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 MARCH 31, 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 May 14, 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 -
March 31, 1998 and December 31, 1997 3
Condensed Statements of Operations -
For the Three Months ended March 31, 1998 and 1997
For the Cumulative From Inception
(January 19, 1995) to March 31, 1998 4
Condensed Statements of Cash Flows -
For the Three Months ended March 31, 1998 and 1997
For the Cumulative From Inception
(January 19, 1995) to March 31, 1998 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
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Condensed Balance Sheets Walker Wingsail America Inc
(A Development Stage Company)
- -------------------------------------------------------------------------------------
Mar 31 December 31,
1998 1977
- -------------------------------------------------------------------------------------
(Unaudited)
Assets $ $
Current Assets:
Cash 1,739 2,341
Prepaid Expenses and Other Current Assets 2,100 2,100
- -----------------------------------------------------------------------------------
Total Current Assets 3,839 4,441
Intangible Assets, Net of Accumulated
Amortization of $578 and $527, Respectively 440 491
Due from Affiliated Entity (Note 6) 60,985 101,391
- -----------------------------------------------------------------------------------
Total Assets 65,264 106,323
==========================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses 7,276 4,625
Note Payable, 112,500 150,000
Customer Deposits 19,958 19,958
- -----------------------------------------------------------------------------------
Total Current Liabilities 139,734 174,583
Due to Affiliated Entity (Note 6) 0 0
License and Sub-License Agreement Obligation
- -----------------------------------------------------------------------------------
Total Liabilities 139,734 174,583
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 (935,404) (929,194)
- -----------------------------------------------------------------------------------
Total Stockholders' Equity -74,470 -68,260
- -----------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 65,264 $106,323
==========================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Condensed Statements of Operations Walker Wingsail America, Inc
(A Development Stage Company)
- -------------------------------------------------------------------------------------------------------
Cumulative
For the Three Months Ended From Inception
March 31 March 31 (January 19, 1995)
1998 1997 to March 31, 1998
(Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------
Selling, General and Administrative Expenses (6,210) (54,188) (996,282)
- --------------------------------------------------------------------------------------------------
Other Income(Loss)
Deferred Syndication Costs (43,062)
Interest Expense (17,223)
Gain on Sale of Demonstration Yacht 8,850
Gain on Surrender of Licence Agreement 96,036
Interest Income 62 4,327
Other Income 2,130
Gain (Loss) on Foreign Currency Exchange Rate 9,820
- --------------------------------------------------------------------------------------------------
Total Other Income(Loss) - 62 60,878
- --------------------------------------------------------------------------------------------------
Net Loss from Development Stage Operations $ (6,210) $ (54,126) $(935,404)
==========================================
Net Loss Per Share - (0.02) (0.39)
==========================================
Weighted Average Number of Common Shares Outstanding 2,386,680 2,386,680 2,382,060
==========================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Condensed Statements of Cash Flows Walker Wingsail America,Inc
(A Development Stage Company)
- --------------------------------------------------------------------------------------------------------------
For the Three For the Three Cumulative
Months Ended Months Ended From Inception
March 31 March 31 (January 19, 1995)
1998 1997 to 31 March 1998
(Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities (6,210) (54,126) (935,404)
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 51 11,132 101,916
Gain on Sale of Demonstration Yacht (8,850)
Non-Cash Debt Issuance Costs
Amortisation of Note Payable Discount 1,902 7,500
Deferred Syndication Costs 43,062
Stock Compensation for Services Rendered 18,500
Proceeds from Surrender of Licence (96,036)
Decrease (Increase) in Prepaid Expenses and Other
Current Assets (2,100)
(Decrease) Increase in Accounts Payable 2,651 4,948 7,276
(Decrease) Increase in Customer Deposits (14,930) 19,958
(Decrease) Increase in Due to Affiliated Entity 38,783 228,999
(Increase) Decrease in due from Affiliated Entity 40,406 40,406
- --------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided By Operating Activities 36,898 (12,291) (574,773)
- --------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from Sale of Demonstration Yacht 357,000
Acquisition of Demonstration Yacht (353,452)
Organization Costs (1,018)
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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 (602) (12,291) 1,739
-------------------------------------------
Cash, Beginning 2,341 21,461 -
-------------------------------------------
Cash, Ending $ 1,739 $ 9,170 $ 1,739
===========================================
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 March 31, 1998 and December 31, 1997; the results of its operations
and its cash flows for the three months ended March 31, 1998 and 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 March 31, 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 licence 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 $60,985 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 three months ended March 31, 1998.
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, 1998
WITH THE QUARTER ENDED MARCH 31, 1997 AND THE PERIOD FROM INCEPTION FROM
(JANUARY 19, 1995) to MARCH 31, 1998
RESULTS OF OPERATIONS
During the period from the inception of the Company (January 19, 1995)
through March 31, 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 three
month period ended March 31, 1998, (the Current Period ), or the three
month period ended March 31, 1997, (the Prior Period ), or during the
period from inception (January 19, 1995) to March 31, 1998.
The Company incurred selling, general and administrative expenses of $6,210
in the Current Period and $54,188 in the Prior Period and $996,282 during
the period from inception (January 19, 1995) to March 31, 1998.
The Company incurred depreciation and amortization expenses of $51 in the
Current Period and $11,132 in the Prior Period and $101,916 during the
period from inception (January 19, 1995) to March 31, 1998.
The Company incurred no other income during the current period. In the
prior period the Company incurred a interest income of $62. During the
period from inception (January 19, 1995 to March 31, 1998 the Company
received other income of $121,163, including a gain on surrender of licence
agreement of $96,036 with Deferred Syndication Costs of $43,062 and Interest
Expense of $17,223.
During the three months ended March 31, 1998 the net cash provided by
operating activities amounted to $36,898, of this amount cash was decreased
in the amount of $6,159 as a result of the net income, net of non-cash
items. In the prior period the net cash used in operating activities
amounted to $12,291 of this amount cash was decreased in the amount of
$41,092 as a result of the net income, net of non-cash items. An increase
of $4,948 in accounts payable, a decrease of $14,930 in customer deposits
and an increase in the amount due to the affiliated entity of $38,783.
During the period of inception (January 19, 1995) to March 31, 1998 the net
cash used in operating activities amounted to $574,773. Of this amount,
cash was decreased in the amount of $869,312 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 March
31, 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 organisation costs in the amount of $1,018.
During the three months ended March 31, 1998 the net cash used in financing
activities amounted to $37,500 which was an instalment of the loan
repayment. There was no net cash used in financing activities during the
prior period. 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 March 31, 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 authorised.
WALKER WINGSAIL AMERICA, INC.
November 11 1998
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John Walker, President (Principal
Executive Officer, Principal
Financial Officer and Principal
Accounting Officer)