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 SEPTEMBER 30, 1997
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 04-3303425
(State or other jurisdiction of (IRS Employer Indentification 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 8 1997:
Common Stock $0.001 par value 2,386,680
Class Number of Shares
<PAGE> 1
WALKER WINGSAIL AMERICA INC
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets -
September 30, 1997 and December 31, 1996...................... 3
Condensed Statements of Operations -
For the Three Months ended September 30, 1997 and 1996
For the Nine Months ended September 30, 1997
For the Cumulative From Inception
January 19, 1995) to September 30, 1997....................... 4
Condensed Statements of Cash Flows -
For the Nine Months ended September 30, 1997 and 1996
For the Cumulative From Inception
(January 19, 1995) to September 30, 1997...................... 5
Notes to Condensed Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 7-8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 9-10
Signatures
<PAGE> 2
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Balance Sheets Walker Wingsail America Inc
(A Development Stage Company)
- ----------------------------------------------------------------------------
Sep 30 December 31
1997 1996
(Unaudited)
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets $ $
Current Assets:
Cash 3,184 21,461
Prepaid Expenses and Other Current Assets 2,100 2,100
- ----------------------------------------------------------------------------
Total Current Assets 5,284 23,561
Due From Affiliated Entity (Note 5) 114,052 0
Intangible Assets, Net of Accumulated
Amortization of $357 and $74,197
respectively (Note 3) 542 813,301
- ----------------------------------------------------------------------------
Total Assets 119,878 836,862
============================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses 11,702 26,448
Note Payable, Net of Unamortized Discount
of $0 and $1902 respectively (Note 4) 150,000 148,098
Customer Deposits 19,958 44,888
- ---------------------------------------------------------------------------
Total Current Liabilities 181,660 219,434
Due to Affiliated Entity (Note 5) 0 129,675
License and Sub-License Agreement Obligation 0 556,090
- ---------------------------------------------------------------------------
Total Liabilities 181,660 905,199
- ---------------------------------------------------------------------------
Stockholders' Equity
Preferred Stock: $.001 Par Value;
5,000,000 Shares Authorized 0 0
Common Stock: $.001 Par Value; 20,000,000
Shares Authorized, 2,386,680 Shares
Issued and Outstanding (Note 8) 2,387 2,387
Additional Paid-in Capital 858,547 858,547
Deficit Accumulated During Development
Stage (922,716) (929,271)
- ---------------------------------------------------------------------------
Total Stockholders' Equity (61,782) (68,337)
- ---------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 119,878 $ 836,862
===========================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE> 3
<TABLE>
<CAPTION>
Condensed Statements of Operations Walker Wingsail America, Inc
(A Development Stage Company)
- ---------------------------------------------------------------------------
Cumulative
For the Three Months Ended For the Nine For the Nine From Inception
-------------------------- Months Ended Months Ended (January 19, 1995)
September 30 September 30 September 30 September 30 to September 30,
1997 1996 1997 1996 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selling, General and Administrative Expenses (13,055) (77,244) (89,539) (325,928) (983,592)
- -------------------------------------------------------------------------------------------------------------------------
Other Income(Loss)
Deferred Syndication Costs (43,062)
Interest Expense (17,223)
Gain on Sale of Demonstration Yacht - - - 8,850 8,850
Gain on Surrender of Licence Agreement 96,036 96,036 96,036
Interest Income - 586 64 2,426 4,325
Other Income - - - 2,130 2,130
Gain (Loss) on Foreign Currency Exchange Rate - (98) (6) (1,704) 9,820
- -------------------------------------------------------------------------------------------------------------------------
Total Other Income (Loss) 96,036 488 96,094 11,702 60,876
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) from Development Stage Operations $82,981 $(76,756) $ 6,555 $(314,226) $(922,716)
=========================================================================================================================
Net Income (Loss) Per Share 0.03 (0.03) - (0.13) (0.44)
=========================================================================================================================
Weighted Average Number of Common Shares Outstanding 2,386,680 2,382,767 2,386,680 2,351,435 2,097,577
=========================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE> 4
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows Walker Wingsail America,Inc
(A Development Stage Company)
- ----------------------------------------------------------------------------
For the Nine For the Nine Cumulative
Months Ended Months Ended From Inception
Sep 30 Sep 30 (January 19, 1995)
1997 1996 to Sep 30, 1997
(Unaudited) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss from Development Stage Operations 6,555 (314,266) (922,716)
Adjustments to Reconcile Net Loss from Development Stage
Operations to Net Cash
(Used In) Provided by Operating Activities:
Depreciation and Amortization 22,315 33,397 101,814
Gain on Sale of Demonstration Yacht (8,850) (8,850)
Gain on Surrender of Licence Agreement (96,036) (96,036)
Non-Cash Debt Issuance Costs 3,500
Amortisation of Note Payable Discount 1,902 3,646 7,500
Deferred Syndication Costs 43,062
Stock Compensation for Services Rendered 18,500
Decrease (Increase) in Prepaid Expenses and Other
Current Assets - 10,069 (2,100)
(Decrease) Increase in Accounts Payable (14,746) (32,086) 11,702
(Decrease) Increase in Customer Deposits (24,930) 19,923 19,958
(Decrease) Increase in Due to Affiliated Entity 86,663 (165,917) 216,338
- ---------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities (18,277) (450,584) (610,828)
- ---------------------------------------------------------------------------------------------------
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)
- ---------------------------------------------------------------------------------------------------
Net Cash Provided by Investing Activities 357,000 2,530
- ---------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from Issuance of Note Payable - 142,500 142,500
Principal Repayments of License and Sub-License
Agreement Obligation (136,995) (330,390)
Proceeds from Issuance of Common Stock, Net of
Syndication Costs - 45,800 842,434
Deferred Syndication Costs (4,250) (43,062)
- ---------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities - 47,055 611,482
- ---------------------------------------------------------------------------------------------------
Net Increase in Cash (18,277) (46,489) 3,184
- ---------------------------------------------------------------------------------------------------
Cash, Beginning 21,461 79,250 -
- ---------------------------------------------------------------------------------------------------
Cash, Ending $ 3,184 $ 32,761 $ 3,184
===================================================================================================
</TABLE>
For non cash investing and financing activities during the nine months ended
September 30, 1997 see notes 4 and 5
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE> 5
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 September 30, 1997 and December 31, 1996; the results of its
operations and its cash flows for the nine months ended September 30, 1997
and 1996 and the cumulative period from inception (January 19, 1995) through
September 30, 1997
The information included in the condensed balance sheet as of December 31,
1996 has been derived from the Company 's Form 10-KSB for the year ended
December 31, 1996 (1996 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 1996 Form
10-KSB.
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. 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 were due on March 28, 1997. The note is collateralized by
substantially all assets of the Company. As of September 30, 1997
borrowings outstanding under the note amounted to $150,000. In connection
with the note agreement, the Company incurred debt issuance costs in the
amount of $12,500 and issued 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. The Company is in the process of negotiating an extended due
date.
4. LICENSE AND SUB-LICENSE AGREEMENT OBLIGATION:
As a result of Walker Wingsail America Inc (WWA) being unsuccessful in
raising further equity funds on the terms and conditions recommended by the
company's US financial advisor, Walker Wingsail Systems plc (WWS) and WWA
have agreed to cancel the licence agreement entered into on May 5, 1995. In
order to preserve control over the North American Wingsail market, the
company made a takeover offer to the stockholders on July 10, 1997 on the
basis of two ordinary shares in WWS for every one common share in WWA.
During the quarter ended September 30, 1997 the license and sub-license
agreement obligation in the amount of $556,090 has been reversed and the
previous payments made to WWS by WWA under this obligation have been
credited in the amount of $330,390. The net license intangible asset in the
amount of $790,444 has also been reversed. This transaction has resulted in
a net gain on surrender of license in the amount of $96,036 during the
quarter ended September 30, 1997 . (See note 5)
5. DUE TO/FROM AFFILIATED ENTITY:
As a result of Walker Wingsail America Inc (WWA) cancelling the license and
sub-license agreement, WWS reversed the license fee and netted this figure
off against the balance due to WWS in the amount of $216,338. The remaining
net balance of $114,052 has been included in as due from affiliated entity
and will be used to reduce the cost of the investment by WWS. (See note 4)
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% for each such sale
made by Wingsail, U.S.A. Inc.
7. COMMON STOCK ISSUANCE:
No stock has been issued during the nine months ended September 30, 1997.
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30,
1997 WITH THE QUARTER ENDED SEPTEMBER 30, 1996 AND THE PERIOD FROM INCEPTION
FROM (JANUARY 19, 1995) to SEPTEMBER 30, 1997.
RESULTS OF OPERATIONS
During the period from the inception of the Company (January 19, 1995)
through September 30, 1997, 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 September 30, 1997, (the Current Period ), or the three
month period ended September 30, 1996, (the Prior Period ), or during the
period from inception (January 19, 1995) to September 30, 1997. The Company
realized a gain of $82,981 mainly due to the reversal of amortisation on
surrender of the License Agreement during the Current Period and a loss of
$76,756 in the Prior Period and a loss of $922,716 during the period from
inception (January 19, 1995) to September 30, 1997 from development-stage
operations.
The Company incurred selling, general and administrative expenses of $13,055
in the Current Period and $77,244 in the Prior Period and $983,592 during
the period from inception (January 19, 1995) to September 30, 1997.
The Company incurred depreciation and amortization expenses of $51 in the
Current Period and $11,133 in the Prior Period and $101,814 during the
period from inception (January 19, 1995) to September 30, 1997.
The Company incurred a gain on the reversal of amortisation is respect of
the surrender of the license agreement and no other income during the
current period. In the prior period the Company incurred a loss on foreign
currency exchange rate of $98 and interest income of $586. During the
period from inception (January 19, 1995 to September 30, 1997 the Company
received other income of $121,161, with Deferred Syndication Cost of $43,062
and Interest Expense of $17,223.
During the nine months ended September 30, 1997 the net cash used in
operating activities amount to $18,277, of this amount cash was decreased in
the amount of $65,264 as a result of the net income, net of non-cash items.
During the period of inception (January 19, 1995) to September 30, 1997 the
net cash used in operating activities amounted to $610,888. Of this amount,
cash was decreased in the amount of $856,726 as a result of the net loss,
net of non-cash items.
During the nine months ended September 30, 1997 there were no cash flow from
investing activities. During the period from inception (January 19, 1995)
to September 30, 1997 the cash flows from investing activities amounted to
$2,530 which consisted of the purchase of the demonstration yacht for
$353,452, the proceeds from the sale of the demonstration yacht in the
amount of $357,000, and an outlay for organisation costs in the amount of
$1,018.
During the nine months ended September 30, 1997 there were no cashflows from
financing activities.
During the period from inception (January 19 1995) to September 30, 1997,
the net cash provided by financing activities amounted to $611,482 which
consisted of $842,434 in proceeds of issuance of Common Stock, $142,500
proceeds from issuance of note payable, less $43,062 in deferred syndication
costs, less repayments of license and sub license agreement obligation of
$330,390.
<PAGE> 7
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to continue in operation has been dependent upon
raising additional capital until revenues are sufficient to fund the
company's operating expenses, and the Company has therefore been exploring
the possibility of raising additional capital through private sources. The
Company has been unable to secure such financing on a timely basis or on
terms that are acceptable to it. The directors therefore resolved on July
10, 1997 to recommend to its stockholders that an offer of takeover by its
affiliated entity, WWS, be accepted. The offer was made on July 10, 1997
and as at August 1, 1997 the necessary single majority of acceptances has
been received totalling 2,237,066 shares. The Company is now therefore a
subsidiary of WWS. The takeover terms offered two WWS Ordinary Shares for
every share of Common Stock held. Under the terms of the offer WWS will
purchase the 30% shareholding of Mr J G Walker and Mrs J M Walker in Wwa for
the original nominal value paid of $200. WWS is in the process of
attempting to raise approximately $4,300,000 of capital through a U.K.
offering of its Convertible Unsecured Loan Stock. So far, approximately
$1,200,000 has been subscribed.
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 were due on
March 28, 1997. The Company is in the process of negotiating an extended
due date. The loan is secured by substantially all of the Company's assets,
but the liability to repay will be undertaken by WWS. The Company currently
has no other borrowing facilities or alternative financing methods available
to it.
The Company is not currently committed to expend funds for marketing or any
other activities or purchases.
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 September 30, 1997
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.
November 14, 1997 /s/ John Walker
John Walker, President
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
<PAGE> 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 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 AMERICAN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3
<SECURITIES> 0
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<ALLOWANCES> 0
<INVENTORY> 2
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0
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</TABLE>
