A Preferred Stock owned by such Investor divided by (y) the total
number of shares of Series A Preferred Stock outstanding; provided (i) the
Company enters into the Major Transaction and (ii) Investors and their
designees purchase all shares of Series B Preferred Stock requested by the
Company. The Series B Request to purchase all or a portion of the Series B
Preferred Stock must be approved by a majority of the Board of Directors of
the Company.
(b) The sole remedy against any Investor (the "Default Holder")
who fails to purchase all or a portion (the "Defaulted Number") of his or its
Holder's Number within 90 days after the Series B Request (a "Series B
Default") shall be one of (x) the Company shall exercise its right to redeem
the Default Redemption Number (as defined below) of such Default Holder's
Purchased Shares pursuant to paragraph 9(b) of Part A of the Certificate of
Designation, or (y) the other Investors shall exercise their rights under the
Stockholders Agreement (described in the Term Sheet) to purchase up to the
Default Redemption Number of such Default Holder's Purchased Shares. In
connection with the purchase of the Series B Preferred, each party hereto
shall execute and deliver a subscription agreement substantially similar to
this Agreement. The "Default Redemption Number" shall be equal to the product
of (1) the quotient of (A) the Defaulted Number divided by (B) the Holder's
Number multiplied by (2) 50% multiplied by (3) the number of Purchased Shares
held by such Default Holder.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that, except as disclosed in the
Offering Memorandum:
3.1. Corporate Organization and Authority. The Company:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the corporate power and authority to own or lease its
properties as and in the places where such business is now conducted and to
carry on its business as now
2
<PAGE>
conducted.
There are no other states or jurisdictions in which the failure of the
Company or any of the Subsidiaries to qualify to transact business could
reasonably be expected to materially adversely affect business, financial
condition, operations or prospects of any of them.
3.2. Capitalization. On the date hereof, the authorized capital of
the Company consists of (i) 20,000,000 shares of Common Stock, $.001 par
value, of which on the date hereof, 450,000 shares are validly issued, fully
paid, non-assessable and outstanding, and (ii) 1,000,000 shares of Serial
Preferred Stock, of which on the date hereof no shares are issued and
outstanding. All outstanding shares were issued in compliance with all
applicable Federal and state securities laws. Except as contemplated by this
Agreement or the Term Sheet, there are (i) no outstanding subscriptions,
warrants, options, conversion privileges or other rights or agreements to
purchase or otherwise acquire or issue any shares of capital stock of the
Company (or shares reserved for such purpose), (ii) no preemptive rights or
rights of first refusal with respect to the issuance of additional shares of
capital stock of the Company, including the Purchased Shares and the shares
of Common Stock into which the Purchased Shares are convertible, and (iii) no
commitments or understandings (oral or written) of the Company to issue any
shares, warrants, options or other rights.
3.3. Validity of Purchased Shares. When issued, sold and delivered
in accordance with the terms and for the consideration expressed herein, the
Purchased Shares shall be duly authorized, validly issued, fully paid and
non-assessable.
3.4. Common Stock Issuable on Conversion of Purchased Shares. The
shares of Common Stock initially issuable upon conversion of the Purchased
Shares have been duly authorized and have been, and at all times prior to
such conversion will have been, duly reserved for issuance upon such
conversion and, when so issued, will be validly issued, fully paid and
non-assessable.
3.5. Changes in Condition. Except as set forth in the Disclosure
Material, there has been no substantial change in, or agreements to change,
the business plans or capitalization of the Company which are adverse to the
Investors.
3.6. Private Offering. Neither the Company nor anyone acting on its
behalf has offered any of the Purchased Shares for sale to, or solicited
offers to buy any thereof from, or otherwise approached or negotiated with
respect thereto with, any prospective purchaser other than the prospective
Investors.
3.7. Brokers and Finders. The Company has not retained any
investment banker, broker or finder in connection with the transactions
contemplated by this Agreement.
4. Representations and Warranties of the Investors. Each Investor
represents and warrants to the Company as follows:
4.1. Authorization. When executed and delivered by such Investor,
this agreement will constitute the valid and binding obligation of such
Investor.
4.2. Brokers and Finders. Such Investor has not retained any
investment banker,
3
<PAGE>
broker or finder in connection with the transactions contemplated by this
Agreement.
5. Securities Laws.
5.1. Securities Laws Representations and Covenants of Investors.
(a) This Agreement is made with each Investor in reliance upon
such Investor's representation to the Company, which by such Investor's
execution of this Agreement such Investor hereby confirms, that the Purchased
Shares to be received by such Investor will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that such Investor has
no present intention of selling, granting any participation in or otherwise
distributing the Purchased Shares.
(b) Each Investor understands and acknowledges that the
offering of the Purchased Shares pursuant to this Agreement will not be
registered under the Securities Act of 1933, as amended (the "Securities
Act") or qualified under any state "Blue Sky" laws ("State Securities Laws")
on the grounds that the offering and sale of the Purchased Shares are exempt
from registration and qualification, respectively, under the Securities Act
and the State Securities Laws, and that the Company's reliance upon such
exemption is predicated upon such Investor's representations set forth in
this Agreement.
(c) Each Investor covenants that, unless the Purchased Shares,
the shares of Common Stock issuable upon conversion of the Purchased Shares
or any shares of capital stock of the Company received in respect of the
foregoing have been registered under the Securities Act, such Investor will
not dispose of such shares unless and until (i) such Investor shall have
notified the Company of the proposed disposition and shall have furnished
the Company with a statement of the circumstances surrounding the proposed
disposition and (ii) such Investor shall have furnished the Company with an
opinion of counsel reasonably satisfactory in form and substance to the
Company to the effect that (x) such disposition will not require
registration under the Securities Act and (y) appropriate action necessary
for compliance with the Securities Act and any applicable state, local or
foreign law has been taken.
(d) In connection with the investment representations made
herein, each Investor represents that (i) such Investor is able to fend for
itself in the transactions contemplated by this Agreement; (ii) such Investor
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of such Investor's prospective
investment in the Purchased Shares; (iii) such Investor has the ability to
bear the economic risks of such Investor's prospective investment and can
afford the complete loss of such investment; (iv) such Investor has been
furnished with and has had access to such information as would be made
available in the form of a registration statement under the Securities Act
together with such additional information as is necessary to verify the
accuracy of the information supplied; and (v) such Investor has had access to
officers of the Company and an opportunity to ask questions of and receive
answers from such officers and has had all questions that have been asked by
such Investor satisfactorily answered by the Company.
(e) Each Investor further represents by execution of this
Agreement that such Investor is an accredited investor, as defined in Rule
501 promulgated under the Securities Act.
4
<PAGE>
(f) By acceptance hereof, each Investor agrees that the
Purchased Shares, the shares of Common Stock issued on conversion of the
Purchased Shares and any shares of capital stock of the Company received in
respect of the foregoing held by it may not be sold by such Investor without
registration under the Securities Act, or an exemption therefrom, and
therefore such Investor may be required to hold such shares for an
indeterminate period.
5.2. Legends. All certificates for the Purchased Shares and the shares
of Common Stock issued on conversion thereof, and each certificate
representing any shares of capital stock of the Company received in respect
of the foregoing, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise and each
certificate for any such securities issued to subsequent transferees of any
such certificate (unless otherwise permitted herein) shall bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT, NOR MAY SUCH
SHARES BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE SUBSCRIPTION
AGREEMENT DATED AS OF DECEMBER 9, 1997, PURSUANT TO WHICH THEY WERE
ISSUED."
In addition, such certificates shall bear any legend that, in the opinion of
the Company's counsel, is required under the Stockholders Agreement
(described below), the By-laws of the Company or pursuant to any state, local
or foreign law governing the Purchased Shares or the shares of Common Stock
issued on conversion thereof.
6. Conditions to Investors' Obligations at the Closing. The
obligations of the Investors under Section 1.1 of this Agreement are subject
to the fulfillment at or before the Closing of each of the following
conditions, any of which may be waived in writing by the Investors or any of
them.
6.1. Representations and Warranties. The representations and
warranties contained in Section 3 shall be true and correct on and as of the
Closing Date with the same effect as if made on and as of the Closing Date.
6.2. Performance. The Company shall have performed or fulfilled
all terms, covenants and conditions contained herein required to be performed
or fulfilled by the Company before the Closing.
6.3. Certificate of Designation. The Certificate of Designation
shall have been approved by the Board of Directors of the Company in the
manner and by the vote required by Delaware law, and shall have been duly
filed with the Secretary of State of the State of Delaware and shall have
become effective.
6.4. Stockholders Agreement; Registration Rights. The Company
and each of the Investors shall have executed and delivered a Stockholders
Agreement and a Registration
5
<PAGE>
Agreement with substantially the terms outlined in the Term Sheet.
6.5. Board of Directors. Terrence S. Cassidy, J.C. Demetree,
Jr., James J. Pinto, Laurence S. Zimmerman and James Whittier shall have been
elected as directors of the Company.
6.6. Proceedings Satisfactory. All corporate and legal
proceedings taken by the Company in connection with the transactions
contemplated by this Agreement and all documents and papers relating to such
transactions shall be reasonably satisfactory in form and substance to the
Investors.
7. Conditions to the Company's Obligations at the Closing. The
obligations of the Company under Section 1.1 of this Agreement are subject to
the fulfillment at or before the Closing of each of the following conditions,
any of which may be waived in writing by the Company:
7.1. Warranties True on the Closing Date. The representations
and warranties of each of the Investors contained in Sections 4 and 5 shall
be true on and as of the Closing with the same effect as though said
representations and warranties had been made on and as of the Closing.
8. Additional Covenants of the Company.
8.1. Access. From and after the date of this Agreement, the
Company will afford to representatives of the Investors full access during
normal business hours to the plant, properties, business and records of the
Company, and the opportunity to discuss the affairs of the Company with the
Company's officers.
8.2. Financial Statements, etc.
(a) If the Major Transaction is completed, the Company
shall deliver to each Investor within 90 days after the end of each fiscal
year of the Company a consolidated balance sheet of the Company as of the end
of such year and related consolidated statements of income, stockholders
equity and changes in financial position for such year, in reasonable detail
and stating in comparative form the figures as of the end of and for the
previous fiscal year and accompanied by the report of independent public
accountants of recognized standing selected by the Company. In addition, the
Company shall deliver to each Investor (i) within 45 days after the end of
each of the first three quarterly periods in each fiscal year of the Company,
an unaudited consolidated balance sheet of the Company as of the end of each
such quarter and an unaudited consolidated statement of income of the Company
for the portion of such fiscal year ended with the last day of such quarter,
all in reasonable detail and stating in comparative form the figures for the
corresponding date and period in the previous fiscal year and prepared and
certified by an authorized financial officer of the Company, subject,
however, to year-end adjustments.
(b) Reports. The Company shall cooperate with each
Investor in supplying such information as may be reasonably requested by such
Investor to complete and file any information reporting forms presently or
hereafter required by the SEC as a condition to the
6
<PAGE>
availability of an exemption, presently existing or hereafter adopted, from
the Securities Act for the sale of any of the Purchased Shares, shares of
Common Stock issued on conversion of Purchased Shares and shares of capital
stock of the Company received in respect of the foregoing.
(c) Reports. The Company shall deliver to each Investor,
contemporaneously with delivery to holders of Common Stock, a copy of each
report of the Company delivered to holders of Common Stock as such holders.
(d) Other Information. The Company shall deliver to each
Investor such other data and information as to the business operations or
assets, or the condition, financial or otherwise, of the Company or the
Subsidiaries as such Investor may reasonably request.
9. Miscellaneous
9.1. Entire Agreement; Successors and Assigns. This Agreement
constitutes the entire contract between the parties relative to the subject
matter hereof and no party shall be liable or bound to the other in any
manager by any warranties, representations or covenants except as
specifically set forth herein. Any previous agreement among the parties with
respect to the sale of the Purchased Shares is superseded by this Agreement.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the respective executors' administrators, heirs, successors
and assigns of the parties. Except as expressly provided herein, nothing in
this Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.2. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
9.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.4. Headings. The headings of the sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
9.5. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal
delivery, if sent by fax upon delivery, if sent by overnight mail delivery,
on the next day, or if sent by registered or certified mail five days after
deposit, addressed to a party at its address hereinafter shown below its
signature or at such other address as such party may designate by ten days
advance written notice to the other party. Any notice to the Investors shall
be sent to the address set forth on the signature page hereof. Any notice to
the Company shall be sent to Landtel Communications, Inc., 156 West 56th
Street Suite 2001, New York, New York 10019, Fax: 212 582 1022, Attention of
Laurence Zimmerman, with a copy to Hahn & Hessen LLP, 350 Fifth Avenue, New
York, New York 10118, Fax: 212 594 7167, Attention of James Kardon.
9.6. Limitation on Representations and Warranties. All
representations and warranties made by the Company concerning the Major
Transaction are based solely upon the
7
<PAGE>
representations and warranties made by William Aylward to the Company.
Nothing has come to the attention of the Company that the representations
and warranties concerning the Major Transaction are not true and correct in
all material respects and makes no further representations or warranties
concerning those matters.
9.7. Amendment of Agreement. The terms and provisions of this
Agreement may not be modified or amended except in writing.
9.8. Counsel. Each of the parties (i) acknowledges that Hahn & Hessen
LLP has acted, and from time to time continues to act, as counsel to each of
the Investors, or affiliates thereof, as well as to the Company, (ii)
consents to the representation of the Company and such other representation
of the Investors by Hahn & Hessen LLP and (iii) waives any conflicts of
interest claim which may arise therefrom. Without limitation on the
foregoing, Hahn & Hessen LLP is authorized to disclose all information
concerning the Company and its plans to each of the Investors.
9.9. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such
provision or any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LANDOVER PRINCIPAL LTD.
By:___________________
NATIONAL WIRELESS HOLDINGS INC.
By:__________________________
______________________________
James J. Pinto
______________________________
Vernon L. Fotheringham
DCI INVESTMENTS
By:____________________________
J.C. Demetree, Jr.
LANDTEL COMMUNICATIONS, INC.
By:_______________________
Date:
8
<PAGE>
EXHIBIT 11.1
NATIONAL WIRELESS HOLDINGS INC.
COMPUTATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Net income (loss)..................................................... $ 25,959,164 $ (1,016,824) $ (640,081)
------------- ------------- ------------
Weighted average common shares outstanding:
Primary:
Shares of Common Stock outstanding................................ 3,259,923 3,253,000 3,222,863
Dilutive effect of Convertible Preferred Stock....................
Dilutive effect of stock options..................................
------------- ------------- ------------
3,259,923 3,253,000 3,222,863
------------- ------------- ------------
Fully diluted:
Shares of Common Stock outstanding................................ 3,259,923 3,253,000 3,222,863
Dilutive effect of Convertible Preferred Stock....................
Dilutive effect of stock options..................................
------------- ------------- ------------
3,259,923 3,253,000 3,222,863
------------- ------------- ------------
------------- ------------- ------------
Income (loss) per share--primary...................................... $ 7.96 $ (0.31) $ (0.20)
Income (loss) per share--fully diluted................................ $ 7.96 $ (0.31) $ (0.20)
</TABLE>
NET INCOME (LOSS) PER SHARE DATA:
Net gain (loss) per share is computed on the basis of the gain (loss) for
the period divided by the weighted average number of common shares and common
share equivalents outstanding during the period.
<PAGE>
Exhibit 21
NATIONAL WIRELESS HOLDINGS INC.
JURISDICTION OF INCORPORATION OF SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation
- ---------------------------------------------------------------------------
NWH Inc. Delaware
TLC Productions, Inc. Florida
Electronic Data Submissions, Inc. Delaware
Anagram International Communications Ltd. Delaware
PCC, Inc. Delaware
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<CASH> 21,256,356
<SECURITIES> 49,598,687
<RECEIVABLES> 893,498
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 72,979,081
<PP&E> 1,981,013
<DEPRECIATION> 763,271
<TOTAL-ASSETS> 79,085,656
<CURRENT-LIABILITIES> 35,591,782
<BONDS> 0
0
0
<COMMON> 32,530
<OTHER-SE> 43,036,996
<TOTAL-LIABILITY-AND-EQUITY> 79,085,656
<SALES> 3,308,080
<TOTAL-REVENUES> 4,717,681
<CGS> 1,626,661
<TOTAL-COSTS> 5,947,273
<OTHER-EXPENSES> (44,196,516)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,760
<INCOME-PRETAX> 42,859,164
<INCOME-TAX> 16,900,000
<INCOME-CONTINUING> 25,959,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,959,164
<EPS-PRIMARY> 7.96
<EPS-DILUTED> 7.96
</TABLE>
