<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to ________
Commission file number 0-27751
WORLDQUEST NETWORKS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 75-2838415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16990 Dallas Parkway, Suite 220, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (972) 818-0460
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO ______
----
At May 11, 2000, the registrant had outstanding 6,376,199 shares of par value
$.01 common stock.
Transitional Small Business Disclosure Format (check one):
Yes ______ No X
-----
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<PAGE>
WORLDQUEST NETWORKS, INC.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
-----------------------------
WORLDQUEST NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $33,359,688 $1,159,995
Accounts Receivable 93,945 113,688
----------------- -----------------
Total Current Assets 33,453,633 1,273,683
Property & Equipment, Net 1,139,683 574,573
Other Assets 743,676 1,144,777
----------------- -----------------
Total Assets $35,336,992 $2,993,033
================= =================
Current Liabilities
Accounts Payable $1,218,053 $1,532,293
Accrued Expenses 309,074 466,083
Deferred Revenue 186,539 159,201
Notes Payable 100,000 266,814
Line of credit from principal stockholder - 888,725
Current portion of capital lease obligation - 98,815
Subordinate promissory notes - 494,568
----------------- -----------------
Total current liabilities 1,813,666 3,906,499
Term loan 1,100,000 1,100,000
Accrued interest 237,619 199,814
Capital lease obligation - 28,660
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, par value $0.01 per share:
Authorized shares--10,000,000; none issued
and outstanding at December 31, 1999
and March 31, 2000 - -
Common stock, par value $0.01 per share:
Authorized shares--50,000,000; issued and
outstanding shares--3,196,699 at
December 31, 1999 and 6,371,949
at March 31, 2000 63,720 31,967
Additional capital 41,190,436 3,571,622
Accumulated deficit (9,068,449) (5,845,529)
----------------- -----------------
Total stockholder equity (deficit) 32,185,707 (2,241,940)
----------------- -----------------
Total liabilities and stockholder equity (deficit) $35,336,992 $2,993,033
================= =================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE>
WORLDQUEST NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Retail prepaid calling card revenue $1,978,567 $1,228,351
Wholesale traffic and other 1,852 203,528
----------------- -----------------
Total Revenue 1,980,419 1,431,879
Cost of sales 1,616,095 1,233,969
----------------- -----------------
Gross margin (deficit) 364,324 197,910
Selling, general and administrative 1,939,438 467,342
Research and development costs 8,836 62,851
----------------- -----------------
Operating loss (1,583,950) (332,283)
Interest expense (1,912,212) (38,925)
Other income 273,253 -
----------------- -----------------
Loss before income taxes (3,222,909) (371,208)
Income tax benefit - -
----------------- -----------------
Net loss $(3,222,909) $(371,208)
================= =================
Weighted average common shares outstanding - basic and
diluted 4,945,474 3,000,000
================= =================
Net loss per share- basic and diluted ($0.65) ($0.12)
================= =================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
<PAGE>
WORLDQUEST NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Accumulated
Shares Amount Capital Deficit Total
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 3,196,699 $31,967 $3,571,622 $ (5,845,529) $(2,241,940)
Sale of common stock in connection
with initial public offering 3,162,500 31,625 36,204,942 36,236,567
Exercise of warrants issued in
connection with subordinate
promissory notes 12,750 128 76,373 76,500
Fair value of warrants issued
for services 1,337,500 1,337,500
Net Loss for Three Months Ended
March 31, 2000 (3,222,920) (3,222,920)
----------------------------------------------------------------------------------
Balance at March 31, 2000 6,371,949 $63,719 $41,190,437 $ (9,068,449) $32,185,707
==================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-4-
<PAGE>
WORLDQUEST NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------------------
2000 1999
---------------- -------------
<S> <C> <C>
Operating Activities
Net Loss $(3,222,920) $(371,208)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 54,072 47,177
Amortization 267,104 21,139
Goodwill write-off - 139,747
Write-off of deferred debt costs 1,406,932 -
Fair value of warrants issued for services 1,337,500 -
Changes in operating assets and liabilities:
Accounts receivable 19,743 153,061
Accrued interest 37,805 21,699
Accounts payable and accrued expenses (93,865) 39,553
Deferred revenue 27,338 11,153
Other assets 161,997 (12,727)
---------------- -------------
Net cash (used in) provided by operating activities (4,294) 49,594
Investing Activities
Net additions to property and equipment (717,066) (83,902)
---------------- -------------
Net cash used in investing activities (717,066) (83,902)
Financing Activities
Changes in line of credit (888,725) 48,085
Payments on capital leases (434,975) (25,738)
Payments on notes payable (1,991,814) -
Sale of common stock 36,236,567 -
---------------- -------------
Net cash provided by financing activities 32,921,053 22,347
Increase (decrease) in cash and cash equivalents 32,199,693 (11,961)
Cash and cash equivalents at beginning of period 1,159,995 18,833
---------------- -------------
Cash and cash equivalents at end of period $ 33,359,688 $ 6,872
================ =============
Supplemental Disclosure of Cash Flow Information
Interest paid $118,552 $4,658
================ =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-5-
<PAGE>
WORLDQUEST NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
WorldQuest Networks, Inc. and Subsidiary (collectively "the Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for annual financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. The results for the interim periods
presented are not necessarily indicative of the results that may be expected for
any future period. The balance sheet at December 31, 1999 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. It is suggested that the financial statements
in this Form 10-QSB be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1999.
2. Net Loss Per Share
Stock options and warrants convertible into 1,277,697 and 477,005 shares
of the Company's common stock at March 31, 2000 and 1999, respectively, are
excluded from the calculation of net loss per share as their effect would be
antidilutive.
3. Initial Public Offering
In February 2000, the Company completed its initial public offering,
selling a total of 3,162,500 shares of common stock at a price of $13 per share.
The offering commenced on February 4, 2000, with the closing of 2,750,000 shares
on February 9, 2000 and the sale of an additional 412,500 shares, representing
the over-allotment option, closing on February 22, 2000. The initial public
offering resulted in net proceeds of approximately $36 million to the Company.
4. Warrants and Options
In March 2000, the Company granted a consulting company options to acquire
50,000 shares of common stock upon the Company's execution of an Internet portal
agreement arranged by the consulting company. The fair value of these options of
approximately $1.3 million was expensed in the first quarter of 2000.
In December 1999, the Company raised $1.9 million through the private
placement of promissory notes and common stock purchase warrants. These notes
were repaid in February and March 2000 from the proceeds of the Company's
initial public offering. The unamortized fair value of the common stock purchase
warrants of $1.4 million was recognized as additional interest expense in the
first quarter of 2000.
5. Related Party Transactions
In February 2000, $889,000 which represented the outstanding principal on
the line of credit with Eagle Venture Capital LLC (Eagle), a significant
stockholder of the Company, was repaid using proceeds from the initial public
offering. As of March 31, 2000, the Company owed Eagle $1.1 million under a term
loan with principal and interest payable May 5, 2002.
On April 17, 2000, the Company reached an agreement to purchase the
remaining 40% interest in BDC, LLC for $600,000. A director of the Company owns
BDC, LLC.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
--------------------------------------------------------------------
The following discussion of the financial condition and results of
operations of WorldQuest Networks, Inc. should be read in conjunction with the
Management's Discussion and Analysis or Plan of Operation (including Risk
Factors That May Effect Results of Operations and Financial Condition) and the
Consolidated Financial Statements and the Notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
This quarterly report on Form 10-QSB contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). See "Forward Looking Statements", below.
Results of Operations
The following table sets forth statement of operations data as a percentage
of revenues for the periods indicated:
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 2000
---- ----
<S> <C> <C>
Retail prepaid calling card revenue............................ 85.8% 99.9%
Wholesale traffic (1).......................................... 14.2 0.1
----- ----
Total revenue............................................. 100.0 100.0
Cost of sales.................................................. 86.2 81.6
----- -----
Gross margin (deficit)......................................... 13.8 18.4
Selling, general and administrative............................ 32.6 97.9
Research and development....................................... 4.4 0.5
----- -----
Operating loss................................................. (23.2) (80.0)
Interest expense............................................... (2.7) (96.6)
Other income................................................... -- 13.8
----- -----
Net loss....................................................... (25.9)% (162.7)%
===== =====
</TABLE>
- -------------
(1) Wholesale traffic represents the sale of excess line capacity and other
revenue represents facsimile transmission.
-7-
<PAGE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Revenue
Revenue increased to $2.0 million for the three months ended March 31, 2000
from $1.4 million for the comparable period in 1999 as a result of the growth of
our customer base and an increase in repeat purchases from our existing
customers.
Cost of Sales
Cost of sales consists primarily of the costs of termination of long
distance traffic over our networks. Cost of sales increased to $1.6 million for
the three months ended March 31, 2000 from $1.2 million for the comparable
period in 1999. This $0.4 million increase was primarily attributable to our
increased sales volume, somewhat offset by improved margins on retail calling
cards. We expect cost of sales to increase in future periods to the extent that
our sales volume increases.
Operating Expenses
Selling, General and Administrative. Selling, general and administrative
expenses consist of advertising and promotional expenditures, payroll and
related expenses for executive and administrative personnel, facilities
expenses, professional services expenses, travel and other general corporate
expenses. Selling, general and administrative expenses increased to $1.9 million
for the 2000 quarter from $0.5 million for the 1999 quarter, which included the
write off of $140,000 of goodwill in connection with the termination of our
Costa Rican operations in June 1999. Selling, general and administrative
expenses for 2000 include a charge of $1.3 million relating to the fair value of
warrants granted to a consultant on completion of a strategic relationship
agreement. We expect selling, general and administrative expenses to increase in
absolute dollars, but decrease as a percentage of revenue, as we continue to
pursue advertising and marketing efforts, expand our network termination
locations worldwide, expand our staff and incur additional costs related to the
growth of our business.
Research and Development Costs. Research and development costs consist
primarily of payroll and related expenses for evaluating and integrating new
hardware and software, Web site development and information technology
personnel, Internet access and hosting charges and Web content and design
expenses. Research and development costs decreased to $ 9,000 for the three
months ended March 31, 2000 from $ 63,000 for the comparable period in 1999 due
to capitalization of product development costs in the 2000 quarter. While we
will continue to incur expenses for research and development to increase our
product line and enhance our services, we expect these expenditures will
continue to decrease as a percentage of revenue as our sales volume increases.
Interest Expense, Net
Interest expense consists of interest earned on cash and cash equivalents,
and includes interest expense charges attributable to capital leases for
equipment, borrowings under a credit facility with our principal stockholder and
to unsecured subordinated convertible promissory notes issued in a private
offering in December 1999. For the three months ended March 31, 2000, interest
expense totaled $1.6 million, which includes interest income of $273,000, and
cash and non-cash charges of $1,849,000 relating to the fair value of warrants
and issuance costs relating to our private placement of $1.9 million of
promissory notes in December 1999 and other financing activities prior to our
initial public offering which were paid off with proceeds from the offering, as
compared to interest expense of $39,000 in the 1999 quarter. There were no
non-cash items or interest income in the 1999 quarter.
-8-
<PAGE>
Income Taxes
As of March 31, 2000, we had approximately $5.7 million of net operating
loss carryforwards for federal income tax purposes, which expire beginning in
2011. We have provided a full valuation allowance on the deferred tax asset,
consisting primarily of net operating loss carryforwards, because of uncertainty
regarding its future realizability. Limitations on the utilization of these
carryforwards may result if we experience a change of control, as defined in the
Internal Revenue Code of 1986, as amended, as a result of changes in the
ownership or our common stock.
Net Loss
We incurred a net loss of $(3.2) million for the three months ended March
31, 2000 as compared to $(371,000) for the same quarter in 1999. Included in the
2000 net loss of $(3.2) were non-cash marketing expense of $1.3 million and cash
and non-cash interest expenses of $1.8 million noted above. Net loss, adjusted
to exclude these cash and non-cash expenses was $(36,000). The adjusted net loss
of $(36,000) in the 2000 quarter decreased from a net loss of $(371,000) in the
1999 quarter, which included the write off of $140,000 of goodwill in connection
with the termination of our Costa Rican operations in June 1999, due to
increased sales volume, higher gross margins and interest income.
Liquidity and Capital Resources
As of March 31, 2000, we had approximately $33.4 million of cash and cash
equivalents. As of that date, our principal commitments consisted of contracts
for long distance transmissions and our credit facility with our principal
stockholder.
Outstanding amounts owed to our principal stockholder as of March 31, 2000
and 1999 were $1.1 million and $1.8 million, respectively. In May 1999, we
amended our credit facility with our principal stockholder to convert $1.1
million to a term loan bearing interest at 8% per annum with interest and
principal payable May 5, 2002. Our principal stockholder also agreed at such
time to convert $200,000 of the loan into 60,061 shares of our common stock, at
a conversion price of $3.33 per share. We also continue to have a line of credit
with our principal stockholder. The amount we are able to borrow under this line
of credit was increased to $1.4 million by an amendment to our credit facility
in August 1999, $468,000 of which was drawn and outstanding as of the date of
the amendment.
In December 1999, we raised $1.9 million through the private placement of
units consisting of promissory notes with a face value of $1.9 million and
common stock purchase warrants. These notes were fully repaid during February
and March 2000 from the proceeds of our initial public offering.
Net cash used in operating activities was $4,000 for the three months ended
March 31, 2000 and net cash provided by operating activities was $50,000 in the
1999 quarter. Net cash used in and provided by operating activities for the 2000
and 1999 quarters primarily consisted of net operating losses as well as
increases in other assets, offset by increases in accounts payable, accrued
expenses and accrued interest.
Net cash used in investing activities consists of additions to property and
equipment, including computer equipment and Internet gateways for voice over the
Internet transmission. Net cash used in investing activities was $717,000 for
the three months ended March 31, 2000 and $84,000 in the 1999 quarter. During
the remainder of the year 2000, we expect to spend approximately $1.3 million in
capital expenditures, of which $800,000 will be for gateway servers, $100,000
for data base servers, $200,000 for software and $200,000 in miscellaneous other
equipment.
-9-
<PAGE>
Net cash provided by financing activities was $32.9 million for the three
months ended March 31, 2000 and $22,000 for the 1999 quarter. Net cash provided
by financing activities for the 2000 quarter was affected by proceeds from the
company's initial public offering of its common stock, and the 1999 quarter was
impacted by the proceeds from the company's line of credit and payment on
capital leases.
On April 17, 2000, the Company reached an agreement to purchase the
remaining 40% interest in BDC, LLC for $600,000. A director of the Company owns
BDC, LLC.
We currently anticipate that the net proceeds of our initial public
offering, together with our other available funds, will be sufficient to meet
our anticipated needs for working capital and capital expenditures through at
least the next 18 months. We may need to raise additional funds prior to the
expiration of such period if, for example, we pursue business or technology
acquisitions or experience operating losses that exceed our current
expectations. If we raise additional funds through the issuance of equity,
equity-related or debt securities, such securities may have rights, preferences
or privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.
Forward Looking Statements
Certain statements in this report, including statements of WorldQuest's and
management's expectations, intentions, plans and beliefs, including those
contained in or implied by "Management's Discussion and Analysis or Plan of
Operation" and the Notes to Condensed Consolidated Financial Statements, are
"forward-looking statements", within the meaning of Section 21E of the Exchange
Act, that are subject to certain events, risk and uncertainties that may be
outside WorldQuest's control. These forward-looking statements include
statements of management's plans and objectives for WorldQuest's future
operations and statements of future economic performance, information regarding
our expansion and possible results from expansion, our expected growth, our
capital budget and future capital requirements, the availability of funds and
our ability to meet future capital needs, the realization of our deferred tax
assets, and the assumptions described in this report underlying such
forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements, our expansion and acquisition strategy, our
ability to achieve operating efficiencies, our dependence on network
infrastructure, capacity, telecommunications carriers and other suppliers,
industry pricing and technology trends, evolving industry standards, domestic
and international regulatory matters, general economic and business conditions,
the strength and financial resources of our competitors, our ability to find and
retain skilled personnel, the political and economic climate in which we conduct
operations and the risk factors described from time to time in our other
documents and reports filed with the Securities and Exchange Commission (the
"Commission").
-10-
<PAGE>
PART II - OTHER INFORMATION
Items 1, 3, 4 and 5 are omitted from this report as inapplicable.
- -----------------------------------------------------------------
Item 2. Changes in Securities.
- -------------------------------
The effective date of our first registration statement, filed on Form SB-2
under the Securities Act of 1933 (no. 333-93019) relating to our initial public
offering of our Common Stock, was February 4, 2000. A total of 3,162,500 shares
of our Common Stock were sold at a price of $13.00 per share. Net proceeds to
WorldQuest were approximately $36 million. From the time of receipt through
March 31, 2000, the net proceeds were applied toward:
- Repayment of indebtedness, $2,946,195;
- Equipment purchases including additional back-up systems,
$276,307;
- Software development, $38,190; and
- General corporate purposes, including payment of outstanding
payables, payoffs of capital leases, liability insurance premiums,
development of strategic relationships and research and
development of new products, $845,202.
The remaining proceeds are being used as working capital or are being held in
high quality, short-term investment instruments such as short-term corporate
investment grade or United States Government interest-bearing securities.
Of the $2,946,195 paid for repayment of indebtedness, $867,647 was paid to Eagle
Venture Capital, LLC, which owns approximately 42% of our Common Stock and is
controlled by B. Michael Adler, our Chairman of the Board and Chief Executive
Officer.
WorldQuest issued 12,750 shares of common stock on March 28, 2000 upon exercise
of a warrant by the holder of such warrant and payment of the exercise price of
$6.00 per share. WorldQuest also granted a warrant to purchase 50,000 shares of
common stock, at an exercise price of $6.00 per share, to a consulting company
on March 16, 2000, which were earned by such consultant under an existing
agreement. WorldQuest issued these securities in reliance on the non-public
offering exemption afforded by Section 4(2) of the Securities Act of 1933, as
amended.
-11-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) The following exhibits are filed as part of this Quarterly
Report on Form 10-QSB pursuant to Item 601 of Regulation S-B:
Exhibit
Number Description of Exhibits
- ------ -----------------------
3.1 Certificate of Incorporation of WorldQuest, filed as Exhibit
3.1 to WorldQuests' Form SB-2 Registration Statement, File No.
333-82721 (the "Prior Registration Statement"), and
incorporated herein by reference.
3.2 Bylaws of WorldQuest, filed as Exhibit 3.2 to the Prior
Registration Statement, and incorporated herein by this
reference.
4.1 Specimen common stock certificate, filed as Exhibit 4.1 to the
Prior Registration Statement, and incorporated herein by this
reference.
4.2 Amended and Restated Note dated May 5, 1999 payable to
WorldQuest Networks, LLC (now known as Eagle Venture Capital,
LLC), filed as Exhibit 4.2 to the Prior Registration
Statement, and incorporated herein by this reference.
4.3.1 Representatives' Warrant dated February 4, 2000 granted to
John G. Kinnard and Company Incorporated for 68,750 shares of
common stock, filed as Exhibit 4.3.1 to WorldQuest's Annual
Report on Form 10-KSB for the fiscal year ended December 31,
1999, and incorporated herein by reference.
4.3.2 Representatives' Warrant dated February 4, 2000 granted to
Kaufman Bros., L.P. for 178,750 shares of common stock, filed
as Exhibit 4.3.2 to WorldQuest's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999, and incorporated
herein by reference.
4.3.3 Representatives' Warrant dated February 4, 2000 granted to
WestPark Capital, Inc. for 27,500 shares of common stock,
filed as Exhibit 4.3.3 to WorldQuest's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999, and
incorporated herein by reference.
4.4 Amended and Restated Note date August 15, 1999 payable to
Eagle Capital Venture, LLC, which replaces the Amended and
Restated Note filed as Exhibit 4.2, filed as Exhibit 4.4 to
the Prior Registration Statement, and incorporated herein by
this reference.
4.5 Form of Unsecured Subordinated Convertible Promissory Note
issued in the private placement closed in December 1999 (the
"Private Placement"), filed as Exhibit 4.5 to WorldQuest's
Form SB-2 Registration Statement, file no. 333-93019 (the
"Second Registration Statement"), and incorporated herein by
this reference.
4.6 Form of Warrant issued in the Private Placement, filed as
Exhibit 4.6 to the Second Registration Statement, and
incorporated herein by this reference.
*10.1 Purchase Agreement dated April 17, 2000 between WorldQuest and
BDC, LLC.
*27.1 Financial Data Schedule.
- -----------------------
* Filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of
2000.
-12-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WORLDQUEST NETWORKS, INC.
May 15, 2000 By: /s/ Mark C. Levy
---------------------------------
Mark C. Levy, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT 10.1
WORLDQUEST NETWORKS, INC.
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is entered into effective as of April
17, 2000 between BDC LLC, a Delaware limited liability company ("BDC"), and
WorldQuest Networks, Inc., a Texas corporation ("WQN").
WHEREAS, BDC and WQN entered into that certain Joint Venture Agreement
dated April 9, 1999 (the "JV Agreement") pursuant to which the parties formed a
joint venture (the "JV") to provide Internet voice and related services at three
sites identified in the JV Agreement; and
WHEREAS, WQN desires to purchase from BDC, and BDC desires to sell to WQN,
all of BDC's right, title and interest in and to the JV upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements set forth herein, together with other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. WQN hereby purchases from BDC, and BDC hereby sells to WQN, all of
BDC's right, title and interest in and to the JV and the JV shall be deemed
dissolved and BDC shall have no further right or interest in or to the Joint
Venture or any of the assets, business or profits of the JV and WQN shall be
entitled to 100% thereof from and after the date of this Agreement. WQN shall
pay $600,000 for the purchase of BDC's interest in the JV, which amount shall be
paid in immediately available funds. BDC hereby represents, warrants and
covenants to WQN that BDC is transferring good, marketable and valid title to
its interest in the JV to WQN free and clear of all liens, security interests,
taxes, encumbrances, restrictions on transferability or claim of any interest
therein of any kind by any other party.
2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument; shall be governed by and construed in accordance with the laws
of the State of Texas; and shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors, administrators and
assigns. The parties agree from and after the date hereof, upon request of the
other party, to execute, acknowledge and deliver all such further acts,
assignments, transfers, conveyances, powers of attorney and assurances as may be
required to carry out the intent of this Agreement.
Executed effective as of the date and year first above written.
BDC LLC
By: /s/ E. Denton Jones
-----------------------------------
E. Denton Jones, Member and Manager
WORLDQUEST NETWORKS, INC.
By: /s/ B. Michael Adler
--------------------
B. Michael Adler, Chairman and CEO
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE REGISTRANT'S REPORT ON FORM 10-QSB FOR THE
THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS .
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 33,359,688
<SECURITIES> 0
<RECEIVABLES> 110,224
<ALLOWANCES> (16,279)
<INVENTORY> 0
<CURRENT-ASSETS> 33,453,633
<PP&E> 1,976,222
<DEPRECIATION> (836,539)
<TOTAL-ASSETS> 35,336,992
<CURRENT-LIABILITIES> 1,813,666
<BONDS> 0
0
0
<COMMON> 63,720
<OTHER-SE> 32,121,987
<TOTAL-LIABILITY-AND-EQUITY> 35,336,992
<SALES> 1,980,419
<TOTAL-REVENUES> 1,980,419
<CGS> 1,616,095
<TOTAL-COSTS> 3,564,369
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,912,212)
<INCOME-PRETAX> (3,222,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,222,909)
<EPS-BASIC> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
