UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required]
For the quarterly period ended - September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period from ________ to ________
Commission file number 33-33042-NY
CORONADO INDUSTRIES, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Nevada 22-3161629
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16929 E. Enterprise Drive, Suite 202, Fountain Hills, AZ 85268
- --------------------------------------------------------------- ---------
(Address of Principal executive offices) (as of date of filing) (Zip Code)
Issuer's telephone number (602) 837-6810
---------------
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 Registrant was required to file such reports), and (2)
has been subject such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant 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 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: 32,621,090
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
CORONADO INDUSTRIES, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
Page
----
PART I
Item 1 Financial Statements 1
Item 2. Management's Discussion and Analysis
or Plan of Operation 7
PART II
Item 1. Legal Proceedings 10
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matter to a Vote of Security Holders N/A
Item 5. Other Matters N/A
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
September 30, December 31,
1999 1998
(Unaudited) (Audited)
----------- -----------
ASSETS
Current Assets:
Cash $ 7,608 $ 36,844
Accounts Receivable, net 14,559 61,405
Inventory 24,265 24,865
Prepaid Expenses 0 22,490
----------- ----------
Total Current Assets 46,432 145,604
Property and Equipment, net 120,736 144,436
Other Assets:
Intangible Assets 29,772 32,589
Deferred Loan Expense 27,500 0
----------- ----------
Total Assets $ 224,440 $ 322,629
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes Payable -- Officers $ 16,975 $ 0
Accounts Payable 15,474 28,989
Accrued Salaries 200,000 0
----------- ----------
Total Current Liabilities $ 232,449 $ 28,989
Long-term Debt 230,000 0
----------- ----------
Total Liabilities 462,449 28,989
----------- ----------
Stockholders' Equity (Deficit):
Preferred Stock 0 0
Common Stock - $.001 par value;
50,000,000 shares authorized, 32,555,297
shares outstanding at September 30, 1999;
31,560,176 outstanding at December 31, 1998 32,555 31,561
Additional Paid-in Capital 3,017,776 2,778,926
Accumulated Deficit (3,288,340) (2,516,847)
----------- ----------
Total Stockholders' Equity (Deficit) (238,009) 293,640
----------- ----------
Total Liabilities And Stockholders'
Equity (Deficit) $ 224,440 $ 322,629
=========== ==========
1
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
Nine Months Three Months
------------------------ -------------------------
1999 1998 1999 1998
---- ---- ---- ----
Product Revenues $ 46,000 $ 0 $ 0 $ 0
Patient Revenues 28,005 241,515 0 61,748
----------- ---------- ----------- -----------
Total Revenues $ 74,005 $ 241,515 $ 0 $ 61,748
----------- ---------- ----------- -----------
Cost of Product Revenues 125,150 0 0 0
Cost of Patient Revenues 67,255 431,592 0 174,802
----------- ---------- ----------- -----------
Total Cost of Revenues 192,405 431,592 0 174,802
----------- ---------- ----------- -----------
Gross Loss (118,400) (190,077) 0 (113,054)
General and Administrative
Expenses 744,598 797,686 213,436 238,113
----------- ---------- ----------- -----------
Loss from Operations (862,998) (987,763) (213,436) (351,167)
Interest Expense (16,995) (13,117) (8,100) (945)
Other Income 108,500 66 (1,500) --
----------- ----------- ----------- -----------
Net Loss (771,493) (1,000,814) (223,036) (352,112)
=========== =========== =========== ===========
Basic Loss per Share $ (.02) $ (.05) $ (.01) $ (.02)
=========== =========== =========== ===========
Weighted Average Shares
Outstanding 32,132,948 20,296,248 32,254,865 21,606,842
=========== =========== =========== ===========
2
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For The Nine Month Period Ended September 30, 1999
Total
Common Stock Stock-
------------------- Additional Retained Holders'
Shares Paid-in Earnings Treasury Equity
Outstanding Amount Capital (Deficit) Stock (Deficit)
----------- ------ ------- --------- ----- -------
Balance at
December
31, 1998 31,560,176 $31,561 $2,778,926 $(2,516,847) $ -- $293,640
Stock issued
for services 995,121 994 238,850 -- -- 239,844
Net loss -- -- -- (771,493) -- (771,493)
---------- ------- ---------- ----------- ----- --------
Balance at
September
30, 1998 32,555,297 $32,555 $3,017,776 $(3,288,340) $ -- $(238,009)
========== ======= ========== =========== ===== =========
3
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
September 30, September 30,
1999 1998
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Cash paid for operating expenses $(100,735) $(205,557)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment -- (12,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 16,975 --
Repayment of debt -- (37,500)
Proceeds from stock sale -- --
--------- ---------
NET INCREASE (DECREASE) IN CASH (83,760) (255,538)
CASH, beginning of period 91,368 509,265
--------- ---------
CASH, end of period $ 7,608 $ 253,727
========= =========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $(223,036) $(352,112)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 2,439 876
Depreciation 7,900 6,733
Stock issued for services 43,387 46,000
Interest added to loan -- 945
(Increase)/decrease in:
Accounts receivable 16,698 16,525
Inventory -- (17,416)
Prepaid expenses -- 25,772
Increase (decrease) in:
Accounts payable (23,123) 9,470
Accrued salaries 75,000 50,000
Accrued payroll taxes -- 7,650
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (100,735) $(205,557)
========= =========
4
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
September 30, September 30,
1999 1998
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Cash paid for operating expenses $(357,211) $ (786,209)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment -- (26,400)
Sale of Buildings 111,000 --
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 216,975 25,000
Repayment of debt -- (282,970)
Proceeds from stock sales -- 1,258,675
--------- ----------
NET INCREASE (DECREASE) IN CASH (29,236) 188,096
CASH, beginning of period 36,844 65,631
--------- ----------
CASH, end of period $ 7,608 $ 253,727
========= ==========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss (771,493) (1,000,814)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 5,317 2,628
Depreciation 23,700 31,868
Gain On Sale Of Building (111,000) 0
Stock issued for services 239,844 221,000
Interest added to loan -- 945
(Increase)/decrease in:
Accounts receivable 46,846 (70,958)
Inventory 600 (17,416)
Prepaid expenses 22,490 75,272
Increase (decrease) in:
Accounts payable (13,515) (52,314)
Accrued salaries 200,000 26,327
Accrued payroll taxes -- (2,747)
--------- ----------
NET CASH USED IN OPERATING ACTIVITIES $(357,211) $ (786,209)
========= ==========
5
<PAGE>
Coronado Industries, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
In the opinion of management, the accompanying financial statements reflect all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the Company's financial position as of September 30, 1999 and the results
of its operations for the three and nine months ended September 30, 1999.
Although management believes that the disclosures in these financial statements
are adequate to make the information presented not misleading, certain
information and footnote disclosures normally included in financial statements
that have been prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities Exchange Commission.
The results of operations for the three and nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the full
year ending December 31, 1999. The accompanying consolidated financial
statements should be read in conjunction with the more detailed financial
statements, and the related footnotes thereto, filed with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the financial position, results of
operations, cash flows and changes in stockholder's equity of Coronado
Industries, Inc., and its wholly-owned subsidiaries. All material intercompany
transactions, accounts and balances have been eliminated.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
6
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIC LOSS PER SHARE:
For the nine and three month periods ending September 30, 1999 and 1998, basic
loss per share includes no dilution and is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share are not presented as
their affect is antidilutive.
3. SEGMENT INFORMATION:
The Company divides its revenues and costs on the following geographic basis for
segment reporting purposes:
9 Month 3 Month
--------- ---------
Scottsdale revenues $ 28,005 $ 0
Scottsdale costs 67,255 0
--------- ---------
$ (39,250) $ 0
General corporate revenues 46,000 0
General corporate costs 869,748 213,436
--------- ---------
$(823,748) $(213,436)
The Company's assets are allocated on the following geographic basis for segment
reporting purposes:
Scottsdale $ 0
Clearwater 105,736
General corporate 118,704
---------
Total Assets $ 224,440
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this document contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Company intends
that such forward-looking statements be subject to the safe harbors created
thereby. Such forward-looking statements involve risks and uncertainties and
include, but are not limited to, statements regarding future events and the
Company's plans and expectations. The Company's actual results may differ
materially from such statements. Although the Company believes that the
assumptions underlying the forward-looking statements herein are reasonable, any
of the assumptions could prove inaccurate and, therefore, there can be no
assurance that the results contemplated in such forward-looking statements will
be realized. In addition, the business and operations of the Company are subject
to substantial risks which increase the uncertainties inherent in the
forward-looking statements included in this document. The inclusion of such
forward-looking information should not be regarded as a representation by the
Company or any other person that the future events, plans or expectations
contemplated by the Company will be achieved.
YEAR 2000 ISSUES
The Company believes its present operations are Year 2000 compliant because the
Company's current use of computers on the headquarters level is minimal and the
primary customer of the Company's treatment centers is the federal government.
At the headquarters level the Company's computers are used exclusively for word
processing, as opposed to accounting, functions. Since the Company's present and
future product sales will be done on a cash-on-delivery or pre-paid basis, the
Company will have no significant accounts receivable for product sales. All of
the Company's employee payroll functions are handled by a nationwide third-party
vendor which has advised the Company that its operations are Year 2000
compliant.
With respect to the Company's treatment centers, the Company purchased a
computer software system in December 1997 which was represented as Year 2000
compliant and the Company's computers purchased in 1997 use an operating system
which is represented as Year 2000 compliant. At this time the Company believes
the risks to its operations from a Year 2000 problem are minimal.
QUARTER ENDING SEPTEMBER 30, 1999
OPERATIONS. Since Registrant closed its Scottsdale glaucoma treatment center on
March 2, 1999, there is no complete quarter of the 1999 fiscal year to compare
to the prior year's operations.
For the quarter ending September 30, 1999 Registrant experienced a net loss of
$223,036, which was comprised primarily of its general and administrative
expenses of $213,436. 65.6% of Registrant's 1999 third quarter corporate
expenses consisted of officers salaries of $75,000 (35.1%), professional
expenses of $53,985 (25.3%) and shareholder services and media promotion of
$11,106 (5.2%). In comparison, during the third quarter of the 1998 fiscal year
83.2% of Registrant's corporate expense of $238,113 consisted of officers
salaries of $50,000 (21.0%), professional expenses of $52,385 (22.0%) and
shareholder services and media promotion of $95,785 (40.2%). In April 1999 the
annual salaries of Registrant's Chairman and President were increased to
$150,000. Registrant expects its professional expenses in 1999 to remain at a
high level as a result of its continuing costs for its FDA application presently
estimated at $25,000 per month. Since the Registrant engaged a public relations
firm in the second quarter who will receive cash for services, it is likely that
Registrant's shareholder services expenses will be lower in the remainder of
1999 than in the first half of 1999.
8
<PAGE>
NINE MONTHS ENDING SEPTEMBER 30, 1999
OPERATIONS. For the nine months ending September 30, 1999 Registrant experienced
a net loss of $771,493, which was comprised primarily of a net loss from the
sale of Registrant's product of $118,400, its general and administrative
expenses incurred at the corporate level of $744,598 and a net gain from the
sale of the Scottsdale treatment center building of $108,500. The Registrant had
a net loss from operations of $862,998 for the nine months ending September 30,
1999. 61.4% of Registrant's 1999 corporate expenses consisted of officers
salaries of $200,000 (26.9%), professional expenses of $181,860 (24.4%) and
shareholder services and media promotion of $74,905 (10.1%). In comparison,
during the first three quarters of the 1998 fiscal year 78.8% of Registrant's
corporate expense of $797,686 consisted of officers salaries of $150,000
(18.8%), professional expenses of $148,330 (18.6%) and shareholder services and
media promotion of $330,461 (41.4%). In April 1999 the annual salaries of
Registrant's Chairman and President were increased to $150,000. Registrant
expects its professional expenses in 1999 to remain at a high level as a result
of its continuing costs for its FDA application presently estimated at $25,000
per month. Since the Registrant engaged a public relations firm in the second
quarter who will receive cash for services, it is likely that Registrant's
shareholder services expenses will be lower in the remainder of 1999 than in the
first half of 1999.
During the first quarter of 1998 the Registrant's Scottsdale treatment center
produced a net loss of $55,917, with revenues of $28,005 and costs of revenues
of $83,922 before allocation of management overhead. In the first quarter of
1999 the services of Dr. Leo Bores, the Medical Director of the Scottsdale
treatment center, were needed at the Registrant's headquarters in connection
with the Registrant's FDA product approval process and the Scottsdale treatment
center was closed on March 2, 1999. However, the Registrant intends to move the
equipment used in the Scottsdale center to the Clearwater center without
incurring any loss on that equipment. No charges or write-offs will be incurred
from the closure of the Scottsdale treatment center, and all losses incurred in
the past at the Scottsdale treatment center are recoverable from the sale of the
Registrant's patented equipment in the U.S. prior to FDA product approval (see
below).
The Registrant currently plans on opening its Clearwater treatment center within
three months of securing the services of a suitable medical director and
obtaining sufficient financing for the center (see below). The Registrant is
hopeful, without any assurance, that the right physician will be able to make
the Clearwater treatment center much more profitable than the Scottsdale center.
However, the Registrant will incur substantial travel expenses in the future in
managing the Clearwater treatment center, expenses which were not involved in
managing the Scottsdale treatment center.
LIQUIDITY AND CAPITAL RESOURCES. On a short-term and long-term basis Registrant
requires only minimal capital to sustain its manufacturing of the patented
equipment, because of Registrant's current inventory levels. Because of the
Registrant's cash position at year-end and minimal general and administrative
cash expenses totaling approximately $1,000,000 per year, the Registrant was
suffering from a liquidity shortage during the first three quarters of 1999. On
May 4, 1999 Registrant obtained a loan of $270,000 from a third party, bearing
an annual interest rate of 18% and secured by Registrant's equipment, inventory
and accounts receivable, a security deposit of $40,000 from the loan proceeds
and the personal guaranty of Registrant's Chairman, G. Richard Smith.
9
<PAGE>
In June 1999 Registrant arranged for the sale of the building in which its
Scottsdale treatment center had previously operated. Registrant received
$108,500 of net proceeds from this sale.
Even with the May 1999 loan and the June 1999 building sale, it is likely
Registrant will need external financing in the last quarter of 1999 in order to
continue its FDA product application, unless substantial product sales are
achieved. There can be no assurance Registrant will be able to obtain any
financing in the future.
Registrant also requires approximately $400,000 to $600,000 to adequately fund
the first year's operation of its planned Clearwater glaucoma treatment center.
Registrant is presently planning to secure debt financing in 1999 to finance the
Clearwater treatment center. However, at this time Registrant has received no
commitments from any source to provide such financing and its financing sources
appear limited.
In fourth quarter of 1998 the Registrant commenced the sale of a limited number
of units of its patented equipment to ophthalmologists in the United States,
pursuant to FDA investigational device exemption regulations. These FDA
regulations permit the Registrant to recover from the sale of its product an
amount equal to its costs of preparing its product for FDA approval. The
Registrant's patented product was presented to a number of U.S. physicians at
the convention of American Academy of Ophthalmologists in New Orleans in
November 1998 and a conference in Hawaii in January 1999. The Registrant has
arranged with a lender for the financing of purchases of up to 200 units of the
Registrant's patented equipment by U.S. ophthalmologists. The monthly payment
for the equipment by the physician will be approximately equal to the dollar
amount reimbursed to the physician by Medicare for the treatment of one glaucoma
patient each month. Through September 30, 1999 the Registrant had sold 3 units
of its product in the U.S. The Registrant expects, without assurance, that its
limited sale of its product to U.S. physicians in the coming months will have a
positive impact on the Registrant's short-term liquidity; however, its sales
effort may be somewhat limited by Registrant's lack of substantial funding for
marketing.
Prior to and as a result of the presentation of the Registrant's patented
equipment at the New Orleans' convention of ophthalmologists in November 1998,
the Registrant has held discussions with potential distributors for the
Registrant's product in the U.S. on a non-exclusive and an exclusive basis. The
Registrant also had negotiations in November and December 1998 with a European
distributor concerning exclusive distribution of the Registrant's product in
Europe pursuant to a multi-year agreement. The Registrant expects negotiations
on one or more U.S. and European distribution agreements to continue throughout
1999; however, there is no assurance that any distribution contracts will ever
be executed by the Registrant.
On a long-term basis, Registrant anticipates, without assurances, that the sale
of its product in the U.S. and internationally will provide sufficient liquidity
to the Registrant.
In February through April 1999 the Registrant received loans totaling $40,000
from each of G. Richard Smith and Gary R. Smith, the Registrant's Chairman and
President, respectively. These loans accrued annual interest at the rate of 15%
and were repaid in May 1999. During the third quarter of 1999 Registrant
received loans totaling $16,975 from G. Richard Smith and Gary R. Smith. These
loans accrue annual interest at the rate of 15%.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no legal proceedings instituted by or against the
Registrant during the quarter ending September 30, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
There were no Reports on Form 8-K filed during the quarter ended
September 30, 1999.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto authorized.
CORONADO INDUSTRIES, INC.
Date: November 12, 1999 By: /s/ Gary R. Smith
------------------ ---------------------------------------
Gary R. Smith, President (Chief
Executive Officer) and Treasurer
(Chief Financial and Accounting Officer)
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,606
<SECURITIES> 0
<RECEIVABLES> 14,559
<ALLOWANCES> 0
<INVENTORY> 24,265
<CURRENT-ASSETS> 46,432
<PP&E> 120,736
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,440
<CURRENT-LIABILITIES> 232,449
<BONDS> 0
0
0
<COMMON> 32,555
<OTHER-SE> (238,009)
<TOTAL-LIABILITY-AND-EQUITY> 224,440
<SALES> 74,005
<TOTAL-REVENUES> 74,005
<CGS> 192,405
<TOTAL-COSTS> 192,405
<OTHER-EXPENSES> 744,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,995
<INCOME-PRETAX> (771,493)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (771,493)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
