<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, 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
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(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.) 87-0365268
------------
1350 Albert Street, Youngstown, Ohio 44505
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(Address of principal executive offices)
(330) 746-1331
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(Issuer's telephone number)
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(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
September 30, 1995
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
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<PAGE> 3
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Current Assets:
Cash $ 4,466 $ 122,631
Amount due from officer 2,864 -
Accounts receivable, less allowance for
doubtful accounts and returns of
$227,992 and $299,939, respectively 1,246,801 1,766,480
Receivable from sale of assets 636,250 -
Inventory 2,134,062 2,598,453
Prepaid expenses 43,647 111,678
Costs and estimated earnings in
excess of billings on
uncompleted contracts 363,861 319,320
----------- -----------
Total Current Assets 4,431,951 4,918,562
----------- -----------
Property, Plant and Equipment:
Land 74,969 74,969
Buildings and improvements 3,063,965 3,021,833
Equipment, machinery and tooling 2,361,909 2,301,531
Office furniture and equipment 122,213 116,021
Vehicles 150,787 137,546
Airplane 207,600 207,600
----------- -----------
5,981,443 5,859,500
Less: accumulated depreciation (1,123,284) (841,307)
----------- -----------
4,858,159 5,018,193
----------- -----------
Other Assets:
Goodwill, net 605,039 1,000,165
Software development, net 39,891 366,284
Other intangible costs, net 90,928 112,033
Deposits and other 19,261 24,902
----------- -----------
755,119 1,503,384
----------- -----------
$10,045,229 $11,440,139
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
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<PAGE> 4
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED) Year Ended
September 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 - 6,955
Revolving line of credit 107,906 182,359
Amount due officer - 17,300
Accounts payable 2,253,018 2,644,062
Accrued liabilities 431,328 406,273
Billings in excess of costs
and estimated earnings on
uncompleted contracts 264,185 140,160
----------- -----------
Total Current Liabilities 3,496,437 3,830,343
----------- -----------
Long-Term Debt, Net of Current Portion 4,030,609 4,279,081
Lease Deposit 9,575 9,575
----------- -----------
4,040,184 4,288,656
----------- -----------
Deferred Tax Liability 61,345 370,045
----------- -----------
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 (785,966) (282,134)
----------- -----------
2,447,263 2,951,095
----------- -----------
$10,045,229 $11,440,139
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
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<PAGE> 5
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues $1,790,046 $1,763,106 $6,424,870 $4,402,545
Cost of Revenues 1,602,372 1,074,236 4,972,225 3,001,405
---------- ---------- ---------- ----------
Gross Profit 187,674 688,870 1,452,645 1,401,140
General and Administrative
Costs 494,802 667,503 1,835,293 1,255,764
---------- ---------- ---------- ----------
Operating Income (Loss) (307,128) 21,367 (382,648) 145,376
Other Income (Expense):
Gain on sale of assets 77,601 - 77,601 -
Other income 32,610 30,518 48,188 74,240
Rental income, net 22,532 22,532 67,596 30,600
Interest expense (88,018) (94,659) (313,068) (261,330)
Amortization of
intangibles (39,514) (18,270) (65,201) (22,747)
Inventory writedown (245,000) - (245,000) -
---------- ---------- ---------- ----------
Loss before Provision for
Income Taxes (546,917) (38,512) (812,532) (33,861)
Provision for Income Tax
Benefit 207,800 9,700 308,700 8,000
---------- ---------- ---------- ----------
Net Loss $ (339,117) $ (28,812) $ (503,832) $ (25,861)
========== ========== ========== ==========
Net Loss Per Share $ (.01) $ - $ (.01) $ -
========== ========== ========== ==========
Weighted Average Shares
Outstanding 49,630,799 23,639,450 49,630,799 23,639,450
========== ========== ========== ==========
</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 Twenty-One Months Ended September 30, 1995
<TABLE>
<CAPTION>
Additional
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
earnings - - 30,760,868 307,609 570,342
Sales of common
stock - - 575,833 5,758 260,743
Common stock
issued in
payment of debt - - 1,321,601 13,216 526,996
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 Loss
(unaudited) - - - - -
---------- ---------- ----------- --------- ----------
Balance,
September 30, 1995 $ - $ - $48,460,111 $484,601 $2,669,485
========== ========== =========== ========= ==========
<CAPTION>
Common
Stock Accumulated
Subscribed (Deficit) Total 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
earnings 79,143 568,301 1,525,395
Sales of common
stock - - 266,501
Common stock
issued in
payment of debt - - 540,212
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 Loss
(unaudited) - (503,832) (503,832)
---------- ---------- -----------
Balance,
September 30, 1995 $ 79,143 $ (785,966) $ 2,447,263
========== ========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
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<PAGE> 7
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Month Period Ended
September 30, September 30,
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (503,832) $ (25,861)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 281,977 121,250
Amortization of software development costs 141,247 54,148
Amortization of intangibles 65,201 22,747
Decrease in provision for returns and
doubtful accounts (71,947) (153,575)
Cash received in purchase of subsidiaries - 61,413
Gain on sale of assets (77,601) -
Changes in Assets and Liabilities:
(Increase) Decrease in Assets:
Accounts receivable 591,626 (546,018)
Inventory 416,386 (1,173,341)
Prepaid expenses 68,031 (12,382)
Costs and earnings in
excess of billings
on uncompleted contracts (44,541) 378,532
Deposits and intangibles 5,641 7,412
Increase (Decrease) in Liabilities:
Accounts payable (385,410) 275,544
Accrued liabilities 25,055 70,806
Billings in excess of costs
and estimated earnings
on uncompleted contracts 124,025 8,957
Net deferred tax liability (308,700) (8,000)
---------- ----------
Net cash provided (used) by operating activities 327,158 (918,368)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (121,943) (20,251)
Acquisition of subsidiaries - (150,000)
Computer software development costs (30,102) (39,142)
Proceeds from sale of assets 50,000 -
---------- ----------
Net cash used by investing activities (102,045) (209,393)
---------- ----------
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-7-
<PAGE> 8
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Month Period Ended
September 30, September 30,
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Financing Activities:
Proceeds from sale of stock $ - $ 511,500
Proceeds from debt 337,971 1,647,761
Principal payments on debt (661,085) (800,291)
Payments on amount due officers, net (20,164) (57,552)
---------- ----------
Net cash provided (used) by financing
activities (343,278) 1,301,418
---------- ----------
Net Increase (Decrease) in Cash (118,165) 173,657
Cash, Beginning of Period 122,631 (48,187)
---------- ----------
Cash, End of Period $ 4,466 $ 125,470
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-8-
<PAGE> 9
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 nine month periods ended
September 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
Computer Easy International, 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 or 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.
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<PAGE> 10
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 statement of
operations from June 9, 1994 through December 31, 1994.
The Company had an operating agreement for a line of credit under
which it could borrow $300,000 or 80% of the eligible accounts
receivable of the software division at a monthly rate of 3%. The
credit line was terminated on August 31, 1995, as the Company is
in default.
On September 6, 1995, Forte Computer Easy, Inc. sold its rights
to the Floor Plan Plus(TM) and 3D Design(TM) lines for $691,889,
together with a $200,000 contingent payment based upon future
performance goals of the acquiring company, International
Microcomputer Software, Inc. (NASDAQ:IMSI). These product lines
represent a significant portion of the historical sales of the
software operating division. Proceeds from the sale will be
utilized for debt reduction of this division.
Results of Operations:
Results of operations for the nine months ended September 30,
1995 and 1994:
Revenue increased 45.9% for the nine months ended September 30,
1995 to $6,424,870, compared to $4,402,545 for the comparable
period ended September 30, 1994. The increase in revenue is due
to the inclusion of revenues of the computer software and disk
fulfillment divisions for nine months in the period ended
September 30, 1995, and from June 9, 1994 for the comparable
period ended September 30, 1994. Revenues included in these
periods were $2,063,582 and $1,093,401, respectively.
-10-
<PAGE> 11
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS: (CONTINUED)
Results of Operations: (Continued)
Total gross profit as a percentage of sales decreased 9.2% for
the nine months ended September 30, 1995 to $1,452,645, compared
to $1,401,140 for the comparable period ended September 30, 1994.
The decrease in gross profit margin to 22.6% for the nine months
ended September 30, 1995 from 31.8% for the comparable period
ended September 30, 1994, is due to a significant lower ratio in
computer software revenues, which has a higher profit margin than
other divisions of the Company.
Total operating costs increased to $1,835,293 for the nine months
ended September 30, 1995, compared to $1,255,764 for the
comparable period ended September 30, 1994, an increase of 46.1%.
This increase is primarily due to the computer software and disk
fulfillment divisions operating costs for nine months included in
the nine month period ended September 30, 1995, compared to their
operating costs from June 9, 1994 through September 30, 1994 for
the comparable period ended September 30, 1994.
The Company reported a consolidated net loss of $503,832 for the
nine months ended September 30, 1995, compared to a net loss of
$25,861 for the comparable period ended September 30, 1994. The
net loss for the nine months ended September 30, 1995 was
significantly affected by the reduction in revenue of the
software division; increased interest expense of $51,738
attributable to long-term debt on an acquired subsidiary;
increased writeoff of intangibles of $42,454, mainly attributable
to writeoff of goodwill created by the acquisition of the two
subsidiaries, and a provision for inventory writedown based upon
the sale of the Company's software division's main product line.
These increased costs were primarily offset by the sale of the
software division's main product line.
Management of the Company plans on reviewing the remaining
computer software product lines to determine the viability of
continuing this division. Costs to upgrade the remaining
programs, and also to make them compatible with the new Microsoft
Windows 95 operating system will be major determining factors in
this decision.
-11-
<PAGE> 12
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS: (CONTINUED)
Results of Operations: (Continued)
Results of operations for the three months ended September 30,
1995 and 1994:
Revenue increased 1.5% for the three months ended September 30,
1995 to $1,790,046, compared to $1,763,106 for the comparable
period ended September 30, 1994. The increase is due to the
inclusion of the computer software and disk fulfillment divisions
revenues for the three months ended September 30, 1995, as
compared to the comparable period in 1994. Software division
sales were down 83.7%, or $549,477, for the three months ended
September 30, 1995, as compared to the comparable period in 1994.
Sales for the software division declined due to the Company
placing emphasis on finalizing negotiations for the sale of its
main product lines to another software company. These
negotiations were finalized on September 6, 1995, and thereafter
the Company did not have the rights to sell any of the product
lines sold, or any of the inventory on hand of these product
lines.
Total gross profit as a percentage of sales decreased 28.6% to
$187,674 for the three months ended September 30, 1995, as
compared to $688,870 for the comparable period in 1994. The
decrease in gross profit is attributable to the following
factors. Software division sales were down significantly and the
gross profit margin on these revenues decreased to 33.6% for the
three months ended September 30, 1995, as compared to 66.9% for
the comparable period in 1994; the disk duplication and
fulfillment division's gross profit margin percent dropped to
1.7% for the three months ended September 30, 1995, as compared
to 18.3% for the comparable period in 1994; the reduction in
gross profit margin was due to a major portion of the quarter's
revenues being generated from CD Rom duplication, of which had to
be sublet out and resulted in no gross profit to the division.
The manufacturing fenestration division's gross profit margin
percent decreased to 10.7% for the three months ended September
30, 1995, as compared to 21.9% for the comparable period in 1994.
This reduction in gross profit percentage is mainly attributable
to unabsorbed manufacturing burden flowed through the division's
operating statement.
Total operating costs decreased to $494,802 for the three months
ended September 30, 1995, compared to $667,503 for the comparable
period in 1994, a decrease of 25.9%. This decrease is due to
reduced sales and marketing costs, and general and administrative
costs in the software division.
-12-
<PAGE> 13
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS: (CONTINUED)
Results of Operations: (Continued)
Results of operations for the three months ended September 30,
1995 and 1994: (Continued)
The Company reported a consolidated net loss of $339,117 for the
three months ended September 30, 1995, compared to a net loss of
$28,812 for the comparable period in 1994. The net loss for the
three months ended September 30, 1995 was significantly affected
by the reduced sales contributed by the software division; the
reduced gross profit margins by all divisions, and a provision
for inventory writedown of $245,000 due to the sale of the
software division's main product lines. These increased costs
were partially offset by the gain recognized on the sale of the
software division's main product lines of $77,601.
-13-
<PAGE> 14
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.
-14-
<PAGE> 15
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
-15-
<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-30-1995
<CASH> 4466
<SECURITIES> 0
<RECEIVABLES> 1474793
<ALLOWANCES> 227992
<INVENTORY> 2134062
<CURRENT-ASSETS> 4431951
<PP&E> 5981443
<DEPRECIATION> 1123284
<TOTAL-ASSETS> 10045229
<CURRENT-LIABILITIES> 3496437
<BONDS> 4578515
0
0
<COMMON> 484601
<OTHER-SE> 1962662
<TOTAL-LIABILITY-AND-EQUITY> 10045229
<SALES> 6424870
<TOTAL-REVENUES> 6424870
<CGS> 4972225
<TOTAL-COSTS> 4972225
<OTHER-EXPENSES> 1835293
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 313068
<INCOME-PRETAX> (812532)
<INCOME-TAX> (308700)
<INCOME-CONTINUING> (503832)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (503832)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
