UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000 Commission File Number 000-18389
WORLD WIDE STONE CORPORATION
NEVADA 33-0297934
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification number)
5236 S. 40th Street, Phoenix, AZ 85040
(Address of Principal Executive Offices) (Zip Code)
602-438-1001
(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 March 31, 2000, there were 32,803,768 shares of common stock outstanding.
<PAGE>
WORLD WIDE STONE CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999 ............................... 3
Consolidated Statements of Operations
Three months ended March 31, 2000 and 1999 ......................... 4
Consolidated Statements of Cash Flows
Three months ended March 31, 2000 and 1999 ......................... 5
Notes to Consolidated Financial Statements ......................... 6
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations ...................... 7
PART II. OTHER INFORMATION .................................................. 10
Signature ................................................................... 11
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<PAGE>
WORLD WIDE STONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash $ 264,660 $ 151,147
Accounts receivable 770,650 805,052
Inventory 1,553,019 1,519,767
Prepaid expenses and other 83,318 72,585
----------- -----------
Total current assets 2,671,647 2,548,551
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation of $1,751,849
and $1,622,871, respectively 5,100,673 5,159,297
COST IN EXCESS OF NET ASSETS ACQUIRED, net of
accumulated amortization of $123,115 and
$118,555, respectively 150,474 155,034
OTHER ASSETS:
Other receivables 328,799 299,308
Deferred loan fees, net 43,942 47,505
Prepaid taxes 8,513 10,748
----------- -----------
Total assets $ 8,304,048 $ 8,220,443
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 231,451 $ 228,286
Accrued liabilities 225,062 319,353
Income taxes payable 154,433 94,093
Current portion of long-term debt 320,638 297,830
Revolving line of credit 75,000 --
Other (Banca Serfin S.A. debt) 900,000 900,000
----------- -----------
Total current liabilities 1,906,584 1,839,562
Deferred tax liability 42,380 18,000
LONG-TERM DEBT, net of current portion 910,604 1,037,408
----------- -----------
Total liabilities 2,859,568 2,894,970
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 100,000,000
shares authorized, 34,803,768 shares issued,
32,803,768 outstanding 34,804 34,804
Additional paid-in capital 8,039,436 8,039,436
Accumulated deficit (2,531,407) (2,643,707)
Cumulative remeasurement adjustment 21,647 14,940
Treasury stock, at cost, 2,000,000 shares (120,000) (120,000)
----------- -----------
Total stockholders' equity 5,444,480 5,325,473
----------- -----------
Total liabilities and stockholders' equity $ 8,304,048 $ 8,220,443
=========== ===========
The accompanying notes are an integral part of these
consolidated balance sheets.
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<PAGE>
WORLD WIDE STONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
REVENUE $ 2,046,118 $ 1,394,931
COST OF GOODS SOLD 1,101,411 672,301
------------ ------------
Gross profit 944,707 722,630
COST AND EXPENSES:
Selling, general and administrative 670,117 370,588
Depreciation and amortization 14,935 11,024
------------ ------------
Income from operations 259,655 341,018
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 1,321 2,764
Interest expense (34,349) (8,355)
(Loss) gain on currency remeasurement (29,607) 2,977
------------ ------------
Total other income (expense) (62,635) (2,614)
------------ ------------
Income before provision for income taxes 197,020 338,404
PROVISION FOR INCOME TAXES 84,720 113,000
------------ ------------
Net income 112,300 225,404
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Foreign currency remeasurement adjustment 6,707 (14,075)
------------ ------------
Comprehensive income $ 119,007 $ 211,329
============ ============
EARNINGS PER SHARE
Basic and diluted:
Net income per share $ -- $ .01
============ ============
Weighted average number of
common shares outstanding 32,803,768 32,703,768
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
WORLD WIDE STONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
----------------------
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 112,300 $ 225,404
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 133,538 87,904
Amortization of deferred loan fees 3,563 --
Loss (gain) on foreign currency remeasurement 29,607 (2,977)
Changes in certain assets and liabilities:
Decrease (increase) in accounts receivable 34,402 (112,248)
Increase in inventory (33,252) (96,996)
Increase in prepaid expenses and other (8,498) (75,791)
Increase in other receivables (52,391) (50,735)
Increase in deferred taxes 24,380 113,000
Increase in accounts payable 3,165 12,506
(Decrease) increase in accrued liabilities (94,291) 3,545
Increase in income taxes payable 60,340 --
--------- ---------
Net cash provided by operating activities 212,863 103,612
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment, net (70,354) (38,943)
--------- ---------
Net cash used in investing activities (70,354) (38,943)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from long-term debt 146,004 (38,700)
Net borrowings on the line of credit (175,000) --
--------- ---------
Net cash used in financing activities (28,996) (38,700)
--------- ---------
NET INCREASE IN CASH 113,513 25,969
CASH, beginning of period 151,147 279,167
--------- ---------
CASH, end of period $ 264,660 $ 305,136
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest $ 19,329 $ 8,355
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
WORLD WIDE STONE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
(1) INTERIM FINANCIAL REPORTING:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows for the periods presented have been made. The results of operations
for the three-month period ended March 31, 2000 are not necessarily indicative
of the operating results that may be expected for the entire year ending
December 31, 2000. These financial statements should be read in conjunction with
the Company's Form 10-KSB for the year ended December 31, 1999.
(2) INVENTORY:
Inventory is stated at the lower of cost or market. Inventory and cost of goods
sold include all operating costs incurred at the three factories in Mexico as
well as freight charges from Mexico to the United States. Included in these
operating costs was depreciation of property, plant and equipment of $79,603 and
$76,880 for the three months ended March 31, 2000 and 1999, respectively. An
additional $39,000 of depreciation related to the Company's third factory was
excluded from these operating costs and included in selling, general and
administrative expenses during the three months ended March 31, 2000 because the
third factory had limited new inventory production during the first quarter due
to additional work that was performed on existing inventory to ensure the
quality of the factory's production. As of March 31, 2000, inventory was located
at the plant in Durango, Mexico, at a showroom-warehouse in Phoenix, Arizona,
and at a warehouse in El Paso, Texas. Inventory at March 31, 2000, consists of
finished goods and raw materials of $1,192,100 and $360,919, respectively.
(3) EARNINGS PER SHARE:
The Company utilizes SFAS No. 128, EARNINGS PER SHARE, to compute basic and
diluted earnings per share. Because the Company has no outstanding convertible
securities or other common stock equivalents, there is no difference between
amounts reported for weighted average common shares and earnings per share for
basic and diluted amounts. In March 2000, the Company's Board of Directors
approved a 1-for-30 reverse stock split of the Company's common stock. If
approved, each 30 shares of the Company's common stock outstanding prior to the
reverse stock spilt will represent one share of common stock following the
reverse stock spilt. Stockholders will receive consideration for fractional
shares as a result of the reverse stock spilt. If approved, the Company's net
income per share would be restated as $0.10 and $0.21 for the three months ended
March 31, 2000 and 1999, respectively.
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<PAGE>
(4) FOREIGN CURRENCY TRANSLATION:
The Company's wholly-owned Mexican subsidiaries maintain their books and records
in Mexican pesos. Their functional currency, however, is the U.S. dollar.
Therefore, these subsidiaries utilize the remeasurement method of foreign
currency translation when consolidated.
The remeasurement method of foreign currency converts all monetary assets and
liabilities from Mexican pesos to U.S. dollars at the current rate of exchange
at the balance sheet date. All nonmonetary 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
Mexican pesos to U.S. dollars at a weighted average conversion rate.
Depreciation, amortization, and similar historical-cost-based expenses use a
historical-based rate. Remeasurement gains and losses resulting from
transactions that are short-term in nature are reported in the Company's
consolidated statements of operations as foreign currency remeasurement
adjustments. Remeasurement gains or losses resulting from intercompany
transactions that are long-term in nature are reported as a separate component
of stockholders' equity as a cumulative remeasurement adjustment.
(5) RELATED PARTY TRANSACTIONS
In January 1999, an officer of the Company acquired the building that the
Company leases for its corporate offices in Phoenix, Arizona. In March 2000, the
building was transferred to a director of the Company as part of a divorce
settlement. Because the Company entered into the lease with a third party prior
to the officer's acquisition of the building and the subsequent transfer to the
director, the Company believes that the terms of the lease are no less favorable
to the Company than could be obtained from non-affiliated parties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Report on Form 10-QSB that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding our company's "expectations,"
"anticipation," "intentions," "beliefs," or "strategies" regarding the future.
Forward-looking statements include statements regarding revenue, margins,
expenses, and earnings analysis for fiscal 2000 and thereafter; future products
or product development efforts; spending for acquisitions of additional
equipment or expansion of production facilities; and liquidity and anticipated
cash needs and availability. All forward-looking statements included in this
Report are based on information available to us as of the filing date of this
Report, and we assume no obligation to update any such forward-looking
statements. It is important to note that our actual results could differ
materially from those in such forward-looking statements as a result of a
variety of factors, including those identified in our Form 10-KSB for the year
ended December 31, 1999, as filed with the Securities and Exchange Commission.
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<PAGE>
INTRODUCTION
We quarry, manufacture, and market a wide variety of dimensional stone products.
We extract marble limestone and travertine blocks from quarries located in
Mexico. We then transport the blocks to plants operated by our wholly-owned
Mexican subsidiaries in Durango, Durango, Mexico, where the blocks are cut,
honed, polished or tumbled, then dimensioned and packaged. We market our
dimensional stone products primarily in the United States through distributors,
dealers, and designers. In addition, we sell nominal quantities of our products
in Europe and Canada.
RESULTS OF OPERATIONS OF THE COMPANY FOR THE THREE MONTHS ENDED MARCH 31, 2000
REVENUE. Our revenue for the three months ended March 31, 2000 was $2,046,118,
which represents a 47% increase over revenue of $1,394,931 for the three months
ended March 31, 1999. We attribute the increases in revenue to (1) increased
market acceptance and demand for our products, (2) additional volume sold
through our authorized stocking distributor channel, and (3) approximately
$200,000 in sales of slab product.
COST OF GOODS SOLD; GROSS PROFIT. Cost of goods sold was $1,101,411 for the
three months ended March 31, 2000, compared with $672,301 for the three months
ended March 31, 1999. Gross profit as a percentage of revenue was 46% for the
three months ended March 31, 2000, and 52% for the three months ended March 31,
1999. The decrease in the gross profit as a percentage of revenue is primarily
attributable to lower margins realized on a higher volume of sales through our
authorized stocking distributor channel.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased to $ 670,117 during the three months ended
March 31, 2000 from $ 370,588 during the three months ended March 31 1999.
Selling, general, and administrative expense represented approximately 33% and
27% of revenue during the three months ended March 31, 2000 and 1999,
respectively. The increase in selling, general, and administrative expense is
due to the addition of personnel, increased travel expenses, and increases in
marketing and promotional activities as well as the addition of depreciation
expense related to the third factory during the first three months ended March
31, 2000.
PROVISION FOR INCOME TAXES. We utilized our remaining net operating loss
carryforwards during the year ended December 31, 1999. We accounted for
utilizing our net operating loss carryforwards during the three-month period
ended March 31, 1999 by reducing our deferred tax asset and recording a related
provision for income taxes of $113,000. The reduction of our deferred tax asset
during this period was a non-cash transaction. We have recorded a provision for
income taxes of $84,720 for the three months ended March 31, 2000 using an
effective rate of 43%. The provision for income taxes is comprised of a current
amount of $60,340 and a deferred amount of $24,380.
SEASONALITY
Historically, we have experienced lower sales in the fourth calendar quarter as
a result of production declines during the holiday season as well as seasonal
declines in homebuilding and remodeling. We may also be subject to periodic
declines experienced by the building industry in general.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Our working capital position increased to $765,063 at March 31, 2000 from
$708,989 at December 31, 1999. The increase was attributable to an increase in
cash and a decrease in accrued liabilities. The improvement in our working
capital position can be attributed to improved cash flow and cash management
practices.
Our net cash provided by operating activities was $212,863 for the three months
ended March 31, 2000, compared to net cash provided by operating activities of
$103,612 for the three months ended March 31, 1999. The change was primarily
attributable to a decrease in accounts receivable.
We have a $500,000 revolving line of credit with Bank One, Arizona NA. Interest
on amounts borrowed under the line of credit is payable at the bank's prime rate
plus 1.5%, or a total of 10.25% at March 31, 2000. The line of credit expires on
August 13, 2000, and is secured by our inventory, accounts receivable, and
intangible assets. Franklin E. Cunningham, our Chairman of the Board, President,
and Chief Executive Officer, also has personally guaranteed our obligations
under the line of credit. At March 31, 2000, we had outstanding borrowings of
$75,000 and $425,000 available to us under the line of credit.
In January 2000, we entered into a capital lease agreement with Banc One Leasing
Corporation in order to refinance the balance outstanding on the line of credit
at December 31, 1999. The lease has a five-year term and bears interest at a
rate of 9.29% per annum. We have the option to purchase the equipment for a
nominal amount at the end of the lease term.
We anticipate that our current cash resources, expected cash flow from
operations, and equipment financing will be sufficient to fund our capital needs
during the next 12 months at our current level of operations. We may be required
to obtain additional capital to fund our planned growth during the next 12
months and beyond, particularly for expansion of our facilities and operations
in Mexico. Potential sources of any such capital may include the proceeds from
bank financing, strategic alliances, and offerings of our equity or debt
securities. There can be no assurance that such capital will be available from
these or other potential sources, and the lack of such capital could have a
material adverse affect on our business.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10.8: Lease Agreement dated January 26, 2000, between World
Wide Stone Corporation and Banc One Leasing Corporation.
Exhibit 27.1: Financial Data Schedule
(b) REPORTS ON FORM 8-K
Not Applicable
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<PAGE>
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, 2000 World Wide Stone Corporation
By: /s/ Aaron T. Macneil
-----------------------------------------
Aaron T. Macneil, Chief Financial Officer
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[BANK ONE LOGO]
Lease Agreement
(Finance)
<TABLE>
<S> <C>
Lease No. 100010171 Lessee: World Wide Stone Corporation
Street Address: 5236 S. 40th Street
Lessee Contact: Spencer Cunningham City, State, Zip: Phoenix Arizona 85010
</TABLE>
Equipment Description (equipment deemed new unless described specifically as
used below): See Attached Schedule A-1
A. INSTALLMENT PAYMENT:
Payment No(s). Amount
-------------- ------
1 $4,730.28
59 $4,730.28
B. INSTALLMENT PAYMENT DUE DATES:
Initial installment payment due on Acceptance Date and each payment thereafter
is due on the same day of each (check one) [X] Month [ ] Quarter [ ] Other
(specify)
C. Term: 60 Months D. Admin Fee. $100.00
E. Lessor's Cost: $228,110.00 F. Security Deposit: $ N/A
G. ADDITIONAL PROVISIONS:
If Lessee pays and performs all of its obligations hereunder in full and if
Lessee pays $1.00 at the end of the Term, then Lessor shall release its
interests in the Equipment to Lessee.
1. UNCONDITIONAL LEASE. Lessee leases from Banc One Leasing Corporation
("Lessor") the equipment described above or on any attached schedule(s)
("Equipment") on the terms and conditions set forth herein, Lessee's obligation
to pay all amounts duo hereunder is ABSOLUTE AND UNCONDITIONAL UNDER ALL
CIRCUMSTANCES and shall not be affected by any defect in the Equipment or by any
set off, counterclaim, or defense that Lessee may have against Lessor or anyone
else. Lessee represents that the Equipment is used for business purposes and not
for personal, family or household purposes. LESSOR HAS NOT MADE, AND DISCLAIMS,
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE EQUIPMENT'S QUALITY OR CONDITION,
ITS MERCHANTABILITY OR ITS FITNESS FOR A PARTICULAR PURPOSE OR AS TO THIS
LEASE'S TAX OR ACCOUNTING TREATMENT.
2. TERM; RENT. This Lease commences on the date designated by Lessor below
("Acceptance Date") and continues for the term stated in "C" above. Lessee will
pay the payments stated in "A" above when due as stated in "B" above, whether or
not Lessee receives an invoice. Except as provided in Section 19 hereof, THIS
LEASE CANNOT BE CANCELED OR PREPAID.
3. EQUIPMENT ACCEPTANCE. LESSEE AGREES THAT: LESSEE HAS RECEIVED AND INSPECTED
THE EQUIPMENT; THE EQUIPMENT IS IN GOOD WORKING ORDER AND COMPLIES WITH THE
PURCHASE ORDERS/CONTRACTS; LESSEE IRREVOCABLY ACCEPTS THE EQUIPMENT FOR THIS
LEASE'S PURPOSE "AS-IS, WHERE-IS, WITH ALL FAULTS"; AND LESSEE UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO REVOKE ITS ACCEPTANCE OF THE EQUIPMENT.
4. PURCHASE ORDERS, lessor is not a manufacturer or supplier of the Equipment.
Lessee selected the Equipment and its suppliers. Lessee received, and approved,
the Equipment's purchase orders/contracts. Lessor hereby notifies Lessee that
Lessee may have rights under such orders/contracts and advises Lessee to contact
the manufacturers and suppliers for a description of any such rights.
5. OWNERSHIP, Lessee will possess title to the Equipment.
6. CARE; USE; LOCATION. Lessee will maintain the Equipment in good operating
condition, repair, and appearance; will use the Equipment in the regular course
of its business; and will comply with all laws and regulations. Lessee will not
alter the Equipment unless in accordance with the manufacturer's recommendation.
All alterations and replacements become a part of the Equipment and will be done
without expense to Lessor. The Equipment will remain personal property. Lessee
will keep the Equipment at the location shown above and will not remove it.
Lessor has the right to enter any of the addresses shown above to inspect the
Equipment and any maintenance records.
7. TAXES. Losses will pay all taxes and charges that may be imposed by any
- --------------------------------------------------------------------------------
Additional terms and conditions of this Lease Agreement are found on page 2.
World Wide Stone Corporation Date signed by Lessee: 1/20/00
- ---------------------------- ---------------------
(Lessee Name)
By: /s/ Spencer W. Cunningham Witness Signature: /s/ David P. Skinner
---------------------------- -------------------------
Title: Executive Vice President Witness name printed: David P. Skinner
------------------------- ----------------------
REGARDLESS OF ANY PRIOR, PRESENT OR FUTURE ORAL AGREEMENT OR COURSE OF DEALING,
LESSEE AGREES THAT NO TERM OR CONDITION OF THIS LEASE MAYBE AMENDED, MODIFIED,
WAIVED, DISCHARGED, RESCINDED OR TERMINATED EXCEPT BY A WRITTEN DOCUMENT SIGNED
BY LESSOR AND LESSEE.
By:
---------------------------------------------
Authorized Signature of Lessee
BANC ONE LEASING CORPORATION
By: Lessor's Acceptance Date:
------------------------- ------------------------
Title: Bane One Leasing Customer Service: 1-800-878-2601
----------------------
GUARANTY
For valuable consideration that has been received, the undersigned jointly and
severally unconditionally guarantee to Lessor the full and prompt performance of
all obligations which Lessee now has or may hereafter have to Lessor, including
but not limited to obligations under this Lease. Lessor is not required to
proceed against Lessee or the Equipment or to enforce any other remedy before
proceeding against the undersigned. The undersigned agree to pay all attorney's
fees and other expenses incurred by Lessor by reason of default by Lessee or the
undersigned. The undersigned waive notice of acceptance hereof and of all other
notices or demand of any kind to which the undersigned may be entitled. The
undersigned consents to any extensions or modifications granted to Lessee and to
the release and/or compromise of any obligations of Lessee or any other obligors
and guarantors without in any way releasing the undersigned from obligations
hereunder. This guaranty binds the undersigned's heirs, administrators,
representatives, successors, and assigns and may be enforced by or for the
benefit of any assignee or successor of Lessor. The undersigned consent to the
jurisdiction of any federal or state court in Ohio with respect to any legal
action commenced hereunder. LESSOR AND THE UNDERSIGNED EXPRESSLY WAIVE ANY RIGHT
TO TRIAL BY JURY.
Frank Cunningham N/A
- ---------------- ---
(Guarantor Name) (Guarantor Name)
By: By:
--------------------------------- ------------------------------------
Title: N/A Title:
------------------------------ ---------------------------------
Data signed by Guarantor: Date signed by Guarantor:
------------ ---------------
<PAGE>
[BANK ONE LOGO]
governmental entity during this Lease's term arising from the acquisition, use,
ownership or leasing of the Equipment whether due before or after cancellation,
expiration, of termination of this Lease. Lessee will pay all personal property
taxes for the Equipment directly to the applicable taxing authority and will
file all tax returns for such taxes as owner. Upon Lessor's request, Lessee will
send Lessor satisfactory evidence of payment of such taxes.
8. INDEMNITY. Lessee will indemnify and defend Lessor, its affiliates, their
officers, agents and employees against all loss, liability and expense,
including reasonable attorney's fees (including costs of a successful defense)
from claims in any way related to the Equipment, including claims based upon
negligence; tort; strict liability; bodily injury, including death; property
damage, any alleged violation of others' rights, including intellectual property
rights; or any alleged violation of any law or regulation.
9. LOSS OR DAMAGE. Lessee bears all risks of loss or, and damage to, the
Equipment ("Loss"). Any Loss shall not relieve Lessee of any obligation
hereunder. In the event of any Loss, Lessee shall immediately notify Lessor and,
at Lessor's option, shall (a) place the same in good repair, condition and
working order; or (b) replace the same with like equipment in good repair,
condition and working order, free of encumbrances (such replacement equipment
will become Equipment hereunder) and deliver to Lessor satisfactory evidence of
Lessee's ownership of the replacement equipment to Lessor; or (c) pay to Lessor
the Equipment's Stipulated Loss Payment (defined in Section 14) plus all other
amounts due hereunder,
10. INSURANCE. Lessee will insure the Equipment against all risks of loss or
damage. Such policies will be in form, amount and with insurers satisfactory to
Lessor; will provide for at least 30 days written notice of cancellation to
Lessor, and will require that Lessor's interest remains insured regardless of
any act, emission, neglect, or misconduct of Lessee. Such policies will name
Lessor as Loss Payee as to the Equipment damage coverage. Lessee will deliver to
Lessor satisfactory evidence of continuing insurance coverage required hereby.
Lessor will have no duty to ascertain the existence or terms of any insurance
policies. Lessee irrevocably appoints Lessor as Lessee's attorney-in-fact to
make claim for, receive payment of, and execute and endorse all documents,
checks, or drafts, received in payment for loss or damage under any such
policies.
11. FEES; LATE CHARGES; ADVANCES. Lessee will pay the fee specified in "D' above
to Lessor with the Initial installment payment. If any amount payable hereunder
is not paid when due, Lessee will pay on demand as to each overdue payment a
late payment fee equal to the greater of $15 or 5% of the late payment (but not
to exceed the highest rate permitted by law). If Lessee fails to perform any of
its obligations in this Lease, Lessor may perform the obligation, and the amount
of such obligation and Lessor's expense shall be additional amounts, payable by
Lessee on demand.
12. ASSIGNMENT. LESSEE SHALL NOT, DIRECTLY OR INDIRECTLY (a) ASSIGN OR OTHERWISE
DISPOSE OF THIS LEASE OR ANY INTEREST HEREIN OR ANY OF THE EQUIPMENT, OR (b)
LEASE, SUBLEASE, OR TRANSFER POSSESSION OR USE OF ANY OF THE EQUIPMENT, OR (c)
CREATE OR ALLOW TO EXIST ANY LIEN OR OTHER CLAIM TO ANY OF THE EQUIPMENT.
Lessor, and any assignee of Lessor, may sell, or grant a security interest in,
any of Lessor's rights, obligations, title or interest in the Equipment, this
Lease, or the amounts payable hereunder to any entity (a "transferee"). Any
transferee shall have all of Lessor's rights, powers and remedies hereunder.
Lessee will acknowledge the transaction in writing if requested by Lessor or the
transferee. Lessee shall not assert against any transferee any defense,
counterclaim or set off that Lessee may have against Lessor. Lessee acknowledges
that any such transaction will not materially increase or change its burdens or
risks hereunder.
13. DEFAULT. Any of the following is an event of default hereunder: (a) Lessee
fails to pay any amount within 10 days of its due date hereunder; (b) Lessee
fails to perform any of its other obligations herein; (c) Lessee defaults in any
obligation under the terms of any loan or lease in which Lessor or any affiliate
of Bank One Corporation is a creditor or lessor; (d) Lessee becomes insolvent,
makes an assignment for the benefit of creditors, or ceases doing business as a
going concern; (e) a receiver, trustee, conservator, or liquidator of Lessee is
appointed with or without Lessee's consent: (f) the filing by of against Lessee
of a petition under federal bankruptcy laws or under any other insolvency laws;
(g) any representation or statement made or furnished to Lessor by or on behalf
of Lessee proves to be materially false or misleading when made or furnished;
(h) the occurrence in Lessor's reasonable opinion of any material adverse change
in lessee's financial condition or business; (i) Lessee dies or liquidates its
business; (j) Lessee enters into any merger, consolidation, or other
reorganization and fails to be the surviving entity; (k) Lessee sells or
otherwise disposes of substantially all of its assets except in the ordinary
course of business. In this section, "Lessee" includes any guarantor of any part
of Lessee's obligations herein.
14. REMEDIES. (a) If any event of default exists, Lessor may do one or more of
the following in any order. (i) require Lessee to return any Equipment as
provided herein; (ii) repossess any Equipment wherever found; (iii) sell any
Equipment at public or private sale, with or without advertisement or
publication; or re-lease of otherwise dispose of any of it; or keep any of it;
(iv) require Lessee to pay to lessor on a date specified by Lessor, with respect
to any Equipment (A) all accrued and unpaid amounts due hereunder on of before
such date, plus (B) the principal amount of all remaining installment payments
and other amounts due hereunder plus accrued interest ("Stipulated Loss
Payment'), plus (C) interest at the Overdue Rate on the total of the foregoing;
(v) require Lessee to pay all costs and damages incurred by Lessor due to the
event of default or its actions under this section, including, without
limitation, any attorney fees; and/or (vi) terminate or cancel this Lease, sue
to enforce Lessee's performance of its obligation hereunder, and/or exercise any
other right or remedy then available to Lessor at law or in equity. The "Overdue
Rate" is a per annum rate equal to 18%, but not to exceed the highest rate
permitted by applicable law.
(b) Lessor is not required to take any legal process or give Lessee any notice
before exercising any remedy. None of the above remedies is exclusive, but each
is cumulative. No delay or failure on the part of Lessor to exercise any right
hereunder is a waiver thereof, nor as an acquiescence in any default, nor shall
any single or partial exercise of any right preclude any other exercise thereof
or the exercise of any other right. Lessor shall not be required to sell or
otherwise dispose of any Equipment prior to Lessor enforcing any remedy. Lessor
may sell or re-lease the Equipment in any manner it chooses, free of any claims
or rights of Lessee and without any duty to account to Lessee except as provided
below. If Lessor actually sells or re-leases the Equipment, it will credit the
net proceeds of any sale, or the net present value (discounted at the rate of
18% per annum) of the rents payable under any new lease, against the Stipulated
Loss Payment of the Equipment and any other amounts Lessee owes Lessor, or will
reimburse Lessee for such amount after deducting the costs and expenses
described in subsection 14(a)(v). If Lessee is required to return the Equipment,
Lessee shall (at Lessee's sole expense) disassemble, pack, insure and return the
Equipment to Lessor (in accordance with industry standards) at any location
selected by Lessor. Returned Equipment shall be in its original condition,
subject to reasonable wear and tear resulting from normal and proper use, and
shall be in good working order and condition.
15. MISCELLANEOUS. Lessee's obligations in Sections 7 and 8 hereof will survive
the expiration, cancellation, or termination of this Lease. It any provision
hereof is invalid or unenforceable, the remaining provisions hereof will remain
in full force. The provisions hereof bind and inure to the benefit of the
permitted assigns, successors, heirs and personal representatives of Lessor and
Lessee. Lessor will not be liable to Lessee for any indirect, consequential or
special damages. If this Lease is signed by more than one Lessee, each is
jointly and severally liable for payment and performance of all of Lessee's
obligations hereunder. Upon Lessor's request, Lessee will promptly furnish to
Lessor all financial statements and reports requested by Lessor. Lessee will
deliver to Lessor, documents that Lessor deems advisable for the protection or
perfection of this Lease and of Lessor's rights hereunder and shall pay all
costs incident thereto. Lessee irrevocably appoints Lessor, its assignee, or
designee as Lessee's attorney-in-fact to sign any filings, including financing
statements. Any security deposit stated in 'F' above shall be held without
interest as security for the performance of the terms and conditions contained
herein. Lessor may apply any security deposit to cure any default hereunder.
16. JURISDICTION; JURY WAIVER. This Lease is binding when accepted by Lessor in
the State of Ohio, and shall be deemed to have been made in Ohio. The
interpretation, construction and validity of this Lease shall be governed by the
laws of the State of Ohio, where Lessor has its principal place of business and
where payments are to be made by Lessee. Lessee voluntarily consents to the
jurisdiction of any federal or state court located in Ohio for any legal action
commenced hereunder. LESSEE AND LESSOR IRREVOCABLY WAIVE ANY RIGHT TO A TRIAL BY
JURY.
17. ENTIRE AGREEMENT. THIS LEASE IS THE ENTIRE AGREEMENT BETWEEN THE PARTIES. NO
ORAL OR UNWRITTEN AGREEMENTS OR UNDERSTANDINGS AFFECTING THIS LEASE OR THE
EQUIPMENT EXIST. No manufacturer or supplier is Lessor's agent. Lessor is not
bound by any representation, warranty or agreement made by a manufacturer,
supplier or their employees or agents.
18. DEBT FINANCING. Regardless of any other provision of this Agreement: (a)
this Agreement is intended to be a secured debt financing agreement and is not a
lease; (b) as security for payment of its obligations under this Agreement and
any other present or future obligation of Lessee to Lessor, Lessee grants Lessor
a first priority security interest in the Equipment and all replacements and
proceeds thereof: (c) all references herein to 'Lease', "Lessor's Cost",
"Lessee' and 'Lessor' shall be amended to be "Finance Lease Agreement',
"Financed Amount", 'Borrower", and "Lender" respectively; (d) Lessee represents
that it has granted Lessor a first priority security interest in the Equipment
and in the proceeds and replacements thereof; and (e) at Lessee's sole expense,
Lessee will defend Lessor's first priority security interest in the Equipment
and in the replacements and proceeds thereof from all claims whatsoever.
19. PREPAYMENT. Notwithstanding anything to the contrary herein, if no event of
default has occurred hereunder and if Lessee gives Lessor at least 20 days prior
written notice. Lessee may terminate this Lease by paying to lessor on any
Prepayment Date the total of: (a) all accrued installment payments, interest,
taxes, late charges and other amounts then due and payable hereunder plus (b)
the entire remaining principal balance payable by Lessee hereunder according to
the simple interest method; plus (c) any remaining unamortized internal or
external costs and fees incurred by Lessor in the origination of this Lease.
"Prepayment Date" means any installment payment due date.
<PAGE>
SCHEDULE A-1
Attached to Lease No. 1000101714
QUANTITY DESCRIPTION PAGE 1
- -------- ----------- ------
Equipment Location: 5236 S. 40th Street
Phoenix, Arizona 85040
County: Maricopa
Equipment Cost: $228,110.00
1 1998 Samsung Front End Loader SIN QBY0058 Model LX-473
1 Software System Manager with Report Writer (includes 12
concurrent users, Dynamics, View, Explorer)
1 Multi-Currency Management
1 Integration Manager
TOGETHER WITH ALL ATTACHMENTS, ADDITIONS, ACCESSIONS, PARTS, REPAIRS,
IMPROVEMENTS, REPLACEMENTS AND SUBSTITUTIONS THERETO.
This Schedule A-1 is attached to, and made a part of, the Lease Agreement
referenced above and constitutes a true and accurate description of the
Equipment.
Lessee:
World Wide Stone Corporation
By: /s/ Spencer W. Cunningham
------------------------------
Executive Vice President
Date: 01/26/00
----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF WORLD WIDE STONE CORPORATION FOR THE
QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. 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>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 264,660
<SECURITIES> 0
<RECEIVABLES> 770,650
<ALLOWANCES> 0
<INVENTORY> 1,553,019
<CURRENT-ASSETS> 2,671,647
<PP&E> 6,852,522
<DEPRECIATION> 1,751,849
<TOTAL-ASSETS> 8,304,048
<CURRENT-LIABILITIES> 1,906,584
<BONDS> 910,604
0
0
<COMMON> 34,804
<OTHER-SE> 5,409,676
<TOTAL-LIABILITY-AND-EQUITY> 8,304,048
<SALES> 2,046,118
<TOTAL-REVENUES> 2,046,118
<CGS> 1,101,411
<TOTAL-COSTS> 1,101,411
<OTHER-EXPENSES> 685,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,349
<INCOME-PRETAX> 197,020
<INCOME-TAX> 84,720
<INCOME-CONTINUING> 112,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,300
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
