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 MARCH 31, 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 201 32118
DAYTONA BEACH, FLORIDA (Zip Code)
(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 March 31, 1996, there were 1,996,212 Shares of Common Stock, $.001
par value per Share, outstanding.
<PAGE>
TEL-COM WIRELESS CABLE TV CORPORATION
Index to Form 10-QSB
For Quarter Ended March 31, 1996
PAGE NO.
PART I. FINANCIAL INFORMATION --------
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 9
ITEM 2. EXHIBITS AND REPORTS ON
FORM 8-K 9
SIGNATURES 10
<PAGE>
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
MARCH 31 DECEMBER 31
CURRENT ASSETS 1996 1995
--------- -----------
Cash and Cash Equivalents $1,312,200 $1,767,285
Investment securities 1,000,625 1,000,625
Accounts Receivable - trade 24,732 29,667
Prepaid Expenses 105,709 83,062
---------- ----------
TOTAL CURRENT ASSETS 2,443,266 2,880,639
PROPERTY & EQUIPMENT, NET (NOTE 2) 857,442 716,658
INVESTMENT SECURITIES 750,000 250,000
OTHER ASSETS (NOTE 3) 4,431,767 431,022
---------- ----------
TOTAL ASSETS $8,482,475 $4,278,319
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable $ 11,402 $ 73,054
Accrued Liabilities 22,306 40,981
Short Term Notes Payable 8,000 8,000
---------- ----------
TOTAL CURRENT LIABILITIES 41,708 122,035
LONG TERM DEBT (NOTE 4) 3,475,000 0
STOCKHOLDERS' EQUITY
Common Stock 1,996 1,875
Additional Paid-in Capital 6,056,921 5,057,042
Accumulated Deficit (1,093,150) (902,633)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 4,965,767 4,156,284
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $8,482,475 $4,278,319
========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1995
---- ----
REVENUE $ 83,213 $ 20,115
COST OF SALES 15,089 41,955
----------- -----------
GROSS PROFIT 68,124 (21,840)
EXPENSES
TOTAL GENERAL EXPENSES 279,710 125,974
----------- -----------
OPERATING LOSS (211,586) (147,814)
OTHER INCOME(EXPENSE)
Interest Income 27,069 933
Interest Expense (6,000) 0
----------- -----------
TOTAL OTHER INCOME(EXPENSE) 21,069 933
----------- -----------
NET LOSS ($190,517) ($146,881)
=========== ===========
WEIGHTED AVG. NO. OF COMMON SHARES OUTSTANDING 1,923,889 725,000
=========== ===========
NET LOSS PER COMMON SHARE ($0.10) ($0.20)
=========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS
ENDED
MARCH 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($ 190,517) ($ 146,881)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization & Depreciation expense 26,612 37,612
Decrease in Accounts Receivable 4,935 0
Increase in Prepaid Expenses (22,647) 0
(Decrease)Increase in Accounts Payable (61,652) 5,100
(Decrease)Increase in Other Accrued Liabilities (18,675) 12,329
(Decrease)Increase in Accrued Interest 0 26499
----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (261,944) (65,341)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment (164,141) (40,340)
Acquisition of Licenses (4,000,000) 0
Acquisition of Investments (500,000) 0
Increase in Deposits (4,000) 0
----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (4,668,141) (40,340)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Value of Stock Transfer 1,000,000 0
Long Term Debt 3,475,000 0
Deferred Offering Costs 0 (72,521)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 4,475,000 (72,521)
----------- -----------
NET DECREASE IN CASH (455,085) (178,202)
CASH AT BEGINNING OF PERIOD 1,767,285 226,644
----------- -----------
CASH AT END OF PERIOD $ 1,312,200 $ 48,442
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1996
PART I
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 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
Leasehold improvements $ 9,185
Furniture, fixtures & office 58,953
Equipment 881,533
---------
Less accumulated depreciation (92,229)
---------
Net property & equipment $ 857,442
=========
NOTE 3 OTHER ASSETS
Other assets are summarized as follows:
Licensing fees $ 371,493
Costa Rica licenses 4,000,000
Deposits 70,560
Organization costs 4,000
------------
Less accumulated amortization (14,286)
------------
Net other assets $ 4,431,767
============
NOTE 4 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. Since the Company has satisfied its lease
requirements to the lessors, the lessors are obligated to
transfer ownership of licenses and assign the tower rights
to the Company for $100.
<PAGE>
The transfer of ownership of the licenses is subject to
approval by the Federal Communications Commission (FCC).
The lease-purchase agreement provides for unlimited,
noncancelable lease terms of successive one-year periods
for a lease payment of $100 per year. On March 4, 1996, the
FCC approved the transfer of ownership of licenses to the
Company.
An officer of the Company has a minority interest (less
than one percent) in the entity leasing the licenses to
the Company.
COSTA RICA ACQUISITION
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. 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 acquisition is being accounted for by the purchase
method of accounting. The operating results of this
acquisition are included in the Company's consolidated
results of operations from the date of acquisition.
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.
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 5 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 March 29, 1996, was 201.23 Colons per 1 US
Dollar.
<PAGE>
NOTE 6 SUBSEQUENT EVENTS
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. 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 down payment for acquisition of these licenses.
Balances of payments will be made over the next ten years.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussions should be read in conjunction with
management's discussion and analysis of financial condition and results of
operations set forth in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995, filed with the Securities and Exchange Commission on
March 31, 1996, which discussion is incorporated herein by reference.
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 1,032 subscribers by March 31, 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").
The Company had revenues of $83,213 for the three months ended March
31, 1996, comparable to $20,115 during the same period in 1995. Revenues were
primarily generated from subscription fees, installation charges, interest from
invested proceeds and subscriber cable equipment sales. During the 35 days of
operations of the Costa Rican System, the Company realized revenues from this
existing system of $15,281. The LaCrosse System had revenues of $67,932 related
to subscription services. This increase of 70.38% is attributable to an
increased subscriber base in the System. The Company had $27,069 from its
various security investments.
Expenses for the three months ended March 31, 1996, consisted
primarily of broadcast costs, general and administrative expenses and interest
expense. During the 35 days of operations of the Costa Rican System, the Company
realized operating expenses of $10,100 and cost of sales of $211. The Company
had operating expenses of $269,610 and cost of sales of $15,089. During the
comparable period of 1995, the Company had operating expenses of $125,974 and
cost of sales of $41,955. This increase of 53.27% 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 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 $190,517
at the end of March 31, 1996, in comparison to $146,881 during the same period
in 1995. This increase in loss reflects negotiations and the commencement of
operations in Costa Rica, and the continued growth of the LaCrosse System.
At the end of March 13, 1996, the Company had property and
transmission equipment valued at a cost of $857,442 net of adjusted depreciation
as compared to $400,485 at March 31, 1995, and $716,658 at December 31, 1995.
This increase in property reflects the equipment purchased for the Costa Rican
System and the attending costs of subscriber growth in the LaCrosse System.
Property acquisition will continue as the launch date of June 15, 1996, for the
Costa Rican System approaches.
During the three months ended March 31, 1996, the Company used cash
primarily to fund operating losses, purchase transmission equipment and for
costs accompanying its acquisition of the Costa Rican System. Cash increased
from $48,442 on March 31, 1995, to $1,312,200 on March 31, 1996, primarily due
to the proceeds from the Company's initial public offering and the infusion of
cash from the financing activities associated with the Costa Rican System. The
Company projects an official launch date of the upgraded Costa Rican System on
June 15, 1996. During the next twelve months, the Company intends to continue
expanding both subscriber bases in Costa Rica and LaCrosse, Wisconsin.
<PAGE>
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 further
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 employers 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
Exhibits required to be filed with this report are incorporated by
reference to the Registrant's Registration Statement on Form SB-2 (Registration
No. 33-88788-A).
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TEL-COM WIRELESS CABLE TV CORPORATION
Dated: By: /s/ FERNAND L. DUQUETTE
------------------------ ---------------------------------
Fernand L. Duquette
President
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,312,200
<SECURITIES> 1,750,625
<RECEIVABLES> 24,732
<ALLOWANCES> 105,709
<INVENTORY> 0
<CURRENT-ASSETS> 2,443,266
<PP&E> 857,442
<DEPRECIATION> 92,229
<TOTAL-ASSETS> 8,482,475
<CURRENT-LIABILITIES> 41,708
<BONDS> 0
0
0
<COMMON> 1,996
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,482,475
<SALES> 83,213
<TOTAL-REVENUES> 83,213
<CGS> 15,089
<TOTAL-COSTS> 15,089
<OTHER-EXPENSES> 279,710
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,517)
<EPS-PRIMARY> 0
<EPS-DILUTED> (.10)
</TABLE>
