<PAGE>
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 DECEMBER 31, 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 17,946,007 shares of Common Stock, $.10 par value per share,
outstanding as of February 14, 2000.
Transitional Small Business Disclosure Format: YES NO /X/
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
NUMEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 December 31
1999 * 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 85,086 $ 190,638
Accounts receivable, net of allowance for doubtful
accounts of $120,480 and $120,480, respectively 422,980 1,027,227
Capitalized production costs 114,828 13,109
Employee advances 21,719 33,483
----------- -----------
Total current assets 644,613 1,264,457
Property and equipment, net of accumulated
depreciation and amortization of $165, 716 and $199,012, receptively 90,962 135,356
Other assets 8,683 176,369
Goodwill, net of amortization of $65,684 0 372,210
----------- -----------
Total Assets $ 744,258 $ 1,948,392
=========== ===========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities
Accounts payable and accrued expenses $ 798,669 $ 1,073,319
Advances on bank line-of-credit 1,800,000 0
Deferred revenues 755,897 809,675
Current portion of capital lease obligations 11,031 6,921
Current portion of note payable 236,250 153,608
----------- -----------
Total current liabilities 3,601,847 2,043,523
----------- -----------
Long-term portion of bank line-of-credit 939,594 939,594
Note payable, net of current portion 36,903 1,600,000
Capital lease obligations, net of current portion 10,839 0
----------- -----------
Total liabilities 4,589,183 4,583,117
----------- -----------
Minority interest 201,589 (110,117)
----------- -----------
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) 4,717,224
Accumulated deficit (4,048,014) (8,892,679)
----------- -----------
Total shareholder's deficit (4,046,514) (2,524,608)
----------- -----------
$ 744,258 $ 1,948,392
=========== ===========
</TABLE>
* Derived from JSA's March 31, 1999 audited financial statements
See accompanying notes to consolidated condensed financial statements.
1
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NUMEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31
1998 1999 1998 1999
------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Revenues $ 2,026,002 $ 2,062,176 $ 4,796,758 $ 4,869,136
Cost of revenues 1,293,479 2,598,465 2,755,734 4,555,356
------------------------------------- ------------------------------
Gross profit 732,523 (536,289) 2,041,024 313,780
Operating expenses 543,010 888,489 1,529,091 3,475,619
------------------------------------- ------------------------------
Operating profit (loss) 189,513 (1,424,778) 511,933 (3,161,840)
------------------------------------- ------------------------------
Other income (expense)
Proceeds from bad debts written off in prior year 0 0 0 55,000
Interest expense (128,113) (63,284) (249,934) (119,836)
------------------------------------- ------------------------------
Total other expense (128,113) (63,284) (249,934) (64,836)
------------------------------------- ------------------------------
Profit (loss) before minority interest 61,400 (1,488,062) 261,999 (3,226,675)
Minority interest in income of consolidated subsidiary (24,462) 110,117 (93,117) 110,117
------------------------------------- ------------------------------
Net profit (loss) 36,938 (1,377,945) 168,882 (3,116,558)
Deemed dividend 0 0 0 1,728,107
------------------------------------- ------------------------------
Net loss to applicable to common stock 36,938 (1,377,945) 168,882 (4,844,665)
------------------------------------- ------------------------------
------------------------------------- ------------------------------
Basic and diluted profit (loss) per common share $0.01 ($0.09) $0.07 ($0.32)
------------------------------------- ------------------------------
------------------------------------- ------------------------------
Weighted average number of common shares
outstanding used to calculate basic and diluted
loss per common share 2,538,000 15,068,508 2,538,000 15,068,508
------------------------------------- ------------------------------
------------------------------------- ------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
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NUMEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine months
ended December 31,
---------------------------------
1998 1999
---------------------------------
<S> <C> <C>
Cash flows from operating activities
Net profit (loss) $ 168,882 $(3,116,558)
Adjustments to reconcile net profit (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 24,372 101,866
Minority interest in net income of subsidiary 93,117 (110,117)
Employee compensation paid in common stock 0 121,074
Finder's fee paid in common stock 0 371,094
Changes in operating assets and liabilities:
Accounts receivable (128,294) (610,174)
Other liabilities 19,236 0
Capitalized production costs 217,820 101,720
Accounts payable and accrued expenses 391,764 274,650
Deferred revenues (336,851) 53,778
Deposits 0 (44,645)
---------------------------------
Net cash provided by (used in) operating activities 450,046 (2,857,312)
---------------------------------
Cash flows from investing activities
Debt issued to employees 0 (11,767)
Purchase of trade-mark 0 (12,245)
Purchase of equipment (8,235) (65,445)
Acquisition of business 0 185,441
---------------------------------
Net cash provided by (used in) investing activities (8,235) 95,984
---------------------------------
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 33,000 100,000
Repayment on note payable (20,500) (119,546)
Payments for obligations under capital leases (11,827) (14,949)
Distributions to minority shareholder (232,000) 0
Proceeds from note payable 0 1,380,000
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 (285,789) 2,866,880
---------------------------------
Net decrease in cash 156,022 105,552
Cash, at beginning of the period 0 85,086
---------------------------------
Cash, at end of period $ 156,022 $ 190,638
---------------------------------
---------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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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, Therapy Plus Massager 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 with the launch of an electronic shopping mall for Hispanics. The new
venture "www.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. So as to facilitate the management of and
the raising of capital for the e-commerce venture, a new subsidiary,
InternetMercado Commerce Corporation was formed on November 3, 1999.
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 nine months period ended December 31, 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 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
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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 a deemed dividend of $1,728,107 in connection with the
private placement. This amount represents the difference between the issue
price of the share of preferred stocks and the 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.
NOTE 4 - NEW SUBSIDIARY
To facilitate the management of and the raising of capital for its e-commerce
venture, a subsidiary, InternetMercado Commerce Corporation (IMCC), a
Delaware corporation, was formed on November 3, 1999.
NOTE 5 - $1.5 MILLION THREE-YEAR TERM LOAN
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%,
fully diluted, 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%, fully diluted, ownership of IMCC at an
aggregate exercise prices of $2.38 million. The broker for the loan received
a cash fee of $120,000 and shares of common stock for 0.5%, fully diluted,
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%, fully
diluted, ownership in IMCC, exercisable in similar form and terms to the
warrants issued to Bastion.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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.
5
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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
segments. Forrester Research estimates that by the end of 2000, approximately
43% of U.S. Hispanic households will own computers. International Data
Corporation estimates that the number of Spanish-speaking Internet users
outside the U.S. will increase from approximately 8.3 million in 1999 to 20.6
million in 2002, and Jupiter Communications estimates that the percentage of
Latin Americans outside Brazil using the Internet will increase from
approximately 1.0% in 1999 to 4.7% in 2003, representing a compound annual
growth rate of approximately 50%, compared to an estimated rate of
approximately 12% in the United States for the same period. The Selig Center
for Economic Growth estimates US Hispanic spending was $383 billion in 1999,
with growth at an annual rate of 7.5%, compared to 4.9% for the rest of the
U.S. Population. The Nazca Saatchi and Saatchi Latin American Internet Use
Study reported that Hispanic cybershoppers now spend an average of $547
online per year and purchase at least six times on the internet.
The Company began the development of its e-commerce web site venture in May
1999. The web site, www.internetmercado.com, was launched in January 2000. On
November 3, 1999 the Company formed a new subsidiary, InternetMercado
Commerce Corporation to facilitate the management of and the raising of
capital for its e-commerce venture.
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31,
1999 AND 1998:
Revenues for the three months ended December 31, 1999 were $2,062,000 which
was marginally higher than $2,026,000 for the same period in the prior year.
Year-to-date revenues were $4,869,000 and $4,797,000 for the nine months
ended December 31, 1999 and 1998, respectively.
For the three months ended December 31, 1999 and December 31, 1998, cost of
revenues was $2,598,000 and $1,293,000, respectively, with a gross loss of
$536,000 for the three months ended December 31, 1999, as opposed to, a gross
profit of $733,000 for the same period last year. As a percentage of
revenues, cost of revenues for these periods accounted for 126% and 64% of
revenues, respectively. Cost of revenues for the nine months ended December
31, 1999 was $4,555,000 compared to $2,756,000 for the same period last year
or 94% and 57% 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 the low margins from proprietary
advertising and media programs introduced last year, which are still in their
promotional and development stages. The cost of revenues for the nine months
ended December 31, 1999 resulted in a decrease in gross profit to $314,000
compared to $2,041,000 for the same period last year.
Operating expenses for the three months ended December 31, 1999 and December
31, 1998 were $888,000 and $543,000, respectively, an increase of $345,000.
The increase was primarily due to higher salary expenses and expenses
incurred to develop the Company's e-commerce business. Operating expenses
increased by $1,947,000 to $3,476,000 for the nine months ended December 31,
1999 from $1,529,000 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
shares of common stock of JSA 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 approximately $1,170,000 between
the two nine 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 a settlement amount of
$114,400 was paid to Mr. Salzberg. Finder's, legal and audit fees incurred
for the reverse merger and the private placement were approximately $564,000.
The Company also incurred approximately $50,000 in legal expenses and
amortized finder's fee on the $1.5 million loan from Bastion Capital Fund LLP.
Although the Company incurred interest on the $1.5 million loan from Bastion
Capital Fund LLP which was drawn down on November 3, 1999, total interest
expense for the nine months ended December 31, 1999 was $120,000 compared to
$250,000 for
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the same period last year. The lower interest this year compared to last year
was principally a result of the repayment of $1.8 million in bank borrowing
in April 1999 and the repayments on the note held by one of the Company's
vendors, which had an outstanding balance of $153,000 on December 31, 1999
compared to $273,000 at the beginning of the year.
Net losses for the three months and nine months ended December 31, 1999 were
$1,378,000 and $3,117,000 compared to net profits of $37,000 and $169,000 for
the same periods last year. 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. The higher operating expenses were attributed mainly to
an increase in salary expenses, e-commerce venture expenses and expenses
related to the JSA Acquisition, the private placement and the new $1.5
million loan.
The Company recorded a deemed dividend on its preferred stock of $1,728,107
during the nine months ended December 31, 1999 in connection with the private
placement. This amount represents the difference between the issue price of
the shares of preferred stock and the 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 was
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 three years so as to be
of the same term as the new $1.5 million term loan discussed below.
On November 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, on a fully diluted basis (i.e. after the exercise of warrants
granted in connection with the loan), of the newly formed subsidiary,
InternetMercado Commerce Corporation ("IMCC), which was formed primarily for
the Company's e-commerce venture. 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, fully diluted, 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, fully diluted, 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, fully diluted, in IMCC,
exercisable similar in form and terms to the warrants issued to Bastion.
The Company's total cash and cash equivalents at December 31, 1999 were
$191,000 compared to $156,000 at December 31, 1998.
Net cash used in operating activities during the nine months ended December
31, 1999 was $2,977,000. 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 raising of capital and the
JSA Acquisition. Other outflows were the increase in the Company's account
receivable by $610,000 and the reduction in deferred revenues by $53,000.
Inflows during the period included the increase Accounts payable by $274,000
and a reduction in Capitalized Production Costs by $101,000. Operating
activities provided $450,000 in net cash for the nine months ended December
31, 1998.
Net cash provided by investing activities in the nine months ended December
31, 1999 was $95,000. Investment activities included the acquisition of new
computer hardware and software and the purchase of an URL 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 nine months ended December
31, 1998 was $8,235.
Net cash provided by financing activities during the nine months ended
December 31, 1999 was approximately $2,987,000. The inflows were primarily
the net proceeds of $1,380,000 from the $1.5 million three-year loan raised
in November 1999 and 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 nine months ended December 31, 1999,
the Company also paid $120,000 towards a note held by one of its vendors,
reducing the outstanding balance on that note to approximately $154,000. Cash
usage for financing activities in
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the nine months ended December 31, 1998 was $286,000, which was attributed
mainly to a reduction in bank overdraft by $54,000 and distribution of
$252,000.
The Company has announced that it has raised $3.0 million for the IMCC
subsidiary from an investor group led by The Trust Company Of The West. The
present operations and new capital of the Company and its subsidiaries are
not expected to generate sufficient cash inflow for its new e-commerce
venture and the Company will have to rely upon additional external financing
sources to meet its cash requirements. Management will continue to seek
additional funding in the form of equity or debt, or a combination thereof to
meet its cash requirements. 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 did not experience any problems either directly or indirectly
related to the 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. 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. Although the Company had not experienced any Year 2000
problems, there can be no assurance that it will not encounter such problems
in the future.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There were no new legal proceedings in the three months ended December 31,
1999. Please refer to the previously filed form 10QSB for the quarter ended
September 30, 1999 for details on ongoing legal proceedings.
ITEM 2. EQUITY SECURITIES ISSUED DURING THE NINE MONTHS ENDED DECEMBER 31,
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. On November 8, 1999 the Securities Exchange Commission declared
effective the Company's Registration Statement on Form SB-2 covering the
shares of common stock issuable upon conversion of the Series B convertible
preferred stock.
In April 1999, the Company issued 2,500 shares of common stock in connection
with the exercise of warrants @ $0.75 per share.
In November 1999, the Company issued warrants for 1,000,000 shares of common
stock exercisable at $1.00 per share to Bastion Capital Fund LP as part of
the consideration for the $1.5 million three year term loan to the Company.
In November 1999, the Company issued warrants for 100,000 shares of common
stock exercisable at $1.00 per share to EBI Securities as part of the fees
for arranging the $1.5 million three year term loan to the Company.
8
<PAGE>
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 December 31, 1999.
9
<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/ Jeffrey A Stern
-------------------
President & Chief Executive Officer
/s/ Felix Telado
----------------
Chief Financial Officer
Dated: February 14, 2000
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
DECEMBER 31 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 191
<SECURITIES> 0
<RECEIVABLES> 1,147
<ALLOWANCES> (120)
<INVENTORY> 13
<CURRENT-ASSETS> 1,264
<PP&E> 334
<DEPRECIATION> 199
<TOTAL-ASSETS> 1,948
<CURRENT-LIABILITIES> 2,044
<BONDS> 0
0
144
<COMMON> 1,507
<OTHER-SE> (2,525)
<TOTAL-LIABILITY-AND-EQUITY> 1,948
<SALES> 0
<TOTAL-REVENUES> 4,924
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<TOTAL-COSTS> 4,555
<OTHER-EXPENSES> 3,476
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<INTEREST-EXPENSE> 119
<INCOME-PRETAX> (3,116)
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<NET-INCOME> (4,845)
<EPS-BASIC> (0.32)
<EPS-DILUTED> (0.32)
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