SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
AMENDMENT #1
(Mark One)
[XX] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995 or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-17057
MICROTERRA, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 65-0250676
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4275 Aurora St, Suite F
Coral Gables, Florida 33146
(Address of principal executive offices)
(305) 443-2588
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes XX No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by
court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: The
number of shares of the registrant's common stock outstanding as
of May 12, 1995 was 5,257,897.
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MICROTERRA, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 68,066 $ 164,782
Accounts Receivable-net 613,970 368,703
Inventories 739,429 739,429
Due from related entity 26,169 318,000
Prepaid Expenses 294,747
Loans receivable
-related parties 125,445 153,241
Total Current Assets 1,867,826 1,744,155
PROP., PLANT & EQUIP-NET 1,063,879 1,168,439
OTHER ASSETS:
Investment in mining rts 82,501 82,501
Licenses-net 1,132,233 1,152,824
Non compete-net 150,000
Stock Redemption Option 15,400
Deposits & other assets 39,227 39,227
Total Other Assets 1,419,361 1,274,552
TOTAL ASSETS $ 4,351,066 $ 4,187,146
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
MICROTERRA, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Current Portion-LTD $ 68,456 $ 69,813
Note Payable 70,609 70,609
Account Payable 1,786,888 1,658,987
Accrued Expenses 125,616 127,613
Advances on contracts 1,117,503 1,117,503
Income taxes payable 47,500 47,500
Dividends payable 0 9,450
Total Current Liab 3,216,572 3,101,475
OTHER LIABILITIES:
Notes Payable, LT Portion 0 1,699
Total Other Liabilities 0 1,699
TOTAL LIABILITIES 3,216,572 3,103,174
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01
par value with liquidation preference
values of $10 and $15 per share
10,000,000 shares authorized;
210,533 and 213,533 shares issued
& outstanding respectively 2,105 2,135
Common stock, $.01 par value,
80,000,000 shares authorized;
5,457,897 and 4,817,657 shares
issued and outstanding 54,578 48,176
Additional PIC 445,192 25,300
Additional PIC-PFD 1,046,808 1,049,778
Retained (Deficit) (414,189) (41,417)
Total Stockholder's
Equity 1,134,494 1,083,972
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 4,351,066 $ 4,187,146
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
MICROTERRA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Mos Ended Three Mos Ended
March 31, 1995 March 31, 1994
<S> <C> <C>
INCOME $ 661,956 $ 444,179
COST OF SALES(excluding 546,089 267,694
depreciation and amortization)
GROSS PROFIT 115,867 176,485
EXPENSES:
Amortization & Depreciation 175,151 1,302
Other General & Admin 309,410 6,284
Total General & Admin 484,561 7,586
(LOSS) INCOME
FROM OPERATIONS $ (368,694) $ 168,899
OTHER (EXPENSES) INCOME
Interest Expense ( 4,078) ( 2,272)
NET (LOSS) INCOME
BEFORE TAXES $ (372,772) $ 166,627
INCOME TAXES 0 (57,690)
NET (LOSS) INCOME $ (372,772) 108,937
======= ========
NET (LOSS) INCOME
PER SHARE $ (0.08) $ 0.04
===== =====
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,965,734 2,830,000
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
MICROTERRA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Three Months
Ended Ended
March 31, 1995 March 31, 1994
<S> <C> <C>
Cash Flows from
Operating Activities
Net Income (Loss) $ ( 372,772) $ 108,937
Adjustments to reconcile net
(loss) to net cash
used in operating activities
Non-Cash Items:
Amortization and Depr 175,151 1,302
Stock issued for services 41,667
Changes in assets (increase) decrease:
Accounts receivable (245,267) 214,119
Prepaid expenses 6,586
Inventories
Loans receivable-
related party 27,796 (226,870)
Due from related parties ( 26,169)
Redemption Option ( 15,400)
Changes in liabilities increase
(decrease):
Accounts payable and
accrued expense 214,748 5,811
Net cash used in
operating activities (193,660) 103,299
Cash Flows from
Investing Activities: 0 0
Cash Flows from Financing Activities:
Payments on Borrowing ( 3,056) ( 74)
Stock subscription 100,000
Net cash provided by
Financing Activities 96,944 ( 74)
Net Increase (Decrease)
in Cash ( 96,716) 103,225
Cash at beginning of period 164,782 (34,809)
Cash at end of period 68,066 68,416
======= ======
</TABLE>
Note: Total Interest Paid for the quarter $1,983
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
MICROTERRA, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
During the first quarter of 1995, the Company issued 106,667 common
shares with a value of $55,694 as payment for accounts payable;
33,150 common shares with a value of $33,150 as payment on accrued
expenses; and 200,000 common stock with a value of $176,500 toward
long term employment contracts and 25,000 common shares worth
$25,000 for a field consultant's bonus. The Company also issued
75,423 common shares for the conversion of the "1992 Series"
Preferred Stock and its accrued dividends.
<PAGE>
MICROTERRA, INC..
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
Note 1. BASIS OF REPRESENTATION
On November 1, 1994, the Company acquired Rubeck Engineering
and Construction, Inc. in a transaction qualifying as a tax-free
reorganization and treated as a reverse acquisition. As such,
Rubeck Engineering and Construction, Inc. is treated as the
acquiror for accounting purposes. Therefore, the operating results
shown for the comparative 1994 period are those of Rubeck
Engineering and not those of the Microterra, Inc.
The accompanying financial statements reflect all adjustments
which, in the opinion of management, are necessary for fair
presentation of the financial position and the results of
operations for the interim period represented.
Certain financial information, which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which is not required for interim
reporting purposes has been condensed or omitted. The accompanying
financial statements should be read in conjunction with the
financial statements and notes thereto as of December 31, 1994,
which financial statements are contained in the Company's Annual
Report of Form 10-K.
Note 2. EARNINGS (LOSS) PER SHARE
Per share information is computed based upon the weighted
average number of shares outstanding during the period. In the
first quarter of 1994, Rubeck Engineering and Construction, Inc.
was a privately held corporation with 1,960 common shares
outstanding. In order to make the earnings per share calculation
comparable, the amount of common shares issued to Rubeck
Engineering and Construction, Inc. in November 1994 in the stock
for stock exchange was used. The Company issued 2,830,000 (post
split) shares of its common stock for the 100% of the outstanding
stock in Rubeck Engineering and Construction, Inc.
Note 3. DEFAULT OF MITCHELL POLE COMPANY, INC.
On August 12, 1994, the Company sold its Mitchell Pole
Company, Inc. subsidiary.
On March 22, 1995, the Company was notified that the principal
and interest payments due on the bonds was not paid by the
purchaser of Mitchell Pole Company, Inc. and the trustee demanded
payment from the Company. On April 3, 1995, when the Company did
not make the demanded payment, the Company was notified that the
bonds were in default. The purchaser has agreed to indemnify the
Company with respect to any guarantees of the Company related to
any outstanding revenue bonds issued by the Development Authority
of Mitchell County on behalf of Mitchell Pole Compay, Inc. The
<PAGE>
purchaser through a related company is in the process of
restructuring the debt by issuing new bonds and retiring the old
bonds, thereby eliminating the default and the Company's
guarantees. If this new bond issue does not come to fruition or
the purchaser does not cure the default, the Company could be
liable for the outstanding bond liability in the principal amount
of $4,240,000 plus accrued interest.
On April 19, 1995 signed a note in settlement of claims filed
with Amwest Surety Insurance Company in the principal sum of
$794,876.95 which is to be adjusted up or down to the amount
actually paid out for claims and bearing interest at the rate of
6%. The note was to mature on October 19,1995, unless a
Registration Statement filed by the Company was effective, in which
case an automatic 90 day extension is to be granted.
If no Registration Statement is effective on October 19, 1995, then
the note is to be paid in three monthly installments.
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (AMENDED)
BUSINESS OPERATIONS:
On November 9, 1994, the Company acquired Rubeck Engineering
and Construction, Inc., a privately-held company based in Los
Angeles, in a stock-for-stock exchange. The shareholders of Rubeck
received more than 50% of the issued and outstanding stock
following the acquisition; the acquisition was a "reverse
acquisition". In order to accomplish the acquisition, a reverse
stock split was required; a 20-1 reverse split was done.
Rubeck is a California corporation, organized on March 18,
1991 with principal offices located at 206 South Detroit Street,
Los Angeles, California 90036-3034. Its main telephone number at
that address is (213) 931-1695. Rubeck is engaged in the
installation of fueling stations, including:
1. Retrofitting of existing fueling stations with EPA-required
upgrades;
2. Construction of new, environmentally sound, underground and
aboveground fuel storage systems;
3. Decommissioning of old fuel tanks; and
4. Remediation (bio-remediation) of hazardous materials from
groundwater and soil.
Rubeck's contracts are almost entirely with the governmental
sector, such as the Department of the Interior, the National Park
Service and the Department of Defense (Air Force, Army and Navy).
LIQUIDITY AND CAPITAL RESOURCES:
At the time of the acquisition of Rubeck by the Company, the
Company had sold its operating subsidiary (Mitchell Pole Company,
Inc.), disposed of the site intended for the wood treatment
facility in Fitzgerald, Georgia, had entered into a sale-leaseback
transaction with respect to the Madison Parish Port bio-recycling
plant site, and completely depleted its cash, while having
liabilities of approximately $1,010,300. Rubeck anticipated the
availability of excess cash from its work-in-process to carry the
post-reorganization corporate structure overhead long enough to
raise capital to pay off pre-existing liabilities, increase working
capital and expand bonding capacity to create growth. However,
subsequent to the Company's acquisition of Rubeck, several problems
emerged, some of which were anticipated.
First, the re-emergence of market interest and support for
Microterra did not immediately develop. Initial efforts for a
private placement of common stock to obtain proceeds for the
repayment of the pre-reorganization liabilities of Microterra, Inc.
were unsuccessful. As a result, the ability to repay was limited
to the cash flow of Rubeck.
<PAGE>
Second, an unresolved dispute by Rubeck with Amwest Surety
Insurance Company and the Department of the Interior on the basis
for calculation for the volume of soil removed for remediation at
Yosemite created a disruption of cash flow on that job which
carried over to a second job.
Third, Rubeck's major job at the end of 1994 was in a northern
area of the country where a seasonal closure from November to May
is required by the U.S. Air Force. The seasonal closure
interrupted the job with a limited amount of work to be completed
under a contract where recovery of overhead and profit components
is "backloaded" at the end of the contract.
Fourth, the bonding companies denied additional bonding
availability to Rubeck pending receipt of audited consolidated
financial statements reflecting the acquisition of Rubeck by the
Company and a capital infusion to pay off pre-existing debt. This,
in turn, adversely impacted Rubeck's ability to bid for new work.
To overcome the loss of work due to the unavailability of
bonding, pending the issuance of the audited consolidated financial
statements and infusion of capital, Management:
1. Coast Engineering and Construction Corporation and
Mr. and Mrs Antico provided the bonding companies with
indemnities and pledges as guarantors.
2. Utilized the bonding capacity of Coast
Engineering
and Construction Corporation to bid for jobs which would
permit subcontracting of work or assignment of the
contracts to Rubeck; and
3. Entered into a Joint Operating Agreement
with HWB
Construction to cooperate on its large workload.
This resulted in Rubeck and the Joint Operating Agreement starting
jobs steadily since February:
<TABLE>
<S> <C> <C>
February: Rubeck - 2 jobs, HWB - 1 job
March: Rubeck - 2 jobs, HWB - 2 jobs
April: Rubeck - 0 jobs, HWB - 3 jobs
May: Rubeck - 2 jobs, HWB - 1 job
</TABLE>
However, this strategy did not wholly solve the problem, short
term. Certain Coast jobs involve the withholding of a 10%
retention from job progress payments. Federal contracts utilize
a "Schedule of Values" for determination of progress payments which
"backload" the overhead and profit recovery to the end of the
contract, the average contract length being 5 months. Furthermore,
in performing such contracts, the contractor bills at the end of
each 30 days for the work performed during those thirty days and
the delay in payment is 15 to 30 days. This means that a
contractor must carry the job for 45 to 60 days, as well as waiting
for recovery of overhead and profit. While management's strategy
has continued the work flow, it has resulted in severely straining
the available cash flow. Management anticipates that as the jobs
<PAGE>
mature, they will produce sufficient cash flow to cover not only
the job costs, but all G&A as well. While the Management strategy
provides jobs which are expected to maintain the Company's current
overhead through 1995, cash flow is initially strained and there
will be no immediate excess cash flow with which to deal with
pre-existing liabilities, especially those of Microterra.
In conjunction with the year-end audit of the Company's
financial statements, the 1992, 1993 and 1994 financial statements
of Rubeck were re-audited by the Company's auditors. This,
together with the new management's unfamiliarity with events prior
to November, 1994 contributed to a delay in the completion and
release of the audit. In turn, this delayed the filing of Form
10-K and the issuance of financial statements to bonding companies,
potential investors, etc. Management is now providing financial
statements to the interested parties and is proceeding with
negotiations with bonding companies and potential investors,
brokers and underwriters. Management is diligently pursuing a
number of financing negotiations for both current private
placements of equity and convertible debt securities as well as for
a later public financing with an interim bridge loan to improve the
balance sheet by reducing those liabilities. At present, the
Company is engaged in a number of such financing negotiations.
In March 1995, the Company was notified that the Mitchell Pole
Company, Inc, which it had sold in August 1994, had not made
payment on its bond obligations and demand was made upon the
Company. The Company was informed by the current owners of
Mitchell Pole Company, Inc. that the default was being deliberatly
induced so that they could restructure the debt of Mitchell Pole
with a new bond issue. On April 3, 1995, when the Company did not
make the demanded payments, the Company was notified that the bond
issues were in default. The Company has been closely monitoring
the situation and management has been informed that the new bond
issue should close within weeks. The Company was indemnified by
the purchasers of Mitchell Pole Company, Inc. with respect to the
Company's guarantees of the bond issues and if the new bond issue
does not come to fruition, management intends to pursue all legal
options available.
In summary, events since the Company's acquisition of Rubeck
have strained Rubeck's cash. During the first quarter, Management
has focused its attention on, and directed all available cash to,
the fuel storage system jobs of Rubeck (primarily obtained by
assignment or subcontract from Coast) and, secondarily, HWB
Construction in the expectation that as the jobs mature they will
not only replace the cash committed to them, but also generate cash
flow available for the reduction of the non-job liabilities,
including those of the Company which existed as of the date of the
Rubeck acquisition. While this strategy has been adequate, the
Company is limiting the starting of new jobs and restricting
on-going jobs (which lengthens job completion times and lessens the
overall profit) while recognizing that the jobs will not generate
sufficient liquidity to pay the prior liabilities. Accordingly,
the Company is seeking additional, external capital.
<PAGE>
RESULTS OF OPERATIONS
Rubeck realized gross revenues of $661,956 and $444,179 for
the three months ended March 31, 1995 and 1994 respectively. This
represents a 49% increase of revenues over the same quarter in
1994. However, the Cost of Sales was 82.5% for the 1995 period
and 60.3% for the 1994 period. This increase of 22.2% in cost of
sales was mostly caused by the liquidity strain discussed earlier.
Strained cash flow cripples the ability of Rubeck to complete its
jobs in the most cost efficient manner possible. Similarly, Rubeck
realized net profits before taxes of $166,627 for the first quarter
of 1994 while sustaining net losses of $(372,772) in the first
quarter of 1995. Most of this is due to the parent company and
subsidiaries other than Rubeck having no current operations, but
incurring costs for overhead, including accounting, legal,
royalties, public company expenses, and quarterly amortization of
the High Temperature Fluid Wall Reactor of $102,762 and the
bio-recycling license of $20,588. These additional expenses
resulted
in a huge increase of over 6,287 % increase in the amount of G&A
and other expenses in the 1st quarter 1995 over the 1st quarter
1994. Management needs the ability to bond additional jobs and the
liquidity to efficiently complete existing jobs in order to create
the cash flow necessary to cover the increased corporate overhead
expenses.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of the Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATLANTIS GROUP, INC.
(formerly known as Microterra, Inc.)
Date: April 29, 1996 Manuel E. Iglesias
Manuel E. Iglesias, President/CEO
Date: April 29, 1996 Lorenzo Palomares
Lorenzo Palomares, CFO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-30-1995
<CASH> 68,066
<SECURITIES> 0
<RECEIVABLES> 613,970
<ALLOWANCES> 0
<INVENTORY> 739,429
<CURRENT-ASSETS> 1,867,826
<PP&E> 1,259,758
<DEPRECIATION> 195,879
<TOTAL-ASSETS> 4,351,066
<CURRENT-LIABILITIES> 3,216,572
<BONDS> 0
<COMMON> 54,578
0
2,105
<OTHER-SE> 1,492,000
<TOTAL-LIABILITY-AND-EQUITY> 1,134,494
<SALES> 661,956
<TOTAL-REVENUES> 661,956
<CGS> 546,089
<TOTAL-COSTS> 546,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,078
<INCOME-PRETAX> (372,772)
<INCOME-TAX> 0
<INCOME-CONTINUING> (372,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (372,772)
<EPS-PRIMARY> ( .08)
<EPS-DILUTED> ( .08)
</TABLE>
