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 DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File No. 33-26828
WINDSOR CAPITAL CORP.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 59-2754843
- ------------------------------- ----------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
350 E. IRVING PARK ROAD
ROSELLE, ILLINOIS 60172
- ---------------------------------------- ----------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (630) 529-9424
Check whether the issuer (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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 7,791,000 SHARES OF COMMON
STOCK, $.001 PAR VALUE PER SHARE WERE OUTSTANDING AS OF JANUARY 31, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WINDSOR CAPITAL CORP.
BALANCE SHEET
DECEMBER 31, 1997
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 2,361,854
Receivables 5,585
Merchandise inventories 743,920
Prepaid expenses and other current assets 51,229
-----------
Total current assets 3,162,588
Property and equipment 513,294
Other assets:
Deposits 1,160
Other 6,418
-----------
$ 3,683,460
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 550,040
Accrued salaries, bonuses and employee benefits 59,122
Other accrued expenses 141,002
-----------
Total current liabilities 750,164
-----------
Stockholders' equity:
Preferred stock, $0.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding --
Common stock, $0.001 par value; 20,000,000 shares
authorized; 7,745,000 shares issued and outstanding 7,745
Additional paid in capital 3,626,444
Stock subscription receivable (1,400)
Accumulated deficit (699,493)
-----------
Total stockholders' equity 2,933,296
-----------
$ 3,683,460
===========
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
WINDSOR CAPITAL CORP.
STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
---------------------------
Sales $ 1,157,174 $ 348,062
Costs of goods sold 603,648 161,414
----------- -----------
Gross profit 553,526 186,648
Selling, general and administrative expenses 563,873 234,735
----------- -----------
Net loss $ (10,347) $ (48,087)
=========== ===========
Loss per common share $ (.002) $ (.015)
=========== ===========
Weighted average number of common
shares outstanding 5,025,435 3,226,087
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
WINDSOR CAPITAL CORP.
STATEMENT OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (10,347) $ (48,087)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 22,925 7,697
Change in assets and liabilities:
Receivables (5,315) (26,303)
Merchandise inventories (369,254) (179,471)
Prepaid expenses and other current
liabilities (51,229) (14,824)
Deposits (1,160) (8,833)
Other assets (4,321) (3,373)
Accounts payable 246,296 153,306
Accrued salaries, bonuses and employee
benefits 56,769 28,834
Other accrued expenses 84,122 32,034
----------- -----------
Net cash used in operating activities (31,514) (59,020)
----------- -----------
Cash flows from investing activities:
Capital expenditures (103,802) (225,242)
----------- -----------
Net cash used in investing activities (103,802) (225,242)
----------- -----------
Cash flows from financing activities:
Borrowings from stockholders -- 30,000
Repayment of borrowing from stockholders (50,000) --
Proceeds from the sale of common stock, net 2,056,172 650,000
Cash acquired in capital transaction, net of
cash paid 486,517 --
----------- -----------
Net cash provided by financing activities 2,492,689 680,000
----------- -----------
Net increase in cash and cash equivalents 2,357,373 395,738
Cash and cash equivalents at beginning of period 4,481 35,692
----------- -----------
Cash and cash equivalents at end of period $ 2,361,854 $ 431,430
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Basis of Presentation
On December 31, 1997, Woodfield Enterprises, Inc., a Florida corporation
("Woodfield"), merged with and into Windsor Capital Corp. (the "Registrant").
Pursuant to the merger, 6,700,000 shares of the Registrant's common stock, par
value $0.001 per share, were issued to the former shareholders of Woodfield in a
private transaction pursuant to Section 4(2) of the Securities Act of 1933, as
amended. Prior to the merger, the Registrant had 5,525,000 shares of common
stock outstanding and effectuated a recapitalization, which included a sale by
the Registrant's majority shareholder, International Asset Management Group,
Inc. ("IAMG") to Woodfield of 4,480,000 shares and 5,000,000 warrants, which
were canceled by Woodfield in accordance with the terms and conditions of the
Agreement and Plan of Merger, among the Registrant, IAMG and Woodfield dated
December 18, 1997 (the "Merger Agreement"). Upon completion of the merger, the
Registrant had 7,745,000 shares of common stock outstanding, of which 6,700,000
were held by the former Woodfield shareholders.
On December 31, 1997, resignations were tendered by the executive officers
and all but one of the directors (Mr. Hershel Krasnow) of the Registrant, and
designees of Woodfield were elected to the Board of Directors and as executive
officers of the Registrant in accordance with the terms and conditions of the
Merger Agreement.
The series of transactions described above resulted in the Woodfield
shareholders controlling the Registrant's Board of Directors and having
approximately 87% ownership of the Registrant. Accordingly, the merger has been
accounted for as a capital transaction, which is equivalent to the issuance of
stock by Woodfield for the Registrant's net monetary assets of approximately
$486,000, after the recapitalization. In addition, the historical results of
Woodfield became the operating results of the Registrant.
The interim financial information included herein is unaudited. In the
opinion of management, such unaudited information reflects all adjustments,
consisting only of normal recurring accruals and other adjustments as disclosed
herein, necessary for a fair presentation of the unaudited information.
Results of interim periods are not necessarily indicative of results
expected for the full year.
4
<PAGE>
2. Summary of Significant Accounting Policies
REVENUE RECOGNITION
Revenue from sales of products is generally recognized upon delivery
to customers. The Registrant has established programs which, under certain
conditions, enable customers to return products. The Registrant establishes
liabilities for estimated returns and allowances at the time of delivery to
customers.
MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost or market.
Cost is determined using the average cost method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation on property
and equipment is provided on the straight-line method over the estimated useful
lives of the assets. Maintenance and repairs are charged to expense as incurred;
improvements and betterments are capitalized. Upon the retirement or sale of
property and equipment, the accounts are relieved of the cost and accumulated
depreciation, and any resulting gains or losses are recognized.
INCOME TAXES
The Registrant provides for income taxes pursuant to the provisions
of SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes are
determined based upon differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Deferred
tax assets are also established for future tax benefits of loss and credit
carryforwards. Valuation allowances are established for deferred tax assets when
it is more likely than not that such amounts will not be realized.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Registrant is a mall-based specialty retailer of hand-rolled premium
cigars, cigar-related items and upscale "gentlemen's accessories" which
commenced operations in November 1996. The Registrant operates in regional
malls, primarily in the Midwest and Northeast United States. The goal of the
Registrant is to become the dominant mall-based retailer of premium cigars and
accessories in the United States through the opening and/or acquisition and
operation of free-standing kiosks and in-line stores located in regional malls
throughout the country.
This report contains "forward-looking" statements within the meaning of the
federal securities laws. These forward-looking statements include, among others,
statements relating to the Registrant's growth strategy, which is based upon the
Registrant's interpretation and analysis of cigar industry trends and
management's ability to successfully develop and implement its expansion plan
and market and sell its products to retail consumers. This strategy assumes,
among other things, that (i) strong demand for premium cigars and accessories
will continue and the Registrant will be able to substantially increase its
market share for at least three years, (ii) the Registrant will be able to
substantially increase the number of its retail outlets in Class A and AA malls
by the end of 1998, and (iii) the Registrant will be able to successfully
diversify its merchandising mix away from solely tobacco-related products. Many
known and unknown risks, uncertainties and other factors, including general
economic conditions, government regulations and taxation relating to the tobacco
industry, and risk factors detailed from time to time in the Registrant's
Securities and Exchange Commission filings, may cause these forward-looking
statements to be incorrect, and may cause actual results to be materially
different from any future results expressed or implied by these assumptions,
opinions and beliefs. The Registrant expressly disclaims any intent or
obligation to update any forward looking statements.
RESULTS OF OPERATIONS
For the three months ended December 31, 1997 and 1996, the Registrant
reported net losses of $10,347 and $48,087, respectively. Revenue for the three
months ended December 31, 1997 and 1996 amounted to $1,157,174 and $348,062,
respectively. Gross profit for the three months ended December 31, 1997 and 1996
amounted to $553,526 (47.8% of sales) and $186,648 (53.6% of sales),
respectively. These increases are mainly due to the fact that the Registrant
commenced operations in November 1996 and had 6 kiosks opened by December 31,
1996, whereas the Registrant expanded operations during 1997 and had 10 kiosks
opened by September 30, 1997, and 14 kiosks opened by December 31, 1997;
however, the Registrant also experienced an increase in same store sales. The
Registrant's four kiosks which were open as of December 1, 1996, registered
sales of $210,028 during December 1996 and $226,666 during December 1997, an
increase of 8%.
6
<PAGE>
Total selling, general and administrative expenses ("SG&A"), increased
from $234,735 for the three months ended December 31, 1996 to $563,873 for the
three months ended December 31, 1997, a 140% increase. This increase was also
due mainly to the expansion discussed above; however, also as a result of the
expansion, SG&A expenses decreased as a percentage of sales from 67.4% in the
1996 quarter to 48.7% in the 1997 quarter.
The Registrant anticipates that revenue, as well as operating costs, will
continue to increase during 1998 as a result of its expansion plans, including
the recent merger with Boynton Tobacconists, Inc., discussed below.
During the November-December holiday season, the Registrant generates
sales at a rate substantially higher than during the first 10 months of the
calendar year. During the three months ended December 31, 1997, the Registrant
generated sales of $1,157,174, which represented approximately 53% of its
calendar year 1997 sales.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Registrant's working capital increased from a deficiency of $33,560 at
September 30, 1997 to positive working capital of $2,412,424 at December 31,
1997. This increase was mainly due to the issuance of 2,150,000 shares of the
Registrant's common stock at a price of $1.00 per share, including 2,100,000
shares issued pursuant to a private placement, along with the $486,000 working
capital resulting from the December 31, 1997, merger of Woodfield Enterprises,
Inc. and Windsor Capital Corp. In January 1998, the Registrant utilized
$1,468,821 of its working capital to repay certain obligations assumed in
connection with its merger with Boynton Tobacconists, Inc., a privately-held
Florida corporation; however, this was partially offset by $1,084,313 in working
capital provided by the acquired company and $152,750 received upon the exercise
of 305,500 of the Registrant's Class A Warrants.
During the three months ended December 31, 1997 and 1996, the Registrant
incurred capital expenditures of $103,802 and $225,242, respectively, which
arose principally from the costs of opening kiosks. The Registrant commenced
operations in November 1996, when four kiosks were opened. Two more kiosks were
opened in December 1996. In both November and December 1997, the Registrant
opened two additional kiosks.
In order to fully implement its expansion plans, the Registrant believes it
will need to promptly achieve substantial positive cash flow from operations or
obtain substantial additional debt or equity financing. If such cash flow from
operations does not materialize or if such financing is not available on
acceptable terms, the Registrant will have to cut back on its expansion plans
accordingly.
The Registrant believes that, in any event, it must expand significantly in
order to achieve profitability. Thus, the Registrant believes that its ultimate
viability will depend on the success of its expansion plan. There can be no
assurance that the Registrant will be able to obtain the substantial funds
needed for expansion from internal or external sources, and there can be no
assurance that demand for the Registrant's products will be sufficient for such
expansion.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 22, 1997, seven of the Registrant's shareholders, owning an
aggregate of 5,071,150 of the Registrant's 5,525,000 then outstanding shares of
common stock, approved by written consent in accordance with Delaware law the
merger of Woodfield Enterprises, Inc., into the Registrant.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
27. Financial Data Schedule for the quarterly period ended
December 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WINDSOR CAPITAL CORP.
(Registrant)
Date: February 17, 1998 /s/ GARY N. MANSFIELD
-------------------------
Gary N. Mansfield
Chief Executive Officer
Date: February 17, 1998 /s/ KARL E. DUELL
-------------------------
Karl E. Duell
Chief Financial Officer
8
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data schedule for the quarterly period ended December 31,
1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-QSB FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,361,854
<SECURITIES> 0
<RECEIVABLES> 5,585
<ALLOWANCES> 0
<INVENTORY> 743,920
<CURRENT-ASSETS> 3,162,588
<PP&E> 589,500
<DEPRECIATION> (76,206)
<TOTAL-ASSETS> 3,683,460
<CURRENT-LIABILITIES> 750,164
<BONDS> 0
0
0
<COMMON> 7,745
<OTHER-SE> 2,925,551
<TOTAL-LIABILITY-AND-EQUITY> 3,683,460
<SALES> 1,157,174
<TOTAL-REVENUES> 1,157,174
<CGS> 603,648
<TOTAL-COSTS> 603,648
<OTHER-EXPENSES> 563,873
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,347)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,347)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,347)
<EPS-PRIMARY> (0.002)
<EPS-DILUTED> (0.002)
</TABLE>
