UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to __________
Commission File Number 033-05844-NY
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WEALTH INTERNATIONAL, INC.
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(Name of small business issuer in its charter)
Nevada 87-443026
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(State of incorporation) (I.R.S. Employer Identification No.)
5152 North Edgewood Drive, Suite 250, Provo, Utah 84604
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (801) 426-1500
-----------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
The number of shares outstanding of the issuer's common stock as of August 26,
1997 was 13,417,776 shares.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X ]
WEALTH INTERNATIONAL, INC.
----------------------------
FORM 10-QSB FIRST QUARTER OF FISCAL YEAR ENDING FEBRUARY 28, 1998
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION 1
ITEM 1. FINANCIAL STATEMENTS: 1
CONSOLIDATED BALANCE SHEETS 2
CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONSOLIDATED STATEMENTS OF CASH FLOWS 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION 10
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITIES HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The interim financial statements presented in this Form 10-QSB are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial statements and with the
instructions to Form 10-QSB. Therefore, such financial statements do not
include all of the information and footnotes required for complete audited
financial statements. The unaudited financial statements presented herein
should be read in conjunction with the audited financial statements and
related notes contained in the Company's annual report on Form 10-KSB for the
year ended February 28, 1997.
In the opinion of management, the unaudited consolidated financial
statements presented herein contain all adjustments, consisting only of normal
recurring adjustments, necessary to fairly present the Company's financial
condition as of May 31, 1997 and February 28, 1997, and the results of
operations for the three month periods ended May 31, 1997 and 1996. Such
unaudited interim financial statements should be read in conjunction with the
accompanying explanatory notes. The results of operations for the three
months period ended May 31, 1997 may not be indicative of the results that may
be expected for the fiscal year ending February 28, 1998.
WEALTH INTERNATIONAL, INC.
Consolidated Balance Sheets (Unaudited)
May 31, 1997 and February 28,1997
ASSETS
May 31, 1997 February 28, 1997
--------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents $ 15,836 $ 78,959
Inventories 7,860 11,988
Prepaid expenses
--------------- -----------------
Total current assets 23,696 90,947
PROPERTY AND EQUIPMENT, AT COST, NET 259,648 112,145
OTHER ASSETS 95,296 61,275
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$ 378,640 $ 264,367
=============== ================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 106,112 $ 61,614
Related party notes payable 41,617 61,617
Accrued liabilities 195,627 155,576
Deferred revenue 223,849 353,307
---------------- ----------------
Total current liabilities 567,205 632,114
COMMITMENT AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock; $0.001 par value
Authorized 500,000,000 shares
Issued and outstanding 13,397,178 on
May 31, 1997; 11,934,956 on February
28, 1997 13,397 11,935
Capital in excess of par value 1,006,093 468,954
Accumulated deficit (1,208,055) (848,636)
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Total stockholders' deficit (188,565) (367,747)
----------------- ----------------
$ 378,640 $ 264,367
================= ===============
The accompanying notes form an integral part of these consolidated
financial statements.
WEALTH INTERNATIONAL, INC.
Consolidated Statements of Operations (Unaudited)
For the three months ended May 31, 1997 and May 31, 1996
May 31, 1997 May 31, 1996
---------------- ----------------
Net sales $ 978,762 $ 486,736
Cost of products sold 302,108 214,238
---------------- ----------------
Gross profit 676,654 272,498
Operating expenses
Commissions 406,225 199,191
Selling, general and administrative 629,849 196,358
---------------- ----------------
Total operating expenses 1,036,074 395,549
---------------- ----------------
Loss before income tax benefit (359,419) (123,052)
Income tax benefit
----------------- ----------------
Net loss $ (359,419) $ (123,052)
================= ================
Weighted average common shares outstanding 12,666,164 11,510,956
Net loss per common share $ (0.03) $ (0.01)
The accompanying notes are an integral part of these consolidated
financial statements.
WEALTH INTERNATIONAL, INC.
Consolidated Statements of Cash Flows (Unaudited)
For the three months ended May 31, 1997 and May 31, 1996
May 31, 1997 May 31, 1996
---------------- ---------------
Increase(decrease)in cash and cash equivalents
Cash flows from operating activities
Net loss $ (359,419) $ (123,052)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities
Depreciation and amortization 21,092 6,602
Changes in assets and liabilities
Inventories 4,128 (2,997)
Prepaid expenses 1,706
Other assets (31,568) (17,111)
Accounts payable 44,498 9,953
Accrued liabilities 40,051 33,589
Deferred revenue (129,458) 60,575
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Total adjustments (51,257) (92,317)
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Net cash used in
operating activities (410,676) (30,735)
Cash flows from investing activities -
Purchase of property and equipment (190,033) (27,409)
Cash flows from financing activities -
Proceeds from issuance of common stock 537,586 60,186
----------------- --------------
Net increase (decrease) in cash and cash
equivalents (63,123) 2,042
Cash and cash equivalents at beginning of
quarter 78,959 59,170
----------------- --------------
Cash and cash equivalents at end of quarter $ 15,836 $ 61,212
================= ==============
The accompanying notes form an integral part of these consolidated
financial statements.
WEALTH INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997, February 28, 1997 and May 31, 1996
A summary of the significant accounting policies applied in the
preparation of the accompanying unaudited consolidated financial statements
follows.
1. Nature of Operations.
Wealth International, Inc., a Nevada corporation, through its wholly-
owned subsidiary, World Internet Marketplace, Inc., a Utah corporation
(collectively, the "Company"), is engaged in marketing and distributing
products and services relating to Internet commerce. The Company sells its
products and services to a network of independent distributors, who use the
products and services themselves, or sell the products and services to other
customers.
The Company's revenues are substantially derived from two categories of
products and services: (i) personal and commercial web site development and
maintenance, and related Internet training; and (ii) merchandise sales from
the Company's Internet-based virtual "mall" or "department store" (orders for
merchandise on the Company's virtual "mall" are generally fulfilled by
shipment direct from the manufacturer or wholesaler to the customer).
2. Organization.
On August 27, 1996, the stockholders of Impressive Ventures, Inc. (the
former name of the Company), a non-operating, developmental stage company,
approved an agreement whereby the stockholders of Wealth International, Inc.,
a Utah corporation ("Wealth Utah"), obtained a controlling interest in the
Company. This transaction was treated as an acquisition of the Company by
Wealth Utah, and as a recapitalization of Wealth Utah. Under the agreement,
the stockholders of Wealth Utah exchanged all of their shares in Wealth Utah
for 11,008,980 common shares of the Company, after the effects of a 250 for 1
reverse stock split and a 4 for 1 forward stock split.
The Company had essentially no assets or operations prior to the above-
referenced acquisition. Wealth Utah was established in November 1995 as a
partnership. It was incorporated in July 1996.
After the transaction was completed, the Company changed its name to
Wealth International, Inc., a Nevada corporation, and the operating subsidiary
(Wealth Utah) subsequently changed its name to World Internet Marketplace,
Inc. The unaudited consolidated financial statements include the accounts of
Wealth International, Inc. and its wholly-owned subsidiary. All material
inter-company accounts and transactions have been eliminated.
3. Pro Forma Financial Information.
The Company's subsidiary, World Internet Marketplace, Inc., operated for
federal and state income tax purposes as a partnership from inception in
November 1995 to its incorporation in July 10, 1996. During such time, the
subsidiary's operating results were or will be taxed, with certain exceptions,
for federal and certain state income tax purposes directly to the partners of
such partnership, rather than to the Company. The pro forma financial
information contained in the unaudited financial statements herein is
presented to show the effects on the historical financial information had the
Company's subsidiary had not been treated as a partnership for income tax
purposes for the periods mentioned above. Because the Company has elected not
to record a deferred tax benefit during the quarter ended May 31, 1997, the
pro forma financial information is the same as the historical loss before
income tax benefit.
4. Income Taxes.
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.
5. Use of Estimates.
In preparing the Company's financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
6. New Accounting Standards.
The Company is required to adopt Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share, during the fourth quarter
of its fiscal year ending February 28, 1998. SFAS 128 specifies the
computation, presentation and disclosure requirements for earnings per share.
The Company does not believe that the adoption of SFAS 128 will have a
material effect on the Company's method of calculation or display of earnings
per share amounts.
7. Related Party Transactions.
During the quarterly period ending May 31, 1996, the Company received
loans from Richard Smith and Ron Nilsson, both directors of the Company, and
from their relatives. Amounts received by the Company from such persons bear
interest at standard rates.
8. Subsequent Events.
In August 1997, the Company acquired, pursuant to a license agreement and
purchase agreement, certain software assets. Such software assets involve
Internet commerce solution applications, including foundational software for
the Company's Internet mall, and a web page design system. The total price
paid by the Company, including license fees, was $85,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations for First Quarter of Fiscal Year Ending
--------------------------------------------------------------
February 28, 1998 (FY1998) Compared to First Quarter of Fiscal
--------------------------------------------------------------
Year Ended February 28, 1997 (FY1997)
------------------------------------
Net sales increased 101% to $ 978,762 from $ 486,736 for the three months
ended May 31, 1997 compared with the same period in FY1997. This increase in
net sales is primarily attributable to the growth in the Company's independent
distributor base.
The Company's cost of sales as a percentage of net sales has decreased
for the three month period ended May 31, 1997 to 31% of net sales as compared
to 44% net sales for the three months ended May 31, 1996. The improvement was
due primarily to increased efficiency of operations resulting mainly from
economies of scale in production of the Company's products and services
arising from increased sales volume.
Distributor commissions of $ 406,225 (42% of net sales) paid during the
three months ended May 31, 1997 represented an increase of $ 207,034 from
$199,191 (41% of net sales) paid in the same period of FY1997. The increase
in distributor incentives was primarily due to an increased number of
distributors and a corresponding increase in the total volume of products and
services sold by the Company. The Company's distributors are paid commissions
based on the volume of sales generated by their independent distribution
network and through their Internet web sites. Commissions are paid on weekly
basis.
Selling, general and administrative expenses (excluding distributor
commissions) during the three months ended May 31, 1997 totaled $ 629,849 or
64% of net sales, compared to $ 196,358 or 40% of net sales for the same
period of FY1997. The increase of 221% in selling, general and administrative
expenses primarily resulted from an increased need for customer support
services and office facilities to meet the demands of increased sales volume
and the increase in the number of the Company's distributors. The Company
expects that selling, general and administrative expenses will continue to
grow in keeping with an increase in sales of the Company's products and
services.
Net loss for the three month period ended May 31, 1997 was $359,419,
compared with a net loss of $ 123,052 for the three month period ended May 31,
1996, or a 192% higher net loss. The increase in net loss is primarily
attributable to costs incurred by the Company in continuing to develop and
build the Company's computer network and Internet infrastructure, and
development costs related to maintenance of and improvements to the Company's
Internet site on the World Wide Web. In addition, during the first quarter of
FY1998, the Company relocated its headquarters to larger space to accommodate
the growth in the Company's necessary personnel. Net loss per share during
the first quarter of the Company's FY1998 was $(0.03).
Liquidity and Capital Resources
--------------------------------
At May 31, 1997, current assets of the Company totaled approximately
$23,696 and current liabilities were approximately $ 567,205. The Company's
current ratio at May 31, 1997 was .04 to 1, compared to .14 to 1 at the end of
FY1997. The decrease in current ratio was primarily a result of capital
expenditures for additional computer equipment and related technology.
As of May 31, 1997, the Company's primary source of liquidity was
revenues generated by operations. The Company believes that such revenues
will be sufficient to satisfy the Company's cash needs for working capital and
capital expenditures until May 31, 1998. However, any projections of future
cash needs and cash flows are subject to substantial uncertainty. If cash
generated from continuing operations is insufficient to satisfy the Company's
liquidity requirements, the Company may be required to sell additional equity
securities. Such a sale of additional equity securities would result in
additional dilution to the Company's existing shareholders. There can be no
assurance that additional financing, if required, will be available to the
Company on favorable terms.
Forward Looking Statements
--------------------------
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, new products and various other matters. Such forward-looking
statements reflect the current views of management with respect to future
events and financial performance. The Private Securities Litigation Reform
Act of 1995 provides a "safe harbor" for such forward-looking statements. In
order that any of the Company's forward-looking statements fall within such
safe harbor, the Company notes that certain risks and uncertainties could
cause actual results to differ substantially from anticipated results. Such
risks and uncertainties include, without limitation, the performance of the
Company's independent distributors, the uncertain future of the Internet and
online commerce, capacity constraints on the Company's computer network and
related risks of system failure, and existing and potential governmental
regulation affecting the Internet and the network marketing industry.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In August 1997, the Knight Adjustment Bureau ("Knight") filed a lawsuit
against Richard Smith, dba Wealth International, in the Fourth District Court
for Utah County, alleging that Knight was assigned a claim by Touchfon
International, and further alleging that Richard Smith, dba Wealth
International, owes over $5,000 for certain telephone services under a
contract with Touchfon International. The Company's subsidiary, WI
Marketplace, Inc., successor to Wealth International, Inc., a Utah
corporation, filed an answer and counterclaim on September 4, 1997. At
present, Knight has not replied to the Company's answer and counterclaim.
However, if Knight pursues the matter, the Company intends to vigorously
defend the lawsuit. There can be no assurance that the Company will succeed
in its defense of this matter.
Other than as described in this Part II, Item 1, the Company is not a
party to any material litigation or proceedings.
Item 2. Changes in Securities.
There were no changes in the instruments defining the rights of holders
of any class of the Company's securities during the fiscal quarter ended May
31, 1997.
Item 3. Defaults Upon Senior Securities.
There were no defaults in payments of this type during the reporting
period.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's security holders
during the three month period ended May 31, 1997.
Item 5. Other Information.
None.
Item 6. Exhibits and Other Reports on Form 8-K.
(a) Exhibit
No. Description
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27 Financial Data Schedule
(b) During the quarter ended May 31, 1997, the Company filed no reports on
Form 8-K.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WEALTH INTERNATIONAL, INC.
September 30, 1997 /s/ Daniel G. Lloyd
Date: ___________________ ______________________________________
Daniel G. Lloyd, Chief Financial
Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Financial Data Schedule contains summary information extracted from the
Company's unaudited financial statements for the three month period ended May
31, 1997. Information contained in this Financial Data Schedule is qualified in
its entirety by reference to such unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> MAY-31-1997
<CASH> 15,836
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<PP&E> 302,178
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<COMMON> 13,397
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