The debris from the aborted acquisition attempt by Rocky Mountain Internet Inc was strewn all over the third quarter results of its would-be target, Internet Communications Corp this week. Greenwood Village, Colorado-based ICC was to have been acquired by fellow Colorado-based ISP RMI for about $38m. But due to RMI discovering material difference in ICC’s finances that it had not seen earlier, it exercised its right to pull out of the deal in mid-October. ICC sued RMI for $30m in damages and RMI has indicated that it is likely to countersue (11/19/98). ICC reported third quarter net losses of $1.6m, up from $1.1m last year, which included an $85,000 restructuring charge. Revenues fell 9.4% at $8.4m. The fall in revenues is blamed on the management being diverted by the proposed acquisition from May through October. The company says that since the termination it has hired a number of senior sales people and is getting the company back up to speed. However, it says that due to longer sales cycles, gross revenues will be lower in the current quarter but will return to normal levels next year, when it also predicts profitability. The real state of the company is revealed by the balance sheet, which reveals a cash balance of just $69,000 as of September 30 this year with current liabilities outweighing current assets by $15.8m to $13.3m, which is never a good thing. Soon after the cancellation of the acquisition, Nasdaq Amex threatened the company with de-listing because its tangible assets fell below $2m – companies must meet either that requirement or net income of $500,000, or a market capitalization of $35m. The plunge in the company’s stock price after the RMI cancellation wiped out the market capitalization and the company is clearly not profitable at present. But on November 20, ICC struck a deal with Interwest group Inc, a wholly-owned subsidiary of Anschutz Co for the issuance of 7.125% convertible stock, convertible at $2.25, which has raised $2.0m for the company. It went back to Nasdaq to report that it meets its requirement for a listing, but, says ICC, the exchange did not have time to approve the plan and so will see the company again next quarter. The company’s listing remains intact during the investigation. RMI has also been granted a two-week extension to respond to ICC lawsuit. For the nine months ICC saw net losses of $5.3m, up from $1.5m last time, on revenues that fell 12.5% to $25.1m.
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