-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ee/rtD7Nt545bHqoSIOHNmGBl9fb+L4rrsqCTIDBT2yIt17PXiHlSI6VcY0/lH+G uYvPF98Xkv+CmwSwLttcGQ== /in/edgar/work/0001015402-00-003492/0001015402-00-003492.txt : 20001129 0001015402-00-003492.hdr.sgml : 20001129 ACCESSION NUMBER: 0001015402-00-003492 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMTECH CONSOLIDATION GROUP INC/DE CENTRAL INDEX KEY: 0001086474 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 760544385 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-26111 FILM NUMBER: 777739 BUSINESS ADDRESS: STREET 1: 10497 TOWN & COUNTRY WAY STREET 2: SUITE 460 CITY: HOUSTON STATE: TX ZIP: 77024 BUSINESS PHONE: 7135542244 MAIL ADDRESS: STREET 1: 10497 TOWN & COUNTRY WAY STREET 2: SUITE 460 CITY: HOUSTON STATE: TX ZIP: 77024 10QSB 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 Commission File No. 000-26111 COMTECH CONSOLIDATION GROUP, INC. --------------------------------- (Name of small business issuer in its charter) Delaware 76-0544385 ----------- ---------------- (State or jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10497 Town & Country Way, Suite 460 Houston, TX 77024 713-554-2244 (Address, including zip code and telephone number, including area code, of registrant's executive offices) Common Stock (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X NO --- --- 29,616,623 shares of Common Stock, par value $.00967 per share, were outstanding at September 30, 2000. Documents Incorporated by Reference: None COMTECH CONSOLIDATION GROUP, INC. FORM 10-QSB Table of Content PART I - Financial Information Item 1 - Financial Statements Independent Accountants' Report Condensed Consolidated Financial Statements (Reviewed) Balance Sheets - September 30, 2000 and December 31, 1999 (Audited for 1999) Statements of Operations - Three Months and Nine Months ended September 30, 2000 and 1999 Statements of Cash Flows - Nine Months ended September 30, 2000 and 1999 Notes to Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations PART II Item 2 - Changes in Securities and Use of Proceeds Item 6 - Reports on Form 8-K SIGNATURES
COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Three and nine months ended September 30, 2000 and 1999 (Unaudited - see accompanying accountants' review report) Assets 2000 1999 ------ --------------- --------------- (Audited) Current assets: Cash $ 69,995 $ 21,710 Accounts receivable, less allowances for contractual adjustments and doubtful accounts of $1,000 in 2000 and 1999 105,600 110,007 Prepaid expenses 14,790 - --------------- --------------- Total current assets 190,385 131,717 --------------- --------------- Note receivable - 20,000 Property and equipment, net of accumulated depreciation and amortization 129,958 146,014 Excess of cost over net assets of businesses acquired, less accumulated amortization of $46,750 in 2000 and $34,000 in 1999 633,250 646,000 Other assets 4,435 4,340 --------------- --------------- Total assets $ 958,028 $ 948,071 =============== =============== Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable and accrued expenses 538,007 617,392 Accrued salaries and related liabilities 149,188 131,686 Loans payable to shareholders 42,482 42,482 Note payable 10,000 10,000 Current installments of long-term debt 336,100 63,220 --------------- --------------- Total current liabilities 1,075,777 864,780 Long-term debt, less current installments 261,611 545,114 --------------- --------------- Total liabilities 1,337,388 1,409,894 --------------- --------------- Stockholders' equity: Preferred stock, $.01 par value. Authorized 1,000,000 shares: issued and outstanding, 37,139 shares at September 30, 2000 and 31,028 shares at December 31, 1999 371 310 Common stock, $.00967 par value. Authorized 30,000,000 shares: issued and outstanding, 29,616,623 shares at September 30, 2000 and 22,077,072 at December 31, 1999 286,393 213,485 Additional paid-in capital 2,582,989 2,024,806 Retained earnings (deficit) (3,249,113) (2,700,424) --------------- --------------- Total stockholders' equity (deficit) (379,360) (461,823) Commitments and contingent liabilities --------------- --------------- Total liabilities and stockholders' equity $ 958,028 $ 948,071 =============== ===============
See accompanying notes to consolidated financial statements.
COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three and nine months ended September 30, 2000 and 1999 (Unaudited - see accompanying accountants' review report) Three months ended Nine months ended ---------------------------------------- ---------------------------------------- September 30, September 30, 2000 1999 2000 1999 ------------------- ------------------- ------------------- ------------------- Revenues: Patient service revenue, net $ (17,458) $ 180,000 $ 656,181 $ 718,635 Internet service revenue 99,575 184,119 399,096 528,899 ------------------- ------------------- ------------------- ------------------- Total revenues 82,117 364,119 1,055,277 1,247,534 ------------------- ------------------- ------------------- ------------------- Operating expenses: Health care operations 164,959 129,823 616,210 525,503 Internet operations 123,001 172,848 386,869 378,037 Corporate operations 367,550 86,758 551,503 214,850 Amortization 4,250 10,438 12,750 23,038 Depreciation 12,289 11,827 36,229 31,400 ------------------- ------------------- ------------------- ------------------- Total operating expenses 672,049 411,694 1,603,561 1,172,828 ------------------- ------------------- ------------------- ------------------- Operating income (loss) (589,932) (47,575) (548,284) 74,706 Other income (expenses): Interest income - - - 14 Interest expense (338) - (405) (1,876) ------------------- ------------------- ------------------- ------------------- Net earnings (loss) from continuing (590,270) (47,575) (548,689) 72,844 Earnings (loss) from discontinued operations - (1,314,721) - 202,998 ------------------- ------------------- ------------------- ------------------- Net earnings (loss) $ (590,270) $ (1,362,296) $ (548,689) $ 275,842 =================== =================== =================== =================== Earnings (loss) per share: Basic: From continuing operations $ (0.02) $ (0.00) $ (0.02) $ 0.00 =================== =================== =================== =================== From discontinued operations $ - $ (0.07) $ - $ 0.01 =================== =================== =================== =================== Net earnings (loss) $ (0.02) $ (0.07) $ (0.02) $ 0.01 =================== =================== =================== =================== Diluted: From continuing operations $ (0.02) $ (0.00) $ (0.02) $ 0.00 =================== =================== =================== =================== From discontinued operations $ - $ (0.06) $ - $ 0.01 =================== =================== =================== =================== Net earnings (loss) $ (0.02) $ (0.06) $ (0.02) $ 0.01 =================== =================== =================== =================== Weighted average common shares: Basic 29,848,391 19,669,660 28,869,364 19,026,429 =================== =================== =================== =================== Diluted 32,833,230 21,636,626 31,756,300 20,929,072 =================== =================== =================== ===================
See accompanying notes to consolidated financial statements.
COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended September 30, 2000 and 1999 (Unaudited - see accompanying accountants' review report) 2000 1999 --------------- --------------- Cash flows from operating activities: Net earnings (loss) $ (548,689) $ 72,844 Earnings from discontinued operations - 202,998 --------------- --------------- Net earnings (loss) from continuing operations (548,689) 275,842 Adjustments to reconcile net earnings (loss) from continuing operations to net cash used in operating activities: Depreciation and amortization of property and equipment 36,229 31,400 Amortization of excess of cost over net assets of businesses acquired 12,750 23,038 Stock issued for services 334,010 - Write-off of note receivable 25,000 - (Increase) decrease in operating assets: Accounts receivable (593) (100,251) Prepaid expenses (14,790) - Other (95) - Increase (decrease) in operating liabilities: Accounts payable and accrued expenses (79,385) (104,665) Accrued salaries and related liabilities 17,502 (98,119) --------------- --------------- Net cash provided by (used in) continuing operations (218,061) 27,245 Net cash used in discontinued operations - (110,119) --------------- --------------- Net cash used in operating activities (218,061) (82,874) --------------- --------------- Cash flows from investing activities: Purchase of property and equipment (20,173) (23,593) --------------- --------------- Net cash used in investing activities (20,173) (23,593) --------------- --------------- Cash flows from financing activities: Principal payments on long-term debt (10,623) (42,948) Proceeds from issuance of shares under private placement 297,142 114,000 --------------- --------------- Net cash provided by operating activities 286,519 71,052 --------------- --------------- Net increase (decrease) in cash 48,285 (35,415) Cash at beginning of year 21,710 40,505 --------------- --------------- Cash at end of period $ 69,995 $ 5,090 =============== =============== Supplemental schedule of cash flow information: Interest paid $ 405 $ 1,876 =============== ===============
See accompanying notes to consolidated financial statements. PART I - FINANCIAL INFORMATION ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT ACCOUNTANTS' REPORT -------------------------------- The Board of Directors and Stockholders Comtech Consolidation Group, Inc.: We have reviewed the accompanying condensed consolidated balance sheet of Comtech Consolidation Group, Inc. and subsidiaries as of September 30, 2000, and the related condensed consolidated statements of operations and cash flows for the three-month and nine-month periods ended September 30, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the condensed financial statements (and Note 13 to the annual financial statements for the year ended December 31, 1999 (not presented herein), certain conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2 (and Note 13) to the respective financial statements. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of ComTech Consolidation Group, Inc. and subsidiaries as of December 31, 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated March 24, 2000, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph concerning matters that raise substantial doubt about the Company's ability to continue as a going concern. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1999 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ R. E. Bassie & Co., P.C. Houston, Texas November 17, 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) GENERAL Comtech Consolidation Group, Inc. (Comtech or the Company) is a Houston Texas based consolidation Company that is focused on acquiring and building businesses through acquisitions, with an emphasis toward technology. The Company currently has technology operations in Houston, Texas operating under the name Networks On-line, Inc. and healthcare operations in Louisiana, operating under the name A-1 Bayou. All acquired companies become the direct property of Comtech and are run as wholly owned subsidiaries. Comtech directly manage the financial and administrative functions of all of its subsidiaries. The unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation for each of the periods presented. The results of operations for interim periods are not necessarily indicative of results to be achieved for full fiscal years. As contemplated by the Securities and Exchange Commission (SEC) under Rules of Regulation S-B, the accompanying consolidated financial statements and related footnotes have been condensed and do not contain certain information that will be included in the Company's annual consolidated financial statements and footnotes thereto. For further information, refer to the Company's 1999 audited consolidated financial statements and related footnotes. (2) OPERATIONAL STATUS At September 30, 2000, current liabilities exceeded current assets by $885,392. At September 30, 2000, the Company primarily had two operational subsidiaries: one Internet Service Provider located in Houston, Texas and one healthcare subsidiary located in Louisiana. The net income from these operations is not sufficient to support corporate expenses and pay current liabilities. However, a new Board was elected in late January 2000, which hired a new management team. The new management installed management practices, which resulted in a substantial reduction of corporate expenses. New management also negotiated settlements on a substantial portion of corporate debt, decreasing debt by over $112,000 in the first quarter. To overcome the shortfall in operating expenses, management has raised approximately $300,000 in operating capital through private placements of the Company's common and preferred stock. Management believes that actions presently being taken to obtain additional equity financing through a secondary offering will provide adequate working capital over the next 12 months, without creating new debt. Acquisitions and increasing sales in the technology sector will provide the opportunity for the Company to continue as a going concern. A more complete profile of management plans is shown in the 3rd quarter 10QSB, Item 2. (3) SUBSEQUENT EVENTS In November 2000, the Company issued 3,515,677 ($.01 per share) shares of restricted common stock to the Chairman and Chief Executive Officer for compensation for services performed. In November 2000, the Company issued 2,374,900 ($.01 per share) shares of restricted common stock to the Chief Financial Officer for compensation for services performed. ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 Revenues for the nine months and three months ended September 30, 2000 decreased by $192,257 or 15.4% and $282,002 or 77.4%, respectively, over the comparable periods a year earlier. Decrease in revenue was primarily due to an increase in the contractual adjustments related to billing for Medicare patients in the health care subsidiary. Net losses from continuing operations for the nine and three months ended September 30, 2000 increased by $621,533 and increased by $542,695, respectively. LIQUIDITY AND CAPITAL RESOURCES During the quarter ended September 30, 2000, the Company raised $49,772 through private placements. The funds were used to pay for corporate operations. The Company had filed Form SB-2 with the Securities and Exchange Commission to register 27,000,000 shares of common stock for sale to the public. The Company expects to raise approximately $4,000,000 with this offering. There can be no assurance that the Company will be successful in this effort. SUBSIDIARY OVERVIEW NETWORKS ON-LINE, INC. (NOL) is a wholly owned subsidiary of Comtech whose primary business is providing high speed Internet Access, Video Conferencing, Web Hosting and other bundled Internet Services. Management's goal is to build the revenue base of Networks On-line, Inc. from its current base of approximately $550,000 annually, to over $2 million annually during the next twelve months. To accomplish this task, management had hired an experienced ISP operator whose compensation is performance based and incentive laden to promote achievement of Company's goals. Over the last quarter NOL expanded its bandwidth and upgraded its equipment. The Company is in negotiation to acquire another Internal Service Provide with annual revenues in the $200,000 range, and it has primarily business customers. NOL has hired a marketing manager to begin to recruit new business as well as pursue merger opportunities. A1-BAYOU is a wholly owned subsidiary of Comtech. A-1 Bayou operates in the home health care industry. A-1 Bayou has grown its current operations to generate annual revenues of approximately $1.5 million. Last year the company opened a second office in the Jeanerette, Louisiana area. A-1 Bayou is managed and operated by experienced health care administrator. The administrator is responsible for the growth and management of the day-to-day operations of A-1 Bayou. MARKETING ANALYSIS Comtech subsidiaries operate in two basic market segments: technology and healthcare. Each segment is highly fragmented with the major players putting tremendous pressure on the smaller companies to complete. As a Micro-cap company, Comtech is always searching for under served or niche sectors of the market. By identifying these opportunities, Comtech seeks to provide the consumer with superior service while also partnering with the smaller retailers nationally, giving them a competitive edge as they compete for market share against the larger companies. MARKETING PLAN NETWORKS ON-LINE, INC. The Company intends to increase marketing efforts across the board for all subsidiaries in a cost-effective manner. Management will develop a defined and targeted marketing campaign for Networks On-Line, Inc. through a variety of print and media advertising and marketing programs. These programs will be designed to grow the subscriber base of NOL, while seeking to develop added revenue streams available to the company. FINANCIAL PLAN Management's goals are to increase revenues to $10 to $12 million dollars over the next 12-month period, with revenues increasing to over $20 million dollars in 24 months. The company plans to grow revenue through internal growth and acquisitions, with the acquisitions financed primarily through the issuance of restricted common shares or preferred stock. Management plans to complete a private placement of common stock to properly fund the operations of the parent company. The increase in profits generated by acquiring profitable companies and providing superior, cost effective management and back office functions will provide Comtech with the necessary capital to grow the company. The Company had filed a SB-2 with the SEC to get back on the OCT Bulletin Board and to register free-trade stock which will be used to convert some debt to equity through settlements with some creditors. The Company also will use the free-trade stock to raise operating capital for the corporate office. Management has secured a contract with an investment-banking firm to finance suitable acquisitions. CONCLUSION By successfully executing the company's business plan Comtech will be able to grow the company into a valuable profitable entity. With the tremendous consolidation and spin-off opportunities available to the Company and its shareholders, Comtech will provide its customers the best service and content in the industry. PART II - OTHER INFORMATION ITEM 2 - CHANGES IN SECURITIES AND USES OF PROCEEDS The following information sets forth certain information as of November 13, 2000, for all securities the Company sold since June 30, 2000, without registration under the Act, excluding any information "previously reported as defined in Rule 12b-2 of the Securities Exchange Act of 1934. There were no underwriters in any of these transactions, nor were any sales commissions paid thereon. During the three months ended September 30, 2000, the Company raised $29,772 from the sale of the Company's common and preferred stock. The funds were used to pay corporate operating expenses and to reduce current liabilities. ITEM 6 REPORTS ON FORM 8-K AND EXHIBITS (a) Exhibits - Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. /s/ Lamont Waddell - -------------------- Lamont Waddell, Chief Financial Officer EX-27 2 0002.txt
5 1 3-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 69,995 0 106,600 (1,000) 0 190,385 260,490 132,132 958,028 1,075,777 0 286,393 0 371 (666,124) 958,028 1,055,277 1,055,277 0 0 1,603,561 0 405 (548,689) 0 (548,689) 0 0 0 (548,689) (.02) (.02)
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