<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
Commission file number: 0-26836
WIRELESS ONE, INC.
(Exact name of registrant specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
72-1300837
(I.R.S. Employer Identification No.)
11301 Industriplex Blvd., Suite 4
Baton Rouge, Louisiana
(Address of principal executive office)
70809-4115
(Zip code)
(504) 293-5000
(Registrant's telephone number, including area code)
5551 Corporate Blvd., Suite 2G
Baton Rouge, Louisiana 70808
(Registrant's former address)
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 proceeding 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
----- -----
Number of shares of Common Stock outstanding as of August 14, 1996
16,941,697
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
<S> <C> <C>
Condensed Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995....................... 2
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1996 and 1995, and the
six months ended June 30, 1996 and 1995................... 3
Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 1996
and 1995.................................................. 4
Notes to Condensed Consolidated Financial
Statements................................................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................... 13
</TABLE>
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, December 31,
Assets 1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 73,877,954 110,380,329
Marketable investment securities-restricted 17,670,036 17,637,839
Subscriber receivables, net 295,021 143,633
Accrued interest and other receivables 353,440 405,241
Prepaid expenses 671,335 796,389
----------- -----------
Total current assets 92,867,786 129,363,431
Property and equipment, net 33,066,456 14,266,755
Leased license investment, net 36,454,732 26,724,238
Marketable investment securities - restricted 27,801,368 35,755,505
Note receivable 5,722,482 -
Other assets 7,627,582 7,689,945
----------- -----------
203,540,406 213,799,874
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable 3,788,385 2,356,707
Accrued expenses 1,199,426 862,100
Accrued interest 4,170,833 3,683,333
Current maturities of long-term debt 392,105 376,780
------------ -----------
Total current liabilities 9,550,749 7,278,920
Long-term debt 151,116,860 150,871,267
------------ -----------
160,667,609 158,150,187
------------ -----------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $0.01 par value, 50,000,000 shares
authorized, and 13,498,752 shares issued and outstanding 134,988 134,988
Additional paid-in capital 65,631,596 65,631,596
Accumulated deficit (22,893,787) (10,116,897)
------------ -----------
Total stockholders' equity 42,872,797 55,649,687
------------ -----------
$203,540,406 213,799,874
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 1,431,355 253,170 2,372,132 491,995
----------- ---------- ---------- ---------
Operating expenses:
System operations 710,684 318,367 1,266,626 488,348
Selling, general and admin. 2,892,171 753,727 5,529,724 1,214,856
Depreciation and amortization 1,298,501 241,773 2,262,506 441,292
----------- ---------- ---------- ---------
4,901,356 1,313,867 9,058,856 2,144,496
----------- ---------- ---------- ---------
Operating loss (3,470,001) (1,060,697) (6,686,724) (1,652,501)
----------- ---------- ---------- ---------
Other income (expense):
Interest expense (5,011,604) (84,087) (10,021,497) (198,177)
Interest income 1,737,417 - 3,863,777 -
Other 47,130 98,533 67,554 101,134
----------- ---------- ---------- ---------
Total other income (expense) (3,227,057) 14,446 (6,090,166) (97,043)
----------- ---------- ---------- ---------
Net loss $(6,697,058) (1,046,251) (12,776,890) (1,749,544)
Preferred stock dividend and discount
accretion - 365,311 - 365,311
----------- ---------- ---------- ---------
Net loss applicable to common stock (6,697,058) (1,411,562) (12,776,890) (2,114,855)
=========== ========== ========== =========
Net loss per common share $ (.50) (.70) (.95) (1.05)
=========== ========== ========== =========
Weighted average common shares
outstanding 13,498,752 2,013,950 13,498,752 2,013,950
=========== ========== ========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six Months ended
June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (12,776,890) (1,749,544)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization 2,262,506 441,292
Amortization of Debt Discount 263,598 147,344
Accretion of interest income (447,297) -
Bad debt expense 23,694 -
Changes in Assets and Liabilities:
Receivables (123,281) 4,720
Prepaid expenses 125,054 (237)
Deposits (23,711) -
Other assets - 24,057
Accounts payable and accrued expenses 2,256,504 216,465
-------------- ------------
Net cash used in operating activities (8,439,823) (915,903)
-------------- ------------
Cash flows from investing activities:
Capital expenditures (20,192,427) (2,480,582)
Purchase of Investments and other assets (209,021) -
Proceeds from maturities of securities 8,369,237 -
Issuance of note receivable (5,722,482) -
Acquisition of leased licenses (10,210,874) (2,973,172)
------------- -----------
Net cash used in investing activities (27,965,567) (5,453,754)
------------- -----------
Cash flows from financing activities:
Principal payments on long term debt (2,680) (1,159,580)
Debt issuance costs (94,305) -
Issuance of common stock - 2,155,243
Issuance of preferred stock - 13,738,565
------------- -----------
Net cash provided by (used in) financing
activities (96,985) 14,734,228
------------- -----------
Net increase (decrease) in cash (36,502,375) 8,364,571
Cash at beginning of period 110,380,329 24,481
------------- -----------
Cash at end of period $ 73,877,954 8,389,052
============= ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Organization
Wireless One, Inc. (the "Company") was formed in June 1995 to combine
the operations of a predecessor company ("Old Wireless One") with
certain wireless cable television assets and all related liabilities of
certain subsidiaries of Heartland Wireless Communications, Inc.
("Heartland") for the purpose of further developing, owning, and
operating wireless cable television systems primarily in select
southern and southeastern markets. Old Wireless One had been formed on
December 23, 1993, in conjunction with the merger of its predecessor,
Wireless One, L.L.C., a Limited Liability Company (LLC). LLC had been
formed on February 4, 1993 with six members and on December 23, 1993,
Old Wireless One acquired all of the net assets and outstanding
interests of LLC in a tax free reorganization. Accordingly, the
accompanying consolidated financial statements include results of
operations of Wireless One, Inc. and its subsidiaries and its
predecessor companies since February 4, 1993. Unless otherwise
indicated, references to the Company include Wireless One, Inc. and its
subsidiaries and its predecessors. See the Company's December 31, 1995
Annual Report on Form 10-K for further comments regarding Heartland and
the Heartland Transaction.
(b) Consolidation Policy
The condensed consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. All significant
intercompany balances and transactions are eliminated in consolidation.
(c) Interim Financial Information
The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations for reporting on
Form 10-Q. Accordingly, certain information and footnotes required by
generally accepted accounting principles for complete financial
statements are not included herein. The interim statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's December 31, 1995 Annual Report on Form 10-K.
Interim statements are subject to possible adjustments in connection
with the annual audit of the Company's accounts for full year 1996. In
the Company's opinion, all adjustments necessary for a fair
presentation of these interim statements have been included and are of
a normal and recurring nature. Operating results for the periods ended
June 30, 1996, are not necessarily indicative of the results to be
expected for the full fiscal year.
(d) Marketable Investment Securities
Investments in marketable securities consist of U.S. Treasury
securities which mature periodically through October 1998. The Company
has the ability and intent to hold these investments until maturity
and, accordingly, has classified these investments as held-to-maturity
investments. Held-to-maturity investments are recorded at amortized
cost, adjusted for amortization of premiums or discounts. Premiums and
discounts are amortized over the life of the related held-to-maturity
investment as an adjustment to yield using the effective interest
method. A decline in market value of the Company's
5
<PAGE>
(Continued)
WIRELESS ONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
investments below cost that is deemed other than temporary results in a
reduction in carrying amount to fair value. The impairment is charged
to earnings and a new cost basis for the investment is established.
(e) Net Loss Per Common Share
Net loss per common share is based on the net loss applicable to common
stock divided by the weighted average number of common shares
outstanding during the period presented. Shares issuable upon exercise
of stock options and warrants are antidilutive and have been excluded
from the calculation.
All share and per share data for the period ended June 30, 1995,
including the weighted average number of common shares outstanding,
have been restated for the Heartland Transaction consummated in October
of 1995 giving retroactive effect to the exchange of approximately one
share of Old Wireless One common stock for 4 shares of Wireless One,
Inc. common stock. See the Company's December 31, 1995 Annual Report on
Form 10-K for further description of the Heartland Transaction.
(2) Acquisitions
Applied Video Acquisition-On May 15, 1995, the Company acquired 100%
of the stock of Applied Video Technologies (the "Applied Video
Acquisition") for a total purchase price of approximately $6.5 million
in cash. The Applied Video Acquisition added wireless cable rights
covering one Operating System (Dothan, Alabama), one System Under
Construction (Albany, Georgia) and one Near-Term Launch Market
(Montgomery, Alabama). These three Markets cover approximately 263,000
LOS households.
Other Acquisitions-In addition, the Company has consummated the
acquisition of (i) rights to 11 wireless cable channels in the Macon,
Georgia Market for aggregate consideration of approximately $0.6
million and (ii) rights to eight wireless cable channels in the Bowling
Green, Kentucky Market for aggregate consideration of $.03 million.
(3) Subsequent Events
TruVision Transaction-On July 29, 1996, the Company consummated a
merger with TruVision Wireless, Inc. ("TruVision") whereby a subsidiary
of the Company exchanged approximately 3.4 million shares of the
Company's common stock for all of TruVision's common stock. The Company
merged with and into TruVision, at which time TruVision became a wholly
owned subsidiary of the Company.
The TruVision transaction has been accounted for as a business
combination using the purchase method of accounting. The assets
acquired consist primarily of wireless cable channel rights.
Prior to the consummation of the merger, the Company committed to
provide a bridge loan to TruVision of up to $15 million. This loan was
to be secured by certain assets of TruVision and its subsidiaries. At
June 30, 1996, the Company had funded approximately $5.7 million
6
<PAGE>
of this loan.
Units Offering-On August 12, 1996, the Company completed issuance of
239,252 Units consisting of $239,252,000 of 13.5% Senior Discount Notes
due in 2006 (the "New Unit Offering") and warrants to purchase, in
aggregate, 544,059 shares of the Company's common stock.
Other Transactions-The Company is presently participating with a group
of investors in FCC auctions for 10Mhz personal communication service
(PCS) licenses. On August 9, 1996, the Company invested approximately
$1.5 million in this venture.
The Company has also entered into several agreements with holders of
wireless cable channel rights, including (i) a letter of intent with
Wireless Ventures, L.L.C. ("Wireless Ventures") to acquire a fifty
percent interest in Wireless Ventures, which holds BTA authorizations
in certain markets in Georgia for approximately $1.0 million in cash
("Wireless Ventures Transaction") and (ii) a letter of intent with a
court appointed receiver to acquire rights to 11 MDS channels and
filings for 20 ITFS licenses and related transmission tower leases and
approvals in Auburn/Opelika, Alabama for $0.6 million.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE SAME PERIOD ENDED 1995
The table below sets forth for each of the Operating Systems the later of the
date of launch or acquisition by the Company and the approximate number of
subscribers at June 30, 1996 and June 30, 1995.
<TABLE>
<CAPTION>
Approximate Approximate
Launch or Subscribers at Subscribers at
Market Acquisition Date 06/30/96 06/30/95
- ------ ---------------- -------- --------
<S> <C> <C> <C>
Brenham, Tx February 1996 857 -
Bryan/College Station, Tx May 1995 2,899 212
Milano, Tx October 1995 1,659 -
Wharton , Tx June 1994 2,114 1518
Bunkie, La December 1995 1,498 -
Lafayette, La January 1994 697 522
Lake Charles, La April 1994 555 608
Monroe, La October 1995 1,806 -
Gainesville, Fl January 1996 986 -
Panama City, Fl September 1995 1,751 -
Pensacola, Fl July 1995 2,041 -
Jeffersonville, Ga March 1996 247 -
Tullahoma, Tn November 1995 1,403 -
Bucks, Al April 1996 454 -
Fort Walton Beach, Fl May 1996 70 -
Dothan, Al May 1996 1 -
-------- --------
TOTAL 19,038 2,860
======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Revenue Information
For the Six Months Ended Approximate
June 30, Average Revenue
------------------------ Per Subscriber at
1996 1995 June 30, 1996
------------ ---------- -----------------
Subscription Revenues:
- ----------------------
<S> <C> <C> <C>
Brenham, Tx $ 58,928 $ - $33.69
Bryan/College Station, Tx 407,399 5,733 33.66
Milano, Tx 290,534 - 32.34
Wharton , Tx 375,634 331,401 34.28
Bunkie, La 134,754 - 33.17
Lafayette, La 85,958 56,407 23.15
Lake Charles, La 87,483 98,454 30.66
Monroe, La 217,750 - 30.64
Gainesville, Fl 53,079 - 26.56
Panama City, Fl 219,726 - 30.08
Pensacola, Fl 285,443 - 35.88
Jeffersonville, Ga 8,488 - 32.35
Tullahoma, Tn 126,861 - 31.36
Bucks, Al 19,423 - 33.32
Fort Walton Beach, Fl 672 - -
Dothan, Al - - -
---------- ----------
TOTAL 2,372,132 491,995
========== ==========
</TABLE>
Revenues. Revenues consist primarily of subscription revenues which principally
consist of monthly fees paid by subscribers for the basic programming package
and for premium programming services. Subscription revenues for the six months
ended June 30, 1996 were $2,372,132 as compared to $491,995 for the comparable
period of 1995, an increase of $1,880,134 or 382%. This increase is principally
attributable to the increase in the average number of subscribers for the six
months ended June 30, 1996 compared to the same period ended in 1995 as a result
of the launch of 9 new systems during the remaining six months of 1995 and
during the first half of 1996. In addition, the contributions of two Operating
Systems from Heartland in October 1995, attributed to this increase in the
average number of subscribers for the first six months of 1996.
Systems Operations Expenses. Systems operations expense includes programming
costs, channel lease payments, tower site rentals, and repairs and maintenance.
Programming costs and channel lease payments (with the exception of minimum
payments) are variable expenses which increase as the number of subscribers
increases. Systems operations expense for the six months ended June 30, 1996 was
$1,266,626 as compared to $488,348 for the same period of 1995, reflecting an
increase of $778,278 or 159%. This increase is attributable primarily to the
increase in the number of subscribers for such
9
<PAGE>
period in 1996 compared to such period in 1995 as a result of the new markets
launched as described above.
Selling, General and Administrative. Selling, general and administrative
expenses for the six months ended June 30, 1996 were $5,812,012 compared to
$1,214,856 for the same period of 1995, an increase of $4,597,156 or 378%. The
Company has experienced increasing selling, general and administrative expenses
as a result of its increased wireless cable activities and associated
administrative costs including costs related to opening and maintaining
additional offices and additional compensation expense. The increase is due
primarily to increases in personnel costs, advertising and marketing expenses
and other overhead expenses required to support the expansion of the Company's
operations.
The Company believes such selling, general and administrative costs will not
stabilize until 1998 when all Markets are expected to be launched. At that
time, administrative expenses should remain constant with selling and general
expense stabilizing when desired penetration rates are achieved. In order for
such stabilization to occur within this time period, however, the current system
launch schedule must be met and desired penetration rates must be achieved.
There can be no assurance that the Company will meet the current launch schedule
or that desired penetration rates will be achieved or consequently that such
selling, general and administrative expenses will stabilize within this time
period.
Depreciation and Amortization Expense. Depreciation and amortization expense
for the six months ended June 30, 1996 was $2,262,506 versus $441,292 for the
same period of 1995, an increase of $1,821,214 or 413%. This increase is due
to additional amortization of channel rights from systems launched plus
amortization of amounts related to systems acquired from Heartland. In
addition, depreciation increased due to costs associated with the increase in
subscribers and purchase of equipment for newly launched markets.
Interest Expense. Interest expense increased to $10,021,497 from $198,177 as
compared to the same period ended in 1995. This increase in interest expense is
due to the issuance in October of 1995 of 150,000 units (the "Units")
consisting of $150,000,000 aggregate principal amounts of 13% Senior Notes due
2003.
Interest Income. Interest income of $3,863,777 consists of interest earned on
the proceeds from the Offerings (as described below).
LIQUIDITY AND CAPITAL RESOURCES
The wireless cable television business is a capital intensive business. The
Company's operations require substantial amounts of capital for (i) the
installation of equipment at subscribers' location (ii) the construction of
additional transmission and headend facilities and related equipment purchases,
(iii) the funding of start-up losses and other working capital requirements,
(iv) the acquisition of additional wireless cable channel rights and systems and
(v) investments in, and, maintenance of, vehicles and administrative offices.
Since inception, the Company has expended funds to lease or otherwise acquire
channel rights in various markets, to the construct or acquire its Operating
Systems, to commence construction of Operating Systems in different markets and
to finance initial operating losses.
In order to finance the expansion of its Operating Systems and finance the
launch of additional markets, in October 1995, the Company consummated its
initial public offering of 3,450,000 shares of common stock, $0.01 par value
(the "Common Stock") at $10.50 per share (the "Common Stock Offering"). The
Company received approximately $32.3 million in net proceeds from the Common
Stock Offering. Concurrent with the Common Stock Offering, the Company issued
Units consisting of $150 million aggregate principal amount of Senior Notes and
450,000 warrants to purchase an equal number of shares of Common Stock at an
exercise price of $11.55 per share to the initial purchasers (the "Old Unit
Offering" and together with the Common Stock Offering, the "Offerings"). The
Company placed approximately $53.2 million of the approximately $143.8 million
of net proceeds realized from the sale of the Units into an escrow account to
cover the first three years' interest payments on the Senior Notes as required
by terms of the Indenture.
10
<PAGE>
In August 1996, the Company issued 239,552 Units consisting of $239,252,000
Senior Discount Notes and warrants to purchase, in aggregate, 544,059 shares of
the Company's common stock at an exercise price of $16.6375 per share. Net
Proceeds to the Company was approximately $118.6 million.
During March 1996, the Federal Communications Commission ("FCC") completed an
auction program designed to award initial licenses for MDS channels. Successful
bidders will receive a blanket authorization to serve an entire Basic Trading
Area ("BTA") on all MDS channels within that BTA. The Company had successful
bids totaling approximately $16 million for BTA's. The Company is presently
preparing applications, which were filed with the FCC on May 10, 1996, to
secure these BTA's. Should no petitions be filed by other parties against the
Company's BTA applications, it is expected that the grant by the FCC of these
BTA authorizations will be made during the third quarter of 1996. Assuming all
BTA authorizations are granted to the Company, the Company will be required to
make total down payments of 20% of the $16 million bid with the remaining 80%
being financed over a 10 year term. During this ten-year period, the Company
will be required to make quarterly interest payments for the first two years and
then quarterly principal and interest payments for the remaining term. The
interest rate charged will be equal to the 10 year U.S. Treasury rate at the
time of the issuance of the BTA authorization plus 2-1/2%.
On July 29, 1996, the Company consummated a merger with TruVision Wireless, Inc.
(TruVision) whereby a subsidiary of the Company exchanged approximately 3.4
million shares of the Company's common stock for all of TruVision's common
stock. The Company merged with and into TruVision, at which time TruVision
became a wholly owned subsidiary of the Company.
Prior to the consummation of the merger, the Company committed to provide a
bridge loan to TruVision of up to $15 million. This loan was to be secured by
certain assets of TruVision and its subsidiaries. At June 30, 1996, the Company
had funded approximately $5.7 million of this loan.
For the six months ended June 30, 1996 and 1995, the Company's capital
expenditures were approximately $20.2 million and $2.5 million respectively.
These expenditures primarily related to the acquisition of equipment in certain
of the Company's operating markets, as well as those markets under construction
or near-term launches. The Company estimates that approximately $44.4 million in
capital expenditures will be required in 1996 to continue to fund growth in the
Operating Systems and the systems under construction and to complete the
construction and finance the addition of subscribers to 12 additional markets.
For the six months ended June 30, 1995, cash used in operating activities was
$.9 million consisting primarily of a net loss of $1.7 million and offset by an
increase in accounts payable and accrued expenses of $.2 million, non-cash
expenses of $.14 million, other assets of $.02 million, and depreciation and
amortization expenses of $.4 million. For the six months ended June 30, 1995,
cash used in investing activities was $5.5 million, consisting primarily of
capital expenditures and payments for licenses and organizational costs of
approximately $2.5 million and $3 million respectively. These capital
expenditures were principally related to the construction of new markets and
certain license and organizational costs. For the six months ended June 30,
1995, cash flows provided by financing activities was $14.7 million, consisting
primarily of $2.1 million in proceeds from the subscription of common stock,
$13.7 million in proceeds from the issuance of preferred stock, and offset by
$1.1 million in principal payments of long-term debt.
For the six months ended June 30, 1996, cash used in operating activities was
$8.4 million consisting primarily of a net loss of $12.8 million and offset by
an increase in accounts payable and accrued expenses of $2.2 million, a decrease
in receivables and prepaids of $.002 million, an increase in deposits of $.02
million, depreciation and amortization of $2.3 million, non-cash income of $.4
million and non-cash expenses of $.3 million. For the six months ended June 30,
1996, cash used in investing activities was $27.9 million, consisting primarily
of capital expenditures and payments for licenses and organization costs of
approximately $20.2 million and $10.2 million, respectively. Proceeds from the
maturities of securities of $8.4 million and an acquisition note receivable of
$5.7 million. In addition, the Company made investments and purchased other
assets at a cost of approximately $.2 million. These investing activities were
principally related to the acquisition of equipment in certain of the Company's
operating markets, as well as those markets under construction or near term
launch markets and certain license and organization costs related to those
markets. For the six months ended June 30, 1996, cash flows used in financing
activities was $.096 million, consisting of $.002 million from the repayments of
long-term debt and $.094 million in payments for debt issue costs.
The Company has experienced negative cash flow from operations in each year
since its formation, and the Company expects to continue to experience negative
consolidated cash flow from operations due to operating costs associated with
system development and costs associated with expansion and acquisition
activities. Until sufficient cash flow is generated from operations, the
Company will be required to utilize its current capital resources or external
sources of funding to satisfy its capital needs. The Company currently believes
that the aggregate net proceeds from the Company's Offerings will be sufficient
to meet its expected capital needs at least over the next twelve months.
11
<PAGE>
Historically, the Company has generated operating and net losses and can be
expected to do so for at least the foreseeable future as it continues to develop
additional operating systems. Such losses may increase as operations in
additional systems are commenced or acquired. There can be no assurance that
the Company will be able to achieve or sustain positive net income in the
future. As the Company continues to develop systems, positive System EBITDA
from more mature systems is expected to be partially or completely offset by
operating losses from less developed systems and from development costs
associated with establishing systems in new markets. This trend is expected to
continue until the Company has sufficiently large subscriber base to absorb
operating and development costs of recently launched systems. Based on its
current system launch schedule and targeted penetration and subscriber revenue
rates, the Company believes it will reach a subscriber level in its more mature
systems (those systems with positive System EBITDA) in the second half of 1997
to generate revenues sufficient to offset these operating and development costs.
There can be no assurance, however, that the Company will meet its system launch
schedule or achieve the penetration and subscriber revenue rates necessary to
acquire this subscriber base or that revenues will be sufficient to offset such
costs by that time. EBITDA is a commonly used measure of performance in the
wireless cable industry. However, EBITDA does not purport to represent cash
provided by or used by operating activities and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles.
Subject to the limitations of the Company's indentures relating to the Old Unit
Offering and the New Unit Offering, in order to accelerate its growth rate and
to finance general corporate activities and the launch or build-out of
additional systems, the Company may supplement its existing sources of funding
with financing arrangements at the operating system level or through additional
borrowings, the sale of additional debt or equity securities, including a sale
to strategic investor, joint ventures or other arrangements, if such financing
is available to the Company on satisfactory terms.
As a result of the Old Unit Offering, the New Unit Offering, and the possible
incurrence of additional indebtedness, the Company will be required to satisfy
certain debt service requirements. Following the disbursement of all of the
funds in the escrow account in October 1998, a substantial portion of the
Company's cash flow will be devoted to debt service on the related Senior Notes.
Additionally, beginning on August 1, 2001, interest will begin to accrue on the
Senior Discount Notes related to the New Unit Offering and thereafter a
substantial portion of the Company's cash flow will be devoted to such debt
service. The ability of the Company to make payments of principal and interest
will be largely dependent upon its future performance. Many factors, some of
which will be beyond the Company's control (such as prevailing economic
conditions), may affect its performance. There can be no assurance that the
Company will be able to generate sufficient cash flow to cover required interest
and principal payment when due on the offering or other indebtedness of the
Company. If the Company is unable to meet interest and principal payments in the
future, it may, depending upon circumstances which then exist, seek additional
equity or debt financing, attempt to refinance its existing indebtedness or sell
all or part of its business or assets to raise funds to repay its indebtedness.
The incurrence of additional indebtedness is restricted by the Indentures
governing the Senior Notes and the Senior Discount Notes.
In managing its wireless cable assets, the Company may, at its option, exchange
or trade existing wireless cable channel rights for channel rights in markets
that have a greater strategic value to the Company. The Company continually
evaluates opportunities to acquire, either directly or indirectly through the
acquisition of other entities, wireless cable channel rights. There is no
assurance that the Company will not pursue any such opportunities that may
utilize capital currently expected to be available for its current markets.
12
<PAGE>
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index on page 14
(b) No reports on Form 8-K were filed during the periods presented.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WIRELESS ONE, INC.
Date: August 14, 1996 /s/ Sean Reilly
-------------------------------------
Sean Reilly
President and Chief Executive Officer
Date: August 14, 1996 /s/ Michael C. Ellis
-------------------------------------
Michael C. Ellis
Vice President and Controller
(Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
27 Financial Data Schedule
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 73,877,954
<SECURITIES> 45,471,404
<RECEIVABLES> 322,570
<ALLOWANCES> (27,549)
<INVENTORY> 0
<CURRENT-ASSETS> 92,867,786
<PP&E> 35,809,289
<DEPRECIATION> 2,742,833
<TOTAL-ASSETS> 203,540,406
<CURRENT-LIABILITIES> 9,550,749
<BONDS> 151,116,860
0
0
<COMMON> 134,988
<OTHER-SE> 65,631,596
<TOTAL-LIABILITY-AND-EQUITY> 42,872,797
<SALES> 2,372,132
<TOTAL-REVENUES> 2,372,132
<CGS> 0
<TOTAL-COSTS> 9,058,856
<OTHER-EXPENSES> (3,931,331)
<LOSS-PROVISION> 23,694
<INTEREST-EXPENSE> 10,021,497
<INCOME-PRETAX> (12,776,890)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,776,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,776,890)
<EPS-PRIMARY> (.95)
<EPS-DILUTED> (.95)
</TABLE>
