UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended May 31, 2000
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition
period from to .
Commission file number 033-05844-NY
WORLD INTERNETWORKS, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0443026
(State of incorporation) (I.R.S. Employer Identification No.)
418 South Commerce Road, Suite 422
Orem, Utah 84058
(Address of principal executive offices and zip code)
(801) 434-7517
(Registrant's telephone number, including area code)
5152 North Edgewood Drive, Suite 250, Provo, Utah 84604
(Former address of principal executive offices and zip code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or Section 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 or No
The number of outstanding shares of the Registrant's common stock as of
May 31, 2000, was: 9,043,311 shares.
Transitional Small Business Format (Check One) : Yes [x] No [ ]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Interim consolidated financial statements presented in this Form 10-QSB are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interium financial statements and with the
instructions to Form 10-QSB. Therefore, such financial statements do not
include all of the information and footnotes required for complete audited
financial statements. The unaudited financial statements presented herein
should be read in conjunction with the audited financial statements and
related footnotes contained in the Company's Annual Report on Form 10-KSB
for the year ended February 28, 2000.
World Internetworks, Inc. and Subsidiaries
Consolidated Balance Sheets
May 31, 2000 and February 28, 2000 (Fiscal Year End)
(Unaudited)
ASSETS
May 31, February 28,
2000 2000
Current Assets
Cash and cash equivalents $ 251,512 $ 88,571
Merchant account-compensating cash balance 37,086 -
Accounts receivable 7,633 9,929
Prepaid expenses 3,417 12,200
Total current assets $ 299,648 $ 110,700
Property and Equipment at cost (Note 1)
Computer equipment 18,142 16,283
Office Furniture and equipment 2,140 2,140
Accumulated depreciation (11,341) (10,403)
Net Property and equipment 8,941 8,020
TOTAL ASSETS $ 308,589 $ 118,720
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts Payable $ 52,519 $ 29,206
Accrued expenses 17,599 15,486
Note payable, related party (Note 10) - 30,000
Reserve for discontinued operations
(Note 9) 2,459,205 2,459,205
Total current liabilities 2,529,323 2,533,897
Commitments and contingencies (Note 8)
Shareholders' equity (deficit):
Common stock, $.001 par value; 500,000,000
shares authorized, 9,043,311 and 8,056,607
shares issued at May 31, 2000 and Feb 28,
2000, respectively 9,043 8,057
Additional paid in capital 2,689,426 3,686,994
Treasury stock, at cost (3,186) (3,186)
Stock subscription receivable - (80,000)
Deficit accumulated prior to development
stage (3,979,694) (3,979,694)
Deficit accumulated from the inception of
the development state on October 22, 1998 (936,323) (680,866)
Total shareholders' deficit (2,220,734) (2,415,177)
$ 308,589 $ 118,720
World Internetworks, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended May 31, 2000 and 1999
From Inception of
Development Stage
Three months ended October 22, 1998
May 31, thru May 31,
2000 1999 2000
Net sales and revenues: $ 83,315 $ 4,257 $ 165,990
Costs of products sold 25,885 3,375 70,501
Gross Profit 57,430 882 95,489
Operating Expenses:
Selling, General and
Administrative expenses 316,119 391,896 1,201,252
Depreciation and
amortization 938 372 2,796
Total operating expenses 317,057 392,268 1,204,048
Loss from operations before other
income and extraordinary gain (259,627) (391,386) (1,108,559)
Other Income
Interest income 4,170 - 4,170
Extraordinary Item:
Gain on extinguishment
of debt - - 168,066
Loss before income tax benefit (255,457) (391,386) (940,493)
Income tax benefit - - -
Net loss $(255,457) $(391,386) $(940,493)
Weighted average common
shares outstanding 8,742,332 2,548,774
Loss per
common share $ (0.03)$ (0.15)
World Internetworks, Inc.and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended May 31, 2000 and 1999
(Unaudited)
From Inception of
Development Stage
Three months ended October 22, 1998
May 31, thru May 31,
2000 1999 2000
Cash flows from operating activities:
Net loss $ (255,457) $ (391,385) $ (936,323)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and Amortization 938 372 2,796
Common stock issued for services 30,000 - 446,000
Options and warrants issued below market
price - - 57,000
Gain on extinguishment of debt - - (168,066)
Changes in current assets and liabilities
Compensating balances (37,086) - (37,086)
Accounts Receivable 2,296 - (7,633)
Prepaid expenses 8,783 - (3,417)
Accounts payable 23,313 53,553 79,919
Accrued expenses 2,113 12,539 17,599
Net cash provided by (used in)
operating activities (225,100) (324,921) (549,211)
Cash flows from investing activities:
Purchase of property and equipment (1,859) - (8,677)
Cash flows from financing activities:
Payment of related party note payable (30,000) - -
Stock Subscription received 80,000 - 80,000
Sale of common stock, net of offering
costs 339,900 327,000 729,400
Net cash provided by financing
activities 389,900 327,000 809,400
Net increase (decrease) in cash 162,941 2,079 251,512
Cash at beginning of period 88,571 - -
Cash at end of period $251,512 $ 2,079 $ 251,512
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
May 31, 2000
(Unaudited)
NOTE 1 - ORGANIZATION HISTORY AND NATURE OF OPERATIONS
a. Organization and History
World Internetworks, Inc., was incorporated on March 17, 1986, under the name
Impressive Ventures, Ltd. ("Impressive Ventures") as a Nevada corporation.
Impressive Ventures did not conduct any business operations until August 27,
1996, when it's stockholders approved an agreement under which the
stockholders of Wealth International, Inc., a Utah corporation ("Wealth
Utah"), obtained a controlling interest in Impressive Ventures. This
transaction was treated as an acquisition of Impressive Ventures by Wealth
Utah and as a recapitalization of Wealth Utah. Wealth Utah was established in
November 1995 as a partnership and was incorporated in Utah in July 1996.
Under the agreement, the stockholders of Wealth Utah exchanged all of their
shares in Wealth Utah for 2,752,245 common shares of Impressive Ventures,
after the effects of a 1-for-250 reverse stock split, a 4-for-1 forward stock
split and a 1-for-4 reverse stock split.
After the transaction was completed, Impressive Ventures changed its name to
Wealth International, Inc. ("Wealth Nevada"), a Nevada corporation, and the
operating subsidiary, Wealth Utah, subsequently changed its name to World
Internet Marketplace, Inc. ("WIM"). Wealth Nevada changed its name to World
InterNetWorks, Inc., (the "Company") in January 1998 to more accurately
reflect the nature of the Company's business. The Company formed Global
Wholesale Exchange, Inc. ("GWE") and Global Media Group, Inc. ("GMG"), both
Utah corporations, in June 1996 as additional operating subsidiaries.
b. Nature of Operations
Until October 1998, the Company operated three wholly-owned subsidiaries: (i)
WIM was engaged in marketing and distributing products and services relating
to internet commerce; (ii) GWE provided wholesale goods to consumers via
internet and fax notification; (iii) GMG, doing business as the "Institute for
Financial Independence" organized and sponsored sales seminars that sold WIM
and GWE products.
Business operations were not successful and in October 1998 the operations of
all three of the Company's subsidiaries were discontinued. In October 1999,
each subsidiary filed a Chapter 7 bankruptcy petition in the United States
Bankruptcy Court for the District of Utah (the "Court") and, also in 1999, the
Utah Department of Commerce dissolved each of these subsidiaries (see Note 4).
Consequently, the Company re-entered the development stage.
In February 1999 the Company began to restructure it's business and operating
plan toward the following: (i) providing web site design services and building
software that will allow small business and home-based entrepreneurs to
establish an internet presence at a lower price than our competitors can
provide; (ii) establish an internet training and technical support program
that will help our members understand the internet and learn how to profit
from it; (iii) create strategic alliances with companies such as Dell
Computer, Office Max, Digital River and Walt Disney, through which our members
will be able to offer these companies' products on member web sites and
receive a commission ranging from approximately 4% to10% on each sale,
depending on the terms and conditions for each company; (iv) provide our
members with access to our "Main Street Plaza" online shopping mall, which
will allow them to sell their own products over the internet; (v) provide our
members with unlimited internet access through our relationship with Alta
Vista, one of the top search engines in the country. The Company expects it
will generate revenues under this business plan from monthly web site hosting
fees, web site design and engineering fees, resale of domain names, merchant
account set up and monthly gateway fees, web site and search site marketing
fees and commissions on retail products sold through the Company's Main Street
Plaza.
Revenues generated in the fiscal quarter ended May 31, 2000 under the
Company's new business plan totaled $83,315, primarily from web site hosting
and web site design fees.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's consolidated financial statements are prepared using the accrual
method of accounting. The Company has elected a February 28 fiscal year end.
b. Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity
of three months or less when purchased to be cash equivalents.
c. Depreciation and Amortization
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives of between
5 and 7 years. For financial reporting purposes, the straight-line method of
depreciation is followed. Accelerated methods of depreciation are used for
tax purposes. Maintenance and repairs, which neither materially add to the
value of the asset nor appreciably prolong its life are charged to expense as
incurred. Gains or losses on dispositions of property and equipment are
included in earnings.
d. Revenue Recognition
The Company generally receives the sales price of its web hosting fees and
services in cash at the beginning of the month of service or at the time
orders are made. Sales are generally recognized at the time the web site
hosting is provided or when the service is completed or the product is
shipped.
e. Income Taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.
f. Use of Estimates
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from estimates.
g. Principles of Consolidation
The consolidated financial statements include the accounts of World
InterNetWorks, Inc., World Internet Marketplace, Inc., Global Wholesale
Exchange, Inc., and Global Media Group, Inc. All significant intercompany
accounts have been eliminated.
h. Development costs
The costs of developing the Company's new business plan, including new web-
site design, engineering and marketing research and analysis are charged to
general and administrative expense as incurred.
i. Basic and Fully Diluted Loss Per Common Share
Basic and diluted net income or (loss) per common share are calculated by
dividing net income or (loss) attributable to common stockholders by the
weighted average number of shares of common stock outstanding during the
period. At May 31, 2000 and 1999, there were outstanding common stock
equivalents (options and warrants) to purchase 1,949,000 and 70,000 shares of
common stock, respectively. that were not included in the computation of net
(loss) per common share for the three months ended May 31, 2000 and 1999, as
their effect would have been anti-dilutive, thereby decreasing the net loss
per common share. Therefore, basic net loss per common share and fully diluted
net loss per common share were the same for the three months ended May 31,
2000 and 1999, respectively.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern. However, the Company has sustained
substantial losses from operations from it's inception and the recoverability
of a major portion of the asset amounts shown in the accompanying balance
sheet is dependent upon the Company's ability to raise sufficient working
capital to meet its operating costs and dept obligations on a continuing basis
in its future operations. The financial statements do not include, any
adjustments relating to the recoverability and classification of recorded
assets and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
The Company resumed operations in March 1999 with a new management team and
numerous strategic alliances in place for the purpose of providing state-of-
the-art web site design, technical support, online training and interactive e-
commerce web sites to individuals and small businesses (see Note 1).
Management believes this new business plan will provide the revenues and
margins necessary to result in significant recurring revenue and profitable
growth through hosting, design and engineering fees as well as commissions on
product sales. Management also expects to obtain additional equity financing
through the exercise of outstanding common stock warrants in order to meet its
cash flow needs through the balance of fiscal year 2001. See Note 4 for
additional steps undertaken by management to improve the company's liquidity.
NOTE 4 - BANKRUPTCY PETITION
On October 26, 1999, each of the Company's three subsidiaries, WIM, GWE, and
GMG, filed petitions under Chapter 7 of the United States Bankruptcy Code for
protection from creditors. The petitions require creditors to halt any
collection efforts of amounts owed them by the Company's subsidiaries until a
meeting of creditors and a hearing is conducted by the Court. The Company's
subsidiaries have no assets with which to pay their obligations to creditors.
The meeting of creditors and hearing before the Court was held on January 19,
2000. The Court will take several months to determine the disposition of
creditors claims filed under the petitions. As described in Note 1 the
operations of the subsidiaries were discontinued in October 1998 and all three
Corporate charter's were dissolved by the Utah Department of Commerce in 1999.
The amounts recorded as owed to creditors are classified as "reserve for
discontinued operations" in the accompanying consolidated balance sheets.
NOTE 5 - INCOME TAXES
As of May 31, 2000, the Company had federal and state net operating loss
carryforwards of approximately $4,530,000. The net operating losses will
expire at various dates beginning in years 2012 through 2015, if not utilized.
The Company operated as a partnership under provisions of the Internal Revenue
Code from November 1, 1995 through July 10, 1996. During this period, losses
of the Company flowed through the partnership to individual shareholders.
Accordingly, the Company was not subject to federal income taxes on it's
operations while a partnership and no provision or liability or asset for
federal, or state income taxes for those periods has been reflected.
NOTE 6 - COMMON STOCK ISSUED
a. SHARES ISSUED FOR SERVICES
In May 2000, the Company issued 14,954 shares of common stock restricted under
Rule 144 in payment for management and consulting services provided to the
Company by a shareholder and the Company recorded an expense for consulting
fees totaling $30,000 relating to the shares issued.
Additionally, in May 2000, the Company issued 71,750 shares of common stock
restricted under Rule 144 to an unrelated party in exchange for services
provided relating to the private placement of it's securities described in
more detail in the following paragraphs. The Company recorded a charge to
capital totaling $28,700 relating to the 71,750 shares issued.
In March 1999, the Company issued 1,148,000 shares of common stock restricted
under Rule 144 to several individuals in exchange for services provided to the
Company. Included in the total were 975,000 shares issued to Steven K. Hansen,
President, CEO and Chairman of the Board of Directors of the Company.
Additionally, 50,000 shares of the above total were issued to Leonard W.
Burningham, Esq., who is Counsel to the Company for securities matters. The
remaining 123,000 shares were issued to unrelated parties. The Company
recorded management, legal and professional fees totaling $287,000 relating to
the shares issued.
b. SHARES ISSUED FOR CASH
In March 1999, the Company began a private placement offering of 1,250,000
units ("Units") consisting of one share of "restricted" common stock of the
Company (restricted under Rule 144) and one "unregistered" and "restricted"
common stock purchase warrant (the "Warrant"), granting the warrant holder the
right to purchase an additional share of the Company's common stock at a price
of $2.00 per share. The Warrants expire two years from the completion of the
offering and are callable at a price of $0.01 per share at any time after
ninety days from the effective date of any registration statement, upon 30
days written notice. The Company filed an SB-2 registration statement in April
2000 to register the common stock issued and issuable under the private
placement offering. The registration statement became effective June 22, 2000.
Shares issued and amounts received under this private placement offering
through May 31, 2000 are summarized in the following table:
Common
Shares Warrants Consideration
Date Issued Issued Received
March 1999 100,000 100,000 $40,000
July 1999 50,000 50,000 20,000
October 1999 100,000 100,000 40,000
November 1999 25,000 25,000 10,000
January 2000 80,000 80,000 32,000
February 2000 375,000 375,000 150,000
Total through
February 28, 2000 730,000 730,000 292,000
March 2000 900,000 900,000 360,000
Total through
May 31, 2000 1,630,000 1,630,000 $ 652,000
The Company has now closed the offering.
NOTE 7 - STOCK OPTIONS, STOCK AWARDS AND STOCK WARRANTS
Common Stock Options
During the three months ended May 31, 2000, the Company granted 89,000 options
to purchase the Company's common stock to employees and directors and 15,000
stock options to an unrelated consultant at an exercise price of $1.38 per
share. All the options granted expire 5 years from date of grant. 34,000 of
the stock options were granted to Officers and Directors of the Company and
were vested immediately upon grant. The employee and consultant options vest
over a period of two years with 25% becoming vested after each six months from
the date of grant. The weighted average fair value of the options granted to
Directors and employees during the three months ended May 31, 2000, was $1.03
per share using the Black Scholes pricing model. Had compensation expense of
these options been recorded in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net loss would have been $347,127 or
$0.04 per share. There were no options exercised in the three months ending
May 31, 2000 and 1999, respectively, however, the 15,000 options granted to
the consultant in May 2000, were not accepted and therefore not issued. As of
May 31, 2000, the Company had a total of 309,000 non-qualified options
outstanding.
Common Stock Warrants
During the three months ended May 31, 2000 and 1999, the Company granted
warrants to purchase 900,000 and 100,000 shares, respectively, of the
Company's common stock in connection with the issuance of the same number of
shares of common stock in each three month period under the Company's private
placement offering (see Note 6).
As of November 30, 1999, the Company had a total of 1,640,000 warrants
outstanding.
NOTE 8 - COMMITMENT AND CONTINGENCIES
Employment Contracts
Effective beginning in March 1999, the Company entered into an employment
contract with Steven K. Hansen, President and CEO of the Company the terms of
which provide a monthly salary of $8,000 together with medical insurance
benefits. In addition Mr. Hansen was issued 975,000 shares of the Company's
common stock restricted under rule 144 and 75,000 shares of the Company's
common stock under an S-8 Registration Statement for management services
provided in the months ending May 31, 1999. The term of the employment
contract is three years.
Effective March 4, 1999 the Company entered into an employment contract with
Phillip M. Ray, Secretary/Treasurer of the Company, the terms of which
provided a monthly salary of $3,000 through June 1999. In addition Mr. Ray was
granted 20,000 shares of the Company's restricted common stock issued to his
designee, Automotive Direct, in consideration for payment of a $40,000 debt of
the Company. In addition Mr. Ray was granted options to acquire the Company's
common stock as follows: 50,000 shares at a price of $0.40 per share and an
additional 50,000 shares to be granted at a price of $0.40 per share when
certain business opportunities have been successfully completed for the
Company. The designated business opportunities were not completed and the
second 50,000 share grant was rescinded. In addition cash-less warrants to
purchase 25,000 shares of the Company's common stock will be issued as a
finders fee to Mr. Ray in the event the Company benefits from certain business
opportunities introduced to the Company by Mr. Ray. As of June 30, 2000 the
Company has not realized a benefit and the cash-less warrants have not been
issued. Mr. Ray's active employment ceased at the end of September 1999 and he
subsequently resigned as the Company's Secretary/Treasurer.
Officers and Directors Compensation Commitments
On May 9, 2000, the Board of Directors approved a "site" bonus plan payable to
Steve Hansen, Director, President and CEO of the Company. The site bonus plan
calls for Mr. Hansen to receive a bonus of $1.00 per web-site hosting customer
brought into the Company. The site bonus is not to exceed $15,000 in any one
month. The Board of Directors is to review the bonus for renewal or
modification in March 2001. Payments due Mr. Hansen under the site bonus plan
totaled $1,857 during the three months ended May 31, 2000.
Effective March 4, 1999 Randall L. Roberts and Gary S. Winterton were
appointed to the Board of
Directors of the Company. As Directors compensation they were each granted
options to acquire 10,000 shares of the Company's restricted common stock at a
price of $0.40 per share. In addition, on July 23, 1999 Mr. Winterton was
granted an option to acquire 100,000 shares of the Company's restricted common
stock at a price of $0.40 per share and a third option to acquire 50,000
shares at a price of $0.75 per share. The directors options expire five years
from date granted. Shares underlying the options granted Mr. Winterton will be
included in a registration statement upon the demand of the holder. To date no
such demand has been received by the Company.
Fairway Capital Consulting Agreement
On August 16, 1999, the Company entered into a consulting agreement with
Fairway Capital Partners, LLC. ("Fairway"), to provide non-exclusive
management, consulting and financial services, including advise on corporate
acquisitions and related matters. Terms of the agreement require the Company
to pay Fairway $5,000 per month for the first three months of the agreement,
$10,000 per month for the next three months, and $15,000 for each month after
that. All such payments were paid in full as of February 28, 2000. The
agreement expires on August 1, 2002. Subsequent to entering into the
consulting agreement Fairway became a related party through the acquisition of
4,200,000 shares of the Company's common stock.
On February 4, 2000, the Company and Fairway agreed to modify the agreement
for payments due after March 1, 2000. Under the modified agreement Fairway is
granted the option to reduce the monthly cash payment due them to $7,500 and
to receive an additional $7,500 worth of the Company's "unregistered" and
"restricted" common stock priced at the average closing market
price per share over the last five trading days of the previous month. The
option is effective for each month individually for the remaining term of the
agreement. Fairway capital exercised the option for the four months from
February through May 2000, and were issued 14,954 shares in lieu of $30,000
cash payments otherwise due.
Office Lease
The Company rents office facilities in Orem, Utah on a month to month basis.
There is no long term lease commitment. Monthly rental for the office facility
is currently $800.00.
Litigation and Claims
The Company is engaged in various litigation and claims both as defendant and
plaintiff arising through the normal course of business. In the opinion of
management, based on the advise of legal counsel, these lawsuits do not
represent a material obligation to the Company as of May 31, 2000.
NOTE 9 - SUBSEQUENT EVENTS
On June 23, 2000, the Company's Board of Directors authorized the Company to
loan $10,000 to an executive officer and shareholder of the Company. The loan
is in the form of a promissory note, bears interest at the rate of 8% per
annum and is payable within 120 days of the date of the note.
NOTE 10 - LOSS FROM DISCONTINUED OPERATIONS
On October 22, 1998, the Board of Directors of the Company discontinued the
marketing and distribution of products and services relating to commerce on
the Internet due to a lack of funding and increased losses. There were no
losses attributable the discontinued operations in the three months ended May
31, 2000 and 1999, respectively.
As of May 31, 2000 and 1999 the Company had liabilities of $2,459,205 and
$2,627,271, respectively, which were associated with the discontinued
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
RESULTS ANTICIPATED BY THE COMPANY AND DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE
DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
FEBRUARY 28, 2000.
Overview
Until October 1998, the Company operated three wholly-owned subsidiaries: (i)
World Internet Marketplace, Inc. ("WIM"), was engaged in marketing and
distributing products and services relating to internet commerce; (ii) Global
Wholesale Exchange, Inc. ("GWE"), provided wholesale goods to consumers via
internet and fax notification; (iii) Global Media Group, Inc. ("GMG"), doing
business as the "Institute for Financial Independence" organized and sponsored
sales seminars that sold WIM and GWE products.
Business operations were not successful and in October 1998 the operations of
all three of the Company's subsidiaries were discontinued. In October 1999,
each subsidiary filed a Chapter 7 bankruptcy petition in the United States
Bankruptcy Court for the District of Utah (the "Court") and, also in 1999, the
Utah Department of Commerce dissolved each of these subsidiaries.
Subsequently, the Company re-entered the development stage.
The Company's revenues prior to discontinuing the operations of the three
subsidiaries and entering into the development stage were derived
substantially from two categories of products and services: (i) personal and
commercial web site development and maintenance, and related internet
training; and (ii) merchandise sales from the Company's internet-based virtual
"mall" or "department store". Orders for merchandise on the Company's virtual
"mall" were generally fulfilled by shipment direct from the manufacturer or
wholesaler to the customer.
In February 1999 the Company began to restructure its business and operating
plans toward the following: (i) providing web site design services and
building software that will allow small business and home-based entrepreneurs
to establish an internet presence at a lower price than our competitors can
provide; (ii) establish an internet training and technical support program
that will help our members understand the internet and learn how to profit
from it; (iii) create strategic alliances with companies such as Dell
Computer, Office Max, Digital River and Walt Disney, through which our members
will be able to offer these companies' products on member web sites and
receive a commission ranging from approximately 4% to 10% on each sale,
depending on the terms and conditions for each company; (iv) provide our
members with access to our "Main Street Plaza" online shopping mall, which
will allow them to sell their own products over the internet; (v) provide our
members with unlimited internet access through our relationship with Alta
Vista, one of the top search engines in the country. The Company expects it
will generate revenues under this business plan from monthly web site hosting
fees, web site design and engineering fees, resale of domain names, merchant
account set up and monthly gateway fees, web site and search site marketing
fees and commissions on retail products sold through the Company's Main Street
Plaza.
The Company resumed operations in March 1999 with a new management team and
numerous strategic alliances in place for the purpose of providing state-of-
the-art web site design, technical support, online training and interactive e-
commerce web sites to individuals and small businesses. Revenues generated in
the three months ended May 28, 2000 under the Company's new business plan
totaled $83,315, primarily from web site hosting and design fees.
Management believes this new business plan will provide the revenues and
margins necessary to result in significant recurring revenue and profitable
growth through hosting, design and engineering fees as well as commissions on
product sales. Management also expects to obtain additional equity financing
through the exercise of outstanding common stock warrants in order to meet its
cash flow needs through fiscal year 2001.
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects, new
products and various other matters. Such forward-looking statements reflect
the current views of management relating to future events and financial
performance. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for such forward-looking statements. In order that any of the
Company's forward-looking statements fall within such safe harbor, the Company
notes that certain risks and uncertainties could cause actual results to
differ substantially from anticipated results. Such risks and uncertainties
include, without limitation, the performance of the Company's independent
distributors, the uncertain future of the Internet and E-Commerce, capacity
constraints on the Company's computer network and related risks of system
failure, and existing and potential governmental regulation affecting the
Internet and the network marketing industry.
Results of Operations
Three months ended May 31, 2000 compared with three months ended May 31, 1999
The Company recorded revenues of $83,315 for the three months ended May 31,
2000, an increase of $79,058 over the same period in the previous year. The
1st quarter revenues are primarily from web-site hosting and web-site design
fees generated after the implementation of management's new business plan.
Gross profits on services sold increased $56,548 over the same period in the
previous year to $57,430.
Selling, general and administrative expenses were $316,119 for the three month
period ended May 31, 2000, compared to $391,896 for the same period in the
previous year. Depreciation and amortization totaled $938 for the same period
compared to $372 in the prior year 1st quarter. Management and consulting
fees, salaries, investor relations and other professional fees included in
selling, general and administrative expenses relate to the development and
implementation of the Company's new business plan and decreased as up front
management and consulting fees declined from 1999's 1st quarter.
The Company incurred losses from operations of $259,627 and $391,386 for the
three months ended May 31, 2000 and 1999, respectively. The decrease in loss
from operations is due primarily to a significant increase in revenues over
the prior year's 1st quarter and to a decrease in management and consulting
fees, investor relations and other expenses relating to the development and
implementation of the Company's new business plan. The Company anticipates
that its investment in the implementation of its ongoing business plan will
continue at present or increased levels for the remainder of the fiscal year
ending February 28, 2001, assuming the availability of working capital.
Other income consisted of interest earned on funds raised in the Company's
private placement offering and invested in interest bearing bank accounts and
totaled $4,170 for the three months ended May 31, 2000. There was no interest
earned in the prior year's 1st quarter.
The Company reported a net loss of $255,457 for the three months ended May 31,
2000 compared to a net loss of $391,386 for the three months then ended May
31, 1999.
Liquidity
The Company had negative working capital of $2,229,675 at May 31, 2000
compared to negative working capital of $2,348,505 at February 28, 2000. The
Company's cash increased from $88,571 at the fiscal year end of February 28,
2000, to $251,512 at May 31, 2000. Total current assets increased by $188,948
to $299,648 from the fiscal year end of February 28, 2000, to May 31, 2000.
Current liabilities decreased from $2,533,897 to $2,529,323 in the same
period.
During the three months ended May 31, 2000, the Company issued 986,704 shares
of its common stock as follows:
FOR CASH
In March 2000, the Company issued 900,000 shares of common stock in
exchange for cash in the amount of $360,000. In addition to the shares issued,
each investor received warrants to purchase an equal number of additional
shares of the Company's common stock at $2.00 per share. The shares issued
were restricted under Rule 144 and were issued in private placements to
qualified investors. The shares were subsequently registered under an SB-2
registration statement filed with the Securities and Exchange Commission that
became effective June 22, 2000.
In March 1999, the Company began a private placement offering of 1,250,000
units ("Units") consisting of one share of "restricted" common stock of the
Company (restricted under Rule 144) and one "unregistered" and "restricted"
common stock purchase warrant (the "Warrant"), granting the warrant holder the
right to purchase an additional share of the Company's common stock at a price
of $2.00 per share. The Warrants expire two years from the completion of the
offering and are callable at a price of $0.01 per share at any time after
ninety days from the effective date of any registration statement, upon 30
days written notice. The Company filed an SB-2 registration statement in April
2000 to register the common stock issued and issuable under the private
placement offering. The registration statement became effective June 22, 2000.
Shares issued and amounts received under this private placement offering
through May 31, 2000 are summarized in the following table:
Common
Shares Warrants Consideration
Date Issued Issued Received
March 1999 100,000 100,000 $40,000
July 1999 50,000 50,000 20,000
October 1999 100,000 100,000 40,000
November 1999 25,000 25,000 10,000
January 2000 80,000 80,000 32,000
February 2000 375,000 375,000 150,000
Total through
February 28, 2000 730,000 730,000 292,000
March 2000 900,000 900,000 360,000
Total through
May 31, 2000 1,630,000 1,630,000 $ 652,000
The Company has now closed the offering.
FOR SERVICES
In May 2000, the Company issued 14,954 shares of common stock restricted
under Rule 144 in payment for management and consulting services provided to
the Company by a shareholder and the Company recorded an expense for
consulting fees totaling $30,000 relating to the shares issued.
Additionally, in May 2000, the Company issued 71,750 shares of common
stock restricted under Rule 144 to an unrelated party in exchange for services
provided relating to the private placement of it's securities described in
more detail in the following paragraphs. The Company recorded a charge to
capital totaling $28,700 relating to the 71,750 shares issued.
In March 1999, the Company issued 1,148,000 shares of common stock
restricted under Rule 144 to several individuals in exchange for services
provided to the Company. Included in the total were 975,000 shares issued to
Steven K. Hansen, President, CEO and Chairman of the Board of Directors of the
Company. Additionally, 50,000 shares of the above total were issued to Leonard
W. Burningham, Esq., who is Counsel to the Company for securities matters. The
remaining 123,000 shares were issued to unrelated parties. The Company
recorded management, legal and professional fees totaling $287,000 relating to
the shares issued.
The Company will require substantial additional cash and working capital in
order to continue the development and implementation of its business plan.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In February 1998, our wholly-owned subsidiary, World Internet
Marketplace, Inc., filed a complaint in the Fourth District Court for the
State of Utah, alleging breach of fiduciary duty, conversion, tortious
interference with economic relations and violation of the Utah Uniform Trade
Secrets Act against three former employees. The claims resulted from certain
former employees' commission practices and discussions with competitors. The
defendants filed an answer in March, 1998; no counterclaim was asserted.
In March 1998, Paulette Arnold filed a complaint against World
Internet Marketplace, Inc., in Knoxville County, Tennessee, alleging an
undetailed claim of breach of contract and seeking damages of $ 5,940.
On October 26, 1999, our wholly-owned subsidiaries, World Internet
Marketplace, Inc.; Global Media Group, Inc.; and Global Wholesale Exchange,
Inc., filed for Chapter 7 bankruptcy protection in the United States
Bankruptcy Court for the District of Utah (Salt Lake). The cases were
designated Case Nos. 99-31576; 99-31577; and 99-31578, respectively. The
pending litigation involving World Internet Marketplace, Inc., was stayed in
accordance with U. S. bankruptcy law, pending completion of its bankruptcy
case. The first meeting of creditors was held January 19, 2000. Ms. Arnold
did not file a creditor's claim at that meeting.
Other than as described herein, the Company is not a party to any
other litigation or other legal proceeding or investigation that is expected
to have a materially adverse effect on its financial condition or results of
operations; nor are any such proceedings known or contemplated.
Item 2. Changes in Securities.
None, not applicable.
Item 3. Defaults Upon Senior Securities.
There were no defaults in payments of this type during the reporting
period.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's security holders
during the three month period ended May 30, 2000.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits and Other Reports on Form 8-K.
(A) On April 3, 2000, the Company filed an 8-K Current Report dated
March 22, 2000, with respect to its private offering of
1,250,000 Units.
On April 25, 2000, the Company filed an amended 8-K Current
Report dated February 19, 1999, with respect to its corporate
restructuring.
SIGNATURE
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD INTERNETWORKS, INC.
Date: 7/5/00 /s/Steven K. Hansen
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Steven K. Hansen, Chief Executive Officer
and Director
Date: 7/5/00 /s/Gary S. Winterton
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Phillip M. Ray, Secretary/Treasurer and
Director
Date: 7/5/00 /s/Randal L. Roberts
-------------- -----------------------------
Randal L. Roberts, Director