UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1998
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.)
1080 River Oaks Drive, Suite A150
Jackson, Mississippi
(Address of principal executive office)
39208
(Zip code)
(601) 936-1515
(Registrant's telephone number, including area code)
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 April 30,
1998:
16,910,064
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997
(unaudited) 2
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1998 and
1997 (unaudited) 3
Condensed Consolidated Statements of Cash
Flows for the three months ended March 31, 1998
and 1997 (unaudited) 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 15
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WIRELESS ONE, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
March 31, December 31,
Assets 1998 1997
Current assets:
Cash and cash equivalents $ 12,774,834 $ 15,528,215
Marketable investment securities- 19,407,104 19,258,789
restricted
Subscriber receivables, net 1,771,197 2,071,689
Accrued interest and other receivables 1,102,987 729,237
Prepaid expenses 967,256 1,136,303
------------ ------------
Total current assets 36,023,378 38,724,233
Property and equipment, net 104,148,885 110,099,016
License and leased license investment, net 150,270,175 151,386,399
Other assets 15,588,985 17,377,550
------------ ------------
Total assets $ 306,031,423 $ 317,587,198
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,052,505 $ 2,913,209
Accrued expenses 5,261,929 5,117,451
Accrued interest 9,714,251 4,942,119
Current maturities of long-term debt 1,370,263 871,408
------------ -----------
Total current liabilities 18,398,948 13,844,187
Deferred income taxes 3,900,000 5,200,000
Long-term debt 322,025,890 317,529,032
------------ -----------
344,324,838 336,573,219
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, 16,910,064 shares
issued and outstanding 169,101 169,101
Additional paid-in capital 119,772,011 119,772,011
Accumulated deficit (158,234,527)(138,927,133)
------------ -----------
Total stockholders' equity (38,293,415) (18,986,021)
------------ -----------
$ 306,031,423 317,587,198
============ ===========
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
WIRELESS ONE, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended
March 31,
1998 1997
Revenues $ 10,616,286 $ 7,069,457
Operating expenses:
System operations 6,423,708 5,029,251
Selling, general and administrative 5,769,745 5,979,399
Depreciation and amortization 9,629,691 6,257,440
------------ -------------
21,823,144 17,266,090
------------ -------------
Operating loss (11,206,858) (10,196,633)
------------ -------------
Other income (expense):
Interest expense (10,782,160) (10,298,287)
Interest income 524,374 1,742,770
Equity in losses of affiliate (142,750) (152,135)
Gain on sale of investment 1,000,000 -
------------ -------------
Total other expense (9,400,536) (8,707,652)
------------ -------------
Loss before income taxes (20,607,394) (18,904,285)
Income tax benefit 1,300,000 -
------------ -------------
Net loss (19,307,394) (18,904,285)
============ =============
Basic and diluted loss
per common share $ (1.14) $ (1.12)
============ =============
Basic and diluted weighted average
common shares outstanding 16,910,064 16,946,697
============ =============
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WIRELESS ONE, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
March 31
1998 1997
Cash flows used in operating
activities:
Net loss $(19,307,394) $ (18,904,285)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Bad debt expense 463,738 314,614
Depreciation and
amortization 9,629,691 6,257,440
Amortization of debt
discount 5,345,502 4,810,909
Deferred tax benefit (1,300,000) -
Accretion of interest
income (148,315) (209,604)
Equity in losses of
affiliate 142,750 152,135
Gain on sale of assets (1,000,000) (3,332)
Changes in assets and
liabilities:
Receivables (536,996) (1,080,944)
Prepaid expenses 169,047 147,304
Deposits (4,240) (99,698)
Accounts payable and
accrued expenses 4,055,907 7,198,312
---------- -----------
Net cash used in
operating activities (2,490,310) (1,417,149)
---------- -----------
Cash flows used in investing
activities:
Purchase of investments and other
assets (125,000) (1,640,000)
Capital expenditures (2,376,855) (21,676,135)
Acquisition of license investment (186,489) (673,072)
Proceeds from sale of assets 2,500,000 59,424
---------- -----------
Net cash used in
investing activities (188,344) (23,929,783)
---------- -----------
Cash flows from financing activities:
Principal payments on short-term
debt (74,727) (75,487)
---------- -----------
Net decrease in cash (2,753,381) (25,422,419)
Cash and cash equivalents at beginning
of period 15,528,215 104,448,583
---------- -----------
Cash and cash equivalents at end of
period $ 12,774,834 $ 79,026,164
========== ===========
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
WIRELESS ONE, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 1998
(1) Description of Business and Summary of Significant
Accounting Policies
(a) Description of Organization
Wireless One, Inc. is engaged in the business of
developing, owning, and operating wireless cable
television systems and a high-speed, two-way Internet
access product, primarily in select southern and
southeastern United States markets. At March 31, 1998, the
Company had 34 wireless cable television systems in
operation ("Operating System") and 46 other markets either
under construction or in development ("Future Development
Markets"), 13 of which are held by a 50% owned joint
venture.
(b) Consolidation Policy
The condensed 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) Interim Financial Information
The condensed consolidated financial statements are
unaudited and reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and
notes thereto, contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997. The
results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal
year ending December 31, 1998.
(d) Earnings Per Share
Earnings per share are computed in accordance with SFAS
No. 128, "Earnings Per Share." SFAS No. 128 requires the
replacement of previously reported primary and fully
diluted earnings per share under Accounting Principles
Board Opinion No. 15 with basic earnings per share and
diluted earnings per share. The calculation of basic
earnings per share excludes any dilutive effect of
potential issuances of common stock, while diluted
earnings per share includes the dilutive effect of such
potential issuances. Shares issuable upon exercise of the
Company's stock options and warrants are anti-dilutive and
have been excluded from the calculation of diluted
earnings per share. Per share amounts for all periods
presented have been restated to conform to the
requirements of SFAS No. 128.
(e) Reclassification
Certain expenses for the three months ended March 31,
1997 have been reclassified to conform to current period's
presentation. These reclassifications had no effect on
previously reported net loss.
<PAGE>
WIRELESS ONE, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 1998
(f) Liquidity
The Company's business requires substantial amounts of
capital and liquidity, principally for the acquisition and
installation of equipment, the development and launch of
new products and markets, debt service and working capital
requirements. To date, the Company has funded operating
losses and capital expenditures principally with funds
raised during 1995 and 1996 through its initial public
offering of common stock and the issuance of debt
securities. Management projects that the Company will
require significant additional funds for the continued
implementation of its business plan, including capital
expenditures and debt service requirements in 1998 and
beyond.
The Company forecasts that it will need to raise appro-
ximately $10 - 13 million in additional funding to meet
the capital expenditures and operating needs included in
its business plans for 1998. The Company is actively
seeking to raise these additional funds and is exploring
various alternatives to address its short and long-term
capital needs. These alternatives may include raising
additional funds through various financing arrangements,
restructuring its existing indebtedness, modifying its
business plan, or a combination of the foregoing. While
management believes it will obtain additional funds, there
can be no assurance that additional capital will be
available to the Company on terms that comply with the
Company's credit agreements and indebtedness or on terms
that management finds acceptable. If additional funds are
not available, the Company may not be able to continue to
launch new systems or to further develop its internet
product, and its DirecTV MDU and SFU products may be
curtailed. In addition to its estimated 1998 cash
requirements, the Company must raise additional capital or
generate sufficient operating cash flow to satisfy its
debt service obligations on its 1995 Senior Notes, which
require semi-annual interest payments of $9,750,000
beginning in April 1999.
(g) 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. The
significant estimates impacting the preparation of the
Company's consolidated financial statements include the
allowance for doubtful accounts on subscriber receivables,
the valuation allowances on deferred tax assets and
estimated useful lives of property and equipment and
intangible assets. Actual results could differ from those
estimates.
(h) New Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS
No. 130, "Reporting Comprehensive Income". Effective
January 1, 1998, this statement establishes standards for
reporting and disclosure of comprehensive income and its
components in a full set of general-purpose financial
statements. Because the Company has no elements of
comprehensive income, other than net income, no further
disclosure is included within these consolidated financial
statements.
<PAGE>
(2) Income Taxes
The Company recorded a net deferred tax liability in
conjunction with its acquisition of TruVision. The
liability principally relates to differences in the basis
of the underlying assets and liabilities in excess of net
operating loss carryforwards. The Company recognized
$1,300,000 of deferred income tax benefit for the three
months ended March 31, 1998, representing the tax effect
of the portion of net operating loss carryforwards
generated in the current period which the Company utilized
to reduce the deferred tax liability.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Discussion and Analysis of Financial
Condition and Results of Operations contains certain "forward
looking statements" within the meaning of Section 27A of the
Securities Act of 1933 (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934 (the "Exchange Act"), which
reflect management's best judgment based on factors currently
known. Actual results could differ materially from those
anticipated in these "forward looking statements" as a result of a
number of factors, including but not limited to those discussed
below, particularly in "Cautionary Statements." "Forward looking
statements" provided by the Company pursuant to the safe harbor
established by the federal securities laws should be evaluated in
the context of these factors.
This discussion and analysis should be read in
conjunction with the Company's condensed consolidated financial
statements and notes thereto.
RESULTS OF OPERATIONS FOR THE FIRST QUARTER ENDED MARCH 31, 1998,
COMPARED TO THE FIRST QUARTER ENDED MARCH 31, 1997.
Overview
Since its inception, the Company has significantly increased
its Operating Systems and number of subscribers. This controlled
growth has been achieved from internal expansion and through
acquisitions and mergers. The Company has sustained substantial
net losses, primarily due to fixed operating costs associated with
the development of its systems, interest expense and charges for
depreciation and amortization.
Beginning in the third quarter of 1997, the Company focused
its marketing efforts on developing its new long-term cooperative
marketing agreement with DirecTV (the "DirecTV Agreement") which
offers subscription video services to multiple dwelling units
(MDU's). In April 1998, the Company announced an agreement to
expand the DirecTV Agreement to include marketing of DirecTV
program offerings to Single Family Units (SFU) located in the
Company's markets. The Company intends to initially offer this
DirecTV SFU product to those residents in Operating Systems who are
not currently passed by a hard-wire cable competitor or, due to
topographical restrictions or blockage by trees, unable to receive
the Company's wireless video product. Because of the lower capital
and operating costs per subscriber and the enhanced programming
available through its DirecTV MDU and SFU products, the Company
believes that this focus will provide the Company with the best use
of its wireless spectrum, existing infrastructure, and the
opportunities provided by the marketplace. Because of the
increased opportunity provided by its DirecTV MDU and SFU products,
the Company has determined to de-emphasize the growth of its
traditional wireless video SFU business and currently does not plan
to launch new systems focused on SFUs. Accordingly, the Company
has implemented changes to its business operations to reduce
personnel and other operating expenses to the levels needed to
implement these refocused business objectives, including the
elimination of over 45% of the Company's 900 employees.
While managing its core wireless video subscription
business, the Company has devoted resources to the development of
new products to generate additional revenue streams, while
providing economies of scale for its existing wireless spectrum and
system infrastructure. The Company has developed and commenced the
commercial launch of a two-way wireless internet access product.
The Company believes that significant opportunities exist for this
product with small and mid-size commercial customers, who typically
do not have access to high-speed internet access services from
local exchange carriers or other dedicated service providers. The
Company began the commercial launch of this product during the
second quarter of 1998.
<PAGE>
The Company does not anticipate being able to generate net
income for at least the foreseeable future and there can be no
assurance that other factors, such as, but not limited to, economic
conditions, its inability to raise additional financing or
disruptions in its operations, will not result in further delays in
operating on a profitable basis. Net losses are expected to
continue as the Company focuses its resources on the marketing of
its DirecTV MDU and SFU products, development of its internet
access product and as additional systems are commenced or acquired.
The Company's business plan for the remainder of 1998 reflects a
net cash requirement of approximately $23 - 26 million to finance
the launch and buildout of additional video and internet systems,
fund operating losses, and meet certain debt obligations in 1998.
As of March 31, 1998, the Company had $12.8 million in unrestricted
cash on hand and will require an estimated $10 - 13 million in
additional capital funding to meet its 1998 cash requirements.
Although the Company is actively seeking sources of these
additional capital funds, there can be no assurance that such
efforts will be successful. If additional funds are not available,
the Company may not be able to continue to launch new systems or to
further develop its internet product, and its DirecTV MDU and SFU
products may be curtailed. In addition to its 1998 cash
requirements, the Company must raise additional capital or generate
sufficient operating cash flow to satisfy its future debt service
obligations on its 1995 Senior Notes (as defined in "Liquidity and
Capital Resources") which require semi-annual interest payments of
$9.8 million beginning in April 1999.
Results of Operations
Revenues - The Company's revenues consist of monthly fees
paid by subscribers for the basic programming package and for
premium programming services. The Company's subscription revenues
for the three months ended March 31, 1998 were $10.6 million as
compared to $7.1 million for the same period of 1997, an increase
of $3.5 million or 50%. This increase in revenues for the three
months ended March 31, 1998 over the comparable prior-year period
was primarily due to the average number of subscribers increasing
from 79,447 for the three months ended March 31, 1997 to 110,883
subscribers for the comparable 1998 period. At March 31, 1998, the
Company had 106,945 subscribers versus 88,409 at March 31, 1997.
The increase in average number of subscribers is attributable to
strong growth in Operating Systems that were in operation in the
1997 period. In addition, revenues increased in 1998 due to
increased basic and premium service pricing during the 1998
Quarter.
Systems Operations Expenses - Systems operations expense
includes programming costs, channel lease payments, tower and
transmitter site rentals, cost of program guides, certain repairs
and maintenance expenditures, vehicle expenses and other direct
operating and labor expenses. Programming costs, cost of program
guides, channel lease payments and certain labor (with the
exception of minimum payments) are variable expenses that increase
as the number of subscribers increases. Systems operations
expenses for the three months ended March 31, 1998 were $6.4
million as compared to $5.0 million for the same period of 1997, an
increase of $1.4 million or 28%. This increase is attributable
primarily to the increase in the average number of subscribers
outlined above. As a percent of revenues, systems operations
expenses were 61% of revenues for the three months ended March 31,
1998 compared to 71% for the same period of 1997.
Selling, General and Administrative - SG&A expenses for the
three months ended March 31, 1998 were $5.8 million compared to
$6.0 million for the same period of 1997, a decrease of $.2
million. SG&A expenses decreased due primarily to lower
advertising and marketing expenses offset partially by
administrative costs associated with increased activities and a
larger subscriber base. As a percent of revenues, SG&A expenses
decreased to 54% of revenues for the three months ended March 31,
1998 from 85% for the same period of 1997.
<PAGE>
The Company believes such SG&A costs will not stabilize until
all planned video and internet markets are 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, the Company's
anticipated schedule of system and product launches needs to be met
and desired penetration rates need to be achieved. The Company's
ability to meet its currently anticipated launch schedule is
dependent on numerous factors, including the ability of the Company
to achieve the necessary regulatory approvals for such systems in a
timely manner and its ability to finance the launch of such
systems. Although management currently expects to meet the
anticipated systems and product launch schedule, there can be no
assurance that such schedule will be met or the necessary
penetration rates will be achieved in such markets to provide for
the stabilization of SG&A costs.
Depreciation and Amortization Expense - Depreciation and
amortization expense for the quarter ended March 31, 1998 was $9.6
million versus $6.3 million for the same period of 1997, an
increase of $3.3 million. The increase in depreciation expense
during the period was due to additional capital expenditures
related to the installation of subscriber and other equipment in
Operating Systems to support the growth in the subscriber base. In
addition, amortization of leased license costs increased due to the
acquisition of additional channel rights in 1997.
Interest Expense - Interest expense for the quarter ended
March 31, 1998 was $10.8 million versus $10.3 million for the same
period of 1997, an increase of $.5 million. This increase in
interest expense was due to higher non-cash interest costs
associated with the amortization of the discount associated with
the 1996 Senior Discount Notes (as defined in "Liquidity and
Capital Resources") in August 1996.
Interest Income - Interest income for the quarter ended
March 31, 1998 was $.5 million versus $1.7 million for the same
period of 1997, a decrease of $1.2 million. This decrease in
interest income was due to a decrease in the amount of funds
available for investment that resulted from the net proceeds from
the 1995 Senior Notes and 1996 Unit Offering (as defined in
"Liquidity and Capital Resources") and the utilization of cash
balances to further develop its Operating Systems.
Liquidity and Capital Resources
The wireless cable television and internet access
product businesses are capital intensive. The Company's operations
require substantial amounts of capital for (i) the installation of
equipment at subscribers premises, (ii) the construction of
transmission and headend facilities and related equipment
purchases, (iii) the funding of start-up losses and other working
capital requirements, (iv) the acquisition of wireless cable
channel rights and systems, (v) investments in vehicles and
administrative offices, and (vi) the development, testing and
launch of new products, such as the internet access product. 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
the launch of additional markets, in October 1995, the Company
completed the initial public offering of 3,450,000 shares of its
common stock (the "Common Stock Offering"). The Company received
approximately $32.3 million in net proceeds from the Common Stock
Offering. Concurrently, the Company issued 150,000 units (the
"1995 Unit Offering") consisting of $150 million aggregate
principal amount of senior notes due 2003 (the "1995 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. 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 1995 Senior Notes as required by terms of the indenture
governing the 1995 Senior Notes. At March 31, 1998, there was
approximately $19.4 million remaining in the escrow account, $9.8
million of which was used to pay interest on the 1995 Senior Notes
in April 1998 with the remainder to be used to pay interest on the
1995 Senior Notes due in October 1998. After the October payment
on the 1995 Senior Notes is made, the Company will be required to
fund future interest payments on the 1995 Senior Notes along with
its other debt service obligations from other sources of funds.
<PAGE>
In August 1996, the Company issued 239,252 units (the "1996
Unit Offering") consisting of $239 million aggregate principal
amount of senior discount notes (the "1996 Senior Discount Notes")
and 239,252 warrants to purchase 544,059 shares of common stock at
an exercise price of $16.64 per share. The Company received $118.6
million after expenses. The proceeds are being used to fund
marketing of the Company's new DirecTV MDU and SFU products,
development of the Company's internet product, the launch of new
systems and expansion of the Company's existing markets.
For the three months ended March 31, 1998, cash used
in operating activities was $2.5 million consisting primarily of a
net loss of $19.3 million, in addition to an increase in
receivables and prepaid expenses of $.4 million and a $1.0 million
gain on the sale of the Company's investment in Telecorp Holding
Corporation, Inc. (Telecorp), partially offset by depreciation and
amortization of $9.6 million, an increase in accounts payable and
accrued expenses of $4.1 million, and net non-cash expenses of $4.5
million. For the three months ended March 31, 1998, cash used in
investing activities was $.2 million, consisting primarily of
capital expenditures and payments for licenses and organization
costs of approximately $2.4 million and $.3 million, respectively.
In addition, the Company received $2.5 million in net proceeds from
the sale of its investment in Telecorp. These investing activities
were principally related to the acquisition of equipment in certain
of the Company's Operating Systems, as well as the development
of its new high-speed internet product, and certain license and
organization costs related to those markets. For the three months
ended March 31, 1998, cash flows used in financing activities were
$.1 million consisting of repayments of short-term debt.
For the three months ended March 31, 1997, cash used
in operating activities was $1.4 million consisting primarily of a
net loss of $18.9 million, an increase in receivables and prepaids
of $.9 million and an increase in deposits of $.1 million,
partially offset by an increase in accounts payable and accrued
expenses of $7.2 million, depreciation and amortization expense of
$6.3 million, and net non-cash expenses of $5 million. For the
three months ended March 31, 1997, cash used in investing
activities was $23.9 million, consisting primarily of capital
expenditures and payments for licenses and organization costs of
approximately $21.7 million and $.7 million, respectively. In
addition, the Company made investments and purchased other assets
at a cost of approximately $1.6 million and received proceeds of
$.1 million from the sale of capital assets. These investing
activities were principally related to the acquisition of equipment
in certain of the Company's Operating Systems, as well as in Future
Launch Markets and certain license and organization costs related
to those markets. For the three months ended March 31, 1997, cash
flows used in financing activities were $.1 million consisting of
repayments of short-term debt.
For the three months ended March 31, 1998, the Company made
capital expenditures of $2.4 million versus $21.7 million for the
same period in 1997, a decrease of $19.3 million. This reduction
reflects the Company's business strategy to de-emphasize growth of
its traditional wireless video SFU business, focus on developing
its DirecTV MDU and SFU products and the development of new
products to generate additional revenue streams. Based on its
current business plans, the Company estimates that $18 - 23
million in capital expenditures will be required over the remaining
nine months of 1998 to continue to fund growth in its Operating
Systems, to develop and launch its internet product and to develop
additional Operating Systems.
Historically, the Company has generated operating and
net losses and is expected to do so for at least the foreseeable
future as it continues to market its new DirecTV MDU and SFU
products, develop its internet product and develop additional
Operating Systems. Such losses may increase as these products are
implemented and 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 or operating cash flow in
the future. As the Company continues to develop systems, operating
cash flow from more mature systems is expected to be partially or
completely offset by negative operating cash flow from less
developed systems and from development costs associated with
establishing its new products and its Operating Systems in new
markets. This trend is expected to continue until the Company has
a sufficiently large subscriber base to absorb operating and
development costs of recently launched systems. The Company's
ability to meet its currently anticipated video and internet launch
schedules and achieve its targeted penetration rates and subscriber
levels is dependent on numerous factors, including the Company's
ability to finance new launches and expansion of existing systems,
its experience with its DirecTV MDU and SFU products (which remain
new products for the Company), the acceptance and performance of
its internet access product (a new product for the Company), the
ability of the Company to achieve the necessary regulatory
approvals for anticipated video/internet product launches in a
timely manner, and general economic and competitive factors with
respect to the wireless cable business, many of which are beyond
the Company's control. There can be no assurance that the Company
will be able to achieve the necessary subscriber or revenue levels
to attain positive operating cash flow levels at any time.
<PAGE>
Based on the factors and results discussed above, the Company
believes that the $12.8 million in unrestricted cash at March 31,
1998 will not be sufficient to meet its forecasted capital and
operating requirements for 1998. The Company will need to raise
approximately $10 - 13 million in additional funding in order to
finance the launch and build-out of additional video and internet
systems included in the Company's business plans for 1998. The
Company is actively seeking to raise these additional funds through
financing arrangements at the Operating System level, additional
borrowings, the sale of additional debt or equity securities, joint
ventures or other arrangements, if such financing is available to
the Company on satisfactory terms. There is no assurance that the
Company will be able to raise additional capital within the
limitations of the indentures governing the 1995 Senior Notes or
the 1996 Senior Discount Notes or on terms the Company considers
acceptable. If additional funds are not available, the Company may
not be able to continue to launch new systems or to further develop
its internet product and its DirecTV MDU and SFU products may be
curtailed. In addition to its 1998 cash requirements, the Company
must raise additional capital or generate sufficient positive
operating cash flow to satisfy its future debt service obligations
on its 1995 Senior Notes, which require semi-annual interest
payments of $9.8 million beginning in April 1999.
As a result of the issuance of the 1995 Senior Notes and the
1996 Senior Discount Notes the Company is required to satisfy
significant debt service requirements. Beginning in April 1999,
the Company will be obligated to devote a substantial portion of
the Company's cash flow to debt service on the 1995 Senior Notes,
and after August 1, 2001, on the 1996 Senior Discount Notes. The
ability of the Company to make payments of principal and interest
on these notes will be largely dependent in the short term upon the
ability of the Company to raise additional capital, or obtain
concessions from holders of the 1995 Senior Notes, the 1996 Senior
Discount Notes and/or its lenders, and in the long-term upon its
future financial performance. The Company is exploring various
alternatives to address its short- and long-term capital needs.
These alternatives may include raising additional funds through
various financing arrangements (as described above), restructuring
its existing indebtedness, modifying its business plan, or a
combination of the foregoing. Many factors, some of which may be
beyond the Company's control, may effect the Company's ability to
resolve its long-term capital needs. These factors include the
availability of sufficient financing on terms acceptable to the
Company; the willingness of the holders of the Company's debt
securities to agree to any restructuring of the Company's
indebtedness that the Company may seek; prevailing and perceived
economic conditions, both in general and with respect to the
Company's industry; and other factors that could affect the
Company's performance, such as competition or regulatory
restrictions. While no debt service is required on the Company's
existing Senior Notes until April 1999, there can be no assurance
that the Company will be able to generate sufficient cash flow to
cover required interest and principal payments when due on the 1995
Senior Notes and the 1996 Senior Discount Notes or the other
indebtedness of the Company or that the Company will otherwise be
able to resolve its long-term capital needs.
The Company has been notified by the Nasdaq that it does not
meet all of the financial standards of the listing requirements of
the Nasdaq National Market. The Company has requested that the
listing of its common stock be transferred to the Nasdaq SmallCap
Market. However, the Company does not meet all of the criteria for
listing on the Nasdaq SmallCap Market. Therefore, there can be no
assurance that the Nasdaq will allow the transfer. If the transfer
is denied, the Company may seek to appeal the denial, endeavor to
maintain its listing, or seek listing on an alternative exchange or
market. There can be no assurance, however, that the Company's
common stock will not be delisted or that the Company will be
accepted for listing on any alternative exchange or market. If the
listing of the Company's common stock were not transferred to the
Nasdaq SmallCap Market and the Company's shares were to be delisted
and were not listed on an alternative exchange or market, the
Company's common shareholders may experience a substantial
reduction in the liquidity of their shares.
<PAGE>
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.
New Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS No.
131, "Disclosure about Segments of an Enterprise and Related
Information." This statement is effective for fiscal years
beginning after December 15, 1997 and requires disclosures about
operating segments and enterprise-wide disclosures about products
and services, geographic area and major customers. The Company is
currently evaluating the effect of this statement on the
presentation of and disclosures within its consolidated financial
statements.
Cautionary Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations and the notes to the financial
statements contained herein contain "forward-looking statements."
All statements other than statements of historical fact included in
this report, including, without limitation, statements regarding
future liquidity, cash needs and financing, and the Company's
expectations regarding positive operating cash flow, net losses,
subscriber and revenue levels, profitability and SG&A costs, the
expected results of the Company's business strategy, the listing of
the Company's common stock and other plans and objectives of
management of the Company for future operations and activities are
forward-looking statements.
Important factors that could cause actual results to
differ materially from the Company's expectations include, without
limitation, business opportunities that may be presented to and
pursued by the Company, changes in laws or regulations, the
substantial indebtedness of the Company, uncertainty created by the
Company's limited operating history, negative cash flow and lack of
profitable operations, the Company's need for additional financing,
the need to manage the change in business strategy, uncertainty of
ability to obtain FCC authorizations, government regulations,
competition, physical limitations of wireless cable transmission,
and other factors, many of which are beyond the control of the
Company. Further information regarding these and other factors
that might cause future results to differ from those projected in
the forward-looking statements are described in more detail under
the heading "Factors That May Affect Future Results of the Company"
in the Company's Form 10-K for the year ended December 31, 1997.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index on page E-1
(b) No reports on Form 8-K were filed during the periods
presented.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WIRELESS ONE, INC.
Date: March 14,1998 /s/ Henry M. Burkhalter
Henry M. Burkhalter
Chief Executive Officer
Date: March 14, 1998 /s/ Henry G. Schopfer, III
Henry G. Schopfer, III
Executive Vice President
and Chief Financial Officer
/s/ Laurence O. Woolhiser, Jr.
Date: March 14, 1998 Laurence O. Woolhiser, Jr.
Vice President and
Controller
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
3.1(i) Amended and Restated Certificate of Incorporation
of the Registrant (1)
3.1(ii) Bylaws of the Registrant (1)
4.1 Indenture between the Registrant and United States
Trust Company of New York, as Trustee, dated October
24, 1995(2)
4.2 Warrant Agreement between Registrant and United
States Trust Company of New York, as Warrant Agent,
dated October 24, 1995(2)
4.3 Escrow and Disbursement Agreement between the
Registrant and Bankers Trust Corporation, Escrow Agent,
dated October 24, 1995(2)
4.4 Supplemental Indenture between the Registrant and
United States Trust Company of New York, as trustee, dated
July 26, 1996(3)
4.5 Indenture between the Registrant and United States
Trust Company of New York as Trustee, dated August 12,
1996(3)
4.6 Warrant Agreement between the Registrant and
United States Trust Company of New York, as Warrant Agent,
dated August 12, 1996(4)
11.1 Statement re computation of per share earnings (5)
27.1 Financial Data Schedules(5)
1) Incorporated herein by reference from the Registrant's
Registration Statement on 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 to the Registrant's
Registration Statement on Form S-1 (Registration Number 333-
12449) as declared effective on October 18, 1996.
5) Filed herewith.
<PAGE>
Exhibit 11
Wireless One, Inc.
Earnings Per share Computation Information
Three Months Ended
March 31
1998 1997
Net Loss (19,307,394) (18,904,285)
Weighted average common
shares outstanding 16,910,064 16,946,697
Net loss per common share (1.14) (1.12)
========== ==========
The above earnings per share (EPS) calculations are submitted in accordance
with APB Opinion No. 15. An EPS calculation in accordance with Regulation
S-K item 601 (b) (11) is not shown above because it produces an antidilutive
result. The following information is disclosed for purposes of calculating
the antidilutive EPS:
Weighted average common
shares outstanding 16,910,064 16,946,697
Shares issuable upon exercise
of options and warrants - -
----------- -----------
Weighted average shares
outstanding 16,910,064 16,946,697
Net loss per common share (1.14) (1.12)
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,774,834
<SECURITIES> 19,407,104
<RECEIVABLES> 2,345,647
<ALLOWANCES> 574,450
<INVENTORY> 0
<CURRENT-ASSETS> 36,023,378
<PP&E> 137,441,100
<DEPRECIATION> 33,292,215
<TOTAL-ASSETS> 306,031,423
<CURRENT-LIABILITIES> 18,398,948
<BONDS> 322,025,890
<COMMON> 0
0
169,101
<OTHER-SE> 119,772,011
<TOTAL-LIABILITY-AND-EQUITY> 306,031,423
<SALES> 10,616,286
<TOTAL-REVENUES> 10,616,286
<CGS> 0
<TOTAL-COSTS> 21,823,144
<OTHER-EXPENSES> (1,381,624)
<LOSS-PROVISION> 574,450
<INTEREST-EXPENSE> 10,782,160
<INCOME-PRETAX> (20,607,394)
<INCOME-TAX> (1,300,000)
<INCOME-CONTINUING> (19,307,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,307,394)
<EPS-PRIMARY> (1.14)
<EPS-DILUTED> (1.14)
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