-----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, By1aCl+Rx8GYRXt1Qd57gf0cwwX4mEsPYaBwYWlV1GFZW8g9dtOCypWmgZjHZE3B Ofd8xHyPsDCiQ//2ex3vgA== 0001086474-99-000011.txt : 19990825 0001086474-99-000011.hdr.sgml : 19990825 ACCESSION NUMBER: 0001086474-99-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMTECH CONSOLIDATION GROUP INC/DE CENTRAL INDEX KEY: 0001086474 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [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: 99698059 BUSINESS ADDRESS: STREET 1: 2401 FOUNTAINVIEW STE 418 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 713-785-0045 MAIL ADDRESS: STREET 1: 2401 FOUNTAIN VIEW STREET 2: SUITE 418 CITY: HOUSTON STATE: TX ZIP: 77057-4821 10QSB 1 COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES [CAPTION] Consolidated Balance Sheets June 30, 1999 and December 31, 1998 (Unaudited) Assets 1999 1998 Current assets: Cash $ 26,825 150,624 Accounts receivable, less allowances for contractual adjustments and doubtful accounts of $2,588,429 in 1999 and $4,310,771 in 1998 3,632,561 1,997,506 Receivables from related parties 1,100,000 1,100,000 Prepaid expenses 316,360 262,463 Total current assets 5,075,746 3,510,593 Property and equipment, net of accumulated depreciation and amortization 571,763 595,687 Excess of cost over net assets of businesses acquired, less accumulated amortization of $31,021 in 1999 and $22,171 in 1998 2,368,979 2,377,829 Other assets 168,056 244,457 Total assets $ 8,184,544 6,728,566 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses 1,086,753 1,233,915 Accrued salaries and related liabilities 1,188,610 1,284,849 Due to third-party payors 1,478,812 1,503,623 Loans payable to shareholders 42,482 277,882 Notes payable 181,907 181,888 Convertible subordinated debentures 195,000 Current installments of long-term debt 63,809 69,947 Total current liabilities 4,042,373 4,747,104 Long-term debt, less current installments 317,864 339,693 Total liabilities 4,360,237 5,086,797 Stockholders' equity: Preferred stock, $.01 par value. Authorized 1,000,000 shares: issued and outstanding, 29,410 shares in 1999 and 1998 Class B, 8% cumulative and convertible Common stock, $.00967 par value. Authorized 30,000,000 shares: issued and outstanding, 20,196,858 shares in 1999 and 18,250,849 shares in 1998 195,304 164,108 Additional paid-in capital 1,546,617 1,033,413 Retained earnings 2,082,092 443,954 Total stockholders' equity 3,824,307 1,641,769 Commitments and contingent liabilities Total liabilities and stockholders' equity $ 8,184,544 6,728,566 See accompanying notes to consolidated financial statements.
[CAPTION] COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Operations Three months ended June 30, 1999 and 1998 (Unaudited) 1999 1998 Revenues $ 4,091,727 680,709 Operating expenses: Health care operations 2,980,934 404,053 Internet operations 159,250 93,645 Corporate operations 51,395 6,457 Amortization 4,425 3,562 Depreciation 2,942 31,941 Total operating expenses 3,198,946 539,658 Operating income 892,781 141,051 Other income (expenses): Interest income 15 45 Interest expense (2,537) (1,816) Net earnings $ 890,259 139,280 Net earnings per share $ 0.05 0.01 Weighted average common shares 18,956,000 13,302,852 See accompanying notes to consolidated financial statements.
[CAPTION] COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Operations Six months ended June 30, 1999 and 1998 (Unaudited) 1999 1998 Revenues $ 9,066,335 976,309 Operating expenses: Health care operations 6,960,707 404,053 Internet operations 301,189 435,457 Corporate operations 128,092 13,575 Amortization 12,600 10,714 Depreciation 19,573 41,691 Total operating expenses 7,422,161 905,490 Operating income 1,644,174 70,819 Other income (expenses): Interest income 33 45 Interest expense (6,069) (1,816) Net earnings $ 1,638,138 69,048 Net earnings per share $ 0.09 0.01 Weighted average common shares 17,856,000 13,182,000 See accompanying notes to consolidated financial statements.
[CAPTION] COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Six months ended June 30, 1999 and 1998 (Unaudited) 1999 1998 Cash flows from operating activities: Net earnings $ 1,638,138 69,048 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 19,573 41,691 Amortization of excess of cost over net assets of businesses acquired 12,600 10,714 Bad debt expense 97,188 Decrease in accounts receivable (1,635,055) 5,166 Increase in prepaid expenses (53,897) (72,543) Decrease in other assets 76,401 Decrease in accounts payable and accrued expenses (146,561) (99,090) Decrease in accrued salaries and related liabilities (96,239) (31,101) Decrease in amount due to third-party payors (24,811) Net cash provided by (used in) operating activities (209,851) 21,073 Cash flows from investing activities: Purchase of property and equipment (16,158) Cash received from acquired subsidiaries 244,392 Net cash provided by investing activities 228,234 Cash flows from financing activities: Proceeds from borrowing from shareholders 25,711 Principal payments on long-term debt (27,948) (14,426) Proceeds from long-term debt 68,483 Proceeds from issuance of shares under private placement 114,000 Net cash provided by financing activities 86,052 79,768 Net increase (decrease) in cash (123,799) 329,075 Cash at beginning of year 150,624 2,523 Cash at end of period $ 26,825 331,598 Supplemental schedule of cash flow information: Interest paid $ 6,069 1,816 See accompanying notes to consolidated financial statements.
[CAPTION] COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) General 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 Rule 10-01 of Regulation S-X, 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 1998 audited consolidated financial statements and related footnotes. (2) Property and Equipment Property and equipment is summarized as follows at June 30, 1999 and December 31, 1998: 1999 1998 Equipment $ 303,535 301,922 Furniture and fixtures 451,479 429,087 Leasehold improvements 302,311 336,163 Total property and equipment 1,057,325 1,067,182 Less accumulated depreciation and amortization 485,562 471,485 Net property and equipment $ 571,763 595,687 (3) Long-term Debt Long-term debt at June 30, 1999 and December 31, 1998 is as follows: 1999 1998 Long-term notes $ 381,673 409,640 Less current installments 63,809 69,947 $ 317,864 339,693
(4) Federal Income Tax Expense The estimated federal income tax expense for the six month period ended June 30, 1999 and the year ended December 31, 1998 is eliminated by net operating loss carryforwards. (5) Subsequent Events In February 1998, the six subsidiary corporations of Home Care Center, Inc., wholly owned subsidiaries of Professional Management Providers, Inc., filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In July 1999, the bankruptcy trustee decided to discontinue the operations of the six health care entities. Management believes the discontinuation of the operations of the six health care entities will not have a material affect on the operations and earnings of the Company. Comtech Consolidation Group, Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998 Revenues increased by $3,411,000 or 501% between the three months ended June 30, 1999 and 1998. The revenue increase is due primarily to fifteen health care acquisitions made in 1998 subsequent to the three months ended June 30, 1998. Operating expenses increased by $2,659,000 for the three months ended June 30, 1999 compared with the three ended June 30, 1998 and decreased slightly as a percentage of revenues to 78.1% in 1999 from 79.3% in 1998. This decrease as a percentage of revenues was largely due to a higher revenue volume to cover fixed costs. The Company had net earnings of $890,000 for the three months ended June 30, 1999 as compared with net earnings of $139,000 for the three months ended June 30, 1998, an increase of 640% for the reasons discussed above. Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998. Revenues increased by $8,090,000 or 829% between the six months ended June 30, 1999 and 1998. This increase was due primarily to an increase in the health care operating revenues resulting from fifteen acquisitions made subsequent to June 30, 1998. Operating expenses increased by $6,500,000 for the six months ended June 30, 1999 compared to the six months ended June 30, 1998. This increase was due primarily to the increase in cost associated with the fifteen health care acquisitions made subsequent to June 30, 1998. Operating expenses for the six months ended June 30, 1999 decreased significantly as a percentage of revenues from 92.7% in 1998 to 81.9% in 1999. This decrease was due primarily to increased health care revenues to cover fixed costs offset by slight increase in variable costs. The Company had net earnings of $1,638,000 for the six months ended June 30, 1999 as compared with net earnings of $71,000 for the six months ended June 30, 1998, a significant increase for the reasons discussed above. Liquidity and Capital Resources Net accounts receivable increased by $1,635,000 due primarily to timing differences in the receipt of payments by Medicare and third-party payors. Medicare billings occur on a monthly basis with reimbursements occurring fourteen days from receipt and approval by Medicare. The Company has obtained credit facilities with its bankers and feels these credit facilities coupled with funds from operations will be adequate to meet cash requirements. Outlook This "Outlook" section contains a number of forward-looking statements, all of which are based on current expectations. Actual results may differ materially. Revenue Expectations. Based on current conditions the Company expects revenues to continue to grow through its continued acquisition of undervalued home health agencies. Net earnings are expected to continue to grow as a result of these acquisitions as well as cost reduction programs coupled with restructuring of the operations. Potential Impact of Discontinued Operations. In July 1999, the operations of the six subsidiary corporations that are in Chapter 11 were discontinued by the U.S. Bankruptcy Trustee. The Company believes this will not have material effect on the operations and earnings of the Company. The Company believes that future acquisitions and an effective cost reduction program will garner the continued growth of revenue and earnings in 1999. Year 2000 Issue. The Company has initiated a company-wide program and has developed a formal plan to prepare for the year 2000. Management currently believes that the costs related to Y2K compliance should not have a material effect on operations or the Company's consolidated financial position, results of operations or cash flows. Forward-Looking Statements Certain information contained in these Interim Financial Statements for the Quarter Ended June 30, 1999, including, without limitation, information appearing in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements, all of which are based on current expectations, may differ materially from actual results. Actual results could be affected by a variety of factors. /s/Joel B. Flowers, Jr. Chief Financial Officer EX-27 2
5 6-MOS DEC-31-1999 JUN-30-1999 26,825 0 7,320,990 2,588,429 0 5,075,746 1,057,325 485,562 8,184,544 4,042,373 0 0 294 195,304 3,628,709 8,184,544 4,091,727 4,091,727 0 0 3,198,946 0 2,522 890,259 0 0 0 0 0 890,259 .05 0
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