SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934
for the quarterly period ended June 30, 1996
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 0-22328
COMBINED COMPANIES INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
a Nevada corporation
(State or other jurisdiction of
incorporation or organization) 88-0299116
(I.R.S. Employer
Identification No.)
6000 S. Eastern Ave. Suite 1-D
Las Vegas, Nevada
(Address of principal executive offices)
89119
(Zip Code)
Registrant's telephone number, including area code: (702) 792-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to
be filed by Section 13 of 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
X
No
Indicate the number of shares outstanding of each of the issuer's classes of
common
stock, as of the latest practicable date.
As of June 30, 1996, there were approximately 8,758,848 shares of the
registrant's
common stock outstanding.
Part I - Financial Information
ITEM 1. FINANCIAL INFORMATION.
COMBINED COMPANIES INTERNATIONAL CORP.
(formerly EMS Products International Corp)
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
ASSETS
June 30,
1996 December 31,
1995
Current Assets
Cash $ 140,185 2,972
Money market funds 2,134,845 0
Certificate of deposit 0 2,029,193
Inventory 111,663 111,663
Total Current Assets 2,386,693 2,143,828
Property and Equipment
at cost less accumulated depreciation of $162,430 at June 30, 1996 and
$91,486 at December 31, 1995
124,086
195,030
Other Assets
Patent 14,363 14,363
Muse license 100,000 0
Security deposit 5,712 5,712
Total Other Assets 120,075 20,075
Total Assets $2,630,854 2,358,933
COMBINED COMPANIES INTERNATIONAL CORP.
(formerly EMS Products International Corp)
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
1996 December 31, 1995
Current Liabilities
Notes payable (Note 5) $ 88,000 88,000
Accounts payable 32,729 23,148
Note due to officer 78,863 138,011
Accrued liabilities 5,000 5,000
Total Current Liabilities 204,592 254,159
Stockholders' Equity
Common stock: authorized 50,000,000
shares @ .01 par value; issued and
outstanding 8,808,858 shares at June 30, 1996 and 6,658,858 shares at
December
31, 1995
Paid in capital
Accumulated (deficit)
88,088
3,664,451
(1,326,277)
66,588
3,271,951
(1,233,765)
Total Stockholders' Equity 2,426,262 2,104,774
Total Liabilities and Stockholders' Equity $2,630,854
2,358,933
COMBINED COMPANIES INTERNATIONAL CORP.
(formerly EMS Products International Corp)
CONSOLIDATED INCOME STATEMENTS
For the Quarters and Six Months Ended June 30, 1996 and 1995
Quarters Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
Note (A)
Sales 0 80,570 0 177,680
Cost of Goods Sold 0 16,951 0 29,793
Gross Profit 0 63,619 0 147,887
Operating Costs:
General and administrative costs 44,815 108,604 96,868 196,163
Depreciation 35,472 14,088 70,944 28,176
Total Operating Costs 80,287 122,692 167,812 224,339
Operating Profit (Loss) (80,287) (59,073) (167,812) (76,452)
Other Income/Expenses:
Loss from discontinued operations 0 0 0 (31,240)
Interest income 42,650 30,000 87,800 60,000
Interest expense 12,500 0 (12,500) 0
Net Other Income/Expenses (30,150) 30,000 75,300 28,760
Net (Loss) before taxes (50,137) (29,073) (92,512) (47,692)
Income Taxes (Note 9) 0 0 0 0
Net (Loss) (50,137) (29,073) (92,512) (47,692)
Weighted Number of
Shares Outstanding
6,749,159
5,640,124
6,749,159
5,640,124
Net Loss Per Share $(.01) Nil $(.01) $(.01)
Note (A): 1995 amounts have been restated in order to reflect the loss from
discontinued
operations as a line item.
COMBINED COMPANIES INTERNATIONAL CORP.
(formerly EMS Products International Corp)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
January 1, 1994 to June 30, 1996
Common Stock
Shares $
Paid In Capital
Retained Earnings
Stockholders' Equity
Balance, January 1, 1994 309,840 $3,098 3,261,255 (945,833) 2,318,520
Purchase of subsidiary for stock 28,800 288 357,163 357,451
Purchase of subsidiary for stock 5,439,018 54,390 27,617 82,007
Loss, Year Ended December 31,1994 (194,401) (194,401)
Balance December 31, 1994 5,777,658 57,776 3,646,035 (1,140,234) 2,563,577
Issuance of stock for services 660,000 6,600 (1,100) 5,500
Issuance of stock for services 250,000 2,500 2,500
Rescission of Donsco acquisition (28,800) (288) (513,919) 176,654 337,553
Cash contribution to Gamevision 140,935 140,935
Loss, Year Ended December 31,1995 (270,185) (270,185)
Balance, December 31, 1995 6,658,858 66,588 3,271,951 (1,233,765) 2,104,774
Common stock issued for Muse License 500,000 5,000 95,000 100,000
Sale of Common stock 600,000 6,000 108,000 114,000
Sale of Common stock 1,050,000 10,500 189,500 200,000
Loss, Period Ended June 30, 1996 (92,512) (92,512)
Balance June 30, 1996 8,808,858 $88,088 3,664,451 (1,326,277) 2,426,262
COMBINED COMPANIES INTERNATIONAL CORP.
(formerly EMS Products International Corp)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended June 30, 1996 and 1995
Periods Ended June 30, 1996 1995
Cash Flows From Operating Activities
Net (loss) for the periods $ (92,512) (47,692)
Adjustments to reconcile net losses to net cash
provided (used) by operating activities
Depreciation 70,944 32,747
(Increase) decrease in accounts receivable 0 113,464
(Increase) decrease in inventory 0 105,624
(Increase) decrease in prepaid expenses 0 18,773
Increase (decrease) in accounts payable 9,581 (71,598)
Increase (decrease) in accrued liabilities 0 (5,000)
Net Cash Provided (Used) by Operating Activities (11,987) 146,318
Cash Flow From Investment Activities
Decrease in certificate of deposit 2,029,193 0
(Increase) decrease in property and equipment 0 27,430
Donsco subsidiary rescission common stock 0 (288)
Additional paid in capital and accumulated deficit, net 0 (357,163)
Net Cash Provided (Used) by Investment Activities 2,029,193 (330,021)
Cash Flows From Financing Activities
Sale of common stock 314,000 0
Issuance of common stock for services 0 9,000
Paid in capital to Gamevision subsidiary 0 140,935
Increase (decrease) in loans - officers (59,148) 4,000
(Increase) decrease in interest receivable 0 (30,500)
Increase (decrease) in notes payable 0 38,000
Net Cash Provided by Financing Activities 254,852 161,435
Net Increase (Decrease) in Cash 2,272,058 (22,268)
Cash Balance, Beginning of Period 2,972 61,371
Cash Balance, End of Period (includes Money Market account as cash
equivalent)
$ 2,275,030
39,103
The accompanying notes are an integral part of these financial statements.
COMBINED COMPANIES INTERNATIONAL CORP.
(formerly EMS Products International Corp)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1 Summary of Significant Accounting Policies:
This summary of significant accounting policies of COMBINED COMPANIES
INTERNATIONAL
CORP. ("CCIC"), formerly EMS Products International Corp, is presented to
assist in
understanding the Company's financial statements. The financial statements and
notes are
representations of the Company's management, which is responsible for their
integrity
and objectivity, and fairly states the results for the periods presented
herein. These
accounting policies conform to generally accepted accounting principles and
have been
consistently applied in the preparation of the financial statements and in the
opinion
of the Company's management.
(a) Organization and Business Activities
(1) Nuclear Airships and Cargo, Inc. ("Nuclear") was formed under the laws of
the
State of Nevada on March 3, 1971. During the years from 1971 to 1979 corporate
stock was issued for the organization of several business ventures such as
aircraft cargo hauling and oil and gas ventures. The Company was unsuccessful
in
its efforts and was inactive from 1979 to September 7, 1993.
(2) On September 8, 1993, EMS PRODUCTS INTERNATIONAL CORP, a company
incorporated in
the State of Nevada on April 9, 1993, whose main business is manufacturing and
distributing of disposable medical devices, merged into the Company. The
Company's name was changed to EMS Products International Corp ("EMS").
(3) On August 4, 1994, CCIC, formerly EMS Products International Corp, acquired
100%
of the outstanding stock of Donsco Manufacturing, Inc., formerly Donsco
Distributing, Inc., under the purchase acquisition method. The main business
activity of "Donsco" was manufacturing and distributing durable medical
equipment. The Purchase Agreement was rescinded effective June 29, 1995 and
operating losses are reported in the financial statements through the period
ended March 31, 1995 as losses from discontinued operations.
(4) On November 8, 1994, EMS Products International Corp changed its name
to
Combined Companies International Corp.
(5) On December 16, 1994, the Company acquired 100% of the outstanding stock of
Gamevision, Inc. under the purchase acquisition method. The main business
activity of Gamevision, Inc. is manufacturing and distributing credit card
activated in-room video games.
(6) On May 1, 1996 the Company acquired 100% of the initial issue of founder's
shares
of Play-Per-View Corp., in exchange for cash of $2,000,000. The main business
activity of Play-Per-View Corp., is the marketing of Gamevisions' units and
development of the product line using the licensed Muse technology.
(b) Depreciation:
Depreciation is provided by the straight-line method at rates calculated to
amortize cost over the estimated useful lives of respective assets. Upon sale
or
retirement of the respective assets, the related cost and accumulated
depreciation are eliminated from the accounts, and gains or losses are
reflected
in income. Repair and maintenance expenditures, not anticipated to extend
original asset lives, are charged to income as incurred.
(c) Inventory:
Inventory is stated at the lower of cost or market and all inventory items
are
finished goods available for sale or use.
(d) Fiscal Year:
The Company reports on a calendar year basis.
(e) Basis of Operation:
The Company prepares its financial statements and federal income taxes on the
accrual basis of accounting.
(f) Deferred Income Taxes:
Deferred income taxes are recorded using the liability method of accounting
under
the provisions of Statement of Financial Accounting Standards No. 109 (SFAS
109).
Deferred taxes result principally from the write-off of intangible assets and
net
operating loss carryforwards.
(g) Revenue Recognition and warranty policy:
The Company recognizes income upon receipt of merchant credit cards deposits
into
the account from Gamevision's video games. Credit cards charges for game unit
use
are deposited into the Company's merchant account within 3 days of activation.
In the event of a problem with the game units for which a customer charge was
processed and the game did not function properly, the use fee will be credited
to
the user charge card used for the transaction. No refunds are provided simply
because the customer was not satisfied with the game selections.
(h) Research and Development Costs:
All research and development costs are expensed at the time of their occurrence.
(i) Money Market funds are treated as cash equivalents if available within 90
days or
less.
Note 2 Common Stock:
Effective November 21, 1994, there was a written shareholder consent action
whereby the
existing issued and outstanding stock was to be exchanged for new corporate
common stock
at the rate of 1 new share for 25 old shares. Fractional shares were dropped.
Effective
April 10, 1995 there was a written shareholder consent action whereby the
existing
issued and outstanding stock of record would receive a 20% stock dividend. For
financial
reporting purposes, all shares have been adjusted to retroactively reflect the
1 for 25
reverse stock split and 20% stock dividend.
On April 3, 1996 the Company issued 500,000 to Muse Technologies, Inc., in
exchange for
a sub-license agreement to use Muse technology for Play-Per-View's video game
developments.
The Company sold 1,650,000 of restricted common stock for an aggregate price of
$314,000.
Note 3 Acquisitions and Dispositions:
(a) On September 8, 1993, EMS PRODUCTS INTERNATIONAL CORP merged into NUCLEAR
AIRSHIPS
AND CARGO, INC. with the shareholders of EMS receiving 25,000 shares of
"Nuclear"
which subsequently changed its name to EMS PRODUCTS INTERNATIONAL CORP.
(b) On August 4, 1994, EMS acquired 100% of the outstanding stock of Donsco
Manufacturing, Inc. ("Donsco") under the purchase acquisition method with the
shareholders of Donsco receiving 28,800 shares (reflects 1 for 25 reverse stock
split). The Purchase Agreement was rescinded effective June 29, 1995 and
losses from
operations were reported in the financial statements through March 31, 1995 as
losses
from discontinued operations, as restated for the 1995 corresponding reporting
period
herein.
(c) On December 16, 1994, the Company acquired 100% of the outstanding stock of
Gamevision, Inc. under the purchase acquisition method.
(d) On May 1, 1996 the Company acquired 1,400,000 founder's shares of
Play-Per-View
Corp., a Delaware corporation. The stock has a par value of $.01 and the
Company paid
$1.43 per share for a total consideration of $2,000,000. Since the Company
purchased
founder's stock, the entire proceeds of $2,000,000 remain with Play-Per-View
Corp., and
are included as cash equivalents in the consolidated financial statements of
the
Company. The funds for the stock were allocated from the Company's CD until
redeemed in
June.
Note 4 Notes Payable:
(a) Gamevision:
Three separate notes were issued to various individuals and the balances
outstanding
are as follows:
$50,000
$30,000
$ 8,000
These notes have no due date and are payable out of proceeds of cash flows
from
Gamevision operations.
Note 5 Options and Warrants:
There are no options or warrants outstanding against the common stock of the
Company.
Note 6 Dividend Policy:
The Company does not anticipate paying cash dividends.
Note 7 Certificate of Deposit/Money Market:
The Company invested $2,000,000 in a Certificate of Deposit ("CD") on November
2, 1995
as a result of its receipt of a matured note. The terms of the CD provided for
the face
rate of 9.03% interest, calculated quarterly and accrued to the CD's maturity
date of
May 1, 1997.
In order to utilize the funds prior to maturity, the Company was able to obtain
an early
redemption of the principal and accrued interest through June 28, 1996 at
which time
the entire principal and interest were transferred to a money market account.
In order
for the Company to receive its funds from the pre-mature redemption of the CD,
the
Company agreed to pay an interest penalty of $12,500.
Note 8 Beneficial Ownership of 5% of Common Stock:
The following list sets forth the information as of June 30, 1996 with respect
to the
beneficial ownership of 5% or more of the Corporation's Common Stock.
Steven Schwartz 420,000 shares
Loretta Davis 720,688 shares
James Schwartz 420,000 shares
Barclay Davis 420,000 shares
Boyce McCary 700,856 shares
Note 9 Income Taxes:
At December 31, 1995, the Company had a federal net operating loss carryforward
available to offset future taxable income. There is no state income tax in the
State of
Nevada.
The net operating loss carryforward was $1,233,765 at December 31, 1995. These
carryforwards will begin to expire in the year 2008.
The deferred tax asset consists of the future benefit of net operating loss
carryforwards. A valuation allowance limits the recognition of the benefit of
deferred
tax assets until realization is reasonable assured by future profitability.
The following is a summary of deferred taxes:
Deferred asset $475,628
Valuation allowance (475,628)
$ 0
Note 10 Commitments:
Operating Leases
The Company is obligated under one lease agreement for office and warehouse
space for a
three year period commencing October 1995 at the rate of $3,600 per month.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
General
The Company was organized under the laws of the State of Nevada on March 3,
1971.
During the period 1971 to 1979 the Company became involved in several business
ventures,
none of which proved successful. From 1979 to September 7, 1993 the Company was
inactive. On September 8, 1993 the Company was merged with EMS Products
International
Corp, a company incorporated in Nevada on April 9, 1993 and engaged in the
business of
manufacturing and distribution of disposable medical supplies. The Company's
name was
changed to EMS Products International Corp. On August 4, 1994 the Company
acquired
DONSCO Manufacturing, Inc. (dba DONSCO Distributing, Inc.). DONSCO manufactured
and sold
durable medical products. The Company consolidated all of its medical supply
business in
its DONSCO subsidiary. Effective June 29, 1995 the Donsco acquisition was
rescinded by
mutual consent. The Company recognized the Donsco's operations through the
March 31,
1995 financial reporting period. Operations and reporting were discontinued
thereafter.
In November, 1994, the Company's name was changed to Combined Companies
International
Corp.
On December 16, 1994 the Company acquired Gamevision, Inc. Gamevision
manufactured,
installed and operated video game equipment in hotel rooms.
On May 1, 1996 the Company acquired all of the founder's stock of Play-Per-View
which
became a wholly owned subsidiary of CCIC. Play-Per-View has exclusive licenses
from
Gamevision for ongoing sales and marketing of the newly designed units. In
addition,
Play-Per-View will receive the benefit of a sub-license agreement from CCIC for
MUSE
technology which is computer software technology commonly known as "Virtual
Realty".
(See THE MUSE LICENSE section discussion below).
Results of Operations
Management's discussion and analysis of the Company's financial condition and
results
of operations presented hereby covers the quarters January 1 to June 30 _ the
first two
quarters of the reporting years 1996 and 1995.
The Operations are summarized into their main product lines as follows:
Gross Revenues: Medical Products Video Games
Jan. 1 to June 30, 1996 $ 0 0
Jan 1 to June 30, 1995 $53,680 177,680
The reporting of the Medical Products line is reflected in the financials
through
March 31, 1995 and are represented as a line item in the income statements as
"losses
from discontinued operations" for the reporting period ended March 31, 1995.
There have been no revenues in 1996 as all previously installed Gamevision
units were
pulled from their locations in anticipation of newer models replacing them.
New models will be manufactured by a Chinese electronics company, Zhuhai Sez
Tong Tu
Electronic Co., Ltd. ("Tong Tu"). A 50/50 Joint Venture letter of intent was
entered
into between the Company and Tong Tu January 12, 1996. The formal Joint
Venture
Agreement was executed in May 1996 between the Company's subsidiary,
Play-Per-View, and
Tong Tu.
The Agreement provides for the initial manufacture of 5,000 units which was
scheduled
to commence by summer 1996. The units will be placed in the United States under
the
auspices of Play-Per-View management. Play-Per-View will also enjoy the
benefits of
placement of units outside the United States as part of the Joint Venture
Agreement.
Tong Tu is currently finalizing the latest refinements of the prototype model
for
final approval of Company management. This revised prototype is expected to
shipped to
the Company in August. Production will commence shortly thereafter once final
Company
approval is given.
The Company will use its cash position to provide a letter of credit to Tong Tu
in
order to meet the Company's commitment for the initial cost of the 5,000 units.
The
Company's portion of the production cost requirements are $500,000 under the
terms of
the Joint Venture Agreement.
The Muse License -
CCIC has a non-exclusive license to use MUSE (Multidimensional User-oriented
Synthetic
Environment). A general application of this technology has been developed by
Muse
Technologies, Inc., and is known by the name "MUSE".
CCIC has granted to Play-Per-View a sub-license which will allow Play-Per-View
to
utilize new computer software technology generally known as "virtual reality".
MUSE can
be used now to develop video games whose graphical displays and level of
realism should
be far superior even to the new thirty-two bit games just becoming available.
Thus, in addition to the standard games which may be played on the
Play-Per-View
systems, future video games are in the planning stages.
Two types of video games are planned. The first kind will be similar to games
currently
available and will be designed to be played on existing and future game playing
equipment from traditional manufacturers such as Nintendo^ or SEGA^. Since the
Company
lacks the expertise to design and develop these games, the Company will look
for a
possible joint venture partner. This newly sought partner's business would be
the
designing, programming and marketing of "traditional" video games. The Company
would
receive a royalty from each game (each of which would be labeled "a
Play-Per-View video
game from [so-and-so] company") and the exclusive use of these new games in the
Company's Hospitality Units.
The second type of video game planned is different from any video game
currently on the
market. It is a game whereby two or more players may simultaneously play
against each
other without being in the same location. This type of game will be made
possible
because of a planned extension to the MUSE system. Muse Technologies, Inc., is
currently working on this extension as part of a contract it has with the
National
Aeronautics and Space Administration (NASA). Through MUSE, any number of people
may hold
a simultaneous conversation while located in widely scattered locations. This
feature
will allow a new type of video game with players scattered throughout the
country, each
player sitting at either a computer terminal, a personal computer or a
Play-Per-View
Hospitality Unit. Each new player will enter a game where his opponents are
other
players. Through MUSE, each individual player will "see" the game playing arena
from his
own unique perspective.
Part II _ Other Information
ITEM 1. LEGAL PROCEEDINGS.
The Company has been named as defendant in lawsuits in the ordinary course
of
business. Management of the Company is of the opinion that these lawsuits will
not have
a material effect on the financial condition of the Company.
ITEM 2. CHANGE IN SECURITIES.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
None.
(b) REPORTS ON FORM 8-K.
None filed for this quarter.
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.
COMBINED COMPANIES INTERNATIONAL CORP.
August 13, 1996 /s/ Steven Schwartz
Dated Steven Schwartz
President
August 13, 1996 /s/ Michael Davis
Dated Michael Davis
Chief Financial Officer