UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OF 15(d)OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended Sept 30, 2001
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
--------- ------
Commission file number 000-28335
----------------
Web4Boats.com, Inc.
- -------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 84-1080043
- --------------------------------- ------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1625 Broadway Suite 770
Denver, CO 80202
(Address of principal executive offices) (Zip Code)
- ----------------------------------------------------------------------------
(Address of principal executive office)
(866) 932-2628
- ----------------------------------------------------------------------------
(Issuer's telephone number)
- ----------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: September 30, 2001,
22,492,089 shares.
Transitional Small Business Format (Check one): Yes [ ] No [x]
WEB4BOATS.COM, INC.
FORM 10-QSB
1
TABLE OF CONTENTS
Page
PART I--FINANCIAL INFORMATION---------------------------------------- 3
Item 1. Financial Statements---------------------------------------- 3
Independent Accountant's Review Report-------------------------- 3
Balance Sheets-------------------------------------------------- 4
Statements of Operations---------------------------------------- 6
Statements of Cash Flows---------------------------------------- 7
Notes to Financial Statements----------------------------------- 9
Item 2. Management's Discussion and Analysis or Plan of Operation--- 13
PART II--OTHER INFORMATION------------------------------------------- 18
Item 1. Legal Proceedings------------------------------------------- 18
Item 2. Changes in Securities--------------------------------------- 18
Item 3. Defaults Upon Senior Securities----------------------------- 18
Item 4. Submission of Matters to a Vote of Security Holders--------- 18
Item 5. Other Information------------------------------------------- 18
Item 6. Exhibits and Reports on Form 8-K---------------------------- 18
Signatures----------------------------------------------------------- 18
2
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
Independent Accountant's Review Report
November 6, 2001
To the Board of Directors and Shareholders
of Web4Boats.com, Inc.:
I have reviewed the accompanying balance sheets of Web4Boats.com, Inc. as of
September 30, 2000 and 2001, and the related statements of operations for each
of the three months and six months then ended, and the related statements of
cash flows for each of the six months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included
in these financial statements is the representation of the management of
Web4Boats.com, 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 accounting standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Web4Boats.com, Inc. will continue as a going concern. As discussed in Note 7
to the financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Carl S. Sanko
Topanga, California
3
Web4Boats.com, Inc.
Balance Sheets
September 30, 2000 and 2001
September 30, September 30,
2000 2001
Assets
Current assets
Cash $ 247 $ 204
Prepaid interest 0 5,000
Prepaid consulting fees 52,000 39,417
Prepaid advertising 140,083 0
Total current assets 192,330 44,621
Property and equipment
Equipment 2,444 2,444
Accumulated depreciation ( 488) ( 976)
Property and equipment, net 1,956 1,468
Other assets
Trademarks, net 8,565 6,383
Total other assets 8,565 6,383
Total assets $ 202,851 $ 52,472
See accompanying notes to financial statements
- Unaudited -
4
Web4Boats.com, Inc.
Balance Sheets
September 30, 2000 and 2001
September 30, September 30,
2000 2001
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 338,991 $ 109,381
Accrued expenses 6,643 18,289
Accrued litigation settlement 42,500 42,500
Short-term borrowings 167,100 135,281
Total current liabilities 555,234 305,451
Shareholders' equity (deficit)
Preferred stock, par value $.001,
20,000,000 shares authorized,
0 issued and outstanding at
September 30, 2000 and 2001,
respectively 0 0
Common stock, par value $.001,
100,000,000 shares authorized,
10,341,793 and 22,492,089 issued
and outstanding at September 30, 2000
and 2001, respectively 10,342 22,492
Paid in capital 2,916,072 4,078,341
Accumulated deficit (3,278,797) (4,353,812)
Total shareholders' equity ( 352,383) ( 252,979)
Total liabilities and shareholders' equity $ 202,851 $ 52,472
See accompanying notes to financial statements
- Unaudited -
5
Web4Boats.com, Inc.
Statements of Operations
For the Six Months Ended September 30, 2000 and 2001
6 Months Ended 6 Months Ended
September 30, September 30,
2000 2001
Revenues $ 1,848 $ 609
Operating expenses:
Salaries 31,250 0
General and administrative 903,841 171,655
Total operating expenses 935,091 171,655
Loss from operations (933,243) (171,046)
Other income 0 0
Net loss $ (933,243) $ (171,046)
Basic and dilutive loss per share $ (.130) $ (.004)
See accompanying notes to financial statements
- Unaudited -
6
Web4Boats.com, Inc.
Statements of Operations
For the Three Months Ended September 30, 2000 and 2001
3 Months Ended 3 Months Ended
September 30, September 30,
2000 2001
Revenues $ 1,658 $ 201
Operating expenses:
Salaries 15,625 0
General and administrative 681,447 104,263
Total operating expenses 697,072 104,263
Net loss $ (695,414) $ (104,062)
Basic and dilutive loss per share $ (.08) $ (.005)
See accompanying notes to financial statements
- Unaudited -
7
Web4Boats.com, Inc.
Statements of Cash Flows
For the Six Months Ended September 30, 2000 and 2001
6 Months Ended 6 Months Ended
September 30, September 30,
2000 2001
Cash flows from operating activities
Net loss $ (933,243) $ (171,046)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 1,334 1,336
Common stock issued for services 482,245 47,000
Changes in operating assets and
liabilities
Prepaid expenses 0 (12,167)
Accounts payable 182,335 86,310
Accrued expenses 4,237 8,120
Short-term borrowings 120,100 (15,600)
Net cash provided by (used in) operating
activities (142,992) (56,047)
Cash flows from investing activities
Sale of fixed assets 26,187 0
Net cash provided by (used in) investing
activities 26,187 0
Cash flows from financing activities
Proceeds from issuance of common stock 0 50,000
Issuance of common stock in payment of
interest payable 95,992 6,000
Net cash provided by (used in) financing
activities 95,992 56,000
Net increase (decrease) in cash (20,813) (47)
Cash, beginning of period 21,060 251
Cash, end of period $ 247 $ 204
See accompanying notes to financial statements
- Unaudited -
8
NOTES TO FINANCIAL STATEMENTS
NOTE 1 Summary of significant accounting policies
Organization and business
Web4boats.com, Inc. ("the Company"), a Delaware Corporation, was
incorporated on February 4, 1994 as New York Bagel Exchange, Inc. Commencing
September 26, 1995, the Company has operated in the business of wholesale and
retail sales of bagels, sandwiches, baked goods, specialty coffees and related
items. On August 22, 1997, the Company acquired the assets and liabilities of
Windom, Inc., a non-operating public shell, resulting in the retirement of all
the common and preferred shares of both companies, and the reissuance, by the
Company, of 2,594,560 shares of common stock. The merger was accounted for,
in substance, as an issuance of stock for the net monetary asets of Windom,
Inc. on August 22, 1997, and the financial statements presented are those of
New York Bagel Exchange, Inc. since the date of its formation. Subsequent to
the merger, the Company continued its wholesale and retail operations. On
January 26, 1999, New York Bagel Exchange, Inc. changed its name to
Webboat.com, Inc., on April 2, 1999, Webboat.com, Inc. changed its name to
Windom.com, Inc., and on April 20, 1999, Windom.com, Inc. changed its name to
Web4boats.com, Inc.
On March 22, 1999, the Board of Directors approved sale of the Company's
inventory and fixed assets for $120,000. The Company ceased its business
operations on March 25, 1999. The actual disposal date of assets subject to
the sale was on April 19, 1999. A gain of approximately $72,000 resulted upon
the disposition. Per Accounting Principles Board opinion No. 30, since the
disposal date occurred subsequent to fiscal year 1999, the gain is to be
recognized when realized, which was in the quarter ended June 30, 1999.
During fiscal year 1998, the Company began making plans to develop a
commercial internet site in which boat builders, manufacturers, dealers,
marinas, individual buyers and sellers would come to advertise sales and
services related to the boating industry. In fiscal 1998, the Company
incurred $259,375 of expense for marketing, consulting and other services
related to development of the Company's new business operations. In April,
1999, the Company issued 1,010,000 shares of its common stock as full payment
for these services. Subsequently, for the year ended March 31, 2000 and
through the six months ended September 30, 2000, the Company has continued to
invest substantially in website development and related costs. The Company
expects, as a going concern, to realize future benefits from these costs.
However, all such development costs are expensed as incurred.
The Company had only minimal revenues from its internet site for the six
months ended September 30, 2000 and 2001. The Company does not expect, as a
going concern, to derive substantial revenues until fiscal year 2002.
Property and equipment
Equipment is recorded at cost and depreciated over estimated useful lives
of five years using the straight-line method. Trademarks are recorded at cost
and amortized over estimated useful lives of five years using the straight-
line method.
9
Sale of operating assets
In April, 2000, the Company paid $5,000 and returned $31,160 in computer
equipment it had purchased in July, 1999, from a vendor involved in the
development of the Company's e-commerce website in settlement of $15,500 in
payables to the vendor, of which $11,750 was accrued as of March 31, 2000. The
sale resulted in a loss of $15,687 for the quarter ended September 30, 2000.
Income taxes
The Company has net operating loss carryforwards from fiscal years 2000
and earlier of approximately $1,620,000 and $1,617,000 for federal and
California state tax purposes, respectively. With additional loss for the six
months ended September 30, 2000, the Company has total net operating loss
carryforwards at September 30, 2001 of approximately $2,104,000 and $2,098,000
for federal and California state tax purposes, respectively. A deferred asset
for these amounts has not been accrued due to the uncertain nature of its
being realized. Net operating loss carryforwards begin to expire in fiscal
year 2011 and 2004 for federal and California state tax purposes,
respectively.
Earnings per share
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding during each three month period.
NOTE 2 Shareholders' equity
Compensatory stock issuance
During the six months ended September 30, 2000, the Company received
salary compensation valued at $43,250 in exchange for common stock.
Stock options
During fiscal year 1998, the Company recorded a charge to operations of
$687,500 for marketing and other services in exchange for issuance of stock
options. The value for such services was computed as the difference between
the quoted market price at the option's measurement date and the option
price. All options were exercisable at time of grant and no options have been
exercised as of September 30, 2001. The number of shares represented by stock
options outstanding at September 30, 2001 are 3,572,000 shares with an option
price of $.07 to $1.00 per share, and $1,487,120 in total, and with a market
price at date of grant of $.06 to $2.00 per share, and $2,031,690 in total.
Outstanding options expire on various dates from October, 2001 to March,
2003. Included in stock options outstanding at September 30, 2001, are
1,500,000 shares which were determined to have a fair value per option of
$.073 as of the date of grant using the Black-Scholes option pricing model
with the following assumptions: expected price volatility of 57.7%, expected
option lives of three years, risk free interest rate of 6.0%.
Stock redeemed and issued
In April, 1999, the Company issued 500,000 shares of restricted common
stock and stock options representing 500,000 shares of common stock to a new
officer as consideration for services which were fully rendered as of March
31, 2001.
10
Preferred stock
In June, 1999, the Company authorized the issuance of 20,000,000 shares of
$.001 par value, preferred stock. In August, 1999, 10,000 shares of preferred
stock was designated as Series A preferred stock with conversion rights of one
share of Series A preferred to 100 shares of common stock. Subsequently, the
10,000 shares of Series A preferred was sold for $100,000 to a related party.
A beneficial conversion feature of $100,000 was present in the transaction and
is reflected in stockholders' equity at September 30, 2001.
In August, 2000, the outstanding 10,000 shares of Series A preferred stock
were converted to 1,000,000 shares of common stock. The Series A preferred
shares were then cancelled and returned to the status of authorized and
unissued.
NOTE 3 Related parties
Short term borrowings
At September 30, 2000, the Company had unsecured promissory notes,
inclusive of accrued interest, of $173,743, payable to eight shareholders.
The notes bear annual interest at a rates of 10% to 12%.
During the year ended March 31, 2001, the Company received $140,000 from
eight lenders, two of which were related parties, in exchange for promissory
notes with interest at 12% per year and terms ranging from seven days to six
months. As inducement to obtain the unsecured loans, the Company issued a
total of 560,000 shares of common stock, valued at $123,800, which was
recorded as interest expense during the year ended March 31, 2001.
At September 30, 2001, the Company had unsecured promissory notes,
inclusive of accrued interest, of $153,571, payable to nine shareholders, and
that bear annual interest at rates of 10% to 12%.
Stock options
Represented in outstanding stock options are 3,320,000 shares at September
30, 2001, to related parties.
NOTE 4 Statements of Cash Flows
Financial instruments
The Company considers all liquid interest-earning investments with a
maturity of three months or less at the date of purchase to be cash
equivalents.
Noncash transactions
During the six months ended September 30, 2000, the Company issued
3,748,333 shares of its common stock, of which 1,983,333 shares was to a
related party. The shares were compensation in exchange for $406,806 in
services, of which $124,828 had been accrued at March 31, 2000 and $192,083
is a prepaid expense at September 30, 2000.
11
During the six months ended September 30, 2001, the Company issued
1,900,000 shares of its common stock, of which 100,000 shares was to a related
party. The shares were compensation in exchange for $47,000 in services and
$6,000 in interest, of which $31,917 is a prepaid expense at September 30,
2001.
Interest paid
During the six months ended September 30, 2000, the Company charged to
operations interest expense of $102,157 and paid $250 of interest in cash.
During the six months ended September 30, 2001, the Company charged to
operations interest expense of $9,119 and paid no interest.
NOTE 5 Commitments and Contingencies
Contract commitments
On April 15, 1999, the Company entered into a one year consulting
agreement, with a related party, under which the Company agreed to pay $10,000
per month, payable in cash or stock, for management and advisory services.
The contract was renewed through March 31, 2002. For the year ended March 31,
2001, $4,000 in cash and 1,233,333 shares of common stock, valued at $116,000
were issued as payment of services received from April through March, 2001.
For the six months ended September 30, 2001, $4,500 in cash and $55,800 was
accrued in accounts payable as payment of services received from April through
September, 2001.
Service commitments
The Company has entered into various contracts for professional services
related to managing and promoting its website. Commitments as of September 30,
2001 under these contracts total $98,750 with all contracts expiring by July
17, 2002.
Litigation
During fiscal 1999, a lawsuit was filed against the Company in which the
plaintiff, a former officer, claimed breach of employment contract related to
fiscal year 1998. In May, 1999, the dispute was settled for $42,500. The
unpaid settlement amount is accrued as of September 30, 2000 and 2001.
NOTE 6 Subsequent events
Stock issued
In October, 2001, the Company issued 4,590,000 shares of common stock to
two related parties in payment of $90,700 in management services accrued at
September 30, 2001.
12
NOTE 7 Going concern
The Company has suffered recurring losses from operations and has a net
capital deficiency that raise substantial doubt about its ability to continue
as a going concern. During fiscal year ended March 31, 1999, as a result of
not being able to meet its obligations as they became due, the Company saw no
alternative but to sell its operating assets, as described in Note 1 above.
Note 1 also describes management's plans in regard to perpetuating its
existence through new operations related to internet marketing and the
boating industry. The Company has the ability to raise funds through the
public equity market and, as stated in Notes 2, 3 and 4, has paid significant
liabilities to related and other parties with common stock and raised
substantial funds from a related party in the private sector as well. While
such plans and fundraising ability seem to mitigate the effect of prior
years' losses and deficits, the Company is essentially only beginning to
market in a new industry. The inability to assess the likelihood of the
effective implementation of management's plans in this new environment also
raises substantial doubt about its ability to continue as a going concern.
Item 2. Management's Discussion and Analysis or Plan of Operation.
You should read the following discussion of our results of operations
and financial condition in conjunction with our consolidated financial
statements and related notes included elsewhere in this Form 10-QSB. Unless
specified otherwise as used herein, the terms "we," "us" or "our" refers to
Web4Boats.com, Inc.
The following Management's Discussion and Analysis or Plan of Operation
contains certain forward-looking statements regarding future financial
condition and results of operations and the company's business operations.
We have based these statements on our expectations about future events. The
words "may," "intend," "will," "expect," "anticipate," "objective,"
"projection," "forecast," "position" or negatives of those terms or other
variations of them or comparable terminology are intended to identify
forward-looking statements. We have based these statements on our current
expectations about future events. Although we believe that our expectations
reflected in or suggested by our forward-looking statements are reasonable,
we cannot assure you that these expectations will be achieved. Our actual
results may differ materially from what we currently expect. Important
factors which could cause our actual results to differ materially from the
forward-looking statements include, without limitation: (1) general economic
and business conditions, (2) effect of future competition, and (3) failure to
raise needed capital.
OVERVIEW
Prior to entering into the Internet market and boating industry, the
Company, as a non-operating entity, merged with a business known as New York
Bagel Exchange, Inc. in September 1997. (For accounting purposes, the merger
resulted in a continuation of the bagel company's operations.) The Company
engaged in the business of wholesale and retail sales of bagels, sandwiches,
baked goods, specialty coffee and related items at a single store. The
Company's Board of Directors approved the sale of the Company's inventory and
13
fixed assets and ceased the bagel related operations on March 25, 1999. The
actual sale of assets was on April 19, 1999. All management of New York
Bagel Exchange, Inc. resigned and new management was subsequently appointed.
On April 20, 1999, the Company changed its name (and direction of its
business)to Web4Boats.com, Inc. and commenced developing a commercial Internet
site in which boat dealers, marinas, individual buyers and sellers would come
to advertise sales and services related to the professional and recreational
boating industry.
To date, the Company has had very little revenue from any of its website
or related operations. The Company's two revenue streams are: (1) affiliate
programs and (2) advertising, particularly classified advertising of boats
for sale.
We are currently set up to derive revenue from fees and commissions
from affiliate programs, such as Amazon.com, Hoosie Boat Transport, Voyager
Insurance Services, Inc., West Marine, and Marine Express. We expect to add
to these revenue generating opportunities with future revenues from fees paid
by banner advertisement placements and links to other websites.
It is anticipated that the enhancement of the website would include Boat
Dealers/Brokers, Boat Builders/Manufacturers, Marinas, and other recreational
suppliers having access to our program and services by paying initial
placement fees, as well as ongoing monthly fees based upon, among other
things, the size of territory, demographics and the transmittal of purchase
requests to them.
We anticipate that we will derive direct revenue from the volume of
purchases made as a result of visiting our website. We also believe our
ability to attract subscribing dealers/brokers and other affiliates for our
website, is directly related to the volume of visits and subsequent purchases
we expect to occur as a result of a visit to our website. As of June 30,
2001, we had an historic daily average over the preceding month of
approximately 15,000 impressions with an historic daily average of
approximately 297 user sessions per day. The Company believes this is a fair
approximation of the use of the site by the boating public at this time
because most of the development work by website designers visiting the site
has been completed.
It is anticipated that sales and marketing costs will consist primarily
of promotion and advertising to build brand awareness and encourage potential
customers to visit our website. We will use Internet advertising, as well as
traditional media, such as television, radio and print. The majority of our
Internet advertising expense is expected to be initially comprised of fees
for advertising services and later of sponsorship and banner advertising
agreements with Internet portals such as Alta Vista, Excite, and Lycos as
well as advertising and marketing affiliations with online boating and
recreational information providers. The Internet portals and online boating
and recreational information providers charge a combination of set-up,
initial, annual, monthly and variable fees. Set-up fees are incurred for the
development of the link between our website and their website. No such
banner advertising is currently in place due to the company's lack of capital.
14
The Company began accruing commissions from products being purchased by
Web4Boats.com viewers being linked to the company's affiliation program in
September, 1999. Revenues from that buying through June 30, 2001, however,
continues to be minimal.
The Company expects to derive substantially all of its revenues from the
sale of advertisements, particularly classified advertisements of boats for
sale. The Company's revenues are derived principally from the sale of
advertisements on short-term contracts. The Company's standard rates for
advertising currently range from $5-100 per 1,000 impressions. The Company
currently has no banner advertisers and its impressions are currently running
approximately 15,000 per day.
The Company has a limited operating history as an Internet company, and
its prospects are subject to the risks, expenses and difficulties frequently
encountered by companies in the new and rapidly evolving markets for Internet
products and services. The Company's operating results may fluctuate
significantly in the future as a result of a variety of factors, many of
which are outside the Company's control.
These factors include the level of usage of the Internet, demand for Internet
advertising, seasonal trends in both Internet usage and boat advertising
placements, the advertising budgeting cycles of individual advertisers, the
amount and timing of capital expenditures and other costs relating to the
expansion of the Company's operations, the introduction of new products or
services by the Company or its competitors, pricing changes in the industry,
technical difficulties with respect to the use of Web4Boats.com, general
economic conditions and economic conditions specific to the Internet
and online media. As a strategic response to changes in the competitive
environment, the Company may from time to time make material pricing, service
or marketing decisions that effect the Company's business. Due to all of the
foregoing factors, in some future quarter the Company's operating results may
fall below the expectations.
RESULTS OF OPERATIONS
Revenues for the three months ended September 30, 2001 were $201.
Operating expenses consist of salaries, marketing and general and
administrative expenses. General and administrative expense primarily
consists of executive, consulting, financial and legal expenses and related
costs. General and administrative expense was $104,263 for the three months
ended September 30, 2001, an approximate $577,184 decrease from the end of the
September 30, 2000, three month period. Virtually all of the amounts up until
September 30, 2001, were related to development of the website business and
include amounts owed to Internet Advisors Group, Inc. or Blair Merriam, its
sole shareholder and employee, for day-to-day management services which has
generally been met with the issuance of shares of Common Stock. The expenses
subsequent to September 30, 2001, were mostly for operations. Most of this
expense has been paid with the issuance of the Company's common stock, both
restricted and registered under Form S-8. The resulting net loss for the three
months ended September 30, 2001, was $(104,062) or $(.005) per share.
15
In April, 2000, all rights and obligations of Internet Advisors Group,
Inc. under the agreement were assigned to Blair Merriam, its sole shareholder
and employee. The parties plan to reverse this assignment in the near future
to accommodate Mr. Merriam's personal financial interests which should have
no effect on the Company. In addition, the agreement was renewed for a
period to expire March 31, 2002.
The Company does not have any non-officer employees, and no cash
salaries or wages are currently being paid. Depending on the success of the
operation and the availability of funds the Company hopes to begin to
establish an internal management team and staff. Poor business results could
delay this plan indefinitely. Under the terms of the agreement with Internet
Advisors Group, Inc. the Company is obligated to pay ten thousand dollars
$10,000)per month that "may be made in either cash, stock, or any combination
thereof." Because the fees may be paid in stock, the Company does not believe
it will have any problems meeting its payment obligations under this agreement
over the next twelve months. These shares have been registered under Form S-8
and such issuances in the future will generally be so registered.
The accounts payable consist mainly of accounting, legal and website
design and development and advertising ($109,381; See Financial Statements).
Overall, the Company's general and administrative and marketing expense
has decreased substantially. These expenses over the 3 months ended September
30, 2001, consisted mostly of payments to consultants to facilitate the
Company's operational goals.
LIQUIDITY AND CAPITAL RESOURCES
The Company's auditor has issued an opinion questioning the
Company's ability to continue as a going concern, and we believe our current
cash and cash equivalents are in fact, not sufficient to meet our anticipated
cash needs for working capital and capital expenditures. The Company intends
to meet its needs through borrowing or through the issuance of common stock.
The Company expects to continue issuing Common Stock and Common Stock
options in exchange for services until it has cash to meet these obligations
The Company anticipates that capital expenditures in the fiscal year
ending March 31, 2002 will be approximately $250,000, primarily for
evaluating the feasibility of its current plans and to determine viable
alternatives for its operations and marketing. The Company has no current
plans on how to obtain additional funding for the expected expenditures and
is evaluating various alternatives. Inability to obtain funding will
substantially slow development of the Company's operations.
With respect to fiscal years beyond March 31, 2002, we may be required
to raise additional capital to meet our long term operating requirements.
If we are unable to obtain additional financing as needed, we may be required
to reduce the scope of our operations or our anticipated expansion, which
could have a material adverse effect on our business, results of operations
and financial condition. Although our revenues have decreased since
implementation of the Web4Boats.com business, our expenses have continued to,
16
and in the foreseeable future are expected to, exceed our revenues.
Accordingly, we do not expect to be able to fund our operations from
internally generated funds for the foreseeable future.
Our cash requirements depend on several factors, including:
(1) the level of expenditures on marketing and advertising
(2) the rate of market acceptance
(3) the ability to expand our customer base
(4) the ability to increase the volume of sales with our
affiliates
(5) the cost of contractual arrangements with online
information providers, search engines, and other referral
sources.
PLAN OF OPERATION
The core elements of the Company's website are complete and operational.
Over the next twelve months the Company plans to devote most of its efforts
and financial resources toward increasing awareness of its website among the
boating public and professionals.
The volume of classified advertisements has reached the point that
management believes it is sufficient, because of its size, to attract boat
buyers and others to the website. In addition, management also believes that
the website traffic will now justify fees for all new ads placed on the
website.
The Company plans to initially arrange most of its links from other websites
and magazines through a barter arrangement under which the other website or
magazine will receive a reciprocal link to its website or services thereby
reducing cash outlays.
The Company has begun to seek a significant infusion of capital, $1 - 5
million, to increase awareness of the website among the boating public and
professionals and to continue development of the website. There can be no
assurance that such funding will be available to the Company. In the event
that such funding is not available to the Company, then Web4Boats.com would
be forced to use whatever cash is generated, mostly by its classified
advertisement sector, for enhancement of the website and its promotion. Such
a process of development would likely be much slower than what could be
achieved with the infusion of substantial new investments. Management
believes, however, that the Company's business is relatively easily scalable.
The core elements of the website are in place, and the website is now able to
achieve its purpose. Thereafter, additional funds are devoted mostly to
promotion of the website and enhancement of the core elements. The
availability of funds determines the speed with which promotion and
enhancements are pursued.
Depending upon the ability of the Company to arrange additional
financing, the Company expects to add full time management and staff by the
end of 2001, which is later than initially anticipated. Development
of the Company's business could significantly alter the timing of the need
for staff and current plans are tentative. In addition, competition for
qualified internet technology and sales personnel is intense, which is
17
expected to make it difficult to add personnel on short notice and at the
optimal time for the Company.
KNOWN RISKS AND TRENDS
SEASONALITY
We expect our business to experience the seasonality of the boating and
warm weather recreational equipment industry as it matures.
LIABILITY FOR THE COMPANY'S SERVICES
Web4Boats.com hosts a wide variety of information, community,
communications and commerce services that enable individuals to exchange
information, generate content, conduct business and engage in various online
activities. The laws relating to the liability of providers of these online
services for activities of their users is currently unsettled. Claims could
be made against Web4Boats.com for defamation, negligence, copyright or
trademark infringement, personal injury or other theories based on the nature
and content of information that may be posted online by its users. Such
claims have been brought, and sometimes successfully pressed, against online
service providers in the past. In addition, Web4Boats.com could be exposed
to liability with respect to the selection of listings that may be accessible
through its Web4Boats.com-branded products and media properties, or through
content and materials that may be posted by users in classifieds, message
boards, clubs, chat rooms, or other interactive community-building services.
Any such finding of liability against Web4Boats.com could have a material
adverse effect on the Company's business.
RELIANCE ON ADVERTISING REVENUES AND UNCERTAIN ADOPTION OF THE
INTERNET AS AN ADVERTISING MEDIUM
Web4Boats.com expects to derive a majority of its revenues from the sale
of advertisements on its website pages under short-term contracts. Most of
its advertising customers have limited experience with the Internet as an
advertising medium. Web4Boats.com's continuing ability to generate
significant advertising revenues will depend upon, among other things:
advertisers' acceptance of the Internet as an effective and sustainable
advertising medium; the development of a large base of users of its services
possessing demographic characteristics attractive to advertisers; and its
ability to continue to develop and update effective advertising delivery and
measurement systems. No standards have yet been widely accepted for the
measurement of the effectiveness of Internet-based advertising. Web4Boats.com
cannot be certain that such standards will develop sufficiently to support
Internet-based advertising as a significant advertising medium. In addition,
adverse economic conditions can significantly impact advertisers ability and
willingness to spend additional amounts on advertising generally, and on
Internet-based advertising specifically. In the past few months, investor
have expressed their worry about the viability and growth potential of
Internet companies that rely on advertising as their business model by
severely depressing the price of such company's stock from what was generally
the recent highs of March, 2000. The Company, however, remains confident
that its business model aimed at a niche (albeit large) segment of the
population of consumers (boating enthusiasts) will ultimately be successful.
17
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
17
Item 6. Exhibits and Reports on Form 8-K.
None.
EXHIBITS
None
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed in its behalf by the undersigned, thereunto
duly authorized.
Web4Boats.com, Inc.
Date: August 8th, 2001 /s/ Dennis Schlagel
-------------------- -----------------------
Dennis Schlagel, President
18