UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1997
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
(Issuer's Telephone Number Including Area Code)
Common Stock, $.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports
required to be filed by Sections 12,13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court.
Yes ___ No X
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the close of the period covered by
this report:
48,346,875 Shares of Common Stock ($.001 par value)
-1-
TABLE OF CONTENTS
FORM 10-QSB REPORT - FOR QUARTER ENDED March 31, 1997
ComTec International, Inc.
PART I
Item 1. Financial Statements 1
Item 2. Management's 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
-2-
PART I
ITEM 1. FINANCIAL STATEMENTS See F-1 to F-5
ITEM 2. Management's Discussion and Analysis or Plan of
Operation
(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 one or more operating companies by June 30,
1997. AWN operates as a wholly owned subsidiary of the Company.
The Company organized a new subsidiary, TTI Communications
Corporation, a long-distance telecommunication business, on
February 12, 1997. This subsidiary began operations approximately
February 19th, 1997 and by March 31, 1997 was functionally
operational. This business presently resells long distance
telephone service through prepaid phone cards. This subsidiary
intends to concentrate on prepaid calling cards, long-distance
domestic and international reselling services and other land-line
telecommunication services. The Company has a 70% interest in TTI
Communications Corporation, the remaining 30% interest in the
subsidiary is owned 10% each by two unaffiliated entities and one
unrelated Limited Liability Company.
The Company organized a new subsidiary, International Media
Group, Ltd. on March 20th, 1997. International Media Group, Ltd.
was formed with a business plan to own, operate and market as a
public advertising media, the use as of giant LED screens. On
approximately March 31st, 1997, the Company obtained possession
through tentative agreements to acquire for future issuance of
common stock in a nonpublic exchange,. six (6) giant light-emitting
diode (LED) screens. The asset acquisition, subject to audit,
title review and market basis evaluation of the giant LED screens
is also contingent upon sufficient authorized and unissued shares
of the Company's common stock being available. Present data value
the assets at $2,400,000. At such valuation the acquisition will
require the future issuance of 25,000,000 shares of the common
stock of the Company ($.096 per share). A closing date for
achievement of the stock exchange portion of the transaction, to be
facilitated through Geneva Reinsurance Company, Ltd., a corporation
organized outside of the United States of America, has not yet been
determined. The giant LED screens provide active light
presentation programs, adaptable for indoor or outdoor use for
sporting events, advertising displays and other theatrical
applications. LED screens are compatible with computer,
television, VCR and other electronic programming, including live
and taped feeds. The Company intends, through its wholly owned
subsidiary, International Media Group, Ltd., to lease out the
screens for short term (one to six week) events.
The Company is continuing to move forward with the acquisition
of a 61% majority interest in Network Teleports, Inc. ("NTI"). 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 Company's 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.
As of the date of this filing, the Company estimates its cash
needs to execute the first part of its business plan by the end of
the current fiscal year June 30, 1997 to be $5,000,000. This
amount is composed of $834,000 for the construction of 139 SMR
channels, $3,000,000 as initial payments to close on three targeted
operating SMR companies, $346,000 for working capital and $820,000
to cure defaults associated with its commercial properties.
On July 27, 1995 the Company acquired all of the outstanding
voting stock of John Sandy Productions, Inc. (JSP), a privately
held corporation under the sole control of John Santucci. The
business purpose of this self-supporting video production company
was to obtain in-house marketing and media production expertise to
support the Company's marketing of its future telecommunication
services. As of the date of this filing, the Company is in dispute
with John Santucci over the original purchase agreement for JSP.
The Company and John Santucci have agreed to go to arbitration with
respect to the contract dispute. For accounting purposes, the
Company's total cash investment in this wholly-owned subsidiary has
been recorded in other assets as of March 31, 1997.
-3-
The Company has limited capitalization and is dependent on the
proceeds of private and public offerings to continue as a going
concern, implementing its business plan and completing targeted
acquisitions. As of March 31, 1997, the unaudited results of the
Company indicated assets of $7,598,257, negative working capital of
$1,025,247, and debt in default of $620,000. All during fiscal 1997
and to the date of this filing, the Company has had and continues
to have a substantial need for working capital to cure defaults on
debt obligations and for normal operating expenses associated with
the Company continuing as a going concern. Any activities in the
communications industry requires adequate financing and on-going
funding sources. The Company has entered this industry with limited
financing and funding sources.
Although still in the development stage, the Company's
Subsidiary, TTI Communications Corporation, is fully operational in
the sale of prepaid phone cards. Marketing is accomplished through
wholesale distribution to independent convenience stores. Through
TTI Communications Corporation, the Company is currently generating
substantial revenues from operations. From the Subsidiaries
inception on February 12, 1997 to March 31, 1997, TTI
Communications Corporation generated a total of $24,894 in revenues
from sales of prepaid long distance telephone cards. Costs and
expenses related to such revenues included costs of product sold
$9,682 and operating expenses of $44,111 totaling $53,793. Prior
to the period ended March 31, 1997 the Company had not generated
significant revenues from operations.
ComTec International, Inc. (the "Company") formulated a
preliminary financing arrangement and tentative debt conversion
option process and obtained One Million Five Hundred Thousand
Dollars ($1,500,000) of debt financing by issuing a Debenture to
Geneva Reinsurance Company, Ltd., a corporation organized outside
of the United States of America. The Debenture requires interest
of 12% per annum payable February 28, 1998. The Debenture matures
and the entire principal amount is due February 28, 1998.
Potential conversion option features anticipate the reservation of
shares for potential conversion with rights for conversion into
shares of the common stock of the Company at any time prior to
maturity. The conversion feature permits the holder of the
debenture to convert all or any part of the Debenture into shares
of the .001 par value common stock of the Company at the rate of
1000 shares per $96.00 of Debenture principal. If converted the
holder is to receive warrants to purchase a number of shares equal
to shares of common stock received in the conversion, said warrants
to be exercisable at any time during a three year period following
conversion at an exercise price of $.90 per share. Geneva
Reinsurance Company, Ltd. had no previous affiliation with the
Company.
An additional agreement involving Geneva Reinsurance Company,
Ltd. calls for future debt funding to be received by the Company in
the amount of One Million Dollars ($1,000,000) under terms to be
negotiated. Such debt funding agreement is anticipated to be
completed by June 30th, 1997.
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 ultimately
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 March 31, 1997, 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 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 March 31, 1997, 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 March 31, 1997.
For the quarter ending March 31, 1997 the Company's incurred
general and administrative expenses of $360,163. For the quarter
ending March 31, 1996 the Company's incurred general and
administrative expenses of $762,497. The majority of this expense
is due normal operating expenses associated with the business plan
concentrating on wireless telecommunications.
On December 3, 1996 the Company formed American Wireless
Network, Inc., a wholly owned subsidiary of the Company to pursue
opportunities in the Specialized Mobile Radio (SMR) industry. In
connection with this transaction, the Company transferred all SMR
radio licenses under ownership and control of the Company valued at
$1,942,000 to American Wireless Network, Inc. (AWN) in exchange for
500,000 shares of common stock in AWN. On December 22, 1996 AWN
issued 143,000 shares of common stock to additional investors of
AWN. In March of 1997 the Company purchased or exchanged for stock
in the Company all shares of AWN held outside of the Company. As
of March 31, 1997, the Company's owned all of the outstanding
common stock of AWN.
During the quarter ended March 31, 1997, ComTec International,
Inc. (the "Company") formulated a preliminary financing arrangement
(and tentative debt conversion option process described above) to
obtain One Million Five Hundred Thousand Dollars ($1,500,000) of
debt financing by issuing a Debenture to Geneva Reinsurance
Company, Ltd., a corporation organized outside of the United States
of America. The Debenture requires interest of 12% per annum
payable February 28, 1998. The Debenture matures and the entire
principal amount is due February 28, 1998
On approximately March 31st, 1997, the Company obtained
possession through tentative agreements to acquire for future
issuance of common stock in a nonpublic exchange,. six (6) giant
light-emitting diode (LED) screens. The asset acquisition,
subject to audit, title review and market basis evaluation of the
giant LED screens is also contingent upon sufficient authorized and
unissued shares of the Company's common stock being available.
Present calculations of the Sellers cost basis record the assets on
the Company's
-4-
balance sheet at $2,400,000. At such valuation the acquisition
will require the future issuance of 25,000,000 shares of the common
stock of the Company ($.096 per share). A closing date for
achievement of the stock exchange portion of the transaction, to be
facilitated through Geneva Reinsurance Company, Ltd., a corporation
organized outside of the United States of America, has not yet been
determined.
As of March 31, 1997, $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 March 31, 1997, the Company records indicated an issued
and outstanding common stock balance of 48,346,875 shares with
shareholder equity of $2,307,638. As of that date, $420,000 of
preferred shares had been authorized and issued.
Quarter March 31, 1996.
For the quarter ending March 31, 1996 the Company's incurred
general and administrative expenses of $762,497. The majority of
these costs were related to start up 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 March 31, 1996.
At March 31, 1996, the Company records indicated an issued
and outstanding common stock balance of 29,814,750 shares with
shareholder equity of $388,708. As of that date, $420,000 of
preferred shares were authorized and issued.
-5-
Part II
ITEM 1. LEGAL PROCEEDINGS
Local Service Corporation vs. ComTec International, Inc. and
various lawsuits and litigation associated with or related to that
suit were settled during the quarter ended March 31, 1997 or prior
to the date of this report.
Sunset Life Insurance Company of America vs. CTI Real Estate,
Inc. This suit, a foreclosure action on the Companies building was
filed in September 1996 in the District Court for Arapahoe County,
Colorado. Sunset Life Insurance Company sought and obtained the
appointment of a receiver to manage the Company's Building. This
suit was consolidated with 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 seeking a commercial
mortgage loan in order to settle the foreclosure action as well as
continuing to attempting to cure the defaults .
On July 27, 1995 the Company acquired all of the outstanding
voting stock of John Sandy Productions, Inc. (JSP), a privately
held corporation under the sole control of John Santucci. The
business purpose of this self-supporting video production company
was to obtain in-house marketing and media production expertise to
support the Company's marketing of its future telecommunication
services. As of the date of this filing, the Company is in dispute
with John Santucci over the original purchase agreement for JSP.
The Company and John Santucci have agreed to go to arbitration with
respect to the contract dispute. For accounting purposes, the
Company's total cash investment in t John Sandy Productions, Inc.
has been recorded in other assets as of March 31, 1997.
The Company has additional contract disputes and adversary
claims with various venders, former consultants and other entities,
all of which arise in the normal course of business of a firm in
the development stage with a business plan similar to the Company.
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.
Increase in Authorized Shares.
The following amendment to the Articles of Incorporation was
adopted by the Shareholders of the corporation on March 28, 1997 at
the annual meeting of the shareholders in the manner prescribed by
the New Mexico Business Corporation Act:
V. Article 5(A) of the articles of incorporation is hereby
amended to read in its entirety as follows:
A) Authorized Shares: The aggregate number of shares
which the corporation shall have authority to issue is 110,000,000
shares. One Hundred Million (100,000,000) shares shall be
designated "Common Stock", and shall have a par value of $.001.
Ten Million (10,000,000) shares shall be designated "Preferred
Stock", and shall have a par value of $.001 per share, and shall be
issued for such consideration, expressed in dollars, as the Board
of Directors may from time to time, determine.
Shareholder Authorization for Recapitalization.
At the Annual Meeting held on March 28, 1997, the
Shareholders of the Company approved a proposal to give the
Company's Board of Directors authority to institute a reverse stock
split of from 3 for 1 to 100 for 1 at the discretion of the Board
of Directors until December 31, 1997. The Board of Directors has
not yet taken any action with respect to the authority granted by
the Shareholders on March 28th, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of the shareholders of the Company was held
on March 28th, 1997. The necessary quorum of voting shares (a
total of 28,711,046 common shares) was present at the meeting in
person or by proxy.
The following matters were placed for Shareholder vote at the
March 28th, 1997 Annual Shareholder meeting.
Election of Directors:
Clifford Perlman was elected to the Board of Directors until
the next annual meeting of the Shareholders. Votes for this
director totaled 28,430,346, votes against totaled 214,300.
Donald G. Mack was elected to the Board of Directors until the
next annual meeting of the Shareholders. Votes for this director
totaled 28,430,346, votes against totaled 214,300.
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Thomas Moscariello was elected to the Board of Directors until
the next annual meeting of the Shareholders. Votes for this
director totaled 28,430,346, votes against totaled 214,300.
Increase in Authorized Shares.
The following amendment to the Articles of Incorporation was
adopted by the Shareholders of the corporation on March 28, 1997 at
the annual meeting of the shareholders in the manner prescribed by
the New Mexico Business Corporation Act:
V. Article 5(A) of the articles of incorporation is hereby
amended to read in its entirety as follows:
A) Authorized Shares: The aggregate number of shares
which the corporation shall have authority to issue is 110,000,000
shares. One Hundred Million (100,000,000) shares shall be
designated "Common Stock", and shall have a par value of $.001.
Ten Million (10,000,000) shares shall be designated "Preferred
Stock", and shall have a par value of $.001 per share, and shall be
issued for such consideration, expressed in dollars, as the Board
of Directors may from time to time, determine.
Votes for the Amendment to the articles of incorporation
totaled 26,976,452, votes against the amendment totaled 1,347,346.
Shareholder Authorization for Recapitalization.
At the Annual Meeting held on March 28, 1997, the
Shareholders of the Company approved a proposal to give the
Company's Board of Directors authority to institute a reverse stock
split of from 3 for 1 to 100 for 1 at the discretion of the Board
of Directors until December 31, 1997.
Votes for the authorization for recapitalization totaled
26,683, 633, votes against the recapitalization proposal totaled
2,019,446.
Shareholder Authorization for Adoption of 1997 Stock Option
Plan.
At the Annual Meeting held on March 28, 1997, the
Shareholders of the Company approved a proposal to establish a 1997
stock option plan which plan when instituted will provide limited
qualified and nonqualified stock option incentives for key
employees, officer and directors.
Votes for the authorization of the 1997 stock option plan
totaled 26,803,402, votes against the recapitalization proposal
totaled 1,401,929.
ITEM 5. OTHER INFORMATION
(a) CHANGES IN BOARD MEMBERS AND OFFICERS
On February 12, 1997, Robert Clausen resigned as
Secretary and member of the Board of Directors of the Company.
There was no disagreement with Mr. Clausen on any
administrative, 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.
Daniel Melnick, age 65 was appointed as a Director of
the Company by the Board of Directors at the annual meeting of
the Board of Directors of the Company held on March 28, 1997.
Mr. Melnick replaces Robert Clausen who previously resigned as
a Director. Mr. Melnick had no previous affiliation with
the Company
On May 6, 1997, Thomas Moscariello resigned as
Secretary and member of the Board of Directors of the Company.
There was no disagreement with Mr. Moscariello on any
administrative, 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.
Clifford S. Perlman assumed the duties as Corporate
Secretary.
-7-
ITEM 6. EXHIBITS AND REPORTS
(a) & (b) Financial Statements and Schedules. See Index to
Financial Statements beginning on page 10.
(c) Exhibits. The following documents are filed herewith or
incorporated herein by reference as Exhibits:
Exhibits
3.0 Articles of Incorporation of the Company. (incorporated
by reference to Exhibit 3.1 to the Company's 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 Company's Form S-1 Registration Statement No. 82
-88530 dated December 20, 1983).
3.2 Amendment to Articles of Incorporation. (incorporated by
reference to Exhibit 3.1 to the Company's Form 8-K filed
May 13,1997)
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 .
27 Financial Data Schedule
(d) The Company filed the following reports on Form 8-K:
Form 8K, May 12, 1997
(1) Incorporated by reference to the Company's Form 10-KSB as of
June 30, 1996
-8-
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: May 19, 1997 By: /s/ Donald G. Mack
Donald G. Mack, President and
Chief Executive Officer
By: /s/ Donald G. Mack
Donald G. Mack
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 May 19, 1997
Donald G. Mack
/s/ Clifford S. Perlman Director May 19, 1997
Clifford S. Perlman
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COMTEC INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements Page
Balance Sheets at March 31, 1996 and March 31, 1997 F-1
Statements of Operations at March 31, 1996
and March 31, 1997 F-3
Statements of Cash Flows at March 31, 1996
and March 31, 1997 F-4
Notes to the Financial Statements F-5
-10-
COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
(a Development Stage Enterprise)
Consolidated Balance Sheet
6/30/96 3/31/97
(unaudited)
---------- -----------
Current Assets
Cash $ 27,482 $ 814,461
Prepaid and other current assets 1,610 37,054
Officer Receivable 25,446 --
---------- -----------
Total current assets 54,538 851,515
---------- -----------
Property and equipment, net 2,149,633 1,826,469
---------- -----------
Other assets
Deposits and other 97,904 2,975,773
License rights 75,000 1,944,500
---------- -----------
172,904 4,920,273
Total assets $2,377,075 $ 7,598,257
========== ===========
Current Liabilities
Accounts payable $ 206,086 $ 230,110
Accrued payroll - officer 31,000 26,000
Other accrued expenses 258,584 0
Short-term Notes & Debentures payable 236,182 1,620,652
Current portion of long-term debt 622,835 620,000
---------- -----------
Total Current liabilities 1,354,687 2,496,762
---------- -----------
Long-term debt 344,584 393,857
Interest in preferred stock of subsidiary 172,720 --
Commitments and contingencies -- 2,400,000
Stockholders' equity
Series A convertible preferred stock,
$1 stated par and liquidation
value 1,000,000 shares authorized,
420,000 shares issued and outstanding;
$420,000 liquidation preference 420,000 420,000
F-1
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Series B convertible preferred stock,
$5 stated par and liquidation value;
1,500,000 shares authorized, no shares
issued and outstanding; liquidation
subordinated to Series A liquidation
value -- --
Series C convertible preferred stock,
$10 stated par and liquidation value;
1,500,000 shares authorized, 39,700
shares issued and outstanding;
liquidation subordinated to Series A
and Series B liquidation value -- 397,000
Common stock, .001 par value;
50,000,000 shares authorized
48,346,875 shares issued and
outstanding 3/31/97 41,299 48,345
Additional paid in capital 6,148,899 8,846,112
Prepaid media agreements (1,300,000) (1,300,000)
Stock held in escrow (1,225,000) (1,225,000)
Deficit accumulated during
the development stage (3,580,114) (4,878,819)
---------- -----------
Total stockholders' equity $ 505,084 $ 2,307,638
---------- -----------
Total Liabilities and
Shareholders Equity $2,377,075 $ 7,598,257
========== ===========
F-2
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ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Three Months Ended Nine Months Ended
March 31, March 31,
(unaudited) (unaudited)
---------------------- -----------------------
1996 1997 1996 1997
---------- ---------- ----------- -----------
Revenues
Sales $ -- $ 24,894 $ -- $ 24,894
Cost of Sales -- 9,682 -- 9,682
---------- ---------- ----------- -----------
Gross Profit -- 15,212 -- 15,212
---------- ---------- ----------- -----------
Expenses
General and
Administrative 762,497 360,163 2,148,876 1,407,801
Interest Expense 94,876 32,476 94,876 42,100
---------- ---------- ----------- -----------
Total Expenses 857,373 392,639 2,243,752 1,449,901
---------- ---------- ----------- -----------
Rental and Other Income 90,910 69,551 302,827 76,195
Gain on Disposition -- 59,789 -- 59,789
---------- ---------- ----------- -----------
Net Loss $ (766,463) $ (248,087) $(1,940,925) $(1,298,705)
========== ========== =========== ===========
Weighted Average
Common Shares 22,150,953 46,429,922 22,150,953 46,429,922
Net Loss per
Common Share (0.03) (0.01) (0.09) (0.03)
F-3
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COMTEC INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended March 31,
1995 1996
(unaudited) (unaudited)
----------- -----------
Operating activities:
Net Loss $(1,940,925) $(1,298,705)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation expense 80,059 3,463
Services exchanged for stock 926,205 --
Changes in assets and liabilities:
Increase in accounts receivable (2,809) (35,444)
Decrease in prepaid interest 11,329 --
Increase (decrease) in
accounts payable 327,804 (239,560)
----------- -----------
Total adjustments $ 1,342,588 $ (271,541)
----------- -----------
Net cash used in operating activities $ (598,337) $(1,570,246)
Investing activities:
Purchase of property, plant and
equipment and trade name $ (140,167) $ (32,968)
Restricted cash (25,044) --
Decrease in note receivable 22,952 --
Management contracts -- (1,814,066)
Cash paid in acquisition (14,964) --
Other (2,021) --
----------- -----------
Net cash used in investing activities $ (159,244) $(1,847,034)
Financing activities:
Advances from related party -- --
Proceeds from private placement of
common stock 798,391 $ 2,704,259
Payments on note payable -- --
Proceeds from Debentures -- 1,500,000
Payment on long-term notes payable (11,327) --
Proceeds from exercise of warrants -- --
----------- -----------
Net cash provided by financing activities $ 787,064 $ 4,204,259
Increase in cash $ 29,483 $ 786,979
Beginning cash balance 21,736 27,482
----------- -----------
Ending cash balance $ 51,219 814,461
F-4
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ComTec International, Inc. and Subsidiaries
NOTES TO MANAGEMENTS UNAUDITED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the nine
month periods ended March 31, 1996 and March 31, 1997 are unaudited
and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for
a fair presentation of the financial position and operating results
for the interim period. The condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of
operations, contained in the Company's Report on Form 10KSB for the
year ended June 30, 1996 and prior periods. The results of
operations for the nine months ended March 31, 1997 are not
necessarily indicative of the results for the entire fiscal year
ending June 30, 1997.
F-5
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COMTEC INTERNATIONAL, INC.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended March 31, 1997
EXHIBITS Page No.
EX-27 Financial Data Schedule 17
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