FORM 10-QSBA
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
(State or other jurisdiction of
incorporation or organization)
501 N. Grandview Avenue, Suite 201
Daytona Beach, Florida
(Address of principal executive offices)
59-3175814
(I.R.S. Employer
Identification No.)
32118
(Zip Code)
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-QSBA
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
$213,859
$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
312,006
2,880,639
PROPERTY & EQUIPMENT, NET (Note 3)
1,270,516
716,658
INVESTMENT SECURITIES
355,000
250,000
OTHER ASSETS (Note 4)
5,676,610
431,022
TOTAL ASSETS
$7,614,132
$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
Note Due to FCC
TOTAL LONG-TERM LIABILITIES
STOCKHOLDERS' EQUITY
951,479
951,479
0
0
Common Stock
1,996
1,875
Additional Paid-in Capital
6,056,921
5,057,042
Accumulated Deficit
(1,833,871)
(902,633)
TOTAL STOCKHOLDERS' EQUITY
4,225,046
4,156,284
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$7,614,132
$4,278,319
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
Nine Months Ended
September 30,
September 30,
1996
1995
1996
1995
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
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
470,055
202,143
1,196,387
456,553
OPERATING LOSS
(385,249)
(175,870)
(941,031)
(404,698)
Other Income(Expense)
Interest Income
22,552
26,731
88,682
56,194
Interest Expense
(31,271)
0
(78,890)
(207,279)
Total Other Income(Expense)
(8,719)
26,731
9,792
(151,085)
NET LOSS
($393,968)
($149,139)
($931,239)
($555,783)
WEIGHTED NUMBER OF
COMMON SHARES
OUTSTANDING
1,996,212
1,875,000
1,979,916
1,321,722
NET LOSS PER COMMON SHARE
($0.20)
($0.08)
($0.47)
($0.42)
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
($931,239)
($555,783)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization & Depreciation expense
79,835
205,100
(Decrease)Increase in Accounts Receivable
7,770
0
(Decrease)Increase in Prepaid Expenses
6,813
(9,911)
(Decrease)Increase in Accounts Payable
(23,287)
(27,254)
(Decrease)Increase in Other Accrued Liabilities
(22,141)
(18,216)
NET CASH USED IN
OPERATING ACTIVITIES
(882,249)
(406,064)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment
(623,929)
(315,245)
Acquisition of Licenses
(2,189,360)
(4,959)
Acquisition of Investments
(105,000)
(2,001,660)
Proceeds from sale of Government Securities
1,000,625
0
Proceeds from sale of Certificate of Deposit
0
0
Increase in Deposits
(59,442)
0
NET CASH USED IN
INVESTING ACTIVITIES
(1,977,106)
(2,321,864)
CASH FLOWS FROM FINANCING ACTIVITIES
Government Loan
Proceeds from Bank Loans
951,479
1,475,000
0
0
Repayment of Bank Loans
Loans to Stockholders
(1,114,000)
(6,550)
0
0
Proceeds from Public Offering
0
5,007,603
Deferred Offering Costs
0
49,676
Payment of Notes & Loans from Related Parties
0
(1,317,000)
NET CASH PROVIDED BY
FINANCING ACTIVITIES
1,305,929
3,740,279
NET (DECREASE)INCREASE IN CASH
(1,553,426)
1,012,351
CASH AT BEGINNING OF PERIOD
1,767,285
276,644
CASH AT END OF PERIOD
$213,859
$1,288,995
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENT
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:
Three Months
Ended
Nine Months
Ended
September 30,
September 30,
1996
1995
1996
1995
Cash paid during the period:
Interest
31,271
0
78,890
207,279
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 Months Ended
Nine Months Ended
September 30,
September 30,
1996
1995
1996
1995
Common Stock issued in
exchange for common stock
of Grupo Masteri, S.A.
1,000,000
0
1,000,000
0
Note Payable issued to
Stockholder in exchange
for common stock of
Televisora Canal Diecinueve
2,000,000
0
2,000,000
0
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
Leasehold improvements
$
12,667
Furniture, fixtures & office
178,446
Equipment
1,218,346
Subtotal
1,409,459
Less accumulated depreciation
138,943
Net property & equipment
$
1,270,516
NOTE 4 OTHER ASSETS
Other assets are summarized as follows:
Licensing fees
$
1,560,854
Costa Rican licenses
4,000,000
Deposits
126,002
Organization costs
4,000
Loans to Stockholders
6,550
Subtotal
5,697,406
Less accumulated amortization
20,796
Net other assets
$
5,676,610
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 due to the FCC of
$951,479 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. On September 1, 1996, the Hickory, NC,
BTA was defaulted on. According to Section 21.959 in the FCC MDA Auction
Information Package, default penalties would include a "three percent
payment calculated based on the defaulting bidder's bid amount."
This amount, $65,544, was deducted from the license fees asset account
and $120,142, the balance of deposit submitted to the FCC for Hickory, NC,
was moved to a deposit account. If the FCC determines that this fee covers
all default fees, then the deposit will be refunded 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 investments 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 System for 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 $1,196,387. 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 and the
inherent costs associated with expansion. As a result of the forfeiture of
the Hickory, NC license, the Company incurred an expense in the amount of
$65,544.
The Company had a net loss of $931,239 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 $1,862,000 are available at September 30, 1996, for carry
forward against future years' taxable income. The tax benefit of these
losses of approximately $633,000 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. With the forfeiture of
the Hickory, NC license, penalties of $65,544 were deducted from payments
initially made for the license. The balance of payments made $120,142
were applied as deposits held by the FCC.
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 $213,859 primarily due to the use of cash from
operating activities in the amount of $882,249, the acquisition of
equipment in the amount of $623,929 net, and the acquisition of licenses in
the amount of $2,189,360.
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: January 15, 1997 By: /s/ FERNAND L. DUQUETTE
Fernand L. Duquette, President
and Principal Financial Officer
6
10
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 213,859
<SECURITIES> 355,000
<RECEIVABLES> 21,898
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 312006
<PP&E> 1,409,459
<DEPRECIATION> 138,943
<TOTAL-ASSETS> 7,614,132
<CURRENT-LIABILITIES> 2,437,607
<BONDS> 0
0
0
<COMMON> 1996
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,614,132
<SALES> 313,408
<TOTAL-REVENUES> 402,090
<CGS> 58,052
<TOTAL-COSTS> 58,052
<OTHER-EXPENSES> 1,196,387
<LOSS-PROVISION> 941,031
<INTEREST-EXPENSE> 78,890
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (931,239)
<EPS-PRIMARY> (.47)
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