UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
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 November 25, 1996
16,946,697
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
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........................14
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WIRELESS ONE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
Assets June 30, December 31,
1996 1995
---- ----
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
------------ ------------
Liabilities and Stockholders' Equity 203,540,406 213,799,874
============ ============
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
============ ============
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
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
administrative 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.
WIRELESS ONE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six Months ended
June 30,
1996 1995
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
============= ===========
See accompanying notes to condensed consolidated financial statements.
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
(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 $.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 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 $.6 million.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three and Six Months Ended June 30, 1996 Compared to the Same Periods Ended
June 30, 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.
Launch or Approximate Approximate
Acquisition Subscribers Subscribers
Market Date at 06/30/96 at 06/30/95
- ------ ----------- ----------- -----------
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 1,518
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
====== ======
Revenue Information
For the Three For the Six Recurring
Months Ended Months Ended Average
June 30, June 30, Revenue Per
Subscriber
1996 1995 1996 1995 June 1996
---- ---- ---- ---- ---------
Subscription Revenues:
Brenham, Tx $ 50,402 $ - $ 58,928 $ - $33.69
Bryan/College 235,508 5,733 407,399 5,733 33.66
Station, Tx
Milano, Tx 149,956 - 290,534 - 32.34
Wharton , Tx 196,646 164,339 375,634 331,401 34.28
Bunkie, La 100,068 - 134,754 - 33.17
Lafayette, La 44,751 32,932 85,958 56,407 23.15
Lake Charles, La 45,075 50,166 87,483 98,454 30.66
Monroe, La 127,889 - 217,750 - 30.64
Gainesville, Fl 47,070 - 53,079 - 26.56
Panama City, Fl 137,267 - 219,726 - 30.08
Pensacola, Fl 175,164 - 285,443 - 35.88
Jeffersonville, Ga 8,488 - 8,488 - 32.35
Tullahoma, Tn 92,976 - 126,861 - 31.36
Bucks, Al 19,423 - 19,423 - 33.32
Fort Walton Beach, 672 - 672 - -
Dothan, Al - - - - -
---------- ---------- ---------- -------- -------
Total $1,431,355 $ 253,170 $2,372,132 $491,995 -
========== ========== ========== ======== =======
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. The Company's
subscription revenues for the quarter ended June 30, 1996 were $1,431,355 as
compared to $253,170 for the comparable period of 1995, an increase of
$1,178,185 or 465%. 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 $1,880,137 or 382%. This increase is principally
attributable to the increases in the average number of subscribers for the
three months and six months ended June 30, 1996, as compared to the same
periods ended June 30, 1995, which resulted from the launch of 9 new systems
during the remaining six months of 1995 and during the first six months of
1996. In addition, the contributions of two Operating Systems from Heartland
in October 1995, attributed to the increase in the average number of
subscribers for the three months and six months ended June 30, 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 increase. Systems operations expense for the quarter ended June
30, 1996 was $710,684 as compared to $318,367 for the same period of 1995,
reflecting an increase of $392,317 or 123%. 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%. These
increases are attributable primarily to the increases in the number of
subscribers for such periods in 1996 compared to such periods in 1995 as a
result of the new markets launched and acquired as described above.
Selling, General and Administrative. Selling, general and administrative
expenses for the quarter ended June 30, 1996 were $2,892,171 compared to
$753,727 for the same period of 1995, an increase of $2,138,444 or 283%.
Selling, general and administrative expenses for the six months ended June 30,
1996 were $5,529,724 compared to $1,214,856 for the same period of 1995, an
increase of $4,314,868 or 355%. 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 quarter ended June 30, 1996 was $1,298,501 versus $241,773 for the
same period of 1995, an increase of $1,056,728 or 437%. 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%. These increases are due to additional amortization of channel rights
from systems launched plus amortization of amounts related to systems
acquired from Heartland. In addition, depreciation expense increased due to
costs associated with the increase in subscribers and purchase of equipment
for newly launched markets.
Interest Expense. Interest expense for the quarter ended June 30, 1996 was
$5,011,604 versus $84,087 for the same period of 1995, an increase of
$4,927,517 or 5,860%. Interest expense for the six months ended June 30,
1996 was $10,021,497 versus $198,177 for the same period of 1995, an increase
of $9,823,320 or 4,956%. These increases in interest expense are 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 $1,737,417 for the quarter ended
June 30, 1996 and $3,863,777 for the six months ended June 30, 1996
consists of interest earned on the proceeds from the Offering in October
of 1995 (as described in liquidity and capital resources).
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 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, $.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.
In August 1996, the Company issued 239,252 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 were 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 BTAs. The Company
is presently preparing applications, which were filed with the FCC on May 10,
1996, to secure these BTAs. 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.
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 offerings 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.
PART II. -OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(c) Exhibits
None.
(d) 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: November 27, 1996 \s\ Sean Reilly
-----------------------------------
Sean Reilly
Chief Executive Officer
Date: November 27, 1996 \s\ Michael C. Ellis
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Michael C. Ellis
Vice President, Controller
and Secretary
(Principal Accounting Officer)
