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| HTLJ.OB > SEC Filings for HTLJ.OB > Form 10-Q on 15-May-2009 | All Recent SEC Filings |
15-May-2009
Quarterly Report
The following discussion should be read in conjunction with the financial statements included in this Form 10-Q. The following discussion and analysis provides certain information, which the Company's management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition for the quarterly period ended March 31, 2009. The statements contained in this section that are not historical facts are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. From time to time, we or our representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in our various filings with the SEC, or press releases or oral statements made by or with the approval of our authorized executive officers.
These forward-looking statements, such as statements regarding anticipated future revenues, capital expenditures and other statements regarding matters that are not historical facts, involve predictions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. We do not undertake any obligation to publicly release any revisions to these forward-looking statements or to reflect the occurrence of unanticipated events. Many important factors affect our ability to achieve our objectives, including, among other things, technological and other developments within a given field, intense and evolving competition, the lack of an "established trading market" for our shares, and our ability to obtain additional financing, as well as other risks detailed from time to time in our public disclosure filings with the SEC.
Overview
The Company currently manages its business as three operational segments and files as a consolidated entity. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers. The three operational segments we currently report are:
· Mound - Steel Fabrication - Primarily focused on the fabrication of metal products including structural steel, steel stairs and railings, bar joists, metal decks, and other miscellaneous steel products.
· Lee Oil - Oil Distribution - Primarily focused on the wholesale and retail distribution of petroleum products including those sold to the motoring public through our retail locations.
· Heartland Steel - Wholesale Steel - This is a startup segment of the business that we are working to develop into full fledged service center for the distribution of steel products. This segment of the business will not be fully operational until later in the year.
Results of Operations
Three Months ended March 31, 2009 as compared to the three months ended March 31, 2008
The main differences between the results of operations from the first quarter of 2008 to the first quarter of 2009 can be attributed primarily to the Lee Oil acquisition that took place in the fourth quarter of 2008 and the startup of operations relating to Heartland Steel. A further breakdown is provided in NOTE E - BUSINESS SEGMENTS of the financial statements.
Revenues. Revenues increased for the three months ended March 31, 2009 to $19,737,679 from $4,058,796 for the three months ended March 31, 2008.
Cost of Goods Sold. Cost of Goods Sold increased for three months ended March 31, 2009 to $17,070,440 from $3,278,225 for the three months ended March 31, 2008.
Gross Profit. Gross Profits increased for three months ended March 31, 2009 to $2,667,239 from $780,571 for the three months ended March 31, 2008.
Expenses. Expenses increased for three months ended March 31, 2009 to $2,426,286 from $380,357 for the three months ended March 31, 2008.
Net Operating Income. Net Operating Income decreased for three months ended March 31, 2009 to $240,953 from $400,214 for the three months ended March 31, 2008.
Other (expense) income. Other (expense) income increased for three months ended March 31, 2009 to $(142,902) from $1,542 for the three months ended March 31, 2008. This was primarily attributable to the interest associated with the acquisition of Lee Oil. Interest expense increased from $8,013 in the first quarter of 2008 to $219,212 in the first quarter of 2009.
Net Income Before income Taxes. Net Income before Income Taxes decreased for the three months ended March 31, 2009 to $98,051 from $401,756 for the three months ended March 31, 2008. This decrease is primarily attributable some costs associated with the startup at Heartland Steel, additional interest expense, and a lower gross profit from the Mound operations.
Liquidity and Capital Resources
Sources of Liquidity
As of March 31, 2009, the Company had accumulated deficit of $12,495,832. As of December 31, 2008, the Company had accumulated deficit of $12,599,401. The Company generated a profit in cash flow from operating activities of $18,949 for the three months ended March 31, 2009.
The Company generated a deficit from investing activities of $202,947 for the three months ended March 31, 2009. This deficit is primarily attributable to the purchase of various property, plant, and equipment during the quarter.
The Company's generated cash flow from financing activities of $219,756 for the three months ended March 31, 2009.
Our principal sources of liquidity would be cash on hand and the conversion of accounts receivable into cash. We also believe cash provided from operating activities will be a great source of liquidity going forward, but would seek outside financing for any major expansion, betterment project, or possible future acquisitions as these would be considered long term projects.
As of March 31, 2009, the Company believes that cash on hand, cash generated by operations, and available bank borrowings will be sufficient to pay trade creditors, operating expenses in the normal course of business, and meet all of its bank and subordinate debt obligations for the next 12 to 24 months.
It is our belief that our stock is currently undervalued and that we are better suited to fund current projects through cash provided from operations and financing rather than attempting to sell what we belief to be an undervalued asset and further dilute the securities.
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