<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
AMENDMENT
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
American Stone Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 13-3704099
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
900 Keele Street Toronto, Ontario Canada M6N 3E7
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (416) 653-6111
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
- --------------------------------------------------------------------------------
- -----------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Shares ($.001 par value)
------------------------------------------------------------
(Title of Class)
------------------------------------------------------------
(Title of Class)
<PAGE> 2
TABLE OF CONTENTS
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<TABLE>
<S> <C> <C>
PART I.......................................................................
A. THE COMPANY.........................................................
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B. BUSINESS AND PROPERTIES.............................................
-----------------------
1. Historical Overview: American Stone Industries, Inc........
----------------------------------------------------
2. ASI's Business.............................................
--------------
A. American Stone Corporation........................
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(1) Incorporation............................
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(2) Business.................................
--------
(3) Property, Plant and Equipment...........
------------------------------
(i) Property.........................
(ii) Plant ...........................
(iii) Equipment........................
(4) Industry Structure.......................
------------------
(5) Industry Production......................
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(6) Marketing Structure.....................
-------------------
(7) Market Size.............................
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(8) Sandstone Market........................
----------------
(9) Workforce...............................
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(10) Competition.............................
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(11) Marketing by ASC........................
----------------
(12) Business Strategy.......................
-----------------
</TABLE>
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<TABLE>
<S> <C> <C>
(13) Sales...................................................................
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(14) Intellectual Property/Proprietary Rights................................
----------------------------------------
(15) Regulation..............................................................
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(16) Material Developments...................................................
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(17) Methods of Distribution and Costs of Transportation.....................
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(18) Major Customers and Sales Contracts.....................................
-----------------------------------
B. Tyrrell Stone Design.............................................................
--------------------
3. Factors Affecting Profitability...........................................................
-------------------------------
4. Cash Flow/Liquidity.......................................................................
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5. Description of Securities.................................................................
-------------------------
6. Prior Dividends, Distributions or Redemptions.............................................
---------------------------------------------
7. Officers and Key Personnel of the Company.................................................
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8. Directors of the Company..................................................................
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9. Other Information Regarding Officers/Directors
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and Key Personnel................................................................
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10. Bankruptcy/Receivership...................................................................
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11. Principal Owners..........................................................................
----------------
12. Shares Beneficially Owned by Officers/Directors...........................................
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13. Management Relationships, Transactions and
------------------------------------------
Remuneration.....................................................................
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A. Loans............................................................................
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B. Related Party Transactions.......................................................
--------------------------
C. Stock Options....................................................................
-------------
</TABLE>
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<TABLE>
<S> <C> <C>
D. Remuneration.....................................................................
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E. Personnel Reliance...............................................................
------------------
F. Credit Line......................................................................
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14. Litigation................................................................................
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15. Management's Discussion and Analysis of Certain Relevant Factors..........................
----------------------------------------------------------------
A. Causes for Losses from Operations...............................................
---------------------------------
B. Trends in Historical Operating Results...........................................
--------------------------------------
C. Gross Margin.....................................................................
------------
D. Foreign/Government Sales.........................................................
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PART II ...................................................................................................
Item 1. Market Price of and Dividends on
--------------------------------
Registrant's Common Shares and
------------------------------
Other Shareholder Matters...............................................
-------------------------
Item 2. Legal Proceedings................................................................
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Item 3. Changes in and Disagreements with Accountants....................................
---------------------------------------------
Item 4. Recent Sales of Unregistered Securities..........................................
---------------------------------------
Item 5. Indemnification of Directors and Officers........................................
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PART F/S ...................................................................................................
Item 1. Consolidated Financial Statements with Independent
--------------------------------------------------
Auditor's Report for the Year
-----------------------------
Ended December 31, 1995.................................................
-----------------------
</TABLE>
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<TABLE>
<S> <C> <C>
Item 2. Consolidated Financial Statements with Independent
--------------------------------------------------
Auditor's Report for the Years
------------------------------
Ended December 31, 1996 and 1995........................................
--------------------------------
Item 4. Unaudited Quality Report on Form 10-QSB for
-------------------------------------------
Three Months Ended March 31, 1997.......................................
---------------------------------
SIGNATURES.......................................................................................
PART III:
- --------
EXHIBITS....................................................................................................
</TABLE>
<PAGE> 6
PART I
------
A. THE COMPANY
-----------
EXACT CORPORATE NAME:
American Stone Industries, Inc.
STATE AND DATE OF INCORPORATION:
Delaware; November 11, 1992
STREET ADDRESS OF PRINCIPAL OFFICE OF CORPORATION:
900 Keele Street
Toronto, Ontario Canada M6N 3E7
COMPANY TELEPHONE NUMBER:
(416) 653-6111
COMPANY FISCAL YEAR:
December 31
PERSON(S) TO CONTACT AT COMPANY WITH RESPECT TO FILING:
Glen Gasparini, President
or
Van P. Carter, Esq.
Walter & Haverfield, P.L.L.
50 Public Square
1300 Terminal Tower
Cleveland, OH 44113
Telephone: (216) 781-1212
Facsimile: (216) 575-0911
TELEPHONE NUMBER IF DIFFERENT FROM ABOVE:
Not applicable
<PAGE> 7
PREFACE TO NARRATIVE DISCUSSION:
In providing information regarding the Registrant, management has
relied upon information which it believes to be reliable and accurate. Some of
the information set forth in this Form 10-SB may be deemed to constitute
"forward-looking statements," as defined in Section 27A of the Security Act of
1933 and/or Section 21E of the Securities Exchange Act of 1934. The Company
acknowledges, however, that the "safe harbor" provision of these securities does
not apply to the Company because the Company is not currently a "reporting
Company," i.e., the Company does not file periodic reports pursuant to the
Securities Exchange Act of 1934. Such statements may include the Company's
discussion of Marketing, Business Strategy, Factors Affecting Profitability and
management's Discussion and Analysis. In making such statements, the Company
intends that there is no representation, warranty or guarantee that such events
will or might occur as discussed. The likelihood of such forward-looking
statements occurring as discussed is dependent upon, among other things, the
Company's ability to generate revenue, to complete its sales and marketing
strategy, to compete with other vendors of Natural Stone, to secure listing as a
"small cap" stock on the NASDAQ, to attract and retain competent management, to
secure the working capital required to expand operations, and, for its primary
product (Berea Sandstone), to remain a desirable product for use in
construction. If any of these events should fail to occur, there may be an
adverse impact upon the Company's ability to achieve the "forward-looking
statements" set forth herein. In addition, facts beyond the Company's control
(such as Acts of God) may have an adverse impact.
B. BUSINESS AND PROPERTIES
-----------------------
1. HISTORICAL OVERVIEW: AMERICAN STONE INDUSTRIES, INC.
----------------------------------------------------
American Stone Industries, Inc. ("ASI" or "the Company") is a holding
company which currently owns interests in two subsidiaries -- American Stone
Corporation ("ASC") and Tyrrell Stone Design Company ("Tyrrell").
The Company was incorporated in the State of Delaware on November 11,
1992 as Viva Designs U.S.A., Inc. The Company at that time was a distributor of
a line of jewelry and fragrances. In or about June 1993 the Company discontinued
those operations. On December 14, 1993, a certificate of amendment was filed to
change the name of the corporation to Viva Medical Sciences Corp. Beginning in
1994 and until a business combination in August 1995, the Company was a
distributor of medical equipment in the United States. In conjunction with the
1995 business combination, the medical equipment distributorship business was
transferred to a related party. On August 9, 1995, the Articles of Incorporation
were amended to effect a change of the corporate name to American Stone
Industries, Inc. Concurrent with the business combination, ASI became a holding
company which conducts business through its wholly-owned subsidiaries, ASC and
Tyrrell. ASC purchases and sells stone for use in the building construction
industry. Tyrrell provides design services to architects and stone processing
centers.
<PAGE> 8
As of January 1, 1996, ASI (through ASC) owned 89.1% of a limited
partnership, Cleveland Quarries, L.P. ("CQ L.P."). In February 1996, ASC
acquired virtually all of the operating assets of CQ L.P. (See "Material
Developments" and "Related Party Transactions"). CQ L.P. was dissolved effective
December 31, 1996.
2. ASI'S BUSINESS
--------------
As a holding company, ASI conducts no operations and maintains only a
minimal corporate staff (See "Officers and Key Personnel of the Company").
The Company's operating assets consist of its two subsidiaries (ASC and
Tyrrell).
A. AMERICAN STONE CORPORATION
--------------------------
(1) INCORPORATION
-------------
ASC is a Delaware corporation incorporated in 1992. ASC acquired the
operating assets of Cleveland Quarries L.P. in February, 1996 and thereafter
began operating the 153 year old quarry situated near Amherst, Ohio known as the
"Cleveland Sandstone Quarries" (the "Cleveland Quarries"). Consisting of an
estimated 300,000,000 cubic feet of reserve deposits located on over 1,000 acres
of ASC-owned property, the Cleveland Quarries is generally considered within the
stone industry to be one of the World's largest sandstone quarries. This
information is based upon various industry reports and surveys since its initial
discovery in 1853.
(2) BUSINESS
--------
ASC is in the business of quarrying and marketing sandstone and
management of the Cleveland Quarries operation. ASC also maintains a sales
office in Toronto, Ontario, Canada.
The Cleveland Quarries produce sandstone, which is known in the
industry as "Berea Sandstone." For more than one hundred (100) years, sandstone
from the Cleveland Quarries has been utilized throughout Ohio, the United States
and Canada in such projects as the following:
Facility/
Building Location Date
-------- -------- ----
The John Hancock Building Boston, Mass. (U.S.A.) 1948
U.S. Post Office Cleveland, Ohio (U.S.A.) 1934
Parliament Building Ottawa, Ontario (Canada) 1865
(rebuilt 1917)
City Hall Buffalo, New York (U.S.A.) 1930
<PAGE> 9
U.S. Bankruptcy Court Little Rock, Ark. (U.S.A.) 1918
Oberlin College Campus Oberlin, Ohio (U.S.A.) 1885-1943
Osgood Hall -- Law courts of Toronto, Ontario (Canada) 1857
Upper Canada
NHL Hockey Hall of Fame Toronto, Ontario (Canada) 1885
County Courthouse Savannah, Ga. (U.S.A.) 1889
St. James Cathedral Toronto, Ontario (Canada) 1853
University of Pennsylvania Philadelphia, Penn. (U.S.A.) 1874-1910
Berea Sandstone has been used in the construction of numerous
additional facilities over the past one hundred (100) years, including
government buildings, banks, churches and prestigious private residential
dwellings throughout the United States and Canada. One of the most current
personal residences of note is that of Mr. William Gates in Seattle, Washington.
(3) PROPERTY, PLANT AND EQUIPMENT
------------------------------
(I) PROPERTY:
ASC owns two (2) separate parcels of land in the Counties of Lorain and
Erie, Ohio. The property contains two categories of natural stone: (1)
Dimensional Stone, which is defined to be natural stone which is cut to size as
specified in architectural designs and primarily used as architectural accents
to buildings, although Dimensional Stone is also used for funeral monuments,
landscape and ornamental objects; and (2) Construction Stone, which is defined
to be natural stone primarily used for glass sand, foundry sand, silicon flour
and construction, especially roadways. On the basis of the reserve estimates
obtained by the previous owner of Cleveland Quarries, L.P., management has
reached certain conclusions regarding the Company's reserves.
From approximately 1960 to 1992 the reserves of Cleveland Quarries,
L.P. have been estimated by the then owner (Stancorp), which drilled samples of
Berea Sandstone on the Company- owned properties. The volume of Berea Sandstone
has been estimated on the basis of the length, width and depth of quarry holes.
These are currently more than 600,000 square feet of exposed quarry face. At
this time, the quarry is more than 60 feet deep and 120 feet in length. In 1996,
one section (360' x 120') was prepared for finishing and this section is
expected to last about eight years at current projected sales rates. Based upon
the exposed quarry face and the depth of Berea Sandstone as evidenced by quarry
holes, management estimates that the total reserves are adequate to meet the
needs of the Company for more than 100 years at current projected sales rates.
In summary, Management projects that the property has a total estimated
Dimensional Stone reserve of 336 million cubic feet. The parcel in Erie County
is in Birmingham Township, and is strictly
<PAGE> 10
a quarry operation. Dimensional Stone reserve estimates were projected to be 126
million cubic feet based on a deposit of at least 30 acres indicated by
topographic studies. The Birmingham Quarry yields both Gray and Buff Sandstone
with a higher compressive strength than that of the quarries located in the main
parcel. The main parcel is in Amherst Township (Lorain County) and is the site
of numerous quarries, the mills and offices. The main parcel fronts the Ohio
State Turnpike approximately twenty minutes west of downtown Cleveland. This
property is estimated to contain 210 million cubic feet of Dimensional Stone and
21 million cubic feet of Construction Stone. Many of the quarries on this
section of land are currently unused and dormant. The same stone that has been
used in thousands of applications around the country is still available for
renovation, restoration and expansion of existing buildings. All of the
properties have permits for use as quarries and all permits are in good
standing. The Birmingham property also contains a supply of natural gas which is
leased to a local utility.
(II) PLANT:
The following is a list of the main buildings on the property:
<TABLE>
<CAPTION>
MILL # SIZE S.F. YEAR BUILT CURRENT USE FUTURE USE
- ------ --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
3 18,175 1946 Processing Processing
6 45,000 1923 Storage Gang Sawing
7 4,490 1955 Storage Carving
8 44,165 1926 Gang Sawing Processing
Office & Office & Office &
Showroom 11,305 1900 Showroom Showroom
</TABLE>
(III) EQUIPMENT:
ASC's equipment consists of saws, cranes, trucks, tow motors, grinders,
stone cutting equipment and haul tools. While some of the equipment is old, most
of it is still cost effective and functional and would be expensive to replace.
(4) INDUSTRY STRUCTURE
------------------
All natural stone products go through several stages prior to final
consumption. The various stages can be defined as follows:
- - Quarrying - extraction of large blocks of stone
- - Primary Processing - sawing the large blocks into smaller blocks or large
slabs
- - Secondary Processing - converting smaller blocks or slabs into finished
product
- - Installation - assembling and installing finished product
<PAGE> 11
Tile
Patio Stone
Sills
BLOCKS are turned into SLABS to make Table Tops
Step Treads
Garden Stone
House Ashlar
Cut Stone
Building Stone
Grindstones
BLOCKS are turned into SMALL BLOCKS to make Coping
Breakwater
Curbing
Laboratory Samples
Soaking Pit Linings
Landscape Pieces
Companies operate in diverse ways within the industry. They are usually
involved in more than one of these disciplines. The operations of companies
operating at each end of the spectrum, (i.e. the quarrying and installation)
tend to locate geographically. Quarry operations locate where the raw material
is found and installers operate in the market in which the finished product is
to be installed. The primary processors often locate at or near the quarries.
For this reason, the same company is often involved in both the quarry and
primary processing segment. Similarly, secondary processors locate at or near
the installers' premises and so companies that do installation are also usually
capable of secondary processing. It is rare to find a company that operates in
all segments of the industry.
The primary and secondary processing segments are the most mechanized
and therefore the most capital intensive. The machinery can be very
sophisticated and very expensive. There have been major advancements in quarry
technology and these operations are also becoming very capital intensive. These
expenses have been a bar to entry into these segments of the industry for many
and, for those that have failed to keep up, it has been a factor creating
adverse consequences.
This change is evidenced by a new phenomenon in the industry. Raw
blocks of stone are being shipped from North America to processing centers
located in Italy, and final product is returned to North America for
installation. Transportation is strictly limited to water and road, but the
portion of the final product cost attributable to transportation has steadily
fallen as the cost of processing has risen. The rising cost of processing has
only been offset by the efficiencies of modern machinery. This would suggest
that the processing centers can compete internationally, if they are as
sophisticated as those in Italy, and benefit from some of the other cost saving
elements available to the industry today.
<PAGE> 12
Even though a large portion of the labor component of the processing
has been eliminated, labor continues to be a problem in Italy. The processing
segment can benefit even further in an inexpensive labor pool location; however,
most third-world or underdeveloped countries offering inexpensive labor pools
also lack the sophisticated labor pool that is necessary to maintain and operate
the equipment. This is one of the reasons processing centers still locate in
countries like Italy, Germany and Japan.
Another important element in the cost of processing with modern
machinery has been a good source of fresh water. This element will become
increasingly more important as water jet technology emerges. Because the
Cleveland Quarries are located near Lake Erie, ASC is assured access to a
continuous source of fresh water.
(5) INDUSTRY PRODUCTION
-------------------
Based upon an August 1995 report prepared for the Company by Industrial
Mineral Facts (the "IMF Report"), the annual world production of raw Dimensional
Stone (Quarry stage) is estimated at thirty-four million (34,000,000) metric
tonnes or about twelve million six hundred thousand (12,600,000) cubic meters.
After primary and secondary processing, the total quantity of finished
Dimensional Stone products is approximately twenty million (20,000,000) tonnes
(59% yield), representing approximately three hundred seventy million
(370,000,000) equivalent square meters. The United States' share of worldwide
production of Dimensional Stone is approximately four percent (4%) and is
produced by about one hundred sixty (160) companies, operating over two hundred
fifty (250) quarries in thirty-five (35) states. The United States and the North
American continent, in general, are large importers of finished Dimensional
Stone products. In addition, six million (6,000,000) tonnes of ornamental stone
are also produced. It is estimated that the Dimensional Stone industry could
reach five hundred million (500,000,000) equivalent square meters by the year
2000, a rate of growth of five to six percent (5-6%) annually. Approximately
eighty percent (80%) of Dimensional Stone product is used by the building and
construction industries, while the remaining twenty percent (20%) is consumed by
the funeral monument, landscape and ornamental objects industries.
Worldwide production and consumption of raw Dimensional Stone, as
provided in the IMF Report, are illustrated on the following graph:
<PAGE> 13
PRODUCTION/CONSUMPTION
By Country
000 tonnes
<TABLE>
<CAPTION>
Country Production Consumption
- ------- ---------- -----------
<S> <C> <C>
Italy 7,500 8,200
Spain 3,500 3,350
China 2,300 1,400
Greece 1,750 1,700
S. Korea 1,600 1,500
India 1,500 700
U.S.A 1,500 1,500
Portugal 1,300 1,150
Brazil 1,250 700
France 1,250 1,400
Benelux 750 800
S. Africa 750 100
Germany 700 1,000
Japan 500 1,700
Taiwan 300 1,350
Others 8,600 8,500
<FN>
* Production and consumption levels are estimates obtained from a bar graph.
</TABLE>
<PAGE> 14
(6) MARKETING STRUCTURE
-------------------
QUARRY TO END-USER
-------------------
Quarry
-------------------
- --------------------- -------------------
Processor ------------------- Primary Processor
- --------------------- -------------------
- ---------------------
Installer
- ---------------------
- ---------------------
General Contractor
- ---------------------
- --------------------- -------------------
Architect Distributor
- --------------------- -------------------
----------------------------------------
-------------------
Designer
-------------------
-------------------
Purchasing Agent
-------------------
-------------------
End-User
-------------------
The market for Dimensional Stone products is served by many more
companies than those involved in production and installation. They include
government agencies, distributors, marketing agencies, architectural and
engineering firms and designers. The company that has the closest contact with
the final consumer is often most responsible for the sale of stone products.
These other companies are often more important to the stone producer than the
stone itself. The illustration to the right indicates how many layers are
potentially between the End-User and the companies involved in the four levels
of the stone industry. The additional layers between End-User and Producer
require a sophisticated marketing department capable of dealing with these
companies. The marketing department may use in-house employees for estimating
and drafting functions or form strategic alliances with outside companies that
perform these functions.
<PAGE> 15
(7) MARKET SIZE
-----------
WORLD MARKET
DIMENSIONAL STONE
<TABLE>
<S> <C>
Europe 43.9%
Far East 18.1%
United States 6.2%
Middle East 2.3%
Other 29.5%
</TABLE>
There are four major geographical
markets for finished Dimensional Stone
products:
* Europe 8,500,000 Tonnes
* United States 1,200,000 Tonnes
* Far East 3,500,000 Tonnes
* Middle East 450,000 Tonnes
Source: IMF Report
Per the IMF Report, these four (4) regions consume at least seventy
percent (70%) of the world's production of raw and finished Dimensional Stone
products. Outside of Saudi Arabia, the countries with the greatest consumption
per capita of Dimensional Stone are Greece, Italy, Spain and Portugal. These
four (4) countries, which account for approximately two percent (2%) of the
world's population, consume over thirty percent (30%) of all Dimensional Stone
products. Per capita consumption in these four (4) countries is four-fold that
of Japan and ten-fold that of the United States. In these countries stone
products are used both in commercial construction and in housing while, in
countries such as Japan and the United States, Dimensional Stone is primarily
used in commercial buildings.
According to the IMF Report, total United States Dimensional Stone
consumption reached three billion two hundred million dollars ($3,200,000,000)
in 1989. Major market areas in the United States include New York, Dallas,
Chicago, Southern California and Florida. In North America, the markets for
natural stone are highly dependent on construction activity. While the
commercial market continues to form as construction start-ups increase in
strategic sectors such as Finance, Technology, Leisure, Healthcare, etc.,
increasing demand in natural stone products in renovation and restoration work
serve to fortify and strengthen burgeoning market demand.
(8) SANDSTONE MARKET
----------------
The worldwide market for Dimensional Sandstone products is estimated to
be approximately seven hundred thousand (700,000) tonnes, based upon the IMF
Report. The United States and Canada produce approximately twenty eight percent
(28%) of this total. This figure is high when compared to the overall share of
Dimensional Stone of all types which, for the United States and Canada, is only
approximately six percent (6%). This is due to the fact that the Northeast
portion of the North American Continent contains some of the world's best
sandstone deposits and because
<PAGE> 16
the product traditionally has been more popular in North America than in other
parts of the world. Specific figures including conglomerate are available for
the state of Ohio as follows.
According to the IMF Report, sandstone and conglomerate production was
two million fifty- three thousand eight hundred fifty-five (2,053,855) tons in
1993. Total sales were one million nine hundred thirty-three thousand two
hundred fifty-nine (1,933,259) tons, of which crushed sandstone and conglomerate
accounted for one million eight hundred ninety-four thousand seven hundred
sixty-one (1,894,761) tons and Dimensional Stone accounted for thirty-eight
thousand four hundred ninety-eight (38,498) tons. Ohio ranks seventh nationally
in production of all Dimensional Stone, but ranks first in the production of
sandstone Dimensional Stone. Construction Stone is used primarily for glass
sand, foundry sand, silica flour, and construction. Dimensional Stone is used
primarily for rough construction purposes. Sandstone production in Ohio accounts
for six and seven-tenths percent (6.7%) of Ohio's total stone production.
For the period 1994 - 1996, the Company's annual production of natural
stone was as follows:
<TABLE>
<CAPTION>
Raw Dimensional Stone
(tonnes)
<S> <C>
1994 2700
1995 3970
1996 8460
</TABLE>
The following markets are those which management has targeted to pursue
after expanding the sales of the Berea Sandstone:
Building Stone:
---------------
- Slabs - Curb Strips - Ashlar - Landscaping
- Sils - Benchstone - Patio Stone - Tile
- Steps - Wallstone - Cutstone
Specialty Products:
- Cores (Oil & Gas Research) - Grindstones
- Breakwater Stone - Ornamental
Construction Materials:
- Crushed Stone - Bank Run / Rip Rap
- Sand
(9) WORKFORCE
---------
ASC has approximately fifty (50) employees, of which about forty-five
(45) are hourly. The average hourly wage of the quarry personnel is less than
ten dollars ($10.00) per hour. The quarries are situated in geographic regions
that have a large labor pool, and management does not believe that
<PAGE> 17
securing additional labor will be difficult or expensive.
In management's opinion, ASC has a positive relationship with its
employees.
There is no collective bargaining agreement in effect and, in the
opinion of management, it is unlikely that there will be one within the
foreseeable future.
(10) COMPETITION
-----------
ASC competes in the natural Dimensional Stone market. More
specifically, ASC competes against limestones and other sandstones. ASC's two
biggest competitors consist of Briar Hill Stone Co. (Glenmont, OH -- about 50
employees) and Indiana Limestone Company (Bedford, IN -- about 50 employees). As
a practical matter, when submitting proposals to provide Berea Sandstone to
larger commercial sites, ASC is in competition with quarries throughout the
United States and abroad.
ASC intends to compete within this environment utilizing a strategy
which embodies the following:
- Ownership of one of the largest sandstone reserves in
the World, which assures that ASC has access to the
raw material;
- Access to a large supply of fresh water (Lake Erie)
which will assist in the conversion to water jet
technology;
- Strategic geographic location. Within a five hundred
(500) mile radius from the quarries, the Company can
serve about two-thirds (66%) of the domestic United
States market;
- Low cost of raw materials; and
- Low cost provider, which is attributable to ASC's
access to a large labor pool that is not under
contract to a union.
(11) MARKETING BY ASC
----------------
The marketing of ASC products from Ohio are primarily done through an
in-house sales staff, and all sales staff are paid a salary. Independent agents
also market company products and are paid a commission on the selling price.
Distributors represent the company, although they deal directly with the
customer. They purchase the products from ASC at discounted rates and sell them
at a markup.
The Company's historical market has been the United States and Canada.
Within the United
<PAGE> 18
States, the Midwest and Northeast regions have traditionally accounted for more
than eighty percent (80%) of the sales in the United States. Sales on the West
Coast (especially in Seattle) have been increasing. In Canada, sales have
occurred almost exclusively in the Provinces of Ontario and British Columbia.
The Company's objective is to develop a world-wide market with primary emphasis
upon the warmer weather sections of the United States. Costs of transportation
become more relevant when the construction site is more than five hundred (500)
miles from the quarries.
(12) BUSINESS STRATEGY
-----------------
ASC intends to expand its current market and financial base through a
business strategy that focuses on:
- Dedication to the core business of ASC, i.e. the
Cleveland Quarries;
- Development of ancillary assets, i.e., the sale,
lease or joint venture of surplus or nonessential
lands; and
- Selective acquisition of compatible assets or
businesses.
In addition, ASC intends to secure incremental capital in order to
upgrade and modernize its quarry operations as called for over time and to
centralize the marketing, administration and business facilities thereby
expanding and enhancing these functions as well as the core operations of
estimating, drafting and design.
(13) SALES
-----
ASC accounts for about ninety-five percent (95%) of the revenue of ASI
and for about seventy-eight percent (78%) of ASI's assets. The balance of the
assets are cash and other liquid assets owned by ASI.
As of December 31, 1996, ASC's backlog of orders was just under two
hundred fifty thousand dollars ($250,000), as compared to a backlog of One
Hundred Thousand Dollars ($100,000) for the period ending December 31, 1995. The
Company is careful not to generate too large of a backlog of orders to assure
that commitments can be fulfilled and to avoid supply problems. As of May 30,
1997, the Company's backlog of orders was four hundred thousand dollars
($400,000), as compared to a backlog of one hundred eighty-nine thousand sixteen
dollars ($189,016) for the five (5) months ended May 30, 1996.
In order to reduce the backlog of orders, the Company has hired new
stone cutters for its finishing shop (Plant 3) and is conducting a cost study to
determine the feasibility of upgrading its slabbing facilities (Plant 8). The
objective is to decrease the existing backlog by increasing production.
<PAGE> 19
In addition, the Company is evaluating an increase in inventory so that
shipments may occur during the winter months, thereby reducing the backlog of
orders in existence for the Spring-Summer period.
In the opinion of management, however, the increase in the Company's
backlog is a positive reflection of management's action to stimulate incremental
marketing efforts, particularly among new distributors of products in Michigan,
Connecticut, Ohio, and Pennsylvania in the United States and Ontario, British
Columbia, and Quebec in Canada.
The Company's sales are cyclical in nature. Sales for the second and
third quarters historically increase and account for more than seventy percent
(70%) of the fiscal year's sales. The first quarter typically has the lowest
sales due to inclement weather in the Northern Ohio region and the difficulty of
operating a quarry in such an environment. Fourth quarter sales are typically
less than for the third quarter, reflecting the delivery schedules of building
contractors.
(14) INTELLECTUAL PROPERTY/PROPRIETARY RIGHTS
----------------------------------------
ASC owns intellectual property (trademarks, trade names, etc.) and does
not license any such rights. ASC copyrights its marketing materials, but such
copyrights are not deemed to have any significant value in the marketplace.
Except as noted above, ASC does not own or license any proprietary
rights.
(15) REGULATION
----------
ASC's operations are subject to a variety of statutes, rules and
regulations, which are applicable to any business operating in the United
States. These statutes, rules and regulations range from record keeping (e.g.,
the duty to maintain tax-related records for specific time periods as required
by the Internal Revenue Code of 1940, as amended) to employment (e.g., the duty
to comply with the Equal Employment Opportunity Act of 1972).
Due to its quarry operations, ASC is also subject to certain more
specific statutes, rules and regulations, the most significant of which include:
- Mines Safety and Health Act ("MSHA"), which mandates
certain safety rules and regulations governing mining
operations.
- Occupational Safety and Health Act of 1970 ("OSHA"),
which requires that the Company provide its employees
with a safe workplace.
- Resource Conservation and Recovery Act of 1976
("RCRA"), which prohibits the transportation and/or
disposal of "hazardous waste" except pursuant to
certain standards.
<PAGE> 20
- The Department of Transportation, which adopts
regulations governing the safe transportation of
goods over interstate highways.
In the opinion of management, ASC is in compliance with all applicable
regulations.
Material changes in these regulations or the adoption of new
regulations could materially impact upon the operations of ASC.
(16) MATERIAL DEVELOPMENTS
---------------------
For the period 1992-1996, the material events which have impacted ASC
are the following:
- The acquisition of ASC by ASI on August 8, 1995. As a
result of the transaction, TMT Masonry, Ltd., the
former parent of ASC, received shares representing
approximately fifty-five percent (55%) of the
Company's outstanding common stock, thereby effecting
a change in control of the Company.
- On February 1, 1996, ASC purchased all inventories,
real estate, equipment, intangible assets, rights in
leases, and all other operational items of Cleveland
Quarries, L.P., in exchange for cash, assumption of
certain liabilities, and other consideration. The
purchase price totaled two million three hundred
twenty thousand two hundred fifty-nine dollars
($2,320,259), which consisted of (a) cash and (b)
forgiveness of debt. In negotiating this purchase
price, management took into consideration, among
other things: (1) the benefit to the Company of
acquiring title to the quarries owned by Cleveland
Quarries, L.P.; (2) the potential economic benefits
to the Company of securing title to these assets,
especially the land and reserves of stone; and (3)
the value of the assets to be acquired. At the time
of the transaction, the General Partner of Cleveland
Quarries, L.P. was Slate and Stone Corporation of
America, Ltd., which held a one percent (1.0%)
interest in the limited partnership. The two limited
partners were Walter Molnar (9.9%) and American Stone
Corporation (89.1%).
- The sale in August, 1996 of twenty-five (25%) of the
Common Shares of ASI to Roulston Venture Partners,
Ltd., which has provided ASC with working capital and
access to a Board of Directors of sophisticated
business people.
- The manufacturing procedure in the industry has
changed drastically since the 1950's. Modern
machinery acquired in the last year, technology, and
improved methods have greatly reduced the cost of
production, but have also required greater amounts of
capital.
<PAGE> 21
- The most positive events for ASC in 1996 were the
acquisitions of new personnel and additional capital.
Both of these events have allowed the company to
increase its production capacity and marketing
efforts. As of the fourth quarter of 1996, the
company became profitable, and is expected to
continue to expand its margin of profitability with
greater revenues.
In or about August 30, 1996, the Company entered into an "Interim
Management Agreement" (the "IM Agreement") with numerous Canadian individuals
and entities. Pursuant to the IM Agreement, the Company was retained as
"co-manager" of Stoklosar Marble Quarries, Limited, an Ontario Canada
corporation.
The IM Agreement was executed in anticipation of the acquisition of
Stoklosar by ASI and was intended to permit ASI an opportunity to become
familiar with the Stoklosar quarries prior to any acquisition.
Subsequent to the execution of the IM Agreement, the Company advanced
Two Hundred Thousand Dollars ($200,000) to defray Stoklosar-related expenses
during the period September through December 1996. On or about December 18,
1996, the money was repaid together with interest computed at three and
three-quarters percent (3.75%) which was the bond rate in Canada.
On or about September 9, 1996, the Company (acting through Mr. Glen
Gasparini, its President) executed a "Share Purchase Agreement" (the "September
1996 Agreement") with various Canadian individuals and entities. Pursuant to the
September 1996 Agreement, the Company was to purchase one hundred percent (100%)
of the issued and outstanding common shares of two (2) Canadian entities, one of
which owned Stoklosar. Mr. Gasparini's father was an investor/creditor of one of
the selling parties.
In October 1996, the Company's Board of Directors declined to ratify
the September 1996 Agreement. Accordingly, that transaction did not close. Mr.
Gasparini requested and received leave of the Board to pursue this acquisition
separately.
On or about December 11, 1996, Mr. Gasparini and others completed their
purchase of the two Canadian entities (including Stoklosar) (hereinafter
referred to as the "Final Stoklosar Transaction"). The parties to the Final
Stoklosar Transaction agreed that the purchase of the common shares (a newly
formed Ontario corporation identified as "1211769 Ontario, Ltd.") "has assumed
all obligations of [ASI] under the Interim Management Agreement...".
The Company, with the exception of the final signature, has executed a
separate agreement to confirm that it complied fully with the terms of the IM
Agreement. In addition, Messrs. Gasparini and Costantino agreed to indemnify,
defend and hold harmless the Company from all claims arising out of the IM
Agreement through the execution of an Indemnification Agreement, which was
ratified by the Company's Board of Directors in March 1997.
<PAGE> 22
At the Annual Meeting of Shareholders held on November 22, 1996, the
shareholders adopted a Resolution which authorized the Company's Board of
Directors to effectuate up to a single one (1) for ten (10) reverse stock split
of any and all issued and outstanding common shares of the Company. A reverse
stock split occurred at the ratio of one (1) new common share for each ten (10)
common shares outstanding. The split was effective May 30, 1997.
(17) METHODS OF DISTRIBUTION AND COSTS OF
------------------------------------
TRANSPORTATION
--------------
All of the stone is shipped via flatbed truck. The current trucking
rates are approximately $0.19/100 miles/cubic foot. This allows the Company to
ship to two-thirds (2/3) of the population of the United States and Canada at an
average of fifty cents ($.50) per cubic foot. Customers are generally charged
for shipping. Customs duties between Canada and the United States are minimal.
(18) MAJOR CUSTOMERS AND SALES CONTRACTS
-----------------------------------
Currently, the Company has one distributor (Van Ness Stone) that
accounts for fifteen percent (15%) of the Company's current sales. Van Ness is
one of Cleveland Quarries' oldest and geographically closest customers. No other
customer accounts for more than five percent (5%) of the Company's sales. These
percentages are expected to change as total sales volume increases over the next
few years. There is also one private residence contract that will be equivalent
to ten percent (10%) of the Company's current annual sales. Several projects
similar to this contract are currently being bid and, if the Company is
successful in securing one or more of these contracts, each contract will be a
lesser percentage of total sales.
B. TYRRELL STONE DESIGN
--------------------
ASI agreed to acquire Tyrrell in February 1996 and closed the
acquisition on May 23, 1996 in exchange for two hundred thousand (200,000)
shares of common stock of the Company. In accordance with the Share Purchase
Agreement, the value assigned for the shares was the closing price on the date
of acquisition, or eighty cents ($.80) per share. It is anticipated that
Tyrrell, a wholly owned subsidiary of ASI, will provide sales in Canada as the
Canadian leg of the Company.
Tyrrell provides design drawings to architects and stone processing
centers throughout North America. Through this acquisition, ASC intends to
expand the scope and magnitude of services which it can offer to customers and
become more involved in the design phase of projects, thereby being in a
position to suggest the use of Berea Sandstone as part of a project.
The revenue of Tyrrell is limited to job bills. Tyrrell has four (4)
full-time employees. All work is performed in Toronto, Canada. For the twelve
(12) months ending December 31, 1996, Tyrrell's revenue was approximately five
percent (5%) of the aggregate revenue of ASC.
Tyrrell owns no assets (other than desktop computers and other office
equipment), intellectual property or proprietary licenses. Competition in the
design arena is diversified and intense. As a
<PAGE> 23
practical matter, it is not anticipated that Tyrrell will be a significant
contributor of revenue for ASC, but the services available through Tyrrell will
assist ASC in marketing its products and servicing the needs of its customers.
3. FACTORS AFFECTING PROFITABILITY
-------------------------------
As discussed in more detail at "Management's Discussion and Analysis of
Certain Relevant Factors," for the past two (2) fiscal years (1995 and 1996),
ASI was not profitable. During the period April-May 1997, four (4) events
occurred which, in the opinion of management, were necessary for the Company to
achieve profitability. These four events were:
<TABLE>
<CAPTION>
ANTICIPATED Date
EVENT OR MILESTONE IMPACT Accomplished
- ------------------ -------------- ------------
<S> <C> <C> <C>
1. Introduction of Master Stone Improved 4/97
Carver/Foreman for the No. 3 Mill (in production and
which specialty work is performed). productivity
2. Clear new quarry area - No. 7 quarry. Block will be 4/97
easier to access
and thus reduce
cost of extraction.
3. Complete setup of distribution yards Increase 5/97
throughout Ontario and Quebec. international
sales. These
markets
historically use
more stone per
capita than the
United States.
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
ANTICIPATED Date
EVENT OR MILESTONE IMPACT Accomplished
- ------------------ ------ ------------
<S> <C> <C> <C>
4. Winterization of primary sawing facility and Enable 5/97
introduction of 11-6 Diameter Block Saw. production to
proceed through
winter months.
Allow for
Inventory
build-up for
head start on
construction
season.
</TABLE>
In the opinion of management, the following is a chronological schedule
of the additional events which must or should occur in order for ASI to become
profitable:
<TABLE>
<CAPTION>
ANTICIPATED Target Date to be
EVENT OR MILESTONE IMPACT Achieved
- ------------------ ------ --------
<S> <C> <C> <C>
1. Changeover to municipal supply of Reduction of cost 8/97
electricity. for electrical
service.
2. Relocate ASI head office to Quarry location- Reduction in 10/97
to South Amherst, Ohio from Toronto, office overhead
Canada. and duplication of
labor because the
office would be
closer to core
business and
Company assets.
3. Development of warm weather market i.e., Development of 1998-1999
Southwest U.S.A. and Pacific Coast. new lines of
distribution.
</TABLE>
In the event that the Company fails to achieve the milestones set forth
above, the Company may not achieve the goals and objectives established by
management and the Board of Directors. While the exact impact of such failure(s)
cannot be predicted with certainty, some of the possible
<PAGE> 25
consequences include the following:
- If the Company is unable to negotiate with suppliers
to reduce the cost of electrical service (Milestone
#1), the cost of electricity will remain at
historically higher rates thereby having a negative
impact on profitability.
- If the Company is unable to relocate the head office
(Milestone #2), there will be no expected effect on
profitability or liquidity. The relocation of the
head office is anticipated to result in more
efficient and effective management of the Company
operations on a day-to-day basis.
- If the Company is unable to develop a warm weather
market (Milestone #3), the Company's sales will
remain cyclical in nature and influenced by inclement
winter weather. The development of this market is
relevant to the Company's objective of creating
steady revenue in all four quarters.
In addition, during the period summarized above, ASI will require
further operating capital, and the ability of the Company to remain liquid could
be impaired. See "Management's Discussion and Analysis of Certain Relevant
Factors."
4. CASH FLOW/LIQUIDITY
-------------------
The Company does not currently have, and is not expected to have within
the next twelve (12) calendar months, any cash flow or liquidity problems. The
Company is not in default with respect to any note, loan, lease or other
indebtedness or financing agreement. The Company is not subject to any
unsatisfied judgments, liens or settlement obligations; however, there are
accrued, unpaid and delinquent property taxes which are being brought current
pursuant to a five (5) year payment plan with the applicable County.
5. DESCRIPTION OF SECURITIES
-------------------------
ASI is seeking to register, pursuant to Section 12 of the Securities
Exchange Act of 1934, the following securities:
Common Shares ($.001 par value)
These shares have:
Yes No
[ ] [X] Cumulative voting rights
[ ] [X] Other special voting rights
[ ] [X] Preemptive rights to purchase in
new issues of shares
<PAGE> 26
[ ] [X] Preference as to dividends or interest
[ ] [X] Preference upon liquidation
[ ] [X] Other special rights or preferences
These shares are not convertible.
These shares are not any form of a note or debt, nor are they Preferred
Shares.
There are no restrictions on dividends under loans or other financing
agreements to which ASI is a party.
There are no current assets available for payment of a dividend.
6. PRIOR DIVIDENDS, DISTRIBUTIONS OR REDEMPTIONS
---------------------------------------------
ASI has not paid dividends or made distributions of its stock or
redeemed any securities within the past five (5) years.
7. OFFICERS AND KEY PERSONNEL OF THE COMPANY
-----------------------------------------
ASI has no full time officer or directors, and the Company does not
compensate any of its officers for services rendered.
CHIEF EXECUTIVE OFFICER:
------------------------
Name: Glen Gasparini
Title: President
Age: 44
Office Street Address: 900 Keele Street
Toronto, Ontario, Canada M6N 3E7
Telephone Number: (416) 653-6111
Name of employers, titles and dates of positions held for past
five years with summary of job responsibilities:
Glen Gasparini, 44, is the President and a Director of the
Company. Mr. Gasparini has spent over twenty (20) years in the
Dimensional Stone industry, having held a number of senior
management positions. His family founded Terrazzo, Mosaic &
Tile Company Limited (TMT), Toronto, Ontario in 1930. As a
third generation member of the family, Mr. Gasparini rose to
become the
<PAGE> 27
President of TMT in 1975 and, later, its controlling
shareholder. He is the immediate past President of the
Terrazzo, Tile and Marble Association of Canada and the
immediate past president of the Terrazzo, Tile and Marble
Guild of Ontario. He is a founding member and Director of the
Terrazzo, Tile and Marble Trade School of Ontario, a member of
the negotiating committee for the Terrazzo, Tile and Marble
Guild of Ontario Union, and a Trustee of the Welfare, Vacation
and Pension Fund for Local 31 of the International Bricklayers
and Allied Craftsmen.
Education: York University Honours B.A.
Major: Political Science.
Also a Director of the Company: [x] Yes [ ] No
Indicate amount of time to be spent on Company
matters if less than full time: 25%
---
CHIEF OPERATING OFFICER: Name: None.
------------------------
CHIEF FINANCIAL OFFICER:
------------------------
Name: Enzo Costantino
Title: Treasurer
Age: 35
Office Street Address: 900 Keele Street
Toronto, Ontario, Canada M6N 3E7
Telephone Number: (416) 653-6111
Name of employers, titles and dates of positions held for past
five years with summary of job responsibilities:
Enzo Costantino, 35, is Treasurer & Director of the Company.
He serves as the Chief Financial Officer of the corporation,
having gained experience as the Cost Accounting Manager for
Canada Packers and the Controller of Daicon, a large General
Contractor. He joined the TMT group in 1994 and has served as
Controller of TMT, in addition to his day to day management of
the company's financial affairs, which includes the
introduction and maintenance of financial and administrative
systems and procedures.
<PAGE> 28
Education (schools, degrees and dates):
Seneca College Accounting & Financial - 1983
Currently pursuing CMA. 5th Level Finalist
Also a Director of the Company: [x] Yes [ ] No
Indicate amount of time to be spent on Company
matters if less than full time: 25%
---
OTHER KEY PERSONNEL:
Name: David Tyrrell
Title: President, American Stone Corporation
Age: 36
Office Street Address: 48 Lavender Road
City of York, Ontario, Canada M6N 2B7
Telephone Number: (416) 656-3422
Name of employers, titles and dates of positions held for past
five years with summary of job responsibilities:
Tyrrell Stone Design - Owner/Operator 1990 to 1996
Owen Sound Ledgerock - Independent Sales Representative 1993 -
1996
Education (schools, degrees and dates):
Drimnagn Castle Christian Brothers School - Graduated 1978
Bolton Street College of Technology, Dublin 1978 to 1982 -
Civil Engineering Tech.
Also a Director of the Company: [ ] Yes [X] No
Indicate amount of time to be spent on Company
matters if less than full time: 100%
----
<PAGE> 29
8. DIRECTORS OF THE COMPANY
------------------------
There are five (5) Directors of ASI. In addition to Messrs. Gasparini
and Costantino as discussed above, the three additional Directors consist of the
following:
DIRECTOR:
---------
Name: Thomas H. Roulston, II (Chairman of the Board)
----------------------
Age: 64
Office Street Address: 4000 Chester Avenue
Cleveland, Ohio 44103
Names of employers, titles and dates of positions held for
past five years with a summary of job responsibilities:
Roulston & Company, Inc., an Investment Advisory Firm. Founder
of the firm in 1963 and has served as Chairman since 1990. Mr.
Roulston is an active investor serving as a Director of a
number of companies in a variety of industries.
Education (schools, degrees and dates):
AB from Dartmouth College
DIRECTOR:
---------
Name: Michael J. Meier (Secretary)
----------------
Age: 42
Office Street Address: 1111 Chester Avenue, Suite 750
Cleveland, Ohio 44114-3516
Names of employers, titles and dates of positions held for
past five years with a summary of job responsibilities:
Michael Meier joined Defiance, Inc. in 1988 as Corporate
Controller, and was named to his current position as Vice
President and Chief Financial Officer in 1990. Prior to
joining Defiance, he spent several years in public accounting
at a regional CPA firm and his own practice in Fort Wayne,
Indiana. He also
<PAGE> 30
spent several years in industry as a plant and divisional
controller for North American Van Lines in Fort Wayne and
Midas International Corporation in Chicago.
Education (schools, degrees, dates):
Mr. Meier is a 1975 honors graduate of Western Michigan
University, where he received his degree in accounting and
mathematics. Mr. Meier also holds certifications as both a CPA
and a CMA.
DIRECTOR:
---------
Name: Timothy Panzica
----------------
Age: 41
Office Street Address: 735 Beta Drive
Mayfield Village, Ohio 44143
Names of employers, titles and dates of positions held for
past five years with a summary of job responsibilities:
Panzica Construction Company - Executive Vice President
Administrative - 30%/Project Management - 70%
Education (schools, degrees, dates):
University of Notre Dame B.S. 1977
The Ohio State University D.D.S. 1980
9. OTHER INFORMATION REGARDING OFFICERS/DIRECTORS
----------------------------------------------
AND KEY PERSONNEL
-----------------
The following Officers/Directors or Key Personnel have worked or
managed a company (including a subsidiary or division of a larger enterprise) in
the same business as ASI:
Glen Gasparini
Enzo Costantino
The Company has utilized historically a variety of other individuals to
provide advice and assistance on miscellaneous matters. None of the individuals
are currently involved with the Company.
<PAGE> 31
The Company does not maintain any "key man" insurance.
10. BANKRUPTCY/RECEIVERSHIP
-----------------------
No petition under the Bankruptcy Act or any State insolvency law has
been filed by or against the Company or its Officers, Directors or other Key
Personnel, nor has a receiver, fiscal agent or similar officer been appointed by
a court; nor has any partnership, corporation or business association of which
any Officer, Director or Key Personnel was an executive officer within the past
five (5) years filed petition under the Bankruptcy Act .
11. PRINCIPAL OWNERS
----------------
Based upon information provided by the Company's transfer agent and its
officers, Key Personnel and Directors, the principal owners of the Company (i.e.
those who have ten percent (10%) or more of the Common Shares) and the
outstanding capitalization are as follows:
AMERICAN STONE INDUSTRY, INC. - COMMON SHAREHOLDER LISTING
AS OF: MAY 31, 1997:
Total Securities: 1,631,362
Total Restricted: 897,619
Total Non-Restricted: 733,743
Shareholders of Record
as of May 31, 1997: 515
*Note: As of December 31, 1996, the total number of securities was 16,313,620.
On May 31, 1997, the Company effected a 1 for 10 (1:10) reverse stock split,
thereby reducing the total number of securities outstanding.
PRINCIPAL SHAREHOLDERS (10% OR MORE)
Name: TMT MASONRY LTD.
Average Percentage of
Price per Total Shares
Share $0.375 Now Held: 25%
------ ---
Office Street Address: 900 Keele Street
Toronto, Ontario Canada M6N 3E7
Telephone No: (416) 653-6111
<PAGE> 32
Principal Occupation: Dimensional Stone Industry.
The beneficial owners of TMT Masonry, Ltd. as at June 1, 1997 are:
Glen Gasparini: 75%
Carlo Onorati: 25%
Name: ROULSTON VENTURES, LTD.
Average Percentage of
Price per Total Shares
Share: $0.375 Now Held: 25%
------ ---
Office Street Address: 4000 Chester Avenue
Cleveland, Ohio 44103
Telephone No: (216) 431-3841
Principal Occupation: Investments
The beneficial owners of Roulston Ventures, Ltd. as at June 1, 1997 and
their approximate ownership percentages (rounded to the nearest hundredth of a
percent) are:
General Partners
----------------
Thomas H. Roulston, IRA .72%
Scott D. Roulston, IRA .36%
Limited Partners 98.92%
----------------
Name: CEDE & CO.
Average Percentage of
Price per Total Shares
Share: N/A Now Held: 12%
--- ---
Office Street Address: Box 20
Bowling Green Station
New York, N.Y. 10004
Principal Occupation: Stock Depositing Firm
<PAGE> 33
12. SHARES BENEFICIALLY OWNED BY OFFICERS/DIRECTORS
-----------------------------------------------
The Officers and Directors of ASI, as a Group, own the following shares
beneficially, as of December 31, 1996 (adjusted to reflect the May 31, 1997
reverse stock split):
Number of Shares Outstanding: 1,631,362
Number of Shares Held Beneficially by
Officers/Directors: 804,170
To the best of the Company's knowledge, there has been no change in
beneficial ownership since December 31, 1996.
13. MANAGEMENT RELATIONSHIPS, TRANSACTIONS AND
------------------------------------------
REMUNERATION
------------
A. LOANS.
------
The Company has not made any loans to any Officers, Key Personnel or
Directors. No Officer, Director or Key Personnel has guaranteed any loan or bank
debt of ASI.
B. RELATED PARTY TRANSACTIONS.
---------------------------
(1) The Company was incorporated on November 11, 1992
as "Viva Designs U.S.A., Inc." Thereafter, the name of the Company was changed
to "Viva Medical Sciences Corp." (See: 1. HISTORICAL OVERVIEW: AMERICAN STONE
INDUSTRIES, INC.)
On or about August 8, 1995, TMT Masonry, Ltd. acquired fifty-five
percent (55%) of Viva Medical Sciences Corp. At that date, the market price of
Viva's common stock was $0.33. The transaction was effected by means of an
exchange of shares in which TMT Masonry, Ltd. tendered one hundred percent
(100%) of the common stock of American Stone Corporation in exchange for eight
million (8,000,000) shares of the common stock of Viva Medical Sciences Corp.,
which was equal to fifty-five percent (55%) of the issued and outstanding common
stock of Viva Medical Sciences Corp. In negotiating the purchase price, TMT
Masonry, Ltd. took into consideration, among other things, (i) the then
financial condition of the Company, (ii) the potential future business
opportunities to the Company which might be generated through an infusion in
working capital, (iii) the value of the Company's assets from the perspective of
TMT Masonry, Ltd., and (iv) the capital structure of the market for the
Company's stock.
(2) In 1996, ASI's President (Mr. Glen Gasparini)
recommended that ASI acquire two Canadian entities, which included the
acquisition of a Canadian quarry known as "Stoklosar." (For a discussion of the
"Stoklosar" transaction, see "Material Developments.") When the Board declined
to pursue the transaction to concentrate their efforts in the United States,
Messrs. Gasparini and Costantino pursued the acquisition individually with the
Board's approval. The Company has received appropriate indemnifications that ASI
is not a party to and has no
<PAGE> 34
responsibility for or out of the proposal and acquisition by Messrs. Gasparini
and Costantino.
(3) In 1996, ASI purchased from David Tyrrell all of
the issued and outstanding Common Shares of Tyrrell Stone Design, Ltd., an
Ontario corporation. In consideration of this transaction, ASI paid Mr. Tyrrell
and agreed to employ him as President of ASI. Pursuant to the terms of his
employment agreement, Mr. Tyrrell was given a base salary of ninety-six thousand
dollars ($96,000) (CDN). (See: 13. D. REMUNERATION, below.)
(4) Terrazzo, Mosaic & Tile Company Limited, a
company which is controlled by Glen Gasparini, advanced twenty-nine thousand
dollars ($29,000) in January 1996 to ASI. The debt was converted to stock and
Terrazzo, Mosaic & Tile received one hundred sixteen thousand (116,000) shares
in exchange for the debt.
(5) Terrazzo, Mosaic & Tile Company Limited was owed
interest for an amount it had advanced of seven hundred forty-eight thousand
three hundred forty-five dollars ($748,345). The interest payment of sixteen
thousand dollars ($16,000) covered the period from February 22, 1996 to August
28, 1996. On August 28, 1996, seven hundred forty-eight thousand three hundred
forty-five dollars ($748,345) of this loan payable was converted to capital.
(6) Terrazzo, Mosaic & Tile Company Limited received
from ASI twenty- two thousand two hundred thirty-three dollars ($22,233) for
reimbursement of office expense, stationery and other business supplies.
(7) In February, 1996, the Company began utilizing
office space of an affiliated company for seven hundred dollars ($700) (CDN) per
month on a month-to-month basis.
(8) Amherst Quarries Inc. owns approximately two
hundred (200) acres adjacent to lands currently held by ASI. Amherst Quarries is
owned ninety percent (90%) by TMT Masonry, which is also owned by Glen
Gasparini, and ten percent (10%) by Walter Molnar.
(9) During the years ended December 31, 1995 and
1996, the Company purchased stone from its unconsolidated subsidiary, Cleveland
Quarries, L.P., and paid for expenses such as stationary and business supplies
through its former parent company, TMT Masonry, Ltd. At December 31, 1995 and
1996, accounts payable to the same affiliates totaled nine thousand seven
hundred thirty-five dollars ($9,735) and ten thousand two hundred two dollars
($10,202), respectively. Such payables are expected to be satisfied in the
normal course of business.
(10) In February, 1996, ASC purchased the operating
assets of Cleveland Quarries, L.P., which was owned eighty-nine and one-tenth
percent (89.1%) by ASC. See "Material Developments."
(11) On or about November 22, 1996, TMT Masonry,
Ltd., Roulston Ventures Ltd., and American Stone Industries, Inc. entered into a
Share Purchase Option Agreement ("Agreement"). Pursuant to the terms of this
Agreement, in the event that TMT or Roulston
<PAGE> 35
Ventures intends to sell all or any part of the Common Shares of the Company,
the selling entity shall first offer to the Company the opportunity to purchase
such shares and, in the event that the Company declines to purchase such shares,
shall offer such shares to the other party to the Agreement. Upon tender, the
Company has fifteen (15) days within which to accept the offer before the shares
will be made available to the other party to the Agreement. In the event that
neither the Company nor the other party buys the shares, they may be sold to a
third party.
In the event that management recommends that the Company (or any of its
subsidiaries) enter into any future business transactions with a related party,
the transaction(s) will be reviewed by a majority of the Board of Directors who
are independent. In addition, if a Director is affiliated with a related party,
that Director will abstain from voting on any such proposal.
C. STOCK OPTIONS.
--------------
The Company has granted stock options to Directors, selected Key
Personnel, and others. Many of the options have expired. At this time, the
outstanding options are as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF EXERCISE EXPIRATION
---- --------- -------- ----------
SHARES PRICE DATE
------ ----- ----
<S> <C> <C> <C>
Glen Gasparini* 100,000 $0.75 October 31, 1997
Enzo Costantino* 100,000 $0.75 October 31, 1997
Carlo Onorati 100,000 $0.75 October 20, 1997
Suncrest Management 250,000 $0.25 August 8, 1998
David Tyrrell* 250,000 $0.50 February 18, 2000
<FN>
*Current Officer, Director, or Key Personnel
</TABLE>
The total number of shares subject to issuance under outstanding stock
options or purchase agreements is eight hundred thousand (800,000) Common
Shares, which is equal to forty nine percent (49%) of the total number of shares
outstanding, assuming conversion or exercise of all options or purchase
agreements.
The Shareholders have not approved any of these options and are not
required to approve any future stock purchase agreement, stock option, warrant
or rights agreement.
D. REMUNERATION
------------
The following table schedules the remuneration to ASI Officers,
Directors and Key Personnel for the past fiscal year:
<TABLE>
<CAPTION>
CASH
----
PERSON TITLE COMPENSATION OTHER
- ------ ----- ------------ -----
<S> <C> <C> <C>
Thomas H. Roulston, II Chairman of the
Board and Director $0.00 None
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C> <C>
Glen Gasparini President, CEO and
Director $0.00 None
Enzo Costantino Treasurer and Director $0.00 None
Michael J. Meier Secretary and Director $0.00 None
Timothy I. Panzica Director $0.00 None
David Tyrrell President ("ASC") $96,000 (CDN) $6,000 (CDN) - car allowance
-------- ------ (see N.1 below as well)
Total: $96,000 (CDN) $6,000
======= ======
</TABLE>
Note 1: Mr. Tyrrell is also entitled through his Employment Agreement to a bonus
based on Net Income of ASC adjusted for depreciation and other factors, computed
as follows:
a) Five percent (5%) of the first one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
b) Four percent (4%) of the second one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
c) Three percent (3%) of the third one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
d) Two percent (2%) of the fourth one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
e) One percent (1%) of all adjusted Net Income in excess of four
million dollars ($4,000,000) earned during a fiscal year.
As of December 31, 1996, Mr. Tyrrell was entitled to a bonus of
approximately three thousand three hundred dollars ($3,300). Mr. Tyrrell's
contract commenced in 1996 and continues through 2001.
E. PERSONNEL RELIANCE.
-------------------
The Company's business is not dependent upon the services of any
single individual or group.
F. CREDIT LINE.
------------
The Company maintains a credit line with First Merit-First National
Bank of Ohio of Cleveland, Ohio. As at June 1, 1997, the credit line provides
for a maximum of seven hundred fifty thousand dollars ($750,000) based upon
fifty percent (50%) of inventory and seventy-five percent (75%) of receivables
reported monthly. The credit line is secured by Company property. The interest
rate is equal to the United States prime lending rate. The use of the line is
two hundred fifty thousand dollars ($250,000) as at June 1, 1997, with the
current usable portion of the line of credit at approximately five hundred
thousand dollars ($500,000). The relationship with the lender is favorable and
the Company is in compliance with the terms of the line of credit as at June 1,
1997.
<PAGE> 37
14. LITIGATION
----------
The Company is not currently a party to any litigation. At this time,
there is no pending or threatened litigation.
15. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CERTAIN RELEVANT
--------------------------------------------------------
FACTORS
-------
Results of Operations
- ---------------------
YEARS ENDED DECEMBER 31
-----------------------
<TABLE>
<CAPTION>
Amount 1996 Amount 1995
<S> <C> <C>
Sales $ 1,702,551 $ 919,694
Cost of Goods Sold 1,038,358 785,354
----------- -----------
Gross Profit 664,193 134,340
Selling, General and
Administrative Expenses 851,163 632,216
----------- -----------
Loss from Operations (186,970) (497,876)
Other Income (Expense)
Gain on Sale of Property 84,611
Other Income 64,821 22,468
Interest Expense 11,655
Interest Income (73,432)
----------- -----------
3,044 107,079
----------- -----------
Net Loss before Provision for
Income Taxes (183,926) (390,797)
Provision for Income Taxes 6,500
----------- -----------
Net Loss (190,426) (390,797)
=========== ===========
Net Loss Per Common Share $ (.01) $ (.04)
=========== ===========
</TABLE>
TOTAL SALES
- -----------
Total sales increased by seven hundred eighty-two thousand eight hundred
fifty-seven dollars ($782,857), or by eighty-five and one-tenth percent (85.1%),
from nine hundred nineteen thousand
<PAGE> 38
six hundred ninety-four dollars ($919,694) in 1995 to one million seven hundred
two thousand five hundred fifty-one dollars ($1,702,551) in 1996. This increase
is, in most part, a result of the following changes implemented by the new
management team which took over in February 1996:
1. Production facilities were upgraded and new equipment was
installed;
2. Product processing was streamlined; and
3. A marketing strategy was developed and implemented.
Sales were at a level that would only provide modest profit in any year. Even
the decrease in expenses in 1997 could not achieve a healthy profit margin
without increased sales. Sales and marketing efforts have been stepped up, and
new agents and distributors have been added. Inventory levels have increased,
employees have been hired and trained, new equipment has been installed and
capacity has increased dramatically. The plant has been winterized for year
round operation. Additionally, the Quarry crew has doubled and a new section of
Quarry 7 has been prepared for use in 1997.
GROSS PROFIT
- ------------
Gross profit increased by five hundred twenty-nine thousand eight hundred
fifty-three dollars ($529,853), or almost four hundred percent (400%), from one
hundred thirty-four thousand three hundred forty dollars ($134,340) in 1995 to
six hundred sixty-four thousand one hundred ninety-three dollars ($664,193) in
1996. The gross profit increased from fourteen and six tenths percent (14.6%) in
1995 to thirty-nine percent (39.0%) in 1996. Many new employees were hired and
much of the labor expenses went into activities required to startup the
operation. These activities included repairs, maintenance equipment
installation, training and administration. The primary mill, fabrication shop,
office and crushing operation were all completely overhauled.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses increased by two hundred eighteen
thousand nine hundred forty-seven dollars ($218,947), or thirty-four and six
tenths percent (34.6%), from six hundred thirty-two thousand two hundred sixteen
dollars ($632,216) in 1995 to eight hundred fifty-one thousand one hundred
sixty-three dollars ($851,163) in 1996. However, as a percentange of total
sales, selling, general and administrative expenses decreased by eighteen and
seven tenths percent (18.7%). The dollar increase was primarily attributable to
consulting fees incurred in the active search for an equity investment in ASTI.
The total cost of this search was approximately one hundred fifty thousand
dollars ($150,000) and there were investor relations fees, such as mailing and
couriers, which were more than normal due to the need for the Company to explain
to its existing and potential shareholders the full extent of the changes to the
Company. The other major activity which caused an increase in these expenses in
1996 was the acquisition of Tyrrell Stone Design. This acquisition required
above-normal legal and accounting fees. This increase in fees is not expected in
future years.
OTHER INCOME (EXPENSE)
- ----------------------
ASI had a debt of approximately seven hundred fifty thousand dollars ($750,000)
during most of 1996 and paid interest of approximately seven and one-half
percent (7.5%). This debt was eliminated in September 1996. ASC also had an
outstanding mortgage of approximately five hundred thousand
<PAGE> 39
dollars ($500,000), which added to the interest expense, but was paid off in
September 1996. The proceeds for loan repayment were derived from the sale of
four million (4,000,000) shares of common stock for one million five hundred
thousand dollars ($1,500,000). The gain on sale of property resulted from the
sale of a Quarry in Kipton.
NET LOSS
- --------
Net loss after taxes decreased by two hundred thousand three hundred seventy-one
dollars ($200,371), from three hundred ninety thousand seven hundred
ninety-seven dollars ($390,797) in 1995 to one hundred ninety thousand four
hundred twenty-six dollars ($190,426) in 1996.
A. CAUSES FOR LOSSES FROM OPERATIONS
---------------------------------
For the fiscal year ending December 31, 1995, the Company incurred a
loss of three hundred ninety thousand seven hundred ninety-seven dollars
($390,797). For the fiscal year ending December 31, 1996, the loss was one
hundred ninety thousand four hundred twenty-six dollars ($190,426). The
underlying causes for losses from operations and the steps that have been and
will be taken to address these causes are as follows:
CAUSES FOR 1995 LOSS -
- The volume of business was not adequate to cover
administrative costs, which included higher
consulting fees as a result of the acquisition and
startup operations; and
- The Cleveland Quarries, L.P. operation had an adverse
impact on the Company's financial position,
contributing two hundred forty-two thousand three
hundred eighteen dollars ($242,318) of the Company's
total loss. Many steps were taken to address the
increased loss. Among other things, the Cleveland
Quarries Management team was replaced, an extensive
overhaul of the antiquated equipment was begun in
earnest, improved stone extraction methods were
adopted immediately, and the main production facility
was renovated and insulated to provide for year-round
production. The assets of Cleveland Quarries, L.P.
were sold to ASC in 1996, and Cleveland Quarries,
L.P. was thereafter dissolved as of December 31,
1996.
CAUSES FOR 1996 LOSS -
- ASI activities included the acquisition of Tyrrell
Stone Design, Inc. and an active search for an equity
investment in ASI. Both of these functions caused the
company to spend money on legal and accounting fees
(some of which were capitalized), that would not have
otherwise been spent during the year, and will not be
required in future years;
- In addition, there were consulting fees incurred in
the process which will not be necessary in the
future. The total was approximately one hundred fifty
<PAGE> 40
thousand dollars ($150,000) and there were investor
relations fees, such as mailing, couriers and
consulting expenses, which were more than normal due
to the need for the Company to explain to its
existing and potential shareholders the full extent
of the changes to the Company. ASI had no revenues to
offset these expenses;
- ASI had a debt of approximately seven hundred fifty
thousand dollars ($750,000) during most of 1996 and
paid interest of approximately seven and one-half
percent (7.5%). This debt was eliminated in September
1996;
- ASC became an operating company in February, 1996.
ASC also acquired the assets of Cleveland Quarries
L.P. and the purchase costs of these assets were
capitalized, but, for all intents and purposes, ASC
was operating in a startup mode for most of the year;
- Many new employees were hired and much of the labor
expenses went into activities required to start up
the operation. These activities included repairs,
maintenance, equipment installation, training and
administration. The Primary mill, Fabrication shop,
Office and Crushing operation were all completely
overhauled; and
- ASC also had an outstanding mortgage of approximately
five hundred thousand dollars ($500,000) which was
paid off in September 1996, which added to the
interest expense. The proceeds for loan repayment
were derived from the sale of four million
(4,000,000) shares of Common Stock for one million
five hundred thousand dollars ($1,500,000).
Revenues were at a level that would only provide a modest profit in any
year. Even with the decrease in expenses for 1997 it will be necessary for sales
to increase in order to be profitable. Many of the steps detailed earlier in
this document have been taken to increase sales in 1997. Sales and marketing
efforts have been stepped up, and new agents and distributors have been added.
Inventory levels have increased, employees have been hired and trained, new
equipment has been installed, and capacity has increased dramatically. The plant
has been winterized for year-round operation. The Quarry crew has doubled a new
section of Quarry 7 and is prepared for use in 1997.
B. TRENDS IN HISTORICAL OPERATING RESULTS
--------------------------------------
The Company's current Officers, Directors, Key Personnel and Management
have limited experience with respect to ASI and ASC and, therefore, are not in a
position to comment upon historical operating results prior to 1995. On the
basis of their limited experience with ASI and ASC and drawing upon their
experience in the industry, management has identified the following trends:
- The operations in Amherst, Ohio have recently been
below a break-even level. The plant, property, and
equipment were too large and too old to be sustained
and operated at the recent sales levels. This was the
result of an ever
<PAGE> 41
declining use of natural stone in the building
industry from the 1950's to the 1980's. Ownership
lacked interest and allowed the facilities and
employees to fall behind to become run-down, thereby
hurting production; and
- Cleveland Quarries has produced stone for public
buildings, churches, schools and prestigious homes
since 1869. Many of these structures are still in
existence today and the possibility of sales for
renovations exist.
With respect to the industry (in general) and ASI/ASC (in particular),
management has identified the following changes in the underlying economics of
the business which, in the opinion of management, will have significant impact
(either favorable or adverse) upon the Company's operating results for the next
twelve (12) months.
- Because it is not as structured as most industries in
North America, the stone industry has been difficult
to evaluate. While there has certainly been a feeling
of optimism at a recent trade show, there is some
question as to what will come from this confidence;
- According to Stone World Magazine's most recent
market study, which revealed an overwhelming
sentiment of optimism, the result will be increased
investment in equipment, facilities and personnel in
the stone industry;
- The survey, which was completed primarily by
fabricators, showed a positive outlook for the
short-term, as well as for the long-term. Of those
polled, eighty four and nine-tenths percent (84.9%)
expected the stone market to increase in 1997 and
eighty-six percent (86%) expected an increase over
the next five (5) to ten (10) years. Only one and
six-tenths percent (1.6%) expected a decrease in
1997, and two and nine-tenths percent ( 2.9%)
predicted a decline over the next five (5) to ten
(10) years. The remainder of those surveyed expected
the market to stay the same;
- Many of the respondents who predicted an increase
believe that it will be fairly significant. Around
eighty percent (80%) forecast an increase of over six
percent (6%) - for the short-term as well as the
long-term - and over half believe the increase will
be more than fifteen percent (15%) over the next five
(5) to ten (10) years;
- A stronger economy and increased demand for stone is
predicted by some to result in better exposure for
natural stone and increased consumer awareness;
- A number of fabricators mentioned the residential
market as a reason for increased optimism;
- Many people pointed to the increased use of stone for
kitchen countertops;
<PAGE> 42
- Even on the commercial end, there is a feeling that
stone use will increase. A number of respondents
cited the amount of bids they have received for
commercial construction projects;
- Lower interest rates and a cyclical upswing of the
economy are factors that will increase commercial
construction;
- Those who predicted no change in the market cited
increased competition and overbuilding in the 1980's;
and
- The few respondents predicting a decline pointed to
specific factors, such as increases in fixed costs
and the minimum wage as a concern.
<TABLE>
<S> <C>
increase 84.9%
decrease 1.6%
stay the same: 13.6%
</TABLE>
Source: "What do stone producers expect for the stone market in 1997?"
Stone World, January/97
The anticipated impact of these changes will be:
- The use of natural stone in the building industry has
come back significantly. Bigger, more expensive
housing and high-end commercial buildings, such as
resorts and financial institutions, have made greater
use of natural stone, which has led to greater demand
for a product that was once widely used. This trend
and the fact that ASC, together with Tyrrell Stone
Design, can provide a full-service stone supply to
the industry should bode well for the Company; and
- Management believes these changes will allow the
Company to increase sales and production and be
profitable in 1997. The break-even level of sales was
<PAGE> 43
surpassed in 1996 and, with many of the startup costs
out of the way, management believes 1997 should prove
to be profitable. The Company plans to fully utilize
the new capacity of the plant prior to adding more
capacity through the purchase and installation of new
equipment. There is currently excess plant capacity.
C. GROSS MARGIN
------------
With respect to its product sales in the past fiscal year, the
Company's gross profit margin (as a percentage of sales) is about thirty-nine
percent (39%). This margin is expected to continue in the next fiscal year.
D. FOREIGN/GOVERNMENT SALES
------------------------
Foreign sales (which are exclusively in Canada) as a percent of total
sales for the past fiscal year were ten percent (10%). Domestic government
sales, as a percent of total sales, for the past fiscal year were ninety percent
(90%).
These sales are expected to be sustained in the upcoming fiscal year.
[INTENTIONALLY LEFT BLANK]
<PAGE> 44
PART II
-------
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON
--------------------------------
REGISTRANT'S COMMON SHARES AND
------------------------------
OTHER SHAREHOLDER MATTERS
-------------------------
The Company's Common Shares are currently traded in the
over-the-counter market via "bulletin board" maintained through the National
Association of Securities Dealers, Inc. ("NASD"). Prior to the reverse stock
split, the trading symbol was "ASTI." As of May 31, 1997 (the date of the
reverse stock split), the trading symbol was changed to "AMST."
The following quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
The Company, through the first half of 1995, was operating under the
name Viva Medical Services Corp. as a distributor of medial equipment in the
United States. The material range of quotes at that time was:
<TABLE>
<CAPTION>
High Low Closing High Low Closing
Period Bid Bid Bid Ask Ask Ask
- ------ --- --- --- --- --- ---
1995
- ----
<S> <C> <C> <C> <C> <C> <C>
First Quarter 8 5 7.75 9 5.5 9
Second Quarter 5 0.5 5 5.5 0.8125 5.5
</TABLE>
In August 1995, the assets of Viva Medical Services were transferred to
a third party and the corporate name was changed to American Stone Industries,
Inc. Concurrent with the name change, ASI became a holding company which
conducts business only through its wholly-owned subsidiary, ASC, which purchases
and sells stone for use in the building construction industry. The mutual range
of quotes for ASI's Common Shares was:
<TABLE>
<CAPTION>
High Low Closing High Low Closing
Period Bid Bid Bid Ask Ask Ask
------ --- --- --- --- --- ---
1995
----
<S> <C> <C> <C> <C> <C> <C>
Third Quarter 0.65 0.25 0.65 0.9375 0.55 0.9375
Fourth Quarter 1.1875 0.21875 1.1875 1.28125 0.40625 1.28125
1996
----
First Quarter 0.72 0.34375 0.7 0.8 0 0.8
Second Quarter 1.125 0.5 1 1.5 0.625 1.375
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Third Quarter 0.75 0.3 0.71875 0.9375 0.53125 0.9375
Fourth Quarter 0.71875 0.375 0.71875 0.75 0.5 0.75
</TABLE>
No cash dividend has been paid by the Company within the past two (2)
fiscal years. The Company's ability to pay dividends is directly related to the
Company's future profitability and need for capital to support growth.
ITEM 2: LEGAL PROCEEDINGS:
------------------
None.
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
In 1996, the Company engaged the accounting firm of Hobe & Lucas to
serve as its Auditors and Accountants. This engagement was made as a matter of
convenience because the Company intends to relocate its principal place of
business from Toronto to Cleveland, Ohio. In addition, the Chairman of the
Company's Board of Directors and its major operations are based in or near
Cleveland, Ohio and the former accounting firm was headquartered in Wayne, New
Jersey. There was no disagreement with the prior accounting firm, nor did that
firm resign.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
The following securities were sold by the Company during the past three
(3) fiscal years without registering the securities pursuant to the Securities
Act of 1933:
<TABLE>
<CAPTION>
Date No. of Shares Recipient Price Paid Exemption/Basis
- ---- ------------- --------- ---------- ---------------
<S> <C> <C> <C> <C>
February 16, 50,000 Alex Lagutenko $0.25 per share Rule 504 of
1994 Regulation D
February 16, 80,000 Walter Essman $0.25 per share Rule 504 of
1994 Regulation D
February 16, 44,664 Cougar Fund $0.25 per share Rule 504 of
1994 Management Regulation D
February 16, 40,000 Cougar Capital $0.25 per share Rule 504 of
1994 Corp. (Man.) Regulation D
Inc.
February 16, 16,000 Cougar Capital $0.25 per share Rule 504 of
1994 Corp. (N.S.) Inc. Regulation D
February 16, 100,224 Sing Pei $0.25 per share Rule 504
1994 Enterprise Co. Regulation D
Ltd.
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
Date No. of Shares Recipient Price Paid Exemption/Basis
- ---- ------------- --------- ---------- ---------------
<S> <C> <C> <C> <C>
February 16, 159,200 Cathy Kuo $0.25 per share Rule 504
1994 Regulation D
February 16, 50,000 A&M Ventures $0.25 per share Rule 504
1994 Regulation D
February 16, 50,000 Tronco Ltd. $0.25 per share Rule 504
1994 Regulation D
February 16, 150,000 John B. Lowy, $0.25 per share Rule 504
1994 P.C. Regulation D
April 22, 1994 250,000 Alda Not known Rule 144
Artherapedic
Systems, Inc.
April 22, 1994 10,000 Muriel Korngold Not known Rule 144
Wexler
May 30, 1994 125,000 BC Management $100,000 ($.80 Rule 504
per share) Regulation D
February 15, 29,572 A & Z Ventures $22,000 ($.74 Rule 504
1995 Inc. per share) Regulation D
March 22, 3,000 Honey Essman $3,000 ($1.00 Rule 504
1995 per share) Regulation D
March 22, 50,000 A & Z Ventures $17,500 ($.35 Rule 504
1995 Inc. per share) Regulation D
July 14, 1995 470,000 Sunset Not known Unknown
Management
Services
August 7, 1995 25,000 John B. Lowy, Not known Rule 504
P.C. Regulation D
August 8, 1995 8,000,000 TMT Masonry, Issued in Rule 504
Ltd. exchange for Regulation D
100% of the
common stock of
American Stone
Corporation
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
Date No. of Shares Recipient Price Paid Exemption/Basis
- ---- ------------- --------- ---------- ---------------
<S> <C> <C> <C> <C>
August 9, 1995 51,896 Alda $77,844 ($1.50 Rule 504
Artherapedic per share) Regulation D
Systems, Inc.
August 9, 1995 79,604 Alda $19,901 ($.25 Rule 504
Artherapedic per share) Regulation D
Systems, Inc.
August 9, 1995 470,000 Suncrest $235,000 ($.50 Rule 504
Management per share) Regulation D
Services SA
August 9, 1995 425,772 Suncrest $106,443 ($.25 Rule 504
Management per share) Regulation D
Services SA
August 9, 1995 108,000 Cougar Fund $27,000 ($.25 Rule 504
Management per share) Regulation D
(Man.) Inc.
April 15, 1996 60,000 R.F. Conversion of Rule 504
Corporation $15,000 debt Regulation D
($.25/share)
April 17, 1996 690,000 Georgia Capital Conversion of Rule 504
Corporation $175,000 debt Regulation D
($.25/share)
May 23, 1996 116,000 Terrazzo, Conversion of Rule 504
Mosaic & Tile $29,800 Regulation D
Company, Ltd. ($.26/share) of
accounts
receivable into
equity
May 23, 1996 200,000 David Tyrrell Purchase 100% Rule 504
of Tyrrell Stone Regulation D
Designs, Ltd.
valued at
$160,000
($.80/share)
May 23, 1996 656,000 Georgia Capital Conversion of Rule 504
Corporation $194,405 debt Regulation D
($.30/share)
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
Date No. of Shares Recipient Price Paid Exemption/Basis
- ---- ------------- --------- ---------- ---------------
<S> <C> <C> <C> <C>
August 28, 4,000,000 Roulston $1,500,000 Accredited
1996 Ventures, Ltd. ($.375/share) investor/Rule
504, Section 4(2)
</TABLE>
No underwriter was involved in any transaction. All transactions were
made in reliance upon Section 4(2) of the Securities Act of 1933 or Rule 144 or
504 of Regulation D promulgated thereunder.
With respect to the bases for the transactions summarized above,
analysis of documents available to management indicates the following:
- With respect to the transactions prior to August 8, 1995, the
documentation supporting these transactions is minimal. These
transactions took place prior to TMT's acquisition of a
controlling interest. None of the officers or directors of the
Company prior to August 8, 1995 are available for comment or
additional information. The information provided has been
derived from corporate minutes and other documents available
to the Company and is believed to be correct; however, these
documents do not provide all of the information requested. To
the extent that information is not provided, such information
is not available.
- With respect to the August 1995 transaction involving TMT
Masonry, Ltd., the purchaser was an "Accredited Investor," as
defined in Regulation D of the Securities Act of 1933. Prior
to affecting the transaction, TMT Masonry, Ltd. conducted
extensive due diligence into the organization and operation of
Viva Medical Science Corp.
- With respect to the May 17, 1996 transaction involving
Terrazzo, Mosaic & Tile Company, Ltd. ("TMT"), this entity was
under the control of Mr. Glen Gasparini who was also the
president of American Stone Industries, Inc. Accordingly, Mr.
Gasparini had substantial personal knowledge of the
organization and affairs of the issuer. In that capacity, Mr.
Gasparini had full and complete access to all relevant
corporate information concerning American Stone Industries.
- With respect to the May 21, 1996 transaction involving Mr.
David Tyrrell, Mr. Tyrrell conducted substantial due diligence
into the affairs of American Stone Industries, Inc. and was
provided with extensive financial and operational information
concerning that entity. In addition, Mr. Tyrrell, as a result
of this transaction, agreed to become the President of
American Stone Corporation.
- Regarding the April 15, 1996 transaction with R.F.
Corporation, this entity had been a consultant to American
Stone Industries and, in that context, had become intimately
familiar with the organization and operation of the Company.
<PAGE> 49
- With respect to the April 15, 1996 transaction involving
Georgia Capital Corporation and the May 17, 1996 transaction
involving that same entity, Georgia Capital Corporation was
given full and complete access to the financial records of the
issuer, and was thoroughly familiar with the operational
aspects of the Company.
- With respect to the August 28, 1996 transaction involving
Roulston Ventures, Ltd., this entity is an Accredited
Investor, as defined in Regulation D of the Securities Act of
1933. In addition, Roulston Ventures, through its management,
conducted substantial due diligence with respect to the
Company, including a comprehensive examination of the books
and records of the Company with an on-site visit to the
Company's operations.
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The Company's By-Laws, adopted at the annual meeting of shareholders
held on November 22, 1996, provide, in pertinent part, for indemnification, in
selected circumstances, of any person who was a Director or Officer of the
Corporation, or is or was serving at the request of the Corporation as a
Director, Officer, Trustee, or Employee of another corporation, partnership,
joint venture, trust or other enterprise ("Indemnified Party").
In summary, the By-Laws provide that the Corporation shall indemnify
any Indemnified Party who was or is a party, or who is threatened to be made a
party, to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, including all appeals
(other than an action, suit or proceeding by or in the right of Corporation) by
reason of the fact that the Indemnified Party is a Director or Officer of the
Corporation, or was serving at the request of the Corporation as a Director,
Officer, Trustee or Employee of another corporation, partnership, joint venture,
trust or other enterprise. The indemnification includes obligation to pay all
expenses (including attorney's fees), judgments, decrees, fines, penalties and
amounts paid in settlement actually and reasonably incurred by the Indemnified
Party in connection with such action, suit or proceeding if the individual acted
in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation and, with respect to any
criminal action or proceeding, he had no reasonable cause to believe that his
conduct was unlawful.
In addition, a similar obligation of indemnification shall occur with
respect to any threatened, pending or completed action or suit, including all
appeals, by or in the right of the Corporation (i.e., all derivative actions) to
procure a judgment in its favor, by reason of the fact that the Indemnified
Party is or was a Director or Officer of the Corporation or was serving at the
request of the Corporation as a Director, Officer, Trustee, or Employee of the
Corporation, partnership, joint venture, trust or other enterprise. In a
derivative action, no indemnification shall be made with respect to any claim,
issue, or matter for which such person was fully adjudged to be liable for
negligence or misconduct in the performance of his duty to the Corporation,
unless, and only to the extent that, the court in which such suit or action was
brought shall determine upon application that, despite the adjudication of
liability, in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to be indemnified for such expense as the court
shall deem proper.
<PAGE> 50
In addition, to the extent that a Director or Officer has been
successful on the merits or otherwise in the defense of any action, suit or
proceeding commenced by a third party, or in the defense of any derivative
action or of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection with such matter.
The By-Laws also provide that the Corporation's Board of Directors may
authorize the Company to advance the expenses to be incurred in the defense of
any individual to whom the Company has an obligation of indemnification.
The indemnification provisions provided by the by-laws shall not be
deemed exclusive of any other rights. In this context, Delaware General
Corporation Law Section 145 authorizes such indemnification of Officers,
Directors, Employees and Agents.
<PAGE> 51
PART F/S
--------
The following pages set forth the Company's Audited Financial
Statements for the fiscal years ending December 31, 1995 and December 31, 1996
and the Form 10-QSB for the quarterly period ended March 31, 1997.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 52
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITORS' REPORT
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE> 53
CONTENTS
PAGE
----
Independent Auditors' Report 1
Consolidated financial statements:
Balance sheet 2
Statement of operations 3
Statement of stockholders' equity 4
Statement of cash flows 5
Notes to financial statements 6
<PAGE> 54
INDEPENDENT AUDITORS' REPORT
Board of Directors
American Stone Industries, Inc.
Toronto, Canada
We have audited the accompanying consolidated balance sheet of American Stone
Industries, Inc. (a subsidiary of TMT Masonry, Ltd.) and subsidiary as of
December 31, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. We did not audit the financial statements of Cleveland Quarries,
L.P., a consolidated subsidiary, which statements reflect total assets of
$1,758,000 as of December 31, 1995, and total revenue of $918,000 for the year
then ended. These statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Cleveland Quarries, L.P., is based solely on the report of the
other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of American Stone Industries, Inc. and
subsidiary as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As described in Note 10 to the financial statements, the financial statements
have been revised to consolidate the Company's limited partnership investment in
Cleveland Quarries, L.P., which was previously recorded on the equity method of
accounting. As a result, the net loss had been increased by $241,117 ($.022 per
share).
HORTON & COMPANY, L.L.C.
Wayne, New Jersey
April 3, 1996 (except for Note 10,
as to which the date is July 8, 1997)
<PAGE> 55
PAGE 2
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<PAGE> 56
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and cash equivalents $ 14,161
Accounts receivable 97,984
Current portion of notes receivable 77,549
Inventory 130,556
----------
Total current assets 320,250
----------
Property and equipment:
Land and buildings 913,215
Machinery and equipment 742,814
Transportation equipment 15,673
Office furniture and equipment 36,625
----------
1,708,327
Less accumulated depreciation 367,077
----------
1,341,250
----------
Other assets:
Notes receivable, net of current portion 39,511
Goodwill 38,465
Other intangibles 58,841
Deposits 1,000
----------
137,817
----------
$1,799,317
==========
</TABLE>
See notes to financial statements
<PAGE> 57
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Demand note payable $ 743,466
Current maturities of long-term debt 549,313
Accounts payable and accrued expenses 316,893
Due to consulting firm 132,570
-----------
Total current liabilities 1,742,242
-----------
Long-term debt, net of current maturities 28,432
-----------
Stockholders' equity:
Common stock, $.001 par value
20 million shares authorized
14,591,828 shares issued and outstanding 14,592
Additional paid-in capital 777,249
Accumulated deficit (763,198)
-----------
28,643
-----------
$ 1,799,317
===========
</TABLE>
See notes to financial statements
<PAGE> 58
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Sales $ 919,694
Cost of sales 785,354
---------
Gross profit 134,340
General and administrative expenses 632,216
---------
Loss from operations (497,876)
---------
Other income:
Gain on sale of property 84,611
Other income 22,468
---------
107,079
---------
Net loss $(390,797)
=========
Loss per common share $ (.036)
=========
</TABLE>
See notes to financial statements
<PAGE> 59
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common stock
-------------------------- Additional
Issued paid-in Accumulated
Shares Par value capital deficit
--------- --------- ------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1995, as
restated for reverse acquisition
accounting 8,000,000 $8,000 $ - $(372,401)
Loan from parent reclassified
to additional paid-in capital - - 777,249 -
Stock issued in business
combination accounted as a
reverse acquisition 6,591,828 6,592 - -
Net loss - - - (390,797)
----------- -------- -------- ---------
14,591,828 $ 14,592 $777,249 $(763,198)
=========== ======== ======== =========
</TABLE>
See notes to financial statements
<PAGE> 60
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Net loss $(390,797)
---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and depletion expense 139,894
Amortization expense 15,127
Gain on sale of property (84,611)
Changes in assets and liabilities:
Decrease in accounts receivable 42,670
Increase in inventory (10,056)
Increase in accounts payable and accrued expenses 147,551
Increase in amounts due to consulting firm 107,874
----------
Total adjustments 358,449
---------
Net cash used in operating activities (32,348)
----------
Cash flows from investing activities:
Capital expenditures (6,510)
Payments received on notes receivable 31,360
Proceeds from sale of property 6,530
Other (2,914)
----------
Net cash provided by investing activities 28,466
----------
Cash flows from financing activities:
Proceeds from loan advances 90,384
Principal payments on long-term debt (137,374)
---------
Net cash used in financing activities (46,990)
----------
Net decrease in cash and cash equivalents (50,872)
Cash and cash equivalents at beginning of year 65,033
----------
Cash and cash equivalents at end of year $ 14,161
==========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 1995, the Company completed a business
combination through the issuance of 8,000,000 shares of its common stock. The
business combination was accounted as a reverse acquisition as described in Note
2.
For the year ended December 31, 1995, the Company reclassified a loan from an
affiliated company to additional paid-in capital as described in Note 6.
Various property was sold in 1995 with Cleveland Quarries, L.P. taking $145,000
in notes receivable.
For the year ended December 31, 1995, total interest paid was $108,922.
See notes to financial statements
<PAGE> 61
AMERICAN STONE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of American Stone
Industries, Inc. (a subsidiary of TMT Masonry, Ltd..), (hereinafter
"ASI" or the "Company") is presented to assist in understanding the
financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for
their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION
Under the accounting rules for a reverse acquisition which were applied
to the business combination described in Note 2, the accompanying
financial statements include the accounts of American Stone Corporation
and its majority-owned subsidiary Cleveland Quarries, L.P. ("CQ") for
the year ended December 31, 1995, and of American Stone Industries,
Inc. for the period from the date of the acquisition, August 8, 1995,
through December 31, 1995. Significant intercompany transactions and
balances have been eliminated in consolidation.
HISTORY AND BUSINESS ACTIVITY
The Company was incorporated in the State of Delaware on November 11,
1992, as Viva Designs U.S.A., Inc. The Company was a distributor of a
line of jewelry and fragrances until June 1993 when it discontinued
those operations. On December 14, 1993, a certificate of amendment was
filed to change the name of the corporation to Viva Medical Sciences
Corp. Beginning in 1994 and until the business combination described in
Note 2, the Company was a distributor of medical equipment in the
United States. In conjunction with the business combination, the
medical equipment distributorship business was transferred to a related
party. On August 9, 1995, articles of amendment were filed reflecting a
change of the corporate name to American Stone Industries, Inc.
Concurrent with the business combination described in Note 2, ASI
became a holding company which conducts business only through its
wholly-owned subsidiary, American Stone Corp. ("ASC"). ASC purchases
and sells stone for use in the building construction industry.
<PAGE> 62
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
HISTORY AND BUSINESS ACTIVITY (CONTINUED)
American Stone Industries, Inc. is a publicly-held company whose stock
is traded on the OTC Bulletin Board.
American Stone Corporation also holds an 89.1% ownership interest in
Cleveland Quarries, L.P. of Amherst, Ohio. Cleveland Quarries, L.P. is
the owner and operator of the Berea Sandstone Quarries which mines
stone predominantly for the building stone market with several
specialty areas making up the balance.
SALE OF BUSINESS
On May 30, 1995, ASI incorporated a wholly-owned subsidiary, VMS Rehab
Systems, Inc. ("VMS"). On June 1, 1995, ASI assigned substantially all
of its assets to VMS.
On July 31, 1995, ASI entered into an agreement to sell all of the
common stock of VMS to Suncrest Management Services, S.A. ("Suncrest"),
a related party, in exchange for the cancellation of debt owed to
Suncrest. The net book value of the assets transferred approximated the
amount of the indebtedness canceled. Suncrest also received an option
to purchase up to 250,000 shares of the Company's common stock at $.25
per share. The option expires August 8, 1998.
CASH AND CASH EQUIVALENTS
For purposes of financial reporting, the Company considers all
highly-liquid debt instruments purchased with an original maturity date
of three months or less to be cash equivalents.
INVENTORY VALUATION
The inventories are stated at the lower of cost (first-in, first-out
method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the
assets. Depletion of sandstone reserves is computed by the
unit-of-production method based on estimated recoverable sandstone
reserves. Such calculation is based on management's estimate of
sandstone reserves since there is no engineer's estimate available.
Depreciation and depletion expense is $139,894 for the year ended
December 31, 1995.
Maintenance, repairs and renewals which neither materially add to the
value of the property and equipment nor appreciably prolong its life
are charged to expense as incurred. Gains or losses on dispositions of
property and equipment are included in income.
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of cost over fair market value related
to be business combination described in Note 2. Goodwill is being
amortized on the straight-line method over a twenty-year period.
Amortization expense of goodwill for the year ended December 31, 1995,
is $819. At December 31, 1995, goodwill is net of accumulated
amortization of $819.
Other intangibles are carried at cost and are being amortized on the
straight-line method over a five- to seven-year period. Amortization
expense of other intangibles for the year ended December 31, 1995, is
$14,308. At December 31, 1995, other intangibles are net of accumulated
amortization of $42,738.
<PAGE> 63
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, principally consist of accounts
receivable. The Company's policies do not require collateral to support
customer accounts receivables.
During the year ended December 31, 1995, no one customer provided more
than 10% of total revenue. Customers are primarily located in Ohio,
surrounding states and Ontario, Canada.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board ("FASB") issued statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosure about Fair
Value of Financial Instruments," which requires the disclosure of the
fair market value of off- and on-balance sheet financial instruments.
The carrying value of all financial instruments, including cash and
cash equivalents, accounts receivable, notes receivable, accounts
payable and long-term and short-term debt, approximates their fair
value at year end.
LOSS PER COMMON SHARE
Loss per common share is based on the weighted average number of shares
outstanding which was 10,763,150 for the year ended December 31, 1995.
2. BUSINESS COMBINATION
On August 8, 1995, the Company acquired all of the outstanding capital
stock of American Stone Corporation ("ASC"), in exchange for 8,000,000
unregistered shares of its common stock. As a result of the
transaction, TMT Masonry, Ltd. ("TMT") the former parent company of ASC
received shares representing approximately 55% of the Company's
outstanding common stock, thereby effecting a change in control of the
Company.
The acquisition of ASC has been accounted for as a reverse acquisition.
Under the accounting rules for a reverse acquisition, ASC is considered
the acquiring entity. As a result, historical financial information for
periods prior to the date of the transaction are those of ASC. However,
the capital structure of ASC has been retroactively restated to reflect
the number of shares received by ASC in the acquisition and the
Company's par value. Under purchase method accounting, balances and
results of operations of the Company have been included in the
accompanying consolidated financial statements from the date of the
transaction, August 8, 1995. While there were no tangible assets
received in the reverse acquisition, the Company assumed liabilities of
$32,692. The Company recorded the assets and liabilities (excluding
intangibles) at their historical cost basis which was deemed to
approximate fair market value. The reverse acquisition is treated as a
non-cash transaction since all consideration given was in the form of
stock. Proforma results of operations (assuming the business
combination had been effected at the beginning of the year ended
December 31, 1995) are not presented because ASI became a holding
Company concurrent with the business combination. As a result, proforma
results of operations for the year ended December 31, 1995, would be no
different than the historical statement of operations presented
herewith.
<PAGE> 64
3. NOTES RECEIVABLE
<TABLE>
<CAPTION>
Notes receivable consist of the following:
<S> <C>
7% loan to an employee of secured by real estate mortgage, payable in
monthly installments of $310 including interest, due August 2000. $ 39,690
Non-interest bearing loan to an employee unsecured, payable in weekly
installments of $25, due in August 1997. 2,370
8% unsecured loan, receivable in monthly installments of $15,000 plus
interest through January 1996, then $10,000 plus interest from May
through October 1996 75,000
--------
Total notes receivable 117,060
Less current portion of notes receivable 77,549
--------
$ 39,511
========
</TABLE>
4. DEMAND NOTE PAYABLE
Demand note payable represents a $750,000 line of credit, secured by a
$750,000 letter of credit issued by a Canadian bank, expiring February
1996. Interest is payable monthly at prime plus .5%. At December 31,
1995, the Company had borrowed $743,466 against the line of credit.
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
<S> <C>
9.4% note payable to a financing organization, due June 1998, payable in monthly installments
of $378 including interest. The note is secured by equipment. $ 9,923
9.9% note payable to a financing organization, due January 1998, payable in monthly
installments of $356 including interest. The note is secured by equipment. 7,921
7.5% note payable to a financing organization, due December 1997, payable in monthly
installments of $973 including interest. The note is secured by equipment. 20,397
12.13% note payable to a financing organization, due July 1997, payable in monthly installments
of $1,567 including interest. The note is secured by equipment. 24,108
6% note payable to a corporation, secured by real estate with a cost of $913,215. The balance
was due November 1995 and was satisfied in February 1996 (Note 9). 498,604
6.9% note payable to a financing organization, due June 1996, payable in monthly installments
of $295 including interest. The note is secured by equipment. 1,592
6% note payable to a financing organization, due July 1996, payable in monthly installments of
$462 including interest. The note is secured by equipment. 15,200
----------
577,745
Less current portion of long-term debt 549,313
----------
$ 28,432
==========
</TABLE>
<PAGE> 65
5. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1996 $549,313
1997 25,761
1998 2,671
--------
$577,745
========
</TABLE>
6. DUE TO CONSULTING FIRM
Due to consulting firm represents non-interest bearing amounts to
Georgia Capital Corporation ("GCC"). GCC is a stockholder in the
Company. In addition, one of the consultants employed by GCC is also a
stockholder in the Company. The payable arose from consulting services
provided and from non-interest bearing advances made to the Company.
During 1996, this payable was satisfied through the issuance of the
Company's common stock (Note 9).
7. STOCKHOLDERS' EQUITY
As the business combination, described in Note 2 above, has been
accounted for as reverse acquisition, the Company has assumed ASI's
capital structure (shares outstanding and par value) as of the
consummation of August 8, 1995. All capital transactions of ASI prior
to the date of the business combination are included in ASI's separate
historical financial information.
On August 8, 1995, the Company issued 8,000,000 shares of unregistered
common stock in connection with the reverse acquisition of ASC,
bringing the total shares of common stock issued and outstanding
immediately subsequent to the transaction to 14,591,828.
Concurrent with the business combination, TMT agreed to reclassify
loans it had made to ASC in the amount of $777,349 to additional
paid-in capital.
8. INCOME TAXES
The Company has a net operating loss available for carryforward to
offset future years' taxable income. The net operating loss expires in
the year ending December 31, 2010.
Deferred income taxes arise from temporary differences in reporting
assets and liabilities for income tax and financial accounting purposes
primarily resulting from net operating losses. The components of the
deferred tax asset and the related tax effects of the temporary
differences are as follows:
<TABLE>
<S> <C>
Non-current deferred income tax asset arising from net
operating loss carryfoward $ 95,000
Valuation allowance (95,000)
Net deferred income tax assets $ -
========
</TABLE>
<PAGE> 66
9. SUBSEQUENT EVENTS
During February 1996, the Company issued 770,000 shares of unrestricted
common stock to Georgia Capital Corporation (Note 6) in satisfaction of
$192,500 of indebtedness including cash advances made to the Company
during 1995 and 1996.
During February 1996, the Company issued 60,000 shares of unrestricted
common stock to consultants in satisfaction of $15,000 payable for
consulting services rendered.
In February 1996, a shareholder who had performed investment banking
services for the Company agreed to return 746,197 shares in
acknowledgment of having failed to perform such services to the
satisfaction of the Company.
During February 1996, the Company received an advance of $773,345 from
TMT. In turn, the funds were advanced to Cleveland Quarries, L.P.
("CQ") which utilized the proceeds to retire a note payable to a bank
for $743,466.
During February 1996, ASC acquired the assets of Cleveland Quarries,
L.P. ("CQ"). Under the term of the agreement, ASC acquired
substantially all of the assets of CQ for $2,100,000. Consideration for
the purchase price would include assumption of a mortgage payable in
the amount of $498,604 and credit for investment in and advances to CQ
totaling $1,528,515.
10. REVISED FINANCIAL STATEMENTS
The financial statements have been revised to consolidate the Company's
limited partnership investment in Cleveland Quarries, L.P., which was
previously recorded on the equity method of accounting. As a result,
the net loss has been increased by $241,117 ($.022 per share).
<PAGE> 67
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
FINANCIAL STATEMENTS
--------------------
DECEMBER 31, 1996 AND 1995
--------------------------
<PAGE> 68
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of American Stone Industries, Inc. and Subsidiaries
Toronto, Canada
We have audited the consolidated balance sheet of American Stone
Industries, Inc. and Subsidiaries as of December 31, 1996, and the related
statements of operations, stockholders equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of American Stone
Industries, Inc. and Subsidiaries as of December 31, 1995, were audited by other
auditors whose report dated April 3, 1996, expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Stone
Industries, Inc. and Subsidiaries as of December 31, 1996, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
As described in Note 12 to the financial statements, the financial
statements have been revised to consolidate the Company's limited partnership
investment in Cleveland Quarries, L.P., which was previously recorded on the
equity method of accounting. As a result, the net loss has been reduced by
$39,981 ($-0- per share) for 1996 and increased by $241,117 ($.03 per share) in
1995.
Hobe & Lucas
Independence, Ohio
January 22, 1997 (except for Note 12
for which the date is July 8, 1997)
<PAGE> 69
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 983,713 $ 14,161
Accounts receivable, net allowance for
doubtful accounts of $5,479 - 1996 and
$-0- 1995 287,628 97,984
Prepaid expenses 36,713 -
Current portion of notes receivable - 77,549
Inventory 431,810 130,556
---------- ----------
Total current assets 1,739,864 320,250
---------- ----------
Property, Plant and Equipment, Net 2,015,143 1,341,250
---------- ----------
Other Assets
Intangibles, Net of amortization 204,492 97,306
Restricted cash 10,900 -
Notes receivable 39,886 39,511
Deposits 1,000 1,000
---------- ----------
256,278 137,817
---------- ----------
$4,011,285 $1,799,317
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, bank line of credit $ 600,000 $ 743,466
Current portion of notes payable 68,007 549,313
Accounts payable 373,422 161,265
Accrued and withheld payroll
and payroll taxes 75,703 33,959
Accrued liabilities 181,140 121,669
Due to consulting firm - 132,570
---------- ---------
Total Current Liabilities 1,298,272 1,742,242
---------- ---------
Long Term Liabilities
Notes payable 87,463 28,432
---------- ---------
Stockholders' equity
Common stock, $.001 par value
20 million shares authorized
16,313,628 - 1996 and 14,591,828 - 1995
shares issued and outstanding 16,314 14,592
Additional paid-in capital 3,562,860 777,249
Accumulated deficit (953,624) (763,198)
-------- ----------
2,625,550 28,643
---------- ----------
$4,011,285 $1,799,317
========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE> 70
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Sales $ 1,702,551 $ 919,694
Cost of goods sold 1,038,358 785,354
----------- -----------
Gross profit 664,193 134,340
----------- -----------
Selling and administrative expenses 851,163 632,216
----------- -----------
Loss from operations (186,970) (497,876)
----------- -----------
Other Income (Expense)
Gain on sale of property - 84,611
Other income 64,821 22,468
Interest income 11,655 -
Interest expense (73,432) -
----------- -----------
3,044 107,079
----------- -----------
Net loss before provision for income taxes (183,926) (390,797)
Provision for income taxes 6,500 -
----------- -----------
Net loss $ (190,426) $ (390,797)
=========== ===========
Net loss per Common Share $ (.01) $ (.04)
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE> 71
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
Common Stock
------------------------ Additional Total
Issued Paid-In Accumulated Stockholders'
Shares Par Value Capital Deficit Equity
--------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995,
restated for reverse acq-
uisition accounting
(Notes 2 and 5) 8,000,000 $ 8,000 $ - $ (372,401) $ (364,401)
Loan reclassified to additional
paid-in-capital - - 777,249 - 777,249
Stock issued in business
combination accounted as a
reverse acquisition 6,591,828 6,592 - - 6,592
Net Loss - - - (390,797) (390,797)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 14,591,828 14,592 777,249 (763,198) 28,643
Additional issue of common
stock during 1996 1,721,800 1,722 2,037,266 - 2,038,988
Loan reclassified to additional
paid-in capital - - 748,345 - 748,345
Net Loss - - - (190,426) (190,426)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 16,313,628 $ 16,314 $ 3,562,860 $ (953,624) $ 2,625,550
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE> 72
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Loss $ (190,426) $ (390,797)
----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation, amortization and depletion 74,655 155,021
Gain on sale of property - (84,611)
Changes in assets and liabilities:
Decrease in accounts receivable (189,644) 42,670
Increase in inventory (301,254) (10,056)
Increase in prepaid expenses (36,713) -
Increase in payables and accrued liabilities 313,372 147,551
Increase in amounts due to consulting firm - 107,874
Other, net (10,900) -
----------- -----------
Total Adjustments (150,484) 358,449
----------- -----------
Net Cash Used in Operating Activities (340,910) (32,348)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from notes receivable 77,174 31,360
Proceeds from sale of property - 6,530
Other - (2,914)
Purchase of property, plant and equipment (550,484) (6,510)
----------- -----------
Net Cash (Used in) Provided by Investing
Activities (473,310) 28,466
----------- -----------
Cash Flows from Financing Activities:
Proceeds from long term debt 994,763 90,384
Net borrowings (repayment) under line of credit
arrangements (143,466) -
Repayment of long term debt (567,525) (137,374)
Proceeds from issuance of common stock 1,500,000 -
----------- -----------
Net Cash Provided by (Used In) Financing Activities 1,783,772 (46,990)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 969,552 (50,872)
Cash and Cash Equivalents at Beginning of Year 14,161 65,033
----------- -----------
Cash and Cash Equivalents at End of Year $ 983,713 $ 14,161
=========== ===========
Supplemental Disclosure of Cash Flows
Information:
Interest paid $ 70,000 $ 108,922
Taxes paid $ - $ -
</TABLE>
See notes to consolidated financial statements
<PAGE> 73
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
Supplemental disclosures of non-cash investing and financing activities:
During the year ended December 31, 1996 the Company issued 200,000 shares of
common stock valued at $160,000 for 100% of the outstanding stock of Tyrrell
Stone Design, Ltd.
In 1996 the Company issued 1,522,000 shares of common stock as payment of
$1,127,333 of outstanding debt of the Company.
Additionally, in 1996 the Company entered into a capital lease for equipment
valued at $145,250.
During the year ended December 31, 1995, the Company completed a business
combination through the issuance of 8,000,000 shares of its common stock. The
business combination was accounted as a reverse acquisition as described in Note
2.
For the year ended December 31, 1995, the Company reclassified a loan from an
affiliated company to additional paid-in capital as described in Note 5.
Various property was sold in 1995 with Cleveland Quarries, L.P. taking $145,000
in notes receivable.
See notes to consolidated financial statements
<PAGE> 74
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
This summary of significant accounting policies of American Stone
Industries, Inc., (hereinafter "ASI" or the "Company") is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
History and Business Activity
- -----------------------------
The Company was incorporated in the State of Delaware on November 11,
1992 as Viva Designs U.S.A., Inc. The Company was a distributor of a line of
jewelry and fragrances until June 1993 when it discontinued those operations. On
December 14, 1993, a certificate of amendment was filed to change the name of
the corporation to Viva Medical Sciences Corp. Beginning in 1994 and until the
business combination described in Note 2, the Company was distributor of medical
equipment in the United States. In conjunction with the business combination,
the medical equipment distributorship business was transferred to a related
party. On August 9, 1995, articles of amendment were filed reflecting a change
of the corporate name to American Stone Industries, Inc. Concurrent with the
business combination described in Note 2, ASI became a holding company which
conducts business only through its wholly-owned subsidiary, American Stone Corp.
("ASC"). ASC purchases and sells stone for use in the building construction
industry.
American Stone Industries, Inc. is a publicly-held company whose stock
is traded on the OTC Bulletin Board.
American Stone Corporation was a holding company with an 89.1%
ownership interest in Cleveland Quarries, L.P. of Amherst, Ohio. Cleveland
Quarries, L.P. (Note 3) was the owner and operator of the Berea Sandstone
Quarries which mines stone predominantly for the building stone market with
several specialty areas making up the balance.
As described in Note 2, on February 1, 1996 ASC merged all inventories,
real estate, equipment, intangible assets, and all rights in leases, contracts,
and all other operational items of Cleveland Quarries L.P. and began operating
the Berea Sandstone Quarries. At that point, Cleveland Quarries, L.P. ceased
operations and liquidated.
On May 23, 1996, the Company acquired all of the outstanding shares of
Tyrrell Stone Design, Ltd. (a Canadian company providing design drawings to
architects) in exchange for 200,000 shares of common stock.
<PAGE> 75
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
Property, Plant and Equipment - At Cost
- ---------------------------------------
Property, plant and equipment at December 31, 1996 and 1995 consisted of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 450,544 $ 275,700
Buildings 778,432 637,515
Equipment 811,356 795,112
Computers 14,100 -
Leasehold improvements 15,346 -
Vehicle 2,500 -
---------- ----------
2,072,278 1,708,327
Less: Accumulated depreciation 57,135 367,077
---------- ----------
Net property, plant and equipment $2,015,143 $1,341,250
========== ==========
</TABLE>
Depletion is being calculated based on management's estimate of sandstone
reserves. There is no engineer's estimate available of such reserves. Depletion
amounted to $700 and $24 for the year ended December 31, 1996 and 1995,
respectively.
The cost of depreciable property is being depreciated over the estimated
useful lives of the assets using the straight-line method for financial
reporting. Depreciation expense was $67,878 and $139,870 for the year ended
December 31, 1996 and 1995, respectively.
Routine maintenance and repairs are charged to operations when incurred.
Expenditures which materially increase value or extend lives are capitalized.
Principles of Consolidation
- ---------------------------
Under the accounting rules for a reverse acquisition which were applied
to the business combination described in Note 2, the accompanying 1995 financial
statements include the accounts of American Stone Corporation and its
majority-owned subsidiary Cleveland Quarries, L.P. ("CQ") for the year ended
December 31, 1995, and of American Stone Industries, Inc. for the period from
the date of the acquisition, August 8, 1995, through December 31, 1995. For
1996, the accompanying financial statements include the accounts of American
Stone Industries, Inc. and its wholly-owned subsidiary American Stone
Corporation (including the merged and consolidated financial statements of CQ)
for the year ended December 31, 1996, and of Tyrrell Stone Design, Ltd. for the
period from the date of acquisition, May 23, 1996, through December 31, 1996.
<PAGE> 76
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
Sale of Business
- ----------------
On May 30, 1995, ASI incorporated a wholly-owned subsidiary, VMS Rehab
Systems, Inc. ("VMS"). On June 1, 1995, ASI assigned substantially all of its
assets to VMS.
On July 31, 1995, ASI entered into an agreement to sell all of the common
stock of VMS to Suncrest Management Services, S.A. ("Suncrest") a related party
in exchange for the cancellation of debt owed to Suncrest. The net book value of
the assets transferred approximate the amount of the indebtedness canceled.
Suncrest also received an option to purchase up to 250,000 shares of the
Company's common stock at $.25 per share. The option expires August 8, 1998.
Cash and Cash Equivalents
- -------------------------
For purposes of financial reporting, the Company considers all
highly-liquid debt instruments purchased with an original maturity date of three
months or less to be cash equivalents.
Intangibles
- -----------
Goodwill represents the excess of cost over fair market value related to
the business combinations described in Note 2. Goodwill is being amortized on
the straight-line method over a twenty and thirty year period. Other intangible
assets, including trademarks are amortized over their economic lives.
Amortization expense for the year ended December 31, 1996 and 1995 is $6,025 and
$15,065, respectively. At December 31, 1996 and 1995, intangibles are net of
accumulated amortization of $7,061 and $43,557, respectively.
Concentration of Credit Risk
- ----------------------------
Financial instruments, which potentially subject the Company to
concentration of credit risk, principally consist of accounts receivable. The
Company's policies do not require collateral to support customer accounts
receivables.
Loss Per Common Share
- ---------------------
Loss per common share is based on the weighted average number of shares
outstanding which was 15,709,213 and 10,763,150 for the years ended December 31,
1996 and 1995, respectively.
The exercise of stock options do not result in material dilution.
Inventory
- ---------
The inventories which consist of sandstone are stated at the lower of
first-in, first-out (FIFO) cost or market.
Restricted Cash
- ---------------
The Company's certificates of deposit are assigned to the Ohio Department
of Natural Resources Division of Reclamation.
Reclassifications
- -----------------
Certain accounts related to the prior year have been reclassified to
conform to the current year presentation.
<PAGE> 77
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 2 - BUSINESS COMBINATION AND ACQUISITIONS
- ----------------------------------------------
On August 8, 1995, the Company acquired all of the outstanding capital
stock of American Stone Corporation ("ASC"), in exchange for 8,000,000
unregistered shares of its common stock. As a result of the transaction, TMT
Masonry, Ltd. ("TMT") the former parent company of ASC received shares
representing approximately 55% of the Company's outstanding common stock,
thereby effecting a change in control of the Company.
The acquisition of ASC has been accounted for as a reverse acquisition.
Under the accounting rules for a reverse acquisition, ASC is considered the
acquiring entity. As a result, historical financial information for periods
prior to the date of the transaction are those of ASC. However, the capital
structure of ASC has been retroactively restated to reflect the number of shares
received by ASC in the acquisition and the Company's par value. Under purchase
method accounting, balances and results of operations of the Company have been
included in the accompanying consolidated financial statements from the date of
the transaction, August 8, 1995. While there were no tangible assets received in
the reverse acquisition, the Company assumed liabilities of $32,692. The Company
recorded the assets and liabilities (excluding intangibles) at their historical
cost basis which was deemed to approximate fair market value. The reverse
acquisition is treated as a non-cash transaction since all consideration given
was in the form of stock. Proforma results of operations (assuming the business
combination had been effected at the beginning of the year ended December 31,
1995) are not presented because ASI became a holding Company concurrent with the
business combination. As a result, proforma results of operations for the year
ended December 31, 1995 would be no different than the historical statement of
operations presented herewith.
On May 23, 1996, the Company acquired all of the outstanding shares of
Tyrrell Stone Design, Ltd. (Tyrrell Stone) in exchange for 200,000 shares of
common stock. This acquisition was accounted for as a purchase, and as a result,
excess cost over fair market value of $156,729 is being amortized over thirty
years. Under purchase method accounting, balances and results of operations of
the Company have been included in the accompanying consolidated financial
statements from the date of the transaction, May 23, 1996. Proforma results of
operations (assuming the business combination had been effected at the beginning
of the year ended December 31, 1996) are not presented since Tyrrell Stone was
incorporated in 1996 and the impact is not material.
<PAGE> 78
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 3 - NOTES RECEIVABLE - EMPLOYEES
- -------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
7%, secured by real estate mortgage, due in
monthly installments of $310 including interest,
final payment due August, 2000 $ 38,716 $ 39,690
Non-interest bearing, unsecured, due in weekly
installments of $25, final payment due August, 1997 1,170 2,370
8% unsecured loan, receivable in monthly installments of $15,000 plus
interest through January 1996, then $10,000
plus interest from May through October 1996. - 75,000
-------- --------
Total notes receivable 39,886 117,060
Less current portion of notes receivable - 77,549
-------- --------
$ 39,886 $ 39,511
======== ========
</TABLE>
NOTE 4 - DUE TO CONSULTING FIRM
- -------------------------------
Due to consulting firm represents non-interest bearing amounts to Georgia
Capital Corporation ("GCC"). GCC is a stockholder in the Company. During 1996,
additional liabilities of $202,381 were incurred. In addition, one of the
consultants employed by GCC is also a stockholder in the Company. The payable
arose from consulting services provided and from non-interest bearing advances
made to the Company. During April and May, 1996, these payables were satisfied
through the issuance of 1,346,000 shares of common stock.
NOTE 5 - STOCKHOLDERS' EQUITY
- -----------------------------
As the business combination, described in Note 2 above, has been
accounted for as reverse acquisition, the Company has assumed ASI's capital
structure (shares outstanding and par value) as of the consummation of August 8,
1995. All capital transactions of ASI prior to the date of the business
combination are included in ASI's separate historical financial information.
On August 8, 1995, the Company issued 8,000,000 shares of unregistered
common stock in connection with the reverse acquisition of ASC, bringing the
total shares of common stock issued and outstanding immediately subsequent to
the transaction to 14,591,828.
During April and May, 1996, the Company issued 1,346,000 shares of
unrestricted common stock to Georgia Capital Corporation in satisfaction of
$334,951 of indebtedness including cash advances made to the Company during 1996
and 1995.
<PAGE> 79
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 5 - STOCKHOLDERS' EQUITY (CONTINUED)
- -----------------------------------------
During February 1996, the Company issued 60,000 shares of unrestricted
common stock to consultants in satisfaction of $15,000 payable for consulting
services rendered.
In February 1996, a shareholder who had performed investment banking
services for the Company agreed to return 746,197 shares in acknowledgment of
having failed to perform such services to the satisfaction of the Company.
In May, 1996, the Company issued 116,000 shares of unrestricted common
stock to Terrazzo Mosaic & Tile Ltd. in satisfaction of $29,037 of indebtedness
of the Company.
In May, 1996, the Company acquired all of the outstanding shares of
Tyrrell Stone Design Ltd. in exchange for 200,000 shares of the Company.
In August, 1996, TMT Masonry Ltd. returned 4,000,000 shares which were
immediately reissued to Roulston Ventures Limited Partnership for $1,500,000.
NOTE 6 - LINE OF CREDIT
- -----------------------
The Company has a line of credit with maximum borrowings of $750,000. The
note provides for borrowing with interest payable monthly at a rate equivalent
to the bank's prime lending rate (8.25% at December 31, 1996). The debt
agreement contains certain restrictive terms and covenants. The Company was in
compliance with its covenants at December 31, 1996. The outstanding balance at
December 31, 1996 was $600,000.
The Company had a $750,000 line of credit, secured by a $750,000 letter
of credit issued by a Canadian bank, which expired February 1996. Interest was
payable monthly at prime plus .5%. At December 31, 1995, the Company had
borrowed $743,466 against the line of credit.
NOTE 7 - LONG TERM DEBT
- -----------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
9.4%, secured by equipment, payable in
monthly installments of $378 including
interest, final payment due June, 1998 $ 6,330 $ 9,923
9.9%, secured by equipment, payable in
monthly installments of $356 including
interest, final payment due January, 1998 4,390 7,921
</TABLE>
<PAGE> 80
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 7 - LONG TERM DEBT (CONTINUED)
- -----------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
12.13%, secured by equipment, payable in
monthly installments of $1,567 including
interest, final payment due July, 1997 $ 10,584 $ 24,108
7.5% note payable to a financing organization,
due December 1997, payable in monthly
installments of $973 including interest. The
note is secured by equipment. This note was
paid in full in 1996 - 20,397
6% note payable to a corporation, secured by real
estate with a cost of $913,215. The balance was
due November 1995 and was satisfied in February
1996 (Note 9) - 498,604
6.9% note payable to a financing organization,
due June 1996, payable in monthly installments
of $295 including interest. The note is secured
by equipment - 1,592
6% note payable to a financing organization, due
July 1996, payable in monthly installments of $462
including interest. The note is secured by equipment - 15,200
8.31%, secured by equipment, payable in
monthly installments of $4,675 including
interest, final payment due September, 1999 - 134,166
-------- --------
155,470 577,745
Less: Current Portion 68,007 549,313
-------- --------
$ 87,463 $ 28,432
======== ========
</TABLE>
Following is a summary of future maturities of long term debt as of
December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 68,007
1998 50,735
1999 36,728
2000 and thereafter -
--------
$155,470
</TABLE>
<PAGE> 81
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 8- FAIR VALUE OF FINANCIAL STATEMENTS
- ------------------------------------------
The carrying amounts of cash, accounts receivable, accounts payable, and
long-term debt approximate the fair value reported in the balance sheet. The
fair value of long-term debt is based on current rates at which the Company
could borrow funds with similar remaining maturities.
NOTE 9 - FINANCIAL REPORTING FOR SEGMENTS OF THE COMPANY
- --------------------------------------------------------
The Company and its subsidiaries operated predominantly in one industry,
the design, quarrying and cutting of sandstone primarily used in the
construction industry.
Following is the information regarding the Company's continuing
operations by geographic location. Transfers between geographic areas are
accounted for on a cost plus profit margin basis.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales, including geographic transfers
United States $ 1,591,550 $ 919,694
Canada 153,583 -
Geographic transfers (42,582) -
----------- -----------
$ 1,702,551 $ 919,694
=========== ===========
(Loss) from operations:
United States $ (50,462) $ (497,876)
Canada (136,508) -
----------- -----------
(Loss) from operations (186,970) (497,876)
Interest expense (73,432) -
Other income (expense) 76,476 107,079
----------- -----------
(Loss) from operations before income taxes $ (183,926) $ (390,797)
=========== ===========
Identifiable assets:
United States $ 3,763,844 $ 1,799,317
Canada 247,441 -
----------- -----------
$ 4,011,285 $ 1,799,317
=========== ===========
NOTE 10- INCOME TAXES
- ---------------------
Income taxes on continuing operations include the following:
1996 1995
---- ----
Canadian:
Currently payable $ 6,500 $ -
Deferred - -
----------- -----------
Total $ 6,500 $ -
=========== ===========
</TABLE>
<PAGE> 82
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 10 - INCOME TAXES (CONTINUED)
- ----------------------------------
<TABLE>
<CAPTION>
A reconciliation of the effective tax rate with the statutory U.S. income tax rate is as follows:
1996 1995
------------------------ ----------------------------
% of % of
Pretax Pretax
Amount Income Amount Income
<S> <C> <C> <C> <C>
Income taxes per
statement of income $ 6,500 4% $ - - %
Tax rate differences resulting from:
Income taxes applicable to
Canadian income at rate
different from U.S. rate (6,500) (4)% - - %
Loss for financial reporting
purpose without tax benefit
(unavailable for carryback
against prior income taxes paid) (62,535) (34)% (132,870) (34)%
-------- --- --------- ---
Income taxes at statutory rate $(62,535) (34)% $(132,870) (34)%
======== === ========= ===
</TABLE>
For United States tax purposes, the Company has net operating loss
carryforwards, expiring primarily in 2010, of approximately $657,000 available
to reduce future taxable income. Future United States taxes may also be reduced
by a capital loss carryforwards of approximately $59,000 which expire in 2000.
Utilization of these carryforwards is contingent upon the Company having
sufficient taxable income in the future.
The Company's deferred tax assets and liabilities at December 31, 1996
and 1995 consist of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax asset $ 427,000 $ 95,000
Valuation allowance (427,000) (95,000)
Deferred tax liability - -
----------- ---------
$ - $ -
=========== =========
</TABLE>
Deferred taxes are provided for temporary differences in deducting
expenses for financial statement and tax purposes. The principal source for
deferred tax assets are different methods for recovering depreciation and net
operating loss and capital loss carryforwards. No deferred taxes are reflected
in the balance sheet at December 31, 1996 and 1995 due to a valuation allowance.
As of December 31, 1996, the Company recognized an $332,000 increase in the
valuation allowance from 1995.
<PAGE> 83
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 11 - RELATED PARTY TRANSACTIONS
- ------------------------------------
During the year ended December 31, 1995, the Company utilized office
space of its former parent, TMT, on a rent-free basis.
In February, 1996, the Company began utilizing office space of an
affiliated company for $700 per month on a month to month basis.
During the years ended December 31, 1996 and 1995, the Company purchased
stone from its unconsolidated subsidiary, Cleveland Quarries, L.P. and paid for
expenses such as stationery and business supplies through its former parent
company, TMT Masonry, Ltd. At December 31, 1996 and 1995, accounts payable to
the same two affiliates totaled $9,735 and $10,202, respectively. Such payables
are expected to be satisfied in the ordinary course of business.
At December 31, 1996, the Company has outstanding stock options to
officers, directors and key personnel totaling 300,000 shares at $0.75 per share
which were awarded in March, 1996 at the then fair market value of the shares.
These options expire in October, 1997. No options were exercised during 1995 and
1996.
NOTE 12 - REVISED FINANCIAL STATEMENTS
- --------------------------------------
The financial statements have been revised to consolidate the Company's
limited partnership investment in Cleveland Quarries, L.P., which was previously
recorded on the equity method of accounting. As a result, the net loss has been
reduced by $39,981 ($-0- per share) for 1996 and increased by $241,117 ($.03 per
share) in 1995.
<PAGE> 84
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- ----- OF 1934
For the quarterly period ended March 31, 1997
------------------
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
- -----
For the transition period from_________ to ________
Commission file number 0-22375
-----------------------------
American Stone Industries, Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-3704099
- -------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
900 Keele Street, Toronto, Ontario Canada, M6N3E7
- --------------------------------------------------------------------------------
(Address of principal executive officer)
(416) 653-6111
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
YES 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:
16,313,628
- ----------------------------
<PAGE> 85
INDEX
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
PART I. FINANCIAL INFORMATION
- -----------------------------
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996...........................1
Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996.....................2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996.....................3
Notes to Consolidated Financial Statements..............................4
Management's Discussion and Analysis of Financial
Condition and Results of Operations............................5
PART II. OTHER INFORMATION
- ---------------------------
Item 2. Changes in securities.................................6
Item 6. Exhibits and Reports on Form 8-K......................6
Signatures..............................................................7
<PAGE> 86
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
Current Assets (Unaudited) (Audited)
- --------------
<S> <C> <C>
Cash $ 349,209 $ 983,713
Accounts receivable 335,255 287,628
Inventory 544,157 431,810
Prepaid expenses 24,797 36,713
----------- -----------
Total Current Assets 1,253,418 1,739,864
----------- -----------
Property, Plant and Equipment, Net - At Cost 1,938,753 2,015,143
- -------------------------------------------- ----------- -----------
Other Assets 253,653 256,278
- ------------ ----------- -----------
$ 3,445,824 $ 4,011,285
=========== ===========
LIABILITIES
-----------
Current Liabilities
- -------------------
Notes payable, bank line of credit $ 250,000 $ 600,000
Current portion of notes payable 68,000 68,007
Accounts payable 378,068 373,422
Accrued liabilities 197,375 256,843
----------- -----------
Total Current Liabilities 893,443 1,298,272
----------- -----------
Long Term Liabilities 71,579 87,463
- --------------------- ----------- -----------
SHAREHOLDERS' EQUITY
--------------------
Common Stock, $001 par value,
20 million shares authorized
16,313,628 issued and
outstanding at March 31, 1997
and December 31, 1996 16,314 16,314
Additional capital 3,562,860 3,562,860
Retained earnings (deficit) (1,098,372) (953,624)
----------- -----------
2,480,802 2,625,550
----------- -----------
$ 3,445,824 $ 4,011,285
=========== ===========
</TABLE>
<PAGE> 87
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE THREE MONTHS ENDED MARCH 31
-----------------------------------
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales $ 378,366 $ 297,658
- ---------
Cost of Sales 374,081 322,793
- ------------- --------- ---------
Gross Profit (Loss) 4,285 (25,135)
- -------------------
Selling, General and Administrative
- -----------------------------------
Expenses 163,870 162,121
-------- --------- ---------
(Loss) From Operations (159,585) (187,256)
- ----------------------
Other Income (Expense)
- ----------------------
Other income 16,736 15,121
Interest income 6,015 2,774
Interest expense (7,914) (20,374)
--------- ---------
14,837 (2,479)
--------- ---------
(Loss) Before Income Taxes (144,748) (189,735)
- -------------------------- --------- ---------
Provision For (Recovery Of) Income
- ----------------------------------
Taxes - -
---- --------- ---------
Net (Loss) $(144,748) $(189,735)
- ---------- ========= =========
Net (Loss) Per Common Share $ (.01) $ (.01)
- --------------------------- ========= =========
</TABLE>
<PAGE> 88
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31
-----------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flow From Operating Activities
- -----------------------------------
Net (Loss) $(144,748) $(189,735)
--------- ---------
Noncash items included in income
Depreciation and amortization 27,586 9,856
Accounts receivable (47,627) (14,203)
Inventory (112,347) 5,124
Prepaid expenses 11,916 -0-
Accounts payable - trade 4,646 159,430
Accrued expenses (59,468) 15,256
--------- ---------
Total Adjustments (175,294) 175,463
--------- ---------
Net Cash Used In Operating Activities (320,042) (14,272)
Cash Flows From Investing Activities 51,429 (2,344)
- ------------------------------------
Cash Flows From Financing Activities (365,891) 22,550
- ------------------------------------ --------- ---------
Net (Decrease) Increase in Cash (634,504) 5,934
- -------------------------------
Cash - Beginning of Period 983,713 14,161
- -------------------------- --------- ---------
Cash - End of Period $ 349,209 $ 20,095
- -------------------- ========= =========
Supplemental Disclosure of Cash Flows
- -------------------------------------
Information
-----------
Interest paid $ 7,900 $ 20,300
Income taxes paid $ -0- $ -0-
</TABLE>
<PAGE> 89
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MARCH 31, 1997
--------------
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ending March 31,
1997 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the American Stone
Industries, Inc. annual report on Form 10-SB for the year ended December 31,
1996.
<PAGE> 90
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
Net sales for the first quarter of 1997 was $378,366, up 27% when
compared to the first quarter of 1996. The 1997 sales increase was primarily due
to the success of the marketing department in establishing new distributors in
promoting our material to a broader range of Architects and Contractors. Also,
by means of trade Shows and advertising in Trade Magazines and personal
presentations and large group seminars by our sales staff at our Quarries for
such bodies as A.I.A. (American Institute of Architecture) and N.O.M.I. (North
Eastern Ohio Masonry Institute). Additionally, in the first three months of 1997
all departments of our Cleveland Quarry operation were in full scale production.
The steps taken in the latter part of 1996 to winterize our operation were
beneficial in producing product for sale and inventory. This was not the case
for the same period in 1996. The Company records most of its sales in the second
and third quarters of the year. Demand for stone products is normally low in the
first quarter in the Great Lakes market due to the cold weather.
The gross profit (loss) percentage for the first quarter of 1997 of 1%
compared to (8)% of the same period for the prior year was improved due to the
Company's cost-cutting efforts and the winterization of its primary sawing
facility allowing year-round production. The Company was able to build up
inventory levels and thus absorbed greater fixed costs incurred during the first
quarter.
Selling and administrative expenses have continued to decline as a
percentage of net sales due to nonrecurring legal, accounting and consulting
costs in 1996 as a result of the Company's need to explain to its existing and
potential shareholders the full extent of changes to the Company.
The net loss was $(144,748) for the first quarter of 1997 and
$(189,735) for the first quarter of 1996. Losses are normally generated during
the first quarter of the year and are primarily the result of the cold weather
in the Great Lakes market and its lower demands for stone.
LIQUIDITY AND SOURCES OF CAPITAL
The Company does not currently have, and is not expected to have within
the next twelve (12) calendar months, any cash flow or liquidity problems. The
Company is not in default with respect to any note, loan, lease or other
indebtedness or financing agreement. The Company is not subject to any
unsatisfied judgments, liens or settlement obligations; however, there are
accrued, unpaid and delinquent property taxes which are being brought current
pursuant to a five-year payment plan with the applicable County.
<PAGE> 91
ITEM 2. CHANGES IN SECURITIES
Effective May 30, 1997, all shareholders of record will receive one new
share of stock for each 10 shares of old stock. The reverse split is necessary
for the company to comply with listing criteria for the Nasdaq Small Cap Market.
The company filed its application to trade on the Nasdaq Small Cap Market on
April 15, 1997. The company believes such a listing will enhance its image with
the investment community and increase the stock's liquidity. The listing
application is expected to be approved by NASD within the next several months.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Thre have been no reports on Form 8-K filed during the quarter for
which this report is filed.
<PAGE> 92
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
American Stone Industries, Inc.
- --------------------------------------------------------------------------------
(Registrant)
Date: July 29, 1997 /s/ Glen Gasparini
----------------------- ---------------------------------------------
Glen Gasparini, President
Date: July 29, 1997 /s/ Enzo Costantino
----------------------- ---------------------------------------------
Enzo Costantino, Chief Financial Officer
*Print the name and title of each signing officer under his or her signature
<PAGE> 93
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
American Stone Industries, Inc.
- -------------------------------------------------------------------------------
(Registrant)
Date: July 29, 1997
--------------------------------------------------------------------------
By:
----------------------------------------------------------------------------
(Signature)*
*Print the name and title of each signing officer under his or her signature
/s/ ENZO COSTANTINO /s/ GLEN GASPARINI
- -------------------------------- ------------------------------
ENZO COSTANTINO GLEN GASPARINI
/s/ TIMOTHY I. PANZICA /s/ MICHAEL J. MEIER
- -------------------------------- ------------------------------
TIMOTHY I. PANZICA MICHAEL J. MEIER
/s/ THOMAS H. ROULSTON, II
- -------------------------------
THOMAS H. ROULSTON, II
<PAGE> 94
PART III
--------
EXHIBITS
--------
<TABLE>
<CAPTION>
<S> <C> <C>
(1) Underwriting Agreement.....................................................Not Applicable
(2) Charter and By-laws
*A. Certificate of Incorporation of Viva Designs
U.S.A. Inc., dated November 13, 1992......................................
*B. Certificate of Amendment of the Certificate of
Incorporation of Viva Designs U.S.A., Inc.,
dated March 9, 1993.......................................................
*C. Certificate of Amendment of the Certificate of
Incorporation of Viva Designs U.S.A., Inc.,
dated December 14, 1993...................................................
*D. Certificate for Renewal and Revival
of Character, dated May 31, 1994..........................................
*E. Certificate of Amendment of the Certificate
of Incorporation of Viva Medical Sciences
Corporation, dated August, 1995...........................................
*C. By-laws of American Stone Industries, Inc.................................
(3) Instruments Defining the Rights of Security Holders........................Not Applicable
(4) Subscription Agreement.....................................................Not Applicable
(5) Voting Trust Agreement.....................................................Not Applicable
(6) Material Contracts
*A. Business Loan Agreement between American
Stone Corporation and First National
Bank of Ohio, dated September 13, 1996....................................
*B. Amendment to Loan Agreement between American
Stone Corporation and First National Bank of Ohio,
dated February 26, 1997...................................................
</TABLE>
<PAGE> 95
<TABLE>
<S> <C> <C>
*C. Employment Agreement between American Stone
Corporation and David Tyrrell, dated February 7, 1996.....................
*D. Asset Purchase Agreement between American Stone
Corporation and Cleveland Quarries L.P.,
dated February 1, 1996....................................................
*E. Amendment to and Restatement of Asset Purchase
Agreement, dated December 10, 1996........................................
*F. Indemnification Agreement between Cleveland
Quarries, L.P., Slate and Stone Corporation of
America, and American Stone Corporation,
dated December 20, 1996...................................................
*G. Share Purchase Agreement between David Tyrrell
and American Stone Industries, Inc.,
dated May 22, 1996........................................................
*H. Stock Purchase Agreement between American
Stone Industries, Inc. and Roulston Ventures
Limited Partnership, dated August 27, 1996................................
*I. Share Purchase Option Agreement between
TMT Masonry, Ltd., Roulston Ventures Limited
Partnership, and American Stone Industries, Inc.,.........................
*J. Interim Management Agreement between Robert
Graham Nash, William Purvis Houston, E. Victor
Artuso, Nicholls Investments, Inc., 237894 Ontario
Limited, Grenville Aggregate Specialties Limited,
American Stone Industries, Inc., and American Stone
Industries, Inc., dated August 30, 1996...................................
K. Indemnification Agreement between Cleveland
Quarries, L.P., Slate and Stone Corporation of America
and American Stone Corporation, adopted by the
Board of Directors of American Stone Corporation
in March, 1997............................................................
</TABLE>
<PAGE> 96
<TABLE>
<S> <C> <C>
L. No Default Confirmation Certificate between American
Stone Industries, Inc., 112769 Ontario Limited, Nicholls
Investments, Inc., Grenville Aggregate Specialties
Limited, 237894 Ontario Limited, and Stoklosar
Marble Quarries Limited..........................................................
M. Share Purchase Option Agreement between TMT
Masonry, Ltd., Roulston Ventures Limited Partnership,
and American Stone Industries, Inc., dated
November 22, 1996 ...............................................................
(7) Material Foreign Patents...........................................................Not Applicable
(8) Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession.........................................................Not Applicable
(9) Escrow Agreements..................................................................Not Applicable
(10) Consents and Other.......................................................................
*A. Letter from Horton & Company Consenting
to the Change in Certifying Accountant,
dated March 19, 1997..............................................................
*B. Letter from Horton & Company, L.L.C.
Consenting to Incorporation of Independent
Auditor's Report, dated March 19, 1997 ...........................................
*C. Letter from Hobe & Lucas, C.P.A.
Consenting to Incorporation of Independent
Auditor's Report, dated March 24, 1997............................................
*D. Subsidiaries of Registrant as of December 31, 1996................................
E. Letter from Jenkins, Hakes & Tewell, Inc. Consenting
to Incorporation of Independent Auditor's Report,
dated June 10, 1997............................................................
F. Letter from Horton & Company, L.L.C.
Consenting to Incorporation of Independent
Auditor's Report, dated April 3, 1996 (except
for Note 10, which is dated July 8, 1997) ......................................
</TABLE>
<PAGE> 97
<TABLE>
<S> <C> <C>
G. Letter from Hobe & Lucas, C.P.A.
Consenting to Incorporation of Independent
Auditor's Report, dated January 22, 1997 (except
for Note 12, which is dated July 8, 1997).......................................
(27) Financial Data Schedule..................................................................
</TABLE>
*Indicates Exhibits included with the Form 10-SB which has
been previously filed.
<PAGE> 1
Exhibit (6)K
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is entered into as of the
20th day of December, 1996, by and between CLEVELAND QUARRIES, LP ("Cleveland
Quarries"), SLATE AND STONE CORPORATION OF AMERICA ("Slate and Stone") and
AMERICAN STONE CORPORATION ("ASC").
WITNESSETH:
WHEREAS, in or about February 1, 1996, Cleveland Quarries and ASC
entered into an Asset Purchase Agreement (the "Initial Agreement"); and
WHEREAS, subsequent to the execution of the Initial Agreement, the
parties thereto determined that there was a mistake in fact with respect to
computation of the Purchase Price; and
WHEREAS, the parties to the Initial Agreement have amended and restated
the Initial Agreement in order to correct the mistake of fact; and
WHEREAS, Cleveland Quarries and Slate and Stone desire to indemnify and
hold ASC harmless from any and all expenses and damages which it might incur as
a result of the mistake of fact including, but not limited to, any legal fees
incurred by ASC in connection with the investigation of this matter and the
preparation of the Amended and Restated Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the willingness of ASC to amend the
Initial Agreement in order to increase the Purchase Price, and other good and
valuable consideration, the parties hereto, intending to be legally bound, agree
as follows:
1. The recitals set forth above are true and correct.
2. As an acknowledgment of their good faith and in consideration of the
willingness of ASC to amend and restate the Initial Agreement in order to
increase the Purchase Price paid to Cleveland Quarries, Cleveland Quarries and
Slate and Stone, jointly and severally, agree to indemnify,
<PAGE> 2
defend and hold ASC and its parent American Stone Industries, Inc. ("ASI")
harmless from any and all claims, causes of action, fines, damages, awards,
costs (including attorneys' fees) or otherwise which in any way arise or result
from any act, error, omission or negligence of Slate and Stone and Cleveland
Quarries or which otherwise in any way relate to or arise from the Initial
Agreement or in any way relate to or arise from the amendment thereto.
3. Slate and Stone and Cleveland Quarries, jointly and severally, at
the election of ASC shall pay for or on behalf of ASC and/or ASI all costs
incurred by ASC and/or ASI, including but not limited to attorneys' fees, which
are incurred by ASC and/or ASI and which result in any way from actions taken by
Cleveland Quarries and Slate and Stone. Such payment shall be made by Slate and
Stone and Cleveland Quarries within fifteen (15) days after being presented with
an invoice for or other evidence of such costs.
4. The parties hereto acknowledge and warrant that they have read this
Agreement; that they have full power and authority to execute the same; and that
the execution hereof is of their free will and is done so voluntarily and with
the intent to be legally bound.
5. This Agreement shall be construed, enforced and interpreted by an
Ohio court in accordance with the internal laws of the State of Ohio, without
regard to its conflicts of laws principles.
6. In the event that any party brings a claim, action or other
proceeding against ASC, ASC shall have the right to employ counsel of its choice
to defend or otherwise contest such claim, action or proceeding and the party or
parties bringing such shall pay all reasonable attorneys' fees and costs
incurred by ASC to defend or contest.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement on the day and year first written above.
<PAGE> 3
SLATE AND STONE CORPORATION
OF AMERICA
By:
---------------------------------------
Its:
---------------------------------------
CLEVELAND QUARRIES, LP
Slate and Stone Corporation of America, its
General Partner
By:
---------------------------------------
Its:
---------------------------------------
AMERICAN STONE CORPORATION
By:
---------------------------------------
Its:
---------------------------------------
<PAGE> 1
Exhibit (6)L
NO DEFAULT CONFIRMATION CERTIFICATE
TO: AMERICAN STONE INDUSTRIES, INC.
AND TO: Walter & Haverfield their solicitors herein;
Re: Certain Agreements with respect to Stoklosar Marble Quarries Limited
- ------------------------------------------------------------------------
WHEREAS Grenville Aggregate Specialties Limited ("Grenville") and 237894 Ontario
Limited ("237894") are the sole shareholders of Stoklosar Marble Quarries
Limited (hereinafter called the "Stoklosar") a corporation duly incorporated
under the laws of the Province of Ontario;
AND WHEREAS William Purvis Houston ("Houston"), the Estate of Robert Graham Nash
("Nash"), E. Victor Artuso ("Artuso") and Nicholls Investments Inc. are
collectively referred to herein as the "Vendors" and individually as a "Vendor";
AND WHEREAS the Vendors and American Stone Industries, Inc. ("American Stone")
entered into a share purchase agreement (the "American Stone Agreement") dated
September 9, 1996 pursuant to which, American Stone was to purchase all the
Shares of Grenville and 237694 on the terms and conditions set out therein;
AND WHEREAS pursuant to finalization of the American Stone Agreement, American
Stone and the Vendors entered into an interim management agreement (the "Interim
Management Agreement") dated August 30, 1996 which provided for the joint
management of Stoklosar by the Vendors and American Stone in anticipation of the
sale provided for in the American Stone Agreement;
AND WHEREAS the American Stone Agreement terminated in accordance with its term,
and 112769 Ontario Limited (the "Purchaser") and the Vendors enter into another
Agreement (the "New Agreement") dated December 11, 1996 pursuant to which the
Purchaser agreed to purchase the Shares on substantially the same terms as were
in the American Stone Agreement;
AND WHEREAS at the time that the American Stone Agreement was executed and
completed on December 11, 1996, the parties entered into a Termination and
Release Agreement dated December 11, 1996 to confirm and record the termination
of the American Stone Agreement, and to provide for the continuation and
amendment of the Interim Management Agreement with the Purchaser assuming the
obligations of American Stone thereunder;
AND WHEREAS the Termination and Release Agreement provided for the full release
of American Stone from both the American Stone Agreement and the Interim
Management Agreement save and except for any breach of the Interim Management
Agreement by American Stone or any improper action undertaken by American Stone
during the period that they were a party to the Interim Management Agreement;
AND WHEREAS pursuant to the preparation of its financial statements, American
Stone wishes to confirm that there is absolutely no liability, real or
contingent, remaining for American Stone under the Interim Management Agreement
by confirming that there was no breach of the Interim Management Agreement by
American Stone nor was there any improper action undertaken by American Stone
during the period that they were a party to the Interim Management Agreement;
NOW THEREFORE in consideration of certain good and valuable consideration, the
receipt and sufficiency whereof each of the parties hereto hereby acknowledges,
the undersigned hereto confirm as follows:
1. The above recitals are true.
2. The undersigned confirm that American Stone did not breach the Interim
Management Agreement in any way, nor did it take or permit any improper
action to be undertaken by American Stone or any other party for whom
American Stone was responsible at law. American Stone therefore has no
further obligations or liabilities, real or contingent, under the
Interim Management Agreement. In return, American Stone confirms that
it has no claims or rights against any of the other parties to the
Interim Management Agreement.
3. The undersigned agree that this Certificate may be relied upon and
pleaded as a complete estoppel by American Stone, its board of
directors and any other party who will be relying on same for purposes
of either preparing, analyzing or reviewing the American Stone
financial statements and other corporate records.
<PAGE> 2
4. This document may be executed in counterpart and may be executed and
delivered by fax and shall be binding on all parties if so executed and
delivered.
Dated this day of _____________, 1997
- ----------------------------------------------------------------------
Witness The Estate of ROBERT GRAHAM NASH
by its executor, (executor)
- ----------------------------------------------------------------------
Witness WILLIAM PURVIS HOUSTON
- ----------------------------------------------------------------------
Witness E. VICTOR ARTUSO
AMERICAN STONE INDUSTRIES, INC.
By:
---------------------------------------------------
By:
---------------------------------------------------
I/we have authority to bind the corporation.
1211769 ONTARIO LIMITED
By:
---------------------------------------------------
By:
---------------------------------------------------
I/we have authority to bind the corporation.
NICHOLLS INVESTMENTS INC.
By:
---------------------------------------------------
By:
---------------------------------------------------
I/we have authority to bind the corporation.
GRENVILLE AGGREGATE
SPECIALTIES LIMITED
By:
---------------------------------------------------
By:
---------------------------------------------------
I/we have authority to bind the corporation.
237894 ONTARIO LIMITED
By:
---------------------------------------------------
By:
---------------------------------------------------
I/we have authority to bind the corporation.
STOKLOSAR MARBLE QUARRIES LIMITED
By:
---------------------------------------------------
By:
---------------------------------------------------
I/we have authority to bind the corporation.
<PAGE> 1
Exhibit (6)M
SHARE PURCHASE OPTION AGREEMENT
-------------------------------
This Share Purchase Option Agreement ("Agreement") is entered into by
and among TMT MASONRY, LTD., ("TMT") of Ontario, Canada, ROULSTON VENTURES
LIMITED PARTNERSHIP ("Roulston Ventures") of Cleveland, Ohio, and AMERICAN STONE
INDUSTRIES, INC. ("Corporation") of Ontario, Canada.
W I T N E S S E T H:
WHEREAS, American Stone Industries, Inc. ("Corporation"), a Delaware
Corporation, has issued and outstanding as of the date of this Agreement,
16,745,153 Common Shares of the Corporation.
WHEREAS, TMT Masonry, Ltd. ("TMT"), owns 4,000,000 of the issued and
outstanding Common Shares of the Corporation as of the date of this Agreement.
WHEREAS, Roulston Ventures Limited Partnership ("Roulston Ventures"),
an Ohio limited partnership owns 4,000,000 of the issued and outstanding Common
Shares of the Corporation as of the date of this Agreement.
WHEREAS, the parties wish to set forth their agreement regarding the
terms and conditions pertaining to sale and restriction of Common Shares owned
by TMT and Roulston Ventures.
NOW, THEREFORE, in consideration of mutual covenants and conditions set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties to this Agreement,
intending to be legally bound, do hereby agree as follows:
<PAGE> 2
1. SALE OF TMT SHARES. TMT covenants and agrees that, prior to
effecting any sale or transfer for value of all or any part of the 4,000,000
Common Shares of the Corporation owned by TMT; TMT shall:
A. OFFER TO CORPORATION. Offer such shares for purchase by the
Corporation pursuant to a written proposal. The written proposal shall
specify the number of Common Shares proposed to be sold and the
proposed purchase price for said shares. The written proposal shall be
delivered to the Secretary of the Corporation by messenger, overnight
delivery, tele-facsimile or certified mail. Such proposal shall
constitute TMT's offer to sell the offered interest set forth in the
proposal to the Corporation upon the terms and conditions set forth in
the proposal. The offer to purchase shall remain open to the
Corporation for a period of fifteen (15) days after its receipt by the
Corporation and may not be withdrawn by TMT during that period.
B. CORPORATION'S REVIEW AND ACCEPTANCE OR REJECTION. The
Secretary of the Corporation shall immediately deliver the TMT proposal
upon receipt to the Board of Directors of the Corporation for
consideration at a special meeting of the Board of Directors.
Thereupon, upon resolution of the Board of Directors, the Corporation
shall notify TMT in writing by messenger, overnight delivery,
tele-facsimile or certified mail within fifteen (15) days after receipt
of the proposal, of the Corporation's acceptance or rejection of TMT's
offer to sell. If accepted, the transaction shall be consummated
through the Corporation's transfer agent in accordance with the terms
of the offer within forty-five (45) days, unless otherwise extended in
writing by the parties to the sale. If the Corporation does not respond
<PAGE> 3
to the proposal within the fifteen (15) day period, such lapse of time
shall be deemed a rejection.
C. OFFER TO ROULSTON VENTURES. In the event the Corporation
declines to purchase such shares as proposed by TMT, TMT shall then
offer the identical proposal to Roulston Ventures by delivering by
messenger, overnight delivery, tele-facsimile or certified mail,
written notice of the proposal, with a copy of the original proposal to
the Corporation included, to Thomas H. Roulston, II, General Partner,
Roulston Ventures Limited Partnership, pursuant to Section 4. Notice.,
herein, or such other address as shall be provided from time to time
hereafter. Such notice of proposal shall constitute TMT's offer to sell
the offered interest set forth in the proposal to Roulston Ventures,
upon the same terms and conditions set forth in the proposal to
Roulston Ventures. The offer to purchase shall remain open to the
Corporation for a period of fifteen (15) days after its receipt by
Roulston Ventures and may not be withdrawn by TMT during that period.
D. ROULSTON VENTURES REVIEW AND ACCEPTANCE OR REJECTION.
Roulston Ventures shall review the proposal. Thereupon, Roulston
Ventures shall notify TMT in writing by messenger, overnight delivery,
tele-facsimile, or certified mail, within fifteen (15) days after
receipt of the notice of sale and proposal of its acceptance or
rejection of the same. If accepted, the transaction shall be
consummated through the Corporation's transfer agent in accordance with
the terms of the offer within forty-five (45) days, unless otherwise
extended in writing by the parties to the sale. If Roulston Ventures
does not respond to the proposal within the fifteen (15) day period,
such lapse of time shall be considered a rejection.
<PAGE> 4
E. REJECTION OF PURCHASE BY CORPORATION AND ROULSTON VENTURES.
If neither the Corporation or Roulston Ventures elect to purchase the
Common Shares proposed to be sold by TMT, TMT shall have the right to
sell the interest so offered to a third-party, provided the sale is
made strictly in accordance with the terms of the original offer as
submitted to the Corporation and Roulston Ventures. If any changes are
made to the offer or in consummating the transaction with the
third-party, TMT must once again re-offer the shares in accordance with
the procedures outlined in Section 1 of this Agreement. Such sale to a
third-party shall not be recognized by the Corporation's transfer agent
unless and until TMT provides an affidavit to the Corporation's
transfer agent setting forth that the terms and conditions of the sale
to the third-party are identical to those previously offered to the
Corporation and Roulston Ventures pursuant to this Agreement.
2. SALE OF ROULSTON VENTURES SHARES. Roulston Ventures covenants and
agrees that, prior to effecting any sale or transfer for value of all or any
part of the 4,000,000 Common Shares of the Corporation owned by Roulston
Ventures; Roulston Ventures shall:
A. OFFER TO CORPORATION. Offer such shares for purchase by the
Corporation pursuant to a written proposal. The written proposal shall
specify the number of Common Shares proposed to be sold and the
proposed purchase price for said shares. The notice of sale shall be
delivered to the Secretary of the Corporation by messenger, overnight
delivery, tele-facsimile or certified mail. Such proposal shall
constitute Roulston Ventures' offer to sell the offered interest to the
Corporation upon the terms and conditions set forth in the proposal.
The offer to purchase shall remain open to the Corporation for a period
of fifteen
<PAGE> 5
(15) days after its receipt by the Corporation and may not be withdrawn
by Roulston Ventures during that period.
B. CORPORATION'S REVIEW AND ACCEPTANCE OR REJECTION. The
Secretary of the Corporation shall immediately deliver the Roulston
Ventures proposal upon receipt to the Board of Directors of the
Corporation for consideration at a special meeting of the Board of
Directors. Thereupon, upon a resolution of the Board of Directors, the
Corporation shall notify Roulston Ventures in writing by messenger,
overnight delivery, tele-facsimile, or certified mail, within fifteen
(15) days after receipt of the proposal, of the Corporation's
acceptance or rejection of Roulston Ventures' offer to sell. If
accepted, the transaction shall be consummated through the
Corporation's transfer agent in accordance with the terms of the offer
within forty-five (45) days, unless otherwise extended in writing by
the parties to the sale. If the Corporation does not respond to the
proposal within the fifteen (15) day period, such lapse of time shall
be deemed a rejection.
C. OFFER TO TMT. In the event the Corporation declines to
purchase such shares as proposed by Roulston Ventures, Roulston
Ventures shall then offer the identical proposal to TMT by delivering
by messenger, overnight delivery, tele-facsimile, or certified mail,
written notice of the proposal, with a copy of the original proposal to
the Corporation included, to Glen Gasparini, President, pursuant to
Section 4. Notice., herein , or such other address as shall be provided
from time to time hereafter. Such notice of proposal shall constitute
Roulston Ventures' offer to sell the offered interest set forth in the
proposal to TMT, upon the same terms and conditions set forth in the
proposal to the Corporation. The
<PAGE> 6
offer to purchase shall remain open to TMT for a period of fifteen (15)
days after its receipt by TMT and may not be withdrawn by Roulston
Ventures during that period.
D. TMT'S REVIEW AND ACCEPTANCE OR REJECTION. TMT shall review
the proposal. Thereupon, TMT shall notify Roulston Ventures in writing
by messenger, overnight delivery, tele-facsimile, or certified mail,
within fifteen (15) days after receipt of the notice of sale and
proposal of its acceptance or rejection of the same. If accepted, the
transaction shall be consummated through the Corporation's transfer
agent in accordance with the terms of the offer within forty-five (45)
days, unless otherwise extended in writing by the parties to the sale.
If TMT does not respond to the proposal within the fifteen (15) day
period, such lapse of time shall be considered a rejection.
E. REJECTION OF PURCHASE BY CORPORATION AND TMT. If neither
the Corporation or TMT elect to purchase the Common Shares proposed to
be sold by Roulston Ventures, Roulston Ventures shall have the right to
sell the interest so offered to a third-party, provided the sale is
made strictly in accordance with the terms of the original offer as
submitted to the Corporation and TMT. If any changes are made to the
offer or in consummating the transaction with the third-party, Roulston
Ventures must once again re- offer the shares in accordance with the
procedures outlined in this Section 2 of the Agreement. Such sale to a
third-party shall not be recognized by the Corporation's transfer agent
unless and until Roulston Ventures provides an affidavit to the
Corporation's transfer agent setting forth that the terms and
conditions of the sale to the third-party are identical to those
previously offered to the Corporation and TMT pursuant to this
Agreement.
<PAGE> 7
3. ENDORSEMENT OF CERTIFICATES. TMT and Roulston Ventures agree to
cause all share certificates previously issued to them to be endorsed with the
following legend:
The shares represented by this certificate are subject to the
terms of a Share Purchase Option Agreement and may not be sold
or transferred for value except in conformity with the terms
of that Agreement. A copy of that Agreement has been deposited
with the Secretary of the Corporation and shall be delivered
to all interested parties within ten (10) days of their
written request for such to the Corporation.
4. NOTICE. Any and all notices required to be sent to the parties to
this Agreement shall be transmitted to:
TO TMT: Glen Gasparini, President
---------------------------------------
TMT Masonry, Ltd.
---------------------------------------
900 Keele Street
---------------------------------------
Toronto, Ontario, Canada M6N 3E7
---------------------------------------
COPY TO:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
TO ROULSTON VENTURES: Thomas H. Roulston, II, General Partner
---------------------------------------
Roulston Ventures Limited Partnership
---------------------------------------
4000 Chester Avenue
---------------------------------------
Cleveland, Ohio 44103
---------------------------------------
COPY TO:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
TO CORPORATION: Michael J. Meier, Secretary
---------------------------------------
American Stone Industries, Inc.
---------------------------------------
c/o 1111 Chester Avenue, #750
---------------------------------------
Cleveland, Ohio 44114
---------------------------------------
<PAGE> 8
COPY TO: Walter & Haverfield, P.L.L.
---------------------------------------
1300 Terminal Tower
---------------------------------------
50 Public Square
---------------------------------------
Cleveland, Ohio 44113
---------------------------------------
Attn.: Van P. Carter, Esq.
---------------------------------------
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year set forth below the signature lines. This Agreement may be executed in
multiple counterparts, each of which shall be an original, but all of which
shall be deemed to constitute one instrument.
"CORPORATION"
American Stone Industries, Inc.
- ---------------------------
By:
-----------------------------------------
Michael J. Meier, its Secretary
- --------------------------- (Duly Authorized)
DATE: ______________________________________
"TMT"
TMT Masonry, Ltd., a _______________________
- ---------------------------
By:
-----------------------------------------
- --------------------------- Glen Gasparini, its President
(Duly Authorized)
DATE:
---------------------------------------
"ROULSTON VENTURES"
Roulston Ventures Limited Partnership, an
Ohio Limited Partnership
- ---------------------------
By:
-----------------------------------------
Thomas H. Roulston, II, its General
- --------------------------- (Duly Authorized)
Partner
DATE:
---------------------------------------
<PAGE> 1
Exhibit (10)E
June 10, 1997
Mr. Glen Gasparini
President
American Stone Industries, Inc.
900 Keele Street
Toronto, Ontario
Canada M6N 2B7
RE: CONSENT TO INCORPORATION OF FINANCIAL STATEMENTS FOR
----------------------------------------------------
CLEVELAND QUARRIES, L.P.
------------------------
Dear Mr. Gasparini:
This firm was the independent auditor for Cleveland Quarries, L.P. for
fiscal year ended December 31, 1995. In this context, we understand that
American Stone Industries, Inc. (the "Company") is in the process of preparing
and filing a Form 10-SB with the Securities & Exchange Commission.
Pursuant to Rule 601(b)(23), this letter will serve as our consent to
the inclusion of the Financial Statements of Cleveland Quarries, L.P. for the
year ended December 31, 1995 in the Company's Form 10-SB, as amended, and to the
reference of Jenkins, Hakes & Tewell, Inc. therein.
Sincerely,
Donna Jenkins
Jenkins, Hakes & Tewell, Inc.
<PAGE> 1
Exhibit (10)F
HORTON & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
1680 ROUTE 23 NORTH, SUITE 110
WAYNE, NEW JERSEY 07470
(973) 305-9800 (TEL) ** (973) 305-8213 (FAX)
July 24, 1997
Mr. Glen Gasparini
President
American Stone Industries, Inc.
900 Keele Street
Toronto, Ontario
Canada M6N 2B7
RE: Consent to Incorporation of
Independent Auditors' Report
Dear Mr. Gasparini:
This firm was the independent auditor for American Stone Industries, Inc. (the
"Company) for the fiscal year ended December 31, 1995. In this context, we
understand that the Company is in the process of preparing and filing a Form
10-SB/A with the Securities & Exchange Commission.
Pursuant to Rule 601(b)(23), this letter will serve as our consent for the
Company to file as an exhibit with the Form 10-SB/A, our Independent Auditors'
Report dated April 3, 1996 (except for Note 10 for which the date is July 8,
1997) for fiscal year ended December 31, 1995, and to the reference of Horton &
Company, L.L.C., therein.
Horton & Company, L.L.C.
<PAGE> 1
Exhibit (10)G
HOBE & LUCAS
CERTIFIED PUBLIC ACCOUNTANTS
CROWN CENTRE, SUITE 430
5005 ROCKSIDE ROAD
INDEPENDENCE, OH 44131
(216) 524-8900 (TEL) ** (216) 524-8777 (FAX)
July 10, 1997
Mr. Glen Gasparini
President
American Stone Industries, Inc.
900 Keele Street
Toronto, Ontario
Canada M6N 2B7
RE: Consent to Incorporation of
Independent Auditors' Report
Dear Mr. Gasparini:
This firm was the independent auditor for American Stone Industries,
Inc. (the "Company) for the fiscal year ended December 31, 1996. In this
context, we understand that the Company is in the process of preparing and
filing a Form 10-SB/A with the Securities & Exchange Commission.
Pursuant to Rule 601(b)(23), this letter will serve as our consent for
the Company to file as an exhibit with the Form 10-SB/A, our Independent
Auditors' Report dated January 22, 1997 (except for Note 12 for which the date
is July 8, 1997) for fiscal year ended December 31, 1996, and to the reference
of Hobe & Lucas, Certified Public Accountants, Inc., therein.
Hobe & Lucas,
Certified Public Accountants, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 983,713
<SECURITIES> 0
<RECEIVABLES> 293,107
<ALLOWANCES> 5,479
<INVENTORY> 431,810
<CURRENT-ASSETS> 1,739,864
<PP&E> 2,072,278
<DEPRECIATION> 57,135
<TOTAL-ASSETS> 4,011,285
<CURRENT-LIABILITIES> 1,298,272
<BONDS> 0
0
0
<COMMON> 16,314
<OTHER-SE> 2,609,236
<TOTAL-LIABILITY-AND-EQUITY> 4,011,285
<SALES> 1,702,551
<TOTAL-REVENUES> 1,779,027
<CGS> 1,038,358
<TOTAL-COSTS> 851,163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,432
<INCOME-PRETAX> (183,926)
<INCOME-TAX> 6,500
<INCOME-CONTINUING> (190,426)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,426)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
