Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of X 1934
For the Fiscal year ended June 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 No.: 0-17757
W W CAPITAL CORPORATION
__________________________________________________________
(Exact name of registrant as specified in its charter)
Nevada 93-0967457
---------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
11990 Grant Street, Suite 400
Northglenn, Colorado 80233
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (303) 452-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange or
Title of each class which registered
Common stock, $.01 par value Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par Value
(Title of Class)
(continued on next page)
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 requirements for the past 90 days.
Yes X No ________
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in PART III of this Form 10-K or any amendment to this
Form 10-K. Yes X No ________
The aggregate market value of the voting stock held by non-affiliates of
the Company on October 21, 1996 (2,682,877 shares of common stock) was $83,169
based on the average of the bid and asked prices ($0.031 per share) as quoted by
the Boston Stock Exchange the Company's common stock on October 21, 1996.*
The number of shares outstanding of each of the Company's sales of common
stock, as of October 21, 1996 was:
Common Stock, 5,530,661 Shares
$.01 par value
Documents Incorporated by Reference
- -----------------------------------
*This value is not intended to make any representation as to the value or
worth of the Company's shares of common stock. The number of shares held by
non-affiliates of the Company has been calculated by subtracting shares held by
controlling persons of the Company from the shares issued by the Company and
outstanding.
W W CAPITAL CORPORATION
FORM 10-K
PART I
Item 1. Business
(a) General Development of Business
W W Capital Corporation ("Company") was originally incorporated as Freedom
Acquisition Fund, Inc., a Colorado corporation, on September 23, 1987, to merge
with or engage in a merger with, or acquisition of, one or a small number of
private firms.
On May 16, 1988, the Company completed a public offering of 15,000,000
Units at an offering price of $.03 per Unit, each Unit consisting of one share
of common stock, one Class A Warrant to purchase one share of the Company's
common stock and one Class B Warrant to purchase one additional share of the
Company's common stock. The net proceeds of the offering to the Company were
approximately $240,000. The exercise period of the Class A Warrants expired on
September 1, 1989. 3,754,500 Class A Warrants, at a price of $0.035 per common
share, were submitted to the Company's transfer agent for exercise, with
proceeds of $131, 408 to the Company before the payment of offering expenses and
commissions associated with the offering. The Class B Warrants expired
unexercised in June, 1990.
On December 9, 1989, the Company's shareholders approved a proposal to
re-incorporate W W Capital in the State of Nevada and to concurrently therewith,
reverse split on a 1 for 100 basis the authorized shares of common stock from
500,000,000 shares par value $0.0001 per share to 5,000,000 shares of common
stock, par value $0.01 per share and the 40,000,000 shares of authorized
preferred stock, par value $0.10 per share to 400,000 shares of preferred stock,
par value $10.00 per share. The re-incorporation and reverse stock split was
effective December 15, 1989.
On November 16, 1990, the Company's shareholders approved a proposal to
increase the number of authorized shares of common stock from 5,000,000 to
15,000,000 shares.
On August 16, 1988, the Company acquired 100% of the outstanding shares of
W-W Manufacturing Co., Inc. ("W-W") one of the oldest and largest livestock
equipment manufacturers in the United States, in exchange for 160,000,000 shares
of the Company's common stock. W-W currently manufactures a full line of cattle
and equine handling and confinement equipment for use by farmers, ranchers,
rodeos, and universities throughout the United States.
W-W's principals began doing business in Texas City, Texas in 1945
designing and building their first cattle squeeze chute. Due to production and
sales growth, the principals moved the operation to Dodge City, Kansas, where
they established their first manufacturing facility in 1948. Operations
continued to expand and develop, and on October 18, 1961, W-W was incorporated
in the State of Kansas.
On October 12, 1990, the Company acquired certain real estate properties in
Abilene, Texas from Western Fire and Marine Insurance Company. The real estate
was acquired in exchange for 80,000 shares ($800,000 par value) of the Company's
newly issued Series A Preferred Stock and $52,428 cash.
On October 25, 1990, the Company acquired certain undeveloped real estate
located in Johnson County, Texas from Apex Realty Investments, Inc. The real
estate was acquired in exchange for 40,000 shares ($400,000 par value) of the
Company's newly issued Series B Preferred Stock.
On August 15, 1991, the Company entered into an exchange agreement
("Exchange Agreement") with Titan Industries, Inc., a Nebraska corporation
("Titan"), whereby the Company would issue to Titan common stock, in exchange
for all the outstanding stock of Titan. The consummation of this Exchange
Agreement was subject to approval by the stockholders of the Company. On
December 13, 1991, the stockholders approved the acquisition. The actual closing
and exchange of stock took place December 30, 1991. Under the terms of the
agreement the stockholders of Titan received 1,600,000 shares of W W Capital
Common Stock in exchange for all the outstanding common shares (7,500) of Titan
Industries. The shares had an aggregate value of $3,600,000 at the date of
closing. The purchase price was arrived at through an arms length negotiation.
On October 26, 1992, the Company entered into an exchange agreement ("Eagle
Exchange Agreement") with Eagle Enterprises, Inc., a Tennessee corporation
("Eagle"), whereby the Company would issue to Eagle common stock, in exchange
for all the outstanding stock of Eagle. The consummation of the Eagle Exchange
Agreement was subject to approval by the Board of Directors of the Company. At a
special meeting of the Board of Directors held October 20, 1992, the Board
unanimously approved the acquisition. The actual closing and exchange of stock
took place on October 26, 1992. Under the terms of the Eagle Exchange Agreement,
the sole stockholder of Eagle (Jerry Bellar) received 325,000 shares of W W
Capital Corporation common stock in exchange for all the outstanding common
shares (1,539) of Eagle Enterprises. The shares had an aggregate value of
$893,750 at the day of closing. The purchase price was arrived through an arms
length negotiation. Eagle Enterprises was formed in August 1985 to manufacture
livestock handling equipment. The company is presently located in a 40,000
square foot facility on 11.5 acres in Livingston, Tennessee. The Company's
primary products are creep, bunk, mineral and round bale feeders for livestock.
The company also manufactures livestock panels and gates along with two versions
of headgates.
On February 19, 1993, the Company entered into an exchange agreement ("Real
Estate Exchange Agreement") with Apex Realty Investments, Inc., a Colorado
corporation ("Apex") a related party, whereby the Company exchanged assets (real
property in Abilene, Texas) and common stock for real property owned by Apex.
Under the terms of the Real Estate Exchange Agreement, Apex received real
property the Company owned in Taylor County, Texas, a note receivable from two
individuals, and 100,000 shares of the Company's restricted common stock in
exchange for approximately 455 acres of real property, with water rights and a
$60,000 timber contract located on the property in the mountains of Grand
County, Colorado. In addition the Company assumed a $265,000 mortgage payable on
the real estate. On December 15, 1994 this land was sold to an unrelated third
party and received net cash of $374,606 after payoff of mortgage and other costs
and the company is carrying back a note for $440,218 on the balance. This note
was paid in-full in February 1996. Details of this transaction are more fully
discussed in note 4 and 6 to the Financial Statements.
On October 15, 1993, the Company acquired various assets of Wholesale Pump
and Supply, Inc. ("Wholesale") of Oklahoma City, Oklahoma by issuing 250,000
shares of common stock. The shares had an aggregate value of $145,000 at the day
of closing. The purchase of assets was arrived through an arms length
negotiation. Wholesale operates as a division of Titan Industries and is
currently doing business in a 10,000 square foot rented warehouse. The company's
primary functions are distributing water well supplies and environmental
monitoring equipment for testing ground water.
(b) Financial Information About Industry Segments
The business of the Company is carried on within two segments by three
operating units, each with its own organization. The management of each
operating subsidiary unit has responsibility for product development,
manufacturing, marketing and for achieving a return on investment in accordance
with the standards and budgets established by W W Capital. Overall supervision,
coordination and financial control are maintained by the executive staff from
the corporate headquarters located at 11990 Grant Street, Metro North Building,
Suite 400, Northglenn, Colorado. As of June 30, 1996, the Company and its
segments had approximately 131 employees. The reader is referred to Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and notes to the Company's Financial Statements for certain financial
information regarding these segments.
(c) Narrative Description of Business
The registrant conducts its business through its two business segments:
livestock handling equipment group, and the water and environmental products
group. A discussion of these segments follows.
Livestock Handling Equipment Group
This division generated 51.9% of total corporate sales compared to 57.00%
for fiscal 1995.
Principal Products, Markets and Distribution
The Livestock Handling group manufactures a broad line of cattle handling,
equine (horse), rodeo equipment and containment systems. This equipment is used
by farmers, ranchers, rodeos, county fairs, veterinarians and universities.
Presently with its 50 year old history W-W Manufacturing, the primary subsidiary
of this segment, is well recognized in the industry as the leader in production
of livestock equipment. With the acquisition of Eagle Enterprises, October 1992,
the Company has experienced growth with this segment reaching a record high
sales of $11,369,826 for fiscal year June 30, 1994. Eagle had manufactured all
types of livestock feeding equipment and various containment systems similar to
that manufactured by W-W Manufacturing. The Eagle line of products is primarily
distinguished from W-W Manufacturing's products by a purchase decision that is
primarily motivated/driven by pricing considerations.
Eagle had eliminated some of its line of feeding equipment which had not
been profitable in 1995. By elimination of these products, Eagle has the
manufacturing capacity to produce the majority of W-W Manufacturing line of
products, thus improving its delivery time to Dealer/Distributors in the east,
and southeastern United States. The Eagle plant was realigned to complement the
W-W Manufacturing line of products and all products will be sold under the W-W
Manufacturing name. This is significant since the W-W Line has a long term (50
years) reputation as an industry leader and manufacturing of quality equipment.
Now that the W-W Manufacturing line is manufactured at Eagle, Eagle has
reintroduce a redesigned feeding line to meet customer needs and enabling Eagle
to produce it profitably. This reintroduction should help Eagle reclaim sales
levels that were lost when the feeding line was dropped as well as pick up new
sales from customers previously handling the W-W Manufacturing line only. The
redesigned feeding line is also being introduced into the midwest and west
markets and is now being manufactured at W-W Manufacturing. Feed equipment has
proven to be a lower margin product line but continues to sell during depressed
market conditions and is used as a lead in product to gain new customers
acceptance for the traditional higher margin W-W working equipment line.
The market for cattle handling equipment is segmented by herd size into
economic classifications. Based upon an independent study done for the Company,
it is believed that economic dissimilarities between large and small operators
create important differences in buying behavior. Recognizing this, management of
the Company has positioned the Company to meet the demands of the market place
and to be able to service both the large and small operator through its sales
and marketing targeted at expanding the Dealer/Distributor network throughout
the entire United States.
The Company did not renew the sales and marketing agreement with Agri-Sales
Associates (Agri-Sales) after the first term concluded in October of 1994. When
utilizing the services of Agri-Sales, some new accounts were established, but
the Company felt it lost some control over the sales functions and felt it
necessary to have closer contact with its customers. After the conclusion of the
Agri-Sales Agreement management assessed the conditions of its customers and
market and realized that no all products were selling and customers inventory
levels were to high. With over sold market area's the Company had to develop a
plan to systemically help customers understand and sell through its inventory.
The Company has established sales areas and hired salespeople to cover the
entire United States. With an aggressive sales and marketing plan in place the
Company has hired an experienced sales manager and seven salesmen to continue to
expand our Dealer/Distributor network. During the transition from Agri-Sales to
our own in-house sales staff and the expansion into new market area, sales
expenses have been higher than expected as salesmen gain knowledge of the
customers and market. As our Dealer/Distributor network is expanded, management
feels there will be an overall reduction in sales expenses and this savings will
be realized to the bottom line. A substantial majority of this segment's sales
will continue to be in cattle handling equipment. It is expected that 80% of
these sales will be generated through the expanded Dealer/Distributor network.
At present the Company works with approximately 80 different distributors
representing 5,000 Sub-Dealers throughout the United States and Mexico.
The Company will continue to generate sales by offering special assistance
in design and installation of product. This service has proven to be a valuable
asset in the sale of equipment to large fairs, expo centers, rodeos and
universities.
Over the years, W-W Manufacturing products have become favored for
durability and ease of use by ranch hands who must work large volumes of cattle.
W-W Manufacturing's presence at rodeos underscores the Company's position in the
marketplace as a producer of equipment for the "working cowboy." W-W
Manufacturing has been responsible for many innovations in rodeo equipment and
has developed a well-respected line for that market. Since 1979, all of the
chutes and rodeo equipment for the Professional Rodeo Cowboys National Finals
Rodeo (NFR) have been supplied by W-W Manufacturing. The NFR is the largest
rodeo championship event in the world. In addition, W-W Manufacturing has
provided all the equipment for the International Rodeo Association Finals since
1978 and for many other top Rodeos across the country.
In the past, the Company has produced both heavy duty and portable horse
stalls. These products have been primarily used by commercial users and
exposition centers. Based on the success of the commercial horse stalls, the
Company has introduced stalls designed for the equine hobbyist and horse show
enthusiast. Aesthetics, ease of use and durability are considered by management
to be the main selling points of this kind of equipment. The new horse stalls
have been marketed through the distributor network already established by the
Company.
Cost of distribution of products has and will continue to be a problem for
the customers and the Company. To help lower this cost the Company need's to
continue to find ways to fill trucks with a variety of products. With the
introduction of the feed equipment, the new stock tank line, dog kennel line and
other horse related products, the Company anticipates these products will help
reduce its distribution cost and provides its customer the opportunity to carry
more items with less depth of inventory.
Management believes these developments are key to the success of the
Company's future expansion, and intends to continue to increase its
Dealer/Distributor network vigorously. Demonstration, Seminars and special
design will continue to be offered and special discounts given to principal
Distributors for volume purchases.
Raw Materials and Facilities
The manufacture of livestock handling equipment requires various sizes of
steel, tubing and other related steel products. The products necessary for
fabrication of equipment are purchased from numerous steel companies, and the
Company has experienced no difficulties in obtaining adequate supplies. The
subsidiaries of this segment are located as follows: W-W Manufacturing, the
largest by sales volume of the two subsidiaries, is located at 2400 East Trail
Street, Dodge City, Kansas. Eagle Enterprises, is located at 175 Windle
Community Road, Livingston, Tennessee.
Competition
The Company encounters competition in varying degrees in both cattle
handling and equine product lines. Competitors are primarily domestic producers
of similar products. These companies compete in price, delivery schedules,
quality, product performance and other conditions of sales. During 1996 and
1995, management invested in new equipment, did extensive training, scheduled
many live demonstrations, improved plant efficiencies, introduced new product
improvements and new products, in order to maintain its competitive edge.
Strategy for Growth
Growth is anticipated in two areas. First, the Company will continue to
expand the distributor/dealer network and expand into the upper midwest and
west. However, this area for growth will be constrained by availability of
capital resources.
Diversification into related product areas now served by the Company could
afford a second area for growth. Management believes W-W Manufacturing's 50 year
old reputation for quality, as well as for introducing new innovations into
existing products, has positioned the Company ideally as a marketer for new
products of its own as well as other companies' products. Over the past couple
of years the Company introduced two of these products, the hydraulic squeeze
chute and the large animal hospital bed as previously discussed. As discussed
earlier the Company reintroduced a new feeding line as well as many product
improvements over the year.
Water and Environment Products Group
The water and environmental products group consists of Titan Industries of
Paxton, Nebraska with distribution locations in Dodge City, Kansas and its
division, of Wholesale Pump and Supply in Oklahoma City, Oklahoma. This group
accounts for 48.1% of total corporate sales for the fiscal year 1996. This
compared with 43.00% in fiscal year 1995.
Titan's functions are broken down primarily into two divisions. The
distribution of water well supplies and related products, and manufacturing of
environmental products for the water industry.
Principal Products, Markets and Distribution
The Company distributes (wholesale) a wide variety of water well and
related products. These products include submersible pumps, high pressure tanks,
pipe, pipe fittings and various other accessories for water well drillers,
plumbers and various other applications of water uses. The Company sells these
products by direct sales through the sales force, by dealers and independent
representatives. These products are primarily sold in a close proximity to the
present three distribution points in Paxton, Nebraska, Dodge City, Kansas, and
Oklahoma City, Oklahoma. The Company has taken steps to widen its water well
supplies distribution by offering new lines not carried by local competitors.
Titan has also improved its delivery schedules to meet the demands of these
customers thereby making service the top priority in expanding this segment of
the business.
The Company is also involved in manufacturing water well monitoring
equipment which adds an environmental aspect to the business. Titan manufactures
several unique products like flush threaded PVC pipe which allows strong joints
without glue. Flush threaded pipe allows for seamless joints both inside and
out. This is significant as monitor wells are tested for impurities, in the
parts per million category, where joint solvents and glues can actually be
measured as part of the contamination. By packaging products together as
monitoring well units, the Company is able to sell these units for greater total
profit margins than the individual components command as separate (commodity
type) items. Another unique product produced by Titan is flush mounted PVC
screens which offer a lower cost and longer life since standard steel screens
are subject to corrosion. The Company has added significant growth in the
environmental sales with other products such as well protectors, manhole covers,
drainage pipe and various other related products.
The environmental products are marketed through distributors which have
been set up throughout the United States. Management plans to continue its
efforts to market aggressively to government agencies as the guidelines for
ground water testing become more stringent.
Raw Materials and Facilities
The Company redistributes various manufactured products through its water
well supply division. Also, the Company uses various sizes of PVC pipe for
production of its well screen and flush jointed products. The Company has not
experienced any difficulties in obtaining the raw material needed for production
of its water well products.
The subsidiary of this segment owns its new headquarters and manufacturing
facilities which consists of 25,000 square feet located in Paxton, Nebraska,
which was completed in December 1994. The Company also has two other
distribution points located in Dodge City, Kansas and Oklahoma City, Oklahoma
(Wholesale Pump and Supply).
Competition
The water well supply division of Titan experiences a high degree of
competition and only sells within a close proximity to its three distribution
points. The environmental products consisting of well screen flush jointed pipe,
and new horizontal drilling products have achieved a unique position in their
various markets. These products encounter some degree of competition, but due to
their unique design and availability of production Titan, maintains a market
dominance in this area, throughout the United States. During 1994, the Company
invested in new equipment, and constructed a new plant which was completed in
December, 1994, to enhance production and improve delivery time. Since the
completion of the facility the Company has enjoyed new customer growth across
the country.
Strategy for Growth
Growth is anticipated in several areas. First, distributor demand of the
Company's existing product line has continued to remain strong as more and more
distributors around the Country became aware of Titan's quality and reliability
of delivery. The Company has improved significantly sales of larger diameter
pipe with the manufacturing equipment added during 1994. Since gross profit
margins increase in direct proportion to pipe diameter size, this new equipment
should enhance profitability. With the addition of Wholesale Pump and Supply in
Oklahoma City, Oklahoma, growth to the south, southeast and southwest has been
greatly improved. The Company anticipates significant additional increases in
these areas with the environmental well products due to the ease and speed of
delivery. Second, the Company continues to increase marketing its products to
governmental agencies as they expand the environmental protection agency
guidelines for testing of ground water. Third, the Company has been
investigating and developing new slotting techniques using high density
polyethylene pipe for use in the horizontal drilling industry. This product is
being used extensively by land fills and in other waste treatment applications.
The Company has also expanded its market in custom fabrication of pipe through
round hole perforations, Titan Ver-ta slot and other applications as requested
by customers. Recent developments in the mining industry show that their is a
significant market for Titans products and is presently looking for ways to
distribute its line of products.
Other Information Relative to the Business
Patents and Trademarks
The Company holds no patents or registered trademarks or service marks.
Seasonality
The Company experiences seasonality in sales in both of its segments. The
livestock handling equipment product segment has increased sales in the fall and
through the spring and lower sales in summer. The water and environment product
segment has increased sales in the spring, summer and into the fall and lower
sales in the winter. With this diversity in sales, the seasonality allows the
Company as a whole to experience overall level sales throughout the year.
Practice Relating to Working Capital
The information relating to this Item is included under Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Dependence Upon a Single Customer
Not Applicable
Dollar Amount of Backlog Orders
Backlog in the livestock handling equipment group was $226,475. This
decrease from 1995 is due to a large special order of $512,000 that was not
shipped until September of 1995. The general decline in orders is due to
depressed beef prices.
The water and environmental products showed a backlog increase from
$173,420 in 1995 to $205,000 as of June 30, 1996. Substantially all the backlog
is expected to be realized as sales during the first quarter of the 1996 fiscal
year.
Business Subject to Renegotiation at Election of Government
Not Applicable
Research and Development Expenditures
Due to the nature of manufacturing operations of the Company and the types
of products produced by its two segments, expenditures for research and
development are not material to the overall operating cost.
Compliance with Environmental Controls
The Company has determined that a significant amount of paint located at
its Tennessee facility, must be disposed of to comply with environmental
regulations. The Company has estimated a range of $10,000 to $45,000 as the cost
to dispose of this paint based upon managements estimate and the actual cost
incurred subsequent to June 30, 1996, to dispose of the most contaminated
barrels of paint. The Company has accrued $10,000 of this charge as a liability
in the accompanying financial statements.
To the best of its knowledge, the Company believes that it is presently in
substantial compliance with all existing environmental laws and does not
anticipate that such compliance will have a material effect on its future
capital expenditures, earnings or competitive position with respect to any of
its business segments other than Tennessee situation discussed above.
Item 2. Properties
The Company's corporate headquarters is located at 11990 Grant Street,
Metro North Building, Suite 400, in Northglenn, Colorado, and is leased from an
unrelated third party.
The livestock handling equipment division is located at 2400 East Trail
Street, Dodge City, Kansas. This facility is leased from Murle F. and Sara R.
Webster, shareholders of the Company, for $5,000 per month, on a month to month
basis. This facility is comprised of approximately 40,000 square feet in three
buildings.
Eagle Enterprises is located at 175 Windle Community Road, Livingston,
Tennessee. This facility is owned by the Company and has approximately 40,000
square feet located on 11.5 acres of land.
The water and environmental products group conducts its primary operations
at Highway 30, Paxton, Nebraska, in a facility which consists of general
offices, manufacturing facilities and open storage areas. This facility is
approximately 25,000 square feet on 10.1 acres of land. The Company also has a
distribution facility at 1904 West Wyatt Earp, Dodge City, Kansas. Both of the
aforementioned locations are owned by the Company. Titan leases a third
distribution facility for its division, Wholesale Pump and Supply located at
1821 N.W. 4th Drive, Oklahoma City, Oklahoma. Which consists of approximately
10,000 square feet of space.
The Company owned certain undeveloped real estate in Grand County,
Colorado. The property is approximately 455 acres located in the Never Summer
Range of the mountains north of the Winter Park ski area which was sold in
December 1994.
The Company also owns an undeveloped 95 acre tract located southeast of
Fort Worth, Texas. The Company has listed this property for sale for $400,000,
and investigating the possibility of a joint venture development.
Item 3. Legal Proceedings
In April, 1994, W-W Manufacturing and Eagle sent written notice to
Agri-Sales that the Companies will not renew their sales and marketing agency
agreement with Agri-Sales when the two year initial contract term expired on
October 26, 1994. Agri-Sales informed the Company that under the contract, W-W
Manufacturing and Eagle can not terminate the sales and marketing agreement
until May 26, 1995. On October 5, 1994, the Company filed a lawsuit in the
Sixteenth Judicial District, Ford County, Kansas, asking the Court for
declaratory judgement and a preliminary injunction against Agri-Sales to resolve
the issue. On October 10, 1994, Agri-Sales filed an answer and made application
for a temporary injunction against the Company. On October 20, 1994, the
District Judge denied Agri-Sales application for a temporary injunction against
the Company. Additionally, Agri-Sales has filed a counter claim for relief
estimating damages of $500,000 to $600,000 for the commissions Agri-Sales would
have earned for the period October 26, 1994 to April 26, 1995, (the date
Agri-Sales contends that the contract will expire) and actual damages of
$475,206. Management is confident the court will decide that the contracts did
expire on October 26, 1994 and the actual amounts due Agri-Sales based upon the
Company's calculation, which had been recorded in the accompanying financial
statements, are substantially less than the amounts claimed. This case is in
discovery and the Company's legal counsel is unable to express an opinion on the
outcome of this case. The Company has been negotiating with Agri-Sales to settle
this law suit. The Company has offered to pay $180,000, with $30,000 due upon
final judgment of the March Group, Inc. law suit discussed below, with the
remaining balance payable in semi annual payment of $25,000 until paid in-full,
with zero interest.
On December 22, 1992, The March Group, Inc. (The March Group) filed a
lawsuit against Eagle and its former shareholders, Jerry R. Bellar (Bellar) and
James Buford (Buford). The March Group alleges that Eagle, Bellar and Buford
breached a listing contract to sell Eagle and has requested damages of $169,596
(Count I). The March Group has also sued the Company for breach of a separate
agreement which the Company had made with The March Group promising to direct
all inquiries it had regarding the purchase of Eagle through The March Group and
is seeking damages of $169,596 (Count II). Additionally, The March Group is
requesting damages against Eagle, Bellar and the Company under a specific
Tennessee statute which would allow The March Group three times its proven
actual damages of $508,788 (Count III).
On May 6, 1994, the Chancery Court, for the State of Tennessee, entered an
order requiring Eagle to pay the March Group $169,596 under Count I and ruled in
favor of defendants on Counts II and III. On June 7, 1995 the court of appeals
reversed the decision that Eagle had to pay $169,596. The case (Count I) has
been remanded back to trial court for trial. The court of appeals affirmed the
decision of the trail court on Count II and III in favor of the Company. After
the Court of Appeals decision, Eagle filed an application for review to the
Tennessee Supreme Court asking it to reconsider the Court of Appeals decision
rejecting Eagle's claim that plaintiff violated the Tennessee Real Estate Broker
Licensing Act, thus forfeiting any fee under the listing contract. Trial of the
remanded case to the trial court will not begin until such time as the Tennessee
Supreme Court has decided whether to grant Eagle's application for review. To
date, the Tennessee Supreme Court has not issued its decision.
At the closing of the sale of Eagle, the Company agreed to pay $50,000 of
the projected fee due the March Group under its listing agreement, which is
recorded in the financial statements. Under the terms of the Eagle sale
agreement, Bellar agreed to indemnify the Company for undisclosed liabilities
after applying a $10,000 deductible. Bellar has acknowledged that his
indemnification obligations require him to pay Eagle for all damages in excess
of $50,000 awarded to the March Group under Count I. The remaining amount due
the March Group ($119,596) and the receivable from Bellar have not been recorded
on the financial statements.
At the time Eagle was purchased, Eagle was a defendant in a lawsuit filed
by Liberty Metal Fabrications, Limited (Liberty Metals) in the State of
Kentucky. The claims against Eagle relate prior to the acquisition of Eagle
(October 26, 1992) by the Company. Liberty Metals was claiming approximately
$91,000 from Eagle. The Company settled the claim by paying $18,000 and
returning certain equipment to Liberty Metals.
Additionally, it is Management's opinion that any amounts paid to Liberty
Metals, by Eagle, should be indemnified by Bellar. It was indicated during the
purchase of Eagle that Eagle's exposure in the Liberty Metals case was "at worst
a wash-out". Bellar denies that Liberty Metals is covered under the
indemnification agreement.
Daniel R. Beaton and Rocky Mountain Realty, Inc ("Beaton") has filed a law
suit in the District Court, County of Adams, State of Colorado against W W
Capital Corporation. Beaton is asserting a claim against the Company for a
claimed real estate commission in the amount of $87,218 plus interest and
attorney fees due from the Company's sale of certain real property located in
Grand County Colorado, pursuant to a listing agreement. The Company's position
is that the listing agreement was intended to exclude any buyer that was
referred to the Company through several listed individuals. The Company settled
this lawsuit by paying Beaton $3,500.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted for a vote of security holders of the Company
during the fourth quarter of the fiscal year ended June 30, 1996.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matter
Market Information
High Bid Low Bid
Quarter ended
September 30, 1994 $ 0.50 $ 0.313
December 31, 1994 0.50 0.375
March 31, 1995 0.833 0.833
June 30, 1995 0.50 0.25
September 30, 1995 $ 0.313 $ 0.281
December 31, 1995 0.313 0.281
March 31, 1996 0.281 0.281
June 30, 1996 0.063 0.063
The Company's Common Stock was listed for trading purposes on the Boston
Stock Exchange on May 15, 1991, and trades under the symbol "WWC.B". The
Company's Common Stock is also listed on the over-the-counter market and trades
under the symbol"WWCA".
Holders
As of October 21, 1996 the Company had approximately 600 record holders of
its common stock, not including some individuals holding shares in street name.
Dividends
The Company did not pay dividends during 1996 or 1995 and does not intend
to pay cash dividends in the foreseeable future. The management of the Company
intends, for the present, to retain all available funds for the development of
its business. Additionally, certain of the Companies' loan covenants prohibit
the paying of dividends.
Item 6. Selected Financial Data
Year Ended June 30,
1996 1995 1994 1993 (2) 1992 (1)
SUMMARY OF OPERATIONS:
Net Sales ................ $ 14,512,234 $ 15,563,461 $ 16,659,136 $ 13,532,260 $ 8,708,067
Gross Profit Margin ...... 2,412,831 3,071,783 3,524,784 3,258,670 2,737,197
Operating Earnings (Loss) (461,213) 26,172 (151,171) (206,831) 360,143
Interest Expense ......... 382,901 384,391 284,435 210,454 138,887
Operating Expense ........ 2,874,044 3,045,611 3,675,955 3,465,501 2,377,054
Net Income (Loss) ........ $ (717,799) $ (405,987) $ (210,669) $ (386,866) $ 154,063
PER SHARE DATA:
Earnings (Loss) .......... $ ( .13) $ ( .07) $ ( .04) $ ( .09) $ .04
Dividends per Common Share .00 .00 .00 .00 .00
Weighted Average
Shares Outstanding ....... 5,530,661 5,449,993 5,277,981 4,551,213 3,822,350
FINANCIAL CONDITION:
Total Assets ............. $ 8,893,908 $ 9,547,517 $ 9,540,438 $ 8,562,981 $ 5,097,987
Fixed Assets (Net) ....... 2,601,594 2,801,530 2,399,172 2,087,958 486,824
Long-term Debt ........... 1,927,267 1,830,730 1,532,484 1,562,597 683,619
Stockholders Equity ...... 2,424,230 3,142,039 3,476,328 3,452,067 2,572,711
Working Capital .......... $ 1,284,898 $ 1,083,808 $ 534,171 $ 971,460 $ 1,201,288
Current Ratio (3) ........ 1.28 1.24 1.12 1.27 1.65
(1) The year ended 1992 reflect the acquisition of Titan Industries had it
been acquired at the beginning of the respective year.
(2) The year ended 1993 reflects the acquisition of Eagle Enterprises from
September 1, 1992 through June 30, 1993.
(3) Percent of current assets to current liabilities.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto under Item 8.
Results of Operations:
The following table presents, for the periods indicated, the dollar value
and percentage relationship which certain items reflected in the Company's
Statements of Operations. This percentage shows the percent as it relates to the
total revenue.
REVENUES: 1996 1995 1994
Livestock Handling Equipment ... $ 7,522,417 51.9% $ 8,870,970 57.0% $ 11,369,826 68.2 %
Water and Environmental Products 6,989,817 48.1 6,692,491 43.0 5,289,310 31.8
Total Revenues .... 14,512,234 100 15,563,461 100 16,659,136 100
Cost of Revenues .............. 12,099,403 83.3 12,491,678 80.3 13,134,352 78.8
Gross Profit ................... 2,412,831 16.7 3,071,783 19.8 3,524,784 21.2
Selling, General and
Administration Expense ...... 2,874,044 19.9 3,045,611 19.6 3,675,955 22.1
Operating Earnings (Loss) ...... (461,213) (3.2) 26,172 0.2 (151,171) (0.9)
Other Income (Expense) ......... 143,728 1.0 (33,192) (0.2) 194,598 1.2
Interest Expense ............... (382,901) (2.7) (384,391) (2.5) (284,435) (1.7)
(Loss) Earnings Before
Income Taxes ................ (700,386) (4.9) (391,411) (2.5) (241,008) (1.4)
Income Taxes Net ............... (17,413) (0.1) 14,576 0.1 (63,604) (0.3)
Net Income (Loss) .............. (717,799) (5.0) (405,987) (2.6) (177,404) (1.1)
Cumulative effect of
accounting change ............ -- -- -- -- (33,265) (.8)
Preferred Stock Dividends ...... -- -- -- -- -- --
Net Income (Loss) .............. $ (717,799) (5.0)% $ (405,987) (2.6) % $ (210,669) (1.9) %
Depreciation and Amortization .. $ 444,653 3.1 % $ 449,245 2.9% $ 428,201 2.6 %
* Less than 1.0%
Fiscal Year Ended June 30, 1996 Compared to Fiscal Year Ended June 30, 1995:
The Company incurred a net operating loss of $717,799 in 1996, as compared
to a net operating loss of $405,987 in 1995. This increase and the overall loss
can be attributed directly to the Company's livestock equipment handling segment
while the water and environmental products segment increased its profits and
sales.
Total Sales declined from $15,563,461 in fiscal 1995 to $14,512,234 in
fiscal 1996, $1,051,227 or 6.76%. Total sales in the livestock equipment
handling decreased $1,348,553 from $8,870,970 in 1995 to $7,522,417 in 1996,
while total sales in the water and environmental products segment increased
$297,326.
The decline in livestock handling equipment sales can be attributed to
lower sales of $893,320 by Eagle and $455,233 by W-W Manufacturing. The overall
decrease in sales to Eagle's and W-W Manufacturing's dealers and distributors
were offset by higher sales of "specials". Special sales consist of equipment
sales to fairs, expo centers, rodeos and universities. It is estimated that
special sales comprised approximately $1,200,000 to $1,500,000 of the total
sales in the livestock equipment handling segment.
During the third and fourth quarter of the year, Eagle reintroduced its
feed equipment and W-W Manufacturing introduced its new lower priced line of
Wrangler and Cowhand gates and panels. Sales of these products have not been
what Management had predicted because of production problems and lack of demand
from customers, due to historically low beef prices. Special sales of livestock
handling equipment has been strong during the first quarter of fiscal 1997, but
traditional sales to dealers and distributors have been flat but have started to
strengthen in the last part of the first quarter. Cattle prices continued to
show upward movement during the fall and are expected to hold through the year.
This will dramatically effect the traditional sales to dealer and distributors
and along with new product improvements and introduction of new products the
Company is expecting sales to improve over 1996 levels.
The Company is presently exploring new products to sell through its dealer
and Distributor network. These products not only will increase sales, but sales
of these products will not be effected, when beef prices decline again. The
Company is introducing water stock tanks, dog kennels and new shelters and barns
for horses. The Company is also negotiating with a high tech company making
ultra-sound equipment for cattle. This product will help the feeder and feed lot
greatly reduce its feeding cost per animal by analyzing its back fat level,
therefore, allowing shipment to the packer at the optimal time. If negotiations
are successful, the Company would have exclusive right to sell this product for
an extended period of time before any other companies would be allowed to offer
it for sale.
While sales increased overall in the water and environmental products
segment, sales of water well supplies actually declined. This decline was offset
by increases in sales of manufactured goods such as flush joint PVC screen
casting, and its new product slotted high-density polyethylene pipe for the
horizonal drilling market. The decline in sales of water well supplies is
directly related to wet weather experienced in Nebraska, Kansas and Oklahoma
during the year. Decline in spending by both the Federal and State agencies had
hurt sales of well monitoring equipment. But this decline has been offset by
stronger demand for manufactured products by customers in the private sector and
development of new markets such as the mining industries, and waste treatment
areas, which are realizing new market for Titan. It is anticipated the 1997
sales will improve slightly over 1996 sales levels approximately 2% to 3%.
Gross profit margins declined from 19.74% in 1995 to 16.63% in 1996. The
livestock handling equipment segment operated at a 18.78% gross profit margin in
1996 as compared to a 21.23% in 1995, while the water and environmental segment
had a gross profit margin of 16.62% in 1996 as compared to 17.76% in 1995.
The decline in the gross profit margin in the livestock handling equipment
is due to Eagle's gross profit margin dropping from 3.36% in 1995 to (4.32)% in
1996, while W-W Manufacturing declined from 29.29% in 1995 to 22.54% in 1996.
These declines can be attributed to several items; higher steel and welding,
supply costs, but with oppressed market conditions these cost increases could
not be passed on to customers, fixed costs remained relatively constant while
sales declined by 17.93% and "specials" comprised a greater percentage of total
sales and specials have historically have lower gross profit margins. The
Company has taken steps to reduce its manufacturing cost, and improve margins.
The 1.14% decline in gross profit margins in the water and environmental
products are increases in the price of PVC pipe which Titan could not pass the
total increase through to its customers.
Selling expenses as a percentage of sales increased to 9.4% in 1996 from
8.07% in 1995. Traditionally, the livestock handling equipment has had higher
selling expense, 13.16% in 1996 as compared to 10.59% in 1995, while selling
expense in water and environmental products amounted to 5.35% in 1996 as
compared to 4.74% in 1995. A portion of the increase in selling expenses in both
segments is attributable to the Companies efforts to develop new dealers and
distributors and expand its selling areas to new markets not presently being
covered. The increase in livestock handling equipment selling expense is a
function of several factors. The Company in its efforts to expand its markets
had to improve its product literature and selling materials. The Company spent
considerable money on product videos, new sales books and sales aids. To promote
its new products, the Company increased its advertising and show expense. High
cost relative to following up the over selling of products when the Company was
being represented by Agri-Sales. Sales salaries have remained relatively
unchanged, while sales have been lower due to beef prices. Only one of seven
salesmen in the livestock handling equipment is on a base plus commissions with
the remaining salesmen on fixed salaries.
General and administrative expenses decreased by $278,676 in fiscal 1996 as
compared to fiscal 1995. The majority of this decline can be attributed to the
$157,785 difference bad debt expense between fiscal 1996 and 1995. During fiscal
1995, management increased the allowance for doubtful accounts by $181,000 in
the water and environmental products segment. Of the remaining decrease of
$120,891, legal expense accounted for $63,992 of the decrease.
Interest expense remained basically unchanged even though the interest rate
on the Companies line of credit and equipment lines declined during the year,
approximately 1% during fiscal 1996. The reason interest expense did not decline
more is the fact that average debt outstanding during the year was higher during
fiscal 1996 than fiscal 1995 even though at year end the total debt decreased
$9,249.
Management has and is taking the following steps to insure it can meet its
obligations as they come due. The livestock segment has traditionally generated
an overall profit as a segment. With past years decline in beef prices, drought
conditions in three of the largest market areas of the segment and record high
grain prices, the market for traditional cattle equipment was non-existent. The
Company saw the market conditions declining and took steps to broaden its line
with products that could sell in down market conditions. Development of these
products took time and money, but management felt it was necessary steps to take
not knowing how long the market downturn would last. The Company felt to stay
competitive in the short and long-term, the product mix had to be changed
allowing for faster turnover of lower priced products. Management also felt that
to maintain sales volumes, new customers and markets would have to be sought
out. The Company took a bold stand to ensure a long-term place in the market
place by expanding its product line.
These steps took time and money and expenses related to these moves were
higher than expected. The Company feels as new customers continue to come on and
the new products penetrate the market, the Company will start to see sales and
operating profits increasing. There is two ways to increase profits by
increasing sales previously discussed and cutting costs. The Company has reduced
some fixed selling expenses in the fall of 1996 and has reduced administrative
costs. To increase gross profit margins, the Company sought out new sources of
steel which is the largest component of cost of goods sold. The Company has
successfully found a new supplier, who's steel prices will reduce steel cost by
approximately 10%. Benefit from this will not be realized until the second half
of fiscal 1997. Labor efficiencies are being reviewed and new ways of production
are being looked at to reduce cost. A new wash and paint system has been put in
place allowing for less overall paint cost and an improved finished product. If
market conditions improve, sales should increase and with lower material costs,
the Company feels this segment could return to overall profitability in fiscal
1997.
Management is reviewing ways to reduce cost at all levels of the Company.
With the centralizing accounting to the Corporate head quarters from the
subsidiaries, it is determined that the Company has excess office space. The
Company is looking at relocation to less space at a lower cost. All other
overhead cost are being reviewed and management will be taking steps to reduce
costs where applicable and necessary.
Eagle Enterprises, located in the eastern market is presently being
reviewed to determine the best use of this facility. The Company's cost and
break-even level has been reduced. With the downturn in the market and sales,
the Company has not been able to feel the effect of these changes. It is
anticipated that with the introduction of new product sales and if market
conditions improve Eagle could operate at least break-even and even have a
chance to be profitable. Continued weakness in beef prices will depress both
sales and profits in this segment. Prior to June 30, 1996, operating profits
from W-W Manufacturing have been sufficient to offset the continual operating
losses from Eagle. Eagle's operating losses for the last two years have not
reflected its proportionate share of selling and general and administrative
costs, which are being absorbed by W-W Manufacturing, and still has not operated
at a profit. The Company's operating results for fiscal 1997 will be dependent
upon sales and profits from its livestock handling equipment segment. Due to the
overall weakness in the cattle industry because of low beef prices, the Company
can not predict whether or not this segment will generate a profit in fiscal
1997.
It is anticipated the sales and profits from the water and environmental
products segment to be similar to fiscal 1996 levels in fiscal 1997 with a
modest growth. This segment will continue to expand its efforts to market higher
margin manufactured products to its present customers as well as continue to
expand into the horizontal drilling, waste treatment and mining markets. But it
is not expected that this segment can generate enough earnings to offset any
substantial operating loss in the livestock handling equipment segment.
Fiscal Year Ended June 30, 1995 Compared to Fiscal Year Ended June 30, 1994:
The Company incurred a net operating loss of $135,389 before realized and
unrealized loss on real estate held for sale in 1995 as compared to a net loss
of $210,669 in 1994. Included in the current year's loss of $405,987 is a charge
to operations of $270,598 which represents a realized loss of $195,598 on the
sale of the Company real estate in Grand County Colorado and write down of its
investment in real estate in Johnson County Texas of $75,000 reducing the book
value to $373,960. The Company has listed the Texas property for sale for
$400,000. Management does not expect to incur any additional material losses
from the sale of the Texas property. The water and environmental products
segment had a charge to operations to increase the allowance for doubtful
accounts totaling $181,000 in the fourth quarter. The Company has tightened its
credit policies and terms so such large charges do not happen in the future.
Overall revenues decreased from $16,659,136 in fiscal 1994 to $15,563,461
in fiscal 1995, a decline of $1,095,675 or 6.6%. This decline was a result of, a
decrease in livestock handling equipment of $2,498,856, while sales increased by
$1,403,181 in water and environmental products segment. The decline in the
livestock handling equipment was a result of a drop in sales by Eagle of
$1,628,359 and $870,506 by W-W Manufacturing. Eagle's decline in sales was a
result of the elimination of various Eagle livestock feeding equipment which had
not been profitable and overall concern in the cattle industry about cattle
prices.
A portion of the sales in the water and environmental products is
attributable to the acquisition of Wholesale Pump and Supply, Inc. (Wholesale)
of Oklahoma City, Oklahoma, which was acquired on October 15, 1993. Wholesale
operates as a division of Titan and represents $520,010 of the net increase in
sales in the water and environmental products.
It is anticipated that sales in the livestock handling equipment segment
will improve in fiscal 1996. This expected sales increase is based upon the
following items: increased sales orders in "special sales", increased marketing
efforts in the upper midwest and areas west of the Rocky Mountains and
reintroduction of certain of Eagle's feeding equipment during the second quarter
of 1996.
Based upon estimates it is anticipated the 1996 sales in the water and
environmental products will be comparable to the 1995 sales with little increase
in sales. This is because the majority of the sales in this division is in the
midwest and weather conditions have hurt sales in the spring and summer months
of 1995. During 1995, the Company established new distributors on both the east
and west coasts to expand its market area so that weather and economic
conditions will not have a major impact on sales.
Gross profit margins decreased slightly from 21.12% in 1994 to 19.74% in
1995 on an overall company basis. The livestock handling equipment operated at a
21.23% gross profit margin in 1995 as compared to 18.91% gross profit margin in
1994, while the water and environmental earned a gross profit margin of 17.76%
in 1995 as compared to 21.17% in 1994.
The increase in the gross profit margin in the livestock handling is
principally due to the improvement in Eagle's operations which attained a gross
profit margin of (.84)% in 1994 as compared to 3.36% in 1995, while W-W
Manufacturing's gross profit margin decreased from 31.33% in 1994 to 29.29% in
1995. The increase in Eagle's gross profit margin is due to the elimination of
slower-turning and non-profitable Eagle products and the manufacturing of W-W
Manufacturing traditional equipment. Additionally, W-W Manufacturing and Eagle
has not been able to pass through increases in steel and plastic to their
customers. Eagle has operated at a net loss since the Company acquired it. In
August 1994, the Company implemented a new business plan for Eagle. As part of
the plan Eagle reduced its work force by 36 employees and eliminated
slower-turning and non-profitable Eagle products and began manufacturing W- W
Manufacturing traditional equipment. This equipment requires less labor hours
and sells at higher profit margins. Since the implementation of the new business
plan and new products manufactured by Eagle, Eagle has made significant
improvement in operational efficiencies. Even though Eagle incurred operating
losses of $208,098 for the fiscal year ended June 30, 1995, approximately
$171,000 of this loss was realized in July and August. During that period of
time, Eagle had small operating profits in September and December while losing
$81,286 in October and November due to less than breakeven production volume.
Eagle generated an operating profit of $34,243 during the six months ended June
30, 1995. This operating profit is a result of an improved gross profit margin
and lower expenses due to the allocation of costs between Eagle and W-W
Manufacturing. The reduction in expenses is a result of Eagle's operations being
scaled back to be a manufacturing and distribution facility for W-W
Manufacturing for traditional equipment in the east and southeast regions of the
United States. Therefore, the majority of general, administrative and selling
expenses of the livestock handling segment are reflected on the books of W-W
Manufacturing. As Eagle's production volume and gross profit margin continues to
increase through the acceptance of the W-W line of equipment in the east and
southeast, management anticipates Eagle will continue to improve. The ability to
continue to gain in market share in this region is critical to the success of
Eagle. With its marketing and sales strategy and new sales staff in place for
this segment, it is anticipated that profitability and gross margins will
continue to improve as sales are expanded to new territories not previously
covered. During the last six months of the year Eagle averaged a gross profit
margin of 10.38%.
The 3.41% decline in gross profit margins in the water and environmental
products is due to two factors: increases in sales volume and efficiencies has
not offset the additional manufacturing overhead associated with the new
manufacturing facility and price competition. Management is reviewing production
costs and reduced production personnel by three employees in order to increase
gross profit margins.
Selling expenses as a percentage of sales declined to 8.07% for the year
ended June 30, 1995 as compared to 11.75% for the year ended June 30, 1994. This
decline is due to increase in sales in water and environmental products segments
which had lower selling expenses, while sales have declined in the livestock
handling equipment segment which has traditionally higher selling expense.
It is anticipated that selling expenses will increase during the next year
now that W-W Manufacturing has its sales force in place for the full year. The
Company has hired eight salesmen to replace Agri-Sales Associates (Agri-Sales)
which handled the sales in the livestock handling equipment prior to October 26,
1994.
General and administrative expenses increased $71,185 in fiscal 1995 as
compared to fiscal 1994. This increase can be attributed to bad debt expense in
the water and environmental products segment while other general and
administrative has decreased. During fiscal 1995, management increased the
allowance for doubtful accounts by $181,000 in this segment. The problems in
Titan's accounts receivable came to light as the Company continues to centralize
accounting at its Corporate office in Colorado. Management has established new
credit policies for Titan and is closely monitoring accounts receivable.
Interest expense increased by $99,956 in fiscal 1995 as compared to 1994.
This increase is a result of higher interest rates and increased borrowing to
finance inventory and fixed asset acquisitions.
Fiscal Year Ended June 30, 1994 Compared to Fiscal Year Ended June 30, 1993:
Overall revenues increased from $13,532,260 in fiscal 1993 to $16,659,136
in fiscal 1994, an increase of $3,126,876 or 23%. Cost of revenues increased
from $10,273,590 in fiscal 1993 to $13,134,352 in fiscal 1994, an increase of
$2,860,762 or 27.8%. Cost of revenue as a percent of sales increased from 75.9%
in fiscal 1993 to 78.8% in fiscal 1994. The principle reason for the decline in
gross profit margin is attributable to the operations of Eagle Enterprises which
incurred greater losses in fiscal 1994. The earnings and sales of W-W
Manufacturing and Titan Industries remained strong in fiscal 1994.
Total selling, general and administrative expenses increased $210,454 as
compared to the corresponding year. Selling expenses increased $220,455 in
fiscal 1994, while general and administrative expense declined by $10,001.
Increase in selling expenses are attributable to the Company's livestock
handling product group. In an effort to further reduce general and
administrative expenses, and improve controls the Company has started to
centralize the accounting functions, of its subsidiaries at corporate
headquarters in Northglenn, Colorado.
The Company reduced its loss before the cumulative effect of accounting
charge from $353,150 to $177,404. Effective July 1, 1994, the Company adopted
SFAS No 109, Accounting for Income Taxes. The change in accounting principle
reduced the loss in fiscal 1994 by $63,604.
Depreciation and amortization increased from $270,635 in fiscal 1993 to
428,201 in fiscal 1994, an increase of 58.2%. Of the increase of $157,566,
depreciation of property, plant and equipment accounted for $112,768 with
remaining balance relating to amortization of intangibles. The increase in
depreciation corresponds to the Company's investment in equipment during 1994.
Interest expense increased $73,981 in fiscal 1994 as compared to fiscal
1993. This increase is a result of higher interest rates and additional
borrowing to finance capital improvements and increased inventory to handle
increases in sales.
The livestock handling equipment segment's revenue increased from
$9,650,234 in fiscal 1993 to $11,369,826 in fiscal 1994, an increase of
$1,719,592 or 17.8%. The increase was primarily due to strong dealer acceptance
of products, expansion of the distributor network and a strong commitment to
promoting products at trade show and seminar demonstrations. Management
anticipates sales to remain strong through fiscal 1995 and profitability to
improve.
The operating earnings in livestock handling equipment group declined from
$503,370 in fiscal 1993 to $249,589 in fiscal 1994. The drop in operating
earnings is a result of the operations of Eagle Enterprise (Eagle) which
generated an operating loss of $534,283 while W-W Manufacturing generated
operating earnings of $783,872. The cattle feeding equipment manufactured by
Eagle is more direct cost intensive than the cattle handling equipment
manufactured by W-W Manufacturing. Additionally, two large customers of Eagle
are Farmer Cooperatives which require drop shipments, of products, to various
locations. These drop shipments increase the freight and handling costs of the
products sold.
In August 1994, the Company implemented a new business plan for Eagle. As
part of the plan Eagle reduced its work force by 36 employees. Eagle is in the
process of eliminating slower-turning and non- profitable products in the
product line and will concentrate on manufacturing W-W Manufacturing traditional
equipment at its Tennessee plant. Historically, W-W Manufacturing's traditional
equipment requires less labor hours to build and sells at higher profit margin.
Based upon the preliminary operating results of Eagle during the first quarter
of fiscal 1995, profit margins and cash flow are improving, but overall Eagle is
still operating at a loss due to the slowness of season and the temporary season
decline on the cattle market. It is managements belief that Eagle will generate
profits or a worst case breakeven a it moves into the busy fall winter and
spring selling season for livestock equipment. If Eagle does not begin to show
operating income during the second quarter of fiscal 1995, management will be
forced to take additional steps to curtail Eagle's operating losses.
W-W Manufacturing continues to show strong sales and profits. During 1994,
W-W Manufacturing introduced two new products, hydraulic chute and the large
animal hospital bed. Even though these products had high start up costs which
reduced gross profit margins, the products are now showing very strong
acceptance by our customers.
In April 1994, W-W Manufacturing and Eagle sent written notice to
Agri-Sales Associates (Agri-Sales) that the Companies will not renew their sales
and marketing agency agreement with Agri-Sales when the two year initial
contract term expires on October 26, 1994. Management estimates that by
developing its own sales force, W-W Manufacturing and Eagle can reduce sales
commissions by approximately 3 to 4% or $340,000 to $450,000, which would
increase the Company's operating profits. Agri-Sales has informed the Company
that under the contract, W-W Manufacturing and Eagle can not terminate the sales
and marketing agreement until May 26, 1995. On October 5, 1994, the Company
filed a lawsuit in the Sixteenth Judicial District, District County, Ford
County, Kansas, asking the Court for declaratory judgment and a preliminary
injunction against Agri-Sales to resolve the issue.
Revenues in the water and environmental products group increased 36.8%
during fiscal 1994 when compared to revenues of $5,289,310 in fiscal 1993 to
$3,882,026 in fiscal 1994. Approximately $864,900 of the $1,407,280 is
attributed to acquisition of Wholesale Pump and Supply, Inc. (Wholesale Pump),
of Oklahoma City, Oklahoma. On October 15, 1993, the Company acquired certain
assets of Wholesale Pump and the results of its operations from October 15, 1993
have been included in the Company's operations. The balance of the increase is a
result of Titan's effort to improve its distributor network and expand its trade
area for its environmental products. Demand for Titan's manufactured products
continues to grow which placed a strain to its manufacturing capacity. To meet
the need for greater manufacturing efficiency and capacity, Titan broke ground
on a new 25,000 square foot facility in June 1994 in Paxton, Nebraska. It is
expected that the new facility will be competed in November or December of 1994.
Operating earning in the water and environmental products group increased from
$342,093 in fiscal 1993 to $451,281 in fiscal 1994, an increase of 32% which is
consistent with the increase in revenues.
Inflation:
Inflation has not been a significant factor in net income in recent years
because of the relatively modest rate of price increases in the United States.
Liquidity and Capital Resources:
The Company's principal sources of liquidity are borrowings under its
credit facilities and from internally generated funds. At June 30, 1996, the
Company is in violation of certain loan covenants with both First American
National Bank and Bank IV Kansas. The Banks have not declared the Company in
default and have allowed the Company to remain in violation of these agreements.
Subsequent to year end, Bank IV Kansas indicated that the Bank would grant a
waiver of the net worth requirements, if the Company, among other things, would
have each subsidiary guarantee the loans of its affiliates in addition to W W
Capital Corporate guaranty and all revolving equipment lines are immediately
frozen at current levels and repayment schedules with no new advances, with
these notes rewritten into standard term notes at renewal with terms and
conditions to be determined at that time. The Company has agreed to Bank IV's
request.
At June 30, 1996, the Companies had unused lines of credit of $116,000 and
presently the revolving equipment lines have been frozen. Subsequent to year end
the Company borrowed $50,000 of the unused line of credit.
During the past three years, the Company has liquidated part of its real
estate assets and borrowed funds to finance operations, accounts receivables,
inventory and pay heavy legal costs. The $440,219 collection of the note
receivable from sale of real estate in February 1996 and other borrowings
provided funds for operations during 1996. To meet the Company's operating
requirements for fiscal 1997, the Company must become profitable or operate at
break even basis. It is expected that following items will provide additional
funds to enable the Companies to meet its obligations.
The Company owns 95 acres of undeveloped real estate in Texas which has
been listed for sale for $400,000. The Company has considered developing this
real estate and selling the lots either via a joint venture or stand alone basis
because the Company would realize more value than selling the land. It was
estimated the Company and/or joint venture would need approximately $150,000 to
start the development of this property. The Company is presently reviewing
several joint venture possibilities whereby the joint venture partner will
provide the development funds and the Company will provide the land. Based on
preliminary plans the land would be divided into 30 2.5 acre parcels selling
for approximately $40,000 per lot. Total development cost is estimated at
$300,000 to $350,000. It is anticipated that completion of the project would be
12 - 18 months from inception. The Company plans to start the project during
third quarter of the current fiscal year if the Company can fund a joint venture
partner. The above project is dependent upon successfully negotiating an
agreement with one of the joint venture partners. At this time management feels
this can be accomplished. The land continues to be offered for sale while
development negotiations continue. Presently the Company is unable to determine
when this property might be sold.
The Company has a note receivable, secured by a trust deed, which becomes
due December 1, 1996. It is anticipated that this note will be paid in-full by
its due date or at a minimum a partial payment with the note extended..
The Company is presently negotiating with Agri-Sales to settle the lawsuit
regarding W-W Manufacturing and Eagle not renewing their sales and marketing
agency agreement with Agri-Sales. The Company has offered to pay Agri-Sales
$180,000 with the initial payment of $30,000 payable, upon final judgement in
The March Group law suit (see Item 3) and semi annual payments of $25,000 until
paid in-full, with zero percent interest.
The Company has determined that a significant amount of paint located at
its Tennessee facility, must be disposed of to comply with environmental
regulations. The Company has estimated a range of $10,000 to $45,000 as the cost
to dispose of this paint based upon managements estimate and the actual cost
incurred subsequent to June 30, 1996, to dispose of the most contaminated
barrels of paint. The Company has accrued $10,000 of this charge as a liability
in the accompanying financial statements.
Profitability or at least breakeven is imperative for the Company in fiscal
1997. With depreciation expense representing the major fixed non-cash cost, the
Company feels that with expected improved sales from new products and reduced
general and administrative expenses and legal fees, that the Company can produce
cash flow and move towards generating a profit. The Company expects Bank IV to
renew its loans with the Company in December 1996, with some modifications to
the present loan terms. There is no assurance that the Banks will continue to
allow the Company to remain in violation of loan covenants.
Item 8. Financial Statements and Supplementary Data.
W W CAPITAL CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE
Financial Statements:
Independent Auditors' Report . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of June 30, 1996 and
June 30, 1995 . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the years
ended June 30, 1996, 1995 and 1994 . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1996, 1995 and 1994 . . . . . . F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . F-9
Financial Statement Schedules:
Independent Auditors' Report . . . . . . . . . . . . . S-1
I - Condensed Financial Information of Registrant . . . . S-2
All other schedules are omitted because they are applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
Not Applicable
Item 10. Directors and Executive Officers of the Registrant
The Officers of the Company are elected at the Board of Directors' annual
organizational Meeting immediately following the Annual Stockholders' Meeting.
Such Officers hold office until their successors are elected and qualify. The
following information indicates the position and age of the directors and
officers as of October 21, 1996, and their business experience during the prior
five years.
DAVID L. PATTON, age 65, was elected to the Board of Directors of the
Company in December 1991, and Chairman of the Board in December 1993. Mr. Patton
is a partner with the law firm of Patton, Kerbs & Hess in Dodge City, Kansas.
Mr. Patton was a founder of Titan Industries, Inc.,which is currently operated
as a wholly-owned subsidiary of the Company.
STEVE D. ZAMZOW, age 48, joined the Company in 1991 and was elected as the
Company's Chief Financial Officer in June 1992, President and Chief Executive
Officer in December 1993 and elected as a Director in December 1993 by the
shareholders. From 1976 to 1991, Mr. Zamzow owned numerous companies and was a
financial consultant for various companies. Mr. Zamzow has been Vice President
for a steel company and has worked extensively in business workouts. From 1971
to 1974, Mr. Zamzow was employed by Peat, Marwick, Mitchell & Co. as an auditor.
Mr. Zamzow received his accounting degree from the University of Nebraska.
MILLARD T. WEBSTER, age 48, became a director of the Company in 1988 and
has been employed by the Company's subsidiary, W-W Manufacturing Co., Inc. since
1962. Mr. Webster has occupied the positions of piecework production foreman,
production manager, and Vice President and President of the Company's
subsidiary, W-W Manufacturing Co., Inc. Mr. Webster is currently a Vice
President for the Company's subsidiary, W-W Manufacturing Co., Inc. Mr. Webster
graduated from Evangel College, Springfield, Missouri in 1970 with a bachelor's
degree in business administration. Mr. Webster is the brother of Mickey J.
Winfrey, Executive Vice President-Administration, Secretary and Treasurer of the
Company.
THOMAS W. HEMPHILL, age 64, became a director of the Company in December
1991 and served until his resignation July 31, 1996. Since 1986, Mr. Hemphill
has assisted the management of the Company in corporate planning and training.
Mr. Hemphill has been an independent business consultant since leaving the
employment of Security Pacific Corporation in 1975 as Senior Management Advisor.
Mr. Hemphill was a pioneer in the introduction of private mortgage insurance in
the early 1960's and served as President of Excel Investment Company from 1966
to 1975.
EDWARD J. WADE, age 42, became a director of the Company in 1993 and served
until his resignation August 23, 1996. Mr. Wade is a practicing Anesthesiologist
of Pain Anesthesia and Control Care Services, P.A. in Wichita, Kansas. Mr. Wade
received his M.D. from the University of Kansas School of Medicine in 1980 and
his residency and internship through the University of Utah, School of Medicine,
Salt Lake City, Utah in 1992. Mr. Wade then received his Chief Resident of
Anesthesiology with the University of Utah of Salt Lake City, Utah in 1986.
JAMES H. ALEXANDER, age 58, has been nominated to become a Director of the
Company. Since 1992, Mr. Alexander has been a member of the Board of Directors
of Zykronix, Inc. and presently is the
Item 10. Directors and Executive Officers of the Registrant, Continued
Chief Operating Officer. Mr. Alexander is also an independent real estate
broker for TDI Property Brokers. From April 1992, to November 1992, Mr.
Alexander was a member of a management team of a venture capital firm which
funded a satellite communications company. Mr. Alexander is the founder of
T.D.I., Inc., a corporation engaged in consulting, fund raising, acquisitions
and mergers of hi-tech firms. Mr. Alexander has taken courses leading toward
Bachelor of Science Degree in Business Administration from Rollins College.
MICKEY J. WINFREY, age 41, became Vice President-Administration, Secretary
and Treasurer of the Company in 1988. Ms. Winfrey had been employed by the
Company's subsidiary, W-W Manufacturing Co., Inc., from 1973 to 1990, where she
has held positions as secretary/receptionist, payroll clerk, head of personnel
and office manager. Ms. Winfrey is the sister of Millard T. Webster, a director
of the Company.
ROBERT W. CLAAR, age 43, joined the Company in June 1994 and was elected as
the Company's Chief Financial Officer and Vice President. Mr. Claar graduated
from the University of Nebraska and has spent sixteen years in public accounting
and was an audit partner for eight of those years. Mr. Claar has had extensive
SEC reporting experience, as well as experience in serving manufacturing and
distribution clients. Prior to entering public accounting, Mr. Claar owned and
operated his own business in Central Nebraska.
Item 11. Executive Compensation
The following table sets forth the cash compensation paid or accrued during
the fiscal years ended June 30, 1996, 1995 and 1994, to the Company's Chief
Executive Officer, No other executive officer received cash in excess of
$100,000.
Other
Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
Steve D. Zamzow, ......... 1996 $119,166 $ 8,526 (b) $ -- $ 2,284 (a)
President, Chief Executive 1995 110,000 17,000 (b) -- 19,024 (a)
Officer and Director ..... 1994 81,766 -- -- --
(a) Includes accrued vacation and compensated absences earned in prior
years and paid during June 30, 1995, and 1996 respectively.
(b) Bonus amount earned prior to 1994 and paid during subsequent years.
Option Grants in Fiscal Year 1996
During the fiscal year ended June 30, 1996, the Company did not grant stock
options to the executive officers.
Aggregated Option Exercises in Fiscal Year 1995
The following table sets forth for the executive officer named in the
Summary Compensation Table, information concerning each exercise of stock
options during the fiscal year ended June 30, 1996 and the value of the
unexercised stock options at June 30, 1996.
Item 11. Executive Compensation, Continued
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unex- In-the-Money
Shares ercised Options Options at
Acquired at June 30, 1996 June 30, 1996
on Value Exercisable/ Exercisable/
Name Exercise Realized (1) Unexercisable Unexercisable(1)
Steve D. Zamzow --- --- 116,666 (E) $ ---
President, Chief --- --- 33,334 (U) $ ---
Executive Officer
and Director
(1) The option exercise price ranging from $0.75 to $1.50 per share which exceeded the fair market
value of the underlying common stock on June 30, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of October 21, 1996, the ownership of the
Company's common stock by each director of the Company, by each person who is
known by the Company to be the beneficial owner of more than 5% of the Company's
common stock, and by the officers and directors of the Company as a group:
Name and Address of
Officers and Directors and Amount and Nature of Percent of Class
Beneficial Owner(1) Beneficial Ownership(2) of Common Stock
Steve D. Zamzow 117,103(3) 1.99%
4112 Sherman Court
Ft. Collins, CO 80525
Millard T. Webster 271,469(4) 4.60%
2321 Hart Avenue
Dodge City, KS 67801
Thomas W. Hemphill 110,500(5) 1.87%
615 30th West
Eugene, OR 97405
Item 12. Security Ownership of Certain Beneficial Owners and Management,
Continued
David L. Patton 986,986(6) 16.70%
1003 Central
Dodge City, KS 67801
Edward J. Wade 221,684(7) 3.75%
10918 East 13th Street
Wichita, KS 67206
James H. Alexander * *
762 Owl Court
Louisville, CO 80027
All officers and directors 1,983,518(8) 33.60%
as a group (9 persons) (See
Footnotes 1 through 9)
Apex Realty Investments, Inc. 328,241(9) 5.56%
c/o Nicholas L. Scheidt
PO Box 33724
Northglenn, CO 80233-0724
(1) The business address of all officers and directors is 11990 Grant
Street, Suite 400, Northglenn, Colorado 80233.
(2) "Beneficial ownership" is deemed to include shares for which an
individual, directly or indirectly,
has voting or investment power, or both, and shares subject to options exercisable within 60 days of
the date hereof.
(3) Includes 116,666 shares subject to incentive stock options which are
exercisable within sixty days of the date hereof.
(4) Includes 15,000 shares subject to incentive stock options which are
exercisable within sixty days of the date hereof.
(5) Includes 45,500 shares subject to non-qualified stock options which are
fully vested and exercisable.
(6) Includes 582,811 shares held in joint tenancy with Mr. Patton's wife,
900 shares held in a trust in which Mr. Patton has the right to vote and 47,500
shares subject to non-qualified stock options which are fully vested and
exercisable.
(7) Includes 30,000 shares subject to non-qualified stock options which are
fully vested and exercisable.
(8) Includes 281,016 shares subject to stock options which are fully vested
and exercisable.
(9) Includes 5,000 shares subject to non-qualified stock options which are
fully vested and exercisable.
Item 13. Certain Relationships and Related Transactions
On June 30, 1989, W-W Land & Cattle, a partnership owned by Millard T.
Webster, a director of the Company, Mickey J. Winfrey, an officer of the Company
and Terry L. Webster, a brother of Mr. Millard T. Webster and Ms. Winfrey,
executed a promissory note for the amount of $96,424 in favor of the Company's
subsidiary, W-W Manufacturing Co., Inc. Interest was payable annually at 9% per
annum and the principal was due on demand. On June 30, 1993, Ms. Winfrey
satisfied her obligations under this note by paying to the Company the amount of
$11,361. As of June 30, 1995, $23,028 remained payable under this note by
Millard T. Webster and Terry L. Webster.
The Company currently leases its manufacturing facility in Dodge City,
Kansas from Murle F. Webster, father of Millard T. Webster and Mickey J.
Winfrey. This lease requires a monthly rental payment of $5,000. This lease
expired on December 31, 1994, however, it has continued on a month to month
basis. During the fiscal year ended June 30, 1995, $60,000 was paid by the
Company under the lease.
Millard T. Webster, a director of the Company, Mickey J. Winfrey, an
officer of the Company, and Terry L. Webster, have each executed a promissory
note in favor of the Company for the amount of $58,333. Each note bears interest
at 9% per annum, are payable in monthly installments of $767 and are due to be
paid in full by September 30, 1997. Murle F. Webster, lessor of the Company's
manufacturing facility, has executed an assignment of monthly rent back to the
Company under each of these notes.
On October 26, 1992, the Company, through its wholly-owned subsidiaries,
W-W Manufacturing Co., Inc. ("W-W Manufacturing"), and Eagle Enterprises, Inc.
("Eagle"), entered into an exclusive two year initial term sales and marketing
agreement with Agri-Sales Associates, Inc. ("Agri-Sales") to market the
Company's products throughout the United States. Jerry R. Bellar, a 4.1%
stockholder of the Company, is President and a majority stockholder of
Agri-Sales. In conjunction with the cancellation of the agreements, the
Companies owed Agri-Sales approximately $164,863 which was increased to $180,000
under a proposed settlement of a lawsuit between the Company and Agri-Sales (see
"Legal Proceeding" for additional information).
On October 26, 1993, the Company acquired all of the outstanding stock of
Eagle in exchange for 325,000 shares of its common stock. Eagle was owned by
Jerry R. Bellar, who is now a 4.1% stockholder of the Company. As a result of
the acquisition of Eagle, the Company acquired a note payable to Mr. Bellar. On
January 24, 1994, Eagle agreed to become a co-borrower with Mr. Bellar. Said
note was used to refinance Eagle's note payable to him in the amount of
$119,847. This note was paid in-full in January 1996.
At June 30, 1996, the Company has a receivable form Agri-Sales and/or Jerry
Bellar in the amount of $132,221. This balance represents accounts due to the
Company relating to the March Group, Inc. law suit and Liberty Metal
Fabrication, Limited lawsuit (see "Legal Proceeding" for additional
information).
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) List of Financial Statements Filed as a Part of This Report
Consolidated Balance Sheets as of June 30, 1996 and June 30, 1995.
Consolidated Statement of Operations for the years ended June 30, 1996,
1995 and 1994.
Consolidated Statement of Stockholders' Equity for the years ended June 30,
1996, 1995 and 1994.
Consolidated Statement of Cash Flows for the years ended June 30, 1996,
1995 and 1994.
(a) (2) List of Financial Statement Schedules Filed as a Part of This
Report
Schedule I - Condensed Financial Information of Registrant
(a) (3) Exhibits
Exhibit
Number Document
2.1 Exchange Agreement dated August 15, 1991 between W W Capital
Corporation and Titan Industries, Inc. (filed as Exhibit 3.3 to Form 10-K
for the fiscal year ended June 30, 1991 and is hereby incorporated by
reference).
2.2 Exchange Agreement dated October 26, 1992 between W W Capital
Corporation and Eagle Enterprises, Inc. (filed as an exhibit to the
Company's Form 8-K dated November 3, 1993 and is hereby incorporated by
reference).
3.1 Articles of Incorporation dated December 13, 1989 of W W Capital
Corporation, a Nevada corporation (filed as Exhibit 3.2 to the Company's
Form 10-K for the year ended June 30, 1990 and is hereby incorporated by
reference).
3.1.1 Certificate and Amendment to Articles of Incorporation filed
December 21, 1990 with the Nevada Secretary of State (filed as Exhibit 3.01
to the Company's Form 10-Q for the quarter ended December 31, 1990 and is
hereby incorporated by reference).
3.2 Bylaws of W W Capital Corporation (filed as Exhibit 3.2 to the
Company's Form 10-K for the year ended June 30, 1991 and is hereby
incorporated by reference).
10.1 Real Estate Lease Agreement and Amendment between Murle F. and
Sara R. Webster and W W Capital Corporation (filed as an exhibit to the
Company's Post-Effective Amendment No. 1 to Form S-18 and is hereby
incorporated by reference).
10.1.1 Amendment to Real Estate Lease between Murle F. and Sara R.
Webster and W W Capital Corporation dated March 24, 1993 (filed herewith).
10.2 Assignment of Rental Income from Murle F. and Sara R. Webster to
W W Capital Corporation (filed as an exhibit to the Company's
Post-Effective Amendment No. 1 to Form S-18 and is hereby incorporated by
reference).
10.3 1990 Incentive Stock Option Plan (filed as Exhibit 10.16 to the
Company's Form 10-K for the year ended June 30, 1990 and is hereby
incorporated by reference).
10.4 Promissory Note dated June 30, 1990 from Millard T. Webster in
favor of W W Capital Corporation for the amount of $2,716 (filed as Exhibit
10.8 to Form 10-K for the fiscal year ended June 30, 1991 and is hereby
incorporated by reference).
10.5 Promissory Note dated April 30, 1990 from Millard T. Webster and
Mickey J. Winfrey in favor of W W Capital Corporation for the amount of
$43,000 (filed as Exhibit 10.9 to Form 10-K for the fiscal year ended June
30, 1991 and is hereby incorporated by reference).
10.6 Loan Agreement dated June 29, 1992 between W-W Manufacturing Co.,
Inc. (wholly owned subsidiary of the Company) and Bank IV Kansas, N.A.
(Garden City Kansas) (filed as Exhibit 10.12 for the fiscal year ended June
30, 1992 and is hereby incorporated by reference).
10.7 Loan Agreement dated June 29, 1992 between Titan Industries, Inc.
(wholly owned subsidiary of the Company) and Bank IV Kansas, N.A. (Garden
City Kansas) (filed as Exhibit 10.13 for the fiscal year ended June 30,
1992 and is hereby incorporated by reference).
10.8 1990 Non-Qualified Stock Option Plan (filed as Exhibit 10.14 of
Form 10-K for the fiscal year ended June 30, 1992 and is hereby
incorporated by reference).
10.9 Employee Stock Benefit Plan (filed as Exhibit 10.15 of Form 10-K
for the fiscal year ended June 30, 1992 and is hereby incorporated by
reference).
10.10 Loan Agreement dated December 15, 1992 between Eagle
Enterprises, Inc. (wholly owned subsidiary of the Company) and Bank IV
Kansas, N.A. (Garden City, Kansas) (filed as Exhibit 10.10 of Form 10-K for
the fiscal year June 30, 1993 and is hereby incorporated by reference).
10.11 Exchange Agreement between W W Capital Corporation and Apex
Realty Investments, Inc. dated February 19, 1993 (filed as an exhibit to
the Company's Form 8-K dated March 5, 1993 and is hereby incorporated by
reference).
10.11.1 Addendum to Exchange Agreement between W W Capital Corporation
and Apex Realty Investments, Inc. dated August 23, 1993 (filed as Exhibit
10.11.1 of Form 10-K for the fiscal year June 30, 1993 and is hereby
incorporated by reference).
10.12 Loan Agreement dated April 8, 1993 between Eagle Enterprises,
Inc. (wholly owned subsidiary of the Company) and First American National
Bank, N.A. (Cookeville, Tennessee) (filed as Exhibit 10.12 of Form 10-K for
the fiscal year June 30, 1993 and is hereby incorporated by reference).
10.13 1992 Non-Qualified Stock Option Plan (filed as Exhibit 10.13 of
Form 10-K for the fiscal year June 30, 1993 and is hereby incorporated by
reference).
10.14 Loan Agreement dated October 20, 1992 between W W Capital
Corporation, Eagle Enterprises, Inc. and Jerry R. and Jacqueline A. Bellar
(former owners of Eagle Enterprises, Inc.) (filed as Exhibit 10.14 of Form
10-K for the fiscal year June 30, 1993 and is hereby incorporated by
reference).
10.15 Asset Sale and Purchase Agreement between W W Capital
Corporation and Wholesale Pump and Supply, Inc. date October 14, 1993
(filed as Exhibit 10.15 of Form 10-K for fiscal year June 30, 1994 and is
hereby incorporated by reference).
10.16 Real Estate Contract between W W Capital Corporation and Daniel
L. Hahn, Donna R. Hahn and Helene D. Linder, Promissory Note, date December
15, 1994 between W W Capital Corporation and Daniel L. Hahn, Donna R. Hahn
and Helene D. Linder (filed as an exhibit to the Company's Form 8-K dated
December 15, 1994 and is hereby incorporated by reference).
10.17 Loan Agreement dated March 3, 1995 between Titan Industries,
Inc. (wholly owned subsidiary of the Company and Keith County Economic
Development Corporation (incorporated by reference June 30, 1995 10-K).
10.18 Loan Agreement dated March 3, 1995 between Titan Industries,
Inc. (wholly owned subsidiary of the Company and First National Bank in
Ogallala (incorporated by reference June 30, 1995 10-K).
10.19 Letter Agreement dated September 17, 1996, between W W Capital
Corporation and Bank IV Garden City (filed herewith).
21.0 Subsidiaries of the Registrant (filed herewith).
27.0 Financial Data Schedule.
Item 14 (b)
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year covered by this report.
Exhibit 10.19
September 17, 1996
Bank IV
Mr. Steve Zamzow, President
Mr. Robert W. Claar, CFO
WW Capital Corporation
11990 Grant Street
Suite 400
Northglenn, CO 80233
Gentlemen:
Thank you for your letter dated September 4, 1996 advising us of the
resignations of Directors Hemphill and Wade. Please keep us informed on their
replacements.
Your letter confirmed that you are in violation of your loan covenant due
to the fact that year to date losses have reduced your consolidated net worth
below the required $2,850M. Your traditional cash flow is not expected to meet
the goal of 1.20/1 debt service coverage. The bank is willing to grant a waiver
of the net worth requirement under the following conditions:
1. WWC will provide the bank with a detailed breakeven analysis on both
Eagle Enterprises, Inc. and WW Manufacturing, Inc. This analysis should break
out revenue volumes required for the companies to breakeven given various
combinations of product mixes.
2. WWC currently guarantees the loans to the respective subsidiaries. Our
counsel has requested that each subsidiary guarantee the loans of its affiliates
in addition to the holding company's guaranty.
3. All revolving equipment lines are immediately frozen at current levels
and repayment schedules with no new advances. These notes will be rewritten into
standard term notes at renewal with terms and conditions to be determined at the
time we review the operating lines for renewal.
4. A twelve month proforma consolidated Profit & Loss Statement shall be
provided the bank which breaks out and details monthly holding company expenses
separately from other expenses.
If you find these conditions acceptable, please sign the acknowledgement
below and return a copy to me as soon as possible. Upon the bank's satisfactory
receipt of items #1, #2,and #4 our waiver of the net worth covenant will be in
effect.
Should you have questions regarding this correspondence, please contact me.
Sincerely.
Douglas Laubach
Sr. Vice President
Agreed to and acknowledged by the undersigned acting under resolution and
the express authority of the respective Boards of Directors of the companies set
forth below:
Authorized Signer Title
W W Capital Corporation by: /s/: Mr. Steven Zamzow Pres.
Eagle Enterprises, Inc. by: /s/: Mr. Steven Zamzow Pres.
W W Manufacturing, Inc. by: /s/: Mr. Steven Zamzow Pres.
Titan Industries, Inc. by: /s/: Mr. Steven Zamzow Pres.
Exhibit 21.0
Subsidiaries of the Registrant
W-W Manufacturing Co., Inc.
Incorporated in the state of Kansas
Titan Industries, Inc.
Incorporated in the state of Nebraska
Eagle Industries, Inc.
Incorporated in the state of Tennessee
SIGNATURES
Pursuant to the requirements of Section 13, or 15(b) 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.
W W CAPITAL CORPORATION
By /s/ Steve D. Zamzow
Steve D. Zamzow, President
Date: November 08, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons of the Registrant and in
the capacities and on the date indicated.
Signature Title Date
/s/ Steve D. Zamzow President, and 11/08/96
Steve D. Zamzow Director
/s/ Robert W. Claar Chief Financial Officer 11/08/96
Robert W. Claar
/s/ David L. Patton Chairman of the Board 11/08/96
David L. Patton
/s/ Millard T. Webster Director 11/07/96
Millard T. Webster
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
W W Capital Corporation
We have audited the accompanying consolidated balance sheets of W W Capital
Corporation as of June 30, 1996 and 1995 and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three years
in the period ended June 30, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the 1996 and 1995 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of W W Capital Corporation as of June 30, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended June 30, 1996 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company has suffered recurring
losses from operations, has an accumulated deficit of $916,259 and has little
remaining credit on two of the subsidiary's lines of credit. These factors raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that result from the outcome of this
uncertainty.
MILLER AND McCOLLOM
Certified Public Accountants
Denver, Colorado
October 15, 1996
W W CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30,
__________________
1996 1995
____________ ___________
ASSETS
Current Assets:
Cash (Note 17) .................................... $ 131,022 $ 124,458
Accounts receivable, trade, net of allowance for
doubtful accounts of $143,632 in 1996 and $197,008
in 1995 (Notes 7 and 17) ......................... 1,826,917 1,716,941
Accounts receivable, related party (Note 2) ........ 132,221 100,114
Accounts receivable, other ......................... 21,240 18,574
Accounts receivable, employees ..................... -- 6,946
Inventories (Notes 3 and 7) ........................ 3,427,508 3,451,902
Deferred taxes (Note 10) ........................... 99,814 118,350
Prepaid expenses ................................... 18,567 72,961
Current portion of notes receivable from
stockholders (Note 4) ............................ 25,497 23,310
Current portion of notes receivable, other (Note 4) 144,513 25,000
Total Current Assets .......................... 5,827,299 5,658,556
Property and Equipment, net of accumulated
depreciation of $1,901,838 in 1996 and $1,525,737
in 1995 (Notes 5, 7 and 8) ......................... 2,601,594 2,801,530
Other Assets:
Real estate held for sale (Note 6 and 7) ........... 379,414 373,960
Long-term notes receivable from stockholders, net
of current portion (Note 4) ...................... 9,372 34,869
Long-term notes receivable from other affiliated
entity, net of allowance for
doubtful accounts of $7,418 in 1996 and
current portion (Note 4) ......................... 15,610 23,028
Long-term notes receivable, other, net of allowance
for doubtful accounts of $10,535 in 1996 and
current portion (Note 4) ......................... 9,218 509,279
Accounts receivable, net of allowance for
for doubtful accounts of $81,000 in 1995 ......... -- 29,871
Loan acquisition costs, net of accumulated
amortization of $13,996 and $10,146 at
June 30, 1996 and 1995 respectfully .............. 3,276 7,126
Covenant not to compete, net of accumulated
amortization of $73,948 and $46,644 at June 30,
1996 and 1995, respectively (Note 9) ............. 7,964 35,268
Other assets ....................................... 40,161 74,030
Total Other Assets ............................ 465,015 1,087,431
TOTAL ASSETS .................................. $8,893,908 $9,547,517
The accompanying notes are an integral part of the consolidated financial
statements.
W W CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30,
______________
1996 1995
_______ _______
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable: ................................... $ 2,243,753 $ 2,143,658
Revolving credit notes payable to bank (Note 7) ..... 1,734,000 1,662,613
Accrued payroll and related taxes ................... 135,842 128,317
Accrued property taxes .............................. 27,523 31,892
Accrued interest payable ............................ 13,344 30,656
Accrued commissions related party (Note 2) .......... 30,000 165,327
Other current liabilities ........................... 21,714 8,221
Notes payable to related parties
(Notes 2 and 7) ................................... 32,465 35,125
Current portion of notes payable to financial
institutions and other entities (Note 7) .......... 283,833 337,138
Current portion of capital lease obligation (Note 8) 15,993 17,572
Current portion of covenant not to compete (Note 9) . 3,934 14,229
Total Current Liabilities ...................... 4,542,401 4,574,748
Other Liabilities:
Accrued Commissions Related Party (Note 2) .......... 150,000 --
Long-term notes payable to financial institutions and
other entities, net of current portion (Note 7) ... 1,655,218 1,661,519
Long-term capital lease obligation, net of current
portion (Note 8) .................................. 14,214 31,105
Deferred taxes (Note 10) ............................ 99,814 102,585
Negative goodwill - net ............................. 8,021 35,521
Total Other Liabilities ........................ 1,927,267 1,830,730
TOTAL LIABILITIES .............................. 6,469,668 6,405,47
Commitments and Contingencies (Notes 7, 11, 12 and 16)
Stockholders' Equity (Notes 11, and 13):
Common stock, $0.01 par value, 15,000,000 shares
authorized; 5,530,661 shares issued and
outstanding at June 30, 1996 and 1995, respectively 55,306 55,306
Capital in excess of par value ...................... 3,304,099 3,304,099
Preferred stock, $10.00 par value, 400,000 shares
authorized ........................................ -- --
(Accumulated deficit) ................................ (916,259) (198,460)
2,443,146 3,160,945
Less 20,264 shares of treasury stock at cost ........ (18,906) (18,906)
TOTAL STOCKHOLDERS' EQUITY ..................... 2,424,240 3,142,039
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 8,893,908 $ 9,547,517
The accompanying notes are an integral part of the consolidated financial
statements.
W W CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30,
_________________________________
1996 1995 1994
__________ __________ __________
Net Sales (Notes 2, 15 and 17) .............. $ 14,512,234 $15,563,461 $ 16,659,136
Cost of Goods Sold .......................... 12,099,403 12,491,678 13,134,352
Gross Profit ......................... 2,412,831 3,071,783 3,524,784
Operating Expenses:
Selling expenses (Notes 2 and 12) ......... 1,363,215 1,256,106 1,957,635
General and administrative expenses
(Notes 2 and 12) ........................ 1,510,829 1,789,505 1,718,320
Total Operating Expenses ............. 2,874,044 3,045,611 3,675,955
Operating Earnings (Loss) ............ (461,213) 26,172 (151,171)
Other Income (Expense):
Interest income (Notes 2 and 4) ........... 107,402 130,305 90,382
Interest expense (Notes 2 and 7) .......... (382,901) (384,391) (284,435)
Realized and unrealized loss on
real estate held for sale (Notes 2 and 6) (3,500) (270,598) --
Gain (Loss) on property and equipment
dispositions ............................ 400 (3,231) 6,673
Other income, net ......................... 39,426 110,332 97,543
Total Other Income (Expense) ......... (239,173) (417,583) (89,837)
(Loss) before Income Taxes .......... (700,386) (391,411) (241,008)
Income Tax (Note 10):
Current ................................... 1,650 -- --
Deferred (benefit) ........................ 15,763 14,576 (63,604)
Total Income Tax ..................... 17,413 14,576 (63,604)
(Loss) Earnings before
cumulative effect of
accounting change .................. (717,799) (405,987) (177,404)
Cumulative effect of accounting change
on years prior to June 30, 1994 (Note 18) -- -- (33,265)
Net (Loss) Earnings .................. $ (717,799) $ (405,987) $ (210,669)
Primary Net (Loss) Earnings per Share:
Net (loss) earnings before
cumulative effect of accounting
change .................................. $ (.13) $ (.07) $ (.03)
Cumulative effect of accounting change .... -- -- (.01)
Net (Loss) Earnings .................. $ (.13) $ (.07) $ (.04)
Weighted Average Number of Common Shares
Outstanding (Notes 1(h), 11 and 13) ....... 5,530,661 5,449,993 5,277,981
The accompanying notes are an integral part of the consolidated financial
statements.
W W CAPITAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 1996, 1995 and 1994
Common Stock Capital Total
Number of Par In Excess Retained Treasury Stockholders'
Shares Value of Par Value Earnings Stock Equity
Balance at June 30, 1993 .............. 5,056,060 $ 50,560 $ 3,029,092 $ 418,196 $ (45,781) $ 3,452,067
Sale of 43,000 shares of treasury stock -- -- -- -- 26,875 26,875
Issuance of common stock for purchase
of assets of Wholesale Pump and
Supply, Inc. ....................... 250,000 2,500 142,500 -- -- 145,000
Issuance of common stock for cash ..... 75,000 750 74,250 -- -- 75,000
Issuance of common stock as payment of
notes payable to stockholders
(Notes 2 and 7) .................... 38,055 381 37,674 -- -- 38,055
Merger expense relating to acquisition
of Eagle Enterprises, Inc. ......... -- -- (50,000) -- -- (50,000)
Net (loss) year ended June 30, 1994 ... -- -- -- (210,669) -- (210,669)
Balance at June 30, 1994 .............. 5,419,115 54,191 3,233,516 207,527 (18,906) 3,476,328
Issuance of common stock for cash ..... 30,000 300 29,700 -- -- 30,000
Issuance of common stock for product
development rights ................. 35,000 350 19,338 -- -- 19,688
Conversion of preferred stock ......... 11,328 113 (113) -- -- --
Issuance of common stock as payment
of finders fee ..................... 35,218 352 21,658 -- -- 22,010
Net (loss) for year ended June 30, 1995 -- -- -- (405,987) -- (405,987)
Balance at June 30, 1995 .............. 5,530,661 55,306 3,304,099 (198,460) (18,906) 3,142,039
Net (loss) for year ended June 30, 1996 -- -- -- (717,799) -- (717,799)
Balance at June 30, 1996 .............. 5,530,661 $ 55,306 $ 3,304,099 $ (916,259) $ 18,906 $ 2,424,240
The accompanying notes are an integral part of the consolidated financial
statements.
W W CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30,
_________________
1996 1995 1994
________ ________ ________
Cash flows from operating activities:
Supplemental schedule of noncash investing
and financing activities:
Acquisition of equipment under capital
lease obligation .......................... $ -- $ 31,597 $ --
Increase in covenant not to compete ......... -- -- 36,000
Issuance of stock to acquire equipment
and marketing rights ...................... -- 19,688 --
Installment loans to acquire property
and equipment ............................. 28,000 124,113 53,277
Issuance of 250,000 shares of stock to
acquire assets of Wholesale Pump and
Supply, Inc. .............................. -- -- 145,000
Issuance of 38,055 shares of stock as
payment of notes payable stockholders ..... -- -- 38,055
Refinance of note payable to stockholder
with a bank ................................ -- -- 119,847
Increase acquisition costs of Eagle
Enterprises, Inc. ......................... -- -- 50,000
Issuance of stock as finders fee ............ -- 22,010 --
Sale of Grand County real estate:
Receipt of note receivable ................ -- 440,218 --
Payoff of note payable .................... -- 241,170 --
Conversion of account payable to note payable 51,224 -- --
Conversion of account and note receivable to
notes receivable .......................... 135,000 25,000 --
(Continued on Next Page)
W W CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Years Ended June 30,
___________
1996 1995 1994
________ ________ ________
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest ...................... $ 400,213 $ 364,391 $283,918
Income taxes .................. $ 1,650 $ -- $ 924
The accompanying notes are an integral part of the consolidated financial
statements.
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(1) Summary of Significant Accounting Policies
(a) Organization and Operations W-W Capital Corporation (the Company),
was originally incorporated in the State of Colorado on September 23, 1987
and reincorporated in Nevada on December 15, 1989, for the purpose of
acquiring or completing a merger with another company. Effective August 16,
1988, the Company entered into a common stock exchange agreement with W-W
Manufacturing Co., Inc. (W-W) whereby the Company transferred 100% of its
net assets to W-W and issued 160,000,000 shares of its common stock to the
existing stockholders of W-W in exchange for 100% of the outstanding common
stock of W-W. As a result, the Company became the parent of W-W. W-W was
incorporated in the State of Kansas on October 18, 1961 and is engaged in
the manufacture, distribution and sale of a wide range of livestock
confinement and handling equipment at its Dodge City, Kansas, plant.
In December, 1991, the Company acquired Titan Industries, Inc.
(Titan), a Nebraska corporation, in a business combination accounted for as
a pooling of interests. Titan is engaged in the processing, purchasing and
distribution of water well supplies. Titan became a wholly- owned
subsidiary of the Company through the exchange of 1,600,000 shares of the
Company's common stock for all of the outstanding stock of Titan.
On October 26, 1992, the Company acquired Eagle Enterprises, Inc.
(Eagle), a Tennessee Corporation, effective September 1, 1992. The
acquisition was accounted for as a purchase and, accordingly, assets and
liabilities were recorded at their fair values as of the date of the
acquisition, and the results of operations of Eagle are included in the
accompanying consolidated financial statements since the date of
acquisition. The merger agreement provided that the Company issue 325,000
shares of its common stock in exchange for all of the outstanding stock of
Eagle. At its Livingston, Tennessee plant, Eagle produces livestock
handling equipment and confinement equipment.
On October 15, 1993, the Company acquired various assets of Wholesale
Pump and Supply, Inc. (Wholesale) of Oklahoma City, Oklahoma by issuing
250,000 shares of common stock. The acquisition was accounted for as
purchase and accordingly, assets were recorded at their fair values as of
the date of acquisition and the results of Wholesale are included in the
accompanying consolidated financial statements since the date of
acquisition. Wholesale operates as a division of Titan.
(b) Policy of Consolidation The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, W-W, Titan and Eagle.
(c) Inventories Inventories of raw materials, work-in-process and
finished goods are stated at the lower of cost (first-in, first-out (FIFO)
method) or market value. For manufactured finished goods and work in
process, production costs have been included in the value.
(d) Property and equipment Property and equipment are recorded at
cost. Depreciation is computed using various depreciation methods based on
the estimated useful lives of the respective assets. Maintenance and
repairs are charged to expense as incurred; renewals and betterments are
capitalized. Upon sale or disposition of properties, the asset account is
relieved of the cost of the property and the accumulated depreciation
account is charged with depreciation taken prior to the sale. Any resultant
gain or loss is credited or charged to operations.
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(1) Summary of Significant Accounting Policies, Continued
(e) Real Estate Held for Sale Real estate held for sale is stated at
the lower of cost or net realizable value. The Company capitalizes the
carrying cost as part of it's value in real estate held for sale.
(f) Loan Acquisition Costs Loan acquisition costs represent costs
incurred to obtain certain of the Company's long-term debt (Note 7). Such
costs have been capitalized and are being amortized over the terms of the
related notes payable.
(g) Income Taxes Income tax expense is based upon operations as
reported for financial statement purposes. Such amount differs from the
amount as reflected on the Company's income tax returns because certain
items are reported for income tax purposes in periods different from those
in which they are reported in the financial statements. If applicable, the
tax effects of these timing differences are reflected as deferred income
taxes (Note 10).
Tax credits are accounted for on the flow-through method as a
reduction of the provision for Federal income taxes in the year the credits
are realized.
(h) Primary Net Earnings per Share Primary net earnings per share have
been computed using the weighted average number of shares of common stock
outstanding, plus exercisable stock options during the applicable years.
Primary earnings per share for 1996, 1995 and 1994 excluded stock options
because the effect of such inclusion would be antidilutive.
(i) Cash and Cash Equivalents For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid debt
instruments, purchased with an original maturity of three months or less,
to be cash equivalents.
(j) Construction Period Interest Interest expense incurred during the
construction of fixed assets has been capitalized as part of the cost of
those assets. During the years ended June 30, 1995, the Company capitalized
$12,616 in conjunction with the building of the new facility in Paxton,
Nebraska.
(k) Impairment of a Loan The Company uses the allowance method of
accounting for bad debts. Individual notes are evaluated for potential
impairment when payments are in arrears. Loans identified as impaired are
then valued based upon the present value of estimated future cash flows,
valuation of collateral, or management's judgement based upon general
market conditions, historical trends or individual circumstances. The
resulting value is then compared to the carrying amount. An allowance is
established for any resulting deficiency in the loan value compared to the
carrying amount.
The Company recognizes the entire change in this valuation allowance
as bad-debt expense in the same manner in which impairment initially was
recognized or as a reduction in the amount of bad-debt expense that
otherwise would have been reported. Interest accrued on impaired loans is
recognized as interest income. Payments received are applied first to
accrued interest receivable and then to principle.
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(1) Summary of Significant Accounting Policies, Continued
(l) Advertising The Company expenses the cost of advertising the first
time the advertising takes place, except for sales videos and show
materials, which were capitalized and amortized over its expected period of
future benefits of 60 and 36 months respectively.
At June 30,1996, $20,106 of advertising was reported as assets.
Advertising expense for each of the three years ended June 30, 1996 was
$173,782, $112,006 and $112,432 respectively.
(m) Accounting for Stock-Based Compensation The Company will adopt
Statement of Financial Standards No. 123, Accounting for Stock-Based
Compensation during the year ended June 30, 1997. The Company does not
anticipate this statement to have a material effect on the financial
statements. It is the Company's intent to disclose and show pro forma
effects on the financial statements.
(n) Impairment of Long-Lived Assets
The Company determined that the marketing rights for the animal
hospital bed, in its livestock equipment handling segment, was impaired
after estimating the present value of expected gross profit from future
sales as compared to the net book value. The Company wrote down the
intangible asset by $38,557 through a charge to cost of goods sold.
(o) Use 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 amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(p) Going Concern
The Company has suffered recurring operating losses, has a accumulated
deficit of $916,259 at June 30, 1996 and has little remaining credit
available on two of the three subsidiary's lines of credit. In addition, as
described in Note 7, the Company is in default on some of its long term
debt. The bank has indicated a willingness to grant a waiver of the net
worth requirements if the Company meets certain conditions. These factors
indicate that the Company may be unable to continue as a going concern.
Management has and is taking the following steps to insure it can meet
its obligations as they come due. The livestock segment traditionally has
shown an overall profit as a segment. With past years decline in beef
prices, drought conditions in three of the largest market areas of the
segment, and record high grain prices the market for traditional cattle
equipment was non- existent. The Company has taken steps to broaden its
line with products that will sell in down market conditions. The Company
felt to stay competitive in the short- and long-term markets the product
mix had to be changed allowing for faster turnover of lower priced
products.
The Company is reviewing ways to reduce cost at all levels of the
Company. With successfully centralizing accounting to the Corporate
headquarters and realizing that not all the present office space will be
needed, the Company is looking at relocation to less space at a lower cost.
All other overhead cost are being reviewed and the Board will be taking
steps to reduce costs where applicable and necessary.
1
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(1) Summary of Significant Accounting Policies, Continued
(p) Going Concern
The Company has found a new supplier of steel which will reduce steel
cost by approximately 10%. Benefit from this will not be realized until the
second half of fiscal 1997. Labor efficiencies are being reviewed and new
ways of production are being looked at to reduce cost. A new wash and paint
system has been put in place allowing for less overall paint cost and an
improved finished product. With market conditions improving, sales on the
upturn and lower material costs, the Company feels the livestock segment
will return to overall profitability in fiscal 1997.
Eagle Enterprises, located in the eastern market is presently being
reviewed to determine the best use of this facility. The Company's cost and
break-even has been reduced, but with the downturn in the market and sales
the Company has not been able to feel the effect of this improvement. It is
anticipated that with the introduction of new product sales and market
conditions improving that Eagle should at least break-even and even have a
chance to be profitable.
The Company has been negotiating on development of its 95 acres in
Texas. There is presently two developers interested in joint venturing with
the Company in development of this land. Management feels that agreements
can be reached with one of these developers and the project can be started
after the holiday season. It is anticipated from preliminary studies that
the Company will generate significant cash flow and profits from this
project. The cash received from this project will be used to fund
operations and mostly reduce debt obligations.
2
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(2) Related Party Transactions As of June 30, 1996 and 1995, the Company
had various notes receivable due from stockholders and certain affiliated
entities. The outstanding balances of such receivables at June 30, 1996 and 1995
and interest income recorded for each of the years in the three-year period
ended June 30, 1996 are described in Note 4.
The Company has entered into month to month lease agreement with Mr.
Webster in connection with the Company's leasing of land, and buildings used in
its operations (Note 12). During the years ended June 30, 1996, 1995 and 1994,
rental expense incurred for leasing of the aforementioned property amounted to
$60,000, for each year (see Note 4).
Effective February 1, 1994, certain of the former stockholders of Titan
agreed to accept 38,055 shares of the Company's common stock as payment of notes
payable and accrued interest due them totaling $38,055.
On January 24, 1994 Eagle agreed to become a co-borrower with its former
stockholder's to refinance a note which the former stockholder prior borrowings
had been loaned to Eagle. The new note was equal to the amount Eagle owed the
former stockholder under an interest bearing note.
As discussed in Note 7, the Company has notes payable to various
stockholders of the Company.
On October 26, 1992, as discussed in Note 12, W-W and Eagle entered into
exclusive sales and marketing agency agreements with Agri-Sales Associates
(Agri-Sales) whose major stockholder was (Jerry R. Bellar) the former majority
stockholder of Eagle and a current stockholder of the Company. On April 18,
1994, W-W and Eagle sent written notice to Agri-Sales, notifying them, pursuant
to the provisions of the agreements, W-W and Eagle were going to cancel the
agreements at the end of the initial two year term. The Company paid or accrued
approximately $14,673, $234,586, and $1,085,646 in commissions to Agri-Sales
during the years ended June 30, 1996, 1995 and 1994, respectively. At June 30,
1996 and 1995, the Company owed Agri-Sales approximately $180,000 and $165,327
in accrued commissions, while Agri-Sales and/or Bellar owed the Company
approximately $132,221 and $110,114 at June 30, 1996 and 1995, including amounts
due under the indemnification agreement relating to the March Group as discussed
in Note 16. Jerry Bellar is obligated to indemnify the Company for undisclosed
liabilities after applying a $10,000 deductible.
In accordance with its Articles of Incorporation and Bylaws, the Company is
required to indemnify its officers and directors for amounts paid for defense of
certain legal proceedings. During the years ended June 30, 1994, the Company
incurred $57,566 in legal expenses pursuant to such indemnification provision
for current and former officers and directors of the Company. These legal
expenses were related to the Securities and Exchange Commission private
investigation which was concluded in 1994.
The Company has entered into the transactions with related parties as
disclosed above during the three- year period ended June 30, 1996. The Company
has not attempted to determine whether any or all of such transactions have been
consummated on terms equivalent to those that would have prevailed in arm's
length transactions.
3
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(3) Inventories
At June 30, 1996 and 1995,
inventories consisted of the following:
June 30,
_______________________________
1996 1995
________ ________
Raw Materials . $ 422,774 $ 417,094
Work-in-Process 206,200 206,817
Finished Goods 2,798,534 2,827,991
--------- ---------
$3,427,508 $3,451,902
========== ==========
(4) Notes Receivable
A summary of the notes receivable at June 30, 1996 and 1995 is as follows.
(a) Notes Receivable - Stockholders At June 30, 1996 and 1995, notes
receivable due from stockholders consisted of the following:
June 30,
_______________________________
1996 1995
________ ________
Notes receivable - stockholders $ 34,869 $ 58,179
Less current portion (25,497) (23,310)
------- -------
$ 9,372 $ 34,869
========== ==========
Effective June 30, 1988, Millard T. Webster and Mickey J. Winfrey,
stockholders and officers of the Company, and Terry L. Webster, stockholder of
the Company, executed three individual notes totaling $175,000 payable to the
Company in monthly installments of $2,300, including interest at 9% per annum
with final payment in November, 1997. The Company had entered into a lease
agreement (Note 12) with Murle F. Webster for the Company's Dodge City, Kansas,
manufacturing plant at a monthly rent of $5,000. Murle F. Webster, as lessor,
has executed an assignment of $2,300 of the $5,000 monthly rent back to the
Company. The $2,300 monthly assignment is being applied by the Company to the
debt owed by the three aforementioned individuals. The Company recorded interest
income applicable to the above note amounting to $4,290, $6,326, and $8,271
during the years ended June 30, 1996, 1995 and 1994, respectively.
(b) Notes Receivable - Other Affiliated Entity At June 30, 1996 and 1995,
notes receivable due from other affiliated entity consisted of the following:
June 30,
_______________________________
1996 1995
________ ________
W-W Land & Cattle, (Land & Cattle), a partner-
ship owned by certain of the Company's
stockholders; interest payable annually
at 9.6%; principal due on demand* $ 23,028 $ 23,028
Less allowance for doubtful accounts (7,418) -
$ 15,610 $ 23,028
*The above notes are classified as non-current due to uncertainty as to the
timing of collection.
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(4) Notes Receivable, Continued During the years ended June 30, 1996,
1995 and 1994, the Company recorded interest income other affiliated entity
of $2,072, $2,152 and $2,182 respectively, Land & Cattle has not paid
accrued interest in three years.
(c) Notes Receivable - Other At June 30, 1996 and 1995, other notes
receivable consisted of the following:
June 30,
______________________
1996 1995
________ ________
Daniel L. Hahn and Helene D. Linder, 4.0% for the
period December 15, 1994, through December 15,
1995, then New York prime plus 2.0% (maximum
of 11.0%) due December 15, 1999, secured
by deed of trust subject to provision for partial
release of portions of subject property by paying
50% of the net proceeds of sales. $ - $ 440,218
Unsecured note receivable, from former employee,
interest at 9%, semi-monthly principal and
interest payments of $400* 19,753 20,841
R.S.B.P., Inc, 10% principal and interest
due December 1, 1996, secured by a trust deed. 135,000 -
Western Rodeo, 12%, due July 16, 1996
secured by equipment. 9,513 25,000
Haggard Drilling, Inc., 12%, secured by equip-
ment, inventory and accounts receivable,
payable in monthly installments of $2,000 - 48,220
164,266 534,279
Less allowance for doubtful accounts (10,535) -
153,731 534,279
Less current portion (144,513) (25,000)
$ 9,218 $ 509,279
* The above note is classified as non-current due to uncertainty as to the
timing of collection.
The Haggard Drilling, Inc. note receivable and trade accounts receivable
was converted into a new note due from R.S.B.P., Inc.
(d) Loan Impairment At June 30, 1996 and 1995, the Company identified
$42,781 and $48,220 respectively as impaired loans. At June 30, 1996, an
allowance for credit loss was computed in the amount of $17,923, applicable
to impaired loans of $42,781. At June 30, 1995, no allowance for credit
loss was provided. During the year ended June 30, 1996, the Company accrued
interest income of $3,500 on identified impaired loans. During the year
ended June 30, 1996, the Company received interest of $111 on these
impaired loans
4
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(4) Notes Receivable, Continued The following is the change in the
allowance for losses for notes receivable, other affiliated entities and
former employee for the year ended June 30, 1996.
Balance, Beginning of Year $ -
Additions 17,923
Direct write-downs -
________
Balance, End of Year $17,923
=======
(5) Property Plant and Equipment At June 30, 1996 and 1995, property plant
and equipment consisted of the following:
June 30,
` ___________________
Useful Lives 1996 1995
________________ _________ ________
Land and improvements $ 94,840 $ 94,840
Building and improvements 30 yrs - 40 yrs 1,596,930 1,587,040
Leasehold improvements 3 yrs - 7 yrs 207,912 183,960
Machinery and equipment 5 yrs - 7 yrs 1,673,694 1,549,460
Furniture and fixtures and data
processing 5 yrs - 7 yrs 351,887 325,801
Automobiles and trucks 3 yrs - 7 yrs 574,347 550,493
Construction in progress 3,822 35,673
4,503,432 4,327,267
Less accumulated depreciation and amortization (1,901,838) (1,525,737)
(6) Investment in Real Estate On December 15, 1994, the Company sold
its Grand County real estate for an adjusted price of $1,090,216 and
recognized a loss of $195,598 on this transaction. The Grand County
property was acquired under an asset exchange agreement with Apex Realty
Investments, Inc. (Apex), a company wholly-owned by Nicholas L. Scheidt, a
stockholder and former member of the Board of Directors of the Company. The
Company received net cash of $374,606 after closing costs and paying off a
mortgage in the amount of $241,170 against the property. Additionally, the
buyers entered into a five year mortgage payable to the Company for the
remaining balance of $440,218. This note was paid in full in February 1996.
On October 25, 1990, the Company acquired 95 acres of undeveloped real
estate located in Johnson County, Texas, from Apex in exchange for 40,000
shares of the Company's newly issued Series B, $10.00 par value preferred
stock and cash. An independent MAI appraisal dated July 1, 1991, estimated
the fair market value of the property to be $215,000 without regard to the
value of minerals or sand contained on the site. In May, 1988, an
engineering report was prepared based upon a subsurface investigation of
the 95-acre tract which estimated the total quantity of soils classified as
sand to be 1,499,000 cubic yards. The Company had estimated the fair value
of the sand at approximately $390,000.
On August 11, 1995, the Company listed the 95 acres for sale for
$400,000. At June 30, 1995, the Company wrote down the value of this real
estate to its estimated net realizable value of $373,960, recognizing an
unrealized loss of $75,000.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(7) Notes Payable
(a) Revolving Credit Facilities
At June 30, 1996 and 1995, revolving credit facilities consisted of the
following:
June 30,
______________________
1996 1995
________ ________
$750,000 revolving credit note,
interest at bank's prime, plus .75% in 1996, 1.25%
in 1995 (10.50% and 11.75 % at June 30, 1996 and
1995), interest payable monthly, due December 15,
1996 (W-W) $ 750,000 $ 580,254
$850,000 revolving credit note interest at banks
prime, plus .75% in 1996 and 1.25% in 1995
(10.50% and 11.75% at June 30, 1996 and 1995),
interest payable monthly, due December 15, 1996
(Titan) $ 740,000 681,000
$250,000 in 1996, and $450,000 in 1995, revolving
credit note interest at bank's prime, plus 1.50%
(11.25% and 12.00% at June 30, 1996, and 1995),
interest payable monthly, due December 15,
1996 (Eagle) 244,000 401,359
---- ------- -------
$ 1,734,000 $ 1,662,613
=========== ===========
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Average Outstanding Outstanding Rate
Year Ended Interest During the During the During the
June 30, Rate Year Year (1) Year (2)
-----------------------------------------------------------------------
1996 10.75% $1,861,613 $1,751,839 11.80%
1995 11.83% $1,662,613 $1,623,527 11.24%
1994 10.67% $1,551,358 $1,240,562 10.13%
(1) Determined by multiplying days outstanding by principal and
dividing by total days outstanding in the fiscal year.
(2) Determined by dividing interest expense by average amount
outstanding during the year.
All of the above notes are secured by deeds of trust on real estate,
property and equipment, vehicles, inventory, accounts receivable, and
contract rights. The revolving credit agreements provide that outstanding
indebtedness cannot exceed the sum of 80% of the eligible receivables, plus
50% of raw materials and finished goods.
5
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(7) Notes Payable, Continued
(b) Notes Payable - Financial Institutions and Other Entities As of June
30, 1996 and 1995, notes payable to financial institutions and other entities
consisted of the following:
June 30,
1996 1995
Revolving, Equipment, ($350,000) Bank IV Kansas,
interest at banks prime, plus 1.00% in 1996 and 1.25% in
1995 (10.75% and 11.75% at June 30, 1996 and 1995),
payable in monthly principal and interest installments
equal to 2.50% of the out-standing principal balance,
maturing December 15, 1996*,** $ 288,528 $ 324,240
Revolving Equipment line, ($600,000) Bank IV Kansas,
interest at bank's prime, plus 1.00% (10.75% and
11.50% at June 30, 1996 and 1995) payable in monthly
principal and interest installments equal to 2.50% of
the outstanding principal balance, maturing
December 15, 1997*,** 398,644 389,443
Installment Notes Payable, interest ranged from
9.77% to 12.25%, payable in monthly principal and
interest payments of $1,520, secured by equipment. 43,781 24,007
Note payable, to the City of Dodge City,
interest at 5.25%, quarterly principal and interest
payments of $675. 17,554 19,277
Note payable, First American Bank, interest
at 8.00%, monthly principal and interest payments of
$3,041, due January 1996, (co-borrower with Jerry Bellar,
former stockholder of Eagle.) - 75,180
Note payable, Bank IV Kansas, interest at 9.00%,
secured by furniture
and equipment, payable in monthly principal and
interest payments of $1,126. 24,334 36,004
Note payable, First American National Bank, interest
at 8.50%, secured by real estate located in Livingston,
Tennessee, and equipment, payable in monthly principal and
interest payments of $8,300, due April 1998 ** 507,783 565,158
Note payable to the City of Livingston,
interest at 2.00%, collateralized by building, land and
equipment located in Livingston,Tennessee, subordinated to
First American National Bank, payable in monthly principal
and interest payments of $1,288, due May, 1999. 43,761 58,188
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(7) Notes Payable, Continued
(b) Notes Payable - Financial Institutions and Other Entities, Continued
June 30,
1996 1995
Mortgage payable, First National Bank of Ogallala
interest fixed at 9.15% for 5 years, monthly principal
and interest payments of $2,308, secured by real estate
located in Paxton, Nebraska.* 216,555 223,614
Mortgage payable, Keith County Economic Develop-
ment Corporation, interest fixed at 4.38% for 5 years monthly
principal and interest payments of $949, secured by real estate
located in Paxton, Nebraska.* 116,903 123,020
Mortgage payable, Bancfirst, interest at prime plus
1.50%, 9.75% (1996), 10.50% (1995) monthly principal and
interest payments of $1,045 (1996) and $1,090 (1995), secured
by real estate located in Weatherford, Oklahoma due in 2005. 74,499 79,862
Installment notes payable, secured by vehicles,
payable in total monthly installments of $995, including
interest ranging from 6.99% to 10.25% 20,205 80,664
Other note payable interest at 8.50% payable in semi-
monthly installments of $3,500 including interest. 17,504 -
Great Plains Development, Inc., interest at 5.75%
secured by equipment, accounts receivable, furniture and
fixtures. 169,000 -
Monthly principal and interest payments
of $2,449***
1,939,051 1,998,657
Less current portion (283,833) (337,138)
-------- --------
$1,655,218 $1,661,519
========== ==========
Certain loan agreements prohibit the Company from paying cash dividends. In
addition subsidiaries of the Company are required to meet certain restrictive
loan covenants. As a result of these covenants approximately $1,890,000 of the
Company's consolidated net assets at June 30, 1996, are considered to be
restricted net assets of consolidated subsidiaries.
*Secured by all receivables, contract rights, inventory, real estate, and
machinery and equipment. **At June 30, 1996, the Company is in violation of
certain loan covenants with both First American National Bank and Bank IV
Kansas. The Banks have not declared the Company in default and have allowed the
Company to remain in violation of these agreements. Subsequent to year end, Bank
IV Kansas indicated that the Bank would grant a waiver of the net worth
requirements, if the Company, among other things, would have each subsidiary
guarantee the loans of its affiliates in addition to W W Capital Corporate
guaranty and all revolving equipment lines are immediately frozen at current
levels and repayment schedules with no new advances, with these notes rewritten
into standard term notes at renewal with terms and conditions to be determined
at that time. The Company has agreed to Bank IV's request.
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(7) Notes Payable, Continued
(b) Notes Payable - Financial Institutions and Other Entities, Continued
***This loan requires the Company to retain/create 17 full time new jobs
within an 18 month period with 60% held by those with low incomes, as defined.
(c) Notes Payable to Related Parties At June 30, 1996 and 1995, notes
payable to related parties consisted of the following:
June 30,
________________________________
1996 1995
Notes payable, former stockholders of Titan,
interest at 10.00%, unsecured, due on demand $32,465 $35,125
During the years ended June 30, 1996, 1995 and 1994, the Company incurred
interest expense of $3,299 $2,679 and $11,268, respectively, on the above notes
payable.
(d) Aggregate Maturities The aggregate maturities of the notes payable to
financial institutions, other entities and related parties for each of the years
ending June 30, are as follows:
June 30,
--------
1997 $ 316,298
1998 1,113,479
1999 74,579
2000 58,683
2001 55,491
Later 352,986
Total $1,971,516
(8) Capital Lease Obligation The Company is the lessee of certain equipment
under capital leases expiring at various dates through 1998. The assets and
liabilities under the capital leases are recorded at the lower of the present
value of the minimum lease payments or the fair value of the assets. The assets
are amortized over the lower of its lease term or its estimated productive life.
At June 30, 1996, the equipment has original cost of $67,253 with accumulated
amortization of $26,003.
Minimum future lease payments under the capital leases at June 30, 1996,
for each of the next five years and in the aggregate are as follows:
June 30,
1997 $ 19,096
1998 13,208
1999 1,709
2000 --
Total minimum lease payments ................ 34,013
Less executory costs and interest ........... (3,806)
Present value of net minimum lease payment .. 30,207
Less current portion ........................ (15,993)
Long-term portion of capital lease obligation $ 14,214
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(9) Covenants Not to Compete On October 15, 1993, the Company acquired
certain assets of Wholesale Pump & Supply. In connection with this purchase,
Company entered into a covenant not to compete with the majority stockholder of
Wholesale. The agreement provided that Company pay $50,000 upon closing and
$1,000 per month over the next 36 months. The liability was $3,934 and $14,229,
respectively, at June 30, 1996 and 1995.
(10) Income Taxes Effective July 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability method
(see Note 18).
June 30,
_____________________
1996 1995 1994
_______ _______ _______
Current ............................... $ 1,650 $ -- $ --
Deferred .............................. 15,763 14,576 (63,604)
------ ------ -------
$17,41 $ 14,576 $(63,604)
====== ======== ========
A reconciliation of income tax at the statutory rate to the Company's
effective rate is as follows:
June 30,
_____________________
1996 1995 1994
_______ _______ _______
Federal statutory tax rate (34.00)% (34.00)% (34.00)%
State tax net of federal benefit .16 - -
Capital loss and nondeductible
write down of real estate .17 23.51 -
Nondeductible items 1.56 3.16 2.30
Change in deferred tax asset
valuation allowance 34.10 - -
Other .41 11.06 5.30
Effective income tax rate 2.4% 3.73% (26.40)%
Deferred tax assets and liabilities consist of the following:
June 30,
________________________________
1996 1995
_________ _________
Deferred tax assets:
Allowance for doubtful accounts ...... $ 59,869 $ 73,321
Accrued salaries ..................... 20,531 16,739
Net operating loss carryforward ...... 344,327 177,295
Inventory ............................ 25,518 22,949
Other ................................ -- 5,357
-----
Total deferred tax assets .......... 450,245 295,661
Deferred tax liabilities:
Depreciation of property and equipment (211,445) (279,896)
Valuation allowance .................. (238,800) --
--------
Deferred taxes - net ..................... $ -- $ 15,765
===== =========
Current deferred tax asset ............... $ 99,814 $ 118,350
Long-term deferred tax liability ......... (99,814) (102,585)
------- --------
$ -- $ 15,765
===== =========
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(10) Income Taxes, Continued At June 30, 1996, the Company has
approximately $1,012,725 of net operating loss available for carry forward to
offset future year's taxable revenue. The loss carry forward expires at various
times through the year 2011, if not utilized earlier.
At June 30, 1996, the Company has capital loss carryforwards in the amount
of $283,582 which no benefit has been recognized due to uncertainty as to
realization.
(11) Employee Benefit Plans 401(k) Plan Effective February 1, 1993, the
Company established a 401(k) Saving Plan, whereby eligible employees, who have
one-half year of entry service and are age 21 or older, may contribute up to 20%
of their salary up to a maximum as allowed by the Internal Revenue Code. The
Company may make discretionary matching contributions on the first 4% of
employee contributions. Employee contributions are 100% vested, with the
Company's matching contributions vesting at 25% per year after three years of
service. During the year ended June 30, 1996, 1995 and 1994, the Company made
$10,295, $12,350 and $9,213 in discretionary contributions to the Plan.
Stock Options
The Company adopted an Incentive Stock Option Plan (Incentive Plan) at its
annual meeting on November 16, 1990. Under this Plan, the Board of Directors or
its designated committee is authorized to grant officers and key employees
options to purchase up to 950,000 shares of the Company's common stock. These
options have a three-year vesting period.
On June 8, 1990, and May 1, 1992, the Board of Directors adopted a
non-qualified stock option plan for the outside directors of the Company. Under
this plan, the incentive stock option plan committee is authorized to grant
outside directors options to purchase up to 400,000 shares of the Company's
common stock. The Company granted options to purchase up to 122,668 shares at
option prices ranging from $0.5625 to $2.50 per share which are outstanding as
of June 30, 1996. On July 1, 1996, the Company granted to certain directors
options to purchase 30,000 shares at $0.063 per share.
These options will expire five or ten years after issuance.
As of June 30, 1996, the following outstanding stock options are
exercisable:
Number Number
of Options Exercise of Options
Issue Date Outstanding Price Exercisable
November 16, 1990 30,000 $1.00 30,000
December 14, 1990 10,000 $1.00 10,000
May 1, 1992 25,000 $2.50 25,000
February 26, 1993 50,000 $1.50 50,000
July 1, 1993 26,001 $0.8125 26,001
June 10, 1994 217,000 $0.75 144,664
July 1, 1994 26,667 $0.75 26,667
July 1, 1995 30,000 $0.5625 30,000
April 5, 1996 5,000 $0.45 -
July 1, 1996 30,000 $0.063 30,000
-- ---- ------ ------ ------
449,668 372,332
======= =======
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(12) Commitments and Contingencies
Operating Leases
The Company leases its manufacturing facility in Dodge City, Kansas, from
Murle F. Webster, a stockholder (Note 2). The manufacturing facility lease
required a monthly rental of $5,000 which expired in December, 1994, and has
continued on a month to month basis (Note 4). The provisions of the building
leases require the Company to pay insurance, property taxes and maintenance
costs. The Company also leases certain office equipment under noncancelable
operating lease agreements.
On April 14, 1994, the Company entered into a 60-month office space lease.
The lease provides for monthly rental payments of $3,489 escalating to $4,123
for the period beginning June 1, 1994 through May 31, 1999.
Future minimum rental payments under operating leases as of June 30, 1996
are as follows:
Year Office Space Equipment Vehicles Total
1997 $ 45,672 $ 5,381 $ 18,901 $ 69,954
1998 49,478 5,381 18,347 73,206
1999 45,354 5,381 5,458 56,193
2000 - 2,690 4,841 7,531
2001 - - - -
Total minimum
payments required $140,504 $ 18,833 $ 47,547 $ 206,884
Rental expense under operating leases for the years ended June 30, 1996,
1995 and 1994 amounted to $137,066, $130,989, and $116,325, respectively.
Sales and Marketing Agency Agreement
On October 26, 1992, W-W and Eagle entered into sales and marketing agency
agreements with Agri- Sales Associates, Inc. (Agri-Sales), a related party. The
agreements had an initial two-year term and may renew for a like term with the
provision that either party may cancel upon 180 days written notice. On April
18, 1994, the Company notified Agri-Sales, that W-W and Eagle would not renew
their Sales and Marketing Agency Agreements. The agreements provide the
following commission structure by the Company which was in effect during the
period October 26, 1993 through October 25, 1994:
W-W Eagle
___________________________________________________
12 Month 12 Month
Aggregate Aggregate
Cumulative Sales Commission Cumulative Sales Commission
Excluding Specials Rate Excluding Specials Rate
Less than Less than
$5,500,000 10% $4,700,000 7.50%
$5,500,000 to $4,700,000 to
$6,000,000 11% $5,200,000 8.50%
Greater than Greater than
$6,000,000 12% $5,200,000 9.50%
Additionally, Agri-Sales received a commission of 5.00% on special orders
initiated for W-W products (see Note 2).
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(12) Commitments and Contingencies, Continued
Long Distance Service
The Company entered into an agreement for long distance telephone service
which requires a monthly minimum of $5,000 through February 1999.
Employment Contract
On May 1, 1996, the Company entered into 2 year employment with its
territory sales manager which provides for an annual salary of $55,000 plus a
bonus equal to .0075% of the sales increase over annual budgeted sales.
Environmental Remediation Liability
The Company has determined that a significant amount of paint located at
its Tennessee facility, must be disposed of to comply with environmental
regulations. The Company has estimated a range of $10,000 to $45,000 as the cost
to dispose of this paint based upon managements estimate and the actual cost
incurred subsequent to June 30, 1996, to dispose of the most contaminated
barrels of paint. The Company has accrued $10,000 of this charge as a liability
in the accompanying financial statements.
(13) Stockholders' Equity On November 16, 1990, the Board of Directors
amended the articles of incorporation to allow the Company to issue 400,000
shares of $10.00 par value preferred stock in one or more series. The Board of
Directors have the right to: fix the number of shares in any such series, alter
or determine the rights, preferences, privileges, limitations and restrictions
granted to any wholly unissued series of preferred stock. All then outstanding
preferred stock was converted into common stock in October 1992.
(14) Segmented Information and Reconciliation The Company's operations are
classified into principal industry segments; W-W and Eagle which manufacture and
distribute livestock handling equipment, and Titan which processes and
distributes water well and environmental supplies. Following is a summary of
segmented information for each of three years in the period ended June 30, 1996:
Years Ended June 30,
1996 1995 1994
____________ ____________ ____________
Net Sales:
Livestock handling equipment ........ $ 7,522,417 $ 8,870,970 $ 11,369,826
Water well and environmental supplies 6,989,817 6,692,491 5,289,310
--------- --------- ---------
Total Net Sales ........................ $ 14,512,234 $ 15,563,461 $ 16,659,136
============ ============ ============
Operating Earnings:
Livestock handling equipment ........ $ (262,647) $ 512,094 $ 249,589
Water well and environmental supplies 473,133 321,790 451,281
------- ------- -------
Total Operating Earnings ............... 210,486 833,884 700,870
Corporate and Other (1) ................ (928,285) (1,239,871) (878,274)
-- -------- ---------- --------
(Loss) earnings before income taxes,
and cumulative effect of
accounting change ..................... $ (717,799) $ (405,987) $ (177,404)
============ ============ ============
Identifiable Assets:
Livestock handling equipment ........ $ 3,866,469 $ 4,086,651 $ 4,326,768
Water well and environmental supplies 4,438,397 4,324,658 3,288,575
--------- --------- ---------
8,304,866 8,411,309 7,615,343
General corporate assets (2) ........ 589,042 1,136,208 1,925,095
-- ------- --------- ---------
Total assets as reported in
accompanying consolidated
balance sheets ...................... $ 8,893,908 $ 9,547,517 $ 9,540,438
============ ============ ============
W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(14) Segmented Information and Reconciliation, Continued
Years Ended June 30,
1996 1995 1994
________ ________ _______
Capital Expenditures:
Livestock handling equipmen .......... $164,150 $213,440 $356,529
Water well and environmental supplies 72,688 578,796 318,181
Corporate ............................ 3,221 54,685 41,603
----- ------ ------
Total Capital Expenditures .............. $240,059 $846,921 $716,313
======== ======== ========
Depreciation and amortization:
Livestock handling equipment ........... $287,238 $292,199 $252,944
Water well and environmental supplies 123,691 121,331 99,584
Corporate ............................ 33,724 35,715 75,673
------ ------ ------
Total Depreciation and amortization ..... $444,653 $449,245 $428,201
======== ======== ========
(1) Corporate and other includes corporate general and administrative
expenses, net interest expense and other nonoperating income and expense items.
(2) General corporate assets are principally notes receivable and real
estate held for sale.
(15) Major Customer and Sales Agency Agreement
Agri-sales sold approximately 17% and 90% of the Company's net sales under
the Sales and Marketing Agency Agreement described in Note 12 during the years
ended June 30, 1995 and 1994 respectively. These sales are attributable to the
livestock handling equipment segment of the Company. No customer accounted for
more than 10% of total net sales during each of the three years in the period
ended June 30, 1996.
(16) Litigation
In April, 1994, W-W Manufacturing and Eagle sent written notice to
Agri-Sales that the Companies would not renew their sales and marketing agency
agreement with Agri-Sales when the two year initial contract term expired on
October 26, 1994. Agri-Sales informed the Company that under the contract, W-W
Manufacturing and Eagle can not terminate the sales and marketing agreement
until May 26, 1995. On October 5, 1994, the Company filed a lawsuit in the
Sixteenth Judicial District, Ford County, Kansas, asking the Court for
declaratory judgement and a preliminary injunction against Agri-Sales to resolve
the issue. On October 10, 1994, Agri-Sales filed an answer and made application
for a temporary injunction against the Company. On October 20, 1994, the
District Judge denied Agri-Sales application for a temporary injunction against
the Company. Additionally, Agri-Sales has filed a counter claim for relief
estimating damages of $500,000 to $600,000 for the commissions Agri- Sales would
have earned for the period October 26, 1994 to April 26, 1995, (the date
Agri-Sales contends that the contract will expire) and actual damages of
$475,206. Management is confident the court will decide that the contracts did
expire on October 26, 1994 and the actual amounts due Agri- Sales based upon the
Company's calculation, which had been recorded in the accompanying financial
statements, are substantially less than the amounts claimed. This case is in
discovery and the Company's legal counsel is unable to express and opinion on
the outcome of this case. The Company has been negotiating with Agri-Sales to
settle this lawsuit. The Company has offered to pay $180,000, with $30,000 due
upon final settlement of The March Group, Inc. law suit discussed below with the
remaining balance payable in semi-annual payments of $25,000 until paid in-full,
with zero interest.
On December 22, 1992, The March Group, Inc. (The March Group) filed a
lawsuit against Eagle and its former shareholders, Jerry R. Bellar (Bellar) and
James Buford (Buford). The March Group alleges that Eagle, Bellar and Buford
breached a listing contract to sell Eagle and has requested damages of $169,596
(Count I). The March Group has also sued the Company for breach of a separate
agreement which the Company had made with The March Group promising to direct
all inquiries it had regarding the purchase of Eagle through The March Group and
is seeking damages of $169,596 (Count II). Additionally, The March Group is
requesting damages against Eagle, Bellar and the Company under a specific
Tennessee statute which would allow The March Group three times its proven
actual W W CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(16) Litigation, Continued
damages of $508,788 (Count III).
On May 6, 1994, the Chancery Court, for the State of Tennessee, entered an
order requiring Eagle to pay the March Group $169,596 under Count I and ruled in
favor of defendants on Counts II and III. On June 7, 1995 the court of appeals
reversed the decision that Eagle had to pay $169,596. The case (Count I) has
been remanded back to trial court for trial. The court of appeals affirmed the
decision of the trial court on Count II and III in favor or the Company. After
the Court of Appeals decision, Eagle filed an application for review to the
Tennessee Supreme Court asking it to reconsider the Court of Appeals decision
rejecting Eagle's claim that plaintiff violated the Tennessee Real Estate Broker
Licensing Act, thus forfeiting any fee under the listing contract. Trial of the
remanded case to the trial court will not begin until such time as the Tennessee
Supreme Court has decided whether to grant Eagle's application for review. To
date, the Tennessee Supreme Court has not issued its decision.
At the closing of the sale of Eagle, the Company agreed to pay $50,000 of
the projected fee due the March Group under its listing agreement, which is
recorded in the financial statements. Under the terms of the Eagle sale
agreement, Bellar agreed to indemnify the Company for undisclosed liabilities
after applying a $10,000 deductible. Bellar has acknowledged that his
indemnification obligations require him to pay Eagle for all damages in excess
of $50,000 awarded to the March Group under Count I. The remaining amount due
the March Group ($119,596) and the receivable from Bellar have not been recorded
on the financial statements.
Eagle was a defendant in a lawsuit filed by Liberty Metal Fabrications,
Limited (Liberty Metals) in the State of Kentucky. The claims against Eagle
relate prior to the acquisition of Eagle (October 26, 1992) by the Company.
Liberty Metals was claiming approximately $91,000 from Eagle. The Company
settled the claim by paying $18,000 and returning certain equipment to Liberty
Metals.
Additionally, it is Management's opinion that any amounts paid to Liberty
Metals, against Eagle, that Eagle would be indemnified by Bellar. It was
indicated during the purchase of Eagle that Eagle's exposure in the Liberty
Metals case was "at worst a wash-out". Bellar denies that the Liberty Metal case
is covered under the indemnification agreement.
Daniel R. Beaton and Rocky Mountain Realty, Inc ("Beaton") has filed a law
suit in the District Court, County of Adams, State of Colorado against W W
Capital Corporation. Beaton is asserting a claim against the Company for a
claimed real estate commission in the amount of $87,218 plus interest and
attorney fees due from the Company's sale of certain real property located in
Grand County Colorado, pursuant to a listing agreement. The Company settled this
lawsuit by paying Beaton $3,500.
(17) Significant Group Concentrations of Credit Risk
The Company's business activity is in two industry segments, livestock
handling equipment and water well and environmental supplies. W-W and Eagle's
livestock handling equipment customers are principally resalers and are
primarily located in the midwest, Tennessee and Georgia, while Titan's water
well supply customers are principally located in the states of Nebraska Oklahoma
and Kansas. At June 30, 1996, W-W and Eagle's accounts receivable totalled
$678,216 and Titan's totalled $1,328,406.
The Company and its subsidiaries maintain cash balances at several
financial institutions located in the states of Colorado, Kansas, Nebraska and
Tennessee. Accounts at each institution are insured by the Federal Deposit
Insurance Corporation for up to $100,000. A June 30, 1996, bank balances
exceeded the $100,000 insured limit by $39,218.
(18) Change in Accounting Principle
The Company adopted, effective July 1, 1993, Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting For Income Taxes", issued in
February 1992. Under the liability method specified by SFAS 109, deferred tax
assets and liabilities are determined based on the difference W W CAPITAL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 1996
(18) Change in Accounting Principle, Continued
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rules which will be the effect when these
differences reverse. Deferred tax expense is the result of changes in deferred
tax assets and liabilities. The principal types of differences between assets
and liabilities for financial statement and tax return purposes are accumulated
deprecation and business combinations accounted for by the purchase method. A
deferred tax asset is recorded for net operating losses being carried forward
for tax purposes.
The change from the deferred method to the liability method of accounts for
income taxes decreased the Company's 1994 loss by $63,604, $.01 per share,
before the cumulative effect of the change in accounting. Also, net losses for
1994 were decreased by $33,265, $.006 per share, by the cumulative effect of the
change in accounting related to years prior to 1994 which were not restated.
(19) Fair Value of Financial Instruments
Effective June 30, 1996, the Company adopted SFAS No. 107, which requires
disclosing fair value to the extent practicable for financial instruments which
are recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed herein is not necessarily representative of the
amount that could be realized or settled, nor does the fair value amount
consider tax consequences of realization. The following table summarizes
financial instruments by individual balance sheet accounts.
Carrying Fair
Amount Value
_____________ ___________
Financial Assets:
Cash and cash equivalents ........... $ 131,022 $ 131,022
Trade Receivables ................... 1,826,917 1,826,917
Current portion of notes receivable . 170,010 170,010
Long-term portion of notes receivable 34,200 34,200
Total financial assets ............. $2,162,149 $2,162,149
Financial Liabilities:
Revolving Credit notes .............. $1,734,000 $1,734,000
Accounts Payable .................... 2,243,753 2,243,753
Accrued interest .................... 13,344 13,344
Long-term debt (including amounts due
within one year) ................... 1,939,051 1,876,820
Capital Leases ...................... 30,207 29,156
Covenant not to compete ............. 3,934 3,934
Notes payable to related parties .... 32,465 32,465
Total financial liabilities ........ $5,996,754 $5,933,472
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
a) Cash and cash equivalents: the carrying amount reported in the balance
sheet for cash and cash equivalents approximated its fair value.
b) Notes receivable: The carrying amount reported in the balance sheet for
notes receivable approximated its fair value.
c) Revolving credit notes: The carrying amount of revolving credit notes
approximated fair value.
d) Long-term debt: The fair value was estimated using discounted cash flow
analysis, based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
W W Capital Corporation
We have audited the accompanying consolidated balance sheets of W W Capital
Corporation as of June 30, 1996 and 1995 and for each of the three years in the
period ended June 30, 1996 and have issued our report thereon dated October 15,
1996. Our audits also included the financial statement schedules of W W Capital
Corporation, listed in Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
MILLER AND McCOLLOM
Certified Public Accountants
Denver, Colorado
October 15, 1996
W W CAPITAL CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
June 30,
_________________________
1996 1995
____________ ___________
ASSETS
Current Assets:
Cash ................................................... $ 6,715 $ 3,139
Accounts receivable, related party ..................... 132,221 100,114
Accounts receivable, other ............................. -- 19,256
Deferred taxes ......................................... 99,814 118,348
Total Current Assets .............................. 238,750 240,857
Property and Equipment, net of accumulated
depreciation of $82,276 in 1996 and $50,530
in 1995 ................................................ 64,060 92,585
Other Assets:
Real estate held for sale .............................. 379,414 373,960
Notes receivable ....................................... -- 440,219
Investment in wholly owned subsidiaries ................ 2,121,348 2,350,981
Other assets ........................................... 5,274 7,547
TOTAL ASSETS ...................................... $ 2,808,846 $ 3,506,149
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts payable ....................................... $ 186,875 $ 129,471
Accrued expenses ....................................... 10,885 16,100
Amounts payable, subsidiaries .......................... 62,698 52,223
Current portion, long-term debt ........................ 11,796 17,003
Current portion of capital lease obligation ............ -- 387
Total Current Liabilities ......................... 272,254 215,184
Long-term debt ........................................... 12,538 46,341
Deferred taxes ........................................... 99,814 102,585
Total Liabilities ................................. 384,606 364,110
STOCKHOLDERS' EQUITY
Stockholders' Equity:
Common stock, $0.01 par value, 15,000,000 shares
authorized; 5,530,661 shares issued and
outstanding at June 30, 1996 and 1995, respectively .. 55,306 55,306
Capital in excess of par value ......................... 3,304,099 3,304,099
Preferred stock, $10.00 par value, 400,000 shares
authorized ........................................... -- --
(Accumulated deficit) ................................... (916,259) (198,460)
2,443,146 3,160,945
Less 20,264 shares of treasury stock at cost ........... (18,906) (18,906)
TOTAL STOCKHOLDERS' EQUITY ........................ 2,424,240 3,142,039
TOTAL LIABILITIES AND STOCKHOLDERS' EQUIT ......... $ 2,808,846 $ 3,906,149
W W CAPITAL CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT, CONTINUED
STATEMENTS OF OPERATIONS
Years Ended June 30,
___________________________________
1996 1995 1994
__________ __________ __________
Revenues:
Management fee from subsidiaries .......... $ 480,000 $ 655,093 $ 605,840
Operating Expenses:
General and administrative ................ 645,678 750,513 (757,025)
------- ------- --------
Operating (Loss) ..................... (165,678) (95,420) (151,185)
Other Income (Expense):
Interest income ........................... 2,879 9,455 2,053
Interest expense .......................... (5,482) (21,020) (27,012)
Realized and unrealized loss on asset sales
and real estate held for sale ........... (3,500) (271,811) --
Other income .............................. 12,154 52,470 12,903
Equity in subsidiary operations ........... (542,409) (65,085) (77,767)
-------- ------- -------
(Loss) before Income Taxes .......... (702,036) (391,411) (241,008)
Income Tax Expense (credit) deferred ........ 15,763 14,576 (63,604)
------ ------ -------
(Loss) Earnings before cumulative
effect of accounting change .............. (717,799) (405,987) (177,404)
Cumulative effect of accounting change
on years prior to June 30, 1994 .......... -- -- (33,265)
--- ---- -------
Net (Loss) ........................... $(717,799 $(405,987) $(210,669)
========= ========= =========
W W CAPITAL CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT, CONTINUED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30,
______________________________________
1996 1995 1994
________ ________ ________
Net cash flows (used in) provided by operating
activities: ................................ $ (13,571) $(224,049) $ 32,898
--------- --------- ---------
Cash flows from investing activities:
Investment in subsidiaries ................. (365,000) (150,000) (75,000)
Sale of real estate ........................ -- 374,606 --
Proceeds from notes receivable ............. 430,219 -- --
Purchase of equipment ...................... (3,221) (40,654) (41,603)
Additions to real estate held for sale ..... (5,454) (13,097) (33,963)
------ ------- -------
Net cash (used in) provided by investing
activities ................................. 56,544 170,855 (150,566)
------ ------- --------
Cash flows from financing activities:
Bank overdraft ............................. -- 9,258 (9,258)
Proceeds from long-term debt ............... -- 44,576 11,961
Proceeds from issuance of common stock ..... -- 30,000 101,875
Payments on long-term debt ................. (39,010) (26,038) (26,742)
------- ------- -------
Payment on capital lease obligation ........ (387) (1,463) (1,087)
Net cash (used in) provided by financing
activities ................................. (39,397) 56,333 76,749
------- ------ ------
Net Increase (decrease) in cash .............. 3,576 3,139 (40,919)
Cash at beginning of year .................... 3,139 -- 40,919
----- ------
Cash at end of year .......................... $ 6,715 $ 3,139 $ --
========= ========= =====
Supplemental schedule of noncash investing
and financing activities:
Issuance of stock to acquire equipment
and marketing rights ................... $ -- $ 19,688 $ --
Issuance of 250,000 shares of stock to
acquire assets of Wholesale Pump and
Supply, Inc. ........................... -- -- 145,000
Issuance of 38,055 shares of stock as
payment of notes payable stockholders .. -- -- 38,055
Increase acquisition costs of Eagle
Enterprises, Inc. ...................... -- -- 50,000
Issuance of stock as finders fee ......... -- 22,010 --
Sale of Grand County real estate:
Receipt of note receivable ............. -- 440,218 --
Payoff of note payable ................. -- 241,170 --
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest ............................... $ 5,482 $ 21,020 $ 27,012
W W CAPITAL CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT, CONTINUED
NOTES TO CONDENSED FINANCIAL INFORMATION
June 30, 1996
(1) Long-term Debt
Notes payable to financial institutions were as follows:
June 30,
__________________________
1996 1995
____________ __________
Note payable, Bank IV Kansas, interest at
9.00%, secured by furniture and equipment,
payable in monthly principal and interest
payments of $1,126 ........................................ $ 24,334 $ 36,004
Installment note secured by vehicle payable
in monthly installments of $744 including
interest at 10.75% ........................................ -- 27,340
24,334 63,344
Less current portion ................................... (11,796) (17,003)
$ 12,538 $ 46,341
Future matures of notes payable are as follow at June 30, 1996:
Year ended June 30,
1997 $ 11,796
1998 12,538
$ 24,334
(2) Related Party Transactions
At June 30, 1996, and 1995, Jerry R. Bellar, the former majority
shareholder of Eagle and a current stockholder of the Company, owed $132,221 and
$100,114 respectively under on indemnification agreement related to the
Company's acquisition of Eagle.
The following amounts related to wholly owned subsidiaries of the Company
were eliminated in the consolidated financial statements of the Company but are
reflected in this condensed financial statement of registrant:
Amounts receivable (payable) at June 30:
June 30,
____________________
1996 1995
________ ________
W-W Manufacturing Co., Inc. $ 38,817 $ --
Titan Industries, Inc. .... (94,452) (52,223)
Eagle Enterprises, Inc. ... (7,063) --
------
$(62,698) $(52,223)
======== ========
W W CAPITAL CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT, CONTINUED
NOTES TO CONDENSED FINANCIAL INFORMATION, CONTINUED
June 30, 1996
(2) Related Party Transactions, Continued
Management fee income for:
Years Ended June 30,
________________________________
1996 1995 1994
________ ________ ________
W-W Manufacturing Co., Inc. $ 240,000 $ 373,664 $415,840
Titan Industries, Inc. ........................ 240,000 240,000 180,000
Eagle Enterprises, Inc ........................ -- 41,429 10,000
$ 480,000 $ 655,093 $605,840
========= ========= ========
Equity in subsidiary operations for:
Years Ended June 30,
____________________________________
1996 1995 1994
________ ________ ________
W-W Manufacturing Co., Inc. $ (432,908) $ 131,073 $ 313,355
Titan Industries, Inc. ............... 169,914 53,369 243,529
Eagle Enterprises, Inc ............... (279,415) (249,527) (634,651)
$(542,409) $ (65,085) $ (77,767)