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 - March 31, 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 March 31, 1999: 31,623,292.
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
March 31, 1999 and December 31, 1998
March 31, December 31,
1999 1998
(Unaudited) (Audited)
----------- -----------
ASSETS
Current Assets:
Cash $ 8,211 $ 36,844
Accounts Receivable, net 63,726 61,405
Inventory 24,265 24,865
Prepaid Expenses 4,345 22,490
---------- ---------
Total Current Assets 100,547 145,604
Property and Equipment, net 136,536 144,436
Other Assets:
Intangible Assets 31,650 32,589
---------- ---------
Total Assets $ 268,733 $ 322,629
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note Payable to Related Party -
Current Portion 24,000 0
Accounts Payable 38,028 28,989
Accrued Salaries 50,000 0
---------- ---------
Total Current Liabilities $ 112,028 $ 28,989
Long-term Debt 0 0
---------- ---------
Total Liabilities $ 112,028 28,989
---------- ---------
Stockholders' Equity:
Preferred Stock 0 0
Common Stock - $.001 par value;
50,000,000 shares authorized, 31,626,292
shares outstanding at March 31, 1999;
31,560,176 outstanding at December 31, 1998 31,623 31,561
Additional Paid-in Capital 2,794,642 2,778,926
Accumulated Deficit (2,669,560) (2,516,847)
---------- ---------
Total Stockholders' Equity 156,705 293,640
---------- ---------
Total Liabilities And Stockholders'
Equity $ 268,733 $ 322,629
========== =========
1
<PAGE>
CORONADO INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
March 31, March 31
1999 1998
(Unaudited) (Unaudited)
----------- -----------
Product Revenues $ 46,000 $ 0
Patient Revenue 28,005 99,117
----------- ----------
Total Revenues 74,005 99,117
Cost of Product Revenues 3,900 0
Cost of Patient Revenues 67,255 131,958
----------- ----------
Total Costs 71,155 131,958
----------- ----------
Gross Profit (Loss) 2,850 (32,841)
General and Administrative Expenses 154,963 218,443
----------- ----------
Loss from Operations (152,113) (251,284)
Interest Expense (600) (11,011)
Other Income 0 66
----------- -----------
Net Loss (152,713) (262,229)
=========== ===========
Basic Loss per Share $ 0.00 $ (0.01)
=========== ===========
Weighted Average Shares Outstanding 31,591,734 19,203,014
=========== ===========
2
<PAGE>
CORONADO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
March 31, March 31
1999 1998
(Unaudited) (Unaudited)
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES:
Cash paid for operating expenses $ (68,411) $(365,613)
CASH FLOW USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment 0 (11,743)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings 24,000 25,000
Proceeds from stock sale 0 721,549
Repayment of debt 0 (224,631)
Services for stock 15,778 0
--------- ---------
NET INCREASE (DECREASE) IN CASH (28,633) 144,562
CASH, beginning period 36,844 65,631
--------- ---------
CASH, end of period $ 8,211 $ 210,193
========= =========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $(152,713) $(262,229)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 7,900 18,402
Amortization 939 875
Interest 0 5,469
(Increase) decrease in:
Accounts receivable (2,321) (69,392)
Prepaid expenses 18,145 53,750
Inventory 600 0
Increase (decrease) in:
Accounts payable 9,039 (50,095)
Accrued salaries 50,000 (50,000)
Accrued payroll taxes 0 (12,293)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES $ (68,411) $(365,613)
========= =========
3
<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 three months ended March 31, 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.
4
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BASIC LOSS PER SHARE:
For the three month periods ending March 31, 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
-------
Scottsdale revenues $ 28,005
Scottsdale costs 67,255
---------
$ (39,250)
General corporate revenues $ 46,000
General corporate costs 158,863
---------
$(112,863)
The Company's assets are allocated on the following geographic basis for segment
reporting purposes:
Scottsdale $ 0
Clearwater 4,345
General corporate 264,388
--------
Total Assets $268,733
5
<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 MARCH 31, 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 (see below), there is
no complete quarter of the 1999 fiscal year to compare to the prior year's first
quarter operations.
For the quarter ending March 31, 1999 Registrant experienced a net loss from
operations of $152,113, which was comprised of a net loss from Registrant's
Scottsdale treatment center of $39,250, a net gain from the sale of Registrant's
6
<PAGE>
product of $42,100 and its general and administrative expenses incurred at the
corporate level of $154,963. 67.7% of Registrant's 1999 first quarter corporate
expenses consisted of officers salaries of $50,000 (32.3%), professional
expenses of $44,830 (28.9%) and shareholder services and media promotion of
$10,000 (6.5%). In comparison, during the first quarter of the 1998 fiscal year
73.8% of Registrant's corporate expense of $218,443 consisted of officers
salaries of $50,000 (22.8%), professional expenses of $40,477 (18.5%) and
shareholder services and media promotion of $70,941 (32.5%). 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. Registrant expects no change in its officers salaries in 1999. Since most
of Registrant's shareholder services expenses are paid with Registrant's stock
and not cash, Registrant's shareholder services expenses are likely to be higher
in the remainder of 1999 than the first quarter.
During the first quarter of 1998 Registrant's Scottsdale treatment center
generated $28,005 of gross revenues. The Registrant generally recognizes
services rendered as revenues when rendered to the patient. Any amount not paid
by Medicare or another third-party payor for the Registrant's patented procedure
or a traditional diagnostic or treatment procedure is written off by the
Registrant on a patient-by-patient basis when the payment is received by
Registrant, which is the general practice in the medical profession. At 1998
year-end Registrant wrote-off $12,655 of receivables as uncollectible. During
the first quarter of 1999 Registrant wrote-off none of its receivables as
uncollectible.
During the first quarter of 1998 the Registrant's Scottsdale treatment center
produced a net loss of $39,250, with revenues of $28,005 and costs of revenues
of $67,255 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
incurred expenses of $17,000 in the first quarter of 1998 in connection with the
Clearwater treatment center. 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 $700,000 per year, the Registrant was
7
<PAGE>
suffering from a liquidity shortage during the first quarter of 1999. On May 4,
1999 Registrant obtained a loan of $270,000 from a third party. This loan bears
an annual interest rate of 18% and is 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.
These funds should allow Registrant to continue the marketing of its product in
the U.S. and abroad on a limited basis for 4 to 6 months.
Thus far in 1999 Registrant has borrowed approximately $24,000 from each of G.
Richard Smith and Gary R. Smith, the Registrant's Chairman and President,
respectively. The Registrant's Chairman and President may be willing to loan
additional funds to the Registrant in the future, but have made no written
commitment to the Registrant at this time. The Registrant's liquidity in the
second half of 1999 is dependent on obtaining substantial additional funding or
dramatically increased sales of its patented product (see below).
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 March 31, 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.
In May 1999 Registrant commenced a marketing plan for distribution of its
product in the United States through independent, regional distributors of
ophthalmic equipment. Registrant expects to execute non-exclusive agreements
8
<PAGE>
with several such distributors during the next few months; however, thus far no
distributor has executed any distribution agreement with Registrant. Any
distribution of Registrant's product in the near future through such
distributors will likely have a positive impact on the Registrant's liquidity
and profitability in 1999.
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 and March 1999 the Registrant received loans totaling $12,000 from
each of G. Richard Smith and Gary R. Smith, the Registrant's Chairman and
President, respectively. These loans bear annual interest at the rate of 15%.
9
<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 March 31, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
Registrant filed a Form 8-K with the Commission on March 16, 1999.
10
<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: May 14, 1999 By: /s/ Gary R. Smith
------------- ----------------------------------
Gary R. Smith, President (Chief
Executive Officer) and Treasurer
(Chief Accounting Officer)
11
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<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 8,211
<SECURITIES> 0
<RECEIVABLES> 63,726
<ALLOWANCES> 0
<INVENTORY> 24,265
<CURRENT-ASSETS> 100,547
<PP&E> 136,536
<DEPRECIATION> 7,900
<TOTAL-ASSETS> 268,733
<CURRENT-LIABILITIES> 112,028
<BONDS> 0
0
0
<COMMON> 31,623
<OTHER-SE> 125,082
<TOTAL-LIABILITY-AND-EQUITY> 268,733
<SALES> 0
<TOTAL-REVENUES> 74,005
<CGS> 71,155
<TOTAL-COSTS> 154,963
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 600
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