<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 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
May 12, 2000 was:
Common stock - 3,502,750 shares
1
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CORDILLERA COMMUNICATIONS CORP.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
------------------------------
Item 1 - Financial Statements
- ------
<TABLE>
<CAPTION>
Page Number
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<S> <C>
Condensed Consolidated Balance Sheets as of December 31, 1999 and March 31, 2000 (Unaudited) ................. 3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March
31, 1999 and 2000 (Unaudited)............................................................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and 2000
(Unaudited)................................................................................................. 6
Notes to Condensed Consolidated Financial Statements (Unaudited).............................................. 8
Centennial Cayman Corp. and Subsidiaries Financial Statements and notes to the financial statements for the
Nine Months Ended September 30, 1999 (Unaudited)............................................................ 17
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................ 25
- ------
Item 3 - Quantitative and Qualitative Disclosures about Market Risk........................................... 32
- ------
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings................................................................................... 33
- ------
Item 2 - Changes in Securities and Use of Proceeds........................................................... 33
- ------
Item 5 - Other Information................................................................................... 34
- ------
Item 6 - Exhibits and Reports on form 8-K.................................................................... 34
- ------
</TABLE>
2
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CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
----------------- -----------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 4,012,507 $ 7,398,673
Restricted cash (Note 2) 6,542,816 407,445
Accounts receivable, net of allowances for doubtful
accounts of $827,000 and $699,000, respectively 890,668 706,952
Radios and accessories inventory 793,122 567,948
Prepaid licenses and other current assets 1,197,281 985,030
----------------- -----------------
TOTAL CURRENT ASSETS 13,436,394 10,066,048
PROPERTY AND EQUIPMENT, net (Note 5) 8,955,716 7,916,060
LICENSES, net of accumulated amortization of $1,456,000
and $1,059,000, respectively (Note 4) 14,888,617 17,680,560
OTHER NONCURRENT ASSETS, net 1,993,471 1,762,170
----------------- -----------------
TOTAL ASSETS $ 39,274,198 $ 37,424,838
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 1,265,749 $ 1,064,293
Accrued liabilities 1,094,338 1,177,579
Current liabilities related to assets held for sale (Note 3) 32,212 -
----------------- -----------------
TOTAL CURRENT LIABILITIES 2,392,299 2,241,872
LONG-TERM LIABILITIES 160,000 160,000
CAPITAL LEASES PAYABLE - -
CONVERTIBLE NOTES (Note 6) 11,795,049 12,149,742
EXCHANGE NOTES (Note 6) 21,372,449 22,386,132
----------------- -----------------
35,719,797 36,937,746
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
MANDATORILY REDEEMABLE, CONVERTIBLE
PREFERRED STOCK:
Series A, $.01 par value, 352 authorized, issued and outstanding 8,788,138 8,790,112
Series B, $.01 par value, 6,399,648 authorized, 5,735,251 issued and
Outstanding 20,675,033 20,708,510
Series C, $.01 par value, 11,000,000 authorized, 9,834,773 issued and
Outstanding 14,260,411 14,260,411
----------------- -----------------
43,723,582 43,759,033
----------------- -----------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value, 40,000,000 authorized,
3,502,750 issued and outstanding 35,028 35,028
Additional paid-in capital 5,864,542 5,399,525
Accumulated deficit (45,561,490) (47,949,903)
Accumulated other comprehensive income (507,261) (756,591)
----------------- -----------------
Total stockholders' equity (deficit) (40,169,181) (43,271,941)
----------------- -----------------
Total liabilities and stockholders' deficit $ 39,274,198 $ 37,424,838
================= =================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
3
<PAGE>
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
-------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
----------------------------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
--------------------------------------------
<S> <C> <C>
1999 2000
------------------- -------------------
REVENUE:
Radio service revenue 1,481,932 1,150,282
Equipment sales 363,540 74,393
Activation and other 30,660 26,262
------------------- -------------------
1,876,132 1,250,937
------------------- -------------------
COSTS AND EXPENSES RELATED TO REVENUE:
Network and site expense 53,593 87,919
Cost of equipment sold 460,383 63,046
Maintenance and other 95,366 77,152
------------------- -------------------
609,342 228,117
------------------- -------------------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 1,661,916 1,570,646
Depreciation and amortization 568,563 657,828
Loss on Impairment of Assets - -
------------------- -------------------
2,230,479 2,228,474
------------------- -------------------
OPERATING LOSS (963,689) (1,205,654)
------------------- -------------------
OTHER INCOME (EXPENSE):
Interest Expense (1,371,871) (1,456,613)
Interest Income 162,686 125,867
Other 17,562 147,987
------------------- -------------------
(1,191,623) (1,182,759)
------------------- -------------------
NET LOSS (2,155,312) (2,388,413)
DIVIDENDS ON AND ACCRETION OF MANDITORILY
REDEEMABLE PREFERRED SHARES TO REDEMPTION
VALUE
(415,604) (468,017)
------------------- -------------------
NET LOSS APPLICABLE TO COMMON - -
STOCKHOLDERS (2,570,916) (2,856,430)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments (41,064) (249,330)
------------------- -------------------
COMPREHENSIVE LOSS (2,611,980) (3,105,760)
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.73) $ (0.82)
=================== ===================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING BASIC AND DILUTED 3,502,750 3,502,750
=================== ===================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
4
<PAGE>
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------------------------
1999 2000
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (2,155,312) $ (2,388,413)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 568,563 657,828
Loss sale of El Salvador assets - 107,008
Allowance for doubtful accounts 4,403 9,376
Accretion of interest on exchange and
convertible notes 1,260,564 1,440,354
Changes in operating assets and liabilities-
Decrease in accounts receivable 12,881 131,134
Decrease in inventory 423,228 19,324
Decrease in other assets 549,804 182,157
(Decrease) in accounts payable (154,280) (97,194)
(Decrease) in accrued liabilities (461,750) (225,153)
-------------------- --------------------
Net cash used in operating activities 48,101 (163,579)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (361,507) (436,296)
Acquisition of operating and non-operating,
entities and spectrum, net of cash acquired (24,537) (2,000,000)
Cash received on the sale of El Salvador assets - 100,000
(Increase) decrease in restricted cash 294,919 6,135,371
Change in assets held for sale (62,234) -
-------------------- --------------------
Net cash provided by/(used in) investing activities (153,359) 3,799,075
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases payable (4,701) -
-------------------- --------------------
Net cash (used in) financing activities (4,701) -
-------------------- --------------------
CASH EFFECT OF EXCHANGE RATE CHANGES (41,064) (249,330)
-------------------- --------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (151,023) 3,386,166
CASH AND CASH EQUIVALENTS, beginning of period 5,245,119 4,012,507
-------------------- --------------------
CASH AND CASH EQUIVALENTS, end of period $ 5,094,096 $ 7,398,673
==================== ====================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
6
<PAGE>
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------------------------------------------
1999 2000
-------------------- ---------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for-
Interest $ 10,940 $ 3,236
Supplemental schedule of noncash
investing and financing activities-
Accretion of preferred stock to redemption value 35,541 35,451
Dividends payable on preferred stock 380,153 432,565
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
7
<PAGE>
CORDILLERA COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
AS OF MARCH 31, 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.
NOTE 2. BASIS OF PRESENTATION
- ------- ---------------------
The accompanying interim consolidated 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 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 March 31, 2000 and the results of its operations for the
three months ended March 31, 1999 and 2000.
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.
Risks and Other Important Factors
---------------------------------
For each of the periods ended March 31, 2000, the Company's operations have
generated net losses and negative operating cash flows. As of March 31, 2000,
the Company had an accumulated deficit of $46.9 million. The Company has
historically financed its operations with various debt and equity placements as
well as cash flows from operations.
The ability of the Company to make scheduled payments with respect to its
indebtedness will depend upon, among other things; (1) its ability (i) to
successfully implement its business plan, (ii) to expand its operations and
(iii) to successfully develop its subscriber base in its target markets; (2) by
the ability of the Company's subsidiaries to remit cash to the Company in a
timely manner; and (3) the future operating performance of the Company and its
subsidiaries. Each of these factors is, to a large extent, subject to economic,
financial, competitive, regulatory, political and other factors, many of which
are beyond the Company's control. The Company expects that it will continue to
incur cash losses for the foreseeable future. No guarantee can be given that the
Company will be successful in developing and maintaining a level of cash flow
from operations sufficient to permit it to pay the principal of, and interest
on, its indebtedness, including the Notes and the Convertible Notes. If the
Company is unable to generate sufficient cash flow from operations to service
its indebtedness, it may modify its growth plans, restructure or refinance its
indebtedness or seek additional capital. There can be no assurance that (i) any
of these strategies could be effected on satisfactory terms, if at all, in light
of the Company's high leverage or (ii) any such strategy would yield sufficient
proceeds to service the Company's indebtedness, including the Notes and the
Convertible Notes. Any failure by the Company to satisfy its obligations with
respect to the Notes and the Convertible Notes at maturity or prior thereto
would constitute a default under the Indenture governing the Notes and the
agreement governing the Convertible Notes. The Company believes that its cash
and cash equivalents at March 31, 2000 will be sufficient to fund its operations
through at least March 31, 2001.
The Company is subject to various risks in connection with the operations of its
business. These risks include, but are not limited to, U.S. and foreign
regulations, dependence on operating agreements with foreign suppliers,
significant foreign-based customers and suppliers, and international economic
and political instability. Many of the Company's competitors are significantly
larger and have substantially greater financial, technical and marketing
resources than the Company.
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 4). 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.
8
<PAGE>
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 $79,718 and $206,115 for the three months ended March
31, 1999 and 2000, respectively.
Reclassifications
-----------------
Certain amounts in prior periods have been reclassified to conform with the
current presentation.
Cash and cash equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents include short-
term, highly liquid investments with original maturities of three months or less
which are readily convertible into cash and are not subject to significant risk
from fluctuations in interest rates. Restricted cash includes approximately
$6.5 million and $407,000 on deposit with financial institutions at December 31,
1999 and March 31, 2000, respectively. As of March 31, 2000, the amount in
restricted cash is for a performance bond for the build out of certain channels
in Peru.
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
quarter ending June 30, 2000, and the Company's management is still evaluating
the impact of such adoption.
NOTE 3. SALE OF THE U.S. OPERATIONS
- ------- ---------------------------
In August 1997, the Company made a strategic decision to sell the U.S.
Operations and began to seek purchasers for these operations, consisting of
licenses and related assets and liabilities in 20 major trading areas ("MTAs").
The Company completed the sale of the U.S. Operations during 1999. Until the
contingencies related to the Federal Communications Commission were resolved,
the Company transferred the majority of the risks and rewards of the U.S.
Operations to the purchasers by way of management agreements. The transactions
were not recognized as sales until substantially all of the risks, rewards of
ownership and full control of such licenses and the related assets and
liabilities were transferred to the purchasers. The Company was not responsible
for any losses incurred during the time covered by the agreements with the
buyer/managers.
Effective August 1997, the Company recorded an approximate $1,300,000 charge for
termination and other contractually committed costs in connection with the
divestiture of the U.S. Operations in the third quarter of 1997. As of March
31, 2000, the Company had made cash payments of the majority of this amount.
The amount of costs incurred and remaining liabilities related to the U.S.
Operations as of March 31, 2000 is approximately $32,000.
9
<PAGE>
NOTE 4. ACQUISITIONS AND SALES
- ------- ----------------------
Except as indicated in the following, all of the acquisitions were for 100% of
the voting shares of the acquired company. The acquisitions were accounted for
as a purchase and accordingly the results of their operations were included in
the consolidated results of operations from the date of acquisition. The
purchase price was financed by the Company with available cash.
On May 12, 1999, the Company completed the acquisition of certain assets in
Chile and acquired for $400,000 the Chilean assets of RMD Agencia Chile,
consisting of its 800 MHZ channels: 20 channels in Santiago, 20 channels in
Valparaiso/Vina del Mar, and 25 channels in Concepcion/Talcahuano.
On July 26, 1999, the Company completed this acquisition of certain Chilean
assets, including a license for 20 800 MHz channels in Santiago, certain
infrastructure and subscribers, for approximately $2,100,000. Approximately
$220,000 represented the fair value of the net tangible assets. The excess
purchase price over the fair value of the net tangible assets acquired was
approximately $1,880,000, which was allocated to SMR licenses. These licenses
will be amortized over 23 years, the remaining term of the license.
On October 22, 1998, the Company signed an agreement to purchase 100% of the
shares of Trunking S.A. a Chilean non-operating development stage company
holding 800 MHz channels (i) 20 in Santiago and (ii) 176 in various other
Chilean cities. This acquisition closed on July 26, 1999. Total consideration
paid by the Company was $700,000, which was allocated entirely to SMR licenses.
These licenses will be amortized over 26 years, the remaining term of the
license.
During 1999 the Company made a strategic decision to sell its Ecuador subsidiary
and entered into a letter of intent to sell its Ecuador operations for
approximately $2.0 million and, accordingly, wrote down its investment in
Ecuador to the fair market value of $2.0 million and recognized a loss of
approximately $280,000. On January 27, 2000, the Company completed the sale of
100% of the shares of its Ecuador subsidiary. In a related transaction with a
related party, the Company purchased 100% of the shares of two Chilean non-
operating development stage companies having a combined total 800 MHz channels
(i) 40 in Santiago and (ii) 725 in various Chilean cities for approximately $4.0
million, which was allocated entirely to SMR licenses. These licenses will be
amortized over 40 years. Of this purchase price amount, $2.0 million was offset
by the $2.0 million sale price of the Ecuador subsidiary.
In February 2000, the Company entered into an agreement for the sale of all of
its El Salvador assets, except for its 800 MHz licenses, for approximately
$200,000, consisting of a cash payment of $100,000 and the remaining
consideration in the form of a note receivable due in February 2001.
Correspondingly, the Company recognized a loss of approximately $107,000 for the
sale of these assets. As part of this transaction, the Company also entered
into a management arrangement with the purchaser whereby the purchaser will
manage the Company's spectrum in El Salvador and will be entitled to all
revenues of such system and will be responsible for all liabilities and expenses
of such system. The purchaser for the shorter of two years, or the date of a
sale of the Company's 800 MHz licenses in El Salvador.
NOTE 5. PROPERTY AND EQUIPMENT
- ------- ----------------------
The composition of property and equipment follows:
December 31, March 31,
1999 2000
------------------- ------------------
Network infrastructure $ 7,573,469 $ 5,661,563
Radios 3,901,015 3,106,187
Computer equipment and software 850,633 619,668
10
<PAGE>
Furniture and fixtures 554,639 395,219
Leasehold improvements 186,922 190,395
------------------- ------------------
13,066,678 9,973,032
Accumulated depreciation (4,110,962) (2,056,972)
------------------- ------------------
Property and equipment, net $ 8,955,716 $ 7,916,060
=================== ==================
The Company depreciates infrastructure over 10 years, radios over 3 to 5 years,
computer equipment and software over 3 years and leasehold improvements over the
life of the lease.
Depreciation expense was $488,845 and $451,713 for the three months ended March
31, 1999 and 2000, respectively.
NOTE 6. LONG-TERM DEBT
- ------- --------------
<TABLE>
<CAPTION>
Long term debt consisted of the following at March 31, 2000 and December 31,
1999:
December 31, March 31,
1999 2000
--------------- --------------
<S> <C> <C>
14% Exchange Notes due 2005 (the "Exchange Notes"), net of
unamortized discount of $18,627,551 and $17,613,868,
interest payable semi-annually in arrears commencing July 1, 2003 21,372,449 22,386,132
9% Convertible Notes due 2005 (the "Convertible Notes"), interest
payable annually commencing July 1, 2000 11,795,049 12,149,742
--------------- --------------
33,167,498 34,535,874
=============== ==============
</TABLE>
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. At March 31, 2000
the Company was in compliance with such covenants.
NOTE 7. 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 and to generate positive cash
flow and operating profits is contingent upon a number of factors, including the
Company's ability to continue to build out and develop the SMR and other low-
cost, wireless communications networks it currently owns and to attract and
retain sufficient profitable subscribers on its existing systems and those which
are under development in sufficient numbers.
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.
11
<PAGE>
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.
NOTE 8. PREFERRED STOCK
- ------- ---------------
The Company is authorized to issue 17,400,000 shares of preferred stock. Shares
of preferred stock may be issued from time to time in one or more series with
designations, rights, preferences and limitations established by the Company's
Board of Directors.
Holders of preferred stock are entitled to dividends in amounts determined by
the Board of Directors. No distributions may be made to holders of common stock
until all dividends declared, if any, on the preferred stock have been paid.
The indenture related to the Exchange Notes (the "Indenture") restricts the
Company's ability to pay cash dividends.
The Series C Preferred Stock bears a 12% dividend per annum and is payable semi-
annually in each April and October in either cash or additional shares of Series
C Preferred stock at the option of the Company. The Indenture restricts the
ability of the Company to pay cash dividends on the Series C Preferred. In April
2000, the Company issued an additional 596,642 shares of Series C Preferred
Stock as payment for the 12% dividend on the Series C Preferred.
12
<PAGE>
NOTE 9. 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 March 31, 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>
March 31, 2000
Revenues $ - $ 729 $ 498 $ 24 $ - $ - $ 1,251
EBITDA (691) 254 (1) (109) - - (547)
Depreciation and
amortization 12 239 389 18 - - 658
Operating income
(loss) (703) 15 (390) (127) - - (1,205)
Property, plant
and
equipment, net 57 3,687 4,190 - - (18) 7,916
Spectrum, net - 7,420 9,279 982 - - 17,681
Total assets $ 47,822 $ 13,802 $ 14,501 $ 1,113 $ - $ (39,813) $ 37,425
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Corporate Peru Chile El Salvador Other (1) Elimination Total
--------- -------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 1999
Revenues $ - $ 922 $ 245 $ 166 $ 543 $ - $ 1,876
EBITDA (546) 149 (122) (70) 194 - (395)
Depreciation and
amortization 96 212 66 - 194 - 568
Operating income
(loss) (642) (63) (188) (70) - - (963)
Property, plant
and
equipment, net 122 3,884 2,889 3 1,634 322 8,854
Spectrum, net - 7,521 3,198 1,322 1,150 - 13,191
Total assets $ 53,808 $ 16,314 $ 7,884 $ 1,452 $ 3,773 $ (37,814) $ 45,417
</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.
14
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS -------------------- ---------------------
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 94,935 $ 220,029
Restricted cash 406,094 407,445
Accounts receivable - trade, net of allowance for doubtful
Accounts of $827,000 and $659,000, respectively 890,668 706,952
Inventory 695,478 566,928
VAT receivable 713,221 462,326
Prepaid licenses and other current assets 417,859 494,111
-------------------- ---------------------
Total current assets 3,218,255 2,857,791
PROPERTY AND EQUIPMENT, net 8,884,204 7,859,155
SMR LICENSES, net of accumulated amortization
of $1,456,000 and $1,059,000, respectively 14,888,617 17,680,560
OTHER NONCURRENT ASSETS, net 151,044 -
-------------------- ---------------------
Total assets $ 27,142,120 $ 28,397,506
==================== =====================
LIABILITIES AND STOCKHOLDER'S EQUITY
-------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 739,735 $ 475,464
Accounts payable - affiliates 26,433,460 29,279,211
Accrued liabilities 740,493 526,741
-------------------- ---------------------
Total liabilities 27,913,688 30,281,416
COMMITMENTS AND CONTINGENCIES (Notes 1, 2 and 6)
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 (21,122,686) (21,985,698)
Accumulated other comprehensive income (507,261) (756,591)
-------------------- ---------------------
Total stockholder's equity (771,568) (1,883,910)
-------------------- ---------------------
Total liabilities and stockholder's equity $ 27,142,120 $ 28,397,506
==================== =====================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
15
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
----------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------------------
1999 2000
----------------- -----------------
<S> <C> <C>
REVENUE:
Radio service revenue 1,481,932 1,150,282
Equipment sales 363,540 74,393
Other 30,660 26,262
----------------- -----------------
- -
1,876,132 1,250,937
----------------- -----------------
- -
COSTS AND EXPENSES RELATED TO REVENUE:
Network and site expense 53,593 87,919
Cost of equipment sold 460,383 63,046
Maintenance and other 95,366 77,152
----------------- -----------------
- -
609,342 228,117
----------------- -----------------
- -
1,266,790 1,022,820
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 1,444,539
1,585,826
Depreciation and amortization 472,393 646,186
----------------- -----------------
- -
2,058,219 2,090,725
----------------- -----------------
- -
OPERATING LOSS (791,429) (1,067,905)
----------------- -----------------
- -
OTHER INCOME (EXPENSE):
Interest expense (28,545) (7,949)
Interest income - 6,963
Other 17,562 205,880
----------------- -----------------
(10,983) 204,894
----------------- -----------------
NET LOSS (802,412) (863,011)
OTHER COMPREHENSIVE INCOME
(LOSS):
Foreign currency translation
adjustments (41,064) (249,330)
----------------- -----------------
COMPREHENSIVE LOSS (843,476) (1,112,341)
================= =================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
17
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------------------------
1999 2000
-------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (802,412) (863,012)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 472,393 646,186
Loss on sale of El Salvador assets - 107,008
Allowance for doubtful accounts 4,403 9,376
Changes in operating assets and liabilities-
(Increase)/decrease in accounts receivable (12,119) 131,134
Decrease/(increase) inventory 171,830 (77,300)
Decrease in other assets 519,981 136,270
Increase/(decrease) in accounts payable and other 96,682 (160,010)
(Decrease) in accrued liabilities (180,653) (57,368)
-------------------- ---------------------
Net cash used in operating activities 270,105 (127,716)
-------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (367,182) (442,260)
Acquisition of operating and non-operating,
entities and spectrum, net of cash acquired (24,537) (2,000,000)
Cash received on the sale of El Salvador assets - 100,000
(Increase) in restricted cash (1,230,827) (1,351)
-------------------- ---------------------
Net cash used in investing activities (1,622,546) (2,343,611)
-------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates 1,421,805 2,845,751
-------------------- ---------------------
Net cash provided by financing activities 1,421,805 2,845,751
EFFECT OF EXCHANGE RATE CHANGES ON CASH (41,064) (249,330)
-------------------- ---------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 28,300 125,094
CASH AND CASH EQUIVALENTS, beginning of period 559,789 94,935
-------------------- ---------------------
CASH AND CASH EQUIVALENTS, end of period $ 588,089 $ 220,029
==================== =====================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
19
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
AS OF MARCH 31, 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 March 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 months ended March 31, 2000, certain
of the subsidiaries have been paying 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. The Parent Company is under
no obligation to provide additional advances or loans to the Company; however,
if the Company's operating cash flow is not sufficient to meet its needs, the
Parent Company has committed that it will continue to make advances to the
Company as necessary, through at least March 31, 2001.
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 March 31, 2000 and the results of its operations for the
three months ended March 31, 1999 and 2000.
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 $470,000 and $565,000 for the three months ended March 31, 1999
and 2000, 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.
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 $77,468 and $206,115 for the three months ended March
31, 1999 and 2000, respectively.
20
<PAGE>
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
quarter ending June 30, 2000, and the Company's management is still evaluating
the impact of such adoption.
NOTE 2. ACQUISITIONS AND SALES
- ------- ----------------------
Except as indicated in the following, all of the acquisitions were for 100% of
the voting shares of the acquired company. The acquisitions were accounted for
as a purchase and accordingly the results of their operations were included in
the consolidated results of operations from the date of acquisition. The
purchase price was financed by the Company with available cash.
On May 12, 1999, the Company completed the acquisition of certain assets in
Chile and acquired for $400,000 the Chilean assets of RMD Agencia Chile,
consisting of its 800 MHZ channels: 20 channels in Santiago, 20 channels in
Valparaiso/Vina del Mar, and 25 channels in Concepcion/Talcahuano.
On July 26, 1999, the Company completed this acquisition of certain Chilean
assets, including a license for 20 800 MHz channels in Santiago, certain
infrastructure and subscribers, for approximately $2,100,000. Approximately
$220,000 represented the fair value of the net tangible assets. The excess
purchase price over the fair value of the net tangible assets acquired was
approximately $1,880,000, which was allocated to SMR licenses. These licenses
will be amortized over 23 years, the remaining term of the license.
On October 22, 1998, the Company signed an agreement to purchase 100% of the
shares of Trunking S.A. a Chilean non-operating development stage company
holding 800 MHz channels (i) 20 in Santiago and (ii) 176 in various other
Chilean cities. This acquisition closed on July 26, 1999. Total consideration
paid by the Company was $700,000, which was allocated entirely to SMR licenses.
These licenses will be amortized over 26 years, the remaining term of the
license.
During 1999 the Company made a strategic decision to sell its Ecuador subsidiary
and entered into a letter of intent to sell its Ecuador operations for
approximately $2.0 million and, accordingly, wrote down its investment in
Ecuador to the fair market value of $2.0 million and recognized a loss of
approximately $280,000. On January 27, 2000, the Company completed the sale of
100% of the shares of its Ecuador subsidiary. In a related transaction with a
related party, the Company purchased 100% of the shares of two Chilean non-
operating development stage
21
<PAGE>
companies having a combined total 800 MHz channels (i) 40 in Santiago and (ii)
725 in various Chilean cities for approximately $4.0 million, which was
allocated entirely to SMR licenses. These licenses will be amortized over 40
years. Of this purchase price amount, $2.0 million was offset by the $2.0
million sale price of the Ecuador subsidiary.
In February 2000, the Company entered into an agreement for the sale of all of
its El Salvador assets, except for its 800 MHz licenses, for approximately
$200,000, consisting of a cash payment of $100,000 and the remaining
consideration in the form of a note receivable due in February 2001.
Correspondingly, the Company recognized a loss of approximately $107,000 for the
sale of these assets. As part of this transaction, the Company also entered into
a management arrangement with the purchaser whereby the purchaser will manage
the Company's spectrum in El Salvador and will be entitled to all revenues of
such system and will be responsible for all liabilities and expenses of such
system. The purchaser for the shorter of two years, or the date of a sale of the
Company's 800 MHz licenses in El Salvador.
NOTE 3. PROPERTY AND EQUIPMENT
- ------- ----------------------
The composition of property and equipment follows:
December 31, March 31,
1999 2000
------------- -------------
Network infrastructure $ 7,573,469 $ 5,661,563
Radios 3,901,015 3,106,187
Computer equipment and software 675,483 454,321
Furniture and fixtures 480,031 324,068
Leasehold improvements 186,922 190,395
------------- -------------
12,816,920 9,736,534
Accumulated depreciation (3,932,716) (1,877,379)
------------- -------------
Property and equipment, net $ 8,884,204 $ 7,859,155
============= =============
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 $394,925 and $440,071 for the three months ended March
31, 1999 and 2000, respectively.
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 and to generate positive cash
flow and operating profits is contingent upon a number of factors, including the
Company's ability to continue to build out and develop the SMR and other low-
cost, wireless communications networks it currently owns and to attract and
retain sufficient profitable subscribers on its existing systems and those which
are under development in sufficient numbers.
22
<PAGE>
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.
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 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 March 31, 2000 and 1999
(in 000's).
<TABLE>
<CAPTION>
Peru Chile El Salvador Other (1) Elimination Total
--------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
March 31, 2000
Revenues $ 729 $ 498 $ 24 $ - $ - $ 1,251
EBITDA 254 (2) (109) (565) - (422)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Depreciation and
amortization 239 389 18 - - 646
Operating income
(loss) 15 (391) (127) (565) - (1,068)
Property, plant
and
equipment, net 3,687 4,190 - - (18) 7,859
Spectrum, net 7,419 9,280 982 - - 17,681
Total assets $ 13,801 $ 14,501 $ 1,113 $ - $ (1,018) $ 28,397
March 31, 1999
Revenues $ 922 $ 245 $ 166 $ 543 $ - $ 1,876
EBITDA 149 (122) (70) (276) - (319)
Depreciation and
amortization 212 66 - 194 - 472
Operating income
(loss) (63) (188) (70) (470) - (791)
Property, plant
and
equipment, net 3,884 2,889 3 1,634 - 8,410
Spectrum, net 7,521 3,198 1,322 1,150 - 13,191
Total assets $ 16,314 $ 7,884 $ 1,452 $ 3,773 $ (1,927) $ 27,496
</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.
24
<PAGE>
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.
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 March 31, 2000 the Company currently 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 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).
25
<PAGE>
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 March 31, 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 is
focused on identifying and then deploying the most efficient utilization of its
leading channel positions in its principal markets. The Company continually
evaluates technological developments in order to assess alternative uses for the
spectrum while continuing operations of its analog dispatch or SMR businesses as
long as adequate capacity permits. 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. The following
table sets forth the name of each entity acquired since inception by the Company
and the date of occurrence in each of its Latin American markets as of March
31, 2000:
Name Date of Acquisition
SMR Direct Peru, S.R.L. (Peru) (1)
Pompano, S.R.L. (Peru) November 22, 1996
Telecom Supply S.R.L. (Peru) December 9, 1996
C-Comunica S.R.L. (Peru) January 22, 1997
Transnet del Peru, S.A. (Peru) July 31, 1997
Telecomunaciones y Servicios (Chile) January 2, 1998
Peru Tel S.A. (Peru) May 22, 1998
Trunking S.A. (Chile) July 29, 1999
Mobil S.A. (Chile) January 27, 2000
Dial Page (Chile) January 27, 2000
The Company purchased 51% of the capital stock of SMR Direct Peru, S.R.L.
(formerly Mobil Line Peru, S.A.) in February 1996 and the remaining 49% in July
1996. These transactions were accounted for as a step acquisition purchase.
26
<PAGE>
Consolidated Results of Operations
<TABLE>
<CAPTION>
(in thousands)
three months ended March 31,
1999 2000 Change
-------- -------- ------
<S> <C> <C> <C>
Total Operating Revenues $ 1,876 $ 1,251 $ (625)
======== ======== ======
Costs & Expenses Related to Revenues 609 228 (381)
======== ======== ======
Selling, General & Admin. Expenses Latin America 1,586 1,445 (141)
Selling, General & Admin. Expenses Corporate 76 126 50
-------- -------- ------
Total Selling, General & Admin. Expenses 2,228 1,639 (91)
======== ======== ======
Depreciation & Amortization Latin America 473 646 173
Depreciation & Amortization Corporate 96 12 (84)
-------- -------- ------
Total Depreciation & Amortization 569 658 89
======== ======== ======
Interest Expense 1,372 1,457 85
Interest Income 163 126 (37)
======== ======== ======
</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 $625,000 during the three months ended
March 31, 2000, as compared to the three months ended March 31, 1999. The
decrease is due to three factors: (i) the sale of its Ecuador subsidiary which
resulted in a decrease in revenues of approximately $438,000, (ii) the entry
into a management agreement in El Salvador which resulted in a decreased in
revenues of approximately $40,000, and (iii) a decrease in equipment sales
(during the three months ended March 31, 2000, the Company sold 144 units as
compared to 559 units during the same period in 1999).
Costs and Expenses Related to Revenues
27
<PAGE>
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.
Total costs and expenses related to revenues decreased approximately $381,000
during the three months ended March 31, 2000, as compared to the three months
ended March 31, 1999. 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
$91,000 during the three months ended March 31, 2000, as compared to the three
months ended March 31, 1999. Selling, general and administrative expenses
decreased in Latin America due to the the sale of the Company's Ecuador
subsidiary which resulted in a decrease in selling, general and administrative
expenses of $249,000, 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.
The Company expects that selling, general and administrative expenses will
decrease in the future. This decrease is due to the Company's ongoing effort to
minimize overhead expenses.
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 $89,000 during the
three months ended March 31, 2000, as compared to the three months ended March
31, 1999. The increase is due to an increase in depreciation and amortization
in the Latin American operations due to the acquisitions completed in January
2000 (see Note 4). 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 decrease at the corporate level due to the sale of
property, plant and equipment completed during 1999.
Interest Expense
Interest expense increased approximately $85,000 during the three months ended
March 31, 2000, as compared to the three months ended March 31, 1999. This
increase is due to interest on the Exchange and Convertible Notes. As of March
31, 2000, the Company had $22.4 million
28
<PAGE>
outstanding of its 14% Exchange Notes and $12.1 million of its 9% Convertible
Notes. During the three months ended March 31, 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 will
begin in July 2000.
Interest Income
Interest income decreased $37,000 during the three months ended March 31, 2000,
as compared to the three months ended March 31, 1999. The decrease during 1999
is due to the decrease in the Company's cash balance, (including restricted
cash). The Company's cash balance decreased from approximately $16.5 million as
of March 31, 1999 to $7.8 million as of March 31, 2000.
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 $963,000
and $1.3 million for the three months ended March 31, 1999 and 2000,
respectively. Cash outflows of $105,000 cash inflows of $3.6 million net from
operating and investing activities for the three months ended March 31, 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 March 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
($8,800,000 in total), the redemption price for the Series B Preferred Stock is
$3.65 per share ($20,933,666 in total), and the redemption price for the Series
C Preferred Stock is $1.45 per share ($14,260,411 in total).
29
<PAGE>
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 into shares of Common
Stock at a conversion price of $2.25 per share, subject to adjustments in
certain circumstances.
The Company believes that cash on hand of $7.8 million at March 31, 2000,
together with the cash generated from operations, would be sufficient to satisfy
the Company's liquidity needs for at least the succeeding 8 months should the
Company continue its scope of operations consistent with that of the first
quarter of 2000. The Company intends to use its cash on hand and cash generated
by operations primarily to fund:
- capital expenditures (capital expenditures will include the purchase of
equipment including subscriber units)
- the cost of enhancing/completing the Company's analog SMR networks
- corporate expenses
- acquisitions of licenses and companies holding licenses
- debt service requirements; and
- other general corporate expenditures.
Interest payments on the Company's Convertible notes comence on July 1, 2000 and
interest payments on the Exchange notes commence July 1, 2003. Both notes
mature on January 1, 2005. The ability of the Company to make scheduled
payments with respect to its indebtedness will depend upon, among other things,
(1) its ability (i) to implement its business plan, (ii) to expand its
operations and (iii) to successfully develop its subscriber base in its target
markets, (2) the ability of the Company's subsidiaries to remit cash to the
Company in a timely manner and (3) the future operating performance of the
Company and its subsidiaries. Each of these factors is, to a large extent,
subject to economic, financial, competitive, regulatory, political and other
factors, many of which are beyond the Company's control. The Company expects
that it will continue to incur cash losses for the foreseeable future. No
assurance can be given that the Company will be successful in developing and
maintaining a level of cash flow from operations sufficient to permit it to pay
the principal of, and interest on, its indebtedness, including the Notes and the
Convertible Notes. If the Company is unable to generate sufficient cash flow
from operations to service its indebtedness, it may modify its growth plans,
restructure or refinance its indebtedness or seek additional capital. There can
be no assurance that (i) any of these strategies could be effected on
satisfactory terms, if at all, in light of the Company's high leverage or (ii)
any such
30
<PAGE>
strategy would yield sufficient proceeds to service the Company's indebtedness,
including the Notes and the Convertible Notes. Any failure by the Company to
satisfy its obligations with respect to the Notes and the Convertible Notes at
maturity or prior thereto would constitute a default under the Indenture
governing the Notes and the agreement governing the Convertible Notes.
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'
financial conditions or operating results have not, historically been materially
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 March 31, 2000,
the Company has not established any hedge or risk reduction strategies related
to its foreign currency exchange rate exposure.
31
<PAGE>
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 three months ended March 31, 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 terms of
the Exchange Notes and the Convertible Notes do not require payments until the
year 2003 and 2000, respectively. Additionally, 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 March 31, 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 March 31, 2000 was
$34,536.
32
<PAGE>
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
- ---------------------------
On March 31, 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
33
<PAGE>
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>
POPs Total Channel Subscribers as of Subscribers as of
- -------------------------- (mm) (1) Holdings (2) March 31, 2000 March 31, 1999
<S> <C> <C> <C> <C>
Peru
Lima/Callao 7.5 176 7,879 7,137
Other 3.5 145 86 -
---- ----- ------ ------
Total 11.0 321 7,965 7,137
Chile
Metropolitan Region
of Santiago 5.8 190 4,530 2,301
Other 1.7 1,352 498 -
---- ----- ------ ------
7.5 1,542 5,028 2,301
El Salvador
Nationwide (3) 5.8 170 - 701
---- ----- ------ ------
- --------------------------
TOTAL (4) 24.3 2,033 12,993 10,139
- -------------------------- ==== ===== ====== ======
</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 March 31, 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 (see Note 4).
(4) As of March 31, 1999 the Company also had channels and subscribers in
Ecuador. This operation was sold in January 2000 (see Note 4).
Item - Exchibits and Reports on Form 8 K
- -------------------------------------------
None
34
<PAGE>
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: May 15, 2000.
CORDILLERA COMMUNICATIONS CORP.
a Delaware corporation
By: /s/ Karl Maier
------------------------------------------
Name: Karl Maier
Title: President and Chief Executive Officer
35
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-2000
<PERIOD-START> JAN-01-1999 JAN-01-2000
<PERIOD-END> MAR-31-1999 MAR-31-2000
<CASH> 10,555,323 7,806,118
<SECURITIES> 0 0
<RECEIVABLES> 1,717,668 1,405,952
<ALLOWANCES> 827,000 699,000
<INVENTORY> 793,122 567,948
<CURRENT-ASSETS> 13,436,394 10,066,048
<PP&E> 13,066,678 9,973,032
<DEPRECIATION> 4,110,962 2,056,972
<TOTAL-ASSETS> 39,274,198 37,424,838
<CURRENT-LIABILITIES> 2,392,299 2,241,872
<BONDS> 33,167,498 34,535,874
43,723,582 43,759,033
0 0
<COMMON> 35,028 35,028
<OTHER-SE> (40,204,209) (43,306,969)
<TOTAL-LIABILITY-AND-EQUITY> 39,274,198 37,424,838
<SALES> 363,540 74,393
<TOTAL-REVENUES> 1,876,132 1,250,937
<CGS> 460,383 63,046
<TOTAL-COSTS> 2,230,479 2,228,474
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,371,871 1,456,613
<INCOME-PRETAX> (2,155,132) (2,388,413)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,155,312) (2,388,413)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,155,312) (2,388,413)
<EPS-BASIC> (0.73) (0.82)
<EPS-DILUTED> (0.73) (0.82)
</TABLE>
