<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 November 30, 1996
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)
NEVADA 87-0435741
(State or other jurisdiction I.R.S. Employer Id. Number.
of incorporation or organization)
1301 N. Congress Avenue, Suite 135, Boynton Beach, Florida 33426
(Address of principal executive offices)
(201) 226-4600
(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.
<PAGE> 2
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 Jones, Jensen &
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 -
<PAGE> 3
WASATCH INTERNATIONAL CORPORATION
AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND MAY 31, 1996
<PAGE> 4
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Balance Sheet
ASSETS
<TABLE>
<CAPTION>
November 30, May 31,
1996 1996
------------ -------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 979 $10,969
Receivable (Note 2) 200,000 --
Notes receivable and accrued interest - current 6,354 10,011
Prepaid legal fees 7,500 --
-------- -------
Total Current Assets 214,833 20,980
-------- -------
VEHICLE, net of accumulated depreciation of $8,216
and $4,424, respectively 31,605 35,397
-------- -------
OTHER ASSETS
Joint venture - net profit advances (Note 3) 118,000 --
Advance on debtor-in-possession financing (Note 10) 100,000 --
Notes receivable and accrued interest, net - long term 3,657 --
-------- -------
Total Other Assets 221,657 --
-------- -------
TOTAL ASSETS $468,095 $56,377
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
November 30, May 31,
1996 1996
------------ -------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 49,065 $ 1,915
Related party payables (Note 4) 28,450 28,000
Current portion of capital lease payable (Note 5) 1,980 4,524
----------- ---------
Total Current Liabilities 79,495 34,439
----------- ---------
LONG-TERM DEBT
Capital lease payable (Note 5) 26,906 25,271
----------- ---------
Total Liabilities 106,401 59,710
----------- ---------
COMMITMENTS AND CONTINGENCIES
(Notes 6, 9, 10 and 11)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $10.00 par value, 10,000,000
shares authorized, none issued and outstanding -- --
Common stock, $0.001 par value, 50,000,000
shares authorized, 28,901,618 and 2,979,020
shares issued and outstanding, respectively 28,902 2,979
Additional paid-in capital 1,535,262 981,179
Deficit accumulated during the development stage (1,202,470) (987,491)
----------- ---------
Total Stockholders' Equity (Deficit) 361,694 (3,333)
----------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 468,095 $ 56,377
=========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the Three Months For the Six Months November 4,
Ended November 30, Ended November 30, 1985 Through
----------------------- --------------------------- November 30,
1996 1995 1996 1995 1996
----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
REVENUE $ 910 $ -- $ 910 $ -- $ 910
----------- ------ ----------- ------ -----------
OPERATING EXPENSES
Officers and directors compensation 671,167 -- 671,167 -- 671,167
Legal fees 410,000 -- 410,500 -- 410,500
Other general and administration
expenses 81,641 -- 118,476 -- 118,476
----------- ------ ----------- ------ -----------
Total Operating Expenses 1,162,808 -- 1,200,143 -- 1,200,143
----------- ------ ----------- ------ -----------
OPERATING LOSS (1,161,898) -- (1,199,233) -- (1,199,233)
----------- ------ ----------- ------ -----------
OTHER INCOME AND (EXPENSE)
Interest expense (1,341) -- (1,341) -- (1,341)
Depreciation (1,896) -- (1,896) -- (1,896)
----------- ------ ----------- ------ -----------
Total Other Income and
(Expense) (3,237) -- (3,237) -- (3,237)
----------- ------ ----------- ------ -----------
NET LOSS $(1,165,135) $ -- $(1,202,470) $ -- $(1,202,470)
=========== ====== =========== ====== ===========
Net Loss Per Share $ (0.04) $(0.00) $ (0.07) $(0.00)
============ ====== =========== ======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE> 7
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit)
From Inception on November 4, 1985 through November 30, 1996
<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
<PAGE> 8
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on November 4, 1985 through November 30, 1996
<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 160,000 160 159,840 --
Common stock to be issued for cash
contributions 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>
The accompanying notes are an integral part of these consolidated
financial statements.
8
<PAGE> 9
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the Three Months For the Six Months November 4,
Ended November 30, Ended November 30, 1985 Through
----------------------- --------------------- November 30,
1996 1995 1996 1995 1996
----------- ---- ----------- ---- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $(1,165,135) $-- $(1,202,470) $-- $(1,202,470)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Common stock issued for services 460,000 -- 460,000 -- 460,000
Common stock options granted
for services 499,500 -- 499,500 -- 499,500
Depreciation 1,896 -- 1,896 -- 1,896
Changes in operating assets and liabilities:
(Increase) in receivable (200,000) -- (200,000) -- (200,000)
(Increase) in prepaid legal fees -- -- (7,500) -- (7,500)
(Increase) decrease in note
receivable and accrued interest -- -- -- -- (10,011)
(Increase) in joint venture in
net profit advances (118,000) -- (118,000) -- (118,000)
(Increase) in debtor-in-possession
financing advance (100,000) -- (100,000) -- (100,000)
Increase (decrease) in accounts
payable and accrued liabilities 49,065 -- 47,150 -- 49,065
----------- --- ----------- --- -----------
Net Cash (Used) by
Operating Activities (572,674) -- (619,424) -- (627,520)
----------- --- ----------- --- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Common stock issued to
acquire subsidiary 147,295 -- 147,295 -- 147,295
Purchase of fixed assets -- -- -- -- (8,935)
----------- --- ----------- --- -----------
Net Cash (Used) by Investing
Activities 147,295 -- 147,295 -- 138,360
----------- --- ----------- --- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Principle payments on capital lease (291) -- (909) -- (909)
Advances from related parties 450 -- 450 -- 28,450
Common stock to be issued for cash
contributions 426,058 -- 462,598 -- 462,598
----------- --- ----------- --- -----------
Net Cash Provided (Used) by
Financing Activities $ 426,217 $-- $ 462,139 $-- $ 490,139
----------- --- ----------- --- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
9
<PAGE> 10
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the Three Months For the Six Months November 4,
Ended November 30, Ended November 30, 1985 Through
------------------- ------------------- November 30,
1996 1995 1996 1995 1996
-------- ---- -------- ---- ------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 778 $-- $ (9,990) $ $ 979
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 201 -- 10,969 -- --
-------- --- -------- --- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 979 $-- $ 979 $-- $ 979
======== === ======== === ========
Cash Paid For:
Interest $ 1,341 $-- $ 1,341 $-- $ 1,341
Income taxes $ -- $-- $ -- $-- $ --
Non Cash Financing Activities:
Issuance of common stock to
acquire subsidiary $147,235 $-- $147,235 $-- $147,235
Issuance of common stock for
services provided $460,000 $-- $460,000 $-- $460,000
Common stock options granted
for services $499,500 $-- $499,500 $-- $499,500
Purchase of vehicle under a
capital lease $ -- $-- $ -- $-- $ 29,795
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
10
<PAGE> 11
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
November 30, 1996 and May 31, 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.
Effective September 25, 1996, the Company acquired all of the
issued and outstanding common stock of Caribbean Holdings Int'l
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 the Company's principal business
operation.
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 November 30, 1996, 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 November 30,
1996. 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.
11
<PAGE> 12
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
November 30, 1996 and May 31, 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 subsidiaries, Graffiti Removal Systems, Inc.
and Caribbean Holdings Int'l 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.
i. Vehicle and Depreciation
The vehicle is stated at cost. Depreciation is provided using
the straight-line method over an expected useful life of five
years.
12
<PAGE> 13
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
November 30, 1996 and May 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
j. Income Taxes
Through November 30, 1996, the Company and its subsidiaries have
sustained operating losses totaling approximately $1,600,000
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 primary
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 subsequent to November 30, 1996.
Accordingly, this receivable has been reflected as current in
the accompanying consolidated financial statements.
NOTE 3 - JOINT VENTURE NET PROFIT ADVANCES
On July 10, 1996, the Company's wholly owned subsidiary,
Caribbean Holdings Int'l Corp., entered into a joint venture
agreement with two individuals unaffiliated with Company the 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 individuals are the heirs to
an estate which is in the process of probate 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 November 30,
1996, a total of $118,000 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.
13
<PAGE> 14
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
November 30, 1996 and May 31, 1996
NOTE 4 - RELATED PARTY PAYABLES
For the periods ended November 30, 1996 and May 31, 1996,
certain officers, directors, employees and shareholders provided
services and cash to the Company which have been accounted for
as related party payables in the amounts of $28,450 and $28,000,
respectively.
NOTE 5 - CAPITAL LEASE PAYABLE
The Company's subsidiary, Grafitti, has purchased a vehicle
under a capital lease. Future minimum lease payments required
under the capital lease as of November 30, 1996 are as follows:
<TABLE>
<S> <C>
1996 $ 377
1997 4,524
1998 4,524
1999 4,524
2000 4,524
2001 4,524
2002 13,482
-------
Total minimum lease payments 36,479
Less amount representing interest (at 11%) (7,593)
-------
Present value of net minimum lease payments 28,886
Less current portion (1,980)
-------
Total $26,906
=======
</TABLE>
As of November 30, 1996, this leased vehicle has a cost of
$39,821 and accumulated depreciation of $8,216.
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, two months of his
salary totaling $41,667 has been accrued in the accompanying
consolidated financial statements. In addition, the Company
president 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
an annual stock option to acquire 500,000 of the Company's
common stock at par value. See Note 8 for a related discussion.
14
<PAGE> 15
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
November 30, 1996 and May 31, 1996
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)
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 Int'l Corp. The
number of shares issued and the basis of this transaction is
contingent upon Caribbean obtaining a fairness legal opinion,
marketable title, and an appraisal for a minimum of $12,000,000
all related to real estate associated with a joint venture for
which Caribbean is a partner. Those contingencies have not been
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 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 was 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 130,000 shares of common stock to officers and directors,
30,000 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.
15
<PAGE> 16
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
November 30, 1996 and May 31, 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 Int'l Corp. (see Note 9).
Through November 30, 1996, the majority shareholder of the
Company has contributed cash funds totaling $362,598 used for
acquisition and investment costs and operating expenses. The
majority shareholder is to be issued one share of common stock
for every dollar contributed. These shares had not been issued
as of November 30, 1996 but have been reflected as outstanding
in the accompanying consolidated financial statements.
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
difference between estimated market value on the date of grant,
$1.00, and par value, $.001, applied to the 500,000 options
granted, totalling $499,500 has been recognized as compensation
in the accompanying consolidated statement of operations.
There are no other common stock options outstanding at November
30, 1996.
NOTE 9 - ACQUISITION OF CARIBBEAN HOLDINGS INT'L CORP.
As discussed in Note 1, pursuant to an agreement dated September
25, 1996, the Company acquired all of the issued an outstanding
common stock of Caribbean Holdings Int'l 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 in probate with Caribbean 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 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.
16
<PAGE> 17
WASATCH INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Development Stage Companies)
Notes to the Consolidated Financial Statements
November 30, 1996 and May 31, 1996
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 principal
shareholder of the Company had provided to Kiwi $100,000 toward
the DIP financing on behalf of the Company.
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. As of November 30, 1996, the
Company had not advanced any funds with respect to this
transaction and, therefore, no effect of this transaction has
been reflected in the accompanying consolidated financial
statements.
Subsequent to November 30, 1996, two orders have been approved
by the bankruptcy court increasing the DIP financing to
$9,500,000. 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 is negotiating repayment
terms.
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
quarterly period ended November 30, 1996 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
18
<PAGE> 19
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 of 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.
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 has been
completed on the land. Pursuant to the terms of the Joint Venture Agreement, as
of November 30, 1996, the Company paid $118,000 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. In the event
litigation is instituted, 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.
19
<PAGE> 20
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.
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 thereunto duly authorized.
WASATCH INTERNATIONAL CORPORATION
Date: April 24, 1997 By: /s/ *
------------------------------------
Joe Logan Jr., President
Date: April 24, 1997 By: /s/ *
------------------------------------
Mary Duncan, Secretary
Date: April 24, 1997 By: /s/ John B.M. Frohling
------------------------------------
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., and Mary Duncan have been executed.
21
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