10-Q 1 wwc10q-1204.txt FORM 10-Q FOR 12-04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-QSB (X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2004 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission File No. 0-17757 W-W CAPITAL CORPORATION (exact name of Registrant as specified in its charter) Nevada 93-0967457 (State or other jurisdiction of (IRS Employer Identi- incorporation or organization) fication Number) 235 Welch Street, Unit A-4, Berthoud, CO 80513 (Address of principal executive offices, including zip code) (970) 532-2506 (Registrant's telephone number, including area code) Not Applicable (Former name, address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes _X_ No ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Each Class Number of Shares Outstanding ------------------- at February 11, 2005 Common stock -------------------------- $0.01 Par Value 2,010,614 Transitional Small Business Disclosure Format (Check one): Yes ____ No __X__ W-W CAPITAL CORPORATION Index PART I FINANCIAL INFORMATION PAGE NO. ------ --------------------- -------- Item 1 Balance Sheets ------ December 31, 2004 and June 30, 2004 1 Statements of Income Three and Six Months Ended December 31, 2004 and 2003 3 Statements of Cash Flows Six Months Ended December 31, 2004 and 2003 4 Notes to Financial Statements 6 Item 2 Management's Discussion and Analysis ------ or Plan of Operations 8 Item 3 Controls and Procedures 11 ------ PART II OTHER INFORMATION ------- Item 1 LEGAL PROCEEDINGS 12 ------ Item 2 CHANGES IN SECURITIES AND SMALL ------ BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES 12 Item 3 DEFAULTS UPON SENIOR SECURITIES 12 ------ Item 4 SUBMISSION OF MATTERS TO VOTE OF ------ SECURITY HOLDERS 12 Item 5 OTHER INFORMATION 12 ------ Item 6 EXHIBITS AND REPORT ON FORM 8-K 13 ------ SIGNATURES 14 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS -----------------------------

W-W CAPITAL CORPORATION ----------------------- Balance Sheets ~~September~~December 3031, June 30, ~~2003~~2004 ~~2003~~2004 ---- ---- (Unaudited) Assets ------ Current assets: Cash $ ~~127~~245,~~748~~209 $ ~~127~~139,~~479~~109 ----------- ----------- Accounts receivable, trade 1,~~946~~646,~~143~~032 1,~~672~~760,~~198~~071 Less allowance for doubtful accounts (~~290~~163,000) (~~290~~163,000) ----------- ----------- Net accounts receivable, trade 1,~~656~~483,~~143~~032 1,~~382~~597,~~198~~071 ----------- ----------- Accounts receivable, other 15112,~~078~~592 13112,~~458~~557 Inventories: Raw materials ~~575~~486,~~674~~243 ~~528~~526,~~112~~717 Work-in-process ~~428~~496,~~913~~664 ~~375~~508,~~882~~489 Finished goods ~~655~~877,~~122~~998 ~~607~~842,~~832~~924 ----------- ----------- Total inventories 1,~~659~~860,~~709~~905 1,~~511~~878,~~826~~130 ----------- ----------- Prepaid expenses 74113,~~373~~852 4121,~~556~~602 Current portion of notes receivable, related parties --717 ~~1,261~~717 Current portion of net investment in sales- type lease 6,810 20,588 ~~18,055~~ Deferred income tax asset ~~174~~110,~~000~~300 ~~178~~125,~~000~~900 ----------- ----------- Total current assets 3,~~727~~933,~~639~~417 3,~~273~~895,~~833~~674 ----------- ----------- Property and equipment, at cost: 4,~~660~~896,~~786~~263 4,~~612~~808,~~478~~951 Less accumulated depreciation and amortization (2,~~382~~640,~~133~~153) (2,~~337~~518,~~391~~422) ----------- ----------- Net property and equipment 2,~~278~~256,~~653~~110 2,~~275~~290,~~087~~529 ----------- ----------- Other Assets: Long-term notes receivable related parties, net of current portion 19,~~812~~095 19,~~812~~095 Net investment in sales-type lease, net of current portion -- 6,810 ~~27,398~~ Loan acquisition costs, net of accumulated amortization of $813,~~200~~325 at ~~September~~December 3031, ~~2003~~2004 and $711,~~175~~275 at June 30, ~~2003~~2004 3227,~~800~~675 3329,~~825~~725 ~~Equipment deposits 175,000 175,000~~ Other assets 405,~~463~~669 4028,~~463~~416 ----------- ----------- Total other assets ~~274~~52,~~885~~439 ~~296~~84,~~498~~046 ----------- ----------- TOTAL ASSETS $ 6,~~281~~241,~~177~~966 $ 56,~~845~~270,~~418~~249 =========== ===========

The accompanying Notes are an integral part of the consolidated financial statements 1

W-W CAPITAL CORPORATION ----------------------- Balance Sheets, Continued ~~September~~December 3031, June 30, ~~2003~~2004 ~~2003~~2004 ---- ---- (Unaudited) Liabilities ----------- Current Liabilities: Accounts payable $ 1,~~685~~552,~~342~~995 $ 1,~~260~~676,~~959~~102 Line of Credit 1,626,000 1,353,000 Accrued payroll and related taxes ~~228~~179,~~266~~357 ~~205~~236,~~417~~656 Accrued property taxes 1320,~~575~~106 914,~~050~~520 Accrued interest payable 1118,~~558~~613 1410,~~898~~256 Other current liabilities 1761,~~842~~229 1495,~~444~~682 Current portion of long-term notes payable 2374,~~033,~~000 1427,~~943,~~000 Current portion of capital lease obligations 6973,000 7375,000 ----------- ----------- Total current liabilities 43,~~058~~905,~~583~~300 3,~~520~~888,~~768~~216 ----------- ----------- Other Liabilities: Long-term notes payable, net of current portion 1,~~407~~242,~~997~~871 1,~~498~~358,~~515~~052 Long-term capital lease obligations, net of current portion 1,~~130~~055,~~212~~834 1,~~147~~090,~~461~~940 Deferred income tax liability 20118,~~900~~400 20102,~~900~~200 ----------- ----------- Total other liabilities 2,~~559~~417,~~109~~105 2,~~666~~551,~~876~~192 ----------- ----------- TOTAL LIABILITIES 6,~~617~~322,~~692~~405 6,~~187~~439,~~644~~408 ----------- ----------- Stockholders' Deficit --------------------- Preferred stock: $10.00 par value, 400,000 shares authorized -- -- Common stock, $0.01 par value, 15,000,000 shares authorized; 5,553,827 shares issued at ~~September~~December 3031, ~~2003~~2004 and June 30, ~~2003~~2004 55,538 55,538 Capital in excess of par value 3,305,533 3,305,533 Accumulated deficit (~~818~~562,~~471~~395) (~~824~~651,~~182~~115) ----------- ----------- 2,~~542~~798,~~600~~676 2,~~536~~709,~~889~~956 Less 3,543,213 shares of treasury stock, at cost (2,879,115) (2,879,115) ----------- ----------- NET STOCKHOLDERS' DEFICIT (~~336~~80,~~515~~439) (~~342~~169,~~226~~159) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 6,~~281~~241,~~177~~966 $ 56,~~845~~270,~~418~~249 =========== ===========

The accompanying Notes are an integral part of the consolidated financial statements 2

W-W CAPITAL CORPORATION ----------------------- Statements of Income (Unaudited) Three Months Ended ~~September~~Six 30Months Ended December 31 December 31, ----------- ------------ 2004 2003 ~~2002~~2004 2003 ---- ---- ---- ---- Net sales $ 3,~~089~~269,~~972~~247 $ 3,~~141~~278,~~639~~339 $ 6,486,651 $ 6,368,310 Cost of goods sold 2,~~388~~538,~~868~~602 2,~~565~~455,~~668~~873 5,066,981 4,844,741 ----------- ----------- ----------- ----------- Gross profit ~~701~~730,~~104~~645 ~~575~~822,~~971~~466 1,419,670 1,523,569 ----------- ----------- ----------- ----------- Operating expenses: Selling expenses 281,~~389~~338 ~~241~~299,~~065~~557 570,744 580,946 General and administrative expenses ~~335~~264,~~685~~233 ~~331~~325,~~165~~846 563,344 661,531 ----------- ----------- ----------- ----------- Total operating expenses ~~617~~545,~~074~~571 ~~572~~625,~~230~~403 1,134,088 1,242,477 ----------- ----------- ----------- ----------- Operating earnings 84185,~~030~~074 3197,~~741~~063 285,582 281,092 ----------- ----------- ----------- ----------- Other income (expenses): Interest income 84 78 4,002 10,~~183~~261 -- Interest expense (89,~~486~~978) (86104,~~790~~913) (173,905) (194,399) Gain on sale of assets 3850 1,~~400~~988 ~~100~~850 5,388 Other income (expense), net 12,~~584~~333 1836 3,~~932~~991 2,421 ----------- ----------- ----------- ----------- Total other income (expense) (7486,~~319~~711) (84102,~~758~~011) (165,062) (176,329) ----------- ----------- ~~Earnings~~----------- ~~(loss)~~----------- Earnings before income taxes ~~and~~98,363 ~~cumulative~~95,052 ~~effect of a change in accounting principle 9~~120,~~711~~520 ~~(81~~104,~~017)~~763 Income tax ~~benefit~~expense (~~expense~~28,400) (435,~~000~~200) 32(31,~~000~~800) (39,200) ----------- ----------- ~~Earnings (loss) before cumulative effect of a change in accounting principle 5,711 (49,017) Cumulative effect of a change in accounting principle~~ -- ~~61,744~~ ----------- ----------- Net earnings $ 569,~~711~~963 $ 1259,~~727~~852 $ 88,720 $ 65,563 =========== =========== =========== =========== Earnings per common share: Basic Net earnings $ 0.03 $ 0.03 $ 0.04 $ 0.03 Weighted average number of common shares 2,010,614 2,010,614 2,010,614 2,010,614 Diluted Net earnings $ 0.03 $ 0.03 $ 0.04 $ 0.03 Weighted average number of common shares 2,010,614 2,010,614 2,010,614 2,010,614

The accompanying Notes are an integral part of the consolidated financial statements 3

W-W CAPITAL CORPORATION ----------------------- Statements of ~~Income,~~Cash ~~Continued~~Flows (Unaudited) ~~Three~~Six Months Ended ~~September~~December 3031, ------------ 2004 2003 ~~2002~~ ---- ---- ~~Earnings~~Cash ~~per~~flows ~~common~~from ~~share~~operating activities: ~~Basic~~Net ~~Earnings~~earnings $ 88,720 $ 65,563 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 123,781 122,301 Gain on sale of property and equipment (~~loss~~850) ~~before~~(5,388) ~~cumulative~~Provision ~~effect~~for ofloss aon ~~change~~accounts receivable -- 1,845 Change in ~~accounting~~assets ~~principle~~and $liabilities: ~~.00~~Accounts $receivable 134,627 (164,722) ~~.02~~Inventories 17,225 (80,160) ~~Cumulative~~Other ~~effect~~current ofand anon-current ~~change~~assets in(53,938) ~~accounting~~(54,222) ~~principle~~Accounts ~~.00~~payable ~~.03~~(123,107) 342,841 Accrued expenses and other current liabilities (61,609) 60,066 ---------~~----~~ ---------~~----~~ Net ~~earnings~~cash $provided ~~.00~~by $operating ~~.01~~activities ~~=============~~124,849 ~~=============~~288,124 ~~Weighted~~--------- ~~average~~--------- ~~number~~Cash offlows ~~common~~from ~~shares~~investing ~~2,010,614~~activities: ~~2,010,614~~Proceeds ~~Diluted~~from ~~Earnings~~sale ~~(loss)~~of ~~before~~property ~~cumulative~~and ~~effect~~equipment of850 a29,400 ~~change~~Proceeds infrom ~~accounting~~stockholders' ~~principle~~notes $receivable ~~.00~~-- $1,261 ~~(.02)~~Purchase ~~Cumulative effect~~ of aproperty ~~change~~and inequipment ~~accounting~~(28,082) ~~principle~~(36,111) ~~.00 .03~~ ---------~~----~~ ---------~~----~~ Net ~~earnings~~cash $used ~~.00~~in $investing ~~.01~~activities ~~=============~~$ ~~=============~~(27,232) ~~Weighted~~$ ~~average number of common shares 2~~(5,~~010,614~~450) ~~2,010,614~~--------- ---------

(Continued on following page) 4

W-W CAPITAL CORPORATION ----------------------- Statements of Cash Flows, Continued (Unaudited) ~~Three~~Six Months Ended ~~September~~December 3031, ------------- 2004 2003 ~~2002~~ ---- ---- Cash flows from ~~operating~~financing activities: Net ~~earnings~~short $term ~~5,711~~borrowings (repayments) $ 12272,~~727~~493 ~~Adjustments~~$ ~~to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 62,271 60,349 Gain on sale of property and equipment~~ (365,~~400~~041) ~~(100)~~Payments ~~Provision for loss~~ on ~~accounts~~notes ~~receivable 3~~payable,~~322~~ --financial ~~Write~~institutions ~~off of negative goodwill -- (61,744) Change in assets~~ and ~~liabilities:~~government ~~Accounts~~entities ~~receivable~~ (~~259~~226,~~212~~904) ~~95,764 Inventories~~ (~~147~~196,~~883~~842) ~~(53,078)~~Payments ~~Other~~on ~~current~~capital ~~and~~leases ~~non-current assets~~ (3037,~~437~~106) (6939,~~289~~370) ~~Accounts~~--------- ~~payable~~--------- ~~424,383~~Net ~~187,138~~cash ~~Accrued~~provided ~~expenses~~(used) ~~and~~by ~~other~~financing ~~current~~activities ~~liabilities 27~~8,~~432~~483 (10301,~~699~~253) --------- --------- Net increase (decrease) in cash ~~provided~~106,100 by(18,579) ~~operating~~Cash ~~activities~~at 82beginning of period 139,~~187~~109 ~~161~~127,~~068~~479 --------- --------- Cash ~~flows~~at ~~from~~end ~~investing~~of ~~activities:~~period ~~Purchases~~$ of245,209 ~~property~~$ ~~and~~108,900 ~~equipment~~========= ~~(2,831)~~========= ~~(16,791)~~Supplemental ~~Proceeds~~Information: ~~from~~Cash ~~stockholders'~~paid ~~notes~~during ~~receivable~~the 1period for interest $ 165,~~261~~547 --$ ~~Proceeds~~192,357 ~~from~~Installment ~~sale~~loans ofto acquire property and equipment 16$ 59,~~900~~230 ~~100~~$ ~~---------~~75,481 ~~---------~~Cash ~~Net~~paid ~~cash~~during ~~provided~~the ~~(used)~~period byfor ~~investing~~income ~~activities~~taxes $ 151,~~330~~663 $ ~~(16~~8,~~691) --------- ---------~~020

The accompanying Notes are an integral part of the consolidated financial statements 5 W-W CAPITAL CORPORATION ----------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- NOTE 1 - BASIS OF PRESENTATION ------------------------------ The accompanying unaudited financial statements include the accounts of W-W Capital Corporation (the Company) and its wholly owned subsidiary W-W Manufacturing Co., Inc. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. They do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and changes in cash flows in conformity with generally accepted accounting principles for full-year financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to W-W Capital Corporation's financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2004. In the opinion of management, all adjustments (consisting of normal recurring accrual basis adjustments) considered necessary for a fair presentation have been reflected in the accompanying financial statements. Operating results for the three and six month periods ended December 31, 2004, are not necessarily indicative of the results that may be expected for the year ended June 30, 2005. The Company has incurred operating losses two out of the past four fiscal years, has a weak working capital surplus of $28,117 and has an accumulated deficit of $80,439 as of December 31, 2004. The report of independent auditors on the Company's June 30, 2004 audited financial statements includes an explanatory paragraph indicating there is substantial doubt about the Company's ability to continue as a going concern. The Company believes that it has developed a viable plan to address these issues and that its plan will enable the Company to continue as a going concern for the next 12 months. This plan includes the realization of revenues from the commercialization of new products and the reduction of certain operating expenses. Although the Company believes that its plan will be realized, there is no assurance that these events will occur. The financial statements do not include any adjustments to reflect the uncertainties related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. NOTE 2 - NET BASIC EARNINGS PER SHARE ------------------------------------- The net basic earnings per share amount included in the accompanying statements of income have been computed using the weighted-average number of shares of common stock outstanding and the dilutive effect, if any, of common stock equivalents existing during the applicable three and six month periods. 6 NOTE 3 - RELATED PARTY TRANSACTION ---------------------------------- On June 30, 1989, W-W Land & Cattle, a partnership owned by Millard T. Webster, a director of the Company, Mickey J. Winfrey, a former officer of the Company and Terry L. Webster, a brother of Mr. Millard T. Webster and Ms. Winfrey, executed a promissory note for the amount of $96,424 in favor of the Company's subsidiary, W-W Manufacturing Co., Inc. Interest was payable annually at 9% per annum and the principal was due on demand. On June 30, 1993, Ms. Winfrey satisfied her obligations under this note by paying to the Company the amount of $11,361. As of December 31, 2004, $30,425 remained payable under this note by Millard T Webster and Terry L. Webster. A summary of the related party transactions that effect the Company's statements of income for the three and six months ended December 31, 2004 and 2003, respectively, is as follows: Three Months Ended Six Months Ended December 31, December 31, ------------ ------------ Transactions with related parties 2004 2003 2004 2003 --------------- ---- ---- ---- ---- Interest income $ -- $ -- $ -- $ 1,261 7 ITEM 2. Management's Discussion and Analysis or Plan of Operations ------------------------------------------------------------------ The Company is a manufacturer of livestock equipment, including a full line of cattle and equine handling and confinement equipment used by farmers, ranchers, rodeos and universities. The Company's activities are performed through three units: W-W Manufacturing located in Thomas, Oklahoma, W-W Livingston located in Livingston, Tennessee, and W-W Paul Scales located in Duncan, Oklahoma. Forward-Looking Statements -------------------------- In addition to historical information, this Quarterly Report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and are thus prospective. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, competitive pressures, changing economic conditions, factors discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and other factors, some of which will be outside the control of management. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should refer to and carefully review the information described in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004, along with future documents the Company files with the Securities and Exchange Commission. Critical Accounting Policies and Estimates ------------------------------------------ The Company's significant accounting policies are described in Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) to the Annual Report on Form 10-K for the year ended June 30, 2004. The accounting policies used in preparing the interim financial statements included in this report are the same as those described in the Company's Annual Report. Readers are strongly encouraged to review the Company's significant accounting policies in connection with their review of this report. Analysis of Results of Operations --------------------------------- The Company had net income of $88,720 and earnings per share of $0.04 for the six months ended December 31, 2004 as compared to $65,563 and $0.03 for the same period of 2003. For the three-month period ended December 31, 2004, the Company had net income of $69,963 and earnings per share of $0.03 as compared to $59,852 and $0.03 for the same period of 2003. Net sales increased 1.9% to $6,486,651 for the six-month period ended December 31, 2004, compared to $6,368,310 for 2003. For the three months ended December 31, 2004, net sales decreased slightly from $3,278,339 in 2003 to $3,269,247 in 2004. Net sales performance, as discussed below, varied from plant to plant. Sales at the W-W Manufacturing plant decreased $61,409, or 1.3%, from $4,760,472 for the six months ended December 31, 2003 to $4,699,063 in 2003. The slight decrease in sales is attributable to several large nonrecurring fairground projects sold during the first quarter of fiscal 2004. Management believes with the continued improvement in the economy along with an enhanced marketing approach, sales will be consistent with prior years levels. 8 Sales at the W-W Livingston plant increased $28,321, or 3.1%, from $911,155 for the six months ended December 31, 2003 to $939,476 in 2004. During June 2003 management made the decision to market a new inline pre-galvanized product from the Livingston plant. This product allows for manufacturing without problems related to paint that have been a reason for reduced sales in past years. This new product has allowed the Livingston plant to remain open. Management continues to evaluate the Livingston plant on a regular basis to determine the cost effectiveness of continued production. Sales at the W-W Paul plant increased $151,429, or 21.7%, from $696,683 for the six month period ended December 31, 2003 to $848,112 for 2004. The Duncan location's primary manufacturing responsibilities are livestock scales and hydraulic squeeze chutes as well as a supply source to the Thomas location. The increase in sales was primarily the result of enhanced marketing efforts to existing customers. With a continuation of the improved economy and a new company wide emphasis on marketing, management believes that sales at the Duncan location will increase during the remainder of fiscal 2005. Gross margins as a percentage of sales decreased for the six months ended December 31, 2004 to 21.9% as compared to 23.9% in 2003. For the three months ended December 31, 2004 gross margins as a percentage of sales decreased from 25.1% in 2003 to 22.3% in 2004. This decrease of 2.0% is the result of increased steel costs during the past year. Management does not believe the entire increase in cost can be passed on to customers without a large reduction in sales and anticipates a continued reduction in gross margin percentages because of the volatile steel market. Also, while the Company attempts to pass on the increased cost to customers through price adjustments and surcharges, these price increases tend to lag behind the increased steel costs. Selling expenses as a percentage of sales decreased for the six months ended December 31, 2004 from 9.1% in 2003 to 8.8% in 2004. For the three months ended December 31, 2004 selling expenses as a percentage of sales decreased from 9.1% in 2003 to 8.6% in 2004. Funds expended on selling efforts decreased $10,202 during the six-month period ended December 31, 2004 compared to 2003. Management will continue to evaluate selling expense in an effort to keep costs in line as a percentage of sales, as we continue to grow markets and market share with new products. General and administrative expense as a percentage of sales decreased for the six-month period ended December 31, 2004 from 10.4% in 2003 to 8.7% for the same period in 2004. For the three months ended December 31, 2004 general and administrative expense as a percentage of sales decreased from 9.9% in 2003 to 8.1% in 2004. Overall dollars spent on general and administrative expenses decreased $98,187. Management believes that general and administrative expenses will continue to be reduced for the remainder of fiscal 2005 due to certain cost evaluations and related cost cutting measures implemented during the first quarter of fiscal 2005. Interest expense decreased $20,494, or 10.5%, for the six months ended December 31, 2004 from $194,399 in 2003 to $173,905 for the same period of 2004. Interest expense for the three months ended December 31, 2004 decreased to $89,978 from $104,913 for the same three-month period of 2003. The decrease reflects interest rate incentives earned by the Company that reduced the interest rate charged on the revolving line of credit. If profits and cash flow improve, the Company plans to reduce debt, thereby reducing overall interest expense. 9 Liquidity and Capital Resources ------------------------------- The Company's principal sources of liquidity are from working capital and borrowings under its credit facilities. The Company generated funds from operations of $124,849 during the six-month period ended December 31, 2004 primarily caused by net earnings and a decrease in accounts receivable and inventory balances offset by a decrease in accounts payable balances. The Company used cash from investing of $27,232 for the purchase of certain equipment. Financing activities resulted in a slight increase in borrowings of $8,483 for the six months ended December 31, 2004. As the Company moves into the second half of fiscal 2005, it anticipates increased sales growth with a decline in borrowings. The Company's working capital increased from a deficit of $261,918 at December 31, 2003 to a surplus of $28,117 at December 31, 2004. This improvement is primarily due to an increase in cash and inventory levels. The report of independent auditors on the Company's June 30, 2004 financial statements includes an explanatory paragraph indicating there is substantial doubt about the Company's ability to continue as a going concern. The Company believes that it has developed a viable plan to address these issues and that its plan will enable the Company to continue as a going concern for the next 12 months. Specifically, Management's plans and objectives to improve the financial condition of the Company include the following: o Grow sales of new and existing customers offering the application of the Company's strengths, which are precision manufacturing, quality assembly services and superior product durability and value. o Focus on products and capabilities that are a source of unique value for customers and a reflection of what the Company does best. o Pursue a course of investing in new product development which management believes will lead to new value propositions in the future, establishing a reputation and expertise for product development. o Focus on proprietary products, developing long-term sustainable comparative advantages over our competitors. o Improve productivity, improve cost control, and manage expenses in proportion with the Company's current sales levels to achieve and maintain positive cash flow. o Strategically add key managers and operational expertise as required in a prudent and responsible manner. There can be no assurance that management will be able to accomplish any of the above plans and objectives or achieve the necessary improvements in its cash flows and financial position to meet its obligations as they become due. Nor can there be any assurance that the Company's financial performance will improve even if the above strategy is fully implemented. The Company's ability to continue operations is dependent on its ability to maintain sales with adequate margins, manage expenses, and maintain credit facilities with a lending institution. Accordingly, there can be no assurance that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the uncertainties related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. 10 Notwithstanding the fact that the Company's Auditors have expressed a concern regarding the Company's ability to continue as a going concern, the Auditor's going concern opinion did not result in a violation of any covenant under the Company's existing credit facilities and the Company's current line of credit was extended until October 31, 2005. There can be no assurance that issues which caused the Auditor's going concern opinion will not have an adverse impact on the Company's ability to negotiate terms favorable to the Company in conjunction with any future extensions. The inability of the Company to negotiate an extension of, or replace, its existing line of credit would have a material adverse impact on the Company's operations and ability to continue as a going concern. The Company believes that it will improve in both sales and operating earnings throughout fiscal 2005, and that it will be able to negotiate an extension of, or to replace, its existing line of credit, although no assurances can be given that these goals will be met. With increased working capital and the Company's existing line of credit, the Company feels it has an adequate supply of liquidity to meet its needs. Off-Balance Sheet Arrangements and Contractual Obligations ---------------------------------------------------------- The Company has no off-balance sheet arrangements or significant guaranties to third parties not fully recorded in our balance sheets or fully disclosed in the notes to our consolidated financial statements. The Company's significant contractual obligations include our debt agreements. Certain financial and operating restrictions under these agreements are fully disclosed in notes 8, 9 and 10 of the audited consolidated financial statements at June 30, 2004 contained in the Company's Annual Report on Form 10-K. ITEM 3. Controls and Procedures -------------------------------- As of December 31, 2004, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting him to material information relating to the Company (including its consolidated subsidiary) required to be included in the Company's periodic Securities Exchange Commission (SEC) filings. Disclosure controls and procedures are defined as controls and procedures that are designed to ensure that information required to be disclosed by the Company in reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Subsequent to the date of the evaluation, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls, nor were any corrective actions required with regard to significant deficiencies and material weaknesses. 11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ----------------- Not Applicable ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES ------------------------------------------------------------ Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES ------------------------------- Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- On January 28, 2005, the Company held its annual meeting of stockholders, and the following maters were voted upon. (A) Election of the Board of Directors: Nominee For Withheld ------- --- -------- Harold Gleason 1,158,643 4,840 Millard T. Webster 1,158,333 5,150 L.M. "Mick" McCarty 555,071 608,412 (1) Randall Kourt 1,158,893 4,590 Tim Frymire 1,158,893 4,590 (1) On January 26, 2005 L.M. "Mick" McCarty withdrew his name from the list of nominees for election to the Board of Directors. (B) Proposal to elect Brock and Company, P.C., of Fort Collins, Colorado as the Independent Certified Public Accountants of the Corporation: For Against Abstain --- ------- ------- 1,156,093 2,000 5,390 ITEM 5. OTHER INFORMATION ----------------- Not Applicable 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits Exhibit Number Document ------ -------- 31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. 31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. 32.1 Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 32.2 Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. (b) Reports on Form 8-K None. 13 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. W W CAPITAL CORPORATION (Registrant) Dated: February 15, 2005 By: /s/ Harold Gleason ----------------------------------------- Harold Gleason, President, CEO and Chairman Dated: February 15, 2005 By: /s/ Michael S. Dick ----------------------------------------- Michael S. Dick, Chief Financial Officer 14 EXHIBIT INDEX Exhibit Number Document ------ -------- 31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. 31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. 32.1 Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 32.2 Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Harold Gleason, Chairman, President and Chief Executive Officer of W W Capital Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of W W Capital Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure control and procedures, as of the end of the period covered by this report based on such evaluation: and c. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 15, 2005 By: /s/ Harold Gleason ---------------------------------- Harold Gleason, Chairman, President and Chief Executive Officer Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael S. Dick, Chief Financial Officer of W W Capital Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of W W Capital Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure control and procedures, as of the end of the period covered by this report based on such evaluation: and c. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 15, 2005 By: /s/ Michael S. Dick ---------------------------------------- Michael S. Dick, Chief Financial Officer Exhibit 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-QSB of W W Capital Corporation (the "Company") for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Harold Gleason, Chairman, President and Chief Executive Officer of the Company, certify, based on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 15, 2005 By: /s/ Harold Gleason ------------------------------------ Harold Gleason, Chairman, President and Chief Executive Officer Exhibit 32.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-QSB of W W Capital Corporation (the "Company") for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael S. Dick, Chief Financial Officer of the Company, certify, based on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 15, 2005 By: /s/ Michael S. Dick ---------------------------------------- Michael S. Dick, Chief Financial Officer

Statements of Cash Flows, Continued (Unaudited) Three Months Ended September 30, ------------- 2003 2002 ---- ---- Cash flows from financing activities: Payments on notes payable, financial institutions and government entities $(2,892,535) $(3,233,341) Proceeds from notes payable 2,816,536 3,067,657 Payment on capital leases (21,249) (16,183) ----------- ----------- Net cash used by financing activities (97,248) (181,867) ----------- ----------- Net increase (decrease) in cash 269 (37,490) Cash at beginning of period 127,479 137,948 ----------- ----------- Cash at end of period $ 127,748 $ 100,458 =========== =========== Supplemental Information: Cash paid during the period for interest $ 92,827 $ 98,035 Installment loans to acquire property and equipment $ 75,479 $ 229,519 Cash paid during the period for income taxes $ 920 $ --

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