Mdu Communications International (MDTV) Inactive
Filed: 14 Feb 01, 12:00am
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 31, 2001
MDU Communications International, Inc.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation) | ||
0-26053 (Commission File Number) | 84-1342898 (IRS Employer Identification No.) | |
108-11951 Hammersmith Way, Richmond, B.C., Canada (Address of principal executive offices) | V7A 5H9 (Zip Code) | |
(604) 277-8150
(Registrant's telephone number, including area code)
Item 2.
Acquisition or Disposition of Assets.
On January 31, 2001, MDU Communications Inc. ("MDUC"), a subsidiary of MDU Communications International, Inc. (the "Company") completed an Asset Purchase Agreement with Star Choice Television Network Inc. ("Star Choice"), a subsidiary of Star Choice Communications Inc. (of which MDUC has been a National System Operator since August of 1998), for Star Choice to purchase MDUC's Western Canadian satellite television subscriber base and associated property access agreements for a purchase price of $5,174,278(cdn). In addition, the Agreement provides for Star Choice to receive MDUC's backlog of access agreements and letters of intent for Western Canada. Beginning February 1, 2001, Star Choice assumes all obligations under the property access agreements and will provide on-going service to these properties, owners and subscribers.
Specifically, the Agreement represents the sale of the following number of MDUC's satellite television subscribers: DTA (direct-to-apartment)—4,758; Private Cable—4,916; SMATV—4,733. Of these subscribers sold, approximately 8,000 of the SMATV and Private Cable were purchased by MDUC from 4-12 Electronics Corporation in December of 1998 for $200,000(cdn).
The monthly revenue, after programming costs, represented by MDUC's Western Canadian satellite subscriber base was approximately $103,000. This is based on the average monthly subscription, after programming costs, for the three types of subscribers in this market: the DTA subscriber, the Private Cable subscriber and the SMATV subscriber. Each of these types of subscribers generated revenue, after programming costs, of $17.03(cdn), $3.35(cdn) and $1.22(cdn) per month respectively.
The monthly operating cost to manage and service the Western Canadian subscriber base was approximately $377,000(cdn) per month. The monthly loss attributable to this subscriber base was approximately $274,000(cdn). Because the Western Canadian market was geographically spread out over four large provinces with relatively small Canadian cities, economies of scale became hard to achieve and losses were expected to continue for some time until the Company reached a subscriber base level capable of covering the costs to manage and service this subscriber base. As a result, these subscribers currently represented the Company's lowest earning revenue on a per subscriber basis, yet still requiring a high cost to manage and maintain.
Under the Agreement, Star Choice also receives the telecommunications equipment installed in the properties, required to service these subscribers. This equipment had a net asset book value representing approximately 60% of the net asset book value of the Company as of December 31, 2000.
The Agreement did not result in the sale of any of the Company's infrastructure, the proprietary "Dataman" subscriber management system or MDUC's Internet or security subscribers. Furthermore, the Agreement did not result in the sale of any of MDUC's subscriber base or assets in Eastern Canada (Quebec, Toronto and Nova Scotia) or any of the assets of the U.S. subsidiary, MDU Communications (USA) Inc.
Going forward, the Company is restructuring its Canadian subsidiary, MDUC, and the infrastructure built by the Company to accommodate its Western Canadian subscriber base, growth in Eastern Canada and the addition of its DIRECTV subscriber base in the United States, will in large part be transitioned to the Company's U.S. head office in Totowa, New Jersey with the remainder to the Company's Toronto office. The Company will divest itself of its Western Canadian offices in Calgary, Edmonton, Winnipeg and a majority of its Vancouver office.
The scaled back and restructured operations in Canada will result in an approximate 70% reduction in the Company's monthly operating expenses. The Company, however, remains committed to controlled growth in Eastern Canada. The Company has a growing base of subscribers in Eastern Canada in addition to a backlog of properties waiting for services to be installed. As of January 31, 2001, MDUC had a backlog of signed letters of intent or access agreements in Eastern Canada, primarily in the Toronto and Montreal areas, with 457 properties representing a backlog of approximately 35,000 potential subscribers to the Company's services.
The Company's primary focus, however, will now be on the U.S. market. To that end, the Company has focused on providing services on a bulk or semi-exclusive basis. In bulk or semi-exclusive properties the Company's penetration rates are higher, revenues increase and maintenance costs are lower. Over the past few months, the U.S. subsidiary has been developing significant relationships with large national property owners and managers that provide long-term digital satellite and high-speed Internet service access to their residents on a bulk or semi-exclusive basis.
As of January 31, 2001, the U.S. subsidiary had a backlog of letters of intent or access agreements in place with 152 properties, representing approximately 17,000 potential subscribers to the Company's services.
Item 7.
Financial Statements and Exhibits
Financial Statements—The Company is preparing pro forma financial statements, pursuant to Article 11 of Regulation SX of the Securities Exchange Act of 1934, which will be filed on or before April 15, 2001.
Exhibits—2.1—Disposition of assets—The January 31, 2001 Asset Purchase Agreement with Star Choice Television Network Incorporated is attached to this 8K as an Exhibit.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MDU COMMUNICATIONS INTERNATIONAL, INC. | ||||
Date: February 14, 2001 | By: | /s/ SHELDON NELSON Sheldon Nelson,Chief Executive Officer | ||