UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X Annual Report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the Fiscal year ended June 30, 2001 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
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(Exact name of registrant as specified in its charter)
Nevada 93-0967457
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(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
3500 JFK Parkway, Suite 202
Ft. Collins, Colorado 80525
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(Address of principal executive office)(Zip Code)
Registrant's telephone number, including area code: (970) 207-1100
---------------
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 None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par Value
---------------------------
(Title of Class)
(Continued on next page)
1
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 May 21, 2002 (1,746,258 shares of common stock) was $110,014 based on
the average of the bid and asked prices ($0.063 per share) as quoted on the over
the counter market.
The number of shares outstanding of each of the Company's sales of common stock,
as of May 21, 2002 was:
Common Stock, 2,008,164 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.
2
W W CAPITAL CORPORATION
FORM 10-K
PART I
Item 1. Business
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(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 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 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,
3
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 1/2 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 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 operated as a division of Titan Industries and distributed water well
supplies and environmental monitoring equipment for testing ground water.
During October 1998, the Board of Directors unanimously approved the merger of
W-W Manufacturing and Eagle Enterprises into one legal entity.
On March 21, 2000, W-W Manufacturing, a wholly owned subsidiary of the Company,
acquired various assets and assumed various liabilities of the Adrian J. Paul
Company, (renamed W-W Paul Scales) of Duncan, Oklahoma, out of bankruptcy. The
transaction was accounted for as a purchase and, accordingly, the excess of the
asset values acquired over the liabilities assumed were used first to reduce
long term assets and the remainder was recorded as negative goodwill of $46,853.
W-W Paul Scales operates as a subsidiary of W-W Manufacturing and is currently
doing business in a 35,000 square foot facility leased under a two year
agreement. The Company's primary functions are the manufacture of livestock
scales.
On January 5, 2001, the Shareholders of the Company voted to sell its water and
environmental product segment, Titan Industries, Inc., to certain shareholders
of the Company in exchange for 3,390,399 shares, or approximately 61.2%, of the
common stock of the Company. The transaction had an effective date of December
31, 2000. In addition to giving up its interest in Titan, the Company also
contributed the sum of $850,000 to the capital of Titan to equalize the value of
the consideration being exchanged. The sale was accounted for as a treasury
stock transaction and a loss on disposal of $14,900 was recorded as the result
of professional fees attributable to the transaction.
(b) Financial Information About Industry Segments
---------------------------------------------
The continuing business of the Company is carried on within one segment by three
operating units, each with its own organization. The management of each
operating 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 3500 JFK Parkway, Suite 202, Ft. Collins,
Colorado. As of June 30, 2001, the Company and its segments had approximately
150 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 this
segment.
(c) Narrative Description of Business
---------------------------------
The registrant conducts its business through its business segment: livestock
handling equipment group. A discussion of this segment follows.
4
LIVESTOCK HANDLING EQUIPMENT GROUP
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Principal Products, Markets and Distribution
- --------------------------------------------
The livestock handling group manufactures a broad line of cattle handling,
equine (horse), and rodeo equipment and containment systems. Farmers, ranchers,
rodeos, county fairs, veterinarians, and universities use this equipment.
Presently, with its 57-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. 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.
Since the purchase of Eagle, the Company eliminated some of its line of feeding
equipment which had not been profitable. 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 (57 years) reputation as an industry leader and manufacturing of
quality equipment. Now that the W-W Manufacturing line is manufactured at Eagle,
Eagle has reintroduced a redesigned feeding line to meet customer needs and
enabling Eagle to produce it profitably. This reintroduction has helped 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 has been 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 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.
5
With the acquisition of Adrian J. Paul Scales, on March 21, 2000 the Company
entered the new market of livestock scales. These scales are used to weigh and
track the development of various livestock. This market compliments the W-W line
of equipment and can be sold by the existing W-W distributor/dealer network.
Also the W-W line of products is being offered and sold by the distributors and
dealers of theW-W Paul Scale Company. The Company is in the process of
developing several new scales that will compliment and work interrelated with
the W-W cattle line of chutes.
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 needs to
continue to find ways to fill trucks with a variety of products. With the
reintroduction of the feed equipment, and other horse related products, the
Company believes 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. Demonstrations, seminars and special designs 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 divisions of
this segment are located as follows: W-W Manufacturing, the largest by sales
volume of the three divisions, is located at Route 1, Box 138, Hwy 54, Thomas,
Oklahoma. Eagle Enterprises, is located at 175 Windle Community Road,
Livingston, Tennessee. W-W Paul Scales is located at Hwy 81 South, Duncan,
Oklahoma.
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 2001 and 2000,
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 throughout the country. Future growth will,
however, be constrained by availability of capital resources and continuing good
market conditions.
Diversification into related product areas now served by the Company could
afford a second area for growth as shown with the acquisition of the W-W Paul
Scale Co. Management believes W-W Manufacturing's 57 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.
Continued emphasis will be put on specials and special sales to universities,
expo centers and fairgrounds. This highly visible use of equipment provides
product endorsement for the standard line of products and help
distributors/dealers to sell product to the end consumer.
6
OTHER INFORMATION RELATIVE TO THE BUSINESS
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Patents and Trademarks
- ----------------------
With the purchase of the Adrian J. Paul Company, the livestock handling
equipment segment, has acquired various patents. These patents are all current
and registered with the United States Patent Trademark Office. These patents
deal with systems for weighing non-stationary objects, torque bar suspension
scales with strap assemblies and an on board truck weighing system.
Seasonality
- -----------
The Company experiences seasonality in sales. The livestock handling equipment
product segment has increased sales in the fall through spring and lower sales
in summer.
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 $824,000 in 2001 as
compared to $1,860,000 in 2000. This decrease from 2000 is due to depressed
economic conditions and the extraordinary hot and dry summer. This is expected
to improve as we move into the fall season.
Business Subject to Renegotiation at Election of Government
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Not Applicable
Research and Development Expenditures
- -------------------------------------
Due to the nature of manufacturing operations of the Company and the types of
products produced expenditures for research and development are not material to
the overall operating cost.
Compliance with Environmental Controls
- --------------------------------------
The Company has faced issues with the EPA regarding its paint systems located at
various plants. The problems with the Dodge City, Kansas and temporary Thomas,
Oklahoma plants were solved with the powder coat paint system that was installed
in the new plant in Thomas, Oklahoma, which has passed all EPA requirements. In
the Eagle plant located in Livingston, Tennessee, the Company was issued a
temporary paint operating permit through December 31, 2001. By that time, the
Company was to be in compliance with the VOC's and HAP's emitted due to the
present flow coat paint system and to install a powder coat paint system. Over
the past year, management has worked with various paint suppliers to come up
with a solution that solved the problem of emissions in the air thereby lowering
the VOC's to an acceptable level and meet other governmental guidelines.
Management has located the majority of the powder coat system to be installed
and has placed a $175,000 refundable deposit on the system. Management has been
in contact with the EPA offices and is presently negotiating an extension of
its' current permit until the new powder coat system is installed. To the best
of its knowledge, the Company believes that it is presently in substantial
compliance with all other existing environmental laws.
7
Item 2. Properties
------------------
The Company's corporate headquarters is located at 3500 JFK Parkway, Suite 202,
in Ft. Collins, Colorado, and is leased from an unrelated third party.
The livestock handling equipment division is located at Route 1, Box 138, Hwy
54, Thomas, Oklahoma. This facility is leased from the City of Thomas Economic
Development Authority for $10,217 per month through September 2021. The facility
is comprised of approximately 80,000 square feet located on 10 acres of land.
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.
W-W Paul Scales is located at Highway 81 South, Duncan, Oklahoma. This facility
is leased for $4,000 per month through April 2002 and has approximately 35,000
square feet located on 13.2 acres of land.
Item 3. Legal Proceedings
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Not applicable
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, 2001.
8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ------- Matter
-------------------------------------------------------------
Market Information
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Quarter ended High Bid Low Bid
- ------------- -------- -------
September 30, 1999 $0.063 $0.063
December 31, 1999 0.063 0.063
March 31, 2000 0.500 0.063
June 30, 2000 0.063 0.063
September 30, 2000 $0.500 $0.080
December 31, 2000 0.500 0.070
March 31, 2001 0.063 0.063
June 30, 2001 0.063 0.063
The Company's common stock is listed on the over-the-counter market and trades
under the symbol "WWCL".
Holders
- -------
As of May 21, 2002 the Company had approximately 511 record holders of its
common stock, not including some individuals holding shares in street name.
Dividends
- ---------
The Company did not pay dividends during 2001 or 2000 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 Company's loan covenants prohibit the
paying of dividends.
9
Item 6. Selected Financial Data
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Year ended June 30
- --------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS (A)
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Net Sales 13,092,869 12,210,587 9,108,446 8,988,176 8,170,971
Gross Profit Margin 2,278,452 2,492,566 1,774,109 1,711,749 1,684,958
Operating Earnings
(Loss) (95,939) 456,463 164,026 157,055 (82,299)
Interest Expense 296,265 171,124 164,755 195,616 219,609
Operating Expense 2,374,391 2,036,103 1,610,083 1,554,694 1,767,257
Earnings(Loss)
From Continuing
Operations (247,455) 271,600 46,925 4,655 (69,212)
Net Earnings (Loss) (174,136) 338,777 104,808 87,420 28,120
PER SHARE DATA
--------------
Earnings(Loss)
From Continuing
Operations (.05) .05 .01 .02 .01
Dividends per
Common Share .00 .00 .00 .00 .00
Weighted Average
Shares Outstanding 3,725,881 5,420,397 5,420,397 5,520,397 5,517,064
FINANCIAL CONDITION
-------------------
Total Assets 6,322,810 6,651,737 5,781,655 5,606,381 4,322,928
Fixed Assets (Net) 2,351,435 1,089,280 1,174,409 1,268,605 1,431,905
Long-Term Debt 4,087,665 1,521,418 1,606,879 1,117,818 255,018
Stockholders Equity (49,314) 2,953,995 2,615,218 2,510,410 2,452,990
Working Capital (1) 1,676,546 1,627,455 1,174,058 481,657 (847,169)
Current Ratio (2) 1.80 1.80 1.75 1.24 0.74
A. This summary has been restated to reflect proper accounting treatment
for the discontinued operations regarding the sale of Titan
Industries, Inc. during the year ended 2001.
(1) The year ended 1997 reflects a classification of debt from long-term
to current due to the renewal of bank lines less than one year.
The year ended 1998 reflects a reclassification of debt from short-term
to long-term due to the renewal of its bank lines for longer than one
year.
(2) Percent of current assets to current liabilities.
10
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.
2001 2000 1999
------------------------ ------------------------ ------------------------
Total revenues $ 13,092,869 100.0% $ 12,210,587 100.0% $ 9,108,446 100.0%
Cost of revenues 10,814,417 82.6 9,718,021 79.6 7,334,337 80.5
------------ ----- ------------ ----- ------------ -----
Gross profit 2,278,452 17.4 2,492,566 20.4 1,774,109 19.5
Selling, general, and administrative
expense 2,374,391 18.1 2,036,103 16.7 1,610,083 17.7
------------ ----- ------------ ----- ------------ -----
Operating earnings (loss) (95,939) (0.7) 456,463 3.7 164,026 1.8
Other income (expense) 103,206 0.8 36,261 0.3 47,654 0.5
Interest expense (296,265) (2.3) (171,124) (1.4) (164,755) (1.8)
------------ ----- ------------ ----- ------------ -----
Earnings (loss) before income taxes (288,998) (2.2) 321,600 2.6 46,925 0.5
Income taxes from continuing
operations 41,543 0.3 (50,000) (0.4) -- 0.0
------------ ----- ------------ ----- ------------ -----
Net earnings (loss) from continuing
operations (247,455) (1.9) 271,600 2.2 46,925 0.5
Net earnings of discontinued operations 73,319 0.6 67,177 0.6 57,883 0.6
------------ ----- ------------ ----- ------------ -----
Net earnings (loss) $ (174,136) (1.3)% $ 338,777 2.8% $ 104,808 1.1%
============ ===== ============ ===== ============ =====
Depreciation and amortization $ 221,491 1.7% $ 188,472 1.5% $ 259,496 2.8%
============ ===== ============ ===== ============ =====
On January 5, 2001, the Shareholders of the Company voted to sell it's water and
environmental product segment, Titan Industries, Inc., to certain shareholders
of the Company in exchange for 3,390,399 shares, or approximately 61.2% of the
common stock of the Company. The transaction had an effective date of December
31, 2000. In addition to giving up its interest in Titan, the Company also
contributed the sum of $850,000 to the capital of Titan to equalize the value of
the consideration being exchanged. The sale was accounted for as a treasury
stock transaction and the loss on disposal of $14,900 was the result of
professional fees attributable to the transaction.
As of the result of the sale of Titan, the accompanying financial statements
have been restated for the three years presented to reflect proper accounting
treatment for discontinued operations. The reader should be aware that the
management discussion and analysis for all years presented have been restated to
include only discussion of the livestock equipment segment. Sales in the water
and environmental product segment, disposed of during 2001, were $4,699,336 for
the six month period ended December 31, 2000, $9,053,166 for the year ended June
30, 2000 and $7,278,597 for the year ended June 30, 1999. Gross margins as a
percentage of sales decreased during the six month period ended December 31,
2000 to 14.3% as compared to 17.2% in fiscal 2000 and 18.0% in fiscal 1999.
Total selling expenses as a percentage of sales decreased from 6.6% for fiscal
1999 and 6.1% for fiscal 2000 to 4.8% for the six month period ended December
31, 2000. General and administration expense as a percentage of sales also
dropped from 7.6% at both fiscal 2000 and 1999 to 6.5% for the six month period
ended December 31, 2000. Total interest expense for the six month period ended
December 31, 2000 was $80,659, $145,481 for fiscal 2000 and $128,877 for fiscal
1999.
11
Fiscal Year Ended June 30, 2001 Compared to Fiscal Year Ended June 30, 2000.
The Company had a net loss of $174,136 for the year ended June 30, 2001 as
compared to net earnings of $338,777 for the year ended June 30, 2000. The net
loss is attributed to several factors with the most notable being the cost to
move the largest production plant, formally in Dodge City, Kansas, to its new
modern facility in Thomas, Oklahoma. Moving expenses incurred of approximately
$112,000 included the loading, transporting and unloading of inventory and
equipment, training of new employees, relocation expenses for certain employees,
payroll expenses running dual plants during the four month moving process, set
up costs for the new plant and the cost to clean up the old plant in Dodge City.
Prior to moving, the Company incurred significant expense in training Oklahoma
employees by having them spend time in Dodge City, Kansas working with those
employees to learn the production process needed at the new plant in Oklahoma.
The cost related to this training was approximately $42,000. Other expenses
relating to the loss were costs associated to the sale of Titan Industries
during the year of $14,900 and other unrelated legal expenses of approximately
$78,000. Lower margins were also affected by costs at the new plant immediately
following the move due to the production flow inefficiencies and the learning
process of some of the new employees. Had the Company not incurred these
expenses management believes the Company would have continued to be profitable
for the fiscal year ending June 30, 2001. While these expenses and the related
cost adversely affected fiscal 2001 earnings, it is believed that operations
will stabilize at the new plant, production efficiencies will improve and the
Company will return a profit beginning with the third quarter of fiscal 2002.
Sales improved to $13,092,869 for the fiscal year ended June 30, 2001 as
compared to $12,210,587 for the same period of 2000. This increase of $882,282,
or 7.2%, is due to WW Paul Scales recording twelve months of sales for the year
compared to only four months for fiscal 2000.
Sales at the W-W Manufacturing location in Thomas, Oklahoma, which includes
sales at the Dodge City, Kansas location that was moved during a four month
process of February through May of 2001 to Thomas, decreased from $8,384,438 in
fiscal 2000 to $7,727,463 for the fiscal year ended June 30, 2001. This decrease
of $656,975 was primarily due to production down time during the move and
sluggish economic conditions experienced during the last quarter of the fiscal
year. Sales at the Livingston, Tennessee location declining slightly from
$3,604,068 in fiscal 2000 to $3,486,134 for the fiscal year ended June 30, 2001.
The decrease of $117,934 was due to slow sales during late spring into early
summer. Subsequent to year-end, sales remained sluggish through the summer
months, but showed signs of improvement as the Company moved into the fall
selling season. Despite the sluggish economy, the Company is planning promotions
and specials in an effort to maintain or improve sales levels through the fall
and winter selling season. The Company plans on introducing new additions to the
product line along with product improvements through the spring of 2002. Also,
management has entered into a marketing agreement to sell related products not
presently produced by the Company to enhance its equine product line. The
Company believes the addition of these outside products will help increase sales
of its own products due to increased exposure in related markets. With the
completion of the new plant in Thomas, Oklahoma the Company now has a production
facility that will add significant production capacity therefore allowing for an
aggressive marketing plan to be put in place. During fiscal 2002, efforts will
be made to acquire accounts that were not previously approached due to poor
paint quality offered from products produced in Dodge City. The new powder coat
paint system will allow for improved quality and enhance the sales expansion
plans.
Gross margins decreased from 20.4% in fiscal 2000 to 17.4% in fiscal 2001. This
decrease of 3.0% is due several factors with the primary factor being increased
labor cost of running both plants while moving from Dodge City, Kansas to
Thomas, Oklahoma. During the moving process, the Company continued operations at
the old plant in Dodge City while gearing up operations at the new plant in
Thomas, Oklahoma. The entire moving process took approximately four months to
complete and excess labor was used to have both plants producing products while
additional labor was needed for the moving process of loading and unloading
material and equipment at both plants. Another factor contributing to the
decrease in gross margins was the production inefficiencies at the new plant
while employees were learning their jobs and production flows could be
established. Management anticipates that as the new plant continues to improve
manufacturing efficiencies and employees settle into their jobs, gross margins
will return to normal levels. At the time of this report, margins have started
to show improvement.
12
Selling expense as a percentage of sales remained relatively constant in fiscal
2001 at 7.8% as compared to 7.9% in the same period of fiscal 2000. The Company
continues its aggressive marketing approach directed at developing new
distributors/dealers in areas not previously covered. The Company anticipates
increased selling expenses in fiscal 2002 now that the move into the new
production facility in Thomas, Oklahoma is complete. With the new plant and
powder coat paint system, the Company has a competitive advantage with a
superior product and feels it can attack new markets that it could not in
previous years.
General and administrative expenses increased as a percentage of sales from 8.8%
in fiscal 2000 to 10.3% for the fiscal year ended June 30, 2001. This increase
was due primarily to legal fees, higher management travel costs related to the
move from Dodge City, Kansas to Thomas, Oklahoma, and other start up costs
related to the new plant. The Company anticipates that general and
administration expenses will be cut in fiscal 2002 due to the consolidation of
the two production facilities and decreased legal expenses.
Interest expense increased in fiscal 2001 to $296,265 as compared to $171,124 in
2000. This increase is due to higher borrowing on the Companies revolving line
of credit to cover plant moving costs, accrued interest on the note payable used
to finance the sale of its water and environmental segment, Titan Industries,
and the addition of the capital lease on the new production facility in Thomas,
Oklahoma. As the Company settles into its new plant and inventory levels off,
the Company anticipates that borrowing on its revolving line will be reduced to
normal levels. The Company believes interest expense in Fiscal 2002 will be
higher than past years due to the capital lease of the new manufacturing
facility in Thomas and the debt incurred to complete the sale of Titan.
The Company projects sales to remain flat due to the sluggish economy, but
remains optimistic that profits can improve through Fiscal 2002 as it settles
into the new manufacturing plant in Thomas, Oklahoma. The process of training
new employees and developing production efficiency is anticipated to take
several months. Once that takes place, the benefits of the move should
positively affect future earnings.
Fiscal Year Ended June 30, 2000 Compared to Fiscal Year Ended June 30, 1999.
The Company had net earnings of $338,777 for the year ended June 30, 2000, as
compared to $104,808 for the same period of 1999. The Company has exhausted net
operating losses carried over from prior years, therefore, the financial
statements reflect income tax expense from continuing operations of $50,000 for
the year ended June 30, 2000, as compared to no tax expense in 1999. On a
comparison basis, earnings before income taxes and discontinued operations were
$321,600 for the year ended June 30, 2000 as compared to $46,925 for the year
ended June 30, 1999. The improvement in earnings was due to the overall increase
in sales, higher gross margins, and by strong market acceptance of new products.
Total sales reached a record level of $12,210,587 for the fiscal year ended June
30, 2000, as compared to $9,108,446 for the same period of 1999 representing an
increase of $3,102,141 or 34.1%. Sales at the Dodge City location increased
$1,824,409 and by $810,599 at the Livingston, Tennessee plant. Part of the
increase in sales for the livestock segment is due to the purchase of the Adrian
J. Paul Scale Company, later renamed W-W Paul Scales on March 21, 2000. Of the
total livestock equipment segment, sales by W-W Paul Scales represented $467,133
or 3.8% of total sales and 15.1% of the increase in sales.
Sales in the livestock equipment segment improved to $12,210,587 as stated
earlier. The increase of $3,102,141 is attributable to many factors including
the purchase of the Adrian J. Paul Company. The assets of this company were
purchased out of bankruptcy on March 21, 2000 and accounted for as a purchase.
The name of the company subsequent to the acquisition has been changed to W-W
Paul Scales. Sales reported from the purchase date through the fiscal year end
of June 30, 2000 amounted to $467,133. Other factors attributing to the sales
increase is the continued effort of the sales staff to find new
distributors/dealers throughout the upper Midwest and western states. Sales were
dramatically increased at the eastern plant (Livingston, Tennessee) due to one
of the Company's larger customers acquiring a competitor in the southeastern
part of the United States. Sales also improved due to the strong acceptance of
the Company's equine products. Cattle product sales in all markets continue to
improve due to the strong cattle prices and an overall strong economy. Special
sales to expo centers, universities and fairgrounds also contributed to the
13
year's record sales. The Company continues to increase sales efforts in this
market, since it is an area the Company feels has tremendous growth
opportunities. Sales at the Dodge City plant improved due to the production
support from the hydraulic plant in Oklahoma. With the past and continued labor
problems and production inefficiencies in the Dodge City plant, some of the
production had to be moved to Oklahoma until the new plant in Thomas is
complete. As reported in Fiscal 1999, management has successfully reached an
agreement with the Economic Development Authority of Thomas, Oklahoma to
construct a new modern facility to house the consolidation of the Dodge City
facility and temporary Thomas location. The facility will be owned by the City
of Thomas and the Company will lease/purchase it over a twenty-year term.
Gross margins in the livestock handling equipment segment improved to 20.4% in
fiscal 2000 compared to 19.5% in 1999. The improvement was realized despite the
labor and production problems that persist at the Dodge City location. To combat
these problems, the Company has used the other production facilities in Oklahoma
to help produce product and ship to Dodge City for paint and distribution to
customers. With these steps taken, the Company was able to introduce new
products and expand some existing lines, which enabled sales to increase,
thereby improving gross margins.
Selling expenses as a percentage of sales decreased to 7.9% in fiscal 2000 as
compared to 9.3% in 1999. This decrease was due to the significant increase in
sales without the related increase in expense. The total dollars expended on
selling expense did increase from $847,566 in 1999 to $963,904 in 2000. This
increase was due to higher travel cost related to higher fuel prices, lodging
costs, and airline fares. The Company had expected to spend more dollars on
introducing new products and expanding product lines into new markets not
previously serviced. The increased sales expense is a direct effect of the
aggressive sales and marketing plan maintained by the Company over previous
years, and new sales personnel added.
General and administration expense increased from 8.4% as a percentage of sales
in 1999 to 8.8% in fiscal 2000. The total dollars spent on general and
administration expenses increased from $762,517 in 1999 to $1,072,199 in fiscal
2000. This increase was attributed to the write off of accounts receivables,
costs of start-up activities at the Adrian J. Paul Company and professional
fees.
Interest expense increased slightly in fiscal 2000 to $171,124 from $164,755 for
the same period of 1999. This increase of $6,369 is directly related to the
raise in the prime interest rate, and increase costs of carrying higher
inventories and accounts receivable resulting from the growth in sales.
Fiscal Year Ended June 30, 1999 Compared to Fiscal Year Ended June 30, 1998.
The Company had net earnings of $104,808 in 1999, as compared to $87,420 for
1998. After showing a net loss of $104,217 through the first half of the fiscal
year, the Company made a profit of $39,879 during the third quarter ended March
31, 1999 and $169,146 for the fourth quarter ended June 30, 1999. The improved
sales and profits were realized due to improved market and weather conditions
over the first half of the year. Another factor contributing to the improvement
was the market acceptance of new products introduced over the last six months of
the fiscal year.
Total sales increased $120,270 or 1.3% to $9,108,446 in fiscal 1999 as compared
to $8,988,176 in fiscal 1998. While sales increased overall, sales at W-W
Manufacturing in Dodge City, Kansas decreased by $195,573 while sales at the
Livingston Tennessee plant increased by $315,843. Sales started out very
sluggish due to extreme drought conditions in the southwest and low cattle
prices during the first half of fiscal 1999. As the Company moved into the last
half of the year, market conditions improved and the introduction of new equine
products created stronger customer demand. Sales improved dramatically in the
eastern market due to an existing customer purchasing one of their competitors
that was not handling the W-W line of equipment. Also, the eastern market
continues to become more familiar with stronger and heavier equipment that W-W
produces and the demand for this equipment continues to improve. Sales in the
W-W Manufacturing Dodge City plant decreased, as mentioned earlier, due to
extreme dry conditions during the first quarter and production inefficiencies
attributable to a shortage of labor in the local area. Labor continues to be a
major problem for the Dodge City plant. With no unemployment in the area, it has
been
14
difficult to find adequate employees to fill all the manufacturing jobs on a
regular basis. The labor problem has caused the Company a backlog of orders
larger than is desirable and distributors/dealers have been concerned with the
shipments. In order for the Company to meet demand and keep up with the
aggressive marketing plan, the Company has decided to move the Dodge City
location. The western Oklahoma market, where the present hydraulic division is
located, has had plenty of labor and is better suited for the W-W operations.
Management has successfully reached a tentative agreement with the Economic
Development Authority of Thomas, Oklahoma to move its Dodge City, Kansas and
Weatherford, Oklahoma plants to Thomas, Oklahoma. The agreement calls for the
construction of a new 75,000 sq. foot manufacturing facility including a new
powder coat paint system. The facility will be owned by the City of Thomas and
the Company will lease/purchase it through various federal, state, and local
grants, various low interest loans, and a portion financed through a local bank
over a twenty year term. The Company will receive various state and local tax
incentives and the cost of moving to be provided by the City of Thomas. The
Company continued its efforts of expanding the distributor/dealer network, rodeo
sponsorships, and special designed installation as it moved through the last
half of the fiscal year. In order to improve Dodge City area sales with the
labor shortage, some production of products, mainly the panel lines, had to be
partially moved to the hydraulic production plant in Weatherford, Oklahoma.
While this helped to improve shipments and shortening lead times, it added
additional handling, freight, and other costs to the finished products. The new
and existing equine (horse) equipment continues to gain momentum in the east and
other areas of the country that have large horse populations. Special designs
and large arena installations remain strong as the Company continues its
marketing efforts of this business segment. During the last part of the fiscal
year, the sales of cattle products remained level while the other
non-traditional cattle products exhibited strong improvement. Sales in rodeo
equipment remain secure as the rodeo business continues to show growth in all
parts of the United States.
Gross margins improved to 19.5% in 1999 compared to 19.0% in 1998. The overall
improvement was realized at the W-W Manufacturing plant in Dodge City despite
obvious labor problems and production inefficiencies. Gross margins at the Eagle
plant (Livingston, Tennessee) remain relatively steady with a slight decline
towards the end of the year.
Selling expenses increased from 8.5% in 1998 to 9.3% in 1999. Selling expenses
increased due to the high cost associated with promoting new products to the
marketplace, additional travel cost in marketing the products to new
distributors/dealers, and expanding present market areas. The Company had
forecasted increasing the selling expense as a percentage of sales as explained
in the prior year's report.
General and administration expense decreased as a percentage of sales to 8.4% in
1999 from 8.7% in 1998. The total dollars spent on general and administrative
expenses decreased slightly to $762,518 in 1999 from 786,169 in 1998
representing a decrease of $23,651.
Interest expense continued to decline in fiscal 1999 to $164,755 from $195,616
in 1998. Management successfully completed new banking arrangements with Norwest
Business Credit Inc. of Colorado whereby reducing our overall borrowing cost.
These lines of credit are at more competitive rates, and allow for more
flexibility in structure. The Company utilizes a lock box system for receipts
therefore speeding up the processing time and allowing for a daily direct pay
down on the line of credit.
Impact of Year 2000:
During late fall 1999, the Company made routine software updates and system
reviews to its computer system to be "Year 2000" compliant. As of June 30, 2001
the Company has not experienced any significant disruptions to its operations
due to "Year 2000" issues.
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.
15
Liquidity and Capital Resources:
The Company's principal sources of liquidity are from working capital,
internally generated funds and borrowing under its various credit facilities.
The Company's working capital improved slightly for the year ended June 30, 2001
to $1,676,546 as compared to $1,627,455 for June 30, 2000. With the results of
the net loss of $174,136, the Company did not generate funds from operations.
The Company used cash in operations of $56,339 to fund the net loss, increase in
accounts receivables and increase in accounts payable. Cash flow from operations
was also affected by the write down of slow moving and obsolete inventory that
was located at Dodge City and not moved to the new plant in Thomas, Oklahoma.
Subsequent to the year-end, the Company conducted an auction that liquidated the
old inventory as well as various fixed assets. The provision for loss on the
write off of accounts receivables amounted to $28,212 in fiscal 2001 as compared
to $193,090 for the year ended June 30, 2000. This decrease is due to tighter
credit policies and aggressive collection practices instituted by the Company.
The Company used cash in investing activities for the purchase and replacement
of property and equipment. Cash used in investing activities increased to
$105,364 for the year ended June 30, 2001 compared to $48,620 for the same
period of 2000. Net cash provided from financing activities resulted in a net
increase in borrowing on its revolving credit line of $266,324. This increase
was necessary to fund the move of the production facility from Dodge City,
Kansas to Thomas, Oklahoma, the increase in accounts receivable and the net loss
from operations. As the Company moves into fiscal 2002 it anticipates that
borrowing under its revolving line will decrease as operations at the new
production plant in Oklahoma become more efficient.
The Company arranged a new three-year loan arrangement with its principal
lender, Wells Fargo Business Credit, during the year. Terms and conditions of
the agreement were not altered significantly from the original term agreement,
therefore providing adequate lines to meet current and future needs. Another of
the Company's lending institutions, AM South Bank of Birmingham, Alabama, agreed
to a new loan on the real estate and production facility located in Livingston,
Tennessee. All other banking and credit agreements were satisfactorily
maintained throughout fiscal 2001.
Even with the weakened economic climate and the tragedy of September 11, 2001,
the Company has been able to maintain sales at reasonable levels. Gross margins
may be weakened due to increased promotional costs and discount incentives used
to maintain sales levels. Despite these facts, the Company does anticipate
returning to profitable operations by the end of fiscal 2002.
16
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, 2001 and
June 30, 2000. . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the years
ended June 30, 2001, 2000 and 1999 . . . . . . . F-4
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 2001, 2000 and 1999 . . . . . F-6
Consolidated Statements of Cash Flows for the years ended
June 30, 2001, 2000 and 1999 . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . F-9
Financial Statement Schedules:
Independent Auditors' Report . . . . . . . . . S-1
I - Condensed Financial Information of Registrant . . . . S-2
II - Valuation and Qualifying Accounts . . . . . . S-6
All other schedules are omitted because they are not applicable or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.
17
Independent Auditor's Report
Board of Directors and Stockholders
W W Capital Corporation
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheets of W W
Capital Corporation and subsidiaries as of June 30, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the each of the three years ended June 30, 2001. 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 auditing standards generally
accepted in the United States of America. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of W W Capital
Corporation and subsidiaries as of June 30, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years ended June 30,
2001, in conformity with accounting principles generally accepted in the United
States of America.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado
May 16, 2002
F-1
W W CAPITAL CORPORATION
Consolidated Balance Sheets
===============================================================================================
June 30 2001 2000
- -----------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 216,473 $ 313,898
Accounts receivable, trade, net of allowance for doubtful
accounts of $35,000 in 2001 and $38,000 in 2000 1,547,584 1,401,179
Accounts receivable, other 67,975 41,439
Inventories 1,729,322 1,780,587
Prepaid expenses 50,168 22,097
Current portion of notes receivable, related parties 554 507
Deferred income tax asset 150,100 92,000
---------- ----------
Total current assets 3,762,176 3,651,707
---------- ----------
Property and Equipment, net of accumulated
depreciation of $1,927,259 in 2001 and
$2,134,658 in 2000 2,351,435 1,089,280
---------- ----------
Other Assets
Long-term notes receivable, related parties, net of
current portion 21,073 21,627
Loan acquisition costs, net of accumulated amortization
of $43,574 in 2001 and $25,142 in 2000 6,139 24,571
Equipment deposits 175,000 --
Net assets of discontinued operations -- 1,854,098
Other assets 6,987 10,454
---------- ----------
Total other assets 209,199 1,910,750
---------- ----------
Total assets $6,322,810 $6,651,737
========== ==========
The accompanying Notes are an integral part of the consolidated financial
statements
F-2
W W CAPITAL CORPORATION
Consolidated Balance Sheets (continued)
===============================================================================================
June 30 2001 2000
- -----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 1,423,041 $ 1,285,816
Accrued payroll and related taxes 177,474 209,819
Accrued property taxes 15,950 16,995
Accrued interest payable 62,361 15,076
Accrued income taxes, current -- 36,000
Other current liabilities 121,804 76,546
Current portion of notes payable 220,000 361,000
Current portion of capital lease obligation 65,000 23,000
----------- -----------
Total current liabilities 2,085,630 2,024,252
----------- -----------
Long-Term Liabilities
Long-term notes payable, net of current portion 2,806,268 1,452,992
Long-term capital lease obligations, net of current portion 1,281,397 68,426
Deferred income tax liability 155,100 106,000
Negative goodwill, net of accumulated amortization of
$3,124 in 2001 and $781 in 2000 43,729 46,072
----------- -----------
Net long-term liabilities 4,286,494 1,673,490
----------- -----------
Total liabilities 6,372,124 3,697,742
----------- -----------
Commitments and Contingency -- --
Stockholders' Equity (Deficit)
Preferred stock, $10.00 par value,
400,000 shares authorized -- --
Common stock, $0.01 par value, 15,000,000 shares
authorized, 5,553,827 shares issued in 2001 and
5,540,661 in 2000 55,538 55,406
Capital in excess of par value 3,305,533 3,304,629
Accumulated deficit (531,270) (357,134)
----------- -----------
2,829,801 3,002,901
Less 3,545,663 shares of treasury stock at June 30, 2001
and 120,264 at June 30, 2000, at cost (2,879,115) (48,906)
----------- -----------
Net stockholders' equity (deficit) (49,314) 2,953,995
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 6,322,810 $ 6,651,737
=========== ===========
The accompanying Notes are an integral part of the consolidated financial
statements
F-3
W W CAPITAL CORPORATION
Consolidated Statements of Operations
========================================================================================================
Years ended June 30 2001 2000 1999
- --------------------------------------------------------------------------------------------------------
Net Sales $ 13,092,869 $ 12,210,587 $ 9,108,446
Cost of Goods Sold 10,814,417 9,718,021 7,334,337
------------ ------------ ------------
Gross profit 2,278,452 2,492,566 1,774,109
------------ ------------ ------------
Operating Expenses
Selling expenses 1,023,040 963,904 847,566
General and administrative expenses 1,351,351 1,072,199 762,517
------------ ------------ ------------
Total operating expenses 2,374,391 2,036,103 1,610,083
------------ ------------ ------------
Income (Loss) From Operations (95,939) 456,463 164,026
------------ ------------ ------------
Other Income (Expense)
Interest income 35,060 19,903 26,622
Interest expense (296,265) (171,124) (164,755)
Gain (loss) on property and equipment
dispositions 45,438 1,144 (1,347)
Other income, net 22,708 15,214 22,379
------------ ------------ ------------
Net other income (expense) (193,059) (134,863) (117,101)
------------ ------------ ------------
Earnings (Loss) Before Income Taxes (288,998) 321,600 46,925
Income Tax Benefit (Expense) From
Continuing Operations 41,543 (50,000) --
------------ ------------ ------------
Net earnings (loss) from continuing
operations (247,455) 271,600 46,925
------------ ------------ ------------
Discontinued Operations
Earnings from operations of Titan Industries disposed of
(net of income taxes of $59,000 at June 30,
2001 and $12,000 at June 30, 2000) 88,219 67,177 57,883
Loss on disposal of Titan Industries (14,900) -- --
------------ ------------ ------------
Net earnings of discontinued operations 73,319 67,177 57,883
------------ ------------ ------------
Net earnings (loss) $ (174,136) $ 338,777 $ 104,808
============ ============ ============
The accompanying Notes are an integral part of the consolidated financial
statements
F-4
W W CAPITAL CORPORATION
Consolidated Statements of Operations (continued)
=======================================================================================================
Years ended June 30 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
Earnings Per Common Share
Basic
Earnings (loss) from continuing operations $(0.05) $0.05 $0.01
Earnings from discontinued operations 0.02 0.01 0.01
Loss on disposal of Titan Industries (0.02) 0.00 0.00
------- ------ ------
Net earnings (loss) $(0.05) $0.06 $0.02
====== ===== =====
Weighted average number of
common shares 3,725,881 5,420,397 5,420,397
Diluted
Earnings (loss) from continuing operations $(0.05) $0.05 $0.01
Earnings from discontinued operations 0.02 0.01 0.01
Loss on disposal of Titan Industries (0.02) 0.00 0.00
------- ------ ------
Net earnings (loss) $(0.05) $0.06 $0.02
====== ===== =====
Weighted average number of
common shares 3,725,881 5,420,397 5,420,397
The accompanying Notes are an integral part of the consolidated financial
statements
F-5
W W CAPITAL CORPORATION
Consolidated Statements of Stockholders' Equity
===================================================================================================================================
Years ended June 30, 2001, 2000 and 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock
----------------------- Capital ----------------------- Total
Number of Par In Excess Accumulated Number of Stockholders'
Shares Value of Par Value Deficit Shares Cost Equity
----------- ---------- ------------ ------------ ---------- ----------- ------------
Balance, July 1, 1998 5,540,661 $ 55,406 $ 3,304,629 $ (800,719) (120,264) $ (48,906) $ 2,510,410
Net earnings for year ended
June 30, 1999 -- -- -- 104,808 -- -- 104,808
- ------------------------------------- --------- --------- ----------- ----------- ---------- ----------- -----------
Balance, June 30, 1999 5,540,661 55,406 3,304,629 (695,911) (120,264) (48,906) 2,615,218
Net earnings for year ended
June 30, 2000 -- -- -- 338,777 -- -- 338,777
- ------------------------------------- --------- --------- ----------- ----------- ---------- ----------- -----------
Balance, June 30, 2000 5,540,661 55,406 3,304,629 (357,134) (120,264) (48,906) 2,953,995
Exercise of stock options 13,166 132 904 -- -- -- 1,036
Treasury stock redeemed in sale of
Titan Industries, Inc. -- -- -- -- (3,390,399) (2,812,709) (2,812,709)
Treasury stock redeemed in sale
of inventory -- -- -- -- (35,000) (17,500) (17,500)
Net loss for year ended June 30, 2001 -- -- -- (174,136) -- -- (174,136)
- ------------------------------------- --------- --------- ----------- ----------- ---------- ----------- -----------
Balance, June 30, 2001 5,553,827 $ 55,538 $ 3,305,533 $ (531,270) (3,545,663) $(2,879,115) $ (49,314)
========= ========= =========== =========== ========== =========== ===========
The accompanying Notes are an integral part of the consolidated financial
statements
F-6
W W CAPITAL CORPORATION
Consolidated Statements of Cash Flows
============================================================================================================
Years ended June 30 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net earnings (loss) $ (174,136) $ 338,777 $ 104,808
Adjustments to reconcile net earnings (loss)
to net cash provided (used) by operating activities
Earnings from discontinued operations (43,511) (67,177) (57,883)
Depreciation 203,059 170,040 252,786
Amortization 18,432 18,432 6,710
(Gain) loss on dispositions of property and equipment (45,438) (1,144) 1,347
Provision for loss on accounts and notes receivable 28,212 193,090 37,579
Amortization of negative goodwill (2,343) (781) --
Write down of inventory to net realizable value 52,826 97,418 --
Net changes in assets and liabilities
Accounts receivable (201,153) (402,489) (163,549)
Inventories (16,340) (148,083) (130,165)
Other current and non-current assets (82,704) 5,133 12,361
Accounts payable, accrued expenses and
other current liabilities 206,757 (101,795) 102,143
------------ ------------ ------------
Net cash provided (used) by operating
activities (56,339) 101,421 166,137
------------ ------------ ------------
Cash Flows From Investing Activities
Proceeds from sale of property and equipment 73,435 93,519 --
Purchases of property and equipment (179,306) (157,593) (38,700)
Proceeds from notes receivable, other -- -- 110,341
Proceeds from stockholders' notes receivable 507 466 428
Cash acquired in acquisition of subsidiary -- 14,988 --
------------ ------------ ------------
Net cash provided (used) by
investing activities (105,364) (48,620) 72,069
------------ ------------ ------------
Cash Flows From Financing Activities
Borrowings on notes payable 11,966,434 10,955,779 4,913,435
Payments on notes payable (11,700,110) (10,846,664) (5,054,718)
Payments on capital leases (37,982) (18,270) (11,631)
Payment of loan acquisition costs -- -- (49,713)
Proceeds from the exercise of stock options 1,036 -- --
Repurchase of common stock (165,100) -- --
------------ ------------ ------------
Net cash provided (used) by
financing activities 64,278 90,845 (202,627)
------------ ------------ ------------
The accompanying Notes are an integral part of the consolidated financial
statements
F-7
W W CAPITAL CORPORATION
Consolidated Statements of Cash Flows (continued)
============================================================================================================
Years ended June 30 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash $ (97,425) $ 143,646 $ 35,579
Cash, Beginning of year 313,898 170,252 134,673
------------ ------------ ------------
Cash, End of year $ 216,473 $ 313,898 $ 170,252
============ ============ ============
Supplemental Information
Liabilities assumed to acquire subsidiary $ -- $ 383,990 $ --
Installment loans and capital leases to acquire
property and equipment $ 1,313,904 $ 19,693 $ 121,236
Installment loans used for deposits on purchase
of property and equipment $ 175,000 $ -- $ --
Installment loans used for the repurchase
of common stock $ 750,000 $ -- $ --
Treasury stock acquired in sale of inventory $ 17,500 $ -- $ --
Cash paid during the year for interest $ 248,084 $ 167,096 $ 170,403
Cash paid during the year for income taxes $ 50,677 $ -- $ --
The accompanying Notes are an integral part of the consolidated financial
statements
F-8
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 1 - Summary of Significant Accounting Policies
Nature of Operations. W W Capital Corporation and its wholly-owned
subsidiaries (the Company) principally engage in the manufacture,
distribution and sale of a wide range of livestock confinement and handling
equipment, and in the processing, purchasing and distributing of water and
environmental products.
Basis of Presentation. The accompanying consolidated financial
statements include the accounts of W W Capital Corporation and all of its
wholly-owned subsidiaries, W-W Manufacturing Co., Inc. (W-W Manufacturing),
Titan Industries, Inc. (Titan) and Eagle Enterprises, Inc. (Eagle). W-W
Manufacturing Co. acquired WW Paul Scales on March 21, 2000. The accounts
of WW Paul Scales, since its acquisition, are included in the consolidated
financial statements. During 1999, the Company consolidated W-W
Manufacturing and Eagle into one legal entity without affecting the
financial statements. In January 2001, the Company sold its water and
environmental product segment, Titan Industries, Inc. The Company's
consolidated financial statements have been restated to reflect the segment
as a discontinued operation for all periods presented. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates. The preparation of the Company's consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.
Cash Equivalents. For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with an
original maturity of three months or less to be cash equivalents.
Allowance for Doubtful Accounts. The Company uses the allowance method
of accounting for bad debts. The allowance for bad debts is based on
estimates and it is reasonably possible they may change in the near term.
Inventories. Inventories are stated at the lower of cost or market.
Cost includes materials, labor and production costs and is determined on a
first-in, first-out (FIFO) method.
Property and Equipment. Property and equipment are stated at cost.
Depreciation is computed using straight-line and accelerated methods over
the estimated useful lives of the assets, which are generally thirty to
forty years for buildings and improvements, three to seven years for
leasehold improvements and automobiles and trucks, and five to seven years
for machinery and equipment and office equipment. Amortization of property
and equipment under capital leases is included in depreciation expense.
Loan Acquisition Costs. Loan acquisition costs were incurred to obtain
certain of the Company's long-term debt. Such costs have been capitalized
and are being amortized over the terms of the related debt.
F-9
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 1 - Summary of Significant Accounting Policies (continued)
Long-Lived Assets. Long-lived assets to be held and used are recorded
at cost. Management reviews long-lived assets and the related intangible
assets for impairment whenever events or changes in circumstances indicate
the carrying amount of such assets may not be recoverable. Recoverability
of these assets is determined by comparing the forecasted undiscounted net
cash flows of the operation to which the assets relate, to the carrying
amount including associated intangible assets of such operation. If the
operation is determined to be unable to recover the carrying amount of its
assets, then intangible assets are written down first, followed by the
other long-lived assets of the operation, to fair value. Fair value is
determined based on discounted cash flows or appraised values, depending
upon the nature of the assets.
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 143 "Accounting for
Asset Retirement Obligations." SFAS No. 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in the period
in which it is incurred if a reasonable estimate of fair value can be made.
The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. The statement is not yet
effective, and management has not determined the effect, if any, the
statement will have on results of operations or financial position.
Warranty. The Company provides a warranty to its customers and the
related costs are recorded at the time of service. Future warranty costs
are not considered significant to the financial statements as most warranty
work, if any, is generally performed shortly after the sale.
Negative Goodwill. Negative goodwill was recorded in the acquisition
of the Adrian J. Paul Company. It is the excess of the value of acquired
assets over the total cash paid and liabilities assumed, after reducing
long-term assets. The Company is amortizing negative goodwill using the
straight-line method over a 20-year life.
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations." SFAS No. 141 requires that unamortized negative goodwill
arising from a business combination, for which the acquisition date was
before July 1, 2001, shall be written off and recognized as a change in
accounting principle. The change in accounting principle will be recognized
on July 1, 2002.
Stock-Based Compensation. The Company applies the provisions of
Statement of Financial Accounting Standards Board Statement No. 123 (FAS
123), "Accounting for Stock-Based Compensation." The Statement defined a
fair value based method of accounting for stock options or similar equity
instruments. FAS 123 allows an entity to continue to measure compensation
cost for employee stock option plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board Opinion (APB) No.
25, which was elected by the Company. FAS 123 requires the Company to make
certain proforma disclosures as if the fair value based method had been
applied. The effects of the fair value based method for the periods
presented were not material for proforma disclosure.
Revenue Recognition. The Company recognizes revenue in the period the
product is shipped and title is transferred to the customer.
Advertising. The Company expenses the cost of advertising the first
time the advertising takes place. Advertising expense for the years ended
June 30, 2001, 2000 and 1999 was $137,045, $85,795 and $70,896,
respectively.
F-10
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
===============================================================================
Note 1 - Summary of Significant Accounting Policies (continued)
Income Taxes. Deferred income taxes are recognized for temporary
differences resulting from income and expense items reported for financial
accounting and tax purposes in different periods. Deferred income taxes are
classified as current or noncurrent, depending on the classification of the
assets and liabilities to which they relate. Deferred income taxes arising
from temporary differences that are not related to an asset or liability
are classified as current or noncurrent depending on the periods in which
the temporary differences are expected to reverse. The recognition of
deferred tax assets is reduced if necessary, by the amount of any tax
benefits that, based on available evidence, are not expected to be
realized.
Per Share Data. In 1998, the Company adopted Financial Accounting
Standards Board Statement No. 128(FAS 128), "Earnings Per Share." The
statement modifies the standards for computing and presenting earnings per
share. FAS 128 requires dual presentation of basic and diluted earnings per
share on the face of the income statement. Basic earnings per share were
computed on the basis of weighted average number of shares outstanding.
Diluted earnings per share includes outstanding stock options, unless the
effect would be antidilutive.
Note 2 - Liquidity and Capital Resources
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates the
continuation of the Company as a going concern.
During the year ended June 30, 2001, the Company sustained a $247,455
loss from continuing operations. Additionally, the Company redeemed
treasury stock totaling $2,812,709 in the sale of Titan Industries, Inc.
The redemption of treasury stock and the net loss for the year ended June
30, 2001 resulted in a net stockholders' deficit of $49,314 at June 30,
2001.
The Company relies on revolving notes payable from a financial
institution for its working capital. The associated credit and security
agreements were amended in May 2002 to modify the loan covenants among
other things.
The ability of the Company to continue as a going concern is dependent
on meeting the requirements of its financing agreements in the near term.
Note 3 - Related Party Transactions
Receivables. Notes receivable from stockholders and all affiliated
entities consisted of the following at June 30:
2001 2000
-------- --------
Note receivable from a partnership owned by certain of
the Company's stockholders bears interest at 9%. During
October 1997, the note was renegotiated to provide for
annual installments of $2,500 through 2017 and for
collateral consisting of shares of the Company's common
stock owned by the partners $ 21,627 $ 22,134
Less current portion (554) (507)
-------- --------
$ 21,073 $ 21,627
======== ========
F-11
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 3 - Related Party Transactions (continued)
During the years ended June 30, 2001, 2000 and 1999, the Company
recorded interest income of $1,946, $1,993 and $2,034 for the notes
receivable from related parties.
Operating Lease. The Company leased its manufacturing facility in
Dodge City, Kansas, from Murle F. Webster, a stockholder, on a month to
month basis. The lease required monthly payments of $5,000 through April
2001 and monthly payments of $500 for May and June 2001. The Company closed
the Dodge City, Kansas location during 2001. The provisions of the building
lease required the Company to pay insurance, property taxes and maintenance
costs.
Other. During September 1998, the Company agreed to settle its claim
against Jerry R. Bellar (Bellar), a stockholder of the Company and a former
stockholder of Eagle Enterprises, Inc., and Bellar agreed to settle claims
against the Company asserted by him and two affiliated companies. The
settlement agreement provided for the cancellations of amounts due to the
Company from Bellar recorded at $167,572, and amount payable by the Company
to Bellar of $150,000. The Company paid $20,000 to Bellar in September
1998.
The Company has entered into the transactions with related parties as
disclosed above during the three-year period ended June 30, 2001. 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.
Note 4 - Inventories
Inventories consisted of the following at June 30:
2001 2000
------------- --------------
Raw materials $ 658,943 $ 563,123
Work-in-process 436,237 388,056
Finished goods 634,142 829,408
------------ ------------
$ 1,729,322 $ 1,780,587
=========== ===========
During the fourth quarter of 2001 and 2000, the Company evaluated its
inventories for impairment. The inventory value was written down by $52,826
in 2001 and $97,418 in 2000 to estimate net realizable value of impaired
items. The write down is recorded in cost of goods sold. It is reasonably
possible that estimates of net realizable value may change in the near
term.
Note 5 - Property and Equipment
Property and equipment consisted of the following at June 30:
2001 2000
------------ -----------
Land and improvements $ 102,622 $ 107,922
Building and improvements 1,844,031 781,224
Leasehold improvements 76,510 218,244
Machinery and equipment 1,493,411 1,430,980
Automobiles and trucks 448,402 334,598
Office equipment 313,718 350,970
----------- ------------
4,278,694 3,223,938
Less accumulated depreciation and
amortization (1,927,259) (2,134,658)
----------- -----------
$ 2,351,435 $ 1,089,280
=========== ===========
F-12
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 6 - Discontinued Operation
On January 5, 2001, the stockholders of the Company voted to sell its
water and environmental product segment, Titan Industries, Inc., to certain
stockholders of the Company in exchange for 3,390,399 shares, or
approximately 61.2%, of the outstanding common stock of the Company. The
transaction had an effective date of December 31, 2000. In addition to
giving up its interest in Titan, the Company also contributed the sum of
$850,000 to the capital of Titan to equalize the value of the consideration
being exchanged. The sale is being accounted for as a treasury stock
transaction and the estimated loss on disposal of $14,900 is the result of
professional fees attributable to the transaction. The accompanying
financial statements have been restated to conform to discontinued
operations treatment for all historical periods presented.
The operating results of the discontinued operation is as follows:
For the Period
from July 1, For the For the
2000 through year ended year ended
December 31, June 30, June 30,
2000 2000 1999
----------- ----------- -----------
Net Sales $ 4,699,336 $ 9,053,166 $ 7,278,597
=========== =========== ===========
Earnings before provision for income taxes $ 147,219 $ 79,177 $ 57,883
Provision for income taxes (59,000) (12,000) --
----------- ----------- -----------
Earnings from discontinued operation $ 88,219 $ 67,177 $ 57,883
=========== =========== ===========
Assets and liabilities for the discontinued operation is summarized as
follows:
December 31, June 30,
2000 2000
----------- ----------
Cash $ 105,473 $ 96,986
Receivables 1,258,184 1,579,784
Inventories 2,551,495 2,537,367
Prepaid expenses 18,151 30,540
Deferred income tax asset 22,000 22,000
---------- ----------
Current assets of discontinued
operation 3,955,303 4,266,677
---------- ----------
Net property and equipment 909,224 870,047
---------- ----------
Accounts payable 1,405,448 1,731,932
Accrued liabilities 181,004 138,494
Short-term debt 1,065,000 57,000
---------- ----------
Current liabilities of discontinued
operation 2,651,452 1,927,426
---------- ----------
Long-term debt 290,466 1,330,200
Deferred income tax liability 25,000 25,000
---------- ----------
Long-term liabilities of
discontinued operation 315,466 1,355,200
---------- ----------
Net assets of discontinued operation $1,897,609 $1,854,098
========== ==========
F-13
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 6 - Discontinued Operation (continued)
During January 2001, the Company entered into an informal loan
agreement with an affiliated investment group to borrow up to $1,000,000.
2,448,000 shares of the Company's outstanding common stock collateralized
the loan. Loan proceeds of $750,000 were used to partially fund the capital
contribution to Titan Industries, Inc.
Note 7 - Employee Benefit Plans
401(k) Plan. The Company has a 401(k) Saving Plan, whereby eligible
employees, who have one half year of 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 vesting at 25% per
year after three years of service. During the years ended June 30, 2001,
2000, and 1999, the Company made $11,877, $7,289 and $4,513 in
discretionary contributions to the Plan.
Stock Options. The Company has an Incentive Stock Option Plan. 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. At June 30, 2001, options to purchase
773,500 shares of common stock are available to be granted by the Company
under the plan. These options have a three-year vesting period.
Additionally, the Company has 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 153,334 shares at option prices ranging
from $0.063 to $2.50 per share of which 140,168 are outstanding as of June
30, 2001. Options to purchase 10,000 and 3,166 shares of common stock for
$0.0625 and $0.13 per share were exercised during 2001. These options vest
immediately and expire ten years after issuance.
Number of Weighted Average
Shares Exercise Price
--------- ---------------
Outstanding, July 1, 1998 (all vested) 385,168 $ 0.9000
Granted 30,000 0.1900
Exercised -- --
Cancelled (15,000) 0.6500
-------- -------
Outstanding, June 30, 1999 (all vested) 400,168 0.8600
Granted 30,000 0.0625
Exercised -- --
Cancelled -- --
-------- -------
Outstanding, June 30, 2000 (all vested) 430,168 0.8000
Granted 10,000 0.0625
Exercised (13,166) 0.0800
Cancelled (110,334) 0.7900
-------- -------
Outstanding, June 30, 2001 (all vested) 316,668 $ 0.8100
======== =======
F-14
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 7 - Employee Benefit Plans (continued)
Options Outstanding Vested Options
---------------------------------------------- --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Years) Price Vested Price
---------- ----------- ------------ ---------- -------- ----------
$2.5000 17,500 0.8 $2.5000 17,500 $2.5000
1.5000 50,000 1.7 1.5000 50,000 1.5000
0.8125 16,001 2.0 0.8125 16,001 0.8125
0.7500 143,167 2.9 0.7500 143,167 0.7500
0.5625 20,000 4.0 0.5625 20,000 0.5625
0.3000 10,000 7.0 0.3000 10,000 0.3000
0.1300 10,000 6.0 0.1300 10,000 0.1300
0.0625 50,000 6.9 0.0625 50,000 0.0625
-------- ---- -------- -------- --------
316,668 3.5 $0.8100 316,668 $0.8100
======= ==== ======= ======= =======
Note 8 - Long-Term Debt
Long-term debt consists of the following at June 30:
2001 2000
------------ -----------
Financial Institutions
----------------------
Revolving note payable bears interest at 1.0% above the Bank's
base rate (total interest rate of 7.75% at June 30, 2001). The note is
subject to various conditions described below and provides for the
issuance of $2,200,000 of revolving credit debt. The agreement
matures in October 2004. $ 1,448,452 $ 1,103,126
Note payable bears interest at 9.5% and is due in monthly
installments of $4,191, including principal and interest, through
November 2005. The note is collateralized by real estate and
machinery and equipment located in Livingston, Tennessee. 179,165 -
Term note payable bears interest at 2% over the Bank's base rate
(total interest rate of 8.75% at June 30, 2001). The note is due in
monthly principal installments of $4,021 plus interest through April
2003. The note is collateralized by equipment, inventory, intangibles
and receivables. 118,384 170,653
Term note payable bears interest at 2% over the Bank's base rate
(total interest rate of 8.75% at June 30, 2001). The note is due in
monthly principal installments of $2,917 plus interest through April
2004. The note is collateralized by equipment, inventory, intangibles
and receivables. 99,167 134,167
F-15
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 8 - Long-Term Debt (continued)
2001 2000
------------ -----------
Notes payable bearing interest at rates ranging from 7.6% to 8.9%
and are due in monthly installments, including principal and interest,
totaling $2,219 through February 2003, and $1,744 through
February 2005. The notes are collateralized by vehicles. $ 74,021 $ 13,717
Note payable bears interest at 9.75% and is due in monthly
installments of $949, including principal and interest. The note
matures in March 2005 and is collateralized by equipment in Thomas,
Oklahoma. 30,591 71,033
Note payable bears interest at 9.0% and is due in monthly
installments, including principal and interest, of $522 through
December 2004. The note is collateralized by a vehicle. 18,733 -
Notes paid in full during 2000. - 232,511
------------ -----------
1,968,513 1,725,207
------------ -----------
Other Entities
--------------
Note payable bears interest at 3.0% above the Wall Street
prime lending rate (total interest rate of 13.0% at June 30, 2001). The
note is payable with one payment consisting exclusively of twelve
month's accrued interest on the second anniversary date, January 2003.
The remaining balance is due in monthly principal installments of
$11,419 plus interest through December 2010. The note is collateralized
by 2,228,000 shares of the Company's treasury stock and provides for
the issuance of $1,000,000 total debt. 750,000 -
Note payable bears interest at 2.0% and is due in monthly
installments, including principal and interest, of $2,820 through
March 2009. The note is unsecured. 242,777 -
Note payable bears interest at 5.75% and is due in monthly
installments, including principal and interest, of $2,449 through July
2003. The note is collateralized by accounts receivable, equipment and
furniture and fixtures. The agreement requires the Company to create or
retain seventeen new full-time permanent positions within an eighteen
month period with 60% of the positions for low income individuals. 57,526 82,921
F-16
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 8 - Long-Term Debt (continued)
2001 2000
------------ -----------
Note payable bears interest at 5.25% and is due in
quarterly installments, including principal and interest, of
$675. The note is unsecured. $ 7,452 $ 5,864
----------- -------------
1,057,755 88,785
----------- -------------
3,026,268 1,813,992
Less current portion (220,000) (361,000)
----------- ------------
$2,806,268 $1,452,992
========== ==========
A revolving note payable in the amount of $1,448,452 is
collateralized by equipment, intangibles, inventories and receivables.
The debt is subject to borrowing base limitations of 80% of eligible
accounts receivable and 50% of eligible inventory. The loan agreement
contains certain covenants including the maintenance of minimum net
income, limitations on the acquisition of property and equipment and
the requirement to develop certain inventory control systems. The loans
provide for charges of .25% on unused revolving credit lines and for
payment penalties in the event the agreement is terminated prior to the
maturity date. Receivable collections are used to pay down the note on
a daily basis. After two business days, these funds are available for
borrowing subject to the borrowing base limitations. Approximately
$700,000 of the Company's consolidated net assets at June 30, 2001 are
considered to be restricted net assets of consolidated subsidiaries.
During May 2002, the credit security agreement and loan
documents were amended to increase the variable interest rate and to
modify the collateral provisions and loan covenants.
At June 30, 2001, one subsidiary was in violation of the
covenant pertaining to the maintenance of minimum net income and the
creation of a perpetual inventory system. After amendment of the loan
covenants, the Company is in compliance with covenants.
The aggregate maturities of long-term debt are as follows at
June 30, 2001:
Year
----
2002 $ 220,000
2003 231,102
2004 333,679
2005 1,636,643
2006 145,988
Thereafter 458,856
------------
$ 3,026,268
============
Note 9 - Lease Commitments
Capital Leases. The Company leases its Thomas, Oklahoma plant
under a capital lease arrangement that expires in September 2021. The
leased building has a cost of $1,073,507 and accumulated amortization
of $8,857 at June 30, 2001.
The Company also leases certain manufacturing equipment under
seven capital leases which expire in August 2003 through June 2005.
Assets under capital leases are recorded at fair value and are
amortized over their estimated useful lives. The leased equipment has a
cost of $151,579 and $132,135 and accumulated amortization of $61,255
and $33,581 at June 30, 2001 and 2000.
F-17
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 9 - Lease Commitments (continued)
Future minimum lease payments required under noncancelable
capital leases are as follows at June 30, 2001.
Year Building Equipment Total
---- ------------- --------- -----------
2002 $ 148,850 $ 34,300 $ 183,150
2003 157,600 34,300 191,900
2004 157,600 18,619 176,219
2005 157,600 8,038 165,638
2006 157,600 - 157,600
Thereafter 1,523,475 - 1,523,475
----------- -------- ------------
Total minimum lease payments 2,302,725 95,257 2,397,982
Less: amount representing interest (1,040,923) (10,662) (1,051,585)
----------- -------- ------------
Present value of net minimum lease payments $ 1,261,802 $ 84,595 $ 1,346,397
============= ========= ============
Operating Leases. In January 2000, the Company entered into a
two year lease extension for office space. The lease provides for
monthly rental payments of $2,653 through March 2002, at which time the
Company has an option to extend the lease for an additional two years.
In April 2000, the Company entered into a two year lease for a
production facility. The lease provides for monthly rental payments of
$4,000 though March 2002, at which time the Company has an option to
purchase the production facility for $208,000. The closing of the sale
must occur within 45 days after the conclusion of the lease.
The Company has entered into various lease agreements for
production and office equipment and vehicles. The lease terms are
generally two to five years.
Future minimum rental payments under operating leases as of
June 30, 2001 are as follows:
Warehouse and Vehicles and
Year Office Space Equipment Total
---- ------------ ------------ ------------
2002 $ 59,877 $ 46,735 $ 106,612
2003 - 34,725 34,725
2004 - 17,915 17,915
2005 - 3,320 3,320
2006 - 1,749 1,749
------------ -------- ----------
Total minimum payments required $ 59,877 $ 104,444 $ 164,321
============ ========= ==========
The Company also leased various facilities under informal
agreements. Rental expense under operating leases for the years ended
June 30, 2001, 2000 and 1999 amounted to $196,253, $173,639 and
$164,962, respectively.
Note 10 - Business Combination
On March 21, 2000, W-W Manufacturing, a wholly-owned
subsidiary of WW Capital Corporation, acquired various assets and
assumed certain liabilities of Adrian J. Paul Company, out of
bankruptcy. Adrian J. Paul Company is located in Duncan, Oklahoma and
is a manufacturer of scales used by the livestock industry. Subsequent
to the acquisition, Adrian J. Paul Company was renamed WW Paul Scales.
F-18
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 10 - Business Combination (continued)
W-W Manufacturing assumed liabilities of $383,990 to acquire
the assets. The transaction was accounted for as a purchase and,
accordingly, the excess of asset values over the total of cash paid and
liabilities assumed were used first to reduce long-term assets. The
remainder was recorded as negative goodwill of $46,853.
The accompanying consolidated financial statements reflect the
acquisition from the date acquired. The following unaudited pro forma
summary presents the consolidated results of operations of the Company
as if the business combination had occurred on July 1, 1998.
2000 1999
------------ ------------
Revenues $ 13,495,000 $ 10,910,000
Net earnings $ 397,000 $ 141,000
Earnings per share $ 0.07 $ 0.03
The above amounts are based upon certain assumptions and
estimates, which the Company believes are reasonable. The pro forma
results do not necessarily represent results which would have occurred
if the business combination had taken place at the date and on the
basis assumed above.
Note 11 - Income Taxes
The provision for income taxes is as follows at June 30:
2001 2000 1999
----------- ----------- ----------
Current
Federal $ 37,757 $ 111,000 $ 47,000
State 19,000 18,200 7,600
Deferred (9,000) 17,000 --
Tax benefit of net operating loss (89,300) (96,200) (54,600)
---------- ----------- ----------
$ (41,543) $ 50,000 $ --
========== =========== ==========
A reconciliation of income at the statutory rate to the
Company's effective rate is as follows at June 30:
2001 2000 1999
--------- -------- --------
Federal statutory rate 34.00% 34.00% 34.00%
Non deductible expenses (2.53) 3.63 9.14
Basis difference in assets and liabilities (25.42) 4.94 22.98
Capital loss and reversal of non
deductible write down of real estate -- -- --
Change in deferred tax asset
valuation allowance and net
operating loss -- (29.93) (67.82)
Discontinued Operations (20.42) 3.73 --
Other -- (0.82) 1.70
-------- -------- --------
(14.37)% 15.55% -- %
======== ======= ========
F-19
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 11 - Income Taxes (continued)
Deferred tax assets and liabilities are comprised of the
following at June 30:
2001 2000 1999
--------- --------- ---------
Deferred Tax Assets:
Net operating loss carryforward $ 89,300 $ -- $ 104,100
Allowance for doubtful accounts 13,100 12,300 7,500
Inventory 19,100 11,300 12,400
Accrued salaries 27,600 21,600 19,000
Other 1,000 46,800 2,900
--------- --------- ---------
Total deferred tax assets 150,100 92,000 143,000
Deferred Tax Liabilities:
Depreciation of property and equipment (155,100) (106,000) (116,500)
Other -- -- (9,800)
Valuation allowance -- -- (16,700)
--------- --------- ---------
Deferred taxes - net $ (5,000) $ (14,000) $ --
========= ========= =========
Current deferred tax asset $ 150,100 $ 92,000 $ --
Long-term deferred tax liability (155,100) (106,000) --
--------- --------- ---------
$ (5,000) $ (14,000) $ --
========= ========= =========
At June 30, 2001, the Company has capital loss carryforwards in the
amount of $55,000 which no benefit has been recognized due to uncertainty
as to realization. The losses expire in 2003.
Note 12 - Significant Group Concentrations of Credit Risk
The Company's continuing business activity is in one industry segment,
livestock handling equipment. The Company's livestock handling equipment
customers are principally resellers and are primarily located in the
Midwest, Tennessee and Georgia. At June 30, 2001, the Company's accounts
receivable, net of allowance for doubtful accounts, totaled $1,547,584. The
Company generally does not require collateral for routine open accounts
receivable.
Note 13 - Fair Value of Financial Instruments
The Company discloses fair value to the extent practicable for
financial instruments which are recognized or unrecognized in the balance
sheet. The fair value of the financial statements 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 carrying value of cash, trade receivables, notes receivables and
accounts payable and variable rate debt instruments approximate fair value.
The carrying value of long-term debt approximates fair value in 2001 and
2000 due to the scheduled maturities and restrictive provisions of the
debt.
F-20
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 2001
================================================================================
Note 14 - Contingencies
Environmental. The Company's past and present operations include
activities that are subject to federal and state environmental regulations.
The Company has been notified by the Environmental Protection Agency
that the flow coat paint system located in its Livingston, Tennessee plant
is not in compliance with certain emission regulations. The Company has
placed a $175,000 refundable deposit in a powder coat paint system with a
total estimated cost of $250,000. The new paint system is expected to
comply with federal and state regulations and to improve the quality of its
products.
The Company has been issued a temporary paint permit which expired
December 31, 2001. The Company is negotiating with the Environmental
Protection Agency for an extension of the permit through December 31, 2002.
The accompanying financial statements do not include a provision for costs
which may result from this contingency. It is reasonably possible this
estimate may change in the near term, and the change may be material to the
financial statements.
Account Receivable. The Company has a $252,500 account receivable from
a single customer, which is in default of credit terms. Management is
continuing collection efforts and believes it is reasonably possible it
will collect the balances due. No allowance for uncollectible amounts has
been made for this account in the accompanying financial statements. The
ultimate success of the collection efforts is dependent upon future events
and the estimate of the allowance for doubtful accounts is subject to
change in the near term.
Note 15 - Partially Self-Insured Health Insurance
The Company is partially self-insured for losses and liabilities
related to health insurance claims. Losses are accrued based upon the
Company's estimates and experience. The plan includes a $30,000 stop-loss
provision per month. The self-insurance liability of $88,692 at June 30,
2001 and $53,764 at June 30, 2000 is included in other current liabilities
in the consolidated balance sheets.
F-21
Independent Auditors' Report
The Board of Directors and Stockholders
W W Capital Corporation
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheets of W W
Capital Corporation as of June 30, 2001 and 2000, and the related statements of
operations, stockholders' equity and cash flows for each of the three years
ended June 30, 2001, and have issued our report thereon dated November 9, 2001.
Our audit 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.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado
May 16, 2002
S-1
W W CAPITAL CORPORATION
Schedule I - Condensed Financial Information of Registrant
Balance Sheets
=============================================================================================
June 30 2001 2000
- ---------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 98,423 $ 54,077
Accounts receivable, subsidiaries -- 43,776
Deferred income tax asset 150,100 --
Other current assets 58,923 6,812
----------- -----------
Total current assets 307,446 104,665
----------- -----------
Equipment, net of accumulated depreciation
of $121,224 in 2001 and $114,726 in 2000 7,211 12,143
----------- -----------
Other Assets
Investment in wholly owned subsidiaries 866,476 1,058,869
Investment in discontinued operation -- 1,854,098
Other assets 2,312 2,312
----------- -----------
Total other assets 868,788 2,915,279
----------- -----------
Total assets $ 1,183,445 $ 3,032,087
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 6,983 $ --
Accounts payable, subsidiaries 168,664 --
Accrued expenses 152,012 78,092
----------- -----------
Total current liabilities 327,659 78,092
----------- -----------
Long-Term Liabilities
Long-term notes payable 750,000 --
Deferred income tax liability 155,100 --
----------- -----------
Total long-term liabilities 905,100 --
----------- -----------
Total liabilities 1,232,759 78,092
----------- -----------
Stockholders' Equity
Preferred stock, $10.00 par value, 400,000 shares authorized -- --
Common stock, $0.01 par value, 15,000,000 shares
authorized, 5,553,827 shares issued and outstanding
at June 30, 2001 and 5,540,661 at June 30, 2000 55,538 55,406
Capital in excess of par value 3,305,533 3,304,629
Retained earnings (deficit) (531,270) (357,134)
----------- -----------
2,829,801 3,002,901
Less 3,545,663 shares of treasury stock, at cost at
June 30, 2001 and 120,264 at June 30, 2000 (2,879,115) (48,906)
----------- -----------
Total stockholders equity (49,314) 2,953,995
----------- -----------
Total liabilities and stockholders' equity $ 1,183,445 $ 3,032,087
=========== ===========
S-2
W W CAPITAL CORPORATION
Schedule I - Condensed Financial Information of Registrant
Statements of Operations
==================================================================================================
Years ended June 30 2001 2000 1999
- --------------------------------------------------------------------------------------------------
Revenues
Management fee from subsidiaries $ 336,000 $ 219,000 $ 192,000
Operating Expenses
General and administrative 397,511 263,365 261,535
--------- --------- ---------
Operating loss (61,511) (44,365) (69,535)
Other Income (Expense)
Interest income 1,659 63 7,085
Interest expense (48,969) (170) (47)
Realized loss on asset sales
and real estate held for sale - (1,856) --
Other income 539 2,234 3,872
Equity in earnings (loss) of continuing subsidiary
before income taxes (192,393) 315,694 105,550
--------- --------- ---------
Earnings (Loss) From Continuing Operations
Before Income Taxes (300,675) 271,600 46,925
Income Tax Benefit From Continuing Operations 53,220 -- --
--------- --------- ---------
Net earnings (loss) from continuing
operations (247,455) 271,600 46,925
--------- --------- ---------
Discontinued Operations
Earnings from operations of Titan Industries
disposed of (net of income taxes of $59,000 at
June 30, 2001 and $12,000 at June 30, 2000) 88,219 67,177 57,883
Loss on disposal of Titan Industries (14,900) -- --
--------- --------- ---------
Net earnings of discontinued operations 73,319 67,177 57,883
--------- --------- ---------
Net earnings (loss) $(174,136) $ 338,777 $ 104,808
========= ========= =========
S-3
W W CAPITAL CORPORATION
Schedule I - Condensed Financial Information of Registrant
Statement of Cash Flows
=====================================================================================================
Years ended June 30 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
Net Cash Flows Provided (Used) by Operating Activities $ 209,976 $ 52,415 $(116,796)
--------- --------- ---------
Cash Flows From Investing Activities
Proceeds from notes receivable collections -- -- 110,000
Purchase of equipment (1,566) (3,438) (599)
--------- --------- ---------
Net cash provided (used) by investing activities (1,566) (3,438) 109,401
--------- --------- ---------
Cash Flows From Financing Activities
Proceeds from the exercise of stock options 1,036 -- --
Repurchase of common stock (165,100) -- --
--------- --------- ---------
Net cash used by financing activities (164,064) -- --
--------- --------- ---------
Net Increase (Decrease) in Cash 44,346 48,977 (7,395)
Cash, Beginning of year 54,077 5,100 12,495
--------- --------- ---------
Cash, End of Year $ 98,423 $ 54,077 $ 5,100
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest $ 1,219 $ 170 $ 47
========= ========= =========
Installment loans used for the repurchase of
common stock $ 750,000 $ -- $ --
========= ========= =========
Treasury stock acquired in sale of property $ 17,500 $ -- $ --
========= ========= =========
S-4
W W CAPITAL CORPORATION
Schedule I - Condensed Financial Information of Registrant
Notes
June 30, 2001
================================================================================
Note 1 - Related Party Transactions
At June 30, 1997, Jerry R. Bellar (Bellar), the former majority
shareholder of Eagle and a current stockholder of the Company, owed
$167,572 under an indemnification agreement related to the Company's
acquisition of Eagle. In October 1998, Bellar and the Company settled
amounts due to and from the Company. The Company recorded the subsequent
event at June 30, 1998. A payment of $20,000 was made by the Company to
Bellar to settle all obligations.
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 at June 30:
2001 2000 1999
---------- --------- ---------
Amounts receivable (payable):
W-W Manufacturing Co. Inc. $(168,664) $ 332,657 $ 381,689
Discontinued operation -- (288,881) (290,973)
--------- --------- ---------
$(168,664) $ 43,776 $ 90,716
========= ========= =========
Management fee income from continuing operations:
W-W Manufacturing Co. Inc. $ 336,000 $ 219,000 $ 192,000
========= ========= =========
Equity (loss) from continuing subsidiary operations:
W-W Manufacturing Co. Inc. $(192,393) $ 315,694 $ 105,550
========= ========= =========
S-5
W W CAPITAL CORPORATION
Schedule II - Valuation and Qualifying Accounts
Years ended June 30, 2001
================================================================================
Additions
------------------------
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- ---------- -------- -------- ---------- ---------
June 30, 2001
Allowance for doubtful accounts:
Accounts receivable $ 38,000 $ 28,212 $ -- $ 31,212 $ 35,000
June 30, 2000
Allowance for doubtful accounts:
Accounts receivable 20,000 193,090 -- 175,090 38,000
June 30, 1999
Allowance for doubtful accounts:
Accounts receivable 14,000 27,827 -- 21,827 20,000
Notes receivable 10,000 9,752 -- 19,752 --
S-6
Item 9. Changes in and Disagreements with Accountants on Accounting
- ------- and Financial Disclosures.
-----------------------------------------------------------
Not Applicable
18
PART III
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 November 9, 2001and their business experience during the prior
five years.
STEVE D. ZAMZOW age 53, 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 54, 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.
L.M. "MICK" McCARTY age 67, became a director of the Company in 2001. Since 1981
Mr. McCarty has been a farm/ranch real estate broker and owner of McCarty and
Associates. Additionally, he is vice-president of BOMAC Energy Performance
Systems, a marketing firm for a walking beam compressor which enhances
production of marginal oil wells. Mr. McCarty is past Region 10 vice president,
director and membership drive chairman for Club 20, a consulting broker for the
Registry of Million Dollar Properties, executive secretary of the Colorado
Livestock Marketing Association, advertising and public manager of International
Beef Breeders and regional sales manager for Murphy Products Company, a
livestock additive company. Mr. McCarty graduated from the University of Arizona
in 1959 with a Bachelor of Animal Science degree and a minor in Agricultural
Economics. He was a member of Alpha Zeta, a men's honorary agricultural
fraternity, a member of Phi Delta Theta Fraternity and National President of the
Intercollegiate Rodeo Association.
HAROLD GLEASON age 51, became a director of the Company in 2001. Since 1972, Mr.
Gleason has been the president and CEO of Thomas Publishing Company which owns
The Thomas Tribune, a newspaper published in Thomas, Oklahoma. Mr. Gleason also
has a ranching operation that includes raising, showing, and marketing
registered Hereford cattle on a national basis. In 1986, Mr. Gleason purchased a
small insurance agency and began operating The Gleason Agency which provides
full line coverage. The Gleason Agency has grown to be the largest insurance
agency in the area. Mr. Gleason graduated from Southwestern Oklahoma State
University in 1971 with Bachelor of Science degrees in Business Administration
and Journalism. Mr. Gleason has served as Chairman of the Thomas Economic
Development Authority since 1986.
A. RANDALL KOURT age 59, became a director of the Company in 2001. Mr. Kourt has
been the president of Thomas Drug, Inc. for over thirty years. Thomas Drug, Inc.
currently operates four stores in Oklahoma. Mr. Kourt also owns MKM Apartments
of Thomas. In addition to retail and real estate experience, Mr. Kourt has
served on the Baptist Retirement Centers of Oklahoma board of directors for
three years, and has been Chairman of the Board for the last year. Mr. Kourt
graduated with Bachelor of Science in Pharmacy and Bachelor of Arts in Chemistry
degrees from Southwestern Oklahoma State University in Weatherford, Oklahoma.
19
Item 11. Executive Compensation
- -------- ----------------------
The following table sets forth the cash compensation paid or accrued during the
fiscal years ended June 30, 2001, 2000 and 1999 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 2001 $ 119,359 $ 13,600 $ - $ 9,166 (a)
President, Chief Executive 2000 $ 120,858 $ - $ - $ 13,749 (a)
Officer and Director 1999 $ 120,358 $ - $ - $ 6,874 (a)
(a) Includes accrued vacation and compensated absences earned in
prior years and paid during June 30, 2001, 2000 and 1999.
Option Grants in Fiscal Year 2001
During the fiscal year ended June 30, 2001, the Company did not grant stock
options to the executive officers.
Aggregated Option Exercises in Fiscal Year 2001
The following table sets forth for the executive officer named in the Executive
Compensation Table, information concerning each exercise of stock options during
the fiscal year ended June 30, 2001 and the value of the unexercised stock
options at June 30, 2001.
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, 2001 June 30, 2001
on Value Exercisable/ Exercisable/
Name Exercise Realized (1) Unexercisable Unexercisable (1)
- ---- -------- ------------ ------------- -----------------
Steve D. Zamzow --- --- 150,000 (E) $ ---
President, Chief --- --- (U) $ ---
Executive Officer
and Director
(1) The Option exercise price exceeded the fair market value of the underlying
common stock on June 30, 2001.
20
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The following table sets forth as of May 21, 2002, 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
voting 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 150,437 (3) 6.97%
4112 Sherman Court
Ft. Collins, CO 80525
Millard T. Webster 278,969 (4) 13.74%
1003 Central
Dodge City, KS 67801
Jerry R. Beller 275,000 13.69%
4411 Harding Place
Nashville, TN 37025
Murle F. and Sara R. Webster 237,226 11.81%
Start Route 3, Box 117A
Cedar Creek, MO 65627
Terry L. Webster 105,917 5.27%
1005 E. Canterbury Lane
Springfield, MO 65804
Harold Gleason 5,000 0.25%
115 West Orient
Thomas, OK 73669
James H. Alexander 30,000 (5) 1.47%
5495 W. 115th Place
Broomfield, CO 80020
All officers and directors 464,406(6) 21.01%
as a group (3 persons) (See
footnotes 3, 4,and 5)
(1) The business address of all officers and directors is 3500 JFK Parkway,
Suite 202, Ft. Collins, Colorado 80525
(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 150,000 shares subject to incentive stock options which are
exercisable within sixty days of the date hereof.
(4) Includes 22,500 shares subject to incentive stock options, which are
exercisable within sixty days of the date hereof.
(5) Includes 30,000 shares subject to non-qualified stock options which are
fully vested and exercisable.
(6) Includes 202,500 shares subject to stock options, which are fully vested
and exercisable.
21
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, a former 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, 2001, $21,627 remained payable under this note by
Millard T. Webster and Terry L. Webster through annual installments of $2,500
through 2017.
The Company leased its manufacturing facility in Dodge City, Kansas from Murle
F. Webster, a stockholder, on a month to month basis. The lease required monthly
payments of $5,000 through April 2001 and monthly payments of $500 for May and
June 2001. The Company closed the Dodge City, Kansas location during 2001. The
provisions of the building lease required the Company to pay insurance, property
taxes and maintenance costs.
22
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, 2001 and June 30, 2000.
Consolidated Statements of Operations for the years ended June 30, 2001, 2000,
and 1999.
Consolidated Statements of Stockholders' Equity for the years ended June 30,
2001, 2000, and 1999.
Consolidated Statements of Cash Flows for the years ended June 30, 2001, 2000,
and 1999.
(a) (2) List of Financial Statement Schedules Filed as a Part of This Report
--------------------------------------------------------------------
Schedule I - Condensed Financial Information of Registrant
Schedule II - Valuation and Qualifying Accounts
(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).
23
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).
24
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 (incorporated by reference June
30, 1996 10-K.)
10.20 Articles of Merger of Eagle Enterprises, Inc. With and Into W-W
Manufacturing Co., Inc. dated October 29, 1998.
10.21 Lease agreement dated January 26, 2000 with an effective date at time
of occupancy, between W-W Manufacturing Co. Inc. (wholly owned
subsidiary of the Company) and Thomas Economic Development Authority.
21.0 Subsidiaries of the Registrant (filed herewith).
23.0 Independent Certified Public Accountants Consent
Item 14 (b)
- -----------
No reports on Form 8-K were filed during the fourth quarter of the fiscal year
covered by this report.
25
Exhibit 21.0
Subsidiaries of the Registrant
W-W Manufacturing Co., Inc.
Incorporated in the state of Kansas
26