<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2000
Commission file number 0-30799
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 No.)
599 West Hartsdale Avenue, Suite 201, White Plains, New York 10607
------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(914) 428-8191
---------------------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
------------------- -----------------------------------------
None
Securities registered under Section 12(g) of the Exchange Act:
Title of Each Class Name of Each Exchange On Which Registered
------------------- -----------------------------------------
Common Stock, $.001 par value - OTC Bulletin Board
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. None.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. $638,200.70 based on a price of $.47 per share as of December 7, 2000.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: December 7, 2000: 1,357,874 Shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
- None -
Transitional Small Business Disclosure Format (Check One)
Yes [ ] No [X]
<PAGE> 2
Table of Contents
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management Discussion and Analysis or Plan of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners
and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits, Lists and Reports on Form 8-K
<PAGE> 3
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 16% 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 was most recently a master distributor of Freewwweb.com, a no-cost
Internet service provider with approximately 1,700,000 users in the United
States and Canada. Best Rate currently has no active operations. 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 anticipate that the selection of a merger or acquisition 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 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 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.
<PAGE> 4
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 pursuant to Rule 3a-1 of the General Rules and
Regulations under the Investment Company Act of 1940.
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.
RECENT DEVELOPMENTS
On December 5, 2000 we entered into an agreement and plan of reorganization with
U.S. Cancer Care, Inc., a Delaware corporation. Under this agreement and plan of
reorganization we agreed to acquire all of the issued and outstanding stock in
U.S. Cancer Care, Inc. in return for 6,741,942 shares of our common stock, which
will account for approximately 83% of Worldwide Equipment. Upon the closing of
this transaction there would be approximately 8,099,816 shares of Worldwide
common stock outstanding. In addition, we will issue an aggregate of 3,000
shares of preferred stock, designated in three separate classes, to holders of
U.S. Cancer Care preferred stock. The closing of this transaction is contingent
on the written consent and/or approval of the shareholders of U.S. Cancer Care,
Inc.
U.S. Cancer Care, Inc., was founded in 1998 to manage and expand the operations
of outpatient radiation therapy cancer treatment centers. U.S. Cancer Care
provides management services to outpatient radiation therapy cancer treatment
centers and their radiation and medical oncologists, featuring billing,
collection and management information services using U.S. Cancer Care's
proprietary ROSCOE(TM)and MOSCOE(TM)software systems, as well as administrative,
accounting, non-physician personnel and purchasing. U.S. Cancer Care also
provides management services to hospital owned radiation therapy outpatient
facilities, as well as inpatient facilities. U.S. Cancer Care is a facility
owner and manager, and maintains its relationship with radiation oncologists
through medical service agreements as independent contractors and medical
oncologists through management agreements for MOSCOE(TM)billing and collection.
2
<PAGE> 5
U.S. Cancer Care currently owns or manages 15 outpatient facilities consisting
of:
o four facilities in Northern California (Modesto (2), Sonora,
Turlock),
o five facilities in Northern Florida (St. Augustine, Palatka,
Orange Park, Jacksonville, Jacksonville Beach),
o one facility in Corpus Christi, Texas,
o one joint venture with a Columbia Hospital in Bradenton,
Florida,
o two facilities in Northern California (Stockton and Hayward)
that service Kaiser Permanente members,
o one mobile positron emission tomography unit servicing the
Florida cancer centers, and
o one facility in Scottsdale, Arizona.
U.S. Cancer Care's goal is to become a leading network provider of radiation
therapy services in the United States through strategic relationships, new
center developments, prudent acquisitions, and internal growth from expert
management. This service is predicated upon state-of-the-art proprietary
information systems, and the delivery of superior university level care in a
cost efficient manner.
U.S. Cancer Care's current outstanding preferred stock is designated into 3
series: A, B and C. These series will be converted into series of preferred
stock of Worldwide containing the same rights and preferences. The current
rights and preferences of U.S. Cancer Care's preferred stock are the following:
DIVIDENDS: Dividends on the series A preferred stock are cumulative and
payable at an annual rate of 9% of $5,000 per share. Dividends are payable
quarterly when and as declared by the board of directors. The dividend rate of
the series A preferred stock will increase to an annual rate of 20% of $5,000
per share in March 2002 if the series A preferred stock is outstanding at such
time.
Dividends on the series B preferred stock are cumulative and payable at an
annual rate of 5% of $2,500 per share. Dividends are payable quarterly when and
as declared by the board of directors. The dividend rate of the series B
preferred stock will increase to an annual rate of 9% of $2,500 per share at
such time as U.S. Cancer Care's subsidiary, Corpus Christi Acquisition, LLC,
achieves EBITDA of at least $1 million for four consecutive fiscal quarters. In
addition, the dividend rate of the series B preferred stock will increase to 20%
of $2,500 per share in March 2004 if the series B preferred stock is outstanding
at such time. However, the company can convert the preferred B to common stock
at $ 10 per share if the EBITDA threshold described above is not achieved by
March 2004.
Dividends on the series C preferred stock are cumulative and payable at an
annual rate of 12% of $2,500 per share. Dividends are payable when and if
declared by the board of directors. The dividend rate will increase to an annual
rate of 20% of $2,500 per share in November 2003 if series C shares are
outstanding.
3
<PAGE> 6
No dividends will be paid on the common stock in any fiscal year without all
series of preferred stock first receiving any accrued but unpaid cumulative
dividends.
LIQUIDATION PREFERENCE: In the event of any liquidation, dissolution or
winding up of the company, the holders of the series A preferred stock will be
entitled to receive, in preference to the holders of common stock and other
series of preferred stock, an amount equal to $5,000 per share, plus all accrued
and unpaid dividends. In the event of any liquidation, dissolution or winding up
of the company, the holders of the series B preferred stock will be entitled to
receive, in preference to the holders of common stock, an amount equal to $2,500
per share, plus all accrued and unpaid dividends. The series C preferred stock
is entitled to the same preferences, subject to the rights of the series A and B
stock.
After the holders of the series A, and C preferred stock have been paid in full
their liquidation preference amounts, the remaining assets of the company may be
distributed to the holders of the common stock.
CONVERSION: The holders of the series A preferred stock are entitled at
any time to convert their series A preferred stock into common stock at a
conversion rate calculated by dividing $5,000 by the "conversion price," which
shall be an amount equal to 90% of the average of the fair market value of the
company's common stock for the 20 days prior to the date of conversion.
The holders of the series B preferred stock are entitled subject to the EBITDA
Threshold limitations as set forth below, to convert their series B preferred
stock into common stock at a conversion rate calculated by dividing $2,500 by
the "holder conversion price." This shall be an amount equal to 90% of the
average of the fair market value of the company's common stock for the 20 days
prior to the date of conversion. However, the series B preferred stock may be
converted to common stock at the election of the company at any time after March
2004, upon 90 days written notice, if Corpus Christi does not achieve EBITDA
Threshold of at least $1 million for four consecutive fiscal quarters. If the
series B preferred stock is converted at the election of the company, the
conversion price shall be equal to the greater of the fair market value of the
common stock for the 20 days prior to the date on which the company gives notice
of such conversion and $10.00 per share. The $10.00 conversion price will be
decreased pursuant to a weighted average formula if the company issues shares of
capital stock for a consideration less than the fair market value of the common
stock on the date of issuance.
The holders of series C preferred stock are entitled to convert their series C
preferred stock into common stock at a price of $1.30 per share, subject to
adjustment.
REDEMPTION: The series A, B and C preferred stock may be redeemed at
the option of the company at a price equal to $5,000 per share for the series A
preferred stock, $2,500 per share for the series B preferred stock and $2,500
for the series C preferred stock. In addition, all accrued but unpaid dividends
on all preferred shares shall be paid. Also, the holders of the series A
preferred stock and the series B preferred stock shall have the right to demand
redemption of their shares at the applicable redemption price upon the
occurrence of certain defaults by the company. The series A, B and C preferred
stock shall also be redeemable in full at the
4
<PAGE> 7
applicable redemption price, upon the closing of an underwritten public offering
of the company's common stock which yields proceeds to the company of not less
than $15 million.
LIMITED VOTING RIGHTS: The series A, B and C preferred stock do not
have the right to vote on any matters submitted or required to be submitted to
the vote of the stockholders, except as required by law, and except that the
affirmative vote of the holders of at least a majority of the series A and B
preferred stock, voting as a separate class, is required for (a) amendments to
the company's organizational documents that would amend the terms of the
respective series of preferred stock, and (b) certain mergers, sales of assets
and incurring of indebtedness contemplated by the company.
Also, in connection with the agreement and plan of reorganization, Worldwide
Equipment will issue Mitch Hymowitz, the company's president and director,
options to purchase 200,000 shares of common stock. These options are
exercisable at $.01 per share. The shares of common stock underlying these
warrants contain piggy back registration rights.
The principal of Ocean Crest Merchants Group and Brett Holdings (holder of a
convertible promissory note and shareholder, respectively, in Worldwide
Equipment) is a beneficial shareholder in several entities that hold convertible
promissory notes payable by U.S. Cancer Care and options to purchase shares of
common stock of U.S Cancer Care. Upon the closing of the agreement and plan of
reorganization, conversion of all promissory notes and exercise of the options,
the principal's interest in Worldwide Equipment will be approximately 9.5%. This
interest excludes dilution that will be incurred, if and when the preferred
shares are converted.
5
<PAGE> 8
ITEM 2. 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 3. LEGAL PROCEEDINGS.
We are not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report. However, on October 30, 2000,
Worldwide held a special meeting of its shareholders. At this meeting and
through the solicitation of proxies, Worldwide voted to effect a 50 to 1 reverse
stock split of all outstanding common stock. The reverse stock split was
approved by 72.5% of the outstanding shares of Worldwide. 48,467,245 shares of
the 66,891,353 total shares outstanding as of the record date were voted in
favor of the reverse split, while 2,220,924 were voted against.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Worldwide's common stock traded on the over-the-counter Bulletin Board under the
symbol "wwde." Effective November 2000, the symbol was changed to "wweq." Over
the past calendar periods, 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 0.325 0.015
2nd quarter 2000 0.13 0.02
3rd quarter 2000 0.03 0.009
As of August 31, 2000, there were approximately 2,844 beneficial holders of our
common stock and approximately 110 record holders.
6
<PAGE> 9
Worldwide is authorized to issue 100,000,000 shares of common stock, $0.001 par
value, of which 67,891,328 shares were issued and outstanding as of August 31,
2000 and approximately 1,357,874 shares issued and outstanding after the 50-1
reverse stock split. We are also authorized to issue 1,000,000 shares of
preferred stock, par value $0.001 per share.
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 6. 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.
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 is undertaken by Mitchell Hymowitz,
our sole director and president, who may not be considered a professional
business analyst. We are concentrating 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 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.
7
<PAGE> 10
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, 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.
Except as may be required by law, 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 our 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.
8
<PAGE> 11
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.
We 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 has provided us with $50,000 to pay for both our old and new business
expenses. Ocean Crest also provides 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 have issued Ocean Crest a promissory note convertible at the earlier
of March 15, 2001 or merger or acquisition of our company. The note is
convertible into 8,750,000 (pre-reverse split) 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.
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
9
<PAGE> 12
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 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
10
<PAGE> 13
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 7. FINANCIAL STATEMENTS.
The financial statements required in this report are included, commencing on
Page F-1.
ITEM 8. 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.
11
<PAGE> 14
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
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.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth all compensation awarded to our sole director and
officer:
<TABLE>
<CAPTION>
Period Salary Other
------ ------- ------
<S> <C> <C> <C>
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
</TABLE>
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 November 1997 we entered into an employment contract with Mitchell Hymowitz
for a period of three year. Under this agreement Mr. Hymowitz was entitled to
receive a base salary of $150,000 per year in addition to options to purchase an
aggregate of 200,000 shares of our
12
<PAGE> 15
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. He has not received any additional compensation as of the date of this
report.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of August 31, 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. This table
does not reflect the 50-1 reverse stock split effective October 30, 2000.
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 (175,000 post-reverse
split) shares of common stock that will be received by Ocean Crest Merchants
Group upon conversion of the promissory note held by Ocean Crest. The note is
not convertible until the earlier of March 2001 or any merger or acquisition of
Worldwide. Elliot Loewenstern, the president and principal of Brett Holdings is
also the president and principal of Ocean Crest.
ITEM 12. 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, pre-reverse split. 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 received 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. Subject to our 50-1 reverse
stock split, the note is now convertible into 175,000 shares.
On November 20, 2000, we issued Ocean Crest an additional promissory note,
payable on demand, in the amount of $10,000 in return for payment of certain
working capital expenses.
13
<PAGE> 16
PART F/S
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K.
(a) Exhibits:
3.0 Articles of Incorporation(1)
3.1(a) Amended Articles of Incorporation(1)
3.1(b) Amendment to Amended Articles of Incorporation(1)
3.1(c) Amendment to Amended Articles of Incorporation designating reverse
stock split(3)
3.2 Bylaws(2)
10.1 Employment Agreement with Mitchell Hymowitz(1)
10.2 Consulting Agreement with Ocean Crest(1)
27.1 Financial Data Schedule
(1) Previously filed on Form 10-SB dated June 13, 2000.
(2) Previously filed on Form 10-SB/A dated June 22, 2000.
(3) Previously filed on Form 8-K filed on November 1, 2000.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
14
<PAGE> 17
SIGNATURES
In accordance with Section 13 of the Exchange Act the registrant caused this
report thereunto duly authorized.
Worldwide Equipment Corp.
Date: December 12, 2000 By: /s/ Mitchell Hymowitz
---------------------------------
Mitchell Hymowitz, President
15
<PAGE> 18
PARITZ & COMPANY, P.A.
WORLDWIDE EQUIPMENT CORP.
FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITORS' REPORT
YEAR ENDED AUGUST 31, 2000
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
To the Stockholders and
Board of Directors of
WORLDWIDE EQUIPMENT CORP.
White Plains, New York
We have audited the accompanying balance sheet of WORLDWIDE EQUIPMENT
CORP. as of August 31, 2000 and the related statements of operations,
stockholders' deficiency and cash flows for each of the years in the two year
period 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. as of August 31, 2000, and the results of its operations and its cash
flows for each of the years in the two year period then ended 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. As discussed in Note
2, WORLDWIDE EQUIPMENT CORP. (i) has a negligible asset base and no current
business operation, (ii) has incurred recurring losses, (iii) had a working
capital deficiency and a net capital deficiency of $159,337 as of August 31,
2000, and (iv) 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 financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Hackensack, New Jersey
November 28, 2000 (Except for Note 8B which is dated December 5, 2000)
F-1
<PAGE> 20
WORLDWIDE EQUIPMENT CORP.
BALANCE SHEET
AUGUST 31, 2000
================================================================================
ASSETS
CURRENT ASSETS:
Cash $ 91
---------
TOTAL CURRENT ASSETS AND TOTAL ASSETS $ 91
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses - trade $ 92,512
- affiliate 16,916
Note payable 50,000
---------
TOTAL CURRENT LIABILITIES 159,428
STOCKHOLDERS' DEFICIENCY (159,337)
---------
TOTAL STOCKHOLDERS' DEFICIENCY AND LIABILITIES $ 91
=========
================================================================================
See notes to financial statements
F-2
<PAGE> 21
WORLDWIDE EQUIPMENT CORP.
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Year Ended August 31,
2000 1999
------------ ------------
<S> <C> <C>
Sales - net $ -- $ --
Cost of goods sold -- --
------------ ------------
GROSS PROFIT -- --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 165,207 226,164
------------ ------------
OPERATING LOSS (165,207) (226,164)
OTHER EXPENSES:
Interest expense (73,224) (3,301,210)
------------ ------------
LOSS FROM CONTINUING OPERATIONS (238,431) (3,527,374)
DISCONTINUED OPERATIONS:
Loss from operations of discontinued business segment -- (2,175,646)
Gain on disposal of business segments -- 3,125,149
------------ ------------
NET LOSS USED IN PER COMMON SHARE CALCULATION $ (238,431) $ (2,577,871)
============ ============
LOSS PER SHARE OF COMMON STOCK
Loss from continuing operations (0.01) (0.47)
Loss from operations of discontinued business segment -- (0.29)
Gain (loss) on disposal of discontinued business segment -- 0.41
Weighted average shares of common stock outstanding 48,098,576 7,549,270
</TABLE>
================================================================================
See notes to financial statements
F-3
<PAGE> 22
WORLDWIDE EQUIPMENT CORP.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED AUGUST 31, 2000 AND 1999
================================================================================
<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, 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)
Net loss -- -- -- -- -- (238,431) (238,431)
ISSUANCE OF COMMON STOCK IN
CONNECTION WITH:
Conversion of Preferred
Stock (643,250) (643) 17,152,905 17,153 (16,510) -- --
Conversion of debentures -- -- 23,621,683 23,622 631,378 -- 655,000
Conversion of accounts
payable and accrued
interest -- -- 8,007,453 8,007 450,180 -- 458,187
Exercise of warrants
and options -- -- 99,500 100 4,375 -- 4,475
Stock issued in
settlement of
litigation -- -- 160,000 160 29,840 -- 30,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE-AUGUST 31, 2000 -- $ -- 67,891,328 $ 67,892 $ 20,467,497 $(20,694,726) $ (159,337)
============ ============ ============ ============ ============ ============ ============
</TABLE>
================================================================================
See notes to financial statements
F-4
<PAGE> 23
WORLDWIDE EQUIPMENT CORP.
STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Year Ended August 31,
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Loss from continuing operations $ (238,431) $(3,527,374)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Stock issued in settlement of litigation -- 147,000
Write-off of deferred charges -- 3,306,516
CHANGES IN ASSETS AND LIABILITIES:
INCREASE IN:
Accounts payable and accrued expenses - trade 166,921 500
- affiliate 16,916 --
----------- -----------
NET CASH - CONTINUING OPERATING ACTIVITIES (54,594) (73,358)
----------- -----------
DISCONTINUED OPERATIONS:
Income from discontinued business segments -- 949,503
Items of non-cash in discontinued operations -- (1,290,886)
----------- -----------
NET CASH -DISCONTINUED OPERATIONS -- (341,383)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of loans and notes payable 50,000 276,750
Proceeds from exercise of warrants and options 4,475 --
Proceeds from stock issuances -- 135,000
----------- -----------
NET CASH - FINANCING ACTIVITIES 54,475 411,750
----------- -----------
DECREASE IN CASH (119) (2,991)
CASH - BEGINNING OF YEAR 210 3,201
----------- -----------
CASH - END OF YEAR $ 91 $ 210
=========== ===========
NON-CASH FINANCING ACTIVITIES:
Conversion of debentures into common stock $ 655,000 $ 1,370,000
=========== ===========
Exercise of stock options $ -- $ 200,000
=========== ===========
Conversion of accounts payable and accrued interest into common stock $ 487,187 $ --
=========== ===========
</TABLE>
================================================================================
See notes to financial statements
F-5
<PAGE> 24
WORLDWIDE EQUIPMENT CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION
As of August 31, 2000, Worldwide Equipment Corp. ("WEC") has a
negligible asset base and no active business operations.
As of September 1, 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. During the year ended August 31, 2000, (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, (iii)
4,500,000 shares of ARO were issued to acquire Best Rate International,
Inc. ("BRI"), (iv) options to purchase 2,000,000 shares of ARO were
exercised, (v) 288,000 shares were sold for an aggregate of $36,000,
and (vi) 2,000,000 shares were issued for services rendered. As a
result of the above transactions, as of August 31, 2000 WEC owned
approximately 16.6% of ARO and ARO owned 100% of BRI. Both ARO and BRI
have ceased substantially all business operations and have negative
stockholders' equity. As a result of losses sustained by ARO, WEC's
investment in ARO has been fully written off.
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.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Depreciation is provided for both financial reporting and income tax
purposes using the straight-line and accelerated methods.
INCOME TAXES
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.
================================================================================
F-6
<PAGE> 25
================================================================================
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.
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.
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.
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.
================================================================================
F-7
<PAGE> 26
2. RISKS AND UNCERTAINTIES
The accompanying financial statements have been prepared assuming that
WEC will continue as a going concern. WEC has incurred recurring
losses, had a working capital deficiency and a net capital deficiency
of $159,337 as of August 31, 2000 and has had difficulty meeting its
financial obligations as they become due. These factors raise
substantial doubt about WEC'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..
WEC 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.
3. DISCONTINUED OPERATIONS
On August 30, 1999 WEC 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 for the year ended August 31, 1999.
4. NOTE PAYABLE
This note is non-interest bearing and is payable at the earlier of (1)
March 15, 2001, or (2) upon any merger or acquisition of the Company by
the issuance of 8,750,000 shares of common stock of the Company but, in
no event, more than 9.9% of the outstanding common stock of the
Company. The note is payable to a corporation controlled by a
stockholder of WEC.
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.
During the years ended August 31, 2000 and 1999, convertible debentures
of $655,000 and $1,370,000, respectively, were converted into
23,621,683 and 6,888,000 shares of common stock, respectively. In
addition, in 2000 accrued interest on the convertible debentures of
$127,780 was converted into 2,215,309 shares of common stock
================================================================================
F-8
<PAGE> 27
================================================================================
During the years ended August 31, 2000 and 1999, 643,250 and 256,750
shares, respectively, of Preferred Stock were converted into 17,152,905
and 6,846,496 shares of common stock, respectively.
There were no dividends declared or paid on the convertible Preferred
Stock during 2000 and 1999.
A summary of options outstanding as of August 31, 2000 is as follows:
Number of Shares Exercise Price Expiration Date
---------------- -------------- ---------------
200,000 4.00 No expiration date
226,250 2.00 December 31, 2002
10,000 1.00 December 31, 2000
15,000 1.00 No expiration date
------------
451,250
============
The following table summarizes transactions in options.
Number Weighted
of Average
Common Exercise
Shares Price
--------- --------
OUTSTANDING AT AUGUST 31, 1998 727,500 $2.44
Exercised (136,750) 1.00
--------- --------
OUTSTANDING AT AUGUST 31, 1999 590,750 2.54
Expired (50,000) 1.00
Exercised (89,500) 0.05
--------- --------
OUTSTANDING AT AUGUST 31, 2000 451,250 $2.83
========= ========
All outstanding options were exercisable as of August 31, 2000 and
1999.
See Note 8.
6. INCOME TAXES
The Company has net operating loss carryforwards of approximately
$1,890,000 which expire as follows:
Year Amount
---- ----------
2017 $ 650,000
2018 585,000
2019 415,000
2020 240,000
----------
$1,890,000
==========
================================================================================
F-9
<PAGE> 28
================================================================================
Due to significant changes in stock ownership of the Company,
utilization of these carryforwards may be limited pursuant to Internal
Revenue Service Regulations.
As of August 31, 2000, the Company has a deferred tax asset of
approximately $640,000 relating to the net operating loss carryforwards
against which a full valuation allowance has been recognized for
financial statement reporting purposes.
7. EMPLOYMENT AGREEMENT
In November, 1997 the Company entered into a three-year employment
contract with the President of the Company ("the President"), pursuant
to which he is to receive a base salary of $150,000 per year in
addition to options to purchase an aggregate of 200,000 shares of the
Company's common stock. The President received 1,975,000 shares of the
Company's common stock in lieu of his salary from April, 1999 to
February, 2000.
8. SUBSEQUENT EVENT
.
(A) At a special meeting of the stockholders on October 30, 2000, the
stockholders of WEC approved a one-for-fifty reverse stock split of the
Company's common stock effective November 10, 2000 to shareholders of
record on such date. As a result of the reverse stock split, the
Company will have 1,357,874 shares outstanding.
No effect has been given to the above in the accompanying financial
statements.
(B) Pursuant to an agreement and plan of reorganization dated December
5, 2000, WEC agreed to acquire all of the issued and outstanding stock
in U.S. Cancer Care, Inc. ("USCC") in exchange for 6,741,942 shares (on
a post reverse split basis - see Note 8A) of WEC common stock, which
will account for approximately 83% of the outstanding common stock of
WEC. In addition, WEC will issue an aggregate of 3,000 shares of
Preferred Stock, designated in three separate classes to holders of
USCC Preferred Stock. The closing of this transaction is contingent on
the written consent and/or approval of the shareholders of USCC.
Accordingly, there is no assurance that this transaction will
ultimately close.
The principal of a stockholder of WEC and the holder of the note
payable referred to in Note 4 is a beneficial shareholder in several
entities that hold convertible promissory notes payable by USCC and
options to purchase shares of common stock of USCC. Upon the closing of
the agreement and plan of reorganization, conversion of all promissory
notes and exercise of the options, the principal's interest in WEC will
be approximately 9.5%. This interest excludes dilution that will be
incurred, if and when the preferred shares are converted.
================================================================================
F-10
