FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ending March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to________________
Commission File No. 0-23712
Wincanton Corporation
---------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Washington 91-1395124
----------------------- --------------------------
State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
3653 Hemlock Court, Reno, Nevada 89505
------------------------------------------------------------
(Address of Principal executive offices) (Zip Code)
(702) 829-8812
------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 of 15(d) of the Securities 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 or No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding or each of the issuer's classes of
common stock, as to the latest practicable date. 9,287,752
INDEX TO FINANCIAL STATEMENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as at March 31, 1996,
March 31, 1995 and June 30, 1994 4
Consolidated Statements of Operations and Deficit
Accumulated during the Development Stage
Nine months ended March 31, 1996 Year ended June 30, 1995 Six months ended June
30, 1994 and
From inception to March 31, 1996 5
Consolidated Statements of Changes in Financial Position
Nine months ended March 31, 1996
Year ended June 30, 1995
Six months ended June 30, 1994 6
From inception to March 31, 1996
Notes to Consolidated Financial Statements 7 - 14
Item 2. Management's Description and Analysis of
Financial condition and Results of Operations 15 - 16
PART II OTHER INFORMATION 17 - 18
- - ------- -----------------
Signatures 19
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On or about April 10, 1995, Tradesman Industries, Inc. was sued in the
United States District Court for the District of Delaware by Fairgill
Investments Pty Limited and Roll-on Vehicles Management Pty Limited. The
Complaint in this Action included a First Count for the alleged misappropriation
of trade secrets, a Second Count for alleged patent infringement, a Third Count
for alleged false patent marking, and a Fourth Count for an alleged violation of
Section 43(a) of the Trademark Act. The Action seeks damages and attorneys' fees
and a permanent injunction against the alleged acts of patent infringement and
unfair competition. Tradesman has answered denying misappropriation of trade
secrets as to the First Count, denying that there is any basis whatsoever for
the multiple charges of patent infringement under the Second Count and denying
liability under the Third and Fourth Counts of complaint. Counsel is of the
opinion that Tradesman has meritorious defenses as to each of the Counts of the
Complaint and that Tradesman does not have a significant liability with respect
to the multiple Counts of the Complaint.
On September 21, 1995, the Second Count for patent infringement was dismissed,
with prejudice, by stipulation between the parties and order of Delaware Federal
Court. The other counts were subsequently dismissed.
In December 1995, Robert Page and McGee Settlement Trust brought suit against
the Registrant its subsidiary Tradesman Industries Inc., the company's
directors, employees, certain consultants and other unrelated individuals
alleging in sum, various acts of fraud, securities violations and breaches of
fiduciary duty. The defendant's moved to stay the proceedings and to compel
arbitration, which motion was granted. The arbitration date has not yet been
set. The plaintiffs have claimed damages in the amount of $30,000,000 and to
seek the appointment of a receiver for Wincanton and Tradesman. The Company
contends that Page and McGee Settlement Trust breached their agreement to
provide technology and that no loss should be incurred.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None
(b) Reports on Form 8-K. None
<PAGE>
SIGNATURES
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 thereunto duly authorized.
WINCANTON CORPORATION
----------------------------
(Registrant)
Date: September __, 1996 ___________________________________
Walter Doyle, Director
<PAGE>
Wincanton Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and capital resources
At March 31, 1996, the Registrant had $1,128,817 of current assets and
$9,449,953 of current liabilities compared to $8,783,830 of current assets and
$325,064 of current liabilities as at March 31, 1995. This decrease in working
capital is the result of several factors:
current assets include cash received on the sale of common stock received
from Work Recovery Inc. These shares were received in exchange for a 10%
interest in Tradesman Industries Inc. a subsidiary of the Registrant and
from the sale of certain marketing rights to Tradesman's cargo bed and
tailgate systems.
amounts and notes receivable were $103,451 at March 31, 1996 compared to
$8,486,897 the prior year. The reduction in this balance was due to the
payment by Work Recovery of all amounts due under the sale of 10% of
Tradesman Industries, Inc. (a subsidiary of the Registrant) and the sale of
the North American marketing rights to Tradesman's cargo bed and tail gate
technology.
current assets also include $990,893 due from a director of the
Registrant. This amount bears no interest, is unsecured and is repayable on
demand. The amount due to a director was nil as at March 31, 1995.
current liabilities include accounts payable and accrued liabilities of
$8,683,083 compared to $112,896. The increase in payables is mainly due to
the recording of debt due to Work Recovery, Inc. under a consulting
agreement. The consulting agreement called for payment of $9,600,000 during
the year ended June 30, 1995. The Registrant has paid $2,850,000 to March
31, 1996 and the balance of $6,750,000 is included in accounts payable at
March 31, 1996. The Registrant also accrued payable $1,500,000 under a
licence agreement with Work Recovery, Inc.
income taxes payable were $166,095 compared to $212,168 the year before.
The decrease being a result of a payment on account.
Mortgage payable increased to $600,775 from nil the prior year. The
increase is due to the financing arrangement reached when the Registrant
purchased a tree plantation in Australia.
The Registrant is developing its interests in marketing, licenses and other
business opportunities. It is anticipated that the Registrant will require
further working capital to fund current operating expenses and current
liabilities other than those mentioned above. It is expected that such funds
will be obtained by the sales of additional capital stock of the Registrant
although there can be no assurance that the Registrant will be able to obtain
such funds.
Results of Operations
Nine month period ended March 31, 1996 compared to the year ended June 30, 1995.
The Registrant's loss for the nine month period ended March 31, 1996 was
$1,914,438 compared to a loss of $16,887,396 for the year ended June 30, 1995.
Administrative expenses for the nine month period ended March 31, 1996 were
$1,299,380 compared to $11,693,390 for the year ended June 30, 1995, such
difference due to the Registrant's recording of the consulting fees during the
year ended June 30, 1995 of $9,600,000. Other expenses of $622,397 compared to
$419,866 for the year ended June 30, 1995 were higher relative to the year ended
June 30, 1995, such increase due to the overhead costs for its offices in
Carlsbad and Santa Ana California, where the Registrant is developing its
prototype cargo bed and tail gate systems. Professional fees of $332,262
compared to $281,384 were up relative to the differing periods being reported
on. The increase was due mainly to the legal defense of certain law suites more
particularly described elsewhere in this document. Promotion expenses were down
to $10,187 from $182,500. This reduction is due to the emphasis by the
Registrant during the period to complete its prototype product. Travel and
entertainment of $91,988 were down from $318,897 as the requirement to travel
was reduced.
The Registrant's expenses include exploration and development expenditures of
$26,783 compared to $78,264 for the year ended June 30, 1995, such reduction due
to the shorter period of activity and the concentration of resources to other
areas of interest. These expenditures represents the Registrant's 85% share of
exploration and development and administrative expenditures incurred by the
joint venture.
<PAGE>
September __, 1996
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C.
20549
Re: Wincanton Corporation - File No. 0-23712
Ladies and Gentlemen:
Please find enclosed herewith eight (8) copies of the Form 10-Q for the
quarter ended March 31, 1996.
Kindly acknowledge receipt of the enclosed on the accompanying copy of this
letter and return it to me in the stamped, self-addressed envelope
provided for your convenience.
Thank you.
Very truly yours,
WINCANTON CORPORATION
By: __________________________
Walter Doyle, Secretary
Acknowledged this________ day of _____________________, 1996.
- - ------------------------------------
Securities and Exchange Commission
WINCANTON CORPORATION
(a company in the
development stage)
Consolidated Balance
Sheet
(Expressed in U.S.
dollars)
(unaudited, prepared by
management)
March 31, March 31, June 30,
1996 1995 1994
- - -------------------------------------------------------------------------------
Assets
Current
assets:
Cash $ 34,473 296,933 117,001
Amounts and notes receivable 103,451 8,486,897 390,470
and deposits (note 3)
Due from a 990,893 47,406
director (note 4) -
---------------------------------------------------------------------------
1,128,817 8,783,830 554,877
Options 2,684,619
(note -
11)
Long-term receivable 888,000
(note 3) - -
Resource properties 1 1 1
(note 5)
Investments and 488,128 2,158,997 290,396
advances (note 6)
Capital 1,094,446 959,940 772,778
assets
(note 7)
- - --------------------------------------------------------------------------------
$ 2,711,392 14,587,387 2,506,052
================================================================================
Liabilities and
Shareholders' Equity
Current
liabilities:
Accounts payable $ 8,683,083 112,896 74,756
and accrued
liabilities
Income taxes 166,095 212,168 205,235
payable
Due to
a - -
director
Mortgage payable 600,775 346,690
(note 8) -
--------------------------------------------------------------------------
9,449,953 325,064 626,681
Mortgage 181,300
payable - -
Unearned revenue (notes 6,465,516 9,030,000 1,480,000
6)
Minority
interest - 250,001 -
Shareholders' equity
(note 9)
Capital stock
Authorized:
15,000,000 preferred
shares
15,000,000 common
shares with a par
value of
$0.0001 per share
Issued:
9,287,752 common shares 835 937 796
(March 31, 1995 - 10,156,752
June 30, 1994
-8,746,180)
4,195,895 preferred shares 5 5 -
(March 31, 1995 - 4,195,895
June
30, 1994 -
nil)
Additional 6,494,598 5,381,809 983,561
paid-in capital
Advance on account of - - 117,000
share subscriptions
Cumulative translation (22,635) 23,844 (8,230)
adjustment
Retained earnings
(deficit) accumulated
during
the (19,676,880) (424,273) (875,046)
development
stage
-----------------------------------------------------------------------
(13,204,077) 4,982,322 218,081
- - --------------------------------------------------------------------------------
$ 2,711,392 14,587,387 2,506,062
================================================================================
See accompanying notes to consolidated financial statements.
On behalf
of the
Board:
---------------------- ----------------------
Director Director
WINCANTON CORPORATION
(a company in the
development stage)
<TABLE>
<CAPTION>
Consolidated Statement
of Operations and
Deficit
(Expressed in U.S.
dollars)
(unaudited, prepared by
management)
<S> <C> <C> <C> <C> <C> <C> <C>
From
inception
on Nine Six months
October 5, months
1987 ended Year ended ended Year
ended
to March March 31, June 30, June 30, December
31, 31,
1996 1996 1995 1994 1993 1992 1991
- - ----------------------------------------------------------------------------------------------------------------
Exploration and $ 182,871 26,783 20,168 57,656
development expenditures 78,264 - -
Administrative
expenses:
Financing 188,918 18,749 2,122 12,419
costs - 139,612 -
Joint venture 81,792 15,275 14,247 33,277
operations 18,993 - -
Management fees to 5,000 5,000
a director - - - - -
Consulting and 10,177,747 227,721 55,021
other fees 9,895,005 - - -
Other 1,112,077 622,397 26,188 42,090 286 456
419,866
Professional fees 715,173 332,262 70,718 30,809
281,384 - -
Promotion 192,687 10,187
182,500 - -
Research and 437,133
development - 437,133 - -
Travel and 516,790 91,988 42,227 63,678
entertainment 318,897 - -
----------------------------------------------------------------------------------------------------------- ---------------
13,427,317 1,299,830 208,401 193,603 2,408 12,875
11,693,390
Other
income
(expense)
Unrelated loss on available (1,253,299)
for sale securities (note (587,825.00) (665,474)
2(d))
Write-off of Real (2,684,537)
Estate Options - 2,684,537)
(note 5)
Write-off of (467,656)
advances (467,656)
Write-odd of (1,500,000)
licence (1,500,000)
Loss on sale of (28,614)
investments - (28,614)
---------------------------------------------------------------------------
(587,825.00)
---------------------------------------------------------------------------
Loss before non-controlling (19,544,294) (1,914,438) (17,117,935) (228,569) (251,259) (2,408) (12,875)
interest and income tax
Income 161,671
taxes - - (43,563) 205,234
current
- - ----------------------------------------------------------------------------------------------------------------
Loss before minority (19,705,965) (1,914,438) (17,074,372) (433,803) (251,259) (2,408) (12,875)
interest
Minority interest in 212,477 9,088 16,413
loss of subsidiary - 186,976 - -
- - ---------------------------------------------------------------------------------------------------------------- --------------
Profit (loss) for the (19,493,488) (1,914,438) (16,887,396) (424,715) (234,846) (2,408) (12,875)
period
Deficit accumulated
during the
development stage, (17,762,442) (266,939) (32,093) (29,685) (16,810)
beginning of period - (875,046)
Redemption of minority (183,392) (183,392)
interest in subsidiary - - - -
- - ---------------------------------------------------------------------------------------------------------------- ----------------
Deficit accumulated
during the
development stage, end $ (19,676,880(19,676,880) (17,762,442) (875,046) (266,939) (32,093) (29,685)
of period
================================================================================================================ ================
Loss $ (0.21) (0.06) (0.06) (0.01)
per (1.80) -
share
================================================================================================================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
WINCANTON CORPORATION
(a company in the
development stage)
Consolidated Statement of Changes
in Financial Position
(Expressed in U.S.
dollars)
(unaudited, prepared by
management)
<S>
<C> <C> <C> <C> <C>
From
inception
on Nine Six months
October 5, months
1987 ended Year ended Year
ended ended
to March March 31, June 30, June 30, December
31, 31,
1996 1996 1995 1994 1993
- - ----------------------------------------------------------------------------------------------------------------
Cash provided by (used
in)
Operations:
Profit (loss) for $ (19,493,488)(1,914,438) (16,887,396) (424,715) (234,846)
the period
Items not
involving cash
Amortization of 515
organization costs - - -
Expenses paid 60,000
by stock - 60,000 - -
issuance
Write off of advances for 50,780
research and development - 50,780 - -
Write off of options to 2,684,537
purchase real estate - 2,684,537 - -
Write-off of 467,656
advanced - 467,656 - -
Write-down of 1,500,000
licence 1,500,000
Other (22,635)
(24,154) 9,749 (15,384) 7,154
Change in non-cash
operating
working
capital:
Amounts and notes 3,025,549
receivable and 2,582,618 463,401 (7,529) (12,941)
deposits
Due from (976,398)
(to) a (990,893) 61,901 30,686 (78,092)
director
Income 166,095
taxes - (39,140) 205,235 -
payable
Accounts payable and 8,683,083
accrued liabilities 50,150 8,558,177 62,143 12,513
-----------------------------------------------------------------------------------------------------------
(3,854,306)
(296,717) (3,070,335) (149,564) (306,212)
Financing:
Due from a director
- - - - (13,070)
Advances on account of share
subscriptions - - (117,000) 76,848 40,152
Long-term 600,775
debt (87,725) 160,510 527,990 -
Unearned revenue 2,783,092
(2,069,735) 4,630,827 222,000 -
Redemption of minority (183,392)
interest in subsidiary - - (183,392) -
Additional paid in 1,682,774
capital - 1,682,774 - -
Issue of capital 2,024,148
stock - 1,039,999 390,152 574,797
-----------------------------------------------------------------------------------------------------------
6,907,397
(2,157,460) 7,397,110 1,033,598 601,879
Investments:
Options (143,645)
- (143,645) - -
Resource properties (1)
- - - (1)
Investments and (1,780,011) 402,826
advances (1,892,649) (290,188) -
Capital (1,094,446) (27,907)
assets (293,761) (770,902) (1,876)
Organization costs (515)
- - - -
-----------------------------------------------------------------------------------------------------------
(3,018,618) 374,919
(2,330,055) (1,061,090) (1,877)
- - ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in 34,473 (2,079,258)
cash 1,996,720 (177,056) 293,790
Cash, 2,113,731
beginning - 117,011 294,067 277
of period
- - ----------------------------------------------------------------------------------------------------------------
Cash, end $ 34,473 34,473
of period 2,113,731 117,011 294,067
================================================================================================================
</TABLE>
See accompanying notes to
consolidated financial statements.
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
dollars)
March
31, 1996
(unaudited, prepared by
management)
1. Nature of
operations:
The Corporation was incorporated on October 5, 1987 under the laws of
the State of Washington, U.S.A. The Corporation holds investments in
other
companies as follows:
(a) 100% of the shares of Queensland Industries Inc. ("Queensland"), a
company incorporated under the laws of the Province of British
Columbia, Canada, whose principal business activities are the
exploration and development of natural resource properties.
(b) 100% of the shares of Wincanton (Aust) Pty Ltd.,("Wincanton (Aus)"), a
company incorporated under the laws of Australia, whose principal
business is growing trees.
(c) 90% of the shares of TRADESMAN Industries Inc., ("Tradesman") a company
incorporated under the laws of the state of Delaware, U.S.A., whose
principal business is the manufacturing, marketing and distribution of
trucks, minivans and trailers with electro-hydraulic cargo beds and
tailgate systems, which lower to the ground.
(d) 100% of the shares of Wincanton Properties Pty. Ltd.
("Properties") a company incorporated under the laws of
Australia, whose
sole purpose is to hold the
options to acquire real estate
properties.
(e) 100% of the shares of Wincanton Holdings Pty. Ltd.
("Holdings") a company incorporated under the laws of
Australia, whose
sole purpose is to hold the
options to acquire real estate
properties.
The Corporation is investigating and evaluating various assets, properties
and business opportunities. Accordingly, continuing operations are
dependant upon obtaining additional financing to carry out its business
plans.
2. Significant
accounting
policies:
(a) Basis of
presentation:
These consolidated financial statements include the accounts of the
Corporation, it's subsidiaries, Wincanton (Aus), Tradesman, Properties
, Holdings, Queensland and Queensland's proportionate share of the
assets, liabilities, revenue and expenses of the joint venture
described in note10. All significant intercompany transactions and
balances have been eliminated.
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States. For United States reporting purposes, the corporation is
considered to be in the development stage and the accompanying
financial statements are those of a development stage enterprise.
(b) Resource
properties:
Each group of claims in a property is accounted for as a separate area
of interest. Property acquisition costs are deferred until it is
determined if the property contains economically recoverable ore
reserves and a production decision is made. These acquisition costs and
development costs incurred after a production decision is made will be
amortized against related revenues by the unit-of-production method
upon commencement of commercial production, written-down to an
estimated net realizable value when it is determined that the
property's value is impaired, or written-off when the property is
abandoned or sold.
All exploration, other development and administrative expenditures are
charged to expense as incurred.
The amount shown for resource properties represent costs incurred to
date, and do not necessarily reflect present or future values.
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated Financial
Statements, continued
(Expressed in U.S.
dollars)
March
31, 1996
Notes to Consolidated
Financial Statements
2. Significant accounting
policies, continued:
(c) Translation of foreign
currencies:
Account balances and transactions denominated in foreign currencies and
the accounts of the Corporations's foreign operations have been
translated into U.S. funds, as follows:
(i) Assets and liabilities at the rates of
exchange prevailing at the balance sheet
date;
(ii)Revenue and expenses at average exchange rates for
the period in which the transaction occurred;
(iiiExchange gains and losses arising from foreign currency
transactions are included in the determination of net
earnings
for the
period; and
(iv)Exchange gains and losses arising from the translation
of the Corporation's foreign operations are deferred and
included
as a separate component of
shareholders' equity.
(d) Investments
and advances:
Investments in licences and shares of companies are recorded at cost
when significant influence does not exist. Management estimates whether
impairment of value exists on a periodic basis. Any write-down to
estimated realizable value would be recorded in the period it is
determined.
(e) Loss per share:
The loss per share is calculated based on the weighted average number
of shares outstanding during the nine month period ended March 31,
1996, being 9,287,752 (nine months ended March 31, 1995 9,282,000, six
months ended June 30, 1994 - 7,098,000)
3. Amounts and notes receivable
and deposits
As at March 31, 1996, the Corporation had the following amounts and notes
receivable and deposits:
1995 1994
---------- -----------
Security $ 7,543
deposits 75,332
Work Recovery,
Inc. (note 6) - 6,775,000
Other amounts 95,908
receivable 1,636,565
-----------------------------------------------------------------------
$ 103,451 8,486,897
=======================================================================
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated Financial
Statements, continued
(Expressed in U.S.
dollars)
March
31, 1996
Notes to Consolidated
Financial Statements
4. Due from a Director
Amounts due from a director are
non-interest bearing and due on
demand.
5. Resource
properties:
Queensland owns an 85% interest in a joint venture with North Queensland
Mining Pty. Limited ("North Queensland"), a related company. The joint
venture acquired an 85% interest in certain granite, sandstone, tin and
copper/lead/zinc/silver resource properties. Under the terms of the joint
venture, Queensland and North Queensland have agreed to develop the
resource properties. The Corporation issued 800,000 common shares and paid
$266,000 to Queensland in exchange for 90% of the common shares of
Queensland. Queensland transferred its 800,000 shares of the Corporation
and paid $146,000 to North Queensland in exchange for its 85% interest in
the joint venture.
On April 15, 1994, Queensland redeemed the 10% Minority Interest
outstanding in its common stock in consideration of payment of $250,000 CDN
($183,392 US). The minority shareholder is a director and shareholder of
the Corporation. The excess of the redemption price over the stated capital
in the amount of $183,392, was charged to deficit. As a result of the above
transactions, the Corporation owns 100% of Queensland, which has an 85%
interest in the joint venture.
As these transactions are common control transactions between related
parties, the Corporation has recorded the acquisition at historical cost to
Queensland and North Queensland, which were nominal, in a manner similar to
a pooling of interests.
6. Investments and
advances:
Investment Advances Total Total
1995 1994
--------------------------------------------
Thanksmate $
Pty. Ltd.(a) 100 100 422,932
Work Recovery, 1 21 20
Inc. licence 20
(b)
Saddle Mountain 205,007 205,007
Mining Corp.
(c) (2,626,571 - 1,735,957
shares)
Other (d) 283,000 283,000 88
-
-----------------------------------------------------------------------
$ 205,108 283,020 488,128 2,158,997
=======================================================================
(a) On April 19, 1994, the Corporation entered into an agreement with the
McGee Settlement Trust for the design and patent rights to certain
electro-hydraulic cargo bed and tailgate systems of Thanksmate Pty.
Ltd. Consideration for the acquisition consists of the issuance of
1,000,000 common shares and the payment of $130,000 AUD ($96,300 US)
for the express purpose of building five different prototypes.
The Corporation has recorded this license at the nominal value of $100.
During the year ended June 30, 1995, a claim was filed against
Tradesman for alleged missappropriation of trade secrets, patent
infringement, false patent marking and violation of the Trademark Act
(U.S.). The claim seeks damages and a permanent injunction against the
patent infringement and unfair competition. Counsel is of the opinion
that Tradesman has meritorious defences to the claims and will not have
a significant liability arising from the claim. During the period ended
March 31, 1996, all of the claims under this litigation were dismissed.
(b) On April 15, 1994, Queensland entered into a license agreement with
Work Recovery, Inc. ("WRI"). Under the agreement, Queensland was
granted a master license, for Canada, for the use of ERGOS. ERGOS is a
trademark name for a proprietary piece of equipment that serves as a
work simulator for functional capacity testing in situations of human
work loss due to injury. The agreement calls for certain minumum
performance criterion necessary to keep the license in good standing.
The license is for an initial term of 5 years with renewal provisions
based upon performance. Advance royalties of $1,500,000 were to be paid
during the year ended June 30, 1995. As of March 31, 1996, the
$1,500,000 remains unpaid and management does not believe the advance
will be paid.
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated Financial
Statements, continued
(Expressed in U.S.
dollars)
March
31, 1996
Notes to Consolidated
Financial Statements
6. Investments and
advances, continued
The Corporation has recorded this license at the nomial value of $20.
The Corporation entered into an agreement with WRI to issue common
shares representing a 10% interest in Tradesman. The Corporation
received common shares of WRI with a market value of $2,500,000 as
consideration, realizing a dilution gain of $1,682,774, which was
treated as an addition to paid-in capital. In addition, Tradesman
entered into an agreement with WRI to sell marketing rights for the
cargo bed and tail gate systems in exchange for common shares of WRI
with a market value of $5,005,251. The Corporation sold all but 401,163
of the common shares received and has recorded the value of the common
shares in WRI at $1.
The revenue of $5,005,251 recorded on the sale of the marketing rights
has been reflected as unearned. These amounts will be recognized as
revenue on a straight line basis as the performance criteria under the
licence agreement are met, including the delivery of a minimum number
of units of manufactured product. If the performance criteria are not
met, the Corporation may be liable to repay the licence fee.
In conjunction with the sale of the Tradesman shares and the marketing
rights to WRI, the Company entered into an agreement with WRI whereby
WRI would provided consulting services with respect to the cargo bed
and tailgate system technology during the year ended June 30, 1995 for
aggregate consideration of $9,600,000. Of this amount, approximately
$2,850,000 was paid, with the remaining $6,750,000 included in accounts
payable at March 31, 1996. The Company is contemplating an attempt to
recover the $2,850,000 paid to date. There is no assurance that the
Company will be able to recovery any of the amounts as WRI has
subsequently been placed into receivership.
(c) Wincanton (Aus) entered into an agreement with an arms length company,
whereby plantation assets (trees) were sold for $2,000,000 AUD
($1,530,000 U.S.). Under this agreement, Wincanton (Aus) is required to
care for the trees on the plantation for a period equal to the lessor
of 20 years or until the trees are harvested.
On August 29, 1994 the Company accepted 2,428,571 common shares of the
purchaser, Saddle Mountain Timber Corp., in full settlement of amounts
receivable under the
agreement.
All of the revenues from the sale of the plantation assets have been
recorded as unearned. These amounts will be recognized as revenue on a
prorata basis as the trees are harvested.
(d) The Company advanced monies to a director of Saddle Mountain Timber
Corp. The advances are non-interest bearing, with no fixed terms of
repayment and are secured by the pledge of 2,000,000 shares of Saddle
Mountain Timber Corp.
7. Capital
assets:
March 31, March 31,
1996 1995
--------------------------------------------------------------------
Accumulated Net book Net book
Cost Depreciation value value
--------------------------------------------------------------------
Land $ 331,466 331,466 331,466
-
Plantation 495,271 495,271 495,271
assets -
Vehicles 167,441 167,441
- -
Equipment 100,268 100,268 133,203
-
--------------------------------------------------------------------
$ 1,094,446 1,094,446 959,940
-
====================================================================
During the six months ended June 30, 1994, Wincanton (Aus) sold the
plantation assets, the proceeds of which have been deferred for accounting
purposes and included
in unearned revenue (note 6).
8. Mortgage payable:
The purchase price for the land and plantation assets was $1,000,000 AUD
($740,000 US), payable as to $300,000AUD ($222,000 US) on signing and the
balance payable in instalments of $100,000 AUD ($74,000 US). Wincanton
(Aus) renegotiated the terms of the mortgage to reflect accrued interest of
$160,510. The mortgage is due on demand, and accordingly the entire amount
has been classified as a current liability. The Company has issued 210,000
shares to the vendor of the plantation assets and land, as security for the
mortgage payable. It is expected that these shares will be returned to
treasury when the mortgage is settled.
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated Financial
Statements, continued
(Expressed in U.S.
dollars)
March
31, 1996
Notes to Consolidated
Financial Statements
9. Capital stock and additional
paid-in capital:
Capital stock issued from incorporation of the Corporation on October 5,
1987 to March 31, 1996
(a) Common
Stock
Additional
Common
stock
---------------------
Shares Amount paid-in Total
capital
--------------------------------------------
Issued for cash at $0.10
1987 per share,
net of 100,000 $ 10 $ $
offering costs 9,490 9,500
of $500
Issued for cash at $0.10
1988 per share,
net of 100,000 10 9,490 9,500
offering costs
of $500
Issued for cash at 1,000,000 100 100
$0.0001 per share -
Issued for cash at 3,000 1 99 100
1991 $0.0333 per share
Issued for 800,000 1 1
1993 business -
acquisition
Issued for cash at $0.01 2,000,000 200 19,800 20,000
per share
Issued for cash at $0.02 2,000,000 200 39,800 40,000
per share
Issued for cash at $1.00 514,796 51 514,745 514,796
per share
---------------------------------------------------------------------------
Balance December 6,517,796 573 593,424 593,997
31, 1993
Issued for 13,384 1 40,151 40,152
1994 cash at $.01
per share
Issued for 140,000 14 349,986 350,000
cash at $.01
per share
Issued for 2,075,000 208 208
licences -
---------------------------------------------------------------------------
Balance June 30, 8,746,180 796 983,561 984,357
1994
Issued for cash at $1.01 116,000 12 116,988 117,000
per share
Issued in
exhange for
100,000
shares of Work 200,000 20 187,480 187,500
Recovery, Inc.
Issued in 210,000 21 629,979 630,000
exchange for
debt
Issued in 784,572 78 2,540,811 2,540,889
exchange for
option
Issued in
exchange for
cash
net of offering costs 100,000 10 922,990 923,000
of $77,000
-----------------------------------------------------------------------
Balance March 31, 10,156,752 937 5,381,809 5,382,746
1995
Debt (20) (629,979) (629,999)
restructuring -
(note 8)
Shares returned and (875,000) (88) (88)
cancelled (Note 6) -
Issued for 6,000 6 59,994 60,000
services
rendered
Gain on
dilution of
interest in
Tradesman 1,682,774 1,682,774
(Note 6)
-----------------------------------------------------------------------
Balance March 31, 9,287,752 835 6,494,598 $ 6,495,433
1996
===========================================================================
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated Financial
Statements, continued
(Expressed in U.S.
dollars)
March
31, 1996
Notes to Consolidated
Financial Statements
9. Capital Stock and additional
paid-in capital, continued
(b) Preferred
stock
Shares Amount
-----------------------
Class A convertible 918,000 $ 1
preferred stock
convertible into common
stock at $4.80 per share
Class B convertible 381,323 1
preferred stock
convertible into common
stock at $5.20 per share
Class C convertible 836,035 1
preferred stock
convertible into common
stock at $5.60 per share
Class D convertible 1,055,700 1
preferred stock
convertible into common
stock at $6.00 per share
Class E convertible 1,004,837 1
preferred stock
---------- ---------
convertible into common
stock at $7.86 per share
4,195,895 $ 5
=======================
The preferred
shares:
are non
- transferable
are convertible into common stock, on a
- one for one basis, at prices shown above
have no
- voting
rights
(c) On November 16, 1994 the Corporation granted 800,000 employee share
purchase options. The share purchase options entitle the holder to purchase
one share of the Corporation for each option held at a price of $4.00 per
share for a period of 10 years.
(d) On December 5, 1994 the Corporation issued 2,500,000 warrants. Each warrant
gives the holder the right to purchase one common share in the Corporation
in exchange for the exercise price noted, as follows:
Number of Exercise
Warrants price
1,000,000 $ 1.00
500,000 2.50
500,000 3.50
500,000 4.50
The warrants
expire on December
6, 1999.
10. Investment in
Joint Venture
These consolidated financial statements include Queensland's 85% share of
the assets, liabilities and expenses of their joint venture with North
Queensland
as follows:
March 31, March 31,
1996 1995
----------------------------------------------------------------
Cash $ 1,175 49,056
Accounts receivable 6,411 17,560
and deposits
Resource 1 1
properties
Equipment 2,150 2,695
less
Accounts - -
payable
----------------------------------------------------------------
Venturers equity and $ 9,737 69,312
advances
================================================================
Exploration $ 22,766 87,281
expenditures
Administrative 9,958 9,325
expenses
----------------------------------------------------------------
$ 32,724 96,606
================================================================
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated Financial
Statements, continued
(Expressed in U.S.
dollars)
March
31, 1996
Notes to Consolidated
Financial Statements
11. Write off of Real
Estate Options:
On March 2, 1995, the Corporation, through its wholly owned subsidiaries,
Properties and Holdings, entered into five separate option agreements. The
option agreements give the holder the right to purchase commercial real
estate property in Australia. The option is exercisable for a period of one
year. The purchase price for each option is as follows:
fee.Property Option Preferred
name shares issued
purchase
price
$ AUD $ US # of
shares
Best Place 6,800,000 5,202,000 Class A 918,000
121 Tamar 2,700,000 2,065,500 Class B 381,323
St
Conway 6,800,000 5,202,000 Class C 836,035
Court
Conway 9,200,000 7,038,000 Class D 1,055,700
Plaza
Manchester 11,475,000 8,778,375 Class E 1,004,837
Under the option agreements, the property owners were issued series A, B,
C, D and E preferred shares as shown above, which shares are held by an
escrow agent. The preferred shares are convertible into common shares at
the discretion of the property owners. If converted the property owners may
instruct the escrow agent to sell the common shares for cash. When the cash
raised by selling the common shares is sufficient to pay the option
purchase price, the cash shall be transferred to the owners and title to
the property shall be transferred to the Corporation.
Consideration for the option was the payment of cash in the amount of
$143,645, the issuance of 784,572 common shares at a deemed value of
$4,118,751 and the issue of Preferred shares, which has been assigned a
nominal value of $5 in total.
On March 2, 1996, the option expired unexercised, consequently all related
costs have been written-off to operations.
12. Income
tax:
At March 31, 1996, the Corporation has the following approximate amounts
available to reduce taxable income of future years, the tax benefits of
which has not been reflected in the accounts.
United Canada
States
-------------------------------------------------------------------
Losses - expiring $ 450,000 265,000
2000 to 2009
Amounts deducted for tax
purposes in excess of
amounts deducted 5,015,000
for accounting -
-------------------------------------------------------------------
$ 5,465,000 265,000
===================================================================
13. Contingency
A claim for approximately $30,000,000 has been made against the Company,
Tradesman, certain of its directors, officers el al. alleging various acts
of fraud, securities violations and breaches of fiduciary duties. Counsel
is of the opinion that the plaintiff have breached their agreement to
provide technology to the Company and Tradesman and that no loss should be
incurred. The Company is defending the claim and is unable to determine at
this time what liability, if any, it may ultimately have as a result of
this claim.
WINCANTON CORPORATION
(a company in the
development stage)
Notes to Consolidated Financial
Statements, continued
(Expressed in U.S.
dollars)
March
31, 1996
Notes to Consolidated
Financial Statements
14. Commitment
A subsidiary of the Company is committed to minimum payments under
operating leases for premises for the next five years as
follows:
1996 $ 117,600
1997 235,200
1998 235,200
1999 235,200
2000
117,600
15. Segmented
information:
The Corporation operates in Canada, United States and
Australia. Identifiable assets by geographic segment are as
follows:
Canada United Australia Consolidated
States
------------------------------------------------------------------
$ 72,186 1,565,081 1,074,125 2,711,392
==================================================================
All expenses are
corporate in
nature.
Consolidated
Financial
Statements of
WINCANTON
CORPORATION
(a company in
the development
stage)
(Expressed in
U.S. dollars)
March 31,
1996
(unaudited,
prepared by
management)
