<PAGE> 1
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, 1998
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to ______________
Commission file number 0-22375
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American Stone Industries, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-3704099
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8705 Quarry Rd., Amherst, Ohio 44001
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(Address of principal executive officer)
(440) 986-4501
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(Issuer's telephone number)
Not Applicable
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(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. [X] YES [ ] 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:
1,631,364
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INDEX
AMERICAN STONE INDUSTRIES, INC.
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PART I. FINANCIAL INFORMATION
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Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 .................................. 1
Consolidated Statements of Income
Three Months Ended March 31, 1998 and 1997 ............................ 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 ............................ 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 6. Exhibits and Reports on Form 8-K ................................... 7
Signatures ................................................................. 8
Exhibit 27 Financial Data Schedule as required by Item 601(c) of Regulation S-B
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AMERICAN STONE INDUSTRIES, INC.
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CONSOLIDATED BALANCE SHEETS
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ASSETS
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<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash ........................................ $ 121,955 $ 144,443
Accounts receivable ......................... 447,708 462,703
Inventory ................................... 828,414 797,758
Prepaid expenses ............................ 28,707 37,112
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Total Current Assets ................... 1,426,784 1,442,016
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PROPERTY, PLANT AND EQUIPMENT, NET - AT COST ..... 2,376,843 2,107,823
----------- -----------
OTHER ASSETS ..................................... 218,893 211,450
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$ 4,022,520 $ 3,761,289
=========== ===========
LIABILITIES
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CURRENT LIABILITIES
Notes payable, bank line of credit .......... $ 450,000 $ 350,000
Current portion of notes payable ............ 151,154 126,480
Accounts payable ............................ 432,097 441,372
Accrued liabilities ......................... 160,304 174,053
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Total Current Liabilities .............. 1,193,555 1,091,905
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LONG TERM LIABILITIES ............................ 334,314 36,728
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SHAREHOLDERS' EQUITY
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Common Stock, $.001 par value,
20 million shares authorized
16,313,628 issued and outstanding
at March 31, 1998 and December 31, 1997 ..... 16,314 16,314
Additional capital ............................... 3,562,860 3,562,860
Retained earnings (deficit) ...................... (1,084,523) (946,518)
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2,494,651 2,632,656
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$ 4,022,520 $ 3,761,289
=========== ===========
</TABLE>
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AMERICAN STONE INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF INCOME
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FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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<TABLE>
<CAPTION>
1998 1997
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(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES .................................... $ 464,846 $ 378,366
COST OF SALES ................................ 412,420 357,345
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GROSS PROFIT (LOSS) .......................... 52,426 21,021
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ............................... 177,594 163,870
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(LOSS) FROM OPERATIONS ....................... (125,168) (142,849)
OTHER INCOME (EXPENSE)
Interest income ......................... 966 6,015
Interest expense ........................ (13,803) (7,914)
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(12,837) (1,899)
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(LOSS) BEFORE INCOME TAXES ................... (138,005) (144,748)
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PROVISION FOR (RECOVERY OF)
INCOME TAXES ............................ -- --
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NET (LOSS) ................................... $(138,005) $(144,748)
========= =========
NET (LOSS) PER COMMON SHARE .................. $ (.08) $ (.09)
========= =========
</TABLE>
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AMERICAN STONE INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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<TABLE>
<CAPTION>
1998 1997
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (Loss) ................................ $(138,005) $(144,748)
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Noncash items included in income
Depreciation and amortization ........ 28,891 27,586
Accounts receivable .................. 14,995 (47,627)
Inventory ............................ (30,656) (112,347)
Prepaid expenses ..................... 8,405 11,916
Accounts payable - trade ............. (9,275) 4,646
Accrued expenses ..................... (13,749) (59,468)
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Total Adjustments ............... (1,389) (175,294)
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NET CASH USED IN OPERATING ACTIVITIES .......... (139,394) (320,042)
CASH FLOWS FROM INVESTING ACTIVITIES ........... (305,314) 51,429
CASH FLOWS FROM FINANCING ACTIVITIES ........... 422,260 (365,891)
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NET (DECREASE) INCREASE IN CASH ................ (22,448) (634,504)
CASH - BEGINNING OF PERIOD ..................... 144,443 983,713
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CASH - END OF PERIOD ........................... $ 121,955 $ 349,209
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION
Interest paid ........................ $ 13,800 $ 7,900
Income taxes paid .................... $ -0- $ -0-
</TABLE>
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AMERICAN STONE INDUSTRIES, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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MARCH 31, 1998
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NOTE A - BASIS OF PRESENTATION
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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 ended March 31, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. 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,
1997.
NOTE B - RECLASSIFICATION
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Certain accounts related to the prior year have been reclassified to
conform to the current year presentation.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
Net sales for the first quarter of 1998 was $464,846, up 23% when compared
to the first quarter of 1997. The 1998 sales increase was primarily due to the
continued success of the marketing department in establishing new distributors
in promoting our material to a broader range of architects and contractors, as
well as an increased volume of residential sales. 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 1998 of 11%,
compared to 6% of the same period for the prior year, was improved due to the
Company's cost-cutting efforts and better utilization of its resources.
Selling and administrative expenses have continued to decline as a
percentage of net sales due to nonrecurring legal, accounting and consulting
costs in 1997 as a result of the Company's initial filings with the Securities
and Exchange Commission.
Net other expenses for the first quarter of 1998 was $12,837, compared to
$1,899 for the first quarter of 1997. This was due to an increase in interest
expense as a result of borrowings for the purchase of the new gang saw and for
working capital.
The net loss was $(138,005) for the first quarter of 1998 and $(144,748)
for the first quarter of 1997. 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's primary source of liquidity is the Company's line of credit
under an agreement between the Company and FirstMerit Bank, N.A. (The "Credit
Agreement"). The Credit Agreement provides for maximum borrowings of $750,000,
with interest payable monthly at a rate equivalent to the prime lending rate.
Borrowings under the Credit Agreement are secured by substantially all real
estate, inventory and equipment of the Company. The outstanding balance at March
31, 1998 and December 31, 1997 was $450,000 and $350,000 respectively.
Management believes that 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. Management believes that 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS (CONTINUED)
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FORWARD-LOOKING STATEMENTS
The Company is making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.
This Quarterly Report on Form 10-QSB includes forward-looking statements
relating to the business of the Company. Forward-looking statements contained
herein or in other statements made by the Company are made based on management's
expectations and beliefs concerning future events impacting the Company and are
subject to uncertainties and factors relating to the Company's operations and
business environment, all of which are difficult to predict and many of which
are beyond the control of the Company, that could cause actual results of the
Company to differ materially from those matters expressed in or implied by
forward-looking statements. The Company believes that the following factors,
among others, could affect its future performance and cause actual results of
the Company to differ materially from those expressed in or implied by
forward-looking statements made by or on behalf of the Company; (a) general
economic, business and market conditions; (b) competition; (c) the success of
advertising and promotional efforts; (d) trends within the building construction
industry; (e) the existence or absence of adverse publicity; (f) changes in
relationships with the Company's major customers or in the financial condition
of those customers; and (g) the adequacy of the Company's financial resources
and the availability and terms of any additional capital.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
There have been no reports on Form 8-K filed during the quarter for which
this report is filed.
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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)
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Date: May 4, 1998 /s/ David Tyrrell
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David Tyrrell, President
Date: May 4, 1998 /s/ Enzo Costantino
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Enzo Costantino,
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 121,955
<SECURITIES> 0
<RECEIVABLES> 457,675
<ALLOWANCES> 9,967
<INVENTORY> 828,414
<CURRENT-ASSETS> 1,426,784
<PP&E> 2,564,796
<DEPRECIATION> 187,953
<TOTAL-ASSETS> 4,022,520
<CURRENT-LIABILITIES> 1,193,555
<BONDS> 0
0
0
<COMMON> 16,314
<OTHER-SE> 2,478,337
<TOTAL-LIABILITY-AND-EQUITY> 4,022,520
<SALES> 464,846
<TOTAL-REVENUES> 465,812
<CGS> 412,420
<TOTAL-COSTS> 177,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,803
<INCOME-PRETAX> (138,005)
<INCOME-TAX> 0
<INCOME-CONTINUING> (138,005)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,005)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
