7
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 September 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 (I.R.S. Employer
of Identification No.)
incorporation or organization)
32118
501 N. Grandview Avenue, Suite (Zip Code)
201
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 September 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 September 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
9
PART II. OTHER INFORMATION
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
Item 6. Exhibits and Reports on Form 8-K
10
SIGNATURES 10
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 1996
December 31, 1995
CURRENT ASSETS
(Unaudited)
Cash and Cash Equivalents $213,918 $1,767,285
Investment securities 0 1,000,625
Accounts Receivable - trade 21,898 29,667
Prepaid Expenses 76,249 83,062
TOTAL CURRENT ASSETS 312,065 2,880,639
PROPERTY & EQUIPMENT, NET (Note 3) 1,270,516 716,658
INVESTMENT SECURITIES 355,000 250,000
OTHER ASSETS (Note 4) 4,790,675 431,022
TOTAL ASSETS $6,728,256 $4,278,319
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $49,767 $73,054
Accrued Liabilities 18,840 40,981
Note to Bank 361,000 0
Notes Due to Stockholders 2,008,000 8,000
TOTAL CURRENT LIABILITIES 2,437,607 122,035
STOCKHOLDERS' EQUITY
Common Stock 1,996 1,875
Additional Paid-in Capital 6,056,921 5,057,042
Accumulated Deficit (1,768,268) (902,633)
TOTAL STOCKHOLDERS' EQUITY 4,290,649 4,156,284
TOTAL LIABILITIES & STOCKHOLDERS' $6,728,256 $4,278,319
EQUITY
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Three Nine
Months Months
Ended Ended
Septembe Septembe
r 30, r 30,
1996 1995 1996 1995
(Unaudit (Unaudi (Unaudit (Unaudit
ed) ted) ed) ed)
REVENUE 104,963 34,831 $313,408 $78,488
COST OF SALES 20,157 8,558 58,052 26,633
GROSS PROFIT 84,806 26,273 255,356 51,855
EXPENSES
Total General Expenses 404,451 202,143 1,130,78 456,553
3
OPERATING LOSS (319,645 (175,87 (875,427 (404,698
) 0) ) )
Other Income(Expense)
Interest Income 22,552 26,731 88,682 56,194
Interest Expense (31,271) 0 (78,890) (207,279
)
Total Other (8,719) 26,731 9,792 (151,085
Income(Expense) )
NET LOSS ($328,36 ($149,1 ($865,63 ($555,78
4) 39) 5) 3)
WEIGHTED NUMBER OF
COMMON SHARES
OUTSTANDING 1,996,21 1,875,0 1,979,91 1,321,72
2 00 6 2
NET LOSS PER COMMON ($0.16) ($0.08) ($0.44) ($0.42)
SHARE
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine
Months
Ended
September
30,
1996 1995
(Unaudited (Unaudited
) )
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss ($865,635) ($555,783)
Adjustments to reconcile net
loss to net cash
used in operating activities
Amortization & Depreciation 79,835 205,100
expense
(Decrease)Increase in 7,770 0
Accounts Receivable
(Decrease)Increase in 6,813 (9,911)
Prepaid Expenses
(Decrease)Increase in (23,287) (27,254)
Accounts Payable
(Decrease)Increase in Other (22,141) (18,216)
Accrued Liabilities
NET CASH USED IN
OPERATING ACTIVITIES (816,645) (406,064)
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of Equipment (623,929) (315,245)
Acquisition of Licenses (1,423,568 (4,959)
)
Acquisition of Investments (105,000) (2,001,660
)
Proceeds from sale of 1,000,625 0
Government Securities
Proceeds from sale of 0 0
Certificate of Deposit
Decrease in Deposits 60,700 0
NET CASH USED IN
INVESTING ACTIVITIES (1,091,172 (2,321,864
) )
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from Bank Loans 1,475,000 0
Repayment of Bank Loans (1,114,000 0
Loans to Stockholders ) 0
(6,550)
Proceeds from Public Offering 0 5,007,603
Deferred Offering Costs 0 49,676
Payment of Notes & Loans from 0 (1,317,000
Related Parties )
NET CASH PROVIDED BY
FINANCING ACTIVITIES 354,450 3,740,279
NET (DECREASE)INCREASE IN CASH (1,553,367 1,012,351
)
CASH AT BEGINNING OF PERIOD 1,767,285 276,644
CASH AT END OF PERIOD $213,918 $1,288,995
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 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:
Thre Nine
e Month
Mont s
hs Ended
Ende
d
Sept Septe
embe mber
r 30,
30,
1996 1995 1996 1995
Cash paid during the
period:
Interest 31,2 0 78,89 207,279
71 0
On February 3, 1996, the company acquired two
broadcasting companies in Costa Rica together with
related equipment and contracts for a total cost of $4
million.
The non cash components of these transactions are as
follows:
Three Nine
Months Months
Ended Ended
Septemb Septemb
er 30, er 30,
1996 1995 1996 1995
Common Stock issued
in
exchange for
common stock
of Grupo Masteri, 1,000,0 0 1,000,0 0
S.A. 00 00
Note Payable issued
to Stockholder in
exchange
for common stock
of
Televisora Canal 2,000,0 0 2,000,0 0
Diecinueve 00 00
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
Leasehold improvements $ 12,667
Furniture, fixtures & 178,446
office
Equipment 1,218,346
Subtotal 1,409,459
Less accumulated 138,943
depreciation
Net property & equipment $ 1,270,516
NOTE 4 OTHER ASSETS
Other assets are summarized as follows:
Licensing fees $ 795,061
Costa Rican licenses 4,000,000
Deposits 5,860
Organization costs 4,000
Loans to Stockholders 6,550
Subtotal 4,811,471
Less accumulated 20,796
amortization
Net other assets $ 4,790,675
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 obligation at the time
of the issuance of the BTA authorization plus two and
one half (2 1/2) percent. On July 8, 1996, payment of
$118,936 was submitted to the Federal Communications
Commission to cover payment on the two Wisconsin BTA's
of Stevens Point and Wausau. The Hickory, NC, BTA was
defaulted on. Presently the company is waiting for a
decision from the FCC to determine the exact default
payment due on Hickory, NC, and if the down payments
already made for this market not only cover all default
fees, but exceed the fees due; thereby resulting in a
refund to the company.
Loans
On February 15, 1996, the Company entered into
agreement with Norwest Bank in LaCrosse, Wisconsin, for
two commercial notes. The larger note was for $1
million to cover the initial payment for the
acquisition of Canal 19. This note held 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 was 360 days. Interest was payable
quarterly commencing May 15, 1996, and continued on the
same day of each succeeding quarter and on the due
date. This loan was 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, was 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 Securities account held by the Company at Norwest
Bank in LaCrosse, Wisconsin. On August 15, 1996,
$114,000 of funds, realized when investment securities
were sold, were applied towards the principal on this
note. Currently the second note balance due is
$361,000.
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 September 28,
1996, was 213.49 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 1,255
subscribers by September 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"). It relaunched a newly defined
system on September 15, 1996 and is presently upgrading existing
subscribers to the new services made available. Installation of
new subscribers into the system will commence when all existing
subscribers who desire continuing services are upgraded. 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. The areas in Wisconsin are designated as future
wireless cable television systems. The NC market has been
abandoned
Nine Months Ended 1996 versus 1995
The Company had revenues of $313,408 for the nine
months ended September 30, 1996, comparable to $78,488 during the
same period in 1995. Revenues were primarily generated from
subscription fees, installation charges and subscriber cable
equipment sales. The Costa Rican System was inactive during the
months of August and September, 1996, generating income of only
$11,926 for the 3 months of the third quarter 1996, while the
LaCrosse System had revenues of $93,037 during the same 3 month
period related to subscription services. The Company had a total
interest income for the nine months of $88,682 from its various
security investments.
Cost of sales for both the Costa Rica System and
the LaCrosse Systemfor the nine months ending September 30, 1996,
were $58,052. During the comparable period of 1995, the Company
had a cost of sales of $26,633.
Expenses for the nine months ended September 30, 1996,
consisted primarily of broadcast costs, general and
administrative expenses, and interest expense. The Costa Rican
System, the LaCrosse System and Corporate office had operating
expenses of $1,130,783. During the comparable period of 1995,
the Company had operating expenses of $456,553. 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 Company had a net loss of $865,635 at the end of
September 30, 1996, in comparison to $555,783 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
September 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 September 30, 1996, the Company had property and
transmission equipment valued at a cost of $1,270,516 net of
adjusted depreciation as compared to $652,273 at September 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. Also, during this period, the Company paid an additional
10% down payment on MDS authorizations for the 2 BTA bids
acquired in auction. The balance of the down payment of $118,936
was made on July 8, 1996.
During the nine months ended September 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, for the nine months ending on
September 30, 1996, to $213,918 primarily due to the use of cash
from operating activities in the amount of $816,645, the
acquisition of equipment in the amount of $623,929 net, and the
acquisition of licenses in the amount of $1,423,568.
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 fifteen employees domestically and nineteen employees in
Costa Rica. There are no additional 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: October 22, 1996 By: /s/ FERNAND L.
DUQUETTE
Fernand L. Duquette, President
and Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 213,918
<SECURITIES> 355,000
<RECEIVABLES> 21,898
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 312,065
<PP&E> 1,409,459
<DEPRECIATION> 138,943
<TOTAL-ASSETS> 6,728,256
<CURRENT-LIABILITIES> 2,437,607
<BONDS> 0
0
0
<COMMON> 1996
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,728,256
<SALES> 313,408
<TOTAL-REVENUES> 402,090
<CGS> 58,052
<TOTAL-COSTS> 58,052
<OTHER-EXPENSES> 1,130,783
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,890
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (865,635)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> 0
</TABLE>
