<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from
WASATCH INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 87-0435741
(State or other jurisdiction of incorporation or organization) I.R.S. Employer Id. Number.
</TABLE>
1301 N. Congress Avenue, Suite 135, Boynton Beach, Florida 33426
(Address of principal executive offices)
(561) 732-1200
(Registrant's telephone number including area code)
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. x Yes No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
N/A
Registrant has 35,162,820 shares of common stock outstanding as of
April 23, 1997.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The Consolidated Financial Statements of the Registrant required to be
filed with this 10-QSB Quarterly Report were prepared by the management of the
Company and commence on the following page, together with related Notes. In the
opinion of management, the Consolidated Financial Statements present fairly the
financial condition of the Registrant.
- THIS SPACE INTENTIONALLY LEFT BLANK -
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WASATCH INTERNATIONAL CORPORATION
AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED FINANCIAL STATEMENTS
February 28. 1997 and November 30, 1996
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Balance Sheet
ASSETS
<TABLE>
<CAPTION>
February 28, November 30,
1997 1996
---------- -------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,083 $10,969
Accrued Interest receivable 11,257
Receivable (Note 2) Stockholder 386,911 --
Notes receivable and accrued interest - current (Note 4) -- 10,011
Prepaid legal fees -- --
---------- -------
Total Current Assets 403,331 20,980
---------- -------
VEHICLE, net of accumulated depreciation of $12,010
and $4,424, respectively (Note 4) -- 35,397
---------- -------
OTHER ASSETS
Joint venture - net profit advances (Note 3) $ 129,900 --
Advance on debtor-in-possession financing (Note 10) 1,161,057 --
Investment in Ethnic Broadcasting Corp. 300,000 --
Deposit on purchase of Wasatch/Edwards L.L.C. Partnership 4,000,000 --
Notes receivable and accrued interest, net - long term -- --
---------- -------
Total Other Assets 5,590,957 --
---------- -------
TOTAL ASSETS $5,994,288 $56,377
========== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
February 28, May 31,
1997 1996
----------- ---------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 139,280 $ 1,915
Related party payables (Note 4) 28,000
Advances on stock purchases (Note 5)
Current portion of capital lease payable (Note 4) -- 4,524
Stock recission agreement (note 8) 525,000 --
----------- ---------
Total Current Liabilities 664,280 34,439
----------- ---------
LONG-TERM DEBT
Note payable -- --
Capital lease payable (Note 5) -- 25,271
----------- ---------
Total Liabilities 664,280 59,710
----------- ---------
COMMITMENTS AND CONTINGENCIES
(Notes 6, 9, 10 and 11)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value, 20,000,000
shares authorized, none issued and outstanding -- --
Common stock, $0.001 par value, 50,000,000
shares authorized, 34,262,820 and 2,979,020
shares issued and outstanding, respectively 34,263 2,979
Additional paid-in capital 6,891,103 981,179
Deficit accumulated during the development stage (1,595,358) (987,491)
----------- ---------
Total Stockholders' Equity (Deficit) 5,330,008 (3,333)
----------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 5,994,288 56,377
=========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From Inception on
For the Three Months For the nine Months November 4,
Ended February 28, Ended February 28, 1985 Through
------------------------- ---------------------------- February 28,
1997 1996 1997 1996 1997
--------- ------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE $ 15,672 $ -- $ 16,582 $ -- $ 16,582
--------- ------- ----------- -------- -----------
OPERATING EXPENSES
Officers and directors compensation 62,500 -- 933,667 -- 933,667
Legal fees 67,570 -- 410,500 -- 410,500
Other general and administration
expenses 296,293 -- 214,769 -- 214,769
--------- ------- ----------- -------- -----------
Total Operating Expenses 426,363 -- 1,558,936 -- 1,558,936
--------- ------- ----------- -------- -----------
OPERATING LOSS (398,834) -- (1,530,497) -- (1,530,497)
--------- ------- ----------- -------- -----------
OTHER INCOME AND (EXPENSE)
Interest expense -- (1,341) -- (1,341)
Depreciation -- (1,896) -- (1,896)
Gain on sale of subsidiary (17,946) -- (17,946) -- --
loss on disposition of asset (12,000) -- (12,000) (12,000)
--------- ------- ----------- -------- -----------
Total Other Income and
(Expense) (5,946) -- (15,237) -- (15,237)
--------- ------- ----------- -------- -----------
NET LOSS $(392,888) $ -- $(1,545,734) $ -- $(1,545,734)
========= ======= =========== ======== ===========
Net Loss Per Share $ (0.01) $ (0.00) $ (0.06) $ (0.00)
========= ======= =========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit)
From Inception on November 4, 1985 through February 28, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Additional During the
Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Inception, November 4, 1985 -- $ -- $ -- $ --
Common stock issued for cash at $1.92
per share 6,250 6 11,994 --
Common stock issued to public for cash
at $20.00 per share 6,602 7 132,028 --
Cost of public offering -- -- (38,791) --
Common stock issued to acquire Quazon
Communications, Inc. at $7.31 per share 115,666 116 845,873 --
Net loss from inception on
November 4, 1985
through May 31, 1993 -- -- -- (951,233)
--------- ------ --------- ---------
Balance, May 31, 1993 128,518 129 951,104 (951,233)
Net loss for the year ended May 31, 1994 -- -- -- --
--------- ------ --------- ---------
Balance, May 31, 1994 128,518 129 951,104 (951,233)
Net loss for the year ended May 31, 1995 -- -- -- --
--------- ------ --------- ---------
Balance, May 31, 1995 128,518 129 951,104 (951,233)
Common stock issued to officers for
services provided at $0.20 per share 117,125 117 23,308 --
Common stock issued to an officer for
services provided at $0.002 per share 2,500,000 2,500 2,500 --
Fractional shares issued in reverse split 8,377 8 (8) --
Common stock issued pursuant to a
Form S-8 at $0.02 per share 225,000 225 4,275 --
Net loss for the year ended May 31, 1996 -- -- -- (36,258)
--------- ------ --------- ---------
Balance, May 31, 1996 2,979,020 $2,979 $ 981,179 $(987,491)
--------- ------ --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Stockholders Equity (Deficit) (Continued)
From Inception on November 4, 1985 through February 28, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Additional During the
------------------------ Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance forward 2,979,020 $ 2,979 $ 981,179 $ (987,491)
Common stock issued for the
acquisition of Caribbean Holdings
Int'l Corp. At $.006 per share 25,000,000 25,000 (867,092) 987,491
Common stock issued for legal
fees at $1.00 per share 300,000 300 299,700 --
Common stock issued for
consulting and directors fees
at $1.00 per share 160,000 160 159,480 --
Common stock to be issued
for cash contributions at
$1.00 per share 462,598 463 462,135 --
Common stock options granted
for services -- -- 499,500 --
Net loss for the six months
ended November 30, 1996
(Unaudited) -- -- -- (1,202,470)
Balance, November 30, 1996
(Unaudited) 28,901,618 28,902 1,535,262 $ 1,202,470)
</TABLE>
8 The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 9
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on November 4, 1985 through February 28, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Additional During the
---------------------- Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance forward 28,901,618 $28,902 $1,535,262 $(1,202,470)
Common stock issued for a deposit
on the purchase of the
Wasatch/Edwards LLC partnership
at $1.00 per share 4,000,000 4,000 3,996,000 --
Common stock issued to majority
shareholder for cash advances
at $1.00 per share 836,202 836 835,366 --
Common stock to be issued for services
at $1.00 per share 200,000 200 199,800 --
Common stock to be issued for services
at $1.00 per share 25,000 25 24,975 --
Common stock to be issued for Ethnic
at $1.00 per share 300,000 300 299,700 --
Common stock options granted for services
Net loss for the six months ended
February 28, 1997 (Unaudited) -- -- --
---------- ------- ---------- -----------
Balance, February 28, 1997 (Unaudited) 34,262,820 $34,263 $6,891,103 $(1,595,358)
========== ======= ========== ===========
</TABLE>
9 The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 10
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
February 28, 1997 and November 30, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Wasatch International Corporation (the Company) was incorporated in
the State of Nevada on November 4, 1985 as Java, Inc. The Company
changed its name to Wasatch International Corporation on September
27, 1995. The Company's principal business activity is to seek
potential business ventures and assets which may warrant involvement
or purchase.
On November 7, 1986, the Company issued shares of it's common stock
to acquire Quazon Communications, Inc. In 1989, that Company ceased
operations along with the operations of its wholly owned subsidiary.
On November 12, 1995, the Company acquired all of the issued and
outstanding common stock of Graffiti Removal Systems, Inc.
(Graffiti). Graffiti was incorporated on November 8, 1995 in the
State of Utah. Graffiti's principal business is that of graffiti
removal and consulting. The Company has agreed, in principle to sell
this subsidiary to its former President for the recovery of expenses.
Effective September 25, 1996, the Company acquired all of the issued
and outstanding common stock of Caribbean Holdings Intl. Corp.
(Caribbean) in exchange for 25,000,000 shares of the Company's common
stock (see Notes 3, 7 and 9). Caribbean was incorporated in the State
of Florida on December 27, 1995. Caribbean is a partner in a joint
venture involving the development of and sale of recreational
property in the Bahamas (see Note 6) which is one of the Company's
principal business operations. The acquisition of Caribbean has been
accounted for as a purchase because the shareholder of Caribbean
controls the Company after the acquisition. Accordingly, Caribbean is
treated as the acquiring entity. There was no adjustment to the
carrying value of the assets or liabilities of the Company as a
result of the acquisition as the market value approximated the net
carrying value.
b. Development Stage and Continued Existence
As of February 28, 1997, the activities of the Company and its
subsidiaries have not yet produced significant revenues from
operations. Accordingly, the Companies are considered to be in the
development stage with the accompanying consolidated financial
statements reflecting the results of operations, changes in
stockholders' equity (deficit) and cash flows for the period from
inception on November 4, 1985 through February 28 , 1997. In
addition, the accompanying consolidated financial statements have
been prepared assuming the Companies will continue as going concerns.
The Companies have incurred recurring losses from operations which
raises doubt about the Companies ability to continue as going
concerns. The recovery of assets and continuation of future
operations are dependent upon the Companies ability to obtain
additional debt or equity financing and their ability to generate
revenues sufficient to continue pursuing their business purposes. The
Company is actively pursuing equity and debt financing to fund future
operations and acquisitions.
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
February 28 , 1997 and November 30, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
c. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a May 31 fiscal year
end.
d. Principles of Consolidation
The consolidated financial statements include the Company and its
wholly owned subsidiary, Caribbean Holdings Intl. Corp. All
significant intercompany accounts and transactions have been
eliminated.
e. Consolidated Financial Statement Presentation
Certain balances for prior periods have been reclassified to conform
to the current period consolidated financial statement presentation.
f. Loss Per Share of Common Stock
The loss per share of common stock is based on the weighted average
number of common shares outstanding at the date of the consolidated
financial statements. Only primary loss per share of common stock is
disclosed in the accompanying consolidated statements of operations
as fully diluted loss per share is anti-dilutive.
g. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported 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.
h. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
11
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
February 28, 1997 and November 30, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
i. Vehicle and Depreciation
The vehicle own by Graffiti Removal Systems, Inc was previously
stated at cost. Depreciation was calculated using the straight-line
method over an expected useful life of five years. Due to the pending
sale of Graffiti Removal Systems, Inc., the vehicle has been
eliminated from the financial records.
j. Income Taxes
Through February 28, 1997, the Company and its subsidiaries have
sustained operating losses totaling approximately $1,938,622 that may
be offset against future taxable income through the year 2013. No tax
benefit has been reported in the consolidated financial statement
since their realization cannot be assured.
NOTE 2 - RECEIVABLE
The Company submitted a bid proposal to the U.S. Bankruptcy Court in
Florida in an effort to purchase all of the assets of Palm Beach
Cruise Lines, Inc. (Palm Beach). As part of that acquisition
proposal, the Company advances $312,000 to Palm Beach as
Debtor-in-Possession financing. The Company was unsuccessful in its
bid proposal. As part of the plan of reorganization of the ultimate
buyer of Palm Beach, the U.S. Bankruptcy Court in Florida ordered
that the Company be repaid the $312,000 no later than scheduled
closing of the plan of reorganization, January 18, 1997. The Company
sold its interest in the $312,000 receivable for $200,000 and the
forgiveness of $100,000 owed to an affiliate of the Company's
principal shareholder. The $100,000 was offset against contributions
made to the Company as discussed in Note 6. The $200,000 was
collected by the Company. Accordingly, the accompanying consolidated
financial statements thus reflect collection of the receivable. The
offset against contributions of a affiliate of the Company's primary
share holder, and the $12,000 differential has been treated as a lose
on disposition of an asset on the current financial statement. The
Company was due $368,991 from its principal shareholder as of
February 28, 1997 which has since been advanced in full.
NOTE 3 - JOINT VENTURE NET PROFIT ADVANCES
On July 10, 1996, the Company's wholly owned subsidiary, Caribbean
Holdings Intl. Corp., entered into a joint venture agreement with two
individuals previously unaffiliated with Company or any of its
subsidiaries to, among other things, develop, lease and/or sell real
estate located in the Bahamas beneficially owned by those
individuals. These
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
February 28, 1997 and November 30, 1996
individuals are the heirs to an estate which is in the process of
being probated that owns the real estate. The agreement provides for
net profits to be shared equally by Caribbean and the two
individuals. The agreement also stipulates that advance payments are
to be made to the two individuals toward their share of future net
profits derived from the real estate associated with the joint
venture. Pursuant to the agreement, the two individuals were paid
$100,000 initially in $25,000 installments and $1,500 each monthly
until the estate has been completely probated. Through February 28,
1997, a total of $129,900 of advances toward joint venture net profit
have been paid to the two individuals. Management of the Company
feels that the net profit potential from real estate and the related
joint venture are sufficient to ensure realization of these advances.
Since the ultimate timing of when such net profit generation might be
accomplished, these advances have been reflected as noncurrent in the
accompanying consolidated financial statements. See Note 9 for
further discussion regarding this transaction.
NOTE 4 - RELATED PARTY PAYABLES
As of February, 1997 the Company agreed to the sale of the Company's
wholly owned subsidiary, Graffiti Removal to its former President in
exchange for the recovery of exchange expenses. In the current
financials ending February 28, 1997 this has been reflected in the
disposition of the current and long term portion of notes receivable
and the vehicle that was acquired in that subsidiary. The sale will
be subject to the assumption of liabilities including the capital
lease itself. This transaction is expected to generate a gain on sale
of subsidiary of $17,946 incurred with assumption of an excess of
book value liabilities over book value of assets acquired.
NOTE 5 - CAPITAL LEASE PAYABLE
The Company's subsidiary, Graffiti, has purchased a vehicle under a
capital lease. Future minimum lease payments required under the
capital lease as of February 28, have been assumed by the former
President of the Company, and the Company has no further obligations
in respect to the lease
NOTE 6 - COMMITMENTS AND CONTINGENCIES
On October 1, 1996, the Company entered into an employment agreement
with its president for a period of five years. The agreement provides
for annual compensation of $250,000 with annual increases of $10,000.
The Company president has elected to postpone payment of his salary
until the Company has obtained sufficient operational funding.
Accordingly, five months of his salary totaling $104,168 has been
accrued in the accompanying consolidated financial statements. In
addition, the Company president
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
February 28, 1997 and November 30, 1996
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)
shall receive an annual bonus equal to one percent of earnings
before income taxes, depreciation and amortization. The
agreement also provides for other customary employment benefits.
As part of the agreement, the Company president has been
granted stock option to acquire 500,000 of the Company's common
stock at par value. See Note 8 for a related discussion. Said
option has been exercised.
Effective January 1, 1997, the Company entered into an Employment
Agreement with its Chief Financial Officer for a period of five
years. The agreement provides for annual compensation of $150,000
with annual increases of $10,000. The company Chief Financial Officer
has elected to defer payment of his salary until the company has
obtained sufficient operational funding. Accordingly, no accrual of
his salary has been accrued in the Account Consolidated Financial
Statements. In addition, the company Chief Financial Officer shall
receive an annual bonus equal to one percent of earnings before
income taxes, depreciation and amortization. The agreement also
provides for other customary employment benefits. As part of the
agreement, the company Chief Financial Officer has been granted an
annual stock option to acquire 250,000 of the company's common stock
at par value.
In October 1996, in connection with the Wasatch International
Corporation Stock Plan and the filing of the related registration
statement (see Note 7), the Company entered into various consulting
agreements with officers, directors and consultants wherein those
individuals are to provide services to the Company for a period of
one year with the shares of common stock issued as sole compensation.
As discussed in Notes 1 and 9, the Company issued 25,000,000 shares
of common stock to acquire all of the issued and outstanding common
stock of Caribbean Holdings Intl. Corp. The number of shares issued
and the basis of this transaction is contingent upon Caribbean
obtaining a fairness opinion, a legal opinion as to marketable title,
and an appraisal estimating a minimum value of $12,000,000 all
related to real estate associated with a joint venture in which
Caribbean is a partner. Those contingencies have not been fully met
and the ultimate impact on the Company and its financial condition if
they are not satisfied cannot be readily determined.
NOTE 7 - COMMON STOCK
During October of 1995, the board of directors authorized the
issuance of 117,125 shares of the Company's common stock to certain
officers for services provided. The shares were valued at $23,425 or
$0.20 per share. On November 4, 1995, the shareholders approved a
reverse stock split of the Company's outstanding common stock at a
rate of one share for every two hundred shares outstanding. The
Company provided that no shareholder
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<PAGE> 15
would be reduced below 50 shares and, accordingly, issued 8,377
fractional shares of common stock. On November 12, 1995, the board of
directors authorized the issuance of 2,500,000 shares of the
Company's common stock valued at $5,000 for services provided by an
officer of the Company. An additional 225,000 shares of the Company's
common stock valued at $4,500 were authorized for issuance, and were
issued on January 23, 1996. In October 1996, the Company filed a Form
S-8 Registration Statement under the Securities Act of 1933 relating
to the "Wasatch International Corporation Stock Plan". This plan
provides for the issuance of up to 5,000,000 shares of common stock
as options, grants or awards to individuals who perform special or
extraordinary services on behalf of the Company. In November 1996, in
conjunction with that stock plan, the Company issued 530,000 shares
of common stock to officers and directors, 230,000 shares to
consultants and 300,000 to an attorney for legal services. These
shares have been valued at $1.00 per share in the accompanying
consolidated financial statements based on contemplated concurrent
cash stock transactions.
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
February 28, 1997 and November 30, 1996
NOTE 7 - COMMON STOCK (Continued)
The Company issued 25,000,000 shares of common stock in September
1996 to acquire all of the issued and outstanding common stock of
Caribbean Holding's Intl. Corp. (see Note 9). Through November 30,
1996, the majority shareholder of the Company has contributed cash
funds totaling $545,067 used for acquisition and investment costs and
operating expenses. As of February 28, 1997, the majority shareholder
has been issued 1,298,800 of common stock for the funds contributed
and have been reflected as outstanding in the accompanying
consolidated financial statements. On January 3, 1997 the company
issued 300,000. On February 7, 1997 the company issued 4,000,000
shares of common stock to Dr Charles C. Edwards as a deposit on the
purchase of his interest in Wasatch/Edwards L.L.C Partnership. These
shares were issued at $1.00 per share. The full purchase price is
contingent upon the value of the land in the Bahamas. The Company
issued, on February 7, 1997, 955,000 and 193,800 shares of common
stock on February 21, 1997 to La Salle for money advanced Wasatch at
1.00 per share.
NOTE 8 - COMMON STOCK OPTIONS
The Company's president was granted the option to purchase 500,000
shares of the Company's common stock at par value as part of a
related employment agreement (see Note 6). The President has since
exercised said option. The difference between estimated market value
on the date of grant, $1.00, and par value, $.001, applied to the
500,000 options granted, totaling $499,500 has been recognized as
compensation in the accompanying consolidated statement of
operations.
NOTE 9 - ACQUISITION OF CARIBBEAN HOLDINGS INTL. CORP.
As discussed in Note 1, pursuant to an agreement dated September 25,
1996, the Company acquired all of the issued and outstanding common
stock of Caribbean Holdings Intl. Corp. (Caribbean) in exchange for
25,000,000 shares of the Company's common stock. Caribbean's
principal asset is a 50% net profits interest in a joint venture
having development, ownership and other rights associated with
approximately 15,000 acres of real estate in the Bahamas having a
estimated fair market value of at least $12,000,000. The real estate
is part of an estate that is currently being probated with
Caribbean's joint venture partners being heirs to the property. The
heirs are to convey the ownership of the property to the joint
venture once marketable title has been obtained, in exchange for a
50% net profits interest in the joint venture. The joint venture
interest and the related real estate have no cost basis to the
Company and, accordingly, no related value for the property or the
joint venture interest has been recorded in the accompanying
consolidated financial statements. The agreement provides that
Caribbean is to provide a fairness opinion from investment counsel, a
legal opinion confirming marketable title to the real estate
transferred to the joint venture and a certified appraisal valuing
the real estate at
16
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WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
February 28, 1997 and November 30, 1996
a minimum of $12,000,000. Should the appraisal result in a fair
market value of less than $12,000,000, the number of shares of the
Company's common stock shall be reduced proportionately. These
conditions were to have been met by December 31, 1996 which has not
been accomplished. The Company has informally extended the date
indefinitely for compliance with these conditions.
NOTE 10 - EDWARDS-WASATCH ENTERPRISES L.L.C. JOINT VENTURE
In October 1996, the Company agreed to provide a total of $5,000,000
of Debtor-in Possession (DIP) financing to Kiwi International
Airlines, Inc. (Kiwi), a company which had filed for reorganization
pursuant to Chapter 11 of the National Bankruptcy Code. As of
November 30, 1996, the Company provided Kiwi with $100,000 toward the
DIP financing. On November 26, 1996, the Company entered into a joint
venture agreement with an unaffiliated individual and formed the
Edwards-Wasatch Enterprises L.L.C. (EWE). The Company then assigned
its right to provide Kiwi the DIP financing and the exclusive right
to present a plan of arrangement in the bankruptcy proceedings, which
assignment and arrangement was approved by the Bankruptcy Court.
Subsequent to November 30, 1996, two orders have been approved by the
bankruptcy court increasing the DIP financing to $9,700,000. The EWE
joint venture has financed Kiwi with $5,780,000 in cash and
$3,159,000 in the forms of letters of credit. The Company has a 41.3%
ownership interest in EWE. The joint venture agreement is structured
to enable to the Company to acquire the interest of the other joint
venture partner. In that regard, subsequent to November 30, 1996, the
Company issued 4,000,000 shares of common stock to the other joint
venture partner as down payment for acquiring his interest in EWE.
This joint venture partner has subsequently been appointed to the
board of directors of the Company.
NOTE 11 - SUBSEQUENT EVENTS
In December 1996, the Company issued 500,000 shares of common stock
to an unaffiliated individual in return for $500,000. These funds
were used by the Company to meet the joint venture contributions
discussed in Note 10. The Company has agreed to repay these monies to
the individual in return for the shares of common stock which are
being held in escrow. The Company is in default on its repayment
commitment and suit has been instituted to recover said moneys plus
other relief
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
PLAN OF OPERATION.
The Company had no substantial revenues from operations for the quarter
ended February 28, 1997 and does not anticipate receiving any revenues from
operations during the remainder of the current fiscal year. All funds required
to bring the Company's plans to fruition are derived from investments by
existing or new stockholders.
The following is a summary of the Company's current and past projects.
PALM BEACH CRUISE LINES, INC.
The Company submitted a bid to purchase all of the assets of Palm Beach
Cruise Lines, Inc. ("Palm Beach") a casino/cruise ship operating out of Palm
Beach, Florida and the Bahamas which was in reorganization proceedings pursuant
to Chapter 11 of the United States Bankruptcy Code. Pursuant to an agreement,
the Company advanced $312,000 as Debtor-In-Possession ("DIP") financing to Palm
Beach as working capital. The Company lost its right to offer a plan of
arrangement, but the Court confirmed its right to receive the return of its
$312,000. The Company had transferred said rights to a third party in exchange
for the advancement of $200,000 and the cancellation of a $100,000 obligation of
LaSalle, its largest shareholder.
KIWI INTERNATIONAL AIRLINES, INC.
The Company is currently involved in the advancement of DIP financing
to Kiwi International Airlines, Inc. ("Kiwi") a commercial air carrier which is
in reorganization pursuant to Chapter 11 of the United States Bankruptcy Code.
The Company, in October of 1996, agreed to provide a total of $5,000,000 in DIP
financing to Kiwi. In November of 1996, the Company in association with a
Baltimore individual (hereinafter referred to as "Edwards") agreed to form a
Limited Liability Company, Edwards-Wasatch Enterprises L.L.C. (hereinafter
"EWE") to which the Company assigned its right to provide Kiwi the DIP financing
and for the exclusive right to present a plan of arrangement in the bankruptcy
proceedings. Pursuant to the agreement (the "EWE Agreement"), Edwards agreed to
provide up to $5,000,000 to fund Kiwi operations and the Company agreed to
provide up to an additional $1,000,000. Subsequent Bankruptcy Court Orders
increased the DIP financing to a total of $9,500,000, consisting of $6,000,000
in cash and $3,500,000 in the form of letters of credit.
EWE is currently owned 41.3% by the Company and 58.7% by Edwards. The
Company has an option to acquire Edward's interest in EWE by converting said
interest into shares of the Company's common stock, provided that the Company's
stock is convertible into shares of Kiwi. Management of the Company believes
that a substantial additional investment will be necessary to provide the
capital necessary to pay the cost and expenses of the Chapter 11 proceeding and
to compromise the various claims of Kiwi. The Company's relationship with Kiwi
is that of debtor/creditor and it expects to be repaid the full amount or a
substantial part thereof the DIP loan. The Company is not responsible for any of
Kiwi's debts. However, the Company intends to raise the capital needed to fund
Kiwi's reorganization expenses estimated at $10 to $15 million.
CARIBBEAN HOLDINGS INTERNATIONAL INC.
18
<PAGE> 19
In September 1996 the Company acquired 100% of the outstanding common
stock of Caribbean Holdings International Inc. ("Caribbean"), a Florida
corporation, in exchange for 25,000,000 shares of common stock of the Company.
At the time of the acquisition, the principal asset of Caribbean was a joint
venture agreement with Raymond and Merril MacDonald to develop approximately
15,000 acres of land in the Bahamas. Pursuant to the acquisition agreement
between the Company and Caribbean, Caribbean is to provide the Company with a
real estate appraisal establishing the value of the land at no less than
$12,000,000; a fairness opinion from an investment banking firm establishing a
fair market value of Caribbean at no less then $12,000,000; and a legal opinion
confirming marketable title to the lands. As of this date, no appraisal,
fairness opinion or legal opinion have been completed. Pursuant to the terms of
the Joint Venture Agreement, as of February 28, 1996, the Company paid $129,900
to Raymond & Merril MacDonald.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company has agreed to return the investment of an offshore
purchaser to resolve a dispute regarding a stock purchase. Litigation has been
instituted by the investor, but the Company intends to resolve the matter
amicably.
On or about December, 1996, the company was named in a lawsuit along
with four other defendants to recover an alleged loan in the amount of
approximately $50,000. Said matter has been settled in principle and the terms
are confidential. Management does not believe that this amount is material.
Further, to the knowledge of management, no director or executive
officer is party to any action in which any has an interest adverse to the
Company.
ITEM 2. CHANGES IN SECURITIES.
On October 30, 1996 the Company filed a Certificate of Amendment of
Articles of Incorporation to authorize 20,000,000 of preferred stock, par value
$0.001. No shares of preferred stock have been issued as of this date.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None; not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None; not applicable.
ITEM 5. OTHER INFORMATION.
None, not applicable.
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (SECTION 249.308 OF THIS CHAPTER).
(a) Exhibits* Exhibit Number Page Number
None.
(b) Reports on Form 8-K.
None.
- THIS SPACE INTENTIONALLY LEFT BLANK -
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WASATCH INTERNATIONAL CORPORATION
Date: May 14, 1997 By: /s/*
---------------------------------------
Joe Logan Jr., President
Date: May 14, 1997 By: /s/*
---------------------------------------
Eli Leibowitz, Chief Financial Officer
Date: May 14, 1997 By: /s/*
---------------------------------------
Mary Duncan, Secretary
Date: May 14, 1997 By:
---------------------------------------
John B.M. Frohling
Attorney-in-fact
* John B.M. Frohling by signing his name thereto signs this Form 10-QSB on
behalf of the persons indicated above. An original power of attorney
authorizing John B.M. Frohling to sign this Form 10-QSB on behalf of Joe
Logan Jr., Eli Leibowitz, and Mary Duncan have been executed.
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WASATCH
INTERNATIONAL CORPORATION (A DEVELOPMENTAL STAGE CO.) CONSOLIDATED FINANCIAL
STATEMENTS, NOVEMBER 30, 1996 AND FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 5,083
<SECURITIES> 0
<RECEIVABLES> 398,168
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 403,331
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,994,288
<CURRENT-LIABILITIES> 664,280
<BONDS> 0
0
0
<COMMON> 34,263
<OTHER-SE> 5,295,745
<TOTAL-LIABILITY-AND-EQUITY> 5,994,288
<SALES> 0
<TOTAL-REVENUES> 15,672
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 726,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (392,888)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 5,000
<CHANGES> 0
<NET-INCOME> (392,888)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
