UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO 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
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)
5236 S. 40th St., Phoenix, Arizona 85040
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 438-1001
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 34,385,868.
Documents incorporated by reference: NONE.
<PAGE>
PART I
EXPLANATORY NOTE REGARDING RESTATEMENT OF FINANCIAL STATEMENTS
In connection with the audit of its financial statements for the year
ended December 31, 1997, World Wide Stone Corporation (the "Company") determined
that the acquisition of certain quarry rights in December of 1995 had not been
properly recorded in its financial statements for the year ended December 31,
1995. In that transaction, the Company issued two million shares of Common Stock
valued at $1,200,000 to a director and officer of one of the Company's Mexican
subsidiaries. The Company originally recorded the value of the shares issued in
connection with this transaction as an asset (value of lease rights) in its
financial statements for the year ended December 31, 1995. Under Statement of
Financial Accounting Standards ("SFAS") No. 13, Accounting For Leases, only
payments related to a lease acquisition with independent third parties are
eligible for capitalization. Accordingly, the amounts should have been expensed
in the fourth quarter of 1995 when the transaction occurred. As a result, the
Company has restated its financial statements for the year ended December 31,
1995 to reflect the proper application of SFAS No. 13. In addition, the Company
has adjusted the financial statements for the year ended December 31, 1995 to
reclassify an understatement to "common stock" and "paid in capital" of $15,000.
The Company hereby amends and restates certain Items of its Form 10-K
for the year ended December 31, 1995, to reflect the restatement of its
financial statements for the year ended December 31, 1995, as described above.
The information contained in this Form 10-K/A reflects, where appropriate,
changes required to conform to the restatement of the financial statements.
ITEM 2. PROPERTIES. The Company occupies 3,000 square feet of 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 acquired the rights
to mine a very large deposit of homogenous green quartzite in the State of
Chihuahua, Mexico by issuing 2,000,000 shares of common stock valued at
$1,200,000 to a director and officer of one of the Company's subsidiaries. The
Company has restated its financial statements for the year ended December 31,
1995 to expense the $1,200,000 value of the shares issued in connection with the
acquisition of the quarry rights. See Note 7 to the Consolidated Financial
Statements. In addition, during 1998 the Company determined that the costs that
would be required to develop this quarry site and to process the stone extracted
from this quarry site would be much higher than originally anticipated.
Accordingly, the Company has determined that it will not be economically
feasible for the Company to attempt to develop this quarry site. As a result, in
September of 1998, the Company and the officer of its subsidiary agreed to
rescind the transaction. In connection with this rescission, the Company will
return the quarry rights to the individual and the individual will return the
two million shares of Common Stock to the Company for cancellation. See Item 13,
"Certain Relationships and Related Transactions."
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.
<PAGE>
PART II
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 statements and notes 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: $ 1,077,479 $ 642,877 $ 155,022 $ 49,861 $ 345,109
Costs and Expenses: $ 2,357,780 $ 891,515 $ 445,377 $ 75,801 $ 657,849
----------- ----------- ----------- ----------- -----------
Net Profit or Loss $(1,233,235) $ (264,400) $ (314,986) (225,940) (1,823,960)
----------- ----------- ----------- ----------- -----------
Total shares outstanding: 34,385,868 30,325,868 34,382,886 33,382,886 15,581,056
BALANCE SHEET DATA:
Total Assets: $ 3,550,440 $ 3,598,003 $ 3,439,715 $ 3,326,935 $ 3,488,583
Total Liabilities: $ 984,152 $ 1,030,980 $ 609,417 $ 324,151 $ 266,859
----------- ----------- ----------- ----------- -----------
Total Stockholders' Equity: $ 2,566,288 $ 2,567,023 $ 2,830,298 $ 3,002,784 $ 3,221,724
----------- ----------- ----------- ----------- -----------
</TABLE>
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 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 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
<PAGE>
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 emphasized, 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 $1,077,479 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.
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 $3,550,440 respectively. Changes
in total assets in 1993, 1994 and 1995 were primarily due to the purchase of
equipment. As per Note 7 to the Consolidated Financial Statements, the Company
has restated its financial statements for the year ended December 31, 1995 to
expense $1,200,000 value of shares issued in connection with the acquisition of
quarry rights originally capitalized.
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
<PAGE>
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 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.
<PAGE>
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. This financial information reflects the
restatement of the Company's financial statements for the year ended December
31, 1995 on this form 10-K/A. See Note 7 to the Consolidated Financial
Statements.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In December, 1995, the Company issued 2,000,000 shares of Common Stock
valued at $1,200,000 to Jaime Muguiro, President and Operations Manager of
Marmoles Muguiro, S.A. de C.V., a wholly owned subsidiary of the Company, in
connection with the Company's acquisition of the lease rights to a green
quartzite quarry in Chihuahua, Mexico. See Item 2, "Properties" and Note 7 to
the Consolidated Financial Statements.
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 are filed in accordance with the provisions of this Item. They
have been restated to reflect the changes and corrections discussed in Item 2
and Note 7 to the Consolidated Financial Statements. They are:
Page Number
-----------
1. Report of of Certified Public Accountant. F-1
2. Balance Sheet, December 31, 1995 and 1994 F-2
3. Statement of Stockholders Equity, December 31, 1992,
1993, 1994, and 1995 F-3
4. Statement of Operations, December 31, 1993, 1994, and 1995 F-4
5. Statement of Cash Flows, December 31, 1993, 1994, 1995 F-5
6. Notes to Financial Statements F-6 to F-9
(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.
Exhibit
Number Exhibit
------- -------
27.1 Amended and Restated Financial Data Schedule
(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.
<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: November 2, 1998 WORLD WIDE STONE CORPORATION
/s/ Franklin Cunningham
----------------------------
Franklin Cunningham
Director, Chairman of the Board, President
(Principal Executive Officer)
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.
Signature Title Date
/s/ Franklin Cunningham Director, Chairman November 2, 1998
- ------------------------ of the Board, President
By: Franklin Cunningham (Principal Executive
Officer)
/s/ Lee M. Cunningham Director and November 2, 1998
- ------------------------ Vice President
By: Lee M. Cunningham
/s/ Spencer Cunningham Director and November 2, 1998
- ------------------------ Executive Vice
By: Spencer Cunningham President, Chief
Financial Officer and
Treasurer (Principal
Financial Officer)
/s/ Michael D. Nafziner Director and November 2, 1998
- ------------------------ Director of
By: Michael D. Nafziger National Sales
/s/ Timothy H. Ligget Chief Accounting November 2, 1998
- ------------------------ Officer and Director
By: Timothy H. Ligget (Principal Accounting
Officer)
/s/ L. Ernest Whitesel Director November 2, 1998
- ------------------------
By: L. Ernest Whitesel
<PAGE>
MARK SHELLEY, CPA
110 South Mesa Drive, Suite 1
Mesa, Arizona 85210
INDEPENDENT AUDITOR'S REPORT
To World Wide Stone Corporation:
I have audited the accompanying consolidated balance sheets of World Wide Stone
Corporation (a Nevada corporation) and subsidiaries as of December 31, 1995 and
1994 and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of 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 accounting
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 statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
As discussed in Note 7 to the consolidated financial statements, the Company has
changed its method of accounting for the internal costs associated with
acquiring a lease right and has corrected an error for an understatement of
common stock and paid in capital and has restated its 1995 financial statements
accordingly.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of World Wide Stone Corporation and
subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for each of the three years ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ Mark Shelley
- ----------------
Mark Shelley, CPA
March 15, 1996 (except with respect
to Note 7, which is dated
August 19, 1998)
F-1
<PAGE>
WORLD WIDE STONE CORPORATION
Consolidated Balance Sheet
as of December 31, 1995 and 1994
ASSETS
1995 1994
----------- -----------
Cash $ 23,570 $ 29,183
Accounts Receivable 109,116 57,161
Employee Loans 0 63,752
Inventory 296,495 194,845
----------- -----------
Total Current Assets 429,181 344,941
Property, Plant and Equipment
(net of depreciation)(Note 12) 2,838,839 2,981,675
Trade Name and Company Files (net
of amortization) 227,990 246,229
Deposits 1,995 1,563
Prepaid Expenses 52,435 23,491
Organization Costs (net of amortization) 0 104
----------- -----------
Total Assets 3,550,440 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, 34,385,868
and 30,325,868 shares outstanding,
$.001 par value 34,386 30,326
Paid in Capital 7,853,049 6,624,609
Retained Earnings (Loss) (5,321,147) (4,087,912)
----------- -----------
Total Stockholders' Equity 2,566,288 2,567,023
----------- -----------
Total Liabilities and Stockholders'
Equity par value $.001 $ 3,550,440 $ 3,598,003
=========== ===========
The accompanying notes are an integral part of these statements
F-2
<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
SHARES DOLLARS CAPITAL SUBSCRIBED (LOSS) TOTAL
------ ------- ------- ---------- ------ -----
<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
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
Cancellation 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 (4,087,912) 2,567,023
---------- ------ --------- ------- ---------- ----------
Additional Shares to Mexican
Managers 1,800,000 1,800 (1,800) 0
Acquisition of Green Quarry 2,000,000 2,000 1,198,000 1,200,000
Sales of Stock 360,000 360 34,640 35,000
Purchase/Retirement of shares (100,000) (100) (2,400) (2,500)
Retained Earnings (Loss) (1,233,235) (1,233,235)
---------- ------ --------- ------- ---------- ----------
Balance December 31, 1995 34,385,868 34,386 7,853,049 0 (5,321,147) 2,566,288
---------- ------ --------- ------- ---------- ----------
</TABLE>
F-3
<PAGE>
WORLD WIDE STONE CORPORATION
Statement of Operations
for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Sales and Revenue 1,077,479 642,877 155,022
---------- ---------- ----------
Costs of Goods Sold (764,358) (755,362) (253,636)
---------- ---------- ----------
Gross Profit 313,121 (112,485) (98,614)
---------- ---------- ----------
Costs and Expenses
General and Administrative(Note 12) (1,583,190) (112,128) (24,800)
Professional and Management Fees 0 0 (67,457)
Depreciation (10,128) (5,631) (90,158)
Amortization (104) (18,394) (9,326)
---------- ---------- ----------
(1,593,422) (136,153) (191,741)
---------- ---------- ----------
Net Income from Operations (1,280,301) (248,638) (290,355)
Gain (Loss) on Currency Translation 48,305 100,304 0
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 (1,233,185) (264,350) (314,936)
Provision for Income Taxes (50) (50) (50)
---------- ---------- ----------
Net Income (Loss) (1,233,235) (264,400) (314,986)
========== ========== ==========
Earnings (Loss) per share (0.04) (0.01) (0.01)
---------- ---------- ----------
Weighted Average Number of Common
shares Outstanding 31,359,840 30,599,164 33,385,626
---------- ---------- ----------
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WORLD WIDE STONE CORPORATION
Statement of Cash Flows
for the years ended December 31, 1996, 1995, and 1994
1995 1994 1993
---- ---- ----
Cash Provided by Operations
Net Income (Loss) (1,233,235) (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 (154,624) 28,716 (99,499)
Prepaid Expenses (28,944) 6,784 (30,275)
Deposits (432) (1,563) 0
Changes in Employee Loans 63,752 0 0
---------- ---------- ----------
Net Cash from Operations (1,292,726) (277,921) (400,332)
---------- ---------- ----------
Cash Provided (Used) in Investing
Purchase of Fixed Assets (53,183) (120,032) (93,769)
Acquisition of Green Quarry 1,200,000 0 0
Stock Retirement (2,500) 0 0
---------- ---------- ----------
Net Cash Provided (Used)
in Investing 1,144,317 (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 360 1,125 140,000
Paid in Capital 34,640 0 2,500
---------- ---------- ----------
Cash provided by Financing 142,796 393,972 527,265
---------- ---------- ----------
Net Increase (Decrease) 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 Transactions, See Notes
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WORLD WIDE STONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
During the year 1996 the Company built a second plant next to the original one
in Durango Mexico. This new plant will handle a new line of antique and tumbled
products. New offices and employee bathrooms and kitchen are also in process of
being built.
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 Muguiro, 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 inter-company 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.
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 2,700,000. The future
value of the NOL is not reflected in the face of the financial statements.
F-6
<PAGE>
EARNINGS PER SHARE:
Earnings per share are computed by dividing net income by weighted average
number of shares outstanding. There were no other items which were deemed to be
common stock equivalents.
FOREIGN CURRENCY TRANSLATION
The Company's wholly owned subsidiaries, maintain their books and records
in Mexican pesos. Their functional currency however is U.S. dollars. Therefore
these subsidiaries utilize the re-measurement method of foreign currency
translation when consolidated.
The re-measurement 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 loans is all of the assets
located in Mexico.
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 U.S. dollars. All loans are secured by the
assets of the Mexican companies.
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. As per Note 7 to the
Consolidated Financial Statements, the Company has restated its financial
statements for the year ended December 31, 1995 to expense $1,200,000 value of
shares issued in connection with the acquisition of quarry rights originally
capitalized. These changes are restated below.
1995 1994
---- ----
Office Equipment Mexico 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 (5-12 years) 36,744 10,672
--------- ---------
Gross Property, Plant and Equipment 3,311,544 3,258,361
Accumulated Depreciation (472,705) (276,686)
--------- ---------
Net Property, Plant and Equipment 2,838,839 2,981,675
========= =========
F-7
<PAGE>
5. GENERAL AND ADMINISTRATIVE
1995 1994
---- ----
Salaries and Wages 152,669 10,277
Advertising and Promotion 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 and Fees 11,317 1,156
Travel 13,388 28,821
Acquisition of Green Quarry 1,200,000 0
Other Expenses 62,130 47,908
--------- -------
Total General and Administrative 1,583,190 112,128
========= =======
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.
7. MINING RIGHTS/OTHER ITEMS
On December 3, 1995 the Company acquired the rights to mine a quarry of
special green quartzite in the state of Chihuahua, Mexico. This purchase was
originally recorded at a cost of $1,200,000 paid with 2,000,000 shares of common
stock to obtain the rights form a director of the Company's Mexican subsidiary,
Marmoles Muguiro S.A. de C.V. The Company originally recorded the value of the
shares issued in connection with this transaction as an asset included in
Property, Plant and Equipment in the financial statements previously filed as
part of the Form 10-K for the year ended December 31, 1995. Under SFAS No. 13,
ACCOUNTING FOR LEASES, only payments related to a lease acquisition with
independent third parties are eligible for capitalization. Therefore, the
amounts should have been expensed in the fourth quarter of 1995 when the
transaction occurred. Accordingly, the 1995 financial statements have been
adjusted to reflect the proper application of SFAS No. 13. In addition, the
Company has adjusted the financial statements for the year ended December 31,
1995 to reclassify to Common Stock and Paid in Capital $15,000 that had been
recorded as sales in 1995.
The company hereby amends and restates its Form 10-K for the year ended
December 31, 1995 to reflect the restatement of its financial statements for the
year ended December 31, 1995 as described above. The information contained in
this form 10-K/A reflects, where appropriate, changes required to conform to the
restatement of the financial statements. (See Note 12)
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 $2,700,000. The
future value of the NOL is not reflected in the face of the financial
statements.
1995 1994 1993
---- ---- ----
Change in Deferred Tax Benefit and
Valuation Adjustment 0 0 0
Net Deferred Tax Benefit 0 0 0
Current Taxes Payable 50 50 50
-- -- --
Provision for Income Taxes 50 50 50
== == ==
F-8
<PAGE>
9. INTEREST EXPENSE
1995
----
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 and its President have 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.
11. NON CASH TRANSACTIONS
1995
Acquisition 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 1,452,381 shares of common stock previously
written off.
12. RESTATED FINANCIAL DATA
Subsequent to the issuance of the financial statements for the year ended
December 31, 1995, the Company determined that the acquisition of certain quarry
rights in December of 1995 had not been properly recorded in its financial
statements for the year ended December 31, 1995. In that transaction, the
Company issued 2,000,000 shares of common stock to a director and officer of one
of the Company's Mexican subsidiaries. The Company originally recorded the value
of the shares issued in connection with this transaction as an asset in its
financial statements for the year ended December 31, 1995. Under SFAS No. 13,
ACCOUNTING FOR LEASES, only payments to independent third parties for the
acquisition of a lease may be capitalized. Accordingly, the amounts should have
been expensed in the fourth quarter of 1995 when the transaction occurred. As a
result, the 1995 financial statements have been adjusted to reflect the proper
application of SFAS No. 13. In addition, the Company has adjusted the financial
statements for the year ended December 31, 1995 to reclassify to Common Stock
and Paid in Capital $15,000 that had been recorded as sales in 1995. As a result
of the foregoing, the accompanying financial statements for the year ended
December 31, 1995 have been restated as follows:
DECEMBER 31, 1995
-----------------
AS PREVIOUSLY
BALANCE SHEET REPORTED AS RESTATED
- ------------- ------------- -----------
Property, Plant and Equipment-Net $ 4,038,839 $ 2,838,839
Total Assets 4,750,440 3,550,440
Accumulated Deficit (4,106,147) (5,321,147)
Stockholders' Equity 3,766,288 2,566,288
Total Liabilities and Stockholders' Equity 4,750,440 3,550,440
INCOME STATEMENT
- ----------------
General and Administrative Expenses $ 383,190 $ 1,583,190
Income(Loss) from Operations (65,301) (1,280,301)
Income(Loss) before Income Taxes (18,185) (1,233,185)
Net Income(Loss) (18,235) (1,233,235)
F-9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF WORLD WIDE STONE CORPORATION (THE
"COMPANY") FOR THE YEAR ENDED DECEMBER 31, 1995, AS RESTATED. THIS SCHEDULE IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH RESTATED FINANCIAL STATEMENTS. IN
ADDITION, CERTAIN ENTRIES ON THIS SCHEDULE HAVE BEEN AMENDED FROM THE PREVIOUS
FINANCIAL DATA SCHEDULE FILED FOR THIS PERIOD. THIS EXHIBIT SHALL NOT BE DEEMED
FILED FOR THE PURPOSE OF SECTION 11 OF THE SECURITIES ACT OF 1933 AND SECTION 18
OF THE SECURITIES EXCHANGE ACT OF 1934, OR OTHERWISE SUBJECT TO THE LIABILITY OF
SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY OTHER FILING WHICH
INCORPORATES THIS REPORT BY REFERENCE, UNLESS SUCH OTHER FILING EXPRESSLY
INCORPORATES THIS EXHIBIT BY REFERENCE.
</LEGEND>
<RESTATED>
<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> 429,181
<PP&E> 3,311,544
<DEPRECIATION> 472,705
<TOTAL-ASSETS> 3,550,440
<CURRENT-LIABILITIES> 143,810
<BONDS> 840,342
0
0
<COMMON> 386
<OTHER-SE> 2,531,902
<TOTAL-LIABILITY-AND-EQUITY> 3,550,440
<SALES> 1,077,479
<TOTAL-REVENUES> 1,077,479
<CGS> 764,358
<TOTAL-COSTS> 764,358
<OTHER-EXPENSES> 1,593,422
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,772
<INCOME-PRETAX> (1,233,185)
<INCOME-TAX> 50
<INCOME-CONTINUING> 1,233,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,233,235
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
