<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X Quarterly report Section 13 or 15(d) of the Securities Exchange Act of
--- 1934 for the quarterly period ended June 30, 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 0-28058
---------
VILLAGEWORLD.COM, INC.
----------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
<TABLE>
<CAPTION>
New York 11-3137508
--------------------------------- ----------
<S> <C>
(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification No.)
</TABLE>
620 Johnson Avenue, Bohemia, New York 11716
-------------------------------------------
(Address of Principal Executive Offices)
(631) 218-0700
--------------
(Issuer's Telephone Number Including Area Code)
-------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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 class of common
equity, as of the latest practicable date: At August 8, 2000, the issuer had
outstanding 19,446,203 shares of Common Stock, par value $.001 per share.
(Assuming the conversion of all outstanding Class B Preferred Stock the
outstanding common stock at August 8, 2000 would increase to 89,571,179
shares).
<PAGE> 2
VILLAGEWORLD.COM, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
QUARTER ENDED JUNE 30, 2000
ITEMS IN FORM 10-QSB
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE> 3
VILLAGEWORLD.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited) *
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 69,329 $ 800,561
Accounts receivable 779,129 494,820
Inventory 161,435 96,791
Refundable income taxes 126,000 126,000
Prepaid expenses and other current assets 163,472 129,094
-------------------- --------------------
Total Current Assets 1,299,365 1,669,157
Fixed assets, net of accumulated depreciation 321,839 325,285
Intangible assets, net of accumulated amortization 2,552,454 2,694,252
Deferred tax asset 28,400 28,400
Other assets 91,130 13,230
-------------------- --------------------
TOTAL $ 4,293,188 $ 4,831,695
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable bank $ - $ 200,000
Accounts payable and accrued expenses 913,694 411,693
Deferred income 58,602 49,520
Net current liabilities attributable to discontinued operations 35,021 492,227
Other current liabilities 16,227 63,551
-------------------- --------------------
Total Current Liabilities 1,023,544 1,340,253
Loans payable 573,136 567,885
Accrued preferred stock cumulative dividends 35,700 -
Security deposits payable 2,316 2,316
-------------------- --------------------
Total Liabilities 1,634,696 1,910,454
-------------------- --------------------
Stockholders' Equity:
Convertible Class B preferred stock; $.001 par value; 1,000,000 shares
authorized; 508,152 shares issued and outstanding 508 508
Convertible (redeemable at $117.50) Class C preferred stock; $.001 par value;
25,000 shares authorized; 11,900 and 15,800 shares issued at June 30, 2000
and December 31, 1999. (Note E) 12 16
Common stock; $.001 par value; 200,000,000 shares authorized; 19,511,482 and
17,404,584 shares issued at June 30, 2000 and December 31, 1999. 19,511 17,405
Additional paid in capital 5,401,372 4,597,599
Stock subscription receivable (2,520) -
Accumulated deficit (2,695,767) (1,629,663)
Treasury stock (65,279 shares at cost) (64,624) (64,624)
-------------------- --------------------
Total stockholders' equity 2,658,492 2,921,241
-------------------- --------------------
TOTAL $ 4,293,188 $ 4,831,695
==================== ====================
</TABLE>
* Derived from audited financial statements.
The accompanying notes are an integral part of the financial statements. 3
<PAGE> 4
VILLAGEWORLD.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
REVENUES:
Subscription services $ 178,494 $ 92,554
Hardware sales 517,178 -
Installation services 51,896 -
Maintenance/Consulting 74,869 -
Private label cd roms 393,500 -
Other 65,470 -
------------ ------------
Total Revenues 1,281,407 92,554
------------ ------------
COSTS AND EXPENSES:
Cost of sales 1,058,754 45,393
Selling, general and administrative 800,432 39,628
Amortization of excess of cost over fair value of net assets acquired 70,880 -
Interest expense 3,940 397
------------ ------------
Total costs and expenses 1,934,006 85,418
------------ ------------
Income (loss) from operations
before income taxes (652,599) 7,136
Provision for income taxes - 900
------------ ------------
Net income (loss) $ (652,599) $ 6,236
============ ============
Basic and diluted net income (loss) per common share $ (0.01) $ -
------------ ------------
Basic and diluted weighted average common shares outstanding, giving effect to
the conversion to common stock of all Class B Preferred Stock outstanding 89,430,175 39,372,221
============ ============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
REVENUES:
Subscription services $ 270,075 $ 180,308
Hardware sales 697,002 -
Installation services 106,486 -
Maintenance/Consulting 158,570 -
Private label cd roms 393,500 -
Other 67,143 -
-------------- ------------
Total Revenues 1,692,776 180,308
-------------- ------------
COSTS AND EXPENSES:
Cost of sales 1,306,118 101,724
Selling, general and administrative 1,268,092 65,220
Amortization of excess of cost over fair value of net assets acquired 141,759 -
Interest expense 7,211 1,284
-------------- ------------
Total costs and expenses 2,723,180 168,228
-------------- ------------
Income (loss) from operations
before income taxes (1,030,404) 12,080
Provision for income taxes - 2,400
-------------- ------------
Net income (loss) $ (1,030,404) $ 9,680
============== ============
Basic and diluted net income (loss) per common share (0.01) $ -
-------------- ------------
Basic and diluted weighted average common shares outstanding, giving effect to
the conversion to common stock of all Class B Preferred Stock outstanding 89,006,900 39,372,221
============== ============
</TABLE>
The accompanying notes are an integral part of the financial statements. 4
<PAGE> 5
VILLAGEWORLD.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class B Class C
Preferred Stock Preferred Stock
--------------- ---------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, January 1, 2000 508,152 $ 508 15,800 $ 16
Stock issued to satisfy accrued
professional fees
Stock issued for promotional services
Stocks issued for franchise settlements
Preferred stock converted to
common stock (3,900) (4)
Stock issued in lieu of Class C
preferred stock dividend
Stock issued for cash net of $10,000
private placement fee
Stock issued upon exercise of option
Stock issued for executive
compensation
Accrued preferred stock
cumulative dividends
Net loss - - - -
---------- -------- ---------- -------
Balance, June 30, 2000 508,152 $ 508 11,900 $ 12
========== ======== ========== =======
- - -
</TABLE>
<TABLE>
<CAPTION>
Common Stock Additional Stock
------------ Paid-In Subscription
Shares Amount Capital Receivable
------ ------ ------- ----------
<S> <C> <C> <C> <C>
Balance, January 1, 2000 17,404,584 $ 17,405 $ 4,597,599 $ -
Stock issued to satisfy accrued
professional fees 11,111 11 9,989
Stock issued for promotional services 152,000 152 94,848 (1,520)
Stocks issued for franchise settlements 150,000 150 65,350
Preferred stock converted to
common stock 1,018,650 1,019 (441)
Stock issued in lieu of Class C
preferred stock dividend 1,470 1 (575)
Stock issued for cash net of $10,000
private placement fee 666,667 666 489,334
Stock issued upon exercise of option 7,000 7 6,868
Stock issued for executive
compensation 100,000 100 138,400 (1,000)
Accrued preferred stock
cumulative dividends
Net loss - - - -
---------- ------- ---------- ----------
Balance, June 30, 2000 19,511,482 $19,511 $5,401,372 $ (2,520)
========== ======= ========== ==========
- - - -
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
-------------- Accumulated
Shares Amount Deficit Total
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 2000 (65,279) $ (64,624) $(1,629,663) $ 2,921,241
Stock issued to satisfy accrued
professional fees 10,000
Stock issued for promotional services 93,480
Stocks issued for franchise settlements 65,500
Preferred stock converted to
common stock 574
Stock issued in lieu of Class C
preferred stock dividend (574)
Stock issued for cash net of $10,000
private placement fee 490,000
Stock issued upon exercise of option 6,875
Stock issued for executive
compensation 137,500
Accrued preferred stock
cumulative dividends (35,700) (35,700)
Net loss - - (1,030,404) (1,030,404)
---------- --------- ----------- -----------
Balance, June 30, 2000 (65,279) $ (64,624) $(2,695,767) $ 2,658,492
========== ========= =========== ===========
- - - -
</TABLE>
The accompanying notes are an integral part of the financial statements. 5
<PAGE> 6
VILLAGEWORLD.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
(Unaudited)
2000 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,030,404) $ 9,680
-------------- ---------------
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 181,901 13,477
Deferred promotional costs 15,580
Gain on disposal of fixed assets (6,500)
Stock issued for compensation 137,500
Decrease (Increase) in:
Accounts receivable (284,309) 15,502
Inventory (64,644) -
Prepaid expenses and other current assets (34,378) -
Increase (Decrease) in:
Accounts payable and accrued expenses 512,001 56,503
Related party advances - 2,512
Deferred revenue 9,082 (21,914)
Net current liabilities attributable to discontinued operations (391,706) -
Other current liabilities (47,324) (2,934)
-------------- ---------------
Total adjustments 27,203 63,146
-------------- ---------------
Net cash provided (used) by operating activities (1,003,201) 72,826
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (36,657) (76,087)
Proceeds from sale of fixed assets 6,500 -
-------------- ---------------
Net cash used by investing activities (30,157) (76,087)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable (200,000) -
Proceeds from issuance of common stock 496,875
Proceeds of loans payable 5,251 6
-------------- ---------------
Net cash provided (used) by financing activities 302,126 6
-------------- ---------------
NET INCREASE (DECREASE) IN CASH (731,232) (3,255)
Cash, beginning of period 800,561 21,897
-------------- ---------------
Cash, end of period $ 69,329 $ 18,642
============== ===============
-
</TABLE>
The accompanying notes are an integral part of the financial statements. 6
<PAGE> 7
VILLAGEWORLD.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
(Unaudited)
2000 1999
---------------- ----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NON CASH ACTIVITIES:
Cash paid during the year for:
Interest $ 7,097 $ 887
Income taxes 1,950 4,688
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES:
11,111 shares of common stock issued for payment of accounts payable:
Accounts payable $ 10,000
150,000 shares of common stock issued for refund of franchise fees and
store deposit:
Franchise fees $ 80,500
Common stock (150)
Additional paid in capital (65,350)
---------------
Cash paid $ 15,000
===============
152,000 shares of common stock deemed issued for
deferred promotional agreement $ 93,480
Cumulative $6 Class C preferred stock dividend accrued $ 35,700
</TABLE>
The accompanying notes are an integral part of the financial statements. 7
<PAGE> 8
VILLAGEWORLD.COM, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - THE COMPANY AND BASIS OF PRESENTATION
The Company is a provider of Internet on-line services,
offering its subscribers a wide variety of services including
electronic mail, software, computing support, and easy access
of the Internet. In addition, the Company provides small
businesses with fully managed services that include Internet
connections, remote dial access and Web hosting services. The
Company also provides full service system integration
specializing in high-end computer networking infrastructures,
Internet solutions, and Local and Wide Area Network
installations.
The information herein is unaudited. However, in the opinion
of management, such information reflects all adjustments
(consisting only of normal recurring accruals) necessary to
make the financial statements not misleading. Additionally,
in accordance with applicable standards for interim
reporting, the accompanying financial statements do not
include all disclosures in conformity with generally accepted
accounting principles.
The results of operations for the six months ended June 30,
2000 are not necessarily indicative of the results of
operations for the full year ending December 31, 2000. The
results of operations and cash flows for the three and
six-months periods ended June 30, 1999 do not include ICS,
which was acquired on July 1, 1999. The accompanying
financial statements should be read in conjunction with the
Company's financial statements for the year ended December
31, 1999 appearing in the Company's Annual Report on Form
10-KSB.
(NOTE B) - CONVERSION OF PREFERRED STOCK
During the quarter ended March 31, 2000, 3,900 shares of
preferred stock were converted into 1,020,120 shares of the
Company's common stock including 1,470 shares for cumulative
preferred stock dividends aggregating $574. No conversions
occurred during the quarter ended June 30, 2000.
(NOTE C) - COMMON STOCK
In February 2000 the Company issued 11,111 shares of its
common stock to an attorney in payment of $10,000 for legal
services previously rendered by such attorney for the
Company.
In February 2000 the Company granted five-year warrants to
four persons to purchase an aggregate of 152,000 shares of
the Company's common stock at an exercise price of $0.01 per
share for the following services:
(1) to one person, for acting as a public spokesman for
the Company, a warrant to purchase 70,000 shares;
(2) to two companies for arranging the transaction with
the spokesman, warrants to purchase an aggregate of
80,000 shares; and
(3) to one person for legal services provided in such
transaction, a warrant to purchase 2,000 shares.
- 8 -
<PAGE> 9
(NOTE C) - COMMON STOCK (CONTINUED)
In addition to the shares issued to the spokesman, the
related promotional agreement provided for a cash fee of
$30,000 per year payable each year in advance.
Due to the nominal amount of the exercise price, the Company
has recognized the deemed issuance of these 152,000 shares at
the fair value of the Company's common stock at the date of
issuance, $0.625 per share. The excess of such fair value
over the unpaid subscription receivable, $93,480 has been
charged to a deferred cost account, which is being amortized
over the two-year term of the related promotional agreement.
In March 2000 the Company issued an aggregate of 150,000
shares of its common stock to five persons in settlement of
their prior claims against the Company arising from the
Company's discontinued bagel franchising operations.
The Company entered into a memorandum of understanding with
Mr. Robert Appel, pursuant to which he became our Chief
Executive Officer. The memorandum provides for employment on
a full-time basis and contains provisions that Mr. Appel will
not compete or engage in a business competitive with our
current or anticipated business until twelve months after the
termination of the agreement. The memorandum provides for a
base salary of $75,000 per annum and the grant of a five-year
option to purchase 300,000 shares of the Company's common
stock at an exercise price of $.01 per share, with vesting
rights being negotiated. Due to the nominal amount of the
exercise price, the Company recognized at April 14, 2000 the
deemed issuance of 100,000 shares at the then fair value of
the Company's common stock of $1.375 per share.
On April 17, 2000 the Company completed a private placement
funding of $500,000 with Millennium Capital Partners, LLC
("MCP"), an investment group, whereby MCP purchased 666,667
shares of the Company's common stock and a five-year warrant
to purchase 666,667 shares of the Company's common stock at
an exercise price of $1.00 per share, for an aggregate
investment of $500,000. In addition, MCP proposed to invest
an additional $2,500,000 in exchange for common stock and
warrants at a discount from the market price. This proposed
second round of financing will be subject to a due
diligence period by MCP of the Company. In connection with
such transaction the Company issued a five-year warrant to
Perrin, Holden and Davenport Capital Corp. to purchase 5,000
shares of the Company's common stock exercisable at a price
of $1.00 per share.
(NOTE D) - COMMON STOCK OPTIONS
Pursuant to the Company's 1996 Performance Equity Plan ("1996
Plan"), on March 31st of each calendar year during the term
of the 1996 Plan, assuming there are enough shares then
available for grant under the 1996 Plan, each person who is
then a director of the Company is awarded stock options to
purchase 2,000 shares of common stock at the fair market
value thereof (as determined in accordance with the 1996
Plan), all of which options are immediately exercisable as of
the date of grant and have a term of ten years. These are the
only awards, which may be granted to a director of the
Company under the 1996 Plan. On March 31, 2000, the directors
of the Company received this automatic grant of options to
purchase an aggregate of 10,000 shares of common stock at an
exercise price of $2.3125 per share.
- 9 -
<PAGE> 10
(NOTE E)- RECLASSIFICATIONS
The stockholders' equity section of the December 31, 1999
balance sheet has been reclassified to reflect the actual par
value of the Class C Preferred Stock.
Certain components of revenue in the 2000 income statement
have been reclassified to reflect the increased significance
of revenues from maintenance and consulting agreements.
- 10 -
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's financial statements and the notes thereto. The discussion
of results, causes and trends should not be construed to imply any conclusion
that such results or trends will necessarily continue in the future.
FORWARD-LOOKING STATEMENTS
When used in the Form 10-QSB and in future filings by the Company with
the Securities and Exchange Commission, the words or phrases "will likely
result,", "management expects" or "the Company expects," "will continue," "is
anticipated," "estimated" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Section 21E of the
Securities Exchange Act of 1934, as amended. Readers are cautioned not to place
undue reliance on any such forward-looking statements, each of which speak only
as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results and those presently anticipated or projected. The Company
has no obligation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect anticipated or unanticipated
events or circumstances occurring after the date of such statements.
RESULTS OF OPERATIONS
Revenues for the three and six months ended June 30, 2000 were
$1,281,407 and 1,692,776, respectively compared to $92,554 and $180,308 for the
three and six months ended June 30, 1999, an increase of $1,188,853 or 1284%
and $1,512,468 or 839%, respectively. This increase was primarily attributable
to the addition of ICS sales of $643,576 and $963,364 for the three and six
months ended June 30, 2000. ICS sales are comprised of: hardware sales,
installation services and maintenance/consulting. Subscription service revenue
increased by $85,940 and $89,767 for the three and six months ended June 30,
2000. This increase was primarily attributable to an increase in the number of
subscribers, dedicated users and partnerships with several community-based
Internet services. Private label CD roms production is a new product for the
Company and generated revenue of $393,500.
Cost of sales were $1,058,754 and $1,306,118, representing 83% and 77%
of total revenues for the three and six months ended June 30, 2000, compared to
$45,393 and $101,724, representing 49% and 56% of total revenues for the three
and six months ended June 30, 1999. This increase in cost of sales as a
percentage of sales was primarily attributable to the addition of ICS's
computer network business for the three and six months ended June 30, 2000.
Cost of sales of ICS were $457,028 and $636,674 or 71% and 66% of hardware
sales, installation services and maintenance/consulting for the three and six
months ended June 30, 2000. Cost of sales of VillageWorld were $601,726 and
$671,444, representing 94% and 92% of revenues for subscription services and
private label CD rom production for the three and six months ended June 30,
2000. VillageWorld has upgraded its backbone service and redundancy to ensure
its connectivity. These costs have increased without any significant increase
in related revenues as yet. This was undertaken to position the Company for
expansion of its Internet business.
- 11 -
<PAGE> 12
Selling, general and administrative expenses (SG&A) were $800,432 and
$1,268,092 for the three and six months ended June 30, 2000, an increase of
1920% and 1844% from $39,628 and $65,220 for the three and six months ended
June 30, 1999. This increase was primarily attributable to the addition of the
SG&A expenses of ICS for the three and six months ended June 30, 2000. Of the
total SG&A expenses, $433,812 and $608,386 represent VillageWorld for the three
and six months ended June 30, 2000 respectively and $366,620 and $659,256
represents ICS for the three and six months ended June 30, 2000. There was an
increase of $55,511 in professional fees of which $30,145 represents legal fees
and $25,366 represents audit fees. Rent increased by $45,285 for office space
acquired in the merger. There was an increase of approximately $34,500 in
regulatory filing costs from the previous year. Marketing and newspaper
advertising increased by $124,960, which represents the launching of the
Company's franchising program. The Company issued warrants to its Chief
Executive Officer to purchase 100,000 shares of the Company's common stock at
an exercise price of $0.01 per share. Due to such nominal exercise price the
shares were deemed issued at their then fair value of $1.375, and are reported
as compensation expense during the quarter.
The net losses for the three and six months ended June 30, 2000 were
$652,599 and $1,030,404 compared to net income of $6,236 and $9,680 for the
three and six months ended June 30, 1999. The primary reasons for the increase
in the current period loss were: (i) the incorporation of the results of
operations of ICS amounting to a loss of $337,663 for the six months ended June
30, 2000; (ii) amortization expense of goodwill of $141,758; (iii) higher
payroll costs and benefits; (iv) additional internet and telephone connection
costs of approximately $75,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 2000 were $69,329 compared to
$800,561 at December 31, 1999. This decrease in cash was primarily attributable
to the funding of our net loss from operations and to pay liabilities
associated with discontinued operations.
Accounts receivable increased to $779,129 at June 30, 2000 from
$494,820 at December 31, 1999 due to the invoicing of the Commack School
District Technology Implementation contract of $291,000, constituting
approximately 51% of the total contract.
Inventory increased to $161,435 at June 30, 2000 from $96,791 at
December 31, 1999 due to equipment purchased for the Commack School District
Technology Implementation contract. Completion of this contract is expected by
August 2000.
Prepaid expenses and other current assets increased to $163,472 at
June 30, 2000 from $129,094 at December 31, 1999, due primarily to an increase
in prepaid advertising.
Other assets increased to $91,130 at June 30, 2000 from $13,230 at
December 31, 1999 attributable to the costs associated with securing the
services of a celebrity spokesperson, which are being amortized over the
two-year term of the contract.
The combination of accounts payable and accrued expenses increased to
$913,694 at June 30, 2000 from $411,693 at December 31, 1999. This increase was
primarily attributable to an increase in inventory for the Commack contract.
Notes and loans payable decreased to $573,136 at June 30, 2000 from
$767,885 at December 31, 1999, primarily attributable to the repayment of
$200,000 of bank loans.
At June 30, 2000, we had $190,322 of working capital and a current
ratio of 1.2 to 1.
- 12 -
<PAGE> 13
Our operating activities used cash of $1,003,201 for the six months
ended June 30, 2000 as compared to $72,826 provided by operating activities for
the six months ended June 30, 1999. This increase in use of cash was primarily
due to the funding of our net loss from operations and to pay liabilities
associated with discontinued operations.
For the six months ended June 30, 2000, we used $30,157 in investing
activities compared to $76,087 for the same period in 1999. This change was
primarily due to decreased capital expenditures in 2000.
Since the merger, we have funded our operating losses and working
capital needs primarily through private placement of equity securities. In
addition, we have a credit line with a bank with a maximum borrowing of
$200,000.
Additionally we plan to expand our Internet business through the
franchising of Internet service providers and increase our marketing and
advertising to expand our local ISP network.
We will require additional working capital to finance operations. We
have a net remaining liability of $35,021 attributable to our discontinued
bagel operations. In March 2000 we entered into franchise separation agreements
with former franchisees in which we paid $15,000 and issued 150,000 shares of
common stock.
On April 17, 2000 we completed a private placement funding of $500,000
with Millenium Capital Partners, LLC ("MCP"), an investment group, whereby MCP
purchased 666,667 shares of the Company's common stock and a five-year warrant
to purchase 666,667 shares of the Company's common stock at an exercise price
of $1.00 per share, for an aggregate investment of $500,000. In addition, MCP
is entitled to invest an additional $2,500,000 in exchange for common stock and
warrants at a discount from the market price. This proposed second round of
financing will be subject to a due diligence period by MCP of us.
The Company is investigating the possibility of acquiring other
Internet companies currently outsourcing Internet access needs that are
compatible with the ISP services offered by the Company. By then placing these
companies on its existing backbone infrastructure, we expect to add services,
attract new Internet users and increase revenue through the elimination of
outsourcing costs of the acquired companies.
OTHER MATTERS
Recent Developments
We have launched a national franchising program and have received
regulatory approval to license franchises in 40 States. We have filed for
licensing in additional states and anticipate approval. VillageWorld.com is the
first publicly traded Internet Service Provider to launch a national
franchising program. Franchisees will receive exclusive territorial rights to
sell VillageWorld.com services. Franchisees will build on-line villages that
are tailored to meet the needs of their geographic communities. Each village
will be the central point for local content including: commerce, news,
politics, and advertising. The company has committed to launch an extensive
advertising campaign, featuring print ads in The Wall Street Journal and other
major publications.
We have expanded our ISP coverage to include 1000, cities.
VillageWorld expanded national footprint makes its service a local call for
more than 90% of the US population. VillageWorld coverage also includes five of
Canada's largest cities. VillageWorld.com service includes everything a
consumer needs to make the most of the Internet: disk space for a personal Web
site, Usenet news, online multimedia, e-mail addresses and access to
VillageWorld world class technical support.
- 13 -
<PAGE> 14
We are now hosting web sites for rock legend David Bowie, teen band
Hanson, the New York Yankees, and the Cleveland Browns. We also provide Private
Label ISPs for those sites. BowieNet, HansonNet, Yankeesxtreme, and The Browns'
All Access offer members an exclusive virtual backstage pass to their favorite
musician or team in a community-based forum. ISP subscribers receive all the
premium content plus full access to the Internet by letting BowieNet,
HansonNet, Yankeesxtreme, or the Cleveland Browns become their ISP.
VillageWorld.com hosts the sites and provides subscribers with unsurpassed
Internet access with the most local dial-in numbers and great technical
support.
ICS, our systems integration division, has completed 85% of the
Commack School District project and has entered into an agreement with the
Great Neck School District and William Floyd School District. These projects
are scheduled to launch in late August 2000. In addition, four regional
catholic schools have entered into an agreement with ICS for various networking
projects. This gives ICS an opportunity to serve not only the public schools
but also the private schools.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 5, 2000 the Chief Executive Officer of our predecessor
company exercised his options to purchase 2000, shares of common stock at
$.9375 and 5000, shares of common stock at $1.00. The Company received gross
proceeds of $6,875 from such exercise.
On April 14, 2000 we issued warrants to the Chief Executive Officer of
the company to purchase 100,000 shares common stock at an exercise price of
$0.01 per share. Such shares were deemed issued and recorded at their then fair
value of $1.375.
On April 17, 2000 the Company completed a private placement funding of
$500,000 with Millennium Capital Partners, LLC ("MCP"), an investment group,
whereby MCP purchased 666,667 shares of the Company's common stock and a
five-year warrant to purchase 666,667 shares of the Company's common stock at
an exercise price of $1.00 per share, for an aggregate investment of $500,000.
MCP is an "accredited investor" as that term is defined in Regulation D under
The Securities Act of 1933, as amended (the "Act"). There was no underwriter in
this private placement.
All of the above issuances were exempt from the regulation
requirements of the "Act" pursuant to the provisions of Section 4 (2) thereof
as a transactions by an issuer not involving any public offering.
- 14 -
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER
27* Financial Data Schedule (6/30/00)
------------
* Filed herewith
(b) REPORTS ON FORM 8-K
None
- 15 -
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this export to be signed on its behalf by the
undersigned thereunto duly authorized.
VillageWorld.com, Inc.
----------------------
(Registrant)
Dated: August 9, 2000 By: /s/ Robert Appel
----------------------------------------
Robert Appel, Chief Executive Officer
By: /s/ Edilberto Enriquez
---------------------------------------------
Edilberto Enriquez, Treasurer and
Chief Financial Officer
- 16 -
<PAGE> 17
Index to Exhibits
EXHIBIT
NUMBER
27* Financial Data Schedule (6/30/00)
------------
* Filed herewith
- 17 -
