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Previous: CASDIM INTERNATIONAL SYSTEMS INC, 10QSB, 1997-08-19 |
Next: T SF COMMUNICATIONS CORP, SC 13D/A, 1997-08-19 |
<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 June 30, 1997
( ) 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 0-18052
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.)
4004 Beltline Road, Suite 107
Dallas, Texas 75244
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(972) 233-6041
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 of such short 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 June 30, 1997:
31,869,285.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION Page
----
<S> <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>
<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 June 30,
1997 and June 30, 1996.
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, 1997.
1
<PAGE> 4
STELAX INDUSTRIES LTD.
CONSOLIDATED BALANCE SHEETS
(Presented in United States Dollars)
<TABLE>
<CAPTION>
ASSETS June 30, March 31,
1997 1997
Unaudited
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $4,549,267 $6,186,712
Accounts receivable-trade, net (allowance for doubtful accounts at
June 30, and March 31, 1997, $9,266 and $24,600, respectively) 468,282 293,001
-related parties (Note 4) 4,421 --
Inventory - Raw materials 472,414 302,513
Work in process 738,027 366,847
Finished goods 91,240 213,522
Prepaids and other current assets 42,931 37,623
----------- -----------
Total Current Assets 6,366,582 7,400,218
PROPERTY & EQUIPMENT-AT COST:
Plant & Machinery 8,225,165 8,060,727
Building 814,387 810,792
Land 270,136 270,136
----------- -----------
9,309,688 9,141,655
Accumulated Depreciation (509,112) (398,541)
----------- -----------
Total Property & Equipment 8,800,576 8,743,114
INTANGIBLE ASSETS (accumulated amortization of
$60,612 at June 30, 1997 and $47,749 at March 31, 1997) 536,633 538,991
OTHER ASSETS 127,167 74,444
----------- -----------
TOTAL ASSETS $15,830,958 $16,756,767
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 1,518,431 $1,415,583
Convertible note payable 195,982 195,982
Payable to related parties (Note 4) 46,027 20,228
----------- -----------
Total Current Liabilities 1,760,440 1,631,793
STOCKHOLDERS' EQUITY:
Common stock - 50,000,000 shares
authorized, no stated par value;
issued and outstanding 31,869,285
shares at June 30, 1997 and March 31, 1997. 21,821,087 21,821,087
Accumulated deficit (7,928,951) (6,844,173)
Cumulative translation adjustments 178,382 148,060
----------- -----------
Total Stockholders' Equity 14,070,518 15,124,974
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $15,830,958 $16,756,767
=========== ===========
</TABLE>
see notes to consolidated financial statements
2
<PAGE> 5
STELAX INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Presented in United States Dollars)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
June 30, June 30,
1997 1996
-------------- -------------
<S> <C> <C>
Sales $ 544,009 $ 89,248
Cost of sales 1,180,264 58,010
------------- ------------
Gross Profit (Loss) (636,255) 31,238
Selling, general and administrative
expenses (including depreciation and amortization
of $123,434 and $99,148 for the period ended June 30, 1997
and 1996 respectively) 511,442 228,245
------------- ------------
Net loss from operations (1,147,697) (197,007)
Other income (expenses):
Interest expense -- (20,845)
Interest income 62,918 --
------------- ------------
Net loss $ (1,084,779) $ (217,852)
============= ============
Net loss per share $ (.03) $ (0.01)
============= ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
STELAX INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Presented in United States Dollars)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
June 30, June 30,
1997 1996
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,084,779) $ (217,852)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 123,434 99,148
Allowance for doubtful accounts (15,334) --
Foreign currency transaction gain (loss) 30,323 (1,875)
Changes in operating assets and
liabilities:
Decrease (increase) in receivables (164,368) (92,047)
Decrease (increase) in inventory & other assets (476,831) (87,465)
Increase (decrease) in accounts
payable & accrued interest 128,648 (3,482)
------------- ------------
Net cash used in operating activities (1,458,907) (303,573)
INVESTING ACTIVITIES
Purchase of property, equipment & intangibles (178,538) (113,185)
------------- ------------
Net cash used by investing activities (178,538) (113,185)
FINANCING ACTIVITIES:
Convertible note payable -- 564,179
Net proceeds from common stock -- 395,755
------------- ------------
Net cash provided by financing activities -- 959,934
------------- ------------
Increase (decrease) in cash and cash
equivalents (1,637,445) 543,176
Cash & cash equivalents at beginning
of period 6,186,712 41,147
------------- ------------
Cash & cash equivalents at end of period $ 4,549,267 $ 584,323
============= ============
Interest paid $ -- $ --
============= ============
Income taxes paid $ -- $ --
============= ============
Non Cash Transactions:
Investment acquired by equity issue $ -- $ 131,250
============= ============
</TABLE>
See notes to consolidated 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 three months ended June 30, 1997 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, 1997.
(2) LOSS PER SHARE
Loss per share was based on the weighted average number of common shares
31,869,285 and 19,390,909 outstanding during the three month period ended June
30, 1997 and 1996, respectively.
(3) INCOME TAXES
The Company has net operating loss carry forwards of approximately $420,000 for
Canada and $1,143,000 for the U.K.
(4) RELATED PARTY TRANSACTIONS
As of June 30, 1997, funds are owed by the Company totaling $46,027 to the
president of the Company. As of March 31, 1997, the Company owed the president
$20,228. At June 30, 1997 $4,421 had been advanced to the president of the
subsidiary.
5
<PAGE> 8
ITEM 2. Management's Discussion And Analysis of Financial Condition and
Results of Operations.
Results of Operation
Revenues during the three months ended June 30, 1997 were well in excess
of revenues for the comparable period in 1996 as the Company's facility in
Wales, United Kingdom continued to come on-line and sales continued to
increase. Revenues in the first fiscal quarter of 1998 also are above those
for the Company's last fiscal quarter of 1997. The Company's cost of sales as
a percentage of revenues increased dramatically in the first fiscal quarter of
1998 as a result of stainless steel prices declining worldwide causing the
Company to recognize, for financial reporting purposes, the use of higher cost
inventory which was acquired before the decline of stainless steel prices. The
Company, therefore, suffered a loss at the margin level of $636,255. The
Company believes its operations will continue to be affected by pricing
worldwide for stainless steel products both at the revenue level and at the
cost of sales level.
Selling, general and administrative expenses increased in the first fiscal
quarter over the comparable period in the prior year as a result of increased
staffing at the Company's facility and increased marketing and promotional
expenses for the Company's products.
Liquidity and Capital Resources
As of June 30, 1997 the Company had cash of $4,549,267 and net accounts
receivable of $468,282. The Company continues to consume cash on a quarterly
basis to fund prior losses, to purchase inventory as sales continue to increase
and to finance accounts receivable. While the Company's liquidity position is
good as of June 30, 1997, as the Company's operations continue to expand, the
Company may be required to seek outside sources of additional debt and/or
equity funds.
6
<PAGE> 9
PART II
ITEM 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the first quarter for
which this Form 10-Q is filed.
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: August 18, 1997 /s/ Harmon Hardy
---------------------------
Harmon Hardy
President/Chief Financial Officer
8
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,549
<SECURITIES> 0
<RECEIVABLES> 468
<ALLOWANCES> 9
<INVENTORY> 1,301
<CURRENT-ASSETS> 6,366
<PP&E> 9,309
<DEPRECIATION> 509
<TOTAL-ASSETS> 15,830
<CURRENT-LIABILITIES> 1,760
<BONDS> 0
0
0
<COMMON> 21,821
<OTHER-SE> (7,928)
<TOTAL-LIABILITY-AND-EQUITY> 15,830
<SALES> 544
<TOTAL-REVENUES> 544
<CGS> 1,180
<TOTAL-COSTS> 1,180
<OTHER-EXPENSES> 511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,084)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,084)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,084)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
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