UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
_X_ Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Fiscal year ended June 30, 1998 or
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of1934
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
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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
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
- ------------------- ----------------
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 28, 1998 (3,569,354 shares of common stock) was $464,016
based on the average of the bid and asked prices ($0.13 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 28, 1998 was:
Common Stock, 5,540,397 Shares
$.01 par value
Documents Incorporated by Reference
- -----------------------------------
*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.
2
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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
-------------------------------
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.
3
<PAGE>
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.
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.
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
---------------------------------------------
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, 1998, the Company and its segments had approximately
160 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
---------------------------------
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
- ----------------------------------
This division generated 57.7% of total corporate sales in 1998 compared to 54.2%
for fiscal 1997.
Principal Products, Markets and Distribution
- --------------------------------------------
The Livestock Handling group manufactures a broad line of cattle handling,
equine (horse), and rodeo equipment and containment systems. Farmers, ranchers,
rodeos, county fairs, veterinarians, and universities use this equipment.
Presently with its 52-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 prior to 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 (52
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
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.
5
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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 as a percentage of sales 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 120 different distributors
representing 6,200 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.
6
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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 1998 and 1997,
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 52 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
------------------------------------
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 42.3% of total corporate sales for the fiscal year 1998. This
compared with 45.8% in fiscal year 1997.
Titan's functions are broken down primarily into two divisions. The
distributions 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,
pipefitting, 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 a flush mounted PVC screen, 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
- ----------------------------
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 for the
Company's existing product lines has continued to remain strong as more and more
distributors around the country have become aware of Titan's quality and
reliability of delivery. The Company has significantly improved 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 continue to 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 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
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 landfills and in other waste
8
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treatment applications. The Company has also expanded its market in custom
fabrication of products used for filtration, drainage, dewatering, and various
construction applications. An improved version of Enviroflex has already added
to the very encouraging market acceptance that it has enjoyed. The Company feels
that this product, along with the responsiveness to market demands for various
custom applications, should provide excellent opportunities for growth. Recent
developments in the mining industry show that there is a significant market for
Titan's products and the sales/marketing departments are pursuing several key
distribution outlets to more effectively distribute its line of products within
this market sector.
9
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Other Information Relative to the Business
------------------------------------------
Patents and Trademarks
- ----------------------
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
- ------------------------------------
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
- -------------------------------
Backlog in the livestock handling equipment group was $427,510 as compared to
$726,751 in 1997. This decrease from 1997 is due to a general weakening and
drought conditions in the cattle market.
This is expected to improve as we move into the fall season.
The water and environmental products showed a backlog increase from $265,000 in
1997 to $347,000 on June 30, 1998. 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 1998 fiscal year.
Business Subject to Renegotiation at Election of Government
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Not Applicable
Research and Development Expenditures
- -------------------------------------
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
- --------------------------------------
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.
10
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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 1/2 acres 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 11555 S. Hwy 283, Dodge City, Kansas. The Company owns both of the
aforementioned locations. Titan leases a third distribution facility for its
division, Wholesale Pump and Supply located at 1821 NW 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 did own an undeveloped 95-acre tract located southeast of Fort
Worth, Texas. The Company successfully sold this property in November of 1997
and used proceeds to pay off company debt.
Item 3. Legal Proceedings
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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 was
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. W W Capital was seeking to recover approximately $53,000 relating to
the settlement of the Liberty Metals case.
In addition the Company was 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 denied
to reimburse the Company for these fees.
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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 had made written offers to settle the case
with Mr. Bellar. Mr. Bellar had rejected these offers and the Company asked the
court for mediation to settle the outstanding issues. As a result of the
mediation that took place in September 1998 the Company agreed to settle its
claim against Jerry R Bellar, and Bellar agreed to settle claims against the
Company. The settlement agreement provided for the cancellations of amounts due
to the Company from Bellar recorded at $167,572, and amounts payable by the
Company to Bellar of $150,000. The Company paid $20,000 to Bellar in September
1998. The accompanying financial statements reflect the amounts agreed to in the
settlement as of June 30, 1998.
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, 1998.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matter
- ------- --------------------------------------------------------------------
Market Information
- ------------------
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
Quarter ended
- -------------
<S> <C> <C>
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
September 30, 1997 $0.230 $0.230
December 31, 1997 0.180 0.180
March 31, 1998 0.130 0.130
June 30, 1998 0.130 0.130
</TABLE>
The Company's Common Stock is listed on the over-the-counter market and trades
under the symbol "WWCL".
Holders
- -------
As of October 21, 1998 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 1998 or 1997 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>
Item 6. Selected Financial Data
- ------- -----------------------
Year ended June 30
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
- ---------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales ......... 15,576,140 15,072,285 14,512,234 15,563,461 16,659,136
Gross Profit margin 2,867,106 2,859,843 2,412,831 3,071,783 3,524,784
Operating Earnings 247,454 349,922 (461,213) 26,172 (151,171)
(Loss)
Interest Expense .. 340,182 374,522 382,901 384,391 284,435
Operating Expense . 2,619,652 2,509,921 2,874,044 3,045,611 3,675,955
Net Earnings (Loss 87,420 28,120 (717,799) (405,987) (210,669)
PER SHARE DATA
Earnings .......... .02 .00(A) (.13) (.07) (.04)
Dividends per ..... .00 .00 .00 .00 .00
Common Share
Weighted Average .. 5,560,794 5,549,544 5,530,661 5,449,993 5,277,981
Shares Outstanding
FINANCIAL CONDITION
Total Assets ...... 7,680,578 8,679,093 8,893,908 9,547,517 9,540,438
Fixed Assets (Net) 2,103,249 2,296,363 2,601,594 2,801,530 2,399,172
Long-Term Debt .... 2,860,930 577,074 1,927,267 1,830,730 1,532,484
Stockholders Equity 2,510,410 2,452,990 2,424,240 3,142,039 3,476,328
Working Capital (1) 3,116,776 289,203 1,284,898 1,083,808 534,171
Current Ratio (2) . 2.35 1.05 1.28 1.24 1.12
<FN>
(A) Less than .01 cent
(1) The year ended 1997 reflects a classification of debt from long-term to
current due to the renewal of Bank lines less than one year. The year
ended 1998 reflects a reclassification of debt from short-term to
long-term due to the renewal of its bank lines for longer than one
year.
(2) 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>
1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Livestock Handling Equipment $ 8,988,175 57.7% $ 8,170,971 54.2% $ 7,522,417 51.9%
Water and Environmental .... 6,587,965 42.3 6,901,314 45.8 6,989,817 48.1
Products --------- ---- --------- ---- --------- ----
Total Revenues ............. 15,576,140 100.0 15,072,285 100.0 14,512,234 100.0
---------- ----- ---------- ----- ---------- -----
Cost of Revenues ........... 12,709,034 81.6 12,212,442 81.0 12,099,403 83.3
---------- ---- ---------- ---- ---------- ----
Gross Profit ............... 2,867,106 18.4 2,859,843 19.0 2,412,831 16.7
Selling, General, and
Administrative Expense .. 2,619652 16.8 2,509,921 16.7 2,874,044 19.9
Operating Earnings (Loss) .. 247,454 1.6 349,922 2.3 (461,213) (3.2)
Other Income (Expense) ..... 180,148 1.2 52,720 0.4 143,728 1.0
Interest Expense ........... (340,182) (2.2) (374,522) (2.5) (382,901) (2.7)
-------- ---- -------- ---- -------- ----
Earnings (Loss) Before
Income Taxes ............... 87,420 0.6 28,120 0.2 (700,386) (4.9)
Income Taxes ............ 87,420 0.6 28,120 0.2 (700,386) (4.9)
Income Taxes Net ........... -- 0.0 -- 0.0 17,413 (0.1)
------------ ---- ------------ ---- ------------ ----
Net Earnings (Loss) ........ $ 87,420 0.6% $ 28,120 0.2% $ (717,799) (5.0)%
============ === ============ === ============ ====
Depreciation & Amortization $ 394,230 2.5% $ 408,561 2.7% $ 444,653 3.1%
============ === ============ === ============ ===
</TABLE>
14
<PAGE>
Fiscal Year Ended June 30, 1998 Compared to Fiscal Year Ended June 30, 1997.
The Company had net earnings of $87,420 in 1998, as compared to $28,120 for
1997. Had the Company not realized a loss of $72,354 on the Texas land sale, the
Company would have had a profit of $159,774. The overall improved performance is
due to improved sales and profits in the livestock equipment segment primarily
the Eagle plant, while the water and environmental products segments sales and
profits were slightly decreased compared to 1997.
Total sales increased $503,855 or 3.2% to $15,576,140 in fiscal 1998 as compared
to $15,072,285 in fiscal 1997. Total sales in livestock equipment segment
increased $817,204 to $8,988,175 in 1998. Sales in the water and environmental
products segment decreased $313,349 to $6,587,965 in 1998 compared to $6,901,314
in 1997. Sales volume at both Eagle of $349,118 and W-W Manufacturing of
$468,086 contributed to the increase in livestock handling equipment sales.
Sales increases were realized even though the cattle industry showed a down turn
during the late winter through summer months. Extreme dry weather conditions in
the south along with depressed cattle prices contributed to the overall poor
performance of the cattle industry as a whole during the last half of the year.
The continuing efforts of expanding the distributor/dealer network, rodeo
sponsorships, and special designed installations contributed to the increase in
sales. Sales continue to improve on new panel lines, and remained steady with
the traditional heavy cattle equipment. New and continuing equine (horse)
equipment continues to gain strength in the east and other areas of the country
that have large horse populations. The company will continue its efforts to
produce new and redesign equipment to meet the demands of all customers. Special
designs and large installations remain strong as the Company continues to market
its products at this segment of the business. This livestock segment has also
been successful in selling its products to other parts of the world including
Japan, Europe, and South America. Sales in rodeo equipment remain strong as the
rodeo business continues to show growth in all parts of the United States. With
the Company continuing to expand in new market areas mainly the west and upper
midwest states, and continuing to evaluate all product lines. Sales are expected
to remain strong through fiscal 1999.
Sales decreased in the water and environmental product segment overall.
Environmental products continue to decline with the governmental funding
continuing to be cut. The other major factor contributing to the decline in
sales is the depressed PVC pipe prices. Prices on PVC pipe are at all time lows
and are expected to remain low during the winter months into spring. Prices are
expected to improve as we move into spring and summer of 1999.
The water well supplies aspect of this segment continues to be very competitive
in pricing and margin. While this aspect of the business remains very
competitive, the Company continues to expand its other division of manufactured
products. The Company continues to manufacture various pipes, tanks, and
accessories for the water, horizontal drilling, waste treatment, and mining
industries. The custom fabrication market continues to grow with present
applications used for filtration, drainage, dewatering and other construction
application. With the success of slotted and perforated pipe and the new
emerging enviroflex product, the Company should see an improvement in sales and
profits through fiscal 1999.
Gross margins declined to 18.4% in 1998 from 19.0% in 1997. The decrease was
realized in the livestock equipment segment showing an overall decline to 18.4%
in 1998 from 20.6% in 1997. The water and environmental segment improved its
gross margin to 17.5% in 1998 as compared to 17.0% in 1997. The decline in the
livestock equipment segment gross margins was due to a significant decrease at
the W-W Manufacturing plant in Dodge City Kansas due to severe labor shortages
and extreme inefficiency in production. Standard product had to be manufactured
at its Weatherford Oklahoma plant then shipped to the Dodge City Kansas plant
for shipment to the end customer. This resulted in high level of inefficiencies
and added freight cost. Gross margins continued to improve at the Eagle plant in
Livingston Tennessee to 15.0% in 1998 as compared to 11.5% in 1997. The increase
in gross margins in the water and environmental products segment were due to
increased
15
<PAGE>
sales in the companies manufactured products. Sales continue to do well in
standard flush joint PVC screen and casing, and slotted high-density
polyethylene pipe introduced in fiscal 1996.
Titan's Ver-ta Slot product continues to show acceptance which product developed
for heavier wall applications found in landfills highway construction, and
various mining applications. Vertical slotted openings are available in various
diameters, schedules, and types of pipe the Company had developed the Ver-ta
Slot for all applications and material including belled end, gasket end, plain
end, or flush joint material. With the introduction of the Enviroflex 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
screens 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 high quality, and innovative products.
Selling expenses as a percentage of sales remained constant at 7.6% in 1998 as
compared to 1997. The selling expenses in the livestock equipment segment
decreased to 8.5% in 1998 compared to 9.2% in 1997. The decrease is attributed
to the continuing improvement in sales in the distribution/dealer network
without a corresponding increase in selling expenses. The Company plans to
increase some selling expenses in new market areas in the coming fiscal year.
Selling expenses in the water and environmental products segment increased to
6.4% in 1998 compared to 5.6% in 1997. This increase is attributed to up front
selling and marketing expenses related to several introductions of new products.
The Company plans to pursue new markets for its products therefor continuing to
see slight increases in selling expenses throughout the balance of the fiscal
year. It is expected that total dollars expended on selling expenses will
increase in fiscal 1998-1999, but the overall sales expense will remain fairly
consistent as a percentage of sales.
General and administration expenses increased $67,418 in fiscal 1998 as compared
to fiscal 1997. This is attributed to the increase in write offs of accounts
receivable in both segments. On a comparable basis had the write offs not been
significant, the Companies general and administrative expenses would have
decreased during fiscal 1998. Management has taken the necessary steps to
tighten credit policies where by allowing for sales growth to continue, and at
the same time minimize the risk of future write offs. The company has taken and
will continue to find ways of lowering general and administrative expenses in
the future. All expenses are reviewed and compared to budgeted projections on a
monthly basis then reviewed with both operating segments to insure expenses are
kept as low as possible.
Interest expenses continued to decline in 1998 to $340,182 from $374,522 in
1997. The company continued to pay down debt during 1998 reducing it by
$432,051; compared to a reduction of $142,742 in fiscal 1997. Subsequent to the
year-end, management has received a financial commitment for new lines of credit
with Norwest Business Credit Inc. of Colorado. These lines are at more
competitive rates and the structure will allow the Company more flexibility and
should lower interest expenses throughout 1999. The steps taken over the past
year in reducing selling, general and administrative, and interest expenses
should continue in fiscal 1999. Management feels that fiscal 1999 will benefit
more from these cost reductions than in 1998 as they will have an effect for a
twelve-month period. Fiscal 1999 should be a year of continued growth in sales
and profits through the aggressive marketing efforts and cost reductions that
have been implemented in all segments of the Company.
16
<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. Both Eagle of $208,439 and W-W Manufacturing of $440,115 can attribute
the increase in livestock handling equipment sales to improved sales. 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
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
17
<PAGE>
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.
18
<PAGE>
Interest expenses declined slightly in 1998 to $374,522 from $382,901 in 1997.
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 1998 levels in fiscal 1999 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 1999.
19
<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.
20
<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 year's 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.
21
<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 improvement, 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 improvement, 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.
Impact of Year 2000:
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. This is a broad
business and operational problem, as well as accounting systems problem. This
may cause system failures of miscalculations causing disruptions of operations
in normal business activities, including, among other things a temporary
inability to process transactions.
The company has been in the process of modifying its computer systems
to be "Year 2000" compliant since late 1997. The process involves systems
reviews, testing and modification or replacement of date sensitive software. The
company has allocated financial resources to examine and make all the necessary
changes to insure its computer systems will meet all its "Year 2000"
obligations.
The company has been making and is continuing to make such changes in
existing systems, targeting June 30, 1999 as the expected completion date.
Neither the "Year 2000" nor the financial effects of the reviews, testing and
modifications are expected to have a material adverse effect on the corporations
business or its consolidated financial position. The company is in the process
of evaluating "Year 2000" exposures of its major vendors and customers to insure
that a lack of readiness by either of them will not impact the companies'
business operations.
22
<PAGE>
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.
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 $87,420 and produced a cash flow from operations
of $282,679 for fiscal 1998. The funds generated from operating cash flow and
the sale of the Texas property provided adequate liquidity to meet current
obligations and allow for a net reduction in borrowings of $432,051 in 1998.
The company was in violation of certain loan covenants resulting from prior
year's losses in 1996 and prior periods. These losses had hindered the company
from having the proper lines of credit during the past two years. With the
profits and improved cash flow generated from the past two years the company has
received a financial commitment from Norwest Business Credit Inc. of Colorado,
for new lines of credit and a term loan for a three year term. This commitment
allows the Company new and enlarged revolving credit lines to enable the Company
the flexibility it needs to allow for sales and inventory growth.
The Company has also extended its forbearance with First American Bank for the
Eagle facility to September 1999. With the new revolving line commitment for
three years and Eagle's real estate loan extension until 1999, the loans in the
1998 financial statements have been re-classified as long-term noted payable.
With this reclassification, the Companies working capital has gone from $289,203
in 1997 to $3,116,776 in 1998. The Company feels that the expected profits,
working capital and cash flow during fiscal 1998- 1999 and renewed lines of
credit will adequately supply the Company with the liquidity necessary to meet
its obligations.
The Company successfully sold the 94.5 acres of undeveloped real estate in Texas
for $335,000 with $198,681 being paid at closing, net of selling expenses and
the balance of $110,000 is being carried on a three year note. The cash paid
down was used to reduce the revolving credit lines therefore, reducing interest
expense in 1998.
The Company successfully settled its last remaining lawsuit with Jerry Bellar.
The Company should now receive a substantial decrease in legal costs therefore
lowering general and administrative expenses in the future.
Based on current conditions in all subsidiaries and general economic conditions,
the Company anticipated continuing to make a profit for fiscal 1999. 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 1999.
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, 1998 and
June 30, 1997...................................................... F-3, F-4
Consolidated Statements of Operations for the years
ended June 30, 1998, 1997 and 1996................................. F-5
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1998, 1997 and 1996....................... F-6
Consolidated Statements of Cash Flows for the years ended
June 30, 1998, 1997 and 1996....................................... F-7, F-8
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>
Independent Auditor's Report
- ----------------------------
Board of Directors and Stockholders
W W Capital Corporation
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheets of W W
Capital Corporation and subsidiaries as of June 30, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the each of the two years ended June 30, 1998. 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 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 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, 1998 and 1997, and the results of
their operations and their cash flows for each of the two years ended June 30,
1998, in conformity with generally accepted accounting principles.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado
October 20, 1998
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- ----------------------------
Board of Directors and Stockholders
W W Capital Corporation
Fort Collins, Colorado
We have audited the statements of operations, stockholders' equity, and
cash flows of W W Capital Corporation for the year then ended June 30, 1996.
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 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 financial statements referred to above present
fairly, in all material respects, the results of its operations and cash flows
of W W Capital Corporation for the year then ended June 30, 1996, in conformity
with generally accepted accounting principles.
MILLER AND McCOLLOM
Certified Public Accountants
Denver, Colorado
October 15, 1996
F-2
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Consolidated Balance Sheets
- ----------------------------------------------------------------------------------------
June 30 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash ..................................................... $ 281,449 $ 357,373
Accounts receivable - trade (net of allowance for doubtful
accounts of $104,500 in 1998 and $134,000 in 1997) .... 1,885,976 2,026,991
Accounts receivable - related party - .................... 167,572
Accounts receivable - other .............................. 60,593 13,321
Inventories .............................................. 3,157,499 3,341,156
Prepaid expenses ......................................... 19,262 15,984
Current portion of notes receivable - related parties .... 893 9,286
Current portion of notes receivable - other .............. 20,342 6,549
---------- ----------
Total current assets ........................... 5,426,014 5,938,232
========= =========
Property and Equipment - net of accumulated
depreciation of $2,561,929 in 1998 and
$2,256,851 in 1997 ....................................... 2,103,249 2,296,363
--------- ---------
Other Assets
Real estate held for sale ................................ -- 381,035
Long-term notes receivable - related parties
(net current portion) ................................. 22,135 23,028
Long-term notes receivable - other (net of allowance for
doubtful accounts of $10,000 in 1998 and 1997
and current portion) .................................. 99,752 9,753
Loan acquisition costs - net of accumulated amortization
of $17,272 in 1998 and $15,868 in 1997 ................ -- 1,404
Other assets ............................................. 29,428 29,278
---------- ----------
Total other assets ............................. 151,315 444,498
---------- ----------
Total assets ................................... $7,680,578 $8,679,093
========== ==========
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements
F-3
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Consolidated Balance Sheets (continued)
- ---------------------------------------------------------------------------------------------------
June 30 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ............................................... $ 1,714,738 $ 2,232,990
Revolving credit notes payable to bank .......................... -- 1,834,000
Accrued payroll and related taxes .............................. 225,154 184,569
Accrued property taxes .......................................... 29,646 34,442
Accrued interest payable ....................................... 25,158 12,344
Accrued commissions related party .............................. -- 150,000
Other current liabilities ....................................... 14,542 18,777
Current portion of notes payable ................................ 300,000 1,172,018
Current portion of capital lease obligation ..................... -- 9,889
----------- ---------
Total current liabilities .............................. 2,309,238 5,649,029
----------- ---------
Long - Term Liabilities
Long-term notes payable - net of current portion 2,860,930 575,390
Long-term capital lease obligation - net of current portion ...... -- 1,684
----------- ---------
Net long term liabilities .............................. 2,860,930 577,074
----------- ---------
Total liabilities ...................................... 5,170,168 6,226,103
----------- ---------
Commitments and Contingencies ........................................ -- --
----------- ---------
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 shares issued
at June 30, 1998 and 1997 ..................................... 55,406 55,406
Capital in excess of par value ................................... 3,304,629 3,304,629
Accumulated deficit .............................................. (800,719) (888,139)
----------- ----------
2,559,316 2,471,896
Less 120,264 shares in 1998 and 20,264 shares in 1997
of treasury stock at cost ...................................... (48,906) (18,906)
----------- -----------
Net stockholders' equity ............................... 2,510,410 2,452,990
----------- -----------
Total liabilities and stockholders' equity ............. $ 7,680,578 $ 8,679,093
----------- -----------
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements
F-4
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Consolidated Statement of Operations
- --------------------------------------------------------------------------------------
Years ended June 30 1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales .............................. $ 15,576,140 $ 15,072,285 $ 14,512,234
Cost of Goods Sold ..................... 12,709,034 12,212,442 12,099,403
---------- ---------- ----------
Gross profit ............. 2,867,106 2,859,843 2,412,831
---------- ---------- -----------
Operating Expenses
Selling expenses ................... 1,188,403 1,146,090 1,363,215
General and administrative expenses 1,431,249 1,363,831 1,510,829
------------ ------------ ------------
Total operating expenses . 2,619,652 2,509,921 2,874,044
------------ ------------ ------------
Income From Operations ................. 247,454 349,922 (461,213)
------------ ------------ ------------
Other Income (Expense)
Interest income .................... 81,910 74,939 107,402
Interest expense ................... (340,182) (374,522) (382,901)
Realized and unrealized loss on
real estate held for sale ....... (72,354) -- (3,500)
Gain on property and equipment
dispositions .................... 87,122 6,629 400
Other income (expense) - net ....... 83,470 (28,848) 39,426
------------ ------------ ------------
Net other income (expense) (160,034) (321,802) (239,173)
------------ ------------ ------------
Earnings (Loss) Before Income Taxes .... 87,420 28,120 (700,386)
------------ ------------ ------------
Income Tax
Current ............................ -- -- (1,650)
Deferred ........................... -- -- (15,763)
------------ ------------ ------------
Total income tax ......... -- -- (17,413)
------------ ------------ ------------
Net earnings (loss) .... $ 87,420 $ 28,120 $ (717,799)
============ ============ ============
Earnings (Loss) Per Common Share
Basic
Net earnings (loss) ........... $ 0.02 $ 0.00 $ (0.13)
Weighted average number of
common shares ................ 5,540,661 5,530,661 5,530,661
Diluted
Net earnings (loss) ............. $ 0.02 $ 0.00 $ (0.13)
Weighted average number of
common shares ................ 5,560,794 5,549,544 5,530,661
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements
F-5
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Years ended June 30, 1998, 1997 and 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock
---------------------- Capital --------------------- Total
Number of Par In Excess Accumulated Number of Stockholders'
Shares Value of Par Value Deficit Shares Cost Equity
----------- ------- ------------ ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1995 ................... 5,530,661 $ 55,306 $ 3,304,099 $ (198,460) (20,264) $ (18,906) $ 3,142,039
Net loss for year ended June 30, 1996 ... -- -- -- (717,799) -- -- (717,799)
--------- -------- --------- --------- --------- -------- ----------
Balance, June 30, 1996 .................. 5,530,661 55,306 3,304,099 (916,259) (20,264) (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, June 30, 1997 .................. 5,540,661 55,406 3,304,629 (888,139) (20,264) (18,906) 2,452,990
Acquisition of treasury stock ........... -- -- -- -- (100,000) (30,000)
Net earnings for year ended June 30, 1998 -- -- -- 87,420 -- -- 87,420
--------- --------- ----------- ----------- --------- -------- ----------
Balance, June 30, 1998 .................. 5,540,661 $ 55,406 $ 3,304,629 $ (800,719) (120,264) $ (48,906) $ 2,510,410
========= ========= =========== =========== ========= ========= ===========
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements
F-6
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
- -----------------------------------------------------------------------------------------------------
Years ended June 30 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss) ..................................... $ 87,420 $ 28,120 $(717,799)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities
Depreciation and amortization ....................... 394,230 408,561 444,653
(Gain) loss on dispositions of property and equipment (87,122) (6,629) (400)
Loss on sale of real estate held for sale .......... 72,354 -- --
Provision for loss on accounts and notes receivable.. 30,112 17,756 (116,423)
Discount on note .................................... -- -- 10,000
Impairment of assets .............................. -- -- 38,557
Other ............................................... -- (3,991) (1,544)
Deferred income taxes ............................... -- -- 15,763
Net changes in assets and liabilities
Accounts receivable ................................. 63,630 (261,134) (75,336)
Inventories ......................................... 183,657 86,352 24,394
Other current and non-current assets ................ (5,290) 19,471 33,055
Accounts payable, accrued expenses and
other current liabilities ......................... (456,312) 10,946 155,034
-------- ------- -------
Net cash provided by (used in)
operating activities .......................... 282,679 299,452 (190,046)
------- ------- --------
CashFlows From Investing Activities
Proceeds from sale of real estate ...................... 198,681 -- --
Additions to real estate held for sale .................. -- (1,621) (5,454)
Proceeds from sale of property and equipment ........... 124,424 9,100 1,000
Purchases of property and equipment .................... (265,152) (85,519) (195,468)
Proceeds from notes receivable, other .................. 6,209 140,464 461,795
Proceeds from stockholders' notes receivable ........... 9,286 25,583 23,310
------- ------- -------
Net cash provided by investing activities ..... 73,448 88,007 285,183
------- ------- -------
CashFlows From Financing Activities
Borrowings on lines of credit ......................... -- 100,000 364,000
Payments on lines of credit ............................ (150,000) -- (292,613)
Payments on notes payable .............................. (319,984) (243,104) (406,540)
Borrowings from notes payable .......................... 49,506 -- 265,050
Payment on capital leases ................................... (11,573) (18,634) (18,470)
Net proceeds from issuance of common stock .............. -- 630 --
--------- --------- ---------
Net cash used in financing activities ......... (432,051) (161,108) (88,573)
--------- --------- ---------
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements
F-7
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (continued)
- ---------------------------------------------------------------------------------------
Years ended June 30 1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Increase (Decrease) in Cash .................. $ (75,924) $ 226,351 $ 6,564
Cash, Beginning of year .......................... 357,373 131,022 124,458
--------- --------- ---------
Cash, End of year ................................ $ 281,449 $ 357,373 $ 131,022
========= ========= =========
Supplemental Information
Note receivable obtained in sale of
real estate held for sale .................. $ 110,000 $ - $ -
Treasury stock acquired in sale of property .. $ 30,000 $ - $ -
Installment loans to acquire property
and equipment .............................. $ - $ 18,869 $ 28,000
Conversion of account and note receivable
to notes receivable ........................ $ - $ - $ 135,000
Conversion of accounts payable to note payable $ - $ - $ 51,224
Cash paid during the period for interest ..... $ 334,092 $ 377,909 $ 400,213
Cash paid for income taxes ................... $ - $ - $ 1,650
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements
F-8
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
Nature of Operations. W W 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.
Basis of Presentation. The accompanying consolidated financial
statements include the accounts of W W Capital Corporation and all of
its wholly-owned subsidiaries, W-W Manufacturing Co., Inc. (W-W
Manufacturing), Titan Industries, Inc. (Titan) and Eagle Enterprises,
Inc. (Eagle). All significant intercompany accounts and transactions
have been eliminated in consolidation.
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.
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.
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.
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.
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.
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.
F-9
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies (continued)
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.
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.
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.
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, 1998 and 1997 $14,714 and $15,050 of advertising
cost was reported as assets. Advertising expense for each of the three
years ended June 30, 1998 was $$110,082, $97,556, and $173,782,
respectively.
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.
Per Share Data. In 1998, the Company adopted Financial
Accounting Standards Board Statement No. 128(FAS 128), "Earnings Per
Share." The statement modifies the standards for computing and
presenting earnings per share. FAS 128 requires dual presentation of
basic and diluted earnings per share on the face of the income
statement. Basic earnings per share were computed on the basis of
weighted average number of shares outstanding. Diluted earnings per
share includes outstanding stock options, unless the effect would be
antidilutive.
F-10
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
Note 2 - 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:
1998 1997
--------- ---------
<S> <C> <C>
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. The 1998 installment was
received in October 1998 ..................................... $ 23,028 $ 23,028
Three notes receivable received paid in full
during 1998 ........................................ -- 9,286
-------- --------
23,028 32,314
Less current portion ..................................... (893) (9,286)
-------- --------
$ 22,135 $ 23,028
======== ========
</TABLE>
During the years ended June 30, 1998, 1997 and 1996, the
Company recorded interest income of $2,072, $4,365 and $6,362 for the
notes receivable from related parties.
Notes Payable to Stockholder. The Company has outstanding
balances of $21,107 and $27,069 payable to a former stockholder of
Titan as of June 30, 1998 and 1997, 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, 1998, 1997 and 1996, the
Company incurred interest expense of $2,525, $3,004 and $3,299,
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. The provisions of the building leases require the Company to
pay insurance, property taxes and maintenance costs.
Other. During September 1998, the Company settled a law suit
with Agri-Sales Associates (Agri- Sales), whose major stockholder is a
stockholder of the Company. The liability for commissions of $150,000
and recorded receivables of $167,572, including amounts due under an
indemnification agreement were settled for $20,000 paid by the Company
subsequent to year end.
The Company has entered into the transactions with related
parties as disclosed above during the three-year period ended June 30,
1998. 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.
F-11
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
Note 3 - Inventories
Inventories consisted of the following at June 30:
1998 1997
----------- -----------
Raw materials $ 390,607 $ 461,311
Work-in-process 207,079 188,890
Finished goods 2,559,813 2,690,955
----------- -----------
$ 3,157,499 $3,341,156
=========== ==========
Note 4 - Notes Receivable - Other
<TABLE>
<CAPTION>
Other notes receivable consisted of the following at June 30:
1998 1997
----------- ------------
<S> <C> <C>
Note receivable bears interest at 9.5% and is due in
annual principal installments of $20,000. Interest is due
quarterly. The note matures in November 2000. The note is
collateralized by real estate located in Texas, as discussed
in Note 6. $ 110,000 $ -
Unsecured note receivable from a former employee bears
interest at 9%. 19,753 19,753
Note receivable bears interest at 18% and is due in
monthly installments of $500. The note is collateralized by
equipment. 341 4,049
Paid in full during 1998 -- 2,500
---------- ----------
130,094 26,302
Less allowance for doubtful accounts (10,000) (10,000)
Less current portion (20,342) (6,549)
---------- ----------
$ 99,752 $ 9,753
=========== ===========
</TABLE>
Notes receivable totaling $42,781 at June 30, 1998 and 1997 were
identified by management as impaired. The allowance for credit loss was
$10,000 for June 30, 1998 and 1997.
Note 5 - Property and Equipment
<TABLE>
<CAPTION>
Property and equipment consisted of the following at June 30:
1998 1997
----------- ------------
<S> <C> <C>
Land and improvements $ 156,262 $ 94,840
Building and improvements 1,515,956 1,596,930
Leasehold improvements 209,375 207,123
Machinery and equipment 1,845,245 1,691,416
Office equipment 385,897 356,809
Automobiles and trucks 548,908 570,916
Construction in progress 3,535 35,180
---------- ----------
4,665,178 4,553,214
Less accumulated depreciation and amortization (2,561,929) (2,256,851)
---------- ----------
$ 2,103,249 $ 2,296,363
=========== ============
</TABLE>
F-12
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
Note 6 - Investment in Real Estate
In November 1997, the Company sold 95 acres of undeveloped real
estate in Johnson County, Texas for $335,000. The company carried back
a note maturing in November 2000 in the amount of $110,000. A realized
loss was recorded in the amount of $72,354, which includes expenses of
sale of $26,319.
Note 7 - 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 years ended June 30, 1998, 1997, and 1996, the Company made
$7,729, $7,397 and $10,295 in discretionary contributions to the Plan.
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, 1998,
options to purchase 702,500 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 157,668
shares at option prices ranging from $0.063 to $2.50 per share of which
137,668 are outstanding as of June 30, 1998. Options to purchase 10,000
shares of common stock for $0.063 per share were exercised during 1998.
These options will expire five or ten years after issuance.
The following stock options are outstanding at June 30, 1998:
Number Number
of Options Exercise of Options
Issue Date Outstanding Price Exercisable
---------- ----------- ----- -----------
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
July 1, 1997 10,000 $0.17 10,000
------- -------
385,168 381,834
======= =======
F-13
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
Note 8 - Short-Term Notes Payable
The Company had revolving lines of credit until May 31, 1998,
at which time all outstanding balances were converted to term loans as
disclosed in Note 9, the short-term debt is expected to be refinanced
on a long-term basis and, accordingly, is recorded as long-term debt. A
summary of short term notes payable for the year ended June 30, 1998 is
as follows:
<TABLE>
<S> <C> <C>
Weighted average interest rate at year end -- % 10.85%
Balance at year end $ -- $1,834,000
========== ==========
Maximum amount outstanding during the year $1,834,000 $1,834,000
========== ==========
Average amount outstanding during the year $1,746,500 $1,800,667
========== ==========
Weighted average interest rate during the year
based on average short-term notes payable 11.07% 10.66%
Note 9 - Long-Term Debt
Long-term debt consists of the following at June 30:
1998 1997
------------ ------------
Financial Institutions
----------------------
Term Note payable bears interest at 3% over the Bank's
rate (11.50% at June 30, 1998.) The note is due in monthly
installments of $11,000, including principal and interest.
Note matures October 1998 and is expected to be refinanced. $ 775,000 $ 840,000
Term Note payable bears interest at 3% over the Bank's
rate (11.50% at June 30, 1998.) The note is due in monthly
installments of $9,300, including principal and interest.
Note matures October 1998 and is expected to be refinanced. 685,000 750,000
Note payable bears interest at 8.5% and is due in
monthly installments of $8,300, including principal and
interest. The note matured in April 1998 and is
collateralized by real estate located in Livingston,
Tennessee, and machinery and equipment. The Company was
granted a forbearance until September 1999 while alternative
financing is arranged. 392,103 454,862
F-14
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
-------------------------------------------------------------------------------
Note 9 - Long-Term Debt (continued)
1998 1997
---------- ---------
Note payable bears interest at 3% over the Bank's base
rate (11.5% at June 30, 1998) and is due in monthly
installments of $9,950, including principal and interest.
The note matures in October 1998 and is expected to be
refinanced. The note is collateralized by accounts
receivable, inventories, note receivable, property and
equipment, real estate and contract rights. $ 275,012 $ 351,073
Term Note payable bears interest at 3% over the Bank's
rate (11.50% at June 30, 1998.) The note is due in monthly
installments of $3,100, including principal and interest.
Note matures October 1998 and is expected to be refinanced. 224,000 244,000
Note payable bears interest at 3% over the Bank's base
rate (11.5% at June 30, 1998), and is due in monthly
installments of $7,350, including principal and interest.
The note is collateralized by accounts receivable,
inventories, note receivable, property and equipment, real
estate and contract rights. The note matures in October 1998
and is expected to be refinanced. 207,311 263,093
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. 199,336 208,408
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 $1,063 through May 2005, at which time the
remaining balance becomes due. The mortgage is
collateralized by real estate located in Weatherford,
Oklahoma. 63,484 69,457
Note payable bears interest at 10% and is due in
monthly installments of $766, including principal and
interest. The note matures in June 2002 and is
collateralized by equipment in Weatherford, Oklahoma. 30,106 -
F-15
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
---------------------------------------------------------------------------------
Note 9 - Long-Term Debt (continued)
1998 1997
--------- --------
Notes payable bear interest at rates ranging from 9.77%
to 12.25% and are due in monthly installments, including
principal and interest, totaling $1,210 through December
1998, and $707 through April 2000. The notes are
collateralized by equipment. $ 17,185 $ 29,567
Notes payable bear interest at rates ranging from 8.99%
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. 13,672 25,912
Note paid in full during 1998. - 12,570
--------- ---------
2,882,209 3,248,942
--------- ---------
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. 129,221 150,535
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. 103,838 110,513
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. 14,030 29,044
Note payable bears interest at 5.25% and is due in
quarterly installments, including principal and interest, of
$675. The note is unsecured. 10,525 15,305
---------- ----------
257,614 305,397
---------- ----------
</TABLE>
F-16
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 9 - Long-Term Debt (continued)
1998 1997
---------- ----------
<S> <C> <C>
Notes payable bear interest at rates ranging
Related Party 21,107 27,069
--------- ---------
3,160,930 3,581,408
Less current portion and short-term debt (300,000) (3,006,018)
---------- ---------
$2,860,930 $ 575,390
========== ===========
</TABLE>
Term notes payable in the amount of $1,834,000 are
collateralized by deed of trust on real estate, property and equipment,
accounts receivable, inventories, contract rights, and notes receivable
and are cross-collateralized with debt totaling $482,323 at June 30,
1998, and cross-guaranteed by all of the subsidiaries. Effective May
31, 1998, the loans were converted from revolving notes to term notes.
The term notes 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
granted a waiver of certain covenants to October 1998. Approximately
$2,367,000 of the Company's consolidated net assets at June 30, 1998
are considered to be restricted net assets of consolidated
subsidiaries.
In October 1998, the Company received a letter of intent from
a financial institution to refinance certain debt and to provide
working capital. The letter of intent provides for the issuance of
$2,350,000 of revolving credit debt, subject to borrowing base
limitations of 80% of eligible accounts receivable and 50% of eligible
inventory, bearing interest at the Bank's base rate plus 1.5%.
Additionally, the bank will issue a $275,000 term loan bearing interest
at the Bank's base rate plus 2%. The financing commitment requires a
one-time commitment fee of 1% of the total available borrowings to be
paid at closing. Notes payable with an outstanding balance of
$2,166,323 at June 30, 1998 are due in October 1998 and are expected to
be refinanced with borrowings pursuant to the letter of intent. The
Company has classified all debt as long-term because it has the ability
and intent to refinance the debt for three years.
The aggregate maturities of long-term debt are as follows at
June 30, 1998:
Year
----
1998 $ 300,000
1999 400,000
2000 70,000
2001 2,100,000
2002 65,000
Thereafter 225,930
----------
$3,160,930
==========
Note 10 - 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 $2,477 for the period from April 1,
1997 through April 30, 2000.
F-17
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
Note 10 - Commitments and Contingencies (continued)
During 1998, the Company entered into lease agreements for
production and office equipment and vehicles. The lease terms are
generally two to five years. The Company also canceled three existing
vehicle leases effective August 1998.
In August 1998, the Company entered into three, two year lease
agreements for vehicles. The leases provide for total monthly payments
of $1,691. The Company also canceled three existing vehicle leases
effective August 1998.
Future minimum rental payments under operating leases as of June
30, 1998, including the changes in vehicle leases subsequent to year
end, are as follows:
<TABLE>
<CAPTION>
Year Office Space Equipment Vehicles Total
---- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C>
1999 $29,068 $23,541 $41,558 $ 94,167
2000 22,289 23,541 28,759 74,589
2001 - 22,715 - 22,715
2002 - 18,589 - 18,589
2003 - 7,016 - 7,016
------- ------- ------- --------
Total minimum
payments required $51,357 $95,402 $70,317 $217,076
======= ======= ======= ========
</TABLE>
The Company also leases various facilities under informal
agreements. Rental expense under operating leases for the years ended
June 30, 1998, 1997 and 1996 amounted to $168,799, $186,715, and
$159,889, respectively.
Note 11 - 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>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales:
Livestock handling equipment ........... $ 8,988,175 $ 8,170,971 $ 7,522,417
Water well and environmental supplies .. 6,587,965 6,901,314 6,989,817
--------- --------- ---------
Total net sales ............ $ 15,576,140 $ 15,072,285 $ 14,512,234
============ ============ ============
Operating Earnings:
Livestock handling equipment ........... $ 427,900 $ 463,712 $ (262,647)
Water well and environmental supplies .. 246,676 432,221 473,133
------------ ------------ ------------
Total operating earnings ... 674,576 895,933 210,486
Corporate and other (1) ................ (587,156) (867,813) (928,285)
------------ ------------ ------------
Earnings (loss) before income taxes .... $ 87,420 $ 28,120 $ (717,799)
============ ============ ============
</TABLE>
F-18
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 11 - Segmented Information and Reconciliation (continued)
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Identifiable Assets:
Livestock handling equipment ........ $3,704,490 $4,056,207 $3,866,469
Water well and environmental supplies 3,803,234 4,015,170 4,438,397
---------- ---------- ----------
7,507,724 8,071,377 8,304,866
General corporate assets (2) ....... 172,854 607,716 589,042
---------- ---------- ----------
Total assets as reported in
accompanying consolidated
balance sheets ............. $7,680,578 $8,679,093 $8,893,908
========== ========== ==========
Capital Expenditures:
Livestock handling equipment ....... $ 151,050 $ 31,657 $ 164,150
Water well and environmental supplies 174,087 43,495 72,688
Corporate .......................... 19,473 4,226 3,221
---------- ---------- ----------
Total capital expenditures .... $ 344,610 $ 79,378 $ 240,059
========== ========== ==========
Depreciation and Amortization:
Livestock handling equipment ....... $ 277,914 $ 272,915 $ 287,238
Water well and environmental supplies 96,442 113,449 123,691
Corporate .......................... 19,874 22,197 33,724
---------- ---------- ----------
Total depreciation and
amortization ................ $ 394,230 $ 408,561 $ 444,653
========== ========== ==========
<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 corporate fixed assets.
</FN>
</TABLE>
Note 12 - Income Taxes
<TABLE>
<CAPTION>
The provision for income taxes is as follows at June 30:
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Current
Federal .............................. $ 72,700 $ 30,800 $ --
State ................................ 23,300 14,400 1,650
Deferred ................................. -- -- 15,763
Tax benefit of net operating loss (96,000) (45,200) --
-------- -------- ---------
$ -- $ -- $ 17,413
======== ======== =========
</TABLE>
F-19
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- --------------------------------------------------------------------------
Note 12 - Income Taxes (continued)
A reconciliation of income at the statutory rate to the
Company's effective rate is as follows at June 30:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Federal statutory rate ..................... 34.00% 34.00% (34.00)%
Non deductible expenses ..................... 9.51 23.44 1.56
Basis difference in assets and
liabilities ................................ (4.60) (8,90) --
Capital loss and reversed of non
deductib write down of real estate ......... (8.38) -- .17
Change in deferred tax asset
valuation allowance and net
operating loss .............................. (30.53) (49.47) 34.10
Other ........................................ -- .93 .57
----- ----- -----
-- % -- % 2.40%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Deferred tax assets and liabilities are comparised of the following:
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Deferred Tax Assets:
Net operating loss carryforward ...... $ 238,000 $ 239,979 $ 344,327
Allowance for doubtful accounts ...... 38,900 48,960 59,869
Inventory ............................ 28,500 34,775 25,518
Accrued salaries ..................... 26,700 19,242 20,531
--------- --------- ---------
Total deferred tax assets ..... 332,100 342,956 450,245
Deferred Tax Liabilities:
Depreciation of property and equipment 135,000 (176,834) (211,445)
Valuation allowance .................. (197,100) (166,122) (238,800)
-------- -------- --------
Deferred taxes - net ............ $ -- $ -- $ --
========= ========= =========
Current deferred tax asset ............... $ -- $ -- $ 99,814
Long-term deferred tax liability ......... -- -- (99,814)
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
</TABLE>
At June 30, 1998, the Company has approximately $489,000 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, 1998, the Company has capital loss carryforwards
in the amount of $288,000 which no benefit has been recognized due to
uncertainty as to realization.
F-20
<PAGE>
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
- ------------------------------------------------------------------------------
Note 13 - Litigation and Subsequent Event
During September 1998, the Company agreed to settle its claim
against Jerry R. Bellar (Bellar), a stockholder of the Company and a
former stockholder of Eagle Enterprises, Inc., and Bellar agreed to
settle claims against the Company asserted by him and two affiliated
companies. The settlement agreement provided for the cancellations of
amounts due to the Company from Bellar recorded at $167,572, and amount
payable by the Company to Bellar of $150,000. The Company paid $20,000
to Bellar in September 1998. The accompanying financial statements
reflect the amounts agreed to in the settlement as of June 30, 1998.
Note 14 - 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 Manufacturing 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, 1998, W-W Manufacturing and Eagle's accounts receivable
totaled $992,309 and Titan's totaled $842,286.
Note 15 - 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 1998 and 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-21
<PAGE>
Independent Auditors' Report
- ----------------------------
The Board of Directors and Stockholders
W W Capital Corporation
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheets of W W
Capital Corporation as of June 30, 1998 and 1997, and the related statements of
operations, stockholders' equity and cash flows for each of the two years then
ended, and have issued our report thereon dated October 20, 1998. 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
audits. 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 20, 1998
S-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Board of Directors and Stockholders
W W Capital Corporation
We have audited the accompanying statements of operations,
stockholders' equity and cash flows for the year ended June 30, 1996 and have
issued our report thereon dated October 15, 1996. Our audit also included the
financial statement schedules of W W Capital Corporation for the year ended June
30, 1996, 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 audit. 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>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Schedule I - Condensed Financial Information of Registrant Balance Sheets
=====================================================================================
June 30 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash ................................................. $ 12,495 $ 13,060
Accounts receivable, related party ................... -- 167,572
Accounts receivable, subsidiaries .................... 47,672 --
Current portion of notes receivable .................. 20,000 2,500
Other current assets ................................. 7,210 --
---------- ----------
Total current assets ...................... 87,377 183,132
---------- ----------
Equipment, net of accumulated depreciation
of $115,401 in 1998 and $95,527 in 1997 .............. 40,837 41,237
---------- ----------
Other Assets
Real estate held for sale ............................ -- 381,035
Note receivable, net of current portion .............. 90,000 --
Investment in wholly owned subsidiaries .............. 2,366,663 2,122,743
Other assets ......................................... 2,312 2,312
---------- ----------
Total other assets ........................ 2,458,975 2,506,090
---------- ----------
Total assets .............................. $ 2,587,189 $ 2,730,459
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ..................................... $ 66,044 $ 97,949
Accrued expenses ..................................... 10,735 6,600
Accounts payable, subsidiaries ....................... -- 160,351
Current portion, long-term debt ...................... -- 12,570
---------- ----------
Total current liabilities ................. 76,779 277,470
---------- ----------
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 shares issued and outstanding
at June 30, 1998 and 1997 ......................... 55,406 55,406
Capital in excess of par value ....................... 3,304,629 3,304,629
Retained earnings (deficit) .......................... (800,719) (888,140)
---------- ----------
2,559,316 2,471,895
Less 120,264 shares of treasury stock at cost ........ (48,906) (18,906)
---------- ----------
Total stockholders equity ................. 2,510,410 2,452,989
---------- ----------
Total liabilities and stockholders' equity $ 2,587,189 $ 2,730,459
=========== ===========
</TABLE>
S-3
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Schedule I - Condensed Financial Information of Registrant
Statements of Operations
- -----------------------------------------------------------------------------------------
June 30 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Management fee from subsidiaries ............. $ 336,000 $ 480,000 $ 480,000
Operating Expenses
General and administrative ................... 427,120 546,011 645,678
--------- --------- ---------
Operating loss .................... (91,120) (66,011) (165,678)
Other Income (Expense)
Interest income .............................. 6,145 -- 2,879
Interest expense ............................. (695) (2,075) (5,482)
Realized and unrealized loss on asset sales
and real estate held for sale ............. (72,354) 3,319 (3,500)
Other income (expense) ....................... 1,524 (2,960) 12,154
Equity in earnings (loss) of subsidiary
before income taxes ....................... 243,920 95,847 (542,409)
--------- --------- ---------
Earnings (loss) before income taxes 87,420 28,120 (702,036)
Income Tax Expense .............................. -- -- 15,763
--------- --------- ---------
Net earnings (loss) ............... $ 87,420 $ 28,120 $(717,799)
========= ========= =========
</TABLE>
S-4
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Schedule I - Condensed Financial Information of Registrant
Statement of Cash Flows
- -------------------------------------------------------------------------------------------------------------------
June 30 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Cash Flows Used In Operating Activities ........... $(129,351) $(160,089) $ (13,571)
-------- -------- --------
Cash Flows From Investing Activities
Investment in subsidiaries ....................... (40,351) 179,415 (365,000)
Proceeds from the sale of real estate ............ 198,681 -- --
Proceeds from notes receivable collections ...... 2,500 -- 430,219
Proceeds from sales of property and equipment .. -- 4,000 --
Purchase of equipment ............................ (19,474) (4,226) (3,221)
Additions to real estate held for sale ........... -- (1,621) (5,454)
-------- ------- -------
Net cash provided by investing activities 141,356 177,568 56,544
-------- ------- -------
Cash Flows From Financing Activities
Proceeds from issuance of common stock -
630 Payments on long-term debt ..................... (12,570) (11,764) (39,010)
Payment on capital lease obligation ................ -- -- (387)
--------- --------- ---------
Net cash used in financing activities ... (12,570) (11,134) (39,397)
--------- --------- ---------
Net Increase (Decrease) in Cash ....................... (565) 6,345 3,576
Cash, Beginning of year ............................... 13,060 6,715 3,139
--------- --------- ---------
Cash, End of Year ..................................... $ 12,495 $ 13,060 $ 6,715
========= ========= =========
Supplemental Schedule of Noncash Investing
and Financing Activities
Sale of real estate held for investment
Receipt of note receivable ...................... $ 110,000 $ -- $ --
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest ..................................... $ 695 $ 2,075 $ 5,482
========= ========= =========
</TABLE>
S-5
<PAGE>
W W CAPITAL CORPORATION
<TABLE>
<CAPTION>
Schedule I - Condensed Financial Information of Registrant
Notes
June 30, 1998
- --------------------------------------------------------------------------------
Note 1 - Long-Term Debt
Notes payable to financial institutions were as follows at
June 30:
1998 1997
---------- ----------
<S> <C> <C>
Note payable paid in full in 1998 $ - $ 12,570
Less current portion - (12,570)
----------- --------
$ - $ -
=========== ==========
</TABLE>
Note 2 - Related Party Transactions
At June 30, 1997, Jerry R. Bellar (Bellar), the former
majority shareholder of Eagle and a current stockholder of the Company,
owed $167,572 under an indemnification agreement related to the
Company's acquisition of Eagle. In October 1998, Bellar and the Company
settled amounts due to and from the Company. The Company recorded the
subsequent event at June 30, 1998. A payment of $20,000 was made by the
Company to Bellar to settle all obligations.
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:
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
W-W Manufacturing Co. Inc. $353,122 $ 116,416 $ 38,817
Titan Industries, Inc. (270,732) (239,903) (94,452)
Eagle Enterprises, Inc. (34,718) (36,864) (7,063)
--------- --------- --------
$ 47,672 $(160,351) $(62,698)
========= ========= ========
Management fee income for:
W-W Manufacturing Co. Inc. $ 156,000 $ 240,000 $240,000
Titan Industries, Inc. 156,000 240,000 240,000
Eagle Enterprises, Inc. 24,000 - -
--------- --------- --------
$ 336,000 $ 480,000 $480,000
========= ========= ========
Equity in subsidiary operations for:
W-W Manufacturing Co. Inc. $ (32,537) $ (5,925) $(432,908)
Titan Industries, Inc. 82,766 97,332 169,914
Eagle Enterprises, Inc. 193,691 4,440 (279,415)
--------- --------- ---------
$ 243,920 $ 95,847 $(542,409)
========= ========= =========
</TABLE>
S-6
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures.
- -------- -----------------------------------------------------------------
Not Applicable
25
<PAGE>
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 28, 1998, and their business experience during the prior
five years.
DAVID L. PATTON age 67, was elected to the Board of Directors of the Company in
December 1991, and Chairman of the Board in December 1993. Mr. Patton is
presently a Judge in the Court of Tax Appeals for the State of Kansas, and was a
former partner with the law firm of Patton, Kerbs & Hess in Dodge City, Kansas.
Mr. Patton was a co-founder of Titan Industries, Inc., which is currently
operated as a wholly-owned subsidiary of the Company.
STEVE D. ZAMZOW age 50, 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 presently president of Isotech
as well as 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 W W 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.
26
<PAGE>
Item 11. Executive Compensation
- -------- ---------------------
The following table sets forth the cash compensation paid or accrued during the
fiscal years ended June 30, 1998, 1997, and 1996, 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 Year Salary Bonus Compensation Compensation
- ------------------ ---- ------ ----- ------------ ----------
Position
- --------
<S> <C> <C> <C> <C> <C>
Steve D. Zamzow 1998 $119,896 - $ - $ 4,575 (a)
President, Chief Executive 1997 $119,166 - $ - $ 4,575 (a)
Officer and Director 1996 $119,166 $8,526 (b) $ - $ 2,284 (a)
<FN>
(a) Includes accrued vacation and compensated absences earned in prior
years and paid during June 30, 1998 and 1997 respectively.
(b)Bonus amount earned prior to 1994 and paid during subsequent years.
</FN>
</TABLE>
Option Grants in Fiscal Year 1998
During the fiscal year ended June 30, 1998, the Company did not grant
stock options to the Executive officers.
Aggregated Option Exercises in Fiscal Year 1998
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, 1998 and the value of the
unexercised stock options at June 30, 1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
-----------------------------------------------
and Fiscal Year-End Option Values
---------------------------------
Number of Value of
Securities Unexercised
Underlying Unex- In-the-Money
Shares ercised Options Options at
Acquired at June 30, 1998 June 30, 1998
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, 1998.
</FN>
</TABLE>
27
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The following table sets forth as of October 28, 1998, 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 1,191,287 (5) 21.50%
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 1,851,043 (6) 33.41%
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.
(5) Includes 57,500 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>
28
<PAGE>
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. As of November 1, 1997, this note has been
paid in full.
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 was withholding payment of the remaining $150,000
pending receipt of amounts due under an indemnification agreement Subsequent to
June 30, 1998 this lawsuit has been settled. (See "Legal Proceedings" for
additional information)
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. lawsuit and Liberty Metal Fabrication, Limited lawsuit (see
"Legal Proceeding" for additional information).
29
<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, 1998 and June 30, 1997.
Consolidated Statement of Operations for the years ended June 30, 1998, 1997,
and 1996.
Consolidated Statement of Stockholders' Equity for the years ended June 30,
1998, 1997, and 1996.
Consolidated Statement of Cash Flows for the years ended June 30, 1998, 1997,
and 1996.
(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).
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).
30
<PAGE>
10.02 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).
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).
31
<PAGE>
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).
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)
- -----------
No reports on Form 8-K were filed during the fourth quarter of the fiscal year
covered by this report.
32
<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
33
<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 for the year then ended June
30, 1996 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 26, 1998
34
<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>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<SECURITIES> 0
<CASH> 281,449
<RECEIVABLES> 1,990,476
<ALLOWANCES> (104,500)
<INVENTORY> 3,157,499
<CURRENT-ASSETS> 5,426,014
<PP&E> 4,665,178
<DEPRECIATION> 2,561,929
<TOTAL-ASSETS> 7,680,578
<CURRENT-LIABILITIES> 2,309,238
<BONDS> 0
0
0
<COMMON> 55,406
<OTHER-SE> 2,455,004
<TOTAL-LIABILITY-AND-EQUITY> 7,680,578
<SALES> 15,072,285
<TOTAL-REVENUES> 15,072,285
<CGS> 12,709,034
<TOTAL-COSTS> 12,709,034
<OTHER-EXPENSES> 2,619,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (340,182)
<INCOME-PRETAX> 87,420
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,420
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
