UNITED STATES
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 the quarter ended March 31, 1996 Commission File Number 000-18389
WORLD WIDE STONE CORPORATION
NEVADA 33-0297934
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
2150 W. University Drive, Tempe, AZ 85281
(Address of Principal Executive Offices) ( Zip Code)
602-966-0047
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former name, former address and former fiscal year)
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 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_____
As of March 31, 1996, there were 34,395,868 shares of common
stock outstanding.
Documents Incorporated by Reference
None
(Page 1 of 9 Pages)
<PAGE>
World Wide Stone Corporation and Subsidiaries
Index to Form 10-Q
For the Quarter Ended March 31, 1996
Part I. Financial Information
Item 1. Financial Statements
CPA's Certification.......................................3
Consolidated Balance Sheet
March 31, 1996 and December 31, 1995......................4
Consolidated Statement of Operations (Income)
Three months ended March 31, 1996 and 1995................6
Consolidated Statement of Cash Flows
Three months ended March 31, 1996 and 1995................7
Notes to Financial Statements.............................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation.............8
Part II. Other Information
Item 1 Legal Proceedings.........................................9
(Page 2 of 9 Pages)
<PAGE>
Murray Peck P.C.
Certified Public Accountants
5110 North Central, Suite 320
Phoenix, Arizona 85012
Phone (602) 274-1960 - Fax (602) 274-1986
To the Board of Directors
World Wide Stone Corporation
We have compiled the accompanying Balance Sheets of World Wide Stone Corporation
as of March 31, 1996 and December 31, 1995, and the related Statements of Income
for the three month periods ended March 31, 1996 and March 31, 1995, and the
related Statements of Cash Flows for the three month periods ended March 31,
1996 and 1995, respectively, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. The financial statements have been prepared on the accrual
basis of accounting.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures and the
provision for income taxes as required by generally accepted accounting
principles. If the omitted disclosures and provision for income taxes were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position and results of operations.
Accordingly, these financial statements are not designed for those who are not
informed about such matters.
The Balance Sheet for the year ended December 31, 1995 was audited by another
accountant and he expressed an unqualified opinion on this financial statement
dated March 15, 1996. We have not performed any auditing procedures since that
date.
Date: May 13, 1996 Murray Peck, P.C.
Certified Public Accountants
BY: /s/Murray Peck/
---------------------------
Murray Peck, CPA, President
See accountants' report.
(Page 3 of 9 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
BALANCE SHEETS
March 31, 1996 and December 31, 1995
ASSETS
March 31, 1996 Dec. 31, 1995
----------------- ---------------
Current assets
Cash $ 68,393 $ 23,569
Accounts receivable 183,758 109,116
Loans receivable - Intercompany 28,128 0
Inventory 309,737 296,495
Loans to employees 205 0
---------------- ---------------
Total current assets 590,221 429,180
Property, plant, and equipment - Mexico 3,044,560 3,044,560
Mex Marmoles Muguiro 273,589 273,589
Machinery & equipment 269,045 266,984
Accumulated depreciation (566,304) (518,304)
---------------- ---------------
Net property and equipment 3,020,890 3,066,829
Other assets
Prepaid rent 1,995 1,995
Prepaid IVA - Mexico 61,459 52,435
Investment - Green Quarry 1,200,000 1,200,000
---------------- ---------------
Total other assets 1,263,454 1,254,430
---------------- ---------------
Total assets $ 4,874,565 $ 4,750,439
================ ===============
See accountants' report.
(Page 4 of 9 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
BALANCE SHEETS
March 31, 1996 and December 31, 1995
LIABILITIES AND EQUITY
March 31, 1996 Dec. 31, 1995
----------------- ---------------
Liabilities
Current liabilities
Accounts payable $ 43,564 $ 33,094
Accrued pension 4,969 4,969
Payroll taxes 5,057 422
Accrued payroll taxes 24,498 22,627
Accrued interest 16,452 16,230
Other accrued taxes 3,113 0
Sales deposits 14,870 0
Due to Felipe 2,567 2,567
Loan payable - G&C Partners 33,000 35,000
Due to M. Cunningham 14,949 14,949
Loan payable - truck 6,744 7,610
Loan payable - vehicle 12,336 13,003
Loan payable - forklift 15,162 16,456
Long term debt - Mexico 860,500 817,224
---------------- ---------------
Total current liabilities 1,057,781 984,151
---------------- ---------------
Equity
Common stock 34,226 34,226
Additional paid in capital 7,838,209 7,838,209
Retained earnings (4,106,147) (4,087,912)
Current period earnings (loss) 50,496 (18,235)
---------------- ---------------
Total equity 3,816,784 3,766,288
---------------- ---------------
Total liabilities and equity $ 4,874,565 $ 4,750,439
================ ===============
See accountants' report.
(Page 5 of 9 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
STATEMENTS OF INCOME
Three months ended March 31, 1996 and 1995
March 31, 1996 March 31, 1995
-------------- --------------
Income
Sales $ 450,509 $ 241,273
Cost of sales 225,618 128,743
--------- ---------
Gross profit 224,891 112,530
Expenses
Salaries and wages 15,950 982
Salaries - officers 27,000 27,000
Casual labor 3,622 0
Salaries - salesmen 7,150 0
Advertising 2,607 1,962
Promotion 650 0
Auto expense 898 2,490
Bank charges 644 92
Commissions 1,216 0
Consulting fees 1,606 0
Data processing 593 0
Depreciation 48,000 46,632
Dues and subscriptions 2,094 505
Insurance 2,133 2,993
Legal and accounting 17,774 3,983
Licenses and permits 420 110
Office expense 14,264 14,311
Postage 715 854
Rent 8,717 5,003
Supplies 5,215 981
Taxes - payroll 5,521 7,245
Telephone 3,479 2,159
Travel 3,337 5,707
Utilities 703 569
Interest expense 87 0
--------- ---------
Total expenses 174,395 123,578
--------- ---------
Net income (loss) $ 50,496 $ (11,048)
========= =========
See accountants' report.
(Page 6 of 9 Pages)
<PAGE>
World Wide Stone Corporation
Statements of Cash Flows
For the three months ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
March 31 1996 March 31, 1995
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 50,496 $ (11,048)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 48,000 46,632
(Increase) decrease in:
Loans to employees (205) (3,590)
Accounts receivable (74,642) (31,467)
Inventories (13,242) 108,247
Prepaid expenses - IVA (9,024) 17,941
Intercompany receivable - Mexico (28,128) 0
Deposits 0 (1,563)
Investments - Mexico 0 48,495
Increase (decrease) in:
Accounts payable 10,470 (64,293)
Accrued liabilities 24,711 (14,441)
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 8,436 94,913
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,061) 0
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (2,061) 0
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
New borrowings:
Long-term (net) 43,276 3,667
Short-term (net) (4,827) 17,447
Stockholder loans 0 (25,782)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 38,449 (4,668)
--------- ---------
NET INCREASE (DECREASE) IN CASH 44,824 90,245
CASH AT BEGINNING OF YEAR 23,569 29,183
CASH AT MARCH 31 $ 68,393 $ 119,428
========= =========
</TABLE>
See accountants' report.
(Page 7 of 9 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1) General
-------
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The financial statements reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary to fairly present such information. Although the
Company believes that the disclosures are adequate to make the information
presented not misleading, certain information and footnote disclosures,
including significant accounting policies, normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. It is suggested that
these financial statements be read in conjunction with the consolidated
financial statements and the notes thereto as well as Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
included in the Company's latest annual report an Form 10-K filed for the year
ended December 31, 1995.
2) Inventory
---------
Inventory for the company is stated at cost. All of the costs
associated with the production of tile in the Mexican plant have been factored
into the value of the cost of the goods sold and the ending inventory. Cost of
goods sold also included freight from Mexico to the United States. Inventory as
of March 31, 1996 was located at the plant in Durango, Mexico and at the
showroom-warehouse in Tempe, Arizona. Interest expense of the Mexican bank loans
for March 31, 1996 has been capitalized and is found in the ending inventory and
the cost of goods sold.
Item 2. Management's Discussion And Analysis of Financial Condition and Results
of Operations
General
- -------
Sales for the first quarter ending March 31, 1996 have increased 47%
over the same period in 1995. This trend is expected to continue as a result of
continuing market penetration and increase in production volume.
The Company has ordered additional machinery from Italy which will
allow it to produce different finishes and to reduce the inventory of less
popular varieties of stone being produced. A new plant expansion, Phase I, is
now under construction and will be completed in May, 1996, with the new
machinery being delivered in June of 1996. This expansion will require $1.3
million dollars to complete so it will be developed in phases as cash and
financing are available. Phase I (described above) will be operational by July
1996 and has been funded by cash flow.
Results of Operations
- ---------------------
The activities of the Company during the first quarter were focused on
improving both quality and quantity of production at the Mexican facilities,
improving training and work environment for all employees, penetration of the
local Arizona market, and quarry development and improvement.
Production volume continued to rise in the first quarter due to
emphasis on improvement in training of management and employees, better
utilization of space and equipment, continuous improvement in the manufacturing
process, as well as quarry development and exploration. The showroom and
warehouse operation in Tempe, Arizona, has contributed toward greater
penetration of the Arizona market, which allowed an increase in the margin of
profit.
Management continued its commitment in the first quarter to developing
effective ways of fostering continuous improvement of quality. The training
program based on Control Systems Theory was continued. This approach was
developed by Dr. William Glasser and is consistent with the work of W. Edwards
Deming. As adopted by World Wide Stone, Control Theory Management involves
active interest by management in the needs of the workers, a participatory
environment, empowerment for decision-making, and emphasis on personal
responsibility. This approach is thought to be appropriate in multicultural
settings and was instituted both in the U.S. and Mexico.
(Page 8 of 9 Pages)
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company cash flow is sufficient to maintain operations. Expansion
of operations may be financed by debt or equity investment and in part by
retained earnings. (See 1995 10-K.)
Part II - Other Information
Item 1. Legal Proceedings.
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. In
addition, the President of the Registrant has been personally audited for the
same period and has been served with a Notice of Deficiency totaling $937,923
plus penalties of $703,443. The Company has retained a tax attorney who has
advised that the claims are ridiculous and baseless. In the opinion of counsel,
the Company will prevail in tax court. Management further reminds the reader
that the Company reported substantial losses for each of the years in question.
Item 2. Changes in Securities.
None
Item 3. Defaults 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
None
Signature
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 authorized.
Date: May 14, 1996 World Wide Stone Corporation
(Registrant)
BY: /s/Franklin Cunningham/
-------------------------------------
Franklin Cunningham, President
(Page 9 of 9 Pages)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 68,393
<SECURITIES> 0
<RECEIVABLES> 183,758
<ALLOWANCES> 0
<INVENTORY> 309,737
<CURRENT-ASSETS> 590,221
<PP&E> 3,587,194
<DEPRECIATION> (566,304)
<TOTAL-ASSETS> 4,874,565
<CURRENT-LIABILITIES> 1,057,781
<BONDS> 0
0
0
<COMMON> 34,226
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,874,565
<SALES> 450,509
<TOTAL-REVENUES> 450,509
<CGS> 225,618
<TOTAL-COSTS> 225,618
<OTHER-EXPENSES> 174,395
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 50,496
<INCOME-TAX> 0
<INCOME-CONTINUING> 50,496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,496
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
