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, 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 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 November 14, 1996:
Common Stock $0.001 par value 2,386,680
----------------------------- ---------
Class Number of Shares
1
WALKER WINGSAIL AMERICA INC
INDEX
Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - September 30, 1996 and December 31, 1995....... 3
Condensed Statements of Operations - For the Three Months ended
September 30, 1996 and 1995 For the Nine Months Ended September 30,
1996 For the Period from Inception (January 19, 1995) to September 30,
1995 and Cumulative From Inception (January 19, 1995) to September 30,
1996..................................................................... 4
Condensed Statements of Cash Flows For the Nine Months ended September 30,
1996 For the Period From Inception (January 19, 1995) to September 30,
1995 and Cumulative From Inception (January 19, 1995) to September 30,
1996..................................................................... 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............................................ 9-11
Signatures
2
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Condensed Balance Sheets Walker Wingsail America Inc
(A Development Stage Company)
- ----------------------------------------------------------------------------------------------
September 30 December 31,
1996 1995
(Unaudited)
- ----------------------------------------------------------------------------------------------
Assets $ $
Current Assets:
Cash 32,761 79,250
Prepaid Expenses and Other Current Assets 2,620 12,689
- ----------------------------------------------------------------------------------------------
Total Current Assets 35,381 91,939
Demonstration Yacht, Net of Accumulated Depreciation
of $5,302 (Note 3) -- 348,150
Intangible Assets, Net of Accumulated Amortization of
$63,065 and $29,668, Respectively 867,496 896,643
- ----------------------------------------------------------------------------------------------
Total Assets 902,877 1,336,732
=============================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses 12,404 44,490
Note Payable, Net of Unamortized Discount of $3,854
(Note 4) 146,146 -
Customer Deposits 44,881 24,958
Due to Affiliated Entity (Note 5) 80,619 246,536
- ----------------------------------------------------------------------------------------------
Total Current Liabilities 284,050 315,984
License and Sub-License Agreement Obligation 556,090 693,085
- ----------------------------------------------------------------------------------------------
Total Liabilities 840,140 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 2,386,680 and 2,295,680 Shares Issued
and Outstanding, Respectively (Notes 4 and 8) 2,387 2,296
Additional Paid-in Capital 858,547 809,338
Deficit Accumulated During Development Stage (798,197) (483,971)
- ----------------------------------------------------------------------------------------------
Total Stockholders' Equity 62,737 327,663
- ----------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 902,877 1,336,732
=============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
Condensed Statements of Operations Walker Wingsail America Inc
(A Development Stage Company)
- --------------------------------------------------------------------------------------------------------------------------------
For the Nine For the Period Cumulative
For the Three Months Ended Months Ended From Inception From Inception
September 30 September 30 September 30 (January 19, 1995) (January 19, 1995)
1996 1995 1996 to Sept 30, 1995 to Sept 30, 1996)
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
Selling, General and Administrative
Expenses $ (77,244) $ (182,605) $ (325,928) $ (278,318) $ (823,025)
- --------------------------------------------------------------------------------------------------------------------------
Other Income
Gain on Sale of Demonstration Yacht - - 8,850 8,850
Interest Income 586 1,216 2,426 1,216 4,023
Other Income - 2,130 2,130
Gain (Loss) on Foreign Currency
Exchange Rate (98) - (1,704) - 9,825
- --------------------------------------------------------------------------------------------------------------------------
Total Other Income 488 1,216 11,702 1,216 24,828
- --------------------------------------------------------------------------------------------------------------------------
Net Loss from Development Stage
Operations $ (76,756) $ (181,389) $ (314,226) $ (277,102) $ (798,197)
==================================================================================
Net Loss Per Share (0.03) (0.09) (0.13) (0.21) (0.41)
==================================================================================
Weighted Average Number of Common
Shares Outstanding 2,382,767 1,982,066 2,351,435 1,333,179 1,925,051
==================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
Condensed Statement of Cash Flows Walker Wingsail America Inc
(A Development Stage Company)
- --------------------------------------------------------------------------------------------------------------------
For the Nine For the Period Cumulative
Months Ended From Inception From Inception
September 30 (January 19, 1995) (January 19, 1995)
1996 to Sept 30, 1995 to Sept 30, 1996
(Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------------
$ $ $
Cash Flows from Operating Activities
Net Loss from Development Stage Operations (314,226) (277,102) (798,197)
Adjustments to Reconcile Net Loss from Development
Stage
Operations to Net Cash
(Used In) Provided by Operating Activities:
Depreciation and Amortization 33,397 19,952 68,367
Gain on Sale of Demonstration Yacht (8,850) - (8,850)
Non-Cash Debt Issuance Costs 3,500 - 3,500
Amortisation of Note Payable Discount
3,646 - 3,646
Decrease (Increase) in Prepaid Expenses and
Other Current Assets 10,069 - (2,620)
(Decrease) Increase in Accounts Payable and
Accrued Expenses (32,086) 15,934 12,404
Increase in Customer Deposits 19,923 - 44,881
(Decrease) Increase in Due to Affiliated Entity (165,917) 284,648 80,619
- ---------------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided by Operating Activities (450,544) 43,432 (596,250)
- ---------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from Sale of Demonstration Yacht 357,000 - 357,000
Acquisition of Demonstration Yacht - (356,164) (353,452)
Organization Costs - (1,000) (1,018)
- ---------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Investing Activities 357,000 (357,164) 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) (193,395) (330,390)
Proceeds from Issuance of Common Stock, Net of
Syndication Costs 45,800 811,634 857,434
Deferred Syndication Costs (4,250) (55,665) (43,063)
- ---------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 47,055 562,574 626,481
- ---------------------------------------------------------------------------------------------------------------
Effect of Foreign Currency Translation - 15,607
- ---------------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash (46,489) 264,449 32,761
--------------------------------------------------
Cash, Beginning 79,250 - -
--------------------------------------------------
Cash, Ending $ 32,761 $ 264,449 $ 32,761
==================================================
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, 1996 and December 31, 1995; the results of its operations for the
three month and nine month periods ended September 30, 1996, the three month
period ended September 30, 1995, the period from inception (January 19, 1995)
through September 30, 1995, and the cumulative period from inception through
September 30, 1996; and its cash flows for the nine months ended September 30,
1996, the period from inception to September 30, 1995 and the cumulative period
from inception to September 30, 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 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 September 30, 1996, borrowings outstanding under the note
amounted to $146,146, net of unamortized discount of $3,854. 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.
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 nine months ended September 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 nine months ended September 30, 1996, the Company issued 7,000,
29,000 and 5,000 shares of its .001 par value common stock for cash
consideration in the amounts of $10,500, $20,300 and $15,000, respectively,
under non-public placements.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE QUARTER AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 WITH THE QUARTER ENDED SEPTEMBER 30, 1995 AND THE PERIOD FROM
INCEPTION FROM (JANUARY 19, 1995) TO SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
During the period from the inception of the Company (January 19, 1995) through
September 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 September 30, 1996, (the Current Period ), or the three month
period ended September 30, 1995, (the Prior Period ), or during the nine month
period ended September 30, 1996 or during the period from inception (January 19,
1995) to September 30, 1995. The Company suffered a loss of $76,756 during the
Current Period and $181,389 in the Prior Period and $314,226 during nine months
ended September 30, 1996 and $277,102 during the period from inception (January
19, 1995) to September 30, 1995 from development-stage operations.
The Company incurred selling, general and administrative expenses of $77,244 in
the Current Period and $182,605 in the Prior Period and $325,928 during the nine
months ended September 30, 1996 and $278,318 during the period from inception
(January 19, 1995) to September 30, 1995.
The Company incurred depreciation and amortization expenses of $12,956 in the
Current Period and $19,952 in the Prior Period and $31,693 during the nine
months ended September 30, 1996 and $19,952 during the period from inception
(January 19, 1995) to September 30, 1995
The Company incurred a loss on foreign currency exchange rate of $98, and
interest income of $586, during the Current Period, interest income of $1,216
during the Prior Period, and a $1,704 loss on foreign currency, $2,426 in
interest income, $2,130 in other income, and a gain of $8,850 on the sale of its
demonstration yacht, during the nine months ended September 30, 1996 and
interest income of $1,216 was received during the period from inception (January
19, 1995) to September 30, 1995.
The net cash used in operating activities during the Current Period amounted to
$32,347, of this amount, cash was decreased in the amount of $63,800 as a result
of the net loss, net of non-cash items for depreciation and amortization costs
in the amount of $12,956; cash decreased in the amount of $505 as a result of a
increase in prepaid expenses and other current assets; cash decreased in the
amount of $2,897 as a result of an increase in accounts payable and accrued
expenses; and cash decreased in the amount of $34,855 as a result of an increase
in the amount due to WWS. During the Prior Period, the net cash used in by
operating activities amounted to $4,452 of which cash decreased in the amount of
$161,437 as a result of the net loss, net of non-cash items for depreciation and
amortization costs in the amount of $19,952, cash increased in the amount of
$15,934 as a result of an decrease in accounts payable and accrued expenses, and
increased by $141,051 as a result of an increase in the amount due to WWS.
During the nine months ended September 30, 1996 the net cash used in operating
activities amounted to $450,544. Of this amount, cash was decreased in the
amount of $282,533 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 $37,043, $8,850 and $3,500
respectively; cash increased in the amount of $10,069 as a result of a decrease
in prepaid expenses and other current assets; cash decreased in the amount of
$32,086 as a result of a increase 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 $165,917 as a result of a decrease
in the amount due to WWS.
During the period of inception (January 19, 1995) to September 30, 1995 the net
cash provided by operating activities amounted to $43,432. Of this amount, cash
was decreased in the amount of $257,150 as a result of the net loss, net of
non-cash items including depreciation and amortization cost in the amount of
$19,952, and increased in the amount of $15,934 as a result of a decrease in
accounts payable and accrued expenses; cash increased in the amount of $284,648
as a result of an increase in the amount due to WWS.
7
During the Current Period and Prior Period there was no cash flow from investing
activities. During the nine months ended September 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 September 30, 1995 the cash flows from investing
activities consisted on an outlay for organisation costs in the amount of
$1,000.
Cash flows from financing activities increased by a net amount of $10,750 during
the Current Period consisting of $15,000 from the issuance of 5,000 shares of
Common Stock, less deferred syndication costs of $4,250. During the Prior
Period, the net cash used in financing activities amounted to $609,440, which
consisted of deferred syndication costs of $8,598, and $811,433 of proceeds from
the issuance of 2,295,680 of common stock, less a principal repayment of its
obligation on the licence and sub licence agreement with WWS in the amount of
$193,395.
During the period nine months ending September 30, 1996 cash flows from
financing activities increased by $47,055 consisting of an increase from the
$45,800 of proceeds from the issuance of 41,000 shares of Common Stock and
proceeds of $142,500 from the issuance of a note payable, less deferred
syndication costs of $4,250 and a principal repayments of its obligation on the
licence and sub license agreement with WWS in the amount of $136,995. During the
period from inception (January 19 1995) to September 30, 1995, the net cash used
in financing activities amounted to $562,574 which consisted of $193,395 in
principal repayments of Licence and Sub-Licence agreement obligation, $811,634
in proceeds of issuance of Common Stock, less $55,665 in 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.
8
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, 1996
9
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 1996 /s/ JOHN WALKER
- ------------------------ -------------------------------------------
John Walker, President (Principal Executive
Officer, Principal Financial Officer and
Principal Accounting Officer)