FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended April 30, 2000
or
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from
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Commission File Number 0 3928
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WELLINGTON HALL, LIMITED
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(Name of small business issuer in its charter)
NORTH CAROLINA 56-0815012
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
425 JOHN WARD ROAD 27295
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 336-249-4931
Securities registered under section 12 (b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK (NO PAR VALUE)
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ]
Check if there is no disclosure of delinquent filers in response to item
405 of regulation 5-b contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment. (X)
State issuer's revenues for its most recent fiscal year: $ 5,395,680
State the aggregate market value of the voting stock held by
non-affiliates, computed by reference to the price as which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange
Act): Approximately $78,214 as of July 28, 2000.
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable dated: 3,823,220 shares of Common
Stock (No Par) as of July 28, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Company's Annual Report to Shareholders for the fiscal
year ended April 30, 1999, are incorporated by reference into Part II.
2. Portions of the Company's Proxy Statement for the 1999 Annual Meeting of
Shareholders are incorporated by reference into Part III
Transitional Small Business Disclosure Form (Check One)
Yes ( ) No ( X )
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PART I
Item 1. Description of Business
General
The Company manufactures and imports high quality wooden home furniture.
The manufacturing operation involves the machining, sanding, assembling and
finishing of components and other raw materials. The Company's products are
distributed nationally through full-service retail stores, mail order catalogs,
the internet and unaffiliated trade showrooms that service the professional
designer.
The Company owns a lumber processing mill and furniture manufacturing
facility located in San Pedro Sula, Honduras, Central America (the "Honduran
Facilities"). Wellington Hall Caribbean Corporation ("WHCC"), a wholly-owned
subsidiary of the Company, serves as a sales and distribution company for the
Honduran Facilities. WHCC is a North Carolina corporation organized in December,
1988 and is located in Lexington, North Carolina. Muebles Wellington Hall, S.A.
("MWH"), the Honduran subsidiary of WHCC, located in San Pedro Sula, manages and
operates the Honduran Facilities.
The Company has developed and adopted a marketing plan that includes
strategic measures such as (i) augmenting the Company's traditional product line
with new categories of home furnishing products such as mirrors and Chinese
antiques, (ii) augmenting the Company's traditional product line with lower
priced products produced by foreign manufactures (other than and in addition to
the Company's Honduran produced goods), (iii) updating and upgrading catalogs
and other sales aids in all distribution channels, (iv) operating a full time
retail outlet, and (v) beginning in fiscal year 2001, to develop off shore
suppliers for the Company's products produced in the past at the Company's
Lexington facility. See "Business--Markets."
In pursuit of this strategy the Company has established a relationship with
a number of foreign manufactures whose products the Company is distributing
exclusively, or are manufacturing the Company's new designs for distribution,
or, beginning in fiscal year 2001, manufacturing a portion of the Company's
traditional product line manufactured domestically in the past. In addition, the
Company formed a relationship with Furniture Classics (see below) an importer by
which the Company is supplied several categories of products for distribution..
The Company first begin marketing new designs form foreign suppliers in February
of 1998 and formally introduced these products, and products supplied by
Furniture Classics, at the High Point International Furniture Market held in
April 1999 and made the initial shipments of these goods in the first and second
quarter of fiscal year 1999. The Company has continued to expand the resource
base of foreign manufacturers and introduced their products at each of the
furniture markets held semiannually in April and October. The Company does not
have a contractual relationship with the primary manufacturer of these products.
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In March of 1999, the Company and Furniture Classics Limited (FCL) entered
into a verbal agreement whereby FCL would supply the Company a line of mirrors,
chinese antiques, and other products from their foreign sources which the
Company would market exclusively. Under this agreement R. Douglas Ricks, the FCL
president become a shareholder by investing $27,000 for 100,000 shares of the
Company's common stack, was elected a Director, and has assisted management in
developing additional products to further exploit these new sources. As part of
the agreement and to enhance Company sales and possibly finance the growth of
these sales, FCL received certain incentives in the form of warrants. At the
High Point International Furniture Market held in April 1999 the Company
displayed these products and initial shipment of a portion of the resulting
orders were reflected in the Company's sales during the fiscal first quarter
ending on July 31, 1999 and continued through out fiscal year 2000. On May 4,
1999 Company and FCL executed a contractual agreement and on May 21, 1999, FCL
invested $27,000 by the before mentioned agreement for 100,000 shares of the
company's common stock. The funds from the investment were utilized to purchase
inventory specifically for showroom samples of new product introduced at the
April 1999 International Furniture Market held in High Point, North Carolina and
to support the shipment of orders received for mirrors. On October 31, 1999, FCL
exercised a warrant and invested $30,000 by the before mentioned agreement for
100,000 shares of the company's common stock. The funds from the investment were
utilized to purchase inventory (see Managements Discussion and Analysis and the
Proxy Statement).
In addition to the foregoing, the Company recruited an experienced senior
executive to lead its sales and marketing function. In September 1996, the
Company employed Arthur F. Bingham for the newly created position of Senior
Executive Vice President of Sales and Marketing. Mr. Bingham is responsible for
directing and overseeing all aspects of the Company's sales and marketing
activities with the goal of assuring continuing growth in profitable sales. Mr.
Bingham also represents the Company exclusively in the states of North Carolina,
South Carolina and Virginia. Mr. Bingham's employment arrangement provides for
several incentives for him to assist the Company in increasing sales revenues
(see Managements Discussion and Analysis and the Proxy Statement).
Management believes that the highly leveraged position of the Company has
impeded its ability to pursue strategies designed to improve its results of
operations. In response, the Company has pursued a number of strategies to
improve its financial condition by raising equity capital, reducing indebtedness
and increasing working capital. Certain elements of management's plan were
implemented or developed in fiscal year 1997.
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In connection with the employment of Arthur F. Bingham as Senior Executive
Vice President of Sales and Marketing, Mr. Bingham made a loan to the Company of
$285,694. On February 12, 1997, Mr. Bingham purchased 600,000 shares of Common
Stock at a price of $.50 per share, which purchase price was paid by
cancellation of the foregoing loan and for an additional investment of $14,306.
The Company used the funds provided by Mr. Bingham to reduce its indebtedness
and provide working capital. The Company also granted stock options to Mr.
Bingham and to Mr. Ralph Eskelsen, manager of the Honduran Facilities, as
incentives to these key employees. Mr. Eskelsens options expired without
execution.
The Company successfully negotiated with its lenders to amend its loan
agreements therewith to provide more favorable terms. On January 16, 1997, the
Company obtained an additional $250,000 line of credit from Lexington State
Bank. In addition, on March 10, 1997, the Company entered into an agreement with
the Overseas Private Investment Corporation ("OPIC") to restructure its loan to
reduce principal payments until July 1997 (with the deferred payments to be made
in a larger balloon payment at the end of the term of the loan in 1999) and to
lower the interest rate. The effect of the restructured loan was a reduction to
the Company's cash requirements for scheduled principal payments for fiscal 1997
and 1998 of $247,748 and $123,874, respectively, which contributed significantly
to the Company's working capital and cash flow for these years. The restructured
OPIC loan also reduced the interest rate from 12% to 10% per annum. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
On February 21,1997, the Company filed a registration statement with the
Securities and Exchange Commission for the offer and sale of 1,689,887 shares of
its common stock. The shares were to be offered first to the holders of record
of its outstanding common stock as of a date at or about the time that the
registration statement was to becomes effective, who would have had the right
for thirty days to purchase one additional share for each share then held at a
price of $.50 per share. Each Wellington Hall shareholder as of that date could
also have subscribed within that thirty day period for additional shares, and
any available shares would have been sold to shareholders who have subscribed
therefor on a pro rata basis. Any shares still remaining after the expiration of
the offering to Wellington Hall shareholders could have been sold to persons who
were not directors, officers or shareholders of Wellington Hall.
Primarily because of the operating losses experience in fiscal 1997 and
beyond, the aforementioned stock offering was canceled and there are no plans to
pursued the matter further. The legal and related costs associate with the
offering were expensed during fiscal 1998.
On April 23, 1999, Ernst B. Kemm, upon the Board of Directors approval
purchase 1,333,333 shares of the Company's common stock for $400,000 or $.30 per
share. The purpose of the funds was to reduce trade payable with certain vendors
and sales representatives, finance new sales aids, finance the purchase of raw
materials for the Company's Honduran facility and to finance the purchase of
furniture from off shore manufacturers.
On April 30, 2000, Ernst B. Kemm, upon the Board of Directors approval
executed a Loan Term loan with the Company whereby the Company can borrow up to
$110,000 to finance the purchase of inventory from off shore suppliers. Under
the terms of the loan, interest will be paid monthly on the outstanding balance
at a rate of 1 1/2 per above prime as established by Lexington State Bank. Upon
notification by Mr. Kemm, the outstanding balance will be due on the last day of
the thirteenth month following the receipt of notification. The Company has the
right to make payments against the balance from time to time. On April 30, 2000
the Company borrowed &55,000 against this loan.
On April 19, 1999, Hoyt M. Hackney, the Company President, with the
majority of the Board of Directors approval , agreed to alter the "Deferred
Compensation Agreement" between Mr. Hackney and the Company. The agreement
allows that upon retirement, at age 62 or older, or upon his death he or his
estate would received $50,000 per year for a period of ten years (see Proxy
Statement). The Company has accrued the expensed of this obligation over the
last twelve years and is scheduled to continue that expense until the sum of
$300,000 has been accrued. At April. 30, 2000 the Company's Balance Sheet stated
a $312,000 long term liability as a result of this accrual.
The revisions to the "Deferred Compensation Agreement", not yet finalized,
are expected to reduce the compensation to $20,000 per year but, in any even,
not before May 1, 2005. In exchange Mr. Hackney would receiving restricted
stock, 1,000,000 shares of common stock at $.30, which could not be sold until
after retirement or death and then only in increments of 1/10 of the shares per
year for a period of 10 years. This action, if finalized, could capitalize the
$300,000 liability and thus remove the long term liability from the Company's
balance sheet when the transaction is executed.
The primary purpose of the revisions to the "Deferred Compensation
Agreement" was as an incentive to the Company's lenders to restructure the
outstanding loan whereby the potential outlay of $50,000 per year is removed or
delayed to potentially enhance the Company's ability to repay its debt.
Subsequent to the end of fiscal year ended April 30, 1999 and on June 16,
1999, Lexington State Bank (LSB) the company's primary domestic lender
restructured the company's debt (See Management Discussion and Financial
Analysis) whereby three demand notes with an aggregate total of $1,550,000 and
one long term note of approximately $255,000 were replaced by a long term note
of $1,529,784 with repayment amortized over a period of ten years and short term
$300,000 (a revolving line of credit) On June 16, 1999 the Company owed $20,000
against the demand note. The demand notes retired carried interest rates ranging
between prime plus 1% and 1 1/2%. The long term note retired had an interest
rate of prime plus 1.5%. The new long term and demand notes have interest rates
of prime plus 3/4%.
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The effect of the restructured LSB debt reduced the Company's "Current
Liabilities" by approximately $967,280 and depending on the level the Demand
Notes utilized over time, hold the Company's interest and principal to almost
the level of those requirements prior to the restructuring of the debt thus
minimizing the effect on the Company's working capital
On July 22, 1998, WHCC requested the Overseas Private Investment
Corporation (OPIC) waiver the principal payments due on the company's
outstanding debt (See "Management Discussion and Analysis") on July 31 and on
October 31, 1998. The Company did not received an official reply to that request
but only paid the interest due on those dates. Thereafter, and on January 31,
1999 and on April 30, 1999 the company paid interest due and a reduced principal
payment of approximately $21,000 versus approximately $62,000 required by the
terms of the loan agreement. This left the company with a past due balance on
April 30, 1999 of approximately $207,000.
After a number of discussions between the Company and OPIC, the Company
entered a new request on April 23, 1999 to amend the terms of the loan whereby
OPIC would received $225,000 in preferred stock and with the balance of the loan
to be repaid over a period of six years with a one year being a grace period on
the repayment of principal.
The effect on this request, had it been granted, would have effectively
reduced the loan balance from approximately $821,000 at April 30, 1999 to
approximately 600,000; reduce interest expense by approximately $22,550
annually, and enhance the company's effort to restore its sales and profit by
allowing a period to increase working capital. Since the total debt outstanding
with the OPIC was due on October 31, 1999, the Company's Balance Sheet reflects
the debt as a "Current Liability" under "Current maturities on Long Term Debt".
Had OPIC granted the Company's request, approximately $225,000 would have become
equity and the balance will be reflected on the Balance Sheet as a Long Term
Debt.
On October 31, 1999 the Company was unable to make the balloon payment
which had grown to approximately $826,479 and, therefore, the Company was in
default of the loan agreement. The Company did make the quarterly scheduled
interest payments on October 31, 1999, on January 31, 2000 and on April 30,
2000. The acceptance of the interest payments by OPIC does not in any way alter
the default status of the loan.
The Company agreed in December of 1999 to bear the expense of having the
OPIC mortgage on the Company's Honduran facility extended. Under Honduran law
the maximum length of time a mortgage can remain in effect is ten years and
OPIC's original mortgage was due to expire on April 1, 2000. All necessary
actions have now been completed and the original OPIC mortgage has been
effectively extended for another ten years. The expense of this transaction was
minimal.
In February of 2000, the Company's management and OPIC personnel met and
discussed the future Company plans to satisfying the principal balance. The
Company's position was that additional time must be given for it's current
strategy, presented to OPIC during the meeting, to produced the growth in sales
and a resulting level of profitability adequate to servicing the debt and/or
that the Honduran facility be sold or and investor be found with interest in
part ownership of that facility. The proceeds from such a sale or investment
could, among other things, pay off the OPIC loan balance. Selling the Honduras
facility and then contracting the production of the Company's products is
consistent with the Company's current strategy of becoming a marketing and
distribution Company for products available from foreign manufacturers.
On May 1, 2000 the Company and OPIC interred into a Forbearance Agreement
which among other things forebeared OPIC until October 31, 2000 from seeking to
enforce its rights against the collateral under the Loan Agreement due to the
failure by the Company to make payment of principal in full, and interest
thereon by October 31, 1999, as required under the terms of the loan agreement.
In consideration for OPIC's above stated agreement to forbear from seeking to
enforce right against the collateral, WHCC agreed to among other things to:
(i) No later than July 3`, 2000, pledge, or cause to be pledged, to OPIC in a
manner and with documentation (including legal opinions) acceptable to OPIC
in form and substance (once executed, such document shall constitute
"Financing Documents") all of the shares of Muebles Wellington Hall S.A.
(Muebles); and
(ii) Make quarterly interest payments in the manner and at the default rate
specified in the Loan Agreement on the full, unpaid balance of the loan,
effective as of October 31, 1999; and
(iii)Exercise its best efforts to sell Muebles at a net value sufficient to
repay OPIC's debt in full, and to cover OPIC's cost of collection, and
commencing May 1, 2000, provide a written report to OPIC on a monthly basis
regarding the Company's efforts to sell Muebles. The terms of any proposed
sale are subject to OPIC's prior approval, and all of the proceeds of any
sale shall be payable to OPIC, in a manner OPIC may specify, up to the
amount owing to OPIC under the Financial Document; and
(iv) As may be requested by OPIC, WHCC shall cooperate fully to provide OPIC
with a written appraisal, or work with such broker as OPIC may identify to
expeditiously sell Muebles, subject to the provisions of the last sentence
of subparagraph (iii) above.
On May 31, 2000 the Forbearance agreement was amended whereby item (ii)
above was revised to read: Make quarterly interest payments in the manner
specified in the Loan Agreement on the full, unpaid balance of the loan,
effective as of October 31, 1999; and in lieu of making penalty interest
payments on each quarterly payment date specified in the Loan Agreement, the
Company shall pay a total penalty charge of $25,138.7 on October 31, 2000, which
represents the penalty interest that will accrue during the Forbearance Period,
computed on the basis of 360-day years of twelve 30-day months.
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This amendment to the forbearance agreement allows the difference in the
10% interest rate on the OPIC loan balance in effect prior to October 31, 1999
and the default interest rate of 13% included in the Loan Agreement would be
added to the outstanding principal balance quarterly. On January 31, 2000 and on
April 30, 2000 the principal balance was increased accordingly and on April 30,
2000 the outstanding balance was $838,876.34.
On April 30, 2000 Ernest B. Kemm agreed, upon the Board of Directors
approval, to loan the Company up to $110,000 to be used to finance furniture
purchases from offshore source. At April 30, 2000 the Company owed $55,000
against this loan.
The Company's business was founded in 1964, and the Company is incorporated
in North Carolina. The Company's principal office is located at 425 John Ward
Road, Lexington, North Carolina 27295, telephone (336) 249-4931.
Products
The Company's products include occasional living room tables, dining room,
and bedroom furniture, modular wall systems, entertainment cabinets (for storage
of televisions, stereo equipment and video cassette recorders, etc.), console
tables, mirrors, coffee tables, commodes and other occasional and accent pieces.
The product line generally represents an eclectic collection of reproductions or
renderings of 18th and 19th century English, American and French styles and
Chinese Antiques. Many of the Company's 18th century English and French
reproductions and other designs are offered exclusively by the Company.
The Company imports to its domestic facility certain of its designs for
finishing when the domestic production costs for such designs are prohibitive.
These imported designs are assembled in the Honduran Facilities and finished in
the Company's Lexington, North Carolina facility and includes solid mahogany
dining chair frames, occasional items and poster beds. Sales of imported designs
have increased over time as a result of the Company's acquisition of the
Honduran Facilities. As described herein below, WHCC, the Company's North
American subsidiary, distributes the products manufactured at the Honduran
Facilities, and during fiscal 2000, such products accounted for approximately
42% of the Company's consolidated sales (net of inter company sales), while
products produced domestically by the Company accounted for about 48% of its
consolidated sales. Unfinished furniture imported from the Honduran Facilities
accounted for about 26% of the Company's domestically-produced sales, and the
number of imports for finishing from elsewhere was negligible. In addition, WHCC
furnished the Company's domestic operations with approximately 15% of certain
forms of wood utilized in domestic production. The balance of the raw materials
utilized by the Company's domestic operations, including plywood, brass
decorating hardware, finishing material and packing material, are purchased from
domestic sources. The sale of products imported from foreign sources other than
the Honduran facility accounted for about 10.5% of the Company's consolidated
sales.
WHCC markets to the U.S. furniture industry (including the Company) three
categories of unfinished products manufactured by the Honduran Facilities,
including: (i) raw materials in the form of wooden dimension stock (rough
parts); (ii) unfinished assembled items for furniture such as occasional tables
and dining chair frames; and (iii) components (turnings and carvings) utilized
in domestic production (OEM sales). The majority of sales utilize solid
mahogany, but the Company also uses Laurel, Pine and San Juan Areno.
WHCC also markets directly to the retail trade a bedroom, dining room and
occasional table group fully produced and finished in the Honduran Facilities.
By assembling and finishing the group in Honduras, significantly greater
advantage of plentiful, less costly labor and lower overhead can be realized
which result in a lower retail purchase price for the Honduran - produced group.
This lower price, along with the utilization of solid "Honduran Mahogany,"
recognized by the world trade as one of the premier hardwoods, allows the
Company to compete within its market niche. All of the wood utilized by the
Company's Honduran Facilities is harvested from segments of forests under
sustainable management programs.
Markets
The Company utilizes several different avenues of distribution. The Company
distributes its finished products to the designer trade, retail stores, trade
showrooms, the internet and consumer catalogues. The following discussion
describes the views of the Company regarding each avenue of distribution for its
finished products.
Designer Trade
The Company believes that the designer trade has become one of the more
viable outlets for its primary product niche, traditional, high-end furniture.
From the Company's perspective, the advantage of this outlet is that virtually
all sales are "special order," negating the need for promotional discounts, and
the disadvantages are the relatively low sales volume per account versus the
cost of sales aids necessary to service the account, the requirement that it
grant credit to accounts with limited assets and with a limited credit
histories, and the inadequate means the designer normally has available to
receive delivery and service his customer. Since decorators do not generally
stock or display a significant amount of products, they are largely dependent on
the availability and quality of the Company's sales materials, and as such, it
is important for the Company to create and/or improve and maintain its sales
aids, including but not limited to photography and catalogs for both the
Company's and WHCC's products.
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As part of the Company's strategy to increase its sales, the Company is
giving a high priority to maintaining quality sales materials. During fiscal
1999, the Company's financial position prohibited the publication of new sales
catalogs and some new products were neither photographed or cataloged. With
additional funds received late in the fiscal year, a new bedroom and occasional
furniture catalogs have been produced and issued including products produced at
the Company's Honduras facility and marketed by WHCC.
Retail Stores
Retail stores are a desirable outlet for the Company's products because the
potential volume of sales is relatively high and certain retail stores do stock
and display the Company's products. The Company does not, however, have
contractual relationships with such retail stores. The Company and a particular
retail store may have an informal understanding at the time that the Company
sells its products to such a store, which understanding may relate to such
things as amount of the Company's products to be displayed on the store's floor
space, pricing and dating for payment purposes. The Company's use of this outlet
has declined over several years for various reasons, including but not limited
to the fact that many dealers within the industry have gone out of business. In
addition, the Company has been unable to compete effectively with the invoice
dating policy (e.g. "buy now, pay nothing until later") employed by larger
manufacturers because such a policy increases receivables and drains available
cash. The Company believes that its inability to compete with such a policy has
induced many dealers not to consider the Company's products when assigning
available floor space and when assigning resources for warehouse stock.
Accordingly and in the absence of a display or stock, a growing percentage of
the Company's orders received from retail stores are for items which the dealer
can only sale by utilizing the Company's catalogs, a circumstance that further
necessitates the creation and/or improvement and maintenance of the Company's
sales aids. See--"Designer Trade."
Internet
Early in 1996 the company added its own home page to the internet and with
limited expense had essentially the entire product line added by Design On Line
(wellngtonhallltd.com). Design on Lines sales access to it file to designers.
The Home Page and the Design On Line site only provides (hits) inquiries which
can be passed on to dealers. In late spring of 1999, a furniture internet
retailer, Furniture.Com. began selling the Company's WHCC product. The resulting
sales increased to a significant level until late in June 2000 when the
Company's products were removed from Furniture.com's product presentation on the
internet. This remove was made without explanation. The Company is evaluating
adding its products to other internet retailers.
Trade Showrooms
The Company maintains a showroom in High Point, North Carolina to display
its product line during the semiannual International Furniture Market held in
that city in the fall and spring of each year and is affiliated with a limited
number of trade showrooms, that are accessible only to the professional designer
and not generally open to the public, in some major markets and design centers
around the country. Trade showrooms generally target the affluent customer,
which tends to be the Company's ultimate customer, and as such, they have been
an important outlet for the Company in past years. However, the Company believes
that this outlet has diminished in importance somewhat over the last decade
because of "Gallery Programs" sponsored by the larger manufacturers and
retailers under which retail stores act in large part as competing showrooms,
offering substantial discounts to induce designers to purchase from them. It is
the opinion of the Company that trade showrooms sales have diminished to such a
low level that they are no longer of significant to the Company's marketing
efforts.
Consumer Catalogs
Consumer catalogs are a means of distribution that has not been available
to or utilized by the Company prior to late 1996. Since the October 1996
Furniture Market held in High Point N.C., the Company has had a limited portion
of its product lines included from time to time in the catalogs of major catalog
companys. The Company does not have a contractual relationship with the
aforementioned catalog companys though the Company does expect certain of its
products to be similarly included in future editions. The catalog in which the
Company's products appeared included different types of furniture, wooden and
otherwise, in addition to that sold by the Company, as well as those products
that the catalog company markets in addition to furniture like, clothing or
electronics. Sales from theses catalog represent only a small portion of the
Company's total annual sales.
OEM Sales
Following the acquisition and expansion of the Honduran Facilities in 1990,
the Company aggressively sought to sell to other manufacturers ("OEM sales")
dimension stock, wood components (carvings and turnings), and
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unfinished assemblies with significant success. However, in 1993 and early 1994,
the Company's sales of its proprietary products grew to such a level that it
appeared that it would be more profitable to use the majority, if not all of the
capacity of the Honduran Facilities for the production of the Company's products
to the exclusion of its OEM business. During such time, the Company expected to
direct available resources to reducing indebtedness as opposed to continuing to
expand its OEM business. However, very late in 1994 the market for the Company's
products became soft and, without the OEM sales, it became necessary about
mid-1995 and through much of calendar 1996 to curtail production to avoid
additional increases in inventory. For all of fiscal year 1998, the Company's
directed its efforts with some success toward establishing a distribution for
its proprietary line and, at the same time, toward rebuilding a dealer base for
OEM sales. During fiscal year 2000, OEM sales were unchanged and these sale were
negligible relative to the Company's consolidated sales.
Research and Development
While neither the Company nor WHCC has a full-time employee or facility
devoted exclusively to research and development, the Company's President and
Executive Vice Presidents devotes substantial time to the design and development
of new products. Though, because of the nature of the Company's designs, many of
its products may remain marketable for a significant period of time, the
competition in and the fashion orientation of the home furnishings market
require that the Company's product line be continually updated by the
introduction of new products. The development of such new products involves
producing samples of the new items for display and for the production of sales
aids with respect to such new products. The samples are constructed utilizing
production labor and facilities and from raw materials that are purchased in
very small quantities. The Company does not account for the associated cost of
these samples separately, instead absorbing the expenses as production costs.
The labor costs, lost production volume and overhead absorption, and the premium
prices charged on the small quantities of raw materials that such samples
require can, in the aggregate, have a significant impact on operation results.
The Company's does not otherwise spend a material amount on research and
development.
Sales
The Company's sales function is led by Arthur F. Bingham, its Senior
Executive Vice President of Sales and Marketing. The Company employs eight (8)
independent, commissioned sales representatives who generally sell to retail
stores and service trade showrooms in the United States, Japan and Canada. The
Company generally sells its products on a net 30-day basis.
WHCC employs one independent, commissioned sales representative for
products sold to U.S. furniture manufacturers other than the Company, the
Company's OEM business, and that commissioned sales representative covers the
two eastern states in which the majority of the U.S. furniture industry is
located. In addition to this sales representative, the Company's president
devotes a substantial amount of time to marketing certain categories of the
Company's products to customers not specifically covered by the sales
representative. WHCC utilizes the Company's 8 independent representatives for
products finished in the Honduran Facilities and marketed directly to the retail
trade.
Backlog
The Company's firm backlog of orders on April 30, 2000 was approximately
$1,876,566 down from its backlog of $2,342,513 on April 30, 1999. The April 30,
2000 backlog included $763,498 of dmestically-manufactured products, as opposed
to $1,191,649 included in the 1999 backlog. The backlog for WHCC and
Honduran-produced products, less intercompany orders, was $780,936 on April 30,
2000 versus $552,148 on April 30, 1999. The April 30, 2000 backlog included
$332,132 of imported products, from sources other than Honduras, as opposed to
$552,794 included in the 1999 backlog.
Sources and Availability of Raw Materials
The Company's principal raw material is wood, and the Company utilizes
several different species including Mahogany, Laurel, Pine, San Juan Areno,
Walnut, Poplar, Cherry, Oak, Maple and Cedar. Wood is purchased in the form of
dimension stock (rough parts), components (turnings and carvings) and plywood.
The Company uses all of these forms of wood in the manufacturing of its
products. For example, in the production of a table, turnings and carvings may
be used for table legs and specialty designs, plywood may be used for the
tabletop and dimension stock (large pieces of wood that the Company is able to
process into the required dimensions) may be used for other parts of the table.
Plywood is generally available in adequate supply from domestic resources.
Dimension stock and components are generally supplied to the Company by its
Honduran Facilities. These same raw materials are available from domestic
sources but generally at higher prices and lower quality. Accordingly, the loss
of the Honduran Facilities as the Company's primary source of wood and as its
sole supplier of the Company's proprietary line of assembled items of furniture
would have a significant adverse effect on the Company's operations, financial
condition, competitiveness and future prospects.
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Though the agency of the Honduran government responsible for forest
resources is not able to provide an accurate inventory of the supply of mahogany
or other species of wood available in Honduras and large quantities of mahogany
have previously been harvested from Honduras over the years, the Company
believes based upon all available information that an adequate supply of'
mahogany is available and will be available for many years to come. The
Company's belief is based on the fact that the Honduran government has always
made available to the Company as much mahogany as it has requested and has never
indicated that such supply may be in future jeopardy. In addition to mahogany,
the Company currently utilizes the other species of wood referenced above and
continually researches whether other species of wood are available for
manufacturing in commercial quantities in order to expand its resource base.
The Honduran government has established programs such that all timber
harvested is in areas of forest under sustainable management. The program
requires that a physical inventory be taken by representatives of the government
to determine the number of suitable trees of a given variety in a particular
portion of the forest. From the inventory data, the Honduran government
calculates how quickly that particular variety of tree in that particular area
will regenerate and, then, how much can be harvested annually such the supply of
such variety can be sustained. Wood cannot be harvested or transported without a
permit that the Honduran government issues with a termination date, that
specifies the species to be harvested, the amount of wood to be harvested, and
the particular portion of forest is to be harvested and the delivery point for
the harvested wood. is to be delivered.
With respect to the Company, sustainable management works as follows: the
Honduran government solicits the Honduran wood-working industry (users), of
which the Company is a part, to determine the need for various types -of wood.
The Honduran government then issues permits to various entities (suppliers) to
harvest their assigned areas of forest until the aggregate amount of permitted
harvesting satisfies the users' requested needs. Once the permits are issued
specifying the Company as the exclusive recipient; price, delivery and payment
terms can be negotiated with the supplier. Once the permits are issued,
harvesting can not commence until a stumpage tax is paid by the supplier. Most
often the supplier does not have the resources to pay the tax and the Company
effectively prepays the tax.
Seasonality
As is typical in the furniture industry, the Company's greatest volume of
incoming orders is received in the spring and fall of each year. This is due
primarily to the International Furniture Market held each April and October in
High Point, North Carolina. Careful scheduling of production minimizes the
effects of such seasonality on the Company's production and shipments. Orders
are generally shipped within 30 to 90 days of receipt.
Competition
The furniture industry is highly competitive, and no single company
dominates the industry. The Company, while unranked in any known comparative
study of the industry, competes with many nationally-recognized manufacturers of
quality furniture. Many furniture manufacturers have substantially larger
production capabilities, and distribution networks, as well as greater financial
resources than has the Company. The Company's principal method of competing is
by product design (including items or categories of items not available from
other manufacturers), product quality (including high-grade hardwoods and other
materials used in construction and quality-constructed cabinetry and finish) and
price. Most of the Company's designs are offered by the Company exclusively. The
Company believes its pricing structure, product design and product quality to be
competitive with those of its competitors.
The furniture industry is a segmented industry in which design, quality and
price place each manufacturer into a competitive market niche. The Company
competes in the medium-to-high price market, which normally requires a larger
number of items comprising the product line, smaller production lot sizes and
higher inventory requirements to maintain a competitive delivery cycle. The
Company estimates that there approximately 12 to 15 furniture manufacturers
directly competing with the Company in the medium-to-high price market for case
goods. The Company's limited financial resources restrict its ability to compete
effectively in its market niche.
Environmental Control Facilities
The Company's domestic operations must meet extensive federal, state and
local regulatory standards in the areas of safety, health and environmental
pollution controls. Historically, these standards have not had any material
adverse effect on the Company's sales or operations. The furniture industry
currently anticipates increased federal and state environmental regulation,
particularly with respect to emissions from paint and finishing operations and
wood dust levels in manufacturing operations. The industry and its suppliers are
attempting to develop water-based finishing materials to replace commonly-used
organic-based finishes which are a major source of regulated emissions. The
Company cannot at this time estimate the impact of these new standards on the
Company's operations or the cost of compliance thereof (including future capital
expenditure requirements).
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Employees
As of April 30, 2000 the Company had approximately 210 employees, including
approximately 187 people currently employed at the Honduran Facilities.
Approximately 120 of the Company's employees are full-time employees.
Description of Property
The Company owns and operates one plant that houses its United States
production facilities and general offices and is located on 17 acres of land in
Lexington, North Carolina. The 82,500 square foot facility is of brick, steel,
concrete and concrete block construction and is well-maintained and in adequate
condition. The Company's manufacturing facilities generally operate on a 40-hour
week. Substantially all of the Company's physical properties located in
Lexington, North Carolina, including inventory, machinery and equipment, are
pledged as collateral under the Company's loan agreements with Lexington State
Bank of North Carolina, the Company's primary bank lender.
The Company's Honduran Facilities consist of seven and one-half acres of
land located in San Pedro Sula, Honduras, a 21,120 square-foot, equipped
dimension mill, a 7,840 square-foot wood resaw operation, two dry kilns, boilers
and related processing equipment, two buildings for dry lumber storage and a
6,408 square-foot building for "green" lumber storage. In July 1990, the Company
completed construction of a 45,000 square-foot addition to the manufacturing
facility and a 2,600 square-foot office building.
The Company believes its properties are generally suitable and adequate to
meet its intended uses and, in the opinion of management, they are adequately
covered by insurance.
The Honduran Facilities, including both real and personal property such as
plant and equipment but not including inventory or receivables, are pledged to
secure a loan from the OPIC. The loan proceeds were used to finance completion
of capital improvements to the Honduran Facilities. In addition, Banchas, the
Company's Honduran bank lender, holds a second mortgage on the assets of the
Honduran Facilities.
The lumber dimension mill, as well as the furniture manufacturing
operations of the Honduran Facilities, operate on a 44-hour work week (a
standard work week in Honduras). The Company believes that the mill and
furniture manufacturing facilities are in adequate condition and suitable for
its intended uses.
The Company leases a 4,400 square-foot showroom located in High Point,
North Carolina utilized to display the Company's products, particularly new
product introductions, during the semiannual International Furniture Markets.
The Company believes the showroom is in good condition and suitable for its
intended use.
Item 3. Legal Proceedings
There is no pending material litigation involving the Company or any of its
subsidiaries. To the best of management's knowledge, no legal proceedings or
proceedings by any governmental authorities are contemplated.
Item 4. Submission of Matters to Vote of Security Holders.
None
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The information required by Item 5 of Form 10-KSB appears under the caption
" Market Prices, Dividends and Related shareholder Matters" in the Company's
Annual Report to Shareholders for fiscal year ended April 30, 2000, reference to
which is hereby made and the information there is incorporated herein by
reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
The information required by Item 6 of Form 10-KSB appears under the heading
"Management's Discussion and Analysis" in the Company's Annual Report to
Shareholders for fiscal year ended April 30, 2000, reference to which is hereby
made and the information there is incorporated herein by reference.
Item 7. Financial Statements
The information required by Item 7 of Form 10-KSB appears in the Company's
Annual Report to Shareholders for the year ended April 30, 2000, at page 21
through 48, reference to which is hereby made and the information therein
incorporated herein by reference.
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Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The information required by Item 9 of Form 10-KSB appears in the Company's
Proxy Statement for the 2000 Annual
<PAGE>
Meeting of Shareholders under the caption "Election of Directors", reference to
which is hereby made and the information there is incorporated herein by
reference.
Item 10. Executive Compensation
The information required by Item 10 of Form 10-KSB appears in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders under the caption
"Executive Compensation", reference to which is hereby made and the information
there is incorporated herein by reference.
Item 11. Security Ownership of certain Beneficial Owners and Management
The information required by Item 11 of Form 10-KSB appears in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders under the caption
"Voting Securities and Principal Shareholders" and "Election of Directors",
reference to which is hereby made and the information there is incorporated
herein by reference.
Item 12. Certain Relationships and Related Transactions
The information required by Item 12 of Form 10-KSB appears in the company's
Proxy Statement for the 2000 Annual Meeting of Shareholders under the caption
"Certain Transactions", reference to which is hereby made and the information
there is incorporated herein by reference. Item 13. Exhibits, Lists and Reports
on Form 8-K
(a) The following Financial Statements, Financial Statement Schedules
and Exhibits are filed as part of this report:
(1) Financial Statements:
The following consolidated financial statements of the Company, included in
the Annual Report to Shareholders for the year ended April 30, 2000, are
incorporated herein by reference to the pages indicated:
Consolidated Balance Sheets - April 30, 2000, and 1999 (page 33)
Consolidated Stockholders' Equity - Years ended April 30, 2000 and 1999
(page 34)
Consolidated Statements of Income - Years Ended April 30, 2000 and 1999
(page 35)
Consolidated statements of comprehensive Income- Year Ended April 30,
2000 and 1999 (page 36)
Consolidated Statements of Cash Flows - Years Ended April 30, 2000 and 1999
(page 37)
Notes to Consolidated Financial Statements (Pages 38-46)
Independent Auditors' Report (page 13-14)
All other schedule for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or the required information is given in
the financial statements including the notes thereto, and therefore, have been
omitted.
(3) EXHIBITS FILED
10.37 Business Loan Agreement, dated April 30, 2000, between the
Company and Ernst B. Kemm.
10.38 Forbearance Agreement, dated May 1, 2000, Between between the
Company and Overseas private Investment Corporation
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10.39 Modification to Forbearance Agreement, dated May 31, 2000,
Between between the Company and Overseas Private Investment
Corporation
(a) A list of exhibits is included in the accompanying index to
exhibits
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
fourth quarter of fiscal year ended April 30, 2000.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
WELLINGTON HALL, LIMITED
Date: June 28, 1999 By:
------------------------------
Hoyt M. Hackney, Jr.
President, (Principal Executive
Officer, Principal Accounting
Officer)
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:
Name and Signature Position Date
------------------ -------- ----
_______________________ President (Chief June 28, 2000
Hoyt M. Hackney, Jr. Executive Officer
and Chief Financial
Officer), Treasurer
_______________________ Executive Vice June 28, 2000
Ernst B. Kemm President and Director
_______________________ Chairman of the Board June 28, 2000
Donald W.Leonard
_______________________ Secretary and Director June 28, 2000
William W. Woodruff
_______________________ Senior Executive Vice June 28, 2000
Arthur F. Bingham President and Director
_______________________ Director June 28, 2000
R. Douglas Ricks
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<PAGE>
EXHIBIT INDEX
TO
ANNUAL REPORT ON FORM 10-KSB
OF
WELLINGTON HALL, LIMITED
FOR FISCAL YEAR 2000
Exhibit No. Description
3.1 Amended and Restated Charter of Wellington Hall Limited. *
3.2 Bylaws of Wellington Hall, Limited, as amended. *
10.1 Wellington Hall Executive Stock Plan. **
10.2 Employment Agreement and Executive Deferred Compensation
Agreement between the Company and Hoyt M. Hackney Jr., effective
January 1, 1987 and May 8, 1987, respectively. *
10.3 Note - Security Agreement, dated April 23, 1986, between the
Company and Lexington State Bank is incorporated herein by
reference to Exhibit 4.2 to the Company's Annual Report on Form
10-K for the fiscal year ended April 30, 1987.
10.4 Loan Agreement, dated April 15, 1987, between the Company and
Lexington State Bank is incorporated herein by reference to
Exhibit 4.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1987.
10.5 Note - Security and Note Modification Agreements, dated April 26,
1988, between the Company and Lexington State Bank is
incorporated herein by reference to Exhibit 4.3 to the Company's
Annual Report on Form 10-K for fiscal year ended April 30, 1988.
10.6 Loan Agreement between Wellington Hall Caribbean Corporation and
the Overseas Private Investment Corporation, dated December 22,
1989, as amended on September 1, 1990. ***
10.7 Subordination Agreement, dated September 1, 1994, between
Wellington Hall, Limited, Wellington Hall Caribbean Corporation,
Muebles Wellington Hall, S.A. and the Overseas Private Investment
Corporation. ***
10.9 Amendment to Loan Agreement, dated February 1, 1991, between the
company and Lexington State Bank is incorporated herein by
reference to Exhibit 10.14 to the Company's Annual Report on Form
10-K for the fiscal year ended April 30, 1991.
10.10 Loan Agreement, dated August 20, 1991, between Muebles Wellington
Hall, S.A. and Banco de Honduras, S.A. is incorporated herein by
reference to Exhibit A to the Company's Form 10-Q for the quarter
ended July 31, 1991.
10.11 Amendment to Loan Agreement, dated April 10, 1992 between the
Company and Lexington State Bank. ****
10.12 Promissory note, dated January 23, 1992 between the Company and
Hoyt M. Hackney, Jr. ****
10.13 Amendment to Executive Deferred Compensation Agreement , dated
January 23, 1992, between the Company and Hoyt M. Hackney Jr.
****
10.14 Loan Agreement, dated June 28, 1993, between the Company and
Lexington State Bank. *****
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10.15 Lease Agreement dated November 1, 1993 by and between North
Hamilton Corporation and the Company, is incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1994.
10.16 Amendment to the Loan Agreement, dated September 1, 1994 between
Wellington Hall Caribbean Corporation and the Overseas Private
Investment Corporation.******
10.17 Employment and Stock Purchase Agreement dated September 1, 1996
between the Company and Arthur F. Bingham, filed as Exhibit (a)
to the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended July 31, 1996
10.18 Amended Loan Agreement dated March 10, 1997 with the Overseas
Private Investment Corporation, filed as Exhibit (a) to the
Company's Quarterly Report on Form 10-QSB for the quarterly
period ended January 31, 1997
10.19 Promissory Note dated January 16, 1997 between the Company and
Lexington State Bank filed as exhibit 10 (q) in Part II to the
Registration Statement filed February 20, 1997
10.20 Employment Agreement dated December 1, 1997 between the Company
and Ralph L. Eskelsen filed as exhibit 10 (t) in Part II to the
Registration Statement filed February 20, 1997
10.21 Addenda to Employment and Stock Purchase Agreement dated
September 1, 1996 between the Company and Arthur F. Bingham dated
February 10, 1997 filed as exhibit 10 (u) in Part II to the
Registration Statement filed February 20, 1997
10.22 1997 Stock Option and Restricted Stock Plan filed as exhibit 10
(v) in Part II to the Registration Statement filed February 20,
1997
10.23 Nonqualified Stock Option Agreement dated as of February 10, 1997
between the Company and Arthur F. Bingham filed as exhibit 10 (w)
in Part II to the Registration Statement filed February 20, 1997
10.24 Incentive Stock Option Agreement dated as of February 10, 1997
between the Company and Arthur F. Bingham filed as exhibit 10 (x)
in Part II to the Registration Statement filed February 20, 1997
10.25 Incentive Stock Option Agreement dated as of February 10, 1997
between the Company and Ralph L. Eskelsen filed as exhibit 10 (y)
in Part II to the Registration Statement filed February 20, 1997
10.26 Note Modification Agreement dated January 16, 1998 between the
company and Lexington State Bank is incorporated herein by
reference to Exhibit 10.26 to the Company's Quarterly Report on
Form 10-QSB for the fiscal quarter ended January 31, 1998.
10.27 Amendment to Lease Agreement dated March 1, 1998 by and between
Phillips Interest 3, Inc. and the Company, is incorporated herein
by reference to Exhibit 10.27 to the Company's Quarterly Report
on Form 10-QSB for the fiscal quarter ended January 31, 1998.
10.28 Commercial Security Agreement, dated June 16, 1999, between the
Company and Lexington State Bank is incorporated herein by
reference to Exhibit 10.28 to the Company's Annual Report on Form
10-Ksb for the fiscal year ended April 30, 1999.
10.29 Promissory Note, dated June 16, 1999, between the Company and
Lexington State Bank is incorporated herein by reference to
Exhibit 10.29 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 1999.
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10.30 Commercial Pledge Agreement, dated June 16, 1999, between the
Company and Lexington State Bank is incorporated herein by
reference to Exhibit 10.30 to the Company's Annual Report on Form
10-KSB for the fiscal year ended April 30, 1999.
10.31 Business Loan Agreement, dated June 16, 1999, between the Company
and Lexington State Bank is incorporated herein by reference to
Exhibit 10.31 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 1999.
10.32 Promissory Note, dated June 16, 1999, between the Company and
Lexington State Bank is incorporated herein by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 1999.
10.33 Lease Agreement, dated April 26, 1999, between the Company and
Phillips Interests 3, Inc. is incorporated herein by reference to
Exhibit 10.33 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 1999.
10.34 Marketing Agreement, dated May 4, 1999, between the Company and
Furniture Classics, Limited. is incorporated herein by reference
to Exhibit 10.34 to the Company's Annual Report on Form 10-KSB
for the fiscal year ended April 30, 1999.
10.35 Warrants, dated July 22, 1999, issued by the Company to R.
Douglas Ricks is incorporated herein by reference to Exhibit
10.35 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended April 30, 1999.
10.36 Note Modification Agreement, dated July 27, 1999, Between between
the Company and Lexington State Bank is incorporated herein by
reference to Exhibit 10.36 to the Company's Annual Report on Form
10-KSB for the fiscal year ended April 30, 1999.
10.37 Business Loan Agreement, dated April 30, 2000, between the
Company and Ernst B. Kemm is incorporated herein by reference to
Exhibit 10.37 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 2000.
10.38 Forbearance Agreement, dated May 1, 2000, Between between the
Company and Overseas private Investment Corporation is
incorporated herein by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
April 30, 2000.
10.39 Modification to Forbearance Agreement, dated May 31, 2000,
Between between the Company and Overseas Private Investment
Corporation is incorporated herein by reference to Exhibit 10.39
to the Company's Annual Report on Form 10-KSB for the fiscal year
ended April 30, 2000.
11 Earnings Per Share Computation
13 Annual Report to Shareholders of Wellington Hall, Limited for the
year ended April 30, 1998, portions of which are incorporated by
reference into this report.
22 Subsidiaries of the Company
27 Financial Data Schedule (For SEC Use Only)
* Incorporated herein by reference to the identically-numbered exhibits to
the Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1987.
** Incorporated herein by reference to the identically-numbered exhibits to
the Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1986.
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*** Incorporated herein by reference to the identically-numbered exhibits to
the Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1990.
**** Incorporated herein by reference to the identically-numbered exhibits to
the Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1992.
***** Incorporated herein by reference to the identically-numbered exhibits to
the Company's Annual Report on Form 10-KSB for the year ended April 30,
1993.
******Incorporated herein by reference to the identically-numbered exhibits to
the Company's Annual Report on Form 10-KSB for the year ended April 30,
1995
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