UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended November 30, 1999
[ ] Transition Report pursuant to 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.
(Exact name of registrant as specified 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 and zip code)
(801) 434-7517
(Registrant's telephone number, including area code)
5152 North Edgewood Drive, Suite 250, Provo, Utah 84604
(Former address of principal executive offices and zip code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X or No
The number of outstanding shares of the Registrant's common stock as of
January 21, 1999, was: 6,000,607 shares.
Transitional Small Business Format (Check One) : Yes [x] No [ ]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Interim consolidated financial statements presented in this Form 10-QSB are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interium financial statements and with the
instructions to Form 10-QSB. Therefore, such financial statements do not
include all of the information and footnotes required for complete audited
financial statements. The unaudited financial statements presented herein
should be read in conjunction with the audited financial statements and
related footnotes contained in the Company's Annual Report on Form 10-KSB
for the year ended February 28, 1999.
<TABLE>
World Internetworks, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
November 30, 1999 and February 28, 1999 (Fiscal Year End)
<CAPTION>
ASSETS
November 30, February 28,
1999 1999
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 4,286 $ -
Accounts receivable-Trade 1,486 -
Due from shareholder 15,000 -
Total current assets $ 20,772 $ -
Property and Equipment at cost, net 4,412 3,060
$ 25,184 $ 3,060
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts Payable $ 60,159 $ -
Accrued expenses 1,147 -
Reserve for discontinued operations 2,459,206 2,627,271
Total current liabilities 2,520,512 2,627,271
Commitments and contingencies
Shareholders' equity (deficit):
Common stock, $.001 par value; 500,000,000
shares authorized, 5,920,607 and 1,750,107
shares issued at November 30, 1999 and Feb
28, 1999, respectively 6,071 1,750
Capital in excess of par value 2,067,098 1,356,919
Treasury stock, at cost (3,186) (3,186)
Deficit accumulated prior to development
stage (3,979,694) (3,979,694)
Deficit accumulated from the inception of
the development state on October 22, 1998 (585,617) -
Total shareholders' deficit (2,495,328) (2,624,211)
$ 25,184 $ 3,060
</TABLE>
<TABLE>
World Internetworks, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
For the Three Months and Nine Months Ended November 30, 1999 and 1998
<CAPTION>
From Inception of
Development Stage
Three months ended Nine months ended October 22, 1998
November 30, November 30, thru November 30,
1999 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C>
Net sales and revenues: $ 20,793 $ - $ 50,940 $ - $50,940
Costs of Services and
products sold 14,369 - 30,901 - 30,901
Gross Profit 6,424 - 20,039 - 20,039
Operating Expenses:
Selling, General and
Administrative expenses 111,354 - 775,460 - 775,460
Depreciation and
amortization 494 - 1,326 - 1,326
Total operating expenses 111,848 - 776,786 - 776,786
Loss from operations (105,424) - (756,747) - (756,747)
Loss from discontinued
operations - (1,320,486) - (2,337,766) -
Loss before extraordinary
items (105,424) (1,320,486)(756,747)(2,337,766) (756,747)
Extraordinary Item:
Gain on forgiveness of
debt-reserve for
discontinued operations
and accounts payable 171,130 - 171,130 - 171,130
Income tax benefit - - - - -
Net Income (loss) 65,706 (1,320,486)(585,617)(2,337,766) (585,617)
Weighted average common
shares outstanding (1996
restated to give effect to
4 for 1 reverse split
effective September 4,
1998 5,129,774 3,378,594 3,647,774 3,378,594
Net income (loss) per
common share $ 0.01 $ (0.39) $ (0.16) $ (0.69)
</TABLE>
<TABLE>
World Internetworks, Inc.and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended November 30, 1999 and 1998
(Unaudited)
<CAPTION>
From Inception of
Development Stage
Nine months ended October 22, 1998
November 30, thru November 30,
1999 1998 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (585,617) $ (2,337,766) $ (585,617)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and Amortization 1,326 102,908 1,326
Changes in current assets and liabilities
Issuance of common stock for services 372,000 - 372,000
Inventory - 103,955 -
Accounts Receivable - 223,853 -
Due from shareholder (15,000) - (15,000)
Other assets - 103,811 -
Accounts payable 61,738 375,325 61,738
Accrued expenses 1,147 208,233 1,147
Extraordinary gain on forgiveness of
debt-reserve for discontinued
operations and accounts payable (171,130) - (171,130)
Deferred revenue - 169,423 -
Net cash provided (used in)
operating activities (355,535) (1,050,258) (335,536)
Cash flows from investing activities:
Purchase of property and equipment (2,678) - (2,678)
Disposal of property, equipment and
other assets - 801,761 -
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of offering cost 225,000 2,500 225,000
Proceeds from issuance of common stock
options 117,500 - 117,500
Reduction in capital lease obligation - 11,186 -
Net cash provided by financing
activities 342,500 13,686 342,500
Net increase (decrease) in cash 4,286 (243,811) 4,286
Cash at beginning of period - 126,029 -
Cash at end of period $ 4,286 $(108,782) $ 4,286
</TABLE>
NOTE 1 - ORGANIZATION AND HISTORY
a. Nature of Operations
World InterNetWorks, Inc., a Nevada corporation, has three wholly-owned
subsidiaries, World Internet Marketplace, Inc. ("WIM"), a Utah corporation,
was engaged in marketing and distributing products and services relating to
internet commerce, Global Wholesale Exchange, Inc. ("GWE"), a Utah
corporation, which commenced operations in June 1998, and provided wholesale
goods to consumers via internet and fax notification, and Global Media Group,
Inc.("GMG"), a Utah corporation which commenced operations in June 1998, (dba
as the Institute for Financial Independence) and provided seminars that sold
WIM and GWE products and services. Collectively, World InterNetWorks, Inc. and
the three wholly-owned subsidiaries are referred to as the Company.
The Company's revenues prior to discontinuing its operations and entering into
the development stage on October 22, 1998 (see Note 9) were substantially
derived from two categories of products and services: (i) personal and
commercial web site development and maintenance, and related Internet
training; and (ii) merchandise sales from the Company's Internet-based virtual
"mall" or "department store" (orders for merchandise on the Company's virtual
"mall" were generally fulfilled by shipment direct from the manufacturer or
wholesaler to the customer).
The Company is currently engaged in the restructuring of its operations
through development of systems and a customer base for the marketing and
distribution of products and services relating to Internet commerce and
providing state-of-the-art web site design, technical support, online
training and interactive e-commerce web sites to individuals and small
businesses.
b. Organization
On August 27, 1996, the stockholders of Impressive Ventures, Inc. (the former
name of the Company), a non-operating, developmental stage company, approved
an agreement whereby the stockholders of Wealth International, Inc., a Utah
corporation (Wealth Utah), obtained a controlling interest in the Company.
This transaction was treated as an acquisition of the Company by Wealth
Utah, and as a recapitalization of Wealth Utah. Under the agreement, the
stockholders of Wealth Utah exchanged all of their shares in Wealth Utah for
2,752,245 common shares of the Company, after the effects of a 1-for-250
reverse stock split, a 4-for-1 forward stock split and a 1-for-4 reverse
stock split.
Wealth Utah was established in November 1995 as a partnership, had essentially
no assets or operations prior to the acquisition referenced above and was
incorporated in July 1996.
After the transaction was completed, the Company changed its name to Wealth
International, Inc. (Wealth Nevada), a Nevada corporation, and the operating
subsidiary (Wealth Utah) subsequently changed its name to World Internet
Marketplace, Inc. Wealth Nevada changed its name to World
<PAGE>
NOTE 1 - ORGANIZATION AND HISTORY (continued)
InterNetWorks, Inc. in January 1998 to more accurately reflect the nature of
the Company's business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's consolidated financial statements are prepared using the accrual
method of accounting. The Company has elected a February 28 fiscal year end.
b. Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity
of three months or less when purchased to be cash equivalents. Currently, the
Company's cash consists of a general bank checking account and petty cash
funds.
c. Depreciation and Amortization
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives of between
5 and 7 years. For financial reporting purposes, the straight-line method of
depreciation is followed. Accelerated methods of depreciation are used for
tax purposes.
Maintenance and repairs, which neither materially add to the value of the
asset nor appreciably prolong its life are charged to expense as incurred.
Gains or losses on dispositions of property and equipment are included in
earnings.
d. Revenue Recognition
The Company generally receives the sales price of its web pages and products
in cash at the time orders are made. Sales are generally recorded at the time
the Web page is activated or the product is shipped.
e. Income Taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 splits for all periods presented.
g. Use of Estimates
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from estimates.
h. 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.
i. Development costs
The costs of developing the Company's new business plan, including new
web-site design and marketing research and analysis are charged to general and
administrative expense as incurred.
j. Basic and Fully Diluted Net Income (Loss) Per Common Share
Basic and diluted net loss per common share are calculated by dividing net
loss attributable to common stockholders by the weighted average number of
shares of common stock outstanding during the period. At November 30, 1999 and
1998, there were outstanding common stock equivalents (options and warrants)
to purchase 495,000 and 882,375 shares of common stock, respectively. These
common stock equivalents were not included in the computation of diluted net
loss per common share for the three and nine months ended November 30, 1998
and the nine months ended November 30, 1999 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 three months ended November 30, 1999.
The following table (next page) is a reconciliation of the net loss numerator
of basic and diluted net income (loss) per common share for the three and nine
months ended November 30,1999 and 1998:
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Three months ended November 30,
1999 1998
Income Per share Per share
(Loss) Amount (Loss) Amount
Net (loss) from
continuing operations
attributable to common
stockholders $(105,424) $(0.02) $ - $ -
(Loss) from
discontinued operations - - (1,320,486) (0.39)
Extraordinary items 171,130 0.03 - -
Income (loss)
attributable to common
stockholders $ 65,706 $ 0.01 $(1,320,486) $ (0.39)
Weighted average
common shares
outstanding 5,129,774 3,378,594
Weighted average
shares of common
stock equivalents
outstanding 436,667 N/A
Nine months ended November 30,
1999 1998
Per share Per share
(Loss) Amount (Loss) Amount
Net (loss) from
continuing operations
attributable to common
stockholders $ (756,747) $(0.21) $ - $ -
Discontinued operations - - (2,337,766) (0.69)
Extraordinary items 171,130 0.05 - -
(Loss) attributable to
common stockholders $ (585,617) $(0.16) $(2,337,766) $ (0.69)
Weighted average
common shares
outstanding 3,647,774 3,378,594
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern. However, the Company has sustained substantial
losses from operations from it's inception and the recoverability of a major
portion of the asset amounts in the accompanying balance sheets is dependent
upon the Company's ability to raise sufficient working capital to meet its
operating costs and debt obligations on a continuing basis in its future
operations. The financial statements do not include, any adjustments
relating to the recoverability and classification of recorded asset and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
The Company resumed operations in April 1999 with a new management team and
numerous strategic alliances in place for the purpose of providing
state-of-the-art website design, technical support, online training and
interactive e-commerce websites to individuals and small businesses.
Management believes this new direction of the Company has the ability to
achieve the critical mass necessary to result in significant recurring revenue
and profitable growth through hosting fees as well as product sales.
Management also expects to obtain additional financing through a stock
offering in order to meet its cash flow needs through fiscal year 2000. 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
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 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
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. 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, the Company's three subsidiaries, WIM, GWE, and GMG filed
a petition under Chapter 7 of the United States Bankruptcy Code for protection
from creditors. The petition requires 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 US Bankruptcy Court ("Court"). The
meeting of creditors was held on January 19, 2000, however the Court will take
<PAGE>
NOTE 4 - FORGIVENESS OF DEBT AND BANKRUPTCY PETITION (continued)
several weeks to determine the disposition of creditors claims under the
petition filed. The Company's subsidiaries have no assets with which to pay
their obligations to creditors. As described in Note 1 the operations of the
subsidiaries were discontinued in October 1998 and the Company intends to
dissolve their corporate status upon the conclusion of the Court's
proceedings. The amounts owed are classified as "reserve for discontinued
operations" in the accompanying consolidated balance sheets.
NOTE 5 - INCOME TAXES
As of August 31, 1999, the Company had federal and state net operating loss
carryforwards of approximately $4,065,000. The net operating losses will
expire at various dates beginning in years 2012 through 2015, if not utilized.
The Company operated, for tax purposes, as a partnership under provisions of
the Internal Revenue Code from November 1, 1995 through July 10, 1996. During
this period, losses of the Company flowed through the partnership to
individual shareholders. Accordingly, the Company was not subject to federal
income taxes on its operations while a partnership.
<PAGE>
NOTE 6 - COMMON STOCK ISSUED
a. 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 $75,000. 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 management 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 in the three months ended November 30, 1999
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>
NOTE 6 - COMMON STOCK ISSUED (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 in the nine
months ended November 30, 1999 relating to the shares issued.
b. FOR CASH
In October 1999, the Company issued 2,000,000 shares of common stock in
exchange for cash of $100,000. The 2,000,000 shares were issued as the second
installment of a total of 4,200,000 shares to be issued under a definitive
agreement with Fairway Capital Partners, LLC., in exchange for a total of
$1,800,000 in cash plus certain investment banking services to be provided
over a period of one year.
The definitive agreement is more fully described in the business development
section of the Company's accompanying 10Q for the nine months ending November
30, 1999.
In October 1999, the Company issued 100,000 shares of common stock in exchange
for cash in the amount of $40,000. The shares issued are restricted under Rule
144 and were issued in private placements to qualified investors. In addition
to the shares issued, each investor received warrants to purchase an equal
number of additional shares of the Company's common stock at $2.00 per
share.
In August the Company issued 500,000 shares of common stock in exchange for
cash of $25,000. The 500,000 shares were issued as the first installment
under the definitive agreement with Fairway Capital Partners, LLC., described
above and more fully in the business development section of the Company's
accompanying 10Q for the nine months ending November 30, 1999.
In July the Company issued 50,000 shares of common stock in exchange for cash
of $20,000. In April the Company issued 100,000 shares of common stock in
exchange for cash in the amount of $40,000. All the shares issued are
restricted under Rule 144 and were issued in private placements to qualified
investors. In addition to the shares issued, each investor received warrants
to purchase an equal number of additional shares of the Company's common stock
at $2.00 per share.
NOTE 7 - STOCK OPTIONS, STOCK AWARDS AND STOCK WARRANTS
Effective October 13, 1996, the Company adopted a stock option plan which
provides for the granting of stock options and awards to employees, officers
and non-employees to purchase up to 4,000,000 shares of stock, subject to
adjustment under certain circumstances. On October 22, 1996, a 4-for-1 stock
split increased the number of shares available for stock options and awards
<PAGE>
NOTE 7 - STOCK OPTIONS, STOCK AWARDS AND STOCK WARRANTS (continued)
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. The exercise price for incentive stock options may not be less than
the fair market value per share of common stock on the grant date. In the case
of incentive stock options granted to an employee possessing more than 10% of
the total combined voting power of all classes of stock of the Company, the
exercise price may not be less than 110% of fair market price per share of
common stock on the grant date. An employee may not be granted incentive stock
options that would entitle the employee to purchase more than $100,000 in fair
market value of common stock in the year in which the options are exercisable
for the first time.
Incentive Stock Options
During the nine months ended November 30, 1999 the Company canceled 1,532,375
stock options that were outstanding at February 28, 1999 as all grantees had
terminated their employment with the Company and all unexercised options were
forfeited.
Non-Qualified Options
Employees, officers, directors and consultants may be granted non-qualified
options. Directors, officers, employees and consultants are also eligible for
awards of stock and opportunities to make direct purchases of stock in the
Company. During the nine months ended November 30, 1999, the Company granted
150,000 stock options to a director of the Company for consulting services
provided to the Company at exercise prices ranging from $0.40 to $0.75 per
share. The fair market value of the consultant 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 nine months ended November 30,
1999 was $0.58 per share using 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 nine months ended November 30, 1999. All the options granted
expire five years from date of grant. As of November 30, 1999, the Company had
a total of 220,000 non-qualified options outstanding.
<PAGE>
NOTE 7 - STOCK OPTIONS, STOCK AWARDS AND STOCK WARRANTS (continued)
Information with respect to the Company's stock option plans at November 30,
1999 is as follows:
Exercise Number Number Number Number
Price Granted Exercised Canceled Outstanding
1997 Plan $0.25 - 2.50 1,233,750 447,500 786,250 -
1998 Plan $0.38 - 2.50 391,250 147,125 244,125 -
1999 Plan $0.75 - 1.00 650,000 - 650,000 -
1999 Post ** $0.40 - 0.75 270,000 - 100,000 170,000
Totals 2,545,000 594,625 1,780,375 1,802,375
** Granted post reorganization
Common Stock Warrants
During the nine months ended November 30, 1999, the Company granted warrants
to purchase 275,000 shares of the Company's common stock in connection with
the issuance of 250,000 shares of common stock for cash totaling $100,000 (see
Note 6). Additionally, during the nine months ended November 30, 1999, the
Company committed to grant cash-less warrants to purchase 25,000 shares
of the Company's common stock to an executive officer of the Company if and
when certain business opportunities mature (see Note 8). These warrants have
not yet been granted. As of November 30, 1999, the Company had a total of
275,000 warrants outstanding.
NOTE 8 - COMMITMENT AND CONTINGENCIES
Employment Contracts
Effective February 19, 1999 the Company entered into an employment contract
with Steven K. Hansen, President and CEO of the Company, the terms of which
provide a monthly salary of $8,000 together with medical insurance benefits.
In addition Mr. Hansen was issued 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
nine months ending November 30, 1999. The term of the employment contract is
three years.
Effective March 4, 1999 the Company entered into an employment contract with
Phillip M. Ray, Secretary/Treasurer of the Company, the terms of which provide
a monthly salary of $3,000 through June 1999. In addition Mr. Ray was granted
20,000 shares of the Company's restricted common stock issued to his designee,
Automotive Direct in consideration for a $40,000 debt of the Company. Mr. Ray
will also be issued 10,000 shares of the Company's restricted common stock at
a price of $1.00 per
<PAGE>
NOTE 8 - COMMITMENT AND CONTINGENCIES (continued)
share in lieu of salary for the period from June through September 1999. 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.
Directors Compensation Commitments
Effective March 4, 1999 Randall L. Roberts and Gary S. Winterton were
appointed to the Board of Directors of the Company. As Directors compensation
they were each granted options to acquire 10,000 shares of the Company's
restricted common stock at a price of $0.40 per share. In addition,
on July 23, 1999 Mr. Winterton was granted an option to acquire 100,000 shares
of the Company's restricted common stock at a price of $0.40 per share and a
third option to acquire 50,000 shares at a price of $0.75 per share. The
directors options expire in five years. Shares underlying the options
granted Mr. Winterton will be included in a registration statement upon the
demand of the holder.
Litigation and Claims
The Company is engaged in various litigation and claims both as defendant and
plaintiff arising through the normal course of business. In the opinion of
management, based on the advise of legal counsel, these lawsuits do not
represent a material obligation to the Company as of November 30, 1999.
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 loss from discontinued operations.
From
Inception of the
Development
Stage on
October 22,
For the nine months Ended 1998 Through
November 30, November 30,
1999 1998 1999
NET REVENUES $ - $ 2,007,608 $ -
COST OF PRODUCTS SOLD - 799,474 -
Gross Profit - 1,208,134 -
EXPENSES
Commissions - 805,081 -
Selling, general and
administrative - 2,740,819 -
Total Expenses - 3,545,900 -
LOSS BEFORE INCOME TAXES - (2,337,766) -
INCOME TAX EXPENSE - - -
NET LOSS $ - $ (2,337,766) $ -
BASIC LOSS PER SHARE OF
COMMON STOCK $ - $ (0.69)
FULLY DILUTED LOSS PER
SHARE OF COMMON STOCK $ - $ (0.69)
The Company had liabilities of $2,459,206 as of November 30, 1999 which are
associated with the discontinued operations. No income tax benefit has been
attributed to the loss from discontinued operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THE RESULTS ANTICIPATED BY THE COMPANY AND DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE
DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
February 28, 1999.
Overview
Plan of Operations
The Company temporarily ceased business operations on October 22, 1998, as
outlined in its 8-K Current Report of such date.
Since then, the Company has undergone a restructuring, which resulted in the
resignation of former directors and executive officers and the election of a
new management team and board of directors. The company successfully resumed
operations in April of 1999 with a new business plan and significant strategic
relationships.
During the next twelve months, the Company expects to become one of the
premier sites on the Internet providing access to electronic shopping via the
company owned Main Street Plaza, local and national news, free email, free
greeting cards, free ISP through a strategic alliance, business opportunities
and much more. The Company expects to become one of the most popular portals
and high traffic sites on the Internet.
The Company specializes in bringing state-of-the-art web site technology and
Internet related services to the small business and home-based business
communities. The companies vision is to provide these fast growing markets
with a web presence and all of the necessary tools to compete effectively on-
line. With sufficient cost controls in place the company expects to be able to
provide these services at a price point that will put the company at the head
of the "competitive pricing pack."
Through core operations, joint venture arrangements and the Company's
membership network, the Company expects its revenue opportunities to be
classified in four general areas:
Monthly revenues from subscribers for web hosting services
Revenues for site design and engineering services
Sales of various Internet related services including Domain Names, Banner
Ads and Merchant account services.
Commissions/Sales derived from products sold from the Company owned Main
Street Plaza
The Company expects its restructured operations and debt reduction strategies
to provide the potential to raise the required equity financing to maintain
operations. To this end the company has entered into an agreement with
Fairway Capital Partners LLC. See Item 6, 8-K Current Report dated September
14, 1999.
For further information, see the Company's web site at www.wiworks.com.
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects, new
products and various other matters. Such forward-looking statements reflect
the current views of management 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 the
Company's forward-looking sattements fall within such safe harbor, the Company
notes that certain risks and uncertainties could cause actual results to
differ substantially from anticipated results. Such risks and uncertainties
include, without limitation, the performance of the Company's independent
distributors, the uncertain future of the Internet and E-Commerce, capacity
constraints on the Company's computer network and related risks of system
failure, and existing and potential governmental regulation affecting the
Internet and the network marketing industry.
Results of Operations
Three and nine months ended November 30, 1999 compared with three and nine
months ended November 30, 1998
In October 1998, the Company discontinued its previous business of developing
web sites, related Internet training and merchandising through Internet mail.
The Company has since entered into a "development stage" in which it is
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 three and nine months ended November 30, 1998.
The Company recorded revenues from the beginning of its new business plan of
$20,793 and $50,940 for the three and nine month periods ended November 30,
1999, respectively.
Selling, general and administrative expenses were $228,854 and $775,460 for
the three and nine month periods ended November 30, 1999, respectively and
depreciation and amortization totaled $494 and $1,326 for the same periods.
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 the Company's new business
plan.
The Company incurred losses from operations of $105,424 and $756,747 for the
three and nine month periods ended November 30, 1999, respectively. 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 the Company's new business plan. The Company anticipates
that its investment in the development and implementation of it's ongoing
business plan will continue at present levels for the remainder of the fiscal
year ending February 28, 2000, assuming the availability of working capital.
The Company reported a net income of $65,706 for the three months ended
November 30, 1999 and a net loss of $(585,617) for the nine months then ended.
Liquidity
The Company's cash increased from $ 0 at the fiscal year ended February 28,
1999, to $4,286 at November 30, 1999. Accounts payable increased from the
fiscal year ended February 28, 1999, from $0 to $60,159, and total current
liabilities decreased from $2,627,271 to $2,520,512 in the same period.
During the nine months ended November 30, 1999, the Company issued 4,170,500
shares of its common stock as follows:
FOR CASH
In October 1999, the Company issued 2,000,000 shares of common stock in
exchange for cash of $100,000. The 2,000,000 shares were issued as the second
installment of a total of 4,200,000 shares to be issued under a definitive
agreement with Fairway Capital Partners, LLC., in exchange for a total of
$1,800,000 in cash plus certain investment banking services to be provided
over a period of one year.
In October 1999, the Company issued 100,000 shares of common stock in
exchange for cash in the amount of $40,000. The shares issued are restricted
under Rule 144 and were issued in private placements to qualified investors.
In addition to the shares issued, each investor received warrants to purchase
an equal number of additional shares of the Company's common stock at $2.00
per share.
In August the Company issued 500,000 shares of common stock in exchange
for cash of $25,000. The 500,000 shares were issued as the first installment
under the definitive agreement with Fairway Capital Partners, LLC., described
above and more fully in the business development section of the Company's
accompanying 10Q for the nine months ending November 30, 1999.
In July the Company issued 50,000 shares of common stock in exchange for
cash of $20,000. In April the Company issued 100,000 shares of common stock in
exchange for cash in the amount of $40,000. All the shares issued are
restricted under Rule 144 and were issued in private placements to qualified
investors. In addition to the shares issued, each investor received warrants
to purchase an equal number of additional shares of the Company's common stock
at $2.00 per share.
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 $75,000. 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 management 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 in the three months ended November 30, 1999
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
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 in the nine
months ended November 30, 1999 relating to the shares issued.
The Company reported a gain from forgiveness of debt of $171,130 for the three
and nine months ended November 30, 1999 and net income of $65,706 for the same
period. Net losses totaled $585,617 for the nine months ended November 30,
1999.
The Company will require substantial additional cash and working capital in
order to continue the development and implementation of its business plan.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company has received several motions for judgment initiated by
creditors of the subsidiary companies. These motions are being addressed and
attempts will be made to settle the motions brought against the Company. (See
Note 4b of the financial statements).
Other than as described herein, the Company is not a party to any other
litigation or other legal proceeding or investigation that is expected to have
a materially adverse effect on its financial condition or results of
operations; nor are any such proceedings known or contemplated.
Item 2. Changes in Securities.
None, not applicable.
Item 3. Defaults Upon Senior Securities.
There were no defaults in payments of this type during the reporting
period.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's security holders
during the three month period ended November 30, 1999.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits and Other Reports on Form 8-K.
(A) The Company filed an 8-K Current Report dated September 14,
1999, respecting a Letter of Intent with Fairway Capital
Partners, LLC.
The Company filed an 8-K Current Report dated October 26, 1999,
respecting the bankruptcy proceedings.
SIGNATURE
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD INTERNETWORKS, INC.
Date: 1/21/00 /s/Steven K. Hansen
-------------- -----------------------------
Steven K. Hansen, Chief Executive Officer
and Director
Date: 1/20/00 /s/Phillip M. Ray
--------------- -----------------------------
Phillip M. Ray, Secretary/Treasurer
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