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, September 30, 1997
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 06-1034587
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
14115 S. PONTLAVOY AVE. SANTA FE SPRINGS, CALIFORNIA 90670
(Address of Principal Executive Offices) (Zip Code)
(562) 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 Exchange 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 7,455,581 shares of common stock, $.10 par value, and 170,000
shares of preferred stock, $1.00 par value outstanding at September 30, 1997.
Traditional Small Business Disclosure Format (check one):
Yes X No
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NUMEX CORPORATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30,1997
(Unaudited)
Assets
<S> <C>
Current Assets:
Cash and equivalents $15,687
Accounts receivable 39,631
Inventory 9,141
Prepaid expenses 6,660
-------------
Total current assets 71,119
Fixed assets, net 16,304
Deposits 12,390
-------------
Total assets $99,813
=============
<CAPTION>
Liabilities & Stockholders' Equity
<S> <C>
Current liabilities:
Notes payable $1,499,490
Accounts payable 44,440
Accrued expenses 406,282
Customer deposit 47,833
-------------
Total current liabilities 1,998,045
Long-term liabilities:
Notes payable to related parties, long-term 0
------------
Total liabilities 1,998,045
Stockholders' equity:
Preferred stock, $1.00 par value, 10,000,000 shares
authorized, 170,000 issued 170,000
Common stock, $.10 par value, 20,000,000 shares authorized,
8,080,581 issued and 7,455,581 shares outstanding 808,058
Treasury stock, at cost, 625,000 shares (705,824)
Additional paid in capital 8,727,411
Accumulated deficit (10,897,877)
-------------
Total stockholders' equity (1,898,232)
Total liabilities & stockholders' equity $99,813
=============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
NUMEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED, SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
-------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales $81,104 $148,251 $111,518 $164,391
Cost of sales 31,836 63,216 44,286 67,619
------------ ------------- ------------- --------------
Gross profit 49,268 85,035 67,232 96,772
Selling, general and
administrative expenses 66,160 77,949 121,429 241,326
------------ -------------- ------------- --------------
Loss from operations (16,892) 7,086 (54,197) (144,554)
------------ -------------- ------------- --------------
Other Income (Expense)
Interest expense, net (40,250) (43,258) (85,009) (93,328)
Other Income 0 24,027 0 34,203
Loss on assignment of assets
for the benefit of creditors
- subsidiary 0 138 0 138
------------ -------------- ------------- --------------
Total Other Income(Expense) (40,250) (19,093) (85,009) (58,987)
------------ -------------- ------------- --------------
Loss before income taxes (57,142) (12,007) (139,206) (203,541)
Provision for income taxes (800) 0 (800) (800)
------------ -------------- ------------- --------------
Net loss ($57,942) ($12,007) ($140,006) ($204,341)
============ ============== ============= ==============
Per share data:
Net loss ($0.01) ($0.002) ($0.02) ($0.03)
============ ============== ============= ==============
Weighted average common
shares outstanding 6,698,668 6,167,750 6,335,206 6,165,414
============ ============== ============= ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
NUMEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED, SEPTEMBER 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months ended September 30
1997 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($140,007) ($204,341)
Adjustments required to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,877 18,085
Changes in operating assets and liabilities:
Accounts receivable (30,573) 523
Inventory (318) (10,178)
Prepaid expenses (6,660) (113,726)
Restricted cash 5,755 (571)
Dubs 0 (4,385)
Deposits 0 (995)
Accounts payable (34,259) (8,300)
Accrued expenses 76,233 39,316
Customer deposits (68,591) 59,943
----------- -------------
Net cash used in operating activities (195,543) (224,629)
----------- -------------
Cash flows from investing activities:
Purchase of fixed assets (270) -
----------- -------------
Net cash used in investing activities (270) 0
----------- -------------
Cash flows from financing activities:
Proceeds from note payable 200,500 88,000
Proceeds from notes payable to related parties 0 12,000
Repayment of notes payable (4,000) (25,500)
Repayment of notes payable to related parties 0 (12,000)
Proceeds from preferred stock issued 0 153,312
----------- -------------
Net cash provided by financing activities 196,500 215,812
----------- -------------
Net decrease in cash and cash equivalents 687 (8,817)
Cash and cash equivalents, beginning of period 14,981 11,929
----------- -------------
Cash and cash equivalents, end of period $15,668 $3,112
=========== =============
</TABLE>
See Notes to Financials Statements.
<PAGE>
NUMEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30, 1997
(Unaudited)
Supplemental cash flow information for the six months ended September 30, was as
follows:
1997 1996
----------- -----------
Interest paid $22,767 $42,639
Income taxes paid 800 800
Non-cash financing activity for the six months ended September 30, was as
follows:
Issuance of common stock in payment
of legal services 0 11,344
Conversion of accrued interests of a
related party noteholder into common stock 67,082 0
Conversion of accrued interests into notes
payable 158,174 0
Conversion of accounts payable into notes payable 22,039 0
Conversion of notes payable into common stock
at $0.50 per share 676,834 0
See Notes to Financial Statements.
<PAGE>
NUMEX CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 1997
(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, 1997 Operating results for the six months ended
September 30, 1997 are not necessarily indicative of the results that
may be expected for any other interim period or for the fiscal year
ended March 31, 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, continued
Results of Operations
Net sales for the six months ended September 30,1997 and 1996 were $112,000 and
$164,000 respectively. The 32% decrease in current year's net sales was due
mainly from decreased dealer sales and slightly from the discontinuance of the
new Therapy Plus infomercial.
For the six months ended September 30, 1997 and 1996, selling, general and
administrative expenses were $121,000 and $241,000 respectively. The absence of
related expenses incurred in the the reintroduction of Therapy Plus in 1996 and
more cost cutting measures implemented by the Company resulted in a 50% decrease
on the current year's selling, general and administrative expenses.
Net sales for the three months ended September 30, 1997 were $81,000 as compared
to $148,000 for the corresponding period in 1996. The Therapy Plus international
sales through distributors has been the Company's major source of sales income.
The timing difference with regards to receiving and fulfilling the large
quantity orders could result in increase or decrease in sales from the
corresponding quarter.
Selling, general and administrative expenses during the three months ended
September 30,1997 were $66,000, as compared to $78,000 during 1996. During the
fiscal year ending March 31, 1997, the Company wrote off all intangible assets
related to the Therapy Plus license and purchase agreements. The absence of
amortization for these intangibles, plus the decrease in outside services which
was offset with the increase in legal fees, resulted in a 15% decrease in
company's expenses.
Financial Condition, Liquidity and Capital Resources
Cash used in operations during the current six month period was $196,000, which
was offset by a net increase in debt incurred of $196,000, and a slight decrease
of $700 in Registrant's cash position.
During the 2nd quarter, the Registrant's Chairman of the Board converted notes
receivable and accrued interests in the amount of $144,000 to common stock at
$0.50 per share. As previously disclosed in March 31, 1997 10KSB, he also
converted $300,000 of the Company's indebtedness into common stock for $1.00 per
share. Two other noteholders have converted their long term convertible notes
into common stock at $0.50 per share for a total of $600,000.
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.
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, the Company plans to continue marketing Therapy Plus through
wholesale and export distributors, using the newly accepted claims by the
government regulatory agency, regarding arthritis pain. The Company is currently
negotiating with several major companies to distribute the Therapy Plus Product.
Since late fall 1996, Management has been intensively pursuing acquisitions of a
profitable business. Management has been reviewing several acquisition
candidates. In anticipation of possible acquisitions the Company has established
a relationship with a medium size investment banking house which specializes in
private placements of securities and notes with institutional investors.
Management is now in the process of due diligence phase of several acquisition
candidates, whose revenues range from $4 - $30 million annual sales.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Although, there is no guarantee that any of the proposed acquisitions will
materialize, there is reasonable anticipation, once the target company is
definitely established and meets all the criteria of the Company and
institutional investors that funds can be obtained to finalize such an
acquisition.
It is to be noted that the Company has approximately a $6.7 million tax loss
carryforward which can be available to be utilized by any profitable
acquisition.
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 and sale of Registrant's
stock, by issuing Registrant's stock as consideration for the acquisition, or by
any other means that is agreeable to all parties involved in the transaction.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Belin Rawlings & Badal LLP and Numex Corporation and Jack I. Salzberg American
Arbitration Association RE:72 194 01200 96
On December 6, 1997 Belin Rawlings & Badal LLP (the "Claimants") filed a Demand
for Arbitration before the American Arbitration Association in a proceeding
entitled In the Matter of the Arbitration between Belin Rawlings & Badal LLP,
and Numex Corporation and Jack I. Salzberg (the "Respondents") (Case No. 72 194
01200 9) (the "Proceeding"). The proceeding arose out of an allegation by the
Claimants that pursuant to a Promissory Note and Agreement dated June 28, 1994
(the "Agreement") by and between Belin Rawlings & Badal LLP and Numex
Corporation and Mr. Salzberg, the Respondents failed to meet an obligation to
pay an unpaid principal in the amount of $151,000.
Subsequently, on May 15, 1997, the American Arbitration Association awarded to
the Claimants, Belin Rawlings & Badall LLP a total amount of $208,778, plus
interest, at the rate of 10% per annum from May 6, 1997.
Discussions are currently being held by the Company and the Plaintiff to convert
this amount into common stock of the Company.
Jacob M. M. Graff, an individual vs. Numex Corporation; Jack I. Salzberg, an
individual; Anna S. Salzberg, an individual, Superior Court for the State of
California, County of Los Angeles. Case No. BC 172 944
An application for a right to attach order and writ of attachment was filed on
July 21, 1997, by Jacob M. M. Graff (the "Plaintiff"), in the amount to be
secured of $200,000, relating to a promissory note executed and dated September
9, 1992. Concurrent with the execution of the promissory note as referred to
above, by Jack I. Salzberg, as Chairman of the Board of Numex, Mr. Salzberg also
signed a personal guarantee concerning the loan balances of the original and
renewal notes.
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
None
<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/ Jack I. Salzberg
President and Chairman of the Board
Dated: November 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
UNAUDITED FINANCIAL DATA SCHEDULE
</LEGEND>
<CIK> 0000318716
<NAME> NUMEX CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 15,687
<SECURITIES> 0
<RECEIVABLES> 39,631
<ALLOWANCES> 0
<INVENTORY> 9,141
<CURRENT-ASSETS> 79,119
<PP&E> 217,036
<DEPRECIATION> (200,732)
<TOTAL-ASSETS> 99,813
<CURRENT-LIABILITIES> 1,998,045
<BONDS> 0
0
170,000
<COMMON> 808,058
<OTHER-SE> (2,876,290)
<TOTAL-LIABILITY-AND-EQUITY> 99,813
<SALES> 111,518
<TOTAL-REVENUES> 111,518
<CGS> 44,286
<TOTAL-COSTS> 165,715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,009
<INCOME-PRETAX> (139,207)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (140,007)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
