Form 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
Of the Securities and Exchange Act of 1934
- --------------------------------------------------------------------------------
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934 FOR THE TRANSITION
PERIOD FROM _______ TO ______
Commission file number 0-25194
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InterAmericas Communications Corporation
(Exact name of registrant as specified in charter)
Texas 87-0464860
(State of Incorporation) (IRS Employee Identification)
1221 Brickell Avenue
Miami, Florida 33131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number:
(305) 377-6790
Indicate by check mark whether the registrant (1) filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period than that the registrant was required to file
such reports),
Yes [X] No [ ]
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 14, 1997 - 16,152,518
During August 1998 the Company has restated its December 31, 1997 and 1996
annual financial statements and second and third quarter 1996 and all 1997
quarterly unaudited financial statements to reflect the effect of revising the
price per share of Company common stock issued in connection with the May 1996
acquisition of Resetel from $2.25 to $5.99 per share. The revised price per
share is based on the average closing price of the Company's common stock for
the period of 14 days before and after the date the terms of the acquisition
were announced. The previously recorded purchase price was based on the
Company's March 1996 private placement.
NOTE: Page 1 of 11 sequentially numbered pages
<PAGE>
INTERAMERICAS COMMUNICATIONS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Condensed Consoldiated Financial Statements
Balance Sheets -- Three Months Ended March 31, 1997
and Year Ended December 31, 1996 3
Statements of Operations -- Three Months Ended
March 31, 1997 and 1996 4
Statements of Cash Flows -- Three Months Ended
March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations,
Financial Conditions and Liquidity and Capital Resources 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
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<PAGE>
InterAmericas Communications Corporation
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
DEC. 31, 1996
MARCK 31, 1997 AUDITED
(Unaudited) (As Restated)
(AS RESTATED)
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,016,070 $ 723,396
Restricted cash 350,000 0
Accounts receivable 42,887 113,277
Other receivables 81,757 96,686
Prepaid expenses 491,419 329,806
Due from related parties 170,150 26,424
Other current assets 69,046 38,236
----------- -----------
TOTAL CURRENT ASSETS 2,221,329 1,327,825
OTHER NONCURRENT ASSETS
Property and equipment, net 4,327,024 3,956,130
Intangible assets, net 9,441,877 9,567,107
Other assets 126,869 42,333
----------- -----------
TOTAL ASSETS $16,117,099 $14,893,395
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit $ 350,000 $ 0
Accounts payable and
accrued expenses 1,305,189 1,389,647
Lease obligations, current 138,605 114,308
Other current liabilities 388,048 171,303
----------- -----------
TOTAL CURRENT LIABILITIES 2,181,842 1,675,258
OTHER LIABILITIES
Convertible debentures 1,333,000 0
Lease obligations, less current portion 452,523 248,238
Deferred income taxes 156,996 152,105
----------- -----------
TOTAL OTHER LIABILITES 1,942,519 400,343
----------- -----------
TOTAL LIABILITIES 4,124,361 2,075,601
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, authorized
10,000,000 shares, none issued 0 0
Common stock, $.001 par value, authorized
50,000,000 shares, 16,152,518 issued
and outstanding 16,153 16,153
Additional paid in capital 23,477,957 23,167,957
Warrants 167,000
Accumulated deficit (11,572,406) (10,288,607)
Cummulative translation adjustments (95,966) (77,709)
----------- -----------
Total Stockholders' Equity 11,992,738 12,817,794
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,117,099 $14,893,395
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
InterAmericas Communications Corporation
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
1997 1996
(AS RESTATED) (AS RESTATED)
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<S> <C> <C>
Sales $ 324,168 $ 58,468
Cost of Sales (316,377) (159,685)
General and administrative expenses (1,093,731) (489,499)
----------- ------------
LOSS FROM OPERATIONS (1,085,940) (590,716)
Interest income and other 17,901 592
Interest expense (215,406) (30,805)
----------- ------------
NET LOSS $(1,283,445) $ (620,929)
=========== ============
NET LOSS PER SHARE $ (0.08) $ (0.05)
=========== ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 16,152,518 12,198,076
=========== ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
InterAmericas Communications Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------
1997 1996
(AS RESTATED) (AS RESTATED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,283,445) $ (620,929)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization and depreciation expense 278,440 111,672
Benefit conversion interest, net
of capitalized interest 178,000 0
Changes in assets and liabilities:
Accounts receivable 70,390 (42,199)
Other receivables 14,929
Prepaid expenses (161,613)
Due from related parties (143,726)
Other current assets (30,810) (29,432)
(Increase)/Decrease in other assets (79,645) 5,240
Accounts payable and accrued expenses (84,458) (648,772)
Lease obligations, current 24,297 0
Other current liabilities 216,745 0
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,000,896) (1,224,420)
CASH FLOWS FROM INVESTING ACTIVITES:
Acquisition of equipment (392,458) (96,453)
(Increase) in restricted cash (350,000) 0
----------- -----------
NET CASH USED IN INVESTING ACTIVITES: (742,458) (96,453)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable to Related Party 0 1,232,800
Proceeds from credit agreements 2,054,285 83,142
Issuance of Common Stock 0 1,125,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,054,285 2,440,942
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 310,931 1,120,069
EFFECT OF EXCHANGE RATE CHANGES ON CASH (18,257) 12,498
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 723,396 57,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,016,070 $ 1,189,567
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
CONVERSION OF NOTES PAYABLE TO EQUITY $ 1,985,627
===========
RESTRICTED CASH RECEIVED FROM BANK LINE OF CREDIT $ 350,000
===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
COMPANY OVERVIEW
InterAmericas Communications Corporation (the "Company") is a growing
provider of a wide range of telecommunications services over state-of-the-art
fiber optic networks in Santiago, Chile and Lima, Peru. The Company's strategy
is to provide advanced telecommunications services in selected markets in Latin
America, where market deregulation and high demand for access to emerging
telecommunications networks and services should create significant opportunities
for early market entry and expansion.
Currently, the Company has two major wholly owned subsidiaries.
Its Chilean subsidiary, Hewster-Chile ("Hewster"), provides business to
business communication to end users and other carriers in Santiago with high
quality voice and data digital communications services on a private line basis
through a 120 kilometer fiber optic network. In addition, Hewster-Chile provides
its customers with local and wide area network design, engineering,
installation, systems integration and support services. Santiago, the capital of
Chile, has a population of approximately 5.4 million people.
Its Peruvian subsidiary, Red de Servicios Empresariales de
Telecomunicaciones, S. A. ("Resetel"), intends to provide services similar to
Hewster, on a private line basis through a fiber optic network in metropolitan
Lima. Currently, the Company has installed approximately 30 kilometers of its
fiber optic network and plans to complete the installation of another 110
kilometers of fiber optic cable by the end of 1997. Lima, and its adjacent port
city of Callao, has a combined population of approximately 6.4 million people.
FORWARD-LOOKING STATEMENTS
Certain statements set forth below constitute "forward-looking
statements" within the meaning of the safe harbor statements provided under the
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. Given these uncertainties, investors and creditors are cautioned not
to place undue reliance on such forward-looking statements.
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<PAGE>
RECENT DEVELOPMENTS
In November 1996, the Company hired Patricio E. Northland as Chairman
and Chief Executive Officer. Mr. Northland, a U.S. citizen who grew up in Chile,
has an extensive background in international telecommunications and a wide
network of relationships in this industry throughout Latin America. On May 1,
1997, the Company hired Douglas G. Geib II as Chief Financial Officer. Mr. Geib
is a former Partner with the international accounting, tax and consulting firm
of Ernst & Young, LLP. Mr. Geib has extensive experience in corporate finance,
mergers and acquisitions, SEC public registration statements and industry
expertise in a variety of industries, including telecommunications. Terms of Mr.
Geib's three year employment agreement include base salary, performance awards
and non-qualified stock options to purchase 500,000 shares of the Company's
common stock at $2.42 per share.
The Company believes that the background and expertise of Mr. Northland
and Mr. Geib form the essential foundation to aggressively expand the Company's
current operations during the coming year.
On May 7, 1997 the Company issued $2 million of 8% convertible
debentures. This offering is in addition to a similar financing in February 1997
that raised $1.5 million. The terms and conditions of the May offering are
similar to the convertible debentures that were issued in February 1997. The
proceeds from the offering are being used to finance the construction of the
Resetel fiber optic network, complete construction of the Hewster fiber optic
network, and to pay for the administrative and operating costs of the Company.
BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company. The foregoing statements contain all
adjustments, consisting only of normal recurring adjustments which are, in the
opinion of the Company's management, necessary to present fairly the
consolidated financial position of the Company as of March 31, 1997 and the
consolidated results of its operations and its consolidated cash flows for the
three months ended March 31, 1997 and 1996.
Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. These unaudited condensed
consolidated financial statements should be read in conjunction with the
December 31, 1996 audited financial statements of the Company and the notes
thereto.
The financial statements have been prepared on the going concern basis
of accounting, which contemplates realization of assets and liquidation of
liabilities in the ordinary course of business. The Company has incurred
operating losses since its
-7-
<PAGE>
inception while investing in the infrastructure necessary to generate material
operating revenues in the future. In addition, the Company has funded a
significant amount of capital expenditures over the same time period. The
Company's continued funding of its operating expenses, working capital needs and
capital expenditures is dependent on its ability to raise additional financing
in the future. Historically, the Company has been successful in raising such
funds.
Amended Quarterly Financial Information
During August 1998, the Company restated its financial statements to
reflect the effect of revising the price per share of Company common stock
issued in connection with the May 1996 acquisition of Resetel from $2.25 to
$5.99 per share. The revised price per share is based on the average closing
price of the Company's common stock for the period of 14 days before and after
the date the terms of the acquisition were announced. The previously recorded
purchase price was based on the Company's March 1996 private placement. The
effect of the change in price per share increased the reported purchase price
from approximately $2,800 to $7,500.
During October 1997 and August 1998 the Company amended certain financial
information as reported on its March 31, 1997 Form 10-QSB. A summary of the
original and amended unaudited financial information and a description of the
related impact of the Company's statement of operations follows:
($000's) ($000's)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1997
------------ ------------
Revenues ................................. $ 58 $ 324
Loss from Operations ..................... (591) (1,085)
Net loss, as amended ..................... $ (621) $(1,283)
====== =======
Net basic and diluted loss per
share, as amended ....................... $(0.05) $ (0.08)
====== =======
General and administrative
expenses ................................
Depreciation expense ..................... 110 (a)
Interest expense ......................... 178 (b)
Amortization expenses .................... 58 (c)
------ -------
Net loss, as originally reported ......... $ (511) $(1,047)
====== =======
Net basic and diluted loss per
share, as originally reported ........... $(0.04) $ (0.06)
====== =======
- ----------------
(a) Reflects (i) adjustment identified in the fourth quarter of 1996 to provide
depreciation on assets placed in use during the first quarter of 1996, for
which depreciation initially had not commenced until the second quarter of
1996.
(b) Reflects additional interest identified in the fourth quarter of 1997
related to the beneficial conversion feature inherent in the 7%
Convertible Debentures issued in February 1997 (see Note 4). Of the total
adjustment of $310, the amount of $132 was capitalized as part of the
Company's fiber optic network.
(c) Reflects the quarterly effect of the Resetel purchase price described in
the introductory language to the table above.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The Company's sales for the three months ended March 31, 1997 were
$324,168 as compared to $58,468 for the three months ended March 31, 1996. This
increase of approximately $265,700, was attributable to the acquisition of
Hewster Servicios Intermedios, S.A. on July 31, 1996 (currently an operating
division of Hewster), an investment in the required infrastructure necessary to
drive incremental sales, and ongoing marketing of the Company's fiber optic
network in Santiago.
The Company's cost of sales for the three months ended March 31, 1997
was $316,377 as compared to $159,685 for the three months ended March 31, 1996.
This increase of approximately $156,692, was attributable to added costs
associated with the increase in sales discussed above. For the first quarter of
1997 the increase in cost of sales was at a slower rate than the increase in
sales, as compared to the first quarter of 1996, because a greater portion of
the Company's sales costs were more variable in nature during 1997.
The Company's selling, general and administrative expenses ("SG&A") for
the three months ended March 31, 1997 were $1,093,731 as compared to $489,499
for the three months ended March 31, 1996. This increase of approximately
$604,232, was primarily attributable to an increase in the number of personnel
at Hewster, additional marketing expenses related to the Chilean fiber optic
network and corporate expenses related to financing and business development
opportunities. Mr. Northland, the Company's new CEO, continues to emphasize the
importance of controlling all costs, especially SG&A, even though the Company is
growing rapidly.
The Company's interest expense for the three months ended March 31,
1997 was $215,406 as compared to $30,805 for the three months ended March 31,
1996. This increase of approximately $184,601, was due to additional financing
costs related to the issuance of convertible debentures in February 1997.
-8-
<PAGE>
The Company's net loss for the three months ended March 31, 1997 was
$1,225,007 as compared to $620,929 for the three months ended March 31, 1996.
The increase in the Company's net loss was primarily due to the ongoing
investment in the Company's infrastructure in anticipation that sales will
increase in the future.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced operating losses since its inception as a
result of efforts to construct its network infrastructure, build its customer
base, develop its systems, compensate new employees and expand into new markets.
On a cost effective basis, the Company expects to continue to focus on
increasing its customer base, internal resources and geographic coverage.
Accordingly, the Company expects that its cost of sales, SG&A and capital
expenditures will continue to increase significantly, all of which may have a
negative impact on operating results for the foreseeable future. The Company
expects to incur significant operating losses and to generate negative cash
flows from operating and construction activities during the next several years
while it further develops its business and installs and expands its fiber optic
network.
Should the Company not be able to obtain the necessary financing to
further develop its operations, the Company's business and prospects would be
materially adversely affected and the Company would be required to delay capital
and other expenditures. This, in turn, would delay the anticipated revenue
streams associated with those projects until such time, if any, that such
financing becomes available. The Company estimates that its present cash level
would allow the Company to continue operations for approximately three months,
although no assurance can be given in this regard.
Cash used in operating activities for the three months ended March 31,
1997 was approximately $1.0 million as compared to approximately $1.2 million
for the three months ended March 31, 1996. Cash used in operating activities
relate primary to operational, administrative and business development expenses
incurred prior to the generation of revenues.
Cash provided by financing activities during the three months ended
March 31, 1997 approximated $2.1 million and relates primarily to the proceeds
received from the issuance of convertible debentures in February 1997. Cash used
in investing activities during the three months ended March 31, 1997 was
approximately $822,000. These funds were used primarily to expand the Company's
fiber optic networks in Chile and Peru.
EFFECTS OF INFLATION
The Company does not believe that inflation had any significant impact
on operations in 1996, nor does it expect that it will have any significant
impact on operations throughout 1997.
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<PAGE>
PART II
OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed below are filed as part of this Report.
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------
* 10.1 Executive Employment and Severance Agreement
dated April 14, 1997 between InterAmericas
Corporation and Douglas G. Geib II.
* 10.2 Stock Option Agreement dated May 1, 1997 between
InterAmericas Communications Corporation and
Douglas G. Geib II.
* 10.3 Registration Rights Agreement dated May 1, 1997
between InterAmericas Communications
Corporation and Douglas G. Geib II.
* 10.4 Securities Purchase Agreement dated May 6, 1997
between InterAmericas Communications
Corporation and Arcadia Importers and
Exporters, Inc.
* 10.5 Debenture dated May 6, 1997 issued by
InterAmericas Communications Corporations to
Arcadia Importers and Exporters, Inc.
* 10.6 Registration Rights Agreement dated May 6, 1997
between InterAmericas Communications
Corporation and Arcadia Importers and
Exporters, Inc.
27 Financial Data Schedule (for SEC use only)
(b) During the first quarter of 1997, the Company did not file a Form
8-K.
*Previously filed as an exhibit to Form 10-Q filed with the SEC on May 14, 1997
and incorporated herewith by reference.
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<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, thereunto duly authorized.
INTERAMERICAS COMMUNICATIONS CORP.
/s/ Patricio E. Northland 5/14/97
- ------------------------------------------------ ---------------
Patricio E. Northland Date
President, Chairman of the Board and Chief
Executive Officer
/s/ Douglas G. Geib II 5/14/97
- ------------------------------------------------ ---------------
Douglas G. Geib II Date
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- ------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1) CONDENSED
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1997; 2) CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,016,070
<SECURITIES> 350,000
<RECEIVABLES> 146,037
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,221,329
<PP&E> 5,279,325
<DEPRECIATION> 1,084,301
<TOTAL-ASSETS> 16,117,099
<CURRENT-LIABILITIES> 2,181,842
<BONDS> 1,500,000
0
0
<COMMON> 16,153
<OTHER-SE> 11,976,585
<TOTAL-LIABILITY-AND-EQUITY> 16,117,099
<SALES> 0
<TOTAL-REVENUES> 324,168
<CGS> 0
<TOTAL-COSTS> 1,653,908
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,406
<INCOME-PRETAX> (1,283,445)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,283,445)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
