FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1999
Commission File Number 33-16757
ONE WORLD ONLINE.COM, INC.
(Exact name of small business issuer as identified in its charter)
Nevada 87-0411771
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4778 North 300 West, Suite 200, Provo, Utah 84604 (Address of
principal executive offices)
(Zip Code)
(801) 852-3540
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
X Yes __ No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of November 10, 1999: 15,475,000.
<PAGE>
The accompanying notes are an integral part of these financial statements.
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
ONE WORLD ONLINE.COM, INC.
Condensed Consolidated Financial Statements (unaudited)
September 30, 1999
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ONE WORLD ONLINE.COM, INC.
Index to Condensed Consolidated Financial Statements (unaudited)
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Page
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Condensed Consolidated Balance Sheet (unaudited) F-2
Condensed Consolidated Statement of Operations (unaudited) F-3
Condensed Consolidated Statement of Cash Flows (unaudited) F-4
Notes to Condensed Consolidated Financial Statements (unaudited) F-5
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ONE WORLD ONLINE.COM, INC.
Condensed Consolidated Balance Sheet (unaudited)
September 30, 1999
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Assets
Current assets:
<S> <C>
Cash $ 1,780,000
Accounts receivable 1,000
Inventory 237,000
Other current assets 7,000
--------------------
Total current assets 2,025,000
--------------------
Equipment, net 646,000
Other assets 151,000
--------------------
Total assets $ 2,822,000
--------------------
- -------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 68,000
Accrued liabilities 154,000
Current portion of capital lease obligation 5,000
--------------------
Total current liabilities 227,000
--------------------
Capital lease obligation 9,000
--------------------
Stockholders' equity
Common stock 15,000
Additional paid in capital 5,558,000
Accumulated deficit (2,987,000)
--------------------
Total stockholders' equity 2,586,000
--------------------
Total liabilities and stockholders' equity $ 2,822,000
--------------------
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See accompanying notes to condensed consolidated financial statements F-2
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<CAPTION>
ONE WORLD ONLINE.COM, INC.
Condensed Consolidated Statement of Operations (unaudited)
For the Three Months Ended September 30, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Revenue $ 318,000
Cost of sales 519,000
-------------------
Gross margin (201,000)
General and administrative expenses (1,159,000)
Other Income 42,000
-------------------
Loss before income taxes (1,318,000)
Income tax benefit -
-------------------
Net Loss $ (1,318,000)
-------------------
Loss per share - basic and diluted $ (0.09)
-------------------
Weighted average shares - basic and diluted 15,475,000
-------------------
- ------------------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements F-3
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<CAPTION>
ONE WORLD ONLINE.COM, INC.
Consolidated Statement of Stockholders' Equity (unaudited)
For the Quarter Ended September 30, 1999
- --------------------------------------------------------------------------------------------------------------------
Additional
Preferred Stock Common Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1999 - $ - 15,475,000 $ 15,000 $ 5,558,000 $ (1,669,000) $ 3,904,000
Net Loss (1,318,000) (1,318,000)
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Balance at September 30, 1999 - $ - 15,475,000 $ 15,000 $ 5,558,000 $ (2,987,000) $ 2,586,000
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</TABLE>
<PAGE>
ONE WORLD ONLINE.COM, INC.
Condensed Consolidated Statement of Cash Flows (unaudited)
For the Three Months Ended September 30, 1999
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (1,318,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 54,000
Change in:
Accounts receivable (1,000)
Inventory 15,000
Other current assets 10,000
Accounts payable (44,000)
Accrued liabilities 28,000
------------
Net cash used in
operating activities (1,256,000)
------------
Cash flow from investing activities:
Purchase of equipment (222,000)
------------
Cash flow from financing activities:
Principal payments on capital lease
obligation (1,000)
------------
Net decrease in cash (1,479,000)
Cash, beginning of period 3,259,000
------------
Cash, end of period $ 1,780,000
------------
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See accompanying notes to condensed consolidated financial statements
F-4
<PAGE>
ONE WORLD ONLINE.COM, INC.
Notes to Condensed Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
(1) Interim Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements include the accounts
of One World Online.com, Inc. and subsidiaries and include all adjustments
(consisting of normal recurring items) which are, in the opinion of management,
necessary to present fairly the financial position as of September 30, 1999 and
the results of operations for the three months ended September 30, 1999 and cash
flows for the three months ended September 30, 1999. The results of operations
and cash flows for the three months ended September 30, 1999 are not necessarily
indicative of the results to be expected for the entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission rules and regulations. These unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's June 30, 1999
Annual report on Form 10-KSB. The accounting policies followed by the Company
are set forth in Note 2 to the Company's consolidated financial statements in
its June 30, 1999 Annual report on Form 10-KSB.
(2) Basic and Diluted Net Loss Per Common Share
Net loss per share is based on the weighted average number of shares outstanding
at September 30, 1999. Stock options are not included in the calculation of net
loss per common share because their inclusion would be antidilutive, thereby
reducing the net loss per common share. Therefore, there is no difference
between basic and diluted net loss per common share for the period presented in
which the Company incurred a net loss. The Company has common stock options
outstanding at September 30, 1999 that, if exercised, would result in the
issuance of an additional 3,874,500 shares of common stock.
(3) Comparative Financial Information
Comparative financial information for the three month period ended September 30,
1998 is not presented as the Company's date of inception was November 12, 1998.
- --------------------------------------------------------------------------------
F-5
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Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the condensed consolidated
financial statements and accompanying notes and Management's Discussion and
Analysis or Plan of Operation for the year ended June 30, 1999. Wherever in this
discussion the term "Company" is used, it should be understood to refer to One
World Online.com, Inc. ("One World") and its wholly owned subsidiaries, One
World Online Incorporated dba One World Online Marketing ("OWOL Marketing") and
I Ventures, Inc. dba One World Online Technologies ("OWOL Technologies"), on a
consolidated basis, except where the context clearly indicates otherwise. The
Company's September 30, 1999 unaudited condensed consolidated financial
statements assumes the acquisition of One World by OWOL Marketing and OWOL
Technologies on November 12, 1998. Assets and liabilities of One World, OWOL
Marketing and OWOL Technologies are reported at their historical book value. See
Note 1 to the Company's Notes to Consolidated Financial Statements in the
Company's June 30, 1999 Annual Report on Form 10-KSB.
Overview
Since inception, the Company, has focused primarily on developing its
main product line of e-commerce sites, building the One World Community and
related software, building a high-performance, scaleable hardware
infrastructure, hiring capable personnel, developing its marketing plan,
developing technology and e-commerce solutions and raising capital.
Plan of Operation
The Company proposes to be a nationwide provider of consumer Internet
access, e-commerce solutions for businesses and Internet training for businesses
and individuals. The Company has also created the One World Online.com
Community, which includes a broad range of retail products, educational
information, 24-hour radio broadcasts, news and entertainment. The Company's
Internet access services are provided through a national network with
approximately 2,000 "Points of Presence" (local telephone numbers through which
subscribers can access the Internet) that cover approximately 92% of the U.S.
population. As a full solution Internet services company, One World is seeking
to take the $300+ billion Internet and e-commerce market to the masses by
offering a one stop source for Internet solutions such as: nationwide enhanced
Internet Service Provider (ISP) access; a virtual online community complete with
online shopping that includes over 225,000 products, Internet radio station,
library, arcade, and much more; web site creation and hosting; electronic
commerce solutions for mid-size and small businesses; and Internet marketing
training for businesses and individuals. One World is also seeking to redefine
the world of e-commerce through the collective power of uniting individuals with
relationship marketing and rewarding them with a dynamic new concept called
Community Dollars. As customers watch their Community Dollar account balance
grow and use their Community Dollars to purchase products from the One World
Online.com Community, they are expected to become more loyal to the value
offered by One World.
Liquidity and Capital Resources
Since inception, the Company has financed its operations primarily
through the private placement of its common stock. For the three months ended
September 30, 1999, the Company used net cash for operating activities of
$1,256,000. As of September 30, 1999, the Company's liabilities totaled
$236,000, which included $14,000 in capital lease obligation. The Company had
working capital as of September 30, 1999 of $1,798,000.
The Company's capital requirements depend on numerous factors,
including market acceptance of the Company's web site, technical services,
online community, training programs and ISP service. Capital requirements also
depend on the amount of resources needed for its product development programs.
The Company is also highly dependent on its Internet Marketing Consultants
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ability to market its products and services. The Company expects to experience
an increase in its capital expenditures and operating expenses consistent with
the growth of its operations and staffing, and anticipates that this will
continue for the foreseeable future. There can be no assurance, however, that
the Company will continue to grow or that its products and services will be
accepted by the market place.
As of September 30, 1999, the Company had not committed to spend any
material amounts on capital expenditures. The Company believes that existing
funds and anticipated sales will be sufficient to support the Company's
operations through December 31, 1999. The Company will need to raise significant
additional funding to support its operations during 2000. Such additional
funding will be required to fully execute its business plan which includes
continuing its focus as a seller of ISP access and services, building the
virtual One World Online.com Community, and developing and selling web sites and
related products and services. The Company has no material current contractual
arrangements with respect to additional financing and there can be no assurance
that additional financing will be available on commercially reasonable terms or
at all. Any inability to obtain additional financing will have a material
adverse effect on the Company, including possibly requiring the Company to
significantly curtail or cease its operations.
The Company's liquidity and capital resources will also be affected by
the One World Online Charitable Foundation, a charitable organization ("OWOCF")
that established under Section 509(a)(3) of the Internal Revenue code of 1986,
as amended (the "Code"). OWOCF was established in May 1999 by the founders of
the Company to act as the charitable, community service arm of the One World
Online.com, Inc. community. OWOCF owns all of the equity ownership of One World
Online Charities, LLC ("OWOC"), a Utah limited liability company, and is the
sole manager of OWOC. The Company has grand-fathered OWOC as the first
distributor frontline to the Company in the Company's relationship marketing
organization of independent distributors. This means that OWOC will receive a
monthly payment from the Company based on the sales of the distributors below
OWOC in the Company's network marketing organization. In the three months ended
September 30, 1999, $2,633 was contributed by the Company to OWOC. These
payments could be as much as 22% of the shared revenue paid out to the
independent distributors of the Company, however, the actual percentage paid to
OWOC will likely be significantly less in any given month. The Company has a
perpetual right to purchase all of the membership interest owned by OWOCF in
OWOC for the fair market value of this membership interest at the time the
Company elects to purchase this interest. The fair market value will be
determined by mutual agreement, or if agreement cannot be reached, by a panel of
three arbitrators.
The Company may experience variations on a quarterly basis in its
results of operations, in response to a) the timing of Company sponsored
distributor events, b) new product introductions, c) the adverse effect of
Internet Marketing Consultants or the Company's failure, or allegations of their
failure, to comply with applicable government regulations, d) the negative
impact of changes in or interpretations of regulations that may limit or
restrict the sale of certain Company products, e) the operation of the network
marketing system, f) the recruiting and retention of Internet Marketing
Consultants, and g) consumer perceptions of the Company's products and
operations.
Year 2000
The Company uses computer networks and personal microprocessors that
have the potential for operational problems if they lack the ability to handle
the transition to the Year 2000. The Company has been aggressively proactive in
5
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pursuing solutions for the Year 2000 problem. The Company has initiated
communications with its suppliers, dealers, distributors and other third parties
in order to assess and reduce the risk that the Company's operations could be
adversely affected by the failure of these third parties to adequately address
the Year 2000 issue.
The Company's principal computer systems (including the embedded
microprocessor systems) have been purchased since January 1999 and the vendors
supplying such systems have generally represented that such systems are Year
2000 compliant. Some of the software utilized by the Company is standard "off
the shelf" software, typically available from a number of vendors. The Company
has verified with such software vendors that the services and products provided
are, or will be, Year 2000 compliant. In addition, the Company has certain
software that has been written specifically for use by the Company and the
suppliers of such software have warranted that it is Year 2000 compliant.
Subject to such verification, the Company believes that its computer systems and
software are Year 2000 compliant in all material respects. The Company estimates
that the cost to redevelop, replace or repair its technology that is not Year
2000 compliant will not be material. The Company is not using any independent
verification or validation procedures. There can be no assurance, however, that
its systems or programs are or will be Year 2000 compliant and that the failure
of those systems would not have a material adverse impact on the Company's
business and operations.
In connection with its business activities, the Company interacts with
customers, suppliers and financial service organizations who use computer
systems. The Company is verifying with those parties their state of Year 2000
readiness. Based on its assessment activity to date, the Company believes that a
majority of the customers, suppliers and financial service organizations with
whom it interacts are making acceptable progress toward Year 2000 readiness. The
Company currently believes that the most reasonable likely worst case scenario
is that there will be some localized disruptions of customer, supplier and/or
financial services that will affect the Company and its suppliers, and
distribution channels for a short time rather than systemic or long-term
problems affecting its business operations as a whole. In view of the foregoing,
the Company does not currently anticipate that it will experience a significant
disruption to its business as a result of the Year 2000 issue. However, there is
still uncertainty about the broader scope of the Year 2000 issue as it may
affect the Company and third parties that are critical to the Company's
operations. For example, lack of readiness by electrical and water utilities,
financial institutions, government agencies or other providers of general
infrastructure could pose significant impediments to the Company's ability to
carry on its normal operations in the area or areas so affected. The Company is
currently evaluating what contingency plans, if any, to make in the event the
Company or parties with whom the Company does business experience Year 2000
problems.
The statements made herein about the costs expected to be associated
with the Year 2000 compliance and the results that the Company expects to
achieve, constitute forward-looking information. As noted above, there are many
uncertainties involved in the Year 2000 issue, including the extent to which the
Company will be able to successfully and adequately provide for contingencies
that may arise, as well as the broader scope of the Year 2000 issue as it may
affect third parties that are not controlled by the Company. Accordingly, the
costs and results of the Company's Year 2000 program and the extent of any
impact on the Company's operations could vary materially from those stated
herein.
Forward-Looking Statements
When used in this Form 10-KSB, in other filings by the Company with the
SEC, in the Company's press releases or other public or stockholder
communications, or in oral statements made with the approval of an authorized
executive officer of the Company, the words or phrases "would be," "will allow,"
"intends to," "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, are based on
certain assumptions and expectations which may or may not be valid or actually
occur, and which involve various risks and uncertainties, including but not
limited to regulation and legal uncertainties, reliance on key personnel,
uncertainties regarding Company's ability to develop a market, possible lack of
6
<PAGE>
acceptance of the Company's products, uncertainties in connection with the use
of the Internet as a medium of commerce and communications, the highly
competitive nature of the Company's industry, rapid technological changes, the
need for significant additional capital and dependence on retail sales
representatives. Please refer to the "Management's Discussion and Analysis or
Plan of Operation" and specifically the discussion under "Risk Factors" that is
found in the Company's Annual Report on Form 10-KSB for the year ended June 30,
1999, for more details. In addition, sales and other revenues may not commence
and/or continue as anticipated due to delays or otherwise. As a result, the
Company's actual results for future periods could differ materially from those
anticipated or projected.
Unless otherwise required by applicable law, the Company does not
undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
During the quarter ended September 30, 1999, the Company granted
options to acquire 5,000 shares of common stock at the market price on the date
of grant. The options were exempt from registration under Rule 506 of Regulation
D, Section 4(2) of the Securities Act and Section 4(6) of the Securities Act.
The Company did not use an underwriter in connection with the grant of the stock
options.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Securityholders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Index To Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1 Agreement and Plan of Reorganization Between the Company and OWOL
Marketing (Schedules are omitted) (Incorporated by reference to
Exhibit 2.1 of the Company's Current Report on Form 8-K, dated
June 29, 1999
2.2 Agreement and Plan of Reorganization Between the Company and OWOL
Technologies (Schedules are omitted) (Incorporated by referenced
to Exhibit 2.2 of the Company's Current Report on Form 8-K, dated
June 29, 1999)
3(i).1 Articles of Incorporation of One World (Incorporated by
referenced to Exhibit 3(i).1 of the Company's Annual Report on
Form 10-KSB dated June 30, 1999)
3(i).2 Articles of Amendment to Articles of Incorporation of One World
(Incorporated by referenced to Exhibit 3(i).1 of the Company's
Current Report on Form 8-K, dated June 29, 1999)
3(i).3 Articles of Incorporation of OWOL Marketing (Incorporated by
referenced to Exhibit 3(i).3 of the Company's Annual Report on
Form 10-KSB dated June 30, 1999)
8
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3(i).4 Articles of Incorporation of OWOL Technologies (Incorporated by
referenced to Exhibit 3(i).4 of the Company's Annual Report on
Form 10-KSB dated June 30, 1999)
3(i).5 Articles of Amendment to the Articles of Incorporation of OWOL
Technologies (Incorporated by referenced to Exhibit 3(i).5 of the
Company's Annual Report on Form 10-KSB dated June 30, 1999)
3(ii).1 Bylaws of One World (Incorporated by referenced to Exhibit
3(ii).1 of the Company's Annual Report on Form 10-KSB dated June
30, 1999)
3(ii).2 Bylaws of OWOL Marketing (Incorporated by referenced to Exhibit
3(ii).2 of the Company's Annual Report on Form 10-KSB dated June
30, 1999)
3(ii).3 Bylaws of OWOL Technologies (Incorporated by referenced to
Exhibit 3(ii).3 of the Company's Annual Report on Form 10-KSB
dated June 30, 1999)
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
A report was filed on Form 8-K, dated June 29, 1999, to report on (i) a
change in control of registrant, (ii) the acquisition of assets, (iii) changes
in registrant's certifying accountants, (iv) the acquisition of OWOL Marketing
and OWOL Technologies, (v) certain actions taken by the registrant's
stockholders, (vi) the financial statements of the businesses acquired and (vii)
certain pro forma financial information.
An amended report was filed on Form 8-K, dated June 29, 1999, to report
on (i) a change in control of registrant, (ii) the acquisition of assets, (iii)
changes in registrant's certifying accountants, (iv) the acquisition of OWOL
Marketing and OWOL Technologies, (v) certain actions taken by the registrant's
stockholders, (vi) the financial statements of the businesses acquired and (vii)
certain pro forma financial information.
An second amended report was filed on Form 8-K, dated June 29, 1999, to
report on (i) a change in control of registrant, (ii) the acquisition of assets,
(iii) changes in registrant's certifying accountants, (iv) the acquisition of
OWOL Marketing and OWOL Technologies, (v) certain actions taken by the
registrant's stockholders, (vi) the financial statements of the businesses
acquired and (vii) certain pro forma financial information.
An third amended report was filed on Form 8-K, dated June 29, 1999, to
report on (i) a change in control of registrant, (ii) the acquisition of assets,
(iii) changes in registrant's certifying accountants, (iv) the acquisition of
OWOL Marketing and OWOL Technologies, (v) certain actions taken by the
registrant's stockholders, (vi) the financial statements of the businesses
acquired and (vii) certain pro forma financial information.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FLEXPOINT, INC.
Date: November 19, 1999 By /s/ David N. Nemelka
----------------------------
David N. Nemelka
President, Chief Executive Officer, Director
Date: November 19, 1999 By /s/ Paul D. Korth
----------------------------
Paul D. Korth
Principal Financial and Chief Accounting
Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-2000
<CASH> 1,780,000
<SECURITIES> 0
<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 237,000
<CURRENT-ASSETS> 2,025,000
<PP&E> 748,000
<DEPRECIATION> 102,000
<TOTAL-ASSETS> 2,822,000
<CURRENT-LIABILITIES> 227,000
<BONDS> 9,000
0
0
<COMMON> 15,000
<OTHER-SE> 2,571,000
<TOTAL-LIABILITY-AND-EQUITY> 2,822,000
<SALES> 0
<TOTAL-REVENUES> 360,000
<CGS> 0
<TOTAL-COSTS> 1,678,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,318,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,318,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,318,000)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
