U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 0-23871
WORKFIRE.COM, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1434323
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1708 DOLPHIN AVENUE, SUITE 400, KELOWNA, BRITISH COLUMBIA, V1Y 9S4 CANADA
(Address of principal executive offices)
(250) 717-8966
(Issuer's telephone number)
BUFFALO CAPITAL VII, LTD.
7331 S. MEADOW COURT, BOULDER, COLORADO 80301
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes _X_ No___
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
13,940,017 SHARES OF COMMON STOCK, NO PAR VALUE, AS OF
AUGUST 13, 1999
Transitional Small Business Disclosure Format (check one); Yes___ No_X_
Exhibit index on page 17 Page 1 of 20 pages
<PAGE>
<TABLE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
Unaudited
<CAPTION>
JUNE 30, 1999
==============================================================================================================
<S> <C>
Assets
Current assets
Cash $ 168,324
Accounts receivable 3,924
Prepaid expenses 33,333
- --------------------------------------------------------------------------------------------------------------
205,581
Due from related parties 37,439
Capital assets 55,163
- --------------------------------------------------------------------------------------------------------------
$ 298,183
==============================================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 39,689
Minority interest 29,691
Stockholders' Equity
Share capital 835,091
Deficit accumulated during the development stage (601,255)
Foreign currency translation adjustment (5,033)
- --------------------------------------------------------------------------------------------------------------
228,803
- --------------------------------------------------------------------------------------------------------------
$ 298,183
==============================================================================================================
</TABLE>
2
<PAGE>
<TABLE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Consolidated Statement of Loss and Deficit
Unaudited
<CAPTION>
===============================================================================================================
Six month From
period ended inception
June 30, 1999 July 7,1998
to June 30, 1999
- ---------------------------------------------------------------------------------------------------------------
Revenue
<S> <C> <C>
Interest $ 6,390 7,965
Expenses
Research and development
Consultants 14,483 15,042
Internet access charges 2,266 4,384
Purchased research and development - 100,000
Salaries and benefits 158,633 255,713
-----------------------------------------------------------------------------------------------------
175,382 375,139
General and administrative
Amortization 6,533 10,477
Marketing and promotion 263 15,598
Office and administration 35,540 48,125
Professional fees 30,551 41,524
Rent and utilities 26,260 38,058
Salaries and benefits 75,146 134,340
Travel 7,889 23,964
-----------------------------------------------------------------------------------------------------
182,182 312,086
- --------------------------------------------------------------------------------------------------------------
Loss for the period, before minority interest $ (351,174) (679,260)
MINORITY INTEREST IN LOSS OF SUBSIDIARY 40,308 78,005
- ------------------------------------------------------------------------------------------------------------------
LOSS FOR THE PERIOD (310,866) (601,255)
Deficit, beginning of period,
As previously stated (328,086) -
ADJUSTMENT FOR MINORITY INTEREST IN SUBSIDIARY 37,697 -
- --------------------------------------------------------------------------------------------------------------
Deficit, beginning of period, as restated (290,389) -
DEFICIT, END OF PERIOD $ (601,255) (601,255)
==============================================================================================================
Weighted average number of shares outstanding during the period 25,892,745
Loss per share $ (0.01)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
Unaudited
<CAPTION>
===============================================================================================================
Six month From
period ended Inception
June 30, 1999 July 7, 1998
to June 30,1999
===============================================================================================================
<S> <C> <C>
Cash provided by (used in):
Operations
Loss for the period $ (310,866) (601,255)
Items not involving cash:
Amortization 6,533 10,477
Minority interest (40,308) (78,005)
Changes in non-cash working capital:
Accounts receivable 373 (3,924)
Prepaid expenses (28,007) (33,333)
Accounts payable and accrued liabilities 23,673 39,689
---------------------------------------------------------------------------------------------------------
(348,602) (666,351)
Financing
Advances to related parties (26,918) (37,439)
Repayment of advances from related parties (9,943) -
Issue of common shares for cash 262,667 942,880
Issue of common shares upon reorganization and stock purchase 560 560
---------------------------------------------------------------------------------------------------------
226,366 906,001
Investments
Expenditures on capital assets (18,622) (65,640)
Foreign currency translation adjustment (6,476) (5,686)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (147,334) 168,324
Cash, beginning of period 315,658 -
- --------------------------------------------------------------------------------------------------------------
Cash, end of period $ 168,324 168,324
- --------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
Period from January 1, 1999 to June 30, 1999
================================================================================
Workfire.com, Inc. (the "Company") is a development stage company and was
incorporated on September 19, 1997 under the laws of the state of Colorado.
The Company's principal business activity, through its 88.51% owned
subsidary, Workfire.com (formerly Workfire Technologies Inc.), is the
development of software to deliver extended internet services to internet
users (the "Workfire" technology). The Company changed its name from
Buffalo Capital VII on June 18, 1999.
1. SIGNIFICANT ACCOUNTING POLICIES:
a) Translation of Financial Statements
The Company's subsidiary, Workfire Development Corporation, operates in
Canada and its operations are conducted in Canadian currency.
Except as otherwise noted, these statements are presented in United States
currency for the convenience of readers accustomed to United States
currency. The method of translation applied is as follows:
i) Assets and liabilities are translated at the rate of exchange in
effect at the balance sheet date, being US $1.00 per Cdn $1.50.
ii) Revenues and expenses are translated at the exchange rate in
effect at the transaction date. iii) The net adjustment arising
from the translation is recorded as a separate component of
stockholders' equity called "foreign currency translation
adjustment".
b) Basis of consolidation
The consolidated financial statements include the accounts of the
Company and it's 88.51% owned subsidiary Workfire.com (formerly
Workfire Technologies Inc.), ("WF") and WF's wholly-owned subsidiaries,
Workfire Technologies International Inc. ("WTII") and Workfire
Development Corporation ("WDC").
Effective June 18, 1999, Buffalo Capital VII, Ltd. ("BC7") acquired
88.51% of the outstanding common shares of WF. As WF shareholders
obtained control of BC7 through the exchange of their shares of WF for
shares of BC7, the acquisition of WF has been accounted for in these
consolidated financial statements as a reverse acquisition. Effective
June 18, 1999, BC7 adopted the name, Workfire.com, Inc. ("WFI"); and
formally changed to this name on July 12, 1999. Consequently, the
consolidated statements of loss and deficit and cash flows reflect the
results of operations and changes in financial position of WF, and its
wholly-owned subsidiaries WTII and WDC, for the six month period ended
June 30, 1999, combined with those of the legal parent, WFI, from
5
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to June 30, 1999
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
acquisition on June 18, 1999, in accordance with generally accepted
accounting principles for reverse acquisitions.
In these notes to the consolidated financial statements, the Company,
prior to the business combination with WF, is referred to as BC7, and
after completion of the business combination and name change, is
referred to as WFI.
The minority interest in the Company's subsidiary, WF, represents the
minority shareholders' 11.49% share of stockholder's equity less their
proportionate share of the loss of WF.
c) Use of estimates
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 disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
d) Financial instruments
The fair values of cash, accounts receivable and accounts payable and
accrued liabilities approximate their carrying values due to the
relatively short periods to maturity of these instruments. It is not
possible to determine the fair value of amounts due from/to related
parties as a maturity date is not determinable. The maximum credit risk
exposure for all financial assets is the carrying amount of that asset.
e) Capital assets
Capital assets are stated at cost. Amortization is provided using the
following methods and annual rates:
====================================================================
Asset Method Rate
--------------------------------------------------------------------
Office equipment Declining balance 20%
Computer equipment Declining balance 30%
Computer software Declining balance 100%
Incorporation costs Straight line 20%
--------------------------------------------------------------------
Amortization is provided at one-half the annual rates in the year of
acquisition.
6
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to June 30, 1999
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
f) Technology
Software development costs have been accounted for in accordance with
Statement of Financial Accounting Standards No. 86, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED.
Under the standard, capitalization of software development costs begins
upon the establishment of technological feasibility, subject to net
realizable value considerations. Technological feasibility has not been
established at December 31, 1998 and therefore all costs of acquiring,
developing and enhancing the Workfire technology are charged to
earnings as incurred.
g) Loss per share
Loss per share has been calculated using the weighted average number of
common shares outstanding during the period. The full exercise of the
stock options referred to in note 7 is anti-dilutive and consequently
loss per share on a fully diluted basis has not been presented.
2. BUSINESS COMBINATION:
Effective June 18, 1999, WF and BC7 executed a reorganization and stock
purchase agreement. BC7 issued 10,375,662 common shares to the shareholders
of WF in consideration for 88.51% of the issued and outstanding common
shares of WF on the basis of 1 common share of BC7 for every common share
of WF. As the former shareholders of WF obtained control of BC7 through the
share exchange, this transaction has been accounted for in these financial
statements as a reverse acquisition and the purchase method of accounting
has been applied. Under reverse acquisition accounting, WF is considered to
have acquired BC7 with the results of BC7's operations included in the
consolidated financial statements from the date of acquisition. The
acquisition has been recorded at the net asset value of BC7 at the date of
acquisition. The acquisition details are as follows:
Net assets acquired
Cash 1,310
Organizational costs 470
Accounts payable (1,220)
- --------------------------------------------------------------------------------
560
================================================================================
Consideration given for net assets acquired
10,375,662 Common shares issued 560
================================================================================
As WF is deemed to be the continuing entity, share capital of WFI (formerly
BC7) has been increased by $798,091 as a result of accounting for this
combination as a reverse acquisition.
7
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to June 30, 1999
================================================================================
2. BUSINESS COMBINATION(CONTINUED):
The consolidated statements of loss and deficit and cash flows reflect the
results of operations and changes in financial position of WF, the legal
subsidiary, for the six month period ended June 30, 1999, combined with
those of WFI the legal parent, from June 18, 1999, being the effective date
of the acquisition, to June 30, 1999. 3. CASH:
Included in cash is $15,650 restricted for credit purposes on corporate
credit cards. The funds will be released upon the company completing one
year of operations.
4. DUE FROM RELATED PARTIES:
Amounts due from related parties are unsecured with no stated terms of
repayment and do not bear interest.
<TABLE>
5. CAPITAL ASSETS:
<CAPTION>
=====================================================================================================
Accumulated Net book
Cost amortization value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Office equipment $ 12,377 $ 1,188 $ 11,189
Computer equipment 45,802 6,491 39,311
Computer software 4,390 2,190 2,200
Incorporation costs 1,413 283 1,130
Leasehold improvements 1,658 325 1,333
-----------------------------------------------------------------------------------------------------
$ 65,640 $ 10,477 $ 55,163
=====================================================================================================
</TABLE>
8
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to June 30, 1999
================================================================================
6. STOCKHOLDERS' EQUITY:
a) Authorized:
100,000,000 common voting shares, no par value
10,000,000 non-voting preferred shares, no par value
b) Common Shares Issued and Outstanding
The continuity of the Company's issued and outstanding share capital,
is as follows:
<TABLE>
WORKFIRE.COM: NUMBER OF
SHARES AMOUNT
------ ------
<S> <C> <C>
Balance, December 31, 1998 12,372,533 $ 680,213
Voluntary retirement of common shares by shareholder (1,000,000)
-
Issued for cash 350,222 262,667
---------------------------------
Workfire.com balance June 18, 1999 11,722,755 942,880
Number of shares held by dissenting shareholders
to business combination with Buffalo Capital VII(BC7) (1,347,093) (108,349)
Common shares of BC7 issued to WF shareholders
---------------------------------
at time of business combination on June 18, 1999 10,375,662 834,531
---------------------------------
WORKFIRE.COM INC.:
Buffalo Capital VII balance, December 31, 1998 4,620,000 33,650
Expenses paid by shareholder on behalf of the Company 2,790
-
Common shares issued upon 5.804688 to 1 stock split 22,197,658
-
---------------------------------
26,817,658 36,440
Voluntary retirement of common shares by shareholders (23,253,303)
-
---------------------------------
3,564,355 36,440
Increase in the book value of BC7's share capital to that of WF 798,091
-
---------------------------------
BC7 balance, June 18, 1999 prior to business combination with WF 3,564,355 834,531
9
<PAGE>
<CAPTION>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to June 30, 1999
- ----------------------------------------------------------------------------------------------------------
6. STOCKHOLDERS' EQUITY (CONTINUED):
<S> <C> <C>
Shares of BC7 issued to Workfire.com shareholders to Acquire 88.51% of
the shares of WF (above) recorded at the carrying
Value of BC7's net assets (note 2) 10,375,662
560
---------------------------------
WFI balance, June 30, 1999 13,940,017 835,091
---------------------------------
</TABLE>
c) Stock option plan:
For the Company, 1,375,840 common shares have been reserved for
issuance of stock options to key employees. Of this amount, the
following options were granted in during and up to the period ended
June 30th, 1999:
<TABLE>
<CAPTION>
=====================================================================================================
Stock options issued
during period and outstanding Exercise price Expiry
at June 30, 1999 per share Date
<S> <C> <C>
------------------------------------- -------------------------------- -------------------------------
306,375 Cdn $2.93 June 19, 2009
------------------------------------- -------------------------------- -------------------------------
306,375
------------------------------------- -------------------------------- -------------------------------
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements of the Company. This report includes certain
forward-looking statements, which reflect the Company's plans, estimates and
beliefs. The Company's actual results could differ materially from those
discussed in the forward-looking statements based upon, among other things, the
Company's ability to raise additional capital, the Company's ability to complete
its products in a timely manner, the Company's ability to produce a product
which is accepted by the marketplace, and the Company's ability to compete
within its target market.
HISTORY
The Company was incorporated under the laws of the State of Colorado on
September 19, 1997. The Company has one subsidiary, Workfire.com, a Nevada
corporation ("Workfire-Nevada"). As the result of a Reorganization and Stock
Purchase Agreement between the Company and Workfire-Nevada, the Company acquired
88.51% of the issued and outstanding shares of Workfire-Nevada.
The Company, through Workfire-Nevada, is completing a distributed
Internet performance enhancing system. Workfire's proprietary and robust system
intended to provide Internet users and content providers with products which
improve the performance and usability of the Internet. The Company's Genetic
Caching system is intended to provide performance improvements and bandwidth
savings through better management of the transmission of data between a web site
and an end-user. The Genetic Caching server software will be marketed to large
content providers who are looking for a competitive edge and are motivated to
make their customers' browsing experience as enjoyable as possible. The
Company's client software will be marketed to all Internet users. Management
intends to segment the market between different Internet access methods so the
benefits of the technology can be clearly presented to each segment.
The Company's system will consist of a server product as well as an
easy to install client application, which will run in the background. The server
component will be placed at the content provider's web site and will handle all
requests coming to the web site. The client will process the user's Internet
requests without intruding on the user's activities. The client and server
software will be distributed through alpha and beta programs to investors and
screened beta testers before it is released. The product is currently in the
development phase. Alpha versions of the product have been integrated into
working live demonstrations. The beta version of the product is expected in
September of 1999 with full product launch expected during the 4th quarter of
1999.
The Company is a development stage company which has suffered losses
from operations, requires additional financing, and ultimately needs to complete
development of its product, generate revenues, and successfully attain
profitable operations to realize the value of its
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<PAGE>
software product and remain a going concern.
PLAN OF OPERATION
MARKETING
The Company intends to expand its marketing and sales forces over the
next 12 months as the product is launched and customers are signed on. The bulk
of the Company's marketing efforts will be conducted on the Internet and via
direct sales to large content providers. There will also be significant
expenditures at large industry trade shows such as Fall Comdex and Spring
Internet World. The Company has budgeted $1.57 million for its marketing efforts
over from July 1999 to July 2000. This amount includes salaries, advertising and
all other marketing activities.
The Company anticipates hiring approximately 10 people for sales and
marketing over the next 12 months from the date of this report. The new
employees include a Vice President of Marketing/Sales as well as a direct sales
force which will be responsible for signing up content providers. Public
Relations and Graphic Design will be outsourced as required. Projections for
these requirements have been included in the marketing budget.
The Company intends to attend a small number of large trade shows, and
to focus its efforts to maximize the benefits of these trade shows. The first of
these trade shows will be Fall Comdex in November 1999. The expected cost of
attending Fall Comdex and the Company's public relations efforts surrounding the
are estimated to be approximately $100,000. Management believes that the other
trade shows the Company attends will have comparable costs.
Management intends to use a flexible pricing model for the initial
pricing of the Company's products as the Company is attempts to develop a
customer base of high profile content providers. Over time, management believes
the pricing model will develop in a similar fashion to other software server
models. Pricing for the server will range from $2,000 to $30,000 depending on
the amount of traffic a content provider experiences on a regular basis. In
addition, the Company intends to sell technical support contracts to customers.
Pricing for support has not yet been established.
RESEARCH AND DEVELOPMENT
During the next twelve months the Company intends to perform various
Internet research and development activities. The areas of research will
include:
o optimization techniques for Internet protocols such as HTTP;
o advanced compression techniques for text, images, audio/video; and
o research into caching optimization techniques.
12
<PAGE>
These activities will require high speed Internet connectivity and
state-of-the-art server systems. The research will be conducted by engineers and
mathematicians.
The Company anticipates hiring at least 15 to 20 new employees over the
next twelve month period. Additionally, during the next twelve months the
Company plans to purchase approximately $75,000 to $100,000 worth of computer
equipment to provide new employees with the tools required for programming.
Management believes the Company has sufficient working capital to fund
its operations through October 1999.
RESULTS OF OPERATIONS
For the six months ended June 30, 1999, the Company received interest
revenue of $6,390, compared to interest revenue of $1,575 from inception to
December 31, 1998. The increase is attributable to increased cash deposits
during the first six months of 1999.
The Company has incurred a net loss of $601,255 from July 7, 1998 (date
of inception) through June 30, 1999, due to continuing costs of raising capital,
normal expenses of operating over an extended period of time, and due to funds
applied to research and development. In addition, an investment of $100,000 was
made when Workfire purchased the exclusive rights to its proprietary technology.
General and administration expenses were $182,182 and $312,086 for the
six months ended June 30, 1999 and from date of inception to June 30, 1999,
respectively. General and administrative spending consisted primarily of costs
associated with salaries for marketing and administrative staff, expenses
incurred to attend COMDEX in Las Vegas in November 1998, professional fees
relating to the Company's acquisition of Workfire-Nevada and a registration
statement filed with the Securities and Exchange Commission by Workfire-Nevada,
and additional expenses related to Company expansion. The Company anticipates
that these expenses will continue to increase as the Company completes
development of its software and begins to distribute its products.
Research and development costs were $375,139 from date of inception to
June 30, 1999. Research and development costs primarily were made up of expenses
related to engineering design work and testing on the Workfire Technology,
bandwidth requirements relating to that testing, and the cost of the purchase of
the initial Workfire Technology. Research and development expenses for the six
months ended June 30, 1999 were $175,382 compared to $199,757 for the period
from inception to December 31, 1998. During the six months ended June 30, 1999,
the Company experienced increases in consulting fees ($14,483) and salaries and
benefits ($158,633). Generally, the increases in consulting fees and salaries
and benefits are attributable to increased development of the Workfire
Technology. The Company expects research and development spending to increase
significantly as the Company completes the
13
<PAGE>
commercial development of its Technology, and begins to market its product.
The introduction of the Company's technology to the market will be
influenced by the Company's ability to obtain further funding, enter into
strategic relationships, and complete commercial development of its technology
and develop further tests. There can be no assurance that the Company will be
able to obtain the required funding, enter into any strategic agreements or
ultimately complete its commercial technology.
LIQUIDITY AND CAPITAL RESOURCES
From July 7, 1998 to June 30, 1999, the Company has raised
approximately $942,880 through private sales of stock. The Company requires
additional funding to continue operations. Funds to continue operations will be
applied to development of the Workfire Technology, establishing sales and
marketing capabilities, and sales of the Company's product once development is
completed. The Company is currently reviewing multiple avenues of future funding
including a secondary offering of securities, private sale of equity or
arrangements with strategic partners. The Company does not have any commitments
for any such financing and there can be no assurance that the Company will
obtain additional capital when needed or that additional capital will not have a
dilutive effect on current shareholders. The Company does not anticipate
receiving significant funding from lenders.
The Company incurred capital expenditures of approximately $65,640 in
the period from inception to June 30, 1999. The Company anticipates
significantly higher capital expenditures in the near future for computer
equipment and office expansion as the Company nears product introduction. The
timing and amount of such expenditures will be governed by the Company's
development and market introduction schedules, which are subject to change due
to a number of factors including development delays and availability of future
financing.
The Company's working capital at June 30, 1999, was $165,892, as
compared to $309,265 at December 31, 1998. Since the Company has no significant
source of revenue, working capital will continue to be depleted by operating
expenses. Furthermore, if the Corporation should generate an operating loss for
the current year comparable to the loss incurred for the year ended December 31,
1998, a substantial portion of the Corporation's remaining cash and working
capital will be depleted.
The Corporation had current liabilities of $39,689 at June 30, 1999, as
compared to $16,016 at December 31, 1998.
YEAR 2000 COMPLIANCE
Many existing computer systems and applications, and other control
devices use only two digits to identify a year in the date field, without
considering the impact of the upcoming change in the century. Others do not
correctly process "leap year" dates. As a result, such systems and
14
<PAGE>
applications could fail or create erroneous results unless corrected so
that they can correctly process data related to the year 2000 and beyond, but
there can be no assurance that such upgrades will be completed on a timely basis
or without incurring substantial costs. While the Company has evaluated its
products for year 2000 compliance and believes that each is substantially year
2000 compliant, there can be no assurance that the Company's products are or
will ultimately be year 2000 compliant. In addition, the Company believes that
it is not possible to determine whether all of its customers' products into
which the Company's products are incorporated will be year 2000 compliant
because the Company has little or no control over the design production and
testing of its customers' products. The Company relies on its systems,
applications and devices in operating and monitoring all major aspects of its
business, including financial systems (such as general ledger, accounts payable
and payroll modules), customer services, infrastructure, embedded computer
chips, networks and telecommunications equipment and end products. Although the
Company is in the process of upgrading its software to address the year 2000
issue, there can be no assurance that such upgrades will be completed on a
timely basis at reasonable costs, or that such upgrades will be able to
anticipate all of the problems triggered by the actual impact of the year 2000.
The Company also relies, directly and indirectly on external systems for the
testing of substantially all of the Company's products and business enterprises
such as customer, suppliers, creditors, financial organizations, and of
governmental entities, both domestic and international, for accurate exchange of
data. The Company could be affected through disruptions in the operation of the
enterprises with which the Company interacts or from general widespread problems
or an economic crisis resulting from non-compliant year 2000 systems. Despite
the Company's efforts to address the year 2000 impact on its internal systems
and business operations, there can be no assurance that such impact will not
result in a material disruption of its business or have a material adverse
effect on the Company's business, financial condition or results of operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 10, 1999, the Company effected a 5.804688-for-one
stock split, increasing the number of issued and outstanding
shares by 22,197,658 shares.
On June 18, 1999, a change in control of the Company occurred,
in conjunction with closing under a Reorganization and Stock
Purchase Agreement. Prior to closing under the Reorganization
and Stock Purchase Agreement, the Company had a total of
26,817,687 shares issued and outstanding. As the first step in
the closing process certain shareholders of the Company agreed
to voluntarily
15
<PAGE>
surrender for cancellation a total of 23,253,332 shares,
leaving a total of 3,564,355 shares of common stock issued and
outstanding.
Following the cancellation of shares, the Company issued
10,375,662 shares of its common stock, pursuant to Rule 506 of
Regulation D, in exchange for 88.51% of the issued and
outstanding common stock of Workfire.com, a Nevada
corporation. The Company believes there were no more than 35
non-accredited investors issued shares in the exchange. As a
result of that transaction, Workfire.com became an
88.51%-owned subsidiary of the Company.
As the third step in the closing process, certain persons, who
are not affiliates of Workfire.com, purchased a total of
2,952,871 shares and all of the issued and outstanding Class A
and Class B Warrants from prior shareholders of the Company.
The Warrants were then canceled.
As a result of these transactions, on June 18, 1999, the
Company had 13,940,017 issued and outstanding shares of common
stock, of which 10,375,662 shares, or approximately 74.43%,
were owned by persons who were previously shareholders of
Workfire.com. Certain non-affiliated persons designated by
Workfire.com own 2,952,871 shares, or approximately 21.18% of
the issued and outstanding common stock, and persons who were
previously shareholders of the Company owned a total of
611,484 shares or approximately 4.39% of the issued and
outstanding common stock.
On June 19, 1999, the Board of Directors approved the issuance
of stock options to key employees of the Company. Pursuant to
the terms of the stock options, 306,375 shares of the
Company's common stock has been reserved for issuance to the
key employees. The options are exercisable at any through June
19, 2009 at a price of CDN$2.93 per share. The options were
issued pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
A) EXHIBITS
<CAPTION>
REGULATION SEQUENTIAL
S-B NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
3.1 Articles of Incorporation (1)<F1> N/A
3.2 Bylaws (1)<F1> N/A
4.1 Warrant Agent Agreement (1)<F1> N/A
4.2 Specimen Class A Warrant Certificate (1)<F1> N/A
4.3 Specimen Class B Warrant Certificate (1)<F1> N/A
11 Statement Regarding Computation of Per Share Earnings See Financial
Statements
27 Financial Data Schedule 19
99.1 Reorganization and Stock Purchase Agreement (2)<F2> N/A
- ----------------------------
<FN>
<F1>
(1) Incorporated by reference from the Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on March 4, 1998.
<F2>
(2) Incorporated by reference from the Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 18, 1999.
</FN>
</TABLE>
B) REPORTS ON FORM 8-K:
1. Form 8-K dated and filed June 18, 1999, reporting the
closing of the Reorganization and Stock Purchase
Agreement, under Item 1. Changes in Control of the
Registrant.
2. Form 8-K/A Amendment No. 1 dated June 16, 1999,
reporting the closing of the Reorganization and Stock
Purchase Agreement, under Item 1. Changes in Control
of the Registrant and Item 2. Acquisition or
Disposition of Assets, and including the financial
statements of businesses acquired.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WORKFIRE.COM, INC.
Date: August 13, 1999 By:/s/TOM TAYLOR
----------------------------
Tom Taylor, President
18
<PAGE>
Exhibit 27
Financial Data Schedule
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF LOSS AND DEFICIT,
CONSOLIDATED STATEMENT OF CASH FLOWS, AND THE NOTES THERETO, WHICH MAY BE FOUND
ON PAGES 2 THROUGH 10 OF THE COMPANY'S FORM 10-QSB FOR THE PERIOD ENDED JUNE 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 168,324
<SECURITIES> 0
<RECEIVABLES> 3,924
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 205,581
<PP&E> 65,640
<DEPRECIATION> 10,477
<TOTAL-ASSETS> 298,183
<CURRENT-LIABILITIES> 39,689
<BONDS> 0
0
0
<COMMON> 835,091
<OTHER-SE> (601,255)
<TOTAL-LIABILITY-AND-EQUITY> 298,183
<SALES> 0
<TOTAL-REVENUES> 6,390
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 357,564
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (310,866)
<INCOME-TAX> 0
<INCOME-CONTINUING> (310,866)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (310,866)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
