SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 25,2000
------------------------------------------
Date of Report (Date of earliest event reported)
SILVERTHORNE PRODUCTION COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 0-11730 84-0189377
---------------------------- ------------------------ ----------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
7001 Seaview Avenue NW, Suite 210, Seattle, Washington 98117
------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 297-6151
Not Applicable
------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
The registrant is filing the required financial statements in
connection with its acquisition of Aquila International
Telecommunications, Inc. as previously reported in a Current Report
on Form 8-K that was dated April 25, 2000 and filed on May 5, 2000.
(b) Pro Forma Financial Information
The registrant is filing the required pro forma data in connection
with its acquisition of Aquila International Telecommunications,
Inc. as previously reported in a Current Report on Form 8-K that
was dated April 25, 2000 and filed on May 5, 2000.
(c) Exhibits
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
SILVERTHORNE PRODUCTION COMPANY
Dated: June 15, 2000 By: /s/ Jimmy L. Boswell
--------------------
Jimmy L. Boswell, President
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
December 31, 1999 and 1998
TABLE OF CONTENTS
Page
Independent Auditor's Report F-1
Financial Statements:
Balance Sheets F-2
Statements of Income F-3
Statements of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F-10
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
Aquila International Telecommunications, Inc.
San Luis Obispo, California
We have audited the accompanying balance sheets of Aquila International
Telecommunications, Inc., (a California corporation), as of December 31, 1999
and 1998, and the related statements of income, shareholders' equity, and cash
flows for the year ended December 31, 1999 and for the period from March 23,
1998 (date of inception) through December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aquila International
Telecommunications, Inc., as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
McGowan Guntermann
Santa Barbara, California
February 3, 2000
F-1
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash (Note 1F) ........................................ $ 20,392 $ 302
Accounts receivable ................................... 38,750 345
Other receivables ..................................... 200 3,000
----------- -----------
Total current assets ................................ 59,342 3,647
----------- -----------
PROPERTY AND EQUIPMENT - net (Note 3) .................... 170,830 212,366
OTHER ASSETS
Deposits .............................................. 76,318 21,007
----------- -----------
TOTAL ASSETS ............................................. $ 306,490 $ 237,020
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ...................................... $ 42,894 $ 3,606
Accrued expenses ...................................... 393,873 312,605
Deposits received ..................................... 5,306 --
Loan from shareholder (Note 7) ........................ 25,900 32,972
Current portion -
long-term liabilities ............................... 102,969 89,538
----------- -----------
Total Current Liabilities ........................... 570,942 438,721
LONG-TERM LIABILITIES -
net of current portion (Note 4) ....................... 854,332 241,828
----------- -----------
Total Liabilities ................................... 1,425,274 680,549
----------- -----------
SHAREHOLDERS' DEFICIT
Common stock - $1 par value,
5,000,000 shares authorized ........................ 12,000 12,000
Retained deficit ...................................... (1,130,784) (455,529)
----------- -----------
Total Shareholders' Deficit ......................... (1,118,784) (443,529)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT ............................................... $ 306,490 $ 237,020
=========== ===========
</TABLE>
The Accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
STATEMENTS OF INCOME
For the Year Ended December 31, 1999 and for
the Period from March 23, 1998 (Date of
Inception) through December 31, 1998
1999 1998
--------- ---------
INCOME ...................... $ 124,023 $ 345
--------- ---------
COST OF SALES ............... 262,568 8,699
--------- ---------
GROSS PROFIT ................ (138,545) (8,354)
--------- ---------
OPERATING EXPENSES
Advertising .............. 3,797 215
Automobile ............... 14,469 -
Bank charges ............. 2,880 988
Credit card fees ......... 7,255 435
Depreciation ............. 90,835 40,524
Employee benefits ........ 23,788 10,349
Freight .................. 530 -
Insurance ................ 4,259 15
Interest ................. 54,040 3,436
Legal and professional ... 7,077 8,330
Miscellaneous ............ 495 (630)
Office ................... 5,275 2,678
Postage and delivery ..... 717 372
Rent facility ............ 25,365 8,025
Repairs .................. 447 1,149
Salaries ................. 261,489 340,298
Software ................. 1,430 6,015
Supplies ................. 5,017 2,235
Taxes and license ........ 8,534 3,146
Telephone ................ 11,737 8,014
Travel ................... 3,092 11,213
Utilities ................ 4,182 368
--------- ---------
Total Operating Expenses 536,710 447,175
--------- ---------
NET LOSS .................... $(675,255) $(455,529)
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
For the Year Ended December 31, 1999 and for the Period from March 23, 1998
(Date of Inception) through December 31, 1998
<TABLE>
<CAPTION>
Common Retained
Shares Stock Earnings Total
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
BALANCE - March 23, 1998 .. -- $ -- $ -- $ --
Shares issued ............. 12,000 12,000 -- 12,000
Net loss .................. -- -- (455,529) (455,529)
----------- ----------- ----------- -----------
BALANCE - December 31, 1998 12,000 12,000 (455,529) (443,529)
Shares issued ............. 4,025 -- -- --
Net loss .................. -- -- (675,255) (675,255)
----------- ----------- ----------- -----------
BALANCE - December 31, 1999 16,025 $ 12,000 $(1,130,784) $(1,118,784)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1999 and for the Period from March 23, 1998
(Date of Inception) through December 31, 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .......................................... $(675,255) $(455,529)
--------- ---------
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation expense .......................... 90,835 40,524
Changes in
Accounts receivable ......................... (35,605) (3,345)
Prepaid and deferred charges ................ (55,311) (21,007)
Accounts payable and accrued expenses ....... 161,786 316,212
--------- ---------
Total Adjustments ......... 161,705 332,384
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES ........... (513,550) (123,145)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital stock issuance ........................ -- 12,000
Loan from related parties (Note 4E) ........... 212,928 127,972
Advance from ITHC (Note 4F) ................... 435,000 --
Principal payments on capital leases .......... (91,366) (3,635)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....... 556,562 136,337
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ............ (22,922) (12,891)
--------- ---------
INCREASE IN CASH ................................ 20,090 302
CASH - beginning of year ........................ 302 --
--------- ---------
end of year .............................. $ 20,392 $ 302
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for income taxes ....... $ 800 $ 800
Cash paid during the year for interest ........... $ 14,892 $ 3,436
NONCASH TRANSACTIONS
Fixed assets purchased with capital leases ....... $ 24,594 $ 223,777
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Method of Accounting
The Company uses the accrual method of accounting for recording
income and expenses.
B. Property and Equipment
Property and equipment are recorded at cost. Depreciation is
computed using the straight-line method for financial reporting
purposes and amounted to $90,835 and $40,524 for 1999 and 1998,
respectively. Estimated useful lives of the assets are:
<TABLE>
<CAPTION>
Computer software 3 years
<S> <C>
Computer equipment ... 3 years
Office furniture ..... 7 years
Telephone equipment .. 5 years
Leasehold improvements 5 years
</TABLE>
C. Income Taxes
The Company has elected to be taxed under the provision of
Subchapter S of the Internal Revenue Code. Under those provisions,
the Company generally does not pay Federal Corporate tax on its
taxable income. Instead, taxes on the operating profits and
losses are the individual responsibility of the shareholders.
For California state franchise tax purposes the Company is
treated as an S Corporation. Under this election, the net profits
or losses flow to the shareholders and the Company is taxed
directly on its income at a rate of 1.5% for December 31, 1999
and 1998.
The provision for income taxes consists of state taxes currently
due and, if material, deferred taxes resulting from differences
in the accounting methods used for financial reporting purposes
and those used for income tax reporting. There are no material
deferred income tax items, as determined under Statement of
Financial Accounting Standards No. 109, for 1999 and 1998.
D. Allowance for Doubtful Accounts
No allowance for doubtful accounts has been provided as no
material write-offs are expected at December 31, 1999 and 1998.
F-6
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
E. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F. Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in checking
and savings accounts.
G. Advertising
The Company expenses advertising costs as they are incurred.
Advertising expenses for the years ended December 31, 1999 and 1998
were $3,797 and $215 respectively.
Note 2 - BUSINESS
The Company is a FCC licensed long distance carrier. It services
primarily long distance telephone communications to a world-wide
customer base through callback and debit and credit card
applications.
Note 3 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Property and equipment consists of the following:
Furniture and fixtures ....................... $ 1,342 $ 1,127
Leasehold improvements ....................... 12,931 -
Computer equipment ........................... 64,533 34,395
Switch equipment ............................. 217,368 217,368
Computer software ............................ 6,015 -
-------- --------
302,189 252,890
Less: accumulated depreciation .............. (131,359) (40,524)
-------- ---------
Total ........................................... $170,830 $ 212,366
======== =========
</TABLE>
F-7
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 4 - LONG-TERM LOANS PAYABLE
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
A. Dell Financial, two capital leases of computer
equipment, payable $925 per month including
interest at 24%, through July, 2000 and May, 2001 ... $ 13,683 $ 20,564
B. Cisco, capital lease of switching equipment,
payable at $7,227 per month, including interest
at 4%, through June, 2001 ........................... 125,911 205,605
C. Dimension Funding, two capital leases of
computer equipment, payable at $1,100 per month,
including interest at 24 and 21%, through
September, 2001 and November, 2002 .................. 24,561 10,197
D. Lucent Technologies Product Financing, capital
lease of telephone equipment, payable at $332 per
month, including interest at 21%, through April, 2002 7,222 -
E. Ladia, LLC, a related party shareholder as of 1999,
note payable secured by corporate assets, no monthly
payments, due February 12, 2001, interest at 12%,
including accrued interest of $35,924 at
December 31, 1999 ................................... 350,924 95,000
F. ITHC, loan advance, no repayment terms, no interest
charged ............................................. 435,000 -
---------- ----------
Total Loans Payable .............................................. 957,301 331,366
Less: portion due in one year .................................. (102,969) (89,538)
---------- ----------
Total Long-Term Loans Payable ................................... $ 854,332 $ 241,828
========== ==========
</TABLE>
F-8
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 4 - LONG-TERM LOANS PAYABLE (continued)
Maturities of long-term debt (exclusive of the capital lease),
for each of the five years succeeding December 31, 1999, are
as follows:
Year
----
2001 $350,924
Thereafter 435,000
--------
Total .... $785,924
========
Future minimum lease payments under the capital lease for each of
the five years succeeding December 31, 1999, are as follows:
Year
----
2000 $ 113,849
2001 64,567
2002 8,744
---------
187,160
Less imputed interest (15,783)
---------
Total $ 171,377
=========
Note 5 - REVENUES FROM MAJOR CUSTOMERS
One customer accounts for all of the revenue for both periods.
Note 6 - DEVELOPMENT STAGE
The company was formed March 23, 1998, and was in the
development stage until July, 1999.
Note 7 - RELATED PARTY TRANSACTIONS
In addition to the loan to shareholder (Note 4E) which has
accrued interest of $34,275 as of December 31, 1999, another
shareholder has loaned $25,900, accruing interest at 10%, with
$3,973 accrued at December 31, 1999. No interest has been paid
on either loan as of December 31, 1999.
F-9
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 8 - LEASE COMMITMENTS
Operating Leases
The Company has entered into two leases for office and switching
room space in one facility. The terms of the lease are until
February 14, 2000 for one lease at $850 per month, and until
September 30, 2001 for the other lease at $954 per month until
October 1, 2000, and $1,002 per month thereafter. Rent expense
for December 31, 1999 and 1998 is $25,365 and $8,025, respectively.
Future minimum lease payments on the operating lease are as follows:
Year
----
2000 $13,207
2001 9,020
-------
Total $22,227
=======
Capital Leases
The Company purchased equipment which is financed through leasing
arrangements. The equipment was placed in service from 1998 to
1999 and is being depreciated over three years. The total cost of
the equipment is $266,377 and $240,000 at December 31, 1999 and
1998, respectively. The accumulated depreciation is $124,396 and
$40,000 at December 31, 1999 and 1998, respectively. Depreciation
expense for assets under capital leases is $84,396 and $40,000, for
the years ended December 31, 1999 and 1998, respectively.
See Note 4.
F-10
<PAGE>
AQUILA INTERNATIONAL TELECOMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF
OPERATIONS AND UNAUDITED PRO FORMA
COMBINED BALANCE SHEETS
The following unaudited pro forma combined statements of operations for the year
ended June 30, 1999 and the nine month period ended March 31, 2000 and the
unaudited pro forma combined balance sheets as of June 30, 1999 and March 31,
2000, give effect to the business combination of Silverthorne Production Company
and Aquila International Telecommunications, Inc.. The transaction between
Silverthorne Production Company and Aquila International Telecommunications,
Inc. has been accounted for as a combination of companies under the purchase
method. The unaudited pro forma statements of operations have been prepared as
if the proposed transaction occurred on July 1, 1998. The unaudited pro forma
balance sheets have been prepared as if the proposed transaction occurred June
30, 1999 and March 31, 2000, respectively. These pro forma statements are not
necessarily indicative of the results of operations or the financial position
as they may be in the future or as they might have been had the transactions
become effective on the above-mentioned dates.
The unaudited pro forma combined statements of operations for the year ended
June 30, 1999 and the nine month period ended March 31, 2000 include the results
of operations of Aquila International Telecommunications, Inc., Silverthorne
Production Company and previous acquisitions reported in amendments to Current
Reports on Form 8-K that were previously filed during 1999.
The unaudited pro forma combined statements of income and the unaudited pro
forma combined balance sheets should be read in conjunction with the separate
historical financial statements and notes thereto of Silverthorne Production
Company, Aquila International Telecommunications, Inc. and those previous
acquisitions in 1999 reported as amendments to Current Reports on Form 8-K.
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
As of March 31, 2000
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------
Silverthorne (2) Aquila Total Debit Credit Combined
---------------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current
assets $ 3,309,584 $ 59,194 $ 3,368,778 $ 67,666 (3) $ (59,194) (3) $ 3,377,250
Property and
equipment,
net 254,038 151,018 405,056 142,135 (3) (151,018) (3) 396,173
Other assets 1,532,954 76,996 1,609,950 3,086,217 (3) (76,996) (3) 4,619,171
----------- ----------- ----------- ----------- ---------- -----------
Total assets $ 5,096,576 $ 287,208 $ 5,383,784 $ 3,296,018 $ (287,208) $ 8,392,594
=========== =========== =========== =========== ========== ===========
Liabilities
and
Shareholders'
equity
Total current
liabilities $ 1,275,234 $ 195,926 $ 1,471,160 $ 195,926 (3) $(210,260) (3) $ 1,485,494
Long-term debt 180,000 1,302,672 1,482,672 1,302,672 (3) (406,361) (3) 586,361
----------- ----------- ----------- ----------- --------- -----------
Shareholders'
equity
(deficit) 3,641,342 (1,211,390) 2,429,952 - (3,890,787) (3) 6,320,739
----------- ----------- ----------- ----------- --------- -----------
Total
liabilities
and equity $ 5,096,576 $ 287,208 $ 5,383,784 $ 1,498,598 $(4,507,408) $ 8,392,594
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
As of June 30, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------
Silverthorne (1) Aquila Total Debit Credit Combined
---------------- --------- ----------- ----------- ----------- ----------
Assets
<S> <C> <C> <C> <C> <C> <C>
Current
assets ............. $ 326,583 $ 15,981 $ 342,564 $ 67,666 (3) $ (15,981) (3) $ 394,249
Property and
equipment, net ...... 79,356 32,159 111,515 142,135 (3) (32,159) (3) 221,491
Other assets ......... 1,517,644 30,077 1,547,721 3,086,217 (3) (30,077) (3) 4,603,861
----------- --------- ---------- ----------- ----------- -----------
Total assets ......... $ 1,923,583 $ 78,217 $ 2,001,800 $ 3,296,018 $ (78,217) $ 5,219,601
=========== ========= =========== =========== =========== ===========
Liabilities
and
Shareholders'
Equity
Total current
liabilities ......... $ 1,985,148 $ 108,777 $ 2,093,925 $ 108,777 (3) $ (210,260) (3) $2,195,408
Long-term debt ....... -- 683,137 683,137 683,137 (3) (406,361) (3) 406,361
Shareholders'
equity (deficit) .... (61,565) (713,697) (775,262) - (3,393,014) (3) 2,617,832
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities
and equity .......... $ 1,923,583 $ 78,217 $ 2,001,800 $ 791,914 $(4,009,715) $ 5,219,601
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
For the Nine Months Ended March 31, 2000
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------
Silverthorne (2) Aquila Total Debit Credit Combined
---------------- ----------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,592,189 $ 229,151 $ 2,821,340 $ - $ - $ 2,821,340
Cost of revenues 1,909,064 335,346 2,244,410 - - 2,244,410
------------ ---------- ----------- -------- ---------- --------------
Gross profit
(loss) 683,125 (106,195) 576,930 - - 576,930
------------- ---------- ----------- -------- ---------- --------------
Operating expenses
Selling, general
and admin 7,756,564 356,068 8,112,632 171,815 (5) (76,381) (4) 8,208,066
Interest expense 107,767 24,607 132,374 - (14,367) (4) 118,007
------------- ---------- ----------- -------- ---------- -------------
Total operating
expenses 7,864,331 380,675 8,245,006 171,815 (90,748) 8,326,073
------------- ---------- ----------- -------- ---------- -------------
Income (loss) from
operations (7,181,206) (486,870) (7,668,076) 171,815 (90,748) (7,749,143)
------------- --------- ----------- -------- ---------- -------------
Other income
(expense) 59,179 - 59,179 - - 59,179
Income (loss) before
taxes (7,122,027) (486,870) (7,608,897) 171,815 (90,748) (7,689,964)
Income tax expense
(benefit) - - - - - -
------------- --------- ----------- -------- ----------- -------------
Net income (loss) $ (7,122,027) $(486,870) $(7,608,897 $171,815 $ (90,748) $ (7,689,964)
============= ========= =========== ======== ============ =============
Basic earnings per
share $ (0.09) $ (0.10)
============= =============
Weighted average
pro forma shares
outstanding - basic 76,736,355 2,041,445 (3) 78,777,800
============= ========== =============
Diluted earnings
per share $ (0.09) $ (0.10)
============= =============
Weighted average
pro forma shares
outstanding - diluted 76,736,355 2,041,445 (3) 78,777,800
============= ========== =============
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------
Silverthorne (1) Aquila Total Debit Credit Combined
---------------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues ............. $ 1,807,401 $ 1,538 $ 1,808,939 $ - $ - $ 1,808,939
Cost of revenues ..... 1,232,950 47,449 1,280,399 - - 1,280,399
------------ ----------- ------------ ----------- ------------ ------------
Gross profit
(loss) ........... 574,451 (45,911) 528,540 - - 528,540
------------ ----------- ------------ ----------- ------------ ------------
Operating expenses
Selling, general
and admin ........ 730,302 752,713 1,483,015 229,087 (5) (101,841) (4) 1,610,261
Interest expense .. 67,814 31,315 99,129 - (29,635) (4) 69,494
------------ ----------- ------------ ----------- ------------ ------------
Total operating
expenses ........ 798,116 784,028 1,582,144 229,087 (131,476) 1,679,755
------------ ----------- ------------ ----------- ----------- ------------
Income (loss) from
operations .......... (223,665) (829,939) (1,053,604) 229,087 (131,476) (1,151,215)
------------ ----------- ------------ ----------- ----------- ------------
Other income (expense) (4,784) - (4,784) - - (4,784)
Income (loss) before
taxes ............... (228,449) (829,939) (1,058,388) 229,087 - (1,155,999)
Income tax expense
(benefit) ........... (85,211) - (85,211) 85,211 (6) (131,476) -
------------ ----------- ------------ ----------- ----------- ------------
Net income (loss) .... $ (143,238) $ (829,939) $ (973,177) $ 314,298 $ (131,476) $ (1,155,999)
============ =========== ============ =========== =========== ============
Basic earnings per
share ............... $ (0.01) $ (0.04)
============ ============
Weighted average
pro forma shares
outstanding - basic 27,500,000 2,041,445 (3) 29,541,445
============ ============ ============
Diluted earnings
per share ........... $ (0.01) $ (0.04)
============ ============
Weighted average
pro forma shares
outstanding - diluted 27,500,000 2,041,445 (3) 29,541,445
============ ============ ============
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Combined Financial Statements
The following notes and adjustments are related to the business combination
between Silverthorne Production Company (Silverthorne) and Aquila Internal
Telecommunications, Inc (Aquila).
1. Reflects the pro forma amounts, which gives effect to Silverthorne's reverse
acquisition with Inter-American Telecommunication Holding Corporation as
reported in a Current Report on Form 8-K/A dated March 8, 2000.
2. Reflects the March 31, 2000 unaudited balance sheet and statement of
operations for the nine months ended March 31, 2000 of Silverthorne as filed
in a Quarterly Report on Form 10-QSB on May 24, 2000.
3. Records the acquisition of Aquila for $2,697,397. To finance the
acquisition, Silverthorne issued 2,041,445 shares of its common stock. The
purchase price has been allocated as follows:
<TABLE>
<CAPTION>
Asset Category
<S> <C>
Cash ................. $ 13,652
Accounts receivable .. 54,014
Property and equipment 142,135
Intangible assets .... 3,009,900
Deposits ............. 76,317
Accounts payable ..... (40,886)
Accrued expenses ..... (169,374)
Debt ................. (406,361)
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$ 2,679,397
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</TABLE>
4. To eliminate depreciation and interest expense which will not continue
following the business combination.
5. To record depreciation and amortization of fixed assets and intangibles
acquired. Fixed assets are depreciated over a five-year life, intangible
assets over fifteen years.
6. Pro forma income tax adjustment to fully reserve for net operating losses
generated as it is currently more likely than not these will not be utilized
in the near future.
