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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______ Commission file number 0-7722
NUMEX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1034587
(State of other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
11111 SANTA MONICA BOULEVARD, SUITE 210
LOS ANGELES, CALIFORNIA 90025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 914-3007
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.10 per share
INDICATE BY CHECKMARK 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 REPORT(S)), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES /X/ NO
---- ----
Registrant had 17,546,007 shares of Common Stock, $.10 par value per share,
outstanding as of November 10, 1999.
Transitional Small Business Disclosure Format: YES NO /X/
---- ----
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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NUMEX CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 September 30
1999* 1999
----------- -----------
<S> <C> <C>
Assets
Current assets
Cash ............................................................... $ 85,086 $ 69,050
Accounts receivable, net of allowance for doubtful
accounts of $120,480 and $120,480, respectively ................... 422,980 598,889
Capitalized production costs ....................................... 114,828 148,433
Employee advances .................................................. 21,719 30,687
----------- -----------
Total current assets .................................................. 644,613 847,059
Property and equipment, net of accumulated
depreciation and amortization of $165, 716 and $188,938, respectively 90,962 127,613
Other assets .......................................................... 8,683 17,557
Goodwill. net of amortization of $43,789 .............................. 0 394,105
----------- -----------
Total Assets ....................................................... $ 744,258 $ 1,386,334
=========== ===========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities
Accounts payable and accrued expenses .............................. $ 798,669 $ 1,050,925
Advances on bank line-of-credit .................................... 1,800,000 0
Deferred revenues .................................................. 755,897 350,590
Current portion of capital lease obligations ....................... 11,031 11,031
Current portion of note payable .................................... 236,250 178,903
----------- -----------
Total current liabilities ............................................. 3,601,847 1,591,449
----------- -----------
Long-term portion of bank line-of-credit .............................. 939,594 939,594
Note payable, net of current portion .................................. 36,903 0
Capital lease obligations, net of current portion ..................... 10,839 1,609
----------- -----------
Total liabilities ..................................................... 4,589,183 2,532,652
----------- -----------
Minority interest ..................................................... 201,589 0
----------- -----------
Shareholder's deficit
Preferred stock; $1.00 par value, 10,000,000 shares authorized; .... 144,000
0 and 144,000 shares issued and outstanding
Common stock, $0.10 par value, 20,000,000 shares authorized; ....... 253,800 1,514,597
2,538,000 and 15, 145,967 shares issued, and 2,538,000 and
and 15,068,458 outstanding
Treasury stock, at cost, 77,509 shares ............................. (7,750)
Additional paid-in-capital ......................................... (252,300) 4,717,133
Accumulated deficit ................................................ (4,048,014) (7,514,298)
----------- -----------
Total shareholders deficit ............................................ (4,046,514) (1,146,318)
----------- -----------
$ 744,258 $ 1,386,334
=========== ===========
</TABLE>
* Derived from JSA's March 31, 1999 audited financial statements
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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NUMEX CORPORATION AND SUBSIDIARY
Consolidated CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ............................................. $ 1,628,490 $ 1,325,200 $ 2,770,756 $ 2,806,997
Cost of revenues ..................................... 786,549 836,920 1,462,255 1,956,891
------------ ------------ ------------ ------------
Gross profit ......................................... 841,941 488,280 1,308,501 850,106
Operating expenses ................................... 436,363 1,152,893 986,081 2,587,130
------------ ------------ ------------ ------------
Operating profit (loss) .............................. 405,578 (664,613) 322,420 (1,737,024)
------------ ------------ ------------ ------------
Other income (expense)
Proceeds from bad debts written off in prior year 0 0 0 55,000
Interest expense ................................ (49,549) (34,162) (121,821) (56,552)
------------ ------------ ------------ ------------
Total other expense .................................. (49,549) (34,162) (121,821) (1,552)
------------ ------------ ------------ ------------
Profit (loss) before minority interest ............... 356,029 (698,775) 200,599 (1,738,576)
Minority interest in income of consolidated subsidiary (62,530) 0 (68,655) 0
------------ ------------ ------------ ------------
Net profit (loss) .................................... 303,499 (698,775) 131,944 (1,738,576
Deemed dividend ...................................... 0 0 0 1,728,107
------------ ------------ ------------ ------------
Net profit (loss) applicable to common stock ...... 303,499 (698,775) 131,944 (3,466,683)
============ ============ ============ ============
Basic and diluted profit (loss) per common share ..... $0.12 ($0.05) $0.05 ($0.24)
============ ============ ============ ============
Weighted average number of common shares
outstanding used to calculate basic and diluted
earnings (loss) per common share ..................... 2,538,000 15,068,508 2,538,000 14,610,512
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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NUMEX CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six months
ended September 30
---------------------------
1998 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net profit (loss) ................................ $ 131,944 $(1,738,576)
Adjustments to reconcile net profit (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization ............... 24,372 69,865
Minority interest in net income of subsidiary 68,655 0
Employee compensation paid in common stock .. 0 120,978
Finder's fee paid in common stock ........... 0 371,094
Changes in operating assets and liabilities:
Accounts receivable ......................... (277,874) (182,801)
Other liabilities ........................... 14,305 0
Capitalized production costs ................ 200,226 (33,604)
Accounts payable and accrued expenses ....... 86,582 252,256
Deferred revenues ........................... (166,911) (405,307)
Deposits .................................... 0 (4,436)
----------- -----------
Net cash provided by (used in) operating activities .... 81,299 (1,550,531)
----------- -----------
Cash flows from investing activities
Debt issued to employees ......................... 0 (8,968)
Purchase of trade-mark ........................... 0 (12,000)
Purchase of equipment ............................ (1,840) (47,873)
Acquisition of business .......................... 0 185,441
----------- -----------
Net cash provided by (used in) investing activities .... (1,840) 116,600
----------- -----------
Cash flows from financing activities
Decrease in bank overdraft ....................... (54,462) 0
Repayment on bank line of credit ................. 0 (1,800,000)
Debt received from officers ...................... 1,800 0
Repayment on note payable ........................ (15,500) (94,250)
Payments for obligations under capital leases .... (11,494) (9,230)
Distributions to minority shareholder ............ (15,000) 0
Net proceeds from issue of preferred stock ....... 0 3,319,500
Net proceeds from exercise of warrants ........... 0 1,875
----------- -----------
Net cash provided by (used in) financing activities .... (94,656) 1,417,895
----------- -----------
Net decrease in cash ................................... (15,197) (16,036)
Cash, at beginning of the period ....................... 0 85,086
----------- -----------
Cash (overdraft), at end of period ..................... $ (15,197) $ 69,050
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
5
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Notes to Consolidated Condensed Financial Statements (Unaudited)
ORGANIZATION AND BUSINESS
Numex Corporation (the "Company") was incorporated under the laws of the State
of Delaware in August 1980.
Effective March 31, 1999, the Company discontinued the manufacture and sales of
its only product and ceased operations. On April 12, 1999, Numex acquired all
the outstanding capital stock of Jeffrey A. Stern & Associates, Inc. (JSA), a
company incorporated under the laws of the State of California, with the
issuance of 3,046,875 shares of Numex's common stock (the JSA Acquisition). JSA
is the remaining operating entity after the acquisition (see Note 2), which
provides distributing and publishing services to various commercial customers
throughout the United States. In addition, JSA is engaged in publishing,
circulating and selling advertisements in its own print publications. The
Company is currently in the process of attempting to leverage its expertise and
proprietary media vehicles in the Hispanic market by developing an electronic
shopping mall for Hispanics. The new venture "InternetMercado.com", is a
bilingual e-commerce web site specializing in retail and service merchandising
to the US Hispanic market. The site leverages the Company's expertise in
Hispanic marketing, entertainment programming and direct response media to draw
and retain loyal customers to a unique and culturally relevant mix of retailers,
products, services and education elements.
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10QSB and Article 10 of
Regulation S-X. All significant inter-company accounts and transactions have
been eliminated in consolidation.
The unaudited consolidated condensed financial statements do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. All of the financial statements were prepared
on the accrual basis of accounting. In the opinion of the management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for fair presentation have been included. Operating results for the six months
period ended September 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending March 31, 2000. For further
information, refer to the audited financial statements of both the Company and
JSA, and the footnotes thereto, for the year ended March 31, 1999.
NOTE 2 - MERGER
In April 1999, the Company acquired all of the outstanding common stock of JSA.
Listed below are the various events occurring within JSA and Numex in
conjunction with this acquisition:
(a) On April 9, 1999, JSA issued 93.464 shares of no par value common
stock, to certain employees as compensation. These shares were granted
to the employees on January 5, 1999 in connection with the merger.
Additionally, JSA elected to dissolve and liquidate its subsidiary, JSA
Communications LLC, and transfer all of the assets and liabilities to
JSA. Pursuant to the transaction, JSA issued 106.09
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shares of the common stock to acquire the minority's interest in this
subsidiary. JSA accounted for the acquisition using the purchase method
of accounting with the assets acquired and liabilities assumed recorded
at fair values, and the results of the acquired business will be
included in the consolidated financial statements from the closing date
of the JSA Acquisition. JSA recorded goodwill of $437,894 representing
the excess of the purchase price over the fair value of the assets
acquired.
(b) On April 12, 1999, JSA merged with and into a newly found subsidiary of
the Company under a plan of reorganization. In conjunction with the
merger, the former officers of JSA became officers of the Company. The
shareholders of the JSA received 3,046,875 shares of the Company's
common stock (or approximately 26% of the Company's common stock on the
effective date of the merger).
For accounting purposes, this transaction was accounted for as an
acquisition of the Company by JSA (reverse acquisition). The shares
held by the shareholders of the Company prior to the acquisition have
been recognized as if they were issued in connection with the
acquisition of the Company by JSA. The Company accounted for the
acquisition using the purchase method of accounting with the assets
acquired and liabilities assumed recorded at fair values, and the
results of the acquired business will be included in the consolidated
financial statements from the closing date of the merger. No goodwill
was recognized since the purchase price equaled to the fair value of
the assets acquired.
NOTE 3 - PRIVATE PLACEMENT
In conjunction of the merger, the Company also completed a private
placement of 144,000 shares of 5% Series B Convertible Preferred stock
for $25.00 per share on April 12, 1999. These shares are convertible
into 2,400,040 shares of common stock. Concurrent with this placement
and the above merger, the Company reached an agreement with JSA's
lender to amend the line of credit. In accordance with the amendment,
the Company paid $1,800,000 to refinance the outstanding balance of
$2,739,594 to approximately $939,000.
The Company recorded deemed dividend of $1,728,107 in connection with
the private placement. This amount represents the difference between
the issue price of the shares of preferred stocks and the market value
of the shares of common stocks issuable upon conversion of the shares
of preferred stock, assuming that the shares of preferred stock were
converted into shares of common stock on the date of the private
placement.
NOTE 4 - SUBSEQUENT EVENTS
To facilitate the management of and the raising of capital for its e-commerce
venture, the Company formed a new subsidiary, InternetMercado Commerce
Corporation (IMCC), a Delaware corporation, on November 3, 1999.
On November 3, 1999, the Company borrowed $1,500,000 from Bastion Capital Fund
LP ("Bastion") pursuant to a three year term loan agreement. In consideration
for the loan, Bastion received shares of common stock for 5% ownership of the
newly formed subsidiary, IMCC. Bastion also received warrants for 1.0 Million
shares of common stock in the Company at an exercise price of $1.00 per share
and 2 tranches of five year warrants exercisable into 12.5% and 2.5% ownership
of IMCC at aggregate exercise prices of $2.38 million. The broker for the loan
received a cash fee of $120,000 shares of common stock
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for 0.5% ownership of IMCC, warrants for 100,000 shares of common stock in
the Company and warrants for shares of common stock exercisable into a 1.5%
ownership in IMCC, exercisable in similar form and terms to the warrants issued
to Bastion.
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS, AND FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
The following discussion should be read in conjunction with the Company's
condensed consolidated financial statements and the notes thereto appearing
elsewhere in this Form 10-QSB. Certain statements contained herein that are not
related to historical results, including, without limitation, statements
regarding the Company's business strategy and objectives, future financial
position, expectations about pending litigation and estimated cost savings, are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act") and involve risks and uncertainties. Although the
Company believes that the assumptions on which these forward-looking statements
are based are reasonable, there can be no assurance that such assumptions will
prove to be accurate and actual results could differ materially from those
discussed in the forward looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, regulatory
policies, competition from other similar businesses, and market and general
economic factors. All forward-looking statements contained in this Form 10-QSB
are qualified in their entirety by this statement.
INTRODUCTION:
On April 12, 1999, Numex Corporation (the "Company") acquired all of the
outstanding stock of Jeffrey A. Stern & Associates, Inc. ("JSA"), in exchange
for 3,046,875 shares of common stock in the Company (the "JSA Acquisition"). For
accounting purposes, the JSA Acquisition is treated as a re-capitalization of
JSA with JSA as the acquirer (reverse acquisition). Accordingly, the discussion
below provides information solely with respect to the results of operations of
JSA. In connection with the JSA Acquisition, JSA acquired the minority interest
in JSA Communications, LLC in exchange for 106.09 shares in JSA. JSA
Communications LLC was subsequently merged with JSA. This transaction resulted
in goodwill of $437,894 being recorded on JSA's books.
The Company is currently in the process of attempting to leverage its expertise
and proprietary media vehicles in the Hispanic market by developing an
electronic shopping mall for Hispanics. The Company's new venture is called
"InternetMercado.com", which is a bilingual e-commerce web site specializing in
retail and service merchandising to the US Hispanic market. The site leverages
the Company's expertise in Hispanic marketing, entertainment programming and
direct response media to draw and retain loyal customers to a unique and
culturally relevant mix of retailers, products, services and education elements.
The Company's ability to achieve its business plan with respect to
InternetMercado.com depends to a substantial extent on its ability to obtain
financing.
The Hispanic market is one of the fastest-growing Internet and e-commerce market
segments in the US. According to the Tomas Rivera Policy Institute, 30% of US
Hispanic households now own computers in 1998, up from 13% in 1994, a number
that is growing twice as fast as the national average. Internet users among US
Hispanic households increased from 2% to 15% during the same period. The US
Hispanic population is also growing rapidly. In 1980, the US Hispanic population
(including Puerto Rico) was 14.6 million. This number grew 4.8% to 32.5 million
in 1997 and is projected to reach 56.7 million in 2020, and 100.4 million by
2050.
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The Company began the development of its e-commerce web site venture in May
1999. The web site, www.internetmercado.com, is now partially operational and is
expected to be officially launched in January 2000. On November 3, 1999 the
Company formed a new subsidiary, InternetMercado Commerce Corporation, a
Delaware corporation, to facilitate the management of and the raising of capital
for its e-commerce venture.
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30,
1999 AND 1998:
While revenues fell in the three months ended September 30, 1999 by $303,000
compared to the same period last year, total revenues for the six months ended
September 30, 1999 were marginally higher at $2,807,000 compared to $2,771,000
for the same period last year. The fall in revenues in the three months ended
September 30, 1999 was mainly due to lower advertising revenues from one of the
Company's publications and no revenues from an exposition held last year but not
held this year.
For the three months ended September 30, 1999 and September 30, 1998, cost of
revenues was $837,000 and $787,000, respectively. As a percentage of revenues,
cost of revenues for these periods accounted for 63% and 48% of revenues,
respectively. Cost of revenues for the six months ended September 30, 1999 was
$1,957,000 compared to $1,462,000 for the same period last year or 70% and 53%
of revenues, respectively. The higher percentages this year were attributed to
the development expenses incurred to develop the Company's e-commerce software
and web-site and lower margins from recently introduced proprietary advertising
and media programs, which are still in their promotional and development stages
and have not yet generated significant margins. The cost of revenues for the six
months ended September 30, 1999 resulted in a decrease in gross profits to
$850,000 compared to $1,309,000 for the same period last year.
Operating expenses for the three months ended September 30, 1999 and September
30, 1998 were $1,153,000 and $436,000, an increase of $717,000. The increase was
primarily due to higher salary expenses and expenses incurred to develop the
Company's e-commerce business. Operating expenses increased by $1,601,000 to
$2,587,000 for the six months ended September 30, 1999 from $986,000 for the
same period last year. This increase was primarily due to employee compensation
in the form of shares of common stock of JSA issued to certain employees of JSA
in connection with the JSA Acquisition, increase in salary expenses, expenses
incurred to develop the Company's e-commerce business and finder's, legal and
audit fees incurred in respect of the JSA Acquisition and the private placement
discussed below. The JSA shares of common stock issued to employees of JSA were
subsequently exchanged for shares of common stock of the Company. The aggregate
value of the shares was approximately $121,000 on the day the JSA shares were
granted to the employees. Salary expenses increased $691,000 between the two six
month periods. The increase was attributed mainly to employment agreements
entered with Mr. Jack Salzberg as Non-executive Chairman of the Company and Mr.
Jeffrey Stern as President and CEO of the Company, employment of personnel for
the Company's e-commerce business and also an increase in the number of sales
personnel for the Company's distribution and publications business. In August,
1999, pursuant to a settlement agreement, Mr. Salzberg resigned as Non-executive
Chairman of the Board and $58,150 of the settlement amount of $114,400 was paid
to Mr. Salzberg in August, 1999. The balance is due in November 1999. Finder's,
legal and audit fees incurred for the reverse merger and the private placement
were approximately $564,000.
Compared to the same periods last year, interest expense decreased by
approximately $15,000 and $64,000 for the three months and six months ended
September 30, 1999 to $34,000 and $57,000, respectively. Interest expenses were
$49,000 and $121,000 for three months and six months ended
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September 30, 1998. The reductions were a result of the reduction in bank
borrowing and the note held by one of the Company's vendors.
Net loss for the three months and six months ended September 30, 1999 was
$699,000 and $1,739,000 compared to a net profits of $303,000 and $132,000
for the same periods last year. As discussed above, the net losses for the
current periods were mainly due to lower gross profits and higher operating
expenses. The lower gross profits were due to expenses incurred to develop
the Company's e-commerce software and web-site and lower margins from
recently introduced advertising and media programs, which are still in their
promotional and development stages, and have yet to generate significant
margins. The higher operating expenses were attributed mainly to an increase
in salary expenses, e-commerce venture expenses and expenses related to the
JSA Acquisition and the private placement.
The Company recorded a deemed dividend on its preferred stock of $1,728,107
during the six months ended September 30, 1999 in connection with the private
placement. This amount represents the difference between the issue price of the
shares of preferred stock and the estimated market value of the shares of common
stock issuable upon conversion of the shares of preferred stock, assuming that
the shares of preferred stock were converted into shares of common stock on the
date of the private placement.
LIQUIDITY AND CAPITAL RESOURCES:
In connection with the JSA Acquisition, the Company completed a private
placement (the "Private Placement") of 144,000 shares of Series B 5% Convertible
Preferred Stock, priced at $25.00 per share. These shares are convertible into
2,400,040 shares of common stock of the Company. The gross proceeds from the
Private Placement were $3,600,000. Commissions and out-of-pocket expenses
incurred were $281,000. $1,800,000 of the proceeds were used to repay a portion
of JSA's outstanding bank line-of-credit of $2,739,594. The remaining balance of
the bank line-of-credit of approximately $939,000 was refinanced with a 6-year
term loan with interest payments only until June 2002. The term of this loan was
revised to 3 years so as to be of the same term as the new $1.5 million term
loan discussed below.
On November 2 3, 1999, pursuant to a secured three year loan agreement, the
Company borrowed $1,500,000 from Bastion Capital Fund LP ("Bastion"). In
consideration for the loan, Bastion received shares of common stock for 5%
ownership of the newly formed subsidiary, InternetMercado Commerce Corporation
("IMCC), which was formed primarily for the Company's e-commerce venture.
Bastion also receives warrants for 1.0 million shares of common stock in the
Company at an exercise price of $1.00 per share and 2 tranches of five year
warrants exercisable into 12.5% and 2.5% ownership of IMCC at aggregate exercise
prices of $2.38 million. The broker for the loan received a cash fee of
$120,000, shares of common stock for 0.5% ownership of IMCC and warrants for
100,000 shares of common stock in the Company and warrants for shares of common
stock exercisable into a 1.5% ownership in IMCC, exercisable similar in form and
terms to the warrants issued to Bastion.
The Company's total cash and cash equivalents at September 30, 1999 was $69,000
compared to an overdraft of $15,000 at September 30, 1998.
Net cash used in operating activities during the six months ended September 30,
1999 was $1,551,000. This was mainly attributed to the net loss for the period
as a result of expenses incurred to develop the Company's e-commerce web site,
the low margins earned on the Company's new advertising and media programs and
expenses incurred pertaining to the Private Placement and the JSA Acquisition.
Other outflows were the increase in the Company's accounts receivable by
$183,000 and the reduction in
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deferred revenues by $405,000. Accounts payable increased by $252,000 during the
period. Operating activities provided $81,000 in net cash for the six months
ended September 30, 1998, principally through net profit for the period.
Net cash provided by investing activities in the six months ended September 30,
1999 was $117,000. Investment activities included the acquisition of new
computer hardware and software and the purchase of a trademark for the
e-commerce business. For accounting purposes, the JSA Acquisition resulted in
net assets of $185,441 being acquired. Net cash used for the six months ended
September 30, 1998 was $1,840.
Net cash provided by financing activities during the six months ended September
30, 1999 was approximately $1,418,000. The inflows were primarily the net
proceeds of $3,320,000 received from the Private Placement less repayment of
$1,800,000 of JSA's outstanding bank line-of-credit of $2,739,594. During the
six months ended September 30, 1999, the Company also paid $94,000 towards a
note held by one of its vendors, reducing the outstanding balance on that note
to approximately $179,000. Cash usage for financing activities in the six months
ended September 30, 1998 was $95,000, which was attributed mainly to a reduction
in bank overdraft by $54,000.
The Company's present operations and the new loan are not expected to generate
sufficient cash inflow for its new e-commerce venture and it will have to rely
upon additional external financing sources to meet its cash requirements.
Management is currently seeking to raise additional funding in the form of
equity or debt, or a combination thereof. However, there is no guarantee that it
will raise sufficient capital to execute its business plan. To the extent that
the Company is unable to raise sufficient capital, the Company's business plan
will have to be substantially modified and its operation curtailed.
YEAR 2000 ISSUES:
The Company is currently addressing Year 2000 issues. Year 2000 issues are the
result of computer programs being written using two digits rather than four to
define the applicable year associated with the program or an associated
computation. Any of the Company's computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculation causing
disruptions of operations, including among other things, a temporary inability
to process transactions, send invoices or engage in normal business activities.
Management has assessed its information technology hardware and software,
including personal computers, application and network software for Year 2000
compliance readiness. Over the last two years, the Company upgraded and
purchased various computer hardware and software, all of which are Year 2000
compliant and does not foresee the need of additional purchases in relation to
the Year 2000 issues.
Although the Company believes its computer systems are Year 2000 compliant, the
most significant internal control risk posed by the Year 2000 issues is the
possible failure of the Company's accounting systems. If the accounting systems
were to fail, the Company would implement manual accounting processes, which may
slow the timeliness of information needed to manage the business. The Company
has upgraded its accounting systems. However, there can be no assurance that
such action will avoid problems that may arise. The most significant outside
control risk is possible problems experienced by the Company's financing
institutions that maintained the Company's depository accounts and outstanding
debts. These institutions have confirmed that they are in compliance.
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The Company is in the process of finalizing the development of its contingency
plan to address other potential Year 2000 problems and solutions. The plan will
be completed before the year 2000.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There were no new legal proceedings in the three months ended
September 30, 1999. Please refer to the previously filed form 10QSB for the
quarter ended June 30, 1999 for details on ongoing legal proceedings.
ITEM 2. EQUITY SECURITIES ISSUED DURING THE SIX MONTHS ENDED SEPTEMBER 30, 1999:
In April 1999, the Company issued 3,046,875 shares of common stock to the
shareholders of JSA for the JSA Acquisition.
In April 1999, the Company issued 144,000 shares of Series B convertible
preferred stock in a Private Placement at $25.00 per share. These shares are
convertible into 2,400,040 shares of common stock in the company, at a
conversion ratio of one share of preferred stock into 16.667 shares of common
stock.
In April 1999, the Company issued 2,500 shares of common stock in connection
with the exercise of warrants @ $0.75 per share.
ITEM 3. DEFAULT UPON 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
None
(B) FINANCIAL DATA SCHEDULE
Exhibit 27
(C) REPORTS ON FORM 8-K
No reports were filed during the quarter ended September 30, 1999.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of Securities Exchange Act of 1934, the
Company ha duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
NUMEX CORPORATION
By /s/ Jeffrey A Stern
----------------------
President & Chief Executive Officer
/s/ Felix Telado
----------------------
Chief Financial Officer
Dated: November 11, 1999
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
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<RECEIVABLES> 719
<ALLOWANCES> (120)
<INVENTORY> 148
<CURRENT-ASSETS> 847
<PP&E> 317
<DEPRECIATION> (189)
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0
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