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 December 31, 1996
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)
11990 Grant Street, Suite 400, Northglenn, CO 80233
(Address of principal executive offices, including zip code)
(303) 452-5000
(Registrant's telephone number, including area code)
Not Applicable
(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
Common stock at February 14, 1997
---------------------
$0.01 Par Value 5,540,661
<PAGE>
W-W CAPITAL CORPORATION
Index
PART I FINANCIAL INFORMATION PAGE NO.
Item 1 Balance Sheets
December 31, 1996 and June 30, 1996 1
Statements of Operations
Three and Six Months Ended
December 31, 1996 and 1995 3
Statements of Cash Flows
Six Months Ended
December 31, 1996 and 1995 4
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS 12
Item 2 CHANGES IN SECURITIES 14
Item 3 DEFAULTS UPON SENIOR SECURITIES 14
Item 4 SUBMISSION OF MATTERS TO VOTE OF
SECURITY HOLDERS 14
Item 5 OTHER INFORMATION 14
Item 6 EXHIBITS AND REPORT ON FORM 8-K 14
SIGNATURES 15
<PAGE>
Part 1-FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
Balance Sheet
December 31, June 30,
1996 1996
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash ........................................................ $ 71,544 $ 131,022
---------- ----------
Trade accounts receivable ................................... 1,680,182 1,970,549
Less allowance for doubtful accounts ........................ ( 136,162 ) ( 143,632 )
- ------- - -------
Net accounts receivable .................................. 1,544,020 1,826,917
Accounts receivable, other .................................. 12,804 21,240
Accounts receivable, employee ............................... 2,162 --
Accounts receivable, related party .......................... 332,886 132,221
Inventories:
Raw materials .............................................. 441,971 422,774
Work-in-process ............................................ 140,671 206,200
Finished goods ............................................. 2,787,400 2,798,534
--------- ---------
Total inventories ........................................ 3,370,042 3,427,508
--------- ---------
Deferred taxes .............................................. 99,972 99,814
Prepaid expenses ............................................ 74,036 18,567
Current portion of notes receivable ......................... 148,391 170,010
------- -------
Total current assets ..................................... 5,655,857 5,827,299
--------- ---------
Property and equipment, at cost ............................... 4,521,331 4,503,432
Less accumulated depreciation
and amortization ............................................ ( 2,065,599 )( 1,901,838 )
- --------- - ---------
Net property and equipment ............................... 2,455,732 2,601,594
--------- ---------
Other Assets:
Long-term notes receivable from
stockholders, net of current portion ..................... -- 9,372
Long-term notes receivable from
parties, other affiliated entities and related
net of current portion ................................... 15,610 15,610
Real Estate held for resale ................................. 380,394 379,414
Accounts and notes receivable, other ........................ 9,217 9,218
Covenant not to compete, net of
accumulated amortization ................................. -- 7,964
Other assets ................................................ 39,041 43,437
------ ------
Total other assets ....................................... 444,262 465,015
------- -------
TOTAL ASSETS ............................................. $8,555,851 $8,893,908
========== ==========
Continued on following page
See accompanying notes to financial statements
W-W CAPITAL CORPORATION
Balance Sheet, Continued
December 31, June 30,
1996 1996
---- ----
(Unaudited)
Liabilities
Current Liabilities:
Accounts Payable ............................................ $2,182,658 $2,243,753
Revolving credit note payable to Bank ....................... 1,834,000 1,734,000
Accrued property taxes ...................................... 40,445 27,523
Accrued payroll and related taxes ........................... 113,456 135,842
Accrued interest payable .................................... 15,232 13,344
Accrued commissions ......................................... 50,000 30,000
Current portion of long-term payables ....................... 288,951 283,833
Current portion of notes payable to
related parties ............................................ 29,834 32,465
Other current liabilities ................................... 17,468 41,641
------ ------
Total current liabilities ................................ 4,572,044 4,542,401
--------- ---------
Other Liabilities:
Accrued commissions related party ........................... 100,000 150,00
Long-term note payable to financial
institutions net of current portion ........................ 1,571,310 1,655,218
Deferred taxes .............................................. 99,814 99,814
Other Long-term liabilities ................................. 8,030 22,235
----- ------
Total other Liabilities .................................. 1,779,154 1,927,267
--------- ---------
TOTAL LIABILITIES ........................................ 6,351,198 6,469,668
--------- ---------
Stockholders' Equity
Common stock: $.01 par value 15,000,000
shares authorized 5,540,661 shares
issued and outstanding at December
31, 1996, and June 30, 1996, respectively .................. 55,406 55,306
Capital in excess of par value .............................. 3,304,629 3,304,099
Accumulated Deficit ......................................... ( 1,136,476 ) ( 916,259 )
- --------- - -------
2,223,559 2,443,146
Less 20,264 shares of treasury stock at
cost ....................................................... ( 18,906 ) ( 18,906 )
- ------ - ------
TOTAL STOCKHOLDERS' EQUITY ............................... 2,204,653 2,424,240
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ..................................... $8,555,851 $8,893,908
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ............................ $ 3,114,560 $ 3,526,094 $ 6,927,408 $ 7,593,726
Cost of goods sold ................... 2,717,106 2,812,556 5,770,792 6,184,790
--------- --------- --------- ---------
Gross profit ...................... 397,454 713,538 1,156,616 1,408,936
------- ------- --------- ---------
Operating expenses:
Selling expenses .................. 265,632 341,676 544,062 695,237
General and administrative expenses 338,382 373,306 696,417 774,530
------- ------- ------- -------
Total operating expenses ........ 604,014 714,982 1,240,479 1,469,767
------- ------- --------- ---------
Operating earnings (loss) ....... ( 206,560 ) ( 1,444 ) ( 83,863 ) ( 60,831 )
- ------- - ----- - ------ - ------
Other income (expense):
Interest income ................... 17,095 32,664 35,982 68,433
Interest expense .................. (89,900) (103,985) (185,205) (205,804)
Gain on sale of assets ............ 2,624 1,000 3,010 1,000
Other income (expense), net ....... 3,697 1,736 9,859 9,1783
----- ----- ----- ------
Total other income (expense) .... ( 66,484 ) (68,585) ( 136,354) ( 127,193 )
- ------ ------- - ------- - -------
Earnings (Loss) before income taxes (273,044) ( 70,029) (220,217) (188,024)
-------- - ------ -------- --------
Provision for deferred income taxes .. -- ( 1,589) -- ( 24,928 )
- ----- - ------
Net earnings (loss) ............... $ (273,044) $ (68,440) $ ( 220,217) $ ( 163,096)
=========== ============ === ======= === =======
Earnings (Loss) per common share: $ ( .05) $ ( .01) $ ( .04) $ ( .03)
======= ======= ======== =======
Weighted average number of
common shares outstanding ............ 5,537,328 5,530,661 5,533,994 5,530,661
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
W-W CAPITAL CORPORATION
Statement of Cash Flows
(Unaudited)
Six Months Ended
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ................................................. $ ( 220,217) $ ( 163,096 )
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization .............................. 201,858 216,672
Loss (Gain) on property and equipment ...................... ( 3,010) ( 1,000)
Provisions for loss on accounts and notes
receivable .............................................. ( 7,470 ) --
Deferred income taxes ...................................... ( 158 ) 26,578
Changes in assets and liabilities:
Accounts receivable ........................................ 290,367 ( 130,225 )
Inventories ................................................ 57,466 302,422
Other current and non-current assets ....................... (249,859) 21,094
Accounts payable ........................................... ( 61,095) ( 268,503 )
Accrued expenses
and other current liabilities ........................... ( 45,755 ) ( 82,404 )
- ------ - ------
Net cash (used in) provided by operating
activities ............................................ ( 37,873 ) ( 78,462 )
- ------ - ------
Cash flows from investing activities:
Proceed from sale of property and equipment ................ 4,800 1,000
Increase in real estate held for sale ...................... ( 980) ( 4,815 )
Purchase of property and equipment ......................... ( 53,450) ( 72,455 )
Increase in other notes receivable ......................... -- ( 71,556 )
Proceeds from other notes receivable ....................... 18,530 140,834
Proceeds from stockholders' notes receivable ............... 12,462 11,394
------ ------
Net cash (used in) provided by investing
activities ............................................ ( 18,638 ) 4,402
- ------ -----
(Continued on following page)
<PAGE>
W-W CAPITAL CORPORATION
Statement of Cash Flows, Continued
(Unaudited)
Six Months Ended
December 31,
1996 1995
---- ----
Cash flows from financing activities:
Proceeds from lines of credit .............................. $ 100,000 $ 199,000
Payments on lines of credit ................................ -- ( 50,000)
Payments on notes payable - related parties ................ ( 2,631) --
Payments on notes payable to financial
institutions and government entities .................... ( 135,122) ( 219,79)
Proceeds from exercise of common stock option .............. 630 --
Proceeds from notes payable ................................ 34,156 29,550
------ ------
Net cash provided by (used in) financing
activities .............................................. ( 2,967 ) ( 41,241 )
- ----- - ------
Net (decrease) increase in cash ........................... ( 59,478 ) ( 115,301 )
Cash at beginning of period ................................ 131,022 124,458
------- -------
Cash at end of period ................................... $ 71,544 $ 9,157
========= =========
Supplement schedule of non cash investing
and financing activities:
Converted accounts receivable and related
note receivable into new secured note$ .................. -- $ 150,000
Sold investment in real estate held for sale:
Mortgage receivable ......................................... $ -- $ --
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest .................... $ 183,317 $ 206,702
========= =========
</TABLE>
See accompanying notes to financial statements.
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 six month periods ended December
31, 1996, 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 dilative effect, if any, of common
stock equivalents existing during the applicable three and six 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,
1995, 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 months ended December 30, 1996, and 1995,
respectively, is as follows: Three Months Ended Six Months Ended
<TABLE>
<CAPTION>
December 31, December 31,
------------ ------------
Transactions with
Related Parties ............ 1996 1995 1996 1995
- - ---------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Rent expense ............... $15,000 $15,000 $30,000 $30,000
Interest income ............ 691 1,098 1,430 2,939
Interest expense ........... 768 881 1,569 1,759
</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 incurred net losses of $273,044 and $220,217, for the three and
six month period ended December 31, 1996, as compared to net losses of $68,440
and $163,096 in 1995. These losses are mainly attributable to an extreme
slowdown in both segments during the last half of the quarter throughout the
holiday season.
Net sales decreased to $ 6,927,408 for the six months ended December 31,
1996, compared to $ 7,593,726 for 1995. The following table represents actual
sales by segment group.
<TABLE>
<CAPTION>
Sales by segment group: Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Livestock Handling Equipment ... $1,768,615 $1,949,639 $3,706,527 $4,218,952
Water and Environmental Products 1,345,945 1,576,455 3,220,881 3,374,774
--------- --------- --------- ---------
Total Sales ....... $3,114,560 $3,945,386 $6,927,408 $7,593,726
========== ========== ========== ==========
</TABLE>
The sales in the water and environmental product segment decreased $153,893
or 5.9% during the six month period as compared to corresponding period in 1995.
The decrease was primarily due to slow sales during the holiday period of late
November and December. In addition extreme wet and cold weather conditions in
major market areas had an adverse effect on the water supplies aspect of the
business. As weather improves and we move toward the spring selling season sales
are expected to be at and above normal levels. While these factors contributed
to a decline in sales the Company has taken steps to gain market share and
increase sales. The Company has and will continue to introduce new products to
the market place. The most recent introductions being a new pitless tank combo,
and twin pack screens. The pitless tank combo is engineered for quick and easy
installation therefor saving valuable labor cost out in the field. The twin pack
was developed for use when unfavorable conditions exist with conventional
screens and filter packs. The twin pack screen is a screen within a screen
ensuring an effective gravel pack to prevent fine formation sediment from
entering the well. The new products along with the introduction during the
spring 1996 of high density polyethylene slotted screen (HDPE) will greatly
impact sales through the balance of 1997. The Company continues to find new
markets for its products including landfills, mines, environmental remediation,
industrial screening and leachate collection applications. The Company continues
its efforts to establish new distributors and manufacturer's representatives on
both the east and west coasts to expand its market area so that weather and
economics in a certain area will not have a major impact on sales.
During the six months ended December 31, 1996, sales in the livestock
handling equipment segment declined $512,425 or 8.8%. The decline in sales are
due to the continuing concern in the cattle industry about beef prices. However,
the decline in sales was felt most strongly in July and early August of 1996,
but improved as the Company moved into its fall and winter selling season, with
a normal drop during the holiday season. While traditional lines of cattle
livestock systems remains sluggish the special horse stall, versa stall and
rodeo sales division remain strong. The Company expects sales in the livestock
handling equipment segment to gain strength as the beef market improves and we
move into the spring season. Experts in the beef industry predict beef prices to
remain steady through spring and summer and improve as we move into fall.
Marketing studies done by the company show that sales of W-W products will
improve when the cow/calf operator does well. Traditionally when the market
improves the cow/calf operator is the last person to recover. The cow/calf
producer over the last eighteen months has been losing money but as fall
approaches the recovery should be complete, therefore, putting this producer at
a profit level. With the cattle market improving by fall to profit levels, the
livestock equipment segment should reach and maintain traditional sales and
profit levels.
Historically, W-W Manufacturing has sold its equipment to the larger
ranchers and not to smaller operators because along with higher quality and
durability comes higher prices. Therefore, smaller operators opted for lower
priced equipment because the size of their herd, they could not justify the
price for W-W Manufacturing equipment. In order to meet the needs of the smaller
price conscious operator, the Company has designed a new line of quality
equipment which will be priced lower than the traditional equipment.
Additionally, the Company reintroduced a line of feed equipment and gates in
January 1996. This line of equipment has enabled the Company to enter the high
volume aspect of the gate and panel market. These products will not only
increase sales levels, but will give the Company a lead-in-product to open
markets to new customers who have not handled W-W Manufacturing livestock
systems. The Company has, during the last twelve months, introduced these new
products not only to its traditional market but to distributors and dealers
being in new market areas discussed previously. The Company is now reaching
increases in sales from these new products but will not see market wide
acceptance until the fall season. Early indications from trade shows and dealers
is that the Company can anticipate increases in sales levels and market share
from these new and reintroduced products.
Gross profit margins decreased from 18.55% in 1995 to 16.70% in 1996 on an
overall Company basis. The gross profit margin in the livestock handling
equipment decreased slightly from 19.27% in 1995 to 18.90% in 1996. As discussed
earlier this decline is principally a result of lower gross profit margin on
"specials" which accounted for approximately 15% of total sales in the livestock
handling equipment segment during the period. Eagle continues to show
improvement in its operating results. Eagle had a operating loss of $32,924
during the six months ended December 31, 1996, as compared to an operating loss
for the same period of $140,047 in 1995 and $252,287 in 1994. Product sales
shipped out of the Eagle manufacturing facility totaled $1,024,041 in 1996 or an
average of $170,674 per month. Management has estimated Eagle's breakeven point
to be approximately $150,000 in shipments per month. It is anticipated that
Eagle's shipments will increase as orders for the reintroduced feed equipment,
gates and new lower priced cattle handling equipment continue. The Market served
by Eagle is primarily cow/calf operators and as previously discussed this
segment of the cattle industry has lost money for the past eighteen months. The
Company believe as the cow/calf operator becomes profitable and the new products
gain acceptance in the market place, that by the 1997 fall season Eagle should
be profitable on a consistent basis.
Gross profit margins in the water and environmental product segment
decreased from 19.65% in 1995 to 14.20% in 1996. This decline corresponds to
higher depreciation and other costs associated with the new manufacturing
facility as well as higher labor, material cost, supplies and freight cost
relating to the manufacturing process. Presently the Company is reviewing why
the margins have dropped sharply and is putting a plan in place to reduce
manufacturing cost to enable margins to return to normal levels.
The selling expenses as a percent of sales decreased to 7.85% in 1996 as
compared to 9.15% in 1995. The decrease is a result of lower cost as a
percentage of sales in the livestock handling equipment segment This segment
presently is expanding market share while maintaining a staff of six salesman,
and a sales manager. This segment while successfully expanding its
distributor/dealer network plans on maintaining the present sales staff and as
sales continue to improve the sales expense as a percentage of sales will
continue to decrease. Selling expense in the water and environmental segment
during 1996 remained fairly constant compared to 1995. It is anticipated as this
segments sales improve into the heavy spring selling season that selling expense
will decline as a percentage of sales. The Company has been successful in
establishing new dealers and distributors in areas where the Company has not had
a strong presence. It is anticipated that as cattle prices continue to improve
the new dealers and distributors will increase orders on W-W livestock handling
equipment and selling expenses as a percent of sales will decline.
General and administrative expenses decreased $78,113 in 1996 as compared
to 1995. This decrease is a combination of lower legal fees involving lawsuits
and the company continuing to cut and consolidate all general and administrative
expenses. The Board will continue taking steps to further reduce administrative
expenses at the subsidiaries as well as corporate level.
Interest expense decreased $20,599 during the six months ended December 31,
1996, as compared to the same corresponding period in the prior year. This
decrease can be attributed to decrease in borrowing on the lines of credit and a
continued effort on the company's part to reduce debt. With a reduction in debt,
along with a reduction in interest rates the Company's can expect its interest
expense to continue to decline in 1997. 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 $37,873 cash in operating activities in 1996 as compared
to using $78,462 from operations in 1995. This is attributable to the company
reducing inventories and receivables since June of 1996, and used these funds to
reduce debt an account payables. Management anticipates that overall inventory
levels to remain constant, while reductions in its current inventory will be
offset by increases in inventory of the new products in both segments.
The Company renewed its banking arrangements through July of 1997, with its
primary lender on terms similar to which is presently in effect in December
1996. Currently, Eagle is in violation of certain loan covenants with both First
American National Bank and Bank IV, Kansas due to prior net operating losses,
even though the reduction in the outstanding balance of the line of credit cured
certain other violations. Management has discussed these violations with the
Banks and the banks are currently negotiating with the Company as to
arrangements past July of 1997.
During the six months ended December 31, 1996, the Company made capital
additions of $53,450 down from $72,455 in 1995. At the present time the Company
has put the issuance of $1,4000,000 of industrial revenue bonds on hold until
cattle market conditions improve. The Company has maintained contact with the
underwriter and the City of Dodge City and all parties are still interested in
pursuing this when the Company decides conditions are right to go ahead.
There is negotiations with various institutions for long-term financing
going on to insure adequate funds are available as the Company recovers from the
financial difficulties of 1995 and 1996.
Management believes with net cash provided from cash flow, available
balance on lines of credit, funds provided from the development of the Texas
property, and 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 6, 1996, W W 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. W W 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
managements 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. W W Capital is seeking to recover approximately
$53,000 relating to the settlement of the Liberty Metals Case.
On or about December 22, 1992, the March Group filed a law suit in
Tennessee against Jerry Bellar, Eagle Enterprises, W W Capital. Under the terms
of a 1993 agreement, Jerry Bellar agreed and acknowledged his obligation, to
indemnify Eagle Enterprises and W W Capital for all damages in Excess of $50,000
awarded against Eagle. Also, under this 1993 agreement, Bellar agreed that all
attorney fees and expenses incurred by W W Capital and Eagle subject to a
$10,000 deductible would be reimbursed to the Company. W W Capital is seeking
reimbursement of these expenses which as of the time the law suit was filed
totaled $137,777. Since that time additional legal fees and expenses have been
incurred during the March Group trial in December of 1996. The total of these
additional legal fees and expenses has not been determined at this time. In
August 1994 W W Capital's legal counsel Klenda, Mitchell, Austerman and Zuercher
entered into a written agreement with Jerry Bellar to provide professional legal
services to Eagle Enterprises and Jerry Bellar in connection with the appeal of
the Tennessee March Group case. Klenda, Mitchell, Austerman and Zuercher is
seeking judgment for legal services rendered in this case of $25,633.70 plus
interest of $4,546.98 and any other relief the Courts deem just and proper.
Presently W W Capital, Klenda, Mitchell, Austerman and Zuercher and Jerry Bellar
are negotiating to see if a possible settlement can be reached. Management
cannot project an outcome at this time.
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 judgement and a preliminary injunction against Agri- Sales to
resolve the issue. On October 10, 1994, Agri-Sales filed an answer and made
application
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
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 has 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 is confident the court will 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 and opinion on
the outcome of this case. The Company has been negotiating with Agri-Sales to
settle this lawsuit. The Company has offered to pay $180,000, with $30,000 due
upon final settle- ment of The March Group, Inc. law suit discussed below with
the remaining balance pay- able in semi-annual payments of $25,000 until paid
in-full, with zero interest. This offer was excepted by Jerry Bellar and an
agreement was entered into on December 2, 1996.
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 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 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 or 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 in December of 1996 in the Chancery Court of
Nashville, Tennessee. On December 9, 1996 the Court ruled in the March groups
favor 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. Underthe terms of the Eagle Exchange
Agreement, Bellar acknowledges that his
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
indemnification obligates him to pay Eagle for all damages awarded the
March Group in excess of $50,000. At the present time Bellar has filed a post
trial motion in this case and management or legal counsel cannot comment on the
outcome at this time. W W Capital has previously recorded the $50,000 minimum
fee that it was obligated to pay, but, the remaining amount due the March Group
and the offsetting receivable from Bellar have not been recorded on the
financial statements, until the final outcome is reached.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
On January 24, 1997, the Company held its annual meeting of stockholders,
and the following matters were voted upon.
A) Election of Board of Directors which included the following:
Nominee For Withheld
Millard T. Webster 3,713,560 1,093,823
David L. Patton ... 3,568,981 1,248,402
Steve D. Zamzow ... 3,176,591 1,640,792
James H. Alexander 3,347,267 1,470,116
Loyd T. Fredrickson 3,657,966 1,159,417
Nicholas L. Scheidt 1,672,316 0
John D. Dilday .... 924,125 0
Mickey J. Winfrey . 1,075,079 0
B) Election of the Company's independent auditors, Miller and McCollom of
Denver, Colorado.
For Against Abstained
2,761,696 1,656,815 388,872
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: February 14, 1997 By: /s/ Steve D. Zamzow
- - ------------------------- -----------------------------
Steve D. Zamzow, Chief Financial
Officer
Dated: February 14, 1997 By: /s/ Steve D. Zamzow
- - ------------------------ ------------------------------
Steve D. Zamzow, President & CEO
<PAGE>
<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> DEC-31-1996
<CASH> 71,544
<SECURITIES> 0
<RECEIVABLES> 1,680,182
<ALLOWANCES> 136,162
<INVENTORY> 3,370,042
<CURRENT-ASSETS> 5,655,857
<PP&E> 4,521,331
<DEPRECIATION> 2,065,599
<TOTAL-ASSETS> 8,555,851
<CURRENT-LIABILITIES> 4,572,044
<BONDS> 1,779,154
0
0
<COMMON> 55,406
<OTHER-SE> 2,149,247
<TOTAL-LIABILITY-AND-EQUITY> 8,555,851
<SALES> 6,927,408
<TOTAL-REVENUES> 6,927,408
<CGS> 5,770,792
<TOTAL-COSTS> 5,770,792
<OTHER-EXPENSES> 1,240,479
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,205
<INCOME-PRETAX> (220,217)
<INCOME-TAX> 0
<INCOME-CONTINUING> (220,217)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (220,217)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
