SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997 SEC File No 1-9690
INTERNATIONAL FIBERCOM, INC.
Incorporated in the State of Arizona IRS No. 86-0271282
3615 S. 28th Street
Phoenix, AZ 85040
(602) 941-1900
Indicate by check mark 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 preceding 12 months (or for such shorter period that the registrant was
required to file such report, and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Common Stock without par value 8,853,152 shares outstanding at September 30,
1997
<PAGE>
PART 1 - Financial Information
Item 1. Financial Statements
The financial statements are included herewith commencing on page F-1.
Item 2. Management's Discussion any Analysis of Financial Condition and Results
of Operations.
General
- -------
International FiberCom, Inc. (the "Company") is a holding company for two
wholly-owned subsidiaries: Kleven Construction, Inc., d/b/a Kleven
Communications ("Kleven") which specializes in the design, installation and
maintenance of fiber-optic and other cable services for the telecommunications
and cable television industries, and Concepts In Communication, Inc.
("Concepts"), which specializes in systems integration services, including
design engineering and installation and maintenance of structured cable systems,
network hardware and software, work station peripherals and intercommunication
systems, primarily within commercial, industrial and governmental facilities.
The Company derives substantially all of its revenue from contracts that are
accounted for under the percentage of completion method of accounting. Under
this method, revenues are recorded as construction on the job progresses so that
revenue recognized less cost incurred to date yield the percentage of gross
margin estimated for each contract. Overall gross margin percentages can
increase or decrease based upon changes in estimated gross margin percentages
over the lives of individual contracts on jobs.
The Company completed the acquisition of Concepts effective January 1, 1997. The
acquisition of Concepts, along with the existing Kleven subsidiary, has allowed
the Company to become one of the few complete telecommunications service
companies in the nation. The Company provides outside plant, complete
engineering, construction services, splicing and retro-fit systems utilizing
twisted pair, coaxial cable and a myriad of fiber-optic cable. In addition, the
Company can provide complete integration services for end users, as well as
structured cable systems and the required engineering. These services allow the
Company to service both the major telecommunications companies and cable
companies in their building of the "Information Superhighway."
Integration of Concepts has continued into the third quarter. Profitability of
the Concepts subsidiary has been adversly affected by, among other items, costs
attributable to opening a regional office in Phoenix, Arizona and an increase in
costs associated with its national accounts department in order to provide total
integration services for a major healthcare provider on a national basis. The
Company believes that these investments in Concepts will start to bear fruit in
the fourth quarter of this year, and more importantly, will continue to be
accretive on a long term basis. The Company continues to study locations for
future Concepts' offices as part of a general plan to become a national systems
integration concern.
2
<PAGE>
Acquisition
- -----------
The accompanying consolidated statements of operations include the results of
operations of Concepts which the Company acquired effective January 1, 1997.
The following unaudited pro forma condensed consolidated financial statements
for the quarter ended September 30, 1996 give effect to the acquisition of
Concepts by the Company pursuant to the Stock Purchase Agreement between the
parties, and are based on the estimates and assumptions set forth herein and in
the notes to such statements. This pro forma information has been prepared
utilizing the historical financial statements and notes thereto, which are
incorporated by reference herein. The pro forma financial data does not purport
to be indicative of the results which actually would have been obtained had the
purchase been effected on the dates indicated or of the results which may be
obtained in the future.
The pro forma financial information is based on the purchase method of
accounting for the acquisition of Concepts. The pro forma entries are described
in the accompanying footnotes to the unaudited pro forma condensed consolidated
statements. The pro forma unaudited condensed consolidated statements of
operations assume that the acquisition took place on the first day of the period
presented.
Results of Operations.
- ----------------------
The comparability of the results of operations for the third quarter of 1997
with the same period in 1996 was significantly impacted by the acquisition of
Concepts, as shown in the Unaudited Pro Forma Consolidated Statement of
Operations information contained in this Report. Therefore, Management's
Discussion and Analysis of Financial Condition and Results of Operations for
these periods discusses the operations in 1997 compared with actual operations
in 1996 and the operations in 1997 compared with 1996 pro forma figures as if
the Company had owned Concepts since January 1996, which it has not.
Contract Revenues.
- ------------------
Contract revenues for the three months ended September 30, 1997 increased to
$7,265,758 from $2,792,804 in 1996, an increase of 160%. This increase in
revenues is primarily attributable to the addition of Concepts' revenues for the
third quarter of 1997.
On a pro forma basis, contract revenues increased 8% from $6,712,714 in 1996 to
$7,265,758 during the quarter ended September 30. This increase is due primarily
to additional activity of Kleven in fiber optic systems installations for Cox
Communications.
Gross Profit.
- -------------
The Company's gross profit increased to $1,803,694 for the third quarter of 1997
compared with $116,684 in 1996 due to the increased contract revenues from the
Concepts acquisition and continued increase in the gross profit margin of
Kleven. The gross profit margins for the respective periods increased from 4% of
contract revenues in 1996 to 25% of contract revenues in 1997. This increase in
gross margins is primarily due to favorable price renegotiation of ongoing
contracts and increased field productivity of Kleven.
3
<PAGE>
On a pro forma basis, the Company's gross profit for the 1997 quarter was
$1,803,694 compared with $887,116 in 1996. The gross profit in 1996 for Concepts
includes an adjustment of $433,750 of overhead to indirect costs of contract
revenue to accurately and consistently state gross profit margins. The Company's
gross margin increased from 13% in the 1996 quarter to 25% in 1997. This gross
margin increase is primarily attributable to improved performance by Kleven as
noted above.
General and Administrative Costs.
- ---------------------------------
The Company's general and administrative expenses were $1,153,688 for the three
months ended September 30, 1997 compared with $509,010 in 1996, an increase of
126%, chiefly due to the addition of the general and administrative expenses of
Concepts.
On a pro forma basis, general and administrative expenses for the three months
ended September 30, 1997 were $1,153,688, or 16% of revenues, compared with
$1,095,179, or 16% of revenues, for the 1996 quarter. Certain overhead of
Concepts was transferred to indirect costs of construction for the 1996 period
in order to more accurately and consistently state gross profit margins. The
Company has and will continue to consolidate duplicative administrative
functions to the extent possible. In addition, administrative expenses of the
Company include amortization of intangibles resulting from the acquisition.
Other Income (Expense).
- -----------------------
The Company's net expense in this category was $114,020 for the 1997 quarter
compared with net expenses of 78,926 in the 1996 quarter.
Interest expense during the third quarter of 1997 increased from 1996 primarily
as a result of the issuance of $1.5 million of 8% Convertible Subordinated
Debentures ("Debentures") in February 1997 in connection with the acquisition of
Concepts. The increase in interest expense of Concepts represents the costs
associated with the Debentures.
On a pro forma basis, other expense was $114,020 in 1997 compared with a net
expense of $123,839 in 1996. The reduction is due primarily to a decrease in
interest expenses of Kleven because of debt reduction.
Provision for Income Tax Benefit (Expense).
- -------------------------------------------
No income tax expense was accrued in 1997 or 1996 because of net operating loss
carryovers of the Company and Kleven in 1996 and prior years. Such net operating
loss carryovers will be used to offset net income the Company generates in 1997
and possibly future years.
Net Income.
- -----------
The Company generated a net income of $535,986 or approximately 7% or revenues
for the three months ended September 30, 1997 compared with net loss of
($471,251) for the same period in 1996. This is primarily a result of better
profit margins and lower general and administrative expense of Kleven over the
prior period.
4
<PAGE>
On a pro forma basis, the Company's net income increased to $535,986 compared
with a loss of ($331,902), for the prior period. Such increase was primarily due
to the increased profitability of the Kleven subsidiary.
Preferred Stock Dividend
- ------------------------
The Company paid a dividend of $35,000 on its Series B Convertible Preferred
Stock ("Series B Preferred") for the second quarter of 1997. The Company elected
to pay such dividend by issuing 6,747 shares of its Common Stock, valued at
$5.187 per share. The foregoing dividends decreased net income attributable to
Common Stockholders by the amount of the dividend. The shares of Common Stock
outstanding will be adjusted for such dividend at the end of the third quarter
of 1997, although such shares were not issued until October 1997.
Backlog.
- --------
The Company had a backlog of approximately $3,240,000 on a work in process basis
as of September 30, 1997. The Company expects such work orders to be completed
by December 1997. Further, the Company has work orders, which were not started
at September 30, 1997, for Gambro Healthcare, the Cities of Phoenix and Peoria
and other clients, which total in excess of $8.0 million. The Company expects to
commence such work during the fourth quarter of 1997 and complete the same by
June 1998.
Liquidity and Capital Resources.
- --------------------------------
The Company has historically financed its operations through operating cash flow
and lines of credit. The Company's liquidity is impacted by the nature of
billing provisions under its contracts. Generally, in the early period of
contracts, cash expenditures and accrued profits are greater than allowed
billings, while contract completion results in billing previously unbilled costs
and profits. In the third quarter of 1997 the Company funded its operations
through an $800,000 line of credit and cash flow provided by its operating
activities, which was $69,478 at September 30, 1997, and $400,000 raised through
the sale of 150,000 shares of its Common Stock in a private placement under
Section 4(2) under the Securities Act of 1933 (the "Act").
In July 1997 the holders of 1,972 shares of Series A Convertible Preferred Stock
converted such shares into 2,126,463 shares of Common Stock under Regulation S
under the Act. Accordingly, including prior conversions which took place in
1996, there are no shares of the Series A Preferred issued and outstanding.
In October 1997 certain holders of 8% Convertible Subordinated Debentures
converted $900,000 principal amount of such Debentures into 720,000 shares of
Common Stock under Regulation S under the Act.
On November 13, 1997, the Company announced that it had completed the
acquisition of Compass Communications, Inc. ("Compass"), a privately held
telecommunications engineering firm headquartered in Atlanta, Georgia. The
Company is issuing 470,588 shares of its restricted Common Stock to acquire all
of the outstanding capital stock of Compass. In order to raise the funds
required for the provision of working capital to Compass, the Company sold $1.0
million principal amount of 5.5% Convertible Subordinated Debentures and 1,000
shares of Series C Convertible Preferred Stock at a price of $1,000 per share,
for gross offering proceeds of $1.0 million, in a private placement on October
27, 1997. The Company intends to apply the balance of the sales proceeds to its
working capital.
5
<PAGE>
In September 1997 the Company announced that it had signed a definitive
agreement to acquire the assets, business and real estate of a privately-held
telecommunications equipment company located in the southeastern United States.
The purchase price, which is subject to adjustment under certain circumstances,
is approximately $21 million and will be comprised of a combination of cash,
subordinated debt and fewer than 2.0 million shares of the Company's Common
Stock. The Company is seeking a significant amount of financing to complete the
purchase of such company and is presently exploring a private placement of debt
or equity securities or an institutional credit facility.
The Company is also pursuing the establishment of a larger line of credit from
institutional lenders to provide working capital for its expanded business. The
Company believes that the working capital provided by its most recent private
placement, along with internally generated cash flow from the operating
activities of Kleven and Concepts, will satisfy the anticipated growth of its
existing businesses for the next 12 months, exclusive of any required
acquisition financing.
Inflation.
- ----------
The Company does not believe that it is significantly impacted by inflation.
Seasonality.
- ------------
The Company's operations are not seasonal in nature.
Forward-looking Information and Risks of the Business.
- ------------------------------------------------------
This Report contains certain forward-looking statements and information. The
cautionary statements made in this Report should be read as being applicable to
all related forward-looking statements wherever they appear in this Report.
Forward-looking statements, by their very nature, include risks and
uncertainties. Accordingly, the Company's actual results could differ materially
from those discussed herein. A wide variety of factors could cause or contribute
to such differences and could adversely impact revenues, profitability, cash
flows and capital needs. Such factors, many of which are beyond the control of
the Company, include the following: the Company's success in obtaining new
contracts; the volume and type of work orders that are received under such
contracts; the accuracy of the cost estimates for the projects; the Company's
ability to complete the projects on time and within budget; levels of, and
ability to, collect accounts receivable; availability of trained personnel and
utilization of the Company's capacity to complete work; competition and
competitive pressures on pricing; and economic conditions in the United States
and in the region served by the Company.
Part II - Other Information
Item 1. Legal Proceedings
The Company has filed suit against two former officers of Kleven to collect on
unpaid promissory notes owed to the Company. The two former officers of the
Company have filed a countersuit against the Company alleging certain
counterclaims. In the opinion of legal counsel, no estimate can made as to the
time or the amount of the ultimate recovery. In addition, the Company believes
the countersuit is without merit and intends to vigorously defend its position.
The Company has settled a lawsuit with Salt River Project, a major utility
provider. The Company won on 5 of 7 counts. This positively impacted earnings
approximately $20,000, as a contingency had been established in 1996.
6
<PAGE>
Items 2, 3, 4, and 5 are omitted because these Items are inapplicable to this
Report.
7
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1997
(Unaudited)
ASSETS
September 30, December 31,
1997 1996
Current Assets:
Cash and cash equivalent $ 69,478 $ 3,972
Accounts receivable
- trade, net of allowance 5,812,261 2,458,477
- unbilled receivables 88,124 196,815
- other 65,941 27,769
Inventory 621,686
Prepaid expenses 146,752 37,912
Loans receivable - related parties 29,851
Accrued interest receivable 38,578
Costs and estimated earnings in excess of billings 1,905,281 249,546
=========== ===========
Total Current Assets 8,777,953 2,974,491
Property and Equipment, net 3,237,822 2,899,055
Other Assets:
Accounts receivable - long term 38,915 88,478
Loans receivable related party 563,866 562,025
Investments -CIC 1,555,103
Deferred acquisition costs 126,863 234,367
Mortgage closing costs 5,802 6,034
Investment in limited partnership 33,021 28,781
Refundable deposits 32,368 9,480
=========== ===========
2,355,938 929,165
=========== ===========
Total Assets $14,371,713 $ 6,802,711
=========== ===========
F-1
<PAGE>
INTERNATIONAL FIBERCOM, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Current Liabilities:
Notes payable current portion $ 746,339 $ 1,014,986
Notes payable term loans 708,354
Notes payable related party 6,000 6,000
Obligations under capital lease 143,337 110,355
Accounts payable
- trade 2,038,912 1,965,837
- related parties 9,610 24,610
Accrued offering costs 398,000
Accrued expense 874,813 358,585
Accrued interest 69,792
Billings in excess of cost estimated earnings 266,873 185,119
============ ============
Total Current Liabilities 5,262,030 3,665,492
============ ============
Long-Term Liabilities:
Notes payable-long term 318,524 544,833
Obligations under capital lease 276,303 384,108
Convertible debentures 1,500,000 0
============ ============
Total Long-Term Liabilities 2,094,827 928,941
============ ============
Total Liabilities 7,356,857 4,594,433
============ ============
Stockholder's Equity:
Series A convertible preferred
stock 10,000,000 authorized none issued and outstanding 0 1,680,997
Series B convertible preferred
stock 4,400 authorized 3,500 issued and outstanding 2,789,589
Common Stock, no par, 100,000,000 shares authorized:
9,031,842 shares issued, 8,853,152 outstanding 10,986,944 8,555,176
Common stock warrants 99,082 99,082
Additional paid-in capital 462,073 462,073
Retained earnings (7,921,033) (7,921,033)
Current period profit (loss) 1,266,218
============ ============
7,682,873 2,876,295
============ ============
Less: treasury stock 178,690 shares, at cost (668,017) (668,017)
============ ============
Total Stockholders' Equity 7,014,856 2,208,278
============ ============
Total Liabilities and Stockholders' Equity $ 14,371,713 $ 6,802,711
============ ============
</TABLE>
F-2
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Contract Revenues $ 7,265,758 $ 2,792,804 $ 20,362,396 $ 9,158,640
Cost of Contract Revenues 5,462,064 2,676,120 15,638,747 7,909,219
============ ============ ============ ============
Gross Profit 1,803,694 116,684 4,723,649 1,249,421
General and Administrative Expenses 1,153,688 509,010 3,191,547 1,638,387
============ ============ ============ ============
Profit from operations 650,006 (392,326) 1,532,102 (388,966)
Other Income (Expense):
Interest income 22,855 428 45,602 6,088
Interest expense (143,191) (87,432) (347,232) (279,331)
Other income (1,243) 78 1,712 36,578
Gain on disposal of assets 7,559 8,000 181,937 37,082
============ ============ ============ ============
(114,020) (78,926) (117,982) (199,583)
============ ============ ============ ============
Net income before income taxes 535,986 (471,251) 1,414,121 (588,549)
============ ============ ============ ============
Provision for tax benefit (expense) 0 0 160 0
============ ============ ============ ============
Net income 535,986 (471,251) 1,414,281 (588,549)
============ ============ ============ ============
Preferred stock dividend (35,000) 0 (148,063) 0
Net income attributable to
common stockholders $ 500,986 $ (471,251) $ 1,266,218 $ (588,549)
Earnings per Share:
Basic earnings per share $ 0.06 $ (0.08) $ 0.18 $ (0.10)
------------ ------------ ------------ ------------
Fully diluted earnings per share $ 0.03 $ (0.08) $ 0.08 $ (0.10)
------------ ------------ ------------ ------------
Basic weighted average shares outstanding 8,530,197 6,059,639 7,134,717 6,059,639
------------ ------------ ------------ ------------
Fully diluted weighted average shares
outstanding 16,152,004 6,059,639 15,860,068 6,059,639
------------ ------------ ------------ ------------
</TABLE>
F-3
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) 1,266,218 ($ 588,549)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and Amortization 723,660 527,325
(Increase) decrease in contracts receivable (3,263,553) 114,540
(Increase) decrease in subscriptions receivable 0 2,373,500
(Increase) decrease in inventory (621,686) 0
(Increase) decrease in costs and estimated earnings in
excess of billings on uncompleted contracts (1,655,735) (219,219)
(Increase) decrease in prepaid expenses (108,840) (62,263)
(Increase) decrease in accrued interest receivable (38,578)
(Increase) decrease in income tax refund 0 26,000
(Decrease) increase in accounts payable 58,075 (276,342)
(Decrease) increase in accrued expenses 586,020 (798,707)
(Decrease) increase in billings in excess of cost and
estimated earnings on uncompleted contracts 81,754 (114,461)
(Decrease) increase in accrued offering costs 398,000 0
=========== ===========
Net cash provided (used) by operating activities (2,574,665) 981,824
=========== ===========
Cash flows from investing activities:
(Purchase) sale of property and equipment (1,062,427) (120,569)
(Increase) decrease in deposits (22,888) 2,896
(Increase) decrease in goodwill and other assets (1,559,111) 84,586
(Increase) decrease in deferred acquisition costs 107,503 0
=========== ===========
Net cash provided (uses) by investing activities (2,536,923) (33,087)
Cash flows from financing activities:
(Repayment) increase of loans and other
liabilities payable 138,575 (1,452,718)
Proceeds from private offering, net 5,040,360 507,417
(Repayment) proceeds from stockholder loan (1,841) 108,939
=========== ===========
Net cash provided (used) by financing activities 5,177,094 (836,362)
=========== ===========
Net (decrease) increase in cash 65,506 112,375
Cash, beginning of period 3,972 (49,002)
Cash, end of period 69,478 63,373
=========== ===========
</TABLE>
F-4
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
For The Period Ended September 30, 1997
<TABLE>
<CAPTION>
Additional
Series A Preferred Series B Preferred Common Stock Stock Accumulated Paid-In Treasury
Shares Amount Shares Amount Shares Amount Warrants Deficit Capital Stock
------ ------ ------ ------ ------ ------ -------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stockholder's Equity,
December 31 ,1996 1,972 $ 1,680,997 -- -- 6,393,799 $ 8,555,176 $ 99,082 $(7,921,033) $462,073 $(668,017)
Issuance of Series B
convertible
preferred stock -- -- 3,500 2,789,589 -- -- -- -- -- --
Issuance of preferred
stock dividend -- -- -- -- 31,055 45,226 -- (45,226) -- --
Net Income for the
three month period
ended March 31, 1997 -- -- -- -- -- -- -- 430,069 -- --
Issuance of shares in payment
of note to Ray Tucker 115,833 202,708
Issuance of Preferred Stock Dividend 29,255 67,837 (67,837)
Net Income for Three Month Period
Ended June 30, 1997 448,225
------ ----------- ----- ----------- --------- ----------- ---------- ----------- -------- ---------
Stockholder's Equity
June 30, 1997 1,972 $ 1,680,997 3,500 $ 2,789,589 6,569,942 $ 8,870,947 $ 99,082 $(7,155,801) $462,073 $(668,017)
====== =========== ===== =========== ========= =========== ========== =========== ======== =========
Conversion of 1972 shares
of Series A, 9%
convertible preferred
stock to common stock (1,972) $(1,680,997) 2,126,463 $1,680,997
Issuance of preferred
stock dividend 6,747 35,000 (35,000)
Issuance of 150,000 shares
for private placement
effective August, 1997 150,000 400,000
Net Income for the three month
period September 30, 1997 $ 535,986
------ ----------- ----- ----------- --------- ----------- ---------- ----------- -------- ---------
Stockholder's Equity
September 30, 1997 -- -- 3,500 $ 2,789,589 8,853,152 $10,986,944 $ 99,082 $(6,654,815) $462,073 $(668,017)
====== =========== ===== =========== ========= =========== ========== =========== ======== =========
</TABLE>
F-5
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Significant accounting policies:
Basis of presentation:
In the opinion of management, the accompanying consolidated financial
statements reflect all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
September 30, 1997 and the results of its operations for the three
months ended September 30, 1997. Although management believes that the
disclosures in these financial statements are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in financial statements that have been
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of
the Securities Exchange Commission.
The results of operations for the three months ended September 30, 1997
are not necessarily indicative of the results that may be expected for
the full year ending December 31, 1997. The accompanying consolidated
financial statements should be read in conjunction with the more
detailed financial statements, and the related footnotes thereto, filed
with the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
Principles of consolidation:
The consolidated financial statements include the financial position,
results of operations and cash flows of International FiberCom, Inc.,
and its wholly-owned subsidiaries, Kleven Construction, Inc. and
Concepts In Communications, Inc. All material intercompany
transactions, accounts and balances have been eliminated.
Stock options, and restricted stock plans:
At September 30, 1996 the Company had a stock-based compensation plan,
described below. The Company applies APB Opinion 25 and related
Interpretations in accounting for its plan. There was no compensation
cost charged against income for its performance-based plan for the
period ended September 30, 1996. Had compensation cost for the
Company's stock-based plan been determined based on the fair value at
the grant dates for awards under the plan consistent with the method of
FASB Statement 123, the Company's net loss and loss per share would
have been changed to the pro forma amounts indicated below:
In January 1997 the Board of Directors adopted the 1997 International
FiberCom, Inc. Stock Option Plan and 1997 Restricted Stock Plan,
subject to approval by the shareholders at the next annual meeting of
shareholders of the Corporation. A total of 1,200,000 shares of the
Company's Common Stock was reserved and set aside for issuance upon the
exercise of options awarded or grants of stock made under the Plans.
F-6
<PAGE>
In fiscal 1997 through September 30, 1997 the Company has granted a
total of 779,500 options under the 1997 International FiberCom, Inc.
Stock Option Plan to officers, directors and employees at prices
ranging from $.9375 to $1.47 per share, which options are exercisable
through May and July 2002. Further, the Company has granted 77,200
options under the 1994 Incentive Stock Option Plan to such parties in
fiscal 1997 at a price of $1.4781 per share, which options are
exercisable through April 2002.
In fiscal 1997 through September 30, 1997 the Company has issued
486,666 warrants to third parties in connection with acquisitions and
financings at exercise prices ranging from $.9375 to $3.00 per share,
which warrants are exercisable during periods ending May 1998 through
April 2002. Also, in August 1997, the Company granted 450,000 stock
options to two officers exercisable at a price of $3.00 per share
through August 2004. Such options become effective only upon the
completion of two proposed acquisitions by the Company. With the
closing of the acquisition of Compass, 168,750 of such options became
effective in November 1997. In October 1997 the Company issued 67,000
warrants, which are exercisable at $7.20 per share through October 26,
1999, to the placement agent in connection with the private placement
of 5.5% Convertible Subordinated Debetures and Series C Convertible
Preferred Stock.
2. Stockholders' Equity:
During the quarter ended September 30, 1997, the Company issued 450,000
non-qualified stock option exerciseable at $3.00 per share, expiring in
2004.
All stock options issued to employees have an exercise price not less
than the fair market value of the Company's common stock on the date of
grant. In accordance with accounting for such options with utilizing
the intrinsic value method, there is no related compensation expense
recorded in the Company's financial statements for the quarter ended
September 30, 1997. Had compensation cost for stock-based compensation
been determined based on the fair value of the options at the grant
dates consistent with the method of SFAS 123, the Company's net income
and earnings per share for the quarter ended September 30, 1997 would
have been reduced to the proforma amounts presented below:
September 30, 1997
------------------
Net Income as reported $500,986
Proforma $185,986
Net Income per share as reported $0.06
Proforma $0.02
3. Concepts In Communications, Inc. Purchase
In January 1997 the Company acquired Concepts for $4.8 million from its
two shareholders. The Company paid $1.5 million at the closing, which
occurred on February 13, 1997, and the balance was paid in monthly
installments of $1.0 million in March and April and a final payment of
$1.3 million in May 1997. Of such final payment $200,000 of principal
and $2,798 of interest were paid through the issuance of 115,833 shares
of common stock.
F-7
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Pro Forma and Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Concepts IFC/ International
In Kleven Pro Forma FiberCom
Communications Combined Adjustments Consolidated
<S> <C> <C> <C> <C>
Contract Revenues $ 3,919,910 $ 2,792,804 $ 6,712,714
Cost of Contract Revenues 2,715,728 2,676,120 5,5,391,848
Indirect Costs of Contract Revenues 433,750 433,750
=========== =========== ===========
Gross Profit 770,432 116,684 887,116
General and Administrative Expenses 558,869 509,010 27,300(1) 1,095,179
Provision for doubtful accounts 0 0 0
=========== =========== ===========
Profits from Operations 211,563 (392,326) ( 08,063)
Other Income (Expense):
Interest Income 428 428
Interest expense (15,494) (87,432) (30,000)(3) (132,926)
Other Income 581 78 659
Gain on disposal of assets 0 8,000 8,000
=========== =========== ===========
(14,913) (78,926) (123,839)
=========== =========== ===========
Net income before income taxes 196,650 (471,251) (331,902)
=========== =========== ===========
Provision for tax benefit (expense) (68,959) 0 68,959(2) 0
=========== =========== ===========
Net income 127,691 (471,251) (331,902)
=========== =========== ===========
Preferred stock dividend 0 0 (35,000)(4) (35,000)
=========== =========== ===========
Net income attributable to
common stockholders 127,691 (471,251) (366,902)
=========== =========== ===========
Earnings per share ($ 0.06)
-----------
Weighted average shares outstanding 6,059,639
-----------
</TABLE>
(1) Amortize Goodwill
(2) Revise Income Tax Provision
(3) Interest on Convertible Debentures
(4) Preferred Stock Dividend
F-8
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Pro Forma and Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Concepts IFC/ International
In Kleven Pro Forma FiberCom
Communications Combined Adjustments Consolidated
<S> <C> <C> <C> <C>
Contract Revenues $ 10,557,781 $ 9,158,640 $ 19,716,421
Cost of Contract Revenues 7,052,557 7,909,219 14,961,776
Indirect Costs of Contract Revenues 1,223,976 0 1,223,976
============ ============ ============
Gross Profit 2,281,248 1,249,421 3,530,669
General and Administrative Expenses 1,694,655 1,638,387 81,900(1) 3,414,942
Provision for doubtful accounts 0 0 0
============ ============ ============
Profits from Operations 586,593 (388,966) 115,727
Other Income (Expense):
Interest Income 6,088 6,088
Interest expense (40,641) (279,331) (69,792)(3) (389,764)
Other Income 5,121 36,578 41,699
Gain on disposal of assets 37,082 37,082
============ ============ ============
(35,520) (199,583) (304,895)
============ ============ ============
Net income before income taxes 551,073 (588,549) (189,168)
============ ============ ============
Provision for tax benefit (expense) (192,875) 0 192,875(2) 0
============ ============ ============
Net income 358,745 (588,549) (189,168)
============ ============ ============
Preferred stock dividend 0 0 (148,063)(4) (148,063)
============ ============ ============
Net income attributable to
common stockholders 358,198 (588,549) (337,231)
============ ============ ============
------------
Earnings per share ($0.06)
------------
Weighted average shares outstanding 6,059,639
------------
</TABLE>
(1) Amortize Goodwill
(2) Revise Income Tax Provision
(3) Interest on Convertible Debentures
(4) Preferred Stock Dividend
F-9
<PAGE>
Item 6.
The Company filed no Reports on Form 8-K during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTERNATIONAL FIBERCOM, INC.
BY /s/ Terry Beiriger
--------------------------------------
Terry Beiriger,
Chief Financial Officer
DATED: November 14, 1997
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 924632
<NAME> INTERNATIONAL FIBERCOM INC
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 69,478
<SECURITIES> 0
<RECEIVABLES> 5,966,326
<ALLOWANCES> 0
<INVENTORY> 621,686
<CURRENT-ASSETS> 8,777,953
<PP&E> 3,237,822
<DEPRECIATION> 723,660
<TOTAL-ASSETS> 14,371,713
<CURRENT-LIABILITIES> 5,262,030
<BONDS> 0
0
2,789,589
<COMMON> 11,548,099
<OTHER-SE> (7,322,832)
<TOTAL-LIABILITY-AND-EQUITY> 14,371,713
<SALES> 7,265,758
<TOTAL-REVENUES> 7,265,758
<CGS> 5,462,064
<TOTAL-COSTS> 6,615,752
<OTHER-EXPENSES> 35,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,336
<INCOME-PRETAX> 500,986
<INCOME-TAX> 0
<INCOME-CONTINUING> 500,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 500,986
<EPS-PRIMARY> .06
<EPS-DILUTED> .03
</TABLE>
