SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2000
Commission File Number: 0-26277
WOWTOWN.COM, INC.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 98-0204758
-------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
999 West Hastings St., Suite 450
Vancouver, British Columbia, Canada V6C 2W2 (address of
principal executive offices) (Zip Code)
(604) 633-2556
--------------
(Registrant's telephone number, including area code)
N/A
--------------------------------- ---
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) or 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____
As of September 15, 2000 the Company had 15,500,067 shares of Common Stock
issued and outstanding.
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Condensed Consolidated Balance Sheets
As at July 31, 2000 and April 30, 2000
--------------------------------------
(expressed in U.S. dollars)
(Unaudited)
July 31, 2000 April 30,2000
$ $
Assets
Current assets
Cash and cash equivalents 49,882 149,170
Other receivables 12,439 7,318
Prepaid expenses and deposits (note 4) 88,832 25,959
------------- -------------
151,153 182,447
Capital assets - net (note 4) 24,433 25,105
Intangible assets - net (note 4) 33,585 37,462
------------- -------------
209,171 245,014
============= =============
Liabilities
Current liabilities
Accounts payables and accrued liabilities
(note 4) 111,817 104,358
Accounts payable to related party (note 8a) 37,150 26,330
Demand loan from related party (note 5) 100,000 -
------------- -------------
248,967 130,688
============= =============
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
15,500,067 common shares 1,550 1,471
250 preferred shares 1 1
Other capital accounts 976,199 744,697
Deficit accumulated during the development
stage (1,017,546) (631,843)
------------- -------------
(39,796) 114,326
------------- -------------
209,171 245,014
============= =============
Going concern (note 1)
Commitments (note 6)
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Condensed Consolidated Statement of Operations and Deficit
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
$
Expenses
Sales and marketing 207,723
General and administrative 133,726
Development costs 31,038
Amortization 13,684
-----------
386,171
Other income
Interest 468
-------------
Loss for the period and deficit - End of period 385,703
-------------
Basic loss per share (note 2) (0.03)
Weighted average number of shares outstanding 15,213,954
------------------------------------------------------------------------
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Condensed Consolidated Statement of Shareholders' Equity
For the three months ending July 31, 2000
-----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock Preferred stock Other capital accounts
Additional Accumulated Total
paid in other compre- Shareholders'
Number Amount Number Amount capital hensive income Deficit Equity
of Shares $ of Shares $ $ $ $ $
---------------------------------------------------------------------------------
Balance -
April 30,2000 14,709,320 1471 500 1 738,908 5,789 (631,843) 114,326
Conversion of
Preferred Stock
to Common Stock
(note 7) 390,747 39 (250) (39) --
Issuance of
Common Stock
(note 7) 200,000 20 -- -- 149,980 -- -- 150,000
Issuance of Common
Stock for marketing
services (note 7) 200,000 20 224,980 225,000
Marketing services
Receivable (note 7) (143,032) (143,032)
Comprehensive income
Loss for the period -- -- -- -- -- (385,703) (385,703)
Accumulated other com-
prehensive income -
foreign currency
translation -- -- -- -- -- (387) -- (387)
-----------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- (387) (385,703) (386,090)
--------------------------------------------------------------------------------------------------------------------------
Balance -
July 31, 2000 15,500,067 1,550 250 1 970,797 5,402 (1,017,546) (39,796)
</TABLE>
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Condensed Consolidated Statement of Cash Flows
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
$
Cash flows from operating activities
Loss for the period (385,703)
Adjustments to reconcile loss for the period to
net cash used for operating activities
Amortization 13,684
Non-cash marketing fees 81,968
Changes in operating working capital items
Other receivables (5,165)
Prepaid expenses and deposits (62,985)
Accounts payable and accrued liabilities 7,919
Accounts payable to related parties 10,820
-------------
(339,462)
Cash flows from investing activities
Purchase of capital assets (1,028)
Purchase and development of intangible assets (8,097)
-------------
(9,125)
Cash flows from financing activities
Proceeds from issuance of Common stock 150,000
Proceeds from Demand Loan 100,000
-------------
250,000
-------------
Effect of exchange rates on cash (701)
-------------
Net decrease in cash and cash equivalents (99,288)
Cash and cash equivalents - Beginning of period 149,170
-------------
Cash and cash equivalents - End of period 49,882
-------------
Supplemental cash flow information (note 3)
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Notes to Condensed Consolidated Financial Statements
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
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.
The company did not commence operations until February 2000, as such no
comparative income statement or statement of cash flows has been presented.
Nature of operations
wowtown.com Inc.'s (the company) principal business activities include the
establishment of internet web site portals for certain cities and
communities. 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 sites.
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.
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Notes to Condensed Consolidated Financial Statements
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
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
These unaudited interim condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States and include the accounts of the Company and its wholly
owned subsidiary. All significant intercompany transactions and balances
have been eliminated on consolidation. The accompanying interim condensed
consolidated financial statements of the company do not include all notes in
annual financial statements and therefore should be read in conjunction with
the Company's annual financial statements. The accompanying financial
statements include all normal recurring adjustments, which, in the opinion
of management, are necessary to present fairly the Company's financial
position at July 31, 2000 and its results of operations and cash flows for
the three month period then ended.
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.
The convertible preferred shares are not included in the computation of
fully diluted loss per share as their effect is anti-dilutive.
3 Supplemental cash flow information
$
Cash received for interest 432
Cash paid for interest 1,729
Supplemental non-cash financing and investing
activities Common stock issued for consulting
services 225,000
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Notes to Condensed Consolidated Financial Statements
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
4 Balance sheet components
Prepaid expenses and deposits
July April
31,2000 30,2000
$ $
Prepaid Marketing 62,125 -
Security deposit for operating line of credit 21,688 21,688
Other prepaid expenses 5,019 4,271
------------- -------------
26,707 25,959
============= =============
Capital assets
$ $
Furniture and fixtures 8,036 8,069
Office equipment 6,123 6,148
Computer hardware 15,448 14,482
------------- -------------
29,607 28,699
Less: Accumulated amortization 5,174 3,594
------------- -------------
24,433 25,105
============= =============
Intangible assets July 31, 2000 April 30, 2000
$ $
Website development costs 48,072 48,270
Domain names and trademarks 17,971 9,935
Computer software 6,756 6,784
------------- -------------
72,799 64,989
Less: Accumulated amortization 39,214 27,527
------------- -------------
33,585 37,462
============= =============
Accounts payable and accrued liabilities
$ $
Trade accounts payable 102,501 88,321
Accrued employee costs 9,034 11,747
Other accruals 282 4,290
------------- -------------
111,817 104,358
============= =============
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Notes to Condensed Consolidated Financial Statements
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
5 Demand loan from related party
The demand loan consists of a promissory note to a shareholder of the
company payable on demand after December 31, 2000. The note bears interest
at 10% per annum. The note is secured by 2,500,000 common shares which have
been pledged by a majority shareholder of the company.
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 July 31, 2000 are as follows:
$
2001 14,537
Thereafter --
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 May 30, 2000, 200,000 common shares were issued for $150,000.
On June 12, 2000, 100,000 common shares were issued as payment for marketing
services. The shares cannot be traded for a period of one year from the date
of issuance.
On June 12, 2000, as payment for marketing services, the company paid
$105,000 and issued 100,000 common shares. The shares cannot be traded for a
period of one year from the date of issuance.
Both transactions on June 12, 2000 were recorded using the fair value of the
company's common shares as they are publicly traded. The market value of
this security was $1.13 per share on June 12, 2000.
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
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Notes to Condensed Consolidated Financial Statements
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
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.
On May 30, 2000, 250 Series A preferred shares were converted into 390,747
common shares at a conversion price of $0.64 per share.
8 Related party transactions
a) Accounts payable to related party consists of amounts payable for
development costs and other services provided by a company in which on
of the company's directors is a director.
9 Income taxes
The company is subject to U.S. Federal and State income taxes.
The company has accumulated net operating loss ("NOL") carryforwards
totalling $225,000 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. Net deferred tax assets consist of the following:
$
Start-up expenditures 273,000
Net operating loss carryforwards 225,000
Capital assets 23,000
Deferred tax valuation allowance (521,000)
---------
-
===========
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 July 31, 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 $521,000.
<PAGE>
wowtown.com, Inc.
(a development stage enterprise)
(formerly Paramount Services Corp.)
Notes to Condensed Consolidated Financial Statements
For the three months ended July 31, 2000
----------------------------------------
(expressed in U.S. dollars)
(Unaudited)
10 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
as of July 31, 2000 operated portals in Vancouver, B.C., Las Vegas NV 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.
11 Contingencies
On May 23, 2000 the company entered into a Memorandum of Understanding
("MOU") with SpanTec Limited to form a corporation to be designated WOWtown
Latin America Limited. Upon the successful completion of a financing of at
least (pound)500,000 by WOWtown Latin America Limited, WOWtown Latin America
Limited shall pay SpanTec Limited a fee of 10% of capital raised. Concurrent
with the successful completion of the financing, the company shall issue to
SpanTec Limited 100,000 three year common stock warrants for $1.10 per
share.
12 Subsequent events
Subsequent to the period end, the company entered into an MOU with EuroTec
Worldwide Limited to form a corporation to be designated WOWtown Europe
Limited. Upon the successful completion of a financing of at least
(pound)500,000 by WOWtown Europe Limited, WOWtown Europe Limited shall pay
EuroTec Worldwide Limited a fee of 10% of capital raised. Concurrent with
the successful completion of the financing, the company shall issue to
EuroTec Worldwide Limited 100,000 three year common stock warrants for $1.10
per share.
Subsequent to the period end, the company entered into an MOU with BrazilTec
Limited to form a corporation to be designated WOWtown Brazil Limited. Upon
the successful completion of a financing of at least (pound)500,000 by
WOWtown Brazil Limited, WOWtown Brazil Limited shall pay BrazilTec Limited a
fee of 10% of capital raised. Concurrent with the successful completion of
the financing, the company shall issue to BrazilTec Limited 100,000 three
year common stock warrants for $1.10 per share.
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
Summary Financial Data
Results of Operations:
Three Months Ended
July 31, 2000
Sales $ --
Operating Expenses (386,171)
Interest 468
------------
Net Loss $ (385,703)
============
Balance Sheet Data:
July 31, 2000
Current Assets $ 89,208
Total Assets 147,046
Current Liabilities 248,967
Total Liabilities 248,967
Working Capital (159,759)
Stockholders' Deficit (101,921)
The Company has not declared any common stock dividends since our
inception.
Liquidity and Capital Resources
During the three months ended July 31, 2000 the Company's sources and use
of cash were:
Cash used by operations $(339,462)
Proceeds from sale of
common stock 150,000
Purchase of equipment
and intangible assets. (9,125)
Loan from third party 100,000
The Company expects that its expenses will continue to increase during the
next twelve months as a result of increased marketing expenses and the
establishment of new websites. The Company expects that its revenues will be
substantially less than operating expenses until November 2000.
<PAGE>
The Company is in the development stage company and through July 31, 2000
had not generated any revenues from its operations. During the twelve months
ending July 31, 2001 the Company anticipates that it 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
-----------
$1,900,000
As of August 31, 2000 the Company's current liabilities exceeded its
current assets by approximately $146,000. The Company anticipates obtaining the
additional capital which it will require through revenues from operations and
through a combination of debt and equity financing. There is no assurance that
the Company will be able to obtain capital which it will need or that its
estimates of capital requirements will prove to be accurate. As of September 15,
2000 the Company did not have any commitments from any source to provide
additional capital.
The Company's independent accountants have stated in their report to the
Company's financial statements for the year ended April 30, 2000 that, due to
recurring losses from operations, there is substantial doubt as to the Company's
ability to continue in business.
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities.
During the three months ended June 30, 2000 the Company:
(1) issued 390,747 shares of common stock as a result of the conversion of 250
Series A Preferred Shares,
(2) issued 200,000 shares of common stock for consulting services, and
(3) sold 200,000 shares of common stock to a private investor for $150,000 in
cash.
The Company relied upon the exemption provided by Section 3(a)(9) of the
Securities Act of 1933 in connection with the issuance of the shares described
in (1) above.
The Company relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933 in connection with the sale of these shares of common
stock described in (2) and (3) above.
The shares described above are "restricted securities" as that term is
defined in Rule 144 of the Securities and Exchange Commission
Item 6. Exhibits and Reports on Form 8-K:
Exhibits:
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
During the three months ending July 31, 2000, the Company did not file any
reports on form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
wowtown.com, Inc.
September 20, 2000 By /s/ David Packman
--------------------------------------
David Packman, President and Principal
Financial Officer
