<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 June 30, 1998
------------------
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.
- --------------------------------------------------------------------------------
(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.)
8705 Quarry Rd., Amherst, Ohio 44001
- --------------------------------------------------------------------------------
(Address of principal executive officer)
(440) 986-4501
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(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. 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
- -----------------------
<PAGE> 2
INDEX
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- -----------------------------
<S> <C>
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997.............................................................1
Consolidated Statements of Income
Three Months Ended June 30, 1998 and 1997
Six Months Ended June 30, 1998 and 1997.........................................................2
Consolidated Statements of Cash Flows
Six Months Ended June 30, 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 4. Submission of Matters to a Vote of Security Holders....................................7
Item 6. Exhibits and Reports on Form 8-K.......................................................7
Signatures .......................................................................................8
Exhibit 27 Financial Data Schedule as required by Item 601(c) of Regulations S-B
</TABLE>
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AMERICAN STONE INDUSTRIES, INC.
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CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
ASSETS
------
June 30, December 31,
Current Assets 1998 1997
- -------------- ----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
Cash $ 193,207 $ 144,443
Accounts receivable 564,362 462,703
Inventory 792,978 797,758
Prepaid expenses 18,751 37,112
---------- ----------
Total Current Assets 1,569,298 1,442,016
---------- ----------
Property, Plant and Equipment, Net - At Cost 2,413,592 2,107,823
- -------------------------------------------- ---------- ----------
Other Assets 240,936 211,450
- ------------ ---------- ----------
$4,223,826 $3,761,289
========== ==========
LIABILITIES
-----------
Current Liabilities
- -------------------
Notes payable, bank line of credit $ 450,000 $ 350,000
Current portion of notes payable 151,154 126,480
Accounts payable 332,030 441,372
Accrued liabilities 191,725 174,053
---------- ----------
Total Current Liabilities 1,124,909 1,091,905
---------- ----------
Long Term Liabilities 416,750 36,728
- --------------------- ---------- ----------
SHAREHOLDERS' EQUITY
--------------------
Common Stock, $.001 par value,
20 million shares authorized
1,631,364 issued and
outstanding at June 30, 1998
and December 31, 1997 16,314 16,314
Additional capital 3,562,860 3,562,860
Retained earnings (deficit) (897,007) (946,518)
---------- ----------
2,682,167 2,632,656
---------- ----------
$4,223,826 $3,761,289
========== ==========
</TABLE>
See notes to consolidated financial statements.
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AMERICAN STONE INDUSTRIES, INC.
-------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $861,228 $657,780 $1,326,074 $1,036,146
- ---------
Cost of Sales 464,117 356,881 876,537 714,226
- ------------- -------- -------- ---------- ----------
Gross Profit 397,111 300,899 449,537 321,920
- ------------
Selling, General and Administrative
- -----------------------------------
Expenses 192,002 166,314 369,596 330,185
--------- -------- -------- ---------- ----------
Income (Loss) From Operations 205,109 134,585 79,941 (8,265)
- ----------------------------- -------- -------- ---------- ----------
Other Income (Expense)
- ----------------------
Interest income 607 2,760 1,573 8,775
Interest expense (18,200) (2,849) (32,003) (10,762)
-------- -------- ---------- ----------
(17,593) (89) (30,430) (1,987)
-------- -------- ---------- ----------
Income (Loss) Before Income Taxes 187,516 134,496 49,511 (10,252)
- ---------------------------------
Provision For (Recovery Of) Income
- ----------------------------------
Taxes - - - -
----- -------- -------- ---------- ----------
Net Income (Loss) $187,516 $134,496 $ 49,511 $ (10,252)
- ----------------- ======== ======== ========== ==========
Net Income (Loss) Per Common
- ----------------------------
Share $ .11 $ .08 $ .03 $ (.01)
----- ======== ======== ========== ==========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
AMERICAN STONE INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flow From Operating Activities
- -----------------------------------
Net Income (Loss) $ 49,511 $ (10,252)
--------- ---------
Noncash items included in income
Depreciation and amortization 99,041 55,426
Accounts receivable (101,659) (227,931)
Inventory 4,780 (256,280)
Prepaid expenses 18,361 36,713
Accounts payable - trade (109,342) 31,833
Accrued expenses 17,672 (88,922)
--------- ---------
Total Adjustments (71,147) (449,161)
--------- ---------
Net Cash Used In Operating Activities (21,636) (459,413)
- -------------------------------------
Cash Flows From Investing Activities (434,296) 84,054
- ------------------------------------
Cash Flows From Financing Activities 504,696 (324,866)
- ------------------------------------ --------- ---------
Net Increase (Decrease) in Cash 48,764 (700,225)
- --------------------------------
Cash - Beginning of Period 144,443 983,713
- -------------------------- --------- ---------
Cash - End of Period $ 193,207 $ 283,488
- -------------------- ========= =========
Supplemental Disclosure of Cash Flows
- -------------------------------------
Information
-----------
Interest paid $32,000 $10,800
Income taxes paid $ -0- $ -0-
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1998
-------------
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of American
Stone Industries, Inc. and its Subsidiaries (the "Company") 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 and six-month periods ended
June 30, 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-KSB for the year ended December
31, 1997.
NOTE B - RECLASSIFICATION
- -------------------------
Certain accounts related to the prior year have been reclassified to
conform to the current year presentation.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
Net sales for the second quarter of 1998 were $861,228, up 31% when
compared to the second quarter of 1997. For the six months ended June 30, 1998,
net sales were $1,326,074 up 28% when compared to the same period in 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 percentage for the second quarter of 1998 was 46%, the
same when compared to the same period for the prior year. The gross profit
percentage for the first six months ended June 30, 1998 was 34%, compared to 31%
for the same period for the prior year. Production costs for the second quarter
of 1998 were increased as a result of bringing the new gang saw online. However,
those costs were offset by a nonrecurring gain of $82,907 as a result of a
statewide rebate to employers from the Ohio Bureau of Workers' Compensation.
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 second quarter of 1998 were $17,593, compared
to $89 for the second quarter of 1997. For the first six months ended June 30,
1998, net other expenses were $30,430, compared to $1,987 for the same period
for 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 income was $187,516 for the second quarter of 1998 and $134,496
for the second quarter of 1997. For the six months ended net income was $49,511,
compared to a net loss of $(10,252) for the same period 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 June
30, 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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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------
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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<PAGE> 9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of the Company was held on June 24,
1998. At the Annual Meeting, the Company's Stockholders elected the following
persons to serve as Directors of the Company for terms of one year or until
their successors are duly elected and qualified. Votes were cast as:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Enzo Constantino 964,670 - 13,780
Glen Gasparini 964,670 - 13,780
Jacquita K. Hauserman 963,690 - 14,760
Michael J. Meier 964,690 - 13,760
Timothy I. Panzica 963,690 - 14,760
Thomas H. Roulston II 964,690 - 13,760
</TABLE>
Additional proposals were voted upon at the Annual Meeting and the number
of votes cast for, against and abstentions with respect to each were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Amendment to the Certificate of
Incorporation to complete the May, 1997
reverse stock split of the common stock 973,649 3,724 1,077
Ratification of all actions related
to the exchange by holders of common
stock of each share of common stock
for one-tenth of a share of common stock 906,635 4,724 1,077
Approval and adoption of the American
Stone Industries, Inc. 1998 Management
Stock Option Plan 895,420 16,919 97
Approval and adoption of the American
Stone Industries, Inc. 1998 Non-Employee
Director Stock Option Plan. 892,630 18,559 1,247
</TABLE>
For a description of the bases used in tabulating the above-referenced
votes, see the Company's definitive Proxy Statement used in connection with the
Annual Meeting.
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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<PAGE> 10
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, 1998 /s/ DAVID TYRRELL
------------- ------------------------
David Tyrrell, President
Date: July 29, 1998 /s/ ENZO CONSTANTINO
------------- ---------------------------------
Enzo Constantino, Chief Financial
Officer
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 193,207
<SECURITIES> 0
<RECEIVABLES> 574,329
<ALLOWANCES> 9,967
<INVENTORY> 792,978
<CURRENT-ASSETS> 1,569,298
<PP&E> 2,643,081
<DEPRECIATION> 229,489
<TOTAL-ASSETS> 4,223,826
<CURRENT-LIABILITIES> 1,124,909
<BONDS> 0
0
0
<COMMON> 16,314
<OTHER-SE> 2,665,853
<TOTAL-LIABILITY-AND-EQUITY> 4,223,826
<SALES> 1,326,074
<TOTAL-REVENUES> 1,327,647
<CGS> 876,537
<TOTAL-COSTS> 369,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,003
<INCOME-PRETAX> 49,511
<INCOME-TAX> 0
<INCOME-CONTINUING> 49,511
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,511
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
