UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------------------
FORM 10Q-SB Amendment Number 1
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended December 31, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No.: 0-28335
WEB4BOATS.COM, INC.
(Name of Small Business Issuer in its Charter)
DELAWARE 84-1080043
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
P.O. BOX 1028
LA JOLLA, CALIFORNIA 92038
(Address of principal executive offices) (Zip Code)
(858) 459-2628
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Title of each class Name of each exchange on which registered
None None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value per share
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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Common Stock, $0.0001 par value per share - 4,983,460 shares outstanding
as of March 6, 2000
Documents Incorporated by Reference: None.
Disclosure Format (check one): Yes No |X|
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Independent Accountant's Review Report
March 6, 2000
To the Board of Directors and Shareholders of Web4Boats.com, Inc.:
I have reviewed the accompanying balance sheets of Web4Boats.com,
Inc. as of December 31, 1998 and 1999, and the related statements of
operations for each of the three months and nine months then ended, and
the related statements of cash flows for each of the nine months then
ended. These financial statements are the responsibility of the Company's
management.
I conducted my review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that Web4Boats.com, Inc. will continue as a going concern. As
discussed in Note 7 to the financial statements, the Company has suffered
recurring losses from operations and has a net capital deficiency that raise
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.
Carl S. Sanko
Chatsworth, California
<PAGE>
Web4Boats.com, Inc.
Balance Sheets
December 31, 1998 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, December 31,
1998 1999
Assets
Current assets
Cash $ 6,537 $ 746
Accounts receivable 23,703 3,028
Inventory 8,629 0
Total current assets 38,869 3,774
Property and equipment
Furniture and fixtures 2,808 0
Equipment 134,172 33,604
Leasehold improvements 120,650 0
257,630 33,604
Accumulated depreciation (217,248) ( 3,209)
Property and equipment, net 40,382 30,395
Other assets
Deposits 17,826 0
Trademarks, net 0 12,068
Total other assets 17,826 12,068
Total assets $ 97,077 $ 46,237
</TABLE>
See accompanying notes to financial statements
- Unaudited -
<PAGE>
Web4Boats.com, Inc.
Balance Sheets
December 31, 1998 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, December 31,
1998 1999
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 64,291 $ 105,947
Accrued expenses 61,226 2,858
Accrued litigation settlement 42,500 42,500
Short-term borrowings 50,000 18,000
Total current liabilities 218,017 169,305
Shareholders' equity (deficit)
Preferred stock, par value $.001,
20,000,000 shares authorized,
0 and 10,000 issued and
outstanding at December 31, 1998
and 1999, respectively 0 10
Common stock, par value $.001,
100,000,000 shares authorized,
4,898,870 and 4,683,460 issued
and outstanding at December 31, 1998
and 1999, respectively 4,899 4,683
Paid in capital 1,551,728 2,035,776
Accumulated deficit (1,677,567) (2,163,537)
Total shareholders' equity ( 120,940) ( 123,068)
Total liabilities and shareholders' equity $ 97,077 $ 46,237
</TABLE>
See accompanying notes to financial statements
- Unaudited -
<PAGE>
Web4Boats.com, Inc.
Statements of Operations
For the Nine Months Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
9 Months Ended 9 Months Ended
December 31, December 31,
1998 1999
Revenues $ 459,733 $ 3,797
Cost of sales 170,678 0
Gross profit 289,055 3,797
Operating expenses:
Salaries 170,366 46,875
General and administrative 369,270 193,651
Total operating expenses 539,646 240,526
Loss from operations (250,581) (236,729)
Other income:
Gain on disposed operations 0 71,880
Net loss $ (250,581) $ (164,849)
Beneficial conversion feature on
preferred stock 0 100,000
Net loss applicable to common stock
shareholders $ 0 $ (264,849)
Basic and dilutive loss per share $ (.05) $ (.06)
</TABLE>
See accompanying notes to financial statements
- Unaudited -
<PAGE>
Web4Boats.com, Inc.
Statements of Operations
For the Three Months Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
3 Months Ended 3 Months Ended
December 31, December 31,
1998 1999
Revenues $ 126,374 $ 27
Cost of sales 57,969 0
Gross profit 68,405 27
Operating expenses:
Salaries 36,744 15,625
General and administrative 67,699 72,567
Total operating expenses 104,443 88,192
Net loss $ ( 36,038) $ ( 88,165)
Basic and dilutive loss per share $ (.01) $ (.01)
</TABLE>
See accompanying notes to financial statements
- Unaudited -
<PAGE>
Web4Boats.com, Inc.
Statements of Cash Flows
For the Nine Months Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
9 Months Ended 9 Months Ended
December 31, December 31,
1998 1999
Cash flows from operating activities
Net loss $ (250,581) $(164,849)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 37,954 4,051
Common stock issued for services 153,750 46,875
Gain on disposal of segment 0 (71,880)
Loss on disposal of vehicle 988 0
Changes in operating assets and
liabilities
Accounts receivable (13,081) 0
Inventory 0 5,340
Accounts payable 40,263 40,877
Accrued expenses 42,203 ( 37,942)
Short-term borrowings 0 18,000
Net cash provided by (used in) operating
activities 10,508 (159,528)
Cash flows from investing activities
Sale of business operations 0 99,610
Purchases of fixed assets 0 (33,604)
Purchases of trademarks 0 (12,910)
Deposits refunded 0 6,316
Net cash provided by (used in) investing
activities 0 59,412
Cash flows from financing activities
Proceeds from issuance of preferred stock 0 100,000
Payment for redemption of common stock 0 ( 121)
Net cash provided by (used in) financing
activities 0 99,879
Net increase (decrease) in cash 11,496 ( 237)
Cash, beginning of year (4,959) 983
Cash, end of year $ 6,537 $ 746
</TABLE>
See accompanying notes to financial statements
- Unaudited -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 Summary of significant accounting policies
Organization and business
Web4boats.com, Inc. ("the Company"), a Delaware Corporation,
was incorporated on February 4, 1994 as New York Bagel Exchange,
Inc. Commencing September 26, 1995, the Company has operated in the
business of wholesale and retail sales of bagels, sandwiches, baked goods,
specialty coffees and related items. On August 22, 1997, the Company
acquired the assets and liabilities of Windom, Inc., a non-operating public
shell, resulting in the retirement of all the common and preferred shares
of both companies, and the reissuance, by the Company, of 2,594,560
shares of common stock. The merger was accounted for, in substance,
as an issuance of stock for the net monetary asets of Windom, Inc. on
August 22, 1997, and the financial statements presented are those of
New York Bagel Exchange, Inc. since the date of its formation.
Subsequent to the merger, the Company continued its wholesale
and retail operations. On January 26, 1999, New York Bagel Exchange,
Inc. changed its name to Webboat.com, Inc., on April 2, 1999, Webboat.com,
Inc. changed its name to Windom.com, Inc., and on April 20, 1999,
Windom.com, Inc. changed its name to Web4boats.com, Inc.
On March 22, 1999, the Board of Directors approved sale of the
Company's inventory and fixed assets for $120,000. The Company ceased
its bagel business operations on March 25, 1999. The actual disposal date
of assets subject to the sale was on April 19, 1999. A gain of $71,880
resulted upon the disposition. Per Accounting Principles Board opinion
No. 30, since the disposal date occurred subsequent to fiscal year 1999,
the gain is recognized on the realized date of April 19, 1999 and is therefore
included as "Other income" in the Statement of Operations for the nine
months ended December 31, 1999.
During fiscal year 1999, the Company began making plans to develop
a commercial internet site in which boat builders, manufacturers, dealers,
marinas, individual buyers and sellers would come to advertise sales and
services related to the boating industry. In fiscal 1999, the Company
incurred $256,250 of expense for marketing, consulting and other services
related to development of the Company's new business operations. In April,
1999, the Company issued 1,000,000 shares of its common stock as full
payment for these services. Subsequently, for the nine months ended
December 31, 1999, the Company has continued to invest substantially in
website development and related costs. The Company expects, as a going
concern, to realize future benefits from these costs. However, all such
development costs are expensed as incurred.
The Company has no revenues from its internet site for the nine months
ended December 31, 1999. The Company expects, as a going concern, to
derive revenues from the sale of advertisements in the first quarter of fiscal
year 2000.
Property and equipment
Equipment is recorded at cost and depreciated over estimated useful
lives of three to five years using the straight-line method. Trademarks
are recorded at cost and amortized over estimated useful lives of five
years using the straight-line method.
Income taxes
The Company has net operating loss carryforwards from fiscal
years 1999 and earlier of approximately $1,861,000 and $931,000
for federal and California state tax purposes, respectively. With
additional loss for the nine months ended December 31, 1999, the
Company has total net operating loss carryforwards at December 31,
1999 of approximately $2,029,000 and $1,014,000 for federal and
California state tax purposes, respectively. A deferred asset for these
amounts has not been accrued due to the uncertain nature of its being
realized. Net operating loss carryforwards begin to expire in fiscal
year 2011.
Earnings per share
The computation of loss per share of common stock is based on
the weighted average number of shares outstanding during each nine
month period.
<PAGE>
NOTE 2 Shareholders' equity
Compensatory stock issuance
During the nine months ended December 31, 1998, the Company
received legal and professional services valued at $153,750 in exchange
for common stock. During the nine months ended December 31, 1999,
the Company received salary compensation of $46,875 in exchange for
common stock.
Stock options
During fiscal year 1998, the Company recorded a charge to
operations of $687,500 for marketing and other services in exchange
for issuance of stock options. The value for such services was
computed as the difference between the quoted market price at the
option's measurement date and the option price. All options were
exercisable at time of grant and no options have been exercised as
of December 31, 1999. The number of shares represented by
compensatory stock options outstanding at December 31, 1999 are
1,500,000 shares with an option price of $.50 to $1.00 per share,
and $1,000,000 in total, and with a market price at date of grant of
$.56 to $2.00 per share, and $1,687,500 in total. Outstanding options
expire on various dates from September 24, 2002 to March 10, 2003.
Stock redeemed and issued
In April, 1999, the Company contractually redeemed, at par value,
1,215,000 shares of common stock, representing all the outstanding
stock held by a former officer of the Company. The Company then
issued 500,000 shares of restricted common stock and stock options
representing 500,000 shares of common stock to a new officer as
consideration for future services to be rendered.
Issuance of preferred stock
In June, 1999, the Company authorized the issuance of 20,000,000
shares of $.001 par value, preferred stock. In August, 1999, 10,000
shares of preferred stock was designated as Series A preferred stock
with conversion rights of one share of Series A preferred to 100 shares
of common stock. Subsequently, the 10,000 shares of Series A preferred
was sold for $100,000 to a related party. A beneficial conversion feature
of $100,000 was present in the transaction. While there is no net impact to
shareholders' equity, the beneficial conversion feature appears on the
Statement of Operations as an addition to the net loss for purposes of loss
per share calculation at December 31, 1999..
NOTE 3 Related parties
Short term borrowings
At December 31, 1998, the Company had unsecured promissory
notes, inclusive of accrued interest, of $56,444, payable to two
shareholders. The notes bear annual interest at rates of 10% to prime
plus two percent. The notes were exchanged for 150,000 shares of stock
in April, 1999. At December 31, 1999, the Company had unsecured
promissory notes, inclusive of accrued interest, of $19,258, payable to
two shareholders, and that bear annual interest at a rate of 10%.
Stock options
Represented in outstanding stock options are 1,320,000 shares at
December 31, 1998 and 1,820,000 shares at December 31, 1999, to
related parties.
<PAGE>
NOTE 4 Statements of Cash Flows
Financial instruments
The Company considers all liquid interest-earning investments with
a maturity of three months or less at the date of purchase to be cash
equivalents.
Noncash transactions
During the nine months ended December 31, 1999, the Company issued
1,000,000 shares of its common stock to third parties as compensation for
$256,250 in services accrued as of March 31, 1999, and 160,000 shares to
related parties in cancellation of $60,838 in short term borrowings and
accrued interest.
Interest paid
During the nine months ended December 31, 1998 and 1999, the
Company charged to operations interest expense of $3,806 and $1,258,
respectively. No interest was paid for either period.
NOTE 5 Commitments and Contingencies
Lease commitments
The Company leased its former bagel facility under a long-term
operating lease. On April 19, 1999, the Company assigned its lease
to the buyer of its business assets. The assignment was with recourse
in that the Company is responsible if the new lessee fails to make lease
payments. Future minimum lease payments at December 31, 1999,
total approximately $11,000, with the lease expiring on March 31, 2000.
Rent expense for the nine months ended December 31, 1998 and 1999
was approximately $28,000 and $0, respectively.
Contract commitment
On April 15, 1999, the Company entered into a one year consulting
agreement, with a related party, under which the Company agreed to
pay $10,000 per month, payable in cash or stock, for management and
advisory services. No payments had been made under the contract as
of December 31, 1999. Accordingly, $85,000 is accrued as current
liabilities at December 31, 1999.
Litigation
During fiscal 1999, a lawsuit was filed against the Company in
which the plaintiff, a former officer, claimed breach of employment
contract related to fiscal year 1998. In May, 1999, the dispute was
settled for $42,500. The unpaid settlement amount is accrued as of
December 31, 1998 and 1999.
NOTE 6 Subsequent events
The Company, subject to the rules and requirements of the
Securities and Exchange Commission for a publicly traded stock
(under the symbol "EBOT"), exceeded its deadline date for filing
Form 10-SB for the fiscal years ended March 31, 1998 and 1999.
As a result, the Company was removed from trading on the Electronic
Bulletin Board. The Company stock is currently trading on the National
Quotation Bureau. The Company is awaiting acceptance of the Form
10-SB by the Securities and Exchange Commission in order to return to
trading on the Electronic Bulletin Board.
NOTE 7 Going concern
The Company has suffered recurring losses from operations and
has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. As a result of not being able to meet
its obligations as they became due, the Company saw no alternative but
to sell its operating assets, as described in Note 1 above. Note 1 also
describes management's plans in regard to perpetuating its existence
through new operations related to internet marketing and the boating
industry. The Company has the ability to raise funds through the public
equity market and, as stated in Note 2, has raised substantial funds from
a related party in the private sector as well. While such plans and
fundraising ability seem to mitigate the effect of prior years' losses and
deficits, the Company is essentially only beginning to market in a new
industry. The inability to assess the likelihood of the effective
implementation of management's plans in this new environment also
raises substantial doubt about its ability to continue as a going concern.
<PAGE>
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion of our results of
operations and financial condition in conjunction with our consolidated
financial statements and related notes included elsewhere in this Form
10-QSB. Unless specified otherwise as used herein, the terms "we,"
"us" or "our" refers to Web4Boats.com, Inc.
OVERVIEW
Prior to entering into the Internet market and boating industry,
the Company, as a non-operating entity, merged with a business known
as New York Bagel Exchange, Inc. in September 1997. (For accounting
purposes, the merger resulted in a continuation of the bagel company's
operations.) The Company engaged in the business of wholesale and retail
sales of bagels, sandwiches, baked goods, specialty coffee and related items
at a single store. The Company's Board of Directors approved the sale of
the Company's inventory and fixed assets and ceased the bagel related
operations on March 25, 1999. The actual sale of assets was on April
19, 1999. All management of New York Bagel Exchange, Inc. resigned
and new management was subsequently appointed. On April 20, 1999, the
Company changed its name (and direction of its business) to
Web4Boats.com, Inc. and commenced developing a commercial Internet
site in which boat dealers, marinas, individual buyers and sellers would
come to advertise sales and services related to the professional and
recreational boating industry.
We are a national Internet site for new and pre-owned boating and
water sports related information and purchasing services connecting
consumers to our network of affiliated and participating suppliers of
boating and water sports related websites. We launched our new website
(www.Web4Boats.com) for boating and water sports marketing service
in September 1999. Through our website, Web4Boats.com, consumers
can research pricing, specifications, availability, financing and other
information regarding new and pre-owned boats, and recreational
equipment. When consumers make their selection and they are ready
to buy either a boat or any other water sport related products, they
can make their purchases in a variety of ways by utilizing the links on
our website or directly contacting the seller of the classified listed items
or products. In addition, we are continuing to develop value added
programs and product suppliers for consumers such as insurance,
warranty services, and boat transportation services.
<PAGE>
For the nine months ended December 31, 1999, the Company
has had almost no revenue from any of its website or related operations.
We are currently set up to derive revenue from fees and commissions from
affiliate programs, such as Amazon.com, Cyber-Marine.com, Proflowers.com
and Voyager Marine. We expect to add to these revenue generating
opportunities with future revenues from fees paid by banner advertisement
placements and links to other websites. It is anticipated that the enhancement
of the website would include Boat Dealers/Brokers, Boat Builders/
Manufacturers, Marinas, and other recreational suppliers having access to
our program and services by paying initial placement fees, as well as ongoing
monthly fees based upon, among other things, the size of territory,
demographics and the transmittal of purchase requests to them. We anticipate
that we will derive direct revenue from the volume of purchases made as a
result of visiting our website. We also believe our ability to attract
subscribing dealers/brokers and other affiliates for our website, is
directly related to the volume of visits and subsequent purchases we expect
to occur as a result of a visit to our website. Between November 5, 1999
(when the Company started compiling statistics) and February 14, 2000, the
Company delivered an average of 1,666 hits per week.
It is anticipated that sales and marketing costs will consist
primarily of promotion and advertising to build brand awareness and encourage
potential customers to visit our website. We will use Internet advertising,
as well as traditional media, such as television, radio and print. The
majority of our Internet advertising is expected to be comprised of
sponsorship and banner advertising agreements with Internet portals such as
Alta Vista, Excite, and Lycos as well as advertising and marketing
affiliations with online boating and recreational information providers.
The Internet portals and online boating and recreational information
providers charge a combination of set-up, initial, annual, monthly and
variable fees. Set-up fees are incurred for the development of the link
between our website and their website. No such banner advertising is
currently in place.
For the nine months ended December, 1999, the Company's operating
activities related primarily to engaging consulting personnel, raising capital,
purchasing operating assets, performing product development and investing
in sales and marketing programs. The Company began accruing
commissions from products being purchased by Web4Boats.com viewers
being linked to the company's affiliation program in September, 1999.
Revenues from that buying through December 31, 1999, however, are less
than $100.
The Company expects to derive substantially all of its revenues
from the sale of advertisements. Advertising revenues are recognized in
the period in which the advertisement is displayed, provided that no
significant Company obligations remain and collection of the resulting
receivable is probable. Company obligations typically include guarantees
of a minimum number of "impressions," or times that any advertisement
appears on pages where the user views the advertising banner on the
Web4Boats.com website. To the extent minimum guaranteed impressions
are not met, the Company defers recognition of the corresponding revenues
until guaranteed impression levels are achieved. Deferred revenue is
comprised of billings in excess of recognized revenue relating to advertising
contracts. The Company's revenues are derived principally from the sale of
advertisements on short-term contracts. The Company's standard rates for
advertising currently range from $100-250 per 1,000 impressions. The
<PAGE>
Company currently has no banner advertisers and its impressions between
November 5, 1999 (when the Company started compiling statistics) and
February 14, 2000, averaged 1,050 per week. The Company has an extremely
limited operating history as an Internet company, and its prospects are subject
to the risks, expenses and difficulties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services. To
address these risks, the Company must, among other things, continue to
respond to competitive developments, attract, retain and motivate qualified
personnel, implement and successfully execute its advertising sales strategy,
develop and market additional media properties, upgrade its technologies and
commercialize products and services incorporating such technologies. There
can be no assurance that the Company will be successful in addressing such
risks. The extremely limited operating history of the Company makes the
prediction of future results of operations difficult or impossible. The
Company currently expects to significantly increase its operating expenses
to expand its sales and marketing operations, to fund greater levels of product
development and to develop and commercialize additional media properties.
As a result of the Company's extremely limited operating history, the
Company does not have historical financial data for any significant period of
time. Quarterly revenues and operating results will depend substantially upon
the advertising revenues received within the quarter, and will be difficult to
forecast accurately. Accordingly, the cancellation or deferral of a small
number of advertising contracts could have a material adverse effect on the
Company's financial condition. In addition, the Company plans to significantly
increase its operating expenses to expand its sales and marketing operations
and to fund greater levels of product development. To the extent that such
expenses precede or are not subsequently followed by increased revenues, the
Company's results of operations will be materially and adversely affected.
The Company's operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside the
Company's control. These factors include the level of usage of the Internet,
demand for Internet advertising, seasonal trends in both Internet usage and
boat advertising placements, the advertising budgeting cycles of individual
advertisers, the amount and timing of capital expenditures and other costs
relating to the expansion of the Company's operations, the introduction of
new products or services by the Company or its competitors, pricing changes
in the industry, technical difficulties with respect to the use of
Web4Boats.com, general economic conditions and economic conditions specific
to the Internet and online media. As a strategic response to changes in the
competitive environment, the Company may from time to time make material
pricing, service or marketing decisions that effect the Company's business.
Due to all of the foregoing factors, in some future quarter the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's Common Stock
would likely be materially and adversely affected.
RESULTS OF OPERATIONS
The use of any comparison data derived from the Company's
accompanying financial statements is misleading because the Company
disposed of its assets in New York Bagel Exchange, Inc. in April 1999,
(within days after the change of the Company's fiscal year) and subsequently
began to pursue a completely different business than that of the predecessor
company. Therefore, the financial statements have no comparative information
that would be helpful in this regard. Instead the Company will focus on the
forward looking aspects of our financial condition and any risks involved.
<PAGE>
REVENUES
For the nine months ended December 31, 1998 and 1999, our
revenues were $459,733 and $3,797, respectively. Both amounts,
however, are related principally to the Bagel store operation that has
been discontinued. Revenues from the website operations for the period
ended December 31, 1999, are less than $100. There can be no assurance
that revenues will increase in the near future.
SALES AND MARKETING
Sales and marketing expenses in the future will primarily
include Internet marketing and advertising expenses, fees paid to our
purchase request providers, expenses to develop our brand equity and
encourage potential customers to visit our website, personnel and other
costs associated with sales. The Company's customers are expected to
purchase advertisements on a short-term basis. There can be no assurance
that customers will continue to purchase advertising on the Company's
website pages. The Company anticipates that sales and marketing expenses
will increase in future periods as it continues to pursue an aggressive brand
building strategy.
PRODUCT AND TECHNOLOGY DEVELOPMENT
Product and technology development expenses in the future will
primarily include personnel costs relating to the introduction of new
products and services and enhancing the features, content and functionality
of our website, as well as expenses associated with our telecommunications
and computer infrastructure. The Company believes that continued
expansion of its operations is essential to enhance and extend the
Web4Boats.com main website, establish branded properties in targeted
markets and expand the Company's user and advertising base. As a
consequence, the Company intends to continue to increase expenditures in all
operating areas.
GENERAL AND ADMINISTRATIVE
General and administrative expense primarily consists of executive,
consulting, financial and legal expenses and related costs. General and
administrative expense was $369,270 and $193,651 for the nine months
ended December 31, 1998 and 1999, respectively. The first amount is related
entirely to the bagel store operations. Virtually all the second amount is
related to development of the website business. Salaries for all periods
set forth in the financial statements are related solely to the bagel store
operation. Executive compensation in the form of Common Stock and
Common Stock options has been granted to Mr. Dennis Schlagel, the
Company's President since the end of the bagel store operation, and Mr.
Blair J. Merriam, with whom the Company contracts through Internet
Advisors Group, Inc.
<PAGE>
OTHER ITEMS
Current liabilities includes $105,947 of accounts payable and
$42,500 of accrued litigation expense. The former is principally fees
owed to Internet Advisors Group, Inc. (wholly owned and operated by
Blair J. Merriam) for day to day management of the Company. The
latter is an obligation incurred by the former Bagel operation.
The $316,967 set out in the Statement of Cash Flows as proceeds
from issuance of Common Stock consists of the shares issued to officers
and consultants in payment of $259,254 compensation and $57,713 in
payment of short term borrowings and accrued interest.
COST OF REVENUES
Cost of revenues consists of the expenses associated with the
production and usage of the Company's website. As measured in page
views (defined as electronic page displays), between November 5, 1999
(when the Company started compiling statistics) and February 14, 2000,
the company delivered an average of 1,050 page views per week. The
Company anticipates that its content and Internet connection expenses as
a percentage of revenue will continue to increase for the foreseeable future.
PRODUCT DEVELOPMENT
Product development expenses will consist primarily of consultant
compensation to support new product development. Product development
expenses are expected to increase as the Company embarks on its course to
aggressively enhance the features and functionality of Web4Boats.com
website. To date, all product development costs have been expensed as
incurred. The Company believes that significant investments in product
development are required to remain competitive.
EXECUTIVE COMPENSATION
The Company does not have any non-officer employees, and no
cash salaries or wages are currently being paid. However, the President
of the Company, Dennis Schlagel, received 500,000 shares of restricted
Rule 144 Common Stock in lieu of compensation and a Common Stock
purchase option in April 1999, for 500,000 shares of Common Stock
exercisable at the price of $0.50 per share. The Common Stock and
stock options were granted to Mr. Schlagel because the Company did
not have sufficient cash available to induce Mr. Schlagel to join
the Company in an officer and director capacity.
The Company issued 10,000 shares of restricted Rule 144
Common Stock to Daniel Thornton in April 1999, in exchange for
past consulting services. The Common Stock was granted to Mr.
Thornton because the Company did not have sufficient cash available
to induce Mr. Thornton to join the Company in the capacity of director.
The Company's day to day operations are provided by Mr. Blair J.
Merriam under a contract with Internet Advisors Group, Inc. Computer
hardware maintenance and website design are performed on a month-to-month
basis with Web-Light Consulting and Design, Inc. The Company expects to
continue these arrangements at least until summer of 2000. Depending on
the success of the operation and the availability of funds the Company hopes
at that time to begin to establish an internal management team and staff.
Poor business results could delay this plan indefinitely. Under the terms
of the agreement with Internet Advisors Group, Inc., the Company is obligated
to pay Ten Thousand Dollars ($10,000) per month that "may be made in either
cash, stock, or any combination thereof." Because the fees may be paid in
stock, the Company does not believe it will have any problems meeting its
payment obligations under this agreement over the next twelve months.
The Web-Light Consulting and Design agreement is for Web-Light
to design and build Web4Boats.com's website according to the criteria
established by Web4Boats.com for a fee of $32,760.00. Under the
agreement total costs including hardware and setup fees were $63,920.
These fees have been paid. Ongoing monthly fees are $3,750. These
fees are paid as incurred. The Company believes it will have no
problems meeting its obligations under the agreement.
<PAGE>
STOCK OPTIONS GRANTED IN 1999
In April 1999, we granted Common Stock purchase options
(not under any plan) to purchase 1,000,000 shares of Common Stock.
These options were granted to employees, directors and consultants at
exercise prices of fifty cents ($0.50) per share which were below the
fair market value at the date of grant.
LIQUIDITY AND CAPITAL RESOURCES
The Company's auditor has issued an opinion questioning the
Company's ability to continue as a going concern. As of December 31,
1999, the Company had cash and accounts receivable of $3,774. The
Company will require additional cash over the next twelve months to
expand and develop it business as described in this Form 10-QSB.
No definite plans have been developed to meet these capital requirements,
but they will likely entail an attempt to sell an equity interest in the
company. Because of the low trading price of the Company's Common Stock, the
percentage of the Company that may be required to be sold in such a plan
could be substantial and very dilutive to current investors. To reiterate,
however, no such plans have been finalized. Alternative plans of financing,
such as short term and long term loans, will also be investigated. Debt
financing, if available, may involve restrictive covenants with respect to
dividends, raising capital and other financial and operational matters which
could restrict our operations or finances. If we are unable to obtain
additional financing as needed, we may be required to reduce the scope of our
operations or our anticipated expansion, which could have a material adverse
effect on our business, results of operations and financial condition.
In June 1999, we authorized the creation of a class of Preferred
shares. The Twenty Million (20,000,000) shares of Preferred Stock have
a par value of one-tenth cent ($.001) per share, bringing the total number
of common and preferred shares authorized by the Company to One Hundred
Twenty Million (120,000,000) shares. The Company's Board of Directors may
divide and issue the Preferred Shares in series.
In August 1999, the Company designated a portion of the Preferred
Stock as Series A Preferred Stock. Such Series A Preferred Stock consists of
10,000 shares of the authorized Preferred Shares. At the option of the holder,
the purchaser may convert said Series A Preferred Stock into Common Stock of
the Company no sooner than one (1) year after the purchase date. All 10,000
shares were sold for $100,000 on August 13, 1999. The conversion rate for
said stock shall be at the rate of One Hundred (100) shares of Common Stock
for every one (1) share of Series A Preferred Stock. One Million (1,000,000)
shares of Common Stock have been reserved and such shares shall be issued
only in conversion of the Series A Preferred Stock as provided by the terms
of the designation.
A portion of the cash has been used primarily to pay for hardware,
software, programming and other operating expenses to launch its website
and other daily operating costs. The Company anticipates that capital
expenditures in the fiscal year ending March 31, 2000 will be approximately
$50,000, primarily for additions to the Company's networking and computer
infrastructure, leasehold improvements and furniture.
<PAGE>
With respect to fiscal years beyond March 31, 2000, we will be
required to raise additional capital to meet our long term operating
requirements. Although our revenues have decreased since implementation
of the Web4Boats.com business, our expenses have continued to, and in the
foreseeable future are expected to, exceed our revenues. Accordingly, we
do not expect to be able to fund our operations from internally generated
funds for the foreseeable future.
Our cash requirements depend on several factors, including:
(1) the level of expenditures on marketing and advertising,
(2) the rate of market acceptance,
(3) the ability to expand our customer base,
(4) the ability to increase the volume of sales with our affiliates,
and
(5) the cost of contractual arrangements with online information
providers, search engines, and other referral sources.
The Company currently has no material commitments. The
Company anticipates a substantial increase in its capital expenditures
and operating lease arrangements in 2000 consistent with its anticipated
growth. At this time we cannot accurately predict the timing and amount
of our cash requirements.
PLAN OF OPERATION
Over the next twelve months the Company plans to devote most of
its efforts and financial resources toward increasing awareness of its website
among the boating public and professionals. Initial focus, however, must be
on installation of the core features of the website.
The volume of classified advertisements has reached the point that
management believes it is sufficient, because of its size, to attract boat
buyers and others to the website. In addition, management also believes that
the website traffic will now justify fees for all new ads placed on the
website. Finally, with respect to the classified ads, in February the
Company engaged a telemarketing campaign with an independent telemarketing
firm, EveryThingCommunicates.com, to contact all current classified
advertisers collected by the Company and displayed on the website with the
proposal of a fee for continued display of the ad. In this way all non-
paying advertisers are expected to be dropped from the displayed database
approximately by the end of the second quarter of 2000.
The credit card charge portion of the classified advertisement
service and the ability to post a photograph of the boat for sale will become
operational in early March, 2000. The next phase with the classified
advertisement sector is to add new categories (next 30 days) and enhance the
display features (music, voice, etc.) available to the advertiser. The
addition of the display features, however, is a lower priority than the other
aspects of the website development.
<PAGE>
Concerted efforts are now being directed at increasing awareness
of the website among the boating public and professionals. The Company
plans to initially arrange most of its links from other websites and magazines
through a barter arrangement under which the other website or magazine will
receive a reciprocal link to its website or services thereby reducing cash
outlays.
Assuming that the Company acquires the $50,000 to $100,000 it is
seeking and completes development of the core elements of its website
over the first or second quarter of 2000, management believes that the
Company should have begun to bring in significant revenue from its monthly
fees in its classified advertisement sector. At this point the Company will
begin to seek a significant infusion of capital, $1 - 5 million, to increase
awareness of the website among the boating public and professionals and
to continue development of the website. There can be no assurance that
such funding will be available to the Company. In the event that such
funding is not available to the Company, then Web4Boats.com would be
forced to use whatever cash is generated, mostly by its classified
advertisement sector, for enhancement of the website and its promotion.
Such a process of development would likely be much slower than what could be
achieved with the infusion of substantial new investments. Management
believes, however, that the Company's business is relatively easily scalable.
In other words, once the core elements of the website are in place by the end
of the second quarter of 2000, the website will be able to achieve its
purpose. Thereafter, additional funds are devoted mostly to promotion of the
website and enhancement of the core elements. The availability of funds
determines the speed with which promotion and enhancements are pursued.
Depending upon the ability of the Company to arrange additional
financing, the Company expects to add full time management and staff by
the end of 2000. Development of the Company's business could significantly
alter the timing of the need for staff and current plans are tentative. In
addition, competition for qualified internet technology and sales personnel
is intense, which is expected to make it difficult to add personnel on short
notice and at the optimal time for the Company.
STRATEGIC ALLIANCES
In order to serve users more effectively and to extend the
Web4Boats.com brand to new media properties, the Company has
entered into strategic relationships with business partners who offer content,
technology, and distribution capabilities. Strategic alliances are
affiliations and linkages to other web companies that provide related
products and services and in most cases are willing to compensate
Web4boats.com for directing traffic and/or purchasers to their sites. To
date, the Company has had less than $100 of revenue derived from affiliate
programs.
WE HAVE A HISTORY OF NET LOSSES AND EXPECT NET LOSSES FOR THE
FORESEEABLE
FUTURE. IF WE CONTINUE TO LOSE MONEY, OUR OPERATIONS WILL NOT BE
FINANCIALLY VIABLE.
Web4Boats.com has not begun receiving commission or advertising
revenues, however, commissions are currently accruing (less than $100 had
accrued as of December 31, 1999) and the sales of the advertising banners
expected to begin in the first quarter 2000 when the Company has increased
traffic coming to the site. Therefore, Web4Boats.com has a limited operating
history, and its prospects are subject to the risks, expenses and uncertainties
frequently encountered by young companies that operate exclusively in the
new and rapidly evolving markets for Internet products and services.
Because of the recent emergence of the Internet-based boating and recreational
information and purchasing industry, none of our executives has significant
experience in the industry. This limited operating history and management
experience means it is difficult for us to predict future operating results.
We had an accumulated deficit of $2,263,537 as of December 31, 1999.
Our potential for future profitability must be considered in light of the
risks, uncertainties, expenses and difficulties frequently encountered by
companies in the early stages of development, particularly companies in
new and rapidly evolving markets, such as the market for Internet commerce.
<PAGE>
SEASONALITY
We expect our business to experience seasonality as it matures.
Seasonality in the boating and recreational equipment industry, Internet
and commercial online service usage and advertising expenditures is likely
to cause fluctuations in our operating results which will be difficult to
predict until the Company has more experience with its operations.
Internet and commercial online service usage and the growth rate of
such usage may be expected typically to decline during the summer.
Depending on the extent to which the Internet and commercial online
services are accepted as an advertising medium, seasonality in the level
of advertising expenditures could become more pronounced for
Internet-based advertising.
LIABILITY FOR THE COMPANY'S SERVICES
Web4Boats.com hosts a wide variety of information, community,
communications and commerce services that enable individuals to exchange
information, generate content, conduct business and engage in various online
activities. The laws relating to the liability of providers of these online
services for activities of their users is currently unsettled. Claims could
be made against Web4Boats.com for defamation, negligence, copyright or
trademark infringement, personal injury or other theories based on the
nature and content of information that may be posted online by its users.
Such claims have been brought, and sometimes successfully pressed,
against online service providers in the past. In addition, Web4Boats.com
could be exposed to liability with respect to the selection of listings that
may be accessible through its Web4Boats.com-branded products and
media properties, or through content and materials that may be posted by
users in classifieds, message boards, clubs, chat rooms, or other interactive
community-building services. Any such finding of liability against
Web4Boats.com could have a material adverse effect on the Company's
business.
WE ARE UNCERTAIN OF OUR ABILITY TO OBTAIN ADDITIONAL FINANCING FOR
OUR FUTURE
CAPITAL NEEDS. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING WE
MAY NOT
BE ABLE TO CONTINUE TO OPERATE OUR BUSINESS.
We will need to raise additional funds sooner in order to fund rapid
expansion, to develop new or enhance existing services or products, to
respond to competitive pressures or to acquire complementary products,
businesses or technologies. There can be no assurance that additional
financing will be available on terms favorable to us, or at all. If
adequate funds are not available or are not available on acceptable
terms, our ability to fund our expansion, take advantage of potential
acquisition opportunities, develop or enhance services or products or
respond to competitive pressures would be significantly limited.
RELIANCE ON ADVERTISING REVENUES AND UNCERTAIN
ADOPTION OF THE WEB AS AN ADVERTISING MEDIUM
Web4Boats.com expects to derive a majority of its revenues
from the sale of advertisements on its Web pages under short-term
contracts. Most of its advertising customers have limited experience
with the Web as an advertising medium. Web4Boats.com's continuing
ability to generate significant advertising revenues will depend upon,
among other things: advertisers' acceptance of the Web as an effective
and sustainable advertising medium; the development of a large base of
users of its services possessing demographic characteristics attractive to
advertisers; and its ability to continue to develop and update effective
advertising delivery and measurement systems. No standards have yet
been widely accepted for the measurement of the effectiveness of
Web-based advertising. Web4Boats.com cannot be certain that such
standards will develop sufficiently to support Web-based advertising
as a significant advertising medium. In addition, adverse economic
conditions can significantly impact advertisers ability and willingness to
spend additional amounts on advertising generally, and on Web-based
advertising specifically.
<PAGE>
YEAR 2000 ISSUE
Because many computer applications had been written using
two digits rather than four to define the applicable year, some date-sensitive
software had been anticipated to not recognize a date using "00" as the year
2000 rather than the year 1900. This "Year 2000 issue" was expected
to result in system failures or miscalculations causing disruptions of
operations, including disruptions of our website or normal business
activities. As of January 12, 2000 we had no problems with the change
to the Year 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WEB4BOATS.COM, INC.
DATE: March 24, 2000
By:/s/ Dennis Schlagel
______________________________
Dennis Schlagel, President, Chairman
of the Board of Directors
