UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-KSB/A
|X ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 1999 or
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to _______
Commission File Number 000-08638
WULF INTERNATIONAL LTD.
(F/K/A WULF OIL CORPORATION)
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(Name of small business issuer in its charter)
Colorado 83-0218086
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1909 Central Drive, Suite 200 76021
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Bedford, Texas (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code:
(817) 540-7432
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Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to section 12(g) of the Exchange Act:
$.01 par value Common Stock
(Title Of Class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act, during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes No X
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not 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 to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $2,216,571
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The aggregate market value of the voting and non-voting common equity
held by non-affiliates cannot be calculated because there is no established
public market for the issuer's common stock.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Number of Shares Outstanding
Title of Each Class at March 31, 2000
Common Stock, $0.01 Par Value 30,328,911
DOCUMENTS INCORPORATED BY REFERENCE
None
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WULF INTERNATIONAL LTD.
TABLE OF CONTENTS
Form 10-KSB Item
Part I.
Item 1. Business ........................................................3
Item 2. Properties ......................................................5
Item 3. Legal Proceedings ...............................................5
Item 4. Submission of Matters to a Vote of Security Holders..............5
Part II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters .........................................5
Item 6. Management's Discussion and Analysis or Plan of Operation .......6
Item 7. Financial Statements ............................................14
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .........................8
Part III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act ...........8
Item 10 Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners
and Management ..............................................10
Item 12. Certain Relationships and Related Transactions ..................12
Item 13. Exhibits, List and Reports
On Form 8-K .................................................12
Signatures ......................................................13
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PART I.
ITEM 1.
BUSINESS
Since 1997, Wulf International Ltd. (the "Company" or "Wulf") has
continued to develop a plan to provide construction of low cost and low priced
houses in the Philippines and has financed its efforts through the sale of its
stock, both common and preferred. The Company has sold stock in private
transactions for cash and issued stock to consultants for services rendered.
Additionally, while the Company continues to negotiate with investment
bankers regarding a potential financing for this housing project, the investment
bankers will, in all likelihood, require that the Government of the Philippines
guarantee any such financing undertaken. There can be no assurance that the
Government of the Philippines will agree to guarantee any such financing or that
an investment banker will agree to underwrite any such financing, particularly
on any basis other than best efforts.
During 1999, the Government of the Philippines reorganized its housing
program as well as the Executive Branch of the Government, and negotiations with
the Government were placed on hold for much of the year. The Office of the
President now has notified the Company orally that they are ready to enter into
final negotiations for the housing program (see below under Subsequent Events).
On March 15, 1999, the Company assigned a ten percent (10%) interest in
and to the Warisan Joint Venture (a seven percent (7%) in the SPDA-Warisan JV)
to Taticbilt International Corporation, a Philippines Corporation, a qualified
builder of low cost houses in the Philippines.
On April 6, 1999, the Company entered into a preliminary agreement with
Euro Property & Finance Ltd.("Euro Property") wherein Wulf issued 200,000 shares
of preferred stock in exchange for a 20% interest in a gold exploration project
in the Philippines with the option to acquire the balance of the interest held
by Euro Property for the issuance of an additional 100,000 shares of Wulf
preferred stock. Wulf exercised that option on January 31, 2000 (see below)
On April 30, 1999 the Company acquired all of the issued and
outstanding shares of Specialized Financial Services, Inc., d/b/a SFM Mortgage
Company ("SFM"). The shareholders of SFM received 7,500,000 shares of the
Company's common stock. Thus, SFM became a wholly owned subsidiary of the
Company. SFM is a mortgage broker in the home real estate market operating
primarily in Texas and is in the process of expanding into other states. Its
offices are in Bedford, TX in the Dallas/Ft. Worth metropolitan area. SFM has
been in business for approximately 10 years. As a mortgage broker it closes
loans using "warehouse" lines of credit with financial institutions and then
sells those loans to "permanent" lenders within a few days.
SFM is currently a mortgage banker and is approved or exempt to do
business in 20 states, and has exceptions to do business in 17 additional
states. SFM is active in working with low-income and minority housing. SFM plans
to increase its capital and its operating revenue through the acquisition of
several other mortgage companies. There can be no assurance that any of the
negotiations will result in the acquisition of one or more mortgage companies.
The Government of the Philippines has suggested that SFM consider
providing financing for existing low-income mortgages now held by the Government
as well as those mortgages that will be needed for the proposed 2,000,000 new
homes to be built under the Company's present plan. There can be no assurance
that SFM will be able to increase its capital and even if it can increase its
capital that either SFM or the Company will be successful in developing its
operations in the Republic of the Philippines.
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Employees
As of April 14, 2000, the Company and SFM employed an aggregate of 44
persons, 44 of whom are full time and none of whom are part-time. None of either
the Company's or SFM's employees are represented by labor unions. The Company
considers its relations with its employees to be good.
Subsequent Events
On January 31, 2000, the Company exercised its option related to gold
properties held by Euro Property in the Philippines, thereby acquiring 100% of
the interest owned by Euro Property and its subsidiary companies, Gold Mountain
Mining Ltd, Malaguit Mineral Resources Corporation, and Pacific Rim Mining Ltd
in the Philippines. Gold Mountain Mining has filed with the Philippines Energy
and Mineral Resources Department for mining rights to 234,900 hectares of land
in northeastern Mindanao after the expenditure of approximately $1,000,000 for
geological information on these lands. This exploration resulted in the location
of potential areas of significant gold values. Malaguit Mineral Resources has
filed a claim to 30,983 hectares immediately offshore from the Percale Gold
District in Camarines Norte, Luzon, after spending approximately $500,000 in
exploration costs. The recovered data indicate the possibility of economic gold
reserves in this block. The Company intends to conduct further exploration in
these two areas if it has sufficient capital. There is no assurance that gold
deposits of commercial value will be found and defined or that the licenses
required for the extraction of any gold found will be issued by the Government
of the Philippines.
FORWARD LOOKING STATEMENTS
This report and other reports and statements filed by the Company from
time to time with the Securities and Exchange Commission (collectively, "SEC
Filings") contain or may contain certain forward looking statements and
information that are based on the beliefs of the Company's management as well as
estimates and assumptions made by, and information currently available to, the
Company's management. When used in SEC Filings, the words "anticipate",
"believe", "estimate", "expect", "intend", "plan", and similar expressions, as
they relate to the Company or the Company's management, identify forward looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions relating to the Company's operations and results of operations,
competitive factors and pricing pressures, risks inherent in acquisitions and
business expansion, changes in governmental policies and/or regulations in the
Philippines, in addition to any uncertainties specifically identified in the
text surrounding such statements and uncertainties with respect to changes or
developments in social, economic, business, industry, market, legal and
regulatory circumstances and conditions. Should one or more of these risks or
uncertainties materialize or should the underlying assumptions prove incorrect,
actual results may vary significantly from those anticipated, believed,
estimated, expected, intended or planned.
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ITEM 2.
PROPERTIES
The Company owns no real estate. The Company leases approximately 8080
square feet of general office space at 1909 Central Drive, Suite 200, Bedford,
Texas 76021, of which 1070 square feet is on a month to month basis and 7010
square feet is pursuant to a lease that is scheduled to expire on September 1,
2003. The business operations of SFM are also conducted at this location.
The Company believes that its facilities are generally well maintained,
in good operating condition and adequate for its current needs.
ITEM 3.
LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any pending
legal proceedings
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Due to the inactive status of the Company between 1992 and 1997 and the
absence of SEC reporting, the Company does not believe that there is an
established public trading market for its common stock.
As of April 14, 2000, there were approximately 5,760 shareholders of
record of the Company's common stock and 38 shareholders of record of the
Company's preferred stock. There have been no cash dividends paid or declared
since the inception of the Company, and the Company's present financial
condition does not permit the payment of dividends. The Company does not expect
to pay any cash dividends on the common stock in the foreseeable future. Rather,
the Company intends to retain earnings to fund the Company's operations and
planned expansion of its business. The payment of any future cash dividends
would be at the discretion of the Company's Board of Directors and would depend
on future earnings, capital requirements, the Company's financial condition and
other factors deemed relevant by the Board of Directors.
Both common shares and preferred shares have been issued by the Company
in private transactions without registration under the Securities Act of 1933,
as amended. For the year ended December 31, 1999, 3,525,000 shares of the
Company's common stock have been issued in exchange for cash and 1,297,500
shares for services rendered and 129,000 shares of the Company's preferred stock
have issued for cash and 5,300 shares issued for services rendered. Each holder
of the Company's preferred stock has the option to convert their shares into
shares of the Company's common stock on the basis of one (1) share of preferred
stock for five (5) shares of the common stock after one (1) year from the date
of issuance of the preferred stock. During 1999, 89,000 shares of preferred
stock were exchanged for 445,000 shares of common stock. In addition, each
holder of preferred shares has the right to one (1) warrant to purchase the
Company's common stock for $0.10 per share for each share of preferred stock
held. The right of holders of preferred shares to purchase these warrants
expires one year from the date of issuance of the preferred shares. During 1999,
the holders of 50,000 shares of preferred stock exercised their right to
purchase 50,000 shares of common stock.
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ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. The discussion should
be read in conjunction with the financial statements and notes thereto contained
elsewhere in this report.
Results of Operations for the Year Ended December 31, 1999 Compared to the Year
Ended December 31, 1998
In 1999, Wulf acquired gold properties in the Philippines that require
additional expenditures to prove up their value, if any. The principal business
for Wulf in the Philippines, however is the planning, designing and construction
of low-income homes for the Government of the Philippines. The Government
estimates the present need for homes of this type is over 5,000,000 with about
1,000,000 families already qualified to purchase a home. Wulf and its partners
in the Warisan Group have a joint venture agreement with the Government to build
1,000,000 new homes in Mindanao during the next ten years. Further, the Warisan
Group is negotiating with the National Housing Authority to build another
1,000,000 homes in the northern Philippines. Wulf owns 49% interest in the joint
venture. Although several international investment banking firms have indicated
they would assist in providing the needed capital, estimated to be $250,000,000,
there is no assurance that this capital will be provided or that mutually
agreeable terms and conditions can be negotiated with the Government of the
Philippines. To facilitate negotiations with the Government, the Warisan Group
maintains an office in Manila, Philippines.
The Company's wholly-owned subsidiary SFM Mortgage, which was acquired
on April 30, 1999, is in the process of changing its operations to that of a
full scale mortgage company and now has a team in place to accomplish that goal.
The State of Texas has enacted a law allowing mortgage companies to do reverse
mortgages as well as refinancing manufactured homes in one loan versus the two
loan, high interest rates current practice on the home and another loan on the
land. SFM can now refinance homes of this type and the land in a regular
Fannie/Freddie home loan with a standard interest rate. This type of financing
covers an estimated 43% of the homes sold in Texas.
Operating expenses increased substantially in 1999 due to the
acquistion of SFM Mortgage and that subsidiary'expansion in Texas and other
states and the buildup of Internet, wholesale and new lines of business
capability. These increases were primarily for salaries and fringes. Operating
expenses were $2,599,498 in the current year. The operating loss for Wulf's SFM
subsidiary in 1999 was a loss of $380,574.
The Company's general and administrative expenses, principally related
to the Philippines Housing Project declined slightly in 1999 versus the prior
year ($576,664 versus $646,297 in 1998).
The net loss for Wulf in 1999 was $882,166 compared to a loss of
$646,297 in the prior year. The increased loss was caused primarily by the
losses at its SFM Mortgage subsidiary.
Results of Operations for the Year Ended December 31, 1998 Compared to the Year
Ended December 31, 1997
The Company had no operating revenues in 1998 or 1997.
The Company's general and administrative expenses, principally related
to the Philippines Housing Project, increased substantially in 1998 versus 1997.
These expenses were $646,297 in 1998 versus $86,491 in 1997 as activities in the
Philippines covered a full year in 1998 and only began in the latter part of
1997.
6
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Wulf's net loss in 1998 was $646,297 compared to a loss of $86,491 in
1997.
Liquidity and Capital Resources
The Company made no material cash acquisitions or improvement
expenditures during the year ended December 31, 1999, but anticipates a
substantial increase in its capital needs consistent with the implementation of
the Company's business plan (described herein), when, and if, implemented. The
Company believes that its current capital will not be sufficient to meet its
anticipated cash needs for the next 12 months. The Company intends to obtain
additional financing through the sale of equity and/or debt securities and or
part of its interest in the SPDA-Warisan Joint Venture; there can be no
assurance that the Company will obtain financing necessary to implement and
undertake its business plan. Moreover, the obtaining of any financing by the
Company, will, in all likelihood, involve the sale of additional equity, debt,
or convertible debt securities, which could result in additional dilution to the
Company's shareholders. Additionally, the Company will, from time to time,
consider the acquisition of or investment in complementary businesses which
might impact the Company's liquidity requirements or cause the Company to issue
additional equity or debt securities. There can be no assurance that financing
will be available in amounts or on terms acceptable to the Company, if at all,
in order to implement its business plan. If the Company is unable to generate
sufficient capital for its Philippines operations, it will restrict its business
plan to the mortgage operations of its subsidiary, SFM.
Mid-Cities National Bank has extended to the Company's subsidiary, SFM
a line of credit of $50,000 effective from July 29, 1999 for one year. The line
is secured by a lien on equipment, inventories and accounts. As of December 31,
1999 a total of $50,000 has been drawn down on this line. In addition SFM has a
two year bank loan for $21,000 covering certain computer equipment, secured by
the same, maturing July 28, 2001. Interest rates on these loans are at rates of
9% and 9.25%, respectively. The 9% rate on the $50,000 line of credit is
adjusted based on 1% over the lowest money center bank rate quoted in the Wall
Street Journal. The Company's subsidiary, SFM, also has "warehouse lines of
credit" to temporarily fund mortgages until sold to a permanent lender.
New Accounting Standards.
In 1998, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share." This Statement establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. This statement simplifies the previous
standards for computing earnings per share and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. This Statement is effective for financial statements
issued for periods ending after December 15, 1997. The Company has compiled with
the disclosure requirements of SFAS 128 in its financial statements for its
fiscal year ending December 31, 1999.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information. SFAS
131 establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those business enterprises report selected financial information about
operating segments in interim reports to shareholders. It also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The disclosure requirements of SFAS Nos. 131 are effective
for financial statements for financial years beginning after December 15, 1997.
The Company has complied with the disclosure requirements of SFAS No. 131 in its
financial statements for its fiscal year ending December 31, 1999.
Deferred Tax Assets.
The Company has deferred income benefits of $172,975 on its balance sheet as
an asset resulting from the tax losses at its wholly-owned subsidiary, SFM.
7
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ITEM 7.
FINANCIAL STATEMENTS
The financial statements set forth herein commence on page F-1 of this
report.
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of the Company as of April 14,
2000 are as follows:
Name Age Position(s) Held
George Wulf 69 Chairman of Board of Directors, Chief
Executive Officer, and Principal Financial
And Accounting Officer
Pg. Hashim Jaya 40 Vice Chairman of the Board of Directors
Executive Vice President, and Secretary
William L. Franklin 51 President, Chief Operating Officer and Director
Donald Bernard 67 Director
Merve Croston 73 Director
None of the officers or directors of the Company had directorships of
any other SEC reporting companies. None of the officers or directors is involved
in any legal proceedings.
Each Director serves until the next succeeding annual meeting of
shareholders and until his successor is elected and qualified or until his
death, resignation or removal. Annual meeting of shareholders and directors are
held at such time and place as the Board of Directors may from time to time
determine.
George Wulf has served as the Chief Executive Officer Chairman of the
Board of the Company since 1992. From 1992 to 1997, Mr. Wulf also served as the
Company's President and from 1992 to the present as its Principal Financial
Officer. He received BS and MS degrees in petroleum engineering and geology,
respectively, a Ph.D. degree in geology from the University of Michigan and a
LL.B. degree in Law. He is Director and General Manager of Primal Corporation
(Brunei) and Chairman of Integra Mining (Brunei). He started his career with
Mobil in the U.S. and abroad, later worked for Amoco, and then spent over 30
years as an independent oil and gas operator, both in the U.S. and
internationally. He is a fellow of the Geological Society of America and a
member of several other professional organizations including the American
Association of Petroleum Geologists, the Geological Society of Nepal and the
Association of International Petroleum Negotiators.
Pengiran Hashim Jaya has been Vice Chairman and Executive Vice
President, of the Company since October 1997 and Secretary since December 1997.
Mr. Jaya holds a degree in business administration from University of Brunei and
has extensive experience in business and personnel management in Brunei and the
Philippines. Since 1990, he has been the President of Integra Mining, Sdn.,
Bhd., and Executive Vice President of Integra International Inc. since December
1995. Integra International Inc. is engaged in petroleum exploration in Brunei
and in the United States. Integra Mining is engaged in mineral exploration in
Southeast Asia.
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William L. Franklin has been President and Chief Operating Officer of
the Company since March 1998 and a Director since January 15, 2000. Mr. Franklin
has been employed for more than the last five years as Vice President of the
Tarrant County Hospital District where he is responsible for all facilities
related capital activities. He is also President, Director and a shareholder of
AEPM Inc. a project management firm, which with Wulf has a contractual
relationship. He holds BS and MS degrees in Aerospace Engineering from the
Georgia Institute of Technology and an MS degree in Management Science. He is a
Registered Professional Engineer. While in the U. S. Army Corps of Engineers, he
was in charge of a $200 million military housing and airport construction
project in Dhahran, Saudi Arabia. Mr. Franklin also has been involved in
construction projects in the People's Republic of China and large projects in
the Dallas-Ft. Worth area. He is a member of the Construction Management
Association of America and several other professional organizations.
Donald Bernard attended the University of Michigan and received BA, JD,
and LL.M. (International Law) degrees from the University of Texas. He practiced
law briefly and spent 20 years in the U.S. Navy, retiring with the rank of
Commander, Submarine Qualified. He holds a Commercial Pilot's license for
multi-engine and jet aircraft with instrument ratings. Mr. Bernard is the CEO of
a European computer research company and is Chairman of Metro Verde Development
Corporation, a Philippines company engaged in Government privatization project.
He also is a Director of the Angeles University Foundation in the Philippines.
Mr. Bernard was appointed a Director of the Company on February 8, 2000.
Merve Croston received a BS degree in Architecture from the Oklahoma
State University. After working for Wilson Patterson, he jointed Morris Parker
and formed Parker-Croston in 1965. In 1994, Parker Croston merged with
Frankfort-Short Bruza. Mr. Croston retired from FS/Parker-Croston in 1999 after
serving as Chief Executive Officer. He now practices as a Consulting Architect.
Mr. Croston has over 40 years experience in architectural engineering and
management. He is a Fellow of the Society of American Military Engineers and
received the prestigious James R. Wooten Service Award of the American Institute
of Architects. Mr. Croston was appointed a Director of the Company on January
15, 2000.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Act of 1934, as amended, requires the
Company's executive officers, directors, and persons who beneficially own more
than ten percent of a registered class of the Company's equity securities ("ten
percent stockholders") to file initial reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the National
Association of Securities Dealers, Inc. ("NASD"). Executive officers, directors
and ten percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. The Company's
executive officers, directors and ten percent stockholders became subject to
these requirements in December, 1973, when the registration statement relating
to the Company's initial public offering was declared effective by the SEC.
Based solely upon the Company's review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that during the fiscal year ended December 31, 1999, all filing
requirements applicable to its executive officers, directors and ten percent
shareholders were fulfilled on a timely basis, except that (1) Mr. Franklin
failed to report a gift of 10,000 shares of the Company's preferred stock in
June 1999, and gifts totaling 10,000 shares of the Company's preferred stock in
August 1999, and (2) Mr. Wulf failed to report a gift of 50,000 shares of the
Company's preferred stock in July 1999.
ITEM 10.
EXECUTIVE COMPENSATION
Directors of the Company currently receive no compensation for serving
on the Board of Directors other than reimbursement of reasonable expenses
occurred in attending meetings. No compensation was awarded to, earned by, or
paid to officers of the Company in 1999, 1998 or 1997.
9
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ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of the common stock as of April 14, 2000, by (i) all persons known by
the Company to be the owner of record or beneficially of more than 5% of the
outstanding common stock, (ii) each director of the Company, (iii) each
executive officer of the Company and (iv) all directors and executive officers
as a group
Name and Address Nature and Amount of (1)(2)
Of Beneficial Owner Beneficial Ownership Percent of Class
George Wulf(3) 7,997,774 27.9%
P.O. Box 795759
Dallas, Texas 75379
Pengiran Hashim Jaya 255,000 0.9%
#1 Taman Salmah, Simpang #25
Mata Mata, Gadong
Bandar Seri Begawan, Brunei
William L. Franklin(4) 512,500 1.8%
509 Emily Drive
Fort Worth, Texas 76108
Donald Bernard 70,000 0.2%
14 Scenic Drive
Whitehall, Montana 59759
Merve Croston(5) 1,175,000 4.1%
2424 Winton Terrace West
Fort Worth, Texas 76109
Randie Wolzen 3,211,200 11.3%
1909 Central Drive
Bedford, Texas 76021
Steven Nightingale(6) 3,185,000 11.1%
P.O. Box 2071
Reno, Nevada 89505
All executive Officers 10.010.274 34.9%
and Directors as Group (5 persons)
1. Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of common stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person with 60
days upon the exercise of options and warrants. Each beneficial owner's
percentage ownership is determined by assuming that options and warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days have been exercised. Percentages
herein assume a base of 28,679,111 shares of common stock outstanding,
before any consideration is given to outstanding options or warrants.
Certain of the Company's directors disclaim beneficial ownership of some of
shares included in the table.
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2. Includes shares of common stock issuable upon the conversion of shares of
preferred stock to the extent such preferred shares are presently
convertible.
3. Includes 2,255,000 shares with respect to which Mr. Wulf has the right to
acquire by virtue of the conversion of 451,000 outstanding shares of
preferred stock. Mr. Wulf disclaims beneficial ownership of (i) 683,774
shares of common stock owned by Evergreen Petroleum Corporation, a
corporation owned by Mr. Wulf's wife and daughter; (ii) 30,500 shares of
common stock owned by Mr. Wulf's wife; and (iii) 6,000 shares of common
stock held in a trust for Mr. Wulf's daughter pursuant to which Mr. Wulf's
wife is trustee.
4. Includes (i) 400,000 shares of common stock shares with respect to which
Mr. Franklin has the right to acquire by virtue of the conversion of 80,000
outstanding shares of preferred stock, and (ii) 12,500 shares of common
stock by Mr. Franklin's wife.
5. Includes 675,000 shares of common stock with respect to which Mr. Croston
has the right to acquire by virtue of the conversion of 135,000 outstanding
shares of preferred stock.
6. Includes 165,000 shares of common stock with respect to which Mr.
Nightingale has the right to acquire by virtue of the conversion of 33,000
outstanding shares of preferred stock.
The following table sets forth certain information regarding beneficial
ownership of the preferred stock as of April 14, 2000, by (i) all persons known
by the Company to be the owner of record or beneficially of more than five
percent of the outstanding shares of preferred stock, (ii) each director of the
Company, (iii) each executive officer of the Company and (iv) all directors and
executive officers as a group.
Name and Address Nature and Amount of (1)
Of Beneficial Owner Beneficial Ownership Percent of Class
George Wulf 451,000 32.6%
P.O. Box 795759
Dallas, Texas 75379
Pengiran Hashim Jaya 0 0.0%
#1 Taman Slamah, Simpang #25
Mata Mata, Gadong
Bandar Seri Begawan, Brunei
William L. Franklin 82,500 6.0%
509 Emily Drive
Fort Worth, Texas 76108
Donald Bernard 0 0.0%
14 Scenic Drive
Whitehall, Montana 59759
Merve Croston 135.000 9.7%
2424 Winston Terrace West
Fort Worth, Texas 7610
Signet Mining & Investments Ltd 200,000 14.4%
5200 Keller Spring, Suite 423
Dallas, Texas 75248
All Executive Officers and 668,500 48.3%
Directors as a Group (5 persons)
(1) Unless otherwise indicated, the Company believes that all persons named
in the table have sole voting power and investment power with respect to
all shares of preferred stock beneficially owned by them. A person is
deemed to be the beneficial owner of securities that can be acquired by
such person within 60 days upon the exercise of options and warrants.
Each beneficial owner's percentage ownership is determined by assuming
that options and warrants that are held by such person (but not those
held by any other person) and which are exercisable within 60 days have
been exercised. Percentages herein assume a base of 1,402,800 shares of
preferred stock outstanding, before any consideration is given to
outstanding options or warrants.
11
<PAGE>
ITEM 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid to Integra International Inc., a corporation in which
Mr. Wulf is the Chairman and Chief Executive Officer, $83,300 in 1999 for
consulting services.
The Company paid to Pengiran Hashim, an executive officer and director
of the Company, $94,700, for reimbursement of expenses incurred on behalf of the
Company.
ITEM 13
EXHIBITS, LIST AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
1. Financial Statements
The financial statements and schedules listed in the accompanying index
to financial statements are filed as part of this report.
2. Exhibits.
Exhibit
Number Description
2.1 Agreement dated as of April 30, 1999 between Wulf International Ltd.
and SFM Mortgage Company. (1)
3.1 Articles of Incorporation of Wulf International Ltd., as amended. (1)
3.2 Bylaws of Wulf International, Ltd. (1)
4.1 Form of Warrant Agreement. (1)
10.1 Letter Agreement dated December 8, 1997 between AEPM and Wulf
International Ltd., as amended. (1)
10.2 Letter Agreement dated December 8, 1997 between FSB/Parker-Croston and
Wulf International Ltd. (1)
10.3 Joint Venture Agreement dated as of April 1, 1998 by and between Amin
And Sons Corporation and Wulf International Ltd. (1)
10.4 Joint Venture Agreement dated as of June 24, 1998 by and between
Southern Philippines Development Authority and Warisan Group Joint
Venture. (1)
10.5 Agreement dated January 1, 1994 by and between Wulf International Ltd.
and WOC Stock Transfer Company. (1)
10.6 Stock Agreements dated February 1998 between the Company and George
Wulf.
10.7 Letter agreements between Joseph Denahan and the Company. (1)
23.1 Consent of Alvin Dahl & Associates, P. C. (1)
27.1 Financial Data Schedule. (1)
99.1 Euro Property Agreements (2)
99.2 Letter from Philippines Government (2)
------------
(1) Filed with Report 10-KSB dated December 15, 1999.
(2) Filed with Report 10-QSB dated December 23, 1999.
3. Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on behalf
by the undersigned, thereunto duly authorized.
WULF INTERNATIONAL LTD.
By: /s/ George Wulf
------------------------------------------
George Wulf
Chief Executive Officer and Principal
Financial and Accounting Officer
Dated: June 5, 2000
In accordance with the Exchange Act, this report has been signed below
by the following persons of the registrant and in the capacities indicated on
June 5, 2000.
Name Title
/s/ George Wulf
--------------------------
George Wulf Chief Executive Officer, Principal Financial and
Accounting Officer and Chairman of the Board of
Directors
/s/ Pg. Hashim Jaya
--------------------------
Pg. Hashim Jaya Vice-Chairman of the Board, Executive Vice
President and Secretary
/s/ Larry Franklin
--------------------------
Larry Franklin President, Chief Operating Officer and Director
/s/ Donald Bernard
--------------------------
Donald Bernard Director
/s/ Merve Croston
--------------------------
Merve Croston Director
13
<PAGE>
Item 7. Financial Statements
Wulf International, Ltd.
And Subsidiary
Consolidated Financial Statements
and
Independent Auditor's Report
Years Ended December 31, 1999 and 1998
14
<PAGE>
C O N T E N T S
AUDITOR'S OPINION...........................................................1
CONSOLIDATED BALANCE SHEETS.................................................2-3
CONSOLIDATED STATEMENTS OF OPERATIONS.......................................4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY.............................5-6
CONSOLIDATED STATEMENTS OF CASH FLOWS.......................................7-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................9-17
<PAGE>
Independent Auditor's Report
Board of Directors and Stockholders
Wulf International, Ltd.
and subsidiary
Dallas, Texas
We have audited the accompanying consolidated balance sheet of Wulf
International, Ltd. and subsidiary as of December 31, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
financial statements of Wulf International, Ltd. as of December 31, 1998, were
audited by other auditors whose report dated October 12, 1999, expressed an
unqualified opinion on those financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1999 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wulf
International, Ltd. and its subsidiary as of December 31, 1999 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Turner, Stone & Company, LLP
---------------------------------
Certified Public Accountants
May 10, 2000
1
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
Assets
1999 1998
---------- ----------
Current assets:
Cash $ 60,260 $ 6,592
Accounts receivable, trade 98,368 --
Advances to employees 6,003 --
Deferred income tax benefits 172,975 --
---------- ----------
Total current assets 337,606 6,592
---------- ----------
Property and equipment, net of $24,795
of accumulated deprecation 105,870 --
---------- ----------
Other assets:
Deposits 6,776 --
Goodwill, net of $29,581 of
accumulated amortization 414,135 --
Investments in GMM and PRM 200,000 --
Investment in Warisan Group JV -- --
---------- ----------
620,911 --
---------- ----------
$1,064,387 $ 6,592
========== ==========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
Liabilities and Stockholders' Equity
1999 1998
---------- ----------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $ 142,439 $ --
Accrued expenses 84,485 --
Line of credit 81,932 --
Current portion of long-term note payable 5,157 --
---------- ----------
Total current liabilities 314,013 --
---------- ----------
Long-term note payable, net of current portion 23,090 --
Stockholders' equity:
Convertible preferred stock, 10,000,000
shares authorized, 1,402,800 and 1,107,500
issued and outstanding, respectively 1,402,800 1,107,500
Common stock, $ .01 par value,
50,000,000 shares authorized,
28,679,111 and 15,861,611
issued and outstanding, respectively 286,791 158,616
Paid in capital in excess of par value 3,189,575 1,960,192
Accumulated deficit (4,101,882) (3,219,716)
Treasury stock, 50,000 preferred shares,
at cost ( 50,000) --
---------- ----------
727,284 6,592
---------- ----------
$1,064,387 $ 6,592
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
Revenues:
Loan origination and other fees $ 2,181,747 $ --
Other income 34,824 --
----------- -----------
2,216,571 --
Operating costs and expenses:
Personnel costs 1,078,105 --
Loan production costs 1,020,728 --
General and administrative 446,289 646,297
Amortization 29,581 --
Depreciation 24,795 --
----------- -----------
2,599,498 646,297
----------- -----------
Operating loss (382,927) (646,297)
Equity in losses of unconsolidated
joint venture (576,664) --
Interest expense 2,507 --
----------- -----------
Loss before income taxes (962,098) (646,297)
Provision for income tax benefit 79,932 --
----------- -----------
Net loss $ (882,166) $ (646,297)
=========== ===========
Net loss per share:
Basic $ (.04) $ (.05)
Diluted $ (.04) $ (.05)
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Preferred Stock Common Stock Add'l Paid Accumulated Treasury
Shares Amount Shares Amount In Capital Deficit Stock Total
--------- ---------- ---------- --------- ----------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 61,000 $ 61,000 4,538,003 $ 45,380 $ 2,473,788 $( 2,573,419) $ - $ 6,749
Issuance of preferred stock
for cash 158,000 158,000 158,000
Issuance of common stock
for cash 300,000 3,000 27,000 30,000
Issuance of common stock
for services 11,023,068 110,236 134,964 245,200
Issuance of preferred stock
for services 888,500 888,500 ( 675,560) 212,940
Net loss ( 646,297) ( 646,297)
--------- ---------- ---------- --------- ----------- ------------ -------- ------------
Balance at December 31, 1998 1,107,500 $1,107,500 15,861,611 $ 158,616 $ 1,960,192 $( 3,219,716) $ - $ 6,592
Issuance of preferred stock
for cash 129,000 129,000 129,000
Issuance of common stock
for cash 3,525,000 35,250 317,250 352,500
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Preferred Stock Common Stock Add'l Paid Accumulated Treasury
Shares Amount Shares Amount In Capital Equity Stock Total
--------- ---------- ---------- --------- ----------- ------------ -------- ------------
Issuance of common stock
for services 1,297,500 12,975 116,775 129,750
Conversion of preferred
stock ( 89,000) ( 89,000) 445,000 4,450 84,550 -
Issuance of common and
preferred stock for
purchase of SFM 50,000 50,000 7,500,000 75,000 706,308 ( 50,000) 781,308
Issuance of preferred stock
for services 5,300 5,300 5,300
Issuance of preferred stock
for purchase of GMM 200,000 200,000 200,000
Issuance of common stock
for cash upon exercise
of warrants 50,000 500 4,500 5,000
Net loss ( 882,166) ( 882,166)
--------- ---------- ---------- --------- ----------- ------------ -------- ------------
Balance at December 31,
1999 1,402,800 $1,402,800 28,679,111 $ 28,679 $ 3,189,575 $( 4,101,882) $( 50,000) $ 727,284
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------- ----------
Cash flows from operating activities:
Cash from customers $ 2,223,026 $ --
Cash paid to employees (1,078,105) --
Cash paid to suppliers (1,802,024) ( 163,157)
Interest paid ( 265) --
---------- ----------
Net cash used in operating activities ( 657,368) ( 163,157)
---------- ----------
Cash flows from investing activities:
Employee advances repaid 56,100 --
Purchase of property and equipment ( 47,137)
Cash acquired in SFM acquisition 145,901 --
---------- ----------
Net cash used in investing activities 154,864 --
---------- ----------
Cash flows from financing activities:
Issuance of common and preferred stock 481,500 163,000
Proceeds from line of credit 81,932 --
Repayments of notes payable ( 7,260) --
---------- ----------
Net cash provided by financing activities 556,172 163,000
---------- ----------
Net increase (decrease) in cash 53,668 ( 157)
Cash at beginning of period 6,592 6,749
---------- ----------
Cash at end of period $ 60,260 $ 6,592
========== ==========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Reconciliation of Net Loss to Net Cash
Used in Operating Activities
1999 1998
------------- -------------
<S> <C> <C>
Net loss $( 882,166) $( 646,297)
Adjustment to reconcile net loss to net
cash used in operating activities
(changes in assets and liabilities,
net of effect from purchase of SFM):
Depreciation and amortization 54,376 -
Common stock issued for services 134,750 237,940
Preferred stock issued for services 5,300 245,200
(Increase) decrease in accounts receivable, trade 6,455 -
(Increase) decrease in accrued FIT benefit ( 79,932) -
Increase (decrease) in accounts payable, trade 101,114 -
Increase (decrease) in accrued expenses 32,040 -
Increase (decrease) in other current liabilities ( 29,305) -
------------ ------------
Total adjustments 224,798 483,140
------------ ------------
Net cash used in operating activities $( 657,368) $( 163,157)
============ ============
Supplemental Schedule of Non-Cash Investing
and Financing Activities
Issuance of common and preferred stock
in exchange for net assets of SFM $ 781,308 $ -
Issuance of preferred stock for purchase of
GMM and PRM (Note 2) $ 200,000 $ -
</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 December 31, 1999, the majority of its
net assets and its revenues and expenses were from this operating segment (Note
10).
Business combinations
On April 30, 1999, the Company acquired 100% of the outstanding stock of
Specialized Financial Services, Inc. (SMF), 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 WIL's cost over the fair value of acquired net assets allocated to
goodwill.
As part of the agreement, SFM purchased 50,000 shares of WIL'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 a 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, 1998, the beginning of the earliest period presented
in the accompany consolidated financial statements.
Years Ended
December 31,
1999 1998
---- ----
Revenues $ 3,543,436 $ 3,349,100
Net loss $( 911,657) $( 316,218)
Net loss per share $( .03) $( .02)
9
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of consolidation
The accompanying consolidated financial 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. SFM has a year end of December 31.
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 Companys purchase of SFM is being amortized using the
straight-line method over ten years. For the year ended December 31, 1999,
amortization expense totaled $29,581.
Advertising costs
The Company's advertising and marketing costs, which consist primarily of
internet advertising and related expenditures and brochures, signs and various
joint marketing programs, are charged to expense when incurred. For the years
ended December 31, 1999 and 1998, advertising and marketing costs totaled
$33,478 and $0, respectively.
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. None of the Company's
cash is restricted.
10
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
preferred stock dividends (Note 3) 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 (Note 3). 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 into an equivalent of 6,375,374 and
2,524,941 common stock shares.
For the years ended December 31, 1999 and 1998, basic losses per share amounts
are based on 24,295,940 and 13,996,865 weighted average shares of common stock
outstanding, respectively. No effect has been given to the assumed conversion of
convertible preferred stock and the assumed exercise of warrants (Note 3) as the
effect would be antidilutive.
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.
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.
11
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Although the Company has a 56% net interest in the housing project being
conducted through these two joint ventures, the ultimate control of this project
does not rest with the Company but with the SPDA. Accordingly, the Company
accounts for its investment in WRG using the equity method of accounting. For
the years ended December 31, 1999 and 1998, 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.
Gold Mountain Mining, Ltd. (GMM)
In April 1999, the Company issued 200,000 preferred stock shares in exchange for
a 20% interest in each of two Philippine corporations, Gold Mountain Mining,
Ltd. (GMM) and Pacific Rim Mining, Ltd. (PRM). These corporations own
prospecting permits for gold reserves on approximately 261,000 hectares of land
in the Philippines. As part of the agreement, the Company was granted the option
to acquire an additional 75% of each corporation in exchange for an additional
100,000 preferred stock shares.
In January 2000, the Company conditionally exercised the above option. The
100,000 preferred stock shares are being held in escrow pending the receipt of a
certified engineer's appraisal or a certified audit of both corporations.
The Company accounts for its investments in GMM and PRM using the cost method of
accounting until the conditional exercise referred to above is completed, at
which time it will consolidate these corporations into its financial statements.
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 purchases for $.10 per share one common stock share for each
preferred stock share held. The warrants expire one year from the date of
issuance. For the years ended December 31, 1999 and 1998, activity in these
warrants were as follows:
12
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1999 1998
---- ----
Warrants outstanding, beginning of year $ 1,046,500 $ 61,000
Warrants issued through issuance of
preferred stock 388,300 1,046,500
Warrants exercised to purchase
common stock 50,000 -
Warrants expired ( 1,122,500) ( 61,000)
---------- ----------
Warrants outstanding, end of year $ 262,300 $ 1,046,500
========== ==========
4. COMMITMENTS AND CONTINGENCIES
Leases
The Company conducts its operations from facilities in Bedford, Texas under a
month-to-month operating lease requiring a monthly rental of $5,798. During
1999, the Company also used part of an officer's residence for office facilities
and paid that officer approximately $12,000 in rent (Note 8). For the years
ended December 31, 1999 and 1998, rent expense, including the amount paid to the
officer, totaled $62,447 and $3,684, respectively.
At December 31, 1999, The Company was not obligated under any non-cancelable
operating or capital lease agreements.
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
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 December 31, 1999 and 1998, the amount of this
contingent liability totaled $695,942 and $299,966, respectively.
13
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Conciliation agreement
In April 1998, SFM 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 mortgage lending funds available to
low/moderate income minority single family, owner-occupied homes in the
metroplex by $35,415,258.
At December 31, 1999, SFM had funded loans through two lending institutions in
the amount of $3,458,186, 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 15% 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 year ended December 31, 1999,
employer matching and discretionary contributions to the plan totaled $0.
6. NOTES PAYABLE
The Company's notes payable consist of a business line of credit due in July
2000 which bears interest at prime plus 1.0%, is secured by all Company assets
and contains no significant restrictions or covenants. 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 following is a schedule of future maturities required under the terms of the
above note payable.
Year Amount
2000 $ 5,157
2001 7,301
2002 7,927
2003 7,862
----------
$ 28,247
==========
14
<PAGE>
<TABLE>
<CAPTION>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES
The Company uses the accrual method and SFM uses the cash basis method of
accounting for tax reporting purposes. At December 31, 1999 and 1998, the
Company had net operating loss carry forwards for tax reporting purposes of
approximately $1,600,000 and $1,300,000, respectively. During 1999,
approximately $600,000 of loss carry forwards expired. The remaining carry
forwards expire through the year 2013.
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.
A reconciliation of income tax benefits at the statutory federal rate of 34% to
income tax benefits at the Company's effective tax rate for the years ended
December 31, 1999 and 1998 is as follows.
1999 1998
---- ----
<S> <C> <C>
Tax benefits computed at statutory rate $ 327,113 $ 219,724
Increase in valuation allowance ( 241,966) ( 219,724)
Permanent and other differences ( 5,215) -
------------- -------------
$ 79,932 $ -
============= =============
Significant components of the Company's deferred tax assets (benefits) and
liabilities are summarized below.
1999 1998
Deferred tax assets:
Net operating loss carry forward $ 544,000 $ 442,000
Cash basis of accounting differences 39,376 -
Less valuation allowance ( 410,401) ( 442,000)
------------- -------------
172,975 -
Deferred tax liabilities:
Cash basis of accounting differences - -
------------- -------------
Net deferred tax assets $ 172,975 $ -
============= =============
For the years ended December 31, 1999 and 1998 income tax benefit is comprised
of the following components.
Current tax benefit $ - $ -
Deferred tax benefit 79,932 -
------------- -------------
$ 79,932 $
============= =============
</TABLE>
15
<PAGE>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1999 and 1998, the Company made payments to
the following related parties totaling $267,662 and $121,000, respectively, for
services rendered.
1999 1998
Evergreen Petroleum Corporation $ 4,500 $ 56,000
Integra International 45,300 32,000
Integra Mining 38,000 -
WOC Transfer Co. 38,500 12,500
Jennifer Beal 39,662 2,500
Penigiran Hashim Jaya 68,700 18,000
George Wulf 33,000 -
Evergreen Petroleum Corporation is privately owned by Janis Wulf and Jennifer
Beal. George Wulf is also the Chairman and CEO of Integra International and
Integra Mining. Jennifer Beal and Janis Wulf own WOC Transfer Co., the stock
transfer agent for the Company, and are the daughter and wife of George Wulf.
Penigiran Hashim Jaya is an officer of the Company.
9. 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 years 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.
16
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<CAPTION>
WULF INTERNATIONAL, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SEGMENT INFORMATION
The Company conducts its operations through two reporting segments, each of
which is conducted through separate corporations. Those reportable segments are
its Philippine housing project and its mortgage lending activity.
The following table reflects certain information about the Company's reportable
operating segments for the year ended December 31, 1999. For the year ended
December 31, 1998, the Company's only reportable segment was its Philippine
housing project and, accordingly the December 31, 1998 consolidated financial
statement contains the required segment information for that year. There are no
inter-company revenue or expense transactions.
Philippine Housing Mortgage Total
------------------ -------- -----
<S> <C> <C> <C>
Revenue from external customers $ 20,059 $ 2,196,512 $ 2,216,571
Operating loss ( 189,877) ( 193,050) ( 382,927)
Interest expense 265 2,242 2,507
Depreciation and amortization - 54,376 54,376
Consulting services, non cash 135,050 - 135,050
Expenditures to acquire long-lived
assets - 47,137 47,137
Total long-lived assets net of
depreciation - 105,870 105,870
Equity in net loss of investees 576,664 - 576,664
Income tax benefit - 79,932 79,932
</TABLE>
