PINX:WSID Quarterly Report 10-Q Filing - 5/31/2012

Effective Date 5/31/2012

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended May 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)


604-830-6499

Registrant’s telephone number, including area code


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 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 filer o                                                      Accelerated filer o

Non-accelerated filer o                                                        Small 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


Indicate the number of shares outstanding of each of the issuer's classes of common stock as of July 12, 2012.


Title of each class

Number of shares

Common Stock, par value $0.001 per share

21,088,680





2



PART I.

FINANCIAL INFORMATION


Item 1.

Financial Statements







3



W.S. INDUSTRIES, INC.

(A Development Stage Company)

INTERIM FINANCIAL STATEMENTS

May 31, 2012

(Unaudited)

(Stated in US Dollars)






4



W.S. INDUSTRIES, INC.

(A Development Stage Company)

INTERIM BALANCE SHEETS

May 31, 2012 and August 31, 2011

(Unaudited)

(Stated in US Dollars)


ASSETS

May 31, 2012

August 31, 2011

 

 

 

Current

 

 

Cash

$          1,963

$           7,088

Prepaid expenses

2,582

-

 

4,545

7,088

Equipment – Note 2

113

143

 

$           4,658

$             7,231

 

 

 

LIABILITIES

 

 

 

Current

 

 

Accounts payable and accrued liabilities – Note 5

$       249,728

$           92,375

Convertible promissory notes payable – Note 7

535,964

521,119

Loans and advances – Note 3 and 5

118,616

70,000

 

 

 

 

904,308

683,494

 

 

 

CAPITAL DEFICIT

 

 

 

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

(21,156,019)

(20,932,632)

Accumulated other comprehensive income

5,515

5,515

 

 

 

 

(899,650)

(676,263)

 

 

 

 

$          4,658

$            7,231


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

Commitment – Note 6




SEE ACCOMPANYING NOTES





5



W.S. INDUSTRIES, INC.

(A Development Stage Company)

INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

for the three and nine months ended May 31, 2012 and May 31, 2011 and

for the period from April 5, 2004 (Date of Inception) to May 31, 2012

(Unaudited)

(Stated in US Dollars)



 

 

 

 

 

April 5, 2004

 

 

 

 

 

(Date of

 

Three months ended

Nine months ended

Inception) to

 

     May 31,

     May 31,

     May 31,

     May 31,

     May 31,

 

2012

2011

2012

2011

2012

Revenue

 

 

 

 

 

Storage rental fee

 $              -   

 $             -   

$              -   

 $             -   

$     17,285

Expenses

 

 

 

 

 

Administrative services

5,400

5,400

16,200

16,200

86,466

Bad debt expense

-

-

-

-

8,085

Bank charges

280

68

948

184

3,680

Consulting fees

1,344

-

2,688

-

11,566

Courier and postage

-

-

-

-

177

Depreciation

9

12

30

40

2,128

Entertainment

-

-

-

-

2,810

Management fees - Notes 5 and 6

30,300

30,300

90,900

90,900

534,100

Office and miscellaneous

-

-

-

-

12,918

Professional fees

7,008

10,935

42,094

41,647

266,130

Registration and filing fees

398

1,375

6,102

9,336

50,856

Rent

-

-

-

-

17,418

Research and marketing

-

-

-

-

7,500

Telephone

-

-

-

-

3,027

Travel

-

-

-

-

6,154

Wages

-

-

-

-

6,139

Loss before other items

(44,739)

(48,090)

(158,962)

(158,307)

(1,019,154)

Interest income

-

-

-

-

4,327

Interest expense

(15,961)

(10,695)

(43,764)

(28,529)

(121,784)

Accretion of debt discount - Note 7

(3,101)

(5,117)

(19,845)

(5,117)

(32,992)

Foreign exchange gain (loss)

28

(351)

(816)

(318)

(11,025)

Loss on extinguishment of debt – Note 7

-

(19,982,676)

-

(19,982,676)

(19,982,676)

Impairment of investment

 -

-

-

-

  (10,000)

Net loss for the period

(63,773)

(20,046,929)

(223,387)

(20,174,947)

(21,156,019)

Other comprehensive income (loss)

 

 

 

 

 

Foreign currency translation adjustment

-

-

-

-

5,515

Comprehensive loss for the period

$  (63,773)

   (20,046,929)

$  (223,387)

$(20,174,947)

$ (21,150,504)

Basic  and diluted loss per share

$        0.00

$            0.95

$           0.01

$              0.96

 

Weighted average number of shares outstanding

21,088,680

21,088,680

21,088,680

21,088,680

 



SEE ACCOMPANYING NOTES






6



W.S. INDUSTRIES, INC.

(A Development Stage Company)

INTERIM STATEMENTS OF CASH FLOWS

for the Nine Months Ended May 31, 2012 and 2011 and

for the period from April 5, 2004 (Date of Inception) to May 31, 2012

(Unaudited)

(Stated in US Dollars)


 

 

 

April 5, 2004

 

Nine Months Ended

(Date of inception)

 

May 31

May 31

to May 31, 2012

 

2012

2011

(cumulative)

 

 

 

 

Cash Flows used in Operating Activities

 

 

 

Net loss for the period

$        (223,387)

$     (20,174,947)

$        (21,156,019)

Items not affecting cash:

 

 

 

Bad debt expense

-

-

8,085

Depreciation

  30

40

2,128

Accretion of debt discount

19,845

5,117

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:

 

 

 

Prepaid Expenses

(2,582)

-

(2,582)

Receivables

-

-

(8,085)

Accounts payable and accrued liabilities  

157,353

151,478

816,735

 

 

 

 

Net cash used in operating activities

(48,741)

(35,636)

(314,070)

 

 

 

 

Cash Flows from Financing Activities

 

 

 

Loans and advances

48,616

33,240

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

43,616

33,240

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

(5,125)

(2,396)

1,963

 

 

 

 

Cash, beginning of period

7,088

3,475

-

 

 

 

 

Cash, end of period

$          1,963

$            1,079

$                1,963

Non-Cash Transactions

 

 

 

Supplemental Information

 

 

 

Interest and taxes paid in cash

$                 -

$                    -

$                      -


Non cash Transactions – Note 8


SEE ACCOMPANYING NOTES

W.S. INDUSTRIES, INC.





7



(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT)

for the period April 5, 2004 (Date of Inception) to May 31, 2012

(Unaudited)

(Stated in US Dollars)


 

 

 

 

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)

 

 

 

 

 

 

 

.../cont’d


SEE ACCOMPANYING NOTES



8



W.S. INDUSTRIES, INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT)

for the period April 5, 2004 (Date of Inception) to May 31, 2012

(Unaudited)

(Stated in US Dollars)

...cont’d/

 

 

 

 

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

-

-

-

(223,387)

-

(223,387)

Balance, May 31, 2012

21,088,680

$       21,089

$  20,229,765

$  (21,156,019)

$        5,515

$      (899,650)

 

 

 

 

 

 

 
















SEE ACCOMPANYING NOTES





9


W.S. INDUSTRIES, INC.

(A Development Stage Company)

May 31, 2012

NOTES TO THE INTERIM FINANCIAL STATEMENTS


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 May 31, 2012, the Company had an accumulated deficit of $21,156,019 (August 31, 2011: $20,932,632) and has a working capital deficit of $899,763 (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)

May 31, 2012

NOTES TO THE INTERIM FINANCIAL STATEMENTS


Note 2

Equipment


 

 

May 31, 2012

 

 

 

Accumulated

 

 

 

Cost

Depreciation

Net

 

 

 

 

 

 

Computer equipment

$  1,940

$  1,827

$ 113


 

 

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)

May 31, 2012

NOTES TO THE INTERIM FINANCIAL STATEMENTS


Note 4

Capital Stock (continued)


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 nine months ended May 31, 2012, the Company incurred management fees of $7,800 and $23,400 respectively (May 31, 2011: $7,800 and $23,400) payable to the director of the Company. As at May 31, 2012, accounts payable included $28,800 (August 31, 2011 - $5,400) in management fees payable to the officer of the Company.


As at May 31, 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 May 31, 2012, accounts payable included $23,400 (August 31, 2011 - $7,200) in administrative fees payable to the spouse of the officer of the Company. During the three and nine months ended May 31, 2012, the Company incurred administrative fees of $5,400 and $16,200 respectively (May 31, 2011: $5,400 and $16,200).






12


W.S. INDUSTRIES, INC.

(A Development Stage Company)

May 31, 2012

NOTES TO THE INTERIM FINANCIAL STATEMENTS


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 $67,500 during the three and nine months ending May 31, 2012 (2011 - $22,500 and $67,500) in management fees and accrued interest of $15,961 and $43,764 for the three and nine months ending May 31, 2012 (2011 - $10,695 and $28,529).


As at May 31, 2012 the balance of unpaid management fees and accrued interest thereon totals $160,427 (August 31, 2011 - $49,164) which is included in Accounts Payable and Accrued Liabilities.


Note 7

Convertible Promissory Notes


 

May 31, 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 $32,992 (August 31, 2011 - $13,147), less repayment of $5,000 (August 31, 2011 - $nil), non-interest bearing, 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 totalling $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 nine-month period ended May 31, 2012, the Company recorded accretion expense of $19,845 (2011: $5,117) on the non-interest bearing convertible note.  During the nine months period ended May 31, 2012 the Company recorded accrued interest of $43,764 (2011: $7,224) on the interest bearing convertible note in accrued liabilities.






13


W.S. INDUSTRIES, INC.

(A Development Stage Company)

May 31, 2012

NOTES TO THE INTERIM FINANCIAL STATEMENTS


Note 7

Convertible Promissory Notes (continued)


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 May 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.  


Note 8

Non-cash Transactions


Transactions that do not involve cash are excluded from the statement of cash flows. During the nine months ended May 31, 2012, the Company settled accounts payable and accrued liabilities of $nil (2011: $512,265) and loans and advances payable of $nil (2011: $28,699) by the issuance of promissory notes payable.








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 May 31, 2012 we generated no revenues from operations and have experienced losses since inception.


As of the period ended May 31, 2012 the Company has cash on hand of $1,963 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 May 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 $21,156,019 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 nine months period ended May 31, 2012 our net loss was $223,387 compared to $20,174,947 for the nine month period ended May 31, 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 nine month period ended May 31, 2012, at $42,094 up from $41,647 in 2011.  Interest were higher at $43,764 for 2012; in 2011 interest was $28,529.  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 May 31, 2012 to $19,845 from $5,117 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. In nine month period ended May 31, 2011, the Company 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. No such item has incurred in 2012.  


Liquidity and Capital Requirements


As of May 31, 2012, the Company had total assets of $4,658, and total liabilities of $904,308 and a negative working capital of $899,763. 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 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.






16



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.  


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 May 31, 2012, the end of the nine 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 May 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


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 August 31, 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





17



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:


 

Exhibit No.

Description

 

31.1

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Chief Executive Officer

 

31.2

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Chief Financial Officer

 

32.1

Section 906 Certifications under Sarbanes-Oxley Act of 2002 of Chief Executive Officer

 

32.2

Section 906 Certifications under Sarbanes-Oxley Act of 2002 of Chief Financial Officer

 

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






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:    July 12, 2012

W. S. INDUSTRIES, INC.


By: /s/ Fraser Campbell

_______________________

Fraser Campbell

President and Chief Executive Officer






PINX:WSID Quarterly Report 10-Q Filling

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PINX:WSID Quarterly Report 10-Q Filing - 5/31/2012
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