SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 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 October 31, 2000 the Company had 15,500,067 shares of Common Stock issued
and outstanding.
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Condensed and Consolidated Balance Sheets
(expressed in U.S. dollars)
(Unaudited)
October 31, April 30,
2000 2000
---------- ---------
Assets
Current assets
Cash and cash equivalents $ - $149,170
Other receivables 19,263 7,318
Prepaid expenses and deposits (note 4) 21,683 25,959
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Total current assets 40,946 182,447
Capital assets - net (note 4) 22,229 25,105
Intangible assets - net (note 4) 28,244 37,462
--------------------------------------------------------------------------------
$ 91,419 $245,014
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Liabilities and Shareholders' Deficiency
Current liabilities
Bank overdraft $ 26,921 $ -
Accounts payable and accrued
liabilities (note 4) 216,033 104,358
Accounts payable to related parties
(note 9a) 37,150 26,330
Demand loan from related party (note 6) 200,000 -
--------------------------------------------------------------------------------
Total current liabilities 480,104 130,688
Shareholders' deficiency
Capital stock (note 8)
Authorized
30,000,000 common shares at
par value $0.0001
5,000,000 preferred shares
at a par value of $0.0001
Issued
15,500,067 common shares 1,550 1,471
250 preferred shares 1 1
Other capital accounts 1,139,731 744,697
Deficit accumulated during the
development stage (1,529,967) (631,843)
--------------------------------------------------------------------------------
Total stockholders' deficiency (388,685) 114,326
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$ 91,419 $ 245,014
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The accompanying notes are an integral
part of these financial statements
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Condensed and Consolidated Statements of Operations
For the six months ended October 31, 2000 and
for the three months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
Three Six
Months Months
ended ended
October 31, October 31,
2000 2000
---------- -----------
Operating Expenses
Sales and marketing $243,674 $482,797
General & administrative 164,030 331,598
Interest 2,027 2,027
Development costs 32,652 63,690
Amortization 6,728 20,412
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Total operating expenses 449,111 900,524
--------------------------------------------------------------------------------
(Loss) from operations (449,111) (900,524)
Other income
Foreign exchange 978 1,820
Interest 112 580
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Total other income (expenses) 1,090 2,400
--------------------------------------------------------------------------------
Net (loss) $(448,021) $(898,124)
Net (loss) per share - Basic and Diluted $ (0.03) $ (0.07)
--------------------------------------------------------------------------------
Weighted average shares
of common stock outstanding 15,500,067 12,537,565
--------------------------------------------------------------------------------
The accompanying notes are an integral
part of these financial statements
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Condensed and Consolidated Statement of Stockholders' Equity
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
Common stock Preferred stock Other capital accounts
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated
other
Number Number Additional compre- Deferred Total
of of Paid-in hensive consul- Stockholders'
Shares Amount Shares Amount Capital Income ting Deficit equity
------------------------------------------------------------------------------------------------------------------------------------
Balance as of
April 30, 2000 14,709,320 $1,471 500 $1 $738,908 $5,789 $- $(631,843) $114,326
Conversion of
Preferred stock
to Common Stock
(note 8) 390,747 39 (250) (39) -
Shares issued for:
Private placement 200,000 20 149,980 150,000
Marketing services 200,000 20 224,980 225,000
Consulting services
receivable (8,823) (8,823)
Contribution by principal
shareholder (note 8) 479,000 (447,600) 31,400
Comprehensive income
Loss for the period (898,124) (898,124)
Accumulated other comprehensive
income - foreign currency translation (2,464) (2,464)
Balance
as of
October
31, 2000 15,500,067 $1,550 250 $ 1 $1,584,006 $ 3,325 $(447,600) $(1,529,967) $(388,685)
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Condensed and Consolidated Statement of Cash Flows
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
Cash flows from operating activities
Loss for the period $(898,124)
Adjustments to reconcile loss for the period
to net cash used for operating activities
Amortization 20,412
Non-cash marketing fees 247,577
Changes in operating working capital items
Other receivables (12,203)
Prepaid expenses and deposits 3,043
Accounts payable and accrued liabilities 114,488
Accounts payable to related parties 10,820
--------------------------------------------------------------------------------
(513,987)
Cash flows from investing activities
Purchase of capital assets (732)
Purchase and development of intangible assets (8,588)
--------------------------------------------------------------------------------
(9,320)
Cash flows from financing activities
Proceeds from issuance of common stock 150,000
Proceeds from demand loan 200,000
Proceeds from bank indebtedness 26,921
--------------------------------------------------------------------------------
376,921
Effect of exchange rates on cash (2,784)
--------------------------------------------------------------------------------
(Decrease) in cash and cash equivalents (149,170)
Cash and cash equivalents - beginning of period 149,170
--------------------------------------------------------------------------------
Cash and cash equivalent - end of period $ -
Supplementary cash flow information (note 3)
The accompanying notes are an integral
part of these financial statements
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 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 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 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 Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 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.
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 October 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 $ 561
Cash paid for interest 3,836
Supplementary non-cash financing and investing activities
Common stock issued for consulting services 200,000
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
4 Balance sheet components
Prepaid expenses and deposits
October 31, April 30,
2000 2000
Security deposit for operating line of credit $20,424 $21,688
Other prepaid expenses 1,259 4,271
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$ 21,683 $ 25,959
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Capital assets
October 31, April 30,
2000 2000
Furniture and fixtures $7,531 $8,069
Office equipment 6,136 6,148
Computer hardware 15,215 14,482
------------ ----------
Less: Accumulated depreciation 6,653 3,594
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$ 22,229 $ 25,105
=========== ==========
Intangible assets
October 31, April 30,
2000 2000
Website development costs $47,979 $48,270
Domain names and trademarks 17,700 9,935
Computer software 6,654 6,784
------------ -----------
Less: Accumulated amortization 44,089 27,527
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$ 28,244 $ 37,462
=========== ===========
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
Accounts payable and secured liabilities
October 31, April 30,
2000 2000
Trade accounts payable $155,106 $88,321
Accrued employee costs 39,900 11,747
Other accruals 21,027 4,290
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$ 216,033 $ 104,358
============ ===========
5 Bank indebtedness
The Company has an authorized line of credit of $30,000, secured under
deposit, which bears interest at the rate of 5.29% per annum.
6 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.
7 Commitments
The Company leases certain facilities and equipment used in its operations
under operating leases. Future minimum lease payments under these lease
agreements at October 31, 2000 are as follows:
$
2001 31,875
Thereafter -
8 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.
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
8 Capital stock (Continued)
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.
On September 14, 2000 the Company filed a registration statement on form SB-2
with the Securities and Exchange Commission to qualify the sales to the
public of the following securities:
o 2,000,000 shares of the Company's common stock at a price of $1.00 per
share;
o shares of the Company's common stock that are issuable upon the conversion
of the Company's Series A preferred stock;
o 3,090,747 shares of the Company's common stock offered by certain of the
Company's shareholders; and
o 300,000 shares of the Company's common stock issuable upon the exercise
of warrants.
The Company will not receive any funds upon the conversion of the Series A
preferred shares or from the sale of the common stock by the selling
stockholders. The Company will receive approximately $300,000 if all warrants
are exercised.
During the period, certain of the Company's principal shareholders entered
into Agreements with third parties to provide services to the Company. Under
the terms of these Agreements, the shareholders sold shares to the third
parties at a discount to their fair market value. The shareholders also paid
the sum of $150,000 cash under the terms of these Agreements. Accordingly,
the Company has recorded $479,000 as additional paid in capital, charges in
respect of consulting services of $31,400 and deferred consulting charges of
$447,600. The deferred consulting services will be amortized over the terms
of the Agreements.
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
8 Capital stock (Continued)
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.
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.
9 Related party transactions
Accounts payable to related party consists of amounts payable for development
costs and other services provided by a company in which one of the Company's
director is a director.
10 Income taxes
The Company is subject to U.S. Federal and State income taxes.
The Company has accumulated net operating loss ("NOL") carryforwards totaling
$225,000 which can be applied to reduce taxable income in future taxable
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 $810,000
Net operating loss carryforwards 225,000
Capital assets 23,000
Deferred tax valuation allowance (1,058,000)
--------------
$ -
=================
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
10 Income taxes (Continued)
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 October 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.
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 62 city portals including 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.
12 Contingencies and Commitments
a) 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.
b) The Company entered into an MOU with BrazilTec Limited on August 4, 2000
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.
c) On August 16, 2000 the Company entered into a Technology Licensing Agreement
with ThinkView, Inc. for the non-exclusive use of certain ThinkView. Inc.
technologies. The agreement is for an initial one year period and will
automatically
<PAGE>
WOWTOWN.COM, INC.
(A Development Stage Company)
(formerly Paramount Services Corp.)
Notes to Condensed and Consolidated Financial Statements
For the six months ended October 31, 2000
(expressed in U.S. dollars)
(Unaudited)
12 Contingencies and Commitments (Continued)
renew for successive one year periods unless otherwise terminated by either
party on 60 days notice. Under the terms of the agreement as amended, the
Company shall pay ThinkView, Inc. 100,000 shares of the Company's common
stock. The market value of this security was $0.875 per share on August 16,
2000. No compensation has been issued. The shares issuable to ThinkView, Inc.
cannot be traded for a period of one year from the date of issuance.
d) The Company entered into an MOU with EuroTec Worldwide Limited on August
18, 2000 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.
e) By resolution of the Company's directors, the Company has agreed to
compensate certain consultants and officers, directors under one year
contracts, each at the rate of $100,000 per annum commencing October 1, 2000
and ending September 30, 2001.
13 Subsequent events
The Company's bank indebtedness was repaid through the application of the
Company's deposit.
The Company entered into a consulting agreement for a three month term
commencing November 1, 2000. As consideration under this contract the Company
has agreed to issue 25,000 unregistered shares of the Company's common stock.
The market value of the Company's commons stock was $0.4375 per share on
November 1, 2000.
The Company has agreed effective December 1, 2000 to issue 30,000
unregistered common shares of the Company to a person who will become an
advisor to the Company.
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
During the six months ended October 31, 2000 the Company's sources and use
of cash were:
Cash used by operations $(513,987)
Proceeds from sale of
common stock 150,000
Purchase of equipment
and intangible assets. (9,320)
Loan from third party 200,000
Bank loan 26,921
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 June 2001.
The Company is in the development stage company and through October 31,
2000 had not generated any revenues from its operations. During the twelve
months ending October 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 October 31, 2000 the Company's current liabilities exceeded its
current assets by approximately $439,000. 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 December 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 six months ended October 31, 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 October 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.
December 19, 2000 By /s/
---------------------------------------
David Packman, President and Principal
Financial Officer
