<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, 2000
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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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
--------------------------------- ----------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of 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 CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
1,736,364
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<PAGE> 2
INDEX
AMERICAN STONE INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999................................1
Consolidated Statements of Income
Three Months Ended June 30, 2000 and 1999..........................2
Six Months Ended June 30, 2000 and 1999
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999............................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
<PAGE> 3
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
2000 1999
----------- ----------
(Audited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 47,972 $ 50,378
Accounts receivable 733,593 683,784
Inventory 1,076,567 901,101
Prepaid expenses 27,881 54,876
----------- -----------
Total Current Assets 1,886,013 1,690,139
----------- -----------
Property, Plant and Equipment, Net - At Cost 2,917,916 3,001,369
----------- -----------
Other Assets 79,603 54,932
----------- -----------
$ 4,883,532 $ 4,746,440
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, bank line of credit $ 738,835 $ 668,720
Current portion of notes payable 433,932 413,338
Accounts payable 244,544 303,740
Accrued liabilities 210,962 190,707
----------- -----------
Total Current Liabilities 1,628,273 1,576,505
----------- -----------
Long Term Liabilities 413,942 527,366
----------- -----------
SHAREHOLDERS' EQUITY
Common Stock, $.001 par value, 20 million shares
authorized 1,736,364 and 1,723,364 issued and
outstanding at June 30, 2000 and December 31,
1999, respectively 1,736 1,723
Additional capital 3,919,938 3,874,451
Retained earnings (deficit) (1,080,357) (1,233,605)
----------- -----------
2,841,317 2,642,569
----------- -----------
$ 4,883,532 $ 4,746,440
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1999 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.
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,
------------------------------- -------------------------------
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 1,073,354 $ 987,416 $ 1,663,267 $ 1,621,321
Cost of sales 711,088 735,295 1,105,356 1,152,985
----------- ----------- ----------- -----------
Gross Profit 362,266 252,121 557,911 468,336
Selling, general and
administrative expenses 187,961 220,660 334,203 404,393
----------- ----------- ----------- -----------
Income (loss) from operations 174,305 31,461 223,708 63,943
----------- ----------- ----------- -----------
Other income (expense)
Interest income - 555 - 1,702
Interest expense (33,069) (29,631) (70,460) (54,318)
----------- ----------- ----------- -----------
(33,069) (29,076) (70,460) (52,616)
----------- ----------- ----------- -----------
Income before income taxes 141,236 2,385 153,248 11,327
Provision for (recovery of)
income taxes - - - -
----------- ----------- ----------- -----------
Net Income $ 141,236 $ 2,385 $ 153,248 $ 11,327
=========== =========== =========== ===========
Net income per common share
Basic $ .08 $ .00 $ .09 $ .01
=========== =========== =========== ===========
Diluted $ .08 $ .00 $ .09 $ .01
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 153,248 $ 61,235
--------- ---------
Noncash items included in income
Depreciation and amortization 143,728 102,631
Accounts receivable (49,809) 25,451
Inventory (175,466) (121,908)
Prepaid expenses 26,995 (60,061)
Other assets (24,671) -
Accounts payable - trade (59,196) 91,725
Accrued expenses 20,255 60,467
--------- ---------
Total Adjustments (118,164) 98,305
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES 35,084 159,540
CASH FLOWS FROM INVESTING ACTIVITIES (60,275) (447,598)
CASH FLOWS FROM FINANCING ACTIVITIES 22,785 270,814
--------- ---------
NET (DECREASE) INCREASE IN CASH (2,406) (17,244)
CASH - BEGINNING OF PERIOD 50,378 196,942
--------- ---------
CASH - END OF PERIOD $ 47,972 $ 179,698
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION
Interest paid $ 70,500 $ 54,300
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, 2000
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, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. 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,
1999.
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,
-------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net sales, including geographic transfers
United States $ 1,506,719 $ 1,330,978
Canada 156,548 341,775
Geographic transfers - (51,432)
----------- -----------
$ 1,663,267 $ 1,621,321
=========== ===========
Income (loss) from operations:
United States $ 223,708 $ 97,767
Canada - (33,824)
----------- -----------
Income (loss) from operations: 223,708 63,943
Interest expense (70,460) (54,318)
Interest income - 1,702
----------- -----------
Income (loss) from operations before income taxes $ 153,248 $ 11,327
=========== ===========
Identifiable assets:
United States $ 4,883,532 $ 4,894,561
Canada - 253,182
----------- -----------
$ 4,883,532 $ 5,147,743
=========== ===========
</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 second quarter of 2000 were $1,073,354, up 9% compared
with $987,416 for the second quarter of 1999. For the six months ended June 30,
2000, net sales were $1,663,267 up 3% when compared to the same period in 1999.
The sales increase for the second quarter and six months ended June 30, 2000 was
due to production for new projects at Oberlin College, Bethany College and the
New York State Assembly and increased demand for the Company's slab stone and
stock products.
Gross profit percentage for the second quarter of 2000 increased to 34%
compared with 26% in the same period a year ago. The gross profit percentage for
the first six months ended June 30, 2000 was 34%, compared to 29% for the same
period for the prior year. The margin improvement was due to better pricing,
manufacturing efficiencies, workflow scheduling and utilization of new
equipment.
Selling, general and administrative expenses continued to decline as a
percentage of net sales, falling from 22% in the second quarter of 1999 to 18%
in the latest quarter due to the increased sales volume. For the six months
ended June 30, 2000 the selling, general and administrative expenses as a
percentage of net sales was 20% compared to 25% for the same period in 1999 due
to cost control measures.
Net other expense for the second quarter of 2000 was $33,069 compared with
$29,076 for the second quarter of 1999. For the first six months ended June 30,
2000, net other expenses were $70,460, compared to $52,616 for the same period
in 1999. This was due to an increase in interest expense associated with
borrowings during the second half of 1999 for new equipment and for working
capital.
Net income for the second quarter of 2000 was $141,236 compared with net
income of $2,385 for the second quarter of 1999. For the six months ended June
30, 2000, the net income was $153,248, compared to $11,327 for the same period
of 1999. 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, 2000 and December 31, 1999 was $738,835 and $668,720 respectively.
Subsequent to the end of the second quarter of 2000, the Company received
$900,000 in cash from the private placement of 200,000 shares of newly issued
common stock. The shares were acquired by Roulston Venture Capital Limited
Partnership at $4.50 per share in a transaction approved by a majority of the
independent members of the Board.
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND SOURCES OF CAPITAL (CONTINUED)
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.
YEAR 2000
The Company has completed its Year 2000 remediation efforts and, since
January 1, 2000, has not experienced any significant problems internally or with
suppliers and customers in connection with this event. Nevertheless, the Company
is aware of some remaining future dates that could potentially cause computer
system problems, and is continuing to monitor its mission critical computer
applications to ensure that any problems are addressed promptly.
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 April 19,
2000. 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 Costantino 1,402,506 - 32
Glen Gasparini 1,402,506 - 32
Jacquita K. Hauserman 1,402,506 - 32
Michael J. Meier 1,402,506 - 32
Timothy I. Panzica 1,402,506 - 32
Thomas H. Roulston II 1,402,506 - 32
Louis Stokes 1,402,506 - 32
</TABLE>
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.
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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.
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(Registrant)
Date: August 1, 2000 /s/ James M. Rallo
------------------- -----------------------------------------
James M. Rallo, President
Date: August 1, 2000 /s/ Enzo Costantino
------------------- -----------------------------------------
Enzo Costantino, Chief Financial Officer
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