FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2004
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 0-17757
W-W CAPITAL CORPORATION
(exact name of Registrant as specified in its charter)
Nevada 93-0967457
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication Number)
3500 JFK Parkway, Suite 202, Ft. Collins, CO 80525
(Address of principal executive offices, including zip code)
(970) 207-1100
(Registrant's telephone number, including area code)
Not Applicable
(Former name, address and former fiscal year, if changed since last report)
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 the filing
requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes ___ No _X_
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of Each Class Number of Shares Outstanding
- ------------------- at May 14, 2004
Common stock ---------------------
$0.01 Par Value 2,010,614
W-W CAPITAL CORPORATION
Index
-----
PART I FINANCIAL INFORMATION PAGE NO.
- ------ --------------------- --------
Item 1 Balance Sheets
- ------ March 31, 2004 and June 30, 2003 1
Statements of Operations
Three and Nine Months Ended
March 31, 2004 and 2003 3
Statements of Cash Flows
Nine Months Ended
March 31, 2004 and 2003 5
Notes to Financial Statements 7
Item 2 Management's Discussion and Analysis
- ------ of Financial Condition and Results
of Operations 9
Item 3 Quantitative and Qualitative Disclosures
- ------ About Market Risks 12
Item 4 Controls and Procedures 12
- ------
PART II OTHER INFORMATION
- ------- -----------------
Item 1 LEGAL PROCEEDINGS 13
- ------
Item 2 CHANGES IN SECURITIES 13
- ------
Item 3 DEFAULTS UPON SENIOR SECURITIES 13
- ------
Item 4 SUBMISSION OF MATTERS TO VOTE OF
- ------ SECURITY HOLDERS 13
Item 5 OTHER INFORMATION 13
- ------
Item 6 EXHIBITS AND REPORT ON FORM 8-K 13
- ------
SIGNATURES 14
Part I - FINANCIAL INFORMATION
------------------------------
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
W-W CAPITAL CORPORATION
-----------------------
Balance Sheets
March 31 June 30,
2004 2003
---- ----
(Unaudited)
Assets
- ------
Current assets:
Cash 181,970 $ 127,479
----------- -----------
Trade accounts receivable $ 1,741,954 $ 1,672,198
Less allowance for doubtful accounts (345,000) (290,000)
----------- -----------
Net accounts receivable, trade 1,396,954 1,382,198
----------- -----------
Accounts receivable, other 12,884 13,458
Inventories:
Raw materials 502,337 528,112
Work-in-process 424,933 375,882
Finished goods 746,443 607,832
----------- -----------
Total inventories 1,673,713 1,511,826
----------- -----------
Prepaid expenses 97,536 41,556
Current portion of notes receivable, related
parties 717 1,261
Current portion of net investment in sales-
type lease 20,588 18,055
Deferred income tax asset 185,100 178,000
----------- -----------
Total current assets 3,569,462 3,273,833
----------- -----------
Property and equipment, at cost 4,667,974 4,612,478
Less accumulated depreciation
and amortization (2,475,611) (2,337,391)
----------- -----------
Net property and equipment 2,192,363 2,275,087
----------- -----------
Other Assets:
Long-term notes receivable, related
parties, net of current portion 19,095 19,812
Net investment in sales-type lease, net of
current portion 6,810 27,398
Loan acquisition costs, net of accumulated
amortization of $10,250 at March 31,
2004 and $7,175 at June 30, 2003 30,750 33,825
Equipment deposits 175,000 175,000
Other assets 30,569 40,463
----------- -----------
Total other assets 262,224 296,498
----------- -----------
TOTAL ASSETS $ 6,024,049 $ 5,845,418
=========== ===========
The accompanying Notes are an integral part of
the consolidated financial statements
1
W-W CAPITAL CORPORATION
-----------------------
Balance Sheets, Continued
March 31, June 30,
2004 2003
---- ----
(Unaudited)
Liabilities
- -----------
Current Liabilities:
Accounts payable $ 1,483,807 $ 1,260,959
Accrued payroll and related taxes 238,173 205,417
Accrued property taxes 7,915 9,050
Accrued interest payable 16,245 14,898
Other current liabilities 13,599 14,444
Current portion of long-term notes payable 1,805,000 1,943,000
Current portion of capital lease obligations 68,000 73,000
----------- -----------
Total current liabilities 3,632,739 3,520,768
----------- -----------
Other Liabilities:
Long-term notes payable, net of current portion 1,371,667 1,498,515
Long-term capital lease obligations, net
of current portion 1,095,816 1,147,461
Deferred income tax liability 109,800 20,900
----------- -----------
Total other liabilities 2,577,283 2,666,876
----------- -----------
TOTAL LIABILITIES 6,210,022 6,187,644
----------- -----------
Stockholders' 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
at March 31, 2004 and June 30, 2003 55,538 55,538
Capital in excess of par value 3,305,533 3,305,533
Accumulated deficit (667,929) (824,182)
----------- -----------
2,693,142 2,536,889
Less 3,545,213 shares of treasury stock at cost (2,879,115) (2,879,115)
----------- -----------
NET STOCKHOLDERS' DEFICIT (185,973) (342,226)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 6,024,049 $ 5,845,418
=========== ===========
The accompanying Notes are an integral part of
the consolidated financial statements
2
W-W CAPITAL CORPORATION
-----------------------
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31,
-------- ---------
2004 2003 2004 2003
---- ---- ---- ----
Net sales $ 3,499,955 $ 2,784,624 $ 9,868,265 $ 8,982,699
Cost of goods sold 2,604,191 2,215,033 7,448,932 7,189,505
----------- ----------- ----------- -----------
Gross profit 895,764 569,591 2,419,333 1,793,194
----------- ----------- ----------- -----------
Operating expenses:
Selling expenses 308,725 297,061 889,672 819,872
General and administrative expenses 361,066 305,011 1,022,597 950,183
----------- ----------- ----------- -----------
Total operating expenses 669,791 602,072 1,912,269 1,770,055
----------- ----------- ----------- -----------
Operating earnings (loss) 225,973 ( 32,481) 507,064 23,139
----------- ----------- ----------- -----------
Other income (expense):
Interest income 220 101 10,481 176
Interest expense (87,472) (91,429) (281,871) (283,425)
Loss on sale of assets (9,893) (2,950) (4,505) (2,850)
Other income (expense), net 4,461 1,482 6,884 53,482
----------- ----------- ----------- -----------
Total other income (expense) (92,684) (92,796) (269,011) (232,617)
----------- ----------- ----------- -----------
Earnings (loss) before income taxes and cumulative
effect of a change in accounting principle 133,289 (125,277) 238,053 (209,478)
Income tax benefit (expense) (42,600) 50,000 (81,800) 84,000
----------- ----------- ----------- -----------
Earnings (loss) before cumulative effect of a
change in accounting principle 90,689 (75,277) 156,253 (125,478)
Cumulative effect of a change in accounting
principle -- -- -- 61,744
----------- ----------- ----------- -----------
Net earnings (loss) $ 90,689 $ (75,277) $ 156,253 $ (63,734)
=========== =========== =========== ===========
The accompanying Notes are an integral part of
the consolidated financial statements
3
W-W CAPITAL CORPORATION
-----------------------
Statements of Operations, continued
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31,
-------- ---------
2004 2003 2004 2003
---- ---- ---- ----
Earnings per common share:
Basic
Earnings (loss) before cumulative effect
of a change in accounting principle $ 0.05 $ (0.04) $ 0.08 $ (0.06)
Cumulative effect of a change in
accounting principle 0.00 0.00 0.00 0.03
------------- ------------- ------------- -------------
Net earnings (loss) $ 0.05 $ (0.04) $ 0.08 $ (0.03)
============= ============= ============= =============
Weighted average number of common
shares 2,010,614 2,010,614 2,010,614 2,010,614
Diluted
Earnings (loss) before cumulative effect
of a change in accounting principle $ 0.05 $ (0.04) $ 0.08 $ (0.06)
Cumulative effect of a change in
accounting principle 0.00 0.00 0.00 0.03
------------- ------------- ------------- -------------
Net earnings (loss) $ 0.05 $ (0.04) $ 0.08 $ (0.03)
============= ============= ============= =============
Weighted average number of common
shares 2,010,614 2,010,614 2,010,614 2,010,614
The accompanying Notes are an integral part of
the consolidated financial statements
4
W-W CAPITAL CORPORATION
-----------------------
Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
---------
2004 2003
---- ----
Cash flows from operating activities:
Net earnings (loss) $ 156,253 $ (63,734)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 178,824 183,077
(Gain)/loss on sale of property and equipment (5,388) 2,850
Loss on impairment of rental property 9,893 --
Provision for doubtful accounts receivable 65,531 10,820
Write off of negative goodwill -- (61,744)
Change in assets and liabilities:
Accounts receivable (62,232) 252,979
Inventories (161,887) 219,495
Other current and non-current assets (62,505) (22,035)
Accounts payable 222,848 (62,433)
Accrued expenses and other current liabilities 121,023 (84,884)
--------- ---------
Net cash provided by operating activities 462,360 374,391
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment 29,400 11,100
Proceeds for stockholders' notes receivable 1,261 --
Purchase of property and equipment (41,556) (32,004)
--------- ---------
Net cash used in investing activities $ (10,895) $ (20,904)
--------- ---------
(Continued on following page)
5
W-W CAPITAL CORPORATION
-----------------------
Statements of Cash Flows, Continued
(Unaudited)
Nine Months Ended
March 31,
---------
2004 2003
---- ----
Cash flows from financing activities:
Payments on notes payable, financial
institutions and government entities $(9,859,093) $(9,389,861)
Proceeds from notes payable 9,518,764 9,030,449
Payments on capital leases (56,645) (53,378)
----------- -----------
Net cash used in financing activities (396,974) (412,790)
----------- -----------
Net increase (decrease) in cash 54,491 (59,303)
Cash at beginning of period 127,479 137,948
----------- -----------
Cash at end of period $ 181,970 $ 78,645
=========== ===========
Supplemental Information:
Cash paid during the period for interest $ 280,525 $ 315,581
Installment loans to acquire property and
equipment $ 75,481 $ 280,506
Cash paid during the period for income taxes $ 11,352 $ --
The accompanying Notes are an integral part of
the consolidated financial statements
6
W-W CAPITAL CORPORATION
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements include the accounts of
W-W Capital Corporation (the Company) and its wholly-owned subsidiary W-W
Manufacturing Co., Inc. All significant intercompany accounts and transactions
have been eliminated.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. They do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and changes in cash
flows in conformity with generally accepted accounting principles for full-year
financial statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to W-W Capital
Corporation's financial statements included in its Annual Report on Form 10-K
for the year ended June 30, 2003. In the opinion of management, all adjustments
(consisting of normal recurring accrual basis adjustments) considered necessary
for a fair presentation have been reflected in the accompanying financial
statements. Operating results for the three and nine month periods ended March
31, 2004, are not necessarily indicative of the result that may be expected for
the year ended June 30, 2004.
The Company has incurred operating losses two out of the past three
fiscal years, has a working capital deficit of $63,277 and has an accumulated
deficit of $185,973 as of March 31, 2004. The report of independent auditors on
the Company's June 30, 2003 audited financial statements and the independent
accountant's review report on the Company's March 31, 2004 financial statements
include an explanatory paragraph indicating there is substantial doubt about the
Company's ability to continue as a going concern. The Company believes that it
has developed a viable plan to address these issues and that its plan will
enable the Company to continue as a going concern for the next twelve months.
This plan includes the realization of revenues from the commercialization of new
products and the reduction of certain operating expenses. Although the Company
believes that its plan will be realized, there is no assurance that these events
will occur. The financial statements do not include any adjustments to reflect
the uncertainties related to the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the inability
of the Company to continue as a going concern.
NOTE 2 - NET BASIC EARNINGS PER SHARE
- -------------------------------------
The net basic earnings (loss) per share amount included in the
accompanying statement of operations have been computed using the
weighted-average number of shares of common stock outstanding and the dilutive
effect, if any, of common stock equivalents existing during the applicable three
and nine month periods.
7
NOTE 3 - NEGATIVE GOODWILL AND CHANGE IN ACCOUNTING PRINCIPLE
- -------------------------------------------------------------
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. SFAS No. 141 was
effective for the Company on July 1, 2002.
As of July 1, 2002, the Company had $61,744 of unamortized negative
goodwill relating to the fiscal year 2000 purchase of the Adrian J. Paul Company
by its subsidiary, WW Manufacturing Company. The write off resulted in an
increase in income and was reflected as a cumulative effect of a change in
accounting principle in the quarter ended September 30, 2002.
A reconciliation of reported net income (loss) for the three and nine
months ended March 31, 2003 adjusted to reflect the adoption of SFAS No. 141 as
if it had been effective July 1, 2001 is as follows:
Three Months Nine Months
------------ -----------
Reported net loss $ (75,277) $ (63,734)
Subtract-back adjustment for
accounting change -- (61,744)
Add-back goodwill amortization -- --
---------- ---------
Adjusted net loss $ (75,277) $(125,478)
========== =========
Adjusted net loss per share- basic $ (0.04) $ (0.06)
Adjusted net loss per share- diluted $ (0.04) $ (0.06)
NOTE 4 - RELATED PARTY TRANSACTION
- ----------------------------------
The Company has a number of related party transactions. See the
footnotes to W-W Capital Corporation financial statements for the year ended
June 30, 2003, included in its Annual Report on Form 10-K for the nature and
type of related party transactions.
A summary of the related party transactions that effect the Company's
statement of operations for the three and nine months ended March 31, 2004 and
2003, respectively, is as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
Transactions with
- -----------------
Related parties 2004 2003 2004 2003
- --------------- ---- ---- ---- ----
Interest income $ -- $ -- $ 1,261 $ --
8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
- --------------------------------------------------------------------------------
The business of the Company is carried on within one segment group by
three operating units. The livestock handling equipment segment is composed of
W-W Manufacturing (W-W Manufacturing), Eagle Enterprises (Eagle) and W-W Paul
Scales (Paul).
Forward-Looking Statements
- --------------------------
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, competitive pressures, changing economic conditions,
factors discussed in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, and other factors, some of which will be
outside the control of management. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. Readers should refer to and
carefully review the information described in future documents the Company files
with the Securities and Exchange Commission.
Analysis of Results of Operations
- ---------------------------------
The Company had net income of $156,253 for the nine months ended March
31, 2004, as compared to a net loss of $63,734 for the same period of 2003 which
included income of $61,744 related to a change in accounting principle. For the
three-month period ended March 31, 2004, the Company had net income of $90,689
as compared to a net loss of $75,277 for the same period of 2003.
Net sales increased 9.9% from $8,982,699 for the nine months ended
March 31, 2003, compared to $9,868,265 for 2004. For the three months ended
March 31, 2004 net sales increased 25.7% from $2,784,624 in 2003 compared to
$3,499,955 in 2004.
Sales at the W-W Manufacturing plant in Thomas, Oklahoma increased
$1,052,789 or 17.1% from $6,154,046 to $7,206,835 for the same nine-month period
of 2003 and 2004. The increase in sales is attributable to an overall recovery
in the economy and geopolitical environment. Based on present conditions, the
Company anticipates sales to remain steady during the final quarter of fiscal
2004.
Sales decreased $156,489, or 9.7%, at the Eagle plant in Livingston,
Tennessee from $1,616,668 for the nine months ended March 31, 2003 compared to
$1,460,199 for the same period of 2004. The Livingston plant was hit hardest by
the sluggish economy, the need to update certain equipment and the need for
installation of a new paint system. After the powder coat paint system was
implemented in Thomas, Oklahoma, many customers purchased only product with a
powder coat finish. With the economic environment in decline, management decided
that the cost to install a new paint system in the Livingston plant was to high
and the risk too great for the Company to take. During November 2002 the
decision to scale back operations at the plant was made. While certain revenues
were transferred to the Thomas plant, many revenues were permanently lost.
During June 2003
9
management made the decision to market a new inline pre-galvanized product from
the Livingston plant. This product allows for the manufacturing of product
without problems related to painting. Sales of the new product line have shown
steady improvement during the first three quarters of fiscal 2004 and management
believes the new product line will continue to show improvement throughout the
fourth quarter of fiscal 2004
Sales at the Paul location in Duncan, Oklahoma remained steady
decreasing slightly from $1,211,985 for the nine months ended March 31, 2003 to
$1,201,232 for the same nine-month period in 2004. The Duncan location's primary
manufacturing responsibilities are livestock scales and hydraulic squeeze chutes
as well as a supply source to the Thomas location. While overall sales at the
Duncan location have remained relatively stable, the improved economic outlook
and a new emphasis on the marketing of new and redeveloped scales should help
sales at the Duncan location to increase during the final quarter of fiscal
2004.
Gross margins as a percentage of sales increased for the nine months
ended March 31, 2004 to 24.5% as compared to 20.0% in 2003. For the three months
ended March 31, 2004 gross margins as a percentage of sales increased from 20.5%
in 2003 to 25.6% in 2004. This increase is the result of a drop in steel prices
during the last portion of fiscal 2003. The Company also performed an extensive
evaluation of raw materials during the fourth quarter of fiscal 2003 and found
several ways to lower certain costs. During the third quarter of fiscal 2004
steel prices again increased. The Company was able to implement retail price
adjustments as well as surcharges to help offset the increased cost. Management
anticipates a decrease in regards to gross margin percentages because the of the
volatility of the cost of steel which is expected to sharply increase during the
fourth quarter of 2004 and first quarter of 2005. The Company will continue to
seek improvements through manufacturing system analysis as well as price
adjustments, however, the Company does not believe the entire increase in cost
can be passed on to customers without a large reduction in sales.
Selling expenses as a percentage of sales decreased slightly for the
nine months ended March 31, 2004 from 9.1% in 2003 to 9.0% in 2004. Total
dollars expended for selling expense increased $69,800 for the nine-month period
ended March 31, 2004 as compared to the same period in 2003. The increase in
dollars spent is due to the Company's participation in additional shows and
related travel costs. Through the balance of the fiscal year, management will
continue to evaluate selling expense to find ways to keep costs in line as a
percentage of sales, as we continue to grow markets and market share with new
products.
General and administrative expense decreased slightly for the nine
months ended March 31, 2004 as a percentage of sales from 10.6% in 2003 as
compared to 10.4% for the same period of 2004. Overall dollars spent on general
and administrative expenses increased $72,414 for the nine months ended March
31, 2004 as compared to the same period of 2003. The Company believes that the
general and administrative expense percentage will continue to remain consistent
throughout the remainder of fiscal 2004.
Interest expense decreased for the nine months ended March 31, 2004 to
$281,871 from $283,425 for the same period of 2003. Interest expense for the
three months ended March 31, 2004 decreased to $87,472 from $91,429 for the same
three-month period of 2003. The decrease reflects interest rate incentives
earned by the Company that reduced the interest rate charged on the revolving
line of credit.
10
Management's Discussion of Critical Accounting Policies
- -------------------------------------------------------
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires management to make estimates and
judgments that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Assumptions and estimates were based on the facts and
circumstances known at March 31, 2004. However, future events rarely develop
exactly as forecast, and the best estimates routinely require adjustment. The
accounting policies discussed in Item 7 of the Annual Report on Form 10-K for
the year ended June 30, 2003 are considered by management to be the most
important to an understanding of the financial statements, because their
application places the most significant demands on management's judgment and
estimates about the effect of matters that are inherently uncertain. These
policies are also discussed in Note 1 of the Notes to Consolidated Financial
Statements included in Item 8 of that report. There have been no material
changes to that information during the first nine months of fiscal 2004.
Liquidity and Capital Resources
- -------------------------------
The Company has traditionally used a combination of cash generated from
operations and its revolving credit facility to support operations and various
growth initiatives. The Company generated funds from operations of $462,360
during the nine month period ended March 31, 2004. This was primarily caused by
an increase in accounts payable balances, accrued expenses and net earnings. The
Company uses cash in investing activities primarily for the purchase of new
property and equipment. Cash purchases of property and equipment of $41,556
remained steady for the nine months ended March 31, 2004 compared to $32,004 for
the same period ended March 31, 2003. Cash used in financing activities resulted
in a decrease in borrowings of $396,974 for the nine months ended March 31,
2004. This compares to decreased borrowings of $412,790 for the same period
ended March 31, 2003. As the Company moves into the final quarter of fiscal
2004, it anticipates that borrowings will remain consistent.
The Company's working capital decreased from $1,510,170 at March 31,
2003 to a deficit of $63,277 at March 31, 2004. This reduction is due to the
reclassification of certain long-term debt to current liabilities because a
Credit and Security Agreement with Wells Fargo Business Credit Inc. matures
October 2004. The Company is negotiating an extension to the agreement and
believes it will be finalized during the first quarter of fiscal 2005.
The report of independent auditors on the Company's June 30, 2003
financial statements and the independent accountant's review report on the
Company's March 31, 2004 financial statements include an explanatory paragraph
indicating there is substantial doubt about the Company's ability to continue as
a going concern. The Company believes that it has developed a viable plan to
address these issues and that its plan will enable the Company to continue as a
going concern for the next twelve months. The plan includes the realization of
revenues from the commercialization of new products and the reduction of certain
operating expenses. The financial statements do not include any adjustments to
reflect the uncertainties related to the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
inability of the Company to continue as a going concern. There is no assurance
that the Company will be able to achieve additional financing or that such
events will be on terms favorable to the Company.
11
During February 2004 the Company completed an amendment to the Credit
and Security Agreement with Wells Fargo Business Credit, Inc. In addition to
setting new loan covenants and waiving covenant violations at June 30, 2003, the
amendment also created interest rate incentives achievable during the remainder
of the fiscal year. Through March 31, 2004 the Company has been able to lower
the interest rate charged on the revolving line of credit by 2%. The Company was
in compliance with all covenants related to credit facilities at March 31, 2004.
With increased working capital and lines of credit, the Company feels it has an
adequate supply of liquidity to meet its current obligations.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks
- --------------------------------------------------------------------
The Company is exposed to market risk from changes in interest rates.
Market risk is the potential loss arising from adverse changes in market rates
and prices. For fixed rate debt, interest rate changes affect the fair value of
financial instruments but do not impact earnings or cash flows. Conversely for
floating rate debt, interest rate changes generally do not affect the fair
market value but do impact future earnings and cash flow, assuming other factors
are held constant. At March 31, 2004, the Company had variable rate notes
payable of approximately $2,418,000. Holding other variables constant, the
pre-tax earnings and cash flow impact for the next year resulting from a one
percentage point increase in interest rates would be approximately $24,200.
The Company is also exposed to market risk through the volatility of
the steel market. The price of steel has continued to increase due to surcharges
assessed at the time of shipment from the vendor that have been implemented due
to the increase in and the volatility of market prices of materials used in the
production of steel. The effect of higher prices for steel may delay projects
and reduce profitability if the increases cannot be passed along to customers in
the form of higher prices.
ITEM 4. Controls and Procedures
- --------------------------------
As of March 31, 2004, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Chief Executive Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based upon that evaluation,
the Chief Executive Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting him to material information relating
to the Company (including its consolidated subsidiary) required to be included
in the Company's periodic Securities Exchange Commission (SEC) filings.
Disclosure controls and procedures are defined as controls and procedures that
are designed to ensure that information required to be disclosed by the Company
in reports filed with the SEC is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.
Subsequent to the date of the evaluation, there have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect internal controls, nor were any corrective actions
required with regard to significant deficiencies and material weaknesses.
12
PART II
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
Not Applicable
ITEM 2. CHANGES IN SECURITIES
---------------------
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
--------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
-----------------
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Exhibit
-------
Number Document
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31.0 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 (attached hereto).
32.0 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(attached hereto).
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Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
W W CAPITAL CORPORATION
(Registrant)
Dated: May 14, 2004 By:/s/ Steve D. Zamzow
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Steve D. Zamzow, President & CEO
Dated: May 14, 2004 By:/s/ Mike Dick
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Mike Dick, Controller
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Exhibit 31.0
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steve D. Zamzow, certify that:
1. I have reviewed this quarterly report on Form 10-Q of W W Capital
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the consolidated financial statements, and
other financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and I have:
a. designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to me by others within those entities, particularly during
the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure control and
procedures, as of the end of the period covered by this report
based on such evaluation: and
c. disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: May 14, 2004 By: /s/ Steve D. Zamzow
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Steve D. Zamzow, President and CEO
Exhibit 32.0
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of W W Capital Corporation
(the "Company") for the period ending March 31, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Steve
D. Zamzow, President and Chief Executive Officer of the Company, certify, based
on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Dated: May 14, 2004 By: /s/ Steve D. Zamzow
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Steve D. Zamzow, President and CEO