UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of X 1934 ---------
For the Fiscal year ended June 30, 1997 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 _____
For the Transition period from ____________ to ____________
Commission File No.: 0-17757
W W CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada 93-0967457
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(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
3500 JFK Parkway, Suite 202
Ft. Collins, Colorado 80525
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Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (970) 207-1100
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Securities registered pursuant to Section 12(b) of the Act:
Name of exchange or
Title of each class which registered
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Common stock, $.01 par value None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par Value
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(Title of Class)
(continued on next page)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.
Yes X No
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The aggregate market value of the voting stock held by non-affiliates of the
Company on October 24, 1997 (2,464,088 shares of common stock) was $418,895
based on the average of the bid and asked prices ($0.17 per share) as quoted on
the over the counter market.
The number of shares outstanding of each of the Company's sales of common stock,
as of October 24, 1997 was:
Common Stock, 5,540,661 Shares
$.01 par value
Documents Incorporated by Reference
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*This value is not intended to make any representation as to the value or worth
of the Company's shares of common stock. The number of shares held by
non-affiliates of the Company has been calculated by subtracting shares held by
controlling persons of the Company from the shares issued by the Company and
outstanding.
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W W CAPITAL CORPORATION
FORM 10-K
PART I
Item 1. Business
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(a) General Development of Business
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W W Capital Corporation ("Company") was originally incorporated as Freedom
Acquisition Fund, Inc., a Colorado corporation, on September 23, 1987, to merge
with or engage in a merger with, or acquisition of, one or a small number of
private firms.
On May 16, 1988, the Company completed a public offering of 15,000,000 Units at
an offering price of $.03 per Unit, each Unit consisting of one share of common
stock, one Class A Warrant to purchase one share of the Company's common stock
and one Class B Warrant to purchase one additional share of the Company's common
stock. The net proceeds of the offering to the Company were approximately
$240,000. The exercise period of the Class A Warrants expired on September 1,
1989. 3,754,500 Class A Warrants, at a price of $0.035 per common share, were
submitted to the Company's transfer agent for exercise, with proceeds of $131,
408 to the Company before the payment of offering expenses and commissions
associated with the offering. The Class B Warrants expired unexercised in June,
1990.
On December 9, 1989, the Company's shareholders approved a proposal to
re-incorporate W W Capital in the State of Nevada and to concurrently therewith,
reverse split on a 1 for 100 basis the authorized shares of common stock from
500,000,000 shares par value $0.0001 per share to 5,000,000 shares of common
stock, par value $0.01 per share and the 40,000,000 shares of authorized
preferred stock, par value $0.10 per share to 400,000 shares of preferred stock,
par value $10.00 per share. The re-incorporation and reverse stock split was
effective December 15, 1989.
On November 16, 1990, the Company's shareholders approved a proposal to increase
the number of authorized shares of common stock from 5,000,000 to 15,000,000
shares.
On August 16, 1988, the Company acquired 100% of the outstanding shares of W-W
Manufacturing Co., Inc. ("W-W") one of the oldest and largest livestock
equipment manufacturers in the United States, in exchange for 160,000,000 shares
of the Company's common stock. W-W currently manufactures a full line of cattle
and equine handling and confinement equipment for use by farmers, ranchers,
rodeos, and universities throughout the United States.
W-W's principals began doing business in Texas City, Texas in 1945 designing and
building their first cattle squeeze chute. Due to production and sales growth,
the principals moved the operation to Dodge City, Kansas, where they established
their first manufacturing facility in 1948. Operations continued to expand and
develop, and on October 18, 1961, W-W was incorporated in the State of Kansas.
On October 12, 1990, the Company acquired certain real estate properties in
Abilene, Texas from Western Fire and Marine Insurance Company. The real estate
was acquired in exchange for 80,000 shares ($800,000 par value) of the Company's
newly issued Series A Preferred Stock and $52,428 cash.
On October 25, 1990, the Company acquired certain undeveloped real estate
located in Johnson County, Texas from Apex Realty Investments, Inc. The real
estate was acquired in exchange for 40,000 shares ($400,000 par value) of the
Company's newly issued Series B Preferred Stock.
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On August 15, 1991, the Company entered into an exchange agreement ("Exchange
Agreement") with Titan Industries, Inc., a Nebraska corporation ("Titan"),
whereby the Company would issue to Titan common stock, in exchange for all the
outstanding stock of Titan. The consummation of this Exchange Agreement was
subject to approval by the stockholders of the Company. On December 13, 1991,
the stockholders approved the acquisition. The actual closing and exchange of
stock took place December 30, 1991. Under the terms of the agreement the
stockholders of Titan received 1,600,000 shares of W W Capital Common Stock in
exchange for all the outstanding common shares (7,500) of Titan Industries. The
shares had an aggregate value of $3,600,000 at the date of closing. The purchase
price was arrived at through an arms length negotiation.
On October 26, 1992, the Company entered into an exchange agreement ("Eagle
Exchange Agreement") with Eagle Enterprises, Inc., a Tennessee corporation
("Eagle"), whereby the Company would issue to Eagle common stock, in exchange
for all the outstanding stock of Eagle. The consummation of the Eagle Exchange
Agreement was subject to approval by the Board of Directors of the Company. At a
special meeting of the Board of Directors held October 20, 1992, the Board
unanimously approved the acquisition. The actual closing and exchange of stock
took place on October 26, 1992. Under the terms of the Eagle Exchange Agreement,
the sole stockholder of Eagle (Jerry Bellar) received 325,000 shares of W W
Capital Corporation common stock in exchange for all the outstanding common
shares (1,539) of Eagle Enterprises. The shares had an aggregate value of
$893,750 at the day of closing. The purchase price was arrived through an arms
length negotiation. Eagle Enterprises was formed in August 1985 to manufacture
livestock handling equipment. The company is presently located in a 40,000
square foot facility on 11 1/2 acres in Livingston, Tennessee. The Company's
primary products are creep, bunk, mineral and round bale feeders for livestock.
The company also manufactures livestock panels and gates along with two versions
of headgates.
On February 19, 1993, the Company entered into an exchange agreement ("Real
Estate Exchange Agreement") with Apex Realty Investments, Inc., a Colorado
corporation ("Apex") a related party, whereby the Company exchanged assets (real
property in Abilene, Texas) and common stock for real property owned by Apex.
Under the terms of the Real Estate Exchange Agreement, Apex received real
property the Company owned in Taylor County, Texas, a note receivable from two
individuals, and 100,000 shares of the Company's restricted common stock in
exchange for approximately 455 acres of real property, with water rights and a
$60,000 timber contract located on the property in the mountains of Grand
County, Colorado. In addition the Company assumed a $265,000 mortgage payable on
the real estate. On December 15, 1994 this land was sold to an unrelated third
party and received net cash of $374,606 after payoff of mortgage and other costs
and the company is carrying back a note for $440,218 on the balance. This note
was paid in-full in February 1996. Details of this transaction are more fully
discussed in note 4 and 6 to the Financial Statements.
On October 15, 1993, the Company acquired various assets of Wholesale Pump and
Supply, Inc. ("Wholesale") of Oklahoma City, Oklahoma by issuing 250,000 shares
of common stock. The shares had an aggregate value of $145,000 at the day of
closing. The purchase of assets was arrived through an arms length negotiation.
Wholesale operates as a division of Titan Industries and is currently doing
business in a 10,000 square foot warehouse rented on a month to month basis. The
company's primary functions are distributing water well supplies and
environmental monitoring equipment for testing ground water.
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(b) Financial Information About Industry Segments
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The business of the Company is carried on within two segments by three operating
units, each with its own organization. The management of each operating
subsidiary unit has responsibility for product development, manufacturing,
marketing and for achieving a return on investment in accordance with the
standards and budgets established by W W Capital. Overall supervision,
coordination and financial control are maintained by the executive staff from
the corporate headquarters located at 3500 JFK Parkway, Suite 202, Ft. Collins,
Colorado. As of June 30, 1997, the Company and its segments had approximately
147 employees. The reader is referred to Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations and notes to the
Company's Financial Statements for certain financial information regarding these
segments.
(c) Narrative Description of Business
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The registrant conducts its business through its two business segments:
livestock handling equipment group, and the water and environmental products
group. A discussion of these segments follows.
Livestock Handling Equipment Group
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This division generated 54.2% of total corporate sales compared to 51.9% for
fiscal 1996.
Principal Products, Markets and Distribution
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The Livestock Handling group manufactures a broad line of cattle handling,
equine (horse), rodeo equipment and containment systems. This equipment is used
by farmers, ranchers, rodeos, county fairs, veterinarians and universities.
Presently with its 51 year old history W-W Manufacturing, the primary subsidiary
of this segment, is well recognized in the industry as the leader in production
of livestock equipment. With the acquisition of Eagle Enterprises, October 1992,
the Company has experienced growth with this segment reaching a record high
sales of $11,369,826 for fiscal year June 30, 1994. Eagle had manufactured all
types of livestock feeding equipment and various containment systems similar to
that manufactured by W-W Manufacturing. The Eagle line of products is primarily
distinguished from W-W Manufacturing's products by a purchase decision that is
primarily motivated/driven by pricing considerations.
Eagle had eliminated some of its line of feeding equipment which had not been
profitable in 1995. By elimination of these products, Eagle has the
manufacturing capacity to produce the majority of W-W Manufacturing line of
products, thus improving its delivery time to Dealer/Distributors in the east,
and southeastern United States. The Eagle plant was realigned to complement the
W-W Manufacturing line of products and all products will be sold under the W-W
Manufacturing name. This is significant since the W-W Line has a long term (51
years) reputation as an industry leader and manufacturing of quality equipment.
Now that the W-W Manufacturing line is manufactured at Eagle, Eagle has
reintroduced a redesigned feeding line to meet customer needs and enabling Eagle
to produce it profitably. This reintroduction should help Eagle reclaim sales
levels that were lost when the feeding line was dropped as well as pick up new
sales from customers previously handling the W-W Manufacturing line only. The
redesigned feeding line is also being introduced into the midwest and west
markets and is now being manufactured at W-W Manufacturing. Feed equipment has
proven to be a lower margin product line but continues to sell during depressed
market conditions and is used as a lead in product to gain new customers
acceptance for the traditional higher margin W-W working equipment line.
The market for cattle handling equipment is segmented by herd size into economic
classifications. Based upon an independent study done for the Company, it is
believed that economic dissimilarities between large and small operators create
important differences in buying behavior. Recognizing this, management of the
Company has positioned the Company to meet the demands of the market place and
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to be able to service both the large and small operator through its sales and
marketing targeted at expanding the Dealer/Distributor network throughout the
entire United States.
The Company did not renew the sales and marketing agreement with Agri-Sales
Associates (Agri-Sales) after the first term concluded in October of 1994. When
utilizing the services of Agri-Sales, some new accounts were established, but
the Company felt it lost some control over the sales functions and felt it
necessary to have closer contact with its customers. After the conclusion of the
Agri-Sales Agreement management assessed the conditions of its customers and
market and realized that not all products were selling and customers inventory
levels were too high. With over sold market areas, the Company had to develop a
plan to systematically help customers understand and sell through its inventory.
The Company has established sales areas and hired salespeople to cover the
entire United States. With an aggressive sales and marketing plan in place the
Company has hired an experienced sales manager and seven salesmen to continue to
expand our Dealer/Distributor network. During the transition from Agri-Sales to
our own in-house sales staff and the expansion into new market area, sales
expenses have been higher than expected as salesmen gain knowledge of the
customers and market. As our Dealer/Distributor network is expanded, management
felt there would be an overall reduction in sales expenses and this savings
would be realized on the bottom line. This can be seen clearly by looking at the
continued decline in selling cost in the accompanying financial statements. A
substantial majority of this segment's sales will continue to be in cattle
handling equipment. It is expected that 80% of these sales will be generated
through the expanded Dealer/Distributor network. At present the Company works
with approximately 94 different distributors representing 5,700 Sub-Dealers
throughout the United States and Mexico.
The Company will continue to generate sales by offering special assistance in
design and installation of product. This service has proven to be a valuable
asset in the sale of equipment to large fairs, expo centers, rodeos and
universities.
Over the years, W-W Manufacturing products have become favored for durability
and ease of use by ranch hands who must work large volumes of cattle. W-W
Manufacturing's presence at rodeos underscores the Company's position in the
marketplace as a producer of equipment for the "working cowboy." W-W
Manufacturing has been responsible for many innovations in rodeo equipment and
has developed a well-respected line for that market. Since 1979, all of the
chutes and rodeo equipment for the Professional Rodeo Cowboys National Finals
Rodeo (NFR) have been supplied by W-W Manufacturing. The NFR is the largest
rodeo championship event in the world. In addition, W-W Manufacturing has
provided all the equipment for the International Rodeo Association Finals since
1978 and for many other top Rodeos across the country.
In the past, the Company has produced both heavy duty and portable horse stalls.
These products have been primarily used by commercial users and exposition
centers. Based on the success of the commercial horse stalls, the Company has
introduced stalls designed for the equine hobbyist and horse show enthusiast.
Aesthetics, ease of use and durability are considered by management to be the
main selling points of this kind of equipment. The new horse stalls have been
marketed through the distributor network already established by the Company.
Cost of distribution of products has and will continue to be a problem for the
customers and the Company. To help lower this cost the Company needs to continue
to find ways to fill trucks with a variety of products. With the introduction of
the feed equipment, the stock tank line, and other horse related products, the
Company anticipates these products will help reduce its distribution cost and
provides its customer the opportunity to carry more items with less depth of
inventory.
Management believes these developments are key to the success of the Company's
future expansion, and intends to continue to increase its Dealer/Distributor
network vigorously. Demonstration, seminars and special design will continue to
be offered and special discounts given to principal distributors for volume
purchases.
4
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Raw Materials and Facilities
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The manufacture of livestock handling equipment requires various sizes of steel,
tubing and other related steel products. The products necessary for fabrication
of equipment are purchased from numerous steel companies, and the Company has
experienced no difficulties in obtaining adequate supplies. The subsidiaries of
this segment are located as follows: W-W Manufacturing, the largest by sales
volume of the two subsidiaries, is located at 2400 East Trail Street, Dodge
City, Kansas. Eagle Enterprises, is located at 175 Windle Community Road,
Livingston, Tennessee. The Hydraulic Chute division is located at 401 Loomis
Rd., Weatherford, Oklahoma.
Competition
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The Company encounters competition in varying degrees in both cattle handling
and equine product lines. Competitors are primarily domestic producers of
similar products. These companies compete in price, delivery schedules, quality,
product performance and other conditions of sales. During 1997 and 1996,
management invested in new equipment, did extensive training, scheduled many
live demonstrations, improved plant efficiencies, introduced new product
improvements and new products, in order to maintain its competitive edge.
Strategy for Growth
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Growth is anticipated in two areas. First, the Company will continue to expand
the distributor/dealer network and expand into the upper midwest and west.
However, this area for growth will be constrained by availability of capital
resources and continuing good market conditions.
Diversification into related product areas now served by the Company could
afford a second area for growth. Management believes W-W Manufacturing's 51 year
old reputation for quality, as well as for introducing new innovations into
existing products, has positioned the Company ideally as a marketer for new
products of its own as well as other companies' products.
Water and Environment Products Group
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The water and environmental products group consists of Titan Industries of
Paxton, Nebraska with distribution locations in Dodge City, Kansas and its
division, Wholesale Pump and Supply in Oklahoma City, Oklahoma. This group
accounts for 45.8% of total corporate sales for the fiscal year 1997. This
compared with 48.1% in fiscal year 1996.
Titan's functions are broken down primarily into two divisions. The distribution
of water well supplies and related products, and manufacturing of environmental
products for the water industry.
Principal Products, Markets and Distribution
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The Company distributes (wholesale) a wide variety of water well and related
products. These products include submersible pumps, high pressure tanks, pipe,
pipe fittings and various other accessories for water well drillers, plumbers
and various other applications of water uses. The Company sells these products
by direct sales through the sales force, by dealers and independent
representatives. These products are primarily sold in a close proximity to the
present three distribution points in Paxton, Nebraska, Dodge City, Kansas, and
Oklahoma City, Oklahoma. The Company has taken steps to widen its water well
supplies distribution by offering new lines not carried by local competitors.
Titan has also improved its delivery schedules to meet the demands of these
customers thereby making service the top priority in expanding this segment of
the business.
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The Company is also involved in manufacturing water well monitoring equipment
which adds an environmental aspect to the business. Titan manufactures several
unique products like flush threaded PVC pipe which allows strong joints without
glue. Flush threaded pipe allows for seamless joints both inside and out. This
is significant as monitor wells are tested for impurities, in the parts per
million category, where joint solvents and glues can actually be measured as
part of the contamination. By packaging products together as monitoring well
units, the Company is able to sell these units for greater total profit margins
than the individual components command as separate (commodity type) items.
Another unique product produced by Titan is flush mounted PVC screens which
offer a lower cost and longer life since standard steel screens are subject to
corrosion. Titan has introduced several new products expanding its manufacturing
goods to include a combo-buried pressure tank Enviroflex well screen, and
various Verta-slot applications used in heavier wall applications. The Company
has added significant growth in the environmental sales with other products such
as well protectors, manhole covers, drainage pipe and various other related
products.
The environmental products are marketed through distributors which have been set
up throughout the United States. Management plans to continue its efforts to
market aggressively to government agencies as the guidelines for ground water
testing become more stringent.
Raw Materials and Facilities
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The Company redistributes various manufactured products through its water well
supply division. Also, the Company uses various sizes of PVC pipe for production
of its well screen and flush jointed products. The Company has not experienced
any difficulties in obtaining the raw material needed for production of its
water well products.
The subsidiary of this segment owns its new headquarters and manufacturing
facilities which consists of 25,000 square feet located in Paxton, Nebraska,
which was completed in December 1994. The Company also has two other
distribution points located in Dodge City, Kansas and Oklahoma City, Oklahoma
(Wholesale Pump and Supply).
Competition
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The water well supply division of Titan experiences a high degree of competition
and only sells within a close proximity to its three distribution points. The
environmental products consisting of well screen flush jointed pipe, and new
horizontal drilling products have achieved a unique position in their various
markets. These products encounter some degree of competition, but due to their
unique design and availability of production Titan, maintains a market dominance
in this area, throughout the United States. During 1994, the Company invested in
new equipment, and constructed a new plant which was completed in December,
1994, to enhance production and improve delivery time. Since the completion of
the facility the Company has enjoyed new customer growth across the country.
Strategy for Growth
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Growth is anticipated in several areas. First, distributor demand of the
Company's existing product line has continued to remain strong as more and more
distributors around the Country became aware of Titan's quality and reliability
of delivery. The Company has improved significantly sales of larger diameter
pipe with the manufacturing equipment added during 1994. Since gross profit
margins increase in direct proportion to pipe diameter size, this new equipment
should enhance profitability. With the addition of Wholesale Pump and Supply in
Oklahoma City, Oklahoma, growth to the south, southeast and southwest has been
greatly improved. The Company anticipates significant additional increases in
these areas with the environmental well products due to the ease and speed of
delivery. Second, the Company continues to increase marketing its products to
governmental agencies as they expand the Environmental Protection Agency
guidelines for testing of ground water. Third, the Company has been
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investigating and developing new slotting techniques using high density
polyethylene pipe for use in the horizontal drilling industry. This product is
being used extensively by land fills and in other waste treatment applications.
The Company has also expanded its market in custom fabrication of pipe through
round hole perforations, Titan Versa slot and other applications as requested by
customers. Recent developments in the mining industry show that their is a
significant market for Titans products and is presently looking for ways to
distribute its line of products.
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Other Information Relative to the Business
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Patents and Trademarks
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The Company holds no patents or registered trademarks or service marks.
Seasonality
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The Company experiences seasonality in sales in both of its segments. The
livestock handling equipment product segment has increased sales in the fall and
through the spring and lower sales in summer. The water and environment product
segment has increased sales in the spring, summer and into the fall and lower
sales in the winter. With this diversity in sales, the seasonality allows the
Company as a whole to experience overall level sales throughout the year.
Practice Relating to Working Capital
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The information relating to this Item is included under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources."
Dependence Upon a Single Customer
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Not Applicable
Dollar Amount of Backlog Orders
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Backlog in the livestock handling equipment group was $726,751. This increase
from 1996 is due to general improvement in the cattle market but mostly improved
dealer/distributor demand.
The water and environmental products showed a backlog increase from $205,000 in
1996 to $265,000 on June 30, 1997. This increase is due to larger demand for
manufacturing goods. Substantially all the backlog is expected to be realized as
sales during the first quarter of the 1997 fiscal year.
Business Subject to Renegotiation at Election of Government
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Not Applicable
Research and Development Expenditures
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Due to the nature of manufacturing operations of the Company and the types of
products produced by its two segments, expenditures for research and development
are not material to the overall operating cost.
Compliance with Environmental Controls
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In 1996, the Company had determined that a significant amount of paint located
at its Tennessee facility, must be disposed of to comply with environmental
regulations. The Company had estimated a range of $10,000 to $45,000 as the cost
to dispose of this paint based upon management's estimate and the actual cost
incurred subsequent to June 30, 1996 to dispose of the most contaminated barrels
of paint. The Company had accrued $10,000 of this charge as a liability in the
fiscal 1996. During 1997, the Company successfully completed its cleanup, and
the remaining cost of $15,561 that had not been accrued in 1996 has been
reflected in the accompanying financial statements for 1997.
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To the best of its knowledge, the Company believes that it is presently in
substantial compliance with all existing environmental laws and does not
anticipate that such compliance will have a material effect on its future
capital expenditures, earnings or competitive position with respect to any of
its business segments.
Item 2. Properties
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The Company's corporate headquarters is located at 3500 JFK Parkway, Suite 202,
in Ft. Collins, Colorado, and is leased from an unrelated third party.
The livestock handling equipment division is located at 2400 East Trail Street,
Dodge City, Kansas. This facility is leased from Murle F. and Sara R. Webster,
shareholders of the Company, for $5,000 per month, on a month to month basis.
This facility is comprised of approximately 40,000 square feet in three
buildings. The Company also has an Hydraulic division located at 401 Loomis Rd.,
Weatherford, Oklahoma. This facility is comprised of approximately 10,000 square
feet.
Eagle Enterprises is located at 175 Windle Community Road, Livingston,
Tennessee. This facility is owned by the Company and has approximately 40,000
square feet located on 11 1/2acres of land.
The water and environmental products group conducts its primary operations at
Highway 30, Paxton, Nebraska, in a facility which consists of general offices,
manufacturing facilities and open storage areas. This facility is approximately
25,000 square feet on 10.1 acres of land. The Company also has a distribution
facility at 1904 West Wyatt Earp, Dodge City, Kansas. Both of the aforementioned
locations are owned by the Company. Titan leases a third distribution facility
for its division, Wholesale Pump and Supply located at 1821 N.W. 4th Drive,
Oklahoma City, Oklahoma. The facility consists of approximately 10,000 square
feet of space, and is rented on a month to month basis for $1,100 per month.
The Company also owns an undeveloped 95 acre tract located southeast of Fort
Worth, Texas. The Company has listed this property for sale for $400,000, and
also is investigating the possibility of a joint venture development.
Item 3. Legal Proceedings
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On December 6, 1996, WW Capital and its legal counsel, Klenda, Mitchell,
Austerman and Zuercher, a Limited Liability Company and General Partnership
filed a law suit in the U.S. District Court Wichita, Kansas against Jerry R.
Bellar, individually. WW Capital sued to recover under provisions of the
Exchange Agreement cost associated with the settlement of "People's Bank of
Hunstville v. Liberty Metals Fabricating, LTD and Eagle Enterprises." It is
management's opinion that any amounts paid to Liberty Metals, on behalf of Eagle
would be indemnified by Bellar. It was indicated during the purchase of Eagle
that Eagle's exposure in the Liberty Metals case was "at worst a wash-out".
Bellar denies that the Liberty Metal case is covered under the indemnification
agreement. WW Capital is seeking to recover approximately $53,000 relating to
the settlement of the Liberty Metals case.
In addition the Company is seeking to recover its Legal fees advanced on
behalf of Bellar relating to the March Group case. Provisions of the exchange
agreement and a letter from Mr. Bellar to the Company attorneys, Klenda,
Mitchell, Austerman and Zuercher, call for Mr. Bellar to reimburse the Company
for all legal fees expended by the Company on Mr. Bellar's behalf. Mr. Bellar
contends that the legal fees advanced on his behalf are unreasonable and has
denied to reimburse the Company for these fees.
On or about March 26, 1997, the above captioned case was transferred to
the United States District Court for the Middle District of Tennessee in
Nashville. The Company has retained legal counsel of Farris, Warfield, and
Kanaday, PC in Nashville to handle the case.
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Legal Proceedings - (continued)
- -------------------------------
On two occasions the Company has made written offers to settle the case
with Mr. Bellar. At this time, the settlement offers have been rejected by Mr.
Bellar. Presently the case is in the discovery phase and management can not
project an outcome at this time. WW Capital is seeking to recover approximately
$195,235 relating to the reimbursement of legal fees and Liberty Metals, of
which $167,572 has been recorded in the financial statements.
In April, 1994, W-W Manufacturing and Eagle sent written notice to
Agri-Sales that the Companies would not renew their sales and marketing agency
agreement with Agri-Sales when the two year initial contract term expired on
October 26, 1994. Agri-Sales informed the Company that under the contract, W-W
Manufacturing and Eagle can not terminate the sales and marketing agreement
until May 26,1995. On October 5, 1994, the Company filed a lawsuit in the
Sixteenth Judicial District, Ford County, Kansas, asking the Court for
declaratory judgment and a preliminary injunction against Agri-Sales to resolve
the issue. On October 10, 1994, Agri-Sales filed an answer and made application
for a temporary injunction against the Company. On October 20, 1994, the
District Judge denied Agri-Sales application for a temporary injunction against
the Company. Additionally, Agri-Sales had filed a counter claim for relief
estimating damages of $500,000 to $600,000 for the commissions Agri-Sales would
have earned for the period October 26, 1994 to April 26, 1995, (the date
Agri-Sales contends that the contract will expire) and actual damages of
$475,206. Management was confident the court would decide that the contracts did
expire on October 26, 1994 and the actual amounts due Agri-Sales based upon the
Company's calculation, which had been recorded in the accompanying financial
statements, are substantially less than the amounts claimed. This case is in
discovery and the Company's legal counsel is unable to express an opinion on the
outcome of this case. The Company has been negotiating with Agri-Sales to settle
this lawsuit.
While the case was in the Discovery stage, the Company reached a
settlement agreement with Agri-Sales to settle the lawsuit. The Company offered
to pay $180,000 with $30,000 due upon final settlement of the March Group, Inc.
lawsuit discussed below with the remaining balance payable in semi-annual
payments of $25,000 until paid in full, with zero interest. This offer was
accepted by Jerry Bellar and an agreement was entered into on December 2, 1996.
The second installment of $25,000 has not been paid awaiting the outcome of the
lawsuit the Company filed against Bellar for non-compliance with the exchange
agreement previously discussed above.
On December 22, 1992, The March Group, Inc. (The March Group) filed a
lawsuit against Eagle and its former shareholders, Jerry R. Bellar (Bellar) and
James Buford (Buford). The March Group alleges that Eagle, Bellar and Buford
breached a listing contract to sell Eagle and has requested damages of $169,596
(Count I).
The March Group has also sued the Company for breach of a separate
agreement which the Company had made with The March Group promising to direct
all inquiries it had regarding the purchase of Eagle through The March Group and
is seeking damages of $169,596 (Count II).
Additionally, The March Group is requesting damages against Eagle, Bellar
and the Company under a specific Tennessee statue which would allow The March
Group three times its proven actual damages of $508,788 (Count III).
On May 6, 1994, the Chancery Court, for the State of Tennessee, entered an
order requiring Eagle to pay The March Group $169,596 under Count I and ruled in
favor of defendants on Counts II and III. On June 7, 1995 the court of appeals
reversed the decision that Eagle had to pay $169,596. The case (Count I) has
been remanded back to trial court for trial. The court of appeals affirmed the
decision of the trial court on Count II and III in favor for the Company. After
the Court of Appeals decision, Eagle filed an application for review to the
Tennessee Supreme Court asking it to reconsider the Court of Appeals decision
rejecting Eagle's claim that plaintiff violated the Tennessee Real Estate Broker
Licensing Act, thus forfeiting any fee under the listing contract. Trial of the
10
<PAGE>
remanded case to the trial court will not begin until such time as the Tennessee
Supreme Court has decided whether to grant Eagle's application for review. The
Tennessee Supreme Court denied Eagle's application to review the Court of
Appeals decision and trial was held on December 1996 in the Chancery Court of
Nashville, Tennessee. On December 9, 1996 the Court ruled in the favor of The
March Group and judgment was entered against Eagle for $137,264 plus prejudgment
interest totaling $30,815.45 and post judgment interest at the stationary rate
of 10% per annum and costs of the action. Under the terms of the Eagle Exchange
agreement, Bellar acknowledges that his indemnification obligates him to pay
Eagle for all damages awarded The March Group in excess of $50,000. In January
1997 Bellar filed a post trial motion in this case and has settled with The
March Group.
WW Capital had previously recorded the $50,000 minimum fee and on April 3,
1997 paid the $50,000 to finalize its obligations in this suit. Mr. Bellar has
paid all sums in excess of the $50,000 and this case in now closed.
Eagle was a defendant in a lawsuit filed by Liberty Metal Fabrications,
Limited (Liberty Metals) in the State of Kentucky. The claims against Eagle
relate prior to the acquisition of Eagle (October 26, 1992) by the Company.
Liberty Metals was claiming approximately $91,000 from Eagle. The Company
settled the claim by paying $18,000 and returning certain equipment to Liberty
Metals.
Additionally, it is Management's opinion that any amounts paid to Liberty
Metals, against Eagle, that Eagle would be indemnified by Bellar. It was
indicated during the purchase of Eagle that Eagle's exposure in the Liberty
Metals case was "at worst a wash-out". Bellar denies that the Liberty Metal case
is covered under the indemnification agreement.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
No matters were submitted for a vote of security holders of the Company during
the fourth quarter of the fiscal year ended June 30, 1997.
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matter
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Information
High Bid Low Bid
Quarter ended
- -------------
<S> <C> <C>
September 30, 1995 $ 0.313 $0.281
December 31, 1995 0.313 0.313 0.281
March 31, 1996 0.281 0.281
June 30, 1996 0.063 0.063
September 30, 1996 $ 0.063 $ 0.063
December 31, 1996 0.063 0.063
March 31, 1997 0.130 0.130
June 30, 1997 0.230 0.230
</TABLE>
The Company's Common Stock is listed on the over-the-counter market and trades
under the symbol "WWCL".
11
<PAGE>
Holders
- -------
As of October 21, 1997 the Company had approximately 558 record holders of its
common stock, not including some individuals holding shares in street name.
Dividends
- ---------
The Company did not pay dividends during 1997 or 1996 and does not intend to pay
cash dividends in the foreseeable future. The management of the Company intends,
for the present, to retain all available funds for the development of its
business. Additionally, certain of the Companies' loan covenants prohibit the
paying of dividends.
12
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
- ------- -----------------------
Year Ended June 30,
1997 1996 1995 1994 1993 (2)
---- ---- ---- ---- --------
SUMMARY OF OPERATIONS:
- ----------------------
<S> <C> <C> <C> <C> <C>
Net Sales ................ $ 15,072,285 $ 14,512,234 $ 15,563,461 $ 16,659,136 $ 13,532,260
Gross Profit Margin ...... 2,859,843 2,412,831 3,071,783 3,524,784 3,258,670
Operating Earnings (Loss) 349,922 (461,213) 26,172 (151,171) (206,831)
Interest Expense ......... 374,522 382,901 384,391 284,435 210,454
Operating Expense ........ 2,509,921 2,874,044 3,045,611 3,675,955 3,465,501
Net Earnings (Loss) ...... 28,120 $ (717,799) $ (405,987) $ (210,669) $ (386,866)
PER SHARE DATA:
Earnings (Loss) .......... .00(A)$ ( .13) $ ( .07) $ ( .04) $ ( .09)
Dividends per Common Share .00 .00 .00 .00 .00
Weighted Average
Shares Outstanding ....... 5,549,544 5,530,661 5,449,993 5,277,981 4,551,213
FINANCIAL CONDITION:
- --------------------
Total Assets ............. $ 8,679,093 $ 8,893,908 $ 9,547,517 $ 9,540,438 $ 8,562,981
Fixed Assets (Net) ....... 2,296,363 2,601,594 2,801,530 2,399,172 2,087,958
Long-term Debt ........... 577,074 1,927,267 1,830,730 1,532,484 1,562,597
Stockholders Equity ...... 2,452,990 2,424,240 3,142,039 3,476,328 3,452,067
Working Capital (1) ...... 289,203 $ 1,284,898 $ 1,083,808 $ 534,171 $ 971,460
Current Ratio (3) ........ 1.05 1.28 1.24 1.12 1.27
<FN>
A. Less than .01 cent
(1) The year ended 1997 reflects a reclassification of debt from long-term to current due to the renewal of Bank lines less
than one year.
(2) The year ended 1993 reflects the acquisition of Eagle Enterprises from September 1, 1992 through June 30, 1993.
(3) Percent of current assets to current liabilities.
</FN>
</TABLE>
13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto under Item 8.
Results of Operations:
The following table presents, for the periods indicated, the dollar value and
percentage relationship which certain items reflected in the Company's
Statements of Operations. This percentage shows the percent as it relates to the
total revenue.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Livestock Handling Equipment ... $ 8,170,971 54.2% 7,522,417 51.9% $ 8,870,970 57.0%
Water and Environmental Products 6,901,314 45.8 6,989,817 48.1 6,692,491 43.0
------------ ----- ----------- ----- ---------- -----------
Total Revenues . 15,072,285 100.0 14,512,234 100.0 15,563,461 100.0
---------- ----- ---------- ----- ---------- -----
Cost of Revenues .............. 12,212,442 81.0 12,099,403 83.3 12,491,678 80.3
------------ ----- ---------- ----- ---------- ----------
Gross Profit ................... 2,859,843 19.0 2,412,831 16.7 3,071,783 19.8
Selling, General and
Administration Expense .... 2,509,921 16.7 2,874,044 19.9 3,045,611 19.6
Operating Earnings (Loss) ...... 349,922 2.3 (461,213) (3.2) 26,172 0.2
Other Income (Expense) ......... 52,720 0.4 143,728 1.0 (33,192) (0.2)
Interest Expense ............... (374,522) 2.5 (382,901) (2.7) (384,391) (2.5)
------------ ----- ---------- ----- ---------- -----
Earnings (Loss) Before
Income Taxes .............. 28,120 0.2 (700,386) (4.9) (391,411) (2.5)
Income Taxes Net ............... -- 0.0 17,413 (0.1) 14,576 0.1
------------ --- ------ ---- ------ -------
Net Earnings (Loss) ........... $ 28,120 0.2% $ (717,799) (5.0)% $ (405,987) (2.6)
============ === ============ ==== ============ ====
Depreciation and Amortization .. $ 408,561 2.7% $ 444,653 3.1 % $ 449,245 2.9%
============ === ============ === ========== ===
</TABLE>
14
<PAGE>
Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30, 1996:
The Company had net earnings of $28,120 in 1997, as compared to a net loss of
$717,799 in 1996. After showing a net loss of $220,217 through the first six
months of the fiscal year, the Company made a profit the last two quarters of
$42,776 through the third quarter ended March 31, and $205,562 for the fourth
quarter ended June 30, 1997. The improved performance is due to improved sales
and profits in the livestock and equipment segment, while the water and
environmental products segment remained fairly consistent with the previous
year.
Total sales increased $560,051 or 3.9% to $15,072,285 in fiscal 1997 as compared
to $14,512,234 in fiscal 1996. Total sales in the livestock equipment segment
increased $648,554 to $8,170,971 in 1997. Sales in the water and Environmental
products segment decreased $88,503 to $6,901,314 in 1997 compared to $6,989,817
in 1996. The increase in livestock handling equipment sales can be attributed to
improved sales by both Eagle of $208,439 and W-W Manufacturing of $440,115. The
increase is attributable to general improvement of the cattle industry during
the last half of fiscal 1997, and the efforts of expanding the
distributor/dealer network during the declined cattle market of the past
eighteen months. The newly expanded distributor/dealer network produced strong
results during the third and fourth quarters. Special sales and designs for
Fairs, Expo Centers and Rodeos continue to remain steady as the Company
continues to be the leader in this area. Sales continue to improve on the new
re-introduced feed equipment and new panel lines along with the traditional
heavy cattle equipment. The demand from feed yards and vets for hydraulic chutes
and working arenas remain strong and is expected to continue throughout the
fiscal year. New and continuing equine (horse) products continue to gain
strength in the east and other areas of the country that have heavy horse
population. The Company will continue its efforts in the equine equipment area
to avoid sales decline when the next cattle slump occurs.
Rodeo equipment sales remain strong as the Company continues to maintain its
place as the leader of this segment of the livestock equipment business. The
Rodeo Equipment is the preferred choice of various rodeo associations including
the Professional Rodeo Cowboy Association, supplying equipment for the NFR
Finals for almost 20 years, and the Pro Rodeo Hall of Fame.
The Company continues to evaluate existing products for improvement as well as
develop new products to insure it maintains its leadership roll in the livestock
equipment industry. By listening to the end user and dealers, the Company
introduced innovative improvements to existing products during fiscal 1997 which
has helped improve distributor/dealer sales. Livestock systems which have always
been one of the strongest aspects of the Company's business has been boosted
with the introduction of two modified systems during the second half of fiscal
1997. Sales in all areas of the livestock equipment segments are expected to
remain strong through fiscal 1998 with the strongest growth to be in new
distributor/dealer sales.
The Company's two basic aspects of the water and environmental products segment
are distribution of water well supplies, and the manufacturing of various pipes,
tanks and accessories for the water, horizontal drilling and mining industries.
While sales decreased slightly in the water and environmental products segment,
sales of Company manufactured products showed strong improvement. Sales continue
to go well in standard flush joint PVC screen and casing, and slotted
high-density polyethylene pipe introduced in fiscal 1996 has continued to gain
strength in the horizontal drilling market.
Titan's Ver-ta Slot product continues to show strong acceptance which product
developed for heavier wall applications found in landfills highway construction,
and various mining applications. Vertical slotted openings are available in
15
<PAGE>
various diameters, schedules and types of pipe the Company has develop the
Ver-ta Slot for all applications and material including belled end, gasket end,
plain end or flush joint material
Another new product gaining market acceptance is Titan's Combo-buried Pressure
Tank. This tank offers many advanced features over competitor's tanks including
strength, convenience of installation, and simplified operation. With the
introduction of the Enviorflex well screen, Titan again leads the way with an
innovative well screen that's a cost effective way to prevent sedimentation in
horizontal remidiation wells. This screen offers strength and high performance
not found in other screens. This screen can be used for ground water, extraction
applications, and solid vapor extraction wells. These and other new products
being developed will help Titan maintain its reputation for being the "ultimate
supplier" of water and well products.
To help prevent the winter months downturn in the distributor portion of the
business Titan has expanded its distributor/dealer base in the south and west.
The expansion is expected to maintain higher sales levels during late second and
earlier third quarters. Traditionally these quarters are lower sales months due
to the extreme weather conditions in the midwest. It is anticipated that fiscal
1998 sales will improve slightly through second and third quarters of fiscal
1998 with strong sales during the late spring and early summer quarters.
Gross margins improved to 19.0% in 1997 from 16.7% in 1996. The livestock
handling equipment segment improved to 20.6% in 1997 compared to 18.8% in 1996,
and the water and environmental segment improved its gross profit to 17.0% in
1997 as compared to 16.6% in 1996. The improved gross profit in the Livestock
segment is due to Eagle's improvement to 11.5% in 1997 compared to (4.3%) in
1996. W-W Manufacturing improved to 23.7% in 1997 compared to 22.5% in 1996.
These improvements are due to lower steel and related costs and better
efficiencies in the manufacturing process. The Company is looking at all ways to
improve gross margins and feels that improvements will continue in fiscal 1998.
The increase in gross profit margins in the water and environmental products
were due to slightly lower prices on PVC pipe, increased sales in the
manufactured products, which commands higher profit margins.
Selling expenses as a percentage of sales decreased to 7.6% in 1997 from 9.4% in
1996. Selling expenses in the livestock equipment segment decreased to 9.2% in
1997 compared to 13.2% in 1996. Selling expenses in the water and environmental
products segment were relatively steady at 5.6% in 1997 compared to 5.3% in
1996. As seen above, the overall decrease in selling expense was attributed to
the improvements in the livestock equipment segment. These improvements were
generally due to the increase in sales while expenses stayed relatively
consistent. Another reason for the decrease was the higher expenses in 1996 on
selling aids and literature without a corresponding amount spent in 1997. Sales
salaries have remained fairly consistent and as sales continue to improve,
selling expense as a percentage of sales should continue to decline.
General and administrative expenses decreased $146,998 in fiscal 1997 as
compared to fiscal 1996. The decline is attributable to lower legal expenses
with several lawsuits being settled during the year. (See note to financial
statement regarding litigation's.) Other factors include reducing staff at
subsidiary levels as more duties and functions are performed by the Corporate
headquarters, as well as reducing overall telephone, insurance and travel costs.
During the last half of the fiscal year, the Board of Directors took steps to
cut corporate overhead. However, the benefits of these cuts did not have an
impact on the fiscal year ended June 1997, due to the cost of buying out of the
lease space in Denver, Colorado and the severance pay issued to a former officer
of the company. These costs were absorbed during the fourth quarter of fiscal
1997. The Board of Directors and management feels that general and
administrative expenses should continue to decline during the current fiscal
year.
16
<PAGE>
Interest expenses declined slightly in 1997 to $374,522 from $382,901 in 1996.
This was attributable to the overall reduction in debt in all companies through
fiscal 1997. Management has and will continue to take the steps necessary to
keep the various subsidiary's operations competitive in products, services
offered and obtaining quality employees. The steps taken in the Livestock
Equipment segment last fiscal year, as explained in the following section
comparing Fiscal 1996 with Fiscal 1995, have proven to be very positive steps
for the Company. The Company has lowered cost, improved margins, sales and
profits. Expenses used to obtain new distributors/dealers has proven to be a
wise investment with over ten new distributors with over 100 store locations.
Management can not guarantee that current conditions will continue due to
outside influence that the Company can not control such as the economy, interest
rates, cattle prices, weather conditions, and grain prices. However, based on
dealers, the cattle outlook, steps the Company has taken with new product, it is
expected that fiscal 1998 will continue to be profitable.
It is anticipated the sales and profits from the water and environmental
products segment to be similar to fiscal 1997 levels in fiscal 1998 with a
modest growth. This segment will continue to expand its efforts to market higher
margin manufactured products to its present customers as well as continue to
expand into the horizontal drilling, waste treatment and mining markets. It is
anticipated that with both segments current condition, the Company can
anticipate sales and profits to be on the increase for fiscal 1998.
17
<PAGE>
Fiscal Year Ended June 30, 1996 Compared to Fiscal Year Ended June 30, 1995:
The Company incurred a net operating loss of $717,799 in 1996, as compared to a
net operating loss of $405,987 in 1995. The increase and the overall loss was
attributed directly to the Company's livestock equipment handling segment while
the water and environmental products segment increased its profits and sales.
Total sales declined from $15,563,461 in fiscal 1995 to $14,512,234 in fiscal
1996, $1,051,227 or 6.76%. Total sales in the livestock equipment handling
decreased $1,348,553 from $8,870,970 in 1995 to $7,522,417 in 1996, while total
sales in the water and environmental products segment increased $297,326.
The decline in livestock handling equipment sales was attributed to lower sales
of $893,320 by Eagle and $455,233 by W-W Manufacturing. The overall decrease in
sales to Eagle's and W-W Manufacturing's dealers and distributors were offset by
higher sales of "specials". Special sales consisted of equipment sales to fairs,
expo centers, rodeos and universities. It was estimated that special sales
comprised approximately $1,200,000 to $1,500,000 of the total sales in the
livestock equipment handling segment.
During the third and fourth quarter of the year, Eagle reintroduced its feed
equipment and W-W Manufacturing introduced its new lower priced line of Wrangler
and Cowhand gates and panels. Sales of those products had not been what
Management had predicted because of production problems and lack of demand from
customers, due to historically low beef prices. Special sales of livestock
handling equipment was strong during the first quarter of fiscal 1997, but
traditional sales to dealers and distributors were flat but started to
strengthen in the last part of the first quarter. Cattle prices continued to
show upward movement during the fall and were expected to hold through the year.
This dramatically effected the traditional sales to dealer and distributors and
along with new product improvements and introduction of new products the Company
expected sales to improve over 1996 levels.
The Company has been exploring new products to sell through its dealer and
Distributor network. These products not only would increase sales, but sales of
these products would not be effected, when beef prices decline. The Company
introduced water stock tanks, dog kennels and new shelters and barns for horses.
The Company also negotiated with a high tech company making ultra-sound
equipment for cattle. This product would help the feeder and feed lot greatly
reduce its feeding cost per animal by analyzing its back fat level, therefore,
allowing shipment to the packer at the optimal time. Based upon successful
negotiations, the Company would have exclusive right to sell this product for an
extended period of time before any other companies would be allowed to offer it
for sale.
While sales increased overall in the water and environmental products segment,
sales of water well supplies actually declined. The decline was offset by
increases in sales of manufactured goods such as flush joint PVC screen casting,
and its new product slotted high-density polyethylene pipe for the horizontal
drilling market. The decline in sales of water well supplies was directly
related to wet weather experienced in Nebraska, Kansas and Oklahoma during the
year. Decline in spending by both the Federal and State agencies hurt sales of
well monitoring equipment. This decline was offset by stronger demand for
manufactured products by customers in the private sector and development of new
markets such as the mining industries, and waste treatment areas, which were
realized as a new market for Titan. It was anticipated the 1997 sales would
improve slightly over 1996 sales levels approximately 2% to 3%.
Gross profit margins declined from 19.74% in 1995 to 16.63% in 1996. The
livestock handling equipment segment operated at a 18.78% gross profit margin in
1996 as compared to a 21.23% in 1995, while the water and environmental segment
had a gross profit margin of 16.62% in 1996 as compared to 17.76% in 1995.
18
<PAGE>
The decline in the gross profit margin in the livestock handling equipment was
due to Eagle's gross profit margin dropping from 3.36% in 1995 to (4.32)% in
1996, while W-W Manufacturing declined from 29.29% in 1995 to 22.54% in 1996.
These declines were attributed to several items including higher steel and
welding, supply costs, and with oppressed market conditions, these cost
increases could not be passed on to customers. Fixed costs remained relatively
constant while sales declined by 17.93% and "specials" comprised a greater
percentage of total sales and specials historically have had lower gross profit
margins. The Company took steps to reduce its manufacturing cost, and improve
margins.
The 1.14% decline in gross profit margins in the water and environmental
products were increases in the price of PVC pipe which Titan could not pass the
total increase through to its customers.
Selling expenses as a percentage of sales increased to 9.4% in 1996 from 8.07%
in 1995. Traditionally, the livestock handling equipment has had higher selling
expense, 13.16% in 1996 as compared to 10.59% in 1995, while selling expense in
water and environmental products amounted to 5.35% in 1996 as compared to 4.74%
in 1995. A portion of the increase in selling expenses in both segments was
attributable to the Companies efforts to develop new dealers and distributors
and expand its selling areas to new markets not previously covered. The increase
in livestock handling equipment selling expense was a function of several
factors. The Company in its efforts to expand its markets, had to improve its
product literature and selling materials. The Company spent considerable money
on product videos, new sales books and sales aids. To promote its new products,
the Company increased its advertising and show expense, and there was high cost
relative to following up the over selling of products when the Company was being
represented by Agri-Sales. Sales salaries have remained relatively unchanged,
while sales have been lower due to beef prices. Only one of seven salesmen in
the livestock handling equipment was on a base plus commissions while the
remaining salesmen were on fixed salaries.
General and administrative expenses decreased by $278,676 in fiscal 1996 as
compared to fiscal 1995. The majority of this decline was attributed to the
$157,785 difference bad debt expense between fiscal 1996 and 1995. During fiscal
1995, management increased the allowance for doubtful accounts by $181,000 in
the water and environmental products segment. Of the remaining decrease of
$120,891, legal expense accounted for $63,992 of the decrease.
Interest expense remained basically unchanged even though the interest rate on
the Companies line of credit and equipment lines declined during the year,
approximately 1% during fiscal 1996. The reason interest expense did not decline
more was the fact that average debt outstanding during the year was higher
during fiscal 1996 than fiscal 1995 even though at year end the total debt
decreased $9,249.
Management took the following steps to insure it met its obligations as they
came due. The livestock segment traditionally generated an overall profit as a
segment. With past years decline in beef prices, drought conditions in three of
the largest market areas of the segment, and record high grain prices, the
market for traditional cattle equipment was non-existent. The Company saw the
market conditions declining and took steps to broaden its line with products
that could sell in down market conditions. Development of these products took
time and money, but management felt they were necessary steps to take not
knowing how long the market downturn would last. The Company felt to stay
competitive in the short and long-term, the product mix had to be changed
allowing for faster turnover of lower priced products. Management also felt that
to maintain sales volumes, new customers and markets would have to be sought
out. The Company took a bold stand to ensure a long-term place in the market
place by expanding its product line.
19
<PAGE>
Those steps took time and money and expenses related to the moves were higher
than expected. The Company felt as new customers continued to come on and the
new products penetrated the market, the Company would start to see sales and
operating profits increase. There were two ways to increase profits: by
increasing sales previously discussed, and cutting costs. The Company reduced
some fixed selling expenses in the fall of 1996 and reduced administrative
costs. To increase gross profit margins, the Company sought out new sources of
steel which were the largest components of cost of goods sold. The Company
successfully found a new supplier, whose steel prices reduced steel cost by
approximately 10%. Benefits would not be realized until the second half of
fiscal 1997. Labor efficiencies were reviewed and new ways of production were
looked at to reduce cost. A new wash and paint system was put in place allowing
for less overall paint cost and an improved finished product. Based on market
conditions improvment, sales were expected to increase, and with lower material
costs, the Company felt the segment could return to overall profitability in
fiscal 1997.
Management reviewed ways to reduce cost at all levels of the Company. With the
centralizing accounting to the Corporate head quarters from the subsidiaries, it
was determined that the Company had excess office space. The Company looked at
relocation to less space at a lower cost. All other overhead costs were reviewed
and management took steps to reduce costs where applicable and necessary.
Eagle Enterprises, located in the eastern market was reviewed to determine the
best use of the facility. The Company's cost and break-even level was reduced.
With the downturn in the market and sales, the Company did not feel the effect
of these changes. It was anticipated that with the introduction of new product
sales market conditions improvment, Eagle could operate at least break-even and
possibly have a chance to be profitable. Continued weakness in beef prices would
depress both sales and profits in the segment. Prior to June 30, 1996, operating
profits from W-W Manufacturing were sufficient to offset the continual operating
losses from Eagle. Eagle's operating losses for the last two years have not
reflected its proportionate share of selling and general and administrative
costs, which were being absorbed by W-W Manufacturing, and still did not
operated at a profit. The Company's operating results for fiscal 1997 depended
on sales and profits from its livestock handling equipment segment. Due to the
overall weakness in the cattle industry because of low beef prices, the Company
could predict whether or not the segment would generate a profit in fiscal 1997.
20
<PAGE>
Fiscal Year Ended June 30, 1995 Compared to Fiscal Year Ended June 30, 1994:
The Company incurred a net operating loss of $135,389 before realized and
unrealized loss on real estate held for sale in 1995 as compared to a net loss
of $210,669 in 1994. Included in the current year's loss of $405,987 is a charge
to operations of $270,598 which represents a realized loss of $195,598 on the
sale of the Company real estate in Grand County Colorado and write down of its
investment in real estate in Johnson County Texas of $75,000 reducing the book
value to $373,960. The Company has listed the Texas property for sale for
$400,000. Management does not expect to incur any additional material losses
from the sale of the Texas property. The water and environmental products
segment had a charge to operations to increase the allowance for doubtful
accounts totaling $181,000 in the fourth quarter. The Company has tightened its
credit policies and terms so such large charges do not happen in the future.
Overall revenues decreased from $16,659,136 in fiscal 1994 to $15,563,461 in
fiscal 1995, a decline of $1,095,675 or 6.6%. This decline was a result of, a
decrease in livestock handling equipment of $2,498,856, while sales increased by
$1,403,181 in water and environmental products segment. The decline in the
livestock handling equipment was a result of a drop in sales by Eagle of
$1,628,359 and $870,506 by W-W Manufacturing. Eagle's decline in sales was a
result of the elimination of various Eagle livestock feeding equipment which had
not been profitable and overall concern in the cattle industry about cattle
prices.
A portion of the sales in the water and environmental products is attributable
to the acquisition of Wholesale Pump and Supply, Inc. (Wholesale) of Oklahoma
City, Oklahoma, which was acquired on October 15, 1993. Wholesale operates as a
division of Titan and represents $520,010 of the net increase in sales in the
water and environmental products.
It is anticipated that sales in the livestock handling equipment segment will
improve in fiscal 1996. This expected sales increase is based upon the following
items: increased sales orders in "special sales", increased marketing efforts in
the upper midwest and areas west of the Rocky Mountains and reintroduction of
certain of Eagle's feeding equipment during the second quarter of 1996.
Based upon estimates it is anticipated the 1996 sales in the water and
environmental products will be comparable to the 1995 sales with little increase
in sales. This is because the majority of the sales in this division is in the
midwest and weather conditions have hurt sales in the spring and summer months
of 1995. During 1995, the Company established new distributors on both the east
and west coasts to expand its market area so that weather and economic
conditions will not have a major impact on sales.
Gross profit margins decreased slightly from 21.12% in 1994 to 19.74% in 1995 on
an overall company basis. The livestock handling equipment operated at a 21.23%
gross profit margin in 1995 as compared to 18.91% gross profit margin in 1994,
while the water and environmental earned a gross profit margin of 17.76% in 1995
as compared to 21.17% in 1994.
The increase in the gross profit margin in the livestock handling is principally
due to the improvement in Eagle's operations which attained a gross profit
margin of (.84)% in 1994 as compared to 3.36% in 1995, while W-W Manufacturing's
gross profit margin decreased from 31.33% in 1994 to 29.29% in 1995. The
increase in Eagle's gross profit margin is due to the elimination of
slower-turning and non-profitable Eagle products and the manufacturing of W-W
Manufacturing traditional equipment. Additionally, W-W Manufacturing and Eagle
has not been able to pass through increases in steel and plastic to their
customers. Eagle has operated at a net loss since the Company acquired it. In
August 1994, the Company implemented
21
<PAGE>
a new business plan for Eagle. As part of the plan Eagle reduced its work force
by 36 employees and eliminated slower-turning and non-profitable Eagle products
and began manufacturing W-W Manufacturing traditional equipment. This equipment
requires less labor hours and sells at higher profit margins. Since the
implementation of the new business plan and new products manufactured by Eagle,
Eagle has made significant improvement in operational efficiencies. Even though
Eagle incurred operating losses of $208,098 for the fiscal year ended June 30,
1995, approximately $171,000 of this loss was realized in July and August.
During that period of time, Eagle had small operating profits in September and
December while losing $81,286 in October and November due to less than
break-even production volume. Eagle generated an operating profit of $34,243
during the six months ended June 30, 1995. This operating profit is a result of
an improved gross profit margin and lower expenses due to the allocation of
costs between Eagle and W-W Manufacturing. The reduction in expenses is a result
of Eagle's operations being scaled back to be a manufacturing and distribution
facility for W-W Manufacturing for traditional equipment in the east and
southeast regions of the United States. Therefore, the majority of general,
administrative and selling expenses of the livestock handling segment are
reflected on the books of W-W Manufacturing. As Eagle's production volume and
gross profit margin continues to increase through the acceptance of the W-W line
of equipment in the east and southeast, management anticipates Eagle will
continue to improve. The ability to continue to gain in market share in this
region is critical to the success of Eagle. With its marketing and sales
strategy and new sales staff in place for this segment, it is anticipated that
profitability and gross margins will continue to improve as sales are expanded
to new territories not previously covered.
During the last six months of the year Eagle averaged a gross profit margin of
10.38%.
The 3.41% decline in gross profit margins in the water and environmental
products is due to two factors: increases in sales volume and efficiencies has
not offset the additional manufacturing overhead associated with the new
manufacturing facility and price competition. Management is reviewing production
costs and reduced production personnel by three employees in order to increase
gross profit margins.
Selling expenses as a percentage of sales declined to 8.07% for the year ended
June 30, 1995 as compared to 11.75% for the year ended June 30, 1994. This
decline is due to increase in sales in water and environmental products segments
which had lower selling expenses, while sales have declined in the livestock
handling equipment segment which has traditionally higher selling expense.
It is anticipated that selling expenses will increase during the next year now
that W-W Manufacturing has its sales force in place for the full year. The
Company has hired eight salesmen to replace Agri-Sales Associates (Agri-Sales)
which handled the sales in the livestock handling equipment prior to October 26,
1994.
General and administrative expenses increased $71,185 in fiscal 1995 as compared
to fiscal 1994. This increase can be attributed to bad debt expense in the water
and environmental products segment while other general and administrative has
decreased. During fiscal 1995, management increased the allowance for doubtful
accounts by $181,000 in this segment. The problems in Titan's accounts
receivable came to light as the Company continues to centralize accounting at
its Corporate office in Colorado. Management has established new credit policies
for Titan and is closely monitoring accounts receivable.
Interest expense increased by $99,956 in fiscal 1995 as compared to 1994. This
increase is a result of higher interest rates and increased borrowing to finance
inventory and fixed asset acquisitions.
Inflation:
Inflation has not been a significant factor in net income in recent years
because of the relatively modest rate of price increases in the United States.
22
<PAGE>
Liquidity and Capital Resources:
The Company's principal sources of liquidity are borrowings under its credit
facilities and from internally generated funds. The Company generated funds from
operations with net earnings of $28,120 and produced a cash flow from operations
of $299,452 for fiscal 1997. These funds provided adequate liquidity to meet
current obligations and allow for a net reduction in borrowings of $142,742.
The Company is in violation of certain loan covenants from prior years losses
but with the profit of $248,338 created during the last half of fiscal 1997, the
Company cured most of the violations with the debt to equity violation still
remaining. The Banks have allowed the Company to remain in violation and has
agreed to renew the current loans until January 31, 1998.
The revolving equipment lines that were frozen at the last renewal have been
classified as current liabilities as seen on the balance sheet. This
classification is necessary since the loans have been only renewed at six month
intervals. The real estate note at First American Bank for the Eagle facility
has also been classified as short term since under the terms of the note, it
matures in April 1998.
At the present time, the Company is negotiating with several banks in Tennessee
to renew the real estate loan for an additional five year payout. Based on
profits being generated by Eagle and the equity in the real estate, management
feels that one of several institutions should renew the note on similar terms
that have been in existence in the past.
The Company is also negotiating with its present Bank and several other
financial institutions to renew the revolving and equipment lines past January
31, 1998. The Company feels that expected profits and cash flow during fiscal
1998 will adequately supply the Company with the liquidity necessary to meet its
obligations. The Company's 94.5 acres of undeveloped real estate in Texas can
also provide funds necessary to meet obligations. The Company is presently in
the final stages of either selling the land, or entering into a joint venture
development agreement.
The Company has settled several of the law suites during fiscal 1997, which has
decreased legal expenses and has presently made an offer to settle the last case
with Mr. Bellar, and management is not able at this time to make a prediction on
the outcome of the negotiations.
As reported last year, the Company determined that a significant amount of paint
located at its Tennessee facility had to be disposed of to comply with
Environmental regulations. The Company has successfully disposed of all paint
and closed the case. The cost of approximately $25,561 has been recorded and
paid in accompanying financial statements.
Based on current conditions in all subsidiary and general economic conditions,
the Company anticipated continuing to make a profit for fiscal 1998. With
depreciation expense representing the major fixed non-cash cost, reduced legal
feels and general administrative expense, the Company feels that traditional
cash flow will allow the Company to continue to reduce debt in fiscal 1998. The
Company will also use the proceeds from the sale or development of the 94.5
acres of land in Texas to reduce debt. Based on the improved earnings and cash
flow, the Company anticipates being successful in renewing its loans with one or
several banks under terms and conditions similar to ones presently in effect.
23
<PAGE>
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
W W CAPITAL CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE
Financial Statements:
Independent Auditors' Report ............................ . . F-1, F-2
Consolidated Balance Sheets as of June 30, 1997 and
June 30, 1996 ........................................... . . . . F-3
Consolidated Statements of Operations for the years
ended June 30, 1997, 1996 and 1995 ...................... . . . . F-5
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1997, 1996 and 1995 ............ . . . . F-6
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995 ............................ . . . . F-7
Notes to Consolidated Financial Statements .............. . . . . F-9
Financial Statement Schedules:
Independent Auditors' Report ............................ . . .S-1, S-2
I - Condensed Financial Information of Registrant ....... . . . . S-3
All other schedules are omitted because they are not applicable or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.
24
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosures.
----------------------
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
The Officers of the Company are elected at the Board of Directors' annual
organizational Meeting immediately following the Annual Stockholders' Meeting.
Such officers hold office until their successors are elected and qualify. The
following information indicates the position and age of the directors and
officers as of October 24, 1997, and their business experience during the prior
five years.
DAVID L. PATTON age 66, was elected to the Board of Directors of the Company in
December 1991, and Chairman of the Board in December 1993. Mr. Patton is a
partner with the law firm of Patton, Kerbs & Hess in Dodge City, Kansas. Mr.
Patton was a founder of Titan Industries, Inc., which is currently operated as a
wholly-owned subsidiary of the Company.
STEVE D. ZAMZOW age 49, joined the Company in 1991 and was elected as the
Company's Chief Financial Officer in June 1992, President and Chief Executive
Officer in December 1993 and elected as a Director in December 1993 by the
shareholders. From 1976 to 1991, Mr. Zamzow owned numerous companies and was a
financial consultant for various companies. Mr. Zamzow has been Vice President
for a steel company and has worked extensively in business workouts. From 1971
to 1974, Mr. Zamzow was employed by Peat, Marwick, Mitchell & Co. as an auditor.
Mr. Zamzow received his accounting degree from the University of Nebraska.
MILLARD T. WEBSTER age 49, became a director of the Company in 1988 and has been
employed by the Company's subsidiary, W-W Manufacturing Co., Inc. since 1962.
Mr. Webster has occupied the positions of piecework production foreman,
production manager, and Vice President and President of the Company's
subsidiary, W-W Manufacturing Co., Inc. Mr. Webster is currently a Vice
President for the Company's subsidiary, W-W Manufacturing Co., Inc. Mr. Webster
graduated from Evangel College, Springfield, Missouri in 1970 with a bachelor's
degree in business administration.
JAMES H. ALEXANDER age 59, become a Director of the Company in 1997. Since 1992,
Mr. Alexander has been a member of the Board of Directors of Zykronix, Inc. and
former Chief Operating Officer. Mr. Alexander is also an independent real estate
broker for TDI Property Brokers. From April 1992, to November 1992, Mr.
Alexander was a member of a management team of a venture capital firm which
funded a satellite communications company. Mr. Alexander is the founder of
T.D.I., Inc., a corporation engaged in consulting, fund raising, acquisitions
and mergers of hi-tech firms. Mr. Alexander has taken courses leading toward
Bachelor of Science Degree in Business Administration from Rollins College.
LOYD FREDRICKSON age 79, become a Director of the Company in 1997. Mr.
Fredrickson was the former President and Owner of Wholesale Pump & Supply, Inc.
for over 30 years prior to its purchase by the Company's Titan Industries, Inc.,
wholly owned subsidiary of WW Capital Corporation, October 1994. From 1968 to
1982, Mr. Fredrickson also owned and operated Southern Midwest, Inc., the
company was engaged in the construction and lease trucking business. From
October 1984 to November 1996, he served as a consultant to the water and
environmental product division of Titan Industries. Mr. Fredrickson is presently
employed by North American Compressor Corporation, an Oklahoma City-based
manufacturer of high pressure breathing air compressors.
25
<PAGE>
Item 11. Executive Compensation
- -------- ----------------------
The following table sets forth the cash compensation paid or accrued during the
fiscal years ended June 30, 1997, 1996, and 1995, to the Company's Chief
Executive Officer. No other executive officer received cash in excess of
$100,000.
<TABLE>
<CAPTION>
Other
Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
- --------------------------- ---- ------ ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Steve D. Zamzow 1997 $119,166 - $ - $ 4,575 (a)
President, Chief Executive 1996 $119,166 $ 8,526 (b) $ - $ 2,284 (a)
Officer and Director 1995 $110,000 $ 17,000 (b) $ - $19,024 (a)
<FN>
(a) Includes accrued vacation and compensated absences earned in
prior years and paid during June 30, 1997 and 1996
respectively.
(b) Bonus amount earned prior to 1994 and paid during subsequent years.
</FN>
</TABLE>
Option Grants in Fiscal Year 1997
During the fiscal year ended June 30, 1997, the Company did not grant
stock options to the executive officers.
Aggregated Option Exercises in Fiscal Year 1997
The following table sets forth for the executive officer named in the
Summary Compensation Table, information concerning each exercise of stock
options during the fiscal year ended June 30, 1997 and the value of the
unexercised stock options at June 30, 1997.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unex- In-the-Money
Shares ercised Options Options at
Acquired at June 30, 1997 June 30, 1997
on Value Exercisable/ Exercisable/
Name Exercise Realized (1) Unexercisable Unexercisable (1)
- ---- -------- ------------ ------------- -----------------
<S> <C> <C> <C> <C>
Steve D. Zamzow --- --- 150,000 (E) $ ---
President, Chief --- --- --- (U) $ ---
Executive Officer
and Director
<FN>
(1) The Option exercise price exceeded the fair market value of the underlying common stock on June 30, 1997.
</FN>
</TABLE>
26
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
The following table sets forth as of October 21, 1996, the ownership of the
Company's common stock by each director of the Company, by each person who is
known by the Company to be the beneficial owner of more than 5% of the Company's
common stock, and by the officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Name and Address of
Officers and Directors and Amount and Nature of Percent of Class
Beneficial Owner (1) Beneficial Ownership (2) of Common Stock
<S> <C> <C>
Steve D. Zamzow 150,437 (3) 2.72%
4112 Sherman Court
Ft. Collins, CO 80525
Millard T. Webster 278,969 (4) 5.04%
1003 Central
Dodge City, KS 67801
David L. Patton 1,179,389(5) 21,25%
807 SW Terrace
Topeka, KS 66611
Loyd T. Fredrickson 230,350 4.16%
27287 Northwest 62nd St.
Oklahoma City, OK 73112
James H. Alexander * *
762 Owl Court
Louisville, CO 80027
All officers and directors 1,837,145 (6) 33.16%
as a group (9 persons) (See
Footnotes 1 through 9
Apex Realty Investments, Inc. 305,241 (7) 5.51%
c/o Nicholas L. Scheidt
PO Box 33724
Northglenn, CO 80233-0724
<FN>
(1) The business address of all officers and directors is 3500 JFK Parkway, Suite 202, Ft. Collins,
Colorado 80525.
(2) "Beneficial ownership" is deemed to include shares for which an
individual, directly or indirectly, has voting or investment power, or
both, and shares subject to options exercisable within 60 days of the
date hereof.
(3) Includes 150,000 shares subject to incentive stock options which are
exercisable within sixty days of the date hereof.
(4) Includes 22,500 shares subject to incentive stock options which are
exercisable within sixty days of the date hereof.
27
<PAGE>
(5) Includes 47,500 shares subject to non-qualified stock options which are fully vested and exercisable.
(6) Includes 220,000 shares subject to stock options which are fully vested and exercisable.
(7) Includes 5,000 shares subject to non-qualified stock options which are fully vested and exercisable.
</FN>
</TABLE>
Item 13. Certain Relationships and Related Transactions
---- --- ----------------------------------------------
On June 30, 1989, W-W Land & Cattle, a partnership owned by Millard T. Webster,
a director of the Company, Mickey J. Winfrey, a former officer of the Company
and Terry L. Webster, a brother of Mr. Millard T. Webster and Ms. Winfrey,
executed a promissory note for the amount of $96,424 in favor of the Company's
subsidiary, W-W Manufacturing Co., Inc. Interest was payable annually at 9% per
annum and the principal was due on demand. On June 30, 1993, Ms. Winfrey
satisfied her obligations under this note by paying to the Company the amount of
$11,361. As of June 30, 1997, $23,028 remained payable under this note by
Millard T. Webster and Terry L. Webster.
The Company currently leases its manufacturing facility in Dodge City, Kansas
from Murle F. Webster, father of Millard T. Webster and Mickey J. Winfrey. This
lease requires a monthly rental payment of $5,000. This lease expired on
December 31, 1994, however, it has continued on a month to month basis. During
each of the three fiscal years ended June 30, 1997, $60,000 was paid by the
Company under the lease.
Millard T. Webster, a director of the Company, Mickey J. Winfrey, an officer of
the Company, and Terry L. Webster, have each executed a promissory note in favor
of the Company for the amount of $58,333. Each note bears interest at 9% per
annum, are payable in monthly installments of $767 and are due to be paid in
full by September 30, 1997. Murle F. Webster, lessor of the Company's
manufacturing facility, has executed an assignment of monthly rent back to the
Company under each of these notes.
On October 26, 1992, the Company, through its wholly-owned subsidiaries, W-W
Manufacturing Co., Inc. ("W-W Manufacturing"), and Eagle Enterprises, Inc.
("Eagle"), entered into an exclusive two year initial term sales and marketing
agreement with Agri-Sales Associates, Inc. ("Agri-Sales") to market the
Company's products throughout the United States. Jerry R. Bellar, a 4.1%
stockholder of the Company, is President and a majority stockholder of
Agri-Sales. In conjunction with the cancellation of the agreements, the
Companies owed Agri-Sales approximately $164,863 which was increased to $180,000
under a proposed settlement of a lawsuit between the Company and Agri-Sales (see
"Legal Proceeding" for additional information). The Company paid $30,000 of the
liability during 1997 and is withholding payment of the remaining $150,000
pending receipt of amounts due under an indemnification agreement (see below).
On October 26, 1993, the Company acquired all of the outstanding stock of Eagle
in exchange for 325,000 shares of its common stock. Eagle was owned by Jerry R.
Bellar, who is now a 4.1% stockholder of the Company. As a result of the
acquisition of Eagle, the Company acquired a note payable to Mr. Bellar. On
January 24, 1994, Eagle agreed to become a co-borrower with Mr. Bellar. Said
note was used to refinance Eagle's note payable to him in the amount of
$119,847. This note was paid in-full in January 1996.
At June 30, 1997, the Company has a receivable form Agri-Sales and/or Jerry
Bellar in the amount of $195,235 of which $167,572 is recorded in the financial
statements. This balance represents accounts due to the Company relating to the
March Group, Inc. law suit and Liberty Metal Fabrication, Limited lawsuit (see
"Legal Proceeding" for additional information).
28
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) (1) List of Financial Statements Filed as a Part of This Report
Consolidated Balance Sheets as of June 30, 1997 and June 30, 1996.
Consolidated Statement of Operations for the years ended June 30, 1997, 1996 and
1995.
Consolidated Statement of Stockholders' Equity for the years ended June 30,
1997, 1996 and 1995.
Consolidated Statement of Cash Flows for the years ended June 30, 1997, 1996 and
1995.
(a) (2) List of Financial Statement Schedules Filed as a Part
of This Report
Schedule I - Condensed Financial Information of Registrant
(a) (3) Exhibits
Exhibit
Number Document
- ------ --------
2.1 Exchange Agreement dated August 15, 1991 between W W Capital
Corporation and Titan Industries, Inc. (filed as Exhibit 3.3 to
Form 10-K for the fiscal year ended June 30, 1991 and is hereby
incorporated by reference).
2.2 Exchange Agreement dated October 26, 1992 between W W Capital
Corporation and Eagle Enterprises, Inc. (filed as an exhibit to
the Company's Form 8-K dated November 3, 1993 and is hereby
incorporated by reference).
3.1 Articles of Incorporation dated December 13, 1989 of W W Capital
Corporation, a Nevada corporation (filed as Exhibit 3.2 to the
Company's Form 10-K for the year ended June 30, 1990 and is
hereby incorporated by reference).
3.1.1 Certificate and Amendment to Articles of Incorporation filed
December 21, 1990 with the Nevada Secretary of State (filed as
Exhibit 3.01 to the Company's Form 10-Q for the quarter ended
December 31, 1990 and is hereby incorporated by reference).
3.2 Bylaws of W W Capital Corporation (filed as Exhibit 3.2 to the
Company's Form 10-K for the year ended June 30, 1991 and is
hereby incorporated by reference).
10.1 Real Estate Lease Agreement and Amendment between Murle F. and
Sara R. Webster and W W Capital Corporation (filed as an exhibit
to the Company's Post-Effective Amendment No. 1 to Form S-18 and
is hereby incorporated by reference).
10.1.1 Amendment to Real Estate Lease between Murle F. and Sara R.
Webster and W W Capital Corporation dated March 24, 1993 (filed
herewith).
10.2 Assignment of Rental Income from Murle F. and Sara R. Webster to
W W Capital Corporation (filed as an exhibit to the Company's
Post-Effective Amendment No. 1 to Form S-18 and is hereby
incorporated by reference).
<PAGE>
10.3 1990 Incentive Stock Option Plan (filed as Exhibit 10.16 to the
Company's Form 10-K for the year ended June 30, 1990 and is
hereby incorporated by reference).
10.4 Promissory Note dated June 30, 1990 from Millard T. Webster in
favor of W W Capital Corporation for the amount of $2,716 (filed
as Exhibit 10.8 to Form 10-K for the fiscal year ended June 30,
1991 and is hereby incorporated by reference).
10.5 Promissory Note dated April 30, 1990 from Millard T. Webster and
Mickey J. Winfrey in favor of W W Capital Corporation for the
amount of $43,000 (filed as Exhibit 10.9 to Form 10-K for the
fiscal year ended June 30, 1991 and is hereby incorporated by
reference).
10.6 Loan Agreement dated June 29, 1992 between W-W Manufacturing
Co., Inc. (wholly owned subsidiary of the Company) and Bank IV
Kansas, N.A. (Garden City Kansas) (filed as Exhibit 10.12 for
the fiscal year ended June 30, 1992 and is hereby incorporated
by reference).
10.7 Loan Agreement dated June 29, 1992 between Titan Industries,
Inc. (wholly owned subsidiary of the Company) and Bank IV
Kansas, N.A. (Garden City Kansas) (filed as Exhibit 10.13 for
the fiscal year ended June 30, 1992 and is hereby incorporated
by reference).
10.8 1990 Non-Qualified Stock Option Plan (filed as Exhibit 10.14 of
Form 10-K for the fiscal year ended June 30, 1992 and is hereby
incorporated by reference).
10.9 Employee Stock Benefit Plan (filed as Exhibit 10.15 of Form 10-K
for the fiscal year ended June 30, 1992 and is hereby
incorporated by reference).
10.10 Loan Agreement dated December 15, 1992 between Eagle
Enterprises, Inc. (wholly owned subsidiary of the Company) and
Bank IV Kansas, N.A. (Garden City, Kansas) (filed as Exhibit
10.10 of Form 10-K for the fiscal year June 30, 1993 and is
hereby incorporated by reference).
10.11 Exchange Agreement between W W Capital Corporation and Apex
Realty Investments, Inc. dated February 19, 1993 (filed as an
exhibit to the Company's Form 8-K dated March 5, 1993 and is
hereby incorporated by reference).
10.11.1 Addendum to Exchange Agreement between W W Capital Corporation
and Apex Realty Investments, Inc. dated August 23, 1993 (filed
as Exhibit 10.11.1 of Form 10-K for the fiscal year June 30,
1993 and is hereby incorporated by reference).
10.12 Loan Agreement dated April 8, 1993 between Eagle Enterprises,
Inc. (wholly owned subsidiary of the Company) and First American
National Bank, N.A. (Cookeville, Tennessee) (filed as Exhibit
10.12 of Form 10-K for the fiscal year June 30, 1993 and is
hereby incorporated by reference).
10.13 1992 Non-Qualified Stock Option Plan (filed as Exhibit 10.13 of
Form 10-K for the fiscal year June 30, 1993 and is hereby
incorporated by reference).
10.14 Loan Agreement dated October 20, 1992 between W W Capital
Corporation, Eagle Enterprises, Inc. and Jerry R. and Jacqueline
A. Bellar (former owners of Eagle Enterprises, Inc.) (filed as
Exhibit 10.14 of Form 10-K for the fiscal year June 30, 1993 and
is hereby incorporated by reference).
<PAGE>
10.15 Asset Sale and Purchase Agreement between W W Capital Corporation
and Wholesale Pump and Supply, Inc. date October 14, 1993 (filed
as Exhibit 10.15 of Form 10-K for fiscal year June 30, 1994 and
is hereby incorporated by reference).
10.16 Real Estate Contract between W W Capital Corporation and Daniel
L. Hahn, Donna R. Hahn and Helene D. Linder, Promissory Note,
date December 15, 1994 between W W Capital Corporation and Daniel
L. Hahn, Donna R. Hahn and Helene D. Linder (filed as an exhibit
to the Company's Form 8-K dated December 15, 1994 and is hereby
incorporated by reference).
10.17 Loan Agreement dated March 3, 1995 between Titan Industries, Inc.
(wholly owned subsidiary of the Company and Keith County Economic
Development Corporation (incorporated by reference June 30, 1995
10-K).
10.18 Loan Agreement dated March 3, 1995 between Titan Industries, Inc.
(wholly owned subsidiary of the Company and First National Bank
in Ogallala (incorporated by reference June 30, 1995 10-K).
10.19 Letter Agreement dated September 17, 1996, between W W Capital
Corporation and Bank IV Garden City (incorporated by reference
June 30, 1996 10-K.)
21.0 Subsidiaries of the Registrant (filed herewith).
23.0 Independent Certified Public Accountants Consent
27.0 Financial Data Schedule.
Item 14 (b)
- -----------
An 8-K was filed on July 21, 1997 covering the fourth quarter change of
auditors, item 4.
31
<PAGE>
Exhibit 21.0
Subsidiaries of the Registrant
W-W Manufacturing Co., Inc.
Incorporated in the state of Kansas
Titan Industries, Inc.
Incorporated in the state of Nebraska
Eagle Industries, Inc.
Incorporated in the state of Tennessee
32
<PAGE>
Exhibit 23.0
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS CONSENT
We consent to the use of our report dated October 15, 1996 relating to
the financial statements of W W Capital Corporation as of June 30, 1996 and for
each of the two years then ended in the Annual Report on Form 10K. We further
consent to the use of our report dated October 15, 1996 on the financial
schedules appearing in Item 14 of such Annual Report.
MILLER AND McCOLLOM
Certified Public Accountants
Denver, Colorado
October 24, 1997
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13, or 15(b) 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.
WW CAPITAL CORPORATION
By: /s/ Steve D. Zamzow
---------------------
Steve, D. Zamzow, President & CEO
Date: October 27, 1997
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following per sons of the Registrant and in the
capacities and on the date indicated.
Signature Date Title Date
/s/ Steve D. Zamzow President, Chief Executive 10/24/97
- ------------------- Officer and Director --------
Steve D. Zamzow
/s/Dianne Gano Controller 10/24/97
- -------------- --------
Dianne Gano
/s/David Patton Chairman of the Board 10/24/97
- --------------- --------
David Patton
/s/James Alexander Secretary/Treasurer 10/24/97
- ------------------ --------
James Alexander
/s/ Millard T. Webster Director 10/24/97
- ---------------------- --------
Millard T. Webster
/s/ Loyd Fredrickson Director 10/24/97
- -------------------- --------
Loyd Fredrickson
<PAGE>
Independent Auditor's Report
- ----------------------------
Board of Directors
W W Capital Corporation
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheet of W W
Capital Corporation and subsidiaries as of June 30, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of W W Capital
Corporation and subsidiaries as of June 30, 1997, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado
October 10, 1997
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors and Stockholders
W W Capital Corporation
Fort Collins, Colorado
We have audited the balance sheet of W W Capital Corporation as of June
30, 1996, and the related statements of operations, stockholders' equity, and
cash flows for each of the two years then ended. These financial statements are
the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of W W Capital
Corporation as of June 30, 1996, and the results of its operations and its cash
flows for each of the two years then ended, in conformity with generally
accepted accounting principles.
MILLER AND McCOLLOM
Certified Public Accountants
Denver, Colorado
October 15, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
ASSETS
June 30,
1997 1996
---- ----
<S> <C> <C>
Current Assets:
Cash $357,373 $131,022
Accounts receivable, trade, net of allowance for
doubtful accounts of $134,000 in 1997 and $143,632
in 1996 (Notes 9,10 and 17) 2,026,991 1,826,917
Accounts receivable, related party (Notes 4, 9,10 and 16) 167,572 132,221
Accounts receivable, other (Notes 9 and 10) 13,321 21,240
Inventories (Notes 3, 9 and 10) 3,341,156 3,427,508
Deferred taxes (Note 15) - 99,814
Prepaid expenses 15,984 18,567
Current portion of notes receivable from
related parties (Notes 4, 9 and 10) 9,286 25,497
Current portion of notes receivable, other (Notes 4, 9 and 10) 6,549 144,513
------------- -------------
Total Current Assets 5,938,232 5,827,299
------------- -------------
Property and Equipment, net of accumulated
depreciation of $2,256,851 in 1997 and $1,901,838
in 1996 (Notes 6,9,10 and 11) 2,296,363 2,601,594
Other Assets:
Real estate held for sale (Notes 5, 7 and 10) 381,035 379,414
Long-term notes receivable from related parties, net of
allowance for doubtful accounts of $7,418 in 1996
and current portion (Notes 4,9 and 10) 23,028 24,982
Long-term notes receivable, other, net of allowance
for doubtful accounts of $10,000 in 1997 and $10,535 in 1996 and
current portion (Notes 5, 9 and 10) 9,753 9,218
Loan acquisition costs, net of accumulated
amortization of $15,868 and $13,996 at
June 30, 1997 and 1996, respectively 1,404 3,276
Covenant not to compete, net of accumulated
amortization of $81,912 and $73,948 at June 30,
1997 and 1996, respectively - 7,964
Other assets 29,278 40,161
------------- -------------
Total Other Assets 444,498 465,015
------------- -------------
TOTAL ASSETS $8,679,093 $8,893,908
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
--------
1997 1996
---- ----
<S> <C> <C>
Current Liabilities:
Accounts payable ........................................ $ 2,232,990 $ 2,243,753
Revolving credit notes payable to bank (Note 2, 9 and 10) 1,834,000 1,734,000
Accrued payroll and related taxes ....................... 184,569 135,842
Accrued property taxes .................................. 34,442 27,523
Accrued interest payable ................................ 12,344 13,344
Accrued commissions related party (Note 4) .............. 150,000 30,000
Other current liabilities ............................... 18,777 21,714
Current portion of notes payable (Notes 2, 4 and 10) .... 1,172,018 316,298
Current portion of capital lease obligation (Note 11) ... 9,889 15,993
Current portion of covenant not to compete .............. -- 3,934
----------- -----------
Total Current Liabilities ........................... 5,649,029 4,542,401
----------- -----------
Other Liabilities:
Accrued commissions related party (Note 4) .............. -- 150,000
Long-term notes payable, net
of current portion (Notes 2, 9 and 10) ............... 575,390 1,655,218
Long-term capital lease obligation, net of current
portion (Note 11) .................................... 1,684 14,214
Deferred taxes (Note 15) ................................ -- 99,814
Negative goodwill - net ................................. -- 8,021
----------- -----------
Total Other Liabilities ............................. 577,074 1,927,267
----------- -----------
TOTAL LIABILITIES ................................... 6,226,103 6,469,668
----------- -----------
Commitments and Contingencies (Notes 2, 4, 8, 12, and 16) . -- --
Stockholders' Equity (Note 8):
Preferred stock, $10.00 par value, 400,000 shares
authorized ............................................ -- --
Common stock, $0.01 par value, 15,000,000 shares
authorized; 5,540,661 and 5,530,661 shares issued and
outstanding at June 30, 1997 and 1996 ................. 55,406 55,306
Capital in excess of par value .......................... 3,304,629 3,304,099
Retained earnings (deficit) ............................. (888,139) (916,259)
----------- -----------
2,471,896 2,443,146
Less 20,264 shares of treasury stock at cost .............. (18,906) (18,906)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .......................... 2,452,990 2,424,240
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 8,679,093 $ 8,893,908
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Sales (Notes 14 and 17) ............ $ 15,072,285 $ 14,512,234 $ 15,563,461
Cost of Goods Sold ..................... 12,212,442 12,099,403 12,491,678
------------ ------------ ------------
Gross Profit ................... 2,859,843 2,412,831 3,071,783
------------ ------------ ------------
Operating Expenses:
Selling expenses (Notes 4,12 and 16) . 1,146,090 1,363,215 1,256,106
General and administrative expenses
(Notes 4, 12 and 16) ............. 1,363,831 1,510,829 1,789,505
------------ ------------ ------------
Total Operating Expenses ......... 2,509,921 2,874,044 3,045,611
------------ ------------ ------------
Operating Earnings (loss) ......... 349,922 (461,213) 26,172
------------ ------------ ------------
Other Income (Expense):
Interest income (Note 4) ............. 74,939 107,402 130,305
Interest expense (Note 4) ............ (374,522) (382,901) (384,391)
Realized and unrealized loss on
real estate held for sale (Note 7) . -- (3,500) (270,598)
Gain (loss) on property and equipment
dispositions ....................... 6,629 400 (3,231)
Other income (expense) net ........... (28,848) 39,426 110,332
------------ ------------ ------------
Total Other Income (Expense) ...... (321,802) (239,173) (417,583)
------------ ------------ ------------
Earnings (loss) before income taxes ... 28,120 (700,386) (391,411)
------------ ------------ ------------
Income Tax (Note 15):
Current .............................. -- 1,650 --
Deferred ............................. -- 15,763 14,576
------------ ------------ ------------
Total Income Tax ................... -- 17,413 14,576
------------ ------------ ------------
Net Earnings (loss) .............. $ 28,120 ($ 717,799) ($ 405,987)
============ ============ ============
Primary Net Earnings (loss) per Share:
Net Earnings (loss) ................ 0.(a) (0.13) (0.07)
============ ============ ============
Weighted Average Number of Common Shares
Outstanding .......................... 5,549,544 5,530,661 5,449,993
============ ============ ============
<FN>
a. Less than one cent
</FN>
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Years Ended June 30, 1997, 1996 and 1995
Common Stock Capital Retained Total
Number of Par In Excess Earnings Treasury Stockholders'
Shares Value of Par Value (Deficit) Stock Equity
------ ----- ------------ --------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1994 ................. 5,419,115 $ 54,191 $ 3,233,516 $ 207,527 ($ 18,906) $ 3,476,328
Issuance of common stock for cash ....... 30,000 300 29,700 -- -- 30,000
Issuance of common stock for product
development rights .................... 35,000 350 19,338 -- -- 19,688
Conversion of preferred stock ........... 11,328 113 (113) -- -- --
Issuance of common stock as payment
of finders fee ........................ 35,218 352 21,658 -- -- 22,010
Net (loss) for year ended June 30, 1995 . -- -- -- (405,987) -- (405,987)
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1995 ................ 5,530,661 55,306 3,304,099 (198,440) (18,906) 3,142,039
Net (loss) for year ended June 30, 1996 . -- -- -- (717,799) -- (717,799)
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 ................ 5,530,661 55,306 3,304,099 (916,259) (18,906) 2,424,240
Exercise of options ..................... 10,000 100 530 -- -- 630
Net earnings for year ended June 30, 1997 -- -- -- 28,120 -- 28,120
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1997 ................ 5,540,661 $ 55,406 $ 3,304,629 ($ 888,139) ($ 18,906) $ 2,452,990
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) ........................... $ 28,120 ($717,799) ($405,987)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization ............. 408,561 444,653 449,245
(Gain) loss on dispositions of property and
equipment ............................. (6,629) (400) 273,829
Provision for loss on accounts and
notes receivable ...................... 17,756 (116,423) 229,841
Discount on note .......................... -- 10,000 --
Impairment of assets ...................... -- 38,557 --
Other ..................................... (3,991) (1,544) (9,972)
Deferred income taxes ..................... -- 15,763 14,576
Net changes in assets and liabilities:
Accounts receivable ....................... (261,134) (75,336) (25,714)
Inventories ............................... 86,352 24,394 (444,161)
Other current and non-current assets ...... 19,471 33,055 (71,673)
Accounts payable, accrued expenses
and other current liabilities .......... 10,946 155,034 15,736
--------- --------- ---------
Net cash provided by (used in) operating
activities .................................... 299,452 (190,046) 25,720
--------- --------- ---------
Cash flows from investing activities:
Sale of real estate ........................... -- -- 374,606
Additions to real estate held for sale ........ (1,621) (5,454) (13,097)
Proceeds from sale of property and
equipment ................................. 9,100 1,000 3,000
Purchases of property and equipment ........... (85,519) (195,468) (677,180)
Proceeds from notes receivable, other ......... 140,464 461,795 3,168
Purchase of marketing rights .................. -- -- (33,537)
Proceeds from stockholders' notes
receivable .................................. 25,583 23,310 22,826
--------- --------- ---------
Net cash provided by (used in) investing
activities ................................... 88,007 285,183 (320,214)
--------- --------- ---------
(Continued on next page)
F-7
<PAGE>
Cash flows from financing activities:
Borrowings on lines of credit ............. $ 100,000 $ 364,000 $ 236,000
Payments on lines of credit ............... -- (292,613) (24,745)
Payments on notes payable ................. (243,104) (406,540) (257,152)
Borrowings from notes payable ............. -- 265,050 400,476
Payment on capital leases ................. (18,634) (18,470) (18,571)
Net proceeds from issuance of common
stock ................................... 630 -- 30,000
--------- --------- ---------
Net cash provided by (used in) financing
activities ................................ (161,108) (88,573) 366,008
--------- --------- ---------
Net increase in cash ........................ 226,351 6,564 71,514
Cash at beginning of year ................... 131,022 124,458 52,944
--------- --------- ---------
Cash at end of year ......................... $ 357,373 $ 131,022 $ 124,458
========= ========= =========
Supplemental schedule of noncash investing
and financing activites:
Acquisition of equipment under capital
lease obligation ....................... $ -- $ -- $ 31,597
Issuance of stock to acquire equipment
and marketing rights ................... -- -- 19,688
Installment loans to acquire property
and equipment .......................... 18,869 28,000 124,113
Issuance of stock as finders fee ............ -- -- 22,010
Sale of Grand County real estate:
Receipt of note receivable .............. -- -- 440,218
Payoff of note payable .................. -- -- 241,170
Conversion of account payable to note payable -- 51,224 --
Conversion of account and note receivable to
notes receivable ...................... -- 135,000 25,000
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest ......................... $ 377,909 $ 400,213 $ 364,391
Income taxes ..................... $ -- $ 1,650 $ --
</TABLE>
The accompanying notes are an integral part of the consolidated finaincial
statements.
F-8
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(1) Summary of Significant Accounting Policies
- ----------------------------------------------
(a)Nature of Operations. WW Capital Corporation and its wholly-owned
subsidiaries (the Company) principally engage in the manufacture,
distribution and sale of a wide range of livestock confinement and
handling equipment, and in the processing, purchasing and distributing
of water well supplies.
(b) Basis of Presentation. The accompanying consolidated financial
statements include the accounts of WW Capital Corporation and all of
its wholly-owned subsidiaries, W-W Manufacturing Co., Inc. Titan
Industries, Inc. (Titan) and Eagle Enterprises, Inc. (Eagle). All
significant intercompany accounts and transactions have been
eliminated in consolidation.
(c)Use of Estimates. The preparation of the Company's consolidated
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 disclosures
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.
(d)Cash Equivalents. For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with an
original maturity of three months or less to be cash equivalents.
(e)Loan Impairment. The Company uses the allowance method of accounting
for bad debts. Individual notes are evaluated for potential impairment
when payments are in arrears. Loans identified as impaired are then
valued based upon the present value of estimated future cash flows,
valuation of collateral, or management's judgment based upon general
market conditions, historical trends or individual circumstances. The
resulting value is then compared to the carrying amount. An allowance
is established for any resulting deficiency in the loan value compared
to the carrying amount.
The Company recognizes the entire change in the valuation allowance as
bad debt expense in the same manner in which impairment initially was
recognized or as a reduction in the amount of bad debt expense that
otherwise would have been reported. Interest accrued on impaired loans
is recognized as interest income. Payments received are applied first
to accrued interest receivable and then to principal.
(f) Inventories. Inventories are stated at the lower of cost or market.
Cost includes materials, labor and production costs and is determined
on a first-in, first-out (FIFO) method.
(g)Property and Equipment. Property and equipment are stated at cost.
Depreciation is computed using straight-line and accelerated methods
over the estimated useful lives of the assets, which are generally
thirty to forty years for buildings and improvements, three to seven
years for leasehold improvements and automobiles and trucks, and five
to seven years for machinery and equipment and office equipment.
Interest expense incurred during the construction of fixed assets has
been capitalized as part of the cost of those assets. During the year
ended June 30, 1995, the Company capitalized $12,616 in conjunction
with the building of the new facility in Paxton, Nebraska.
F-9
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(h)Real Estate Held for Sale. Real estate held for sale is stated at the
lower of cost or net realizable value. The Company capitalizes the
carrying cost as part of it's value in real estate held for sale.
(i)Loan Acquisition Costs. Loan acquisition costs represent costs
incurred to obtain certain of the Company's long-term debt. Such costs
have been capitalized and are being amortized over the terms of the
related debt.
(j)Stock-Based Compensation. In 1997, the Company adopted Statement of
Financial Accounting Standards Board Statement No. 123 (FAS 123),
"Accounting for Stock-Based Compensation." The Statement defined a fair
value based method of accounting for stock options or similar equity
instruments. FAS 123 allows an entity to continue to measure
compensation cost for employee stock option plans using the intrinsic
value based method of accounting prescribed by Accounting Principles
Board Opinion (APB) No. 25, which was elected by the Company. FAS 123
requires the Company to make certain proforma disclosures as if the
fair value based method had been applied. The adoption of FAS 123 had
no effect on net income and the effects of the fair value based method
were not material for proforma disclosure.
(k)Impairment of Long-Lived Assets. In 1996, the Company adopted Financial
Accounting Standards Board Statement No. 121 (FAS 121), " Impairment of
Long-Lived Assets." In the event that facts and circumstances indicate
that the cost of assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset
would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow value is required.
During 1996, the Company determined that the marketing rights for the
animal hospital bed, in its livestock equipment handling segment, were
impaired after estimating the present value of expected gross profit
from future sales as compared to the net book value. The Company wrote
down the intangible asset by $38,557 through a charge to cost of goods
sold.
(l)Warranty. The Company provides a warranty to its customers and the
related costs are recorded at the time of service. Future warranty
costs are not considered significant to the financial statements as
most warranty work, if any, is generally performed shortly after the
sale.
(m)Advertising. The Company expenses the cost of advertising the first
time the advertising takes place except for sales videos and show
materials, which were capitalized and amortized over their expected
period of future benefits of 60 and 36 months respectively.
At June 30, 1997 and 1996 $15,050 and $20,106 of advertising cost was
reported as assets. Advertising expense for each of the three years
ended June 30, 1997 was $97,556, $173,782 and $112,006, respectively.
(n)Income Taxes. The Company accounts for income taxes under an asset and
liability approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been recognized in different periods for financial and income tax
reporting.
F-10
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(o)Per Share Data. Primary net earnings (loss) per share is based on the
weighted average number of common shares outstanding during the period.
Outstanding stock options have not been included in the computation of
the earnings (loss) per share when the effect would have been
antidilutive.
(2) Capital Resources and Financing
-------------------------------
At June 30, 1997, the Company had debt to one Bank totaling
$2,448,166 that matured in July 1997. During October 1997, the Bank
issued a letter of intent to refinance the matured debt through January
1998.
Additionally, the Company has a mortgage note payable at a
separate financial institution with an outstanding balance of $454,862
at June 30, 1997 that matures in April 1998. The Company was not in
compliance with certain covenants of its debt agreement at June 30,
1997, making the debt callable.
The Company is negotiating the renewal of all of the above
debt on a long-term basis. The Company's ability to continue operations
is dependent on its ability to continue to refinance its debt
obligations.
(3) Inventories
-----------
<TABLE>
<CAPTION>
Inventories consisted of the following at June 30:
1997 1996
---- ----
<S> <C> <C>
Raw materials $ 461,31 $ 422,774
Work-in-process 188,890 206,200
Finished goods 2,690,955 2,798,534
----------- -----------
$3,341,156 $3,427,508
</TABLE>
(4) Related Party Transactions and Subsequent Event
<TABLE>
<CAPTION>
Notes Receivable. Notes receivable from stockholders and all
affiliated entities consisted of the following at June 30:
1997 1996
---- ----
<S> <C> <C>
Three notes receivable bear interest at 9% are due in
aggregate monthly installments of $2,300 through November
1997. The notes are collateralized by the assignment of
rental payments due from the Company totaling $2,300 per
month. $ 9,286 $ 34,869
Note receivable from a partnership owned by certain
of the Company's stockholders bears interest at 9%. During
October 1997, the note was renegotiated to provide for annual
installments of $2,500 through 2017 and for collateral
consisting of shares of the Company's common stock owned by
the partners. 23,028 23,028
32,314 57,897
Less allowance for doubtful accounts - ( 7,418)
Less current portion (9,286) (25,497)
-------- ---------
$23,028 $24,982
======= =======
</TABLE>
F-11
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Related Party Transactions and Subsequent Event - (continued)
- -------------------------------------------------------------
During the years ended June 30, 1997, 1996 and 1995, the Company
recorded interest income of $4,365, $6,362 and $8,478 for the notes
receivable from related parties.
Notes Payable to Stockholder. The Company has outstanding
balances of $27,069 and $32,465 payable to a former stockholder of
Titan as of June 30, 1997 and 1996, respectively. The notes are
unsecured, bear interest at 10%, and are payable in total monthly
installments of $700 through March 2001 and $350 through July 2001.
During the years ended June 30, 1997, 1996 and 1995, the Company
incurred interest expense of $3,004, $3,299 and $2,679, respectively,
on the notes payable to stockholder.
Operating Lease. The Company leases its manufacturing facility in
Dodge City, Kansas, from Murle F. Webster, a stockholder. The
manufacturing facility lease expired in December 1994 and has
continued on a month to month basis. The lease requires monthly
payments of $5,000, of which $2,300 is assigned to repay notes
receivable and accrued interest on stockholder loans. The provisions
of the building leases require the Company to pay insurance, property
taxes and maintenance costs.
Other. At June 30, 1997 and 1996 the Company has a liability of
$150,000 and $180,000 for commissions to Agri-Sales Associates
(Agri-Sales), whose major stockholder is a stockholder of the Company.
During the years ended June 30, 1996 and 1995, the Company incurred
$14,673 and $234,586 in commissions to Agri-Sales Associates. No
commissions were incurred during 1997.
Additionally, the Company has recorded receivables of $167,572
and $132,221 from the stockholder and Agri-Sales as of June 30, 1997
and 1996, including amounts due under an indemnification agreement.
The Company has discontinued payments of amounts due for commissions
until amounts due under the indemnification agreement have been
collected.
The Company has entered into the transactions with related
parties as disclosed above during the three-year period ended June 30,
1997. The Company has not attempted to determine whether any or all of
such transactions have been consummated on terms equivalent to those
that would have prevailed in arm's length transactions.
(5) Notes Receivable - Other
- -----------------------------
<TABLE>
<CAPTION>
Other notes receivable consisted of the following at June 30:
1997 1996
---- ----
<S>
Unsecured note receivable from a former employee <C> <C>
bears interest at 9%. $19,753 $19,753
Note receivable bears interest at 12% and is due in monthly
installments of $500. The note is collateralized by equipment. 4,049 9,513
Other 2,500 -
Paid in full during 1997 - 135,000
-------
26,302 164,266
Less allowance for doubtful accounts (10,000) (10,535)
Less current portion ( 6,549) (144,513)
$ 9,753 $ 9,218
======= =======
</TABLE>
F-12
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Notes Receivable - Other- (continued)
Notes receivable totaling $42,781 at June 30, 1997 and 1996 were
indentified by management as impaired. The allowance for credit loss
was $10,000 and $17,923 for June 30, 1997 and 1996 respectivley.
During 1997, the Company renegotiated its collateral position with
certain borrowers resulting in the reduced allowance.
(6) Property and Equipment
- ---------------------------
<TABLE>
<CAPTION>
Property and equipment consisted of the following at June 30:
1997 1996
---- ----
<S> <C> <C>
Land and improvements $ 94,840 $ 94,840
Building and improvements 1,596,930 1,596,930
Leasehold improvements 207,123 207,912
Machinery and equipment 1,691,416 1,673,694
Office equipment 356,809 351,887
Automobiles and trucks 570,916 574,347
Construction in progress 35,180 3,822
----------- -----------
4,553,214 4,503,432
Less accumulated depreciation and amortization (2,256,851) (1,901,838)
----------- -----------
$2,296,363 $2,601,594
========== ==========
</TABLE>
(7) Investment in Real Estate
- ----------------------------------
The Company owns 95 acres of undeveloped real estate in
Johnson County, Texas. During August 1995, the Company listed the land
for sale for $400,000. At June 30, 1995, the Company wrote down the
value of the real estate to its estimated net realizable value of
$373,960, recognizing an unrealized loss of $75,000. The Company has
capitalized certain holding costs and improvements totaling $7,075
since June 30, 1995. At June 30, 1997 management was evaluating
residential development alternatives for the property.
In December 1994, the Company sold its Grand County real
estate for an adjusted price of $1,090,216 and recognized a loss of
$195,598 on this transaction. The Grand County property was acquired
under an asset exchange agreement with Apex Realty Investments, inc.
(Apex), a company wholly-owned by Nicholas L. Scheidt, a stockholder
and former member of the Board of Directors of the Company. The Company
received net cash of $374,606 after closing costs and paying off a
mortgage in the amount of $241,170 against the property. Additionally,
the buyers entered into a five year mortgage payable to the Company for
the remaining balance of $440, 218. This note was paid in full in
February 1996.
(8) Employee Benefit Plans
- -------------------------------
401(k) Plan. The Company has a 401(k) Saving Plan, whereby
eligible employees who have one half year of entry service and are age
21 or older, may contribute up to 20% of their salary up to a maximum
as allowed by the Internal Revenue Code. The Company may make
discretionary matching contributions on the first 4% of employee
contributions vesting at 25% per year after three years of service.
During the year ended June 30, 1997, 1996, and 1995 , the Company made
$7,397, $10,295 and $12,350 in discretionary contributions to the Plan.
F-13
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Employee Benefit Plans - (continued)
------------------------------------
Stock Options. The Company has an Incentive Stock Option Plan.
Under this Plan, the Board of Directors or its designated committee is
authorized to grant officers and key employees options to purchase up
to 950,000 shares of the Company's common stock. At June 30, 1997,
options to purchase 712,500 shares of common stock are available to be
granted by the Company under the plan. These options have a three-year
vesting period.
Additionally, the Company has a non-qualified stock option
plan for the outside directors of the Company. Under this plan, the
incentive stock option plan committee is authorized to grant outside
directors options to purchase up to 400,000 shares of the Company's
common stock. The Company granted options to purchase up to 147,668
shares at option prices ranging from $0.063 to $2.50 per share of which
137,668 are outstanding as of June 30, 1997. Options to purchase 10,000
shares of common stock for $0.063 per share were exercised during 1997.
These options will expire five or ten years after issuance.
The following stock options are outstanding at June 30, 1997:
<TABLE>
<CAPTION>
Number Number
of Options Exercise of Options
Issue Date Outstanding Price Exercisable
------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
December 14, 1990 10,000 $1.00 10,000
May 1, 1992 25,000 $2.50 25,000
February 26, 1993 50,000 $1.50 50,000
July 1, 1993 26,001 $0.8125 26,001
June 10, 1994 182,500 $0.75 182,500
July 1, 1994 26,667 $0.75 26,667
July 1, 1995 30,000 $0.5625 30,000
April 5, 1996 5,000 $0.45 1,666
July 1, 1996 20,000 $0.063 20,000
---------- --------
375,168 371,834
========= =======
</TABLE>
Additionally, options to purchase 10,000 shares of the
Company's common stock for $0.17 per share were issued on July 1, 1997 to a
Director.
(9) Short-Term Notes Payable
- ----------------------------------
<TABLE>
<CAPTION>
Revolving credit facilities from a bank consisted of the following at June 30:
1997 1996
---- ----
<S> <C> <C>
Revolving note payable with maximum available borrowings
of $850,000 bears interest at .75% over
the Bank's base rate (10.75% at June 30, 1997) .............. $ 840,000 $ 740,000
Revolving note payable with maximum available borrowings
of $750,000, bears interest at .75% over
the Bank's base rate (10.75% at June 30, 1997) .............. 750,000 750,000
Revolving note payable with maximum available borrowings
of $250,000, bears interest at 1.5% over
the Bank's base rate (11.50% at June 30, 1997) .............. 244,000 244,000
---------- ----------
$1,834,000 $1,734,000
</TABLE>
F-14
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
Short -Term Notes Payable - (continued)
<S> <C> <C>
Weighted average interest rate at year end 10.85% 10.75%
Maximum amount outstanding during the year $1,834,000 $1,861,613
Average amount outstanding during the year $1,800,667 $1,751,839
Weighted average interest rate during the year
based on average short-term notes payable 10.66% 11.80%
</TABLE>
All of the short-term notes payable are collateralized by deeds of
trust on real estate, property and equipment, accounts receivable, inventories
and contract rights, and are cross-collateralized with long-term debt totaling
$614,166 at June 30, 1997, and cross-guaranteed by all of the subsidiaries. The
revolving credit agreements provide that outstanding indebtedness cannot exceed
the sum of 80% of the eligible accounts receivable and 50% of raw material and
finished goods inventories. The loan agreements prohibit the Company from paying
cash dividends. Additionally, the Company's subsidiaries are required to meet
certain restrictive loan covenants pertaining to the maintenance of minimum
working capital, current ratio, net worth, and debt service coverage ratios. The
Company was in violation of certain covenants at June 30, 1997. As a result of
these covenants approximately $1,965,000 of the Company's consolidated net
assets at June 30, 1997 are considered to be restricted net assets of
consolidated subsidiaries. During October 1997, the Company received a letter of
intent to renew the short-term notes payable above, all of which matured in July
1997, through January 1998.
<TABLE>
<CAPTION>
(10) Long-Term Debt
Long-term debt consists of the following at June 30: 1997 1996
--------- --------
<S> <C> <C>
Financial Institutions
----------------------
Note payable bears interest at 8.5% and is due in monthly
installments of $8,300, including principal and interest. The
note matures in April 1998 and is collateralized by real
estate located in Livingston, Tennessee, and machinery and
equipment. The agreement contains covenants relating to the
maintenance of a minimum cash flow ratio, a minimum
stockholder's equity balance and a maximum debt to worth
ratio. The Company is in violation of these covenants making
the debt callable. $454,862 $507,783
Note payable bears interest at 1% over the Bank's base rate
(11.0% at June 30, 1997) and is due in monthly installments of
$9,950, including principal and interest. The Bank has issued
a letter of intent to renew the note, which matured in July
1997, through January 1998. The note is collateralized by
accounts receivable, inventories, property and equipment, real
estate and contract rights. 351,073 398,644
F-15
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Long-Term Debt - (continued)
Note payable bears interest at 1% over the Bank's base rate
(11.0% at June 30, 1997), and is due in monthly installments
of $7,350, including principal and interest. The Bank has
issued a letter of intent to renew the note, which matured in
July 1997, through January 1998. The note is collateralized by
accounts receivable, inventories, property and equipment, real
estate and contract rights. 263,093 288,528
Mortgage note payable bears interest at 9.15% through February
2000. The interest rate is 4.98% over the Bank's consumer real
estate index rate and is subject to change every five years
commencing in March 2000. The note is payable in installments,
including principal and interest, of $2,308 and matures in
March 2010. The mortgage is collateralized by real estate
located in Paxton, Nebraska, accounts receivable, inventories,
property and equipment, contract rights and intangibles.
208,408 216,555
Mortgage note payable bears interest at 1.5% over the New York
Chase prime rate (10.0% at June 30, 1997) and is due in
monthly installments, including principal and interest, of
$1,054 through May 2005, at which time the remaining balance
becomes due. The mortgage is collateralized by real estate
located in Weatherford, Oklahoma. 69,457 74,499
Notes payable bear interest at rates ranging from 9.77% to
12.25% and are due in monthly installments, including
principal and interest, totaling $1,520 through July 1997,
$1,210 through December 1998, and $707 through April 2000. The
notes are collateralized by equipment. 29,567 43,781
F-16
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Long-Term Debt - (continued)
----------------------------
Notes payable bear interest at rates ranging from 6.99% to
10.25% and are due in monthly installments, including
principal and interest, totaling $1,236 through November
1998 and $600 through January 2000. The notes are
collateralized by vehicles. 25,912 20,205
Note payable bears interest at 9.0% and is due in monthly
installments, including principal and interest, of $1,126
through July 1998. The note is collateralized by furniture
and equipment. 12,570 24,334
------ ------
1,414,942 1,574,329
--------- ---------
Other Entities
--------------
Note payable bears interest at 5.75% and is due in monthly
installments, including principal and interest, of $2,449
through July 2003. The note is collateralized by accounts
receivable, equipment and furniture and fixtures. The
agreement requires the Company to create or retain seventeen
new full-time permanent positions within an eighteen month
period with 60% of the positions for low income individuals. 150,535 169,000
Mortgage note payable bears interest at 4.38% through January
2000. The interest rate will be adjusted in February 2000 and
February 2005. The note is due in monthly installments of
$949, including principal and interest, through February 2010.
The note is collateralized by real estate located in Paxton,
Nebraska, accounts receivable, inventories, property and
equipment, contract rights and intangibles. 110,513 116,903
Mortgage note payable bears interest at 2.0% and is due in
monthly installments, including principal and interest, of
$1,288 through May 1999. The note is collateralized by land,
building and equipment located in Livingston, Tennessee,
subordinated to a financial institution. 29,044 43,761
F-17
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Long-Term Debt - (continued)
----------------------------
1997 1996
Note payable bears interest at 5.25% and is
due in quarterly installments, including principal
and interest, of $675. The note is unsecured. 15,305 17,554
Note payable paid in full during 1997 - 17,504
----------------- ------------
305,397 364,722
------------ ------------
Related Party (Note 4) 27,069 32,465
---------------------- ------------- ------------
1,747,408 1,971,516
Less current portion (1,172,018) (316,298)
------------- ------------
$ 575,390 $1,655,218
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
The aggregate maturities of long-term debt are as follows at
June 30, 1997:
Year
----
<S> <C> <C>
1998 $1,172,018
1999 88,807
2000 69,685
2001 62,068
2002 59,388
Thereafter 295,442
-------
$1,747,408
==========
</TABLE>
(11) Capital Lease Obligation
The Company leases certain office and production equipment
under capital leases expiring at various dates through 1999. The assets
and liabilities under the capital leases are recorded at the lower of
the present value of the minimum lease payments or the fair value of
the assets. The assets are amortized over the lower of its lease term
or its estimated productive life. At June 30, 1997, the equipment has
original cost of $64,836 with accumulated amortization of $53,262.
<TABLE>
<CAPTION>
Minimum future lease payments under the capital leases at June
30, 1997 are as follows:
Year
----
<S> <C>
1998 $13,207
1999 1,231
---------
Total minimum lease payments 14,438
Less executory costs and interest (2,865)
---------
Present value of net minimum lease payment $11,573
=======
Current portion $ 9,889
=======
Long-term portion $ 1,684
========
</TABLE>
(12) Commitments and Contingencies
- ---- -----------------------------
Operating Leases. In March 1997, the Company entered into a
three year lease for office space. The lease provides for monthly
rental payments of $2,312 escalating to $2,457 for the period beginning
April 1, 1997 through April 30, 2000.
F-18
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Commitments and Contingencies - (continued)
-------------------------------------------
<TABLE>
<CAPTION>
Future minimum rental payments under operating leases as of June 30,
1997 are as follows:
Year Office Space Equipment Vehicles Total
---- ------------ --------- -------- -----
<S> <C> <C> <C> <C>
1998 $27,961 $5,105 $40,152 $73,218
1999 28,828 5,105 18,960 52,893
2000 22,109 2,552 8,470 33,131
-------- ------- --------- --------
Total minimum
payments required $78,898 $12,762 $67,582 $159,242
======= ======= ======= ========
</TABLE>
During March 1997, the Company terminated its existing office
space lease. To terminate the lease the Company paid $12,010 which is
included in operating lease expense in 1997.
The Company also leases various facilities under informal
agreements. Rental expense under operating leases for the years ended
June 30, 1997, 1996 and 1995 amounted to $186,715, $159,889, and
$130,989, respectively.
Long Distance Service. The Company entered into an agreement for
long distance telephone service which requires monthly minimum
payments of ---------------------- $3,000 through May 1998.
Employment Contract. In May 1996, the Company entered into two
year employment with its territory sales manager which provides for an
annual salary of $55,000 plus a bonus equal to .0075 percent of the
sales increase over annual budgeted sales.
Environmental Remediation Liability. During the year ended June
30, 1997, the Company completed disposal of a significant amount of
paint located at its Tennessee facility to comply with environmental
regulations. The cost of the disposal totaled $25,561, of which
$10,000 was accrued at June 30, 1996.
(13) Segmented Information and Reconciliation
- ---- ----------------------------------------
The Company's operations are classified into principal industry segments;
W-W and Eagle which manufacture and distribute livestock handling
equipment, and Titan which processes and distributes water well and
environmental supplies. Following is a summary of segmented information
for each of the three years in the period ended June 30:
<TABLE>
<CAPTION>
Net Sales: 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Livestock handling equipment $ 8,170,971 $ 7,522,417 $ 8,870,970
Water well and environmental supplies 6,901,314 6,989,817 6,692,491
--------- --------- ---------
Total Net Sales $15,072,285 $14,512,234 $15,563,461
=========== =========== ===========
Operating Earnings:
Livestock handling equipment $ 463,712 $ (262,647) $ 512,094
Water well and environmental supplies 432,221 473,133 321,790
------- ------- -------
Total Operating Earnings 895,933 210,486 833,884
Corporate and Other (1) (867,813) (928,285) (1,239,871)
--------- --------- -----------
Earnings (loss) before income taxes $ 28,120 $ (700,386) $ (391,411)
============== =========== ============
</TABLE>
F-19
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
Segmented Information and Reconciliation - (continued)
- ------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Identifiable Assets:
Livestock handling equipment ........ $4,056,207 $3,866,469 $4,086,651
Water well and environmental supplies 4,015,170 4,438,397 4,324,658
---------- ---------- ----------
8,071,377 8,304,866 8,411,309
General corporate assets (2) ........ 607,716 589,042 1,136,208
---------- ---------- ----------
Total assets as reported in
accompanying consolidated
balance sheets ...................... $8,679,093 $8,893,908 $9,547,517
========== ========== ==========
Capital Expenditures:
Livestock handling equipment ........ $ 31,657 $ 164,150 $ 213,440
Water well and environmental supplies 43,495 72,688 578,796
Corporate ........................... 4,226 3,221 54,685
---------- ---------- ----------
Total Capital Expenditures .............. $ 79,378 $ 240,059 $ 846,921
========== ========== ==========
Depreciation and amortization:
Livestock handling equipment ........ $ 272,915 $ 287,238 $ 292,199
Water well and environmental supplies 113,449 123,691 121,331
Corporate ........................... 22,197 33,724 35,715
---------- ---------- ----------
Total Depreciation and amortization ..... $ 408,561 $ 444,653 $ 449,245
========== ========== ==========
<FN>
(1) Corporate and other includes corporate general and
administrative expenses, net interest expense and other
nonoperating income and expense items.
(2) General corporate assets are principally notes receivable and real
estate held for sale.
</FN>
</TABLE>
(14) Major Customer and Sales Agency Agreement
- ---- -----------------------------------------
Agri-sales sold approximately 17% of the Company's net sales under a Sales
and Marketing Agency Agreement during the year ended June 30, 1995. These sales
are attributable to the livestock handling equipment segment of the Company. No
customer accounted for more than 10% of total net sales during any of the three
years in the period ended June 30, 1997.
(15) Income Taxes
- ---- ------------
<TABLE>
<CAPTION>
The provision for income taxes is as follows at June 30:
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current
Federal ........................... $ 30,800 $ -- $ --
State ............................. 14,400 1,650 --
Deferred ............................... -- 15,763 14,576
Tax benefit of net operating loss ...... (45,200) -- --
------- -------- --------
$ -- $ 17,413 $ 14,576
======== ======== ========
</TABLE>
A reconciliation of income at the statutory rate to the Comapny's effective rate
is as follows at June 30:
F-20
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
Income Taxes - continued
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate .................. 34.00% (34.00)% (34.00)%
Non deductible expenses ................. 23.44 1.56 3.16
Basis difference in assets .............. (8.90) -- --
Capital loss and non deductible
write down of real estate .......... -- .17 23.51
Change in deferred tax asset valuation
allowance and net operating loss ... (49.47) 34.10 --
Other ................................... 11.06
----- ----- -----
.93 .57 11.06
===== ===== =====
--% 2.40 3.73 %
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts .................. 48,960 59,869
Accrued salaries ................................. 19,242 20,531
Net operating loss carryforward .................. 239,979 344,327
Inventory ........................................ 34,775 25,518
--------- ---------
Total deferred tax assets ................... 342,956 450,245
Deferred tax liabilities:
Depreciation of property and equipment ........... (176,834) (211,445)
Valuation allowance .............................. (166,122) (238,800)
--------- --------
Deferred taxes - net ............................ $ -- $ --
========= ========
Current deferred tax asset ............................ -- 99,814
Long-term deferred tax liability ...................... -- (99,814)
- ------------------------------------------------------- -------- --------
$ -- $ --
========= ========
</TABLE>
At June 30, 1997, the Company has approximately $705,800 of net operating loss
available for carryforward to offset future year's taxable revenue. The loss
carry forward expires at various times through the year 2011, if not utilized
earlier.
At June 30, 1997, the Company has capital loss carryforwards in the amount of
$283,582 which no benefit has been recognized due to uncertainty as to
realization.
(16) Legal Proceedings
- ---- -----------------
On December 6, 1996, WW Capital and its legal counsel, Klenda, Mitchell,
Austerman and Zuercher, a Limited Liability Company and General Partnership
filed a law suit in the U.S. District Court Wichita, Kansas against Jerry R.
Bellar, individually. WW Capital sued to recover under provisions of the
Exchange Agreement cost associated with the settlement of "People's Bank of
Hunstville v. Liberty Metals Fabricating, LTD and Eagle Enterprises." It is
management's opinion that any amounts paid to Liberty Metals, against Eagle,
that Eagle would be indemnified by Bellar. It was indicated during the purchase
of Eagle that Eagle's exposure in the Liberty Metals case was "at worst a
wash-out" Bellar denies that the Liberty Metal case is covered under the
indemnification agreement. WW Capital is seeking to recover approximately
$53,000 relating to the settlement of the Liberty Metals Case.
F-21
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Legal Proceedings - (continued)
- -------------------------------
In addition the Company is seeking to recover its Legal fees advanced on
behalf of Bellar relating to the March Group case. Provisions of the exchange
agreement and a letter from Mr. Bellar to the Company attorneys, Klenda,
Mitchell, Austerman and Zuercher, call for Mr. Bellar to reimburse the Company
for all legal fees expended by the Company on Mr. Bellar's behalf. Mr. Bellar
contains that the legal fees advanced on his behalf are unreasonable and has
denied to reimburse the Company for these fees.
On or about March 26, 1997, the above captioned case was transferred to
the United States District Court for the Middle District of Tennessee in
Nashville. The Company has retained legal counsel of Farris, Warfield, and
Kanaday, PC in Nashville to handle the case.
On two occasions the Company has made written offers to settle the case
with Mr. Bellar. At this time, the settlement offers have been rejected by Mr.
Bellar. Presently the case is in the discovery phase and management can not
project an outcome at this time. WW Capital is seeking to recover approximately
$195,235 relating to the reimbursement of legal fees and Liberty Metals, of
which $167,572 has been recorded in the financial statements.
In April, 1994, W-W Manufacturing and Eagle sent written notice to
Agri-Sales that the Companies would not renew their sales and marketing agency
agreement with Agri-Sales when the two year initial contract term expired on
October 26, 1994. Agri-Sales informed the Company that under the contract, W-W
Manufacturing and Eagle can not terminate the sales and marketing agreement
until May 26,1995. On October 5, 1994, the Company filed a lawsuit in the
Sixteenth Judicial District, Ford County, Kansas, asking the Court for
declaratory judgment and a preliminary injunction against Agri-Sales to resolve
the issue. On October 10, 1994, Agri-Sales filed an answer and made application
for a temporary injunction against the Company. On October 20, 1994, the
District Judge denied Agri-Sales application for a temporary injunction against
the Company. Additionally, Agri-Sales had filed a counter claim for relief
estimating damages of $500,000 to $600,000 for the commissions Agri-Sales would
have earned for the period October 26, 1994 to April 26, 1995, (the date
Agri-Sales contends that the contract will expire) and actual damages of
$475,206. Management was confident the court would decide that the contracts did
expire on October 26, 1994 and the actual amounts due Agri-Sales based upon the
Company's calculation, which had been recorded in the accompanying financial
statements, are substantially less than the amounts claimed. This case is in
discovery and the Company's legal counsel is unable to express an opinion on the
outcome of this case. The Company has been negotiating with Agri-Sales to settle
this lawsuit.
While the case was in the Discovery stage, the Company reached a
settlement agreement with Agri-Sales to settle the lawsuit. The Company offered
to pay $180,000 with $30,000 due upon final settlement of the March Group, Inc.
lawsuit discussed below with the remaining balance payable in semi-annual
payments of $25,000 until paid in full, with zero interest. This offer was
accepted by Jerry Bellar and an agreement was entered into on December 2, 1996.
The second installment of $25,000 has not been paid awaiting the outcome of the
lawsuit the Company filed against Bellar for non-compliance with the exchange
agreement previously discussed above.
On December 22, 1992, The March Group, Inc. (The March Group) filed a
lawsuit against Eagle and its former shareholders, Jerry R. Bellar (Bellar) and
James Buford (Buford). The March Group alleges that Eagle, Bellar and Buford
breached a listing contract to sell Eagle and has requested damages of $169,596
(Count I).
F-22
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The March Group has also sued the Company for breach of a separate
agreement which the Company had made with The March Group promising to direct
all inquiries it had regarding the purchase of Eagle through The March Group and
is seeking damages of $169,596 (Count II).
Additionally, The March Group is requesting damages against Eagle, Bellar
and the Company under a specific Tennessee statue which would allow The March
Group three times its proven actual damages of $508,788 (Count III).
On May 6, 1994, the Chancery Court, for the State of Tennessee, entered an
order requiring Eagle to pay The March Group $169,596 under Count I and ruled in
favor of defendants on Counts II and III. On June 7, 1995 the court of appeals
reversed the decision that Eagle had to pay $169,596. The case (Count I) has
been remanded back to trial court for trial. The court of appeals affirmed the
decision of the trial court on Count II and III in favor for the Company. After
the Court of Appeals decision, Eagle filed an application for review to the
Tennessee Supreme Court asking it to reconsider the Court of Appeals decision
rejecting Eagle's claim that plaintiff violated the Tennessee Real Estate Broker
Licensing Act, thus forfeiting any fee under the listing contract. Trial of the
remanded case to the trial court will not begin until such time as the Tennessee
Supreme Court has decided whether to grant Eagle's application for review. The
Tennessee Supreme Court denied Eagle's application to review the Court of
Appeals decision and trial was held on December 1996 in the Chancery Court of
Nashville, Tennessee. On December 9, 1996 the Court ruled in the favor of The
March Group and judgment was entered against Eagle for $137,264 plus prejudgment
interest totaling $30,815.45 and post judgment interest at the stationary rate
of 10% per annum and costs of the action. Under the terms of the Eagle Exchange
agreement, Bellar acknowledges that his indemnification obligates him to pay
Eagle for all damages awarded The March Group in excess of $50,000. In January
1997 Bellar filed a post trial motion in this case and has settled with The
March Group.
WW Capital had previously recorded the $50,000 minimum fee and on April 3,
1997 paid the $50,000 to finalize its obligations in this suit. Mr. Bellar has
paid all sums in excess of the $50,000 and this case in now closed.
Eagle was a defendant in a lawsuit filed by Liberty Metal Fabrications,
Limited (Liberty Metals) in the State of Kentucky. The claims against Eagle
relate prior to the acquisition of Eagle (October 26, 1992) by the Company.
Liberty Metals was claiming approximately $91,000 from Eagle. The Company
settled the claim by paying $18,000 and returning certain equipment to Liberty
Metals.
Additionally, it is Management's opinion that any amounts paid to Liberty
Metals, against Eagle, that Eagle would be indemnified by Bellar. It was
indicated during the purchase of Eagle that Eagle's exposure in the Liberty
Metals case was "at worst a wash-out". Bellar denies that the Liberty Metal case
is covered under the indemnification agreement.
(17) Significant Group Concentrations of Credit Risk
- ---- -----------------------------------------------
The Company's business activity is in two industry segments, livestock
handling equipment and water well and environmental supplies. W-W Manfufacturing
and Eagle's livestock handling equipment customers are principally resellers and
are primarily located in the midwest, Tennessee and Georgia, while Titan's water
well supply customers are principally located in the states of Nebraska,
Oklahoma and Kansas. At June 30, 1997, W-W Manufacturing and Eagle's accounts
receivable totaled $952,147 and Titan's totaled $1,074,844.
F-23
<PAGE>
WW CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(18) Fair Value of Financial Instruments
- ---- -----------------------------------
Effective June 30, 1996, the Company adopted statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments," which requires disclosing fair value to the extent practicable for
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value of the financial statements disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider tax consequences of realization. The carrying value
of cash, trade receivables, notes receivables and accounts payable and variable
rate debt instruments approximate fair value. The carrying value of long-term
debt approximates fair value in 1997 due to the scheduled maturities and
restrictive provisions of the debt. The carrying value of long-term debt
exceeded the fair value by approximately $63,300 at June 30, 1996 based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.
F-24
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
W W Capital Corporation
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheet of W W
Capital Corporation as of June 30, 1997, and the related statements of
operations, stockholders' equity and cash flows for the year then ended,
and have issued our report thereon dated October 10, 1997. Our audit
also included the financial statement schedule of W W Capital
Corporation listed in Item 14. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audit. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects
the information set forth therein.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado
October 10, 1997
S-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
W W Capital Corporation
We have audited the accompanying consolidated balance sheet of W W
Capital Corporation as of June 30, 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the two years in the
period ended June 30, 1996 and have issued our report thereon dated October 15,
1996. Our audits also included the financial statement schedules of W W Capital
Corporation as of June 30, 1996, and for each of the two years in the period
then ended, listed in Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statements
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
MILLER AND McCOLLOM
Certified Public Accountants
Denver, Colorado
October 15, 1996
S-2
<PAGE>
<TABLE>
<CAPTION>
ASSETS
------
Years Ended June 30,
--------------------
1997 1996
---- ----
<S> <C> <C>
Current Assets:
Cash ......................................................... $ 13,060 $ 6,715
Accouts receivable, related party ............................ 167,572 132,221
Notes receivable ............................................. 2,500 --
Deferred taxes ............................................... -- 99,814
----------- -----------
Total Current Assets ..................................... 183,132 238,750
----------- -----------
Property and Equipment, net of accumulated depreciation
of $95,527 in 1997 and $82,276 in 1996 ......................... 41,237 64,060
Other Assets:
Real estate held for sale .................................... 381,035 379,414
Investment in wholly owned subsidiaries ...................... 2,122,743 2,121,348
Other assets ................................................. 2,312 5,274
----------- -----------
TOTAL ASSETS ............................................. $ 2,730,459 $ 2,808,846
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITITY
LIABILITIES
-----------
Current Liabilites:
Accounts payable ............................................. $ 97,949 $ 186,875
Accrued expenses ............................................. 6,600 10,885
Accounts payable, subsidiaries ............................... 160,351 62,698
Current portion, long-term debt .............................. 12,570 11,796
Total Current Liabilites ................................. 277,470 272,254
----------- -----------
Long-term debt ................................................. -- 12,538
Deferred taxes ................................................. -- 99,814
----------- -----------
Total Liabilites .......................................... 277,470 384,606
----------- -----------
STOCKHOLDERS' EQUITY
--------------------
Stockholders' Equity:
Preferred stock, $10.00 par value, 400,000 shares
authorized ................................................ -- --
Common stock, $0.01 par value, 15,000,000 shares
authorized;5,540,661 and 5,530,661 shares issued and
outstanding at June 30, 1997 and 1996, respectively ....... 55,406 55,306
Captial in excess of par value ................................ 3,304,629 3,304,099
Retained earnings (deficit) ................................... (888,140) (916,259)
----------- -----------
2,471,895 2,443,146
Less 20,264 shares of treasury stock at cost ................... (18,906) (18,906)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ............................... 2,452,989 2,424,240
----------- -----------
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY ................. $ 2,730,459 $ 2,808,846
=========== ===========
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
Years ended June 30,
--------------------
1997 1996 1995
<S> <C> <C> <C>
Revenues:
Management fee from subsidiaries .......... $ 480,000 $ 480,000 $ 655,093
Operating Expenses:
General and administrative ................ 546,011 645,678 750,513
--------- --------- ---------
Operating (Loss) ................... (66,011) (165,678) (95,420)
Other Income (Expense):
Interest income ........................... -- 2,879 9,455
Interest expense .......................... (2,075) (5,482) (21,020)
Realized and unrealized loss on asset sales
and real estate held for sale ........... 3,319 (3,500) (271,811)
Other income .............................. (2,960) 12,154 52,470
Equity in Earnings (loss) of subsidiary
before income taxes ..................... 95,847 (542,409) (65,085)
--------- --------- ---------
Earnings (loss) before Income taxes ....... 28,120 (702,036) (391,411)
Income Tax Expense .......................... -- 15,763 14,576
--------- --------- ---------
Net Earnings (Loss) .................... $ 28,120 ($717,799) ($405,987)
========= ========= =========
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
Years ended June 30,
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net cash flows (used in) operating
activites ................................... ($172,779) ($ 13,571) ($224,049)
--------- --------- ---------
Cash flows from investing activites:
Investment in subsidiaries .................. 179,415 (365,000) (150,000)
Sale of real estate ......................... -- -- 374,606
Proceeds from notes receivable .............. 430,219 --
Proceeds from sales of property and equipment 4,000 -- --
Purchase of equipment ....................... (4,226) (3,221) (40,654)
Additions to real estate held for sale ...... (1,621) (5,454) (13,097)
--------- --------- ---------
Net cash provided by investing
activites ................................... 177,568 56,544 170,855
--------- --------- ---------
Cash flows from financing activites:
Bank overdraft .............................. -- -- 9,258
Proceeds from long-term debt ................ -- -- 44,576
Proceeds from issuance of common stock ...... 630 -- 30,000
Payments on long-term debt .................. (11,764) (39,010) (26,038)
Payment on capital lease obligation ......... -- (387) (1,463)
--------- --------- ---------
Net cash (used in) provided by financing
activites ................................... (11,134) (39,397) 56,333
--------- --------- ---------
Net increase in cash .......................... 6,345 3,576 3,139
Cash at beginning of year ..................... 6,715 3,139 --
--------- --------- ---------
Cash at end of year ........................... $ 13,060 $ 6,715 $ 3,139
========= ========= =========
Supplemental schedule of noncash investing
and financing activies:
Issuance of stock to acquire equipment
and marketing rights .................. $ -- $ -- $ 19,688
Issuance of stock as finders fee .......... -- -- 22,010
Sale of Grand County real estate:
Receipt of note receivable ............ -- -- 440,218
Payoff of note payable ................ -- -- 241,170
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest .......................... $ 2,075 $ 5,482 $ 21,020
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
(1) Long-term Debt
Notes payable to financial institutions were as follows:
June 30,
---------
1997 1996
---- ----
<S> <C> <C>
Note payable, NationsBank Kansas, interest at
9.00%, secured by funiture and equipment,
payable in monthly principal and interest
payments of $1,126 ............................... $ 12,570 $ 24,334
Less current portion ......... (12,570) (11,796)
-------- --------
$ -- 12,538
======== ========
</TABLE>
Future maturities of notes payable consists of $12,570 that is due during 1998.
(2) Related Party Transactions
At June 30, 1997 and 1996, Jerry R. Bellar, the former majority
shareholder of Eagle and a current stockholder of the Company,
owed $167,572 and $132,221 respectively under on indemnifcation
agreement related to the Company's acquisition of Eagle.
The following amounts related to wholly owned subsidiaries of the
Company were eliminated in the consolidated financial statements
of the Company but are reflected in this condensed financial
statement of registrant:
<TABLE>
<CAPTION>
Amounts receivable (payable) at June 30:
1997 1996
---- ----
<S> <C> <C>
W-W Manufacturing Co, Inc. ............... $ 116,416 $ 38,817
Titan Industries, Inc. ................... (239,903) (94,452)
Eagle Enterprises, Inc. .................. (36,864) (7,063)
--------- ---------
($160,351) ($ 62,698)
========= =========
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
(2) Related Party Transactions, Continued
Management fee income for: Years ended June 30,
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
W-W Manufacturing Co., Inc ............ $ 240,000 $ 240,000 $ 373,664
Titan Industries, Inc. ................ 240,000 240,000 240,000
Eagle Enterprises, Inc. ............... -- -- 41,429
--------- --------- ---------
$ 480,000 $ 480,000 $ 655,093
========= ========= =========
</TABLE>
<TABLE>
Equity in subsidiary operations for: Years Ended June 30,
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
W-W Manufacturing Co., Inc ............. ($ 5,925) ($432,908) $ 131,073
Titan Industries, Inc. ................. 97,332 169,914 53,369
Eagle Enterprises, Inc. ................ 4,440 (279,415) (249,527)
--------- --------- ---------
$ 95,847 ($542,409) ($ 65,085)
========= ========= =========
</TABLE>
S-7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS
OF OPERATIONS FOUND ON PAGES F-2, F-3 AND F-4 OF THE COMPANY'S
FORM 10-K FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 357,373
<SECURITIES> 0
<RECEIVABLES> 2,160,991
<ALLOWANCES> (134,000)
<INVENTORY> 3,341,156
<CURRENT-ASSETS> 5,938,232
<PP&E> 4,553,214
<DEPRECIATION> 2,256,851
<TOTAL-ASSETS> 8,679,093
<CURRENT-LIABILITIES> 5,649,029
<BONDS> 555,966
0
0
<COMMON> 55,406
<OTHER-SE> 2,397,584
<TOTAL-LIABILITY-AND-EQUITY> 8,679,093
<SALES> 15,072,285
<TOTAL-REVENUES> 15,072,285
<CGS> 12,212,442
<TOTAL-COSTS> 12,212,442
<OTHER-EXPENSES> 2,509,921
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (374,522)
<INCOME-PRETAX> 28,120
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,120
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
