<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, 1999
-------------
__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 Identification No.)
incorporation or organization)
8705 Quarry Rd., Amherst, Ohio 44001
- --------------------------------------------------------------------------------
(Address of principal executive officer)
(440) 986-4501
- --------------------------------------------------------------------------------
(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 CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
1,716,364
- --------------
<PAGE> 2
INDEX
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- -----------------------------
<S> <C>
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998........................................1
Consolidated Statements of Income
Three Months Ended June 30, 1999 and 1998..................................2
Six Months Ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998....................................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...............8
Item 6. Exhibits and Reports on Form 8-K..................................8
Signatures ..................................................................9
</TABLE>
<PAGE> 3
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
Current Assets (Unaudited) (Audited)
- -------------- ----------- -----------
<S> <C> <C>
Cash $ 179,698 $ 196,942
Accounts receivable 794,820 820,271
Inventory 934,132 812,224
Prepaid expenses 90,475 30,414
----------- -----------
Total Current Assets 1,999,125 1,859,851
----------- -----------
Property. Plant and Equipment, Net - At Cost 2,996,579 2,652,704
- -------------------------------------------- ----------- -----------
Other Assets 201,947 200,855
- ------------ ----------- -----------
$ 5,197,651 $ 4,713,410
=========== ===========
LIABILITIES
-----------
Current Liabilities
- -------------------
Notes payable, bank line of credit $ 500,000 $ 450,000
Current portion of notes payable 276,697 228,813
Accounts payable 494,069 402,344
Accrued liabilities 251,358 190,891
----------- -----------
Total Current Liabilities 1,522,124 1,272,048
----------- -----------
Long Term Liabilities 584,889 411,959
- --------------------- ----------- -----------
SHAREHOLDERS' EQUITY
--------------------
Common Stock, $.001 par value,
20 million shares authorized
1,716,364 issued and
outstanding at June 30, 1999
and December 31, 1998 1,716 1,716
Additional capital 3,849,958 3,849,958
Retained earnings (deficit) (761,036) (822,271)
----------- -----------
3,090,638 3,029,403
----------- -----------
$ 5,197,651 $ 4,713,410
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements.
-1-
<PAGE> 4
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 1,037,324 $ 861,228 $ 1,671,229 $ 1,326,074
COST OF SALES 735,295 464,117 1,152,985 876,537
----------- ----------- ----------- -----------
GROSS PROFIT 302,029 397,111 518,244 449,537
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 220,660 192,002 404,393 369,596
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS 81,369 205,109 113,851 79,941
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 555 607 1,702 1,573
Interest expense (29,631) (18,200) (54,318) (32,003)
----------- ----------- ----------- -----------
(29,076) (17,593) (52,616) (30,430)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 52,293 187,516 61,235 49,511
PROVISION FOR (RECOVERY OF) INCOME
TAXES -- -- -- --
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 52,293 $ 187,516 $ 61,235 $ 49,511
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE
Basic $ .03 $ .11 $ .04 $ .03
=========== =========== =========== ===========
Diluted $ .03 $ .11 $ .04 $ .03
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE> 5
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
-----------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flow From Operating Activities
- -----------------------------------
Net income $ 61,235 $ 49,511
--------- ---------
Noncash items included in income
Depreciation and amortization 102,631 99,041
Accounts receivable 25,451 (101,659)
Inventory (121,908) 4,780
Prepaid expenses (60,061) 18,361
Accounts payable - trade 91,725 (109,342)
Accrued expenses 60,467 17,672
--------- ---------
Total Adjustments 98,305 (71,147)
--------- ---------
Net Cash Used In Operating Activities 159,540 (21,636)
- -------------------------------------
Cash Flows From Investing Activities (447,598) (434,296)
- ------------------------------------
Cash Flows From Financing Activities 270,814 504,696
- ------------------------------------ --------- ---------
Net (Decrease) Increase in Cash (17,244) 48,764
- -------------------------------
Cash - Beginning of Period 196,942 144,443
- -------------------------- --------- ---------
Cash - End of Period $ 179,698 $ 193,207
- -------------------- ========= =========
Supplemental Disclosure of Cash Flows
- -------------------------------------
Information
-----------
Interest paid $ 54,300 $ 32,000
Income taxes paid $ -0- $ -0-
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE> 6
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999
-------------
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 six-month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. 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,
1998.
NOTE B - FINANCIAL REPORTING FOR SEGMENTS OF THE COMPANY
- --------------------------------------------------------
The Company and its subsidiaries operate 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>
Six Months Ended June 30,
--------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales, including geographic transfers
United States $ 1,380,885 $ 976,630
Canada 341,775 415,414
Geographic transfers (51,432) (65,970)
----------- -----------
$ 1,671,229 $ 1,326,074
=========== ===========
Income (loss) from operations:
United States $ 147,675 $ 38,323
Canada (33,824) 41,618
----------- -----------
Income (loss) from operations: 113,851 79,941
Interest expense (54,318) (32,003)
Interest income 1,702 1,573
----------- -----------
Income (loss) from operations before income taxes $ 61,235 $ 49,511
=========== ===========
Identifiable assets:
United States $ 4,944,469 $ 4,054,577
Canada 253,182 169,249
----------- -----------
$ 5,197,651 $ 4,223,826
=========== ===========
</TABLE>
-4-
<PAGE> 7
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
Net sales for the second quarter of 1999 were $1,037,324, up 20% compared
with $861,228 for the second quarter of 1998. For the six months ended June 30,
1999, net sales were $1,671,229 up 26% when compared to the same period in 1998.
The sales increase was due to production for several larger commercial
construction projects, including Old City Hall in Toronto, Marist College in New
York, and Baldwin-Wallace College in Ohio.
Gross profit percentage for the second quarter of 1999 decreased to 29%
compared with 46% in the same period a year ago. The gross profit percentage for
the first six months ended June 30, 1999 was 31%, compared to 34% for the same
period for the prior year. Production costs for the period increased more
dramatically than sales for the same period due to problems relating to the
installation of a new profile saw and bridge saw. Gross profit in the 1998
second quarter included a nonrecurring gain of $82,907 as a result of a
statewide rebate to employers from the Ohio Bureau of Workers' Compensation.
Selling, general and administrative expenses continued to decline as a
percentage of net sales, falling from 22% in the second quarter of 1998 to 21%
in the latest quarter due to the increased sales volume. For the six months
ended June 30, 1999 the selling, general and administrative expenses as a
percentage of net sales was 24% compared to 28% for the same period in 1998 due
to higher sales volume.
Net other expense for the second quarter of 1999 was $29,076 compared with
$17,593 for the second quarter of 1998. For the first six months ended June 30,
1999, net other expenses were $52,616, compared to $30,430 for the same period
in 1998. This was due to an increase in interest expense associated with
borrowings for the purchase of three new saws and for working capital.
Net income for the second quarter of 1999 was $52,293 compared with net
income of $187,516 for the second quarter of 1998. For the six months ended June
30, 1999, the net income was $61,235, compared to $49,511 for the same period of
1998. Earnings in the stone quarrying industry are normally the weakest in the
first quarter of the year when cold weather restricts operations and reduces
demand 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, 1999 and December 31, 1998 was $500,000 and $450,000 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.
-5-
<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.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue -- software, hardware or an embedded chip that does
not correctly process date information for years after 1999 -- results from the
practice of storing date information with only the last two digits of the year.
The Year 2000 issue affects virtually all companies and organizations, including
government agencies, utilities and other basic service providers, which are
outside the Company's control. Like most business enterprises, the Company is
taking steps to identify and address the potential effects of the Year 2000
issue.
The Company has initiated an internal review of Year 2000 issues, which
addresses (i) internal information technology ("IT") systems such as any
hardware and software used to process daily operational data and information;
(ii) non-IT systems or embedded technology such as micro-controllers; and (iii)
the Year 2000 compliance of key service providers and customers.
The Company utilizes standard non-customized hardware and software in its
IT systems. To the extent such hardware of software is not Year 2000 compliant,
Management believes that the disruption to the operations of the Company and the
cost of replacement of the hardware or software would be minimal. In addition,
the Company has evaluated the impact of the Year 2000 issue on the Company's
non-IT systems and believes the Company's operations will not be materially
adversely impacted by non- compliant non-IT systems.
The Company is in the process of evaluating the impact of Year 2000 issues
on key third parties. The Company has requested assurances from its electrical
power supplier and its largest customer that such parties are Year 2000
compliant. To the extent such parties are not Year 2000 compliant, the Company's
operations or business may be materially adversely impacted. Substantial
interruption of electrical power supplied to the Company's operating quarries
due to the electrical power supplier's failure to achieve Year 2000 compliance
has been identified as having the greatest potential adverse impact. In such an
event, the Company would need to seek alternative sources of electrical power to
meet the demands of the quarry operations. Management believes that to the
extent other service providers are not Year 2000 compliant, such services may be
obtained from other sources with minimal disruption to the operations of the
Company.
-6-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------
YEAR 2000 READINESS DISCLOSURE (CONTINUED)
To date, the Company has spent approximately $5,000 in evaluating the
impact of Year 2000 on the operations of the Company and expects future costs to
be minimal.
Although the Company expects to be Year 2000 compliant, statements with
regard to such expectations are subject to various factors that may materially
affect the Company's Year 2000 compliance efforts. These factors include the
ability to detect, locate and correct system codes and the failure of key third
parties to achieve Year 2000 compliance. The Company has taken actions that it
believes are appropriate and reasonable to determine the readiness of third
parties; however, it must in part rely on representations made by such third
parties.
-7-
<PAGE> 10
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 23,
1999. 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:
For Against Abstain
---------- ------- -------
Enzo Constantino $1,352,887 - 100
Glen Gasparini 1,352,887 - 100
Jacquita K. Hauserman 1,352,887 - 100
Michael J. Meier 1,352,907 - 80
Timothy I. Panzica 1,352,907 - 80
Thomas H. Roultson II 1,352,907 - 80
Louis Stokes 1,347,907 - 5,080
No additional proposals were voted upon at the Annual Meeting.
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.
(a) EXHIBITS
27.1 Financial Data Schedule
(b) There have been no reports on Form 8-K filed during the quarter for
which this report is filed.
-8-
<PAGE> 11
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: August 12, 1999 /s/ David Tyrrell
----------------- ----------------------------------------
David Tyrrell, President
Date: August 12, 1999 /s/ Enzo Costantino
----------------- ----------------------------------------
Enzo Costantino, Chief Financial Officer
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 179,698
<SECURITIES> 0
<RECEIVABLES> 794,820
<ALLOWANCES> 0
<INVENTORY> 934,132
<CURRENT-ASSETS> 1,999,125
<PP&E> 3,376,669
<DEPRECIATION> 380,090
<TOTAL-ASSETS> 5,197,651
<CURRENT-LIABILITIES> 1,522,124
<BONDS> 0
0
0
<COMMON> 1,716
<OTHER-SE> 3,088,922
<TOTAL-LIABILITY-AND-EQUITY> 5,197,651
<SALES> 1,671,229
<TOTAL-REVENUES> 1,672,931
<CGS> 1,152,985
<TOTAL-COSTS> 404,393
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,318
<INCOME-PRETAX> 61,235
<INCOME-TAX> 0
<INCOME-CONTINUING> 61,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,235
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
