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Previous: CASDIM INTERNATIONAL SYSTEMS INC, 10QSB, 1996-11-19 |
Next: PROJECTAVISION INC, 10-Q, 1996-11-19 |
<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 033-27667-FW
STELAX INDUSTRIES LTD.
----------------------
(Exact name of registrant as specified in its charter)
British Columbia NONE
- ---------------- ----
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 4287-A, Belt Line Rd., #195
Dallas, Texas 75244
-------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 416-7123
----------------------------------------
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 (X) No ( )
The number of shares outstanding of registrant's Common Stock at September 30,
1996: 31,869,285.
<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
Page
----
<S> <C> <C>
ITEM 1. Financial Statements. 2
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 6
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K. 7
Signature Page. 8
</TABLE>
i
<PAGE> 3
PART I
ITEM 1. Financial Statements
The accompanying financial statements are unaudited for the interim period, but
include all adjustments (consisting only of normal recurring accruals) which
management considers necessary for the fair presentation of results at
September 30, 1996 and September 30, 1995.
Moreover, these financial statements do not purport to contain complete
disclosures in conformity with generally accepted accounting principles and
should be read in conjunction with the Registrant's audited financial
statements at and for the fiscal year ended March 31, 1996.
1
<PAGE> 4
STELAX INDUSTRIES LTD.
CONSOLIDATED BALANCE SHEETS
(Presented in United States Dollars)
<TABLE>
<CAPTION>
ASSETS
September30 March31,
1996 1996
Unaudited
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 8,060,988 $ 41,147
Accounts receivable-trade 97,025 ----
Inventory 845,319 3,365
------------ ------------
Total Current Assets 9,003,332 44,512
PROPERTY & EQUIPMENT-AT COST:
Plant & Machinery 7,162,647 6,785,493
Building 810,410 810,410
Land 270,136 270,136
------------ ------------
8,243,193 7,866,039
Accumulated Depreciation (183,311) ----
------------ ------------
Total Property & Equipment 8,059,882 7,866,039
INTANGIBLE ASSETS (accumulated amortization o
$22,097 at September 30, 1996) 501,393 523,490
OTHER ASSETS 21,336 15,300
------------ ------------
TOTAL ASSETS $ 17,585,943 $ 8,449,341
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 706,575 $ 264,041
Payable to Maritime --- 1,033,561
Convertible note payable 195,982 ----
Accrued interest --- 52,899
Payable to related parties (Note 4) 261,936 542,538
------------ ------------
Total Current Liabilities 1,164,493 1,893,039
STOCKHOLDERS' EQUITY (DEFICIT) (Note 5):
Common stock - 50,000,000 shares
authorized, no stated par value;
issued and outstanding 31,869,285 and
18,733,906 shares at September 30, 1996
and March 31, 1996, respectively 21,848,087 11,291,686
Accumulated deficit (5,426,637) (4,735,384
------------ ------------
$ 16,421,450 $ 6,556,302
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 17,585,943 $ 8,449,341
============ ============
</TABLE>
See notes to financial statements.
2
<PAGE> 5
STELAX INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Presented in United States Dollars)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
-------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Sales
$ 2,202 $ ---- $ 91,450 $ ----
Cost of Sales 67,598 ---- 125,608 ----
---------- ---------- ---------- ----------
Gross Profit (65,396) ---- (34,158) ----
Selling, general and administrative
expenses (including depreciation and
amortization of $205,408 for the six
months ended September 30, 1996) 473,305 87,829 701,550 122,976
---------- ---------- ---------- ----------
Net loss from operations (538,701) (87,829) (735,708) (122,976)
Other income (expense):
Interest income 84,022 ---- 84,022 ----
Interest expense (3,492) ---- (24,337) ----
---------- ---------- ---------- ----------
Net loss $ (458,171) $ (87,829) $ (676,023) $ (122,976)
========== ========== ========== ==========
Net loss per share $ (0.015) $ (0.005) $ (0.027) $ (0.008)
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE> 6
STELAX INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Presented in United States Dollars)
Unaudited
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------
September 30, September 30,
1996 1995
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (676,023) $ (122,976)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 205,408 ----
Changes in operating assets and
liabilities:
Decrease (increase) in receivables (97,025) ----
Decrease (increase) in investment option ---- (384,650)
Decrease (increase) in inventory & other assets (847,990) -----
Increase (decrease) in accounts
payable & accrued interest 109,033 90,355
Foreign currency transaction loss (15,231) ----
-------------- -------------
Net cash used in operating activities (1,321,828) (417,271)
INVESTING ACTIVITIES
Purchase of property, equipment & intangibles (246,114) ----
-------------- -------------
Net cash used by investiing activities (246,114) ----
FINANCING ACTIVITIES:
Note payable issue 195,982 300,000
Payment of Maritime payable (1,033,561) ----
Net proceeds from common stock 10,425,362 185,686
-------------- -------------
Net cash provided by financing activities 9,587,783 485,686
-------------- -------------
Increase (decrease) in cash and cash
equivalents 8,019,841 68,415
Cash & cash equivalents at beginning
of period 41,147 67
-------------- -------------
Cash & cash equivalents at end of period $ 8,060,988 $ 68,482
============== =============
Interest paid $ 77,236 $ 0
============== =============
Income taxes paid $ 0 $ 0
============== =============
Non Cash Transactions:
Investment acquired by equity issue $ 131,040 $ ----
============== =============
Option to purchase investment acquired by equity
issue $ ---- $ 500,000
============== =============
</TABLE>
See notes to financial statements.
4
<PAGE> 7
STELAX INDUSTRIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(presented in United States dollars)
(Unaudited)
(1) INTERIM FINANCIAL STATEMENTS
In the opinion of management, the interim financial statements reflect all
adjustments necessary to a fair statement of the results for the interim
periods presented. The results for the six months ended September 30, 1996 are
not necessarily indicative of results to be expected for the entire year.
These financial statements, notes and analyses should be read in conjunction
with the Company's annual financials for the fiscal year ended March 31, 1996.
(2) LOSS PER SHARE
Loss per share was based on the weighted average number of common shares,
24,602,211 and 16,229,506 outstanding during the six month period ended
September 30, 1996 and 1995, respectively.
(3) INCOME TAXES
The Company has net operating loss carryforwards of approximately $420,000 for
Canada and $141,000 for the U.K.
(4) RELATED PARTY TRANSACTIONS
As of September 30, 1996, funds are owed by the Company totaling $261,936 to
the President of the Company and his affiliates. As of March 31, 1996, the
Company owed such parties $542,538.
(5) STOCKHOLDERS' EQUITY
The Company received a net $10,425,362 from the completion of a public stock
offering on the Le Nouveau Marche in July, 1996, a subordinate trading board of
France's Bourse stock exchange. Additionally, the Company sold convertible
notes payable, of which an unconverted balance of $195,982 remains at September
30, 1996.
The Company issued the final common stock required per the terms of the asset
acquisition agreement from fiscal year 1996, equaling 74,880 shares valued at
$131,040.
In July, 1996, the Company paid the balance of the amount owed to Maritime per
the terms of the asset acquisition agreement. As a result of the agreement and
the payment occurring in the United Kingdom, the Company has a translation loss
of $15,231 recorded as a reduction to stockholders' equity.
In April, 1996, the Company granted 375,000 in common stock options at prices
ranging from $2.00 to $5.00 for corporate relation support and consideration
for the Company financing that occurred in the prior year.
5
<PAGE> 8
PART I
ITEM 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations.
Results of Operation.
During the six months ended September 30, 1996, the Company commenced
initial shipments of product from its facilty in Wales, United Kingdom.
Revenues were $91,450 with cost of sales of $125,608 for the six month period.
The Company's selling, general and administrative expenses were $701,550
reflecting costs incurred in maintaining the facility pending completion of the
Company's financing, which occurred in July 1996, and recommencing operations.
As the Company acquired the steel mill facility in November 1995, there are no
comparable results of operations for the three months or six months ended
September 30, 1995.
Liquidity and Capital Resources
In July 1996 the Company raised a net amount of $10,425,000 in
equity. These funds are sufficient for the Company to pursue its business
objectives over the next twelve months including bringing to full production
the Company's steel mill facility and purchasing raw inventory for sales of the
Company's stainless steel products.
6
<PAGE> 9
PART II
ITEM 6. Exhibits and Reports on Form 8-K
The Company filed two reports on Form 8-K (Report dated July 1, 1996 and Report
dated July 11, 1996) during the second quarter for which this Form 10-Q is
filed, both reporting on Item 5. Other Events.
7
<PAGE> 10
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
STELAX INDUSTRIES LTD.
Date: November 19, 1996
-----------------------
/s/ Harmon Hardy
--------------------------------------
Harmon Hardy
President/Chief Financial Officer
8
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,060
<SECURITIES> 0
<RECEIVABLES> 97
<ALLOWANCES> 0
<INVENTORY> 845
<CURRENT-ASSETS> 9,003
<PP&E> 7,162
<DEPRECIATION> 183
<TOTAL-ASSETS> 17,585
<CURRENT-LIABILITIES> 1,164
<BONDS> 0
0
0
<COMMON> 21,848
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,585
<SALES> 91
<TOTAL-REVENUES> 91
<CGS> 125
<TOTAL-COSTS> 125
<OTHER-EXPENSES> 701
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> (676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (735)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (676)
<EPS-PRIMARY> (0.027)
<EPS-DILUTED> (0.027)
</TABLE>
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