Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
November 30, 2011
COMMISSION FILE NUMBER: 333-121044
W. S. INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| Nevada | 98-0439650 | |
| (State of organization) |
(I.R.S. Employer Identification No.)
|
815 Hornby Street
Suite 404, Vancouver, BC
V6Z 2E6
(Address of principal executive offices)
Tel: 604-830-6499
Registrant’s telephone number, including area code
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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 o No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated file o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x No o
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of a specified date with the past 60 days (OTCBB).
On November 30, 2011 there the market value of the voting stock held by non-affiliates of the Registrant was $1,170,780.
Registrant’s revenues for the most recent fiscal year and for the period covered by this report are $0.00
State the number of shares outstanding of each of registrant’s classes of common equity, for the period covered by this report and as at the latest practicable date:
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of November 30, 2011.
|
Title of each class
|
Number of shares
|
|
|
Common Stock, par value $0.001 per share
|
21,088,680
|
ITEM 1 FINANCIAL STATEMENTS
W.S. INDUSTRIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)
(Stated in US Dollars)
W.S. INDUSTRIES, INC.
(A Development Stage Company)
INTERIM BALANCE SHEETS
November 30, 2011 and August 31, 2011
(Stated in US Dollars)
|
ASSETS
|
November 30, 2011
|
August 31, 2011
|
||||||
|
(Unaudited)
|
||||||||
|
Current
|
||||||||
|
Cash
|
$ | 825 | $ | 7,088 | ||||
|
Equipment – Note 2
|
132 | 143 | ||||||
| $ | 957 | $ | 7,231 | |||||
|
LIABILITIES
|
||||||||
|
Current
|
||||||||
|
Accounts payable and accrued liabilities – Note 5
|
$ | 151,372 | $ | 92,375 | ||||
|
Convertible promissory notes payable – Note 7
|
529,345 | 521,119 | ||||||
|
Loans and advances – Note 3
|
83,755 | 70,000 | ||||||
| 764,372 | 683,494 | |||||||
|
STOCKHOLDERS’ DEFICIENCY
|
||||||||
| Capital stock – Note 4 | ||||||||
| Common stock, $0.001 par value | ||||||||
|
150,000,000 Authorized
|
||||||||
| 21,088,680 Issued and outstanding (2010: 21,088,680) | ||||||||
| 21,089 | 21,089 | |||||||
|
Additional paid-in capital
|
20,229,765 | 20,229,765 | ||||||
|
Deficit accumulated during the development stage
|
(21,019,884 | ) | (20,932,632 | ) | ||||
|
Accumulated other comprehensive income
|
5,515 | 5,515 | ||||||
| (763,515 | ) | (676,263 | ) | |||||
| $ | 957 | $ | 7,231 | |||||
Nature of Operations and Ability to Continue as a Going Concern – Note 1
Commitment – Note 6
SEE ACCOMPANYING NOTES
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the three months ended November 30, 2011 and 2010 and
For the period from April 5, 2004 (Date of Inception) to November 30, 2011
(Unaudited)
(Stated in US Dollars)
|
April 5, 2004
|
||||||||||||
|
(Date of
|
||||||||||||
|
Three months ended
|
Inception) to
|
|||||||||||
|
November 30,
|
November 30,
|
|||||||||||
|
2011
|
2010
|
2011
|
||||||||||
|
(cumulative)
|
||||||||||||
|
Revenue
|
$ | - | $ | - | $ | 17,285 | ||||||
|
Expenses
|
||||||||||||
|
Administrative services – Note 5
|
5,400 | 5,400 | 75,666 | |||||||||
|
Bad debt expense
|
- | - | 8,085 | |||||||||
|
Bank charges
|
361 | 65 | 3,093 | |||||||||
|
Consulting fees
|
- | - | 8,878 | |||||||||
|
Courier and postage
|
- | - | 177 | |||||||||
|
Depreciation
|
11 | 14 | 2,109 | |||||||||
|
Entertainment
|
- | - | 2,810 | |||||||||
|
Management fees - Note 5
|
30,300 | 30,300 | 473,500 | |||||||||
|
Office and miscellaneous
|
- | - | 12,918 | |||||||||
|
Professional fees
|
25,000 | 20,007 | 249,036 | |||||||||
|
Registration and filing fees
|
4,300 | 2,701 | 49,054 | |||||||||
|
Rent
|
- | - | 17,418 | |||||||||
|
Research and marketing
|
- | - | 7,500 | |||||||||
|
Telephone
|
- | - | 3,027 | |||||||||
|
Travel
|
-- | - | 6,154 | |||||||||
|
Wages
|
- | - | 6,139 | |||||||||
|
Loss before other items
|
(65,372 | ) | (58,487 | ) | (908,279 | ) | ||||||
|
Interest income
|
- | - | 4,327 | |||||||||
|
Interest expense
|
(13,231 | ) | (8,338 | ) | (91,251 | ) | ||||||
|
Accretion of debt discount – Note 7
|
(8,226 | ) | - | (21,373 | ) | |||||||
|
Foreign exchange gain (loss)
|
(423 | ) | 61 | (10,632 | ) | |||||||
|
Loss on extinguishment of debt – Note 7
|
- | - | (19,982,676 | ) | ||||||||
|
Impairment of investment
|
- | - | (10,000 | ) | ||||||||
|
Net loss for the period
|
(87,252 | ) | (66,764 | ) | (21,019,884 | ) | ||||||
|
Other comprehensive income:
|
||||||||||||
|
Foreign currency translation adjustment
|
- | - | 5,515 | |||||||||
|
Comprehensive loss for the period
|
$ | (87,252 | ) | $ | (66,764 | ) | $ | (21,014,369 | ) | |||
|
Basic and diluted loss per share
|
$ | (0.00 | ) | $ | (0.00 | ) | ||||||
|
Weighted average number of shares outstanding
|
21,088,680 | 21,088,680 | ||||||||||
SEE ACCOMPANYING NOTES
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the years ended November 30, 2011 and 2010 and
for the period from April 5, 2004 (Date of Inception) to November 30, 2011
(Unaudited)
(Stated in US Dollars)
|
Three months ended
November 30, |
April 5, 2004
(Date of inception)
to November 30,
|
|||||||||||
|
2011
|
2010
|
2011
|
||||||||||
|
(cumulative)
|
||||||||||||
|
Cash Flows used in Operating Activities
|
||||||||||||
|
Net loss for the period
|
$ | (87,252 | ) | $ | (66,764 | ) | $ | (21,019,884 | ) | |||
|
Items not affecting cash:
|
||||||||||||
|
Bad debt expense
|
- | - | 8,085 | |||||||||
|
Depreciation
|
11 | 14 | 2,109 | |||||||||
|
Accretion of debt discount
|
8,226 | - | 21,373 | |||||||||
| Loss on extinguishment of debt | - | - | 19,982,676 | |||||||||
|
Impairment of investment
|
- | - | 10,000 | |||||||||
|
Changes in non-cash working capital balances:
|
||||||||||||
|
Accounts receivable
|
- | - | (8,085 | ) | ||||||||
|
Accounts payable and accrued liabilities
|
58,997 | 45,659 | 718,379 | |||||||||
|
Net cash used in operating activities
|
(20,018 | ) | (21,091 | ) | (285,347 | ) | ||||||
|
Cash Flows from Financing Activities
|
||||||||||||
|
Loans and advances
|
13,755 | 25,000 | 111,138 | |||||||||
|
Common stock issued
|
- | - | 297,186 | |||||||||
|
Common stock repurchased
|
- | - | (62,000 | ) | ||||||||
|
Net cash provided by financing activities
|
13,755 | 25,000 | 346,342 | |||||||||
|
Cash Flows used in Investing Activities
|
||||||||||||
|
Acquisition of equipment
|
- | - | (4,427 | ) | ||||||||
|
Acquisition of investments
|
- | - | (64,903 | ) | ||||||||
|
Net cash used in investing activities
|
- | - | (69,350 | ) | ||||||||
|
Effect of exchange rate changes on cash
|
- | - | 9,178 | |||||||||
|
Net increase (decrease) in cash during the period
|
(6,262 | ) | 3,909 | 825 | ||||||||
|
Cash, beginning of period
|
7,088 | 3,475 | - | |||||||||
|
Cash, end of period
|
$ | 825 | $ | 7,384 | $ | 825 | ||||||
|
Non-Cash Transactions
|
||||||||||||
|
Supplemental Information
|
||||||||||||
|
Interest and taxes paid in cash
|
$ | - | $ | - | $ | - | ||||||
SEE ACCOMPANYING NOTES
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
for the period April 5, 2004 (Date of Inception) to November 30, 2011
(Unaudited)
(Stated in US Dollars)
|
Deficit
|
|||||||||||||||||||||||||
|
Accumulated
|
Accumulated
|
||||||||||||||||||||||||
|
Additional
|
During the
|
Other
|
|||||||||||||||||||||||
|
Paid-in
|
Development
|
Comprehensive
|
|||||||||||||||||||||||
|
Number
|
Par Value
|
Capital
|
Stage
|
Income
|
Total
|
||||||||||||||||||||
|
Issued for cash:
|
|||||||||||||||||||||||||
|
Private placement agreements
|
|||||||||||||||||||||||||
|
-at $ 0.000049 |
20,007,680 | $ | 20,008 | $ | (19,022 | ) | $ | - | $ | - | $ | 986 | |||||||||||||
|
- at $0.01 |
2,000,000 | 2,000 | 18,000 | - | - | 20,000 | |||||||||||||||||||
|
- at $ 0.20 |
81,000 | 81 | 16,119 | - | - | 16,200 | |||||||||||||||||||
|
Foreign currency translation adjustment
|
- | - | - | - | 380 | 380 | |||||||||||||||||||
|
Net loss for the period
|
- | - | - | (11,573 | ) | - | (11,573 | ) | |||||||||||||||||
|
Balance, August 31, 2004
|
22,088,680 | 22,089 | 15,097 | (11,573 | ) | 380 | 25,993 | ||||||||||||||||||
|
Foreign currency translation adjustment
|
- | - | - | - | 1,279 | 1,279 | |||||||||||||||||||
|
Net loss for the year
|
- | - | - | (32,276 | ) | - | (32,276 | ) | |||||||||||||||||
|
Balance, August 31, 2005
|
22,088,680 | 22,089 | 15,097 | (43,849 | ) | 1,659 | (5,004 | ) | |||||||||||||||||
|
Issued for cash:
|
|||||||||||||||||||||||||
|
Private placement agreements
|
|||||||||||||||||||||||||
|
- at $ 0.20 |
1,000,000 | 1,000 | 199,000 | - | - | 200,000 | |||||||||||||||||||
|
Shares repurchased
- at $0.20
|
(2,000,000 | ) | (2,000 | ) | (398,000 | ) | - | - | (400,000 | ) | |||||||||||||||
|
Capital contribution
|
- | - | 398,000 | - | - | 398,000 | |||||||||||||||||||
|
Foreign currency translation adjustment
|
- | - | - | - | 4,788 | 4,788 | |||||||||||||||||||
|
Net loss for the year
|
- | - | - | (51,090 | ) | - | (51,090 | ) | |||||||||||||||||
|
Balance, August 31, 2006
|
21,088,680 | 21,089 | 214,097 | (94,939 | ) | 6,447 | 146,694 | ||||||||||||||||||
|
Issued for cash:
|
|||||||||||||||||||||||||
|
Private placement agreements
|
|||||||||||||||||||||||||
| - at$ 0.20 | 300,000 | 300 | 59,700 | - | - | 60,000 | |||||||||||||||||||
|
Shares repurchased - at $0.20 |
(300,000 | ) | (300 | ) | (59,700 | ) | - | - | (60,000 | ) | |||||||||||||||
|
Foreign currency translation adjustment
|
‘ - | - | - | - | 785 | 785 | |||||||||||||||||||
|
Net loss for the year
|
- | - | - | (54,962 | ) | - | (54,962 | ) | |||||||||||||||||
|
Balance, August 31, 2007
|
21,088,680 | 21,089 | 214,097 | (149,901 | ) | 7,232 | 92,517 | ||||||||||||||||||
|
Foreign currency translation adjustment
|
- | - | - | - | (944 | ) | (944 | ) | |||||||||||||||||
|
Net loss for the year
|
- | - | - | (128,431 | ) | - | (128,431 | ) | |||||||||||||||||
|
Balance, August 31, 2008
|
21,088,680 | 21,089 | 214,097 | (278,332 | ) | 6,288 | (36,858 | ) | |||||||||||||||||
.../cont’d
SEE ACCOMPANYING NOTES
Continued
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
for the period April 5, 2004 (Date of Inception) to November 30, 2011
(Unaudited)
(Stated in US Dollars)
|
Deficit
|
||||||||||||||||||||||||
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
|
Additional
|
During the
|
Other
|
||||||||||||||||||||||
|
Paid-in
|
Development
|
Comprehensive
|
||||||||||||||||||||||
|
Number
|
Par Value
|
Capital
|
Stage
|
Income
|
Total
|
|||||||||||||||||||
|
Balance, August 31,
2008
|
21,088,680 | 21,089 | 214,097 | (278,332 | ) | 6,288 | (36,858 | ) | ||||||||||||||||
|
Foreign currency translation adjustment
|
- | - | - | - | (773 | ) | (773 | ) | ||||||||||||||||
|
Net loss for the year
|
- | - | - | (196,545 | ) | - | (196,545 | ) | ||||||||||||||||
|
Balance, August 31, 2009
|
21,088,680 | 21,089 | 214,097 | (474,877 | ) | 5,515 | (234,176 | ) | ||||||||||||||||
|
Net loss for the year
|
- | - | - | (208,999 | ) | - | (208,999 | ) | ||||||||||||||||
|
Balance, August 31, 2010
|
21,088,680 | 21,089 | 214,097 | (683,876 | ) | 5,515 | (443,175 | ) | ||||||||||||||||
|
Extinguishment of debt – Note 7
|
- | - | 20,015,668 | - | - | 20,015,668 | ||||||||||||||||||
|
Net loss for the year
|
- | - | - | (20,248,756 | ) | - | (20,248,756 | ) | ||||||||||||||||
|
Balance, August 31, 2011
|
21,088,680 | 21,089 | 20,229,765 | (20,932,632 | ) | 5,515 | (676,263 | ) | ||||||||||||||||
|
Net loss for the period
|
- | - | - | (87,252 | ) | - | (87,252 | ) | ||||||||||||||||
|
Balance, November 30, 2011
|
21,088,680 | $ | 21,089 | $ | 20,229,765 | $ | (21,019,884 | ) | $ | 5,515 | $ | (763,515 | ) | |||||||||||
SEE ACCOMPANYING NOTES
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)
(Stated in US Dollars)
Note 1 Nature of Operations and Ability to Continue as a Going Concern
The Company is in the development stage and offered wine storage and cellaring services and also invested in wine for long term appreciation and resale. The Company had disposed of its wine collection during the year ended August 31, 2009; the Company intends to explore new investment opportunities. The Company was incorporated in the State of Nevada, United States of America on April 5, 2004 and its fiscal year end is August 31. Effective July 2, 2008, the Company is listed for trading on the Over-the-Counter Bulletin Board in the United States of America.
These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At November 30, 2011, the Company had an accumulated deficit of $21,019,884 and has a working capital deficit of $763,415 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but is considering obtaining additional funds by debt financing to the extent there is a shortfall from operations. While the Company is broadening its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements of the Company for the year ended August 31, 2011. The interim results are not necessarily indicative of the operating results expected for the full fiscal year ending on August 31, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading.
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)
(Stated in US Dollars)
|
Note 2
|
Equipment
|
|
November 30, 2011
|
||||||||||||
|
Accumulated
|
||||||||||||
|
Cost
|
Depreciation
|
Net
|
||||||||||
|
Computer equipment
|
$ | 1,940 | $ | 1,808 | $ | 132 | ||||||
|
August 31, 2011
|
||||||||||||
|
Accumulated
|
||||||||||||
|
Cost
|
Depreciation
|
Net
|
||||||||||
|
Computer equipment
|
$ | 1,940 | $ | 1,797 | $ | 143 | ||||||
|
Note 3
|
Loans and Advances
|
Loans and advances totalling $83,755 (August 31, 2011: $70,000) are unsecured, non-interest bearing and have no specific terms of repayment. (Note 5)
Note 4 Capital Stock
On May 31, 2004, the Company forward split its common stock on the basis of 20.3 new for 1 old. The number of shares issued and outstanding, par value and additional paid-in capital has been restated to give retroactive effect to the forward split of its common stock.
On February 18, 2011, the Company increased its authorized share capital from 100,000,000 to 150,000,000 common shares.
Private Placements
On May 31, 2004, the Company issued 20,007,680 common shares at $0.000049 per share, for total proceeds of $986. During June 2004, the Company issued 2,000,000 common shares at $0.01 per share, for total proceeds of $20,000. During June, July, and August 2004, the Company issued 81,000 common shares at $0.20 per share, for total proceeds of $16,200. On July 20, 2006, the Company issued 1,000,000 common shares at $0.20 per share, for total proceeds of $200,000. On July 27, 2007, the Company issued 300,000 common shares at $0.20 per share, for total proceeds of $60,000.
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)
(Stated in US Dollars)
|
Note 4
|
Capital Stock – (cont’d)
|
During the year ended August 31, 2006, the Company reacquired 2,000,000 common shares from a director of the Company for $2,000 pursuant to a promissory note, which was paid prior to August 31, 2006. The fair value of this transaction was recorded at $0.20 per share and consequently the Company has received a capital contribution of $398,000.
In December 2006, the Company received an order for production from the British Columbia Securities Commission to provide certain information and documents relating to, inter alia, the sale of the above noted 1,000,000 common shares at $0.20 per share to verify the availability of the registration and prospectus exemptions relied upon by the Company in offering such shares to residents of British Columbia. To resolve the matter, the Company issued a voluntary rescission offer to rescind any previous subscriptions of these shares and offered a full refund of the subscription monies. In lieu and in place of these shares, the Company offered an equivalent number of shares for sale pursuant to the updated private placement dated June 27, 2007. Of the nine original investors included in the 1,000,000 share private placement, three of these investors accepted the rescission offer at $0.20 per share and were refunded the total amount of their investment of $60,000 and 300,000 common shares were returned to treasury and cancelled. The remaining six investors rejected the rescission offer and three new investors completed and paid the remaining portion of the private placement by the payment of $60,000.
|
Note 5
|
Related Party Transactions
|
Pursuant to a resolution dated June 1, 2008, an officer of the Company who is majority shareholder of the Company is to be paid a monthly management fee of $2,600 per month. The amount may be adjusted from time to time at the discretion of the Board of Directors. During the year ended August 31, 2011, $118,300 which was accrued management fees from previous years was settled through the issuance of a convertible promissory note as described in Note 7 and later a part of accrued management fee $5,000 was paid by the Company.
As at November 30, 2011, accounts payable included $13,200 (August 31, 2011 - $5,400) in management fees payable to the officer of the Company. During three months ended November 30, 2011, there is an amount of $7,800 (2010 - $7,800) accrued as a management fee to the officer of the Company.
|
Note 5
|
Related Party Transactions – (cont’d)
|
As at November 30, 2011, loans and advances includes an advance of $45,000 (August 31, 2011 - $45,000) from the officer of the Company.
Pursuant to a resolution dated June 1, 2008, the spouse of an officer of the Company is to be paid monthly to provide administrative services to the Company at a rate of $1,800 per month. The amount may be adjusted from time to time at the discretion of the Board of Directors. During the year ended August 31, 2011, $63,000 (2010 - $Nil) in respect of these administrative fees was settled through the issuance of a convertible promissory note as described in Note 7.
As at November 30, 2011, accounts payable included $12,600 (August 31, 2011 - $7,200) in administrative fees payable to the spouse of the officer of the Company. During three months ended November 30, 2011 the Company also incurred administrative fees of $5,400 (2010- $ 5,400) to the spouse of an officer of the Company.
|
Note 6
|
Commitment
|
On March 1, 2008 the Company entered into a Management Agreement whereby the Company is obligated to pay $7,500 per month in return for various management services. The agreement has no fixed term; however, accrued fees incur interest at a rate of 15% per annum whereby interest is compounded quarterly. In connection with this agreement the Company has incurred $22,500 during the quarter ended November 30, 2011 (2010 - $22,500) in management fees and accrued $2,406 (2010 - $8,338) in interest during the period.
During the year ended August 31, 2011 a portion balance of the unpaid management fees and accrued interest of $288,670 was settled by issuing a convertible promissory note as described in Note 7.
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)
(Stated in US Dollars)
|
Note 7
|
Convertible Promissory Notes
|
|
November 30, 2011
|
August 31,
2011
|
|||||||
|
Convertible promissory note payable, bearing interest at 15% per annum compounded quarterly, due April 1, 2012
|
$ | 288,670 | $ | 288,670 | ||||
|
Convertible promissory notes payable with a face value of $252,294 and a fair value of $219,302 at issuance and including accumulated accretion of $21,373 (August 31, 2011 - $13,147), non-interest bearing, due April 1, 2012
|
240,675 | 232,449 | ||||||
| $ | 529,345 | $ | 521,119 | |||||
On April 1, 2011, the Company agreed with certain of its creditors to settle $540,964 in amounts owed in respect of accrued management and administrative fees as well as loans and advances payable to those creditors in exchange for convertible promissory notes in the same amount. The Company accounted for the transaction as an extinguishment of debt and recorded a loss on extinguishment of $19,982,676 as a result of recording the new promissory notes at their fair value of $20,523,640. The fair value of the notes was determined with reference to the quoted market price of the Company’s shares multiplied by the number of common shares of the Company that would be issued upon conversion of the notes. The premium of the fair value of the notes over the principal balances totalling $20,015,668 was recorded as additional paid-in capital.
These notes mature on April 1, 2012 and bear no terms of interest except for the note in the amount of $288,670 which bears interest at the rate of 15% per annum. The non-interest bearing convertible notes with an aggregate face value of $252,294 were discounted using an estimated market discount rate of 15% and their fair value was calculated to be $219,302. The difference of $32,992 will be accreted over the remaining life until maturity using the effective interest rate method. During the period ended November 30, 2011, the Company recorded accretion expense of $8,226 (2010: $Nil) on the non-interest bearing convertible note. During the period ended November 30, 2011 the Company recorded accrued interest of $10,825 (2010: $Nil) on the interest bearing convertible note in accrued liabilities.
Note 7 Convertible Promissory Notes – (cont’d)
The terms of the convertible promissory notes allow the note holders to elect to convert the principal and accrued interest thereon at any time during the term of the notes into common shares at $0.01 per share. The conversion features of these notes are without price re-set or cash settlement clauses and therefore have not been bifurcated and recorded as a derivative liability.
At November 30, 2011, $181,300 (August 31, 2011: $181,300) of the non-interest bearing promissory notes are due to an officer of the Company and his spouse.
ITEM 2 | MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
Financial Condition
We are a development stage corporation and have realized limited operations and generated limited revenues from our business operations.
On July 2, 2008 the Company began trading on the over-the-counter-bulletin-board (“OTCBB”) under the symbol “WSID”. For the interim period ended November 30, 2011 we generated no revenues from operations and have experienced losses since inception.
As of the period ended November 30, 2011 the Company has cash on hand of $825, compared to $7,088 as at August 31, 2011. The Company has disposed of its wine collections during the year ended August 31, 2009 and the Company may need to consider an alternate business model if we are to become profitable. The Company is open to new opportunities and is seeking to broaden its horizons.
At November 30, 2011 the Company estimated that it would require $250,000 to meet its operating needs for the current fiscal year, the Company has not yet satisfied its need for cash. The Company will rely on its President to determine how to raise these funds, bearing in mind the best interests of the Company.
There is limited historical financial information about us upon which to base an evaluation of our performance. We are in development stage operations and have generated limited revenues. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns.
To date, the Company has not recognized significant revenue through its operations and had an accumulated deficit of $21,019,884 since inception. We have no assurance that, if needed, future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
On July 2, 2008 the Company began trading on the over-the-counter-bulletin-board (“OTCBB”) under the symbol “WSID”. We have no revenues from operations, have experienced losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations.
In the three month period ended November 30, 2011 our net loss was $87,252 compared to $66,764 for the three month period ended November 30, 2010. This difference was due to an increase in several areas.
Results of Operations - continued
Professional fees, which include accounting and audit fees and legal fees, increased for the period ended November 30, 2011, at $25,000 up from $20,007 in 2010. Bank charges and interest were higher at $13,592 for 2011; in 2010 bank charges and interest were $8,143. This increase is a result of compounding interest charges incurred on the prior period’s unpaid management fees settled through the issuance of convertible promissory note and additional unpaid management fees for the current period. Accretion of debt discount on the non-interest bearing convertible promissory notes, increased for the period ended November 30, 2011 to $13,231 from nil in 2010. The increase related to April 1, 2011 issuance of the non-interest bearing convertible promissory notes with a face value of $252,294 and fair value of $219,302 at issuance.
Liquidity and Capital Requirements
As of November 30, 2011, the Company had total assets of $957, and total liabilities of $764,372.As of August 31, 2011, the Company had total assets $7,231 and total liabilities of $683,494 and negative working capital of $676,406.
The Company has no other capital resources other than the ability to use its common stock to raise additional capital. The Company’s current cash is not sufficient to sustain operations in the next 3 months. Estimated cash needed for next 12 months is $250,000. The cash will be mainly used for general administrative, corporate (legal, accounting and audit), financing and management.
No commitments to provide additional funds have been made by management or other stockholders except as set forth above. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses. There are no assurances that we will be able to secure further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
ITEM 3 | DISCLOSURES ABOUT MARKET RISK
Foreign Currency
In addition to the U.S. Dollar, we conduct business in Canadian Dollars and, therefore, are subject to foreign currency exchange risk on cash flows primarily related to expenses. Accounting and management fees which make up approximately three quarters of our expenses are paid in US funds. Since we primarily operate in US dollars our exposure to foreign currency risk should the Canadian dollar appreciate is limited. To date we have not engaged in hedging activities to hedge our foreign currency exposure. In the future, we may enter into hedging instruments to manage our foreign currency exchange risk or continue to be subject to exchange rate risk.
Inflation
Although inflation has not materially impacted our operations in the recent past, increased inflation could have a negative impact on our operating and general and administrative expenses, as these costs could increase.
ITEM 4 | CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president and our secretary and treasurer, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of November 30, 2011, the end of the three month period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our president and our secretary and treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and our secretary and treasurer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended November 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II | OTHER INFORMATION
ITEM 1 | LEGAL PROCEEDINGS
None.
ITEM 1A | RISK FACTORS
There has been no change to the risk factors since the period ended November 30, 2011 as filed with the audited financial statements.
ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3 | DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 | OTHER INFORMATION
None
ITEM 6 | EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter for which this report is filed. The following exhibits are filed with this report:
ITEM 7 | SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: January 14, 2012 | W. S. INDUSTRIES, INC. | ||
|
|
|
By: /s/ Fraser Campbell | |
| Fraser Campbell | |||
| President and Chief Executive Officer | |||