<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 SEPTEMBER 30, 1996
( ) 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, 48,605,794 shares outstanding at
September 30, 1996
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
-2-
<PAGE> 3
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash $ 255,549 $ 143,254
Accounts receivable, less allowance for
doubtful accounts and returns of
$0 and $299,939, respectively 198,394 437,160
Inventory 1,782,078 1,666,832
Prepaid expenses 15,002 31,474
Costs and estimated earnings in
excess of billings on
uncompleted contracts 43,574 246,472
----------- -----------
Total Current Assets 2,294,597 2,525,192
----------- -----------
Property, Plant and Equipment:
Land 74,969 74,969
Buildings and improvements 2,968,203 2,957,795
Equipment, machinery and tooling 1,839,282 2,099,581
Office furniture and equipment 85,423 122,709
Vehicles 171,725 140,787
Airplane -- 207,600
----------- -----------
5,139,602 5,603,441
Less: accumulated depreciation (1,118,303) (1,196,182)
----------- -----------
4,021,299 4,407,259
----------- -----------
Other Assets:
Net assets of discontinued operations -- 74,000
Goodwill, net 318,926 360,533
Other intangible costs, net 29,598 27,170
Deposits and other 2,913 3,467
----------- -----------
351,437 465,170
----------- -----------
$ 6,667,333 $ 7,397,621
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-3-
<PAGE> 4
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 242,000 $ 243,438
Revolving line of credit 107,906 107,906
Amount due officer 18,013 18,013
Accounts payable 353,673 596,369
Accrued liabilities 53,455 457,170
Net liabilities of discontinued
operations 209,945 --
Accrued costs of discontinued operations -- 277,619
Billings in excess of costs
and estimated earnings on
uncompleted contracts 17,408 371,778
----------- -----------
Total Current Liabilities 1,002,400 2,072,293
----------- -----------
Long-Term Debt, Net of Current Portion 4,429,684 4,021,664
Lease Deposit 9,575 9,575
Deferred Tax Liability 92,273 160,573
----------- -----------
4,531,532 4,191,812
----------- -----------
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;
48,610,111 shares issued; 48,605,794
and 48,153,794 shares outstanding,
respectively; 1,718,422 shares
subscribed 484,601 484,601
Paid-in capital 2,413,902 2,669,485
Common stock subscribed 79,143 79,143
Accumulated deficit (1,840,724) (1,727,609)
----------- -----------
1,136,922 1,505,620
Less: Treasury stock, 4,317 and 456,317
shares, respectively at cost (3,521) (372,104)
----------- -----------
1,133,401 1,133,516
----------- -----------
$ 6,667,333 $ 7,397,621
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-4-
<PAGE> 5
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Revenues $ 1,115,699 $ 1,365,903 $ 2,635,113 $ 4,361,288
Cost of Revenues 895,515 1,219,943 2,087,032 3,541,366
----------- ----------- ----------- -----------
Gross Profit 220,184 145,960 548,081 819,922
Operating Costs:
Selling, general and
administrative 224,571 166,479 497,196 532,900
----------- ----------- ----------- -----------
Income Loss (4,387) (20,519) 50,885 287,022
Other Income (Expense):
Gain on sale of assets 123,439 -- 123,439 --
Other income (expense) (4,420) 29,908 12,841 37,018
Rental income 24,029 22,532 71,905 67,596
Interest expense (74,370) (77,860) (285,646) (254,879)
Amortization of
intangibles (16,630) (14,900) (49,932) (44,699)
----------- ----------- ----------- -----------
Income (Loss) from Continuing
Operations before Provision
for Income Taxes 47,661 (60,839) (76,508) 92,058
Provision for Income Tax
Benefit (Expense) (18,000) 23,100 29,000 (34,900)
----------- ----------- ----------- -----------
Income (Loss) from
Continuing Operations 29,661 (37,739) (47,508) 57,158
Discontinued Operations:
Loss from operations of
software division and
disk fulfillment
division (35,454) (301,378) (35,454) (560,990)
Income (Loss) on disposal
of disk fulfillment
division 62,847 -- (30,153) --
----------- ----------- ----------- -----------
Net Income (Loss) $ 57,054 $ (339,117) $ (113,115) $ (503,832)
=========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-5-
<PAGE> 6
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings Per Share
Income (Loss) from
Continuing Operations $ - $ - $ - $ -
Loss from Discontinued
Operations and Operations
to be Disposed of - - - (.01)
Income (Loss) from Disposal
of disk and fulfillment
division - - - -
---------- ---------- ---------- ----------
Net Income (Loss) $ - $ - $ - $ (.01)
========== ========== ========== ==========
Weighted Average Shares
Outstanding 49,813,420 49,630,799 49,813,420 49,630,799
========== ========== ========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-6-
<PAGE> 7
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Nine Months Ended September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Additional Common
Shares Paid-in Stock Treasury
of Common Common Capital Subscribed Stock
--------- ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1995 48,460,111 $ 484,601 $ 2,669,485 $ 79,143 $ (372,104)
Sale of treasury stock -- -- (255,583) -- 368,583
Net loss (unaudited) -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, September 30,
1996 48,460,111 $ 484,601 $ 2,413,902 $ 79,143 $ (3,521)
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Total
Accumulated Stockholders'
Deficit Equity
------- ------
<C> <C>
Balance, December 31,
1995 $(1,727,609) $ 1,133,516
Sale of treasury stock -- 113,000
Net loss (unaudited) (113,115) (113,115)
----------- -----------
Balance, September 30,
1996 $(1,840,724) $ 1,133,401
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-7-
<PAGE> 8
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Nine Month Period Ended
------------------------------
September 30, September 30,
------------- -------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $(113,115) $(503,832)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 227,451 281,977
Amortization of software development costs -- 141,247
Amortization of intangibles 49,932 65,201
Decrease in provision for returns and
doubtful accounts -- (71,947)
Gain on sale of assets (123,439) (77,601)
Changes in Assets and Liabilities:
(Increase) Decrease in Assets:
Accounts receivable 174,660 591,626
Inventory (115,246) 416,386
Prepaid expenses 16,472 68,031
Costs and estimated earnings in excess
of billings on uncompleted contracts 202,898 (44,541)
Deposits and intangibles (10,199) 5,641
Increase (Decrease) in Liabilities:
Accounts payable (242,696) (385,410)
Accrued liabilities (371,904) 25,055
Accrued costs of discontinued operations (207,827)
Net liabilities of discontinued operations 303,945
Billings in excess of costs and estimated
earnings on uncompleted contracts (354,370) 124,025
Net deferred tax liability (68,300) (308,700)
--------- ---------
Net cash provided (used) by operating
activities (631,738) 327,158
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures (97,376) (121,943)
Computer software development costs -- (30,102)
Proceeds from the sale of assets 250,000 50,000
--------- ---------
Net cash provided (used) by investing
activities 152,624 (102,045)
--------- ---------
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-8-
<PAGE> 9
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period Ended
--------------------------------
September 30, September 30,
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Financing Activities:
Proceeds from sale of treasury stock $ 113,000 $ --
Proceeds from debt 2,942,000 337,971
Principal payments on debt (2,463,591) (661,085)
Payments on amount due officers, net -- (20,164)
----------- -----------
Net cash provided by financing
activities 591,409 (343,278)
----------- -----------
Net Increase in Cash 112,295 (118,165)
Cash, Beginning of Year 143,254 122,631
----------- -----------
Cash, End of Year $ 255,549 $ 4,466
=========== ===========
</TABLE>
Supplemental Disclosure of Non-Cash Investing and Financing Activities
<TABLE>
<CAPTION>
September 30, September 30,
------------- -------------
1996 1995
---- ----
<S> <C> <C>
Payment of accrued liability with equity
in a building $31,811 $ --
======= =======
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-9-
<PAGE> 10
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
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 nine month period
ended September 30, 1996, are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. These
unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
footnotes thereto of the Company for the year ended December 31, 1995.
Principles of Consolidation:
The consolidated financial statements include the accounts of Forte
Computer Easy, Inc. and its wholly-owned subsidiary, Forte, Inc. All
significant inter-company balances and transactions have been eliminated
in consolidation.
Discontinued Operations:
The Company has phased out its software operating division in late 1995
and has sold the disk and fulfillment division effective August 1996.
Results of operations for these two divisions in 1995 and the results of
operations for the disk fulfillment division in 1996 are through its
sale presented in the accompanying Statements of Operations as loss from
discontinued operations.
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.
-10-
<PAGE> 11
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
General:
The Company has decided to discontinue its operations in the software
publishing and computer disk duplication and fulfillment divisions.
Management is of the opinion it is in the best long-range interest of the
Company to focus its financial resources in the fenestration division of the
Company.
The Company has made significant advancement during the nine month period
ended September 30, 1996, to close out the assets and liabilities of the
software publishing division and its related assets and liabilities.
Management believes it will have all affairs of the discontinued division
finalized early in the fourth quarter of 1996.
The Company finalized the sale of the disk duplication and fulfillment
division to its current president for a minimal value. This transaction was
finalized on August 5, 1996.
Reorganization Negotiations:
On October 25, 1996, the Company entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") with AAP Holdings, Inc., a
Delaware corporation ("AAPH"). Pursuant to the Reorganization Agreement, the
Company will acquire one hundred percent (100%) of the issued and outstanding
common stock of American Architectural Products, Inc., a Delaware corporation
("AAP") in exchange for shares of Series A Convertible Preferred Stock of the
Company which is convertible into a number of shares of the Company's common
stock which is equal to sixty percent (60%) of the issued and outstanding
common stock of the Company on the closing date of the transaction. In
addition, the Company will issue to AAPH options to purchase 1.5 times the
number of shares of the Company's common stock subject to options previously
issued by the Company which are outstanding on the closing date of the
transaction. Such options will be identical in price and exercise terms to
the previously outstanding options. The Company currently anticipates that
the closing of this transaction will occur prior to the end of 1996.
-11-
<PAGE> 12
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
Reorganization Negotiations: (Continued)
AAP is also engaged in the fenestration manufacturing business through its
principal operating subsidiaries Eagle Window & Door, Inc. ("Eagle") and
Taylor Building Products Company ("Taylor"). Eagle's primary product line
consists of aluminum clad and all-wood window and door products which are
targeted to high-end residential and certain "institutional" niche markets.
Taylor's primary products consist of urethane-insulated steel entry doors
and polystyrene-insulated steel garage doors. AAP also has a subsidiary
known as Mallyclad Corp. ("Mallyclad") which, pursuant to the Reorganization
Agreement, will either be sold by AAP or merged into AAP prior to closing of
the acquisition of AAP by the Company. Management expects the acquisition of
AAP to dramatically increase the Company's sales volume and to significantly
enhance the Company's competitive and strategic position in the manufacture
and distribution of windows, doors and other fenestration products. The
transaction with AAPH is subject to customary closing conditions. Following
consummation of the AAPH transaction, the Company intends to seek
shareholder approval of a reincorporation of the Company in Delaware under
the name American Architectural Products Corporation.
Results of Operations for the Nine Months Ended September 30, 1996 and 1995
Revenues decreased 39.6% to $2,635,113 for the nine months ended September
30, 1996, compared to $4,361,288 for the comparable period in 1995. The
decrease is attributable to two major contracts which were in process during
the nine month period ended September 30, 1995, and were completed during
1995.
Gross profit decreased 33.2% to $548,081 for the nine month ended September
30, 1996, compared to $819,922 for the comparable period in 1995. The gross
profit percentage increased 10.6% to 20.8% for the nine months ended
September 30, 1996, compared to 18.8% for the comparable period in 1995. The
overall reduction in total gross profit for the nine months ended September
30, 1996, is attributable to the significant reduction in recognized
contract revenues from the comparable period in 1995.
-12-
<PAGE> 13
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
Results of Operations for the Nine Months Ended September 30, 1996 and
1995 (Continued)
Selling general and administrative costs decreased to $497,196 for the nine
months ended September 30, 1996, compared to $532,900 for the comparable
period in 1995. The reduction in 1996 is due to an allocation of overhead
costs to accrued discontinued operating costs. This allocation represents an
estimated portion of costs incurred to assist in the affairs of the two
discontinued divisions of the Company. This allocation of overhead costs to
accrued discontinued operating costs during the nine months ended September
30, 1996, was offset by increased costs in administrative compensation,
travel and related expenses of approximately $121,000.
Interest expense increased 12.1% to $285,646 for the nine months ended
September 30, 1996, compared to $254,879 for the comparable period in 1995.
The increase in interest expense is attributable to new debt incurred during
the first quarter of 1996, higher interest rates, and a significant loan
with the City of Youngstown which was non-interest bearing until November 1,
1995.
The net loss decreased 77.5% to $113,115 for the nine months ended September
30, 1996, compared to $503,832 for the comparable period in 1995. The
decrease in the net loss is primarily due to a reduction in losses incurred
by discontinued software division and absorption of discontinued operating
costs by the accrual for costs of discontinued operations made at December
31, 1995. The loss during the nine months ended September 30, 1996, was also
mitigated by a gain on the sale of the Company airplane and miscellaneous
non-producing manufacturing equipment.
Results of Operations for the Three Months Ended September 30, 1996 and 1995
Revenues decreased 18.3% to $1,115,699 for the three months ended September
30, 1996, compared to $1,365,903 for the comparable period in 1995. The
decrease in revenues is due to two major contracts which were in process
during the three month period ended September 30, 1995, and were completed
during 1995.
-13-
<PAGE> 14
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS: (CONTINUED)
Results of Operations for the Three Months Ended September 30, 1996 and 1995
(Continued)
Gross profit increased 50.8% to $220,184 for the three months ended
September 30, 1996, compared to $145,960 for the comparable period in 1995.
The gross profit percentage increased to 19.7% for the three months ended
September 30, 1996, as compared to 10.3% for the comparable period in 1995.
This increase in gross profit percentage is due to a high percentage of
revenue recognized on a contract with an above average gross profit margin
during the three months ended September 30, 1996. The gross profit margin
percentage for the three months ended September 30, 1995, was also below
average due to increased unabsorbed manufacturing burden which was flowed
through this three month period of operations.
Selling, general and administrative costs increased to $224,571 for the
three months ended September 30, 1996, compared to $166,479 for the
comparable period in 1995. This increase during the three months ended
September 30, 1996, is mainly attributable to increased administrative
compensation, travel and related costs. These increased costs were offset by
a final allocation of overhead costs against accrued discontinued operating
costs. This allocation represents an estimated portion of overhead costs
incurred to assist in the affairs of the two discontinued divisions of the
Company.
The Company reported net income of $57,054 for the three months ended
September 30, 1996, compared to a loss of $339,117 for the comparable period
in 1995. The net income for the three months ended September 30, 1996, is
mainly attributable to the gain on the sale of the Company airplane and
non-producing manufacturing assets and an adjustment for an overaccrual made
during the second quarter of 1996 for loss on disposal of discontinued
operations.
-14-
<PAGE> 15
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.
-15-
<PAGE> 16
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
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 255,549
<SECURITIES> 0
<RECEIVABLES> 198,394
<ALLOWANCES> 0
<INVENTORY> 1,782,078
<CURRENT-ASSETS> 2,294,597
<PP&E> 5,139,602
<DEPRECIATION> 1,118,303
<TOTAL-ASSETS> 6,667,333
<CURRENT-LIABILITIES> 1,002,400
<BONDS> 4,779,590
0
0
<COMMON> 484,601
<OTHER-SE> 648,800
<TOTAL-LIABILITY-AND-EQUITY> 6,667,333
<SALES> 2,635,113
<TOTAL-REVENUES> 2,635,113
<CGS> 2,087,032
<TOTAL-COSTS> 2,087,032
<OTHER-EXPENSES> 497,196
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 285,646
<INCOME-PRETAX> (76,508)
<INCOME-TAX> (29,000)
<INCOME-CONTINUING> (47,508)
<DISCONTINUED> (65,607)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (113,115)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
