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, 19
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. 9,077,752
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Consolidated Balance Sheet
(Expressed in U.S. dollars)
as at March 31, 1998
(unaudited, prepared by management)
1998 1997
Current assets:
Cash $ 14,246 20,419
Amounts and notes receivable and deposits
(note 3) 19,414 13,613
Due from a director - 3,900
33,660 37,932
Resource properties (note 5) - 1
Investments and advances (note 6) - 20
Capital assets (note 7) 169,148 171,678
$ 202,808 209,631
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 7,251,455 8,540,370
Unearned revenue (note 3) 5,005,251 5,005,251
Due to a director (note 4) 275,000 -
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:
9,077,752 common shares
(March 31, 1997 - 9,287,752) 834 835
4,195,895 preferred shares
(March 31, 1997 - 4,195,895) 5 5
Additional paid-in capital 6,494,596 6,494,596
Cumulative translation adjustment - (14,635)
Deficit accumulated during
the development stage (18,824,333) (19,816,791)
(12,328,898) (13,335,990)
202,808 209,631
See accompanying notes to consolidated financial statements.
<PAGE>
WINCANTON CORPORATION
(a company in the development stage)
Consolidated Statement of Operations and Deficit
(Expressed in U.S. dollars)
(unaudited, prepared by management)
From inception
on October 5, Nine months
1987 to ended Year ended Year ended
March 31, March 31, June 30, June 30,
1998 1998 1997 1996
Exploration and
development
expenditures $184,735 - 1,864 26,783
Administrative expenses:
Financing costs 49,306 - - -
Joint venture operations 96,002 - 13,644 15,841
Consulting and other
fees 10,391,197 - - 442,571
Other 742,318 4,327 27,051 335,582
Professional fees 1,149,733 58,902 159,149 561,591
Promotion 216,047 - 1,531 32,016
Research and development 437,233 - - 100
Travel and entertainment 621,031 - 22,496 173,733
Wages 381,913 - 96,000 197,196
14,084,780 63,229 319,871 1,758,630
Other income (expenses)
Unrealized loss on
available for sale
securities (101,428) - - -
Loss on sale of capital
assets (86,832) - - (86,832)
Write-off of Real Estate
Options (note 11) (2,684,537) - - -
Write-off of advances (1,223,203) - 37,934 (793,481)
Write-off of license (1,500,000) - - -
Legal settlement costs (400,000) - (400,000) -
Loss on sale of
investments (64,305) - - (35,691)
(6,060,305) - (362,066) (916,004)
<PAGE>
Loss before discontinued
operations and non-controlling
interest (20,329,820) (63,229) (683,801) (2,701,417)
Minority interest in
loss of subsidiary 212,477
Loss before discontinued
operations (20,117,343) (63,229) (683,801) (2,701,417)
Income from discontinued
operations 1,476,402 1,485,899 - 900,657
Gain (loss) for the
period (18,640,941) 1,422,670 (683,801) (1,800,760)
Deficit accumulated during the
development stage,
beginning of period - (20,247,003)(19,563,202) (17,762,442)
Redemption of minority
interest in subsidiary (183,392) - - -
Deficit accumulated during
the development stage,
end of period $(18,824,333) (18,824,333)(20,247,003) (19,563,202)
Gain (loss) per share$ 0.16 (0.07) (0-19)
See accompanying notes to consolidated financial statements.
WINCANTON CORPORATION
(a company in the development stage)
Consolidated Statement of Changes in Financial Position
(Expressed in U.S. dollars)
(unaudited, prepared by management)
From inception
on October 5, Nine months
1987 to ended Year ended Year ended
March 31, March 31, June 30, June 30,
1998 1998 1997 1996
Cash provided by (used in)
CONTINUING OPERATIONS
Operations:
Loss from continuing
operations $(20,117,343) (63,229) (683,801) (2,701,417)
Items not involving cash
Amortization of
organization costs 515 - - -
Expenses paid by stock
issuance 60,000 - - -
Write off of advances for
research and development 50,780 - - -
<PAGE>
Write off of options to
purchase real estate 2,684,537 - - -
Write-off of advances 1,223,203 - (37,934) 793,481
Write-down of license 1,500,000 - - -
Loss on sale of
capital assets 86,832 - 86,832 -
Loss on sale of investments 35,691 - - 35,691
Other 1,742 129 94 -
Change in non-cash operating
working capital:
Amounts and notes
receivable and deposits 3,109,586 (8,486) 5,280 2,669,861
Due from (to) a director 327,429 275,000 138,699 (100,765)
Accounts payable and
accrued liabilities 7,950,194 (226,845) 545,254 (199,886)
(3,086,834) (23,431) (32,408) 583,797
DISCONTINUED OPERATIONS
Income (loss) from
discontinued operations
(note 12) 1,476,402 1,485,899 - 900,657
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 (684,198) (1,485,460) - -
Income taxes payable - - - (166,095)
Proceeds on sale of
capital assets 391,701 - - 391,701
Proceeds on sale of
investments 148,629 - - 148,629
Long-term debt - - - (688,500)
Investments (736,435) 20 - -
Capital assets (762,325) 2,530 - (12,343)
Unearned revenue 692,000 - - (1,530,000)
Other 31,921 - - 31,921
923,633 2,989 - (558,092)
Financing:
Unearned revenue 630,827 - - (2,000,000)
Redemption of minority
interest in subsidiary (183,392) - - -
Additional paid in
capital 1,682,774 - - -
Issue of capital stock 2,024,147 (1) - -
4,154,356 (1) - (2,000,000)
Investments:
Options (143,645) - - -
Resource properties - 1 - -
Investments and
advances (1,547,882) - 35,000 (136,500)
Capital assets (321,989) - - (7,962)
<PAGE>
Proceeds from sale of
capital assets 16,436 - - 16,436
Proceeds from sale of
investments 20,686 - - 20,686
Organization costs (515) - - -
(1,976,909) 1 35,000 (107,340)
Increase (decrease)
in cash 14,246 (20,442) 2,592 (2,081,635)
Cash, beginning of period - 34,688 32,096 2,113,731
Cash, end of period 14,246 14,246 34,688 32,096
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, 1998
(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:
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.
The Corporation is investigating and evaluating various assets, properties
and business opportunities. Accordingly, continuing operations are dependent
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 and it's subsidiary, Tradesman.
All significant inter-company transactions and balances have been eliminated.
<PAGE>
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.
(c) Investments, advances and licenses
Investments, advances and licenses consist of investments in shares of
companies, which are available for sale, advances to individuals and
companies, and licenses. 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 licenses are recorded at cost and are
written-down to reflect permanent impairment in value.
2. Significant accounting policies, continued:
(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.
(a) Translation of foreign currencies:
Account balances and transactions denominated in foreign currencies and the
accounts of the Corporation's foreign operations have been translated into
U.S. funds, as follows:
<PAGE>
(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) Gain (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, 1998 and 1997
being 9,077,752 and 9,287,752 respectively.
3. Amounts and notes receivable and deposits
As at March 31, 1998, the Corporation had the following amounts and notes
receivable and deposits:
1998 1997
Work Recovery, Inc. $ 1 1
Other amounts receivable 6,000 13,612
$ 6,001 13,613
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 40,116 of the common shares received and has recorded the value
of the common shares in WRI at $1.
<PAGE>
The revenue of $5,005,251 recorded on the sale of the marketing fights has
been reflected as unearned. These amounts will be recognized as revenue on a
straight line basis as the performance criteria under the license 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 license 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,
1998. 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 recover
any of the amounts. 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.
During the quarter ended September 30, 1997, WRI was awarded a default
judgement against the Company in the amount of $6,750,000. The Company has
retained counsel and has successfully reopened the default judgement.
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 forestry land and improvements to
Dominion Estates Ply Ltd., a company related to a director of Wincanton
(Aus), in exchange for amounts owing. Dominion Estates Ply 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 a Director
Amounts due to a director and to companies controlled by a director bear
interest at 10% per annum. The loan is secured by the assets of the Company.
5. Resource properties:
During the quarter ended September 30,1997, the Company sold all of it's
interest in Queensland Industries, Inc. to a director of the Company, for
nominal proceeds.
<PAGE>
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 ($1 83,392
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:
lnvestment Advances Total Total
1998 1996
Thanksmate Pty. Ltd.(a) $ - - - -
Saddle Mountain Mining Corp.(b) - - - -
Work Recovery, Inc. license (c) - - - 20
Other (d) - - - -
$ - - - 20
(a) Thanksmate Ply 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 $1 00. The license was subsequently
transferred to Tradesman and written-off to research and development in
fiscal 1996.
During the year ended June 30, 1 995, a claim was filed against Tradesman for
alleged misappropriation 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.
<PAGE>
(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, l995. These shares were sold during fiscal l996 for
a further loss of $623,517.
(c) Work Recovery, Inc.
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 minimum 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, 1998, the $1,500,000 remained unpaid and management does not believe the
advance will be paid.
During the quarter ended September 30, 1997 the Company sold all of its
interest in Queensland Industries, Inc.
(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, l996 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)which has been paid.
Consequently, as at June 30, 1996, $199,500 (1995 - $294,651) has been
written-off to operations.
<PAGE>
7. Capital assets:
March 31, March 31,
1998 1997
Accumulated Net book Net book
cost Depreciation value value
Land $ - - - -
Plantation assets - - - -
Vehicles 169,148 - 169,148 169,148
Equipment - - - 2,530
$169,148 - 169,148 171,678
8. Mortgage payable:
The purchase price for the land and plantation assets was $1,000,000 AUD
($740,000 US), payable as to $300,000 AUD ($222,000 US) on signing and the
balance payable in installments 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. The shares have been returned to the company and cancelled
by the transfer agent.
9. Capital stock and additional paid-in capital:
Capital stock issued from incorporation of the Corporation on October 5, 1987
to March 31, 1998
(a) Common Stock
Common stock Additional
Shares Amount paid-in capital Total
1987 Issued for cash at $0.10 per share,
net of offering costs
of $500 100,000 10 $ 9,490 $ 9,500
1988 lssued 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 $.0l per share 13,384 1 40,151 40,152
Issued for cash
at $.0l per share 140,000 14 349,986 350,000
Issued for licenses 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
<PAGE>
Issued in exchange 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 June 30, 1995,
1996 and 1997 9,287,752 $ 835 $6,494,596 $6,495,431
Security on mortgage
shares cancelled (210,000) $ (1) $ (1)
(Note 8 )
Balance March 31, 1998 9,077,752 $ 834 $6,494,596 $6,495,430
(b) Preferred stock
Shares Amount
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
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.
<PAGE>
(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. lnvestment 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,
1998 1997
Cash $ - 2,351
Accounts receivable and deposits - 7,543
Resource properties - 1
Equipment - 2,530
Ventures equity and advances $ - 12,425
Exploration expenditures $ - -
Administrative expenses - -
During the quarter ended September 30, 1997 the Company sold all of its
interest in Queensland Industries, Inc.
11. Write off of Real Estate Options:
On March 2,1995, the Corporation, through its wholly owned subsidiaries,
Wincanton Properties Pty. Ltd. and Wincanton Holdings Ply Ltd., 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:
Property name Option Preferred shares issued
purchase price
$ AUD $ USD of shares
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
<PAGE>
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 (Aus) Ply 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.
During the quarter ended September 30,1997 the Company sold all of its
interest in Queensland Industries, Inc. to a director. At September 30, 1997
there were assets of $1,251 and liabilities of $1,503,1 1 0. The Company's
remaining investment in and advances to Queensland were written-off.
13. Income taxes
At March 31, 1998, 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
United States
Losses - expiring 2000 to 2009 $450,000
Amounts deducted for tax purposes
in excess of amounts deducted for
accounting 5,015,000
$5,465,000
<PAGE>
14. Contingency
(a) 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 plaintiffs 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.
During the year ended June 30,1997 the action was stayed pending full payment
by the Company of $400,000 by May 28,1998. Under the settlement agreement,
the Company is required to pay $300,000 in cash by May 28,1998 and repurchase
1,000,000 common share of the Company from the plaintiff for $100,000 by May
28, 1998. Upon payment in full, the Company will be dismissed with
prejudice. If payment in full is not made, plaintiffs have the fight to
continue the litigation. The Company has made all payments to March 31,
1998 and has included the balance to be paid, $100,000 in accounts payable
and accrued liabilities as at March 31, 1998.
(b) During the quarter ended September 30, l997, WRI was awarded a default
judgement against the Company in the amount of $6,750,000. The Company has
retained counsel and has successfully reopened the default judgement.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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.
During the Quarter ended September 30, 1997, the action was stayed pending
full payment by the Registrant of $400,000 by May 28, 1998. Under the
Settlement Agreement, the Registrant is required to pay $300,000 in cash by
March 28, 1998 and repurchase 1,000,000 common shares of the Registrant by
May 28, 1998. Upon payment in full, the Registrant will be dismissed with
prejudice. If payment is not made, plaintiffs have the right to continue
the litigation. The Registrant has made all payments required to March 31,
1998 and has included the balance owing of $100,000 in accounts payable and
accrued liabilities at March 31, 1998.
<PAGE>
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.
During the Quarter ended September 30, 1997, Work Recovery, Inc. was awarded
a default judgement against the Registrant in the amount of $6,750,000. The
Registrant has retained counsel and during the quarter ended March 31, 1998
has successfully caused the default judgement to be removed and has responded
to the original complaint.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities None
None
Item 4. Submission of Matters to a Vote of Security Holders None
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.
Wincanton Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and capital resources
At March 31, 1998, the Registrant had $33,660 of current assets and
$7,251,455 of current liabilities compared to $37,932 of current assets and
$8,540,370 of current liabilities as at March 31, 1997. This change in
working capital is the result of several factors:
current assets went down from $37,932 to $33,660.
current liabilities include accounts payable and accrued liabilities of
$7,251,455 compared to $8,540,370. The decrease in payables is mainly due
to the sale by the Registrant of Queensland Industries, Inc. and the
resultant reduction in accounts payable and accrued liabilities on
Queensland's account. Queensland was sold to a director of the Registrant
for nominal consideration. The Registrant has included in accounts payable
the unpaid amount due, $100,000 in settlement of the Page lawsuit settlement.
<PAGE>
The Registrant is active only in defending itself against the lawsuits
described in Part II. Future operations will include 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. 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, 1998 compared to the year ended June 30,
1997.
The Registrant's gain for the nine month period ended March 31, 1998 was
$1,422,670 compared to a loss of $683,801 for the year ended June 30, 1997.
Administrative expenses for the nine month period ended March 31, 1998 were
$63,229 compared to $319,871 for the year ended June 30, 1997, such
difference due to the Registrant's inactivity except for the legal defense of
the aforementioned law suite.
Income from discontinued operations includes a gain on the sale of Queensland
Industries, Inc. which was sold to a director of the Registrant during the
quarter ended September 30, 1997 for nominal proceeds. The gain results
from the reduction in account payable and accrued liabilities, which remain
on the accounts of Queensland.
<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)
Friday, May 01, 1998
Henri Hornby
Henri Hornby, Director/President
Neil F. Honrby
Neil F. Hornby, Director/Secretary
