UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1995
Commission File No. 000-18389
(Filing Dated: March 25, 1996)
WORLD WIDE STONE CORPORATION
(Exact Name of Registrant as specified in its Charter)
NEVADA 33-0297934
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2150 W. University Dr., Tempe, Arizona 85281
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 966-0047
Securities registered pursuant to Section 12(g) of the Act:
$.001 Par Value Common;
$.001 Par Value Preferred.
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 NO X
---- -----
The aggregate market value of Common Stock (voting stock) of Registrant
held by non-affiliates at December 31, 1995, based upon the low bid price was
approximately $10,952,277 within 60 days of December 31, 1995.
The number of shares outstanding of the Registrant's Common Stock as of
December 31, 1995, was 34,225,868.
Documents incorporated by reference: NONE.
PART I
Item 1. Business. WORLD WIDE STONE CORPORATION
The Registrant was incorporated under the laws of the State of Delaware
on June 12, 1988, under the name Tacitus Ventures, Inc. as a blind pool - blank
check company for the purpose of acquiring or merging with one or a limited
number of private companies, sole proprietorships or partnerships. On November
15, 1989, the Registrant filed its Certificate of Amendment of Certificate of
Incorporation with the Delaware Secretary of State. Said Amendment allowed for a
name change of Registrant to World Wide Stone Corporation, a Delaware
corporation,
<PAGE>
and allowed for an increase in the authorized shares as approved by the
shareholders. On November 15, 1989, the Registrant filed a Certificate and
Agreement of Merger with the Delaware Secretary of State; wherein, the
Registrant agreed to a merger with World Wide Stone Corporation, a private
Nevada corporation, with the Registrant to be the surviving entity and the
private World Wide Stone Corporation, a Nevada corporation, being dissolved. The
closing of the Certificate and Agreement of Merger occurred on November 30,
1989; whereby, the Registrant exchanged 15,000,000 common shares and 5,000,000
convertible preferred shares of the Registrant's unissued authorized treasury
stock for 15,000,000 common share and 5,000,000 convertible preferred shares of
World Wide Stone Corporation, a Nevada corporation, outstanding stock, on a
share-for-share basis. On November 30, 1989, the Registrant filed its Articles
of Incorporation as a domestic corporation with the Nevada Secretary of State,
and filed its Certificate of Dissolution with the Delaware Secretary of State.
Registrant is now domiciled in the State of Nevada, with its corporate offices
located in the City of Tempe, State of Arizona, where it is registered as a
Foreign Corporation.
On March 18, 1991, the Company acquired an operating dimensional stone
factory located in the City of Durango, State of Durango, Country of Mexico.
This acquisitions assets and operations are in two wholly-owned subsidiaries of
the Registrant: (1) a Mexican corporation, called Sociedad Piedra Sierra, S.A.
de C.V., and (2) a Nevada corporation, called Cantera Stone, Inc. A third
wholly-owned Mexican corporation called Marmoles Muguiro, S.A. de C.V., operates
the plant. All employees are employed by this corporation, which owns no assets.
The plant and quarry were fully operational in 1995. Production volumes have
increased each quarter during 1995 and the Company earned a profit from
operations. Experience with the quarry, plant, and employees has allowed
significant improvement in every aspect of the company. Of particular interest
is the management system based on Control Systems Theory that was introduced in
early 1995 and has continued to date. (See Management Discussion and Analysis ,
page 4.)
The Company's activities do not pollute nor threaten to pollute air or
water in any significant manner. Accordingly, federal, state and local laws and
regulations governing the discharge of materials into the environment have
little direct impact upon either the Company or its subsidiaries.
Item 2. Properties. The Company occupies 3,000 square feet showroom and
warehouse space for its corporate offices at 2150 W. University Drive, Tempe,
Arizona 85281. Tenant improvement began in October 1994 and the company occupied
the space in December. Prior to this move the company occupied approximately
1,500 square feet of space for its executive offices located at 9614 N. 23rd
St., Phoenix, Arizona 85028, which premises had been provided without charge to
date under a verbal agreement between the Company and its President.
On March 18, 1991, the Company acquired four acres of land in Durango,
Durango, Mexico; the land consists of about four acres of prime real estate in
the city of Durango including a 20,000 square foot factory and warehouse,
housing the Company's dimensional stone factory. The Company also has leasehold
rights on four cantera stone quarries in the area of the factory and a lease on
the primary quarry operation where marble-limestone and travertine are
extracted. The marble limestone quarry was discovered by management through
extensive prospecting efforts and a land lease was negotiated with the land
owner with only a small earnest deposit, under very favorable terms and
conditions for the company. On December 3, 1995, the Company purchased the
rights to mine a very large deposit of homogenous green quartzite in the State
of Chihuahua, Mexico. This deposit contains more than 400 million cubic meters
of stone above grade. Various shades of green are present with different types
of white veining from occasional streaks of white and green to spider web white.
ASTM testing is not yet conclusive although this material, named Verde Imperial,
is expected to test out as commercially durable for floors which would
positively impact its value per cubic meter. This material was displayed in
Milan, Italy at an international buying fair in February 1996 with very
encouraging response. (See Management Discussion and Analysis for market
details, page 4). This quarry was purchased from a group of Mexican nationals,
one of which is the manager of the Durango factory. The purchase price was
$1,200,000 paid with 2.000,000 shares of R-144 common stock or sixty cents per
share. (See notes 6 and 7 of the Financials, pages F-9 and F-10) These quarries
have significant value; however, the financials do not reflect this value due to
the rules regarding booking assets. The rule states that the registrant may book
an asset at purchase price or market value, whichever is lower.
<PAGE>
The foregoing properties are free of liens and encumbrances at this
time; except as reported above, the factory property has non-property related
debts, and a line of credit in the amount of $850,000 which is secured by the
land, building and equipment of the factory.
Item 3. Legal Proceedings. The Company has been audited by the I.R.S. for the
years 1989, 1990, and 1991. October 11, 1995 the Company received a Notice of
Deficiency in the amount of $564,130 plus interest and penalties in the amount
of $423,098. The Company has retained a tax attorney who has advised that their
claims are ridiculous and baseless. In the opinion of counsel, we will prevail
in tax court. Management further reminds the reader that the company reported
substantial losses for each of the years in question.
Item 4. Submission Matters to a Vote of Security Holders. NONE
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
(a) The common stock of the Registrant is thinly traded
Over-The-Counter and is quoted in the National Quotation Bureau's "Pink Sheets".
However, the existence of a limited and sporadic market in the Registrant's
common stock should not be deemed to constitute an established public trading
market. There is no established public market for the Registrant's common shares
except for the stock being listed on a daily basis in the above "Pink Sheets".
The table below shows the range of high and low bid quotations for the
Registrant as reported by Escalator Securities, Inc. for 1990, 1991, 1992, 1993,
1994, and 1995. These quotations represent prices between dealers and do not
include retail markup, markdown or commission. They do not represent actual
transactions and have not been adjusted for stock dividends or splits, of which
there have been none.
During 1990, the Company successfully completed registration under Form
8-A to become a 12(g) fully reporting company. All quotes are in dollars.
Quarter High Low
------- ---- ---
First, 1990 3 .35
Second, 1990 2-1/8 1
Third, 1990 2 1
Fourth, 1990 3.00 3.00
First, 1991 2 1-1/2
Second,1991 2-1/8 1
Third, 1991 2 1
Fourth,1991 1-1/2 1/8
First, 1992 1/10 1/10
Second,1992 1/10 1/10
Third, 1992 1/10 1/10
Fourth,1992 1/10 1/10
First,1993 1/10 1/10
Second,1993 1/10 1/10
Third,1993 1/10 1/10
Fourth,1993 1/10 1/10
<PAGE>
Quarter High Low
------- ---- ---
First,1994 1 1
Second,1994 1 1
Third,1994 1 1
Fourth,1994 1 1
First,1995 1 1
Second, 1995 1 1
Third, 1995 1 1
Fourth, 1995 1 1
(b) On December 31, 1995, the average reported closing bid
quotation for the Registrant's common stock was "$1.00". The approximate number
of holders of the Corporation's common Stock as of December 31, 1995, was 475 of
record according to the Registrant's transfer agent. No dividends have been paid
or declared by the Registrant. There are no restrictions on the Registrant's
present or future ability to pay dividends, except for the financial condition
and performance of the Registrant. Future dividend policy is subject to the
discretion of the Board of Directors and will depend upon a number of factors
including earnings, capital requirements and the financial condition of the
Registrant.
Item 6. Selected Financial Data.
The following selected financial data (AUDITED) has been derived
from the registrant's financial statements, which have been examined by Mark
Shelley, Independent Certified Public Accountant, for all periods included
herein and should be read in conjunction with the financial statement and note
thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
For the Years Ended December 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues: $1,092,479 $642,877 $155,022 $49,861 $345,109
Costs and Expenses: $1,110,664 ($891,565) ($216,372) ($275,801) ($402,550)
Net Profit or Loss ($18,185) ($264,400) ($314,986) (225,940) (1,823,960)
Net LOSS per Share: ($.00005) ($.0088) ($0.01) ($0.01) ($0.11)
Total shares outstanding: 34,225,868 30,599,164 29,773,249 33,382,886 18,081,056
Balance Sheet Data:
Total Assets: $4,750,440 $3598,003 $3,326,935 $3,303,583 $2,159,480
Total Liabilities: $984,152 $1,030,980 $324,151 $266,859 $139,106
Total Stockholder's Equity: $3,766,288 $2,567,023 $3,002,784 $3,036,724 $2,020,374
Cash Dividends per Common Share: $0.00 $0.00 $0.00 $0.00 $0.00
</TABLE>
A profit of $177,834 was earned from operations if you add back depreciation
attributed to Mexico of (1995 $185,891) and U.S. depreciation of (1995 $10,128).
The company paid $249,326 in interest payments during 1995.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
In 1993, a commitment for debt financing was obtained from Banca Serfin
S.A. The first funding was received in July 1993. These funds were used to begin
rebuilding the machinery to produce limestone,travertine and marble, as well as
prospecting for new quarry deposits. The Company was very fortunate to
successfully acquire a lease in 1993 on the current source of marble block as a
direct result of those efforts. Additionally, new equipment was ordered from
Italy to increase production to profitable levels. Said machinery was received
in August of 1994 and installed and on line in September 1994. With this new
equipment the production volume approximately tripled without an appreciable
increase in costs, with the notable exception of interest carry on the debt.
(Interest rates in
<PAGE>
Mexico are high and the Company is paying more than $20,000 per month in debt
service as of 1995 year end. As a result, the cost to produce a square foot of
tile or slab is significantly reduced which will allow the Company to earn
profits.) Although 1994 finished with losses of about $264,000 this is a
substantially improved over prior years. 1995 has been a year of growth and
stabilization. The showroom and warehouse operation in Tempe, Arizona has made a
respectable market penetration in Arizona, which has allowed the Company to
increase its margin of profit. This is a trend that has increased each quarter
of the year and is expected to continue through 1996. Additionally production
volume and quality has progressed steadily throughout the year and this trend is
also expected to continue through 1996. As of the date of this writing,
production has increased 45% over fourth quarter 1995 levels.
In order to foster continuous quality improvement both at the factory
and the U.S. offices, a program based on Control Systems Theory was begun.
Control Theory is a biological theory of human behavior taught primarily by Dr.
William Glasser, author of the book The Control Theory Manager. Dr. Glasser's
work is strongly influenced by W. Edwards Deeming. It is believed that Control
Theory forms the basis for an appropriate multi-cultural approach to a
multinational company. This theory maintains that all people are internally
motivated and will not produce quality unless their needs for belonging,
accomplishment, freedom, and fun are met. What people choose in order to meet
these needs will vary from person to person and culture to culture. Control
Theory management as adopted by the Company involves active interest by
management in the needs of the workers; a non-threatening, participatory
environment; more effective training; more empowerment for decision-making; and
more emphasis on personal responsibility. Cooperation rather than coercion is
stressed. Final inspections were de-emphasized in favor of training workers to
inspect their own work. A quality environment in the factory was emphasize,
since it is considered essential for quality production.
The application of Control Theory has proven to be beneficial in
increasing the satisfaction and cooperation of employees and the quality of the
finished product. A commitment has been made to continuing education and
application of these principles in the company.
Comparison of Years 1993, 1994, 1995:
Revenues for the Company for the years ended December 31, 1993, 1994,
and 1995 were $155,022, $642,877, and $1,092,479 respectively. During 1993 bank
financing was realized and the operation and Company direction that exists today
was born. Machinery was refurbished and additional machinery was ordered from
Italy. Quarry acquisition and development took place (see 1994 10-K) and
production at low levels began.
In 1994 the existing machinery had been refurbished and new machinery
began to arrive. In September 1994 the most significant equipment purchases were
installed and on-line. Quarry development continued throughout the year.
1995 was a year of marked progress in three major areas of operation.
First, quarry development, a large cost of operations item, continued. In the
fourth quarter the Company successfully changed its quarry method from drilling
and light explosives to diamond wire extraction. This involves a significant
decrease in quarry waste and an increase in production volume and quality. The
drilling equipment will be removed to the new Verde Imperial quarry in the
second quarter of 1996, to begin the development of this deposit. Second, with
the installation of new equipment, additional production volume has been
realized, and with increasing experience, the production volume is growing
monthly. Third is market penetration and satisfaction. The Company is gaining
customer base monthly and is earning a reputation as a reliable source of
quality products.
Total assets for the Corporation for the years ended December 31, 1993,
1994, and 1995 were $3,439,715, $3,598,003, and $4,750,440 respectively. Changes
in total assets in 1993 and 1994 were primarily due to the purchase of
equipment. In 1995 the change is primarily due to the December 3 acquisition of
the Verde Imperiale quarry lease. This quartzite deposit is expected to be an
integral part of the future growth and profitability of the Company. Significant
investment will be necessary to realize this potential. Quarry development will
be accomplished in stages as capital is available; full development is projected
to require less than $800,000. Then, production of dimensional stone may also be
achieved in stages as capital permits. Here, full development has no limits,
although the Company plans to build a new production facility for approximately
seven million dollars; management is examining the possibilities available to
raise this capital. No reliance should be placed on these new production goals
as the funding source is not currently known.
<PAGE>
The Company plans to build a Rustic Finish factory addition in two
stages in 1996. The source of stage one financing ($150,000) is not currently
known; however, management has high confidence that this will be accomplished in
the second quarter of 1996. Stage one will allow the Company to convert
semi-finished material now in physical inventory, but not listed in the
inventory values in the financials, into approximately $500,000 of cash flow.
(Inventory values in the financials only include first quality finished
products.) Stage two will require approximately $1,150,000 to complete. The
funding source is not currently identified.
Liquidity and Capital Resources:
The Corporation's assets are not liquid and consist of those items
listed herein. In 1995, the Company successfully refinanced a portion of its
Mexican bank debt, lowering the interest paid; however, the interest remains
high. Efforts to further reduce the debt burden are continuing, and a verbal
commitment from Banca Serfin, S.A. de C.V. has been offered to reduce the debt
service interest in total to approximately 10% interest on the remaining
outstanding balance. (The reader should note that this reduction may not occur
and no reliance should be placed on this event.)
Mexico experienced a 50% currency devaluation in December of 1994 which
has impacted the company. Banca Serfin S.A. has advised that the Company is
receiving and will continue to receive the lowest interest rates available given
the current economic conditions in Mexico. Expansion plans will be funded by
earnings and equity capital. These plans include expansion of our existing
factory as well as building a new high production factory and new and continuing
quarry development.
Financial Resources:
Future funds for operations and expansion are expected to be obtained
through debt and equity financing as well as earnings from operations.
Operations can support the Company's capital needs and equity financing is
considered practical, by management, for the expansion plans.
Industry Segments:
Virtually all of future operating revenues are expected to be derived
from mining, importing, cutting, finishing, selling, brokering, exporting and
importing products made of stone (e.g., marble, limestone and travertine)
Competition:
All phases of the Corporation's activities listed in its Industry
Segment are highly competitive and, therefore, investment in the Corporation
involves risks arising out of this competition. The Corporation competes with
numerous direct competitors for the best sales contracts and distributor
relationships. The most significant competition is from the numerous producers
in Italy. The Company does have some competitive advantage due to the
geographical location being much closer to the U.S.A. market, thus reducing
shipping time and costs.
Effect of Compliance with Governmental Policies:
The earnings of the Corporation may be effected by governmental
regulation and legislation which, among other things, may effect importation
requirements, tariffs, interstate commerce, and the general building,
development and re-modeling climate. The policies of the various governmental
authorities influence to a significant extent the overall growth and no growth
climates for importation, exportation, building and development.
Inflation or Deflation:
The management does not believe that inflation or deflation will have a
demonstrable effect on the
<PAGE>
operation of the Corporation; however, it is possible that inflation will have a
negative effect on the Corporation, especially if expenses such as employee
compensation, shipping and communications increase. Increases in these areas may
not be readily recoverable in the prices and services offered by the
Corporation. To the extent that inflation results in higher interest rates and
has other adverse effects on the value of securities, it may adversely effect
the Corporation's financial position and results of operations. It is also
possible that deflation will have a negative effect, as well, particularly with
respect to the prices and demand for the Corporation's products and the values
of its assets. Mexico experienced 50% inflation in December 1994 due to the peso
devaluation which actually benefitted the company for a few months by reducing
the effective cost of doing business. The Company sells in dollars and pays its
production costs primarily in Pesos. However, the debt is primarily in U.S.
dollars and all of the marketing, sales and equipment costs are in dollars.
Looking at the entire situation it is expected that long term this Mexican
inflation issue will have no effect to a slightly positive influence.
Item 8. Financial Statements and Supplementary Data.
Financial information required by this Item and included in the Report
is set forth beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure: None.
PART III
Item 10. Director and Executive Officers of the Registrant.
Name, Age Since Position - Offices
--------- ----- ------------------
Franklin Cunningham, 44 1989 President, Treasurer, Director
Spencer Cunningham, 46 1994 Executive Vice President, Director
Lee M. Cunningham, 44 1989 Corporate Secretary, Director
L. Ernest Whitesel, 57 1992 Director
Directors are elected by stockholders to hold office until the next
annual meeting of stockholders and until their successors are elected and have
qualified. Upon the death, resignation or removal of a Director, the Board may
appoint a replacement for the unexpired term of his/her predecessor. Officers
are elected by the Board of Directors and serve at the pleasure of the Board.
The name, age and principal occupation of the Directors and Officers
who served during 1995, or who continue to serve as of year end 1995, and
certain information regarding his or her business experience, are set forth as
follows:
Franklin Cunningham, Age 44: Mr. Cunningham has previously formed
several companies, some of which are in the dimensional (architectural) stone
industry and all of which continue today in profitable operation, with the
exception of Cunningham & Associates, which was phased out when Mr. Cunningham
joined the Company.
His first company was founded in 1973. In the interim until the
establishment of Cunningham & Associates, he served as an officer of Intile
Designs of Arizona, Inc. Intile Designs of Arizona, Inc. is a substantially
owned subsidiary of Intile Designs, Inc., headquartered in Houston, Texas, in
which Mr. Cunningham continues today as a stockholder.
During Mr. Cunningham's tenure, Intile Designs, Inc. was placed on
"INC." magazine's 1986 list of "500 Fastest Growing Companies". Mr. Cunningham
contributed significantly to the growth of Intile as a direct result of
advantageous relationships he developed and his perceptive abilities to
anticipate demands in the related markets with respect to product mix,
costing/pricing strategies and presentation.
<PAGE>
As a result of his experience in the industry, Mr. Cunningham has
strong business ties with numerous key, foreign national and domestic
architectural stone and ceramic tile industries companies including raw material
suppliers, equipment suppliers, manufacturers, manufacturers representatives,
distributors, architects and designers. In addition, Mr. Cunningham has proven
experience in wholesale, resale, distribution, manufacturing and quarrying of
architectural stone products, and has built wholesale, retail and warehouse
facilities for these operations.
Prior to his joining the Company, Mr. Cunningham was doing a
substantial business in the United States, Mexico, Italy, West Germany, Taiwan,
Spain, Portugal, India, Turkey and Indonesia.
Lee M. Cunningham, Age 44: Ms. Cunningham was active for eighteen years
in interior design and furnishings, building products and building construction,
and importing. She has both conceptual understanding and established both
domestic and international relationships in these fields, which relate to
architectural stone products, offering the resulting benefit to the Company. She
is a licensed general contractor in the State of Arizona and has been
responsible for several residential and commercial building projects. She earned
her B.A degree from Western International University and her M.A. in Human
Resources from Ottawa University.
From 1972 to 1986, Ms. Cunningham owned and managed an interior design
studio and furniture showroom, during which time she gained experience in the
architectural stone industry. Following the sale of her showroom, she was
employed by Intile Designs of Arizona in design and marketing. During that time,
she was also involved in the purchase and sale of architectural stone products.
She remains a stockholder of Intile Designs, Inc., which is the parent company
of Intile Designs of Arizona.
Ms. Cunningham is also currently active as a consultant in human
resources and leadership, and facilitates seminars for professional growth.
Spencer W. Cunningham Age 46: Mr. Cunningham is the Executive Vice
President and Director since August 24, 1994. He is a graduate of Ohio State
University School of Business Administration, holding a B.S.B.A. degree in Real
Estate and Urban Land Economics. For his first post graduate employment in 1973,
he was hired by the Chairman of the Board of the third largest Ohio savings and
loan association to establish its first commercial lending department, where he
worked as commercial loan officer and commercial real estate appraiser,
reporting directly to the Chairman, Senior Vice President and Special Loan
Committee. In one of numerous projects Mr. Cunningham did a land use feasibility
study for, and designed a multi-million dollar, multi-tiered parking garage for
the company, upon which effort the company committed funding and construction of
the facility in Columbus, Ohio.
In 1975, Mr. Cunningham left the lending industry to establish a
successful real estate development company specializing in renovations of
historic real properties. Serving at various times as Vice President, Director,
Treasurer and/or Secretary of Spencer Cunningham & Associates, Inc. (SC&A), an
Ohio corporation (1980-1985), he was an association group insurance
administrator and broker specializing in professional liability insurances and
other specialty lines coverages, licensed by numerous carriers from coast to
coast. SC&A was recognized nationally as a leader in its field, earning millions
in premium dollars annually with only two licensees employed. The Cunningham
interest was sold in 1984. Mr. Cunningham fulfilled his obligation to the firm
and left in 1985.
Since then, he has operated his private real estate construction
company and served as an independent business development consultant in Ohio and
Arizona, prior to joining this Company.
L. Ernest Whitesel, Age 56: From 1962 to 1974, Mr. Whitesel was an
owner in an automotive industry dealership and a consultant to the industry. He
served as general manager, vice president and partner in the Pete Ellis
Automotive Dealerships throughout the Southwestern United States. This included
overseeing the daily operations of five dealerships having average annual gross
retail sales in excess of $225,000,000. From 1981 to 1990, he was the principal
partner in a general insurance agency, handling life, accident, health and
service contracts. Average annually gross sales were $10,000,000. From 1990 to
present, Mr. Whitesel has been a semi-retired
<PAGE>
investor; however, as a principal investor in Interactive Media Technology, a
NASDAQ bulletin board listed (non- reporting) company, he serves as National
Sales Manager.
(a) Family Relationships: Franklin Cunningham and Lee M. Cunningham are
husband and wife. Spencer W. Cunningham is the brother of Franklin Cunningham
and, thereby, the brother-in-law of Lee M. Cunningham. Lee M. Cunningham is,
thereby, a sister-in-law to Spencer W. Cunningham. Excepting the aforementioned,
there are no other family relationships which exist between or among any of the
Officers or Directors of the Company.
(b) Other Directorships: To the best of the knowledge of the Company,
and according to the representations of the Directors, no Director, except as
provided herein, is a director in any other company with a class of securities
registered pursuant to section 12 of the Securities Exchange Act or subject to
the requirements of section 15(d) of such Act or any company registered under
the Investment Company Act of 1940.
(b) Involvement in Certain Legal Proceedings: The Company and its
President are the subject of an IRS audit for the years 1989, 1990 and 1991 and
a notice of deficiency of about $1,000,000 to the Company and about $1,640,000
to Frank and Lee Cunningham has been served. It is the opinion of management,
legal counsel and accountants that these claims are baseless and unfounded.
Item 11. Executive Compensation.
(a) Cash: The Corporation paid salaries to two executives in 1995, as
follows:
Frank Cunningham $72,000
Spencer Cunningham $36,000
(b) Bonuses and Deferred Compensation:
Name of Individual Capacities in Cash Amount,
or Number in Group Which Served Compensation
------------------ ------------ ------------
Franklin Cunningham President, Director $0.00
(c) Proposed Remuneration. The Company is obligated to pay the
President $120,000 annually to commence at the direction of the President of the
Company. In 1995 all employees are on the payroll.
(d) Remuneration of Directors. Director do not receive a fee for Board
meetings attended and are not reimbursed for expenses incurred in attending such
meetings; however, the Board reserves the right to award a nominal fee for
attendance should the Board decide it prudent to do so. Said fee shall not be
retroactive.
(e) Options, Warrants or Rights. No options, warrants or rights have
been granted to any Officer or Director of the Corporation.
(f) Non-cash Compensation:
<TABLE>
<S> <C> <C>
Name of Individual Capacities in Which Served Non-cash Compensation
Spencer Cunningham V.P., Director, since August 1994 1,000,000 shares common stock
</TABLE>
Said compensation was paid for current and past years of consulting advice to
the Company.
Item 12. Security Ownership of certain Beneficial Owners and Management.
The following tables set forth, as of December 31, 1995, information
with respect to the ownership of each
<PAGE>
person known by the Corporation to own beneficially more than five (5%) percent
of the $.001 par value common stock (voting stock) of the Corporation and the
ownership of all Directors individually and all Officers and Directors as a
group, and information with respect to the ownership of each Director and all
Directors and Officers as a group known by the Registrant to own beneficially
any other class of security of the Registrant, naming the class of equity
security. In the case of Officer and Directors, the information as to shares
beneficially owned, not necessarily being within the knowledge of the
Corporation, has been furnished by the respective Officers and Directors
individually.
Percentages listed are approximate.
<TABLE>
<CAPTION>
Name and Address Number of Title Percent
of Beneficial Owner Shares Owned of Class of Class
------------------- ------------ -------- --------
<S> <C> <C> <C>
Franklin & Lee M. Cunningham(A) 18,119,695 Common 53%
7575 N. Indian Bend Rd. #2001
Scottsdale, Arizona 85250
Spencer W. Cunningham 1,138,000 Common 3%
101 N. 7th Street #121
Phoenix, Arizona 85035
L. Ernest Whitesel 23,750 Common 0%
311 E. Country Gables Dr.
Phoenix, 85022
All Officers and
Directors as a Group(B) 19,281,445 Common 56%
Officers of subsidiary company,
Marmoles Muguiro, S.A. de C.V.:
Jaime Muguiro 4,280,000 Common 12%
Boulevard Francisco Villa
Km 2 CD. Industrial
Durango, Durango, Mexico
Alejandro Muguiro 1,520,000 Common 4%
Boulevard Francisco Villa
Km 2 CD. Industrial
Durango, Durango, Mexico
----- Last Item / Common Class -----
Note: All issued Preferred Stock C has been exercised or cancelled and returned to treasury.
----- Last Item / Preferred Class -----
None issued or outstanding
</TABLE>
NOTES:
----- (A) The voting and investment power in regards to those shares
owned by Franklin and Lee M. Cunningham are shared equally between
them. In all other cases, the party named has represented that they
have sole voting and investment powers in regards to the shares owned.
(B) "All Officers and Directors as a Group" with respect to
the Class of Common Stock include four persons.
(C) All Preferred Stock shares are non-voting and are
convertible at the rate of ten (10) Common shares for one (1) Preferred
share. Preferred shares may only be converted with the prior approval
of the Board of Directors.There are no Preferred shares issued and
outstanding at this time.
<PAGE>
Item 13. Certain Relationships and Related Transactions.
(See paragraph 2, item 2, "Properties".) Jaime Muguiro is the President
and Operations Manager of Marmoles Muguiro, S.A. de C.V., a wholly owned
subsidiary of the Registrant, and has received compensation in the Company's
purchase of the lease rights described as Verde Imperiale marble deposit.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a,1) Financial Statements: The financial statements of World Wide
Stone Corporation, included in the Annual Report to shareholders for the year
1995, and filed in accordance with the provisions of this Item, are found in the
response to Item 8 and are included as a part of this Annual Report. They are:
<TABLE>
<CAPTION>
Page Number
<S> <C> <C>
1. Report of Certified Public Accountant. F-1
2. Balance Sheet, December 31, 1995 and 1994 F-2
3. Statement of Stockholders Equity, December 31, F-3
1992, 1993, 1994, and 1995
4. Statement of Operations, December 31, F-4
1993, 1994, and 1995
5. Statement of Cash Flows, December 31, F-5
1993, 1994, 1995
6. Notes to Financial Statements F-6 to F-11
</TABLE>
(a,2) Financial Statement Schedules: The financial statement
schedules required to be filed, if any, are included in the financial
statements found in the response to Item 8.
(a,3) Exhibits:
(A) Articles of Incorporation of the Registrant, as
amended to date.
(B) By-Laws of the Corporation, as amended to date
(b) Reports on Form 8-K: The current reports on Form 8-K which were
filed during the last quarter of the period covered by this Report by the
Registrant with the Securities and Exchange Commission are: NONE.
(LAST ITEM / SIGNATURES ON FOLLOWING PAGE)
<PAGE>
SIGNATURES:
Pursuant to the requirement of Section 13 or 15(d) 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.
Dated: March 25, 1996 WORLD WIDE STONE CORPORATION
{Franklin Cunningham}
----------------------------------------
By: /s/ Franklin Cunningham
Franklin Cunningham,
Director, Chairman of the Board, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
{Franklin Cunningham} Director, Chairman March 25, 1996
-------------------------------------- of the Board, and
By: /s/ Franklin Cunningham President
Franklin Cunningham
{Lee M. Cunningham} Director and March 25, 1996
-------------------------------------- Secretary
By: /s/ Lee M. Cunningham
Lee M. Cunningham
{Spencer Cunningham} Director and March 25, 1996
-------------------------------------- Executive Vice
By: /s/ Spencer Cunningham President
Spencer Cunningham
{L. Ernest Whitesel} Director March 25, 1996
--------------------------------------
By: /s/ L. Ernest Whitesel
L. Ernest Whitesel
</TABLE>
<PAGE>
MARK SHELLEY CPA
110 S. Mesa Dr. #1
Mesa, Arizona 85210
(602) 833-4054
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
World Wide Stone Corporation
I have audited the accompanying balance sheet of World Wide Stone
Corporation as of December 31, 1995 and 1994 and the related statement of
operations, stockholders' equity, and cash flows for the three years ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I have conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statements
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of World Wide Stone
Corporation as of December 31, 1995 and 1994 and the results of their operations
and their cash flows for the three years ended December 31, 1995 in conformity
with generally accepted accounting principles.
Mark Shelley CPA
/s/ Mark Shelley
March 15, 1996
<PAGE>
WORLD WIDE STONE CORPORATION
Balance Sheet
as of December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets
1995 1994
---------------- ----------------
<S> <C> <C>
Cash 23,570 29,183
Accounts Receivable 109,116 57,161
Employee Loans 0 63,752
Inventory 296,495 194,845
Prepaid Expenses 52,435 23,491
---------------- ----------------
Total Current Assets 481,616 368,432
Property, Plant and Equipment (net of depreciation) 4,038,839 2,981,675
Trade Name and Company Files (net of amortization) 227,990 246,229
Deposits 1,995 1,563
Organization Costs (net of amortization) 0 104
---------------- ----------------
Total Assets 4,750,440 3,598,003
================ ================
Liabilities
Accounts Payable 38,485 133,385
Payroll Taxes Payable 22,627 82,351
Loans from Shareholders 0 25,782
Bank Loans 0 163,187
Private Notes Payable 52,516 49,949
Current Portion of Long Term Debt 30,182 5,932
---------------- ----------------
Total Current Liabilities 143,810 460,586
---------------- ----------------
Mexican Bank Loans 811,830 550,000
Phoenix Equipment Loans 28,512 20,394
---------------- ----------------
Total Liabilities 984,152 1,030,980
---------------- ----------------
Stockholders' Equity
Common Stock
100,000,000 shares authorized, 34,225,868
and 30,325,868 shares outstanding
$.001 par value 34,226 30,326
Paid In Capital 7,838,209 6,624,609
Retained Earnings (Loss) (4,106,147) (4,087,912)
---------------- ----------------
Total Stockholders' Equity 3,766,288 2,567,023
---------------- ----------------
Total Liabilities and Stockholders' Equity 4,750,440 3,598,003
================ ================
The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>
WORLD WIDE STONE CORPORATION
Statement of Operations
for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------------- ---------------- ---------------
<S> <C> <C> <C>
Sales and Revenue 1,092,479 642,877 155,022
---------------- ---------------- ---------------
Cost of Goods Sold (764,358) (755,362) (253,636)
---------------- ---------------- ---------------
Gross Profit 328,121 (112,485) (98,614)
---------------- ---------------- ---------------
Costs and Expenses
General and Administrative (383,190) (112,128) (24,800)
Professional and Management Fees (67,457)
Depreciation (10,128) (5,631) (90,158)
Amortization (104) (18,394) (9,326)
---------------- ---------------- ---------------
(393,422) (136,153) (191,741)
---------------- ---------------- ---------------
Net Income from Operations (65,301) (248,638) (290,355)
Gain on Currency Translation 48,305 100,304
Interest Income 1,583 1,810 685
Interest Expense (2,772) (117,826) (25,266)
---------------- ---------------- ---------------
47,116 (15,712) (24,581)
---------------- ---------------- ---------------
Income (Loss) Before Income Taxes (18,185) (264,350) (314,936)
Provision for Income Taxes (50) (50) (50)
---------------- ---------------- ---------------
Net Income(Loss) (18,235) (264,400) (314,986)
================ ================ ===============
Earnings (Loss) per Share a (0.01) (0.01)
---------------- ---------------- ---------------
Average Number of
Common shares outstanding 32,154,361 30,599,164 33,385,626
---------------- ---------------- ---------------
a. less than $.01
The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>
WORLD WIDE STONE CORPORATION
Statement of Stockholders' Equity
for the years ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Common Stock Paid-in Stock Retained Total
Shares Dollars Capital Subscribed (Loss)
---------- ------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 33,382,886 33,383 6,527,927 (50,000) (3,508,526) 3,002,784
---------- ------ --------- ------- --------- ---------
Conversion of Stock Subscription (47,500) 50,000 2,500
Purchase of Consulting
Payment of Mexican Taxes Debt 1,000,000 1,000 139,000 140,000
Retained Earnings (Loss) (314,986) (314,986)
---------- ------ --------- ------- --------- ---------
Balance December 31, 1993 34,382,886 34,383 6,619,427 0 (3,823,512) 2,830,298
---------- ------ --------- ------- --------- ---------
Return of Common Stock (3,609,637) (3,610) 3,610
Return of Common Stock (120,000) (120) 120 0
Cancelation of common stock
pertaining to 2 debentures
which were written off in 1991 (1,452,381) (1,452) 1,452 0
Purchase of consulting with
Common Stock 1,125,000 1,125 1,125
Retained Earnings (Loss) (264,400) (264,400)
---------- ------ --------- ------- --------- ---------
Balance December 31, 1994 30,325,868 30,326 6,624,609 0 (4,087,912) 2,567,023
---------- ------ --------- ------- --------- ---------
Additional shares to Mexican Managers 1,800,000 1,800 (1,800) 0
Sale of Stock 200,000 200 19,800 20,000
Purchase/Retirement of shares (100,000) (100) (2,400) (2,500)
Purchase of Green Quarry 2,000,000 2,000 1,198,000 1,200,000
Retained Earnings (Loss) (18,235) (18,235)
---------- ------ --------- ------- --------- ---------
Balance December 31, 1995 34,225,868 34,226 7,838,209 0 (4,106,147) 3,766,288
---------- ------ --------- ------- --------- ---------
The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>
World Wide Stone Corporation
Statement of Cash Flows
for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------------- ---------------- ---------------
<S> <C> <C> <C>
Cash Provided by Operation
Net Income (Loss) (18,235) (264,400) (314,986)
Amortization 18,343 18,394 9,326
Depreciation 196,019 186,528 90,158
Change in Accounts Receivable (51,955) (97,786) (14,805)
Change in Inventory (101,650) (154,594) (40,251)
Change in Payables (151,624) 28,716 (99,499)
Prepaid Expenses (28,944) 6,784 (30,275)
Consulting Purchased with Stock 1,125
Deposits (432) (1,563)
Change in Employee Loans 63,752
---------------- ---------------- ---------------
Net Cash from Operations (77,726) (276,796) (400,322)
---------------- ---------------- ---------------
Cash from Investing Activities
Purchase of Fixed Assets (53,183) (120,032) (93,769)
Stock Purchase (2,500)
---------------- ---------------- ---------------
Net Cash Used in Investing (55,683) (120,032) (93,769)
---------------- ---------------- ---------------
Cash from Financing Activities
Bank Debt 114,873 395,544 317,643
Equipment Loans 16,138 13,174 13,152
Loan to Stockholder (25,782) (20,820) 43,970
Private Notes Payable 2,567 4,949 10,000
Issuance of Common Stock 20,000 140,000
Paid in Capital Adjustment 2,500
---------------- ---------------- ---------------
Cash from Financing 127,796 392,847 527,265
---------------- ---------------- ---------------
Net Increased (Decreased) in Cash (5,613) (3,981) 33,164
Beginning Cash 29,183 33,164 0
---------------- ---------------- ---------------
Ending Cash 23,570 29,183 33,164
================ ================ ===============
Significant Non Cash Transctions, See Notes
The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>
WORLD WIDE STONE CORPORATION
1. Nature of operations and summary of significant accounting policies:
Nature of operations:
The Company is in the dimensional stone production and sales
business. In March 1991 the Company purchased dimensional stone production
facilities in Durango, Mexico. This plant started operations in July 1993 and
became fully operational in September 1994. The Company had one operating quarry
in 1995.
Principals of consolidation:
The financial statements include all of the assets and
liabilities of the U.S. company as well as those of the Mexican companies. The
Mexican plant consists of three Mexican entities, namely: Marmoles Miguiro, S.A.
(the operational factory), Sociedad Piedra Sierra, S.A. (which holds the
machinery and equipment) and a trust which holds the real estate.
All material intercompany transactions, accounts and balances
have been eliminated.
Accounts receivable:
Management considers all accounts receivable to be fully
collectible; therefore, no allowance for doubtful accounts has been provided.
Inventory:
Inventory for the Company is stated at cost. All of the costs
for 1995 and 1994 associated with the production of tile in the Mexican plant
have been factored into the value of the cost of goods sold and the ending
inventory. Costs of goods sold also includes freight from Mexico to the United
States. Inventory as of December 31, 1992 was zero. Inventory as of December 31,
1993 was located only at the plant in Durango, Mexico. Inventory as of December
31, 1994 and 1995 was located at the plant in Durango, Mexico and at the
showroom- warehouse in Tempe, Arizona. Interest expense of the Mexican bank
loans for 1995 has been capitalized and is found in the ending inventory and the
cost of goods sold.
Property, equipment and depreciation:
Depreciable property and equipment are stated at cost.
Depreciation is being provided by use of straight-line method over the estimated
useful lives of the assets.
Income recognition:
Income is recognized on sales when a contract (purchase order)
is signed by the buyer and the shipment is made of the product either from the
warehouse in Phoenix or directly from the factory in Durango, Mexico.
Interest income is recognized when accrued.
<PAGE>
Income taxes:
Provision is made for deferred income taxes where differences
exist between the period in which transactions affect taxable income and the
period in which they enter into the determination of income in the financial
statements. As of December 31, 1995 the consolidated Company had a Net Operating
Loss (NOL) carry forward for federal income tax purposes of approximately
4,000,000. The future value of the NOL is not reflected in the face of the
financial statements.
Earnings per share:
Earnings per share are computed by dividing net income by
weighted average number of shares outstanding. For purposes of this computation,
the effects of the recapitalization and subsequent conversion of preferred stock
to common stock have been retroactively applied to all periods presented. There
were no other items which were deemed to be common stock equivalents.
Foreign Currency Translation
The Company's wholly owned Mexican subsidiary, Marmoles
Muguiro S.A. de C.V. maintains its books and records in Mexican pesos. Its
functional currency however is U.S. dollars. Therefore Marmoles Muguiro utilizes
the remeasurement method of foreign currency translation when it is
consolidated.
The remeasurement method of foreign currency translation
converts all monetary assets and liabilities from pesos to U.S. dollars at the
current rate of exchange at the balance sheet date. All non-monetary assets and
liabilities are converted at the historical rates that were present when the
particular transaction took place. Revenue and expenses from the statements of
operations are converted from pesos to U.S. dollars at a weighted average
conversion rate. Depreciation, amortization, and similar historical cost based
expenses use a historical based rate. Any translation gain or loss is reported
on the Company's consolidated statement of operations.
2. Related Party Transactions
The Company has a private demand note to a brother of the
chairman for $14,949.
3. Mexican Bank Debt
In May 1993 the Company obtained loans of $250,000 from Banca Serfin, (
a Mexican Bank) to develop the stone plant. Security for this loan was the
equipment. During May and June of 1993 the machinery at the plant was upgraded
and reconditioned. In July 1993, production at the factory began. By the end of
1993 the loans had been increased to $317,643 plus accrued interest of $5,543.
In 1993 this total is actually five notes from the bank. During 1994 additional
funds were advanced from Banca Serfin. Also $550,000 was converted into a lower
interest loan guaranteed by Bancomex. The Bancomex loan is in dollars instead of
pesos. During 1995 the Company endeavored to convert the loans to a lower
interest rate and was successful. Security for these loan is all of the assets
located in Mexico.
<PAGE>
1994
All the 1994 loans are with Banca Serfin except the Bancomex $550,000
loan, which is processed through Banca Serfin. All loans except the Bancomex
loan are in pesos. The Bancomex loan is in US dollars. All loans are secured by
the assets of the Mexican companies.
Loan Description Ending Rate Principal
2 year interest every 90 days 11% 550,000
90 day renewable 25% 9.390
90 day renewable 24% 5,070
90 day renewable 24% 75,028
90 day renewable 27.4% 24,413
90 day renewable 27.4% 2,817
90 day renewable 27.4% 19,531
installment loan 23.75% 9,070
-------
Total Bank Loan Principal 695,319
Accrued Interest 17,868
-------
Total Owed to Mexican Banks 713,187
-------
1995
Bancomext range 19.55% to 12.1 % 611,830
90 day renewable notes
US dollars
NAFINSA 14.65% 200,000
renewable note
US dollars
Installment Note 23.75% 5,394
Mexican pesos -------
Total debt 817,224
Accrued Interest 16,230
-------
Total Mexican Bank Debt 833,454
=======
<PAGE>
4. Property, Plant and Equipment
Below is a summary of the fixed assets of the Company. All assets are
amortized over their useful lives on a straight line basis. The depreciation
attributed to Mexico (1995 $185,891) is included in the Costs of Goods Sold
section of the Statement of Operations. The depreciation attributed to Phoenix
is shown separately on the Statement of Operations.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Office Equipment Mexico (7 years) 2,239 1,107
Rolling Stock Phoenix (5 years) 33,562 33,562
Rolling Stock Mexico (5 years) 156,813 156,813
Real Estate and Specialty Systems Mexico 40, 10 years) 1,752,061 1,751,250
Machinery and Equipment Mexico (12 years) 1,330,125 1,304,957
Machinery and Equipment Phoenix (5-12years) 36,744 10,672
Green Quarry Purchase (Note 7) 1,200,000
4,511,544 3,258,361
Accumulated Depreciation (472,705) (276,686)
--------- ---------
Net Property, Plant and Equipment 4,038,839 2,981,675
---------- ---------
5. General and Administrative 1995 1994
---- ----
Salaries and Wages 152,669 10,277
Advertising 15,069 10,767
Commissions and Consulting 76,370 2,637
Legal and Accounting 31,536 7,750
Rent 20,711 2,812
Payroll Taxes 11,317 1,156
Travel 13,388 28,821
Other Expenses 62,130 47,908
------- -------
Total General and Administrative 383,190 112,128
------- -------
</TABLE>
6. Leases and Royalty
The Company has a three year lease for its showroom/warehouse in Tempe,
Arizona. beginning in 1994.
Year 1996 1997 1998 1999 2000
Rent 18,632 17,743 0 0 0
The company pays a royalty on its leased quarry of 90 pesos per cubic
meter. This is approximately $16.90 at year end. These payments go into Cost of
Goods Sold.
The Company will pay a royalty on its green quarry rights purchase of
30 pesos per cubic meter once production begins. This will be approximately $4.
<PAGE>
7. Purchase of Green Quarry
On December 3, 1995 the Company purchased the rights to mine a quarry
of special green quartsite in the state of Chihuahua, Mexico. The Company paid
2,000,000 shares of R-144 common stock for these rights. The Company also agreed
to pay a royalty of 700 pesos per month (about $91), until the quarry is
operational and then 30 pesos per cubic meter thereafter. The 30 pesos will be
adjusted for inflation. The stock was issued to the manager of the Company's
Mexican plant for two years of work in finding the quarry and securing the
rights. The manager of the Mexican plant previously to this issuance owned 8% of
the Company's stock. With this additional 2,000,000 he now owns 14%. The
valuation of the quarry has been placed at $1,200,000.
8. Provision for Income Taxes
Provision is made for deferred income taxes where differences
exist between the period in which transactions affect taxable income and the
period in which they enter into the determination of income in the financial
statements. As of December 31, 1995 the consolidated Company had a total Net
Operating Loss (NOL) carry forward for federal income tax purposes of
approximately $4,000,000. The future value of the NOL is not reflected in the
face of the financial statements.
1995 1994 1993
---- ---- ----
Change in Deferred Tax Benefit 6,200 89,900 107,000
Valuation Adjustment (6,200) (89,900) (107,000)
------ ------- --------
Net Tax Benefit 0 0 0
Current Taxes Payable 50 50 50
---- ---- ----
Provision for Income Taxes 50 50 50
==== ==== ====
9. Interest Expense
Mexican Banks (included in costs of goods sold) 246,554
Phoenix Equipment Loans 2,772
-------
Total Interest Expense 249,326
=======
10. IRS Audit
The Company has been audited by the I.R.S. for the years 1989, 1990,
and 1991. On October 11, 1995 the Company received a Notice of Deficiency in the
amount of $564,130 plus interest and penalties in the amount of $423,098. The
Company has retained a tax attorney who has advised that these claims are
baseless. This may require the Company to take this case to tax court in order
to prevail.
<PAGE>
11. Non Cash Transactions
1995
Purchase of rights to green quarry for 2,000,000 shares of stock Final
payment of 1,800,000 shares for investment of $140,000 in 1993
1994
Purchase of consulting with 1,125,000 shares of common stock
Return and cancellation of 1,572,381 shares of common stock previously
written off
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 23,570
<SECURITIES> 0
<RECEIVABLES> 109,116
<ALLOWANCES> 0
<INVENTORY> 296,495
<CURRENT-ASSETS> 481,616
<PP&E> 4,511,544
<DEPRECIATION> 472,705
<TOTAL-ASSETS> 4,750,440
<CURRENT-LIABILITIES> 143,810
<BONDS> 0
0
0
<COMMON> 34,226
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,750,440
<SALES> 1,092,479
<TOTAL-REVENUES> 1,094,062
<CGS> 764,358
<TOTAL-COSTS> 764,358
<OTHER-EXPENSES> 393422
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,185)
<INCOME-TAX> 50
<INCOME-CONTINUING> (18,235)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (18,235)
<NET-INCOME> 0
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
