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 June 30, 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.)
2821 East Commercial Blvd., Suite 202, FT. Lauderdale, FL 33308
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 771-7950
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 June 30, 2000, there were 23,695,664 shares of Common Stock, par value
$.001 per share outstanding.
<PAGE>
WORLDCAST INTERACTIVE, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
2
<PAGE>
Consolidated Balance Sheets
A S S E T S
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
(Unaudited)
----------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 54,283 $ 1,017
Accounts receivable, net -- 2,255
----------- -----------
Total Current Assets 54,283 3,272
Property and Equipment, net 46,931 51,931
Investment in CableTech, Inc. 259,323 --
----------- -----------
Total assets $ 360,537 $ 55,203
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 991,885 $ 2,199,050
Warranty liability 365,167 447,000
Due to officers 23,687 221,586
Notes payable-related party 30,000 --
Notes payable -- 523,324
Notes payable-STI -- 150,347
Bridge financing -- 588,000
----------- -----------
Total Current Liabilities 1,410,739 4,129,307
----------- -----------
Stockholders' Equity:
Series B convertible preferred stock,$.001 par value,
5,000,000 authorized, none issued -- --
Common stock,$.001 par value, 100,000,000 authorized,
23,695,664 and 9,481,195 shares issued and outstanding as of
June 30,2000 and December 31,1999, respectively 51,959 37,925
Additional paid-in capital 8,385,401 4,603,214
Notes receivable-officers (1,682,374) (1,808,560)
Accumulated deficit (7,805,188) (6,906,683)
----------- -----------
Total Stockholders' deficit (1,050,202) (4,074,104)
----------- -----------
Total liabilities and shareholders' deficit $ 360,537 $ 55,203
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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WORLDCAST INTERACTIVE, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ -- $ 100,947 $ -- $ 63,650
Cost of goods sold -- 181,514 -- 127,652
----------- ----------- ----------- -----------
Gross margin -- (80,567) -- (64,002)
----------- ----------- ----------- -----------
Selling, general and
administrative expenses 663,311 705,941 305,535 255,410
----------- ----------- ----------- -----------
Operating loss (761,311) (786,508) (403,535) (319,412)
----------- ----------- ----------- -----------
Other Income (Expenses):
Other, net -- -- -- --
Interest expense (235,194) (3,820) (17,626) (3,594)
----------- ----------- ----------- -----------
(235,194) (3,820) (17,626) (3,594)
----------- ----------- ----------- -----------
Net loss $ (898,505) (790,328) $ (323,161) $ (323,006)
=========== =========== =========== ===========
Net loss per share of
common Stock-Basic $ (0.06) $ (0.12) $ (0.01) $ (0.04)
=========== =========== =========== ===========
Weighted average common
shares Outstanding-Basic 16,250,081 7,025,416 22,893,888 9,449,173
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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WORLDCAST INTERACTIVE, INC.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Notes Total
Common Stock Paid-in Receivable Accumulated Stockholders'
Shares Amount Capital Officers 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) (575,343)
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)
Net loss -- -- -- -- (323,161) (323,161)
Repayment of notes receivable,
Officers 126,186
Conversion of debt&payables 1,949,223 1,769 563,964 -- -- 691,919
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2000 23,695,664 $ 51,959 $ 8,385,401 $(1,682,374) $(7,805,188) $(1,050,202)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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WORLDCAST INTERACTIVE, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
June 30,
2000 1999
(Unaudited) (Unaudited)
------------ -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (898,505) $(790,328)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 5,000 --
Common stock issued for services 404,895 151,328
Common stock issued for interest 235,194 --
Changes in assets and liabilities:
Decrease (increase) in operating assets:
Accounts receivable, net 2,255 (5,961)
Inventory -- 11,545
Prepaid expenses & other current assets -- (91,933)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 227,762 252,642
----------- ---------
Total adjustments 965,742 317,621
----------- ---------
Net Cash (Used in) Operating Activities (23,399) (472,707)
----------- ---------
Cash Flows from Investing Activities:
Acquisition of property and equipment -- (19,466)
Investment in Cable Tech, Inc. (234,323) --
----------- ---------
Net Cash (Used in) Investing Activities (234,323) (19,466)
----------- ---------
</TABLE>
6
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WORLDCAST INTERACTIVE, INC.
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
June 30,
2000 1999
(Unaudited) (Unaudited)
----------- ----------
<S> <C> <C>
Cash Flows from Financing Activities:
Repayment of notes payable $ -- $ (20,801)
(Increase)/decrease in receivable-officers 126,188 (1,808,560)
Proceeds from sale of common stock -- 1,995,244
Proceeds from short term loans 155,800 260,822
Proceeds from stockholder loan 29,000 34,500
---------- ----------
Net Cash Provided by Financing Activities 310,988 461,205
---------- ----------
Increase (decrease)in Cash and Cash Equivalents 53,266 (30,968)
Cash and Cash Equivalents - Beginning of Period 1,017 25,574
---------- ----------
Cash and Cash Equivalents - End of Period $ 54,283 $ (5,394)
========== ==========
Supplemental Disclosure of Non-Cash Financing Activities:
Issuance of common stock in connection with the
settlement of debt, accounts payable, accrued
expenses and accrued payroll $3,811,223
----------
</TABLE>
7
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WORLDCAST INTERACTIVE INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
On November 9, 1999, FutureTrak International, Inc. changed its name to
WorldCast Interactive, Inc. WorldCast Interactive, Inc. and Subsidiaries (the
"Company") is in the business of providing mobile satellite antennas to the
yachting industry allowing the yachts to receive satellite transmissions while
at sea. Beginning in fiscal 1999, the Company changed their business approach to
providing wiring infrastructure to multi-housing communities, which enables the
tenants to obtain Direct TV and high speed internet access. As a result of
limited operating capital, the Company's operations were severely limited to
focusing on it's acquisition of Cable Tech, Inc. and it's wholly owned
subsidiary. As discussed in Note 2, the Company completed the acquisition of
Cable Tech on August 17, 2000.
ESTIMATES
In preparing financial statements in accordance with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts and disclosures of assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
DEPRECIATION
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation for financial reporting purposes is computed by using the
straight-line method over the estimated useful life of the related assets, which
are as follows:
Years
-----
Computer equipment 3-5
Office equipment 5
Furniture and fixtures 7
For income tax purposes, accelerated methods of depreciation are generally used.
Deferred income taxes are provided for the difference between depreciation
expense for tax and financial reporting purposes.
LOSS PER SHARE
Basic net loss per share equals net loss divided by the weighted average shares
outstanding during the year. Dilutive EPS has not been presented because common
stock equivalents would be anti-dilutive in 2000 and 1999.
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INTERIM FINANCIAL DATA
In the opinion of management, the accompanying unaudited financial statements
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. The annual
financial statements of the Company as of December 30, 1999 should be read in
conjunction with these statements. The financial information included herein has
not been audited. However, management believes the accompanying unaudited
interim financial statements contain all adjustments, consisting of only normal
recurring adjustments necessary to present fairly the consolidated financial
position of WorldCast Interactive, Inc. as of June 30, 2000 and the results of
their operations for the six months and three months ended June 30, 2000 and
1999 and cash flows for the six months ended June 30, 2000 and 1999. The results
of operations and cash flows for the period are not necessarily indicative of
the results of operations or cash flows for the year ending December 31, 2000.
NOTE 2: ACQUISITION
On August 17,2000 the Company completed the execution of a amended merger
agreement resulting in the acquisition of all of the outstanding common stock
CableTech, Inc. and its wholly-owned subsidiary, Lyncs Technologies, Inc. in
exchange for 865,067 shares of the Company's Series B Convertible Preferred
Stock. The owners of Series B Convertible Shares are entitled to convert those
preferred shares to common shares on a semi-annual basis. Each preferred share
has voting rights equivalent to 4.6245 shares of WorldCast common stock and
shall be converted into 4.6245 shares of WorldCast common stock upon the
election of the preferred shareholder. Preferred shareholders are also provided
with liquidation preferences in the amount equal to $9.25 per share, adjusted to
reflect a price increase of 10% per annum, compounded daily, plus any and all
accrued and unpaid dividends. The preferred shareholders shall elect a majority
of WorldCast's board of directors if WorldCast fails to obtain the following
requirements by June 30, 2001:
1 obtaining of $5,000,000 of equity capital;
2 increase Cable Tech's "run rate", as defined, by $5,000,000 by June 30, 2001;
3 obtain a listing of the Company's common stock on the OTC bulletin Board; and
4 settle all Cable Tech debts and obligations secured by the former Cable Tech's
sole shareholder's personal guarantee or surety agreements existing as of June
30, 2000.
If The Company fails to meet the aforementioned requirements by June 30, 2001,
the Series B Preferred shareholders will retain the right to elect a majority of
the board of directors until such requirements are satisfied.
In connection with the execution of the Merger agreement, the Company, Perrins
Management Corporation ("Consultant") and Robert H. Perrins, Jr.(Former Sole
shareholder of Cable Tech, Inc. ), entered into a Consulting Agreement
("Consulting Agreement"). Under this Agreement, the Consultant shall provide
consulting services to WorldCast for a period of two years commencing July 1,
2000. In consideration of the services, Mr. Perrins shall be granted and issued
seven million seven hundred sixty thousand units of the Company's share
appreciation rights ("SAR") convertible after June 30,2001 into seven million
seven hundred sixty thousand shares of the Company's common stock at a
conversion ratio of 1:1 or, at the sole election of Mr. Perrins, each SAR unit
may be converted into cash at the rate of $.40 per SAR unit, subject to a
claw-back provision set forth in the Consulting Agreement. The
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claw-back provision provides that in the event that the share price of the
Company's common stock is $2.00 per share or more for a fifteen day consecutive
period within the quarter ending July 1, 2001, then 3,000,000 of the 7,760,000
SAR units issued to Mr. Perrins will be canceled. In further consideration of
the services to be provided by the Consultant, WorldCast shall pay the
Consultant a consulting fee of $20,833 per month for the term of the agreement.
The Company has valued the total consideration given including the SAR's not
subject to the claw back provision at $5,904,502 and will account for the
acquisition as purchase. The SAR's subject to the claw back provisions are
considered contingent consideration and the value of any these which remain
outstanding after June 30, 2001 will be added to the purchase price for Cable
Tech, Inc. The operations of Cable Tech and its wholly owned subsidiary will be
included with the Company's from the acquisition date forward.
As of June 30,2000 the Company has incurred $259,323 in connection with the
acquisition Cable Tech, Inc. These costs are in addition to the consideration
given as described above.
On August 17,2000 the Company, Perrins Management Corporation, and Robert H.
Perrins, Jr., entered into a financial accommodation agreement pursuant to which
the Company will issue Mr. Perrins 1,187,104 shares of the Company's common
stock, in lieu of and in full satisfaction of a repayment of a loan payable by
Cable Tech, Inc to Mr. Perrins in the amount of $454,008.
NOTE 3: SETTLEMENT OF DEBT
During the six months ended June 30, 2000, the Company issued 14,274,457 shares
of stock in settlement of debt and services amounting to $3,811,223 representing
$149,313 of accounts payable, $1,554,951 of notes payable and bridge financing,
$237,000 of due to officers, $1,190,500 of accrued payroll, $ of services, and
$235,194 of interest.
NOTE 4: NOTES PAYABLE
During April 2000 a shareholder loaned the Company $30,000. The loan is payable
on demand and bears interest at 8%. Interest is payable with the repayment of
the principal. As of the date of the filing the shareholder has not request
repayment of the loan.
NOTE 5: CONSULTING AGREEMENTS
WorldCast engaged the professional services of George Bassett and his firm,
Basscor as an independent financial consultant to help facilitate capital
formation. The terms of this consulting agreement are two six month periods
commencing May 15,2000 with a $10,000 monthly fee convertible into common shares
of the Company at a 25% discount to the ten previous days ask-bid average.
WorldCast rescinded the Equity Investment Line Agreement with EuroFund
Derivatives Limited of Edinburgh, UK on June 19,2000 when funding did not appear
to be available per the terms and conditions of the agreement.
10
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WORLDCAST INTERACTIVE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 six months ended June 30,2000 the Company continued to manage the
Space Scanner warranty claims as it further negotiated with the manufacturer,
galaxis GmbH of Germany. The Company had agreed per a non-binding memorandum of
understanding, to provide assistance on accounting reconciliation to galaxis in
managing the Space Scanner warranty claims prior to executing a binding
settlement.
Galaxis GmbH, the manufacturer of the Space Scanner proposed a settlement offer
with the owners of defective Space Scanners. The galaxis GmbH settlement offer
proposes three options;(i) to refund to the owner the lesser of 80% paid or
$1,800 per Space Scanner;(ii) upgrade the owner to an advance in motion system;
or(iii) upgrade the owner to the most advanced in motion system. All three
options requires the owners of Space Scanners to execute a complete release of
any further claims and to return the Space Scanner to a designated warehouse.
Galaxis GmbH in preparing to receive back Space Scanners as a result of this
settlement proposal has executed an agreement with a public storage facility to
manage the receipt of the Space Scanners and to store them. Galaxis GmbH
escrowed with the Company's California legal counsel sufficient funds to pay the
single largest warranty claim.
As discussed in Item 5 and Note 2 to the financial statements on August 17,2000,
the Company completed the acquisition of Cable Tech, Inc. and its wholly owned
subsidiary. Cable Tech is a LUCENT BusinessPartner and provides telephony and
data networking infrastructure to customers in San Jose, California and the
surrounding 50 miles, better known as Silicon Valley. The operations of Cable
Tech and its wholly owned subsidiary will be included in the Company's
consolidated financial statements from the date of acquisition.
SIX AND THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX AND THREE MONTHS ENDED
JUNE 30, 1999
Results of Operations
Gross revenues decreased from $100,947 and $63,650 for the six and
three months ended June 30, 1999, respectfully, to no sales for the six and
three months ended June 30, 2000, a decrease of 100%. A decline in sales for the
six and three month periods ended June 30, 2000 was prompted by
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Management's decision to pursue its acquisition of Cable Tech and Subsidiary,
which was completed on August 17, 2000, as well as discontinuing sales of the
Space Scanner manufactured by Galaxis.
Selling, General and Administrative expenses for the six and three
month periods ended June 30, 2000 decreased by $42,630 and increased by $50,125
respectively from $705,941 and $255,410 respectively for the six and three
months ended June 30, 1999, an decrease of approximately 6% and an increase of
approximately 20%, respectively. The fluctuation is primarily the result of
decreased payroll expense associated with a reduction of employees, as well as
the costs associated with the initial investigation of Cable Tech, consulting
fees associated with tax planning and legal and accounting fees associated with
the reporting and listing requirements of being a public company. The favorable
warranty liability claim development of approximately $80,000 favorably impacts
Selling, General and Administrative expenses.
Other income (expense) consisted of two components, interest expense
and a gain on warranty reserve as follows:
Interest expense accrued on loans from financing companies and
investors, which increased by $231,374 to $235,194 in the six months ending June
30,2000 from $3,820 in June 30,1999. The increase is due primarily to the
average outstanding balance of debt during the related periods.
The net loss for the six months ended June 30, 2000 was ($898,505) as
compared to ($790,328) at June 30, 1999, an increase of $108,177 or
approximately 14%.
Liquidity and Capital Resources
Due to the severe capital restraints during the six months ended June
30, 2000, the Company employed 4 executive personnel whose compensation was
accrued and subsequently converted into equity.
Through June 30, 2000 the Company completed several agreements with
debt holders, executive management and former employees which converted
liabilities totaling $3,811,223 into 14,274,457 shares of the Company's stock at
an average price of $.23 per share. These transactions were made in reliance of
the exemption from registration provided by Section 4(2) of the Securities Act.
The Company, to date, has experienced severe negative cash flows and
has met its cash requirements by issuing its securities. Additional funds were
generated by borrowings of approximately $183,000. The capital was obtained from
two private investors ($154,000) and a related party ($29,000). On March 15,
2000, these liabilities were converted at $.1875 per share in reliance of the
exemption from registration provided by Section 4(2) of the Securities Act. The
conversion equated to 661,333 shares of common stock for the $124,000 loan and
154,667 shares of common stock for the $29,000. As of June 30, 2000, a note
payable of $30,000 remained outstanding. The note accrues interest at 8% per
annum and is due upon demand.
The Company as of June 30, 2000 has negative working capital of $1,446,456. The
Company anticipates that it will need to raise additional funds through private
or public offerings or additional borrowings to sustain its operations. There
can be no assurances that the Company will be able to obtain financing on
acceptable terms.
William Tessaro, the Company's Chief Technical Officer loaned the Company an
aggregate of $171,204 in 1998. Mr. Tessaro has converted the outstanding amount
of the loan including interest ($208,000)
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into 1,264,000 shares of the Company's common stock. This conversion was made in
reliance of the exemption provided by Section 4(2) of the Securities Act.
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.
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Part II: Other Information
ITEM 1: Legal Proceedings
WorldCast and certain of its officers were named defendants in a
warranty claim action brought by Charter Memories, Inc. Per the Company's legal
counsel's opinion, it appears that the Company's warranty obligations to Charter
Memories is limited to its contractual obligation of $43,000 for the value of
the Space Scanners. Charter Memories had added to their litigation lost profit
and other related costs whereby their claim for damages approximated $98,000.
Galaxis GmbH has placed in escrow with the Company's legal counsel US$50,000 to
satisfy this claim.
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
On July 18,2000 the Company's CEO resigned. The Company and the CEO are
presently working on an amicable separation agreement. This reduction will
result in an annual savings and benefits of approximately $250,000.
WorldCast and its wholly-owned subsidiary, ConvergIT, Inc.
("ConvergIT"), have entered into an Agreement and Plan of Merger, originally
dated May 8, 2000 ("Merger Agreement") with Cable Tech, Inc. ("Cable Tech") and
Cable Tech's wholly-owned subsidiary, Lyncs Technologies, Inc. ("Lyncs
Technologies"). The Merger Agreement provided, among other things that upon the
terms and subject to conditions therein, for the merger of ConvergIT into Cable
Tech. Cable Tech, the surviving corporation, became a wholly owned subsidiary of
WorldCast. Cable Tech and ConvergIT made the appropriate filings to complete the
Merger Agreement with the State of Florida on August 17, 2000.
Under the Merger Agreement, all of the shares of capital stock of Cable
Tech issued and outstanding are exchanged for 865,067 shares of Series B
Convertible Preferred Stock of WorldCast. The owners of Series B Convertible
Shares are entitled to convert those preferred shares to common shares on a
semi-annual basis. Each preferred share has voting rights equivalent to 4.6245
shares of WorldCast common stock and shall be converted into 4.6245 shares of
WorldCast common stock upon the election of the preferred shareholder. Preferred
shareholders are also provided with liquidation preferences in the amount equal
to $9.25 per share, adjusted to reflect a price increase of 10% per annum,
compounded daily, plus any and all accrued and unpaid dividends. The preferred
shareholders shall elect a majority of WorldCast's board of directors if
WorldCast fails to obtain the following requirements by June 30, 2001:
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1. obtaining of $5,000,000 of funding;
2. increase Cable Tech's "run rate" by $5,000,000 during the 12 month
period ended June 30, 2001;
3. obtain a listing of WorldCast's common stock on the OTC bulletin
Board; and
4. settle all Cable Tech debts and obligations secured by Bob Perrins'
personal guarantee or surety agreements existing as of June 30, 2000.
If WorldCast fails to obtain the requirements by June 30, 2001, the
preferred shareholders will retain the right to elect a majority of the board of
directors until the Company satisfies the above requirements.
In connection with the execution of the Merger Agreement, WorldCast,
Perrins Management Corporation ("Consultant") and Robert H. Perrins, Jr.,
entered into a Consulting Agreement ("Consulting Agreement"). Under this
Agreement, the Consultant shall provide consulting services to WorldCast for a
period of two years commencing July 1, 2000. In consideration of the services,
Mr. Perrins shall be granted and issued seven million seven hundred sixty
thousand units of WorldCast share appreciation rights ("SAR") convertible into
seven million seven hundred sixty thousand shares of common stock of WorldCast
at a conversion ratio of 1:1 or, at the sole election of Mr. Perrins, each SAR
unit may be converted into cash at the rate of $.40 per SAR unit, subject to a
claw-back provision set forth in the Consulting Agreement. The claw-back
provision provides that in the event that the share price of common stock of
WorldCast is $2.00 per share or more for a fifteen day consecutive period within
the quarter ending July 1, 2001, then 3,000,000 of the 7,760,000 SAR units
issued to Bob Perrins will be canceled and the total consideration Bob Perrins
is entitled will be the remaining 4,760,000 SAR units. In further consideration
of the services to be provided by the Consultant, WorldCast shall pay the
Consultant a consulting fee of $20,833 per month for an additional term of 2.
In addition, WorldCast, Perrins Management Corporation, and Robert H.
Perrins, Jr., entered into a financial accommodation agreement pursuant to which
WorldCast will issue Mr. Perrins 1,187,104 shares of WorldCast common stock, in
lieu of and in full satisfaction of a repayment of a loan payable to Mr. Perrins
in the amount of $454,008.39.
The foregoing summary of the merger is qualified in its entirety by
reference to a current report to be filed on form 8-K within fifteen days of the
closing of the merger.
WORLDCAST INTERACTIVE
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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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 as of August 21,2000.
WORDLCAST INTERACTIVE, INC.
By: /s/ Robert S. Kelner
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Robert S. Kelner, President, Chief Operating Officer,
Interim Chief Financial Officer (authorized Officer and
Chief Accounting Officer)
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