<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________.
Commission File No. 0-25896
TEL-COM WIRELESS CABLE TV CORPORATION
--------------------------------------------
(Name of small business issuer in its charter)
FLORIDA 59-3175814
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1506 N.E. 162ND STREET
NORTH MIAMI BEACH, FL 33162
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuers telephone number, including area code (305) 947-3010
--------------
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
Title of Class: COMMON STOCK, PAR VALUE $.001 PER SHARE
---------------------------------------
COMMON STOCK PURCHASE WARRANTS
---------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months 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. (X)
State issuer's revenues for the reported transition period: $1,085,149
As of April 13, 1998 the aggregate market value of the common stock held by
non-affiliates of the registrant was approximately $5,709,000, based on the
average of the closing bid and asked prices on that date of $2.5625. As of that
date, there were 4,009,643 shares of the issuer's Common Stock outstanding.
Transitional Small Business Disclosure Format. YES NO X
---- ----
<PAGE> 2
Operating expenses also include charges of $120,142 in 1997 and $65,544
in 1996 related to the default on the North Carolina licenses. The change in
useful lives of licenses from 40 years to 15 years resulted in a $200,000 charge
in 1997 for the additional amortization. Amortization using a 40 year life was
$110,050 in 1997 and $93,246 in 1996.
Excluding the above described unusual operating expenses and the effect
of the change in accounting estimate totaling $1,436,142, the costs of operating
the Costa Rican and LaCrosse Systems and the corporate office in Florida totaled
$2,001,140 (184% of related revenues) in 1997. During 1996, the Company had
comparable operating expenses of $1,679,764 (366% of related revenues). The
$321,376 increase in comparable operating expenses is due to the increased
variable costs of providing subscriber services to the significantly expanded
Costa Rican System.
The operating expenses as a percent of revenues declined from 366% to
184% because of the significant increase in subscribers in Costa Rica and the
spreading of fixed and semi-variable operating expenses over a larger revenue
base. An entire year of revenues from the higher Costa Rican subscriber base at
January 1, 1998 should cause the operating expense ratio to decline
significantly in 1998 from the 184% ratio for 1997.
INTEREST EXPENSE/INTEREST INCOME
The $545,396 of interest expense for 1997 was $441,974 higher than 1996
because of the $2 million Rosen loan, as follows:
1. $50,000 was paid to extend the maturity and $188,750 was charged
to restructure the loan;
2. The loan was outstanding for the entire year (compared to 10
months in 1996);
3. The interest rate increased from 3.6% to 12% for the last 7 months
in 1997;
4. $109,967 was included in interest expense for the early conversion
to common stock;
Interest income decreased significantly due to the significant
reduction in cash equivalents in the last half of 1996. The company's cash
equivalents and short term investments at the beginning of 1996 generated
significant interest income in 1996 before they were used to:
1. Pay for the Costa Rican licenses;
2. Purchase equipment for both the Costa Rican and LaCrosse Systems;
3. Make the down payment on the new US licenses; and
4. Fund operating losses for 1996.
NET LOSS
The $3,061,964 net loss for 1997 includes $1,584,859 of expenses and
charges that are not expected to recur in 1998 and future years. The $1,382,214
net loss for 1996 included a $65,544 charge for abandoning the Hickory North
Carolina licenses. After excluding these unusual items from both 1997 and 1996
and the $200,000 additional amortization of licenses in 1997, the net loss for
1997 actually declined by $39,565 from $1,316,670 for 1996 to $1,277,105 for
1997 with comparable amortization of licenses in both years.
-18-
<PAGE> 3
The following table lists the adjustments necessary to reflect a
comparable 40 year license amortization in 1997 and 1996 and to exclude the
charges and expenses that are not expected to recur in 1998 and future years:
<TABLE>
<CAPTION>
1997 1996
------------- --------
<S> <C> <C>
Investment banking consulting services $ 988,000 $ -
Other investment banking consulting services 128,000 -
Loan extension and restructure costs 238,750 -
Charge for early conversion of Debenture 109,967 -
Write-down deposit on Hickory NC license 120,142 65,544
---------- --------
Total non-recurring expenses 1,584,859 65,544
Effect on 1997 of change in estimate to a 15 year life
for licenses 200,000 -
---------- --------
Total $1,784,859 $ 65,544
========== ========
</TABLE>
The revenues from an increased Costa Rican subscriber base and
operating for a full year in Costa Rica are the principal reasons for the
$39,565 improvement in 1997 operating results, excluding these unusual items
and the $200,000 for the change in accounting estimate. The higher gross profit
from the 1997 Costa Rican subscriber base covered more of the fixed and
semi-variable operating expenses in 1997 than the gross profit from the 1996
Costa Rican subscriber base could cover.
With 4,600 subscribers on January 1, 1998 compared with 1,300
subscribers on January 1, 1997, the Company expects 1998 to continue this trend
of improved operating results in Costa Rica.
INFLATION AND FOREIGN CURRENCY FLUCTUATION
Costa Rica experienced a decline in the value of the Colon relative to
the US dollar of approximately 1% per month in 1997. The government of Costa
Rica mandates minimum salary increases on July 1 and January 1 of each year. The
Company has been able to increase its prices to cover the wage increases and the
effects of the currency decline in Costa Rica and believes that it will be able
to continue to do so without significant effect on its subscriber base.
The providers of the programming that the Company rebroadcasts in
LaCrosse have increased the rates charged per subscriber when the contracts were
renewed primarily in the fall of 1997. These increases have not been significant
and, as the low cost provider of alternative cable TV, the Company believes it
has the ability to increase its rates to pass the additional programming costs
onto its subscribers.
LIQUIDITY
SOURCE AND USE OF CASH FOR 1997
During 1997 the Company raised $830,479 of cash/working capital from
the following sources:
<TABLE>
<CAPTION>
<S> <C>
Loans from shareholders $ 180,479
Proceeds from sale of preferred stock 200,000
Exercise of warrants issued to investment banking consultants 450,000
---------
Total cash/working capital added $ 830,479
=========
</TABLE>
-19-
<PAGE> 4
Approximately $316,000 of the cash was used to purchase equipment to
increase the Costa Rican subscriber base from 1,300 at the end of 1996 to 4,600
at the end of 1997. The remaining $514,479 was used to fund operating losses and
increase the cash position by $86,589, from $26,618 at December 31, 1996 to
$113,207 at December 31, 1997.
The Company has reviewed its computer software needs and does not
expect to incur a significant expense in order for the company to comply with
the year 2000 requirements.
RESTRUCTURE ROSEN LOAN AND CONVERSION TO COMMON STOCK
See Note 4 of the Notes to the Consolidated Financial Statements
included in Part II, Item 7 of this report, with respect to the debt
restructuring, the contemporaneous change in control which occurred in May 1997
and the agreement to convert the Debenture and related interest into common
stock in 1998.
WORKING CAPITAL DEFICIT/ADDITIONAL DEBT OR EQUITY FINANCING REQUIRED
The accompanying financial statements reflect current liabilities of
$982,412 and current assets of $180,237 resulting in a working capital deficit
of $802,175.
Although the Costa Rican and LaCrosse operations generate positive cash
flow, the cash flow does not cover the corporate overhead. After the conversion
of the Rosen debentures the Company will continue to show a working capital
deficit with the current subscriber base. Increasing the subscriber base
requires additional capital because the incremental equipment and labor
installation costs per subscriber exceed the installation fees charged the
subscriber. It generally takes between 6 months and a year for the gross profit
from each new subscriber to cover the incremental costs of adding the
subscriber.
The Company intends to substantially increase its current subscriber
base in the Costa Rican System and to moderately grow the LaCrosse System. The
company also plans to fully develop the Fifth Avenue Channel. The Company
believes it needs to raise an additional $1,500,000 of debt or equity capital
for capital expenditures and operations, including its corporate overhead and
its Costa Rican, LaCrosse and Fifth Avenue operations. The Company is exploring
various sources of additional financing, but has no commitments in this regard.
Failure to secure additional debt or equity financing could have a material
adverse effect on the Company and its ability to continue as a going concern.
Reference is made to the Report of Independent Certified Public
Accountants included in the accompanying consolidated financial statements
included in Part II, item 7 of this report regarding their explanatory paragraph
about the Company's ability to continue as a going concern.
AGREEMENT TO ACQUIRE 60% OF THE FIFTH AVENUE CHANNEL
In November 1997 the Company agreed to acquire 60% of the capital stock
of The Fifth Avenue Channel, Inc. ("Fifth Avenue"), 45% from Mel Rosen, the
Company's President and controlling shareholder, and 15% from International
Broadcast Corporation ("IBC"). As consideration, the Company will issue 200,000
shares of its common stock upon the closing of the purchase of the Fifth Avenue
capital stock, which is expected to occur in the second quarter of 1998.
-20-
<PAGE> 5
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank note payable $ -- $ 361,000
Note payable to President/Chairman of the Board
(Notes 3 and 4) -- 2,000,000
Advances from and notes payable to stockholders
(Note 5) 362,479 8,000
Accounts payable 304,639 153,276
Accrued liabilities 308,993 16,787
Current portion of long-term debt (Note 6) 6,301 5,736
- - ------------------------------------------------------------------------------------------------------
Total current liabilities 982,412 2,544,799
- - ------------------------------------------------------------------------------------------------------
Convertible debenture to President/Chairman of the Board
(Note 4) 2,366,000 --
License fees payable (Note 3) 951,479 951,479
Long-term debt, less current portion (Note 6) 9,997 16,975
- - ------------------------------------------------------------------------------------------------------
Total liabilities 4,309,888 3,513,253
- - ------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 7)
STOCKHOLDERS' EQUITY (Note 8):
Preferred stock, $.001 par value, shares authorized
5,000,000; 500 shares designated as Series A,
issued and outstanding, none and 500, respectively;
1,500 shares designated as Series B, none issued
and outstanding -- 1
Common stock, $.001 par value, shares authorized
10,000,000; issued and outstanding 4,009,643 and
2,196,212, respectively 4,010 2,196
Additional paid-in capital 8,171,457 7,544,720
Accumulated deficit (5,508,611) (2,284,847)
- - ------------------------------------------------------------------------------------------------------
Less: Stock subscription receivable -- (400,000)
- - ------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,666,856 4,862,070
- - ------------------------------------------------------------------------------------------------------
$ 6,976,744 $ 8,375,323
======================================================================================================
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-4
<PAGE> 6
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1997 1996
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE $ 1,085,149 $ 459,185
COST OF SALES 170,614 96,599
- - ---------------------------------------------------------------------------------------
Gross profit 914,535 362,586
OPERATING EXPENSES 3,437,282 1,745,308
- - ---------------------------------------------------------------------------------------
Operating loss (2,522,747) (1,382,722)
- - ---------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 6,179 103,930
Interest expense (545,396) (103,422)
- - ---------------------------------------------------------------------------------------
(539,217) 508
- - ---------------------------------------------------------------------------------------
NET LOSS (3,061,964) (1,382,214)
PREFERRED STOCK DIVIDENDS (NOTE 8) 161,800 --
- - ---------------------------------------------------------------------------------------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS (3,223,764) (1,382,214)
- - ---------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,758,112 1,983,542
=======================================================================================
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (1.17) $ (.70)
=======================================================================================
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-5
<PAGE> 7
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL
------------------------------ ---------------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 1,875,000 $ 1,875 -- -- $ 5,057,042
Issuance of common stock in 121,212 121 -- -- 999,879
payment of acquisition (Note 3)
Issuance of common stock in
payment of consulting fees (Note 8) 200,000 200 -- -- 987,800
Sale of preferred stock (Note 8) -- -- 500 1 499,999
Net loss -- -- -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 2,196,212 2,196 500 1 7,544,720
Partial payment of subscriptions
receivable for preferred stock (Note 8) -- -- -- -- --
Cancellation of subscriptions
receivable for preferred -- -- (300) -- (300,000)
stock (Note 8)
Sale of preferred stock (Note 8) -- -- 100 -- 100,000
Issuance of common stock in debt
restructuring (Note 4) 180,000 180 -- -- 78,570
Issuance of warrants in debt
restructuring (Note 4) -- -- -- -- 10,000
Issuance of warrants in payment of
consulting fees (Note 8) -- -- -- -- 128,000
Conversion of preferred stock to
common stock (Note 8) 1,183,431 1,184 (300) (1) (1,183)
Exercise of warrants for common
stock (Note 8) 450,000 450 -- -- 449,550
Preferred stock dividends (Note 8) -- -- -- -- 161,800
Net loss -- -- -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 4,009,643 $ 4,010 -- $ -- $ 8,171,457
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
STOCK TOTAL
ACCUMULATED SUBSCRIPTION STOCKHOLDERS'
DEFICIT RECEIVABLE EQUITY
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, December 31, 1995 $ (902,633) $ -- $ 4,156,284
Issuance of common stock in -- -- 1,000,000
payment of acquisition (Note 3)
Issuance of common stock in
payment of consulting fees (Note 8) -- -- 988,000
Sale of preferred stock (Note 8) -- (400,000) 100,000
Net loss (1,382,214) -- (1,382,214)
- - ---------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 (2,284,847) (400,000) 4,862,070
Partial payment of subscriptions
receivable for preferred stock (Note 8) -- 100,000 100,000
Cancellation of subscriptions
receivable for preferred -- 300,000 --
stock (Note 8)
Sale of preferred stock (Note 8) -- -- 100,000
Issuance of common stock in debt
restructuring (Note 4) -- -- 78,750
Issuance of warrants in debt
restructuring (Note 4) -- -- 10,000
Issuance of warrants in payment of
consulting fees (Note 8) -- -- 128,000
Conversion of preferred stock to
common stock (Note 8) -- -- --
Exercise of warrants for common
stock (Note 8) -- -- 450,000
Preferred stock dividends (Note 8) (161,800) -- --
Net loss (3,061,964) -- (3,061,964)
- - ---------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 $(5,508,611) $ -- $ 2,666,856
===============================================================================================================
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-6
<PAGE> 8
TEL-COM WIRELESS CABLE TV CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 10)
================================================================================
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1997 1996
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,061,964) $(1,382,214)
Adjustments to reconcile net loss to net
cash used in operating activities:
Write-off of prepaid consulting fees 988,000 --
Depreciation and amortization 532,113 246,401
Inducement costs and interest accrued to debenture balance 266,000 --
Warrants and stock compensation and other expense incurred
in connection with debt restructure 188,750 --
Compensation in form of warrants issued to consultants 128,000 --
Write-off of deposit 120,142 --
Loss on disposal of property and equipment -- 2,851
Loss on sale of investment securities -- 12,688
(Increase) decrease in accounts receivable (34,080) 10,928
Decrease in prepaid expenses 23,791 38,510
Increase in accounts payable and accrued liabilities 443,569 56,028
- - ------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (405,679) (1,014,808)
- - ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities -- (655,750)
Proceeds from sales and maturities of investment securities -- 1,893,687
Purchase of property and equipment (315,921) (780,061)
Acquisition of licenses -- (1,000,000)
Increase in other assets (1,277) (59,442)
Decrease (increase) in restricted cash 346,400 (346,400)
- - ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 29,202 (947,966)
- - ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants 450,000 --
Proceeds from subscription receivable 100,000 --
Proceeds from sale of preferred stock 100,000 100,000
Proceeds from issuance of notes payable -- 1,475,000
Proceeds from loans from stockholders 255,979 --
Payment of loans from stockholders (75,500) --
Payment of notes payable (361,000) (1,114,000)
Payment of long-term debt (6,413) (238,893)
- - ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 463,066 222,107
- - ------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 86,589 (1,740,667)
- - ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, beginning of year 26,618 1,767,285
- - ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 113,207 $ 26,618
==================================================================================================================
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-7
<PAGE> 9
TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. LIQUIDITY AND GOING The Company's financial statements are
CONCERN CONSIDERATIONS 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, 1997, the
Company had an accumulated deficit of
approximately $5,509,000 and a working
capital deficit of approximately $802,000.
The $3,061,964 net loss for 1997 includes
$1,584,859 of expenses and charges that are
not expected to recur in 1998 and future
years. The $1,382,214 net loss for 1996
included a non recurring $65,544 charge for
abandoning the Hickory North Carolina
licenses.
The following table lists the charges and
expenses that are not expected to recur in
1998 and future years:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Investment banking consulting services $ 988,000 $ --
Other investment banking consulting
services 128,000 --
Loan extension and restructure costs 238,750 --
Charge for early conversion of Debenture 109,967 --
Write-down of deposit on Hickory
NC license 120,142 65,544
--------------------------------------------------------------------------
$1,584,859 $65,544
==========================================================================
</TABLE>
ADDITIONAL DEBT OR EQUITY FINANCING REQUIRED
Although the Costa Rican and LaCrosse
operations generate positive cash flow, the
cash flow does not cover the Company's
current corporate overhead. After the
conversion of the President's debentures the
Company will continue to show a working
capital
F-13
<PAGE> 10
TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
On May 19, 1997, the Company entered into an
agreement with the Seller restructuring the
$2 million note into a convertible debenture
maturing in 12 months and bearing interest
at 12% per annum (7% to be paid monthly and
5% at maturity). The principal amount of the
debenture was increased $100,000 for
expenses owed or reimbursable to the Seller
at the May 19 issue date of the debenture.
As consideration for this debt
restructuring, the Company agreed to issue
to the Seller (i) 180,000 shares of the
Company's common stock with piggy back
registration rights, (ii) a warrant to
purchase 500,000 shares at $1.00 per share,
and (iii) a warrant to purchase 500,000
shares at $5.00 per share. Under the
Agreement, the Seller became the President
and Chairman of the Board and received the
right to nominate two members to the
Company's Board of Directors until such time
as the President exercised the conversion
rights under the Debenture. The Company
released the President from any liability in
connection with the Costa Rica acquisition.
A value of $78,750 was assigned to the
aforementioned stock and $10,000 to the
warrants issued.
The Debenture is convertible by the
President into the Company's common stock at
any time 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) $.50 per share of common
stock or (b) 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 average closing bid for the Company's
shares for the 5 trading days immediately
prior to signing the agreement was below
$.50 per share. The Company is required to
reserve a sufficient number of shares of
common stock for such conversion and
maintain an effective registration statement
for such shares.
F-19
<PAGE> 11
TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
At either the President's or the Company's
option, $1 million of the debenture may be
extended for an additional period of 12
months with interest at 15% per annum (8% to
be paid monthly and 7% to be paid at
maturity). The company paid $12,000 of
interest on the original note in early 1997.
No interest was paid on the Debenture in
1997 and the $156,033 of interest accrued
from May 19, 1997 to December 31, 1997 was
added to the Debenture balance.
In November 1997 the President notified the
Company of his intention to convert the
Debenture into common stock on or before May
15, 1998. As inducement for the early
conversion and for the President foregoing
all interest on the Debenture after December
31, 1997, an additional $109,967 was added
to the Debenture principal balance. The
resulting $2,366,000 Debenture balance will
be converted at $.50 per share into
4,732,000 restricted common shares to be
issued to the President in 1998.
All of the costs of restructuring the debt
totaling $188,750 and the $109,967
inducement were recorded as additional
interest expense in 1997.
5. LOANS AND NOTES As of December 31, 1997 and 1996, loans and
PAYABLE notes payable consist of the following:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------------------------------
<S> <C> <C>
Loans payable to the President, no specified
interest rate or repayment terms $ 262,479 $ --
Note payable to unrelated third party with
interest at 18%. Convertible with piggy back
registration rights to common stock at the
greater of $.50 or 50% of the 5 day average
bid price of the common stock prior to
conversion 50,000 --
</TABLE>
F-20
<PAGE> 12
TEL-COM WIRELESS CABLE TV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
on the date of grant, expect that the terms
of an incentive stock option granted under
the SOP to a stockholder owning 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 compensation 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) "Accounting 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 (no options were granted
in 1997); no dividend yield; an expected
life of five years; 130% expected volatility
and 6.3% risk-free interest rate.
F-25
