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 December 31, 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 16, 1999, 1,352,424 shares of the issuer's common stock were
outstanding.
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
INDEX
- ------------------------------------------------------------------------------
Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Balance Sheet as of December 31, 1998
[Unaudited].................................................. 1......2
Condensed Consolidated Statements of Operations for the three
and six months ended December 31, 1998 and 1997 [Unaudited].. 3......
Condensed Consolidated Statements of Cash Flows for the six
months ended December 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......10
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8K........................... 11......
Signature Page.................................................... 12......
. . . . . . . .
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------------------------------------------------------
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998.
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Assets:
Current Assets:
<S> <C>
Cash and Cash Equivalents $ 26,349
Accounts Receivable [Less Allowance for Doubtful Accounts of $82,472] 345,478
Inventory [Net of Valuation Allowance of $50,000] 39,993
Other Current Assets 500
-----------
Total Current Assets 412,320
Property and Equipment - Net 933,827
-----------
Other Assets:
Residual Value of Equipment 1,165,000
Others 119,142
Total Other Assets 1,284,142
Total Assets $ 2,630,289
===========
The Accompanying Notes Are an Integral Part of These Condensed Consolidated Financial Statements.
1
</TABLE>
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998.
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Liabilities and Stockholders' Equity [Deficit]:
Current Liabilities:
<S> <C>
Notes Payable $ 1,183,313
Accounts Payable 603,852
Accrued Payroll and Payroll Related Liabilities 274,924
Customer Deposits 194,809
Other Current Liabilities 75,752
-----------
Total Current Liabilities 2,332,650
Long-Term Debt 397,173
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 (182,920)
Capital in Excess of Par Value 8,785,100
Accumulated Deficit (8,701,849)
Total Stockholders' Equity [Deficit] (99,534)
Total Liabilities and Stockholders' Equity [Deficit] $ 2,630,289
===========
The Accompanying Notes Are an Integral Part of These Condensed Consolidated Financial Statements.
2
</TABLE>
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Three months ended Six months ended
December 31, December 31,
------------ ------------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
Revenues:
<S> <C> <C> <C> <C>
Product Sales $ 853,152 $3,046,463 $ 1,057,571 $ 5,641,744
Rental, Service and Other 110,236 -- 193,131 --
---------- ---------- ----------- -----------
Total Revenues 963,388 3,046,463 1,250,702 5,641,744
---------- ---------- ----------- -----------
Cost and Expenses:
Cost of Revenues - Product Sales 541,450 2,441,023 715,791 4,526,569
Cost of Revenues - Rental, Services
and Other 16,132 -- 89,278 --
Selling, General and Administrative 398,488 779,199 992,858 1,754,621
--------- ---------- ----------- -----------
Total Cost and Expenses 956,070 3,220,222 1,797,927 6,281,190
---------- ---------- ----------- -----------
Operating Income [Loss] 7,318 (173,759) (547,225) (639,446)
---------- ---------- ----------- -----------
Other Income [Expense]:
Interest Expense (27,810) (28,272) (52,312) (41,993)
Interest Income -- 6,306 24 21,593
Miscellaneous Income 2,903 7,885 35,216 31,988
---------- ---------- ----------- -----------
Other [Expense] Income (24,907) (14,081) (17,072) 11,588
---------- ---------- ----------- -----------
Loss Before Income Taxes, Minority
Interest in Subsidiary and
Extraordinary Item (17,589) (187,840) (564,297) (627,858)
Provision for Income Taxes -- -- -- --
Minority Interest in Loss of Subsidiary -- (35,779) -- (9,350)
------- ----------- ----------- -----------
Loss Before Extraordinary Items (17,589) (223,619) (564,297) (637,208)
Extraordinary Items:
Gain from Extinguishment of Debt
[Net of Income Taxes of $-0-] 35,564 -- 35,564 98,226
---------- ---------- ----------- -----------
Net Income [Loss] $ 17,975 $ (223,619) $ (528,733)$ (538,982)
========== ========== =========== ===========
Income [Loss] Per Share:
Loss Before Extraordinary Items $ (.01) $ (.17) $ (.41)$ (.47)
Extraordinary Items .02 -- .02 .07
---------- ---------- ----------- -----------
Net Income [Loss] Per Share $ .01 $ (.17) $ (.39)$ (.40)
========== ========== =========== ===========
Weighted Average Common
Shares Outstanding 1,352,424 1,352,424 1,352,424 1,352,424
========== ========== =========== ===========
The Accompanying Notes Are an Integral Part of These Condensed Consolidated Financial Statements.
3
</TABLE>
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Six months ended
December 31,
1 9 9 8 1 9 9 7
------- -------
Operating Activities:
<S> <C> <C>
Net Loss $ (528,735) $ (538,982)
Adjustments to Reconcile Net Loss to Net Cash
Provided by [Used for] Operating Activities:
Depreciation and Amortization 230,890 169,572
Provisions for Losses on Accounts Receivable (30,000) (38,611)
Provisions for Losses on Inventory -- (114,482)
Minority Interest in Consolidated Subsidiary -- 9,350
Gain from Extinguished Debt 35,564 (98,226)
Gain from Disposal of Fixed Assets 7,064 --
Changes in Assets and Liabilities:
Accounts Receivable 106,124 (8,592)
Inventory 140,821 96,413
Other Current Assets 25,087 17,081
Accounts Payable (41,727) (483,116)
Accrued Payroll and Related Liabilities 96,023 (2,245)
Other Current Liabilities (38,121) (9,423)
---------- -----------
Net Cash - Operating Activities 2,990 (1,001,261)
---------- -----------
Investing Activities:
Purchase of Property and Equipment (6,161) (519,137)
Proceeds from Sale of Property and Equipment 30,894 --
Other -- (241,700)
---------- -----------
Net Cash - Investing Activities 24,733 (760,837)
---------- -----------
Financing Activities:
Net Decrease in Notes Payable -- 366,120
Principal Payments on Long-Term Debt (94,954) (126,228)
Proceeds from Long-Term Debt 57,000 750,000
---------- -----------
Net Cash - Financing Activities (37,954) 989,892
---------- -----------
[Decrease] in Cash and Cash Equivalents (10,231) (772,206)
Cash and Cash Equivalents - Beginning of Periods 36,580 1,500,540
---------- -----------
Cash and Cash Equivalents - End of Periods $ 26,349 $ 728,334
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest $ 52,313 $ 41,993
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) $ 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
</TABLE>
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
- ------------------------------------------------------------------------------
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 December 31, 1998, and 1997, the
consolidated results of its operations for the three and six months ending
December 31, 1998 and 1997 and its cash flows for the six months ending December
31, 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 December 31, 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 six months ended December 31, 1998, 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 six months ended
December 31, 1997, 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. Officer Loan
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 per share. 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.
5. Subsequent Events
In January 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 per
share. The note bears interest at the rate of 10% per annum. 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. The note bears interest at the rate of 10% per annum.
. . . . . . . . . . . . .
5
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
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.
Three Months Ended December 31, 1998 Compared to Three Months Ended
December 31, 1997
Total revenues for the three months ended December 31, 1998 were $963,388
compared to $3,046,463 for the three months ended December 31, 1997. This
represents a decrease of $2,083,075 or 68%.
Revenues from product sales for the three months ended December 31, 1998 totaled
$853,152 resulting in a $2,193,311 or 72% decrease compared to $3,046,463 for
the three months ended December 31, 1997. Revenues from rental, service and
other for the three months ended December 31, 1998, were $110,236, a 100%
increase compared to $0 for the three months ended December 31, 1997. The
increase in rental revenue reflects increased rental activity by Medical
Marketplace.
Revenues from computer product sales and rentals were $62,077 for the three
months ended December 31, 1998 and $1,261,019 for the three months ended
December 31, 1997. 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 $901,311 in revenues for the three
months ended December 31, 1998, compared to $1,785,444 for the three months
ended December 31, 1997. The current quarter's result represents a $884,133 or
50% 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 three months ended December 31, 1998
and 1997 were $557,582 or 58% of revenues and $2,441,023 for 80% of revenues,
respectively.
Cost of revenues for computer products were $31,668 or 51% of revenues and
$1,188,323 or 94% of revenues for the three months ended December 31, 1998, and
1997, respectively. The decrease in cost of revenue as a percentage of sales is
due to the sale of low cost inventory.
Cost of revenues for medical products were $525,914 or 58% of revenues and
$1,252,700 or 70% of revenues for the three months ended December 31, 1998, and
1997, respectively. The 12% 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 December 31, 1998 and 1997 were $398,488 or 41% of revenues and
$779,199 or 26% of revenues, respectively. The aggregate decrease in SG&A
expenses from the prior period was $380,711.
SG&A expenses attributed to computer products were $244,006 or 393% of revenues
and $451,959 or 36% of revenues for the three months ended December 31, 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 $207,953, directly
reflecting the extent of cut backs in the second quarter.
6
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
SG&A expenses attributed to medical products were $154,482 or 17% of revenues
and $327,240 or 18% of revenues for the three months ended December 31, 1998,
and 1997, respectively. The $172,758 aggregate decrease in SG&A expenses
reflects the extensive personnel cut backs at Medical Marketplace.
Total operating income/(loss) was $7,318 and ($173,759) for the three months
ended December 31, 1998, and 1997, respectively. This $166,441 favorable change
was a result of reduced costs and the business conditions described herein.
Operating loss for computer products was $213,597 and $379,263 for the three
months ended December 31, 1998, and 1997, respectively. This $165,666 favorable
change is a result of reduced expenses and reflects the Company's efforts to
wind down the computer business.
Operating income for medical products and rentals was $220,915 and $205,504 for
the three months ended December 31, 1998, and 1997, respectively. This $15,411
favorable change is due to increased sales and leasing activity and reduced
personnel expense.
Interest expense for the three months ended December 31, 1998, was $27,811
compared to $28,272 for the three months ended December 31, 1997.
The Company's consolidated net income/(loss) $17,975 or $0.01 per share for the
three months ended December 31, 1998, versus $(223,619) or $(0.17) per share for
the three months ended December 31, 1997.
The net profit was a result of the business conditions described herein.
Six Months Ended December 31, 1998 Compared to Six Months Ended
December 31, 1997
Total revenues for the six months ended December 31, 1998 were $1,250,702
compared to $5,641,744 for the six months ended December 31, 1997. This
represents a decrease of $4,391,042 or 78%.
Revenues from product sales for the six months ended December 31, 1998 totaled
$1,057,571 resulting in a $4,584,173 or 81% decrease compared to $5,641,744 for
the six months ended December 31, 1997. Revenues from rental, service and other
for the six months ended December 31, 1998, were $193,131, a 100% increase
compared to $0 for the six months ended December 31, 1997. The increase in
rental revenue reflects increased rental activity by Medical Marketplace.
Revenues from computer product sales and rentals were $150,298 for the six
months ended December 31, 1998 and $2,465,666 for the six months ended December
31, 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 $1,100,404 in revenues for the six
months ended December 31, 1998, compared to $3,176,078 for the six months ended
December 31, 1997. This represents a $2,075,674 or 65% decrease in revenues over
the same period in 1997. 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 six months ended December 31, 1998 and
1997 were $805,069 or 64% of revenues and $4,526,569 or 80% of revenues,
respectively.
Cost of revenues for computer products were $93,537 or 62% of revenues and
$2,072,490 or 84% of revenues for the six months ended December 31, 1998, and
1997, respectively. The decrease in cost of revenue as a percentage of sales is
due to the sale of previously devalued inventory.
7
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Cost of revenues for medical products were $711,532 or 65% of revenues and
$2,454,079 or 77% of revenues for the six months ended December 31, 1998, and
1997, respectively. The 12% 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 six
months ended December 31, 1998 and 1997 were $992,858 or 79% of revenues and
$1,754,621 or 31% of revenues, respectively. The aggregate decrease in SG&A
expenses from the prior period was $761,763.
SG&A expenses attributed to computer products were $525,427 or 350% of revenues
and $1,087,576 or 44% of revenues for the six months ended December 31, 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 $562,149, directly
reflecting the extent of cut backs in the six month period.
SG&A expenses attributed to medical products were $467,431 or 42% of revenues
and $667,045 or 21% of revenues for the six months ended December 31, 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 $547,225 and $639,446 for the six months ended December
31, 1998, and 1997, respectively. This $92,221 favorable change was a result of
reduced costs and the business conditions described herein.
Operating loss for computer products was $468,666 and $694,400 for the six
months ended December 31, 1998, and 1997, respectively. This $225,734 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 $(78,559) and $54,954 for
the six months ended December 31, 1998, and 1997, respectively and reflects the
Company's reduced sales and difficulty in funding new purchases.
Interest expense for the six months ended December 31, 1998, was $52,313
compared to $41,993 for the six months ended December 31, 1997. The increase of
$10,320 is due to financed purchases of medical rental equipment.
The Company's consolidated net loss was $528,733 or $0.39 per share for the
six months ended December 31, 1998, versus $538,982 or $0.40 per share for the
six months ended December 31, 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 ($1,920,330) at December 31,
1998. Working capital at December 31, 1997 was $883,213.
8
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
During the six months ended December 31, 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. 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 continuing to cut costs, while reevaluating its operations
as they pertain to the 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.
9
<PAGE>
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
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 per share. 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 per
share. The note bears interest at the rate of 10% per annum. 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. The note bears interest at the rate of 10%
per annum.
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.
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.
10
<PAGE>
COMPUTER MARKETPLACE, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
- ------------------------------------------------------------------------------
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
11
<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 16, 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.
12
<PAGE>
<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> 6-Mos
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-END> Dec-31-1998
<CASH> 26,349
<SECURITIES> 0
<RECEIVABLES> 427,950
<ALLOWANCES> 82,472
<INVENTORY> 39,993
<CURRENT-ASSETS> 412,320
<PP&E> 933,827
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,630,289
<CURRENT-LIABILITIES> 2,332,650
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> (99,669)
<TOTAL-LIABILITY-AND-EQUITY> 2,630,289
<SALES> 1,057,571
<TOTAL-REVENUES> 1,250,702
<CGS> 805,069
<TOTAL-COSTS> 1,797,927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,312
<INCOME-PRETAX> (546,297)
<INCOME-TAX> 0
<INCOME-CONTINUING> (546,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 35,564
<CHANGES> 0
<NET-INCOME> (528,733)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
