UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended December 31, 1996
Commission File No. 0-12116
ComTec International, Inc.
(Name of Small Business Issuer in its charter)
New Mexico 75-2456757
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10855 E. Bethany Drive, Aurora, CO 80014
(Address of principal executive offices)
(303) 743-7983
(IssuerOs Telephone Number Including Area Code)
Common Stock, $.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required
to be filed by Sections 12,13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes __ No X
Indicate the number of shares outstanding of each of the issuerOs
classes of common equity, as of the close of the period covered by
this report:
47,726,683 Shares of Common Stock ($.001 par value)
TABLE OF CONTENTS
FORM 10-QSB REPORT - FOR QUARTER ENDED DECEMBER 31, 1996
ComTec International, Inc.
PART I
Item 1.Financial Statements 1
Item 2.ManagementOs Discussion and Analysis or Plan of Operation 1
PART II
Item 1.Legal Proceedings 5
Item 2.Change in Securities 6
Item 3.Defaults Upon Senior Securities 7
Item 4.Submission of Matters to a vote of Security Holders 8
Item 5.Other Information 8
Item 6.Exhibit and Reports on Form 8-K 8
SIGNATURE PAGE 9
INDEX TO THE FINANCIAL STATEMENTS 10
COMTEC INTERNATIONAL
(A Development Stage Enterprise)
Consolidated Balance Sheets
June 30, December 31,
1996 1996
(Unaudited)
Assets
Current assets
Cash $ 27,482 $ 26,062
Office receivable 25,446 54,435
Prepaid expenses 1,610 6,850
Total current assets 54,538 87,347
Property and equipment, net 2,149,633 2,040,235
Other assets
Deposits and other 97,904 125,044
License rights 75,000 1,944,500
172,901 4,014,044
Total assets $2,377,075 $4,197,126
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 206,086 $ 433,667
Accrued payroll officer 31,000 61,000
Other accrued expenses 258,584 491,635
Short-term notes payable 236,182 135,866
Current portion of long-term note 622,835 620,000
Total current liabilities 1,354,687 1,742,168
Long-term debt 344,584 353,286
Interest in preferred stock of subsidiary 172,720 172,720
Stockholders' equity
Series A convertible preferred 420,000 420,000
Series C convertible preferred - 397,000
Common stock, .011 par value 41,299 46,860
Additional paid-in capital 6,148,899 8,088,504
Prepaid media agreements (1,300,000) (1,300,000)
Stock held in escrow (1,225,000) (1,225,000)
Deficit accumulated during development
stage (3,580,114) (4,498,412)
Total stockholders' equity 505,084 1,928,952
$ 2,377,075 $4,197,126
COMTEC INTERNATIONAL
(A Development Stage Enterprise)
Consolidated Statement of Operations
Three Months Ended Six Months Ended
1995 1996 1995 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue
Rental and other income $ 113,500 $ - $ 211,917 $ 69,551
Gain on disposition - 59,789 - 59,789
Total 113,500 59,789 211,917 129,340
Cost of sales
Contract labor 2,212 - 19,493 -
Production costs 28,785 - 58,964 -
Total 30,997 - 78,457 -
Gross profit 82,503 59,789 133,460 129,340
Expenses
General and administrative 326,931 706,201 1,307,922 1,022,686
Management fees - - - 15,328
Interest - 9,624 - 9,624
Total 326,931 715,825 1,307,922 1,047,638
Net income (loss) $ (244,428) $ (656,036) $(1,174,462) $ (918,298)
Weighted average common
shares outstanding 11,229,000 44,512,969 11,229,000 44,512,969
Net loss per share $ (.03) $ (.02) $ (.10) $ (.02)
COMTEC INTERNATIONAL
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
Six Months Ended
December 31,
1996 1995
(Unaudited) (Unaudited)
Operating activities
Net loss $ (918,298) $ (1,174,462)
Adjustments to reconcile net loss to net
cash used by operating activities
Depreciation expense 142,366 56,973
Services exchanged for stock - 568,405
Changes in assets and liabilities
Accounts receivable (28,989) (19,560)
Prepaid interest (5,240) 14,248
Accounts payable and accrued expenses 490,632 424,035
598,769 1,044,101
Net cash used in operating
activities (319,529) (130,361)
Investing activities
Purchase of property, plant and
equipment and trade name (32,968) (118,297)
Restricted cash - (25,044)
Decrease in note receivable - 20,711
Management contracts (1,869,500) (75,000)
Cash paid in acquisition of net cash
purchased - (14,964)
Other (1,971,640) -
Net cash used in investing
activities (3,874,108) (212,594)
Financing activities
Advances from related party - -
Proceeds from common stock and preferred
stock 4,286,666 256,363
Payments on note payable (100,316) 78,030
Payments on long-term notes payable 5,867 (10,345)
Net cash provided by financing
activities 4,192,217 324,048
Increase in cash (1,420) (18,907)
Beginning cash balance 27,482 21,735
Ending cash balance $ 26,062 $ 2,828
PART I
ITEM 1. FINANCIAL STATEMENTS See F-1 to F-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(a) Plan of Operation:
On May, 10, 1995, The Company's strategic business plan changed
from gaming and transportation to wireless telecommunications.
Initially, the Company's emphasis has been conducted as a holding
company of various telecommunication businesses.
On December 3, 1996, the Company created American Wireless
Network, Inc., a wholly-owned subsidiary to execute a business plan
concentrating on developing Specialized Mobile Radio (SMR) systems
through new construction of radio channels and acquisitions of
operating SMR companies. To date, American Wireless Network, Inc.
(AWN) has constructed 184 SMR 800Mhz channels and is under contract to
construct an additional 1,250 channels over the next two years. AWN
intends to acquire two operating companies by March 31, 1997. AWN
operates as a totally independently managed company with itOs own
Board of Directors and Officers. AWN common stock owned by the Company
is controlled through a voting trust.
The Company has a signed letter of intent to acquire a long-
distance telecommunication business by March 31, 1997. This business
concentrates on prepaid calling cards, long-distance domestic and
international reseller service and other land-line telecommunication
services. Once acquired, it is intended that this business unit will
operate as a wholly owned subsidiary.
The Company is continuing to move forward with the acqusition of
a 61% majority interest in Network Teleports, Inc. (ONTIO). NTI is
currently broadcasting television and cable programming along with
other data and transmission services via satellite uplink from its hub
located in New Orleans, Louisiana. Pursuant to the acquisition
agreement this transaction is valued at $915,000. The purchase
payments are being held in escrow pending final FCC approval of the
transaction and final due diligence review. The Company expects this
transaction to close in calendar year 1997 pending the outcome of the
CompanyOs due diligence review.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Company's strategic business plan is highly dependent upon
acquiring operating communication companies and in creating new
companies to take advantage of opportunities in the communication
industry.
This strategy is highly dependent upon having adequate funds to,
1). acquire operating telecommunication companies, 2). develop new
companies in the telecommunications industries, 3). attract qualified
employees to oversee and operate these businesses and 4). expand
existing companies with new expansion capital. To date, the Company
has used cash and its own Common and Preferred Stock to acquire SMR
assets, start the process to acquire operating companies and
supplement the expansion of its management and support operations.
The Company is currently in discussions with one or more
companies for private and/or public debt and equity financing
package(s). In September 1996, the Company started to raise a minimum
of $1 million ($5 million maximum offering) through a private
placement. This offering expired in December with no units being sold.
Series B Preferred Stock were authorized in connection with this
offering with no shares issued and outstanding.
On October 23, 1996, the Company obtained a firm commitment to
underwrite a $25 million debt and a $15 million common stock secondary
offering. Although the Company will endeavor to finance its working
capital needs through additional debt or equity financing, there is no
assurance that any financing will utimately be sold in the public
markets. In addition, any debt financing may require the Company to
mortgage, pledge or hypothecate its assets. Furthermore, as of
December 31, 1996, the Company was in default covering certain notes
payable and short term notes and there is no guarantee that even if
the future debt or equity financing is secured future defaults can or
will be cured.
As of the date of this filing, the Company has authorized Series
B Preferred Stock, stated value $5.00, in connection with the private
placement and authorized and issued 39,767 shares of Series C
Preferred Stock with a stated value of $10.00 in connection with the
DCL options acquired per the closing agreement dated August 6, 1996.
During quarter ended December 31, 1996, the Company continued as
a development stage enterprise. The Company's financial statements are
therefore not indicative of anticipated revenues which may be attained
or expenditures which may be incurred by the Company in future
periods. The Company's plan to achieve profitable operations is
subject to the validity of its assumptions and risk factors within the
telecommunication industry and pertaining to the Company.
Quarter Ended December 31, 1996.
As of December 31, 1996, $35,000 consisting of a short-term
note due Phillips Energy Corp. due Local Service Corp, were in
dispute. As of the date of this filing, the Company has agreed to pay
$45,000 consisting of principal and accrued interest to date. The
first two installments under this agreement were paid as of the date
of this filing.
At December 31, 1996, the Company records indicated an issued
and outstanding common stock balance of 46,859,625 shares with
shareholder equity of $468,596. As of that date, $420,000 of
preferred shares had been authorized and issued, but are being held
pending the outcome of the Company's counter claims against Local
Service Corp., International Corporate Development LTD, Premier
Financial Services, Inc., Phillips Energy Corporation, and the
individuals: John Watson, Frank Grey, and Bob Laventhal. (see Part 11
Item 1. LEGAL PROCEEDINGS).
Quarter December 31, 1995.
Prior to May 10, 1995, the Company's only activity was attempting
to execute the business plans in the areas of gaming and
transportation. These business plans failed during this period.
For the quarter ending December 31, 1995 the CompanyOs incurred
general and administrative expenses of $173,418, a 330% increase from
the same period during fiscal 1994. The majority of these costs were
related to the acquisition and operation of John Sandy Production,
Inc. and increased operational costs directly related to the Company's
continued business plan activities in the wireless telecommunication
industry. No significant items were recorded in the three months
ending December 31, 1995.
On July 26, 1995, the Company acquired John Sandy Productions,
Inc.. John Sandy Productions, Inc.(OJSPO), accordingly, comparing
results of operations from 1994 to 1995 are not indicative of like
operations during these periods.
At December 31, 1995, the Company records indicated an issued
and outstanding common stock balance of 36,001,308 shares with
shareholder equity of $360,013. As of that date, $420,000 of
preferred shares had been authorized and issued, but are being held
pending the outcome of the CompanyOs counter claims against Local
Service Corp., International Corporate Development LTD, Premier
Financial Services, Inc., Phillips Energy Corporation, and the
individuals: John Watson, Frank Grey, and Bob Laventhal. (see Part 11
Item 1. LEGAL PROCEEDINGS).
Part II
ITEM 1. LEGAL PROCEEDINGS
Local Service Corporation vs. ComTec International, Inc.. This
suit (the "Receivership Action") was filed in December 1995 in the
District Court for Arapahoe County, Colorado. Local Service
Corporation, the former owner of the Company's building at 10855 E.
Bethany Drive in Aurora, Colorado (the "Company's Building"), sought
the appointment of a receiver for the Company, dissolution of the
Company, and an inspection of the Company's books and records.
Plaintiffs' claims were based upon alleged illegal and fraudulent acts
on the part of the Company's management in encumbering the Company's
real estate without consideration and corporate waste and
mismanagement. On January 4, 1996, the court entered an order
appointing John Watson as receiver. On January 12, 1996, upon motion
filed by the Company, the court vacated the order appointing the
receiver and ordered the receiver not to interfere with the Company's
business. On March 6, 1996, the Company filed counterclaims against
Local Service Corporation, International Corporate Development Ltd.,
Premier Financial Services, Inc., Phillips Energy Corporation, John
Watson, Frank Grey, and Bob Laventhal. The Company is seeking
undetermined monetary damages for actions of this group arising from
their attempt to seize control of the Company. This case is scheduled
for a jury trial in September 1997.
The following suits involve individuals or companies who participated
in or encouraged the Receivership Action against the Company:
Premier Financial Services, Inc. vs. ComTec International, Inc.
and Keystone Holding Corp. This suit was filed on September 30,
1996, in the District Court for the City and County of Denver,
Colorado. Premier Financial Services, Inc. alleges that the
Company breached the terms of a consulting agreement pursuant to
which Premier was to receive certain compensation for finding an
acquisition for Keystone Holding Corp. An answer is due
November 5, 1996.
Wayne Johnson vs. Key Communications Group, Inc. and ComTec
International, Inc. This suit was filed on September 30, 1996 in
the District Court for the City and County of Denver, Colorado.
Wayne Johnson alleges nonpayment of a promissory note in the
principal amount of $40,000 plus interest. An answer is due
November 5, 1996. The Company proposes to claim that an offset
is due the Company based on a signed employment agreement with
Mr. Johnson.
Gayle A. Couture vs. Key Communications Group, Inc. and ComTec
International, Inc. This suit was filed on September 30, 1996 in
the District Court for the City and County of Denver, Colorado.
Gayle Couture alleges nonpayment of a promissory note in the
principal amount of $8,300.95 plus interest. An answer is due
November 5, 1996. The Company proposes to claim that an offset
is due the Company based on a signed employment agreement with
Ms. Couture.
Phillips Energy Corp. vs. ComTec International, Inc. This suit
was filed on September 30, 1996 in the District Court for the
City and County of Denver, Colorado. Phillips Energy Corp.
alleges nonpayment of a promissory note in the principal amount
of $35,000 plus interest. An answer is due November 5, 1996.
Wayne Johnson vs. Donald Mack. This suit was filed on September
30, 1996 in the District Court for the City and County of Denver,
Colorado. Wayne Johnson claims for unpaid wages for services
performed. An answer is due November 5, 1996.
Gayle A. Couture vs. Donald Mack. This suit was filed on
September 30, 1996 in the District Court for the City and County
of Denver, Colorado. Gayle Couture claims for unpaid wages for
services performed. An answer is due November 5, 1996.
ComTec International, Inc. d/b/a ComTec Holding Corp. vs. Tim
Degarmo, DBI Design Builders, LLC and all other occupants. This
suit was filed on April 19, 1996 in the District Court for
Arapahoe County, Colorado. The Company initiated the action to
evict DBI Builders for nonpayment of rent. DBI was the
contractor for the tenant finish work performed on the Company's
Building and it counterclaimed for $27,000, allegedly owed for
tenant finish work. The Company then filed a counterclaim
alleging that DBI's failure to obtain a construction permit,
shoddy workmanship, and nonpayment of DBI's subcontractors. The
Company and Donald Mack have also filed a claim against Tim
Degarmo for defamation. This suit is schedule for trial on
October 20, 1997.
Other suits involving the Company are:
Shamrock Electric Co. vs. Nattem U.S.A. Incorporated; Keystone
Holding Corp.; ComTec International; Tim Degarmo T.B.A. DBI
Construction a/k/a DBI Design Builders a/k/a Carlton Builders
Inc.; David L. Terry; Celia M. Terry; Local Service Corporation;
Spelman Mortgage and Investment Company; Kansas City Life
Insurance Company; Sunset Life Insurance Company of America; Key
Communications Group; Golesh Door & Trim, Inc.; Roberta F.
Gillis, Public Trustee of Arapahoe County, and any and all
occupants. This suit was filed in April 16, 1996 in the District
Court for Arapahoe County, Colorado. This is a mechanic's lien
action seeking payment for work performed on the Company's
Building in the approximate amount of $13,000. Kansas City Life
Insurance Company and Golesh Door & Trim, Inc. have each
counterclaimed and filed for judicial foreclosure on the
Company's Building. Not all of the parties have responded in
this action. No trial date has been set. The Company is
attempting to cure the defaults to stop the foreclosure action.
Sunset Life Insurance Company of America vs. CTI Real Estate,
Inc. This suit was filed in September 1996 in the District Court
for Arapahoe County, Colorado. Sunset Life Insurance Company
seeks the appointment of a receiver to manage the Company's
Building. The court has directed that this suit be consolidated
with the action filed by Shamrock Electric Co.
Except for the foregoing, no material legal proceedings, to which
the Company is a party or to which the property of the Company is
subject, is pending or is known by the Company to be contemplated.
ITEM 2. CHANGE IN SECURITIES. NONE
ITEM3. DEFAULTS UPON SENIOR SECURITIES. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
ITEM 5. OTHER INFORMATION
(a) CHANGES IN BOARD MEMBERS AND OFFICERS
On November 22 1996, Kelsey T. Kennedy resigned as Chief
Financial Officer of the Company. There was no disagreement with
Kelsey T. Kennedy on any manner of accounting principle or
practice, financial statement disclosure, scope or procedure,
which disagreement, if not resolved to the satisfaction of this
officer, would have caused him to make reference to the subject
matter in connection with its report.
On December 31, 1996, Mitchell B. Chi resigned as Chief
Financial and Operating Officer and member of the Board of
Directors of the Company. There was no disagreement with Mitchell
B. Chi on any manner of accounting principle or practice,
financial statement disclosure, scope or procedure, operational
issues and public disclosure which disagreement, if not resolved
to the satisfaction of this officer, would have caused him to
make reference to the subject matter in connection with its
report. Mr. Chi was hired by American Wireless NetworkOs as Chief
Operating and Finance Officer on January 1, 1997 and elected to
the Board of Directors of American Wireless Network, Inc. on
December 3, 1996.
On December 31, 1996, Donald O. Smith resigned as Chief
Technology Officer of the Company. There was no disagreement with
Donald O. Smith on any operational or technology issues or public
disclosure which disagreement, if not resolved to the
satisfaction of this officer, would have caused him to make
reference to the subject matter in connection with its report.
Mr. Smith was hired by American Wireless NetworkOs as Chief
Technology Officer on January 1, 1997, elected to the Board of
Directors of American Wireless Network, Inc. on December 3, 1996
and appointed to the Company's Voting Trust for American Wireless
Network on February 7, 1997.
ITEM 6. EXHIBITS AND REPORTS
(a) & (b) Financial Statements and Schedules. See Index to Financial
Statements beginning on page 7.
(c) Exhibits. The following documents are filed herewith or
incorporated herein by reference as Exhibits:
Exhibits
2.0 Acquisition of John Sandy Productions, Inc. dated July 26, 1995.
(1).
2.1 Acquisition Agreement between the Company and DCL Associates
dated April 29, 1996. (1).
2.2 Letter of Intent between the Company and Telecosm dated May 31,
1996. (1).
2.3 Acquisition Agreement between the Company and Commercial
Communications, Inc. dated January 3, 1996. (1).
3.0 Articles of Incorporation of the Company. (incorporated by
reference to Exhibit 3.1 to the CompanyOs Form S-1 Registration
Statement No. 82-88530 dated December 20, 1983).
3.1 By-laws. (incorporated by reference to Exhibit 3.2 to the
CompanyOs Form S-1 Registration Statement No. 82-88530 dated
December 20, 1983).
4.0 Certificate of Designation of Series A Preferred Shares. (1)
4.1 Certificate of Designation of Series B Preferred Shares. (1)
4.2 Certificate of Designation of Series C Preferred Shares. (1)
10.01 Form of Employment Agreement between the Company and its
officers. (1)
11 Not Applicable.
15 Not Applicable.
18 Not applicable.
19 Not applicable.
22 Not Applicable.
23 Not Applicable.
24 Not applicable .
d) The Company filed the following reports on Form 8-K:
August 14, 1996
September 12, 1996
_____________
(1) Incorporated by reference to the CompanyOs Form 10-KSB as of June
30, 1996
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report signed on its behalf by the Undersigned, thereunto duly
authorized.
COMTEC INTERNATIONAL, INC.
Date: November 1, 1996 By: /s/ Donald G. Mack
Donald G. Mack, President and
Chief Executive Officer
By: /s/ Gordon Dihle
Gordon Dihle
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Signature Title Date
/s/ Donald G. Mack Director February 20, 1997
Donald G. Mack
/s/ Thomas Moscariello Director February 20, 1997
Thomas Moscariello
/s/ Robert Clauson Director February 20, 1997
Robert Clauson