Form 10-QSB/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURTIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission File Number 0-27973
NOSTRAD TELECOMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0306460
State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization
420 - 171 West Esplanade
North Vancouver, British Columbia, Canada V7M 3J9
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 983-8778
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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___ No _X_
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of June 15, 2000
Common Stock, no par value 12,200,000
Class Number of shares
NOSTRAD TELECOMMUNICATIONS INC.
INDEX
PART I Financial Information Page No.
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 2000 & 1999 and December 31, 1999 3
Condensed Consolidated Statements of Operations
Three Months ended March 31, 2000 & 1999 4
Condensed Consolidated Statement of Shareholders Equity
For the Three months ended March 31, 2000 5
Condensed Consolidated Statement of Cash Flows
Three Months ended March 31, 2000 & 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management Discussion and Analysis of Results of
Operations and Financial Condition 8-11
2
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------------------------------
Assets March 31, December 31, March 31,
2000 1999 1999
(unaudited) (audited) (unaudited)
--------------------------------------------------
Current Assets
Cash $ 50,381 $ 8,251 $ (791)
Trade receivables 369,195 139,023 37,546
Inventory 69,277 63,948
108,202
Deposits & prepaid expenses 35,911 38,888 48,778
- -------------------------------------------------------------------------------------------------------
524,764 250,110 193,735
Licenses and Development Costs (note 2)
Licenses, net 506,643 523,768 258,260
Deferred development costs 31,642 25,057 400,846
- -------------------------------------------------------------------------------------------------------
538,285 548,825 659,106
Fixed Assets
Fixed Assets 514,804 564,174 506,829
less Accumulated Depreciation (333,170) (274,021) (181,979)
- -------------------------------------------------------------------------------------------------------
181,634 290,154 324,850
- -------------------------------------------------------------------------------------------------------
$ 1,244,683 $ 1,089,088 $ 1,177,691
=======================================================================================================
Liabilities
Current Liabilities
Accounts payable $ 903,244 $ 1,019,836 $ 598,565
Shareholder loans 357,752 600,800 626,830
Due to related parties 598,836 405,503 48,890
- -------------------------------------------------------------------------------------------------------
1,859,832 2,026.139 1,274,285
- -------------------------------------------------------------------------------------------------------
Commitments
Shareholders' Equity
Share Capital
Authorized
25,000,000 common shares, par value $0.001
Issued & outstanding - 11,200,000 common 11,200 11,200 9,900
shares (9,900,000 common shares at
March 31, 1999)
Additional Paid-in Capital 1,618,395 1,618,395 1,489,695
Subscriptions received 946,900 250,000
- -------------------------------------------------------------------------------------------------------
Accumulated Deficit (3,191,644) (2,816,646) (1,596,189)
- -------------------------------------------------------------------------------------------------------
(615,149) (937,051) (96,594)
- -------------------------------------------------------------------------------------------------------
$ 1,244,683 $ 1,089,088 $ 1,177,691
=======================================================================================================
The notes to unaudited condensed consolidated financial statements are an
integral part thereof
3
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
Quarter Quarter
ended ended
March 31 March 31
2000 1999
---- ----
Revenues
Sales Revenues $ 6,348 $ 9,617
Service Revenues 137,990 11,415
- --------------------------------------------------------------------------------
144,338 21,032
- --------------------------------------------------------------------------------
Cost of Sales
Cost of Sales 2,028 51,097
Cost of Services 46,522 2,900
Direct Marketing 243 10,073
- --------------------------------------------------------------------------------
48,793 64,070
- --------------------------------------------------------------------------------
Gross Profit 95,525 (43,038)
Expenses
Professional costs 119,726 91,070
Office and administration 172,235 69,241
Travel 18,400 44,778
Depreciation & amortization 62,960 49,323
Salary and benefits 37,266 45,402
Communication costs 13,181 12,940
Investor relations 6,527 361
- --------------------------------------------------------------------------------
430,295 313,115
- --------------------------------------------------------------------------------
Net loss (334,770) (353,153)
Other
Foreign exchange gain (loss) (40,228) 56,386
- --------------------------------------------------------------------------------
Net comprehensive loss $ (374,998) (299,767)
================================================================================
Average Number of outstanding 11,200,000 9,900,000
shares
- --------------------------------------------------------------------------------
Net (loss) per share $ (0.03) $ (.03)
================================================================================
The notes to unaudited condensed consolidated financial statements are an
integral part thereof
4
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
March 31, 2000
Comprehensive
Subscribed Common Stock Additional Income (loss)/
----------------------- -------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock split
after
January 1, 1997 -- $ -- 3,000,000 $ 3,000 $ -- $ -- $ 3,000
Share Subscriptions 461,538 300,000 -- -- -- -- 300,000
Reverse Acquisition
by Nostrad -- -- 3,700,000 3,700 367,640 -- 371,340
Foreign Currency
Translation -- -- -- -- -- 8,257 8,257
Net loss - 1997 -- -- -- -- -- (334,857) (334,857)
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Balance
December 31, 1997 461,538 300,000 6,700,000 6,700 367,640 (326,600) 347,740
- ------------------------------------------------------------------------------------------------------------------------------------
Private Placement,
net of Subcriptions (461,538) (300,000) 1,500,000 1,500 973,500 -- 675,000
Finders Fees -- -- -- -- (19,745) -- (19,745)
Shares issued for
Licenses -- -- 1,700,000 1,700 168,300 -- 170,000
Foreign Currency
Translation -- -- -- -- -- (11,929) (11,929)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss - 1998 -- -- -- -- -- (957,895) (957,895)
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Net Comprehensive
Loss (969,824)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance
December 31, 1998 -- -- 9,900,000 9,900 1,489,695 (1,292,752) 203,171
- ------------------------------------------------------------------------------------------------------------------------------------
Shares issued for
Licenses -- -- 1,300,000 1,300 128,700 -- 130,000
- ------------------------------------------------------------------------------------------------------------------------------------
Subscription
received -- 250,000 -- -- -- -- 250,000
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Currency
Translation -- -- -- -- -- (10,192) (10,192)
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Net loss - 1999 -- -- -- -- -- (1,510,031) (1,510,031)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Comprehensive
Loss (1,520,222)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1999 -- 250, 000 11,200,000 11,200 1,618,395 (2,816,646) (937,051)
- ------------------------------------------------------------------------------------------------------------------------------------
Subscription
received -- 704,000 -- 7,100 -- -- 969,900
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Currency
Translation -- -- -- -- -- (40,228) (40,228)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss -
March 31, 2000 -- -- -- -- -- (334,770) (334,770)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Comprehensive
Loss (374,998)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance,
March 31, 2000 -- 954, 000 11,200,000 18,300 1,618,395 (3,191,644) (615,149)
- ------------------------------------------------------------------------------------------------------------------------------------
The notes to the unaudited condensed consolidated financial statements are an
integral part thereof
5
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Quarter Quarter
ended ended
March 31 March 31
2000 1999
---- ----
OPERATING ACTIVITIES
Net income (loss) for period $(374,998) $(299,767)
Add expense items not involving cash
Depreciation 62,960 49,323
Add changes in non-cash working capital items:
Accounts receivable (230,172) (3,323)
Inventory (5,329) (88)
Deposits & prepaids 2,977 (16,658)
Accounts Payable 76,740 203,515
- --------------------------------------------------------------------------------
Net funds (used) by operating activities (467,822) (66,998)
INVESTING ACTIVITIES
Licenses & deferred development costs (26,407) 2,480
Fixed asset purchases 82,507 (55,621)
- --------------------------------------------------------------------------------
Net funds (used) by investing activities 56,100 (53,141)
FINANCING ACTIVITIES
Share subscriptions 696,900 --
Shareholder loans (243,048) 44,981
- --------------------------------------------------------------------------------
Net funds provided by financing activities 453,852 44,981
- --------------------------------------------------------------------------------
NET INCREASE IN CASH 42,130 (75,158)
Cash at beginning of period 8,251 74,367
- --------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 50,381 $ (791)
================================================================================
The notes to condensed consolidated financial statements are an integral part
thereof
Supplemental information:
Interest paid $ -- $ --
---------
Taxes paid $ -- $ --
---------
Shares issued for licenses $ -- $ --
--------- ---------
6
Condensed Consolidated Financial Statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
March 31, 2000
1. INTERIM FINANCIAL STATEMENTS
The results of operations for the interim period shown in this report are
not necessarily indicative of results to be expected for the fiscal year.
In the opinion of management, the information contained herein reflects all
adjustments necessary to make the results of operations for the interim
period a fair statement of such operations. All such adjustments are of a
normal recurring nature.
2. CONTINUING OPERATIONS
Nostrad Telecommunications Inc. ("Nostrad" or the "Company") was
incorporated in Nevada on September 24, 1993. On September 29, 1997, the
Company's name was changed from Cave Productions, Inc. to Nostrad.
Effective September 30, 1997, Nostrad Telecommunications Pte. Ltd., a
private Singapore company ("Nostrad Singapore") sold its wholly owned
subsidiary companies Nostrad Media Pte. Ltd., a Singapore company which
holds the Company's interests in Asian licenses; and OmniVision Africa
Ltd., a British Virgin Island company, which holds the Company's interests
in African licenses; (collectively as "Nostrad Subsidiaries") to the
Company for 3,700,000 common shares and $300,000 cash or kind. 1,300,000
common shares have been reserved for issuance to Nostrad Singapore for
obtaining Pay TV licenses in Morocco.
In order to develop the licenses held by the Company, the Company must
continue to raise funds. The Company has been heavily reliant upon its
major shareholder, Nostrad Singapore to continue to fund the Company's
growth. During the current fiscal year the Company's common shares
commenced trading on the over the counter pink sheets. The Company is
currently applying to get the Company's shares listed on a major stock
exchange. If the Company is unable to list its shares, the ability to raise
additional funds through the issuance of shares may be hampered.
These financial statements have been prepared on the going concern basis,
which assumes the realization of assets and liquidation of liabilities in
the normal course of business. The application of the going concern concept
is dependent upon the ability of the Company to raise additional financing
and attain future profitable operations.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with United
States generally accepted accounting principles
a) The accompanying consolidated financial statements include the
accounts of the Company and of acquired subsidiary companies: Nostrad
Media Pte. Ltd. (100% owned), Mongolia Home Vision Corporation HH (80%
owned by Nostrad Media Pte. Ltd.), OmniVision Africa Ltd. (100%
owned), OmniVision (U) Ltd. (100% owned by OmniVision Africa Ltd.),
OmniVision (Ghana) Ltd. (80% owned by OmniVision Africa Ltd.),
OmniVision (Tanzania) Ltd. (80% owned by OmniVision Africa Ltd. and
OmniVision (Maroc) Ltd. (65% owned by OmniVision Africa Ltd.). All
significant inter-company accounts and transactions have been
eliminated in consolidation.
b) The Company capitalizes the costs related to obtaining rights to
provide paging, cable television, telephone, and Internet services in
specific countries, and for the rights to broadcast specific channels.
Costs incurred are initially capitalized as Deferred Development
Costs. If after a twelve-month period, rights have not been fully
obtained, the Deferred Development Costs will be expensed. There is no
assurance that revenues exceeding these costs will be realized by the
Company.
7
Item 2. Management's Discussion and Analysis
Results of Operations
The Company is a development stage telecommunications company. Expenditures
to-date have been primarily focused on purchasing capital equipment, and for
general overhead in the Company's four international offices. Nostrad commenced
paging operations in Mongolia during 1998, and commenced providing DTH
subscription services in Morocco during 1999. The Company's primary focus for
the last three years has been and continues to be MMDS Subscription TV services
and is currently licensed in Kampala, Uganda; and in Dar es Salaam, Tanzania.
The Company is authorized to distribute DTH subscriber Pay-TV in Morocco. The
Company plans to implement the MMDS licenses as soon as possible and is also
endeavoring to obtain additional MMDS licenses in areas with potential for
Subscription TV. By areas of potential, the Company is referring to areas where
there are at least 100,000 television households, which are not currently being
serviced by cable or wireless pay TV.
Period ended March 31, 2000 compared to the period ended March 31, 1999
During Fiscal-2000 to date, the Company:
1. Continued providing direct to home ("DTH") television service in
Morocco which commenced during October 1999.
2. Continued ordering the balance of the equipment required to launch its
Paging and MMDS operations in Kampala, Uganda. To date, the Company
has completed its construction of its head-end site for the Paging and
MMDS systems.
3. The Company has completed a private placement for $1,000,000 as of
April 26, 2000. The Company has made no commitments for capital
expenditures.
The Company continues to distribute "Showtime" programming package, a Direct to
Home (DTH) service. Showtime is a Viacom Inc. company headquartered in Dubai,
UAE and uplinks 14 specialty Pay-TV channels and 25 Free to Air channels. The
Company is attempting to secure exclusive licenses for MMDS frequencies in the
Ivory Coast, Morocco, Tunisia, Bangladesh and Indonesia. In Pakistan, the
Company continues to be in negotiations to provide Subscriber Management,
Programming, Operational and Technical Management for the country's exclusive
MMDS operator.
During Fiscal 2000 to date there was a material change in the Company's
sales and gross profit outlined as follows:
- -------------------------------------------------------------------------------
Period to March 2000 Period to March 1999
- -------------------------------------------------------------------------------
Pager sales revenues $ 1,000 $ 3,480
Pager service revenues -- 8,520
DTH Sales 5,325 6,137
DTH Services 137,675 2,163
------- ------
144,000 21,000
------- ------
Cost of Sales
Cost of Pager Sales 1,023 2,187
Cost of Pager Services -- 1,003
Cost of DTH Sales 1,805 48,910
Cost of DTH Services 46,172 2,900
----------------------------------
49,000 55,000
----------------------------------
Gross Profit $95,000 $(34,000)
- -------------------------------------------------------------------------------
Since starting up in late 1998, paging operations in Mongolia competed against
inexpensive mobile telephone "receive only" services. Consequently, the Company
experienced less than expected pager sales. With respect to DTH sales, the
number of subscribers has grown to over 300 plus 3 hotels. Consequently service
fees rose to over $137,000 during Q!-2000 as compared to 2,000 during Q1-1999.
Gross profit has improved to 65% during Q1-2000. During Q1-1999 DTH was
commencing launch in Morocco and consequently its margin was adversely affected.
8
During October 1999, the Company officially launched its Pay-TV services in
Morocco, under an exclusive distribution agreement with Showtime (a Viacom
company). To date, the Company has completed its construction of its head-end
site for the Pay-TV and Paging systems in Uganda. The Paging transmitters,
terminal and pager inventory are on site and the Company plans to launch this
operation the last half of 2000. The Company has also recently completed
engineering and systems design for Tanzania and plans to launch Pay TV services
there before the end of 2000. Due to the slowdown of the Asian markets and
unresolved programming copyright issues, facilitation of the Subscription TV
roll out in Mongolia has been delayed indefinitely.
During the 4th quarter, the Company commenced taking subscriptions to a
private placement of 1,000,000 units (each consisting of one common share and
one share purchase warrant entitling the holder to purchase one additional share
of the Company for $1.50 during the first year and $2.00 during the second year
raising a total of $1,000,000. As of the effective date, the Company had
subscriptions totaling $250,000. As at March 31, 2000, $954,000 worth of
subscriptions had been received. On April 26, 2000, the Company had subscribed
the entire offering to qualified investors, and subsequently issued 1,000,000
units, each consisting of one common share, par value $0.01 and one common share
purchase warrant, entitling the holder to purchase an additional common share
for $1.50 within one year and $2.00 within two years..
During YE 2000 to date, General and administration expenses, net of
depreciation were $367,000 as compared to $264,000 during the YE 99. The cause
of this $103,000 increase is due to increased activity in its North American
head office, $86,000; and the opening of its Rabat, Morocco office, $103,000.
This was partially offset by reduced expenditures in Mongolia, Singapore and
Uganda.
- --------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------
Mongolia
General and administration $ 6,000 $ 17,000
Depreciation 8,000 15,000
North American Head Office
General and administration 179,000 93,000
Depreciation -- --
Singapore Office
General and administration 21,000 55,000
Depreciation and development costs expense -- 13,000
Kampala Office
General and administration 53,000 94,000
Depreciation 51,000 21,000
Morocco Office
General and administration 108,000 5,000
Depreciation 4,000 --
-----------------------
Total General and administration $367,000 $264,000
-----------------------
Total Depreciation and deferred cost write down- $ 63,000 $ 49,000
================================================================================
During Q1 2000 to date, general and administration expenses, in its North
American head office rose to $179,000, up $86,000 from Q1 1999. The increase was
due to increased consulting fees $20,000 and increased office costs of $35,000.
Morocco's general and
9
administration expenses rose to $108,000 from $5,000 during Q1 99. The cause of
this $103,000 increase is due to increased office expenditures during the year.
Liquidity and Capital Resources
As at March 31, 2000, the Company's working capital was a $1,332,000
deficiency, as compared to working capital deficiency of $1,081,000 as at March
31, 1999. The Company owes $957,000 to certain shareholders and related
companies. This amount is included in the working capital deficiency.
Approximately 40% of the amounts owed to insiders will be converted to equity of
the Company. The Company has no other long-term liabilities. Additional working
capital is intended to be raised by way private placement and further borrowings
from its majority shareholder.
Plan of Operation
Projects
o The Morocco DTH project. The Company has commenced providing and
marketing ShowTime's DTH services in October 1999. As of March 31,
2000 OmniVision has 300 individual subscriber (currently 350), and 3
Hotel's (with combined total of 780 rooms).
o The Uganda Pay TV project. It is anticipated that the Company will be
able to roll out the Pay TV project in the second half of the year
2000. In order to accomplish this the Company will require an
additional $800,000 to cover inventory, marketing, additional
equipment and other startup costs. Subject to receiving financing, the
Company anticipates that the equipment will arrive in Kampala by the
end of May 2000. The Company has completed the construction of the
head-end and entered into a long term lease of tower space on Kololo
Hill.
o The Uganda Pager System. The Company has acquired licenses to provide
pager service throughout Kampala. It is planned to launch the Paging
service during the second half of 2000. The Paging and Pay TV project
will be administered and managed from the same location.
o The Tanzania Pay TV project. The Company has decided to commence roll
out of Pay TV in Dar es Salaam at approximately the same time as
Uganda. In order to accomplish this the Company will require an
additional $1,000,000. The Company plans to co-locate its transmission
facilities with its local partner, Central Television Network (CTN),
which operates one of the local free to air Television stations.
10
Funding
To date, the Company has obtained licenses to provide PAY-TV in areas where
over 5,400,000 TV households will be passed by the Company's signals. The
Company must now commence a marketing program and sell its receivers and
subscription to the TV households. If all or parts of the target markets are to
be rolled out, the Company must raise approximately $8.0 million over the next
24 months. The Company plans to raise the funds by way of equity, debt, or other
similar financial instruments. The Company plans to seek assistance from various
investment advisors to advise the Company on the most appropriate method of
raising these funds on a best effort basis.
Statements in this registration statement that may not be historical facts
and that may be forwardlooking statements are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made by the Company. These factors include, but are not limited to:
(i) the nature of the Pay TV markets, specifically obtaining suitable
programming at a reasonable cost, (ii) the ability of the Company to raise
capital for projects within the context of overall telecommunication capital
market dynamics, (iii) the establishment of a sustainable subscriber base to the
point of economic viability, (iv) the viability of Pay TV projects based on
imperfect demographic analysis, (v) regulatory changes impacting on the nature,
scope and content of projects and operations, throughout the Company's areas of
operations, (vi) other factors detailed from time to time in the Company's
filings with the United States Securities and Exchange Commission, and (vii) or
any other factors. In order to mitigate the political risk in the Company's
target markets, the Company has arranged for political risk insurance provided
through Lloyd's of London, based on a variable valuation of the operating
companies in the nations concerned.
11