THIS DOCUMENT IS A COPY OF THE QUARTERLY REPORT ON FORM 10-Q FILED ON
FEBRUARY 17, 1999 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1998
Commission File Number: 0-22520
AMTEC, INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1989122
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
599 Lexington Avenue, 44th Floor
New York, New York 10022
(Address of principal executive offices
(212) 319-9160
(Registrant's telephone number)
Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 x No ____
Class Outstanding as of February 12, 1999
Common Stock, par value 30,811,721
$.001 per share
Transitional Small Business Format (Check one): Yes No x
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995.
Except for the historical information contained herein, the matters
discussed in this Quarterly Report are forward-looking statements which
involve risks and uncertainties, including but not limited to economic,
competitive, governmental, international and technological factors
affecting the Company's revenues, joint ventures, operations, markets and
prices, and other factors discussed in the Company's Annual Report on Form
10-K, filed with the Securities and Exchange Commission on June 30, 1998.
Page
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements 4
Consolidated Balance Sheets as of December 31, 1998 and 4
March 31, 1998
Consolidated Statement of Operations for the three and nine 5
months ended December 31, 1998 and 1997
Consolidated Statement of Cash Flows for the nine months 6
ended December 31, 1998 and 1997
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial Condition 12
and Result of Operations
PART II. OTHER INFORMATION 16
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Default upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
PART I
FINANCIAL INFORMATION
AMTEC INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS Dec. 31, 1998 Mar. 31, 1998
- ---------------------------------------------- ------------- -------------
<S> <C> <C>
ASSETS:
Current assets
Cash $ 5,850,056 $ 10,442,334
Accounts Receivable 104,881 114,661
Prepaid expenses and other current assets 228,129 356,554
------------ ------------
Total current assets 6,183,066 10,913,549
Property and equipment, net 821,265 897,265
Investment in construction of GSM networks,
net of amortization 28,518,017 28,461,810
Other assets 63,301 113,180
Deferred expenses -- 6,916
------------ ------------
TOTAL ASSETS $ 35,585,649 $ 40,392,720
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
Accounts payable $ 175,663 $ 551,705
Accrued expenses 47,491 798,376
Loans payable - shareholders -- 1,452,553
Bank loans payable within 1 year 4,000,000 --
Other current payables 9,737,721 10,234,872
------------ ------------
Total current liabilities 13,960,875 13,037,506
------------ ------------
Bank loans 17,528,747 20,028,602
Other payables 1,487,727 1,487,727
Minority interest -- 941,974
------------ ------------
TOTAL LIABILITIES 32,977,349 35,495,809
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock: authorized 10,000,000 shares
Series E Convertible Preferred Stock:
$.001 par value; 36.5 and 73 shares issued
and outstanding in Dec.31,1998 and
March 31,1998, respectively 1 1
Common stock: $.001 par value, authorized
100,000,000 shares; 30,008,426 and 26,532,502
issued and outstanding at Dec. 31, 1998 and
March 31, 1998, respectively 30,008 26,533
Additional paid-in capital 35,000,867 33,148,529
Accumulated deficit (32,693,336) (27,394,590)
Cumulative foreign currency exchange loss (690) 613
Non employee deferred option cost, net -- (1,378,1225)
Warrants 271,450 493,950
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,608,300 4,896,911
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 35,585,649 $ 40,392,720
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
AMTEC INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS Nine months ended Dec 31 Quarter ended Dec 31
1998 1997 1998 1997
- ---------------------------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
--------------------------- --------------------------
Expenses:
Selling, general and administrative 3,163,638 3,672,582 1,060,769 1,207,104
Amortization of GSM investment 1,709,845 - 624,048 -
-------------------------- --------------------------
Total expenses 4,873,483 3,672,582 1,684,817 1,207,104
-------------------------- --------------------------
Loss from operations (4,873,483) (3,672,582) (1,684,817) (1,207,104)
Other income (expense):
Amortization of stock options (459,374) - - -
Other - net (293,812) (81,721) (542,632) 21,339
--------------------------- --------------------------
Total other income (expense) (753,186) (81,721) (542,632) 21,339
--------------------------- --------------------------
Loss before minority interest (5,626,669) (3,754,303) (2,227,449) (1,185,765)
Minority interest in loss of subsidiaries (941,974) (49,330) (187,280) (272,371)
--------------------------- ---------------------------
Net loss (4,684,695) (3,704,973) (2,040,169) (913,394)
Preferred stock dividend 614,051 222,891 145,107 114,891
-------------------------- ---------------------------
Loss applicable to common shares (5,298,746) (3,927,864) (2,185,276) (1,028,285)
=========================== ===========================
Basic loss per common share (0.20) (0.13) (0.08) (0.04)
=========================== ===========================
Weighted average common shares outstanding 26,458,488 30,728,346 25,971,101 29,210,664
========================== ==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
AMTEC INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended
Dec. 31, 1998 Dec. 31, 1997
- ---------------------------------------------------- ------------- -------------
<S> <C> <C>
Cash flows used in operating activities:
Net loss $ (5,298,746) $ (3,704,973)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of deferred option cost 459,374 --
Depreciation and amortization of GSM investment 1,709,845 --
Depreciation 87,855 58,072
Preferred Stock dividend 614,051 --
Issuance of common and options stock for
compensation, directors' fees and services
rendered -- 392,381
(Increase) decrease in:
Accounts receivable 9,780 (116,215)
Prepaid expenses and other current assets 128,425 16,117
Deferred Expense 6,916 --
Other assets 49,879 4,827
Increase (decrease) in:
Accounts payable and accrued expenses (219,861) (506,655)
Accrued interest -- 93,126
Other current payables (497,151) --
Foreign currency loss (1,303) 280
Minority Interest (941,974) (20,082)
------------ ------------
Net cash used in operating activities (3,892,910) (3,783,122)
------------ ------------
Cash flows used in investing activities:
Purchase of property and equipment (11,855) (83,171)
GSM construction costs and additional investments (1,766,052) (9,101,705)
Timing reversal of investment in joint venture -- 1,192,000
------------ ------------
Net cash used in investing activities (1,777,907) (7,992,876)
------------ ------------
Cash flows from financing activities:
Borrowings 1,500,145 10,392,983
Preferred stock dividend -- (222,891)
Proceeds from sale of Series C convertible
preferred stock -- 2,500,000
Proceeds from sale of Series E convertible
preferred stock -- 6,691,035
Common stock buyback (321,606) --
Preferred stock buyback (100,000) --
------------ ------------
Net cash provided by financing activities 1,078,539 19,361,127
------------ ------------
Net increase (decrease) in cash and cash equivalents (4,592,278) 7,585,129
Cash and cash equivalents, beginning of period 10,442,334 5,390,871
------------ ------------
Cash and cash equivalents, end of period $ 5,850,056 $ 12,976,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
AMTEC, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
- -----------------------------------------------------------------------------
Supplemental Cash Information:
No income taxes were paid during the first nine months of fiscal 1999 or
1998.
Interest paid with respect to the bank loan and other vendors financing
during the first nine months of fiscal 1999 and 1998 were $ 1,709,000 and
$1,323,000 respectively.
Non Cash Financing Activities:
Shareholder loans payable of $1,452,553 and related accrued interest of
$906,488 were credited to Additional paid-in capital
34.9 shares of Series E Convertible Preferred Stock were converted into
4,776,188 shares of common stock (inclusive of conversions of preferred
dividends).
Warrants valued at $222,500 were cancelled and credited to Additional
paid-in capital.
The Company cancelled a Common Stock Investment Agreement, as permitted by
the Agreement, with Promethean Investment Group on August 12, 1998.
1,019,465 shares previously held in escrow designated for issuance under
terms of the agreement were cancelled.
The option granted to the Hebei Provincial Government to acquire 3,000,000
shares of the Company's common stock at a price of $3.0625 per share was
cancelled. Unamortized Deferred Option Cost valued at $918,751 was charged
to Additional Paid in Capital.
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements as of December 31, 1998 and
for the nine months then ended are unaudited and reflect all
adjustments which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results
for the interim period. All of the adjustments are of a normal
recurring nature. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto together with management's discussion
and analysis of financial condition and results of operations,
contained in the Annual Report on Form 10-K filed by the Company on
June 30, 1998 for the Company's fiscal year ended March 31, 1998.
The results of operations for the nine months ended December 31,
1998 are not necessarily indicative of the results for the entire
year ending March 31, 1999.
Basis of Presentation
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles.
Realization of a major portion of the assets in the accompanying
balance sheet is dependent upon the Company's existing projects
developing profitable operations.
Included in the financial statements are the financial statements of
the Company for the nine months ended December 31, 1998 and 1997 and
the financial statements of its joint venture subsidiaries for the
nine months ended September 30, 1998 and 1997.
Revenue Recognition
Due to the early stage of the networks' rollout, the Company has not
been able to determine its revenue earned under its cash flow
sharing contract with China United Telecommunications Incorporated
("UNICOM"). The Company elected to recognize revenue when cash is
received, which is once a year, during the Company's last quarter.
The Company is implementing a system to estimate its revenue from
the cash flow sharing contract and the Company expects to accrue
revenue beginning in its next fiscal year.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the Company, its 70%
owned subsidiary Hebei United Telecommunications Equipment Co., Ltd.
("Hebei Equipment") (a 20 year life Sino-foreign joint venture) and
subsidiary, and the Company's wholly owned subsidiary, ITV
Communications, Inc. All significant intercompany accounts and
transactions are eliminated in consolidation. Hebei Equipment in
turn owns 51% of Hebei United Telecommunications Engineering
Company, Ltd. ("Hebei Engineering") (a 25 year life Sino-foreign
joint venture).
NOTE 3 - ASSETS
The consolidated balance sheet includes approximately $28.5 million
of assets, net of amortization, associated with the construction of
the Hebei GSM Networks. The Company, which has the right to the
largest share of the distributable cash flow from these networks
over a fifteen year period, amortizes its investment in these
networks over that period.
NOTE 4 - LIABILITIES
The consolidated balance sheet includes total liabilities of
approximately $32.9 million. Of this amount, approximately $32.7
million are liabilities of AmTec's subsidiary (Hebei Engineering),
which are guaranteed by co-investors in the Company's joint venture
with no recourse to AmTec, Inc. During the quarter ended December
31, 1998, Hebei Engineering obtained a $1.5 million bank loan in
addition to its $20 million loan payable. $4 million of the loan
payable was reclassified to current liabilities as loan payable
within one year. AmTec, Inc.'s direct liabilities amount to
approximately $0.2 million. The decrease in consolidated liabilities
primarily relates to the elimination of shareholder loans and
related accrued expenses of ITV, Inc., an inactive wholly-owned
subsidiary.
NOTE 5 - CHANGES TO EQUITY
The decrease in Stockholders' Equity of approximately $2.3 million
is due primarily to the net loss for the nine months ended December
31, 1998 of approximately $5.3 million offset by an increase in
Additional paid-in capital resulting primarily from the cancellation
of shareholders' loans and related accrued interest.
On September 14, 1998 the Company announced its intention to
purchase up to $1 million of its common stock on the open market. As
of December 31, 1998, the Company had purchased 280,800 shares under
this program for a total cost of approximately $312,600. All the
common stock repurchased were cancelled as of December 31, 1998.
During the nine months ended December 31, 1998, the Company issued
4,776,188 shares of its Common Stock upon the conversion of 34.9
shares of its Series E Convertible Preferred Stock.
On November 10, 1998, 38.5 of the Company's Series E Convertible
Preferred Shares were acquired from an investment fund by the
Company and investors known to the Company. As a result of this
transaction, the Company bought back 3.08 Series E Convertible
Preferred Shares, at a consideration of US$100,000, which would have
been convertible into 433,754 common shares at the conversion rate
effective on November 12, 1998. All the Series E Convertible
Preferred Shares repurchased by the Company were retired on January
20, 1999.
During the quarter ended December 31, 1998, the Company cancelled
the option granted to the Hebei Provincial Government to acquire
3,000,000 shares of the Company's common stock at a price of $3.0625
per share. At the date of grant, $1,837,500 was capitalized as
Deferred Option Cost of which $918,751 was amortized through
September 31, 1998. The unamortized Deferred Option Cost up to the
date of cancellation was charged to Additional Paid in Capital.
NOTE 6 - SIGNIFICANT TRANSACTIONS
On August 27, 1998 the Company signed a definitive agreement with a
subsidiary of Global TeleSystems, Inc. ("GTS"), under which a
subsidiary of GTS will acquire approximately 5.9 million shares of
the Company's common stock and the Company, through a subsidiary,
will acquire GTS's 75% interest in a Shanghai-based joint venture.
The shares will be issued at a price of $1.35 per share and will
make GTS, through a wholly owned subsidiary, AmTec's second largest
shareholder following the close of the transaction with UIHH
described below. The joint venture holds the rights to a majority
share of the cash flow generated by Shanghai VSAT Network Systems
(SVC), the premier satellite-based telecommunications network
operator in China. The merger is subject to final due diligence
among other conditions.
On December 23, 1998, the company signed a definitive agreement with
UIH Hunan Inc. ("UIHH"), an indirect subsidiary of United
International Holdings, Inc., under which AmTec will issue to UIHH's
direct parent company $12 million of convertible preferred stock
("Series F Shares") in exchange for 100% of the common stock of
UIHH. The Series F Shares will be convertible into AmTec's common
stock at a price equal to the Average Closing Price of the common
stock during the ten trading days ending three trading days prior to
closing of the transaction. However, the conversion price of the
Series F Shares will be no higher than $1.25 per share. Once issued,
the Series F Shares will carry certain anti-dilution provisions.
UIHH holds a 49% interest in a Sino-foreign joint venture with the
Broadcasting Bureau of Hunan, the monopoly cable television operator
in Hunan Province, People's Republic of China. The agreement, which
is subject to satisfactory completion of due diligence and approvals
of appropriate regulatory authorities in China among other
conditions, provides UAP with a three year option to increase its
holdings in AmTec to 25% of AmTec's fully diluted common shares for
a price of $3 per share and with rights of co-investment with AmTec
in China. Subject to shareholder approval as required by the
American Stock Exchange, the consummation of this transaction will
make UAP AmTec's largest shareholder.
NOTE 7 - GSM NETWORK OPERATION
On October 1, 1998, Hebei Unicom's sixth GSM network launched
operations in the city of Langfang, Hebei Province, which has a
metropolitan area population of 3.6 million people. As of February
12, 1999 the subscriber base of the six networks reached
approximately 35,000 subscribers, an increase of 15,000 subscribers
from September 30, 1998.
NOTE 8 - NEW ACCOUNTING PRONOUNCEMENTS
Comprehensive Income - In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, "Reporting
Comprehensive Income". This statement is effective for financial
statements issued for periods beginning after December 31, 1997.
Management has evaluated the effect on its financial reporting of
the adoption of this statement and has found the majority of
required disclosures not to be applicable and the remainder not to
be significant.
Segments of an Enterprise and Related Information - In June 1997,
the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This statement is effective for
fiscal years beginning after December 15, 1997. SFAS No. 131
requires the reporting of profit and loss, specific revenue and
expense items, and assets for reportable segments. It also requires
the reconciliation of total segment revenues, total segment profit
or loss, total segment assets, and other amounts disclosed for
segments, in each case to the corresponding amounts in the general
purpose financial statements. Management has evaluated the effect on
its financial reporting of the adoption of this statement and has
found the majority of required disclosures not to be applicable and
the remainder not to be significant.
Disclosures about Pensions and Other Postretirement Benefits--In
February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits". This Statement is
effective for fiscal years beginning after December 15, 1997. This
Statement revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits to the
extent practicable, and requires additional information on changes
in the benefit obligations and fair values of plan assets that will
facilitate financial analysis. Management is currently evaluating
the effect of adopting this statement on its financial reporting.
Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operation
AmTec, Inc. ("AmTec" or "the Company") is a telecommunications company with
operations in the People's Republic of China (the "PRC" or "China"). The
Company has focused its operations on China because of its large and
rapidly growing need for telecommunications services, its requirement for
foreign capital and technology to meet that need, and AmTec's opportunity
to obtain cash flow sharing and technical services agreements with
operators who hold exclusive or semi-exclusive communications licenses. The
Company has established majority ownership in joint ventures with Chinese
and other partners to provide financing, network construction and
operational consulting services to licensed China network operators. The
Company's current operations primarily are focused on a series of cellular
telephone networks in the northeastern province of Hebei, which has 11
major cities and a population of approximately 64 million people. These
networks are being launched with subscribers growing from 20,000 to 35,000
in the third quarter. Revenues and income will be shown in the fourth
quarter for the full year.
Key components of AmTec's business strategy are developing existing network
interests and obtaining additional interests in communications networks in
China, including combining the efforts of major telecommunications
companies in China. Amtec is in the process of closing mergers with 1) GTS
which will give the Company data networking services throughout China from
Shanghai and with 2)UIHH which will give the company cable television
transmission for 255,000 subscribers in Hunan Province.
Joint Ventures in China
AmTec holds a 70% interest in Hebei United Telecommunications Equipment
Company Limited ("Hebei Equipment"), a Sino-foreign joint venture with a
wholly-owned subsidiary of the Electronics Industry Department of Hebei
Province. Hebei Equipment, in turn, holds a 51% interest in Hebei United
Telecommunications Engineering Company Limited ("Hebei Engineering"), a
joint venture with NTT International ("NTTI") and Itochu Corp. Both Hebei
Equipment and Hebei Engineering are organized as Sino-foreign equity joint
ventures under the laws of China and are headquartered in Shijiazhuang, the
capital of Hebei Province. If the mergers with GTS and UIHH close as
expected. AmTec will acquire their interest in China which are also
Sino-foreign joint ventures.
Cellular Telephone Networks
Currently, legal restrictions in China prohibit foreign participation in
the operation and ownership of communications networks. Therefore, the
Company has established majority ownership in joint ventures with Chinese
and other partners to provide financing, network construction and
operational consulting services to licensed Chinese network operators.
Substantially all of the Company's revenues are derived from contractual
arrangements for the sharing of cash flows generated from network
operations rather than from ownership or operation of the networks. Until
regulations in China change to permit direct foreign ownership and
operations of communications networks, all future revenues of the Company
will continue to be derived from these contractual arrangements.
Through Hebei Engineering, AmTec entered into an agreement (the "Unicom
Agreement") on February 9, 1996 with Unicom to (i) finance and assist
Unicom in the construction of cellular networks (the "GSM Networks" or "GSM
Project") in the ten largest cities in Hebei Province and (ii) provide
consulting and management support services to Unicom in its operation of
the GSM Networks in the 10 largest cities of Hebei Province. This GSM
Project will have a capacity of up to 70,000 subscribers. Hebei Engineering
is entitled to 78% of the distributable cash flow (defined as activation
charges plus depreciation plus net income) from the GSM Networks for a
15-year period commencing February 9, 1996.
The construction and operational plan for the GSM Networks consists of a
"roll-out" across Hebei Province on a city-by-city basis. As of February
12, 1999 six cities, were providing commercial service, to approximately
35,000 subscribers.
As of December 31, 1998, construction of the GSM Networks had been financed
by Hebei Engineering with $3 million of equity capital, approximately $11
million of vendor financing guaranteed by NTTI, and a $21.5 million Term
Loan facility from Bank of Tokyo Mitsubishi also guaranteed by NTTI and
Itochu. Of the $3 million of equity raised by Hebei Engineering, $1.53
million was contributed by Hebei Equipment.
Achievement of the Company's business objectives is dependent upon Unicom's
operation of the GSM Networks, among other factors. The implementation of
the GSM Networks involves systems design, site procurement, construction,
electronics installation, initial systems optimization and receipt of
necessary permits and business licenses prior to commencing commercial
service. While no major difficulties have been encountered to date in
launching the six networks now operating, absence of difficulties in
launching additional networks can not be assured.
Results of Operations for the Nine and Three Months Ended December 31, 1998
As Compared to the Nine and Three Months Ended December 31, 1997.
Due to the early stage of the networks' rollout, the Company has not been
able to determine its revenue earned under its cash flow sharing contract
and the Company did not recognize revenue from the GSM operations during
the nine months ended December 31, 1998 and 1997. Instead revenues are
recognized when cash is received, which is expected to occur in the last
fiscal quarter. The Company is implementing a system to estimate its
revenue from the cash flow sharing contract and the Company expects to
begin accruing revenue within the next year as the networks continue to
develop.
As of February 12, 1999 six cellular networks serving approximately 35,000
subscribers were operating in Hebei province.
Selling, general and administrative expenses increased from approximately
$3.6 million during the nine months ended December 31, 1997 to
approximately $4.8 million during the nine months ended December 31, 1998.
The increase primarily related to increases in the amortization of the
investment in GSM network of approximately $1.7 million and an increase in
salaries and fringe benefits of approximately $0.3 million related to the
hiring of a Chief Financial Officer and General Counsel in June 1997. These
increases were offset by an approximately $0.8 million reduction in the
start-up costs of the Company's joint venture.
Selling, general and administrative expenses increased from approximately
$1.2 million during the three months ended December 31, 1997 to
approximately $1.6 million during the three months ended December 31, 1998.
The increase for the quarter was primarily attributed to the amortization
of the Company's investment in the GSM networks offset by a reduction in
the start-up costs of its joint venture.
The Company reported assets of approximately $35.6 million at December 31,
1998, a decrease of 12% or $5 million from March 31, 1998. This decrease
primarily related the funding of current operations of approximately $4.6
million using cash. The Company's additional investment in the GSM networks
of approximately $1.7 million during the nine months ended December 31,
1998 was offset by approximately the same amount of amortization provided
during the period.
The consolidated balance sheet of the Company includes total liabilities of
approximately $32.9 million. Of this amount, approximately $32.7 million
are liabilities of AmTec's Sino-foreign joint venture subsidiaries, with no
recourse to AmTec, Inc. AmTec's direct liabilities amount to approximately
$0.2 million. The decrease in consolidated liabilities is primarily
attributed to the elimination of shareholder loans and related accrued
expenses and a decrease in minority interest.
The Company's loss before dividends increased from $3.7 million during the
nine months ended December 31, 1997 to $5.6 million during the nine months
ended December 31, 1998. The increase in net loss primarily relates to an
increase in selling, general and administrative expenses and offset by an
increase in the minority interest in loss of subsidiaries.
The decrease in Stockholders' Equity of approximately $2.3 million for the
nine months ended December 31, 1998 was the net result of an increase in
Additional paid-in capital of approximately $1.8 million, a loss for the
nine months of approximately $5.3 million, the cancellation of deferred
option cost of $1.4 million and the cancellation of 300,000 warrants valued
at $0.2 million. The increase in Additional paid-in capital was due to the
elimination of approximately $2.4 million of shareholders' loans and
related accrued interest, elimination of $0.9 million deferred option cost,
amortization of the discount on the Series E Convertible Preferred Stock of
approximately $0.6 million and elimination of approximately $0.3 million
paid-in capital in relation to common stocks buy back during the nine
months ended December 31, 1998.
Liquidity and Capital Resources
While the Company reported $216,348 of revenue during the year ended March
31, 1998, it did not report revenues for the nine months ended December 31,
1998. As stated earlier, the Company has elected not to recognize revenue
earned under its contract with China UNICOM due to the early stage of the
networks' rollout and the availability of a system to report revenue on a
monthly basis. Instead revenues are recognized when cash is received under
the revenue sharing contract. However, the Company expects to begin
recognizing revenue on a quarterly basis beginning next year as the
networks continue to develop and system are implemented. As a result, the
Company generated an operating loss of $5.62 million and a loss applicable
to common shares of $5.29 million during this period. While the Company
expects to achieve profitable operations within several years, there can be
no assurances that the Company will achieve this goal. As a result, the
Company has financed its current activities primarily through private
equity placements.
During the nine months ended December 31, 1998, the Company's cash
decreased by approximately $4.6 million was primarily due to additional
investment in the GSM network of approximately $1.7 million, cash used to
fund current operations of approximately $3.9 million, $0.3 million of cash
used to buy back common stock, $0.1 million of cash used to buy back
preferred stock. The cash decrease was partially offset by an additional
$1.5 million bank loans obtained by the Company's subsidiary (Hebei
Engineering). The loan is guaranteed by co-investors in the Company's joint
venture with no recourse to AmTec, Inc. The Company's current cash position
plus anticipated funding is expected to be sufficient to support its
operations through January 1, 2000.
Equity Issuance
The Company issued 4,776,188 shares of its Common Stock during its first
nine months upon conversion of 34.9 shares of the Company's Series E
Convertible Preferred by certain holders of the Series E Shares.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Default upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during
the six months ended December 31, 1998.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the
nine months ended December 31, 1998.
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.
Dated: February 12, 1999 AmTec, Inc.
By: /s/ Joseph R. Wright, Jr.
-----------------------------
Joseph R. Wright, Jr.
Chief Executive Officer
By: /s/ Albert G. Pastino
------------------------------
Albert G. Pastino
Principal Financial and
Accounting Officer
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