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, 1998
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 Identification No)
incorporation or organization)
Devonport Royal Dockyard, Plymouth, Devon, UK PL1 4SG
(Address of principal executive offices)
44 1752 608000
(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 No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of August 8, 1998:
Common Stock $0.001 par value 2,386,680
----------------------------- ----------------
Class Number of Shares
WALKER WINGSAIL AMERICA INC
INDEX Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets -
June 30, 1998and December 31, 1998.................. 3
Condensed Statements of Operations -
For the Three Months ended June 30, 1998 and 1997
For the Six Months ended June 30, 1998 and 1997
For the Cumulative From Inception
(January 19, 1995) to June 30, 1998................. 4
Condensed Statements of Cash Flows -
For the Six Months ended June 30, 1998and 1997
For the Cumulative From Inception
(January 19, 1995) to March 31, 1998................. 5
Notes to Condensed Financial Statements.............. 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 8-9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................... 10-11
Signatures
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Balance Sheets Walker Wingsail America Inc
(A Development Stage Company)
- --------------------------------------------------------------------------------------------------------------------
Jun 30 December 31,
1998 1977
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets $ $
Current Assets:
Cash 1,693 2,341
Prepaid Expenses and Other Current Assets 2,100 2,100
- ------------------------------------------------------------------------------------------------------------------
Total Current Assets 3,793 4,441
Intangible Assets, Net of Accumulated Amortization of $629 and $527, Respectively 388 491
Due from Affiliated Entity (Note 6) 46,411 101,391
- ------------------------------------------------------------------------------------------------------------------
Total Assets 50,592 106,323
=========================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses 2,555 4,625
Note Payable, 112,500 150,000
Customer Deposits 19,958 19,958
- ------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 135,013 174,583
Due to Affiliated Entity (Note 6) 0 0
License and Sub-License Agreement Obligation
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities 135,013 174,583
- ------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred Stock: $.001 Par Value; 5,000,000 Shares Authorized
Common Stock: $.001 Par Value; 20,000,000 Shares Authorized 2,386,680
Shares Issued and Outstanding (Note 9) 2,387 2,387
Additional Paid-in Capital 858,547 858,547
Deficit Accumulated During Development Stage (945,355) (929,194)
- ------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity -84,421 -68,260
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 50,592 $ 106,323
=========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Statements of Operations Walker Wingsail America, Inc
(A Development Stage Company)
- ---------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended For the Six For the Six Cumulative
Months Ended Months Ended From Inception
June 30 June 30 June 30 June 30 (January 19, 1995)
1998 1997 1998 1997 to June 30, 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selling, General and Administrative Expenses (9,951) (22,296) (16,161) (76,484) (1,006,233)
- ----------------------------------------------------------------------------------------------------------------------------
Other Income(Loss)
Deferred Syndication Costs (43,062)
Interest Expense (17,223)
Gain on Sale of Demonstration Yacht 8,850
Gain on Surrender of License Agreement 96,036
Interest Income 2 64 4,327
Other Income 2,130
Gain (Loss) on Foreign Currency Exchange Rate (6) (6) 9,820
- ----------------------------------------------------------------------------------------------------------------------------
Total Other Income(Loss) - (4) - 58 60,878
- ----------------------------------------------------------------------------------------------------------------------------
Net Income(Loss) from Development Stage Operations $ (9,951) $ (22,300) $ (16,161) $ (76,426) $ (945,355)
====================================================================
Net Income(Loss) Per Share - (0.01) (0.01) (0.03) (0.40)
====================================================================
Weighted Average Number of Common Shares Outstanding 2,386,680 2,386,680 2,386,680 2,386,680 2,382,394
====================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows Walker Wingsail America, Inc
(A Development Stage Company)
- -------------------------------------------------------------------------------------------------------------------
Cumulative
For the Six For the Six From Inception
Months Ended Months Ended (January 19, 1995)
June 30, 1998 June 30, 1997 to June 30, 1998
(Unaudited) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities (16,161) (76,426) (945,355)
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 102 22,264 101,967
Gain on Sale of Demonstration Yacht (8,850)
Gain on Surrender of License Agreement
Non-Cash Debt Issuance Costs
Amortization of Note Payable Discount 1,902 7,500
Deferred Syndication Costs 43,062
Stock Compensation for Services Rendered 18,500
Proceeds from Surrender of License (96,036)
Decrease (Increase) in Prepaid Expenses and Other (2,100)
Current Assets 2,555
(Decrease) Increase in Accounts Payable (2,070) (12,582)
(Decrease) Increase in Customer Deposits (24,930) 19,958
(Decrease) Increase in Due to Affiliated Entity 76,804 228,999
(Increase) Decrease in due from Affiliated Entity 54,980 54,980
- -------------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided By Operating Activities 36,851 (12,968) (574,820)
- -------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from Sale of Demonstration Yacht 357,000
Acquisition of Demonstration Yacht (353,452)
Organization Costs (1,018)
- -------------------------------------------------------------------------------------------------------------
Net Cash Provided by Investing Activities - - 2,530
- -------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from Issuance of Note Payable 142,500
Capital Repayment of Loan (37,500) (37,500)
Principal Repayments of License and Sub-License
Agreement Obligation (330,390)
Proceeds from Issuance of Common Stock, Net of
Syndication Costs 842,434
Deferred Syndication Costs (43,062)
- -------------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided by Financing Activities (37,500) - 573,982
- -------------------------------------------------------------------------------------------------------------
Net Increase in Cash (649) (12,968) 1,692
---------------------------------------------
Cash, Beginning 2,341 21,461 -
---------------------------------------------
Cash, Ending $ 1,692 $ 8,493 $ 1,692
=============================================
</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, 1998 and December 31, 1997; the results of its operations
and its cash flows for the six months ended June 30, 1998and 1997 and the
cumulative period from inception (January 19, 1995) through March 31, 1998
The information included in the condensed balance sheet as of December 31,
1997 has been derived from the Company 's Form 10-KSB for the year ended
December 31, 1997 (1997 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 1997 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. DEMONSTRATION YACHT:
In February, 1997, 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 were due on March 28, 1997. A new date of December 31, 1998 has
been agreed. The note is collateralized by substantially all assets of the
Company. As of June 30, 1998 borrowings outstanding under the note amounted
to $112,500. 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.
5. 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 license 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.
6. 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 $228,999. The remaining
net balance of $46,411 has been included in as due from affiliated entity
and will be used to reduce the cost of the investment by WWS. (See note 5)
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. LITIGATION
During January 1998, the Company, WWS and Mr and Mrs John Walker were named
as parties to a lawsuit initiated by Wingsail USA Inc. The lawsuit alleges,
among other things, breach of contract with respect to certain distributor
agreements with the Company and WWS, and raises certain warranty issues,
with respect to the demonstration yacht purchased by Wingsail USA Inc., from
the Company during February 1996 (Note 3). Action under the lawsuit has
been postponed while the Company, WWS and Mr & Mrs Walker are in
negotiations with Wingsail USA Inc., in an attempt to settle the
disagreements. The Company, WWS and Mr and Mrs Walker believe that the
lawsuit is without merit and, in the event that a settlement is not reached,
they intend to vigorously defend this action. The litigation is in its
initial stages and the potential losses by the Company are not predictable
at this time.
9. COMMON STOCK ISSUANCE:
No stock has been issued during the six months ended June 30, 1998.
10. SUBSEQUENT EVENTS
On July 10, 1998 all the employees of Walker Wingsail Systems plc were made
redundant and a liquidator of the company was nominated. This was Ian
Walker of Pannell Kerr Forster, 2 Barnfield Crescent, Exeter, EX1 1QT,
Devon, England. A notice was sent to all shareholders advising them of an
Extra-ordinary general meeting to be held on August 7, 1998 at Alexandra
Palace, Wood Green, London, N22 7AY, England asking them to consider and if
thought fit, to pass the following resolutions.
1. Extra-ordinary Resolution
THAT it has been proved to the satisfaction of this meeting
that the company cannot, by reason of its liabilities,
continue its business, and that it is advisable to wind up
the same and accordingly that the company be would up
voluntarily.
2. Ordinary Resolution
THAT I E Walker of Pannell Kerr Forster, 2 Barnfield
Crescent, Exeter EX1 1QT be and is hereby appointed as
liquidator of the company for the purpose of the voluntary
winding up.
A notice was also sent to all Creditors giving notice of a Creditors meeting
to be held on August 10, 1998, at the New Continental Hotel, Millbay Road,
Plymouth, Devon, PL1 3LD, England for the purposes mentioned in Sections 99
to 101 of the Insolvency Act 1986 to
a. to have laid before it a statement as to the affairs of
the company
b. to nominate one or more insolvency practitioners as
liquidator or liquidators; and
c. if thought fit, to appoint a liquidation committee
d. and to pass any other resolution necessary.
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, 1998
WITH THE QUARTER ENDED JUNE 30, 1997 AND THE PERIOD FROM INCEPTION FROM
(JANUARY 19, 1995) to JUNE 30, 1998
RESULTS OF OPERATIONS
During the period from the inception of the Company (January 19, 1995)
through June 30, 1998, 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 six
month period ended June 30, 1998, (the Current Period ), or the six month
period ended June 30, 1997, (the Prior Period ), or during the period from
inception (January 19, 1995) to June 30 , 1998.
The Company incurred selling, general and administrative expenses of $9,951
in the Current Period and $22,296 in the Prior Period and $1,006,233 during
the period from inception (January 19, 1995) to June 30, 1998.
The Company incurred depreciation and amortization expenses of $51 in the
Current Period and $11,132 in the Prior Period and $101,967 during the
period from inception (January 19, 1995) to June 30, 1998.
The Company incurred no other income during the current period. In the
prior period the Company incurred a loss on foreign currency exchange rate
of $6 and other income of $2. During the period from inception (January 19,
1995 to June 30, 1998 the Company received other income of $121,163,
including a gain on surrender of license agreement of $96,036 with Deferred
Syndication Costs of $43,062 and Interest Expense of $17,223.
During the three months ended June 30, 1998 the net cash used in operating
activities amounted to $47, of this amount cash was decreased in the amount
of $9,900 as a result of the net income, net of non-cash items. There was a
decrease of 4,721 in accounts payable and a decrease in the amount due from
affiliated entity of $14,574. In the prior period the net cash used in
operating activities amounted to $677, of this amount cash was decreased in
the amount of $11,168 as a result of the net income, net of non-cash items.
A decrease of $17,530 in accounts payable, a decrease in customer deposits
of $10,000 and as increase in the amount due to the affiliated entity of
$38,021.
During the period of inception (January 19, 1995) to June 30, 1998 the net
cash used in operating activities amounted to $574,820. Of this amount,
cash was decreased in the amount of $879,212 as a result of the net loss,
net of non-cash items.
There were no cash flows from investing activities during the current or
prior period. During the period from inception (January 19, 1995) to June
30, 1998 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 organization costs in the amount of $1,018.
During the three months ended June 30, 1998, and the prior period, there was
no cash used in financing activities. During the period from inception
(January 19 1995) to March 31, 1998, the net cash provided by financing
activities amounted to $573,982 which consisted of $842,434 in proceeds of
issuance of Common Stock, $105,000 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.
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. The Company explored the possibility of
raising additional capital of approximately $8,000,000 through private
sources, but such further Capital has not been forthcoming. The Company
therefore currently has no plans, agreements, understandings or arrangements
for completing such a financing since there was no assurance that the
Company would 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 were due on
March 28, 1997. A new date of December 31, 1998 has been agreed. 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. During 1998/1999, it is management's
intention to incur minimal office and administration expenses and
professional fees. These continued losses and deficiency in working capital
raise substantial doubt about the Company and its ability to continue in
existence as a going concern. In regard to this matter, the control of the
Company was shifted to WWS through an exchange of stock. In July 1997 Walker
Wingsail Systems plc made an offer of takeover of the Company, and this was
taken up by 56% of issued stock. The Company and its ability to continue as
a going concern is dependent upon the ability of WWS to support the Company
in meeting its obligations for professional and administrative costs until
such time as the Company is sold as a shell corporation or it generates
sufficient cash flow in its capacity as a sales representative for WWS to
support itself.
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, 1998
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 authorized.
WALKER WINGSAIL AMERICA, INC.
November 11, 1998 /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, 1998 FINANCIAL STATEMENTS OF WALKER WINGSAIL AMERICA, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-END> JUN-30-1998
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0
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</TABLE>
