UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1999
Commission File Number 333-51683
World House Entertainment, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 87-0567884
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1200 South Mount Juliet Road, Nashville, TN 37229
-------------------------------------------------
(Address of principal executive offices) (Zip code)
(615) 773-7166
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(Registrant's telephone number, including area code)
2831 Dogwood Place Nashville, Tennessee 37204
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(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $.001 par value 12,250,000
- ---------------------------- ----------
Class Number of shares outstanding at July 28, 1999
This document is comprised of 13 pages.
<PAGE>
FORM 10-QSB
1ST QUARTER
WORLD HOUSE ENTERTAINMENT, INC.
June 30, 1999
(Unaudited)
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements *
Condensed, consolidated balance sheet - June 30, 1999 (Unaudited)...... 3
Condensed, consolidated statements of operations - Six months
ended June 30, 1999 and June 30, 1998 (Unaudited)................... 4
Condensed, consolidated statements of cash flows - Six months
ended June 30, 1999 and June 30, 1998 (Unaudited).................... 5
Notes to condensed, consolidated financial statements (Unaudited)..... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 8
PART II - OTHER INFORMATION................................................. 11
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters To A Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures ............................................................ 12
* The accompanying financial statements are not covered by an
independent Certified Public Accountant's report.
2
<PAGE>
Part I. Item 1. Financial information
WORLD HOUSE ENTERTAINMENT, INC.
Condensed, Consolidated Balance Sheet
June 30, 1999
(Unaudited)
ASSETS
CURRENT ASSETS
Cash ...................................................... $ 1,502
Other current assets ...................................... 450
---------
TOTAL CURRENT ASSETS ........................ 1,952
PROPERTY AND EQUIPMENT, NET ................................... 14,005
---------
$ 15,957
=========
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities ................... $ 31,643
Short-term debt ............................................ 12,500
Indebtedness to related party - short-term ................. 2,248
---------
TOTAL CURRENT LIABILITIES .................. 46,391
---------
SHAREHOLDERS' DEFICIT
Common stock ............................................... 780
Additional paid-in capital ................................. 213,782
Retained deficit ........................................... (244,996)
---------
TOTAL SHAREHOLDERS' DEFICIT ............... (30,434)
---------
$ 15,957
=========
See accompanying notes to condensed, consolidated financial statements
3
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
Condensed, Consolidated Statements of Operations
(Unaudited)
Six Months Ended
June 30,
-------------------------
1999 1998
--------- ---------
REVENUES ....................................... $ 5,394 $ 10,417
--------- ---------
COSTS AND EXPENSES
General and administrative .................. 38,466 33,834
Provision for bad debts ..................... 2,500 5,000
Related party expenses ...................... 9,000 9,000
--------- ---------
49,966 47,834
--------- ---------
OPERATING (LOSS) .................. (44,572) (37,417)
OTHER INCOME (EXPENSE)
Interest Income ............................. 5,000 5,000
Interest Expense ............................ (728) (8,460)
--------- ---------
LOSS BEFORE INCOME TAXES .......... (40,300) (40,877)
INCOME TAXES ................................... -- --
--------- ---------
NET (LOSS) ........................ $ (40,300) $ (40,877)
========= =========
Basic loss per common share .................... $ (.05) $ (.06)
--------- ---------
Basic common shares outstanding ................ 770,000 700,000
========= =========
See accompanying notes to condensed, consolidated financial statements
4
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
Condensed, Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
---------------------
1999 1998
--------- --------
NET CASH (USED IN)
OPERATING ACTIVITIES .............. $ (53,741) $ (27,531)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ................ (1,244) (965)
--------- ---------
NET CASH (USED IN)
INVESTING ACTIVITIES ............. (1,244) (965)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable ....................... (150,000) --
Proceeds from issuance of notes payable .......... 5,000 26,250
Shareholder advance .............................. 2,117 130
Proceeds from sale of stock ...................... 200,000 --
Cash paid for offering costs ..................... (1,208) (4,336)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES .............. 55,909 22,044
--------- ---------
NET INCREASE (DECREASE) ........... 924 (6,452)
CASH, BEGINNING OF PERIOD ............................ 577 7,709
--------- ---------
CASH, END OF PERIOD .............. $ 1,501 $ 1,257
========= =========
Supplemental disclosures of cash flows information:
Interest paid ........................................ $ 18,921 $ 962
========= =========
Income taxes paid .................................... $ -- $ --
========= =========
See accompanying notes to condensed, consolidated financial statements
5
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
Notes to Condensed, Consolidated Financial Statements
(Unaudited)
June 30, 1999
Note A: Management's Statement
In the opinion of management, the accompanying unaudited condensed, consolidated
financial statements contain all adjustments (all of which are normal and
recurring in nature) necessary to present fairly the financial position of World
House Entertainment, Inc. and Subsidiary (the "Company") at June 30, 1999, and
the results of operations and cash flows for the six month periods ended June
30, 1999 and 1998. The Notes to the Consolidated Financial Statements which are
contained in the 1998 Form 10-KSB should be read in conjunction with these
Condensed, Consolidated Financial Statements.
Note B: Related party transactions
During the six month period ended June 30, 1999, the Company paid off
shareholders, which had previously made bridge loans to the Company, out of the
proceeds from its initial public offering. The total debt paid during the
quarter was $150,000 plus related accrued interest.
An officer of the Company contributed his services and provided workspace at no
charge to the Company during the six month period ended June 30, 1999. The
transactions are reflected in the accompanying unaudited, condensed,
consolidated financial statements as charges to compensation and rent expense in
the amounts of $6,000 and $3,000, respectively with corresponding credits to
paid-in capital.
Note C: Shareholders' deficit
The following table summarizes transactions affecting shareholders' deficit for
the six month period ended June 30, 1999:
<TABLE>
<CAPTION>
Additional Total
Common stock Paid-in Offering Retained Shareholders'
Shares Amount Capital Costs Deficit Deficit
------ ------ ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 ........... 700,000 $ 700 $ 31,800 $ (25,731) $(204,696) $(197,927)
Sale of common stock, at $2.50 per
share, pursuant to initial public
offering, net of offering costs .... 80,000 80 199,920 (1,207) -- 198,793
Services and rent contributed by
corporate officer .................. -- -- 9,000 -- -- 9,000
Net loss for the quarter ended
June 30, 1999 ..................... -- -- -- -- (40,300) (40,300)
------- --------- --------- --------- --------- ---------
BALANCE, JUNE 30, 1999 780,000 $ 780 $ 240,720 $ (26,938) $(244,996) $ (30,434)
======= ========= ========= ========= ========= =========
</TABLE>
6
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
Notes to Condensed, Consolidated Financial Statements
(Unaudited)
June 30, 1999
Note D: Income taxes
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the six months ended June 30, 1999 resulting in a
deferred tax asset, which was fully allowed for, therefore the net benefit and
expense result in $-0- income taxes.
7
<PAGE>
Part I. Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
WORLD HOUSE ENTERTAINMENT, INC.
RESULTS OF OPERATIONS
The Company recorded a net loss of $40,300 for the first six months of 1999,
while a loss of $40,877 was reported for the first six months of 1998.
Net sales declined by $5,023 or 48 percent when compared with the year earlier
period because the President of the Company had to take a leave of absence due
to medical reasons.
Total operating expenses increased by only $2,132 or 4 percent over the year
earlier period.
Interest expense decreased by $7,732 or 91 percent during the six months ended
June 30, 1999 when compared with the same period in 1998 because the Company
extinguished a substantial portion of its debt during the period.
FINANCIAL CONDITION
The Company sold 80,000 shares of its common stock during the first quarter of
1999. The shares were sold shortly after the Securities and Exchange Commission
declared its registration statement on Form SB-2 effective. The shares were
priced at $2.50 each. Net proceeds, after deducting costs related to the
offering, were approximately $173,000.
The Company used substantially all of the proceeds from its offering to
extinguish bridge loans totaling $150,000, and related accrued interest.
At June 30, 1999, the Company continued to have negative working capital.
Current assets equaled $1,952 while current liabilities equaled $46,391.
As of June 30, 1999, the Company experienced operating losses and negative cash
flow from operations. In the aggregate, these indicators raised substantial
doubt about the Company's ability to continue as a going concern.
8
<PAGE>
THE OUTLOOK AND SUBSEQUENT EVENTS
Form 8-K, dated July 15, 1999, Item 2. Acquisition or Disposition of Assets
On July 9, 1999 the Company merged with 800 America, Inc. ("America") pursuant
to an Agreement and Plan of Merger (the "Merger Agreement") and issued in the
aggregate 10,000,000 shares of its restricted common stock to the three
shareholders of America. Pursuant to the terms of the Merger Agreement, the
Company remains as the surviving corporation and, following the closing of the
Merger, is now in the process of changing its name to 800 AMERICA.COM, Inc.
Following completion of the Merger, the new shareholders of the Company owned
10,000,000 out of 11,950,000 total shares issued and outstanding, or 83.7%.
Under the terms of the Merger Agreement which was approved by the shareholders
of the Company, the Company's wholly owned and only operating subsidiary, Songs
For The Planet, Inc. was purchased by Elizabeth Peters, the Company's former
President, for Ten Dollars and other good and valuable consideration and all
debt owed by Songs For The Planet, Inc. to the Company was forgiven as of the
closing date of the Merger.
Closing of the transaction was subject to shareholder approval of both the
Company and America. Proxies were not solicited by the Company. Instead, the
Company obtained shareholder approval by written consent as provided under
Section 78.320 of the Nevada General Corporation Law. The current shareholders
of the Company who did not join in the above described consent may dissent and
obtain fair value for their shares as provided by the Nevada General Corporation
Law. The Company does not expect any shareholders of Company to exercise their
dissenter's rights. No registration statement will be filed covering the
issuance of shares to the America shareholders because the Company believes such
issuance is exempt from the registration requirements of the Securities Act of
1933 by virtue of Rule 506 and Section 4(2) of the Act.
America was formed as a Delaware corporation on March 26, 1999 for the purpose
of operating a shopping mall web site. America derives revenue from two sources:
(1) an annual $10.00 membership fee is charged to members that entitles such
members to shop on-line at America's web site. The web site allows members
access to over one hundred fifty stores, including many nationally known and
recognized retailers, and offers such members a rebate of from 3% to 10% on
purchases made through the web site; (2) rent and commission fees from the
merchants and retailers whose stores are represented at America's web site.
Rents vary between one hundred and two hundred dollars per month per retailer
and commissions are based upon the volume of sales from members. America's
assets consist of a web site, equipment, fixtures and a membership/subscriber
base that numbers approximately 70,000. America's executive offices are located
at 1200 South Mount Juliet Road (mailing address P.O. Box 291029), Nashville, TN
37229, (888) 855-9872.
The Company determined that the proposed transaction with America would
significantly increase the Company's revenue and income generating potential and
gain the Company access to the exploding internet market for on-line shopping.
There is no relationship between the Company or its affiliates, officers or
directors and America or its affiliates, officers and directors.
The exchange ratio provided for in the Merger Agreement of 6,666.67 shares of
the Company's common stock for each share of America common stock was arrived at
by arms length negotiation based upon the revenues, income and potential for
growth of America as of the time the transaction was negotiated.
The Company intends to continue the business of America in the same manner as
prior to the Merger.
Subsequent to the merger, the Company obtained $500,000 for working capital
through the sale and issuance of 300,000 shares of its
restricted common stock.
9
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The following condensed pro forma financial statements dated June 30, 1999 are
provided to illustrate the effect of the above merger and the sale and issuance
of additional common stock. At the time of the merger and after the sale of its
operating subsidiary, the Company had no operating assets or liabilities. This
merger will be accounted for as a reverse acquisition. Accordingly, the
operating subsidiary is not considered a significant constituent part of the
combined entity and historic financial statements for the prior year are not
included in these condensed proforma financial statements. 800 America, Inc. was
incorporated in March 1999 and at June 30, 1999 had approximately three months
of operating history which will be reflected in financial statements from
inception. The pro forma adjustments illustrate the changes to the historic
balance sheet as if the events had taken place on June 30, 1999 and illustrate
the changes to the historic income statement as if the events had taken place on
January 1, 1999.
<TABLE>
<CAPTION>
Condensed Pro Forma Balance Sheet World House 800 America Post Merger Post Merger
Entertainment Adjustment Stock Sale Pro Forma
------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Current Assets 57,748 500,000 557,748
Property and Equipment 184,616 -- 184,616
Total assets 242,364 500,000 742,364
Current Liabilities 138,192 -- 138,192
Stockholders Equity
Common Stock 780 11,170 300 12,250
Additional Paid In Capital 194,371 (11,170) 499,700 682,901
Retained Earnings (195,151) 104,172 -- (90,979)
Total Equity -- 104,172 500,000 604,172
Total Liabilities and Equity -- 242,364 500,000 742,364
Condensed Pro Forma Income Statement
For the Six Months ended June 30, 1999
World House 800 America Post Merger Post Merger
Entertainment Adjustment Stock Sale Pro Forma
------------- ---------- ---------- ---------
Income -- 406,585 - 406,585
Operating Expense 9,114 261,348 - 270,462
Net Income from Operations (9,114) 145,237 - 139,123
Income Tax Expense -- 41,365 - 41,365
Net Income (9,114) 103,872 - 94,758
10
</TABLE>
<PAGE>
Part II. - Other Information
WORLD HOUSE ENTERTAINMENT, INC.
OTHER INFORMATION
Items 1 Through 5 - No response required.
Item 6 - Exhibits and reports on Form 8-K.
(a) Exhibits
27* Financial Data Schedule
(b) Reports on Form 8-K - Filed July 15, 1999 regarding the merger of
the Company with 800 America, Inc.
11
<PAGE>
SIGNATURES
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the six months ended June 30, 1999 have been
included.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
World has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WORLD HOUSE ENTERTAINMENT, INC.
(Registrant)
DATE: July 28, 1999 BY: /s/ Elie Rabi
--------------------------------------------
Elie Rabi
President and Principal Executive Officer
12
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- -----------------------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 3 and 4 of the Company's Form 10-QSB for the year to date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 1,502
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,952
<PP&E> 27,153
<DEPRECIATION> 13,148
<TOTAL-ASSETS> 15,957
<CURRENT-LIABILITIES> 46,391
<BONDS> 0
<COMMON> 780
0
0
<OTHER-SE> 31,214
<TOTAL-LIABILITY-AND-EQUITY> 15,957
<SALES> 5,394
<TOTAL-REVENUES> 5,394
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 49,966
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 728
<INCOME-PRETAX> (40,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (40,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,300)
<EPS-BASIC> (.05)
<EPS-DILUTED> 0
</TABLE>
