U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number: 0-27274
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WALKER WINGSAIL AMERICA, INC.
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(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 04-3293446-11210942
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
DEVONPORT ROYAL DOCKYARD, PLYMOUTH, DEVON, ENGLAND PL1 4SG
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-44-1752-605426
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
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The aggregate number of shares of Common Stock, outstanding as of May 15,
1996 was: 2,352,650
<PAGE>
WALKER WINGSAIL AMERICA, INC.
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets-
March 31, 1996 and December 31, 1995.........................2
Condensed Statements of Operations-
For the Three Months ended March 31, 1996,
For the Period From Inception (January 19,
1995) to March 31, 1995 and Cumulative From
Inception (January 19, 1995) to March 31, 1996...............3
Condensed Statements of Cash Flows-
For the Three Months ended March 31, 1996,
For the Period From Inception (January 19,
1995) to March 31, 1995 and Cumulative From
Inception (January 19, 1995) to March 31, 1996...............4
Notes to Condensed Financial Statements.........................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................8
Signatures
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<TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS WALKER WINGSAIL AMERICA, INC.
(A DEVELOPMENT STAGE COMPANY)
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MARCH 31, DECEMBER 31,
1996 1995
(UNAUDITED)
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<S> <C> <C>
ASSETS
Current Assets:
Cash $ 284,381 $ 79,250
Prepaid Expenses and Other Current Assets 5,516 12,689
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Total Current Assets 289,897 91,939
Demonstration Yacht, Net of Accumulated Depreciation of $5,302 (Note 3) - 348,150
Intangible Assets, Net of Accumulated Amortization of $40,800 and
$29,669, Respectively. 885,511 896,643
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TOTAL ASSETS $ 1,175,408 $ 1,336,732
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ 40,134 $ 44,490
Note Payable, Net of Unamortized Discount
of $7.500 (Note 4) 142,500 -
Customer Deposits 34,881 24,958
Due to Affiliated Entity 166,559 246,536
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Total Current Liabilities 384,074 315,984
License and Sub-license Agreement Obligation 614,085 693,085
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Total Liabilities 998,159 1,009,069
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Stockholders' Equity:
Preferred Stock: $.001 Par Value; 5,000,000 Shares Authorized - -
Common Stock: $.001 Par Value; 20,000,000 Shares Authorized;
2,352,680 and 2,295,680 Shares Issued and Outstanding,
Respectively (Notes 4 and 7) 2,353 2,296
Additional Paid-in Capital 823,281 809,338
Deficit Accumulated During Development Stage (648,385) (483,971)
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Total Stockholders' Equity 177,249 327,663
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$ 1,175,408 $ 1,336,732
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ============== ===============
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS WALKER WINGSAIL AMERICA, INC.
(A DEVELOPMENT STAGE COMPANY)
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FOR THE THREE FOR THE PERIOD CUMULATIVE
MONTHS ENDED FROM INCEPTION FROM INCEPTION
MARCH 31, (JANUARY 19, 1995) (JANUARY 19, 1995)
1996 TO MARCH 31, 1995 TO MARCH 31, 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED)
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<S> <C> <C> <C>
Selling, General and Administrative Expenses $ 178,197 $ 71,900 $ 675,294
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Other Income:
Gain on Sale of Demonstration Yacht 8,850 - 8,850
Interest Income 3,965 - 5,562
Other Income 2,100 - 2,100
Gain (Loss) on Foreign Currency Exchange Rate (1,132) - 10,397
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Total Other Income 13,783 - 26,909
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Net Loss from Development Stage Operations $ (164,414) $ (71,900) $ (648,385)
===================================================================
Net Loss per Share $ (0.07) $ (0.08) $ (0.37)
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Weighted Average Number of Common
Shares Outstanding 2,302,493 894,204 1,736,735
===================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS WALKER WINGSAIL AMERICA, INC.
(A DEVELOPMENT STAGE COMPANY)
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FOR THE THREE FOR THE PERIOD CUMULATIVE
MONTHS ENDED FROM INCEPTION FROM INCEPTION
MARCH 31, (JANUARY 19, 1995) (JANUARY 19, 1995)
1996 TO MARCH 31, 1995 TO MARCH 31, 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED)
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<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Loss from Development Stage Operations $ (164,414) $ (71,900) $ (648,385)
Adjustments to Reconcile Net Loss from
Development Stage Operations to Net Cash
(Used in) Provided by Operating Activities:
Depreciation and Amortization 11,132 - 46,102
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 7,173 - (5,516)
(Decrease) Increase in Accounts Payable
and Accrued Expenses (4,356) - 40,134
Increase in Customer Deposits 9,923 - 34,881
(Decrease) Increase in Due to affiliated
Entity (79,977) 114,266 166,559
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Net Cash (Used in) Provided by Operating Activities (225,869) 42,366 (371,575)
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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)
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Net Cash Provided by (Used in) Investing Activities 357,000 (1,018) 2,530
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Cash Flows from Financing Activities:
Proceeds from Issuance of Note Payable 142,500 - 142,500
Principal Repayments of License and Sub-license
Agreement Obligation (79,000) - (272,395)
Proceeds from Issuance of Common Stock, Net of
Syndication Costs 10,500 201 822,134
Deferred Syndication Costs - (41,549) (38,813)
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Net Cash Provided by (Used in) Financing Activities 74,000 (41,348) 653,426
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Net Increase in Cash 205,131 - 284,381
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Cash, Beginning 79,250 - -
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Cash, Ending $ 284,381 $ - $ 284,381
===================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS WALKER WINGSAIL AMERICA, INC.
(UNAUDITED) (A DEVELOPMENT STAGE COMPANY)
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1. INTERIM REPORTING:
In the opinion of management, the accompanying unaudited condensed financial
statements of Walker Wingsail America, Inc. (the Company) contain all
adjustments necessary to present fairly the Company's financial position as of
March 31, 1996 and December 31, 1995, and the results of its operations and its
cash flows for the three months ended March 31, 1996, the period from inception
(January 19, 1995) through March 31, 1995, and the period from inception through
March 31, 1996.
The information included in the condensed balance sheet as of December 31, 1995
has been derived from the Company's Form 10-KSB for the period from inception
(January 19, 1995) through December 31, 1995 (1995 Form 10-KSB). 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-KSB.
2. NET LOSS PER SHARE:
Net loss per share for the three months ended March 31, 1996, the period form
inception (January 19, 1995) through March 31, 1995, and the period from
inception through March 31, 1996 is 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. Although it was the Company's intention to repay the balance due to
Walker Wingsail Systems PLC for allocated expenses at the point the Company
completed a secondary offering, upon receipt of the proceeds from the
aforementioned sale of the demonstration yacht, the Company elected to remit a
payment toward the outstanding obligation with Walker Wingsail Systems PLC in
the amount of $151,000.
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 September 28, 1996, (which due date may be extended at the option of the
Company until March 28, 1997). The note is collateralized by substantially all
of the assets of the Company. As of March 31, 1996, borrowings outstanding under
the note amounted to $142,500, net of unamortized discount of $7,500. 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 March 31, 1996, certificates representing the stock have not
yet been issued to the lender.
5. LICENSE AND SUB-LICENSE AGREEMENT OBLIGATION:
During the three months ended March 31, 1996, the Company remitted a payment
toward its license and sub-license agreement obligation with an affiliated
entity, Walker Wingsail Systems PLC, in the amount of $79,000.
6. 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% of each such sale made by Wingsail, U.S.A. Inc.
7. COMMON STOCK ISSUANCE:
During February, 1996, the Company issued 7,000 shares of its .001 par value
common stock for cash consideration in the amount of $10,500 under a non-public
placement.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996
WITH THE PERIOD FROM INCEPTION (JANUARY 19, 1995) TO MARCH 31, 1995
RESULTS OF OPERATIONS
During the period from the inception of the Company (January 19, 1995)
through March 31, 1995, 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 months ended March 31, 1996 (the "Current Period"), or during the period
from inception (January 19, 1995) to March 31, 1995 (the "Prior Period"), and
the Company suffered a loss of $164,414 during the Current Period and $71,900 in
the Prior Period from development-stage operations. The Company incurred
selling, general and administrative expenses of $178,197 in the Current Period
and $71,900 in the Prior Period. The Company incurred depreciation and
amortization expenses of $11,132 during the Current Period with no amount in the
Prior Period. The Company incurred a loss on foreign currency exchange rate of
$1,132 and recognized interest income of $3,965, other income of $2,100, and a
gain of $8,850 on the sale of its demonstration yacht during the Current Period,
with no corresponding amounts in the Prior Period. The net cash used in
operating activities during the Current Period amounted to $225,869. Of this
amount, cash was decreased in the amount of $158,632 as a result of the net
loss, net of non-cash items including depreciation and amortization, gain on
sale of a demonstration yacht, and non-cash debt issuance costs in the amounts
of $11,132, $8,850, and $3,500 respectively; cash increased in the amount of
$7,173 as a result of a decrease in prepaid expenses and other current assets;
cash decreased in the amount of $4,356 as a result of a decrease in accounts
payable and accrued expenses; cash increased in the amount of $9,923 as a result
of an increase in customer deposits; and $79,977 of the cash used in operating
activities was attributable to a decrease in the amount due to WWS. During the
Prior Period the net cash provided by operating activities amounted to $42,366.
Of this amount, cash decreased in the amount of $71,900 as a result of the net
loss and increased by $114,266 as a result of an increase in the amount due to
WWS. During the Current Period, cash flows from investing activities consisted
of the proceeds from the sale of the demonstration yacht in the amount of
$357,000. During the Prior Period, the cash flows from investing activities
consisted of an outlay for organization costs in the amount of $1,018. During
the Current Period, cash flows from financing activities of $74,000 consisted of
$142,500 of proceeds from the issuance of a note payable and $10,500 of proceeds
from the issuance of 7,000 shares of Common Stock, less a principal repayment of
its obligation on the license and sub-license agreement with WWS in the amount
of $79,000. During the Prior Period, the net cash used in financing activities
amounted to $41,348, which consisted primarily of deferred syndication costs.
-6-
<PAGE>
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
September 28, 1996 (which due date may be extended at the option of the Company
until 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.
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<PAGE>
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 March 31, 1996.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements 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 authorized.
WALKER WINGSAIL AMERICA, INC.
MAY 17, 1996 By: /S/ JOHN WALKER
------------ ----------------------------------------------------
Date John Walker, President (Principal Executive Officer,
Principal Financial Officer and Principal Accounting
Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE MARCH 31,1996 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> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 284
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 6
<CURRENT-ASSETS> 290
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,175
<CURRENT-LIABILITIES> 384
<BONDS> 614
0
0
<COMMON> 2
<OTHER-SE> 175
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</TABLE>
