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
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
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 Number 0-27274
WALKER WINGSAIL AMERICA INC
(Exact Name of Registrant as specified in its charter)
Delaware 3293446 11210942
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
Devonport Royal Dockyard, Plymouth, Devon, UK PL1 4SG
(Address of principal executive offices)
44 1752 605426
(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 or 15(d) of the Securities Exchange
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 requirement for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of August 14, 1996:
Common Stock $0.001 par value 2,381,680
Class Number of Shares
WALKER WINGSAIL AMERICA INC
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 1996 and
December 31, 1995......................................... 2
Condensed Statements of Operations -
For the Three Months ended June 30, 1996 and 1995
For the Six Months ended June 30, 1996
For the Period from Inception (January 19, 1995)
to June 30, 1995 and Cumulative From Inception
(January 19, 1995) to June 30, 1996....................... 3
Condensed Statements of Cash Flows -
For the Six Months ended June 30, 1996
For the Period From Inception (January 19,
1995) to June 30, 1995 and Cumulative From
Inception (January 19, 1995) to June 30, 1996............. 4
Notes to Condensed Financial Statements......................... 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 7-9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 10
Signatures
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Balance Sheets Walker Wingsail America Inc
(A Development Stage Company)
- -------------------------------------------------------------------------------
June 30 December 31,
1996 1995
(Unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets $ $
Current Assets:
Cash 54,358 79,250
Prepaid Expenses and Other Current Assets 2,115 12,689
- -------------------------------------------------------------------------
Total Current Assets 56,473 91,939
Demonstration Yacht, Net of Accumulated
Depreciation of $5,302 (Note 3) - 348,150
Intangible Assets, Net of Accumulated
Amortization of $51,881 and $29,669,
Respectively 874,378 896,643
- -------------------------------------------------------------------------
Total Assets 930,851 1,336,732
=========================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses 15,300 44,490
Note Payable, Net of Unamortized Discount
of $5,677 (Note 4) 144,323 -
Customer Deposits 44,881 24,958
Due to Affiliated Entity (Note 5) 45,764 246,536
- -------------------------------------------------------------------------
Total Current Liabilities 250,268 315,984
License and Sub-License Agreement Obligation 556,090 693,085
- -------------------------------------------------------------------------
Total Liabilities 806,358 1,009,069
- -------------------------------------------------------------------------
Stockholders' Equity
Preferred Stock: $.001 Par Value; 5,000,000
Shares Authorized Common Stock: $.001 Par
Value; 20,000,000 Shares Authorized 2,381,680
and 2,295,680 Shares Issued and Outstanding,
Respectively (Notes 4 and 8) 2,382 2,296
Additional Paid-in Capital 843,552 809,338
Deficit Accumulated During Development Stage (721,441) (483,971)
- -------------------------------------------------------------------------
Total Stockholders' Equity 124,493 327,663
- -------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $930,851 $1,336,732
=========================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Statement of Operations Walker Wingsail America Inc
(A Development Stage Company)
- ----------------------------------------------------------------------------------------------------------------------------------
For the Six For the Period Cumulative
For the Three Months Ended Months Ended From Inception From Inception
June 30 June 30 June 30 (January 19, 1995) (January 19, 1995)
1996 1995 1996 to June 30, 1995 to June 30, 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selling, General and Administrative Expenses (70,487) (23,813) (248,684) (95,713) (745,781)
- --------------------------------------------------------------------------------------------------------------------------
Other Income
Gain on Sale of Demonstration Yacht -- -- 8,850 -- 8,850
Interest income (2,125) -- 1,840 -- 3,437
Other income 30 -- 2,130 -- 2,130
Gain (Loss) on Foreign Currency Exchange
Rate (474) -- (1,606) -- 9,923
- --------------------------------------------------------------------------------------------------------------------------
Total Other Income (2,569) -- 11,214 -- 24,340
- --------------------------------------------------------------------------------------------------------------------------
Net Loss from Development Stage Operations $ (73,056) $ (23,813) $ (237,470) $(95,713) $ (721,441)
==========================================================================================================================
Net Loss Per Share (0.03) (0.02) (0.10) (0.10) (0.39)
==========================================================================================================================
Weighted Average Number of Common Shares
Outstanding 2,368,702 1,024,482 2,335,598 966,936 1,845,448
==========================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Statement of Cash Flows Walker Wingsail America Inc
(A Development Stage Company)
- -------------------------------------------------------------------------------------------------------------------
For the Six For the Period Cumulative
Months Ended From Inception From Inception
June 30 (January 19, 1995) (January 19, 1995
1996 to June 30, 1995 to June 30, 1996
(Unaudited) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities (237,470) (95,713) (721,441)
Net Loss from Development Stage Operations
Adjustments to Reconcile Net Loss from Development Stage
Operations to Net Cash
(Used In) Provided by Operating Activities:
Depreciation and Amortization 22,264 -- 57,234
Gain on Sale of Demonstration Yacht (8,850) -- (8,850)
Non-Cash Debt Issuance Costs 3,500 -- 3,500
Decrease (Increase) in Prepaid Expenses and
Other Current Assets 10,574 -- (2,115)
(Decrease) Increase in Accounts Payable (29,189) -- 15,301
Increase in Customer Deposits 19,923 -- 44,881
(Decrease) Increase in Due to Affiliated Entity (200,772) 143,597 45,764
- ----------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided by Operating Activities (420,020) 47,884 (565,726)
- ----------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from Sale of Demonstration Yacht 357,000 -- 357,000
Acquisition of Demonstration Yacht -- -- (353,452)
Organization Costs -- (1,018) (1,018)
- ----------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Investing Activities 357,000 (1,018) 2,530
- ----------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from Issuance of Note Payable 144,323 -- 144,323
Principal Repayments of License and Sub-License
Agreement Obligation (135,995) -- (330,390)
Proceeds from Issuance of Common Stock,
Net of Syndication Costs 30,800 201 842,434
Deferred Syndication Costs -- (47,067) (38,813)
- ----------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Financing Activities 38,128 (46,866) 617,554
- ----------------------------------------------------------------------------------------------------------
Net Increase in Cash (24,892) -- 54,358
- ----------------------------------------------------------------------------------------------------------
Cash, Beginning 79,250 -- --
- ----------------------------------------------------------------------------------------------------------
Cash, Ending $ 54,358 $ -- $ 54,358
==========================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
NOTES TO CONDENSED FINANCIAL WALKER WINGSAIL AMERICA, INC.
STATEMENTS (UNAUDITED) (A DEVELOPMENT STAGE COMPANY)
1. INTERIM REPORTING:
In the opinion of management, the accompanying unaudited interim
condensed financial statements of Walker Wingsail America Inc. (the
"Company") contain all adjustments necessary to present fairly the
Company's financial position as of June 30, 1996 and December 31, 1995;
the results of its operations for the three month and six month periods
ended June 30, 1996, the three month period ended June 30, 1995, the
period from inception (January 19, 1995) through June 30, 1995, and the
cumulative period from inception through June 30, 1996; and its cash
flows for the six months ended June 30, 1996, the period from inception
to June 30, 1995 and the cumulative period from inception to June 30,
1996.
The information included in the condensed balance sheet as of December
31, 1995 has been derived from the Company 's Form 10-KQB for the period
from inception (January 19, 1995) through December 31, 1995 (1995 Form
10-KQB). The unaudited condensed financial statements contained herein
should be read in conjunction with the financial statements and the
corresponding notes contained in the Company's 1995 Form 10-KQB.
2. NET LOSS PER SHARE:
Net loss per share is calculated based on the weighted average number of
shares of common stock and common stock equivalents outstanding during
the corresponding periods.
3. DEMONSTRATION YACHT:
In February, 1996, the Company sold its demonstration yacht to Wingsail
U.S.A., Inc., an unaffiliated third party, for cash consideration in the
amount of $357,000.
4. NOTE PAYABLE:
During March, 1996, the Company borrowed $142,500, net of unamortized
discount of $7,500, under a 7.75% note agreement with an effective
interest rate of 13.2%. Under the terms of the note agreement, the
outstanding borrowings are due on March 28, 1997. The note is
collateralized by substantially all assets of the Company. As of June
30, 1996, borrowings outstanding under the note amounted to $144,323, net
of unamortized discount of $5,677. In connection with the note
agreement, the Company incurred debt issuance costs in the amount of
$12,500 and is obligated to issue 50,000 shares of its .001 par value
common stock to the lender. Such shares of common stock have been
recorded at a value of $3,500 in the accompanying balance sheet as issued
and outstanding common stock. As of June 30, 1996, formal common stock
certificates have not yet been issued to the lender.
5. DUE TO AFFILIATED ENTITY:
Although it was the Company's intention to repay the balance due to
Walker Wingsail Systems PLC for allocated expenses at the point of the
Company completed a secondary offering, upon receipt of the proceeds from
the aforementioned sale of the demonstration yacht in February, 1996
(Note 3), the Company elected to remit a payment toward the outstanding
obligation with Walker Wingsail Systems PLC in the amount of $151,000.
In addition, in May, 1996, the Company remitted an additional payment of
$166,559 toward such outstanding obligation to Walker Wingsail Systems
PLC.
6. LICENSE AND SUB-LICENSE AGREEMENT OBLIGATION:
During the six months ended June 30, 1996, the Company remitted payments
toward its license and sub-license agreement obligation with Walker
Wingsail Systems, PLC in the aggregate amount of $136,994.
7. SALES REPRESENTATION AGREEMENTS:
In March 1996, Walker Wingsail Systems PLC entered into a sales
representation agreement with Wingsail, U.S.A., Inc. pursuant to which it
agreed to pay a commission of 20% of each sale of Walker Wingsail yachts
for which Wingsail, U.S.A., Inc. is responsible. Walker Wingsail Systems
PLC has also agreed to pay the Company a commission of 2% for each such
sale made by Wingsail, U.S.A. Inc.
8. COMMON STOCK ISSUANCE:
During the six months ended June 30, 1996, the Company issued 7,000 and
29,000 shares of its .001 par value common stock for cash consideration
in the amounts of $10,500 and $20,300, respectively, under non-public
placements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30,
1996 AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996, WITH THE PERIOD
FROM INCEPTION (JANUARY 19, 1995) TO JUNE 30, 1995
RESULTS OF OPERATIONS
During the period from the inception of the Company (January 19, 1995)
through June 30, 1996, the Company has engaged in no significant
operations. During the Current Period (defined below) the Company s
primary activities consisted of acting as a sales representative for an
affiliated entity, Walker Wingsail Systems PLC ( WWS ).
No revenues were received by the Company from operations during the three
month period ended June 30, 1996, (the Current Period ), or the three
month period ended June 30, 1995, (the Prior Period ), or during the six
month period ended June 30, 1996 or during the period from inception
(January 19, 1995) to June 30, 1995. The Company suffered a loss of
$73,056 during the Current Period and $23,813 in the Prior Period and
$237,470 during six months ended June 30, 1996 and $95,713 during the
period from inception (January 19, 1995) to June 30, 1995 from
development-stage operations.
The Company incurred selling, general and administrative expenses of
$70,487 in the Current Period and $23,813 in the Prior Period and
$248,684 during the six months ended June 30, 1996 and $95,713 during the
period from inception (January 19, 1995) to June 30, 1995.
The Company incurred depreciation and amortization expenses of $11,132 in
the Current Period with no amount in the Prior Period and $22,264 during
the six months ended June 30, 1996 and no amount during the period from
inception (January 19, 1995) to June 30, 1995
The Company incurred a loss on foreign currency exchange rate of $474,
other income of $30 and recognized an overstatement of interest income of
$2,125, during the Current Period with no other income received during
the Prior Period, and a $1,606 loss on foreign currency, $1,840 in
interest income, $2,130 in other income, and a gain of $8,850 on the sale
of its demonstration yacht, during the six months ended June 30, 1996 and
no other income was received during the period from inception (January
19, 1995) to June 30, 1995.
The net cash used in operating activities during the Current Period
amounted to $194,151, of this amount, cash was decreased in the amount
of $61,924 as a result of the net loss, net of non-cash items for
depreciation and amortization costs in the amount of $11,132; cash
increased in the amount of $ 3,401 as a result of a decrease in prepaid
expenses and other current assets; cash decreased in the amount of
$24,833 as a result of a decrease in accounts payable and accrued
expenses; cash increased in the amount of $10,000 as a result of an
increase in customer deposits; and cash decreased in the amount of
$120,795 as a result of a decrease in the amount due to WWS. During the
Prior Period, the net cash provided by operating activities amounted to
$5,518, of which cash decreased in the amount of $23,813 as a result of
the net loss and increased by $29,331 as a result of an increase in the
amount due to WWS.
During the six months ended June 30 1996 the net cash used in operating
activities amounted to $420,020. Of this amount, cash was decreased in
the amount of $220,556 as a result of the net loss, net of non-cash
items including depreciation and amortization costs, gain on the sale of
demonstration yacht, and non-cash debt issuance costs in the amounts of
$22,264, $8,850 and $3,500 respectively; cash increased in the amount of
$10,574 as a result of a decrease in prepaid expenses and other current
assets; cash decreased in the amount of $29,189 as a result of a decrease
in accounts payable and accrued expenses; cash increased in the amount of
$ 19,923 as a result of an increase in customer deposits; and cash
decreased in the amount of $200,772 as a result of a decrease in the
amount due to WWS.
During the period of inception (January 19, 1995) to June 30 1995 the net
cash provided by operating activities amounted to $47,884 of which cash
decreased in the amount of $95,713 as a result of the net loss and
increased by $143,597 as a result of an increase in the amount due to
WWS.
During the Current Period and Prior Period there was no cash flow from
investing activities. During the six months ended June 30, 1996 cash
flows from investing activities consisted of the proceeds from the sale
of the demonstration yacht in the amount of $357,000 and during the
period from inception (January 19, 1995) to June 30, 1995 the cash flows
from investing activities consisted on an outlay for organization costs
in the amount of $1018.
Cash flows from financing activities decreased by a net amount of $37,695
during the Current Period consisting of an increase from the $20,300 of
proceeds from the issuance of 29,000 shares of Common Stock, less a
principal repayment of its obligation on the license and sub-license
agreement with WWS in the amount of $57,995. During the Prior Period,
the net cash used in financing activities amounted to $5,518, which
consisted of deferred syndication costs and during the six months
ended June 30, 1996 cash flows from financing activities increased by
$36,305 consisting of an increase from the $30,800 of proceeds from the
issuance of 36,000 shares of Common Stock, less principal repayments of
its obligation on the licence and sub license agreement with WWS in the
amount of $136,995, and during the period from inception (January 19
1995) to June 30 1995, the net cash used in financing activities amounted
to $46,866 which consisted primarily of deferred syndication costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to continue in operation is dependent upon raising
additional capital until revenues are sufficient to fund the company's
operating expenses. The Company is currently exploring the possibility
of raising additional capital of approximately $8,000,000 through private
sources. The Company currently has no plans, agreements, understandings
or arrangements for completing such a financing, and there can be no
assurance that the Company will be able to secure such financing on a
timely basis or on terms that are acceptable to it, or that such funds
will be adequate for its future operations. During the first quarter
1996 the Company entered into a term loan agreement with an unaffiliated
third party pursuant to which the Company borrowed $142,500, net of
unamortized discount of $7,500, at an annual interest rate of 7-3/4% (an
effective annual interest rate of 13.2%) for working capital purposes.
Under the terms of the loan agreement, the borrowings are due on March
28, 1997. The loan is secured by substantially all of the Company's
assets. The Company currently has no other borrowing facilities or
alternative financing methods available to it.
Contingent on the Company's ability to raise approximately $8,000,000 in
additional capital, the Company plans to acquire ship building facilities
at a location yet to be determined in the eastern United States and to
begin commercial production of Walker Wingsail yachts using the Walker
WIngsail technology. The Company believes that the initial cost of
acquiring and bringing into full production a ship building facility
necessary for its operations will be approximately $3.5 to $4.0 million.
There can be no assurance that the Company will be able to raise such
capital on terms satisfactory to it.
The Company is not currently committed to expend funds for marketing or
any other activities or purchases. However, during 1996, it is
management's intention to promote the Company relative to its available
cash funds. Management also expects to incur minimal office and
administration expenses and professional fees for which the Company
currently has sufficient cash to fund. Dependent upon the success of
additional capital raising activities, the Company's expenditures will
increase accordingly to fund its post-development stage operations.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits:
27.01 Financial Data Schedule
b. Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during
the quarterly period ended June 30 1996.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorised.
WALKER WINGSAIL AMERICA, INC.
August 12, 1996 /s/ JOHN WALKER
John Walker, President
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1996 FINANCIAL STATEMENTS OF WALKER WINGSAIL AMERICA, INC. AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000942652
<NAME> WALKER WINGSAIL AMERICA, INC.
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> JUN-30-1996
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</TABLE>
