UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from
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.)
9350 East Arapahoe Road, Suite 340, Englewood, Co. 80112
(Address of principal executive offices)
(303) 662-8373
(Issuer's Telephone Number Including Area Code)
Common Stock, $.001 par value
-----------------------------
(Title of Class)
Former address: 10855 East Bethany Drive, Aurora, CO 80014
-----------------------------------------------------------
(former name, former address and former fiscal year if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
---- -----
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed by
a court.
Yes X No
----- ----
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practical date:
As of September 24, 1998, 42,703,700 shares of Common Stock ($.001
par value) were outstanding
Transitional Small Business Disclosure Format (check one):
Yes No X
---- -----
<PAGE>
TABLE OF CONTENTS
FORM 10-QSB REPORT - FOR QUARTER ENDED SEPTEMBER 30, 1997
ComTec International, Inc.
PART I
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1997 (unaudited)
and June 30, 1997 (audited) 3
Condensed Consolidated Statements of Operations 4
Three Months ended September 30, 1997 and 1996
and from inception (unaudited)
Condensed Consolidated Statements of Cash Flows 5
Three Months ended September 30, 1997 and 1996
and from inception (unaudited)
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
or Plan of Operation 7
PART II
Item 1. Legal Proceedings 11
Item 2. Change in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a vote
of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibit and Reports on Form 8-K 12
SIGNATURE PAGE 13
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<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Consolidated Condensed Balance Sheets
<CAPTION>
September 30, 1997 June 30, 1997
(unaudited) (audited)
------------------ -------------
<S> <C> <C>
Assets
Current Assets
Cash and equivalents
(includes restricted funds
of $78,600) $ 144,750 $ 630,000
Accounts Receivable, less allowance
For doubtful collections of $250,000 158,018 127,100
Other current assets 35,820 -
Investment in Marketable securities 248,400 248,400
------------------ -------------
Total Current Assets 586,988 1,005,500
------------------ -------------
Property and Equipment, net 264,612 275,500
Investments - Other 101,600 -
Other Assets 48,518 40,000
------------------ -------------
Total Assets $ 1,001,718 $ 1,321,000
================== =============
LIABILITIES
Current Liabilities
Convertible Debenture 1,000,000 1,000,000
Notes Payable 70,000 110,000
Accounts Payable 516,964 504,000
Accrued Liabilities 449,056 482,700
----------------- -------------
Total Current Liabilities 2,036,020 2,096,700
----------------- -------------
STOCKHOLDER'S DEFICIT
Common Stock, .001 par value;
Authorized 100,000 shares;
13,194,751 shares issued
June 30, 1997 and September 30, 1997
September 30, 1997 13,200 13,200
Capital in Excess of Par 7,910,100 7,910,100
Unrealized loss in marketable securities - (3,600)
Deficit accumulated during the
development stage (8,957,603) (8,695,400)
------------------ -------------
Total Shareholder Deficit (1,034,302) (775,700)
------------------ -------------
Total Liabilities and
Stockholders Deficit $ 1,001,718 $ 1,321,000
================== =============
</TABLE>
-3-
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Consolidated Condensed Statements of Operations
<CAPTION>
For the Three Months Ended
September 30, 1997 September 30, 1996 Cumulative
(unaudited) (unaudited) Amounts from
Inception
(unaudited)
------------------ ------------------ ------------
<S> <C> <C> <C>
Expenses
Selling, General and
Administrative 285,527 316,485 2,691,227
Compensation in the
form of common stock 3,502,300
Management fees-
related party 15,328 65,000
Loss before other
income (expense) 285,527 331,813 6,258,527
------------------ ------------------ ------------
Other Income (expense)
Interest and
Dividend Income (701) 5,599
Interest expense 6,500 (348,100)
Rental and Other Income 69,551 132,700
Prepaid Calling Card
services, less revenues (5,905) (520,705)
Loss on investments,
foreclosures and disposals 23,471 (648,129)
Write-down of intangible (1,300,000)
------------
Total Other Income
(Expense) 23,365 69,551 (2,678,635)
----------------- ------------------- ------------
Net Loss (262,162) (262,262) (8,937,162)
================= =================== ============
Weighted Average Common
Shares Outstanding 8,857,079 9,352,626 5,274,501
================= =================== ============
Net Loss per Common Share (0.03) (0.03) (1.76)
================= =================== ============
</TABLE>
-4-
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Consolidated Statements of Cash Flows
<CAPTION>
For the Three Months Ended
September 30, 1997 September 30, 1996 Cumulative
(unaudited) (unaudited) Amounts from
inception
(unaudited)
------------------ ------------------ ------------
<S> <C> <C> <C>
Operating activities:
Net Loss (262,162) (262,262) (8,937,162)
================== ================== ============
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Depreciation expense 10,859 22,534 212,359
Services and Interest
exchanged for stock 2,861,200
Write Down of Intangible 1,300,000
Losses on investments,
foreclosure and disposal 497,600
Changes in assets
and liabilities:
Accounts receivable (30,918) (53,989) (183,418)
Deposits and other (101,600) (104,100)
(Increase) decrease
in other current assets (35,820) (5,240) (24,720)
Increase (decrease) in
account payable &
liabilities (24,680) (23,647) 1,704,620
Net cash used in
operating activities (444,321) (322,604) (2,673,621)
================== ================== ============
Investing activities:
Proceeds from acquisition 22,100
License rights (150,000)
Marketable securities (250,000)
Non-Operating assets (75,000) (25,000)
Related Party (39,000)
Purchase of property,
plant and equipment (32,698) (291,300)
Restricted cash -
Decrease in note receivable -
SMR Management contracts -
Cash paid in acquisition -
Other (929) (4,640) (80,429)
Net cash used in
investing activities (929) (37,338) (813,629)
================== ================== ============
Financing activities:
Advances from related
party 184,500
Proceeds: private place
of common stock 422,329 1,138,900
Proceeds: short term notes 82,450 151,000
Warrants 30,000
Convertible Debentures 2,500,000
Payments on notes payable (40,000) (367,800)
Payment on long-term
notes payable (4,600)
Net cash provided by
financing activities (40,000) 504,779 3,632,000
================== ================== ===========
Increase (Decrease) in cash (485,250) 69,837 144,750
================== ================== ===========
Beginning cash balance 630,000 27,482 -
------------------ ------------------ -----------
Ending cash balance 144,750 97,319 144,750
================== ================== ===========
</TABLE>
-5-
<PAGE>
ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Notes to the Consolidated Financial Statements
Note 1.
a) The summary of the Issuer's significant accounting policies are
incorporated by reference to the Company's SEC Form 10-KSB as of June 30,
1997. The notes to the audited financial statements presented with the
Company's SEC Form 10-KSB as of June 30, 1997 are an integral part of the
audited balance sheet data presented herein.
b) The accompanying unaudited condensed financial statements reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of operations, financial position and cash flows.
The results of the interim period are not necessarily indicative of the
results for the full year.
Note 2.
On March 28, 1997 the Shareholders of the Company approved a proposal to give
the Company's Board of Directors authority to institute a reverse stock split
of from 3 for 1 to 100 for 1 at the discretion of the Board of Directors until
December 31, 1997. On December 26, 1997 the Board of Directors of the Company
acted pursuant to shareholder authority granted at the Annual Meeting of
Shareholders held March 28th, 1997, to declare a one for five reverse stock
split of the Company's .001 par value common stock effective 12:01 A.M.
January 31st, 1998. All share data and per share data is stated to reflect
the reverse stock split.
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Overview
- --------
ComTec international Inc. was incorporated on July 6, 1983 in
the State of New Mexico, originally under the name of Nisus Video,
Inc. The Company has undergone many changes to date as a result of
certain reorganizations and recent change of management.
Historical changes are more fully disclosed in prior 34 Act filings
and the most recent changes, including changes in management are
described in the Company's 10-KSB for the year ended June 30, 1997.
The Company is currently authorized to issue 100,000,000 common
shares, $0.001 par value and 10,000,000 preferred shares, $0.001
par value. The Company has one wholly owned operating subsidiary,
American Wireless Network, Inc. ("AWN") and three inactive
subsidiaries.
On March 28, 1997 the Shareholders of the Company approved a
proposal to give the Company's Board of Directors authority to
institute a reverse stock split of from 3 for 1 to 100 for 1 at the
discretion of the Board of Directors until December 31, 1997. On
December 26, 1997 the Board of Directors of the Company acted
pursuant to shareholder authority granted at the Annual Meeting of
Shareholders held March 28th, 1997, to declare a one for five
reverse stock split of the Company's .001 par value common stock
effective 12:01 A.M. January 31st, 1998. All share data and per
share data is stated to reflect the reverse stock split.
On December 3, 1996 the Company formed American Wireless
Network, Inc., a wholly owned subsidiary of the Company to pursue
opportunities in the Specialized Mobile Radio (SMR) industry. AWN
currently operates SMR sites in seven Metropolitan Trade Areas
("MTAs") in the southeastern U.S.A., utilizing specialized mobile
radio licenses purchased from Centennial Communications Corp. in a
transaction that closed on July 6, 1998.
(a) Plan of Operation:
Forward-Looking Statements
--------------------------
The foregoing and subsequent discussion contains certain
forward-looking statements within the meaning of Section 27A of the
Securities A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are intended to be covered
by the safe harbors created thereby. These forward-looking
statements include the plans and objectives of management for
future operations, including plans and objectives relating to the
possible further capitalization and additional acquisitions of
wireless communications license and operating companies. The
forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties.
Assumptions relating to the foregoing involve judgments with
respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes
that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking
statements included in this Form 10-QSB will prove to be accurate.
In light of the significant uncertainties inherent in the forward-
looking statements included herein, the inclusion of such
information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
(a) Plan of Operation:
Since May 10, 1995, the Company's strategic business plan has,
aside from terminated venture in the LED screens and the divested
TTI prepaid phone card investment, been concentrated on wireless
telecommunications. Currently, the Company's only business is the
recently commenced operation of basic two-way communications
services. The Company has been and continues to be in the
development stage. The Company remains in the development stage
and from inception (March 15, 1994) has only generated auxiliary
revenues to defray the cost of its planned operations, with only
limited success in implementing actual operations. The Company has
financed its operations during the development stage from the sale
of its common stock and from issuance of short and long-term debt.
-7-
<PAGE>
During the quarter ended September 30, 1997 and through the
present the Company continued as a developmental stage entity
focused on developing its wireless SMR business plan. During the
quarter ended September 30, 1997, activities consisted of
developing the Company's strategic business plan, efforts to
acquire other entities and operations, developing a management and
support staff and maintaining reporting compliance for various
federal government agencies, such as the SEC and FCC. The
Company's most significant accomplishment to date is the action of
its current management in completing the closing on July 6, 1998 of
the purchase of thirteen operating SMR systems located in seven
southeastern U.S.A. Metropolitan Trade Areas.
Current Status and Operations
As a result of negotiations which began in the quarter ended
September 30, 1997, on December 5, 1997 AWN completed the initial
phase of a purchase agreement whereby AWN purchased seven operating
SMR systems for $3,035,697. The wireless communications assets and
associated business acquired from Centennial Communications Corp.
lay within the following seven MTAs: Birmingham, Alabama;
Knoxville, Tennessee; Memphis, Tennessee; Nashville, Tennessee; New
Orleans, Louisiana; Oklahoma City, Oklahoma; Tulsa, Oklahoma.
The recently acquired systems are relatively new. The 105
operating channels had approximately 1400 subscribers, generating
recurring monthly revenues of approximately $20,000 on the purchase
date. These operating systems have a total of 13 sites, 105
constructed channels and cover seven (7) of the 51 MTA's, including
nine cities located in four southeastern United States,
encompassing a total population of 17.4 million, of which the seven
(7) systems are presently capable of covering approximately 5.9
million pops. Since December, 1997 AWN has had possession and
management of the wireless communications assets and associated
business previously owned by Centennial Communications Corp.
serving the above locations.
At present AWN operates its seven SMR communications systems
from its office in Englewood, Colorado. The Company has very
limited staff and currently relies upon contracted technical
support for repairs and maintenance. AWN's SMR communication
services are sold to individual customers through an independent
dealer network of local two-way radio communications equipment
vendors ("Dealers"). These Dealers are paid a commission or given
a usage fee discount for customers who use AWN spectrum and the
Dealers maintain the local relationships with the customers. AWN
acts as the direct billing provider of SMR communications to the
customer base provided by the Dealers. Under the present
operation, AWN is responsible for local telephone lines, equipment
maintenance, tower site rentals, customer loading, coding and
billing and all customer service and financial relationships. AWN
also has all responsibility for maintaining its SMR licenses,
making payments to the FCC on its licenses and funding all
equipment additions and system improvements. Under present
operation and level of usage, expenses of operating the system
significantly exceed revenues from the systems.
The capacity of the Company's SMR communications systems to
carry users (customers) is only utilized to approximately ten
percent of capacity. AWN is undertaking a campaign to find a
compatible joint venture partner who would have the potential to
utilize and merchandize the systems to a much greater extent than
the Company is able to do. Such and arrangement, if achieved would
also shift operations and associated costs of operations and
marketing to an existing SMR operating entity or entities on a
joint venture basis.
New Funding Efforts:
The Company is pursuing debt funding of up to $200,000,000 from
sources referred to it by certain foreign shareholders. The
purpose of such funding, if obtained, would be restricted in use,
requiring the purchase of assets or operations located within the
USA with sufficient positive cash flow to service the debt. The
conditions of such funding, if achieved, would include loan fees of
10% of the amount of the loan and require the issuance of up to
twenty percent of the equity of the Company to the lenders. The
Company has no commitment or other agreement which would entitle it
to receive such funding. No assurance can be given that this or
other debt or equity funding will be obtained.
Pending Acquisitions:
Currently there are no letters of intent or other formalized
agreements to acquire any entity or assets. The only acquisition
which the Company has accomplished to date is the purchase
completed July 6, 1998, whereby AWN purchased seven operating SMR
systems for $3,035,697. from Centennial Communications Corp.
-8-
<PAGE>
(b) Liquidity and Capital Resources
The Company reported a net loss (unaudited) of $262,162 for
the quarter ended September 30, 1997 and has reported net losses
from inception (March 15, 1994) to September 30, 1997 of
$8,937,162. The Company had deficient working capital at
September 30, 1997 of $1,449,032. As of September 30, 1997, the
Company reported deficient equity of $1,034,302. To date, these
losses and cash flow deficiencies have been financed principally
through the sale of common stock and warrants and issuance of short
and long-term debt which includes related party debt. Additional
capital and/or borrowings will be necessary in order for the
Company to continue in existence until attaining profitable
operations. Although a portion of convertible debt was liquidated
through the issuance of common stock, no assurances can be given
that the sources of borrowings would continue. The Company is
highly leveraged and a number of developments over the past quarter
had material adverse effects on the Company. The Company has a
significant investment in license rights obtained through the
acquisition of assets from Centennial Communications, Corp., the
recoverability of which is dependent upon the success of future
events.
AWN has acquired ownership and management of 105 operating
channels of 900 MHz Metropolitan Trade Area licenses, principally
in the southeastern United States. It is the intent of the
Company's management that meaningful operations can be generated
through AWN and thereby take the Company out of the development
stage. Management has developed a strategic business plan to raise
private financing, develop a management team, maintain reporting
compliance, seek new expansive areas in communications and develop
a wholesale market in analog SMR. As part of its plan to resolve
the lack of liquidity, the Company issued approximately 19,683,331
common shares liquidate $2,600,000 of convertible debentures in
March of 1998. The Company's inactive or dispossessed
subsidiaries were principally in the telecommunication business
except for AmNet Resources, Inc., which held real property. TTI
was in the business of reselling long distance service through
prepaid phone cards. TTI became operational in February, 1997 and
ceased operations on December 2, 1997, due to excessive losses.
This operation only provided auxiliary revenues and did not take
the Company out of the development stage. International Media
Group, Ltd. (" IMG") was formed to operate and market advertising
media through the use of giant LED screens, IMG is currently
inactive after incurring substantial expenditures in attempting to
utilize and operate the screens. The Company's management has
determined to liquidate the LED screens.
From October 1, 1998 to the end of fiscal year ended June 30,
1999, the Company estimates its cash needs to maintain operations
under its current negative cash flow situation is approximately
$450,000. This amount is composed of $450,000 for working capital
assuming that current operations continue in its present status.
These amounts include offsets for anticipated amounts of cash
generated from the current operations.
The Company has limited capitalization and is dependent on the
proceeds of private or public offerings to continue as a going
concern and implementing a business plan. As of September 30,
1997, the unaudited results of the Company indicated assets of
$1,001,718 and deficit working capital of $1,449,032. All during
fiscal 1997 and to the date of this filing, the Company has had and
continues to have a substantial need for working capital for normal
operating expenses associated with the Company continuing as a
going concern. This lack of cash has slowed its ability to develop
SMR assets and initiate revenue producing operations. Any activity
in the wireless industry requires adequate financing and on-going
funding sources. The Company has entered this industry with
limited financing and funding sources.
At September 30, 1997 (unaudited), the following contingent
stock issue requirements and warrants were outstanding:
Shares reserved for the Company's incentive stock option
plan (900,000)
Shares reserved for issuance in accordance with
outstanding warrants issued June 30, 1997 (4,242,923)
exercisable at $4.50 per share, expiring June 30, 2000.
Shares committed for issue with respect to purchase of
LED Screens (5,000,000)
Shares reserved for contingent issue with respect to
$1,000,000 convertible debt (2,083,333)
Shares reserved for contingent issue with respect to
contingent warrants associated with convertible debt and
LED Screens (7,083,333)
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<PAGE>
During quarter ended September 30, 1997, the Company continued
as a development stage enterprise. The Company's financial
statements are therefore not indicative of anticipated revenues
which may be attained or expenditures which may be incurred by the
Company in future periods. The Company's ability to achieve
profitable operations is subject to the validity of its assumptions
and risk factors within the industry and pertaining to the Company.
No revenues were generated from the Company's wireless
business during the quarters ended September 30, 1996 or 1997. For
the quarter ending September 30, 1997, the Company recorded "other
income" of $23,365 as a result of adjustments to previously
recorded foreclosure losses. For the quarter ending September 30,
1996, the Company recorded other income of $69,551. During the
September 1996 quarter, the Company recorded rental income from the
commercial property in Parker and Aurora Colorado. Both of these
properties were forfeited in foreclosures during the year ended
June 30, 1997. During September 30, 1996, the Company recorded
proceeds of $50,000 from a favorable settlement of a lawsuit by Key
Communications, a wholly-owned subsidiary of the Company.
For the quarter ending September 30, 1997, the Company
incurred General and Administrative Expenses of $285,527, a
decrease of $46,286 from the quarter ending September 30, 1996,
when the Company incurred expenses of $331,813. The largest
expense item, officer's compensation, increased $22,500 from the
prior year quarter. For the quarter ending September 30, 1997, the
Company's incurred officers compensation expense of $81,500 paid to
two individuals who are no longer associated with the Company. For
the quarter ending September 30, 1996, the Company's incurred
officers salaries expense of $59,000. The Company's Quarter ended
September 30, 1997 financial statements reflect adjustments and
nonrecurring items of both revenue and costs, as well as
development stage costs and are not indicative of anticipated
revenues which may be attained or expenditures which may be
incurred by the Company in future periods.
The Company has undergone a complete change in management over
the past year. Since October, 1997 the Company has undergone
management restructure to the extent that the no Director, Officer
or Management Executive associated with the Company as of the
6/30/96 10KSB is now associated with the Company. Since October,
1997 several new management executives have joined the ComTec
International, Inc. organization. James J. Krejci, MBA, formerly
a top executive with Jones Intercable, Inc./Jones International,
Ltd. associated companies was named CEO of AWN and COO of the
Company in February, 1998. Michael Bunch, a CPA and MBA, became the
organization's controller in tandem with the appointment of Gordon
Dihle, as CFO and as a Company Director in the initial management
restructure which took place in October, 1997 following the
resignation of Clifford S. Perlman. As a result of the Special
Meeting of Shareholders held August 26, 1998, Donald G. Mack and
Daniel Melnick were removed as Directors of the Company. In the
same special shareholders meeting, James J. Krejci and Gordon D.
Dihle were elected to the Company's Board of Directors until the
next annual meeting of the Shareholders. As of August 26, 1998 the
Company's Board of Directors consisted of J. Kent Millington
(appointed May 8, 1998), James J. Krejci and Gordon D. Dihle. J.
Kent Millington who was appointed May 8, 1998 resigned from the
board of directors effective September 2, 1998. At a Special Board
of Directors meeting held September 2, 1998, the following officers
were appointed by the Board of Directors: James J. Krejci as
President, CEO and Chairman of the Board of Directors and Gordon D.
Dihle as Secretary and Treasurer.
-10-
<PAGE>
Part II
ITEM 1. LEGAL PROCEEDINGS
On September 14, 1998 the Company received by certified mail
a Complaint filed in Superior Court of California, County of San
Diego, Case No. 723581 entitled John Brent, et al vs. ComTec
International, Inc., a New Mexico corporation, et al Defendants.
The Complaint by seven named Plaintiffs alleges securities fraud,
improper sale of unregistered securities, and stock manipulation
against the Company and five individual defendants who were former
officers and/or directors of the Company, none of whom are
currently associated with the Company. The Company believes that
it has meritorious defenses and will vigorously defend against the
allegations of the Complaint. Due to the very recent notice of the
matter, further information is not available. The Company's answer
or other response is due approximately October 15, 1998.
Except for the foregoing, no non course of business or other
material legal proceedings, to which the Company is a party or to
which the property of the Company is subject, is pending or is
known by the Company to be contemplated.
ITEM 2. CHANGE IN SECURITIES. NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE
ITEM 5. OTHER INFORMATION
(a) CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND DISCLOSURE
On July 14, 1997 the Company accepted the resignation of
Ehrhardt, Keefe, Steiner and Hottman as the Company's
independent Certified Public Accountants for the fiscal
year ended June 30, 1997. The Company duly reported this
change in accountants to the Securities and Exchange
Commission in its Form 8-K current report dated July 18,
1997. During the year end June 30, 1996 and the
subsequent interim periods, there was no disagreement with
Ehrhardt, Keefe, Steiner and Hottman 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 July 14, 1997 the Company retained Hixson, Marin,
Powell & DeSanctis, P.A. of Miami, Florida as its
independent Certified Public Accountants. During the
Company's two most recent fiscal years, and the interim
periods since completion of its last fiscal year, the
Company had not consulted Hixson, Marin, Powell &
DeSanctis, P.A. with respect to the application of
accounting principles to a specified transaction, the type
of audit opinion that might be rendered on the Company's
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
July 18, 1997.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) & (b) Financial Statements and Schedules. See Financial
Statements beginning on page 3.
(c) Exhibits. The following documents are filed herewith or
incorporated herein by reference as Exhibits:
Exhibits
- --------
2.1 N/A
3.0 Articles of Incorporation of the Company. (incorporated
by reference to Exhibit 3.1 to the Company's Form S-1
Registration Statement No. 82-88530 dated December 20,
1983). Amendment Incorporated by Reference to Form 8-K
dated May 12, 1997.
3.1 By-laws. (incorporated by reference to Exhibit 3.2 to the
Company's Form S-1 Registration Statement No. 82-88530
dated December 20, 1983).
4.0 Certificate of Designation of Series A Preferred Shares.
(1)
4.1 Certificate of Designation of Series B Preferred Shares.
(1)
4.2 Certificate of Designation of Series C Preferred Shares.
(1)
10.01 Form of Employment Agreement between the Company and its
officers. (1)
11 Not Applicable.
15 Not Applicable.
18 Not applicable.
19 Not applicable.
22 Not Applicable.
23 Not Applicable.
24 Not applicable.
27 Financial Data Schedule
99 Not applicable
d) The Company filed the following reports on Form 8-K:
July 14, 1997 - Current Form 8-K to report the
conversion of $1.5 million debentures to equity by
entities not residents of the USA; July 21, 1997 -
Current Form 8-K to report change of the Company's
certifying independent auditors from Ehrhardt, Keefe,
Steiner and Hottman to Hixson, Marin, Powell & DeSanctis,
P.A. Certified Public Accountants, which change was made
effective July 14, 1998; August 18, 1997 - Current 8-K
to report the adverse summary judgment ruling with
respect to foreclosure of the Company's property in
Aurora, Colorado and the filing by the Company of a suit
for declaratory relief with respect to certain SMR
license options agreements.
____________
(1) Incorporated by reference to the Company's Form 10-KSB as of
June 30, 1997
-12-
<PAGE>
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: September 28, 1998 By: /s/ James J. Krejci
---------------------------
James J. Krejci, President
and Chief Executive Officer
By: /s Gordon Dihle
---------------------------
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Company and in the capacities and on the dates
indicated.
Signature Title Date
/s/ James J. Krejci Director September 28, 1998
- --------------------
James J. Krejci
/s/ Gordon Dihle Director September 28, 1998
- --------------------
Gordon Dihle
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 144,750
<SECURITIES> 248,400
<RECEIVABLES> 408,018
<ALLOWANCES> 250,000
<INVENTORY> 0
<CURRENT-ASSETS> 586,988
<PP&E> 264,612
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,001,718
<CURRENT-LIABILITIES> 2,036,020
<BONDS> 0
0
0
<COMMON> 13,200
<OTHER-SE> (1,047,503)
<TOTAL-LIABILITY-AND-EQUITY> (1,001,718)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 285,527
<LOSS-PROVISION> 23,471
<INTEREST-EXPENSE> 6,500
<INCOME-PRETAX> (262,162)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (262,162)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
