U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT
OR
[ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2000
Commission File No. 000-26828
MORO CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 51-0338736
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
Bala Pointe, Suite 240
111 Presidential Boulevard
Bala Cynwyd, Pennsylvania 19004
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(Address of Principal Executive Offices) (Zip Code)
(610) 667-9050
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(Registrant's telephone number, including area code)
Check whether the registrant (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 X NO
--- ---
As of June 30, 2000, 5,600,000 shares of common stock were outstanding.
<PAGE>
Independent Accountants' Report
Board of Directors and Shareholders
Moro Corporation
We have reviewed the accompanying consolidated balance sheet, statement of
operations, and statement of cash flow of Moro Corporation and consolidated
subsidiary as of June 30, 2000, and for the three-month and six-month periods
then ended. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
LARSON, ALLEN, WEISHAIR & CO., LLP
Blue Bell, Pennsylvania
July 27, 2000
<PAGE>
MORO CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 480,883
Accounts receivable 1,690,732
Inventory 494,801
Other current assets 11,265
----------
Total current assets 2,677,681
Property and equipment, net 252,270
Deposits 11,653
----------
$2,941,604 $ .
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $1,021,000
Notes payable 221,200 $ 50,000
Accounts payable 600,196
Accrued expenses 60,348 1,674
Income taxes payable 84,119 .
---------- ---------
Total current liabilities 1,986,863 51,674
---------- ---------
Long-term debt, net of current portion 467,411
----------
Stockholders' equity:
Common stock, $.001 par value; authorized 25,000,000 shares;
issued and outstanding 5,000,000 shares at December 31,
1999 and 5,600,000 shares at June 30, 2000 59,425 58,825
Additional paid-in capital 415,150
Retained earnings (accumulated deficit) 12,755 (110,499)
---------- ---------
487,330 (51,674)
---------- ---------
$2,941,604 $ .
========== =========
</TABLE>
See notes to financial statements 3
<PAGE>
MORO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $2,574,289 $2,574,289
Cost of sales 1,727,934 1,727,934
---------- ----------
Gross profit 846,355 846,355
---------- ----------
Operating expenses:
Selling, general and
administrative expenses 586,212 25,486 596,212 42,736
Depreciation expense 6,037 -- 6,037 --
---------- ---------- ---------- ----------
592,249 25,486 602,249 42,736
---------- ---------- ---------- ----------
Operating income (loss) 254,106 (25,486) 244,106 (42,736)
Other income (expense):
Interest expense (36,084) -- (36,733) --
---------- ---------- ---------- ----------
Income (loss) before income taxes 218,022 (25,486) 207,373 (42,736)
Provision for income taxes 84,119 -- 84,119 --
---------- ---------- ---------- ----------
Net income (loss) before
reorganization items 133,903 (25,486) 123,254 (42,736)
Reorganization items -- 771,281 -- 771,281
---------- ---------- ---------- ----------
Net income $ 133,903 $ 745,795 $ 123,254 $ 728,545
========== ========== ========== ==========
Earnings per share $ .02 -- $ .02 --
========== ========== ========== ==========
Weighted average shares 5,600,000 -- 5,304,972 --
========== ========== ========== ==========
</TABLE>
See notes to financial statements 4
<PAGE>
MORO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 123,254 $ 728,545
Adjustment to reconcile net income (loss)
to net cash used by operating activities:
Common stock issued for services 10,000
Depreciation 6,037
Changes in assets and liabilities:
Increase in accounts receivable (1,690,732)
Increase in inventory (494,801)
Increase in other current assets (11,265) (103,627)
Increase in deposit (11,653)
Increase (decrease) in accounts payable
and accrued expenses 658,870 (915,422)
Increase in income taxes payable 84,119 --
---------- ---------
Net cash used by operating activities (1,326,171) (290,504)
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment (258,307)
Proceeds of line of credit 1,021,000
Proceeds of notes payable 644,861 58,825
Principal payments of notes payable (6,250) --
---------- ---------
Net cash provided by investing activities 1,401,304 58,825
---------- ---------
Cash flows from financing activities:
Issuance of common stock 200,000
Capital contributions 205,750
----------
Net cash provided by financing activities 405,750
----------
Net increase (decrease) in cash 480,883 (231,679)
Cash at beginning of period -- 231,679
---------- ---------
Cash at end of period $ 480,883 $ 0
========== =========
Supplemental disclosure of non-cash financing activities:
Common stock issued for services $ 10,000
==========
</TABLE>
See notes to financial statements 5
<PAGE>
MORO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
Note 1 Description of the business:
Moro Corporation, formerly Food Court Entertainment Network, Inc. (the
"Company"), is a Delaware corporation, which was incorporated on
February 12, 1992. The Company changed its name on June 7, 1999. The
Company's plan was to establish a national television network to
broadcast a high quality television program called Cafe USA,
specifically to large, enclosed shopping mall food courts across the
United States. The Company's activities have consisted primarily of
designing, developing and producing its Cafe USA programming,
establishing contacts and entering into agreements with potential
advertisers and mall operators, producing and evaluating market tests
of its programming, developing a system for delivery of programming
into mall food courts, engaging management, employees and consultants
for operations, including marketing, installing and operating Cafe USA
in various mall food courts.
The Company, which had been a development stage company, was unable to
market its Cafe USA network to advertisers, incurred substantial
losses and was unable to obtain additional financing. Accordingly, the
Company, while maintaining the operation of its Cafe USA network in
twenty malls and continuing to supply updated programming to the malls
each week, sought a purchaser for its assets. In July 1998, the assets
and operating leases were sold to Prime Spot Media U.S.A. for
$422,000. In connection therewith, the Company has written down the
carrying value of its assets subject to the sales agreement to their
selling price and has also written off certain other assets and has
accrued a liability for an obligation under an existing employment
agreement.
On June 24, 1998, the Board of Directors adopted a resolution that the
corporation file a petition for relief under Chapter 11 of Title II of
the United States Code (the Bankruptcy Code). The voluntary petition
was subsequently filed on August 13, 1998.
On May 3, 1999 (the "Confirmation Date"), the U.S. Bankruptcy Court
confirmed the Company's Plan of Reorganization (the "Reorganization"),
and the Company emerged from bankruptcy. Pursuant to the
Reorganization, on such date certain indebtedness of the Company was
canceled in exchange for cash and new equity interests.
Holders of the Company's shares before the confirmation of
reorganization received 10% of the shares in the emerging entity.
The Company's creditors received all of the Company's net cash assets,
5% of the Company stock in the emerging entity, plus a total of
$50,000 cash, and a note payable of $50,000 plus interest of 5%.
6
<PAGE>
MORO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
Note 2 Summary of significant accounting policies:
Basis of presentations:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. The unaudited financial statements
should be read in conjunction with the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1999.
The accompanying unaudited condensed consolidated financial statements
include the accounts of J.M. Ahle Co., Inc. (100% owned). See Note 3.
All intercompany transactions have been eliminated in consolidation.
Fresh start reporting:
As of April 30, 1999, the Company adopted Fresh Start Reporting in
accordance with the American Institute of Certified Public
Accountant's Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code", ("SOP 90-7").
Fresh Start Reporting resulted in material changes to the Condensed
Consolidated Balance Sheet, including valuation of assets, intangible
assets (including goodwill) and liabilities at fair market value and
valuation of equity based on the appraised reorganization value of the
ongoing business.
Cash and cash equivalents:
For purposes of reporting cash flows, the Company considers all cash
accounts, which are not subject to withdrawal restrictions or
penalties, and certificates of deposit and commercial paper with
original maturities of 90 days or less to be cash or cash equivalents.
Accounts receivable:
The Company provides an allowance for doubtful accounts, as needed,
for accounts deemed uncollectible.
7
<PAGE>
MORO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
Note 2 Summary of significant accounting policies (continued):
Inventory:
Inventory is recorded at the lower of cost or market using the
first-in, first-out (FIFO) method.
Equipment and depreciation:
Property and equipment are carried at cost. Depreciation is calculated
using the straight-line method over their estimated useful lives of
seven years.
Revenue recognition:
Revenue from product sales is recognized upon shipment to customers.
Provisions for discounts and rebates to customers, and returns and
other adjustments are provided for in the same period the related
sales are recorded.
Income taxes:
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of
balance sheet items for financial and income tax reporting. There is
no difference between the basis for financial and income tax
reporting, thus no deferred tax asset or liability was recorded.
Note 3 Acquisitions:
At the close of business on March 31, 2000, the Company purchased
substantially all of the operating assets of J.M. Ahle Co., Inc., a
New Jersey corporation ("Ahle") for cash. Ahle is a distributor of
reinforcing steel to contractors and subcontractors for use in the
construction of highways, airports, bridges, treatment facilities,
schools, public facilities, industrial and commercial buildings, and
other structures.
As part of the transaction, the Company assumed substantially all of
the known operating liabilities of Ahle. In addition, the Company
acquired the assets of Ahle for their net book value plus $100,000,
all as set forth in the Asset Purchase Agreement. The purchase price
paid by the Company was $1,406,212.
8
<PAGE>
MORO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
Note 3 Acquisitions (continued):
Condensed financial information for the Ahle operation for the three
months ended June 30, 2000 and 1999 is as follows:
2000 1999
---------- ----------
Sales $2,574,289 $2,427,072
Cost of sales 1,727,934 1,575,863
---------- ----------
Gross profit 846,355 851,209
Operating expenses 592,249 513,209
---------- ----------
Operating income 254,106 338,000
Interest expense 35,427
---------- ----------
Income before income taxes 218,679 338,000
Provision for income taxes 84,119 131,820
----------- ----------
Net income $ 134,560 $ 206,180
========== ==========
Note 4 Reorganization items:
In accordance with SOP 90-7, expenses resulting from the Chapter 11
reorganization should be reported separately as reorganization items
in the Condensed Consolidated Statements of Operations.
Note 5 Demand notes payable, bank:
The Company has available a $1,250,000 line of credit from a bank
which accrues interest at prime plus .75% (10.25% at June 30, 2000).
At June 30, 2000 borrowings on the line of credit were $1,021,000. The
line of credit is secured by all corporate assets.
9
<PAGE>
MORO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
Note 6 Long-term debt:
<TABLE>
<CAPTION>
2000
--------
<S> <C>
Term loan, bank, due April 1, 2005, payable in 60 equal monthly
principal and interest installments at 9.00% annum. Corporate assets
are pledged as collateral. $118,750
Subordinate term loan, due April 1, 2005, payable in 60 monthly
interest installments at 9.0% per annum. Principal payable in equal
annual installments of $75,000 beginning on April 1, 2002. Collateral
pledged is equipment. 300,000
Term loan due April 1, 2002, principal installment of $150,000 is due
March 31, 2001 and bears interest at 8% per annum. The remainder is
payable in twelve equal quarterly installments beginning April 1, 2001
and ending April 1, 2004 and bears interest at 8% per annum. 219,861
Note payable, creditors, principal and interest at 5% per annum due
May 2000. 50,000
--------
688,611
Less: current portion 221,200
--------
$467,411
========
</TABLE>
Maturities of long-term debt are as follows:
2000 $221,200
2001 46,475
2002 125,868
2003 128,679
2004 91,389
2005 75,000
--------
$688,611
10
<PAGE>
MORO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
Note 7 Common stock:
On March 31, 2000, the Company sold 571,429 shares of common stock for
$.35 per share for a total of $200,000 and issued 28,571 shares at
$.35 per share in exchange for legal services rendered to the Company.
The Company's principal stockholder contributed $205,750 of cash as
additional paid-in capital. No additional shares of common stock were
issued in connection with this transaction.
11
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
During the six months ended June 30, 2000, the Company had revenues of
$2,574,289, gross profit of $846,355, net income of $133,903, and earnings per
share of $.02. All of the revenues for the six months ended June 30, 2000 were
attributable to the Company's operating subsidiary, J.M. Ahle Co., Inc. ("Ahle")
which was acquired by the Company as of April 1, 2000.
Plan of Operations
The Company engages in the identification, evaluation and investigation of
prospective business opportunities, and if believed warranted, to acquire such
businesses. As of April 1, 2000, the Company acquired substantially all of the
operating assets of Ahle, a distributor of reinforcing steel to the construction
industry. The Company intends to expand the business of Ahle and to continue to
evaluate and, if appropriate, pursue other potential business acquisitions.
Liquidity and Capital Resources
For the six month period ended June 30, 2000, there was a net increase in
cash of $480,883. This was attributable to the net cash provided by investing
and financing activities of $1,807,054 which offset the cash used by operating
activities of $1,326,171. As of June 30, 2000, total cash on hand was $480,833,
and working capital was $690,818, of which $494,801 was invested in inventory.
The Company financed the recent purchase of Ahle through a combination of
bank financing, loans and capital contributions from its principal stockholder,
and sales of equity securities of the Company. The Company intends to finance
the operations of Ahle through use of the bank line of credit as well as from
funds generated by the operations of Ahle. The Company believes these financial
resources are adequate to fund the current level of operations.
PART II- OTHER INFORMATION
Item 2. Changes in Securities
On March 31, 2000, the Company sold 571,429 shares of Common Stock at $.35
per share for an aggregate of $200,000 to four accredited investors and issued
28,571 shares at $.35 per share in
11
<PAGE>
exchange for legal services rendered to the Company. The shares were issued
pursuant to the exemption from registration set forth in Section 4(2) and Rule
506 promulgated under the Act, and constitute restricted securities as such term
is defined under Rule 144 promulgated under the Act.
Item 6. Exhibits and Reports on Form 8-K.
(b) During the quarter ended June 30, 2000, the Company did not file any
reports on Form 8-K.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MORO CORPORATION
Date: August 4, 2000 By: /s/ David W. Menard
-------------------------
David W. Menard,
President
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