SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
Form 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-26836
WIRELESS ONE, INC.
(Exact name of registrant as specified in its charter)
Delaware 72-1300837
(State or other (I.R.S. Employer
jurisdiction of incorporation Identification No.)
or organization)
11301 Industriplex Boulevard, Suite 4
Baton Rouge, Louisiana 70809-4115
(Address of principal executive offices) (Zip Code)
(504) 293-5000
(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, $0.01 par value per share
(Title of Class)
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 statements 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 (affiliates being directors, executive officers and holders
of more than 5% of the Company's common stock) of the Registrant at
March 21, 1997 was approximately $28.1 million.
The number of shares of the registrant's common stock, $0.01 par
value per share, outstanding at March 21, 1997 was 16,946,697.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its 1997 Annual
Meeting of stockholders have been incorporated by reference into Part
III of this Form 10-K.
Wireless One, Inc.,
and Subsidiaries
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............. F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995, and 1996...................................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994, 1995, and 1996.......................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995, and 1996...................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Independent Auditors' Report
The Board of Directors
Wireless One, Inc.:
We have audited the accompanying consolidated balance sheets of Wireless
One, Inc. and subsidiaries as of December 31, 1995 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
December 31, 1996. In connection with our audits of the consolidated
financial statements, we have also audited the financial statement
schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Wireless One, Inc. and subsidiaries as of December 31, 1995 and 1996,
and the results of their operations and their cash flows for each of the
years in the three year period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
February 21, 1997
WIRELESS ONE, INC.
Consolidated Balance Sheets
December 31, 1995 and 1996
<TABLE>
<CAPTION>
Assets 1995 1996
------ -------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 110,380,329 $ 104,448,583
Marketable investment securities - restricted
(note 5) 17,637,839 18,149,180
Subscriber receivables, less allowance for doubtful
accounts of $73,641 and $292,619 in 1995 and 1996,
respectively 143,633 998,734
Accrued interest and other receivables 405,241 464,166
Prepaid expenses 796,389 1,149,296
-------------- --------------
Total current assets 129,363,431 125,209,959
Property and equipment, net (note 6) 14,266,755 82,636,712
License and leased license investment, net of
accumulated amortization of $548,283 and
$2,823,658 in 1995 and 1996, respectively 26,724,238 154,444,536
Marketable investment securities - restricted (note 5) 35,755,505 18,885,565
Other assets (note 7) 7,689,945 14,432,590
-------------- --------------
$ 213,799,874 $ 395,609,362
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,356,707 $ 4,105,994
Accrued expenses 862,100 6,775,218
Accrued interest 3,683,333 4,482,864
Current maturities of long-term debt (note 8) 376,780 3,169,383
------------- --------------
Total current liabilities 7,278,920 18,533,459
Long-term debt (note 8) 150,871,267 299,909,221
Deferred taxes (note 9) - 6,500,000
------------- --------------
158,150,187 324,942,680
Redeemable convertible preferred stock, $.01 par
value, 15,000 shares authorized, no shares
issued or outstanding (note 10) - -
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.01 par value, 50,000,000 shares
authorized, 13,498,752 and 16,946,697 shares
issued and outstanding in 1995 and 1996, respectively 134,988 169,467
Additional paid-in capital 65,631,596 120,284,507
Accumulated deficit (10,116,897) (49,787,292)
------------- --------------
Total stockholders' equity 55,649,687 70,666,682
------------- --------------
Commitments and contingencies (note 13) - -
------------- --------------
$ 213,799,874 $ 395,609,362
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
WIRELESS ONE, INC.
Consolidated Statements of Operations
Years Ended December 31, 1994, 1995, and 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ --------------
<S> <C> <C> <C>
Revenues $ 399,319 $ 1,410,318 $ 11,364,828
Operating expenses:
Systems operations 274,886 841,819 5,316,190
Selling, general and administrative 1,800,720 4,431,839 18,659,100
Depreciation and amortization 413,824 1,783,066 11,625,507
------------ ------------ --------------
2,489,430 7,056,724 35,600,797
------------ ------------ --------------
Operating loss (2,090,111) (5,646,406) (24,235,969)
------------ ------------ --------------
Other income (expense):
Interest expense (171,702) (4,070,184) (28,087,948)
Interest income - 2,024,116 8,146,958
Equity in losses of investee (note 7) - - (193,436)
------------ ------------ --------------
Total other expense (171,702) (2,046,068) (20,134,426)
Loss before income taxes (2,261,813) (7,692,474) (44,370,395)
Income tax benefit (note 9) - - 4,700,000
------------ ------------ --------------
Net loss (2,261,813) (7,692,474) (39,670,395)
Preferred stock dividends and discount
accretion (note 10) - (786,389) -
------------ ------------ --------------
Net loss applicable to common stock $ (2,261,813) $ (8,478,863) $ (39,670,395)
============ ============ ==============
Net loss per common share $ (1.21) (2.02) (2.65)
============ ============ ==============
Weighted average common shares outstanding 1,863,512 4,187,736 14,961,934
============ ============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
WIRELESS ONE, INC.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1994, 1995, and 1996
<TABLE>
<CAPTION>
Additional
Common paid-in Subscriptions Accumulated
Stock capital receivable deficit Total
--------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 5,381 $ 834,619 $ (219,020) $ (162,610) $ 458,370
Issuance of 1,475,823
shares of common stock 14,758 9,145,242 (8,660,000) - 500,000
Collections of subscriptions
receivable - - 5,647,156 - 5,647,156
Net loss - - - (2,261,813) (2,261,813)
--------- ------------- ------------ ------------- -------------
Balance at December 31, 1994 20,139 9,979,861 (3,231,864) (2,424,423) 4,343,713
Collections of subscriptions
receivable - - 3,231,864 - 3,231,864
Conversion of redeemable
preferred stock and warrants
into 4,524,512 shares
of common stock 45,246 14,453,442 - - 14,498,688
Issuance of 3,450,000
shares of common stock
pursuant to initial
public offering 34,500 32,340,708 - - 32,375,208
Issuance of 750,000 warrants - 3,015,000 - - 3,015,000
Issuance of 3,510,290
shares of common stock
in purchase transactions 35,103 6,628,974 - - 6,664,077
Preferred stock dividends
and accretion of discount - (786,389) - - (786,389)
Net loss - - - (7,692,474) (7,692,474)
--------- ------------- ------------ ------------- -------------
Balance at December 31, 1995 134,988 65,631,596 - (10,116,897) 55,649,687
Issuance of 3,442,945
shares of common stock
in purchase transactions 34,429 48,166,801 - - 48,201,230
Issuance of stock options
in purchase transactions - 1,401,723 - - 1,401,723
Issuance of warrants to
purchase 544,059 shares
of common stock - 5,053,387 - - 5,053,387
Issuance of 5,000 shares of
common stock upon exercise
of employee stock options 50 31,000 - - 31,050
Net loss - - - (39,670,395) (39,670,395)
--------- ------------- ------------ ------------- -------------
Balance at December 31, 1996 $ 169,467 $ 120,284,507 $ - $ (49,787,292) $ 70,666,682
========= ============= ============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1995, and 1996
1994 1995 1996
-------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,261,813) $ (7,692,474) $ (39,670,395)
Adjustments to reconcile net loss to
net cash used in operating activities:
Bad debt expense 54,608 196,281 371,349
Depreciation and amortization 413,824 1,783,066 11,625,507
Amortization of debt discount 104,767 328,301 7,845,537
Accretion of interest income - (213,230) (976,638)
Deferred income tax benefit - - (4,700,000)
Equity in losses of investee - - 193,436
Changes in assets and liabilities:
Receivables (167,277) (571,957) (868,890)
Prepaid expenses (46,515) (468,707) (145,949)
Deposits - - 917,796
Accounts payable and accrued
expenses 237,378 6,004,541 3,265,187
------------ -------------- --------------
Net cash used in operating
activities (1,665,028) (634,179) (22,143,060)
------------ -------------- --------------
Cash flows from investing activities:
Purchase of investments and other assets (102,000) (1,533,446) (2,778,012)
Capital expenditures (2,960,842) (9,805,057) (60,408,418)
Acquisition of license investment (5,156,054) (6,762,415) (43,898,328)
Purchase of marketable investment
securities - (53,180,114) -
Proceeds from maturities of securities - - 17,335,237
------------ -------------- --------------
Net cash used in investing
activities (8,218,896) (71,281,032) (89,749,521)
------------ -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt and warrants 4,275,819 144,764,902 120,624,614
Principal payments on long-term debt (103,306) (11,502,054) (13,089,874)
Debt issuance costs - (343,839) (1,604,955)
Issuance of common stock 5,647,156 35,008,396 31,050
Issuance of redeemable preferred stock - 14,343,654 -
------------ -------------- --------------
Net cash provided by financing
activities 9,819,669 182,271,059 105,960,835
------------ -------------- --------------
Net increase (decrease) in cash (64,255) 110,355,848 (5,931,746)
Cash and cash equivalents at beginning
of period 88,736 24,481 110,380,329
------------ -------------- --------------
Cash and cash equivalents at end of period $ 24,481 $ 110,380,329 $ 104,448,583
============ ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
WIRELESS ONE, INC.
Notes to Consolidated Financial Statements
December 31, 1995 and 1996
(1) Description of Business and Summary of Significant Accounting
Policies
(a) Nature of Operations
Wireless One Inc. is engaged in the business of developing,
owning, and operating wireless cable television systems
primarily in select southern and southeastern United States
markets.
(b) Consolidation Policy
The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. All significant
inter-company balances and transactions are eliminated in
consolidation.
(c) Property and Equipment
Property and equipment are stated at cost and include the cost
of transmission equipment as well as subscriber installations.
The Company capitalizes the excess of direct costs of subscriber
installations over installation fees. These direct costs include
reception materials and equipment on subscriber premises,
installation labor, overhead charges and direct commissions.
Depreciation and amortization are recorded on a straight-line
basis for financial reporting purposes over the estimated useful
lives of the assets. Any unamortized balance of the
nonrecoverable portion of the cost of a subscriber installation
is fully depreciated upon subscriber disconnection and the
related cost and accumulated depreciation are removed from the
balance sheet. Repair and maintenance costs are charged to
expense when incurred; renewals and betterments are capitalized.
Equipment awaiting installation consists primarily of
accessories, parts and supplies for subscriber installations,
and is stated at the lower of average cost or market on a first
in first out basis.
(d) License and Leased License Investment
Licenses and leased license investment consists primarily of
costs incurred in connection with the Company's acquisition of
channel rights. Channel rights represent the right to utilize
all of the capacity on channels operated under a license
received from the Federal Communications Commission ("FCC").
These assets are recorded at cost and amortized using the
straight-line method over the assets estimated useful lives,
usually 10-20 years, beginning with inception of service in each
market. Amortization expense for the years ended December 31,
1994, 1995 and 1996 was $191,915, $574,169 and $2,275,374
respectively. As of December 31, 1995 and 1996, approximately
$17,809,000 and $76,269,000 of channel rights were not subject
to amortization.
(e) Long Lived Assets
Effective January 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles to
be held and used or disposed of by an entity be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
The adoption of this statement had no impact on the financial
position or results of operations of the Company.
The Company periodically evaluates the propriety of the carrying
amounts of the license and leased license investment and
property and equipment in each market, as well as the
depreciation and amortization periods based on estimated
undiscounted future cash flows and other factors to determine
whether current events or circumstances warrant adjustments to
the carrying amounts or a revised estimate of the useful life.
If warranted, an impairment loss would be recognized to reduce
the carrying amount of the related assets to management's
estimate of the fair value of the individual license and related
property and equipment.
(f) Revenue Recognition
Revenues from subscribers are recognized in the month that the
service is provided.
(g) Income Taxes
The Company utilizes the asset and liability method of
accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
A valuation allowance is provided to reduce the carrying value
of deferred tax assets to an amount which more likely than not
will be realized. Changes in the valuation allowance represent
changes in an estimate and are reflected as an adjustment to
income tax expense in the period of the change.
(h) 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.
(i) Debt Issuance Costs
Costs incurred in connection with issuance of the Company's 1995
Senior Notes and 1996 Senior Discount Notes (see note 8) are
included in other assets and are being amortized using the
interest method over the term of the notes.
(j) Cash and Cash Equivalents
Cash and cash equivalents includes cash and temporary cash
investments that are highly liquid and have original maturities
of three months or less.
(k) Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(l) Marketable Investment Securities
Investments in marketable securities at December 31, 1995 and
1996 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 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. No such
impairments have been recorded for the years ended December 31,
1994, 1995 and 1996.
(m) Reclassifications
Certain amounts in the prior year consolidated financial
statements have been reclassified to conform with the current
year presentation. These reclassifications had no effect on
previously reported net loss.
(2) Liquidity
The growth of the Company's business requires substantial
investment on a continuing basis to finance capital expenditures
and related expenses for expansion of the Company's customer
base and system development. In addition, the Company has
recorded net losses since inception and expects to continue to
experience net losses while it develops and expands its wireless
cable systems. Management expects that the Company will require
significant additional financings, through debt or equity
financings, joint ventures or other arrangements, to achieve its
targeted subscriber levels in its current business plans in its
operating systems and target markets and to cover ongoing
operating losses. Additional debt or equity also may be
required to finance future acquisitions of wireless cable
companies, wireless cable systems or channel rights. While
management believes the Company will be able to obtain
additional debt or equity capital on satisfactory terms to meet
its future financing needs, there can be no assurance that
either additional debt or equity capital will be available.
(3) Initial Public Offering and Heartland Transaction
Wireless One, Inc. was formed in June, 1995, by the shareholders of
a predecessor company ("Old Wireless One") and Heartland Wireless
Communications, Inc., ("Heartland"). Old Wireless One had been
formed in 1993.
During October, 1995, the Company completed a series of
transactions which included (i) the issuance of 3,450,000 shares of
common stock at $10.50 per share in an initial public offering;
(ii) the issuance of $150,000,000 of 13% Senior Notes due in 2003
(the "1995 Senior Notes") and warrants to purchase 450,000 shares
of the Company's common stock, and (iii) the acquisition of certain
wireless cable television assets and related liabilities of certain
subsidiaries of Heartland for common stock of the Company and notes
(the "Heartland Transaction").
The consummation of the Heartland Transaction included the
Company's acquisition of all of the outstanding capital stock of
Old Wireless One and certain wireless cable television assets and
related liabilities in Heartland's markets in Texas, Louisiana,
Alabama, Georgia and Florida. In connection with the Heartland
Transaction, the shareholders of Old Wireless One received
approximately 6.5 million shares of the Company's common stock and
Heartland received approximately 3.5 million shares of the
Company's common stock. In addition, Heartland received notes in
the amount of $10,000,000, which were subsequently repaid by the
Company from the proceeds of the offerings of the Company's common
stock and 1995 Senior Notes.
The Heartland Transaction has been accounted for as a business
combination using the purchase method of accounting. In accordance with
Staff Accounting Bulletin No. 48, the Heartland assets and liabilities
acquired have been recorded using the historical cost basis previously
reported by Heartland, reduced by the amount of notes issued to Heartland
in connection with the transaction. The assets acquired consist primarily
of systems and equipment and various wireless cable channel rights. The
following is a summary of the net assets acquired:
Current assets $ 318,892
Current liabilities (35,956)
Systems and equipment, net 2,392,711
Leased license investment and other intangibles 13,476,534
------------
Net assets acquired 16,152,181
Notes issued to Heartland (10,000,000)
------------
$ 6,152,181
============
The 1995 financial statements of Wireless One, Inc. include the results of
operations of the business interests acquired in the Heartland Transaction
since October 18, 1995. Pro forma unaudited consolidated operating results
of the Company and the Heartland business acquired for the years ended
December 31, 1994 and 1995, assuming the transaction had been completed as of
January 1, 1994, are summarized below:
1994 1995
------------ ------------
Total revenues $ 1,287,312 $ 1,976,142
Net loss applicable to common stock $ (3,776,669) $ (8,863,252)
Net loss per common share $ (0.29) $ (0.68)
These pro forma results have been prepared for comparative purposes
only and include an adjustment for additional interest expense
associated with the portion of the proceeds of the notes utilized to
repay $7 million of notes to Heartland. Net loss per common share is
based on the weighted average number of shares outstanding during the
year adjusted to give effect to shares issued in the transaction.
They do not purport to be indicative of the results of operations
which actually would have resulted had the combination been in effect
on January 1, 1994 or of future results of operations of the
consolidated entity.
(4) Acquisitions
On July 29, 1996, the Company merged with TruVision Wireless Inc.,
("TruVision") whereby the Company issued to the then TruVision
shareholders 3,262,945 shares of common stock. The Company also paid
$1.8 million in cash and issued 180,000 shares of common stock to certain
affiliates of TruVision and issued stock options equivalent to 195,226
shares of the Company's common stock with an estimated fair value at the
date of acquisition of $1,401,723. TruVision acquires, develops, owns
and operates wireless cable television systems within the southeastern
United States primarily in Mississippi, Alabama, and Tennessee.
The following summarizes the allocation of estimated fair market value of
the net assets acquired in the transaction:
Current assets $ 1,146,604
Property and equipment 16,427,882
Other assets 2,149,155
License and leased license investment 80,645,464
Current liabilities (5,719,908)
Deferred tax liability (11,200,000)
Short term debt (32,046,244)
------------
$ 51,402,953
============
In 1996, the Company also acquired (i) Shoals Wireless, Inc., whose
principal asset was an Operating System in the Lawrenceburg,
Tennessee Market, for approximately $1.2 million (ii) an Operating
System and hard-wire cable system in the Huntsville, Alabama Market
for approximately $6 million, (iii) rights to 11 wireless cable
channels in the Macon, Georgia Market for approximately $600,000,
(iv) rights to eight wireless cable channels in the Bowling Green,
Kentucky Market for $300,000, (v) rights to 16 wireless cable
channels in the Jacksonville, North Carolina Market for
approximately $820,000 ($800,00 is being withheld pending grant of
licenses) and 12 wireless cable channels in the Chattanooga,
Tennessee Market for $517,000 and (vi) rights to 11 MDS channels and
filings for 20 ITFS licenses and related transmission tower leases
and approvals in Auburn/Opelika, Alabama for $600,000.
The foregoing transactions have been accounted for as business
combinations using the purchase method of accounting. The various
purchase prices have been allocated to the net assets acquired based
on management's estimates of fair values of assets and liabilities
acquired. Approximately $94,529,000 of the purchase prices have
been allocated to license and leased license investment and are
being amortized over 20 years.
The December 31, 1996 financial statements of Wireless One, Inc. include
the results of operations of the business interests acquired in the
various transactions discussed above from the dates of the respective
transactions. Summarized below is the unaudited pro forma information
for the years ended December 31, 1995 and 1996 as if the transactions
discussed herein and in note 3 had been consummated as of January 1,
1995.
1995 1996
------------ -------------
Revenues $ 6,387,670 $ 15,270,994
Net loss applicable to common stock $ (8,649,605) $ (53,156,071)
Net loss per common share $ (0.52) (3.14)
The unaudited pro forma results have been prepared for comparative
purposes only and include adjustments to conform financial statements of
the acquired entities to accounting policies used by the Company and to
record additional amortization of license and leased license investments
related to the excess purchase price over historical costs of these
license and leased license investments. Adjustments have also been made
to recognize income tax benefits during the periods to the extent
deferred tax assets can be realized through reversals of taxable
temporary differences. Net loss per common share is based on the
weighted average number of shares outstanding during the year adjusted to
give effect to shares issued in the transactions. The unaudited pro
forma results do not purport to be indicative of the results of
operations which actually would have resulted had the combinations been
in effect on January 1, 1995 or of the future results of operations of
the consolidated entity.
(5) Marketable Investment Securities - Restricted
Marketable investment securities - restricted at December 31, 1995
and 1996 consists of U.S. Treasury securities placed in escrow
pursuant to the bond indenture relating to the 1995 Senior Notes. The
investments have been deposited into an escrow account and, pending
disbursement, the collateral agent has a first priority lien on the
escrow account for the benefit of the holders of the notes. Such
funds may be disbursed from the escrow account only to pay interest
on the notes and, upon certain repurchases or redemptions of the
notes, to pay principal of and premium, if any, thereon. The
maturities of the securities purchased have been matched to the
interest payment dates of the notes.
A summary of the Company's restricted held to maturity securities at
December 31, 1995 and 1996 follows:
Amortized Unrealized Unrealized Fair
December 31, 1995 Cost Loss Gain Value
----------------- ------------ ---------- --------- ------------
U.S. Treasury Notes $ 22,343,879 $ (1,110) $ 113,163 $ 22,455,932
U.S. Treasury Notes
interest coupon strips 31,049,465 - 199,185 31,248,650
------------ --------- --------- ------------
$ 53,393,344 $ (1,110) $ 312,348 $ 53,704,582
============ ========= ========= ============
December 31, 1996
U.S. Treasury Notes $ 15,214,837 $ (38,659) $ - $ 15,176,178
U.S. Treasury Notes
interest coupon strips 21,332,090 (23,675) 14,596 21,323,011
Other 487,818 - 15,135 502,953
------------ --------- --------- ------------
$ 37,034,745 $ (62,334) $ 29,731 $ 37,002,142
============ ========= ========= ============
Scheduled maturities for the marketable securities held at December
31, 1996, are as follows:
Amortized Fair
Cost Value
------------ ------------
Maturing in less than 1 year $ 18,149,180 $ 18,152,471
Maturing from 1-5 years 18,885,565 18,849,671
------------ ------------
$ 37,034,745 $ 37,002,142
============ ============
(6) Property and Equipment
Major categories of property and equipment at December 31, 1995 and
1996 are as follows:
Estimated
Life 1995 1996
-------- ------------ ------------
Equipment awaiting installation - $ 2,230,144 $ 9,109,287
Subscriber premises equipment
and installation costs 5 3,561,714 43,049,807
Transmission equipment and
system construction costs 10 8,092,890 29,463,789
Office furniture and equipment 7 1,270,131 7,161,468
Buildings and leasehold
improvements 31.5 523,203 2,031,754
------------ ------------
15,678,082 90,816,105
Less accumulated depreciation (1,411,327) (8,179,393)
------------ ------------
$ 14,266,755 $ 82,636,712
============ ============
Depreciation expense for the years ended December 31, 1994, 1995
and 1996 was $221,909, $1,208,897 and $9,350,133 respectively.
(7) Other Assets
Other assets at December 31, 1995 and 1996 consist of the following:
1995 1996
--------- ----------
Debt issuance costs, net of accumulated
amortization of $163,927 and $1,068,230
in 1995 and 1996, respectively $ 6,053,898 $ 11,129,764
Deposits and other 1,410,543 492,747
Investments in unconsolidated subsidiaries 225,504 2,810,079
----------- ------------
$ 7,689,945 $ 14,432,590
=========== ============
Investments in unconsolidated subsidiaries relates to the Company's
50% investment in Wireless One North Carolina, LLC (WONC) accounted
for on the equity method and its 16.5% investment in Telecorp
Holding Corp, Inc., (Telecorp) accounted for on the cost method.
WONC is in the business of acquiring, developing and operating
wireless cable television systems in North Carolina. Telecorp is in
the business of acquiring personal communication service (PCS)
licenses for the purpose of developing and operating a PCS
network. Neither of these entities has commenced operations as of
December 31, 1996.
(8) Long-term Debt
Long-term debt consists of the following:
1995 1996
------------ ------------
13% Senior Notes due 2003; face value
of $150,000,000, net of unamortized
discount - (1995 Senior Notes) $148,149,131 $148,384,135
13.5% Senior Discount Notes due 2006;
face value of $239,252,000, net of
unamortized discount - (1996 Senior
Discount Notes) - 126,400,136
9.5% installment notes, principal and
interest due in installments through
August 31, 2006 - 22,257,207
Subordinated non-interest bearing notes
(face value outstanding at December
31, 1995 and 1996 of $3,400,000 and
$3,050,000, respectively), discounted
to an 8% effective rate, principal and
interest due in installments through
July 1997 2,939,156 2,880,672
Other 159,760 3,156,454
------------ ------------
151,248,047 303,078,604
Less current maturities (376,780) (3,169,383)
------------ ------------
Long-term debt, excluding current
maturities $150,871,267 $299,909,221
============ ============
Scheduled maturities of long term debt for the next five years and
thereafter, are as follows:
1997...........................$ 3,169,383
1998........................... 821,426
1999........................... 2,781,078
2000........................... 2,394,819
2001........................... 2,630,560
Thereafter..................... 291,281,338
Interest on the 1995 Senior Notes is payable semi-annually on April
15 and October 15 of each year. The 1995 Senior Notes are
redeemable at the option of the Company, in whole or in part, at any
time on or after October 15, 1999, at variable redemption prices in
excess of par. On or prior to October 15, 1998, the Company may
redeem up to 30% of the aggregate principal amount of the 1995
Senior Notes with the proceeds from a sale to a strategic investor,
as defined. In addition, upon the occurrence of a change of
control, as defined, each holder of the 1995 Senior Notes may
require the Company to repurchase all or a portion of such holder's
1995 Senior Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest.
The 1996 Senior Discount Notes will accrete in value until August 1,
2001 at a rate of 13.5% per annum to an aggregate principal amount
of $239,252,000. Thereafter, cash interest on the notes will accrue
at a rate of 13.5% per annum on the face value of the notes payable
semi-annually on February 1 and August 1 of each year commencing
February 1, 2002. The Company is accreting the 1996 Senior Discount
Notes using the effective yield. Interest expense accreted to the
balance of the notes during the year ended December 31, 1996 was
$6,453,922. The 1996 Senior Discount Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or
after August 1, 2001 at variable redemption prices in excess of par.
On or prior to August 1, 1999, the Company may redeem up to 30% of
the aggregate principal amount of the 1996 Senior Discount Notes
with the proceeds from a sale to a strategic investor, as defined.
In addition, upon the occurrence of a change of control, as
defined, each holder of the 1996 Senior Discount Notes may require
the Company to repurchase all or a portion of such holder's 1996
Senior Discount Notes at 101% of the accreted value thereof, plus
accrued and unpaid interest.
The 1995 Senior Notes and 1996 Senior Discount Notes are issued and
outstanding under indentures which contain certain restrictive
covenants, including limitations on the incurrence of indebtedness,
the making of restricted payments, transactions with affiliates,
sale and leaseback transactions, the existence of liens, disposition
of proceeds of asset sales, the making of guarantees and pledges by
restricted subsidiaries, transfers and issuance of stock of
subsidiaries, investments in unrestricted subsidiaries, the conduct
of the Company's business and certain mergers and sales of assets.
The 9.5% installment notes were incurred in connection with an
auction of Basic Trading Area ("BTA") rights in which the Company
was the successful bidder. The notes require quarterly payments of
interest only through August 31, 1998. Thereafter, the notes
require equal quarterly payments of principal and interest of
$1,000,849 through August 31, 2006.
(9) Income Taxes
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities are
presented below:
1995 1996
------------ ------------
Deferred tax assets:
Net operating loss carryforwards $ 2,955,166 $ 24,537,357
Allowance for bad debts 25,038 176,771
Accrued liabilities deductible
when paid 152,320 216,368
Other 68,000 24,796
------------ ------------
3,200,524 24,955,292
Less valuation allowance (2,136,029) (5,766,361)
------------ ------------
Deferred tax asset 1,064,495 19,188,931
------------ ------------
Deferred tax liabilities:
Fixed assets, principally due to
differences in depreciation and
underlying basis 11,700 473,997
License Investment, due to
differences in basis from
amortizable lives and purchase
accounting adjustments 1,052,795 25,214,934
----------- ------------
Deferred tax liabilities 1,064,495 25,688,931
----------- ------------
Net deferred tax liability $ - $ 6,500,000
=========== ============
The net changes in total valuation allowance for the years ended
December 31, 1995 and 1996 were increases of $1,911,619 and
$3,630,332 respectively. In assessing the realizability of deferred
tax assets, the Company considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. The
Company considers the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies in
making this assessment. Based upon these considerations, the
Company has recognized deferred tax assets to the extent such assets
can be realized through future reversals of existing taxable
temporary differences.
The Company did not recognize any income tax benefit for 1994 or
1995 due to management's conclusion that a 100% valuation allowance
for the net deferred tax asset was warranted. The consummation of
the TruVision transaction resulted in deferred tax liabilities that
will be recognized during periods in which the net operating losses
may be utilized. The Company has therefore recorded a deferred tax
benefit in the year ended December 31, 1996 to the extent such
assets can be realized through future reversals of deferred tax
liabilities. Income tax benefit in 1996 consists entirely of
deferred income tax benefit resulting from the recognition of net
operating losses.
The reconciliation of income tax from continuing operations computed
at the U.S. Federal statuatory tax rate to the company's effective
income tax rate is as follows for each of the years ended December
31,:
1994 1995 1996
------- ------- -------
Tax at U.S. Federal statutory rate (34.0)% (34.0)% (34.0)%
State and local income taxes, net
of U.S. federal benefit - - (0.9)
Valuation allowance 34.0 28.3 23.5
Other - 5.7 0.8
------- ------- -------
-% -% (10.6)%
======= ======= =======
The Company had net operating loss carryforwards for Federal and
state income tax purposes of approximately $62,916,000 as of
December 31, 1996. The carryforwards expire in years 2008-2011.
(10) Redeemable Convertible Preferred Stock
On April 14, 1995, the Company completed a private placement of
14,781.75 shares of redeemable convertible preferred stock and
591,270 warrants to purchase common stock (collectively the "Units")
at a price of $1,000 per Unit. The proceeds from the issue were
$13,866,000, net of issuance costs. The excess of the liquidation
value over the carrying value was accreted by periodic charges to
additional paid-in capital during the period the stock was
outstanding. Contemporaneously with the closing of the initial
public offering of common stock in October 1995, the preferred stock
and warrants were converted into approximately 4,524,512 shares of
common stock.
(11) Stockholders' Equity
In connection with the 1995 Senior Notes, the Company issued warrants
to acquire 450,000 shares of its common stock. Each warrant entitles
the holder to purchase one share of common stock at $11.55 per share.
The warrants are exercisable at any time on or after October 24, 1996
and will expire on October 24, 2000. For financial reporting purposes,
these warrants were valued at $1,890,000.
In connection with the 1996 Senior Discount Notes, the Company issued
warrants to acquire 544,059 shares of common stock. The warrants are
exercisable at any time on or after August 12, 1997, at an exercise
price of $16.6375 per share and will expire on August 12, 2001. For
financial reporting purposes, these warrants were valued at $5,053,387.
In connection with the Heartland Transaction, the Company issued
warrants (the "GKM Warrants") to purchase 300,000 shares of common
stock to an underwriter for nominal consideration. The GKM Warrants
are initially exercisable at $12.60 per share through October 18, 2000.
For financial reporting purposes, these warrants were valued at
$1,125,000.
In connection with the Heartland Transaction, and as amended in
connection with the TruVision Transaction, certain of the shareholders
of the Company have entered into an agreement whereby, among other
things, they have agreed to vote their common stock to elect a
specified slate of directors, which will be designated by the parties
to the stockholders agreement.
(12) Stock Option Plan
In October of 1995, the Company adopted the 1995 Long-Term
Performance Incentive Plan (the "Incentive Plan"), which provides
for the grant to key employees of the Company of stock options,
appreciation rights, restricted stock, performance grants and any
other type of award deemed to be consistent with the purpose of the
Incentive Plan.
The total number of shares of Common Stock which may be granted
pursuant to the Incentive Plan is 1,300,000. The Incentive Plan
will terminate upon the earlier of the adoption of a Board of
Directors' resolution terminating the Incentive Plan or on the tenth
anniversary of the date of adoption, unless extended for an
additional five-year period for grants of awards other than
incentive stock options.
The exercise price of stock options is determined by the
Compensation Committee of the Board of Directors, but may not be
less than 100% of the fair market value of the common stock on the
date of the grant and the term of any such option may not exceed 10
years from the date of grant. With respect to any employee who owns
stock representing more than 10% of the voting power of the
outstanding capital stock of the Company, the exercise price of any
incentive stock option may not be less than 110% of the fair market
value of such shares on the date of grant and the term of such
option may not exceed five years from the date of grant.
Awards granted under the Incentive Plan will generally vest upon a
proposed sale of substantially all of the assets of the Company, or
the merger of the Company with or into another corporation. Options
generally vest over a five-year period commencing on the date of
grant and expire ten years from the date of grant.
On July 26, 1996, The Company adopted the 1996 Non Employees
Directors' Stock Option Plan (the "Directors' Plan"). Directors of
the Company who are not employees of the Company are eligible to
receive options under the Directors' Plan. The total number of
shares of Common Stock for which options may be granted under the
Directors' Plan is 100,000.
Participants in office on July 26, 1996, received options to acquire
4,000 shares under the Directors' Plan and on January 1 of each
year, eligible participants will receive options to acquire 2,000
shares under the Directors' Plan.
Options granted under the Directors' Plan may be subject to vesting
and certain other restrictions. Subject to certain exceptions, the
right to exercise an option generally terminates at the earlier of
(i) the first date on which the initial grantee of such option is no
longer a director of either the Company or any subsidiary for any
reason other than death or permanent disability or (ii) the
expiration date of the option. Options granted under the Directors'
Plan will also generally vest upon a "change in control" of the
Company.
For the aforementioned plans, the Company has adopted the disclosure-
only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for the stock option grants.
Had compensation cost for the Company's two stock option plans been
determined based on the fair value at the grant date for awards in
1995 and 1996 consistent with the provisions of SFAS No. 123, the
Company's net loss applicable to common stock and net loss per common
share would have been increased to the pro forma amounts indicated
below:
1995 1996
------------- -------------
Net Loss Applicable to Common Stock -
as reported $ 8,478,863 $ 39,670,395
Net Loss Applicable to Common Stock -
pro forma 10,141,210 44,022,171
Net Loss Per Common Share - as reported 2.02 2.65
Net Loss Per Common Share - pro forma 2.42 2.94
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1995 and 1996: expected
volatility of 83%; expected dividend yield of 0%; risk-free interest
rate of 6.76%; and expected lives of 10 years.
Information regarding these option plans for 1994, 1995 and 1996 is as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------------ ------------------------
Weighted
Average
Exercise
Shares Shares Shares Price
--------- -------- --------- -------
<S> <C> <C> <C> <C>
Options Outstanding, beginning of year - 248,917 804,187 $ 7.98
Options Granted
Exercise Price = Fair Market Value 248,917 555,270 59,000 $ 11.89
Exercise Price < Fair Market Value - - 195,226 $ 6.82
Options exercised - - 5,000 $ 6.21
Options canceled - - 25,000 $ 10.50
--------- -------- --------- -------
Options outstanding, end of year 248,917 804,187 1,028,413 $ 7.93
--------- -------- --------- -------
Option price range at end of year $ 6.21 $ 4.16 - 13.83 $ 4.16 - 16.25
Option price range for exercised shares $ - - $ 6.21
Options available for grant at end of year 1,051,083 495,813 371,587
Weighted-average fair value of options,
granted during the year $ 13.10
</TABLE>
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1996.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------- ------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/96 Life Price at 12/31/96 Price
- --------------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 4.16 - $ 6.21 421,145 7.9 $ 5.6545 271,793 $ 5.3492
$ 6.63 - $ 7.59 310,840 9.2 $ 7.0985 195,226 $ 6.8200
$10.24 - $13.83 264,428 8.4 $11.6020 17,440 $10.7221
$15.25 - $16.25 32,000 7.6 $15.5937 0 $ 0.0000
--------- --- -------- ------- --------
1,028,413 8.4 $ 7.9295 484,459 $ 6.1353
========= === ======== ======= ========
</TABLE>
(13) Commitments and Contingencies
The Company leases, from third parties, channel rights licensed by
the FCC. Under FCC policy, the base term of these leases cannot
exceed the term of the underlying FCC license. FCC licenses for
wireless cable channels generally must be renewed every five to ten
years, and there is no automatic renewal of such licenses. The use
of such channels by third parties is subject to regulation by the
FCC and, therefore, the Company's ability to enjoy the benefit of
these leases is dependent upon the third party lessor's continuing
compliance with applicable regulations. The remaining terms of the
Company's leases range from approximately five to twenty years.
Most of the Company's leases provide for rights of first refusal for
their renewal. The termination of or failure to renew a channel
lease or termination of the channel license would result in the
Company being unable to deliver television programming on such
channel. Although the Company does not believe that the termination
of or failure to renew a single channel lease, other than that with
EdNet, could adversely affect the Company, several of such
terminations or failures in one or more markets that the Company
actively serves could have a material adverse effect on the Company.
Channel rights lease agreements generally require payments based on
the greater of specified minimums or amounts based upon various
factors, such as subscriber levels or subscriber revenues.
The Company is a party to a renewable long-term agreement with the
Mississippi EdNet Institute, Inc. ("EdNet"), a non-profit, quasi-
governmental body which manages the licenses designated to various
state educational entities. The agreement gives the Company
exclusive rights to utilize excess air time (that portion of a
channel's airtime available for commercial broadcasting according to
FCC regulations) on the 20 ITFS channels in Mississippi. The terms
of the channel leases are 10 years, commencing in 1992. The
contract provides for the monthly payment of $0.05 per subscriber
per channel or, beginning one year after operating the first market,
a minimum of $7,500 per month. Expense for 1996 related to this
agreement was $79,336. The agreement also required TruVision to
make advances to EdNet during the first 24 months of operations in
the amount of $6,000 per month. These advances are being recovered
as a credit against license fees owed to EdNet. The commercial use
of these channels represents the majority of the Company's channels
in Mississippi and the loss of, or inability to renew the EdNet
Agreement would have a material adverse effect on the Company's
operation.
The EdNet agreement requires the Company to install, operate, and
maintain a system sufficient to serve 95% of the population of the
licensed geographic area of Mississippi by July 1, 1998. The
agreement also requires the Company to provide installations and
equipment at no charge to EdNet at 1,100 sights EdNet may designate
and to install and equip an electronic classroom in each of its
Mississippi markets at a minimum cost of $20,000 per classroom.
The Company capitalizes the cost incurred to comply with the
facility installation and interconnection requirements of the EdNet
Agreement and depreciates such cost over the estimated life of the
related equipment.
Payments under the channel rights lease agreements generally begin
upon the completion of construction of the transmission equipment
and facilities and approval for operation pursuant to the rules and
regulations of the FCC. However, for certain leases, the Company is
obligated to begin payments upon grant of the channel rights.
Channel rights lease expense was $179,172, $380,346, and $1,454,898
for the years ended December 31, 1994, 1995, and 1996, respectively.
The Company also has certain operating leases for office space,
equipment and transmission tower space. Rent expense incurred in
connection with other operating leases was $79,791, $183,003, and
$1,805,083 for the years ended December 31, 1994, 1995, and 1996,
respectively.
Future minimum lease payments due under channel rights leases and
other noncancelable operating leases at December 31, 1996 are as
follows:
Channel Other
Year ending rights operating
December 31, leases leases
------------ ------------ ------------
1997...................... $ 1,588,462 $ 1,432,564
1998...................... 1,688,164 1,361,857
1999...................... 1,703,548 1,310,972
2000...................... 1,737,460 1,244,260
2001...................... 1,745,272 967,600
Thereafter................ 1,810,871 802,202
------------ ------------
$ 10,273,777 $ 7,119,455
============ ============
The Company has entered into various service agreements to obtain
programming for delivery to customers of the Company. Such
agreements require a per subscriber fee to be paid by the Company on
a monthly basis. These agreements range in life from two to ten
years.
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have
a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.
(14) Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of cash, temporary
cash investments, and accounts receivable. The Company places its
cash and temporary cash investments with high credit quality
financial services companies. Collectibility of subscriber accounts
receivable is impacted by economic trends in each of the Company's
markets. Such receivables are typically collected within thirty
days, and the Company has provided an allowance which it believes is
adequate to absorb losses from uncollectible accounts.
(15) Supplemental Cash Flow Information
Cash interest payments made in 1994, 1995, and 1996 totaled
$168,512, $351,178, and $19,404,454 respectively.
The Company made no Federal or state income tax payments during the
years ended December 31, 1994, 1995, and 1996.
During 1995, the Company paid $288,104 in cash and issued 48,752
shares of its common stock in connection with the acquisition of
channel rights in Tennessee. The cost of the channel rights and
other intangible assets acquired was $800,000 based on the initial
public offering price per share of $10.50.
During 1995, the Company completed a public offering of the 1995
Senior Notes which had an underwriters fee treated as a non-cash
transaction in the accompanying cash flow statement of $5,250,000.
During 1996, the Company paid $1.8 million in cash, issued 3,442,945
shares of common stock and issued options valued at $1,401,723 in
connection with the TruVision acquisition. The cost of the acquisition
including property and equipment and license rights acquired was
$51,402,953 based on the then market price of the Company's stock of
$14.
In December 1996, the Company entered into a lease transaction for
computer equipment accounted for as a capital lease. The value
assigned to the equipment and the related capital lease obligation was
$924,782.
During 1996, the Company financed $22,257,207 of the bid price in the
BTA auction with the FCC representing 80% of the Company's bid in those
markets. In addition, the Company recorded other long term debts of
$1,959,252 and related license investment related to BTA's in which the
company was the successful bidder but has not been granted the licenses
as of December 31, 1996 (see note 8).
During 1996, the Company acquired all of the outstanding common stock
of Shoals Wireless, Inc., whose principal asset is a wireless cable
system in Lawrenceburg, Tennessee, for $1,068,000 in cash and a note
payable for $118,000.
During 1996, the Company completed a public offering of the 1996 Senior
Discount Notes which had an underwriters fee treated as a non-cash
transaction in the accompanying cash flow statement of $4,374,986.
(16) Disclosures About Fair Value Of Financial Instruments
The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1996.
The fair value of a financial instrument is defined as the amount at
which the instrument could be exchanged in a current transaction
between willing parties.
At December 31, 1996
--------------------
Carrying Estimated
Amount Fair Value
-------------- --------------
Marketable investment securities $ 37,034,745 $ 37,002,142
Long-term debt 303,078,604 288,818,456
The estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation
methodologies as follows:
* The carrying amounts of cash and cash equivalents, subscriber
receivable, accrued interest and other receivables, accounts
payable and accrued expenses approximate fair value because of
the short term nature of these items.
* The fair values of the Company's marketable investment securities
are based on quoted market prices.
* The fair value of long-term debt is based upon market quotes
obtained from dealers where available and by discounting future
cash flows at rates currently available to the Company for
similar instruments when quoted market rates are not available.
Fair value estimates are subject to inherent limitations. Estimates of
fair value are made at a specific point in time, based on relevant
market information and information about the financial instrument. The
estimated fair values of financial instruments presented above are not
necessarily indicative of amounts the Company might realize in actual
market transactions. Estimates of fair value are subjective in nature
and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.
SCHEDULE II
Wireless One, Inc.
Valuation and Qualifying Accounts
Years Ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Balance at Charged to
Beginning of Costs and Balance at
Description Period Expenses Deductions end of period
- -------------------------------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C>
1996
Deducted in balance sheet from
subscriber receivables:
Allowance for doubtful accounts 73,641 371,349 152,371 292,619
--------- ---------- --------- -----------
Deducted in balance sheet from
leased license investment:
Amortization of leased license
investment 548,283 2,275,375 - 2,833,658
--------- ---------- --------- -----------
Deducted in balance sheet from
other assets: Amortization
of debt issuance costs 163,926 904,304 - 1,068,230
--------- ---------- --------- -----------
1995
Deducted in balance sheet from
subscriber receivables:
Allowance for doubtful accounts 4,000 196,281 126,640 73,641
--------- ---------- --------- -----------
Deducted in balance sheet from
leased license investment:
Amortization of leased license
investment 230,902 317,381 - 548,283
--------- ---------- --------- -----------
Deducted in balance sheet from
other assets: Amortization
of debt issuance costs - 163,926 - 163,926
--------- ---------- --------- -----------
1994
Deducted in balance sheet from
subscriber receivables:
Allowance for doubtful accounts - 54,605 50,608 4,000
--------- ---------- --------- -----------
Deducted in balance sheet from
leased license investment:
Amortization of leased license
investment 4,116 226,786 - 230,902
--------- ---------- --------- -----------
Deducted in balance sheet from
other assets: Amortization
of debt issuance costs - - - -
--------- ---------- --------- -----------
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 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, on April 10, 1997.
WIRELESS ONE, INC.
By: /s/ Michael C. Ellis
--------------------------------------
Michael C. Ellis
Vice President, Controller and
Assistant Secretary
EXHIBIT INDEX
Sequentially
Exhibit No. Description Numbered Page
2.1 TruVision Merger Agreement among the Registrant,
TruVision and Wireless One MergerSub, Inc., dated April
25, 1996(1)
3.1(i) Amended and Restated Certificate of Incorporation of
the Registrant(2)
3.1(ii) Bylaws of the Registrant(2)
4.1 Indenture between the Registrant and United States
Trust Company of New York, as Trustee, dated October
24, 1995(3)
4.2 Escrow and Disbursement Agreement between the
Registrant and Bankers Trust Corporation, Escrow Agent,
dated October 24, 1995(3)
4.3 Supplemental Indenture between the Registrant and
United States Trust Company of New York, as Trustee,
dated July 26, 1996(4)
4.4 Indenture between the Registrant and United States
Trust Company of New York as Trustee, dated August 12,
1996(4)
10.1 1995 Long-Term Performance Incentive Plan of the
Registrant(3) *
10.2 1996 Director's Stock Option Plan of the Registrant(4) *
10.3 Warrant Agreement between the Registrant and Gerard,
Klauer & Mattison L.L.C. (including form of warrant
certificate) dated October 18, 1995(3)
10.4 Amended and Restated Registration Rights Agreement
among the Registrant, Heartland and certain
stockholders dated July 29, 1996(4)
10.5 Amended and Restated Stockholders Agreement among the
Registrant, and certain stockholders dated July 29,
1996 ("Stockholders Agreement")(4), as amended by
Amendment No. 1 dated September 17, 1996(5)
10.6 Standard forms of MDS License Agreement of the
Registrant(2)
10.7 Standard forms of ITFS License Agreement of the
Registrant(2)
10.8 Form of Employment Agreement between the Registrant and
certain executive officers(1) *
10.9 Acquisition and Market Escrow Agreement among the
parties to Exhibit 2.1 dated July 29, 1996(1)
11.1 Statement re: Computation of Ratio of Per Share
Earnings(6)
21.1 Subsidiaries of the Registrant(6)
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule(6)
_________________________________________
(1) Incorporated herein by reference from the Registrant's Registration
Statement Form S-1 (Registration Number 333-05109 ) as declared
effective by the Commission on August 7, 1996.
(2) Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (Registration Number 33-94942) as declared
effective by the Commission on October 18, 1995.
(3) Incorporated herein by reference from the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1995.
(4) Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (Registration Number 333-12449) as declared
effective by the Commission on October 18, 1996.
(5) Incorporated by reference from the Registrant's Post-Effective Amendment
No. 1 to Registration Statement on Form S-3 (Registration Number
333-12449) as declared effective by the Commission on October 21, 1996.
(6) Previously filed.
* Executive Compensation Plans and Arrangements
EXHIBIT 23.1
The Board of Directors
Wireless One, Inc.
We consent to incorporation by reference in the registration statements on
Form S-3 (No. 333-12449), Form S-3 (No. 333-15475) and Form S-8 (No. 333-
11563) of Wireless One, Inc. of our report dated February 21, 1997,
relating to the consolidated balance sheets of Wireless One, Inc. and
subsidiaries as of December 31, 1995 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 December 31, 1996, and related
schedule which report appears in Amendment No. 1 to the December 31, 1996
annual report on Form 10-K of Wireless One, Inc.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
April 10, 1997
