Item 1. Business - ------- --------
(a) General Development of Business -------------------------------
W W Capital Corporation ("Company") was originally incorporated as Freedom Acquisition Fund, Inc., a Colorado corporation, on September 23, 1987, to merge with or engage in a merger with, or acquisition of, one or a small number of private firms.
On May 16, 1988, the Company completed a public offering of 15,000,000 Units at an offering price of $.03 per Unit, each Unit consisting of one share of common stock, one Class A Warrant to purchase one share of the Company's common stock and one Class B Warrant to purchase one additional share of the Company's common stock. The net proceeds of the offering to the Company were approximately $240,000. The exercise period of the Class A Warrants expired on September 1, 1989. 3,754,500 Class A Warrants, at a price of $0.035 per common share, were submitted to the Company's transfer agent for exercise, with proceeds of $131, 408 to the Company before the payment of offering expenses and commissions associated with the offering. The Class B Warrants expired unexercised in June, 1990.
On December 9, 1989, the Company's shareholders approved a proposal to re-incorporate W W Capital in the State of Nevada and to concurrently therewith, reverse split on a 1 for 100 basis the authorized shares of common stock from 500,000,000 shares par value $0.0001 per share to 5,000,000 shares of common stock, par value $0.01 per share and the 40,000,000 shares of authorized preferred stock, par value $0.10 per share to 400,000 shares of preferred stock, par value $10.00 per share. The re-incorporation and reverse stock split was effective December 15, 1989.
On November 16, 1990, the Company's shareholders approved a proposal to increase the number of authorized shares of common stock from 5,000,000 to 15,000,000 shares.
On August 16, 1988, the Company acquired 100% of the outstanding shares of W-W Manufacturing Co., Inc. ("W-W") one of the oldest and largest livestock equipment manufacturers in the United States, in exchange for 160,000,000 shares of the Company's common stock. W-W currently manufactures a full line of cattle and equine handling and confinement equipment for use by farmers, ranchers, rodeos, and universities throughout the United States.
W-W's principals began doing business in Texas City, Texas in 1945 designing and building their first cattle squeeze chute. Due to production and sales growth, the principals moved the operation to Dodge City, Kansas, where they established their first manufacturing facility in 1948. Operations continued to expand and develop, and on October 18, 1961, W-W was incorporated in the State of Kansas.
On October 12, 1990, the Company acquired certain real estate properties in Abilene, Texas from Western Fire and Marine Insurance Company. The real estate was acquired in exchange for 80,000 shares ($800,000 par value) of the Company's newly issued Series A Preferred Stock and $52,428 cash.
On October 25, 1990, the Company acquired certain undeveloped real estate located in Johnson County, Texas from Apex Realty Investments, Inc. The real estate was acquired in exchange for 40,000 shares ($400,000 par value) of the Company's newly issued Series B Preferred Stock.
On August 15, 1991, the Company entered into an exchange agreement ("Exchange Agreement") with Titan Industries, Inc., a Nebraska corporation ("Titan"), whereby the Company would issue to Titan common stock, in exchange for all the outstanding stock of Titan. The consummation of this Exchange Agreement was subject to approval by the stockholders of the Company. On December 13, 1991, the stockholders approved the acquisition. The actual closing and exchange of stock took place December 30, 1991. Under the terms of the agreement the stockholders of Titan received 1,600,000 shares of W W Capital Common Stock in exchange for all the outstanding common shares (7,500) of Titan Industries. The shares had an aggregate value of $3,600,000 at the date of closing. The purchase price was arrived at through an arms length negotiation.
On October 26, 1992, the Company entered into an exchange agreement ("Eagle Exchange Agreement") with Eagle Enterprises, Inc., a Tennessee corporation ("Eagle"), whereby the Company would issue to Eagle common stock, in exchange for all the outstanding stock of Eagle. The consummation of the Eagle Exchange Agreement was subject to approval by the Board of Directors of the Company. At a special meeting of the Board of Directors held October 20, 1992, the Board unanimously approved the acquisition. The actual closing and exchange of stock took place on October 26, 1992. Under the terms of the Eagle Exchange Agreement, the sole stockholder of Eagle (Jerry Bellar) received 325,000 shares of W W Capital Corporation common stock in exchange for all the outstanding common shares (1,539) of Eagle Enterprises. The shares had an aggregate value of $893,750 at the day of closing. The purchase price was arrived through an arms length negotiation. Eagle Enterprises was formed in August 1985 to manufacture livestock handling equipment. The company is presently located in a 40,000 square foot facility on 11 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 February 19, 1993, the Company entered into an exchange agreement ("Real Estate Exchange Agreement") with Apex Realty Investments, Inc., a Colorado corporation ("Apex") a related party, whereby the Company exchanged assets (real property in Abilene, Texas) and common stock for real property owned by Apex. Under the terms of the Real Estate Exchange Agreement, Apex received real property the Company owned in Taylor County, Texas, a note receivable from two individuals, and 100,000 shares of the Company's restricted common stock in exchange for approximately 455 acres of real property, with water rights and a $60,000 timber contract located on the property in the mountains of Grand County, Colorado. In addition the Company assumed a $265,000 mortgage payable on the real estate. On December 15, 1994 this land was sold to an unrelated third party and received net cash of $374,606 after payoff of mortgage and other costs and the company is carrying back a note for $440,218 on the balance. This note was paid in-full in February 1996.
On October 15, 1993, the Company acquired various assets of Wholesale Pump and Supply, Inc. ("Wholesale") of Oklahoma City, Oklahoma by issuing 250,000 shares of common stock. The shares had an aggregate value of $145,000 at the day of closing. The purchase of assets was arrived through an arms length negotiation. Wholesale operates as a division of Titan Industries and is currently doing business in a 10,000 square foot warehouse rented on a month to month basis. The company's primary functions are distributing water well supplies and environmental monitoring equipment for testing ground water.
(b) Financial Information About Industry Segments ---------------------------------------------
The business of the Company is carried on within two segments by three operating units, each with its own organization. The management of each operating subsidiary unit has responsibility for product development, manufacturing, marketing and for achieving a return on investment in accordance with the standards and budgets established by W W Capital. Overall supervision, coordination and financial control are maintained by the executive staff from the corporate headquarters located at 3500 JFK Parkway, Suite 202, Ft. Collins, Colorado. As of June 30, 1998, the Company and its segments had approximately 160 employees. The reader is referred to Item 7, Management's Discussion, and Analysis of Financial Condition and Results of Operations and notes to the Company's Financial Statements for certain financial information regarding these segments.
(c) Narrative Description of Business ---------------------------------
The registrant conducts its business through its two business segments: livestock handling equipment group, and the water and environmental products group. A discussion of these segments follows.
Livestock Handling Equipment Group - ----------------------------------
This division generated 57.7% of total corporate sales in 1998 compared to 54.2% for fiscal 1997.
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 52-year-old history W-W Manufacturing, the primary subsidiary of this segment, is well recognized in the industry as the leader in production of livestock equipment. With the acquisition of Eagle Enterprises, October 1992, the Company has experienced growth with this segment reaching a record high sales of $11,369,826 for fiscal year June 30, 1994. Eagle had manufactured all types of livestock feeding equipment and various containment systems similar to that manufactured by W-W Manufacturing. The Eagle line of products is primarily distinguished from W-W Manufacturing's products by a purchase decision that is primarily motivated/driven by pricing considerations.
Eagle had eliminated some of its line of feeding equipment which had not been profitable prior to 1995. By elimination of these products, Eagle has the manufacturing capacity to produce the majority of W-W Manufacturing line of products, thus improving its delivery time to Dealer/Distributors in the east, and southeastern United States. The Eagle plant was realigned to complement the W-W Manufacturing line of products and all products will be sold under the W-W Manufacturing name. This is significant since the W-W Line has a long-term (52 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 should help Eagle reclaim sales levels that were lost when the feeding line was dropped as well as pick up new sales from customers previously handling the W-W Manufacturing line only. The redesigned feeding line is also being introduced into the midwest and west markets and is now being manufactured at W-W Manufacturing. Feed equipment has proven to be a lower margin product line but continues to sell during depressed market conditions and is used as a lead in product to gain new customers acceptance for the traditional higher margin W-W working equipment line.
The market for cattle handling equipment is segmented by herd size into economic classifications. Based upon an independent study done for the Company, it is believed that economic dissimilarities between large and small operators create important differences in buying behavior. Recognizing this, management of the Company has positioned the Company to meet the demands of the market place and to be able to service both the large and small operator through its sales and marketing targeted at expanding the Dealer/Distributor network throughout the entire United States.
The Company did not renew the sales and marketing agreement with Agri-Sales Associates (Agri- Sales) after the first term concluded in October of 1994. When utilizing the services of Agri-Sales, some new accounts were established, but the Company felt it lost some control over the sales functions and felt it necessary to have closer contact with its customers. After the conclusion of the Agri-Sales Agreement management assessed the conditions of its customers and market and realized that not all products were selling and customers inventory levels were too high. With over sold market areas, the Company had to develop a plan to systematically help customers understand and sell through its inventory. The Company has established sales areas and hired salespeople to cover the entire United States. With an aggressive sales and marketing plan in place the Company has hired an experienced sales manager and seven salesmen to continue to expand our Dealer/Distributor network. During the transition from Agri-Sales to our own in-house sales staff and the expansion into new market area, sales expenses have been higher than expected as salesmen gain knowledge of the customers and market. As our Dealer/Distributor network is expanded, management felt there would be an overall reduction in sales expenses and this savings would be realized on the bottom line. This can be seen clearly by looking at the continued decline in selling cost as a percentage of sales in the accompanying financial statements. A substantial majority of this segment's sales will continue to be in cattle handling equipment. It is expected that 80% of these sales will be generated through the expanded Dealer/Distributor network. At present the Company works with approximately 120 different distributors representing 6,200 Sub-Dealers throughout the United States and Mexico.
The Company will continue to generate sales by offering special assistance in design and installation of product. This service has proven to be a valuable asset in the sale of equipment to large fairs, expo centers, rodeos, and universities.
Over the years, W-W Manufacturing products have become favored for durability and ease of use by ranch hands who must work large volumes of cattle. W-W Manufacturing's presence at rodeos underscores the Company's position in the marketplace as a producer of equipment for the "working cowboy." W-W Manufacturing has been responsible for many innovations in rodeo equipment and has developed a well-respected line for that market. Since 1979, all of the chutes and rodeo equipment for the Professional Rodeo Cowboys National Finals Rodeo (NFR) have been supplied by W-W Manufacturing. The NFR is the largest rodeo championship event in the world. In addition, W-W Manufacturing has provided all the equipment for the International Rodeo Association Finals since 1978 and for many other top Rodeos across the country.
In the past, the Company has produced both heavy duty and portable horse stalls. These products have been primarily used by commercial users and exposition centers. Based on the success of the commercial horse stalls, the Company has introduced stalls designed for the equine hobbyist and horse show enthusiast. Aesthetics, ease of use and durability are considered by management to be the main selling points of this kind of equipment. The new horse stalls have been marketed through the distributor network already established by the Company.
Cost of distribution of products has and will continue to be a problem for the customers and the Company. To help lower this cost the Company needs to continue to find ways to fill trucks with a variety of products. With the introduction of the feed equipment, the stock tank line, and other horse related products, the Company anticipates these products will help reduce its distribution cost and provides its customer the opportunity to carry more items with less depth of inventory.
Management believes these developments are key to the success of the Company's future expansion, and intends to continue to increase its Dealer/Distributor network vigorously. Demonstration, seminars and special design will continue to be offered and special discounts given to principal distributors for volume purchases.
Raw Materials and Facilities - ----------------------------
The manufacture of livestock handling equipment requires various sizes of steel, tubing, and other related steel products. The products necessary for fabrication of equipment are purchased from numerous steel companies, and the Company has experienced no difficulties in obtaining adequate supplies. The subsidiaries of this segment are located as follows: W-W Manufacturing, the largest by sales volume of the two subsidiaries, is located at 2400 East Trail Street, Dodge City, Kansas. Eagle Enterprises, is located at 175 Windle Community Road, Livingston, Tennessee. The Hydraulic Chute division is located at 401 Loomis Rd., Weatherford, 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 1998 and 1997, management invested in new equipment, did extensive training, scheduled many live demonstrations, improved plant efficiencies, introduced new product improvements and new products, in order to maintain its competitive edge.
Strategy for Growth - -------------------
Growth is anticipated in two areas. First, the Company will continue to expand the distributor/dealer network and expand into the upper midwest and west. However, this area for growth will be constrained by availability of capital resources and continuing good market conditions.
Diversification into related product areas now served by the Company could afford a second area for growth. Management believes W-W Manufacturing's 52 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.
Water and Environment Products Group ------------------------------------
The water and environmental products group consists of Titan Industries of Paxton, Nebraska with distribution locations in Dodge City, Kansas and its division, Wholesale Pump and Supply in Oklahoma City, Oklahoma. This group accounts for 42.3% of total corporate sales for the fiscal year 1998. This compared with 45.8% in fiscal year 1997.
Titan's functions are broken down primarily into two divisions. The distributions of water well supplies and related products, and manufacturing of environmental products for the water industry.
Principal Products, Markets and Distribution - --------------------------------------------
The Company distributes (wholesale) a wide variety of water well and related products. These products include submersible pumps, high-pressure tanks, pipe, pipefitting, and various other accessories for water well drillers, plumbers, and various other applications of water uses. The Company sells these products by direct sales through the sales force, by dealers and independent representatives. These products are primarily sold in a close proximity to the present three distribution points in Paxton, Nebraska, Dodge City, Kansas, and Oklahoma City, Oklahoma. The Company has taken steps to widen its water well supplies distribution by offering new lines not carried by local competitors. Titan has also improved its delivery schedules to meet the demands of these customers thereby making service the top priority in expanding this segment of the business.
The Company is also involved in manufacturing water well monitoring equipment, which adds an environmental aspect to the business. Titan manufactures several unique products like flush threaded PVC pipe, which allows strong joints without glue. Flush threaded pipe allows for seamless joints both inside and out. This is significant as monitor wells are tested for impurities, in the parts per million category, where joint solvents and glues can actually be measured as part of the contamination. By packaging products together as monitoring well units, the Company is able to sell these units for greater total profit margins than the individual components command as separate (commodity type) items. Another unique product produced by Titan is a flush mounted PVC screen, which offer a lower cost and longer life since standard steel screens are subject to corrosion. Titan has introduced several new products expanding its manufacturing goods to include a combo-buried pressure tank Enviroflex well screen and various Verta-slot applications used in heavier wall applications. The Company has added significant growth in the environmental sales with other products such as well protectors, manhole covers, drainage pipe and various other related products.
The environmental products are marketed through distributors, which have been set up throughout the United States. Management plans to continue its efforts to market aggressively to government agencies, as the guidelines for ground water testing become more stringent.
Raw Materials and Facilities - ----------------------------
The Company redistributes various manufactured products through its water well supply division. Also, the Company uses various sizes of PVC pipe for production of its well screen and flush jointed products. The Company has not experienced any difficulties in obtaining the raw material needed for production of its water well products.
The subsidiary of this segment owns its new headquarters and manufacturing facilities which consists of 25,000 square feet located in Paxton, Nebraska, which was completed in December 1994. The Company also has two other distribution points located in Dodge City, Kansas and Oklahoma City, Oklahoma (Wholesale Pump and Supply).
Competition - -----------
The water well supply division of Titan experiences a high degree of competition and only sells within a close proximity to its three distribution points. The environmental products consisting of well screen flush jointed pipe, and new horizontal drilling products have achieved a unique position in their various markets. These products encounter some degree of competition, but due to their unique design and availability of production Titan, maintains a market dominance in this area, throughout the United States. During 1994, the Company invested in new equipment, and constructed a new plant which was completed in December, 1994, to enhance production and improve delivery time. Since the completion of the facility the Company has enjoyed new customer growth across the country.
Strategy for Growth - -------------------
Growth is anticipated in several areas. First, distributor demand for the Company's existing product lines has continued to remain strong as more and more distributors around the country have become aware of Titan's quality and reliability of delivery. The Company has significantly improved sales of larger diameter pipe with the manufacturing equipment added during 1994. Since gross profit margins increase in direct proportion to pipe diameter size, this new equipment should continue to enhance profitability. With the addition of Wholesale Pump and Supply in Oklahoma City, Oklahoma, growth to the south, southeast, and southwest has been greatly improved. The Company anticipates significant additional increases in these areas due to the ease and speed of delivery. Second, the Company continues to increase marketing its products to governmental agencies as they expand the Environmental Protection Agency guidelines for testing of ground water. Third, the Company has been investigating and developing new slotting techniques using high-density polyethylene pipe for use in the horizontal drilling industry. This product is being used extensively by landfills and in other waste
treatment applications. The Company has also expanded its market in custom fabrication of products used for filtration, drainage, dewatering, and various construction applications. An improved version of Enviroflex has already added to the very encouraging market acceptance that it has enjoyed. The Company feels that this product, along with the responsiveness to market demands for various custom applications, should provide excellent opportunities for growth. Recent developments in the mining industry show that there is a significant market for Titan's products and the sales/marketing departments are pursuing several key distribution outlets to more effectively distribute its line of products within this market sector.
Other Information Relative to the Business ------------------------------------------
Patents and Trademarks - ----------------------
The Company holds no patents or registered trademarks or service marks.
Seasonality - -----------
The Company experiences seasonality in sales in both of its segments. The livestock handling equipment product segment has increased sales in the fall and through the spring and lower sales in summer. The water and environment product segment has increased sales in the spring, summer and into the fall and lower sales in the winter. With this diversity in sales, the seasonality allows the Company as a whole to experience overall level sales throughout the year.
Practice Relating to Working Capital - ------------------------------------
The information relating to this Item is included under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."
Dependence Upon a Single Customer - ---------------------------------
Not Applicable
Dollar Amount of Backlog Orders - -------------------------------
Backlog in the livestock handling equipment group was $427,510 as compared to $726,751 in 1997. This decrease from 1997 is due to a general weakening and drought conditions in the cattle market. This is expected to improve as we move into the fall season.
The water and environmental products showed a backlog increase from $265,000 in 1997 to $347,000 on June 30, 1998. This increase is due to larger demand for manufacturing goods. Substantially all the backlog is expected to be realized as sales during the first quarter of the 1998 fiscal year.
Business Subject to Renegotiation at Election of Government - -----------------------------------------------------------
Not Applicable
Research and Development Expenditures - -------------------------------------
Due to the nature of manufacturing operations of the Company and the types of products produced by its two segments, expenditures for research and development are not material to the overall operating cost.
Compliance with Environmental Controls - --------------------------------------
In 1996, the Company had determined that a significant amount of paint located at its Tennessee facility, must be disposed of to comply with environmental regulations. The Company had estimated a range of $10,000 to $45,000 as the cost to dispose of this paint based upon management's estimate and the actual cost incurred subsequent to June 30, 1996 to dispose of the most contaminated barrels of paint. The Company had accrued $10,000 of this charge as a liability in the fiscal 1996. During 1997, the Company successfully completed its cleanup, and the remaining cost of $15,561 that had not been accrued in 1996 has been reflected in the accompanying financial statements for 1997.
To the best of its knowledge, the Company believes that it is presently in substantial compliance with all existing environmental laws and does not anticipate that such compliance will have a material effect on its future capital expenditures, earnings or competitive position with respect to any of its business segments.
Item 2.
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 2400 East Trail Street, Dodge City, Kansas. This facility is leased from Murle F. and Sara R. Webster, shareholders of the Company, for $5,000 per month, on a month to month basis. This facility is comprised of approximately 40,000 square feet in three buildings. The Company also has an Hydraulic division located at 401 Loomis Rd., Weatherford, Oklahoma. This facility is comprised of approximately 10,000 square feet.
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 1/2 acres of land.
The water and environmental products group conducts its primary operations at Highway 30, Paxton, Nebraska, in a facility which consists of general offices, manufacturing facilities and open storage areas. This facility is approximately 25,000 square feet on 10.1 acres of land. The Company also has a distribution facility at 11555 S. Hwy 283, Dodge City, Kansas. The Company owns both of the aforementioned locations. Titan leases a third distribution facility for its division, Wholesale Pump and Supply located at 1821 NW 4th Drive, Oklahoma City, Oklahoma. The facility consists of approximately 10,000 square feet of space, and is rented on a month to month basis for $1,100 per month.
The Company did own an undeveloped 95-acre tract located southeast of Fort Worth, Texas. The Company successfully sold this property in November of 1997 and used proceeds to pay off company debt.
Item 3.
Item 3. Legal Proceedings - ------- -----------------
On December 6, 1996, W W Capital and its legal counsel, Klenda, Mitchell, Austerman and Zuercher, a Limited Liability Company and General Partnership filed a law suit in the U.S. District Court Wichita, Kansas against Jerry R. Bellar, individually. W W Capital sued to recover under provisions of the Exchange Agreement cost associated with the settlement of "People's Bank of Hunstville v. Liberty Metals Fabricating, LTD and Eagle Enterprises." It was management's opinion that any amounts paid to Liberty Metals, on behalf of Eagle would be indemnified by Bellar. It was indicated during the purchase of Eagle that Eagle's exposure in the Liberty Metals case was "at worst a wash-out". Bellar denies that the Liberty Metal case is covered under the indemnification agreement. W W Capital was seeking to recover approximately $53,000 relating to the settlement of the Liberty Metals case.
In addition the Company was seeking to recover its Legal fees advanced on behalf of Bellar relating to the March Group case. Provisions of the exchange agreement and a letter from Mr. Bellar to the Company attorneys, Klenda, Mitchell, Austerman and Zuercher, call for Mr. Bellar to reimburse the Company for all legal fees expended by the Company on Mr. Bellar's behalf. Mr. Bellar contends that the legal fees advanced on his behalf are unreasonable and denied to reimburse the Company for these fees.
On or about March 26, 1997, the above captioned case was transferred to the United States District Court for the Middle District of Tennessee in Nashville. The Company has retained legal counsel of Farris, Warfield, and Kanaday, PC in Nashville to handle the case.
On two occasions the Company had made written offers to settle the case with Mr. Bellar. Mr. Bellar had rejected these offers and the Company asked the court for mediation to settle the outstanding issues. As a result of the mediation that took place in September 1998 the Company agreed to settle its claim against Jerry R Bellar, and Bellar agreed to settle claims against the Company. The settlement agreement provided for the cancellations of amounts due to the Company from Bellar recorded at $167,572, and amounts payable by the Company to Bellar of $150,000. The Company paid $20,000 to Bellar in September 1998. The accompanying financial statements reflect the amounts agreed to in the settlement as of June 30, 1998.
Item 4.
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, 1998.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matter - ------- --------------------------------------------------------------------
Market Information - ------------------
The Company's Common Stock is listed on the over-the-counter market and trades under the symbol "WWCL".
Holders - -------
As of October 21, 1998 the Company had approximately 558 record holders of its common stock, not including some individuals holding shares in street name.
Dividends - ---------
The Company did not pay dividends during 1998 or 1997 and does not intend to pay cash dividends in the foreseeable future. The management of the Company intends, for the present, to retain all available funds for the development of its business. Additionally, certain of the Companies' loan covenants prohibit the paying of dividends.
Item 6.
Item 6. Selected Financial Data - ------- -----------------------
Year ended June 30
Item 7.
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.
Item 8. Financial Statements and Supplementary Data. - ------- --------------------------------------------
W W CAPITAL CORPORATION INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE
Financial Statements:
Independent Auditors' Report ...................................... ,
Consolidated Balance Sheets as of June 30, 1998 and June 30, 1997...................................................... ,
Consolidated Statements of Operations for the years ended June 30, 1998, 1997 and 1996.................................
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1998, 1997 and 1996.......................
Consolidated Statements of Cash Flows for the years ended June 30, 1998, 1997 and 1996....................................... ,
Notes to Consolidated Financial Statements.........................
Financial Statement Schedules:
Independent Auditors' Report....................................... S-1, S-2
I - Condensed Financial Information of Registrant.................. S-3
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.
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, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for the each of the two years ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion the 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, 1998 and 1997, and the results of their operations and their cash flows for each of the two years ended June 30, 1998, in conformity with generally accepted accounting principles.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado October 20, 1998
INDEPENDENT AUDITOR'S REPORT - ----------------------------
Board of Directors and Stockholders W W Capital Corporation Fort Collins, Colorado
We have audited the statements of operations, stockholders' equity, and cash flows of W W Capital Corporation for the year then ended June 30, 1996. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the results of its operations and cash flows of W W Capital Corporation for the year then ended June 30, 1996, in conformity with generally accepted accounting principles.
MILLER AND McCOLLOM
Certified Public Accountants
Denver, Colorado October 15, 1996
W W CAPITAL CORPORATION
The accompanying Notes are an integral part of the consolidated financial statements
W W CAPITAL CORPORATION
The accompanying Notes are an integral part of the consolidated financial statements
W W CAPITAL CORPORATION
The accompanying Notes are an integral part of the consolidated financial statements
W W CAPITAL CORPORATION
The accompanying Notes are an integral part of the consolidated financial statements
W W CAPITAL CORPORATION
The accompanying Notes are an integral part of the consolidated financial statements
W W CAPITAL CORPORATION
The accompanying Notes are an integral part of the consolidated financial statements
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
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 well supplies.
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). 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 generally accepted accounting principles 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.
Loan Impairment. The Company uses the allowance method of accounting for bad debts. Individual notes are evaluated for potential impairment when payments are in arrears. Loans identified as impaired are then valued based upon the present value of estimated future cash flows, valuation of collateral, or management's judgment based upon general market conditions, historical trends or individual circumstances. The resulting value is then compared to the carrying amount. An allowance is established for any resulting deficiency in the loan value compared to the carrying amount.
The Company recognizes the entire change in the valuation allowance as bad debt expense in the same manner in which impairment initially was recognized or as a reduction in the amount of bad debt expense that otherwise would have been reported. Interest accrued on impaired loans is recognized as interest income. Payments received are applied first to accrued interest receivable and then to principal.
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.
Loan Acquisition Costs. Loan acquisition costs represent costs 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.
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies (continued)
Stock-Based Compensation. In 1997, the Company adopted 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 adoption of FAS 123 had no effect on net income and the effects of the fair value based method were not material for proforma disclosure.
Impairment of Long-Lived Assets. In 1996, the Company adopted Financial Accounting Standards Board Statement No. 121 (FAS 121), " Impairment of Long-Lived Assets." In the event that facts and circumstances indicate that the cost of assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value is required.
During 1996, the Company determined that the marketing rights for the animal hospital bed, in its livestock equipment handling segment, were impaired after estimating the present value of expected gross profit from future sales as compared to the net book value. The Company wrote down the intangible asset by $38,557 through a charge to cost of goods sold.
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.
Advertising. The Company expenses the cost of advertising the first time the advertising takes place except for sales videos and show materials, which were capitalized and amortized over their expected period of future benefits of 60 and 36 months respectively.
At June 30, 1998 and 1997 $14,714 and $15,050 of advertising cost was reported as assets. Advertising expense for each of the three years ended June 30, 1998 was $$110,082, $97,556, and $173,782, respectively.
Income Taxes. The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in different periods for financial and income tax reporting.
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.
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
Note 2 - Related Party Transactions and Subsequent Event
During the years ended June 30, 1998, 1997 and 1996, the Company recorded interest income of $2,072, $4,365 and $6,362 for the notes receivable from related parties.
Notes Payable to Stockholder. The Company has outstanding balances of $21,107 and $27,069 payable to a former stockholder of Titan as of June 30, 1998 and 1997, respectively. The notes are unsecured, bear interest at 10%, and are payable in total monthly installments of $700 through March 2001 and $350 through July 2001.
During the years ended June 30, 1998, 1997 and 1996, the Company incurred interest expense of $2,525, $3,004 and $3,299, respectively, on the notes payable to stockholder.
Operating Lease. The Company leases its manufacturing facility in Dodge City, Kansas, from Murle F. Webster, a stockholder. The manufacturing facility lease expired in December 1994 and has continued on a month to month basis. The lease requires monthly payments of $5,000. The provisions of the building leases require the Company to pay insurance, property taxes and maintenance costs.
Other. During September 1998, the Company settled a law suit with Agri-Sales Associates (Agri- Sales), whose major stockholder is a stockholder of the Company. The liability for commissions of $150,000 and recorded receivables of $167,572, including amounts due under an indemnification agreement were settled for $20,000 paid by the Company subsequent to year end.
The Company has entered into the transactions with related parties as disclosed above during the three-year period ended June 30, 1998. 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.
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
Note 3 - Inventories
Inventories consisted of the following at June 30: 1998 1997 ----------- ----------- Raw materials $ 390,607 $ 461,311 Work-in-process 207,079 188,890 Finished goods 2,559,813 2,690,955 ----------- ----------- $ 3,157,499 $3,341,156 =========== ==========
Note 4 - Notes Receivable - Other
Notes receivable totaling $42,781 at June 30, 1998 and 1997 were identified by management as impaired. The allowance for credit loss was $10,000 for June 30, 1998 and 1997.
Note 5 - Property and Equipment
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
Note 6 - Investment in Real Estate
In November 1997, the Company sold 95 acres of undeveloped real estate in Johnson County, Texas for $335,000. The company carried back a note maturing in November 2000 in the amount of $110,000. A realized loss was recorded in the amount of $72,354, which includes expenses of sale of $26,319.
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 entry service and are age 21 or older, may contribute up to 20% of their salary up to a maximum as allowed by the Internal Revenue Code. The Company may make discretionary matching contributions on the first 4% of employee contributions vesting at 25% per year after three years of service. During the years ended June 30, 1998, 1997, and 1996, the Company made $7,729, $7,397 and $10,295 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, 1998, options to purchase 702,500 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 157,668 shares at option prices ranging from $0.063 to $2.50 per share of which 137,668 are outstanding as of June 30, 1998. Options to purchase 10,000 shares of common stock for $0.063 per share were exercised during 1998. These options will expire five or ten years after issuance.
The following stock options are outstanding at June 30, 1998:
Number Number of Options Exercise of Options Issue Date Outstanding Price Exercisable ---------- ----------- ----- ----------- December 14, 1990 10,000 $1.00 10,000 May 1, 1992 25,000 $2.50 25,000 February 26, 1993 50,000 $1.50 50,000 July 1, 1993 26,001 $0.8125 26,001 June 10, 1994 182,500 $0.75 182,500 July 1, 1994 26,667 $0.75 26,667 July 1, 1995 30,000 $0.5625 30,000 April 5, 1996 5,000 $0.45 1,666 July 1, 1996 20,000 $0.063 20,000 July 1, 1997 10,000 $0.17 10,000 ------- ------- 385,168 381,834 ======= =======
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
Note 8 - Short-Term Notes Payable
The Company had revolving lines of credit until May 31, 1998, at which time all outstanding balances were converted to term loans as disclosed in Note 9, the short-term debt is expected to be refinanced on a long-term basis and, accordingly, is recorded as long-term debt. A summary of short term notes payable for the year ended June 30, 1998 is as follows:
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
Term notes payable in the amount of $1,834,000 are collateralized by deed of trust on real estate, property and equipment, accounts receivable, inventories, contract rights, and notes receivable and are cross-collateralized with debt totaling $482,323 at June 30, 1998, and cross-guaranteed by all of the subsidiaries. Effective May 31, 1998, the loans were converted from revolving notes to term notes. The term notes provide that outstanding indebtedness cannot exceed the sum of 80% of the eligible accounts receivable and 50% of raw material and finished goods inventories. The loan agreements prohibit the Company from paying cash dividends. Additionally, the Company's subsidiaries are required to meet certain restrictive loan covenants pertaining to the maintenance of minimum working capital, current ratio, net worth, and debt service coverage ratios. The Company was granted a waiver of certain covenants to October 1998. Approximately $2,367,000 of the Company's consolidated net assets at June 30, 1998 are considered to be restricted net assets of consolidated subsidiaries.
In October 1998, the Company received a letter of intent from a financial institution to refinance certain debt and to provide working capital. The letter of intent provides for the issuance of $2,350,000 of revolving credit debt, subject to borrowing base limitations of 80% of eligible accounts receivable and 50% of eligible inventory, bearing interest at the Bank's base rate plus 1.5%. Additionally, the bank will issue a $275,000 term loan bearing interest at the Bank's base rate plus 2%. The financing commitment requires a one-time commitment fee of 1% of the total available borrowings to be paid at closing. Notes payable with an outstanding balance of $2,166,323 at June 30, 1998 are due in October 1998 and are expected to be refinanced with borrowings pursuant to the letter of intent. The Company has classified all debt as long-term because it has the ability and intent to refinance the debt for three years.
The aggregate maturities of long-term debt are as follows at June 30, 1998:
Year ---- 1998 $ 300,000 1999 400,000 2000 70,000 2001 2,100,000 2002 65,000 Thereafter 225,930 ---------- $3,160,930 ==========
Note 10 - Commitments and Contingencies
Operating Leases. In March 1997, the Company entered into a three year lease for office space. The lease provides for monthly rental payments of $2,312 escalating to $2,477 for the period from April 1, 1997 through April 30, 2000.
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------------
Note 10 - Commitments and Contingencies (continued)
During 1998, the Company entered into lease agreements for production and office equipment and vehicles. The lease terms are generally two to five years. The Company also canceled three existing vehicle leases effective August 1998.
In August 1998, the Company entered into three, two year lease agreements for vehicles. The leases provide for total monthly payments of $1,691. The Company also canceled three existing vehicle leases effective August 1998.
Future minimum rental payments under operating leases as of June 30, 1998, including the changes in vehicle leases subsequent to year end, are as follows:
The Company also leases various facilities under informal agreements. Rental expense under operating leases for the years ended June 30, 1998, 1997 and 1996 amounted to $168,799, $186,715, and $159,889, respectively.
Note 11 - Segmented Information and Reconciliation
The Company's operations are classified into principal industry segments; W-W and Eagle which manufacture and distribute livestock handling equipment, and Titan which processes and distributes water well and environmental supplies. Following is a summary of segmented information for each of the three years in the period ended June 30:
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - ----------------------------------------------------------------------------
Note 12 - Income Taxes
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - --------------------------------------------------------------------------
Note 12 - Income Taxes (continued)
A reconciliation of income at the statutory rate to the Company's effective rate is as follows at June 30:
At June 30, 1998, the Company has approximately $489,000 of net operating loss available for carryforward to offset future year's taxable revenue. The loss carry forward expires at various times through the year 2011, if not utilized earlier.
At June 30, 1998, the Company has capital loss carryforwards in the amount of $288,000 which no benefit has been recognized due to uncertainty as to realization.
W W CAPITAL CORPORATION
Notes to Consolidated Financial Statements June 30, 1998 - ------------------------------------------------------------------------------
Note 13 - Litigation and Subsequent Event
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 accompanying financial statements reflect the amounts agreed to in the settlement as of June 30, 1998.
Note 14 - Significant Group Concentrations of Credit Risk
The Company's business activity is in two industry segments, livestock handling equipment and water well and environmental supplies. W-W Manufacturing and Eagle's livestock handling equipment customers are principally resellers and are primarily located in the Midwest, Tennessee and Georgia, while Titan's water well supply customers are principally located in the states of Nebraska, Oklahoma and Kansas. At June 30, 1998, W-W Manufacturing and Eagle's accounts receivable totaled $992,309 and Titan's totaled $842,286.
Note 15 - Fair Value of Financial Instruments
Effective June 30, 1996, the Company adopted statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," which requires disclosing fair value to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheet. The fair value of the financial 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 1998 and 1997 due to the scheduled maturities and restrictive provisions of the debt. The carrying value of long-term debt exceeded the fair value by approximately $63,300 at June 30, 1996 based on the Company's current incremental borrowing rates for similar types of borrowing arrangements.
Independent Auditors' Report - ----------------------------
The Board of Directors and Stockholders W W Capital Corporation Fort Collins, Colorado
We have audited the accompanying consolidated balance sheets of W W Capital Corporation as of June 30, 1998 and 1997, and the related statements of operations, stockholders' equity and cash flows for each of the two years then ended, and have issued our report thereon dated October 20, 1998. Our audit also included the financial statement schedule of W W Capital Corporation listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
BROCK AND COMPANY, CPAs, P.C.
Fort Collins, Colorado October 20, 1998
S-1
INDEPENDENT AUDITOR'S REPORT ----------------------------
The Board of Directors and Stockholders W W Capital Corporation
We have audited the accompanying statements of operations, stockholders' equity and cash flows for the year ended June 30, 1996 and have issued our report thereon dated October 15, 1996. Our audit also included the financial statement schedules of W W Capital Corporation for the year ended June 30, 1996, 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 audit. In our opinion, such financial statements schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
MILLER AND McCOLLOM Certified Public Accountants
Denver, Colorado October 15, 1996
S-2
W W CAPITAL CORPORATION
S-3
W W CAPITAL CORPORATION
S-4
W W CAPITAL CORPORATION
S-5
W W CAPITAL CORPORATION
Note 2 - 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:
S-6
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. - -------- -----------------------------------------------------------------
Not Applicable
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant - -------- --------------------------------------------------
The Officers of the Company are elected at the Board of Directors' annual organizational Meeting immediately following the Annual Stockholders' Meeting. Such officers hold office until their successors are elected and qualify. The following information indicates the position and age of the directors and officers as of October 28, 1998, and their business experience during the prior five years.
DAVID L. PATTON age 67, was elected to the Board of Directors of the Company in December 1991, and Chairman of the Board in December 1993. Mr. Patton is presently a Judge in the Court of Tax Appeals for the State of Kansas, and was a former partner with the law firm of Patton, Kerbs & Hess in Dodge City, Kansas. Mr. Patton was a co-founder of Titan Industries, Inc., which is currently operated as a wholly-owned subsidiary of the Company.
STEVE D. ZAMZOW age 50, 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 49, 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.
JAMES H. ALEXANDER age 59, become a Director of the Company in 1997. Since 1992, Mr. Alexander has been a member of the Board of Directors of Zykronix, Inc. and former Chief Operating Officer. Mr. Alexander is presently president of Isotech as well as an independent real estate broker for TDI Property Brokers. From April 1992 to November 1992, Mr. Alexander was a member of a management team of a venture capital firm, which funded a satellite communications company. Mr. Alexander is the founder of T.D.I., Inc., a corporation engaged in consulting, fund raising, acquisitions and mergers of hi-tech firms. Mr. Alexander has taken courses leading toward Bachelor of Science Degree in Business Administration from Rollins College.
LOYD FREDRICKSON age 79, become a Director of the Company in 1997. Mr. Fredrickson was the former President and Owner of Wholesale Pump & Supply, Inc. for over 30 years prior to its purchase by the Company's Titan Industries, Inc., wholly owned subsidiary of W W Capital Corporation, October 1994. From 1968 to 1982, Mr. Fredrickson also owned and operated Southern Midwest, Inc., the company was engaged in the construction and lease trucking business. From October 1984 to November 1996, he served as a consultant to the water and environmental product division of Titan Industries. Mr. Fredrickson is presently employed by North American Compressor Corporation, an Oklahoma City-based manufacturer of high pressure breathing air compressors.
Item 11.
Item 11. Executive Compensation - -------- ---------------------
The following table sets forth the cash compensation paid or accrued during the fiscal years ended June 30, 1998, 1997, and 1996, to the Company's Chief Executive Officer. No other executive officer received cash in excess of $100,000.
Option Grants in Fiscal Year 1998
During the fiscal year ended June 30, 1998, the Company did not grant stock options to the Executive officers.
Aggregated Option Exercises in Fiscal Year 1998
The following table sets forth for the executive officer named in the Summary Compensation Table, information concerning each exercise of stock options during the fiscal year ended June 30, 1998 and the value of the unexercised stock options at June 30, 1998.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - -------- --------------------------------------------------------------
The following table sets forth as of October 28, 1998, the ownership of the Company's common stock by each director of the Company, by each person who is known by the Company to be the beneficial owner of more than 5% of the Company's common stock, and by the officers and directors of the Company as a group:
Item 13.
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, 1997, $23,028 remained payable under this note by Millard T. Webster and Terry L. Webster.
The Company currently leases its manufacturing facility in Dodge City, Kansas from Murle F. Webster, father of Millard T. Webster and Mickey J. Winfrey. This lease requires a monthly rental payment of $5,000. This lease expired on December 31, 1994, however, it has continued on a month to month basis. During each of the three fiscal years ended June 30, 1997, $60,000 was paid by the Company under the lease.
Millard T. Webster, a director of the Company, Mickey J. Winfrey, an officer of the Company, and Terry L. Webster, have each executed a promissory note in favor of the Company for the amount of $58,333. Each note bears interest at 9% per annum, are payable in monthly installments of $767 and are due to be paid in full by September 30, 1997. Murle F. Webster, lessor of the Company's manufacturing facility, has executed an assignment of monthly rent back to the Company under each of these notes. As of November 1, 1997, this note has been paid in full.
On October 26, 1992, the Company, through its wholly-owned subsidiaries, W-W Manufacturing Co., Inc. ("W-W Manufacturing"), and Eagle Enterprises, Inc. ("Eagle"), entered into an exclusive two year initial term sales and marketing agreement with Agri-Sales Associates, Inc. ("Agri-Sales") to market the Company's products throughout the United States. Jerry R. Bellar, a 4.1% stockholder of the Company, is President and a majority stockholder of Agri-Sales. In conjunction with the cancellation of the agreements, the Companies owed Agri-Sales approximately $164,863 which was increased to $180,000 under a proposed settlement of a lawsuit between the Company and Agri-Sales (see "Legal Proceeding" for additional information). The Company paid $30,000 of the liability during 1997 and was withholding payment of the remaining $150,000 pending receipt of amounts due under an indemnification agreement Subsequent to June 30, 1998 this lawsuit has been settled. (See "Legal Proceedings" for additional information)
On October 26, 1993, the Company acquired all of the outstanding stock of Eagle in exchange for 325,000 shares of its common stock. Eagle was owned by Jerry R. Bellar, who is now a 4.1% stockholder of the Company. As a result of the acquisition of Eagle, the Company acquired a note payable to Mr. Bellar. On January 24, 1994, Eagle agreed to become a co-borrower with Mr. Bellar. Said note was used to refinance Eagle's note payable to him in the amount of $119,847. This note was paid in-full in January 1996.
At June 30, 1997, the Company has a receivable form Agri-Sales and/or Jerry Bellar in the amount of $195,235 of which $167,572 is recorded in the financial statements. This balance represents accounts due to the Company relating to the March Group, Inc. lawsuit and Liberty Metal Fabrication, Limited lawsuit (see "Legal Proceeding" for additional information).
PART IV
Item 14.
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, 1998 and June 30, 1997.
Consolidated Statement of Operations for the years ended June 30, 1998, 1997, and 1996.
Consolidated Statement of Stockholders' Equity for the years ended June 30, 1998, 1997, and 1996.
Consolidated Statement of Cash Flows for the years ended June 30, 1998, 1997, and 1996.
(a) (2) List of Financial Statement Schedules Filed as a Part of This Report
Schedule I - Condensed Financial Information of Registrant
(a) (3) Exhibits
Exhibit Number Document - ------ --------
2.1 Exchange Agreement dated August 15, 1991 between W W Capital Corporation and Titan Industries, Inc. (filed as Exhibit 3.3 to Form 10-K for the fiscal year ended June 30, 1991 and is hereby incorporated by reference).
2.2 Exchange Agreement dated October 26, 1992 between W W Capital Corporation and Eagle Enterprises, Inc. (filed as an exhibit to the Company's Form 8-K dated November 3, 1993 and is hereby incorporated by reference).
3.1 Articles of Incorporation dated December 13, 1989 of W W Capital Corporation, a Nevada corporation (filed as Exhibit 3.2 to the Company's Form 10-K for the year ended June 30, 1990 and is hereby incorporated by reference).
3.1.1 Certificate and Amendment to Articles of Incorporation filed December 21, 1990 with the Nevada Secretary of State (filed as Exhibit 3.01 to the Company's Form 10-Q for the quarter ended December 31, 1990 and is hereby incorporated by reference).
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).
10.02 Assignment of Rental Income from Murle F. and Sara R. Webster to W W Capital Corporation (filed as an exhibit to the Company's Post-Effective Amendment No. 1 to Form S-18 and is hereby incorporated by reference).
10.3 1990 Incentive Stock Option Plan (filed as Exhibit 10.16 to the Company's Form 10-K for the year ended June 30, 1990 and is hereby incorporated by reference).
10.4 Promissory Note dated June 30, 1990 from Millard T. Webster in favor of W W Capital Corporation for the amount of $2,716 (filed as Exhibit 10.8 to Form 10-K for the fiscal year ended June 30, 1991 and is hereby incorporated by reference).
10.5 Promissory Note dated April 30, 1990 from Millard T. Webster and Mickey J. Winfrey in favor of W W Capital Corporation for the amount of $43,000 (filed as Exhibit 10.9 to Form 10-K for the fiscal year ended June 30, 1991 and is hereby incorporated by reference).
10.6 Loan Agreement dated June 29, 1992 between W-W Manufacturing Co., Inc. (wholly owned subsidiary of the Company) and Bank IV Kansas, N.A. (Garden City Kansas) (filed as Exhibit 10.12 for the fiscal year ended June 30, 1992 and is hereby incorporated by reference).
10.7 Loan Agreement dated June 29, 1992 between Titan Industries, Inc. (wholly owned subsidiary of the Company) and Bank IV Kansas, N.A. (Garden City Kansas) (filed as Exhibit 10.13 for the fiscal year ended June 30, 1992 and is hereby incorporated by reference).
10.8 1990 Non-Qualified Stock Option Plan (filed as Exhibit 10.14 of Form 10-K for the fiscal year ended June 30, 1992 and is hereby incorporated by reference).
10.9 Employee Stock Benefit Plan (filed as Exhibit 10.15 of Form 10-K for the fiscal year ended June 30, 1992 and is hereby incorporated by reference).
10.10 Loan Agreement dated December 15, 1992 between Eagle Enterprises, Inc. (wholly owned subsidiary of the Company) and Bank IV Kansas, N.A. (Garden City, Kansas) (filed as Exhibit 10.10 of Form 10-K for the fiscal year June 30, 1993 and is hereby incorporated by reference).
10.11 Exchange Agreement between W W Capital Corporation and Apex Realty Investments, Inc. dated February 19, 1993 (filed as an exhibit to the Company's Form 8-K dated March 5, 1993 and is hereby incorporated by reference).
10.11.1 Addendum to Exchange Agreement between W W Capital Corporation and Apex Realty Investments, Inc. dated August 23, 1993 (filed as Exhibit 10.11.1 of Form 10-K for the fiscal year June 30, 1993 and is hereby incorporated by reference).
10.12 Loan Agreement dated April 8, 1993 between Eagle Enterprises, Inc. (wholly owned subsidiary of the Company) and First American National Bank, N.A. (Cookeville, Tennessee) (filed as Exhibit 10.12 of Form 10-K for the fiscal year June 30, 1993 and is hereby incorporated by reference).
10.13 1992 Non-Qualified Stock Option Plan (filed as Exhibit 10.13 of Form 10-K for the fiscal year June 30, 1993 and is hereby incorporated by reference).
10.14 Loan Agreement dated October 20, 1992 between W W Capital Corporation, Eagle Enterprises, Inc. and Jerry R. and Jacqueline A. Bellar (former owners of Eagle Enterprises, Inc.) (filed as Exhibit 10.14 of Form 10-K for the fiscal year June 30, 1993 and is hereby incorporated by reference).
10.15 Asset Sale and Purchase Agreement between W W Capital Corporation and Wholesale Pump and Supply, Inc. date October 14, 1993 (filed as Exhibit 10.15 of Form 10-K for fiscal year June 30, 1994 and is hereby incorporated by reference).
10.16 Real Estate Contract between W W Capital Corporation and Daniel L. Hahn, Donna R. Hahn and Helene D. Linder, Promissory Note, date December 15, 1994 between W W Capital Corporation and Daniel L. Hahn, Donna R. Hahn and Helene D. Linder (filed as an exhibit to the Company's Form 8-K dated December 15, 1994 and is hereby incorporated by reference).
10.17 Loan Agreement dated March 3, 1995 between Titan Industries, Inc. (wholly owned subsidiary of the Company and Keith County Economic Development Corporation (incorporated by reference June 30, 1995 10-K).
10.18 Loan Agreement dated March 3, 1995 between Titan Industries, Inc. (wholly owned subsidiary of the Company and First National Bank in Ogallala (incorporated by reference June 30, 1995 10-K).
10.19 Letter Agreement dated September 17, 1996, between W W Capital Corporation and Bank IV Garden City (incorporated by reference June 30, 1996 10-K.)
21.0 Subsidiaries of the Registrant (filed herewith).
23.0 Independent Certified Public Accountants Consent
27.0 Financial Data Schedule.
Item 14 (b) - -----------
No reports on Form 8-K were filed during the fourth quarter of the fiscal year covered by this report.
Exhibit 21.0
Subsidiaries of the Registrant
W-W Manufacturing Co., Inc. Incorporated in the state of Kansas
Titan Industries, Inc. Incorporated in the state of Nebraska
Eagle Industries, Inc. Incorporated in the state of Tennessee
Exhibit 23.0
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS CONSENT ------------------------------------------------
We consent to the use of our report dated October 15, 1996 relating to the financial statements of W W Capital Corporation for the year then ended June 30, 1996 in the Annual Report on Form 10K. We further consent to the use of our report dated October 15, 1996 on the financial schedules appearing in Item 14 of such Annual Report.
MILLER AND McCOLLOM Certified Public Accountants
Denver, Colorado October 26, 1998