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, 1998
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. 11,323,948
PART I
FINANCIALS
WINCANTON CORPORTION
(a company in the development stage)
Consolidated Balance Sheet
(Expressed in U.S. dollars)
as at September 30, 1 998
(unaudited, prepared by management)
1998 1997
Assets
Current assets:
Cash $ 3,172 14,733
Amounts and notes receivable
and deposits (note 3) 6,001 6,001
9,173 20,734
Capital assets (note 5) 169,148 169,148
$ 178,321 189,882
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
$ 2,000 7,433,907
Unearned revenue (note 3) 5,005,251
Due to a director (note 4) 7,300 100,000
Shareholders' equity (note 6)
Capital stock
Authorized:
15,000,000 preferred shares
15,000,000 common shares with a par
value of $0.0001 per share
Issued:
11,323,948 (September 30,1997 - 9,287,752)
1,059 835
4,195,895 preferred shares
(September 30,1997 - 4,195,895) 5 5
Additional paid-in capital 7,305,811 6,494,596
Deficit accumulated during
the development stage (7,137,854) (18,812,260)
169,021 (12,316,824)
178,321 189,882
See accompanying notes to consolidated financial statements.
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, Three months
1987 to ended Year ended Year ended
December 31, December 31, June 30, June 30,
1998 1998 1998 1997
Exploration and development
expenditures $184,735 - - 1,864
Administrative expenses:
Financing costs 99,372 50,066 - -
Joint venture
operations 96,002 - - 13,644
Consulting and
other fees 10,391,197 - - -
Other 692,589 6,625 (52,027) 27,051
Professional
fees 1,214,667 16,231 107,605 159,149
Promotion 216,047 - - 1,531
Research and
development 437,233 - - -
Travel and
entertainment 621,031 - - 22,496
Wages 381,913 - - 96,000
14,150,051 72,922 55,578 319,871
Other income (expenses)
Gain on debt settlement 6,746,499 6,746,499
Gain on write off of
Unearned revenue 5,005,251 5005,251
Unrealized loss on available for
sale securities (101,428) - - -
Loss on sale of
capital assets (86,832) - - -
Write-off of Real
Estate Options (2,684,537) - - -
Write-off of
advances (1,223,203) - - 37,934
Write-down of
license (1,500,000) - - -
Legal settlement
costs (400,000) - - (400,000)
Loss on sale of
investments (64,305) - - -
5,691,445 11,751,750 - (362,066)
Loss before discontinued operations and non-controlling interest
(8,643,341) 11,678,828 (55,578) (683,801)
Minority interest in loss of subsidiary
212,477
Loss before discontinued operations
(8,430,864) 11,678,828 (55,578) (683,801)
Income from discontinued operations
1,476,402 1,485,899
Gain (loss) for the period
(6,954,462) 11,687,828 1,430,321 (683,801)
Deficit accumulated during the development stage, beginning of period
- (18,816,682) (20,247,003) (19,563,202)
Redemption of minority interest in subsidiary
(183,392)
Deficit accumulated during the
development stage, end of period
$(7,137,854) (7,137,854) (18,816,682) (20,247,003)
Gain (loss) per share
$ 1.20 0.15 (0.07)
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, Three months
1987 to ended Year ended Year ended
December 31, December 31, June 30, June 30,
1998 1998 1998 1997
Cash provided by (used in)
CONTINUING OPERATIONS
Operations:
Loss from continuing operations
$(8,420,864) 11,678,828 (55,578) (683,801)
Items not involving cash
Expenses and accounts payable paid by stock issuance
871,539 811,539 - -
Write off of advances for research and development
50,780 - - -
Write off of options to purchase real estate
2,684,537 - - -
Write-off of advances
1,223,203 - - (37,934)
Write-down of license
1,500,000 - - -
Loss on sale of capital assets
86,832 - - -
Loss on sale of investments
35,691 - - -
Redemption of capital stock
(100) (100)
Other (55,175) - (57,303) 94
Change in non-cash operating
working capital:
Amounts and notes receivable and deposits
3,118,576 (2,212) 5,280
Due from (to) a director
69,226 (373,700 381,000 138,699
Accounts payable and accrued liabilities
762,595 (7,126,157) (288,287) 545,254
(3,088,411) (12,125) (22,380) (32,408)
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations (note 12)
1,476,402 - 1,485,899 -
Items not affecting cash:
Loss on sale investments
587,826 - - -
Gain on sale of plantation maintenance obligations
(221,888) - - -
Changes in non-cash working capital
Accounts payable and accrued liabilities
(693,695) - (1,485,460) -
Income taxes payable
- - - -
Proceeds on sale of capital assets
394,231 - 2,530 -
Proceeds on sale of investments
148,629 - - -
Longterm debt - - - -
Investments (736,435) - 20 -
Capital assets (764,855) - - -
Unearned revenue 692,000 - - -
Other 31,921 - - -
914,136 - 2,989 -
Financing:
Unearned revenue
630,827 - - -
Redemption of minority interest in subsidiary
(183,392) - - -
Additional paid in capital
1,682,774 - (1) -
Issue of capital stock
2,024,147 - - -
4,154,356 - (1) -
Investments:
Options (143,645) - 0 -
Resource properties - 1 - -
Investments and advances
(1,547,882) - 0 35,000
Capital assets (321,989) - 0 -
Proceeds from sale of capital assets
16,436 - 0 -
Proceeds from sale of investments
20,686 - 0 -
Organization costs
(515) - 0 -
(1,976,909) - 1 35,000
Increase (decrease) in cash
3,172 (12,125,838) 19,391) 2,592
Cash, beginning of period
- 15,297 34,688 32,096
Cash, end of period
$ 4,459 4,459 15,297 34,688
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)
September 30, 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 R's subsidiary, Tradesman. All significant inter-company
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) 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.
(c) Research and development costs
Research and development costs are charged to operations as incurred.
(d) Gain (loss) per share:
The loss per share is calculated based on the weighted average number of
shares outstanding during the six month period ended December 31, 1998 and
1997 being 9,745,832 and 9,287,752 respectively.
3. Amounts and notes receivable and deposits
As at September 30, 1998, the Corporation had the following amounts and notes
receivable and deposits:
1999 1998
Work Recovery, Inc. $ 1 1
Other amounts receivable 6,000 6,000
$6,001 6,001
Work Recovery, Inc.
The Corporation entered into an agreement with WRI to issue common shares
representing a 1 0% 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.
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 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 September
30, 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 R has determined
the liability has been legally dismissed.
During the year ended June 30, 1998+C465, 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.
4. Due to a Director
Amounts due to a director and to companies controlled by a director bear
interest at 1 0% per annum. The loan is secured by the assets of the Company.
Capital assets:
September 30 September 30
1998 1997
Accumulated Net book Net book
Cost Depreciation value value
Vehicles $169,148 - 169,148 169,148
6. Capital stock and additional paid-in capital:
Capital stock issued from incorporation of the Corporation on October 5, 1987
to September 30, 1998
(a) Common Stock
Common stock Additional
Shares Amount paid-in capital Total
1987 Issuedforcashat$0.10pershare, net of offering costs of $500
100,000 10 $ 9,490 $ 9,500
1988 Issuedforcashat$0.10pershare, 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
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 June 30,1998
9,077,752 834 6,494,596 6,495,430
Shares returned pursuant to the Page law suit
(1,000,000) (100) - (100)
Issued in exchange for debt
3,246,196 325 811,215 811,540
Balance September 30,1998
11,323,948 1,059 7,305,811 7,306,870
(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.
(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.
7. 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.
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 and advances to Queensland were written-off.
8. Income taxes
At September 30, 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
9. 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 shares of the Company from the plaintiff for
$1 00,000 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 right to continue the litigation. The Company The Company has fulfilled
its obligations and the law suit has been dismissed with prejudice.
(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. The Registrant
has fulfilled its requirements and has been dismissed with predjudice.
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 is
defending the action. The Registrant is unable to confirm whether these
consulting services were actually performed by Work Recovery, Inc. and is
contemplating anattempt 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 has successfully reopened the default
judgement.
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.
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 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 December 31, 1997, the action was stayed pending full
payment by the Registrant of $400,000 by May 28, 1998. The Registrant has
fulfilled its requirements and has been dismissed with prejudice.
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 is defending
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 December 31, 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 has successfully reopened the default
judgement.
During the Quarter ended December 31, 1998, the Registrant has negotiated a
settlement agreement and mutual release with Work Recovery, Inc. whereby Work
Recovery Inc. released all claims of action and causes for action against the
Registrant in exchange for a settlement payment of $5,000.
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.
Wincanton Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and capital resources
At December 31, 1998, the Registrant had $9,173 of current assets and $2,000 of
current liabilities compared to $20,734 of current assets and $7,401,455 of
current liabilities as at December 31, 1997.
Current assets went down from $20,734 to $9,173.
Current liabilities include accounts payable and accrued liabilities of $2,000
compared to $7,401,455. The decrease in payables is due to the settlement of
$811,540 of debt through issuance of 3,246,196 common shares and the negotiated
settlement with Work Recovery, Inc. whereby accounts payable in the amount of
$6,751,499 was settled for cash payment of $5,000.
The Registrant was 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 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.
Results of Operations
Six-month period ended December 31, 1998 compared to the year ended June 30,
1998.
The Registrant's profit for the Six month period ended December 31, 1998 was
$11,678,828 compared to a gain of $1,430,321 for the year ended June 30, 1998.
Administrative expenses for the Six month period ended December 31, 1998 were
$72,922 compared to $55,578 for the year ended June 30, 1998, such difference
due to the recording of interest on the amount due to a company controlled by a
director during the current period. The Registrant has been inactive except for
the legal defense of the aforementioned lawsuit.
As a result of the settlement agreement reached with Work Recovery, Inc., the
Registrant has recorded a gain on debt settlement of $6,746,499 and a gain on
write off of unearned revenue of $5,005,251.
During the year ended June 30, 1998, 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 for nominal proceeds. The gain
results from the reduction in account payable and accrued liabilities, which
remain on the accounts of Queensland.
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: February 16, 1999
Henri Hornby
Henri Hornby, Director
Neil F. Hornby
Neil F. Hornby, Director
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