<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: JUNE 30, 1998
[ ] 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.
(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 August 17,
1998 was 19,991,613.
Transitional Small Business Disclosure Format. Yes No X
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,041 $ 85,082
Accounts receivable, net of allowance for doubtful accounts of
$62,164 at June 30, 1998 and December 31, 1997 323,742 360,702
Inventories 71,384 106,806
Loans receivable - officer 73,008 43,885
Prepaid expenses and other current assets 70,464 36,247
------------- -------------
TOTAL CURRENT ASSETS 546,639 632,722
PROPERTY AND EQUIPMENT, Net 90,629 110,090
OTHER ASSETS
Deposits 12,015 17,825
------------- -------------
$ 649,283 $ 760,637
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank credit line payable $ 236,500 $ --
Current portion of long-term debt 50,000 50,000
Accounts payable 142,019 200,049
Accrued expenses 20,121 43,540
Customer's deposit 62,537 207,908
------------- -------------
TOTAL CURRENT LIABILITIES 511,177 501,497
LONG-TERM DEBT, net of current portion 91,667 116,667
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized - 40,000,000
shares; issued and outstanding - 12,498,107 shares 124,981 124,981
Additional paid-in capital 210,022 210,022
Accumulated deficit (288,564) (192,530)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 46,439 142,473
------------- -------------
$ 649,283 $ 760,637
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
COMC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 310,777 $ 598,834 $ 881,615 $ 1,619,403
COST OF REVENUES 177,255 312,919 486,905 997,442
------------- ------------- ------------- -------------
GROSS PROFIT 133,522 285,915 394,710 621,961
OPERATING EXPENSES 231,139 287,498 477,150 634,367
------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (97,617) (1,583) (82,440) (12,406)
OTHER INCOME (EXPENSE)
Interest income -- 124 219 248
Interest expense (9,537) (14,495) (13,813) (25,205)
------------- ------------- ------------- -------------
TOTAL OTHER INCOME (EXPENSE) (9,537) (14,371) (13,594) (24,957)
------------- ------------- ------------- -------------
NET LOSS $ (107,154) $ (15,954) $ (96,034) $ (37,363)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,498,107 12,498,107 12,498,107 12,498,107
============= ============= ============= =============
BASIC LOSS PER SHARE $ (0.01) $ -- $ (0.01) $ --
============= ============= ============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
COMC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (96,034) $ (37,363)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation 19,461 11,163
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 36,960 189,313
Inventories 35,422 8,202
Prepaid expenses and other current assets (34,217) (50,168)
Increase (decrease) in:
Accounts payable and accrued expenses (81,449) (7,925)
Customer's deposit (145,371) (2,045)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (265,228) 111,177
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment -- (25,948)
Other assets 5,810 --
Loans receivable - officer (29,123) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (23,313) (25,948)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from bank credit line 236,500
Principal payments on short-term and long-term borrowings (25,000) (100,418)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 211,500 (100,418)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (77,041) (15,189)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 85,082 57,180
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,041 $ 41,991
=========== ===========
CASH PAID FOR:
Interest $ 13,813 $ 28,277
=========== ===========
Income taxes $ -- $ 2,045
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
COMC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been
prepared by COMC, Inc. (the "Company") without audit and, in the
opinion of the management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of (a) the results of
operations for the three and six months ended June 30, 1998 and 1997,
(b) the financial position at June 30, 1998 and (c) the cash flows for
the six months ended June 30, 1998 and 1997. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1997 has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The
consolidated financial statements and notes are condensed as permitted
by Form 10-QSB and do not contain certain information included in the
annual financial statements and notes of the Company. The consolidated
financial statements and notes included herein should be read in
conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-KSB.
2. SUBSEQUENT EVENTS
In August 1998 the Company signed a merger agreement with ICF
Communication Systems, Inc. Under the merger agreement, ICF will merge
with and into a wholly-owned subsidiary of the Company in consideration
for $5 million in cash ($1.5 million will be paid at closing, and the
remaining $3.5 million paid in installments with the first year) and $9
million of COMC common stock. The ICF transaction was completed on
August 17, 1998.
In August 1998 the Company received $1.5 million from private investors
in exchange for a private placement of Common Stock and Warrants in the
form of Units at $15.00 per Unit. Each Unit consists of ten (10) shares
of Common Stock and two (2) warrants which give the right to purchase
Common Stock at $2.00 per share for a two year period. The proceeds of
this private placement were used to finance the consummation of the
merger with ICF. The Company engaged a placement agent to secure these
funds and will be compensated for services rendered in the form of (1)
a sales commission equal to 19% of the gross proceeds, (2) a two year
warrant to purchase a number of shares equal to 10% of the underlying
shares of Common Stock sold as Units sold at a purchase price of $1.50
per share, (3) a Due Diligence and Investor Research Fee of $15,000 for
the first $1,000,000 received by the Company and (4) the reimbursement
of expenses associated with the offering, including legal, accounting,
presentation, printing, travel and filing fees.
5
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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.
COMC, Inc. designs, implements, supports and manages computer network
systems, telecommunications and voice equipment and premise wiring for
healthcare organizations, financial institutions and entertainment sectors. Its
customers include Cedar-Sinai Medical Center, Molina Health Care, Bank of
America, Sanwa Bank, The Walt Disney Company, Warner Bros. and NBC Studios.
The Company is planning to expand by acquiring small to mid-sized
companies in high growth markets that have greater than 50% of revenue from
maintenance service contracts. Under this acquisition and consolidation
strategy, the Company is attempting to build its operations in the high growth
markets of Los Angeles, San Francisco and San Diego California; Phoenix,
Arizona; Las Vegas and Reno, Nevada.
Results of Operations
- ---------------------
During the six months ended June 30, 1998 compared to six months ended
June 30, 1997 revenues decreased approximately $738,000 or 45.6%. This was
primarily due to the Company obtaining a large cabling project from Western
Carlson Design which produced revenues totaling $582,000 during the first five
months of 1997 and was only partially offset by additional business from Sanwa
Bank and EDS Unigraphics. Additionally, the Company has been seeking out
customers whose revenues are labor driven which traditionally produces higher
profit margins than the mark up on materials supplied. As a result total
revenues have decreased. Revenue generated from labor activities increased from
60.0% during the first six months of 1997 to 70.7% during the comparable period
in 1998. Cost of revenues decreased $511,000 or 51.2%. Technician labor
decreased $134,000 or 30.4% and material purchases decreased $372,000 or 67.9%
due the to the one-time Western Carlson Design project and others in 1997 which
was very material intense. Operating expenses decreased $157,000 or 24.8%
primarily due to less professional and consulting fees and travel expenses for
the on going merger and acquisition activities. In addition, office salaries
have been reduced by $72,000 or 23.9% in anticipation of upcoming acquisitions.
Other expenses decreased $11,000 or 45.5% primarily due to a reduction of
interest paid toward our revolving credit facility with the bank. As a result of
the above, the net loss for the six months ended June 30, 1998 was $96,034
compared to a net loss for the six months ended June 30, 1997 of $37,363.
During the three months ended June 30, 1998 compared to three months
ended June 30, 1997 revenues decreased $288,000 or 48.1%. This was primarily due
to the Company obtaining a large cabling project for Western Carlson Design
which produced revenues totaling $582,000 during the first five months of 1997
and was only partially offset by additional business from Sanwa Bank and EDS
Unigraphics. Additionally, the Company has been seeking out customers whose
revenues are labor driven which traditionally produces higher profit margins
than the mark up on materials supplied. As a result total revenues have
decreased. Cost of revenues also decreased $84,000 or 41.8% which was the
technician labor associated with the large cabling project for Western Carlson
Design. Operating expenses decreased $56,000 or 19.6% primarily due to a
reduction in office staff and other administrative expenses. Accounting and
legal expenses have increased due the ICF Communications merger about to close.
Other expenses decreased $5,000 or 33.6% primarily due to a reduction of
interest paid toward our revolving credit facility with the bank for acquisition
6
<PAGE>
and public entity costs incurred in 1995 and 1996. The three months ended June
30, 1998 net loss was $107,154 an increase of $91,000 from the three months
ended June 30, 1997.
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 six months ended June 30, 1998 Sanwa Bank, EDS Unigraphics, and
Bank of America accounted for 34%, 18% and 16% of the Company's revenue,
respectively. Sanwa Bank and EDS Unigraphics were new customers in the first
quarter of 1998 and for the six months ended June 30, 1997 Bank of America
represented 8%. For the three months ended June 30, 1998 Sanwa Bank, Bank of
America and Charles Pankow Builders accounted for 29%, 23% and 16% of the
Company's revenue, respectively. Sanwa Bank and Charles Pankow builders were new
customers in the second quarter of 1998 and for the three months ended June 30,
1997 Bank of America represented 13%.
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 six months ended June 30, 1998 Cable Connector
Warehouse and GTE Supply accounted for 26% and 15% of the company's total
material purchases, respectively. Cable Connector Warehouse and GTE Supply were
used in the comparable period last year and accounted for 27% and 45% of the
company's total material purchases, respectively. For the three months ended
June 30, 1998 GTE Supply, Graybar Electric and Anicom accounted for 45%, 14% and
12% of the company's total material purchases, respectively. For the comparable
period last year GTE Supply, Graybar Electric and Anicom accounted for 7%, 1%
and 24% of the companies total material purchases, respectively.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents decreased $33,950 at June 30, 1998 compared
to June 30, 1997. Cash used in operating activities amounted to $265,228 and was
primarily due to a net loss during the period, a customer deposit received that
was applied during the first quarter 1998 and an increase in accounts
receivables coupled with a decrease in accounts payable. Cash used in investing
activities was $23,313 due to loans to officers. Financing activities provided
$211,500 from the Company's credit line.
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
$137,500 as of August 14, 1998. The Company has a revolving credit agreement
available for $300,000 with the same bank. Interest is at the bank's prime rate
plus 2.5% and as of August 10, 1998 has used $236,500.
In August 1998 the Company signed a merger agreement with ICF
Communication Systems, Inc. Under the merger agreement, ICF will merge with and
into a wholly-owned subsidiary of the Company in consideration for $5 million in
cash ($1.5 million will be paid at closing, and the remaining $3.5 million paid
in installments with the first year) and $9 million of COMC common stock. The
ICF transaction was completed on August 17, 1998.
In August 1998 the Company received $1.5 million from private investors
in exchange for a private placement of Common Stock and Warrants in the form of
Units at $15.00 per Unit. Each Unit consists of ten (10) shares of Common Stock
and two (2) warrants which give the right to purchase Common Stock at $2.00 per
share for a two year period. The proceeds of this private placement were used to
finance the consummation of the merger with ICF. The Company engaged a placement
agent to secure these funds and will be compensated for services rendered in the
form of (1) a sales commission equal to 19% of the gross proceeds, (2) a two
year warrant to purchase a number of shares equal to 10% of the underlying
shares of Common Stock sold as Units sold at a purchase price of $1.50 per
share, (3) a Due Diligence and Investor Research Fee of $15,000 for the first
$1,000,000 received by the Company and (4) the reimbursement of expenses
associated with the offering, including legal, accounting, presentation,
printing, travel and filing fees.
7
<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.
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.
Part II. OTHER INFORMATION
Item 1. Legal proceedings
Not Applicable
Item 2. Changes in Securities
Disclosure relating to a private placement of the Company's securities
is shown under Management Discussion and Analysis. Liquidity and
Capital Resources is herein incorporated by reference.
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
8
<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: August 17, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below as of August 17, 1998 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)
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,041
<SECURITIES> 0
<RECEIVABLES> 323,742
<ALLOWANCES> 0
<INVENTORY> 71,384
<CURRENT-ASSETS> 546,639
<PP&E> 90,629
<DEPRECIATION> 0
<TOTAL-ASSETS> 649,283
<CURRENT-LIABILITIES> 511,177
<BONDS> 91,667
0
0
<COMMON> 124,981
<OTHER-SE> (78,542)
<TOTAL-LIABILITY-AND-EQUITY> 649,283
<SALES> 0
<TOTAL-REVENUES> 881,615
<CGS> 0
<TOTAL-COSTS> 486,905
<OTHER-EXPENSES> 477,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,813
<INCOME-PRETAX> (96,034)
<INCOME-TAX> 0
<INCOME-CONTINUING> (96,034)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,034)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
