U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSBA
Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Quarter Ended September 30, 2001 Commission File No. 0-9416
WCM CAPITAL, INC.
(FORMERLY FRANKLIN CONSOLIDATED MINING CO., INC.)
(Exact name of registrant as specified in its charter)
Delaware #13-2879202
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 343, Millburn, New Jersey 07041
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area code (212) 344-2828
The Number of Shares Outstanding of Common Stock
$.01 Par Value, at September 30, 2001 1,318,767
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 [ ]
ACCOUNTANT'S REVIEW REPORT
To the Board of Directors
WCM CAPITAL, INC.
Springfield, New Jersey
We have reviewed the accompanying Balance Sheet of WCM Capital, Inc. as of
September 30, 2001 and the related Statement of Operations and Cash Flows for
the nine months then ended in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. We did not audit the accumulated amounts from inception
through December 31, 1997, which included an accumulated deficit of
($18,638,659) as of December 31, 1997. Those amounts were audited by other
auditors whose reports have been furnished to us and our opinion insofar as it
relates to those accumulated amounts is based solely on the report of the other
auditors. The financial statements of WCM Capital, Inc. as of December 31, 1997
were audited by other auditors whose report on those statements dated November
14, 2000 included an explanatory paragraph that described the going concern
uncertainty discussed in Note 2 to the financial statements. All information
included in these financial statements is the representation of the management
of WCM Capital Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review and the reports of other auditors, we are not aware of
any material modifications that should be made to the September 30, 2001
financial statements in order for them to be in conformity with generally
accepted accounting principles with the following exceptions.
The Security and Exchange Commission has determined that the financial
statements for the years ended December 31, 1998 through 1999 were considered
unaudited. Therefore, the years 1998 through 1999 are presently being audited by
IWA Financial Consulting LLC and the final statements for the year ended
December 31, 2000 audited by Polakoff Weismann Leen LLC are being amended, as
are the financial statements for the quarters ended March 31, 2001 and June 30,
2001. It cannot be determined at this date whether the financial statements
being audited or reviewed will affect the review for the quarter ending
September 30, 2001. Therefore, the financial statements for the quarter ending
September 30, 2001 are subject to change.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company is an exploration stage enterprise whose
operations have generated recurring losses and cash flow deficiencies from
inception, and as of September 30, 2001, has a substantial working capital
deficiency. As a result, it was in default with respect to payments on several
notes and convertible debentures and is wholly dependent on outside funding to
finance current operations. Such matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans concerning
these matters are also described in Note A. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
The financial statements for WCM Capital, Inc. for the period ended
September 30, 2000 were reviewed by other accountants. Therefore, we do not make
any representation or assurance about them.
IWA FINANCIAL CONSULTING LLC
November 15, 2001
F-1
WCM CAPITAL INC.
(An Exploration Stage Company)
BALANCE SHEETS
ASSETS
September 30,
--------------------
2001 2000
-------- -------
Property and equipment - at cost $525,000 525,000
Less: Accumulated depreciation and amortization 144,375 91,875
-------- -------
Net property and equipment 380,625 433,125
-------- -------
Other assets -
Mining reclamation bonds 141,853 139,071
-------- -------
Total $522,478 572,196
======== =======
See auditors' reports and notes to financial statements
F-2
WCM CAPITAL INC.
(An Exploration Stage Company)
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
2001 2000
------------ -----------
Current liabilities:
Accounts payable and accrued expenses $ 1,877,141 863,118
Payroll and other taxes --
Convertible debentures 145,000 145,000
Notes payable:
Related companies and others 297,029 218,965
U.S. Mining Inc. - related company 72,814 1,721,855
------------ -----------
Total current liabilities 2,391,984 2,948,938
------------ -----------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share; 40,000,000 shares
authorized; 1,318,767 shares issued and outstanding 13,188 13,188
Additional paid-in capital 18,390,360 18,390,360
Deficit accumulated during the exploration stage (20,273,054) (20,780,290)
------------ -----------
Total stockholders' equity (1,869,506) (2,376,742)
------------ -----------
Total $ 522,478 572,196
============ ===========
See auditors' reports and notes to financial statements
F-3
WCM CAPITAL INC.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
December 1,
1977
(Inception)
Nine months ended Three months ended through
September 30, September 30, September 30,
2001 2000 2001 2000 2001
----------- ---------- ---------- ---------- -----------
Revenues:
Sales $ -- -- -- -- 876,082
Interest income 2,098 2,055 700 685 555,946
Forgiveness of debt -- -- -- -- 1,768,829
Other income -- -- -- -- 79,397
----------- ---------- ---------- ---------- -----------
Total 2,098 2,055 700 685 3,280,254
----------- ---------- ---------- ---------- -----------
Expenses:
Mine expenses and environmental remediation costs 5,585 48,258 5,585 11,372 3,673,744
Write down of inventories -- -- -- -- 223,049
Loss on sale/write down of mining, milling and
other property and equipment -- -- -- 6,113,901
Depreciation and depletion 39,375 39,375 13,125 13,125 2,054,918
General and administrative 73,334 221,952 13,687 74,099 7,750,687
Interest 46,753 125,460 15,280 43,105 1,572,861
Amortization of debt issuance -- -- -- 683,047
Loss on settlement of litigation -- -- -- -- 100,000
Loss on sale of property -- -- -- -- 225,000
Equity in net loss and settlement of claims
of Joint Venture -- -- -- 1,059,971
Other -- -- -- -- 96,130
----------- ---------- ---------- ---------- -----------
Total 165,047 435,045 47,677 141,701 23,553,308
----------- ---------- ---------- ---------- -----------
Net loss $ (162,949) (432,990) (46,976) (141,016) (20,273,054)
=========== ========== ========== ========== ===========
Loss per common share $ (0.12) (0.33) (0.04) (0.11)
=========== ========== ========== ==========
Weighted average shares outstanding 1,318,767 1,318,767 1,318,767 1,318,767
=========== ========== ========== ==========
See auditors' reports and notes to financial statements
F-4
WCM CAPITAL INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
December 1,
1977
(Inception)
Nine months ended through
September 30, September 30,
2001 2000 2001
--------- -------- -----------
Cash flows from operating activities:
Net loss $(162,949) (432,990) (20,273,054)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and depletion 39,375 39,375 2,054,918
Forgiveness of debt -- -- (1,768,829)
Provision for uncollectible account -- -- 350,000
Write down of mining, milling and the other
property and equipment -- -- 6,113,901
Amortization of debt issuance expense -- -- 683,047
Loss on sale of equipment -- -- 225,000
Value of common stock issued for:
Services and interest -- -- 1,934,894
Settlement of:
Litigation -- -- 100,000
Claims by joint venture partner -- -- 936,000
Compensation resulting from stock options granted -- -- 311,900
Value of stock options granted for services -- -- 112,500
Equity in net loss of joint venture -- -- 123,971
Other -- -- (7,123)
Changes in operating assets and liabilities: --
Interest accrued on mining reclamation bonds (2,097) (2,055) (16,853)
Accounts payable and accrued expenses 52,857 144,110 2,139,358
Payroll and other taxes -- -- (29,960)
--------- -------- -----------
Net cash used in operating activities (72,814) (251,560) (7,010,330)
--------- -------- -----------
Cash flows from investing activities:
Purchases and additions to mining, milling and other
property and equipment -- -- (5,120,354)
Purchases of mining reclamation bonds, net -- -- (125,000)
Deferred mine development costs and other expenses -- -- (255,319)
--------- -------- -----------
Net cash used in investing activities -- -- (5,500,673)
--------- -------- -----------
See auditors' reports and notes to financial statements
F-5
WCM CAPITAL INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
December 1,
1977
(inception)
Nine months ended through
September 30, September 30,
2001 2000 2001
--------- --------- -------------
Cash flows from financing activities:
Issuance of:
Common stock -- -- 8,758,257
Underwriter's stock warrants -- -- 100
Commissions on sales of common stock -- -- (381,860)
Purchases of treasury stock -- -- (12,500)
Payments:
Deferred underwriting costs -- -- (63,814)
Debt issuance expenses -- -- (164,233)
Repayments:
Other notes and loan payables -- -- (120,000)
Loans from affiliate -- -- (48,661)
Proceeds:
Exercise of stock options -- -- 306,300
Advances from joint venture partner -- -- 526,288
Other notes and loans payable 72,815 251,560 2,331,189
Loans from affiliate -- -- 55,954
Issuance of convertible debentures and notes -- -- 1,505,000
Advances to joint venture partner -- -- (181,017)
--------- -------- ----------
Net cash provided by financing activities 72,815 251,560 12,511,003
--------- -------- ----------
Increase (decrease) in cash -- -- --
Cash Beginning -- -- --
========= ======== ==========
Cash Ending -- -- --
========= ======== ==========
Supplemental disclosure of cash flow data -
Interest paid -- -- 299,868
========= ======== ==========
See auditors' reports and notes to financial statements
F-6
WCM CAPITAL INC.
(An EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE A - BASIS OF PRESENTATION/GOING CONCERN UNCERTAINTY:
The accompanying financial statements have been prepared assuming WCM
Capital Inc. (The "Company") will continue as a going concern.
However, the Company has had recurring losses and cash flow
deficiencies since inception. As of September 30, 2001 and 2000, the
Company did not have any cash balances, an accumulated deficit of
$20,273,054 and $20,780,290, respectively, and current liabilities of
$2,391,983 and $2,948,938, respectively, and a working capital
deficiency of $2,391,983 and $2,948,938, respectively. The Company was
in default on the payment of the principal balances and accrued
interest on certain notes and debentures (Notes E, F and G). In
addition to the payable of its current liabilities, management
estimates that the Company will incur general, administrative, and
other costs and expenditures, exclusive of any costs and expenditures
related to any mining and milling operations or environmental matters
(Note Hb), at a rate of approximately $25,000 per quarter during the
year 2001 as based upon the year 2000 actual costs. Actual relative
expenses thereto have been $4,000 a quarter. Such matters raise
substantial doubt as to the Company's ability to continue as a going
concern.
U.S. Mining Co. (USM) has verbally pledged to provide financing to the
Company on an as needed basis through September 30, 2001. The funds
covered general, administrative and other costs. Additional funds
would be needed to support the extraction and milling processes if
they commenced, and to upgrade the processing facilities to allow for
a possible increase in ore processing capacity.
There is no assurance that the Company will have adequate funds
available to repay the funds advanced by USM. In the event the Company
defaults on these obligations, USM could file suit for recovery of
advances. Such actions would have a materially adverse effect on the
possible future operations of the Company.
Substantially all of the plant and equipment is related to exploration
properties. The ultimate realization of the Company's investment in
such properties and equipment is dependent upon the success of future
property sales, the existence of economically recoverable reserves,
the ability of the Company to obtain financing or make other
arrangements for development and future profitable production.
Accordingly, it has been determined that these assets will not realize
any future profitable production, therefore, with the exception of the
Gold Hill Mill, as noted in Note B and D, substantially all other
assets have been written off as impaired.
F-7
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization:
The Company (formerly Franklin Consolidated Mining Co., Inc.),
incorporated on December 1, 1976 under the laws of the State of
Delaware, was formed to engage in the exploration, development and
mining of precious and non-ferrous metals, including gold, silver,
lead, copper and zinc. The Company owns or has an interest in a number
of precious and non-ferrous metal properties. The Company's principal
mining properties are (i) the Franklin Mines, located near Idaho
Springs in Clear Creek County, Colorado, for which the Company
acquired the exclusive right to explore, develop, mine, and extract
all minerals located in approximately 51 mining claims of which 28 are
patented (Franklin Mines) and (ii) the Franklin Mill, a crushing and
flotation mill which is located on the site of the Franklin Mines
(Franklin Mill). The Company is an exploration stage enterprise, as it
did not generate any significant revenues through September 30, 2001.
Accounting Estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting
period. While actual results could differ from those estimates,
management does not expect such variances, if any, to have a material
effect on the financial statements.
Mining, Milling and Other Property and Equipment:
Recorded at costs incurred to acquire, improve and develop mining and
milling properties capitalized and amortized in relation to the
production of estimated reserves. Exploration costs and costs to
maintain the mineral rights and leases are expensed as incurred.
Management periodically reviews the recoverability of the capitalized
mineral properties and mining equipment and takes into consideration
various information including, but not limited to, historical
production records taken from previous mine operations, results of
exploration activities conducted to date, estimated future prices and
reports and opinions of outside geologists, mine engineers, and
consultants. When it is determined that a project or property will be
abandoned or its carrying value has been impaired, a provision is made
for any expected loss on the project or property.
F-8
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
Post-closure reclamation and site restoration costs are estimated
based upon environmental and regulatory requirements and are amortized
over the life of the mine using the units-of-production method.
Current expenditures relating to ongoing environmental and reclamation
programs are expenses as incurred.
Depreciation of equipment is computed using the straight-line method
over the estimated useful lives of the related assets.
Impairment of Long-Lived Assets:
The company has adopted the provisions of FASB Statement of Financial
Accounting Standards No. 121, "Accounting of the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS
121). Under SFAS 121, impairment losses on long-lived assets are
recognized when events or changes in circumstances indicate that the
undiscounted cash flows estimated to be generated by such assets are
less than their carrying value and, accordingly, all or a portion of
such carrying value may not be recoverable. Impairment losses then are
measured by comparing the fair value of assets to their carrying
amounts. The Company, due to certain restrictions associated with
milling operations, sold the Gold Hill Mill Properties on June 5, 1998
in exchange for property and equipment with a market value of $725,000
and a 14% note receivable of $350,000. As of December 31, 1998, this
note was voided and a $200,000 impairment loss was taken against the
$725,000 of equipment acquired. All other property and equipment were
considered impaired as of December 31, 1997, for a total impairment
loss of $5,913,901.
Revenue Recognition:
Revenues, if any, from the possible sales of mineral concentrates will
be recognized by the Company only upon receipt of final settlement
funds from the smelter.
Environmental Remediation Costs:
Accrued based on estimates of known environmental remediation
exposures. Ongoing environmental compliance costs, including
maintenance and monitoring costs are expensed as incurred.
F-9
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
Income Taxes:
Deferred income taxes are to be provided on transactions, which are
reported in the financial statements in different periods than for
income tax purposes. The Company utilized Financial Accounting Board
Statement No. 109, "Accounting for Income Taxes," ("SFAS 109"). SFAS
109 requires recognition of deferred tax liabilities and assets for
expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference
between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which
the difference is expected to reverse. Under SFAS 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce deferred
tax assets to the amounts expected to be realized (Note I).
Loss Per Common Share:
The Company has adopted SFAS 128 "Earnings Per Share" ("SFAS 128"),
which requires the presentation of "basic" and "diluted" earnings per
share on the face of the income statement. Loss per common share is
computed by dividing the net loss by the weighted average number of
common shares outstanding during each period. Common stock equivalents
have been excluded from the computations since the results would be
anti-dilutive. Loses per share have been restated for prior periods to
give effect to the reverse stock splits during 1999 (Note J).
Fair Value of Financial Investments:
The carrying amount of the Company's borrowings approximate fair
value.
Statement of Comprehensive Income:
SFAS 130 "Reporting Comprehensive Income" prescribes standards for
reporting comprehensive income and its components. Since the Company
currently does not have any items of comprehensive income, a statement
is not required.
F-10
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE D - ACQUISITIONS OF MINING AND MILLING PROPERTIES:
On December 26, 1976, the Company acquired Gold Developers and
Producers Incorporated, a Colorado corporation which, prior to the
acquisition, leased 28 patented mining claims from Audrey and David
Hayden and Dorothy Kennec pursuant to a mining lease and option to
purchase, dated November 12, 1976 (hereinafter referred to as "Hayden"
and "Kennec"). In 1981, the Company commenced a rehabilitation program
to extend and rehabilitate the shafts and tunnels in place at the
Franklin Mines, install the Franklin Mill, and search for and
delineate a commercial ore body. In 1983, the Company completed the
Franklin Mill.
Gold Hill Mill:
On July 3, 1996, the Company acquired the Gold Hill Mill from a wholly
subsidiary of Gems, in exchange for an 8% mortgage note with an
initial principal balance of $2,500,000. The Gold Hill Mill is a fully
permitted milling facility located in Boulder, Colorado.
At December 31, 1997, the Company reduced by $1,200,000 the carrying
value of certain of the Gold Hill Mill assets to $1,300,000, which
approximates management's estimate of fair value. All the Gold Hill
assets were sold during 1998 (see Note B).
F-11
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE E - NOTES PAYABLE - RELATED PARTY AND OTHERS:
Due to related party and others consisting of the following at
September 30:
2001 2000
-------- ------
12% unsecured demand notes due to the
Company's former President and his affiliated
entity $142,718 71,965
Secured promissory note (a) 60,000 60,000
Unsecured promissory notes (b) 94,310 87,000
-------- -------
$297,028 218,965
======== =======
(a) The outstanding principal balance payable on July 18, 1996 was
defaulted. Collateralized by a subordinated security interest in
the Company's mining reclamation bonds. Interest is payable based
on the rate of interest applicable to the mining reclamation bond
(8% at September 30, 2001).
(b) This principal amount represents four unsecured promissory notes.
The Company assumed these obligations on Novembers 25, 1997, as
part of the acquisition from USM. These notes were in default at
this time and remained in default as of September 30, 2001;
interest accrued at 17%.
Accrued interest on the above notes at September 30, 2001 and 2000
aggregated approximately $113,000 and $81,000, respectively.
F-12
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE F - CONVERTIBLE DEBENTURES AND OTHER CONVERTIBLE DEBT:
At September 30, 2001 and 2000 consisted of a $145,000 12.25%
convertible debenture, which matured December 31, 1994.
As of September 30, 2001 and 2000, the Company was in default with
respect to the principal balance of the debenture and accrued interest
of approximately $116,000 and $98,000, respectively. As a result, the
Company may be subject to legal proceedings by the Transfer
Agent/Trustee under the Indenture Agreement or by debenture holders
seeking repayment of principal plus interest and other costs.
Management cannot assure that funds will be available for the required
payments or the effect of any actions brought by or on behalf of the
debenture holders (Note Ic).
In September 1996, the Company acquired a 20% interest in Newmineco by
issuing a 9.5% note payable of $600,000 to Gems, convertible to common
stock at the Company's option on or after January 1, 1997. On February
10, 1997, the Company notified the assignees that it elected to
convert the principal balance into 102,564 shares of common stock, as
adjusted, based on the conversation rate of $5.85 per share. As a
result of problems concerning obtaining permits and various other
issued related to Mogul Mines, the purchase price was reduced to
$150,000 on December 31, 1996 and to zero on December 31, 1997 (Note
B). The $450,000 and $150,000 reductions in the purchase price in 1996
and 1997 respectively were effectuated through an equivalent reduction
in the principal balance of an 8% mortgage note payable to an
affiliate of Gems.
NOTE G - NOTE PAYABLE - RELATED PARTY:
The Company issued an 8% promissory note for the outstanding balance
of $955,756, at December 31, 1997, representing advances to the
Company by an affiliated entity, POS Financial, Inc. (POS), a New
Jersey corporation and obligations assumed in connection with the
contributions of Joint Venture interest (Note B). The note was payable
on May 4, 1998, and is secured by all the Company's mining claims and
mining properties; subject to successive 30-day extensions throughout
1998 and 1999 subject to the mutual agreement of the maker and lender
for no additional consideration. On March 5, 1998, POS assigned this
note to USM. Both POS and USM are considered related parties as they
are owned by a director of WCM and can exert significant influence
over the Company. Additional amounts were loaned to the Company by USM
during 1999 and 2000. The principal balance due of $1,768,829 was
forgiven by USM at December 31, 2001. Accrued interest of $328,953
remains a liability of the Company. The balance due on the note at
September 30, 2000 aggregated $1,721,855 plus accrued interest of
$295,587.
F-13
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE G - NOTE PAYABLE - RELATED PARTY (continued):
Additional amounts were loaned to the Company through September 30,
2001 and remain unpaid as of that date.
NOTE H - COMMITMENTS AND CONTINGENCIES:
(a) Lease Agreement:
On November 13, 1997, Hayden entered into an agreement to sell the
Hayden interests to USM for a purchase price of $75,000 (the
"Hayden-USM Purchase Agreement"). The purchase price was evidenced by
a promissory note, due February 2, 1998. Payment on the note has been
waived until USM receives a report of clear title.
Upon the execution of the Hayden-USM Purchase Agreement, USM agreed to
give Hayden mineral rights to some land parcels and will receive
royalties that will be expenses as incurred. As of September 30, 2001,
USM had not received clear title but continued to make Purchase
Agreement extension payments.
Kennec receives a 50% share on land and mineral rights on certain
parcels of acreage.
All royalty payments made under the Hayden and Kennec agreements were
expensed as incurred as mine expenses and environmental remediation
costs in the accompanying Statement of Operations.
The Company pays a monthly rental of $3,500 (on a month to month
basis) for the office space, secretarial and other services provided
to the Company pursuant to an oral agreement with a non-affiliate. As
of February 28, 2001, the Company ceased its tenancy.
(b) Environmental Matters:
During 1999, inspections of the Franklin Mining properties revealed
that certain drainage problems and substandard linings at the tailings
disposal areas created potential hazards and that protection measures
are required.
F-14
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE H - COMMITMENTS AND CONTINGENCIES (continued):
The Company received a letter dated March 9, 2000 from the Colorado
Division of Minerals and Geology (the "DMG"), which set forth measures
that must be taken to bring the site into compliance with groundwater
regulations and to stabilize the tailings pond and site. In the event
the Company completed all of the required actions by July 31, 2001, a
Temporary Cessation order would have been granted by DMG. As of the
date of this report, a Temporary Cessation order has not been granted
and management remains in the process of attempting to have this order
granted.
(c) Litigation:
(i) The Company and others were defendants in an action related to a
dispute over fees for engineering consulting services. The
parties settled this matter in September 1999 and litigation was
discontinued.
(ii) In September 1997, certain of the Company's 12.25% Convertible
Debenture holders (see Note B) instituted an action against the
Company for payment of approximately $42,500 principal amount of
its 12.25% Convertible Debentures plus accrued and unpaid
interest totaling approximately $13,000 and other costs and
expenses related thereto. A default judgment was entered against
the Company in the amount of $42,500 plus interest, costs and
disbursements. The Company and USM have been negotiating with the
debenture holders without a settlement. The continuing default
could result in the Company being subject to additional legal
proceedings and there is no assurance that funds will be
available to cure the default or reach a settlement.
(iii)On or about May 14, 1998, Redstone Securities Inc. ("Redstone")
commenced an action against the Company in connection with an
Investment Banking Agreement dated August 28, 1996, between
Redstone and the Company. On or about July 31, 1998, the Company
answered the complaint and filed a cross complaint against
Redstone. In September 1999, the matter was settled whereby the
Company agreed to lift the stop transfer order on the shares held
by Redstone allowing them the ability to sell those shares to an
unqualified third party.
F-15
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE I - COMMITMENTS AND CONTINGENCIES (continued):
(d) NASDAQ Notification:
During 1998 and 1999, the Company received notification letters from
NASDAQ informing them that the Company's common stock was not in
compliance with the NASDAQ small-cap market price requirement of
$1.00, which became effective on February 23, 1998.
In order to mitigate the minimum bid price requirement, the Company
effectuated reverse stock splits during 1998 and 1999 (Note J) wherein
the stock price remained above the $1.00 minimum bid price requirement
for the necessary ten-day period.
While the Company is currently in compliance with the minimum bid
price requirement, there can be no assurance in the future that it
will be able to maintain such compliance.
NOTE I - INCOME TAXES:
As of September 30, 2001, the Company had federal net operating loss
carryforwards of approximately $11,876,000 available to reduce future
federal taxable income, which, if not used, will expire at various
dates through December 31, 2020. Changes in the ownership of the
Company may subject these loss carryforwards to substantial
limitations.
The deferred tax attributable to the potential benefits from such net
operating loss carryforwards has been offset by a reduction in
carrying value by an equivalent valuation allowance due to the
uncertainties related to the extent and timing of its future taxable
income. There are no other material temporary differences.
F-16
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE I - INCOME TAXES (continued):
Deferred Valuation
Tax Asset Allowance
---------- ---------
Balance at December 31, 1998 $4,509,000 4,509,000
Increase in Federal deferred tax asset, year
ended December 31, 1999 210,000 210,000
---------- ---------
Balance at December 31, 1999 4,719,000 4,719,000
Increase in Federal deferred tax asset, year
ended December 31, 2000 470,000 470,000
---------- ---------
Balance at December 31, 2000 5,189,000 5,189,000
Increase in Federal deferred tax asset, nine months
ended September 30, 2001 50,000 50,000
---------- ---------
Balance at September 30, 2001 $5,239,000 5,239,000
========== =========
NOTE J - STOCKHOLDERS' EQUITY:
(a) Reverse Stock Splits:
On May 26, 1998 and December 20, 1999 reverse stock splits of 25
to 1 and 3 to 1 respectively were effected.
(b) Common Stock Reserved for Issuance:
At September 30, 2001 and 2000, there were 3,867 shares of common
stock reserved for issuance upon the exercise of the 12.25%
$145,000 convertible debentures (see Note F).
F-17
WCM CAPITAL, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE J - STOCKHOLDERS' EQUITY (continued):
(c) Issuance of Common Stock
From December 1, 1977 (inception) through September 30, 2001, the
Company issued common stock for:
Shares Amount
------ ------------
Cash, including net proceeds of $283,995 from Public offering 355,648 $ 8,758,256
Exercise of stock options 46,298 792,250
Commissions of sales of common stock -- (451,483)
Purchase and retirement of 666 shares -treasury stock (666) (12,500)
Non-cash, other than related parties:
Services and property 165,582 1,673,394
Conversion of debentures and notes payable 246,107 2,648,820
Stock options and stock warrants granted -- 39,100
Settlement of litigation and other 13,710 100,000
Non-cash, related parties:
Services and property 97,919 918,030
Settlement of claims by related parties 80,000 936,000
Repayment of related party loans 314,169 3,001,681
------------ ------------
1,318,767 $ 18,403,548
============ ============
F-18
MANAGEMENT'S DISCUSSION AND ANALYSIS
CAUTIONARY STATEMENT ON FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, Management believes that
certain of the matters discussed in this Quarterly Report for the period ended
September 30, 2001 are "forward looking risks and uncertainties which cause
actual results to differ materially from those discussed herein including, but
not limited, risks relating to changing economic conditions, change in price as
disclosed in this Quarterly Report. The Company cautions readers that any such
forward-looking statements are based upon management's current expectations and
beliefs but are not guaranties of future performance. Actual results could
differ materially from those expressed or implied in forward-looking statements.
Liquidity and Capital Resources
The Company had no active mining or milling operations during the third quarter
ended September 30, 2001; however, the Company continued its efforts to bring
the site into compliance with groundwater regulations and to stabilize the
tailings ponds and site generally in anticipation of obtaining a grant of
Temporary Cessation from the Division of Minerals and Geology of the State of
Colorado ("DMG").
During the first quarter of 2000, we filed a notice with the DMG requesting that
our permit be placed into Temporary Cessation. A Temporary Cessation is a
limited period of non-production, which results when an operator plans to
temporarily cease production for at least 180 days upon filing of a notice of
such intent with the DMG. As a condition to granting the request, the Company
must address certain issues with respect to groundwater and tailings disposal
ponds. Thus, the Company's efforts have been focused on addressing these issues.
We believe that we have adequately addressed the concerns of the DMG and expect
that it will grant our application for Temporary Cessation in the fourth quarter
of this year.
While we have actively sought to place our permit into Temporary Cessation, we
remain hopeful that economically viable commercial mining operations at the
Idaho Springs mining facilities can be conducted in the future. Given the
current economic climate and our efforts concerning the Temporary Cessation
order, it is highly unlikely that we the Company will begin operating in fiscal
year 2001.
Management estimates that we will incur general, administrative and other costs
and expenditures, exclusive of any costs and expenditures related to any mining
and milling operations and interest, at the rate of approximately $15,000 per
month for the remainder of 2001.
U.S. Mining Co. and its sole shareholder, William C. Martucci, has verbally
pledged to provide financing to the Company on an as needed basis for purposes
of meeting our general administrative and other costs until on or about December
31, 2001. The Company cannot assure, however, that USM will fulfill its
commitment to fund the Company's operations through year-end 2001. The funds
received from USM will cover the general, administrative and other costs
approximated at $15,000 per month. Additional monies will be needed to ready the
Franklin Mine and Milling properties for the commencement of extraction and
milling and to support the extraction and milling processes once underway as
well as to upgrade the processing facilities to allow for an increase in ore
processing capacity should we decide to reactivate our permit.
There can be no assurance that the Company will have adequate funds available to
repay the funds advanced by USM or that USM will fulfill its obligations to fund
the Company through December 31, 2001.
WCM Capital, Inc. 2
10-QSB Quarter Ended 9/30/01
Results of Operations:
Nine months ended September 30, 2001 Compared to Nine Months Ended September 30,
2000
We had a net loss of $162,949 for the nine months ended September 30, 2001 as
compared to a net loss of $432,990 during the same period in 2000.
Environmental remediation costs and mine expenses were $5,585 for the nine
months ended September 30, 2001 compared to $48,258 during the same period in
2000. This decrease was due to inactivity.
General and administrative expenses were $73,333 for the nine months ended
September 30, 2001 compared with $221,952 during the same period in 2000. This
decrease resulted principally from decrease in legal and professional fees.
Interest expense was $46,753 during the nine months ended September 30, 2001 as
compared to $125,460 during the same period in 2000. This decrease was due to an
apparent over-accrual for 2000 coupled with forgiveness of debt at December 31,
2000.
Three Months ended September 30, 2001 Compared to Three Months Ended September
30, 2000
The Company had a net loss of $ 46,977 for the three months ended September 30,
2001, as compared to a net loss of $ 141,016 during the same period in 2000.
Environmental remediation costs and mine expenses were $ 5,585 for the three
months ended September 30, 2001 as compared to $ 11,372 during the same period
in 2000.
General and administrative expenses were $13, 686 for the three months ended
September 30, 2001, compared with $74,099 during the same period in 2000. This
decrease resulted from a decrease in legal and professional fees.
Interest expense was $15,280 during the three months ended September 30, 2001,
as compared to $43,105 during the same period in 2000. This decrease was due to
forgiveness of the US Mining Note in 2000.
WCM Capital, Inc. 3
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PART II
Item 1. Legal Proceedings
Convertible Debentures
On June 1, 1994, the Company advised the Transfer Agent/Trustee that the Company
was not in compliance with certain of the terms of the indenture (the
"Indenture") relating to the Company's 12 1/4% Convertible Debentures (the
"Debentures") in that it had not maintained current filings with the Securities
and Exchange Commission (the "Commission") as required. Accordingly, the
Transfer Agent/Trustee was instructed not to convert any of the Debentures into
Common Stock of the Company until such time as the Company notified the Transfer
Agent. The Company failed to make required sinking fund payments in 1994 and was
unable to pay the principal balance of the Debentures due on December 31, 1994
resulting in default under the terms of the Indenture.
In September, 1997, certain of the Company's 12 1/4% Convertible Debenture
holders, including the Hopis Trust (the "Plaintiff Debenture holders")
instituted an action in the Supreme Court of the State of
New York against the Company for payment on approximately $42,500 principal
amount of Debentures plus accrued and unpaid interest totaling approximately
$13,000 and other costs and expenses related thereto.
Thereafter, the Plaintiff Debenture holders moved for summary judgment against
the Company. The Company did not to oppose the motion and default was entered
against the Company in the amount of $42,500 plus interest, costs and
disbursements (the "Default"). Moreover, the issue of attorney's fees was
severed from the case and all to be set down for an inquest.
In February 1998, USM entered into an Agreement with the Plaintiff Debenture
holders agreeing to pay the Judgment plus certain additional costs in the event
that the Company fails to pay the Judgment and USM consummates the Transaction
with the Company. In the event that USM did not consummate the Transaction by
July 12, 1998, USM agreed to pay the Plaintiff Debenture holders $5,100 for
their Agreement not to enter the Judgment against the Company or pursue the
inquest. Plaintiff Debenture holders agreed not to enter the Judgment against
the Company until July 12, 1998 or until USM notifies them that it will not
pursue the Transaction.
On or about April 6, 1998, Martucci terminated his letter of intent to
consummate the Transaction with the Company. Despite such termination, Plaintiff
Debenture holders agreed to extend the terms of their Agreement with USM through
December 1998. As of date hereof, the Company is not aware of any further
extension nor, to its knowledge has the Judgment been entered. If the proposed
settlement is not consummated, there can be no assurance that the Judgment will
not be entered and the Company will be required to pay the amount of the
Judgment, including any costs, interest and penalties related thereto.
The continued default in the Debentures by the Company may result in Company
being subject to additional legal proceedings by the Transfer Agent/Trustee
under the Indenture or from other holders seeking immediate payment of the
$102,500 plus related interest and penalties. While the Company hopes to cure
the default or, in the alternative, reach an acceptable settlement arrangement
with the holders, there can be no assurance that the funds will be available in
the future to meet all of the Company's obligations.
WCM Capital, Inc. 4
10-QSB Quarter Ended 9/30/01
On November 2, 2000 American Stock Transfer and Trust Company ("AST") served the
Company with a summons, as Trustee under the Indenture dated January 2, 1990 to
receive damages on behalf of the holders of the Company's 12-1/4% Convertible
Debenture Holders in the amount of $142,000.00 plus interest and other fees.
This action is as a result of the default on the Debentures described above and
are separate and apart from the September 1997 action, which involves specific
debenture holders.
On or about October 4, 2001 AST filed a motion for default judgment against the
Company in Supreme Court, New York County for the entire amount of the unpaid
debentures (including those holders represented separately in the Hopis Trust
litigation) of $142,000 principal plus interest from March 31, 1995 through
August 31, 2001 at the rate of 12-1/4% totaling $111,617.92, plus interest on
the unpaid interest at a rate of 12-1/4% totaling $54,404.77 and attorneys fees
of $4,635.73, for a total of $312,658.42, together with costs, disbursements and
additional interest continuing to accrue at a rate of 12-1/4% until the judgment
is paid. While the Company did not oppose the motion, we have not been notified
as to whether a judgment was entered against the Company.
Kennec v. Franklin Mining Co. et al.
On or about September 4, 2001, Dorothy L. Kennec commenced an action in District
Court, Clear Creek County Colorado (Case No. 01CV76) against Audrey L. Hayden,
Gold Developers and Producers, Inc., U.S. Mining, Inc., Franklin Consolidated
Mining Co., Inc. and the Company as occupants and all other persons claiming an
interest in certain properties and mineral rights located in Idaho Springs,
Clear Creek County, Colorado. The suit (1) alleges breach of contract Against
Gold Developers & Producers,
Inc. Franklin Mining and the Company, (2) requests termination of possessory
rights and eviction of Franklin Mining, US Mining and WCM Capital, (3) requests
an adjudication of the rights of the parties with respect to the property, (4)
alleges unlawful encumbrance of the property which slandered Plaintiff Kennec's
title, (5) alleges that Defendant Franklin Mining is committing waste on the
property by failing to maintain said property, failing to mine the property in
accordance with current standards and operating the property in violation of
Federal and State mining and zoning laws, (6) requests partition of the mining
claims so as to segregate and identify one half of the property in which
Plaintiff Kennec will have an undivided surface and mineral interest, (7) seeks
an accounting from Defendants Hayden, Franklin Mines and US Mining as to all
amounts paid as rent and/or royalties under the Hayden/Kennec Leases. In
addition to seeking damages for breach of contract, slander of title and waste,
Plaintiff Kennec is seeking orders for partition and possess, to adjudicate the
rights of the parties regarding title to the Property, declaring the
Hayden/Kennec Leases terminated and restoring possession of 1/2 interest to
Plaintiff Kennec, releasing the liens as to Plaintiff's property and any damages
related thereto,
On or about November 2, 2001, the Company, together with US Mining, filed an
answer to the aforementioned complaint pursuant to which we denied all of the
material allegations set forth in the complaint. We further asserted affirmative
defenses that Plaintiff fails to state a claim against us upon which relief can
be granted, the Complaint fails to join necessary parties, accord and
satisfaction, assumption of risk, estoppels, failure of consideration, license,
payment, release, waiver and failure to use reasonable means to mitigate
damages. Additionally, US Mining filed a counterclaim for $10,000 loan to
Plaintiff which was never repaid. The Company intends to continue to
aggressively defend this case.
Environmental Matters:
As of the date hereof, the Company has no violations against it with respect to
the Franklin Mines and Franklin Mill. While there are no outstanding violations
against the Company at this time, there can be no assurance that the Company
will be able to adequately comply with any future conditions set forth by the
DMG regarding its permit or that violations will not arise in the future.
WCM Capital, Inc. 5
10-QSB Quarter Ended 9/30/01
There can be no assurance, however, that the Company will adequately address the
groundwater and tailings issues relating to its notification to place its permit
into Temporary Cessation, which may result in violations cited by the DMG.
NASDAQ Listing
On or about October 5, 2001, the Company received a delisting notification from
the NASDAQ Stock Market pursuant to which the Staff determined that the Company
failed to comply with the filing, net tangible assets/shareholders'
equity/market capitalization/ net income and disclosure requirements, as set
forth in the Nasdaq Marketplace Rules 4310(c)(14), 4310(c)(02)(B) and
4310(c)(16). In addition, the Staff cited the Company for certain public
interest concerns, as referenced in Marketplace rules 4300 and 4330(a)(03). On
or about October 12, the Company sent a formal request for continued listing on
the Nasdaq SmallCap Market, notwithstanding the Staff's determinations as set
forth above. On or about October 16, 2001, the Company received confirmation
that our request will be considered at an oral hearing to be held before a Panel
authorized by the Board of Directors of the Nasdaq Stock Market, Inc. Board of
Directors on Thursday, November 15, 2001 at 9:30 a.m. in Washington DC. There
can be no assurance that the Company will be successful in its attempt to remain
listed on the Nasdaq SmallCap Market. Nasdaq also halted trading in the
Company's stock on or about September 9, 2001 with respect to issues relating to
the subject matter of the delisting proceedings and in response to the Company's
press release of September 9, 2001 regarding errors in the Company's financial
statements. See Item 5. Other Information-Company's Financial Statements. On or
about November 14, 2001, the Company, by letter, withdrew it request for a
hearing and voluntarily withdrew its securities from listing on the Nasdaq Small
Cap Market.
Since the Company's stock will no longer be included for continued listing on
the Nasdaq Small Cap Market, we are hopeful that the Company's Common Stock will
qualify for trading on the Over-The-Counter/Bulletin Board ("OTC") market and
the Company and we will make every effort to facilitate the quotation of our
Common Stock on the OTC.
In the event that the Company's Common Stock is traded on the OTC, it may become
subject to the "penny stock" trading rules. The penny stock trading rules impose
additional duties and a responsibility upon broker-dealers recommends the
purchase of a penny stock (by a purchaser that is not an accredited investor as
defined by Rule 501(a) promulgated by the Commission under the Securities Act)
or the sale of a penny stock. Among such duties and responsibilities, with
respect to a purchaser who has not previously had an established account with
the broker-dealer, the broker-dealer is required to (i) obtain information
concerning the purchaser's financial situation, investment experience, and
investment objectives, (ii) make a reasonable determination that transactions in
the penny stock are suitable for the purchaser and the purchaser (or his
independent adviser in such transactions) has sufficient knowledge and
experience in financial matters and may be reasonably capable of evaluating the
risks of such transactions, followed by receipt of a manually signed written
statement which sets forth the basis for such determination and which informs
the purchaser that it's unlawful to effectuate a transaction in the penny stock
without first obtaining a written agreement to the transaction. Furthermore,
until the purchaser becomes an established customer (i.e., having had an account
with the dealer for at least one year or, the dealer had effected three sales or
more of penny stocks on three or more different days involving three or more
different issuers), the broker-dealer must obtain from the purchaser a written
agreement to purchase the penny stock which sets forth the identity and number
of shares of units of the security to be purchased prior to confirmation of the
purchase. A dealer is obligated to provide certain information disclosures to
the purchaser of penny stock, including (i) a generic risk disclosure document
which is required to be delivered to the purchaser before the initial
transaction in a penny stock, (ii) a transaction-related disclosure prior to
effecting a transaction in the
WCM Capital, Inc. 6
10-QSB Quarter Ended 9/30/01
penny stock (i.e., confirmation of the transaction) containing bid and asked
information related to the penny stock and the dealer's and salesperson's
compensation (i.e., commissions, commission equivalents, markups and markdowns)
connection with the transaction, and (iii) the purchaser-customer must be
furnished account statements, generally on a monthly basis, which include
prescribed information relating to market and price information concerning the
penny stocks held in the customer's account. The penny stock trading rules do
not apply to those transactions in which the broker-dealer or salesperson does
not make any purchase or sale recommendation to the purchaser or seller of the
penny stock.
Required compliance with the penny stock trading rules affect or will affect the
ability to resell the Common Stock by a holder principally because of the
additional duties and responsibilities imposed upon the broker-dealers and
salespersons recommending and effecting sale and purchase transactions in such
securities. In addition, many broker-dealers will not effect transactions in
penny stocks, except on an unsolicited basis, in order to avoid compliance with
the penny stock trading rules. The penny stock trading rules consequently may
materially limit or restrict the liquidity typically associated with other
publicly traded equity securities. In this connection, the holder of Common
Stock may be unable to obtain on resale the quoted bid price because a dealer or
group of dealers may control the market in such securities and may set prices
that are not based on competitive forces.
Furthermore, at times there may be a lack of bid quotes which may mean that the
market among dealers is not active, in which case a holder of Common Stock may
be unable to sell such securities. Because market quotations in the
over-the-counter market are often subjected to negotiation among dealers and
often differ from the price at which transactions in securities are effected,
the bid and asked quotations of the Common Stock may not be reliable.
Item 2. Changes in Securities and Use of Proceeds
NONE
Item 3. Default on Senior Securities
See Item 1. Legal Proceedings - Convertible Debenture
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Temporary Cessation Notification
Throughout 1999, inspections of the Franklin Mining properties revealed that
certain reclamation issues still remained outstanding at the property. Drainage
problems and substandard linings at the tailings disposal areas created
potential hazards and required protection measures are addressed. Tailings Pond
No. 5 was of specific concern to the DMG. After several extensions had been
granted, the Company was unable to complete all of the preventive work required
by the DMG. Due to lack of funds, the Company has not been able to institute its
paste backfill program, which it believes would alleviate the problems currently
existing at its tailings disposal area.
WCM Capital, Inc. 7
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On January 5, 2000, the Company submitted a letter to the DMG to clarify why,
among other things, it has not completed all of the recommended preventive
measures at the site, specifically with respect to its tailings ponds. The
Company explained its difficulty in obtaining needed financing to continue its
reclamation and remediation plans and to begin mining and milling operations at
the Franklin Mines due to the depressed price of gold. Therefore, the Company
concluded that it is economically unfeasible to mine and mill at the properties
at this time. Notwithstanding, the Company does not wish to abandon its business
plan or reclaim the property but rather intends to maintain the mine and mill
site and to comply with all DMG regulations with hopes of restarting the mine
and mill as soon as the price of gold makes it profitable to do so.
On February 7, 2000, the DMG responded to the Company's correspondence with a
recommendation that the Company's mining permit be placed in Temporary
Cessation. Temporary Cessation is a limited period of non-production, which
results when an operator plans to temporarily cease production for at least 180
days upon the filing of notice thereof with the DMG. In the event that a
Temporary Cessation is granted, no further reclamation work or mining work would
be required for the duration of the Temporary Cessation, beyond basic
maintenance and reclamation required to keep the site from further
deterioration. The DMG further indicated that should the Company choose to apply
for Temporary Cessation, certain of the tailings pond area would be required to
be stabilized and the groundwater and the stability of the tailings ponds must
be protected from further deterioration. The DMG required that any notice of
Temporary Cessation submitted must specifically address an alternative interim
reclamation plan for Tailings Pond No. 5 as well as outlining the temporary
stabilization measures needed to comply with these requirements.
As recommended by the DMG, the Company requested for a change of status of its
permit to Temporary Cessation. Following a meeting of the DMG and
representatives of the Company held on February 10, 2000, the DMG set forth the
measures in a letter, dated March 9, 2000, which must be taken by the Company to
bring the site into compliance with groundwater regulations and to stabilize the
tailings pond and site during the Temporary Cessation.
The Company's application for Temporary Cessation of its permit is still pending
before the DMG and we expect our application to be granted by the conclusion of
fiscal year 2001 or the first quarter of 2002.
While the Company continues its water monitoring activities and to work the DMG
to obtain Temporary Cessation, there can be no assurance that our request will
be granted. In the event that our application is denied, we will have to comply
with more stringent requirements to keep our permit active. It is likely that we
will be unable to continue rehabilitation and reclaimation work as required by
the DMG due to our lack of funding. Failure to comply with any rules,
regulations or orders of the DMG can result in citations, which, if remained
uncorrected, will result in the loss of our mining permit and will have a
material adverse effect on the Company as a whole.
Company Financial Statements.
At the request of the Division of Corporate Finance of the Securities and
Exchange Commission, we announced on October 17, 2001 that there were potential
errors in the audited financial statements of the Company for the fiscal years
ended 1996 through 2000. The Company and its independent auditors have been
working closely with the SEC to make the required corrections and reissue the
effected reports during the fourth quarter of 2001.
WCM Capital, Inc. 8
10-QSB Quarter Ended 9/30/01
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
B. Reports on Form 8-K
SIGNATURE
In accordance with the requirements of the Securities and Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WCM CAPITAL, INC.
/s/ Robert Waligunda
Date: November 20, 2001 -------------------------------
Robert Waligunda, President
WCM Capital, Inc. 9
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