-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VdiAGjy97wKVLJ2dKAmPRBRumXIQS3JHKdWQkU2rBKrH3m6Mpo6GgaKfSWsqiANO lNm40vOXE1wJBW726kNHbA== 0001065949-98-000030.txt : 19980903 0001065949-98-000030.hdr.sgml : 19980903 ACCESSION NUMBER: 0001065949-98-000030 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980902 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHITE CLOUD EXPLORATION INC CENTRAL INDEX KEY: 0000736314 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 840959153 STATE OF INCORPORATION: UT FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-11424 FILM NUMBER: 98703204 BUSINESS ADDRESS: STREET 1: 116 STANYAN CITY: SAN FRANCISCO STATE: CA ZIP: 94118 BUSINESS PHONE: 4153873135 MAIL ADDRESS: STREET 1: 116 STANYAN CITY: SAN FRANCISCO STATE: CA ZIP: 94118 10QSB/A 1 FORM 10QSB/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended: March 31, 1998 Commission File number: 0-114244 WHITE CLOUD EXPLORATION, INC. (Exact name of registrant as specified in its charter) UTAH 84-0959153 - --------------------------------- ------------------------ State or Other Jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 116 STANYAN, SAN FRANCISCO, CALIFORNIA 94118 - ------------------------------------------------------------------------------- (Address of principal Executive Offices Zip Code) Registrant's telephone number, including area code: 415-387-3135 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes X No ____ As of March 31, 1998, there were 15,030,245 outstanding shares of common stock, par value $.0001. PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WHITE CLOUD EXPLORATION, INC. Consolidated Balance Sheet (Unaudited) March 31, December 31 1998 1997 ASSETS Current Assets Cash 5,707 59,147 Accounts Receivable 183,066 137,454 Less Allow for Doubtful Accts (58,434) (53,325) ----------------------------------- 130,339 143,276 Inventory 162,000 162,000 ----------------------------------- Total Current Assets 292,339 305,276 Fixed Assets Property, Plant & Equipment 30,859 17,905 Less accumulated Depreciation (11,753) (5,653) ---------------------------------- Total Fixed Assets 19,106 12,252 Other Assets Due from member - 27,935 Other Assets - 16,853 --------------------------------- Total Other Assets 0 44,788 ================================= Total Assets $311,445 $362,316 LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities Accrued Expenses 200,000 $200,157 Accounts Payable 331,571 319,983 Interest Payable 23,005 25,668 Due to Stockholders 316,424 307,424 Due to Member 44,349 55,537 Line of Credit 43,377 54,968 Notes Payable 450,000 450,000 ---------------------------------- Total Current Liabilities 1,408,727 1,413,737 Stockholders' Equity (Deficit) Preferred Stock, no par value 10,000,000 shares authorized no shares issued or outstanding. - - Common Stock, $0.001 par value, 50,000,000 shares authorized 15,030,245 shares issued and outstanding. 15,030 15,030 Additional Paid in Capital 989,502 989,502 Accumulated Deficit (2,101,814) (2,055,953) ---------------------------------- Total Stockholders' Deficit (1,097,282) (1,051,421) ---------------------------------- Total Liabilities & Stockholders' Deficit $311,445 $362,316 ================================== The accompanying notes are an integral part of this financial statement WHITE CLOUD EXPLORATION, INC. Consolidated Statement of Income and Expense (Unaudited) For the three months ended March 31, 1998 1997 ---------------------------------- OPERATING REVENUES Revenues $198,397 ($59,953) Cost of goods sold 22,972 81,784 ---------------------------------- Gross profit 175,426 (141,737) OPERATING EXPENSES Royalties - 56,250 Research & development 23,955 621,563 Selling expenses 27,479 950 Professional fees 20,561 7,635 General & Administrative 6,937 6,795 Marketing 1,250 - Commitment/Loan fees - - ---------------------------------- Total operating expense 80,182 693,193 ---------------------------------- OPERATING PROFIT (LOSS) 95,244 (234,929) OTHER (REVENUES) & EXPENSES Interest expense 4,268 5,764 Miscellaneous income (1,691) - Loss on sale of receivables 138,528 - ---------------------------------- Total other revenues & expenses 141,105 5,764 NET INCOME (LOSS) (45,861) (240,693) ================================== LOSS PER SHARE Primary (0.00) (0.02) Weighted number of shares outstanding 15,030,245 15,030,245 The accompanying notes are an integral part of this financial statement WHITE CLOUD EXPLORATION, INC. Consolidated Statement of Cash Flows (Unaudited) Quarter Ended March 31 1998 1997 ---------------------- Cash flows from Operating Activities Net income (loss) (45,861) 39,621 Depreciation & amortization (Increase) decrease in Accts Receivable (40,503) (168,002) (Increase) decrease in Inventory 0 (7,980) (Decrease) increase in Accrued Expenses (157) (231) (Decrease) increase in Accts Payable 11,588 (40,269) (Decrease) increase in Interest Payable (2,663) 0 Net cash flows used for Operating Activities (77,596) (176,861) Cash flows from investing activities (Purchase) sale of Fixed Assets (12,954) (15,768) (Purchase) sale of Other Assets 50,889 124,166 ------------------------- Total cash used for investing 37,935 108,398 Cash flows from financing activities (Decrease) increase in Due to Stockholders 9,000 67,500 (Decrease) increase in Due to Member (11,188) 12,884 (Decrease) increase in Line of Credit (11,591) (34,007) (Decrease) increase in Notes Payable 0 0 Additional capital invested 0 8,610 ------------------------- Total cash from financing activities (13,779) 54,987 Increase (Decrease) in cash (53,440) (13,476) ------------------------- Cash and cash equivalents - beginning of period 59,147 13,961 ------------------------- Cash and cash equivalents - end of period 5,707 485 ========================= The accompanying notes are an integral part of this financial statement WHITE CLOUD EXPLORATION, INC. STATEMENT OF STOCKHOLDER'S EQUITY MARCH 31, 1998 ADDITIONAL TOTAL PAID-IN ACCUMULATED STOCKHOLDER'S COMMON STOCK CAPITAL DEFICIT EQUITY ---------------------------------------------------------- Shares Amount Balance at December 31, 1994 56,710 $57 $75,925 ($102,487) ($26,505) Issuance of common stock for cash 156,000 156 77,844 78,000 Net loss for year ended Dec 31, 1995 (89,906) (89,906) ---------------------------------------------------------- Balance at December 31, 1995 212,710 213 153,769 (192,393) (38,411) Issuance of common stock for cash 14,362 14 342,986 343,000 Capital contribution 250,000 250,000 Net loss for year ended Dec 31, 1996 (895,058) (895,058) ----------------------------------------------------------- Balance at December 31, 1996 227,072 227 746,305 (1,087,451) (340,919) Issuance of common stock for cash - - - - - Capital contribution 250,000 250,000 Issuance of common stock for services & repayment of debt to related party 43,290 43 7,457 7,500 Issuance of common stock in conjunction with merger 14,759,883 14,760 (14,760) Net loss for year ended Dec 31, 1997 (968,502) (968,502) ----------------------------------------------------------- Balance at December 31, 1997 15,030,245 15,030 989,502 (2,055,953) (1,051,421) Net loss for quarter March 31, 1998 (45,861) (45,861) ----------------------------------------------------------- Balance at March 31, 1998 15,030,245 $15,030 989,502 ($2,101,814) ($1,097,282) =========================================================== The accompanying notes are an integral part of this financial statement WHITE CLOUD EXPLORATION, INC. NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization- White Cloud Exploration, Inc. (the Company) was incorporated in the State of Utah on July 22, 1983, for the purpose of obtaining capital to seek potentially profitable business opportunities. Since inception, the Company has been engaged in organizational activities. The Company acquired two entities, Watchout, a California Corporation, and Goldpoint International, a limited liability company. White Cloud Exploration, Inc. changed its year-end from June 30 to December 31. The Watchout Agreement was entered into effective May 30, 1997, and the Watchout Acquisition consummated pursuant thereto effective as of December 29, 1997. Pursuant to the Watchout Agreement, the shareholders of Watchout contributed to the company all of Watchout's common stock for an aggregate consideration of 11,296,300 shares of the company common stock. The company owns 100% of the issued and outstanding shares of Watchout. Watchout designs, develops, and intends to market worldwide watches and other consumer goods utilizing proprietary colored liquid crystal display technology. The Goldpoint Agreement entered into contemporaneously with the Watchout Agreement and the Goldpoint Acquisition was considered contemporaneously with the consummation of the Watchout acquisition. Pursuant to the Goldpoint Agreement, the members of Goldpoint contributed to the company an aggregate of 100% of the equity interests in Goldpoint for an aggregate consideration of 2,140,000 shares of the company's common stock. As a result of the Goldpoint Acquisition, the company owns 100% of the outstanding membership interests in Goldpoint. Goldpoint designs and markets fine writing instruments. 2. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization-Watchout, a California corporation, is a development stage enterprise engaged in the development of fashion watches. Watchout plans to develop, manufacture and sell watches and personal accessories worldwide. Goldpoint International, LLC, A Delaware limited liability company, designs and markets fine writing instruments. Property and Equipment- Property and equipment are stated at cost. Depreciation is computed using the double-declining balance method over estimated useful lives of 5 years. Other Assets- Other assets consists of organizational costs and trademarks which have been capitalized and are being amortized over 5 and 40 years, respectively, using the straight-line method. WHITE CLOUD EXPLORATION, INC. NOTES TO FINANCIAL STATEMENTS Research and Development- Research and development costs are expensed when incurred. Income Taxes- No provision have been made for income taxes. As of December 31, 1997, the company had net operating loss (NOL) carryforwards for federal income tax purposes of approximately $2,055,900. These net-operating losses may be used to offset future taxable income. Unused carryforwards will expire in 2012. Uses of Estimates- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported activities during the reporting period. Actual results may differ from those estimates. 3. RELATED PARTY TRANSACTIONS Watchout has recorded unsecured, non-interest-bearing amounts due to stockholders for the reimbursement of expenses. There are no specific repayment terms; however, these amounts are expected to be repaid within 12 months of the balance sheet date. Watchout has also recorded $70,000 in amounts due to stockholders. The amounts are payable on demand at an interest rate of 5.81%. A shareholder, WCM Investments, Inc., had a consulting agreement in which 1,150,000 shares of White Cloud Exploration were issued in 1997. 4. CHANGES IN CONTROL Effective December 29, 1997 White Cloud Exploration acquired 100% of the outstanding common stock of Watchout and 100% of the limited liability interests in Goldpoint International, LLC in exchange for 11,296,300 and 2,140,000 shares of White Cloud Exploration restricted common stock. 5. COMMITMENTS AND CONTINGENCIES License Agreement- On September 21, 1995 Watchout entered into a license agreement with an unrelated third party for the use of patents and technical knowledge. The agreement provides for minimum payments for the first four years through September 1999, totaling $915,000, which may be offset by the payment of royalties as a percentage of sales. The agreement may be canceled at any time, without cause, by Watchout, with 60 days notice and with no further liability. In addition to expense reimbursements of $20,000,minimum payments in the amount of $225,000 and $296,250 have been made for 1997 and 1996, respectively, and are reported as royalties in the accompanying Statement of Operations. WHITE CLOUD EXPLORATION, INC. NOTES TO FINANCIAL STATEMENTS Investment by Distribution- Watchout entered into an agreement with a distributor on July 21, 1996. The agreement provides that the distributor invest $500,000 - $250,000 as a cash payment to Watchout and $250,000 to be made available to Watchout for use in Hong Kong, oversees production, quality assurance/quality control and establish a $150,000 standby letter of credit. In exchange, Watchout will issue the distributor 4% of the common stock outstanding as of the date of the agreement, grant distribution rights in Southeast Asia (except Japan), pay 9% commission based on the factory store costs of the product, and grant the right to open Watchout retail stores in all of Southeast Asia. The agreement will remain in effect for a minimum of four years or until the distributor's investment of $500,000 is earned through commissions. Consulting Agreement- On November 15, 1996, Watchout entered into an agreement which requires payment of $150,00 in finder's fees to be made to an independent consultant, plus 2% of the amount accepted under a placement agreement but not to exceed $250,000. In addition, the consultant earned compensation consisting of 1,150,000 shares of White Cloud Exploration, Inc. Placement Agreement- On February 5, 1997, Watchout entered into an agreement with a placement agent to secure additional capital or financing in the minimum amount of $6,000,000. The agreement requires Watchout to pay commissions to the placement agent equal to 10% of the additional capital or financing received and a non-accountable expense allowance equal to 3% of the additional capital or financing. In addition, Watchout is partially responsible for certain expenses incurred by the placement agent upon closing. In 1996, commitment fees paid to the placement agent amounted to $20,000. No fees were paid in 1997 under this agreement. As a condition of the agreement, the placement agent reserved the right of first refusal to underwrite or place any future public or private sales of debt or equity securities of Watchout, including those involving any principal stockholders of the Watchout through November 19, 1999. Watchout has also agreed to pay the placement agent a 5% finder's fee in the event that they are party to any merger, acquisition or joint venture introduced directly or indirectly by the placement agent. In connection with the placement agreement, the Board of Directors issued 3,639,925 shares of common stock to the placement agent for $500. The shares may be repurchased on a pro rata basis if $6,000,000 is not raised pursuant to the terms of the aforementioned agreement. WHITE CLOUD EXPLORATION, INC. NOTES TO FINANCIAL STATEMENTS Stock Warrants- In connection with the loan agreements dated September 19, 1997, Watchout agreed to pay finder's fees to a third party. The agreement requires payment of finder's fees in the form of $32,500 at the closing of the loans and 250,000 stock warrants with an exercise price of $.10 a share expiring on December 19, 2000. Payment of the finder's fees had not been made as of the balance sheet date, however, the $32,500 fee has been accrued at December 31, 1997. The warrants are to be issued when and if the private placement described previously under Placement Agreement is consummated. In connection with the loans arranged for by Sands Brothers & Co., Ltd. ("Sands Brothers"), White Cloud Exploration has agreed to issue stock warrants to Raymond J. Larkin, Watchout-Goldpoint Partners, L.P., Sands Brothers and Mark Hollo totaling 75,000, 225,000, 25,000 and 25,000 shares respectively, with an exercise price of $.01 a share, expiring on September 3, 2000. 6. LINE OF CREDIT A promissory note to Goldpoint International, LLC of $54,968 payable with interest 60 days from the date of each cash advance under a letter of credit issued by Opal Trade Corporation. Interest accrues at a rate of 4% over the prime rate designated by Chemical Bank. This note is collateralized by the assets of the company. 7. LOAN PAYABLE ( a ) Two 18% promissory notes of $150,000 and $50,000 due September 3, 1998. These notes are considered Senior and have priority in right of payment over all indebtedness of the company. ( b ) A 12% promissory note of $166,000 payable to John Bader in one payment of principal and interest due on demand or at the time of first funding of a private placement of stock in the amount of $6,000,000 by Watchout. All sums past due shall bear interest at 18% from their maturity date. Collateral security includes the first $1.32 per unit production proceeds upon the sale of certain products. ( c ) A 12% promissory note of $84,000 payable to Wayne Williams in one payment of principal and interest due on demand or at the time of first funding of a private placement of stock in the amount of $6,000,000 by Watchout. All sums past due shall bear interest at 18% from their maturity date. Collateral security includes priority assignment of contract rights to the next $0.68 per unit in production proceeds, second only to the $1.32 per unit assigned to John Bader from proceeds from certain products. WHITE CLOUD EXPLORATION, INC. NOTES TO FINANCIAL STATEMENTS 8. GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the company as a going concern. However the company has sustained substantial operating losses in recent years. In addition, the company has used substantial amounts of working capital in its operations. Further, at December 31, 1997 current liabilities exceed current assets by $1,108,461, and total liabilities exceed total assets by $1,051,421. In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon continued operations of the company, which in turn is dependent upon the company's ability to meet its financing requirements, and the success of its future operations. Management believes that actions presently being taken to revise the company's operating and financial requirements provide the opportunity for the company to continue as a going concern. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS On a consolidated basis, after the acquisition of Goldpoint and Watchout! subsidiaries, the Company had revenues in the first quarter of 1998 of $198,397 as compared to the same period in 1997 of ($59,953). The cost of goods sold in the three month period in 1998 was $22,572 and for the same period in 1997 was $81,784. The gross profit for the 1998 period was $175,426 compared to ($141,737) for the 1997 period. The Company incurred operating expenses for the three month period of $80,182 in 1998 compared to $693,193 in the same period in 1997. The Company recorded a net operating profit of $95,244 for the 1998 period as compared to a ($234,924) operating loss for the same period in fiscal year 1997. The net income (loss) for the 3 month period in 1998 was ($45,861) compared to ($240,688) in 1997. The losses were due to start up expenses and research and development costs for the production of Watchout! and Goldpoint products. The Company losses will continue until more revenue from sales can be achieved. While the Company is seeking capital sources for investment, there is no assurance that capital sources can be found. The loss per share for the 1998 first quarter was nominal compared to ($.02) in the first quarter of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company had nominal cash capital at the end of the period. The Company will be forced to make private placements of stock in order to fund operations continuance. No assurance exists as to the ability to make private placements of stock. It had accounts receivable (net) of about $123,000 and inventory of $162,000 as its assets. The Company has significant current liabilities of $1,408,727 which exceed current assets by approximately $1,100,000. The Company is in default on notes in the amounts of $166,000 and $84,000, although no demand for payment has been issued. PART II OTHER INFORMATION Item 1. Legal Proceedings - None. Item 2. Changes in securities - 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 (a) The following are filed as Exhibits to this Quarterly Report. The numbers refer to the Exhibit Table of Item 601 of Regulation S-K: None. (b) Reports on Form 8-K filed during the three months ended March 31, 1998. (incorporated by reference) None. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. Dated: September 2, 1998 WHITE CLOUD EXPLORATION, INC. by:/s/Robert Galoob ----------------------------- President EX-27 2 FDS --I
5 3-MOS DEC-31-1998 MAR-31-1998 5,707 0 183,066 (58,434) 162,000 292,339 30,859 (11,753) 311,445 1,408,727 0 0 0 15,030 (1,112,312) 311,445 198,397 198,397 22,972 175,426 80,182 0 (0) (45,861) 0 (45,861) 0 0 0 (45,861) (0) (0)
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