UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 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)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
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 __
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this
form, and
no disclosure will be contained, to the best of registrantOs
knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB: [ ]
The aggregate market value of the 11,265,022 shares of voting
stock held by non-affiliates of the issuer was
approximately $2,253,004. The aggregate market value was
based upon the mean between the closing bid
and asked price for the common shares as reported in the Over-
The-Counter Bulletin Board as of June 28, 1996.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Number of shares outstanding of each of the issuerOs classes
of
common stock as of June 30, 1996 was 41,299,254.
State issuerOs revenues for its most recent fiscal year: $0.
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 X No__
DOCUMENTS INCORPORATED BY REFERENCE: None
TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT - FOR FISCAL YEAR ENDED JUNE 30,
1996
ComTec International, Inc.
PART I
Item 1. Description of Business 1
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for Common Stock Equity and Related Stockholder Matters 9
Item 6. Management's Discussion and Analysis or Plan of Operation 10
Item 7. Financial Statements 13
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 14
Item 10. Executive Compensation 18
Item 11. Security Ownership of Certain Beneficial Owners and
Management 20
Item 12. Certain Relationships and Related Transactions 20
Item 13. Exhibits and Reports on Form 8-K 21
SIGNATURE PAGE 23
INDEX TO FINANCIAL STATEMENTS 24
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development:
ComTec International Inc. was incorporated on July 6,
1983 in the State of New Mexico, originally under the name of
Nisus Video, Inc. It is a fully reporting 12(g), 34 Act
publicly traded company. The Company has undergone many
changes to date as a result of certain reorganizations. These
changes are more fully disclosed in prior 34 Act filings. The
CompanyOs principal office is located at 10855 East Bethany
Drive, Aurora Colorado 80014, its telephone number is
303.743.7983, toll free number is 1.888.BUY.YRLS, facsimile
number is 303.743.7986, and E:Mail address is
mobileplanet.com. The Company is authorized to issue
50,000,000 common shares, $0.001 par value, and 5,000,000
preferred shares, $0.001 par value.
On May 10, 1995, and pursuant to the terms and
conditions of a written agreement, the control of the Company
was acquired by the shareholders of Keystone Holding
Corporation (OKHCO), a privately owned Colorado corporation
under the control of Donald G. Mack, solely in exchange for
voting securities of the Company. In connection with this
acquisition 11,228,971 shares of the CompanyOs common stock
were issued to KHC shareholders in exchange for the following
major assets of KHC: 1). a commercial revenue producing
property valued at $392,214 and (2). a satellite uplink
system valued at $290,000 (net of depreciation). In
connection with the revenue producing property was a $347,645
liability (SEE ITEM 12, CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.)
As a result of this transaction, the Company experienced
a complete change of management control. On October 27, 1995,
Nattem, USA , Inc. (then the name of the Company) changed its
name to ComTec International, Inc., and finalized the
CompanyOs new strategic business plan to develop various
telecommunications services and products, principally in the
areas of Specialized Mobile Radio (SMR), satellite uplink
services, wireless Global Positioning Satellite (GPS)
products and services, traditional long distance voice and
data communications.
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 CompanyOs marketing
of its future telecommunication services. As of the date of
this filing, the Company has agreed to terminate the original
purchase agreement of JSP with John Santucci. For accounting
purposes, the CompanyOs total cash investment in this wholly-
owned subsidiary has been recorded in other assets as of June
30, 1996.
During fiscal 1996, the Company expanded its management
and support staff in-order to execute its strategic business
plan in the wireless telecommunication industry and target
operational SMR companies for acquisition and joint ventures.
As of June 30, 1996, the Company controlled management option
agreements on 185 SMR licenses obtained through the Omni-
Range acquisition, some of which were partially constructed.
On August 6, 1996, the Company acquired option
agreements to manage 1,380 800Mhz SMR channels in 20 states.
These channels have been granted an Extended Implementation
Waiver (OEIWO) which require minimum operational status by
each calendar year end. Through this acquisition the Company
also obtained an additional 1,055 channels which expire the
end of October 1996. The Company is currently attempting to
save some of these October 1996 channels. The Company is in
the process of analyzing and creating a plan to construct,
trade and blend the EIW channels with acquisition targets.
Construction and initial loading of at least 139 channels is
planned for by the end of December 1996 as required by the
Federal Communication Commission. The Company estimates
$1,112,000 will be needed by the end of December 31, 1996, to
construct the 139 channels required to maintain the 1,380 EIW
channel status.
Based on successful financing to acquire over 30
targeted SMR systems, the Company anticipates it will be a
fully operational SMR telecommunication company during the
first half of calendar 1997.
(b) Business of Issuer:
During the fiscal year ended June 30, 1996 the Company
continued as a developmental stage entity focused on
executing its wireless SMR business plan started in 1993
through the efforts of Keystone Holding Company. Activities
have been concentrated on creating and executing the
CompanyOs strategic business plan, raising private financing,
developing a management and support staff to execute its
business plan, and maintaining proper reporting compliance
for various federal government agencies, such as the SEC and
FCC. The Company is broken into three developing business
units as of the date of this filing:
Wireless SMR Services: Activities involve seeking
possible operating SMR companies for acquisition,
negotiating management and option agreements for SMR
800Mhz radio licenses, designing and planning the
national SMR system build-out, acquiring SMR radio
equipment, identifying tower site owners as locations
for the CompanyOs SMR sites, and maintaining FCC
compliance reviews and performing due diligence reviews
on SMR companies under Letters of Intent to acquire. Due
to recent changes in the federal regulation of SMR radio
spectrum, SMR operators can now compete with
conventional cellular service, expand their existing two-
way radio services to allow inter-system
regional/national call roaming and offer new enhanced
services such as two-way paging and wide-area call
conferencing. As of June 30, 1996, the Company had
various SMR channels as a result of the Omni Range
acquisition. As of August 6, 1996, the Company acquired
options to manage 1,380 SMR licenses in 20 states (SEE
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION - CLOSED ACQUISITIONS). To date, this business
unit has not generated any revenues.
Wireless Global Positioning Satellite Products: Through
the proposed acquisition of certain assets of GPS
Communications, Inc. (SEE ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - PENDING
ACQUISITIONS), the Company will own all patents pending
and intellectual rights on three commercial products
using the federally owned tracking system called Global
Positioning Satellite (GPS). This service is free to any
user who has a GPS receiver worldwide. GPS allows a
properly equipped user to identify within 10 meters, the
exact longitude and latitude of its physical position.
Using GPS data, the Company plans to create proprietary
products to track and transmit various information for
the railroad industry. The first product in development
has been funded by Southern Pacific Railroad (SPR) and
tracks the exact location and internal data (such as the
temperature and humidity) of a refrigerated railcar and
transmits this packet data over a wireless cellular or
SMR system to a centralized monitoring station. This
product, the RCL-2000 has passed various tests by SPR
and is ready for large scale commercial use. The Company
also plans to develop additional GPS products for the
trucking and utilities industries. Assuming the
consummation of the acquisition, the Company plans on
selling its first RCL-2000 products by the end of the
calendar year 1996 with additional fees to monitor the
data. To date, this business unit has not generated any
revenues.
Long-distance switching services: Activities involve
exploring possible long-distance land-line and satellite
uplink communication opportunities, negotiating the
acquisition of a satellite teleport system located in
Louisiana, and obtaining an operating tandem and
personal computer based switches. The long-distance
switching business has grown dramatically since the
deregulation of AT&T and new demands for faster and more
economical transmission of video, data and voice
information throughout the world. Successful acquisition
of a long-distance switch will allow the Company to
operate as a long distance telephone company and call
transfer station. In addition, this segment will
complement the SMR wireless business by offering long-
distance voice and data services to subscribers who need
seamless communications from a wireless hand-held unit
to an international land-line system. To date, one
acquisition of a satellite teleport is pending (SEE ITEM
6. MANAGEMENTOS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION - PENDING ACQUISITIONS) and various long-
distance switching platforms have been targeted. To
date, this business unit has not generated any revenues.
Company activities have also involved the purchase of a
commercial office building in Aurora, Colorado, as well as
its revenue producing commercial property in Parker,
Colorado. (See Item 2, DESCRIPTION OF PROPERTY, for a
description of the CompanyOs properties as well as the nature
and extent of the encumbrances thereon.)
The Company is currently in the process of expanding its
accounting, administrative and support operations in order to
consolidate the marketing, management and support areas of
newly acquired SMR companies, thus resulting in an overall
projected higher operating profits.
Competition:
The CompanyOs success depends on its ability to compete
with other wireless communications providers, including
cellular mobile telephone operators and established SMR
operators, in each of its proposed markets.
Existing cellular and SMR operators in the CompanyOs
proposed operating territories have been in operation for a
number of years, and have significant customer bases. In
addition to their entrenched market position, these operators
have available significantly greater financial and other
resources than those available to the Company. Larger SMR
companies are currently converting to all digital formats,
which require current subscribers to purchase more expensive
digital radio equipment or find another analog system
provider. The Company will take advantage of this temporary
analog demand by expanding an acquired SMR operating capacity
with additional managed licenses and services. Cellular
systems and certain SMR operators permit automatic Ohand-offO
of ongoing calls from cell to cell, which generally prevents
interruption of a call. The Company will not offer this
feature until its first regional build-out is completed and
augmented with SMR technology, such as SmartLink inter-
system roaming. The competition for new SMR subscribers
within the Company's proposed operating territories may also
include Nextel Communications and/or other independent SMR
regional operators. The Company also faces possible
competition for digital mobile service from other radio
operators for channels that may be allocated by the FCC in
the future and operators of new wireless communications
technologies such as personal communications systems (OPCSO).
Until an analog system is fully loaded, the conversion to
digital will be analyzed based on future revenues projected.
The GPS products for the transportation industry are
considered proprietary and innovative by the Company. The RCL-
2000 has been successfully tested by Southern Pacific
Railroad since 1995 within their specifications and
satisfaction. The Company believes that the market for the
RCL-2000 could be as high as 100,000 units which could be
higher as the product is modified to encompass the trucking
industry. To the best of the CompanyOs knowledge, no other
wireless GPS products for the transportation industry
currently exists.
Existing long-distance and satellite operators in the
CompanyOs proposed operating territories have been in
operation for a number of years, and have significant
customer bases. In addition to their entrenched market
position, these operators have significantly greater
financial and other resources available than those available
to the Company. The Company believes it can ultimately
provide long-distance and satellite services ranging from
conventional data and voice services to advanced
international satellite uplink services.
Government Regulation:
The Company is currently subject to regulation under the
Federal Communications Commission (FCC) as defined in the
Code of Federal Regulations (CFR) for wireless services. The
licensing, construction, operation, sale, interconnection
arrangements and acquisitions of SMR Systems are regulated by
the FCC. FCC approvals will be required prior to completion
of an acquisition of any such SMR license which could cause a
delay. Issuance of licenses is approved by the FCC for an
operating period of 5 years. Prior to expiration, the
licensee must submit an application for renewal of the
license evidencing that the licensee has been complying with
the FCC rules and regulations. While there can be no
assurance that such renewal of the license will be granted,
historically such licenses have been renewed, provided that
compliance with the FCC rules and regulations for the
operation of the facilities has occurred. New SMR licenses
must be constructed and operational within a set time limit
otherwise the license reverts back to the FCC for public
auction. Licenses that expire are returned to the FCC for
public auction.
The United States Department Of Transportation may
require any external electrical monitoring devices used on
the public railways or highways to be approved prior to their
use. The GPS monitoring products being developed for sale by
the Company may require such approval. In additional, certain
systems may also require safety certification by the
Underwriters Laboratories (UL) prior to any installation.
The FCC also regulates the long distance and satellite
uplink and teleport industry. The Company will need to comply
with tariff and regulatory requirements. Resellers are
responsible for obtaining licenses to do business and/or file
tariffs with individual state PUCs or PSCs as required by
those state commissions. It is also the long-distance
resellerOs responsibility to remain in compliance with any
PUC or FCC ruling regarding telemarketing requirements or
regulations. The reseller is required to obtain federal and
state tax exemption certificates. The reseller must also
obtain all sales taxes from the end-user, including
applicable federal, state, city, county, and local taxes.
Employees and Consultants:
As of the date of this filing, the Company employs
fourteen (14) persons: Clifford S. Perlman, Director and
Chairman of the Board of Directors; Donald G. Mack, Director,
President and Chief Executive Officer; Mitchell Chi, Director
and Chief Operating Officer; Kelsey Kennedy, Chief Financial
Officer; Anne Paoletti, Director of Marketing; Steve Brodsky,
Senior Engineer; Tom Moscariello, Director and Vice President
Marketing/Sales; Chris Hanneman, Senior Vice President of
Investor Relations; Robert Clauson, Corporate Secretary and
Director; and five accounting and administrative employees.
The Company periodically retains outside consultants such
as attorneys, accountants and industry consultants to perform
certain corporate administrative tasks and specific SMR
related projects.
Wireless SMR Industry
The wireless communications industry, which includes
services such as cellular, SMR, paging, and others, is one of
the fastest growing industries in the world. The wireless
telephone communications industry for the general public is
twelve years old, beginning with limited cellular service in
1983 in Chicago, Illinois. Nationwide penetration for
cellular service has only recently risen above 8% to
approximately 33,000,000, and the industry continues to grow
at a rate in excess of 25% per year. An estimated two out of
every three new phone numbers currently being issued are
issued for wireless subscribers. As estimated by the American
Mobile Telecommunications Association there will be in excess
of 120,000,000 wireless communications users in the United
States by the year 2004 and over 5,000,000 Enhanced SMR users
by 1998. This is compared to 33,000,000 cellular users and
391,000 SMR users in 1995 as estimated by the American Mobile
Telecommunications Association.
The Company plans to offer mobile communications
services ranging from two-way dispatch, to services
comparable in quality to those provided by current cellular
telephone operators in its proposed operating territories. In
addition, the Company plans to offer, in a single handset
services and combinations of services currently not available
in its proposed operating territories, including combined
mobile telephone (mobile telephone service combined with two-
way radio capabilities), short (alpha-numeric) messaging such
as paging and dispatch (the ability to communicate directly
to others through a single handset without interconnecting to
the regular "land line" telephone system) and data
transmission (fax and computer data transfer of information).
Through several key personnel on its management and
consulting teams with extensive experience in the wireless
communications industry, the Company plans the staged
conversion of acquired analog systems to a digital mobile
network. In its effort to replace the current operating
analog SMR systems, the Company expects to significantly
expand the existing coverage and capacity of the analog
systems as well as to provide advanced value added features,
call clarity, quality and call security to its subscribers.
ITEM 2. DESCRIPTION OF PROPERTY
Real Estate:
On May 30, 1995, the Company purchased two commercial
properties. In consideration of a total purchase price of
$1,499,156 (including real estate commissions), the Company
acquired an office building where it currently maintains its
principal place of business in Aurora, Colorado from an
unrelated party. In consideration of a total purchase price
of $392,214, the Company purchased a commercial revenue
producing car property in Parker, Colorado from the President
of the Company, a related party.
The office building is comprised of approximately 18,000
square feet of office space and 65 parking spaces located on
approximately one acre in Aurora, Colorado. The purchase
price was paid $2,500 in cash; $121,000 by means of a
promissory note; an agreement to issue 420,000 shares of
convertible preferred stock, valued at $1 per share; the
issuance of 400,001 shares of common stock, valued at $.75
per share; and the assumption of approximately $620,000 in
liabilities represented by the existing Promissory Note and
Deed of Trust. The Promissory Note for $620,000 was never
assumed by the Company in connection with the acquisition of
property, but is secured by a lien on the property. The lien
entitles the holder of the note to foreclose on the building
in the event the note is not paid when due. The building is
also encumbered by a second lien in favor of Omni-Range for
certain assets which the Company acquired in July 1995. As of
the date of this filing, the Company has been served with a
foreclosure notice and the demand to appoint a receiver by
the promissory note holder and other secured creditors. The
Company has also been served with a notice to foreclose on
the other secured property located in Aurora and Parker,
Colorado by the same note holder. (SEE ITEM 3. LEGAL
PROCEEDINGS.)
The car lot property is comprised of one acre of open
land and single story sales office located in Parker,
Colorado. The purchase price paid was $392,214. In connection
with this transaction, the Company assumed a first mortgage
of $352,000, issued 172,720 preferred shares of stated $1
value per share of Key Car Finance (a subsidiary of the
Company) to the President of the Company and issued a note
payable to the President of the Company in the amount of
$148,000. Revenue generated from this property is $3,862 per
month, which has been assigned to the Promissory Note holder
of the commercial property described above. This property has
been served with a notice to foreclose on November 4, 1996.
The Company is attempting to cure the default on this
property of approximately $104,000. (SEE ITEM 3. LEGAL
PROCEEDINGS.) (SEE ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.)
The office building was substantially vacant and
unfinished when acquired by the Company. Since that date, the
Company has completed interior construction sufficient to
occupy approximately 66% of the building as its principal and
administrative office. The remaining building space is
anticipated to be leased to both affiliated and unaffiliated
entities, although no specific contracts have been completed
as of the date of this report. The internal construction
costs and other improvements to date have been approximately
$102,000.
Intangibles:
SMR licenses must be constructed and operational within a
set time limit or they expire and revert back the Federal
Communication Commission (FCC) for public auction in 1997.
Operational as defined by the FCC is two paying customers per
frequency (called channels once constructed). The Company
values each license channel based on the assumption that the
channel will be fully constructed and operational within the
time limit set forth by the FCC. The value of each channel is
determined by the gross purchase price plus all direct costs
to acquire the license channel such as legal fees and
independent due diligence review costs. Certain channels have
a higher individual value based on Basic Trading Area (BTA)
locations and Economic Areas (EA). The Company values all
channels based on the most recent average cost per channel
which does not account for BTA and EA differences.
As of June 30, 1996, the Company owned management
contracts for 185 SMR channels which it acquired through the
Omni-Range purchase. The Company is determining the status of
these channels and if not expired, will commence completion
of the build-out and subscriber loading based on projected
demand. (SEE ITEM 6. MANAGEMENTOS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION - CLOSED ACQUISITIONS)
As of the date of this filing, the Company owns options
to manage 1,380 channels for which the Company paid an
aggregate of $1,988,357 plus $130,000 in legal and due
diligence costs. Channels which expire are expensed in the
year in which they expire using the recent average cost.
ITEM 3. 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.
Local Service Corp. has also filed for foreclosure of
its deed of trust on the Company's commercial property
located at 10672 S. Parker Road, Parker, Colorado (the
"Parker Property"), based on the Company's failure to pay
monthly payments to Local Service Corp. for the Company's
Building. The Parker Property secured the Company's
obligations on the Company's Building, which was purchased
from Local Service Corp. on May 30, 1995. Foreclosure is
scheduled for November 4, 1996. The Company is attempting to
cure the default which is estimated to be approximately
$104,000 to stop the foreclosure action.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 10, 1995 and pursuant to definitive proxy
solicitation materials under Regulation 14A of the Securities
Exchange Act of 1934, as amended, the Company conducted a
Special Meeting of Stockholders (the OMeetingO). At the
Meeting, the Company sought stockholder approval of the
following five matters:
1.An increase in the number of shares of common stock
eligible for issuance under the CompanyOs 1993 Incentive
Stock Option Plan (the OPlanO) to 3,000,000 shares;
2.An extension of the termination date of the Plan to
September 16, 1998;
3.An increase in the number of authorized common shares to
50,000,000 with a designated par value of $.001;
4.The creation of a class of 5,000,000 shares of Preferred
Stock, $.001 par value per share;
5.A change in the CompanyOs name to ComTec International,
Inc..
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(conOt)
The votes cast for, against and withheld on each such matter
were as follows:
<TABLE>
<CAPTION>
Nominee or Matter Votes For Votes Against Votes Withheld
<S> <C> <C> <C>
Increase Number of
Plan Shares 10,785,318 7,300 1,500
Extend Termination
date of Plan 10,784,818 7,800 1,500
Increase Authorized Shares 10,784,418 7,800 1,500
Authorize Preferred Stock 10,784,318 9,300 1,500
Change Name of Company 10,790,618 1,000 2,500
</TABLE>
As a result of the ShareholderOs vote the resolutions were
adopted. There have been no other stockholder meetings
subsequent to, and as of the date of this filing.
PART II
ITEM 5. MARKET FOR COMMON STOCK EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Market Information.
The principal market for the CompanyOs common stock, its
only trading class of equity securities, is the Over-The-
Counter market. The CompanyOs common stock currently trades
under the symbol YRLS.
The following table indicates the quarterly high and low
bid market price ranges of the CompanyOs common stock in the
Over-The-Counter market on the Electronic Bulletin Board for
the fiscal years ended June 30, 1995 and June 30, 1996, as
reported by the NASDAQ section of the National Association of
Securities Dealers, Inc., registered broker-dealers who have
regularly been making a market in the CompanyOs common stock
and/or information derived from confirmations of sales and/or
purchases by individuals. The information supplied represents
quotations between dealers that does not include retail
markups, markdowns or commissions, actual transactions and
any adjustments for stock dividends.
Rounded to nearest full penny for presentation purposes only.
<TABLE>
<CAPTION>
BID BID
HIGH($) LOW($)
<S> <C> <C>
Fiscal 1995:
First Quarter: July 1, 1994 through
September 30, 1994 $1.25 $.05
Second Quarter: October 1, 1994 through
December 31, 1994 .81 .38
Third Quarter: January 1, 1995 through
March 31, 1995 .75 .38
Fourth Quarter: April 1, 1995 through
June 30, 1995 .94 .38
Fiscal 1996:
First Quarter: July 1, 1995 through
September 30, 1995 $.88 $.31
Second Quarter: October 1, 1995 through
December 31, 1995 .44 .25
Third Quarter: January 1, 1996 through
March 31, 1996 .38 .13
Fourth Quarter: April 1, 1996 through
June 30, 1996 .25 .06
</TABLE>
The Company proposes to have its Common Stock listed on
NASDAQ as soon as practical. NASDAQ requires total assets of
$4,000,000, capital and surplus of $2,000,000, market value
of the Opublic floatO of $1,000,000, 2 market makers, and a
minimum bid price of $3.00 per share. The Company currently
does not meet these requirements.
On March 29, 1996, the CompanyOs Board of Directors
approved a common stock reversal. As of the date of this
filing, the reversal amount has not been finalized, nor has
the matter been presented for a vote to shareholders.
On October 25, 1996, the CompanyOs Board of Directors
approved to increase the number of authorized shares of the
CompanyOs Common Stock from 50,000,000 to 100,000,000. As of
the date of this filing, this matter has not been resolved by
the Board nor presented for a vote to shareholders. The
Company anticipates a proxy statement will be sent to
shareholders on this matter no later than the end of quarter
ended December 31, 1996.
(b) Holders.
As of June 30, 1996, the approximate number of holders
of record of shares of the CompanyOs common stock, $.001 par
value per share, the CompanyOs only class of trading
securities, was believed by management to be as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
<S> <C>
Common Stock, $.001 par 520
</TABLE>
(c) Dividends.
The Company has paid no dividends during the fiscal
years ended June 30, 1995 and June 30, 1996. Other than the
requirements of the New Mexico Business Corporation Act that
dividends be paid out of capital surplus only and that the
declaration and payment of a dividend not render the Company
insolvent, there are no restrictions on the CompanyOs present
or future ability to pay dividends.
The payment by the Company of dividends, if any, in the
future rests within the discretion of its Board of Directors
and will depend, among other things, upon the CompanyOs
earnings, its capital requirements and its financial
condition, as well as other relevant factors. There is no
plan to pay dividends in the immediate future.
ITEM 6. MANAGEMENTOS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
(a) Plan of Operation:
On May, 10, 1995, The CompanyOs strategic business plan
changed from gaming and transportation to wireless
telecommunications. Initially, the CompanyOs emphasis will be
certain Specialized Mobile Radio (SMR) acquisitions currently
under contract or in negotiations; and the secondary focus
will be on other communications services and activities.
These other services and activities are anticipated to
include GPS products for the transportation industry; long
distance services (Switching, Prepaid Calling Cards, POS/ATM
Transactions); and Satellite uplinking services. To date, the
CompanyOs activities have been limited to raising initial
capital, hiring its initial employees, negotiating and
acquiring its initial SMR systems and channels, developing
its strategic business plan and commencing further
acquisitions of operating Specialized Mobile Radio (OSMRO)
systems.
The Company has agreements to enter targeted markets,
acquire SMR channels, acquire or form joint ventures with
existing operators, develop, construct and market SMR systems
and selectively convert any analog SMR systems to Enhanced
Specialized Mobile Radio (ESMR or Digital) to provide digital
mobile services. The Company recently purchased option
agreements covering 1,380 (YX) SMR channels in 20 states.
Management Agreements and Option Contracts give a company the
right to control, build-out and expand SMR service for a
specific radio frequency in a given territory.
The Company has recently targeted several companies to
acquire control of Management Agreements and Option Contracts
for over 4,700 SMR channels licensed by the Federal
Communications Commission, in over forty states. These
targeted channels are in addition to the 1,380 channels
current under contract by the Company. If consummated and
fully constructed, these proposed transactions could cover
areas with a total combined population in excess of
100,000,000.
The CompanyOs goal is to aggregate channels in its
proposed operating territories and increase revenues and
number of subscribers in the first twelve to eighteen months.
Through acquisition and management of radio licenses,
construction of newly licensed SMR stations, and the
acquisition of existing SMR systems the Company could
increase the customer base and the corresponding revenues in
the proposed operating territories. As a particular market is
entered, the goals are to aggregate sufficient channel
capacity, increase the number of subscribers, and increase
recurring revenues per subscriber by the sale of additional
features. By combining its stations with existing systems in
particular markets, the Company will be able to increase the
capacity or efficiencies on the traditional SMR systems to
permit growth by adding additional subscribers.
As the CompanyOs traditional SMR systems approach
capacity, continued subscriber growth and related revenue
increases may be slowed to insure system quality and customer
satisfaction while progress is made on the implementation of
new technology such as Digital Enhancements or Enhanced
Specialized Mobile Radio (ESMR).
In the past, the Company has executed some of these
activities through wholly-owned subsidiaries, which will be
dissolved and consolidated into one operating company by the
end of fiscal year ended June 30, 1997.
Closed Acquisitions:
Omni Range Communications LLC (OOmniO), during July
1995, the Company acquired contracts to manage certain SMR
channels and options to acquire additional SMR channels from
unaffiliated third parties (aggregating 185 channels) in
consideration for a purchase price of $75,000. The purchase
price was payable with $25,000 down and the balance by a 90-
day $50,000 promissory note secured by a second deed of trust
on the CompanyOs real estate in Aurora, Colorado. The Company
is in default under the note given to Omni. Under the terms
of the Agreement, Omni is entitled to foreclose its lien on
property on which the Registrant maintains principal business
office. As of the date of this report, Omni has verbally
agreed to extend the CompanyOs obligation.
DCL Associates, Inc. (ODCLO) is a private company which
assisted the Company in obtaining option agreements covering
2,435 (YX) SMR channels in 20 states. Pursuant to the
acquisition agreement, this transaction is valued at
approximately $1,988,357. The Company satisfied its closing
obligations as of August 6, 1996, defined as the option
closing date in the option agreements, with payment of
$149,127 in cash and subsequent issuance of a combination of
the CompanyOs common stock and preferred stock. As of the
date of this filing, 1,055 licenses will expire on October
31, 1996. National build-out plans have started as of the
date of this filing with the selection of initial SMR sites
for construction, the identification of radio equipment
required and the negotiation of leasing tower sites for the
CompanyOs system. The Company is required by the FCC to have
at least 139 SMR channels operational by the end of calendar
1996 in order to maintain the 1,380 channels currently under
an FCC Extended Implementation Waiver (increasing the
operational deadline for these channels to December 1998.)
Pending Acquisitions:
GPS Communications, Inc. (OGPSIO) is a private company
under agreement with the Company to sell all its patents and
intellectual rights on three commercial products which use
the federally owned tracking system called Global Positioning
Satellite (GPS). This transaction is valued at $350,000.
Payment for these assets will be made in the form of the
CompanyOs common stock valued at $100,000 plus royalties paid
on any GPS products sold up to a maximum payment of $250,000.
This transaction is expected to close prior to the end of
calendar year ended 1996 and is subject to certain conditions
being met by GPSI.
Network Teleports, Inc. (ONTIO) is a private corporation
and a proposed majority owned subsidiary of the Company
pursuant to a contract to purchase 61% of the issued and
outstanding shares of 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
due diligence review and expects this transaction will close
in the first quarter of calendar year 1997.
Telecosm & Associates L.C. (OTelecosmO) is a private
Liability Company under contract with the Company to sell all
controlling interest in 2,199 SMR Management Agreements and
Option Contracts governed by the a special FCC build-out
extension called the Chang/Goodman Waiver (OCGWO). The
continuation of the CGW is subject to final approval by the
FCC in the near future. As of the date of this filing, the
contract has expired. In the event these channels are granted
an Extended Implementation Waiver by the FCC, the Company
intends to proceed with the purchase of the management and
option agreements from Telecosm. As of the date of this
report, Telecosm has verbally agreed to extend the CompanyOs
obligation.
Commercial Communications Inc. (OCCIO) is a private
corporation whose primary business is providing SMR two-way
dispatch services. CCI is currently protected under Chapter
11 laws of the United States Bankruptcy Courts. The Company
has an acquisition agreement to acquire the assets and
business of CCI in a transaction valued at $500,000. Payment
for this system will be made in the form of a promissory note
and a combination of the CompanyOs common stock and preferred
stock. The revenues are yet to be audited and it is expected
that as a result of the bankruptcy proceedings, CCI may have
suffered a percentage of lost revenues. However, the initial
value in this acquisition will be additional SMR channels
(radio spectrum) and an experienced technical staff. As of
the date of this filing, the acquisition of this company has
been approved by the United States Bankruptcy Court, is
undergoing final due diligence review by the Company and is
expected to close before the end of the calendar year.
(b) ManagementOs Discussion and Analysis of Financial
Condition and Results of Operations.
The CompanyOs strategic business plan is highly
dependent upon acquiring operating SMR companies, adding the
CompanyOs unconstructed radio channels under management
agreements and options, and then consolidating all redundant
operations. The Company believes this
acquire/augment/consolidate strategy will increase the
overall operating territories increasing revenues from SMR
services and at the same time lowering the overall general
and administrative costs on the group as a whole.
During fiscal year ended June 30, 1996, the Company
increased its activities in targeting SMR operating companies
for acquisition. During 1996 the Company signed various
Letter of Intent to acquire SMR companies. Certain Letters of
Intent require cash deposits before any due diligence can
proceed. These Letters of Intent contain conditions for the
deposit amount to be refunded to the Company. During 1996,
the Company has escrowed cash consideration for two
acquisitions: Mobile One Communications and Network
Teleports. Due to a failure to proceed with the closing
requirements by the Company, a $50,000 cash deposit for the
Mobile One was forfeited.
This strategy is highly dependent upon having adequate
funds to, 1). acquire companies and radio spectrum, 2).
construct new SMR sites, and 3). create an efficient support
operation for the consolidated entities. To date, the Company
has used cash and its own Common and Preferred Stock to
acquire SMR licenses, 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 by the end of December 31,
1996 to execute the first part of its business plan to be
$2,112,000. This amount is composed of $1,112,000 for the
construction of 139 SMR channels, $600,000 as initial
payments to close on three targeted operating SMR companies,
$150,000 for working capital and $250,000 to cure defaults
associated with its commercial properties.
From January 1, 1997 to the end of fiscal year ended
June 30, 1997, the Company estimates its cash needs to
execute the second part of its business plan to be
$8,200,000. This amount is composed of $5,600,000 for the
construction of 700 additional SMR channels, $2,000,000 as
initial payments to close on ten additional targeted
operating SMR companies and $600,000 for working capital.
These amounts do not include net cash generated from the
acquired operating companies or revenue for services
generated on the constructed channels placed in operation
during this period. Accordingly, the net cash required could
be lower to execute the first and second part of the
CompanyOs business plan. Funds to market the CompanyOs
services will be paid for partially through the use of a
prepaid media contract in the amount of $1,300,000 and from
gross profits from acquired operating companies.
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 June 30, 1996, the
audited results of the Company indicated assets of
$2,377,075, negative working capital of $1,300,149 and debt
in default of $856,182. All during fiscal 1996 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.
This lack of cash has slowed its ability to acquire SMR
companies and start the construction phase of its business
plan. Any activities in the wireless industry requires
adequate financing and on-going funding sources. The Company
has entered this industry with limited financing and funding
sources.
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. In connection with this offering, American
Investment Services has agreed to assist the Company, on a
best efforts basis, in placing this Series B Preferred Stock
offering with private investors.
On October 23, 1996, the Company has 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 June 30, 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 fiscal year ended June 30, 1996, the Company
continued as a development stage enterprise. The CompanyOs
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
CompanyOs plan to achieve profitable operations is subject to
the validity of its assumptions and risk factors within the
industry and pertaining to the Company.
Results of Operations:
Fiscal Year Ended June 30, 1996.
As of June 30, 1996 the Company incurred direct expenses
of $2,465,920 associated with the execution of its business
plans in the communications industry. From the period of July
1, 1995 to June 30, 1996, the CompanyOs management incurred
general and administrative expenses of $2,272,796, a 116%
increase from similar expenses incurred during 1995. The
major expenses incurred were officers compensation of
$1,843,987, support staff salary of $34,064, and costs
associated with the foreclosure and receivership action
further described below.
During January 1996, the Company was subject to a
foreclosure and receivership action by a creditor involved
with the purchase of the CompanyOs property in Aurora,
Colorado, former consultants and then current officers (SEE
ITEM 3. LEGAL PROCEEDINGS.) The receivership action was
dismissed by the Court after five days and resulted in all
accounting and confidential records confiscated being
returned to the Company in varying levels of disorganization.
In addition, through this action, the Company lost key
officers who were in the process of developing and executing
its strategic business plan and overseeing various support
and accounting functions. This failed action required the
Company to, 1). hire additional staff to reorganize the
accounting and business records, 2). reassemble a senior
management team to continue the execution of the CompanyOs
business plan and 3). renegotiate terms with companies to be
acquired or in the process of being acquired by the Company.
As of June 30, 1996 the Company was still in the process of
re-entering and auditing information during this period and
completing various SEC 1995 and 1996 reports required and out
of compliance until August 1996. Management believes this
action resulted in many one time costs being reflected in the
fiscal year ended June 30, 1996 associated with legal and
accounting fees ($159,292), contract accounting services
($42,740), executive placement fees ($18,000), consulting and
management fees ($11,032), new computer systems ($8,758) and
other direct costs such as printing and office supplies.
Additional costs indirectly associated with this action was,
1). the loss of escrowed cash for one acquisition (see below,
OMobile One CommunicationsO), 2). delays in meeting closing
obligations on many targeted operating SMR companies, 3).
delays in starting the required construction of the CompanyOs
radio licenses under management contract with third parties
and 4). time associated with the recruiting and debriefing of
new senior executives. The Company has filed counter claims
against this group for damages associated with this action
(see Item 3. LEGAL PROCEEDINGS.)
As of June 30, 1996, $35,000 consisting of a short-term
note due Phillips Energy Corp. and $121,000 (of which as of
the date of this filing is approximately $104,000 including
legal costs and accrued interest to date) due Local Service
Corp., are in dispute via counter-claims against Local
Service Corp. and Phillips Energy (see Item 3. LEGAL
PROCEEDINGS.)
On July 31, 1995, the Company entered into a written
agreement with Mobile One Communications, Inc. ("MOC"), a
Colorado corporation wherein MOC granted the Company the
exclusive right and option to acquire SMR licenses and
equipment and manage said licenses during the four month
option period ended November 30, 1995. The purchase price for
the licenses and equipment was $625,000 inclusive of 300,000
shares of the Registrant's common stock valued at $.75 per
share or an aggregate of $225,000. The Company paid $50,000
to MOC for this option which expired on November 15, 1995.
The Company defaulted in its obligations under the agreement
with MOC and the escrow cash has been released to Mobile One
Communications, Inc. A $50,000 charge to operations has been
recorded as of June 30, 1996 in connection with this failed
acquisition. The stock issued for the transaction has been
canceled.
Fiscal Year Ended June 30, 1995:
Prior to May 10, 1995, the CompanyOs only activity was
attempting to execute the business plans in the areas of
gaming and transportation. These business plans failed during
this period.
From the period of March 15, 1994 to June 30, 1995, Key
Communications, Key Car Finance (purchased by the Company on
May 10, 1995 in a stock for stock exchange and recorded as a
reverse acquisition) and current management incurred general
and administrative expenses of $1,051,064. The majority items
are: officers compensation ($456,488) and consulting fees for
due diligence and brokering targeted SMR companies
($604,883). Prior to May 10, 1995, the CompanyOs prior
management (then called Nattem USA, Inc.) incurred general
and administrative expenses of $152,261, a 75% decrease from
similar expenses incurred during 1994. The majority of these
costs were related to legal expenses ($26,866), salary
($90,000) and travel expenses ($24,829) for the prior
President of the Company.
On May 10, 1995, the Company acquired all the assets of
Keystone Holding Corporation (OKHCO), had a complete change
of management control and started developing a
telecommunication company specializing in the areas of
Specialized Mobile Radio, satellite teleport uplinks,
traditional long distance voice and data communications.
Accordingly, comparing results of operations from 1994 to
1995 are not indicative of like operations during these
periods.
As of June 30, 1995 the Company had certain notes in
default. Subsequent to June 30, 1995 and during fiscal year
ended June 30, 1996, $130,973 of notes payable--related
parties-- which are reported as in default as of June 30,
1995 have been paid through the issuance of the CompanyOs
common stock and $39,500 which, in the opinion of the
CompanyOs senior management should be offset against a former
officerOs breach of a non-disclosure/non-circumvention
agreement which called for a $75,000 payment for such a
breach.
As of June 30, 1995, the Company was a development stage
entity with virtually no revenues.
ITEM 7. FINANCIAL STATEMENTS
Financial statements meeting the requirements of Item
310 of regulation S-B, for the years ending June 30, 1995 and
June 30, 1996 have been audited by Causey Demgen & Moore Inc.
and Ehrhardt Keefe, Steiner and Hottman, P.C., respectively,
and are annexed as a separate section to this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On October 3, 1994, the Company engaged Hollander,
Gilbert & Co., Los Angeles, California (OHollander,
GilbertO), as the CompanyOs independent accountants. Prior to
the engagement of Hollander, Gilbert, the Company did not
consult with Hollander, Gilbert regarding the application of
accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that
might be rendered on the CompanyOs financial statements.
During the period from December 21, 1993 to September
22, 1994, there were no disagreements with Vink Pier & Teague
on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the
satisfaction of Vink Pier & Teague, would have caused Vink
Pier & Teague to make reference to the subject matter of the
disagreements in connection with any report that they would
have issued on the CompanyOs financial statements.
Effective July 20,1995, the Board of Directors of the
Company dismissed Hollander, Gilbert & Co.. The report of
Hollander, Gilbert & Co. for the year-end June 30, 1994
contained a modification as to the CompanyOs ability to
continue as a going concern. During the year end of June 30,
1994, and the subsequent interim period, there was no
disagreement with Hollander, Gilbert & Co. on any manner of
accounting principle or practice, financial statement
disclosure or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of those
accountants, would have caused it to make reference to the
subject matter in connection with its report. The Company
dismissed Hollander, Gilbert & Co. as the CompanyOs
independent accountants due to the CompanyOs relocation and
change in senior management.
Effective July 20, 1995, the Company retained Michael B.
Johnson, Englewood, Colorado as its independent accountant
(OJohnsonO). During the CompanyOs two most recent fiscal
years, and the interim period since completion of its last
fiscal year, the Company had not consulted Johnson with
respect to the application of accounting principles to a
specified transaction, the type of audit opinion that might
be rendered on the CompanyOs financial statements or any
matter that was the subject of a disagreement or reportable
event.
On December 15, 1995, the Company dismissed Michael B.
Johnson, as its independent Certified Public Accountant and
retained Causey Demgen & Moore Inc., of Denver, Colorado as
its independent Certified Public Accountants. The Company
duly reported this change in accountants to the Securities
and Exchange Commission in its Form 8-K current report dated
December 15, 1995. During the year end of June 30, 1995, and
the subsequent interim period, there was no disagreement with
Michael B. Johnson on any manner of accounting principle or
practice, financial statement disclosure or auditing scope or
procedure, which disagreement, if not resolved to the
satisfaction of those accountants, would have caused it to
make reference to the subject matter in connection with its
report. The Company dismissed Michael B. Johnson as the
CompanyOs independent accountants due to delays in commencing
their audit work. During the CompanyOs two most recent fiscal
years, and the interim period since completion of its last
fiscal year, the Company had not consulted Causey Demgen &
Moore Inc. with respect to the application of accounting
principles to a specified transaction, the type of audit
opinion that might be rendered on the CompanyOs financial
statements or any matter that was the subject of a
disagreement or reportable event.
On August 14, 1996, Causey Demgen & Moore Inc., declined
to stand for reelection as the CompanyOs independent
Certified Public Accountants for the fiscal year ended June
30, 1996. The Company duly reported this change in
accountants to the Securities and Exchange Commission in its
Form 8-K current report dated August 22, 1996. During the
year end of June 30, 1995, and the subsequent interim
periods, there was no disagreement with Causey Demgen & Moore
Inc. on any manner of accounting principle or practice,
financial statement disclosure or auditing scope or
procedure, which disagreement, if not resolved to the
satisfaction of those accountants, would have caused it to
make reference to the subject matter in connection with its
report.
On August 29, 1996, the Company retained Ehrhardt,
Keefe, Steiner and Hottman, PC, of Denver, Colorado, as its
independent Certified Public Accountants. During the
CompanyOs two most recent fiscal years, and the interim
periods since completion of its last fiscal year, the Company
had not consulted Ehrhardt, Keefe, Steiner and Hottman, PC
with respect to the application of accounting principles to a
specified transaction, the type of audit opinion that might
be rendered on the CompanyOs financial statements or any
matter that was the subject of a disagreement or reportable
event. The Company duly reported this change in accountants
to the Securities and Exchange Commission in its Form 8-K
current report dated September 12, 1996.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT
(a) Identify Directors and Executive Officers.
The following table sets forth: (1) names and ages of
all persons who presently are and who have been selected as
directors of the Company as of June 30, 1996; (2) all
positions and offices with the Company held by each such
person; (3) the term or office of each person named as a
director; and 4) any period during which he or she has served
as such:
<TABLE>
<CAPTION>
Director Name/Title From To
<S> <C> <C>
Clifford S. Perlman, 70 One year Next Annual
Chairman of Board of
Directors June 1996 Meeting
Donald G. Mack, 39 One year, Next Annual
President, CEO and
Director May 1996 Meeting
Mitchell Chi, 45 One year, Next Annual
COO and Director June 1996 Meeting
Thomas Moscariello, 36 One year, Next Annual
Vice President and
Director May 1996 Meeting
Robert Clauson, 31 One year Next Annual
Secretary and Director March 1996 Meeting
</TABLE>
There is no understanding or arrangement between any
directors or any other person or persons pursuant to which
such individual was or is to be selected as a director or
nominee of the Company.
Each director is serving a term of office which shall
continue until the next annual meeting of Shareholders and
until his successor has been duly elected and qualified.
Officers of the Company serve at the pleasure of the Board of
Directors.
Business Experience
The following is a brief account of the experience,
during the past five years, of each director and executive
officers of the Company:
CLIFFORD S. PERLMAN - Chairman of the Board - 1994
Mr. Perlman has served since June 1994 as Chairman of the
Board of Directors, Chief Executive Officer and President
of the Company. From 1990 to present, Mr. Perlman continues
to serve as an independent business consultant to both
private and public companies. In 1991, Mr. Perlman served
as Chief Executive Officer and Director of the MGM Grand
Hotels, Inc., also a NYSE company. From 1958 to 1982, Mr.
Perlman was founder and Director of LUM Restaurants, a NYSE
company. Through LUMS, Mr. Perlman founded and served as
Chairman of CaesarOs World, Inc., a New York Stock Exchange
(NYSE) company and the parent company of CaesarOs Palace
Casino and Resort in Las Vegas, Nevada.
DONALD G. MACK - Chief Executive Officer, President and
Director - 1995
From 1989 Mr. Mack has been with the predecessor to ComTec
International, Keystone Holding Corp., a private Denver
company engaged in telecommunication activities focusing on
wireless and data services, as President, CEO, and founder.
From 1990 to 1993. Mr. Mack was the CEO of Learning and
Leisure Technologies Inc., a Denver company engaged in
developing child care centers. Mr. Mack may be considered
the OpromoterO of the Company pursuant to the SEC
definition as such.
MITCHELL B. CHI - Chief Operating Officer and Director -
1996
From 1993 to 1996, Mr. Chi was Executive Vice President of
Arrowhead Industries, Corp., Denver, Colorado. From 1985 to
1993, Mr. Chi was the CEO, President and founder of
MicroSage, Inc., Santa Fe, New Mexico, a MicroAge Computer
Center franchise. Prior to 1984, Mr. Chi was a Vice
President in the JAron Commodity Division of Goldman Sachs
and Co., New York, New York and was a Senior Accountant at
Price Waterhouse and Co., New York, New York. Mr. Chi has a
Masters degree in Finance from Columbia University, a BA in
Accounting from Fairleigh Dickenson University and a
Certified Public Accountant in the states of New Jersey and
New York (now inactive).
KELSEY KENNEDY - Chief Financial Officer - Part-Time, -
1996
From 1996 to the present, Mr. Kennedy is the Managing
Director of Novum Consulting Group LLC.. From 1988 to 1996
Mr. Kennedy practiced as Kelsey T. Kennedy, CPA of Denver,
Colorado, an independent Certified Public Accountant. From
1983 to 1988, Mr. Kennedy was a Vice-President for
Computerland Operated Stores, Inc. (a subsidiary of the
Computerland Corporation) and President of a regional
Computerland franchise corporation. Prior to 1982, he was
Director of a financial consulting practice for Arthur
Young & Company (now Ernst & Young). Mr. Kennedy is a
Certified Public Accountant in the State of Colorado.
THOMAS J. MOSCARIELLO - Vice President of Sales and
Marketing and Director - 1995
Since May 1995, Mr. Moscariello has served as an executive
officer and director of Key Communication Group and became
an officer and director of ComTec International in May
1996. Simultaneously therewith and since 1995, Mr.
Moscariello has been employed as an account executive by
InterTel DataCom, Inc.. From 1990 to 1995, Mr. Moscariello
was employed as an account executive by WilTel
Communication Systems, Inc.. Mr. Moscariello received a
Bachelor of Science degree in Engineering Technology from
the University of Hartford (Hartford, CT) in 1982.
ROBERT CLAUSON - Secretary and Director - 1995
From 1992 to the present, Mr. Clauson has been a Vice
President for Childcare Centers of North America, Inc..
From 1989 to 1991, Mr. Clauson was employed by KinderCare
Learning Centers, Inc. as a Director. In 1990, he founded
Kids at Work, a consulting firm specializing in the
evaluation and establishment of on-site child care centers.
Mr. Clauson holds a Bachelor of Early Childhood degree from
Utah Valley College and a Bachelor of Business
Administration degree from Brigham Young University.
(b) Identification of Certain Significant Employees and
Consultants
The Company does not employ any persons or consultants
who are not executive officers who make a significant
contribution to the business of the Company.
(c) Family Relationships
No family relationship exists between any director or
executive officers of the Company.
(d) Involvement in Certain Legal Proceedings
No event listed in Subparagraphs (1) through (4) of
Subparagraph (d) of Item 401 of Regulation S-B, has occurred
with respect to any present executive officer or director of
the Company during the past five years which is material to
an evaluation of the ability or integrity of such director or
officer.
(e) Compliance With Section 16(a) of the Exchange Act
To the date of this filing and to the best knowledge of
the Company, no Form 3, Form 4 and/or Form 5 has been filed
with the Securities and Exchange Commission (SEC) by any of
its officers or directors. As of the date of this report, the
SEC has not taken any additional action with regard to this
failure to file reports.
ITEM 10. EXECUTIVE COMPENSATION.
(a) General
(1) through (7) All Compensation Covered. During the
fiscal year ended June 30, 1996, the Company employed the
following senior management team who serves pursuant to
employment agreement further described in Section (g) below.
(b) Summary Compensation Table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
Name and Position Year Salary Bonus Other SAR Options LTIP Other
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clifford S. Perlman
(g1) 1995 $60,000 None None None None $312,383 None
Chairman of the
Board of Directors 1996 $60,000 None None None None $281,949 None
Donald G. Mack (g2) 1995 $120,000 None None None None None None
President and
Chief Executive
Officer 1996 $224,600 None $30,000 None None None None
Mitchell B. Chi
(g3) 1996 $84,000 $27,000 None None None None None
Chief Operating
Officer
Thomas Moscariello
(g4) 1996 $45,000 None None None None None None
VP Sales and Marketing
Robert Clauson (g5) 1995 $60,000 None None None None None None
Corporate Secretary 1996 $60,000 None None None None None None
</TABLE>
(c) Option/SAR Grant Table. During the fiscal
year ended June 30, 1996, no grants of stock options or
freestanding SAROs were made by the Company.
On August 10, 1995, the Shareholders of the Company
approved the increase in the number of common shares
reserved for the Incentive Stock Option Plan from 500,000
to 3,000,000 common shares and also approved the extension
of the termination date of the Incentive Stock Option Plan
from September 16, 1996 to September 16, 1998. The
Incentive Stock Option Plan (the OPlanO), was originally
approved by the Board of Directors and Shareholders on
December 21, 1993. The Plan provides for the grant to the
CompanyOs employees, officers and/or directors of stock
options that qualify as incentive stock options under
Section 422A of the Internal Revenue Code of 1986, as
amended. The Plan provides for the grant of stock options
to purchase up to an aggregate of 3,000,000 shares of
common stock. Options may be granted for terms of up to
three years. Options are to be granted at exercise prices
at least equal to the fair market value of the CompanyOs
common stock at the date of grant (110% of the fair market
value in the case of options granted to greater than 10%
shareholders). Options are subject to early forfeiture
upon termination of employment or other relationship with
the Company. There were no options granted during the
fiscal year ended June 30, 1996. No options are presently
issued or outstanding.
(d) Aggregate Option/SAR Exercises and Fiscal
Year-End Option/SAR Value Table. No stock options or
freestanding SAROs are issued or outstanding. Accordingly,
and during the fiscal year ended June 30, 1996, no stock
options or freestanding SAROs were exercised.
Notwithstanding the foregoing, an aggregate of 3,000,000
shares of the CompanyOs common stock, $.001 par value per
share are reserved for issuance pursuant to the CompanyOs
incentive stock option plan, as adopted by the CompanyOs
Board of Directors in June, 1995, and ratified and approved
by the CompanyOs stockholders on August 10, 1995.
(e) Long-Term Incentive Plan (OLTIPO) Awards
Table. During the fiscal year ended June 30, 1995, 624,766
shares of common stock were issued to Mr. Perlman
representing five percent (5%) of the CompanyOs issued and
outstanding shares as of June 20, 1995. During the fiscal
year ended June 30, 1996, 1,666,666 shares of common stock
were issued to Mr. Perlman representing five percent (5%)
of the CompanyOs issued and outstanding shares as of June
20, 1996.
(f) Compensation of Directors. (1) and (2).
During the fiscal year ended June 30, 1996, no director of
the Company received any compensation in his capacity as
director, other than reimbursement of travel expenses.
(g) Employment Contracts and Termination of
Employment, and Change-in Control Arrangements.
(1) Effective May 10, 1995, the Company entered
into a two year Employment Contract with Mr. Perlman to
manage and direct the affairs of the Company and act in
the capacity of Chairman of the Board at an annual base
salary of $60,000. In addition, the Company agreed to
compensate Mr. Perlman by: (1) paying him 50% cash and
50% stock on the balance of his $80,000 accrued salary
from a prior agreement once the Company has closed on
adequate financing; and (2) Mr. Perlman shall receive a
stock bonus paid annually equal to 5% of the issued and
outstanding shares on June 20 of each year throughout
the term of his agreement.
(2) Mr. Mack entered into a three year Employment
Agreement ending August 31, 1997 with the Company
(through predecessor company, Key Communications Group,
Inc. (KCG)) as an executive officer and director.
Pursuant to the Company having sufficient funds to pay
individual salaries, Mr. Mack has agreed to accrue
monthly compensation of $10,000. In addition, The
Company agreed to compensate Mr. Mack at the end of each
fiscal year an amount equal to one percent (1%) of the
gross revenues of KCG; plus a minimum five percent (5%)
increase based on the profitability of the Company. To
date, Mr. Mack has not earned any performance bonuses
based on gross revenues and profitability of KGC. Mr.
Mack shall also be entitled to such benefits as
retirement, stock options, medical insurance and life
insurance once the Company has sufficient funds.
By virtue of a written three year employment agreement
between the Company and Mr. Mack dated as of May 10,
1995, Mr. Mack agreed to accrue monthly compensation of
$10,000, with the option to convert the same to shares
of the CompanyOs common stock at a 20% discount from the
bid price of the CompanyOs common stock in the over the
counter market on the date of conversion.
By virtue of a written management agreement between Key
Car Finance Company and Mr. Mack, Mr. Mack agreed to
accrue a monthly management fee of $2,500, with the
option to convert the same to shares of the CompanyOs
common stock at a 20% discount from the bid price of the
CompanyOs common stock in the over the counter market on
the date of conversion.
As additional compensation, the Company agreed to pay to
Mr. Mack:(I) a bonus equal to 5% of the quarterly net
increase in the CompanyOs net assets payable annually;
(ii) 10% of the CompanyOs net before tax profit payable
annually; and (iii) performance stock options, effective
for four years, based upon the Company reaching certain
financial criteria. In the latter regard, and when the
Company reached $1,000,000, $5,000,000 and $15,000,000
in gross revenues, the Company becomes obligated to
issue Mr. Mack 1,000,000 shares at $.10, 2,000,000
shares at $.20 and 3,000,000 shares at $.30,
respectively. To date, Mr. Mack has not earned any
performance bonuses based on the above financial
criteria. The agreement also obligated the Company to
purchase a $1,500,000 term life policy on Mr. Mack
payable to his named beneficiaries.
3) Mr. Chi is serving the Company under a three
year employment contract ending June 14, 1999. He
receives base compensation in the amount of $7,000 per
month which is partially be paid in the form of Class A
voting common stock of the Company at a 20% discount to
the bid price as quoted by NASDAQ. Mr. Chi received an
initial employment inducement of 150,000 shares of the
CompanyOs common stock at June 14, 1996 paid in the form
of Class A voting common stock of the Company at a 20%
discount to the bid price as quoted by NASDAQ.
(4) Mr. Moscariello is serving the Company under
a three year employment contract ending May 10, 1999. He
receives base compensation in the amount of $3,750 per
month which is paid in the form of Class A voting common
stock of the Company at a 20% discount to the bid price
as quoted by NASDAQ.
(5) Robert Clauson is serving the Company under a three
year employment contract ending May 10, 1999. He
receives base compensation in the amount of $5,000 per
month which is paid in the form of Class A voting common
stock of the Company at a 20% discount to the bid price
as quoted by NASDAQ.
On October 4, 1996, the Company filed with the SEC
Report S-8 registering the following ComTec
International Common Stock shares: Mr. Perlman,
1,300,000 shares; Mr. Mack, 2,200,000 shares; Mr. Chi,
184,821 shares; and Mr. Clauson, 333,333 shares and
62,500 to a management consultant.
(h) Report on Repricing of Options/SAROs. No
stock options or freestanding SAROs are issued or
outstanding. Accordingly, and during the fiscal year ended
June 30, 1996, no stock options or freestanding SAROs were
repriced.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners:
The information is furnished as of June 30, 1996, as to the
number of shares of the CompanyOs common stock, $.001 par
value per share owned beneficially or is known by the Company
to own beneficially more than 5% of any class of such
security who is not also an Officer or Director of the
Company:
At June 30, 1996 the Company had outstanding 41,299,254
Class A Common Stock, the only class of voting securities
outstanding. Each common share entitles the holder to one
vote in any matter submitted to shareholders for approval.
The common shares vote as a single class.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percentage
of Beneficial Owner of Beneficial Ownership of Total Class
<S> <C> <C>
Ferrara Food Company, Inc. 4,200,000 10.2%
120 Tice Lane, Suite C
East Brunswick, NJ 07243
Donald G. Mack 20,997,004 (1)-(5) 50.8%
10855 E. Bethany Drive
Aurora, CO 80014
</TABLE>
(1) Includes 124,058 shares as a result of Mr. MackOs
equity ownership of shares in Keystone Holding
Corporation of which Mr. Mack is still an officer,
director and a principal shareholder.
(2) Includes an aggregate of 4,597,439 shares owned by
the Mack Family Trust, a Colorado inter vivos trust
which is controlled by Arthur R. Mack Jr., Mr. MackOs
father not living in the same household as Mr. Mack. Mr.
Mack disclaims beneficial ownership of these shares.
(3) Includes an aggregate of 1,459,504 shares owned by
Suzette Mack, the wife of Mr. Mack. Mr. Mack disclaims
beneficial ownership of these shares.
(4) Includes 11,228,971 shares owned by the
shareholders of Keystone Holding Corporation of which
Mr. Mack is still an officer, director and a principal
shareholder. Mr. Mack disclaims beneficial ownership of
these shares.
(5) Includes 3,587,032 shares converted from
compensation earned and notes payable due Mr. Mack
during fiscal year ended June 30, 1996.
(b) Security Ownership of Management:
The information is furnished as of June 30, 1996 as to
the number of shares of the CompanyOs common stock, $.001 par
value per share owned by each executive officer and director
of the Company and by all executive officers and directors as
a group:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Security Percentage
of Security Owner Ownership of Total Class
<S> <C> <C>
Clifford S. Perlman 3,653,115 8.8%
2304 Roscomare Road
Los Angeles, CA 90077
Donald G. Mack 3,711,090 9.0%
10855 E. Bethany Drive
Aurora, CO 80014
Mitchell B.Chi 150,000 .4%
10855 E. Bethany Drive
Aurora, CO 80014
Thomas Moscariello 629,471 1.5%
10855 E. Bethany Drive
Aurora, CO 80014
Robert Clauson 369,821 .9%
10855 E. Bethany Drive
Aurora, CO 80014
</TABLE>
Total officers and directors,
as a group (5 persons) 8,513,497 20.6%
(c) Changes in Control.
As of the date of this Report, the Company has not
entered into any agreements, the operation of which may at a
subsequent date result in a change of control of the Company.
The Company knows of no arrangement, including the
pledge by any person of securities of the Company, which may
at a subsequent date result in a change of control of the
Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a)(b) On February 12, 1996, Mr. Perlman converted all of
the CompanyOs cash obligations to him through February
28, 1996 into shares of common stock valued at $.10 per
share or 80% of the $.125 bid price on that date. Mr.
Perlman received 1,300,000 shares in settlement of the
CompanyOs $130,000 obligation to him, and computed as
follows: ten months salary at $5,000 per month, $40,000
in prior unpaid obligation and $40,000 worth of stock
previously unpaid. This transaction was approved by the
CompanyOs Board of Directors on February 12, 1996.
On June 20, 1996, Mr. Perlman earned 1,666,666 of the
CompanyOs Common Stock pursuant to the terms and
conditions of his Employment Agreement dated May 10,
1995. This transaction was valued at $.162 per share or
80% of the $.211 bid price on that date.
On June 17, 1994, the Company purchased from Mr. Mack,
the CompanyOs President and CEO a car lot located in
Parker, Colorado. The purchase price paid was
$392,214. In connection with this transaction, the
Company assumed a first mortgage of $352,000, issued
172,720 preferred shares of stated $1 value per share
of Key Car Finance (a subsidiary of the Company) to
the President of the Company and issued a note payable
to the President of the Company in the amount of
$148,000.
Donald G. Mack, the CompanyOs President and Chief
Executive Officer was a principal stockholder of
Keystone Holding Corp., whose assets were purchased by
the Company on May 10, 1995. As a result of this
transaction, Mr. Mack received .08% of the CompanyOs
common stock as of June 30, 1995 and executed two
related party - notes payable to him in the amount of:
1). $81,202 in connection with the purchase of the
commercial property in Parker, Colorado and 2).
$10,000 in connection with amounts owed him from Key
Communications, Inc., a subsidiary of the Company.
On February 12, 1996, Mr. Mack converted part of the
CompanyOs cash obligations to him through February 28,
1996 into shares of common stock valued at $.10 per
share or 80% of the $.125 bid price on that date. Mr.
Mack received 2,200,000 shares in settlement of the
CompanyOs $220,000 obligation to him, and computed as
follows: $120,600 in salary earned from the Company, a
$30,000 management fee from the Company and a partial
reduction of the notes payable due him in the amount
of $69,300. This transaction was approved by the
CompanyOs Board of Directors on February 12, 1996.
On July 16, 1996, Mr. Mack converted all of the
CompanyOs cash obligations to him as of June 30, 1996
into shares of common stock valued at $.10 per share
or 80% of the $.125 bid price on that date. Mr. Mack
received 1,387,030 shares in settlement of the
CompanyOs $138,703 obligation to him as follows:
$104,000 in salary earned from the Company and final
reduction on any remaining notes payable due him in
the amount of $34,703. This transaction was approved
by the CompanyOs Board of Directors on July 16, 1996.
The Company and Keystone Holding Corp. are related
through certain common stockholders and common
management.
Except for the foregoing and during the fiscal year
ended June 30, 1996, no officer, director or relative
or spouse of the foregoing persons or any relative of
such person who has the same home as such person, or
is a director or other officer of any parent or
subsidiary of the Company or any shareholder known by
the Company to own of record or beneficially more than
five (5%) percent of the CompanyOs Common Stock, had a
direct or indirect material interest in any
transaction or presently proposed transaction to which
the Company or any of its parents or subsidiaries was
or is a party.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following documents are filed herewith
or incorporated herein by reference as Exhibits:
2.0 Acquisition of Keystone Holding Corp. dated May
10, 1995 (incorporated by reference to the
CompanyOs Form 8-K dated May 10, 1995).
2.1 Definitive Acquisition Agreement By and Between
Key Communications Group, Inc. and Omni-Range
Communications dated August 5, 1995. (1)
2.2 Agreement between the Company and Video Licensing
Group, Inc. dated January 24, 1996. (1)
2.3 Acquisition Agreement between the Company and DCL
Associates dated April 29, 1996. (1)
2.4 Letter of Intent between the Company and Telecosm
dated May 31, 1996. (1)
3.1 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).
3.2 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.
4.2 Certificate of Designation of Series C Preferred
Shares.
10.01 Form of Employment Agreement between the
Company and its officers. (1)
10.02 Commercial contract to buy and sell real
estate between Keystone Holding Corp. and Local
Service Corporation dated May 5, 1995. Exhibit
header reads OInternational Network.O (1)
10.03 Warranty Deed dated May 30, 1995 from Local
Service Corporation to Nattem USA, Inc.. (1)
10.04 Deed of Trust, security agreement and
financing statement executed by David L. Terry and
Celia M. Terry dated September 9, 1986. (1)
10.05 Promissory Note and Deed of Trust dated May
30, 1995 executed by Key Car Finance Company in
favor of Local Service Corporation. (1)
10.06 Agreement of Sale By and Between Nattem USA,
Inc. and John Sandy Productions, Inc. dated July
26, 1995, together with Exhibits. (1)
10.07 Option Agreement By and Between Key
Communications Group, Inc. and Mobile-One
Communications, Inc. dated July 31, 1995. (1)
10.08 Agreement among the Company, Proxhill
Marketing Limited and Adex Corp. dated December
15, 1995. (1)
16 Letters on change in certifying accountant.
(incorporated by reference to the CompanyOs Form 8-
K dated August 22, 1996 and September 12. 1996).
21 Subsidiaries of the registrant. (1)
27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during
the quarter ended June 30, 1996.
_________________
(1) Incorporated by reference to the exhibits filed with the
CompanyOs Form 10-KSB for the fiscal year ended June 30,
1995.
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: October 29, 1996 By:/s/donald g. mack
Donald G. Mack, President
and Chief Executive Officer
By:/s/ kelsey T. Kennedy
Kelsey T. Kennedy, 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 October 29, 1996
Donald G. Mack
/s/robert clauson Director October 29, 1996
Robert Clauson
/s/mitchell b. chi Director October 29, 1996
Mitchell B. Chi
/s/clifford perlman
Clifford Perlman Director October 29, 1996
/s/ tom moscariello
Tom Moscariello Director October 29, 1996
COMTEC INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements
Page
Reports of Independent Certified Public Accountants F-2
Consolidated Balance Sheet for the years ended June 30, 1995
and 1996 F-4
Consolidate Statements of Operations for the Period of
Inception March 15, 1996 to June 30, 1995,
the Year Ended June 30, 1996 and the Cumulative Amounts from
Inception March 15, 1994 through June 30, 1996 F-5
Consolidate Statements of Changes in Stockholder's Equity for
the Period of Inception March 15, 1994 to June 30, 1996 F-6
Consolidate Statement of Cash Flow for the Period of
Inception March 15, 1996 to June 30, 1995,
the Year Ended June 30, 1996 and the Cumulative Amounts from
Inception March 15, 1994 through June 30, 1996 F-7
Notes to Financial Statements F-8
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders
Comtec International, Inc.
We have audited the accompanying consolidated balance sheet of
Comtec International, Inc. and Subsidiaries (a development stage
enterprise) as of June 30, 1996 and the related consolidated
statements of operations, stockholders' equity, and cash flows
for the year then ended and the amounts for the year ended June
30, 1996 included in the cumulative period from inception
(March 15, 1994) to June 30, 1996. These consolidated financial
statements are the responsibility of Comtec International, Inc.
and Subsidiaries' management. Our responsibility is to express
an opinion on these consolidated financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Comtec International, Inc. and Subsidiaries
(a development stage enterprise) at June 30, 1996 and the results
of their operations and their cash flows for the year then ended
and the amounts for the year ended June 30, 1996 included in the
cumulative period from inception (March 15, 1994) to June 30,
1996 in conformity with generally accepted accounting principles.
As discussed in Note 11 to the consolidated financial statements,
at June 30, 1996, the number of shares of common stock
outstanding along with options, shares reserved for the Company's
incentive stock option plan, conversion features of the three
classes of convertible preferred stock and other subsequent
issuances of common stock, exceeded total authorized stock by
11,352,898 shares. Should the holders of the options and
preferred stock elect to exercise or convert these items into
common stock, the Company may be required to repurchase
11,352,898 shares of common stock in the open market in an amount
sufficient to satisfy the options or preferred stock conversion
features.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company has incurred losses from operations and has
yet to begin its planned principal operations that raise
substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are
discussed in Note 2 of the consolidated financial statements.
The consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/ehrhardt keefe steiner & hottman pc
Ehrhardt Keefe Steiner & Hottman PC
October 11, 1996, except for Note 11
as to which the date is October 25, 1996
Denver, Colorado
F - 2
This report is a copy of a previously issued Causey Demgen &
Moore Inc. audit report. Causey Demgen & Moore Inc. resigned as
Company auditors on August 14, 1996, has not withdrawn its
opinion, but has declined to reissue this report unless it was
paid disputed audit fees for the fiscal 1995 audit. The
financial statements from inception to June 30, 1995 included in
this report are the same as the audited financial statements
previously filed in the Form 10-KSB for 1995 fiscal year end. In
the opinion of management, no events have occurred that would
require any change to the financial statements covered by the
report.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Comtec International, Inc.
(formerly Nattem USA, Inc.)
We have audited the accompanying consolidated balance sheet of
Comtec International, Inc. and Subsidiaries (a development stage
enterprise) as of December 31, 1994 and June 30, 1995 and the
related consolidated statements of operations, stockholders,'
equity (deficit), and cash flows for the period from inception to
December 31, 1994 and the six months ended June 30, 1995. These
financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Comtec International, Inc. and Subsidiaries
(a development stage enterprise) at December 31, 1994 and June
30, 1995 and the results of their operations and their cash flows
for the period from inception to December 31, 1994 and the six
months ended June 30, 1995 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Companies will continue as a going concern. As shown in
the financial statements, the Companies have incurred substantial
losses since inception, and on a combined basis reflect a
substantial deficit in working capital, which raises substantial
doubt about the ability of the Companies to continue as a going
concern. Management's plans in regard to those matters are
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Denver, Colorado
June 14 1996, except for Note 11
as to which the date is August 6, 1996
/s/ Causey Demgen & Moore Inc.
F - 3
COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
(a Development Stage Enterprise)
Consolidated Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets
Cash $ 27,482
Officer receivable 25,446
Prepaid expenses and other current
assets 1,610
Total current assets 54,538
Property and equipment, net (Notes 5, 6
and 7) 2,149,633
Other assets
Deposits and other 97,904
License rights (Note 5) 75,000
172,904
Total assets $2,377,075
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 206,086
Accrued payroll - officer (Note 8) 31,000
Other accrued expenses 258,584
Short-term notes payable (Note 7) 236,182
Current portion of long-term debt (Note 622,835
Total current liabilities 1,354,687
Long-term debt (Note 7) 344,584
Interest in preferred stock of subsidiary
(Note 5) 172,720
Commitments and contingencies (Notes 5,
7, 8, 11 and 12)
Stockholders' equity (Notes 4, 5, 8, 9,
11 and 12)
Series A convertible preferred stock, $1
stated par and liquidation value;
1,000,000 shares authorized, 420,000
shares issued and outstanding; $420,000 420,000
liquidation preference
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, no shares
issued and outstanding; liquidation
subordinated to Series A and Series B -
liquidation value
Common stock, .001 par value; 50,000,000
shares authorized, 41,299,254 shares
issued and outstanding 41,299
Additional paid-in capital 6,148,899
Prepaid media agreements (1,300,000)
Stock held in escrow (1,225,000)
Deficit accumulated during the
development stage (3,580,114)
Total stockholders' equity 505,084
Total liabilities and stockholders'
equity $2,377,075
</TABLE>
F - 4
COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
(a Development Stage Enterprise)
Consolidated Statements of Operations
For the Period from Inception (March 15, 1994) to June 30, 1995,
the Year Ended
June 30, 1996 and Cumulative Amounts from Inception (March 15,
1994)
through June 30, 1996
<TABLE>
<CAPTION>
Cumulative
Amounts
June 30, from
1996 1995 Inception
<S> <C> <C> <C>
Expenses
General and administrative
(including $562,383, $1,843,987,
and $2,406,370 of compensation
in the form of common stock) $1,051,064 $2,272,796 $3,323,860
Management fees - related party
(Note 8) 35,000 30,000 65,000
Interest expense, net 94,876 163,124 258,000
Total expenses 1,180,940 2,465,920 3,646,860
Rental and other income 32,608 54,544 87,152
Net loss $ (1,148,332) $ (2,411,376) $ (3,559,708)
Weighted average common shares
outstanding 12,299,000 27,251,358 21,071,219
Net loss per common share $ (.09) $ (.09) $ (.17)
</TABLE>
F - 5
COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
(a Development Stage Enterprise)
Consolidated Statement of Changes in Stockholders' Equity
For the Period from Inception (March 15, 1994) through June 30, 1996
<TABLE>
<CAPTION>
Preferred Stock - Series A Common Stock
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balance at inception - $ - - $ -
Issuance of common stock to
Keystone upon incorporation of - - 5,240,186 5,240
Key Comm and Key Car (Note 4)
Issuance of common stock to
Keystone upon purchase of - - 5,988,785 5,989
communication equipment (Note 4)
Special distribution to - - - -
shareholder of Key Car (Note 5)
Contributions to capital of - - - -
accrued wages to officers (Note
9)
Forgiveness of amounts owed by
Key Comm and Key Car to Keystone - - - -
for advances made (Note 8)
Warrants exercised (Note 9) - - 30,000 30
Shares issued in connection with
purchase of office building (Note 420,000 420,000 450,876 451
5)
Shares issued to consultants for - - 500,000 500
services (Note 9)
Shares issued to consultant to be - - 400,000 400
returned (Note 9)
Shares issued to Comtec in a - - 2,963,310 2,963
reverse acquisition (Note 4)
Shares issued to officers for - - 624,766 625
services (Note 9)
Shares sold in a private - - 40,000 40
placement (Note 9)
Net loss for the period from - - - -
inception to June 30, 1995
Balance at June 30, 1995 420,000 420,000 16,237,923 16,238
Issuance of common stock at $.25
per share for prepaid media - - 5,200,000 5,200
agreements (Note 11)
Issuance of common stock at $.25
per share in conjunction with
purchasing of majority interest
in unrelated entity - pending - - 4,900,000 4,900
approval (Note 5)
Contributions to capital of
accrued wages to officers - - - -
(Note 9)
Issuance of common stock for cash
at a price per share ranging from
$.11 to $.40 (Note 9) - - 2,638,683 2,639
Issuance of common stock in
satisfaction of debt at $.125 per
shares (Note 9) - - 1,230,097 1,230
Issuance of common stock in lieu
of compensation or in
satisfaction of accrued salaries
at a price per share ranging from - - 5,710,365 5,710
$.10 to $.18 (Note 8)
Issuance of common stock for
services at a price per share
ranging from $.11 to $.73 (Notes - - 5,382,186 5,382
8 and 9)
Net loss for the year ended June - - - -
30, 1996
Balance at June 30, 1996 420,000 $ 420,000 41,299,254 $41,299
</TABLE>
F - 6
Continued below
COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
(a Development Stage Enterprise)
Consolidated Statement of Changes in Stockholders' Equity
For the Period from Inception (March 15, 1994) through June 30, 1996
Continued from above
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Additional During the Prepaid Escrowed Stockholders'
Paid-in Development Media Shares Equity
<S> <C> <C> <C> <C> <C>
Balance at
inception $ - $ - $ - $ - $ -
Issuance of common
stock to Keystone
upon incorporation of
Key Comm and Key Car
(Note 4) (5,140) - - - 100
Issuance of common
stock to Keystone 254,011 - - - 260,000
upon purchase of
communication equipment
(Note 4)
Special distribution (260,100) (20,406) - - (280,506)
to shareholder of
Key Car (Note 5)
Contributions to 217,000 - - - 217,000
capital of accrued
wages to officers
(Note 9)
Forgiveness of amounts
owed by Key Comm 184,495 - - - 184,495
and Key Car to
Keystone for advances
made (Note 8)
Warrants exercised 29,970 - - - 30,000
(Note 9)
Shares issued in
connection with 337,705 - - - 758,156
purchase of office
building (Note 5)
Shares issued to 249,500 - - - 250,000
consultants for
services (Note 9)
Shares issued to (400) - - - -
consultant to be
returned (Note 9)
Shares issued to (233,872) - - - (230,909)
Comtec in a reverse
acquisition (Note 4)
Shares issued to 311,758 - - - 312,803
officers for
services (Note 9)
Shares sold in a 9,960 - - - 10,000
private placement
(Note 9)
Net loss for the period
from inception to - (1,148,332) - - (1,148,332)
June 30, 1995
Balance at June 30, 1,094,887 (1,168,738) - - 362,387
1995
Issuance of common
stock at $.25 per 1,294,800 - (1,300,000) - -
share for prepaid media
agreements (Note 11)
Issuance of common
stock at $.25 per
share in conjunction 1,220,100 - - (1,225,000) -
with purchasing of
majority interest in
unrelated entity -
pending approval
(Note 5)
Contributions to 24,100 - - - 24,100
capital of accrued
wages to officers
(Note 9)
Issuance of common
stock for cash at a 617,086 - - - 619,725
price per share ranging
from $.11 to $.40 (Note
9)
Issuance of common
stock in satisfaction 128,770 - - - 130,000
of debt at $.125 per
shares (Note 9)
Issuance of common
stock in lieu of
compensation or in 618,254 - - - 623,964
satisfaction of accrued
salaries at a price per
share ranging from $.10
to $.18 (Note 8)
Issuance of common
stock for services 1,150,902 - - - 1,156,284
at a price per share
ranging from $.11 to
$.73 (Notes 8 and 9)
Net loss for the year - (2,411,376) - - (2,411,376)
ended June 30, 1996
Balance at June 30, $6,148,899 $(3,580,114) $(1,300,000) $(1,225,000) $505,084
</TABLE>
F - 7
COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
(a Development Stage Enterprise)
Consolidated Statement of Cash Flows
For the Period from Inception (March 15, 1994) to June 30, 1995,
the Year Ended
June 30, 1996 and Cumulative Amounts from Inception (March 15,
1994)
through June 30, 1996
<TABLE>
<CAPTION>
Cumulative
June 30 Amounts from
1995 1996 Inception
<S> <C> <C> <C>
Operating activities
Net loss $(1,148,332) $(2,411,376) $(3,559,708)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 29,565 90,139 119,704
Issuance of stock for services 562,383 1,156,284 1,718,667
Changes in assets and liabilities
Receivables - (25,446) (25,446)
Prepaid expenses 5,000 4,500 9,500
Accounts payable and accrued expenses 225,482 845,661 1,071,143
822,430 2,071,138 2,893,568
Net cash used in operating activities (325,902) (340,238) (666,140)
Investing activities
Purchase of property, plant and
equipment and trade name (2,500) (70,248) (72,748)
Cash received in reverse acquisition 22,170 - 22,170
Purchase of non-operating assets, net - (25,000) (25,000)
Other 15,902 (95,404) (79,502)
Net cash provided by (used in)
investing activities 35,572 (190,652) (155,080)
Financing activities
Advances from related party 184,495 - 184,495
Proceeds from sales of common stock 10,000 619,725 629,725
Payments on notes payable and related
party notes (61,646) (80,291) (141,937)
Proceeds from short-term notes payable 151,000 - 151,000
Payments on long-term notes payable (1,783) (2,798) (4,581)
Proceeds from exercise of warrants 30,000 - 30,000
Net cash provided by financing
activities 312,066 536,636 848,702
Increase in cash 21,736 5,746 27,482
Cash, beginning of period - 21,736 -
Cash, end of period $ 21,736 $ 21,482 $ 27,482
Supplemental disclosures of non-cash
investing and financing activities
Purchase of building
Prepaid interest $ 10,000 $ - $ 10,000
Land 424,967 - 424,967
Building 1,456,403 - 1,456,403
Note payable (269,000) - (269,000)
Mortgage payable (972,000) - (972,000)
Preferred stock (592,720) - (592,720)
Common stock (338,156) - (338,156)
Special distribution 280,506 - 280,506
$ - $ - $ -
</TABLE>
During the period from inception (March 15, 1994) to June 30,
1995, the Company financed the acquisition of land and building,
and of communications equipment from officers of the Company
through the issuance of notes payable and issuances of common and
preferred stock. Additionally, the Company financed the
acquisition of an automobile and computer equipment from related
parties through notes payable.
During the year ended June 30, 1996 and the period from inception
(March 15, 1994) to June 30, 1995, the officers of Key Comm
relieved the Company from liability for accrued salaries of
$24,100 and $217,000 (Note 9).
Additionally, Keystone, an affiliated company, forgave amounts
owed by Key Comm and Key Car in the amount of $184,495 (Note 8).
During the year ended June 30, 1996, there were various other
noncash transactions involving conversions of debt and other
accrued liabilities to common stock (Notes 8 and 9).
Assets and liabilities acquired from Comtec in reverse
acquisition (Note 4):
<TABLE>
<CAPTION>
Cumulative
June 30, Amounts from
1995 1996 Inception
<S> <C> <C> <C>
Cash $ 22,170 $ - $ 22,170
Note receivable 35,000 - 35,000
Allowance for doubtful accounts (16,390) - (16,390)
Trade name 3,500 - 3,500
Accounts payable (60,246) - (60,246)
Accrued expenses (92,443) - (92,443)
Notes payable - related parties (70,000) - (70,000)
Short-term notes payable (52,500) - (52,500)
Common stock 230,909 - 230,909
$ - $ - $ -
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 42,196 $ 33,970 $ 76,166
</TABLE>
F - 7
COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Organization
Comtec International, Inc., (Comtec) was incorporated in New
Mexico on July 6, 1983 as Nisus Video, Inc., originally Comtec
was formed for the development, manufacture and sales of video
and photographic camera systems and related equipment. Comtec is
currently seeking opportunities to develop various
telecommunications services and products principally in the areas
of Specialized Mobile Radio (SMR), satellite teleport uplinks,
and traditional long distance voice and data communications.
Key Car Finance Company (Key Car) was incorporated in Colorado on
March 15, 1994 for the purpose of owning and renting land and a
building in Parker, Colorado to a single tenant. Key
Communications Group, Inc. (Key Comm) was incorporated in
Colorado on March 30, 1994 for the purpose of entering the
communications industry. The Company is considered to be in the
development stage. Key Car and Key Comm were both wholly owned
subsidiaries of Keystone Holding Corporation, Inc. (Keystone)
until May 10, 1995, at which time both entities were sold to
Comtec in a stock for stock exchange (Note 3).
During 1995, Comtec established a wholly owned subsidiary, CTI
Real Estate (CTI) to hold the Key Car property and its current
office building (Note 5). The land and buildings were
transferred to CTI during fiscal 1996.
These consolidated financial statements have been prepared on a
combined basis for the period from inception to May 10, 1995
since Key Comm and Key Car were wholly owned subsidiaries of
Keystone. The financial statements for the period from May 10,
1995 to June 30, 1996 have been prepared on a consolidated basis
and include the accounts of the Key Comm, Key Car, and CTI and
the accounts of Comtec from May 10, 1995, the date of the
acquisition (the Company). The Company also owns 100% of the
stock of Data Voice & Wireless, Inc. (DV&W) a Colorado
corporation formed on March 15, 1994. DV&W has had no activity
since inception. All significant intercompany accounts and
transactions have been eliminated in these consolidated financial
statements.
The period from inception (March 15, 1994) to June 30, 1995,
includes the activity of the Company from March 15, 1994 to June
30, 1995 as the activity from March 15, 1995 (inception) to June
30, 1994 is immaterial to the consolidated financial statements
taken as a whole.
Use of Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the assets'
estimated useful lives as follows:
Years
Building 30
Communications equipment 10
Automobile 5
Computer equipment 5
License Rights
Rights to develop SMR licenses are recorded at cost. To the
extent the licenses are developed, they are amortized over their
five year life. If the licenses are not developed, they are
expensed at the time the rights expire.
Loss Per Common Share
Loss per common share is based on the weighted average number of
common shares outstanding during each period. Common stock
equivalents are not considered as their effect is antidilutive.
Income Taxes
The Company calculates and records the amount of taxes payable or
refundable currently or in future years for temporary differences
between the financial statement basis and income tax basis based
on the current enacted tax laws.
Temporary differences are differences between the tax basis of
assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible
amounts in future years. The Company's temporary differences
result primarily from net operating loss carryforwards.
Reclassifications
Certain reclassifications have been made to the 1995 financial
statements to conform to the 1996 financial statement
presentation.
Accounting Standards Not Yet Adopted
Statement of Financial Accounting Standards No. 121 - Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of is effective for fiscal years beginning after
December 15, 1995. This Statement establishes standards for the
impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable
intangibles to be disposed of.
Statement of Financial Accounting Standards No. 123 - Accounting
for Stock-Based Compensation is effective for transactions
entered into after December 15, 1995. This Statement establishes
financial accounting and reporting standards for stock-based
employee compensation plans, including stock purchase plans,
stock options, restricted stock and stock appreciation rights.
Subject to the contingent finders fee option discussed at Note
11, management believes the adoption of these standards will not
have a material impact on the consolidated financial statements.
Note 2 - Continued Operations and Realization of Assets
The Company is in the development stage of operations and has not
yet commenced its planned principal operations. Accordingly, the
Company has lost approximately $3,600,000 since it undertook its
operations. Such losses have resulted in a working capital
deficiency of $1,300,149 and $856,182 of the Company's debt in
default (Note 7). To date, the Company's activities have
consisted primarily of raising capital through private
placements, seeking business opportunities and more recently
acquiring licensing rights and operating SMR frequency companies.
Management's current plans consist of acquiring additional
license rights and operating companies in order to develop the
licenses. Additionally, the Company is planning to raise
additional equity capital through private placements to fund the
acquisitions and development of licenses. There can be no
assurance that the Company will be successful in obtaining
additional licenses or existing operating companies or in raising
additional capital.
The consolidated financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
Note 3 - Bankruptcy and Subsequent Reorganization
A petition was filed November 14, 1985 placing Comtec in Chapter
11 Bankruptcy. On December 11, 1986 this petition was converted
to a Chapter 7 Bankruptcy which was converted to Chapter 11 on
July 27, 1989. On April 10, 1992, the Company emerged from
bankruptcy as a reorganized entity.
The Company has accounted for its Chapter 11 reorganization as a
quasi-reorganization and as such made the following adjustments
to its accounts:
The net result of settling the pre-petition unsecured
creditors' claims of $631,734 for $2,500 was credited to
accumulated deficit and the accumulated deficit of the Company
was eliminated by a charge to common stock at April 10, 1992.
Note 4 - Acquisition Agreement
On May 10, 1995, Keystone exchanged all of the common stock of
both Key Car and Key Comm to Comtec for 11,228,971 shares of
Comtec's common stock. Comtec and Keystone are related through
certain common stockholders and common management. The
acquisition has been accounted for as the acquisition by Key Comm
and Key Car of Comtec for 2,963,310 shares of common stock with
all assets recorded at historical cost and, therefore, the
consolidated financial statements include the accounts of Key
Comm and Key Car for all periods presented and the accounts of
Comtec from May 10, 1995, the effective date of the acquisition
for accounting purposes. All number of shares and per share
disclosures prior to May 10, 1995 have been restated to reflect
the share exchange rate inherentit in the reverse acquisition.
Note 5 - Purchase of Assets
On May 30, 1995, the Company purchased an office building from an
unrelated company. The purchase price of $1,499,156 consisted
the issuance of a note payable to the seller of $121,000, the
issuance of 420,000 shares of $1 per share stated value Series A
Convertible Preferred Stock, the issuance of 400,001 shares of
common stock valued at $300,000 ($.90 per share) to the seller,
the issuance of 50,875 shares of common stock to the real estate
broker for a commission of $38,156 ($.75 per share) and is
subject to an approximately $620,000 mortgage payable with
interest at 10.5%.
On June 17, 1994, Key Car purchased from its president, land and
a building for $672,720. The consideration to be paid consisted
of the assumption of a first mortgage of $352,000 to an unrelated
individual, the issuance of 172,720 shares of $1 stated valued
per share value preferred stock of Key Car and a note payable to
Key Car's president for $148,000 bearing interest at 16.5% with
the final payment due April 30, 1995 (Note 7). The preferred
stock is convertible into common stock of Key Car at the rate of
one share of common stock for each share of preferred stock. If
such preferred stock were converted to common stock, Key Car's
president would own approximately 95% of Key Car. This is
reflected as interest in the preferred stock of subsidiary in the
accompanying financial statements. Subsequent to year-end, Key
Car's president agreed to exchange his Key Car preferred stock
for 345,440 shares of common stock of Comtec valued at $.50 per
share. Key Car's president had entered into an agreement to
purchase the property on March 10, 1994 for $392,214 from an
unrelated individual. Therefore, for financial statement
purposes, this land and building is recorded at the president's
historical cost basis of $392,214 and the additional price paid
by Key Car of $280,506 was recorded as a special distribution.
On November 23 ,1994, Key Comm purchased communication equipment
from Keystone for 5,988,785 shares of Key Comm common stock
(valued at $260,000) and the assumption of a $40,000 note
payable. The asset has been recorded at Keystone's cost basis in
the asset of $300,000.
In August 1995, the Company acquired 185 unconstructed and non-
operational rights to manage and operate SMR frequency channels
for $25,000 cash and a $50,000 note payable (Note 7).
On July 31, 1995, Key Comm entered into an option agreement with
Mobile-One Communications, Inc. (Mobile-One) to acquire certain
SMR systems. Key Comm paid $50,000 for a two-month option and
was scheduled to pay an additional $125,000 by September 30, 1995
to extend the option for an additional two months. This payment
was not made and the option was allowed to lapse. During the
year ended June 30, 1996, the $50,000 option fee was expensed.
On January 24, 1996, the Company entered into a letter-of-intent
to acquire 61% of the outstanding common stock of Network
Teleports, Inc. in exchange for 4,900,000 shares of the Company's
common stock (including finders' fees). The shares are currently
being held in escrow pending the outcome of an audit of the
financial statements of Network Teleports, Inc. and FCC approval
of the transaction. Due to the complexities related to FCC
approval, the ultimate acquisition is not deemed probable at this
time. Accordingly, pro forma information is not presented.
On July 26, 1995, the Company entered into a definite agreement
to acquire 100% of the outstanding stock of a television and film
production company in exchange for 5166,667 shares of the
Company's common stock valued at $50,000 ($.09 per share),
$20,000 in cash and notes payable of $80,000. On October 11,
1996, the transaction was terminated. The Company anticipates it
will receive the issued stock back and is currently negotiating
additional terms of the termination. The transaction has been
revised in the June 30, 1996 consolidated financial statements as
a reduction to common stock outstanding for the shares to be
returned. If such stock is not ultimately returned, it will be
charged to expense.
Note 6 - Property and Equipment
Property and equipment consists of the following at June 30,
1996:
<TABLE>
<CAPTION>
<S> <C>
Land $ 424,967
Buildings and improvements 1,515,111
Communications equipment 300,000
Automobile 5,150
Computer equipment 17,364
2,262,592
Less accumulated depreciation (112,959)
$2,149,633
</TABLE>
Note 7 - Notes Payable and Long-Term Debt
Notes payable consisted of the following at June 30, 1996:
Related Party Notes Payable
<TABLE>
<CAPTION>
<S> <C>
10% notes payable, due to former officers, principal
and interest due December 2, 1995, unsecured. The $ 25,835
notes are in default (Note 11).
18% notes payable to an entity related to a former
officer/director personally guaranteed by a former
officer of the Company. Principal and interest due
June 1, 1994. The note is in default (Note 11) 40,000
$ 65,835
Short-Term Notes Payables
10% note payable - individual, principal and interest
due March 7, 1995. The note is in default. Interest
accrues at 21% on principal and interest in default an $ 35,000
is unsecured.
12% note payable - unrelated company, principal and
interest due October 6, 1995. The note is in default
and is secured by a second deed of trust on real
property with a net book value of approximately 50,000
$1,448,000 (Note 5).
9% notes payable to an unrelated company, principal
payments of $50,000 and $71,000 due July 30, 1995 and
September 30, 1995, respectively. Interest due on
September 30, 1995. Interest accrued at 15% on any
balance past maturity, secured by a second deed of
trust on the Key Car land and building and an 85,347
assignment of rents. The note is in default (Note 11).
Long-Term Debt $170,347
10.5% mortgage payable, payable $6,487 per month
including interest with a balloon payment due October
1, 1996, secured by an office building. The note is in $620,000
default (Note 11).
9% mortgage payable, principal and interest payments
payable at the rate of $2,832 monthly, balloon payment
due August 1, 2004, secured by land and building.
347,419
967,419
Less current portion
(622,835)
$ 344,584
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
June 30,
<S> <S>
1997 $ 622,835
1998 2,965
1999 3,243
2000 3,547
Thereafter 334,829
$ 967,419
</TABLE>
Note 8 - Related Party Transactions
On April 30, 1994, Key Car entered into a three-year management
agreement with an officer of the Company to provide services with
regards to managing the land and building owned by Key Car at the
rate of $2,500 per month. During the period from inception to
June 30, 1995, and the year ended June 30, 1996, Key Car expensed
$35,000 and $30,000 under this agreement, respectively. At June
30, 1996, no amounts were owed under this agreement.
During the period from inception to June 30, 1995, Key Car and
Key Comm were advanced a total of $184,495 from Keystone. During
April 1995, Keystone forgave the entire balance owed by Key Car
and Key Comm prior to Comtec's acquisition which is included as a
capital contribution in the accompanying consolidated financial
statements.
Effective June 1, 1994, the Company entered into a three-year
employment contract with Clifford S. Perlman to manage and direct
the operations of the Company, and to serve as the Company's
Chairman of the Board of Directors, Chief Executive Officer and
President, at an annual base salary of $120,000. At May 10,
1995, the Company and Mr. Perlman restructured the agreement for
the remaining two years. Mr. Perlman will serve as the chairman
at the Board of Directors and receive an annual based salary at
$60,000. Mr. Perlman will be entitled to 5% of the outstanding
common stock of the Company on June 20 for each year of the
employment contract.
Effective June 1, 1994, the Company entered into a one-year
consulting agreement with Steven B. Knudson to provide legal,
financial and management consulting services, at $75 per hour,
chargeable against a $3,000 per month retainer. Mr. Knudson will
also be entitled to receive 3.5% of the outstanding common stock
on a full diluted basis at all times for prior services
performed. In May 1995, Mr. Knudson resigned his position and
the contract was terminated.
Under the terms of the two aforementioned agreements, in addition
to the cash portion of the agreements the Company has agreed to
issue 624,766 and 1,666,368 shares of the Company's common stock
recorded as compensation expense of $312,383 and $281,949 during
the period from inception to June 30, 1995 and the year ended
June 30, 1996, respectively. In June 1995, the 624,766 shares
were issued. The 1,666,368 shares due at June 30, 1996 will be
issued subsequent to June 30, 1996. Additional shares can be
issued under the anti-dilution provisions of the agreement with
Mr. Perlman. As of June 30, 1996, $31,000 of accrued salaries
remain unpaid to Mr. Perlman under the agreement.
In October 1994, Key Comm also entered into a five-year
employment agreement with its president which is renewable for an
additional five-year period upon acceptance by Key Comm's
president. In December 1995, the Comtec entered into a three
yearCompany restructured its employment agreement with the
president. The new employment three year agreements along with a
three year management agreement allows for a $240,000$120,000
base salary plus $30,000 management fee (to be adjusted by the
Board of Directors) payable in cash or at the option of the
employee, in common stock at a price equal to 80% of the quoted
bid price on the date of the conversion. Additionally, the
agreement allows for certain cash and option bonuses based on the
performance and growth of the Company. No material bonuses have
been earned under the contract through June 30, 1996.
Throughout fiscal 1996 and subsequent thereto, the Company has
also entered into four, three year employment agreements with
key employees with base salaries ranging from $44,400 to $84,000.
All are payable in cash or common stock and certain agreements
contain bonus provisions similar to the president's agreement
mentioned above. No material bonuses have been earned under the
contracts through June 30, 1996. One key employee received a
signing bonus of 150,000 shares of common stock which were issued
and outstanding at June 30, 1996 resulting in an expense of
$27,000.
In connection with the employment agreements, the Company issued
5,710,365 shares of common stock to the offices and employees in
satisfaction of accrued salaries valued at $623,964.
Note 9 - Stockholders' Equity
Authorized Shares of Common Stock
On August 10, 1995, the stockholders of the Company approved an
increase in the authorized shares of stock of the Company to
50,000,000 shares with a par value of $.001 per share and
5,000,000 shares of preferred stock with a par value of $.001 per
share. All equity transactions have been restated to reflect the
par value of the common stock in the accompanying consolidated
financial statements.
Stock Option Plan
Effective September 17, 1993, the Board of Directors adopted an
incentive stock option plan (the Plan), which was subsequently
approved by the Company's stockholders at the special Meeting of
Stockholders held on December 31, 1993. The Plan provides for
the grant to the Company's employees, officers and/or directors
of stock options that qualify as incentive stock options under
Section 422A of the Internal Revenue Code of 1986, as amended.
The Plan provides for the grant of stock options to purchase up
to an aggregate of 3,000,000 shares of common stock, as amended.
Options may be granted for terms of up to three years options are
to be granted at exercise prices at least equal to the fair
market value of the Company's common stock at the date of grant
(110% of the fair market value in the case of options granted to
greater than 10% shareholders) options are subject to early
forfeiture upon termination of employment or other relationship
with the Company. The Plan terminates on September 16, 1998.
During September through November 1993, the company issued
options to certain officers and/or directors to purchase a total
of 500,000 shares of common stock exercisable at prices ranging
from $375 to $1.6875 per share. During June 1994, in conjunction
with the change in officers and directors, options representing
310,000 of such shares were forfeited. The Board of Directors of
the Company has elected to extend the exercise date of the
remaining options representing 190,000 of such shares,
exercisable at $1.375 per share, through May 10, 1995, at which
time the options expired. No other options have been granted
under the Plan.
Sales of Common Stock
During the period from inception to June 30, 1995 and for the
year ended June 30, 1996, the Company sold 40,000 and 2,638,683
shares of common stock for cash at prices ranging from $.11 to
$.40 per share.
Common Stock Issued for Services
During the period from inception to June 30, 1995, the Company
issued 500,000 shares of its common stock valued at $280,000 (an
average of $.56 per share) in exchange for services performed.
In addition, the Company issued 400,000 shares of common stock to
a company which was to perform certain services on behalf of the
Company. The services were not performed to the Company's
satisfaction and has asked for the return of the shares. The
consultant company has returned these shares.
During the year ended June 30, 1996, the Company issued 3,715,818
shares of common stock, to unrelated third parties for services.
The issuances were valued at prices ranging from $.11 to $.73 per
share.
Capital Contributions
During the period from inception to June 30, 1995 and the year
ended June 30, 1996, certain officers of the Company forgave
$217,000 and $24,100, respectively, of accrued salaries which are
recorded as capital contributions in the accompanying
consolidated financial statements.
Common Stock Issued for Debt
During the year ended June 30, 1996, the Company issued 1,230,097
shares of common stock in satisfaction of $130,000 of notes
payable, 700,000 shares of which were issued to an officer of the
Company for $70,000 of notes payable.
Exercise of Warrants
In connection with the bankruptcy reorganization, the Company
issued 860,999 of each "A", "B", and "C" warrants to certain
holders of the Company's common stock. The "A", "B", and "C"
warrants were exercisable at $.40, $1.00, and $2,00 per share
until April 12, 1993, April 10, 1994, (subsequently extended
until June 30, 1995) and April 10, 1995, respectively.
On April 12, 1993, the remaining 129,578 "A" warrants expired.
During the period from May 10, 1995 to June 30, 1995, 30,000 "B"
warrants were exercised providing $30,000, to the Company. As of
June 30, 1995, the remaining 545,558 "B" warrants and 860,999 "C"
warrants had expired.
Preferred Stock
The Board of Directors has designated 1,000,000 shares of
preferred stock as Series A Convertible Preferred Stock. The
Series A Convertible Preferred Stock is non-voting, has an issue
price and a liquidation preference of $1 per share and is
convertible into common shares of the Company at the closing bid
price of the Company's common stock on the date notice of
conversion is received; provided, however, that no conversion may
be made unless and until the closing bid price shall have reached
$10 per share for more than 20 consecutive trading days prior to
the date of conversion. The Company has the option to redeem the
Series A Preferred Stock at $1.00 per share. At June 30, 1996,
420,000 shares of Series A Preferred Stock were issued and
outstanding related to the acquisition of the office building
described in Note 5.
The Board of Directors has designated 1,500,000 shares of
preferred stock as Series B Convertible Preferred Stock. The
Series B Convertible Preferred Stock is non-voting, has an issue
price and liquidation preference of $5 per share, subordinate to
the $1 liquidation preference of the Series A Convertible
Preferred Stock, and is convertible into one share of common
stock shares of the Company at the closing bid price of the
Company's common stock on the date notice of conversion is
received, provided, however, that no conversion may be made
unless and until the closing bid price shall have reached $7.50
per share for more than 20 consecutive trading days prior to the
date of conversion. The holders are due a cumulative annual
dividend equal to 10% of the issue price of the Series B
convertible Preferred Stock, as calculated on June 30 of each
year. The Company has the option to redeem the Series B
Convertible Preferred Stock at $5 per share. At June 30, 1996,
no Series B Convertible Preferred Stock was outstanding.
The Board of Directors has designated 1,500,000 shares of
preferred stock as Series C Redeemable Convertible Preferred
Stock. The Series C Redeemable Convertible Preferred Stock is
non-voting, has an issue price and liquidation preference of $10
per share, subordinate to the $1 and $5 liquidation preferences
of the Series A convertible Preferred Stock and the Series B
Convertible Preferred Stock , respectively, and is convertible
into common share of the Company at the closing bid price of the
Company's common stock on the date of their notice of conversion.
The Company has the option to redeem the Series C Redeemable
Convertible Preferred Stock at $10 per share. Subsequent to June
30, 1996, the Company issued 180,000 39,767 shares of Series C
Redeemable Convertible Preferred Stock in connection with the
acquisition of DCL (Note 12).
Note 10 - Income Taxes
As of June 30, 1996, total deferred tax assets, liabilities and
valuation allowance are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets resulting from net
operating loss carryforwards $1,248,000
Valuation allowance (1,248,000)
$ -
</TABLE>
Certain of the Company's net operating losses are subject to
annual limitations on the amount that may be deducted. At June
30, 1996, the Company had net operating loss carryforwards of
approximately $3,670,000 which, will expire through 2011.
Note 11 - Commitments and Contingencies
Employment Agreements
In October 1994, Key Comm entered into two three-year employment
agreements with two former officers which contain self-renewing
terms, subject to the option of the Company to terminate the self-
renewing provision near the end of each term. The agreements
provide severance benefits under certain conditions, of either
one times annual salary payable upon termination of employment or
the annual salary payable upon termination of employment or the
remainder due under the agreement. The aggregate estimated
contingency under these agreements at June 30, 1995 is $260,000.
The agreements also contain a non-compete clause which requires
the former officer employee to pay Key Comm liquidated damages of
$75,000 each if the clause is violated. During December 1995,
these two officers employees were terminated by Key Comm
allegedly for cause. As of June 30, 1996, these two former
officers employees were owed $25,835 for notes payable and
$62,450 for accrued wages which are accrued in the accompanying
consolidated financial statements.
In September 1996, the former employees filed suite for non-
payment on the notes and for accrued wages with a response from
the Company is an answer due November 5, 1996.
Lease Agreement as Lessor
On December 1, 1994, Key Car entered into a two-year lease with
an unrelated individual, leasing the land and building as a used
car lot. The tenant was granted an option to purchase the land
and building for $500,000 through November 30, 1996 subject to
the payment of certain minimum option payments which would be
applied against the purchase price. As of June 30, 1996, $20,000
was received as an option payment. Minimum future rentals due
Key Car under the lease for June 30, 1997 is $19,311.
Property held for lease:
<TABLE>
<CAPTION>
<S> <C>
Land and building $ 392,214
Less accumulated depreciation (15,875)
$ 376,339
</TABLE>
Advertising Agreement
On December 13, 1995, the Company entered into a three-year Media
Purchase Agreement with a privately held company. The Company
issued 5,200,000 shares of common stock valued at $1,300,000
($.25 per share) for a partially prepaid purchase order for
$1,950,000 worth of media advertising. As the Company purchases
advertising, it must pay one-third of the price in cash and the
remaining two-thirds is paid for by the privately held company.
In addition, the Company has granted an option to purchase
1,000,000 shares of the Company's common stock at $.25 per share
exercisable for five years. The $1,300,000 value of the common
stock issued for future services is included as a reduction to
stockholders' equity at June 30, 1996.
Consulting Agreement
During fiscal 1996, the Company entered into a six month
agreement with an unrelated company to raise equity for the
Company or identify certain acquisition candidates. Under the
terms of the agreement, the company is to receive 1,000,000
shares of the Company's common stock and a five year option to
acquire 5,000,000 shares of common stock with the following
terms:
1,000,000 shares at $1.50 when the Company's stock trades
for $3.00 for 20 consecutive days
2,000,000 shares at $2.00 when the Company's stock trades
for $3.50 for 20 consecutive days
2,000,000 shares at $2.50 when the Company's stock trades
for $4.00 for 20 consecutive days
Additionally, the company could receive common stock based on
terms related to equity financing it arranges. During the term
of the consulting agreement, the company identified Network
Teleports, Inc. as a potential acquisition candidate (Note 5) and
as a result, the Company has escrowed 1,000,000 shares for the
finders fee contingent on the completion of the acquisition.
Upon completion, the company will receive the above mentioned
option to acquire 5,000,000 shares of common stock. No additional
compensation was earned by the company under the contract before
its expiration.
Stock Valuation Guarantees
The Company issued value guarantees to two purchasers of common
stock to issue shares equal to the difference between the cash
price per share at the date of acquisition and $.20 per share.
The Company has not issued the shares as the individuals are
currently in litigation with the Company as discussed below. The
maximum shares the Company would have to issue is 566,667 shares.
Litigation
In December 1995, several noteholders filed a complaint for
involuntary dissolution and for appointment of a receiver of
Comtec. On January 4, 1996, one of the plaintiffs was in fact
appointed as receiver of Comtec, however, that order was vacated
by the court on January 12, 1996. The Company has filed a
counter claim against the plaintiff in the original case. No
determination can be made at this time as to the potential range
of settlement or the likelihood of a favorable outcome to Comtec.
The case is scheduled for jury trial in September 1997.
Additionally, the plaintiff has also filed for foreclosure of its
deed of trust on the Company's commercial property located in
Parker Park, Colorado, based on the Company's failure to pay
monthly payments to the plaintiff. The property secured the
Company's obligations on the Company's main office building,
which was purchased from the plaintiff on March 30, 1995 (Note
5). Foreclosure is scheduled for November 4, 1996. The Company
is attempting to cure the default which is estimated to be
approximately $104,000 to stop the foreclosure action.
Comtec filed an action to evict a builder, who was occupying
space in the building owned by Comtec, for nonpayment of rent.
The builder was also the contractor for tenant finish work
performed to the building owned by Comtec. The builder counter-
sued Comtec for amounts allegedly owed for tenant finish on the
property. Management believes that it is remote that the builder
would be awarded any material amount in this litigation. The
case is scheduled for trial on October 20, 1997.
A suit was filed on September 30, 1996 alleging that the Company
breached the terms of a consulting agreement. The Company is to
respond by November 5, 1996.
A suite was filed on September 30, 1996 alleging nonpayment of a
promissory note in the principal amount of $35,000 plus interest
which is included in the accompanying consolidated financial
statements. The Company is to respond by November 5, 1996.
Share Repurchase
At June 30, 1996, the number of shares of common stock
outstanding along with the following:
Shares issued subsequent to June 30, 1996
The Series A Convertible Ppreferred Sstock conversion
features
The options outstanding on the media contract and the
finders fee
The conversion of the Key Car preferred stock to Comtec
common stock
The contingent shares under the value guarantees
The return of the shares issued in conjunction with the
terminated acquisition
Conversion of Key Car preferred stock to common stock
Shares to be issued in subsequent acquisition of DCL
Shares reserved for the Company's incentive stock option
plan
Exceed the total authorized common stock by 11,352,8984,226,024
shares. Should the above transactions occur, the Company would
be required to repurchase 11,352,8984,226,024 shares in the open
market. The average bid/ask price per share as of October 11,
1996 is $.85 per share resulting in a contingent liability of
approximately $9,649,963 as of June 30, 1996.
On March 29, 1996, the Board of Directors approved a common stock
reverse split in an amount to be determined by the Board.
Additionally, On October 25, 1996, the Board of Directors
approved an increase in the number of authorized shares of common
stock from 50,000,000 to 100,000,000. The stockholders of the
Company have not approved these transactions with a proxy
statement expected to be sent in the second quarter of fiscal
1997.
Note 12 - Subsequent Events
License Acquisition
On April 29, 1996, Comtec executed an acquisition agreement with
DCL Associates, Inc. (DCL) to purchase options to approximately
2,4502,435 SMR licenses currently under management agreements
with DCL for approximately$500,000 $150,000 cash, $700,000
$1,400,000 of common stock and 180,000 39,767 shares of Series C
rRedeemable cConvertible pPreferred sStock (Series C) stated
value of $1,800,000 approximately $400,000. The Series C have
mandatory redemptions in one-third increments at closing, and
every six months after until fully redeemed. On August 6, 1996,
the Company released from escrow $149,127, which amount
represents the cash portion of the agreement which is due at
closing and has subsequently issued 2,800,000 shares of common
stock in satisfaction of $700,000 of the common stock portion and
all 39,767 shares of Series C Redeemable Convertible Preferred
Stock . The Company is proceeding with the issuance of the
Company's common stock and preferred stock as the remaining
closing obligation to finalize this acquisition. Subsequent to
August 6, 1996, approximately 1,05500 of the licenses expired.
Private Placement Offering
In September, the Company entered into a best efforts agreement
with an underwriter to sell 1,000,000 units, each unit consisting
of one share of Series B convertible preferred stock and one
common stock warrant, for $5.00 per unit in a private placement
offering. Each warrant will entitle the holder to purchase one
share of the Company's common stock at $3.00 per share for a
period of two years. Sixty days after the offering, the Company
can redeem the warrants at $.001 per warrant with 30 days written
notice. There is no assurance the Company will be successful in
completing the private placement.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 27,482
<SECURITIES> 0
<RECEIVABLES> 25,446
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,538
<PP&E> 2,149,633
<DEPRECIATION> 112,959
<TOTAL-ASSETS> 2,377,075
<CURRENT-LIABILITIES> 1,354,687
<BONDS> 0
0
420,000
<COMMON> 41,299
<OTHER-SE> 463,785
<TOTAL-LIABILITY-AND-EQUITY> 2,377,075
<SALES> 0
<TOTAL-REVENUES> 54,544
<CGS> 0
<TOTAL-COSTS> 2,302,796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163,124
<INCOME-PRETAX> (2,411,376)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,411,376)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
