<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10- QSB
(Mark One)
[ X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE EXCHANGE ACT
For the transition period from ___________ to ___________.
Commission File No. 0-17117
WALL STREET FINANCIAL CORPORATION
(Exact name of Small Business Issuer as specified in its Charter)
Incorporated under the laws of
the State of Delaware 99-0240826
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1088 Bishop Street, Suite 202
Honolulu, HI 96813
(Address of principal executive offices)
(808) 526-3999
Issuer's telephone number
Not applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) 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 No X
State the number of shares outstanding of each of the issuer s classes of common
stock, as of the latest practicable date:
Class of Common Stock Outstanding at December 9, 1997
$.01 par value 15,940,039
Transitional Small Business Disclosure Format (Check one) Yes No X
<PAGE>
FORM 10- QSB
FINANCIAL STATEMENTS AND SCHEDULES
WALL STREET FINANCIAL CORPORATION
For the Quarter ended June 30, 1997
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996 .....3
Statement of Operations - Three months
ended June 30, 1997 and 1996 .....5
Statements of Cash Flows - Three months
ended June 30, 1997 and 1996 .....6
Notes to Financial Statements .....7
Item 2. Management Discussion and Analysis of
Financial Condition and Results of Operations .....8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ....14
Item 2. Changes in Securities ....14
Item 3. Defaults Upon Senior Securities ....14
Item 4. Submission of Matter to a Vote of Security Holders ....14
Item 5. Other Information ....14
Item 6.(a) Exhibits ....14
Item 6.(b) Reports on Form 8-K ....14
<PAGE>
Wall Street Financial Corporation and Subsidiary
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(unaudited) (audited)
Assets
Current Assets
Cash $6,668
Accounts receivable 43,796 20,547
Deposits/prepayments 16,558 1,302
------------ ------------
Total current assets 60,354 28,517
------------ ------------
Advances Receivable-
Officers 47,543
Other 1,550
------------ ------------
0 49,093
------------ ------------
Notes receivable 100,000 100,000
Plant and equipment
Furniture and fixtures 3,247 7,234
Equipment 9,527 17,626
------------ ------------
12,774 24,860
Less: accumulated depreciation 5,571 4,339
------------ ------------
Plant and equipment-net 7,203 20,521
Other Assets 508,655 242,912
Deferred Expenditure 590,714 347,280
Forest Resource 134,500,000 134,500,000
------------ ------------
$135,766,926 $135,288,323
============ ============
The notes on page 7 form an integral part of these financial statements.
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Wall Street Financial Corporation and Subsidiary
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(unaudited) (audited)
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $4,293
Convertible promissory notes payable $1,424,000 1,475,000
Accounts payable-trade 221,317 217,491
------------ ------------
1,645,317 1,696,784
------------ ------------
Accrued liabilities
Payroll and taxes 111,923 79,675
Interest payable-officers 27,103 38,851
Interest payable 208,145 135,739
------------ ------------
347,171 254,265
------------ ------------
Other current liabilities
Litigation settlement 20,000 20,000
------------ ------------
Total current liabilities 2,012,488 1,971,049
Notes Payable-Officers 390,164 210,322
Reserve 600,000 600,000
Notes Payable 51,518,825 51,518,825
------------ ------------
Total liabilities 54,521,477 54,300,196
Deferred Revenue 67,250,000 67,250,000
Shareholders' Equity
Common stock-authorized, 25,000,000
shares of $.01 par value; issued
and outstanding 15,214,959 shares
in 1995 and 15,214,879 at 06/30/97 152,149 152,149
Additional paid-in capital 13,370,976 13,370,976
Retained earnings 484,324 227,002
------------ ------------
14,007,449 13,750,127
Less:
Treasury stock (12,000) (12,000)
------------ ------------
13,995,449 13,738,127
------------ ------------
$135,766,926 $135,288,323
============ ============
The notes on page 7 form an integral part of these financial statements
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<TABLE>
Wall Street Financial Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
for Quarter ended for the six months ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue
Operating 30,708 38,576 44,878 60,539
Land Sale Option 260,000 320,000 400,000 320,000
Gain/(loss) on investment (1,036) 182,243
Interest and dividend income 11 65
Other 52,126 52,226
-------- --------- -------- ---------
341,809 358,576 679,413 380,539
-------- --------- -------- ---------
Expenses
Cost of sales 159,733 183,825 229,807 201,376
Operating expenses 4,000 324,498 8,999 473,480
Interest expenses 43,388 (80,074) 87,592 (60,443)
Depreciation 616 2,516 1,232 4,176
Other expenses 300 300 2,266
-------- --------- -------- ---------
208,037 430,765 327,930 620,855
-------- --------- -------- ---------
Income/(loss) from continuing operations 133,772 (72,189) 351,483 (240,316)
Other Income
Restructure of debt 264,292 264,292
Adjustment of Prior Year's Expense 424,656 424,656
-------- --------- -------- ---------
Income/from operations $133,772 $616,759 $351,483 $448,632
======== ========= ======== =========
Net loss per share continuing operations $0.01 ($0.01) $0.02 ($0.02)
Income per share-other income .05 .05
-------- --------- -------- --------
Net income/(loss) per share from operations $0.01 $0.04 $0.02 $0.03
======== ========= ======== ========
</TABLE>
The notes on page 7 form an integral part of these financial statements.
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Wall Street Financial Corporation and Subsidiary
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30,
(unaudited)
1997 1996
Cash flows from operating activities:
Net income/(loss) from operations $351,483 $448,632
Items not affecting working capital
depreciation 1,232 4,176
Changes in assets and liabilities:
increase/(decrease) in assets & liabilities 17,181 (2,367,680)
---------- ---------
369,896 (1,914,872)
---------- ---------
Cash flows from investing activities:
Purchase of auto (3,950)
Purchase of furniture (1,413) (2,500)
Purchase of equipment (6,844)
Addition to building improvements (10,954)
Addition to notes receivable (100,000)
Addition to other assets (8,987)
Advances to affiliates/subsidiaries (339,127)
---------- ----------
Net cash used in investing activities (340,540) (133,235)
---------- ----------
Cash flows from financing activities:
Proceeds from securities 701,908
Proceeds from convertible notes payable 1,260,000
Proceeds from notes payable-officers (22,688) 89,079
---------- ----------
(22,688) 2,050,888
---------- ----------
Net (decrease) in cash 6,668 2,781
Cash at beginning of year 6,668 0
---------- ----------
Cash at end of period $0 $2,781
========== ==========
Cash paid during the period for:
Interest $0 $0
The notes on page 7 form an integral part of these financial statements.
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NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
(1) The accompanying unaudited condensed consolidated financial statements
of the Company and its subsidiaries have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10- QSB and Article 10 of Regulation S-B.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for completed financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the six months ended June 30,
1997, are not necessarily indicative of the results to be expected for the
entire year.
(2) The 10- QSB filing condensed financial statements for the six months
ending June 30, 1997, consist of the consolidated financial statements of
Wall Street Financial Corporation ( WSF ), its wholly owned subsidiaries WSF
Trust Corporation of Belize Limited, Mayan Resorts Development Company
Limited, and Wall Street Internet Corp., (a development stage company).
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ITEM 2
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
(a) General Development
The Registrant (also referred to as the Company ) was incorporated under the
laws of the State of Delaware in March 1987. The Company invested in a
California-based National bank and developed a franchise system whereby
member banks were supported by various financial products and services.
Unable to achieve profitability the Company discontinued its franchise
efforts. In 1995, under the guidance of a new Board of Directors, the Company
began actively focusing on its interest in a 31,000-acre parcel of prime
Belizean real estate property.
Since 1996 the Company s focus is that of a holding company with three main
operations, a) trust and asset management, b) plantation revitalization,
c) the planning and development of a world-class destination resort with one or
more Caribbean sea-front hotels.
WSF Trust Corporation of Belize, Ltd.("the Trust Company"), a Belize trust
company and wholly-owned subsidiary of Registrant, was formed to implement
the corporate strategy involving trust and asset management. The Trust
Company was declared a full service trust corporation pursuant to the Trust
Corporation Act of the Laws of Belize. With the establishment of the Trust
Company and the appointment of the Trust Company as the sole trustee and
asset manager of one of the largest private Plantations in Belize, the
Registrant assumed an active role in the economic development of the Country
of Belize. To implement these plans and achieve these objectives the Trust
Company has and will make investments in synergistic companies and/or enter
into joint ventures with qualified strategic partners (see section on
"Operations").
Mayan Resorts Development Company, Ltd. ("Mayan Resorts), a Belize company, a
wholly-owned subsidiary of the Trust Company, has the primary objective to
plan and develop a major destination resort in the Country of Belize on a 50-
square-mile oceanfront parcel generally known in Belize as the Salt Creek
Estate or Salt Creek Plantation. Such development will include (1)
implementation of a sustainable Plantation Revitalization Plan that includes
agriculture, forestry and aquaculture projects and (2) preparation and
implementation of a Master Development Plan for a mixed-use, world-class
destination health and wellness resort. The Master Development Plan will
strive to utilize the plantation operations as ecological attractions and the
many Mayan sites on the property as cultural attractions.
Compradore Limited, a Hawaii company, is the registered owner of the property
and holds the Transfer Certificate of Title ("TCT") dated December 19, 1973,
registered in the Land Titles Register Volume 8, Folio 300, at the Belize
General Registry. The TCT encompasses 38,677-acres of land. Due to
subsequent transfers, the Plantation was reduced to 31,423.45 acres in 1989.
The Registrant owns twenty-three and 62/100 percent (23.62%) of the common
stock of Compradore Limited, the title holder of the 31,423.45-acre
Plantation . WSF Trust Corporation of Belize, Ltd. is the sole trustee and
asset manager of the Plantation.
Wall Street Internet Corporation, a Hawaii company and wholly-owned
subsidiary of Registrant, will serve as the communications and marketing arm
for all of Registrant s operations. This company remains a development stage
company and is based in Honolulu, Hawaii.
-8-
LIQUIDITY AND CAPITAL RESOURCES
Assets
Total assets at June 30, 1997, were $135,766,926 as compared to $135,288,323
at December 31, 1996. As of June 30, 1997, the Company had cash balances of
$0 compared to December 31, 1996 cash balances of $6,668. On June 30, 1997,
current assets of the Company were $60,354 compared to $28,517 at December
31, 1996.
Forest Resource
Forest Resource was $134,500,000 at June 30, 1997, and $134,500,000 at
December 31, 1996, and consists of about 14,576 acres dense broad-leaf forest
range that, pursuant to its assessment, contains 60,000 mature and
merchantable #1 and #2 grade Honduras Mahogany and more than 240,000 other
merchantable hardwood trees, mostly cedar. With the implementation of an
ecologically sound Forestry Management and Timber Processing Plan this
resource should remain sustainable based on an estimated growth in
merchantable hardwoods of approximately seven million board feet (7,000,000
BF) or more per annum. Initial plans call for the harvesting and processing
of approximately one million five hundred thousand board feet (1,500,000
BF)in 1998 to be used for export and secondary wood-processing of value-added
products.
Land Resource
No value is reflected with regards to the 23.62% Company s ownership in
Compradore Ltd. or in the Company's interest as sole trustee and asset
manager of the 31,423.45-acre Mayan Salt Creek Estate in Belize City
District, Belize, Central America.
Liabilities
Liabilities for the Company were $54,521,477 at June 30, 1997, compared to
$54,300,196 at December 31, 1996. Of these liabilities, 51,518,825 is due to
an affiliate at June 30, 1997 and December 31, 1996.
Current liabilities
Current liabilities for the Company were $2,012,488 at June 30, 1997,
compared to $1,971,049 at December 31, 1996. The reduction in current
liabilities is a result of the Company s strategy to convert Notes Payable
into Equity and/or Land Ownership. The Company expects to convert, re-
negotiate or pay all or a portion of the current liabilities in 1998.
However, no assurance can be given to that effect.
Deferred Revenue
As the sole trustee and asset manager of the 31,423.45-acre Mayan Salt Creek
Estate, WSF Trust Corporation of Belize Limited will receive fifty (50%)
percent of all revenues. This contract is similar to limited partnership
contracts, in which the general partner (in this case WSF Trust) receives a
share of the property s income. The deferred revenue of $67,250,000 equals
50% of the revenue from the sale of the timber resources and will become
revenue at the time the timber is processed and shipped. The Company has
begun harvesting and processing hardwood into lumber during the first Quarter
of 1997 and anticipates full production capabilities for lumber and value-
added wood products during the first Quarter of 1998.
-9-
Shareholders' Equity
The Company has shareholders' equity in the amount of $13,995,499 at June 30,
1997, compared to $13,738,127 at December 31, 1996.
RESULT OF OPERATIONS
Revenues
The Company had operating revenues of $30,708 for the three month period
ending June 30, 1997, as compared to $38,576 for the comparable quarter in
1996. The Company expects its revenues to increase significantly as the
implementation of its plantation revitalization and resort development plans
progress.
Expenses
Expenses decreased to $208,037 for the three months ending June 30, 1997,
compared to $430,765 for the comparable quarter in 1996. The decrease in
expenses is due to Management s continued restraint in incurring expenses,
and accruing deferred expenses with regards to projects in the planning and
development phases . The senior officers of the company waived significantly
all, and/or deferred, their contractual salaries for the reporting period.
Net Operating Income (Loss)
A net operating income of $133,772 for the Quarter ended June 30, 1997, was
achieved, compared to a net operating loss of ($72,189) at June 30, 1996.
The net income is due to successful test marketing results, the continued
effort of management to minimize general & administrative costs as well as
the reduction in interest expenses, and the capitalization of development
costs.
PLAN OF OPERATION
(a) General
To implement the plantation revitalization and resort development plans and to
achieve desired objectives, the Company will provide capital to its Belize
based Trust Company, which in turn will make investments in synergistic
companies and/or enter into joint ventures with qualified strategic partners.
(b) Operations
The Registrant s activities during the first two quarters of 1997 were
focused on the continued assessment of the resources of its asset base, the
reduction of its liabilities , the preparation and implementation of the
Company s Plantation Revitalization Plan and the Resort Destination
Development Plan.
The Plantation has a 300-year history as a citrus plantation, cattle ranch
and forest range that, at the height of its operation, employed approximately
1,000 persons.
The Plantation now encompasses 31,423.45 acres owned by Compradore Limited,
an affiliate of the Company. It is managed by the Trust Company. The
Plantation is on the ocean and has coastline frontage of approximately 20
miles on the Caribbean Sea. The land itself consists of areas previously
used as a forest range, cattle ranch and tropical fruit plantation. It also
features coastal lagoons, marshes and savannas that transition into tropical
hardwood forests. A major attraction on this property is a large number of
4,000-year-old-Mayan temples and other archaeological sites.
-10-
A portion of the Plantation is densely covered by a hardwood forest
containing major stands of mahogany, cedar, pine, teak and other tropical
hardwoods. The forested area occupies approximately 14,576 acres (5,901
hectares), or approximately 37% of the total land base of the property. All
forestry operations will be based on sustained yield management. The Company
manages the forest resources and plans to operate a sawmill and wood
processing plant.
The Land Use Plan for the Plantation sets forth the appropriate land uses.
The low-lying lagoon areas of the property are appropriate for agriculture
and aquaculture ventures. In addition, many of these lagoons provide
picturesque sites for various types of resort development and for parks,
wildlife sanctuaries and other recreation purposes. Also noted on this plan
is the proposed location for a Phase I-Development Plan for a 1,000-acre
destination resort development. In addition to ecological and archaeological
tourism, an additional theme incorporated into the Plantation revitalization
and development is that of health and wellness.
Mayan Resort Belize (Phase I - Development Project)
Mayan Resort Belize, a 1000-acre resort destination concept designed by the
internationally renowned architectural firm of Wimberly Allison Tong & Goo,
and landscape design by their affiliate Helbert, Hastert & Fee, is based on
data provided by various consultants and was subsequently reviewed by Arthur
Anderson.
Subject to raising the required project financing, the Company plans to
develop Mayan Resort Belize through a partnership. When completed, the Mayan
Resort Belize will be a world-class destination resort, managed by an
international hotel management company, and will offer a wide variety of
resort activities and amenities in the context of an ecologically sound
environment. The development of this project is subject to raising the
necessary infra-structure and construction financing. This project is also
subject to executing a resort/hotel management agreement and other
contingencies. Pursuant to the current plans the development of this project
will include:
A 250-room, five-star resort hotel which can be accessed from the main
national highway and by water is the centerpiece for Phase I. The hotel will
provide guest-rooms clustered in low-rise buildings and in private bungalows
scattered around man-made lagoons. Site well-back from the coastline, the
resort will have swimming pools as well as marine access to many ocean
sports. Adjacent buildings will provide a variety of food and beverage
choices, ballrooms, meeting rooms and other typical hotel facilities. The
architectural character of the resort will be expressed in low-rise
colonial/tropical theme buildings built with local hardwoods taken from the
Plantation's timber resources and the Company's wood-processing operations.
In addition, innovative health and wellness programs will be created for
residents, visitors and the neighbors of the resort.
According to the resort plans, retail shops with a total area of 20,000-sq.
ft. will be clustered near the hotel complex. These shops will sell imported
goods as well as provide an outlet for local craftsmen.
An 18-hole golf course planned to incorporate the land conformation will
provide natural drainage for the interior of the site. The golf course will
offer private memberships to residents and non-residents but will also permit
play by resort guests. Planned recreational facilities also include a tennis
club. These facilities will be supported by appropriate restaurants and food
concessions, locker rooms, swimming pools and a health and wellness center.
-11-
Current plans are for the resort to offer up to 1,085 improved single family
residential houses and villas for sale during the development and
construction phases. These properties will have golf course, lake or
preservation area frontage and views.
A trial marketing effort has been completed during which 20 two- and four-
acre ocean-front lots were purchased at an average pre-development purchase
price of U.S.$10,000.00 per acre, subject to government approval. Once
governmental approval has been obtained, Mayan Resorts plans to design and
build ocean-front villas on these lots. Purchasers include physicians and
other health care leaders. These professionals will make up the team
advising the development of the wellness and health education theme of the
resort which will include a wellness center and an education and medical
center. The cost of construction of private homes on improved lots will be
the responsibility of the owners, but must be within the overall design
guidelines established for the resort. Design and construction packages will
be offered to property owners.
This project is subject to a number of contingencies and there is no
assurance that any resort destination will ever be built at the Plantation.
This project is currently in the planning stages.
Plantation Revitalization Phase I - Forest and Timber Resources
The forest and timber resource assessments obtained through the engagement of
qualified consultants concluded that the entire length of the Plantation is
bordered inland by the North American Highway with many established access
roads into the forested areas. The Plantation s high-bush land contains an
estimated 60,000 mature and merchantable #1 and #2 grade Honduras Mahogany
trees and over 240,000 other mature and merchantable hardwood trees. The more
mature Honduras Mahogany trees, located in the center of the Plantation, are
estimated to be between 40-50 years old with diameters between 23-36 inches
and a clear bole of 30-50 feet. There is a commercial stocking density of
approximately 49 trees per hectare in this timber range. Younger Honduras
Mahogany trees, between 10-25 years in age, are located around the forest
center. These trees have diameters of 12-24 inches, a clear bole of 18-24
feet, and have a commercial stocking density of 60 trees per hectare. (One
hectare = 2.47 acres). Based on this assessment approximately 14,576 acres
(37%) of the Plantation is considered high-bush land holding dense broadleaf
forest cover and tree species of commercial value, consisting of
approximately 60,000 mature and merchantable hardwood trees with an estimated
value range of $107 Million U.S. to $166 Million U.S. Although the property
has an extensive history spanning over 300 years as a citrus plantation,
cattle ranch and forest range, it has been idle (not utilized for productive
purposes) for half a century allowing the trees to mature. One of the
preliminary assessments indicates that the annual growth appears to be over
5% per year or approximately 7.5 million board feet. Among the assessments
it was further reported that (1) a wide variety of non-wood products are also
available on the property, (2) the wildlife resources are as impressive as
its vegetation and (3) world class recreation opportunities are present on
and near the Plantation. The assessment further indicates that tourism is
booming in Belize due to the attraction of its ecological resources and that
the tropical rainforest, wildlife, and the lagoons on the property are among
the best in Central America.
The Company owns these timber resources in perpetuity.
The Company obtained its timber harvesting license and started a test
harvesting and milling program of its mahogany, santa maria and other
tropical hardwood resources. Encouraged by the high-grade quality of the
lumber, the Company exchanged its 100% interest in Belize Transportation
-12-
Agencies, Ltd., d.b.a. Mayan Lines for 20.27% of Sandhill Enterprises, Ltd.,
a Belizean company. Sandhill Enterprises, Ltd. owned and operated a tropical
hardwood sawmill just adjacent to the Plantation, and is one of the two
customers for the estate's timber. On December 28, 1997, the Company
acquired all of the assets of Sandhill Enterprises, Ltd. On September 14,
1997, Mayan Resorts executed a renewable timber purchase contract for the
annual delivery of approximately 1.2 million board feet of Honduras Mahogany
with a leading North Carolina hardwood manufacturer.
The Company will continue to employ the services of forest- and land-
management experts, as required, to prepare, implement and to maintain an
ecologically sound, sustainable resource management plan that will preserve
these resources for future generations.
Wall Street Internet Corporation
Wall Street Internet Corporation ( WSIC ), a Hawaii company and wholly-owned
subsidiary of the Company was formed to operate as a communications and
marketing tool for the Company s operations. Internet services will be based
around the development and operation of two World Wide Websites, one for
Hawaii and another for Belize. The websites will provide access to
electronic media, content publishing of advertising, on-line marketing,
secure commercial financial transactions and customized Internet services.
On March 21, 1996, the Company reported on Form 8-K, the establishment of its
Internet Home Page: http:\\www.wsf.com.
The Company s ability to implement the above-described plan of operations
will, to a large extent, be dependent upon management s ability to attract
qualified developers as joint venture partners for the various non-company
owned projects and to raise additional capital. While the Company is
confident in producing the required investment and working capital through
the sale of timber due to the increasing value of its hardwood timber
resource, there can be no assurance that such capital will become available
as required. The Company therefore will continue to seek capital from
private and/or institutional investors. The Company plans to raise
sufficient funds through a placement of debt or equity instruments to develop
the required infrastructure for the project, including development of the
golf-course and the pre-sale of lots, homes and villas.
The information set forth in this Plan of Operation is management s best
estimate based upon current plans. Actual expenditures will be greater or
lesser depending upon many factors including, but not limited to, available
capital, overall market condition in the plantation management and resort
development, and the status of the commercial domestic and international
financial markets.
Due to possible economic or political factors that may affect the viability
of this project, there can be no assurance that the Company will be able to
raise the funds required for the implementation of all or portions of its
plans.
Inflation
The Company s business and operations have not been and are not expected to
be materially affected by inflation.
Impact of Future Accounting Pronouncements
None
-13-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
At December 31, 1996, the Registrant was a party to several lawsuits as
plaintiff or defendant, none of which individually or in the aggregate is
considered material in relation to the Registrant's financial position or
results of operations, including:
The Company is involved in litigation as a result of the cancellation of
shares. Pursuant to the terms on an Agreement and Plan of Merger dated
January 12, 1994, the Registrant agreed to conditionally issue 6,000,000
shares to Ernest J. Jackson, owner of Jackson Builders Corporation. During
the agreed upon post-closing time, the Board of Directors discovered that
Jackson made material misrepresentations to the Company and that Jackson did
not provide the Company with the closing schedules as required during the
post closing period. Therefore, Jackson did not meet the conditions for the
closing of the merger transaction and forfeited his rights to these shares.
The Company disclosed the material facts in its 1994 8-K Filings. On
September 28, 1994 the Company terminated Mr. Jackson as President and
Director effective immediately. On November 26, 1994, a Plan and Agreement of
Rescission, under which the parties agreed, among other things, to rescind
the Agreement and Plan of Merger, dated January 12, 1994, and Mr. Jackson
agreed to return all of the 6,000,000 shares for cancellation. However, as
the Company discovered after the termination of Mr. Jackson, he had, without
approval of the Company, pledged portions of these conditionally issued and
restricted shares to personal creditors. Therefore in order to avoid legal
action, Mr. Jackson executed a stock power in the name of the Company, with
Paine Webber signature guarantee, and agreed to return the stock certificates
on December 31, 1994. However, he failed to deliver the stock certificates as
agreed upon. Based on a legal opinion obtained from the national law firm of
Wickwire Gavin, the rescission agreement and the stockpower, the Company
cancelled the 6,000,000 shares. In addition the Company holds Mr. Jackson
personally liable for liabilities incurred, while Chairman, and recognized
the potential liability.
Item 2. Changes in Securities None.
Item 3. Defaults Upon Senior Securities None.
Item 4. Submission of Matter to a Vote of Security Holders None.
Item 5. Other Information None.
Item 6 (a) Exhibits None.
Item 6 (b) Report on Form 8-K None
-14-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant Certified that it has reasonable grounds to believe that it meets
all requirements for filing on Form 10- QSB , and has duly caused this
Disclosure Statement to be signed on its behalf by the undersigned.
Dated: January 31, 1998
WALL STREET FINANCIAL CORPORATION
/s/ Gerhart W. Walch
Principal Executive Officer
-15-
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<MULTIPLIER> 1
<S> <C>
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0
0
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