<PAGE>
THE SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
Commission File No. 0-16472
COMC, INC.
FORMERLY AUTOMEDIX SCIENCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Illinois 36-3021754
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 N. Glenoaks Blvd.
Burbank, California 91502
(Address of principal executive offices)
(818) 556-3333
(Issuer's telephone number)
Check whether the issuer filed all required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter Period that the registrant was required to file such reports), and has
been subject to such filing requirements for the past 90 days. Yes___ No _X_
The number of shares outstanding of Registrants Common Stock as of November 10,
1997 was 12,498,107.
Transitional Small Business Disclosure Format. Yes ___ No _X_
<PAGE>
Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with the
financial statements and related notes thereto of the Company included elsewhere
herein.
Initially, the Company's purpose was the research and development of
medical technologies for the treatment of cancer and other conditions. Because
the Company was unable to raise capital to continue the clinical trials with
respect to the medical device for cancer treatment which it had designed, in the
spring of 1992, it ceased its operations. As a consequence, the Board of
Directors of the Company began to investigate the possibility of a new business
direction and to search for viable acquisition or merger candidates which would
enable the Company to maximize value to shareholders. As previously mentioned,
the Company completed the acquisition of Complete Communications, Inc.("CCI"),
in November 1996. The transaction was accounted for as a reverse acquisition.
Therefore, discussion in this section will be based on the operating results of
CCI for the nine months ended September 30, 1997 and 1996.
Results of Operations
During the nine months ended September 30, 1997 compared to nine months
ended September 30, 1996 revenues decreased approximately $230,000 or 10.2%.
This is primarily due to the fact that in 1997, new revenues from our largest
customer (Western Carlson Design) which totaled $1,004,000 was not sufficient to
replace the reduction in revenue from our two largest customers in 1996 (Cedar
Sinai Medical Center and Digital Equipment Corp.) which totaled $1,746,000. Cost
of revenues decreased $433,000 or 25.3%. Price and volume changes had little to
no impact on revenues. Technician labor decreased $666,000 or 53.9% due to the
reduction in Cedar Sinai Medical Center and Digital Equipment Corp. activity.
Material purchases increased $222,000 or 32.9% to meet the needs of the Western
Carlson Design contract which was much more material intense. Operating expenses
increased $133,000 or 18.1% due to professional and consulting fees for the
public entity plus merger and acquisition costs that totaled nearly $200,000.
These expenses were offset by reductions in payroll and benefits, office
supplies, travel and entertainment. Other expenses increased $15,000 or 63.0%
primarily due to additional interest expenses from two new lines of credit
required for acquisition costs incurred in 1995 and 1996. As a result of the
above, the loss before taxes for the nine months ended September 30, 1997 was
$143,656 an improvement of $56,000 from the nine months ended September 30,
1996.
During the three months ended September 30, 1997 compared to three
months ended September 30, 1996 revenues decreased $311,000 or 43.2%. This was
primarily due to a contract with Digital Equipment Corp. which began in April
1996 and generated billings of $359,000 during the three months ended September
30, 1996. The Digital Equipment Corp. contract expired in October 1996. Price
and volume changes had little to no impact on revenues. Cost of revenues also
decreased $395,000 or 59.2% which was due to the technician labor associated
with the Digital Equipment Corp. contract and other efficiencies implemented by
the Company. Operating expenses decreased $48,000 or 17.2% primarily due to the
Company replacing salaried salesmen with commissioned outside salesmen. Other
expenses increased $4,000 or 48.2% due to additional interest expenses from two
new lines of credit required for acquisition costs incurred in 1995 and 1996.
The quarter ended September 30, 1997 loss before taxes was $106,293 an
improvement of $125,000 from the quarter ended September 30, 1996.
CCI has depended on a few large customers for the majority of its
revenue to date. A loss of any one could have a material effect on the company's
liquidity. Due to the quality of the Company's major customers, the
collectibility of accounts receivable has not been a problem.
For the nine months ended September 30, 1997 Western Carlson Design and
Bank of America accounted for 50% and 9% of the Company's revenue, respectively.
Western Carlson Design accounted for 1% of revenues for the nine months ended
September 30, 1996 while Bank of America represented 5%.
2
<PAGE>
For the three months ended September 30, 1997 Western Carlson Design,
Sanwa Bank, Bank of America and The Signature Group accounted for 37%, 25%, 12%
and 12% of the Company's revenue, respectively. Sanwa Bank and The Signature
Group were new customers in 1997. Western Carlson Design had no revenue for the
three months ended September 30, 1996 while Bank of America represented 3%.
The Company deals with many material suppliers under various credit
term policies. It is CCI's practice to secure the most competitive pricing among
these suppliers. For the nine months ended September 30, 1997 GTE Supply, Cable
Connector Warehouse and Anicom accounted for 43%, 25% and 19% of the companies
total material purchases, respectively. Of these suppliers, only Cable Connector
Warehouse was used in the comparable period last year and accounted for 7% of
total material purchased. For the three months ended September 30, 1997 GTE
Supply, Anicom and Cable Connector Warehouse accounted for 36%, 31% and 18% of
the company's total material purchases, respectively. Of these suppliers, only
Cable Connector Warehouse was used in the comparable period last year and
accounted for 6% of total material purchased.
Liquidity and Capital Resources
In November 1996, the Company consummated the acquisition of Complete
Communications, Inc., a California corporation ("CCI"), in consideration for the
issuance of 10,000,000 shares of Common Stock to John Ackerman, the sole
shareholder of CCI. In connection with this transaction, the Company changed its
name to COMC, Inc.
Cash and cash equivalents increased $19,211 at September 30, 1997
compared to December 31, 1996. Cash provided by operating activities amounted to
$136,558 and was primarily due to an increase in accounts receivable collections
offset by the period's net loss. Cash used in investing activities was $55,014
due to loans to officers and the purchase of necessary operational equipment.
Financing activities used $62,333 for principal payments on long-term and
short-term borrowings due to acquisition costs incurred in 1995 and 1996.
The Company has a $250,000 term loan agreement with a bank, principal
payable in a monthly installment of $4,167 and interest at the bank's prime rate
plus 2.5%. The note matures on April 15, 2001 and has an outstanding balance of
$174,999 as of November 5, 1997. The Company has a revolving credit agreement
available for $300,000 with the same bank, interest at the bank's prime rate
plus 2.5% and as of November 7, 1997 has used $183,000. The Company has a
$100,000 equipment line of credit with the same bank which was established in
January 1997 and remains available.
In December 1996 the Company entered into a letter of intent with Able
Cable, Inc. ("ACI"), a provider of interconnect services of voice and data
communications systems. Under the terms of the letter of intent, the Company
will acquire ACI in consideration for a cash payment of $1,000,000 and the
issuance of Common Stock as well as payments in the amount of $960,000 over a
period of four years under employment and consulting agreements to be entered
into with the principals of ACI. Compilations provided to the Company indicate
that during its most recent fiscal year ACI generated revenues of $6.8 million,
while pre-tax profits amounted to $267,000. Consummation of the transaction is
contingent upon financing arrangements and the satisfactory completion of the
Company's due diligence investigation of ACI's affairs, neither of which can be
assured at this time. Recently, ACI has requested a modification to the letter
of intent in the form of an increased acquisition price based on better than
expected performance.
In April 1997, the Company entered into a letter of intent providing
for a business combination with ICF Communications Systems, Inc. ("ICF").
Pursuant to the letter of intent, the Company will acquire ICF for a total
consideration of $12.1 million of which $9.6 million is payable in cash with the
balance to be paid by the issuance of the Company's Common Stock. Approximately
$8 million is due at the closing. Additional payments will be made annually over
a two- year period from the closing. It is currently anticipated that two of
ICF's principals will enter into employment agreements with the Company. ICF is
a telephone service provider based in the San Francisco area. According to
compilations provided to the Company, during its most recent fiscal year ICF
generated revenues of approximately $15 million. Its pre-tax profits during this
period aggregated approximately $1.3 million. Consummation of the transaction is
contingent, among other things, upon financing arrangements and the satisfactory
completion of the Company's due diligence investigation of ICF's affairs,
neither of which can be assured at this time. As of this date, the letter of
intent has expired although both parties are still in discussions.
3
<PAGE>
The Company intends to continue its search for additional merger and
acquisition candidates that will expand its existing markets in related products
and services.
Part II. OTHER INFORMATION
Item 1. Legal proceedings
The Company has received notice from the Labor Commissioner of the
State of California for four claims from former employees totaling $44,000 less
any accrued interest. The claims allege unpaid commissions for the period from
January 1, 1997 to April 30, 1997 in four of the cases and unpaid wages for the
period from July 21, 1995 to April 30, 1997 for the remaining one. The Company
believes that the claims are without merit and intends to vigorously defend
against the claims at both the conference and hearing level if necessary.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
4
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
COMC, INC.
By: /s/ John Ackerman
----------------------------------------
John Ackerman, Chairman and President
Dated: November 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below as of November 14, 1997 by the following
persons on behalf of Registrant and in the capacities indicated.
/s/ Ernest C. Mauritson
---------------------------------------------
Ernest C. Mauritson, Controller
(Principal Financial and Accounting Officer)
5
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMC, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 76,391 $ 57,180
Accounts receivable 485,311 738,724
Loans receivable - officer 38,198
Inventories 81,390 97,040
Prepaid expenses and other 43,385 21,103
----------- -----------
TOTAL CURRENT ASSETS 724,675 914,047
PROPERTY AND EQUIPMENT, Net 119,920 115,177
OTHER ASSETS
Deposits 22,580 17,825
----------- -----------
$ 867,175 $ 1,047,049
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 208,761 $ 192,284
Accrued expenses 59,006 47,323
Income taxes payable 2,045
Current portion of long-term debt 50,000 50,000
Notes payable 266,000 300,000
----------- -----------
TOTAL CURRENT LIABILITIES 583,767 591,652
----------- -----------
LONG-TERM DEBT, net of current portion 138,334 166,667
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - authorized 40,000,000 shares, $.01 par value
issued and outstanding - 12,498,107 shares 124,981 124,981
Additional paid-in capital 210,022 210,022
Accumulated deficit (189,929) (46,273)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 145,074 288,730
----------- -----------
$ 867,175 $ 1,047,049
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
6
<PAGE>
COMC, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
-----------------------------
1997 1996
------------ ------------
REVENUES $ 408,876 $ 719,989
COST OF REVENUES 272,360 666,871
------------ ------------
GROSS PROFIT 136,516 53,118
OPERATING EXPENSES 229,626 277,170
------------ ------------
LOSS BEFORE
OTHER INCOME (EXPENSE) (93,110) (224,052)
OTHER INCOME (EXPENSE)
Interest income 124 1,353
Interest expense (13,307) (8,977)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (13,183) (7,624)
------------ ------------
NET LOSS $ (106,293) $ (231,676)
============ ============
NET LOSS PER SHARE $ (.01) $ (.02)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,498,107 10,000,000
============ ============
See accompanying Notes to Condensed Consolidated Financial Statements
7
<PAGE>
COMC, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
September 30,
-----------------------------
1997 1996
------------ ------------
REVENUES $ 2,028,279 $ 2,257,960
COST OF REVENUES 1,269,802 1,702,996
------------ ------------
GROSS PROFIT 758,477 554,964
OPERATING EXPENSES 863,993 731,337
------------ ------------
LOSS BEFORE
OTHER INCOME (EXPENSE) (105,516) (176,373)
OTHER INCOME (EXPENSE)
Interest income 372 1,801
Interest expense (38,512) (25,198)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (38,140) (23,397)
------------ ------------
NET LOSS $ (143,656) $ (199,770)
============ ============
NET LOSS PER SHARE $ (.01) $ (.02)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,498,107 10,000,000
============ ============
See accompanying Notes to Condensed Consolidated Financial Statements
8
<PAGE>
COMC, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(143,656) $(199,770)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation 12,073 41,415
(Increase) decrease in:
Accounts receivable 253,413 17,064
Inventories 15,650 (120,008)
Prepaid expenses and other current assets (22,282) 12,359
Deposits (4,755) (1,928)
Increase (decrease) in:
Account payable and accrued expenses 28,160 (79,365)
Income taxes payable and deferred income tax (2,045) (4,352)
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 136,558 (334,585)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (27,956)
Loans to officers (38,198)
Purchase of property and equipment (16,816) (48,810)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (55,014) (76,766)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowing 76,000 80,000
Proceeds from long-term borrowing 179,167
Loan from stockholder 102,392
Distribution to stockholder (51,863)
Principal payments on short-term borrowing (110,000)
Principal payments on long-term borrowing (28,333)
--------- ---------
NET CASH PROVIDED BY(USED IN)
FINANCING ACTIVITIES (62,333) 309,696
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,211 (101,655)
CASH AND CASH EQUIVALENTS, BEGINNING 57,180 172,350
--------- ---------
CASH AND CASH EQUIVALENTS, END $ 76,391 $ 70,695
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for interest $ 41,584 $ 25,198
========= =========
Cash paid for income taxes $ 2,045 $ 2,720
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
9
<PAGE>
COMC, INC AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, which
are for the interim periods, do not include all disclosures provided in the
annual consolidated financial statements. These unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the footnotes thereto contained in the Annual Report on
Form 10-KSB for the year ended December 31, 1996 of COMC, Inc. (the "Company"),
as filed with the Securities and Exchange Commission. The December 31, 1996
balance sheet was derived from audited consolidated financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations for the three months and nine months ended September 30,
1997 are not necessarily indicative of the results to be expected for the full
fiscal year.
Net Income (loss) Per Share - Net income (loss) per share is based upon the
weighted average number of common shares outstanding during the periods
presented.
2. Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements, primary earnings per share will be renamed basic earnings per
share and will exclude the dilutive effect of stock options. The impact will not
change primary earnings per share for the three months and nine months ended
September 30, 1997 and 1996.
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income, which shall be effective for fiscal year
beginning after December 15, 1997. The Company will apply the requirements of
this statement on its fiscal year ended December 31, 1998. This statement
discusses how to report and display comprehensive income and its components.
Comprehensive income consists of net income and other comprehensive income.
Other comprehensive income refers to revenues, expenses, gains and losses that
under generally accepted accounting principles are included in comprehensive
income but excluded from net income. As of September 30, 1997, the Company had
no items of other comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement No.131,
Disclosures about Segments of an Enterprise and Related Information, which shall
be effective for fiscal year beginning after December 15, 1997. The Company will
apply the requirements of this statement on its fiscal year ended December 31,
1998. This statement discusses how to report operating segments and certain
information about its products and services, the geographic areas in which they
operate, and its major customers.
3. Loans Receivable - Officer
As of September 30, 1997, the Company had outstanding loans receivable from its
President of $38,198. The loans bear interest at 1% per month and are due on
December 31, 1997.
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 76,391
<SECURITIES> 0
<RECEIVABLES> 485,311
<ALLOWANCES> 0
<INVENTORY> 81,390
<CURRENT-ASSETS> 724,675
<PP&E> 119,920
<DEPRECIATION> 0
<TOTAL-ASSETS> 867,175
<CURRENT-LIABILITIES> 583,767
<BONDS> 138,334
0
0
<COMMON> 124,981
<OTHER-SE> 20,093
<TOTAL-LIABILITY-AND-EQUITY> 867,175
<SALES> 0
<TOTAL-REVENUES> 2,028,279
<CGS> 0
<TOTAL-COSTS> 1,269,802
<OTHER-EXPENSES> 863,993
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,512
<INCOME-PRETAX> (143,656)
<INCOME-TAX> 0
<INCOME-CONTINUING> (143,656)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143,656)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> .00
</TABLE>
