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, 2000
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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:
September 30, 2000
Common - 11,132,400 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
reviewed by its independent auditor 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>
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
As of September 30, 2000
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 330,686
Accounts receivable 185,280
Theft loss receivable 105,530
Inventory 615,456
Income tax refunds receivable 498
Other current assets 27,773
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Total Current Assets 1,265,223
EQUIPMENT, less accumulated depreciation of
$121,069 340,778
Deferred contract costs, less accumulated
amortization of $23,664 212,981
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TOTAL ASSETS $ 1,818,982
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CURRENT LIABILITIES
Notes payable $ 100,000
Current portion of installment notes payable 32,601
Demand note payable to stockholder 37,851
Accounts payable 721,257
Accounts payable to affiliate 544,456
Accrued expenses 144,589
Customer deposits 92,441
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Total Current Liabilities 1,673,195
LONG-TERM DEBT, net of current portion 74,942
Note payable to stockholder 77,087
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Total Liabilities 1,825,224
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STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 25,000,000
shares authorized, 11,132,400 shares
issued and outstanding 11,132
Paid in capital 2,203,764
Retained earnings (deficit) (2,221,138)
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Total Stockholders' Equity (Deficit) ( 6,242)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,818,982
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</TABLE>
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Nine Months Ended
September 30, 2000 and 1999
<CAPTION>
3 Months Ended 9 Months Ended
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
REVENUES
- non-affiliates $2,225,423 $2,183,846 $6,749,149 $6,876,897
- affiliates 505,550 505,550
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2,730,973 2,183,846 7,254,699 6,876,897
COST OF SALES
- purchases from
affiliates 1,194,179 2,441,411
- other 1,536,794 1,730,352 4,813,288 5,915,756
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2,385,669 1,730,352 6,283,782 5,915,756
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GROSS MARGIN 345,304 453,494 970,917 961,141
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Selling expenses 311,596 286,378 1,125,305 674,474
General and administrative 227,617 193,734 1,165,538 465,789
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NET (LOSS) FROM
OPERATIONS (193,909) ( 26,618) (1,319,926) (179,122)
Loss on sale of assets ( 5,446)
Interest income 65 43
Interest (expense) ( 6,529) ( 3,204) ( 32,116) ( 4,726)
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NET (LOSS) $ (200,438) $ ( 29,822)$(1,357,423) $ (183,805)
========== ========== ========== ==========
Income (loss) per common
share $(.018) $(.003) $(.126) $(.018)
Weighted average shares
outstanding 11,132,400 9,990,900 10,804,978 9,985,344
</TABLE>
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Nine Months Ended September 30, 2000 and 1999
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,357,423) $(183,805)
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock issued for services 390,000
Depreciation 51,343 17,818
Amortization 23,664
Loss on sale of asset 5,446
Change in cash from:
Accounts receivable ( 82,434) 947
Insurance claim receivable (127,755)
Inventory ( 238,013) ( 74,355)
Other current assets ( 8,241) ( 4,732)
Income tax refunds receivable 10,090
Accounts payable 129,072 (147,032)
Accrued expenses ( 44,806) 8,144
Customer deposits 92,441
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NET CASH FROM OPERATING ACTIVITIES (1,028,861) (510,770)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment ( 197,230) ( 14,176)
Proceeds from sale of assets 6,000
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NET CASH FLOWS FROM INVESTING ACTIVITIES ( 191,230) ( 14,176)
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CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash 750,000 50,000
Proceeds from new installment notes payable 106,619 332,755
Advances by (repayments to) founding stockholder 69,373 ( 1,576)
Accounts payable to affiliate 544,456
Payments on notes payable ( 34,852)
Principal payments on installment loans ( 39,610) ( 6,144)
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NET CASH FROM FINANCING ACTIVITIES 1,395,986 375,035
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NET CHANGE IN CASH 175,895 (149,911)
CASH ON HAND - beginning of year 154,791 226,418
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- end of year $ 330,686 $ 76,507
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SUPPLEMENTAL DISCLOSURES
Interest paid $ 25,587 $ 4,726
Income taxes paid 0 0
</TABLE>
COLE COMPUTER CORPORATION
NOTES TO 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
("SEC"), and should be read in conjunction with the audited financial
statements and notes thereto contained in the Company's Annual Report filed
with the SEC on Form 10-KSB. 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 the interim periods
presented have been reflected herein. The results of operations for interim
are not necessarily indicative of the results to be expected for the full
year. Notes to the financial statements which would substantially duplicate
the disclosure contained in the 1999 audited financial statements, as reported
in the 10-KSB, have been omitted.
NOTE 2. COMMON STOCK ISSUANCE
During the 9 months ended September 30, 2000, 500,000 shares were sold for
$750,000 in cash and 125,000 shares were issued for $187,500 worth of
services. Additionally, 250,000 shares were issued in payment of a $250,000
loan and 8,000 shares were issued for prepaid advertising of $12,000. 135,000
shares valued at $202,500 were issued for the purchase of an interest in a
contract to convert print books into CD-ROM and internet-downloadable versions
for a large non-profit corporation. In addition to the potential revenue
stream from the sale of the CD-ROMS, company promotional information will be
included with the CD-ROM's and with newsletters sent to the subscriber
database, which exceeds 700,000 members. The Company expects to provide up to
$150,000 to finance the conversion of the books. As of September 30, 2000,
the Company had advanced $15,938. The Company expects revenue from this
project to begin in October 2000; however due to the contingent nature of the
project, the entire $218,428 invested was recognized as an expense during June
2000.
NOTE 3. WAREHOUSE AGREEMENT
In October 2000, the Company entered into an agreement with Lasertech Computer
Distributors, Inc. ("Lasertech"), a major Company vendor controlled by a
Company director and stockholder, that provides for a warehouse for the
Company and also for financing of up to $1,000,000. Pursuant to the agreement,
Lasertech guaranteed payments on the part of the Company to another key
Company vendor, Bell Microproducts, thereby assisting the Company in
increasing its credit limit with that vendor. Additionally, Lastertech's
subsidiary, LTCom, which itself sells computer equipment, extended credit to
the Company in the amount of $1,000,000. Cole transferred its warehouse
employees to LTCom, which assumed responsibility for the warehouse functions
for the Company. The agreement provides that the Company may purchase the
entire warehouse operation operated by LTCom or a partial interest in the
operation. The full purchase price is $500,000 cash and $1,000,000 of Company
stock and partial interest would be allocated prorata with the amount paid.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
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The statements contained in this Form 10-Q are not purely historical but
also forward-looking statements and are being provided in reliance upon the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. All forward-looking statements are being made based on management's
best interpretation of the company's current data and are also based on
current management expectations and information available to the Company as of
this date. The Company assumes no obligation to update any forward-looking
statement. It is important to note that actual results may well differ
materially from historical results or those contemplated in the forward-
looking statements. Forward-looking statements involve a number of risks and
uncertainties, and include trend information. Factors that could cause actual
results to differ materially include, but not limited to, those identified in
"Certain Factors" and in other Company filings with the Securities and
Exchange Commission. All references are to the Company's fiscal period
ending December 31, 2000 unless otherwise indicated. These statements
specifically address 3rd Quarter 2000 results. Management has made best
efforts in its attempt to forecast future potential of the company and report
all relevant information of which it has been made aware. Management does
caution shareholders, investors, or potential investors to make their own
independent judgements and to seek competent and qualified advisors regarding
this report.
Results of Operations
The following discussion highlights our Company's performance and it
should be read in conjunction with the financial statements (including related
notes) accompanying this report.
Revenues increased 25% even though retail sales of $637,889 for the 3rd
quarter 2000 were down from $1,250,725 in the comparable period of '99. The
increase in the 3rd quarter was due primarily from $505,550 in sales to
affiliates and $177,803 in GSA sales. For the first nine months of 2000
revenue increased 5% from the same period in '99.
Cost of sales as a percentage of revenue increased to 87% from 79% when
compared to 3rd quarter of '99. This 8% can be contributed to the decrease
in retail sales as a percentage of total revenue. Cost of sales as a
percentage of revenue for the first nine months was 87% compared to 86% for
same period in '99.
Selling expenses as a percentage of total revenue dropped to 11% from
13% in 3rd quarter '99. This reflects the $40,269 decrease in advertising
expense. For the nine months of the year selling expenses as a percentage of
total revenue is 6% higher than the 10% in '99. Rent and labor costs for 3
new stores and salaries for GSA sales staff contributed to the increase.
General and administrative costs as a percentage of total revenue
decreased to 8% from 9% in the 3rd quarter '99. This decrease was due to the
stabilizing of G & A costs with an associated increase of revenue when
compared to same period in '99. General and administrative expense as a
percentage of total revenue for the nine months of the year is at 16%, up 9%
from the 7% experienced in '99.
Our loss of $200,438 in the 3rd quarter was less than desired when
compared to loss of $29,822 in '99. Loss for the year totaled $1,357,423
while '99 was $183,805. Expenses continued to exceed margins created by
revenue generated.
We have a negative working capital balance of $407,972. This is due
primarily to the losses experienced in the past. We are determined to make
reductions in overhead expenses-payroll, travel , etc. To help in this
effort of reducing expenses, we entered into an agreement with Lasertech
Computer Distributors, Inc. ("Lasertech"), a major vendor controlled by one of
our directors that provides a warehouse and financing of up to $1,000,000 for
product. As part of this agreement, warehouse employees were transferred to
LTCom, Lasertech's subsidiary, along with responsibility for the warehouse
functions and costs. We anticipate this agreement could result in significant
reductions in cost of sales and general and administrative costs in the fourth
quarter of 2000 with total effect to begin by end of 1st quarter 2001.
A negative equity of $6,242 exists due to the losses sustained in this
and prior periods. It should be corrected by profits and reductions in
expense from future periods.
Liquidity.
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The Company had current assets of $330,686 in cash, $185,280 in
Accounts Receivable and $615,456 of inventory. The Company had trade accounts
payable of $721,257, accrued expenses of $144,589.
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 third 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.
(i)
27 Financial Data Schedule
(ii)
Annual Report on Form 10-KSB for the calendar year ended
December 31, 1999, incorporated herein by reference.
(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: 11/14/00 By/s/John L. Ruth
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John L. Ruth, President and COO
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: 11/14/00 By/s/John L. Ruth
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John L. Ruth, President and COO
Date: 11/14/00 By/s/Homer O. Cole, III
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Homer O. Cole III, Director
and CEO
Date: 11/14/00 By/s/Cynthia A. Cole
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Cynthia A. Cole, Director
and Secretary/Treasurer
