United States
Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
March 31, 2000 0-28225
WORLDNET RESOURCE GROUP, INC.
(Exact name of registrant as specified in its charter)
UTAH
(State or other jurisdiction of incorporation or organization
91-2063237
(I.R.S. Employer Identification No.)
4052 Del Rey Avenue, Suite 108
Marina Del Rey, California 90292
(Address of principal executive offices)
(310) 578-6950
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the 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.
X Yes No
State the number of shares outstanding of each of the registrants classes
of common equity, as of the latest practicable date.
Common stock, par value $.001; 45,722,084 shares outstanding
as of September 1, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORLDNET RESOURCE GROUP, INC.
(f/k/a MULTI-MEDIA INDUSTRIES CORPORATION) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
December 31, March 31, March 31,
____________ __________ ___________
1999 2000 1999
____________ __________ ___________
CURRENT ASSETS
Cash $ 18,872 $ 18,950 $ 95
Inventory 21,639 21,639 21,639
Notes Receivable - 25,360 -
Due From Stockholders 29,912 185,342 -
____________ __________ ___________
Total Current Assets 70,423 251,291 21,734
____________ __________ ___________
EQUIPMENT, net 17,544 21,016 1,955
____________ __________ ___________
LEASEHOLD IMPROVEMENT, net - 3,820 -
____________ __________ ___________
INVESTMENTS 979,849 4,878,569 -
____________ __________ ___________
GOODWILL 150,540 304,171 -
____________ __________ ___________
OTHER ASSETS
Record Masters 513,000 513,000 1,325,000
Remastering Costs, net 150,567 134,526 195,735
Record License Rights 1,000 1,000 1,000
Cost of Financing - 1,242,833 -
____________ __________ ___________
Total Other Assets 664,567 1,891,359 1,521,735
____________ __________ ___________
$ 1,882,923 $7,350,225 $ 1,545,424
____________ __________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES
Accounts payables
and accrued expenses $ 274,779 $ 247,008 $ 151,047
Accrued Interest 11,098
Due to related parties 370,666 48,500
Stockholders Advances 397,197 118,988 118,528
Due to Planet
Entertainment Co. 180,615 180,615 180,615
Due to Investments - 81,058
Note Payable - Bridge Loan - 855,000 84,477
____________ __________ ___________
Toal Current
Liabilities 1,223,257 1,531,169 445,765
____________ __________ ___________
STOCKHOLDERS' EQUITY
Preferred stock,
$.001 par value;
50,000,000 shares
authorized;no shares
issued and outstanding
authorized; 6,391,711,
& 19,767,888 shares
issued & outstanding 6,392 20,058 39,520
Contributed Capital 5,000
Additional Paid-In
Capital 14,144,008 19,344,032 13,220,733
Accumulated (deficit) (13,490,734) (13,545,034) (12,165,594)
____________ __________ ___________
Total Stockholders
Equity 659,666 5,819,056 1,099,659
____________ __________ ___________
$ 1,882,923 $7,350,225 $1,545,424
____________ __________ ___________
<PAGE>
WORLDNET RESOURCE GROUP, INC.
(f/k/a MULTI-MEDIA INDUSTRIES CORPORATION) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three
Months Ended
Years Ended December 31, March 31,
_____________________________________________________
1998 1999 1999 2000
_________ __________ ___________ ____________
SALES 4,547 $ $ - $ -
COST OF SALES 1,478 - -
_________ __________ ___________ ____________
GROSS PROFIT 3,069 - -
_________ __________ ___________ ____________
OPERATING EXPENSES:
General and
Administrative 174,929 345,004 49,119 366,633
Amortization 60,907 61,156 15,056 26,300
Depreciation 233 815
Loss on impairment
of assets 812,000
_________ __________ ___________ ____________
Total Operating
Expenses 235,836 1,218,160 64,408 393,748
_________ __________ ___________ ____________
OTHER EXPENSES:
Financing Costs 537,167
Interest expense 3,900 36,000 2,575
_________ __________ ___________ ____________
Total Other
Expenses 3,900 36,000 2,575 537,167
_________ __________ ___________ ____________
OTHER INCOME 887
_________ __________ ___________ ____________
NET (LOSS) (236,667) (1,254,160) $ (66,983) $ (930,028)
_________ __________ ___________ ____________
NET (LOSS) PER
COMMON SHARE
BASIC AND DILUTED (0.13) (0.37) $ (0.02) $ (0.06)
_________ __________ ___________ ____________
Weighted Average Number
of Common Shares
Outstanding 1,833,200 3,395,430 3,293,326 15,955,913
_________ __________ ___________ ____________
<PAGE>
WorldNet Resource Group, Inc.
Consolidated Statement of Stockholders' Equity
For 1st QTR Ending March 31, 2000
Common Stock Additional Paid-In Accumulated
Shares Amount Capital (Deficit)
____________________________________________________________
Balances,
December 31,
1999 6,461,00 6,641 14,152,826 (10,466,986)
Issuance of
Common Stock
for Services 160,694 161 145,418
Issuance of
Common Stock
for Debt 607,655 608 831,051
Issuance of
Common Stock
for
Acquisition 12,000,000 12,000 2,388
of Eccount
Issuance of
Common Stock
for
Acquisition 69,444 69 13,819
of Navitech
Issuance of
Common Stock
for Exercise 700,000 700 1,620,300
of Warrants
Sale of Common
Stock 48,500 49 145,962
Net (Loss)
for the
quarter ended
March 31, 2000 (251,980)
_____________________________________________________________
Balances,
March 31
2000 20,047,293 20,048 16,911,764 (10,718,966)
_____________________________________________________________
<PAGE>
WorldNet Resource Group, Inc.
Consolidated Statement of Cash Flows
For 1st QTR Ending March 31, 2000
For the Three
Years ended Months Ended
December 31, March 31,
_________________________ ______________________
1998 1999 1999 2000
___________ ____________ __________ ___________
CASH FLOWS FROM (TO)
OPERATING ACTIVITIES:
Net (loss) $ (236,667) $ (1,254,160) $ (66,983) $ (930,028)
Adjustments to
reconcile net
(loss) to net
cash provided
(used) by
operations:
Depreciation and
amortization 61,157 61,156 15,289 27,115
Loss on Impairment
of Assets 812,000
Stock Issued for
Services 299,465 55,000 437,228
Purchase of office
furnitures &
equipment 7,525
Changes in :
Changes in
Inventory 1,228
Prepaid Expenses 21,350
Due from Stockholders (29,912) 155,430
Accounts Payable and
Accrued Expenses (93,745) 176,311 49,119 (7,733)
Advances (20) -
Accrued Interest (48,010) (8,523) 2,575 -
Accrued Interest
Related Party (2,083)
___________ ____________ __________ ___________
Cash Flows Provided
(Used) by Operating
Activities (394) (188,128) - (310,463)
___________ ____________ __________ ___________
CASH FLOWS FROM (TO)
INVESTING ACTIVITIES:
Advances to Anything
Surplus (52,387)
Advances to Cars
Direct (600,000)
Cash Paid for
Investments (328,250) (165,320)
Collection of Notes
Receivable 20,000
Cash Flows Provided
(used) by Investing
Activities - (380,637) - (745,320)
CASH FLOWS FROM (TO)
FINANCING ACTIVITIES:
Sale of Common
Stock 293,750 100,650
Repayment of
Note Payable (84,477)
Advances from
Stockholders 378,269 118,988
Proceeds of Short
Term Debt 855,000
___________ ____________ __________ ___________
Cash Flows Provided
(Used) by Financing
Activities - 587,542 - 1,074,638
___________ ____________ __________ ___________
NET CHANGES IN CASH $ (394) $ 18,777 $ - $ 18,855
CASH, BEGINNING OF
PERIOD $ 489 $ 95 $ 95 $ 95
___________ ____________ __________ ___________
CASH, END OF PERIOD $ 95 $ 18,872 $ 95 $ 18,950
___________ ____________ __________ ___________
<PAGE>
NOTE 1 - BASIS OF PRESENTATION
The accompanying reviewed financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and in
accordance with the instructions for the Form 10-QSB.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the financial statements
contain all material adjustments, consisting only of normal
recurring adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial
condition, results of operations, and cash flows of the
Company for the interim periods presented.
The results of the three months ended March 31, 2000 are
not necessarily indicative of the results of operations for
the full year. These financial statements and related
footnotes should be read in conjunction with the financial
statements and footnotes included in the Company's 8-K/A-1
filed with the Securities and Exchange Commission on
September 7, 2000.
NOTE 2 - GOING CONCERN ISSUES
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as
a going concern which contemplates the realization of
assets, particularly record masters, and the satisfaction
of liabilities in the normal course of business. The
Company has incurred operating losses since inception,
has a working capital deficit and a significant
accumulated deficit. Additionally, during 1996, efforts
to market the film titles represented by the film license
rights acquired during 1995, were discontinued. The
Company's continuation as a going concern is dependent
upon its ability to generate sufficient cash flow from
operations to meet its obligations on a timely basis,
and/or obtain financing as may be required.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements
include the accounts of WorldNet Resource Group, Inc. and
its wholly owned subsidiaries, Randall and Century. All
significant intercompany accounts and transactions have
been eliminated in consolidation.
EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS No. 128) was issued in
February 1997 (effective for financial statements issued
for periods ending after December 15, 1997). This
Statement simplifies the standards for computing earnings
per share (EPS) previously found in Accounting Principles
Board Opinion No. 15, "Earnings Per Share", and makes
them more comparable to international EPS standards.
SFAS No. 128 replaces the presentation of primary EPS
with a presentation of basic EPS. In addition, the
Statement requires dual presentation of basic and diluted
<PAGE>
EPS on the face of the income statement for all entities
with complex capital structures and requires a
reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of
the diluted EPS computation.
REVENUE RECOGNITION
Sales of compact disks are recognized at the time
inventory has been shipped to customers.
INVENTORY
Inventory consists of compact disks and is stated at the
lower of cost (first-in, first-out) or market.
EQUIPMENT
Equipment is carried at cost and depreciated on a
straight-line basis over the estimated useful lives of
three to ten years. Depreciation expense was $933 and
$932 for the years ended December 31, 1998 and 1999,
respectively and $233 and $815 for the three months ended
March 31, 1999 and 2000, respectively.
EQUITY INVESTMENT
The Company accounts for its equity investment under the
equity method. The Company's share of earnings is
included in income as earned. During the 1st quarter
ended March 31, 2000, earnings from the Company's equity
investment were immaterial.
OTHER INVESTMENTS
The Company accounts for other investments at fair value
which approximates cost at March 31, 2000.
REVERSE STOCK SPLIT
In January 2000, the Company's Board of Directors
approved a one for twelve reverse split of the
outstanding common shares of the Company. All per share
amounts have been restated to reflect the reverse stock
split.
NAME CHANGE
In January 2000, the Company changed its name from Multi-
Media Industries Corporation to WorldNet Resource Group,
Inc.
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
RECORD MASTERS
Record masters consist of record titles and are stated at
the lower of cost or net realizable value.
Amortization of record masters will be computed based on
the ratio that current years' revenues will bear to
anticipated total gross revenues over the estimated life
of the record master (generally 5-10 years). As of
December 31, 1999 and 1998, no revenues have been
generated from the record masters; therefore, no
amortization has been recorded. As discussed in Note 6,
the Company has determined that an adjustment of the
carrying value was required in 1999.
REMASTERING COSTS
Remastering costs consist of costs associated with the
reproduction of record titles including license costs,
artwork and liner notes.
Amortization of remastering costs is computed based on a
straight-line basis over the life of the music license
agreement following the date of initial release
(approximately 5 years). Amortization expense was
$60,224 and $59,974 for the years ended December 31, 1999
and 1998, respectively and accumulated amortization was
$130,477 and $70,253 for the years ended December 31,
1999 and 1998, respectively. Amortization expense was
$15,056 and $16,041 for the three months ended March 31,
1999 and 2000, respectively and accumulated amortization
was $146,518 for the three months ended March 31, 2000.
RECORDING LICENSE RIGHTS
Recording license rights represent the exclusive
unlimited rights to certain recordings. Amortization of
recording license rights will be computed based on the
ratio that current years' revenues will bear to
anticipated total gross revenues over the term of the
license agreement.
As of December 31, 1999 and 1998 and for the three months
ended March 31, 2000, no revenues have been generated
from the recording license rights; therefore, no
amortization has been recorded.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value of financial instruments approximate carrying
value due to the short maturity of the instruments. Fair
value of notes payable was based upon current borrowing
rates available for financings with similar maturities.
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
GOODWILL
The Company amortizes costs in excess of the fair value
of net assets of businesses acquired (goodwill) using the
straight-line method over the estimated recovery periods.
Recoverability is reviewed annually (or sooner), if
events or circumstances indicate that the carrying amount
may exceed fair value. Recoverability is determined by
comparing the undiscounted net cash flows of the assets,
to which goodwill applies, to the net book value
including goodwill of those assets. The analysis
involves significant management judgment to evaluate the
capacity of an acquired business to perform within
projections. Recoverability for AnythingSurplus.com is
estimated to be five years. Amortization expense for the
years ended December 31, 1999 and 1998 was $-0- and $-0-
respectively. Amortization expense three months ended
March 31, 2000 was $10,258.
USE OF ESTIMATES IN THE PREPARATION OF CONSOLIDATED
FINANCIAL STATEMENTS
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial
statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates
and assumptions. The rate of amortization of record
masters is, in part, based upon anticipated total gross
revenues over the estimated life of the record masters.
Although no amortization has been recorded to date,
actual gross revenues may differ from the amount
ultimately realized over the life of the record master.
The difference may be material.
INCOME TAXES
Deferred income taxes are recorded to reflect the tax
consequences in future years of temporary differences
between the tax basis of the assets and liabilities and
their financial statement amounts at the end of each
reporting period. Valuation allowances are established
when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is
the tax payable for the current period and the change
during the period in deferred tax assets and liabilities.
Deferred tax assets and liabilities have been netted to
reflect the tax impact of temporary differences.
The Company has a net operating loss carryforward in
excess of $5,000,000, expiring in 2017- 2019. Since it is
more likely than not that the Company will not utilize
the net operating loss in the near term, a valuation
allowance equal to the deferred tax asset, which
consisted primarily of the net operating loss
carryforwards, has been provided. Upon a change in
control, the net operating loss carryforward may be
limited.
<PAGE>
NOTE 4 - ACQUISITIONS
ACQUISITION OF ANYTHINGSURPLUS.COM
During December 1999, the Company acquired 100% of the
common stock of AnythingSurplus.com, Inc.
("AnythingSurplus"), in exchange for 833,333 shares of
the Company's restricted common stock. Two entities,
which are controlled by two of the majority stockholders
of the Company ("Majority Stockholders") one of whom was
the Company's President, owned an aggregate of 40% shares
of AnythingSurplus. The purchase price amount in excess
of the Majority Stockholders' historical cost basis has
been reflected as a distribution to the stockholders and
reduction of the purchase price. AnythingSurplus was
formed on September 30, 1999 and has had minimal
operations to date.
The Company had advanced $100,000 to AnythingSurplus as
required by the stock purchase agreement. The Company
may advance up to an additional $900,000 to
AnythingSurplus to be used for operations and salaries.
The purchase price has been allocated as follows:
Furniture and fixtures $ 16,288
Stockholder receivable 47,612
Advances forgiven (100,000)
Goodwill 150,540
Distributions to stockholders 52,227
___________
Value of stock issued $ 166,667
ACQUISITION OF HALL OF FAME PARTNERS, INC.
During December 1999, the Company acquired 20% the
outstanding common stock of Hall of Fame Partners, Inc.
(Hall of Fame), in exchange for 833,333 shares of the
Company's restricted common stock valued at $.20 per
share and $262,000 cash. Two entities, which are
controlled by two of the majority stockholders of the
Company, one of whom was the Company's President, own an
aggregate of 20% of the shares of Hall of Fame. The
purchase price amount in excess of the majority
stockholders' historical cost basis has been reflected as
a distribution to the stockholders and reduction of the
purchase price. The investment will be accounted for
under the equity method.
<PAGE>
NOTE 4 - ACQUISITIONS (Continued)
The Company has agreed to repurchase 550,000 shares of
its common stock issued to Hall of Fame for $110,000.
ACQUISITION OF AUCTIONFUN, INC.
During December 1999, the Company acquired 5% of the
outstanding shares of Auctionfun.com, Inc. (Auctionfun)
in exchange for 1,000,000 shares of the Company's
restricted common stock valued at $.20 per share and
approximately $437,000 cash. The investment will be
accounted for under the cost method.
Neither Hall of Fame nor Auctionfun have had any
significant operations to date.
NOTE 5 - EQUIPMENT
Equipment consists of the following:
December 31, March 31,
1999 2000
(Unaudited)
Office equipment 16,288 20,575
Processing equipment 4,665 4,665
_________ ________
20,953 25,240
Less accumulated
depreciation (3,409) (4,224)
_________ _________
$ 17,544 $ 21,016
_________ _________
NOTE 6 - IMPAIRMENT OF RECORD MASTERS
In accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting For the Impairment
of Long-Lived Assets and For Long-Lived Assets to be
Disposed Of", the Company records impairment losses on
long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than
the assets' carrying amount.
During 1999, the Company adjusted the carrying value of
the record masters. Based upon current management
estimates indicating impairment, the Company adjusted the
carrying value of the record masters, resulting in a
reduction of the asset and a charge to operations of
$812,000.
NOTE 7 - CONVERTIBLE DEBENTURE
On February 2, 2000 the Company issued a $500,000
Convertible Debenture at a rate of 8% per annum
commencing on March 3, 2000 with a maturity date of
<PAGE>
February 3, 2001. This note was immediately converted
into 520,835 shares at a price of $0.96.
NOTE 8 - SHORT TERM CONVERTIBLE NOTES
On March 1, 2000 the Company issued Convertible Notes
with a total face value of $555,000. On March 16, 2000,
the Company also issued a non-convertible Note with a
face value of $300,000. All Notes bear an interest rate
of 8% per annum, and each was due three months after the
issuance date. The Notes included detachable cashless
warrants for 700,000 shares of common stock that were
immediately exercised. Related to these warrants, the
Company is amortizing financing costs of $1,715,000 over
the life of the note.
NOTE 9 - NOTES PAYABLE - RELATED PARTY
On December 31, 1999 there was a Note Payable - Related
Party balance of $397,164. During the three months ended
March 31, 2000, the Company made several cash payments to
this balance that totaled $45,000, the company also
issued 221,000 shares at a price of $1.50 to several
shareholders as payment to the loan.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
This Form 10-QSB contains certain forward-looking statements. For
this purpose any statements contained in this Form 10-QSB that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as Amay,@ Awill,@
Aexpect,@ Abelieve,@ Aanticipate,@ Aestimate@ or Acontinue@ or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of
factors.
General
The Company was incorporated in 1981 in the state of Utah under the
name M-K Energy. The Company changed its name in 1982 to Cache Drilling,
Inc. and again in 1988 to Almur Cosmetics, Inc. The Company originally
sold securities to the public pursuant to a registration granted by the
Utah Securities Division on May 1, 1981, and the exemption from
registration under section 3(a)(11) of the Securities Act of 1933.
Subsequent to the Company's initial public offering the Company engaged in
several business ventures, none of which proved successful.
In January 2000, control of the Company was acquired by the current
controlling shareholders. Since that time, the Company has undertaken to
reorganize its management and business strategy. While the Company will
continue to work in the entertainment industry, the Company will also act
as an incubator for internet-related companies primarily focused on
helping traditional brick-and-mortar businesses take advantage of new
media technology. The Company will develop these companies either as
majority-owned subsidiaries or through strategic partnering arrangements.
The Company may also acquire or partner with existing internet companies
whose business model or technology complements the Company's strategy and
enhances its products and services.
The Company has two primary criteria for evaluating companies for
acquisition and development. The first is based on demonstrated synergies
with the Company's core business and the ability to promote synergistic
business relationships among the companies within its portfolio. The
second criteria will be the ability of that company or business model to
generate revenues within a short period of time, preferably 90 days.
<PAGE>
The Company will also seek to realize gains through the selective
sale of minority interests in its subsidiaries to outside investors. In
some cases, the Company may also seek to sell all or a majority interest
in some subsidiaries. The Company believes that this strategy provides it
the ability to increase shareholder value and provide capital to support
future growth in the Company's subsidiaries and investments. The Company
expects to continue to develop and refine the products and services of its
business, with the goal of increasing revenue as new products are
commercially introduced, and to continue to pursue the acquisition of or
investment in, additional allied companies and technologies.
The Company currently owns or is negotiating the acquisition of all
or a majority interest in several companies including, Eccount, Inc.,
AnythingSurplus.com, Inc., Century Records, Inc., and Randall
Entertainment, Inc. The Company has minority interests in Auctionfun.com,
Inc., and Hall of Fame Partners, Inc.
Products and Services
The products and services of the Company's subsidiaries as of August
31, 2000, include the following:
Eccount
The Company acquired Eccount in January 2000, when it issued
12,000,000 post-split shares to Stephen Brown to acquire all of the issued
and outstanding shares of Eccount. Eccount will be an online incentive
bank consisting of electronic dollars earned by members when shopping on
the internet for goods or services from member merchants. These eccount
dollars in turn can be used by the eccount members as payment for
purchases from member merchants within the system. Eccount will be used
to enhance and encourage business among member merchants, particularly the
Company's subsidiaries. The Company will target a wide range of
businesses to be member merchants including supermarkets,
telecommunications companies, airlines, credit card companies, music and
book sellers, leading online merchants and content providers, and others.
Eccount will also sell on-line direct marketing services to its
member merchants and others.
AnythingSurplus.com
AnythingSurplus was established to be the premier internet site
providing an on-line discount store that specializes in providing retail
surplus inventory to consumers, and to a lesser extent to businesses. The
surplus inventory will come from a variety of industries including home
electronics, furniture, sporting goods, pet supplies, clothing, and more.
All merchandise will be sold on consignment. Revenue will be generated by
equally splitting excess revenues over merchandise liquidation value with
the partnering companies.
<PAGE>
The Company is currently building a web site for AnythingSurplus,
which will be accessible at http://www.anythingsurplus.com.
Auctionfun.com
The Company acquired a five percent interest in Auctionfun in
December 1999. Auctionfun is a development stage company established to be
a premier source for buying and selling products and/or services in a
unique and entertaining auction format on the internet. As the name
suggest, the niche of Auctionfun is on the actual transaction. The focus
is to provide a fun and enjoyable experience for consumers as they shop
and barter on-line.
In addition to the auction service, Auctionfun will create a site
where communities can develop around specific products and business
categories. For instance, train collectors can meet people with the same
interests, distributors can chat with manufacturers, and corporations can
engage distributors and consumers with new promotions. This will be done
through providing a community section on the web site. These sections
provide a hub to communicate and will contain links to specific products,
associations, clubs, and other related sites.
Century Records
Century is involved in various areas of the recorded music industry.
Century's principal activities include the acquisition, licensing,
production, marketing and distribution of high quality recorded music in a
variety of music formats: Compact Disks (ACD's@), video, CD-ROM and to a
lesser extent, cassette tapes. Century produces such types of music as
gospel, adult contemporary, reggae, top 40, blues, country, rap, rock,
instrumental, rock and roll, jazz, pop rock, classical, easy listening,
big band, rhythm and blues, various ethnic folk and music recordings.
Century owns a Master Catalog of about of 4,000 song titles.
Ownership of such master recordings gives the owner all the rights to
commercially exploit the master recordings in any formats which are
legally permissible. The owner of a master recording pays the artist
continuing royalty on revenues generated by the commercial exploitation of
the master recordings. The usual industry terms of such royalty
arrangements require continuing royalties on net sales. In certain
instances, Century's rights to these master recordings are not exclusive.
Hall of Fame
The Company owns a 20% interest in Hall of Fame. Hall of Fame is a
development stage company established to create a national Big Band & Jazz
Hall of Fame Museum, produce an annual network television awards show and
stage an annual celebrity golf tournament. Hall of Fame currently owns
the exclusive license to the Federal Trademark of "The National Big Band &
Jazz Hall of Fame Museum", and has a contract with Emmy Award winner Steve
Binder to
<PAGE>
produce/direct the television awards show. Although Hall of
Fame will make great efforts to ensure the success of all three
activities, the museum is the main focus of the project.
Hall of Fame believes it will gain most of the exposure for the
museum through promotional events. The two main promotional activities
that will take place annually are the production of the television awards
show and the celebrity golf tournament. In addition, Hall of Fame will
develop a website museum. The virtual museum will contain over 1,500
musician biographies, and provide a taste for the actual museum. Also,
admission tickets will be available for purchase on-line.
Randall Entertainment
The Company has determined that Randall does not fit within its
current business model. Therefore, all operations of Randall have been
discontinued and Randall's assets have accordingly been written off by the
Company.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily
through loans and private sales of our equity securities. As of March 31,
2000, we had on hand approximately $18,950 in cash.
For the three months ended March 31, 2000, operating activities used
net cash of approximately $310,463 primarily form a net loss from
operations of approximately $930,028, which was offset by depreciation and
amortization of $27,115 and other non-cash charges of $600,183.
For the three months ended March 31, 2000, investing activities used
net cash of approximately $745,320, primarily for unsecured advances to an
internet start-up company for $600,000, and for the purchase of other
internet start-up investments.
In addition, financing activities provided net cash of approximately
$1,074,638, primarily from the proceeds from the placement of short-term
debt, which totaled approximately $1,355,000. This was partially offset
by payments on short-term debt and offering costs, which totaled $159,
017.
Results Of Operations
Comparison of the three months ended March 31, 2000 and the three months
ended March 31, 1999.
Revenues
Revenue from previous periods were mainly derived from the sale of
compact disks by the Company's Century Records subsidiary. This revenue
driver has proven unsuccessful and the
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Company has decided to change its focus.
General and administrative expenses increased from $49,119 to
$366,633, or by 646% for the three months ended March 31, 2000 as compared
to the corresponding period in 1999. The increases for the three months
were primarily due to increase in Web Development expense, Business
Development expense, Investor Relations and Promotions, and legal and
accounting fees. Web Development related expenses were $125,750, Business
Development related expense were $25,000, Investor Relations and
Promotions were $82,656, and legal and accounting fees were $89,810.
Depreciation and Amortization
Depreciation expense during the three months ended March 31, 2000
were $815 increasing from $233 for the three months ended March 31, 1999.
Amortization expense during the three months ended March 31, 2000
were $26,300 increasing from $15,056 or by 75%. The increase was due to
the increase in the amortization of Goodwill, which was $0 from the
previous year. The increase in Goodwill came as a result of the
AnythingSurplus.com and Navitech acquisitions. Amortization for Goodwill
totaled to $10,258 an increase from $0 from the previous year.
Amortization expense for Record Remastering Costs was $15,056 and $16,041
respectively.
Financing Costs
Financing costs during the three months ended March 31, 2000 were
$537,167 increasing from $0 for the first three months ending March 31,
1999. The increase consisted primarily of $53,000 brokerage fees in
connection to the issuance of various convertible notes issued during the
period, while $484,167 was related to warrants in connection with
financing during the period as well.
Interest Expense
There was no interest expense during the three months ended March 31,
2000. The initial $500,000 convertible Debenture issued in February 2,
2000 was immediately converted to stock shortly after it was issued. The
other convertible Debentures were not issued until the latter part of the
1st quarter.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 31, 1998, TopSpeed Corporation filed suit against the Company
in the Third Judicial District Court in Salt Lake County, State of Utah,
claiming that the Company failed to
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pay TopSpeed for services rendered. On January 26, 1999, a default judgment
was entered against the Company in the amount of $11,682.77. In March 2000,
the Company paid TopSpeed $5,198.00 in exchange for a full and complete
release of all of TopSpeed's claims against the Company. A Satisfaction of
Judgment was filed by TopSpeed in April 2000.
Item 2. Changes in Securities
No instruments defining the rights of the holders of any class of
registered securities have been materially modified, limited or qualified.
The following securities, which are not registered under the
Securities Act of 1933, were issued by the Company during the quarter
ended March 31, 2000.
On January 10, 2000, the Company sold 27,500 shares of its common
stock to an accredited investor. The Company received total consideration
of $100,650. These shares were issued pursuant to exemptions from
registration requirements set forth in Rule 504 of Regulation D and
Section 3(b) of the Securities Act of 1933.
On January 28, 2000 the Company issued 12,000,000 restricted shares
of its common stock in exchange for all of the 10,000 issued and
outstanding shares of Eccount, Inc. These shares were issued pursuant to
an exemption from registration under Section 4(2) of the Securities Act of
1933. No cash was received by the Company. With the completion of this
transaction, control of the Company was acquired by the sole shareholder
of Eccount.
On February 3, 2000, the Company issued 21,000 shares of its common
stock to an accredited investor in exchange for a Promissory Note in the
amount of $45,360. The Promissory Note is non-interest bearing and
payable on demand. These shares were issued pursuant to exemptions from
registration requirements set forth in Rule 504 of Regulation D and
Section 3(b) of the Securities Act of 1933. The Company has made demand
on the Promissory Note. To date, $20,000 of the $45,360 has been paid to
the Company.
Also on February 3, 2000, the Company issued a 8% Series A Senior
Subordinated Convertible Redeemable Debenture due on February 3, 2002,
with a face amount of $500,000. The Debenture was immediately convertible
into common shares of the Company. The Company received total
consideration of $435,000. On February 3, 2000, the Debenture was
converted into 520,835 common shares of the Company at a conversion price
of $0.96 per share. The Debenture , and the shares underlying the
Debenture were issued pursuant to exemptions from registration
requirements set forth in Rule 504 of Regulation D and Section 3(b) of the
Securities Act of 1933.
On February 7, 2000, the Company issued 8,334 common shares to
Internet Marketing Consortium for certain internet marketing services
provided to the Company. The services
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provided were valued at $30,000. The shares were issued pursuant to an
exemption from registration under Section 4(2) of the Securities Act of
1933.
On February 16, 2000, the Company issued 69,444 restricted shares of
its common stock to a consultant retained to assist the Company locate
acquisition or merger prospects to further develop the Company's business
and to assist the Company with the completion of any such transaction.
These shares were issued pursuant to an exemption from registration set
forth in Section 4(2) of the Securities Act of 1933.
On March 1, 2000, the Company issued four 8% Convertible Notes due on
May 1, 2000, with a total face amount of $555,000. Pursuant to the terms
of the Notes, which all have identical terms except for the face amount,
the Company also issued warrants to purchase 550,000 shares of its
restricted common stock at $0.01 per share. The warrants were exercised
immediately and 550,000 restricted shares were issued by the Company. The
Company received total consideration of $505,500. Interest on the note is
payable monthly. The Note is convertible into restricted shares of the
Company's common stock based upon the current market price on the date of
conversion. The Note provides interest at 10% per annum on the entire
outstanding balance if the Company defaults upon the Note. The Note, the
shares underlying the Note, the warrants and the shares underlying the
warrants were issued pursuant to an exemption from registration pursuant
to Section 4(2) of the Securities Act of 1933.
On March 16, 2000, the Company sold an 8% Note due on June 16, 2000,
with a face amount of $300,000 and warrants to purchase 150,000 shares of
restricted common stock at $0.01 per share. The warrants were exercised
immediately. The Company received $262,500. Interest on the note is
payable monthly at 8% per annum. If the Company defaults on the Note,
interest will accrue on the entire amount in default at 10% per annum.
The Note, the warrants, and the shares underlying the warrants were issued
pursuant to an exemption from registration pursuant to Section 4(2) of the
Securities Act of 1933.
On March 28, 2000, the Company issued 8,334 restricted common shares
to its former president for services rendered during 1999. The services
provided were valued at $12,500. The shares were issued pursuant to an
exemption from registration under Section 4(2) of the Securities Act of
1933.
On March 28, 2000, the Company issued 27,000 restricted common shares
to its former secretary for services rendered during 1999 and the first
quarter of 2000. The services provided were valued at $40,500. The
shares were issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933.
On March 28, 2000, the Company issued 10,000 restricted common shares
for rental expense incurred during 1999 and the first quarter of 2000.
The rental expense was valued at $15,000. The shares were issued pursuant
to an exemption from registration under Section 4(2) of the Securities Act
of 1933.
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On March 28, 2000, the Company issued 126,840 restricted common
shares to its president for services rendered and for reimbursement of
expenses incurred on behalf of the Company. The services and
reimbursement were valued at $190,260. The shares were issued pursuant to
an exemption from registration under Section 4(2) of the Securities Act of
1933.
On March 28, 2000, the Company issued 134,312 restricted common
shares to resolve an outstanding debt of $201,468. The shares were issued
pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933.
Item 5. Other Information
The Company incorporates fully herein by reference the Form 8-Ks it
filed on February 7, 2000 and March 28, 2000.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits. The following exhibits are included as part of this
report:
Exhibit SEC
Number Ref. Title of Document Location
2.01 2 Agreement and Plan of Attached
Reorganization
4.01 4 8% Series A Senior Subordinated Attached
Convertible Redeemable Debenture
4.02 4 8% Convertible Notes Attached
No. A 001- A004
4.03 4 8% Convertible Note Attached
No. B 001
27.01 27 Financial Data Schedule Attached
(B) Reports on Form 8-K
On February 7, 2000, Navitec Group, Inc., a reporting company filed a
Form 8-K reporting that it had been acquired by the Company. The pro-
forma financial statements required to be filed with this 8-K, are not
finished and have not been filed.
<PAGE>
On March 28, 2000, the Company filed Form 8-K reporting the
resignations of William K. Beck, Edward Superfon, and Robert C. Stenquist
as directors, and the resignation of Robert C. Stenquist as the Secretary.
The Company also reported the appointment of Debra Gilson as Secretary and
Treasurer and Robert C. Stenquist as assistant secretary. The 8-K
disclosed that the Company had reached agreements in principal to acquire
all of the issued and outstanding shares of Car Rental Direct.com, Inc.,
and Engulf and Devour Creative Group, Inc. Finally, the 8-K also stated
that the Company had reached an agreement in principle to enter into a
joint venture agreement with Hagen Marketing & Communications, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this to be signed on its behalf by the
undersigned thereunto duly authorized.
WorldNet Resource Group, Inc.
September 14, 2000 /s/ Stephen Brown
Stephen Brown
Chief Executive Officer, President and Director
September 14, 2000 /s/ Noel Navarro
Noel Navarro
Vice President, Secretary, Treasurer and
Chief Accounting Officer
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