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: August 31, 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)
Registrant's telephone number (801) 434-7517
5152 North Edgewood Drive, Suite 250, Provo, Utah 84604
------------------------------------------------------------
(Former Address of principal executive offices) (zip Code)
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 outstanding shares of the Registrant's common stock as of
October 25, 1999, was: 3,398,107 shares.
Transitional Small Business Disclosure Format (Check One): Yes [x] No []
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, 1999.
<PAGE>
WORLD INTERNETWORKS, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Financial Statements
August 31, 1999
<PAGE>
<TABLE>
World Internetworks, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
August 31, 1999 and February 28, 1999 (Fiscal Year End)
<CAPTION>
ASSETS
August 31, February 28,
1999 1999
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,295 $ -
Total current assets 2,295 -
Property, plant and equipment at cost, net 3,531 3,060
$ 5,826 $ 3,060
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 139,897 $ -
Accrued expenses 14,692 -
Advanced Payable to shareholder 10,000 -
Reserve for discontinued operations 2,627,271 2,627,271
Total current liabilities 2,791,860 2,627,271
Commitments and contingencies
Shareholders' equity (deficit):
Common stock, $.001 par value; 500,000,000
shares authorized; 3,548,107 and 1,750,107
shares issued at August 31, 1999 and Feb 28, 1999,
respectively 3,548 1,750
Capital in excess of par value 1,727,121 1,356,919
Treasury stock, at cost (3,186) (3,186)
Deficit accumulated prior to development stage (3,979,694) (3,979,694)
Deficit accumulated from the inception of the
development stage on October 22, 1998 (533,823)
Total shareholders' deficit (2,786,034) (2,624,211)
$ 5,826 $ 3,060
</TABLE>
The notes to Consolidated Financial Statements are an integral part of these
statements.
<TABLE>
World Internetworks, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
For the Three Months and Six Months Ended August 31, 1999 and 1998
<CAPTION>
From
Inception
of Development
Three months ended Six months ended Stage-October 22,
August 31, August 31, 1998 thru May 31,
1999 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C>
Net sales and revenues: $ 25,890 $ - $ 30,147 $ - $ 30,147
Cost of products sold 13,157 - 16,532 - 16,532
Gross profit 12,733 - 13,615 - 13,615
Operating expenses:
Selling, general and
administrative
expenses 154,710 - 546,606 - 546,606
Depreciation and
amortization 460 - 832 - 832
Total operating
expenses 155,170 - 547,438 - 547,438
Loss from operations(142,437) - (533,823) - (533,823)
Loss from discontinued
operations - (718,239) - (1,017,280) -
Loss before income
tax benefit (142,437) (718,239)(533,823)(1,017,280)(533,823)
Income tax benefit - - - - -
Net loss $(142,437) $(718,239)(533,823)(1,017,280)(533,823)
Weighted average common
shares outstanding (1998
restated to give effect
to a 4 for 1 reverse split
effective September
4, 1998) 3,198,107 3,378,594 2,906,774 3,378,594
Loss per common share $ (0.04) $ (0.21) $ (0.18) $ (0.30)
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<TABLE>
World Internetworks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended August 31, 1999 and 1998
(Unaudited)
<CAPTION>
From
Inception
of Development
Six months ended Stage-October 22,
August 31, 1998 thru May 31,
1999 1998 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(533,823) $(1,017,280) $(533,823)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 832 102,502 832
Changes in current assets and
liabilities
Inventory - 70,517 -
Accounts receivable - 187,197 -
Prepaid expenses - (3,000) -
Other assets - 90,794 -
Accounts payable 139,897 447,376 139,897
Accrued expenses 14,692 (252,874) 14,692
Advance payable to shareholder 10,000 - 10,000
Deferred revenue - 126,423 -
Net cash provided by (used in)
operating activities (368,402) (248,345) (368,402)
Cash flows from investing activities:
Purchase of property and equipment (1,303) (119,494) (1,303)
Cash flows from financing activities:
Sale of common stock, net of
offering cost 372,000 174,800 372,000
Proceeds from note payable - 109,128 -
Satisfaction of note payable - (35,920) -
Proceeds from employee note receivable - 1,397 -
Reduction in lease obligation - (1,284) -
Net cash provided by (used in)
financing activities 372,000 248,121 372,000
Net increase (decrease) in cash 2,295 (119,718) 2,295
Cash at beginning of period - 126,029 -
Cash at end of period $ 2,295 $ 6,311 $ 2,295
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
August 31, 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, and provided wholesale goods to consumers via internet and fax
notification, and Global Media Group, Inc., a Utah corporation(BMG),
which commenced operations in June 1998, (dba as the Institute for
Financial Independence) which performed seminars that sold 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 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" were
generally fulfilled by shipment direct from the manufacturer or
wholesaler to the customer).
The Company is currently engaged in the development of systems for
marketing and distribution of products and services relating to
Internet commerce and providing state-of-the-art web site design,
technical support, online training and interactive e-commerce web
sites to individuals and small businesses.
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 fiscal 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 Reverse Split
On September 4, 1998, the Company effected a reverse stock split on a
1-for-4 basis. The accompanying financial statements have been
restated to reflect this 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
In 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 shares of common stock at $0.25 to $2.50 per share were
outstanding during the year ended February 28, 1999. Additional
options to purchase 270,000 shares of common stock at $0.40 to $0.75
per share have been issued in the six months since February 28, 1999.
The options 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 three months and six months
ended August 31, 1999 and 1998. Therefore, basic net loss per common
share and fully diluted net loss per common share were the same for
the three months and six months ended August 31, 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.
k. Development costs
The costs of developing the Company's new business plan, including
new web-site design and marketing research and analysis are charged
to general and administrative expense as incurred.
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 from
it's inception and the recoverability of a major portion of the asset
amounts in the accompanying balance sheets is dependent upon the
Company's ability to raise sufficient working capital to meet its
operating costs and debt obligations on a continuing basis in its
future operations. The financial statements do not include, any
adjustments relating to the recoverability and classification of
recorded asset 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 August 31, 1999, the Company had a federal and state net
operating loss carryforwards of approximately $4,130,000. The net
operating losses will expire at various dates beginning in years 2012
through 2015, 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
periods has been reflected.
NOTE 5 - COMMON STOCK AND COMMON STOCK WARRANTS ISSUED
FOR SERVICES
In March 1999 the Company issued 1,148,000 shares of common stock
restricted under Rule 144 to several individuals in exchange for
services provided to the Company. Included in the total were 975,000
shares issued to Steven K. Hansen, President, CEO and Chairman of the
Board of Directors. Additionally, 50,000 shares of the above total
were issued to Leonard W. Burningham, Esq., who is Counsel to the
Company for securities matters. The remaining 123,000 shares were
issued to unrelated parties. The Company recorded management fees,
legal and professional fees totaling $287,000 in March 1999 relating
to the shares issued. Additionally, the Company has agreed to issued
247,500 shares of the Company's common stock through an S-8
Registration Statement for similar services that have been accrued as
accounts payable in the amount of $75,000.
FOR CASH
In April the Company issued 100,000 shares of common stock in
exchange for cash in the amount of $40,000. In July the Company
issued 40,000 shares of common stock in exchange for cash of $20,000.
All the shares issued are restricted under Rule 144 and were issued
in private placements to qualified investors. In addition to the
shares issued each investor received warrants to purchase an equal
number of additional shares of the Company's common stock at $2.00
per share.
In August the Company issued 500,000 shares of common stock in
exchange for cash of $25,000. The 500,000 shares were issued as the
first installment of a total of 4,200,000 shares to be issued under a
definitive agreement with Fairway Capital Partners, LLC., in exchange
for a total of $1,800,000 in cash plus certain investment banking
services to be provided over a period of one year. This best efforts
arrangement is more fully described in the business development section
of the Company's accompanying 10Q for the six month period ending
August 31, 1999.
NOTE 6 - 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. On September 4, 1998, the Company effected a
reverse stock split on a 1-for-4 basis, reducing the number of shares
available for stock options and awards to non-qualified stock options
or awards to the original 4,000,000 shares.
Incentive Stock Options
Under the plan, 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 Company has not granted any additional
options under the plan in the current fiscal year. 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 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. Options to purchase
270,000 at prices ranging from $0.40 to $0.75 were granted in the
period ended August 1999. 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 August 31, 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
1999 Post **$ 0.40 - 0.75 - - - 270,000
Totals 2,275,000 594,625 148,000 1,802,375
** Granted post reorganization
NOTE 7 - COMMITMENT AND CONTINGENCIES
Employment Contracts
Effective February 19, 1999 the Company entered into an employment
contract with Steven K. Hansen, President and CEO of the Company,
the terms of which provide a monthly salary of $8,000 together with
medical insurance benefits. In addition Mr. Hansen was issued
800,000 shares of the Company's common stock restricted under rule
144. The term of the contract is three years.
Effective March 4, 1999 the Company entered into an employment
contract with Phillip M. Ray, Secretary/Treasurer of the Company,
the terms of which provide a monthly salary of $3,000 through June
1999. In addition Mr. Ray was granted 20,000 shares of the
Company's restricted common stock issued to his designee, Automotive
Direct in consideration for a $40,000 debt of the Company. Mr. Ray
will also be issued 10,000 shares of the Company's restricted common
stock in lieu of salary valued at $1.00 per share for the period
from June through September 1999. In addition Mr. Ray has been
granted options to acquire the Company's common stock as follows:
50,000 shares at a price of $0.40 per share, vested immediately and
50,000 shares to be granted at a price of $0.40 per share when
certain business activities have been successfully completed for the
Company. In addition cash-less warrants to purchase 25,000 shares of
the Company's common stock will be issued as a finders fee to Mr.
Ray in the event the Company benefits from business opportunities
introduced to the Company by Mr. Ray.
Directors Compensation Commitments
Effective March 4, 1999 Randall L. Roberts and Gary S. Winterton
were appointed to the Board of Directors of the Company. As
Directors compensation they were each granted options to acquire
10,000 shares of the Company's restricted common stock at a price of
$0.40 per share. In addition, on July 23, 1999 Mr. Winterton was
granted an option to acquire 100,000 shares of the Company's
restricted common stock at a price of $0.40 per share and a third
option to acquire 50,000 shares at a price of $0.75 per share. The
directors options expire in five years. Shares underlying the
options granted Mr. Winterton will be included in a registration
statement upon the demand of the holder.
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 opinion of management, based on the advise of
legal counsel, these lawsuits do not represent a material obligation
to the Company as of August 31, 1999.
NOTE 8 - 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. Following is a summary of the loss
from discontinued operations.
From
Inception of the
Development
Stage on
October 22,
For the six months Ended 1998 Through
August 31, August 31,
1999 1998 1999
[S] [C] [C] [C]
NET REVENUES $ - $ 2,168,965 $ -
COST OF PRODUCTS SOLD - 566,622 -
Gross Profit - 1,582,343 -
EXPENSES
Commissions - 760,394 -
Selling, general and
administrative - 1,839,229 -
Total Expenses - 2,599,623 -
LOSS BEFORE INCOME TAXES - (1,017,280) -
INCOME TAX EXPENSE - - -
NET LOSS $ - $(1,017,280) $ -
BASIC LOSS PER SHARE OF
COMMON STOCK $ - $ (0.08)
FULLY DILUTED LOSS PER SHARE
OF COMMON STOCK $ - $ (0.8)
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 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Plan of Operations
- ------------------
The Company temporarily ceased business operations on October 22, 1998,
as outlined in its 8-K Current Report of such date.
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.
As of August 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 Period Ended August 31,1999
- -----------------------------------------------------
In October 1998, the Company discontinued its previous business of
developing web sites, related Internet training and merchandising through and
Internet mall. The Company has since entered a "development stage" in which
it is developing marketing systems and distribution of products and services
relating to Internet commerce, together with designing/hosting web sites for
individuals and small businesses involved in e-commerce. Consequently, all
operating results prior to the discontinuance of its previous operations have
been reflected singularly as losses from discontinued operations. Current
operations are, therefore, not comparable to operations for the quarter ended
August 31, 1998. During the three months ended August 31, 1999, the Company
recorded revenues of $25,890 and $30,147 for the six months ended August 31,
1999.
Selling, general and administrative expenses were $154,710 for the three
months ended August 31, 1999 and $546,606 for the six months ended August 31,
1999; depreciation and amortization totaled $460 for the three months ended
August 31, 1999 and $832 for the six months ended August 31, 1999. Management
fees, salaries, investor relations and other professional fees included in
selling, general and administrative expenses relate to the development and
implementation of the Company's new business plan.
The Company incurred losses from operations of ($142,437) during the
three months ended August 31, 1999 and ($533,823) for the six months ended
August 31, 1999. The loss from operations is due primarily to management
fees, salaries and other professional fees included in selling, general and
administrative expenses relating to the development and implementation of the
Company's new business plan. The Company anticipates that its investment in
the development of its ongoing business plan will continue at present or
decreased levels for the remainder of fiscal 2000, assuming availability of
working capital.
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.
Liquidity
- ---------
During the quarter ended August 31, 1999, the Company had limited cash
resources. During April, 1999, the Company authorized the issuance of 100,000
shares of its "restricted securities" (common stock) in consideration of the
sum of $40,000, and 50,000 shares of its "restricted securities" (common
stock) in consideration of the sum of $20,000 (these 150,000 shares have not
yet been issued). The Company also authorized 1,148,000 shares of its
"restricted securities" (common stock) to be issued to a number of individuals
for services rendered of an aggregate value of approximately $287,000; these
shares have also not yet been issued.
The Company's cash increased from $0 at the fiscal year ended
February 28, 1999, to $2,295 at August 31, 1999.
The Company had a loss from operations for the period ended August 31,
1999 of $(134,937).
The Company will require substantial cash assets in order to continue
its contemplated business operations.
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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In February 1998, World Internet Marketplace, Inc., a subsidiary, filed a
complaint in the Fourth District Court for Utah County, Utah, alleging breach
of fiduciary duty, conversion, tortuous 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 June, 1998, World Internet Marketplace, Inc. filed a complaint in the
Fourth District Court for Utah County, Utah, alleging wrong doings of a former
officer of this entity. The matter is still pending.
The Company also has received several motions for judgment initiated by
creditors of the subsidiary companies, upon default of contractual obligations
by the Company. These motions will be addressed and attempts will be made to
settle the motions brought against the Company.
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 2. Changes in Securities.
None, not applicable.
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 August 31, 1999.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits and Other Reports on Form 8-K.
(A) Subsequent to the quarter ended August 31, 1999, the Company
filed an 8-K Current Report dated September 14, 1999,
respecting a Letter of Intent with Fairway Capital Partners,
LLC.
SIGNATURE
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: 10/21/99 /s/Steven K. Hansen
-------------- -----------------------------
Steven K. Hansen, Chief Executive Officer
and Director
Date: 10/21/99 /s/Phillip M. Ray
--------------- -----------------------------
Phillip M. Ray, Secretary/Treasurer
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