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 June 30,1997 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 June 30, 1997, there were 35,222,618 shares of common stock outstanding.
Documents Incorporated by Reference
None
(Page 1 of 10 Pages)
<PAGE>
World Wide Stone Corporation and Subsidiaries
Index to Form 10-Q
For the Quarter Ended June 30, 1997
Part I. Financial Information
Item 1. Financial Statements
CPA's Certification.........................................3
Consolidated Balance Sheet
June 30, 1997 and December 31, 1996.........................4
Consolidated Statement of Operations (Income)
Six months ended June 30, 1997 and 1996.....................6
Consolidated Statement of Operations (Income)
Three months ended June 30, 1997 and 1996...................7
Consolidated Statement of Cash Flows
Six months ended June 30, 1997 and 1996.....................8
Notes to Financial Statements..............................10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation..............10
Part II. Other Information
Item 1. Legal Proceedings..........................................10
(Page 2 of 10 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 June 30, 1997 and December 31, 1996, and the related Statements of Income
for the three month periods ended June 30, 1997 and March 31, 1996, and the
related Statements of Cash Flows for the three month periods ended June 30, 1997
and 1996, 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, 1996 was audited by another
accountant and he expressed an unqualified opinion on this financial statement
dated March 25, 1997. We have not performed any auditing procedures since that
date.
Date: August 5, 1997 Murray Peck, P.C.
Certified Public Accountants
BY: /s/Murray Peck/
-----------------------------
Murray Peck, CPA, President
See accountants' report.
(Page 3 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
BALANCE SHEETS
June 30, 1997 and December 31, 1996
ASSETS
June 30, 1997 Dec. 31, 1996
------------- -------------
Current assets
Cash $ 84,333 $ 43,756
Accounts receivable 144,593 27,561
Inventory 559,697 590,335
Rental Deposits 2,895 2,895
Deposits on Equipment 0 65,680
----------- -----------
Total current assets 791,518 730,227
Property and equipment
Mexican land, building & original mach. & equip. 3,044,560 3,044,560
Mex Marmoles Muguiro 273,589 273,589
Machinery & equipment - USA 135,591 98,392
Sociedad machinery and equipment 706,607 458,789
Accumulated depreciation (853,978) (742,086)
----------- -----------
Net property and equipment 3,306,369 3,133,244
Other assets
Prepaid expenses 6,395 8,136
Prepaid IVA - Mexico 205,467 108,981
Investment - Green Quarry 1,200,000 1,200,000
----------- -----------
Total other assets 1,411.862 1,317,117
----------- -----------
Total assets $ 5,509,749 $ 5,180,588
=========== ===========
See accountants' report.
(Page 4 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
BALANCE SHEETS
March 31, 1997 and December 31, 1996
LIABILITIES AND EQUITY
June 30, 1997 Dec. 31, 1996
-------------- -------------
Liabilities
Current liabilities
Accounts payable $ 15,273 $ 98,661
Accrued pensions, taxes and fees payable 44,894 10,386
Sales deposits 21,285 14,835
Current portion long-term debt 76,954 89,932
Loans payable - short term 30,189 43,449
----------- -----------
Total current liabilities 188,595 257,263
Long-term debt
Loans payable - vehicles and equipment 54,595 35,953
Long term debt - Mexico 858,092 805,166
----------- -----------
Total long-term debt 912,687 841,119
----------- -----------
Total liabilities 1,101,282 1,098,382
----------- -----------
Equity
Common stock (par value) 35,223 35,223
Additional paid in capital 7,889,017 7,889,017
Retained earnings (3,842,034) (4,106,147)
Current period earnings (loss) 326,261 264,113
----------- -----------
Total equity 4,408,467 4,082,206
----------- -----------
Total liabilities and equity $ 5,509,749 $ 5,180,588
=========== ===========
See accountants' report.
(Page 5 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
STATEMENTS OF INCOME
Six months ended June 30, 1997 and 1996
June 30, 1997 June 30, 1996
------------- -------------
Income
Sales $1,519,941 $ 899,367
Cost of sales 655,629 420,796
---------- ---------
Gross profit 864,312 478,571
Expenses
Salaries and wages 58,962 32,198
Salaries - officers 54,467 63,000
Casual labor 0 3,647
Salaries - salesmen 27,300 17,750
Advertising 38,373 4,070
Promotion 2,860 2,017
Auto expense 3,422 3,693
Bank charges 1,676 1,346
Commissions 4,929 2,066
Consulting fees 22,965 7,173
Data processing 4,200 590
Depreciation 111,892 96,000
Dues and subscriptions 2,900 4,443
Insurance 7,741 5,513
Legal and accounting 48,734 20,770
Licenses and permits 217 420
Office expense 19,888 40,031
Postage 3,945 1,950
Rent 18,623 18,827
Supplies 6,080 8,516
Taxes - payroll 13,124 12,129
Telephone 11,597 5,332
Travel 19,980 12,471
Utilities 1,250 1,100
Other expense (income) 0 (135)
Interest expense 52,926 0
---------- ---------
Total expenses 538,051 364,917
---------- ---------
Net income $ 326,261 $ 113,654
========== =========
See accountants' report.
(Page 6 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
STATEMENTS OF INCOME
Three months ended June 30, 1997 and 1996
Income June 30, 1997 June 30, 1996
------------- -------------
Sales $ 869,107 $ 448,859
Cost of sales 386,431 195,180
--------- ---------
Gross profit 482,676 253,679
Expenses
Salaries and wages 31,997 16,247
Salaries - officers 27,467 36,000
Casual labor 0 25
Salaries - salesmen 13,650 10,600
Advertising 15,198 1,464
Promotion 2,860 1,367
Auto expense 2,023 2,795
Bank charges 742 702
Commissions 2,830 850
Consulting fees 14,165 5,567
Data processing 4,200 (3)
Depreciation 55,946 48,000
Dues and subscriptions 1,762 2,350
Insurance 4,856 2,350
Legal and accounting 5,419 2,996
Licenses and permits 0 0
Office expense 15,580 26,967
Postage 2,097 1,236
Rent 8,425 8,906
Supplies 2,887 3,301
Taxes - payroll 5,997 6,608
Telephone 7,068 1,853
Travel 13,905 9,134
Utilities 700 397
Other expense (income) 0 (222)
Interest expense 26,463 0
--------- ---------
Total expenses 266,237 190,521
--------- ---------
Net income $ 216,439 $ 63,158
========= =========
See accountant's report.
(Page 7 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
STATEMENTS OF CASH FLOWS
Six months ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 326,261 $ 113,654
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 111,892 96,000
(Increase) decrease in:
Accounts receivable (117,032) (6,878)
Inventories 30,638 (101,623)
Prepaid expenses - IVA (94,745) (52,717)
Deposits 65,680 0
Increase (decrease) in:
Accounts payable (83,388) 41,609
Accrued liabilities 40,958 19,189
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 280,264 109,234
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (285,017) (109,147)
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES (285,017) (109,147)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
New borrowings:
Long-term (net) 71,568 107,163
Short-term (net) (26,238) (5,499)
Purchase of common stock 0 10,000
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 45,330 111,664
--------- ---------
NET INCREASE (DECREASE) IN CASH 40,577 111,751
CASH AT BEGINNING OF YEAR 43,756 23,569
CASH AT JUNE 30 $ 84,333 $ 135,320
========= =========
</TABLE>
See accountant's report.
(Page 8 of 10 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, 1996.
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 June 30, 1997 was located at the plant in Durango, Mexico and at the
showroom-warehouses in Tempe, Arizona, Anaheim, California and El Paso, Texas.
Interest expense of the Mexican bank loans for June 30, 1997 has been added to
the line of credit.
Item 2. Management's Discussion And Analysis of Financial Condition and Results
of Operations
General
- -------
Sales for the second quarter ending June 30, 1997 have increased 48%
over the same period in 1996. Pre-tax earnings for the same period increased by
71%. This increase in pre-tax earnings of 71% is a graphic example of the
economies of scale, which have been reported in the Company's 10-K. Increases in
production volume, along with continuing market penetration, have given the
Company additional product to sell and this increased production volume has
reduced the cost of production per square foot as reported. This has allowed the
Company to post record earnings reflecting a 71% increase in profits. Market
response on all the company's products has continued to improve. The need for
additional production volume is always present. The natural stone market is
measured in billions of dollars annually and the Company will continue to expand
its market share.
The Company's new plant, dba Socieded Piedra Sierra S.A. de C.V., is
operational and nearly complete. All machinery for Phase I has been received.
Installation of the final machine, a 1600mm block cutter from Italy, will be
complete by mid-August and immediately go on line. With this complete,t he
Company will fully realize the installed capacity of the Phase I expansion,
producing the 70% plus increase that was projected. Construction activities have
caused some production delays and have slowed third quarter production volume.
With his construction complete, the Company will focus full attention on
operations (production, marketing, and sales) which should produce the projected
increases. The percentage of increase will level off as Phase I comes to full
production. By year end the full effect is expected to have been realized, of
course adjusting for the seasonal market variables. At that time the Company
will need to build additional plant capacity to continue substantial growth.
Sociedad Piedra Sierra S.S. de C.V was funded almost entirely by earnings.
Future growth will be funded by earnings, debt and equity financing.
Results of Operations
- ---------------------
The activities of the Company during the second 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, quarry development and improvement, and coordination of
all the contractors necessary to bring the new plant to installed capacity.
Production volume continued to rise in the second 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.
(Page 9 of 10 Pages)
<PAGE>
Management continued its commitment in the second 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 by Lee M. Cunningham.
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. The assets of the Company are not liquid and consist of these
items listed herein. During the second quarter of 1996, the Company successfully
refinanced its Mexican bank debt, lowering the interest rate paid to an
effective rate of about 12%. The exact amount is difficult to pinpoint because
of ancillary bank charges and fees. (see 1995 10-K.) With the exception of
interest carrying charges, all of Phase I was paid for with earnings.
Part II - Other Information
Item 1. Legal Proceedings.
The Registrant filed a lawsuit against Mario Ruiz and Progressive
Transfer Company on February 7, 1997. A Notice of Entry of Order Granting
Preliminary Injunction was granted March 10, 1997. This case is being heard by
the District Court, Clark County, Nevada, Case No. A369361 Dept. No. XVI Docket
No. "V". The purpose is to recover the certificates of common stock of the
Registrant, the certificates which Ruiz failed to return September 29, 1990. The
transfer agent is also a party, as a formality, to prevent the inappropriate
transfer of the certificates representing said common stock of the Registrant on
its books.
The Registrant hired an independent audit of the Company's bank debt,
i.e. line of credit. The audit has raised many concerns regarding the amount
owed to Banca Serfin S.A. An attorney has been engaged by the Registrant and
legal action is expected. Management does not anticipate any increase in the
Company's reported bank debt as a result of this dispute. Counsel has advised
the Registrant that one to two years may be required to settle this matter.
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a vote of Security HoldersNone
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-KNone
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: August 12, 1997 World Wide Stone Corporation
(Registrant)
BY: /s/ Franklin Cunningham
----------------------------------
Franklin Cunningham, President
(Page 10 of 10 Pages)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 84,833
<SECURITIES> 0
<RECEIVABLES> 144,593
<ALLOWANCES> 0
<INVENTORY> 559,697
<CURRENT-ASSETS> 791,518
<PP&E> 4,160,347
<DEPRECIATION> 853,978
<TOTAL-ASSETS> 5,509,749
<CURRENT-LIABILITIES> 188,595
<BONDS> 0
0
0
<COMMON> 35,222,618
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,509,749
<SALES> 1,519,641
<TOTAL-REVENUES> 1,519,941
<CGS> 655,629
<TOTAL-COSTS> 655,629
<OTHER-EXPENSES> 538,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 326,261
<INCOME-TAX> 0
<INCOME-CONTINUING> 326,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 326,261
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
