SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended April 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-26277
wowtown.com, Inc
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(Name of Small Business Issuer in its charter)
Delaware 98-0204758
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(State of incorporation) (IRS Employer
Identification No.)
999 West Hastings St., Suite 450
Vancouver, British Columbia V6C 2W2
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(Address of Principal Executive Office) Zip Code
Registrant's telephone number, including Area Code: (604)-633-2556
Securities registered pursuant to Section 12(b)of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
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 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.
X
YES NO
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Company's revenues during the year ended April 30, 2000 were $-0-.
The aggregate market value of the voting stock held by non-affiliates of the
Company, (3,018,667 shares) based upon the average bid and asked prices of
the Company's common stock on July 31, 2000 was approximately $3,381,000.
Documents incorporated by reference: None
As of July 31, 2000 the Company had 15,500,067 issued and outstanding shares of
common stock.
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
We were originally incorporated in Delaware on December 18, 1997, under the
name Internet International Communications Ltd. On May 7, 1999, we changed our
name to Paramount Services Corp.
In February, 2000 we acquired all of the issued and outstanding shares of
WOWtown.com, Inc. in exchange for 10,000,000 shares of our common stock. On
February 25, 2000, we changed our name to wowtown.com, Inc.
Concurrent with the acquisition of WOWtown.com, Inc., we sold 500 shares
of our Series A preferred stock at a price of $1,000 per share for gross
proceeds of $500,000. We also issued 200,000 shares of our common stock to a
company controlled by Andrew Hromyk, our former president, as consideration for
consulting services provided in connection with our acquisition of WOWtown.com,
Inc.
Following the acquisition of WOWtown.com, Inc., David Packman was
appointed President as well as a director, Stephen Jackson was
appointed Vice President, Secretary, Treasurer and a Director, Patrick
Helme was appointed Vice President and a Director, and David Jackson
was appointed Chief Executive Officer and a Director. Our former
director and officer, Andrew Hromyk, resigned from his position as an
officer and director.
All historical share data in this report has been adjusted to reflect a
one-for-two forward stock split that was effective February 25, 2000.
Prior to our acquisition of WOWtown.com we had not commenced any
operations.
Our business is now that which was being conducted by Wowtown.com, Inc.
and any reference in this prospectus to "we" or "our", unless otherwise
indicated, includes Wowtown.com, Inc. We are a development stage company and
through July 31, 2000 we had only minimal revenues from our operations.
Our business involves establishing websites which provide information
regarding certain cities in the United States, Canada and other countries. Each
website has, or will have, a directory of restaurants, hotels, sporting events,
entertainment, tourist attractions and similar information. Those wanting more
information regarding a particular business establishment will be linked
directly to the particular establishment's website.
The public can become members of our program without charge. Members
receive cards which entitle the member to various discounts from the
establishments listed on our website.
We expect to generate revenues from listing business establishments in our
directory, designing and maintaining websites for particular business
establishments, and by displaying advertising on our websites. However, to build
a base of establishments for our first directories we have not charged
<PAGE>
establishments for listing on our websites. We began charging new accounts for
our services in May 2000. We will begin charging existing accounts in
August/September 2000. Our charge for a basic listing on our website will be
$29.95 per month.
The following provides certain information concerning our websites which
were in operation as of June 30, 2000.
Operational Establishments
City/Region Since Listed on Website Members Website Address
----------- ----------- ------------------ ------- ---------------
Vancouver, B.C. June 1999 750 4,000 www.vancouverwow.com.
Seattle, WA March 2000 550 2,000 www.seattlewow.com
Las Vegas, NV June 2000 300 None www.lasvegaswow.com
Our main website located at www.wowtown.com provides information on our
company and membership benefits for businesses and consumers. The main website
enables internet users to connect to our other websites.
Our websites allow internet users to comparison shop and purchase over one
million products through an internet shopping service operated by Ezuz.com, a
corporation affiliated with David Jackson, one of our officers and directors.
Ezuz.com receives a percentage of the gross sales made through its internet
shopping service. For hosting this internet shopping service, we are entitled to
receive a percentage of the fees received by Ezuz.com from sales of merchandise
in excess of $75,000 to our members. The percentage of the fees to which we are
entitled will range from 25% to 50% depending upon sales volume. As of June 30,
2000 our members had purchased less than $75,000 of merchandise through the
Ezuz.com internet shopping service and we had not received any revenues from
Ezuz.com.
We also plan to develop an online auction site for each regional websites
to permit an online exchange of goods between individuals in each region.
Although we will earn revenues for sales made through our auction sites, our
primary objective in operating on-line auctions will be to attract consumers to
our websites. We believe that establishments will want to be listed in our
directories if we can demonstrate that a large number of consumers are either
members of our program or visit our websites on a frequent basis.
We plan to sell the rights to market our program in various metropolitan
areas to third parties which we refer to as exclusive resellers. An exclusive
reseller will have the sole marketing rights to a metropolitan area and will
receive a percentage of the fees received for directory listings, advertising,
website design and goods sold through the website. An exclusive reseller will
pay us an initial fee when the territory is assigned. The amount of the initial
fee will depend on the demographics of the territory assigned to the exclusive
reseller. As of June 30, 2000 we had entered into one exclusive reseller
agreement concerning the marketing rights to our program.
<PAGE>
We estimate we will need approximately $50,000 in capital and one month to
develop a basic website for a metropolitan area which has not been assigned to
an exclusive reseller. For a metropolitan area which has been assigned to an
exclusive reseller, we estimate we will need $10,000 in capital and one week to
establish a basic website.
We plan on licensing language translation software for our websites.
Spanish will be the first alternate language to be incorporated due to the large
Spanish-speaking population in the United States and Mexico. Initially, French,
German and Mandarin will be used for metropolitan areas outside North America.
Competition
Our competitors are virtually every business which sells advertising to,
or otherwise promotes, restaurants, hotels, sporting events, entertainment or
tourist attractions. Competitors include newspapers, magazines, television and
radio stations, coupon book sponsors and other internet companies. In addition
there are many internet companies which provide auction sites for local
consumers.
Intellectual Property
We have applied for trade marks for the brandname "WOWtown(TM)", "The
Hottest Local Internet Marketing Portal On The Planet(TM)", "WOW e-store(TM)",
WOWtown Net Savings Card(TM)", "Where all the fun is @(TM)"and other related
trademark expressions. We plan on applying for further trademarks and new forms
of trademark expressions following the establishment of additional websites.
Offices and Employees
Our executive offices are located at Suite 450, 999 West Hastings Street,
Vancouver, British Columbia V6C 2W2 where we lease approximately 1858 square
feet of space under a lease that expires on October 31, 2000. We also maintain a
branch office at Suite 4100 - 800 Fifth Avenue, Seattle, Washington, 98104, and
maintain a sales office located at 18 West McGraw, Seattle Washington, 98109.
As of June 30, 2000 we had six full-time employees. As part of our
expansion plans we intend to hire additional employees as may be required by the
level of our operations.
Forward Looking Statements
This report contains various forward-looking statements that are based on
our beliefs as well as assumptions made by and information currently available
to us. When used in this prospectus, the words "believe", "expect",
"anticipate", "estimate" and similar expressions are intended to identify
forward-looking statements. Such statements may include statements regarding
seeking business opportunities, payment of operating expenses, and the like, and
<PAGE>
are subject to certain risks, uncertainties and assumptions which could cause
actual results to differ materially from our projections or estimates. Factors
which could cause actual results to differ materially are discussed at length
under the heading "Risk Factors". Should one or more of the enumerated risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Investors should not place undue reliance on forward-looking
statements, all of which speak only as of the date made.
ITEM 2. DESCRIPTION OF PROPERTY
See Item 1 of this report.
ITEM 3. LEGAL PROCEEDINGS.
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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Not Applicable
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of June 30, 2000, we had 15,500,067 outstanding shares of common stock
and approximately 40 stockholders of record. We believe the number of beneficial
owners may be greater due to shares held by brokers, banks, and others for the
benefit of their customers. Our common stock began trading on the National
Association of Securities Dealers OTC Bulletin Board on March 9, 2000. Set forth
below are the range of high and low closing prices for the periods indicated as
reported by the NASD. The market quotations reflect interdealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.
Closing Prices
Month Ended High Low
March 31, 2000 $3.19 $1.03
April 30, 2000 $1.50 $0.63
May 30, 2000 $0.937 $0.937
June 30, 2000 $1.125 $1.062
The provisions in our Articles of Incorporation relating to our preferred
stock would allow our directors to issue preferred stock with rights to multiple
votes per share and dividends rights which would have priority over any
dividends paid with respect to our common stock. The issuance of preferred stock
with such rights may make the removal of management difficult even if such
removal would be considered beneficial to stockholders generally, and will have
the effect of limiting stockholder participation in certain transactions such as
mergers or tender offers if such transactions are not favored by incumbent
management.
<PAGE>
Holders of our common stock are entitled to receive such dividends as may
be declared by our board of directors out of funds legally available and, in the
event of liquidation, to share pro rata in any distribution of our assets after
payment of liabilities. Our board of directors is not obligated to declare a
dividend. We have not paid any dividends on our common stock and we do not have
any current plans to pay any common stock dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
On February 7, 2000 we acquired all of the outstanding shares of
WOWtown.com, Inc. a Nevada corporation. On February 25, 2000 we changed our name
from Paramount Services Corp. to wowtown.com, Inc. in order to properly reflect
our new business. Prior to our acquisition of WOWtown.com, we had not commenced
any operations, did not have any material assets, and had approximately $23,000
in liabilities.
Following the transaction, the shareholders of WOWtown.com (Nevada), Inc. owned
a majority of our outstanding shares of common stock. For financial reporting
purposes the transaction was accounted for as a recapitalization. See Note 1 to
the April 30, 2000 financial statements. As such, WOWtown.com (Nevada), Inc.'s
historical financial statements are now reported as our financial statements.
The following summary financial data and related discussion is limited to the
operating results of our wholly owned subsidiary Wowtown.com (Nevada) Inc. which
we acquired on February 7, 2000. Prior to the acquisition of Wowtown.com
(Nevada), Inc. we had not generated any revenue and had not commenced any
operations other than initial corporate formation and capitalization.
The financial data presented below should be read in conjunction with the
more detailed financial statements and related notes which are included
elsewhere in this report.
Summary Financial Data
Results of Operations:
Period from Inception
(June 9, 1999) to April 30, 2000
Sales $ --
Operating Expenses (418,020)
Other Income (Expense) 1,626
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Net Loss (416,394)
============
<PAGE>
Balance Sheet Data:
April 30, 2000
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Current Assets $182,447
Total Assets 245,014
Current Liabilities 130,688
Total Liabilities 130,688
Working Capital 57,759
Stockholders' Equity 114,326
We have not declared any common stock dividends since our inception.
Liquidity and Capital Resources
Since inception (June 9, 1999) and through April 30, 2000 our sources and
use of cash were:
Cash used by operations $(295,155)
Proceeds received from sale of
Preferred Stock 500,000
Purchase of equipment (57,535)
Effect of exchange rates on cash 1,860
The loans from shareholders and other third parties were repaid subsequent
to January 31, 2000.
We expect our expenses will continue to increase during the next twelve
months as a result of increased marketing expenses and the establishment of new
websites. We began generating revenues in May 2000 but we expect that our
revenues will be substantially less than operating expenses until November 2000.
During the twelve months ending April 30, 2001 we anticipate that we will
need capital for the following purposes:
Fund operating losses: $1,450,000
Sales and marketing: 50,000
Expansion of internet services: 300,000
Establishment of additional websites 100,000
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$1,900,000
As of June 30, 2000 we had working capital of approximately $235,000 most
of which was received from the sale in February 2000 of 500 shares of our Series
A Preferred Stock for $500,000. We anticipate obtaining the additional capital
which we will require through revenues from our operations and through a
<PAGE>
combination of debt and equity financing. There is no assurance that we will be
able to obtain capital we will need or that our estimates of our capital
requirements will prove to be accurate. As of the date of this prospectus we did
not have any commitments from any source to provide additional capital.
In February 2000 we sold 500 shares of our Series A preferred stock for
$500,000. Each Series A preferred share may be converted, at the option of the
holder, into shares of our common stock equal in number to the amount determined
by dividing $1,000 by the conversion price, which is 75% of the average closing
bid price of our common stock for the ten trading days preceding the conversion
date or $2.00, whichever amount is less. In addition, all Series A preferred
shares will automatically convert into shares of common stock on February 7,
2001 at the conversion price then in effect. In May 2000 one Series A preferred
shareholder converted 250 Series A preferred shares into 390,747 shares of our
common stock. The actual number of shares to be issued upon the conversion of
the remaining Series A preferred shares will depend upon the price of our common
stock at the time of conversion. However, based upon the market price of our
common stock as of June 30, 2000, ($1.125 per share), we would be required to
issue approximately 298,000 shares of our common stock upon the conversion of
the remaining Series A preferred shares.
ITEM 7. FINANCIAL STATEMENTS
See the financial statements attached to this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective April 28, 2000 we retained PricewaterhouseCoopers LLP ("PWC") to act
as our auditors. In this regard PWC replaced Ernst & Young LLP ("E&Y") which
audited our financial statements for the fiscal years ended April 30, 1999 and
1998. The reports of E&Y for these fiscal years did not contain an adverse
opinion, or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During our two most recent
fiscal years and subsequent interim periods, there were no disagreements with
E&Y on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures, which disagreements, if not resolved
to the satisfaction of E&Y would have caused E&Y to make reference to such
disagreements in its reports.
We have authorized E&Y to discuss any matter relating to our operations
with PWC.
The change in our auditors was recommended and approved by our board of
directors. We do not have an audit committee.
During the two most recvent fiscal years and subsequent interim period
ending April 28, 2000 we did not consult PWC regarding the application of
accounting priciples to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on our financial statements,
or any matter that was the subject of a diagreement or what is defined as a
reportable event by the Securities and Exchange Commission.
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Position
David B. Jackson 54 Chief Executive Officer and a director
David Packman 40 President and a director
Stephen C. Jackson 46 Executive Vice-President, Secretary,
Treasurer and a director
Patrick Helme 40 Vice President, Product Development and a
director
David B. Jackson, Chief Executive Officer and Director:
Mr. Jackson has been our Chief Executive Officer and a director since
February 7, 2000. Since November 1998 Mr. Jackson has also been a director of
eZuz.com, an internet comparison-shopping network, which he co-founded. Mr.
Jackson was the President, CEO and Director of Fortune Entertainment
Corporation, a gaming technology company, from 1996 to December 1998. He also
served as Vice President and Director of Consolidated Ramrod Gold Corp., a
NASDAQ and Toronto Stock Exchange listed base and precious metals exploration
company from 1991 through 1995 and as Vice President of Atlanta Gold Corporation
during the same period.
David E. Packman, President and Director:
Mr. Packman has been our president and a director since February 7, 2000.
Mr. Packman founded our subsidiary, WOWtown.com (Nevada) Inc. in June 1999 and
co-developed vancouverwow.com, our prototype website. He presently oversees all
of the website development, sales, marketing and promotions for wowtown.com,
Inc. Mr. Packman was Executive Vice-President of Ruby Food Services Ltd., and
was with the company for 10 years. He was responsible for all aspects of the
operation, with an emphasis on sales and marketing. Mr. Packman has held senior
management positions with Sysco/Konings Wholesale. Prior to his involvement in
the foodservice distribution industry, he held several senior management
positions with Sirloiner Restaurants and Chi-Chi's Mexican Restaurants, both in
Canada and in the US. Mr. Packman is a past director of the Vancouver Restaurant
Association.
Stephen C. Jackson, Executive Vice President, Secretary, Treasurer and a
Director:
Mr. Jackson has been an officer and director of our corporation since
February 7, 2000. He was editor and features articles writer for the Vancouver
Market Report and has been an officer of several other public companies in
Canada. Through his private consulting practice, which he has operated since
1980, he has provided services to a wide variety of private corporations.
<PAGE>
Mr. Jackson is a past director of the BC Taxi Association and former
director with a regional Chamber of Commerce.
Patrick Helme, Vice President and Director:
Mr. Helme has been our Vice-President and a director since March 1, 2000.
Mr. Helme is one of the founding partners of WOWtown.com, (Nevada) Inc. As a
co-founder of Towncore Internet Ltd., he oversees all of the technical functions
and acts as the primary liaison with all project managers, customers and
technical staff. His main focus was to successfully generate and implement an
outside sales strategy through the recruitment and training of associate sales
partnerships. Mr Helme has developed websites and internet marketing strategies
for a diverse range of businesses. Mr. Helme has extensive experience in
franchising and licensing and has held principal positions with Sandwich Tree
Restaurants Ltd. and Horizon Hotels where he successfully developed license
sales and operations systems with growth of 100 plus franchised units. He is a
graduate of the British Columbia Institute of Technology and the University of
Houston - Hilton Hotel Management.
Each director holds office until his successor is duly elected by the
stockholders. Executive officers serve at the pleasure of the board of
directors. All of our executive officers plan to devote their full time to our
business. David Jackson plans to devote approximately 75% of his time to our
business.
There are no family relationships between any director, executive officer
or employee other than the relationship of David B. Jackson and Stephen C.
Jackson, who are cousins.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation received
by our Chief Executive Officer. None of our former or current executive officers
received in excess of $100,000 in compensation during the fiscal year ended
April 30, 2000 or during any other twelve month period.
Name and Fiscal Other Annual Restricted Options
Principal Position Year Salary Bonus Compensation Stock Awards Granted
David B. Jackson,
Chief Executive Officer 2000 $31,000 -- -- -- --
Employment Agreements
We have a consulting agreement with David Jackson and employment
agreements with our other executive officers. The terms of these agreements are
as follows:
<PAGE>
Annual Consulting Expiration of
Name Fees or Salary (1) Agreement
David B. Jackson $31,000 02/06/01
David Packman $31,000 02/06/02
Stephen C. Jackson $31,000 02/06/02
Patrick Helme $31,000 02/28/02
(1) The respective agreements with the persons in this table provide that the
annual compensation will be $45,000 Canadian dollars. The amounts shown are
the U.S. dollar equivalent based upon currency exchange rates on April 30,
2000.
Our board of directors may increase the compensation paid to our officers
depending upon a variety of factors, including the results of our future
operations.
We do not have any compensatory plan or arrangement that results or will
result from the resignation, retirement, or any other termination of any
executive officer's employment with us or from a change in control of or a
change in an executive officer's responsibilities following a change in control.
Options Granted During Fiscal Year Ending June 30, 2000Long Term Incentive Plans
- Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or other Retirement Plans
We do not have a defined benefit, pension plan, profit sharing or other
retirement plan, although we may adopt one or more of such plans in the future.
Directors' Compensation
At present we do not pay our directors for attending meetings of the board
of directors, although we expect to adopt a director compensation policy in the
future. We have no standard arrangement pursuant to which our directors are
compensated for any services provided as a director or for committee
participation or special assignments.
Except as disclosed elsewhere in this prospectus none of our directors
received any compensation from us during the year ended April 30, 2000.
Stock Options
We do not have a stock option plan and we have not granted any options,
rights or warrants which would allow anyone to acquire shares of our common
stock.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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The following table sets forth, as of July 31, 2000, information with
respect to the only persons owning beneficially 5% or more of our outstanding
common stock and the number and percentage of outstanding shares owned by each
of our directors and officers and by our officers and directors as a group.
Unless otherwise indicated, each owner has sole voting and investment powers
over his shares of common stock.
Shares of Percent of
Name and Address Common Stock Class (3)
David B. Jackson (1) (1)
999 West Hastings St.
Suite 450
Vancouver, B.C. V6C 2W2
Canada
David Packman (1) (1)
999 West Hastings St.
Suite 450
Vancouver, B.C. V6C 2W2
Canada
Stephen C. Jackson (1) (1)
999 West Hastings St.
Suite 450
Vancouver, B.C. V6C 2W2
Canada
Patrick Helme (1) (1)
999 West Hastings St.
Suite 450
Vancouver, B.C. V6C 2W2
Canada
595796 B.C. Ltd. 10,000,000 (1) 65%
Suite 1600, 609 Granville Street
Vancouver, B.C. V7Y 3E4
Bona Vista West Ltd. 2,481,400 16%
P.O. Box 62
2001 Leeward Highway
Turks & Caicos Islands
British West Indies
<PAGE>
All Officers and Directors 10,000,000 65%
as a Group (4 persons)
(1) This person is the beneficial owner of the shares owned by 595796 B.C. Ltd.
(2) The beneficial owners of 595796 B.C. Ltd. are David B. Jackson, David
Packman, Stephen C. Jackson, Patrick Helme (all of whom are our officers
and directors), Guy Prevost and Sarah Moen.
(3) Computed without giving effect to any shares issuable upon the exercise of
any warrants or options or upon the conversion of any promissory notes or
other convertible securities.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We have issued shares of our common stock to the following persons during
the past two years, who are or were affiliated with WOWtown:
Date of Number
Name Issuance of Shares Consideration
595796 B.C. Ltd.(1)(Nevada) 02/00 10,000,000 100 Shares of WOWtown.com,
Inc. valued at $500.00
Century Capital 02/00 200,000 Consulting services valued
Management Ltd. (2) at $10.00
535735 B.C. Ltd.(3) 03/00 3,539 Consulting services valued
at $5,840
Pedpac Marketing Ltd.(4) 03/00 7,781 Consulting services valued
at $12,839
(1) The beneficial owners of 595796 B.C. Ltd. are David B. Jackson, David
Packman, Stephen C. Jackson, Guy Prevost, Sarah Moen and Patrick Helme.
(2) The beneficial owner of Century Capital Management Ltd. is Andrew Hromyk.
(3) The beneficial owners of 535735 B.C. Ltd. are Patrick Helme, Sarah Moen and
Guy Prevost.
(4) David Packman is the beneficial owner of PedPac Marketing Ltd.
See "Business" for information concerning the internet shopping service
provided to us by Ezuz.com, a corporation affiliated with David Jackson, one of
our offices and directors. We also use Ezuz.com to design our websites. As of
<PAGE>
April 30, 2000 we had paid Ezuz.com approximately $22,000 for website related
services. During the twelve months ending April 30, 2001 we expect to pay
Ezuz.com an additional $43,000 for these services.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Number Exhibit Page Number
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1 Underwriting Agreement N/A
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3.1 Certificate of Incorporation and Amendments (1)
---------
3.2 Bylaws (1)
---------
4.1 Certificate of Designation of Series A
preferred stock (1)
--------
5. Opinion of Counsel None
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10. Share Exchange Agreement (1)
--------
27. Financial Data Schedule
(1) Incorporated by reference to the same exhibit number in the Company's
registration statement on Form SB-2 (Commission File #333-38802).
<PAGE>
wowtown.com Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Consolidated Financial Statements
April 30, 2000
(expressed in U.S. dollars)
<PAGE>
Auditors' Report
To the Shareholders of
wowtown.com Inc.
We have audited the consolidated balance sheet of wowtown.com Inc. (a
development stage enterprise) (formerly Paramount Services Corp.) as at April
30, 2000 and the consolidated statements of operations and deficit,
shareholders' equity and cash flows for the period from June 9, 1999 (date of
incorporation) to April 30, 2000. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at April 30, 2000
and the results of its operations and its cash flows for the period from June 9,
1999 (date of incorporation) to April 30, 2000 in accordance with generally
accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in note 1 to the
financial statements, the company has suffered loss from operations that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Chartered Accountants
<PAGE>
wowtown.com Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Consolidated Balance Sheet
As at April 30, 2000
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(expressed in U.S. dollars)
$
Assets
Current assets
Cash and cash equivalents 149,170
Other receivables 7,318
Prepaid expenses and deposits (note 4) 25,959
-------------
182,447
Capital assets - net (note 4) 25,105
Intangible assets - net (note 4) 37,462
------------
245,014
==============
Liabilities
Current liabilities
Accounts payables and accrued liabilities (note 4) 104,358
Accounts payable to related party (note 9(c)) 26,330
-------------
130,680
-------------
Shareholders' Equity
Capital stock (note 7)
Authorized
30,000,000 common shares at par value of $0.0001
5,000,000 preferred shares at par value of $0.0001
Issued
14,709,320 common shares 1,471
500 preferred shares 1
Other capital accounts 744,697
Deficit accumulated during the development stage (631,843)
-------------
114,326
-------------
245,014
-------------
Going concern (note 1)
Commitments (note 6)
Subsequent events (note 12)
Approved by the Board of Directors
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
wowtown.com Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Consolidated Statement of Operations and Deficit
For the period from June 9, 1999 (date of incorporation) to April 30, 2000
-------------------------------------------------------------------------------
(expressed in U.S. dollars)
$
Expenses
General and administrative 210,218
Development costs 106,011
Sales and marketing 70,670
Amortization 31,121
-------------
418,020
-------------
Other income
Interest 1,626
-------------
Loss for the period and deficit - End of period (416,394)
-------------
Basic loss per share (note 2) (0.05)
Weighted average number of shares outstanding 13,906,176
=============
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
wowtown.com Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Consolidated Statement of Shareholders' Equity
For the period from June 9, 1999 (date of incorporation) to April 30, 2000
-------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated Total
Common stock Preferred Shares Additional Other Share-
Number Number paid in comprehensive holders'
of shares Amount of shares Amount capital Income Deficit Equity
$ $ $ $ $ $ $ $
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock issued on
recapitalization of
WOWtown.com (Nevada) Inc. 10,000,000 1,000 -- -- -- -- (999) 1
Common Stock issued to
Paramount Sharholders
(Note 1) 4,498,000 450 -- -- -- -- (450)
Issuance of Preferred
Stock (Note 7) -- -- 500 1 713,999 -- 214,000 500,000
Common Stock issued for
consulting services
(Note 7) 200,000 20 -- -- 6,230 -- -- 6,250
Common Stock issued for
consulting services
(Note 7) 11,320 1 -- -- 18,679 -- -- 18,680
Comprehensive Income
Loss for the period -- -- -- -- -- -- (416,394) (416,394)
Accumulated other compre-
hensive income - foreign
currency translation -- -- -- -- -- 5,789 -- 5,789
-------------------------------------------------------------------------------------------------------
Balance - April 30, 2000 14,709,320 1,471 500 1 738,908 5,789 (631,843) 114,326
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
wowtown.com Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Consolidated Statement of Cash Flows
For the period from June 9, 1999 (date of incorporation) to April 30, 2000
------------------------------------------------------------------------------
(expressed in U.S. dollars)
$
Cash flows from operating activities
Loss for the period (416,394)
Adjustments to reconcile loss for the period to
net cash used for operating activities
Amortization 31,121
Common stock issued for consulting services 18,679
Changes in operating working capital items
Other receivables (7,430)
Prepaid expenses and deposits (26,515)
Accounts payable and accrued liabilities 105,384
-------------
(295,155)
-------------
Cash flows from investing activities
Purchase of capital assets (28,811)
Purchase and development of intangible assets (28,724)
-------------
(57,535)
-------------
Cash flows from financing activities
Proceeds from issuance of preferred stock 500,000
-------------
Effect of exchange rates on cash 1,860
-------------
Increase in cash and cash equivalents and cash and
cash equivalents - End of period 149,170
-------------
Supplemental cash flow information (note 3)
<PAGE>
1 The company and reverse acquisition
On February 7, 2000, Paramount Services Corp. (Paramount) acquired all the
issued and outstanding shares of WOWtown.com, (Nevada) Inc. (WOWtown
subsidiary) in exchange for 10,000,000 common shares, following which the
name Paramount was changed to wowtown.com Inc. (WOWtown parent). As a result
of this transaction, the former shareholders of WOWtown subsidiary obtained
a majority interest in WOWtown parent. For accounting purposes, the
acquisition has been treated as a recapitalization of WOWtown subsidiary
with WOWtown subsidiary as the acquirer (reverse acquisition) of WOWtown
parent. As WOWtown parent was a non-operating entity, the reverse
acquisition has been recorded as an issuance of 4,498,000 common shares for
an amount of $nil and the excess of liabilities over assets of $28,471 has
been charged to the statement of operations. The historical financial
statements prior to February 7, 2000, are those of WOWtown subsidiary. Pro
forma information has not been presented as the recapitalization has not
been treated as a business combination. The accounts of WOWtown parent have
been consolidated from February 7, 2000.
Nature of operations
wowtown.com Inc.'s (the company) principal business activities include the
establishment of internet web site portals for certain cities and local
communities in North America. The portals are intended to provide an
internet user with a local resource guide for the community. The portals
will also offer services for the user and provide the user with discounts
and savings for purchases made from merchants featured on the community
portal site.
Going concern
The company has not yet generated revenues, has an operating loss and no
assurance of future profitability. Even if marketing efforts are successful,
substantial time may pass before profitability will be achieved. During this
time, the company will require financing from outside sources to finance the
company's operating and investing activities until sufficient positive cash
flows from operations can be generated. The company's management has plans
to raise the required financing through the sale of equity. There is no
assurance that this financing will be available to the company, accordingly,
there is substantial doubt about the company's ability to continue as a
going concern. These consolidated financial statements have been prepared on
the basis that the company will be able to continue as a going concern and
realize its assets and satisfy its liabilities in the normal course of
business, and do not reflect any adjustments which would be necessary if the
company is unable to continue as a going concern.
2 Summary of significant accounting policies
Development stage company
The company's activities have primarily consisted of establishing
facilities, recruiting personnel, development, developing business and
financial plans and raising capital. Accordingly, the company is considered
to be in the development stage. The accompanying consolidated financial
statements should not be regarded as typical for a normal operating period.
Basis of presentation
<PAGE>
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States.
Basis of consolidation
The consolidated financial statements include the accounts of the company
and its wholly-owned subsidiary. All significant intercompany transactions
and balances have been eliminated on consolidation.
Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results may differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturities at the date of
purchase of 90 days or less. Interest earned is recognized immediately in
the consolidated statement of operations.
Capital and intangible assets
Capital and intangible assets are recorded at cost less accumulated
amortization. Amortization is provided on a declining-balance basis at the
following rates:
Furniture and fixtures 20%
Office equipment 20%
Computer software and website development costs 100%
Computer hardware 30%
Intangible assets 100%
Additions are amortized at one half of the above rates in the year of
acquisition.
Website development costs
The company accounts for website development costs in accordance with EITF
00-02, Accounting for Website Development Costs. As such, the company
capitalizes costs associated with website applications and infrastructure
development as well as the initial graphics development stage in accordance
with Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.
<PAGE>
Impairment of long-lived assets
The company reviews the carrying amount of long-lived assets in relation to
their fair value whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The determination of
any impairment includes a comparison of future operating cash flows
anticipated to result from the use of the asset to the net carrying value of
the asset. If an impairment exists the carrying value is written down to the
fair value of the asset.
Advertising costs
The company accounts for advertising costs in accordance with AICPA
Statement of Position 93-7, Reporting on Advertising Costs, whereby costs
are generally expensed as incurred except for television and radio
advertisements, which are expensed, including related production costs, the
first time the advertising takes place.
Foreign currency translations and transactions
The functional currency of the company's operations located in countries
other than the U.S. is generally the domestic currency. The consolidated
financial statements are translated to U.S. dollars using the period-end
exchange rate for assets and liabilities and weighted-average exchange rates
for the period for revenues and expenses. Translation gains and losses are
deferred and accumulated as a component of other comprehensive income in
shareholders' equity. Net gains and losses resulting from foreign exchange
transactions are included in the consolidated statement of operations.
Income taxes
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current
period and deferred tax liabilities and assets for future tax consequences
of events that have been recognized in the company's consolidated financial
statements or tax returns. The measurement of current and deferred tax
liabilities and assets are based on provisions of enacted tax laws; the
effects of future changes in tax laws or rates are not anticipated. The
measurement of deferred tax assets is reduced, if necessary, by a valuation
allowance, where, based on available evidence, the probability of
realization of the deferred tax asset does not meet a more likely than not
criterion.
Loss per share
Basic loss per share is computed by dividing loss for the period by the
weighted average number of common shares outstanding for the period. Fully
diluted loss per share reflects the potential dilution of securities by
including other potential common stock, including convertible preferred
shares, in the weighted average number of common shares outstanding for a
period, if dilutive.
<PAGE>
The following table sets forth the computation of loss per share:
$
Loss for the period (416,394)
Less: Beneficial conversion on preferred shares (214,000)
-------------
Loss for the period applicable to common stockholders (630,394)
-------------
The convertible preferred shares are not included in the computation of
fully diluted loss per share as their effect is anti-dilutive.
Stock based compensation
The company accounts for equity instruments issued in exchange for the
receipt of goods or services from other than employees in accordance with
SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force
in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring or in Conjunction with Selling, Goods or
Services" (EITF 96-18). Costs are measured at the estimated fair market
value of the consideration received or the estimated fair value of the
equity instruments issued, whichever is more reliably measurable. The value
of equity instruments issued for consideration other than employee services
is determined on the earlier of a performance commitment or completion of
performance by the provider of goods or services as defined by EITF 96-18.
Comprehensive income
Comprehensive income is defined as the change in equity from transactions,
events and circumstances other than those resulting from investments by
owners and distributions to owners. Comprehensive income consists of net
loss for the period and foreign currency translation.
New accounting pronouncements
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (FAS 133). FAS 133, as
subsequently amended, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000 (October 1, 2000 for the company). FAS
133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. As management of
the company does not currently use derivative instruments, the adoption of
FAS 133 is not expected to have a significant effect on the company's
results of operations or its financial position.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) 101,
Revenue Recognition in Financial Statements, and in March 2000, the SEC
issued SAB 101A which provided certain amendments to SAB 101. The company's
revenue recognition and reporting policies will be established on a basis
consistent with the Staff views set out in those bulletins.
<PAGE>
In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25 (FIN 44), which
clarifies the application of APB 25 for certain issues. This Interpretation
is effective July 1, 2000, but certain conclusions in this Interpretation
cover specific events that occur after either December 15, 1998 or January
12, 2000. The company has not yet determined the effect, if any, this
pronouncement will have on the reporting and measurement of stock based
compensation by the company.
3 Supplemental cash flow information
$
Cash received for interest 1,488
Cash paid for interest 656
Common stock issued for consulting services 24,918
4 Balance sheet components
Prepaid expenses and deposits
$
Security deposit for operating line of credit
(note 5) 21,688
Other prepaid expenses 4,271
-------------
25,959
-------------
Capital assets
$
Furniture and fixtures 8,069
Office equipment 6,148
Computer hardware 14,482
-------------
28,699
Less: Accumulated amortization 3,594
-------------
25,105
-------------
Intangible assets
$
Website development costs 48,270
Domain names and trademarks 9,935
Computer software 6,784
-------------
64,989
<PAGE>
Less: Accumulated amortization 27,527
-------------
37,462
-------------
Accounts payable and accrued liabilities
$
Trade accounts payable 88,321
Accrued employee costs 11,747
Other accruals 4,290
-------------
104,358
-------------
5 Operating line of credit
The company's subsidiary has a corporate VISA with an available credit limit
of $20,000, bearing interest at 18.5% annually. The line of credit is
payable on demand and collateralized by a general security agreement
covering a fixed deposit of $20,000 with VISA and other deposits of $1,688.
6 Commitments
The company leases certain facilities and equipment used in its operations
under operating leases. Future minimum lease payments under these lease
agreements at April 30, 2000 are as follows:
$
2001 19,383
Thereafter -
<PAGE>
7 Capital stock
Common stock
Holders of common shares are entitled to one vote per share and to share
equally in any dividends declared and distributions in liquidation.
On February 25, 2000, the company completed a two-for-one stock split. All
outstanding common shares in these consolidated financial statements have
been presented on a post-split basis.
Pursuant to the acquisition agreement, the company agreed to issue 200,000
common shares with a fair value of $6,250 concurrently with the closing of
the acquisition of WOWtown subsidiary, as payment for consulting services.
On April 18, 2000, 11,320 common shares were issued in settlement of an
accounts payable of $18,680 for consulting services (note 9).
Preferred stock
Each Series A preferred share may be converted, at the option of the holder,
into common shares equal in number to the amount determined by dividing
$1,000 by the conversion price, which is 75% of the average closing bid
price of the common shares for the ten trading days preceding the conversion
date or $2.00, whichever amount is less. In addition, all Series A preferred
shares will automatically convert into shares of common stock on February 7,
2001 at the conversion price then in effect.
The company incurred a beneficial conversion charge on its Series A
preferred shares of $214,000 for the excess of the fair value of $0.09 per
share over the conversion price of $0.07 per share. The beneficial
conversion has been charged to deficit for the period ended April 30, 2000.
As a condition precedent to the closing of the acquisition of WOWtown
subsidiary, the company was required to complete a private placement of 500
of the company's Series A convertible preferred stock at a price of $1,000
per share. The shares were issued on February 7, 2000.
8 Financial instruments
Interest rate risk
The company's exposure to interest rate fluctuations is described in note 5.
The company does not currently enter into any hedging arrangements to limit
its exposure to interest rate fluctuations.
<PAGE>
Foreign exchange risk
The company operates both in the U.S. and in Canada, and is subject to
fluctuations in the relative foreign exchange rates. The company does not
currently enter into any hedging arrangements to limit its exposure to
foreign currency fluctuations.
Concentration of credit risk
Financial instruments which potentially subject the company to
concentrations of credit risk consist primarily of cash and cash
equivalents. The company limits its exposure to credit loss by placing its
cash and cash equivalents on deposit with high credit quality financial
institutions.
Fair value of financial instruments
The company's financial instruments include cash and cash equivalents, other
receivables, operating line of credit, accounts payable and accrued
liabilities and accounts payable to related party. The fair values of these
financial instruments approximate their carrying values.
9 Related party transactions
a) The company has paid (by issuance of 3,539 common shares) $5,840 in
consulting fees to a company where a director of the company is a
shareholder.
b) The company has paid $12,840 (by issuance of 7,781 common shares) in
consulting fees to a company where another director of the company is a
shareholder.
c) The company has paid $21,940 in development costs to a company in which one
of the company's directors is a director and has remaining accounts payable
to this company of $26,330 for development costs and other services
provided by this company.
10 Income taxes
The company is subject to U.S. Federal and State income taxes.
The company has accumulated net operating loss ("NOL") carryforwards
totalling $114,000 which can be applied to reduce taxable income in future
taxation years. The NOL expire in 2000.
The potential tax benefit of these losses, if any, has not been recorded in
the financial statements.
<PAGE>
Net deferred tax assets consist of the following:
$
Start-up expenditures 273,000
Net operating loss carryforwards 114,000
Capital assets 19,000
Deferred tax valuation allowance (406,000)
-------------
--
-------------
Based on a number of factors including, the lack of a history of profits,
management believes that there is sufficient uncertainty regarding the
realization of deferred tax assets such that a full valuation allowance has
been provided.
The income tax provision for the period ended April 30, 2000, does not
differ materially from the amount obtained by applying the applicable
statutory income tax rates of 30% to loss before income taxes, net of the
valuation allowance of $406,000.
11 Segmented information
The company identifies its operating segments based on business activities,
management responsibility and geographical location. The company operates in
one single operating segment being the development of internet portals and
currently operates portals in Vancouver, B.C. and Seattle, WA. In addition,
substantially all of the company's assets are located in Canada. The company
operates as a regional portal, offering Internet infrastructure-based
services to local business and directs Internet users to many businesses and
Internet links relevant to the user-base. The company has registered domain
names for the major cities in the U.S. and Canada in order to create similar
web-sites for other cities.
12 Subsequent events
a) Preferred stock conversion
On May 9, 2000, 250 shares of the company's preferred stock were
converted to 390,747 shares of the company's common stock.
b) Private placement of common stock
On May 30, 2000, the company completed a private placement of 200,000
shares of the company's common stock for $0.75 per share.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 28th day of July, 2000.
wowtown.com, Inc.
By /s/ David Packman
---------------------------
David Packman, President
By /s/ Stephen Jackson
-------------------------
Stephen Jackson, Secretary
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Title Date
/s/ David Packman
------------------
David Packman Director July 28, 2000
/s/ Stephen Jackson
--------------------
Stephen Jackson Director July 28, 2000
/s/ David Jackson
--------------------
David Jackson Director July 28, 2000
/s/ Patrick Helme
------------------
Patrick Helme Director July 28, 2000
