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 September 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)
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 September 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 September 30, 1997
Part I. Financial Information
Item 1. Financial Statements
CPA's Certification..................................................3
Consolidated Balance Sheet
September 30, 1997 and December 31, 1996.............................4
Consolidated Statement of Operations (Income)
Three months ended September 30, 1997 and 1996.......................6
Consolidated Statement of Operations (Income)
Nine months ended September 30, 1997 and 1996........................7
Consolidated Statement of Cash Flows
Nine months ended September 30, 1997 and 1996........................8
Notes to Financial Statements........................................9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation........................9
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 September 30, 1997 and December 31, 1996, and the related Statements of
Income for the three month and nine months periods ended September 30, 1997 and
September 30, 1996, and the related Statements of Cash Flows for the nine month
periods ended September 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: October 30, 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
September 30, 1997 and December 31, 1996
ASSETS
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
Current assets
Cash $ 107,085 $ 43,756
Accounts receivable 173,385 27,561
Inventory 639,590 590,335
Rental Deposits 2,895 2,895
Deposits on Equipment 0 65,680
----------- -----------
Total current assets 922,955 730,227
Property and equipment
Mexican land and building 3,044,560 3,044,560
Mex Marmoles Muguiro 273,589 273,589
Machinery & equipment - USA 135,591 98,392
Sociedad machinery and equipment 706,602 458,789
Accumulated depreciation (909,924) (742,086)
----------- -----------
Net property and equipment 3,297,418 3,133,244
Other assets
Prepaid expenses 8,200 8,136
Prepaid IVA - Mexico 218,735 108,981
Investment - Green Quarry 1,200,000 1,200,000
----------- -----------
Total other assets 1,426,935 1,317,117
----------- -----------
Total assets $ 5,647,308 $ 5,180,588
=========== ===========
See accountants' report.
(Page 4 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
BALANCE SHEETS
September 31, 1997 and December 31, 1996
LIABILITIES AND EQUITY
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
Liabilities
Current liabilities
Accounts payable $ 63,896 $ 98,661
Accrued pensions, taxes and fees payable 17,716 10,386
Sales deposits 11,924 14,835
Current portion long-term debt 52,926 89,932
Loans payable - short term 28,240 43,449
----------- -----------
Total current liabilities 174,702 257,263
Long-term debt
Loans payable - vehicles and equipment 48,427 35,953
Long term debt - Mexico 869,662 805,166
----------- -----------
Total long-term debt 918,089 841,119
----------- -----------
Total liabilities 1,092,791 1,098,382
----------- -----------
Equity
Common stock 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) 472,311 264,113
----------- -----------
Total equity 4,554,517 4,082,206
----------- -----------
Total liabilities and equity $ 5,647,308 $ 5,180,588
=========== ===========
See accountants' report.
(Page 5 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
STATEMENTS OF INCOME
Three months ended September 30, 1997 and 1996
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
Income
Sales $ 746,172 $ 600,993
Cost of sales 364,508 267,841
---------- ----------
Gross profit 381,664 333,152
Expenses
Salaries and wages 36,937 20,618
Salaries - officers 28,400 18,000
Casual labor 0 221
Salaries - salesmen 13,650 13,310
Advertising 12,945 7,638
Promotion 2,893 19
Auto expense 1,900 361
Bank charges 703 2,032
Commissions 2,718 9,255
Consulting fees 8,898 9,514
Data processing 105 0
Depreciation 55,946 58,000
Dues and subscriptions 981 645
Insurance 5,939 6,389
Legal and accounting 5,668 4,705
Licenses and permits 0 1,089
Office expense 11,597 21,264
Postage 843 1,255
Rent 8,141 8,610
Supplies 6,848 10,739
Taxes - payroll 6,271 5,266
Telephone 5,745 4,589
Travel 14,978 12,769
Utilities 1,087 693
Other expense (income) 0 8
Interest expense 2,421 0
---------- ----------
Total expenses 235,614 216,989
---------- ----------
Net income $ 146,050 $ 116,163
========== ==========
See accountants' report.
(Page 6 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
STATEMENTS OF INCOME
Nine months ended September 30, 1997 and 1996
Sept.30, 1997 Sept.30, 1996
------------- -------------
Income
Sales $ 2,266,113 $ 1,500,360
Cost of sales 1,020,137 688,637
----------- -----------
Gross profit 1,245,976 811,723
Expenses
Salaries and wages 95,899 52,816
Salaries - officers 82,867 81,000
Casual labor 0 3,868
Salaries - salesmen 40,950 31,060
Advertising 51,318 11,708
Promotion 5,753 2,036
Auto expense 5,322 4,054
Bank charges 2,379 3,378
Commissions 7,647 11,321
Consulting fees 31,863 16,687
Data processing 4,305 590
Depreciation 167,838 154,000
Dues and subscriptions 3,881 5,088
Insurance 13,680 11,902
Legal and accounting 54,402 25,475
Licenses and permits 217 1,509
Office expense 31,485 61,295
Postage 4,788 3,205
Rent 26,764 27,437
Supplies 12,928 19,255
Taxes - payroll 19,395 17,395
Telephone 17,342 9,921
Travel 34,958 25,240
Utilities 2,337 1,793
Other expense (income) 0 (127)
Interest expense 55,347 0
----------- -----------
Total expenses 773,665 581,906
----------- -----------
Net income $ 472,311 $ 229,817
=========== ===========
See accountant's report.
(Page 7 of 10 Pages)
<PAGE>
WORLD WIDE STONE CORPORATION
STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1997 and 1996
Sept. 30, 1997 Sept.30, 1996
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 472,311 $ 229,817
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 167,838 154,000
(Increase) decrease in:
Accounts receivable (145,824) (184,050)
Inventories (49,255) (119,071)
Prepaid expenses - IVA (109,818) (98,852)
Deposits 65,680 (9,059)
Increase (decrease) in:
Accounts payable (34,765) 183,668
Accrued liabilities 4,419 7,855
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 370,586 164,308
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (332,012) (248,826)
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES (332,012) (248,826)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
New borrowings:
Long-term (net) 76,970 171,163
Short-term (net) (52,215) 4,939
Purchase of common stock 0 41,805
Additional paid in capital 0 10,000
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 24,755 227,907
--------- ---------
NET INCREASE (DECREASE) IN CASH 63,329 143,389
CASH AT BEGINNING OF YEAR 43,756 23,569
CASH AT SEPT. 30 $ 107,085 $ 166,958
========= =========
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 on 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 September 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 September 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 third quarter ending September 30, 1997, have increased
20% over the same period in 1996. Pre-tax earnings for the same period increased
by 20%. Third quarter, 1996 was an exceptional quarter, yet a 20% increase was
achieved in 1997. Net income for the nine months ending September 30, 1997
increased 46% over the same period in 1996.
Third quarter and fourth quarter 1997 production operations have been strained
due to installation and construction activities in the middle of the production
area of the new Sociedad Piedra Sierra plant, that slowed production and thus
impacted potential sales. On October 31, an Italian technician finished the
installation of the new block cutter. With this construction complete, the
Company will focus on operations (quarrying, production, marketing and sales)
which should produce the projected increases in sales and profitability.
Additionally, in the fourth quarter, the Company will move its Tempe, Arizona
headquarters to new, much larger facilities. Tenant improvements on these
facilities are being constructed by existing Company personnel at the Company's
expense. It is believed that this move will help facilitate the growth of the
Company, but may impact operations in the fourth quarter to some extent.
Market response on all the Company's products has continued to improve. The need
for additional production volume is always present and additional expansion is
imminent. A funding commitment is expected in the fourth quarter. The natural
dimensional stone business is measured in billions of dollars anually and the
Company will continue to expand its market share.
Results of Operations
- ---------------------
The activities of the Company during the third 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 third 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
(Page 9 of 10 Pages)
<PAGE>
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 third 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 multi-cultural
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 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: November 11, 1997 World Wide Stone Corporation
(Registrant)
BY: /ss//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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 107,085
<SECURITIES> 0
<RECEIVABLES> 173,385
<ALLOWANCES> 0
<INVENTORY> 639,590
<CURRENT-ASSETS> 922,955
<PP&E> 4,207,342
<DEPRECIATION> 909,924
<TOTAL-ASSETS> 5,647,308
<CURRENT-LIABILITIES> 174,702
<BONDS> 0
0
0
<COMMON> 35,223
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,647,308
<SALES> 2,266,113
<TOTAL-REVENUES> 2,266,113
<CGS> 1,020,137
<TOTAL-COSTS> 1,020,137
<OTHER-EXPENSES> 773,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 472,311
<INCOME-TAX> 0
<INCOME-CONTINUING> 472,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 472,311
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
