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 December 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
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as at December 31, 1996 and
December 31, 1995 4
Consolidated Statements of Operations and Deficit
Accumulated during the Development Stage
Six months ended December 31, 1996
Year ended June 30, 1996
Year ended June 30, 1995 and
From inception to December 31, 1996 5
Consolidated Statements of Changes in Financial Position
Six months ended December 31, 1996
Year ended June 30, 1996
Year ended June 30, 1995 6 - 7
From inception to December 31, 1996
Notes to Consolidated Financial Statements 8 - 15
Item 2. Management's Description and Analysis of
Financial condition and Results of Operations 16 - 17
PART II OTHER INFORMATION 18 - 19
- ------- -----------------
Signatures 20
<PAGE>
Consolidated Financial Statements of
WINCANTON CORPORATION
(a company in the development stage)
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Consolidated Balance Sheet
(Expressed in U.S. dollars)
(unaudited, prepared by management)
<TABLE>
<CAPTION>
===============================================================================================================================
December 31, December 31,
1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Current assets:
Cash $ 22,247 131,042
Amounts and notes receivable and deposits (note 3) 13,613 166,660
Due from a director (note 4) - 1,018,948
------------------------------------------------------------------------------------------------------------------------
35,860 1,316,650
Resource properties (note 5) 1 1
Investments and advances (note 6) 12,632 599,598
Capital assets (note 7) 171,678 1,111,023
- -------------------------------------------------------------------------------------------------------------------------------
$ 220,171 3,027,272
===============================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 8,461,968 8,617,921
Income taxes payable - 166,095
Due to a director (note 4) 1,250 -
Mortgage payable (note 8) - 600,775
------------------------------------------------------------------------------------------------------------------------
8,463,218 9,384,791
Unearned revenue (note 3) 5,005,251 6,465,516
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 (December 31, 1995 - 9,287,752) 835 835
4,195,895 preferred shares (December 31, 1995 - 4,195,895) 5 5
Additional paid-in capital 6,494,596 6,494,596
Cumulative translation adjustment (14,635) (23,490)
Retained earnings (deficit) accumulated during
the development stage (19,729,099) (19,294,981)
------------------------------------------------------------------------------------------------------------------
(13,248,298) (12,823,035)
- -------------------------------------------------------------------------------------------------------------------------------
$ 220,171 3,027,272
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
______________________ Director ______________________ Director
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Consolidated Statement of Operations and Deficit
(Expressed in U.S. dollars)
(unaudited, prepared by management)
<TABLE>
<CAPTION>
===================================================================================================================================
From inception
on October 5, Six months
1987 ended Year ended Year ended
to December 31, December 31, June 30, June 30,
1996 1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Exploration and development expenditures $ 182,871 - 26,783 78,264
Administrative expenses:
Financing costs 49,306 - - -
Joint venture operations 82,358 - 15,841 18,993
Management fees to a director 5,000 - - -
Consulting and other fees 10,391,197 - 442,571 9,895,005
Other 771,899 60,959 335,582 305,544
Professional fees 1,013,436 86,754 561,591 263,564
Promotion 216,047 1,531 32,016 182,500
Research and development 437,233 - 100 437,133
Travel and entertainment 615,188 16,653 173,733 318,897
Wages 285,913 - 197,196 88,717
----------------------------------------------------------------------------------------------------------------------------
13,867,577 165,897 1,758,630 11,510,353
Other expenses
Unrealized loss on available for sale securities (101,428) - - (101,428)
Loss on sale of capital assets (86,832) - (86,832) -
Write-off of Real Estate Options (note 11) (2,684,537) - - (2,684,537)
Write-off of advances (1,261,137) - (793,481) (467,656)
Write-down of licence (1,500,000) - - (1,500,000)
Loss on sale of investments (64,305) - (35,691) (28,614)
----------------------------------------------------------------------------------------------------------------------------
(5,698,239) - (916,004) (4,782,235)
----------------------------------------------------------------------------------------------------------------------------
Loss before discontinued operations and non-controlling interest (19,748,687) (165,897) (2,701,417) (16,370,852)
Minority interest in loss of subsidiary 212,477 - - 186,976
----------------------------------------------------------------------------------------------------------------------------
Loss before discontinued operations (19,536,210) (165,897) (2,701,417) (16,183,876)
Income (loss) from discontinued operations (9,497) - 900,657 (703,520)
----------------------------------------------------------------------------------------------------------------------------
Loss for the period (19,545,707) (165,897) (1,800,760) (16,887,396)
Deficit accumulated during the
development stage, beginning of period - (19,563,202) (17,762,442) (875,046)
Redemption of minority interest in subsidiary (183,392) - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Deficit accumulated during the
development stage, end of period $ (19,729,099) (19,729,099) (19,563,202) (17,762,442)
===================================================================================================================================
Loss per share $ (0.02) (0.19) (1.80)
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Consolidated Statement of Changes in Financial Position
(Expressed in U.S. dollars)
(unaudited, prepared by management)
<TABLE>
<CAPTION>
===================================================================================================================================
From inception
on October 5, Six months
1987 ended Year ended Year ended
to December 31, Decmeber 31 June 30, June 30,
1996 1996 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash provided by (used in)
CONTINUING OPERATIONS
Operations:
Loss from continuing operations $(19,536,210) (165,897) (2,701,417) (16,183,876)
Items not involving cash
Amortization of organization costs 515 -- -- --
Expenses paid by stock issuance 60,000 -- -- 60,000
Write off of advances for research and development 50,780 -- -- 50,780
Write off of options to purchase real estate 2,684,537 -- -- 2,684,537
Write-off of advances 1,261,137 -- 793,481 467,656
Write-down of licence 1,500,000 -- -- 1,500,000
Loss on sale of capital assets 86,832 -- 86,832 --
Loss on sale of investments 35,691 -- 35,691 --
Other 1,648 129 -- 9,749
Change in non-cash operating working capital:
Amounts and notes receivable and deposits 3,115,387 2,595 2,669,861 463,401
Due from (to) a director 15,745 102,015 (100,765) 61,901
Accounts payable and accrued liabilities 7,660,706 28,921 (199,886) 7,756,915
- -----------------------------------------------------------------------------------------------------------------------------------
(3,063,232) (32,237) 583,797 (3,128,937)
- -----------------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations (9,497) -- 900,657 (703,520)
Items not affecting cash:
Loss on sale investments 587,826 -- 587,826 --
Gain on sale of plantation maintenance obligations (221,888) -- (221,888) --
Changes in non-cash working capital
Accounts payable and accrued liabilities 801,262 -- -- 801,262
Income taxes payable -- -- (166,095) (39,140)
Proceeds on sale of capital assets 391,701 -- 391,701 --
Proceeds on sale of investments 148,629 -- 148,629 --
Long-term debt -- -- (688,500) 160,510
Investments (714,067) 22,388 -- (736,455)
Capital assets (764,855) -- (12,343) (12,512)
Unearned revenue 692,000 -- (1,530,000) 2,000,000
Other 31,921 -- 31,921 --
- -----------------------------------------------------------------------------------------------------------------------------------
943,032 22,388 (558,092) 1,470,145
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
continued...
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Consolidated Statement of Changes in Financial Position
(Expressed in U.S. dollars)
(unaudited, prepared by management)
<TABLE>
<CAPTION>
===================================================================================================================================
From inception
on October 5, Six months
1987 ended Year ended Year ended
to December 31, December 31, June 30, June 30,
1996 1996 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
continued...
Financing:
Advances on account of share subscriptions -- -- -- (117,000)
Unearned revenue 630,827 -- (2,000,000) 2,630,827
Redemption of minority interest in subsidiary (183,392) -- -- --
Additional paid in capital 1,682,774 -- -- 1,682,774
Issue of capital stock 2,024,148 -- -- 1,039,999
- -----------------------------------------------------------------------------------------------------------------------------------
4,154,357 -- (2,000,000) 5,236,600
Investments:
Options (143,645) -- -- (143,645)
Resource properties (1) -- -- --
Investments and advances (1,582,882) -- (136,500) (1,156,194)
Capital assets (321,989) -- (7,962) (281,249)
Proceeds from sale of capital assets 16,436 -- 16,436 --
Proceeds from sale of investments 20,686 -- 20,686 --
Organization costs (515) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(2,011,910) -- (107,340) (1,581,088)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 22,247 (9,849) (2,081,635) 1,996,720
Cash, beginning of period -- 32,096 2,113,731 117,011
- -----------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 22,247 22,247 32,096 2,113,731
===================================================================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 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) 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.
(c) 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.
(d) 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, Tradesman, Properties ,
Holdings, Queensland and Queensland's proportionate share of the
assets, liabilities, revenue and expenses of the joint venture
described in note 10. 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.
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements, continued
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
================================================================================
2. Significant accounting policies, continued:
(c) Investments, advances and licences
Investments, advances and licences consist of investments in shares
of companies which are available for sale, advances to individuals
and companies, and licences. Investments in shares of companies
which are available for sale are initially recorded at cost with
subsequent unrealized gains and losses included in a separate
component of shareholders' equity, except where a decline in value
is other than temporary, in which case it is reflected in income.
Advances and licences are recorded at cost and are written-down to
reflect permanent impairment in value.
(d) Capital assets
Capital assets are recorded at cost. The Company has not made
provisions for depreciation as it is still considered to be in the
development stage.
(e) 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;
(iii) Exchange 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.
(f) Research and development costs
Research and development costs are charged to operations as
incurred.
(g) Loss per share:
The loss per share is calculated based on the weighted average
number of shares outstanding during the three month period ended
December 31, 1996, being 9,287,752 (year ended June 30, 1996 -
9,287,752, June 30, 1995 - 9,387,738).
3. Amounts and notes receivable and deposits
As at December 31, 1996, the Corporation had the following amounts and
notes receivable and deposits:
1996 1995
------- -------
Security deposits $ -- 72,293
Work Recovery, Inc. 1 --
Other amounts receivable 13,612 94,367
- -------------------------------------------------------------------------
$13,613 166,660
=========================================================================
Work Recovery, Inc.
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.
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements, continued
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
================================================================================
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 December 31, 1996. The
Company is unable to confirm whether these services were actually
performed by WRI and 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. The Company will retain the
$6,750,000 in accounts payable and accrued liabilities until such
time as it has determined the liability has been legally dismissed.
Saddle Mountain Timber Corp.
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.
On May 14, 1996, Wincanton (Aus) sold the foresty land and
improvements to Dominion Estates Pty Ltd., a company related to a
director of Wincanton (Aus), in exchange for amounts owing.
Dominion Estates Pty Ltd. also undertook to fulfill obligations to
the owner of the plantation resulting in a gain of $221,888 to
Wincanton (Aus) (Note 12).
4. Due (to) from a Director
Amounts due from a director are non-interest bearing and due on demand.
During fiscal 1996, the Company determined that advances of $593,981 to a
director were uncollectible and consequently wrote-off the amounts to
operations.
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
1996 1995
----------------------------------------------
Thanksmate Pty. Ltd.(a) $ -- -- -- 100
Saddle Mountain Mining Corp.(b) -- -- -- 316,477
Work Recovery, Inc. licence (c) 20 -- 20 21
Other (d) 12,612 -- 12,612 283,000
- -------------------------------------------------------------------------------
$12,632 -- 12,632 599,598
===============================================================================
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements, continued
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
================================================================================
(a) Thanksmate Pty Ltd.
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. The licence was subsequently transferred to
Tradesman and written-off to research and development in fiscal
1996.
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.). All of the claims under this litigation were dismissed
in fiscal 1996.
(b) Saddle Mountain Timber Corp.
The Company owned 2,626,571 shares in Saddle Mountain Timber Corp.,
a company trading on the Alberta Stock Exchange. These shares with
an aggregate cost of $1,458,306 had been classified as "available
for sale". The value of these shares had declined since
acquisition, the decline was considered to be other than temporary,
and accordingly the shares were recorded at their market value at
June 30, 1995. These shares were sold during fiscal 1996 for a
further loss of $623,517.
(c) Work Recovery, Inc.
On April 15, 1994, Queensland entered into a licence agreement with
Work Recovery, Inc. ("WRI"). Under the agreement, Queensland was
granted a master licence, 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
licence in good standing. The licence 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 December 31, 1996, the $1,500,000 remains unpaid
and management does not believe the advance will be paid.
The Corporation has recorded this licence at the nominal value of
$20.
(d) Other
The Company previously advanced $392,651 to a director of Saddle
Mountain Timber Corp. The advances are non- interest bearing, with
no fixed terms of repayment. During the year ended June 30, 1996
the Company advanced a further $199,500 and received 586,000 shares
of Saddle Mountain Timber Corp. with a market value of $63,000 as
repayment. The Company agreed to settle the remaining balance for
Cdn $50,000 (U.S. $35,000). Consequently, as at June 30, 1996
,$199,500 (1995 - $294,651) has been written-off to operations.
7. Capital assets:
December 31, December 31,
1996 1995
-----------------------------------------------------------
Accumulated Net book Net book
Cost Depreciation value value
-----------------------------------------------------------
Land $ -- -- -- 331,466
Plantation assets -- -- -- 495,271
Vehicles 169,148 -- 169,148 173,956
Equipment 2,530 -- 2,530 110,330
-----------------------------------------------------------
$171,678 -- 171,678 1,111,023
===========================================================
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.
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements, continued
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
================================================================================
9. Capital stock and additional paid-in capital:
Capital stock issued from incorporation of the Corporation on October 5,
1987 to December 31, 1996
(a) Common Stock
</TABLE>
<TABLE>
<CAPTION>
Common stock
---------------------------- Additional
Shares Amount paid-in capital Total
------------------------------------------------------------------
<S> <C>
1987 Issued for cash at $0.10 per share,
net of offering costs of $500 100,000 10 $ 9,490 $ 9,500
1988 Issued for cash at $0.10 per share,
net of offering costs of $500 100,000 10 9,490 9,500
Issued for cash at $0.0001 per share 1,000,000 100 -- 100
1991 Issued for cash at $0.0333 per share 3,000 1 99 100
1993 Issued for business acquisition 800,000 1 -- 1
Issued for cash at $0.01 per share 2,000,000 200 19,800 20,000
Issued for cash at $0.02 per share 2,000,000 200 39,800 40,000
Issued for cash at $1.00 per share 514,796 51 514,745 514,796
---------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 6,517,796 573 593,424 593,997
1994 Issued for cash at $.01 per share 13,384 1 40,151 40,152
Issued for cash at $.01 per share 140,000 14 349,986 350,000
Issued for licences 2,075,000 208 -- 208
---------------------------------------------------------------------------------------------------------------
Balance June 30, 1994 8,746,180 796 983,561 984,357
Issued for cash at $1.01 per share 116,000 12 116,988 117,000
Issued in exhange for 100,000
shares of Work Recovery, Inc. 200,000 20 187,480 187,500
Issued as security on mortgage payable 210,000 1 -- 1
Issued in exchange for option 784,572 78 2,540,809 2,540,887
Issued in exchange for cash
net of offering costs of $77,000 100,000 10 922,990 923,000
Shares returned and cancelled (Note 6) (875,000) (88) -- (88)
Issued for services rendered 6,000 6 59,994 60,000
Gain on dilution of interest in
Tradesman (Note 6) -- -- 1,682,774 1,682,774
---------------------------------------------------------------------------------------------------------
Balance December 31, 1996 9,287,752 $835 $6,494,596 $6,495,431
===============================================================================================================
</TABLE>
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements, continued
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
================================================================================
9. Capital Stock and additional paid-in capital, continued
(b) Preferred stock
<TABLE>
<CAPTION>
Shares Amount
--------------------------------
<S> <C>
Class A convertible preferred stock 918,000 $ 1
convertible into common stock at $4.80 per share
Class B convertible preferred stock 381,323 1
convertible into common stock at $5.20 per share
Class C convertible preferred stock 836,035 1
convertible into common stock at $5.60 per share
Class D convertible preferred stock 1,055,700 1
convertible into common stock at $6.00 per share
Class E convertible preferred stock 1,004,837 1
------------- -------------
convertible into common stock at $7.86 per share
4,195,895 $ 5
================================
</TABLE>
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 Warrants Exercise 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:
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------------------------------------------------------------------------
<S> <C>
Cash $ 2,351 2,207
Accounts receivable and deposits 7,543 7,543
Resource properties 1 1
Equipment 2,530 2,530
------------------------------------------------------------------------------
Venturers equity and advances $ 12,425 12,281
==============================================================================
Exploration expenditures $ -- 26,783
Administrative expenses -- 10,891
------------------------------------------------------------------------------
$ -- 37,674
==============================================================================
</TABLE>
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements, continued
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Property name Option Preferred shares issued
purchase price
$ AUD $ US # of shares
-------------------------------------------------------------------------------
<S> <C>
Best Place 6,800,000 5,202,000 Class A 918,000
121 Tamar St 2,700,000 2,065,500 Class B 381,323
Conway Court 6,800,000 5,202,000 Class C 836,035
Conway Plaza 9,200,000 7,038,000 Class D 1,055,700
Manchester 11,475,000 8,778,375 Class E 1,004,837
</TABLE>
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.
During fiscal 1995, the option expired unexercised, consequently all
related costs have been written-off to operations.
12. Discontinued operations
On January 12, 1994, the Company incorporated Wincanton (Aust) Pty Ltd.
("Wincanton (Aus)") under the laws of Australia. Wincanton (Aus)
commenced operations in Australia in January 1994, its principal business
was growing trees.
During the year ended June 30, 1996 Wincanton (Aus) ceased operations due
to continuing and unsustainable losses. At June 30, 1996 there were
assets of $45 and liabilities of $810,371. The Company's remaining
investment in and advances to Wincanton (Aus) were written-off.
13. Income taxes
At December 31, 1996, the Company 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
<TABLE>
<CAPTION>
United States Canada
------------------------------------------------------------------------------
<S> <C>
Losses - expiring 2000 to 2009 $ 450,000 265,000
Amounts deducted for tax purposes in excess of
amounts deducted for accounting 5,015,000 --
------------------------------------------------------------------------------
$ 5,465,000 265,000
==============================================================================
</TABLE>
14. Contingency
A claim for approximately $30,000,000 has been made against the Company,
Tradesman, certain of its directors, officers et 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. Any settlement resulting from this claim will
be treated retroactively.
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Notes to Consolidated Financial Statements, continued
(Expressed in U.S. dollars)
December 31, 1996
(unaudited, prepared by management)
- --------------------------------------------------------------------------------
15. Segmented information:
The Corporation operates in Canada, United States and Australia.
Identifiable assets by geographic segment are as follows:
<TABLE>
<CAPTION>
Canada United States Australia Consolidated
--------------------------------------------------------------------------------------------------------
<S> <C>
$ 31,965 188,206 -- 220,171
========================================================================================================
</TABLE>
All expenses are corporate in nature.
<PAGE>
Wincanton Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and capital resources
At December 31, 1996, the Registrant had $35,860 of current assets and
$8,463,218 of current liabilities compared to $1,316,650 of current assets and
$9,384,791 of current liabilities as at December 31, 1995. This decrease in
working capital is the result of several factors:
o current liabilities also include $1,250 due to a director of the
Registrant. This amount bears no interest, is unsecured and is
repayable on demand. The amount due from a director was $1,018,948 as
at December 31, 1995. Of the amounts due from a director, $593,981 was
written-off as uncollectable at June 30, 1996.
o current liabilities include accounts payable and accrued liabilities of
$8,463,218 compared to $9,384,791. The decrease in payables is mainly
due to the payment 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
December 30, 1996 and the balance of $6,950,000 is included in accounts
payable at December 31, 1996. Accounts payable also include a
$1,500,000 liability under a licence agreement.
o income taxes payable were nil compared to $166,095 the year
before. The change in taxes payable is the result of Wincanton (Aust)
Pty Ltd. being discontinued.
o Mortgage payable decreased to nil from $600,775 the prior year. The
decrease is due to Wincanton (Aust) Pty Ltd. being discontinued.
The Registrant is active only in defending itself against the aforementioned law
suite. Future operations will include developing its interests in marketing,
licences 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 sale of additional capital stock of the Registrant
although there can be no assurance that the Registrant will be able to obtain
such funds.
<PAGE>
Results of Operations
Six month period ended December 31, 1996 compared to the year ended June 30,
1996.
The Registrant's loss for the six month period ended December 31, 1996
was $165,897 compared to a loss of $1,800,760 for the year ended June 30,
1996.
Administrative expenses for the six month period ended December 31, 1996 were
$165,897 compared to $1,758,630 for the year ended June 30, 1996, such
difference due to the Registrant's inactivity except for the legal defense of
the aforementioned law suite.
<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 December 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 defendants 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.
On April 29, 1997, Work Recovery, Inc. brought a suite against the Registrant
for collection of $6,750,000 plus interest and attorneys' fees, due under a
Consulting Agreement entered into on July 1, 1994. The Registrant will defend
the action. The Registrant is unable to confirm whether these consulting
services were actually performed by Work Recovery, Inc. and is contemplating an
attempt to recover the $2,850,000 already paid.
<PAGE>
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
/s/ Walter Doyle
----------------------------
Walter Doyle, President
(Registrant)
Date: July 8, 1997 /s/ Henri Hornby
------ -----------------------------
Henri Hornby, Director
