U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended, December 31, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-9459
NUMEX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 6-1034587
(Stateor Other Jurisdiction of .R.S. Employer Identification Number)
Incorporation or Organization)
14115 S. Pontlavoy Ave. Santa Fe Springs, CA 90670
(Address of Principal Executive Offices) (Zip Code)
(310) 404-7176
(Issuer'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 Securities Act of 1934 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
Registrant had 6,145,600 shares of its common stock, $.10 par value,
outstanding at December 31, 1995.
Traditional Small Business Disclosure Format (check one):
Yes X No
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
NUMEX CORPORATION
CONSOLIDATED BALANCE SHEET
December 31, 1995
(Unaudited)
Assets
Current Assets:
Cash and equivalents $22,136
Restricted cash 854
Accounts receivable 1,981
Inventory 63,222
Prepaid expenses 1,300
------------
Total current assets 89,494
Fixed assets, net 6,243
Intangible assets, net 400,710
Deposits 18,664
------------
Total assets $ 515,111
============
Liabilities & Stockholders' Equity
Current liabilities:
Notes payable $562,784
Notes payable to related parties, current portion 1,353,834
Accounts payable 435,357
Accrued expenses 519,131
Customer deposits 72,219
------------
Total current liabilities 2,943,324
Long -term liabilities:
Notes payable to related parties, long- term 0
------------
Total liabilities 2,943,324
Stockholders' equity:
Preferred stock, $100 par value, 100,000 shares
authorized, none issued
Common stock, $.10 par value, 20,000,000 shares
authorized, 6,270,600 issued and
6,145,600 shares outstanding 627,060
Treasury stock, at cost, 125,000 shares (143,324)
Unearned portion of restricted stock issued (562,500)
Additional paid in capital 7,882,903
Accumulated deficit (10,232,352)
------------
Total stockholders' equity (2,428,213)
Total liabilities & stockholders' equity $ 515,111
============
See Notes to Consolidated Financial Statements.
<PAGE>
NUMEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended December 31, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
----------- ---------- ----------- ----------
Net sales $ 4,149 $1,242,246 $936,499 $1,541,282
Cost of sales 1,071 903,413 513,996 1,086,494
----------- ---------- ----------- -----------
Gross profit 3,078 338,833 422,503 454,788
Selling, general and
administrative expenses 105,020 510,252 739,442 1,150,517
----------- ---------- ----------- -----------
Loss from operations (101,942) (171,419) (316,939) (695,729)
----------- ---------- ----------- -----------
Other Income(Expense)
Interest expense, net ( 46,029) ( 38,403) (136,039) (102,324)
Other Income 122,590 0 153,783 1,000
Loss on assignment of assets
for benefit of creditors
- subsidiary 0 0 (403,009) 0
Loss-write-off of goodwill 0 0 (533,475) 0
----------- ---------- ----------- -----------
Total Other expense 76,561 ( 38,403) (918,740) (101,324)
----------- ---------- ----------- -----------
Loss before income taxes ( 25,381) (209,822) (1,235,679) (797,053)
Provision for income taxes 0 0 (800) (800)
----------- ---------- ----------- -----------
Net loss ($25,381) ($209,822) ($1,236,479) ($797,853)
=========== ========== =========== ===========
Per share data:
Net loss ($0.004) ($0.03) ($0.20) ($0.14)
=========== ========== =========== ===========
Weighted average common
shares outstanding 6,145,600 6,145,600 6,145,600 5,824,145
=========== ========== =========== ===========
See Notes to Consolidated Financial Statements.
<PAGE>
Numex Corporation
Consolidated Statements of Cash Flows
For the Nine Months Ended, December 31, 1995 and 1994
(Unaudited)
Nine Months ended Dec 31
1995 1994
---------- ----------
Cash flows from operating activities:
Net loss ($1,236,478) ($797,853)
Adjustments required to reconcile net loss to
net cash used in operating activities:
Loss on assignment of assets to creditors 402,790 0
Loss on write-off of goodwill - Subsidiary 533,474 0
Depreciation and amortization 71,183 116,970
Conversion of accounts payable to note payable 0 175,000
Changes in operating assets and liabilities:
Accounts receivable (1,886) (263,614)
Inventory 69,126 (44,363)
Prepaid expenses (8,165) (94,555)
Restricted cash 5,881 0
Deposits 1,249 (74,252)
Accounts payable (211,097) 416,874
Accrued expenses 29,948 45,000
Customer deposits 34,240 1,226
---------- ----------
Net cash used in operating activities ( 309,735) (519,567)
---------- ----------
Cash flows from investing activities:
Purchase of fixed assets (914) (200,261)
Purchase of intangible assets 0 ( 10,392)
Business combination, net 0 ( 2,990)
---------- ----------
Net cash used in investing activities (914) (213,643)
---------- ----------
Cash flows from financing activities:
Proceeds from note payable - 0
Proceeds from n/p to related parties 332,000 310,000
Repayment of notes payable ( 80,230) ( 41,500)
Repayment of n/p to related parties ( 32,500) ( 33,000)
Proceeds from issuance of common stock 0 500,000
---------- ----------
Net cash provided by financing 219,270 735,500
---------- ----------
Net(decrease)increase in cash
& cash equivalents ( 91,379) 2,290
Cash and cash equivalents,
beginning of period 113,515 6,708
---------- ----------
Cash and cash equivalents,
end of period $22,136 $8,998
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE>
NUMEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 1995
(Unaudited)
Supplemental cash flow information for the nine months ended
December 31, was as follows:
1995 1994
----------- -----------
Interest paid $94,221 $85,565
Income taxes paid 800 -
<PAGE>
NUMEX CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1995
(UNAUDITED)
NOTE 1. GENERAL
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310 of Regulation S-B. 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 and
reclassifications considered necessary for a fair presentation of the
consolidated financial statements have been included.
For further information, refer to the consolidated financial statements and
footnotes thereto included in Registrant's Form 10-KSB for fiscal year ended
March 31, 1995. Operating results for the nine months ended December 31, 1995
are not necessarily indicative of the results that may be expected for any other
interim period or for the fiscal year ended March 31, 1996.
NOTE 2. VIASTAR
Effective July 31, 1995 an assignment was made for the benefit of creditors
of the assets of ViaStar Marketing, Inc. a wholly owned subsidiary of Company,
resulting in a loss of $403,009. These assets are expected to yield
approximately $15,000 to the creditors. The goodwill from the 1994 acquisition
of ViaStar of $533,475 has been written off resulting in a combined loss of
$936,484.
NOTE 3.
In June 1994 the Company issued 1,000,000 shares of the Company's stock to
the shareholder of ViaStar Marketing Inc. in exchange for all the issued and
outstanding shares of ViaStar. Of these 1,000,000 shares, 500,000 were placed in
escrow pending ViaStar's achievement of certain minimum profit goals through
March 31, 1997. Insofar as ViaStar is no longer in business and its assets have
been assigned for the benefit of creditors, the achievement of the minimum
required goals will not be met. Accordingly, as provided in the escrow
agreement, the 500,000 shares in escrow shall be returned to the Company
automatically at March 31, 1997, if not earlier.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended December 31, 1995 were $4,149, as
compared to $1,242,246 for the comparable period in 1994. The decrease of
$1,159,311 is due to the discontinuance (assignment) of operations of ViaStar
Marketing, Inc., of which subsidiary was acquired in June 1994, as well as, a
decrease in product sales (Therapy Plus) of $78,786.
Net sales for the nine months ended December 31, 1995 were $936,499
compared to $1,541,282 for the same period ended December 31, 1994. The decrease
of $604,783 is primarily due to ViaStar Marketing, Inc., which only had
operations for four months of 1995 (Apr. 1, - July 31, 1995) these four months
amounted to $601,244 of the total decrease.
Selling, general and administrative expenses during the three months ended
December 31, 1995 were $105,020, as compared to $510,252 during 1994. The
$405,232 decrease in selling, general and administrative expenses is due to the
discontinued operations of ViaStar which had its last month of operations in
July 1995. The selling, general and administrative expenses of ViaStar were $.00
for the three months ended December 31, 1995 as compared with $469,448 for the
three months ended December 31, 1994. The selling, general and administrative
expenses of the Company without taking the expenses of ViaStar into account
increased in the amount of $64,216, however, the reversal of $60,000 of overhead
allocated to ViaStar in the fiscal year ending March 31, 1996 was the major
reason for the increase.
Selling, general administrative expenses for the nine months ended December
31, 1995 were $739,442 compared to $1,150,517 for the same period ended December
31, 1994. The decrease for this period was $411,075. For the period ended
December 31, 1995 ViaStar Marketing, Inc.'s portion for the nine months
(actually four months) were $417,454 and the Company's (Therapy Plus) portion
for the nine months ended December 31, 1995 was $321,988. For the comparable
period ending December 31, 1994 ViaStar Marketing Inc.'s share was $747,421
which represents actually six months (started June 1994). The Company's portion
was $403,097. The decrease in the Company's selling, general and administrative
expenses was $81,109 and is the result of cost cutting measures originally
implemented by the Company in 1992.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Other Income (Expense) During the three months ended December 31, 1995
other income (expense) was $76,561 as compared to ($38,403) for the three months
ended December 31, 1994. The increase - income of $114,964 is the write off of
adjusted legal fees of $108,580 , insurance of $2,473 and royalty expense
(non-European) adjustment of $11,537 all prior (period) years' periods
adjustments, otherwise, interest expense was up ($7,626) for the December 31,
1995 period as compared to the same period for December 31, 1994.
Other income amounted to $153,783 as compared to $1,000 for the nine months
ended December 31, 1994. The increase of $152,783 is due to the write off of
adjusted legal fees of $108,580, royalties adjusted for the nine months of
$11,537 as a result of backing out royalties for non-European countries; $2,473
for insurance related to audit adjustments; $12,968 audit adjustments (annual
audit) - over accrual; $17,000 adjustment in negotiated audit and tax services,
and miscellaneous adjustment for consulting services of $225.
During the nine months ended December 31, 1995 Other Expense (Interest)
amounted to ($136,039) compared to ($102,324) for the nine months ended December
31, 1994. The increase of ($33,715) is due to increased borrowings.
Other Expense - Extraordinary Items
The following adjustments related to ViaStar Marketing, Inc., were the loss
on assignment of assets for the benefit of creditors of ($403,009) and the write
off of goodwill in the amount of ($533,475), a total of ($936,484) which had no
corresponding figures for the same nine months ended December 31, 1994.
See NOTE 2. to Financial Statements.
Financial Condition, Liquidity and Capital Resources
Cash used in operations during the current nine month period was $310,649,
which was offset by a net increase in debt incurred of $219,270 resulting in a
decrease of $91,379 in Registrant's cash position.
In the past, Registrant's Chairman of The Board and principal stockholder
has provided Registrant, either directly or indirectly through guarantees, with
the necessary working capital needed to continue operating. However, Registrant
has received no assurances, nor is there any agreement in place that the
Chairman will continue to provide such funding.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Current Plans of Registrant Numex On February 6, 1996 the FDA in response
to a premarket notification (510-k) advised Registrant that it may market its
Therapy Plus manual massage roller for temporary relief of minor muscular pain
associated with arthritis. Registrant also previously sponsored a controlled
clinical study to comply with an FTC order with respect to Therapy Plus's
effectiveness in relief for pain associated with arthritis. Accordingly,
Registrant is now exploring options for resuming marketing Therapy Plus in the
United States through direct response television and other distribution
channels.
In addition, registrant will continue its wholesale sales of Therapy Plus
for resale in markets outside of the United States.
Registrant continues to review new products and ventures which have the
best potential to be marketed through Registrant's direct response system, as
well as through other established marketing channels. Funding necessary to
acquire any new products or the rights to these products would either be
obtained through the issuance of Registrant's stock, by issuing Registrant's
stock as consideration for the acquisition, or by any other means that is
agreeable to Registrant and the parties involved in the transaction.
Registrant continues to conduct negotiations with a number of companies
with the intent of acquiring either them or their products. Registrant's
intention is to raise the requisite funding either through the issuance of
Registrant's stock, by issuing Registrant's stock as consideration for the
acquisition, or by any other means that is agreeable to both parties.
<PAGE>
PART II. - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Meir Hayon v. Numex Corporation, et al
An action titled Meir Hayon v. Numex Corporation, et al was filed in the
United States District Court for the Central District of California, on November
29, 1995. This action alleges that defendants, Numex and an officer of Numex,
made certain misrepresentations in connection with the offer and sale by Numex
to plaintiff and his assignors of certain shares of common stock of Numex
pursuant to a private offering by Numex in or about May 1994, and further
alleges that such officer made certain guarantees to the purchasers of the
common stock. The complaint contains claims for relief under Rule 10b-5, common
law misrepresentation, breach of contract, rescission and restitution under
California Corporations Code Section 25501 and money had and received, and seeks
actual punitive damages, attorneys' fees and costs on behalf of plaintiff, Meir
Hayon and two assignors, of claims to Mr. Hayon. The defendants have denied each
and every allegation set forth in the complaint and intend to defend the action
vigorously.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULT IN SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Ex-27 (requirement only for SEC Edgar filing)
(b) Reports on Form
8-K. Form 8-K dated August 2, 1995. *
* previously filed
<PAGE>
SIGNATURE
Pursuant to the requirements of Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NUMEX CORPORATION
By /s/ William R. Fryrear
Chief Financial Officer
Dated: February 12, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<LEGEND>
UNAUDITED FINANCIAL DATA SCHEDULE
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<NAME> NUMEX CORPORATION
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<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 0
<CASH> 22,990
<SECURITIES> 0
<RECEIVABLES> 1,981
<ALLOWANCES> 0
<INVENTORY> 63,222
<CURRENT-ASSETS> 89,494
<PP&E> 225,170
<DEPRECIATION> 218,927
<TOTAL-ASSETS> 515,111
<CURRENT-LIABILITIES> 2,943,324
<BONDS> 0
<COMMON> 627,060
0
0
<OTHER-SE> (3,055,273)
<TOTAL-LIABILITY-AND-EQUITY> 515,111
<SALES> 936,499
<TOTAL-REVENUES> 936,499
<CGS> 513,996
<TOTAL-COSTS> 1,253,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136,039
<INCOME-PRETAX> (299,194)
<INCOME-TAX> 800
<INCOME-CONTINUING> (299,994)
<DISCONTINUED> 936,484
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<NET-INCOME> (1,236,478)
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