FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
Of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1998
Commission File Number 33-19139-NY
Net America International Corporation (formerly Venture World, Ltd.)
(Exact name of registrant as specified in its charter)
DELAWARE 11-2936371
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
616 FIRST AVENUE, SUITE 400
WASHINGTON 98104
(Address of principal executive offices)
Registrant's telephone number
including area code (206) 341-9090
4505 Wasatch Blvd #330 Salt Lake City, Utah 84124
Former Address, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports)
Yes X No
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
10,000,000
(Number of shares of common
stock the registrant had
outstanding as of November 20, 1998)
PART 1
ITEM 1 - FINANCIAL STATEMENTS
BASIS OF PRESENTATION
General
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders'
deficit in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that can be expected for the year ending
December 31, 1998.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The information set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") contains certain
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities Act
of 1934, as amended, and the Private Securities Litigation Reform Act of 1995,
including, among others (i) expected changes in the Company's revenues and
profitability (ii) prospective business opportunities and (iii) the Company's
strategy for expanding and financing it business. Forward- looking
statements are statements other than historical information or statements of
current condition. Some forward-looking statements may be identified by use
of termssuch as "believes", "anticipates", "intends", or "expects". These
forward-looking statements relate to the plans, objectives and expectations of
NetAmerica International Corporation and subsidiaries (the "Company") for
future operations. Although the Company believes that its expectations with
respect to the forward-looking statements are based upon reasonable
assumptions within the bounds of its knowledge of its business and operations,
in light of the risks and uncertainties inherent in all future projections,
the inclusion of forward-looking statements in this report should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
The Company's revenues and results of operations could differ materially from
those projected in the forward-looking statements as a result of numerous
factors, including, but not limited to, the following: (i) changes in external
competitive market factors, (ii) termination of certain Internet backbone or
interconnection agreements or inability to enter into additional Internet
backbone, access or network service agreements, (iii) inability to satisfy
anticipated working capital or other cash requirements, (iv) changes in or
developments under domestic or foreign laws, regulations, licensing
requirements or telecommunications standards, (v) changes in the technology
of or availability of transmission facilities, (vi) changes in the Company's
business strategy or an inability to execute its strategy due to unanticipated
changes in the market for the Company's products or services, (vii) various
competitive factors that may prevent the Company from competing successfully
in the marketplace, (viii) the Company's lack of liquidity and its ability to
raise additional capital, (ix) loss of services of key employees and (x) loss
of a customer which provides significant revenues to the Company. In light of
these risks and uncertainties, there can be no assurance that actual results,
performance or achievements expressed or implied by such forward- looking
statements. The foregoing review of important factors should not be
construed as exhaustive. The Company undertakes no obligations to release
publicly the results of any future revisions it may make to forward-looking
statements to reflect the events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
OVERVIEW
Net America International Corporation, through its operating subsidiaries
(together "NetAmerica" or the "Company"), is an Internet services company
specializing in providing Internet services to corporations, Internet service
providers (ISPs) and consumers. The Company also provides access, technical,
administrative and other support services to ISPs. The Company is seeking to
achieve significant growth through acquisitions, through new business
development and strategic relationships in the United States and targeted
international markets, and through internal growth.
The Company targets local, regional and national ISPs and commercial
customers with (i) regional, national and international Internet access and
service requirements, (ii) limited infrastructure and/or limited capital for
expanding their network infrastructure, or (iii) requirements to expand into
new geographic areas quickly. Through network access and interconnection
agreements with Internet backbone providers and other telecommunications
services providers and through theinstallation and operation of its owned
network operations centers, the Company has developed the ability to offer
local dial-up access and other Internet services throughout the United States.
In addition, the Company believes that numerous opportunities exist to provide
Internet services in and between targeted international markets in Canada,
Europe, Latin America and Asia-Pacific. The Company intends to utilize
acquisitions and international strategic relationships with telecommunications
and marketing partners to achieve market entry and market penetration in global
markets.
From April 1997 to February 1998, NetAmerica, Inc., now the Company's
wholly-owned operating subsidiary, primarily provided dial up Internet access
services to residential and commercial customers on a retail or direct sale
basis. In March 1998, the Company refocused its strategy to concentrate on
the following business opportunities: (a)contracting with Tier 1 Internet
service providers and offering national and international Internet access
products on a wholesale basis to agents, affiliates (distributors), virtual
Internet service providers and value added resellers; (b) providing specialized
retail Internet products and services; (c) providing technical consulting and
contracting services in the areas of information and telecommunication systems
to commercial operations and the Company's distributors, and (d) providing
World Wide Web ("WWW" or "Web") hosting. Web design and development services
and electronic commerce services for commercial Web sites. The Company seeks
to continue to grow its customer base and to expand the range of services
offered to its customers.
MERGER AND ACQUISITIONS
The Company was originally incorporated as World Ventures, Ltd. on May 6,
1987 under the laws of the State of Delaware for the purpose of developing or
acquiring general business opportunities. In March 1989 it raised $250,000
(approximately $185,000 net of expenses and commissions) through a "blind pool"
offering registered with the Securities and Exchange Commission on Form S-18.
The Company did not have any material operations forthe six years prior to
September 1998, when it acquired all of the ownership of NetAmerica,Inc. and
PolarCap, Inc. As a result of these acquisitions, NetAmerica, Inc. and
PolarCap, Inc. became wholly owned subsidiaries of Venture World. In October
1998, Venture World Ltd. changed its name to NetAmerica International
Corporation (the "Company"). As used in this Memorandum, the "Company"
refers to the business of NetAmerica International Corporation and its
subsidiaries.
NetAmerica, Inc. was organized in April, 1997 and currently offers a
broad array of access products and services designed to afford small and
medium-sized Internet Service Providers (ISPs) and their end users seamlessly
integrated Internet access solutions. NetAmerica, Inc. is the Company's
primary operating subsidiary in the Internet services industry. PolarCap,
Inc. is a California corporation formed to acquire digital media development,
content, and production companies worldwide. PolarCap currently owns the
rights to a variety of software technologies related to multimedia,
development tools and applications technologies.
LIQUIDITY AND CAPITAL RESOURCES
In August, September and October 1998 the Company entered into various
Bridge Loans, (the "Bridge Loans"), pursuant to which the Company sought to
borrow a total of $500,000 (five hundred thousand dollars). The bridge
lenders each received a promissory note (the "Bridge Notes") bearing interest
at the rate of 12% per annum, which are convertible into the Company's Common
Stock at $1.00 per share. The Bridge Notes are due and payable upon demand.
As of November 20, 1998 the Company had borrowed a total of $455,000 pursuant
to the Bridge Loans. The Company intends to seek additional capital to execute
its business plan.
RESULTS OF OPERATIONS
During the three and nine months ended September 30, 1998, the Company
incurred losses of $(324,638) and $(979,814), respectively, compared to losses
of $0 and $(319,000) during the same periods in 1997. Included in the losses
incurred during the three and nine months ended September 30, 1998 are the
operating results of NetAmerica, Inc since its acquisition by the Company.
To address and remedy historical operating losses and to increase the
competitiveness, revenues and gross margins of NetAmerica, Inc., the
Company's primary operating subsidiary, the Company has taken various steps
to improve NetAmerica's operating efficiency, network capability and
telecommunications carrier/Internet backbone cost structure. The Company
believes these cost- reduction and revenue-enhancing initiatives will have a
positive impact on the Company's future operating results. However, as its
business remains in the early growth stage, the Company anticipates that it
will continue to incur operating losses and cash flow deficiencies for the
foreseeable future.
Prior to its acquisition of NetAmerica, Inc. and PolarCap, Inc. in 1998,
the Company was a development stage company that had not generated revenues
since inception.
Revenues
Revenues for the three and nine months ended September 30, 1998 were
$518,033 and $991,569, respectively, compared to $0 and $11,100 for the three
and nine months ended September 30, 1997. The increase is revenues is
primarily attributed to the inclusion of the results of operations of
NetAmerica, Inc. subsequent to its acquisition in September 1998.
Gross Margin
Gross margin for the three and nine months ended September 30, 1998 was
$129,407 and $188,720, respectively, compared to $0 and $(51,400) for the three
and none months ended September 30, 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $476,313 from
$0 and to $1,190,801 from $267,600 for the three and nine months ended
September 30, 1998 and 1997, respectively. The increase was due primarily to
(i) inclusion of the operating results of NetAmerica, Inc. (ii) increased
business development and acquisition activity, and (iii) expansion of the
Company's executive management and the addition of certain advisors.
Liquidity and Capital Resources
The Company is a rapidly growing Internet services provider executing a
business plan that requires additional capital for (i) acquisitions, (ii)
additional network equipment and facilities, (iii) expansion into new
domestic and international markets, and (iv) development of additional
products and services. The Company currently has a working capital deficit and
has operated at a loss since its inception. Funding of the working capital
deficit, current and future operating losses and expansion of the Company
will require additional capital investment.
Operations used $549,593 during the nine months ended September 30, 1998
due primarily to the (i) operating losses, (ii) increased business
development and acquisition activity, and (iii) expansion of the Company's
executive management team.
Investing activities used $420,647 during the nine months ended September
30, 1998. Investing activities during the nine months ended September 30, 1998
consisted primarily of cash paid in acquisitions and purchase of fixed assets.
Financing activities provided $975,793 during the nine months ended
September 30, 1998. Financing activities during the nine months ended
September 30, 1998 consisted primarily of proceeds from Bridge Loans and sales
of common stock.
During October 1998, the Company initiated a private placement offering
of common stock ("Private Placement"). The proceeds of the Private Placement
will be used for acquisitions, business development, accounts payable,
equipment purchases, and for general working capital. The Company is
seeking to raise a maximum of $2,000,000 from the Private Placement. There
can be no assurance that the Company will complete all or part of the Private
Placement or that the Private Placement, if completed, will be on terms as
originally proposed by the Company.
RECENT DEVELOPMENTS
Over the past sixty days, the Company has accomplished the following:
Acquisition of Jet-City OnLine. In September, 1998 through its
operating subsidiary, NetAmerica, Inc., the Company entered into an Asset
Purchase Agreement for the purchase of the Internet access customer base for
Jet-City OnLine, Inc. a Washington corporation, located in the Seattle,
Washington area.
Establishment of NetCanada Communications. In October 1998, the
Company has commenced the operations of NetCanada Communications, Inc., a
Canadian corporation and wholly-owned subsidiary of NetAmerica International
Corporation, which will seek to provide Internet aggregation throughout Canada.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
A meeting of the Board of Directors was held on September 21, 1998
to consider the acquisition of two corporations, NetAmerica, Inc. and PolarCap,
Inc. The acquisitions were approved and 8,400,000 common shares were issued
to complete the acquisitions.
As part of the acquisition the name of the Company was changed to
NetAmerica International Corporation and two additional members were added to
the board of directors (Total of four).
Later in October 1998, the original two members of the board of
directors resigned and a third member was added bringing the total to three
members of the board.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Financial Statements as of September 30, 1998.
Financial Data Schedule
(b) Reports on Form 8-K
On October 6, 1998 the Company reported a change in control of
the corporation and all of the events mentioned in Item 5 of
this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NET AMERICA INTERNATIONAL, INC.
(Registrant)
November 22, 1998 /s/ Greg Martin
President
(Chief Executive Officer)
NET AMERICA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(formerly Venture World, Inc.)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
1998 1997
CURRENT ASSETS
Cash $ 6,141 $ 588
Accounts receivable
Trade (net) 485,923 7,175
Other 2,500 -
Inventory 22,668 -
Deposits 52,000 -
Other 1,916 17,281
Total Current Assets 571,148 25,044
PROPERTY AND EQUIPMENT 424,283 136,943
OTHER ASSETS
Customer base 104,217 -
Other 7,500 9,082
Total Other Assets 111,717 9,082
$ 1,107,148 $ 171,069
NET AMERICA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(formerly Venture World, Inc.)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1998 1997
CURRENT LIABILITIES
Accounts payable and accrued expenses $896,728 $ 116,826
Contracts payable 173,416 -
Notes payable 299,638 -
Notes payable - related party 290,000 -
Other 33,058 12,505
Total Current Liabilities 1,692,840 129,331
LONG TERM DEBT
Long term debt - related party 155,000 -
Long term debt - 64,053
Total Long Term Debt 155,000 64,053
STOCKHOLDERS' EQUITY
Common stock (Note 1) 10,000 543,752
Capital in excess of par value 1,505,203 -
Retained Deficit (2,255,895) (566,067)
Total Stockholders' Equity (740,692) (22,315)
$ 1,107,148 $ 171,069
NET AMERICA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(formerly Venture World, Inc.)
Consolidated Statements of Operations
For the Three For the Three For the Nine For the Nine
Months ended Months ended Months ended Months ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
REVENUE
Net Revenue $518,033 $ - $991,569 $11,100
Cost of revenue 388,626 - 802,849 (62,500)
Gross Profit 129,407 - 188,720 (51,400)
EXPENSES
General and
Administrative 476,313 - 1,190,801 267,600
Other Income / (Expense)
Income 114,943 - 114,943 -
Expense (92,676) - (92,676) -
Provision for
income taxes - - - -
NET LOSS $(324,638) $- $(979,814) $(319,000)
Net Loss Per Share $ (.04) $- $ (.11) $ (.04)
Average Outstanding
Shares 8,740,000 8,740,000 8,740,000 8,740,000
NET AMERICA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(formerly Venture World, Inc.)
Consolidated Statements of Cash Flows
For the For the
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
Cash Flows From Operating Activities
Net loss $ (979,814) $(319,000)
Depreciation 53,205 17,289
(Increase) decrease in receivables (478,748) (7,17)
Decrease (increase) in inventory
and other assets (59,303) (7,004)
Increase (decrease) in payables
and accrued expenses 915,067 129,331
Net Cash Used by Operating Activities (549,593) (186,559)
Cash Flow From Investing Activities
Purchase of fixed assets (316,430) -
Purchase of customer base and other
tangible assets (104,217) (7,906)
Net Cash Used by Investing Activities (420,647) (7,906)
Cash Flows From Financing Activities
Issuance of common stock 331,208 131,000
Issuance of notes payable 644,585 64,053
Net Cash Provided by Financing Activities 975,793 195,053
Net (Decrease) Increase In Cash 5,553 588
Cash at Beginning of Period 588 -
Cash at End of Period $ 6,141 $ 588
Supplemental Cash Flow Information:
Cash Paid for:
Interest $ 13,486 $ 3,750
Taxes $ - $ -
NET AMERICA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(formerly Venture World, Inc.)
Notes to the Consolidated Financial Statements
September 30, 1998
NOTE 1 - BACKGROUND AND HISTORY
NetAmerica International Corporation is a consolidated group of companies
including the parent corporation, NetAmerica International Corporation
(NetAmerica International), and its two subsidiaries, NetAmerica, Inc.
(NetAmerica) and PolarCap, Inc. (PolarCap). Net America International (formerly
Venture World, Inc.) is a Delaware Corporation organized on May 6, 1987 for
the purpose of seeking out and developing any general business opportunity.
NetAmerica is a Washington Corporation organized in April 1997 for the purpose
of providing access to products and services to small and medium internet
providers.
PolarCap is a California Corporation organized on April 7, 1997 for the
purpose of investing in and developing rights to a variety of software
technologies related to multimedia, development tools, and applications
technologies.
NetAmerica and PolarCap were 100% acquired by Net America International on
September 30, 1998. Together, all three companies are combined into NetAmerica
International Corporation, a consolidated group of corporations known in this
report as the Company.
The accounting for the acquisition of subsidiaries is treated as a "reverse
acquisition" whereby the control parties of the subsidiary corporations
(NetAmerica and PolarCap) take control of the parent corporation (NetAmerica
International). The balance sheet at September 30, 1998 is presented as if
the historical cost data from all three corporations are combined into one,
similar to a "pooling of interests method of accounting".
Per SEC guidelines, the balance sheet at December 31, 1997, the statements of
operations, and cash flow information for all periods is that of the acquiring
party - Net America, Inc., the Washington subsidiary. All such information for
the parent corporation and PolarCap, Inc. are excluded from such financial
schedules.
The balance sheet shown for September 30, 1998 is the consolidated financial
statements of NetAmerica International Corporation, NetAmerica, Inc. and
PolarCap, Inc. Net loss per share is shown as totaled operating results of
NetAmerica, Inc. divided by total outstanding shares of NetAmerica
International Corporation, including the 8,400,000 shares issued for the
acquisition of NetAmerica, Inc. and PolarCap, Inc.
NOTE 2 - UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all adjustment which
are, in the opinion of management, necessary to properly reflect the results of
the interim period presented. he information presented is not necessarily
indicative of the results from operations expected for the full fiscal year.
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