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, 1998 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 February 1, 1999, 1,352,424 shares of the issuer's common stock were
outstanding.
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
INDEX
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Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 1998
[Unaudited]............................................... 1......2
Condensed Consolidated Statements of Operations for the three
months ended September 30, 1998 and 1997 [Unaudited]...... 3......
Condensed Consolidated Statements of Cash Flows for the three
months ended September 31, 1998 and 1997 [Unaudited].......... 4......
Notes to Condensed Consolidated Financial Statements
[Unaudited]................................................... 5.....
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 6......8
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8K........................... 9......
Signature Page.................................................... 10......
. . . . . . . .
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998.
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Assets:
Current Assets:
<S> <C>
Cash and Cash Equivalents $ 143,355
Accounts Receivable [Less Allowance for Doubtful Accounts of $112,471] 327,232
Inventory [Net of Valuation Allowance of $50,000] 54,993
Property Held for Sale 381,845
Other Current Assets 500
-----------
Total Current Assets 907,925
Property and Equipment - Net 1,003,343
-----------
Other Assets:
Residual Value of Equipment 1,165,000
Others 159,142
Total Other Assets 1,324,142
Total Assets $ 3,235,410
===========
</TABLE>
The Accompanying Notes Are an Integral Part of These Condensed Consolidated
Financial Statements.
1
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998.
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Liabilities and Stockholders' Equity [Deficit]:
Current Liabilities:
<S> <C>
Notes Payable $ 1,492,602
Accounts Payable 709,404
Accrued Payroll and Payroll Related Liabilities 222,758
Customer Deposits 433,254
Other Current Liabilities 91,272
-----------
Total Current Liabilities 2,949,290
Long-Term Debt 449,355
Minority Interest in Net Assets of Subsidiary --
-----------
Commitments and Contingencies --
Stockholders' Equity [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, 1,352,424 Shares Issued and Outstanding 135
Deferred Compensation (228,646)
Capital in Excess of Par Value 8,785,100
Accumulated Deficit (8,719,824)
Total Stockholders' Equity [Deficit] (163,235)
Total Liabilities and Stockholders' Equity [Deficit] $ 3,235,410
===========
</TABLE>
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
September 30,
1 9 9 8 1 9 9 7
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Revenues:
<S> <C> <C>
Product Sales $ 205,054 $ 2,595,281
Rental, Service and Other 82,260 --
----------- -----------
Total Revenues 287,314 2,595,281
----------- -----------
Cost and Expenses:
Cost of Revenues - Product Sales 175,512 2,085,546
Cost of Revenues - Rental, Services and Other 71,976 --
Selling, General and Administrative 592,977 975,422
----------- -----------
Total Cost and Expenses 840,465 3,060,968
----------- -----------
Operating Loss (553,151) (465,687)
----------- -----------
Other Income [Expense]:
Interest Expense (24,501) (13,721)
Interest Income 24 15,287
Miscellaneous Income 30,919 24,103
----------- -----------
Total Other Income 6,442 25,669
----------- -----------
Loss Before Income Taxes, Minority Interest in Subsidiary
and Extraordinary Item (546,709) (440,018)
Provision for Income Taxes -- --
Minority Interest in Loss of Subsidiary -- 26,429
----------- -----------
Loss Before Extraordinary Items (546,709) (413,589)
Extraordinary Items:
Gain from Extinguishment of Debt
[Net of Income Taxes of $-0-] -- 98,226
----------- -----------
Net Loss $ (546,709)$ (315,363)
=========== ===========
Loss Per Share:
Loss Before Extraordinary Items $ (.40)$ (.30)
Extraordinary Items -- .07
----------- -----------
Net Loss Per Share $ (.40)$ (.23)
=========== ===========
Weighted Average Common Shares Outstanding 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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<TABLE>
Three months ended
September 30,
1 9 9 8 1 9 9 7
------- -------
Operating Activities:
<S> <C> <C>
Net Loss $ (546,709) $ (315,363)
Adjustments to Reconcile Net Loss to Net Cash
Provided by [Used for] Operating Activities:
Depreciation and Amortization 122,712 85,243
Provisions for Losses on Accounts Receivable -- (16,823)
Provisions for Losses on Inventory -- (74,482)
Minority Interest in Consolidated Subsidiary -- (26,429)
Gain on Restructuring of Debt -- (98,226)
Changes in Assets and Liabilities:
Accounts Receivable 94,370 (191,936)
Inventory 125,821 51,419
Other Current Assets 21,588 21,341
Accounts Payable 99,389 (525,310)
Accrued Payroll and Related Liabilities 43,857 (56,177)
Other Current Liabilities 215,843 120,229
---------- -----------
Net Cash - Operating Activities 176,871 (1,026,514)
---------- -----------
Investing Activities:
Purchase of Property and Equipment (6,161) (10,723)
Other (36,501) (54,350)
---------- -----------
Net Cash - Investing Activities (42,662) (65,073)
---------- -----------
Financing Activities:
Principal Payments on Long-Term Debt (27,434) (6,735)
Proceeds from Long-Term Debt -- 70,690
---------- -----------
Net Cash - Financing Activities (27,434) 63,955
---------- -----------
Increase [Decrease] in Cash and Cash Equivalents 106,775 (1,027,632)
Cash and Cash Equivalents - Beginning of Periods 36,580 1,500,540
---------- -----------
Cash and Cash Equivalents - End of Periods $ 143,355 $ 472,908
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest $ 24,501 $ 13,720
Cash Paid for Income Taxes $ -- $ --
Supplemental Disclosures of Non-Cash Operating 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) $ --
</TABLE>
The Accompanying Notes Are an Integral Part of These Condensed Consolidated
Financial Statements.
4
<PAGE>
COMPUTER MARKETPLACE, 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 September 30, 1998, and 1997, the
consolidated results of its operations for the three months ending September 30,
1998 and 1997 and its cash flows for the three months ending September 30, 1998
and 1997. 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, 1998 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
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. Subsequent Events
In October 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 per share.
In January 1999, Motorola and the Company mutually agreed to dismiss all
claims pertaining to Motorola v. Computer Marketplace, Inc.
. . . . . . . . . . . .
5
<PAGE>
Item 2.
COMPUTER MARKETPLACE, INC. AND SUBSIDIARIES
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.
Quarter Ended September 30, 1998 Compared to Quarter Ended September 30, 1997
Total revenues for the quarter ended September 30, 1998 were $287,314 compared
to $2,595,281 for the quarter ended September 30, 1997. This represents a
decrease of $2,307,967 or 89%.
Revenues from product sales for the quarter ended September 30, 1998 totaled
$205,054 resulting in a $2,390,227 or 92% decrease compared to $2,595,281 for
the quarter ended September 30, 1997. Revenues from rental, service and other
for the quarter ended September 30, 1998, were $82,260, a 100% increase compared
to $0 for the quarter ended September 30, 1997. The increase in rental revenue
reflects increased leasing activity by New Millennium Leasing, a subsidiary of
Medical Marketplace.
Revenues from computer product sales and rentals were $88,221 for the quarter
ended September 30, 1998 and $1,204,647 for the quarter ended September 30,
1997. 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 $199,093 in revenues for the
quarter ended September 30, 1998, compared to $1,390,634 for the quarter ended
September 30, 1997. The current quarter's result represents a $1,191,541 or 86%
decrease in revenues over the same period in 1997. The decrease in medical
product sales is attributed directly to Medical Marketplace's inability of fund
new purchases.
Total aggregate cost of revenues for the quarter ended September 30, 1998 and
1997 were $247,488 or 86% of revenues and $2,085,546 for 80% of revenues,
respectively.
Cost of revenues for computer products were $61,869 or 70% of revenues and
$884,167 or 73% of revenues for the quarters ended September 30, 1998, and 1997,
respectively. The increase of cost of revenue is due to the reduced sales volume
and the loss of advantage in volume purchasing discounts.
Cost of revenues for medical products were $185,619 or 93% of revenues and
$1,201,379 or 86% of revenues for the quarters ended September 30, 1998, and
1997, respectively. The 8% increase in the cost of revenues primarily has to do
with a decrease 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
quarter ended September 30, 1998 and 1997 were $592,977 or 206% of revenues and
$975,422 or 38% of revenues, respectively. The aggregate decrease in SG&A
expenses from the prior period was $382,445.
SG&A expenses attributed to computer products were $280,028 or 317% of revenues
and $635,617 or 53% of revenues for the quarters ended September 30, 1998, and
1997, 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 $355,589, directly
reflecting the extent of cut backs in first quarter.
6
<PAGE>
COMPUTER MARKETPLACE, INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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SG&A expenses attributed to medical products were $312,949 or 157% of revenues
and $339,805 or 24% of revenues for the quarters ended September 30, 1998, and
1997, respectively. The increase in SG&A expenses as a percentage of revenues is
due primarily to the sales volume decrease.
Total operating loss was $553,151 and $465,687 for the quarters ended September
30, 1998, and 1997, respectively. This $87,464 unfavorable change was a result
of reduced sales volume and the business conditions described herein.
Operating loss for computer products was $253,676 and $315,137 for the quarters
ended September 30, 1998, and 1997, respectively. This $61,461 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 $299,475 and $150,550 for
the quarters ended September 30, 1998, and 1997, respectively and reflects the
expense related to the Company's expanded sales and finance staff.
Interest expense for the quarter ended September 30, 1998, was $24,501 compared
to $13,721 for the quarter ended September 30, 1997. The increase of $10,780 is
due to financed purchases of medical rental equipment.
The Company's consolidated net loss was $546,709 or $0.40 per share for the
quarter ended September 30, 1998, versus $315,363 or $0.23 per share for the
quarter ended September 30, 1997. 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.
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 ($2,041,365) at September 30,
1998. Working capital at September 30, 1997 was $1,132,791.
During the quarter ended September 30, 1998, 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 1997. 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.
7
<PAGE>
COMPUTER MARKETPLACE, INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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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.
During the year ended June 30, 1998, the Company significantly reduced the sized
and scope of its computer business. The Company believes that because of
significant change in the computer industry, the market is more competitive and
opportunities to engage in certain business are no longer available. The
decrease in the usage of mid-sized computer systems and the increase in
importance of personal computers has severely reduced the Company's business in
the RISC 6000 and AS400 market. Further, the emergence of major manufacturers,
(such as, IBM, and DEC) into the reselling business, has made it extremely
difficult for the Company to compete successfully. Note 14 to the Company's
Financial Statements as of and for the year ended June 30, 1998, prepared in
conformity with generally accepted accounting principles, by the Company's
independent auditors, Moore, Stephens, P.C., expresses the auditors uncertainty
as to whether the Company can continue as a going concern. As a result, the
Company is presently in the process of reevaluating its operations as they
pertain to computer business. The Company is actively pursuing acquiring an
alternative business and/or assets which may be developed into a business.
On August 27, 1998, the Company, Medical Marketplace, and Medley Credit
Acceptance Corporation ["Medley"] entered into a Stock Purchase Agreement,
pursuant to which Medley agreed to purchase all of the shares of Medical
Marketplace owned by Computer, which represents 83.3% of the total number of
shares outstanding. Medley agreed to pay 25,000 shares of restricted Medley
Common Stock in exchange for the 2,500,000 shares of Medical Marketplace owned
by the Company so long as Medical Marketplace had $50,000 in net assets at the
time of the closing of the transaction. The closing of the proposed transaction
was subject to the satisfaction of certain conditions including the approval of
a majority of the shares of the Company's common stock outstanding. In addition,
pending the closing, Medley agreed to assist in the day to day management of
Medical Marketplace pursuant to the terms of an Operating Agreement between
Medical Marketplace and Medley. On November 20, 1998, the Company notified
Medley that it was terminating both the Stock Purchase Agreement and Operating
Agreement effective as of November 25, 1998. The Company is continuing in its
search for a purchaser of Medical Marketplace.
During 1998 the Company repaid the outstanding obligations under a credit
facility, Coast Business Credit, from the proceeds of a $200,000 loan from an
individual lender. In exchange for the loan, the Company issued a 12% promissory
note in the aggregate principal amount of $200,000 due October 31, 1998. On
October 8, 1998 the Company repaid the note by delivering title to the Company's
properties located in Corona and Mariposa, California, valued at $230,000. In
addition, the Company received a cash payment of $30,000.00 from the lender.
Shortly thereafter, the lender sold the property to the Kiley Children's Trust,
a trust established for the benefit of the children of L. Wayne Kiley and Nancy
Kiley.
In October 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.
On January 26, 1999, Motorola and the Company agreed mutually to dismiss
all claims pertaining to Motorola v. Computer Marketplace, Inc.
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 ending 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.
8
<PAGE>
COMPUTER MARKETPLACE, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
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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 filed during the quarter for which this report is submitted
9
<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: February 1, 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.
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information 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> 3-Mos
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-END> Sep-30-1998
<CASH> 143,355
<SECURITIES> 0
<RECEIVABLES> 439,703
<ALLOWANCES> 112,471
<INVENTORY> 54,993
<CURRENT-ASSETS> 907,925
<PP&E> 1,003,343
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,235,410
<CURRENT-LIABILITIES> 2,949,290
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> (163,370)
<TOTAL-LIABILITY-AND-EQUITY> 3,235,410
<SALES> 205,054
<TOTAL-REVENUES> 287,314
<CGS> 247,488
<TOTAL-COSTS> 840,465
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,501
<INCOME-PRETAX> (546,709)
<INCOME-TAX> 0
<INCOME-CONTINUING> (546,709)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (546,709)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
