FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1998
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-22723
WOLF INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
NEVADA 98-0171619
(State of incorporation) (IRS Employer ID No.)
SUITE 404 - 110 CAMBIE STREET
VANCOUVER, BRITISH COLUMBIA, CANADA V6B 2M8
(Address of principal executive offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (604) 688-6306
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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. Yes X No
As of August 27, 1998, the Registrant had 3,561,622 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one); Yes No X
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION AND IS
THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
Part I Financial Information
Item 1 Financial Statements.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
6 Months ended 6 Months ended
June 30, 1998 June 30, 1997
-------------- --------------
Assets
Current
Cash and short term deposit $ - $ 66,005
Account receivable 78,594 85,740
Inventory 76,678 54,869
Prepaid expenses 6,900 12,470
---------- ----------
162,172 219,084
Capital Assets 262,999 273,602
Excess of cost over net identifiable
assets acquired 219,547 239,183
---------- ----------
$ 644,718 $ 731,869
========== ==========
Liabilities
Current
Bank indebtedness 53,170 -
Demand bank loan 54,503 $ 90,875
Accounts payable and accrued liabilities 863,471 129,981
Due to shareholders 14,946 -
Income tax payable - 10,853
Current portion of long term debt - 126,265
---------- ----------
986,090 357,974
Long term debt 182,586 67,984
---------- ----------
1,168,676 425,958
---------- ----------
Stockholders' Equity
Common shares 354,368 324,830
Unrealized foreign exchange gain (loss) 21,566 -
Deficit (899,892) (18,919)
---------- ----------
(523,958) 305,911
---------- ----------
$ 644,718 $ 731,869
========== ==========
<PAGE>
INTERIM CONSOLIDATED STATEMENT OF LOSS AND DEFICIT
(UNAUDITED)
6 Months ended 6 Months ended
June 30, 1998 June 30, 1997
-------------- --------------
Revenue
Product sales 283,750 $ 229,464
Cost of goods sold 149,839 118,827
---------- ----------
Gross margin 133,911 110,637
---------- ----------
Expenses
Amortization 28,862 31,330
Administration 384,492 58,168
Executive compensation 17,728 22,530
Interest on long-term debt 8,617 5,273
Rent 37,280 21,911
Research and development 464,964 -
---------- ----------
941,943 139,212
---------- ----------
Earnings (loss) from operations (808,032) (28,575)
Recovery of income taxes - 4,800
---------- ----------
Net earnings (loss) (808,032) (23,775)
Retained earnings (deficit), beginning
of period (91,860) 4,856
---------- ----------
Retained earnings (deficit), end of period (899,892) $ (18,919)
========== ==========
<PAGE>
Item 2 - Management's Discussion and Analysis or Plan of Operation.
(a) Liquidity
The Company is experiencing occasional illiquidity and is dependent upon
the timely collection of receivables to meet its expenses as demonstrated
by having bank indebtedness of $53,170 at June 30, 1998 while receivables
were $78,594. However the Company has not experienced any significant
delays in its collections. Pursuant to below described Licensing Agreement
and pending completion of the sale of the Company's subsidiary, the Company
will be relying upon debt or equity financing for the development of its
new business direction. However as the result of the sale of the
subsidiary the Company will eliminate its existing debt and reduce its
accounts payable.
(b) Capital Resources
The Company's capital assets have remained stable during the six-month
period ended June 30, 1998. However pending completion of the sale of the
Company's subsidiary, the Company will recognize a substantial decrease in
capital assets as substantially all of the capital assets are held in the
subsidiary and will be sold.
(c) Results of Operations
For the six months ended June 30, 1998, the Company incurred a net loss of
$808,032. Sales for the six months ended June 30, 1998 were up $54,286
from the six month period ended June 30, 1997 which reflects the Company's
increased marketing efforts over the past year. However, the Company
continues to have underutilized plant capacity.
As noted below under "Other Information: License Agreement", the Company
has acquired a world-wide licence to manufacture and market a patented
device for the color matching of dentures to a patient's existing tooth
color. To June 30, 1998, the Company incurred $464,964 of costs for
research and development of the device, which included costs to manufacture
an initial supply of devices for demonstration and testing purposes; costs
of various consultants and laboratories in testing the devices; costs to
develop plans and strategies for the ongoing manufacture and marketing of
the devices; and costs related to assistance and attendance at various
dental conferences in North America, to demonstrate the units, and receive
comments from the dental profession.
Administration expenses for the period amounted to $384,492, compared to
$58,168 in the same period of 1997. This substantial increase is primarily
due to the new direction taken by the Company, including substantially
increased legal costs relating to the planned disposal of its subsidiary,
and finalizing of the licensing agreement with Andrew Engineering; wage and
consulting costs for support staff and assistance; travel and advertising;
and costs related to new management as a result of the move of the
Company's head office to Vancouver, British Columbia.
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings: There are no proceedings to report.
Item 2. - Changes in Securities: Subsequent to the end of the quarter,
at the annual general meeting of stockholders held on July 24, 1998,
approval was given for a reverse split of the Company's common stock, on
the basis of one new share of common stock for every three shares presently
outstanding.
Item 3. - Default Upon Senior Securities: There are no defaults to report.
Item 4. - Submission of Matters to a Vote of Security Holders: None during
the second quarter.
Item 5. - Other Information.
Disposition of Assets
On April 20, 1998, the Company executed a Purchase Agreement with Gorda
Technology Holdings Limited, a Turks and Caicos Islands corporation (Gorda)
whereby the Company agreed to sell its wholly owned subsidiary 714674
Alberta, Ltd., an Alberta corporation doing business as Calgary Chemical to
Gorda. The consideration for the sale is: a payment of fifteen percent of
Calgary Chemical after tax profit (as determined by generally accepted
accounting principles) for the fiscal year ended December 31, 1998 payable
on or before March 31, 1999 and completion of an audit of the financial
statements of Calgary Chemical for such period; Gorda's indemnification of
the Company from Calgary Chemical's bank debt; a release of the employment
contract of Blair Coady and the surrender of Mr. Coda's stock options to
acquire 700,000 shares of the Company's common stock. Closing of the
Agreement is contingent upon approval of the transaction by the Company's
shareholders at the next annual meeting of the shareholders scheduled to be
held on July 24, 1998 in Vancouver, British Columbia. The meeting was
subsequently held, and the shareholders approved the sale agreement.
The Company estimates that the sale of the subsidiary will result in a loss
of $306,113, representing the cost of the capital stock of the subsidiary
and advances to date, less estimated recoveries of advances. Under the
terms of the agreement, the shares are to be sold for proceeds equal to 15%
of the after tax profit of Calgary Chemical for its year ending December
31, 1998. The loss of $306,113 does not include these proceeds, as the
amount cannot be quantified at this time.
<PAGE>
Other Information: License Agreement
On April 8, 1998 the Company also entered into a License Agreement with
Andrew Engineering, Inc., a British Columbia corporation, Andrew Rawicz,
Ph.D., and Ivan Melnyk, Ph.D., whereby the Company acquired a world-wide
license to manufacture and market a patented device for the color matching
of dentures to a dental patient's existing tooth color. Doctors Rawicz and
Melnyk hold the patent pending for the color analyzer and Andrews
Engineering developed and or acquired the techniques and other proprietary
information related to the device. The License Agreement requires the
Company and Andrew Engineering to develop a business plan for manufacturing
and marketing of the device including obtaining financing of $1,500,000.00
US over the next six months. The License Agreement also requires the
issuance of 4.8 million shares of restricted stock to Andrew Engineering,
Inc., with registration rights on 600,000 of these shares. The License
Agreement also required that Patrick McGowan be appointed to the Company's
Board of Directors and that Mr. McGowan be appointed President and Chief
Executive Officer. Mr. McGowan is expected to sign a management contract
with the Company on or before the shareholders meeting. At a meeting of
the Company's Board of Directors held on April 16, 1998, Mr. McGowan and
Mr. A. Schwabe were appointed to the Company's Board of Directors and
appointed interim President, CEO and Secretary, Treasurer respectively
pending the approval of the shareholders of the above described Gorda
Technology transaction wherein Mr. Coady would resign from all positions.
The Agreement also provides for the Company to pay a Royalty in the amount
of ten percent (10%) of gross profit on sales if the Company manufactures
the product itself or a Royalty of seven percent (7%) of gross revenue if
manufacturing is done by an independent third party.
Item 6: Exhibits and Reports on Form 8-K:
27.1 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WOLF INDUSTRIES INC.
Dated: August 28, 1998
/s/PATRICK MCGOWAN
Patrick McGowan, President
/s/ALLEN SCHWABE
Allen. Schwabe, Secretary, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
condensed consolidated financial statements of Wolf Industries, Inc. as of and
for the six month period ended June 30, 1998 included in this report on Form
10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
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<CASH> 0
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<RECEIVABLES> 85,494
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<CURRENT-ASSETS> 162,172
<PP&E> 291,860
<DEPRECIATION> 28,861
<TOTAL-ASSETS> 644,718
<CURRENT-LIABILITIES> 986,090
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0
0
<COMMON> 354,368
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