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 December 31, 1998
-----------------
[ ] 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
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(Issuer's telephone number)
TOTAL WORLD TELECOMMUNICATIONS, INC.
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(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 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
December 31, 1998.
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
INDEX
PART I. FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements (unaudited)
Balance Sheets -- December 31, 1998 and September 30, 1998
Statements of Operations -- Three Months Ended December 31, 1998 and
1997
Statements of Cash Flows -- Three Months Ended December 31, 1998 and
1997
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
December 31, 1998 and September 30, 1998
<TABLE>
<CAPTION>
ASSETS
Unaudited
December 31, 1998 September 30, 1998
--------------------- ---------------------
<S> <C> <C>
Current Assets
Cash $4,249 $22,695
Accounts receivable 559,296 -
Inventories 504,483 -
Prepaid Expenses 36,876 -
--------------------- ---------------------
Total Current Assets 1,104,904 22,695
--------------------- ---------------------
Loans Receivable 2,303,882 -
--------------------- ---------------------
Property and Equipment 2,432,897 53,620
Less Accumulated Depreciation (1,951,522) (46,928)
--------------------- ---------------------
Property and Equipment - Net 481,375 6,692
--------------------- ---------------------
Other Assets
Deposits 500 500
--------------------- ---------------------
TOTAL ASSETS $3,890,661 $29,887
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities
Current portion of long term debt 177,035 -
Notes payable - bank 1,170,751 -
Accounts payable 842,838 -
--------------------- ---------------------
Total Current Liabilities 2,190,624 -
--------------------- ---------------------
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 1,184,304 17,394
Retained earnings 499,240 -
--------------------- ---------------------
Total Stockholders' Equity 1,700,037 29,887
--------------------- ---------------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,890,661 $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 Quarter Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------- ---------------------
<S> <C> <C>
Revenues from Operations
Sales $423,393 $1,898
Cost of Sales 330,866 -
--------------------- ---------------------
Gross Profit 92,527 1,898
Operating Expenses
Sales, General and Administration 89,329 105,431
Depreciation 11,232 2,340
--------------------- ---------------------
Total Operating Expenses 100,561 107,771
--------------------- ---------------------
Income (loss) from operations (8,034) (105,873)
--------------------- ---------------------
Other Expenses
Interest expense 5,581 -
--------------------- ---------------------
Net Loss ($13,615) ($105,873)
===================== =====================
Net Loss Per Common Share - -
===================== =====================
Number of Shares Used in Computation 124,900,000 114,888,800
===================== =====================
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
WHITEHALL ENTERPRISES, INC.
TOTAL WORLD TELECOMMUNICATIONS, INC.
Consolidated Statement of Cash Flows - Unaudited
For the Quarter Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------- ---------------------
<S> <C> <C>
Cash flows form operating activities:
Net Loss ($13,615) ($105,873)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 11,233 2,340
Change in assets and liabilities net of effects from purchase of MBM: -
Increase in accounts receivable - -
Increase in inventory - -
Increase in prepaid expenses - -
Increase in loans receivable - -
(Increase) decrease in other assets - 3,900
(Increase) decrease in accounts payable and accrued expenses (11,000) 89,354
--------------------- ---------------------
Total adjustments 233 95,594
--------------------- ---------------------
Net cash provided (used) by operating activities ($13,382) ($10,279)
--------------------- ---------------------
Cash flows from investing activities - -
Cash flows from financing activities:
Payments of notes payable and long-term debt (5,064) -
Payments of mortgage loans - (21,548)
--------------------- ---------------------
Net cash provided (used) by financing activities (5,064) (21,548)
--------------------- ---------------------
Net increase (decrease) in cash and cash equivalents (18,446) (31,827)
Cash received in acquisition of MBM - -
Cash and cash equivalents - beginning of year 22,695 44,559
--------------------- ---------------------
Cash and cash equivalents - end of period $4,249 $12,732
===================== =====================
</TABLE>
See Notes to Financial Statements
5
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(UNAUDITED)
December 31, 1998
(1) GENERAL:
-------
The interim December 31, 1998 unaudited 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 three months
ended December 31, 1997 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 three month period and Mega Blow Plastics Limited for the one month
period ended December 31, 1998.
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 three-month period ended December
31, 1998 are not necessarily indicative of the results that may be expected for
the year ended September 30, 1999.
6
<PAGE>
(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. The Company's Amended Disclosure Statement
dated July 2, 1998 (the "Disclosure Statement") and its Summary of Amended
Disclosure Statement (the "Summary Disclosure Statement") were submitted under
Chapter 11 of the United States Bankruptcy Code for Certain General Unsecured
Creditors and Holders of Existing Common Stock dated July 2, 1998 pursuant to
Section 1125 of the Bankruptcy Code 11 U.S.C. Section 101, et. seq. (the
"Bankruptcy Code") in connection with the solicitation of votes on the Plan from
Holders of Impaired Claims against and Impaired Equity Interests in the Company
and the hearing on Confirmation of the Plan that occurred on August 17, 1998.
At a hearing on June 19, 1998, this Disclosure Statement was approved
by the Bankruptcy Court in accordance with Section 1125(b) of the Bankruptcy
Code as containing information of a kind and in sufficient detail adequate to
enable a hypothetical reasonable investor typical of holders of Claims and
Equity Interests of the relevant Voting Classes to make an informed judgment
whether to accept or reject the Plan.
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.
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 Mega Blow Moulding
Limited, a Canadian plastics company ("MBM"), from 1299004 Ontario Corporation
("129 Ontario"), a wholly-owned subsidiary of 1274328 Ontario Inc. (the
"Proponent"), in consideration for the issuance to the Proponent of
approximately 76% voting control of the Reorganized Debtor, (c) the cancellation
of all Existing Preferred Stock and Existing Common Stock of the Debtor, and (d)
the issuance of common stock of the Reorganized Debtor to Holders of Existing
Preferred Stock and Existing Common Stock of the Debtor.
7
<PAGE>
The Company believed that its efforts to maximize the return for
Creditors and to find an investor and attract value for stockholders have been
full and complete. The Company further believed that the Plan was in the best
interest of all Creditors and Holders of Equity Interests, even though (a) it
did not appear that there are sufficient funds to pay Unsecured Creditors in
full and (b) the percentage of the outstanding equity to be retained by Holders
of Equity Interests following the confirmation of the Plan would be
substantially diluted. In the event of a liquidation of the Company's assets
under Chapter 7 of the Bankruptcy Code, the Company believed the distribution to
Unsecured Creditors would be substantially less than under the Plan. In
addition, absent concessions from holders of Unsecured Claims, there would be no
distribution to Holders of Equity Interests.
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 Debtor to
acquire all of the stock of MBM from a wholly-owned subsidiary of the Proponent,
pursuant to which MBM would become a wholly-owned operating subsidiary of the
Reorganized Debtor on and after August 28, 1998, the date that 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.
8
<PAGE>
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.
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 $1,762,000.
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 December 31, 1998 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) Net Loss per Common Share
-------------------------
Net loss per common share is calculated by dividing the weighted average
number of common shares outstanding during each period into the net loss
applicable to common shares.
(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.
9
<PAGE>
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. None issued or outstanding.
(7) LEGAL PROCEEDINGS:
------------------
All legal proceedings will be eliminated upon the certification of the
Plan of Reorganization by the Bankruptcy Court. (See Note (2).
10
<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, THE OPERATION OF THE COMPANY'S
NETWORKS, TRANSMISSION COSTS, TECHNOLOGICAL CHANGE, 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 December 31, 1998, 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 close the acquisition of MBM.
The Company's plan for growth included the acquisition of MBM. The
Board of Directors are currently studying several other acquisitions. 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. The imminent collection of loans receivable
as part of the dictates 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.
11
<PAGE>
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
this time. In this regard, the Company required 129 Ontario to obtain an
independent valuation of MBM. In addition, the Company has conducted, and will
continue to conduct up to the date until all the requirements of the acquisition
stipulated in agreement referred to above, due diligence as to MBM and its
business operations. The Debtor has 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 will (a) cause the Reorganized Debtor to issue to the Proponent at the
Closing 4,000,000 shares of the Reorganized Debtor 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 is The Gerendasi Group
129 Ontario, which controls the issued and outstanding stock of MBM, is a
wholly-owned subsidiary of the Proponent. The Debtor has been advised by the
Proponent that none of the Proponent, 129 Ontario or MBM have had or have any
affiliation with the Debtor or CVI, except that the Gerendasi Group formerly
owned a small percentage of the Debtor's common stock which was sold in 1996.
12
<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.
13
<PAGE>
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. It is presently anticipated that MBM's
management will remain in place following its acquisition.
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
sic 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, the Proponent has engaged an independent
accountant to value the shares of MBM to be acquired by the Debtor. 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. Due to the cost to the Estate and the fact that the valuation
report has been rendered by an independent Canadian accounting firm, the Debtor
has decided not to obtain its own valuation of the shares of MBM.
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.
For the one month ended December 31, 1998, consolidated revenues from operations
of $423,393 were due to the acquisition and consolidation of MBM. Monthly
revenues from MBM operations are forecasted to continue or increase from this
level during the remainder of fiscal year 1998-1999. The Company's consolidated
net loss of $13,615 for the quarter ended December 31, 1998, was principally due
to the payment of administrative costs of $29,445 relative to the year end audit
and other expenses of the bankruptcy.
14
<PAGE>
Interest expense incurred in MBM was for the amounts due to the Royal Bank of
Canada for the open balance on their loans during the month of December 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company filed with the Bankruptcy Court its Amended Plan of Reorganization
dated July 2, 1998. The Plan has been approved by the Company's Board of
Directors. In addition, Advantage 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 Debtor, (c) the cancellation of all Existing Preferred Stock and
Existing Common Stock of the Debtor, 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 Debtor 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. At December 31, 1998, the Company has operating
cash of $4,249. The cash would be used to defray operating costs and
professional fees necessary to continue supporting the plans for acquisitions
and corporate financial restructuring . For the quarter ended December 31, 1998
15
<PAGE>
the Company utilized proceeds from the sale of assets and other borrowings to
meet operating expenses. MBM presented a negative bank balance approximating
$26,000 that was reclassified with accounts payable and accrued expenses in the
accompanying balance sheet. As of December 31, 1998 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. 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 1.33 compared to 0.59 as of December 31, 1998. The
current ratio at December 31, 1998 was 1.56.
In addition, the Company is currently negotiating with several alternative
financing sources in order to secure additional funding to support the
acquisitions contemplated.
At December 31, 1998, 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 quarter ending March 31, 1999.
16
<PAGE>
PART II.
ITEM 1. LEGAL PROCEEDINGS
-----------------
For information concerning current litigation regarding the Company,
see Note 7 in the Notes to Financial Statements.
ITEM 6. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
(a) Exhibits -- None
(b) The Company filed a Form 8-K report dated February 10,
1999.
17
<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: ___________, 1999 By:_________________________________
Luis Alvarez, President
18
<TABLE> <S> <C>
<ARTICLE> 5
<C>
<S>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,249
<SECURITIES> 0
<RECEIVABLES> 559,296
<ALLOWANCES> 0
<INVENTORY> 504,483
<CURRENT-ASSETS> 1,104,904
<PP&E> 2,432,897
<DEPRECIATION> 1,951,522
<TOTAL-ASSETS> 3,890,661
<CURRENT-LIABILITIES> 2,190,624
<BONDS> 0
0
4,000
<COMMON> 12,493
<OTHER-SE> 1,683,544
<TOTAL-LIABILITY-AND-EQUITY> 3,890,661
<SALES> 423,393
<TOTAL-REVENUES> 423,393
<CGS> 330,866
<TOTAL-COSTS> 330,866
<OTHER-EXPENSES> 100,561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,581
<INCOME-PRETAX> (13,615)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,615)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,615)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
