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As filed with the Securities and Exchange Commission on June 14, 2000.
Registration No. 333-35766
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(AMENDMENT NO. 1)
WORLD INTERNETWORKS, INC.
--------------------------
(Name of small business issuer in its charter)
Nevada 4541 87-0443026
------ ---- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
418 South Commerce Road, Suite 422
Orem, Utah 84058
(801)434-7517
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(Address and telephone number of principal executive offices)
Same as above
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(Address of principal place of business
or intended principal place of business)
Steven K. Hansen
418 South Commerce Road, Suite 422
Orem, Utah 84058
(801) 434-7517
--------------
(Name, address and telephone number of agent for service)
Copies to:
Branden T. Burningham, Esq.
455 East 500 South, Suite 500
Salt Lake City, Utah 84111
(801) 363-7411
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price per Offering Registration
Registered Registered Share (1) Price (1) Fee
---------- ---------- --------- --------- ---
Common Stock, 5,796,000 $1.78125 $10,324,125 $2,725.57
$0.001 par value . .shares
Common Stock
underlying 1,530,000 $1.78125 $ 2,725,312.50 $ 719.48
Warrants(2) . . . . shares
TOTAL. . . . . . . 7,326,000 $1.78125 $13,049,437.50 $3,445.05
shares
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(1) Estimated solely for the purpose of calculating the registration fee
under Rule 457(c) under the Securities Act on the basis of the average of the
bid and asked price of our common stock as quoted on the OTC Electronic
Bulletin Board on April 26, 2000.
(2) In accordance with Rule 416 under the Securities Act of 1933, as amended,
a presently indeterminable number of shares of common stock are registered
hereunder which may be issued in the event the anti-dilution provision of the
Warrants becomes operative.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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WORLD INTERNETWORKS, INC.
7,326,000 Shares of Common Stock
This prospectus covers an aggregate of 7,326,000 shares of our
common stock, which will be sold, from time to time, by some of our
stockholders. These stockholders previously received 5,796,000 of these
shares of common stock from us. The remaining 1,530,000 shares underlie
warrants that some of these stockholders own. We will not receive any money
from the stockholders when they sell their shares of common stock. We have
agreed to pay all costs and expenses relating to the registration of our
common stock, but any stockholders who sell their shares shall be responsible
for any related commissions, taxes, attorney's fees and related charges in
connection with the offer and sale of these securities. The stockholders may
sell all or a portion of the shares registered by this registration statement
in private transactions or in the over-the-counter market at prices related to
the prevailing prices of our common stock at the time of negotiation. The
stockholders may sell their common stock through one or more broker-dealers,
and such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the stockholders.
Our common stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (the "NASD"), under the symbol "WINW."
On April 26, 2000, the price of our common stock as quoted on the OTC Bulletin
Board was $1.6875.
These securities involve a high degree of risk. You should not
invest in these securities unless you can afford to lose your entire
investment. See the caption "Risk Factors," beginning on page 4 of this
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of the prospectus. Any representation to
the contrary is a criminal offense.
You may rely only on the information contained in this prospectus.
We have not authorized anyone to provide information different from that
contained in this prospectus. Neither the delivery of the prospectus nor the
sale of common stock means that information contained in this prospectus is
correct after the date of this prospectus. This prospectus is not an offer to
sell or a solicitation of an offer to buy these shares of common stock in any
circumstances under which the offer or solicitation is unlawful.
The date of this prospectus is June 22, 2000.
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TABLE OF CONTENTS
Available Information . . . . . . . . . . . . . . . . . . . . . . . . .3
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . .3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Determination of Offering Price and Dilution . . . . . . . . . . . . . 8
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . 9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . .10
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Directors, Executive Officers, Promoters and Control Persons . . . . .13
Security Ownership of Certain Beneficial Owners and Management . . . .15
Description of Securities . . . . . . . . . . . . . . . . . . . . . . 17
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . 19
Disclosure of Commission Position on Indemnification for Securities . 19
Act Liabilities
Description of Business . . . . . . . . . . . . . . . . . . . . . . . 20
Management's Discussion and Analysis or Plan of Operation . . . . . . 29
Description of Property . . . . . . . . . . . . . . . . . . . . . . . 36
Certain Relationships and Related Transactions . . . . . . . . . . . .36
Market for Common Equity and Related Stockholder Matters . . . . . . .37
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . .38
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .40
Changes in and Disagreements with Accountants on Accounting and . . . 64
Financial Disclosure
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AVAILABLE INFORMATION
We file periodic reports with the Securities and Exchange
Commission. These documents may be inspected and copied at the Public
Reference Room of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-
SEC-0330 for additional information. Our Commission filings are also
available from the Commission's web site: http://www.sec.gov.
We have filed a registration statement with the Commission on Form
SB-2, under the Securities Act of 1933, with respect to the securities
described in this prospectus. This prospectus is filed as part of the
registration statement. It does not contain all of the information set forth
in the registrations statement and the exhibits and schedules filed with it.
For further information about us and the common stock described by this
prospectus, reference is made to the registration statement and to the
exhibits and schedules filed with it. Copies of these documents may be
inspected at or obtained from the Public Reference Branch.
PROSPECTUS SUMMARY
WORLD INTERNETWORKS, INC.
-------------------------
Since this is a summary of the terms of the common stock described
in this prospectus, it does not contain all of the information that may be
important to you. This prospectus contains "forward-looking" information
within the meaning of the Private Securities Litigation Reform Act of 1995.
We believe that the forward-looking statements contained in this prospectus
are within the meaning of the safe harbor provided by Section 27A of the
Securities Act of 1933. Forward-looking statements contained in this
prospectus involve known and unknown risks, uncertainties and other factors
that could cause actual results, financial or operating performance to differ
from the future results, financial or operating performance or achievements
expressed or implied by such forward-looking statements. You should read the
following summary and the "Risk Factors" section along with the more detailed
information , financial statements and the notes to the financial statements
appearing elsewhere in this prospectus before you decide whether to purchase
the common stock described in this prospectus.
The Company
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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.
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The Offering
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Securities offered by us . . . None
Securities that may be sold
by our stockholders . . . . . . 7,326,000 shares of our common stock.
Use of proceeds . . . . . . . . We will not receive any money from any
stockholders when they sell their shares of
common stock.
Offering Price . . . . . . . . .Market prices prevailing at the time of sale,
at prices related to the prevailing market
prices, at negotiated prices or at fixed
prices, all of which may change.
Transfer Agent . . . . . . . . .Standard Registrar & Transfer Company,
12528 South 1840 East, Draper, Utah 84020,
serves as the transfer agent and registrar for
our outstanding securities.
RISK FACTORS
------------
An investment in shares of World Internetworks' common stock is
very speculative and involves substantial risks. In addition to the general
investment risks and other information in this prospectus, you should
carefully consider the following factors before making an investment decision.
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.
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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 anticipates 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.
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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
"General" 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:
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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.
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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).
YOU SHOULD NOT EXPECT THE PAYMENT OF DIVIDENDS FROM YOUR INVESTMENT
World Internetworks does not expect to pay dividends on its common
stock in the foreseeable future. Future dividends, if any, will depend upon
our earnings, if any. Investors who will need cash dividends from their
investment should not purchase our common stock.
USE OF PROCEEDS
---------------
World Internetworks will not receive any part of the proceeds from
our stockholders' sale of our common stock.
DETERMINATION OF OFFERING PRICE AND DILUTION
--------------------------------------------
We will not receive any money from the stockholders when they sell
their shares of common stock. The stockholders may sell all or a portion of
their common stock in private transactions or in the over-the-counter market
at prices related to the prevailing prices of our common stock at the time of
negotiation. Because we can not accurately predict the prices of such sales,
we can not accurately estimate the amount of any dilution that may result from
the purchase of these shares. However, the net tangible book value of our
common stock on February 29, 2000, was $(0.30) per share. Net tangible book
value per share is determined by subtracting our total liabilities from our
total tangible assets and dividing the remainder by the number of shares of
common stock outstanding.
You should not ascribe any value to our common stock in view of the
lack of any established public market for these securities and their negative
tangible book value, as well as our limited operating history and revenues,
lack of profits and dividends, and the other risk factors discussed in this
prospectus. You are likely to suffer significant dilution relative to any
value you may ascribe to the shares you receive under this prospectus.
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We can not assure you that any public market for our common stock
will equal or exceed the sales price of the shares of common stock sold by our
stockholders. Purchasers of the shares face the risk that their shares will
not be worth what they paid for them.
SELLING SECURITY HOLDERS
------------------------
The following table shows for our stockholders the following
information:
The number of shares of our common stock beneficially owned by them as
of March 24, 2000 and covered by this prospectus; and
The number of shares to be retained after this offering, if any.
Common Stock (1)
----------------
Number of Shares
Owned Prior to Number of Shares
and Registered Beneficially Owned
Name of Selling Stockholder in the Offering after the Offering(2)
--------------------------- --------------- ------------------
Fairway Capital Partners LLC 1,625,000 -0-
Dwain Brannon Group LLC 125,000 -0-
Patrick Kephart 125,000 -0-
Bart Walters 125,000 -0-
Noziroh, Ltd. 375,000 -0-
Capital Investment Partners #1 SA 375,000 -0-
Christian Baddour 200,000 -0-
Jeff Parsons 50,000 -0-
GJM Trading Partners, Ltd. 800,000 -0-
Growth Ventures, Inc. 400,000 -0-
Douglas L. Rex 30,000 22,500
Leonard W. Burningham, Esq. 100,000 (3) 50,000
M. J. Camberlango 160,000 (3) -0-
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Madeleine Franco 36,000 11,250
First Security Bank, Trustee 50,000 (3) -0-
for Harold J. Steele
Sterling K. Jenson 50,000 (3) -0-
Amna S. Jamhour 50,000 (3) 33,400
Cherie S. Darrohn 50,000 (3) -0-
Triangle Bar Ranch 25,000 (3) -0-
Earlene S. Rex 25,000 (3) 13,500
Tri-Gold Investments Ltd. 500,000 (3) -0-
Jayvee & Co. 500,000 (3) -0-
Nottinghill Resources Ltd. 500,000 (3) -0-
Fairwinds Investments Ltd. 400,000 (3) -0-
Charles Walker 200,000 (3) -0-
K. Warren Mitchell 200,000 (3) -0-
Michael R. Viau 200,000 (3) -0-
O. Bryan Wilkinson 50,000 (3) -0-
(1) We assume no purchase in this offering by any stockholder listed
above of any shares of our common stock.
(2) Assumes the sale of all securities being registered.
(3) One-half of this figure constitutes shares of our common stock
underlying warrants that are exercisable at a price of $2 per share.
PLAN OF DISTRIBUTION
--------------------
We are registering the shares of our common stock covered by this
prospectus.
We will pay the costs, expenses and fees of registering the common
stock, but our stockholders will pay any underwriting or brokerage commissions
and similar selling expenses relating to the sale of shares of their common
stock.
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Our stockholders may sell our common stock at market prices
prevailing at the time of the sale, at prices related to the prevailing market
prices, at negotiated prices or at fixed prices, any of which may change. Our
stockholders may sell some or all of their common stock through:
Ordinary broker's transactions, which may include long or short
sales;
Purchases by brokers, dealers or underwriters as principal and
resale by those purchasers for their own accounts under this
prospectus;
Market makers or into an existing market for the common stock;
Transactions in options, swaps or other derivatives; or
Any combination of the selling options described in this
prospectus, or by any other legally available means.
In addition, our stockholders may enter into hedging transactions
with broker-dealers, who may engage in short sales of our common stock in the
course of hedging the positions they assume. Finally, our stockholders may
enter into options or other transactions with broker-dealers that require the
delivery of our common stock to those broker-dealers. Subsequently, the
shares may be resold under this prospectus.
In their selling activities, our stockholders will be subject to
applicable provisions of the Securities Exchange Act of 1934, and its rules
and regulations, including Regulation M, which may limit the timing of
purchases and sales of our common stock by our stockholders.
Those of our stockholders and any broker-dealers involved in the
sale or resale of our common stock may qualify as "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933. In addition, the
broker-dealers' commissions, discounts or concessions may qualify as
underwriters' compensation under the Securities Act of 1933. If any broker-
dealer or any of our stockholders qualifies as an "underwriter," they will be
subject to the prospectus delivery requirements of Section 154 of the
Securities Act of 1933.
In conjunction with sales to or through brokers, dealers or agents,
our stockholders may agree to indemnify such brokers, dealers or agents
against liabilities arising under the Securities Act of 1933. We do not know
of any existing arrangements between our stockholders and any other
stockholder, broker, dealer, underwriter or agent relating to the sale or
distribution of our common stock.
In addition to selling their common stock under this prospectus, our
stockholders may:
Transfer their common stock in other ways not involving market
makers or established trading markets, including by gift,
distribution or other transfer; or
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Sell their common stock under Rule 144 of the Securities Act of
1933, if the transaction meets the requirements of Rule 144.
We have advised our stockholders that, during the time each is
engaged in distribution of their common stock, each must comply with Rule 10b-
5 and Regulation M under the Securities Exchange Act of 1934. They must do
all of the following under those rules:
Not engage in any stabilization activity in connection with our
common stock;
Furnish each broker who may be offering our common stock on
behalf of our stockholders the number of copies of this
prospectus required by each broker; and
Not bid for or purchase any of our common stock or attempt to
induce any person to purchase any of our common stock, other
than as permitted under the Securities Exchange Act of 1934.
Any of our stockholders who may be "affiliated purchasers," as
defined in Regulation M, have been further advised that they must coordinate
their sales under this prospectus with each other and us for the purposes of
Regulation M.
To the extent required by the Securities Act of 1933, a supplemental
prospectus will be filed, disclosing:
The name of any such broker-dealers;
The number of securities involved;
The price at which such securities are to be sold;
The commissions paid or discounts or concessions allowed to
such broker-dealers, where applicable;
That such broker-dealers did not conduct any investigation to
verify the information set out in this prospectus, as
supplemented; and
Other facts material to the transaction.
There is no assurance that any of our stockholders will sell any of
our common stock.
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
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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.
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.
13
<PAGE>
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.
Significant Employees.
----------------------
Steven K. Hansen is a significant full-time employee. We do not
presently employ any non-officers who are expected to make a significant
contribution to our business.
Family Relationships.
---------------------
There are no family relationships between any of our directors or
executive officers.
Involvement in Certain Legal Proceedings.
-----------------------------------------
Except as stated below, during the past five years, no present or
former director, executive officer or person nominated to become a director or
an executive officer of World Internetworks:
14
<PAGE>
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
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. In
addition, World Internet Marketplace was dissolved by the Utah Department of
Commerce on June 18, 1999; the other two corporations were dissolved on August
1, 1999. The Department's computer database shows that Richard T. Smith, who
is a former director of World Internetworks, was also a director of Global
Media Group, Inc., and of Global Wholesale Exchange, Inc.
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
---------------- ---------------------------- --------
<S> <C> <C>
Gary J. McAdam 1,200,000 (1) 13.4%
14 Red Tail Dr.
Highlands Ranch, Colorado
80126
15
<PAGE>
Steven K. Hansen 1,000,000 (2) 11.2%
1379 East Indian Ridge Cir.
Sandy, Utah
84092
Fairway Capital Partners LLC 1,625,000 (3) 18.1%
56 East Pine St., Suite 200
Orlando, Florida
32802
-------- -----
TOTALS 3,825,000 42.7%
(1) 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.
(2) A total of 700,000 of these shares are held of record by Mr. Hansen
and his wife as joint tenants.
(3) This figure does not include an additional 14,954 "unregistered" and
"restricted" shares that our Board of Directors resolved to issue on June 11,
2000, pursuant to our Consulting Agreement with Fairway Capital. See the
heading "General" under the caption "Description of Business" of this
prospectus.
</TABLE>
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
---------------- ---------------------------- ----------
<S> <C> <C>
Steven K. Hansen 1,000,000 (1) 11.2%
1379 East Indian Ridge Cir.
Sandy, Utah
84092
Randal L. Roberts -0- -0-
9878 South Lannae Dr.
Sandy, Utah
84094
16
<PAGE>
Gary S. Winterton 10,000 (2) 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) Mr. Hansen and his wife hold a total of 700,000 of these shares as
joint tenants.
(2) Mr. Winterton purchased these shares in an open-market transaction.
See the caption "Directors, Executive Officers, Promoters and
Control Persons," of this prospectus for information about the offices or
other capacities in which each of these persons serves with World
Internetworks.
Changes in Control.
-------------------
Our Letter of Intent with Fairway Capital gives Fairway Capital the
option to appoint three of five members of our Board of Directors and to
appoint its representatives as executive officers of World Internetworks. If
Fairway Capital exercises this option, its appointees will constitute a
majority of our Board of Directors and will be able to determine our corporate
direction. Fairway Capital has not yet exercised this option. See the Risk
Factor "An Agreement with a Third Party May Result in a Change in Control."
DESCRIPTION OF SECURITIES
-------------------------
World Internetworks has the authority to issue 500,000,000 shares of
one mill ($0.001) par value common voting stock. The holders of our common
stock are entitled to one vote per share on each matter submitted to a vote at
a meeting of stockholders. The shares of common stock do not carry cumulative
voting rights in the election of directors.
Our stockholders have no pre-emptive rights to acquire additional
shares of common stock or other securities, but the Board of Directors does
have the right to resolve that our unissued securities be offered for
subscription only to our common stock holders or only to such stock holders in
proportions based on their stock ownership. The common stock is not subject
to redemption rights and carries no subscription or conversion rights. In the
event of liquidation of World Internetworks, the shares of common stock are
entitled to share equally in corporate assets after satisfaction of all
liabilities. All shares of the common stock now outstanding are fully paid
and non-assessable.
17
<PAGE>
Our Bylaws authorize the Board of Directors to vote to declare
dividends whenever the Board believes it to be expedient.
The common stock holders are not personally liable for the payment
of our debts.
Our shares of common stock are "penny stock" as defined in Rule
3a51-1 of the Securities and Exchange Commission. This designation may
adversely affect the development of any public market for our common stock or,
if such a market develops, its continuation. Broker-dealers are required to
personally determine whether an investment in "penny stock" is suitable for
customers.
Penny stocks are securities (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national
exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation
system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv)
of an issuer with net tangible assets less than $2,000,000 (if the issuer has
been in continuous operation for at least three years) or $5,000,000 (if in
continuous operation for less than three years), or with average annual
revenues of less than $6,000,000 for the last three years.
Section 15(g) of the 1934 Act, and Rule 15g-2 of the Securities and
Exchange Commission require broker-dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny stocks and
to obtain a manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor's account.
Potential investors in our common stock are urged to obtain and read such
disclosure carefully before purchasing any shares that are deemed to be "penny
stock."
Rule 15g-9 of the Securities and Exchange Commission requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience
and investment objectives; (ii) reasonably determine, based on that
information, that transactions in penny stocks are suitable for the investor
and that the investor has sufficient knowledge and experience as to be
reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may make it
more difficult for purchasers of our common stock to resell their shares to
third parties or to otherwise dispose of them.
Of the 8,956,607 shares of our common stock that were issued and
outstanding on March 24, 2000, 5,042,075 shares are "restricted," and
approximately 1,049,984 of these "restricted" shares are currently eligible
for resale under Rule 144 of the Securities and Exchange Commission. An
additional 176,639 shares will become available for resale under Rule 144 on
or before August 1, 2000. The future sale of these "restricted" shares may
have an adverse effect on any market that may develop for our common stock.
18
<PAGE>
INTEREST OF NAMED EXPERTS AND COUNSEL
-------------------------------------
Our financial statements as of February 29, 2000, have been included
herein in reliance on the report of HJ & Associates, LLC (formerly known as
"Jones, Jensen & Company"), independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
We have not hired any expert or counsel on a contingent basis. No
expert or counsel will receive a direct or indirect interest in World
Internetworks, and no such person was a promoter, underwriter, voting trustee,
director, officer or employee of World Internetworks.
Branden T. Burningham, Esq., who assisted us with the preparation of
this prospectus and the registration statement of which it is a part, is the
son of Leonard W. Burningham, Esq. The elder Mr. Burningham beneficially owns
100,000 shares of the shares that we are currently registering. The younger
Mr. Burningham beneficially owns approximately 7,625 shares of our common
stock; we are not currently registering these shares.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
-----------
Section 78.7502(1) of the Nevada Revised Statutes ("NRS")
authorizes a Nevada corporation to indemnify any director, officer, employee,
or corporate agent "who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the corporation" due to his or her corporate role. Section
78.7502(1) extends this protection "against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he
acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful."
Section 78.7502(2) of the NRS also authorizes indemnification of
the reasonable defense or settlement expenses of a corporate director,
officer, employee or agent who is sued, or is threatened with a suit, by or in
the right of the corporation. The party must have been acting in good faith
and with the reasonable belief that his or her actions were in or not opposed
to the corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.7502(1) or 78.7502(2), Section 78.7502(3)
of the NRS requires that he be indemnified "against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
with the defense."
19
<PAGE>
Unless ordered by a court or advanced pursuant to Section 78.751(2),
Section 78.751(1) of the NRS limits indemnification under Section 78.7502 to
situations in which either (1) the stockholders, (2)the majority of a
disinterested quorum of directors, or (3) independent legal counsel determine
that indemnification is proper under the circumstances.
Section 78.751(2) authorizes a corporation's articles of
incorporation, bylaws or agreement to provide that directors' and officers'
expenses incurred in defending a civil or criminal action must be paid by the
corporation as incurred, rather than upon final disposition of the action,
upon receipt by the director or officer to repay the amount if a court
ultimately determines that he is not entitled to indemnification.
Section 78.751(3)(a) provides that the rights to indemnification and
advancement of expenses shall not be deemed exclusive of any other rights
under any bylaw, agreement, stockholder vote or vote of disinterested
directors. Section 78.751(3)(b) extends the rights to indemnification and
advancement of expenses to former directors, officers, employees and agents,
as well as their heirs, executors, and administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability resulting from his or her
corporate role.
Article VIII of our Bylaws contains indemnification provisions that
virtually identical to the indemnification provisions of the NRS. In addition,
Paragraph 6 of our Employment Agreement with Mr. Hansen requires us to
indemnify Mr. Hansen "in any action arising out of the discharge of his
duties," including actions and claims relating to matters that occurred before
February 19, 1999, the date of the Employment Agreement.
This is only a summary of the indemnification provisions of the NRS
and our Articles of Incorporation, Bylaws and contracts. You are urged to
review our Bylaws for the actual text of their indemnification provisions.
See the Exhibit Index.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of World Internetworks pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
-----------------------
General.
--------
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
20
<PAGE>
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.
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
21
<PAGE>
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 $12.50. 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
22
<PAGE>
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
23
<PAGE>
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; these shares are a portion of the shares that we are
registering with the Securities and Exchange Commission.
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
24
<PAGE>
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. On June 11, 2000, our Board of Directors
unanimously resolved to issue 14,954 "unregistered" and "restricted" shares of
our common stock to Fairway Capital as payment through May, 2000. Our Board
of Directors also resolved to issue 71,750 "unregistered" and "restricted"
shares of common stock to Sherman Consulting for its assistance with our
private placement. See the caption "Liquidity and Capital Resources" of this
prospectus.
Principal Products or Services and Their Markets.
-------------------------------------------------
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
25
<PAGE>
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 understanding 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
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<PAGE>
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.
27
<PAGE>
Competitive Business Conditions.
---------------------------------
For a discussion of the competitive risks that we face, see the Risk
Factors "The Highly Competitive Nature of the Internet Industry May Limit Our
Chances of Success" and "The Web Site Design and Hosting Industry Has Low
Barriers to Entry" of this prospectus.
Sources and Availability of Raw Materials.
------------------------------------------
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 prospectus.
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.
Need for 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. However, see the Risk
Factors "The Direct Distribution and Network Marketing Industry is Subject to
Government Scrutiny" and "Any Future Governmental Regulation of the Internet
May Adversely Affect Our Operations" of this prospectus.
Effect of Existing or Probable Governmental Regulations on the Business.
------------------------------------------------------------------------
See the Risk Factors "The Direct Distribution and Network Marketing
Industry is Subject to Government Scrutiny" and "Any Future Governmental
Regulation of the Internet May Adversely Affect Our Operations" of this
prospectus.
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
28
<PAGE>
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.
Reports to Security Holders.
----------------------------
The National Association of Securities Dealers, Inc. requires that
all issuers maintaining quotations of their securities on the OTC Bulletin
Board file periodic reports under the Securities Exchange Act of 1934, and
World Internetworks does file periodic reports with the Securities and
Exchange Commission under Section 15(d) of the 1934 Act.
The public may read and copy any materials that we file with the
Securities and Exchange Commission at the Commission's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address
of that site is http://www.sec.gov.
We intend to furnish to our stockholders annual reports containing
financial statements audited and reported upon by our independent accounting
firm and such other periodic reports as we may determine to be appropriate or
as may be required by law.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR 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.
29
<PAGE>
As of May 31, 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.
30
<PAGE>
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.
31
<PAGE>
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.
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<PAGE>
General and administrative expenses totaled $885,133 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 general and administrative
expenses relate to the development and implementation of our new business
plan.
World Internetworks incurred losses from operations of $848,932 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 $(680,866) 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, World Internetworks
reached an agreement with a creditor holding promissary notes payable by us 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 us
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 our previous consolidated balance
sheets. Additionally, in November 1999, we negotiated reductions of $3,065 in
amounts due various trade creditors.
On October 26, 1999, each of our 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 our subsidiaries until a
meeting of creditors and a hearing is conducted by the Court. Our
33
<PAGE>
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 our
consolidated balance sheets and totaled $2,459,205 at February 29, 2000. We
expect 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
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<PAGE>
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
35
<PAGE>
Counsel to World Internetworks 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.
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.
CERTAIN RELATIONSHIPS AND RELATED 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 calendar years ended December 31, 1999, and 1998, World
Internetworks did not enter into any material transactions, series of similar
transactions, currently proposed transactions, or series of similar
36
<PAGE>
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 World Internetworks' common
stock, or any member of the immediate family of any of the foregoing persons,
had a material interest.
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.
37
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Holders.
--------
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.
EXECUTIVE COMPENSATION
----------------------
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.
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<PAGE>
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.
Summary Compensation Table
--------------------------
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.
39
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FINANCIAL STATEMENTS
--------------------
40
<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>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
----------
Grant Thornton LLP, Certified Public Accountants, of Provo, Utah,
audited our financial statements for the fiscal year ended February 28, 1998.
On February 9, 1999, Grant Thornton resigned as our certifying accountant and
Jones, Jensen & Company, LLC (now known as "HJ & Associates, LLC"), of Salt
Lake City, Utah was subsequently engaged as our certifying accountant.
There were no disagreements between World Internetworks and Grant
Thornton, 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 Grant Thornton to make
reference to the subject matter of the disagreement in connection with its
report.
The reports of Grant Thornton did not contain any adverse opinion or
disclaimer of opinion, and with the exception of a "going concern"
qualification because of substantial losses from operations in recent years,
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years ended February 28, 1997, and 1998, and since
then, Grant Thornton has not advised us that any of the following exists or is
applicable:
That the internal controls necessary for us to develop reliable
information has come to its attention that has led it to no
longer be able to rely on management's representations or that
has made it unwilling to be associated with the financial
statements prepared by management;
That Grant Thornton needed to expand significantly the scope of
its audit or that information has come to its attention that if
further investigated may materially impact the fairness or
reliability of a previously issued audit report or the
underlying financial statements or any other financial
presentation or cause it to be unwilling to rely on
management's representations or be associated with our
financial statements for the foregoing reasons or any other
reason; or
That Grant Thornton has advised us that information has come to
its attention that it has concluded materially impacts the
fairness or reliability of either a previously issued audit
report or the underlying financial statements for the foregoing
reasons or any other reason.
On March 23, 1999, we filed with the Securities and Exchange
Commission a Current Report on Form 8-K disclosing Grant Thornton's
resignation. This Current Report may be reviewed by accessing the Securities
and Exchange Commission's web site: www.sec.gov.
64
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors And Officers
-----------------------------------------
Section 78.7502(1) of the Nevada Revised Statutes ("NRS")
authorizes a Nevada corporation to indemnify any director, officer, employee,
or corporate agent "who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the corporation" due to his or her corporate role. Section
78.7502(1) extends this protection "against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he
acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful."
Section 78.7502(2) of the NRS also authorizes indemnification of
the reasonable defense or settlement expenses of a corporate director,
officer, employee or agent who is sued, or is threatened with a suit, by or in
the right of the corporation. The party must have been acting in good faith
and with the reasonable belief that his or her actions were in or not opposed
to the corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.7502(1) or 78.7502(2), Section 78.7502(3)
of the NRS requires that he be indemnified "against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
with the defense."
Unless ordered by a court or advanced pursuant to Section 78.751(2),
Section 78.751(1) of the NRS limits indemnification under Section 78.7502 to
situations in which either (1) the stockholders, (2)the majority of a
disinterested quorum of directors, or (3) independent legal counsel determine
that indemnification is proper under the circumstances.
Section 78.751(2) authorizes a corporation's articles of
incorporation, bylaws or agreement to provide that directors' and officers'
expenses incurred in defending a civil or criminal action must be paid by the
corporation as incurred, rather than upon final disposition of the action,
upon receipt by the director or officer to repay the amount if a court
ultimately determines that he is not entitled to indemnification.
Section 78.751(3)(a) provides that the rights to indemnification and
advancement of expenses shall not be deemed exclusive of any other rights
65
<PAGE>
under any bylaw, agreement, stockholder vote or vote of disinterested
directors. Section 78.751(3)(b) extends the rights to indemnification and
advancement of expenses to former directors, officers, employees and agents,
as well as their heirs, executors, and administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability resulting from his or her
corporate role.
Article VIII of our Bylaws contains indemnification provisions that
virtually identical to the indemnification provisions of the NRS. In
addition, Paragraph 6 of our Employment Agreement with Mr. Hansen requires us
to indemnify Mr. Hansen "in any action arising out of the discharge of his
duties," including actions and claims relating to matters that occurred before
February 19, 1999, the date of the Employment Agreement.
The foregoing is only a summary of the indemnification provisions of
our Bylaws and contracts. See the Exhibit Index.
Item 25. Other Expenses of Issuance And Distribution
-------------------------------------------
The following table sets forth the expenses which we expect to incur
in connection with the registration of the shares of common stock being
registered hereby. All of these expenses, except for the Commission
registration fee, are estimated:
Securities and Exchange Commission registration fee........$ 3,445.05
Legal fees and expenses....................................$45,000
Accounting fees............................................$ 1,200
Printing and engraving expenses............................$ 500
Transfer agent fees........................................$ 1,500
Miscellaneous..............................................$ 500
--------
Total................................................$52,145.05
Item 26. Recent Sales of Unregistered Securities
---------------------------------------
The following table provides information about all "unregistered"
and "restricted" securities that World Internetworks has sold within the past
three years and which were not registered under the Securities Act of 1933:
66
<PAGE>
<TABLE>
Number
Date of Aggregate
Name of Owner Acquired Shares (1) Consideration
------------- -------- ------ -------------
<S> <C> <C> <C>
Joe Purcell 5/28/97 50,000 (2) Option exercise
Gordon Bradberry 5/28/97 37,500 Option exercise
Brent Wardle 8/18/97 1,500 (2) Option exercise
Brian Wardle 8/18/97 1,500 (2) Option exercise
Ron Wardle 8/18/97 30,000 (2) Option exercise
Paul Foster 10/10/97 750 Option exercise
Shellie Cline 4/28/98 1,250 Option exercise
30 individuals 5/21/98 750 Option exercise
(25 shares per person)
Jerry Foster 6/29/98 3,750 Services
Jerry Foster 7/2/98 15,000 Services
Bill Walsh 7/6/98 3,750 Option exercise
Madeleine Franco 7/6/98 1,875 Services
Danette Uyeda 8/3/98 875 Option exercise
Damien Zamora 8/3/98 6,250 Services
Toni Druce 8/11/98 13,125 Option exercise
Milton Druce 8/11/98 1,125 Option exercise
Justeene Blankenship 8/11/98 15,875 Option exercise
Justeene Blankenship 9/20/98 1,250 Option exercise
Steven K. Hansen 11/30/98 175,000 Services
Dwain Brannon 11/30/98 75,000 Services
Leonard W. Burningham, Esq. 11/30/98 50,000 Services
James C. Thomas 2/19/99 5,000 $5,000
Steven K. Hansen 3/19/99 800,000 Execution of
Employment
Agreement
Douglas L. Rex 3/19/99 10,000 Services
67
<PAGE>
R. Spencer Robinson, Esq. 3/19/99 3,000 Services
David L. Bird, Esq. 3/19/99 15,000 Services
Automotive Direct 3/19/99 20,000 Retirement of
$40,000 debt
Fairway Capital Partners LLC 9/14/99 125,000 (3)
Dwain Brannon Group LLC 9/14/99 125,000 (3)
Bart Walters 9/14/99 125,000 (3)
Patrick Kephart 9/14/99 125,000 (3)
GJM Trading Partners, Ltd. 11/5/99 800,000 (3)
Growth Ventures, Inc. 11/5/99 400,000 (3)
Capital Investment Partners 11/5/99 250,000 (3)
#1 SA
Noziroh, Ltd. 11/5/99 250,000 (3)
Fairway Capital Partners, LLC 11/5/99 300,000 (3)
First Security Bank, Trustee 11/5/99 25,000 (4)
for Harold J. Steele
Sterling K. Jenson 11/5/99 25,000 (4)
Amna S. Jamhour 11/5/99 25,000 (4)
Cherie S. Darrohn 11/5/99 25,000 (4)
Jeffrey H. Barton 11/5/99 62,500 (4)
Triangle Bar Ranch 11/5/99 12,500 (4)
Earlene S. Rex 11/5/99 12,500 (4)
Walter J. Bouck 11/5/99 37,500 (4)
Leonard W. Burningham 11/5/99 50,000 (4)
M. J. Camberlongo 1/12/00 80,000 (4)
Christian Baddour 2/17/00 200,000 (3)
Jeff Parsons 2/17/00 50,000 (3)
68
<PAGE>
Noziroh, Ltd. 2/17/00 125,000 (3)
Capital Investment Partners 2/17/00 125,000 (3)
#1 SA
Fairway Capital Partners, LLC 2/17/00 1,200,000 (4)
Madeleine Franco 2/17/00 36,000 Services
Douglas L. Rex 2/17/00 20,000 Services
Tri-Gold Investments Ltd. 3/22/00 250,000 (4)
Jayvee & Co. 3/22/00 250,000 (4)
Nottinghill Resources Ltd. 3/22/00 250,000 (4)
Fairwinds Investments Ltd. 3/22/00 200,000 (4)
Charles Walker 3/22/00 100,000 (4)
K. Warren Mitchell 3/22/00 100,000 (4)
Michael R. Viau 3/22/00 100,000 (4)
O. Bryan Wilkinson 3/22/00 25,000 (4)
Fairway Capital Partners, LLC 6/11/00 14,954 (5)
Sherman Consulting 6/11/00 71,750 Services
(1) These figures take into account the four-for-one reverse
split of our outstanding common stock on September 4, 1998.
(2) On or about December 12, 1998, our Board of Directors
resolved to cancel these shares for failure to pay the option exercise price
of $0.25 per share.
(3) We issued these shares for the total sum of $162,500, the
exercise price of the options to acquire 4,200,000 shares under the Fairway
Capital Letter of Intent. See the caption "Description of Business."
(4) We issued these shares under our private placement of
1,250,000 Units, at a price of $0.40 per Unit. Each Unit consists of one
"unregistered" and "restricted" share of our common stock and one warrant to
purchase an additional "unregistered" and "restricted" share of our common
stock at a price of $2 per share, expiring two years from the completion of
the private placement. Our offering was oversubscribed by 380,000 Units, and
we have issued all subscribed Units.
(5) We issued these shares under our Consulting Agreement with
Fairway Capital. See the heading "General" of the caption "Description of
Business."
Management believes that each of these investors was an "accredited
investor" as that term is defined under applicable federal and state
securities laws, rules and regulations, or were sophisticated investors with
such knowledge and experience in financial and business matters that they were
capable of evaluating the merits and risks of their investments. Management
also believes that the offer and sale of these shares of common stock were
69
<PAGE>
exempt from the registration requirements of Section 5 of the Securities Act
of 1933, pursuant to Section 4(2) thereof, and from similar states' securities
laws, rules and regulations covering the offer and sale of securities by
available state exemptions from such registration.
Item 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description (1)
------ ---------------
<S> <C>
3.1 Articles of Incorporation, filed March 17, 1986 (2)
3.2 Articles of Amendment, filed September 5, 1996 (2)
3.3 Certificate Pursuant to Section 78.207(4) of the Nevada
Revised Statutes, filed October 11, 1996 (2)
3.4 Certificate Pursuant to Section 78.207(4) of the Nevada
Revised Statutes, filed October 24, 1996 (2)
3.5 Certificate of Amendment, filed March 30, 1998 (2)
3.6 Certificate of Amendment, filed August 31, 1998 (2)
3.7 Bylaws (2)
5.1 Opinion of Branden T. Burningham, Esq. regarding legality (2)
10.1 Letter Agreement with Internet Marketing Concepts, dated
April 13, 1999 (2)
10.2 Letter of Intent with Fairway Capital Partners, LLC,
dated September 12, 1999 (2)
10.3 Consulting Agreement with Fairway Capital Partners, LLC,
dated August 16, 1999 (2)
10.4 Employment Agreement with Steven K. Hansen, dated February
19, 1999 (2)
10.5 Employment Agreement with Gary S. Winterton, dated August
12, 1999 (2)
23.1 Consent of HJ & Associates, LLC (formerly known as "Jones, Jensen
& Company")
23.2 Consent of Branden T. Burningham, Esq.
27.1 Financial Data Schedule
(1) Summaries of all exhibits contained within this
Registration Statement are modified in their
entirety by reference to these Exhibits.
(2) Each of these documents was filed with World Internetworks'
original Registration Statement on Form SB-2, filed
April 27, 2000.
70
<PAGE>
Item 28. Undertakings
------------
World Internetworks hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and
(iii) include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, executive officers
and controlling persons the foregoing provisions or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than our payment of expenses incurred or paid by any of our
directors, executive officers or controlling persons in the successful defense
of any action, suit or proceeding) is asserted by such director, executive
officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
71
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SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing of Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of Orem, State of Utah, on June 13, 2000.
WORLD INTERNETWORKS, INC.
By /s/ Steven K. Hansen
---------------------------------
Steven K. Hansen, President and
Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following person in the capacities
and on the dates stated.
/s/ Steven K. Hansen
---------------------------------
Steven K. Hansen, President and
Director
/s/ Gary S. Winterton
---------------------------------
Gary S. Winterton, Director
72
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Date Filed: June 14, 2000 SEC File No. 333-35766
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
WORLD INTERNETWORKS, INC.
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