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 March 31 1999 Commission File Number 0-14731
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COMPUTER MARKETPLACE(R), INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0558415
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1171 Railroad Street
Corona, California 91720
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(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 May 20, 1999, 12,691,424 shares of the issuer's common stock 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 March 31, 1999
(Unaudited)............................................... 1......2
Condensed Consolidated Statements of Operations for the
three and nine months ended March 31, 1999 and 1998
(Unaudited)................................................ 3......
Condensed Consolidated Statements of Cash Flows for the
nine months ended March 31, 1999 and 1998 (Unaudited)...... 4......
Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................ 5.....7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 8......13
PART II - OTHER INFORMATION
Item 1: Legal Proceedings......................................... 14......
Item 6: Exhibits and Reports on Form 8K........................... 14......
Signature Page.................................................... 15......
. . . . . . . .
<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 MARCH 31, 1999.
(UNAUDITED)
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Assets:
Current Assets:
Cash and Cash Equivalents $ 76,850
Accounts Receivable (Less: Allowance for Doubtful
Accounts of $30,000) 284,779
Inventory (Net of Valuation Allowance of $89,993) --
Other Current Assets 500
-----------
Total Current Assets 362,129
-----------
Property and Equipment - Net 737,524
-----------
Other Assets:
Residual Value of Equipment 765,000
Others 77,442
-----------
Total Other Assets 842,442
-----------
Total Assets $ 1,942,095
===========
The Accompanying Notes Are an Integral Part of These Condensed Consolidated
Financial Statements.
1
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999.
(UNAUDITED)
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Liabilities and Stockholders' (Deficit):
Current Liabilities:
Notes Payable $ 793,514
Accounts Payable 519,871
Accrued Payroll and Payroll Related Liabilities 324,924
Customer Deposits 205,259
Other Current Liabilities 110,616
-----------
Total Current Liabilities 1,954,184
-----------
Long-Term Debt 349,558
-----------
Minority Interest in Net Assets of Subsidiary --
-----------
Commitments and Contingencies --
Stockholders' (Deficit):
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, 1,392,424 Shares Issued and Outstanding 135
Deferred Compensation (137,195)
Capital in Excess of Par Value 8,785,100
Accumulated Deficit (9,009,687)
-----------
Total Stockholders' (Deficit) (361,647)
-----------
Total Liabilities and Stockholders' (Deficit) $ 1,942,095
===========
The Accompanying Notes Are an Integral Part of These Condensed Consolidated
Financial Statements.
2
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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<TABLE>
Three months ended Nine months ended
March 31, March 31,
--------- ---------
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------- ------- ------- -------
Revenues:
<S> <C> <C> <C> <C>
Product Sales $ 820,346 $ 967,542 $ 1,877,917 $ 6,610,712
Rental, Service and Other 122,379 -- 315,510 --
---------- ---------- ----------- -----------
Total Revenues 942,725 967,542 2,193,427 6,610,712
---------- ---------- ----------- -----------
Cost and Expenses:
Cost of Revenues - Product Sales 665,589 1,141,860 1,381,378 5,670,727
Cost of Revenues, Rental, Service
and Other 23,189 -- 112,467 --
Selling, General and Administrative 563,891 726,171 1,556,749 2,480,601
--------- ---------- ----------- -----------
Total Cost and Expenses 1,252,669 1,868,031 3,050,594 8,151,328
---------- ---------- ----------- -----------
Operating (Loss) (309,944) (900,489) (857,167) (1,540,616)
---------- ---------- ----------- -----------
Other Income (Expense):
Interest Expense (42,123) (46,493) (94,436) (84,527)
Interest Income -- 6,042 24 27,635
Miscellaneous Income 26,258 5,342 61,474 33,369
---------- ---------- ----------- -----------
Other Income (Expense) - Net (15,865) (35,109) (32,938) (23,523)
---------- ---------- ----------- -----------
(Loss) Before Income Taxes, Minority
Interest in Loss of Subsidiary and
Extraordinary Items (325,809) (935,598) (890,105) (1,564,139)
Provision for Income Taxes -- -- -- --
Minority Interest in Loss of Subsidiary -- (40,473) -- 32,265
------- ---------- ----------- -----------
(Loss) Before Extraordinary Items (325,809) (895,125) (890,105) (1,531,874)
Extraordinary Items:
Gain from Forfeited Deposit (Net of
Income Taxes of $-0-) -- 50,000 -- 50,000
Gain from Extinguishment of Debt
(Net of Income Taxes of $-0-) 19,107 -- 54,671 98,226
---------- ---------- ----------- -----------
Net (Loss) $ (306,702) $ (845,125) $ (835,434)$(1,383,648)
========== ========== =========== ===========
Income (Loss) Per Share:
Loss Before Extraordinary Item $ (.24) $ (.66) $ (.66)$ (1.13)
Extraordinary Item .01 .04 .04 .11
---------- ---------- ----------- -----------
Net (Loss) Per Share $ (.23) $ (.62) $ (.62)$ (1.02)
========== ========== =========== ===========
Weighted Average Common Shares
Outstanding 1,352,424 1,352,424 1,352,424 1,352,424
========== ========== =========== ===========
</TABLE>
The Accompanying Notes Are an Integral Part of These Condensed Consolidated
Financial Statements.
3
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Nine months ended
March 31,
1 9 9 9 1 9 9 8
------- -------
Operating Activities:
Net Loss $ (835,434) $(1,383,648)
Adjustments to Reconcile Net Loss to Net Cash
(Used for) Operating Activities:
Depreciation and Amortization 363,576 253,807
Provisions for Losses on Accounts Receivable (82,472) (48,544)
Provisions for Losses on Inventory 39,993 (114,482)
Minority Interest in Consolidated Subsidiary -- (32,265)
Gain from Extinguished Debt -- (98,226)
Changes in Assets and Liabilities:
Accounts Receivable 219,295 843,488
Inventory 140,821 163,232
Other Current Assets 66,787 17,792
Accounts Payable (91,280) (341,521)
Accrued Payroll and Related Liabilities 146,023 (42,132)
Other Current Liabilities 7,196 (50,030)
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Net Cash - Operating Activities (25,495) (832,529)
---------- -----------
Investing Activities:
Purchases of Property and Equipment (5,385) (521,307)
Proceeds from Sale of Property and Equipment 546,524 --
Other -- (300,039)
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Net Cash - Investing Activities 541,139 (821,346)
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Financing Activities:
Net Decrease in Notes Payable -- (127,212)
Principal Payments on Long-Term Debt (592,374) (232,243)
Proceeds from Long-Term Debt 117,000 750,000
---------- -----------
Net Cash - Financing Activities (475,374) 390,545
---------- -----------
Increase (Decrease) in Cash and Cash Equivalents 40,270 (1,263,330)
Cash and Cash Equivalents - Beginning of Periods 36,580 1,500,540
---------- -----------
Cash and Cash Equivalents - End of Periods $ 76,850 $ 237,210
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest $ 94,436 $ 84,527
Cash Paid for Income Taxes $ -- $ 3,910
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Reclassification of Accounts Payable to/from Other Liabilities to
Reflect Negotiated Payment Terms $ -- $ (150,000)
Transfer of Inventory Items to/from Rental Equipment $ (104,598) $ (33,007)
Trade of Property Held for Sale for Notes Payable $ 350,951 $ --
The Accompanying Notes Are an Integral Part of These Condensed Consolidated
Financial Statements.
4
<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 Inc and Subsidiaries
(the "Company") are set forth in the Company's Form 10-KSB for year ended June
30, 1998, 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 March 31, 1999, and 1998, the
consolidated results of its operations for the three and nine months ending
March 31, 1999 and 1998 and its cash flows for the three and nine months ending
March 31, 1999 and 1998. 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 March 31, 1999 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, 1998.
(3) Extraordinary Items
In January, 1999, Motorola agreed to dismiss all claims pertaining to Motorola
v. Computer Marketplace, Inc., relieving the Company of an outstanding balance
of $35,564. During the three months ended March 31, 1999, the Company negotiated
settlement terms of certain accounts payable, resulting in a gain of $19,107.
During the nine months ended March 31, 1998, the Company negotiated payment
terms of certain accounts payable, resulting in a gain of $98,226. There was no
income tax effect on these transactions.
(4) Authorized Shares
In March, 1999, the Company authorized the issuance of 20,000 shares of the
Company's Common Stock, to each of the two directors, Joseph Achten and Thomas
Evans, in exchange for services rendered as directors of the Company.
(5) Subsequent Events
On April 23, 1999, the Company acquired all of the issued and outstanding
capital stock of E-Taxi, Inc. in a business combination intended to be accounted
for as a "reverse acquisition." As consideration for 9,074,000 shares of the
E-Taxi's common stock and 400,000 shares of the E-Taxi's Series A Preferred
Stock, the Company issued an aggregate of 9,074,000 shares of the Company's
common stock, par value $.0001 per share (the "Common Shares"), and 400,000
shares of the Company's Series A Preferred Stock, par value $.0001 per share
(the "Preferred Shares"). For accounting purposes, E-Taxi is deemed to be the
acquirer, and the Company is deemed to be acquired, under the purchase method of
accounting.
5
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
(UNAUDITED)
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(5) Subsequent Events (Continued)
As of April 23, 1999, (i) E-Taxi is a wholly owned subsidiary of the Company,
(ii) the stockholders of E-Taxi are the beneficial owners of (a) the Common
Shares, or 81.8% of the shares of Company's common stock outstanding, and (b)
the Preferred Shares, or 100% of the shares of Company's preferred stock
outstanding, and (iii) two of the four existing members of the Company's Board
of Directors resigned and Robert M. Wallace of E-Taxi was appointed as Chairman
of the Board of Directors. As of April 23, 1999, Mr. Wallace beneficially owns
6,426,500 shares of the Company's common stock, or 51.0% of the shares
outstanding, which includes (i) 24,000 shares of the Company's Series A
Preferred Stock held by Gateway Advisors, Inc., a company owned and controlled
by Mr. Wallace, (ii) 102,800 shares of Common Stock owned by the Gateway
Advisors Profit Sharing Plan, and (iii) 1,500,000 shares of Common Stock
issuable upon the exercise of a Common Stock Purchase Warrant owned by Gateway
Advisors. L. Wayne Kiley will remain as the Company's Chief Executive Officer,
President and Chief Accounting Officer until the Company hires suitable
replacements which the Company expects to occur in the near future. The Company
also granted to each of the former holders of E-Taxi capital stock the right to
have the Common Shares and the shares of Common Stock issuable upon conversion
of the Preferred Shares included in the next registration statement filed by the
Company with the Securities and Exchange Commission (other than on a Form S-4 or
Form S-8), subject to certain limitations and restrictions.
The number of shares constituting the Series A Preferred Stock is 400,000,
$.0001 par value per share, all of which were issued to the former holders of
Series A Preferred Stock of E-Taxi. Each share of Series A Preferred Stock is
convertible, at the option of the holder, at any time into four (4) shares of
Common Stock, subject to adjustment. The shares of Series A Preferred Stock are
also automatically converted into shares of Common Stock in the event that the
closing price for the shares of Common Stock equals or exceeds $3.75 per share
for three (3) consecutive trading days. As of the close of business on April 28,
1999, the shares of Common Stock had a closing price of greater than $3.75 per
share for more than three (3) consecutive days, and therefore, as of May 3,
1999, the Preferred Shares were automatically converted into 1,600,000 shares of
Common Stock.
Immediately prior to the closing of the E-Taxi Acquisition, E-Taxi closed (i) a
private offering of its shares of preferred stock and common stock raising an
aggregate of approximately $1,400,000 therefrom and (ii) on the acquisition of
all of the outstanding limited liability company interests of TechStore LLC, a
California limited liability company. As of March 31, 1999 Gateway Advisors,
Inc., Bejan Aminifard, Mosen Aminifard and Derek Wall entered into a
Contribution Agreement, pursuant to which each of the owners of TechStore
contributed their ownership interest in TechStore to E-Taxi in exchange for
shares of Common Stock and Preferred Stock of the Company.
As of April 15, 1999, E-Taxi entered into letters of intent with all of the
outstanding shareholders of SSPS, Inc., a California corporation ("SSPS"),
pursuant to which E-Taxi has agreed to purchase, and the shareholders of SSPS
have agreed to sell, 14,706 shares of the capital stock of SSPS, Inc. or
approximately 89.9% of the shares of SSPS capital stock outstanding. The letters
of intent are non-binding and subject to the satisfaction of certain conditions,
including the execution and delivery of a definitive purchase agreement.
As of April 9, 1999, the Company and Gateway Advisors, Inc., a company owned and
controlled by Robert M. Wallace (the Company's current Chairman of the Board),
entered into a Financial Advisory Agreement, pursuant to which Gateway Advisors,
Inc. agreed to provide certain business development and financial advisory
services for a period of two (2) years in exchange for the issuance by the
Company of 1,500,000 Common Stock Purchase Warrants. Each warrant entitles the
holder to purchase one (1) share of the Company's Common Stock at an exercise
price of $2.50 per share until April 8, 2000.
6
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
(UNAUDITED)
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(5) Subsequent Events (Continued)
As of April 9, 1999, the Company and each of the holders of 1,500,000 Class D
Common Stock Purchase Warrants entered into a Settlement Agreement, pursuant to
which the Company issued 375,000 shares of the Company's Common Stock in
exchange for (i) the cancellation of all Class D Common Stock Purchase Warrants,
(ii) the surrender and transfer to the Company of an aggregate of 500,000 shares
of Common Stock of Medical Marketplace, Inc. (a majority owned subsidiary of the
Company), and (iii) a general release, releasing the Company from all
liabilities. In addition, as of April 9, 1999, the Company and Victoria
Holdings, Inc., the Company's former financial advisor, entered into a
Settlement Agreement, pursuant to which the Company issued 250,000 shares of the
Company's Common Stock in exchange for (i) the cancellation of Options
exercisable for 1,000,000 shares of the Company's Common Stock at an exercise
price of $1.00 per share, and (ii) a general release, releasing the Company from
all liabilities. As part of the foregoing Settlement Agreements, the Company
agreed to include the shares issued in connection therewith in the next
registration statement filed by the Company with the Securities and Exchange
Commission (other than on a Form S-4 or Form S-8), subject to certain
limitations and restrictions.
As of April 9, 1999, the Company entered into an Agreement with L. Wayne Kiley,
the Company's President, Chief Executive Officer and at that time Chairman of
the Board, pursuant to which Mr. Kiley waived (i) his rights to accrued and
unpaid salary in the amount of $279,423 (ii) all of his rights under his
employment agreement with the Company, including without limitation, all future
compensation, and (iii) on behalf of Quality Associates, Inc. (a company owned
and controlled by Mr. Kiley) its rights to accrued and unpaid rent with respect
to the Company's executive offices, in the amount of $53,536. In exchange for
the foregoing, the Company reduced the exercise price of (a) 661,667 options
held by Mr. Kiley from $1.00 to $.60 per share and (b) 29,167 options held by
Mr. Kiley from $1.68 to $.60 per share. In addition, the Company agreed to
include the shares issuable upon the exercise of such options as well as certain
other options issued to management and certain consultants under a Registration
Statement on Form S-8 to be filed with the Commission in the near future.
In April of 1999, Joe Achten, a member of the Company's Board of Directors,
loaned the Company $50,000 in exchange for a Promissory Note due by April 2000,
in the principal amount of $50,000 and the issuance of options to purchase
100,000 shares of the Company's Common Stock at an exercise price of $.50.
. . . . . . . . . .
7
<PAGE>
PART 2. MANAGEMENTS' 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's
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, 1998.
Statements in this report that are not statements of historical or current fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other unknown factors that
could cause the actual results of the Company to be materially different from
the historical results or from any future results expressed or implied by such
forward-looking statements. In addition to statements which explicitly describe
such risks and uncertainties, readers are urged to consider statements labeled
with the terms "believes," "belief," "experts, "intends," "anticipates" or
"plans" to be uncertain forward-looking statements. The forward-looking
statements contained herein are also subject generally to other risks and
uncertainties that are described from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission.
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Total revenues for the three months ended March 31, 1999 were $942,725 compared
to $967,542 for the three months ended March 31, 1998. This represents a
decrease of $24,817 or 3%.
Revenues from product sales for the three months ended March 31, 1999 totaled
$820,346 resulting in a $147,196 or 15% decrease compared to $967,542 for the
three months ended March 31, 1998. Revenues from rental, service and other for
the three months ended March 31, 1999, were $122,379, a 100% increase compared
to no revenue for the three months ended March 31, 1998. The increase in rental
revenue reflects increased rental activity by Medical Marketplace.
Revenues from computer product sales and rentals were $52,509 for the three
months ended March 31, 1999 and $663,941 for the three months ended March 31,
1998. The sales decrease resulted from a substantially diminished sales staff
and reflects the Company's desire to reduce it's expenses and refocus its
computer business.
Medical product sales and rentals contributed $890,216 in revenues for the three
months ended March 31, 1999, compared to $303,602 for the three months ended
March 31, 1998. The current quarter's results represents a $580,572 or 287%
increase in revenues over the same period in 1998.
Total aggregate cost of revenues for the three months ended March 31, 1999 and
1998 were $688,778 or 73% of revenues and $1,141,860 for 117% of revenues,
respectively.
Cost of revenues for computer products were $31,926 or 61% of revenues and
$599,594 or 90% of revenues for the three months ended March 31, 1999 and 1998,
respectively. The decrease in cost of revenues as a percentage of sales is due
to the sale of low cost inventory.
Cost of revenues for medical products were $656,852 or 74% of revenues and
$542,266 or 175% of revenues, (the result of unexpected costs on previous
projects,) for the three months ended March 31, 1999 and 1998, respectively. The
decrease in the cost of revenues primarily has to do with an increase in the
volume of medical equipment leases, and the low costs realized through the
leasing activity.
Total selling, general, and administrative (SG & A) expenses for the three
months ended March 31, 1999 and 1998 were $563,891 or 60% of revenues and
$726,171 or 75% of revenues, respectively. The aggregate decrease in SG&A
expenses from the prior period was $162,280.
8
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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SG&A expenses attributed to computer products were $340,826 or 649% of revenues
and $437,346 or 66% of revenues for the three months ended March 31, 1999 and
1998, respectively. The decrease in SG&A expenses as a percentage of revenues is
due primarily to the sales volume decrease previously mentioned. The aggregate
decrease in SG&A expenses from the prior period was $ 96,520 directly reflecting
the extent of cut backs in the third quarter.
SG&A expenses attributed to medical products were $223,065 or 25% of revenues
and $288,825 or 93% of revenues for the three months ended March 31, 1999 and
1998, respectively. The $65,760 aggregate decrease in SG&A expenses resulted
from lower salary expenses because of extensive personnel reductions at Medical
Marketplace.
Total operating (loss) was ($309,944) and ($900,489) for the three months ended
March 31, 1999 and 1998, respectively. This $590,545 favorable change was a
result of reduced costs and the business conditions described herein.
Operating (loss) for computer products was ($320,243) and ($373,000) for the
three months ended March 31, 1999 and 1998, respectively. This $52,757 favorable
change is a result of reduced expenses and reflects the Company's efforts to
wind down the computer business.
Operating profit/(loss) for medical products and rentals was $10,299 and
($527,489) for the three months ended March 31, 1999 and 1998, respectively.
This $537,788 favorable change is due to increased sales and leasing activity
and reduced personnel expense.
Interest expense for the three months ended March 31, 1999, was $42,123 compared
to $46,493 for the three months ended March 31, 1998.
The Company's consolidated net (loss) ($306,702) or ($.23) per share for the
three months ended March 31, 1999, versus ($845,125) or ($.62) per share for the
three months ended March 31, 1998. The net profit was a result of the business
conditions described herein.
Nine Months Ended March 31, 1999 Compared to Nine Months Ended March 31, 1998
Total revenues for the nine months ended March 31, 1999 were $2,193,427 compared
to $6,610,712 for the nine months ended March 31, 1998. This represents a
decrease of $4,417,285 or 67%.
Revenues from product sales for the nine months ended March 31, 1999 totaled
$1,877,918 resulting in a $4,732,794 or 72% decrease compared to $6,610,712 for
the nine months ended March 31, 1998. Revenues from rental, service and other
for the nine months ended March 31, 1999, were $315,510, a 100% increase
compared to no revenue for the nine months ended March 31, 1998. The increase in
rental revenue reflects increased rental activity by Medical Marketplace.
Revenues from computer product sales and rentals were $202,806 for the nine
months ended March 31, 1999 and $3,129,606 for the nine months ended March 31,
1998. The sales decrease resulted from a substantially diminished sales staff
and reflects the company's desire to reduce it's expenses and wind down its
computer business.
Medical product sales and rentals contributed $1,990,621 in revenues for the
nine months ended March 31, 1999, compared to $3,481,106 for the nine months
ended March 31, 1998. This represents a $1,490,485 or 43% decrease in revenues
over the same period in 1998. The decrease in medical product sales is
attributed directly to Medical Marketplace's inability to fund new purchases.
Total aggregate cost of revenues for the nine months ended March 31, 1999 and
1998 were $1,493,847 or 68% of revenues and $5,670,727 or 87% of revenues,
respectively.
9
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Cost of revenues for computer products were $125,450 or 62% of revenues and
$2,672,084 or 85% of revenues for the nine months ended March 31, 1999 and 1998,
respectively. The decrease in cost of revenue as a percentage of sales is due to
the sale of previously devalued inventory.
Cost of revenues for medical products were $1,368,397 or 69% of revenues and
$2,998,643 or 86% of revenues for the nine months ended March 31, 1999 and 1998,
respectively. The 17% decrease in the cost of revenues primarily has to do with
an increase in the volume of medical equipment leases, and the low costs
realized through the leasing activity.
Total selling, general, and administrative (SG & A) expenses for the nine months
ended March 31, 1999 and 1998 were $1,556,749 or 71% of revenues and $2,480,601
or 37% of revenues, respectively. The aggregate decrease in SG&A expenses from
the prior period was $923,852.
SG&A expenses attributed to computer products were $866,250 or 427% of revenues
and $1,551,106 or 50% of revenues for the nine months ended March 31, 1999, and
1998, respectively. The increase in SG&A expenses as a percentage of revenues is
due primarily to the sales volume decrease previously mentioned. The aggregate
decrease in SG&A expenses from the prior period was $684,856, directly
reflecting the extent of cut backs in the nine month period.
SG&A expenses attributed to medical products were $690,499 or 35% of revenues
and $929,495 or 27% of revenues for the nine months ended March 31, 1999 and
1998, respectively. The increase in SG&A expenses as a percentage of revenues is
due primarily to the sales volume decrease. The aggregate decrease in SG&A
expenses from the prior period was $238,996, directly reflecting the extent of
cut backs in the nine month period.
Total operating loss was ($857,167) and ($1,540,616) for the nine months ended
March 31, 1999, and 1998, respectively. This $683,449 favorable change was a
result of reduced costs and the business conditions described herein.
Operating loss for computer products was ($788,894) and ($1,093,584) for the
nine months ended March 31, 1999, and 1998, respectively. This $419,172
favorable change is a result of reduced expenses and reflects the Company's
efforts to wind down the computer business.
Operating loss for medical products and rentals was ($68,275) and ($447,032) for
the nine months ended March 31, 1999 and 1998, respectively and reflects the
Company's reduced sales and difficulty in funding new purchases.
Interest expense for the nine months ended March 31, 1999, was $94,436 compared
to $84,527 for the nine months ended March 31, 1998. The increase of $9,909 is
due to financed purchases of medical rental equipment.
The Company's consolidated net loss was ($835,434) or ($.62) per share for the
nine months ended March 31, 1999, versus ($1,383,648) or ($1.02) per share for
the nine months ended March 31, 1998. The net loss was a result of the business
conditions described herein.
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.
10
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
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. The Company had negative working capital of ($1,592,055) at March 31,
1999. Negative working capital at March 31, 1998 was ($34,004).
During the nine months ended March 31, 1999, the Company used the June 30, 1998
available cash and vendor extended credit in order to fund the operations of the
Company.
New Millennium Leasing, Inc. ("NMLI"), was formed as a subsidiary of Medical
Marketplace, in early 1998. The primary focus of NMLI was 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.
NMLI only writes leases whose net present value exceeds the sales price of the
equipment. However, in certain circumstances, the lease also allows NMLI to
retain the residual value of the equipment. This residual value becomes an asset
on the balance sheet and is taken into income over the term of the lease.
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 financing.
In October of 1998, L. Wayne Kiley, the Company's President and Chief Executive
Officer, loaned the Company $50,000 in exchange for a Secured Promissory Note in
principal amount of $50,000 and the issuance of options to purchase 100,000
shares of the Company's Common Stock at an exercise price of $.60. In December
of 1998, Mr. Kiley loaned the Company an additional $7,000 in exchange for a
Promissory Note in principal amount of $7,000.
In January of 1999, Joe Achten, a member of the Company's Board of Directors,
loaned the Company $50,000 in exchange for a Promissory Note due by January
2000, in the principal amount of $50,000 and the issuance of options to purchase
100,000 shares of the Company's Common Stock at an exercise price of $.50. In
January 1999, L. Wayne Kiley, the Company's President and Chief Executive
Officer, loaned the Company an additional $10,000 in exchange for a Promissory
Note in principal amount of $10,000.
In April of 1999, Joe Achten, a member of the Company's Board of Directors,
loaned the Company $50,000 in exchange for a Promissory Note due by April 2000,
in the principal amount of $50,000 and the issuance of options to purchase
100,000 shares of the Company's Common Stock at an exercise price of $.50.
In March, 1999, the Company authorized 40,000 shares of Computer Marketplace,
Inc. Common Stock, to two directors, Joe Achten and Tom Evans (20,000 each,) in
exchange for their services and in payment of their 1998 Directors fees.
On January 26, 1999, Motorola and the Company agreed mutually to dismiss all
claims pertaining to Motorola v. Computer Marketplace, Inc., reducing the
Company's current liabilities by $35,564.
On April 23, 1999, the Company acquired all of the issued and outstanding
capital stock of E-Taxi in a business combination intended to be accounted for
as a "reverse acquisition." As consideration for 9,074,000 shares of the
E-Taxi's common stock and 400,000 shares of the E-Taxi's Series A Preferred
Stock, the Company issued an aggregate of 9,074,000 shares of the Company's
common stock, par value $.0001 per share, and 400,000 shares of the Company's
Series A Preferred Stock, par value $.0001 per share. For accounting purposes,
E-Taxi is deemed to be the acquirer, and the Company is deemed to be acquired,
under the purchase method.
11
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
As of April 23, 1999, (i) E-Taxi is a wholly owned subsidiary of the Company,
(ii) the stockholders of E-Taxi are the beneficial owners of (a) the Common
Shares, or 81.8% of the shares of Company's common stock outstanding, and (b)
the Preferred Shares, or 100% of the shares of Company's preferred stock
outstanding, and (iii) two of the four existing members of the Company's Board
of Directors resigned and Robert M. Wallace of E-Taxi was appointed as Chairman
of the Board of Directors. As of April 23, 1999, Mr. Wallace beneficially owns
6,426,500 shares of the Company's common stock, or 51.0% of the shares
outstanding, which includes (I) 24,000 shares of the Company's Series A
Preferred Stock held by Gateway Advisors, Inc., a company owned and controlled
by Mr. Wallace, (ii) 102,800 shares of Common Stock owned by the Gateway
Advisors Profit Sharing Plan, and (iii) 1,500,000 shares of Common Stock
issuable upon the exercise of a Common Stock Purchase Warrant owned by Gateway
Advisors. L. Wayne Kiley will remain as the Company's Chief Executive Officer,
President and Chief Accounting Officer until the Company hires suitable
replacements which the Company expects to occur in the near future. The Company
also granted to each of the former holders of E-Taxi capital stock the right to
have the Common Shares and the shares of Common Stock issuable upon conversion
of the Preferred Shares included in the next registration statement filed by the
Company with the Securities and Exchange Commission (other than on a Form S-4 or
Form S-8), subject to certain limitations and restrictions.
The number of shares constituting the Series A Preferred Stock is 400,000,
$.0001 par value per share, all of which were issued to the former holders of
Series A Preferred Stock of E-Taxi. Each share of Series A Preferred Stock is
convertible, at the option of the holder, at any time into four (4) shares of
Common Stock, subject to adjustment. The shares of Series A Preferred Stock are
also automatically converted into shares of Common Stock in the event that the
closing price for the shares of Common Stock equals or exceeds $3.75 per share
for three (3) consecutive trading days. As of the close of business on April 28,
1999, the shares of Common Stock had a closing price of greater than $3.75 per
share for more than three (3) consecutive days, and therefore, as of May 3,
1999, the Preferred Shares were automatically converted into 1,600,000 shares of
Common Stock.
Immediately prior to the closing of the E-Taxi Acquisition, E-Taxi closed (i) a
private offering of its shares of preferred stock and common stock raising an
aggregate of approximately $1,400,000 therefrom and (ii) on the acquisition of
all of the outstanding limited liability company interests of TechStore LLC, a
California limited liability company. As of March 31, 1999 Gateway Advisors,
Inc., Bejan Aminifard, Mosen Aminifard and Derek Wall entered into a
Contribution Agreement, pursuant to which each of the owners of TechStore
contributed their ownership interest in TechStore to E-Taxi in exchange for
shares of Common Stock and Preferred Stock of the Company.
As of April 15, 1999, E-Taxi entered into letters of intent with all of the
outstanding shareholders of SSPS, Inc., a California corporation ("SSPS"),
pursuant to which E-Taxi has agreed to purchase, and the shareholders of SSPS
have agreed to sell, 14,706 shares of the capital stock of SSPS, Inc. or
approximately 89.9% of the shares of SSPS capital stock outstanding. The letters
of intent are non-binding and subject to the satisfaction of certain conditions,
including the execution and delivery of a definitive purchase agreement.
As of April 9, 1999, the Company and Gateway Advisors, Inc., a company owned and
controlled by Robert M. Wallace (the Company's current Chairman of the Board),
entered into a Financial Advisory Agreement, pursuant to which Gateway Advisors,
Inc. agreed to provide certain business development and financial advisory
services for a period of two (2) years in exchange for the issuance by the
Company of 1,500,000 Common Stock Purchase Warrants. Each warrant entitles the
holder to purchase one (1) share of the Company's Common Stock at an exercise
price of $2.50 per share until April 8, 2000.
12
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
As of April 9, 1999, the Company and each of the holders of 1,500,000 Class D
Common Stock Purchase Warrants entered into a Settlement Agreement, pursuant to
which the Company issued 375,000 shares of the Company's Common Stock in
exchange for (i) the cancellation of all Class D Common Stock Purchase Warrants,
(ii) the surrender and transfer to the Company of an aggregate of 500,000 shares
of Common Stock of Medical Marketplace, Inc. (a majority owned subsidiary of the
Company), and (iii) a general release, releasing the Company from all
liabilities. In addition, as of April 9, 1999, the Company and Victoria
Holdings, Inc., the Company's former financial advisor, entered into a
Settlement Agreement, pursuant to which the Company issued 250,000 shares of the
Company's Common Stock in exchange for (i) the cancellation of Options
exercisable for 1,000,000 shares of the Company's Common Stock at an exercise
price of $1.00 per share, and (ii) a general release, releasing the Company from
all liabilities. As part of the foregoing Settlement Agreements, the Company
agreed to include the shares issued in connection therewith in the next
registration statement filed by the Company with the Securities and Exchange
Commission (other than on a Form S-4 or Form S-8), subject to certain
limitations and restrictions.
As of April 9, 1999, the Company entered into an Agreement with L. Wayne Kiley,
the Company's President, Chief Executive Officer and at that time Chairman of
the Board, pursuant to which Mr. Kiley waived (i) his rights to accrued and
unpaid salary in the amount of $279,423 (ii) all of his rights under his
employment agreement with the Company, including without limitation, all future
compensation, and (iii) on behalf of Quality Associates, Inc. (a company owned
and controlled by Mr. Kiley) its rights to accrued and unpaid rent with respect
to the Company's executive offices, in the amount of $53,536. In exchange for
the foregoing, the Company reduced the exercise price of (a) 661,667 options
held by Mr. Kiley from $1.00 to $.60 per share and (b) 29,167 options held by
Mr. Kiley from $1.68 to $.60 per share. In addition, the Company agreed to
include the shares issuable upon the exercise of such options as well as certain
other options issued to management and certain consultants under a Registration
Statement on Form S-8 to be filed with the Commission in the near future.
In April of 1999, Joe Achten, a member of the Company's Board of Directors,
loaned the Company $50,000 in exchange for a Promissory Note due by April 2000,
in the principal amount of $50,000 and the issuance of options to purchase
100,000 shares of the Company's Common Stock at an exercise price of $.50.
Year 2000
The Company has addressed the Year 2000 issue by converting its existing
accounting and sales software to a new software that is in compliance with the
Year 2000 requirements. The new software took effect July 1, 1998 and its cost
was fully absorbed in the year ended June 30, 1998. It is believed that no third
party relationship would cause any material impact on the Company as a result of
the Year 2000 problem.
13
<PAGE>
COMPUTER MARKETPLACE, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 1. Legal Proceedings
In January, 1999, Motorola agreed to dismiss all claims pertaining to
Motorola v. Computer Marketplace, Inc., relieving the Company of an outstanding
balance of $35,564. During the three months ended March 31, 1999, the Company
negotiated settlement terms of certain accounts payable, resulting in a gain of
$19,107. During the nine months ended March 31, 1998, the Company negotiated
payment terms of certain accounts payable, resulting in a gain of $98,226. There
was no income tax effect on these transactions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by item 601 of regulation S-K:
None required
(b) Reports on Form 8-K
None
14
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COMPUTER MARKETPLACE, INC.
Date: May 21, 1999 By: /s/ L. Wayne Kiley
------------------------------
L. Wayne Kiley
President, Chief Executive Officer and
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial and accounting
officer.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the
consolidated balance sheet and the consolidated statement of operations
and is qualified in its entirety by reference to such schedules.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Jun-30-1999
<PERIOD-END> Mar-31-1999
<CASH> 76,850
<SECURITIES> 0
<RECEIVABLES> 284,779
<ALLOWANCES> 30,000
<INVENTORY> 0
<CURRENT-ASSETS> 362,129
<PP&E> 737,524
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,942,095
<CURRENT-LIABILITIES> 1,954,184
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> 361,782
<TOTAL-LIABILITY-AND-EQUITY> 1,942,095
<SALES> 1,877,917
<TOTAL-REVENUES> 2,193,427
<CGS> 1,493,845
<TOTAL-COSTS> 3,050,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,436
<INCOME-PRETAX> (890,105)
<INCOME-TAX> 0
<INCOME-CONTINUING> (890,105)
<DISCONTINUED> 0
<EXTRAORDINARY> 54,671
<CHANGES> 0
<NET-INCOME> (835,434)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
</TABLE>
