<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
March 31, 1997 0-20101
WINNERS ALL INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3545304
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 N.W. 44 Street Suite 2H, Ft. Lauderdale, Florida 33309
(Address of principal executive offices (Zip Code)
(954)561-0009
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X___ No _____
The number of shares of common Stock, par value $.01 per share, outstanding as
of March 31, 1997 is 18,416,813 shares.
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WINNERS ALL INTERNATIONAL, INC.
INDEX TO FORM 10-QSB
MARCH 31, 1997
PART I - FINANCIAL INFORMATION
PAGE #
------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations-
Three Months Ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9-11
Item 2. Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
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WINNERS ALL INTERNATIONAL, INC AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 473 $ --
Deposit on Investment 297,750 --
----------- -----------
Total Current Assets 298,223 --
----------- -----------
Property and Equipment, Net -- --
Other Assets:
Investment in Wholly-Owned Subsidiary 1,050,000 --
Investment in Int'l Distribution Agreement 30,000 --
----------- -----------
Total Other Assets 1,080,000 --
----------- -----------
$ 1,378,223 $ --
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable and Accrued Expense $ 848,428 $ 870,078
----------- -----------
Total Current Liabilities 848,428 870,078
----------- -----------
Commitments and Contingencies -- --
Stockholders' (Deficit) Equity:
Preferred stock, $1.00 par value, 2,000,000 Shares
Authorized. Series A Convertible, 750,000 Shares
Authorized; Issued; and Outstanding, 62,500 Shares
Unconverted March 31, 1997, 62,500 Shares
Unconverted at December 31, 1996 55,035 55,035
Common Stock $.01 Par Value, $60,000,000
Shares Authorized; 17,279,756 Shares Issued
and Outstanding March 31, 1997; 14,471,756
Shares Issued & Outstanding December 31, 1996 172,787 144,717
Additional Paid-in-Capital 9,401,544 8,026,114
Accumulated (Deficit) (9,099,571) (9,095,944)
Total Stockholders' (Deficit) Equity 529,795 (870,078)
----------- -----------
$ 1,378,223 $ --
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
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WINNERS ALL INTERNATIONAL, INC AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES $ -- $ --
------------ ------------
COST AND EXPENSES
Royalty Expense -- --
General and Administrative 3,627 26,175
Depreciation and Amortization -- --
------------ ------------
3,627 26,175
------------ ------------
OPERATING (LOSS) (3,627) (26,175)
OTHER INCOME (EXPENSE) -- --
------------ ------------
NET (LOSS) $ (3,627) $ (26,175)
============ ============
NET (LOSS) PER COMMON SHARE $ (0.000) $ (0.002)
============ ============
AVERAGE SHARES OUTSTANDING 15,875,756 14,471,756
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
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WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
----------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (3,627) $(26,175)
Adjustments to Reconcile Net Loss to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization -- --
Changes in Assets and Liabilities:
Accounts Payable and Accrued Expenses (21,650) 26,175
----------- --------
Total Adjustments (21,650) 26,175
----------- --------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (25,277) --
----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on Investment (297,750) --
Investment in Wholly-Owned Subsidiary (1,050,000) --
Investment in Int'l Distribution Agreement (30,000) --
----------- --------
NET CASH (USED) BY INVESTING ACTIVITIES: (1,377,750) --
----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Stock 1,403,500 --
----------- --------
NET INCREASE (DECREASE) IN CASH 473 --
CASH AT THE BEGINNING OF YEAR -- --
----------- --------
CASH AT END OF YEAR $ 473 $ --
=========== ========
Supplemental Cash Flow Data:
Non-cash Financing Activities
Acquisition of Subsidiary $ 1,050,000 $ --
=========== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WINNERS ALL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
(UNAUDITED)
PART 1. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CURRENT EVENTS
On February 17, 1997, Winners All International, Inc. (the "Company")
made a determination to change its former fiscal year of July 31 to
December 31.
The Company was operationally inactive from August 1, 1995 to January 26,
1997. The Company has been holding regular Board meetings to restructure
its operations, transact business to rebuild shareholder value, settle
outstanding former legal matters, and bring its Securities Exchange
Commission filing requirements and other compliance matters and records
current.
On January 29, 1997, a Special Meeting of the Board of Directors,
recognized and resolved, that as a result of permanent impairment of
operational assets, a measurement date of January 29, 1997 was established
to abandon former operations effective for year ended July 31, 1995.
On January 28, 1997, the Company entered into an Acquisition Agreement with
Perma Seal wherein the Company purchased all of the issued and outstanding
capital stock of Perma Seal consisting of 1,000 shares of common stock,
with a par value of $.01 per share, in exchange for 2,100,000 shares of
common stock of the Company.
On February 23, 1997, the Company, pursuant to a January 28, 1997
acquisition agreement with Perma Seal International, Inc. ("Perma Seal"),
authorized the issuance of 2,100,000 shares of common stock of the Company
in exchange for all of the issued and outstanding capital stock of Perma
Seal consisting of 1,000 shares, $.01 per value, of common stock.
Accordingly, Perma Seal is a wholly-owned subsidiary of the Company.
February 21, 1997, pursuant to a February 4, 1997 letter of intent, Perma
Seal completed negotiations which resulted in a stock purchase agreement
with Envio Dynamics Corporation ("Envio Dynamics"). Perma Seal will acquire
a 75% stock interest, amounting to 3,750,000 shares, of the authorized
common voting stock of Envio Dynamics in exchange for $750,000. As of April
30, 1997, approximately $450,000 has been paid. The 3,750,000 shares have
been placed in escrow until
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CURRENT EVENTS (CONTINUED)
the remaining $300,000 is paid. Accordingly, the $450,000 previously paid
by Perma Seal to Envio Dynamics will be recorded as a deposit on the books
of Perma Seal until the shares are released from escrow. Upon the exchange
of the shares, Envio Dynamics will be accounted for as a majority (75%)
owned subsidiary of Perma Seal.
On March 21, 1997, Perma Seal entered into a purchase and sale agreement
with the Essex Chemical Corporation ("Essex Chemical") to acquire the land,
building, and equipment, located at 1521 Industrial Drive, Griffin,
Georgia, for $375,000, with a closing date of May 1, 1997. The current
expected closing, as amended, is anticipated to be no later than May 30,
1997, unless extended by mutual agreement by both parties.
On February 20, 1997, the Company adopted a "1997 Non-Statutory Stock
Option Plan" (the "Plan") to aid in attracting and retaining persons to
assist in the development and success of the Company. This Plan provides
for the issuance of non-statutory stock options and is not intended to
qualify as "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code. The purchase price of each share of stock within
this Plan shall not be less than 20% of the fair market value of such
shares on the date the option is granted. The fair market value of a share
on a particular date shall be deemed to be the average of the high-bid and
high-asked prices. Pursuant to the Plan, the Company entered into a
contract with Stanley Merdinger to perform business, consulting and related
services for the Company. In consideration for his services, he will
receive one million shares of stock with an option to purchase two million
additional shares.
On April 4, 1997, the Board of Directors of the Company authorized
management to commence negotiations to acquire 100% of the outstanding
common stock of Designer Wear, Inc. Designer Wear, Inc., a Florida
corporation, is a privately held development stage company, organized
August 1996, which has as its principal business and sole assets, (a) a
worldwide license for the use of the name, likeness and image of the late
American actor James Dean on socks; and, (b) a joint venture for the
worldwide promotion, development and marketing of the trademark "Smith and
Wesson" on apparel and accessories. Howard Weiser, officer and director of
the Company, is also officer, director and stockholder of Designer Wear,
Inc.
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Winners All
International, Inc. have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments
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considered necessary for a fair presentation (consisting of normal
recurring accruals) have been included. Operating results for the three
months ended March 31, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
While the Company believes that the disclosures presented are adequate to
keep the information from being misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes included in the Company's
annual report on form 10-K for the five months ended December 31, 1996.
The accompanying unaudited consolidated financial statements include the
accounts of Perma Seal International Inc., and Winners All Limited (an
inactive subsidiary) for the three months ended March 31, 1997. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Investments in subsidiaries are accounted for on the equity method.
NOTE 2 - ACQUISITION OF PERMA SEAL INTERNATIONAL, INC.
On February 23, 1997, the Company, pursuant to a January 28, 1997
acquisition agreement with Perma Seal International, Inc. ("Perma Seal"),
authorized the issuance of 2,100,000 shares of common stock of the Company
in exchange for all of the issued and outstanding capital stock of Perma
Seal consisting of 1,000 shares, $.01 per value, of common stock.
Accordingly, Perma Seal is a wholly-owned subsidiary of the Company.
The net asset acquired by the Company from Perma Seal consisted of a
distribution agreement valued at cost of $30,000 and secured by a
promissory note. No amortization of this cost has been provided until
revenues are recognized.
The value of the acquisition of Perma Seal was determined by the number of
shares issued times the average bid and asked prices at the time of
issuance of the shares. For accounting purposes, the Company has recorded
the acquisition as a purchase.
8
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND
FINANCIAL CONDITIONS
RESULTS OF OPERATIONS
Quarter ended March 31, 1997 as Compared to the Quarter Ended March 31, 1996
The Company was operationally inactive from August 1, 1995 through January
26, 1997. On January 29, 1997, a Special Meeting of the Board of Directors
was held. Discussions were centered on reorganizing the affairs of the
Company, transacting business in an effort to rebuild shareholder value,
settle all outstanding matters, and to bring business records up to date.
During that same meeting, the Board of Directors recognized and resolved
that, as a result of the permanent impairment of former operational assets,
a measurement date of January 29, 1997 was established to abandon former
operations effective for the year ended July 31, 1995.
The Company incurred insignificant expenses for the quarter ended March 31,
1997. These expenses arose from the Company's efforts in establishing new
business opportunities. Expenses incurred for the quarter ended March 31,
1996 are attributed to the costs of winding down former operations.
FINANCIAL CONDITIONS
The Company has suffered recurring losses from former operations resulting
in an accumulated deficit of $(9,099,571). In addition, management of the
Company has established a "measurement date" of January 29, 1997, to
abandon former operations effective for the year ended July 31, 1995.
Management believes that the abandonment of former operations is the first
step necessary in restructuring the Company towards future profitable
activities.
The Company, currently does not have the liquidity or capital resources to
fund Perma Seal or Envio Dynamics without raising capital either from
borrowing or from the sale of additional shares of stock. In 1997, the
Company has raised approximately $500,000 through the registration and sale
of additional shares of common stock. The Company is raising further
financing through the sale of additional shares of stock. Management is
continuing to negotiate with vendors to resolve all claims resulting from
former operations.
The Company also anticipates further sources of financing from letters of
credit/ These letters of credit are related to the ten month delivery
schedule for 1,000,000 gallons of sealant product. Pursuant to a purchase
order, the anticipated order gross sales price will be $18 million. This
transaction is described in the December 31, 1996 Form 10K.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(A) Stanley Farber, plaintiff, filed a complaint in the Circuit Court of
the Seventeenth Judicial Circuit in and for Broward County, Florida on July
25, 1996. Plaintiff is suing the Company and Davidoff and Molito, former
legal counsel for the Company, for breach of purported executive employment
contract. As a result of the absence of counsel on behalf of the Company, a
motion for final default judgment was granted and a hearing date of June
19, 1997 was established to determine damages. The Company has hired new
counsel to negotiate a settlement or appeal the judgment. Management
believes potential damages to be between $50,000 and $150,000. The outcome
of these proceedings cannot be determined at the present time.
(B) Several lawsuits, in Florida and Georgia, have been recorded against
WinNet, a member of the WinNet joint venture, and the Company. Management
is of the opinion these lawsuits are without merit and expects to file a
motion to dismiss plaintiffs' complaints.
(C) On March 22, 1996, Raymond Kalley, as trustee of the EB Trust and PB
Trust (Plaintiff), sued the following in the Southern District of Florida
(Miami Division): The Company, UC'NWIN Systems Corporation, a consultant to
UC'NWIN Systems Corporation and a beneficiary to the EB and PB Trusts. In
this five-count complaint, Plaintiff sued the Defendants for alleged
violations of Section 18 of the Securities Act of 1934. Plaintiff alleges
that the Defendants, singly and in concert, filed misleading reports under
the Securities Exchange Act of 1934, including without limitation, the
filing of Form 10K. Plaintiff failed to identify which Form 10K was
allegedly misleading or how Plaintiff has been damaged by this alleged
misleading statement. Although Plaintiff alleges that it purchased stock in
UC'NWIN Systems Corporation for approximately $1,000,000, the Plaintiff
does not identify the damage that it allegedly incurred. The Company
believes this lawsuit is without merit and intends to defend this lawsuit
vigorously and expects file a motion to dismiss Plaintiff's complaint. The
outcome cannot be determined at the present time.
(D) On April 17, 1995, AG Industries sued Winners All International, Inc.
and UC'NWIN Systems Corporation for a breach of contract and causes of
action for unjust enrichment and breach of implied contract. AG Industries
seeks damages in excess of $400,000. On August 22, 1995 the Company filed a
Motion to Dismiss and Alternative Motion for a Change of Venue. AG
Industries has responded and opposed the Defendants' motion but the Court
has not yet ruled on it. There has been no further discovery and the
outcome cannot be determined at the present time.
(E) The Company had entered into a five-year employment agreement, with
Brian Travis, a former president, who was a major stockholder, expiring
August 31,
10
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CURRENT EVENTS (CONTINUED)
1998. The employment agreement provides for a base salary of $90,000. In
May 1995, the Company and the former president mutually agreed to terminate
his employment agreement.
In June 1995, the Company engaged outside counsel to make inquiries
concerning certain unauthorized transactions of the Company: (1) Of
compensation and commissions to Brian Travis, the former president, and his
affiliate (Arrow Capital) aggregating approximately $400,000; (2) Involving
other unauthorized activities of the former president as principal of
WinNet, an affiliated entity, in which the Company has a 49% equity
interest, wherein such affiliate made unauthorized purchases of
approximately 50,000 shares of the Company's common stock; (3) For
transactions involving approximately $250,000 for services redeemed by
certain unrelated party entities.
On July 26, 1995, the Company initiated a lawsuit, against the former
president and Arrow Capital, to recover unauthorized payments of
commissions, related to the sale of Regulation S stock, in the amount of
$364,675.
On or about July 3, 1995, Brian Travis initiated a lawsuit against WIN
Network, LLC and Winners All International, Inc. In this action, Mr.
Travis seeks to enforce a purported employment agreement which he claims
was entered into between WIN Network, LLC and Mr. Travis in which Mr.
Travis claims he is entitled to a ten-year employment term and damages
of $10,000,000. Mr. Travis also sues Winners All International, Inc. as
a purported guarantor to the agreement. WIN Network, LLC is comprised
of UC'NWIN Systems, Inc. and Winners All Ltd., a subsidiary of Winners
All International, Inc.
On March 5, 1996, both defendants filed a motion to dismiss the Travis
action on the grounds that the purported employment agreement violated
applicable provisions of the New York Limited Liability Corporation Law,
the WIN Network, LLC operating agreement and Winners All International,
Inc.'s by-laws. As a result of financial restrictions, no further legal
activities were performed by the Company.
On January 29, 1997, the Board of Directors of the Company, due to
financial restraints, ratified that all past and current litigation, and
inquiries, against Brian Travis, shall cease. The Board recognized that all
current and future resources should be directed towards achieving the
objective of obtaining and operating future profitable ventures. Although
no formal settlement has been signed, management is of the opinion that all
litigation between the Company and Brian Travis has been mutually
terminated.
11
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ITEM 2. CHANGE IN SECURITIES - NONE
ITEM 3. DEFAULT UPON SENIOR SECURITIES - NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - PREVIOUSLY SUBMITTED
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SIGNATURES
In accordance with the Exchange Act, the registrant caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
WINNERS ALL INTERNATIONAL, INC.
(Registrant)
Date: May 21, 1997 By: /s/ Edgar M. Reynolds
-----------------------------------
Edgar M. Reynolds
President & Chief Executive Officer
Principal Accounting Officer
Date: May 21, 1997 /s/ Howard Weiser
-----------------------------------
Howard Weiser
Director, Secretary, Treasurer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 473
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 298,223
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,378,223
<CURRENT-LIABILITIES> 848,428
<BONDS> 0
0
0
<COMMON> 172,787
<OTHER-SE> 55,035
<TOTAL-LIABILITY-AND-EQUITY> 1,378,223
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,627
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,627)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,627)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,627)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
