UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Form 10-Q
---------------------
/X/ Quarter report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1996 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period from __________ to ___________
Commission file number 0-10541
_____________________
COMTEX SCIENTIFIC CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-3055012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Seminary Road
Suite 800
Alexandria, Virginia 22311
(Address of principal executive offices)
Registrant's Telephone number including area code
(703) 820-2000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 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 / /
As of February 7, 1997, 7,857,667 shares of the Common Stock of
the registrant were outstanding.
<PAGE>
COMTEX SCIENTIFIC CORPORATION
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Balance Sheets 3
December 31, 1996 and June 30, 1996
Statements of Operations 4
for the Three and Six Months
Ended December 31, 1996 and 1995
Statements of Cash Flows 5
for the Six Months Ended
December 31, 1996 and 1995
Notes to Financial Statements 6
Financial Statements
Item 2. Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
Part II Other Information:
Item 1. Legal Proceedings 13
SIGNATURES 14
<PAGE>
<TABLE>
COMTEX SCIENTIFIC CORPORATION
BALANCE SHEETS AT DECEMBER 31, 1996 AND JUNE 30, 1996
<CAPTION> December 31, June 30,
ASSETS 1996 1996
(Unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 30,430 $ 57,644
Accounts Receivable, Net of Allowance of $95,000
and $108,000 at December 31, and June 30, 1996,
respectively 680,953 582,318
Advances to TII, a related party 337,810 360,573
Prepaid Expenses and Other Current Assets 58,492 49,133
------------ -------------
TOTAL CURRENT ASSETS 1,107,685 1,049,668
PROPERTY AND EQUIPMENT, NET 212,312 267,028
DEPOSITS AND OTHER ASSETS 64,938 65,315
------------ -------------
TOTAL ASSETS $ 1,384,935 $ 1,382,011
============ =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts Payable $ 474,765 $ 502,962
Accrued Expenses 367,001 250,190
Amounts due to Related Parties 257,464 231,714
Notes Payable 321,124 406,439
------------ -------------
TOTAL CURRENT LIABILITIES 1,420,354 1,391,305
LONG-TERM LIABILITIES:
Long-Term Notes Payable - Affiliate 857,348 1,008,831
Other Long-Term Notes Payable 7,950 74,050
------------ -------------
TOTAL LONG-TERM LIABILITES 865,298 1,082,881
TOTAL LIABILITIES 2,285,652 2,474,186
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common Stock, $0.01 Par Value - Shares Authorized:
18,000,000;
Shares issued and outstanding: 7,857,667 78,577 78,547
Additional Paid-In Capital 9,980,575 9,830,010
Accumulated Deficit (10,959,869) (11,000,732)
------------- --------------
TOTAL STOCKHOLDERS' DEFICIT (900,717) (1,092,175)
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,384,935 $ 1,382,011
============= ==============
</TABLE>
The accompanying "Notes to Financial Statements" are an integral part
of these financial statements.
<PAGE>
<TABLE>
COMTEX SCIENTIFIC CORPORATION
STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
(UNAUDITED)
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------------ -----------------------
1996 1995 1996 1995
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES
Information Services Revenues $ 944,542 $ 761,119 $1,854,548 $1,516,306
Data Communications Revenues 137,728 74,298 268,010 152,382
----------- ---------- ----------- ----------
Total Revenues $1,082,270 $ 835,417 $2,122,558 $1,668,688
----------- ---------- ----------- ----------
COSTS AND EXPENSES
Costs of Information Services 447,614 403,324 839,268 806,008
Costs of Data Communications 106,238 199,039 275,749 367,880
Product Development 70,863 67,234 125,272 133,682
Sales and Marketing 128,948 88,029 239,037 180,242
General and Administrative 250,379 224,148 465,882 436,774
Depreciation and Amortization 37,769 34,171 74,761 71,723
----------- ---------- ---------- ----------
Total Costs and Expenses 1,041,811 1,015,945 2,019,969 1,996,309
----------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 40,459 (180,528) 102,589 (327,621)
INTEREST AND OTHER EXPENSE, NET (28,530) (25,987) (61,381) (53,302)
----------- ----------- ---------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES 11,929 (206,515) 41,208 (380,923)
INCOME TAXES 0 0 346 489
----------- ---------- ---------- ----------
NET INCOME (LOSS) $11,929 $(206,515) $40,862 $ (381,412)
=========== =========== ========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ 0.00 $ (0.03) $ 0.01 $ (0.05)
=========== =========== ========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 7,857,667 7,854,667 7,857,667 7,854,667
========== =========== ========== ===========
</TABLE>
The accompanying "Notes to Financial Statements" are an integral part
of these financial statements.
<PAGE>
<TABLE>
COMTEX SCIENTIFIC CORPORATION
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
<CAPTION> Six Months Ended
December 31,
1996 1995
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 40,862 $ (381,412)
Adjustments to reconcile net income (loss) to
net cash provided by (used in )
operating activities:
Depreciation and Amortization Expense 74,761 71,723
Bad Debt Expense 27,083 26,000
Loss on Disposal of Fixed Assets 68 1,346
Changes in Assets and Liabilities:
Accounts Receivable (125,718) (120,919)
Prepaid Expenses and Other Current Assets (9,736) (6,591)
Deposits and Other Assets 377 10,689
Accounts Payable (28,197) 218,689
Accrued Expenses 59,541 236,981
Amounts due to Related Parties 25,750 37,943
--------- -----------
Net Cash provided by Operating Activities 64,791 94,449
--------- -----------
Cash Flows from Investing Activities:
Purchases of Property and Equipment (22,107) (59,388)
Proceeds from Sale of Fixed Assets 2,401 8,185
Advances to TII (4,795) (1,096,541)
Repayments of Advances 27,558 1,291,523
--------- -----------
Net Cash provided by Investing Activities 3,057 143,779
--------- -----------
Cash Flows from Financing Activities:
Notes Payable, Net (94,144) (11,897)
Notes Payable to Related Parties, Net (918)
Proceeds from PrinCap Financing Agreement 1,057,928
Repayments against PrinCap Financing Agreement (1,246,421)
--------- -----------
Net Cash used in Financing Activities (95,062) (200,390)
--------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (27,214) 37,838
Cash and Cash Equivalents Balance at Beginning of Period 57,644 15,163
--------- -----------
Cash and Cash Equivalents Balance at End of Period $ 30,430 $53,001
========= ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 31,800
Cash paid for income taxes $ 346 $ 489
Supplemental disclosure of noncash financing activities:
During the six months ended December 31, 1996, the Amended AMASYS Note was reduced by
$150,565 in connection with the MRI Acquisition. See Note 2 to the Financial Statements.
</TABLE>
The accompanying "Notes to Financial Statements" are an integral part
of these financial statements.
<PAGE>
COMTEX SCIENTIFIC CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim financial statements of Comtex
Scientific Corporation (the "Company" or "Comtex") are unaudited,
but in the opinion of management reflect all adjustments
(consisting only of normal recurring accruals) necessary for a
fair presentation of results for such periods. The results of
operations for any interim period are not necessarily indicative
of results for the full year. These financial statements should
be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1996 ("1996 Form 10-K"), filed
with the Securities and Exchange Commission.
Gain or loss per common share is based upon the weighted
average number of shares outstanding during each quarter and
common stock equivalents, if dilutive. The effect of outstanding
common stock equivalents on net loss per common share is not
included because it would be antidilutive.
Certain amounts for the three and six months ended December
31, 1995, have been reclassified to conform to the presentation
of the three and six months ended December 31, 1996.
2. Related Party Transactions
Acquisition and Divesture of Micro Research Industries:
In 1995, the Company acquired certain assets and assumed
certain liabilities of Telecommunications Industries, Inc.
("TII") representing substantially all the assets of TII's sole
operating division, Micro Research Industries ("MRI")(the
"Acquisition"). MRI provided sales, leasing and maintenance
support of computer hardware and software, primarily to the U.S.
House of Representatives. At the time of the Acquisition,
Infotechnology, Inc. ("Infotech") was a majority stockholder of
both the Company and of TII, and C.W. Gilluly served as the
Chairman and Chief Executive Officer of the Company, Infotech and
TII. In connection with the Acquisition, the Company entered
into a $1 million secured credit facility with Princeton Capital
Finance Company, L.L.P. ("PrinCap")(the "PrinCap Financing
Agreement").
The terms of the Acquisition, through a related Put
Agreement (the "Put"), provided that the Company could, upon the
failure of certain conditions, require TII to repurchase all or
<PAGE>
any portion of the assets acquired and to assume the liabilities
related to MRI. The Acquisition also provided for the
restructuring of the Company's previously matured $1,040,000
promissory notes to Infotech (the "Infotech Notes"), and allowed
the Company to either seek indemnification from TII or reduce the
amount of the Company's indebtedness under the Infotech Notes for
costs or liabilities incurred by the Company in connection with
the MRI business.
On March 25, 1996, the Company exercised the Put and
transferred to TII all the assets and liabilities associated with
MRI. In connection therewith, the Company reduced by $31,000 the
amount it owed under the Infotech Note for rent paid to TII's
landlord.
Pursuant to an order of the Bankruptcy Court in the
bankruptcy proceeding for Infotech, as of June 21, 1996 AMASYS
Corporation ("AMASYS") acquired the assets and assumed the
liabilities of Infotech, including the Infotech Notes. C.W.
Gilluly serves as the President and Chief Executive Officer of
AMASYS. As of October 11, 1996, AMASYS ratified the
restructuring of the Infotech Notes, which reduced the principal
thereof by $150,565. The resulting $889,435 principal was rolled
into a 10% Senior Subordinated and Secured Note, due July 1, 2002
(the "AMASYS Note"), the principal of which is subject to
reduction or increase under certain circumstances. The AMASYS
Note is secured by a continuing interest in all receivables,
products and proceeds thereof, all purchase orders and all
patents then or in the future held by the Company, and is
subordinated to all Senior indebtedness, including amounts due
under the PrinCap Financing Agreement.
Shortly after the Company exercised the Put, TII sold to a
third-party the MRI assets that the Company had transferred to
TII, which PrinCap claimed represented an event of default under
the PrinCap Financing Agreement. On July 24, 1996, the Company
and PrinCap consolidated the $244,449 outstanding under the
PrinCap Financing Agreement into a single note, due October 22,
1996 (the "PrinCap Note"), collateralized by the MRI receivables
from the House of Representatives which had been pledged to
PrinCap. To date, the Company has made no payments against the
PrinCap Note and such note is in default.
On October 24, 1996, TII commenced litigation to collect the
MRI receivables collateralizing the PrinCap Note. Although the
Company is continuing discussions with PrinCap concerning payment
of the PrinCap Note, PrinCap commenced litigation against the
Company, TII, AMASYS, and C.W. Gilluly and his wife to collect
$262,524 under the PrinCap Note and $52,505 of attorneys' fees.
<PAGE>
Services Provided by/to Hadron, Inc.: The Company
contracts with Hadron, Inc. ("Hadron")(13.5% owned by AMASYS) for
corporate and shareholder relations services. Charges for such
services are based on time and material expended by Hadron
personnel in providing such services. The Company expensed
approximately $18,000 for these services during the six months
ended December 31, 1996. Hadron subleases office space from the
Company at the rental rate paid by the Company to its landlord
and also shares certain office related expenses. Total service
charges to Hadron during the six months ended December 31, 1996,
amounted to approximately $10,000.
3. Notes Payable
The note payable of $244,449 due Princeton Capital Finance
Company, L.L.P. is currently in default. The Company is
currently in discussions regarding payment of the note. Interest
on the note has been accrued through December 31, 1996.
On July 1, 1996, the Company agreed with a data
communications vendor to convert a net amount of accounts payable
to the vendor and royalties receivable by the Company from the
vendor to a note payable in the amount of $173,712. Due to sub-
standard service provided by this vendor for the months of July
through November, 1996, the Company negotiated a one-time credit
of approximately $57,000. This credit was applied to the
principal balance of the note. Therefore, at December 31, 1996,
the balance on the note was $61,395. The note bears interest at
10%, with principal and interest payments due monthly through
December, 1997.
On December 31, 1993, the Company assumed certain unsecured,
non-interest bearing debt obligations related to the acquisition
of assets and certain liabilities of International Intelligence
Report, Inc.. At December 31, 1996, $23,230 was outstanding on
these obligations, with $15,280 due within one year.
4. Income Taxes
The Company has recorded net income for the six months ended
December 31, 1996; however, no tax provision has been recorded as
the Company's net operating loss (NOL) and investment tax credit
(ITC) carryforwards are sufficient to offset this income for
federal and state tax purposes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of the three months ended December 31, 1996, to the
three months ended December 31, 1995
During the three months ended December 31, 1996, the
Company's total revenues were approximately $1,082,000, or
approximately $247,000 (30%) greater than the total revenues for
the three months ended December 31, 1995. The increase of
approximately $183,000 in information services revenues reflects
revenues from new customers, certain price increases and
royalties derived from the sale of Comtex' news to information
distributors who pay the Company a royalty based upon usage. The
increase of approximately $63,000 in data communications revenues
reflects the Company's billing of communications charges to its
customers.
Total costs and expenses for the three months ended December
31, 1996, were approximately $1,042,000, representing an
approximately $26,000 (3%) increase in operating expenses from
the three months ended December 31, 1995. This increase in
operating expenses is principally due to an increase in
information services costs, sales and marketing and general and
administrative expenses, offset by a decrease in the costs of
data communications.
Information services costs during the quarter ended December
31, 1996, increased approximately $44,000 over these costs in the
quarter ended December 31, 1995. This increase was primarily due
to an increase in the fees and royalties to information
providers, as new sources were added and revenues increased.
Data communications costs decreased by approximately $93,000
(47%) during the three months ended December 31, 1996, compared
to the three months ended December 31, 1995. This decrease is
due to a one-time negotiated credit of approximately $57,000 from
the Company's primary data communications vendor for sub-standard
service during the months of July through November, 1996, and
lower communications costs related to improved efficiency in FM
and satellite delivery of the Company's products.
Sales and marketing expenses increased by approximately
$41,000 or approximately 46% for the three months ended December
31, 1996, compared to the three months ended December 31, 1995.
This increase was due to increased compensation arising from the
addition of sales support staff and more experienced sales
personnel to the Company's workforce, increased travel expenses
related to new business development, and additional commissions
<PAGE>
related to the increase in information services revenues during
the period.
General and administrative expenses for the three months
ended December 31, 1996, were approximately $250,000 or
approximately $26,000 greater than these expenses during the
three months ended December 31, 1995. This increase was
principally due to a management recruiting fee and executive
performance-based bonuses.
The Company earned operating income of approximately $40,000
during the quarter ended December 31, 1996, compared to an
operating loss of $181,000 for the quarter ended December 31,
1995. The Company earned net income of approximately $12,000
for the three months ended December 31, 1996, compared to a net
loss for the three months ended December 31, 1995, of
approximately $207,000. The increase in operating and net income
reflects the operating leverage as increased revenues were
attained with a corresponding marginal increase in variable
expenses.
Comparison of the six months ended December 31, 1996, to the six
months ended December 31, 1995
During the six months ended December 31, 1996, the Company's
total revenues were approximately $2,123,000, or approximately
$454,000 (27%) greater than the total revenues for the six months
ended December 31, 1995. The increase of approximately $338,000
in information services revenues reflects revenues from new
customers, certain price increases, and royalties derived from
the sale of Comtex' news to information distributors who pay the
Company a royalty based upon usage. The increase of
approximately $116,000 in data communications revenues reflects
the Company's successful recovery of communications costs from
its customers.
Total costs and expenses for the six months ended December
31, 1996, were approximately $2,020,000, representing an
approximately $24,000 (1%) increase in operating expenses from
the six months ended December 31, 1995. This increase in
operating expenses is principally due to an increase in sales and
marketing and general and administrative expenses, offset by a
decrease in the costs of data communications.
Data communications costs decreased by approximately $92,000
(25%) during the six months ended December 31, 1996, compared to
the six months ended December 31, 1995. This decrease is due to
duplicate telecommunications operations during an upgrade in the
Company's processing capability that was completed in fiscal year
1996, improved efficiency in FM and satellite delivery, and a
one-time negotiated credit of approximately $57,000 from the
<PAGE>
Company's primary data communications vendor for sub-standard
service during the months July through November, 1996.
Sales and marketing expenses increased by approximately
$59,000 or approximately 33% in the six months ended December 31,
1996, over the six months ended December 31, 1995. This increase
was due to increased compensation arising from the addition of
sales support staff and more experienced sales personnel to the
Company's workforce, increased travel expenses related to
business development, and additional commissions related to the
increase in information services revenues during these six months.
General and administrative expenses for the six months ended
December 31, 1996, were approximately $29,000 (7%) higher than
these expenses for the six months ended December 31, 1995. This
increase is due to increases in shareholder services, rent and
utility expenses related to the Company's new lease, a management
recruiting fee, and executive performance-based bonuses. These
increases were partially offset by decreased legal fees.
The Company earned operating income of approximately
$103,000 during the six months ended December 31, 1996, compared
to an operating loss of almost $328,000 for the six months ended
December 31, 1995. The Company earned net income of
approximately $41,000 for the six months ended December 31, 1996,
compared to a net loss for the six months ended December 31,
1995, of approximately $381,000. The increase in operating
income reflects the operating leverage as revenues increased with
a minimal increase in variable expenses. The increase in net
income was partially offset by increased interest expense related
to notes payable.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31,1996, the Company's
operations produced operating income of approximately $103,000
and net income of approximately $41,000. At December 31, 1996,
the Company had negative working capital of approximately
$313,000 as compared with negative working capital of
approximately $342,000 at June 30, 1996. This increase in
working capital is a result of operating income. The Company
also had a net stockholders' deficit of approximately $901,000
at December 31, 1996, as compared to a net stockholders' deficit
at June 30,1996, of approximately $1,092,000. The decrease in
stockholders' deficit was due to the retention of net income and
a decrease in notes payable to the Company's majority stockholder
as discussed below.
<PAGE>
As of October 11, 1996, AMASYS, the Company's majority
stockholder (approximately 60%) ratified the reduction of
$150,565 of the principal of the Company's restructured
$1,040,000 promissory notes due AMASYS. The remaining $889,435
principal was rolled into a 10% Senior Subordinated and Secured
Note due July 1, 2002 (the "Amended AMASYS Note").
For the six months ended December 31, 1996, the Company's
operating activities generated approximately $65,000 in cash.
The Company had cash and cash equivalents of approximately
$30,000 at December 31, 1996, compared to approximately $58,000
at June 30, 1996. Currently, the Company's operations generate
cash flow sufficient to cover its monthly expenses and management
believes that cash from operations will provide the Company with
adequate cash resources to meet its obligations on a short-term
basis.
The Company's ability to meet its liquidity needs on a
long-term basis is dependent on its ability to generate
sufficient revenues and cash to cover its current obligations and
to pay down its current and long-term debt obligations. Although
the Company's revenues for the quarter ended December 31, 1996,
were approximately $42,000 higher than the revenues for the
quarter ended September 30, 1996, one of the Company's contracts,
representing approximately 4% of total revenues, expired December
31, 1996, and was not renewed due to the client's departure from
this business model. The Company's management is hopeful that
new customer revenues and increases in existing customer revenues
will be adequate to make up for any customer losses. However, no
assurance may be given that the Company will be able to maintain
the revenue base or the size of profitable operations that would
be necessary to achieve its liquidity needs. If the Company is
not successful in its efforts, it may undertake other actions as
may be appropriate to preserve asset values.
On July 24, 1996, the Company and PrinCap agreed to
consolidate all indebtedness of the Company under the PrinCap
Financing Agreement into a single Note collateralized by MRI
receivables from the U.S. House of Representatives retained by
TII. The Note, due October 22, 1996, is in default. On October
24, 1996, TII commenced litigation against the U.S. House of
Representatives to collect the accounts receivable that had been
pledged to PrinCap. Although the Company has had, and continues
to have discussions with PrinCap regarding payment of the note,
on December 11, 1996, PrinCap commenced litigation against the
Company, TII, AMASYS, and Dr. and Mrs. Gilluly to collect funds
due to PrinCap plus attorney's fees. Under the lawsuit, PrinCap
alleges that it is owed $262,524 plus attorney's fees of $52,505.
Management of the Company believes the Company's indemnification
under the terms of the Amended AMASYS Note will apply to any
amounts due PrinCap (or separately to the Company) not ultimately
recovered through the MRI receivables held by TII, and that any
<PAGE>
such amounts will reduce the principal of the Amended AMASYS
Note.
The ability of TII to collect outstanding MRI
receivables from the U.S. House of Representatives and repay the
Company's outstanding note under the PrinCap Financing Agreement
may have a significant effect on the Company's overall liquidity
and ability to conduct operations.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information provided in Note 2 of the Notes to the
Financial Statements is incorporated herein by
reference.
Item 6. Exhibits and Reports.
(a) Exhibits
Exhibit No.
10.1 Employment Agreement with Donald E. Ziegler dated
December 30, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE> SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned there unto duly authorized.
COMTEX SCIENTIFIC CORPORATION
(Registrant)
Dated: February 14, 1997 By: /S/ C.W. GILLULY
C.W. Gilluly
Chairman of the Board and
Chief Executive Officer
By: /S/ DONALD E.ZIEGLER
Donald E. Ziegler
Chief Financial Officer
(Principal Financial and
Accounting Officer)
December 20, 1996
Mr. Donald E. Ziegler
11005 Forest Oak Lane
Great Falls, Virginia 22066
Dear Donald:
On behalf of Comtex Scientific Corporation (the "Company"),
I am pleased to offer you the position of Senior Vice President
and Chief Financial Officer of the Company working for Charlie
Terry and me. We would like you to begin on December 30, 1996.
The annual salary accompanying this position is $50,000
per annum paid bi-weekly. The term of your employment is for one
year, subject to renewal annually, at the Company's discretion,
for two additional one-year terms; provided, however, the Company
shall have the right to terminate your employment with no further
obligation on the part of the Company if you are convicted of a
felony or a crime of moral turpitude or if you are guilty of
gross negligence or wilful misconduct. In the event that the
Company terminates your employment or decides not to renew your
employment agreement for any reason other than those specified
above, you shall receive four months' severance pay, paid out
over four months in full and complete satisfaction of any claim
you may have by virtue of such termination of or election not to
renew your agreement with the Company.
In the event your employment agreement is renewed, you shall
be entitled to an increase in annual salary which is commensurate
with the annual increase awarded to other executive officers of
the Company as determined by the Board of Directors.
During the term of your employment, you shall be entitled to
participate, on the same terms and conditions as other executive
employees of the Company, in such major medical, dental, life
insurance, 401(k), and other employee benefits which the Company
now provides or in the future may provide to its executive
employees generally. You shall be entitled to four weeks of paid
vacation per year.
As part of the Company's Stock Option Plan, you will be
provided with options to purchase 180,000 shares of Comtex stock,
pending approval of the Board of Directors, in accordance with
the Plan. These options vest over three years and the option
price is determined as set forth in the Plan. In addition, you
shall receive a car allowance in the amount of $140 per month.
Furthermore, the Company will reimburse you for all reasonable
expenses incurred in the performance of your duties in accordance
with the Company's standard policy.
Charlie Terry and I look forward to the opportunity to work
with you here at Comtex. We believe you will find the position
challenging and worthy of your talents.
Very truly yours,
/S/ C.W. GILLULY
C.W. Gilluly, Ed.D. Accepted: /S/ DONALD E. ZIEGLER
Chairman and Donald E. Ziegler
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 30,430
<SECURITIES> 0
<RECEIVABLES> 776,319
<ALLOWANCES> (95,366)
<INVENTORY> 0
<CURRENT-ASSETS> 1,107,685
<PP&E> 788,885
<DEPRECIATION> (576,573)
<TOTAL-ASSETS> 1,384,935
<CURRENT-LIABILITIES> 1,420,354
<BONDS> 0
0
0
<COMMON> 78,547
<OTHER-SE> (979,294)
<TOTAL-LIABILITY-AND-EQUITY> 1,384,935
<SALES> 944,542
<TOTAL-REVENUES> 944,542
<CGS> 0
<TOTAL-COSTS> 1,041,811
<OTHER-EXPENSES> 0
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</TABLE>
