[DESCRIPTION] FORM 10KSB FOR YEAR ENDED FEBRUARY 28, 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended February 28, 1999
[ ] 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
WORLD INTERNETWORKS, INC.
(Name of small business issuer in its charter)
Nevada 87-0443026
(State of incorporation) (I.R.S. Employer
Identification No.)
418 South Commerce Road, Suite 422, Orem, Utah 84058
(Address of principal executive offices) (Zip Code)
Issuer's telephone number ( 801 ) 434-7517
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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.
(1) Yes [X] No [ ] (2) Yes [ X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $0.00
Aggregate market value of the common stock of the issuer held by
non-affiliates, amounting to 2,403,107 shares on October 5, 1999, based upon a
closing bid price of $0.625 per share on such date, was approximately
$1,501,941.
The number of shares outstanding of the issuer's common stock as of
October 5, 1999, was 3,398,107 shares.
Transitional Small Business Disclosure Format (Check One): Yes [X]
No [ ]
<PAGE>
PART I
Item 1. Description of Business.
------------------------
Business Development.
- ---------------------
World Internetworks, Inc.(the "Company," "WI," "Wiworks," "We," "Our" or
similar references) is a Nevada corporation presently engaged in the
development, marketing and distribution of products and services relating to
Internet commerce.
The Company ceased prior operations conducted solely through its
subsidiaries, World Internet Marketplace, Inc., a Utah corporation
("WIMI"),Global Wholesale Exchange, Inc., a Utah corporation ("GWE"), and
Global Media Group, Inc., a Utah corporation ("GMG"), on October 22, 1998, and
recommenced its developmental stage. See the 8-K Current Report dated October
22, 1999, which has been previously filed with the Securities and Exchange
Commission and is incorporated herein by reference. See Item 13.
New directors and executive officers were respectively designated and
elected in February, 1999; the principal executive offices of the Company were
relocated to 418 South Commerce Road, Suite 422, Orem, Utah 84058, facilities
which were provided by Internet Development, Inc. ("IDI") at no cost for one
year; and an arrangement was negotiated with IDI to design and build the
Company's web site and provide related services, with operations to commence
in March, 1999. See the 8-K Current Report dated February 19, 1999, which has
been previously filed with the Securities and Exchange Commission and is
incorporated herein by reference. See Item 13.
Management believes the Company has now created a marketable combination
of Internet tools and income-generating opportunities for the small and home-
based business markets.
With an installed base of 28,000 web sites or "storefronts" and a unique
selling proposition, management believes the Company has the ability to
achieve the critical mass necessary to result in significant recurring revenue
and profitable growth through membership fees, product sales and corporate
advertising revenues. In an age of "affinity marketing," the hosted sites,
each with its own "sphere of influence," represent a viable marketing force
and consumer base.
The Company has numerous projects presently in various stages of
completion. The most visible one will be the introduction of the Wiworks Main
Street Plaza, which is expected to be fully operational by the end of October,
1999, with over 400 eventual merchants representing more than 1,000,000
products for re-sell.
The Company has established a network of Engineers and professional
talent in an out source capacity that continue to function on a project by
project basis.
We are in the process of establishing our own server presence; the
Company is presently negotiating with Verio, the largest provider of server
equipment in the world. Wiworks will be able to lease a very expensive server
and all of the necessary support technology for a nominal monthly fee. These
and other developments discussed below under the heading "Business" will
curtail the Company's dependence on the services and equipment of IDI since
February, 1999, which are outlined in the 8-K Current Report dated February
19, 1999.
The names Wiworks.com, Main Street.com and Wimall.com are registered
domain names of the Company with Internic.
The Company has entered into a Letter of Intent with Fairway Capital
Partners, LLC ("Fairway Capital") pursuant to which Fairway Capital may
acquire 4,200,000 shares of the Company's common stock ("restricted
securities"); if all conditions to the Letter of Intent are satisfied, Fairway
Capital would be entitled to the 4,200,000 shares. This would increase the
present outstanding shares from 3,398,107 shares to 7,098,107 shares; 500,000
shares have been authorized to be issued under the Letter of Intent and are
included in the current outstanding shares of the Company. See the 8-K
Current Report dated September 14, 1999, which is being filed with the
Securities and Exchange Commission simultaneous with this Report and is
incorporated herein by reference. See Item 13.
Business.
- ---------
The Company's principal business is to provide web site design and build
software that will allow the Small Business and Home-Based business
entrepreneur the opportunity to establish an Internet presence at a price
point that will establish Wiworks as a leader in the Hosting industry and
maintain Wiworks at the front of the "competitive pricing pack." The Company
expects to be a trendsetter with innovative new programs and services.
We also intend to establish a program of ongoing Internet training and
technical support that will assist all of our Wiworks members in not only
understanding the Internet, but learning how to profit from it as well. This
training will be comprehensive and unique in the industry. Management believes
that this training will be received well by our members as well as the
thousands of other daily online participants desiring to capitalize on the
potential offered by this vast medium.
The Corporate web-site has been designed and engineered so as to achieve
maximum exposure in "search engine protocol." With our ongoing initiatives, it
is expected that Wiworks.com will achieve an attractive placement in a number
of the over 1500 Search Engine organizations currently serving the Net. This
placement will result in a substantially increased "hit" count to our site.
These new "unique visitors" represent potentially thousands of new Wiworks
members, many of whom will register and begin building their sites on their
first or second visit. In the Pre-launch phase of our business plan, the
Wiworks server currently has over 7,000 visitors per day. These numbers are
expected to grow 10-fold within the next 6-months of operations.
The most widely used Marketing Method on the Internet presently is the
Affiliate Method. This concept uses the premise that 5,000 to 50,000
"Affiliates", each selling your products or services, is potentially more
profitable than a single stand alone operation. Wiworks has taken this concept
and expanded it to create a "Three-Tiered" Affiliate program. Each of our
Members is now motivated to actively sponsor others to join Wiworks from their
own personal web site. For his or her recruiting efforts, the Wiworks Member
is paid monthly for each new member registered. This program provides
compensation to the member down 3-levels, motivating each of our members to
become active proponents of Wiworks in the Marketplace, for which they receive
an increased monthly cash flow. In some situations, this increase is
sufficient to off-set completely the members own monthly fee.
The Company has created a strategic alliance with the largest provider of
these online Affiliate programs in the world. The Wiworks member can now
choose from over 400 National and Local merchants to sell their product lines,
including such notable high profile companies as Dell computer, Officemax.com,
Disney.com and others. Now each Wiworks member can assemble a large product
offering without bearing any of the warehousing, shipping or merchant account
responsibilities. They simply act as an "Affiliate" and sell these products
from their own sites for which they are paid a commission on each sale.
Wiworks presently has over 1-million products to offer to our growing
membership base through this program.
The Company is successfully becoming a "Full Service" Hosting company.
With a recently announced alliance with one of the largest search engines in
the country, Wiworks is now able to provide our members with access to the
Internet. Now included in each membership is an Internet Service Provider
("ISP"). This valuable service is offered free to each paying member and
allows him or her to save up to $20.00 per month by eliminating whatever
service that they are presently using.
Strategic Partners and Affiliates
---------------------------------
Each of these strategic partners provides WINW with a specific product or
technical service designed to enhance the Wiworks franchise and accelerate the
membership growth.
LinkShare Corporation ("LinkShare")is the worldwide leader in affiliate
marketing programs for companies doing business on the web. The Company
manages a very large affiliate network, which includes tens of thousands of
affiliate sites, and more than 350 leading merchants, including Officemax.com,
Dell Computer, Borderline Books and others. LinkShare offers companies of all
sizes an unparalleled degree of flexibility in software, services and support
for performance-based partnerships.
AltaVista Company ("AltaVista")is the premier online media and commerce
network. The Company integrates unique Internet technology and services to
deliver relevant results faster for both individuals and Web-based businesses.
AltaVista is a majority-owned operating company of CMGI, Inc. Andover, Mass.
Compaq Computer Corp. ("Compaq") holds the remaining minority interest in
AltaVista.
Internet Marketing Concepts ("IMC") of Orem, Utah, provides advanced
software solutions for the small business and home-based business markets. IMC
offers marketing and development tools along with revolutionary concepts to
furnish a custom web presence for this growing industry.
OfficeMax.com is the online subsidiary of OfficeMax , which operates over
860 full-size superstores in more than 360 markets in 49 states and Puerto
Rico. OfficeMax also features CopyMax and FurnitureMax, in-store modules
devoted exclusively to print-for-pay services and office furniture. It also
has 18 delivery centers throughout the United States. OfficeMax.com provides
each of the Company's distributors with over 20,000 commissionable office
products to sell from their Wiworks sites.
Digital River, Digital River (Minneapolis) is the largest online source
of software and leading out source of Web-based commerce solutions. The
Company provides more than 5,000 software publishers and online retailers with
its proprietary technology for Internet delivery of more than 130,000 digital
products, including 30,000 software applications. The Company's distributors
now have over 130,000 of the "hottest" software titles available to sell right
from his/her site and another opportunity to earn commission dollars.
WI Marketing Plan and Roll-Out
------------------------------
Now that a base of Members has been successfully established, the
Company's strategic marketing plan to significantly increase its installed
membership base will be implemented in three phases:
Phase 1- begins October 1, 1999, with an aggressive campaign directed at
the existing 28,000 storefront owners. This process will include an online
effort via each members existing web site, direct mail and the use of a call
center to contact and convert a significant number to the new Wiworks
opportunity.
A successful conversion of these sites, after the initial promotional
offer (60-day free trial offer), will provide an immediate cash flow for the
Company of $39.95 per month, per member. These reoccurring fees will provide
the Company with a portion of working capital needed to fund future growth and
expansion in Phases 2 and 3.
Phase 2- will begin October 15, 1999. This phase will be centered on the
introduction of the Wiworks Main Street Plaza. This Plaza will provide the
over 1,000,000 small businesses in America with an opportunity to establish an
Internet presence in a "High Traffic" shopping Plaza. This presence can now be
established for about the same cost as a good "coupon" campaign. Our
membership base of Independent Contractors will establish the initial contact
with these merchants and facilitate the enrollment process for an additional
commission consideration. Once a significant merchant base has been
established, the Company will consider a National advertising campaign
directed at the small and home-based markets.
Phase 3 will be directed to the over 2,000,000 web surfers that search
the Internet daily for value and technology opportunities. This effort is
expected to include Ezines (Electronic Magazines), target Email, Co-op online
advertising, search engine promotions and the use of every online method
available. Our competitors in the industry enjoy significant daily
registration traffic with programs that are neither as comprehensive nor as
competitively priced as that of Wiworks. We anticipate that we will achieve a
significant increase in the daily "hit count" resulting in a commensurate
increase in the number of member registrations.
WI Member Future Expectations
-----------------------------
With the unique and valuable features offered by the Company to its
network of member/distributors, the Company has a motivated and enthusiastic
sales force. This marketing team, if trained properly, can very rapidly
penetrate some very lucrative business markets and create a large following of
site owners and members reliant on the Company to provide them with their Web
presence and passive revenue opportunities.
As the Company's business plan is executed, we envision having an
installed base of over 200,000 members within the next 24 months. With a
critical mass of this magnitude, we will continue to negotiate additional
pricing discounts for our members from national carriers of goods and
services, in addition to continually provide technology to enhance each member
web site presence.
Financing/Capital Structure
---------------------------
The common stock of World InterNetworks, Inc. currently trades on the
NASD OTC Electronic Bulletin Board under the symbol "WINW," though there is no
"established trading market" for its shares.
The Company is still in the development stage. Principals, consultants
and other suppliers of the Company have acquired an ownership interest by
making direct cash purchases of common stock and/or through distribution of
common stock in partial payment for their services. In the opinion of
management, such distributions have been reasonable and necessary and have
helped the Company obtain a caliber of professional assistance that otherwise
would have been unavailable to a company of limited financial resources.
Successful completion of this offering should provide the necessary seed
capital for the Company to maintain operations through the current fiscal year
considering expenses anticipated at less than $60,000 per month. The Company
has been fortunate to be able to contract professional services in a "stock
for services" arrangement. It is expected that the Company will be in a
position to be self-funded through operations by the first calendar quarter of
2000.
Principal Products and Services.
- --------------------------------
Our products include a variety of services that provide our members with
additional revenue opportunities including:
Free Unlimited Email addresses.
Free Email postcards in over 25 languages
Free Internet Access via AltaVista ISP
Online Internet training and assistance
Easy to use site builder technology
Associate referral program for commissions on new-members
Over 1,000,000 products to sell from member sites
Automatic inclusion in the new Main Street Plaza
Access to the Wiworks banner ad program
Distribution Methods of the Products or Services.
- -------------------------------------------------
Our distribution methods include Telemarketing, Online marketing to
present Internet users, Targeted Email, Ezines (electronic magazines), Direct
mail, Co-op advertising in trade publications and Seminars.
Our principal markets include the SOHO (Small office and Home office)
market and the national small retail merchant market along with the "Internet
Surfer" market, which is estimated at over 2,000,000 users.
Status of any Publicly Announced New Product or Service.
- --------------------------------------------------------
None; not applicable.
Competitive Business Conditions.
- --------------------------------
The competitive field is strong with numerous larger companies such as
Yahoo, AOL, Geocities, Compaq, Amazon.com and others. Each has an interest in
becoming the sponsor of the new Internet participant. This number is estimated
to be in excess of 50,000,000 households. See the heading "Certain Factors
Expected to Impact Operating Results," below, under the caption Management's
Discussion and Analysis or Plan of Operation, Part II, Item 6, specifically
the risk factor "Competition; Low Barrier to Entry."
Sources and Availability of Raw Materials and Names of Principal
Suppliers.
- ----------
None; not applicable.
Dependence on One or a Few Major Customers.
- -------------------------------------------
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
- ------------------------------
The names Wiworks.com, Main Street.com and Wimall.com are registered
domain names of the Company with Internic.
Need for any Governmental Approval of Principal Products or
Services.
- ---------
See the heading "Certain Factors Expected to Impact Operating Results,"
below, under the caption Management's Discussion and Analysis or Plan of
Operation, Part II, Item 6.
Effect of Existing or Probable Governmental Regulations on
Business.
- ---------
The integrated disclosure system for small business issuers adopted by
the Securities and Exchange Commission in Release No. 34-30968 and effective
as of August 13, 1992, substantially modified the information and financial
requirements of a "Small Business Issuer," defined to be an issuer that has
revenues of less than $25 million; is a U.S. or Canadian issuer; is not an
investment company; and if a majority-owned subsidiary, the parent is also a
small business issuer; provided, however, an entity is not a small business
issuer if it has a public float (the aggregate market value of the issuer's
outstanding securities held by non-affiliates) of $25 million or more.
The Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc. ("NASAA") have
expressed an interest in adopting policies that will streamline the
registration process and make it easier for a small business issuer to have
access to the public capital markets. The present laws, rules and regulations
designed to promote availability to the small business issuer of these capital
markets and similar laws, rules and regulations that may be adopted in the
future, will substantially limit the demand for "blank check" companies like
the Company, and may make the use of these companies obsolete.
Also, see the heading "Certain Factors Expected to Impact Operating
Results," below, under the caption Management's Discussion and Analysis or
Plan of Operation, Part II, Item 6.
Research and Development.
- -------------------------
None; not applicable.
Cost and Effects of Compliance with Environmental Laws.
- -------------------------------------------------------
None; not applicable.
Number of Employees.
- --------------------
One full time employee (the Company's President, Steven K. Hansen) and
one part time receptionist.
Forward Looking Statements.
- --------------------------
The foregoing description of the Company's present and intended business
operation contained numerous forward-looking statements, which are modified in
their entirety by reference to the heading "Certain Factors Expected to Impact
Operating Results," below, under the caption Management's Discussion and
Analysis or Plan of Operation, Part II, Item 6.
PRELIMINARY NOTES REGARDING FORWARD-LOOKING STATEMENTS
ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY
TO BE COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "1995 ACT").
SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL
FACTORS GOVERN WHETHER ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN WILL BE
OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN. THESE FORWARD-LOOKING
STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS,
INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND THE FUTURE
ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING TO THE FOREGOING
INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC,
COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS, AND THE TIME AND
MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF WHICH ARE
DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS
UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY
OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, THERE CAN BE NO
ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE AND
BUSINESS DEVELOPMENTS, THE IMPACT OF WHICH MAY CAUSE THE COMPANY TO ALTER ITS
MARKETING, CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN
AFFECT THE COMPANY'S RESULTS OF OPERATIONS IN LIGHT OF THE SIGNIFICANT
UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, THE
INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY
THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY
WILL BE ACHIEVED.
Item 2. Description of Properties.
--------------------------
The new principal executive offices of the Company are located at
418 South Commerce Road, Suite 422, Orem, Utah 84058, Telephone: 801-434-7517;
and Facsimile: 801-229-0092. These facilities are being provided by IDI at no
cost for one year. For more information on this relationship, see the 8-K
Current Report dated February 19, 1999. See Item 13.
Item 3. Legal Proceedings.
------------------
In February 1998, WIMI, the Company's subsidiary, filed a
complaint in the Fourth District Court for Utah County, alleging of
breach of fiduciary duty, conversion, tortious interference with economic
relations and violation of the Utah Uniform Trade Secrets Act
against three former employees of the Company. The claims resulted
from certain commission practices and discussions with competitors
engaged in by the former employees. Defendants filed an answer in
March of 1998 in which no counterclaim was asserted. The matter is
still pending.
In March 1998, Paulette Arnold, a private citizen, filed a
complaint against WIMI in Knoxville County, Tennessee, alleging an undetailed
claim of breach of contract by World Internet Marketplace, Inc. in the amount
of $ 5,940. The matter is still pending.
Other than as described herein, the Company is not a party to
any other litigation or other legal proceeding or investigation that
is expected to have a material adverse effect on its financial
condition or results of operations, nor are any such proceedings
known or contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
There were no matters submitted to a vote of the Company's security
holders during the fourth quarter, either through the solicitation of proxies
or otherwise.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
---------------------------------------------------------
Market Information
------------------
The Company's common stock trades on the over-the-counter market
(symbol: "WINW") and is quoted on the National Association of Securities
Dealers Electronic Bulletin Board, though there is presently no "established
trading market" for these shares. High and low bid information for the
Company's common stock as quoted on the Electronic Bulletin Board for the
Company's fiscal years ending February 28, 1998, and February 28,1999,
respectively, and the six months ended September 30, 1999, is set forth in the
table below. These quotations reflect inter-dealer bid prices, without retail
mark-up, mark-down or commissions and may not represent actual transactions.
<TABLE>
Stock Quotations*
<CAPTION>
Period High Bid Low Bid
------ -------- -------
<S> <C> <C>
March 1 to May 31, 1997 $3.375 $2.25
June 1 to August 31, 1997 $3.50 $1.50
September 1 to November 30, 1998 $2.625 $1.50
December 1 to February 28, 1998 $1.875 $0.375
March 1 to May 31, 1998 $1.375 $0.625
June 1 to August 31, 1998 $1.625 $0.75
September 1 to September 3, 1998 $1.03125 $1.00
Common New**
September 4, 1998 to November 30, 1998 $4.375 $0.25
December 1, 1998 to February 28, 1999 $3.50 $0.25
March 1, 1999 to May 31, 1999 $2.3125 $0.96875
June 1, 1999 to August 31, 1999 $1.625 $0.50
September 1, 1999 to September 30, 1999 $0.8125 $0.50
</TABLE>
*The future sale of presently outstanding "unregistered" and
"restricted" common stock by members of management, holders
of 5% or more of the Company's outstanding securities and
others may have an adverse effect on any market that may
develop for the Company's common stock. Presently, there
are 2,137,011 "restricted securities" of the Company
outstanding. Currently available for sale under Rule 144
are 444,261 shares; during the next six months, another
26,750 will become available for resale under Rule 144.
**The Company effected a one for four reverse split of its
outstanding securities effective on September 4, 1998.
Shareholders
------------
The approximate number of holders of record of the Company's common
stock, par value $0.001, as of February 28, 1998, was 446, and as of
February 28, 1999 was 473. This total does not include the number of
beneficial owners of common stock held in "nominee" or "street" name,
as to which number the Company cannot speculate. Currently, there are
approximately 466 stockholders of record.
Dividends
---------
The Company has not paid cash dividends on its common stock in the
last fiscal year. At the present time, the Company's anticipated
capital requirements are such that it intends to follow a policy of
retaining any earnings in order to fund future growth and development of
the Company's business operations. The Company does not anticipate paying
any dividends in the near future. Other than any applicable statutory
requirements, there are no material restrictions that limit the Company's
ability to pay dividends on its common equity or that are likely to do so
in the future.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Plan of Operation
-----------------
The Company temporarily ceased business operations on October 22, 1998,
as outlined in its 8-K Current Report of such date. See Item 13.
Since then, the Company has undergone a restructuring, which resulted in
the resignation of former directors and executive officers and the election of
a new management team. See the 8-K Current Report dated February 19, 1999,
Item 13.
As of May 31, 1999, the Company has successfully resumed operations with
a business model based upon the premise that a "Full Service" web hosting
company would be able to fill a niche that existed in the marketplace. To
that end, the Company has established a business opportunity that includes
everything needed for a small business to successfully compete on the World
Wide Web.
Through core operations, joint venture arrangements and the Company's
distributor network, the Company expects its revenue opportunities to be
classified in four general areas:
* Hosting fees generated from membership enrollments.
* Advertising revenues received from the sale of advertised space to
outside third party organizations.
* Commissions from sales of varied products associated with our
numerous retail partners, including those associated with LinkShare.
* Monthly lease fees received from merchants desiring to be included in
the Wiworks Main Street Plaza.
The Company has successfully established relationships with numerous
technology and retail partners to facilitate the successful launch of the
Company and its ongoing operations. For further information, see the
Company's web site at www.wiworks.com.
It is expected that the Company will be in a position to be self-funded
through operations by the first calendar quarter of 2000.
Results of Operations
---------------------
For the fiscal year ended February 28, 1998, 69% of the Company's
revenues were generated from a single independent distributor. In June, of
1998, the Company elected to cease operations with this distributor. The
termination of this relationship with the independent distributor and the
resulting transition resulted in a significant reduction in revenue without
commensurate reduction in expenses.
In June, 1998, the Company established Global Media Group to replace the
revenues generated from this independent distributor; this effort failed to
generate any significant revenues and only incurred liabilities in the
attempt.
In October, 1998, due to this disparity between revenue and expenses, the
Company ceased operations on October 22, 1998. See the 8-K Current Report
dated October 22, 1998, Item 13. At this time, the Company began to explore
alternatives, including voluntary reorganization, receivership or seeking
relief under the bankruptcy statutes. As of Feb 28, 1999 the evaluation
process was still occurring and alternatives were being evaluated. A search
team was engaged to actively pursue other viable business alternatives and
facilitate the Company's resuming operations.
In February, 1999, the search team identified a new President and he was
engaged on February 19, 1999, together with new additional directors and
executive officers. See the 8-K Current Report dated February 19, 1999.
As of February 28, 1999, alternatives were still being explored as to the
most effective method to resume operations.
Comparison of Fiscal year end 1999 to Fiscal year end 1998
----------------------------------------------------------
Due to the closure of operations in October of 1998, the comparison
between the year over year audited statements was great. The revenues were
reduced significantly and the expense line increased dramatically due to the
failed attempt to replace the revenues produced by the independent
distributor. Further, the Company recommenced its developmental stage in
October, 1999, so no revenues have been recorded from past operations of its
subsidiaries for the fiscal years ended February 28, 1999 and 1998. Net
losses from discontinued operations were ($2,450,128) and ($680,930),
respectively, in fiscal 1999 and 1998.
Liquidity and Capital Resources
-------------------------------
As of February 28, 1999, all of the open accounts had been closed and the
Company had no cash assets.
Year 2000
---------
The Company uses third party equipment and software that is Year
2000 compliant. The Company has implemented a review of key products provided
by outside vendors to determine if their products are Year 2000 compliant and
presently believes that all software provided by third parties that is
critical to its business is Year 2000 compliant or will be before the year
2000.
Certain Factors Expected to Impact Operating Results
----------------------------------------------------
Many factors outside the Company's control may significantly affect
the Company's operating results in any future fiscal quarter.
For example, the Company's operating results may be affected by changes in
the use of the Internet, seasonal trends in Internet use and online
shopping, the continuing interest and activity of the Company's
independent direct distributors, the amount and timing of capital
expenditures and other costs associated with development and expansion of
the Company's Internet site and related products and services, the
introduction and success of competitive Internet sites, price competition
in the industry, technical difficulties associated with the Company's
computer network, and general economic conditions and economic conditions
specific to Internet commerce. Due to these and other factors, it is
probable that the Company's operating results will fall below expectations
of the Company, its shareholders or market analysts in some future fiscal
quarter. Important risk factors and uncertainties that the Company expects
will impact its operating results include the following:
Limited Funds Available for Operating Expenses. The Company
currently has limited operating capital or cash resources. Substantial
funding necessary to meet the Company's anticipated expansion may be needed,
though the Company anticipates revenues for the first quarter of 2000 will
funds its intended operations. The Company's ability to raise debt or equity
funding from non-affiliated sources will be severely limited by reason of its
lack of historical operations, limited assets and the limited public market
for its common stock.
Unsuccessful Prior Operations and No Operating History. The Company's
past operations, conducted through subsidiaries, were unsuccessful, and were
terminated in October, 1998; the Company then recommenced its development
stage and new operations. There is no successful operating history or results
of operations.
Government Scrutiny of Direct Distribution and Network Marketing
Industry. Direct distribution and network marketing programs
are frequently subject to scrutiny by the Federal Trade Commission and
other governmental authorities under laws and regulations that are
designed to ensure that product sales within network marketing programs
are made to actual consumers, and that compensation programs and
advancement in the network organization are based on the sale of products
rather than mere "investment" in a sponsoring company or
recruitment of new distributors. The Company will retain outside legal
counsel to assist in maintaining compliance with all such laws and
regulations; however, there is the risk that the Company's network
marketing system could be found not to be in compliance with the
applicable laws and regulations of a particular jurisdiction. Failure by
the Company to comply with all such laws and regulations could result in a
material adverse impact on the Company in a particular market
or in general.
Government Regulation of the Internet. At present, the Company is not
aware of any laws or regulations specifically restricting the
commercial use of the Internet. However, related laws and regulations,
including those pertaining to trademark, copyright, patent, licensing,
obscenity, and security matters, can affect the use of the Internet for
online commerce. Management believes that the Company is currently in
compliance with all laws pertaining to the Internet, whether directly or
tangentially. Nevertheless, there can be no assurance that there will not
be legislation enacted and implemented in the future that could restrict
use of the Internet as a commercial medium. If such new legislation were
implemented, it could have a material adverse impact on the Company and
its business operations.
Uncertain Future of the Internet. Critical issues concerning the
viable commercial use of the Internet remain unresolved and may
impact the growth of Internet use. Such issues include security,
reliability, cost, ease of use and access, and quality of service.
Although the Company believes that its products and services may be
economically and commercially marketed using the Internet, and furthermore
that the number of users of the Internet will continue to grow, there can
be no assurance that commerce and communication over the Internet will
become widespread, or that the Company's products or services will become
widely recognized or used.
Marketing and distribution of the Company's products and services will
depend in large part on a robust Internet industry and adequate infrastructure
for providing Internet access and carrying growing Internet traffic. The
Internet may not prove to be a viable commercial marketplace because of
inadequate development of necessary infrastructure, such as a reliable network
backbone or timely development of related products, such as high-speed modems
or other quickening devices. Because global commerce and online networks are
still relatively new and evolving, it is not possible to predict with any
assurance whether the Internet will prove to be a viable commercial
market. If it does not, the Company's business operations and financial
condition could be materially adversely affected.
Risk of Capacity Constraints; Reliance on Internal Information Systems
Controls. The Company's business operations depend, in large part, on a high
volume of traffic on its Internet site. Accordingly, the performance,
reliability and availability of the Company's Internet site, computer network
infrastructure and Internet commerce processing systems are critical to the
Company's ability to attract and retain new customers. Any systems
interruptions that result in the unavailability of the Company's Internet site
or its computer system could reduce the volume of traffic to the Company's
Internet site and consequently, the volume of goods sold by the Company. The
Company has experienced periodic computer system interruptions in the past,
and anticipates that such interruptions will occur from time to time in the
future. Continued growth of the Company's network of independent direct
distributors or other customers will require the Company to expand and
upgrade its Internet technology, including its computer network and
Internet commerce processing systems. There can be no assurance that the
Company will accurately predict the need for such expansion or upgrade, or
that it will be able to make such necessary expansion or upgrade in a
timely manner.
Risk of System Failure. The Company's ability to successfully receive
and process orders for the Company's products and services depends, in large
part, on efficient, uninterrupted operation of the its computer and
communications equipment. Substantially all of the Company's computer and
communications equipment is located at the Company's headquarters, in a leased
facility in Provo, Utah. The Company's computer and communications equipment
is vulnerable to flood, earthquake, power loss, telecommunications failure,
and other similar events. The Company does not presently have redundant
systems or a contingent disaster recovery plan and does not carry adequate
business interruption insurance to cover potential losses that may occur from
such an event. The Company's computer equipment is also vulnerable to
computer viruses, break-ins, and similar events that could lead to
interruptions, loss of data, or dysfunction. The occurrence of any such event
could have a material adverse effect on the Company's business, financial
condition and results of operation.
Security Risks of Online Commerce. A challenge to the success of
online commerce is the secure transmission of confidential
information. The Company relies on encryption devices supplied by third
parties to provide the security, authentication and secure transmission
of confidential information. There can be no assurance that computer
capabilities, new discoveries in encryption technology, or other
circumstances will not result in a breach of the security devices that the
Company employs to protect confidential data, including customer
information such as credit card numbers. If such a breach were to occur,
it could have a material adverse effect on the Company's reputation,
business operations and financial condition. Moreover, such a breach
could result in the misappropriation of proprietary or confidential
information. These concerns may require the Company to spend resources to
protect against the possibility of such breaches, and may inhibit the
use of the Internet for commerce.
Limited Market for Shares. There is currently only a limited market
for the Company's common stock. There can be no assurance that
a larger market for the Company's common stock will ever be developed or
maintained. Factors such as the success or lack thereof of the
Company's efforts to market its products and services through its,
competition, governmental regulations, and fluctuations in operating
results may all have an effect on the market for the Company's common
stock, which market may be volatile. The stock markets generally have
experienced, and will likely experience in the future, extreme price and
volume fluctuations which have affected the market price of the shares of
many small capital companies, and which have often been unrelated to the
operating results of such companies. Such broad market fluctuations,
as well as general economic and political conditions, may adversely affect
the market price of the Company's common stock in any market that
develops.
Reliance on Key Personnel; New Management Team. The Company's
performance is substantially dependent on the performance of its
executive officers and key employees. Given the Company's early stage of
development, the Company is dependent on its ability to retain and
motivate highly-qualified personnel, especially in management and
technical positions. The Company does not have a "key person" life
insurance policy on any of its employees. The loss of the services of any
of its executive officers or other key employees could have a material
adverse effect on the business, operating results or financial condition
of the Company. The Company's future growth and success also depends on
its ability to identify, hire train and retain other qualified management
and technical personnel in the future. The inability to hire and retain
necessary personnel could have a material adverse effect on the Company's
business operations and financial condition.
Penny Stock. The Company's securities are deemed "penny stock" as
defined in Rule 3a51-1 of the Securities and Exchange
Commission. Such a designation could have a material adverse effect on
the development of the public market for shares of the Company's common
stock or, if such a market develops, its continuation, since
broker-dealers are required to personally determine whether an investment
in such securities is suitable for customers prior to any solicitation of
any offer to purchase these securities. Compliance with procedures
relating to sale by broker-dealers of "penny stocks" may make it more
difficult for purchasers of the Company's common stock to resell their
shares to third parties or to otherwise dispose of such shares.
Volatility of Stock Price. Any market price for shares of common
stock of the Company is likely to be very volatile, and numerous
factors beyond the control of the Company may have a significant effect.
In addition, the stock markets generally have experienced, and continue
to experience, extreme price and volume fluctuations which have affected
the market price of many small capital companies and which have often
been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic and political
conditions, may adversely affect the market price of the Company's common
stock in any market that may develop.
Competition; Low Barriers to Entry. The market for Internet
services is relatively new, intensely competitive, rapidly evolving and
subject to rapid technological change. The Company expects competition to
persist, intensify and increase in the future. The Company's potential
competitors can be divided into several groups: computer hardware and service
vendors such as IBM and Hewlett Packard; advertising and media agencies such
as Ogilvy & Mather, Young & Rubicam and Foote, Cone & Belding; Internet
integrators and web presence providers such as Agency.com and iXL Holdings;
large information consulting service providers such as Anderson Consulting,
Cambridge Technology Partners and Electronic Data Systems Corporation;
telecommunications companies such as AT&T and MCI; Internet and online service
providers such as America Online, Netcom Online and UUNet Technologies; and
software vendors such as Microsoft, Netscape, Novell, Amaxon.com and Oracle.
Almost all of the Company's current and potential competitors have longer
operating histories, larger installed customer bases, longer relationships
with clients and significantly greater financial, technical, marketing and
public relation resources than the Company and could decide at any time to
increase their resource commitments to the Company's target market. As a
strategic response to changes in the competitive environment, the Company may
from time to time make certain pricing, service technology or marketing
decisions or business or technology acquisitions that could have a material
adverse effect on the Company's business, financial condition, results of
operations and prospects. Competition of the type described above could
materially adversely affect the Company's business, results of operations,
financial condition and prospects.
In addition, the Company's ability to generate clients will depend
to a significant degree on the quality of its services and its reputation
among its clients and potential clients, compared with the quality of its
services provided by, and the reputations of, the Company's competitors. To
the extent the Company loses clients to its competitors because of
dissatisfaction with the Company's services or its reputation is adversely
affected for any other reason, the Company's business, result of operations,
financial condition and prospects could be materially adversely affected.
There are relatively low barriers to entry into the Company's
business. Because firms such as the Company rely on the skill of their
personnel and the quality of their client service, they have no patented
technology that would preclude or inhibit competitors from entering their
markets. The Company is likely to face additional competition from new
entrants into the market in the future. There can be no assurance that
existing or future competitors will not develop or offer services that provide
significant performance, price, creative or other advantages over those
offered by the Company, which could have a material adverse effect on its
business, financial condition, results of operations and prospects.
Item 7. Financial Statements.
---------------------
Consolidated Financial Statements dated February 28, 1999
Independent Auditor's Report
Consolidated Balance Sheet for February 28, 1999
Consolidated Statements of Operations for the years ended
February 28, 1999 and 1998 and from inception through February 28, 1999
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows for the years ended
February 28, 1999 and 1998 and from inception through February 28, 1999
Notes to the Consolidated Financial Statements
<PAGE>
WORLD INTERNETWORKS, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Financial Statements
February 28, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
World InterNetWorks, Inc. and Subsidiaries
(A Development Stage Company)
Orem, Utah
We have audited the accompanying consolidated balance sheet of
World InterNetWorks, Inc. and Subsidiaries (a development stage company) as of
February 28, 1999 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the year ended February
28, 1999 and from inception of the development stage on October 22, 1998
through February 28, 1999. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosure in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of World InterNetWorks, Inc. and Subsidiaries (a development stage
company) as of February 28, 1999, and the consolidated results of their
operations and their cash flows for the year ended February 28, 1999 and from
inception of the development stage on October 22, 1998 through February 28,
1999 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 3 to the consolidated financial statements, the Company's
recurring losses from operations and stockholders' equity (deficit) raise
substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 3.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/S/Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
August 23, 1999
<TABLE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheet
<CAPTION>
ASSETS
February 28,
1999
<S> <C>
CURRENT ASSETS
Cash $ -
Total Current Assets -
FIXED ASSETS (Note 1)
Computers and equipment 9,655
Furniture and fixtures 1,950
Accumulated depreciation (8,545)
Net Fixed Assets 3,060
TOTAL ASSETS $ 3,060
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Reserve for discontinued operations (Note 7) $2,627,271
Total Current Liabilities 2,627,271
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value; 500,000,000
shares authorized; 1,750,107 shares issued
and outstanding 1,750
Additional paid-in capital 1,356,919
Treasury stock at cost (1,020 shares) (3,186)
Deficit accumulated prior to the development
stage (3,979,694)
Deficit accumulated from the inception of the
development stage on October 22, 1998 -
Total Stockholders' Equity (Deficit) (2,624,211)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 3,060
</TABLE>
<TABLE>
WORLD INTERNET WORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
<CAPTION>
From
Inception of the
Development
Stage on
October 22,
For the Years Ended 1998 Through
February 28, February 28,
1999 1998 1999
<S> <C> <C> <C>
REVENUES $ - $ - $ -
OPERATING EXPENSES - - -
LOSS FROM OPERATIONS - - -
LOSS FROM DISCONTINUED
OPERATIONS (Note 7) (2,450,128) (680,930) -
LOSS BEFORE INCOME TAXES (2,450,128) (680,930) -
INCOME TAX EXPENSE - - -
NET LOSS $ (2,450,128) $ (680,930) $ -
BASIC LOSS PER SHARE
Loss from operations $ 0.00 $ 0.00
Loss from discontinued operations (0.74) (0.22)
BASIC LOSS PER SHARE $ (0.74) $ (0.22)
FULLY DILUTED LOSS PER SHARE
Loss from operations $ 0.00 $ 0.00
Loss from discontinued operations (0.74) (0.22)
Fully Diluted Loss Per Share $ (0.74) $ (0.22)
</TABLE>
<TABLE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<CAPTION>
Additional Employee
Common Stock Treasury Paid-In Notes Accumulated
Shares Amount Stock Capital Receivable Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance,
February 28, 1997 2,983,739 $ 2,984 $ - $ 477,905 $ - $ (848,636)
Issuance of common
stock from the
exercise of options 341,500 341 - 564,389 (37,500) -
Issuance of notes
receivable to employees - - - - (41,397) -
Award of common stock to
an officer - - - 56,000 - -
Purchase of treasury stock - - (3,186) - - -
Net loss for the year ended
February 28, 1998 - - - - - (680,930)
Balance, February 28, 1998
(inception of development
stage) 3,325,239 3,325 (3,186) 1,098,294(78,897)(1,529,566)
Issuance of common
stock from the
exercise of options 147,125 147 - 216,603 - -
Issuance of common stock
for services 27,650 28 - 40,272 - -
Cancellation of
common stock (1,750,000) (1,750) - 1,750 - -
Payments received on
employee notes
receivable - - - - 78,897 -
Adjustment for
fractional shares 93 - - - - -
Net loss for the
year ended
February 28, 1999 - - - - - (2,450,128)
Balance,
February 28, 1999 1,750,107 $ 1,750 $ (3,186) $1,356,919$ - $(3,979,694)
</TABLE>
<TABLE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
<CAPTION>
From
Inception of the
Development
Stage on
October 22,
For the Years Ended 1998 Through
February 28, February 28,
1999 1998 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,450,128) $(680,930) $ -
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 103,314 181,310 -
Stock award compensation expense - 56,000 -
Write-off other assets 103,811 - -
Loss on disposal of property
and equipment 400,125 - -
Common stock issued for services 40,300 - -
Allowance for doubtful accounts 250,000 - -
Changes in assets and liabilities:
(Increase) decrease in inventory 103,955 (91,967) -
(Increase) decrease in accounts
receivable (26,147) (223,853) -
(Increase) decrease in other assets - (81,441) -
Increase (decrease) in deferred
revenue 169,423 377,270 -
Increase (decrease) in accounts
payable 512,847 341,218 -
Increase (decrease) in accrued
expenses 190,272 248,949 -
Net Cash Provided (Used) by Operating
Activities (602,228) 126,556 -
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property - 13,049 -
Purchase of property and equipment - (541,561) -
Net Cash Used by Investing Activities - (528,512) -
CASH FLOWS FROM FINANCING ACTIVITIES
(Increase) decrease in employee notes
receivable 78,897 (41,397) -
Proceeds from related party note
payable 230,000 40,000 -
Principal payments on related party
note payable (33,128) (68,489) -
Principal payments on capital leases (16,320) (5,132) -
Purchase of treasury stock - (3,186) -
Issuance of common stock 216,750 527,230 -
Net Cash Provided by Financing
Activities $ 476,199 $ 449,026 $ -
NET INCREASE (DECREASE) IN CASH $(126,029) $ 47,070 $ -
CASH AT BEGINNING OF YEAR 126,029 78,959 -
CASH AT END OF YEAR $ - $ 126,029 $ -
CASH PAID FOR:
Interest expense $ 2,013 $ 5,715 $ -
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Acquisition of equipment through
a capital lease $ - $ 21,452 $ -
Common stock issued for employee note
receivable $ - $ 37,500 $ -
Property and equipment used as payment
of accrued wages $ 13,205 $ - $ -
</TABLE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 28, 1999
NOTE 1 - ORGANIZATION AND HISTORY
a. Nature of Operations
World InterNetWorks, Inc., a Nevada corporation, has three wholly-
owned subsidiaries, World Internet Marketplace, Inc. (WIM), a Utah
corporation, engaged in marketing and distributing products and
services relating to internet commerce, Global Wholesale Exchange,
Inc. (GWE), a Utah corporation, which commenced operations in June
1998, providing wholesale goods to consumers via internet and fax
notification, and Global Media Group, Inc. (BMG), which commenced
operations in June 1998, a Utah corporation (dba as the Institute for
Financial Independence) which performs seminars that sell WIM and GWX
products. Collectively, World InterNetWorks, Inc. and the three
wholly-owned subsidiaries are referred to as the Company.
The Company's revenues prior to the Company discontinuing its
operations and entering into the development stage on October 22,
1998 (see Note 7) were 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).
b. 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 2,752,245 common shares of the Company, after the effects of
a 1-for-250 reverse stock split, a 4-for-1 forward stock split and a
1-for-4 reverse 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. (Wealth Nevada), a Nevada corporation, and
the operating subsidiary (Wealth Utah) subsequently changed its name
to World Internet Marketplace, Inc. Wealth Nevada changed its name
to World InterNetWorks, Inc. in January 1998 to more accurately
reflect the nature of the Company's business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's consolidated financial statements are prepared using
the accrual method of accounting. The Company has elected a February
28 year end.
b. Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash
equivalents.
c. Depreciation and Amortization
Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated service
lives of between 5 and 7 years. For financial reporting purposes,
the straight-line method of depreciation is followed. Accelerated
methods of depreciation are used for tax purposes.
Maintenance and repairs, which neither materially add to the value of
the asset nor appreciably prolong its life are charged to expense as
incurred. Gains or losses on dispositions of property and equipment
are included in earnings.
d. Revenue Recognition
The Company generally receives the sales price of its web pages and
products in cash at the time orders are made. Sales are generally
recorded at the time the Web page is activated or the product is
shipped.
e. 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 basis 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.
f. Common Stock Split and Reverse Split
During 1997, the Company effected a reverse stock split of 1-for-250
and, subsequently, a forward stock split of 4-for-1. On September 4,
1998, the Company effected a reverse stock split on a 1-for-4 basis.
The accompanying financial statements has been restated to reflect
these stock splits for all periods presented.
g. 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 estimates.
h. Basic and Fully Diluted Loss Per Share
During February 1997, the FASB issued Statement of Financial
Accounting Standard No. 128, "Earnings per Share". This statement
changed the method in which earnings (loss) per share are determined.
The new standard requires the computation of basic earnings (loss)
per share and earnings (loss) per share assuming dilution. Options
to purchase 1,532,375 and 1,079,500 shares of common stock at $0.25
to $2.50 per share were outstanding during the years ended February
28, 1999 and 1998, respectively. They were not included in the
computation of net loss per common share because they would have had
an antidilutive effect on the net loss per common share for the years
ended February 28, 1999 and 1998. Basic net loss per common share
basic and assuming dilution were the same for the years ended
February 23, 1999 and 1998, respectively.
i. Principles of Consolidation
The consolidated financial statements include the accounts of World
InterNetWorks, Inc., World Internet Marketplace, Inc., Global
Wholesale Exchange, Inc. and Global Media Group, Inc. All
significant intercompany accounts have been eliminated.
j. Advertising
The Company follows the policy of charging the costs of advertising
to expense as incurred.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern.
However, the Company has sustained substantial losses from operations
in recent years the recoverability of a major portion of the recorded
asset amounts shown in the accompanying balance sheets is dependent
upon the Company's ability to meet its financing requirements on a
continuing basis and to succeed in its future operations. The
financial statements do not include, any adjustments relating to the
recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence.
The Company resumed operations in April 1999 with a new management
team and numerous strategic alliances in place for the purpose of
providing state-of-the-art website design, technical support, online
training and interactive e-commerce websites to individuals and small
businesses. Management believes this new direction of the Company
has the ability to achieve the critical mass necessary to result in
significant recurring revenue and profitable growth through hosting
fees as well as product sales. Management also expects to obtain
additional financing through a stock offering in order to meet its
cash flow needs through fiscal year 2000.
NOTE 4 - INCOME TAXES
As of February 28, 1999, the Company had a federal and state net
operating loss carryforwards of approximately $3,600,000. The net
operating losses will expire at various dates beginning in years 2012
through 2014, if not utilized.
The Company operated, for tax purposes, as a partnership under
provisions of the Internal Revenue Code from November 1, 1995 through
July 10, 1996. During this period, losses of the Company flowed
through the partnership. Accordingly, the Company was not subject to
federal income taxes on Company operating results for the period in
which the partnership was in existence, and no provision or current
liability or asset for federal, or state income taxes for those
period has been reflected.
NOTE 5 - STOCK OPTIONS AND STOCK AWARDS
Effective October 13, 1996, the Company adopted a stock option plan
which provides for the granting of stock options and awards to
employees, officers and non-employees to purchase up to 4,000,000
shares of stock, subject to adjustment under certain circumstances.
On October 22, 1996, a 4-for-1 stock split increased the number of
shares available for stock options and awards to non-qualified stock
options or awards.
Incentive Stock Options
Under the plans, incentive stock options may be granted to employees
and officers. During 1998, 1,565,000 incentive stock options were
granted under the plan. Incentive stock options vest at graded rates
over the vesting periods. The exercise price for incentive stock
options may not be less than the fair market value per share of
common stock on the grant date. In the case of incentive stock
options granted to an employee possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the
exercise price may not be less than 110% of the fair market price per
share of common stock on the grant date. An employee may not be
granted incentive stock options that would entitle the employee to
purchase more than $100,000 in fair market value of common stock in
the year in which the options are exercisable for the first time
Non-Qualified Options
Employees, officers, directors and consultants may be granted non-
qualified options. Directors, officers, employees and consultants
are also eligible for awards of stock and opportunities to make
direct purchases of stock in the Company. During 1998, there were no
non-qualified options granted under the plan. Non-qualified options
vest at graded rates over the vesting periods. Non-qualified options
also include options which are performance based. These options vest
20% each time the grantee sells a designated number of storefronts
for the Company. The exercise price for non-qualified stock options
may not be less than the lessor of (1) the book value per share of
common stock as of the end of the fiscal year of the Company
immediately preceding the grant date, or (2) 50% of the fair market
value per share of common stock on the grant date.
Information with respect to the Company's stock option plan at
February 28, 1999 is as follows:
Exercise Number Number Number Number
Price Authorized Exercised Canceled Outstanding
1997 Plan $0.25 - 2.50 1,233,750 447,500 148,000 638,250
1998 Plan $0.38 - 2.50 391,250 147,125 - 244,125
1999 Plan $0.75 - 1.00 650,000 - - 650,000
Totals 2,275,000 594,625 148,000 1,532,375
Stock Awards
During 1998, a stockholder gave 100,000 shares of the Company's
restricted common stock to an officer of the Company. The fair
market value of the stock on the date of gift was estimated to be
$56,000 and has been recorded as compensation expense.
NOTE 6 - COMMITMENT AND CONTINGENCIES
Litigation and Claims
The Company is engaged in various litigation and claims both as
defendant and plaintiff arising through the normal course of
business. In the option of management, based on the advise of legal
counsel, these lawsuits do not represent a material obligation to
the Company as of February 28, 1999.
NOTE 7 - LOSS FROM DISCONTINUED OPERATIONS
On October 22, 1998, the Board of Directors of the Company decided
to discontinue the marketing and distribution of products and
services relating to commerce on the internet due to a lack of
funding and increased losses. The following is a summary of the
loss from discontinued operations.
From
Inception of the
Development
Stage on
October 22,
For the Years Ended 1998 Through
February 28, February 28,
1999 1998 1999
[S] [C] [C] [C]
NET REVENUES $ 1,988,774 $7,762,125 $ -
COST OF PRODUCTS SOLD 826,073 999,612 -
Gross Profit 1,162,701 6,762,513 -
EXPENSES
Selling, general and
administrative 2,827,748 2,986,536 -
Commissions 785,081 4,456,907 -
Total Expenses 3,612,829 7,443,443 -
LOSS BEFORE INCOME TAXES (2,450,128) (680,930) -
INCOME TAX EXPENSE - - -
NET LOSS $(2,450,128) $ (680,930) $ -
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.74) $ (0.22)
FULLY DILUTED LOSS PER SHARE
OF COMMON STOCK $ (0.74) $ (0.22)
The Company had liabilities of $2,627,271 which are associated with
the discontinued operations. No income tax benefit has been
attributed to the loss from discontinued operations.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
See the 8-K Current Report dated February 9, 1999, which has been
previously filed with the Securities and Exchange Commission and is
incorporated herein by reference, respecting the Company change in Certifying
Accountants. There were no disagreements between the Company and Grant
Thornton LLP, the previous accounting firm, whether resolved or not resolved,
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which, if not resolved, would have
caused them to make reference to the subject of the disagreement in connection
with their reports.
PART III
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
Directors, Executive Officers, Promoters, and Control Persons
-------------------------------------------------------------
The following table sets forth certain information regarding the
directors and executive officers of the Company as of October 5, 1999:
<TABLE>
Name Age Position
---- --- --------
<S> <C> <C>
Steven K. Hansen 40 President, Director
Philip M. Ray 36 Secretary/Treasurer,
Director
Randal L. Roberts 47 Director
Gary S. Winterton 30 Director
</TABLE>
All directors of the Company hold office until the next annual meeting
of the shareholders of the Company and until their successors have been duly
elected and qualified. The executive officers of the Company are elected
annually and serve at the pleasure of the Board of Directors.
Steven K. Hansen. Mr. Hansen, age 40, has extensive experience in
sales and marketing. He has served as Vice President of Allen & Associates, a
Texas based organization which provided membership development services for
Chamber of Commerce organizations nationwide; these non-profit business
organizations were reliant on Mr. Hansen's efforts to provide the necessary
funding for programs and services. During the past 10 years, he has served as
a Financial Advisor for Paine Webber, Smith Barney and Everen Securities. Mr.
Hansen and his partner managed over $120 Million of client assets. He also
has extensive experience in the areas of money management, sales, marketing,
administration and client services.
Phillip M. Ray. Mr Ray, age 36, has extensive experience in sales,
marketing and client services. In 1995, he became a Senior Partner in
Automotive Direct Marketing. He has also served as the President of United
Printing and Mailing. While completing his Bachelor of Arts Degree at Brigham
Young University, and subsequently, Mr. Ray served as a consultant for the
Covey Leadership Center. In this capacity, he trained personnel from Fortune
500 companies.
Randal L. Roberts. Mr. Roberts, age 47, is a Vice President and
Manager of the International Banking Department of First Security Bank, a $22
Billion financial services company, with banking offices in seven states. He
brings over 20 years experience in Commercial lending and International
operations to the Company. Mr. Roberts has been responsible for a 328%
increase in International business for his department over the past five
years, and is responsible for hundreds of millions of dollars in international
transactions. In his capacity as a commercial banker, Mr. Roberts has
provided financial analysis of well over 2,000 different banks and
corporations.
Gary S. Winterton. Mr. Winterton, age 30, is currently the Acting
President of Internet Marketing Concepts, an Internet development company. He
brings broad experience to the Company, including seven years with the
Covey Leadership Center, where he was one of the top revenue producers and
business developers. He was a key figure in the development of the highly
acclaimed "First Things First" time management training division. Following
his tenure with Covey Leadership Center, Mr. Winterton served as Vice
President of a marketing/communications company which provided recruiting,
training and motivational materials for the direct sales and network marketing
industry.
Material Employment Contracts
-----------------------------
The Company has or shortly will execute Employment Contracts with
certain members of its management as follows, which modifies the arrangements
set forth in the 8-K Current Report dated February 19, 1999:
Steven K. Hansen. Mr. Hansen was designated on February 19, 1999,
to act as the President of the Company for a period of three years; at a
monthly salary of $8,000; with a complete medical benefit package for him and
his family; and with 800,000 shares of "restricted securities" (common stock)
to be issued no later than 10 days from the execution of the Employment
Contract.
Phillip M. Ray. Mr. Ray was designated Secretary/Treasurer, on
March 4, 1999, and will act as the business development manager,
responsibilities to include all facets the Company's direct selling
efforts, the transfer of existing web sites to the new server, day to day
operations and introductions to strategic business alliances. He will receive
a monthly salary of $3,000, until June 1, 1999, with a six month review;
20,000 shares of "restricted securities" (common stock) have been issued in
the name "Automotive Direct" in consideration of a $40,000 debt of the
Company; 10,000 shares shall be issued for salary for the period ended
September 30, 1999; and Mr. Ray shall be accorded the following options to
purchase additional shares of these "restricted securities," for a period of
two years after vesting, with all non-vested options to expire on termination
of employment for any reason: 50,000 shares, to vest immediately, at a price
of $0.40 per share; an additional 50,000 shares at a price of $0.40 per share,
to vest upon successful communications effort with Wiworks members, proactive
ideas and concepts provided to the Company and the closure of various back
office issues; and a 25,000 cash-less finder's fee, in the event the Company
benefits from certain introductions made by Mr. Ray.
Randal L. Roberts. Mr. Roberts was designated as a director on
March 4, 1999. For his service on the Board of Directors, he shall be granted
the option to acquire 10,000 shares of "restricted securities" (common stock)
at a price of $$0.40 per share for fiscal 1999. This options shall vest
immediately, and shall expire in five years.
Gary S. Winterton. Mr. Winterton was designated as a director on
March 4, 1999. For his service on the Board of Directors, he shall be granted
the option to acquire 10,000 shares of "restricted securities" (common stock)
at a price of $0.40 per share for fiscal 1999; an additional 50,000 shares to
be priced at the market price for the Company's securities on any national
medium on July 23, 1999, for a price of $0.75 per share; and 100,000 shares at
a price of $0.40 per share. These options shall vest immediately, and shall
expire in five years. These shares shall be included in a registration
statement by the Company on demand by Mr. Winterton.
Termination of Employment and Change in Control Arrangements
------------------------------------------------------------
Not applicable.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires officers,
directors and persons who beneficially own more than 10% of a fully reporting
company's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. The Company is not a fully
reporting company, and, accordingly, is not subject to such reporting
requirements; it files reports under Section 15(d).
Item 10. Executive Compensation.
-----------------------
Executive Compensation Summary Information
------------------------------------------
The compensation information set forth on the following table
summarizes the compensation received by Management for the past fiscal year
and since the recommencement of the Company's developmental stage:
<TABLE>
Name and Principal Salary Bonus Other Securities All Other
Position ($) ($)* Annual Underlying Compensation
Comp- Option/SARs ($)
ensation (#)
------------------ ------ ----- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Steven K. Hansen $0 0 0 0 0
Phillip M. Ray $0 0 0 0 0
Randal L. Roberts $0 0 0 0 0
Gary S. Winterton $0 0 0 0 0
</TABLE>
* The Company provides bonus compensation to certain executive officers
in accordance with an incentive bonus program. Under the
bonus program, the Company's Board of Directors considers the
relative contribution of each included executive officer to the
overall profitability of the Company on a periodic basis, based on
sales, revenues, and overall Company performance, and allocates bonus
compensation accordingly.
With respect to long-term compensation, other than grants of options
listed in the above table, the Company made no restricted stock
awards or Long-Term Incentive Plan payouts during the fiscal year
ended February 28, 1999.
Stock Option and Stock Appreciation Rights Grants in the Fiscal Year
Ending February 28, 1999
------------------------
See Note 5 of the audited financial statements of the Company included in
Part I, Item 7.
1996 Stock Option Plan
----------------------
The Company's 1996 Stock Option Plan (the "Plan") provides for the award
of incentive stock options to key employees and the award of nonqualified
stock options, as well as awards of stock and rights to purchase stock, to
employees and certain non-employees who have important relationships with the
Company. 16,000,000 shares of the Company's common stock are available for
issuance pursuant to awards granted under the Plan.
Stock Option Grants. The Plan Committee may grant Incentive Stock
Options and Non-Qualified Stock Options under the Plan. With respect to each
option grant, the Plan Committee will determine the number of shares subject
to the option, the option price, the period of the option, the time or times
at which the option may be exercised (including whether the option will be
subject to any vesting requirements and whether there will be any conditions
precedent to exercise of the option),and the other terms and conditions of the
option.
Restricted Stock. The Plan Committee may issue shares of the
Company's common stock under the Plan subject to the terms, conditions, and
restrictions determined thereby. Upon the issuance of restricted stock, the
number of shares reserved for issuance under the Plan will be reduced by the
number of shares issued. No awards of restricted shares have been granted
under the Plan.
Changes in Capital Structure. The Plan provides that if the
outstanding common stock of the Company is increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any recapitalization,
stock split or certain other transaction, appropriate adjustment will be made
by the Plan Committee in the number and kind of shares available for grants
under the Plan. In addition, the Plan Committee will make appropriate
adjustments in the number and kind of shares as to which outstanding options
will be exercisable.
For information regarding options issued or outstanding at fiscal year
end, see Note 5 of the audited financial statements of the Company included in
Part I, Item 7.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values
--------------------------
There were no exercises of options by the Company's directors or
executive officers during the past fiscal year.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table sets forth, as of October 5, 1999, the number of
shares of the Company's common stock, held by all persons known to the Company
to be beneficial owners of more than five percent of the Company's common
stock (the Company's only class of voting securities) and by executive
officers and directors of the Company individually and as a group.
<TABLE>
Name/Address of 5% Beneficial Owner,
Director, Officer Number of Shares Percent of Class*
----------------------------------- ---------------- ----------------
<S> <C> <C>
Steven K. Hansen 975,000 28.69%
Phillip M. Ray 20,000 .05%
Randal L. Roberts --0 --0--
Gary S. Winterton --0 --0--
Officers and Directors as a Group
(4 persons) 975,000 28.74%
*Does not include options outlined above under Part III, Item 10.
</TABLE>
Item 12.Certain Relationships and Related Party Transactions.
-------------------------------------------------------
Except as outlined in Part III, Item 10, or in the 8-K Current Report
dated February 19, 199, there have been no material transactions with members
of management, 5% stockholders or promoters or founders during the past two
fiscal years ended February 28, 1999 and 1998.
Item 13. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
---------------------------------------------------------------
(a)
22 Subsidiaries
27 Financial Data Schedule.
(b) Forms 8-K filed during the fiscal year ended February 28, 1999.
(i) 8-K Current Report dated October 22, 1998
(ii) 8-K Current Report dated February 9, 1999
(iii) 8-K Current Report dated February 19, 1999
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.
WORLD INTERNETWORKS, INC.
Date: 10/6/99 /s/Steven K. Hansen
------------- ----------------------------
Steven K. Hansen, President
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Date: 10/6/99 /s/Steven K. Hansen
------------ --------------------------------
Steven K. Hansen, President and
Director
Date: 10/6/99 /s/Phillip M. Ray
------------ --------------------------------
Phillip M. Ray, Secretary/Treasurer and
Director
Date: 10/6/99 /s/Randal L. Roberts
------------ ---------------------------------
Randal L. Roberts, Director
Date: 10/6/99 /s/Gary S. Winterton
------------ ---------------------------------
Gary S. Winterton, Director
Exhibit 22
Subsidiaries
World Internet Marketplace, Inc., a Utah corporation ("WIMI"),Global Wholesale
Exchange, Inc., a Utah corporation ("GWE"), and Global Media Group, Inc., a
Utah corporation ("GMG")
<TABLE> <S> <C>
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<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
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<CURRENT-ASSETS> 0
<PP&E> 11605
<DEPRECIATION> 8545
<TOTAL-ASSETS> 3060
<CURRENT-LIABILITIES> 2627271
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0
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<COMMON> 1750
<OTHER-SE> (2614356)
<TOTAL-LIABILITY-AND-EQUITY> 3060
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