<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________
CORDILLERA COMMUNICATIONS CORP.
(Exact name of Registrant as specified in its charter)
State of Delaware 84-1324155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1528 Wazee Street, Suite 200 80202
Denver, Colorado (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 405-0475
Indicate by check mark whether the Registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No _
--- ---
The number of shares outstanding of the Registrant's common stock as of
August 21, 2000 was:
Common stock - 3,502,750 shares
<PAGE> 2
CORDILLERA COMMUNICATIONS CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<S> <C>
Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 (Unaudited).................... 2
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended
June 30, 2000 and 1999 (Unaudited).......................................................................... 3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999 (Unaudited).... 4
Notes to Condensed Financial Statements (Unaudited)............................................................ 6
Centennial Cayman Corp. and Subsidiaries Financial Statements and notes to the financial statements for the
Six Months Ended June 30, 2000 (Unaudited).................................................................. 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................. 20
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................ 27
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS...................................................................................... 29
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.............................................................. 29
ITEM 5 - OTHER INFORMATION...................................................................................... 30
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K....................................................................... 30
</TABLE>
<PAGE> 3
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,280,059 $ 3,917,572
Restricted cash -- 6,136,722
Other current assets 119,048 163,845
Net current assets of discontinued operations 1,666,141 1,738,027
------------ ------------
Total current assets 8,065,248 11,956,166
PROPERTY AND EQUIPMENT, net 45,466 71,512
OTHER NONCURRENT ASSETS, net 1,681,912 1,842,427
NET NONCURRENT ASSETS OF DISCONTINUED OPERATIONS 24,377,495 23,923,865
------------ ------------
Total assets $ 34,170,121 $ 37,793,970
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 469,773 $ 526,014
Accrued liabilities 272,217 353,845
Current liabilities related to assets held for sale -- 32,212
------------ ------------
Total current liabilities 741,990 912,071
LONG-TERM LIABILITIES 160,000 160,000
CONVERTIBLE NOTES (Note 3) 11,882,388 11,795,049
EXCHANGE NOTES (Note 3) 23,399,798 21,372,449
------------ ------------
Total liabilities 36,184,176 34,239,569
COMMITMENTS AND CONTINGENCIES
MANDATORILY REDEEMABLE, CONVERTIBLE
PREFERRED STOCK:
Series A, $.01 par value, 352 authorized, issued and outstanding 8,792,086 8,788,138
Series B, $.01 par value, 5,735,251 authorized,
issued and outstanding 20,741,987 20,675,033
Series C, $.01 par value, 11,000,000 authorized, 10,431,409
and 9,834,766 issued and outstanding, respectively 15,125,543 14,260,411
------------ ------------
44,659,616 43,723,582
------------ ------------
STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value, 40,000,000 authorized,
3,502,750 issued and outstanding 35,028 35,028
Additional paid-in capital 4,913,917 5,864,542
Accumulated deficit (51,027,050) (45,561,490)
Accumulated other comprehensive income (595,566) (507,261)
------------ ------------
Total stockholders' deficit (46,673,671) (40,169,181)
------------ ------------
Total liabilities and stockholders' deficit $ 34,170,121 $ 37,793,970
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
2
<PAGE> 4
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Radio service revenue $ -- $ -- $ -- $ --
Equipment sales -- -- -- --
Other Revenue -- -- -- --
----------- ----------- ----------- -----------
-- -- -- --
----------- ----------- ----------- -----------
COSTS AND EXPENSES RELATED TO REVENUE:
Network and site expense -- -- -- --
Cost of equipment sold -- -- -- --
Maintenance and other -- -- -- --
----------- ----------- ----------- -----------
-- -- -- --
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 120,063 50,014 235,784 126,104
Depreciation and amortization 11,440 50,710 23,082 146,880
----------- ----------- ----------- -----------
131,503 100,724 258,866 272,984
----------- ----------- ----------- -----------
OPERATING LOSS (131,503) (100,724) (258,866) (272,984)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,361,276) (1,343,776) (2,809,940) (2,691,800)
Interest income 105,650 158,184 224,554 325,568
Other -- (85,493) (68,279) (85,493)
----------- ----------- ----------- -----------
(1,255,626) (1,271,085) (2,653,665) (2,451,725)
----------- ----------- ----------- -----------
NET LOSS FROM CONTINUING OPERATIONS (1,387,129) (1,371,809) (2,912,531) (2,724,709)
DISCONTINUED OPERATION
Results of operations of discontinued
Operations (1,690,018) (1,182,562) (2,553,029) (1,984,974)
----------- ----------- ----------- -----------
NET LOSS (3,077,147) (2,554,371) (5,465,560) (4,709,683)
DIVIDENDS ON AND ACCRETION OF MANDATORILY REDEEMABLE
PREFERRED SHARES TO REDEMPTION VALUE (485,608) (435,374) (953,625) (850,978)
----------- ----------- ----------- -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(3,562,755) $(2,989,745) (6,419,185) (5,560,661)
=========== =========== =========== ===========
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments 161,025 (50,250) (88,305) (91,314)
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS $(3,401,730) $(3,039,995) $(6,507,490) $(5,651,975)
=========== =========== =========== ===========
Basic and diluted net loss per share:
Continuing operations $ (0.53) $ (0.51) $ (0.10) $ (0.02)
=========== =========== =========== ===========
Results of discontinuing operations $ (0.48) $ (0.34) $ (0.73) $ (0.57)
=========== =========== =========== ===========
Net loss $ (1.02) $ (0.85) $ (1.83) $ (1.59)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
3,502,750 3,502,750 3,502,750 3,502,750
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
3
<PAGE> 5
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,465,560) $(4,709,683)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 1,578,011 1,456,090
Loss on disposal of property and equipment 107,008 34,262
Loss on impairment of asset 395,576 --
Allowance for doubtful accounts 88,766 70,080
Accretion of interest on exchange and
convertible notes 2,258,644 2,521,129
Changes in operating assets and liabilities-
Decrease in accounts receivable 106,566 113,310
(Increase)/decrease in inventory (3,041) 465,951
Decrease in other assets 252,157 110,669
Decrease in accounts payable (214,075) (591,815)
Decrease in accrued liabilities (242,449) (347,636)
----------- -----------
Net cash used in operating activities (1,138,397) (877,643)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (573,207) (982,518)
Acquisition of operating and non-operating,
entities and spectrum, net of cash acquired (2,000,000) (758,306)
Payment on contingent payable to seller -- (400,000)
Cash received on the sale of El Salvador assets 100,000 --
Decrease in restricted cash 6,124,651 1,298,838
Change in assets held for sale -- 137,966
----------- -----------
Net cash provided by/(used in) investing activities 3,651,444 (704,020)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases payable -- (24,607)
----------- -----------
Net cash (used in) financing activities -- (24,607)
----------- -----------
CASH EFFECT OF EXCHANGE RATE CHANGES (88,305) (91,314)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,424,742 (1,697,584)
CASH AND CASH EQUIVALENTS, beginning of period 4,012,507 5,245,119
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 6,437,249 $ 3,547,535
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
4
<PAGE> 6
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------
2000 1999
---------- -----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 6,052 $ 20,896
Supplemental schedule of noncash investing and financing
activities:
Accretion of preferred stock to redemption value 70,902 70,902
Dividends payable on preferred stock 307,553 273,205
Payment of dividends on Series C preferred stock
in additional shares 865,132 764,531
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
5
<PAGE> 7
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
NOTE 1. ORGANIZATION AND OWNERSHIP
Cordillera Communications Corp. and subsidiaries (formerly, Centennial
Communications Corp., collectively, the "Company") is a Delaware corporation
engaged in the acquisition, development and operation of specialized mobile
radio ("SMR") and other low-cost, wireless communications networks, the sale of
communications services using those networks, and the sale and servicing of
related accessories and equipment in certain countries of Latin America. Prior
to August 1997, the Company also had operations in the United States (the "U.S.
Operations"), at which time the Company made the decision to sell the U.S.
Operations. This sale was completed during 1999. The Company has acquired SMR
licenses through direct applications to governments and through acquisitions of
interests in other entities (all of which are wholly owned) that have been
granted or have applied for SMR licenses. On August 11, 2000, the Company
entered into a Stock Purchase Agreement to sell the capital stock of two of the
Company's wholly-owned subsidiaries, Centennial Cayman Corp. and SMR Direct
Cayman Corp., for approximately $66.5 million. The sale of these two
subsidiaries will constitute a sale of substantially all of the Company's
operating assets (see Note 2) and will result in the termination of the
Company's operations as an operator of SMR radio spectrum and related
businesses. As such, the Company has accounted for such operations as
discontinued operations, with a measurement date of August 11, 2000.
NOTE 2. BASIS OF PRESENTATION
The accompanying interim financial statements include the accounts of Company,
all of which are wholly owned. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The condensed financial statements have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In management's
opinion, all adjustments (which are of a normal recurring nature) have been
recorded which are necessary to present fairly the financial position of the
Company as of June 30, 2000 and the results of its operations for the three and
six months ended June 30, 1999 and 2000.
The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
Operating results for the interim periods are not necessarily indicative of
results for an entire year.
Recent Developments
Nextel Agreement
On August 11, 2000, the Company entered into a Stock Purchase Agreement with
Nextel International (Delaware) Ltd. ("Nextel"), a wholly-owned subsidiary of
Nextel International, Inc. ("Nextel International"). Under the terms of the
Stock Purchase Agreement, the Company anticipates that Nextel will purchase all
of the issued and outstanding capital stock of two of the Company's wholly-owned
subsidiaries, Centennial Cayman Corp. and SMR Direct Cayman Corp., for
approximately $66.5 million. The sale of these two subsidiaries will constitute
a sale of substantially all of the Company's operating assets and will result in
the termination of the Company's operations as an operator of SMR radio spectrum
and related businesses. As such, the Company has accounted for such operations
as discontinued operations, with a measurement date of August 11, 2000. The
Company expects to record a gain as a result of this transaction. Closing is
expected to occur on August 31, 2000.
The payment from Nextel will consist of (a) $36.5 million, which will reflect
the purchase price for the business and assets of several Peruvian companies
("Peru Price"), and (b) $30 million, plus interest, which
6
<PAGE> 8
will reflect the purchase price for the business and assets of several Chilean
companies ("Chile Price"). Nextel will pay the Peru Price in two payments as
follows: (i) $20 million due at the closing of the Stock Purchase Agreement, and
(ii) a note payable for $16.5 million bearing interest at 8% per year due 12
months from the closing of the Stock Purchase Agreement. Nextel will pay the
Chile Price as follows: (i) $6 million due at the closing of the Stock Purchase
Agreement, and (ii) a note payable for $24 million bearing interest at 8% per
year due no later than 24 months after the closing of the Stock Purchase
Agreement, upon obtaining necessary regulatory relief from the Chilean
government or the full deployment of an iDEN system by Nextel in Chile within
such 24 month period. In the event the necessary regulatory relief is not
obtained within such 24 month period, the note payable portion of the Chilean
Price may be reduced to as low as $10 million plus interest.
The Company will indemnify Nextel against (a) damages incurred in connection
with, arising out of or resulting from (i) any inaccuracy or breach of any
representation or warranty made by the Company pursuant to the Stock Purchase
Agreement, (ii) any breach, non-compliance or nonfulfillment by the Company of
any material covenant, agreement or undertaking to be complied with or
performed by the Company contained in or made pursuant to the Stock Purchase
Agreement, and (iii) certain potential tax and regulatory contingencies
regarding the past operation of the assets. Nextel, however, is not entitled to
make claims for money damages arising out of these obligations unless the
amount (individually or in the aggregate) exceeds $100,000. In addition,
Company is not required to indemnify Nextel for any amounts that exceed
$7,500,000 in the aggregate. In addition, the Company will indemnify Nextel for
one-half of the aggregate severance costs incurred and paid by Nextel after the
closing date regarding the termination of certain employees of the Peruvian
Companies and the Chilean Companies, but only to the extent that the Peruvian
employee severance costs do not exceed $500,000 in the aggregate and to the
extent the Chilean employee severance costs do not exceed $500,000 in the
aggregate.
Nextel will indemnify the Company against damages incurred in connection with,
arising out of or resulting from (a) any inaccuracy or breach of any
representation or warranty made by Nextel under the Stock Purchase Agreement
and (b) any breach, non-compliance or nonfulfillment by Nextel of any material
covenant, agreement or undertaking to be complied with or performed by Nextel
under the Stock Purchase Agreement.
Nextel International has entered into an agreement with the Company
guaranteeing payment obligations and indemnification obligations of Nextel
under the Stock Purchase Agreement.
Merrill Lynch Agreements
In conjunction with the Nextel agreement, the Board has authorized agreements
with Merrill Lynch Global Allocation Fund, Inc. to be closed contemporaneously
with the closing of the Stock Purchase Agreement, through which the Company will
repurchase all of its issued and outstanding debt represented by the Company's
14% Exchange Notes in the aggregate amount of $40,000,000 due 2005 (carrying
amount of $23.4 million at June 30, 2000) and the Company's 9% Convertible Notes
in the aggregate amount of $10,000,000 due 2006 (carrying amount of $11.9
million at June 30, 2000). In exchange for these existing notes, the Company
will pay Merrill Lynch $37,350,000 and offer Merrill Lynch a 50% share of the
net proceeds received from the disposal any and all assets held by the Company
following the closing of the Stock Purchase Agreement. The Company anticipates
that the cash portion of the payment will be approximately $31.0 million and
that the remainder will be funded by new notes to be issued by the Company in
the principal amount of approximately $6.350 million.
Each new note will (i) be due not more than 12 months plus 5 days from the
closing of the Stock Purchase Agreement; (ii) bear an interest rate of 8%; (iii)
be senior to any and all obligations of the Company to its shareholders,
including any rights of the Company's shareholders to the cash proceeds of the
notes payable arising out of the Stock Purchase Agreement; and (iv) be secured
by the obligations of Nextel to the Company and by the assets of the Company.
Upon the Company's repurchase of the Exchange Notes, the Company's public
reporting requirements will terminate.
7
<PAGE> 9
Other Related Activities
After the closing contemplated by the Stock Purchase Agreement, the Board
proposes to take such actions as it deems appropriate to wind up the Company's
operations. Such actions may include possibly using a liquidating trust and/or
dissolving the Company by filing a Certificate of Dissolution with the Delaware
Secretary of State in accordance with the governing documents of Cordillera and
pursuant to Section 275 of the Delaware General Corporation Law. If a decision
is made to liquidate the Company, the Company will begin the process of
disposing of its properties, discharging its liabilities and distributing its
remaining assets to the shareholders. Until a determination is made, the Company
will maintain its corporate existence, and its operations will consist
substantially of managing its relationship with Nextel, holding notes receivable
from Nextel, and completing the disposition of other assets.
Reclassifications
Certain amounts in prior periods have been reclassified to conform with the
current presentation.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". Among other
provisions, it requires that entities recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. Gains and losses resulting from changes in the fair
values of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The effective date of
this standard was delayed (via the issuance of SFAS No. 137 in June 1999). The
effective date for SFAS No. 133 is now for all fiscal quarters of all fiscal
years beginning after June 15, 2000, though earlier adoption is encouraged and
retroactive application is prohibited. This means that the standard must be
adopted by the Company no later than January 1, 2001. To date, the Company has
not entered into any derivative financial instruments or hedging activities.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, Revenue Recognition ("SAB 101"). SAB 101 provides
guidance on the recognition, presentation, and disclosures related to revenue in
the financial statements. The Company is required to adopt this standard in the
Company's four quarter of 2000, and the Company's management is still evaluating
the impact of such adoption.
NOTE 3. LONG-TERM DEBT
Long term debt consisted of the following at June 30, 2000 and December 31,
1999:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------------------------
<S> <C> <C>
14% Exchange Notes due 2005 (the "Exchange Notes"), net of
unamortized discount of $16,600,202 and $18,627,551,
interest payable semi-annually in arrears commencing July 1, 2003 23,399,798 21,372,449
9% Convertible Notes due 2005 (the "Convertible Notes"), interest
payable semi-annually commencing July 1, 2000 11,882,388 11,795,049
------------ ------------
35,282,186 33,167,498
============ ============
</TABLE>
8
<PAGE> 10
Certain of the Company's long-term debt contain restrictive covenants regarding
the Company's ability to pay dividends, incur additional debt and issue
additional equity securities, as well as other restrictions. As of June 30,
2000 the Company was in compliance with such covenants.
NOTE 4. COMMITMENTS AND CONTINGENCIES
Recovery of Investments
Since its inception, the Company's efforts have been primarily directed towards
raising capital and acquiring, developing and operating SMR and other low-cost,
wireless communications networks. Further, the Company has made significant
investments in pre-operating entities in various Latin American countries whose
primary assets were SMR licenses. The ability of the Company to recover its
investment in property, equipment and spectrum is contingent upon the closing of
the transaction with Nextel.
Recoverability of Licenses
The terms of the Company's SMR license agreements contain provisions whereby
the Company must achieve certain levels of subscriber load and network build
out. If such commitments are not met, the Company could be subject to the
revocation of the applicable licenses.
Compliance with the terms of SMR licenses and certain regulatory requirements,
such as construction deadlines and minimum subscriber requirements, can be
difficult to meet. In addition, there can be no guarantee that in the future
all regulatory requirements will be met or that the Company will not lose any
applicable licenses as a result of its failure to meet such requirements.
The Company is not in compliance with certain terms of the concession agreements
in Peru including homologation of equipment (certifying the equipment before
entering Peru), site to site transmission of signal (currently allowed only site
to handset), unauthorized transfer and use of channels between the Peruvian
companies and unauthorized use of certain frequencies granted. The Company has
applied to correct these non-compliance issues and is waiting for approval from
the Peruvian Ministry of Transportation, Communications, Housing and
Construction (the "Ministry"). The Company believes that the applications will
be approved and will result only in minimal fines, if any; however, there can be
no assurance of such outcome. The Company is currently not in compliance with
certain minimum subscriber loading requirements with respect to its licenses in
the provinces outside Lima/Callao and the Company's paging license. Failure to
comply with such requirements may subject the licenses relating to such channels
to punitive measures. The Company filed an amendment for each of the Company's
two Peruvian subsidiaries relating to these minimum subscriber loading
requirements with the Ministry. The Company, based on its own discussions with
the Peruvian authorities and based on advice from the Company's outside legal
advisors in such matters, believes that the outcome of the items raised by the
regulators will not result in an impairment of the carrying amount of the
Peruvian licenses.
Litigation
In the normal course of business, the Company is subject to, and may become a
party to, litigation. In management's opinion, none of the matters currently in
litigation will have a material impact on the Company's financial position or
results of operations.
9
<PAGE> 11
NOTE 5. SEGMENT INFORMATION AND GEOGRAPHIC DATA
In accordance with the provisions of SFAS No. 131, the Company has determined
that its reportable segments are strategic geographic units that develop and
operate SMR networks as well as the corporate unit which oversees all
operations. The Company is managed by country as each country may require a
slightly different business strategy. The accounting policies of the segments
are the same as those for the Company. The segments are evaluated based upon
gains in subscribers and based upon EBITDA. EBITDA represents operating loss
before depreciation and amortization and is not a measurement under U.S.
generally accepted accounting principles and may not be similar to EBITDA
measures of other companies.
The following information presents certain summarized balance sheet and
statement of operations data by geographic region as of and for the six months
ended June 30, 2000 and 1999 (in 000's).
<TABLE>
<CAPTION>
Corporate Peru Chile El Salvador Other (1) Elimination Total
---------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 2000
Revenues $ -- $ 1,392 $ 996 $ 23 $ -- $ -- $ 2,411
EBITDA (1,207) 466 31 (621) (2) -- (1,333)
Depreciation and
amortization 23 763 755 36 1 -- 1,578
Operating income
(loss) (1,230) (296) (723) (656) (3) -- (2,908)
Spectrum, net -- 7,369 9,129 568 47 17,113
Total assets $ 46,702 $ 12,535 $ 14,198 $ 668 $ 47 $ (39,030) $ 35,120
June 30, 1999
Revenues $ -- $ 2,030 $ 500 $ 224 $ 947 $ -- $ 3,701
EBITDA (1,167) 399 (283) (74) 214 -- (911)
Depreciation and
amortization 147 607 170 107 425 -- 1,456
Operating income
(loss) (1,315) (208) (453) (182) (209) -- (2,367)
Spectrum, net -- 7,473 3,851 1,239 1,097 -- 13,660
Total assets $ 51,610 $ 16,199 $ 9,837 $ 1,316 $ 4,281 $ (39,621) $ 43,622
</TABLE>
10
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For the three months ended June 30, 2000 and 1999 (in 000's):
<TABLE>
<CAPTION>
Corporate Peru Chile El Salvador Other(1) Elimination Total
---------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 2000
Revenues $ -- $ 663 $ 497 $ -- $ -- $ -- $ 1,160
EBITDA (516) 212 33 (512) -- -- (783)
Depreciation and
amortization 11 523 367 18 -- -- 920
Operating income
(loss) (528) (311) (333) (529) -- -- (1,701)
Spectrum, net -- 7,369 9,129 568 47 17,113
Total assets $ 46,702 $ 12,535 $ 14,198 $ 668 $ 47 $ (39,030) $ 35,120
June 30, 1999
Revenues $ -- $ 1,108 $ 254 $ 58 $ 405 $ -- $ 1,825
EBITDA (619) 251 (161) (4) 17 -- (516)
Depreciation and
amortization 50 395 104 107 231 -- 887
Operating income (669) (144) (265) (112) (213) -- (1,403)
(loss)
Spectrum, net -- 7,473 3,851 1,239 1,097 -- 13,660
Total assets $ 51,610 $ 16,199 $ 9,837 $ 1,316 $ 4,281 $ (39,621) $ 43,622
</TABLE>
----------
(1) Includes operations in Ecuador and other.
The ability of the Company's subsidiaries to pay dividends or make loans or
advances to the Parent is subject to regulation within their respective
jurisdictions of organization and operations. While the existing laws and
regulations of these jurisdictions generally do not prohibit the Company's
subsidiaries from paying dividends or making loans or advances to the Parent,
there can be no guarantee that such laws will continue to permit such payments.
11
<PAGE> 13
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 157,190 $ 94,935
Restricted cash 418,165 406,094
Accounts receivable - trade, net of allowance for doubtful
accounts of $777,000 and $827,000, respectively 652,130 890,668
Inventory 533,112 695,478
VAT receivable 469,507 713,221
Prepaid licenses and other current assets 386,768 417,859
-------------- --------------
Total current assets 2,616,872 3,218,255
PROPERTY AND EQUIPMENT, net 7,259,091 8,884,204
SMR LICENSES, net of accumulated amortization
of $1,266,663 and $1,456,000, respectively 17,113,216 14,888,617
OTHER NONCURRENT ASSETS, net 5,189 151,044
-------------- --------------
Total assets $ 26,994,368 $ 27,142,120
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 477,639 $ 739,735
Accounts payable - affiliates 29,456,539 26,433,460
Accrued liabilities 473,092 740,493
-------------- --------------
Total liabilities 30,407,270 27,913,688
STOCKHOLDER'S EQUITY:
Common stock, $1 par value, 50,000 authorized,
2 issued and outstanding, respectively 2 2
Additional paid-in capital 20,858,377 20,858,377
Accumulated deficit (23,675,715) (21,122,686)
Accumulated other comprehensive income (595,566) (507,261)
-------------- --------------
Total stockholder's equity (3,412,902) (771,568)
-------------- --------------
Total liabilities and stockholder's equity $ 26,994,368 $ 27,142,120
============== ==============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
12
<PAGE> 14
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Radio service revenue 962,898 1,367,034 2,113,180 2,848,966
Equipment sales 30,021 448,744 104,414 812,284
Other 167,281 9,374 193,543 40,034
----------- ----------- ----------- -----------
1,160,200 1,825,152 2,411,137 3,701,284
----------- ----------- ----------- -----------
COSTS AND EXPENSES RELATED TO REVENUE:
Network and site expense 63,068 44,169 150,987 97,762
Cost of equipment sold 15,696 371,252 78,742 831,635
Maintenance and other 83,940 111,767 161,092 207,133
----------- ----------- ----------- -----------
162,704 527,188 390,821 1,136,530
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 1,266,700 1,763,603 2,711,239 3,349,429
Depreciation and amortization 908,743 836,817 1,554,929 1,309,210
Loss on impairment of assets 395,576 -- 395,576 --
----------- ----------- ----------- -----------
2,571,019 2,600,420 4,661,744 4,658,639
----------- ----------- ----------- -----------
OPERATING LOSS (1,573,523) (1,302,456) (2,641,428) (2,093,885)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest Expense (14,420) (10,578) (22,369) (39,123)
Interest Income 5,541 45,340 12,504 45,340
Other (107,616) 85,132 98,264 102,694
----------- ----------- ----------- -----------
(116,495) 119,894 88,399 108,911
----------- ----------- ----------- -----------
NET LOSS (1,690,018) (1,182,562) (2,553,029) (1,984,974)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments 161,025 88,283 (88,305) 91,314
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS (1,528,993) (1,094,279) (2,641,334) (1,893,660)
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
13
<PAGE> 15
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,553,029) $ (1,984,974)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 1,554,929 1,309,210
Loss on disposal of property and equipment 107,008 --
Loss on impairment of asset 395,576 --
Allowance for doubtful accounts 88,766 70,080
Changes in operating assets and liabilities-
(Increase)/decrease in accounts receivable 106,566 113,310
(Increase)/decrease in inventory (43,484) 34,018
(Increase)/decrease in other assets 231,243 176,749
Increase/(decrease) in accounts payable (157,834) (7,162)
Increase/(decrease) in accrued liabilities (111,018) (150,745)
------------- -------------
Net cash used in operating activities (381,277) (439,514)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (579,171) (1,194,310)
Acquisition of operating and non-operating,
entities and spectrum, net of cash acquired (2,000,000) (758,306)
Cash received on the sale of El Salvador assets 100,000 --
Payment of contingent payable to seller -- (400,000)
(Increase) decrease in restricted cash (12,071) (1,236,045)
------------- -------------
Net cash used in investing activities (2,491,242) (3,588,661)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates 3,023,079 3,980,111
------------- -------------
Net cash provided by financing activities 3,023,079 3,980,111
------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (88,305) (91,314)
------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 62,255 (139,378)
CASH AND CASH EQUIVALENTS, beginning of period 94,935 559,789
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 157,190 $ 420,411
============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
14
<PAGE> 16
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements include the accounts
of Centennial Cayman Corp. and its subsidiaries (collectively, the "Company"),
all of which are wholly owned. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The Company was incorporated in June 1996 as a wholly owned subsidiary of
Cordillera Communications Corp.(formerly Centennial Communications Corp., the
"Parent Company"). Centennial Cayman Corp. and subsidiaries (collectively, the
"Company") is a Cayman Islands corporation engaged in the acquisition,
development and operation of specialized mobile radio ("SMR") and other
low-cost, wireless communications networks, the sale of communications services
using those networks, and the sale and servicing of related accessory equipment
in certain countries of Latin America. The Company has acquired SMR licenses
through direct applications to governments, contributions from the Parent
Company and through acquisitions of interests in other entities (all of which
are wholly owned at December 31, 1999 and June 31, 2000) that have been granted
or have applied for SMR licenses.
To date, the Company has been primarily dependent on funds provided by the
Parent Company, however, during the three and six months ended June 30, 2000,
certain of the subsidiaries have been repaying back receivables owed. The
Company has received equity contributions as well as extensions of credit from
the Parent Company to fund its activities and anticipates that the Parent
Company will make additional equity contributions to the Company.
On August 11, 2000, the Parent Company entered into a Stock Purchase Agreement
to sell the capital stock of the Company, for approximately $66.5 million.
The condensed consolidated financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In management's opinion, all adjustments (which are of a normal
recurring nature) have been recorded which are necessary to present fairly the
financial position of the Company as of June 30, 2000 and the results of its
operations for the three and six months ended June 3, 2000 and 1999.
The condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999. Operating results for the interim periods are not necessarily indicative
of results for an entire year.
The Company's Parent incurs certain direct and indirect expenses on behalf of
the Company including management, financing and other corporate overhead items.
Items directly identifiable to the Company's operations are charged to the
Company by the Parent. The Parent also allocates a portion of its corporate
overhead based on the estimated level of activity performed by the Parent on
behalf of the Company. Such allocations of indirect expenses totaled
approximately $396,000 and $566,000 for the three months ended June 30, 2000
and 1999, respectively and approximately $961,000 and $1,036,000 for the six
months ended June 30, 2000 and 1999, respectively, and management believes that
such amounts reasonably represent the costs that would have been incurred on a
stand alone basis. Management believes that the method used to allocate a
portion of the Parent Company's corporate overhead is reasonable.
15
<PAGE> 17
SMR Licenses
Direct and certain indirect costs of obtaining SMR licenses, such as
application, legal and consulting fees, as well as the fair market value of
licenses obtained in certain acquisitions, are capitalized and amortized using
the straight-line method over the period of the related license (generally 10
to 40 years) upon commencement of service (See Note 2). SMR licenses in the
countries in which the Company operates are issued conditionally for various
periods of time. The SMR licenses are generally renewable providing the
licensee has complied with applicable rules and policies. In most instances,
the Company believes it has complied and intends to comply with these standards
and is amortizing the related costs using the straight line method over their
estimated useful life, generally 40 years, which includes the renewal period.
In some cases, the Company currently is not in compliance with applicable
requirements and, where appropriate, has filed requests for extensions with the
appropriate government agency. The Company expects that such extension requests
will be granted and the risk of having these or any other licenses revoked is
remote.
The Company amortizes the SMR licenses over the expected life of the license,
which may include extension periods if extensions are considered probable.
Amortization expense was $187,000 and $329,000 for the three months ended June
30, 2000 and 1999, respectively and $393,000 and $407,000 for the six months
ended June 30, 2000 and 1999, respectively.
Reclassifications
Certain amounts in prior periods have been reclassified to conform with the
current presentation.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". Among other
provisions, it requires that entities recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. Gains and losses resulting from changes in the fair
values of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The effective date of
this standard was delayed (via the issuance of SFAS No. 137 in June 1999). The
effective date for SFAS No. 133 is now for all fiscal quarters of all fiscal
years beginning after June 15, 2000, though earlier adoption is encouraged and
retroactive application is prohibited. This means that the standard must be
adopted by the Company no later than January 1, 2001. To date, the Company has
not entered into any derivative financial instruments or hedging activities.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, Revenue Recognition ("SAB 101"). SAB 101 provides
guidance on the recognition, presentation, and disclosures related to revenue
in the financial statements. The Company is required to adopt this standard in
the fourth quarter of 2000, and the Company's management is still evaluating
the impact of such adoption.
NOTE 2. PROPERTY AND EQUIPMENT
The composition of property and equipment follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------- --------------
<S> <C> <C>
Network infrastructure $ 6,369,800 $ 7,573,469
Radios 3,614,434 3,901,015
Computer equipment and software 523,256 675,483
Furniture and fixtures 308,771 480,031
Leasehold improvements 190,749 186,922
-------------- --------------
11,007,010 12,816,920
Accumulated depreciation (3,747,919) (3,932,716)
-------------- --------------
Property and equipment, net $ 7,259,091 $ 8,884,204
============== ==============
</TABLE>
16
<PAGE> 18
The Company depreciates infrastructure over 10 years, radios over 5 and 3
years, computer equipment and software over 3 years and leasehold improvements
over the life of the lease.
Depreciation expense was $721,418 and $654,536 for the three months ended June
30, 2000 and 1999, respectively and $1,161,489 and $1,049,461 for the six
months ended June 30, 2000 and 1999, respectively.
NOTE 3. COMMITMENTS AND CONTINGENCIES
Recovery of Investments
Since its inception, the Company's efforts have been primarily directed towards
raising capital and acquiring, developing and operating SMR and other low-cost,
wireless communications networks. Further, the Company has made significant
investments in pre-operating entities in various Latin American countries whose
primary assets were SMR licenses. The ability of the Company to recover its
investment in property, equipment and spectrum is contingent upon the closing of
the transaction with Nextel.
Recoverability of Licenses
The terms of the Company's SMR license agreements contain provisions whereby
the Company must achieve certain levels of subscriber load and network build
out. If such commitments are not met, the Company could be subject to the
revocation of the applicable licenses.
Compliance with the terms of SMR licenses and certain regulatory requirements,
such as construction deadlines and minimum subscriber requirements, can be
difficult to meet. In addition, there can be no guarantee that in the future
all regulatory requirements will be met or that the Company will not lose any
applicable licenses as a result of its failure to meet such requirements.
The Company is not in compliance with certain terms of the concession agreements
in Peru including homologation of equipment (certifying the equipment before
entering Peru), site to site transmission of signal (currently allowed only site
to handset), unauthorized transfer and use of channels between the Peruvian
companies and unauthorized use of certain frequencies granted. The Company has
applied to correct these non-compliance issues and is waiting for approval from
the Peruvian Ministry of Transportation, Communications, Housing and
Construction (the "Ministry"). The Company believes that the applications will
be approved and will result only in minimal fines, if any; however, there can be
no assurance of such outcome. The Company is currently not in compliance with
certain minimum subscriber loading requirements with respect to its licenses in
the provinces outside Lima/Callao and the Company's paging license. Failure to
comply with such requirements may subject the licenses relating to such channels
to punitive measures. The Company filed an amendment for each of the Company's
two Peruvian subsidiaries relating to these minimum subscriber loading
requirements with the Ministry. The Company, based on its own discussions with
the Peruvian authorities and based on advice from the Company's outside legal
advisors in such matters, believes that the outcome of the items raised by the
regulators will not result in an impairment of the carrying amount of the
Peruvian licenses.
17
<PAGE> 19
Litigation
In the normal course of business, the Company is subject to, and may become a
party to, litigation. In management's opinion, none of the matters currently in
litigation will have a material impact on the Company's financial position or
results of operations.
NOTE 4. SEGMENT INFORMATION AND GEOGRAPHIC DATA
In accordance with the provisions of SFAS No. 131, the Company has determined
that its reportable segments are strategic geographic units that develop and
operate SMR networks as well as the corporate unit which oversees all
operations. The Company is managed by country as each country may require a
slightly different business strategy. The accounting policies of the segments
are the same as those for the Company on a consolidated basis. The segments are
evaluated based upon gains in subscribers and based upon EBITDA. EBITDA
represents operating loss before depreciation and amortization and is not a
measurement under U.S. generally accepted accounting principles and may not be
similar to EBITDA measures of other companies.
The following information presents certain summarized balance sheet and
statement of operations data by geographic region as of June 30, 2000 and 1999
(in 000's).
<TABLE>
<CAPTION>
Peru Chile El Salvador Other(1) Elimination Total
---------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
June 30, 2000
Revenues $ 1,392 $ 996 $ 23 $ -- $ -- $ 2,411
EBITDA 466 31 (621) (963) -- (1,087)
Depreciation and
amortization 763 755 36 1 -- 1,555
Operating income
(loss) (296) (724) (656) (965) -- (2,641)
Spectrum, net 7,369 9,129 568 47 -- 17,113
Total assets $ 12,535 $ 14,198 $ 668 $ 47 $ (454) $ 26,994
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
Peru Chile El Salvador Other(1) Elimination Total
---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1999
Revenues $ 2,030 $ 500 $ 224 $ 947 $ -- $ 3,701
EBITDA 399 (283) (74) (827) -- (785)
Depreciation and
amortization 607 170 107 425 -- 1,309
Operating income
(loss) (208) (453) (182) (1,251) -- (2,094)
Spectrum, net 7,473 3,851 1,239 1,097 -- 13,660
Total assets $ 16,199 $ 9,837 $ 1,316 $ 3,344 $ (2,348) $ 28,348
For the three months ended June 30, 2000 and 1999 (in 000's):
Peru Chile El Salvador Other(1) Elimination Total
---------- ---------- ----------- ---------- ----------- ----------
June 30, 2000
Revenues $ 663 $ 497 $ -- $ -- $ -- $ 1,160
EBITDA 212 33 (512) (397) -- (664)
Depreciation and
amortization 523 367 18 -- -- 908
Operating income
(loss) (311) (333) (529) (401) -- (1,574)
Spectrum, net 7,369 9,129 568 47 -- 17,113
Total assets $ 12,535 $ 14,198 $ 668 $ 47 $ (454) $ 26,994
Peru Chile El Salvador Other(1) Elimination Total
---------- ---------- ----------- ---------- ----------- ----------
June 30, 1999
Revenues $ 1,108 $ 254 $ 58 $ 405 $ -- $ 1,825
EBITDA 251 (161) (4) (552) -- (466)
Depreciation and
amortization 395 104 107 231 -- 837
Operating income
(loss) (144) (265) (112) (782) -- (1,303)
Spectrum, net 7,473 3,851 1,239 1,097 -- 13,660
Total assets $ 16,199 $ 9,837 $ 1,316 $ 3,344 $ (2,348) $ 28,348
</TABLE>
----------
(1) Includes operations in Ecuador and other.
The Company's cash flow and its ability to make distributions to the Parent is
significantly dependent upon the cash flow of its subsidiaries. The Company's
ability to recover its investment in these subsidiaries, to fund operations in
other countries and to make distributions to the Parent, among other things,
depends to a significant degree on its ability to transfer funds from such
subsidiaries to the Parent.
The ability of the Company's subsidiaries to pay dividends or make loans or
advances to the Parent Company is subject to regulation within their respective
jurisdictions of organization and operation. While the existing laws and
regulations of these jurisdictions generally do not prohibit the Company's
subsidiaries from paying dividends or making loans or advances to the Parent
Company, there can be no assurance that such laws will continue to permit or
will not restrict such payments to be made.
Further, the Company is exposed to credit risk related to receivables
denominated in non-United States dollar currencies in these foreign countries.
19
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes thereto appearing
elsewhere in this report. During 1999, the Company completed the sale of its
U.S. Operations and the reader should factor these divestitures into its
reading of the following discussion and analysis.
On August 11, 2000, the Company entered into a Stock Purchase Agreement with
Nextel International (Delaware) Ltd. ("Nextel"), a wholly-owned subsidiary of
Nextel International, Inc. ("Nextel International"). Under the terms of the
Stock Purchase Agreement, the Company anticipates that Nextel will purchase all
of the issued and outstanding capital stock of two of the Company's wholly-owned
subsidiaries, Centennial Cayman Corp. and SMR Direct Cayman Corp., for
approximately $66.5 million. The sale of these two subsidiaries will constitute
a sale of substantially all of the Company's operating assets and will result in
the termination of the Company's operations as an operator of SMR radio spectrum
and related businesses. As such, the Company has accounted for such operations
as discontinued operations, with a measurement date of August 11, 2000. The
Company expects to record a gain as a result of this transaction. Closing is
expected to occur on August 31, 2000.
RISKS RELATING TO FORWARD-LOOKING STATEMENTS
Certain statements contained in this report including, without limitation,
statements containing the words "believes," "anticipates," "intends,"
"expects," "projects," and words of similar import constitute "forward-looking
statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following:
- general economic and business conditions, both nationally,
internationally and in the regions in which the Company operates
- demographic changes
- existing government regulations and changes in, or the failure to
comply with, government regulations
- the intensity of competitive activity and its resulting impact on
pricing strategies and product offerings
- the loss of any significant subscribers or suppliers
- changes in business strategy or development plans
- technological developments
- the ability to attract and retain qualified personnel
- the significant indebtedness of the Company
- the availability and terms of capital to fund the expansion of the
Company's business, including he construction and deployment of the
Company's networks
- and other factors referenced in this report
Given these uncertainties, prospective investors are cautioned not to place
undue reliance on such forward-looking statements. The Company disclaims any
obligations to update any such factors or publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
OVERVIEW
General
As of June 30, 2000 the Company offers analog SMR service in Peru and Chile. In
Peru, the Company commenced operations in May 1996, and in Chile the Company
acquired an operating company in January 1998 but did not launch a full scale
sales and marketing program until August 1998. As of December 31, 1999 the
Company also had operations in Ecuador and El Salvador. During 1999 the Company
decided to focus on its Chile and Peru operations, accordingly, on January 27,
2000 the Company completed the sale of 100% of the shares of its Ecuador
20
<PAGE> 22
subsidiary (see Note 4). On February 21, 2000 the Company entered into an
agreement for the sale of all of its El Salvador assets, except for its 800 MHz
licenses. As part of this transaction, the Company also entered into a
management agreement with the purchaser whereby the purchaser will manage the
800 MHz licenses for a period of two years (see Note 4).
The Company has developed its operations in Latin America through the
acquisition of non-operating entities, whose primary assets were spectrum, as
well as by acquiring operating entities and through the grant of channels from
government auctions.
As of June 30, 2000, the Company provided wireless communications services in
two Latin American countries. The Company currently holds the largest SMR
channel position in Peru, Chile and El Salvador. The Company's strategy was
focused on identifying and then deploying the most efficient utilization of its
leading channel positions in its principal markets. The Company has developed
its operations in Latin America through (i) acquisitions of license holding
companies whose primary assets were spectrum, (ii) acquisitions of operating
entities, and (iii) acquisition of channels at government auctions and bids.
21
<PAGE> 23
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(in thousands) (in thousands)
three months ended June 30, six months ended June 30,
1999 2000 Change 1999 2000 Change
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total Operating Revenues $ 1,825 $ 1,160 $ (665) $ 3,701 $ 2,411 $(1,290)
======= ======= ======= ======= ======= =======
Costs & Expenses Related to Revenues 528 163 (365) 1,137 391 (746)
======= ======= ======= ======= ======= =======
Selling, General & Admin. Expenses Latin America 727 198 (529) 2,313 1,643 (670)
Selling, General & Admin. Expenses Corporate 1,086 1,081 (5) 1,162 1,207 45
------- ------- ------- ------- ------- -------
TOTAL SELLING, GENERAL & ADMIN. EXPENSES 1,813 1,279 (534) 3,475 2,850 (625)
======= ======= ======= ======= ======= =======
Depreciation & Amortization Latin America 836 909 73 1,309 1,555 246
Depreciation & Amortization Corporate 51 11 (40) 147 23 (124)
------- ------- ------- ------- ------- -------
TOTAL DEPRECIATION & AMORTIZATION 887 920 33 1,456 1,578 122
======= ======= ======= ======= ======= =======
Interest Expense 1,359 1,375 16 2,731 2,832 101
Interest Income 208 111 (97) 371 237 (134)
======= ======= ======= ======= ======= =======
</TABLE>
Revenues
The Company derives its revenues primarily from (i) monthly network access
fees, which vary depending on the plan chosen by the subscriber, (ii) the sale
and rental of subscriber units to subscribers, (iii) ancillary service revenue,
consisting of fees charged for maintenance and loss and damage insurance, and
(iv) ancillary equipment revenue, consisting of the sale of base stations,
antennae, and other complementary products. The Company sets the pricing of the
different components of its service in accordance with its marketing plans in
each of the countries in which it operates, taking into account, among other
things, competitive factors (i.e. the Company subsidizes the cost of the radios
it sells). Monthly fixed network access fees as well as ancillary service
charges are billed in advance; revenues are recognized for the measurement of
income in the period in which service is delivered. Subscriber unit and
ancillary equipment sales are recognized at the time of sale.
Total revenue decreased approximately $665,000 and $1,290,000 during the three
and six months ended June 30, 2000, respectively, as compared to the amounts for
the corresponding periods in the prior year. The decrease is due to three
factors: (i) the sale of its Ecuador subsidiary which resulted in a decrease in
revenues of approximately $946,000, (ii) the entry into a management agreement
in El Salvador which resulted in a decrease in revenues of approximately
$72,000, and (iii) a decrease in equipment sales.
Costs and Expenses Related to Revenues
Costs and expenses related to revenues include both the cost of service and the
cost of equipment sold, and is exclusive of depreciation and amortization. The
cost of service represents the cost of maintaining the Company's analog SMR
networks, site lease costs, technical expenses and utilities.
22
<PAGE> 24
Total costs and expenses related to revenues decreased approximately $365,000
and $746,000 during the three and six months ended June 30, 2000, respectively,
as compared to the amounts for the corresponding periods in the prior year. The
decrease is mainly due to the decrease in equipment sales and the Company's
efforts to minimize expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of compensation
expenses but also include expenses such as marketing, rent, professional fees
and other general corporate expenses. At the operating companies, selling,
general and administrative expenses consist primarily of subscriber acquisition
costs, marketing and advertising, salaries and office expenses.
Total selling, general and administrative expenses decreased approximately
$534,000 and $625,000 during the three and six months ended June 30, 2000,
respectively, as compared to the amounts for the corresponding periods in the
prior year. Selling, general and administrative expenses decreased in Latin
America due to the sale of the Company's Ecuador subsidiary which resulted in a
decrease in selling, general and administrative expenses of $559,000, and the
Company's ongoing effort to reduce overhead expenses. This decrease was offset
by the increase at the corporate level due to the decision of the Company to
consolidate its Latin American operations in Denver and to close its Miami
office. This decision resulted in increased travel expenses from Denver and
severance costs associated with the closing of the Miami office.
Depreciation and Amortization
The Company depreciates its infrastructure equipment over 10 years and its
radios (subscriber units) over 3 to 5 years using the straight-line method.
Subscriber units represent the equipment which is used by a customer to access
the SMR service (i.e. portable and mobile radios). The Company retains title to
the subscriber units it rents and leases as part of the subscriber agreement.
Upon termination of service under a rental or lease contract, the subscriber is
required to return the unit to the Company and the unit is placed into service
with another subscriber. Spectrum is amortized over the term of the licenses
(including expected renewal periods), generally 40 years, using the
straight-line method.
Depreciation and amortization expense increased approximately $33,000 and
$122,000 during the three and six months ended June 30, 2000, respectively, as
compared to the amounts for the corresponding periods in the prior year. The
increase is due to an increase in depreciation and amortization in the Latin
American operations due to the acquisitions completed in January 2000. This
increase was offset by a decrease in Latin America due to the sale of the
Company's Ecuador subsidiary and El Salvador assets. In addition, depreciation
decreased at the corporate level due to the sale of property, plant and
equipment completed during 1999.
Interest Expense
Interest expense increased approximately $16,000 and $101,000 during the three
and six months ended June 30, 2000, respectively, as compared to the amounts for
the corresponding periods in the prior year. This increase is due to interest on
the Exchange and Convertible Notes. As of June 30, 2000, the Company had $23.4
million carrying amount outstanding of its 14% Exchange Notes and $11.9 million
of its 9% Convertible Notes. During the three and six months ended June 30,
2000, interest expense reflects the application of a compounded, effective
interest rate of approximately 20% on the Exchange Notes. Accretion of discount
on the Notes will cause the interest expense to increase in the future. Cash
payments of interest on such debt began in July 2000.
Interest Income
Interest income decreased approximately $97,000 and $134,000 during the three
and six months ended June 30, 2000, respectively, as compared to the amounts
for the corresponding periods in the prior year. The decrease is due to the
decrease in the Company's cash balance, (including restricted cash). The
Company's cash balance decreased from approximately $14.0 million as of June
30, 1999 to $6.9 million as of June 30, 2000.
23
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has been primarily engaged in development and
expansion activities requiring substantial expenditures. Consequently, the
Company has reported operating losses before interest of approximately $2.3
million and $2.4 million for the six months ended June 30, 1999 and 2000,
respectively. Cash outflows of $1.6 million and cash inflows of $2.5 million
net from operating and investing activities for the six months ended June 30,
1999 and 2000, respectively. These change in cash reflect the change in
restricted cash.
The Company has had significant investing cash outflows since inception.
Substantially all of the cash used in investing activities was for acquisitions
and for expenditures related to the construction of the Company's analog SMR
networks and for the purchase of analog SMR radios in the countries in which it
operates. To date, the funds necessary to finance the Company's operating and
investing activities have been obtained by the Company through the sale of its
Common Stock, Series A Preferred, Series B Preferred, Series C Preferred,
Exchange Notes, Convertible Notes, and from cash flow from operations.
On October 3, 1997, the Company consummated an approximate $11.1 million
financing (the "Series C Offering") with an investor group led by the Company's
existing stockholders and Prudential Securities Incorporated and its
affiliates. In connection therewith, the Company issued the Senior Notes which
were convertible into shares of the Company's Common Stock at a price of $1.45
per share. On January 15, 1998, the outstanding principal amount of the Senior
Notes and all accrued and unpaid interest thereon was converted into 7,955,691
shares of Series C Preferred Stock which are convertible into common shares at
a price of $1.45 per share. The Series C Preferred bears a 12% dividend per
annum payable on a semi-annual basis, at the Company's option in cash or in
additional shares of Series C Preferred. The Indenture restricts the ability of
the Company to pay cash dividends on the Series C Preferred. On April 30, 2000
the Company issued additional 596,642 shares of Series C Preferred Stock as
payment for the 12% dividend on the Series C Preferred.
Pursuant to the Exchange Notes agreement, on or after January 31, 2006, at the
option of the holders holding at least 5% of the outstanding shares of Series C
Preferred, the Company is obligated to redeem shares of Series C Preferred
tendered to the Company at a redemption price currently equal to the redemption
price discussed below, plus all declared, accrued and unpaid dividends. The
Company is only required to redeem shares of Series C Preferred on four
occasions in each 12-month period. The Company is obligated to redeem the
Series A Preferred and the Series B Preferred annually in one-third increments
beginning on June 1, 2006, at the redemption price discussed below, plus all
declared, accrued and unpaid dividends.
The redemption price for the Series A Preferred Stock is $25,000 per share
(approximately $8.8 million in total), the redemption price for the Series B
Preferred Stock is $3.65 per share ($21.0 million in total), and the redemption
price for the Series C Preferred Stock is $1.45 per share ($15.1 million in
total). The holders of Preferred Stock have an option into convert any or all of
the redeemable shares of Preferred Stock to common stock prior to each scheduled
annual redemption.
On January 15, 1998, the Company raised total gross proceeds of approximately
$20.5 million from the sale of Private Notes and Warrants. This offering
consisted of 40,000 units each consisting of $1,000 in principal amount at
maturity of the Private Notes and one Initial Warrant (as defined) to purchase
64 shares of Common Stock at an exercise price of $0.01 per share. The Notes
mature January 1, 2005. Interest is payable, in cash, at a rate of 14% per
annum, semi-annually in arrears on January 1 and July 1 of each year commencing
July 1, 2003. For accounting purposes, the Notes accrete at a rate of
approximately 20% per annum compounding semi-annually. Pursuant to a
Registration Rights Agreement, the Company filed a registration statement with
the Securities and Exchange Commission with respect to an offer and, in August
1999 completed the exchange of Exchange Notes for the Private Notes, whereby
the Exchange Notes have terms substantially identical to those of the Private
Notes. Because the Company completed the Exchange Offer later than required by
certain provisions of the arrangement, it incurred approximately $160,000 in
liquidated damages which were accrued in 1999 and are payable on July 1, 2003.
In addition, on January 15, 1998 the Company issued $10.0 million in aggregate
principal amount of Convertible Notes pursuant to a purchase agreement dated
January 15, 1998. Cash interest will not accrue on the Convertible Notes prior
to January 1, 2000. Thereafter, interest on the Convertible Notes is payable in
cash at a rate of 9% per annum on January 1 and July 1 of each year, commencing
on July 1, 2000. The Convertible Notes are convertible
24
<PAGE> 26
into shares of Common Stock at a conversion price of $2.25 per share, subject to
adjustments in certain circumstances.
Interest payments on the Company's Convertible notes commenced on July 1, 2000
and interest payments on the Exchange notes commence July 1, 2003. Both notes
mature on January 1, 2005.
As discussed below, the Company will enter into an agreement to repurchase the
Exchange and Convertible Notes.
Nextel Agreement
On August 11, 2000, the Company entered into a Stock Purchase Agreement with
Nextel International (Delaware) Ltd. ("Nextel"), a wholly-owned subsidiary of
Nextel International, Inc. ("Nextel International"). Under the terms of the
Stock Purchase Agreement, the Company anticipates that Nextel will purchase all
of the issued and outstanding capital stock of two of the Company's wholly-owned
subsidiaries, Centennial Cayman Corp. and SMR Direct Cayman Corp., for
approximately $66.5 million. The sale of these two subsidiaries will constitute
a sale of substantially all of the Company's operating assets and will result in
the termination of the Company's operations as an operator of SMR radio spectrum
and related businesses. As such, the Company has accounted for such operations
as discontinued operations, with a measurement date of August 11, 2000. The
Company expects to record a gain as a result of this transaction. Closing is
expected to occur on August 31, 2000.
The payment from Nextel will consist of (a) $36.5 million, which will reflect
the allocated purchase price for the business and assets of several Peruvian
companies ("Peru Price"), and (b) $30 million, plus interest, which will reflect
the purchase price for the business and assets of several Chilean companies
("Chile Price"). Nextel will pay the Peru Price in two payments as follows: (i)
$20 million due at the closing of the Stock Purchase Agreement, and (ii) a note
payable for $16.5 million bearing interest at 8% per year due 12 months from the
closing of the Stock Purchase Agreement. Nextel will pay the Chile Price as
follows: (i) $6 million due at the closing of the Stock Purchase Agreement, and
(ii) a note payable for $24 million bearing interest at 8% per year due no later
than 24 months after the closing of the Stock Purchase Agreement, upon obtaining
necessary regulatory relief from the Chilean government or the full deployment
of an iDEN system by Nextel in Chile within such 24 month period. In the event
the necessary regulatory relief is not obtained within such 24 month period, the
note payable portion of the Chilean Price may be reduced to as low as $10
million.
The Company will indemnify Nextel against (a) damages incurred in connection
with, arising out of or resulting from (i) any inaccuracy or breach of any
representation or warranty made by the Company pursuant to the Stock Purchase
Agreement, (ii) any breach, non-compliance or nonfulfillment by the Company of
any material covenant, agreement or undertaking to be complied with or
performed by the Company contained in or made pursuant to the Stock Purchase
Agreement, and (iii) certain potential tax and regulatory contingencies
regarding the past operation of the assets. Nextel, however, is not entitled to
make claims for money damages arising out of these obligations unless the
amount (individually or in the aggregate) exceeds $100,000. In addition,
Company is not required to indemnify Nextel for any amounts that exceed
$7,500,000 in the aggregate. In addition, the Company will indemnify Nextel for
one-half of the aggregate severance costs incurred and paid by Nextel after the
closing date regarding the termination of certain employees of the Peruvian
Companies and the Chilean Companies, but only to the extent that the Peruvian
employee severance costs do not exceed $500,000 in the aggregate and to the
extent the Chilean employee severance costs do not exceed $500,000 in the
aggregate.
Nextel will indemnify the Company against damages incurred in connection with,
arising out of or resulting from (a) any inaccuracy or breach of any
representation or warranty made by Nextel under the Stock Purchase Agreement
and (b) any breach, non-compliance or nonfulfillment by Nextel of any material
covenant, agreement or undertaking to be complied with or performed by Nextel
under the Stock Purchase Agreement.
Nextel International has entered into an agreement with the Company
guaranteeing payment obligations and indemnification obligations of Nextel
under the Stock Purchase Agreement.
Merrill Lynch Agreements
In conjunction with the Nextel agreement, the Board has authorized agreements
with Merrill Lynch Global Allocation Fund, Inc. to be closed contemporaneously
with the closing of the Stock Purchase Agreement, through
25
<PAGE> 27
which the Company will repurchase all of its issued and outstanding debt
represented by the Company's 14% Exchange Notes in the aggregate amount of
$40,000,000 due 2005 (carrying amount of $25.4 million at June 30, 2000) and the
Company's 9% Convertible Notes in the aggregate amount of $10,000,000 due 2006
(carrying amount of $11.9 million at June 30, 2000). In exchange for these
existing notes, the Company will pay Merrill Lynch $37,350,000 and offer Merrill
Lynch a 50% share of the net proceeds received from the disposal any and all
assets held by the Company following the closing of the Stock Purchase
Agreement. The Company anticipates that the cash portion of the payment will be
approximately $31.0 million and that the remainder will be funded by new notes
to be issued by the Company in the principal amount of approximately $6.350
million.
Each new note will (i) be due not more than 12 months plus 5 days from the
closing of the Stock Purchase Agreement; (ii) bear an interest rate of 8%; (iii)
be senior to any and all obligations of the Company to its shareholders,
including any rights of the Company's shareholders to the cash proceeds of the
deferred purchase price arising out of the Stock Purchase Agreement; and (iv) be
secured by the obligations of Nextel to the Company and by the assets of the
Company. Upon the Company's repurchase of the Exchange Notes, the Company's
public reporting requirements will terminate.
FOREIGN INVESTMENT RISK
The Company's foreign operating subsidiaries are all directly affected by their
respective countries' governmental, economic, fiscal and monetary policies and
other political factors. The Company believes that its operating subsidiaries'
adversely affected by these factors.
INFLATION AND FOREIGN CURRENCY EXCHANGE
The net monetary assets of certain of the Company's subsidiaries are subject to
foreign currency exchange risks since they are maintained in local currency.
Certain of the Company's subsidiaries operate in countries in which the rate of
inflation is significantly higher than that of the United States. The Company
will attempt to protect its earnings from inflation and possible currency
devaluation by setting prices in direct relation to the dollar and in some
cases by periodically adjusting prices in local currencies. However, there can
be no assurance that any significant devaluation against the dollar could be
offset, in whole or in part, by a corresponding price increase. As of June 30,
2000, the Company has not established any hedge or risk reduction strategies
related to its foreign currency exchange rate exposure.
26
<PAGE> 28
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the financial position,
results of operations or cash flows of the Company due to adverse changes in
financial market prices and rates. The Company is exposed to market risk in the
area of changes in foreign currency exchange rates as measured against the
United States dollar. These exposures are directly related to its normal
operating activities.
All of the Company's revenues during the six months ended June 30, 1999 and
2000 are from foreign subsidiaries while a significant portion of its
operations were financed through the financial instruments noted above. The
Company has attempted to protect its earnings from inflation and possible
currency devaluation by setting prices in direct relation to the dollar and by
periodically adjusting prices in local currencies. However, there can be no
assurance that any significant devaluation against the dollar could be offset,
in whole or in part, by a corresponding price increase. In the near term, the
Company's foreign currency exchange rate exposure is limited, as the Company
has been transferring available cash generated by its foreign subsidiaries to
the United States frequently to minimize the risk of foreign exchange loses.
Accordingly, as of June 30, 2000, the Company has not established any hedge or
risk reduction strategies related to its foreign currency exchange rate
exposure.
The Company has used mandatorily redeemable preferred stock, Exchange notes and
Convertible notes to finance its operations. The Company is required to redeem
its mandatorily redeemable preferred stock beginning January 31, 2006, as
defined by the Exchange Note Agreement. These financial instruments are all at
a fixed rates and therefore do not expose the Company to any interest rate
market risk. The table presented below provides information about the Company's
financial instruments (amounts in thousands):
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total*
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Exchange Notes (principal only) -- -- -- -- -- 40,000 40,000
Convertible Notes (principal only) -- -- -- -- -- 10,000 10,000
Total Debt Service (principal & interest) 535 1,069 1,069 3,869 6,669 56,287 69,498
Average Interest Rate % 17.1% 17.6% 18.1% 18.6% 19.0% 19.3%
</TABLE>
* The total carrying amount of the Company's debt as of June 30, 2000 was
$35,282.
27
<PAGE> 29
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
On March 30, 1997, Telefonica del Peru S.A. ("Telefonica"), petitioned
Instituto Nacional de Defensa de la Competencia y de la Proteccion de la
Propriedad Intelectual (the "INDECOPI"), the Peruvian trademark authority, to
nullify the trademark "Radio Trunking del Peru" previously granted to the
Company's subsidiary, SMR Direct Peru, S.R.L. (formerly Mobil Line Peru, S.A.)
("SMR Direct Peru"), by INDECOPI on the grounds that such trademark is not
distinctive. At the same time Telefonica challenged SMR Direct Peru's
application to use the trademark "Radio Trunking" with a corresponding logo.
The Company responded to these petitions on May 15, 1997 and June 12, 1997,
respectively. The Company was successful in defending Telefonica's claim with
regard to the use of the trademark "Radio Trunking" with the corresponding logo
but Telefonica prevailed with regard to the trademark "Radio Trunking del Peru"
without the logo. The Company does not believe that the outcome of the lost
trademark will have a material adverse effect on the Company's operations in
Peru. The Company successfully opposed the registration of the trademark
"INSTACOM Radio Trunking" requested by Telefonica del Peru S.A.
ITEM 2. - CHANGE IN SECURITIES AND USE OF PROCEEDS
On April 30, 2000, the Company issued 596,642 additional shares of Series C
Preferred Stock at a price of $1.45 per share in connection with the dividend
earned by the Series C Preferred Stock. The Series C Preferred Stock bears a
12% dividend payable semi-annually in each April and October in either cash or
additional shares at the option of the Company. As of April 30, 2000 the
outstanding shares of Series C Preferred Stock was 10,431,409.
(a) Inapplicable.
(b) Inapplicable.
(c) Inapplicable
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<PAGE> 30
ITEM 5. - OTHER INFORMATION
CHANNEL HOLDINGS
The table below sets forth the Company's channel holdings and subscriber
information in its Latin American markets.
<TABLE>
<CAPTION>
Total Channel Subscribers as of Subscribers as of
POPs (mm)(1) Holdings(2) June 30, 2000 June 30, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
PERU
Lima/Callao 7.5 176 7,138 7,137
Other 3.5 145 126 --
------------------ ------------------ ------------------ ------------------
Total 11.0 321 7,264 7,137
CHILE
Metropolitan Region of
Santiago 5.8 190 4,620 2,722
Other 1.7 1,352 593 --
------------------ ------------------ ------------------ ------------------
7.5 1,542 5,213 2,722
EL SALVADOR
Nationwide(3) 5.8 170 -- 765
------------------ ------------------ ------------------ ------------------
TOTAL(4) 24.3 2,033 12,477 10,624
================== ================== ================== ==================
</TABLE>
(1) Represents the approximate number of people ("POPs") in the markets in
which the Company has channels.
(2) Channels are voice paths on which mobile communications are
transmitted. Channels are licensed per geographic area and, using
analog technology, each channel can generally serve up to 125
subscribers in a given area. All of the Company's channels are in the
800 MHz spectrum.
(3) As of June 30, 2000 the Company holds channels in El Salvador. However,
pursuant to the management agreement signed in February 2000 the
Company is not entitled to the revenues and expenses, and therefore to
the subscribers of this operation.
(4) As of June 30, 1999 the Company also had channels and subscribers in
Ecuador. This operation was sold in January 2000.
ITEM - EXHIBITS AND REPORTS ON FORM 8 K
10.1 Stock Purchase Agreement
29
<PAGE> 31
SIGNATURE
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 thereunto duly authorized.
Date: August 21, 2000.
CORDILLERA COMMUNICATIONS CORP.
a Delaware corporation
By: /s/ Karl Maier
--------------------------------------------
Name: Karl Maier
Title: President and Chief Executive Officer
30
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1* Stock Purchase Agreement
27 Financial Data Schedule
</TABLE>
-----------
* To be filed by amendment.
