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, 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 Indentification 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 X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of November 11, 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 -
September 30, 1998 and December 31, 1998 3
Condensed Statements of Operations -
For the Three Months ended September 30, 1998 and 1997
For the Nine Months ended September 30, 1998 and 1997
For the Cumulative From Inception
(January 19, 1995) to September 30, 1998 4
Condensed Statements of Cash Flows -
For the Nine Months ended September 30, 1998 and 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)
- -------------------------------------------------------------------------------------
Sep 30, December 31,
1998 1977
(Unaudited)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Assets $ $
Current Assets:
Cash 1,162 2,341
Prepaid Expenses and Other Current Assets 2,100 2,100
- -----------------------------------------------------------------------------------
Total Current Assets 3,262 4,441
Intangible Assets, Net of Accumulated Amortization
of $680 and $527, Respectively 338 491
Due from Affiliated Entity (Note 6) 44,113 101,391
- -----------------------------------------------------------------------------------
Total Assets 47,713 106,323
==========================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses 951 4,625
Note Payable, 112,500 150,000
Customer Deposits 19,958 19,958
- -----------------------------------------------------------------------------------
Total Current Liabilities 133,409 174,583
Due to Affiliated Entity (Note 6) 0 0
License and Sub-License Agreement Obligation
- -----------------------------------------------------------------------------------
Total Liabilities 133,409 174,583
- -----------------------------------------------------------------------------------
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 (946,630) (929,194)
- -----------------------------------------------------------------------------------
Total Stockholders' Equity -85,696 -68,260
- -----------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 47,713 $106,323
==========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Condensed Statements of Operations
<TABLE>
<CAPTION>
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)
Sep 30, Sep 30, Sep 30, Sep 30, to September 30,
1998 1997 1998 1997 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selling, General and Administrative Expenses (1,274) (13,055) (17,435) (89,539) (1,007,507)
- --------------------------------------------------------------------------------------------------------------------------------
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 96,036 96,036
Interest Income 64 4,327
Other Income 2,130
Gain (Loss) on Foreign Currency Exchange Rate (6) 9,820
- --------------------------------------------------------------------------------------------------------------------------------
Total Other Income(Loss) - 96,036 - 96,094 60,878
- --------------------------------------------------------------------------------------------------------------------------------
Net Income(Loss) from Development Stage Operations $ (1,274) $ 82,981 $ (17,435) $ 6,555 $ (946,629)
==========================================================================
Net Income(Loss) Per Share - 0.03 (0.01) - (0.40)
==========================================================================
Weighted Average Number of Common Shares Outstanding 2,386,680 2,386,680 2,386,680 2,386,680 2,382,686
==========================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
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)
1998 1997 to Sep 30, 1998
(Unaudited) (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities (17,435) 6,555 (946,629)
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 153 22,315 102,018
Gain on Sale of Demonstration Yacht (8,850)
Gain on Surrender of License Agreement (96,036) (96,036)
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
Decrease (Increase) in Prepaid Expenses and Other (2,100)
Current Assets
(Decrease) Increase in Accounts Payable (3,675) (14,746) 950
(Decrease) Increase in Customer Deposits (24,930) 19,958
(Decrease) Increase in Due to Affiliated Entity 86,663 228,999
(Increase) Decrease in due from Affiliated Entity 57,278 57,278
- -----------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided By Operating Activities 36,321 (18,277) (575,350)
- -----------------------------------------------------------------------------------------------------------
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 (1,179) (18,277) 1,162
-------------------------------------------
Cash, Beginning 2,341 21,461 -
-------------------------------------------
Cash, Ending $ 1,162 $ 3,184 $ 1,162
===========================================
</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 September 30, 1998 and December 31,
1997; the results of its operations and its cash flows for the nine
months ended September 30, 1998 and 1997 and the cumulative period from
inception (January 19, 1995) through September 30, 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 September 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 $44,113 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 nine months ended September 30, 1998.
10. VOLUNTARY LIQUIDATION OF WALKER WINGSAIL SYSTEMS PLC
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.
On August 18, 1998 shareholders of WWS were advised that the above
resolutions of the two meetings were passed.
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, 1998 WITH THE QUARTER ENDED SEPTEMBER 30, 1997 AND THE PERIOD FROM
INCEPTION FROM (JANUARY 19, 1995) to SEPTEMBER 30, 1998
RESULTS OF OPERATIONS
During the period from the inception of the Company (January 19, 1995)
through September 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 nine
month period ended September 30, 1998, (the Current Period ), or the
nine month period ended September 30, 1997, (the Prior Period ), or
during the period from inception (January 19, 1995) to September 30 ,
1998.
The Company incurred selling, general and administrative expenses of
$1,274 in the Current Period and $13,055 in the Prior Period and
$1,007,507 during the period from inception (January 19, 1995) to
September 30, 1998.
The Company incurred depreciation and amortization expenses of $51 in the
Current Period and $51 in the Prior Period and $102,018 during the period
from inception (January 19, 1995) to September 30, 1998.
The Company incurred no other income during the current period. In the
prior period the Company incurred a gain on the reversal of amortization
in respect of the surrender of the license agreement of $96,036. During
the period from inception (January 19, 1995 to September 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 September 30, 1998 the net cash used in
operating activities amounted to $530, of this amount cash was decreased
in the amount of $1,223 as a result of the net income, net of non-cash
items. There was a decrease of $1,605 in accounts payable and a decrease
in the amount due from affiliated entity of $2,298. In the prior period
the net cash used in operating activities amounted to $5,309, of this
amount cash was decreased in the amount of $13,004 as a result of the net
income, net of non-cash items. A decrease of $2,164 in accounts payable,
and an increase in the amount due to the affiliated entity of $9,859.
During the period of inception (January 19, 1995) to September 30, 1998
the net cash used in operating activities amounted to $575,350. Of this
amount, cash was decreased in the amount of $880,435 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
September 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 September 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 (WWS) 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.
Since the voluntary liquidation of WWS, there has been no costs incurred
that cannot be paid by the funds held by WWA. It will therefore have to
cease trading until such time as the Company can be sold as a shell
corporation. A form 15 will be filed.
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, 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
- ---------------- ---------------------------------
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
SEPTEMBER 30, 1998 FINANCIAL STATEMENTS OF WALKER WINGSAIL AMERICA, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
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<INVENTORY> 1
<CURRENT-ASSETS> 3
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<TOTAL-ASSETS> 48
<CURRENT-LIABILITIES> 133
<BONDS> 0
0
0
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<OTHER-SE> (88)
<TOTAL-LIABILITY-AND-EQUITY> 48
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<OTHER-EXPENSES> (90)
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</TABLE>
