FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
-------------------------------
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 (IRS Employer
incorporation or organization) Identification No.)
1506 N.E. 162ND STREET
NORTH MIAMI BEACH, FLORIDA 33162
(Address of principal executive offices) (Zip Code)
305-947-3010
(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 November 7, 1997, there were 4,059,643 shares of common stock, $.001
par value per share, outstanding.
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TEL-COM WIRELESS CABLE TV CORPORATION
Index to Form 10-QSB
For Quarter Ended September 30, 1997
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
ITEM 2. MANAGEMENT'S DISCUSSION 11
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K 13
SIGNATURES 13
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TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, 1997 DECEMBER 31, 1996
CURRENT ASSETS (Unaudited)
------------------------- ------------------------
<S> <C> <C>
Cash and Cash Equivalents $6,212 $26,618
Restricted Cash 0 346,400
Accounts Receivable - Trade 47,979 18,739
Prepaid Consulting Fees 311,000 988,000
Prepaid Expenses 10,387 44,552
------------------------- ------------------------
TOTAL CURRENT ASSETS 375,578 1,424,309
PROPERTY & EQUIPMENT, NET (NOTE 3) 1,428,770 1,365,235
LICENSES, NET (NOTE 4) 5,546,812 5,458,444
OTHER ASSETS, NET (NOTE 4) 135,450 127,335
------------------------- ------------------------
TOTAL ASSETS $ 7,486,610 $8,375,323
========================= ========================
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $336,733 $153,276
Accrued Liabilities 126,607 16,787
Truck Loans 17,902 22,711
Loans and Debentures Due to Stockholders 2,482,400 2,008,000
Notes Due to Bank 0 361,000
------------------------- ------------------------
TOTAL CURRENT LIABILITIES 2,963,642 2,561,774
LICENSE FEES PAYABLE 951,479 951,479
---------------- ---------------
TOTAL LIABILITIES 3,915,121 3,513,253
STOCKHOLDERS' EQUITY
Preferred Stock 0 1
Common Stock 3,557 2,196
Additional Paid-in Capital 7,560,112 7,544,720
Accumulated Deficit (3,992,180) (2,284,847)
------------------------- ------------------------
3,571,489 5,262,070
Less: Stock Subscription Receivable 0 (400,000)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY $7,486,610 $8,375,323
========================= ========================
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------- --------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUE $295,561 $104,963 $783,984 $313,408
COST OF SALES 59,978 20,157 128,634 58,052
------------------ ---------------- ------------------ ------------------
GROSS PROFIT 235,583 84,806 655,350 255,356
OPERATING EXPENSES 705,185 470,055 2,063,860 1,196,387
------------------ ---------------- ------------------ ------------------
OPERATING LOSS (469,602) (385,249) (1,408,510) (941,031)
OTHER INCOME(EXPENSE)
Interest Income 367 22,552 4,710 88,682
Interest Expense (237,096) (31,271) (303,532) (78,890)
------------------ ---------------- ------------------ ------------------
TOTAL OTHER INCOME(EXPENSE) (236,729) (8,719) (298,822) 9,792
------------------ ---------------- ------------------ ------------------
NET LOSS ($706,331) ($393,968) ($1,707,332) ($931,239)
================== ================ ================== ==================
WEIGHTED NUMBER OF
COMMON SHARES
OUTSTANDING 2,556,212 1,996,212 2,345,245 1,979,916
================== ================ ================== ==================
NET LOSS PER COMMON SHARE ($0.28) ($0.20) ($0.73) ($0.47)
================== ================ ================== ==================
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($1,707,332) ($931,239)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization & Depreciation expense 412,224 79,835
Increase (Decrease) in Accounts Receivable (29,240) 7,770
Decrease (Increase) in Prepaid Expenses 839,165 6,813
Increase (Decrease) in Accounts Payable 183,457 (23,287)
Increase (Decrease) in Accrued Liabilities 109,820 (22,141)
---------------------- ---------------------
NET CASH USED IN
OPERATING ACTIVITIES (191,906) (882,249)
---------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment (222,879) (623,929)
Acquisition of Licenses 0 (472,089)
Acquisition of Investments 0 (105,000)
Proceeds from Sale of Investments 346,400 1,000,625
Increase in Deposits and other assets (8,115) (59,442)
---------------------- ---------------------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 115,406 (259,835)
---------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Bank Loans 0 1,475,000
Proceeds from Stockholder Loans 221,902 (6,500)
Proceeds from Sale of Stock 200,000 0
Repayment of Bank Loans (361,000) (1,114,000)
Repayment of Truck Loans (4,808) 0
---------------------- ---------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 56,094 354,500
---------------------- ---------------------
NET DECREASE IN CASH (20,406) (787,584)
CASH AT BEGINNING OF PERIOD 26,618 1,767,285
---------------------- ---------------------
CASH AT END OF PERIOD $6,212 $979,701
====================== =====================
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
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TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 1997
(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 for the nine
months ended September 30, 1997 and 1996 follows:
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1997 1996
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<S> <C> <C>
Interest paid during the period $ 16,345 $ 78,890
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Non-cash investing and financing activities:
Loan issued to restructure debt $ 78,498 $ -
Warrants and common stock issued to restructure debt 88,750
Loans issued for Costa Rica licenses (Grupo Masteri,S.A. in 1996) 174,000 2,000,000
Warrants issued for investment banking consulting services 128,000 -
Common stock issued to acquire Televisora Canal Diecinueve - 1,000,000
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NOTE 3 PROPERTY & EQUIPMENT
Property and equipment at September 30, 1997 are summarized as
follows:
Leasehold improvements $ 13,381
Furniture, fixtures & office equipment 74,926
Equipment 1,720,692
------------------------
Subtotal 1,808,999
Less accumulated depreciation 380,229
------------------------
Net property & equipment $ 1,428,770
========================
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NOTE 4 LICENSES & OTHER ASSETS
Licenses and other assets at September 30, 1997 are summarized
as follows:
Licensing fees $ 1,560,855
Costa Rican licenses 4,174,000
Deposits 126,698
Organization costs 4,000
Loans to Stockholders 6,550
-----------------------
Subtotal 5,872,103
Less accumulated amortization 189,841
-----------------------
Net other assets $ 5,682,262
=======================
NOTE 5 COMMITMENTS
LICENSES IN THE UNITED STATES
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.
On March 28, 1996, the Federal Communications Commission
completed its auction of authorizations to provide single
channel and Multichannel Multipoint Distribution Service
(MMDS) 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. The
total amount bid for these licenses, after a 15% small
business credit, was $3,046,212. 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 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 authorizations. On July 8, 1996,
payment of $118,936 was submitted to the Federal
Communications Commission to cover payment on the two
Wisconsin markets of Stevens Point and Wausau. License fees
payable to the FCC of $951,479 for the two Wisconsin 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 authorization plus two and
one half (2 1/2) percent.
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On September 1, 1996, the unpaid license fee payable of
$1,671,175 for the Hickory, NC, license was defaulted.
According to Section 21.959 in the FCC MDA Audit Information
Package, a maximum default payment of three percent of the
defaulting bidder's bid amount would be due to the FCC. Of
this amount, $65,544 was charged to operations in 1996. The
remaining $120,142 of the deposit submitted to the FCC for
Hickory, NC, was recorded as a refundable deposit at December
31, 1996. In addition, the Company will be liable to the FCC
for the difference between the Company's winning bid and a
lower winning bid received by the FCC in a subsequent auction
of this license. The FCC has not yet announced plans to
re-auction the Hickory, NC, license.
COSTA RICA LICENSES
On February 7, 1996, the Company signed two agreements for the
acquisition from Melvin Rosen (the "Seller") of three
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
three 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 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 was 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.
The Company operates its wireless cable pay television
business in Costa Rica through another wholly owned subsidiary
corporation known as TelePlus, S.A. ("TelePlus"). The Company
acquired TelePlus from Seller on February 23, 1996, and in
consideration thereof, agreed to pay Seller a lump sum amount
equal to $50 times the number of subscribers under contract
with TelePlus in excess of the subscribers purchased from
Seller at a date one year after TelePlus has six pay
television channels broadcasting to the public. TelePlus began
broadcasting six pay television channels in October 1996.
Currently, TelePlus has approximately 4,200 subscribers and
$174,000 is included in the cost of licenses for the increase
in subscriber base in the year from October 31, 1996 to 1997.
The cost of the Costa Rican channel licenses is amortized on a
straight-line basis over 40 years beginning when the
acquisition of the licenses was consummated.
NOTE 6 FOREIGN CURRENCY TRANSLATION
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 30, 1997, was approximately 239 Colons per 1
US Dollar.
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NOTE 7 LOAN RESTRUCTURE
On February 12, 1997, the Company and Seller entered into an
agreement providing for the restructuring of the $2 million
note given by the Company to Seller as payment for the
acquisition of Canal 19. This agreement was amended and
restated by a letter agreement dated February 21, 1997. The
agreement, as amended and restated, provided for the Company
to make a payment of $625,000 toward reduction of the
principal balance of the note on or before March 7, 1997. The
remaining principal balance, plus accrued interest thereon,
was to be paid on or before February 23, 1998, provided that,
with an additional payment of $100,000, the Company could
extend such maturity date for an additional period of six
months. The Company paid Seller a deposit of $50,000 on
February 24, 1997. The $50,000 deposit was to be applied
toward the principal balance of the note provided, however,
that, if the $625,000 principal reduction payment was not
timely paid, Seller could retain such deposit. The Company
failed to pay the $625,000 payment and the $50,000 was
retained by the Seller.
On May 19, 1997, the Company entered into a Debt Restructuring
Agreement with the Seller for the restructuring of the $2
million debt into a convertible debenture to mature in 12
months with interest to accrue at 12% per annum (7% to be paid
monthly and 5% at maturity). The principal amount of the
Debenture is $2 million plus $100,000 for expenses owed or
reimbursable to Seller at the issue date of the Debenture. At
the Company's option, $1 million of this amount may be
extended for an additional period of 12 months with interest
to accrue on such amount at 15% per annum (8% to be paid
monthly in arrears and 7% to be paid at maturity). The Seller
has the option, exercisable within six months of the issue
date of the Debenture, to elect to extend the maturity date of
the debenture for an additional 12 months, in which event,
commencing on the first day of the 13th month after the issue
date of the Debenture, one-half of the principal amount will
accrue interest at 12% per annum (7% to be paid monthly in
arrears and 5% to be paid at maturity) and one-half of the
principal amount will accrue interest at 15% per annum (8% to
be paid monthly in arrears and 7% to be paid at maturity).
As consideration for this debt structuring, the Company agreed
to issue to the Seller (i) 180,000 shares of the Company's
common stock with piggy back registration rights, (ii) a
warrant to purchase 500,000 shares at $1.00 per share, and
(iii) a warrant to purchase 500,000 shares at $5.00 per share.
Under the Agreement, the Seller received the right to nominate
two members to the Company's Board of Directors until such
time as Seller exercised the conversion rights under the
Debenture and received a release from any liability in
connection with the Costa Rica acquisition. A value of $88,750
was assigned to the aforementioned stock and warrants issued
to restructure the debt.
The Debenture is convertible by Seller into the Company's
common stock at any time after the issue date prior to payment
of the Debenture on at least 30 days' advance notice to the
Company. The conversion price is equal to the lesser of (1)
$.50 per share of common stock or (2) a price per share of
common stock equal to the average of the closing "bid" for the
Company's common stock as reported on NASDAQ for the five
trading days immediately prior to the conversion date. The
Company also will reserve for issuance upon conversion a
sufficient number of shares of common stock and will register
such reserved shares and maintain an effective registration
statement for such shares.
The Seller has notified the Company of his intention to
convert the Debenture into common stock before December 31,
1997. However, until the conversion occurs, there is risk that
the Company could default in its obligations under the
Debenture. In such case the Seller will be entitled to a
transfer of all stock of Canal 19, Grupo and TelePlus and the
right to purchase all capital assets of the Company in Costa
Rica for fair market value. The capital assets of TelePlus
consist
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primarily of subscriber contracts, transmission equipment and
subscriber reception equipment necessary for the operation of
the Costa Rican wireless cable television service.
All of the costs of restructuring the debt totaling $167,248
have been written off as additional interest expense in the
third quarter of 1997 when the Seller indicated his intent to
convert the debt into common stock. interest continues to
accrue until the debt is converted.
NOTE 8 FINANCING - CONVERTIBLE PREFERRED STOCK PURCHASE
On November 25, 1996, the Company accepted a Subscription
Agreement from Amber Capital Corporation and Investor Resource
Services, Inc. (the "Buyers") for a total of 500 shares of its
Series A Convertible Preferred Stock at a price of $1,000 per
share (the "Preferred Shares"), for a total Subscription price
of $500,000. The Buyers delivered $100,000 and promissory
notes for $400,000, at closing. The Buyers paid an additional
$100,000 against the Notes on January 8, 1997. The balance of
the Notes, which was due on January 31, 1997, was not paid,
and the Company and the Buyers agreed to terminate the balance
of the Subscription Agreements and cancel the Notes. On March
14, 1997, Aurora Capital purchased 100 shares of the Company's
Series B Convertible Preferred Stock for $100,000. The 300
aggregate shares of Series A and Series B Convertible
Preferred Stock were converted into 1,183,431 shares of common
stock on September 16, 1997.
NOTE 9 CONSULTING AGREEMENT AND EXERCISE OF WARRANTS IN OCTOBER, 1997
In July 1997, the Company entered into a two-year Consulting
Agreement with an investment banking firm (the "Consultant").
Pursuant thereto the Company granted the Consultant 500,000
one-year warrants exercisable at $1.00 per share, 200,000
one-year warrants exercisable at $2.50 per share and 100,000
three-year warrants exercisable at $2.50 per share. A value of
$128,000 was assigned to the warrants and $64,000 per quarter
is being amortized in operating expenses in the third and
fourth quarters of 1997.
In October 1997, assignees of the Consultant exercised the
500,000 one year warrants at $1 per share and the company
received $450,000 of the proceeds in early October, 1997. The
remaining $50,000 is to be paid before December 31, 1997.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company operates wireless cable television systems in LaCrosse, Wisconsin
(the "LaCrosse System") and in the Central American country of Costa Rica (the
"Costa Rican System"). Since beginning its initial wireless cable television
system in LaCrosse in September 1994, the Company has built its customer base to
approximately 1,200 subscribers as of September 30, 1997. On February 23, 1996,
the Company acquired TelePlus, S.A., a provider of wireless cable TV to
subscribers in Costa Rica. During the third quarter of 1996, the Company
upgraded the Costa Rican service and delivery system and relaunched the new
cable system on September 15, 1996. Marketing of the new system to new
subscribers began only after all existing subscribers who desired continuing
services were upgraded. As of September 30, 1997, the Costa Rican System had
approximately 4,200 subscribers. On March 28, 1996, the Company successfully bid
for authorizations to three 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 North Carolina authorization has been abandoned.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH 1996
The Company had revenues of $295,561 for the three months ended September 30,
1997, compared to $104,963 during the same period in 1996. The $190,598 revenue
increase is primarily from subscription fees and installation charges generated
on a significantly increased Costa Rican subscriber base. During the third
quarter of 1996, only 11% of total revenues were generated by the Costa Rican
System while it was upgraded and relaunched. During the comparable 1997 period,
68% of total revenues of $295,561 were generated by the Costa Rican System and
32% by the LaCrosse System.
Cost of sales for the three months ended September 30, 1997, were $59,978,
reflecting the significant expansion in the Costa Rican subscriber base. During
the comparable 1996 quarter the Company had cost of sales of $20,157, primarily
for the LaCrosse System.
Operating expenses for the three months ended September 30, 1997, consisted of
recurring broadcast costs, subscriber installation costs and general and
administrative expenses totaling $394,185, and $311,000 of amortization of
prepaid financial and public relations consulting expenses. The $311,000 of
consulting expense represents (i) 25% of the $988,000 value of the 200,000
shares of common stock issued in exchange for the one year of consulting service
that commenced on January 1, 1997 plus (ii)50% of the $128,000 assigned to the
warrants issued to an investment banking firm in July, 1997 for consulting
services. The $394,185 of recurring operating costs of the Costa Rica and
LaCrosse Systems and of the corporate office in Florida for 1997 was $75,870
less than the $470,055 for the comparable 1996 period because the 1996 period
had abnormal expenses attributable to the system upgrade in Costa Rica.
The $205,825 increase in interest expense in the 1997 period was primarily due
to the restructuring of the $2,000,000 note due to the Seller of the Costa Rican
System. Interest expense for 1997 includes the $167,248 write off of the costs
to restructure the debt and the effect of increasing the interest rate from 3.6%
to 12% per annum.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH 1996
The Company had revenues of $783,984 for the nine months ended September 30,
1997, compared to $313,408 during the same period in 1996. The $470,576 revenue
increase is primarily due to a significantly increased Costa Rican subscriber
base. Also, revenues in the 1996 period were negatively impacted by the
aforementioned relaunch of the Costa Rican system. The Costa Rican System
generated approximately 62% of 1997 revenues and 21% of 1996 revenues and the
LaCrosse System generated approximately 38% of 1997 revenues and 79% of 1996
revenues.
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Cost of sales for the nine months ended September 30, 1997 increased $70,582
over the comparable 1996 period due primarily to the significant increase in
Costa Rican subscribers.
Operating expenses for the nine months ended September 30, 1997, include
$805,000 of non-recurring financial and public relations consulting expense
assigned to the aforementioned consulting agreements. These agreements will not
be renewed and $311,000 will be amortized to expense in the fourth quarter of
1997. The recurring expenses of operating the Costa Rican and LaCrosse Systems
and the corporate office in Florida totaled $1,258,860 for the first nine months
of 1997. During the comparable period of 1996, the Company had operating
expenses of $1,196,387. This $62,471 increase in recurring operating expenses is
due to the increased variable costs of providing subscriber services to the
significantly expanded Costa Rican System.
Interest expense for the nine months ended September 30, 1997 was $224,642 above
the comparable 1996 period because of the aforementioned write off of the
$167,248 debt restructuring costs and the higher interest rate. Interest expense
will be almost negligible if or when the Debentures are converted.
Excluding the $805,000 non-recurring consulting expenses and the write off of
the $167,248 of debt restructuring costs, the Company's net loss of $735,084 for
1997 declined $196,155 from the $931,239 during the same period in 1996. The
significant increase in gross profit in 1997 covered more of the general
expenses in 1997 than in the 1996 period due to the continued significant
build-up of the subscriber base in Costa Rica in 1997 compared to 1996.
LIQUIDITY
On September 30, 1997, the Company had property and transmission equipment
valued at a cost of $1,808,999 as compared to $1,409,459 at September 30, 1996,
and $1,585,253 at December 31, 1996. This increase in capitalized property and
equipment cost over the past year primarily reflects the increase in the Costa
Rican subscriber base.
During the nine months ended September 30, 1997, the Company used cash primarily
to fund operating losses and purchase subscriber reception equipment for the
significant increase in subscribers in Costa Rica.
See Note 7 of the Notes to the Consolidated Financial Statements included in
Part I, Item 1 of this report, with respect to a debt restructuring and
contemporaneous change in control which occurred in May 1997. The balance sheet
at September 30, 1997 reflects the entire $2,100,000 Debenture as a current
liability. However, the Debenture holder has indicated his intention to convert
the Debenture into common stock before December 31, 1997.
Subsequent to September 30, 1997, the Company received $450,000 of the $500,000
due from the exercise of 500,000 warrants by assignees of the investment banking
firm to whom the warrants were issued in July, 1997. The $450,000 will be used
primarily to expand the Costa Rican subscriber base and for general working
capital purposes.
The Company must increase its subscriber base without corresponding increases in
corporate overhead to achieve profitability. Incremental equipment and labor
installation costs per subscriber are incurred before the Company receives fees
from the subscribers and such costs are only partially offset by installation
charges. To achieve subscriber growth beyond its current subscriber base or
develop additional wireless cable systems or related products and services, the
Company will need to raise additional debt or equity capital. The Company is
currently exploring various sources of additional financing, but has no
commitments in this regard. Failure to secure additional financing could have a
material adverse effect on the Company.
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PART II OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES:
In July 1997, the Company entered into a two-year Consulting
Agreement with an investment banking firm (the "Consultant").
Pursuant thereto the Company granted the Consultant 500,000
one-year warrants exercisable at $1.00 per share, 200,000
one-year warrants exercisable at $2.50 per share and 100,000
three-year warrants exercisable at $2.50 per share. In October
1997, assignees of the Consultant exercised the 500,000 one
year warrants at $1 per share.
The foregoing securities were all issued without registration
under the Securities Act of 1933, as amended by reason of the
exemption from registration afforded by the provisions of
Section 4(2) thereof, as transactions by an issuer not
involving a public offering, each recipient of securities
having delivered appropriate investment representations to
the Company with respect thereto and having consented to the
imposition of restrictive legends upon the certificates
evidencing such securities. No fees or commissions were paid
in connection with the issuance of the securities.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K.
Exhibit 11-Computation of Per Share Earnings (Loss)
Exhibit 27 - Financial Data Schedule (EDGAR version only)
Reports on Form 8K. 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: November 14, 1997 By: /s/ SAMUEL H. SIMKIN
----------------------------
Samuel H. Simkin, Vice President
and Principal Financial Officer
13
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
Exhibit 11 Computation of Per Share Earnings (Loss)
Exhibit 27 Financial Data Schedule (EDGAR version only)
EXHIBIT 11
TEL-COM WIRELESS CABLE TV
CORPORATION
COMPUTATION OF PER SHARE EARNINGS (LOSS)
Third Quarter and Nine Months Ended Sept. 30, 1997
<TABLE>
<CAPTION>
Third Nine
Quarter Months
Number Number Number Number
of Days of Shares of Days of Shares
<S> <C> <C> <C> <C>
Shares outstanding at beginning of year: 92 2,196,212 273 2,196,212
Issuance of 180,000 shares on restructuring
of $2 Million Note Payable on May 19, 1997 92 180,000 134 88,344
Conversion of Series A Preferred Shares into
1,183,431 Common Shares on Sept. 16, 1997 14 180,087 14 60,689
------- ---------
Weighted average shares outstanding for the 2,556,299 2,345,245
period
Net Income (Loss) for the period $(706,331) $(1,707,332)
Net Income (Loss) per share $(0.28) $(0.73)
</TABLE>
Note:
The common stock equivalent warrants and options have not been included because
their effect would be antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-01-1997
<CASH> 6,212
<SECURITIES> 0
<RECEIVABLES> 47,979
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 375,578
<PP&E> 1,808,999
<DEPRECIATION> 380,229
<TOTAL-ASSETS> 7,486,610
<CURRENT-LIABILITIES> 2,963,642
<BONDS> 2,000,000
0
0
<COMMON> 3,557
<OTHER-SE> 3,571,489
<TOTAL-LIABILITY-AND-EQUITY> 7,486,610
<SALES> 783,984
<TOTAL-REVENUES> 783,984
<CGS> 128,634
<TOTAL-COSTS> 128,634
<OTHER-EXPENSES> 2,063,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 298,822
<INCOME-PRETAX> (1,707,332)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,707,332)
<EPS-PRIMARY> (.73)
<EPS-DILUTED> (.73)
</TABLE>
