U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No.:0-23819
COLE COMPUTER CORPORATION
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(Name of Small Business Issuer in its Charter)
NEVADA 76-0547762
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
11711 South Portland
Oklahoma City, Oklahoma 73170
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (405) 692-5351
N/A
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(Former Name or Former Address, if changed since last Report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
(1) Yes X No (2) Yes X No
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(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes____ No ___
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
September 30, 1999
Common - 9,990,900 shares
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
Transitional Small Business Issuer Format Yes X No
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Consolidated Financial Statements of the Company required
to be filed with this 10-QSB Quarterly Report were prepared by management and
commence on the following page, together with related Notes. In the opinion
of management, the Consolidated Financial Statements fairly present the
financial condition of the Company.
<PAGE>
COLE COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
As of September 30, 1999
CURRENT ASSETS
Cash $ 76,507
Accounts receivable 85,111
Insurance claim receivable 127,755
Inventory 725,950
Other current assets 15,320
Total Current Assets 1,030,644
EQUIPMENT, less accumulated depreciation of $51,522 65,693
TOTAL ASSETS $1,096,337
CURRENT LIABILITIES
Current portion of installment
notes payable $ 6,883
Notes payable 332,755
Demand note payable to stockholder 47,487
Accounts payable 407,415
Accrued expenses 163,727
Total Current Liabilities 958,267
LONG-TERM DEBT, net of current portion 20,601
Total Liabilities 978,868
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 25,000,000
shares authorized, 9,990,900 shares
issued and outstanding 9,991
Paid in capital 495,704
Retained earnings (Deficit) (388,226)
Total Stockholders' Equity (Deficit) 117,469
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,096,337
<PAGE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Month Periods Ended September 30, 1999 and 1998
- - - - 1999 - - - -
- - - - 1998 - - - -
3 Months 9 Months 3
Months 9 Months
REVENUES $2,183,846 $6,876,897
$2,473,917 $5,919,568
COST OF SALES 1,730,352 5,915,756
2,157,435 5,241,320
GROSS MARGIN 453,494 961,141
316,482 678,248
Selling expenses 286,378 674,474
191,186 415,299
General and administrative 193,733 465,789
93,029 248,775
Total Operating Expenses 480,112 1,140,263
284,216 664,075
NET INCOME (LOSS)
FROM OPERATIONS ( 26,618) (179,122)
32,266 14,173
Other income and (expense)
Interest income 43
131 561
Interest (expense) (3,204) ( 4,726) (
11,144) ( 20,532)
NET INCOME (LOSS)
BEFORE TAXES ( 29,822) (183,805)
21,253 ( 5,798)
INCOME TAX (benefit)
NET INCOME (LOSS) $ ( 29,822) $ (183,805) $
21,253 $ ( 5,798)
Income (loss) per
common share $(0.00) $(0.02)
$ 0.00 $(0.00)
Weighted average
shares outstanding 9,990,900 9,985,344
7,300,002 7,300,002
<PAGE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Nine Months Ended September 30, 1999 and 1998
1999 1998
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $(183,805) $( 5,798)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 17,818 13,198
Change in cash from:
Accounts receivable 947 ( 13,669)
Insurance claim receivable (127,755)
Inventory ( 74,355) (657,220)
Other current assets ( 4,732) ( 1,120)
Accounts payable (147,032) 621,855
Accrued expenses 8,144 37,550
NET CASH FROM OPERATING
ACTIVITIES (510,770) ( 5,204)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of equipment ( 14,176) ( 30,111)
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock 50,000
Proceeds from short-term loans,
net of repayments 332,755
Advances by (repayments to)
stockholders ( 1,576) 47,035
New installment loans 20,468
Principal payments on
installment loans ( 6,144) ( 19,346)
NET CASH FROM FINANCING
ACTIVITIES 375,035 48,157
NET INCREASE (DECREASE) IN CASH (149,911) ( 12,842)
CASH ON HAND - beginning of period 226,418 22,960
- end of period $ 76,507 $ 35,802
SUPPLEMENTAL DISCLOSURES
Interest paid $ 4,726 $ 9,388
Income taxes paid 0 0
<PAGE>
COLE COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements of Cole Computer
Corporation have been prepared in accordance with generally accepted
accounting principles and the rules of the Securities and Exchange Commission.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for interim periods are not necessarily indicative of
the results to be expected for the full year.
NOTE 2. THEFT LOSS
In May 1999, the Company suffered a theft loss of $127,755 through the
unauthorized use of credit cards. Management has not written off this amount,
because they believe the amount is properly reimbursable.
NOTES 3. SHORT-TERM NOTES PAYABLE
In connection with the theft loss, the Company agreed to repay the credit card
clearing bank, pending an investigation of liability, in 8 monthly
installments of $15,000 beginning July 20, 1999, plus a final installment of
the remaining balance on March 20, 2000, with no interest.
The Company borrowed $250,000 from a director, stockholder and major supplier.
This amount is unsecured and is repayable in February 2000, with 12% interest
payable monthly.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
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Computer Masters has developed the unique opportunity in the
computer markets with sales of parts, software, upgrade components and custom
designed computer systems coupled with quality and personal service to retail
and wholesale customers as well as local, state and federal government
agencies.
This market niche exists because of the monumental and rapid changes
in the computer industry wherein a computer system from last year (or even
last month) needs to be upgraded due to technology advances. The ultimate
design of every computer system today must consider the need for
interchangeable parts so that these systems can be upgraded, with ease, when
future technology advances are made.
Computer Masters has sought to fill this market need by its
selection of strategic suppliers, including Advanced Micro Devices, Microsoft
and many others, and has grown with such partners to now hold direct
purchasing power, which provides a substantial economic advantage over other
competitors in its area of focus.
Computer Masters has found that rural and small-town computer
markets have been left alone by the major computer companies which have chosen
to focus on sales or complete systems alone or by major retailers who fail to
offer parts, upgrade components or professional support to the computer user.
From its home base in central Oklahoma, Computer Masters has and
will continue to be in the development of select market areas in the Midwest,
especially rural and "small-town" America, which have been neglected by major
computer retailers. This niche currently seeks personal contact with quality
support and services to meet their information systems needs, no matter if
such consumer is a family, small business, school district, federal government
agency or military forces base.
Results of Operations.
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The Company achieved revenues from commercial operations of
$2,183,846 for the quarter ended September 30, 1999, as compared to $2,473,917
for the quarter ended September 30, 1998. Such revenues were derived from
sales of computer systems, component parts and upgrade parts from its nine
storefront locations in Oklahoma and Arkansas. During 1998, the Company
opened four new locations and is pleased to report significant activity
accomplishments at each existing and new location.
During 1998, the Company's gross profit margin was an estimated
10.7% of net sales. This includes wholesale, government and retail sales
activities. No single customer accounted for more than 10% of sales
activities for the year. This gross margin percentage reflects the opening of
four new store fronts in 1998.
The Company incurred a ($29,822) net loss after taxes for the
quarter ended September 30, 1999, as compared to net income of $21,253 for the
quarter ended September 30, 1998. Such activities include all costs
of operations along with incurred or accrued costs from the reorganization
activities between the public corporation and the privately held Computer
Masters.
Liquidity.
- ----------
The Company had current assets of $76,507 in cash, $85,111 in
Accounts Receivable and $725,950 of inventory. The Company had trade accounts
payable of $407,415, accrued expenses of $163,727, along with current portions
of installments and notes payable of $6,883.
Year 2000
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All hardware products sold by the Company are Year 2000 compliant.
However, the Company accepts no responsibility or Y2K compliance with regards
to software. Software compliance is the sole responsibility of its respective
manufacturers.
The Company can give no assurance that third parties with whom it
intends to do business will ensure Year 2000 compliance in a timely manner or
that, if they do not, their computer systems will not have an adverse effect
on the Company. However, the Company does not believe that Year 2000
compliance issues of third parties will result in a material adverse
effect on its financial condition or results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 2. Changes in Securities.
None; not applicable.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of the Company's security holders
during the first quarter of the calendar year covered by this Report.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(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.
COLE COMPUTER CORPORATION
Date: 11/12/99 By /s/ Homer O. Cole III
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Homer O. Cole III, Director
and President
Date: 11/12/99 By /s/ Cynthia A. Cole
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Cynthia A. Cole, Director
and Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated:
COLE COMPUTER CORPORATION
Date: 11/12/99 By /s/ Homer O. Cole III
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Homer O. Cole III, Director
and President
Date: 11/12/99 By /s/ Cynthia A. Cole
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Cynthia A. Cole, Director
and Secretary/Treasurer
Date: 11/12/99 By /s/ Kam Mar
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Kam Mar, Director
Date: 11/12/99 By /s/ S.F. Hartley
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S. F. Hartley, D.P.M., Director
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