FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 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
(exact name of Registrant as specified in its charter)
Nevada 93-0967457
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication Number)
3500 JFK Parkway, Suite 202, Fort Collins, CO 80525
(Address of principal executive offices, including zip code)
(970) 207-1100
(Registrant's telephone number, including area code)
11990 Grand Street, Suite 400, Northglenn, CO 80233
(Former name, address and former fiscal year, if changed since last report)
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 the
filing requirements for the past 90 days. Yes _X_ No ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___ No ___ NOT APPLICABLE _X_
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Title of Each Class Number of Shares Outstanding
------------------- At May 21, 1997
Common stock ---------------
$0.01 Par Value 5,530,661
<PAGE>
W-W CAPITAL CORPORATION
Index
PART I FINANCIAL INFORMATION PAGE NO.
------ --------------------- --------
Item 1 Balance Sheets 1
------ March 31, 1997 and June 30, 1996
Statements of Operations 3
Three and Nine Months Ended
March 31, 1997 and 1996
Statements of Cash Flows 4
Nine Months Ended
March 31, 1997 and 1996
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis 7
------ of Financial Condition and Results
of Operations
PART II OTHER INFORMATION
------- -----------------
Item 1 Legal Proceedings 12
------
Item 2 Changes In Securities 12
------
Item 3 Defaults Upon Senior Securities 13
------
Item 4 Submission of Matters to a Vote of
------ Security Holders 13
Item 5 Other Information 13
------
Item 6 Exhibits and Report on Form 8-K 13
------
Signatures 14
<PAGE>
Part 1-FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
W-W CAPITAL CORPORATION
-----------------------
<TABLE>
<CAPTION>
Balance Sheet
March 31, June 30,
1997 1996
---- ----
Assets (Unaudited)
- ------
<S> <C> <C>
Current assets:
Cash ....................................... $ 95,963 $ 131,022
----------- -----------
Trade accounts receivable .................. 2,103,139 1,970,549
Less allowance for doubtful accounts ....... (134,030) 143,632
-------- -------
Net accounts receivable ................. 1,969,109 1,826,917
Accounts receivable, other ................. 12,005 21,240
Accounts receivable, employee .............. 1,142 --
Accounts receivable, related party ......... 167,572 132,221
Inventories:
Raw materials .............................. 433,226 422,774
Work-in-process ............................ 142,341 206,200
Finished goods ............................. 2,695,875 2,798,534
--------- ---------
Total inventories ....................... 3,271,442 3,427,508
--------- ---------
Deferred taxes ............................. 99,014 99,814
Prepaid expenses ........................... 108,012 18,567
Current portion of notes receivable ........ 21,699 170,010
------ -------
Total current assets .................... 5,745,958 5,827,299
--------- ---------
Property and equipment, at cost .............. 4,533,884 4,503,432
Less accumulated depreciation
and amortization ........................... (2,156,691) (1,901,838)
---------- ----------
Net property and equipment .............. 2,377,193 2,601,594
--------- ---------
Other Assets:
Long-term notes receivable from
stockholders, net of current portion .... -- 9,372
Long-term notes receivable from
affiliated entities,
net of current portion .................. 15,610 15,610
Real estate held for resale ................ 380,714 379,414
Accounts and notes receivable, other ....... 9,218 9,218
Covenant not to compete, net of
accumulated amortization ................ -- 7,964
Other assets ............................... 40,349 43,437
------ ------
Total other assets ...................... 445,891 465,015
------- -------
TOTAL ASSETS ............................ $ 8,569,042 $ 8,893,908
=========== ===========
</TABLE>
Continued on following page
See accompanying notes to financial statements.
<PAGE>
W-W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Balance Sheet, Continued
March 31, June 30,
1997 1996
---- ----
(Unaudited)
Liabilities
- -----------
<S> <C> <C>
Current Liabilities:
Accounts payable ............................... $ 2,124,741 $ 2,243,753
Revolving credit note payable to bank .......... 1,834,000 1,734,000
Accrued property taxes ......................... 37,635 27,523
Accrued payroll and related taxes .............. 192,949 135,842
Accrued interest payable ....................... 9,475 13,344
Accrued commissions ............................ 53,500 30,000
Current portion of long-term payables .......... 307,887 283,833
Current portion of notes payable to
related parties ............................. 28,468 32,465
Other current liabilities ...................... 42,711 41,641
------ ------
Total current liabilities ................... 4,631,366 4,542,401
--------- ---------
Other Liabilities:
Accrued commissions related party .............. 100,000 150,000
Long-term note payable to financial
institutions net of current portion ......... 1,486,288 1,655,218
Deferred taxes ................................. 99,814 99,814
Other long-term liabilities .................... 4,145 22,235
----- ------
Total other liabilities ..................... 1,690,247 1,927,267
--------- ---------
TOTAL LIABILITIES ........................... 6,321,613 6,469,668
--------- ---------
Stockholders' Equity
Common stock: $.01 par value 15,000,000
shares authorized 5,530,661 shares
issued and outstanding at March 31, 1997,
and June 30, 1996, respectively ............ 55,406 55,306
Capital in excess of par value ................. 3,304,629 3,304,099
Accumulated deficit ............................ (1,093,700) (916,259)
---------- --------
2,266,335 2,443,146
Less 20,264 shares of treasury stock at
cost ........................................ (18,906) (18,906)
------- -------
TOTAL STOCKHOLDERS' EQUITY .................. 2,247,429 2,424,240
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ........................ $ 8,569,042 $ 8,893,908
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
W-W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ............................ $ 3,604,314 $ 3,362,289 $ 10,531,721 $ 10,956,015
Cost of goods sold ................... 2,829,591 2,938,830 8,600,383 9,123,620
--------- --------- --------- ---------
Gross profit ...................... 774,723 423,459 1,931,338 1,832,395
------- ------- --------- ---------
Operating expenses:
Selling expenses .................. 308,790 326,062 852,851 1,021,299
General and administrative expenses 347,010 322,855 1,043,427 1,097,415
------- ------- --------- ---------
Total operating expenses ........ 655,800 648,947 1,896,278 2,118,714
------- ------- --------- ---------
Operating earnings (loss) ....... 118,923 (225,488) 35,060 (286,319)
------- -------- ------ --------
Other income (expense):
Interest income ................... 16,639 15,119 52,621 83,552
Interest expense .................. (104,065) (95,871) (289,270) (301,675)
Gain on sale of assets ............ 3,250 -- 6,261 1,000
(Loss) on sale of real estate
held for sale ..................... -- -- --
Other income (expense), net ....... 8,029 5,172 17,887 14,350
----- ----- ------ ------
Total other income (expense) .... (76,147) (75,580) (212,501) (202,773)
------- ------- -------- --------
Earnings (loss) before income taxes 42,776 (301,068) (177,441) ( 489,092)
------ -------- -------- - -------
Provision for deferred income taxes .. -- -- -- (24,928)
------ ------- ------ -------
Net earnings (loss) ............... 42,776 $ ( 301,068) $ (177,441) $( 464,164)
====== ========== =========== ========
Earnings (loss) per common share: .... $ .01 $ ( .05) $ ( .03) $ ( .08)
============ =========== ========== =========
Weighted average number of
common shares outstanding ............ 5,537,328 5,530,661 5,537,328 5,530,661
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
W-W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Statement of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) earnings .................................. $(177,441) $(464,164)
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization ........................ 257,884 322,132
Loss (gain) on property and equipment ................ (6,261) 1,000
Provisions for loss on accounts and notes
receivable ........................................ (9,602) (55,000)
Interest income added to notes receivable
affiliates ........................................ -- (347)
Deferred income taxes ................................ 800 (24,626)
Changes in assets and liabilities:
Accounts receivable .................................. (132,590) (223,031)
Inventories .......................................... 156,066 127,269
Other current and non-current assets ................. (116,702) 11,699
Accounts payable ..................................... (105,047) 75,260
Accrued expenses
and other current liabilities ..................... 27,296 ( 7,789)
--------- ---------
Net cash (used in) provided by operating
activities ........................................ (105,597) (237,597)
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment ......... 6,300 1,000
Increase in real estate held for sale ................ (1,301) ( 5,134)
Purchase of property and equipment ................... (30,492) (130,935)
Increase in other notes receivable ................... -- --
Proceeds from other notes receivable ................. 138,776 479,704
Proceeds from stockholders' notes receivable ......... 18,906 15,790
--------- ---------
Net cash (used in) provided by investing
activities ...................................... 132,189 360,425
--------- ---------
(Continued on following page)
<PAGE>
W-W CAPITAL CORPORATION
Statement of Cash Flows, Continued
(Unaudited)
Cash flows from financing activities:
Proceeds from lines-of-credit ........................ $ 100,000 $ 349,000
Payments on notes payable related parties ............ (3,996) (1,393)
Payments on notes payable to financial
institutions and government entities .............. (158,285) (621,170)
Proceeds from exercise of common stock option ........ 630 --
Proceeds from notes payable .......................... -- 99,364
------- ------
Net cash provided by (used in) financing
activities ........................................ (61,651) (174,199)
------- --------
Net (decrease) increase in cash ..................... (35,059) (51,371)
Cash at beginning of period .......................... 131,022 124,458
------- -------
Cash at end of period ............................. $ 95,963 $ 73,087
========= =========
Supplement schedule of non cash investing
and financing activities:
Converted accounts receivable and related
note receivable into new secured note ................ $ -- $ 150,000
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest .............. $ 289,270 $ 306,752
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
W-W CAPITAL CORPORATION
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements include the accounts of W-W
Capital Corporation (the Company) and its three wholly-owned subsidiaries W-W
Manufacturing Co., Inc., Titan Industries, Inc., and Eagle Enterprises, Inc. All
significant intercompany accounts and transactions have been eliminated.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. They do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and changes in cash
flows in conformity with generally accepted accounting principles for full-year
financial statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to W-W Capital
Corporation's financial statements included in its Annual Report on Form 10-K
for the year ended June 30, 1996. In the opinion of management, all adjustments
(consisting of normal recurring accrual basis adjustments) considered necessary
for a fair presentation have been reflected in the accompanying financial
statements. Operating results for the three and nine month period ended March
31, 1997, are not necessarily indicative of the result that may be expected for
the year ended June 30, 1997.
NOTE 2 - NET EARNINGS PER SHARE
- -------------------------------
The net earnings (loss) per share amount included in the accompanying
statement of operations have been computed using the weighted average number of
shares of common stock outstanding and the dilutive effect, if any, of common
stock equivalents existing during the applicable three and nine month periods.
NOTE 3 - RELATED PARTY TRANSACTION
- ----------------------------------
The Company has a number of related party transactions. See the footnotes
to W-W Capital Corporation financial statements for the year ended June 30,
1996, included in its Annual Report on Form 10-K for the nature and type of
related party transactions.
The related party transactions include sales commission paid to Agri-Sales
Associates which had entered into a sales and marketing agreement with the
Company. The former owner of Eagle Enterprises is also the principal owner of
Agri-Sales and holder of the Company's restricted common stock, as more fully
discussed in the Annual Report on Form 10-K for the year ended June 30, 1996.
A summary of the related party transactions that effect the Company's
statement of operations for the three and nine months ended March 31, 1997, and
1996, respectively, is as follows:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
Transactions with
Related Parties 1997 1996 1997 1996
- --------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Rent expense ............... $ 15,000 $ 15,000 $ 45,000 $ 45,000
Interest income ............ 504 1,009 1,934 3,948
Interest expense ........... 735 707 2,304 2,466
Commission expense ......... -- -- -- 234,886
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
--------------
The business of the Company is carried on within two segments by a number
of operating units. The livestock handling equipment segment is composed of W-W
Manufacturing (W-W Manufacturing) and Eagle Enterprises (Eagle), and the water
and environmental product segment is represented by Titan Industries (Titan).
(A) Analysis of Results of Operations
---------------------------------
The Company realized a net profit for the three months ended March 31, 1997
of $42,776 compared to a net loss of $301,068 for the same period of 1996, an
improvement of 114%. The net losses for the nine months ended March 31, 1997 and
1996 are $177,441 and $464,164 respectively.
Net sales increased for the three month period March 31, 1997 to
$3,604,314, as compared to $3,362,289 for the same period of 1996, an increase
of $242,025. Net sales for the nine months ended March 31, 1997 decreased to
$10,531,722 compared to $10,956,015 for 1996. The following table represents
actual sales by segment group.
<TABLE>
<CAPTION>
Sales by segment group: Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Livestock Handling Equipment ... $ 2,059,259 $ 1,854,485 $ 5,765,786 $ 6,073,437
Water and Environmental Products 1,545,055 1,507,804 4,765,936 4,882,578
--------- --------- --------- ---------
Total Sales: ...... $ 3,604,314 $ 3,362,289 $10,531,722 $10,956,015
=========== =========== =========== ===========
</TABLE>
<PAGE>
The sales in the livestock handling equipment segment increased $204,774 or
11% during the quarter ended March 31, 1997 as compared to the corresponding
quarter in 1996, while still showing a decrease of $307,651 for the entire nine
month period in 1997 as compared to the nine month period of 1996. The increase
in sales for the quarter can be attributed to strong distributor and dealer
demand. This demand is directly proportional to the increase in beef prices and
improvement in the cattle market as a whole. Entering the spring selling season
with improved cattle prices, the traditional heavier W-W equipment has regained
strength in the market place. The biggest growth in sales can be seen from new
distributors and dealers set up over the past year. During the depressed cattle
prices the Company took steps to find new customers so when market conditions
improved the Company could rebound faster than normal. The Company currently is
experiencing strong demand for the entire product line from these new customers
as W-W products continue to gain acceptance in the market place. The Company
currently has a back log of $862,000 as compared to $231,500 for the same period
in 1996. The decrease in sales for the nine months is attributed to slow demand
during the first and second quarter when cattle prices were still weak. The
Company has also experienced significant increases in sales in the East and
Southeast which is serviced by the Eagle plant. Eagle's sales increased to
$499,000 for the quarter ended March 31, 1997, as compared to $374,000 for the
same period in 1996. The Company expects the Eastern and Southeastern market to
continue to improve as the cow/calf operator returns to a profitable situation.
The cow/calf operator is the last segment of the industry to improve after a
traditional dip in the market as experienced for the past eighteen months.
Historically, W-W Manufacturing has sold its equipment to large ranchers
and operations in the high cattle populated states. During the last eighteen
month cattle slump, as previously reported, the Company designed a new line of
equipment and re-introduced Eagle's line of feed equipment to meet the demand of
the smaller operation looking for a lighter and lower price product. These
products continue to show improvement, and more importantly, has proved to be
the lead-in-product allowing for sales of the traditional W-W heavier equipment
as market conditions improve. The Company expects sales in the livestock
handling equipment segment to remain strong and expects sales to meet or exceed
1996 levels. The Company will be introducing new products during the fall market
and will continue to improve present products to meet the ever changing market
demand.
The sales in the water and environmental product segment increased $37,251
or 2.5% during the quarter ended March 31, 1997 as compared to corresponding
quarter in 1996, while showing a decrease of $116,642 for the entire nine month
period in 1997 as compared to the nine month period in 1996. This decrease can
be attributed to governmental agencies cutting back funds for ground water
monitoring and remediation. This decrease has been felt most strongly in the
area serviced by Wholesale Pump, which includes Oklahoma, Texas and other
Southern states. The decline in sales for the nine months ended were mainly due
to lower than normal demand during the holiday period and January. As weather
improved and spring approached the Company realized a strong demand for both
water well supplies and environmental manufactured products.
<PAGE>
As reported earlier, the Company has taken steps to continue to introduce
products to the market. Along with the introduction of the Pitless Tank Combo,
Twin Pack Screen and High Density Polyethylene Slotted Screen (HDPE) during
calendar 1996, the Company has now become the exclusive manufacturer of a new
product called Enviroflex screen. This, along with the HDPE screen, continues to
allow the Company to expand its presence in the horizonal drilling market. The
new Enviroflex well screen is a cost-effective way to prevent sedimentation in
horizontal remediation wells. Enviroflex screens offer both strength and
performance without the compromises found in other screens adapted from the
water or petroleum well drilling industries. Enviroflex screens are ideal for
ground water extraction and soil vapor extraction wells. With the ease of
installation and strength advantages of Enviroflex screens over other materials
available, this product promises to be another industry leader. The Company
continues to find new markets for its products and will grow in areas such as
landfills, mining, environmental remediation, industrial screening and leachate
collection applications. The Company will continue to establish new distributors
and manufacturer's representatives in all areas of the country so that weather
and economics in certain areas will not have a major impact on sales. Based upon
heavy spring demand, it is anticipated that sales during the fourth quarter will
be strong and sales for the entire year in this segment will equal or exceed
last years sales volume.
Gross profit margins increased from 16.73% in 1996 to 18.35% in 1997 on an
overall company basis. This increase can be attributable to the improvement in
the combined gross margins of W-W Manufacturing and Eagle Enterprises in the
livestock handling equipment segment. The gross margins in this segment improved
from 17.15% in 1996 to 20.68% in 1997. This improvement is due to strong
distributor/dealer demands for traditional W-W products, improved operating
efficiencies, negotiating lower steel cost, and Eagle's ability to continue to
improve its sales and margins above break-even. Eagle had an operating profit
during the third quarter of 1997 of $25,905 compared to an operating loss of
$110,598 for 1996. For the nine months ended March 31, 1997, Eagle had an
operating loss of $7,020 compared to an operating loss of $250,645 for the same
period of 1996.
Eagle has now shown a profit in two of the three quarters of fiscal
1996-1997. The second quarters loss was attributed to the normal holiday down
turn with sales below break-even levels. Product sales shipped out of the Eagle
manufacturing facility has improved to $1,456,962 for the nine months ended
March 31, 1997 compared to 1,430,956 in 1996. At the time of this report,
Eagle's sales remain strong and the Company anticipates sales and profits to
remain strong throughout the balance of 1997.
Gross profit margins in the water and environmental product segment
decreased from 16.21% in 1996 to 15.53% in 1997. As reported in earlier reports,
this decline is attributed to higher depreciation costs associated with the new
manufacturing facility in Paxton, completed in December of 1994. Also, the
decline during the quarter is a result of lower sales levels during the holidays
and January with fixed cost remaining fairly consistent.
<PAGE>
Along with the growth of new manufactured products discussed earlier and
improved sales in the spring and summer months, the Company anticipates margins
to improve.
Selling expenses, as a percent of sales, decreased to 8.09% in 1997 as
compared to 9.33% in 1996. This decrease is attributed to an increase in sales
in the third quarter without corresponding increase in selling expense. The cost
associated with developing new territories in the livestock handling equipment
segment has also been absorbed and this cost will be lower as new sales are
realized from these markets. The Company also has completed its clean up on
market areas that were oversold by Agri-sales during its time as the marketing
and sales force for the livestock handling equipment segment. Selling expenses
in the water and environmental products segment remain fairly consistent during
the nine months ended March 31, 1997. As sales continue to improve company wide,
it is anticipated that selling expenses will continue to decline as a percentage
of sales.
General and administrative expenses decreased $53,988 in 1997 as compared
to 1996. This decrease is a combination of lower legal fees involving lawsuits
and the Company continuing to cut and consolidate all general and administrating
expenses. There was an increase in general administrative expense during the
three months ended March 31, 1997 due to some expenses related to moving the
corporate office, severance pay and the cost associated with exiting the Denver
office lease early. The costs associated with the above are being expensed over
the four month period of March, April, May and June of fiscal 1997. General and
administration expenses during this period will actually be higher due to the
cost previously mentioned. With the beginning of fiscal 1997-1998 general and
administrative costs will be greatly reduced due to lower lease costs, salaries
and other operational overhead reductions. The Company and Board of Directors
will continue to take steps necessary to reduce when ever possible
administrative expenses at all subsidiaries as well as the corporate level.
Interest expense decreased $12,405 during the nine months ended March 31,
1997 as compared to the same corresponding period in 1996. This can be
attributed to a decrease in borrowing on the lines-of-credit and a continued
effort on the Comany's part to reduce debt. The Company will continue to reduce
debt and anticipates the proceeds of the sale or development of the real estate
in Texas will be used to pay down debt, therefore reducing interest costs. With
the recent rise of interest rates, the Company can expect to see a corresponding
rise in its rate charged by various institutions. However, this rise should not
have a material impact on the Company with its overall debt being reduced.
Inflation has not had a significant effect on operations in the recent years
because of the relatively modest rate of price increases in the United States.
(B) Liquidity and Capital Resources
-------------------------------
The Company used $105,598 cash in operating activities in 1997 as compared
to using $237,597 in 1996. The Company, in its continuing efforts to improve
inventory turnover, reduced inventory levels by $156,066 since June 1996. With
the increase in sales, the Company used cash to increase accounts receivable by
$132,590. The Company also used funds to reduce accounts payable by $105,047
since June of 1996. With the continued strong sales demand, management
anticipates cash will be used to carry accounts receivables. The Company will
continue its efforts when possible, to reduce its investment in inventory.
<PAGE>
The Company provided cash from investing activities of $132,190 primarily
from the collection of Titan's outstanding accounts receivable balance at the
time Titan was acquired. This cash was used to reduce debt and accounts payable.
The Company had a net reduction in borrowing from financial institutions of
$61,651 since June of 1996 and anticipates overall debt to continue to decrease
over the balance of fiscal 1996-1997.
During the nine months ended March 31, 1997, the Company made capital
additions of $30,492, down from $130,935 for the same period of 1996. The
Company is in the process of budgeting for fiscal 1997-1998 and does not
anticipate an investment above current levels in capital expenditures.
The Company renewed its banking arrangements through July of 1997, with
it's primary lender on terms similar to conditions in effect December of 1996.
The Company's primary lender, Bank IV of Garden City, Kansas, has been purchased
by Nations Bank. The Company is negotiating arrangements with Nations Bank to go
beyond July of 1997. The Board and Company are looking at other lending
institutions and financial arrangements that could, over the long run, be more
beneficial to the Company and reduce interest expense.
As reported earlier, the Company listed for sale, it's property located in
Johnson County, Texas. This is still the primary objective, however the
development of the land seems to be the most profitable for the Company. At
present a joint venture plan is in place with a local developer and real estate
agent to sell the land in 30, 2 1/2 acre parcels. The Company and developer are
presently seeking financial sources to finance the development cost. All
proceeds from the sale or development will be used to reduce debt and expand
markets.
Management believes that with net cash provided from cash flow, available
balance on lines-of- credit, funds provided from the development of the Texas
property, and with the Company's ability to obtain additional long-term
financing, the Company will have adequate sources to meet its current
obligations.
<PAGE>
PART II
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
On December 22, 1992, The March Group, Inc. (The March Group) filed a
lawsuit against Eagle Enterprises, Inc 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 has 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 statute which would allow The March Group three times its
proven actual.
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 the 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 of 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 would 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 judgement was entered against Eagle for $137,264 plus
prejedgement interest totalling $30,815.45 and post judgement 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.
W-W 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 is now closed.
ITEM 2. CHANGES IN SECURITIES
---------------------
Not Applicable
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
--------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
-----------------
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Exhibit 27 Financial Data Schedule
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
W-W CAPITAL CORPORATION
(Registrant)
Dated: May 21, 1997 By: /s/ Dianne J. Gano
--------------------------
Dianne J. Gano, Controller
Dated: May 21, 1997 By: /s/ Steve D.Zamzow
----------------------------
Steve D. Zamzow, President & CEO
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
W-W CAPITAL CORPORATION
(Registrant)
Dated: May 21, 1997 By:________________________________
Dianne J. Gano, Controller
Dated: May 21, 1997 By:________________________________
Steve D. Zamzow, President & CEO
<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 1, 2 AND 3 OF THE
COMPANY'S FORM 10-Q FOR THE
YEAR-TO-DATE, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 95,963
<SECURITIES> 0
<RECEIVABLES> 2,103,139
<ALLOWANCES> (134,030)
<INVENTORY> 3,271,442
<CURRENT-ASSETS> 5,745,958
<PP&E> 4,533,884
<DEPRECIATION> (2,156,691)
<TOTAL-ASSETS> 8,569,042
<CURRENT-LIABILITIES> 4,631,366
<BONDS> 1,690,247
0
0
<COMMON> 55,406
<OTHER-SE> 2,192,023
<TOTAL-LIABILITY-AND-EQUITY> 8,569,042
<SALES> 10,531,721
<TOTAL-REVENUES> 10,531,721
<CGS> 8,600,383
<TOTAL-COSTS> 8,600,383
<OTHER-EXPENSES> 1,896,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (289,270)
<INCOME-PRETAX> (177,441)
<INCOME-TAX> 0
<INCOME-CONTINUING> (177,441)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (177,441)
<EPS-PRIMARY> (3.21)
<EPS-DILUTED> (3.21)
</TABLE>
