UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 1997 Commission File Number 0-14731
COMPUTER MARKETPLACE(R), INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0558415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1171 Railroad Street
Corona, California 91720
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (909) 735-2102
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of November 12, 1997, 1,352,424 shares of the issuer's common stock, par
value, $.0001 per share were outstanding.
<PAGE>
COMPUTER MARKETPLACE(R), INC., AND SUBSIDIARIES
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INDEX
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Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 1997
[Unaudited].................................................. 1
Condensed Consolidated Statements of Operations for the three
months ended September 30, 1997 and 1996 [Unaudited]......... 2
Condensed Consolidated Statements of Cash Flows for the three
months ended September 30, 1997 and 1996 [Unaudited]......... 3
Notes to Condensed Consolidated Financial Statements [Unaudited].. 4
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 5 - 7
Signature Page........................................................ 8
. . . . . . . .
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
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COMPUTER MARKETPLACE(R), INC., AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
[UNAUDITED]
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Assets:
Current Assets:
Cash and Cash Equivalents $ 472,908
Accounts Receivable - Net 1,903,992
Inventory - Net 515,486
Other Current Assets 31,251
-----------
Total Current Assets 2,923,637
Property Held for Sale - Net 486,534
Property and Equipment - Net 621,925
Other Assets 100,720
Total Assets $ 4,132,816
===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Notes Payable $ 514,080
Accounts Payable 603,502
Accrued Payroll and Payroll Related Liabilities 98,868
Current Portion of Long-term Debt 192,862
Other Current Liabilities 381,534
-----------
Total Current Liabilities 1,790,846
Long-Term Debt 157,625
Minority Interest in Net Assets of Subsidiary 92,009
-----------
Commitments and Contingencies --
Stockholders' Equity:
Preferred Stock - $.0001 Par Value, 1,000,000 Shares
Authorized, No Shares Issued and Outstanding --
Common Stock - $.0001 Par Value, 50,000,000 Shares
Authorized, 1,352,424 Shares Issued and Outstanding 135
Deferred Compensation (411,550)
Capital in Excess of Par Value 8,785,099
Accumulated Deficit (6,281,348)
Total Stockholders' Equity 2,092,336
Total Liabilities and Stockholders' Equity $ 4,132,816
===========
The Accompanying Notes are an Integral Part of these Condensed
Consolidated Financial Statements.
1
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COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
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<TABLE>
Three months ended
September 30,
1 9 9 7 1 9 9 6
------- -------
Revenues:
<S> <C> <C>
Product Sales, Rental, Service and Other $2,595,281 $ 7,179,879
---------- -----------
Cost and Expenses:
Cost of Revenues - Product Sales, Rental, Service and Other 2,085,546 6,259,661
Selling, General and Administrative 975,422 1,259,830
Total Cost and Expenses 3,060,968 7,519,491
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Operating Loss (465,687) (339,612)
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Other Income [Expense]:
Interest Expense (13,721) (115,510)
Interest Income 15,287 234
Miscellaneous Income 24,103 9,491
---------- -----------
Total Other Income [Expense] 25,669 (105,785)
---------- -----------
Loss Before Income Taxes, Minority Interest in
Income of Subsidiary and Extraordinary Item (440,018) (445,397)
Provision for Income Taxes -- --
Minority Interest in Income of Subsidiary 26,429 --
---------- -----------
Loss Before Extraordinary Item (413,589) (445,397)
Extraordinary Item:
Gain from Extinguishment of Debt [Net of Income Taxes of
$-0-] 98,226 --
---------- -----------
Net Loss $ (315,363) $ (445,397)
========== ===========
Loss Per Share:
Loss Before Extraordinary Item [Net of Income Taxes] $ (.30) $ (.33)
Extraordinary Item .07 --
---------- -----------
Net Loss Per Share $ (.23) $ (.33)
========== ===========
Weighted Average Common Shares Outstanding 1,352,424 1,352,424
========== ===========
The Accompanying Notes are an Integral Part of these Condensed Consolidated Financial Statements.
</TABLE>
2
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
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<TABLE>
Three months ended
September 30,
1 9 9 7 1 9 9 6
------- -------
Operating Activities:
<S> <C> <C>
Net Loss $ (315,363) $ (445,397)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization 85,243 67,161
Provisions for Losses on Accounts Receivable (16,823) (10,842)
Provisions for Losses on Inventory (74,482) 30,000
Minority Interest in Consolidated Subsidiary (26,429) --
Gain on Extinguishment of Debt (98,226) --
Changes in Assets and Liabilities:
Accounts Receivable (191,936) (330,794)
Inventory 51,419 550,721
Other Current Assets 21,341 53,702
Accounts Payable (525,310) 362,683
Accrued Payroll and Related Liabilities (56,177) (84,771)
Other Current Liabilities 120,229 (91,669)
---------- -----------
Net Cash - Operating Activities (1,026,514) 100,794
---------- -----------
Investing Activities:
Decrease in Loans/Notes Receivable - Related Parties -- 18,699
Purchases of Property and Equipment (10,723) (9,375)
Other (54,350) (2,432)
---------- -----------
Net Cash - Investing Activities (65,073) 6,892
---------- -----------
Financing Activities:
Net Decrease in Notes Payable 70,690 (163,354)
Principal Payments on Long-term Debt (6,735) (14,019)
---------- -----------
Net Cash - Financing Activities 63,955 (177,373)
---------- -----------
Net [Decrease] in Cash and Cash Equivalents (1,027,632) (69,687)
Cash and Cash Equivalents - Beginning of Periods 1,500,540 594,921
---------- -----------
Cash and Cash Equivalents - End of Periods $ 472,908 $ 525,234
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest $ 13,720 $ 115,046
Cash Paid for Income Taxes $ -- $ --
Supplemental Disclosure of Non-Cash Investing and Financing
Activities:
Reclassification of Accounts Payable to/from Other
Liabilities to Reflect Negotiated Payment Terms $ 150,000 $ 45,431
Transfer of Inventory Items to/from Rental Equipment $ -- $ 93,511
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
3
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
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[1] Significant Accounting Policies
Significant accounting policies of Computer Marketplace(R), Inc. and
Subsidiaries [the "Company"] are set forth in the Company's Form 10-KSB for the
year ended June 30, 1997, as filed with the Securities and Exchange Commission.
[2] Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments [consisting only of normal
recurring accruals] necessary for a fair presentation of the consolidated
financial position of the Company as of September 30, 1997, the consolidated
results of its operations for the three month periods ending September 30, 1997
and 1996 and its cash flows for the three month periods ending September 30,
1997 and 1996. Although the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information and footnote information normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. Results of operations for the period
ended September 30, 1997 are not necessarily indicative of results to be
expected for the full year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form 10-KSB
for the year ended June 30, 1997.
[3] Stock Transactions
In April 1997, the Company effected a one-for-six reverse stock split of the
outstanding shares of common stock of the Company by changing the 8,114,542 then
outstanding shares of common stock, par value $.0001 per share, into 1,352,424
shares of common stock of the Company, par value $.0001 per share. All share
data has been adjusted and retroactively restated to reflect this change.
[4] Extraordinary Item
During the three months ended September 30, 1997, the Company negotiated payment
terms of certain accounts payable, resulting in a gain of $98,226. There was no
income tax effect on this transaction.
. . . . . . . . . .
4
<PAGE>
Item 2:
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Results of Operations
The following information should be read in conjunction with the condensed
consolidated financial statements and the notes thereto included in this
quarterly report and in the audited financial statements and management
discussion and analysis of financial condition and results of operations
contained in the Company's Form 10-KSB for the fiscal year ended June 30, 1997.
Quarter ended September 30, 1997 Compared to Quarter ended September 30, 1996
Total revenues for the quarter ended September 30, 1997 were $2,595,281 compared
to $7,179,879 for the quarter ended September 30, 1996. This represents a
decrease of $4,584,598 or 64%.
Revenues from computer product sales and rentals for the quarter ended September
30, 1997 totaled $1,204,647 a $3,594,094 or 75% decrease compared to $4,798,741
for the quarter ended September 30, 1996. The sales decrease results in part
from price reductions in new computer hardware which negatively impacts selling
prices and sales of used computer hardware. The Company anticipates the lower
compueter product sales trend to continue into the second quarter. The most
significant factor resulting in this decrease in sales is that all branch
offices of the Company were closed down during the year ending June 30, 1997.
The sales associated with these offices diminished substantially. In addition,
the sales staff at the main facility in Corona, California was reduced.
Medical product sales and rentals contributed $1,390,634 in revenues for the
quarter ended September 30, 1997, compared to $2,381,138 for the quarter ended
September 30, 1996. The comparative quarter ending September 30, 1996 included
two transactions totaling $1,500,000. Long lead times required in concluding
many of the transactions associated with the medical equipment business,
primarily having to do with the timing and complexity of the installations,
reduce the accuracy of comparisons by quarter. In addition, a considerable time
investment occurred during the quarter ending Sptember 30, 1997 in the creation
of substantial offshore business, as well as developing our new leasing
subsidiary, New Millennium Leasing. The prospects for increased business and
margins in the second quarter 1997 resulting from the aforementioned activities,
is positive and the Company has derived a benefit from those activities which
will be reflected in the second quarter 1997. Continutuing investments made by
Medical Marketplace, Inc. in experienced sales representatives and technical
staff, as well as a growing recognition within the industry as an established
reseller of previously owned and upgraded magnetic resonance imaging, computed
tomography scanner and ultrasound equipment have positively impacted the sales
of this subsidiary. Continued revenue growth and sustained profitablity for this
subsidiary are expected througout the fiscal year.
Previsously owned medical equipment is continuting to gain acceptance in the
health care community as a cost effective altenrative to new equipment. The
Company believes that its field representative program, financial strength and
support structure will provide Medical Marketplace, Inc. a distinct advanatgae
over many of the subsidiary's competitors.
Total aggregate cost of revenues for the quarter ended September 30, 1997 and
1996 were $2,085,546 or 80% of revenues and $6,259,661 or 87% of revenues,
respectively.
Cost of revenues for computer products were $884,167 or 73% of revenues and
$4,325,265 or 90% of revenues for the quarters ended September 30, 1997 and
1996, respectively. The decrease of cost to revenue is due largely to the
increase in profitablity associated with end user sales, compared to increased
cost to revenue associated with wholesale or dealer sales.
5
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Quarter ended September 30, 1997 Compared to Quarter ended September 30, 1996
[Continued]
Costs of revenues for medical products were $1,201,379 or 86% of revenues and
$1,934,396 or 81% of revenues for the quarters ended September 30, 1997 and
1996, respectively. The 5% increase in cost of revenue primarily has to do with
market fluctuations and mangement does not view this 5% differential as a trend.
Total selling, general and administrative ["SG&A"] expenses for the quarter
ended September 30, 1997 and 1996 were $975,422 or 38% of revenues and
$1,259,830 or 18% of revenues, respectively. The aggregate decrease in SG&A
expenses from the prior period was $284,408 or 23%.
SG&A expenses attributed to computer products were $635,617 or 53% of revenues
and $1,101,044 or 23% of revenues for the quarters ended September 30, 1997 and
1996, respectively. The increase in SG&A expenses as a percentage of revenues is
due primarily to the sales volume decrease previously mentioned.
SG&A expense attributed to medical products were $339,805 or 24% of revenues and
$158,786 or 7% of revenues for the quarters ended September 30, 1997 and 1996,
respectively. The increase in SG&A expenses as a percentage of revenues is due
primarily to the increase in personnel expense.
Total operating loss was $465,687 and $339,612 for the quarters ended September
30, 1997 and 1996, respectively. This $126,075 or 37% unfavorable change was a
result of the business conditions described herein.
Operating loss for computer products was $315,137 and $627,568 for the quarters
ended September 30, 1997 and 1996, respectively.
Operating [loss] income for medical products was $(150,550) and $287,956 for the
quarters ended September 30, 1997 and 1996, respectively.
Interest expense for the three months ended September 30, 1997, was $13,721
compared to $115,510 for the three months ended September 30, 1996. The decrease
of $101,789 or 88% is due to the repayment of the mortgage payable associated
with the sale of the Company's headquarters facility in the year ended June 30,
1997.
The Company's consolidated net loss was $315,363 or $.23 per share for the
quarter ended September 30, 1997, versus $445,397 or $.33 per share for the
quarter ended September 30, 1996. The net loss was a result of the business
conditions described herein. In addition, during the three months ended
September 30, 1997, the Company negotiated payment terms of certain accounts
payable, resulting in a gain of $98,226, shown as an extraodinary item in the
financial statements.
Variability of Periodic Results and Seasonality
Results from any one period cannot be used to predict the results for other
fiscal periods. Revenues fluctuate from period to period; however, management
does not see any seasonality or predictability to these fluctuations.
6
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Liquidity and Capital Resources
The Company has historically financed its growth and cash needs primarily
through borrowings and cash generated from operations. The funds received
through the initial public offering in June 1993, in the amount of approximately
$6.6 million, enabled the Company to eliminate most of its long-term debt at
that time. Working capital at September 30, 1997 and 1996, was $1,132,791 and
$2,375,922, respectively.
During the quarter ended September 30, 1997, the Company used the June 30, 1997
available cash and cash equivalents of approximately $1,500,000, the
availability of borrowing under the Company's revolving credit facility, vendor
extended credit in order to fund the operations of the Company.
Management has implemented a "just in time" concept concerning the purchase of
equipment, therefore increasing efficiency, while reducing inventory and
accounts payable. Management has continued to emphasize the inventory reduction
program, believing that these disciplined strategic reductions will enhance the
Company's operating effectiveness and provide additional liqudity.
In addition, the Company is in engaging in discussion with multiple lending
institutions, as well as with the present lender, to replace the current credit
line which expires December 31, 1997.
New Millennium Leasing, Inc. ["NMLI"] was formed in early 1997. The primary
focus of the Company is to provide leasing for a majority of the sales generated
by its parent, Medical Marketplace, Inc. ["MMP"]. In so doing, NMLI will add
incremental revenue and net income by discounting those leases, on a non
recourse basis, to lenders who buy leases in this manner.
The stated goal of NMLI is to both increase the profitability of each
transaction entered into by MMP, and, via leasing, to generate new transactions
that MMP would not have previously been able to generate due to the lack of a
leasing division.
7
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
executed on this 14th day of November, 1997.
COMPUTER MARKETPLACE(R), INC.
By: /s/ L. Wayne Kiley
L. Wayne Kiley
President, Chief Executive
Officer, (Chief Accounting
Officer) and Director Signing on
behalf of the Registrant and as
Principal Financial and
Accounting Officer.
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condolidated
balance sheet and the consolidated statement of operations and is qualified in
its entirety by reference to specified documents.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> jun-30-1997
<PERIOD-END> sep-30-1997
<CASH> 472,908
<SECURITIES> 0
<RECEIVABLES> 1,903,992
<ALLOWANCES> 0
<INVENTORY> 515,486
<CURRENT-ASSETS> 2,923,637
<PP&E> 621,925
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,132,816
<CURRENT-LIABILITIES> 1,790,846
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> 2,092,201
<TOTAL-LIABILITY-AND-EQUITY> 4,132,816
<SALES> 2,595,281
<TOTAL-REVENUES> 2,595,281
<CGS> 2,085,546
<TOTAL-COSTS> 975,422
<OTHER-EXPENSES> (25,669)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (440,018)
<INCOME-TAX> 0
<INCOME-CONTINUING> (440,018)
<DISCONTINUED> 0
<EXTRAORDINARY> 98,226
<CHANGES> 0
<NET-INCOME> (315,363)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>