<PAGE> 1
FORM 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from ____________ to ___________.
Commission file number 0-25634
FORTE COMPUTER EASY, INC.
(Exact name of small business issuer as specified in its charter)
Utah
(State or other jurisdiction of incorporation or organization
(IRS Employer Identification No.) 87-0365268
1350 Albert Street, Youngstown, Ohio 44505
(Address of principal executive offices)
(330) 746-1331
(Issuer's telephone number)
-----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ___ No X
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common stock, $.01 par value, 48,460,111 shares outstanding at
June 30, 1995
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
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<PAGE> 3
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Current Assets:
Cash $ 140,475 $ 122,631
Accounts receivable, less allowance for
doubtful accounts and returns of
$236,392 and $299,939, respectively 1,054,045 1,766,480
Inventory 2,344,949 2,598,453
Prepaid expenses 66,076 111,678
Costs and estimated earnings in
excess of billings on
uncompleted contracts 461,598 319,320
----------- -----------
Total Current Assets 4,067,143 4,918,562
----------- -----------
Property, Plant and Equipment:
Land 74,969 74,969
Buildings and improvements 3,036,185 3,021,833
Equipment, machinery and tooling 2,349,884 2,301,531
Office furniture and equipment 121,481 116,021
Vehicles 150,787 137,546
Airplane 207,600 207,600
----------- -----------
5,940,906 5,859,500
Less: accumulated depreciation (1,027,962) (841,307)
----------- -----------
4,912,944 5,018,193
----------- -----------
Other Assets:
Goodwill, net 988,000 1,000,165
Software development, net 345,645 366,284
Other intangible costs, net 98,511 112,033
Deposits and other 59,134 24,902
----------- -----------
1,491,290 1,503,384
----------- -----------
$10,471,377 $11,440,139
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-3-
<PAGE> 4
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 440,000 $ 433,234
Current portion of capital lease
obligations 4,830 6,955
Revolving line of credit 135,066 182,359
Amount due officer 6,421 17,300
Accounts payable 2,245,781 2,644,062
Accrued liabilities 434,741 406,273
Billings in excess of costs
and estimated earnings on
uncompleted contracts 13,591 140,160
----------- -----------
Total Current Liabilities 3,280,430 3,830,343
----------- -----------
Long-Term Debt, Net of Current Portion 4,125,847 4,279,081
Lease Deposit 9,575 9,575
----------- -----------
4,135,422 4,288,656
----------- -----------
Deferred Tax Liability 269,145 370,045
----------- -----------
Commitments - -
Stockholders' Equity:
Preferred stock - $.01 par value;
20,000,000 shares authorized; no
shares issued or outstanding - -
Common stock - $.01 par value;
50,000,000 shares authorized;
48,460,111 shares issued and
outstanding; 1,718,422 shares
subscribed 484,601 484,601
Paid-in capital 2,669,485 2,669,485
Common stock subscribed 79,143 79,143
Accumulated deficit (446,849) (282,134)
----------- -----------
2,786,380 2,951,095
----------- -----------
$10,471,377 $11,440,139
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-4-
<PAGE> 5
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues $2,413,960 $1,670,289 $4,634,824 $2,639,439
Cost of Revenues 1,823,673 1,150,550 3,369,853 1,927,169
---------- ---------- ---------- ----------
Gross Profit 590,287 519,739 1,264,971 712,270
Selling, General and
Administrative Costs 691,187 370,407 1,340,491 588,261
---------- ---------- ---------- ----------
Operating Profit (Loss) (100,900) 149,332 (75,520) 124,009
Other Income (Expense):
Other income (expense) (16,141) 31,679 15,578 43,722
Rental income, net 22,532 8,068 45,064 8,068
Interest expense (112,578) (84,343) (225,050) (166,671)
Amortization of
intangibles (25,687) (4,477) (25,687) (4,477)
---------- ---------- ---------- ----------
Income (Loss) before Provision
for Income Taxes (232,774) 100,259 (265,615) 4,651
Provision for Income Tax Benefit
(Expense) 88,500 (38,000) 100,900 (1,700)
---------- ---------- ---------- ----------
Net Income (Loss) $ (144,274) $ 62,259 $ (164,715) $ 2,951
========== ========== ========== ==========
Net Income (Loss) per Share ( - ) .01 ( - ) -
========== ========== ========== ==========
Weighted Average Shares
Outstanding 48,900,487 14,973,985 48,900,487 14,973,985
========== ========== ========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
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<PAGE> 6
FORTE COMPUTER EASY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Eighteen Months Ended June 30, 1995
<TABLE>
<CAPTION>
Shares of Shares Paid-in
Preferred Preferred of Common Common Capital
--------- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 - $ - 12,901,809 $ 129,018 $ 566,004
Sale of preferred
stock 1,000,000 10,000 - - 240,000
Acquisition of
subsidiary
for stock - - 1,900,000 19,000 505,400
Reverse merger and
conversion of S
Corporation
losses - - 30,760,868 307,609 570,342
Sales of common
stock - - 575,833 5,757 260,743
Common stock
issued in
payment of debt - - 1,321,601 13,217 526,996
Preferred stock
converted to
common stock (1,000,000) (10,000) 1,000,000 10,000 -
Net loss
(unaudited) - - - - -
---------- ---------- ----------- ---------- -----------
Balance,
December 31, 1994 - - 48,460,111 484,601 2,669,485
Net Income
(unaudited) - - - - -
---------- ---------- ----------- ---------- -----------
Balance,
June 30, 1995 $ - $ - $48,460,111 $ 484,601 $ 2,669,485
========== ========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Common Total
Stock Accumulated Stockholders'
Subscribed Deficit Equity
---------- ------- ---------
<S> <C> <C> <C>
Balance,
December 31, 1993 $ - $ (408,638) $ 286,384
Sale of preferred
stock - - 250,000
Acquisition of
subsidiary
for stock - - 524,400
Reverse merger and
conversion of S
Corporation
losses 79,143 568,301 1,525,395
Sales of common
stock - - 266,500
Common stock
issued in
payment of debt - - 540,213
Preferred stock
converted to
common stock - - -
Net loss
(unaudited) - (441,797) (441,797)
---------- ---------- -----------
Balance,
December 31, 1994 79,143 (282,134) 2,951,095
Net Income
(unaudited) - (164,715) (164,715)
---------- ---------- -----------
Balance,
June 30, 1995 $ 79,143 $ (446,849) $ 2,786,380
========== ========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-6-
<PAGE> 7
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (164,715) $ 2,951
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 186,655 36,662
Amortization of software development costs 68,400 26,468
Amortization of intangibles 25,687 4,477
Decrease in provision for returns and
doubtful accounts (63,547) (83,336)
Cash received in purchase of subsidiaries - 61,413
Changes in Assets and Liabilities:
(Increase) Decrease in Assets:
Accounts receivable 775,982 (445,555)
Inventory 253,504 (601,573)
Prepaid expenses 45,602 5,946
Costs and estimated earnings in excess of
billings on uncompleted contracts (142,278) 68,537
Deposits and intangibles (34,232) 2,854
Increase (Decrease) in Liabilities:
Accounts payable (398,281) 185,235
Accrued liabilities 28,468 149,343
Billings in excess of costs and estimated
earnings on uncompleted contracts (126,569) (16,348)
Net deferred tax liability (100,900) 1,700
---------- ----------
Net cash provided (used) by operating activities 353,776 (601,226)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (81,406) -
Acquisition of subsidiaries - (150,000)
Computer software development costs (47,761) (11,712)
---------- ----------
Net cash used by investing activities (129,167) (161,712)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from sale of stock $ - $ 250,000
Proceeds from debt 333,886 1,224,223
Principal payments on debt (529,772) (411,873)
Payments on amount due officers (10,879) (53,634)
---------- ----------
Net cash provided (used) by financing
activities (206,765) 1,008,716
---------- ----------
Net Increase in Cash 17,844 245,778
Cash (Overdraft), Beginning of Period 122,631 (48,187)
---------- ----------
Cash, End of Period $ 140,475 $ 197,591
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-7-
<PAGE> 8
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation:
The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and in accordance with the instructions to
Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for audited year-end financial statements. In the
opinion of management, all adjustments for normal recurring
accruals considered necessary to present fairly the Company's
consolidated statements for all periods presented have been made.
Operating results for the three and six month periods ended June
30, 1995 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. These unaudited
consolidated financial statements should be read in conjunction
with the unaudited consolidated financial statements and footnotes
thereto of the Company for the year ended December 31, 1994.
Principles of Consolidation:
The consolidated financial statements include the accounts of Forte
Computer Easy Inc. and its wholly-owned subsidiaries, Forte, Inc.
and Arizona Disk Fulfillment, Inc. All significant inter-company
balances and transactions have been eliminated in consolidation.
Net Income (Loss) per Common Share:
The computation of income (loss) per common share is based on the
net loss attributable to common stockholders and the weighted
average number of common shares outstanding for each period.
-8-
<PAGE> 9
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS:
General:
Prior to June 8, 1994, the Company was principally engaged in the business of
software publishing. Effective June 8, 1994, the Company acquired all the
outstanding stock of Forte, Inc. and Arizona Disk Fulfillment, Inc. Based upon
these acquisitions, the Company expanded its operations into the manufacturing
of commercial and architectural fenestration products, and into computer disk
duplication and fulfillment services for software publishers and technology
based industries.
For financial reporting purposes, the acquisitions are accounted for as
purchases in accordance with Accounting Principles Board Opinion No. 16. In
addition, the acquisition of Forte, Inc. was recorded as a reverse merger and
the results of operations were included for the entire period. Accordingly,
the results of operations of Computer Easy International, Inc. and Arizona
Disk Fulfillment, Inc. are included in the consolidated statements of
operations from June 9, 1994, through December 31, 1994.
Results of Operations for the Three Month Periods Ended June 30, 1995 and 1994:
Revenue increased 44.5% for the three months ended June 30, 1995 to $2,413,960,
compared to $1,670,289 for the comparable period ended June 30, 1994. The
increase in revenue is attributable to the inclusion of acquired subsidiaries'
revenues in the three months ended June 30, 1995, and from June 9, 1994 for the
comparable period ended June 30, 1994.
Total gross profit decreased by 6.7% for the three months ended June 30, 1995 to
$590,287, compared to $519,739 for the three months ended June 30, 1994. The
decrease in gross profit margin to 24.5% for the three months ended June 30,
1995 from 31.1% for the comparable period ended June 30, 1994, is due primarily
to the completion of several contracts during the period ended June 30, 1994
with higher profit margins.
Total operating costs increased to $691,187 for the three months ended June 30,
1995, compared to $370,407 for the comparable period ended June 30, 1994, an
increase of 86.6%. This increase is primarily due to the operating costs of the
software and disk fulfillment divisions included in the three month period ended
June 30, 1995, compared to their operating costs from June 8, 1994 to June 30,
1994 for the comparable period ended June 30, 1994.
-9-
<PAGE> 10
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS: (CONTINUED)
The Company reported a consolidated net loss of $144,274 for the
three months ended June 30, 1995, compared to a net income of
$62,259 for the comparable period ended June 30, 1994. The net
loss for the three months ended June 30, 1995 was significantly
affected by increased interest expense of $28,235 attributable to
long-term debt on an acquired subsidiary and the increased
writeoff of intangibles of $59,288, mainly attributable to
amortization of goodwill created by the acquisition of the two
subsidiaries.
Results of Operations for the Six Month Periods Ended June 30,
1995 and 1994:
Revenue increased 75.6% for the six months ended June 30, 1995,
to $4,634,824, compared to $2,639,439 for the comparable period
ended June 30, 1994. The increase in revenue is attributable to
the inclusion of the computer software and disk and fulfillment
division revenues in the six months ended June 30, 1995, and from
June 9, 1994, for the comparable period ended June 30, 1994.
Total gross profit increased by .3% for the six months ended June
30, 1995, to $1,264,971, compared to $712,270 for the six months
ended June 30,1994. The increase in gross profit margin to 27.3%
for the six months ended June 30, 1995, from 27% for the
comparable period ended June 30, 1994, is due to the Company
securing contracts in the fenestration division with larger
profit margins.
Total operating costs increased to $1,340,491 for the six months
ended June 30, 1995, compared to $588,261 for the comparable
period ended June 30, 1994, an increase of 127.8%. This increase
is primarily due to the operating costs of the software and disk
fulfillment divisions included in the six month period ended June
30, 1995, compared to their operating costs from June 9, 1994, to
June 30, 1994, for the six month period ended June 30, 1994.
The Company reported a consolidated net loss of $164,715 for the
six months ended June 30, 1995, compared to a net income of
$2,951 for the comparable period ended June 30, 1994. The net
loss for the six months ended June 30, 1995, was significantly
affected by the reduction in revenue of the software division,
increased interest expense of $58,379 attributable to long-term
debt on an acquired subsidiary, and increased charge off of
intangibles of $59,288, mainly attributable to amortization of
goodwill created by the acquisition of the two subsidiaries.
-10-
<PAGE> 11
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any litigation other than routine
litigation incidental to the business.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote or Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits required to be filed.
(b) The Company did not file any reports on Form 8-K during this
quarter.
-11-
<PAGE> 12
SIGNATURES
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.
FORTE COMPUTER EASY, INC.
Date: November 22, 1996 /s/ Frank J. Amedia
-------------------
Frank J. Amedia
President, Chief Executive Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 140,475
<SECURITIES> 0
<RECEIVABLES> 1,290,437
<ALLOWANCES> 236,392
<INVENTORY> 2,344,949
<CURRENT-ASSETS> 4,067,143
<PP&E> 5,940,906
<DEPRECIATION> 1,027,962
<TOTAL-ASSETS> 10,471,377
<CURRENT-LIABILITIES> 3,280,430
<BONDS> 4,570,677
0
0
<COMMON> 484,601
<OTHER-SE> 2,301,979
<TOTAL-LIABILITY-AND-EQUITY> 10,471,377
<SALES> 4,634,824
<TOTAL-REVENUES> 4,634,824
<CGS> 3,369,853
<TOTAL-COSTS> 3,369,853
<OTHER-EXPENSES> 1,340,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225,050
<INCOME-PRETAX> (265,615)
<INCOME-TAX> (100,900)
<INCOME-CONTINUING> (164,715)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (164,715)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
