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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
June 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 June 30, 1997 is 19,771,756 shares.
IN ACCORDANCE WITH RULE 201 OF
REGULATION S-T, THIS FORM 10-QSB
IS BEING FILED IN PAPER PURSUANT
TO A TEMPORARY HARDSHIP
EXEMPTION.
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<PAGE>
WINNERS ALL INTERNATIONAL, INC.
INDEX TO FORM 10-QSB
JUNE 30, 1997
PART 1 - FINANCIAL INFORMATION
PAGE #
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations -
Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11-12
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
<PAGE>
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT-STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
Current Assets:
Cash $ 57,382 $ -
Expense Advances 18,931 -
Note Receivable 250,000 -
Prepaid Expense 7,500 -
--------------- ---------------
Total Current Assets 333,813 -
--------------- ---------------
Property and Equipment, Net 2,802 -
Other Assets:
Investment in Wholly-Owned
Subsidiary 1,050,000 -
Loan Receivable 169,633 -
Investment - License and Option 1,000 -
Organization Costs - Net 198 -
---------------- ----------------
Total Other Assets 1,220,831 -
$ 1,557,446 -
================= ================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 694,065 $ 870,078
Loans Payable 142,405 -
------------------ -----------------
Total Current Liabilities 836,470 870,078
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 June 30, 1997, 62,500 Shares
Unconverted at December 31, 1996. 55,035 55,035
Common Stock $.01 Par Value, $60,000,000
Shares Authorized; 19,771,756 Shares Issued
and Outstanding June 30, 1997; 14,471,756
Shares Issued & Outstanding December 31, 1996 197,717 144,717
Additional Paid-in-Capital 10,230,624 8,026,114
Accumulated(Deficit) (9,762,400 (9,095,944)
--------------- ---------------
Total Stockholder' (Deficit)Equity 720,976 (870,078)
---------------- ---------------
$ 1,557,446 $ -
================ ===============
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT-STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Six months ended June 30,
1997 1996
REVENUES $ - $
-------- --------
COST AND EXPENSES
Royalty Expense - -
General and Administrative 610,365 26,175
Depreciation and Amortization 91 -
-------- --------
610,456 26,175
-------- --------
OPERATING (LOSS) (610,456) (26,175)
OTHER INCOME (EXPENSE) (56,000) -
NET (LOSS) $(666,627) $(26,175)
---------- --------
NET (LOSS) PER COMMON SHARE $ ( 0.039) $ (0.002)
------------ -------------
AVERAGE SHARES OUTSTANDING 17,121,756 14,471,756
============ ==============
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT-STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended June 30,
1997 1996
REVENUES $ - $ -
---------- -----------
COST AND EXPENSES
Royalty Expense - -
General and Administrative 606,738
Depreciation and Amortization 91
---------- -----------
606,829 -
---------- -----------
OPERATING (LOSS) (606,829) -
OTHER INCOME (EXPENSE) (56,000) -
NET (LOSS) $ (662,829) -
----------- -----------
NET (LOSS) PER COMMON SHARE $( 0.035) -
----------- -----------
AVERAGE SHARES OUTSTANDING 19,094,285 14,471,756
============= ===========
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT-STAGE COMPANY)
CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
Six months ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(666,456) $ (26,175)
Adjustments to Reconcile Net Loss to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization 91 -
Changes in Assets and Liabilities:
(Increase) in Prepaid Expenses (7,500) -
(Increase) In Expense Advances (18,931) -
Increase in Accounts Payable and Accrued Expenses (176,013) 26,175
---------- ---------
Total Adjustments (202,353) -
---------- ---------
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 (2,883) -
Organization Costs Paid (208)
License and Option Agreement (1,000) -
Loans to Company being Acquired (169,633) -
Investment in Wholly-Owned Subsidiary (1,050,000) -
----------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES: (1,473,724) -
------------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Stock 2,257,510 -
Proceeds from Loans 142,405 -
----------- ---------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES 2,399,915 -
----------- ---------
NET INCREASE (DECREASE) IN CASH 57,382 -
CASH AT THE BEGINNING OF YEAR - -
----------- ---------
CASH AT END OF YEAR $ 57,382 $ -
============ =========
Supplemental Cash Flow Data:
Non-cash Financing Activities
Stock Issued in Payment of Fees and Prior Debts 207,500
Acquisition of Subsidiary 1,050,000
----------- ----------
Total Non-cash Financing Activities $ 1,257,500 $ -
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
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 June 13, 1997, Perma Seal International, Inc. ("Perma Seal") and Ultimate
Urethane Roofing, Inc. ("Ultimate Urethane"), a privately held Florida
corporation, entered into a License and Option Agreement ("Agreement"), wherein
Perma Seal 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. The terms and conditions of the Agreement require a
fifteen percent (15%) royalty ("Royalty") on Net Sales for any products
manufactured, sublicensed, or sold, which utilize the Process. In addition,
Perma Seal agreed to pay Ultimate Urethane $15,000 for each of twelve (12)
months after the execution of the Agreement as advance payments to be credited
against Royalty payments to become due under the Agreement. The advance payment
is recorded as a prepaid expense. Perma Seal also paid $1,000 at the time of
execution of the Agreement as consideration for entering into the Agreement and
for the options to purchase Ultimate Urethane.
On July 17, 1997, Perma Seal and Polymer Creation, Inc. ("Polymer Creation"),
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 is 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 Perma Seal'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 (1) year for $475,000.
7
<PAGE>
On June 30, 1997, Perma Seal 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 Perma Seal. To date, the Promissory Note has
not been satisfied by Envio Dynamics and legal counsel has been advised to
pursue its collection in the most expeditious manner.
Contemporaneously with the execution of the Mutual General Release, Envio
Dynamics et al, Perma Seal, and Essex Chemical Corporation ("Essex Chemical"),
executed an Agreement and General Release (Essex) ("Essex General Release"),
terminating the Assignment of Lease dated February 27, 1997 and Purchase and
Sale Agreement dated March 21, 1997, for the land, building, and equipment
located at 1521 Industrial Drive, Griffin, Georgia, between Perma Seal and Essex
Chemical.
Upon the execution of the Mutual General Release, the Company had advanced
$268,750 towards the Stock Purchase Agreement, directly to Envio Dynamics, which
was substantially covered by the issuance of the above described Promissory
Note. In addition, the Company had paid $30,000 for the International
Distribution Agreement, which it is writing off.
Upon the execution of the Essex General Release, the Assignment of Lease and
Purchase and Sale Agreement, the Company had paid, directly to Essex Chemical,
$188,500 in back and current lease payments, which it has shown as an operating
expense of the period. In addition, a prepaid lease expense payment for the
month of July for $7,250 is shown as loss on investment.
Other (Expense) shown on the June 30, 1997 column on the CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS includes:
Loss on Investment - Canceled Stock Purchase Agreement $18,750
Loss on Investment - Canceled International Distribution Agreement 30,000
Loss on Investment - Canceled Lease 7,250
---------
Total $56,000
On May 27, 1997, the Company and Designer Wear entered into an acquisition
agreement, wherein all of the issued and outstanding capital stock of Designer
Wear, consisting of 2,150,000 shares of common stock, with a par value of $.01
per share, was to be acquired by the Company for 5,376,000 shares of common
stock of the Company. On July 1, 1997, the Company closed ("Closing") the
acquisition agreement dated May 27, 1997 with Designer Wear and 2,149,000 shares
of common stock, with a par value of $.01 per share, were acquired by the
Company for 5,370,000 shares of common stock of the Company. Designer Wear will
be accounted for as a majority owned subsidiary. Since the Closing of the
acquisition of Designer Wear was after June 30, 1997, financial and other
supporting information is hereby incorporated herein by this reference from the
Form 8-K filed with the Securities and Exchange Commission dated July 16, 1997,
by the Company.
8
<PAGE>
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the Company 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 three months ended June 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 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 for the six months ended June 30, 1997. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Investment in subsidiary is 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, 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. No amortization of this cost
was recorded and the entire amount has been written off as described elsewhere
in this report.
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.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND
FINANCIAL CONDITIONS
RESULTS OF OPERATIONS
Quarter ended June 30, 1997 as Compared to the Quarter Ended June 30, 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 significant expenses for the quarter ended June 30, 1997.
These expenses arose from the Company's efforts in beginning new business
operations. Expenses incurred for the quarter ended March 31, 1996, are
attributed to the costs of winding down former operations.
FINANCIAL CONDITIONS
The Company suffered recurring losses from former operations and incurred new
operational expenses and losses resulting in an accumulated deficit of
($9,762,400). Management of the Company 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 without raising capital, either from borrowing or from the sale of
additional shares of stock. In 1997, the Company has raised approximately
$1,000,000 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. The Company has also borrowed approximately $150,000 for its
new operations. 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
for orders of Perma Seal's sealant and coating product.
10
<PAGE>
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. Damages were determined to
be approximately $145,000 by the Court. The Company hired new counsel to
appeal the judgment and/or negotiate a settlement. 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 plaintiff's 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 to 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.
11
<PAGE>
(E) 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.
(F) The Company was made aware of a judgment by Finova Capital Corporation of
approximately $11,000, entered on January 1997. The Company is in the
process of negotiating with a collection agency to settle this matter.
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
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
caused this Quarter Ended June 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 August 15, 1997.
WINNERS ALL INTERNATIONAL, INC.
(Registrant)
By: /s/ Edgar M. Reynolds
Edgar M. Reynolds
President, Director, Chief Executive Officer
By: /s/ Howard Weiser
Howard Weiser
Chairman of the Board, Treasurer, Secretary
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 57,382
<SECURITIES> 0
<RECEIVABLES> 250,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 333,813
<PP&E> 2,893
<DEPRECIATION> 91
<TOTAL-ASSETS> 1,557,446
<CURRENT-LIABILITIES> 836,470
<BONDS> 0
0
55,035
<COMMON> 197,717
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,557,446
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 666,627
<TOTAL-COSTS> 666,627
<OTHER-EXPENSES> 56,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 666,627
<INCOME-TAX> 0
<INCOME-CONTINUING> 666,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 666,627
<EPS-PRIMARY> 0.039
<EPS-DILUTED> 0.039
</TABLE>
