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 June 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
--- --- --- ---
(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:
June 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.
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
As of June 30, 1999
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 10,515
Accounts receivable 63,050
Insurance claim receivable 127,755
Inventory 799,787
Other current assets 13,780
Total Current Assets 1,014,887
EQUIPMENT, less accumulated depreciation of $38,923 71,070
TOTAL ASSETS $1,085,957
CURRENT LIABILITIES
Current portion of installment
notes payable $ 6,883
Demand note payable to stockholder 54,051
Accounts payable 696,875
Accrued expenses 158,489
Total Current Liabilities 916,298
LONG-TERM DEBT, net of current portion 22,368
Total Liabilities 938,666
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) (358,404)
Total Stockholders' Equity (Deficit) 147,291
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,085,957
</TABLE>
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three and Six Month Periods Ended June 30, 1999 and 1998
<CAPTION>
- - - - 1999 - - - - - - - - 1998 - - - -
3 Months 6 Months 3 Months 6 Months
<S> <C> <C> <C> <C>
REVENUES $2,130,159 $4,693,051 $1,825,898 $3,445,651
COST OF SALES 1,894,903 4,185,404 1,687,192 3,083,885
GROSS MARGIN 235,256 507,647 138,706 361,767
Selling expenses 222,737 388,096 129,171 224,113
General and administrative 140,981 272,054 69,927 155,746
NET INCOME (LOSS)
FROM OPERATIONS (128,462) (152,502) ( 60,392) ( 18,092)
Other (income) and expense
Interest (income) ( 14) ( 43) ( 372) ( 430)
Interest expense 807 1,522 3,624 9,388
NET INCOME (LOSS)
BEFORE TAXES (129,255) (153,981) ( 63,644) ( 27,050)
INCOME TAX (benefit) ( 3,530)
NET INCOME (LOSS) $ (129,255) $ (153,981) $ ( 60,114)$ ( 27,050)
Income (loss) per
common share $(0.013) $(0.015) $(0.008) $(0.004)
Weighted average
shares outstanding 9,990,900 9,974,233 7,300,002 7,300,002
</TABLE>
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Ended June 30, 1999 and 1998
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(153,981) $( 27,050)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 12,441 8,798
Change in cash from:
Accounts receivable 23,008 ( 1,227)
Insurance claim receivable (127,755)
Inventory (148,191) (393,216)
Other current assets ( 3,192) ( 13)
Accounts payable 142,427 338,183
Accrued expenses 2,906 63,418
NET CASH FROM OPERATING ACTIVITIES (252,337) ( 11,107)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment ( 14,176) ( 22,543)
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock 50,000
Advances by (loans to) stockholders 4,987 48,774
New installment loans 20,468
Principal payments on installment loans ( 4,377) ( 9,989)
NET CASH FROM FINANCING ACTIVITIES 50,610 59,253
NET INCREASE (DECREASE) IN CASH (215,903) 25,603
CASH ON HAND - beginning of period 226,418 22,960
- end of period $ 10,515 $ 48,563
SUPPLEMENTAL DISCLOSURES
Interest paid $ 1,522 $ 9,388
Income taxes paid 0 0
</TABLE>
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 filed a claim with its
insurance carrier and believes the amount is fully reimbursable.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
- ------------------
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.
- ----------------------
The Company achieved revenues from commercial operations of
$2,130,159 for the quarter ended June 30, 1999, as compared to $1,825,898 for
the quarter ended June 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 ($129,255) net loss after taxes for the
quarter ended June 30, 1999, as compared to a net loss of ($60,114) for the
quarter ended June 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 $10,515 in cash, $63,050 in
Accounts Receivable and $799,787 of inventory. The Company had trade accounts
payable of $696,875, accrued purchases/expenses of $158,489, along with
current portions of installments and notes payable of $6,883.
The Company also raised $392,900 through the sale of 392,900 shares
of its common stock ("restricted securities") during 1998.
Year 2000
- ---------
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: 8/13/99 By/s/Homer O. Cole III
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Homer O. Cole III, Director
and President
Date: 8/13/99 By/s/Cynthia A. Cole
------------ ----------------------
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: 8/13/99 By/s/Homer O. Cole III
------------ ----------------------
Homer O. Cole III, Director
and President
Date: 8/13/99 By/s/Cynthia A. Cole
------------ ------------------------------
Cynthia A. Cole, Director
and Secretary/Treasurer
Date: 8/13/99 By/s/Kam Mar
------------ ------------------------------
Kam Mar, Director
Date: 8/13/99 By/s/S. F. Hartley, D.P.M.
------------ ------------------------------
S. F. Hartley, D.P.M., Director
<TABLE> <S> <C>
<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 10515
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<RECEIVABLES> 63050
<ALLOWANCES> 0
<INVENTORY> 799787
<CURRENT-ASSETS> 1014887
<PP&E> 109993
<DEPRECIATION> 38923
<TOTAL-ASSETS> 1085957
<CURRENT-LIABILITIES> 916298
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0
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<COMMON> 9991
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<TOTAL-LIABILITY-AND-EQUITY> 1085957
<SALES> 4693051
<TOTAL-REVENUES> 4693051
<CGS> 4185404
<TOTAL-COSTS> 4185404
<OTHER-EXPENSES> 660150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1522
<INCOME-PRETAX> (153981)
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<NET-INCOME> (153981)
<EPS-BASIC> (0.015)
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</TABLE>
