UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
WORLDWIDE EQUIPMENT CORP.
(Name of Small Business Issuer in its charter)
Florida 59-3191053
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
599 W. Hartsdale Avenue, Suite 201, White Plains, NY 10607
---------------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 428-8191
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value per share
(Title or class)
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TABLE OF CONTENTS
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PART I
ITEM 1. DESCRIPTION OF BUSINESS............................................................ 1
ITEM 2. PLAN OF OPERATION.................................................................. 4
ITEM 3. DESCRIPTION OF PROPERTY............................................................ 7
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT................................................... 7
ITEM 5. MANAGEMENT......................................................................... 8
ITEM 6. EXECUTIVE COMPENSATION............................................................. 9
ITEM 7. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS............................................................... 9
ITEM 8. DESCRIPTION OF SECURITIES.......................................................... 10
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS................................................................ 11
ITEM 2. LEGAL PROCEEDINGS.................................................................. 12
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................................... 12
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES............................................ 12
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................................... 13
PART F/S
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS.................................................. 14
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development
Worldwide Equipment Corp. is a Florida corporation that was incorporated in June
1993.
Other than our equity interests in our subsidiaries, ARO of America, Inc. and
Best Rate International, Inc., we have no operations or assets. Best Rate is
wholly owned by ARO. We hold approximately 23% of the issued and outstanding
stock of ARO. ARO is a privately-held company with no active operations since
August 1998 when it sold its assets to a sport utility manufacturing business.
Best Rate is a master distributor of Freewwweb.com, a no-cost Internet service
provider with approximately 1,000,000 users in the United States and Canada. We
have a negligible asset base and no active operations. We have not conducted any
operational activities since August 1999, when we disposed of equipment assets
held by our former subsidiary, International Tractor Co. Presently, we are
seeking merger and acquisition opportunities.
We are filing this registration of our securities on a voluntary basis because
the primary attraction of us as a merger partner or acquisition vehicle will be
our status as a reporting public company. Any business combination or
transaction could result in a significant issuance of shares and substantial
dilution to our current stockholders.
We anticipate that the selection of a business opportunity in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly-registered corporation. These
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes), for all stockholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
We have, and will continue to have, nominal capital with which to provide the
owners of business opportunities with any significant cash or other assets.
However, we believe that we will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
publicly-registered company without incurring the cost and time required to
conduct an initial public offering. The owners of the business opportunities
will, however, incur significant legal and accounting costs in connection with
their acquisition of a business opportunity, including the costs of preparing
reports such as Form 8-K's, 10-K's or 10-KSB's, agreements and related reports
and documents. The Securities Exchange Act of 1934 specifically requires that
any merger or acquisition candidate comply with all applicable reporting
requirements, which include providing audited financial statements to be
included
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within the numerous filings relevant to complying with the Exchange Act.
Nevertheless, our officers and directors have not conducted market research and
are not aware of statistical data which would support the perceived benefits of
a merger or acquisition transaction for the owners of a business opportunity.
Investment Company Act of 1940
Although we will be subject to regulation under the Securities Act of 1933 and
the Securities Exchange Act of 1934, we believe that we will not be subject to
regulation under the Investment Company Act of 1940 insofar as we will not be
engaged in the business of investing or trading in securities. In the event that
we engage in business combinations which result in our holding passive
investment interests in a number of entities, we could be subject to regulation
under the Investment Company Act of 1940. In this event, we would be required to
register as an investment company and could be expected to incur significant
registration and compliance costs. We have obtained no formal determination from
the Securities and Exchange Commission as to our status under the Investment
Company Act of 1940 and, consequently, any violation of such Act would subject
us to material adverse consequences. We anticipate expect to be exempt from the
Investment Company Act of 1940 via Regulation 3a-2.
Investment Adviser Act of 1940
We believe we are not an investment adviser under the Federal Investment Adviser
Act of 1940, which classification would involve a number of negative
considerations. Accordingly, we will not furnish or distribute advice, counsel,
publications, writings, analysis or reports to anyone relating to the purchase
or sale of any securities within the language, meaning and intent of Section
202(a)(11) of the Investment Adviser Act of 1940, 15 U.S.C.
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Risk Factors
We have no operations or revenues and have limited assets. With the exception of
our interests in ARO and Best Rate, we have no operations. We have no revenues
or earnings from operations. We have little or no tangible assets or financial
resources. We will, in all likelihood, continue to sustain operating expenses
without corresponding revenues, at least until the consummation of a business
combination. This may result in our incurring a net operating loss which will
increase continually until we consummate a business combination with a
profitable business opportunity. There is no assurance that we can identify such
a business opportunity and consummate such a business combination.
Transferability of our shares of common stock is limited because a significant
number of states have enacted securities or blue sky laws and regulations
restricting or, in many instances, prohibiting, the initial sale and subsequent
resale within that state of securities of blank check companies such as us. In
addition, many states, while not specifically prohibiting or restricting blank
check companies, would not register our securities for sale or resale in their
states. Because of these regulations, we have no current plan to register any
securities with any state. To ensure that any state laws are not violated
through the resales of our securities, we will refuse to register the transfer
of any securities to residents of any state which prohibits this resale or if no
exemption is available for such resale. It is not anticipated that a secondary
trading market for our securities will develop in any state until consummation
of a business combination.
We are and will continue to be a minor participant in the business of seeking
mergers with, joint ventures with and acquisitions of small private and public
entities. A large number of established and well-financed entities, including
venture capital firms, are active in mergers and acquisitions of companies which
may be desirable target candidates for us. Nearly all of these entities have
significantly greater financial resources, technical expertise and managerial
capabilities than we, and, consequently, we will be at a competitive
disadvantage in identifying possible business opportunities and successfully
completing a business combination. In addition, we will also compete in seeking
merger or acquisition candidates with numerous other small public companies.
We have no arrangement, agreement or understanding with respect to engaging in a
merger with, joint venture with or acquisition of, a private or public entity.
There can be no assurance that we will be successful in identifying and
evaluating suitable business opportunities or in concluding a business
combination. We cannot assure you that we have or will be able to negotiate a
business combination on favorable terms. We have not established a specific
length of operating history or a specified level of earnings, assets, net worth
or other criteria which we will require a target business opportunity to have
achieved, and without which we would not consider a business combination in any
form with such business opportunity. Accordingly, we may enter into a business
combination with a business opportunity having no significant operating history,
losses, limited or no potential for earnings, limited assets, negative net worth
or other negative characteristics.
Our proposed operations, even if successful, will in all likelihood result in
our engaging in a business combination which will limit our activities to those
engaged in by the entity with
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which we merge or acquire. Our inability to diversify our activities into a
number of areas may subject us to economic fluctuations within a particular
business or industry and therefore increase the risks associated with our
operations.
In the event that we engage in business combinations which result in our holding
passive investment interests in a number of entities, we could become subject to
regulation under the Investment Company Act of 1940. Although we will be subject
to regulation under the Securities Exchange Act of 1934, we believe that we will
not be subject to regulation under the Investment Company Act of 1940, insofar
as we will not be engaged in the business of investing or trading in securities.
In the event we are subject to the Investment Company Act, we would be required
to register as an investment company and could be expected to incur significant
registration and compliance costs. We have not obtained formal determination
from the Securities and Exchange Commission regarding our status under the
Investment Company Act of 1940 and, consequently, any violation of this act
could cause material adverse consequences to our business.
A business combination involving the issuance of our common stock will, in all
likelihood, result in stockholders of a private company obtaining a controlling
interest in us. Any similar business combination may require our management to
sell or transfer all or a portion of our common shares held by them, or resign
as members of our board of directors. The resulting change in control could
result in the removal of key management personnel and a corresponding reduction
in or elimination of his participation in our future affairs.
Our primary plan of operation is based upon a business combination with a
private company which will result in our issuing securities to stockholders of a
company we are merging with or acquiring. The issuance of previously authorized
and unissued common stock would result in reduction in percentage of shares
owned by our present and prospective stockholders.
The requirement of audited financial statements may disqualify business
opportunities. Sections 13 and 15(d) of the Securities Exchange Act of 1934
require companies to provide information about significant acquisitions,
including certified financial statements for the company acquired, covering one,
two or three years, depending on the relative size of the acquisition. The time
and additional costs that may be incurred by some target entities to prepare
such statements may preclude consummation of an otherwise desirable acquisition.
Acquisition prospects that do not have or are unable to obtain the required
audited financial statements may not be appropriate for acquisition so long as
the reporting requirements of the 1934 Act are applicable.
ITEM 2. PLAN OF OPERATION.
We currently have no operations or revenues. We are seeking to acquire assets or
shares of an entity actively engaged in business which generates revenues, in
exchange for our securities. We do not have any possible acquisition of merger
candidates as of the date of this filing.
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Our purpose is to seek, investigate and, if such investigation warrants, acquire
an interest in business opportunities presented to us by persons or firms who or
which desire to seek the perceived advantages of an Exchange Act registered
corporation. We will not restrict our search to any specific business, industry,
or geographical location and we may participate in a business venture of
virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to be restrictive of our virtually
unlimited discretion to search for and enter into potential business
opportunities. Our management anticipates that we may be able to participate in
only one potential business venture because we have nominal assets and limited
financial resources. This lack of diversification should be considered a
substantial risk to our stockholders because it will not permit us to offset
potential losses from one venture against gains from another.
The analysis of new business opportunities will be undertaken by, or under the
supervision of Mitchell Hymowitz, our sole director and president, who may not
be considered a professional business analyst. Mr. Hymowitz will be the key
person in the search, review and negotiation with potential acquisition or
merger candidates. We intend to concentrate on identifying preliminary
prospective business opportunities which may be brought to our attention through
present associations of our officers and directors, or by our stockholders. In
analyzing prospective business opportunities, we will consider such matters as:
o the available technical, financial and managerial resources;
o working capital;
o other financial requirements;
o history of operations, if any;
o prospects for the future;
o nature of present and expected competition;
o the quality and experience of management services which may be
available and the depth of that management;
o the potential for further research, development, or exploration;
o the potential for growth or expansion;
o the potential for profit;
o the perceived public recognition of acceptance of products,
services, or trades; and
o name identification.
In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. We may also acquire stock or
assets of an existing business. On the consummation of a transaction, it is
probable that our present management and stockholders will no longer control us.
In addition, our sole director may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of our
stockholders. Any terms of sale of the shares presently held by any member of
management will be also afforded to all other stockholders on similar terms and
conditions. Any and all such sales will only be made in compliance with federal
and applicable state securities laws.
We anticipate that any securities issued in any such reorganization would be
issued in reliance upon exemption from registration under applicable securities
laws. In some circumstances,
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however, as a negotiated element of its transaction, we may agree to register
all or a part of these securities immediately after the transaction is
consummated or at specified times thereafter. If such registration occurs, of
which there can be no assurance, it will be undertaken by the surviving entity
after we have successfully consummated a merger or acquisition and we are no
longer considered a shell company. Until such time as this occurs, we will not
attempt to register any additional securities. The issuance of substantial
additional securities and their potential sale into any trading market which may
develop in our securities may have a depressive effect on the value of our
securities in the future, if such a market develops, of which there is no
assurance.
While the actual terms of a transaction to which we may be a party cannot be
predicted, it may be expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so-called "tax-free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code. In order to obtain tax-free
treatment, it may be necessary for the owners of the acquired business to own
80% or more of the voting stock of the surviving entity. In such event, our
stockholders would retain less than 20% of the issued and outstanding shares of
the surviving entity, which would result in significant dilution in the equity
of such stockholders.
As part of our investigation, our management may meet with a target company's
management and key personnel, may visit and inspect material facilities, obtain
analysis of verification of certain information provided, check references of
management and key personnel, and take other reasonable investigative measures,
to the extent of our limited financial resources and management expertise. The
manner in which we participate in an opportunity will depend on the nature of
the opportunity, our respective needs and desires and other parties, our
management of the opportunity and relative negotiation strength.
We will not acquire or merge with any entity which cannot provide independently
audited financial statements within a reasonable period of time after closing of
the proposed transaction. We will be subject to all of the reporting
requirements included in the 1934 Act. Included in these requirements is the
affirmative duty to file independent audited financial statements as part of our
Form 8-K to be filed with the Securities and Exchange Commission upon
consummation of a merger or acquisition, as well as our audited financial
statements included in its annual report on Form 10-K (or 10-KSB, as
applicable). If such audited financial statements are not available at closing,
or within time parameters necessary to insure our compliance with the
requirements of the 1934 Act, or if the audited financial statements provided do
not conform to the representations made by the candidate to be acquired in the
closing documents, the closing documents will provide that the proposed
transaction will be voidable, at the discretion of our present management. If
this transaction is voided, the agreement will also contain a provision
providing for the acquisition entity to reimburse us for all costs associated
with the proposed transaction.
Except as may be required by law, we do not intend to provide our stockholders
with any complete disclosure documents, including audited financial statements,
concerning an acquisition or merger candidate and its business prior to the
consummation of any acquisition or merger transaction.
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We anticipate that we will incur nominal expenses in the implementation of our
business plan. Since we have nominal capital with which to pay these anticipated
expenses, we have entered into a consulting agreement with Ocean Crest Merchants
Group. Ocean Crest will provide us with $50,000 to pay for both our old and new
business expenses. Ocean Crest will also provide consulting services which
consist of assisting us in merger and acquisition opportunities. The funds we
receive from Ocean Crest should satisfy our working capital requirements for the
next several months. We will issue Ocean Crest a promissory note convertible at
the earlier of March 15, 2001 or the filing of a registration statement under
the Securities Act of 1933 with the Securities and Exchange Commission into
8,750,000 shares of common stock in return for their services and financing.
We do not anticipate using any other outside consultants or advisors to
effectuate our business purpose. However, if we do retain additional consultants
or advisors, any cash fee earned by this party will need to be paid by the
prospective merger/acquisition candidate, as we have no cash assets to
compensate a consultant or advisor.
Employees
We have one full time and no part time employees. We do not need to hire
additional employees to facilitate our business plan.
Competition
We will remain an insignificant participant among the marketplace of firms that
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than we. In view of
our limited financial resources and limited management availability, we will
continue to be at a significant competitive disadvantage to our competitors.
ITEM 3. DESCRIPTION OF PROPERTY.
We currently maintain our offices at 599 W. Hartsdale Avenue, Suite 201, White
Plains, New York 10607. We pay no rent for the use of this office. We do not
believe that we will need to maintain an office at any time in the foreseeable
future in order to carry out our plan of operations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of August 30, 2000
regarding beneficial ownership of our common stock by (i) each stockholder known
us to be the beneficial owner of more than 5% of our common stock, (ii) by each
director and executive officer and (iii) by all executive officers and directors
as a group. Each of the persons named in the table has sole voting and
investment power with respect to common stock beneficially owned.
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Number of Percentage of
Name shares owned shares owned
- ---- ------------ ------------
Mitchell Hymowitz 2,100,000 3.1%
11 Genesee Trail
Harrison, NY 10528
Brett Holdings, Inc.* 5,595,541 8.2%
2600 N. Military Trail, Suite 206
Boca Raton, FL 33431
All officers and directors 2,100,000 3.1%
as a group (1 person)
* The interest held by Brett Holdings excludes 8,750,000 shares of common stock
that will be received by Ocean Crest Merchants Group upon the conversion of the
promissory note held by Ocean Crest. The president and principal of Brett
Holdings is also the president and principal of Ocean Crest.
ITEM 5. MANAGEMENT.
Officers and Directors
The following table sets forth certain information concerning each of our
directors and executive officers:
Name Age Position
---- --- --------
Mitchell Hymowitz 38 President and Sole Director
Mitchell Hymowitz, 38 years old, has served as our president and sole director
since June 1999, and as our chief financial officer since November 1997. From
August 1998 to June 1999, Mr. Hymowitz served as our vice president, secretary
and treasurer. Mr. Hymowitz has served as president of our minority-owned
subsidiary, ARO of America, Inc. from June 1999 to the present, and served as
vice president, treasurer and secretary between August 1998 and June 1999. In
addition, Mr. Hymowitz has served as president of Best Rate International, a
wholly-owned subsidiary of ARO, since September 1999. From 1990 to November
1997, Mr. Hymowitz was employed by H & W Hardware Co., a hardware retailer, as
that company's vice president. Simultaneously during that period, Mr. Hymowitz
was employed as treasurer of 220 First Avenue Realty, a building management
company. Mr. Hymowitz received his B.S. in accounting from the University of
Buffalo.
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ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth all compensation awarded to our sole director and
officer:
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Period Salary Other
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Mitchell Hymowitz November 1997 - October 1998 $150,000 200,000 Options
Exercise @$4.00
November 1998 - October 1999 $144,375 None
November 1999 - February 2000 $ 30,000 None
March 2000 - Present None None
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We issued Mitchell Hymowitz 1,975,000 shares of our common stock as payment of
his salary from April 1999 through February 2000, included as salary above.
Employment Agreement
In March 1997 we entered into an employment contract with Mitchell Hymowitz for
a period of three years, commencing on November 1, 1997. Under this agreement
Mr. Hymowitz is to receive a base salary of $150,000 per year in addition to
options to purchase an aggregate of 200,000 shares of our common stock. Due to
our financial condition, Mr. Hymowitz received 1,975,000 shares of our common
stock in lieu of his salary from April 1999 to February 2000.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Brett Holdings, Inc. loaned us $550,000 pursuant to a convertible debenture in
August 1997. Brett Holdings was granted options to purchase 900,000 shares of
common stock at $0.50 per share in connection with the loan. To date, Brett
Holdings has exercised 670,000 options. Brett Holdings is a shareholder in our
company.
We have entered into a consulting agreement with Ocean Crest Merchants Group.
Under this agreement Ocean Crest will receive a promissory note convertible into
8,750,000 shares of common stock in return for providing us with consulting
services and $50,000 in financing. The president and principal of Ocean Crest is
also the president and principal of Brett Holdings.
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ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock
Worldwide's articles of incorporation authorizes it to issue 100,000,000 shares
of common stock at $.001 par value. Each holder of common stock is entitled to
one vote for each share of common stock held. August 30, 2000, there were
66,891,353 shares of common stock outstanding. Upon liquidation, each
stockholder is entitled to receive a proportionate share of his, her or its
assets available for distribution to stockholders after the payment of
liabilities and after distribution in full of preferential amounts, if any. All
shares of common stock issued and outstanding are fully-paid and nonassessable.
Holders of the common stock are entitled to share pro rata in dividends and
distributions with respect to the common stock, as may be declared by the board
of directors out of funds legally available therefor.
Preferred Stock
Worldwide's articles of incorporation permit the issuance of 1,000,000 shares of
convertible preferred stock. We had authorized the issuance of series A
convertible preferred stock, all of which automatically converted into shares of
our common stock on July 1, 1999. The preferred stock is entitled to preference
in the declaration of dividends if and when any dividends are declared or paid
and in the event of liquidation.
Options and Warrants
We also have a number of options and warrants outstanding to purchase shares of
our common stock. A summary of options and warrants outstanding as of August 30,
2000, is as follows:
Number of Shares Exercise Price Expiration Date
---------------- -------------- ---------------
230,000 $0.50 August 31, 2000
200,000 4.00 No expiration date
228,250 2.00 December 31, 2000
60,000 1.00 August 31 - December 31, 2000
15,000 1.00 No expiration date
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PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Worldwide's common stock traded on the over-the-counter Bulletin Board under the
symbol "wwde." However, Worldwide was not compliant with the NASD's eligibility
requirements on May 18, 2000 and was delisted from the OTCBB. The common stock
now trades on the pink sheets. Over the past two fiscal years, its common stock
has traded at closing sales prices indicated in the following chart:
High Low
---- ---
1st quarter 1998 4.50 3.75
2nd quarter 1998 4.00 2.75
3rd quarter 1998 3.125 1.25
4th quarter 1998 2.25 0.5625
1st quarter 1999 1.0625 0.3125
2nd quarter 1999 0.38 0.10
3rd quarter 1999 0.15 0.045
4th quarter 1999 0.0475 0.015
1st quarter 2000 2.13 0.015
2nd quarter 2000 0.13 0.02
As of August 30, 2000, there were in excess of approximately 2,844 holders of
our common stock.
Worldwide is authorized to issue 100,000,000 shares of common stock, $0.001 par
value, of which 66,891,353 shares were issued and outstanding as of August 30,
2000. We are also authorized to issue 1,000,000 shares of preferred stock, par
value $0.001 per share. As of August 30, 2000 there were 999,975 shares of
common stock not issued in connection with 37,500 shares of series A convertible
preferred stock that automatically converted in July 1999. There are no other
shares of preferred stock issued or outstanding. Each holder of common stock is
entitled to one vote per share of common stock held.
As of August 30, 2000, we also have the following options and warrants
outstanding:
Number of Shares Exercise Price Expiration Date
---------------- -------------- ---------------
230,000 $0.50 August 31, 2000
200,000 4.00 No expiration date
228,250 2.00 December 31, 2000
60,000 1.00 August 31 - December 31, 2000
15,000 1.00 No expiration date
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Dividend Policy
Worldwide has not paid any cash dividends on its common stock and presently
intends to continue a policy of retaining earnings, if any, for reinvestment in
its business.
ITEM 2. LEGAL PROCEEDINGS.
In August 1997 we entered into a 30 day $30,000 promissory note with Edward J.
Farrell Jr. We have been in default. However, on April 5, 2000, a settlement was
reached whereby we paid Mr. Farrell $25,000 and 160,000 shares of common stock.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On February 21, 2000, we terminated our relationship with Moore Stephens, P.C.
and appointed Paritz & Company, P.A. as our independent auditors. There were no
disagreements with Moore Stephens, P.C.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In December, 1997, we consummated the sale of 900,000 units, each unit
consisting of one share of series A convertible preferred stock and one warrant
to purchase one share of common stock at an exercise price of $2.00 per share.
This offering was made pursuant to the exemption from federal registration
afforded by Rule 506 of the Securities Act of 1933, as amended. Each purchaser
in this private placement represented and warranted that he was an accredited
investor as defined in Regulation D of the Securities Act and had access to our
financial information.
From February 1998 through April 2000, 673,750 shares of our common stock were
issued for the exercise of warrants pursuant to the private placement above, for
an aggregate of $1,041,100.
In August 1998 we consummated the sale of 991,666 shares of common stock at
$0.75 per share to five investors pursuant to Rule 504 of Regulation D of the
Securities Act of 1933, as amended. These investors had access to our financial
information and other information concerning our company.
From September 1998 through August 1999, $1,370,000 of our convertible
debentures were converted into 6,887,769 shares of our common stock.
From August 1999 through April 2000, 22,832,762 shares of our common stock were
issued pursuant to the conversion of 856,250 shares of series A convertible
preferred stock.
From September 1999 through March 2000, $655,000 of our convertible debentures
were converted into 23,621,683 shares of our common stock. In addition,
4,035,674 shares of our common stock were issued as payment for accrued interest
aggregating approximately $226,193.
In April 2000, we issued 160,000 shares of our common stock in settlement of a
default to repay a promissory note.
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In April 2000, we issued 3,972,010 shares of our common stock as payment for
accrued expenses aggregating approximately $198,600.
The shares issued in above transactions not covered by Regulation D were issued
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Worldwide shall indemnify to the fullest extent permitted by, and in the manner
permissible under the laws of the State of Florida, any person made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he is or was
a director or officer of Worldwide, or served any other enterprise as director,
officer or employee at the request of Worldwide. The board of directors, in its
discretion, shall have the power on behalf of Worldwide to indemnify any person,
other than a director or officer, made a party to any action, suit or proceeding
by reason of the fact that he/she is or was an employee of Worldwide.
Indemnification of officers or persons controlling Worldwide for liabilities
arising under the Securities Act of 1933 has been determined by the Commission
to be against public policy and unenforceable.
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PART F/S
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The following financial statements of the Company are filed as part of this
Report:
Audited balance sheet as of August 31, 1999 and related statements of
operations, stockholders' equity and cash flows for the periods then ended
August 31, 1999 and August 31, 1998. Unaudited balance sheet as of May 31, 2000
and related statements of operations, stockholders' equity and cash flows for
the period.
(2) Exhibits:
3.0 Articles of Incorporation*
3.1 Amended Articles of Incorporation*
3.1(a) Amendment to Amended Articles of Incorporation*
3.2 Bylaws*
10.1 Employment Agreement with Mitchell Hymowitz*
10.2 Consulting Agreement*
27.1 Financial Data Schedule
99 Consent of Former Auditor*
* Previously filed
-14-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
Worldwide Equipment Corp.
Date: August 30, 2000 By: /s/ Mitchell Hymowitz
--------------------------------------
Mitchell Hymowitz, President
-15-
<PAGE>
Paritz & Company, P.A.
WORLDWIDE EQUIPMENT CORP.
AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITORS' REPORT
YEAR ENDED AUGUST 31, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and
Board of Directors of
Worldwide Equipment Corp. and Subsidiaries
White Plains, New York
We have audited the accompanying consolidated balance sheet of
Worldwide Equipment Corp. and Subsidiaries as of August 31, 1999 and the related
consolidated statement of operations, stockholders' equity (deficiency) and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Worldwide Equipment
Corp. and Subsidiaries as of August 31, 1999, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Worldwide Equipment Corp. will continue as a going concern. As
discussed in Note 2, Worldwide Equipment Corp. has incurred recurring losses,
had a working capital deficiency and a net capital deficiency of $1,068,568 as
of August 31, 1999 and has had difficulty meeting its financial obligations as
they become due. These factors raise substantial doubt about Worldwide Equipment
Corp's ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Paritz & Company, P.A.
Hackensack, New Jersey
April 30, 2000
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Stockholders and Board of Directors of
Worldwide Equipment Corp.
We have audited the accompanying consolidated statements of
operations, stockholders' equity [deficit], and cash flows of Worldwide
Equipment Corp. and its subsidiaries for the year ended August 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated results of
operations and cash flows of Worldwide Equipment Corp. and its subsidiaries for
the year ended August 31, 1998, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming that Worldwide Equipment Corp. will continue as a going
concern. As discussed in Note 3 [not presented herein] to the consolidated
financial statements, Worldwide Equipment Corp. had a working capital deficit of
$6,515,946 and a net capital deficit of $695,447 as of August 31, 1998, and has
had difficulty meeting its financial obligations as they become due. These
factors raise substantial doubt about Worldwide Equipment Corp.'s ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 3 [not presented herein]. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
December 9, 1998
F-2
<PAGE>
WORLDWIDE EQUIPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AUGUST 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 210
---------------
TOTAL CURRENT ASSETS AND TOTAL ASSETS $ 210
===============
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 413,778
Convertible debentures 655,000
---------------
Total current liabilities 1,068,778
STOCKHOLDERS' DEFICIENCY (1,068,568)
---------------
TOTAL STOCKHOLDERS' DEFICIENCY AND LIABILITIES $ 210
===============
====================================================================================================================
</TABLE>
See notes to financial statements
F-3
<PAGE>
WORLDWIDE EQUIPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998
---------------------- -------------------
<S> <C> <C>
Sales - net $ - $ -
Cost of goods sold - -
---------------------- -------------------
GROSS PROFIT - -
======================================================================================================================
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 226,164 1,834,541
---------------------- -------------------
Operating loss (226,164) (1,834,541)
---------------------- -------------------
Other (Income) expenses:
Interest expense 3,301,210 1,029,550
Interest income - (1,060)
Other (income) - (87,500)
---------------------- -------------------
3,301,210 940,990
---------------------- -------------------
LOSS FROM CONTINUING OPERATIONS (3,527,374) (2,775,531)
DISCONTINUED OPERATIONS:
Loss from operations of discontinued business segment (2,175,646) (5,804,869)
Gain (loss) on disposal of business segments 3,125,149 (2,690,651)
---------------------- -------------------
NET LOSS (2,577,871) (11,271,051)
Less imputed non-cash preferred dividend - 3,600,000
---------------------- -------------------
NET LOSS USED IN PER COMMON SHARE CALCULATION $(2,577,871) $(14,871,051)
====================== ===================
======================================================================================================================
LOSS PER SHARE OF COMMON STOCK
Loss from continuing operations (0.47) (1.07)
Loss from operations of discontinued business segment (0.29) (2.25)
Gain (loss) on disposal of discontinued business segment 0.41 (1.04)
Weighted average shares of common stock outstanding 7,549,270 2,583,275
======================================================================================================================
</TABLE>
See notes to financial statements
F-4
<PAGE>
WORLDWIDE EQUIPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED AUGUST 31, 1999 AND 1998
<TABLE>
<CAPTION>
===================================================================================================================================
ADDITIONAL TOTAL
PREFERRED COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT DEFICIENCY
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE-SEPTEMBER 1, 1997 - $ - 2,096,374 $2,096 $3,205,414 $ (3,007,373) $ 200,137
Net loss - - - - - (11,271,051) (11,271,051)
Issuance of common stock in
connection with:
Private placements, net of issuance
of costs of $360,000 900,000 900 891,667 892 3,906,958 - 3,908,750
Exercise of private placement
warrants - - 332,500 332 899,668 - 900,000
Convertible promissory note - - 100,000 100 74,900 - 75,000
Exchange of warrants - - 95,000 95 (95) - -
Exercise of warrants - - 262,500 263 192,237 - 192,500
Stock issuances - - 223,000 223 149,777 - 150,000
Stock based compensation - - - - 1,202,792 - 1,202,792
Deferred interest - - - - 3,871,425 - 3,871,425
Imputed non-cash Series A
Convertible Preferred Stock
dividend - - - - - (3,600,000) (3,600,000)
Accretion of Series A Convertible
Preferred Stock - - - - 3,600,000 - 3,600,000
Stock subscription receivable - - - - 75,000 - 75,000
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE-AUGUST 31, 1998 900,000 900 4,001,041 4,001 17,178,076 (17,878,424) (695,447)
Net loss - - - - - (2,577,871) (2,577,871)
Issuance of common stock in
connection with:
Conversion of Preferred Stock (256,750) (257) 6,846,496 6,847 (6,590) - -
Conversion of debentures - - 6,888,000 6,888 1,363,112 - 1,370,000
Exercise of stock options - - 670,000 670 334,330 - 335,000
Exercise of private placement
options - - 136,750 137 136,613 - 136,750
Exercise of private placement
warrants - - 107,500 107 (107) - -
Stock issuances - - 100,000 100 (100) - -
Stock issued in settlement of
litigation - - 100,000 100 362,900 - 363,000
------------------------------------------------------------------------------------------------------------------------------------
BALANCE-AUGUST 31, 1999 643,250 $643 18,849,787 $18,850 $19,368,234 $(20,456,295) $(1,068,568)
=============================================================================================
===================================================================================================================================
</TABLE>
See notes to financial statements
F-5
<PAGE>
WORLDWIDE EQUIPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
===============================================================================================================================
Year Ended August 31,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Loss from continuing operations $(3,527,374) $(2,775,531)
------------------------------------------------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization - 787,380
Amortization on discount of convertible debentures 111,301
Stock based compensation - 1,202,792
Stock issued in settlement of litigation 147,000
Write-off of deferred charges 3,306,516
Changes in assets and liabilities:
Increase (decrease) in:
Accounts payable and accrued expenses 500 442,777
------------------------------------------------
TOTAL ADJUSTMENTS 3,454,016 2,544,250
------------------------------------------------
NET CASH - CONTINUING OPERATING ACTIVITIES (73,358) (231,281)
===============================================================================================================================
DISCONTINUED OPERATIONS:
Income (loss) from discontinued business segments 949,503 (8,495,520)
Items of non-cash in discontinued operations (1,290,886) 3,466,532
------------------------------------------------
NET CASH -DISCONTINUED OPERATIONS (341,383) (5,028,988)
===============================================================================================================================
INVESTING ACTIVITIES:
Sale of net assets -ARO of America, Inc. net of cash paid - (1,175,000)
------------------------------------------------
NET CASH - INVESTING ACTIVITIES - (1,175,000)
===============================================================================================================================
FINANCING ACTIVITIES:
Proceeds from issuance of loans and notes payable 276,750 945,223
Proceeds from stock issuances 135,000 668,750
Proceeds from issuance of Preferred Stock - 3,240,000
Proceeds from exercise of warrants issued with Preferred Stock - 900,000
Proceeds from exercise of warrants - 192,500
Proceeds from additional stock issuances - 150,000
------------------------------------------------
NET CASH - FINANCING ACTIVITIES 411,750 6,096,473
===============================================================================================================================
DECREASE IN CASH (2,991) (338,796)
CASH - BEGINNING OF YEAR 3,201 341,997
===============================================================================================================================
CASH - END OF YEAR $ 210 $ 3,201
===============================================================================================================================
</TABLE>
See notes to financial statements
F-6
<PAGE>
WORLDWIDE EQUIPMENT CORP. AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
===============================================================================================================================
Year Ended August 31,
1999 1998
<S> <C> <C>
Cash paid during the year for:
Interest $ - $ 166,383
======================================
Income taxes $ 325 $ 1,683
======================================
Non-cash financing activities:
Conversion of debentures into common stock $ 1,370,000 $ 75,000
======================================
Exercise of stock options $ 200,000
===============
===============================================================================================================================
</TABLE>
See notes to financial statements
F-7
<PAGE>
WORLDWIDE EQUIPMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
================================================================================
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business description
As of August 31, 1999, Worldwide Equipment Corp. ("the Company") has a
negligible asset base and no active business operations.
As of August 31, 1998, the Company was a holding company for its then
wholly-owned subsidiaries, International Tractor Co., Inc. ("ITC")
(which was sold in August, 1999 - see Note 3 and ARO of America, Inc.
("ARO") which was acquired in August, 1997 and owned 40% of the issued
and outstanding common stock of East European Imports, Inc. ("EEI") (a
development stage company) which planned to assemble and sell sports
utility vehicles. In May, 1999 EEI ceased all business operations.
During the year ended August 31, 1999, ARO sold 1,480,000 shares of its
common stock for $370,000, which resulted in the Company owning
approximately 63% of the issued and outstanding shares of ARO at August
31, 1999. Subsequent to August 31, 1999, (I) ARO sold an additional
1,020,000 shares of common stock for $255,000, (ii) convertible
debentures aggregating $550,000 and related accrued interest of $78,054
were converted into 1,250,000 shares of ARO, and (iii) 4,500,000 shares
of ARO were issued to acquire Best Rate International (see Note 7C). In
addition, options to purchase 2,000,000 shares of ARO are outstanding.
As a result of the above transactions, as of March 31, 2000 the Company
owned approximately 23% of the issued and outstanding shares of ARO
(approximately 19.5% if the options referred to above are exercised.)
Basis of presentation
The 1998 consolidated financial statements include the accounts of the
Company and all majority- owned subsidiaries. The Company's investment
in ARO in 1999 is accounted for using the equity method of accounting,
since control was deemed temporary. The investment in ARO was written
down to zero as a result of losses sustained.
All material inter-company balances and transactions are eliminated.
Uses of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of net
revenue and expenses during each reporting period. Actual results could
differ from those estimates.
Revenue recognition
Revenue from product sales is recognized at the time the product is
shipped.
F-8
<PAGE>
================================================================================
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost. Major additions,
improvements and renewals, which substantially increase the useful
lives of assets, are capitalized. Maintenance, repairs and minor
renewals are expensed as incurred.
Depreciation is provided for both financial reporting and income tax
purposes using the straight-line and accelerated methods.
Income taxes
The Company files separate Federal and state income tax returns.
The Company accounts for deferred income taxes in accordance with SFAS
Statement No. 109 ("SFAS 109"), which requires that deferred tax assets
and liabilities be recognized for the future tax consequence
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. In addition, SFAS 109 requires recognition of future tax
benefits, such as net operating loss carryforwards, to the extent that
realization of such benefits is more likely than not and that a
valuation allowance be provided when it is more likely than not that
some portion of the deferred tax assets will not be realized.
Stock based compensation
Statement of Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123") encourages, but does not require, companies
to record compensation cost for stock-based employee compensation at
fair value. The Company has chosen not to adopt SFAS 123 and to
continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at
the date of the grant over the amount an employee must pay to acquire
the stock.
Impairment of long-lived assets
The Company accounts for the impairment of long-lived assets in
accordance with SFAS No. 121 which requires that long-lived assets and
identifiable intangibles held and used by a company be reviewed for
possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Advertising
The Company expenses advertising costs as incurred. Total advertising
costs charged to expense amounted to approximately $510 and $ 0 for the
years ended August 31, 1999 and 1998, respectively.
Comprehensive income
Effective January 1, 1998, the Company adopted the provision of
Statement No. 130. "Reporting Comprehensive Income", which modifies the
financial presentation of comprehensive income and its components. In
accordance with this Statement, a consolidated statement of
comprehensive income is included in the financial statements to present
all changes in stockholders' equity in the periods presented, other
than changes resulting from transactions relating to the Company'
stock.
F-9
<PAGE>
================================================================================
Fair value of financial instruments
The Company adopted SFAS No. 107, "Disclosure About Fair Value of
Financial Instruments", which requires disclosing fair value, to the
extent practicable, for financial instruments which are recognized or
unrecognized in the balance sheet. The fair value of the financial
instruments disclosed herein is not necessarily representative of the
amount that could be realized or settled, nor does the fair value
amount consider the tax consequences of realization or settlement.
For the year ended August 31, 1998, in assessing the fair value of
these instruments, the Company used a variety of methods and
assumptions, which were based on estimates of market conditions and
risks existing at that time. For certain instruments, including trade
receivables, trade payables and loan and notes payable, it was assumed
that the carrying amount approximated fair value for these instruments
because of their short maturities. It was estimated that the carrying
amount of the Company's long-term debt approximated its fair value
based on quoted market prices for similar issues.
Earnings per share
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share", which is effective for financial statements issued for periods
ending after December 15, 1997.
SFAS 128 supersedes Accounting Principles Board Opinion No. 15,
"Earnings Per Share", and replaces its primary earnings per share with
a new basic earnings per share representing the amount of earnings for
the period available to each share of common stock outstanding during
the reporting period. SFAS 128 also requires a dual presentation of
basic and diluted earnings per share on the face of the statement of
operations for all companies with complex capital structures. Diluted
earnings per share reflects the amount of earnings for the period
available to each share of common stock outstanding during the
reporting period, while giving effect to all dilutive potential common
shares that were outstanding during the period, such as common shares
that could result from the potential exercise or conversion of
securities into common stock.
The computation of diluted earnings per share does not assume
conversion, exercise or contingent issuance of securities that would
have an antidilutive effect on earnings per share, i.e., increasing
earnings per share or reducing loss per share). The dilutive effect of
outstanding options and warrants and their equivalents are reflected in
dilutive earnings per share by the application of the treasury stock
method which recognizes the use of proceeds that could be obtained upon
exercise of options and warrants in computing diluted earnings per
share. It assumes that any proceeds would be used to purchase common
stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price
of the common stock during the period exceeds the exercise price of the
options or warrants.
Reclassifications
Certain amounts included in the 1998 financial statements have been
reclassified to conform with 1999 presentation.
F-10
<PAGE>
================================================================================
2. RISKS AND UNCERTAINTIES
The accompanying consolidated financial statements have been prepared
assuming that Worldwide Equipment Corp. will continue as a going
concern. Worldwide Equipment Corp. has incurred recurring losses, had a
working capital deficiency and a net capital deficiency of $1,068,568
as of August 31, 1999 and has had difficulty meeting its financial
obligations as they become due. These factors raise substantial doubt
about Worldwide Equipment Corp's ability to continue as a going
concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
In addition, the Company has a negligible asset base and no active
business operations. Other than issuing shares to stockholders, the
Company has not conducted any business since August, 1999.
The Company will, in all likelihood, continue to sustain operating
expenses without corresponding revenues, at least until the
consummation of a business combination. This may result in the Company
incurring a net operating loss which will increase continually until it
consummates a business combination with a profitable business entity.
There is no assurance that the Company can identify such a business
opportunity and consummate such a business combination on favorable
terms..
The Company intends to seek to acquire assets or shares of an entity or
group of entities actively engaged in business which generates
revenues, in exchange for their securities. The Company has no
particular acquisitions in mind and has not entered into any
negotiations regarding such an acquisition. None of the officers,
directors, employees or affiliates has engaged in any preliminary
contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between the
Company and any other company as of the date of this registration
statement.
3. DISCONTINUED OPERATIONS
On August 30, 1999 the Company sold all of the issued and outstanding
common stock of ITC for a total consideration of the assumption of all
obligations of ITC and the indemnification and release of the Company
and its officers, directors and shareholders of all claims and
obligations that may arise.
The gain on disposition of discontinued operations included in the
accompanying statement of operations results from the excess of
liabilities over assets assumed by the purchaser.
Sales of ITC were $3,842,234 and $7,844,767 for the years ended August
31, 1999 and 1998, respectively.
Pursuant to an agreement dated August 6, 1998, ARO sold substantially
all its assets and certain liabilities to EEI, and paid $500,000 at
closing, in exchange for 40% of EEI's common stock . The sale resulted
in a loss to operations of approximately $2,700,000 for the year ended
August 31, 1998. ARO agreed to make additional payments to EEI in the
amount of $1,300,000 (of which $650,000 has been paid) or suffer
dilution. The Company can also incur dilution based on profit levels up
to $20,000,000. The maximum dilution is 20%.
4. CONVERTIBLE DEBENTURES
The Convertible Debentures bear interest at rates ranging from 6% to
10% per annum and were due, as extended, on August 31, 1999 and 2000.
See Note 7A for details relating to the conversion of these notes into
common stock.
F-11
<PAGE>
================================================================================
5. STOCKHOLDERS' EQUITY
The Company is authorized to issue 100,000,000 shares of common stock,
par value $.001 per share, and 1,000,000 shares of convertible
preferred stock ("the Convertible Preferred Stock"), par value $.001
per share.
Each share of Convertible Preferred Stock may be converted into two
shares of the Company's common stock and each warrant is convertible
into one share of common stock at a price of $2, subject to adjustment
under certain circumstances. Each share of Convertible Preferred Stock
is non-voting, unless converted into common stock of the Company. The
Convertible Preferred Stock is entitled to preference in the
declaration of dividends if and when any dividends are declared or paid
and in the event of liquidation. There were no dividends declared or
paid on the Convertible Preferred Stock during 1999 and 1998. All
shares of the Convertible Preferred Stock not converted on or prior to
July 1, 1999 will be automatically converted, based on the conversion
ratio, into shares of common stock of the Company on that date. On the
date of any conversion, the conversion ratio will be automatically
adjusted so as to give the holder such number of common shares that the
aggregate market value be at least $4. The discount resulting from an
allocation of proceeds to the beneficial conversion feature is
analogous to a dividend and is recognized as a return to the preferred
shareholders over the minimum period in which the preferred
shareholders can realize that return. The resulting discount is
allocated from the date of issuance through the date the security was
first convertible.
Pursuant to a private placement memorandum dated December 9, 1997, the
Company offered a maximum of 900,000 units of its securities at $4 per
unit ("the Preferred Units"). Each Preferred Unit consisted of one
share of Series A Convertible Preferred Stock and one Common Stock
Purchase Warrant. As of August 31, 1998, 900,000 Preferred Units were
issued for aggregate consideration of $3,240,000 net of offering costs.
A summary of options outstanding as of August 31, 1999 is as follows:
<TABLE>
<CAPTION>
Number of Shares Exercise Price Expiration Date
---------------- -------------- ---------------
<S> <C> <C>
200,000 4.00 No expiration date
313,250 2.00 December 31, 2000
60,000 1.00 August 31 - December 31, 2000
17,500 1.00 No expiration date
---------------------
590,750
=====================
</TABLE>
The following table summarizes transactions in options.
<TABLE>
<CAPTION>
Number Weighted
of Average Weighted
Common Exercise Average
Shares Price Fair Value
------ ----- ----------
<S> <C> <C> <C>
Options outstanding at August 31, 1997 120,000 $1.75 $ .70
Granted 1,550,000 1.84 1.42
Cancelled (190,000) 0.50 1.10
Exercised (752,500) 1.58 2.60
-------------------------------------------------
Options outstanding at August 31, 1998 727,500 2.44 2.70
Exercised (136,750) 1.00 -
-------------------------------------------------
Options outstanding at August 31, 1999 590,750 $2.54 $2.70
=================================================
</TABLE>
F-12
<PAGE>
================================================================================
All outstanding options were exercisable as of August 31, 1999 and
1998.
No options were issued during the year ended August 31, 1999.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted average assumptions used for the grants awarded during the
year ended August 31, 1998:
<TABLE>
<CAPTION>
Year Ended
August 31, 1998
---------------
<S> <C>
Dividend yields -%
Expected volatility 108%
Risk-free interest rate 5.5 %
Expected lives 1.9 years
</TABLE>
The weighted-average fair value of options granted was $2.75 for the
year ended August 31, 1998.
If compensation cost (totaling approximately $465,000), for options
issued under the Plan during 1998 had been determined based on the fair
value at the grant dates for awards under Plan, consistent with the
alternative method set forth under SFAS No. 123, the Company's net loss
and basic diluted net loss per share of common stock would have been
increased on a pro forma basis as indicated below.
<TABLE>
<CAPTION>
Year Ended
August 31, 1998
---------------
<S> <C>
Net loss:
As reported $(14,871,051)
Pro forma $(15,336,051)
Basic and diluted net loss per share of common stock:
As reported $ (5.75)
Pro forma $ (5.93)
</TABLE>
6. INCOME TAXES
The Company has net operating loss carryforwards of approximately
$1,650,000 which expire as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C> <C>
2117 $ 650,000
2118 585,000
2119 415,000
------------------
$1,650,000
==================
</TABLE>
Due to significant changes in stock ownership of the Company,
utilization of these carryforwards is limited pursuant to Internal
Revenue Service Regulations.
As of August 31, 1999, the Company has a deferred tax asset of
approximately $560,000 relating to the net operating loss carryforwards
against which a full valuation allowance has been recognized for
financial statement reporting purposes.
F-13
<PAGE>
================================================================================
7 SUBSEQUENT EVENTS
A. From September, 1999 through March, 2000, $655,000 of
convertible debentures of the Company were converted into
23,621,683 shares of common stock of the Company. In addition,
4,035,674 shares of common stock were issued as payment for
accrued interest aggregating approximately $226,193.
B. In February, 2000, $550,000 of convertible debentures of ARO
were converted into 625,000 shares of ARO. Simultaneously, an
additional 625,000 shares of ARO were issued in payment of
accrued interest of $78,054.
C. In September, 1999, ARO acquired all of the issued and
outstanding shares of Best Rate International, Inc. ("Best
Rate") in exchange for 4,500,000 shares of common stock of
ARO. Best Rate is a master distributor of Freewwweb, a no-cost
Internet service provider.
D. In March, 2000, the Company entered into a one-year consulting
agreement with a corporation owned by a stockholder of the
Company, pursuant to which the consultant loaned the Company
$50,000, which amount is convertible into 8,750,000 shares of
the Company's common stock.
E. In April, 2000, the Company issued 160,000 shares of common
stock in settlement of a default to repay a promissory note.
In April, 2000, the Company issued 3,972,010 shares of common
stock as payment for accrued expenses aggregating
approximately $198,600.
F-14
<PAGE>
Paritz & Company, P.A.
WORLDWIDE EQUIPMENT CORP.
UNAUDITED FINANCIAL STATEMENTS
WITH
ACCOUNTANTS' REVIEW REPORT
NINE MONTHS ENDED MAY 31, 2000
<PAGE>
ACCOUNTANTS' REVIEW REPORT
To The Stockholders and
Board of Directors of
Worldwide Equipment Corp.
White Plains, New York
We have reviewed the accompanying balance sheet of Worldwide Equipment
Corp. as of May 31, 2000 and the related statements of operations, stockholders'
deficiency and cash flows for the nine months then ended in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of Worldwide
Equipment Corp.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an examination in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are 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
Worldwide Equipment Corp. will continue as a going concern. Worldwide Equipment
Corp. has incurred recurring losses, had a working capital deficiency and a net
capital deficiency of $119,928 as of May 31, 2000 and has had difficulty meeting
its financial obligations as they become due. These factors raise substantial
doubt about Worldwide Equipment Corp's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Paritz & Company, P.A.
Hackensack, New Jersey
August 23, 2000
F-15
<PAGE>
WORLDWIDE EQUIPMENT CORP.
BALANCE SHEET
MAY 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 151
---------
TOTAL CURRENT ASSETS AND TOTAL ASSETS $ 151
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses - trade $ 57,970
- affiliate 12,109
Convertible debentures 50,000
---------
TOTAL CURRENT LIABILITIES 120,079
STOCKHOLDERS' DEFICIENCY (119,928)
---------
TOTAL STOCKHOLDERS' DEFICIENCY AND LIABILITIES $ 151
=========
See accountants' review report
F-16
<PAGE>
WORLDWIDE EQUIPMENT CORP. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
NINE MONTHS ENDED MAY 31, 2000
(Unaudited)
Sales - net $ --
Cost of goods sold --
------------
GROSS PROFIT --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 125,798
------------
OPERATING LOSS (125,798)
OTHER EXPENSES:
Interest expense (73,224)
------------
NET LOSS $ (199,022)
============
NET LOSS USED IN PER COMMON SHARE CALCULATION $ (199,022)
============
LOSS PER SHARE OF COMMON STOCK:
Loss from continuing operations (0.01)
============
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING 41,857,179
See accountants' review report
F-17
<PAGE>
WORLDWIDE EQUIPMENT CORP.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
NINE MONTHS ENDED MAY 31, 2000
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS'
PREFERRED STOCK COMMON STOCK CAPITAL DEFICIT DEFICIENCY
------------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - AUGUST 31, 1999 643,250 $ 643 18,849,787 $ 18,850 $ 19,368,234 $(20,456,295) $ (1,068,568)
Net loss -- -- -- -- -- (199,022) (199,022)
Issuance of common stock in
connection with:
Conversion of Preferred Stock (599,000) (599) 15,986,267 15,986 (15,387) --
Conversion of debentures -- -- 25,836,992 25,837 814,207 -- 840,044
Conversion of accounts payable -- -- 5,792,144 5,792 283,826 -- 289,618
Exercise of private placement
warrants -- -- 99,500 100 (100) -- --
Stock issued in settlement of
litigation -- -- 160,000 160 17,840 -- 18,000
---------- ------- ------------ -------- ------------ ------------ ------------
BALANCE - MAY 31, 2000 $ 44,250 $ 44 $ 66,724,690 $ 66,725 $ 20,468,620 $(20,655,317) $ (119,928)
========== ======= ============ ======== ============ ============ ============
</TABLE>
See accountants' review report
F-18
<PAGE>
WORLDWIDE EQUIPMENT CORP.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MAY 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES:
Net loss $ (199,022)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts payable and accrued expenses-trade 136,972
-affiliate 12,109
-----------
NET CASH USED IN OPERATING ACTIVITIES (49,941)
-----------
FINANCING ACTIVITIES:
Proceeds from issuance of loans and notes payable 50,000
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 50,000
-----------
DECREASE IN CASH (59)
CASH - BEGINNING OF PERIOD 210
-----------
CASH - END OF PERIOD $ 151
===========
Supplemental disclosures of cash flow information:
Non-cash financing activities:
Conversion of debentures and related accrued interest into common stock $ 1,064,000
===========
</TABLE>
See accountants' review report
F-19
<PAGE>
EXHIBIT INDEX
3.0 Articles of Incorporation*
3.1 Amended Articles of Incorporation*
3.1(a) Amendment to Amended Articles of Incorporation*
3.2 Bylaws*
10.1 Employment Agreement with Mitchell Hymowitz*
10.2 Consulting Agreement*
27.1 Financial Data Schedule
99 Consent of Former Auditor*
* Previously filed.
