SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: May 26, 2000
WINCHESTER MINING CORPORATION
--------------
(New name of registrant as specified in its charter)
Hi-Plains Energy Corp.
--------------------
(Prior name of corporation pre-merger)
Wyoming 0-27311 84-1413868
- ---------------- ------------- ------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.
incorporation pre-merger)
pre-merger)
Delaware 0-30651 84-1413868
- ----------------- ------------- ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.
incorporation post-merger)
post-merger)
409 Granville Street, Suite #1010, Vancouver, B.C. Canada V6C 1T2
----------------------------------------------------------
(NEW ADDRESS)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (604)609-0409
1
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On May 15, 2000, Winchester Mining Corp. completed a Share Purchase
Agreement with shareholders of Hi-Plains Energy Corp. in which Winchester Mining
Corp., a Delaware corporation, acquired all 780,000 shares outstanding of the
Registrant for the purposes of accomplishing a Merger of Hi-Plains Energy Corp.
and Winchester Mining Corp. The Merger was completed on May 15, 2000.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
None.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None.
ITEM 5. OTHER EVENTS
History of Winchester Mining Corp.
In 1996 the Company was listed on the OTCBB with the symbol WNCR. The prior
management raised funds for a mining property in the Northwest Territories. The
budget was spent and the Company remained inactive until March of 1999. In
September of 1999, the Company raised several hundred thousand dollars to invest
in online gambling. The Company has since divested itself of these acquisitions
due to the questionable nature of the online gambling industry. In September of
1999, Wayne Miller became president of Winchester Mining, Corp. The Company
commissioned Digicorp of Vancouver British Columbia, Canada to develop websites
for the Company: Hollywoodmall.net and Pacificnorthwestmall.net. They have been
under development since October of 1999. An agreement with Cartoon Products was
signed to distribute licensed products from Disney, Warner Bros., NFL, NCAA,
MLB, NBA, etc. Radiant Communications of Vancouver is developing and managing
these websites.
Bullseye Communications Group has been hired to develop an overall
marketing plan for the Company and the two "mall" websites. To date they have
developed the corporate logo for the Pacificnorthwestmall.com and are currently
developing the retail solicitation packages needed to attract retailers to the
sites.
Marketing
The Company's marketing program is being modeled around the "permission
marketing" concept. The Company's promotional program revolves around an
award/reward system used to provide customers with a tangible incentive to make
purchases from its websites. With the Pacificnorthwestmall and Hollywoodmall
credits, customers will be able to purchase additional products from its
websites.
2
This type of marketing program has been tried and proven, in the Trading
Stamp program. Every time a customer bought something at a participating store,
the customer earned some stamps. They collected the stamps in a little book.
With enough books a customer could get free gifts. This was a way to reward
frequent shopping trips.
This type of component has been adopted to draw customers to the Company's
websites. The concept is that as customers with the Company begin to earn
credits, they will be motivated to earn more credits. The cycle will begin,
customers will tell their friends, neighbors and relatives, and they too will,
hopefully, do the same.
Another important factor to the entire credits program is its cost
effectiveness. It is completely up to the Company to determine the value of
credits, thereby being able to control cost to maximize the effectiveness of the
program.
Product Decisions
The Company will be developing a product mix which will capitalize and
focus on the most popular goods purchased by its target markets. The Company
will constantly survey our account holders in order to be on the cutting edge in
offering the most desireable goods and products.
Objectives
The Company intends to use Banner advertising in conjunction with a strong
affiliate program to introduce Pacificnorthwestmall.com and Hollywoodmall.net to
the target market. The Company's permission marketing program has commenced in
May 2000.
Selling Tactics
E-Mail Newsletter - Anyone visiting the Company websites will have the
opportunity to sign up with the monthly or biweekly newsletter. Initially, the
benefit for signing up to the newsletter will be a tangible item with real value
to the customers. In the future, when the companies "permission marketing"
program has taken hold, the Company will give away credits, information or
something else with a perceived value to attract potential customers to its
newsletter.
Search Engine Positioning - The Company will employ products like
WebPosition Gold (tm), software which has a submitter to submit websites to
optimal positions in all of the major search engines. Further, it will analyze
the website and suggest to improve website rankings. It also has a rank checking
utility to compare against competition.
Press Coverage - The Company will diligently pursue all press coverage
possible.
3
Expanded Referral Log Reporting - Every time someone visits a website they
will bring valuable information with them, what website they came from and what
keyword they queried the search engine to find us. With this type of
information, the Company can make adjustments to enhance the website
performance. The Company intends to capture and review this information on a
weekly basis.
E-Mail - The Company will rely heavily on staying in contact with customers
with the use of e-mail. E-mail is an extremely cost effective medium to enhance
customer contact and loyalty. The Company recognizes that regular e-mail will
cultivate a relationship with customers. This in turn will cause a majority of
online e-commerce monies spent on by account holders to flow through Company
sponsored or owned websites. This is a result of a high comfort level with the
customer base which is achieved by regular e-mail contact. It is important for
the Company to receive permission from its customers before opening this dialog.
ITEM 6. RESIGNATION AND APPOINTMENT OF OFFICERS AND DIRECTORS
Directors from Winchester Mining Corp. now form the Board after the Merger
of companies. The business experience of the Directors is disclosed herein.
WAYNE MILLER, age 51, President and Director, graduated in 1966 from high
school, attended Simon Fraser University for four years, 2 years in economics
and 2 years in geography. He worked at Sears Canada in Management and sales.
After University he worked for 7 years in the restaurant industry in management
and acquired valuable experience in all facets of business. He became a
stockbroker in 1984 and worked in the financial industry for 15 years raising
funds for junior publicly traded companies on the CDNX market. He was with
Georgia Pacific Securities from 1989 to 1999. He became president of Winchester
Mining Corp. in September 1999 and also became President of Dalmation Res. Ltd.
in February 2000. Dalmation Res. Ltd. is publicly traded on the CDNX exchange
symbol (DTN).
GARY BURNIE, age 50, Secretary and Director, was involved in management of
Travellers Acceptance Corp. for 3 years. He then became a stockbroker in the
financial industry for 13 years raising funds for junior CDNX companies at
Wolverton Securities, Inc. Since 1984 he has raised funding for various
companies on the CDNX market and the OTCBB. He was recently President of First
American Scientific, an OTCBB company.
BARRY MILLER, age 37, Director, was employed with Eaton's Canada in sales.
He became a stockbroker and worked for 2 years in the financial industry at
Merrit Investments (1986-1988). He opened his own business in the electronics
industry for 2 years and returned to the financial industry in public relations
for a number of CDNX companies, most recently International Wayside Gold Mines,
Ltd., symbol (IWA). He was also employed with LML Payment Systems, Inc., a NASD
small cap company, in investor relations.
4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIALS, & EXHIBITS
Financial Statements - December 31, 1999
- Pro Forma for March 31, 2000 (Unaudited)
Exhibits - 2.1 - Articles of Merger
2.2 - Plan of Merger
2.3 - Certificate of Ownership and Merger
3.1 - Certificate of Incorporation
3.2 - Bylaws
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 26, 2000 Winchester Mining Corp.
By:/s/Wayne Miller
---------------------------
President
WINCHESTER MINING CORPORATION
Financial Statements
C O N T E N T S
December 31, 1999 and 1998
Independent Auditors' Report . . . . . . . . . . . . . . . . . . .F-1
Consolidated Balance Sheet as of December 31, 1999 and 1998 . F-2
Consolidated Statement of Loss For The Years Ended
December 31, 1999 and 1998 . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Stockholders' Equity For The Years Ended
December 31, 1999 and 1998 . . . . . . . . . . . . F-4
Consolidated Statement of Cash Flows For The Years Ended
December 31, 1999 and 1998 . . . . . . . . . . . . . . . F-5
Notes to the Consolidated Financial Statements . .. . . F-6-F-13
Pro Forma Combined - March 31, 2000 (Unaudited)
Cover Sheet PF-1
Pro Forma Combined Condensed Financial Information PF-2
Pro Forma Combined Condensed Balance Sheet PF-3
Pro Forma Combined Condensed Statements of Loss PF-4-5
Notes to Pro Forma Combined Condensed Financial Statements PF-6
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
BATEMAN & CO., INC., P.C.
Certified Public Accountants
5 Briardale Court
Houston, Texas 77027-2904
(713) 552-9800
FAX (713) 552-9700
www.batemanhouston.com
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders
Winchester Mining Corporation
Vancouver, BC, Canada
We have audited the accompanying balance sheets of Winchester Mining Corporation
(a Delaware Corporation) as of December 31, 1999 and 1998 and the related
statements of loss, stockholders' equity (deficit), and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Winchester Mining Corporation
as of December 31, 1999 and 1998, and the results of its operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and negative cash flows from operations since inception that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to those matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ BATEMAN & CO., INC., P.C.
Houston, Texas
May 12, 2000
Member
INTERNATIONAL ASSOCIATION OF PRACTISING ACCOUNTANTS
Offices in Principal Cities Around The World
F-1
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------------------
MARCH 31,
2000 DECEMBER 31,
---------------------------------------
(UNAUDITED) 1999 1998
--------------------- --------------------- --------------
ASSETS
Current Assets:
Cash $254,116 $219 $149
Note receivable, net of allow-
ance for bad debts of $45,507 0 0 0
Inventory, at cost 3,414 2,816 0
Prepaid expenses 9,707 970 305
--------------------- --------------------- --------------
Total current assets 267,237 4,005 454
--------------------- --------------------- --------------
Total assets $267,237 $4,005 $454
===================== ===================== ==============
LIABILITIES
Current liabilities:
Accounts payable and
accrued expenses 81,275 26,118 4,449
Due to related parties 103,919 36,332 241,667
Accrued liability for
contingencies 25,000 25,000 0
--------------------- --------------------- --------------
Total current liabilities 210,194 87,450 246,116
--------------------- --------------------- --------------
Total liabilities 210,194 87,450 246,116
--------------------- --------------------- --------------
Commitments and contingencies - - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.0001 par value,
100,000,000 shares authorized,
35,540,000, 33,750,000
and 25,250,000 shares
issued and outstanding 3,554 3,375 2,525
Capital in excess of par value 1,190,002 923,414 502,643
Deficit accumulated during the
development stage (1,136,513) (1,010,234) (750,830)
--------------------- --------------------- --------------
Total stockholders'
equity (deficit) 57,043 (83,445) (245,662)
--------------------- --------------------- --------------
Total liabilities and
stockholders' equity $267,237 $4,005 $454
===================== ===================== ==============
The accompanying notes are an integral part of these statements.
F-2
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF LOSS FOR THE PERIODS ENDED
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
- -----------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE QUARTER
NOVEMBER 6, ENDED
1996 THROUGH MARCH 31,
MARCH 31, 2000 YEARS ENDED DECEMBER 31,
-------------------------------------
2000 (UNAUDITED) 1999 1998
---------------------- --------------------- --------------------- --------------
Revenues $15,537 $0 $15,537 $0
---------------------- --------------------- --------------------- --------------
Less, Costs and expenses:
Cost of revenues 76,201 0 76,201 0
Consulting and
management fees 591,195 35,669 140,309 201,667
Provision for
contingencies 25,000 0 25,000 0
Depreciation and
amortization 539 0 305 108
Writeoffs and abandon-
ments of mineral
properties 276,000 0 0 0
Other general and
administrative 185,420 90,610 33,126 49,728
---------------------- --------------------- --------------------- --------------
Total operating
expenses 1,154,355 126,279 274,941 251,503
---------------------- --------------------- --------------------- --------------
Loss from operations (1,138,818) (126,279) (259,404) (251,503)
---------------------- --------------------- --------------------- --------------
Other income (expense):
Interest income 2,305 0 0 0
Interest expense 0 0 0 0
---------------------- --------------------- --------------------- --------------
Total other income
(expense) 2,305 0 0 0
---------------------- --------------------- --------------------- --------------
Loss before taxes
on income (1,136,513) (126,279) (259,404) (251,503)
Provision for income
taxes 0 0 0 0
---------------------- --------------------- --------------------- --------------
Net loss ($1,136,513) ($126,279) ($259,404) ($251,503)
====================== ===================== ===================== ==============
Basic earnings (loss)
per common share ($0.00) ($0.01) ($0.01)
===================== ===================== ==============
Weighted average number
of shares outstanding 34,104,066 31,895,206 22,429,177
===================== ===================== ==============
The accompanying notes are an integral part of these statements.
F-3
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIODS ENDED
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------------------
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
----------------------- --------------- ----------------------- -------------------- --------------
YEAR ENDED DECEMBER 31, 1998:
Balances,
December 31,
1997 20,050,000 $2,005 $183,163 ($499,327) ($314,159)
Shares issued
for debt 5,200,000 520 319,480 320,000
Development
stage net
loss (251,503) (251,503)
----------------------- --------------- ----------------------- -------------------- -------------
Balances,
December 31,
1998 25,250,000 2,525 502,643 (750,830) (245,662)
YEAR ENDED DECEMBER 31, 1999:
Shares issued
for cash 3,000,000 300 149,700 150,000
Shares issued
for debt 5,500,000 550 274,450 275,000
Less, Related
issuance costs (3,379) (3,379)
Development
stage net
loss (259,404) (259,404)
----------------------- --------------- ----------------------- --------------------- ------------
Balances,
December 31,
1999 33,750,000 3,375 923,414 (1,010,234) (83,445)
QUARTER ENDED MARCH 31, 2000 (UNAUDITED):
Shares issued
for cash 1,790,000 179 288,011 288,190
Less, Related
issuance costs (21,423) (21,423)
Development
stage net
loss (126,279) (126,279)
----------------------- --------------- ----------------------- -------------------- -------------
Balances,
March 31,
2000 35,540,000 $3,554 $1,190,002 ($1,136,513) $57,043
======================= =============== ======================= ==================== =============
The accompanying notes are an integral part of these statements.
F-4
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
NOVEMBER 6, QUARTER
1996 ENDED
THROUGH MARCH 31,
MARCH 31, 2000 YEARS ENDED DECEMBER 31,
-----------------------------------
2000 (UNAUDITED) 1999 1998
------------------------ --------------------- --------------------- ------------
Cash flows from operating activities:
Net loss ($1,136,513) ($126,279) ($259,404) ($251,503)
Adjustments to reconcile
net income to cash
provided (used) by develop-
mental stage activities:
Provision for bad
debts 45,507 0 0 45,507
Depreciation and
amortization 539 0 305 108
Change in current assets
and liabilities:
Inventory (3,414) (598) (2,816) 0
Prepaid expenses (10,246) (8,737) (970) 1,313
Accounts payable and
accrued expenses 81,275 55,157 21,669 2,894
Accrued liability
for contingencies 25,000 0 25,000 0
Due to related
parties 698,919 67,587 69,665 201,667
------------------------ --------------------- --------------------- ------------
Cash flows from oper-
ating activities (298,933) (12,870) (146,551) (14)
------------------------ --------------------- --------------------- ------------
Cash flows from investing activities:
Loan to related party (50,000) 0 0 0
Loan repayments 4,493 0 0 0
------------------------ --------------------- --------------------- ------------
Cash flows from inves-
ting activities (45,507) 0 0 0
------------------------ --------------------- --------------------- ------------
Cash flows from financing activities:
Net proceeds from sale
of common stock 598,556 266,767 146,621 0
------------------------ --------------------- --------------------- ------------
Cash flows from finan-
cing activities 598,556 266,767 146,621 0
------------------------ --------------------- --------------------- ------------
Net increase (decrease)
in cash and equivalents 254,116 253,897 70 (14)
Cash and equivalents:
Beginning of period 0 219 149 163
------------------------ --------------------- --------------------- ------------
End of period $254,116 $254,116 $219 $149
======================== ===================== ===================== ============
Supplemental cash flow disclosures:
Cash paid for interest $0 $0 $0 $0
Cash paid for income taxes 0 0 0 0
Non-cash financing and
investing activities:
Shares issued for debt 595,000 0 275,000 320,000
The accompanying notes are an integral part of these statements.
F-5
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Following is a summary of the Company's organization and significant accounting
policies:
ORGANIZATION AND NATURE OF BUSINESS - The Company was incorporated as
Winchester Mining Corporation on November 6, 1996 in the state of Delaware,
and is a development stage enterprise engaged in searching for capital, and
in organizing and developing internet businesses. Its goal is to develop an
on-line international network of entertainment based websites and payment
clearing systems, including a shopping mall. It has also engaged in
referrals of internet browsers for a fee to an offshore online gambling
casino. Although its principal office is in Vancouver, BC, Canada, it
expects its internet businesses to invite customers from anywhere in the
world. In 1996 through 1997, the company attempted to establish a mining
business and pursued several unsuccessful Canadian mining opportunities.
As a development stage enterprise, the Company anticipates incurring
substantial additional losses as it pursues its internet businesses and as
it investigates other business opportunities.
On May 13, 2000, in connection with its merger with Hi-Plains Energy Corp.
(see "Subsequent Events," below), the Company changed its name from
Winchester Mining Corporation to PNW Capital Corp.
BASIS OF PRESENTATION - The accounting and reporting policies of the
Company conform to generally accepted accounting principles of development
stage enterprises.
USES OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. The Company's periodic filings with the Securities and
Exchange Commission include, where applicable, disclosures of estimates,
assumptions, uncertainties and concentrations in products and markets which
could affect the financial statements and future operations of the Company.
FOREIGN CURRENCY TRANSLATION - Foreign currency transactions have been
translated into U.S. dollars using:
o Year-end rates for monetary assets and liabilities;
o Historical rates for all other assets and liabilities; and
o Average rates during the year for revenues and expenses.
Exchange gains and losses arising from these foreign currency translations
are reflected in income or expense as incurred.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers all cash in banks, money market funds, and
certificates of deposit with a maturity of less than one year to be cash
equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS -
The carrying amounts of cash, accounts receivable, accounts payable, due to
related parties, and accrued expenses approximate fair value because of the
short maturity of these items. These fair value estimates are subjective in
nature and involve uncertainties and matters of significant judgment, and,
therefore, cannot be determined with precision. Changes in assumptions
could significantly affect these estimates. At March 31, 2000, December 31,
1999, and December 31, 1998, the Company had no derivative financial
instruments.
F-6
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
INVENTORY - Inventories are stated at the lower of cost or market, with
cost determined using the first-in first-out (FIFO) method.
FEDERAL INCOME TAXES - Deferred income taxes are reported for timing
differences between items of income or expense reported in the financial
statements and those reported for income tax purposes in accordance with
Statement of Financial Accounting Standards Number 109 accounting for
income taxes, which requires the use of the asset/liability method of
accounting for income taxes. Deferred income taxes and tax benefits are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and for tax loss and credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
Company provides deferred taxes for the estimated future tax effects
attributable to temporary differences and carryforwards when realization is
more likely than not.
Differences between book and tax income arise primarily from the valuation
of stock issued for services.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK - Earnings (loss) per share is
computed on the weighted average number of shares outstanding during the
year, in accordance with FASB Statement Number 128, earnings per share.
NOTE 2 - GOING CONCERN ASSUMPTION:
Since its inception in 1996, the Company has incurred operating losses
approximating $1,100,000 and negative cash flows from operations since inception
approximating $298,000. Operating revenues since inception have been
insignificant. Although the Company sold common stock in March, 2000 and May,
2000 resulting in cash proceeds approximating $413,000, a substantial part of
the proceeds has been or will be utilized in connection with the merger with
Hi-Plains (see "Subsequent Events," below). Therefore, management expects that
additional debt or equity financing will be required to complete its business
plan. When the merger with Hi-Plains is consummated, the Company intends to seek
additional equity financing; however, there is no assurance these endeavors will
be successful.
These factors create substantial doubt about the Company's ability to continue
as a going concern. The ability of the Company to continue as a going concern is
dependent upon (a) obtaining sufficient additional debt or equity financing to
finance operations, capital improvements, and other necessary activities, (b)
achieving a profitable level of operations, (c) acquiring a profitable business,
or (d) a combination of these actions. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.
F-7
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
NOTE 3 - RELATED PARTY TRANSACTIONS:
Due to related parties consists of the following:
DECEMBER 31,
---------------------------------------
MARCH 31,
------------------------------------------------ 2000 1999 1998
---------------- ---------------- -----------------
DESCRIPTION
Due to companies controlled by
a former officer/director $89,952 $36,332 $ -
Consulting fees payable - - 241,667
Due to the Company's President 13,967 - -
---------------- ---------------- -----------------
Total $103,919 $36,332 $241,667
================ ================ =================
Management fees include the following for the periods ended:
DECEMBER 31,
---------------------------------------
MARCH 31,
DESCRIPTION 2000 1999 1998
---------------- ---------------- -----------------
Paid to former officers/
directors $ - $13,900 $ -
Paid to a current officer/
director - 3,365 -
Accrued to companies controlled
by a former director 13,390 14,398 -
In June, 1997, the Company loaned $50,000 to Trimac Financial Corporation, a
company controlled by a then director, on a promissory note bearing 12% interest
and becoming due in September, 1997. Payments totaling $4,493 were received in
October 1997, reducing the balance to $45,507. The Company determined that the
note became uncollectible in 1998, and accordingly provided an allowance for bad
debts for the entire remaining balance. The debtor company's corporate charter
was revoked in early 2000. Because the note was deemed to be on nonaccrual
status, no interest income was ever recognized on the note.
NOTE 4 - ACCRUED LIABILITY FOR CONTINGENCIES:
Certain former officers and directors of the Company, or companies controlled by
the former officers and directors, have asserted two claims against the Company,
as follows:
o A convertible debenture dated April 15, 1998 in the amount of
$150,000, bearing 5% interest payable semi-annually, convertible into
common shares at the rate of $0.05 per share at the option of the
debenture holder for the then remaining balance of unpaid principal
and interest. The former officers and directors assert this debenture
was issued as consideration for expenditures made on the Company's
behalf in connection with a 1997 option agreement to purchase 50%
interest in certain mineral properties in the Northwest Territories,
Canada. The option agreement was abandoned by the Company, resulting
in losses of approximately $276,000.
o A convertible debenture dated April 15, 1998 in the amount of
$100,000, bearing 5% interest payable semi-annually, convertible into
common shares at the rate of $0.05 per share at the option of the
debenture holder for the then remaining balance of unpaid principal
and interest. The former officers and directors assert this debenture
was issued as consideration for the pledge of Company shares owned by
a company controlled by former officers and directors as collateral in
connection with a proposed mineral property deal. The mineral property
deal was not consummated.
F-8
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
The debenture holders have demanded that the Company convert the debentures into
common shares. However, current management of the Company disputes the validity
of the debentures, and believes they do not represent either bonafide
transactions or legally enforceable obligations. Accordingly, the debentures
have not been recognized as liabilities on the accompanying balance sheets.
Current management intends to vigorously contest the validity of these two
asserted debentures, and has made a provision of $25,000 in 1999 as the
estimated cost of defending against these claims.
NOTE 5 - FEDERAL INCOME TAX:
The currently payable (refundable) provision (credit) for Federal income tax
consists of the following:
DECEMBER 31,
---------------------------------------
MARCH 31,
2000 1999 1998
---------------- ---------------- -----------------
Currently payable (refundable)
provision(credit)
attributable to:
Current operations ($42,900) ($88,100) ($85,500)
Less:
Limitation due to absence
of prior taxable income 42,900 88,100 85,500
---------------- ---------------- -----------------
Net amount payable
(refundable) $ - $ - $ -
================ ================ =================
The Company follows Statement of Financial Accounting Standards Number 109 (SFAS
109), accounting for income Taxes. Deferred income taxes reflect the net effect
of (a) temporary difference between carrying amounts of assets and liabilities
for financial purposes and the amounts used for income tax reporting purposes,
and (b) net operating loss carryforwards. The cumulative tax effect at the
expected rate of 34% of significant items comprising the Company's net deferred
tax amounts are as follows:
DECEMBER 31,
---------------------------------------
MARCH 31,
2000 1999 1998
---------------- ---------------- -----------------
Deferred tax assets
attributable to:
Net operating loss carry-
forward $386,400 $343,400 $255,200
Less, Valuation allowance (386,400) (343,400) (255,200)
---------------- ---------------- -----------------
Net deferred tax assets $ - $ - $ -
================ ================ =================
At December 31, 1999 the Company had net operating loss carryovers which expire
as follows:
EXPIRES: AMOUNT
December 31, 2011 $10,100
December 31, 2012 489,200
December 31, 2013 251,500
December 31, 2014 259,400
-----------------
Total $1,010,200
=================
F-9
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
NOTE 6 - COMMITMENTS:
On October 1, 1999, the Company entered into a three year management agreement
with a company controlled by a former director of the company. The future
minimum management fees are as follows:
YEAR ENDING DECEMBER 31, AMOUNT
2000 $41,571
2001 41,571
2002 31,179
-----------------
Total $114,321
=================
On October 1, 1999, the Company entered into a three year operating lease for
office space with a company controlled by a former director of the Company. The
future minimum rent payments are as follows:
YEAR ENDING DECEMBER 31, AMOUNT
2000 $4,367
2001 4,367
2002 3,275
-----------------
Total $12,009
=================
The Company incurred rent expense of $409 (March 31, 2000) and $2,302 (December
31, 1999).
On March 18, 1999, the Company entered into an internet casino license agreement
for a period of three years. During fiscal 1999, Hollywood Casino Corporation
filed a domain name dispute complaint regarding the domain names used by the
Company in its internet casino referral operations. Subsequent to December 31,
1999, the National Arbitration Forum rendered a decision under which the Company
lost rights to all but one internet casino domain name. Even though the casino
license has been cancelled, the Company has committed to make the following
future license fee payments:
YEAR ENDING DECEMBER 31, AMOUNT
2000 $15,000
2001 12,000
2002 3,000
-----------------
Total $30,000
=================
Included in Costs of revenues for the year ended December 31, 1999 are $13,000
of casino licensing fees and $50,026 for the initial license payment.
F-10
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
NOTE 7 - COMMON STOCK:
During the development stage, the Company has issued shares of its common stock
as follows:
PRICE PER
DESCRIPTION AND DATES SHARES SHARE AMOUNT
------------------------------------------------ ----------------- ------------------- ------------------
SHARES ISSUED FOR CASH:
November 7, 1996 50,000 $0.010 $500
February 27, 1997 20,000,000 0.010 200,000
July 17, 1998 5,200,000 0.062 320,000
March 15, 1999 2,000,000 0.050 100,000
March 31, 1999 1,000,000 0.050 50,000
March 13, 2000 1,790,000 0.161 288,190
SHARES ISSUED FOR DEBT (1):
March 15, 1999 3,500,000 0.050 175,000
March 31, 1999 2,000,000 0.050 100,000
(1) Value based on face value of obligation relieved.
In May, 2000, the Company sold an additional 6,700,000 shares for cash for total
consideration of $156,760, or $0.02 per share
NOTE 8 - SUBSEQUENT EVENTS:
On May 9, 2000, the Company acquired all the outstanding stock of Hi-Plains
Energy Corp., a Wyoming corporation that is also in the development stage, for
$15,600. Concurrently therewith, the Company paid consulting and legal fees of
$134,400 to facilitate the merger of Hi-Plains into Winchester, and the filing
of related forms with the Securities and Exchange Commission.
On May 12, 2000, the Company entered into a Plan of Merger under which:
o Hi-Plains would be merged into Winchester effective May 13, 2000.
o Winchester would change its name to PNW Ccapital, Inc.
o Each share issued and outstanding immediately prior to the effective
date would remain as issued and outstanding common stock in Winchester
(renamed PNW) without change.
A summary balance sheet of Hi-Plains as of March 31, 2000 is as follows:
Assets:
Cash $213
Investment in Western Technology 750
-----------------
Total assets $963
=================
Liabilities and stockholders' equity:
Common stock $780
Additional paid-in capital 1,470
Deficit accumulated during the development stage (1,287)
-----------------
Total liabilities and stockholders' equity $963
=================
F-11
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
A summary statement of operations of Hi-Plains is as follows:
QUARTER YEAR
ENDED ENDED
MARCH 31, DECEMBER 31, 1999
2000
---------------- ----------------------
Revenue $ -
Costs and expenses 25 1,149
---------------- ----------------------
Net loss ($25) ($1,149)
================ ======================
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board has issued several new accounting
pronouncements which may affect the Company in future years. FASB Statement
Number 128, earnings per share, became effective for periods ending after
December 15, 1997, simplifies the standards for computing earnings per share,
and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation.
FASB STATEMENT NUMBER 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE, is
effective for periods ending after December 15, 1997, and establishes standards
for disclosing information about an entity's capital structure. This
pronouncement did not have a significant effect on the Company's financial
statement disclosures.
FASB STATEMENT NUMBER 130, REPORTING COMPREHENSIVE INCOME, became effective for
fiscal years beginning after December 15, 1997, and establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company had no comprehensive income other than
net income during the last two fiscal years.
FASB STATEMENT NUMBER 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION, became effective for fiscal years beginning after December
15, 1997, and establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. As the Company has only one business
segment, the pronouncement had no material effect during the current periods.
FASB STATEMENT NUMBER 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER
POSTRETIREMENT BENEFITS, became effective for fiscal years beginning after
December 15, 1997, and revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans. It standardizes the disclosure requirements for pensions and
other postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures.
Since the Company has no pension or postretirement benefit plans, the
pronouncement had no effect in the current periods.
F-12
WINCHESTER MINING CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------
FASB STATEMENT NUMBER 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, becomes effective for fiscal years beginning after June 15, 1999,
and establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. The
Company does not believe this pronouncement will have a material effect on its
financial statements in the near future.
FASB STATEMENT NUMBER 134, ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED
AFTER THE SECURITIZATION OF MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING
ENTERPRISE, becomes effective for fiscal years beginning after December 15,
1998. It is not expected to apply to the Company.
NOTE 10 - YEAR 2000 COMPLIANCE:
The Company utilizes "off-the-shelf" computer software in its operations
obtained from major vendors such as Intuit and Microsoft. Currently, management
believes that most critical systems are year 2000 compliant, or will be made
compliant prior to December 31, 2000. The estimated cost of becoming compliant
is minimal, and is not expected to have a material effect on the financial
statements or the Company's ability to serve its customers.
F-13
WINCHESTER MINING CORPORATION
PRO FORMA FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
PF-1
WINCHESTER MINING CORPORATION
(A development stage enterprise)
Pro Forma Combined Condensed Financial Information
March 31, 2000 and December 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------
On May 9, 2000, the Company acquired all the outstanding stock of Hi-Plains
Energy Corp., a Wyoming corporation that is also in the development stage, for
$15,600. Concurrently therewith, the Company paid consulting and legal fees of
$134,400 to facilitate the merger of Hi-Plains into Winchester, and the filing
of related forms with the Securities and Exchange Commission.
On May 12, 2000, the Company entered into a Plan of Merger under which:
o Hi-Plains would be merged into Winchester effective May 13, 2000.
o Winchester would change its name to PNW Capital, Inc.
o Each share issued and outstanding immediately prior to the effective date
would remain as issued and outstanding common stock in Winchester (renamed PNW)
without change.
The acquisition of Hi-Plains will be accounted for as a purchase, whereby the
basis for accounting for Hi-Plains' assets and liabilities will be based upon
their fair market value at the date of acquisition.
The unaudited Pro Forma Condensed Statements of Loss (Pro Forma Statements of
Operations) for the year ended December 31, 1999 and the three months ended
March 31, 2000 gives pro forma effect to the acquisition and merger of Hi-Plains
as if they had occurred on January 1, 1999. The Pro Forma Statements of Loss are
based on the historical results of operations of the Company and Hi-Plains for
the year ended December 31, 1999 and the three months March 31, 2000.
The unaudited Pro Forma Combined Condensed Balance Sheet as of March 31, 2000
gives pro forma effect to the acquisition of Hi-Plains as if it had occurred on
that date.
The unaudited Pro Forma financial statements and accompanying notes should be
read in conjunction with and are qualified by the historical financial
statements of the Company and notes thereto, included elsewhere herein.
PF-2
WINCHESTER MINING CORPORATION
(A development stage enterprise)
Pro Forma Combined Condensed Balance Sheet
March 31, 2000
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Winchester Hi-Plains
Mining Energy Pro Forma Pro Forma
Corporation Corp. Adjustments Combined
---------------------- --------------------- --------------------- -------------------
ASSETS
Current assets:
Cash $254,116 $213 ($3,646)A 250,683
Note receivable, net 0 0
Inventory, at cost 3,414 0 3,414
Goodwill 13,417 B 13,417
Other assets 9,707 750 10,457
---------------------- --------------------- -------------------
Total current assets 267,237 963 277,971
---------------------- --------------------- --------------------- -------------------
Total assets $267,237 $963 $9,771 $277,971
====================== ===================== ===================== ===================
LIABILITIES
Current liabilities:
Accounts payable and
accrued expenses $81,275 81,275
Due to related parties 103,919 103,919
Accrued liability for
contingencies 25,000 25,000
Total current
---------------------- --------------------- -------------------
liabilities 210,194 0 210,194
---------------------- --------------------- -------------------
Total liabilities 210,194 0 210,194
---------------------- --------------------- -------------------
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 3,554 780 (110)B 4,224
Capital in excess of
par value 1,190,002 1,470 9,814 B 1,201,286
Deficit accumulated during
the development stage (1,136,513) (1,287) 67 (1,137,733)
---------------------- --------------------- --------------------
Total stockholders'
equity (deficit) 57,043 963 67,777
---------------------- --------------------- --------------------- --------------------
Total liabilities
and stockholders'
equity $267,237 $963 $9,771 $277,971
====================== ===================== ===================== ====================
The accompanying notes are an integral part of these statements.
PF-3
WINCHESTER MINING CORPORATION
(A development stage enterprise)
Pro Forma Combined Condensed Statements of Loss For The Three Months Ended
March 31, 2000 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Winchester Hi-Plains
Mining Energy Pro Forma Pro Forma
Corporation Corp. Adjustments Combined
---------------------- --------------------- --------------------- ---------------------
Revenues $0 $0 $0
---------------------- --------------------- --------------------- ---------------------
Less, Costs and expenses:
Cost of revenues 0 0 0
Consulting and
management fees 35,669 35,669
Provision for
contingencies 0 0 0
Depreciation and
amortization 0 0 244 B 244
Writeoffs and abandon-
ments of mineral
properties 0 0 0
Other general and
administrative 90,610 90,610
---------------------- --------------------- --------------------- ---------------------
Total operating
expenses 126,279 0 244 126,523
---------------------- --------------------- --------------------- ---------------------
Loss from operations (126,279) 0 (244) (126,523)
---------------------- --------------------- --------------------- ---------------------
Other income (expense):
Interest income 0 0 0
Interest expense 0 0 0
---------------------- --------------------- --------------------- ---------------------
Total other income
(expense) 0 0 0 0
---------------------- --------------------- --------------------- ---------------------
Loss before taxes
on income (126,279) 0 (244) (126,523)
Provision for income
taxes 0 0 0 0
---------------------- --------------------- --------------------- ---------------------
Net loss ($126,279) $0 ($244) ($126,523)
====================== ===================== ===================== =====================
Basic earnings (loss)
per common share ($0.00) $0.00 ($0.00)
====================== ===================== =====================
Weighted average number
of shares outstanding 34,104,066 780,000 40,804,066
====================== ===================== =====================
The accompanying notes are an integral part of these statements.
PF-4
WINCHESTER MINING CORPORATION
(A development stage enterprise)
Pro Forma Combined Condensed Statements of Loss For The Year Ended
December 31, 1999 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Winchester Hi-Plains
Mining Energy Pro Forma Pro Forma
Corporation Corp. Adjustments Combined
---------------------- --------------------- --------------------- ------------
Revenues $15,537 $0 $15,537
---------------------- --------------------- --------------------- ------------
Less, Costs and expenses:
Cost of revenues 76,201 0 76,201
Consulting and
management fees 140,309 140,309
Provision for
contingencies 25,000 0 25,000
Depreciation and
amortization 305 0 976 B 1,281
Writeoffs and abandon-
ments of mineral
properties 0 0 0
Other general and
administrative 33,126 1,149 34,275
---------------------- --------------------- --------------------- ------------
Total operating
expenses 274,941 1,149 976 277,066
---------------------- --------------------- --------------------- ------------
Loss from operations (259,404) (1,149) (976) (261,529)
---------------------- --------------------- --------------------- ------------
Other income (expense):
Interest income 0 0 0
Interest expense 0 0 0
---------------------- --------------------- --------------------- ------------
Total other income
(expense) 0 0 0 0
---------------------- --------------------- --------------------- ------------
Loss before taxes
on income (259,404) (1,149) (976) (261,529)
Provision for income
taxes 0 0 0 0
---------------------- --------------------- --------------------- ------------
Net loss ($259,404) ($1,149) ($976) ($261,529)
====================== ===================== ===================== ============
Basic earnings (loss)
per common share ($0.01) $0.00 ($0.01)
====================== ===================== ============
Weighted average number
of shares outstanding 31,895,206 780,000 38,595,206
====================== ===================== ============
The accompanying notes are an integral part of these statements.
PF-5
WINCHESTER MINING CORPORATION
(A development stage enterprise)
Notes to Pro Forma Combined Condensed Financial Information
March 31, 2000 and December 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------
A. Adjustments to cash reflect the following
Sale of 6,700,000 shares of stock in May, 2000 for
$156,760, less $10,406 in related offering costs
$146,354
Purchase of all the outstanding shares of Hi-Plains
Energy Corp. (15,600)
Payment of fees and costs in connection with merger
and SEC filings (134,400)
--------------------------
($3,646)
==========================
B. Reflects the allocation of the purchase price of Hi-Plains, calculated as
follows:
Total purchase price of Hi-Plains $15,600
Less, Amount allocated to tangible assets (963)
--------------------------
Amount allocated to Goodwill 14,637
Less, Amortization, based on fifteen year
amortization period:
Year ended December 31, 1999 (976)
Three months ended March 31, 2000 (244)
--------------------------
$13,417
==========================
C. Common stock adjustments reflect the following:
Sale of 6,700,000 shares of stock in May, 2000 for
$156,760, less $10,406 in related offering costs $670
Elimination of Hi-Plains common stock (780)
--------------------------
($110)
==========================
D. Capital in excess of par adjustments reflect the following:
Sale of 6,700,000 shares of stock in May, 2000 for
$156,760, less $10,406 in related offering costs $145,684
Payment of fees and costs in connection with merger
and SEC filings (134,400)
Elimination of Hi-Plains common stock (1,470)
--------------------------
$144,214
==========================
E. Adjustments to Deficit accumulated during the development stage include the
following:
Elimination of Hi-Plains deficit $1,287
Amortization of Goodwill, year ended December 31,
1999 (976)
Amortization of Goodwill, three months ended
March 31, 2000 (244)
--------------------------
$67
==========================
PF-6