SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to
______________
Commission file number 0-25896
Tel-Com Wireless Cable TV Corporation
(Exact name of registrant as specified in its charter)
Florida 59-3175814
(State of incorporation) (I.R.S.Employer
Identification No.)
501 Grandview Avenue, Suite 201
Daytona Beach, Florida
32118
(Address of principal executive offices)
(Zip Code)
Issuer's telephone number, including area code: (904) 226-
9977
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of Class: on which registered:
Common Stock, par value NASDAQ
$.001
Common Stock Purchase NASDAQ
Warrants
Check whether the issuer (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 for 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
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
Issuer's revenues for its most recent fiscal year are
$459,185.
The aggregate market value of the voting stock held by non-
affiliates of the registrant based on the closing sale price on
March 31, 1997, was approximately $2,196,212.
The approximate number of shares outstanding of the
registrant's Common Stock as of April 11, 1997, was 2,196,212.
Transitional Small Business Disclosure Format: Yes No X
PART I
Item 1. Business
General Development of Business
Historical Background
Tel-Com Wireless Cable TV Corporation (the "Company")
was organized as a Florida corporation on May 7, 1993, under
the name Tele Consulting Corp. The Company changed its name
to Tel-Com Wireless Cable TV Corporation on February 14,
1994. The Company is a developer, owner and operator of
wireless cable television systems in the United States and
abroad. Wireless cable television is provided to
subscribers by transmitting designated frequencies over the
air to a small receiving antenna at each subscriber's
location. The Company provides television and related cable
services for multiple dwelling units, commercial locations
and single family residences. The Company commenced
operations in LaCrosse, Wisconsin, and surrounding areas of
Minnesota in September, 1994 and currently has no wireless
cable operations in other domestic markets. In February
1996, the Company, through a wholly-owned Costa Rican
subsidiary, acquired two Costa Rican corporations and
commenced wireless cable operations in the Republic of Costa
Rica. (See "Acquisitions.") The Company's executive offices
are located at 501 Grandview Avenue, Suite 201, Daytona
Beach, Florida 32118, and its telephone number is (904) 226-
9977. The Company's business office in LaCrosse, Wisconsin
is located at 335 Lang Drive, LaCrosse, Wisconsin 54603,
telephone number (608) 782-4100; and its business office in
Costa Rica is located at Calle 24, San Jose, Costa Rica,
telephone number (506) 226-9094.
Financings
On May 10, 1995, the Company raised net proceeds of
approximately $5,300,000 from the sale of 1,150,000 shares
of Common Stock and warrants to purchase an additional
1,610,000 shares of Common Stock pursuant to a registered
public offering.
On November 25, 1996, the Company accepted a
Subscription Agreement for total of 500 shares of its Series
A Convertible Preferred Stock at a price of $1,000 per share
(the "Preferred Shares"), 250 to Amber Capital Corporation
and 250 to Investor Resource Services, Inc. (the "Buyers")
for a total Subscription price of $500,000. Each Buyer
delivered $50,000 at closing, and a promissory note for
$200,000. Each buyer paid an additional $50,000 against the
Note. The balance of the Note, which was due on January 31,
1997, has not been paid, and the Company and the Buyers have
agreed to terminate the balance of the Subscription
Agreements and cancel the Notes.
In April, 1997, Aurora Capital purchased a total of 100
shares of the Company's Series B Convertible Preferred Stock
for a total price of $100,000.
Acquisitions
On February 7, 1996, the Company signed two agreements
for the acquisition of two companies that together hold
certain rights for the exclusive use of 18 frequency
licenses granted, or for which applications are pending, for
broadcasting wireless cable services throughout the country
of Costa Rica (the "Costa Rica Acquisition"). The Company
also acquired certain related equipment and contracts with
subscribers for pay television services. Due to the age and
technical obsolescence of the physical assets acquired, no
value was assigned to any of the assets acquired by the
Company in the Costa Rica Acquisition except the channel
licenses. Virtually all of the assets have been disposed of
and replaced with new equipment. These agreements were
amended and restated on February 22, 1996. The closing of
the two acquisitions was consummated on February 23, 1996.
Canal 19. In the first acquisition, the Company,
through Fepeca de Tournon, S.A., a new, wholly-owned Costa
Rican subsidiary corporation of the Company ("Fepeca de
Tournon, S.A."), acquired from Melvin Rosen (the "Seller")
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 $3,000,000, $1,000,000 of
which was paid at the closing, with the balance to be paid
on February 23, 1997, with interest thereon at the rate of
3.6% per annum payable monthly. The payment of this
deferred amount is secured by all of the acquired shares of
stock of Canal 19, Grupo Masteri, S.A., and Tele Plus, S.A.
(see below).
Among the assets owned by Canal 19 are certain rights
to licenses, for which applications are pending with the
Republic of Costa Rica, for the exclusive use of three
"superband" television frequency channels (288-294 mHz, 300-
306 mHz, 312-318 mHz), and 12 microwave frequency channels
(2300-2325 mHz (4 channels), 2350-2375 mHz (4 channels), and
2400-2425 mHz (four channels). With respect to the licenses
for the three superband frequencies, as part of the Costa
Rica Acquisition, Canal 19 was assigned the rights to these
licenses from Cable Television Yuda, another company
controlled by the Seller. Although the Company does not
anticipate any obstacles to final approval, the assignment
of these licenses requires approval by the Costa Rican
authorities. The transfer of these licenses has been
recommended by administrative resolution dated November 24,
1995, and operation of the licenses was authorized by a
confirmation dated February 3, 1996. Final approval of the
transfer of these licenses is pending. The Company is
currently broadcasting cable programming over these
channels.
With respect to the microwave frequencies, the Company
has been advised that, at the time of the acquisition of
Canal 19, the Costa Rican authorities had preliminarily
allocated three microwave frequency licenses to Canal 19.
Each frequency license has the technical capability of
serving four television channels. These frequencies were
reserved in favor of Canal 19 by an administrative
resolution on February 11, 1995. Operation of the
frequencies was authorized by a special confirmation on
February 2, 1996. Canal 19 has applied for the granting of
these microwave licenses by concession. This application
has received preliminary approval by the Costa Rican
authorities. Although the Company does not anticipate any
obstacles to final approval, final approval of the licenses
is currently pending. Notwithstanding final approval, use
of these microwave frequency licenses by Canal 19 for
broadcasting cable programming will require additional
authorization by the Costa Rican government. The Company
has only recently been advised of this additional step in
the approval process. The additional governmental approval
required to broadcast cable programming over these channels
may substantially delay the use of such channels by the
Company. The Company has no present plans to utilize these
channels.
Canal 19 also holds the license for the broadcast
rights over UHF channel 19, which the Company has agreed to
transfer back to the Seller to permit the Seller to continue
operating his broadcast business under that frequency.
Until such time as the transfer of this license is
completed, the Company has agreed to cause Canal 19 to allow
the Seller to operate a broadcast business using the air
time for the UHF channel 19 frequency.
Grupo Masteri. In the second acquisition, the Company,
through Fepeca de Tournon, S.A., acquired from the Seller
all of the outstanding shares of common stock of Grupo
Masteri, S.A., a Costa Rican corporation ("Grupo"), for a
total purchase price of $1,000,000 paid at the closing in
the form of 121,212 restricted shares of the Company's
common stock, which represented approximately 6% of the
Company's outstanding common stock at the time of the
acquisition. The assets owned by Grupo included the
exclusive use of three UHF frequency licenses (Channel 56:
722-728 mHz; Channel 58: 734-740 mHz; and Channel 60: 746-
752 mHz), transmitting and receiving equipment for operation
of three pay television channels, other equipment, and
approximately 1,700 active subscribers to one to three
channels of pay television services. Due to the age and
technical obsolescence of the physical assets acquired in
the Costa Rica Acquisition, the Company assigned no value to
such assets. Virtually all of the physical assets have been
disposed of and replaced with new equipment.
TelePlus. 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
1,700 subscribers purchased from Seller at a date one (1)
year after TelePlus has six (6) pay television channels
broadcasting to the public. TelePlus began broadcasting six
(6) pay television channels in October, 1996. Currently,
TelePlus has approximately 3,000 subscribers. TelePlus
leases the air-time for the broadcast channels from Canal 19
and Grupo and has acquired subscriber contracts and certain
physical assets, consisting primarily of transmission
equipment and subscriber reception equipment, from Grupo.
The Company currently broadcasts cable programming over six
channels in the Costa Rica System and has no present plans
to use the twelve additional microwave channels.
Rosen Debt. On February 12, 1997, the Company and
Seller entered in an agreement providing for the
restructuring of the 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 6 months. The Company paid Seller a
deposit of $50,000 on February 24, 1997, and, as
consideration for the restructuring of the Note, agreed to
issue to Mr. Rosen 100,000 shares of its common stock, par
value $.001 per share, having certain piggyback registration
rights. The $50,000 deposit was to be applied toward the
principal balance of the note; provided, however, that if
the $625,000 principal deduction payment was not timely
paid, Seller could retain such deposit. The Company failed
to pay the $625,000 payment, the $50,000 was retained and,
on April 2, 1997, Seller declared the Note to be in default.
On April 14, 1997, the Company entered into a letter of
understanding with the Seller for the restructuring of the
$2 million debt into a convertible debenture to mature in
twelve (12) months with interest to accrue at 12% per annum
(7% to be paid monthly in arrears and 5% to be paid at
maturity). The principal amount of the debenture will be $2
million plus certain 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 twelve (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 will have the option, exercisable within six (6)
months of the issue date of the debenture, to elect to
extend the maturity date of the debenture for an additional
twelve (12) months, in which event, commencing on the first
day of the thirteenth 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 restructuring, Seller
will (i) be issued 180,000 shares of the Company's Common
Stock with piggy back registration rights; (ii) be entitled
to nominate two (2) members to the Company's Board of
Directors until such time as Seller has exercised the
conversion rights under the debenture; and (iii) receive a
release from any liability in connection with the Costa Rica
Acquisition.
The debenture will be 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 thirty (30)
days' advance notice to the Company. The conversion price
is equal to the lesser of (a) $1.00 per share of Common
Stock or (b) 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 (5) 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 for a period of twenty-six (26)
months.
The Seller will have the option to the return of the
twelve microwave frequency licenses held by Canal 19 in
exchange for the Company's use of part of Seller's Channel
19 offices for an additional sales office and the provision
to the Company of approximately $25,000 to $30,000 per year
in advertising on Channel 19 for up to five (5) years.
If the Company defaults in its obligations under the
debenture, then Seller will be entitled to a transfer of all
stock of Canal 19, Grupo, and TelePlus and to the right to
purchase all capital assets of the Company in Costa Rica for
fair market value.
The Company and Seller are currently negotiating and
drafting the terms of definitive agreements to reflect the
terms of the preliminary understanding. Pending the
execution of definitive agreements, Seller has agreed to
abate any proceedings or remedies for default of the debt.
While the Company is optimistic that definitive agreements
on the terms described above will be executed in due course,
no assurance thereof can be given.
Business of the Company
Principal Services and Markets
LaCrosse. The Company's business began on August 24,
1993, when the Company entered into an agreement (the "Lease-
Purchase Agreement") with Grand Alliance LaCrosse (F)
Partnership and Home/Systems Joint Venture, which ultimately
provided for the lease and purchase of seventeen (17)
commercial channel licenses and certain transmitting
equipment in LaCrosse, Wisconsin (the "LaCrosse System").
The Lease-Purchase Agreement also provided for the sublease
and assignment to the Company of a 10-year lease of space on
a transmission tower. The tower lease includes the use of
the tower, transmitter building, and space for the Company's
exterior concrete pad, which supports the Company's three
satellite dish receivers.
Pursuant to the Lease-Purchase Agreement, the Company
made an initial deposit of $25,000 upon signing, expended
approximately $40,000 to install three transmitters, and
made a final lump-sum payment of $400,000 in August 1994.
Transmission facility construction obligations under the
Lease-Purchase Agreement were satisfied (i) by the $40,000
payment to construct the transmitters, (ii) as part of the
Company's final lump-sum payment of $400,000, and (iii) by
the construction by the Company of transmission facilities
for 11 channels. Construction was funded through private
financing transactions in August and December 1994. The
Lessors subsequently transferred ownership of all of the
licenses to the Company for $100, and the FCC approved such
transfer in March 1996.
FCC licenses for wireless cable channels generally must
be renewed every 10 years, and there is no automatic renewal
of such licenses. The channel licenses now owned by the
Company expire at different times, with the first expiring
beginning in 2001. Channel licenses are subject to non-
renewal, revocation or cancellation for violations of the
Communications Act of 1934, as amended (the "Communication
Act") or the FCC's rules and policies. The termination of,
or failure to renew, a channel lease would result in the
Company's being unable to deliver television programming on
any such channel and could have a material adverse effect on
the Company.
The Company began transmitting programming in LaCrosse
in December 1994 and, as of March 1, 1997, the Company had
approximately 1,300 subscribers in the LaCrosse System.
There are approximately 100,000 households within the
LaCrosse System's 25-mile signal pattern. The Company
currently offers 22 channels in the LaCrosse System,
consisting of 17 wireless cable channels and 5 local off-air
(VHF/UHF) broadcast channels.
The Company has also entered into lease agreements for
ITFS excess capacity for four channels with each of the
Shekinah Network and the Morningstar Educational Network for
use in the LaCrosse System. These companies have been
granted licenses by the FCC for rights to such channels.
The terms of such leases expire 10 years from the license
grant date and provide for the negotiation of new lease
agreements upon the expiration of the initial 10-year terms.
The failure to add such licenses to the LaCrosse System
could have a material adverse effect on the Company if
additional channels become necessary to compete effectively
with hardwire cable and direct broadcast satellite
providers.
In the event the Company is ultimately successful in
leasing any ITFS channels, each must be used a minimum of 20
hours per week for educational programming. The remaining
"excess air time" on an ITFS channel may be used by the
Company without further restrictions (other that the right
of the ITFS license holder, at its option, to recapture up
to an additional 20 hours of air time per week for
educational programming). Certain programs (e.g., C-SPAN
and The Discovery Channel) may qualify as educational and
thereby permit full-time usage of an ITFS channel. Lessees
of ITFS "excess air time" generally have the right to
transmit to their subscribers the educational programming
provided by the lessor at no incremental cost. FCC
regulations also permit ITFS licensees to meet all of their
minimum educational programming requirements using only one
channel. If the Company is successful in leasing the eight
ITFS channels for the LaCrosse System, two of these ITFS
channels could be used by the lessors solely for educational
programming, with the remaining six channels available to
the Company without restriction. In such event, the
Company, if it elects to use these additional channels and
has the capital resources available to acquire necessary
broadcast equipment, would increase the number of premium
and movie channels available in the LaCrosse System.
Costa Rica. The Company acquired certain rights to up
to eighteen pay television broadcast channels in Costa Rica
in February 1996 (the "Costa Rica System"). Three channels
are UHF frequencies (Channels 56, 58, and 60); three are
"superband" frequencies (channels 35, 37, and 39); and
twelve are microwave frequencies similar to those used in
the LaCrosse System. At the time the Company acquired these
licenses, the three "superband" channels were in full
operation broadcasting a scrambled signal of pay television
programming to approximately 1,700 subscribers. The Company
currently broadcasts pay television programming over the
three "superband" channels and the three UHF channels in the
Costa Rica System, and has no present plans to use the
additional twelve microwave channels. The twelve microwave
channels were to be maintained for future expansion of the
system, but will be transferred to Melvin Rosen pursuant to
the Rosen Agreement (See "Acquisitions - Rosen Debt" above).
The Company's transmission equipment is located on a
leased tower site on a mountaintop approximately 12,000 feet
above sea level and 10,000 feet above the San Jose Central
Valley. From this site, the Company is capable of
broadcasting its UHF signals over a radius of more than 100
miles.
As of March 31, 1997, the Company had approximately
3,000 subscribers in the Costa Rica System. There are
approximately 750,000 line-of-site households in the San
Jose Central Valley that are reachable from the Company's
present transmission facility, and an additional
approximately 150,000 households in the remaining regions of
Costa Rica that the Company could service from additional
transmission facilities. All 6 of the channel licenses
owned by the Company may be used exclusively by the Company
anywhere in the entire nation of Costa Rica.
The Costa Rica market comprises a total population of
approximately 3,350,000 people in approximately 900,000
separate households. In the Central Valley, there are
presently 22 VHF and UHF broadcast channels. While most
programming is in Spanish, a number of channels offer
English and other foreign-language programs for the large
number of expatriate residents of, and foreign visitors to,
Costa Rica.
Marketing
The Company utilizes media advertising, telemarketing,
direct mail, and door-to-door marketing to increase its
subscriber base both in the LaCrosse System and the Costa
Rica System. The Company also intends to run promotional
pricing campaigns and take advantage of public relations
opportunities. The Company emphasizes price-to-value,
reliability of service, quality and reliability of
equipment, and picture quality in its marketing programs.
LaCrosse. With respect to price-to-value relationship,
the Company believes that it is offering its LaCrosse System
subscribers competitive pricing. Subscription fees start at
$23.50 per month for basic programming, including a premium
movie channel, and the Company anticipates charging $7-$10
per month for additional premium and movie channels. Pay-
per-view stations may be made available in the future at an
additional charge. Specially-priced packages may also be
made available, and pricing during promotional periods may
also be lower. Installation fees average $40.00 per
subscriber and range from $9.95 (for promotional specials)
to $150.00 (for distant subscribers who require larger and
more expensive receiving antennas). The two hard-wire cable
companies in LaCrosse currently offer installation for $10
to $60, basic subscription service for approximately $36,
premium stations for $12 each, and broadcast programming
over 28 and 40 channels, respectively. Although the
Company's standard programming package includes fewer
channels, one of the hard-wire cable companies in the
LaCrosse market is currently charging $34.00 per month for
its equivalent programming package, as compared to the
$23.50 currently charged by the Company. Cable customer
charges are subject to a 5% local franchise tax. Wireless
cable customers do not have to pay any franchise tax. The
Company tries to focus its customers on the value received
for the price paid and believes its product/pricing offers a
competitive choice.
Costa Rica. The Company currently offers six channels
of pay television in Costa Rica (HBO Ole, Cinemax, Sony
Entertainment, Warner Brothers Network, Fox Sports
International, and Discovery Channel. Movies generally are
in English with Spanish subtitles. Most remaining
programming is in Spanish. Each subscriber receives an
addressable set-top converter and a remote control which is
also able to operate the 22 off-air channels available for
reception. Installation costs average approximately $20.
Antennas and converters are leased, with the cost included
in the monthly subscription fee. Monthly subscription fees
for the Costa Rica System are currently approximately $15 to
$19.50 per month, depending on the programming package. The
Company believes that it provides a high-quality, price-
competitive alternative to hard-wire cable services in Costa
Rica. These services are marketed primarily to the Spanish-
speaking indigenous population who are attracted to the
Company's lower-priced, value alternative.
In both systems, the Company focuses on the reliability
of its service in its marketing efforts. The Company
provides 24-hour-per-day service, with rapid response time
on incoming telephone calls, uniformed field personnel, and
flexible installation scheduling. Additionally, the Company
emphasizes its picture quality and the reliability of its
wireless transmission. Within its signal coverage pattern,
the Company believes that the picture quality of the
Company's service is as good or better than that received by
hard-wire cable subscribers because, absent any line-of-
sight obstruction, there is less opportunity for signal
degradation between transmitter and the subscriber. Also,
wireless cable service has proven very reliable, primarily
due to the absence of certain distribution system components
that can fail and thereby cause outages. The Company has
positioned itself as a reliable, cost-effective alternative
to traditional hard-wire cable operations.
Hardware
A number of reputable manufacturers produce the
equipment used in wireless cable systems, from transmitters
to the set-top converters which feed the signal to the
television set. Because the signal is broadcast over the
air directly to a receiving antenna, wireless cable does not
experience the problems caused by amplifying signals over
long distances experienced by some hardwire cable
subscribers. This is particularly the case for a signal
delivered over longer distances. Amplification of signals
can lead to greater signal noise and, accordingly, a
grainier picture for some subscribers. Also, the
transmission of wireless signals is not subject to the
problems caused by deteriorating underground cables used in
conventional systems. As a result, wireless cable is
sometimes more reliable than conventional cable, and picture
quality is generally equal to or better than ordinary cable.
In addition, extreme weather conditions typically do not
affect wireless cable transmitters, so customers seldom
experience outages sometimes common to conventional cable.
In Costa Rica, the Company anticipates even greater
market penetration than in the United States because of the
absence of significant hard-wire cable services and the
impediment of significant costs to install cabling to expand
their geographic service areas. Unlike the United States
where hard-wire cable has been in existence and established
for many years and cable infrastructure is in place, no such
wide-ranging infrastructure is in place in Costa Rica, and
the Company believes its ability to provide quality pay
television services by wireless transmission will be a very
competitive alternative or the only alternative in the many
areas not serviced by hard-wire cable.
Several large U.S. wireless cable providers are
currently converting to digital compression equipment, which
allows several programs to be carried in the amount of
bandwidth where only one program is carried now.
Manufacturers have equipment with compression ratios as high
as 16 to 1, although compression ratios of 6 to 1 or 10 to 1
are more common. At such time as the Company is in a
position to deploy digital compression technology, the
Company will be able to increase its channel capacity
several fold without having to acquire additional frequency
licenses in both its U.S. markets and Costa Rica. Digital
compression technology would permit the Company to offer as
many or more programming options as its hard-wire
competitors. Presently, the Company does not believe
digital compression technology will affect its competitive
position in either of its markets.
Digital capability ultimately will be essential for
wireless cable to compete with hard-wire cable. The ability
to offer substantially more programming utilizing existing
wireless cable channel capacity is dependent on effectively
deploying digital technology. Digital technology has only
recently become commercially available to the wireless cable
industry. The Company does not expect, for financial and
other reasons, to be able to deploy such technology in its
existing systems for several years. It is expected that, at
such time as the Company may deploy digital technology, the
cost of digital equipment will be closer to the cost of
analog equipment. Future systems may be able to be launched
with compression from the start, thereby eliminating the
need to remove older equipment. There can be no assurance
that the Company will have the financial resources to deploy
digital technology successfully or that cost-effective
digital equipment will be available to the Company. Failure
by the Company to deploy digital technology could have a
material adverse effect on its operating results and
business expansion.
Competition
The pay television industry is highly competitive.
Wireless cable television systems face or may face
competition from several sources, including established hard-
wire cable companies.
Wireless cable programming is transmitted through the
air via microwave frequencies that generally require a
direct "line-of-sight" from the transmitter facility to the
subscriber's receiving antenna. In communities with dense
foliage, hilly terrain, tall buildings or other obstructions
in the transmission path, transmission may be blocked at
certain locations or require additional repeater equipment
to circumvent such obstructions. Traditional hard-wire
cable systems deliver the signal to a subscriber's location
through a network of coaxial cable and amplifiers and do not
require a direct line-of-sight for transmission and,
therefore, may have a competitive advantage over the Company
in those areas where the reception of wireless cable
transmissions is difficult or impossible. In the Costa Rica
System, however, the Company is not broadcasting its 6
channels over microwave frequencies, so the Company has no
requirement for "line of sight" transmission and can reach
virtually all households within the signal pattern.
Since wireless cable systems do not require an
extensive network of coaxial cable and amplifiers, the
systems' capital cost per installed subscriber is
significantly less than that for hard-wire cable systems.
In addition, operating costs of wireless cable systems are
generally lower than those of comparable hard-wire cable
systems due to lower network maintenance and depreciation
expense. As a result of lower capital and operating costs,
the Company is able to charge less for its standard service
packages than the amount charged for comparable service
provided by hard-wire cable system operators, thereby
enhancing the Company's competitive position.
U.S. wireless cable programming can only be transmitted
on the frequencies made available for wireless cable by the
FCC. Currently, the number of channels of cable television
programming that can be provided to subscribers of U.S.
wireless cable systems is limited to 33. Costa Rica has no
such limits, but, other than the frequencies owned by the
Company, there are no other frequencies currently available
for acquisition. Hard-wire cable systems are not limited in
this regard and frequently offer more channels of cable
television programming than wireless cable systems. The
LaCrosse System competes with two hard-wire cable companies,
which currently offer 28 and 40 channels, respectively, to
their subscribers compared to the 22 channels the Company
currently offers. The Costa Rica System currently offers 6
pay channels and the three local hard-wire cable companies
offer from 36 to 40 channels, approximately one-third of
which are re-broadcast of local, off-air programming. The
Company believes that, with its 22 off-air channels plus 6
pay channels, its channel line-up and service is price
competitive.
U.S. programming is generally available to traditional
hard-wire and wireless operators on comparable terms,
although operators that have a smaller number of subscribers
often are required to pay higher per-subscriber fees.
Accordingly, operators in the initial operating stage
generally pay higher programming fees on a per subscriber
basis. In Costa Rica, there are fewer programming
alternatives than in the U.S. but there are still a
substantial number of Spanish-language and international
programs available. The Company offers a package of what it
believes to be the most desirable program alternatives in
Costa Rica.
Unlike hard-wire operators, wireless cable operators
who don't hold licenses to the frequencies in their markets
have to lease the wireless cable channels on which they
transmit their programming from channel license holders.
Leases generally require the Operator to pay the lessor a
fee based on a percentage of subscription revenues,
averaging approximately 5%, or, if greater, a minimum
monthly fee. Although hard-wire operators do not have to
lease channels, they do have to pay franchise fees generally
on all gross revenues from cable system operations (as
compared to only subscription revenues in the case of
wireless cable), typically in the range of 3% to 5%, an
expense that is not incurred by wireless operators.
Certain hard-wire cable operators have announced their
intention to develop interactive features for use by their
subscribers, such as shopping via video catalogs and playing
video games with neighbors. Interactive services are not
currently available for wireless cable. The Company
believes that the same manufacturers who currently are
developing digital compression converters for both hard-wire
and wireless cable will also make new developments in
interactivity available to both industry segments. The FCC
has designated a return path channel for use in connection
with interactive and Internet services which may be offered
by wireless cable operators. The Company believes that, if
it is economically feasible to do so, wireless cable systems
can include two-way interactivity. However, to the extent
such services are available on hard-wire cable systems, but
not available on wireless cable systems, the Company could
be at a competitive disadvantage. The Company does not
anticipate demand for interactive services in Costa Rica for
several years as technology demand in Costa Rica is behind
that in the U.S.
In the LaCrosse market, two traditional hard-wire cable
companies are the Company's primary direct competitors. The
Company estimates that within its signal pattern for
LaCrosse, over 60% of the households are hard-wire cable
subscribers. The two hard-wire cable companies in LaCrosse
currently offer 28 and 34 channels, respectively, to their
subscribers compared to the 22 channels the Company
currently offers. Of the approximately 100,000 potential
subscribers within the LaCrosse System's signal pattern,
approximately 20,000 are currently not wired for hard-wire
cable and approximately 20,000 more have access to such
services but are not subscribers. The Company is directing
its principal marketing efforts toward potential subscribers
who are either not wired for hard-wire cable or are not
presently hard-wire cable customers.
In Costa Rica, three hard-wire cable companies are the
Company's primary, direct competitors. The Company
estimates that within its signal pattern for Costa Rica,
fewer than 20% of the households are hard-wire cable
subscribers and no more than an additional 10% have access
to hard-wire cable services. The three hard-wire cable
companies in Costa Rica currently offer up to 46 (11 local,
35 international), 48 (13 local, 35 international), and 36
(9 local, 27 international) channels, respectively, and
charge approximately $22, $25, and $23 per month,
respectively, for basic programming (movies are additional),
and approximately $15, $23, and $23, respectively, for
installation services. None offers pay-per-view programming
or addressable converters. All three companies offer
discounts for long-term contracts. The Company offers a
package of 28 channels (22 local off-air, 6 international)
for a monthly fee of approximately $15 to $20, plus
installation. Based on the Company's existing subscriber
base of approximately 3,000 households that presently pay an
average of $18 per month for six channels of programming and
the very limited penetration of hard-wire cable into this
market, the Company believes that it has a competitive
programming alternative to hard-wire cable.
In addition to competition from traditional,
established hard-wire cable television systems, wireless
cable television operators face competition from a number of
other sources. Premium movie services offered by cable
television systems have encountered significant competition
from the home video cassette recorder industry, a major
participant in the television program delivery industry. In
addition, in areas where several off-air television stations
can be received without the benefit of cable television,
cable television systems also have experienced competition
from the availability of broadcast signals generally and
have found market penetration to be more difficult. In
particular, in Costa Rica, there are over 20 broadcast
channels available in the San Jose central valley. In
addition to the foregoing, wireless cable systems face
potential competition from emerging trends and technologies
in the cable television industry, including satellite
receivers, direct broadcast satellite, telephone companies,
satellite master antenna television, and local multi-point
distribution services. Many of these newer technologies are
not available in Costa Rica and may not be available for
several years because the demand for technology in Costa
Rica lags behind that of the United States.
Satellite receivers are generally seven to twelve foot
dishes mounted in the yards or on the roof tops of
subscribers to receive a wide range of television and radio
signals from orbiting satellites. Their popularity has been
reduced due to scrambling, which requires users to purchase
decoders and pay for programming. Although these systems
are capable of delivering over 100 channels of programming,
equipment and connection currently cost $1,000- $2,000.
Satellite receivers are popular in Costa Rica in wealthier
and outlying communities but do not represent a significant
share of the market.
Direct broadcast satellite ("DBS") involves the
transmission of an encoded signal directly from a satellite
to the home user using a relatively small (12 to 36 inch)
dish mounted on a rooftop or on the ground. DBS services
are capable of delivering over 100 channels of programming.
Such services currently cost $200-$1,000 for equipment and
connection, and average approximately $35 per month for
access to basic programming. Local broadcast channels are
not currently offered by DBS.
The United States Congress recently passed legislation
permitting local telephone exchange carriers ("LECs") to
provide video programming directly to subscribers in their
telephone service areas. LEC delivery of video programming
will likely require extensive deployment of fiber-optic
transmission facilities and/or highly sophisticated
electronics and substantial capital investment. The Company
believes that numerous regulatory and technological hurdles
to the successful implementation of telephone video service
remain.
Satellite master antenna television ("SMATV") is a
multi-channel television service for multiple dwelling
units. SMATV operates under an agreement with a private
landowner to service a specific multiple dwelling unit, such
as an apartment complex. The FCC has recently amended its
rules to provide point-to-point delivery of video
programming by SMATV operators and other video delivery
systems in the 18 gHz band.
Off-air local broadcasts (e.g., ABC, NBC, CBS, Fox,
UPN, WB, and PBS) provide a free programming alternative to
the U.S. public. Federal legislation requires the prior
consent of certain off-air broadcasters for retransmission
of their signals over wireless cable systems. The Company
does not anticipate that it will have difficulty obtaining
necessary consents.
The FCC has proposed certain rules to reallocate the 28
gHz band to create a new video programming delivery service
referred to as local multi-point distribution service
("LMDS"). If adopted as proposed, such rules would allow
for the entry into each market of at least two new wireless
video program distributors with access to upwards of 49
channels each. If LMDS is adopted by the FCC, the Company
does not anticipate licensing and system construction for
several years. Significant opposition to LMDS currently
exists including opposition from the National Aeronautics &
Space Administration ("NASA") claiming that LMDS will
interfere with the transmission to NASA satellites.
Sources of Programming
LaCrosse. The Company currently arranges for
programming from three sources for the LaCrosse System: (i)
broadcasters of off-air (VHF/UHF) signals, (ii) an NBC
affiliate station for the retransmission of its signal, and
(iii) suppliers of programming typically broadcast over
cable systems. Programming from off-air broadcasters is
negotiated on a case-by-case basis and may be available for
no charge or for a minimal royalty payment. The VHF and UHF
broadcasters in LaCrosse, Wisconsin (CBS, ABC, FOX, PBS and
Channel 50), allow the Company's customers to receive their
signals through a high-grade antenna provided by the Company
without the assessment of any fee or royalty. There is no
NBC affiliate broadcasting off-air in LaCrosse, but the
Company has an agreement with the NBC affiliate in nearby
Eau Claire, Wisconsin, to allow the Company to retransmit
its programming over one of the Company's MMDS frequencies
without any fee provided the Company purchases at least $500
of advertising each year from this station.
In addition to off-air broadcasters, the Company has
agreements with program suppliers for ESPN, ESPN 2, CNN, CNN
Headline News, USA, WGN, WTBS, TNT, A&E, Nickelodeon,
Discovery, TNN, the Family Channel, Lifetime, the Weather
Channel and Showtime for broadcasting in the LaCrosse
System. The program agreements generally have three year
terms, with provisions for automatic renewals and are
subject to termination for breach of the agreement,
including non-payment. The programming agreements generally
provide for royalty payments based upon the number of
Company subscribers receiving the programming each month.
Individual program prices vary from supplier to supplier,
and more favorable pricing sometimes is afforded to
operators with larger subscriber bases. If any existing
programming contracts are canceled, or not renewed upon
expiration, the Company would have to seek program material
from other sources.
Costa Rica. The Company currently arranges for
programming from two sources in Costa Rica: (i)
broadcasters of off-air signals and (ii) suppliers of pay
television programming broadcast by satellite . The VHF/UHF
signals broadcast in Costa Rica are received at no charge
through a high-grade antenna. The six pay television
channels offered by the Company include HBO Ole, Cinemax,
Sony Entertainment, Warner Brothers Network, Fox Sports
International, and Discovery Channel with a late-night
alternative of Spice on one channel. Movies generally are
broadcast dubbed in Spanish or in English with Spanish
subtitles, and most other programming is in Spanish. The
agreements for such programming are typically indefinite in
length, provide for royalty payments based upon the number
of TelePlus subscribers receiving the programming each
month, and are terminable for non-payment. Individual
program prices will vary from subscriber to subscriber, and
more favorable pricing may be available as TelePlus's
subscriber base increases.
In addition to the programming alternatives described
above, the Company may introduce a "pay-per-view" service
that enables customers to order and pay for one program at a
time. Pay-per-view services have been successful for
specialty events such as wrestling, heavyweight prize
fights, concerts, and early release motion pictures. This
service can also be promoted for the purchase of movies in
competition with video rental stores. Pay-per-view requires
the subscriber to have an "addressable" converter which
allows the operator to control what the subscriber watches
without having to visit the subscriber location to change
equipment. All subscribers in both the LaCrosse and Costa
Rica Systems are equipped with addressable converters. In
order for customers to order pay-per-view events more
conveniently, however, an "impulse" pay-per-view converter
would be desirable because it has a return line via phone or
cable to the cable operator's computer system and enables a
subscriber to order pay-per-view events by pushing a button
on a remote control rather than requiring the subscriber to
make a telephone call to order an event.
Government Regulation
United States. The wireless cable industry is subject
to regulation by the FCC pursuant to the Communications Act
of 1934, as amended (the "Communications Act"). The
Communications Act empowers the FCC, among other things: to
issue, revoke, modify and renew licenses within the spectrum
available to wireless cable; to approve the assignment
and/or transfer of control over such licenses; to determine
the location of wireless cable systems; to regulate the
kind, configuration and operation of equipment used by
wireless cable systems; and to impose certain equal
employment opportunity requirements on wireless cable
operators. The FCC has determined that wireless cable
systems are not "cable systems" for purposes of the
Communications Act. Accordingly, a wireless cable system
does not require a franchise from a local authority and is
subject to fewer local regulations than a hard-wire cable
system. In addition, utility poles and dedicated easements
are not necessary.
Pursuant to the Cable Television Consumer Protection
and Competition Act of 1992 (the "Cable Act"), the FCC
adopted rate regulations exclusively for traditional hard-
wire cable systems which provide for, among other things,
reductions in the basic service and equipment rates charged
by most hard-wire cable operators and FCC oversight of rates
for all other services and equipment. The Cable Act also
provides for rate deregulation of a traditional hard-wire
cable operator in a particular market once there is
"effective competition" in that market. Effective
competition exists, among other circumstances, when another
multi-channel video provider exceeds a 15% penetration in
that market. FCC regulations also require traditional hard-
wire cable operators to undertake various customer service
improvements. The Company cannot predict precisely what
effect these regulations or other governmental regulations
may have on traditional hard-wire cable operators as to
price and service. While current FCC regulations are
intended to promote the development of a competitive pay
television industry, the rules and regulations affecting the
wireless cable industry may change, and any future changes
in FCC rules, regulations, policies and procedures could
have an adverse effect on the industry as a whole and on the
Company in particular. The Company cannot predict what
impact such changes would have on the industry as a whole or
on the Company in particular.
Under the Telecommunications Act of 1996 (the "1996
Act"), Congress has directed the FCC to eliminate cable rate
regulations for "small systems," as defined in the 1996 Act,
and for large systems under certain prescribed
circumstances, and for all cable systems effective three
years after enactment of the 1996 Act. The 1996 Act could
have a material impact on the wireless cable industry and
the competitive environment in which the Company operates.
The 1996 Act will result in comprehensive changes to the
regulatory environment for the telecommunications industry
as a whole. The legislation will, among other things,
substantially reduce regulatory authority over cable rates.
Another provision of the 1996 Act will afford hard-wire
cable operators greater flexibility to offer lower rates to
certain of their subscribers, and would thereby permit cable
operators to offer discounts on hard-wire cable service to
the Company's subscribers or prospective subscribers. The
legislation will permit telephone companies to enter the
video distribution business, subject to certain conditions.
The entry of telephone companies into the video distribution
business, with greater access to capital and other
resources, could provide significant competition to the
wireless cable industry, including the Company. In
addition, the legislation will afford relief to DBS by
exempting DBS providers from local restrictions on reception
antennas and preempting the authority of local governments
to impose certain taxes. The Company cannot predict the
substance of rules and policies to be adopted by the FCC in
implementing the provisions of the legislation.
With a wireless cable system, the signals are sent from
the transmitter to the subscriber's receiving antenna over
microwave frequencies. The wireless cable TV system
programming is in a scrambled format using low-power
transmitters operating in the 2.1 to 2.7 gHz frequency
range. These super high frequency channels are allocated
solely to wireless cable TV transmissions and are licensed
by the FCC. In major markets, the frequencies available for
wireless cable consist of up to 33 channels, the maximum
permitted by the FCC. Of these 33 channels, 13 can be held
by wireless cable entities and used full-time for commercial
programming delivery, and 20 generally are held by qualified
educational institutions ("ITFS" channels). Commercial use
of channel licenses held by educational institutions is
available only through contracts with such educational
institutions and within specifically limited guidelines.
ITFS channel licenses that are not secured by educational
institutions may, in some instances, be acquired directly by
commercial broadcasters without obligation to compensate the
educational institutions. Six of the channels currently
owned by the Company in the LaCrosse System were ITFS
channels which were acquired when no educational institution
applied for the rights to such channels. These channels may
be used by the Company, without restriction, for full-time
commercial programming.
Applications for renewal of licenses must be filed
within a certain period prior to expiration and there is no
automatic renewal of such licenses. Petitions to deny
applications for renewal may be filed during certain periods
following the filing of such applications. Licenses are
subject to revocation, cancellation or non-renewal for
violation of the Communications Act or the FCC's rules and
policies.
Costa Rica. Television operations in Costa Rica are
regulated mainly by the Radio and Television Law - Ley de
Radio y Television, No. 1758 of 19 June 1954, as amended
(the "Law"); the Regulation of Wireless Stations -
Reglamento de Esstaciones Inalambricas, No. 63 of 11
December, 1956; and the Broadcasting Rule of Atlantic City
and the International Agreements Regarding Broadcasting
executed in Washington, D.C., on March of 1949, which have
been ratified by the Congress of Costa Rica. According to
the Law, television operations can only be established,
conducted and exploited by means of a concession granted by
the Radio Control Office ("RCO"), upon payment of the taxes
and completion of all formal requirements imposed by the
Law. Once the concession is granted, the RCO will
periodically control and supervise its operation. In order
to verify that the terms and conditions of the concession
are being fulfilled, the RCO is authorized to visit and
inspect the place of business of the concessionaire at any
time. If there is any incorrect technical functioning, the
licensee, within forty-eight hours, must reestablish the
concession to its original terms under penalty of
cancellation of the license. Concessions for the Company's
Costa Rica System are owned by the Costa Rican operating
companies which were acquired by the Company through its
wholly-owned Costa Rican subsidiary in February 1996.
Furthermore, the owner of a concession is obligated to
strive to increase the cultural level of the population.
The owner of the concession is jointly liable, together with
whomever broadcasts or transmits through the frequency, for
any violations of the Law, provided there is intentional
conduct by the concessionaire. In case of negligence, the
liability is subsidiary to the direct offender's. The
concessionaire is not liable in the absence of willful
participation or negligence. Any broadcast shall operate
free of impurities (espurias y armobucas) and with the
frequency adjusted so that no interference is caused to
other concessionaires. If the operating center does not
meet these requirements, its functioning will not be
authorized by the RCO. Other governmental limitations or
restrictions apply, such as a prohibitions against
broadcasting certain information, whether private or
official, local or international, except in situations of
emergency; false news; alarm calls without reason; the
broadcasting of programs emanating from other
concessionaires without their previous authorization; and
the use of vulgar or improper language.
The Law establishes that licenses are granted for a
limited time, but they are automatically extended by payment
of the corresponding dues, provided that the functioning and
installation of the station are adjusted to the stipulations
of the Law. The transfer or alienation of the right to a
frequency is permitted only with the previous authorization
of the RCO, which means that a formal request has to be
submitted to the RCO on these terms. According to the RCO's
current interpretation, a frequency can be leased to a third
party without prior consent from the Government. The lessor
remains as the concessionaire and, therefore, continues to
be subject to all obligations related to the concession.
Article 3 of the Law requires that concessionaires have
not less than 65% Costa Rican ownership. The Company has
been advised by its Costa Rican counsel that this provision
is not being actively enforced and that there is a decision
from the Constitutional Court declaring a similar provision
in a related law (Ley de medios de Difusion y Agencias de
Publicidad) to be unconstitutional. However, based on Costa
Rican counsel's recommendation, the Company structured its
ownership of these licenses to be indirect through a tiered
subsidiary structure, whereby a Costa Rican company, wholly-
owned by the Company, owns 100% of the outstanding capital
stock of the Costa Rican companies holding the licenses.
The Company believes that this structure adequately meets
the requirements of Costa Rican law. However, in the event
this structure is not acceptable to the government, an
alternate ownership structure would have to be implemented,
which could have a material adverse effect on the Company.
Development of New Territories
On March 28, 1996, the FCC completed its auction of
authorizations to provide single channel and multi-channel
Multipoint Distribution Service ("MDS") wireless cable
services in 493 Basic Trading Areas. The Company won bids
in three markets: Hickory - Lenoir - Morganton, North
Carolina; Wausau - Rhinelander, Wisconsin; and Stevens Point
- - Marshfield - Wisconsin Rapids, Wisconsin. 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. The
Company has made the second required deposit equal to 10% of
its winning bid only on the two Wisconsin licenses. The
Wisconsin territories provide in excess of 150,000 line-of-
sight households and offer markets that the Company believes
are competitively equivalent to or better than that of the
LaCrosse System.
The licenses are to be conditionally issued following
the Company's payment in full of the initial 20% down
payment; however, while the Company has made the 20% down
payment for the two Wisconsin licenses, the FCC has not yet
conditionally issued the licenses. The remaining balance of
approximately $2,800,000 for the acquisition of these
licenses will be paid over the next ten years. As the
Company did not make the required additional 10% payment on
the North Carolina license, the Company has forfeited its
right to acquire such license. The default payment for
forfeiting the license is anticipated to be $65,544.
Although the Company may receive a refund of as much as
$120,142 in connection with its application for the North
Carolina license, there can be no assurance that the Company
will receive any refund. In addition, the Company may 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 reauction the Hickory, NC, license.
The grant of the Wisconsin licenses will be conditioned
on the Company's fully and timely meeting its quarterly
payment obligations, and the development of operating
systems within 18 months of the grant of each license. The
Company is unable to predict the exact date by which such
systems must be operational since it does not know when the
licenses will be conditionally issued by the FCC. The
Company estimates that the cost of developing a fully
operational system in each market would be approximately
$1,200,000 per system. To date, the Company has not taken
any steps to develop these systems. Development of these
markets and the funding of the acquisition price for the
licenses will require additional debt or equity financing,
which may not be available to the Company on acceptable
terms, if at all. The Company has made no arrangements or
commitments for such future financing, and there can be no
assurance that the Company will be able to raise such
capital on acceptable terms, if at all. Failure to obtain
such additional financing could cause a forfeiture of the
licenses and could adversely affect the financial position
and growth of the Company.
In addition to the material liquidity risks associated
with developing new operating systems utilizing the
Wisconsin licenses, the development of such systems will be
dependent on, among other things, successful construction of
operating systems; identification and procurement of
acceptable tower sites; the availability of suitable
management and other personnel; and the Company's general
ability to manage growth. There can be no assurance that
the Company will be able to successfully develop operating
systems utilizing the Wisconsin licenses. If the Company
chooses not to develop an operating system, it may decide to
attempt to lease a license or to sell a license. If the
Company decides to attempt to lease a license or to sell a
license, then there is no assurance that there will be a
buyer or lessor for such license or one offering an
acceptable price when the Company attempts to sell or lease
it. There is also a risk that other license holders will
attempt to sell or lease their licenses at the same time as
the Company. Additionally, any transfer of a license must
be approved by the FCC.
The Company intends to focus its operations, marketing,
and service in regional markets to increase efficiencies and
profitability. However, the Company does not currently have
the financial resources to develop operating systems in the
foregoing markets, and there can be no assurance that the
Company will ever develop systems in such markets. To
develop and launch additional wireless cable systems in
areas where the Company holds licenses, or otherwise, 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.
In Costa Rica, the Company believes it is well-
positioned to compete effectively with other pay television
providers in the San Jose Central Valley area, principally
hard-wire cable operators, and to establish a profitable
business. The Company also is evaluating the possibility of
directing its signals into other key metropolitan areas of
Costa Rica that aren't served by any cable or other pay
television service by establishing additional transmission
sites and/or utilizing more powerful transmitters.
Employees
As of March 28, 1997, the Company had 34 full-time
employees and no part-time employees serving in its
executive, LaCrosse, and Costa Rica offices. The Company
maintains various benefit plans and experiences good
employee relations.
Major Customers
The Company is not dependent upon one or a few major
customers or suppliers.
Costs and Effects of Compliance with Environmental Laws
The Company complies with all applicable federal,
state, and local environmental laws and regulations, none of
which the Company believes have a material effect on its
operations and business.
Item 2. Properties
The Company's executive offices are situated at 501
Grandview Avenue, Suite 201, Daytona Beach, Florida 32118
and are leased from an independent third party pursuant to a
lease expiring in August, 1999. The leased space includes
approximately 1,400 square feet and provides for lease
payments of approximately $1,460 per month. The Company
believes that this facility currently provides adequate
space for the Company's present executive office activities.
The Company's LaCrosse facility is situated at 335 Lang
Drive, LaCrosse, Wisconsin 54603 and is leased from an
independent third party pursuant to a lease expiring in
November, 1997. The leased space includes approximately
2,000 square feet and provides for lease payments of
approximately $1,100 per month. The Company believes that
this facility currently provides adequate space for the
Company's present business activities in LaCrosse.
The Company's Costa Rica facility is situated at Calle
24, San Jose, Costa Rica, and is leased from an independent
third party pursuant to a lease expiring in April, 1998.
The leased space includes approximately 4,600 square feet
and provides for lease payments of approximately $1,600 per
month. The Company believes that this facility currently
provides adequate space for the Company's present business
activities in Costa Rica.
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters
The Common Stock ("Common Stock") of the Company, par
value $.001 per share, has traded on the NASDAQ over-the-
counter ("SmallCap") market under the symbol "TCTV" since
qualification for listing on NASDAQ on May 3, 1995.
Warrants ("Warrants") to purchase Common Stock of the
Company are traded on the over-the-counter market under the
symbol "TCTVW." The initial offering price for the Common
Stock was $5.00 per share and the initial offering price for
each Warrant to purchase one share of Common Stock was $.25
per Warrant.
The following table sets forth the range of high and
low bid prices for the Common Stock and Warrants as of the
periods indicated as reported by NASDAQ. These over-the-
counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
Common Stock High ($) Low ($)
1st Quarter 1996 9.50 7.50
2nd Quarter 1996 8.63 7.33
3rd Quarter 1996 8.00 5.00
4th Quarter 1996 5.75 4.13
Warrants
1st Quarter 1996 3.59 2.00
2nd Quarter 1996 3.57 2.33
3rd Quarter 1996 2.55 1.38
4th Quarter 1996 1.75 1.00
As of March 31, 1997, approximately 2,196,212 shares of
the Company's Common Stock and 2,475,000 Warrants,
respectively, were outstanding and, as far as the Company
can determine, were held by in excess of 300 shareholders.
The Company has not paid any cash dividends since its
inception and does not anticipate paying cash dividends in
the foreseeable future.
Item 6. Management's Discussion and Analysis
The Company started operations in its initial wireless
cable television system in LaCrosse, Wisconsin (the
"LaCrosse System") in September 1994. Through September 30,
1995, the Company was primarily focusing on system
construction, training personnel to service and install
subscriber and transmission equipment, and developing a
subscriber base. The Company began providing programming to
subscribers in the LaCrosse System in December 1994 and, as
of March 31, 1997, the Company had approximately 1,300
subscribers in the LaCrosse System. In February 1996, the
Company, through a wholly-owned Costa Rica subsidiary,
acquired two Costa Rica corporations and commenced wireless
cable operations in the San Jose area, serving approximately
1,700 subscribers (the "Costa Rica System"). In October
1996, after several months of inactivity while the Company
replaced virtually all of the operating equipment, the
Company relaunched subscriber services in the Costa Rica
System. As of March 31, 1997, the Company had approximately
3,000 subscribers receiving programming in its Costa Rica
System.
Results of Operations
The Company had revenues of $459,185 for the year
ended December 31, 1996, as compared to $155,399 during the
comparable period in 1995. This increase of approximately
200% is attributable primarily to the commencement of
operations in the Costa Rica System. The Costa Rica System
was in operation for only 35 days of the first quarter of
1996 and was inactive for most of the second and third
quarters during equipment upgrade. Revenues were primarily
generated from subscription fees and installation charges.
The Company had operating expenses of $1,652,380 and
cost of sales of $96,599 for the year ended December 31,
1996. During the comparable period of 1995, the Company had
operating expenses of $777,725 and cost of sales of $38,244.
Expenses for the year ended December 31, 1996, consisted
primarily of broadcast costs, general and administrative
expenses, and interest expense. Also included in expenses
for the year was $65,544, representing the anticipated
amount of the partial forfeiture of the Company's deposit
for a broadcast license covering Hickory, North Carolina.
The Company incurred $197,468 in interest expense for the
year ended December 31, 1996, as compared to $43,900 during
the comparable period of 1995. This increase in total
expenses primarily reflects expenditures for the startup and
operation of the Costa Rica System. The increase in cost of
sales for the year ended December 31, 1996, reflects an
increase in marketing and promotional costs for Costa Rica
as compared to the same period in 1995. The Company had a
net loss of $1,382,214 (or $0.70 per share) for the year
ended December 31, 1996, as compared to $751,959 (or $0.51
per share) during the same period in 1995. The loss for the
year ended December 31, 1996, reflects primarily the
commencement of operations in Costa Rica.
Liquidity and Capital Resources
The wireless cable television business is capital
intensive. Since its inception, the Company has expended
funds to acquire channel rights in the LaCrosse System, the
Costa Rica System and other domestic markets, and to
construct its operating systems in LaCrosse, Wisconsin and
San Jose, Costa Rica. Transmission equipment expenditures
and other start-up expenditures were made by the Company
before it could begin the delivery of programming to its
subscribers in the LaCrosse System and the Costa Rica
System.
The Company's accumulated deficit at December 31, 1996,
was $2,284,847, an accumulated deficit of $902,633 at
December 31, 1995. At December 31, 1996, the Company also
had a working capital deficit of approximately $1,120,000.
The Company's financial resources are limited and have to
date been depleted through expansion and losses sustained by
the Company since its inception. The Company's expansion
activities and net losses have placed substantial pressure
on the working capital and liquidity of the Company. The
Company is currently experiencing a severe cash shortage.
These conditions raise substantial doubt as to the Company's
ability to continue as a going concern. Although the
Company believes that funds expected to be generated from
operations and additional short-term debt or equity
financing will be sufficient to fund the Company's working
capital requirements for the next 6 months, there can be no
assurance that the Company will be able to procure
additional capital or generate sufficient revenues to fund
its operations currently or after such period. Although the
Company is actively pursuing additional financing
alternatives, the Company has no arrangements or commitments
for additional capital at this time, and there can be no
assurance that the Company will be able to raise such
capital. The Company does not currently have any available
bank credit facilities. There can be no assurance that any
additional required or desired financing will be available
through bank borrowings, debt or equity offerings, or
otherwise, on acceptable terms, if at all. The ability of
the Company to finance its activities and growth will depend
on its ability to procure additional financing and achieve a
profitable level of operations, consummate its agreement
with Melvin Rosen to restructure the Rosen Debt, and meet
its financial obligations to the FCC to avoid defaulting on
the FCC licenses purchased at auction. There can be no
assurance that such financing can be obtained or that the
Company will achieve profitable operations.
In February 1996, the Company borrowed a total of
$1,475,000 in two loans from Norwest Bank in LaCrosse,
Wisconsin. The Company used $1 million of the loan proceeds
to cover the initial payment for the acquisition of Canal
19. This loan was repaid in June 1996. The $475,000 of the
loan proceeds was used for improvements to the Costa Rica
System. This loan was paid in full on February 15, 1997.
The total purchase price paid by the Company in
the Costa Rica Acquisition was $4,000,000. The purchase
price was paid in the form of $1,000,000 in cash, a
$2,000,000 promissory note and restricted common stock of
the Company valued at $1,000,000 (See "Business -
Acquisitions"). Due to the age and technical obsolescence
of the physical assets acquired in the Costa Rica
Acquisition, no value was assigned to any of the assets
acquired by the Company in the Costa Rica Acquisition except
the channel licenses. Virtually all of the assets have been
disposed of and replaced with new equipment. A $4,000,000
value has been assigned to the licenses. The licenses are
reflected as an "other asset" of the Company on the
Consolidated Balance Sheet of the Company at December 31,
1996. The value of the Costa Rica licenses will be
amortized on a straight-line basis over a 40-year period.
The anticipated annual effect on the Company's financial
position and results of operations will be $100,000 of
amortization expense. The consolidated financial statements
included as part of this Report illustrate the effect of the
Costa Rica Acquisition on the Company's financial position
and results of operations as of and for the period from the
date of acquisition (February 23, 1996) through December 31,
1996.
No assurance can be given that the Company will
generate substantial revenues from the Costa Rica System or
that the Company's business operations in Costa Rica will
prove to be profitable. The Company's operations in Costa
Rica are subject to all of the risks inherent in the
establishment of a new business, particularly one in the
highly competitive pay television industry. The likelihood
of the success of the Company must be considered in light of
the problems, expenses, difficulties, complications and
delays frequently encountered in connection with
establishing a new business, including, without limitation,
market acceptance of the Company's services, regulatory
problems, unanticipated expenses and competition. There can
be no assurances that the Company's business in Costa Rica
will be successful.
In March 1996, the Company was the successful bidder on
broadcast licenses for three additional U.S. wireless cable
markets (Wausau, WI, Stevens Point, WI, and Hickory, NC) for
a total price of $3,046,212. The Company paid the initial
10% deposit in the total amount of $304,622 for the three
licenses and made the second required deposit equal to 10%
of its winning bid only on the Wisconsin licenses. The
licenses are to be conditionally issued only upon payment in
full of the initial 20% down payment. The Company has made
the 20% down payment on the two Wisconsin licenses but has
not yet received conditional issuance of the licenses from
the FCC. As the Company did not make the required
additional 10% payment on the North Carolina license, the
Company has forfeited its right to acquire such license.
The Company believes that the default payment for forfeiting
the license will be $65,544 based on information contained
in the FCC auction information package. If the FCC
determines that this default payment covers all default
fees, then the Company may receive a refund in the amount of
$120,142 in connection with its application for the North
Carolina license. There can be no assurance that the
Company will receive any refund in connection with its
deposit for the North Carolina license. The balance of the
winning bids is payable in quarterly installments for a 10
year period running from the date that the license is
conditionally issued. Payments of interest only, at a rate
based on the rate of the effective 10 year U.S. Treasury
obligation plus 2.5%, must be made for the first two years.
The remaining principal and interest is payable during the
remainder of the 10-year term.
The licenses are conditioned on full and timely
performance of the licensee's quarterly payments, and the
development of operating systems within 18 months of the
grant of each license. The Company is unable to predict the
exact date by which such systems must be operational, since
it does not know when the licenses will be conditionally
issued by the FCC. The Company estimates that the cost of
developing a fully operational system in each market would
be approximately $1,200,000 per system. As of the date of
this Report, the Company has not taken any steps to develop
these systems. The Company intends to fund system
development and the acquisition of these licenses from
future debt or equity financings. The Company has no
arrangements or commitments for such future financings, and
there can be no assurance that the Company will be able to
raise such capital on acceptable terms, if at all. Failure
to raise the funds needed for license acquisition costs or
system construction would cause a forfeit of the license.
In May 1995, the Company closed its initial public
offering of Common Stock and Warrants with net proceeds to
the Company (after deducting underwriting discounts and
other expenses of the offering payable by the Company) of
approximately $5,100,000. The Company repaid approximately
$1,400,000 of notes payable and accrued interest payable
from the net offering proceeds. As of November 15, 1996,
all of the proceeds from the Company's initial public
offering had been expended. The Company will need to raise
additional capital in order to pay outstanding indebtedness
when due, and to sustain its operations and growth. The
Company is actively pursuing additional capital. The
Company has no arrangements or commitments for any
additional capital, and there can be no assurance that the
Company will be able to raise additional capital on
acceptable terms, if at all. The failure by the Company to
raise additional capital will have a material adverse effect
on its financial position and results of operations.
In addition to the repayment of approximately
$1,400,000 of indebtedness, proceeds of approximately
$1,200,000 from the Company's initial public offering were
used for facilities build-out, the purchase and installation
of machinery and equipment and working capital for the
LaCrosse System. Approximately $400,000 was used for the
initial 20% down-payment for the newly acquired Wisconsin
licenses and the 10% payment on the North Carolina license
which was forfeited. Proceeds of $1,000,000 were used as
part of the purchase price in the Costa Rica Acquisition and
approximately $1,100,000 has been used for facilities build-
out, the purchase and installation of machinery and
equipment, and working capital for the Costa Rica System.
Comparing the actual use of proceeds to the estimated
use of proceeds as reflected in the Company's Prospectus
dated May 3, 1995, the Company spent approximately
$2,500,000 for new system development in connection with the
newly acquired domestic licenses and the acquisition and
development of the Costa Rica System. The Company used all
of the estimated $700,000 allocated for "new system
development" plus the net proceeds from the exercise of the
underwriter's over-allotment option of approximately
$700,000 to fund these expenditures. An additional
$1,100,000 was shifted from estimated capital expenditures,
personnel and installation expenses and working capital
anticipated to be used for the LaCrosse System for the above-
stated purposes. Approximately $1,200,000 was used for
facilities build-out, the purchase and installation of
machinery and equipment and working capital for the LaCrosse
System, as compared to the $2,369,500 estimated to be used
for such purposes. Subscriber growth in the LaCrosse System
and related expenditures have been slower than anticipated
allowing the Company to use funds allocated for the LaCrosse
System to pursue new markets.
At December 31, 1996, the Company had property,
transmission equipment, and receiving equipment valued at a
cost of $1,365,235 net of accumulated depreciation, as
compared to $716,658 at December 31, 1995. Also at December
31, 1996, the Company had channel license rights valued at
costs of $5,458,444 net of accumulated amortization of
$102,410 compared to $362,329 and $9,164, respectively, as
of December 31, 1995. This increase in property reflects
the equipment purchased for the Costa Rica System and the
attending costs of subscriber growth in the LaCrosse System.
The Company has spent approximately $624,000 to completely
replace the transmission (or "head-end") equipment for the
Costa Rica System and for subscriber reception equipment,
including antennas. The Costa Rica System is now fully
addressable, which allows for termination of subscriber
services from the Company's offices. The system upgrade
also included the installation of six 1000 watt transmitters
and a new directional antenna. This equipment enables the
Company to deliver a clearer signal over longer distances.
With the six transmitters, the Company is currently
broadcasting cable programming over six channels.
Subscribers in the Costa Rica System also receive 22 off-air
(VHF/UHF) stations utilizing a Company-provided antenna.
Cash decreased from $1,767,285 at December 31,1995, to
$26,618 at December 31, 1996. During the year ended
December 31, 1996, the Company used cash primarily to fund
operating losses, purchase transmission equipment and for
costs accompanying its acquisition and development of the
Costa Rica System.
During the next twelve months, the Company intends to
continue its efforts to expand the subscriber base in the
LaCrosse System. In the Costa Rica System, the Company
believes that it has developed the infrastructure to expand
the subscriber base to 7,500 within the next twelve months.
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 and Costa Rica Systems, 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 in areas where the Company holds additional licenses
or to acquire existing wireless cable operations, 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.
Item 7. Financial Statements
Financial statements prepared in accordance with
Regulation S-B are attached as exhibits to this Report and
incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants on
Accounting and
Financial Disclosure
On October 6, 1995, the Company dismissed its
independent accountant, Lovelace, Roby & Company, P.A. The
principal accountant's report on the Financial Statements of
the Company for the year ended December 31, 1994, and period
May 7, 1993 (date of inception), through December 31, 1993,
prior to dismissal did not contain an adverse opinion or
disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
During the two years preceding the dismissal of this
accountant, there was no disagreement with the former
accountant on any matter of accounting principle or
practices, financial statement disclosure, or auditing scope
or procedure. The Company engaged BDO Seidman, LLP, 201 S.
Orange Avenue, Suite 950, Orlando, Florida 32801 as its new
principal accountant to audit its financial statements,
effective October 6, 1995. The decision to change
accountants was recommended and approved by the Company's
Board of Directors.
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the
Exchange Act
Directors and Executive Officers
The following table lists certain information about the
directors and executive officers of the Company:
Name Age Position
Fernand L. Duquette 50 President and
Director
Dennis J. Devlin 47 Vice President and
Director
J. Richard Crowley 41 Director
Richard L. Vega 36 Director
Each Director of the Company holds such position until
the next annual meeting of shareholders and until his
successor is duly elected and qualified. The officers hold
office until the first meeting of the Board of Directors
following the annual meeting of shareholders and until their
successors are chosen and qualified, subject to early
removal by the Board of Directors.
Fernand L. Duquette: President and Director
Mr. Duquette is a founder and has served as President
and a director of the Company from May 1993 to the present.
From January 1991 through May 1993, Mr. Duquette was self
employed as a consultant in the telecommunications field.
From December 1981 through January 1991, Mr. Duquette was
the president and principal shareholder of Citrus Oaks
Investments, Inc., D & A Group, Inc., and D & M Investments,
Ltd., which were entities involved in residential and
commercial real estate development in Florida. From 1978 to
1981, Mr. Duquette was project manager for Prince Michal ben
Saoud and the Saudi Catering Company for the design and
construction of major dry storage buildings and water and
sewage treatment plants in Saudi Arabia and Egypt. From 1970
to 1978, Mr. Duquette was a representative for Banker's Life
and Casualty (John D. McArthur, Chairman) responsible for
coordination of a nationwide management company of
consulting engineers, architects and planners for commercial
and residential land planning, development and construction.
Mr. Duquette has a Bachelor of Science degree in Civil
Engineering from the Ecole Politechnique of the University
of Montreal.
Dennis J. Devlin: Vice President and Director
Mr. Devlin is a founder and has served as director and
Vice President of the Company since May 1993. Mr. Devlin is
the founder and has served as president of Dennis' Mobile
Home Service and Supply, Inc., Wayne, Michigan since 1979.
Mobil Home Services is engaged in the construction of
additions, roof systems and specialized products for mobile
home owners, including remodeling, insurance services, parts
supply, and repair. Mr. Devlin received a Bachelor of Art
Education degree in 1971 from Eastern Michigan University.
Richard L. Vega: Director
Mr. Vega has served as a director of the Company since
May 1996. Mr. Vega has been involved in the
telecommunications, engineering, and consulting industry for
over ten (10) years. Since October 1994, he has been
president of the Richard L. Vega Group, Orlando, Florida, a
consulting engineering firm to wireless cable and television
businesses. From 1984 to 1994, he was president and founder
of Phone One Communications, Inc., Orlando, Florida, a
similar consulting firm.
J. Richard Crowley: Director
Mr. Crowley has served as a director of the Company
since May 1996. Mr. Crowley has served as chief operating
officer and chief financial officer of Clinical Diagnostic
Systems, Inc., Orlando, Florida, a medical diagnostic
testing company, since 1991. From 1984 to 1991, he was
president and chief financial officer of Control Laser
Corporation, Orlando, Florida, a manufacturer of industrial
lasers. Mr. Crowley received a Bachelor of Science degree
in accounting from Auburn University.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's executive officers, directors, and
affiliates to file initial reports of ownership and reports
of changes of ownership of the Company's Common Stock with
the Securities and Exchange Commission. These executive
officers, directors, and affiliates are required to furnish
the Company with copies of all Section 16(a) forms that they
file. Based solely on the Company's review of Securities
and Exchange Commission Forms 3, 4, and 5 submitted to the
Company and written representations from these officers,
directors, and affiliates that no other reports were
required, the Company reports that the following forms were
filed late or not at all for the 1996 fiscal year:
Form 4 for Fernand L. Duquette for 5,000 shares of
common stock granted August 2, 1996, has not been filed.
Form 4 for Dennis J. Devlin for 5,000 shares of common
stock granted December 3, 1996, has not been filed.
Form 4 for J. Richard Crowley for 5,000 shares of
common stock granted August 2, 1996, was filed September 30,
1996.
Form 4 for Richard L. Vega for 5,000 shares of common
stock granted August 2, 1996, was filed September 16, 1996.
Item 10. Executive Compensation
Director's Remuneration
Commencing June 1996, each non-employee Director
received a fee of $500 for each board and committee meeting
attended. Each Director received at the annual meeting of
the Directors a non-discretionary grant of a stock option
for 5,000 shares of common stock.
Executive Compensation
Summary Compensation Table
The following table sets forth a summary of cash and
non-cash compensation awarded or paid to, or earned by, the
Company's President with respect to services rendered in
1994, 1995 and 1996. No other executive officer of the
Company received compensation in excess of $100,000 during
the Company's last completed fiscal year.
Name and Principal Annual Compensation
Position
Value
of
Year Salary Bonus Securit
ies
Underly
ing
Options
(1)
Fernand L. 1996 $120,000 -0- $-0-
Duquette,
President
1995 $92,000 -0- $-0-
1994 $84,500 -0- -0-
Option Grants
The following table sets forth for each of the named
executive officers of the Company information with respect
to options granted during 1996.
OPTION GRANTS IN 1996
Number
of % of Total
Securiti Options
es Granted Exercise
Name and Underlyi Employees or Expirati
Principal ng in Base on
Position Options Fiscal Price Date
Granted Year ($ Sh.)
(# Sh.)
Fernand 5,000(1) 8.77 8.25 8/2/2001
L.
Duquette
Fernand 25,000(1 43.86 5.85 12/3/200
L. ) 1
Duquette
(1) Options granted as incentive stock options under the
Company's 1995 Stock Option Plan at 110% of the fair market
value of the Company's Common Stock on the date of grant.
Options Exercised
The following table sets forth for each of the named
executive officers of the Company information with respect
to option exercises during 1996, and the status of their
options on December 31, 1996, as to (i) the number of shares
of common stock underlying options exercised during 1996,
(ii) the aggregate dollar value realized upon the exercise
of such options, and (iii) the total number of unexercised
in-the-money options at December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996
AND OPTION VALUES ON DECEMBER 31, 1996
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options at
12/31/96 (#Sh)(1) 12/31/96 ($)(2)
Shares
Acquire Value
d Realiz
Name on ed Exercis Unexercis Unexercis
Exercis ($) able able Exercisa able
e ble
(# Sh.)
Fernand 0 0 37,000 0 0 0
L.
Duquett
e
(1) Exercisable options are those exercisable on December
31, 1996. Unexercisable options are those not exercisable on
December 31, 1996.
(2) Value of exercisable and unexercisable in-the-money
options represents the excess of the fair market value of
the stock underlying the options at December 31, 1996, over
the exercise price assuming the options were exercised at
that time.
Item 11. Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth information regarding
beneficial ownership of the Company's Common Stock by all
persons known by the Company to own beneficially 5% or more
of the outstanding shares of the Company's Common Stock,
each director
and executive officer, and all executive officers and
directors of the Company as a group, as of March 31, 1997:
Name and Address of Amount and Percent of
Beneficial Nature Outstandin
Owner or Identity of Group of g
Beneficial Shares(2)
Ownership(1)
Fernand L. Duquette 313,000(3)(4 13.82%
501 Grandview Ave. )
Suite 201
Daytona Beach, Florida
32118
Dennis J. Devlin 297,000(3)(4 13.11%
35451 Elm Street )
Wayne, MI 48184
Melvin Rosen 121,212 5.35%
930 N.E. 176th Street
N. Miami Beach, Florida
33162
Richard L. Vega 5,000(4) .22%
1245 W. Fairbanks Ave.
Suite 380
Winter Park, Florida 32789
J. Richard Crowley 5,000(4) .22%
2600 Maitland Center Pkwy.
Suite 100
Maitland, Florida 32751
All officers and directors 600,000(3)(4
as a ) 26.49%
group (4 persons)
(1) Except as otherwise indicated, all stockholders have
sole voting and investment power with respect to the
shares of Common Stock set forth opposite their respective
names.
(2) Based on 2,196,212 shares of Common Stock
outstanding on March 31, 1997.
(3) Includes 10,000 shares and warrants to purchase
10,000 shares held jointly by Messrs. Duquette and Devlin.
Messrs. Duquette and Devlin have agreed not to offer or
sell any shares of Common Stock until May 3, 1997.
(4) Includes currently exercisable stock options or
warrants, or both, to purchase 41,000, 20,000, 3,000 and
5,000 shares held by Messrs. Duquette, Devlin, Vega and
Crowley, respectively.
Item 12. Certain Relationships and Related Transactions
Upon its incorporation on May 7, 1993, the Company
issued 250,000 shares of its Common Stock to each of Messrs.
Duquette and Devlin, officers and directors of the Company,
for total consideration of $124,276. During the nine-month
period ended September 30, 1994, Mr. Devlin made net cash
capital contributions to the Company of approximately
$46,550 which were used for working capital.
Mr. Duquette and Mr. Devlin each had a minority
interest of less than 1% in the Grand Alliance LaCrosse (F)
Partnership, which sold certain station licenses for the
LaCrosse System to the Company. Mr. Duquette and Mr. Devlin
received less than 1% of the fees paid by the Company to
Grand Alliance LaCrosse (F) Partnership.
In August 1994, Messrs. Duquette and Devlin jointly
purchased a unit of the Company's securities, for a purchase
price of $50,000, as part of a private placement by the
Company of 22.5 units to 29 accredited investors. The units
consisted of secured promissory notes in the principal
amount of $50,000, 10,000 shares of Common Stock, and a
warrant to purchase 10,000 shares of the Company's Common
Stock.
During August 1994, the Company advanced $50,000 to
Messrs. Duquette and Devlin. The loan was payable on
demand, without interest. Proceeds of the loan were used by
Messrs. Duquette and Devlin for personal expenses. The loan
was repaid in full in November 1994.
In February 1996, the Company, through its Costa Rica
subsidiaries, acquired two companies that together hold
certain rights to eighteen frequency licenses for
broadcasting wireless cable services in Costa Rica. In the
first acquisition, the Company, through Fepeca de Tournon,
S.A., a new, wholly-owned Costa Rica subsidiary corporation
of the Company ("Fepeca de Tournon, S.A."), acquired from
Melvin Rosen all of the outstanding shares of common stock
of Televisora Canal Diecinueve, S.A., a Costa Rica
corporation ("Canal 19") for a total purchase price of
$3,000,000, $1,000,000 of which was paid to Mr. Rosen at the
closing, with the balance to be paid on February 23, 1997,
with interest thereon at the rate of 3.6% per annum payable
monthly. The payment of this deferred amount is secured by
all of the acquired shares of stock of Canal 19 and of Grupo
Masteri, S.A. (see below).
In the second acquisition, the Company, through Fepeca
de Tournon, S.A., acquired from Mr. Rosen all of the
outstanding shares of common stock of Grupo Masteri, S.A., a
Costa Rica corporation ("Grupo"), for a total purchase price
of $1,000,000 paid at the closing by delivery to Mr. Rosen
of 121,212 restricted shares of the Company's common stock,
which represented approximately 6% of the Company's
outstanding capital stock at the time of the acquisition.
Such shares are subject to certain registration rights. See
"Management's Discussion and Analysis-Liquidity and Capital
Resources," and "Business-Acquisitions."
On December 23, 1996, the Company engaged Kent T.
Allen, Carl Caserta, Richard J. Fixaris and Charles S.
Arnold (the "Consultants") to provide financial and public
relations services to the Company for a period of twelve
months. The Company has issued a total of 200,000 shares of
its common stock to the Consultants as compensation for the
services to be provided by the Consultants pursuant to the
Consulting Agreements between the Consultants and the
Company (the "Consulting Agreements"). The Consultants have
each agreed to pay for all of the costs and expenses
incurred by the Consultants in connection with rendering
financial and public relations services to the Company
pursuant to the Consulting Agreements. The Company has filed
a registration statement on Form S-8 covering the shares of
common stock issued to the Consultants. The Consultants
have disclaimed any affiliation with one another.
On February 24, 1997, Mr. Duquette and Mr. Devlin each
loaned to the Company the sum of $25,000 ($50,000 in the
aggregate) for use by the Company in paying a required
deposit to Mr. Rosen (see "Business - General Development of
Business - Rosen Debt"). These loans are represented by
accounts payable from the Company with interest at the prime
rate. No repayment terms have yet been determined by the
lenders and the Company.
As the requisite conditions of competitive, free-market
dealings may not exist, the foregoing transactions cannot be
presumed to have been carried out on an arms- length basis,
nor upon terms no less favorable than had unaffiliated
parties been involved.
Except as set forth herein, there are currently no
other proposed transactions between the Company, its
officers, directors, shareholders, and affiliates. Although
future transactions between the Company and such parties are
possible, including a transaction relating to a business
opportunity, the Board of Directors of the Company has
adopted a policy regarding transactions between the Company
and any officer, director or affiliate, including loan
transactions, requiring that all such transactions be
approved by a majority of the independent and disinterested
members of the Board of Directors and that all such
transactions be for a bona fide business purpose and be
entered into on terms at least as favorable to the Company
as could be obtained from unaffiliated independent third
parties.
Item 13. Exhibits and Reports on Form 8-K
Exhibits. See Index to Exhibits for a list of those
exhibits filed as part of this report.
Reports on Form 8-K. The Company filed the following
Current Reports on Form 8-K during the fourth quarter of
1996 and prior to the date of this Report:
1. Current Report on Form 8-K dated November 25,
1996, as amended by the Current Report on Form 8-KA dated
December 23, 1996 and filed on December 23, 1996. On
November 25, 1996, the Company entered into a consulting
agreement with Cored Capital Corporation, which agreement
was rescinded by the mutual agreement of the parties on
December 23, 1996.
2. Current Report on Form 8-K dated November 25,
1996, as amended by the Current Report on Form 8-KA dated
December 23, 1996 and filed on December 23, 1996. On
November 25, 1996, the Company entered into a consulting
agreement with Ocean Marketing Corporation, which agreement
was rescinded by the mutual agreement of the parties on
December 23, 1996.
3. Current Report on Form 8-K dated November 26,
1996. The Company reported under Item 5 that on November
26, 1996, the Company accepted a subscription from Investor
Resource Services, Inc. for purchase of 250 shares of the
Company's Series A Convertible Preferred Stock ("Series A
Stock") at a price of $1,000 per share for a total purchase
price of $250,000.
4. Current Report on Form 8-K dated November 26,
1996. The Company reported under Item 5 that on November 26,
1996, the Company accepted a subscription from Amber Capital
Corporation for purchase of 250 shares of the Company's
Series A Convertible Preferred Stock ("Series A Stock") at a
price of $1,000 per share for a total purchase price of
$250,000.
5. Current Report on Form 8-K dated December 23,
1996. The Company reported under Item 5 that on December 23,
1996, the Company entered into a Consulting Agreement with
Charles S. Arnold whereby the Company engaged Mr. Arnold to
provide certain financial and public relations services.
6. Current Report on Form 8-K dated December 23,
1996. The Company reported under Item 5 that on December 23,
1996, the Company entered into a Consulting Agreement with
Carl Caserta whereby the Company engaged Mr. Caserta to
provide certain financial and public relations services.
7. Current Report on Form 8-K dated December 23,
1996. The Company reported under Item 5 that on December 23,
1996, the Company entered into a Consulting Agreement with
Kent T. Allen whereby the Company engaged Mr. Allen to
provide certain financial and public relations services.
8. Current Report on Form 8-K dated December 23,
1996. The Company reported under Item 5 that on December 23,
1996, the Company entered into a Consulting Agreement with
Richard J. Fixaris whereby the Company engaged Mr. Fixaris
to provide certain financial and public relations services.
9. Amendment No. 3 to Current Report on Form 8-K/A
dated February 12, 1997, as further amended by Amendment No.
4 to Current Report on Form 8-K/A dated February 27, 1997.
These Amendments amend the Current Report on Form 8-K dated
February 12, 1996, as amended by Amendment to Current Report
on Form 8-K/A dated February 23, 1996, as further amended by
Amendment No. 2 to Current Report on Form 8-K/A dated May
20, 1996, reporting under Item 2 acquisitions of stock
and/or assets in certain Costa Rican companies. On February
12, 1997, the Company and Melvin Rosen ("'Seller") entered
in an agreement providing for the restructuring of the
promissory note (the "Note") dated February 23, 1996, in the
original principal amount of $2,000,000, given by the
Company to Seller in connection with the acquisition of
Televisora Canal Diecinueve, S.A. The agreement was amended
and restated by the parties on February 21, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed in its behalf by the
undersigned, thereunto duly authorized.
TEL-COM WIRELESS CABLE
TV CORPORATION
Dated: April 29, 1997 By: /s/ Fernand L.
Duquette
Fernand L. Duquette,
President
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ Fernand L. Duquette April
29, 1997
Fernand L. Duquette, President and
Director
/s/ Dennis J. Devlin April
29, 1997
Dennis J. Devlin, Vice President and
Director
/s/ J. Richard Crowley April 29,
1997
J. Richard Crowley, Director
/s/ Richard L. Vega April 29,
1997
Richard L. Vega, Director
INDEX TO EXHIBITS
Exhibit Plans of Acquisition:
2
2.1 Agreement for Purchase and Sale of Stock
dated February 7, 1996, by and among Tel-
Com Wireless Cable TV Corporation,
Televisora Canal Diecinueve, S.A., and
Melvin Rosen was filed as Exhibit 2.1 to
the Current Report on Form 8-K dated
February 12, 1996, and is incorporated
herein by reference.
2.2 Amended and Restated Agreement for
Purchase and Sale of Stock dated February
22, 1996, among Tel-Com Wireless Cable TV
Corporation, Televisora Canal Diecinueve,
S.A., and Melvin Rosen, was filed as
Exhibit 2.1 to the Current Report on Form
8-K/A dated February 22, 1996, and is
incorporated herein by reference.
2.3 Agreement for Purchase and Sale of Stock
dated February 7, 1996, by and among Tel-
Com Wireless Cable TV Corporation, Grupo
Masteri, S.A., and Melvin Rosen was filed
as Exhibit 2.2 to the Current Report on
Form 8-K dated February 12, 1996, and is
incorporated herein by reference.
2.4 Amended and Restated Agreement for
Purchase and Sale of Stock dated February
22, 1996, among Tel-Com Wireless Cable TV
Corporation, Grupo Masteri, S.A., and
Melvin Rosen, was filed as Exhibit 2.2 to
the Current Report on Form 8-K/A dated
February 22, 1996, and is incorporated
herein by reference.
2.5 Letter Agreement dated February 12,
1997, between the Company and Melvin
Rosen was filed as Exhibit 2 to the
Current Report on Form 8-K/A dated
February 14, 1997, and is incorporated
herein by reference.
2.6 Amended and Restated Letter
Agreement dated February 21, 1997 between
the Company and Melvin Rosen was filed as
Exhibit 2 to the Current Report on Form
8-K/A dated February 27, 1997, and is
incorporated herein by reference.
Exhibit 3.1 The Articles of Incorporation, as
3 amended to date, and the
bylaws of the Company were attached as
an Exhibit to the Registration Statement
on Form SB, filed on May 3, 1995, are
incorporated herein by reference.
3.2 Amendments to the Articles of
Incorporation authorizing Series A
Preferred Stock were filed as Exhibit 4.1
to the Current Report on Form 8-K dated
November 26, 1996, and are incorporated
herein by reference.
Exhibit Instruments defining the rights of security
4 holders are set forth in the Articles of
Incorporation, as amended, as described in
Exhibit 3.
Exhibit Material Contracts: Pag
10 e
10.3Stock Option Agreement (Duquette)
10.4 Stock Option Agreement (Devlin)
10.5Stock Option Agreement (Crowley)
10.6Stock Option Agreement (Vega)
10.7Stock Option Agreement (Duquette)
10.8Stock Option Agreement (Devlin)
Exhibit A list of the Subsidiaries of the Registrant
21 was filed as Exhibit 21 to the Annual Report
on Form 10-KSB dated March 29, 1996, and is
incorporated herein by reference.
Financi F-1
al
Stateme
nts
Exhibit 99.1Subscription Agreement dated November 25,
99 1996, between the Company and Amber
Capital Corporation was filed as Exhibit
99 to the Current Report on Form 8-K
dated November 26, 1996, and is
incorporated herein by reference.
99.2Subscription Agreement dated November 25,
1996, between the Company and Investor
Resource Services, Inc. was filed as
Exhibit 99 to the Current Report on Form
8-K dated November 26, 1996, and is
incorporated herein by reference.
99.3Consulting Agreement dated December 23,
1996, between the Company and Kent T.
Allen was filed as Exhibit 99 to the
Current Report on Form 8-K dated December
23, 1996, and is incorporated herein by
reference.
99.4Consulting Agreement dated December 23,
1996, between the Company and Charles S.
Arnold was filed as Exhibit 99 to the
Current Report on Form 8-K dated December
23, 1996, and is incorporated herein by
reference.
99.5Consulting Agreement dated December 23,
1996, between the Company and Carl
Caserta was filed as Exhibit 99 to the
Current Report on Form 8-K dated December
23, 1996, and is incorporated herein by
reference.
99.6Consulting Agreement dated December 23,
1996, between the Company and Richard J.
Fixaris was filed as Exhibit 99 to the
Current Report on Form 8-K dated December
23, 1996, and is incorporated herein by
reference.
TEL-COM WIRELESS CABLE TV CORPORATION
STOCK OPTION GRANT
Optionee: Dennis J. Devlin
Address: 34131 Michigan Avenue
Wayne, MI 48184
Total Shares Subject to Option: 5,000
Exercise Price per Share: $5.85
Date of Grant: December 3, 1996
Expiration Date: December 3, 2001
Type of Option: [ X ] Incentive Stock
Option
[ ] Nonqualified Stock
Option
1. Grant of Option. Tel-Com Wireless Cable TV
Corporation, a Florida corporation (the "Company"), hereby
grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of
common stock of the Company set forth above (the "Shares")
at the exercise price per share set forth above (the
"Exercise Price"), subject to all of the terms and
conditions of this Stock Option Grant (this "Grant") and the
Company's 1995 Stock Option Plan, as amended to the date
hereof (the "Plan"). If designated as an Incentive Stock
Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. Exercise Period of Option. Subject to the terms
and conditions of the Plan and this Grant, from and after
the Date of Grant, this Option shall be exercisable as to
all or any part of the Shares; provided that Optionee shall
in no event be entitled under this Option to purchase a
number of shares of the Company's common stock greater than
the "Total Shares Subject to Option" indicated above.
3. Restriction on Exercise. This Option may not be
exercised unless such exercise is in compliance with the
Securities Act of 1933, as amended (the "Securities Act")
and all applicable state securities laws as they are in
effect on the date of exercise, and the requirements of any
stock exchange or national market system on which the
Company's common stock may be listed at the time of
exercise. Optionee understands that the Company is under no
obligation to register, qualify or list the Shares with the
Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such
compliance.
4. Exercise Prior to Expiration of Option. Except as
provided below in this Section, this Option shall terminate
and may not be exercised if Optionee ceases to be in
Continuous Employment with the Company or any Parent or
Subsidiary of the Company. Optionee shall be considered to
be employed by the Company if Optionee is an officer,
director or full-time employee of the Company or any Parent
or Subsidiary of the Company or if the Committee determines
that Optionee is rendering substantial services as a part-
time employee, consultant, contractor or adviser to the
Company or any Parent or Subsidiary of the Company. The
Committee shall have discretion to determine whether
Optionee has ceased Continuous Employment with the Company
or any Parent or Subsidiary of the Company and the effective
date on which such employment terminated (the "Termination
Date").
4.1 Termination Generally. This Option shall be
exercisable on or prior to the Expiration Date only as long
as the Optionee is in "Continuous Employment" with the
Company or is continually on the Board of Directors of the
Company or any Parent, Subsidiary, or any successor thereof.
Notwithstanding the preceding sentence, on or prior to the
Expiration Date, an Option which is otherwise exercisable in
accordance with its provisions shall be exercisable;
(i) for a period ending ninety (90) days
after Optionee's Termination Date, unless the Optionee was
terminated for Cause by the Company, in which case the
Option terminates on the Termination Date; or
(ii) for a period ending ninety (90) days
after the removal or resignation of the Optionee from the
Board of Directors, which such Optionee has served; or
(iii) by the estate of the Optionee,
within one (1) year after the date of the Optionee's death,
if the Optionee should die while in the Continuous
Employment of the Company or while serving on the Board of
Directors of the Company or any Parent, Subsidiary, or any
successor thereof; or
(iv) within one (1) year after Optionee's
Termination Date, if the Optionee becomes disabled during
Continuous Employment with the Company and such disability
is the cause of termination.
For purposes of this Grant, the term "Continuous
Employment" shall mean the absence of any interruption or
termination of employment (or termination of a consulting
contract) with the Company or any Parent or Subsidiary which
now exists or hereafter is organized or acquired by the
Company. Continuous Employment with the Company shall not
be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by
the Company or in the case of transfers between locations of
the Company or between any Parent or Subsidiary, or
successor thereof. The term "Cause" as used in this Section
4 shall mean: (i) commission of a felony or a charge of
theft, dishonesty, fraud or embezzlement; (ii) failure to
adhere to Company's reasonable directives and policies,
willful disobedience or insubordination; (iii) disclosing to
a competitor or other unauthorized person, proprietary
information, confidences or trade secrets of the Company or
any Parent or Subsidiary; (iv) recruitment of Company or any
Parent or Subsidiary personnel on behalf of a competitor or
potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof; or (v) solicitation of
business on behalf of a competitor or potential competitor
of the Company, any Parent or Subsidiary, or any successor
thereof.
4.2 No Right of Employment. Nothing in the Plan
or this Grant shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company or
any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
5. Manner of Exercise.
5.1 Exercise Agreement. This Option shall be
exercisable by delivery to the Company of an executed
written Stock Option Exercise Agreement in the form attached
hereto as Exhibit A, or in such other form as may be
approved by the Company, which shall set forth Optionee's
election to exercise some or all of this Option, the number
of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreement as may
be required by the Company to comply with applicable
securities laws.
5.2 Exercise Price. The Stock Option Exercise
Agreement shall be accompanied by full payment of the
Exercise Price for the Shares being purchased. The exercise
of this Option shall be contingent upon prior or
simultaneous receipt by the Company of cash or a certified
bank check to its order, shares of the Company's common
stock, or any combination of the foregoing in an amount
equal to the full Exercise Price of the Shares being
purchased. For purposes of this Section 5, shares of the
Company's common stock that are delivered in payment of the
Exercise Price shall be valued at their fair market value,
as determined under the provisions of the Plan. In the
alternative, the Board of Directors may, but is not required
to, accept a promissory note, secured or unsecured, in the
amount of the Exercise Price made by the Optionee on terms
and conditions satisfactory to the Board of Directors.
5.3 Withholding Taxes. Prior to the issuance of
the Shares upon exercise of this Option, Optionee must pay
or make adequate provision for any applicable federal or
state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such
notice and payment are in form and substance satisfactory to
counsel for the Company, the Company shall cause the Shares
to be issued in the name of Optionee or Optionee's legal
representative.
6. Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO within (a) the date two years
after the Date of Grant, or (b) the date one year after
exercise of the ISO with respect to the Shares to be sold or
disposed, Optionee shall immediately notify the Company in
writing of such disposition. Optionee acknowledges and
agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income
recognized by Optionee from any such early disposition by
payment in cash (or in Shares, to the extent permissible
under Section 5.2) or out of the current wages or other
earnings payable to Optionee.
7. Nontransferability of Option. Except as otherwise
provided in Section 4 hereof, an Option granted to an
Optionee may be exercised only during such Optionee's
lifetime by such Optionee. An Option may not be sold,
exchanged, assigned, pledged, encumbered, hypothecated or
otherwise transferred except by will or by the laws of
descent and distribution. No Option or any right thereunder
shall be subject to execution, attachment or similar process
by any creditors of the Optionee. Upon any attempted
assignment, transfer, pledge, hypothecation or other
encumbrance of any Option contrary to the provisions hereof,
such Option and all rights thereunder shall immediately
terminate and shall be null and void with respect to the
transferee or assignee.
8. Tax Consequences. Set forth below is a brief
summary as of the date this form of Grant was adopted of
some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as
an ISO, there will be no regular federal income tax
liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated
as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject Optionee to an
alternative minimum tax liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If
this Option does not qualify as an ISO, there may be a
regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. The
Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of
exercise.
8.3 Disposition of Shares. In the case of a
Nonqualified Stock Option, if Shares are held for more than
one year before disposition, any gain on disposition of the
Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an ISO, if Shares are
held for more than one year after the date of exercise and
more than two years after the Date of Grant, any gain on
disposition on the Shares will be treated as long-term
capital gain for federal income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one
year or two year periods (a "disqualifying disposition"),
gain on such disqualifying disposition will be treated as
compensation income (taxable at ordinary income rates) to
the extent of the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise
Price (the "Spread"), or, of less, the difference between
the amount realized on the sale of such Shares and the
Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. Interpretation. Any dispute regarding the
interpretation of this Grant shall be submitted by Optionee
or the Company to the Company's Board of Directors or the
Committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Committee shall
be final and binding on the Company and on Optionee.
10. Entire Agreement. The Plan and the Stock Option
Exercise Agreement attached as Exhibit A are incorporated
herein by this reference. This Grant, the Plan and the
Stock Option Exercise Agreement constitute the entire
agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject
matter hereof.
TEL-COM WIRELESS CABLE TV
CORPORATION
By:______________________________________
Fernand L. Duquette, President
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the
Plan, represents that Optionee has read and understands the
terms and provisions thereof, and accepts this Option
subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or
disposition of the Shares and that Optionee should consult a
tax adviser prior to such exercise or disposition.
________________________________________
Dennis J. Devlin
clients/tcc/stock/12/3/96DEV Opt Grant
TEL-COM WIRELESS CABLE TV CORPORATION
STOCK OPTION GRANT
Optionee: Fernand L. Duquette
Address: 3855 South Atlantic Avenue
Daytona Beach, FL 32127
Total Shares Subject to Option: 25,000
Exercise Price per Share: $5.85
Date of Grant: December 3, 1996
Expiration Date: December 3, 2001
Type of Option: [ X ] Incentive Stock
Option
[ ] Nonqualified Stock
Option
1. Grant of Option. Tel-Com Wireless Cable TV
Corporation, a Florida corporation (the "Company"), hereby
grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of
common stock of the Company set forth above (the "Shares")
at the exercise price per share set forth above (the
"Exercise Price"), subject to all of the terms and
conditions of this Stock Option Grant (this "Grant") and the
Company's 1995 Stock Option Plan, as amended to the date
hereof (the "Plan"). If designated as an Incentive Stock
Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. Exercise Period of Option. Subject to the terms
and conditions of the Plan and this Grant, from and after
the Date of Grant, this Option shall be exercisable as to
all or any part of the Shares; provided that Optionee shall
in no event be entitled under this Option to purchase a
number of shares of the Company's common stock greater than
the "Total Shares Subject to Option" indicated above.
3. Restriction on Exercise. This Option may not be
exercised unless such exercise is in compliance with the
Securities Act of 1933, as amended (the "Securities Act")
and all applicable state securities laws as they are in
effect on the date of exercise, and the requirements of any
stock exchange or national market system on which the
Company's common stock may be listed at the time of
exercise. Optionee understands that the Company is under no
obligation to register, qualify or list the Shares with the
Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such
compliance.
4. Exercise Prior to Expiration of Option. Except as
provided below in this Section, this Option shall terminate
and may not be exercised if Optionee ceases to be in
Continuous Employment with the Company or any Parent or
Subsidiary of the Company. Optionee shall be considered to
be employed by the Company if Optionee is an officer,
director or full-time employee of the Company or any Parent
or Subsidiary of the Company or if the Committee determines
that Optionee is rendering substantial services as a part-
time employee, consultant, contractor or adviser to the
Company or any Parent or Subsidiary of the Company. The
Committee shall have discretion to determine whether
Optionee has ceased Continuous Employment with the Company
or any Parent or Subsidiary of the Company and the effective
date on which such employment terminated (the "Termination
Date").
4.1 Termination Generally. This Option shall be
exercisable on or prior to the Expiration Date only as long
as the Optionee is in "Continuous Employment" with the
Company or is continually on the Board of Directors of the
Company or any Parent, Subsidiary, or any successor thereof.
Notwithstanding the preceding sentence, on or prior to the
Expiration Date, an Option which is otherwise exercisable in
accordance with its provisions shall be exercisable;
(i) for a period ending ninety (90) days
after Optionee's Termination Date, unless the Optionee was
terminated for Cause by the Company, in which case the
Option terminates on the Termination Date; or
(ii) for a period ending ninety (90) days
after the removal or resignation of the Optionee from the
Board of Directors, which such Optionee has served; or
(iii) by the estate of the Optionee,
within one (1) year after the date of the Optionee's death,
if the Optionee should die while in the Continuous
Employment of the Company or while serving on the Board of
Directors of the Company or any Parent, Subsidiary, or any
successor thereof; or
(iv) within one (1) year after Optionee's
Termination Date, if the Optionee becomes disabled during
Continuous Employment with the Company and such disability
is the cause of termination.
For purposes of this Grant, the term "Continuous
Employment" shall mean the absence of any interruption or
termination of employment (or termination of a consulting
contract) with the Company or any Parent or Subsidiary which
now exists or hereafter is organized or acquired by the
Company. Continuous Employment with the Company shall not
be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by
the Company or in the case of transfers between locations of
the Company or between any Parent or Subsidiary, or
successor thereof. The term "Cause" as used in this Section
4 shall mean: (i) commission of a felony or a charge of
theft, dishonesty, fraud or embezzlement; (ii) failure to
adhere to Company's reasonable directives and policies,
willful disobedience or insubordination; (iii) disclosing to
a competitor or other unauthorized person, proprietary
information, confidences or trade secrets of the Company or
any Parent or Subsidiary; (iv) recruitment of Company or any
Parent or Subsidiary personnel on behalf of a competitor or
potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof; or (v) solicitation of
business on behalf of a competitor or potential competitor
of the Company, any Parent or Subsidiary, or any successor
thereof.
4.2 No Right of Employment. Nothing in the Plan
or this Grant shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company or
any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
5. Manner of Exercise.
5.1 Exercise Agreement. This Option shall be
exercisable by delivery to the Company of an executed
written Stock Option Exercise Agreement in the form attached
hereto as Exhibit A, or in such other form as may be
approved by the Company, which shall set forth Optionee's
election to exercise some or all of this Option, the number
of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreement as may
be required by the Company to comply with applicable
securities laws.
5.2 Exercise Price. The Stock Option Exercise
Agreement shall be accompanied by full payment of the
Exercise Price for the Shares being purchased. The exercise
of this Option shall be contingent upon prior or
simultaneous receipt by the Company of cash or a certified
bank check to its order, shares of the Company's common
stock, or any combination of the foregoing in an amount
equal to the full Exercise Price of the Shares being
purchased. For purposes of this Section 5, shares of the
Company's common stock that are delivered in payment of the
Exercise Price shall be valued at their fair market value,
as determined under the provisions of the Plan. In the
alternative, the Board of Directors may, but is not required
to, accept a promissory note, secured or unsecured, in the
amount of the Exercise Price made by the Optionee on terms
and conditions satisfactory to the Board of Directors.
5.3 Withholding Taxes. Prior to the issuance of
the Shares upon exercise of this Option, Optionee must pay
or make adequate provision for any applicable federal or
state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such
notice and payment are in form and substance satisfactory to
counsel for the Company, the Company shall cause the Shares
to be issued in the name of Optionee or Optionee's legal
representative.
6. Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO within (a) the date two years
after the Date of Grant, or (b) the date one year after
exercise of the ISO with respect to the Shares to be sold or
disposed, Optionee shall immediately notify the Company in
writing of such disposition. Optionee acknowledges and
agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income
recognized by Optionee from any such early disposition by
payment in cash (or in Shares, to the extent permissible
under Section 5.2) or out of the current wages or other
earnings payable to Optionee.
7. Nontransferability of Option. Except as otherwise
provided in Section 4 hereof, an Option granted to an
Optionee may be exercised only during such Optionee's
lifetime by such Optionee. An Option may not be sold,
exchanged, assigned, pledged, encumbered, hypothecated or
otherwise transferred except by will or by the laws of
descent and distribution. No Option or any right thereunder
shall be subject to execution, attachment or similar process
by any creditors of the Optionee. Upon any attempted
assignment, transfer, pledge, hypothecation or other
encumbrance of any Option contrary to the provisions hereof,
such Option and all rights thereunder shall immediately
terminate and shall be null and void with respect to the
transferee or assignee.
8. Tax Consequences. Set forth below is a brief
summary as of the date this form of Grant was adopted of
some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as
an ISO, there will be no regular federal income tax
liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated
as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject Optionee to an
alternative minimum tax liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If
this Option does not qualify as an ISO, there may be a
regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. The
Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of
exercise.
8.3 Disposition of Shares. In the case of a
Nonqualified Stock Option, if Shares are held for more than
one year before disposition, any gain on disposition of the
Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an ISO, if Shares are
held for more than one year after the date of exercise and
more than two years after the Date of Grant, any gain on
disposition on the Shares will be treated as long-term
capital gain for federal income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one
year or two year periods (a "disqualifying disposition"),
gain on such disqualifying disposition will be treated as
compensation income (taxable at ordinary income rates) to
the extent of the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise
Price (the "Spread"), or, of less, the difference between
the amount realized on the sale of such Shares and the
Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. Interpretation. Any dispute regarding the
interpretation of this Grant shall be submitted by Optionee
or the Company to the Company's Board of Directors or the
Committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Committee shall
be final and binding on the Company and on Optionee.
10. Entire Agreement. The Plan and the Stock Option
Exercise Agreement attached as Exhibit A are incorporated
herein by this reference. This Grant, the Plan and the
Stock Option Exercise Agreement constitute the entire
agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject
matter hereof.
TEL-COM WIRELESS CABLE TV
CORPORATION
By:______________________________________
Fernand L. Duquette, President
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the
Plan, represents that Optionee has read and understands the
terms and provisions thereof, and accepts this Option
subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or
disposition of the Shares and that Optionee should consult a
tax adviser prior to such exercise or disposition.
________________________________________
Fernand L. Duquette
clients/tcc/stock/12-3-96 DUQ Opt Grant
TEL-COM WIRELESS CABLE TV CORPORATION
STOCK OPTION GRANT
Optionee: J. Richard Crowley
Address: 5515 Pine Shade Court
Orlando, FL 32819
Total Shares Subject to Option: 5,000
Exercise Price per Share: $7.5
Date of Grant: August 2, 1996
Expiration Date: August 2, 2001
Type of Option: [ X ] Incentive Stock
Option
[ ] Nonqualified Stock
Option
1. Grant of Option. Tel-Com Wireless Cable TV
Corporation, a Florida corporation (the "Company"), hereby
grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of
common stock of the Company set forth above (the "Shares")
at the exercise price per share set forth above (the
"Exercise Price"), subject to all of the terms and
conditions of this Stock Option Grant (this "Grant") and the
Company's 1995 Stock Option Plan, as amended to the date
hereof (the "Plan"). If designated as an Incentive Stock
Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. Exercise Period of Option. Subject to the terms
and conditions of the Plan and this Grant, from and after
the Date of Grant, this Option shall be exercisable as to
all or any part of the Shares; provided that Optionee shall
in no event be entitled under this Option to purchase a
number of shares of the Company's common stock greater than
the "Total Shares Subject to Option" indicated above.
3. Restriction on Exercise. This Option may not be
exercised unless such exercise is in compliance with the
Securities Act of 1933, as amended (the "Securities Act")
and all applicable state securities laws as they are in
effect on the date of exercise, and the requirements of any
stock exchange or national market system on which the
Company's common stock may be listed at the time of
exercise. Optionee understands that the Company is under no
obligation to register, qualify or list the Shares with the
Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such
compliance.
4. Exercise Prior to Expiration of Option. Except as
provided below in this Section, this Option shall terminate
and may not be exercised if Optionee ceases to be in
Continuous Employment with the Company or any Parent or
Subsidiary of the Company. Optionee shall be considered to
be employed by the Company if Optionee is an officer,
director or full-time employee of the Company or any Parent
or Subsidiary of the Company or if the Committee determines
that Optionee is rendering substantial services as a part-
time employee, consultant, contractor or adviser to the
Company or any Parent or Subsidiary of the Company. The
Committee shall have discretion to determine whether
Optionee has ceased Continuous Employment with the Company
or any Parent or Subsidiary of the Company and the effective
date on which such employment terminated (the "Termination
Date").
4.1 Termination Generally. This Option shall be
exercisable on or prior to the Expiration Date only as long
as the Optionee is in "Continuous Employment" with the
Company or is continually on the Board of Directors of the
Company or any Parent, Subsidiary, or any successor thereof.
Notwithstanding the preceding sentence, on or prior to the
Expiration Date, an Option which is otherwise exercisable in
accordance with its provisions shall be exercisable;
(i) for a period ending ninety (90) days
after Optionee's Termination Date, unless the Optionee was
terminated for Cause by the Company, in which case the
Option terminates on the Termination Date; or
(ii) for a period ending ninety (90) days
after the removal or resignation of the Optionee from the
Board of Directors, which such Optionee has served; or
(iii) by the estate of the Optionee,
within one (1) year after the date of the Optionee's death,
if the Optionee should die while in the Continuous
Employment of the Company or while serving on the Board of
Directors of the Company or any Parent, Subsidiary, or any
successor thereof; or
(iv) within one (1) year after Optionee's
Termination Date, if the Optionee becomes disabled during
Continuous Employment with the Company and such disability
is the cause of termination.
For purposes of this Grant, the term "Continuous
Employment" shall mean the absence of any interruption or
termination of employment (or termination of a consulting
contract) with the Company or any Parent or Subsidiary which
now exists or hereafter is organized or acquired by the
Company. Continuous Employment with the Company shall not
be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by
the Company or in the case of transfers between locations of
the Company or between any Parent or Subsidiary, or
successor thereof. The term "Cause" as used in this Section
4 shall mean: (i) commission of a felony or a charge of
theft, dishonesty, fraud or embezzlement; (ii) failure to
adhere to Company's reasonable directives and policies,
willful disobedience or insubordination; (iii) disclosing to
a competitor or other unauthorized person, proprietary
information, confidences or trade secrets of the Company or
any Parent or Subsidiary; (iv) recruitment of Company or any
Parent or Subsidiary personnel on behalf of a competitor or
potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof; or (v) solicitation of
business on behalf of a competitor or potential competitor
of the Company, any Parent or Subsidiary, or any successor
thereof.
4.2 No Right of Employment. Nothing in the Plan
or this Grant shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company or
any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
5. Manner of Exercise.
5.1 Exercise Agreement. This Option shall be
exercisable by delivery to the Company of an executed
written Stock Option Exercise Agreement in the form attached
hereto as Exhibit A, or in such other form as may be
approved by the Company, which shall set forth Optionee's
election to exercise some or all of this Option, the number
of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreement as may
be required by the Company to comply with applicable
securities laws.
5.2 Exercise Price. The Stock Option Exercise
Agreement shall be accompanied by full payment of the
Exercise Price for the Shares being purchased. The exercise
of this Option shall be contingent upon prior or
simultaneous receipt by the Company of cash or a certified
bank check to its order, shares of the Company's common
stock, or any combination of the foregoing in an amount
equal to the full Exercise Price of the Shares being
purchased. For purposes of this Section 5, shares of the
Company's common stock that are delivered in payment of the
Exercise Price shall be valued at their fair market value,
as determined under the provisions of the Plan. In the
alternative, the Board of Directors may, but is not required
to, accept a promissory note, secured or unsecured, in the
amount of the Exercise Price made by the Optionee on terms
and conditions satisfactory to the Board of Directors.
5.3 Withholding Taxes. Prior to the issuance of
the Shares upon exercise of this Option, Optionee must pay
or make adequate provision for any applicable federal or
state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such
notice and payment are in form and substance satisfactory to
counsel for the Company, the Company shall cause the Shares
to be issued in the name of Optionee or Optionee's legal
representative.
6. Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO within (a) the date two years
after the Date of Grant, or (b) the date one year after
exercise of the ISO with respect to the Shares to be sold or
disposed, Optionee shall immediately notify the Company in
writing of such disposition. Optionee acknowledges and
agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income
recognized by Optionee from any such early disposition by
payment in cash (or in Shares, to the extent permissible
under Section 5.2) or out of the current wages or other
earnings payable to Optionee.
7. Nontransferability of Option. Except as otherwise
provided in Section 4 hereof, an Option granted to an
Optionee may be exercised only during such Optionee's
lifetime by such Optionee. An Option may not be sold,
exchanged, assigned, pledged, encumbered, hypothecated or
otherwise transferred except by will or by the laws of
descent and distribution. No Option or any right thereunder
shall be subject to execution, attachment or similar process
by any creditors of the Optionee. Upon any attempted
assignment, transfer, pledge, hypothecation or other
encumbrance of any Option contrary to the provisions hereof,
such Option and all rights thereunder shall immediately
terminate and shall be null and void with respect to the
transferee or assignee.
8. Tax Consequences. Set forth below is a brief
summary as of the date this form of Grant was adopted of
some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as
an ISO, there will be no regular federal income tax
liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated
as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject Optionee to an
alternative minimum tax liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If
this Option does not qualify as an ISO, there may be a
regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. The
Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of
exercise.
8.3 Disposition of Shares. In the case of a
Nonqualified Stock Option, if Shares are held for more than
one year before disposition, any gain on disposition of the
Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an ISO, if Shares are
held for more than one year after the date of exercise and
more than two years after the Date of Grant, any gain on
disposition on the Shares will be treated as long-term
capital gain for federal income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one
year or two year periods (a "disqualifying disposition"),
gain on such disqualifying disposition will be treated as
compensation income (taxable at ordinary income rates) to
the extent of the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise
Price (the "Spread"), or, of less, the difference between
the amount realized on the sale of such Shares and the
Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. Interpretation. Any dispute regarding the
interpretation of this Grant shall be submitted by Optionee
or the Company to the Company's Board of Directors or the
Committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Committee shall
be final and binding on the Company and on Optionee.
10. Entire Agreement. The Plan and the Stock Option
Exercise Agreement attached as Exhibit A are incorporated
herein by this reference. This Grant, the Plan and the
Stock Option Exercise Agreement constitute the entire
agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject
matter hereof.
TEL-COM WIRELESS CABLE TV
CORPORATION
By:______________________________________
Fernand L. Duquette, President
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the
Plan, represents that Optionee has read and understands the
terms and provisions thereof, and accepts this Option
subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or
disposition of the Shares and that Optionee should consult a
tax adviser prior to such exercise or disposition.
________________________________________
J. Richard Crowley
clients/tcc/stock/8/2/96CROW Opt Grant
TEL-COM WIRELESS CABLE TV CORPORATION
STOCK OPTION GRANT
Optionee: Dennis J. Devlin
Address: 34131 Michigan Avenue
Wayne, MI 48184
Total Shares Subject to Option: 5,000
Exercise Price per Share: $8.25
Date of Grant: August 2, 1996
Expiration Date: August 2, 2001
Type of Option: [ X ] Incentive Stock
Option
[ ] Nonqualified Stock
Option
1. Grant of Option. Tel-Com Wireless Cable TV
Corporation, a Florida corporation (the "Company"), hereby
grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of
common stock of the Company set forth above (the "Shares")
at the exercise price per share set forth above (the
"Exercise Price"), subject to all of the terms and
conditions of this Stock Option Grant (this "Grant") and the
Company's 1995 Stock Option Plan, as amended to the date
hereof (the "Plan"). If designated as an Incentive Stock
Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. Exercise Period of Option. Subject to the terms
and conditions of the Plan and this Grant, from and after
the Date of Grant, this Option shall be exercisable as to
all or any part of the Shares; provided that Optionee shall
in no event be entitled under this Option to purchase a
number of shares of the Company's common stock greater than
the "Total Shares Subject to Option" indicated above.
3. Restriction on Exercise. This Option may not be
exercised unless such exercise is in compliance with the
Securities Act of 1933, as amended (the "Securities Act")
and all applicable state securities laws as they are in
effect on the date of exercise, and the requirements of any
stock exchange or national market system on which the
Company's common stock may be listed at the time of
exercise. Optionee understands that the Company is under no
obligation to register, qualify or list the Shares with the
Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such
compliance.
4. Exercise Prior to Expiration of Option. Except as
provided below in this Section, this Option shall terminate
and may not be exercised if Optionee ceases to be in
Continuous Employment with the Company or any Parent or
Subsidiary of the Company. Optionee shall be considered to
be employed by the Company if Optionee is an officer,
director or full-time employee of the Company or any Parent
or Subsidiary of the Company or if the Committee determines
that Optionee is rendering substantial services as a part-
time employee, consultant, contractor or adviser to the
Company or any Parent or Subsidiary of the Company. The
Committee shall have discretion to determine whether
Optionee has ceased Continuous Employment with the Company
or any Parent or Subsidiary of the Company and the effective
date on which such employment terminated (the "Termination
Date").
4.1 Termination Generally. This Option shall be
exercisable on or prior to the Expiration Date only as long
as the Optionee is in "Continuous Employment" with the
Company or is continually on the Board of Directors of the
Company or any Parent, Subsidiary, or any successor thereof.
Notwithstanding the preceding sentence, on or prior to the
Expiration Date, an Option which is otherwise exercisable in
accordance with its provisions shall be exercisable;
(i) for a period ending ninety (90) days
after Optionee's Termination Date, unless the Optionee was
terminated for Cause by the Company, in which case the
Option terminates on the Termination Date; or
(ii) for a period ending ninety (90) days
after the removal or resignation of the Optionee from the
Board of Directors, which such Optionee has served; or
(iii) by the estate of the Optionee,
within one (1) year after the date of the Optionee's death,
if the Optionee should die while in the Continuous
Employment of the Company or while serving on the Board of
Directors of the Company or any Parent, Subsidiary, or any
successor thereof; or
(iv) within one (1) year after Optionee's
Termination Date, if the Optionee becomes disabled during
Continuous Employment with the Company and such disability
is the cause of termination.
For purposes of this Grant, the term "Continuous
Employment" shall mean the absence of any interruption or
termination of employment (or termination of a consulting
contract) with the Company or any Parent or Subsidiary which
now exists or hereafter is organized or acquired by the
Company. Continuous Employment with the Company shall not
be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by
the Company or in the case of transfers between locations of
the Company or between any Parent or Subsidiary, or
successor thereof. The term "Cause" as used in this Section
4 shall mean: (i) commission of a felony or a charge of
theft, dishonesty, fraud or embezzlement; (ii) failure to
adhere to Company's reasonable directives and policies,
willful disobedience or insubordination; (iii) disclosing to
a competitor or other unauthorized person, proprietary
information, confidences or trade secrets of the Company or
any Parent or Subsidiary; (iv) recruitment of Company or any
Parent or Subsidiary personnel on behalf of a competitor or
potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof; or (v) solicitation of
business on behalf of a competitor or potential competitor
of the Company, any Parent or Subsidiary, or any successor
thereof.
4.2 No Right of Employment. Nothing in the Plan
or this Grant shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company or
any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
5. Manner of Exercise.
5.1 Exercise Agreement. This Option shall be
exercisable by delivery to the Company of an executed
written Stock Option Exercise Agreement in the form attached
hereto as Exhibit A, or in such other form as may be
approved by the Company, which shall set forth Optionee's
election to exercise some or all of this Option, the number
of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreement as may
be required by the Company to comply with applicable
securities laws.
5.2 Exercise Price. The Stock Option Exercise
Agreement shall be accompanied by full payment of the
Exercise Price for the Shares being purchased. The exercise
of this Option shall be contingent upon prior or
simultaneous receipt by the Company of cash or a certified
bank check to its order, shares of the Company's common
stock, or any combination of the foregoing in an amount
equal to the full Exercise Price of the Shares being
purchased. For purposes of this Section 5, shares of the
Company's common stock that are delivered in payment of the
Exercise Price shall be valued at their fair market value,
as determined under the provisions of the Plan. In the
alternative, the Board of Directors may, but is not required
to, accept a promissory note, secured or unsecured, in the
amount of the Exercise Price made by the Optionee on terms
and conditions satisfactory to the Board of Directors.
5.3 Withholding Taxes. Prior to the issuance of
the Shares upon exercise of this Option, Optionee must pay
or make adequate provision for any applicable federal or
state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such
notice and payment are in form and substance satisfactory to
counsel for the Company, the Company shall cause the Shares
to be issued in the name of Optionee or Optionee's legal
representative.
6. Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO within (a) the date two years
after the Date of Grant, or (b) the date one year after
exercise of the ISO with respect to the Shares to be sold or
disposed, Optionee shall immediately notify the Company in
writing of such disposition. Optionee acknowledges and
agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income
recognized by Optionee from any such early disposition by
payment in cash (or in Shares, to the extent permissible
under Section 5.2) or out of the current wages or other
earnings payable to Optionee.
7. Nontransferability of Option. Except as otherwise
provided in Section 4 hereof, an Option granted to an
Optionee may be exercised only during such Optionee's
lifetime by such Optionee. An Option may not be sold,
exchanged, assigned, pledged, encumbered, hypothecated or
otherwise transferred except by will or by the laws of
descent and distribution. No Option or any right thereunder
shall be subject to execution, attachment or similar process
by any creditors of the Optionee. Upon any attempted
assignment, transfer, pledge, hypothecation or other
encumbrance of any Option contrary to the provisions hereof,
such Option and all rights thereunder shall immediately
terminate and shall be null and void with respect to the
transferee or assignee.
8. Tax Consequences. Set forth below is a brief
summary as of the date this form of Grant was adopted of
some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as
an ISO, there will be no regular federal income tax
liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated
as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject Optionee to an
alternative minimum tax liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If
this Option does not qualify as an ISO, there may be a
regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. The
Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of
exercise.
8.3 Disposition of Shares. In the case of a
Nonqualified Stock Option, if Shares are held for more than
one year before disposition, any gain on disposition of the
Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an ISO, if Shares are
held for more than one year after the date of exercise and
more than two years after the Date of Grant, any gain on
disposition on the Shares will be treated as long-term
capital gain for federal income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one
year or two year periods (a "disqualifying disposition"),
gain on such disqualifying disposition will be treated as
compensation income (taxable at ordinary income rates) to
the extent of the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise
Price (the "Spread"), or, of less, the difference between
the amount realized on the sale of such Shares and the
Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. Interpretation. Any dispute regarding the
interpretation of this Grant shall be submitted by Optionee
or the Company to the Company's Board of Directors or the
Committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Committee shall
be final and binding on the Company and on Optionee.
10. Entire Agreement. The Plan and the Stock Option
Exercise Agreement attached as Exhibit A are incorporated
herein by this reference. This Grant, the Plan and the
Stock Option Exercise Agreement constitute the entire
agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject
matter hereof.
TEL-COM WIRELESS CABLE TV
CORPORATION
By:______________________________________
Fernand L. Duquette, President
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the
Plan, represents that Optionee has read and understands the
terms and provisions thereof, and accepts this Option
subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or
disposition of the Shares and that Optionee should consult a
tax adviser prior to such exercise or disposition.
________________________________________
Dennis J. Devlin
clients/tcc/stock/8/2/96DEV Opt Grant
TEL-COM WIRELESS CABLE TV CORPORATION
STOCK OPTION GRANT
Optionee: Fernand L. Duquette
Address: 3855 South Atlantic Avenue
Daytona Beach, FL 32127
Total Shares Subject to Option: 5,000
Exercise Price per Share: $8.25
Date of Grant: August 2, 1996
Expiration Date: August 2, 2001
Type of Option: [ X ] Incentive Stock
Option
[ ] Nonqualified Stock
Option
1. Grant of Option. Tel-Com Wireless Cable TV
Corporation, a Florida corporation (the "Company"), hereby
grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of
common stock of the Company set forth above (the "Shares")
at the exercise price per share set forth above (the
"Exercise Price"), subject to all of the terms and
conditions of this Stock Option Grant (this "Grant") and the
Company's 1995 Stock Option Plan, as amended to the date
hereof (the "Plan"). If designated as an Incentive Stock
Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. Exercise Period of Option. Subject to the terms
and conditions of the Plan and this Grant, from and after
the Date of Grant, this Option shall be exercisable as to
all or any part of the Shares; provided that Optionee shall
in no event be entitled under this Option to purchase a
number of shares of the Company's common stock greater than
the "Total Shares Subject to Option" indicated above.
3. Restriction on Exercise. This Option may not be
exercised unless such exercise is in compliance with the
Securities Act of 1933, as amended (the "Securities Act")
and all applicable state securities laws as they are in
effect on the date of exercise, and the requirements of any
stock exchange or national market system on which the
Company's common stock may be listed at the time of
exercise. Optionee understands that the Company is under no
obligation to register, qualify or list the Shares with the
Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such
compliance.
4. Exercise Prior to Expiration of Option. Except as
provided below in this Section, this Option shall terminate
and may not be exercised if Optionee ceases to be in
Continuous Employment with the Company or any Parent or
Subsidiary of the Company. Optionee shall be considered to
be employed by the Company if Optionee is an officer,
director or full-time employee of the Company or any Parent
or Subsidiary of the Company or if the Committee determines
that Optionee is rendering substantial services as a part-
time employee, consultant, contractor or adviser to the
Company or any Parent or Subsidiary of the Company. The
Committee shall have discretion to determine whether
Optionee has ceased Continuous Employment with the Company
or any Parent or Subsidiary of the Company and the effective
date on which such employment terminated (the "Termination
Date").
4.1 Termination Generally. This Option shall be
exercisable on or prior to the Expiration Date only as long
as the Optionee is in "Continuous Employment" with the
Company or is continually on the Board of Directors of the
Company or any Parent, Subsidiary, or any successor thereof.
Notwithstanding the preceding sentence, on or prior to the
Expiration Date, an Option which is otherwise exercisable in
accordance with its provisions shall be exercisable;
(i) for a period ending ninety (90) days
after Optionee's Termination Date, unless the Optionee was
terminated for Cause by the Company, in which case the
Option terminates on the Termination Date; or
(ii) for a period ending ninety (90) days
after the removal or resignation of the Optionee from the
Board of Directors, which such Optionee has served; or
(iii) by the estate of the Optionee,
within one (1) year after the date of the Optionee's death,
if the Optionee should die while in the Continuous
Employment of the Company or while serving on the Board of
Directors of the Company or any Parent, Subsidiary, or any
successor thereof; or
(iv) within one (1) year after Optionee's
Termination Date, if the Optionee becomes disabled during
Continuous Employment with the Company and such disability
is the cause of termination.
For purposes of this Grant, the term "Continuous
Employment" shall mean the absence of any interruption or
termination of employment (or termination of a consulting
contract) with the Company or any Parent or Subsidiary which
now exists or hereafter is organized or acquired by the
Company. Continuous Employment with the Company shall not
be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by
the Company or in the case of transfers between locations of
the Company or between any Parent or Subsidiary, or
successor thereof. The term "Cause" as used in this Section
4 shall mean: (i) commission of a felony or a charge of
theft, dishonesty, fraud or embezzlement; (ii) failure to
adhere to Company's reasonable directives and policies,
willful disobedience or insubordination; (iii) disclosing to
a competitor or other unauthorized person, proprietary
information, confidences or trade secrets of the Company or
any Parent or Subsidiary; (iv) recruitment of Company or any
Parent or Subsidiary personnel on behalf of a competitor or
potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof; or (v) solicitation of
business on behalf of a competitor or potential competitor
of the Company, any Parent or Subsidiary, or any successor
thereof.
4.2 No Right of Employment. Nothing in the Plan
or this Grant shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company or
any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
5. Manner of Exercise.
5.1 Exercise Agreement. This Option shall be
exercisable by delivery to the Company of an executed
written Stock Option Exercise Agreement in the form attached
hereto as Exhibit A, or in such other form as may be
approved by the Company, which shall set forth Optionee's
election to exercise some or all of this Option, the number
of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreement as may
be required by the Company to comply with applicable
securities laws.
5.2 Exercise Price. The Stock Option Exercise
Agreement shall be accompanied by full payment of the
Exercise Price for the Shares being purchased. The exercise
of this Option shall be contingent upon prior or
simultaneous receipt by the Company of cash or a certified
bank check to its order, shares of the Company's common
stock, or any combination of the foregoing in an amount
equal to the full Exercise Price of the Shares being
purchased. For purposes of this Section 5, shares of the
Company's common stock that are delivered in payment of the
Exercise Price shall be valued at their fair market value,
as determined under the provisions of the Plan. In the
alternative, the Board of Directors may, but is not required
to, accept a promissory note, secured or unsecured, in the
amount of the Exercise Price made by the Optionee on terms
and conditions satisfactory to the Board of Directors.
5.3 Withholding Taxes. Prior to the issuance of
the Shares upon exercise of this Option, Optionee must pay
or make adequate provision for any applicable federal or
state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such
notice and payment are in form and substance satisfactory to
counsel for the Company, the Company shall cause the Shares
to be issued in the name of Optionee or Optionee's legal
representative.
6. Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO within (a) the date two years
after the Date of Grant, or (b) the date one year after
exercise of the ISO with respect to the Shares to be sold or
disposed, Optionee shall immediately notify the Company in
writing of such disposition. Optionee acknowledges and
agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income
recognized by Optionee from any such early disposition by
payment in cash (or in Shares, to the extent permissible
under Section 5.2) or out of the current wages or other
earnings payable to Optionee.
7. Nontransferability of Option. Except as otherwise
provided in Section 4 hereof, an Option granted to an
Optionee may be exercised only during such Optionee's
lifetime by such Optionee. An Option may not be sold,
exchanged, assigned, pledged, encumbered, hypothecated or
otherwise transferred except by will or by the laws of
descent and distribution. No Option or any right thereunder
shall be subject to execution, attachment or similar process
by any creditors of the Optionee. Upon any attempted
assignment, transfer, pledge, hypothecation or other
encumbrance of any Option contrary to the provisions hereof,
such Option and all rights thereunder shall immediately
terminate and shall be null and void with respect to the
transferee or assignee.
8. Tax Consequences. Set forth below is a brief
summary as of the date this form of Grant was adopted of
some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as
an ISO, there will be no regular federal income tax
liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated
as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject Optionee to an
alternative minimum tax liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If
this Option does not qualify as an ISO, there may be a
regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. The
Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of
exercise.
8.3 Disposition of Shares. In the case of a
Nonqualified Stock Option, if Shares are held for more than
one year before disposition, any gain on disposition of the
Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an ISO, if Shares are
held for more than one year after the date of exercise and
more than two years after the Date of Grant, any gain on
disposition on the Shares will be treated as long-term
capital gain for federal income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one
year or two year periods (a "disqualifying disposition"),
gain on such disqualifying disposition will be treated as
compensation income (taxable at ordinary income rates) to
the extent of the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise
Price (the "Spread"), or, of less, the difference between
the amount realized on the sale of such Shares and the
Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. Interpretation. Any dispute regarding the
interpretation of this Grant shall be submitted by Optionee
or the Company to the Company's Board of Directors or the
Committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Committee shall
be final and binding on the Company and on Optionee.
10. Entire Agreement. The Plan and the Stock Option
Exercise Agreement attached as Exhibit A are incorporated
herein by this reference. This Grant, the Plan and the
Stock Option Exercise Agreement constitute the entire
agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject
matter hereof.
TEL-COM WIRELESS CABLE TV
CORPORATION
By:______________________________________
Fernand L. Duquette, President
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the
Plan, represents that Optionee has read and understands the
terms and provisions thereof, and accepts this Option
subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or
disposition of the Shares and that Optionee should consult a
tax adviser prior to such exercise or disposition.
________________________________________
Fernand L. Duquette
clients/tcc/stock/8/2/96DUQ Opt Grant
TEL-COM WIRELESS CABLE TV CORPORATION
STOCK OPTION GRANT
Optionee: Richard L. Vega
Address: 1245 W. Fairbanks Ave., Suite
380
Winter Park, FL 32789
Total Shares Subject to Option: 5,000
Exercise Price per Share: $7.50
Date of Grant: August 2, 1996
Expiration Date: August 2, 2001
Type of Option: [ X ] Incentive Stock
Option
[ ] Nonqualified Stock
Option
1. Grant of Option. Tel-Com Wireless Cable TV
Corporation, a Florida corporation (the "Company"), hereby
grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of
common stock of the Company set forth above (the "Shares")
at the exercise price per share set forth above (the
"Exercise Price"), subject to all of the terms and
conditions of this Stock Option Grant (this "Grant") and the
Company's 1995 Stock Option Plan, as amended to the date
hereof (the "Plan"). If designated as an Incentive Stock
Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. Exercise Period of Option. Subject to the terms
and conditions of the Plan and this Grant, from and after
the Date of Grant, this Option shall be exercisable as to
all or any part of the Shares; provided that Optionee shall
in no event be entitled under this Option to purchase a
number of shares of the Company's common stock greater than
the "Total Shares Subject to Option" indicated above.
3. Restriction on Exercise. This Option may not be
exercised unless such exercise is in compliance with the
Securities Act of 1933, as amended (the "Securities Act")
and all applicable state securities laws as they are in
effect on the date of exercise, and the requirements of any
stock exchange or national market system on which the
Company's common stock may be listed at the time of
exercise. Optionee understands that the Company is under no
obligation to register, qualify or list the Shares with the
Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such
compliance.
4. Exercise Prior to Expiration of Option. Except as
provided below in this Section, this Option shall terminate
and may not be exercised if Optionee ceases to be in
Continuous Employment with the Company or any Parent or
Subsidiary of the Company. Optionee shall be considered to
be employed by the Company if Optionee is an officer,
director or full-time employee of the Company or any Parent
or Subsidiary of the Company or if the Committee determines
that Optionee is rendering substantial services as a part-
time employee, consultant, contractor or adviser to the
Company or any Parent or Subsidiary of the Company. The
Committee shall have discretion to determine whether
Optionee has ceased Continuous Employment with the Company
or any Parent or Subsidiary of the Company and the effective
date on which such employment terminated (the "Termination
Date").
4.1 Termination Generally. This Option shall be
exercisable on or prior to the Expiration Date only as long
as the Optionee is in "Continuous Employment" with the
Company or is continually on the Board of Directors of the
Company or any Parent, Subsidiary, or any successor thereof.
Notwithstanding the preceding sentence, on or prior to the
Expiration Date, an Option which is otherwise exercisable in
accordance with its provisions shall be exercisable;
(i) for a period ending ninety (90) days
after Optionee's Termination Date, unless the Optionee was
terminated for Cause by the Company, in which case the
Option terminates on the Termination Date; or
(ii) for a period ending ninety (90) days
after the removal or resignation of the Optionee from the
Board of Directors, which such Optionee has served; or
(iii) by the estate of the Optionee,
within one (1) year after the date of the Optionee's death,
if the Optionee should die while in the Continuous
Employment of the Company or while serving on the Board of
Directors of the Company or any Parent, Subsidiary, or any
successor thereof; or
(iv) within one (1) year after Optionee's
Termination Date, if the Optionee becomes disabled during
Continuous Employment with the Company and such disability
is the cause of termination.
For purposes of this Grant, the term "Continuous
Employment" shall mean the absence of any interruption or
termination of employment (or termination of a consulting
contract) with the Company or any Parent or Subsidiary which
now exists or hereafter is organized or acquired by the
Company. Continuous Employment with the Company shall not
be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by
the Company or in the case of transfers between locations of
the Company or between any Parent or Subsidiary, or
successor thereof. The term "Cause" as used in this Section
4 shall mean: (i) commission of a felony or a charge of
theft, dishonesty, fraud or embezzlement; (ii) failure to
adhere to Company's reasonable directives and policies,
willful disobedience or insubordination; (iii) disclosing to
a competitor or other unauthorized person, proprietary
information, confidences or trade secrets of the Company or
any Parent or Subsidiary; (iv) recruitment of Company or any
Parent or Subsidiary personnel on behalf of a competitor or
potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof; or (v) solicitation of
business on behalf of a competitor or potential competitor
of the Company, any Parent or Subsidiary, or any successor
thereof.
4.2 No Right of Employment. Nothing in the Plan
or this Grant shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company or
any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
5. Manner of Exercise.
5.1 Exercise Agreement. This Option shall be
exercisable by delivery to the Company of an executed
written Stock Option Exercise Agreement in the form attached
hereto as Exhibit A, or in such other form as may be
approved by the Company, which shall set forth Optionee's
election to exercise some or all of this Option, the number
of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreement as may
be required by the Company to comply with applicable
securities laws.
5.2 Exercise Price. The Stock Option Exercise
Agreement shall be accompanied by full payment of the
Exercise Price for the Shares being purchased. The exercise
of this Option shall be contingent upon prior or
simultaneous receipt by the Company of cash or a certified
bank check to its order, shares of the Company's common
stock, or any combination of the foregoing in an amount
equal to the full Exercise Price of the Shares being
purchased. For purposes of this Section 5, shares of the
Company's common stock that are delivered in payment of the
Exercise Price shall be valued at their fair market value,
as determined under the provisions of the Plan. In the
alternative, the Board of Directors may, but is not required
to, accept a promissory note, secured or unsecured, in the
amount of the Exercise Price made by the Optionee on terms
and conditions satisfactory to the Board of Directors.
5.3 Withholding Taxes. Prior to the issuance of
the Shares upon exercise of this Option, Optionee must pay
or make adequate provision for any applicable federal or
state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such
notice and payment are in form and substance satisfactory to
counsel for the Company, the Company shall cause the Shares
to be issued in the name of Optionee or Optionee's legal
representative.
6. Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO within (a) the date two years
after the Date of Grant, or (b) the date one year after
exercise of the ISO with respect to the Shares to be sold or
disposed, Optionee shall immediately notify the Company in
writing of such disposition. Optionee acknowledges and
agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income
recognized by Optionee from any such early disposition by
payment in cash (or in Shares, to the extent permissible
under Section 5.2) or out of the current wages or other
earnings payable to Optionee.
7. Nontransferability of Option. Except as otherwise
provided in Section 4 hereof, an Option granted to an
Optionee may be exercised only during such Optionee's
lifetime by such Optionee. An Option may not be sold,
exchanged, assigned, pledged, encumbered, hypothecated or
otherwise transferred except by will or by the laws of
descent and distribution. No Option or any right thereunder
shall be subject to execution, attachment or similar process
by any creditors of the Optionee. Upon any attempted
assignment, transfer, pledge, hypothecation or other
encumbrance of any Option contrary to the provisions hereof,
such Option and all rights thereunder shall immediately
terminate and shall be null and void with respect to the
transferee or assignee.
8. Tax Consequences. Set forth below is a brief
summary as of the date this form of Grant was adopted of
some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as
an ISO, there will be no regular federal income tax
liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated
as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject Optionee to an
alternative minimum tax liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If
this Option does not qualify as an ISO, there may be a
regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. The
Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of
exercise.
8.3 Disposition of Shares. In the case of a
Nonqualified Stock Option, if Shares are held for more than
one year before disposition, any gain on disposition of the
Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an ISO, if Shares are
held for more than one year after the date of exercise and
more than two years after the Date of Grant, any gain on
disposition on the Shares will be treated as long-term
capital gain for federal income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one
year or two year periods (a "disqualifying disposition"),
gain on such disqualifying disposition will be treated as
compensation income (taxable at ordinary income rates) to
the extent of the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise
Price (the "Spread"), or, of less, the difference between
the amount realized on the sale of such Shares and the
Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. Interpretation. Any dispute regarding the
interpretation of this Grant shall be submitted by Optionee
or the Company to the Company's Board of Directors or the
Committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Committee shall
be final and binding on the Company and on Optionee.
10. Entire Agreement. The Plan and the Stock Option
Exercise Agreement attached as Exhibit A are incorporated
herein by this reference. This Grant, the Plan and the
Stock Option Exercise Agreement constitute the entire
agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject
matter hereof.
TEL-COM WIRELESS CABLE TV
CORPORATION
By:______________________________________
Fernand L. Duquette, President
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the
Plan, represents that Optionee has read and understands the
terms and provisions thereof, and accepts this Option
subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or
disposition of the Shares and that Optionee should consult a
tax adviser prior to such exercise or disposition.
________________________________________
Richard L. Vega
clients/tcc/stock/8/2/96VEG Opt Grant
Tel-
Com Wireless
Cable TV
Corporation
Consolidated
Financial Statements
Years Ended
December 31, 1996 and 1995
Tel-
Com Wireless
Cable TV
Corporation
Consolidated
Financial Statements
Years Ended
December 31, 1996 and 1995
Report of Independent Certified Public Accountants F-2
Financial statements
Consolidated balance sheets F-3 _ F-4
Consolidated statements of operations F-5
Consolidated statements of stockholders' equity
(deficit)F-6
Consolidated statements of cash flows F-7
Summary of significant accounting policies F-8 _ F-11
Notes to consolidated financial statements F-12 _ F-31
Report of Independent Certified Public Accountants
To the Board of Directors
Tel-Com Wireless Cable TV Corporation
Daytona Beach, Florida
We have audited the accompanying consolidated balance sheets
of Tel-Com Wireless Cable TV
Corporation as of December 31, 1996 and 1995 and the related
consolidated statements of
operations, stockholders' equity (deficit) and cash flows
for the years then ended. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all
material respects, the financial position of Tel-Com
Wireless Cable TV Corporation at Decem-
ber 31, 1996 and 1995, and the results of their operations
and their cash flows for the years then
ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming that the
Company will continue as a going concern. As described in
Note 15 to the financial statements,
the Company has experienced significant operating losses and
has negative working capital at
December 31, 1996. These conditions raise substantial doubt
about the Company's ability to
continue as a going concern. Management's plans in regard to
these matters are also described in
Note 15. The financial statements do not include any
adjustments that might result from the
outcome of this uncertainty.
BDO Seidman, LLP
Orlando, Florida
April 4, 1997
December 31,
1996 1995
Assets
Current:
Cash and cash equivalents $
26,618 $1,767,285
Restricted cash (Note 7)
346,400 _
Investment securities (Note 2)
_ 1,000,625
Accounts receivable _ trade, net of allowance
for doubtful accounts of $19,028 and $-0-
18,739 29,667
Prepaid consulting fees (Note 6)
988,000 _
Prepaid other expenses
44,552 83,062
Total current assets
1,424,309 2,880,639
Property and equipment, net (Note 3)
1,365,235 716,658
Investment securities (Note 2)
_ 250,000
Licenses, net (Notes 4 and 8)
5,458,444 362,329
Other assets, net (Note 5)
127,335 68,693
$
8,375,323 $4,278,319
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
December 31,
1996 1995
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable (Note 7) $
2,369,000 $ 8,000
Accounts payable
153,276 73,054
Accrued liabilities
16,787 40,981
Current portion of long-term debt (Note 9)
5,736 _
Total current liabilities
2,544,799 122,035
License fees payable (Note 8)
951,479 _
Long-term debt, less current portion (Note 9)
16,975 _
Total liabilities
3,513,253 122,035
Commitments and contingencies (Notes 6, 8, 14 and 15)
Stockholders' equity (Note 10):
Preferred stock, $.001 par value, shares authorized
5,000,000;
500 shares designated as Series A; issued and outstanding
5001 _
Common stock, $.001 par value, shares authorized
10,000,000;
issued and outstanding 2,196,212 and 1,875,000
2,196 1,875
Additional paid-in capital
7,544,720 5,057,042
Accumulated deficit
(2,284,847) (902,633)
5,262,070 4,156,284
Less: Stock subscription receivable
(400,000) _
Total stockholders' equity
4,862,070 4,156,284
$
8,375,323 $4,278,319
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
Year ended December 31,
1996 1995
Revenue $
459,185 $155,399
Cost of sales
96,599 38,244
Gross profit
362,586 117,155
Operating expenses
1,652,380 777,725
Operating loss
(1,289,794) (660,570)
Other income (expense)
Interest income
105,048 116,958
Interest expense
(197,468) (43,900)
(92,420) 73,058
Loss before extraordinary loss
(1,382,214) (587,512)
Extraordinary loss on early
extinguishment of debt (Note 12)
_ (164,447)
Net loss
$(1,382,214) $(751,959)
Weighted average number of
common shares outstanding
1,983,542 1,460,274
Loss before extraordinary loss
per common share $
(.70) $ (.40)
Extraordinary loss on early extinguishment
of debt per common share $
_ $ (.11)
Net loss per common share $
(.70) $ (.51)
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
Total
Additional StockStockholders'
Common Stock Preferred StockPaid-
inAccumulatedSubscriptionEquity
Shares Amount Shares Amount
Capital DeficitReceivable (Deficit)
Balance, December 31, 1994725,000 $725 _ $_
$170,101 $(387,215)$ _ $(216,389)
Adjustment (Note 11) _ _ _ _
(236,541) 236,541 _ _
Initial public offering, net of
offering costs (Note 10)1,150,0001,150 _
_5,123,482 _ _5,124,632
Net loss _ _ _ _
_ (751,959) _ (751,959)
Balance, December 31, 19951,875,0001,875 _
_5,057,042 (902,633) _4,156,284
Issuance of common stock in
payment of acquisition (Note 1)121,212121 _ _
999,879 _ _1,000,000
Issuance of common stock in
payment of consulting fees (Note 6)200,000200_ _
987,800 _ _ 988,000
Sale of preferred stock (Note 10)_ _ 500 1
499,999 _ (400,000) 100,000
Net loss _ _ _ _
_(1,382,214) _(1,382,214)
Balance, December 31, 19962,196,212$2,196 500 $1
$7,544,720$(2,284,847)$(400,000)$4,862,070
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
Year ended December 31,
1996 1995
Cash flows from operating activities:
Net loss $
(1,382,214) $ (751,959)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss on disposal of property and equipment
2,851 _
Depreciation and amortization
246,401 79,461
Loss on sale of investment securities
12,688 _
Extraordinary loss from early extinguishment of debt
_ 164,447
Decrease (increase) in accounts receivable
10,928 (29,667)
Decrease (increase) in prepaid expenses
38,510 (83,062)
Increase in accounts payable
80,222 27,674
(Decrease) in accrued liabilities
(24,194) (28,469)
Net cash used in operating activities
(1,014,808) (621,575)
Cash flows from investing activities:
Purchase of investment securities
(655,750) (3,001,195)
Proceeds from sales and maturities of investment
securities1,893,687 1,799,945
Purchase of property and equipment
(780,061) (415,324)
Acquisition of licenses
(1,000,000) (4,958)
Increase in other assets
(59,442) (65,560)
Net cash used in investing activities
(601,566) (1,687,092)
Cash flows from financing activities:
Increase in restricted cash
(346,400) _
Proceeds from sale of preferred stock
100,000 5,174,308
Proceeds from issuance of notes payable
1,475,000 _
Payment of notes payable
(1,114,000) (1,325,000)
Payment of long-term debt
(238,893) _
Net cash provided by (used in) financing activities
(124,293) 3,849,308
Net increase (decrease) in cash and cash equivalents
(1,740,667) 1,540,641
Cash and cash equivalents, beginning of year
1,767,285 226,644
Cash and cash equivalents, end of year $
26,618 $1,767,285
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
Principles of
Consolidation
The consolidated financial statements include the accounts
of Tel-Com
Wireless Cable TV Corporation and its wholly-owned
subsidiaries after
elimination of intercompany accounts and transactions.
Nature of
Organization
Tele Consulting Corporation was incorporated in the State of
Florida on
May 7, 1993, primarily to complete the development and begin
operation of
a wireless cable television transmission facility. The
Company subsequently
amended its articles of incorporation changing the name of
the corporation to
Tel-Com Wireless Cable TV Corporation (_the Company_).
The Company's initial wireless cable television system is
located in
LaCrosse, Wisconsin. The Company plans to provide television
for multiple
dwelling units, commercial locations and single family
residences in
LaCrosse, as well as expanding through the development of
additional
wireless cable systems.
The Company was a development stage enterprise until January
1995 (at
which time the Company commenced operations) as defined in
Statements of
Financial Accounting Standards (SFAS) No. 7 _Accounting and
Reporting by
Development Stage Enterprises._
On February 23, 1996, the Company acquired three Costa Rican
corporations
and commenced wireless cable operations in the Republic of
Costa Rica (see
Note 1). Two of these corporations were acquired through a
new, wholly-
owned Costa Rican subsidiary.
Cash and
Cash Equivalents
For financial presentation purposes, the Company considers
those short-term,
highly liquid investments with original maturities of three
months or less to
be cash and cash equivalents.
Investment
Securities
Investment securities are stated at cost and adjusted for
accretion of discount
and amortization of premium. Investment securities are
classified as such
based upon the Company's intent and ability to hold to
maturity. Gains and
losses on sales of investment securities are computed on a
specific identifica-
tion method and based upon net proceeds and adjusted book
values as of the
settlement date.
Generally accepted accounting principles require investment
and mortgage-
backed securities that the Company has the positive intent
and ability to hold
to maturity to be classified as held-to-maturity securities
and reported at
amortized cost. Investment and mortgage-backed securities
that are held
principally for selling in the near term are to be
classified as trading
securities and reported at fair value, with unrealized gains
and losses included
in income. Investment and mortgage-backed securities not
classified as either
held-to-maturity or trading securities are to be classified
as available-for-sale
securities and reported at fair value, with unrealized gains
and losses
excluded from earnings and reported in a separate component
of
stockholders' equity. The Company adopted the Statement on
January 1,
1994 with no material effect on the financial statements of
the Company.
Property and
Equipment
Property and equipment are stated at cost. Depreciation
expense is provided
using the straight-line method for financial statement
purposes and accelerated
methods for federal income tax purposes over the estimated
useful lives of
the various assets, generally 5 to 25 years.
Licenses
Costs incurred to acquire or develop wireless cable channel
licenses are
capitalized and amortized on a straight-line basis over
their expected useful
lives of 40 years. Amortization of the licenses begins upon
the commence-
ment of operations.
Organizational
Costs
Organizational costs are stated at cost less accumulated
amortization.
Amortization expense is provided using the straight-line
method over a five-
year period.
Net Loss per
Common Share
Net loss per common share is computed based upon the
weighted average
number of shares outstanding during each period. Common
stock equivalents
include warrants and options and have not been included
since their effect
would be antidilutive.
Reclassifications
Certain amounts from the 1995 financial statements were
reclassified to
conform to current year presentations.
Income Taxes
The Company accounts for income taxes in accordance with
Statements of
Financial Accounting Standards No. 109, _Accounting for
Income Taxes_
(_FAS 109_) which requires recognition of estimated income
taxes payable
or refundable on income tax returns for the current year and
for the estimated
future tax effect attributable to temporary differences and
carryforwards.
Measurement of deferred income tax is based on enacted tax
laws including
tax rates, with the measurement of deferred income tax
assets being reduced
by available tax benefits not expected to be realized.
Certain
Significant
Risks and
Uncertainties
Operations in the United States of America are regulated by
the U.S. Federal
Communications Commission and may be subject to nonrenewal,
revocation
or cancellation for violations of the Communications Act of
1934 that may
occur.
In connection with the Company's Costa Rican operations (see
Note 1), its
operations are regulated mainly by the Radio and Television
Law _ Ley de
Radio y Television, No. 1758 of June 19, 1954 as amended and
the Regula-
tion of Wireless Stations _ Regulamenta de Esstaciones
Inalimbrieds, No. 63
of December 11, 1956 and the Broadcasting Rule of Atlantic
City and the
International Agreements Regarding Broadcasting executed in
Washington,
DC in 1949.
The pay television industry is highly competitive. Wireless
cable television
systems face or may face competition from several sources,
including
traditional and established hard-wire cable companies.
The preparation of financial statements in conformity with
generally accepted
accounting principles requires management to make estimates
and assump-
tions that affect the reported amounts of assets and
liabilities and disclosure
of contingent assets and liabilities at the date of the
financial statements and
the reported amounts of revenues and expenses during the
period reported.
Actual results could differ from those estimates.
Recent
Accounting
Pronouncements
In March 1995, the Financial Accounting Standards Board
issued Statement
of Financial Accounting Standards No. 121, _Accounting for
the Impairment
of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of_ (_SFAS
No. 121_). SFAS No. 121 requires, among other things,
impairment loss of
assets to be held and gains or losses from assets that are
expected to be
disposed of be included as a component of income from
continuing operations
before taxes on income. The Company adopted SFAS No. 121 in
1996, and
its implementation did not have a material effect on the
consolidated financial
statements.
1. Acquisitions
On February 23, 1996, the Company acquired 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.
In the first acquisition, the Company, through Fepeca de
Tournon, 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 $3,000,000, $1,000,000 of
which was paid at the
closing and the balance is 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, S.A. and Teleplus, S.A., 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
$1,000,000 which was
paid at the closing in the form of restricted shares of the
Company's common
stock valued at fair market value as of the date of closing.
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 1,700 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 3,000
subscribers. TelePlus
leases their air-time from the broadcast channels from Canal
19 and Grupo
and has acquired subscriber contracts and certain physical
assets, consisting
primarily of transmission equipment and subscriber reception
equipment,
from Grupo. The Company currently broadcasts cable
programming over six
channels in the Costa Rica System and has no present plans
to use the 12
additional microwave channels.
The assets owned by the companies acquired consisted mainly
of the
frequency licenses and property and equipment. The entire
purchase price of
$4,000,000 was allocated to the frequency licenses and will
be amortized
over a 40-year period. Due to the age and technical
obsolescence of the
property and equipment, no purchase price was allocated to
these assets.
Pursuant to the restructuring of the note payable related to
the first acquisi-
tion as described in Note 14, the Seller will (i) be issued
180,000 shares of
the Company's common stock with piggy back registration
rights; (ii) be
entitled to nominate two members to the Company's Board of
Directors until
such time as Seller has exercised the conversion rights
under the debenture;
and (iii) receive a release from any liability in connection
with the Costa Rica
acquisition. The Company will adjust the purchase price of
the first
acquisition by the fair market value of the 180,000 shares
of common stock
at the date of issuance.
The following unaudited pro forma summary presents the
consolidated results
of operations as if the above acquisitions had occurred at
the beginning of
1995, with pro forma adjustments to give effect to
amortization of broadcast
licenses acquired over 40 years, together with related
income tax effects, and
does not purport to be indicative of what would have
occurred had the
acquisition been made as of these dates or of results which
may occur in the
future. The results of operations of the acquired companies
for the period of
January 1, 1996 to February 23, 1996, the date of
acquisition, were not
significant and have been excluded from the following pro
forma information:
Year ended December 31,
1995
Sales
$345,992
Net loss
$(875,614)
Loss per share
$ (.55)
2. Investment
Securities
As of December 31, 1995, all investments were classified as
held to maturity
investments and were stated at amortized cost. The amortized
cost and
approximate market values of investment securities were as
follows:
UnrealizedUnrealized
Amortized Gross
Gross Fair
December 31, 1995 Cost Gain
Loss Value
U.S. Government and
agency obligations$1,250,625$7,465
$ _ $1,258,090
Amortized Fair
December 31, 1995
Cost Value
Due in one year or less
$1,000,625 $ 1,008,090
Due after one year through five years
_ _
Due after five years through ten years
250,000 250,000
$1,250,625 $ 1,258,090
Proceeds from the sales and maturities of investment
securities were approxi-
mately $1,894,000 and $1,800,000 during 1996 and 1995,
respectively.
Due to the acquisition of the Costa Rican operation during
1996 (see Note 1)
and the significant amount of expenditures associated with
this acquisition,
the Company transferred one of its investments from held to
maturity to
available for sale. The security had an unrealized loss of
approximately
$3,000 on the date of the transfer, which was realized upon
its immediate
sale.
3. Property and
Equipment
Property and equipment are summarized as follows:
Useful
Lives
1996 1995
Leasehold improvements 7 _ 10 years $
12,667 $ 8,674
Furniture, fixtures and
office equipment 7 years
77,139 50,201
Equipment 5 _ 10 years
1,390,442 726,655
Vehicles 5 years
105,005 _
1,585,253 785,530
Less accumulated depreciation
220,018 68,872
Net property and equipment $
1,365,235 $716,658
The Company had depreciation expense of $152,355 and $68,872
for 1996
and 1995, respectively.
4. Licenses
Licenses consist of the following:
Location of License
1996 1995
LaCrosse, Wisconsin $
371,493 $371,493
San Jose, Costa Rica
4,000,000 _
Stevens Point, Wisconsin
530,615 _
Wausau, Wisconsin
658,736 _
5,560,854 371,493
Less accumulated amortization
(102,410) (9,164)
Net licenses $
5,458,444 $362,329
5. Other Assets
Other assets are summarized as follows:
1996 1995
FCC deposits (Note 8) $
120,142 $ _
Other deposits
5,860 66,560
Organization costs
4,000 4,000
130,002 70,560
Less accumulated amortization
2,667 1,867
Net other assets $
127,335 $68,693
6. Commitments
Licenses Lease and Purchase Option Agreement
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
$371,493 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 com-
menced operations. Since the Company has satisfied its lease
requirements to
the lessors, the lessors transferred ownership of licenses
and assigned the
tower rights to the Company for $100. On March 4, 1996, the
FCC
approved the transfer of ownership of licenses to the
Company.
Operating Leases
The Company leases its offices, certain operating facilities
and equipment
under several operating leases with terms expiring through
2000. The
Company is required to make minimum lease payments under
these operating
leases approximately as follows: 1997 _ $72,000; 1998 _
$47,000; 1999 _
$34,000 and 2000 - $4,000.
Consulting Agreements
On December 23, 1996 the Company engaged four individuals
(the
_Consultants_) to provide financial and public relations
services to the
Company. The Company has issued a total of 200,000 shares of
its common
stock to the Consultants as compensation for the services to
be provided by
the Consultants pursuant to the Consulting Agreements
between the
Consultants and the Company (the _Consulting Agreements_)
for a 12-month
period. The Consultants have each agreed to pay for all of
the costs and
expenses incurred by the Consultants in connection with
rendering financial
and public relations services to the Company pursuant to the
Consulting
Agreements. The Consultants have agreed to spend not less
than $500,000 in
such endeavors. The cost associated with these Consulting
Agreements has
been recorded as prepaid consulting fees at the fair market
value of the
200,000 shares on the date the agreements were signed, which
was approxi-
mately $988,000. These costs will be amortized over the 12-
month duration
of the agreements. No costs were expensed as of December 31,
1996 as no
services had yet been performed under the agreements.
7. Notes
Payable
As of December 31, 1996 and 1995, notes payable consist of
the following:
1996 1995
$2,000,000 note payable to an individual,
interest only at 3.6% per annum,
payable
monthly, principal and unpaid
interest due
in full February 1997, collateralized
by
all outstanding stock of its
subsidiaries,
Televisora Canal Diecinueve, S.A.;
Grupo
Masteri, S.A.; and Teleplus, S.A.
(see Note 14) $
2,000,000 $ _
$475,000 note payable to a bank, interest
only at prime plus .5% payable
quarterly,
principal and unpaid interest was
paid in
full February 1997, collateralized by
a
certificate of deposit in the amount
of
$346,400
361,000 _
Note payable to a related party, no specified
interest or terms of repayment
8,000 8,000
$
2,369,000 $8,000
8. License
Fees
On March 28, 1996, the Federal Communications Commission
completed its
auction of authorization to provide single channel and
multichannel
Multipoint Distribution Service (_MDS_) in 493 Basic Trading
Areas
(_BTA_). The Company won bids in three 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 BTA
authoriza-
tions 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. On July 8, 1996, payment of $118,936 was
submitted to the
Federal Communications Commission to cover payment on the
two Wiscon-
sin BTAs of Sevens 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 U.S. Treasury
obligation at the
time of the issuance of the BTA authorization plus two and
one-half percent.
On September 1, 1996, the unpaid license fee payable of
$1,671,175 for the
Hickory, NC, BTA was defaulted on. 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. This
amount, $65,544, was charged to operations in 1996. The
remaining amount,
$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, BTA license.
9. Long-Term
Debt
Long-term debt consists of two loans, principal and interest
at 9.7% and
9.25%, payable monthly through August 2000, collateralized
by vehicles.
Future required principal payments under these loans are as
follows: 1997 _
$5,736; 1998 _ $6,301; 1999 _ $6,508 and 2000 _ $4,166.
10. Stockholders'
Equity
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of
_blank check_
preferred stock and to permit the Board of Directors,
without shareholder
approval, to establish such preferred stock in one or more
series and to fix
the rights, preferences, privileges and restriction thereof,
including dividend
rights, conversion rights, terms of redemption, liquidation
preferences and
the number of shares constituting any series or the
designation of such series.
On November 25, 1996, the Company designated and sold 500
shares of
Series A convertible preferred stock at a price of $1,000
per share (the
_Preferred Shares_) to two companies (the _Buyers_) for
$500,000. Under
the terms of the stock subscription agreements, each Buyer
delivered $50,000
in cash and a $200,000 promissory note at closing. Each
promissory note
provides for four weekly installments of no less than
$50,000 with the final
payment due no later than December 31, 1996. The Preferred
Shares are
being held in escrow and are pledged as security for the
promissory notes. As
of December 31, 1996, the Company had not received any of
the required
installment payments according to the terms of the
promissory notes.
The Preferred Shares are convertible into shares of common
stock of the
Company at any time by the Buyers and will be automatically
converted into
common stock on the effective date of a Registration
Statement covering the
Preferred Shares. The conversion rate is equal to the lesser
of (i) $3.25 per
share of common stock or (ii) a discount of 35% from the
average of the
_bid_ for five trading days prior to the effective date of a
Registration
Statement covering the Preferred Shares (the _Conversion
Price_). The
common stock issuable upon conversion of the Preferred
Shares is subject to
certain registration rights. In the event such shares of
common stock are not
registered and available for sale pursuant to an effective
registration statement
within 120 days from November 25, 1996 (except in the event
the
promissory note described above is not timely paid or the
holder of such
shares is not prompt in providing the Company required
information), the
Company must issue an additional number of Preferred Shares
equal to 10%
of the total number for each additional 30-day delay in
providing an effective
registration statement pursuant to which the common stock
underlying the
Preferred Shares is registered and delivered to the Buyers.
The Company did
not complete a Registration Statement, and as discussed
above, the Buyers
have not made timely payments on the promissory note.
Therefore, the
Company has not issued additional Preferred Shares to the
Buyers subsequent
to year end.
The Company has agreed not to issue any additional common
stock pursuant
to Regulation S of the General Regulations of the Securities
and Exchange
Commission or to register any of its securities by means of
a Form S-8
registration statement without the prior written consent of
the Buyers, whose
consent shall not be unreasonably withheld.
Subsequent to year end, the Company received payments
totaling $100,000.
The Company and the Buyers mutually agreed to terminate the
subscription
agreements and cancel the notes receivable. As a result, the
Buyers were only
issued 200 of the original 500 shares of preferred stock
which were being
held in escrow pursuant to the agreements.
Stock Option Plan
In January 1995, the Company adopted a Stock Option Plan
(the _SOP_),
pursuant to which officers, directors and key employees of
the Company are
eligible to receive incentive and/or nonqualified stock
options. The SOP
covers 200,000 shares of the Company's common stock, $.001
par value.
The SOP is administered by the Board of Directors and will
expire in 2005.
Incentive stock options granted under the SOP are
exercisable for a period of
up to ten years from the date of grant at an exercise price
which is not less
than the fair market value of the common stock on the date
of grant, except
that the terms of an incentive stock option granted under
the SOP to a
stockholder owing more than ten percent of the outstanding
common stock
may not exceed five years and its exercise price may not be
less than 110
percent of the fair market value of the common stock on the
date of grant.
The Company applies APB Opinion 25, _Accounting for Stock
Issued to
Employees,_ and related interpretations in accounting for
options issued to
employees. Accordingly, no compensation cost has been
recognized for
options granted to employees at exercise prices which equal
or exceed the
market price of the Company's common stock at the date of
grant. Options
granted at exercise prices below market prices are
recognized as compensa-
tion cost measured as the difference between market price
and exercise price
at the date of grant.
Statements of Financial Accounting Standards No. 123 (FAS
123) _Account-
ing for Stock-Based Compensation,_ requires the Company to
provide pro
forma information regarding net income and earnings per
share as if
compensation cost for the Company's employee stock options
had been
determined in accordance with the fair value based method
prescribed in FAS
123. The Company estimates the fair value of each stock
option at the grant
date by using the Black-Scholes option-pricing model with
the following
weighted-average assumptions used for grants in 1996 and
1995, respectively:
no dividend yield for both years; an expected life of five
years for both
years; expected volatility of 130% and 89%; and risk-free
interest rates of
6.3% and 5.7%.
Under the accounting provisions of FAS 123, the Company's
net loss and
loss per share would have been reduced to the pro forma
amounts indicated
below:
1996 1995
Net loss
As reported
$(1,382,214) $(751,959)
Pro forma
(1,679,484) (913,979)
Loss per share
As reported
(.70) (.51)
Pro forma
(.85) (.63)
A summary of the status of options under this plan as of
December 31, 1996 and 1995 and changes
during the years ending on those dates are presented below:
1996
1995
Weighted-
Average Weighted-Average
SharesExercise
PriceSharesExercise Price
Balance at beginning of year 20,000
$9.85 _ $ _
Granted 57,000
6.50 20,000 9.85
Balance at end of year 77,000
$7.37 20,000 $9.85
Options exercisable at year end 77,000
$7.37 20,000 $9.85
Options granted during the year at exercise prices which
exceed market price of stock at date of grant:
Weighted average exercise price 40,000
$6.60 13,000 $10.18
Weighted average fair value 40,000
5.33 13,000 8.08
Options granted during the year at exercise prices which
equal market price of stock at date of grant:
Weighted average exercise price 17,000
$6.45 7,000 $9.25
Weighted average fair value 17,000
5.17 7,000 8.14
The following table summarizes information about options
under the plan outstanding at December 31,
1996:
Options Outstanding
Options Exercisable
NumberWeighted-Average
Number
Range of Outstanding RemainingWeighted-
AverageExercisableWeighted-Average
Exercise Pricesat Dec. 31, 1996Contractual LifeExercise
Priceat Dec. 31, 1996Exercise Price
$ 5.32 to 5.85 37,000 8.9years $5.75
37,000 $5.75
$ 7.50 to 8.25 20,000 4.6 7.88
20,000 7.88
$ 9.25 to 10.18 20,000 9.0 9.85
20,000 9.85
77,000 7.8 $7.37
77,000 $7.37
Initial Public Offering
On May 10, 1995, the Company completed its initial public
offering. The
Company sold 1,150,000 shares at $5 per share and 1,610,000
redeemable
common stock purchase warrants at $.25 per warrant and
received
$5,124,632 in proceeds, net of offering costs. The Company
used these
proceeds to repay indebtedness in connection with its
private placements,
purchase equipment and for working capital and general
corporate purposes.
Stock Warrants
Redeemable Common Stock Purchase Warrants _ In connection
with the
public offering, the Company sold 1,610,000 redeemable
common stock
purchase warrants at a price of $.25 per warrant. Each
warrant entitles the
holder to purchase, at any time from the date of the
offering through the fifth
anniversary date, one share of common stock at a price of
$5.75 per share.
The warrants are redeemable at a price of $.25 per warrant
under certain
circumstances.
Private Placement Warrants _ In August 1994 and December 1,
1994, the
Company issued an aggregate of 625,000 common stock warrants
as part of
the sale of units of its securities. Such warrants may be
exercised no sooner
than one year and no later than five years from the date of
their issuance at
an exercise price of $5.75 per share. The warrants provide
for adjustment in
the number of shares underlying the warrants upon the
occurrence of certain
events, such as stock dividends, stock splits or other
reclassifications of the
Company's common stock, a consolidation or merger of the
Company, or a
liquidating distribution of the Company's common stock.
Stock Warrants _ In connection with the public offering, the
Company sold
underwriter's stock warrants, at a price of $.001 per
warrant. A total of
100,000 warrants to purchase a like number of shares of
common stock and
140,000 warrants to purchase a like number of warrants were
sold. The
underwriter's stock warrants are exercisable at a price of
$7.50 per share,
and the underwriter's warrants will be exercisable at a
price of $.375 per
warrant for a period of five years commencing on May 10,
1995. Each
warrant underlying the underwriter's warrants is exercisable
for one share of
common stock at an exercise price of $5.75 per share.
None of these warrants were exercised as of December 31,
1996.
Shares Reserved
At December 31, 1996, the Company has reserved 2,675,000
shares of
common stock for future issuance under all of the above
arrangements.
11. Income Taxes
For the period from May 7, 1993 (date of inception) through
July 31, 1994,
the Company was taxed under the provisions of Subchapter
S of the Internal
Revenue Code. On July 31, 1994, the Company's status as
an S corporation
was terminated, and a net operating loss carryforward of
approximately
$120,000 was generated as a result of the Company's
activity during the
months of August through December 1994. A
reclassification of $236,541
was made from accumulated deficit to additional paid-in
capital as a result of
the Company's activity during the time that it was an S
corporation. This was
accomplished through an adjustment during the year ended
December 31,
1995.
The components of net deferred income taxes consist of the
following:
1996 1995
Deferred income tax assets:
Net operating loss carryforwards $
982,200 $365,000
Other
7,400 _
Gross deferred income tax assets
989,600 365,000
Valuation allowance
(826,000) (317,100)
Total deferred income tax assets
163,600 47,900
Deferred income tax liabilities:
Depreciation
(97,200) (41,800)
Amortization
(66,400) (6,100)
Total deferred income tax liabilities
(163,600) (47,900)
Net deferred income taxes $
_ $ _
The changes in the valuation allowance for deferred income
tax assets were
increases of $508,900 and $246,000 during 1996 and 1995,
respectively.
The following summary reconciles differences from income
taxes at the
federal statutory rate with the effective rate:
Year ended December 31,
1996 1995
Federal income taxes at statutory rates
(34.0%) (34.0%)
Losses without tax benefits
34.0% 34.0%
Income taxes at effective rates
0% 0%
Unused net operating losses for income tax purposes,
expiring in various
amounts from 2009 through 2011, of approximately $2,505,000
are available
at December 31, 1996 for carryforward against future years'
taxable income.
Under Section 382 of the Internal Revenue Code, the annual
utilization of
this loss may be limited due to changes in ownership. A
valuation allowance
of approximately $826,000 has been offset against the tax
benefit of these
losses due to it being more likely than not that the
deferred income tax assets
will not be realized.
12. Extraordinary
Item
The extraordinary loss in 1995 was from early repayment of
8% secured
promissory notes due in 1999 obtained in two separate
private placement
offerings in 1994 (see Note 10).
13. Supplemental
Cash Flow
Information
Certain supplemental disclosure of cash flow information and
noncash
investing and financing activities for the years ended
December 31, 1996 and
1995 is as follows:
1996 1995
Cash paid during the year for:
Interest $
197,722 $82,733
Noncash investing and financing activities:
Write-off of debt issuance costs $
_ $164,447
Common stock issued for acquisitions
1,000,000 _
Common stock issued for consulting
fees 988,000 _
Preferred stock issued for note
receivable400,000 _
Licenses acquired for notes payable
1,189,361 _
Note payable issued in connection
with acquisition
2,000,000 _
Long-term debt incurred in connection
with
the purchase of property and
equipment 23,732 _
14. Subsequent
Event
On February 12, 1997, the Company and Seller entered in an
agreement
providing for the restructuring of the 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 and, as
consideration for the
restructuring of the note, agreed to issue to Seller 100,000
shares of its
common stock, par value $.001 per share, having certain
piggy back
registration rights. 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, the
$50,000 was
retained and on April 2, 1997, Seller declared the Note to
be in default.
On April 14, 1997, the Company entered into a letter of
understanding with
the Seller for the restructuring of the $2 million debt into
a convertible
debenture to mature in 12 months with interest to accrued at
12% per annum
(7% to be paid monthly and 5% at maturity). The principal
amount of the
debenture will be $2 million plus certain 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 will
have the option,
exercisable within six months of the issue date of the
debenture, to elect to
extend the maturity date of the debenture of 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
accrued 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, Seller will (i)
be issued 180,000
shares of the Company's common stock with piggy back
registration rights;
(ii) be entitled to nominate two members to the Company's
Board of
Directors until such time as Seller has exercised the
conversion rights under
the debenture; and (iii) receive a release from any
liability in connection with
the Costa Rica acquisition.
The debenture will be 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 (a) $1.00 per share of common stock or (b)
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 for a period of 26 months.
The Seller will have the option to the return of the 12
microwave frequency
licenses held by Canal 19 in exchange for the Company's use
of part of
Seller's Channel 19 offices for an additional sales office
and the provision to
the Company of approximately $25,000 to $30,000 per year in
advertising on
Channel 19 for up to five years.
If the Company defaults in its obligations under the
debenture, then Seller
will be entitled to a transfer of all stock of Canal 19,
Grupo and TelePlus and
to the right to purchase all capital assets of the Company
in Costa Rica for
fair market value. The assets of Canal 19 consist primarily
of rights to
licenses, for which applications are pending with the
Republic of Costa Rica,
for the exclusive use of these _superband_ television
frequency channels and
twelve microwave frequency channels. The assets of Grupo
consist primarily
of licenses for the exclusive use of three UHF frequency
channels. The assets
of Teleplus consist primarily of subscriber contracts,
transmission equipment
and subscriber reception equipment necessary for the
operation of the Costa
Rican wireless cable television service.
The Company and Seller are currently negotiating and
drafting the terms of
definitive agreements to reflect the terms of the
preliminary understanding.
Pending the execution of definitive agreements, Seller has
agreed to abate any
proceedings or remedies for default of the debt. While the
Company is
optimistic that definitive agreements on the terms described
above will be
executed in due course, no assurance thereof can be given.
15. Going Concern
Consideration
The Company's financial statements are presented on the
going concern
basis, which contemplates the realization of assets and the
satisfaction of
liabilities in the normal course of business. However, the
Company has
suffered recurring losses from operations. At December 31,
1996, the
Company had an accumulated deficit of approximately
$2,285,000 and a
working capital deficit of approximately $1,120,000.
During the year ended December 31, 1996, the Company was
successful in
acquiring two companies with broadcast channel rights in
Costa Rica and won
FCC bids for three FCC broadcast channel licenses in the
U.S. The
Company expended significant capital to complete these
acquisitions and
make initial payments towards the FCC licenses.
The Company's expansion activities and net losses have
placed substantial
pressure on the working capital and liquidity of the
Company. These
conditions raise substantial doubt as to the Company's
ability to continue as
a going concern. Although the Company believes that funds
expected to be
generated from operations and additional debt or equity
financing will be
sufficient to fund the Company's working capital
requirements for at least six
months following the Company's planned registration with the
SEC of
unissued common stock in the second quarter of 1997, there
can be no
assurance that the Company will be able to procure
additional capital through
public or private financing efforts or generate sufficient
revenues to fund its
operations after such period. The Company is actively
pursuing additional
financing alternatives. However, the Company has no
arrangements or
commitments for additional capital. The Company does not
currently have
any available bank credit facilities. The ability of the
Company to finance its
activities and growth will depend on its ability to procure
additional
financing, achieve a profitable level of operations,
consummate its agreement
to restructure the $2,000,000 note payable related to the
Costa Rica
acquisition (see Notes 1 and 14) and meet its financial
obligation to the U.S.
government to avoid defaulting on the FCC licenses purchased
at auction.
_______________________________
(1) Represents excess of fair market value of common stock
underlying options on date of grant over exercise price.
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 26,618
<SECURITIES> 346,400
<RECEIVABLES> 18,739
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