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 November 30, 1997
---------------------
[ ] 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
-----------------
WEALTH INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Nevada 87-0443026
- ------------------------ -----------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
5152 North Edgewood Drive, Suite 250, Provo, Utah 84604
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (801)426-1500
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
The number of shares outstanding of the issuer's common stock as of
January 12, 1998 was 13,592,776 shares.
Transitional Small Business Disclosure Format (Check One):
Yes [ ] No [X]
WEALTH INTERNATIONAL, INC.
FORM 10-QSB THIRD QUARTER OF FISCAL YEAR ENDING FEBRUARY 28, 1998
TABLE OF CONTENTS
Page
----
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 7
PART II. OTHER INFORMATION 8
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 2. CHANGES IN SECURITIES 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITIES HOLDERS 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 10
<PAGE>
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 November 30, 1997 and February 28, 1997, and the results of
operations for the three-month periods ended November 30, 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-month
period ended November 30, 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 Sheet (Unaudited)
November 30, 1997 and February 28, 1997
ASSETS
November 30, 1997 February 28, 1997
----------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents $ 48,092 $ 78,959
Inventories 18,940 11,988
Receivables 31,434 --
----------------- -----------------
Total current assets 98,466 90,947
PROPERTY AND EQUIPMENT, AT COST, NET 358,335 112,145
OTHER ASSETS 247,468 61,275
----------------- -----------------
$ 704,269 $ 264,367
================= ================
LIABILITIES AND STOCKHOLDERS DEFICIT
CURRENT LIABILITIES
Accounts payable $ 226,583 $ 61,614
Related party notes payable 11,617 61,617
Accrued liabilities 112,849 155,576
Deferred revenue 618,768 353,307
----------------- -----------------
Total current liabilities 969,817 632,114
COMMITMENT AND CONTINGENCIES - -
STOCKHOLDERS DEFICIT
Common stock; $0.001 par value
Authorized 500,000,000 shares
Issued and outstanding 13,592,776
on November 30, 1997; 11,934,956
on February 28, 1997 13,593 11,935
Capital in excess of par value 1,084,440 468,954
Accumulated deficit (1,363,581) (848,636)
------------------ ----------------
Total stockholders deficit (265,548) (367,747)
------------------ ----------------
$ 704,269 $ 264,367
================== ================
The accompanying notes form an integral part of these consolidated financial
statements.
WEALTH INTERNATIONAL, INC.
Consolidated Statement of Operations (Unaudited)
November 30, 1997 and November 30, 1996
<TABLE>
<CAPTION>
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended
November 30, November 30, November 30, November 30,
1997 1996 1997 1996
(See Note 3) (See Note 3)
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 2,617,761 $ 486,736 $ 6,316,716 $ 1,460,208
Interest income 36 -- 1,191 --
Cost of products sold 240,367 214,238 981,638 642,714
------------- ------------- -------------- -------------
Gross Profit 2,377,430 272,498 5,336,269 817,494
Operating expenses
Commissions 1,492,653 199,191 3,417,061 597,573
Selling, general and
administrative expenses 902,498 196,358 2,434,152 589,074
------------- ------------- -------------- -------------
Total operating expenses 2,395,152 395,549 5,851,214 1,186,647
------------- ------------- -------------- -------------
Loss before income tax benefit (17,722) (123,052) (514,944) (369,156)
Income tax benefit -- -- -- --
------------- ------------- -------------- -------------
Net loss $ (17,722) $ (123,052) $ (514,944) $ (369,156)
============= ============= ============== =============
Weighted average common shares
outstanding (See Note 4) 13,556,776 11,510,956 13,085,671 11,510,956
Net loss per common share (See
Note 4) $ (0.00) $ (0.01) $ (0.04) $ (0.03)
</TABLE>
The accompanying notes are an integeral part of these consolidated
financial statements.
WEALTH INTERNATIONAL, INC.
Consolidated Statement of Cash Flows (Unaudited)
November 30, 1997 and November 30, 1996
Nine Months Ended Nine Months Ended
November 30, 1997 November 30, 1996
(See Note 3)
Increase (decrease) in cash and
cash equivalents
Cash flows from operating activities
Net loss $ (514,944)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Depreciation and amortization 73,129
Changes in assets and liabilities
Inventories (38,384)
Prepaid expenses --
Other assets (200,658)
Accounts payable 164,969
Accrued liabilities (42,727)
Deferred revenue 265,461
-------------
Total adjustments 221,790
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Net cash provided by (used in)
operating activities (293,154)
Cash flows from investing activities
Purchase of property and equipment (323,820)
Cash flows from financing activities
Proceeds from issuance of common stock 616,107
Satisfaction of note payable (30,000)
-------------
Net cash provided by (used in)
financing activities 586,107
Net increase (decrease) in cash and cash
equivalents (30,867)
Cash and cash equivalents at beginning of year 78,959
-------------
Cash and cash equivalents at end of quarter $ 48,092
=============
The accompanying notes form an integral part of these consolidated
financial statements.
WEALTH INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLDATED FINANCIAL STATEMENTS
November 30, 1997, February 28, 1997 and November 30, 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
16,800,000 shares of the Company, after the effects of a 250 for 1 reverse
stock split and a 4 for 1 forward stock split. In October 1996, the
stockholders of Wealth Utah returned 5,791,020 shares to the Company,
resulting in net holdings by such stockholders of 11,008,980 shares of the
Company s common stock.
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. 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.
In particular, the financial information for the three and nine-month periods
ended November 30, 1996 presented in the statements of operations included
herewith, is based entirely on estimates of quarterly operating results
derived from the Company s audited financial statements for the fiscal year
ended February 28, 1997. Accordingly, financial information regarding cash
flows for the nine-month period ended November 30, 1996 has not been included
herewith.
4. Net Loss Per Share.
Net loss per share is computed based on the weighted average number of common
shares outstanding during the periods presented assuming that the Company s
recapitalization and acquisition of Wealth Utah, and the resultant issuance of
a net amount of 11,008,980 shares of the Company s common stock occurred as of
January 1, 1996.
5. 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.
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.
Item 2. Management s Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations for Periods Ended August 31, 1997 Compared
----------------------------------------------------------------
to Periods Ended August 31, 1996
--------------------------------
Net sales increased 438% and 333% to $2,617,761 and $6,316,716 from
$486,736 and $1,460,208 for the three and nine-month periods ended November
30, 1997, respectively, compared with the same periods in the Company s fiscal
year ended February 28, 1997 (FY1997). This increase in net sales is
primarily attributable to growth in the Company s base of independent
distributors and improved product offering, which has correspondingly resulted
in increased sales of the Company s Internet-related products, including web
page design services. In addition, sales of products offered on the WI Mall
increased with improvements to the functionality of the WI Mall user
interface.
The Company s cost of sales as a percentage of net sales has decreased
for the three and nine-month periods ended November 30, 1997 decreased to 9%
and 16%, respectively, from 44% for both of the same periods ended November
30, 1996. In general, such decrease was due to improved efficiency of
operations resulting mainly from economies of scale in production and
distribution of the Company s products and services arising from increased
sales volume.
Distributor commissions of $1,492,653 (57% of net sales) and $3,417,061
(54% of net sales) paid during the three and nine-month periods ended November
30, 1997, respectively, represented an increase of $1,293,462 and $2,819,488
from $199,191 (41% of net sales) and $597,573 (41% of net sales) paid in the
same periods of FY1997. The significant rise in distributor commissions was
primarily due to significant increases in the number of the Company s
distributors and a corresponding increase in the total volume of products and
services sold. In addition, sales of products and services with higher
commission rates have increased in the first three quarters of the Company s
fiscal year ending February 28, 1998 (FY1998). The Company s distributors are
paid commissions on a weekly basis based on the volume of sales generated by
their independent distribution network and through their Internet web sites.
Selling, general and administrative expenses (excluding distributor
commissions) during the three and nine-month periods ended November 30, 1997
totaled $902,498 (34% of net sales) and $2,434,152 (38% of net sales),
respectively, compared to $196,358 (40% of net sales) and $589,074 (40% of net
sales) for the same period of FY1997. The increase of 360% in selling,
general and administrative expenses between the three-month period ended
November 30, 1997 and the three-month period ended November 30, 1996 primarily
resulted from costs arising from an increased demand for customer service
personnel and computer programming personnel, and related costs for necessary
office facilities, to meet the needs of the growing number of the Company s
distributors. The Company expects that selling, general and administrative
expenses will continue to grow in keeping with increased sales of the
Company's products and services.
Net loss for the three and nine-month periods ended November 30, 1997 was
$17,722 and $514,944, respectively, compared with a net loss of $123,052 and
$369,156 for the same periods ended November 30, 1996. Such net loss for the
three-month period ended November 30, 1997 represented an 86% smaller loss
than for the same period ended November 30, 1996. This decrease in
comparative net loss is mainly attributable to improvements in the costs of
goods sold and the Company s operating expenses. Conversely, the net loss for
the nine-month period ended November 30, 1997 represented a 39% greater loss
than for the same period ended November 30, 1996. Such increase in the
Company s net loss for the nine-month period is primarily due to costs of
development of the Company s computer network and Internet infrastructure,
including Internet-related software applications, the majority of which were
incurred by the Company in the first two quarters of FY1998. Net loss per
share during the third quarter of the Company s FY1998 was negligible, at
approximately one mill $(0.001) loss per share.
Liquidity and Capital Resources
--------------------------------
At November 30, 1997, current assets of the Company totaled approximately
$98,486 and current liabilities were approximately $969,817. The Company s
current ratio at November 30, 1997 was .10 to 1, compared to .14 to 1 at the
end of FY1997. The decrease in current ratio primarily results from capital
expenditures during the first three quarters of FY1998 for computer equipment,
related software applications, and related technology.
As of November 30, 1997, the Company s primary source of liquidity was
revenues generated by continuing operations. The Company believes that such
revenues will be sufficient to satisfy the Company s cash needs for working
capital and capital expenditures until November 30, 1998. However, any
projections of future cash needs and cash flow 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 approximately $5,500 for certain telephone services under
a contract with Touchfon International. The Company s subsidiary, World
Internet Marketplace, Inc., successor to Wealth International, Inc., a Utah
corporation, filed an answer and counterclaim on September 4, 1997. At
present, the Company has responded to Knight s discovery requests, and has
made formal requests of Knight for additional information. Knight has not yet
replied to the Company s discovery requests. 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
November 30, 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 November 30, 1997.
Item 5. Other Information.
None.
Item 6. Exhibits and Other Reports on Form 8-K.
(a) Exhibit
No. Description
------- -----------
27 Financial Data Schedule
(b) Reports of Form 8-K.
Form 8-K Current Report, filed with the Securities and Exchange Commission on
September 17, 1997, incorporated herein by this reference.
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.
Date: ___________________ /s/ Daniel G. Lloyd
----------------------
Daniel G. Lloyd, Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Financial Data Schedule contains summary information extracted from the
Company's unaudited financial statements for the nine-month period ended
November 30, 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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> NOV-30-1997
<CASH> 48,092
<SECURITIES> 0
<RECEIVABLES> 31,434
<ALLOWANCES> 0
<INVENTORY> 18,940
<CURRENT-ASSETS> 98,466
<PP&E> 358,335
<DEPRECIATION> 73,129
<TOTAL-ASSETS> 704,269
<CURRENT-LIABILITIES> 969,817
<BONDS> 0
0
0
<COMMON> 13,593
<OTHER-SE> (279,141)
<TOTAL-LIABILITY-AND-EQUITY> 704,269
<SALES> 6,316,716
<TOTAL-REVENUES> 6,317,907
<CGS> 981,638
<TOTAL-COSTS> 6,832,852
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (514,944)
<INCOME-TAX> 0
<INCOME-CONTINUING> (514,944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (514,944)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
