SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934.
For Quarter Ended 9/30/96 Commission File Number 1-6203
C.E.C. Industries Corp.
(Exact name of registrant as specified in its charter)
Nevada 87-0217252
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Cactus Garden Drive, F-60,
Green Valley, Nevada 89014
(Address of principal
executive offices) (Zip Code)
Registrant's telephone number, including area code: 702-893-4747
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicated by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
17,881,795 Common Shares on October 28, 1996
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Balance Sheet as of September 30, 1996 and
March 31, 1996 3
Statement of Income for the three months
ended September 30, 1996 and 1995 4
Statement of Cash Flows for the three months ended
September 30, 1996 and 1995 5-6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults by the Company upon its
Senior Securities 9
Item 4. Submission of Matter to a Vote of
Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports of Form 8-K 9
SIGNATURE 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
C.E.C. INDUSTRIES CORP.
Consolidated Balance Sheet
For the Dates Indicated
ASSETS
Sept. 30 March 31
1996 1996
--------- -----------
Current Assets $ 342,365 $ 1,292,156
Property, Plant & Equipment 283,868 59,265
Investments in Undeveloped Land 2,627,161 4,157,528
Other Assets 7,406,015 5,606,699
----------- -----------
Total Assets $10,659,409 $11,115,648
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable $ 817,078 $ 441,945
Notes Payable 1,903,587 3,305,529
Line of Credit 0 500,000
Other Current Liabilities 276,476 429,139
Stockholders' Equity 7,662,268 6,439,035
-----------
Total Liabilities and Equity $10,659,409 $11,115,648
===========
<PAGE>
C.E.C. INDUSTRIES CORP.
Consolidated Statement of Income
For the Periods Indicated
1996 1995
Quarter Six Months Quarter Six Months
Ended Ended Ended Ended
9/30/96 9/30/96 9/30/95 9/30/95
Income: Royalty $ $ $ 4,876 $ 59,693
Sales 835,590 1,806.313 155,000 309,042
Fees 60,500 60,500
---------- ---------- --------- ----------
$ 835,590 $1,806,313 $ 220,376 $ 429,235
Cost of Sales 664,228 1,681,100 599 1,163
---------- ---------- --------- ----------
Gross Profit $ 171,362 $ 125,213 $ 219,777 $ 428,072
Selling, General and
Administrative
Expense 273,160 520,999 55,170 1,010,707
Other Income and
Expenses
Interest Income 20,530 41,230 14,507 27,846
Interest Expense (65,722) (374,507) (72,009) (148,760)
Other Expenses (29,531) (27,802)
Gain on Sale of
Investment 1,195,132 1,175,132
Research and
Development (63,075) (63,664)
---------- ---------- --------- ----------
$1,149,940 $ 841,855 $(150,108) $ (212,380)
Net Income (Loss)
before Income
Taxes $1,048,142 $ 446,069 $ 14,499 $ (795,015)
---------- ---------- --------- ----------
Provision For Income
Taxes - - - -
---------- ---------- --------- ----------
Net Income (Loss) $1,048,142 $ 446,069 $ 14,499 $ (795,015)
========== ========== ========= ==========
Net Earnings Per
Share (Schedule 1) $ 0.06 $ 0.03 $ 0.03 $ (0.22)
========== ========== ========= ==========
Dividend per Share $ 0 $ 0 $ 0 $ 0
Sales of Unregistered
Securities (Shs) None None None None
<PAGE>
<TABLE>
C.E.C. INDUSTRIES CORP.
Consolidated Statement of Cash Flows
For the Periods Indicated
<CAPTION>
1996 1995
Quarter Six Months Quarter Six Months
Ended Ended Ended Ended
9/30/96 9/30/96 9/30/95 9/30/95
<S> <C> <C> <C> <C>
Increase (Decrease in cash and cash equivalents:
Cash flows from operating activities:
Net loss from continuing operations $ 1,048,142 $ 446,069 $ 14,499 $ (795,015)
----------- ----------- ----------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization $ 11,849 $ 14,112 $ 11,852 $ 14,552
Loss on investment 20,000
Treasury Shares Issued 3,746 3,746
Gain on sale of asset (1,195,132) (1,195,132)
Common Stock issued for professional services 204,120
Sources (uses) of cash due to change in current
assets and current liabilities:
Decrease (increase) in restricted cash 0 500,000
Decrease (increase) in accounts receivable (88,868) 446,001 (25,788) (90,474)
Decrease (increase) in inventory (19,259) (19,259) 48,918 (3,722)
Decrease (increase) in other current assets (28,645) 24,239 (61,012) (48,794)
Decrease (increase) in other assets 210,107 64,585 - -
Increase (decrease) in accounts payable 744,896 494,556 49,021 81,818
Increase (decrease) in accrued liabilities 57,246 (272,085) 103,219 22,346
----------- ----------- ----------- ----------
Total adjustments $ (307,806) $ 281,137 $ 129,956 $ (21,528)
----------- ----------- ----------- ----------
Net cash provided by operating activities $ 740,336 $ 727,206 $ 144,455 $ (186,543)
Cash flows from investing activities:
Sale of land 0 1,554,185
Excess of purchase price of asset over cost (30,035) (30,035)
Notes Receivable - Related Parties (243,979) (243,979)
Capital expenditures (262,533) (262,533) 157 (753)
----------- ----------- ---------- ----------
Net cash provided by investing activities $ (536,547) $ 1,017,638 $ (512,045) $ (512,955)
Cash flows from financing activities:
Proceeds from issuance of common stock 0 204,120 22,614 1,016,090
Common Stock issued for real estate
investment 0 0 (12,922) (312,922)
Payment on debt (379,446) (2,124,906) (150,000) (250,000)
Proceeds from issuance of notes 222,964 222,964 428,483 871,967
Payments received on notes receivable 17,000 17,000
Loans to related parties (62,831) (62,831)
----------- ----------- ---------- ----------
Net Cash Flow from Financing Activities (202,313) (1,743,653)
Net increase (decrease) in cash and cash ----------- ----------- ---------- ----------
equivalents $ 1,476 $ 1,191 $ (79,415) $ (4,363)
----------- ----------- ---------- ----------
Cash and cash equivalents at beginning of
period $ 2,991 $ 3,276 $1,102,506 $1,027,454
----------- ----------- ---------- ----------
Cash and cash equivalents at end of period $ 4,467 $ 4,467 $1,023,091 $1,023,091
=========== =========== =========== ==========
</TABLE>
<PAGE>
C.E.C. INDUSTRIES CORP.
Schedule I
For the Periods Indicated
1996 1995
Quarter Six Months Quarter Six Months
Ended Ended Ended Ended
9/30/95 9/30/95 9/30/94 9/30/94
Earnings (loss) per period $ 1,048,142 $ 446,069 $ 14,499 $ (795,015)
Weighted Average Number
of Common Shares 17,018,795 17,018,795 4,543,474 3,580,353
Net Earnings per share $ 0.06 $ 0.03 $ .003 $ (.22)
Supplemental Schedule of Non-Cash Investing and Financing Activities:
During the quarter ended June, 30, 1996, the Company issued 652,000 shares of
common stock on Form S-8 for professional services. The shares were valued
at $204,120.
On June 15, 1996, the Company purchased Auto Express, Inc. in exchange for
495,000 shares of common stock, for a total value of $173,250.
On June 21, 1996, the Company purchased $100,000 in phone cards from One
World Communications, Inc. in exchange for 200,000 shares of common stock,
for a total value of $100,000.
In June, 1996, the Company's wholly owned subsidiary, Mid-Nevada Art, Inc,
exchanged approximately $1.33 Million in artwork for approximately $3.5
Million in On world Communications, Inc. Pre-Paid long distance phone cards
at $.45 per minute. The company has re-evaluated the cards at $2.52 Million
bringing the Pre-Paid long distance rate to approximately $.33 per minute.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10Q instructions and in the opinion of
management contains all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September
30, 1996, the results of operation for the six months ended September 30,
1996 and 1995 and the cash flows for the six months ended September 30, 1996
and 1995. These results have been determined on the basis of generally
accepted accounting principles and practices and applied consistently with
those used in the preparation of the company's 1996 Annual Report on Form
10-K.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that the
accompanying consolidated financial statements be read in conjunction
with the financial statements and notes there to incorporated by reference in
the Company's 1996 Annual Report on Form 10-K.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
Quarter Ended September 30, 1996
The Sales for the six months ended September 30, 1996, were $1,806,313
compared to sales for the six months ended September 30, 1995 of $429,235.
Sales in 1996 consisted of revenues from the sale of the Company's real
estate properties, ($968,131), revenues from Auto Express, Inc. ($834,207)
and Mid-Nevada Art, Inc. ($3,975).
The Company depended on short term financing for its operating
expenses during the first and second quarter of 1996. Management is seeking
acquisitions that would produce a continual cash flow.
Selling, General and administrative expenses decreased from $1,010,707
in 1995 to $520,000 in 1996 due to decreases in Officers and Directors
compensations. The Company issued 652,000 shares of common stock on Form S-8
for professional services valued at $204,120. Interest expense increased
from $149,760 in 1995 to $374,507 in 1996 due to accrued interest.
The Company's subsidiary, Mid-Nevada Art, posted a $1,195,132 gain on
the sale of 31 pieces of artwork and a loss of $20,000 with it's divesture of
Moonridge Development Company.
The proposed plan to spin-off the Company's subsidiary, Custom
Environmental International (CEI) had not been completed by the Company's
previous management since the announcement dated October 4, 1995. Current
management has re-evaluated this spin-off and has decided that the spin-off
was not in the best interest of the shareholders and herefore has terminated
this transaction.
Current management decided it was in the best interest of the company
to divest itself of Moonridge Development Company due to the new managements
decision change of direction and its determination to avoid the risks
associated with Moonridge construction activities. The Company has maintained
its interest in all of the undeveloped land and its 24.5% interest int he
Victory Village III, Ltd., project of 320 apartment units in Henderson,
Nevada.
In June, the company's wholly owned subsidiary, Mid-Nevada Art, Inc.,
exchanged 31 of it's original artwords for $3.5 Million dollars of pre-paid
telephone cards at a rate of $.45 per minutes. The company has since
re-evaluated the pre-paid telephone cards at $2.52 Million dollars at a rate
of $.33 per minute posting a gain of $1.19 Million. The Contract between One
World Cards and Mid-Nevada Art states that should One World Cards be unable
to provide the long distance carrier as represented, and One World Cards
would have 30 days to provide an alternate Long Distance carrier or return
the art work exchanged under the agreement. The Company plans on using these
Pre-Paid Cards in its acquisition activities as well as raising capital by
the sale of the Phone Cards. The sale was not reflected in the First Quarter
of the Company's Financial Statements as Mid-Nevada Art is on a January to
December Fiscal year. The Exchange of the artwork is reflected in the Second
Quarter Financials.
In June, the Company purchased 100% of the issued and outstanding
shares of Auto Express, Inc. For 495,000 shares of common stock valued at
$173,250. The operations of Auto Express are reflected in the Company's
Second Quarters Financials as Auto Express is on a January to December Fiscal
year.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Legal action in the District Court of Utah, Central Division, has been
filed against the Company by Mr. George Matthews, the former President and
Director of the Company regarding his employment contract. In a counter-suit
filed by the company, the company alleged improprieties by the former
president. Counsel is of the opinion that the Company will prevail in the
litigation.
Item 2. Changes in Securities
None.
Item 3. Defaults by the company upon its Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On August 21, 1996, the Company held its annual meeting of
shareholders. At that meeting the Company elected new directors for the
fiscal 1996. The following were elected as directors: Gerald Levine, Marie
Levine, Janice E. Smith, Alvin B. Green, and Gerald Krupp.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
A Form 8-K was filed on June 21, 1996, to report changes in control of
the Company with new officers and director. Also reported was the change in
the company's certified accountant from Deloitte & Touche LLP to William L.
Clancy, CPA. Also reported was the resignation of Charles McHaffie as a
director of the Company.
A Form 8-K was filed on June 27, 1996, to report the acquisition of
Auto Express by the company.
A Form 8-K was filed on June 27, 1996, to report the Exchange Agreement
between Mid-Nevada Art, Inc., a wholly owned subsidiary of the Company, and
One World Cards.
A Form 8-K was filed August 26, 1996, to report the new Board of
Directors.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
C.E.C. INDUSTRIES CORP.
November 13, 1996 By: /s/ Gerald Levine
Gerald Levine, President and
Chief Operations Officer
November 13, 1996 By: /s/ Marie A. Levine
Marie A. Levine
Principal Financial and
Accounting Officer
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1996
<CASH> (54928)
<SECURITIES> 0
<RECEIVABLES> 97384
<ALLOWANCES> 0
<INVENTORY> 200457
<CURRENT-ASSETS> 342868
<PP&E> 434644
<DEPRECIATION> 134835
<TOTAL-ASSETS> 10659409
<CURRENT-LIABILITIES> 2997141
<BONDS> 0
<COMMON> 850940
0
13063
<OTHER-SE> 5750123
<TOTAL-LIABILITY-AND-EQUITY> 10659409
<SALES> 1806313
<TOTAL-REVENUES> 1806313
<CGS> 1681100
<TOTAL-COSTS> 1681100
<OTHER-EXPENSES> 520999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 374507
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 446069
<EPS-PRIMARY> .03
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