<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: MARCH 31, 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 May 11,
1998 was 12,498,107.
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>
March 31, December 31,
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ....................................................... $ 3,286 $ 85,082
Accounts receivable, net of allowance for doubtful accounts of
$62,164 at March 31, 1998 and December 31, 1997 .............................. 439,156 360,702
Inventories ..................................................................... 62,390 106,806
Loans receivable - officer ...................................................... 58,795 43,885
Prepaid expenses and other current assets ....................................... 68,208 36,247
--------- ---------
TOTAL CURRENT ASSETS ..................................................... 631,835 632,722
PROPERTY AND EQUIPMENT, Net .......................................................... 100,359 110,090
OTHER ASSETS
Deposits ........................................................................ 12,015 17,825
--------- ---------
$ 744,209 $ 760,637
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank credit line payable ........................................................ $ 170,000 $ --
Current portion of long-term debt ............................................... 50,000 50,000
Cash overdraft .................................................................. 15,027 --
Accounts payable ................................................................ 141,559 200,049
Accrued expenses ................................................................ 59,437 43,540
Customer's deposit .............................................................. 51,028 207,908
--------- ---------
TOTAL CURRENT LIABILITIES ................................................ 487,051 501,497
LONG-TERM DEBT, net of current portion ............................................... 103,565 116,667
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 ............................................................. (181,410) (192,530)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY ............................................... 153,593 142,473
--------- ---------
$ 744,209 $ 760,637
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
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COMC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
------------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
REVENUES ................................. $ 570,838 $ 1,020,569
COST OF REVENUES ......................... 309,650 684,523
------------ ------------
GROSS PROFIT ............................. 261,188 336,046
OPERATING EXPENSES ....................... 246,011 346,869
------------ ------------
INCOME (LOSS) FROM OPERATIONS ............ 15,177 (10,823)
OTHER INCOME (EXPENSE)
Interest income ..................... 219 124
Interest expense .................... (4,276) (10,710)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) ...... (4,057) (10,586)
------------ ------------
NET INCOME (LOSS) ........................ $ 11,120 $ (21,409)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING .................. 12,498,107 12,498,107
============ ============
BASIC EARNINGS (LOSS) PER SHARE .......... $ -- $ --
============ ============
See accompanying Notes to Consolidated Financial Statements.
3
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COMC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1998 1997
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ................................................................... $ 11,120 $ (21,409)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation ............................................................... 9,731 7,909
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable .................................................... (78,454) (451,030)
Inventories ............................................................ 44,416 6,335
Prepaid expenses and other current assets .............................. (31,961) (17,116)
Increase (decrease) in:
Accounts payable and accrued expenses .................................. (42,593) 449,389
Customer's deposit ..................................................... (156,880)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES .................................. (244,621) (25,922)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment ................................................. -- (7,606)
Other assets ........................................................................ 5,810
Loans receivable - officer .......................................................... (14,910)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES .................................. (9,100) (7,606)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from bank credit line .................................................... 170,000
Cash overdraft ...................................................................... 15,027
Principal payments on short-term and long-term borrowings ........................... (13,102) (12,500)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .................... 171,925 (12,500)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................................... (81,796) (46,028)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........................................... 85,082 57,180
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................................. $ 3,286 $ 11,152
========= =========
CASH PAID FOR:
Interest ............................................................................. $ 4,276 $ 10,710
</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 months ended March 31, 1998 and 1997, (b) the financial position at
March 31, 1998 and (c) the cash flows for the three months ended March
31, 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.
5
<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 March 31, 1998
and 1997.
Under an acquisition and consolidation strategy, the Company is
attempting to build its operations and expand its presence in the high growth
markets of Los Angeles, San Francisco and San Diego California; Phoenix,
Arizona; Las Vegas and Reno, Nevada.
In December 1996, the Company entered into a letter of intent with
Able Cable, Inc. ("ACI"), a provider of interconnect services relating to
voice and data communications systems. While this first letter of intent has
expired, the Company has signed a new letter of intent on April 28, 1998.
Under the terms of this agreement, the Company will acquire ACI in
consideration for a cash payment of $450,000. In addition, the Company will
issue $4,050,000 worth of the Company's Common Stock. 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.
In April 1997 the Company entered into a letter of intent providing
for a business combination with ICF Communications, Inc. ("ICF") a full
service telecommunications provider of voice, data and other client service
support. While this original letter of intent expired, in March 1998 the
Company entered into a new letter of intent with ICF. Under the terms of this
new letter of intent, the Company will acquire ICF in consideration for a cash
payment of $3,000,000 and a note payable for $1,000,000. In addition, the
Company will issue $12,000,000 worth of the Company's Common Stock.
Consummation of the transaction is contingent 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.
Results of Operations
During the three months ended March 31, 1998 compared to three months
ended March 31, 1997 revenues decreased approximately $450,000 or 44.1%. 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
quarter of 1997 and was only partially offset by additional business from
Sanwa Bank and EDS Unigraphics. Cost of revenues decreased $375,000 or 54.8%.
Technician labor decreased $42,000 or 18.0% and material purchases decreased
$313,000 or 72.7% due the to the one-time Western Carlson Design project in
1997 which was very material intense. Operating expenses decreased $75,000 or
22.4% 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 $34,000 or 33.4%. Other expenses
decreased $7,000 or 61.7% primarily due to an interest expense reduction in
our revolving credit facility with the bank. The Company has been attempting
to reduce the percentage of low margin premise wiring/cabling projects and
increase the higher margin voice and data service activity. As a result of the
above, the net income before taxes for the three months ended March 31, 1998
was $11,120 compared to a loss before taxes for the three months ended March
31, 1997 of $21,409.
6
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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 three months ended March 31, 1998 Sanwa Bank, EDS
Unigraphics, and Bank of America accounted for 37%, 28% and 12% of the
Company's revenue, respectively. Sanwa Bank and EDS Unigraphics were new
customers in the first quarter of 1998 and for the three months ended March
31, 1997 Bank of America represented 4%.
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 three months ended March 31, 1998 Cable
Connector Warehouse and Anicom accounted for 17% and 13% 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 17% of total material purchased.
Liquidity and Capital Resources
Cash and cash equivalents decreased $7,866 at March 31, 1998 compared
to March 31, 1997. Cash used in operating activities amounted to $244,621 and
was primarily due to 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 $9,100 and
was due to loans to officers. Financing activities provided $171,925 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 $154,167 as of April 15, 1998. 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 April 9, 1998 has used $170,000.
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 received notice from the Labor Commissioner of the State
of California in October of 1997 for four claims from former employees
totaling $44,000 plus 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. As of April 23, 1998, all claims have been dismissed by
the Labor Commissioner.
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
7
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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: May 12, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below as of May 12, 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)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,286
<SECURITIES> 0
<RECEIVABLES> 439,156
<ALLOWANCES> 0
<INVENTORY> 62,390
<CURRENT-ASSETS> 631,835
<PP&E> 100,359
<DEPRECIATION> 0
<TOTAL-ASSETS> 744,209
<CURRENT-LIABILITIES> 487,051
<BONDS> 103,565
0
0
<COMMON> 124,981
<OTHER-SE> 28,612
<TOTAL-LIABILITY-AND-EQUITY> 744,209
<SALES> 0
<TOTAL-REVENUES> 570,838
<CGS> 0
<TOTAL-COSTS> 309,650
<OTHER-EXPENSES> 246,011
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,270
<INCOME-PRETAX> 11,120
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,120
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
