JMT take a look at the log today and you will see what Iam talking
about.And this kind of trading goes on and on for two and one half
months now.When the company is saying that there are only three
million shares in the float,you do not see this kind of trading going on
almost daily sometimes.Here I also have some info for you.
COMTECH CONSOLIDATION GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998 and December 31, 1997
(1) Summary of Significant Accounting Policies
The Company
Comtech Consolidation Group, Inc., a Delaware corporation, was incorporated on July 16, 1987. The Company is a Houston, Texas based consolidation company that is focused on acquiring and building growth oriented businesses through acquisitions.
Principles of Consolidation
The consolidated financial statements include the accounts of Comtech Consolidation Group, Inc. and its wholly-owned subsidiaries (the Company). All material intercompany profits, transactions and balances have been eliminated.
The accounts of purchased companies are included in the consolidated financial statements from the dates of acquisition. The excess of cost over the fair value of net assets of businesses acquired is being amortized using the straight-line method over a 14-year period commencing with the dates of acquisition.
Property and Equipment and Depreciation
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to ten years.
Earnings per Share
Earnings (losses) per common share have been computed by dividing net losses by the weighted average number of common shares outstanding during the respective periods.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all highly liquid investments with original maturities of three months of less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Reclassifications
Certain 1997 amounts have been reclassified to conform to the 1998 presentation.
(2) Acquisitions
Effective February 15, 1998, the Company issued 500,000 shares of its common stock in exchange for all of the outstanding stock of Professional Management Providers, Inc. (PMP), a Louisiana health care management corporation.
Effective April 1, 1998, the Company issued 500,000 shares of its common stock in exchange for all of the outstanding stock of Unique Dawning, Inc., a Texas health care corporation.
Effective April 1, 1998, the Company issued 250,000 shares of its common stock in exchange for all of the outstanding stock of OSF Financial Services, Inc., a Texas mortgage banking corporation.
Effective June 30, 1998, the Company, through its wholly-owned subsidiary, PMP, issued 2,000 shares of its Class B preferred stock for all of the outstanding stock of Superior Quality Health Care, Inc., a Texas health care corporation.
All of the above acquisitions have been accounted for using the purchase method with the purchase price allocated to the acquired assets and liabilities based on their respective estimated fair values at the acquisition dates. Such allocations were based on evaluations and estimations. A valuation adjustment in the amount of $30,000 has been assigned to the value of existing contracts.
The purchase allocation is summarized as follows:
Current assets
$ 1,124,249
Property and equipment
83,584
Non current assets
800,000
Excess of cost over net assets of business acquired
30,000
Current liabilities
(851,359)
Long-term liabilities
(76,069)
$ 1,110,405
(3) Property and Equipment
Property and equipment is summarized as follows at June 30,1998 and December 31, 1997:
1998
1997
Equipment
$ 415,827
361,293
Furniture and fixtures
25,233
-
Leasehold improvements
15,360
-
Transportation equipment
25,500
-
Total property and equipment
481,920
361,293
Less accumulated depreciation and amortization
94,437
30,108
Net property and equipment
$ 387,483
331,185
(4) Short-term Note Payable
The Company has a $2,000,000 line of credit with Warehouse Lending Corporation of America, Inc. that expires March 1999. (related to mortgage banking activities). The line of credit bears interest at the prevailing commercial paper rate plus a margin of 2.75% to 3.25%. Borrowing against the line of credit is secured by the Company's inventory of mortgage loans.
(5) Long-term Notes Payable
Long-term notes payable at June 30, 1998 and December 31, 1997 are as follows:
1998
1997
Note payable to a bank, with interest at
the lender's prime rate plus 2%, due March 5, 2000
$ 68,483
-
Note payable, with interest at 13.24%, due Jan 2003
collateralized by transportation equipment
18,639
Total long-term notes payable
87,122
-
Less current installments
18,193
-
Long-term notes payable, less current installments
$ 68,929
-
Aggregate yearly maturities of long-term debt for the periods after June 30, 1998 are as follows:
1999
$18,193
2000
60,543
2001
5,523
2002
2,863
$ 87,122
(6) Preferred Stock
Effective June 30, 1998, the Company issued 2,000 shares of its Class B preferred stock in exchange for all of the outstanding stock of Superior Quality Health Care, Inc. The Class B preferred shares have a face value of $100 per share, with an annual accumulative dividend equal to 8%, with a term of 24 months. The Class B preferred shares are convertible by the shareholders for the Company's common stock at anytime after 12 months from the date of issuance at a conversion rate equal to 80% of the then market price of the Company's common stock. The Class B preferred shares are redeemable by the Company at anytime in exchange for cash payment equal to the full-face amount of the shares plus accumulated dividends. At the end of the 24 month term, if not redeemed by the Company for cash equal to the face amount of the preferred shares, the shares automatically convert to common stock at a conversion rate equal to 80% of the then market bid price of the Company's common stock.
(7) Investments in Unconsolidated Subsidiaries
The Company owns a 50% interest in a company who principal business activity is real estate investments. This investment is being accounted for using the equity method.
(8) Federal Income Tax Expense
In 1997, the Company provided a 100% valuation allowance for deferred federal income taxes related to available net operating loss carryforwards. Accordingly, all of the estimated federal income tax expense for the six-month period ended June 30, 1998 is eliminated by the net operating loss carryforwards.
(9) Subsequent Event
On August 3, 1998, the Company issued $750,000 of 8% senior subordinated convertible redeemable debentures due August 3, 1999. Interest on the outstanding balance is due and payable monthly commencing September 3, 1998. The debentures may be converted into shares of the Company's stock at the lower of 75% of the closing bid price of the Company's stock the day immediately preceding the date of receipt by the Company of notice of conversion or by 75% of the closing bid price of the Company's stock on the five days immediately preceding the date of subscription by the holder as reported by the National Association of Securities Dealers Electronic Bulletin Board ("NASDAQ").
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