[DESCRIPTION] FORM 10KSB FOR YEAR ENDED FEBRUARY 29, 2000
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 29, 2000
[ ] 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: $82,675.
Aggregate market value of the common stock of the issuer held by
non-affiliates, amounting to shares on March 24, 2000, based upon a closing
bid price of $3.125 per share on such date, was approximately $16,005,021.
The number of shares outstanding of the issuer's common stock as of
March 24, 2000, was 8,956,607 shares.
Transitional Small Business Disclosure Format (Check One): Yes [X]
No [ ]
<PAGE>
PART I
Item 1. Description of Business.
------------------------
Organization and History.
-------------------------
World Internetworks is a Nevada corporation. It was incorporated on
March 17, 1986, under the name "Impressive Ventures, Ltd." for the purpose of
engaging in any lawful activity or business. We did not conduct any business
operations until August 27, 1996, when our stockholders approved an agreement
under which the stockholders of Wealth International, Inc., a Utah corporation
("Wealth Utah"), obtained a controlling interest in Impressive Ventures. This
transaction was treated as an acquisition of Impressive Ventures by Wealth
Utah, and as a recapitalization of Wealth Utah. Under the agreement, the
stockholders of Wealth Utah exchanged all of their shares in that company for
2,752,245 common shares of Impressive Ventures, 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.
After the transaction was completed, Impressive Ventures changed its
name to "Wealth International, Inc." and the operating subsidiary (Wealth
Utah) subsequently changed its name to "World Internet Marketplace, Inc." In
January, 1998, we changed our name to "World InterNetWorks, Inc." in order to
more accurately reflect the nature of our business.
Nature of Operations.
---------------------
Until 1999, we had three wholly-owned subsidiaries: (i) World
Internet Marketplace, Inc., a Utah corporation, which was engaged in marketing
and distributing products and services relating to internet commerce; (ii)
Global Wholesale Exchange, Inc., a Utah corporation, which commenced
operations in June, 1998, providing wholesale goods to consumers via internet
and fax notification; and (iii) Global Media Group, Inc., a Utah corporation
doing business as the "Institute for Financial Independence", which commenced
operations in June, 1998, and performed seminars that sold the other
subsidiaries' products. Our subsidiaries have ceased operations. In 1999,
each filed a Chapter 7 bankruptcy petition. In the same year, the Utah
Department of Commerce dissolved each subsidiary. See the Risk Factor "We
Have a History of Unsuccessful Operations."
Our business operations were unsuccessful and on October 22, 1998,
we discontinued operations and re-entered the development stage. Our revenues
prior to the discontinuation of operations 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 our internet-based virtual "mall" or "department
store." Orders for merchandise on the virtual "mall" are generally fulfilled
by shipment direct from the manufacturer or wholesaler to the customer. As
discussed under the caption "Legal Proceedings," each of our subsidiaries
filed a Chapter 7 bankruptcy case in the United States Bankruptcy Court for
the District of Utah on October 26, 1999.
As part of World Internetworks' efforts to create a profitable
business plan, on November 30, 1998, former management entered into agreements
with Steven K. Hansen and Dwain Brannon. Under these agreements, Messrs.
Hansen and Brannon were retained to use their best efforts to assist in:
identifying and retaining a new management team; and
developing a corporate restructuring plan.
For their efforts, World Internetworks agreed to issue 75,000 shares
each to Messrs. Hansen and Brannon, with Mr. Hansen to receive an additional
175,000 "unregistered" and "restricted" shares and Mr. Brannon to receive an
additional 75,000 such shares. We recorded a management fee expense of $45,000
in connection with the issuance of the 75,000 shares to Mr. Hansen and the
75,000 shares to Mr. Brannon.
In February, 1999, our new directors and executive officers were
appointed and we began to proceed with our present business plan.
Our business plan calls for us to do the following:
provide web site design and build software that will allow
small business and home-based entrepreneurs to establish an
internet presence at a lower price than our competitors can
provide;
establish an internet training and technical support program
that will help our members understand the internet and learn
how to profit from it;
use the "affiliate method" to encourage members to recruit
other members. Under this method, each member will be paid for
each new member registered, down two membership levels;
create strategic alliances with companies such as Dell
Computer, Office Max, Digital River and Walt Disney, by which
our members will be able to offer these companies' products on
member web sites and receive a commission ranging from
approximately 4% to 10% on each sale, depending on the terms
and conditions for each company;
provide our members with access to our "Main Street Plaza"
online shopping mall, which will allow them to sell their own
products over the internet;
through our relationship with Alta Vista, one of the top search
engines in the country, provide our members with unlimited
internet access;
increase market awareness of our service through search engine
placement. We are already rated in the top 10 on Alta Vista
and Google and expect to rate highly on America Online and
Yahoo! in the near future.
On April 13, 1999, we executed an agreement with Internet Marketing
Concepts, of Orem, Utah, to help us proceed with our business plan. Under the
agreement, IMC agreed to make available to us, free of charge, a team of
designers to help us design and build our web site, and to allow us to use
IMC's Quicksite 3.0 technology for that purpose. We charge our members a
monthly hosting fee of $29.95. Of this amount, we paid $5.00 to the
sponsoring distributor; $12.45 to IMC; and we kept $12.55. All of our web
sites are sold on a reseller basis at $495. Of this amount, $200 is paid as
commission and we would split the remaining $295 with IMC ($147.50 to each
entity). In addition, IMC provided us with a merchant account for online
purchases and was responsible for all billing of our sites. IMC also
performed all technical services for us, including maintenance, customer
service and technical updates. Gary Winterton, the former Acting President of
IMC, is a member of our Board of Directors. Until December, 1999, we also
leased our office space from IMC, although we paid our own expenses for
telephones, printing and related matters. As of December, 1999, we terminated
our relationship with IMC.
On September 14, 1999, our Board of Directors voted to adopt and
ratify a Letter of Intent with Fairway Capital, under which Fairway Capital
agreed to provide certain services to us. These services include:
Visiting our offices and performing "due diligence" on our
corporate structure, activities, finances and business model;
Assisting us in the development of strategies for corporate
finance, business model, internet presence and public
relations;
Introducing us to representatives of National Securities in
Chicago, Illinois, with the goal of retaining National
Securities to expose us to its clients;
Introducing us to the Regional Investment Bankers Association
with the goal of increasing our exposure to the brokerage
community;
Assisting in the design of business plan documents to be
presented to potential strategic partners, brokerage firms and
investors; and
Completing the business plan documents and obtaining our
acceptance of the documents.
Under the Letter of Intent, we agreed to grant to Fairway Capital
options to purchase 500,000 shares of our common stock for the services
itemized above. Fairway Capital has completed each of the items listed above.
Fairway Capital and its associates have exercised all of the 3 million options
granted to them as follows:
On September 14, 1999, we issued a total of 500,000 shares of
common stock to Fairway Capital and the following entities, in
exchange for $25,000:
Name of Recipient No. of Shares
----------------- -------------
Fairway Capital Partners LLC 125,000
Dwain Brannon Group LLC 125,000
Bart Walters 125,000
Patrick Kephart 125,000
On November 5, 1999, we issued a total of 2,000,000 shares of
common stock to Fairway Capital and the following entities, in
exchange for $100,000:
Name of Recipient No. of Shares
----------------- -------------
GJM Trading Partners, Ltd. 800,000
Growth Ventures, Inc. 400,000
Fairway Capital Partners LLC 300,000
Capital Investment Partners #1 SA 250,000
Noziroh, Ltd. 250,000
On February 17, 2000, we issued 500,000 shares of common stock
to Fairway Capital and the following entities, in exchange for
$25,000:
Name of Recipient No. of Shares
----------------- -------------
Christian Baddour 200,000
Jeff Parsons 50,000
Noziroh, Ltd. 125,000
Capital Investment Partners 125,000
Upon granting the 3,000,000 options on September 14, 1999, we
recorded a prepaid cost of capital of $1,725,000, based on the market price
per share of $0.625 on that date, less the option price of $0.05 per share.
We are charging this prepaid cost of capital to paid in capital ratably as we
receive the capital raised from sources that Fairway Capital has introduced.
The Letter of Intent provides for Fairway Capital to have
"piggyback" registration rights in connection with any future registrations of
our securities. On April 27, 2000, which is subsequent to the period covered
by this Report, we filed with the Securities and Exchange Commission a
registration statement on Form SB-2 with respect to the registration of
7,326,000 shares of our common stock, which includes these securities.
In addition, the Letter of Intent provided for Fairway Capital to
introduce us to leaders in the internet industry to assist us in building an
advisory board, and to introduce us to at least three people who would be
qualified to serve on the advisory board. We agreed to grant Fairway Capital
options to purchase 600,000 shares of our common stock for each of these
services, for a total of 1,200,000 shares. These services have been rendered
and on February 17, 2000, we issued all shares for these services to Fairway
Capital.
Fairway Capital also has an option under the Letter of Intent to
appoint three of five members of our Board of Directors and to have its
representatives appointed as executive officers of World Internetworks.
Fairway Capital has not yet exercised either option.
The Letter of Intent also provides for the parties to execute a
three-year consulting agreement at fees to be set in that agreement. The
parties entered into a Consulting Agreement on August 16, 1999. The
Consulting Agreement provides for Fairway Capital to render non-exclusive
management, consulting and financial services, including advice on corporate
acquisitions and related matters. In exchange, we agreed to pay Fairway
Capital $5,000 per month for the first three months of the Consulting
Agreement, $10,000 per month for the following three months, and $15,000 for
each month after that. The Consulting Agreement will expire on August 1,
2002.
On February 4, 2000, World Internetworks and Fairway Capital agreed
to modify the agreement. As modified, we will pay Fairway Capital $7,500 per
month, beginning in March 2000, with Fairway Capital, at its option, to
receive an additional $7,500 worth of "unregistered" and "restricted" common
stock priced at the average closing price of such stock over the last five
trading days of each month. The modifications are effective for payments
beginning in March, 2000.
Business.
---------
World Internetworks is a full-service web services provider that
focuses on small and home-based businesses. For a monthly membership fee of
$39.95, we provide an internet package that includes web site design and
hosting, unlimited free e-mail and internet training. For no additional
charge, our members are able to list their web sites in our Main Street Plaza
online shopping mall.
Principal Products and Services.
--------------------------------
World Internetworks is a full-service internet services provider.
Our principal business is to provide web site design, hosting and access to
our "Main Street Plaza" shopping mall for small and home-based businesses that
want to take advantage of the recent trend toward e-commerce. For a monthly
membership fee of $39.95, our members have access to our web design software,
which allows even non-computer experts to quickly and easily build their own
web sites. Using our software, the typical user can have a fully-functional
web site in a few hours without having to learn any programming language. Our
web site features include:
50 megabytes of web space;
Internet access through Alta Vista Company's Micro Portal;
Personal CGI and log directories;
Microsoft front page extensions;
Unlimited free e-mail;
Domain name hosting at no extra monthly cost; and
Discount web master services to help with web site development.
In addition to our web site hosting services, our $39.95 monthly
membership fee gives our members access to our Main Street Plaza online
shopping mall. The Main Street Plaza, which became fully operational in
October, 1999, currently consists of approximately 340 merchants that
collectively sell approximately 2 million products.
Our online mall includes the web sites of such large, dominant
retailers as Office Max; Toys R U; Dell Computer; LL Bean and Digital River,
alongside the sites of our own members. We believe that the aggregation of
many large and small retailers' web sites into one large online "mall"
provides much greater visibility to our members, whose web sites may never
receive enough "hits" to justify the sites' existence if they stood on their
own.
On October 20, 1999, we entered into a FreeAccess Software License
Agreement with Alta Vista Company. Under the Agreement, Alta Vista licensed
to us the rights to use, distribute, market and sublicense its FreeAccess
internet access software. We also have the right to use Alta Vista's marks in
connection with the marketing and distribution of FreeAccess. The license is
non-exlusive and non-transferable.
We also intend to establish a program of ongoing internet training
and technical support that will help our members understand the internet
and learn how to profit from it as well.
Distribution Methods of the Products or Services.
-------------------------------------------------
A key measure of any web site's success is the number of users
accessing the site, or "hits," per day. A retailer's web site is only useful
as long as it is being seen by potential customers. One way to ensure this is
to obtain a listing on a "search engine," which is an online research device
that allows a user to type in certain key words and then locates web sites
that include the information that the user is seeking. For example, a holiday
shopper who is interested in finding out what new toys are popular might
access a search engine and type in the word "toys." The search engine would
then search the worldwide web for web sites that deal with toys. The method
that the search engine uses to locate these sites is called its "search
protocol."
Our web site has been designed to achieve maximum exposure to search
engine protocols. On November 4, 1999, we signed an Advertising Agreement
with Go2Net, Inc., of Seattle, Washington. Under the Advertising Agreement,
we purchased 775,000 "impressions" of banner advertising on Go2Net's
MetaCrawler search engine and the Go2Net Network, at a cost of $5,000. We
expect this advertising to increase the number of "hits" to our web site,
which we believe will help us to achieve an attractive placement with many of
the approximately 1500 search engine organizations currently serving the
internet. We believe that this placement will in turn result in a
substantially increased "hit" count to our site. These potential new visitors
represent potentially thousands of new members, many of whom will register and
begin building their sites on their first or second visit.
In March, 2000, our server received an average of approximately
18,000 hits per day. As our advertising takes effect and we obtain favorable
listings on search engines, we expect these figures to grow three-fold within
the next six months of operations.
One of the most widely used marketing methods on the internet today
is the "affiliate" method. This concept uses the premise that thousands of
"affiliates," each selling a retailers products or services, is potentially
more profitable than a single stand-alone operation. Using this concept, we
have adopted a two-tiered affiliate program that is designed to encourage our
existing members to recruit new members. Under this program, each of our
members is paid a monthly referral commission of $5 every time we receive the
monthly membership fee of a member that the first member has recruited.
Similarly, the first-line member will receive $4 per month for every third-
line member that is recruited by the members that the first-line member has
recruited. We believe that this program will motivate each of our members to
become active proponents of World Internetworks in the marketplace.
Many large retailers have also discovered the benefits of the
affiliate method. Using this method, online retailers establish "links" from
their own web sites to the web sites of other retailers. For every purchase
made as a result of this link, the first retailer receives a commission
ranging from approximately 4% to 10%. The amount of the commission typically
increases with the monthly sales volume that is derived from the first-line
web site. Each retail partner sets its own commission structure.
In order to exploit the advantages of the affiliate method, we have
become a member of the affiliate network established by LinkShare Corporation
of New York City. LinkShare manages the world's largest affiliate network,
which includes tens of thousands of affiliate sites and over 350 leading
merchants such as Office Max; Dell Computer; and 1-800-Flowers. As a result
of this arrangement, each of our members will be eligible for commissions on
all sales by member retailers that originate from the first member's site.
Most retail affiliate relationships do not rely on written
agreements between the parties, but are established through the commission-
paying retailer's web site. However, on April 28, 1999, World Internetworks
entered into a Dealer Agreement with Digital River, Inc., of Eden Prairie,
Minnesota, authorizing us to advertise Digital River's products on our web
site and to maintain a link to Digital River's own web site for a one-time fee
of $500. We will receive a commission for all sales that result from our link
to Digital River's web site. Digital River is engaged in the electronic
distribution of computer software to end users.
Status of any Publicly Announced New Product or Service.
--------------------------------------------------------
None; not applicable.
Competitive Business Conditions.
--------------------------------
The market for internet services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technological change.
World Internetworks expects competition to persist, intensify and increase in
the future. Most of our 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 we do and could decide at any time to increase
their resource commitments to our target market. In order to remain
competitive, we may from time to time make certain pricing, service technology
or marketing decisions and we can not assure you that these decisions will
lead to success. Competition of the type described above could materially
adversely affect our business, results of operations, financial condition and
prospects.
In addition, our ability to generate clients will depend
to a significant degree on the quality of our services and our reputation
among our clients and potential clients. If we lose clients to our
competitors because of dissatisfaction with our services or our reputation is
adversely affected for any other reason, our revenues will likely decrease and
our prospects could be materially adversely affected.
There are relatively low barriers to entry into the web site design
and hosting business. Because firms such as World Internetworks 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. We are likely to face additional competition from new
entrants into the market in the future. We can not assure you that existing
or future competitors will not develop or offer services that provide
significant performance, price, creative or other advantages over those
that we offer.
Sources and Availability of Raw Materials and Names of Principal
Suppliers.
----------
The internet industry is not typically dependent upon raw materials
in the sense that a manufacturer is dependent upon raw materials used in the
production of its products. Our most vital piece of equipment is a web server
that is operated by Blueberry Hill Communications, Inc., of Palm Desert,
California. See the caption "Description of Property" of this Report.
Dependence on One or a Few Major Customers.
-------------------------------------------
World Internetworks does not depend on one or a few major customers.
We currently have a membership base of approximately 600 users. Virtually any
small business that is interested in economically entering the world of e-
commerce is a potential customer.
Our inter-retailer affiliate marketing program is dependent on our
relationships with LinkShare and Commission Junction, both of whom are
affiliate managers. If these relationships were to end for any reason, our
members would not be eligible for the commissions payable under these
programs. Because the programs are an attractive part of our business plan,
we may lose some members and potential members who were drawn to us primarily
due to those programs. If enough potential members make this decision, our
operating results could suffer significantly.
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 World Internetworks with Internic.
Need for any Governmental Approval of Principal Products or
Services.
---------
We are not aware of any law or regulation that would require
government approval of any of our products or services or 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
World Internetworks is currently in compliance with all laws pertaining to use
of the internet. Nevertheless, we can not assure you that restrictive
legislation will not be enacted in the future. New regulation may require us
to expend large amounts of money to ensure compliance or may simply prohibit
us from doing certain things. In either case, our profitability may be
adversely affected.
Effect of Existing or Probable Governmental Regulations on
Business.
---------
See above.
Research and Development.
-------------------------
World Internetworks has engaged the services of four computer
engineers, two of whom are employees and two of whom work on an independent
contractor basis. These engineers perform technical tasks such as designing
our Main Street Plaza web site and adding merchants to the site. The
engineers are paid by the hour based on invoices submitted to World
Internetworks for payment. Other than these tasks, we do not expect that
research and development will be a significant part of our operations.
Costs and Effects of Compliance with Environmental Laws.
--------------------------------------------------------
Management does not believe that compliance with environmental laws
will require a significant portion of our resources.
Number of Employees.
--------------------
We have six full-time employees. We have also engaged the services
of two independent contractor computer engineers to assist with technical
aspects of our operations, as discussed under the heading "Research and
Development," above.
Forward Looking Statements.
--------------------------
The foregoing description of our 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
WORLD INTERNETWORKS DEEMS ALL FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN 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 WORLD INTERNETWORKS. 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 WORLD INTERNETWORKS. ALTHOUGH WE BELIEVE 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 US TO
ALTER OUR MARKETING, CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN
TURN AFFECT OUR 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
WORLD INTERNETWORKS OR ANY OTHER PERSON THAT OUR OBJECTIVES OR PLANS WILL BE
ACHIEVED.
Item 2. Description of Property.
--------------------------
World Internetworks does not currently own any real property. It is
currently renting office facilities from Springwater Office Suites, Inc., an
unaffiliated third party, at a monthly rate of $800. The offices are located
in Orem, Utah.
We have an account with Blueberry Hill Communications, Inc., of Palm
Desert, California, under which Blueberry Hill provides web hosting and DNS
services to us. Our web site is maintained on a Unix BSDI dedicated server
consisting of a 300 MHz Intel Pentium Pro central processing unit with MMX, a
3.2 gigabyte hard drive and 128 megabytes of random access memory. The server
is monitored 24 hours per day and has all necessary power backup systems. We
pay Blueberry Hill a fee of $975 per month for this service. We have also
executed a Reselling Partner Agreement with 4Domains.com, a division of
Blueberry Hill, which allows us to register our members' domain names. The
Reselling Partner Agreement provides for up to 50 registrations at a price of
$49 per registration.
Item 3. Legal Proceedings.
------------------
In February 1998, our wholly-owned subsidiary, World Internet
Marketplace, Inc., filed a complaint in the Fourth District Court for the
State of Utah, alleging breach of fiduciary duty, conversion, tortious
interference with economic relations and violation of the Utah Uniform Trade
Secrets Act against three former employees. The claims resulted from certain
former employees' commission practices and discussions with competitors. The
defendants filed an answer in March, 1998; no counterclaim was asserted.
In March 1998, Paulette Arnold filed a complaint against World
Internet Marketplace, Inc., in Knoxville County, Tennessee, alleging an
undetailed claim of breach of contract and seeking damages of $ 5,940.
On October 26, 1999, our wholly-owned subsidiaries, World Internet
Marketplace, Inc.; Global Media Group, Inc.; and Global Wholesale Exchange,
Inc., filed for Chapter 7 bankruptcy protection in the United States
Bankruptcy Court for the District of Utah (Salt Lake). The cases were
designated Case Nos. 99-31576; 99-31577; and 99-31578, respectively. The
pending litigation involving World Internet Marketplace, Inc., was stayed in
accordance with U. S. bankruptcy law, pending completion of its bankruptcy
case. The first meeting of creditors was held January 19, 2000. Ms. Arnold
did not file a creditor's claim at that meeting.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
There were no matters submitted to a vote of our security holders
during the fourth quarter of the fiscal year ended February 29, 2000, either
through the solicitation of proxies or otherwise.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
---------------------------------------------------------
Market Information
------------------
Our common stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc., under the symbol WINW. There is
presently no "established trading market" for our shares. The following table
shows high and low closing bid information for our common stock as quoted on
the OTC Bulletin Board for our fiscal years ended February 28, 1999, and 1998.
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>
Quarterly Period Ended High Bid Low Bid
---------------------- -------- -------
<S> <C> <C>
May 31, 1997 $3.375 $2.25
August 31, 1997 $3.50 $1.50
November 30, 1997 $2.625 $1.50
May 31, 1998 $1.375 $0.625
August 31, 1998 $1.625 $0.75
November 30, 1998* $4.375 $0.25
February 28, 1999* $3.50 $0.25
May 31, 1999* $2.3125 $0.96875
August 31, 1999* $1.625 $0.50
November 30, 1999* $0.96875 $0.50
February 29, 2000* $3.25 $0.5625
* We effected a one-for-four reverse split of our outstanding common
stock on September 4, 1998.
Shareholders
------------
As of March 24, 2000, we had approximately 488 stockholders of
record. This figure does not include beneficial owners of common stock held
in "nominee" or "street" name, as we can not accurately estimate the number of
these beneficial owners.
Dividends.
----------
World Internetworks has not declared any cash dividends with respect
to its common stock, and does not intend to declare dividends in the
foreseeable future. There are no material restrictions limiting, or that are
likely to limit, our ability to pay dividends on our common stock.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
THIS REPORT ON FORM 10-KSB CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS
ANTICIPATED BY US AND DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED BELOW IN THE
THE SECTION ENTITLED "CERTAIN FACTORS EXPECTED TO IMPACT OPERATING RESULTS."
Plan of Operation
-----------------
World Internetworks temporarily ceased business operations on
October 22, 1998. Since then, it 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 March 1, 1999, we resumed operations with a business model
based upon the premise that a "full service" web hosting company would be able
to fill a market niche. We expect our revenue opportunities to be
classified in four general areas:
Hosting fees generated from membership enrollments;
Advertising revenues received from the sale of advertised space
on our web site to outside third party organizations;
Commissions from sales of products associated with our retail
partners, including those associated with LinkShare; and
Monthly lease fees received from merchants desiring to be
included in the Wiworks Main Street Plaza.
We have established relationships with technology and retail
partners such as Alta Vista and LinkShare to facilitate the launch of our
operations. We expect to be self-funded through operations by the second
calendar quarter of 2000.
We are currently attempting to increase the number of hosted web
sites on our service. Our efforts include:
contacting all 28,000 former members of our earlier
unsuccessful service by telephone in an effort to make them
paying members of our current service;
follow-up mailings to former members who have not yet converted
to our new service. Our current plan is to mail a CD-Rom that
shows the user our web site technology and allows him or her to
launch a browser to begin building a web site;
acquiring current and accurate e-mail lists and send e-mail
advertising. We believe that recipients of these
advertisements will be good candidates for a web site because
they are already online;
buying mailing lists of small businesses and mailing
advertisements to them, with follow-up telephone calls to
recipients who have not responded; and
conducting public seminars on the use of the internet as a
business tool.
We have also retained Jordan Richard Assoc. of Salt Lake City, Utah,
to assist us with public relations matters.
We have had good initial success with our telephone marketing
campaign and have been able to hire one receptionist; two customer service
representatives; one computer programmer and a billing and accounting
employee.
Results of Operations.
----------------------
Overview
Until October 1998, we operated three wholly-owned subsidiaries: (i)
World Internet Marketplace, Inc. ("WIM"), was engaged in marketing and
distributing products and services relating to internet commerce; (ii) Global
Wholesale Exchange, Inc. ("GWE"), provided wholesale goods to consumers via
internet and fax notification; (iii) Global Media Group, Inc. ("GMG"), doing
business as the "Institute for Financial Independence" organized and sponsored
sales seminars that sold WIM and GWE products.
Business operations were not successful and in October 1998 the
operations of all three of our subsidiaries were discontinued. In October
1999, each subsidiary filed a Chapter 7 bankruptcy petition in the United
States Bankruptcy Court for the District of Utah (the "Court") and, also in
1999, the Utah Department of Commerce dissolved each of these subsidiaries.
Consequently, we re-entered the development stage.
Our revenues prior to discontinuing the operations of the three
subsidiaries and entering into the development stage were derived
substantially 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 our internet-based virtual "mall" or
"department store". Orders for merchandise on our virtual "mall" were
generally fulfilled by shipment direct from the manufacturer or wholesaler to
the customer.
In February 1999 we began to restructure our business and operating
plan toward the following: (i) providing web site design services and building
software that will allow small business and home-based entrepreneurs to
establish an internet presence at a lower price than our competitors can
provide; (ii) establish an internet training and technical support program
that will help our members understand the internet and learn how to profit
from it; (iii) create strategic alliances with companies such as Dell
Computer, Office Max, Digital River and Walt Disney, through which our members
will be able to offer these companies' products on member web sites and
receive a commission ranging from approximately 4% to 10% on each sale,
depending on the terms and conditions for each company; (iv) provide our
members with access to our "Main Street Plaza" online shopping mall, which
will allow them to sell their own products over the internet; (v) provide our
members with unlimited internet access through our relationship with Alta
Vista, one of the top search engines in the country. We expect we will
generate revenues under this business plan from monthly web site hosting fees,
web site design and engineering fees, resale of domain names, merchant account
set up and monthly gateway fees, web site and search site marketing fees and
commissions on retail products sold through our Main Street Plaza.
We resumed operations in March 1999 with a new management team and
numerous strategic alliances in place for the purpose of providing state-of-
the-art web site design, technical support, online training and interactive e-
commerce web sites to individuals and small businesses. Revenues generated in
the fiscal year ended February 29, 2000 under our new business plan totaled
$82,675, primarily from web site hosting fees.
Management believes this new business plan will provide the revenues
and margins necessary to result in significant recurring revenue and
profitable growth through hosting, design and engineering fees as well as
commissions on product sales. Management also expects to obtain additional
equity financing through the exercise of outstanding common stock warrants in
order to meet its cash flow needs through fiscal year 2001.
From time to time, we 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 relating 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 our forward-looking statements fall within such safe harbor, we
note 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 our independent distributors, the
uncertain future of the Internet and E-Commerce, capacity constraints on our
computer network and related risks of system failure, and existing and
potential governmental regulation affecting the Internet and the network
marketing industry.
Results of Operations.
----------------------
Year ended February 29, 2000 compared with year ended February 28, 1999.
In October 1998, World Internetworks discontinued its previous
business of developing web sites, related Internet training and merchandising
through Internet mail. We have since entered into a "development stage" in
which we are developing marketing systems and distribution channels for
products and services relating to E-Commerce, together with the design and
hosting of web sites for individuals and small businesses involved in E-
Commerce. Consequently all operating results prior to the discontinuance of
the previous operations have been classified singularly as losses from
discontinued operations. Current operations are, therefore, not comparable to
operations for the year ended February 28, 1999.
We recorded revenues from the beginning of our new business plan of
$82,675 for the year ended February 29, 2000. Related costs of products and
services sold totaled $44,616 in the same period.
Selling, general and administrative expenses totaled $945,633 for
the year ended February 29, 2000, and depreciation and amortization totaled
$1,858 for the same period. Management and consulting fees, salaries, investor
relations and other professional fees included in selling, general and
administrative expenses relate to the development and implementation of our
new business plan.
World Internetworks incurred losses from operations of $909,432 for
the year ended February 29, 2000. The loss from operations is due primarily to
Management and consulting fees, salaries, investor relations and other
professional fees relating to the development and implementation of our new
business plan. World Internetworks anticipates that its investment in the
development and implementation of its ongoing business plan will continue but
at reduced levels, and that selling and general operating costs will increase
for the fiscal year ending February 28, 2001, assuming the availability of
working capital. We reported a net loss of $(741,366) for the year ended
February 29, 2000.
Fiscal year ended February 28, 1999 compared with fiscal year ended February
28, 1998.
As a result of the closure of operations in October 1998, the
comparison of the year over year results of operations was significant.
Revenues declined from $7,762,125 for the February 28, 1998 year to $1,988,774
in the year ended February 28, 1999. Cost of products sold and operating
expenses decreased from $8,443,055 to $4,438,902 in the same periods. Net
losses from discontinued operations were ($2,450,128) and ($680,930),
respectively, in fiscal 1999 and 1998. World Internetworks recommenced its
development stage in October 1998.
Liquidity and Capital Resources.
Our cash increased from $ 0 at the fiscal year ended February 28,
1999, to $88,571 at February 29, 2000. Accounts payable increased from $0 to
$29,206 during the fiscal year ended February 29, 2000, and total current
liabilities decreased from $2,627,271 to $2,533,897 in the same period.
In the fiscal year ended February 29, 2000, the Company reached an
agreement with a creditor holding promissary notes payable by the Company in
the amount of $160,000 plus accrued interest payable related to the notes in
the amount of $8,066. Under the agreement the creditor agreed to release the
Company from any and all obligations to repay the notes and related accrued
interest. The promissary notes and related interest payable had been included
in the reserve for discontinued operations in previous consolidated balance
sheets of the Company. Additionally, in November 1999, the Company negotiated
reductions of $3,065 in amounts due various trade creditors.
On October 26, 1999, each of the Company's three subsidiaries, WIM,
GWE, and GMG, filed petitions under Chapter 7 of the United States Bankruptcy
Code for protection from creditors. The petitions require creditors to halt
any collection efforts of amounts owed them by the Company's subsidiaries
until a meeting of creditors and a hearing is conducted by the Court. The
Company's subsidiaries have no assets with which to pay their obligations to
creditors. The meeting of creditors and hearing before the Court was held on
January 19, 2000. The Court will take several months to determine the
disposition of creditors claims filed under the petitions. The amounts
recorded as owed to creditors are classified as "reserve for discontinued
operations" in the Company's consolidated balance sheets and totaled
$2,459,205 at February 29, 2000. The Company expects the entire balance of
the reserve will be absolved from payment when the Court files its report on
the bankruptcy proceedings.
During the year ended February 29, 2000, World Internetworks issued
6,306,500 shares of its common stock as follows:
FOR CASH
In March 1999, we began a private placement offering of 1,250,000
units ("Units") consisting of one share of "restricted" common stock of the
Company (restricted under Rule 144) and one "unregistered" and "restricted"
common stock purchase warrant (the "Warrant"), granting the warrant holder the
right to purchase an additional share of our common stock at a price of $2.00
per share. The Warrants expire two years from the completion of the offering
and are callable at a price of $0.01 per share at any time after ninety days
from the effective date of any registration statement, upon 30 days written
notice. We filed an SB-2 registration statement in April 2000 to register the
common stock issued and issuable under the private placement offering. The
registration statement is being reviewed by the Securities and Exchange
Commission and various state securities regulating departments and is not yet
effective. Shares issued and amounts received under this private placement
offering during the year ended February 29, 2000 are summarized in the
following table:
Common
Shares Warrants Consideration
Date Issued Issued Received
---- ------ ------ --------
March, 1999 100,000 100,000 $ 40,000
July, 1999 50,000 50,000 20,000
October, 1999 100,000 100,000 40,000
November, 1999 25,000 25,000 10,000
January, 2000 80,000 80,000 32,000
February, 2000 375,000 375,000 150,000
Totals 730,000 730,000 $ 292,000
Subsequent to February 29, 2000 an additional 900,000 "units" were
issued for cash in the amount of $360,000 under our private placement
offering, bringing the total "units" placed under the offering to 1,630,000.
We have now closed the offering.
In January 2000, we issued 1,700,000 shares of common stock in
exchange for cash of $62,500 and services. The 1,700,000 shares were issued as
the final installment of a total of 4,200,000 shares issued under a definitive
agreement with Fairway Capital Partners, LLC.("Fairway"), in exchange for a
total of $187,500 in cash plus services related to the introduction of sources
of capital to World Internetworks by Fairway. Previously, under the Fairway
agreement, we issued 2,000,000 shares of common stock in November 1999 and
500,000 shares in October 1999, in exchange for cash of $100,000 and $25,000
respectively. We recorded a cost of capital totaling $2,437,100 relating to
the services provided by Fairway and the issuance of the 4,200,000 shares at a
price below the market price of our common shares. Of the $2,437,100 cost,
$1,366,482 has been reported as a deferred offering cost in the accompanying
balance sheets which amount relates to the portion of the capital received
under the private placement offering after February 29, 2000. .
FOR SERVICES
In February 2000, World Internetworks issued 36,000 shares of common
stock restricted under Rule 144 in payment of accounts payable totaling
$36,000. An additional 20,000 shares of common stock restricted under Rule 144
were issued to an unrelated individual in exchange for professional services
provided to us. We recorded an expense for professional fees totaling $20,000
relating to the shares issued for services.
In November 1999, we issued 247,500 shares of common stock under an
S-8 Registration Statement to several individuals in payment of accounts
payable totaling $99,000. Included in the total were 75,000 shares issued to
Steven K. Hansen, President, CEO and Chairman of the Board of Directors of
World Internetworks, for consulting services previously provided.
Additionally, 50,000 shares of the above total were issued to Leonard W.
Burningham, Esq., who is Counsel to World Internetworks for securities
matters, for legal and professional services previously provided. The
remaining 122,000 shares were issued to unrelated parties for legal and
professional services previously provided.
Additionally, in November 1999, World Internetworks issued 25,000
shares of common stock restricted under Rule 144 to Leonard W. Burningham,
Esq., who is Counsel to World Internetworks for securities matters. We
recorded legal and professional fees totaling $10,000 relating to the shares
issued.
In March 1999, we issued 1,148,000 shares of common stock restricted
under Rule 144 to several individuals in exchange for services provided to us.
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. We recorded management, legal and
professional fees totaling $287,000 relating to the shares issued.
SHARES CANCELED
In February 2000, World Internetworks canceled 75,000 shares of
common stock previously held by a former officer. We did not pay any
consideration for the shares canceled.
We reported a gain from forgiveness of debt of $168,066 for the year
ended February 29, 2000, and a net loss of $(741,366) for the same period.
Management expects to obtain additional equity financing through the
exercise of outstanding common stock warrants in order to meet its cash flow
needs through fiscal year 2001.
We will require substantial additional cash and working capital in
order to continue the development and implementation of our business plan.
Certain Factors Expected to Impact Operating Results
----------------------------------------------------
Many factors outside our control may significantly affect
our operating results in any future fiscal quarter. For example, our
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 our independent direct distributors, the amount and timing of
capital expenditures and other costs associated with development and expansion
of our Internet site and related products and services, the introduction and
success of competitive Internet sites, price competition in the industry,
technical difficulties associated with our computer network, and general
economic conditions and economic conditions specific to Internet commerce.
Due to these and other factors, it is probable that our operating results will
fall below expectations World Internetworks, its shareholders or market
analysts in some future fiscal quarter. Important risk factors and
uncertainties that World Internetworks expects will impact its operating
results include the following:
WE HAVE A HISTORY OF UNSUCCESSFUL OPERATIONS
World Internetworks has previously operated through its wholly-owned
subsidiaries, World Internet Marketplace, Inc., a Utah corporation; Global
Wholesale Exchange, Inc., a Utah corporation; and Global Media Group, Inc., a
Utah corporation. These operations were unsuccessful and World Internetworks
and its subsidiaries ceased operations in October, 1998. On October 26, 1999,
each of our subsidiaries filed a Chapter 7 bankruptcy case in the United
States Bankruptcy Court for the District of Utah. In 1999, the Utah
Department of Commerce also dissolved each of these subsidiaries. We can not
assure you that our future operations will have any more success than our
previous operations.
WE MAY HAVE DIFFICULTY OBTAINING FUNDING IN THE FUTURE
We currently have limited operating capital and cash resources. We
may need substantial funding in order to meet the expenses of our anticipated
expansion, although management believes that proceeds from the recent issuance
of shares of our common stock will fund our planned operations in the near
term. Our ability to raise funding may be severely limited due to our
historical lack of successful operations, our limited assets and the limited
public market for our common stock.
ANY FUTURE GOVERNMENTAL REGULATION OF THE INTERNET MAY ADVERSELY AFFECT OUR
OPERATIONS
At present, management 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 World Internetworks is
currently in compliance with all laws pertaining to use of the internet.
Nevertheless, we can not assure you that restrictive legislation will not be
enacted in the future. New regulation may require us to expend large amounts
of money to ensure compliance or may simply prohibit us from doing certain
things. In either case, our profitability may be adversely affected.
UNCERTAINTY ABOUT THE FUTURE OF THE INTERNET MAY LEAD TO UNCERTAINTY ABOUT OUR
OPERATIONS
Because the internet is such a new commercial medium, critical
issues as to its viability remain unresolved and may limit the growth of e-
commerce. These issues include security, reliability, cost, ease of use and
access, and quality of service. Although we believe that our internet-related
products and services are commercially viable and that the number of internet
users will continue to grow, we can not assure you that commerce and
communication over the internet will become widespread, or that our products
or services will become widely recognized or used.
OUR OPERATIONS WILL DEPEND ON ADEQUATE INTERNET INFRASTRUCTURE
Marketing and distribution of our products and services will
require adequate infrastructure for providing internet access and carrying
growing internet traffic. The internet may prove not 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, we can not predict whether the internet will prove to be a viable
commercial market. If it does not, our business operations and financial
condition could be negatively affected.
CAPACITY CONSTRAINTS MAY LIMIT OUR ABILITY TO MAKE SALES
Our business operations depend, in large part, on a high volume of
traffic on our internet site. Accordingly, the performance, reliability and
availability of our site, computer network infrastructure and internet
commerce processing systems are critical to our ability to attract and retain
new customers. Any systems interruptions that make our site unavailable or
limit our ability to process orders could reduce the volume of goods that we
sell. We have experienced periodic computer system interruptions in the past,
and anticipate that such interruptions will occur from time to time in the
future. Continued growth of our network of independent direct
distributors or other customers will require us to expand and
upgrade our internet technology, including our computer network and
internet commerce processing systems. We can not assure you that we will
accurately predict the need for such expansion or upgrade, or that we will be
able to make any such expansion or upgrade in a timely manner.
A COMPUTER SYSTEM FAILURE WOULD HURT OUR OPERATIONS
Our ability to receive and process orders for products and services
depends on efficient, uninterrupted operation of our computer and
communications equipment. Substantially all of our computer and
communications equipment is located at our headquarters in a leased facility
in Orem, Utah and at a facility in Palm Desert, California. Our computer and
communications equipment is vulnerable to flood, earthquake, power loss,
telecommunications failure, and other similar events. We do not have
redundant systems or a contingent disaster recovery plan and do not carry
adequate business interruption insurance to cover potential losses that may
occur from such an event. Our computer equipment is also vulnerable to
computer viruses, break-ins and similar events that could lead to
interruptions, loss of data or malfunction. Any such event would limit our
revenues during the "down time" and may require substantial expense to repair.
THE POTENTIAL SECURITY RISKS OF ONLINE COMMERCE MAY MAKE OUR PRODUCTS AND
SERVICES LESS DESIRABLE
One challenge to the success of online commerce is the secure
transmission of confidential information such as customer credit card numbers.
We rely on encryption devices supplied by third parties to provide this
security. However, we can not assure you that computer capabilities, new
discoveries in encryption technology or other circumstances will not result in
a breach of the security devices that we employ to protect confidential data.
If such a breach were to occur, our reputation, business operations and
financial condition could all be negatively affected. These concerns may
require us to spend additional resources to protect against the possibility of
such breaches. In addition, consumer concerns about internet security may
make our products and services less attractive.
AN AGREEMENT WITH A THIRD PARTY MAY RESULT IN A CHANGE IN CONTROL
Our Board of Directors has adopted an agreement with Fairway Capital
Partners, LLC. Among other things, the agreement gives Fairway Capital the
option to appoint its own representatives to fill three of five seats on our
Board of Directors and to appoint its representatives as executive officers.
If Fairway Capital exercises this option, its representatives will have a
majority of our Board of Directors and will be able to dictate our corporate
policy and business direction. We can not assure you that these decisions
will be consistent with our current direction or that they will be positive
for us and our stockholders. Fairway Capital has not yet exercised this
option. For a discussion of the Fairway Capital agreement, see the heading
"Organization and History" under the caption "Description of Business."
THE LIMITED MARKET FOR OUR SHARES WILL MAKE THEIR PRICE MORE VOLATILE
The market for our common stock is very limited and we can not
assure you that a larger market will ever be developed or maintained. The
market for our common stock is likely to be volatile and many factors may
affect the market. These include, for example:
Our success, or lack of success, in marketing our products and
services;
Competition;
Governmental regulations; and
Fluctuations in operating results.
The stock markets generally have experienced, and will probably
continue to experience, extreme price and volume fluctuations which have
affected the market price of the shares of many small capital companies.
These fluctuations have often been unrelated to the operating results of such
companies. Such broad market fluctuations, as well as general economic and
political conditions, may decrease the market price of our common stock in any
market that develops.
THE SUCCESS OF OUR OPERATIONS WILL DEPEND LARGELY ON STEVEN K. HANSEN
Our success will depend largely on the efforts of our President,
Steven K. Hansen. We do not have a "key person" life insurance policy on Mr.
Hansen. The loss of Mr. Hansen could have devastating effect on our business,
operating results and financial condition. Our future growth and success also
depends on our 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 severely limit our ability to grow.
THE HIGHLY COMPETITIVE NATURE OF THE INTERNET INDUSTRY MAY LIMIT OUR CHANCES
OF SUCCESS
The market for internet services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technological change.
World Internetworks expects competition to persist, intensify and increase in
the future. Most of our 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 we do and could decide at any time to increase
their resource commitments to our target market. In order to remain
competitive, we may from time to time make certain pricing, service technology
or marketing decisions and we can not assure you that these decisions will
lead to success. Competition of the type described above could materially
adversely affect our business, results of operations, financial condition and
prospects.
In addition, our ability to generate clients will depend
to a significant degree on the quality of our services and our reputation
among our clients and potential clients. If we lose clients to our
competitors because of dissatisfaction with our services or our reputation is
adversely affected for any other reason, our revenues will likely decrease and
our prospects could be materially adversely affected.
THE WEB SITE DESIGN AND HOSTING INDUSTRY HAS LOW BARRIERS TO ENTRY
There are relatively low barriers to entry into the web site design
and hosting business. Because firms such as World Internetworks 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. We are likely to face additional competition from new
entrants into the market in the future. We can not assure you that existing
or future competitors will not develop or offer services that provide
significant performance, price, creative or other advantages over those
that we offer.
AUDITOR'S "GOING CONCERN" OPINION
The Independent Auditor's Report for our audited consolidated
financial statements as of February 29, 2000, expresses "substantial doubt
about [our] ability to continue as a going concern," due to our recurring
losses from operations and stockholders' equity (deficit).
Item 7. Financial Statements.
---------------------
Consolidated Financial Statements dated February 29, 2000
Independent Auditor's Report
Consolidated Balance Sheet for February 29, 2000
Consolidated Statements of Operations for the years ended
February 29, 2000 and February 28, 1999, and from inception through
February 29, 2000
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows for the years ended
February 29, 2000 and February 28, 1999, and from inception through
February 29, 2000
Notes to the Consolidated Financial Statements
<PAGE>
WORLD INTERNETWORKS, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Financial Statements
February 29, 2000
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity (Deficit). . . . . . . . 6
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . 8
Notes to the Consolidated Financial Statements . . . . . . . . . . . . 10
<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 29, 2000 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years ended February 29,
2000 and February 28, 1999 and from inception of the development stage on
October 22, 1998 through February 29, 2000. 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 audits.
We conducted our audits 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 audits provide 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 29, 2000, and the consolidated results of their operations and
their cash flows for the years ended February 29, 2000 and February 28, 1999
and from inception of the development stage on October 22, 1998 through
February 29, 2000 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.
HJ & Associates, LLC
Salt Lake City, Utah
May 25, 2000
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
</TABLE>
<TABLE>
<CAPTION>
February 29,
2000
<S> <C>
CURRENT ASSETS
Cash $ 88,571
Accounts receivable 9,929
Prepaid expenses 12,200
Total Current Assets 110,700
FIXED ASSETS (Note 1)
Computers and equipment 16,283
Furniture and fixtures 2,140
Accumulated depreciation (10,403)
Net Fixed Assets 8,020
TOTAL ASSETS $ 118,710
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 29,206
Accrued expenses 15,486
Note payable, related party 30,000
Reserve for discontinued operations (Note 9) 2,459,205
Total Current Liabilities 2,533,897
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value; 500,000,000
shares authorized;
8,056,607 shares issued and outstanding 8,057
Additional paid-in capital 3,686,994
Treasury stock at cost (1,020 shares) (3,186)
Stock subscription receivable (80,000)
Deferred offering costs (1,366,482)
Deficit accumulated prior to the development stage (3,979,694)
Accumulated deficit from the inception of the
development stage on October 22, 1998 (680,866)
Total Stockholders' Equity (Deficit) (2,415,177)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 118,710
</TABLE>
<PAGE>
WORLD INTERNET WORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
From
Inception of the
Development
Stage on
October 22,
For the Years Ended 1998 Through
February 29, February 28, February 29,
2000 1999 2000
<S> <C> <C> <C>
REVENUES
Sales $ 82,675 $ - $ 82,675
Costs of goods sold 44,616 - 44,616
Gross Profit 38,059 - 38,059
OPERATING EXPENSES - - -
General and administrative expenses 885,133 - 885,133
Depreciation 1,858 - 1,858
Total Operating Expenses 886,991 - 886,991
LOSS FROM OPERATIONS BEFORE
EXTRAORDINARY GAIN AND LOSS
FROM DISCOUNTED OPERATIONS (848,932) - (848,932)
EXTRAORDINARY ITEM
Gain on extinguishment of debt 168,066 - 168,066
Total Extraordinary Gain 168,066 - 168,066
LOSS FROM DISCONTINUED
OPERATIONS (Note 8) - (2,450,128) -
LOSS BEFORE INCOME TAXES (680,866) (2,450,128) (680,866)
INCOME TAX EXPENSE - - -
NET LOSS $ (680,866) $(2,450,128) $ (680,866)
BASIC LOSS PER SHARE
Loss from operations $ (0.21) $ -
Gain on extinguishment of debt 0.04 -
Gain (loss) from discontinued
operations - (0.74)
BASIC (LOSS) PER SHARE $ (0.17) $ (0.74)
</TABLE>
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Additional
Common Stock Treasury Paid-in
Shares Amount Stock Capitol
<S> <C> <C> <C> <C>
Balance, February 28, 1998
(inception of development
stage) 3,325,239 $ 3,325 $ (3,186) $1,098,294
Issuance of common stock from
the exercise of options at
$1.47 per share 147,125 147 - 216,603
Issuance of common stock
for services at $1.46 per
share 27,650 28 - 40,272
Cancellation of common stock (1,750,000) (1,750) - 1,750
Payments received on
employee notes receivable - - - -
Adjustment for fractional
shares 93 - - -
Net loss for the year ended
February 28, 1999 - - - -
Balance, February 28, 1999 1,750,107 1,750 (3,186) 1,356,919
Common stock issued for
services at $0.25 per share 1,148,000 1,148 - 285,852
Common stock issued for cash
at $0.40 per share 505,000 505 - 201,495
Common stock issued for
subscription receivable at
$0.40 per share 200,000 200 - 79,800
Common stock issued for
exercise of options at
$0.05 per share 2,500,000 2,500 - 122,500
Common stock issued for
services at $0.40 per share 272,500 273 - 108,727
Options issued below market
value at $0.40 to $0.75
per share - - - 49,500
Warrants issued below market
value at $0.00 per share - - - 7,500
Common stock issued for
services at $1.00 per share 20,000 20 - 19,980
Common stock issued for cash
at $1.00 per share 36,000 36 - 35,964
Common stock issued for
exercise of options at
$0.04 per share 1,700,000 1,700 - 60,800
Balance forward 8,131,607 $ 8,132 $ (3,186) $2,329,037
Employee Stock
Notes Subscriptions Accumulated
Receivable Receivable Deficit
<S> <C> <C> <C>
Balance, February 28, 1998
(inception of development
stage) $ (78,897) $ - $ (1,529,566)
Issuance of common stock from
the exercise of options at
$1.47 per share - - -
Issuance of common stock
for services at $1.46 per
share - - -
Cancellation of common stock - - -
Payments received on
employee notes receivable 78,897 - -
Adjustment for fractional
shares - - -
Net loss for the year ended
February 28, 1999 - - (2,450,128)
Balance, February 28, 1999 - - (3,979,694)
Common stock issued for
services at $0.25 per share - - -
Common stock issued for cash
at $0.40 per share - - -
Common stock issued for
subscription receivable at
$0.40 per share - (80,000) -
Common stock issued for
exercise of options at
$0.05 per share - - -
Common stock issued for
services at $0.40 per share - - -
Options issued below market
value at $0.40 to $0.75
per share - - -
Warrants issued below market
value at $0.00 per share - - -
Common stock issued for
services at $1.00 per share - - -
Common stock issued for cash
at $1.00 per share - - -
Common stock issued for
exercise of options at
$0.04 per share - - -
Balance forward $ - $ (80,000)$ (3,979,694)
</TABLE>
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
<TABLE>
<CAPTION>
Additional
Common Stock Treasury Paid-in
Shares Amount Stock Capitol
<S> <C> <C> <C> <C>
Balance forward 8,131,607 $ 8,132 $ (3,186)$2,329,037
$ - $ (80,000) $(3,979,694)
Options issued below market
value at $0.05 per share - - - 1,725,000
- - -
Options issued below market
value at $0.04 per share - - - 712,100
- - -
Cancellation of common stock (75,000) (75) - 75
- - -
Stock offering costs - - - (1,079,218)
- - -
Net loss for the year ended
February 29, 2000 - - - -
- - (680,866)
Balance, February 29, 2000 8,056,607 $ 8,057 $ (3,186)$3,686,994
$ - $ (80,000) $(4,660,560)
Employee Stock
Notes Subscriptions Accumulated
Receivable Receivable Deficit
<S> <C> <C> <C>
Balance forward $ - $ (80,000)$ (3,979,694)
Options issued below market
value at $0.05 per share - - -
Options issued below market
value at $0.04 per share - - -
Cancellation of common stock - - -
Stock offering costs - - -
Net loss for the year ended
February 29, 2000 - - (680,866)
Balance, February 29, 2000 $ - $ (80,000)$ (4,660,560)
</TABLE>
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception of the
Development
Stage on
October 22,
For the Years Ended 1998 Through
February 29, February 28, February 29,
2000 1999 2000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (680,866) $(2,450,128) $ (680,866)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,858 103,314 1,858
Common stock issued for services 416,000 40,300 416,000
Allowance for doubtful accounts - 250,000 -
Options and warrants issued below
market price 57,000 - 57,000
Gain on forgiveness of debt (168,066) - (168,066)
Write-off other assets - 103,811 -
Loss on disposal of property and
equipment - 400,125 -
Changes in assets and liabilities:
(Increase) decrease in inventory - 103,955 -
(Increase) decrease in accounts
receivable (9,929) ( 26,147) (9,929)
(Increase) decrease in prepaid
expenses (12,200) - (12,200)
Increase (decrease) in deferred
revenue - 169,423 -
Increase (decrease) in accounts
payable 56,606 512,847 56,606
Increase (decrease) in accrued
expenses 15,486 190,272 15,486
Net Cash Used by Operating
Activities (324,111) ( 602,228) (324,111)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (6,818) - (6,818)
Net Cash Used by Investing Activities (6,818) - (6,818)
CASH FLOWS FROM FINANCING ACTIVITIES
(Increase) decrease in employee notes
receivable - 78,897 -
Proceeds from related party note
payable 30,000 230,000 30,000
Principal payments on related party
note payable - (33,128) -
Principal payments on capital leases - (16,320) -
Purchase of treasury stock - - -
Issuance of common stock 389,500 216,750 389,500
Net Cash Provided by Financing
Activities $ 419,500 $ 476,199 $ 419,500
</TABLE>
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception of the
Development
Stage on
October 22,
For the Years Ended 1998 Through
February 29, February 28, February 29,
2000 1999 2000
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH $ 88,571 $ (126,029) $ 88,571
CASH AT BEGINNING OF YEAR - 126,029 -
CASH AT END OF YEAR $ 88,571 $ - $ 88,571
CASH PAID FOR:
Interest expense $ - $ 2,013 $ -
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Property and equipment used as
payment of accrued wages $ - $ 13,205 $ -
Common stock issued for services $ 416,000 $ - $ 416,000
Common stock issued for accounts
payable $ 36,000 $ - $ 36,000
Common stock issued for subscription
receivable $ 80,000 $ - $ 80,000
Options and warrants issued below
market value $ 57,000 $ - $ 57,000
Options issued below market value
for stock offering costs $ 1,070,618 $ - $ 1,070,618
Options issued below market value
for deferred stock offering costs $ 1,366,482 $ - $ 1,366,482
</TABLE>
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 1 - ORGANIZATION, HISTORY AND NATURE OF OPERATIONS
a. Organization and History
World Internetworks, Inc., was incorporated on March 17, 1986, under the name
Impressive Ventures, Ltd. ("Impressive Ventures") as a Nevada corporation.
Impressive Ventures did not conduct any business operations until August 27,
1996, when it's stockholders approved an agreement under which the
stockholders of Wealth International, Inc., a Utah corporation ("Wealth
Utah"), obtained a controlling interest in Impressive Ventures. This
transaction was treated as an acquisition of Impressive Ventures by Wealth
Utah and as a recapitalization of Wealth Utah. Wealth Utah was established in
November 1995 as a partnership and was incorporated in Utah in July 1996.
Under the agreement, the stockholders of Wealth Utah exchanged all of their
shares in Wealth Utah for 2,752,245 common shares of Impressive Ventures,
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.
After the transaction was completed, Impressive Ventures 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. ("WIM"). Wealth Nevada changed its name to World
InterNetWorks, Inc., (the "Company") in January 1998 to more accurately
reflect the nature of the Company's business. The Company formed Global
Wholesale Exchange, Inc. ("GWE") and Global Media Group, Inc. ("GMG"), both
Utah corporations, in June 1998 as additional operating subsidiaries.
b. Nature of Operations
Until October 1998, the Company operated three wholly-owned subsidiaries: (i)
WIM was engaged in marketing and distributing products and services relating
to internet commerce; (ii) GWE provided wholesale goods to consumers via
internet and fax notification; (iii) GMG, doing business as the "Institute for
Financial Independence" organized and sponsored sales seminars that sold WIM
and GWE products.
Business operations were not successful and in October 1998 the operations of
all three of the Company's subsidiaries were discontinued. In October 1999,
each subsidiary filed a Chapter 7 bankruptcy petition in the United States
Bankruptcy Court for the District of Utah (the "Court") and, also in 1999, the
Utah Department of Commerce dissolved each of these subsidiaries (see Note
4). Consequently, the Company re-entered the development stage.
The Company's revenues prior to discontinuing the operations of the three
subsidiaries and entering into the development stage were derived
substantially 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.
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 1 - ORGANIZATION AND HISTORY (continued)
b. Nature of Operations (continued)
In March 1999 the Company began to restructure it's business and operating
plan toward the following: (i) providing web site design services and building
software that will allow small business and home-based entrepreneurs to
establish an internet presence at a lower price than our competitors can
provide; (ii) establish an internet training and technical support program
that will help our members understand the internet and learn how to profit
from it; (iii) create strategic alliances with companies such as Dell
Computer, Office Max, Digital River and Walt Disney, through which our members
will be able to offer these companies' products on member web sites and
receive a commission ranging from approximately 4% to10% on each sale,
depending on the terms and conditions for each company; (iv) provide our
members with access to our "Main Street Plaza" online shopping mall, which
will allow them to sell their own products over the internet; (v) provide our
members with unlimited internet access through our relationship with Alta
Vista, one of the top search engines in the country. The Company expects it
will generate revenues under this business plan from monthly web site hosting
fees, web site design and engineering fees, resale of domain names, merchant
account set up and monthly gateway fees, web site and search site marketing
fees and commissions on retail products sold through the Company's Main Street
Plaza.
Revenues generated in the fiscal year ended February 29, 2000 under the
Company's new business plan totaled $82,675, primarily from web site hosting
fees.
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method and estimates
The Company's consolidated financial statements are prepared under generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that effect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d. Revenue Recognition
The Company generally receives the sales price of its web hosting fees and
services in cash at the beginning of the month of service or at the time
orders are made. Sales are generally recognized at the time the web site
hosting is provided or when the service is completed or the product is
shipped.
e. Income Taxes
The Company accounts for income taxes using an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax laws or rates. The effect of changes in
tax laws or rates will be recognized in years in which they occur.
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 has been restated to reflect this
stock split for all periods presented.
g. 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.
h. Development costs
The costs of developing the Company's new business plan, including new
web-site design, engineering and marketing research and analysis are charged
to general and administrative expense as incurred.
i. Advertising
The Company follows the policy of charging the costs of advertising to expense
as incurred.
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j. Basic and Fully Diluted Net Income (Loss) Per Common Share
Basic and diluted net income or (loss) per common share are calculated by
dividing net income or (loss) attributable to common stockholders by the
weighted average number of shares of common stock outstanding during the
period. At February 29, 2000 and February 28, 1999, there were outstanding
common stock equivalents (options and warrants) to purchase 495,000 and
882,375 shares of common stock, respectively that were not included in the
computation of diluted net (loss) per common share as their effect would have
been anti-dilutive, thereby decreasing the net loss per common share. The
common stock equivalents were included in the computation of diluted net
income per common share for the year ended February 29, 2000.
The following table is a reconciliation of the net loss numerator of basic and
diluted net income (loss) per common share for the years ended February 29,
2000. and February 28, 1999:
<TABLE>
For the Year Ended
February 29, 2000 February 28, 1999
Income Per Share Per Share
(Loss) Amount (Loss) Amount
<S> <C> <C> <C> <C>
Net (loss) from continuing
operations attributable to
common stockholders $ (848,932) $ (0.21) $ - $ -
(Loss) from discontinued
operations - - (2,450,128) (0.74)
Extraordinary items 168,066 0.04 - -
Net (loss) attributable
to common stockholders $ (680,866) $ (0.17) $ (2,450,128)$ (0.74)
Weighted average common shares
outstanding 5,129,774 3,378,594
</TABLE>
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 shown in the accompanying balance
sheet 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 as a going concern.
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 3 - GOING CONCERN (continued)
The Company resumed operations in March 1999 with a new management team and
numerous strategic alliances in place for the purpose of providing
state-of-the-art web site design, technical support, online training and
interactive e-commerce web sites to individuals and small businesses (see Note
1). Management believes this new business plan will provide the revenues and
margins necessary to result in significant recurring revenue and profitable
growth through hosting, design and engineering fees as well as commissions on
product sales. Management also expects to obtain additional equity financing
through the exercise of outstanding common stock warrants in order to meet its
cash flow needs through fiscal year 2001. See Note 4 for additional steps
undertaken by management to improve the company's liquidity.
NOTE 4 - FORGIVENESS OF DEBT AND BANKRUPTCY PETITION
a. Forgiveness of debt
On October 28, 1999, the Company reached an agreement with a creditor holding
promissory notes payable by the Company in the amount of $160,000 plus accrued
interest payable related to the notes in the amount of $8,066. Under the
agreement the creditor agreed to release the Company from any and all
obligations to repay the notes and related accrued interest. The creditor
forgave the amounts due under the notes in exchange for the Company's
executive officer arranging for the private sale of 412,500 shares of the
Company's common stock owned by the creditor to unrelated parties. The
promissory notes and related interest payable had been included in the reserve
for discontinued operations in previous consolidated balance sheets of the
Company. These amounts have been accounted for as extraordinary items in the
accompanying condensed consolidated statements of operations.
b. Bankruptcy petition filed
On October 26, 1999, each of the Company's three subsidiaries, WIM, GWE, and
GMG, filed petitions under Chapter 7 of the United States Bankruptcy Code for
protection from creditors. The petitions require creditors to halt any
collection efforts of amounts owed them by the Company's subsidiaries until a
meeting of creditors and a hearing is conducted by the Court. The Company's
subsidiaries have no assets with which to pay their obligations to creditors.
The meeting of creditors and hearing before the Court was held on January 19,
2000. The Court will take several months to determine the disposition of
creditors claims filed under the petitions. As described in Note 1 the
operations of the subsidiaries were discontinued in October 1998 and all three
Corporate charter's were dissolved by the Utah department of Commerce in 1999.
The amounts recorded as owed to creditors are classified as "reserve for
discontinued operations" in the accompanying consolidated balance sheets.
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 5 - INCOME TAXES
As of February 29, 2000, the Company had federal and state net operating loss
carryforwards of approximately $4,280,000. The net operating losses will
expire at various dates beginning in years 2012 through 2019, if not utilized.
The Company operated 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 to individual shareholders.
Accordingly, the Company was not subject to federal income taxes on it's
operations while a partnership and no provision or current liability or
asset for federal, or state income taxes for those periods has been reflected.
NOTE 6 - COMMON STOCK ISSUED OR CANCELED
a. Shares Canceled
In February 2000, the Company canceled 75,000 shares of common stock
previously held by a former officer of the Company. The Company did not pay
any consideration for the shares canceled.
b. Shares Issued for Services
In February 2000, the Company issued 36,000 shares of common stock restricted
under Rule 144 in payment of accounts payable totaling $36,000. An additional
20,000 shares of common stock restricted under Rule 144 were issued to an
unrelated individual in exchange for professional services provided to the
Company. The Company recorded an expense for professional fees totaling
$20,000 relating to the shares issued for services.
In November 1999, the Company issued 247,500 shares of common stock under an
S-8 Registration Statement to several individuals in payment of accounts
payable totaling $99,000. Included in the total were 75,000 shares issued to
Steven K. Hansen, President, CEO and Chairman of the Board of Directors of the
Company, for consulting services previously provided. Additionally, 50,000
shares of the above total were issued to Leonard W. Burningham, Esq., who
is Counsel to the Company for securities matters, for legal and professional
services previously provided. The remaining 122,000 shares were issued to
unrelated parties for legal and professional services previously provided.
Additionally, in November 1999, the Company issued 25,000 shares of common
stock restricted under Rule 144 to Leonard W. Burningham, Esq., who is Counsel
to the Company for securities matters. The Company recorded legal and
professional fees totaling $10,000 relating to the shares issued.
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 of the Company.
Additionally, 50,000 shares of the above total were issued to Leonard
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 6 - COMMON STOCK ISSUED (continued)
b. Shares Issued for Services (continued)
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, legal and professional fees totaling $287,000 relating to
the shares issued.
c. Shares Issued for Cash
In March 1999, the Company began a private placement offering of 1,250,000
units ("Units") consisting of one share of "restricted" common stock of the
Company (restricted under Rule 144) and one "unregistered" and "restricted"
common stock purchase warrant (the "Warrant"), granting the warrant holder the
right to purchase an additional share of the Company's common stock at a price
of $2.00 per share. The Warrants expire two years from the completion of the
offering and are callable at a price of $0.01 per share at any time after
ninety days from the effective date of any registration statement, upon 30
days written notice. The Company filed an SB-2 registration statement in April
2000 to register the common stock issued and issuable under the private
placement offering. The registration statement is being reviewed by the
Securities and Exchange Commission and various state securities regulating
departments and is not yet effective. Shares issued and amounts received under
this private placement offering during the year ended February 29, 2000 are
summarized in the following table:
<TABLE>
Common
Shares Warrants Consideration
Date Issued Issued Received
<C> <C> <C> <C>
March 1999 100,000 100,000 $ 40,000
July 1999 50,000 50,000 20,000
October 1999 100,000 100,000 40,000
November 1999 25,000 25,000 10,000
January 2000 80,000 80,000 32,000
February 2000 375,000 375,000 150,000
Totals 730,000 730,000 292,000
</TABLE
Subsequent to February 29, 2000 an additional 900,000 "units" were issued for
cash in the amount of $360,000 under the Company's private placement offering,
bringing the total "units" placed under the offering to 1,630,000. The Company
has now closed the offering (see Note 9).
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 6 - COMMON STOCK ISSUED (continued)
c. Shares Issued for Cash (continued)
In January 2000, the Company issued 1,700,000 shares of common stock in
exchange for cash of $62,500 and services. The 1,700,000 shares were issued as
the final installment of a total of 4,200,000 shares issued under a definitive
agreement with Fairway Capital Partners, LLC.("Fairway"), in exchange for a
total of $187,500 in cash plus services related to the introduction of sources
of capital to the Company by Fairway. Previously, under the Fairway agreement,
the Company issued 2,000,000 shares of common stock in November 1999 and
500,000 shares in October 1999, in exchange for cash of $100,000 and $25,000
respectively. The Company recorded a cost of capital totaling $2,437,100
relating to the services provided by Fairway and the issuance of the 4,200,000
shares at a price below the market price of the Company's common shares. Of
the $2,437,100 cost, $1,366,482 has been reported as a deferred offering cost
in the accompanying balance sheets which amount relates to the portion of the
capital received under the private placement offering after February 29, 2000.
NOTE 7 - STOCK OPTIONS, STOCK AWARDS AND STOCK WARRANTS
a. Stock Options
Effective in 1996, the Company adopted a stock option plan which provides for
the granting of stock options and awards to employees, officers and
non-employee consultants 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 to eligible participants. 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
eligible participants to the original 4,000,000 shares. Additionally, the
Company issued non-qualified options to employees, officers, directors and
consultants in previous years.
During the year ended February 29, 2000, the Company canceled all 1,532,375
stock options that were outstanding at February 28, 1999, under provisions of
the option agreements that provide for their exercise within 90 days after the
termination of an optionee's employment or business relationship with the
Company. All of the option holders had terminated their relationships with the
Company on or before October 22, 1998 and all unexercised options were
therefore forfeited.
During the year ended February 29, 2000, the Company granted 150,000
non-qualified stock options to a director of the Company for consulting
services at exercise prices ranging from $0.40 to $0.75 per share. The fair
market value of the options was $0.58 per share, or $87,000 in total using the
Black-Scholes pricing model and was charged to selling, general and
administrative expenses. Additionally, the Company granted 70,000
non-qualified stock options to employees and directors at exercise prices of
$0.40 per share. Of these employee grants 50,000 shares were issued at $0.35
per share below the market price of the Company's common stock on the date of
the grant. The fair market value of the 50,000 options granted below market
value was $0.61 per share, or $30,500 in total, using the Black-Scholes
pricing model and was charged to selling, general and administrative expenses.
The weighted average fair value of the options granted to employees at market
value during the year ended February 29, 2000 was $0.58 per share using
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 7 - STOCK OPTIONS, STOCK AWARDS AND STOCK WARRANTS (continued)
the Black-Scholes pricing model. Had compensation expense for the issuance of
these options been recorded in accordance with the method prescribed by SFAS
No. 123, "Accounting for Stock-Based Compensation", the Company's net loss
from continuing operations attributable to common stockholders would have been
$785,747 or $0.22 per share for the year ended February 29, 2000. All the
options granted expire five years from date of grant. As of February 29, 2000,
the Company had a total of 220,000 non-qualified options outstanding.
Information with respect to the Company's stock option plan at February 29,
2000 is as follows:
</TABLE>
<TABLE>
Exercise Options Options Options Options
Price Granted Exercised Canceled Outstanding
<S> <C> <C> <C> <C> <C>
Options Granted prior
to October 22, 1999 $0.25 - 2.50 2,275,000 594,625 1,680,375 -
Fiscal Year 2000 Grants $0.40 - 0.75 220,000 - - 220,000
Totals 2,275,000 594,625 148,000 220,000
</TABLE>
There were no options exercised in the year ending February 29, 2000.
b. Common Stock Warrants
During the year ended February 29, 2000, the Company granted warrants to
purchase 730,000 shares of the Company's common stock in connection with the
issuance of 730,000 shares of common stock under the Company's private
placement offering (see Note 6 c).
On July 26, 1999 the Company granted a cash-less warrant to purchase 10,000
shares of the Company's common stock to a former executive officer of the
Company in lieu of salary payments then due to him. Additionally, the Company
committed to grant cash-less warrants to purchase 25,000 shares of the
Company's common stock to the same former executive officer of the Company if
and when certain business opportunities mature (see Note 8). To date these
warrants have not yet been granted.
As of February 29, 2000, the Company had a total of 740,000 warrants
outstanding.
NOTE 8 - COMMITMENT AND CONTINGENCIES
a. Employment Contracts
On February 19, 1999 the Company entered into an employment contract with
Steven K. Hansen, President and CEO of the Company that became effective in
March 1999, the terms of which provide a monthly salary of $8,000 together
with medical insurance benefits. In addition Mr. Hansen was issued 975,000
shares of the Company's common stock restricted under rule 144 and 75,000
shares of the Company's common stock under an S-8 Registration Statement for
management services provided in the year ended February 29, 2000. The term of
the employment contract is three years.
Effective March 4, 1999 the Company entered into an employment contract with
Phillip M. Ray,
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 8 - COMMITMENT AND CONTINGENCIES (continued)
a. Employment Contracts (continued)
Secretary/Treasurer of the Company, the terms of which provided 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 payment of a $40,000 debt of the
Company. Mr. Ray was granted a cash-less ($0.00 exercise price) warrant to
purchase 10,000 shares of the Company's restricted common stock in lieu of
salary for the period from June through September 1999. The Company recorded a
compensation expense of $7,500 in connection with this warrant. To date this
warrant has not been exercised. In addition, Mr. Ray was granted options to
acquire the Company's common stock as follows: 50,000 shares at a price of
$0.40 per share and 50,000 shares to be granted at a price of $0.40 per share
when certain business opportunities have been successfully completed for the
Company. The designated business opportunities were not completed and the
second 50,000 share grant was rescinded. 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 certain business
opportunities introduced to the Company by Mr. Ray. As of May 26, 2000 the
Company has not realized a benefit and the cash-less warrants have not been
issued. Mr. Ray's active employment ceased at the end of September 1999 and he
subsequently resigned as the Company's Secretary/Treasurer.
b. 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 Director's 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. To date no such demand has been received by the Company.
c. Fairway Capital Consulting Agreement
On August 16, 1999, the Company entered into a consulting agreement with
Fairway Capital Partners, LLC. ("Fairway"), to provide non-exclusive
management, consulting and financial services, including advise on corporate
acquisitions and related matters. Terms of the agreement require the Company
to pay Fairway $5,000 per month for the first three months of the agreement,
$10,000 per month for the next three months, and $15,000 for each month after
that. All such payments were paid in full as of February 29, 2000. The
agreement expires on August 1, 2002. Subsequent to entering into the
consulting agreement Fairway became a related party through the acquisition of
4,200,000 shares of the Company's common stock (see Note 6).
On February 4, 2000, the Company and Fairway agreed to modify the agreement
for payments due after March 1, 2000. Under the modified agreement Fairway is
granted the option to reduce the monthly cash payment due them to $7,500 and
to receive an additional $7,500 worth of the Company's "unregistered" and
"restricted" common stock priced at the average closing market
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 8 - COMMITMENT AND CONTINGENCIES (continued)
price per share over the last five trading days of the previous month. The
option is effective for each month individually for the remaining term of the
agreement.
d. Office Lease
The Company rents office facilities in Orem, Utah on a month to month basis.
There is no long term lease commitment. Monthly rental for the office facility
is currently $800.00.
e. 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 February 29, 2000.
<PAGE>
WORLD INTERNETWORKS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 9 - 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 losses from discontinued operations:
<TABLE>
From
Inception of the
Development
Stage on
October 22,
For the Years Ended 1998 through
February 29, February 28, February 29,
2000 1999 2000
<S> <C> <C> <C>
NET REVENUES $ - $ 1,988,774 $ -
COST OF PRODUCTS SOLD - 826,073 -
Gross Profit - 1,162,701 -
EXPENSES
Commissions - 2,827,748 -
Selling, general and
administrative - 785,081 -
Total Expenses - 3,612,829 -
LOSS BEFORE INCOME TAXES - (2,450,128) -
INCOME TAX EXPENSE - - -
NET LOSS $ - $ (2,450,128) $ -
BASIC LOSS PER SHARE OF
COMMON STOCK $ - $ (0.74) $ -
</TABLE>
As of February 29, 2000, the Company had liabilities of $2,459,205 which were
associated with the discontinued operations. No income tax benefit has been
attributed to the loss from discontinued operations.
NOTE 10 - SUBSEQUENT EVENTS
On March 22, 2000, the Company issued an additional 900,000 "units" of its
private placement of common stock and warrants (see Note 6 c) for cash in the
amount of $360,000. Total "units" placed under the offering comes to
1,630,000. The Company has now closed the offering.
On May 9, 2000, the Board of Directors approved a "site" bonus plan payable to
Steve Hansen, president and CEO of the Company. The site bonus plan calls for
Mr. Hansen to receive a bonus of $1.00 per web-site hosting customer brought
into the Company. The site bonus is not to exceed $15,000 in any one month.
The Board of Directors is to review the bonus for renewal or modification in
March 2001.
Also, at the May 9, 2000 meeting, the Board granted 70,000 options to purchase
the Company's common stock at a exercise price of $1.38 per share to various
employees and consultants of the Company. The employee options vest over a
period of two years with 25% becoming vested after each six months from the
date of grant. Additionally, 34,000 options to purchase the Company's
common stock were granted to officers and directors of the Company at the same
exercise price. The officers and directors options vest immediately upon
grant.
<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 the names of all current directors
and executive officers of World Internetworks. These persons will serve until
the next annual meeting of the stockholders or until their successors are
elected or appointed and qualified, or their prior resignation or termination.
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
---- ---- ----------- --------------
<S> <C> <C> <C>
Steven K. Hansen President 2/99 *
Director 2/99 *
Phillip M. Ray Secretary/ 2/99 3/00
Treasurer 2/99 3/00
Randal L.Roberts Director 2/99 *
Gary S. Winterton Director 2/99 *
</TABLE>
* These persons presently serve in the capacities
indicated.
Business Experience.
--------------------
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.
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 World Internetworks. 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, was the Acting President
of Internet Marketing Concepts, an internet development company, until
December, 1999. He brings broad experience to World Internetworks, 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
-----------------------------
On February 19, 1999, World Internetworks entered into an Employment
Agreement with Steven K. Hansen, our current President. It became effective
in March, 1999. The Employment Agreement provides for Mr. Hansen to receive a
salary of $8,000 per month ($96,000 per year), along with medical and dental
insurance coverage for Mr. Hansen and his dependents. Under the Employment
Agreement, we issued 800,000 "unregistered" and "restricted" shares of our
common stock to Mr. Hansen. The Employment Agreement also requires us to
reimburse Mr. Hansen for all reasonable expenses incurred in connection with
our business and to include him in all pension, profit-sharing and similar
plans.
Phillip Ray, our former Secretary/Treasurer, was hired at a salary
of $3,000 per month. He received three months' salary; his salary was
terminated effective June 1, 1999. Instead, on July 26, 1999, we granted Mr.
Ray options to purchase up to 60,000 "unregistered" and "restricted" shares of
our common stock at a price of $0.40 per share. Ten thousand of these
warrants are deemed to be "cashless," in which Mr. Ray may surrender options
in exchange for shares, rather than paying cash. In addition, we issued
20,000 "unregistered" and "restricted" shares of our common stock to
Automotive Direct, which is controlled by Mr. Ray, in exchange for the
retirement of a $40,000 corporate debt.
On August 12, 1999, we executed a compensation agreement with Gary
S. Winterton with respect to his services as a director. Under the agreement,
Mr. Winterton was granted an option to purchase 110,000 "unregistered" and
"restricted" shares of our common stock at a price of $0.40 per share, with an
additional option to purchase 50,000 such shares at the higher of the closing
bid price of our common stock on July 23, 1999, or $0.75. The exercise price
of these options has been set at $0.75 per share. We have also granted to Mr.
Winterton an option to purchase an additional 10,000 "unregistered" and
"restricted" shares at a price of $0.40 per share.
We have also agreed to compensate Randal L. Roberts for his services
as a director. Our arrangement with Mr. Roberts is the same as our
arrangement with Mr. Winterton with respect to their services as directors.
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. World Internetworks 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 following table sets forth all compensation awarded to Mr.
Hansen, our President, our only executive officer who received compensation in
excess of $100,000 for the fiscal years ended February 28, 1999, and February
29, 2000:
Annual Long Term
Compensation Compensation Awards
Name and Position Year Salary Securities Underlying Options
----------------- ---- ------ -----------------------------
Steven K. Hansen 1999 (1) -0- -0-
President 2000 $347,300 (2) -0-
(1) We entered into an Employment Agreement with Mr. Hansen on
February 19, 1999, which became effective in March, 1999. Mr. Hansen did not
receive any compensation during the 1999 fiscal year.
(2) This figure includes $84,800 in cash compensation paid to Mr.
Hansen and $262,500 for services paid with World Internetworks common stock.
Option Grants in 1999
---------------------
This table shows the options that World Internetworks granted to its
executive officers and directors during the calendar year ended February 29,
2000:
Number
of Options Exercise Expiration
Name Granted* Price per Share Date
---- ------- --------------- ----
Steven K. Hansen -0- -0- -0-
Phillip Ray 50,000 $0.40 7/26/01
10,000 Market price on 7/26/01
date of exercise
Randal L. Roberts 10,000 $0.40 3/19/01
Gary S. Winterton 110,000 $0.40 8/12/01
50,000 $0.75 8/12/01
* None of these options has yet been exercised.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
------------------------------------------------
The following table sets forth the shareholdings of each of our
stockholders who is known to beneficially own more than five percent of our
outstanding common stock as of March 24, 2000. To the knowledge of
management, each of these stockholders has sole investment and sole voting
power over the shares indicated.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class (1)
---------------- ---------------------------- --------
<S> <C> <C>
Gary J. McAdam 1,200,000 (2) 13.4%
14 Red Tail Dr.
Highlands Ranch, Colorado
80126
Steven K. Hansen 1,000,000 (3) 11.2%
1379 East Indian Ridge Cir.
Sandy, Utah
84092
Fairway Capital Partners LLC 1,625,000 18.1%
56 East Pine St., Suite 200
Orlando, Florida
32802
-------- -----
TOTALS 3,825,000 42.7%
</TABLE>
(1) Does not include shares of common stock underlying options and
warrants.
(2) A total of 800,000 of these shares are held of record by GJM Trading
Partners, Ltd., of which Mr. McAdam is a general partner, and 400,000 shares
are held of record by Growth Ventures, Inc., of which Mr. McAdam is President.
(3) A total of 700,000 of these shares are held of record by Mr. Hansen
and his wife as joint tenants.
Security Ownership of Management.
---------------------------------
The following table sets forth the shareholdings of our directors
and executive officers as of March 24, 2000. Each of these persons has sole
investment and sole voting power over the shares indicated.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class (1)
---------------- ---------------------------- --------
<S> <C> <C>
Steven K. Hansen 1,000,000 (2) 11.2%
1379 East Indian Ridge Cir.
Sandy, Utah
84092
Randal L. Roberts -0- -0-
9878 South Lannae Dr.
Sandy, Utah
84094
Gary S. Winterton 10,000 (3) 0.1%
517 South 1045 West
Orem, Utah 84058
-------- -----
All directors and executive 1,010,000 11.3%
officers as a group
(3 persons)
</TABLE>
(1) Does not include shares of common stock underlying options and
warrants.
(2) Mr. Hansen and his wife hold a total of 700,000 of these shares as
joint tenants.
(3) Mr. Winterton purchased these shares in an open-market transaction.
See the caption "Directors, Executive Officers, Promoters and
Control Persons," of this Report for information about the offices or
other capacities in which each of these persons serves with World
Internetworks.
Item 12. Certain Relationships and Related Party Transactions.
-----------------------------------------------------
On February 18, 2000, Fairway Capital loaned us $30,000 for a period
of 30 days, at an interest rate of 7% per year. We have fully repaid the
loan.
Other than as discussed under the heading "Executive Compensation,"
during the fiscal years ended February 29, 2000, and February 28, 1999, World
Internetworks did not enter into any material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, in which the amount involved exceeded $60,000 and in which any
director or executive officer, or any security holder who we know to own of
record or beneficially more than five percent of our common stock, or any
member of the immediate family of any of the foregoing persons, had a
material interest.
Item 13. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
---------------------------------------------------------------
(a)
27 Financial Data Schedule.
(b) Forms 8-K filed during the fiscal year ended February 29, 2000.
(i) 8-K Current Report dated February 19, 1999
(ii) 8-K Current Report dated September 14, 1999
(iv) 8-K Current Report dated October 26, 2000
(v) 8-K Current Report dated March 22, 2000
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: 5/31/00 /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: 5/31/00 /s/ Steven K. Hansen
------------ --------------------------------
Steven K. Hansen, President and
Director
Date: 5/30/00 /s/ Randal L. Roberts
------------ ---------------------------------
Randal L. Roberts, Director
