U.S. 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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
----------
Commission file number 0-26886
INTERNET HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Utah 13-3758042
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
16 Curzon Street, Mayfair, London
United Kingdom
W1Y 7FF
(Address of principal executive offices)
011 44 171 409 1600
(Issuer's telephone number, including area code)
Check whether the issuer (1) 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 18,575,558 shares of common
stock as of May 15, 2000.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
a) Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999.............. 3
b) Consolidated Statements of Operations
for the three months ended March 31, 2000
and the period from inception to
March 31, 2000.................................... 4
c) Consolidated Statements of Cash Flows
for the three months ended March 31, 2000
and the period from inception to
March 31, 2000.................................... 5
d) Note to Financial Statements...................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................7 to 8
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND
USE OF PROCEEDS.......................................... 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................... 9
a) EXHIBITS.......................................... 9
b) REPORTS ON FORM 8-K............................... 9
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash investments $ 4,726,720 $ 506,149
Other receivables 30,092 1,474
Prepaid expenses 146,912 194,445
Purchase deposit 65,060 --
----------- -----------
Total current assets 4,968,784 702,068
FIXED ASSETS, at cost, net of accumulated
depreciation of $5,652 and $ -, respectively 170,966 --
INVESTMENTS, at cost 666,406 666,406
SECURITY DEPOSITS 234,295 --
----------- -----------
$ 6,040,451 $ 1,368,474
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 107,742 $ 85,591
----------- -----------
Total current liabilities 107,742 85,591
CONVERTIBLE NOTE -- 50,000
----------- -----------
Total liabilities 107,742 135,591
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 50,000,000 shares authorized,
16,559,470 and 11,359,470 shares issued and outstanding, respectively 16,559 11,359
Additional paid-in capital 6,262,162 1,217,362
Retained earnings (accumulated deficit) (346,012) 4,162
----------- -----------
Total stockholders' equity 5,932,709 1,232,883
----------- -----------
$ 6,040,451 $ 1,368,474
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
3
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Period From
Ended Inception To
March 31, 2000 March 31, 2000
-------------- --------------
REVENUES:
Exchange gains $ 2,706 $ 11,906
Interest income 3,365 5,136
------------ ------------
Total revenues 6,071 17,042
EXPENSES 356,245 363,054
------------ ------------
Net loss $ (350,174) $ (346,012)
============ ============
PER SHARE DATA:
Basic and diluted loss per share $ (0.02) $ (0.03)
============ ============
Weighted average number of common
shares outstanding 15,025,404 13,369,109
============ ============
The accompanying notes to consolidated financial statements are an
integral part of this statement.
4
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Period From
Ended Inception To
March 31, 2000 March 31, 2000
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (350,174) $ (346,012)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 5,652 5,652
Increase in other receivables (28,618) (30,092)
(Increase) decrease in prepaid expenses 47,533 (146,912)
Increase in purchase deposit (65,060) (65,060)
Increase in security deposits (234,295) (234,295)
Increase in accounts payable and accrued expenses 22,151 107,742
----------- -----------
Net cash used by operating activities (602,811) (708,977)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (176,618) (176,618)
----------- -----------
Net cash used by investing activities (176,618) (176,618)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of convertible note -- 50,000
Shares issued for cash 5,000,000 5,562,315
----------- -----------
Net cash provided by financing activities 5,000,000 5,612,315
----------- -----------
NET INCREASE IN CASH 4,220,571 4,726,720
CASH, BEGINNING OF PERIOD 506,149 --
----------- -----------
CASH, END OF PERIOD $ 4,726,720 $ 4,726,720
=========== ===========
NONCASH OPERATING AND FINANCING ACTIVITIES:
Shares issued in exchange for investment $ -- $ 666,406
Liabilities incurred on reverse acquisition -- 84,377
Shares issued pursuant to consulting agreement -- 200,000
Conversion of note payable to common stock 50,000 --
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
5
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The consolidated balance
sheet at December 31, 1999 has been derived from audited financial
statements at that date. In the opinion of management all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 2000 are not necessarily indicative of the results
which may be expected for the year ending December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto for the period ended December 31, 1999.
(2) Stockholders' equity
On January 28, 2000, the Company sold 5,000,000 shares of common stock at a
price of $1.00 per share pursuant to Regulation S. The Company has agreed
to register 25% of the shares under the Securities Act of 1933, as amended.
In consideration for underwriting the issue in full, the underwriter
received warrants to purchase up to 1,000,000 shares of common stock of the
Company. On May 12, 2000, the underwriters exercised all the warrants for
$1,000,000.
(3) Acquisition agreements
On March 3, 2000, the Company offered to acquire Radical Technology Plc
("Radical"). In connection therewith, it is anticipated that the Company
will issue 1,281,714 shares of common stock, then constituting
approximately 7.7% of its outstanding shares, to the stockholders of
Radical in order to acquire 100% of the issued capital stock of Radical.
On March 24, 2000, the Company entered into an agreement to acquire Core
Ventures Limited. Core Ventures Limited, a British Virgin Island Venture
Capital company, is a subsidiary of Troy Limited, a Grand Cayman
Corporation. The terms of the agreement include the issuance of 1,800,000
common shares of Internet Holdings, Inc. for 100% of the outstanding shares
of Core Ventures Limited. The acquisition is conditional on the completion
of the due diligence process.
(4) Subsequent events
On April 13, 2000, the Company purchased a 10% holding in Eurindia Plc, an
equity management company which seeks to invest in small to medium sized
Indian Information Technology services companies, for (pound)400,000,
approximately $636,800.
On April 17, 2000, the Company purchased a 5% holding in Compaer AG, a
supplier of online insurance for both business-to-business and
business-to-consumer markets in Germany, for DM2.5 million, approximately
$1,314,000.
On May 3, 2000, the Company entered into an agreement to acquire Ferman AG,
a Swiss venture capital company. The terms of the agreement include the
issuance of 3,360,000 common shares of Internet Holdings, Inc. for 51% of
the outstanding shares of Ferman AG. The acquisition is conditional on the
completion of the due diligence process.
Within the next two months, the Company expects to raise up to $30 million
in a Regulation S offering under the Securities Act of 1933, as amended.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Plan of Operation
The objective of the Company is to be the leading publicly-held technology
holding company specializing in Internet and Internet-related businesses in
Europe by investing in and establishing a presence in the major segments of the
global Internet and information technology economies. The Company's operating
strategy is to integrate its five-division platform and the companies contained
therein into a collaborative network which leverages its collective knowledge
and resources, with a clear emphasis on capital growth, balance sheet strength
and the use of its operating subsidiaries to create cash flow from operations.
The Company will provide operational assistance, capital support, industry
expertise, and a strategic network of business relationships intended to
maximize the long-term market potential for its affiliated companies and its own
operating subsidiaries. To achieve this operating strategy the Company has
created five decentralized divisions:
HTTP IT LIMITED ("HTTP IT"). This division invests in and/or acquires
traditional Information Technology ("IT") and software development companies.
HTTP IT LIMITED's pending acquisition of Radical Technology PLC ("RadTech") will
be the base for the Company's investment in incubation operation. Radtech is
also the base for the Company's investments in incubation operations. Through
Radtech, the Company can offer incubator businesses 'value added' investment by
immediately supplying office space, operational assistance, capital support,
industry experience and access to a strategic network of business relationships.
HTTP INDUSTRIAL LIMITED. This division focuses on the active management of
Internet and Internet-related businesses and seeks to acquire stakes typically
in excess of 25% of the issued share capital of the partnering companies. These
companies can be post or pre-IPO businesses but are considered to be maturing
companies, with an emphasis on capitalizing on initial success. Part of the
Company's strategy is to migrate companies from the incubator division at HTTP
IT to HTTP INDUSTRIAL LIMITED upon establishing their commercial viability.
HTTP COMMUNICATIONS LIMITED. This division will supply satellite access for
Internet and Internet-related companies on a global scale. The Company has
formed strategic alliances and joint ventures and intends to take stakes in
telephony companies with the objective of establishing significant capital
growth and creating short-term income.
HTTP EQUITY PARTNERS LIMITED. This division will make investments of
varying sizes in both pre and post-IPO Internet and Internet-related companies,
with the emphasis on pre-IPO companies. HTTP EQUITY PARTNERS has formed joint
venture and strategic alliances with traditional investment banks, private
individuals and specific Internet investment companies throughout Europe, the US
and the Middle East.
HTTP VENTURES LIMITED. This division seeks to capitalize on the Company's
alliances with recognized specialist organizations and individuals within the
Internet and IT economy by establishing joint ventures in which both the Company
and the joint venture partners can pool their intellectual, financial and
networking resources for the specific purpose of promoting and enhancing the
value of the respective joint venture companies.
To date, the Company has raised $5 million to implement its business
strategy. Additionally, within the next two months the Company expects to raise
up to $30 million in a Regulation S offering under the Securities Act of 1933,
as amended. Further funding will be necessary for the Company to continue its
plan of operations.
7
<PAGE>
Results of Operations for the three months ended March 31, 2000
The Company experienced a loss for the period ended March 31, 2000. For the
quarter ended March 31, 2000 the loss was $350,174. The Company's loss since
inception was $346,012. The Company's revenues for the period were approximately
$6,000, of which $3,365 was interest income. The Company's revenues from
inception were $17,042.
General and administrative expenses (G&A) for the quarter ended March 31,
2000 were $356,245. The major components of these expenses for the quarter ended
March 31, 2000 were consulting costs of $96,548 and professional fees of
$114,147. The legal fees were associated with the acquisition of Radical
Technology Plc and the Company's public filings. General and administrative
expenses from inception were $363,054.
As of March 31, 2000, Internet Holdings had current assets of $4,968,784
comprised of cash and cash investments aggregating $4,726,720.
At this time the Company had outstanding obligations of $107,742, comprised
of accounts payable and accrued expenses.
On January 24, 2000 Palamon (Gestion) S.A exercised its loan note for
$50,000 for 200,000 shares. The purpose of the loan note was to enable the
Company to file all outstanding reports required by the Exchange Act, and to
search for suitable acquisition candidates in the Internet related fields.
On January 6, 2000, the Company entered into an underwriting agreement with
Panther Capital Ltd. ("Panther") to sell shares of common stock and warrants of
the Company pursuant to an exemption from registration under Regulation S
promulgated under the Securities Act. Under the Underwriting Agreement, the
Company sold 5,000,000 shares of its common stock, at a price of $1.00 per
share, for whom Panther acted as lead underwriter. In consideration for such
underwriting agreement, Panther received warrants to purchase up to 1,000,000
shares of common stock of the Company (the "Warrants"). On May 12, 2000, Panther
exercised all the Warants for $1,000,000.
On March 3, 2000 the Company offered to acquire all of the issued and
outstanding shares of Radical Technology Plc in a stock-for-stock transaction.
The offer was announced unconditional on April 21, 2000 when the Company
obtained acceptances from 76.73% of the outstanding shares of Radical Technology
Plc.
On March 24, 2000 the Company entered into an agreement to acquire Core
Venture Limited. Core Ventures Limited, a British Virgin Island venture capital
company, is a subsidiary of Troy Limited, a Grand Cayman corporation. The terms
of the agreement is the issuance of 1,800,000 common shares of Internet
Holdings, Inc. for 100% of the outstanding shares of Core Ventures Limited. Troy
Limited has guaranteed the value of Core Ventures Limited, to be determined by
the Company on December 15, 2000, to be not less than $25 million. In the event
the net assets are lower than $25 million, Troy Limited will pay the difference
in cash or marketable securities.
On April 13, 2000 the Company purchased a 10% holding in Eurindia Plc, an
equity management company which seeks to invest in small to medium sized Indian
Information Technology services companies, for (pound)400,000, approximately
$636,800. On April 17, 2000 the Company purchased a 5% holding in Compaer AG, a
supplier of online insurance for both business-to-business and
business-to-consumer markets in Germany for DM2.5 million, approximately
$1,314,000.
On May 3, 2000 the Company entered into an agreement to acquire Ferman AG,
a Swiss Venture Capital company. The terms of the agreement is the issuance of
3,360,000 common share of Internet Holdings, Inc. for 51% of the outstanding
shares of Ferman AG. The principal shareholders of Ferman AG have guaranteed the
value of this holding to be not less than $42 million at completion date.
8
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) - (c)
On January 6, 2000, the Registrant entered into an underwriting agreement
with Panther Capital Ltd. to sell shares of common stock and warrants of the
Registrant pursuant to an exemption from registration under Regulation S of the
Securities Act of 1933, as amended. For a detailed description of this offering,
reference is made to the Registrant's reports on Form 8-K filed January 31, 2000
and February 7, 2000, and such documents are hereby incorporated herein by
reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
The Registrant has filed reports on Form 8-K during the three months
ended March 31, 2000:
(i) The Registrant's report on Form 8-K for events which occurred on
December 14, 1999 discloses that the Registrant raised $50,000 through
the issuance of a Convertible Loan Note pursuant to an exemption from
registration under Section 4(2) and/or Regulation S of the Securities
Act.
(ii) The Registrant's report on Form 8-K for events which occurred on
December 22, 1999 describes the implementation of transactions
contemplated by the conditional Acquisition Agreement and Plan of
Reorganization with Fairfax Equity Ltd. and the stockholders of
Fairfax, dated October 27, 1999.
(iii) The Registrant's report on Form 8-K for events which occurred on
January 10, 2000 discloses the resignation of Christopher J. Wilkes
from his position as a director of the Registrant.
(iv) The Registrant's report on Form 8-K for events which occurred on
January 6, 2000 describes the underwriting agreement with Panther
Capital Ltd. to sell shares of common stock and warrants pursuant to
an exemption from registration under Regulation S of the Securities
Act (the "Underwriting Agreement").
(v) The Registrant's report on Form 8-K for events which occurred on
January 28, 2000 discloses the sale of all shares and warrants
pursuant to the Underwriting Agreement.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
INTERNET HOLDINGS, INC.
May 17, 2000 By: /s/ Stefan Allesch-Taylor
---------------------------
Stefan Allesch-Taylor,
President
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,726,720
<SECURITIES> 666,406
<RECEIVABLES> 30,092
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,968,784
<PP&E> 176,618
<DEPRECIATION> 5,652
<TOTAL-ASSETS> 6,040,451
<CURRENT-LIABILITIES> 107,742
<BONDS> 0
0
0
<COMMON> 16,559
<OTHER-SE> 5,916,150
<TOTAL-LIABILITY-AND-EQUITY> 6,040,451
<SALES> 0
<TOTAL-REVENUES> 6,071
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 356,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (350,174)
<INCOME-TAX> 0
<INCOME-CONTINUING> (350,174)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (350,174)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
