2
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 1996
_______________________________
Commission File Number 0-25896
TEL-COM WIRELESS CABLE TV CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-3175814
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 N. Grandview Avenue, Suite 32118
201 (Zip Code)
Daytona Beach, Florida
(Address of principal executive
offices)
904-226-9977
(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 preceding 12 months (or 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___
On June 30, 1996, there were 1,996,212 Shares of Common Stock,
$.001 par value per Share, outstanding.
TEL-COM WIRELESS CABLE TV CORPORATION
Index to Form 10-QSB
For Quarter Ended June 30, 1996
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion 8
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings
10
Item 2. Changes in Securities
10
Item 3. Defaults Upon Senior Securities
10
Item 4. Submission of Matters to a Vote of Security Holders
10
Item 5. Other Information
10
SIGNATURES 10
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 1996 December
31, 1995
CURRENT ASSETS
(Unaudited)
Cash and Cash Equivalents $310,139 $1,767,285
Investment securities 0 1,000,625
Accounts Receivable - trade 24,206 29,667
Prepaid Expenses 112,160 83,062
TOTAL CURRENT ASSETS 446,505 2,880,639
PROPERTY & EQUIPMENT, NET (Note 3) 1,218,805 716,658
INVESTMENT SECURITIES 755,000 250,000
OTHER ASSETS (Note 4) 4,674,994 431,022
TOTAL ASSETS $7,095,304 $4,278,319
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts Payable $33,561 $73,054
Accrued Liabilities 20,188 40,981
Note to Bank 414,542 0
Notes Due to Stockholders 2,008,000 8,000
TOTAL CURRENT LIABILITIES 2,476,291 122,035
STOCKSHOLDERS' EQUITY
Common Stock 1,996 1,875
Additional Paid-in Capital 6,056,921 5,057,042
Accumulated Deficit (1,439,904) (902,633)
TOTAL STOCKSHOLDERS' EQUITY 4,619,013 4,156,284
TOTAL LIABILITIES & STOCKSHOLDERS' $7,095,304 $4,278,319
EQUITY
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Three Six
Months Months
Ended Ended
June 30, June
30,
1996 1995 1996 1995
(Unaudi (Unaudi (Unaudi (Unaudi
ted) ted) ted) ted)
REVENUE 125,232 24,984 $208,44 $45,099
5
COST OF SALES 22,806 54,224 37,895 96,179
GROSS PROFIT 102,426 (29,240 170,550 (51,080
) )
EXPENSES
Total General Expenses 446,622 241,654 726,332 341,129
OPERATING LOSS (344,196 (270,89 (555,78 (392,20
) 4) 2) 9)
Other Income(Expense)
Interest Income 39,061 28,530 66,130 29,463
Interest Expense (41,619) (17,401 (47,619 (43,900
) ) )
Total Other Income(Expense) (2,558) 11,129 18,511 (14,437
)
NET LOSS ($346,75 ($259,7 ($537,2 ($406,6
4) 65) 71) 46)
WEIGHTED NUMBER OF
COMMON SHARES OUTSTANDING 1,996,21 1,369,0 1,971,7 1,049,0
2 00 68 00
NET LOSS PER COMMON SHARE ($0.17) ($0.19) ($0.27) ($0.39)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
Ended
June 30,
1996 1995
(Unaudited) (Unaudited
)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss ($537,271) ($406,646)
Adjustments to reconcile net
loss to net cash
used in operating activities
Amortization & Depreciation 53,224 191,549
expense
Decrease in Accounts 5,461 0
Receivable
Increase in Prepaid Expenses (29,098) (10,812)
(Decrease)Increase in (39,493) (27,328)
Accounts Payable
(Decrease)Increase in Other (20,793) 18,417
Accrued Liabilities
(Decrease)Increase in 0 (38,833)
Accrued Interest
NET CASH USED IN
OPERATING ACTIVITIES (567,970) (273,653)
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of Equipment (548,861) (214,928)
Acquisition of Licenses (1,304,632) (4,975)
Acquisition of Investments (505,000) (1,251,250
)
Proceeds from cashing 1,000,625 0
Government Security
Proceeds from cashing 0 50,000
Certificate of Deposit
Decrease in Deposits 60,700 0
NET CASH USED IN
INVESTING ACTIVITIES (1,297,168) (1,421,153
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from Bank Loans 1,475,000 24,000
Repayment of Bank Loans (1,060,458) 0
Loans to Stockholders (6,550) 0
Proceeds from Public Offering 0 5,270,675
Deferred Offering Costs 0 (213,396)
Payment of Notes & Loans from 0 (1,349,000
Related Parties )
NET CASH PROVIDED BY
FINANCING ACTIVITIES 407,992 3,732,279
NET DECREASE IN CASH (1,457,146) 2,037,473
CASH AT BEGINNING OF PERIOD 1,767,285 226,644
CASH AT END OF PERIOD $310,139 $2,264,117
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 1996
(Unaudited)
NOTE 1 BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited,
consolidated financial statements include all adjustments
necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods
presented. They include statements of all company
affiliates, domestic and foreign. Certain information and
note disclosures normally included in financial statements
prepared according to generally accepted accounting
principles have been condensed or omitted.
NOTE 2 SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information:
Three Six
Months Months
Ended Ended
June June
30, 30,
1996 1995 1996 1995
Cash paid during the period:
Interest 41,61 0 47,61 0
9 9
On February 3, 1996, the company acquired two broadcasting
companies in Costa Rica together with related equipment and
contracts for a total of $4 million.
The non cash components of these transactions are as follows:
Three Six
Months Months
Ended Ended
June June 30,
30,
1996 1995 1996 1995
Common Stock issued
in
exchange for
common stock
of Grupo Masteri, 1,000,0 0 1,000,000 0
S.A. 00
Note Payable issued
to Stockholder in
exchange
for common stock
of
Televisora Canal 2,000,0 0 2,000,000 0
Diecinueve 00
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
Leasehold improvements $ 11,722
Furniture, fixtures & 170,864
office
Equipment 1,151,805
Less accumulated 115,586
depreciation
Net property & equipment $ 1,218,805
NOTE 4 OTHER ASSETS
Other assets are summarized as follows:
Licensing fees $ 676,125
Costa Rica licenses 4,000,000
Deposits 5,860
Organization costs 4,000
Loans to Stockholders 6,550
Less accumulated 17,541
amortization
Net other assets $ 4,674,994
NOTE 5 COMMITMENTS
Licenses
During 1993, the Company entered into agreements for the
lease and purchase of certain channel licenses and for the
lease and purchase of transmitting equipment and tower site
usage in LaCrosse, Wisconsin.
Pursuant to the agreements, the Company has incurred $366,535
of costs related to the channel licenses. The cost of the
channel licenses is amortized on a straight-line basis over
40 years beginning when the Company commenced operations.
The Company has satisfied its lease requirements to the
lessors, and the lessors transferred ownership of licenses
and assigned the tower rights to the Company for $100. The
transfer of ownership of the licenses is subject to approval
by the Federal Communications Commission (FCC). On March 4,
1996, the FCC approved the transfer of ownership of licenses
to the Company. The leases terminated upon the FCC's
approval of the transfers.
Costa Rica Licenses
On February 7, 1996, the Company signed two agreements for
the acquisition of two companies that together hold 18
frequency licenses for broadcast of pay television (or
"wireless cable") services in Costa Rica together with
related equipment and contracts with subscribers for pay
television services. These agreements were amended and
restated on February 22, 1996. The closing of the two
acquisitions was consummated on February 23, 1996.
In the first acquisition, the Company, through Fepeca
deTournon, S.A. ("FdT"), a new, wholly owned Costa Rican
subsidiary corporation of the Company, acquired all of the
outstanding shares of common stock of Televisora Canal
Diecinueve, S.A., a Costa Rican corporation ("Canal 19"), for
a total purchase price of $3 million; $1 million of which was
paid at the closing and the balance OF $2 million in the form
of a note due to be paid one year after the closing with
interest at the rate of 3.6% per annum. The payment of this
deferred amount is secured by all of the acquired shares of
stock of Canal 19 and of Grupo Masteri, discussed below.
In the second acquisition, the Company, through FdT, acquired
all of the outstanding shares of common stock of Grupo
Masteri, S.A., a Costa Rican corporation ("Grupo"), for a
total purchase price of $1 million paid at the closing in the
form of restricted shares of the Company's common stock
representing approximately six (6) percent of the company's
total outstanding shares. The Company has agreed to provide
the seller certain registration rights with respect to these
shares. As of March 31, 1996, these shares have not been
registered.
The cost of the channel licenses is amortized on a straight-
line basis over 40 years beginning when the acquisition of
the licenses was consummated.
MDS Auction
On March 28, 1996, the Federal Communications Commission
completed its auction of authorizations to provide single
channel and multichannel Multipoint Distribution Service
(MDS) in 493 Basic Trading Areas ("BTA"). The Company won
bids in 3 markets; Hickory-Lenoir-Morganton, NC; Wausau-
Rhinelander, WI; and Stevens Point-Marshfield-Wisconsin
Rapids, WI. On April 5, 1996, the Company submitted a
payment of $239,502, that, coupled with its initial deposit
of $65,120, made up the initial 10% of the down payment for
acquisition of these licenses. On June 28, 1996, the Federal
Communications Commission called for the second 10% of the
down payment before the BTA authorizations were issued. The
Company had until July 8, 1996, to submit a balance of
payment of $304,622 to satisfy the initial down payment
total. Under confirmation of receipt of down payment, the
FCC would issue the BTA authorizations. Balances of payments
for these licenses will be made over the next ten years in
quarterly payments. Interest charged for this installment
plan would be based on the rate of the effective ten-year US
Treasury obigation at the time of the issuance of the BTA
authorization plus two and one half (2 1/2) percent.
Loans
On February 15, 1996, the Company entered into agreement with
Norwest Bank in LaCrosse, Wisconsin, for two commercial
notes. The larger note is for $1 million to cover the
initial payment for the acquisition of Canal 19. This note
holds an annual interest rate equal to .50% in excess of the
prime rate as established by Norwest Bank Minnesota. The due
date of the loan is 360 days. Interest is payable quarterly
commencing May 15, 1996, and continues on the same day of
each succeeding quarter and on the due date. This loan is
secured by the $1 million US Government obligation held by
the Company at Norwest Investment Services. This loan was
satisfied on June 5, 1996.
The second note, also dated February 15, 1996, is for the sum
of $475,000, and is slated to be used for improvements to the
Costa Rican operation. It carries an annual rate of 7.48%
and interest is payable quarterly commencing May 15, 1996.
It is secured by the Savings account held by the Company at
Norwest Bank in LaCrosse, Wisconsin.
NOTE 6 COSTA RICAN REVENUES AND EXPENSES
Costa Rican revenues and expenses were calculated monthly
using the currency exchange rate for Costa Rican Colons into
United States Dollars determined at the close of the business
day on the last day of each applicable month. The exchange
rate on June 28, 1996, was 206.92 Colons per 1 US Dollar.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Since the Company started operations in its initial wireless
cable television system in LaCrosse, Wisconsin (the "LaCrosse System")
in September 1994, the Company reached a level of programming services
delivered to approximately 1,209 subscribers by June 30, 1996. On
February 23, 1996, the Company began providing services for
approximately 1,712 subscribers in its newly acquired Costa Rican
company TelePlus, S.A. (the "Costa Rican System").
On March 28, 1996,the company successfully bid for BTA authorizations
to 3 markets; Hickory-Lenoir-Morganton, NC; Wausau-Rhinelander, WI;
and Stevens Point-Marshfield-Wisconsin Rapids, WI. These areas are
designated as future wireless cable television systems.
Six Months Ended 1996 versus 1995
The Company had revenues of $208,445 for the six months ended
June 30, 1996, comparable to $45,099 during the same period in 1995.
Revenues were primarily generated from subscription fees, installation
charges and subscriber cable equipment sales. The Costa Rican System
generated revenues of $52,850 while the LaCrosse System had revenues of
$155,595 related to subscription services. The Company had interest
income of $66,130 from its various security investments.
Expenses for the six months ended June 30, 1996, consisted
primarily of broadcast costs, general and administrative expenses and
interest expense. The Costa Rican System realized operating expenses
of $19,985. The LaCrosse System and Corporate office had operating
expenses of $706,347. During the comparable period of 1995, the
Company had operating expenses of $341,129. This increase in operating
expenses reflects the increase of costs relative to programming and
cable hardware necessary to accommodate the increase in subscriber
services. It also reflects the inherent costs associated with
expansion.
The Costa Rica System had a cost of sales of $276 and the
LaCrosse System had a cost of sales of $37,619. During the comparable
period of 1995, the Company had a cost of sales of $96,179. The
reduction in cost of sales during this period in 1996 reflects the
decrease in initial marketing and promotional costs incurred during the
same period in 1995.
The Company had a net loss of $537,271 at the end of June 30,
1996, in comparison to $406,646 during the same period in 1995. This
increase in loss reflects the continued build-up of operations in Costa
Rica and the continued growth of the LaCrosse System.
Unused net operating losses for income tax purposes, expiring
in 2010, of approximately $1,439,754 are available at June 30, 1996,
for carry forward against future years' taxable income. The tax
benefit of these losses of approximately $430,000 has been offset by a
valuation allowance due to it being more likely than not that the
deferred tax assets will not be realized.
Liquidity
On June 30, 1996, the Company had property and transmission
equipment valued at a cost of $1,218,805 net of adjusted depreciation
as compared to $563,014 at June 30, 1995, and $716,658 at December 31,
1995. This increase in property reflects the capitalization of the
Costa Rican System and the costs of attendant subscriber growth in the
LaCrosse System. Property acquisition will continue as the launch date
of July 15, 1996, for the expanded Costa Rican System approaches. Also
during this period the Company paid a 10% down payment on MDS
authorizations for the 3 BTA bids acquired in auction. A down payment
of $304,622 was made on April 5 that was made up of the company's
initial deposit of $65,120 and an additional $239,502 in cash payments.
During the six months ended June 30, 1996, the Company used
cash primarily to fund operating losses, purchase transmission
equipment and for costs accompanying its capitalization of the Costa
Rican System. Cash decreased from $1,767,285 on December 31, 1995, to
$310,139 on June 30, 1996, primarily due to the use of cash for
operations in the amount of $567,970, the acquisition of equipment in
the amount of $548,861, and the acquisition of licenses in the amount
of $1,304,632.
The Company projects an official launch date of the upgraded
Costa Rican System on July 15, 1996. During the next twelve months,
the Company intends to continue expanding both subscriber bases in
Costa Rica and LaCrosse, Wisconsin.
On June 5, 1996, the company realized the maturity of its
government bond of $1,000,625. $1,000,000 was used to satisfy an
outstanding bank loan that was originally due on February 15, 1997.
The bond had been used as collateral for the original loan.
Although incremental equipment and labor installation costs
per subscriber are incurred after a subscriber signs up for the
Company's wireless cable service, such costs are incurred by the
Company before it receives fees from the subscribers and are only
partially offset by installation charges. To sustain subscriber growth
beyond its initial base in the LaCrosse System and the Costa Rican
System, the Company will need to generate enough operating revenues to
enable it to continue to invest in subscriber reception equipment and
installation or raise additional debt or equity capital. In addition,
to develop and launch additional wireless cable systems, the Company
will need to raise additional capital. There can be no assurance that
operating revenues will be sufficient to sustain subscriber growth or
that additional financing, if required, will be available on terms
acceptable to the Company, if at all.
Profitability will be determined by the Company's ability to
maximize revenue from subscribers while maintaining variable expenses.
Significant increases in revenues will generally come from subscriber
growth. Currently, the Company has thirteen employees domestically and
nineteen employees in Costa Rica. There are no plans to increase
employees in either location.
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings: None
ITEM 2 Changes in Securities: None
ITEM 3 Defaults Upon Senior Securities: None
ITEM 4 Submission of Matters to a Vote of Security Holders:
None
ITEM 5 Other Information: None
ITEM 6 Exhibits and Reports on Form 8-K: None
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEL-COM WIRELESS CABLE TV CORPORATION
Date: July 22, 1996 By: /s/ FERNAND L. DUQUETTE
Fernand L. Duquette, President
and Principal Financial Officer
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 310,139
<SECURITIES> 755,000
<RECEIVABLES> 24,206
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 446,505
<PP&E> 112,160
<DEPRECIATION> 115,586
<TOTAL-ASSETS> 7,095,304
<CURRENT-LIABILITIES> 2,476,291
<BONDS> 0
0
0
<COMMON> 1996
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,095,304
<SALES> 208,445
<TOTAL-REVENUES> 274,575
<CGS> 37,895
<TOTAL-COSTS> 37,895
<OTHER-EXPENSES> 726,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,619
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (537,271)
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