UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11968
COSMO COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-2268005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Unit 2 - 55 Travail Road, Markham Ontario,Canada
(Address of principal executive offices)
Registrant's telephone number including area code: (905) 209-0488
Former name, former address, and former fiscal year, if changed since
last report.
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 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) and has
been subject to such filing requirements for the past 90 days.
Yes No ___X____
29,104,066 shares of the issuer's Common Stock were outstanding as of
the latest practicable date September 30,2003
INDEX
Registrant's representations.................................. 3
Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 2003 and March 31, 2003.......................... 4-5
Condensed Consolidated Statements of Operations
For the three months ended September 30, 2003, and 2002....... 6
Condensed Consolidated Statements of Operations
For the six months ended September 30, 2003 and 2002........... .8
Notes to Condensed Consolidated Financial
Statements.......................................................9
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................10-12
Signature........................................................13
..
PART 1 - FINANCIAL INFORMATION
Item I. Financial Statements
The registrant represents that the Condensed Consolidated
Financial Statements furnished herein have been prepared in
accordance with generally accepted accounting principles applied
on a basis consistent with prior years and that such Condensed
Consolidated Financial Statements reflect, in the opinion of the
management of the Company, all adjustments (which include only of
normal recurring adjustments) necessary to present fairly the
consolidated financial position of Cosmo Communications Corporation
and its subsidiaries (the "Company"), as of September 30, 2003 and
the results of its operation and its cash flows for the six months
then ended.
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September March
30, 2003 31, 2003
$ $
(in '000s) (in '000s)
CURRENT ASSETS
Cash and cash equivalents 770 815
Accounts receivable, net of allowance for
doubtful accounts of $18,000 and $16,000 in
September and March respectively 7,698 2,381
Inventories 2,602 2,017
Prepaid and sundry receivable 36 39
_________ ________
Total current assets 11,106 5,252
_________ ________
PROPERTY AND EQUIPMENT, net 46 17
DEFERRED CHARGES 23 27
___________ __________
TOTAL 11,175 5,296
_________ _________
See notes to condensed consolidated financial statements
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September March
30, 2003_ 31, 2002
$ $
(in 000's) (in 000's)
CURRENT LIABILITIES
Accounts payable and accrued expenses 2,326 441
Accounts payable to related party(note 5) 6,692 3,232
Loan from related party(note 5) 1,481 1,438
________ ________
Total current liabilities 10,499 5,111
STOCKHOLDERS' EQUITY
Common Stock (note 6) 1,571 1,571
Treasury stock (note 6) (116) (116)
Additional paid-in capital 26,273 26,273
Accumulated deficit (25,806) (26,225)
Accumulated other comprehensive loss (1,246) (1,318)
_________ ________
Total stockholders' deficiency 676 185
TOTAL 11,175 5,296
_________ ________
See notes to condensed consolidated financial statements
COSMO COMMUNCIATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
September 30 September 30
2003 2002
(In 000's) (In 000's)
Sales $ 8,402 $ 2,945
Cost of Sales 7,852 2,574
____________ ____________
Gross Margin 550 371
Commission income 585 206
Exchange gain 6 6
Total operating income 1,141 583
Operating expenses:
Selling Expenses 301 126
General and Administrative 326 314
Amortization 6 2
Total operating expenses 633 442
Income from operation 508 141
Interest expenses ( 38) (21)
Taxation (74) -
NET INCOME (LOSS) 396 120
INCOME PER SHARE 0.02 0.00
OUTSTANDING (AVERAGE) 29,104,000 29,104,000
See notes to condensed consolidated financial statements
COSMO COMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
September 30 September 30
2003 2002
In 000's In 000's
Sales 18,559 5,403
Cost of sales 17,703 4,580
Gross margin 856 823
Commission income 849 332
Exchange gain 31 15
Total operating income 1,736 1,170
Operating expenses:
Selling expenses 551 242
General and administrative 608 574
Amortization 8 3
Total operating expenses 1,167 819
Income (loss) from operations 569 336
OTHER INCOME/(EXPENSE)
Other income - 9
Interest expenses (76) (48)
Taxation (74) -
Net income/(loss) $419 $312
INCOME PER SHARE 0.0155 0.0107
OUTSTANDING (AVERAGE) 29,104,000 29,104,000
See notes to condensed consolidated financial statements
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES: (in 000's) (in 000's)
Net income $ 419 $ 312
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation & amortization 8 4
(Increase) Decrease in accounts receivable,
net (5,317) (2,633)
(Increase) Decrease in inventories (585) (289)
(Increase) Decrease in others 3 (64)
Increase (Decrease) in accounts payable, trade 1,885 942
and services
Increase (Decrease) in accounts payable due to
parent company, trading account 3,460 -
Increase (Decrease) in bank overdraft - (164)
Translation Adjustments 72 155
Net cash used in operating activities (55) (1,737)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment (33) -
Net cash used in investing activities (33) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in due to parent company 43 -
Net increase (decrease) in loan due relatedy party - (5)
Net increase (decrease) in due to
related party - 1,932
Net cash provided by financing activities 43 1,927
Increase (Decrease) in cash and cash equivalents (45) 190
Cash and cash equivalents at the beginning of the 815 295
period
Cash and cash equivalents at the end of the period $ 770 $ 485
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ 28 $ 24
See notes to condensed consolidated financial statements
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
1. SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies followed by quarterly financial reporting are
the same as those disclosed in Note 1 of the Notes to the Consolidated
Financial Statements included in the Company's report on Form 10K for
the fiscal period ended March 31, 2003.
2. INVENTORIES:
Inventories are stated at the lower of cost (first in, first-out) or
market. Inventory at September 30, 2003 and March 31, 2003 consisted
primarily of finished goods.
3. INCOME /(LOSS) PER SHARE:
Income (loss) per common share is computed based upon the weighted
average number of common shares and dilutive common equivalent shares
outstanding for each period.
4. OTHER ASSETS
Other assets consist of deposits paid on leases.
5. RELATED PARTY TRANSACTIONS
The Company, through its subsidiaries purchased goods from affiliates
of the parent company for resale. Transactions are stated in US
currency and are priced at cost. Balance due is payable based on a
trade term of 90 days. There had been no interest accrued on the
balance as of September 30, 2003.
An affiliate of the parent company also provides a loan to the
Company at an interest rate of prime plus 1%. The loan is payable on
demand. Interest rate accrued on the loan was $270,451 as of
September 30, 2003
In addition, the Company received through its subsidiaries commissions
from affiliates of the parent company in the amount of $194,991based
on an agreement to broker sales for the parent company.
6. COMMON STOCK AND TREASURY STOCK
(a) Authorized
30,000 Preferred stock, cumulative, convertible at $0.01 par value
9,970,000 Preferred stock, at $0.01 par value
50,000,000 common stock at $0.05 par value
On June 19, 2001, shareholders of the Company at a Special Meeting,
approved the amendment of the Company's Articles of Incorporation
to increase the number of authorized shares from 4 million to
50 million shares.
(b) Issued
$
('000)
29,104,000 common stock 1,571
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following is management's discussion and analysis of certain significant
factors, which have affected the Company's financial condition, and results
of operation during the period included in the accompanying condensed
consolidated financial statements.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This quarterly report may contain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks could differ
materially from these forward-looking statements as a result of
such risks and uncertainties, including, among others, general
economic conditions, governmental regulation and competitive factors,
and, more specially, interest rate levels availability of financing,
consumer confidence and preferences, the effectiveness of the Company's
competitors, and costs of materials and labor. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this quarterly report will in fact transpire.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital is $571,000 at September 30, 2003, an
improvement of approximately $469,000 from March 31, 2003. The ratio
of current assets to current liabilities at September 30, 2003 was
1.06 to 1, as compared to 1.03 to 1 March 31, 2003. The Company has
sufficient working capital for the six months ended September 30, 2003
primarily from funds provided from parent company.
As of September 30, 2003, the parent company has provided loans and
working capital credits to a total of $8,173,000. Management believes
that the continued commitment by the parent company to provide additional
financing at its discretion, the Company expects to meet its working
capital requirements throughout 2003.
FINANCIAL AND MANAGEMENT PLANS
The company's stockholders' equity at September 30, 2003 and March 31,
2003 was $ 676,000 and $185,000 respectively. Management has not
planned any significant changes in the operation of the Company,
but has strategically expand its product lines, particularly in
video products such as TV with built in DVD units. This introduction
has significantly increased the sales of the Company.
RESULTS OF OPERATIONS
SALES
Sales in this quarter of 2003 increased by $5,457,000 or 185% compared
to the corresponding period in 2002. Sales for the six months ended
September 30, 2002 increased by approximately $13,156,000 or 243% as
compared to the corresponding period in 2002. The increase was
primarily due to new product lines such as DVD players, TV and DVD
combination units, home based security camera system, and MP3 players.
COST OF SALES AND GROSS MARGIN
Gross margin as a percentage of sales was approximately 7% in this
quarter as compared to 12.5% for the same period in 2002. The change
in cost of sales and gross margin in the two periods in comparison
reflects the Company's sales strategy to expand sales and the sacrifice
of lower profit margins. In the longer term, the Company expects
that average gross profit margin across the product lines will be
gradually improved.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses during the six months
ended September 30, 2003 increased by $343,000 as compared to the
corresponding period in 2002 due to higher level of sales activities.
Commission income increased by $517,000 as compared to the
corresponding period.
INTEREST EXPENSE AND OTHER COSTS
Interest expense increased by $28,000 as compared to the
corresponding six months in 2002, as a result of lower interest rates
and the Company does not pay interest on balances due to parent
company on trading activities.
NET INCOME
The Company had an income of $419,000 for the six months ended
September 30, 2003 compared to an income of $312,000 for the same
quarter in 2002. During the three months ended September 30, 2003,
the Company had an income of $396,000 as a compared to an income of
$120,000 in 2002.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed by the
undersigned - thereunto duly authorized.
COSMO COMMUNICATIONS CORPORATION
Date: November 30, 2003
/s/Philip Lau
Chairman of the Board
/s/Peter Horak
President, Cosmo Communications Corporation