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: September 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)
NOT APPLICABLE
(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:
14,046,080 SHARES OF COMMON STOCK, NO PAR VALUE, AS OF
NOVEMBER 15, 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>
SEPTEMBER 30, 1999
=================================================================================================================
<S> <C>
Assets
Current assets
Cash $ 56,777
Accounts receivable 3,837
Prepaid expenses 106,479
-------------------------------------------------------------------------------------------------------------
167,093
Capital assets 59,181
- -----------------------------------------------------------------------------------------------------------------
$ 226,274
=================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 47,698
Due to related parties 143,264
--------------
190,962
Minority interest 3,820
Stockholders' Equity
Share capital 895,973
Deficit accumulated during the development stage (859,420)
Foreign currency translation adjustment (5,061)
-------------------------------------------------------------------------------------------------------------
31,492
- -----------------------------------------------------------------------------------------------------------------
$ 226,274
=================================================================================================================
</TABLE>
2
<PAGE>
<TABLE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Consolidated Statement of Loss and Deficit
Unaudited
<CAPTION>
====================================================================================================================================
From
Nine month inception
period ended July 7, 1998 to
September 30, 1999 September 30, 1999
====================================================================================================================================
<S> <C> <C>
Revenue
Interest $ 8,767 10,342
Expenses
Research and development
Consultants 30,007 30,566
Internet access charges 2,929 5,047
Purchased research and development - 100,000
Salaries and benefits 244,770 341,850
----------------------------------------------------------------------------------------------------------------------------
277,706 477,463
General and administrative
Amortization 9,809 13,757
Marketing and promotion 70,282 85,617
Office and administration 46,570 59,155
Professional fees 57,700 68,673
Rent and utilities 43,317 55,115
Salaries and benefits 116,134 175,328
Travel 17,851 33,926
------------------------------------------------------------------------------------------------------------------------------
361,663 491,571
- ------------------------------------------------------------------------------------------------------------------------------------
Loss for the period, before minority interest $ (630,602) (958,692)
MINORITY INTEREST IN LOSS OF SUBSIDIARY 63,179 99,272
- ------------------------------------------------------------------------------------------------------------------------------------
LOSS FOR THE PERIOD (567,423) (859,420)
Deficit, beginning of period,
As previously stated (328,086) -
Adjustment for minority interest in subsidiary 36,089 -
- ------------------------------------------------------------------------------------------------------------------------------------
Deficit, beginning of period, as restated (291,997) -
DEFICIT, END OF PERIOD $ (859,420) (859,420)
====================================================================================================================================
Weighted average number of shares outstanding during the period 21,872,878
Loss per share $ (0.02)
====================================================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
Unaudited
<CAPTION>
====================================================================================================================================
From
Nine month Inception
period ended July 7, 1998
September 30, 1999 to September 30,1999
====================================================================================================================================
<S> <C> <C>
Cash provided by (used in):
Operations
Loss for the period $ (567,423) (859,420)
Items not involving cash:
Amortization 9,809 13,757
Minority interest (63,179) (99,272)
Changes in non-cash working capital:
Accounts receivable 460 (3,837)
Prepaid expenses (101,153) (106,479)
Accounts payable and accrued liabilities 31,682 47,698
--------------------------------------------------------------------------------------------------------------------------------
(689,804) (1,007,553)
Financing
Advances from related parties 143,842 143,264
Issue of common shares for cash 262,667 942,880
Issue of common shares for services 56,250 56,250
Issue of common shares upon reorganization
and stock purchase 560 560
--------------------------------------------------------------------------------------------------------------------------------
463,319 1,142,954
Investments
Expenditures on capital assets (25,920) (72,938)
Foreign currency translation adjustment (6,476) (5,686)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (258,881) 56,777
Cash, beginning of period 315,658 -
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 56,777 56,777
====================================================================================================================================
</TABLE>
4
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
Period from January 1, 1999 to September 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 89% owned
subsidiary, 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 89% 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 89%
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"), with shareholder
approval of the name change 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 nine month period ended
September 30, 1999, combined with those of the legal parent, WFI, from
acquisition on June 18, 1999, in accordance with generally accepted
accounting principles for reverse acquisitions.
5
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to September 30, 1999
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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% 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 September 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 September 30, 1999 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 6 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 10,431,725 common shares to the shareholders
of WF in consideration for 89% 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
10,431,725 Common shares issued 560
As WF is deemed to be the continuing entity, share capital of WFI (formerly
BC7) has been increased by $802,723 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 September 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 nine month period ended September 30, 1999, combined
with those of WFI the legal parent, from June 18, 1999, being the effective
date of the acquisition, to September 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.
5. CAPITAL ASSETS:
<TABLE>
<CAPTION>
====================================================================================
Accumulated Net book
Cost amortization value
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Office equipment $ 12,268 $ 2,296 $ 9,972
Computer equipment 52,557 8,219 44,338
Computer software 5,042 2,546 2,496
Incorporation costs 1,413 304 1,109
Leasehold improvements 1,658 392 1,266
----------------------------------------------------------------------------------------
$ 72,938 $ 13,757 $ 59,181
====================================================================================
</TABLE>
8
<PAGE>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to September 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>
<CAPTION>
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 September 30, 1999 11,722,755 942,880
Number of shares held by dissenting stockholders
to business combination with Buffalo Capital VII (BC7) (1,291,030) (103,717)
Common shares of BC7 issued to WF shareholders ---------------------------------
at time of business combination on June 18, 1999 10,431,725 839,163
---------------------------------
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 - 802,723
---------------------------------
BC7 balance, June 18, 1999 prior to business combination with WF 3,564,355 839,163
9
<PAGE>
<CAPTION>
WORKFIRE.COM INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
$ United States
Period from January 1, 1999 to September 30, 1999
================================================================================
6. STOCKHOLDERS' EQUITY (CONTINUED):
<S> <C> <C>
Shares of BC7 issued to Workfire.com shareholders to Acquire 89.00% of the
shares of WF (above) recorded at the carrying
Value of BC7's net assets (note 2) 10,431,725 560
Shares issued for services during period(net of minority interest) 50,000 56,250
---------------------------------
WFI balance, September 30, 1999 14,046,080 895,973
---------------------------------
</TABLE>
c) Stock option plan:
For the Company, 1,381,839 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 September 30th, 1999:
<TABLE>
<CAPTION>
========================================================================================================
Stock options issued
during period and outstanding Exercise price Expiry
at September 30, 1999 per share Date
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
306,375 Cdn $2.93 June 19, 2009
- --------------------------------------------------------------------------------------------------------
5,999 US $1.1875 September 7,2004
========================================================================================================
312,374
========================================================================================================
</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
89.00% 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
is 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. Both the client and the server are intended to
improve web performance independently, and should further improve performance
when used together. The client is intended to process the user's Internet
requests without intruding on the user's activities. The Company intends to
distribute the client and server software through alpha and beta programs to
investors and screened beta testers prior to release. The system is currently in
the development phase. As of the date of this report, Beta versions of the
server product have been integrated into working live demonstrations. The full
product launch of the Workfire Server is expected in January 2000.
The Company is a development stage company which has suffered losses
from operations, requires additional financing, and ultimately needs to complete
development of its
11
<PAGE>
product, generate revenues, and successfully attain profitable operations to
realize the value of its software product and remain a going concern.
PLAN OF OPERATION
MARKETING
The Company intends to expand its marketing and sales forces during the
next 12 months as the product is launched and the Company begins selling to
customers. The bulk of the Company's marketing efforts will be conducted on the
Internet and via direct sales to large content providers. There will be
significant expenditures relating to the Company's attendance at large industry
trade shows such as Fall Comdex and Spring Internet World. The Company has
budgeted $1.57 million for its marketing efforts from November 1999 to November
2000. This amount includes salaries, advertising and all other marketing
activities.
During the next 12 months, the Company anticipates hiring approximately
10 people for sales and marketing, including a Vice President of Marketing/Sales
and a direct sales force which will be responsible for sales to content
providers. Public Relations and Graphic Design will be outsourced as required.
Salaries for these employees have been included in the Company's marketing
budget.
The Company intends to attend a small number of large trade shows and
focus its marketing 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 Fall Comdex are estimated to be approximately $75,000. Management
believes that the other trade shows the Company plans to attend will have
comparable costs.
Management intends to use a flexible pricing model for the initial
pricing of the Company's products as the Company 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 $2,500 to $25,000 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. Management
estimates that one year of technical support will be priced at 40% of the cost
of the product.
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:
* optimization techniques for Internet protocols such as HTTP;
* advanced compression techniques for text, images, audio/video; and
* 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 for
research and development over the next twelve months. 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 December 1999.
RESULTS OF OPERATIONS
For the nine months ended September 30, 1999, the Company received
interest revenue of $8,767, compared to interest revenue of $1,575 from
inception to December 31, 1998. The increase is attributable to increased cash
deposits during the first nine months of 1999.
The Company has incurred a net loss of $859,420 from July 7, 1998 (date
of inception) through September 30, 1999, due to continuing costs of raising
capital, normal expenses of operating over an extended period of time, and
research and development expenses. In addition, an investment of $100,000 was
made when Workfire purchased the exclusive rights to its proprietary technology.
General and administration expenses were $361,663 and $491,571 for the
nine months ended September 30, 1999, and from date of inception to September
30, 1999, respectively. For the nine months ended September 30, 1999, general
and administrative spending consisted primarily of costs associated with
salaries for marketing and administrative staff ($116,134), and expenses
incurred for marketing and press conferences for Internet World in New York and
Comdex in Las Vegas ($70,282). Also included in general and administrative costs
were professional fees of $57,700, a majority of which were incurred in
conjunction with the share exchange of Workfire.com for Workfire.com Inc.
shares, which occurred June 18th, 1999. The increases are attributable to the
increase in the size of the company requiring increased administration spending
in the areas of rent and office supplies as well as the expenses relating to
operating a public vs. private company. The Company anticipates that these
expenses will continue to increase as the Company completes development of its
software and begins to distribute its products.
From inception to September 30, 1999, the Company spent $477,463 on
research and development activities. Research and development costs primarily
consist of expenses related to engineering design work and testing on the
Workfire Technology ($341,850), bandwidth requirements relating to that testing
($5,047), and the cost of the purchase of the initial Workfire Technology
($100,000). For the nine months ended September 30, 1999, research and
development expenses were $277,706. During the nine months ended September 30,
1999, the Company incurred consulting fees of $30,007 and salaries and benefits
of $244,770. Generally, the increases in consulting fees and salaries and
benefits are attributable to the increased development of the Workfire
Technology. The Company expects research and development
13
<PAGE>
spending to increase significantly as the Company completes the 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.
On September 30, 1999, shareholders holding 1,291,030 shares of
Workfire-Nevada common stock, gave notice to the Company of their intention to
dissent from the share exchange between the Company and Workfire-Nevada.
Pursuant to the General Corporation Law of the State of Nevada, the dissenting
shareholders of Workfire-Nevada were paid the fair value of their shares, which
was determined by a third-party accounting firm at $.057 per share. On October
28, 1999, the dissenting shareholders notified the Company that they believe the
fair value of their common stock, prior to the share exchange, was higher. The
dissenting shareholders have demanded that the Company pay them $0.75 per share,
plus interest, which represents a difference of $0.693 per share or an aggregate
of $894,684. The Company must pay the dissenting shareholders the amount
demanded on or before December 27, 1999, or must institute a proceeding, in the
appropriate court in the State of Nevada, to determine the fair value. If the
Company institutes a proceeding to determine the fair value of the shares, the
Company may have to bear the entire cost of the proceeding, its legal fees, and
the legal fees of the dissenting shareholders.
LIQUIDITY AND CAPITAL RESOURCES
From July 7, 1998 to September 30, 1999, the Company has raised
approximately $942,880 through private sales of stock. In the period ended
September 30, 1999, approximately $143,000 was advanced from two private
companies, controlled by shareholders of the Company. As of the date of this
report, the terms of repayment have not been finalized; however, these advances
bear interest at prevailing market rates.
The Company incurred capital expenditures of approximately $72,938 from
inception to September 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 September 30, 1999, was $(23,869), as
compared to $309,265 at December 31, 1998. This decrease was due to the Company
using its capital in the normal course of business. Since the Company has no
significant source of revenue, working capital will continue to be depleted by
operating expenses. Furthermore, if the Company 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 Company's remaining cash and
working capital will be depleted.
14
<PAGE>
The Company had current liabilities of $190,962 at September 30, 1999,
as compared to $16,016 at December 31, 1998. The increase is due in large part
to the short-term loans received in the period.
The Company requires additional funding to continue operations, develop
the Workfire Technology, establish sales and marketing capabilities, and
generate sales once product development is completed. On November 5, 1999, the
Company announced that it had entered into an agreement with a financial
advisory firm to provide financing for Workfire-Nevada. Details regarding the
financing have not been finalized.
As a result of obtaining the financial commitment, the Company's Board
of Directors has determined to distribute all of the Company's shares of
Workfire-Nevada pro rata to the Company's shareholders of record as at the close
of business on November 12, 1999.
It is expected that the Company will seek another business opportunity
upon completion of the share distribution, as well as a change of its corporate
name and trading symbol.
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 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 26,817,658 shares issued and outstanding. As the first
step in the closing process certain shareholders of the Company agreed to
voluntarily surrender for cancellation a total of 23,253,303 shares, leaving a
total of 3,564,355 shares of common stock issued and outstanding.
Following the cancellation of shares, the Company issued 10,431,725
shares of its common stock, pursuant to Rule 506 of Regulation D, in exchange
for 89% of the issued and outstanding common stock of Workfire.com, a Nevada
corporation. As a result of that transaction, Workfire.com became an 89%-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
13,996,080 issued and outstanding shares of common stock, of which 10,431,725
shares, or approximately 74.54%, 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
16
<PAGE>
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.
During September 1999, the Board of Directors approved the issuance of
stock options to Headline Technologies Ltd. to purchase up to 5,999 shares of
the Company's common stock, in exchange for technical audit, research and
development services. Pursuant to the terms of the stock options, 5,999 shares
of the Company's common stock has been reserved for issuance to Headline
Technologies Ltd. The options are exercisable at any through September 7, 2004
at a price of $1.1875 per share. The options were issued pursuant to Section
4(2) of the Securities Act of 1933, as amended.
During September 1999, the Company issued 25,000 shares of common stock
to The MacLean Marketing Group, Inc. at a price of $1.125 per share, in exchange
for marketing services. The shares were issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
During September 1999, the Company issued 20,000 shares of common stock
to Revell-Pechar, Inc. at a price of $1.125 per share, in exchange for public
relations services. The shares were issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
During September 1999, the Company issued 5,000 shares of common stock
to Mars Hill Virtual Management Inc. at a price of $1.125 per share, in exchange
for Internet web page design services and sales assistance. The shares 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.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
A) EXHIBITS
<CAPTION>
REGULATION SEQUENTIAL
S-B NUMBER EXHIBIT PAGE
<S> <C> <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 dated June 18,
1999.
</FN>
</TABLE>
B) REPORTS ON FORM 8-K:
None.
18
<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: November 15, 1999 By:/s/TOM TAYLOR
Tom Taylor, President
19
<PAGE>
Exhibit 27
Financial Data Schedule
20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS, AND THE NOTES THERETO, WHICH MAY BE FOUND
BEGINNING ON PAGES 2 THROUGH 10 OF THE COMPANY'S FORM 10-QSB AT AND FOR THE NINE
MONTH PERIOD ENDED ENDED SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 56,777
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 167,093
<PP&E> 72,938
<DEPRECIATION> 13,757
<TOTAL-ASSETS> 226,274
<CURRENT-LIABILITIES> 190,962
<BONDS> 0
0
0
<COMMON> 895,973
<OTHER-SE> (859,420)
<TOTAL-LIABILITY-AND-EQUITY> 226,274
<SALES> 0
<TOTAL-REVENUES> 8,767
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 639,369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (567,423)
<INCOME-TAX> 0
<INCOME-CONTINUING> (567,423)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (567,423)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
