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
September 30, 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)
3475 Sheridan Street, Suite #301, Hollywood, Florida 33021
---------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(954)964-5553
(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 September 30, 1997 is 29,003,675 shares.
========================================================================
WINNERS ALL INTERNATIONAL, INC.
INDEX TO FORM 10-QSB
SEPTEMBER 30, 1997
PART 1 - FINANCIAL INFORMATION
PAGE #
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations -
Nine Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Operations -
Three Months Ended September 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations 9
Financial Conditions 9-10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10-11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11-15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(DEVELOPMENT-STAGE COMPANIES)
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
ASSETS
September 30, December 31,
1997 1996
(Unaudited)
Current Assets:
Cash $ 1,966 $ -
Expense Advances 44,852 -
Stock Subscriptions Receivable 70,000 -
Notes and Loans Receivable 292,717 -
Inventory 3,582 -
Prepaid Expenses 22,367 -
--------------- ---------------
Total Current Assets 435,484 -
--------------- ---------------
Property and Equipment, Net 48,315 -
--------------- ---------------
Other Assets:
Deposits 13,880 -
Investment in Subsidiaries 3,559,980 -
Loans Payable 325,801 -
Investment - License and Option 1,000 -
Deferred Charges, Net 72,823 -
---------------- ----------------
Total Other Assets 3,973,484 -
---------------- ----------------
$ 4,457,283 -
================ ================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable
and Accrued Liabilities $ 1,018,594 $ 870,078
Loans Payable 308,468 -
------------------ -----------------
Total Current Liabilities 1,327,062 870,078
------------------ -----------------
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 September 30, 1997,
62,500 Shares Unconverted at
December 31, 1996. 55,035 55,305
Common Stock $.01 Par Value, 60,000,000
Shares Authorized; 29,003,675 Shares
Issued and Outstanding September 30,
1997; 14,471,756 Shares Issued &
Outstanding December 31, 1996 261,162 144,717
Additional Paid-in-Capital 13,507,773 8,026,114
Accumulated(Deficit) (10,693,749) (9,095,944)
------------- -------------
Total Stockholder' (Deficit)Equity 3,130,221 (870,078)
------------- -------------
$ 4,457,283 $ -
============= =============
SEE NOTES TO FINANCIAL STATEMENTS
3
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(DEVELOPMENT-STAGE COMPANIES)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Nine months ended September 30,
1997 1996
REVENUES $ - $ -
----------- ----------
COST AND EXPENSES
Cost of Product Development
and Demonstrations 45,362 -
Royalty Expense 2,500 -
General and Administrative 1,483,868 26,175
Depreciation and Amortization 10,075 -
----------- ----------
1,541,805 26,175
----------- ----------
OPERATING (LOSS) (1,541,805) (26,175)
OTHER INCOME (EXPENSE) (56,000) -
----------- ----------
NET (LOSS) $(1,597,805) $ (26,175)
------------ ----------
NET (LOSS) PER COMMON SHARE $ ( 0.074) $ (0.002)
----------- ----------
AVERAGE SHARES OUTSTANDING 21,737,716 14,471,756
============ ==========
SEE NOTES TO FINANCIAL STATEMENTS
4
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(DEVELOPMENT-STAGE COMPANIES)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended September 30,
1997 1996
REVENUES $ - $ -
----------- ----------
COST AND EXPENSES
Cost of Product Development
and Demonstrations 45,362 -
Royalty Expense 2,500 -
General and Administrative 873,503 26,175
Depreciation and Amortization 9,984 -
----------- ----------
931,349 26,175
----------- ----------
OPERATING (LOSS) (931,349) (26,175)
OTHER INCOME (EXPENSE) - -
----------- ----------
NET (LOSS) $ (931,349) $ (26,175)
----------- ----------
NET (LOSS) PER COMMON SHARE $ ( 0.038) $ (0.002)
----------- ----------
AVERAGE SHARES OUTSTANDING 24,487,716 14,471,756
========== ==========
SEE NOTES TO FINANCIAL STATEMENTS
5
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(DEVELOPMENT-STAGE COMPANIES)
CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
Nine months ended September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(1,597,805) $ (26,175)
Adjustments to Reconcile Net Loss to
Net Cash Provided (Used) by Operating
Activities:
Depreciation and Amortization 10,075 -
Changes in Assets and Liabilities:
(Increase) in Prepaid Expenses (8,345) -
(Increase) in Stock Subscriptions
Receivable (70,000)
(Increase) in Loans and Expense Advances (111,166) -
Increase in Accounts Payable, Accrued
Expenses and Payroll Taxes Payable (56,166) 26,175
(Increase) in Deferred Charges (16,000) -
---------- ---------
Total Adjustments (139,270) 26,175
---------- ---------
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES (868,809) -
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Note Receivable
(Terminated Stock Purchase Agreement) (250,000) -
Purchase of Equipment (25,626) -
Organization Costs Paid (208)
License and Option Agreement (1,000) -
Loans to Company being Acquired (136,268) -
Investment in Subsidiaries (3,643,710) -
Deposits (13,880) -
----------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES: (4,070,692) -
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Stock 5,598,114 -
Proceeds from Loans 192,753 -
----------- ---------
CASH FLOWS PROVIDED FROM FINANCING
ACTIVITIES 5,800,918 -
----------- ---------
NET INCREASE (DECREASE) IN CASH (6,849) -
CASH AT THE BEGINNING OF YEAR 8,815 -
----------- ---------
CASH - SEPTEMBER 30, 1997 $ 1,966 $ -
========== =========
Supplemental Cash Flow Data:
Non-cash Financing Activities
Acquisition of Subsidiaries 3,643,710 -
Consulting Fees 565,900 -
Debt Reduction 22,500 -
---------- ----------
Total Non-cash Financing Activities $ 4,232,110 $ -
=========== ==========
CASH PAID DURING THE YEAR FOR:
Interest $ 1,254 -
Income Taxes - -
----------- ----------
$ 1,245 -
=========== ==========
SEE NOTES TO FINANCIAL STATEMENTS
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(DEVELOPMENT-STAGE COMPANIES)
(UNAUDITED)
PART 1. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the
Registrant 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 considered
necessary for a fair presentation, (consisting of normal recurring
accruals) have been included. Operating results for the nine months
ended September 30, 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 Registrant 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 Urecoats International for the nine months ended
September 30, 1997 and Designer Wear for the three months ended
September 30, 1997, which represents the period subsequent to the
acquisition of Designer Wear by the Registrant. All significant
inter-company accounts and transactions have been eliminated in
consolidation.
Investments in subsidiaries are accounted for on the equity method.
(See Note 2)
7
NOTE 2 - ACQUISITION OF DESIGNER WEAR, INC.
On July 1, 1997, the Registrant closed its Acquisition Agreement dated
May 27, 1997 for Designer Wear, Inc., in which the Registrant acquired
99.95% of the issued and outstanding capital stock of Designer Wear,
consisting of 2,149,000 shares at $ .01 par value, of common stock, from
the Designer Wear shareholders solely in exchange for 5,370,000 shares
of the Registrant's restricted common stock. Accordingly, Designer Wear
is a majority-owned subsidiary of the Registrant. The net assets
acquired by the Registrant include (a) a worldwide license for use of
the name, likeness and image of the late American actor "James Dean" on
socks; and (b) a 49% interest in a joint venture with ROK International,
for the worldwide promotion, development and marketing of the trademark
"Smith and Wesson" on apparel and accessories. Advance Royalties under
the license are being amortized.
On July 18, 1997, Designer Wear entered into an Acquisition Agreement
with ROK International, Inc. The Acquisition Agreement was closed on
October 7, 1997. The results of this acquisition have not been included
in this quarter due to the Acquisition Agreement closing after September
30, 1997. Refer to the Form 8-K filed with the Securities and Exchange
Commission dated October 23, 1997, which is incorporated herein by this
reference.
The value of the acquisition of Designer Wear 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 Registrant
has recorded the acquisition as a purchase.
NOTE 3 - CONSULTANTS
The Registrant entered into consulting arrangements and agreements with
several consultants for assisting it in financial matters, public
relations, marketing, and developing its subsidiaries' business
operations. Each of the respective consultants were issued restrictive
common stock and/or cash for their consulting services. The value of
the consulting services, where restricted common stock of the registrant
was issued, was determined by the number of shares issued, times the
average bid and asked prices, at the time of issuance of the shares.
NOTE 4 - PRIVATE PLACEMENT
The Registrant offered a Private Placement for 3,000,000 shares of its
restricted common stock pursuant to Rule 505 under the Securities Act of
1933, as amended, on August 1, 1997. The stock sold was to "accredited
investors", as defined in Section 501(a) of Regulation D under the
Securities Act of 1933. The Private Placement was closed on September
30, 1997 with 2,211,919 shares being sold. The net proceeds received
from the private placement amounted to $180,894.00. The net proceeds
received on or before September 30, 1997, amounted to $87,494.00. The
remaining Net Proceeds amounting to $ 70,000.00 are reflected as
Subscriptions Receivable. The shares of restricted common stock have
been recorded at a price per share equal to the greater of (i) thirty
percent (30%) of the highest average bid price for the three (3)
business days prior to the date the fully executed Subscription
Agreement was received; or (ii) $.075 per share, whichever was greater.
8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION
AND FINANCIAL CONDITIONS
RESULTS OF OPERATIONS
Quarter ended September 30, 1997 as compared to the Quarter Ended
September 30, 1996:
The Registrant 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 centered on reorganizing the affairs
of the Registrant, transacting business in an effort to rebuild
shareholder value, settle all outstanding matters, and bring the
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 Registrant incurred significant expenses for the quarter ended
September 30, 1997. These expenses arose from the Registrant's
continued efforts in beginning its new business operations. Expenses
incurred for the quarter ended March 31, 1997, are attributed to the
costs of winding down former operations.
As stated elsewhere in this report, the Registrant's subsidiary entered
into a Purchase and Sale Agreement for the purchase of two new,
unlicensed, proprietary products, which utilize recycled crumb rubber
from used tires, and their related technologies. The costs of the new
Product will be reflected in the next quarter.
Urecoats International stopped delivery of its licensed product under
its purchase order to Ipseal de Mexico, S.A. de C.V. ("Ipseal"), in
Mexico, due to problems found with the licensed product formula after
it was applied. Ipseal was not charged for the initial delivery. The
costs and expenses relating to this delivery are reflected under costs
of goods sold.
Urecoats International performed product demonstrations. The costs and
expenses relating to these events are reflected under Cost of Product
Development and Demonstrations.
Urecoats International purchased a trailer, equipment, accessories, and
supplies, for the application of the licensed product. These
expenditures are reflected under Property and Equipment, Net on the
Balance Sheet.
Designer Wear did not have any revenues from the sale of its licensed
socks using the name, image and likeness of "James Dean" during the
quarter.
FINANCIAL CONDITIONS
The Registrant suffered recurring losses from former operations and
incurred new operational expenses and losses resulting in an
accumulated deficit of ($10,693,749). Management of the Registrant
established a "measurement date" of January 29, 1997, to abandon
9
former operations effective for the year ended July 31, 1995.
Management believed that the abandonment of former operations was the
first step necessary in restructuring the Registrant towards future
profitable activities.
The Registrant currently does not have the liquidity or capital
resources to fund its subsidiaries' business operations without
raising capital, either from borrowing or from the sale of additional
shares of stock. In 1997, the Registrant has raised approximately
$1,180,000.00 through the registration and sale of additional shares
of common stock. The Registrant is raising further financing through
the sale of additional shares of stock. The Registrant has also
borrowed approximately $300,000 for its new operations. Management is
continuing to negotiate with vendors to resolve all claims resulting
from former operations.
The Registrant continues to anticipates further sources of financing
from letters of credit for orders of Urecoats International's sealant
and coating products.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(A) From the former abandoned operations of the Registrant, 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 Registrant and Davidoff and
Molito, former legal counsel for the Registrant, for breach of
purported executive employment contract. As a result of the absence
of counsel on behalf of the Registrant, a motion for final default
judgment was granted and a hearing date of June 19, 1997 was
established to determine damages. Damages were determined to be
approximately $145,000 by the Court. Present Management hired new
counsel to appeal the judgment and/or negotiate a settlement. The
outcome of these proceedings cannot be determined, and negotiations
are continuing, at the present time.
(B) From the former abandoned operations of the Registrant, several
lawsuits in Florida and Georgia, were recorded against WinNet, a
member of the WinNet joint venture, and the Registrant. Present
Management is of the opinion that these lawsuits are without merit.
(C) From the former abandoned operations of the Registrant, 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 Registrant, UC'NWIN Systems
Corporation, a consultant to UC'NWIN Systems Corporation and a
beneficiary to the EB and PB Trusts. In this 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
10
stock in UC'NWIN Systems Corporation for approximately $1,000,000,
the Plaintiff does not identify the damage that it allegedly
incurred. Present Management believes this lawsuit is without
merit. The outcome cannot be determined at the present time.
(D) From the former abandoned operations of the Registrant, on
April 17, 1995, AG Industries sued the Registrant 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 Registrant
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. Present Management
has received nothing regarding further discovery on this matter
and the outcome cannot be determined at the present time.
(E) From the former abandoned operations of the Registrant, on
January 29, 1997, the Board of Directors of the Registrant, due to
financial restraints, ratified that all past and current litigation,
and inquiries, against Brian A. Travis, a former President of the
Registrant, shall cease. The Board recognized that all current and
future resources should be directed towards achieving the objective
of obtaining and operating future profitable businesses. Although
no formal settlement has been signed, present Management is of the
opinion that all litigation between the Registrant and Brian Travis
has been mutually terminated.
(F) From the former abandoned operations of the Registrant, present
Management was made aware of a judgment by Finova Capital Corporation
of approximately $11,000.00, entered in January 1997. Present
Management has negotiated a settlement of $8,500.00 and has paid
$1,000 towards this settlement.
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
CURRENT EVENTS
On October 15, 1997, the Registrant entered into an Agreement with
Millennium Holdings Group, Inc. ("Millennium Holdings"), a New York
Corporation, for corporate consulting services in the areas of mergers
and acquisitions, corporate finance, corporate financial relations,
introductions to other corporate relations companies and other
financial services ("Consulting Agreement"). The terms and conditions,
in relevant part, of the Consulting Agreement provide for compensation
to Millennium Holdings as follows:
(a) three hundred and seventy five thousand (375,000) shares
of the Registrant's restricted stock for three hundred and
seventy five dollars ($375.00) (the "Shares")upon execution
of the Consulting Agreement, with registration rights as
described below;
11
(b) two hundred thousand (200,000) registered options based
at the bid in lieu of services for Millennium Holdings one year
fee for consulting services;
(c) two hundred thousand (200,000 shares) registered options
at the bid the day the Consulting Agreement was signed;
(d) two hundred ad fifty thousand (250,000) registered options
at seventy-five cents ($ .75) good until October 15, 1999;
(e) three hundred thousand (300,000) registered options at one
dollar and fifty cents ($1.50) good until October 15, 1999; and
(f) one hundred and fifty thousand (150,000) registered options
at two dollars ($2.00) good until October 15, 1999.
Under the Consulting Agreement, in connection with the location and
identification of potential candidates for corporate merger and/or
acquisition, Millennium Holdings shall be entitled to receive
compensation in an amount equal to ten percent (10%) of the value of the
total price paid by the Registrant for any completed merger or
acquisition with an identity located and/or identified by Millennium
Holdings (the "Transaction"). One-half of Millennium Holdings' fee
shall be paid in cash and one-half in shares of the Registrant's
restricted stock, with "piggyback" registration rights as described
below. In the event no cash is paid in the Transaction, then the entire
fee shall be payable in shares of the Registrant's restricted stock;
should the Transaction involve all cash, then the entire fee to
Millennium Holdings shall be payable in cash.
Further, under the Consulting Agreement, should the Registrant file any
registration statement with the SEC for any of its securities to yield
gross proceeds of at least $1,000,000.00, at any time subsequent to the
date of execution of the Consulting Agreement, the Registrant shall
provide prior written notice of its intention to Millennium Holdings and
to any subsequent holder of any portion of the Shares, at written
request and direction of Millennium Holdings and/or subsequent holders,
shall thereupon be included in such registration statement. In the
event of NASD-registered broker-dealer executing a letter of intent to
conduct a firm commitment underwriting of the Registrant's securities,
with anticipated gross proceeds of at least $1,000,000.00, and shall
require that all of the Registrant's shareholders waiver registration
rights, Millennium Holdings will provide a written waiver of its
registration right.
On October 24, 1997, Perma Seal International, Inc. changed its name to
Urecoats International, Inc. ("Urecoats Inernational").
On October 30, 1997, Urecoats International entered into a Purchase
and Sale Agreement with Creative Chemical Company (3C), a company in
London, Ontario, Canada, for the purchase of two proprietary products,
which utilize recycled crumb rubber from used tires, and their related
technologies (hereinafter collectively referred to as "Product"). The
terms and conditions of the Agreement include an outright purchase
of the Product, for two payments of $25,000.00 in cash and $30,000.00
in the Registrant's restricted common stock. The issuance of
$30,000.00 of the Registrant's common stock will take place after the
first spray and application of the Product, which is expected to take
place during the month of November, and the remaining $25,000.00 in cash
will be paid when Urecoats International begins delivery under its
purchase order to Mexico with the new Product.
12
On June 13, 1997, Urecoats International, under its former name of
Perma Seal International, Inc., and Ultimate Urethane Roofing, Inc.
("Ultimate Urethane"), entered into a License and Option Agreement
("Agreement"), wherein Urecoats International was granted an exclusive
worldwide license, with options to purchase one hundred percent (100%)
of the capital stock of Ultimate Urethane, for a sealant and coating
manufacturing, distribution and application process, utilizing recycled
materials ("Process"), and to manufacture, use and/or sublicense or
cause to be manufactured, used and/or sublicensed that Process, from
Ultimate Urethane.
On October 6, 1997, Urecoats International, under its former name of
Perma Seal International, Inc., based on problems encountered with its
licensed formula, Ultimate Urethane Roofing, Inc. and Alan Robertson,
respectively, executed a Letter of Agreement and Amendment to the
License and Option Agreement dated June 30, 1997 (the "Agreements").
Under the Agreements, in part, the Parties agreed that the License and
Option Agreement would be a nonexclusive license, with no advance
royalties, effective July 1, 1997, Royalty payments at five percent
(5%), noncompetition in Mexico, cancellation of consulting
arrangement with Robertson, settlement of outstanding consulting fees,
advance royalty payments and expenses, and payment of $20,000.00 to
Robertson and Ultimate Urethane in four installments at $5,000.00 on
October 6, 1997, October 21, 1997, November 5, 1997, and November 19,
1997. The Advance Royalty payment made to Ultimate Urethane for July,
1997, will be reclassified as an expense for consulting services in the
next quarter due to the Agreements being executed after September 30, 1997.
On July 17, 1997, Urecoats International, Inc., under its former name
Perma Seal International, Inc., and Polymer Creation, Inc. ("Polymer
Creation"), had entered into a Commercial Lease and Option Agreement
("Commercial Agreement"), for 27.06 acres of land and a building and
all other improvements thereon situated in the City of Roberta, County
of Crawford, State of Georgia, described as the "Roberta Facility"
located at Route 2, Highway 341 South, Roberta, Georgia 31078. The
Commercial Agreement provides for an original term of one (1) year,
commencing August 1, 1997, and terminating on July 31, 1998, with up to
two (2) consecutive one (1) year renewal terms. The Commercial Agreement
is intended to be a Net Lease, whereas Urecoats International's
annualized net monthly cost is expected to be $6,778 per month. The
Commercial Agreement includes a Purchase Option for the Roberta Facility
within one year for $475,000.00. On August 15, 1997, Urecoats
International, under its former name of Perma Seal International, Inc.,
and Polymer Creation, amended the Commercial Agreement to have a
commencement date of August 15, 1997.
On July 26, 1997, Urecoats International, under its former name of Perma
Seal International, Inc., received a letter from the Crawford County
Commission, where it pledged to assist Urecoats International with the
infrastructure of Land, Accel and Decel Lanes, Water and Sewer Lines,
Other future Facilities, Buildings and Land needs, Financial Assistance
from the Roberta/Crawford County Development Authority, Rail Road Spur,
Power Lines, Tax Exemptions, Employment Requirements and Related Tax
Credits - Development Authority, Employment Tax Credits, and Sealant and
Coating Products, Tax Exemptions and Grants, in relation to Urecoats
International's start-up manufacturing, production and distribution
operations at the Roberta Facility. The Commercial Agreement described
13
above included initially, as part of the Net Lease payment, payment for
building taxes. The Crawford County Commission stated in its July 26,
1997 letter that no taxes on the building will be due for the 1997
calendar year. The Net Lease payment now amounts to $6,119.76 per
month.
On October 29, 1997, Urecoats International received a letter from the
Crawford County Commission, wherein Urecoats International was advised
that grant monies have been made available for the Roberta Facility
project, including funding for accel/decel lanes, paving of the streets
into the complex and existing building, water and sewer lines will be
provided, and fire hydrants will be placed at strategic locations. A
$250,000.00 grant has also been approved for some equipment for the
building provided that criteria required by the Department of Community
of Affairs can be met, which relates to employment of some low to
moderate income employees. Specialized training for certain skills will
also be provided at no cost to Urecoats International.
On July 10, 1997, Urecoats International, under its former name of Perma
Seal International, Inc., had entered into a Purchase Agreement with
EnviroEngineering, L.L.C., for the purchase of equipment for the Roberta
Facility, for $40,000.00 in cash. The terms and conditions of the
Purchase Agreement required a $5,000.00 down payment and the remaining
$35,000.00 upon delivery of the equipment at the Roberta Facility.
Urecoats International made the $5,000.00 down payment but has taken
delivery of the equipment at this time. An additional payment of
$3,780.00 has been paid to EnviroEngineering, L.L.C. for half of the
shipping costs, which are not included in the purchase price. The
$5,000.00 deposit and $3,780.00 for shipping are reflected as deposits
on equipment - Roberta Facility in the financial statements. Urecoats
International expects to pay for the equipment under the Purchase
Agreement out of the equipment grant described above.
On June 30, 1997, Urecoats International, under its former name of Perma
Seal International, Inc., and Envio Dynamics Corporation ("Envio
Dynamics") executed an Agreement and Mutual General Release ("Mutual
General Release"), terminating any and all agreements between each of
the parties, including the Stock Purchase Agreement dated February 21,
1997 and the International Distribution Agreement dated on or about
January 27, 1997. As part of that Mutual General Release, Envio
Dynamics signed a Promissory Note payable within thirty (30) days for
$250,000 to Urecoats International. To date, the Promissory Note has not
been satisfied by Envio Dynamics. Urecoats International has advised
its legal counsel to pursue collection.
On May 27, 1997, the Registrant entered into an Acquisition Agreement
with Designer Wear, Inc. (hereinafter referred to as "Designer Wear").
The Acquisition Agreement was closed on July 1, 1997. Refer to the Form
8-K filed with the Securities and Exchange Commission dated July 16,
1997, which is incorporated herein by this reference.
On July 18, 1997, Designer Wear entered into an Acquisition Agreement
with ROK International, Inc. The Acquisition Agreement was closed on
October 7, 1997. Refer to the Form 8-K filed with the Securities and
Exchange Commission dated October 23, 1997, which is incorporated herein
by this reference.
14
On September 23, 1997, Howard Weiser was appointed as the new President
and Chief Executive Officer of the Registrant by the Board of Directors.
Howard Weiser also resigned as Treasurer of the Registrant on September
23, 1997. Howard Weiser was previously appointed Chairman of the Board
and such appointment was ratified by the Board on July 29, 1997.
On September 23, 1997, Edgar M. Reynolds resigned as President and Chief
Executive Officer of the Registrant. Edgar M. Reynolds was appointed
as Vice President and Treasurer of the Registrant by the Board on
September 23, 1997.
On October 16, 1997, the Registrant received a facsimile notice from
Harry W. Brooks, Jr. indicating that he resigned from the Board of
Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS - NONE
(b) FORM 8-KS:
(i) Form 8-K filed on July 16, 1997.
(ii) Form 8-K filed on October 23, 1997.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
Registrant caused this Quarter Ended September 30, 1997 Form 10-QSB
Report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hollywood, and State of Florida on November
17, 1997.
WINNERS ALL INTERNATIONAL, INC.
(Registrant)
By: /s/ Howard Weiser
-------------------------
Howard Weiser
President, Chief Executive Officer
and Chairman of the Board
By: /s/ Edgar M. Reynolds
-------------------------
Edgar M. Reynolds
Vice President, Treasurer
and Director
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