-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VhdpAmXrs1k5tirSCLSDHl31wjV91HP8ykTVWcaaGOBO78k2GY5PEXOuyRwBJ5zY jMUybBsRjFiXK9mE90rBAg== 0000913906-99-000018.txt : 19990217 0000913906-99-000018.hdr.sgml : 19990217 ACCESSION NUMBER: 0000913906-99-000018 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER MARKETPLACE INC CENTRAL INDEX KEY: 0000900475 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 330008870 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22014 FILM NUMBER: 99542240 BUSINESS ADDRESS: STREET 1: 1171 RAILROAD ST CITY: CORONA STATE: CA ZIP: 91720 BUSINESS PHONE: 9097352102 MAIL ADDRESS: STREET 1: 1171 RAILROAD ST CITY: CORONA STATE: CA ZIP: 91720 10QSB 1 10QSB 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. 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...... . . . . . . . . PART I - FINANCIAL INFORMATION Item 1. Financial Statements - ------------------------------------------------------------------------------ COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998. [UNAUDITED] - ------------------------------------------------------------------------------ Assets: Current Assets: 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
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998. [UNAUDITED] - ------------------------------------------------------------------------------ Liabilities and Stockholders' Equity [Deficit]: Current Liabilities: 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
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [UNAUDITED] - ------------------------------------------------------------------------------ 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: 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
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED] - ------------------------------------------------------------------------------ Six months ended December 31, 1 9 9 8 1 9 9 7 ------- ------- Operating Activities: 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
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 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 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 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 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 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 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 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 EX-27 2 FDS --
5 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. 6-Mos Jun-30-1998 Dec-31-1998 26,349 0 427,950 82,472 39,993 412,320 933,827 0 2,630,289 2,332,650 0 0 0 135 (99,669) 2,630,289 1,057,571 1,250,702 805,069 1,797,927 0 0 52,312 (546,297) 0 (546,297) 0 35,564 0 (528,733) (.39) (.39)
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