Annual Report (SEC form 10KSB)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
CURRENT OPERATIONS
The Company continues expenditures in research and development, and expansion of product line, for the development of "URECOATS 100". This Roofing Industry product, with worldwide marketability, is the first product, in a line of products utilizing recycled material in their composition, for the sealant and coating industry.
Settlements of litigation and judgments arising from discontinued former operations were a focus of Management during 1998.
As a result of pending litigation, recurring losses and limited resources, the Board of Directors approved resolutions to discontinue the activities of Designer Wear and ROK. Management believes that in order to maximize resources, the discontinuance of Branded Merchandise products operations was necessary in restructuring the Company towards profitable activities.
RESULTS OF OPERATIONS
Selling, General and Administrative costs of $329,757, consisted of $204,697 for personnel costs; $40,706 for shareholder communications and stock transfer costs; $32,000 for loan fees; $27,930 for travel; and $24,424 for miscellaneous expenses.
Research and Development expenditures of $672,228, consisted of $24,412 for materials; $372,992 for technical consultants; $33,904 for demonstrations; $80,000 for salaries; $11,025 for auto expenses; $21,427 for rent; $14,265 for telephone; $37,389 for travel and entertainment; and $76,814 for miscellaneous expenses.
The Company also incurred a loss of $(3,833,214), which included the write-off of intangibles of $3,433,750, relating to discontinued Branded Merchandise product operations.
Selling, General and Administrative costs of $310,793, consisted of $196,667 for salaries; $35,599 for rent; $7,123 for telephone costs; $20,986 for shareholder communications and stock transfer costs; $10,757 for computer services; and $39,661 for miscellaneous expenses.
Included in research and development costs of $623,784 is a charge of $515,000 arising from the initial search for the development of a product for the sealant and coating industry. Other expenditures were for demonstration of product costs.
The Company incurred $450,127 of expenses related to its discontinued Branded Merchandise product operations.
The Company was operationally inactive from August 1, 1995 through January 26, 1997. On January 29, 1997, a Special Meeting of the Board of Directors was held. Discussions centered on reorganizing the affairs of the Company, transacting business in an effort to rebuild shareholder value, settle all outstanding matters, and to bring business records up to date. During that same meeting, the Board of Directors recognized and resolved, that as a result of the permanent impairment of former operational assets, a measurement date of January 29, 1997 was established to abandon former operations effective for the year ended July 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to fund its anticipated cash requirements from the private sale of additional shares of restricted stock. In 1998, the Company raised approximately $1,279,600 through the private sale of additional shares of restricted common stock. The Company incurred $296,747 of additional debt from related parties and note holders. The Company utilized $185,008 for equipment acquisitions, $62,500 for settlement of lawsuits and $1,032,092 for operating activities. The Company continues to anticipate further sources of financing from letters of credit resulting from sales of product. In addition, the Company intends to reduce its debt and payables through the issuance of additional shares of restricted common stock.
The Company received approximately $1,127,709 from the sales of common stock and loans and expensed $147,274, net, on acquisition of intangibles, $27,789, net, on property and equipment, and approximately $951,567, net, on operating activities.
ITEM 7. FINANCIAL STATEMENTS
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URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
PAGE
------
INDEPENDENT AUDITOR'S REPORT ................................ 17
CONSOLIDATED BALANCE SHEET .................................. 18
CONSOLIDATED STATEMENTS OF OPERATIONS ....................... 19
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) .......... 20
CONSOLIDATED STATEMENTS OF CASH FLOWS ....................... 21-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................. 23-39
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
BAUM & COMPANY, P.A.
4310 SHERIDAN STREET, SUITE 202
HOLLYWOOD, FLORIDA 33021
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors and Stockholders Urecoats Industries Inc.
We have audited the accompanying consolidated balance sheet of Urecoats Industries Inc. (formerly "Winners All International, Inc.") as of December 31, 1998, and the related consolidated statement of stockholders' (deficit) for the year then ended, and the related consolidated statements of operations and cash flows for the years ended December 31, 1998 and 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Urecoats Industries Inc. as of December 31, 1998 and the results of its consolidated operations and its consolidated cash flows for the years ended December 31, 1998 and 1997, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Notes 2 and 3 to the consolidated financial statements, the Company has suffered recurring losses, has discontinued a segment of operations, and is in the continuous process of seeking additional capital, which outcome cannot currently be determined. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters are described in Note 2. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As described in Note 12, the Company is currently involved in a number of lawsuits, many of which the outcome or final settlement cannot be reasonably determined at the present time.
/s/ Joel S. Baum Joel S. Baum, C.P.A Baum & Company, P.A. Certified Public Accountants Hollywood, Florida
April 14, 1999 Page 17
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ASSETS
------
Current Assets:
Cash $ 102,801
Loans Receivable 21,042
Prepaid Expenses 39,535
----------------
Total Current Assets 163,378
----------------
Property and Equipment, Net (Notes 1,6) 207,036
----------------
Other Assets:
Intangibles, Net (Notes 1,7) 997,777
Deposits 5,227
----------------
Total Other Assets 1,003,004
----------------
Total Assets $ 1,373,418
================
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current Liabilities:
Accounts Payable and Accrued Expenses (Note 9) $ 1,460,515
Loans Payable (Note 10) 72,752
Notes Payable (Note 8) 184,453
Due to Related Parties (Note 11) 232,623
----------------
Total Current Liabilities 1,950,343
----------------
Commitments and Contingencies (Note 12) 685,114
----------------
Stockholders' (Deficit):
Preferred Stock, $1.00 Par Value, 2,000,000 Shares
Authorized; Series A Convertible, 750,000 Shares
Authorized; Issued & Outstanding, 62,500 Shares
Unconverted (Less Offering Costs of $7,465) 55,035
Common Stock $.01 Par Value, 60,000,000 shares
Authorized; 58,992,784 Shares Issued & Outstanding 589,928
Additional Paid-In-Capital 15,806,185
Accumulated (Deficit) - Discontinued Operations (13,379,285)
Accumulated (Deficit) - Development Stage Operations (4,333,902)
----------------
Total Stockholders' (Deficit) (1,262,039)
----------------
Total Liabilities and Stockholders' (Deficit) $ 1,373,418
================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
DEVELOPMENT
DEVELOPMENT STAGE
STAGE OPERATIONS
OPERATIONS (INCEPTION) CUMULATIVE
YEAR ENDED DECEMBER 31, DEVELOPMENT
DECEMBER 31, 1997 STAGE
1998 (RESTATED NOTE 3) OPERATIONS
-------------- ----------------- ------------
Revenues $ -0- $ -0- $ -0-
-------------- ----------------- ------------
Costs and Expenses:
Selling, General and
Administrative 329,757 310,973 640,730
Professional Fees 490,576 261,273 751,849
Depreciation and
Amortization 32,291 3,226 35,577
Research and Development 672,228 623,784 1,296,012
Consulting Fees 789,125 820,669 1,609,794
-------------- ----------------- ------------
Total Costs and Expenses 2,313,977 2,019,925 4,333,902
-------------- ----------------- ------------
Net(Loss)From Development
Stage Operations (2,313,977) (2,019,925) (4,333,902)
-------------- ----------------- ------------
(Loss) From Discontinued
Operations (3,833,214) (450,127)
-------------- -----------------
Net(Loss) $ (6,147,191) $ (2,470,052)
============== =================
Net(Loss)Per Common Share Basic and Dilutive Development Stage
Operations $ (.041) $ (.091)
Discontinued
Operations (.069) (.020)
-------------- -----------------
Total $ (.110) $ (.111)
============== =================
Weighted Average Shares
Outstanding 55,915,534 22,339,736
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
DECEMBER 31, 1998
Preferred Stock Common Stock
Amount Amount
--------------- --------------------
Additional
PV PV Paid-In
Shares $1.00 Shares $.01 Capital
------ ------- ---------- -------- -----------
Balance at
December 31, 1997 62,500 $55,035 30,034,679 $300,347 $12,963,253
Issuance of Stock -- -- 28,958,105 $289,581 $ 2,842,932
Net(Loss)
for the Year -- -- -- -- --
------ ------- ---------- -------- -----------
Balance at
December 31, 1998 62,500 $55,035 58,992,784 $589,928 $15,806,185
====== ======= ========== ======== ===========
Development
Discontinued Stage
Operations Operations Total
Accumulated Accumulated Stockholder's
(Deficit) (Deficit) (Deficit)
------------ ----------- -------------
Balance at
December 31, 1997 $ (9,546,071)(1) $(2,019,922)(1) $ 1,752,639
Issuance of Stock -- -- 3,132,513
Net(Loss)
for the Year (3,833,214) $(2,313,977) $ (6,147,191)
------------ ----------- -------------
Balance at
December 31, 1998 $(13,379,285) $(4,333,902) $ (1,262,039)
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