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, 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:
June 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 autidtor 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 June 30, 2000
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 97,000
Accounts receivable 107,017
Theft loss receivable 105,530
Inventory 374,399
Income tax refunds receivable 498
Other current assets 32,516
Total Current Assets 761,960
EQUIPMENT, less accumulated depreciation of 356,614
$102,089
Deferred contract costs, less accumulated amortization
of $11,832 224,813
TOTAL ASSETS $ 1,298,387
CURRENT LIABILITIES
Notes payable $ 100,000
Current portion of installment notes payable 21,602
Demand note payable to stockholder 37,851
Accounts payable 589,775
Accrued expenses 185,694
Total Current Liabilities 934,922
LONG-TERM DEBT, net of current portion 92,182
Note Payable to stockholder 77,087
Total Liabilities 1,104,191
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) (2,020,700)
Total Stockholders' Equity (Deficit) 194,196
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,298,387
</TABLE>
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Six Months Ended June 30, 2000 and 1999
<CAPTION>
3 Months Ended 6 Months Ended
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES $2,055,383 $2,130,159 $4,523,726 $4,693,051
COST OF SALES
Materials 1,763,257 1,767,449 3,701,318 3,919,058
Labor 44,609 79,305 86,791 166,363
Other 47,409 48,149 110,004 99,983
Total Cost of Sales 1,855,275 1,894,903 3,898,113 4,185,404
GROSS MARGIN 200,108 235,256 625,613 507,647
Selling expenses 392,367 222,737 813,709 388,096
General and administrative 644,296 140,981 937,921 272,053
NET (LOSS) FROM OPERATIONS (836,555) (128,462)(1,126,017) (152,502)
Loss on sale of assets (5,446) (5,446)
Interest income 65 14 65 43
Interest (expense) (13,073) (807) (25,587) (1,522)
NET (LOSS) BEFORE TAXES (855,009) (129,255)(1,156,985) (153,981)
INCOME TAX (Benefit)
NET (LOSS) (855,009) (129,255)(1,156,985) (153,981)
Income (loss) per common share $ (.075) $ (.013)$ (.109) $ (.015)
Weighted average shares
outstanding 11,132,400 9,990,900 10,641,267 9,974,233
</TABLE>
<TABLE>
COLE COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Six Months Ended June 30, 2000 and 1999
<CAPTION>
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,156,985) $(153,981)
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock issued in 1999 for 2000 services 390,000
Depreciation 32,363 12,441
Amortization 11,832
Loss on sale of asset 5,446
Change in cash from:
Accounts receivable (4,171) 23,008
Inventory 3,044 (148,191)
Income tax refunds receivable 10,090
Accounts payable (2,411) 142,427
Accrued expenses (3,699) 2,906
NET CASH FROM OPERATING ACTIVITIES (727,475) (252,337)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (194,086) (14,176)
Proceeds from sale of assets 6,000
NET CASH FLOWS FROM INVESTING ACTIVITIES (188,086)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash 750,000 50,000
Proceeds from new installment notes payable 106,619
Advances by (repayments to) founding stockholder 69,373 4,987
Payments on notes payable (33,370)
Principal payments on installment loans (34,852) (4,377)
NET CASH FROM FINANCING ACTIVITIES 857,770 50,610
NET CHANGE IN CASH (57,791) (215,903)
CASH ON HAND - beginning of year 154,791 226,418
- end of year $ 97,000 $ 10,515
SUPPLEMENTAL DISCLOSURES
Interest paid $ 25,587 $ 1,522
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 Registration Statement
filed with the SEC on Form SB-2. 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 SB-2, have been omitted.
NOTE 2. COMMON STOCK ISSUANCE
During the 6 months ended June 30, 2000, 500,000 shares were sold
for $750,000 and 518,000 shares were issued as follows: 268,000 shares were
issued for services valued at $390,000 and 250,000 shares were issued in
exchange for a $250,000 note payable to a current stockholder and major
supplier. Included in the shares issued for services is 135,000 shares valued
at $202,500 issued for the purchase of an interest in a contract to convert
print books into CD-ROM and internet-downloadable versions for the American
Heart Association. In connection with this purchase, the Company is obligated
to fund up to $150,000 in related costs of conversion. As of June 30, 2000,
the Company had advanced $15,938. The Company expects revenue from this
project to begin late 2000, but due to the contingent nature of the project,
the entire $218,428 invested is recognized as an expense as of June 30, 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
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Cole's Objective is to maximize the stockholders' value by executing
a strategy that focuses on the priority of growth, profitability, customer
satisfaction and service. The following discussion highlights the Company's
performance in context to these priorities, and it should be read in
conjunction with the financial statements (including related notes)
accompanying this report.
Cole Computer Corporation suffered during the second quarter from
similar industry decrease in sales. The sales decreases were in part due to
the industry reaction to Y2K. Many of the Corporate and Government customers
spent a major portion of their IT budget to make sure they were Y2K compliant.
The industry should start making a recovery during the 3rd quarter.
Cole management has implemented several cost saving measures to
reduce overhead. The Company reduced middle management personnel by 32
percent and is looking at further reductions in the 3rd quarter.
In addition, Cole reached an agreement with a major distributor to
open a distribution network in Oklahoma. This will reduce our inventory
investment and significantly reduce our shipping cost. Under this agreement,
10 personnel were taken off of Cole's payroll to the new distribution company,
again reducing the overall overhead in personnel cost.
During this quarter, Cole has signed strategic alliances with
several high tech companies to diversify and expand. In June, Cole Computer
Corporation established a joint venture to develop the electronic delivery
system for the American Heart Association's Emergency Cardiovascular Care
International Guidelines 2000. The International Guidelines 2000 will be
published in the August 22 issue of "Circulation." Cole Computer Corporation
will work with CurrentsOnLine.com, Inc. to provide the Internet based delivery
and distribution system for the International Guidelines 2000. This worldwide
distribution will be targeted to over 200 countries who recognize these
Guidelines for Cardiopulmonary Resuscitation (CPR) as well as Advanced and
Pediatric emergency cardiovascular care. These International Guidelines will
be offered over the Internet for the first time since their inception in 1974.
In addition, Cole has added strength to its commitment to the
government market by signing an agreement with Engineering and Professional
Services, Inc. (EPS), a major provider of computers and services. EPS is a
multi-disciplined, problem-solving organization with proven capabilities in
physical, engineering and systems science applications. The scope of projects
conducted by EPS in these fields has ranged from the analysis, design,
development and implementation of manual and semi-automated data processing
systems, to supplying ADP mini-and large-scale computer systems for major
military, scientific and industrial applications. The Company is maturing and
this, augmented by client confidence, allows us to begin integrating
additional technical capabilities in meeting military requirements.
EPS has years of technical and management successes in supporting
military requirements. EPS has successfully managed systems engineering and
technical support programs and their experienced personnel and corporate
knowledge base has provided high yield, low risk, rapid response support at a
profitable level. EPS offers a singularly and totally committed capability to
meet program challenges and to assist in meeting engineering requirements of
customers.
EPS has proven through existing contracts that it can successfully
support Government Engineering requirements. EPS is recognized as a responsive
performer in the U.S. Army Communications - Electronics Command (CECOM)
community. EPS has a complete range and depth of personnel in-house and ready-
to-serve.
Our Company will continue to build on its strengths and will launch
a new retail outlet during the month of August in Arkansas and others later.
Results of Operations.
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The revenues we produced for the 2nd quarter of 2000 dropped 3.5%
compared to the same period in 1999. The drop in sales is due to decreases in
all sales categories.
Selling expenses increased 76% in the 2nd quarter of 2000 compared
to 2nd quarter of 1999. This reflects an increase in GSA salaries of $37,500
paid by stock per an employment contract and an increase in advertising
expense of $35,000 in 2000 when compared to same period in 1999.
General and administrative expenses increased nearly 400% in the 2nd
quarter of 2000 when compared to same period in 1999. Outside services paid
with Company stock of $202,500, stock issued to employees of $150,000, along
with increases in officer salaries, legal services and depreciation made up
the principal reasons for this increase of general and administrative
expenses, when compared to same period in 1999.
We experienced a loss of ($855,000) in the 2nd quarter of 2000
compared to a loss of ($130,000) in the 2nd quarter of 1999. The primary
reasons for this loss were the increases in selling, general and
administrative expenses and the drop in sales as mentioned above.
The remaining 171,628 private placement shares were sold in April
2000 @ $1.50 per share providing an additional $257,442 cash for working
capital. An additional 268,000 shares of Company stock were issued in
2ndquarter of 2000 to pay for outside services and employee contracts. These
issuances were valued at $402,000.
Liquidity.
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The Company had current assets of $97,000 in cash, $107,017 in
Accounts Receivable and $374,399 of inventory. The Company had trade accounts
payable of $589,775, accrued expenses of $185,694.
During the six months ended June 30, 2000, 500,000 shares were sold
for $750,000 and 518,000 shares were issued as follows: 268,000 shares were
issued for services valued at $390,000 and 250,000 shares were issued in
exchange for a $250,000 note payable to a current stockholder and major
supplier.
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 second 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: 8/18/00 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: 8/18/00 By/s/John L. Ruth
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John L. Ruth, President and COO
Date: 8/18/00 By/s/Homer O. Cole, III
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Homer O. Cole III, Director
and CEO
Date: 8/18/2000 By/s/Cynthia A. Cole
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Cynthia A. Cole, Director
and Secretary/Treasurer
