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Previous: NATIONAL TAX CREDIT PARTNERS L P, 10-Q, 1998-08-18 |
Next: CODED COMMUNICATIONS CORP /DE/, 10QSB, 1998-08-18 |
<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, 1998
( ) 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, 1998:
31,869,285.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART 1. FINANCIAL INFORMATION
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,
1998 and June 30, 1997.
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, 1998.
1
<PAGE> 4
STELAX INDUSTRIES LTD
CONSOLIDATED BALANCE SHEETS
(Presented in United States dollars)
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
Unaudited
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 628,667 $ 852,892
Inventory-Raw materials 45,372 124,664
Work in process 321,944 700,930
Finished goods 348,205 247,163
Accounts Receivable-Trade, net (allowance for
doubtful accounts at June 30 and March 31,
1998, $93,358 and $93,593, respectively) 630,358 597,426
Prepaids and other current assets 70,858 87,380
------------ ------------
Total Current Assets 2,045,404 2,610,455
PROPERTY & EQUIPMENT-AT COST:
Plant & Machinery 9,221,991 9,155,297
Building 849,138 840,240
Land 270,136 270,136
------------ ------------
10,341,265 10,265,673
Accumulated Depreciation (933,357) (825,263)
------------ ------------
Total Property & Equipment 9,407,908 9,440,410
INTANGIBLE ASSETS (accumulated amortization of
$116,089 and $101,924 at June 30 and
March 31, 1998, respectively) 534,344 548,509
OTHER ASSETS 16,407 37,495
------------ ------------
TOTAL ASSETS $ 12,004,063 $ 12,636,869
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,652,829 $ 1,833,281
Convertible notes payable 195,982 195,982
Payable to related parties (Note 4) 101,671 81,352
------------ ------------
Total Current Liabilities 1,950,482 2,110,615
STOCKHOLDERS' EQUITY:
Common stock - 50,000,000 shares authorized, no stated par value; issued
and outstanding 31,869,285 shares
at June 30 and March 31, 1998, respectively 21,821,087 21,821,087
Cumulative translation adjustments 149,652 240,501
Accumulated deficit (11,917,158) (11,535,334)
------------ ------------
Total Stockholders' Equity $ 10,053,581 $ 10,526,254
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 12,004,063 $ 12,636,869
============ ============
</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
------------------------------------
June 30, June 30,
1998 1997
--------------- ---------------
<S> <C> <C>
Sales 423,879 544,009
Cost of sales 471,818 1,180,264
--------------- ---------------
Gross loss (47,939) (636,255)
Selling, general and administrative expenses
(including depreciation and amortization of
$122,259 and $123,434 for the period ended
June 30, 1998 and 1997, respectively) 340,571 511,442
--------------- ---------------
Loss from operations (388,510) (1,147,697)
Other income (expense):
Interest income 8,748 62,918
Interest expense (2,064) --
--------------- ---------------
Net loss $ (381,826) $ (1,084,779)
=============== ===============
Weighted average shares of common stock 31,869,285 31,869,285
=============== ===============
Net loss per share $ (0.01) $ (0.03)
=============== ===============
</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>
Three Months Ended
------------------------------------
June 30, June 30,
1998 1997
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (381,826) $ (1,084,779)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation & amortization 122,259 123,434
Allowance for doubtful accounts (235) (15,334)
Foreign currency transaction gain (90,849) 30,323
Changes in operating assets and liabilities:
Decrease (increase) in receivables (32,697) (164,368)
Decrease (increase) in inventory & other assets 394,846 (476,831)
Increase (decrease) in accounts
payable & accrued interest (160,131) 128,648
--------------- ---------------
Net cash (used) provided by operating activities (148,633) (1,458,907)
INVESTING ACTIVITIES
Purchase of property, equipment & intangibles (75,592) (178,538)
--------------- ---------------
Net cash used by investing activities (75,592) (178,538)
Increase (decrease) in cash and cash
equivalents (224,225) (1,637,445)
Cash & cash equivalents at beginning
of period 852,892 6,186,712
--------------- ---------------
Cash & cash equivalents at end of period $ 628,667 $ 4,549,267
=============== ===============
Interest paid $ 2,064 $ --
=============== ===============
Income taxes paid $ -- $ --
=============== ===============
</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 three months ended June 30, 1998 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, 1998.
(2) LOSS PER SHARE
Loss per share was based on the weighted average number of common shares
31,869,285 outstanding during the three month period ended June 30, 1998 and
1997.
(3) INCOME TAXES
The Company has net operating loss carry forwards of approximately $420,000 for
Canada and $6,200,000 for the U.K.
(4) RELATED PARTY TRANSACTIONS
As of June 30, 1998, funds are owed by the Company totaling $101,671 to the
president of the Company. As of March 31, 1998, the Company owed the president
$81,352.
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, 1998 were $423,000 as
compared to $544,00 for the comparable period in 1997. This decrease reflects
management's previously announced decision to cease production and sale of
stainless steel. The Company has significantly reduced overhead and headcount at
its facility in Wales resulting in a reduced loss of $382,000 for the three
months ended June 30, 1998 as compared to a loss of $1,084,000 for the three
months ended June 30, 1997.
Liquidity and Capital Resources
The Company's liquidity position continues to deteriorate as the Company
continues to experience losses. At June 30, 1998 the Company had cash and net
accounts receivable of $1,259,000. The Company continues to consume cash to fund
losses and to finance accounts receivable. Management of the Company believes
the Company will be required to seek outside sources of additional debt and/or
equity capital.
6
<PAGE> 9
PART II
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
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 14, 1998 /s/ Harmon Hardy
----------------
Harmon Hardy
President/Chief Financial Officer
8
<PAGE> 11
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 628
<SECURITIES> 0
<RECEIVABLES> 630
<ALLOWANCES> 93
<INVENTORY> 714
<CURRENT-ASSETS> 2,045
<PP&E> 9,407
<DEPRECIATION> 933
<TOTAL-ASSETS> 12,004
<CURRENT-LIABILITIES> 1,950
<BONDS> 0
0
0
<COMMON> 21,821
<OTHER-SE> (11,917)
<TOTAL-LIABILITY-AND-EQUITY> 12,004
<SALES> 423
<TOTAL-REVENUES> 423
<CGS> 471
<TOTAL-COSTS> 471
<OTHER-EXPENSES> 340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> (381)
<INCOME-TAX> 0
<INCOME-CONTINUING> (381)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (381)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
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