10QSB 1 d10qsb.txt 03/31/2002 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 [ ] 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 33-90696 ------------------- 1224 Washington Avenue Miami Beach, Florida 33139 (Address of principal executive offices) (305) 866-3360 (Issuer's telephone number) Check whether the Issuer (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 [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. As of March 31, 2002, 2,820,100 shares of $.0001 par value common stock were outstanding. Transitional Small Business Disclosure Format (check one) Yes [ ] No [X] ANDEAN DEVELOPMENT CORPORATION INDEX Part I. Financial Information. Item 1. Financial Statements (Unaudited). Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Part II. Other Information. ANDEAN DEVELOPMENT CORPORATION PART I FINANCIAL INFORMATION Item 1. Financial Statements Certain information and footnote disclosures normally included in financial statements prepared in accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"), although the Company believes the disclosures made are adequate to make the information presented not misleading, and, in the opinion of management, all adjustments have been reflected which are necessary for a fair presentation of the information shown and the accompanying notes. These condensed unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2001. The results for the nine months ended March 31, 2002 are not necessarily indicative of the results of operations for a full year or of future periods. The accompanying notes are an integral part of these financial statements. ANDEAN DEVELOPMENT CORPORATION Consolidated Balance Sheets March 31, 2002 and December 31, 2001
A S S E T S March 31, December 31, 2002 2001 ----------------------- ------------------- (Unaudited) Current Assets: Cash $ 4,425 $ 931 Accounts receivable 184,187 185,687 Notes receivable 251,588 327,911 Other current assets 214,263 168,279 ---------------- ----------------- Total Current Assets 654,463 682,808 ---------------- ----------------- Property, Plant and Equipment, net 359,506 379,842 ---------------- ----------------- Other Assets: Note receivable from related party and other 1,347,755 1,415,273 Investment in unconsolidated subsidiaries 2,543 2,543 Deposits and other 268,483 - Advances under agreement - 264,231 ---------------- ----------------- 1,618,781 1,682,047 ---------------- ----------------- $ 2,632,750 $ 2,744,697 ================ =================
The accompanying notes are an integral part of these consolidated financial statements. ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Continued) March 31, 2002 and December 31, 2001 LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31, 2002 2001 ----------------------- ------------------- (Unaudited) Current Liabilities: Obligations with banks $ 15,050 $ 35,310 Accounts payable and accrued expenses 67,097 98,237 Due to related parties 32,729 49,203 Current portion of long-term debt 34,352 34,923 Income taxes payable 11,253 - ------------------ ------------------ Total Current Liabilities 160,481 217,673 ------------------ ------------------ Long-Term Liabilities: Long-term debt, excluding current portion 74,185 75,503 Staff severance indemnities 35,653 39,427 ------------------ ------------------ 109,838 114,930 ------------------ ------------------ Minority interest 192,505 196,019 ------------------ ------------------ Shareholders' Equity: Preferred stock, $.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding - - Common stock, $.0001 par value, 20,000,000 shares authorized, 2,820,100 shares issued and outstanding 282 282 Additional paid-in capital 5,660,187 5,660,187 Accumulated deficit (3,097,221) (3,105,509) Accumulated other comprehensive income (loss) (393,322) (338,885) ------------------ ------------------ Total Shareholders' Equity 2,169,926 2,216,075 ------------------ ------------------ $ 2,632,750 $ 2,744,697 ================== ==================
The accompanying notes are an integral part of these consolidated financial statements. ANDEAN DEVELOPMENT CORPORATION Consolidated Statements of Income Three Months Ended March 31, 2002 and 2001
2002 2001 --------------------- ----------------------- (Unaudited) (Unaudited) Revenues from Operations: Revenues $ 102,074 $ 250,000 Cost of operations 30,417 38,205 ----------------- ----------------- Gross Profit 71,657 211,795 Selling and Administrative Expenses 34,139 187,719 ----------------- ----------------- Income from Operations 37,518 24,076 ----------------- ----------------- Other Income (Expense), Net (29,230) 8,658 ----------------- ----------------- Income Before Income Taxes and Minority Interest 8,288 32,734 Income Taxes - 15,373 ----------------- ----------------- Income Before Minority Interest 8,288 17,361 Minority Interest - 10,854 ----------------- ----------------- Net Income 8,288 28,215 Other Comprehensive Loss; Foreign Currency Translation Adjustment (54,437) (95,910) ----------------- ----------------- Comprehensive Loss $ (46,149) $ (67,695) ================= ================= Net Income per Common Share $ .003 $ .01 ================= ================= Weighted Average Shares Outstanding 2,820,100 2,820,100 ================= =================
The accompanying notes are an integral part of these consolidated financial statements. ANDEAN DEVELOPMENT CORPORATION Consolidated Statements of Shareholders' Equity Three Months Ended March 31, 2002
Accumulated Other Common Additional Accumulated Comprehensive Stock Paid-In Capital Deficit Income (Loss) ------------------- -------------------- ------------------- -------------------- Balance at December 31, 2001 $ 282 $ 5,660,187 $ (3,105,509) $ (338,885) Net income (Unaudited) - - 8,288 - Foreign currency translation adjustment (Unaudited) - - - (54,437) ---------------- ----------------- ----------------- ------------------ Balance at March 31, 2002 (Unaudited) $ 282 $ 5,660,187 $ (3,097,221) $ (393,322) ================ ================= ================= ================== Total Shareholders' Equity -------------------- Balance at December 31, 2001 $ 2,216,075 Net income (Unaudited) 8,288 Rescinded dividends (Unaudited) - Foreign currency translation adjustment (Unaudited) (54,437) ---------------- Balance at March 31, 2002 (Unaudited) $ 2,169,926 ================
The accompanying notes are an integral part of these consolidated financial statements. ANDEAN DEVELOPMENT CORPORATION Consolidated Statements of Cash Flows Three Months Ended March 31, 2002 and 2001
2002 2001 ----------------------- ---------------------- (Unaudited) (Unaudited) Cash Flows from Operating Activities: Net income $ 8,288 $ 28,215 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 20,336 21,208 Translation adjustment (54,437) (95,910) Minority interest (3,514) (374,472) Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 1,500 2,411,838 Inventory - 51,408 Other current assets (45,984) (10,604) Notes receivable 76,323 56,243 Deposits and other assets (268,483) 92,634 Goodwill - 205,157 Increase (decrease) in: Accounts payable and accrued expenses (31,140) (1,527,649) Income taxes payable 11,253 (30,788) Staff severance indemnity (3,774) (1,338) ----------------- ----------------- Net Cash (Used in) Provided by Operating Activities (289,632) 825,942 ----------------- ----------------- Cash Flows from Investing Activities: Disposition of fixed assets - 62,802 Investment in unconsolidated subsidiaries - 104,850 ----------------- ----------------- Net Cash Provided by Investing Activities - 167,652 ----------------- -----------------
The accompanying notes are an integral part of these consolidated financial statements. ANDEAN DEVELOPMENT CORPORATION Consolidated Statements of Cash Flows (Continued) Three Months Ended March 31, 2002 and 2001
2002 2001 ------------------- -------------------- (Unaudited) (Unaudited) Cash Flows from Financing Activities: Borrowings from (advances to) related parties $ 315,275 $ (202,658) Proceeds from (payments on) obligations with bank (20,260) (960,929) Principal payments on long-term debt (1,889) - ---------------- ----------------- Net Cash Provided by (Used in) Financing Activities 293,126 (1,163,587) ---------------- ----------------- Net Increase (Decrease) in Cash 3,494 (169,993) Cash at Beginning of Period 931 213,589 ---------------- ----------------- Cash at End of Period $ 4,425 $ 43,596 ================ ================= Supplemental Disclosure of Cash Flow Information: Cash paid during the quarter for interest $ - $ 1,987 Cash paid during the quarter for taxes - 15,373 Supplemental Disclosure of Non-Cash Financing Activities: Rescinded dividends - (423,018)
The accompanying notes are an integral part of these consolidated financial statements. ANDEAN DEVELOPMENT CORPORATION Notes to Consolidated Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The quarterly financial information --------------------- included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period. For further information, refer to the consolidated financial statements and notes thereto included in the Company's form 10-KSB as of and for the year ended December 31, 2001. Functional Currency - The consolidated financial statements have ------------------- been translated in accordance with the provisions set forth in Statement of Financial Accounting Standards No. 52, from Chilean pesos (the functional currency) into US dollars (the reporting currency). Earnings Per Common Share - Earnings per common share are based on ------------------------- the weighted average number of shares outstanding of 2,820,100 for the periods ended March 31, 2002 and 2001, respectively. Warrants issued with exercise prices greater than the existing market value of the company stock are deemed anti-dilutive and are not compo nents of earnings per share. The accompanying notes are an integral part of these consolidated financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis contains various "forward looking statements" within the meaning of the Securities Act of 1933, as amended, the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act 1995. Such statements consist of any statement other than a recitation of historical fact and can be identified by the use of forward-looking terminology such as "may", "expect", "anticipate", "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those contained in the forward-looking statements, that these forward-looking statements are necessarily speculative, and there are certain risks and uncertainties that could cause actual events or results to differ materially from those referred to in such forward-looking statements. The Company does not have a policy of updating or revising forward-looking statements and thus it should not be assumed that silence by management of the Company over time means that actual events are bearing out as estimated in such forward-looking statements. Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements included herein. Further, this quarterly report on Form 10-QSB should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements included in its 2001 Annual Report on Form 10-KSB and the risk factors described therein. GENERAL Andean Development Corporation ("ADC" or the "Company") was incorporated in Florida on October 19, 1994 and is presently a holding company for Errazuriz y Asociados Ingenieros S.A. ("AE&A"), and E&A Ingesis S.A. ("INA"), both Chilean corporations located in Santiago, Chile. Except as otherwise specifically noted, ADC, AE&A and INA are collectively referred to herein as the "Company." AE&A provides engineering and project management services for water and energy related private and public works and provides technical assistance for both turnkey and non-turnkey major works, mainly related to the development and construction of energy, water and sewage treatment projects in Chile. INA acts as the agent in the sale of major electrical and mechanical equipment. INA is also developing, in a joint venture with genteAndina S.A., a Chilean company specializing in education ("genteAndina S.A"), a communication network and related software for (i) rural area remote education, and (ii) post graduate professional education "at home" for Union leaders and key employees in Chile, which, if successful, could be adopted and developed in other countries in South America. On April 1, 2001, the Company executed an agreement with an unrelated company, genteAndina, S. A. in which the Company will invest approximately $500,000 in exchange for guaranteed interest income of 1/2% monthly and 35% of the profits of genteAndina, S. A. genteAndina, S. A. will continue developing the software and projects previously undertaken by the Company. As of December 31, 2001, approximately $425,000 was advanced to genteAndina, S. A. under this agreement and is included in deposits and other in the accompanying consolidated financial statements. The Company, supported by the government of Chile and by certain Chilean institutions, is developing at the Company's cost: . Software to be used to educate the school populations of indigenous rural communities located in isolated areas in the mountains of Chile or close to its coast line, and . Software to teach leadership, and other related matters, to union leaders in Chile, highly qualified employees of the government of Chile, and to certain private industries such as Corporacion del Cobre de Chile, Chilean Copper Corporation ("Codelco"). The Company has entered into an agreement with Codelco, through one of the Company's sponsoring institutions, Fundacion Tucapel Jimenez Alfaro, by which the Company will provide educational services to union leaders at Codelco's Andina Division. Codelco is the industry leader in the Chilean mining industry and the Company anticipates, but cannot guarantee, that once the Codelco project proves successful, other Chilean companies will execute similar agreements. Currently, the Company is well positioned in its core business segment to take advantage of an economic upturn in the large projects sector, since the Company is well established in its marketplace and has maintained customers who are established in their specialties. The Company is also the majority owner (83.6%) of a non-operating subsidiary, Consonni USA, Inc. ("Consonni"), the assets of which consist of cash and notes receivables. In 2000, the Company sold the operating subsidiary of Consonni. On August 31, 2001, the Company extended the expiration date of its Redeemable Common Stock Purchase Warrants (the "Warrants") from November 13, 2001 to November 13, 2003. The Company originally issued the Warrants in connection with a stock offering on Registration Statement Form SB-2 (SEC File No. 333-90696) which was declared effective by the Securities and Exchange Commission on November 13, 1996. FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED MARCH 31, 2002 TO THREE MONTHS ENDED MARCH 31, 2001 Gross Revenues and Costs of Operations Gross revenues decreased from $250,000 for the three months ended March 31, 2001 to $102,074 for the three months ended March 31, 2002, a decrease of $153,580. The decrease in gross revenues is a result of the sale of certain subsidiaries in the last two fiscal years, general economic conditions, including financial instability in Argentina, implementation of the business strategy and a decrease in operational costs. Cost of Operations decreased from $38,205 for the three months ended March 31, 2001 to $34,417 for the three months ended March 31, 2002, a decrease of $3,788. This decrease comes primarily from a decrease in operational costs following the sale of certain subsidiaries during the last two fiscal years and a decrease of operational costs resulting from the implementation of the business strategy. Selling and Administrative Expenses, Incomes from Operations and Other Income (Expenses). Selling and Administrative Expenses decreased from $187,719 for the three months ended March 31, 2001 to $34,139 for the three months ended March 31 2002, a decrease of $153,580. This decrease is primarily a result of the sale of certain subsidiaries during the last two fiscal years and the decrease in revenues and operating costs as a result of the implementation of the business strategy. Income from Operations, increased from $24,076 for the three months ended March 31, 2001 to $37,518 for the three months ended March 31, 2002, an increase of $13,442. Other Income (Expenses) decreased from a net income of $8,658 for the three months ended March 31, 2001 to net expenses of ($29,230) for the three months ended March 31, 2002. This decrease is primarily as a result of the sale of certain subsidiaries during the last two fiscal years and the decrease in revenues and operating costs as a result of the implementation of the business strategy. Net Income and Income Tax. Net income before income taxes decreased from $32,734 for the three months ended March 31, 2001 to $8,288 for the three months ended March 31, 2002, and taxes decreased in the same period from $15,373 to $-0-. In the same period, the corresponding portion of the minority interest decreased from $10,854 to $-0-. As a consequence of the previous figures, the net income of the Company decreased in the period from $28,215 to $8,288, primarily due to the decrease in gross revenues. Liquidity and Capital Resources. The Company has financed its operations and other working capital requirements principally from operating cash flow. Current Assets Cash and Short Term Investments increased from $931 as of December 31, 2001 to $4,425 at the three month period ended March 31, 2002, an increase of $3,494. As of December 31, 2001 and at the three month period ended March 31, 2002, the Company has no short-term investments. This increase in cash and a decrease in operating costs as a result of the implementation of the business strategy. Accounts receivable decreased from $185,687 at December 31, 2001 to $184,187 at the three month period ended March 31, 2002, a decrease of $1,500. Total Current Assets decreased from $682,808 at December 31, 2001 to $654,463 for the three month period ended March 31, 2002, a decrease of $28,345. This was a result of the decrease of revenues as a consequence of the implementation of the business strategy. Property, plant and equipment decreased from $379,842 at December 31, 2001 to $359,506 at the three month period ended March 31, 2002, a decrease of $20,336, primarily as a result of the implementation of the business strategy. Other assets decreased from $ 1,682,047 at December 31, 2001 to $1,618,781 for the three month period ended March 31, 2002, a decrease of $63,266. This decrease is a result of the implementation of the business strategy which does not include investments in subsidiaries. Liabilities Current liabilities decreased from $217,673 at December 31, 2001, to $160,481 at the three month period ended March 31, 2002, a decrease of $57,192. This decrease is as a result of implementation of the business strategy of reducing debt through consolidation and limiting expenditures, and a decrease in operating costs as a result of the implementation of the business strategy. Long-term liabilities decreased from $114,930 at December 31, 2001 to $109,838 at the three month period ended March 31, 2002, a decrease of $5,092. The Company anticipates that its cash requirements will continue to increase as it continues to expend substantial resources to build its infrastructure, develop its business plan and establish its sales and marketing network operations, customer support and administrative organizations. The Company currently anticipates that its available cash resources and cash generated from operations will be sufficient to meet its presently anticipated working capital and capital expenditure requirements for the next twelve months. As of March 31, 2002, there were no commitments for long term capital expenditures. If the Company is unable to maintain profitability, or seeks further expansion, additional funding will become necessary. No assurances can be given that either equity or debt financing will be available. COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 TO THREE MONTHS ENDED MARCH 31, 2000 Gross Revenues and Costs of Operations Gross revenues decreased from $2,389,103 for the three months ended March 31, 2000 to $250,000 for the three months ended March 31, 2001, a decrease of $2,139,103. The decrease in gross revenues is a result of the sale of certain subsidiaries during 2000 and the loss in revenues from Consonni as a consequence of the sale of most of the Company's interest in Consonni. Cost of Operations decreased from $1,932,261 for the three months ended March 31, 2000 to $38,205 for the three months ended March 31, 2001, a decrease of $1,894,056. This decrease comes primarily from a decrease in operational costs following the sale of certain subsidiaries during 2000 and the decrease in revenues resulting from the sale of most of the Company's interest in Consonni. Selling and Administrative Expenses, Incomes from Operations and Other Income (Expenses) Selling and Administrative Expenses decreased from $436,819 for the three months ended March 31, 2000 to $187,719 for the three months ended March 31 2001, a decrease of $249,100. This decrease comes primarily from a decrease in operational costs following the sale of certain subsidiaries during 2000. Income from Operations, increased from $20,023 for the three months ended March 31, 2000 to $24,076 for the three months ended March 31, 2001. Other Income (Expenses) increased from net expenses of ($79,239) for the three months ended March 31, 2000 to income of $8,658 for the three months ended March 31, 2001. This comes primarily from a decrease in expenses following the sale of certain subsidiaries during 2000 and the decrease in expenses resulting from the sale of most of the Company's interest in Consonni. Net Income and Income Tax. Net Income increased from a loss of ($136,211) for the three months ended March 31, 2000 to net income of $28,215 for the three months ended March 31, 2001, primarily as a result of the sale of certain subsidiaries and most of the Company's interest in Consonni. Current Assets Cash and Short Term Investments decreased from $213,589 as of December 31, 2000 to $43,596 at the three month period ended March 31, 2001, a decrease of $169,993. As of December 31, 2000 and at the three month period ended March 31, 2001, the Company has no short-term investments. This decrease comes primarily from a decrease in cash following the sale of certain subsidiaries during 2000, including most of the Company's interest in Consonni. Accounts receivable decreased from $2,511,838 at December 31, 2000 to $100,000 at the three month period ended March 31, 2001, a decrease of $2,411,838. This decrease comes primarily from a decrease in accounts receivable following the sale of certain subsidiaries during 2000 and the sale of most of the Company's interest in Consonni. Inventory and other current assets decreased from $231,847 as of December 31, 2000 to $169,835 at the three month period ended March 31, 2001, a decrease of $62,012. Total Current Assets decreased from $3,105,274 at December 31, 2000 to $833,688 for the three month period ended March 31, 2001, a decrease of $2,271,586. This decrease was primarily due to the sale of certain subsidiaries during 2000. Property, plant and equipment decreased from $503,651 at December 31, 2000 to $440,849 at the three month period ended March 31, 2001, a decrease of $62,802. Other assets decreased from $2,344,650 at December 31, 2000 to $1,668,000 for the three month period ended March 31, 2001, a decrease of $676,650. This decrease is primarily the result of a decrease in investments in subsidiaries in 2000, a write off of goodwill, and the sale of those subsidiaries during 2000. Liabilities Current liabilities decreased from $2,597,055 at December 31, 2000, to $93,655 at the three month period ended March 31, 2001. This decrease comes primarily from a decrease in liabilities following the sale of certain subsidiaries during fiscal 2000 and the sale of most of the Company's interest in Consonni. Long-term liabilities decreased from $495,382 at December 31, 2000 to $71,026 at the three month period ended March 31, 2001, due to the Company decision to rescind a declared dividend. PART II OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K (a) The following Exhibits are filed as part of the Quarterly Report on Form 10-QSB None. (b) Reports on Form 8-K: None. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANDEAN DEVELOPMENT CORPORATION By: /s/ Pedro Pablo Errazuriz Date: May 15, 2002 President and Chief Executive Officer -----------------------------