UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 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 1-5701
SILVER LEDGE, INC.
(Exact name of small business issuer as specified in its charter)
Montana 87-0297202
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
352 South Main Street, Clearfield, Utah 84015
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 773-8607
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding as of March 31, 1996
Common Stock, $.10 par value 45,657,907
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements. . . . . . . 1
Balance Sheets -- March 31, 1996 and December 31,
1995 2
Statements of Operations -- three months ended
March 31, 1996 and 1995. . . . . . . . . . . . 3
Statements of Stockholders' Equity. . . . . . . . 4
Statements of Cash Flows -- three months ended
March 31, 1996 and 1995. . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis and Results
of operations . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 10
Item 2. Changes In Securities. . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities. . . . . . . . 10
Item 4. Submission of Matters to a Vote of Securities
Holders . . . . . . . . . . . . . . . . . 10
Item 5. Other Information. . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . . 11
-i-
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PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended March 31, 1996, have been prepared by the Company.
SILVER LEDGE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and December 31, 1995
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SILVER LEDGE, INC.
Consolidated Balance Sheets
ASSETS
March 31, December 31,
1996 1995
(Unaudited)
CURRENT ASSETS
Cash $ - $ 279
Accounts receivable - trade (Note 1) 276,140 305,556
Accounts receivable - related parties
(Note 2) 527,744 436,971
Inventory (Note 1) 412,761 547,136
Total Current Assets 1,216,645 1,289,942
FIXED ASSETS, net of accumulated
depreciation (Note 1) 44,952 46,794
TOTAL ASSETS $ 1,261,597 $ 1,336,736
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 73,563 $ 58,044
Accounts payable 174,155 146,908
Accrued expenses 1,100 78,150
Line of credit 234,061 291,902
Total Current Liabilities 482,879 575,004
Total Liabilities 482,879 575,004
COMMITMENTS AND CONTINGENCIES (Note 3) - -
STOCKHOLDERS' EQUITY
Common Stock, par value $0.10 per share,
50,000,000 shares authorized, 45,657,907
shares issued and outstanding 4,565,791 4,565,791
Deficit in capital in excess of par value (2,946,215) (2,946,215)
Accumulated deficit (840,858) (857,844)
Total Stockholders' Equity 778,718 761,732
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,261,597 $ 1,336,736
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SILVER LEDGE, INC.
Consolidated Statements of Operations
For the Three
Months Ended March 31,
1996 1995
(Unaudited) (Unaudited)
REVENUES
Sales $ 696,119 $ 804,511
Cost of goods sold 515,128 631,428
Gross Profit 180,991 173,083
EXPENSES
Depreciation and amortization 1,842 771
General and administrative 162,163 140,482
Total Expenses 164,005 141,253
NET INCOME FROM OPERATIONS 16,986 31,830
Income tax expense (Note 1) - -
NET INCOME (LOSS) $ 16,986 $ 31,830
INCOME (LOSS)
PER SHARE $ 0.00 $ 0.00
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SILVER LEDGE, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
Deficit in
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
Balance,
December 31, 1994 45,657,907 $ 4,565,791 $ (2,946,215) $ (924,185)
Net income for
the year ended
December 31, 1995 - - - 66,341
Balance,
December 31, 1995 45,657,907 4,565,791 (2,946,215) (857,844)
Net income for the
three months ended
March 31, 1996 - - - 16,986
Balance, March 31,
1996 45,657,907 $ 4,565,791 $ (2,946,215) $ (840,858)
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SILVER LEDGE, INC.
Consolidated Statements of Cash Flows
For the Three
Months Ended March 31,
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 16,986 $ 31,830
Non-cash expenses and revenues
included in income
Depreciation 1,842 771
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (61,357) (32,570)
(Increase) decrease in inventory 134,375 (83,173)
Increase (decrease) in accounts
payable and accrued expenses (49,803) (124,921)
Increase (decrease) in cash overdraft 15,519 -
Net Cash (Used) by Operating Activities 57,562 (208,063)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - -
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of line of credit (57,841) -
Proceeds from line of credit - 227,041
Net Cash Provided by Financing
Activities (57,841) 227,041
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (279) 18,978
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 279 3,655
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ - $ 22,633
CASH PAID FOR
Interest $ - $ 17,359
Income taxes - -
<PAGE>
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Silver
Ledge, Inc. (the Company) is presented to assist in
understanding these financial statements. These accounting
policies conform to generally accepted accounting
principles.
The Company is in the business of manufacturing and selling
steel and steel related products such as wood burning
stoves.
a. Property and Equipment
Maintenance and repairs of property and equipment that do
not improve or extend the life of the respective assets are
charged to expense as incurred. The property and equipment
are depreciated over their estimated useful life of 5-7
years.
b. Income Taxes
No provision for income taxes has been made due to
operating losses in prior years. The Company has net
operating loss carryovers to future years as follows:
Expiring
Amount in Year
$ 379,924 2001
2,523 2004
Total $ 382,447
c. Dividends
No dividends have been declared or paid since the inception
of the Company.
d. Income (Loss) Per Share
Income (loss) per share is computed based on the weighted
average number of shares outstanding during each year.
<PAGE>
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - Summary of Significant Accounting Policies (Continued)
e. Accounts Receivable
Accounts receivable are shown net of any accounts deemed
uncollectible by the Company. The allowance for doubtful
accounts for the year ended December 31, 1995 was $12,499.
f. Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of Silver Ledge, Inc. and its wholly-owned
subsidiaries: Heritage Stoves, Inc., Clearfield
Manufacturing and Clearfield Products. The consolidation
was completed using the pooling of interests method of
accounting for business combinations and all significant
inter-company transactions have been eliminated.
g. Inventory
The inventory consists of raw materials used in the
manufacturing processes and work in process. The inventory
is carried at its lower of cost or market value using the
first-in-first-out method.
At December 31, inventories were as follows:
1995
Raw materials and supplies $ 401,959
Work-in-process 18,021
Finished goods 127,156
Total $ 547,136
h. Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
i. Fixed Assets
The Company's fixed assets are recorded at cost:
1995
Equipment $ 53,628
Vehicles 5,000
58,628
Accumulated depreciation (11,834)
Net book value $ 46,794
<PAGE>
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 2 - Related Party Transactions
In 1992 the Company's officers and directors formed a
company which assumed all of the debt on the equipment that
the Company then owned. The officers and directors are
leasing the equipment back to the Company. Neither the
sale nor the lease back agreements were negotiated at arms
length. The Company was owed $139,139 and $27,055 from the
sale and lease back of the equipment at December 31, 1995
and March 31, 1996, respectively. The Company paid
$198,000 in rent to the related parties in 1995. The
Company is renting its buildings from two major
shareholders on a month to month basis. The Company paid
$116,600 to the shareholders in 1995.
In 1994, the Company had approximately $800,000 in sales to
companies owned by a major shareholder. At December 31,
1995 and March 31, 1996, the Company was owed $436,971 and
$500,689 by those companies, respectively.
NOTE 3 - Commitments and Contingencies
The Company is involved in litigation arising in the course
of business. It is not possible to state the ultimate
outcome, if any, in these matters. The following is a
summary of those matters:
Matters reduced to judgment against the Company or its
subsidiaries, or otherwise made certain, but still pending
because the amount remains unpaid or no agreement for
payment has been reached:
A. MAC JAC DEVELOPMENT vs. SILVER LEDGE, INC. dba
CLEARFIELD COMPANIES, INC.; Superior Court, County of
Sacramento, State of California, Case No. 356036 (filed
1987). The claim in the principal sum of $3,000 was for
back rent with a total three-year rental of $64,368
potentially being due (less any amount of mitigation) and
for unlawful detainer pursuant to a written agreement for
the rental of real property. The claim was disputed by
Clearfield Companies, Inc. The amount of the claim was
disputed by Silver Ledge, Inc. as possession of the
premises was returned to lessor for re-rental. Judgement
was rendered for the Plaintiff. The judgement remains
unpaid.
B. ELLSWORTH (L.J.) CONSTRUCTION, INC. vs. SILVER LEDGE,
INC., et al.; Seventh Judicial District Court, Bingham
County, State of Idaho, Case No. 13426 (filed 1987). The
claim in the principal sum of $33,871 was for goods
provided and services rendered. Default Judgment was
entered, prior to 1990, for failure to answer. The
judgment remains unpaid. The financial statements have
been adjusted to reflect the claim in accounts payable.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth the percentage relationship
to sales of principal items contained in the Company's Statements
of Operations for the three month period ended March 31, 1996 and
1995. It should be noted that percentages discussed throughout
this analysis are stated on an approximate basis.
Three Months Ended
March 31,
1996 1995
(Unaudited)
Sales. . . . . . . . . . . . . . . . . . 100 % 100%
Cost of goods sold . . . . . . . . . . . 74 78
Gross profits. . . . . . . . . . . . . . 26 22
Total expenses . . . . . . . . . . . . . 24 18
Net income from operations . . . . . . . 2 4
Net income . . . . . . . . . . . . . . . 2 4
Results of Operations for the Three Months Ended March 31, 1996 and 1995
Total sales of $696,119 for the three months ended March 31,
1995 ("first quarter of 1996") represent a decrease of
approximately 13% from total revenue of $804,511 for the three
months ended March 31, 1995 ("first quarter of 1995"), primarily
attributed to the decreased sales by the fabricating division due
to the overall decrease in stove sales. As a percentage of total
sales, cost of goods sold decreased from 78% for the first quarter
of 1995 to 74% for the first quarter of 1996. Total cost of goods
sold decreased 18% during the first quarter of 1996 compared with
the 13% decrease in sales for the same period. General and
administrative expenses increased 15% for the first quarter of 1995
due the addition of a new salesperson and the lease of new
equipment, and as a percentage of sales, general and administrative
expenses increased from 18% for the first quarter of 1995 to 24%
for the corresponding 1996 period. Net income of $16,986 for the
first quarter of 1996 decreased $14,844, or 47%, when compared
with the 1995 period primarily attributed to the 13% decrease in
total sales and 15% increase in general and administrative
expenses.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been
satisfied primarily by income from operations and by a commercial
line of credit. Working capital at March 31, 1996 was $733,766
compared to $714,938 at December 31, 1995. This 3% increase in
working capital for the first quarter of 1996 is attributed to the
Company's 21% increase in accounts receivables from related parties
due to general business cycles, 99% decrease in accrued expenses
due to the payment of taxes in a lump sum instead of quarterly, and
20% decrease in the Company's line of credit. These results were
partially offset by the 10% decrease in trade accounts receivable
and 25% decrease in inventory due to the decrease in stove sales,
and the 27% increase in cash overdraft. The Company anticipates
meeting its working capital needs during the current fiscal year
primarily with revenues from operations, but will use its available
line of credit to supplement working capital as necessary.
Cash provided by operating activities for the first quarter of
1996 was $57,562 compared with cash used by operating activities of
$208,063 for the corresponding 1995 period. Despite the Company's
decrease in net income for the first quarter of 1996, the Company's
cash flow form operations improved for the period due to the
$134,375 decrease in inventory. These results were partially
offset by the $61,357 increase in accounts receivable and $49,803
decrease in accounts payable and accrued expenses.
As of March 31, 1996, the Company had total assets of
$1,261,597 and total stockholders' equity of $778,718. In
comparison, as of December 31, 1995, the Company had total assets
of $1,336,736 and total stockholders' equity of $761,732. The
decrease of approximately 6% in total assets for the three month
period ended March 31, 1996 is primarily attributed to the decrease
in trade accounts receivable and inventory due to decreased stove
sales.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
PART II
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to which
any of its property is subject and, to the best of its knowledge,
no such actions against the Company are contemplated or threatened.
Item 2. Changes In Securities
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
three month period ended March 31, 1996.
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SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SILVER LEDGE, INC.
Date: June 10, 1996 By /S/ Robin D. Porter
(Signature)
ROBIN D. PORTER, President, CEO,
Treasurer and Chief Financial Officer
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