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, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
----------------- -----------------
Commission File Number 0-20922
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WHITEHALL ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 75-2274730
- --------------------------------------------------------------------------------
(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
801 Brickell Avenue, 9th Floor, Miami, Florida 33131
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(904) 409-0200
------------------
(Issuer's telephone number)
TOTAL WORLD TELECOMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Former name, former address and former 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 Exchange Act during the past 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 in the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 124,900,000 shares as of
June 30, 1999.
1
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
INDEX
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (unaudited)
Balance Sheets -- June 30, 1999 and September 30, 1998
Statements of Operations -- Nine Months and Three Months
Ended June 30, 1999 and 1998
Statements of Cash Flows -- Nine Months Ended June 30, 1999 and 1998
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Financial Statements, Pro Forma Financial Information and Exhibits
2
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY TOTAL WORLD TELECOMMUNICATIONS, INC.
Consilidated Balance Sheet - Unaudited
June 30, 1999 and September 30, 1998
ASSETS
<TABLE>
<CAPTION>
Unaudited
September 30,
June 30, 1999 1998
------------- ---------------
<S> <C> <C>
Current Assets
Cash $ 4,272 $ 22,695
Accounts receivable 488,994 --
Interest receivable 93,168 --
Inventories 465,644 --
Prepaid Expenses 88,165 --
----------- -----------
Total Current Assets 1,140,243 22,695
----------- -----------
Loans Receivable 1,133,132 --
----------- -----------
Deferred Financing Costs 77,561
----------- -----------
Property and Equipment 2,563,289 53,620
Less Accumulated Depreciation (2,028,878) (46,928)
----------- -----------
Property and Equipment - Net 534,411 6,692
----------- -----------
Investments in subsidiary -- --
Other Assets
Deposits 500 500
----------- -----------
TOTAL ASSETS $ 2,885,847 $ 29,887
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities
Checks issued in excess of cash balance -- --
Current portion of long term debt 199,242 --
Notes payable - bank 393,965 --
Accounts payable 736,048 --
----------- -----------
Total Current Liabilities 1,329,255 --
----------- -----------
Long Term Debt 689,540 --
----------- -----------
Total Liabilities 2,018,795 --
----------- -----------
Shareholders' Equity
Preferred stock, $.001 par value,
4,000,000 million shares authorized, issued
and outstanding at December 31, 1998 4,000 --
Common Stock, $.0001 par value,
200,000,000 shares authorized, 124,900,000
shares issued and outstanding 12,493 12,493
Additional Paid In Capital 735,302 17,394
Retained earnings 115,257 --
----------- -----------
Total Stockholders' Equity 867,052 29,887
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 2,885,847 $ 29,887
=========== ===========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY TOTAL WORLD TELECOMMUNICATIONS, INC.
Consolidated Statement of Operations - Unaudited
For the Nine Months and Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
For the Nine For the Quarter For the Nine For the Quarter
Months Ended Ended June 30, Months Ended Ended June 30,
June 30, 1999 1999 June 30, 1998 1998
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from Operations
Sales $ 3,005,959 1,186,703 $ 18,592 $ 12,056
Cost of Sales 2,269,783 887,632 -- --
------------- ------------- ------------- -------------
Gross Profit 736,176 299,071 18,592 12,056
Consulting fees 53,566 53,566 -- --
------------- ------------- ------------- -------------
Total operating revenues 789,742 352,637 18,592 12,056
------------- ------------- ------------- -------------
Operating Expenses
Sales, General and Administration 645,317 265,765 179,606 32,291
Depreciation 78,628 33,697 7,020 2,340
------------- ------------- ------------- -------------
Total Operating Expenses 723,945 299,462 186,626 34,631
------------- ------------- ------------- -------------
Income (loss) from operations 65,797 53,175 (168,034) (22,575)
------------- ------------- ------------- -------------
Other Income - Interest 93,168 44,849 6,496 --
------------- ------------- ------------- -------------
Other Expenses
Interest expense 93,168 44,849 -- --
Bankruptcy fees and expenses -- -- 16,153 14,904
------------- ------------- ------------- -------------
Total Other Expenses 93,168 44,849 16,153 14,904
------------- ------------- ------------- -------------
Net Income (Loss) $ 65,797 $ 53,175 ($ 177,691) ($ 37,479)
============= ============= ============= =============
Net Income (Loss) Per Common Share $ 0.00 $ 0.00 -- --
============= ============= ============= =============
Number of Shares Used in Computation 124,900,000 124,900,000 114,888,800 114,888,800
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
WHITEHALL ENTERPRISES, INC.
TOTAL WORLD TELECOMMUNICATIONS, INC.
Consolidated Statement of Cash Flows - Unaudited
For the Nine Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows form operating activities:
Net income (loss) $ 65,797 $(177,691)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 78,628 7,020
Change in assets and liabilities net of effects from purchase of MBM: -- --
Decrease in accounts receivable 59,923 --
(Increase) in interest receivable (93,168) --
(Increase) in inventory 97,618 --
(Increase) in prepaid expenses -- --
(Increase) in loans receivable (20,200) --
(Increase) decrease in other assests (34,358) 3,900
Increase (decrease) in accounts payable (200,215) 89,354
--------- ---------
Total adjustments (111,772) 100,274
--------- ---------
Net cash provided by (used in) operating activities (45,975) (77,417)
--------- ---------
Cash flows from investing activities:
Acquisition of equipment (48,611) --
--------- ---------
Cash flows from financing activities:
Net Borrowings 76,163 --
Proceeds from sale of property -- 50,000
Advances for bankruptcy proceedings -- 60,000
Payments of mortgage loans -- (60,292)
--------- ---------
Net cash provided by (used in) financing activities 76,163 49,708
--------- ---------
Net (decrease) in cash and cash equivalents (18,423) (27,709)
Cash received in acquisition of MBM -- --
Cash and cash equivalents - beginning of year 22,695 44,559
--------- ---------
Cash and cash equivalents - end of period $ 4,272 $ 16,850
========= =========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
(1) GENERAL:
The interim June 30, 1999 unaudited consolidated financial statements,
in the opinion of management, include all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation of financial
position as of such date and earnings and cash flows for the periods then ended.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted and the Statements of Operations for nine and
three months ended June 30, 1998 have been reclassified for comparative
purposes. It is recommended that these interim financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
1998.
The consolidated financial statements of the Company include those
accounts of Whitehall Enterprises, Inc. and Mega Blow Plastics Limited, a
Canadian plastics company. All significant intercompany transactions and
balances have been eliminated in the consolidation. The acquisition of Mega Blow
Plastics Limited was effective December 1, 1998. Results of consolidated
operations and cash flows include the transactions of Whitehall Enterprises,
Inc. for the nine and three month period and Mega Blow Plastics Limited for the
three and seven month period ended June 30, 1999.
The preparation of 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Operating results for the nine and three-month period ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the year ended September 30, 1999.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instrument purchased with an
original maturity of three months or less to be cash equivalents.
6
<PAGE>
Income Taxes
- ------------
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 109 Accounting for Income Taxes, requires
companies to use the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the consolidated
financial statement carrying amounts and the tax basis of existing assets and
liabilities. Pursuant to SFAS No. 109, the effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes the enactment
date. Under the deferred method, deferred taxes were recognized using the tax
rate applicable to the year of the calculation and were not adjusted for
subsequent changes in tax rates. The Company adopted SFAS No. 109 in 1993.
Concentration of Credit Risk
- ----------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily cash and accounts receivable. The Company extends
credit based on an evaluation of the customer's financial condition, generally
(except for mortgages receivable) without requiring collateral.
Exposure to losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses. In addition, at June 30, 1999, the
Company had deposits with financial institutions, which were insured for up to
$100,000 by the U.S. Federal Deposit Insurance Corporation. The Company believes
it is not exposed to any significant credit risk on cash and cash equivalents.
(2) AMENDED PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE UNITED STATES
--------------------------------------------------------------------
BANKRUPTCY COURT:
-----------------
The Company filed with the United States Bankruptcy Court for the
Southern District of Florida (the "Bankruptcy Court") its Amended Plan of
Reorganization dated July 2, 1998, under Chapter 11 of the United States
Bankruptcy Code.
The Plan has been approved by the Company's Board of Directors. In
addition, Advantage Fund Limited, formerly known as GFL Advantage Fund Limited
("Advantage"), which the Company believes held in excess of 90% of the unsecured
claims against the Company, consented to the Plan as part of a settlement
between the Company and Advantage which has been approved by the Bankruptcy
Court.
7
<PAGE>
The Company's efforts resulted in (a) the Advantage Settlement
Agreement, which has been approved by the Bankruptcy Court, pursuant to which
Advantage has agreed to support the Plan, and (b) an agreement for the Company
to acquire all of the stock of MBM, pursuant to which MBM became a wholly-owned
operating subsidiary of the Company. On August 28, 1998, the Plan was ultimately
confirmed by the Bankruptcy Court.
(3) AGREEMENT FOR THE PURCHASE OF MBM
---------------------------------
On December 1, 1998, under conditions and terms prescribed to and
approved by the Bankruptcy Court in the Company's Chapter XI Reorganization, the
Company entered into an agreement with 129 Ontario for the purchase of 100% of
the issued and outstanding stock of MBM. As a result thereof MBM became a wholly
owned subsidiary of the Company. The following table summarizes the more
significant terms of the agreement:
o The Company issued 4 million preferred shares in the Company's capital
stock.
o 129 Ontario represented that MBM was not a party to or bound by any
agreement of guarantee, indemnification, surety, or similar
commitments of the obligations, liabilities (contingent or otherwise)
or indebtedness of any other person, corporation or partnership,
except for trade accounts payable incurred in the normal course of
operations. Consequently, the Company is accruing interest income in
an amount equal to MBM's interest expense.
o Whitehall Enterprises, Inc. acknowledged that all assets owned by MBM
are subject to a security issued by MBM to the Royal Bank of Canada as
collateral for bank notes aggregating approximately $1.2 million.
o 129 Ontario has executed all necessary documents holding the Company
harmless of any liability pursuant to the stock purchase agreement and
in accordance with the Reorganization Plan approved by the Bankruptcy
Court.
As of June 30, 1999, and through the date of this report, the
transactions and events relative to the purchase of MBM were managed in the form
prescribed and approved by the Bankruptcy Court in the Plan. Proceeds from the
collection of loans receivable is expected by the end of the current fiscal
year.
(4) EARNINGS PER SHARE
------------------
The Company has adopted SFAS No. 128 "Earnings per Share" which requires
the presentation of both basic and diluted earnings per share. Basic net income
per share is computed based on the weighted average number of common shares
outstanding during the period.
8
<PAGE>
(5) FINANCIAL CONDITION:
--------------------
Since inception, the Company had incurred substantial losses and, as of
September 30, 1998, before effecting changes from the Chapter XI Reorganization,
had an accumulated deficit of $80,013,953 and a working capital deficiency of
over $26 million. During 1997-98 the Company went through a Chapter XI
Reorganization. A significant amount of the Company's officers' and directors'
time has been spent in various financing activities including, but not limited
to raising private placement funds and seeking new acquisitions as well as
carrying out the Plan of Reorganization.
The Company purchased Mega Blow Plastics Limited effective December 1,
1998, which the Company anticipates will increase profitability. Management
believes that the acquisition, along with other future acquisitions and other
activities, coupled with cost cutting and revenue raising programs, should
result in significant improvement in the future.
There can be no assurance that the newly acquired entity will be
profitable, the cost cutting and revenue raising programs will be effective, all
of which are necessary to meet the Company's obligations over the next year
(6) EQUITY TRANSACTIONS
-------------------
Quasi-Reorganization
--------------------
The Company's Board of Directors approved a Quasi-Reorganizaion
effective September 30, 1998, whereby the accumulated deficit has been offset
against additional paid in capital. The resulting retained earnings at September
30, 1998 is zero. Profit or loss shall be measured and included in retained
earnings from October 1, 1998 forward.
A summary of the stock is as follows:
Common Stock - Authorized 200,000,000 shares of common stock , $.0001
par value per share. Issued and outstanding 124,927,647 shares of common stock.
Preferred Stock - Authorized 4,000,000 shares of preferred stock at
$.001 par value per share. All issued or outstanding.
(7) LEGAL PROCEEDINGS:
------------------
All legal proceedings were eliminated upon the certification of the
Plan of Reorganization by the Bankruptcy Court. (See Note (2).
9
<PAGE>
(8) INVENTORIES
-----------
Raw materials are valued at the lower of cost and net realizable value with cost
being determined substantially on a first-in, first-out basis.
Finished goods are valued at the lower of cost and net realizable value
with cost being determined by the retail method.
At June 30, 1999 inventories consisted of
Raw materials $117,319
Packaging and skids 26,576
Finished goods 321,749
--------
$465,644
========
There were no inventories on hand at September 30, 1998.
(9) PROPERTY AND EQUIPMENT
----------------------
At June 30, 1999 property and equipment are stated at cost less
accumulated amortization. Amortization is provided over the estimated useful
lives of the assets on the following basis:
Leasehold improvements straight line over term of lease
Machinery and equipment 20% of diminishing balance
Office equipment 20% of diminishing balance
Accumulated
Cost Amortization Net
---- ------------ ---
Leasehold improvements $ 3,841 $ 2,137 $ 1,704
Machinery and equipment 2,418,002 1,920,918 497,084
Office furniture and 141,446 105,823 35,623
equipment ---------- ---------- ---------
$2,563,289 $2,028,878 $ 534,411
========== ========== =========
(10) BANK INDEBTEDNESS
-----------------
The bank indebtedness includes an operating loan, due on demand, of
$398,484. The bank indebtedness is secured by a registered general assignment of
book debts and a general security agreement.
10
<PAGE>
(11) LONG-TERM DEBT
The term loans, payable to the Royal Bank, are secured by a registered
security agreement having a first charge over all assets other than real
property. The term loans bear interest at rates varying from 6.47% to bank prime
plus 1.75%.
Bank Term Loans $423,884
Note Payable 265,656
--------
$689,540
========
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND SECTION 21F OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SPECIFICALLY, ALL STATEMENTS OTHER
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT REGARDING THE
COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND PLANS AND OBJECTIVES OF
MANAGEMENT OF THE COMPANY FOR FUTURE OPERATIONS ARE FORWARD-LOOKING STATEMENTS.
THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF THE COMPANY'S
MANAGEMENT, AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE
TO THE COMPANY'S MANAGEMENT. WHEN USED IN THIS REPORT, THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE," "EXPECT" AND "INTEND" AND WORDS OR PHRASES OF SIMILAR
IMPORT AS THEY RELATE TO THE COMPANY OR COMPANY'S MANAGEMENT, ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT VIEW OF
THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS RELATED TO CERTAIN FACTORS INCLUDING, WITHOUT
LIMITATIONS, COMPETITIVE FACTORS, GENERAL ECONOMIC CONDITIONS, CUSTOMER
RELATIONS, RELATIONSHIPS WITH VENDORS, THE INTEREST RATE ENVIRONMENT, COST OF
CAPITAL, GOVERNMENTAL REGULATION AND SUPERVISION, CHANGES IN INDUSTRY PRACTICES,
DISRUPTIONS ASSOCIATED WITH EXPANSION, ONE-TIME EVENTS AND OTHER FACTORS
DESCRIBED HEREIN. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE
CORRECT. BASED UPON CHANGING CONDITIONS, SHOULD ANY ONE OR MORE OF THESE RISKS
OR UNCERTAINTIES MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS
ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR INTENDED. ALL SUBSEQUENT WRITTEN
AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS
ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE APPLICABLE
CAUTIONARY STATEMENTS.
RESULTS OF OPERATIONS
- ---------------------
During the quarter ended June 30, 1999, the Company focused its
resources in the effort to successfully carry out the objectives approved by the
Bankruptcy Court in the Company's Chapter XI Bankruptcy Reorganization Plan. The
most important goal was to overview the operations of MBM.
The Company's plan for growth included the acquisition of MBM. The
Board of Directors is currently studying several other acquisitions and
specifically, negotiating with the principals of two acquisition candidates. To
achieve this growth and the necessary working capital, the Company will require
additional funding. The Company has received preliminary commitments from
investors to arrange future funding for
12
<PAGE>
acquisitions. The imminent collection of loans receivable as part of the MBM
Stock Purchase Agreement approved by the Bankruptcy Court will provide cash to
expand MBM sales and capital for the further investigation of other
acquisitions. While the Company has reason to expect the completion of these
arrangements in the near future, no assurances can be given that such funds will
be available.
Description of Stock Purchase Agreement
---------------------------------------
On June 19, 1998, following extensive negotiations, the Company entered
into the Stock Purchase Agreement with 129 Ontario who agreed to sell, and the
Company, after the approval of the Bankruptcy Court, agreed to purchase,
effective as of December 1, 1998, 100% of the issued and outstanding stock of
MBM. As a result thereof, MBM became a wholly-owned subsidiary of the Company.
Prior to and during the Reorganization Case, management of the Company actively
searched for an operating business to bring into the Company following the
August 28, 1998 Court approved Plan. Management determined, in the exercise of
its business judgment, that MBM was the best operating business available at the
time. In this regard, the Company required 129 Ontario to obtain an independent
valuation of MBM. In addition, the Company conducted due diligence as to MBM and
its business operations. The Company agreed in the Stock Purchase Agreement, in
consideration for the sale of the MBM stock, that, subject to the terms and
conditions of the Stock Purchase Agreement, including the Confirmation of the
Plan, it would (a) cause the Reorganized Company to issue to 1274328 Ontario,
Inc. the Proponent of the Chapter XI reorganization plan, at the Closing
4,000,000 shares of the Comany's Preferred Stock. Note 3 summarizes the material
terms of the Stock Purchase Agreement.
General Information Regarding the Proponent and 129 Ontario
-----------------------------------------------------------
The Proponent, 1274328 Ontario Inc., is an Ontario corporation which
was formed on December 31, 1997. The Proponent's business address is 3101
Bathurst Street, Suite 600, Toronto Ontario M6A2A6. The Proponent is a holding
company which has an investment in MBM and holds passive investments in other
enterprises. Because it was formed on December 31, 1997, the Proponent has no
financial history. The sole shareholder of the Proponent was the Gerendasi
Group. 129 Ontario, which controled the issued and outstanding stock of MBM, was
a wholly-owned subsidiary of the Proponent. The Company has been advised by the
Proponent that neither the Proponent, 129 Ontario or MBM have had or have any
affiliation with the Company, except that the Gerendasi Group formerly owned a
small percentage of the Company's common stock which was sold in 1996.
13
<PAGE>
General Information Regarding MBM
---------------------------------
Overview. Since its formation in 1984, MBM has operated as a
specialized custom molder or manufacturer of plastic bottles and containers for
use in the pharmaceutical, health and beauty, household cleaner and food product
industries. During fiscal 1998, MBM's revenues are generated in the United
States. MBM also has a strong market presence in the Province of Ontario,
Canada, which is the main manufacturing center in Canada. Plastic is a
disposable material which is in high demand in today's environmentally friendly
and industrialized world. Management of MBM believes that demand will continue
to grow significantly well into the next century. With an estimated market in
North America of over $15 billion for plastic products, management of MBM
believes that MBM is well positioned for growth.
Customers. MBM concentrates on manufacturing products for customers who
are the end user of the products and orders placed by manufacturer agents. MBM
has fostered relationships with many major North American corporations,
including Johnson & Johnson, G.K. Packaging, Fenton Webber, Novo Pharm, Jones
Packaging and the Canadian shampoo division of L'Oreal. Management of MBM
believes that MBM has an excellent reputation for quality and customer services
and prides itself on its ability to consistently maintain a zero percent defect
rate. This has resulted in long-standing customer relationships, many in excess
of 10 years.
Facilities/Equipment. MBM operates from a leased, 46,000 square foot
manufacturing facility in metropolitan Toronto, Canada. MBM operates nine Bekum
blowing machines. The Bekum machine is considered by industry experts to be the
best currently available and gives MBM a state-of-the-art manufacturing
capacity. The Bekum machine can be operated almost indefinitely when properly
maintained and updated. All machines are computerized and controlled by special
tracking devices which monitor all aspects of machine productivity. Further,
MBM's computerized systems give the manufacturing process numerous diagnostic
features which maximize productivity and quality control. All manufacturing
machines are constantly serviced and maintained to the highest degree possible
by a specially trained maintenance staff as will as by 24 hour on-call
maintenance professionals. MBM seeks to maximize productivity and utilization of
fixed overhead cost by operating the plant 24 hours a day with four shifts.
Personnel. MBM employs regular employees including production,
management, foremen and office staff. MBM's management is experienced in every
facet of operations including machine operation, machine repairs and
maintenance, completing setups, mold maintenance, purchasing, distributing and
marketing. A majority of MBM's staff has been with MBM since its inception and
has grown and been promoted over time. MBM's management has remained in place
following the acquisition.
14
<PAGE>
Materials. MBM's major raw usage consists of the following resins: Pet
G., H.D.P.E. (High Density Polyethylene) and L.D.P.E. (Low Density
Polyethylene). Management of MBM is not aware of any environmental concerns in
respect of MBM, its manufacturing facilities or its products. MBM presently uses
six major suppliers of the above resins. MBM has been dealing with each of its
major suppliers for over ten years. In the event that its existing sources of
supplies are insufficient to meet its existing needs, management of MBM believes
that alternative supplies would be available at competitive prices from one of
its other major suppliers or from outside alternative suppliers not currently
engaged by MBM.
Valuation of MBM. In connection with the transactions contemplated by
the Stock Purchase Agreement, 1274328 Ontario, Inc., engaged an independent
accountant to value the shares of MBM to be acquired by the Company. The
valuation report was conducted as of February 1, 1998 and provided a value
ranging from $9.7 to $11 million for MBM. The financial information included in
the valuation report is in Canadian dollar values. As of February 1, 1998, the
Canadian dollar had a value of $.69 in United States dollars. As of December 31,
1998, the Canadian dollar had a value of slightly in excess of $.68 in United
States dollars.
Activities for the entire year ended September 30, 1998 were related to carrying
out the Plan of Reorganization under Chapter XI. Consequently, revenues were of
a non operating and passive nature and expenses incurred were significantly for
attorneys fees and bankruptcy costs.
The Company's operations consists almost entirely of the operations of MBM.
Revenues consist sales of finished inventory to customers. Cost of inventory
sold includes the purchased cost of raw materials, direct labor, packaging and
direct factory overhead.
Revenues from sales for the quarter ended June 30, 1999, were $1,186,703
representing a steady monthly performance since the acquisition of MBM.
Corresponding cost of sales for the quarter were $887,632, representing a gross
margin of 25.2%. This percentage is comparable to 26.75% gross margin for the
quarter of March, 1999 and 24.64% for the 10 months ended November 30, 1998.
General and administrative expenses were $265,765 or 22.4% of sales for the
quarter compared to $645,317 or 21.5% of sales for the year to date period ended
on June 30, 1999.
Improvements in results of operations is due from management's emphasis in
attaining greater profitability through cost cutting measures in the
subsidiary's operating methods.
15
<PAGE>
Interest expense incurred in MBM was paid on loans due to the Royal Bank of
Canada during the period ended in June 30, 1999.
The Company's consolidated net income for the quarter amounted to $53,175
compared to a consolidated net loss of $(37,479) for the quarter ended June 30,
1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company filed with the Bankruptcy Court its Amended Plan of Reorganization
dated July 2, 1998. The Plan was approved by the Company's Board of Directors.
In addition, Advantage Fund Ltd. consented to the Plan as part of a settlement
between the Company and Advantage which had been approved by the Bankruptcy
Court. In summary, the Plan was based upon (a) a transfer of all Unsecured
Claims and assets of the Company (excluding certain tax attributes and a portion
of the Condominium Parcel Net Proceeds) to a liquidating trust of which Holders
of Allowed Unsecured Claims will be the primary beneficiaries and Holders of
Allowed Subordinated Claims will be secondary beneficiaries, (b) the purchase by
the Company of all of the issued and outstanding stock of MBM, from 129 Ontario,
in consideration for the issuance of approximately 76% voting control of the
Reorganized Company, (c) the cancellation of all Existing Preferred Stock and
Existing Common Stock of the Company, and (d) the issuance of common stock of
the Company after the Reorganization Plan to Holders of Existing Preferred Stock
and Existing Common Stock of the Company.
The Company's efforts resulted in (a) the approval by the Bankruptcy Court of
the Advantage Settlement Agreement, pursuant to which Advantage agreed to
support the Plan, and (b) an agreement for the Company to acquire all of the
stock of MBM. The Plan was ultimately confirmed by the Bankruptcy Court on
August 28, 1998.
On December 1, 1998, under conditions and terms prescribed to and approved by
the Bankruptcy Court in the Company's Chapter XI Reorganization, the Company
entered into an agreement with 129 Ontario for the purchase of 100% of the
issued and outstanding stock of MBM. As a result thereof MBM became a wholly
owned subsidiary of the Company.
On June 30, 1999 the Company had deposits of $4,272. Liquidity needs are
required to defray operating costs and professional fees necessary to continue
supporting the plans for acquisitions and corporate financial restructuring. For
the quarter ended June 30, 1999 the Company earned consulting fees of $53,566.
These funds were utilized to meet operating expenses. MBM presented a negative
bank balance approximating $21,000 that was reclassified in accounts payable and
accrued expenses in the balance sheet. As of June 30, 1999, and through the date
of this report, the transactions and events relative to the purchase of MBM were
managed
16
<PAGE>
in the form prescribed and approved by the Bankruptcy Court in the Plan.
Proceeds from the collection of loans receivable is expected by the end of the
current fiscal year. The Company believes that the collection of these loans
will provide the funding necessary to complete its financial programs and
achieve its strategic plans. The collection of these loans will also provide the
Company with a quick ratio of 1.36 compared to 0.487 as of December 31, 1998.
The current ratio at June 30, 1999 was .86.
Pursuant to the agreement for the purchase of MBM, the Company has accrued
interest receivable from 129 Ontario in an amount equal to MBM's interest
expense of $44,849 and $93,168 for the quarter and nine month period ended June
30, 1999. Collection of this interest is expected by the end of the current
fiscal year.
In addition, the Company is currently negotiating with several alternative
financing sources in order to secure additional funding to support the
acquisitions contemplated.
At June 30, 1999, MBM provided sufficient cash from operations to sustain its
operating cash flow needs. The Company expects for this trend to continue or
improve during the remainder of the fiscal year.
17
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
-----------------
For information concerning current litigation regarding the Company,
see Note 7 in the Notes to Financial Statements.
ITEM 5. OTHER INFORMATION
-----------------
On August 11, 1999 the Company's common stock was listed for inclusion
in the OTC Bulletin Board and continues to use the symbol "WTHL".
ITEM 6. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) See Exhibits 1 and 2 below.
(b) The Company filed Form 8-K reports dated February 10, 1999, May 10,
1999 and June 16, 1999.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Filing status
------ ---------------------- -------------
<S> <C> <C> <C>
1. (10.45) Stock Purchase Agreement for the purchase of all
issued and outstanding shares of MBM from 129
Ontario.
Filed with 10-KSB
2. (10.46) Audited financial statements of business acquired.
Audited financial statements of MBM as of and for the
period ended November 30, 1998.
Filed with 8-K
3. (10.47) Pro-forma combined financial data. Unaudited pro
forma combined balance sheet and statements of
operations of the Company and MBM.
Filed with 8-K
</TABLE>
18
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned as a duly authorized officer and as the chief financial officer of
the Registrant.
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
(Registrant)
Date: August 19, 1999 By:/s/ Luis Alvarez
--------------------------------
Luis Alvarez, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 4,272
<SECURITIES> 0
<RECEIVABLES> 1,715,294
<ALLOWANCES> 0
<INVENTORY> 465,644
<CURRENT-ASSETS> 1,140,243
<PP&E> 2,563,289
<DEPRECIATION> 2,028,878
<TOTAL-ASSETS> 2,885,847
<CURRENT-LIABILITIES> 1,329,255
<BONDS> 0
0
4,000
<COMMON> 12,493
<OTHER-SE> 850,559
<TOTAL-LIABILITY-AND-EQUITY> 2,885,847
<SALES> 3,005,959
<TOTAL-REVENUES> 3,152,693
<CGS> 2,269,783
<TOTAL-COSTS> 2,993,728
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,168
<INCOME-PRETAX> 65,797
<INCOME-TAX> 0
<INCOME-CONTINUING> 65,797
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,797
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
