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 - June 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 June 30, 1999: 32,283,373.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
CORONADO INDUSTRIES, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
Page
----
PART I
Item 1 Financial Statements 1
Item 2. Management's Discussion and Analysis
or Plan of Operation 4
PART II
Item 1. Legal Proceedings 5
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 5
SIGNATURES 6
<PAGE>
CORONADO INDUSTRIES, INC.
BALANCE SHEETS
June 30, 1999 and December 31, 1998
June 30, December 31,
1999 1998
(Unaudited) (Audited)
----------- -----------
ASSETS
Current Assets:
Cash $ 91,368 $ 36,844
Accounts Receivable, net 31,257 61,405
Inventory 24,265 24,865
Prepaid Expenses 0 22,490
---------- ---------
Total Current Assets 146,890 145,604
Property and Equipment, net 128,636 144,436
Other Assets:
Intangible Assets 30,711 32,589
Deferred Loan Expense 29,000 0
---------- ---------
Total Assets $ 335,237 $ 322,629
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Note Payable to Related Party -
Current Portion 0 0
Accounts Payable 38,597 28,989
Accrued Salaries 125,000 0
---------- ---------
Total Current Liabilities $ 163,597 $ 28,989
Long-term Debt 230,000 0
---------- ---------
Total Liabilities $ 393,597 28,989
---------- ---------
Stockholders' Equity (Deficit):
Preferred Stock 0 0
Common Stock - $.001 par value;
50,000,000 shares authorized, 32,283,373
shares outstanding at June 30, 1999;
31,560,176 outstanding at December 31, 1998 32,273 31,561
Additional Paid-in Capital 2,974,671 2,778,926
Accumulated Deficit (3,065,304) (2,516,847)
---------- ---------
Total Stockholders' Equity (Deficit) (58,360) 293,640
---------- ---------
Total Liabilities And Stockholders'
Equity (Deficit) $ 335,237 $ 322,629
========== =========
1
<PAGE>
CORONADO INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED JUNE 30, 1999 AND MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Product Revenues $ 46,000 $ 0 $ 0 $ 0
Patient Revenue 28,005 179,767 0 80,650
----------- ---------- ----------- ----------
Total Revenues 74,005 179,767 0 80,650
Cost of Product Revenues 125,150 0 121,250 0
Cost of Patient Revenues 67,255 256,790 0 124,832
----------- ---------- ----------- ----------
Total Cost of Revenues 192,405 256,790 121,250 124,832
----------- ---------- ----------- ----------
Gross Loss 118,400 77,023 121,250 44,182
General and Administrative Expenses 531,162 559,573 376,199 341,130
----------- ---------- ----------- ----------
Loss from Operations (649,562) (636,596) (497,449) (385,312)
Interest Expense (8,895) (12,172) (8,295) (1,161)
Deferred Loan Expense (l,000) 0 (1,000) 0
Other Income 111,000 66 111,000 0
----------- ----------- ----------- -----------
Net Loss (548,457) (648,702) (395,744) (386,473)
=========== =========== =========== ===========
Basic Loss per Share $ (.02) $ (0.03) $ (0.1) $ (0.02)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 31,921,774 19,979,061 31,954,432 20,754,324
=========== =========== =========== ===========
</TABLE>
2
<PAGE>
CORONADO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
June 30, June 30,
1999 1998
(Unaudited) (Unaudited)
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES:
Cash paid for operating expenses $(203,843) $(215,898)
CASH FLOW USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment 0 (2,175)
Sale of building 111,000 0
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings 246,000 0
Repayment of debt (40,000) (20,058)
Proceeds from stock sale 0 537,203
Loan origination fee (30,000) 0
--------- ---------
NET INCREASE (DECREASE) IN CASH 83,157 299,072
CASH, beginning period 8,211 210,193
--------- ---------
CASH, end of period $ 91,368 $ 509,265
========= =========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $(395,744) $(386,473)
Adjustments to reconcile net loss to net
cash used in operating activities:
Deferred loan expense 1,000 0
Amortization 939 876
Depreciation 7,900 6,733
Stock issued for services 180,679 165,000
(Gain) on sale of building (111,000) 0
Increase in:
Accounts receivable 32,469 (18,091)
Inventory 0 0
Patents 0 0
Professional retainers 0 0
Prepaid expenses 4,345 (4,250)
Increase (decrease) in:
Accounts payable 569 (11,689)
Accrued salaries 75,000 30,000
Accrued expenses 0 0
Accrued payroll taxes 0 1,996
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $(203,843) $(215,898)
========= =========
3
<PAGE>
CORONADO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
June 30, June 30,
1999 1998
(Unaudited) (Unaudited)
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES:
Cash paid for operating expenses $(256,476) $ (580,652)
CASH FLOW USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment 0 (13,919)
Sale of building 111,000 0
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings 230,000 25,000
Repayment of debt 0 (245,470)
Proceeds from stock sale 0 1,258,675
Loan origination fee (30,000) 0
--------- ----------
NET INCREASE (DECREASE) IN CASH 54,524 443,634
CASH, beginning period 36,844 65,631
--------- ----------
CASH, end of period $ 91,368 $ 509,265
========= ==========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $(548,457) $ (648,702)
Adjustments to reconcile net loss to net
cash used in operating activities:
Deferred loan expense 1,000 0
Amortization 1,878 1,752
Depreciation 15,800 25,135
Stock issued for services 196,457 175,000
(Gain) on sale of building (111,000) 0
Increase in:
Accounts receivable 30,148 (87,483)
Inventory 600 0
Patents 0 0
Professional retainers 0 0
Prepaid expenses 22,490 49,500
Increase (decrease) in:
Accounts payable 9,608 (61,784)
Accrued salaries 125,000 (23,673)
Accrued expenses 0 0
Accrued payroll taxes 0 (10,397)
--------- ----------
NET CASH USED IN OPERATING ACTIVITIES $(256,476) $ (580,652)
========= ==========
4
<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 March 31, 1999 and the results of
its operations for the three months ended March 31, 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 six months ended June 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.
5
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIC LOSS PER SHARE:
For the three month and six month periods ending June 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:
3 Month 6 Month
------- -------
Scottsdale revenues $ 28,005 $ 28,005
Scottsdale costs 67,255 67,255
--------- ---------
$ (39,250) $ (39,250)
General corporate revenues $ 46,000 $ 46,000
General corporate costs 158,863 656,312
--------- ---------
$(112,863) $(610,312)
The Company's assets are allocated on the following geographic basis for segment
reporting purposes:
Scottsdale $ 0
Clearwater 108,636
General corporate 226,601
--------
Total Assets $335,237
========
6
<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 JUNE 30, 1999
Operations. Registrant was a development stage company through the quarter ended
September 30, 1997, with revenues having been generated from its Scottsdale
glaucoma treatment center starting on September 1, 1997. 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 June 30, 1999 Registrant experienced a net loss of
$395,744, which was comprised primarily of a net loss from the sale of
Registrant's product of $121,250, its general and administrative expenses
incurred at the corporate level of $376,199 and a net gain from the sale of the
Scottsdale treatment center building of $111,000. The Registrant had a net loss
from operations of $497,449 for the quarter ending June 30, 1999. Registrant's
costs of product revenues of $121,250 for the quarter were incurred in the
7
<PAGE>
hiring of European marketing consultants in May 1999 with the payment of
Registrant's common stock. Additional payments to these consultants in the
future will be paid as a percentage of sales generated. 58.8% of Registrant's
1999 second quarter corporate expenses consisted of officers salaries of $75,000
(19.9%), professional expenses of $83,045 (22.0%) and shareholder services and
media promotion of $63,080 (16.8%). In comparison, during the second quarter of
the 1998 fiscal year 81.7% of Registrant's corporate expense of $278,403
consisted of officers salaries of $50,000 (14.7%), professional expenses of
$55,468 (16.3%) and shareholder services and media promotion of $172,935
(50.7%). 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 second quarter.
SIX MONTHS ENDING JUNE 30, 1999
OPERATIONS. For the six months ending June 30, 1999 Registrant experienced a net
loss of $548,457, 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 $531,162 and a net gain from the sale of the
Scottsdale treatment center building of $111,000. The Registrant had a net loss
from operations of $649,562 for the six months ending June 30, 1999. 61.4% of
Registrant's 1999 first half corporate expenses consisted of officers salaries
of $125,000 (23.5%), professional expenses of $127,875 (24.1%) and shareholder
services and media promotion of $73,080 (13.8%). In comparison, during the first
half of the 1998 fiscal year 78.6% of Registrant's corporate expense of $559,573
consisted of officers salaries of $100,000 (17.9%), professional expenses of
$95,945 (17.1%) and shareholder services and media promotion of $243,876
(43.6%). 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.
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
8
<PAGE>
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 half 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.
In June 1999 Registrant arranged for the sale of the building in which its
Scottsdale treatment center had previously operated. Registrant received
$111,000 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 second half 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 June 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
9
<PAGE>
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.
A meeting with the FDA in Washington, D.C. was held on August 4 1999 to
ascertain exactly what additional information will be required from the
Registrant in its application to complete the FDA's approval process for the PNT
product. Registrant's current study protocol is being modified by the FDA at
this time to ensure that the additional information required will be collected
in an acceptable manner. Registrant has been advised study protocol revision is
standard procedure in the FDA approval process and that it is progressing
satisfactorily toward FDA approval.
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.
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 June 30, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
Registrant filed no reports on Form 8-K with the Commission during
the period ended June 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: August 13, 1999 By: /s/ Gary R. Smith
--------------- ----------------------------------
Gary R. Smith, President (Chief
Executive Officer) and Treasurer
(Chief Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 91,368
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 24,265
<CURRENT-ASSETS> 146,890
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 335,237
<CURRENT-LIABILITIES> 163,597
<BONDS> 0
0
0
<COMMON> 32,273
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 335,237
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
