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 December 31, 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, $.001 par value
(Title of Class)
(former name, former address and former fiscal year if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No x
---- -----
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed by
a court.
Yes X No
----- ----
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practical date:
As of September 24, 1998, 42,703,700 shares of Common Stock ($.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 DECEMBER 31, 1997
ComTec International, Inc.
PART I
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1997 (unaudited)
and June 30, 1997 (audited) 3
Condensed Consolidated Statements of Operations 4
Six Months ended December 31, 1997 and 1996
and from inception (unaudited)
Condensed Consolidated Statements of Operations 5
Three Months ended December 31, 1997 and 1996
and from inception (unaudited)
Condensed Consolidated Statements of Cash Flows 6
Six Months ended December 31, 1997 and 1996
and from inception (unaudited)
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
or Plan of Operation 8
PART II
Item 1. Legal Proceedings 13
Item 2. Change in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a vote
of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE PAGE 15
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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>
December 31, 1997 June 30, 1997
(unaudited) (audited)
----------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and equivalents
(includes restricted funds
of $78,600) $ 633,534 $ 630,000
Accounts Receivable, less allowance
For doubtful collections of $250,000 95,952 127,100
Other current assets 22,671 -
Investment in Marketable securities - 248,400
----------------- -------------
Total Current Assets 752,157 1,005,500
----------------- -------------
Property and Equipment, net 272,775 275,500
Investments - Other
(Centennial SMR assets purchase) 3,035,697 -
Other Assets 56,806 40,000
----------------- -------------
Total Assets $ 4,117,436 $ 1,321,000
================= =============
LIABILITIES
Current Liabilities
Convertable Debenture 2,600,000 1,000,000
Notes Payable 474,147 110,000
Accounts Payable 495,557 504,000
Accrued Liabilities 419,508 482,700
Total Current Liabilities 3,989,212 2,096,700
----------------- -------------
Long Term Debt - FCC 1,390,707 -
Note Payable - related 40,000 -
Total Liabilities 5,419,919 2,096,700
================= =============
STOCKHOLDER'S DEFICIT
Common Stock, .001 par value;
Authorized 100,000 shares;
13,194,751 shares issued
June 30, 1997 and December 31, 1997
December 31, 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 (9,225,783) (8,695,400)
----------------- -------------
Total Shareholder Deficit (1,302,483) (775,700)
----------------- -------------
Total Liabilites and Stockholders Deficit $ 4,117,436 $ 1,321,000
================= =============
</TABLE>
-3-
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Consolidated Condensed Statements of Operations
<CAPTION>
For the Six Months Ended
December 31, 1997 December 31, 1996 Cumulative
(unaudited) (unaudited) Amounts from
Inception
(unaudited)
----------------- ----------------- ------------
<S> <C> <C> <C>
Revenues
Sales 19,295 19,295
Cost of Sales 30,775 30,775
----------------- ------------
Gross Profit (11,480) (11,480)
----------------- ------------
Expenses
Selling, General
and Administrative 505,050 1,022,686 2,910,750
Compensation in the
form of common stock 3,502,300
Management fees-
related party 15,328 65,000
----------------- ----------------- ------------
Loss before other
income (expense) (516,530) (1,038,014) (6,489,530)
----------------- ----------------- ------------
Other Income (expense)
Interest and Dividend Income 1,066 7,366
Interest expense 6,500 (9,624) (348,100)
Rental and Other Income 13,933 69,551 146,633
Prepaid Calling Card
services, less revenues (58,783) (573,583)
Loss on investments,
foreclosures and disposals 23,471 59,789 (648,129)
Write-down of intangible (1,300,000)
----------------- ----------------- ------------
Total Other Income (Expense) (13,813) 119,716 (2,715,813)
----------------- ----------------- ------------
Net Loss (530,343) (918,298) (9,205,343)
================= ================= ============
Weighted Average
Common Shares Outstanding 8,857,079 8,902,594 5,074,501
================= ================= ============
Net Loss per Common Share (0.06) (0.10) (1.81)
================= ================= ============
</TABLE>
-4-
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Consolidated Condensed Statements of Operations
<CAPTION>
For the Three Months Ended
December 31, 1997 December 31, 1996
(unaudited) (unaudited)
----------------- -----------------
<S> <C> <C>
Revenues
Sales 19,295
Cost of Sales 30,775
-----------------
Gross Profit (11,480)
-----------------
Expenses
Selling, General and Administrative 219,523 706,201
Compensation in the form of common stock - -
Management fees- related party - -
----------------- -----------------
Loss before other income (expense) (231,003) (706,201)
----------------- -----------------
Other Income (expense)
Interest and Dividend Income 1,767 -
Interest expense - (9,624)
Rental and Other Income 13,933 -
Prepaid Calling Card services,
less revenues (52,878) -
Loss on investments,
foreclosures and disposals - 59,789
Write-down of intangible - -
----------------- -----------------
Total Other Income (Expense) (37,178) 50,165
----------------- -----------------
Net Loss (268,181) (656,036)
================= =================
Weighted Average Common Shares Outstanding 8,857,079 8,902,594
================= =================
Net Loss per Common Share (0.03) (0.07)
================= =================
</TABLE>
-5-
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries
(a Development Stage Enterprise)
Consolidated Statements of Cash Flows
<CAPTION>
For the Six Months Ended
December 31, 1997 December 31, 1996 Cumulative
(unaudited) (unaudited) Amounts from
inception
(unaudited)
----------------- ----------------- ------------
<S> <C> <C> <C>
Operating activities:
Net Loss (530,343) (918,298) (9,205,343)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Depreciation expense 22,087 223,587
Services and Interest
exchanged for stock 142,366 2,861,200
Write Down of Intangible 1,300,000
Losses on investments,
foreclosure and disposal (23,471) 474,129
Changes in assets and
liabilities:
Accounts receivable 31,148 (28,989) (121,352)
Deposits and other (16,806) (19,306)
(Increase) decrease in
other current assets (22,671) (5,240) (11,571)
Increase (decrease) in
account payable &
liabilities (71,635) 490,632 1,657,665
----------------- ----------------- ------------
Net cash used in
operating activities (611,691) (319,529) (2,840,991)
----------------- ---------------- -------------
Investing activities:
Proceeds from acquisition 22,100
License rights -
Centennial SMR assets (3,035,697) (3,185,697)
Marketable securities 248,400 (1,600)
Non-Operating assets (25,000)
Related Party 40,000 1,000
Purchase of property,
plant and equipment (32,968) (291,300)
Restricted cash -
Decrease in note receivable -
SMR Management contracts -
Cash paid in acquisition (1,869,500) -
Other 7,668 (1,971,640) (71,832)
----------------- ---------------- -------------
Net cash used in
investing activities (2,739,629) (3,874,108) (3,552,329)
----------------- ---------------- -------------
Financing activities:
Advances from
related party 184,500
Proceeds: private place
of common stock 4,286,666 1,138,900
Proceeds: short term notes 364,147 515,147
Warrants 30,000
Converable Debentures 1,600,000 4,100,000
Payments on notes payable (100,316) (327,800)
Long-term notes payable 1,390,707 5,867 1,386,107
----------------- ---------------- -------------
Net cash provided by
financing activities 3,354,854 4,192,217 7,026,854
----------------- ---------------- -------------
Increase (Decrease) in cash 3,534 (1,420) 633,534
Beginning cash balance 630,000 27,482 -
----------------- ---------------- -------------
Ending cash balance 633,534 26,062 633,534
================= ================ =============
</TABLE>
-6-
<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 intregral 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.
-7-
<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. Since
December 5, 1997, AWN has operated 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.
-8-
<PAGE>
During the quarter ended December 31, 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 December 31, 1997, activities consisted of developing
the Company's strategic business plan, the aquisition of SMR
licenses, related assets and operations from Centennial
Communications Corp., 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 interim management agreements and a formal
purchase agreement ended into in the quarter ended December 31,
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.
lie 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.
-9-
<PAGE>
(b) Liquidity and Capital Resources
The Company and Centennial Communications Corp., a Colorado
Corporation, initially entered into a letter of intent dated as of
October 16, 1997 and a formal agreement was entered into on
December 4, 1997 between American Wireless Network, Inc., a
Colorado Corporation and Centennial Communications Corp. (the
"Agreement") whereby the American Wireless Network, Inc. acquired
management control on December 5, 1997 of the SMR assets and SMR
licenses owned by Centennial Communications Corp. together with the
SMR related business limited to and located in the seven following
USA metropolitan trade areas: Birmingham, Alabama; Knoxville,
Memphis, and Nashville, Tennessee; Oklahoma City and Tulsa,
Oklahoma; and New Orleans, Louisiana. The assets acquired by the
agreement include SMR licenses issued by the Federal Communications
Commission ("FCC"), radio equipment and antennas, tower site leases
and the customer base of Centennial Communications Corp. in the
seven acquired markets. Transfer of title to the assets and
licenses occurred at a second closing on July 6, 1998. Until
transfer of legal title of the assets to American Wireless Network,
Inc., on July 6, 1998, the seven markets were operated by American
Wireless Network, Inc. pursuant to a management agreement. The
total purchase price of the assets was $3,035,697, consisting of
cash deposit of $200,000 in October 1997, payment $1,000,843 in
cash on December 4, 1997, a promissory note from American Wireless
Network, Inc. to Centennial Communications Corp. in the amount of
$444,147 (which was paid on July 6, 1998) and assumption of FCC
notes totaling $1,390,707 by American Wireless Network, Inc.
The Company obtained funding for the initial December 4th, 1997
closing of the herein described asset acquisition from cash
obtained through a convertible debt financing issuance of One
Million Six Hundred Thousand Dollars ($1,600,000) of convertible
debt financing from entities organized outside of the United States
of America, whose shareholders are not residents of the United
States of America. The terms of the convertible debt financing
are, maturity date: December 31, 2000, interest at 12% per annum
due on December 31, 2000, and a conversion feature effective after
January 31, 1998, allowing the holders of the debt to convert said
debt into equity at the rate of fifty units, each unit consisting
of one share of .001 par value common stock of the Company and one
warrant to purchase one share of .001 par value common stock at a
price of $.58 per share, per one dollar of debt converted. Accrued
interest would be forfeited upon conversion to equity. The Company
had thirty one days from the date of notice of intent of the debt
holder to convert in which to prepay the debt together with accrued
interest thereon, if such debt is so prepaid, the holder's
conversion right is terminated. As reported on the Company's 8K
filed on April 7, 1998, the $1,600,000 convertible debt was
converted to .001 par value common stock and warrants on March 23,
1998. The funds to complete the final closing on July 6, 1998 were
obtained by obtaining a loan of $600,000 on July 2, 1998 from
Queens Cross Group Ltd. and entity organized outside of the United
States of America, whose shareholders are not residents of the
United States of America. The $600,000 debt financing incurred to
finance the final closing of the acquisition of certain Specialized
Mobile Radio assets from Centennial Communications, Inc. also
required the issuance of 1,538,461 shares of the Company's .001 par
value common stock to Queens Cross Group Ltd. 1,538,461 shares of
the Company's .001 par value common stock were issued on September
3, 1998 to Queens Cross Group Ltd. in satisfaction of that
obligation. The terms of the debt financing are, maturity date:
six months from issue, interest at 12% per annum due six months
from issue, if the notes are not paid within six months, the
interest rate increases to 18% per annum.
The Company reported a net loss (unaudited) of $530,343 for
the six month period ended December 31, 1997 and has reported net
losses from inception (March 15, 1994) to December 31, 1997 of
$9,205,343. The Company had deficient working capital at December
31, 1997 of $3,237,055. As of December 31, 1997, the Company
reported deficient equity of $1,302,483. 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 will 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
-10-
<PAGE>
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 December 31, 1997,
the unaudited results of the Company indicated assets of $4,117,436
and deficit working capital of $3,237,055. 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 December 31, 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)
Shares reserved for contingent issue with respect to
$1,600,000 convertible debt (17,599,998)
Shares reserved for contingent issue with respect to
contingent warrants associated with convertible debt
(17,599,998)
During quarter ended December 31, 1997, the Company continued
as a development stage enterprise. The Company's financial
statements are therefore not indicative of anticipated revenues
which may be attained or expenditures which may be incurred by the
Company in future periods. The Company's ability to achieve
profitable operations is subject to the validity of its assumptions
and risk factors within the industry and pertaining to the Company.
As a result of the aquisition of SMR licenses and existing
operations from Centennial Communications Corp., $19,295 of
revenues (during the month of December, 1997) were generated from
the Company's wireless business during the quarter ended December
31, 1997. No revenues were generated from the Company's wireless
business during the quarter ended December 31, 1996.
For the quarter ending December 31, 1997, the Company incurred
General and Administrative Expenses of $219,523, a decrease of
$486,678 from the quarter ending December 31, 1996, when the
Company incurred General and Administrative expenses of $706,201.
The Company's Quarter ended December 31, 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.
-11-
<PAGE>
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.
-12-
<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.
As reported in Form 8-Ks filed on December 30, 1997 and May
13, 1997, 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE
ITEM 5. OTHER INFORMATION
As reported in Form 8-Ks filed on December 30, 1997 and
September 3, 1998, by an agreement executed on December 4, 1997,
American Wireless Network, Inc., a wholly owned subsidiary of
ComTec International, Inc. (the "Company") acquired management
control of Specialized Mobile Radio ("SMR") related assets and
licenses owned by Centennial Communications Corp. of Denver,
Colorado in seven metropolitan trade areas located in southeastern
USA. The transaction was an arms length purchase and sale
transaction, negotiated by the representatives of each party to the
agreement.
The Company and Centennial Communications Corp., a Colorado
Corporation, initially entered into a letter of intent dated as of
October 16, 1997 and a formal agreement was entered into on
December 4, 1997 between American Wireless Network, Inc., a
Colorado Corporation and Centennial Communications Corp. (the
"Agreement") whereby the American Wireless Network, Inc. acquired
management control on December 5, 1997 of the SMR assets and SMR
licenses owned by Centennial Communications Corp. together with the
SMR related business limited to and located in the seven following
USA metropolitan trade areas: Birmingham, Alabama; Knoxville,
Memphis, and Nashville, Tennessee; Oklahoma City and Tulsa,
Oklahoma; and New Orleans, Louisiana. The assets acquired by the
agreement include SMR licenses issued by the Federal Communications
Commission ("FCC"), radio equipment and antennas, tower site leases
and the customer base of Centennial Communications Corp. in the
seven acquired markets. Since the acquisition, American Wireless
Network, Inc. has continued to utilize the assets acquired in the
transaction for the same purposes, that of commercial sale of air
time to business users, as was utilized by Centennial
Communications Corp. Transfer of title to the assets and licenses
occurred at a second closing on July 6, 1998. Until transfer of
legal title of the assets to American Wireless Network, Inc., on
July 6, 1998, the seven markets were operated by American Wireless
Network, Inc. pursuant to a management agreement. The total
purchase price of the assets was $3,035,697, consisting of cash
deposit of $200,000 in October 1997, payment $1,000,843 in cash on
December 4, 1997, a promissory note from American Wireless Network,
Inc. to Centennial Communications Corp. in the amount of $444,147
(which was paid on July 6, 1998) and assumption of FCC notes
totaling $1,390,707 by American Wireless Network, Inc. Prior to
this acquisition, neither the Company nor its subsidiary, American
Wireless Network, Inc., had any affiliation with Centennial
Communications Corp. nor any of its officers, directors, affiliated
companies or shareholders.
-13-
<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:
Current Report on Form 8-K was filed on December 30, 1997
to report the initial aquisition of SMR licenses and related assets
from Centennial Communications Corp. on December 4, 1998 and the
one for five reverse stock split which became effective January 31,
1998.
_____________
(1) Incorporated by reference to the Company's Form 10-KSB as of
June 30, 1997
-14-
<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
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
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0
0
<COMMON> 13,200
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<TOTAL-LIABILITY-AND-EQUITY> 4,117,436
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<OTHER-EXPENSES> 505,050
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