UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
August 31, 2012
COMMISSION FILE NUMBER: 333-121044
W. S. INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada
98-0439650
_______________________ ____________________________________
(State of organization) (I.R.S. Employer Identification No.)
815 Hornby Street
Suite 404, Vancouver, BC
V6Z 2E6
_______________________________________
(Address of principal executive offices)
Tel: 604-830-6499
_________________________________________________
Registrant’s telephone number, including area code
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark if the registrant is not required file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
1
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K
Yes o No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated file o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x No o
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of a specified date with the past 60 days (OTCBB).
On August 31, 2012, the the market value of the voting stock held by non-affiliates of the Registrant was $1,170,780.
Registrant’s revenues for the most recent fiscal year and for the period covered by this report are $0.00
State the number of shares outstanding of each of registrant’s classes of common equity, for the period covered by this report and as at the latest practicable date:
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of October 31, 2012 .
Title of each class | Number of shares |
Common Stock, par value $0.001 per share | 21,088,680 |
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Table of Contents
TABLE OF CONTENTS
|
| Page | |
PART I | |||
Item 1. | Business | 4 | |
Item 1A. | Risk Factors | 6 | |
Item 1B. | Unresolved Staff Comments | 6 | |
Item 2. | Properties | 7 | |
Item 3. | Legal Proceedings | 7 | |
Item 4. | Mine Safety Disclosures | 7 | |
PART II | |||
Item 5. | Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities | 8 | |
Item 6. | Selected Financial Data | 9 | |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 | |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 11 | |
Item 8. | Financial Statements and Supplementary Data | 12 | |
Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 20 | |
Item 9A. | Controls and Procedures | 20 | |
Item 9B. | Other Information | 21 | |
PART III | |||
Item 10. | Directors, Executive Officers and Corporate Governance | 22 | |
Item 11. | Executive Compensation | 24 | |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 25 | |
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 25 | |
Item 14. | Principal Accountant Fees and Services | 26 | |
PART IV | |||
Item 15. | Exhibits, Financial Statement Schedules | 27 | |
3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Disclaimer
This report contains forward-looking statements, which reflect, among other things, management’s expectations regarding the Company’s future growth, results of operations, performance and business prospects and opportunities. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions but no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this report should not be unduly relied upon. These statements speak only as of the date of this report and save and except as required under applicable securities legislation the Company assumes no obligation to update or revise them to reflect new events or circumstances.
COMPANY OVERVIEW
W.S. Industries, Inc. (or “the Company”) was incorporated in the State of Nevada on April 5, 2004, for the purpose of providing consulting services to businesses, and engaging in any other lawful activity. The Company’s principal address is 404-815 Hornby Street, Vancouver, B.C. V6Z 2E6.
W.S. Industries, Inc. has been in the development stage since inception and has nominal operating history and revenues. Since inception the Company has been engaged in the wine storage business; however, this was terminated during the year ended August 31, 2009. The Company will continue to explore new investment opportunities and new business ventures to attract shareholders for various business opportunities.
PRINCIPAL PRODUCTS AND SERVICES
In the past our Company has provided services and information concerning wine storage, the cellaring of fine wines and accessories for the oenophile; however, the Company disposed of its wine collection during the year ended August 31, 2009. Currently, the Company does not offer any products or services but the Company is looking for new business opportunities. While continuing to explore new investment opportunities, the administrative operations of the business are currently being run from the office of Mr. Fraser Campbell, the Company’s President.
The Company’s website is under construction and once ready it will serve the interested parties in obtaining information regarding services we intend to provide in future. Potential customers or investors will be able to contact the Company electronically and will be contacted by a representative of the Company.
Company will be using its website to market its products and services in future like it did in past. Information about the products and services will be available online.
MARKETING STRATEGY
Not yet decided.
WEB MARKETING STRATEGY
Not yet decided.
MARKETING AND SALES
Not yet decided.
NEW PRODUCTS OR SERVICES
Not yet decided.
4
COMPETITIVE BUSINESS CONDITIONS
Not yet decided.
OUR COMPETITIVE POSITION
Not yet decided.
SOURCES AND AVAILABILITY OF RAW MATERIALS
We do not require any raw materials for our business.
CUSTOMER BASE
Not yet decided.
INTELLECTUAL PROPERTY
Not yet decided.
GOVERNMENTAL REGULATION ISSUES
The Company comes under the regulations of the British Columbia Securities Commission in British Columbia, Canada.
RESEARCH AND DEVELOPMENT
To date, we have not undergone any research and development, except that required to establish and update our website.
ENVIRONMENTAL LAW COMPLIANCE
To the extent which environmental compliance may be necessary, we do not anticipate any significant compliance expense.
INSURANCE
We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party to a liability action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that could cause us to cease operations.
EMPLOYEES
Our employee at the present time is Treasurer and Secretary and director, James F. Dempsey, who will devote as much time as he determines is necessary to carry out the business of the Company and administrative services provided by Carolyn Davis.
REPORTS TO SECURITY HOLDERS
We are a reporting company under the requirements of the Exchange Act and file quarterly, annual and other reports with the Securities and Exchange Commission. Our annual report will contain the required audited financial statements. We are not required to deliver an annual report to security holders and will not voluntarily deliver a copy of the annual report to the security holders. The reports and other information filed by us will be available for inspection and copying at the public reference facilities of the Commission, 100 F Street, NE, Washington, D.C. 20549.
Copies of the material may be obtained by mail from the Public Reference Section of the Commission at 100 F Street, NE, Washington, D.C. 20549, at prescribed rates. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission maintains a World Wide Website on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission.
Effective September, 2008 under new regulatory requirements of the British Columbia Securities Commission, as an over-the-counter-bulletin-board (“OTCBB”) listed company conducting business in British Columbia, Canada, we became a reporting issuer in British Columbia and are required to file quarterly, annual and other reports on SEDAR. These regulatory filings can be viewed under the Company’s profile at www.SEDAR.com.
5
ITEM 1A RISK FACTORS
A smaller reporting company is not required to provide the information required by this item.
ITEM 1B UNRESOLVED STAFF COMMENTS
A smaller reporting company is not required to provide the information required by this item.
ITEM 2. DESCRIPTION OF PROPERTY
We do not own any real property at this time, and we conduct our business from one of our officer’s and director’s office located at Suite 404 – 815 Hornby Street, Vancouver, B.C. Canada.
The Company believes that existing office facilities are adequate for its needs through August 2013. Should the Company require additional space at that time, or prior thereto, the Company will attempt to secure space on commercially reasonable terms and without undue operational disruption.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding, nor are we aware of any pending or threatened legal proceeding against us or any officer or director which might be material to an evaluation of our management or have any potentially adverse effect upon the Company.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
Effective July 2, 2008, the Company is listed for trading on the Over-the-Counter Bulletin Board in the United States of America, since that date the shares had a low of $0.05 and a high of $0.51 per share. Our shares are quoted under the symbol “WSID.OB.” The following table sets forth, for the periods indicated, the high and low bids for our common stock on the OTC Bulletin Board based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions as reported by the OTC Bulletin Board.
Quarter Ended | OTC Bulletin Board | |
| High | Low |
November 30, 2010 | $0.50 | $0.50 |
February 28, 2011 | $0.50 | $0.50 |
May 31, 2011 | $0.50 | $0.50 |
August 31, 2011 | $0.50 | $0.50 |
November 30, 2011 | $0.50 | $0.50 |
February 28, 2012 | $0.50 | $0.50 |
May 31, 2012 | $0.50 | $0.50 |
August 31, 2012 | $0.50 | $0.50 |
There are no outstanding options or warrants to purchase, or securities convertible into, our common stock. The issuer did not sell and securities or repurchase any securities during the period of this report.
6
Holders
There are 80 holders of record for our common stock. One of our record holders is Mr. Dempsey, our director, secretary and treasurer, who holds 18,007,680 restricted shares or approximately 85% of our issued common stock.
Dividend Policy
We have never paid cash dividends on our capital stock. We currently intend to retain any profits we earn to finance the growth and development of our business. We do not anticipate paying any cash dividends in the foreseeable future.
Section 15(g) of the Securities Exchange Act of 1934
Our company's shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market, assuming one is established and maintained, of which there can be no assurance.
Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one-page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.
Securities authorized for issuance under equity compensation plans
We have no equity compensation plans and accordingly we have no shares authorized for issuance under an equity compensation plan.
ITEM 6. SELECTED FINANCIAL DATA.
A smaller reporting company is not required to provide the information required by this Item.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS
This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
Financial Condition
We are a development stage corporation and have realized limited operations and generated limited revenues from our business operations.
On July 2, 2008 the Company began trading on the over-the-counter-bulletin-board (“OTCBB”) under the symbol “WSID”. For the year ended August 31, 2012 we generated no revenues from operations and have experienced losses since inception.
7
As of the year ended August 31, 2012, the Company has bank indebtedness of $43 compared to cash of $7,088 as at August 31, 2011. The Company has disposed of its wine collections during the year ended August 31, 2009 and the Company may need to consider an alternate business model if we are to become profitable. The Company is open to new opportunities and is seeking to broaden its horizons.
At August 31, 2012, the Company estimated that it would require $600,000 to meet its operating needs for the current fiscal year, the Company has not yet satisfied its need for cash. The Company will rely on its President to determine how to raise these funds, bearing in mind the best interests of the Company.
RESULTS OF OPERATIONS
There is limited historical financial information about us upon which to base an evaluation of our performance. We are in development stage operations and have generated limited revenues. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns.
To date, the Company has not recognized significant revenue through its operations and had an accumulated deficit of $21,242,348 compared to $20,927,117 for the year ended August 31, 2011. We have no assurance that, if needed, future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
On July 2, 2008 the Company began trading on the over-the-counter-bulletin-board (“OTCBB”) under the symbol “WSID”. We have no revenues from operations, have experienced losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations.
Total loss during the year ended August 31, 2012 was $315,231 compared to $20,248,756 and this loss in 2011 was more due to debt extinguishment. Professional fees for 2012 were $48,614 versus $59,032 in 2011, an 18% decrease related to that additional accounting analysis was required on the convertible debt issued in 2011. The administrative assistant services costs of $21,600 in 2012 which is consistent with 2011 of $21,600. Interest on management fees accrued were higher at $61,168 for 2012, in 2011 interest on management fees accrued were $40,469. This increase is a result of interest charges incurred against unpaid management fees owed to a non-related party and compounding effect of interest. Management fees and bonuses amounted to $121,200 for 2012, in which were consistent with 2011. Consulting fee was $5,270 and paid for XBRL filing that was nil in 2011. Accretion of debt discount increased to $19,845 as compared to $13,147. Penalties due to the failure to file Canadian tax returns were $25,652 for the current year and were nil in 2011.
Mr. Campbell is responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. Should he not have sufficient experience, he may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the SEC which ultimately could cause you to lose your investment.
Liquidity and Capital Requirements
As of August 31, 2012, the Company had total assets of $105, and total liabilities of $991,599 and a negative working capital of $991,599. As of August 31, 2011, the Company had total assets $7,231 and total liabilities of $683,494 and negative working capital of $676,406.
The Company has no other capital resources other than the ability to use its common stock to raise additional capital. The Company’s current cash is not sufficient to sustain operations in the next 3 months. Estimated cash needed for next 12 months is $600,000. The cash will be mainly used for general administrative, corporate (legal, accounting and audit), financing and management and outstanding liabilities.
No commitments to provide additional funds have been made by management or other stockholders except as set forth above. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses. There are no assurances that we will be able to secure further funds
8
required for our continued operations. We will pursue various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
For the year ended August 31, 2012, the Company had an overall decrease in cash of $7,131. There was negative cash flow from operations of $55,720 and the company was unable to pay its expenses and liabilities out of operations as it was already in the negative. To pay expenses arising from normal operations the Company had to borrow money during the year. The Company borrowed a total of $53,589 during the year, which left its financing activities in a positive position. Cash flow from investing activities was nil.
ITEM 7A. DISCLOSURES ABOUT MARKET RISK
Foreign Currency
In addition to the U.S. Dollar, we conduct business in Canadian Dollars and, therefore, are subject to foreign currency exchange risk on cash flows primarily related to expenses. Accounting and management fees which make up approximately three quarters of our expenses are paid in US funds. Since we primarily operate in US dollars our exposure to foreign currency risk should the Canadian dollar appreciate is limited. To date we have not engaged in hedging activities to hedge our foreign currency exposure. In the future, we may enter into hedging instruments to manage our foreign currency exchange risk or continue to be subject to exchange rate risk.
Inflation
Although inflation has not materially impacted our operations in the recent past, increased inflation could have a negative impact on our operating and general and administrative expenses, as these costs could increase.
9
10
W.S. INDUSTRIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
August 31, 2012 and 2011
(Stated in US Dollars)
11
| Tel: 604 688 5421 Fax: 604 688 5132 www.bdo.ca | BDO Canada LLP 600 Cathedral Place 925 West Georgia Street Vancouver BC V6C 3L2 Canada |
![[wsindustries10k2012002.gif]](wsindustries10k2012002.gif)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders,
W. S. Industries, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of W.S. Industries, Inc. (the “Company”) (A Development Stage Company) as of August 31, 2012 and 2011 and the related statements of operations and comprehensive loss, cash flows and stockholders' equity (deficiency) for the years then ended and for the period from April 5, 2004 (Date of Inception) to August 31, 2012. 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 the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion these financial statements referred to above present fairly, in all material respects, the financial position of W.S. Industries, Inc. (A Development Stage Company) as of August 31, 2012 and 2011 and the results of its operations and its cash flows for the years then ended and for the period from April 5, 2004 (Date of Inception) to August 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has an accumulated deficit of $21,247,863 and expects to incur further losses in the development of its business. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BDO Canada LLP
Chartered Accountants |
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Vancouver, Canada |
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November 22, 2012 |
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BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. |
W.S. INDUSTRIES, INC.
(A Development Stage Company)
BALANCE SHEETS
August 31, 2012 and 2011
(Stated in US Dollars)
ASSETS | 2012 | 2011 |
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Current |
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Cash | $ - | $ 7,088 |
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Equipment – Note 3 | 105 | 143 |
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| $ 105 | $ 7,231 |
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LIABILITIES | ||
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Current |
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Bank indebtedness | $ 43 | $ - |
Accounts payable and accrued liabilities – Note 6 | 332,003 | 92,375 |
Convertible promissory notes payable – Note 8 | 535,964 | 521,119 |
Loans and advances – Note 4 | 123,589 | 70,000 |
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| 991,599 | 683,494 |
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STOCKHOLDERS’ DEFICIENCY |
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Capital stock – Note 5 |
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Common stock, $0.001 par value |
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150,000,000 Authorized (2011: 25,000,000) |
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21,088,680 Issued and outstanding (2011: 21,088,680) | 21,089 | 21,089 |
Additional paid-in capital | 20,229,765 | 20,229,765 |
Deficit accumulated during the development stage | (21,247,863) | (20,932,632) |
Accumulated other comprehensive income | 5,515 | 5,515 |
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| (991,494) | (676,263) |
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| $ 105 | $ 7,231 |
Nature of Operations and Ability to Continue as a Going Concern – Note 1
Commitment – Note 7
SEE ACCOMPANYING NOTES
2
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the years ended August 31, 2012 and 2011 and
For the period from April 5, 2004 (Date of Inception) to August 31, 2012
(Stated in US Dollars)
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| April 5, 2004 |
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| (Date of |
| Years ended | Inception) to | |
| August 31, | August 31, | |
| 2012 | 2011 | 2012 |
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| (cumulative) |
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Revenue | $ - | $ - | $ 17,285 |
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Expenses |
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Administrative services – Note 6 | 21,600 | 21,600 | 91,866 |
Bad debt expense | - | - | 8,085 |
Bank charges | 1,178 | 319 | 3,910 |
Consulting fees | 5,270 | - | 14,148 |
Courier and postage | - | - | 177 |
Depreciation | 38 | 52 | 2,136 |
Entertainment | - | - | 2,810 |
Management fees and bonus - Note 6 | 121,200 | 121,200 | 564,400 |
Office and miscellaneous | - | 54 | 12,918 |
Penalties | 25,652 | - | 25,652 |
Professional fees | 48,614 | 59,032 | 272,650 |
Registration and filing fees | 9,902 | 10,130 | 54,656 |
Rent | - | - | 17,418 |
Research and marketing | - | - | 7,500 |
Telephone | - | - | 3,027 |
Travel | - | - | 6,154 |
Wages | - | - | 6,139 |
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Loss before other items | (233,454) | (212,387) | (1,076,361) |
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Interest income | - | - | 4,327 |
Interest expense | (61,168) | (40,469) | (139,188) |
Accretion of debt discount – Note 8 | (19,845) | (13,147) | (32,992) |
Foreign exchange loss | (764) | (77) | (10,973) |
Loss on extinguishment of debt – Note 8 | - | (19,982,676) | (19,982,676) |
Impairment of investment | - | - | (10,000) |
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Net loss for the period | (315,231) | (20,248,756) | (21,247,863) |
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Other comprehensive income: |
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Foreign currency translation adjustment | - | - | 5,515 |
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Comprehensive loss for the period | $ (315,231) | $ (20,248,756) | $ (21,242,348) |
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Basic and diluted loss per share | $ (0.01) | $ (0.96) |
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Weighted average number of shares outstanding | 21,088,680 | 21,088,680 |
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SEE ACCOMPANYING NOTES
3
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the years ended August 31, 2012 and 2011 and
for the period from April 5, 2004 (Date of Inception) to August 31, 2012
(Stated in US Dollars)
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| April 5, 2004 | |
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| (Date of | |
| Years ended | Inception) to | ||
| August 31, | August 31, | ||
| 2012 | 2011 | 2012 | |
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| (cumulative) | |
Cash Flows used in Operating Activities |
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Net loss for the period | $ (315,231) | $ (20,248,756) | $ (21,247,863) | |
Items not affecting cash: |
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Bad debt expense | - | - | 8,085 | |
Depreciation | 38 | 52 | 2,136 | |
Accretion of debt discount | 19,845 | 13,147 | 32,992 | |
Loss on extinguishment of debt | - | 19,982,676 | 19,982,676 | |
Impairment of investment | - | - | 10,000 | |
Changes in non-cash working capital balances: |
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Accounts receivable | - | - | (8,085) | |
Accounts payable and accrued liabilities | 239,628 | 186,494 | 899,010 | |
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Net cash (used in) operating activities | (55,720) | (66,387) | (321,049) | |
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Cash Flows from Financing Activities |
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Loans and advances | 53,589 | 70,000 | 150,972 | |
Repayment of promissory note payable | (5,000) | - | (5,000) | |
Common stock issued | - | - | 297,186 | |
Common stock repurchased | - | - | (62,000) | |
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Net cash provided by financing activities | 48,589 | 70,000 | 381,158 | |
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Cash Flows used in Investing Activities |
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| |
Acquisition of equipment | - | - | (4,427) | |
Acquisition of investments | - | - | (64,903) | |
|
|
|
| |
Net cash used in investing activities | - | - | (69,330) | |
|
|
|
| |
Effect of exchange rate changes on cash | - | - | 9,178 | |
|
|
|
| |
Net increase (decrease) in cash during the period | (7,131) | 3,613 | (43) | |
|
|
|
| |
Cash, beginning of period | 7,088 | 3,475 | - | |
|
|
|
| |
Cash (bank indebtedness), end of period | $ (43) | $ 7,088 | $ (43) | |
|
|
|
| |
Non-Cash Transactions – Note 10 |
|
|
| |
Supplemental Information |
|
|
| |
Interest and taxes paid in cash | $ - | $ - | $ - | |
SEE ACCOMPANYING NOTES
4
|
|
|
| Deficit |
|
|
|
|
|
| Accumulated | Accumulated |
|
|
|
| Additional | During the | Other |
|
|
|
| Paid-in | Development | Comprehensive |
|
| Number | Par Value | Capital | Stage | Income | Total |
|
|
|
|
|
|
|
Issued for cash: |
|
|
|
|
|
|
Private placement agreements |
|
|
|
|
|
|
-at $0.000049 | 20,007,680 | $ 20,008 | $ (19,022) | $ - | $ - | $ 986 |
- at $0.01 | 2,000,000 | 2,000 | 18,000 | - | - | 20,000 |
- at $0.20 | 81,000 | 81 | 16,119 | - | - | 16,200 |
Foreign currency translation adjustment | - | - | - | - | 380 | 380 |
Net loss for the period | - | - | - | (11,573) | - | (11,573) |
|
|
|
|
|
|
|
Balance, August 31, 2004 | 22,088,680 | 22,089 | 15,097 | (11,573) | 380 | 25,993 |
Foreign currency translation adjustment | - | - | - | - | 1,279 | 1,279 |
Net loss for the year | - | - | - | (32,276) | - | (32,276) |
|
|
|
|
|
|
|
Balance, August 31, 2005 | 22,088,680 | 22,089 | 15,097 | (43,849) | 1,659 | (5,004) |
Issued for cash: |
|
|
|
|
|
|
Private placement agreements |
|
|
|
|
|
|
- at $0.20 | 1,000,000 | 1,000 | 199,000 | - | - | 200,000 |
Shares repurchased - at $0.20 | (2,000,000) | (2,000) | (398,000) | - | - | (400,000) |
Capital contribution | - | - | 398,000 | - | - | 398,000 |
Foreign currency translation adjustment | - | - | - | - | 4,788 | 4,788 |
Net loss for the year | - | - | - | (51,090) | - | (51,090) |
|
|
|
|
|
|
|
Balance, August 31, 2006 | 21,088,680 | 21,089 | 214,097 | (94,939) | 6,447 | 146,694 |
Issued for cash: |
|
|
|
|
|
|
Private placement agreements |
|
|
|
|
|
|
- at $0.20 | 300,000 | 300 | 59,700 | - | - | 60,000 |
Shares repurchased - at $0.20 | (300,000) | (300) | (59,700) | - | - | (60,000) |
Foreign currency translation adjustment | ‘ - | - | - | - | 785 | 785 |
Net loss for the year | - | - | - | (54,962) | - | (54,962) |
|
|
|
|
|
|
|
Balance, August 31, 2007 | 21,088,680 | 21,089 | 214,097 | (149,901) | 7,232 | 92,517 |
Foreign currency translation adjustment | - | - | - | - | (944) | (944) |
Net loss for the year | - | - | - | (128,431) | - | (128,431) |
|
|
|
|
|
|
|
Balance, August 31, 2008 | 21,088,680 | 21,089 | 214,097 | (278,332) | 6,288 | (36,858) |
|
|
|
|
|
|
|
.../cont’d
SEE ACCOMPANYING NOTES
5
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
for the period April 5, 2004 (Date of Inception) to August 31, 2012
(Stated in US Dollars)
|
|
|
| Deficit |
|
|
|
|
|
| Accumulated | Accumulated |
|
|
|
| Additional | During the | Other |
|
|
|
| Paid-in | Development | Comprehensive |
|
| Number | Par Value | Capital | Stage | Income | Total |
|
|
|
|
|
|
|
Balance, August 31, 2008 | 21,088,680 | 21,089 | 214,097 | (278,332) | 6,288 | (36,858) |
Foreign currency translation adjustment | - | - | - | - | (773) | (773) |
Net loss for the year | - | - | - | (196,545) | - | (196,545) |
|
|
|
|
|
|
|
Balance, August 31, 2009 | 21,088,680 | 21,089 | 214,097 | (474,877) | 5,515 | (234,176) |
Net loss for the year | - | - | - | (208,999) | - | (208,999) |
|
|
|
|
|
|
|
Balance, August 31, 2010 | 21,088,680 | 21,089 | 214,097 | (683,876) | 5,515 | (443,175) |
Extinguishment of debt – Note 8 | - | - | 20,015,668 | - | - | 20,015,668 |
Net loss for the year | - | - | - | (20,248,756) | - | (20,248,756) |
|
|
|
|
|
|
|
Balance, August 31, 2011 | 21,088,680 | $21,089 | $20,229,765 | $(20,932,632) | $5,515 | $(676,263) |
Net loss for the year | - | - | - | (315,231) | - | (315,231) |
Balance, August 31, 2012 | 21,088,680 | 21,089 | 20,229,765 | (21,247,863) | 5,515 | (991,494) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEE ACCOMPANYING NOTES
6
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 1
Nature of Operations and Ability to Continue as a Going Concern
The Company is in the development stage and offered wine storage and cellaring services and also invested in wine for long term appreciation and resale. The Company had disposed of its wine collection during the year ended August 31, 2009; the Company intends to explore new investment opportunities. The Company was incorporated in the State of Nevada, United States of America on April 5, 2004 and its fiscal year end is August 31. Effective July 2, 2008, the Company is listed for trading on the Over-the-Counter Bulletin Board in the United States of America.
These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At August 31, 2012, the Company had an accumulated deficit of $21,247,863 (August 31, 2011: $20,932,632) and has a working capital deficit of $991,599 (August 31, 2011: $676,406) and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but is considering obtaining additional funds by debt financing to the extent there is a shortfall from operations. While the Company is expanding its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.
Note 2
Significant Accounting Polices
The financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. Actual results may vary from these estimates.
The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Development Stage
The Company is a development stage company as defined in the Financial Accounting Standards Board (“FASB”) ASC 915-10 as it is devoting substantially all of its efforts to establish a new business and planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company’s development stage activities.
Foreign Currency Translation
The functional currency for the Company’s operations is the US dollar. Monetary assets and liabilities denominated in Canadian dollars are translated into U.S. dollars at the exchange rate prevailing at the end of the year. Non-monetary assets and liabilities are translated at the exchange rate prevailing at the respective transaction dates while revenues and expenses are translated at the average exchange rate during the year. Exchange gains and losses are recognized in the statement of operations.
7
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 2
Significant Accounting Polices – (cont’d)
Equipment and Depreciation
The Company records office equipment and computer equipment at cost and provides for depreciation at a rate of 30% per annum for computer equipment both using the declining balance method. Additions during the year are amortized at one-half rates.
Impairment of Long-lived Assets
In accordance with Financial Accounting Standards Board (“FASB”) ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the carrying values of long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes pursuant to ASC 740 “Accounting for Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The Company has adopted the provisions of ASC 740 which prescribes a recognition threshold and measurement attribute for tax positions taken or expected to be taken in a tax return.
Basic and Diluted Loss per Share
The Company reports basic loss per share in accordance with ASC 260-10, “Earnings per Share”. Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net loss position at the calculation date. At August 31, 2012 and 2011, the Company had no outstanding common stock equivalents.
Comprehensive Loss
The Company has adopted ASC 220-10 “Reporting Comprehensive Income”. Comprehensive loss is comprised of net loss and foreign currency translation adjustments.
Research and Marketing Costs
Research and marketing costs are expensed as incurred.
8
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 2
Significant Accounting Polices – (cont’d)
Financial Instruments (cont’d)
ASC 820-10, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820-10 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820-10 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1-
quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 -
observable inputs other than Level I, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 -
assets and liabilities whose significant value drivers are unobservable by little or no market
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Please refer to the table below for the fair values of our financial instruments.
Fair Value of Financial Instruments:
| August 31, 2012 | August 31, 2011 |
| ||
Assets | Carrying Amount | Fair Value | Carrying Amount | Fair Value | Fair Value Levels |
Cash | - | - | 7,088 | 7,008 | 1 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Bank indebtedness | 43 | 43 | - | - | 1 |
Convertible promissory notes payable | 535,965 | 535,964 | 521,119 | 521,119 | 2 |
Loans and advances | 123,589 | 123,589 | 70,000 | 70,000 | 2 |
9
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 2
Significant Accounting Polices – (cont’d)
Financial Instruments (cont’d)
The Company’s long-term debt is based on Level 2 inputs in the ASC 820 fair value hierarchy. Based on the borrowing rates currently available to the Company for loans with similar term. As the convertible promissory notes payable and loans and advances are due on demand or past their maturity, their fair values would approximate their carrying amounts.
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There were no assets or liabilities measured at fair value on a nonrecurring basis during the periods ended August 31, 2012 and 2011.
Accounting Standards Not Yet Effective
In June 2011, the FASB issued Accounting Standards Update 2011-05, “Presentation of Comprehensive Income (Topic 220)”. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity, among other amendments in this Update. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company is currently evaluating the impact of this update on the financial statements.
In December 2011, the FASB issued Accounting Standards Update 2011-12, “Comprehensive Income (Topic 220)”. The amendments in this Update supersede certain pending paragraphs in Accounting Standards Update 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to effectively defer only those changes in Update 2011—5 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company is currently evaluating the impact of this update on the consolidated financial statements.
10
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 3
Equipment
|
|
|
| ||
| August 31, 2012 | ||||
|
| Accumulated |
| ||
| Cost | Depreciation | Net | ||
|
|
|
| ||
Computer equipment | $ 1,940 | $ 1,835 | $ 105 | ||
| August 31, 2011 | ||
|
| Accumulated |
|
| Cost | Depreciation | Net |
|
|
|
|
Computer equipment | $ 1,940 | $ 1,797 | $ 143 |
Note 4
Loans and Advances
Loans and advances totaling $123,589 (August 31, 2011: $70,000) are unsecured, non-interest bearing and have no specific terms of repayment.
11
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 5
Capital Stock
On May 31, 2004, the Company forward split its common stock on the basis of 20.3 new for 1 old. The number of shares issued and outstanding, par value and additional paid-in capital has been restated to give retroactive effect to the forward split of its common stock.
On February 18, 2011, the Company increased its authorized share capital from 25,000,000 to 150,000,000 common shares.
Private Placements
On May 31, 2004, the Company issued 20,007,680 common shares at $0.000049 per share, for total proceeds of $986. During June 2004, the Company issued 2,000,000 common shares at $0.01 per share, for total proceeds of $20,000. During June, July, and August 2004, the Company issued 81,000 common shares at $0.20 per share, for total proceeds of $16,200. On July 20, 2006, the Company issued 1,000,000 common shares at $0.20 per share, for total proceeds of $200,000. On July 27, 2007, the Company issued 300,000 common shares at $0.20 per share, for total proceeds of $60,000.
During the year ended August 31, 2006, the Company reacquired 2,000,000 common shares from a director of the Company for $2,000 pursuant to a promissory note, which was paid prior to August 31, 2006. The fair value of this transaction was recorded at $0.20 per share and consequently the Company has received a capital contribution of $398,000.
In December 2006, the Company received an order for production from the British Columbia Securities Commission to provide certain information and documents relating to, inter alia, the sale of the above noted 1,000,000 common shares at $0.20 per share to verify the availability of the registration and prospectus exemptions relied upon by the Company in offering such shares to residents of British Columbia. To resolve the matter, the Company issued a voluntary rescission offer to rescind any previous subscriptions of these shares and offered a full refund of the subscription monies. In lieu and in place of these shares, the Company offered an equivalent number of shares for sale pursuant to the updated private placement dated June 27, 2007. Of the nine original investors included in the 1,000,000 share private placement, three of these investors accepted the rescission offer at $0.20 per share and were refunded the total amount of their investment of $60,000 and 300,000 common shares were returned to treasury and cancelled. The remaining six investors rejected the rescission offer and three new investors completed and paid the remaining portion of the private placement by the payment of $60,000.
12
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 6
Related Party Transactions
Pursuant to a resolution dated June 1, 2008, an officer of the Company who is majority shareholder of the Company is to be paid a monthly management fee of $2,600 per month. The amount may be adjusted from time to time at the discretion of the Board of Directors. During the year ended August 31, 2011, $118,300 which was accrued management fees from previous years was settled through the issuance of a convertible promissory note as described in Note 8.
During the year ended August 31, 2012, the company incurred management fees of $31,200 (2011: $31,200) payable to the director of the company. As at August 31, 2012, accounts payable included $36,600 (August 31, 2011 - $5,400) in management fees payable to the Director and officer of the company.
As at August 31, 2012, loans and advances includes an advance of $70,110 (August 31, 2011 $ - $45,000) from a director and officer of the Company.
Pursuant to a resolution dated June 1, 2008, the spouse of an officer of the Company is to be paid monthly to provide administrative services to the Company at a rate of $1,800 per month. The amount may be adjusted from time to time at the discretion of the Board of Directors. During the year ended August 31, 2011, $63,000 (2010 - $Nil) in respect of these administrative fees was settled through the issuance of a convertible promissory note as described in Note 8.
During the year ended August 31, 2012, the Company also incurred administrative fees of $21,600 (2011- $21,600) payable to the wife of an officer of the Company. As at August 31, 2012, accounts payable included $28,800 in administrative services payable to the wife of an officer of the Company.
Note 7
Commitment
On March 1, 2008 the Company entered into a Management Agreement whereby the Company is obligated to pay $7,500 per month in return for various management services. The agreement has no fixed term; however, accrued fees incur interest at a rate of 15% per annum whereby interest is compounded quarterly. During the year ended August 31, 2012 in connection with this agreement the Company has incurred $90,000 (2011 - $90,000) in management fees and accrued $61,168 (2011 - $40,469) in interest during the year.
During the year ended August 31, 2011 a portion of the balance of unpaid management fees and accrued interest $288,670 was settled by issuing a convertible promissory note as described in Note 8.
13
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 8
Convertible Promissory Notes
| August 31, 2012 | August 31, 2011 |
|
|
|
Convertible promissory note payable, bearing interest at 15% per annum compounded quarterly, came due April 1, 2012 | $ 288,670 | $ 288,670 |
Convertible promissory notes payable with a face value of $252,294 and a fair value of $219,302 at issuance and including accumulated accretion of $32,992 (August 31, 2011 - $13,147), less repayment of $5,000 (August 31, 2011 - $nil), non-interest bearing, came due April 1, 2012 | 247,294 | 232,449 |
|
|
|
| $ 535,964 | $ 521,119 |
On April 1, 2011, the Company agreed with certain of its creditors to settle $540,964 in amounts owed in respect of accrued management and administrative fees as well as loans and advances payable to those creditors in exchange for convertible promissory notes in the same amount. The Company accounted for the transaction as an extinguishment of debt and recorded a loss on extinguishment of $19,982,676 as a result of recording the new promissory notes at their fair value of $20,523,640. The fair value of the notes was determined with reference to the quoted market price of the Company’s shares multiplied by the number of common shares of the Company that would be issued upon conversion of the notes. The premium of the fair value of the notes over the principal balances totaling $20,015,668 was recorded as additional paid-in capital.
These notes matured on April 1, 2012 and bore no terms of interest except for the note in the amount of $288,670 which bears interest at the rate of 15% per annum. The non-interest bearing convertible notes with an aggregate face value of $252,294 were discounted using an estimated market discount rate of 15% and their fair value was calculated to be $219,302. The difference of $32,992 was accreted over the life to maturity using the effective interest rate method. During the year ended August 31, 2012, the Company recorded accretion expense of $19,845 (2011: $13,147) on the non-interest bearing convertible note. During the year ended August 31, 2012, the Company recorded accrued interest of $61,168 (2011: $18,960) on the interest bearing convertible note in accrued liabilities.
The terms of the convertible promissory notes allow the note holders to elect to convert the principal and accrued interest thereon at any time during the term of the notes into common shares at $0.01 per share. The conversion features of these notes are without price re-set or cash settlement clauses and therefore have not been bifurcated and recorded as a derivative liability.
At August 31, 2012, $176,300 (August 31, 2011: $181,300) of the non-interest bearing promissory notes are due to an officer of the Company and his spouse.
The convertible promissory notes came due on April 1, 2012. The Company is currently negotiating to amend the terms of the debt.
14
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 9
Income Taxes
The significant components of the Company’s deferred tax assets are as follows:
| 2012 | 2011 |
Deferred tax assets |
|
|
Net operating losses carry forward | $ 377,000 | $ 298,000 |
Less: valuation allowance | (377,000) | (298,000) |
Deferred tax assets | $ - | $ - |
|
|
|
Statutory rate applied to loss before income taxes | $ (107,000) | $ (6,885,000) |
Loss on extinguishment of debt | - | 6,819,000 |
Permanent differences | 28,000 | - |
Change in valuation allowance | 79,000 | 66,000 |
Income tax expense | $ - | $ - |
The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income. As management of the Company does not currently believe that it is more likely-than-not that the Company will receive the benefit of this asset, a valuation allowance equal to the deferred tax asset has been established at both August 31, 2012 and 2011.
At August 31, 2012, the Company has incurred accumulated net operating losses totaling approximately $1,111,000 (2011 - $877,000) which are available to reduce taxable income in future taxation years.
15
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 9
Income Taxes – (cont’d)
These losses expire as follows:
Year of Expiry | Amount | |
|
|
|
2024 |
| $11,000 |
2025 |
| 31,000 |
2026 |
| 36,000 |
2027 |
| 53,000 |
2028 |
| 43,000 |
2029 |
| 91,000 |
2030 |
| 42,000 |
2031 |
| 570,000 |
2032 |
| 234,000 |
|
| $1,111,000 |
Uncertain Tax Positions
The Company has adopted FASB ASC 740-10, "Accounting for Uncertainty in Income Taxes" ("ASC 740-10"). ASC 740-10 prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns. ASC 740-10 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions.
All of the Company’s tax returns are subject to tax examinations until respective statute of limitation. The Company currently has no tax years under examination. The Company’s tax filings are delinquent for all tax years since inception and are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in significant assessments of additional taxes, penalties and interest that are subsequently resolved with the authorities or potentially through the courts. During the year ended August 31, 2012, the Company has accrued and expensed $25,652 (2011 - $nil) in penalties and interest to delinquent tax returns. Management believes the Company has adequately provided for any ultimate amounts that are likely to result from these audits; however, final assessments, if any, could be significantly different than the amounts recorded in the financial statements.
16
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
Note 9
Income Taxes – (cont’d)
Based on the management’s assessment of ASC 740-10, it was concluded that the adoption of ASC 740-10, as of September 1, 2007, had no significant impact on the Company’s results of operations or financial position, and required no adjustment to the opening balance sheet accounts. The year-end analysis supports the same conclusion, and the Company does not have an accrual for uncertain tax positions as of August 31, 2012. As a result, tabular reconciliation of beginning and ending balances would not be meaningful. If interest and penalties were to be assessed, we would charge interest to interest expense, and penalties to other operating expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.
Note 10
Non-cash Transactions
Transactions that do not involve cash are excluded from the statement of cash flows.
During the year ended August 31, 2011, the Company settled accounts payable and accrued liabilities of $512,265 and loans and advances payable of $28,699 totaled $540,964 by the issuance of promissory notes payable.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures: Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed in the reports our files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required due to the material weaknesses in internal control over financial reporting described below
(a)
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of August 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control- Integrated Framework. Our management has concluded that, as of August 31, 2011, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles. Our management reviewed the results of their assessment with our board of directors. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes when our level of business operations increases: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) is largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial
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reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
(b) Changes in Internal Control over Financial Reporting:
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of our fiscal year ended August 31, 2012 that have materially affected or are reasonably likely to materially affect, the internal control over financial reporting.
ITEM 9 B. OTHER INFORMATION
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE;
Our officers and directors will serve until their respective successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serve until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.
As of August 31, 2012, our executive officers and directors, their age and positions are set forth below:
Name
Age Position
Fraser Campbell 53
President, Chief Executive Officer,
Chief Financial Officer. and Director
James F. Dempsey 59 Secretary, Treasurer, and Director
James F. Dempsey resigned as President, Chief Executive Officer on January 06, 2011 and Fraser Campbell appointed as President, Chief Executive Officer and CFO. Mr. Campbell is a partner and director of First Growth Management (“FGM”), a private equity company which invests both capital and varied management resources in small to mid-sized businesses with attractive growth potential. Mr. Campbell has held a number of executive positions in FGM investee companies including as President of Modu-Loc Fence Rentals Ltd., IFCO Systems Canada and PalEx Canada. Mr.Campbell is a Director of Pacific Safety Products. Mr.Campbell studied Geology and Chemistry at University of Alberta and Concordia University.
For the past decade, James F. Dempsey has worked in the Vancouver residential real estate market where he specializes in meeting the needs of Seniors. Prior to his real estate career, Jack spent many years as a professional helicopter pilot. Jack's community service work includes serving on the board of the Vancouver Abbeyfield Society.
The directors are elected for one-year terms that expire at the next annual meeting of shareholders. Executive officers are elected annually by the Board of Directors to hold office until the first meeting of the Board following the next annual meeting of shareholders and until their successors have been elected and qualified.
Family Relationships.
There are no family relationships among our officers, directors, or persons nominated for such positions.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of two meetings during the period from inception through August 31, 2012. No director attended fewer than 75% of all meetings of the Board of Directors during this period. The Company has no committees.
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Indemnification
Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
Audit Committee and Charter
We do not have a separately designated audit committee of the board or any other board-designated committee. Audit committee functions are performed by our board of directors. None of our directors are deemed independent. Our directors, Mr. Dempsey and Mr. Campbell, also hold positions as officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.
Audit Committee Financial Expert
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, at the present time, we believe the services of a financial expert are not warranted.
Code of Ethics
We have not yet adopted a corporate code of ethics.
Disclosure Committee and Charter
We do not yet have a disclosure committee and disclosure committee charter.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us from inception August 31, 2012, for our officers and directors. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.
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Summary Compensation Table | ||||||||
Names Executive Officer & Principal Position |
| Annual Compensation | Awards | Payouts | Securities | Long Term Compensation | ||
Year Ended | Salary | Bonus | Other Annual Compensation | Under SARS | Restricted Shares or Restricted Options | Other Shares or LTIP |
| |
|
| (US$) | (US$) | (US$) | (#) | (US$) | (US$) | (US$) |
James F. Dempsey Treasury & Secretary | 2012 | 31,200 | 0 | 0 | 0 | 0 | 0 | 0 |
2011 | 31,200 | 0 | 0 | 0 | 0 | 0 | 0 | |
|
|
|
|
|
|
|
| |
Fraser Campbell President & CFO | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
2011 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
We have no employment agreements with any of our officers.
The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officers.
There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
Compensation of Directors
Our directors do not receive any compensation for serving as a member of the board of directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information with respect to beneficial ownership of our common stock as of August 31, 2011 for (i) each executive officer (ii) each director, (iii) each person known to us to be the beneficial owner of more than 5% of the outstanding shares, and (iv) all directors and officers as a group.
Name and Address of Beneficial Owner1,2 | Number of Shares | Percentage of Shares |
James F. Dempsey Vancouver, BC | 18,007,680 | 85.39% |
Fraser Campbell Vancouver, BC | Nil | Nil% |
(1)
The person named above may be deemed to be a "parent" and "promoter" of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his direct stock holdings. Mr. Dempsey is the only "promoter" of our company.
(2)
Each shareholder has sole and direct ownership of his shares.
All the shares listed above were acquired by the holder in March 2004 and are restricted pursuant to Rule 144.
All Officers and Directors as a Group 18,007,680 - Direct ownership of 85% (approx.) 1 Individual.
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Changes in Control.
There are currently no arrangements, which would result in a change in control of the Company.
Our principal stockholder, James F. Dempsey, currently, owns approximately 85% of our common stock based on shares issued to him as full consideration for his payment of organizational expenses. As a result, he will have significant influence over all matters requiring approval by our stockholders, and will not require the approval of the minority stockholders in order to take any action. In addition, Mr. Dempsey will be able to elect all of the members of our Board of Directors, allowing him to exercise significant control of our affairs and management. In addition, Mr. Dempsey may affect most corporate matters requiring stockholder approval by written consent, without a duly-noticed and duly-held meeting of stockholders. In essence, Mr. Dempsey controls our Company and your vote is of little importance or consequence.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Other than the sale of shares to our officers and directors, we have not entered into any transactions with our officers, directors, persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family members of these persons. We are not a subsidiary of` any other company. Our former President, founder and Director, James F. Dempsey, was our only promoter. Mr. Dempsey provided and cash in the sum of $985.60 for his 18,007,680 shares of Common Stock.
In addition, we issued 101,000 shares to Carolyn Davis - wife of James Dempsey, and 1000 shares to each of Bob Delaney - Uncle to James Dempsey, Emily and Rebecca Dempsey - daughters of James Dempsey, Coleen Dempsey – mother of James Dempsey, for consideration of $0.20 per share.
In addition, Carolyn Davis also purchased 100,000 shares of the Company’s Common Stock, for consideration of $0.20 per share, in the offering conducted pursuant to the Company’s SB-2 registration statement declared effective by the SEC as of September 19, 2005.
Pursuant to the laws of British Columbia, Mr. Tibor Gajdics was also deemed a founder. Mr. Gajdics purchased 100,000 shares of the Company’s Common Stock, for consideration of US$.20 per share, in the offering conducted pursuant to the Company’s SB-2 registration statement declared effective by the SEC as of September 19, 2005.
Mr. Dempsey is not independent under the independence standards applicable to the small business issuer under paragraph (a)(1) of Item 407(a) of Regulation S-B.
Future transactions, if any, will be approved by a majority of the disinterested members and will be on terms no less favorable to us than those that could be obtained from unaffiliated parties.
During the year ended August 31, 2012, the company incurred management fees of $31,200 (2011: $31,200) payable to the James F. Dempsey who is Treasury and director of the company. As at August 31, 2012, accounts payable included $36,600 (August 31, 2011 $5,400) in management fees payable to the Jack Dempsey who is Treasurey and Director and officer of the company.
As at August 31, 2012, loans and advances includes an advance of $70,110 (August 31, 2011 $ - $45,000) from a James F. Dempsey as director and officer and Treasury of the Company.
Pursuant to a resolution dated June 1, 2008, the spouse of an officer of the Company is to be paid monthly to provide administrative services to the Company at a rate of $1,800 per month. The amount may be adjusted from time to time at the discretion of the Board of Directors.
During the year ended August 31, 2011, $63,000 (2010 - $Nil) in respect of these administrative fees was settled through the issuance of a convertible promissory note as described in Note 8.
During the year ended August 31, 2012, the Company also incurred administrative fees of $21,600 (2011- $21,600) payable to the wife of an officer of the Company. As at August 31, 2012, accounts payable included $28,800 in administrative services payable to the wife of an officer of the Company.
On April 1, 2011, the Company agreed with related parties to settle $181,300 in amounts owed in respect of accrued management for James F. Dempsey $118,300 and administrative fees for Carolyn Davis $63,000 in exchange for convertible promissory notes in the same amount. The Company accounted for the transaction as an extinguishment of debt new promissory notes issued at their fair value. The fair value of the notes was determined with reference to
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the quoted market price of the Company’s shares multiplied by the number of common shares of the Company that would be issued upon conversion of the notes. These convertible promissory notes became due on April 01, 2012 but company could not pay due to lack of funds and still negotiating with related parties.
These notes matured on April 1, 2012 and company is still negotiating with related parties.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
(1) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-QSBs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
2011 and 2012
$49,126 and $43,990 BDO Canada LLP
(2)
Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
2011 and 2012
$nil
BDO Canada LLP
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
2011 and 2012
$6,879 and $nil
BDO Canada LLP
(4) All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:
2011 and 2012
$nil
BDO Canada LLP
PART IV
ITEM 15.EXHIBITS
The following Exhibits 3.01-3.03 are incorporated herein by reference from our Form SB-2 Registration Statement filed with the Securities and Exchange Commission, SEC File No. 333-121044, filed on December 7, 2004. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:
Exhibit No.
Document Description
3.01
Articles of Incorporation.
3.02
Certificate of Amendment to
Articles of Incorporation
3.03
Bylaws
All other previously filed exhibits are incorporated herein by reference.
The following documents are included herein:
Exhibit No.
Document Description
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended.
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32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief Financial Officer).
99.1
Letter from British Columbia Securities Commission, dated September 26, 2007.
101
Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
Reports on Form 8-K: No reports were on filed on Form 8K during the period ended August 31, 2012
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 29, 2012
W. S. INDUSTRIES, INC.
By: /s/ Jack Dempsey
_______________________
Jack Dempsey
President and Chief Executive Officer
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