<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, 1999
----------------
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
- ----
For the transition period from to
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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
- ------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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:
1,716,364
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<PAGE> 2
INDEX
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- -----------------------------
<S> <C>
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998.................1
Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998...........2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 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 6. Exhibits and Reports on Form 8-K.....................8
Signatures..............................................................9
Financial Data Schedule
</TABLE>
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AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets
- --------------
Cash $ 169,191 $ 196,942
Accounts receivable 822,123 820,271
Inventory 969,328 812,224
Prepaid expenses 22,981 30,414
----------- -----------
Total Current Assets 1,983,623 1,859,851
----------- -----------
Property. Plant and Equipment, Net - At Cost 2,856,270 2,652,704
- -------------------------------------------- ----------- -----------
Other Assets 249,512 200,855
- ------------ ----------- -----------
$ 5,089,405 $ 4,713,410
=========== ===========
LIABILITIES
-----------
Current Liabilities
- -------------------
Notes payable, bank line of credit $ 500,000 $ 450,000
Current portion of notes payable 246,467 228,813
Accounts payable 497,377 402,344
Accrued liabilities 222,329 190,891
----------- -----------
Total Current Liabilities 1,466,173 1,272,048
----------- -----------
Long Term Liabilities 584,887 411,959
- --------------------- ----------- -----------
SHAREHOLDERS' EQUITY
--------------------
Common Stock, $.001 par value,
20 million shares authorized
1,716,364 issued and
outstanding at March 31, 1999
and December 31, 1998 1,716 1,716
Additional capital 3,849,958 3,849,958
Retained earnings (deficit) (813,329) (822,271)
----------- -----------
3,038,345 3,029,403
----------- -----------
$ 5,089,405 $ 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.
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AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Net Sales $ 633,905 $ 464,846
- ---------
Cost of Sales 417,690 412,420
- ------------- --------- ---------
Gross Profit 216,215 52,426
- ------------
Selling, General and Administrative
- -----------------------------------
Expenses 183,733 177,594
-------- --------- ---------
Income (Loss) From Operations 32,482 (125,168)
- -----------------------------
Other Income (Expense)
- ----------------------
Interest income 1,147 966
Interest expense (24,687) (13,803)
--------- ---------
(23,540) (12,837)
--------- ---------
Income (Loss) Before Income Taxes 8,942 (138,005)
- --------------------------------- --------- ---------
Provision For (Recovery Of) Income
- ----------------------------------
Taxes -- --
----- --------- ---------
Net Income (Loss) $ 8,942 $(138,005)
- ----------------- ========= =========
Net Income (Loss) Per Common Share
- ----------------------------------
Basic $ .01 $ (.08)
========= =========
Diluted $ .01 $ (.08)
========= =========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
(Unaudited) (Unaudited)
--------- ---------
<S> <C> <C>
Cash Flow From Operating Activities
- -----------------------------------
Net income (loss) $ 8,942 $(138,005)
--------- ---------
Noncash items included in income
Depreciation and amortization 47,954 28,891
Accounts receivable (1,852) 14,995
Inventory (157,104) (30,656)
Prepaid expenses 7,433 8,405
Accounts payable - trade 95,033 (9,275)
Accrued expenses 31,438 (13,749)
--------- ---------
Total Adjustments 22,902 (1,389)
--------- ---------
Net Cash Used In Operating Activities 31,844 (139,394)
- -------------------------------------
Cash Flows From Investing Activities (300,176) (305,314)
- ------------------------------------
Cash Flows From Financing Activities 240,581 422,260
- ------------------------------------ --------- ---------
Net (Decrease) Increase in Cash (27,751) (22,448)
- -------------------------------
Cash - Beginning of Period 196,942 144,443
- -------------------------- --------- ---------
Cash - End of Period $ 169,191 $ 121,955
- -------------------- ========= =========
Supplemental Disclosure of Cash Flows
- -------------------------------------
Information
-----------
Interest paid $ 24,700 $ 13,800
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
MARCH 31, 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 three-month period
ended March 31, 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-SB for the year ended
December 31, 1998.
NOTE B - 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>
Three Months Ended March 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net sales, including geographic transfers
United States $ 510,756 $ 362,664
Canada 148,569 127,419
Geographic transfers (25,420) (25,237)
----------- -----------
$ 633,905 $ 464,846
=========== ===========
Income (loss) from operations:
United States $ 63,096 $ (90,572)
Canada (30,614) (34,596)
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Income (loss) from operations: 32,482 (125,168)
Interest expense (24,687) (13,803)
Interest income 1,147 966
----------- -----------
Income (loss) from operations before income taxes $ 8,942 $ (138,005)
=========== ===========
Identifiable assets:
United States $ 4,727,570 $ 3,811,908
Canada 361,835 210,612
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$ 5,089,405 $ 4,022,520
=========== ===========
</TABLE>
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<PAGE> 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the first quarter of 1999 were $633,905, up 36%
compared with $464,846 for the first quarter of 1998. The sales increase was due
to production for several larger commercial construction projects, including Old
City Hall in Toronto, Cornell University in New York, and Baldwin-Wallace
College in Ohio. Demand for stone products in the Company's primary market, the
Great Lakes region, is normally low in the first quarter compared with the rest
of the year due to the cold weather.
Gross profit percentage for the first quarter of 1999 improved to
34% compared with 11% in the same period a year ago. The improvement reflects
the Company's success in containing costs of production through better manpower
planning and better utilization of existing machinery.
Selling, general and administrative expenses continued to decline as
a percentage of net sales, falling from 38% in the first quarter of 1998 to 29%
in the latest quarter due to the increased sales volume.
Net other expense for the first quarter of 1999 was $23,540 compared
with $12,837 for the first quarter of 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 first quarter of 1999 was $8,942 compared with a
net loss of $(138,005) for the first quarter 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 March 31, 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.
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<PAGE> 8
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.
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<PAGE> 9
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.
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<PAGE> 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
(b) 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> 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.
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(Registrant)
Date: May 14, 1999 /s/ David Tyrrell
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David Tyrrell, President
Date: May 14, 1999 /s/ Enzo Costantino
------------------- -------------------
Enzo Costantino, Chief Financial Officer
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 169,191
<SECURITIES> 0
<RECEIVABLES> 837,148
<ALLOWANCES> 15,025
<INVENTORY> 969,328
<CURRENT-ASSETS> 1,983,623
<PP&E> 3,183,177
<DEPRECIATION> 326,907
<TOTAL-ASSETS> 5,089,405
<CURRENT-LIABILITIES> 1,466,173
<BONDS> 0
0
0
<COMMON> 1,716
<OTHER-SE> 3,036,629
<TOTAL-LIABILITY-AND-EQUITY> 5,089,405
<SALES> 633,905
<TOTAL-REVENUES> 635,052
<CGS> 417,690
<TOTAL-COSTS> 183,733
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,687
<INCOME-PRETAX> 8,942
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,942
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
