SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission file number 0-8638
WULF INTERNATIONAL LTD. (formerly Wulf Oil Corporation)
(Exact name of registrant as specified in its charter)
COLORADO 83-0218086
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1909 Central Dr. (Suite 200), Bedford, TX 76021
(Address of principal executive offices) (Zip Code)
817.540.5492
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
$.01 par value common stock
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock 32,297,111
<PAGE>
Table of Contents
-----------------
Part I - Financial Information Page No.
Item 1 - Wulf International Ltd.
Financial Statements (UNAUDITED)
Balance Sheets as of June 30, 2000 and 1999 3
Statement of Operations for the Six Months ended
June 30, 2000 and 1999 5
Statement of Operations for the Three Months ended
June 30, 2000 and 1999 6
Statement of Cash Flows for the Six Months ended
June 30, 2000 Notes to 7
Financial Statements 9
Item 2 - Management's Discussion and Analysis or Plan of Operation 15
Part II - Other Information
Item 1 Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
(a) Exhibits: (None)
(b) Reports on form 8-K (None)
Signature Page 19
<PAGE>
Independent Accountant's Report
-------------------------------
Board of Directors and Stockholders
Wulf International, Ltd.
and subsidiary
Dallas, Texas
We have reviewed the accompanying consolidated balance sheet of Wulf
International, Ltd. and subsidiary as of June 30, 2000 and the related statement
of operations stockholders' equity and cash flows for the three months and six
months then ended. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying June 30, 2000 consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
Certified Public Accountants
August 14, 2000
2
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<TABLE>
<CAPTION>
PART I
Item 1. Financial Statements
WULF INTERNATIONAL, LTD.
------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
June 30, 2000 AND 1999
----------------------
(Unaudited)
-----------
Assets
------
2000 1999
---------- ----------
<S> <C> <C>
Current assets:
Cash $ 72,384 $ 216,804
Accounts receivable, trade 98,368 111,850
Advances to employees 4,003 32,931
---------- ----------
Total current assets 174,755 361,585
---------- ----------
Property and equipment, net of $43,395
of accumulated deprecation 102,033 95,314
---------- ----------
Other assets:
Deposits 6,776 6,776
Deferred income tax benefits 172,975 93,043
Goodwill, net of $51,766 of
Accumulated amortization 391,950 437,320
Investments in Philippines mineral exploration data, 250,000 --
---------- ----------
Net of $50,000 of amortization
821,701 537,139
---------- ----------
$1,098,489 $ 994,038
========== ==========
</TABLE>
3
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $ 152,703 $ 62,304
Accrued payroll and other expenses 148,537 119,148
Bank loans 58,826 --
Current portion of long term debt 9,639 5,692
Other current liabilities 26,437 --
----------- -----------
Total current liabilities 396,142 187,144
----------- -----------
Long-term note payable, net of current portion 14,125 27,037
Stockholders' equity:
Convertible preferred stock, 10,000,000
shares authorized, 1,402,800 and 1,164,800
issued and outstanding, respectively 1,402,800 1,164,800
Common stock, $ .01 par value,
50,000,000 shares authorized,
32,297,111 and 26,798,390
issued and outstanding, respectively 322,971 267,983
Paid in capital in excess of par value 3,433,759 3,044,833
Accumulated deficit (4,471,308) (3,697,759)
----------- -----------
688,222 779,857
----------- -----------
$ 1,098,489 $ 994,038
=========== ===========
</TABLE>
4
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<TABLE>
<CAPTION>
WULF INTERNATIONAL, LTD.
------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE SIX MONTHS ENDED June 30, 2000 AND 1999
-----------------------------------------------
(Unaudited)
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Loan origination and other fees $ 1,611,139 $ 656,132
Other income 42 61
----------- -----------
1,611,181 656,193
Operating costs and expenses:
Personnel costs 797,061 284,406
Loan production costs 591,849 237,282
General and administrative 315,276 144,558
Amortization 72,186 7,395
Depreciation 18,600 4,348
----------- -----------
1,794,972 677,989
----------- -----------
Operating loss (183,833)
(21,796)
Corporate general and administrative expenses,
principally related to Philippines Housing project (272,068) (299,240)
Interest expense 2,499 678
----------- -----------
Loss before income taxes (458,400) (321,714)
Provision for income tax benefit 0 --
----------- -----------
Net loss $ (458,400) $ (321,714)
=========== ===========
Net loss per share:
Basic $ (.015) $ (.016)
Diluted $ (.012) $ (.013)
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
WULF INTERNATIONAL, LTD.
------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED June 30, 2000 AND 1999
-------------------------------------------------
(Unaudited)
2000 1999
--------- ---------
Revenues:
Loan origination and other fees $ 872,999 $ 656,132
Other income 61
--------- ---------
873,060 656,193
Operating costs and expenses:
Personnel costs 439,277 284,406
Loan production costs 298,681 237,282
General and administrative 154,104 144,558
Amortization 61,093 7,395
Depreciation 9,300 4,348
--------- ---------
962,455 677,989
--------- ---------
Operating loss (89,437) (21,796)
Corporate general and administrative expenses,
principally related to Philippines Housing project (218,921) (256,397)
Interest expense 1,280 678
--------- ---------
Loss before income taxes (309,638) (278,871)
Provision for income tax benefit 0 --
--------- ---------
Net loss $(309,638) $(278,871)
========= =========
Net loss per share:
Basic $ (.010) $ (.013)
Diluted $ (.008) $ (.010)
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
WULF INTERNATIONAL, LTD.
------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE SIX MONTHS ENDED June 30, 2000 AND 1999
-----------------------------------------------
(Unaudited)
2000 1999
----------- -----------
Cash flows from operating activities:
Cash from customers $ 1,611,181 $ 656,193
Cash paid to employees (797,061) (284,406)
Cash paid to suppliers (1,128,360) (670,227)
Interest paid (2,499) (678)
----------- -----------
Net cash used in operating activities (316,739) (299,118)
----------- -----------
Cash flows from investing activities:
Purchase of mineral exploration data (100,000)
Employee advances repaid 2,000 13,055
Purchase of property and equipment (14,362) (16,134)
----------- -----------
Net cash used in investing activities (112,362) (3,079)
----------- -----------
Cash flows from financing activities:
Issuance of common and preferred stock 384,880 372,000
Advances 71,487 --
Repayments of notes payable & bank loans (15,142) (5,492)
----------- -----------
Net cash provided by financing activities 441,225 366,508
----------- -----------
Cash flows from acquisition of SFM Mortgage -- 145,901
Net increase (decrease) in cash 12,124 210,212
Cash at beginning of period 60,260 6,592
----------- -----------
Cash at end of period $ 72,384 $ 216,804
=========== ===========
The accompanying notes are an integral part of the financial statements.
7
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<TABLE>
<CAPTION>
WULF INTERNATIONAL, LTD.
------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE SIX MONTHS ENDED June 30, 2000 AND 1999
-----------------------------------------------
Reconciliation of Net Loss to Net Cash
--------------------------------------
Used in Operating Activities
----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Net loss $(458,400) $(321,714)
--------- ---------
Adjustment to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 90,786 11,743
Common stock issued for services 19,280 16,500
Preferred stock issued for services 140,000 1,800
(Increase) decrease in Accounts Receivable-trade (111,850)
Increase (decrease) in accounts payable, trade 10,264 62,304
Increase (decrease) in accrued expenses 64,052 119,148
Increase (decrease) in other current assets/ liabilities (182,721) (77,049)
--------- ---------
Total adjustments 141,661 22,596
--------- ---------
Net cash used in operating activities $(316,739) $(299,118)
========= =========
Supplemental Schedule of Non-Cash Investing
-------------------------------------------
and Financing Activities
------------------------
Issuance of preferred stock for purchase of
Philippines mineral exploration data $ 100,000
Issuance of preferred stock for payment of advances $ 200,000
and payment for services
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
WULF INTERNATIONAL, LTD.
------------------------
AND SUBSIDIARY
--------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business
-------------------------
Wulf International, Ltd. (the Company) was incorporated in the state of Colorado
in 1973. The Company originally operated as an oil and gas exploration entity
until 1992. In 1992, the Company became inactive and ceased reporting with the
SEC but retained its status as a registered company. During 1997 and 1998 the
Company negotiated a joint venture agreement with a native Philippines company
and an agency of the Government of the Philippines, the Southern Philippines
Development Authority (SPDA) (Note 2), to construct one million low cost housing
units in the southern portion of the country. The Company is currently seeking
funding and government guarantees for this project.
In April 1999, through the acquisition described below, the Company's primary
operations became mortgage banking and at June 30, 2000, the majority of its net
assets and its revenues and expenses were from this operating segment.
Business combinations
---------------------
On April 30, 1999, the Company acquired 100% of the outstanding stock of
Specialized Financial Services, Inc. (SFM), a Texas corporation engaged in
mortgage banking activities, in exchange for 7,500,000 shares of common stock
valued at $0.104 a share. The transaction was accounted for as a purchase. The
purchase price was allocated to the fair value of the net assets acquired with
the excess of Wulf's cost over the fair value of acquired net assets allocated
to goodwill.
As part of the agreement, SFM purchased 50,000 shares of Wulf's preferred stock
at $1.00 per share and received an option to purchase 200,000 shares of the
Company's preferred stock at $0.10 per share. This option must be exercised
prior to any proposed secondary public offering of the Company's preferred
stock. The accompanying consolidated statement of operations includes SFM's
results of operations subsequent to April 30, 1999.
The following pro forma information is presented as if the above acquisition had
occurred as of January 1, 1999, the beginning of the earliest period presented
in the accompanying consolidated financial statements.
Six months ended
June 30,
---------------------------
2000 1999
----------- -----------
Revenues $ 1,611,181 1,946,475
Net loss (458,400) (343,809)
Net loss per share (.015) (.017)
9
<PAGE>
Principles of consolidation and basis of presentation
-----------------------------------------------------
The accompanying unaudited consolidated condensed financial statements of Wulf
International Ltd have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. For further
information, refer to the financial statements and footnotes thereto included in
the Company's report on form 10-KSB for the year ended December 31, 1999. These
statements include the general accounts of the Company and its wholly owned
subsidiary Specialized Financial Services, Inc. (SFM). All inter-company
transactions, accounts and balances have been eliminated in the consolidation.
Property and equipment
----------------------
Property and equipment are stated at cost less accumulated depreciation.
Depreciation of property and equipment are being provided by accelerated methods
for financial and tax reporting purposes over estimated useful lives of five to
seven years.
Goodwill
--------
Goodwill relating to the Company's purchase of SFM is being amortized using the
straight-line method over ten years. For the quarter June 30, 2000, amortization
expense totaled $11,093.
Management estimates
--------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash flows
----------
For purposes of the statement of cash flows, each includes demand deposits and
time deposits with maturities of less than three months.
Impairment of long-lived assets
-------------------------------
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This Statement establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used, and long-lived assets and
certain identifiable intangibles to be disposed of. The Company periodically
evaluates, using independent appraisals and projected undiscounted cash flows,
the carrying value of its long-lived assets and certain identifiable intangibles
to be held and used whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. In addition, long-lived
assets and identifiable intangibles to be disposed of are reported at the lower
of carrying value or fair value less cost to sell.
Net loss per share
------------------
Basic loss per share amounts are computed by dividing the net loss plus any
preferred stock dividends by the weighted average number of common stock shares
outstanding. Diluted loss per share amounts reflect the maximum dilution that
would have resulted from the conversion of the preferred stock shares and
warrants. Diluted loss per share amounts are computed by dividing the net loss
by the weighted average number of common stock shares outstanding plus the
assumed conversion of preferred stock shares and warrants.
For the quarters ended June 30, 2000 and 1999, basic loss per share amounts are
based on 31,313,011 and 21,330,864 weighted average shares of common stock
outstanding, respectively. For the six months ended June 30, 2000 and 1999 the
basic loss per share amounts are based on 30,435,044 and 19,508,355 weighted
average shares of common stock outstanding, respectively.
10
<PAGE>
2. INVESTMENT IN UNCONSOLIDATED AFFILIATES
Warisan Group JV (WRG)
----------------------
In April 1998, the Company formed a joint venture with a Republic of the
Philippines company, Amin and Sons Corporation (ASC), for the purposes of
participating in a socialized low cost housing project for the Republic of the
Philippines. The Company owns an 80% interest and ASC owns a 20% interest in
this joint venture, which is registered and organized under the laws of the
Republic of the Philippines. Wulf gave a Philippines company qualified as a
builder of low cost housing a 10% interest this year.
To accomplish this purpose WRG formed a joint venture with the Southern
Philippines Development Authority (SPDA), a government owned and controlled
corporation. The name of this joint venture is SPDA-Warisan Joint Venture (SWJV)
and it is owned 70% by WRG and 30% by SPDA.
The Company accounts for its investment in WRG using the equity method of
accounting. For the quarters ended June 30, 2000 and 1999, all capital
contributed to the joint venture has been expended for operating purposes and,
as a result, the joint venture has substantially no net assets. Accordingly,
there is no difference between the amount at which this joint venture investment
is carried and the Company's underlying equity in the joint venture's net
assets.
Philippines Mineral Exploration Investment
------------------------------------------
Wulf has acquired from several Filipino companies the sole proprietary rights to
the geologic data on gold and other mineral deposits in two areas in the
Republic of the Philippines. We have been informed that the sellers' cost was
approximately 1.49 million dollars. The data was acquired during the period
1996-1998 and consists of rock samples, geologic surveys, numerous maps and
other information. Wulf issued 300,000 shares of its $1 par value authorized
unissued preferred stock for these rights and copies of all data. The
information covers two geographic areas, one in the northern Philippines, the
Playa de Oro Project, and the other in the southern Philippines, the Sierra de
Oro Project.
Playa de Oro Project - This is an area of known gold deposits lying offshore
from a large deposit of primary gold that has been mined for many years. The
area of interest covers about 57,000 hectares in shallow water. The exploration
plan is to (1)complete the exploration permits, (2) conduct detailed side-scan
sonar over the ocean floor, and (3) collect selected subsea samples and analyze
for gold content. The Company plans to complete the exploration permit
requirements as soon as possible. The estimated cost is $15,000.
Sierra de Oro Project - The island of Mindanao is known for several primary gold
deposits. The area of sampling covers about 580,000 hectares and some 29
exploration permit areas. Hundreds of rock samples were collected and analyzed
for gold, silver, and other minerals. The exploration plan is to (1)acquire new
permits on the anomalous gold areas as defined by the sampling, (2) conduct an
air magnetic survey and possibly color satellite photography, and (3) obtain
core-drilling samples in the most promising areas. The cost of this program is
estimated at $700,000. Subject to the availability of funds, the Company plans
to conduct the air magnetic survey early in 2001.
11
<PAGE>
The Company is amortizing its investment over three years (3), starting January
1, 1999, and has amortized $50,000 to date.
3. CONVERTIBLE PREFERRED STOCK
The Company's preferred stock shares are convertible into the Company's common
stock shares at any time after one year from the date of issuance at the rate of
five common stock shares for each share of preferred stock. The preferred shares
do not pay a dividend, are non-voting and have a preference in liquidation of up
to $1.00 per share. In addition, each preferred share grants the holder to one
warrant to purchase for $.10 per share one common stock share for each preferred
stock share held. The warrants expire one year from the date of issuance.
4. COMMITMENTS AND CONTINGENCIES
Leases
------
The Company conducts its operations from facilities in (a)Bedford, Texas under a
lease expiring in September 2003 requiring a monthly rental of $5,798, and (b)
Azle, TX which is under a month to month lease.
Litigation
----------
The Company is subject to legal proceedings that arise in the ordinary course of
business. Management does not believe that the outcome of any of these matters
will have a material adverse effect on the Company's consolidated financial
position, operating results or cash flows.
Contingent liabilities
----------------------
SFM is subject to normal industry buyback provisions on loans sold to investors
on which there is fraud, first payment default and for sub-prime loans defaults
in the first year and other normal and customary provisions. SFM has no loans at
the present time that are subject to such buybacks.
The Company has entered into several transactions related to its Philippines
housing project joint venture (Note 2) for which payment of the obligations
incurred is contingent upon funding of the project. These amounts are only due
and payable when and if funding for this project is obtained. Accordingly, no
liabilities relating to this contingency have been recorded in the accompanying
financial statements. At June 30, 2000 the amount of this contingent liability
was $970,232.
12
<PAGE>
At June 30, 2000 SFM had temporarily funded loans through two lending
institutions in the amount of $4,222,877 for loans not yet funded by the final
lender.
5. EMPLOYEE BENEFIT PLAN
The Company's SFM subsidiary has adopted a profit sharing plan under Section
401(k) of the Internal Revenue Code of 1986. The plan covers substantially all
full time employees that meet general eligibility requirements. Company matching
and discretionary contributions to the plan are determined annually by the Board
of Directors, subject to a limitation of 25% of 5% of eligible compensation.
Participants vest in their employee deferral account balances immediately and in
their employer matching and discretionary account balances over a period of two
to six years based on years of service. For the quarters ended June 30, 2000 and
1999, employer matching and discretionary contributions to the plan totaled
$4010 and 0.
6. NOTES PAYABLE
The Company's notes payable consist of a business line of credit (balance
$47,672) of its SFM subsidiary due in July 2001 which bears interest at a rate
of the Wall Street Journal Prime Rate plus 1.0%, and is secured by substantially
all the assets of its SFM subsidiary. The interest rate is currently 10.5%.
Also, a loan financing computer equipment matures in July 2001 and has a balance
of $11,153. It is secured by the equipment financed. Both loans are guaranteed
by the SFM CEO, who is a 11% shareholder in Wulf, and one of her family members.
The loans are payable on demand by the bank, and are also subject to default
conditions normal for this size business, including change in control or key
management.
In addition, the Company has another note payable with principal and interest
payable monthly through November 2003. This note bears interest at 8.25% and is
secured by the equipment it is financing. The current balance totals $23,764.
7. INCOME TAXES
The Company uses the accrual method and SFM uses the cash basis method of
accounting for tax reporting purposes.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. In addition, future tax benefits, such as those from net operating loss
carry forwards, are recognized to the extent that realization of such benefits
is more likely than not. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
13
<PAGE>
8. FINANCIAL INSTRUMENTS
The Company's financial instruments, which potentially subject it to credit
risks, consist of its cash, accounts receivable and notes payable.
Cash
----
The Company maintains its cash in bank deposit and other accounts that, at
times, may exceed federally insured limits. The Company has not experienced any
losses in such accounts, and does not believe it is subject to any credit risks
involving cash.
Accounts receivable
-------------------
The Company's accounts receivable are unsecured and represent fees of closed
mortgage loans from customers in the Dallas/Ft. Worth metropolitan area not
collected at quarter's end. Management believes it is not exposed to any
significant credit risks affecting accounts receivable and that these amounts
are fairly stated at estimated net realizable amounts.
Notes payable
-------------
Management believes the carrying value of these notes represent the fair value
of these financial instruments because their terms are similar to those in the
lending market for comparable loans with comparable risks.
14
<PAGE>
Item 2. Management's Discussion and Analysis
Acquisition of SFM Mortgage Co.
-------------------------------
On April 30, 1999, Wulf International Ltd. (hereinafter also referred to as
Wulf or the Company) closed its agreement to acquire all of the shares of
Specialized Financial Services, Inc. d/b/a SFM Mortgage Company of Bedford,
Texas, for 7,500,000 shares of Wulf common stock. SFM is an eleven-year old
mortgage finance company with 44 employees. It does business primarily in Texas,
but is qualified and does limited business in other states. Through lines of
credit with major financial institutions, SFM provide mortgage money primarily
to the home real estate market. This acquisition will be helpful to Wulf because
SFM can assist with mortgage financing for the Philippines National Shelter
Project when, and if that project can obtain funding, approvals and be
implemented. This project is for one million new homes to be built by the
Southern Philippines Development Authority (SPDA)-Warisan Joint Venture of which
Wulf is a 49% partner and is further described below.
Philippines National Shelter Low Cost Housing Projects
------------------------------------------------------
The Company's Philippines Projects, which are described in detail in the
Company's form 10KSB for 1999, and which are subject to obtaining financing and
government guarantees, neither of which can be assured, are described in outline
form below. Mr. Franklin, President of Wulf visited in the Philippines with
government officials during July of this year.
Wulf, through joint venture participation in the Warisan Group Corporation,
continues to pursue low cost housing development programs in the Philippines.
This is in three distinct sectors:
1. The SPDA-Warisan Joint Venture to develop one million low cost homes on or
near the main southern island of Mindanao, is progressing and must be
presented to President Estrada for final approval. The next step is to have
a Philippines based consultant conduct over the next four months a market
based feasibility study to identify the existing housing inventory, the
demand for new homes in all economic categories, and the available
developer and contractor resources in each location. This data will be
collected for all cities and principal towns in the Southern Philippines,
and it will be used to identify the ten most advantageous locations in
which to start this program. These sites will constitute the first two
years' ramp-up of the program. The study will also be coordinated with the
Investment Coordinating Council, which must recommend to the President the
approval of the bond issue to provide operating capital to the program.
2. Preliminary negotiations are underway with the National Development
organization (NDC) for a similar program for the entire country. The NDC
(and public law) supports conversion of previously authorized but unused
agricultural bonds to be used for housing infrastructure development. The
NDC also is prepared to make available for housing development all of the
land it owns across the Philippines. The Flagship Committee will recommend
to the President that he approve this conversion at its presentation in
December. This will be supported by a second part of the above described
feasibility study, which will provide detailed information concerning the
housing market throughout the Republic of the Philippines.
3. Squatter relocation projects continue to be authorized by the National
Housing Authority in response to the needs of infrastructure projects
sponsored by the Flagship Committee. The Warisan Group, in joint venture
with an experienced local general contractor (WERR Construction
International), has begun to submit proposals to construct these projects.
The first of these proposals is currently under evaluation by the NHA.
15
<PAGE>
Results of Operations
---------------------
Quarter ended June 30, 2000
---------------------------
Wulf's mortgage subsidiary (SFM Mortgage) incurred a pretax loss of
$19,750 in the quarter, compared to a loss of $94,396 in the first quarter. This
improvement was due to higher loan volume and reduced costs. The loss itself is
due to volume not meeting expected levels.
General and administrative expenses for the three months totaled
$218,921 compared to $256,397 in the prior year. The majority of these expenses
were related to the Philippines National Shelter Project and included
professional fees, travel, and expenses associated with the Project's office in
the Philippines.
Wulf's total net losses for the second quarter were $309,638 compared
to a loss of $278,871 in the comparable period in 1999.
Six Months Ended June 30, 2000
------------------------------
Wulf's net losses for the six months were $458,400 compared to $321,714
in the prior year period. Expenses related to our proposed projects in the
Philippines totaled $272,068 in the current period compared to $299,240 in the
prior year. Losses at the SFM Mortgage subsidiary totaled $114,146 in the
current period compared to $44,365 in the comparable six months of 1999.
Liquidity and Capital Resources
-------------------------------
Wulf continued to fund its business through existing working capital,
bank loans described below, private sales of securities and issuance of common
and preferred stock in exchange for professional services and other expenses.
Wulf expects to continue to fund itself through these means. Bank of Texas has
extended to the Company's SFM Mortgage subsidiary a line of credit of $50,000
(current balance $47,672) effective from July 29, 2000 for one year. The line is
secured by a lien on equipment, inventories and accounts. In addition, SFM had a
two year bank loan for $21,000 (current balance $11,153) covering certain
computer equipment, secured by same, maturing July 28, 2001. See Note 6 above
for additional information.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
Insofar as is known to the Company's management as of June 30, 2000, there
are no material legal proceedings now pending, threatened, or contemplated in
any court or agency to which the Company is, or may be a party, or against any
officer or director, in such capacity; or of which any of their property is the
subject.
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Item 2. Changes in Securities and Use of Proceeds
Both common and preferred stock have been sold in private sales under
section 4(2) of the Securities Act of 1933, as amended. In addition both common
and preferred shares have been issued for services to benefit from the
professional advice of certain experts and for other expenses. These are
summarized in the table below:
Three Months Ended June 30, 2000
--------------------------------
Shares Dollars
--------- ---------
Common stock sold cash 300,000 $30,000
Common stock issued to employees as
retention incentive 1,328,000 13,280
Common stock issued for preferred converted 500,000 100,000
Common stock issued for warrants exercised 58,000 5,800
Preferred stock issued for debt forgiveness 200,000 200,000
and services to a relative of a 11% shareholder
(see note 1 below)
Six Months Ended June 30, 1999
------------------------------
Shares Dollars
--------- ---------
Common stock sold cash 598,800 $ 59,800
Common stock issued to employees as
retention incentive 1,328,000 13,280
Common stock issued for preferred converted 750,000 150,000
Common stock issued for services 600,000 6,000
Common stock issued for warrants exercised 58,000 5,800
Preferred stock issued for debt forgiveness 200,000 200,000
and services to a family member of an
11% shareholder (see note 1 below)
Preferred stock issued for Philippines mineral 100,000 100,000
Exploration data
Note 1. A family member of an 11% shareholder advanced $60,000 to SFM Mortgage,
which debt was eliminated in exchange for the a portion of the preferred stock
listed above. An additional advance of $26,437 to SFM from that same family
member remains open.
The holders of preferred stock have the option to convert their stock to
common on the basis of one share of preferred for five shares of common after
one year from date of issue. Preferred shareholders also have the right to one
warrant to purchase common stock for $0.10 per share for each share of preferred
held, with the warrant expiring one year from date of purchase of the preferred
stock. The preferred stock is non-voting stock but has first right on all assets
in the event of liquidation up to $1.00 per preferred share.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
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Item 5. Other Information.
On April 1, 1998, SFM Mortgage Corporation et al entered into a compromise
Conciliation Agreement with the United States Department of Housing and Urban
Development and the Fort Worth Human Relations Commission settling a complaint
which alleged a violation by SFM of the Fair Housing Act. The Settlement
Agreement provides that over the next three years SFM will increase the funds
available to low/moderate income minority single family, owner-occupied mortgage
loans by $35,415,258 in the Dallas/Ft. Worth metroplex.
The Company's SFM Mortgage subsidiary has been informed on August 3, 2000
that its loan origination agreement with the U.S. Department of Housing and
Urban Development (HUD) has been terminated for its Bedford, TX office applying
to loans originating in the HUD Ft. Worth region. The action was taken because
of the above average number of defaults of SFM Mortgage. This action does not
affect SFM's right to purchase insured mortgages or to service its own portfolio
or the portfolio of other mortgagees. SFM mortgage did not underwrite these
loans and has since hired its own underwriter. SFM may after 6 months reapply
for the ability to originate loans from its Bedford, TX office. In the meantime
it retains the right to originate loans from its Azle, TX office.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (None)
(b) Reports on Form 8-K (None)
SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995.
Statements contained in this document which are not historical fact are
forward-looking statements based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WULF INTERNATIONAL LTD.
/s/ George R. Wulf
Date: August 9, 2000 ---------------------------------
George R. Wulf, Chairman and CEO
(Principal executive officer
and principal financial and
accounting officer)
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