FORM 10-QSB
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________________ to _____________________.
Commission file number: 000-28743
WORLDCAST INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-06939498
------- -----------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
20283 State Road 7, suite 300, Boca Raton, Florida 33498
- -------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 864-2316
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
----- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
As of March 31, 2000, there were 21,746,440 shares of Common Stock, par value
$.001 per share 1
<PAGE>
WORLDCAST INTERACTIVE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND
DECEMBER 31, 1999
2
<PAGE>
<TABLE>
<CAPTION>
WORLDCAST INTERACTIVE, INC.
INDEX PAGE
----- ----
<S> <C> <C>
Part I. Financial Information 4
Item 1. Financial Statements (unaudited) 4-8
Item 2. Management's Discussion and Analysis of Financial Condition 9-11
and Results of Operations
Part II. Other Information 12
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
A S S E T S
March 31, 2000 December 31, 1999
(Unaudited)
---------------- ----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,230 $ 1,017
Accounts receivable, net - 2,255
---------------- ---------------
Total Current Assets 1,230 3,272
Property and Equipment, net 49,431 51,931
---------------- ---------------
Total assets
$ 50,661 $ 55,203
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,003,664 $ 2,199,050
Warranty liability 447,000 447,000
Due to 0fficers 18,956 221,586
Notes payable-related party - 523,324
Notes payable-STI - 150,347
Bridge financing - 588,000
---------------- ---------------
Total Current Liabilities 1,469,620 4,129,307
---------------- ---------------
Stockholders' Equity:
Preferred stock,$.001 par value,5,000,000 authorized,
None issued - -
Common stock,$.001 par value, 100,000,000 authorized,
21,746,440 and 9,481,195 shares issued and outstanding as of
March 31,2000 and December 31,1999, respectively 50,190 37,925
Additional paid-in capital 7,821,437 4,603,214
Notes receivable-officers (1,808,560) (1,808,560)
Accumulated deficit (7,482,026) (6,906,683)
---------------- ---------------
Total Stockholders' deficit (1,418,959) (4,074,104)
---------------- ---------------
Total liabilities and shareholders' deficit $ 50,661 $ 55,203
================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
WORLDCAST INTERACTIVE, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------------
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
Sales $ - $ 37,297
Cost of goods sold - 53,862
------------ --------------
Gross margin - (16,565)
------------ --------------
Selling, general and administrative expenses 357,775 561,756
------------ --------------
Operating loss
357,775 (578,321)
------------ --------------
Other Income (Expenses):
Other, net - -
Interest expense (217,568) (40,250)
------------ --------------
(217,568) (40,250)
------------ --------------
Net loss $ (575,343) $ (618,571)
============ ==============
Net loss per share of common Stock-Basic $ (0.06) $ (0.14)
============ ==============
Weighted average common shares Outstanding-Basic 9,613,079 4,471,674
============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
WORLDCAST INTERACTIVE, INC.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Notes Total
Common Stock Paid-in Receivable Accumulated Stockholders'
Shares Amount Capital Officer's Deficit Equity
------ ------ ------- --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 9,481,195 $37,925 $ 4,603,214 $ (1,808,560) $(6,906,683) $(4,074,104)
Net loss - - - - (575,343) (575,3431)
Conversion of debt&payables 12,265,245 12,265 3,218,223 - - 3,230,488
----------- ----------- ------------ ------------- ------------- -------------
Balance at March 31, 2000 21,746,440 $ 50,190 $ 7,821,437 $ (1,808,560) $ (7,482,026) $(1,418,959)
=========== =========== ============ ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
WORLDCAST INERACTIVE,INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
June 30,
1999 1998
(Unaudited) (Unaudited)
-------------------- --------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (575,343) $ (618,571)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 2,500 6,350
Common stock issued for services 250,000 151,330
Common stock issued for interest 217,568 -
Changes in assets and liabilities:
Decrease (increase) in operating assets:
Accounts receivable, net 2,255 (4,114)
Inventory - 44,902
Prepaid expenses & other current assets - (48,601)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (51,567) 64,085
Total adjustments 420,756 213,952
---------- -----------
Net Cash (Used in)Operating Activities (154,587) (404,619)
---------- -----------
Cash Flows from Investing Activities:
Acquisition of property and equipment - (14,449)
---------- ------------
</TABLE>
7
<PAGE>
WORLDCAST INTERACTIVE, INC.
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
March 31,
2000 1999
(Unaudited) (Unaudited)
-------------------- -------------------
<S> <C> <C>
Cash Flows from Financing Activities:
Repayment of notes payable $ - $ (25,801)
Proceeds from sale of common stock - 431,569
Proceeds from short term loan 125,800 -
Proceeds from stockholder loan 29,000 -
--------------- -------------
Net Cash Provided by Financing Activities 154,800 405,768
--------------- -------------
Increase (decrease)in Cash and Cash Equivalents 213 (13,300)
Cash and Cash Equivalents - Beginning of Period 1,017 25,574
--------------- --------------
Cash and Cash Equivalents - End of Period $ 1,230 $ 12,274
=============== ===========
Supplemental Disclosure of Non-Cash Financing Activities:
Issuance of common stock in connection with
Debt, acounts payable, accrued expenses and
Accrued payroll employees and officer's $ 3,230,488
===========
</TABLE>
8
<PAGE>
WORLDCAST INTERACTIVE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
GENERAL
Amounts presented herein have generally been rounded in the nearest thousand
dollars and the related dollar and percentage fluctuations are calculated on
such rounding.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain statements which are forwarded-looking
and the accuracy of which are based upon certain uncertainties in the Company's
future operations and results. For a discussion of important factors that could
cause the actual results to differ materially from those contained in such
forward-looking statements, see "Forward-Looking Statements" below.
During the three months ended March 31,2000 the Company continued to
manage the Space Scanner warranty claims as it further negotiated with the
manufacturer, galaxis of Germany. The Company had agreed per the non-binding
memorandum of understanding, to provide assistance to galaxis in managing the
Space Scanner warranty claims prior to executing a binding settlement.
Negotiations have continued with galaxis GmbH of Germany. The Company
also continues to work with galaxis to manage and negotiate warranty claims. To
date the Company has not resolved a significant portion of these warranty
claims.
Management has been evaluating new business opportunities for the
Company to enter the commercial market place for convergence integration of
voice , data, multimedia and fax and not to rely on the galaxis products as its
main focus and source of revenue.
The Company has met with data network and telecommunication
infrastructure providers such as Cisco Systems to discuss channel partner and
reseller agreements of their equipment and services. To date the Company is
proceeding to formalize a reseller agreement with Cisco Systems, otherwise no
other formal agreements have been entered into. These factors as well as the
very severe capital restraints which the Company continues to operate under
resulted in no sales during the quarter ending March 31,2000. The Company
anticipates commencing its new business strategies and earning revenue during
the second quarter of 2000. However there is no assurance that any will be
realized.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Results of Operations
Gross revenues decreased from $37,297 for the three months ended March
31,1999 to no sales the three months ended March 31,2000, a decrease of $37,297
or approximately 100%. A decline in sales for the three months ended March
31,2000 was prompted by Managements decision to not rely on the sale of the
Space Scanner manufactured by galaxis and to direct resources into the
convergence integration in the commercial market. The Company was in discussions
with Cisco to become a channel partner to resell their network products and
services into the commercial market.
Cost of operations for the three months ended March 31,2000 decreased
by $203,981 from $561,756 for the three months ended March 31,1999 to $357,775,
a decrease of approximately 36 %. The reduction in operation costs is due to the
reduction in staff and the relocation to a lower cost facility.
9
<PAGE>
Other income (expense) consisted of one component, interest expense as
follows:
Interest expense accrued on loans to financing companies and investors
which increased by $177,318 to $217,568 in March 31,2000 from $40,250 in March
31,1999, or 441%. The increase is due primarily to the average outstanding
balance of debt during the related periods.
The net income (loss) for the period ended March 31,2000 was
($575,343) as compared to ($618,571) at March 31,1999,a decrease of $42,228 or
approximately 6.8% .
Liquidity and Capital Resources
Due to the severe capital restraints, the Company operates with only
executive personnel whose compensation was accrued and subsequently converted
into equity. Other expenses, comprising of interest on outstanding debt and
professional fees, which primarily relate to operating a public company.
Through March 31,2000, the Company completed several agreements with
debt holders, executive management and former employees which converted
liabilities totaling approximately $2,500,000.00 into the Company's stock.
Approximately, an additional $700,000.00 in liabilities were subsequently
converted to the Company's stock as of April 7,2000.
The Company raised a total of approximately $154,000.00 to fund
operations. These investments were converted to equity during the first three
months ending March 31,2000. The capital was obtained from a private investor
($124,000) and a related party ($29,000).
Forward Looking Statements
The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operation contains various "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act, which represent the Company's expectations or beliefs concerning
future events, including without limitation the following: changes in the
Company's sales, costs, expenses and other financial information; changes or
adjustments in the Company's downsizing plan, including without limitation the
reduction of the Company's workforce and the potential growth opportunities
through sale, installation and service of other third party products; the
Company's ability to secure additional line of credits and other sources of
financing, as well as other sources, if necessary for the Company to do so; and
the sufficiency of the Company's cash provided by some of its stockholders to
move ahead the Company toward realization of revenue provided by operation,
investing and financing activities for the Company's future liquidity and
capital resource needs.
The Company cautions that these statements are further qualified by
important factors that could cause actual to differ materially from those
contained in the forward-looking statements, including without limitation the
following; general economic conditions; specific economic conditions relating to
convergence technologies, the demand for Company's products and services; the
size and timing of the future sales and new contracts; specific features
requests by customers; production delays or manufacturing inefficiencies;
management decisions to commence or discontinue service or product lines; the
Company's ability to introduce or sell new products on a cost-effective and
timely basis; the amount of timing of research and development expenditures when
and where applicable; the maintenance of present and the availability of future
strategic alliances and joint marketing or service agreements; the introduction
of new products and product enhancements by the Company or its competitors; the
budgeting cycle of customers; the adaptation of technologies by the customers;
changes in the proportion of the revenue attributable to new and existing
products and services and maintenance and support services; changes in the level
of operating expenses; and the present and future level of competition in the
industry. As a result of these and other important factors, the results actually
achieved may differ materially from expected results included in these
statements.
10
<PAGE>
WORLDCAST INTERACTIVE INC.
Year 2000 Compliance
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. Software failures due to processing
errors potentially arising from calculations using the year 2000 date are a
known risk. The Company is addressing this risk to the availability and
integrity of financial systems and the reliability of operational systems. The
Company has established processes for evaluation and managing the risks and
costs associated with this problem.
Major areas of potential business impact have been identified and initial
conversion efforts are underway. The Company also is communicating with
suppliers, dealers, financial institutions and others with which it does
business to coordinate year 2000 conversion. After evaluations of the responses
from such communications, the Company will prepare a contingency plan to
mitigate year 2000 issues, if necessary. The total cost of compliance and its
effect on the Company's future results of operations is being determined as part
of the detailed conversion planning.
11
<PAGE>
WORLDCAST INTERACTIVE INC.
Part II: Other Information
ITEM 1: Legal Proceedings
WorldCast and certain of its officers are named defendants in an action
brought by Charter Memories, Inc. on May 4, 1999 in the United States
District Court, Central District of California, for damages totaling
approximately $96,000, for alleged misrepresentation concerning the
qualities and characteristics of Space Scanner Receiver and Antenna
equipment purchased by Charter Memories. WorldCast is presently
conducting discussions regarding settlement of this case.
ITEM 2: Changes in Securities and Use of Proceeds
None
ITEM 3: Defaults upon Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Securities Holders
None
ITEM 5: Other Information
12
<PAGE>
WORLDCAST INTERACTIVE
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned as a duly authorized officer as the chief financial officer of the
Registrant.
WORDLCAST INTERACTIVE, INC.
By: /s/ Ahmad Moradi
---------------------------------------
Ahmad Moradi, Chairman of the Board
and Chief Executive Officer
By: Robert S. Kelner
---------------------------------------
Robert S. Kelner, Chief Operating Officer,
Chief Financial Officer (authorized Officer
and Chief Accounting Officer)
DATED: May 12,2000
14
