PINX:WSID Quarterly Report 10-Q Filing - 2/29/2012

Effective Date 2/29/2012

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
 
 February 29, 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 whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes  x     No  o
 

 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes  o     No  x
 

 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K

 
Yes  o     No  x
 

 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated file   o                                                                                                            Accelerated filer  o
 
Non-accelerated filer  o                                                                                                       Smaller reporting company  x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  x                        No  o
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of a specified date with the past 60 days (OTCBB).
 
On  February 29, 2012  there  the  market  value  of the  voting  stock  held by non-affiliates of the Registrant was $1,170,780.
 
Registrant’s revenues for the most recent fiscal year and for the period covered by this report are $0.00.

 

SEE ACCOMPANYING NOTES
 
1

 
 
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 February 29, 2012.

 
Title of each class
Number of shares
Common Stock, par value $0.001 per share
21,088,680

 

 

 

SEE ACCOMPANYING NOTES
 

 

 

2

 
 
ITEM 1 FINANCIAL STATEMENTS
 

 

 

 
W.S. INDUSTRIES, INC.
 
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
 
February 29, 2012
 
(Unaudited)
 
(Stated in US Dollars)
 
 

 

 


SEE ACCOMPANYING NOTES

 

 

 
3

 
 
 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
INTERIM BALANCE SHEETS
February 29, 2012 and August 31, 2011
(Unaudited)
(Stated in US Dollars)
 
 
February 29, 2012
   
August 31, 2011
 
   
(Unaudited)
       
ASSETS
           
Current
           
Cash
  $ 10,557     $ 7,088  
Prepaid expenses
    3,926       -  
      14,483       7,088  
Equipment – Note 2
    122       143  
    $ 14,605     $ 7,231  
                 
 LIABILITIES    
 
 
                 
Current
               
Accounts payable and accrued liabilities – Note 5
  $ 199,003     $ 92,375  
Convertible promissory notes payable – Note 7
    532,863       521,119  
Loans and advances – Note 3 and 5
    118,616       70,000  
                 
      850,482       683,494  
                 
STOCKHOLDERS’ DEFICIENCY
   

 

 
                 
Capital stock – Note 4
               
Common stock, $0.001 par value
               
150,000,000 Authorized
               
 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
    (21,092,246 )     (20,932,632 )
Accumulated other comprehensive income
    5,515       5,515  
                 
      (835,877 )     (676,263 )
                 
    $ 14,605     $ 7,231  

 
Nature of Operations and Ability to Continue as a Going Concern – Note 1
 
Commitment – Note 6

SEE ACCOMPANYING NOTES
 
4

 
 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
for the three and six months ended February 29, 2012 and February 28, 2011 and
for the period from April 5, 2004 (Date of Inception) to February 29, 2012
(Unaudited)
(Stated in US Dollars)

               
April 5, 2004
 
               
(Date of
 
   
Three months ended
   
Six months ended
   
Inception) to
 
   
February 29,
   
February 28,
   
February 29,
   
February 28,
   
February 29,
 
   
2012
   
2011
   
2012
   
2011
   
2012
 
Revenue
                             
Storage rental fee
  $ -     $ -     $ -     $ -     $ 17,285  
Expenses
                                       
Administrative services
    5,400       5,400       10,800       10,800       81,066  
Bad debt expense
    -       -       -       -       8,085  
Bank charges
    307       52       668       166       3,400  
Consulting fees
    1,344       -       1,344       -       10,222  
Courier and postage
    -       -       -       -       177  
Depreciation
    10       14       21       28       2,119  
Entertainment
    -       -       -       -       2,810  
Management fees - Note 5
    30,300       30,300       60,600       60,600       503,800  
Office and miscellaneous
    -       -       -       -       12,918  
Professional fees
    10,086       10,704       35,086       30,711       259,122  
Registration and filing fees
    1,404       5,260       5,704       7,961       50,458  
Rent
    -       -       -       -       17,418  
Research and marketing
    -       -       -       -       7,500  
Telephone
    -       -       -       -       3,027  
Travel
    -       -       -       -       6,154  
Wages
    -       -       -       (162 )     6,139  
Loss before other items
    (48,851 )     (51,730 )     (114,223 )     (110,266 )     (974,415 )
Interest income
    -       -       -       -       4,327  
Interest Expense
    (14,571 )     (9,495 )     (27,803 )     (17,784 )     (105,821 )
Accretion of Debt Discount - Note 7
    (8,518 )     -       (16,744 )     -       (29,891 )
Foreign exchange gain (loss)
    (422 )     (29 )     (844 )     32       (11,055 )
Loss on Extinguishment of Debt - Note-7
    -       -       -       -       (19,982,676 )
Impairment of investment
     -        -       -       -       (10,000 )
Net loss for the period
    (72,362 )     (61,254 )     (159,614 )     (128,018 )     (21,092,246 )
Other comprehensive income (loss)
    -       -       -       -       -  
Foreign currency translation adjustment
    -       -       -       -       5,515  
Comprehensive loss for the period
  $ (72,362 )     (61,254 )   $ (159,614 )     (128,018 )     (21,086,731 )
Basic loss per share
  $ 0.00     $ 0.00     $ 0.00     $ 0.00          
Weighted average number of shares outstanding
    21,088,680       21,088,680       21,088,680       21,088,680          

 

SEE ACCOMPANYING NOTES
 

 

5

 
 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the years ended February 29, 2012 and February 28 2011 and
for the period from April 5, 2004 (Date of Inception) to February 29, 2012
(Unaudited)
(Stated in US Dollars)

         
April 5, 2004
 
   
Six months ended
   
(Date of inception)
 
   
February 29, February 28,
   
to February 29,
 
   
2012
   
2011
   
2012
 
               
(cumulative)
 
Cash Flows used in Operating Activities
                 
Net loss for the period
  $ (159,614 )   $ (128,018 )   $ (21,092,246 )
Items not affecting cash:
                       
Bad debt expense
    -       -       8,085  
Depreciation
    21       28       2,109  
Accretion of debt discount
    16,744       -       29,891  
Loss on extinguishment of debt
    -       -       19,982,676  
Impairment of investment
    -       -       10,000  
Changes in non-cash working capital balances:
                       
Prepaid Expenses
    (3,926 )     -       (3,926 )
Accounts receivable
    -       -       (8,085 )
Accounts payable and accrued liabilities
    106,628       103,974       758,158  
                         
Net cash used in operating activities
    (40,147 )     (24,016 )     (305,476 )
                         
Cash Flows from Financing Activities
                       
Loans and advances
    48,616       25,000       145,999  
Repayment of Promissory Note Payable
    (5,000 )     -       (5,000 )
Common stock issued
    -       -       297,186  
Common stock repurchased
    -       -       (62,000 )
                         
Net cash provided by financing activities
    35,764       25,000       376,185  
                         
Cash Flows used in Investing Activities
                       
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
    (3,469 )     984       10,557  
                         
Cash, beginning of period
    7,088       3,475       -  
                         
Cash, end of period
  $ 10,557     $ 4,459     $ 10,557  
Non-Cash Transactions
                       
Supplemental Information
                       
Interest and taxes paid in cash
  $ -     $ -     $ -  

SEE ACCOMPANYING NOTES
 
6

 
Continued


 
                       
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
      -       -       298,000       -       -       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 )
 

SEE ACCOMPANYING NOTES
 
7

 
 
Continued
 
                     
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       (27,332 )     6,288       (36,858 )
Foreign currency translation adjustment
    -       -       -       -       (773 )     (773 )
Net loss for the year
    -       -       -       (296,545 )     -       (196,545 )
                                                 
Balance, August 31, 2009
    21,088,680       21,089       214,097       (474,877 )     5,515       (234,176 )
Net loss for the year
    -       -       -       (208,999 )     -       (208,999 )
                                                 
Balance, August 31, 2010
    21,088,680       21,089       214,097       (683,876 )     5,515       (443,175 )
Extinguishment of debt – Note 7
    -       -       20,015,668       -       -       20,015,668  
Net loss for the year
    -       -       -       (20,248,756 )     -       (20,248,756 )
                                                 
Balance, August 31, 2011
    21,088,680       21,089       20,229,765       (20,932,632 )     5,515       (676,263 )
Net loss for the period
    -       -       -       (159,614 )     -       (159,614 )
Balance, February 29, 2012
    21,088,680     $ 21,089     $ 20,229,765     $ (21,092,246 )   $ 5,515     $ (835,877 )
 

 

SEE ACCOMPANYING NOTES
 
8

 

 

 

 

 

 

 

W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 29, 2012
(Unaudited)
(Stated in US Dollars)

 

 

 

 

 

 

 

 
SEE ACCOMPANYING NOTES
 
9

 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 29, 2012
(Unaudited)
(Stated in US Dollars)
 
 
Note 1
Nature of Operations and Ability to Continue as a Going Concern
 
The Company is in the development stage and offered wine storage and cellaring services and also invested in wine for long term appreciation and resale.  The Company had disposed of its wine collection during the year ended August 31, 2009; the Company intends to explore new investment opportunities.  The Company was incorporated in the State of Nevada, United States of America on April 5, 2004 and its fiscal year end is August 31.  Effective July 2, 2008, the Company is listed for trading on the Over-the-Counter Bulletin Board in the United States of America.

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.  At February 29, 2012, the Company had an accumulated deficit of $21,092,246 (August 31, 2011: $20,932,632) and has a working capital deficit of $835,999 (August 31, 2011: $676,406) and expects to incur further losses in the development of its business.  Additionally, on April 1, 2012, convertible promissory notes with a face value of $535,594  became due.  The Company is negotiating further terms with the lenders.  These matters cast substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  Management has no formal plan in place to address this concern but is considering obtaining additional funds by debt financing to the extent there is a shortfall from operations.  While the Company is broadening its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.  It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements of the Company for the year ended August 31, 2011.  The interim results are not necessarily indicative of the operating results expected for the full fiscal year ending on August 31, 2012.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading.
 


 
10

 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 29, 2012
(Unaudited)
(Stated in US Dollars)

 



 
Note 2
Equipment
       
 
   
November 30, 2012
 
         
Accumulated
       
   
Cost
   
Depreciation
   
Net
 
Computer equipment
  $ 1,940     $ 1,818     $ 122  

         August 31, 2011
 
 
         
Accumulated
       
   
Cost
   
Depreciation
   
Net
 
Computer equipment
  $ 1,940     $ 1,797     $ 143  

Note 3
Loans and Advances
 
Loans and advances totalling $118,616 (August 31, 2011: $70,000) are unsecured, non-interest bearing and have no specific terms of repayment. (Note 5)
 
Note 4
Capital Stock
 
On May 31, 2004, the Company forward split its common stock on the basis of 20.3 new for 1 old.  The number of shares issued and outstanding, par value and additional paid-in capital has been restated to give retroactive effect to the forward split of its common stock.
 
On February 18, 2011, the Company increased its authorized share capital from 100,000,000 to 150,000,000 common shares.
 
Private Placements
 
On May 31, 2004, the Company issued 20,007,680 common shares at $0.000049 per share, for total proceeds of $986.  During June 2004, the Company issued 2,000,000 common shares at $0.01 per share, for total proceeds of $20,000.  During June, July, and August 2004, the Company issued 81,000 common shares at $0.20 per share, for total proceeds of $16,200. On July 20, 2006, the Company issued 1,000,000 common shares at $0.20 per share, for total proceeds of $200,000.  On July 27, 2007, the Company issued 300,000 common shares at $0.20 per share, for total proceeds of $60,000.
 
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.
 
11

 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 29, 2012
(Unaudited)
(Stated in US Dollars)
 
Note 4
Capital Stock (Cont’d)
 
Private Placements (Cont’)
 
In December 2006, the Company received an order for production from the British Columbia Securities Commission to provide certain information and documents relating to, inter alia, the sale of the above noted 1,000,000 common shares at $0.20 per share to verify the availability of the registration and prospectus exemptions relied upon by the Company in offering such shares to residents of British Columbia.  To resolve the matter, the Company issued a voluntary rescission offer to rescind any previous subscriptions of these shares and offered a full refund of the subscription monies.  In lieu and in place of these shares, the Company offered an equivalent number of shares for sale pursuant to the updated private placement dated June 27, 2007.  Of the nine original investors included in the 1,000,000 share private placement, three of these investors accepted the rescission offer at $0.20 per share and were refunded the total amount of their investment of $60,000 and 300,000 common shares were returned to treasury and cancelled.  The remaining six investors rejected the rescission offer and three new investors completed and paid the remaining portion of the private placement by the payment of $60,000.
 
Note 5
Related Party Transactions
 
Pursuant to a resolution dated June 1, 2008, an officer of the Company who is majority shareholder of the Company is to be paid a monthly management fee of $2,600 per month. The amount may be adjusted from time to time at the discretion of the Board of Directors. During the year ended August 31, 2011, $118,300 which was accrued management fees from previous years was settled through the issuance of a convertible promissory note as described in Note 7.  ,
 
During the three and six months ended February 29, 2012, the Company incurred management fees of $7,800 and $15,600 respectively (February 28, 2011: $7,800 and $15,600) payable to the director of the Company. As at February 29, 2012, accounts payable included $21,000 (August 31, 2011 - $5,400) in management fees payable to the officer of the Company.
 
As at February 29, 2012 loans and advances includes an advance of $70,000 (August 31, 2011 - $45,000) from the officer of the Company.
 
Pursuant to a resolution dated June 1, 2008, the spouse of an officer of the Company is to be paid monthly to provide administrative services to the Company at a rate of $1,800 per month.  The amount may be adjusted from time to time at the discretion of the Board of Directors. During the year ended August 31, 2011, $63,000 (2010 - $Nil) in respect of these administrative fees was settled through the issuance of a convertible promissory note as described in Note 7.
 
As at February 29, 2012, accounts payable included $18,000 (August 31, 2011 - $7,200) in administrative fees payable to the spouse of the officer of the Company. During the three and six months ended February 29, 2012, the Company incurred administrative fees of $5,400 and $10,800 respectively (February 28, 2011: $5,400 and $10,800).

 
12

 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 29, 2012
(Unaudited)
(Stated in US Dollars)
 
Note 6
Commitment
 
On March 1, 2008 the Company entered into a Management Agreement whereby the Company is obligated to pay $7,500 per month in return for various management services.  The agreement has no fixed term; however, accrued fees incur interest at a rate of 15% per annum whereby interest is compounded quarterly.
 
In connection with this agreement the Company has incurred $22,500 and $45,000 during the three and six months ending Feb 29, 2012 (2011 - $22,500 and $45,000) in management fees and accrued interest of $14,571 and $27,803 for the three and six months ending February 29, 2012 (2011 - $9,495 and $17,834). As at February 29, 2012 the balance of unpaid management fees and accrued interest thereon totals $121,966 which is included in Accounts Payable and Accrued Liabilities.

Note 7
Convertible Promissory Notes

   
February 29, 
2012
   
August 31,
2011
 
             
Convertible promissory note payable, bearing interest at 15% per annum compounded quarterly, due April 1, 2012
  $  288,670     $  288,670  
Convertible promissory notes payable with a face value of $252,294 and a fair value of $219,302 at issuance and including accumulated accretion of $29,891 (August 31, 2011 - $13,147), less repayment of $5,000 (August 31, 2011 - $nil), non-interest bearing, due April 1, 2012
          244,193             232,449  
                 
    $ 532,863     $ 521,119  

 
On April 1, 2011, the Company agreed with certain of its creditors to settle $540,964 in amounts owed in respect of accrued management and administrative fees as well as loans and advances payable to those creditors in exchange for convertible promissory notes in the same amount.  The Company accounted for the transaction as an extinguishment of debt and recorded a loss on extinguishment of $19,982,676 as a result of recording the new promissory notes at their fair value of $20,523,640.  The fair value of the notes was determined with reference to the quoted market price of the Company’s shares multiplied by the number of common shares of the Company that would be issued upon conversion of the notes.  The premium of the fair value of the notes over the principal balances totalling $20,015,668 was recorded as additional paid-in capital.

 
13

 
W.S. INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 29, 2012
(Unaudited)
(Stated in US Dollars)

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
 
Note 7
Convertible Promissory Notes(Cont’d)

rate of 15% and their fair value was calculated to be $219,302.  The difference of $32,992 will be accreted over the remaining life until maturity using the effective interest rate method. During the period ended February 29, 2012, the Company recorded accretion expense of $16,744 (2010: $Nil) on the non-interest bearing convertible note.  During the period ended February 29, 2012 the Company recorded accrued interest of $27,803 (2010: $Nil) on the interest bearing convertible note in accrued liabilities.
 
These notes mature on April 1, 2012 and bear no terms of interest except for the note in the amount of $288,670 which bears interest at the rate of 15% per annum.  The non-interest bearing convertible notes with an aggregate face value of $252,294 were discounted using an estimated market discount rate of 15% and their fair value was calculated to be $219,302.  The difference of $32,992 will be accreted over the remaining life until maturity using the effective interest rate method. During the period ended February 29, 2012, the Company recorded accretion expense of $16,744 (2011: $Nil) and repaid $5,000 (2011: $nil) on the non-interest bearing convertible note.  During the period ended February 29, 2012 the Company recorded accrued interest of $27,803 (2010: $Nil) 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 February 29, 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

 

ITEM 2 | MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
 
Financial Condition
 
We are a development stage corporation and have realized limited operations and generated limited revenues from our business operations.
 
On July 2, 2008 the Company began trading on the over-the-counter-bulletin-board (“OTCBB”) under the symbol “WSID”.  For the interim period ended February 29, 2012 we generated no revenues from operations and have experienced losses since inception.
 
As of the period ended February 29, 2012 the Company has cash on hand of $10,557 compared to $7,088 as at August 31, 2011.  The Company has disposed of its wine collections during the year ended August 31, 2009 and the Company may need to consider an alternate business model if we are to become profitable. The Company is open to new opportunities and is seeking to broaden its horizons.
 
At February 29, 2012 the Company estimated that it would require $400,000 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 $21,092,246 since inception. We have no assurance that, if needed, future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
 
On July 2, 2008 the Company began trading on the over-the-counter-bulletin-board (“OTCBB”) under the symbol “WSID”.  We have no revenues from operations, have experienced losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations.
 
In the three month period ended February 29, 2012 our net loss was $72,362 compared to $61,254 for the three month period ended February 28, 2011.  This difference was due to an increase in several areas.

 
15

 
 
Results of Operations - continued
 
Professional fees, which include accounting and audit fees and legal fees, increased for the six month period ended February 29, 2012, at $35,086 up from $30,711 in 2011.  Interest were higher at $27,803 for 2012; in 2011 bank charges and interest were $17,784.  This increase is a result of compounding interest charges incurred on the prior period’s unpaid management fees settled through the issuance of convertible promissory note and additional unpaid management fees for the current period. Accretion of debt discount on the non-interest bearing convertible promissory notes, increased for the period ended February 29, 2012 to $16,744 from nil in 2011. The increase related to April 1, 2011 issuance of the non-interest bearing convertible promissory notes with a face value of $252,294 and fair value of $219,302 at issuance.
 
Liquidity and Capital Requirements
 
As of February 29, 2012, the Company had total assets of $14,605, and total liabilities of $850,482. 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 $400,000.  The cash will be mainly used for general administrative, corporate (legal, accounting and audit), financing and management and outstanding liabilites.
 
No commitments to provide additional funds have been made by management or other stockholders except as set forth above.  Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses.   There are no assurances that we will be able to secure further funds required for our continued operations.  We will pursue various financing alternatives to meet our immediate and long-term financial requirements.  There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms.  If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due.  In such event, we will be forced to scale down or perhaps even cease our operations.
 
ITEM 3 | DISCLOSURES ABOUT MARKET RISK
 
Foreign Currency
 
In addition to the U.S. Dollar, we conduct business in Canadian Dollars and, therefore, are subject to foreign currency exchange risk on cash flows primarily related to expenses.   Accounting and management fees which make up approximately three quarters of our expenses are paid in US funds.   Since we primarily operate in US dollars our exposure to foreign currency risk should the Canadian dollar appreciate is limited.  To date we have not engaged in hedging activities to hedge our foreign currency exposure.  In the future, we may enter into hedging instruments to manage our foreign currency exchange risk or continue to be subject to exchange rate risk.
 
Inflation
 
Although inflation has not materially impacted our operations in the recent past, increased inflation could have a negative impact on our operating and general and administrative expenses, as these costs could increase.  
 

 
16

 
 
ITEM 4 | CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president and our secretary and treasurer, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of February 29, 2012, the end of the six month period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our president and our secretary and treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and our secretary and treasurer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended February 29, 2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 

 

 
17

 
 
PART II | OTHER INFORMATION
 
ITEM 1 | LEGAL PROCEEDINGS
 
None.
 
ITEM 1A | RISK FACTORS
 
There has been no change to the risk factors since the year ended November 30, 2011 as filed with the audited financial statements.

 
ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 
None
 
ITEM 3 | DEFAULTS UPON SENIOR SECURITIES
 
 
None
 
ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 
None
 
ITEM 5 | OTHER INFORMATION
 
 
None
 

ITEM 6 | EXHIBITS AND REPORTS ON FORM 8-K
 
There were no reports on Form 8-K filed during the quarter for which this report is filed.  The following exhibits are filed with this report:
 

 

 
18

 
 
ITEM 7 | SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date:  April 12, 2012  W. S. INDUSTRIES, INC.  
       
 
By:
/s/ Fraser Campbell  
    Fraser Campbell  
    President and Chief Executive Officer  

 

 

 

 

 

 

 

 

 

 
19

 

PINX:WSID Quarterly Report 10-Q Filling

PINX:WSID Stock - Get Quarterly Report SEC Filing of PINX:WSID stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

PINX:WSID Quarterly Report 10-Q Filing - 2/29/2012
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