U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
Commission file number 33-40848
WORLDWIDEWEB INSTITUTE.COM, INC.
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(Name of Small Business Issuer in its Charter)
Florida 65-026047
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6245 N.W. 9th Avenue, Suite 201, Fort Lauderdale, Florida 33309
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(Address of Principal Executive Offices) (Zip Code)
(954) 776-8444
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(Issuer's Telephone Number)
Securities registered under Section
12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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None
Securities registered under Section 12(g) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
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None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $7,308,012
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. $72,124,872 based on a price of $12.00 per share as of June 30, 2000.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: June 30, 2000: 9,889,406 Shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
- None -
Transitional Small Business Disclosure Format (Check One)
Yes No X
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Table of Contents
Page
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PART I
Item 1. Description of Business.....................................
Item 2. Description of Property.....................................
Item 3. Legal Proceedings...........................................
Item 4 Submission of Matters to a Vote of Security Holders.........
PART II
Item 5. Market for Common Equity and
Related Stockholder Matters.................................
Item 6. Management Discussion and Analysis..........................
Item 7. Financial Statements........................................
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure......................
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act.........................................
Item 10. Executive Compensation......................................
Item 11. Security Ownership of Certain Beneficial
Owners and Management.......................................
Item 12. Certain Relationships and Related Transactions..............
Item 13. Exhibits, Lists and Reports on Form 8-K.....................
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PART I
Item 1. Description of Business
BUSINESS DESCRIPTION
Background
WorldWideWeb Institute.com, Inc., a Florida corporation, provides
creative Internet- business solutions for small to medium size businesses. It
provides integrated, Internet-based services that include:
o creative design and maintenance of custom designed Web sites;
o marketing strategy and consulting services;
o enhancements and expansion of Web sites;
o hosting services; and
o e-commerce solutions.
The Company provides a design, production, hosting and domain
registration program enabling clients to have their own corporate Web site at
affordable prices. Customers may purchase enhancements which include additional
pages beyond the basic 6 page Web site, animation and flash features, on-line
marketing services, and other products. The Company offers significantly reduced
rates for hosting after the first year.
The Company was incorporated in the State of Florida in 1990 as
Interamerican Pharmaceutical Corporation. The Company changed its name to
Spectrum Pharmaceutical Corporation in April 1991. Prior to July 1999, the
Company had been principally engaged the development and marketing of certain
products utilizing the chemical compound procaine hydrochloride for the
treatment of tinnitus, certain symptoms of Alzheimer's Disease and cocaine
addiction. On July 2, 1999, the Company issued approximately 5,025,000 shares of
its common stock to acquire 100% of the issued and outstanding stock of
WorldWideWeb Institute, Inc. (a privately owned Florida corporation).
WorldWideWeb Institute, Inc. then became the Company's wholly-owned operating
subsidiary. On July 30, 1999, the Company changed its name to WorldWideWeb
Institute.com, Inc. The Company's executive officers are located at 625 N.W. 9th
Avenue, Suite 201, Fort Lauderdale, Florida 33309 and its telephone number is
(954) 776-8444.
Strategy
The Company's goal is to make WorldWideWeb Institute.com a leading
provider of Internet web site and e-commerce solutions for small to medium-sized
enterprises. Its strategy to achieve this objective includes:
o expanding operations by internal growth and acquisitions;
o acquiring and licensing proprietary software and services;
o enhancing the WorldWideWeb Institute brand; and
o developing strategic relationships.
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Expanding Operations by Internal Growth and Acquisitions.
WorldWideWeb plans to expand through internal growth primarily in foreign
markets, and through acquisition of synergistic Internet industry companies. The
Company believes that in the fragmented market for providing Internet-business
solutions services, its current established customer base, and being able to
aggregate a full range of Internet web site marketing and e-commerce solutions,
will enable it to grow. As of June 30, 2000, the Company had offices in Fort
Lauderdale and Toronto, Canada. It had affiliate sales offices Melbourne,
Australia and Sao Paulo, Brazil. It maintained independent sales organizations
in New Jersey, and Tamarac, Florida.
Developing or Licensing Proprietary Software and Services. The
Company has developed software intended to enable Internet users and first time
web users to design and produce their own Web sites. The software has great
functionality which allows users to develop Web sites with diverse features
including with basic e-commerce capabilities. The Company also has developed
internal software tools which have the capability of semi-automating the Web
site. The Company seeks to identify and license proprietary software which can
be utilized by existing and prospective customers to upgrade their Web sites and
drive traffic to their sites.
Enhancing the WorldWideWeb Institute Brand. In a fragmented
industry like Internet- business solutions services, the Company's goal is to
create a recognized brand. The Company markets through traditional brand
promotion and other marketing strategies such as creation and distribution of
sales and marketing material and public relations campaigns. Its success in
creating a brand will likely also depend on establishing and maintaining close
relationships with industry analysts and industry publications.
Developing Strategic Relationships. The Company has established
strategic relationships through certifications of Microsoft, Novell, Lucent, IBM
and others, and has been designated as a technology partner of both Primis
Telecommuncations in Australia and Cable and Wireless in Europe. The Company
intends to continue to develop strategic relationships. Such relationships
enable WorldWideWeb to enter new markets, gain early access to leading-edge
technology, cooperatively market products and services with leading technology
vendors and gain enhanced access to vendor training and support.
Training and Education
WorldWideWeb has developed an effective method for educating
students and business for entry on the Internet, while use student skills to
cost effectively developed web sites for its customers. The concept, as defined
as "Internet student programs," allows low cost production of Web sites by
offering, via school credits, partial scholarships or stipends, and on the job
training to college students in the South Florida area, in the Company's
Canadian and Australian sales affiliates. As of June 30, 2000 only a small
percentage of the Company's Web sites were student produced.
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WorldWideWeb Institute Solution
WorldWideWeb Institute believes that having a web site is only the
beginning of establishing an presence on the Internet. The Company strives to be
able to bundle a high quality product together with on-line marketing and
e-commerce support services at an affordable price. The Company's goal is to
position itself as a leading supplier of Internet Web development services, with
products and services that address the Internet Web development life cycle from
development through deployment and utilization. WorldWideWeb utilizes the latest
technology relating to commercial Internet Web sites including animation, flash
technology, co-fusion programming, video and audio streaming, and software
designed to place the site in the top 10-20 rankings in major search engines.
While the Company has already shown significant growth in the past
24 months,. The following is a summary of the factors that management believes
will support future growth:
o The Company has experience with large scale Web site
production, and hosting. The Company currently hosts a
worldwide customer base of approximately16,000 existing
Web site clients.
o A significant number of existing accounts require
additional upgrading or enhancement work.
o The market for basic Web sites comprises the largest and
fastest growing part of the potential market. Only a small
but rapidly growing percentage of small businesses,
organizations and home based businesses have Web sites. As
more people become familiar with the Internet, a basic Web
site will be requisite as a marketing tool for businesses,
and may become as important for individuals almost as a
listing in the phone book.
o The Company anticipates continued future growth will come
from overseas where little competition exists in
Australia, Europe and South America, and where significant
markets exist, and there are few if any sources for
hands-on training.
o The Company anticipates significant growth and service
from the development and hosting of high end web sites and
e-commerce sites.
WorldWideWeb Institute's goal is to lead the Internet development
services market in terms of:
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o Providing the services to create timely, high quality, low
cost commercial web sites;
o Providing users with complimentary leading edge marketing
campaigns and advertising services;
o Providing Internet maintenance services and updating;
o Offering Web based Internet and MCSE related training
courses; and
o Offering in-house, instructor led Internet and MCSE course
work for the local area.
Competition
The market for Internet professional services is relatively new,
intensely competitive, rapidly evolving and subject to rapid technological
change. While relatively new, the market is already highly competitive and
characterized by an increasing number of entrants that have introduced or
developed products and services similar to those offered by the Company. The
Company expects competition not only to persist, but to increase. Increased
competition may result in price reductions, reduced margins and loss of market
share. Industry competitors fall into several categories, including Internet
service firms, technology consulting firms, technology integrators, strategic
consulting firms, and in-house information technology, marketing and design
departments of its potential clients. Most of the current and potential
competitors have longer operating histories, larger installed customer bases,
greater name recognition, longer relationships with clients and significantly
greater financial, technical, marketing and public relations resources than the
Company does.
Customers
WorldWideWeb Institute.com focuses primarily on small and medium
sized businesses. It believes that the needs of such businesses provide
excellent market opportunities. Its customers are from a broad variety of
industries including travel, real estate and physician practices. Its failure or
inability to meet a client's expectations in the performance of services could
injure its business reputation or result in a claim for substantial damages
against us regardless of its responsibility for such failure. In addition, the
services the Company provides for its clients may include confidential or
proprietary client information. Although it has implemented policies to prevent
such client information from being disclosed to unauthorized parties or used
inappropriately, any such unauthorized disclosure or use could result in a claim
against us for substantial damages. Its contractual provisions attempting to
limit such damages may not be enforceable in all instances or may otherwise fail
to protect it from liability for damages. Moreover, it does not currently have
errors and omissions insurance.
Employees
As of June 30, 2000 the Company had approximately 111 employees of
which approximately 108 are on a full-time basis. None of the Company's
employees are represented by a labor union. It has not experienced no work
stoppages and it generally believe that its relationship with its employees is
good. Competition for qualified personnel in the industry is intense. The
Company believes that its future success in the industry will depend in part on
its ability to attract, hire or acquire and retain qualified employees.
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Government Regulation
Currently, the Company is not subject to any direct governmental
regulation other than the securities laws and regulations applicable to all
publicly owned companies, and laws and regulations applicable to businesses
generally. Few laws or regulations are directly applicable to access to, or
commerce on, the Internet. Due to the increasing popularity and use of the
Internet, it is likely that a number of laws and regulations may be adopted at
the local, state, national or international levels with respect to the Internet.
Any new legislation could inhibit the growth in use of the Internet and decrease
the acceptance of the Internet as a communications and commercial medium, which
could in turn decrease the demand for its services or otherwise have a material
adverse effect on the Company's future operating performance.
Item 2. Description of Property
The Company's corporate headquarters are located at 6245 NW 9th
Avenue, Fort Lauderdale, Florida. At the end of the fiscal year ending March 31,
2000 the Company leased from an unaffiliated landlord, approximately 14,000
square feet of office space in Fort Lauderdale leased on a month to month basis.
The Company pays annual rent of approximately $146,000 plus its allocable share
of real estate taxes, insurance, and other assessments. Subsequent to the end of
the fiscal year, the Company reduced the amount of space it leased at its
facility at 6245 NW 9th Avenue to approximately 10,000 square feet at an annual
rent of approximately $108,000 per year at an annual rent of approximately
$36,000 per year to an unrelated affiliate.
The Company's Canadian operations are located on 2300 Yonge St.
Toronto, Ontario, Canada. The Company subleases from an unaffiliated party,
approximately 7,000 square feet of office space Toronto for an annual rent of
approximately $147,000. The sublease on such property expires in April 2001.
The Company believes that in the event that the leases with
respect to any of the aforementioned facilities should not be renewed,
alternative space will be available at comparable rates.
Item 3. Legal Proceedings
The Company is a plaintiff in two cases in Broward County Court
alleging former Company employee violations of non-compete, confidentiality and
non-circumvention agreements.
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First, in WorldWideWeb Institute, Inc. v. USAWEB Technology, Inc.,
the Company seeks the recovery of damages and injunctive relief in connection
with USAWEB's solicitation of employees to resign from the Company and accept
positions at USAWEB which the Company believes is in violation of their
non-compete and non-disclosure agreements with the Company. USAWEB has filed a
counterclaim through which it seeks the recovery of damages for the Company's
alleged tortious interference with its relationships with employees and third
parties.
Second, in WorldWideWeb Institute, Inc. et al., v. Carol Fletcher
Hudson, the Company is seeking damages and injunctive relief in connection with
Ms. Hudson's breach of a non-compete agreement and non-disclosure agreement.
WorldWideWeb Institute, Inc., a Canadian corporation, ("WorldWideWeb Canada"),
is seeking a declaration that Ms. Hudson is not entitled to stock in
WorldWideWeb Canada because she has failed to perform any duties on behalf of
the Company. Defendant has filed a counterclaim alleging that she is entitled to
an equity interest in the Company and WorldWideWeb Canada. Ms. Hudson has also
raised in her counterclaim a claim for intentional infliction of emotional
distress based upon the conduct of an officer of the Company. This action is
scheduled for trial in October, 2000. As discovery has not been completed, the
Company cannot predict the probability of any outcome in the lawsuit.
The Company is involved in two other actions. In WorldWideWeb
Institute, Inc. v. Scott Christenson, the plaintiff seeks the recovery of monies
in connection with the Company's alleged failure to perform its contractual
obligations. The amount in controversy is less than $5,000.00. The trial in this
action is scheduled for August 11, 2000. The Company cannot predict the
probability of any outcome in the lawsuit.
The Company also is a plaintiff in a multi-part complaint for
declaratory relief and damages with its former Chief Technology Officer and
Director, Dana Williams. The case WorldWideWeb Institute.com, Inc. vs. Dana
Williams, alleges that Ms. Williams while an officer and director of the Company
set up and implemented plans to run a competing company. It also alleges breach
of fiduciary duty including solicitation of current and former employees and
misappropriation of trade secrets and other proprietary information, and unjust
enrichment. The suit demands monetary damages and assignment back to the Company
or cancellation of all shares.
Item 4. Submission of Matters to a Vote of Security Holders
On March 28, 2000, the shareholders of the Company approved the
amendment to the Articles of Incorporation of the Company to provide for the
designation of 2,000,000 shares of blank check preferred stock. This action was
taken by a written consent of a majority of the shareholders of the Company
(approximately 58%) pursuant to the Section 607.0705 of the Florida Business
Corporation Act. No proxy solicitation was needed and proxies were not used. The
board of directors of the Company subsequently approved the amendment and the
articles of incorporation of the Company were amended to provide for 2,000,000
blank check preferred stock.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Our common stock is traded over-the-counter and quoted on the OTC
Electronic Bulletin Board under the symbol "WWWA". The reported high and low bid
prices for the common stock are shown below for the prior two year fiscal
period. The prices do not always represent actual transactions. The following
information gives effect to a 1:10 reverse stock split of our outstanding common
stock completed on June 29, 1999.
High Low
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Fiscal Year 1999:
First Quarter $.10 $.10
Second Quarter $.10 $.10
Third Quarter $.10 $.10
Fourth Quarter $.10 $.10
Fiscal Year 2000:
First Quarter $7.75 $.10
Second Quarter $13.53 $6.88
Third Quarter $11.63 $9.50
Fourth Quarter $11.63 $9.50
On June 30, 2000, the closing bid price of our common stock on the
OTC Electronic Bulletin Board was $12. As of June 30, 2000, there were
approximately 399 record owners of our common stock.
We have never paid cash dividends on our common stock. We intend
to keep future earnings, if any, to finance the expansion of our business. We do
not anticipate that any cash dividends will be paid in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Management's discussion and analysis contains various forward
looking statements. These statements consist of any statement other than a
recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may," "expect," "anticipate," "estimate" or
"continue" or use of negative or other variations or comparable terminology.
The Company cautions that these statements are further qualified
by important factors that could cause actual results to differ materially from
those contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.
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The following discussion should be read in conjunction with the
information contained in the Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this report.
Results of Operations
The following table sets forth for the periods indicated certain
line items from the Company's statement of operations as a percentage of the
Company's consolidated net sales:
Year Ended March 31,
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2000 1999
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Net sales $ 7,308,012 100.0% $ 2,672,394 100%
Cost of sales $ 1,904,734 26.1 $ 356,853 13.4
Gross profit $ 5,403,278 73.9 $ 2,315,541 86.6
Selling, general and
administrative expenses $ 7,702,802 105.4 $ 2,311,949 86.5
Income (Loss) from Operations $(2,299,530) (31.5) $ 3,592 0.1
Net Interest $ (9,720) (0.1) $ (394) (0.0)
Other expenses (income) $ 530,000 7.3 -- --
Foreign currency Adjust $ (59,253) (0.8) -- --
Net income (loss) $(1,787,750) (24.5)% $ (48,030) (1.8)
Comparison of the Results of Operations for the Twelve Months Ended March 31,
2000 and March 31, 1999
Net sales increased by $4,635,618, or approximately 173%, to
$7,308,012 for the year ended March 31, 2000, as compared to $2,597,240 for the
year ended March 31, 1999. For the year ended March 31, 2000, the Company's
revenues included $1,769,396 in foreign sales as a result of its acquisition and
consolidation of the operations of World Wide Web Institute, Inc. (Canada), a
formerly 20% owned foreign sales and production office. Domestic revenues were
$5,538,616 for the year ended March 31, 2000, as compared to $2,672,394 for year
ended March 31, 1999, an increase of 107% or $2,866,222 . The Company believes
that sales of its web sites in foreign markets continue to have strong future
growth, while domestic sales may decline in the first quarter.
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Although domestic revenues were ahead significantly on a year to
year basis, sales growth slowed significantly during the third and fourth
quarters, primarily reflecting the increased alternatives for web site
production and hosting available to the Company's primary market - small to
medium sized enterprises. This resulted in significantly higher marketing costs
required to secure new customers, which effected the costs of producing the
Company's six page basic web site coupled with a year hosting contract.
Cost of sales during the year ended March 31, 2000 were
$1,904,734, representing 26.1% of sales during the period, as compared to
$356,853 for the year ended March 30, 1999, representing 40% of sales for the
period. The decrease in cost of sales as a percentage of sales during the year
ended March 31, 2000, when compared to the year ended March 31, 1999, was
attributable to the relatively fixed costs of production for year ended 1999 and
year ended 2000 spread over a larger revenue base for the year ended March 31,
2000. The Company, which utilized student interns for much of its work for the
year ended March 31, 1999 incurred higher costs of maintain production personal
as it utilized more experienced web design and production personnel for the year
ended March 31, 2000.
Selling, general, and administrative expenses increased by
$5,390,853 to $7,702,802 for the year ended March 31, 2000, as compared to
$2,311,949 million for the year ended March 31, 1999, an increase of
approximately 233.2% . The increase was primarily attributable to four major
factors: (1) significantly higher management and administrative costs necessary
to accommodate a higher level of sales and production; (2) costs associated with
the development of proprietary software in Canada, development of on-line
marketing services, and certain personnel and related expenses necessary to
explore the development of other new products; (3) direct and associated costs
of securing capital and additional expenses related to being a public company;
and (4) corporate development costs related to expansion of marketing the
Company's product in foreign markets
The loss from operations was $2,299,530 for the year ended March
31, 2000, as compared to a profit of $3,592 for the year ended March 31, 1999.
Such increase was primarily attributable to the aforementioned significant
increases in selling costs, and general and administrative expenses,.
Interest and financing expense increased by $9,326 or
approximately .13%, to $9,720 for the year ended March 31, 2000, as compared to
$394 for the year ended March 31, 1999.. This increase was primarily
attributable to the Company's bank charges and merchant account setup charges
required for operations.
The Company experienced a net loss for the year ended March 31,
2000 of $1,787,750, or $.22 per share, representing (24.5%) of sales during the
period, as compared to a net loss of $48,030 or $.01 per share assuming
dilution, representing .9% of sales during the year ended March 31, 1999. The
decrease in net income was primarily attributable to the aforementioned increase
in selling general and administrative expenses coupled slowing growth of web
site product sales in the U.S. in the third and fourth quarters. The Company
intends to focus its domestic sales efforts on sales of high-end web sites,
marketing of targeted user e-mail and fax lists, enhancements for its current
customer base, and other new products.
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Subsequent to the end of the fiscal year, the Company introduced
an upgraded e- commerce enabled web site product, and began to market target
user e-mail and other data under the trade name "Online Sniper.com." It is
likely that the Company may experience significant operating losses for the next
quarter or two until revenue from these products begins to make a substantial
impact. The Company also expects an increased contribution to revenue from
foreign sales.
Liquidity and Capital Resources
In the year ended March 31,1999 and the year ended March 31,2000,
the Company financed its operating and investment activities through three
private placement equity transactions. Net cash used by operating activities in
the year ended March 31,2000 was $1,713,518 primarily due to the Company's the
year ended March 31,2000 net loss, compared to net cash generated by operating
activities of $349,177 in the year ended March 31,1999. Net cash used by
investing activities was $3,865,555 in the year ended March 31,2000, principally
as a result of the investment in other related entities and affiliates compared
to net cash used by investing activities for the year ended the year ended March
31,1999 of $284,553. The Company generated $13,258,985 in net cash from
financing activities in the year ended March 31,2000 compared to $151,435 in the
year ended March 31,1999. The Company had an increase of cash and cash
equivalents in the year ended March 31,2000 of 7,679,913 compared to $216,059 in
the year ended March 31,1999 primarily from its financing activities.
As of the year ending March 31, 2000, the Company had a working
capital of $6,961,257 compared to a working capital deficiency of $561,433 as of
the year ending March 31, 1999. The Company anticipates reporting a significant
loss for its first quarter, reducing its current working capital levels.
During the fiscal year ending March 31, 2000, the Company was able
to raise a total of $12,986,209 less expenses through private placement
Regulation D transactions. The Company may continue to receive working capital
from the exercise of additional stock options, private placements, long term
debt and operations. The Company expects that it may acquisitions to diversify
its product line. It is possible that such acquisitions may require additional
capital. While the Company believes it will be able to secure the necessary
capital, no assurances, however, can be given that future financing would be
available or if available, that it could be obtained at terms satisfactory to
the Company.
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Capital expenditures for fiscal 2000 were approximately $627,296
as compared to approximately $219,558 for fiscal 1999. These expenditures were a
direct result of purchases of network servers, computer and telecommunications
equipment and other fixed assets. The Company has had $150,000 in capital
commitments for the first quarter of the year ended March 31,2000. The Company
anticipates that its total capital expenditure needs for the year ended March
31,2001 will be approximately $550,000..
As of June 30, 2000, the Company has made commitments of
approximately $150,000 to marketing affiliates in Sao Paulo, Brazil and
Melbourne, Australia. Both affiliates are currently experiencing working capital
needs. The Company has plans to restructure or close its Brazilian affiliate,
and to restructure and streamline operations in Australia to generate growth in
revenues and profitability.
Impact of Inflation on Results of Operations, Liabilities and Assets
The Company does not believe that its business is dependent on
commodity prices or services that would be impacted by inflationary pressures.
The Company purchases servers, computers and telecommunications equipment, whose
prices have been declining. The Company is dependent on the services of web
designers, software and programming specialists and on-line marketing
specialists. To the extent that these services are in high demand, compensation
levels may continue to rise. In such an event, the Company may be forced to
raise its prices, or may have its profit margins for its products and services
eroded. The Company has found ways to replace some of its skilled labor with
proprietary software programs which can perform many of the same tasks. The
Company's foreign affiliates, especially Brazil, may be effected by inflation.
As of the date of this filing, Brazil's contribution to revenues is minimal.
Recent Developments
On July 11, 2000, the Company signed a letter of intent to merge
(possibly through a newly formed wholly owned subsidiary) with SkyBiz
International Ltd. SkyBiz is a Hamilton, Bermuda-based Web site development and
hosting company with operations in Tulsa, Oklahoma.
SkyBiz hosts more than 1 million web sites and generates business through sales
of web sites to first time users, home-based businesses, and other customers in
the U.S. and more than 180 other countries. Management believes SkyBiz can
provide the Company with a substantial customer base for sales of enhancements
and on line marketing services with relatively little additional cost of sales.
Under the purposed terms of the agreement, the Company would issue
SkyBiz convertible stock which would be convertible into 80% of the Company's
common shares. The letter of intent also provides that SkyBiz shall have the
right to convert into an additional 5% of the total number of shares of the new
company upon the achievement of $16.5 million of pre-taxed profits. The
percentages shall be based upon fully deluded common shares of the new company.
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The completion of this merger is subject to:
o the structuring of a definitive agreement;
o standard due diligence; and
o completion of audited financials for both entities and
subsidiaries.
On March 31, 2000, the Company issued 11,200 shares of Series A
Convertible Preferred Stock for a total purchase price of $11,200,000 to a small
group of accredited investors. The stated value of each share of the preferred
stock is $1,000 per share. Each share of Series A Convertible Preferred Stock is
convertible into common stock of the Company at $4.50 per share. Except upon
approval of the holders of a majority in interest of the Series A Preferred
Stock, no purchaser may convert their shares preferred stock if it results in
the purchaser receiving more than 4.99% of the outstanding shares of common
stock of WorldWideWeb. The conversion price will be adjusted for any stock
splits, stock dividends, corporate reorganizations and certain other corporate
transactions and issuance of securities at below market price. The preferred
stock includes no dividend and carries no voting rights except as required under
the Florida Business Corporation Act and, in that event, the vote of the holders
of a majority of the series of preferred stock will be required to approve any
transaction affecting the Series A Convertible Preferred Stock.
WorldWideWeb is required to file a Registration Statement covering
the underlying shares of common stock by May 15, 2000 and complete the
registration process within 210 days of closing or become subject to certain
charges and remedies. WorldWideWeb may not undertake any additional financing
for a period of 240 days following the closing date without the approval of the
placement agent for the financing, and the purchasers have a right of first
refusal for a period of 120 days following the prior period. In addition, for a
period of 18 months following the March 31, 2000 closing, the purchasers have a
right to purchase up to an additional 2,222,222 shares of WorldWideWeb common
stock at a purchase price of $7.50 per share.
The Zanett Securities Corporation acted as placement agent for
this financing and received a commission of $920,000 as well as reimbursement
for certain expenses. WorldWideWeb also issued to The Zanett Securities
Corporation a warrant to purchase 250,000 shares of our common stock at an
exercise price of $4.50 which represented the market price of our common stock
at the closing date. The warrant carries a three year term and is subject to
certain adjustments for various corporate transactions. The shares of our common
stock underlying the warrant will also be included in the Company's Registration
Statement covering the purchasers' shares.
Item 7. Financial Statements
The financial statements required by this report are included,
commencing on F-1.
12
<PAGE>
Item 8. Changes In and Disagreements With Accountants
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The Company's executive officers and directors as of June 30, 2000
are as follows:
Name Age Positions
---- --- ---------
Smiley Sansoni 42 Chairman of the Board
Alan Pavsner 48 President and Chief Executive Officer
Shawn McNamara 35 Executive Vice President and Chief
Operating Officer
Ernest D. Chu 53 Director and Chief Financial Officer
Jack P. Phelan 48 Director
Smiley Sansoni. Since April 1998, Mr. Sansoni has served as the
Company's Chairman of the Board of Directors. He served as the Company's Chief
Executive Officer from April 1998 to June 2000. From 1982 through April 1998 Mr.
Sansoni was the Managing Director and Chief Operating Officer of Sansoni &
Sansoni, Pty., an Australian advertising agency. From 1991 through March 1998
Mr. Sansoni was President and Chief Operating Officer of Media Plus
International, an advertising and media buying company.
Alan Pavsner. Since March 2000 Mr. Pavsner has served as Chief
Operating Officer for WorldWideWeb. Previously, between March 1999 and March
2000, he was Vice President for Field Operations for Integrated Homes, Inc.,
Boca Raton, Florida, which was engaged in providing low voltage technology
solutions to major builders and developers under residential construction.
Between January 1997 and March 1999, Mr. Pavsner was Vice President of Marketing
for Spectra Systems, Inc., which was engaged in developing advanced technology
equipment to major OEMs and Department of Defense contractors. Between January
1995 and January 1997, Mr. Pavsner was Vice President for P.N.C. Investments,
Ltd. which was engaged in advising clients relative to acquisitions, and mergers
and public securities markets. Between 1974 and 1995, Mr. Pavsner served with
the United States Marine Corps where he concluded his career as Commanding
Officer of Marine Aviation Support Group, Naval Air Warfare Center, Point Mugu,
California and retired with the rank of Lieutenant Colonel. Mr. Pavsner also
serves as a Director and principal on a limited basis of two companies engaged
in locating suitable acquisition candidates.
Shawn McNamara. Mr. McNamara was General Manager of WorldWideWeb
from April, 2000 until promoted to Chief Operating Officer in June 2000. Between
June, 1999 and June, 2000, Mr. McNamara was General Manager of DBD Management,
Fort Lauderdale, Florida, which served as an independent consultant to
governmental authorities in connection with Internet related crimes. Between
September, 1998 and November, 1999, Mr. McNamara was President of Global
Telenet, Inc., Pompano, Florida, an Internet-based marketing company. Between
August, 1997 and September, 1998, he served as President of Internet Video
Network, Pompano, Florida, which was also an Internet-based marketing company.
Prior to that, Mr. McNamara was General Manager for the U.S. Government for
certain adult entertainment clubs in receivership in Southeast Florida from
July, 1995 to August, 1997.
13
<PAGE>
Ernest D. Chu. Mr. Chu has served as the Company's Chief Financial
Officer and Director since April, 1999. Since March, 1995 he has served as Chief
Executive Officer and a Director of Corporate Builders, LP, a limited
partnership. Since October, 1997, he has served as a Director of CB Medical,
Inc., a Florida corporation. From 1993 to 1999, Mr. Chu served as President and
Director of W2 Technologies, Inc., a Delaware investment company. Mr. Chu
graduated cum laude from Amherst College.
Jack P. Phelan. Mr Phelan has served as a Director of the Company
since February 2000. Since June, 1998, he has served as President of Helios
International Asset Management, a registered investment advisor located in Boca
Raton, Florida. From January, 1995 to June, 1998, he served as President of
Nicholson/Kenny Capital Management, a managment firm located in Boca Raton,
Florida. Mr. Phelan is a member of the Association of Investment Management
Research, the New York Society of Security Analysis, the Financial Analysts
Society of South Florida, the International Society of Financial Analysts and
the International Association for Financial Planning. he is also a member of
MENSA and the International Society of Philosophical Enquiry.
Directors are elected at each annual meeting of stockholders.
Directors hold office until the next annual meeting of stockholders. Executive
officers are elected by and serve at the discretion of the Board of Directors.
The board of directors held approximately nine meetings during the year ended
March 31, 2000 and consented to approximately 29 corporate resolutions.
Item 10. Executive Compensation
Summary Compensation Table
The table below sets forth information relating to the
compensation the Company paid during the past three fiscal years to: (i) the
President and Chief Executive Officer; and (ii) each executive officer who
earned more than $100,000 during the fiscal year ended March 31, 2000.
14
<PAGE>
<TABLE>
<CAPTION>
Fiscal Other Annual LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Options/ (#)** Payouts Compensation
--------------------------- ---- -------- ----- ------------ -------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Smiley Sansoni, 1999 $72,740 - - - - -
President and CEO 2000 $120,861 - - 450,000 - -
Brett Hudson* 1999 $76,276 - - - - -
2000 $112,113 - - 75,000 - -
Myra Delane 1999 $30,738 - - - - -
2000 $84,458 - - - - -
Dana Williams* 1999 $49,925 - - - - -
2000 $107,861 - - - - -
Ernest Chu*** 1999 $3,000 - - - - -
2000 $157,000 - - - - -
</TABLE>
*Terminated relationship with the Company in May 2000.
**Options are exercisable at $5.00 per share of common stock. Mr. Sansoni's
options are exercisable through July 1, 2004. Mr. Hudson's options are
exercisable through October 1, 2003.
***Mr. Chu receives consulting fee from the Company for services rendered by him
and for the utilization of resources of Corporate Builders LP, of which he is a
general partner. He receives all compensation through his interest in Corporate
Builders.
Option Grants in Last Fiscal Year
The following table sets forth information concerning the
Company's grant of options to purchase shares of common stock during the fiscal
year ended March 31, 2000 to (i) its President and Chief Executive Officer; and
(ii) each of executive officers who earned more than $100,000 during the fiscal
year ended March 31, 2000.
Percent of
Number of Total Options/
Securities SARs Granted
Underlying To Employees Exercise Or
Fiscal Options/SARs In Fiscal Base Price Expiration
Name Year Granted (#) Year ($/Sh) Date
---- ---- ------------ ------------- ------------ ----------
Smiley Sansoni, 1999 - - - -
President and CEO 2000 450,000 86% $5.00 7/1/04
Brett Hudson* 1999 - - - -
2000 75,000 14% $5.00 10/1/03
Myra Delane 1999 - - - -
2000 - - - -
Dana Williams* 1999 - - - -
2000 - - - -
Ernest Chu 1999 - - - -
2000 - - - -
*Terminated relationship with Company in May 2000.
15
<PAGE>
Employment Agreements
Smiley Sansoni. On June 1, 1999 the Company entered into a five year
employment agreement with Smiley Sansoni, the Chairman of the Board of Directors
for such capacities as agreed to from time to time. Mr. Sansoni receives an
annual base salary of $250,000. In addition to his base salary, Mr. Sansoni may
receive a annual bonus of up to 25% of his base salary per year. He is
guaranteed a minimum bonus of $50,000 per year. He is also entitled to an
automobile allowance of $1,300 per month and three weeks paid vacation per year.
In connection with this agreement, the Company has authorized Mr. Sansoni to
take out an insurance policy in the face amount of $1,600,00, which premiums
shall be paid by the Company. The Company is not entitled to any interest or
claim under this policy.
Alan Pavsner. On April 24, 2000 the Company has entered into an
employment contract with Alan Pavsner under which Mr. Pavsner serves as the
Company's Executive Vice President and Chief Operating Officer. Under the terms
of this agreement Mr. Pavsner receives a base salary of $150,000. In addition to
his base salary he receives a minimum annual bonus of $45,000 which may increase
to 50% of his base salary. Mr. Pavsner also received options to purchase 10,000
shares of the Company's common stock exercisable at $1.50 per share. These
options expire March 4, 2003. He also receives options to purchase 90,000 shares
at the rate of 30,000 per year commencing March 15, 2001. These options are
exercisable at $9.50 per share.
Shawn McNamara. On April 26, 2000 the Company entered into an
employment contract with Shawn McNamara under which Mr. McNamara serves as the
Company's full time General Manager. Under the terms of this agreement Mr.
McNamara receives an annual base salary of $90,000. In addition to his base
salary he receives an annual bonus of up to 30% of his annual salary. He is
entitled to two weeks paid vacation, increasing to three weeks paid vacation
after the initial year of his employment agreement. In addition, Mr. McNamara
shall receive options to purchase 30,000 shares of the Company's common stock at
$9.00 per share. These shares vest over a three year period commencing March 15,
2001 in 10,000 share increments. In connection with any acquisition, merger of
other business compensation facilitated by Mr. McNamara, the will compensate Mr.
McNamara with a cash payment of the greater of $75,000 or 1% of the value of the
transaction and the greater of 50,000 options at the current market price or
10,000 options for each $7.5 million in value of the transaction.
Ernest Chu. The Company has entered into an employment and consulting
agreement with Ernest Chu under which Mr. Chu serves as the Company's Chief
Financial Officer, member of Board of Directors and Consultant. Effective
January 1, 2000, Mr. Chu receives a monthly salary of $10,000 for his services
as Chief Financial Officer. In the event Mr. Chu is terminated (for any reason)
the Company shall continue to pay Mr. Chu his monthly payment for up to four
months. The Company shall also issue Mr. Chu 40,000 options exercisable at the
market price of the Company's common stock on the date of termination. In the
case Mr. Chu's employment as Chief Financial Officer is terminated, he will
remain with the Company as a consultant for a term of 12 months. He will receive
a consulting fee of $5,000 per month for 12 months, commencing on the date his
severance compensation ceases.
16
<PAGE>
1999 Stock Option Plan
On July 31, 1999, the Company adopted and implemented a Stock Option
Plan (the "Plan"). The Plan increases the employees', advisors', consultants'
and non-employee directors' proprietary interest in the Company and aligns more
closely their interests with the interests of our shareholders. The Plan also
maintains the Company's ability to attract and retain the services of
experienced and highly qualified employees and non-employee directors.
Under the Plan, the Company reserved an aggregate of 740,000 shares of
common stock for issuance pursuant to options granted under the Plan ("Plan
Options"). The Board of Directors or a Committee of the Board of Directors (the
"Committee") will administer the Plan including, without limitation, the
selection of the persons who will be granted Plan Options under the Plan, the
type of Plan Options to be granted, the number of shares subject to each Plan
Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of common stock owned
by the eligible person and receive a new Plan Option to purchase shares of
common stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of our common stock must be at least 110% of such fair
market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
the Directors or the Committee, provided that no Plan Option may be exercisable
more than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of our common stock,
no more than five years after the date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in our
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Officers, directors, key employees and consultants and subsidiaries (if
applicable in the future) will be eligible to receive Non-Qualified Options
under the Plan. Only officers, directors and employees who are employed by the
Company or by any subsidiary thereof are eligible to receive Incentive Options.
17
<PAGE>
All Plan Options are nonassignable and nontransferable, except by will
or by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not an employee of but is a member of the Board of
Directors and his service as a Director is terminated for any reason, other than
death or disability, the Plan Option granted to him shall lapse to the extent
unexercised on the earlier of the expiration date or 30 days following the date
of termination. If the optionee dies during the term of his employment, the Plan
Option granted to him shall lapse to the extent unexercised on the earlier of
the expiration date of the Plan Option or the date one year following the date
of the optionee's death. If the optionee is permanently and totally disabled
within the meaning of Section 22(c)(3) of the Internal Revenue Code of 1986, the
Plan Option granted to him lapses to the extent unexercised on the earlier of
the expiration date of the option or one year following the date of such
disability.
The Board of Directors or the Committee may amend, suspend or terminate
the Plan at any time, except that no amendment shall be made which (i) increases
the total number of shares subject to the Plan or changes the minimum purchase
price therefore (except in either case in the event of adjustments due to
changes in our capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan has
been suspended or terminated by the Board of Directors, the Plan shall terminate
in approximately 10 years from the date of the Plan's adoption. Any such
termination of the Plan shall not affect the validity of any Plan Options
previously granted thereunder.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
No exercises have been made.
Long-Term Incentive Plans Awards in Last Fiscal Year
The Company has not awarded any long term plans awards.
18
<PAGE>
<TABLE>
<CAPTION>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table provides certain information regarding our common
stock beneficially owned as of June 30, 2000:
o each person who is known by us to own beneficially 5% or more of our
common stock; o by each of our executive officers and directors; and o
by all of our executive officers and directors as a group.
Warrant ownership is included in the number of shares of common stock
beneficially owned. The conversion of our warrants are not taken into
consideration in computing the ownership and voting percentages below. As of
June 30, 2000 there was 9,889,406 shares of common stock outstanding. Unless
otherwise stated, address for the beneficial shareholder is 6245 N.W. 9th
Avenue, Suite 201, Fort Lauderdale, Florida 33309.
Number of Shares
Name and Address of of Common Stock Ownership Voting
Beneficial Owner Beneficially Owned Percentage Percentage
-------------------- ------------------ ---------- ----------
<S> <C> <C> <C>
Smiley Sansoni 3,614,000 36.5% 36.5%
Brett Hudson, 808,000 8.2% 8.2%
5836 NW 123rd Ave.,
Coral Springs, FL 33076
Dana Williams, 463,000 4.7% 4.7%
10181 SW 1st St.,
Plantation, FL 33324
Mira Y. Delane 171,000 1.7% 1.7%
Ernest D. Chu (1) -- -- --
Corporate Builders, LP (1), 282,000 2.9% 2.9%
515 N. Flagler Drive, West
Palm Beach, FL 33401
Alan Pavsner 165,000(2) 1.7% 1.7%
Shawn McNamara 80,000(3) 1.0% 1.0%
Jack P. Phelan 20,000(4) * *
Gilder Funding Corp., 516,601 5.2% 5.2%
1200 North Bayshore Dr.,
N. Miami Beach, FL 33181
Parkplace Consulting, Inc. 750,000(5) 7.6% 7.6%
6574 N. State Road 7, Suite 12G
Coconut Creek, FL 33073
All executive officers and
directors as a group (5 persons) 3,879,000 39.2% 39.2%
-------------------
</TABLE>
(1) Mr. Chu is a general partner of Corporate Builders LP, but disclaims any
beneficial ownership of its ownership interest in the Company. (2) Includes
options to purchase 90,000 shares of common stock exercisable at $9.50 per share
and an additional 10,000 options exercisable at $1.50.
(3) Includes options to purchase 30,000 shares of common stock exercisable at
$9.50 per share. (4) Includes options to purchase 20,000 shares of common stock
exercisable at $9.50 per share. (5) Includes warrants to purchase 333,334 shares
of common stock.
19
<PAGE>
* Less than one percent.
Item 12. Certain Relationships and Related Transactions
The Company has made several loans to directors of the Company and its
subsidiaries. The Company has made loans in the aggregate of $94,790.03 over the
past two fiscal years. There are no repayment terms for these outstanding debts.
The Company loaned Media Magic Partners, Inc., $19,050. Smiley Sansoni,
the Chairman of the of the Company's Board of Directors, is a minority
shareholder of Media Magic Partners. This loan is secured by a promissory note
which matures on July 20, 2002 at an interest rate of four percent.
Item 13. Exhibits, Lists and Reports on Form 8-K
a) Exhibits
2(i) Agreement and Plan of Reorganization and Stock Purchase Agreement(2)
2(ii) Preferred Stock Security Purchase Agreement (3)
3(i)(a) Amendment to Articles of Incorporation(1)
3(i)(b) Certificate of Designation of Preferred Stock(1)
3(ii) Bylaws(1)
10(i) Stock Option Plan (1)
10(ii) Employment Contract with Sansoni(1)
10(iii) Employment Contract with Pavsner(1)
10(iv) Employment Contract with McNamara(1)
10(v) Employment and Consulting Agreement with Chu(1)
21 Subsidiaries(1)
27 Financial Data Schedule(1)
(1) Included herein
(2) Previously filed on Form 8-K current report dated June 2, 1999
(3) Previously filed on Form 8-K current report dated April 14, 2000
b) Reports on Form 8-K
No reports were filed during the last quarter of the period
covered by this report.
20
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant caused this report to be signed on its
behalf by the undersigned and duly authorized on July 17, 2000.
WORLDWIDEWEB INSTITUTE.COM, INC.
By:/s/ Smiley Sansoni
-------------------------------
Smiley Sansoni
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the date indicated above.
SIGNATURE TITLE
--------- -----
/s/ Smiley Sansoni Chairman of the Board
----------------------------------
Smiley Sansoni
/s/ Ernest D. Chu Chief Financial Officer and Director
----------------------------------
Ernest D. Chu (Principal Accounting and
Financial Officer)
/s/ Alan Pavsner President and Chief Executive Officer
----------------------------------
Alan Pavsner
/s/ Shawn McNamara Executive Vice President and Chief
----------------------------------
Shawn McNamara Operating Officer
/s/ Jack P. Phelan Director
----------------------------------
Jack P. Phelan
<PAGE>
WORLDWIDEWEB
INSTITUTE.COM, INC.
AND SUBSIDIARIES
(formerly Spectrum Pharmaceutical Corp.)
Financial Statements
and
Auditor's Report
March 31, 2000 and 1999
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
<PAGE>
WorldWideWeb Institute.com, Inc. and Subsidiaries
(formerly Spectrum Pharmaceutical Corp.)
Index to Consolidated Financial Statements
Page
----
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements
Consolidated Balance Sheets
as of March 31, 2000 and 1999 F-4
Consolidated Statements of Operations and Comprehensive Income
for the years ended March 31, 2000 and 1999 F-6
Consolidated Statement of Changes in Shareholders' Equity
for the years ended March 31, 2000 and 1999 F-7
Consolidated Statements of Cash Flows
for the years ended March 31, 2000 and 1999 F-9
Notes to Consolidated Financial Statements F-11
F-2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
WorldWideWeb Institute.com, Inc. and Subsidiaries
We have audited the consolidated balance sheets of WorldWideWeb Institute.com,
Inc. (formerly Spectrum Pharmaceutical Corp.) (a Florida corporation) and
Subsidiaries as of March 31, 2000 and 1999, and the related consolidated
statements of operations and comprehensive income, changes in shareholders'
equity, and cash flows for each of the years then ended. 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. The financial statements of the Company's
wholly-owned subsidiary, WorldWideWeb Institute.com, Inc. as of and for the year
ended March 31, 1999 were audited by other auditors whose report was dated June
5, 1999.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the 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
WorldWideWeb Institute.com, Inc. (formerly Spectrum Pharmaceutical Corp.) as of
March 31, 2000 and 1999 and the results of its consolidated operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
June 26, 2000
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-3
<PAGE>
<TABLE>
<CAPTION>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Consolidated Balance Sheets
March 31, 2000 and 1999
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash on hand and in bank $ 7,896,072 $ 216,159
Accounts receivable, net of allowance for
doubtful accounts of $-0-, respectively
Trade -- 41,251
Refundable income taxes 102,280 --
Other 23,660 10,000
Prepaid and other expenses 16,579 49,263
------------ ------------
Total current assets 8,038,591 316,673
------------ ------------
Property and equipment - at cost
Computer equipment 706,560 196,591
Office equipment, furnishings and other 210,576 86,551
------------ ------------
917,136 283,142
Accumulated depreciation (199,998) (42,130)
------------ ------------
Net property and equipment 717,138 241,012
------------ ------------
Other Assets
Due from related parties 579,463 112,731
Note receivable 21,691 --
Software license 58,983
Investments in other entities 2,274,921 --
Marketing and customer lists,
net of accumulated amortization of
approximately $20,796 and $-0-, respectively 395,135 --
Deferred offering costs 18,035 --
Other 8,287 5,014
------------ ------------
Total other assets 3,356,515 117,745
------------ ------------
Total Assets $ 12,112,244 $ 675,430
============ ============
</TABLE>
- Continued -
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Consolidated Balance Sheets - Continued
March 31, 2000 and 1999
2000 1999
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of capital lease payable $ - $ 1,379
Accounts payable - trade 292,728 50,381
Other accrued liabilities 163,054 114,468
Income taxes payable -- 50,750
Deferred revenues 347,389 111,128
Due to officer/shareholder 274,163 550,000
------------ ------------
Total current liabilities 1,077,334 878,106
------------ ------------
Commitments and Contingencies
Shareholders' Equity
Preferred stock - $0.001 par value
2,000,000 shares authorized
Series A - $1,000 stated value
11,200 shares allocated, issued and outstanding 11,200,000 --
Common stock - $0.001 par value 50,000,000
shares authorized. 9,769,450 and 5,716,250
issued and outstanding, respectively 9,769 5,716
Additional paid-in capital 2,971,958 1,147,775
Foreign currency translation adjustment (58,958) 3,195
Accumulated deficit (3,086,959) (1,358,462)
------------ ------------
11,035,810 (201,776)
Stock subscription receivable (900) (900)
------------ ------------
Total shareholders' equity 11,034,910 (202,676)
------------ ------------
Total Liabilities and Shareholders' Equity $ 12,112,244 $ 675,430
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Consolidated Statements of Operations and Comprehensive Income
Years ended March 31, 2000 and 1999
2000 1999
----------- -----------
<S> <C> <C>
Revenues
Domestic $ 5,538,616 $ 2,672,394
Foreign 1,769,396 --
----------- -----------
Total revenues 7,308,012 2,672,394
Cost of Sales 1,904,734 356,853
----------- -----------
Gross Profit 5,403,278 2,315,541
----------- -----------
Operating Expenses
Selling expenses
Compensation and related costs 1,680,742 593,488
Other selling expenses 1,503,592 736,148
Amortization of marketing lists 20,797 --
General and administrative expenses
Compensation and related costs 2,132,639 502,306
Consulting and professional fees 596,473 67,449
Other general and administrative expenses 1,223,275 370,428
Research and development expenses 414,120 --
Depreciation 131,170 42,130
----------- -----------
Total operating expenses 7,702,808 2,311,949
----------- -----------
Income (Loss) from operations (2,299,530) 3,592
Other income (expense)
Interest and other (9,720) (394)
Litigation settlement (20,000) --
Forgiveness of accrued officer compensation 550,000 --
----------- -----------
Income (Loss) before provision for income taxes (1,779,250) 3,198
Provision for income taxes 50,753 (51,228)
----------- -----------
Net Income (Loss) (1,728,497) (48,030)
Other comprehensive income (expense)
Change in foreign currency translation adjustment (62,153) --
----------- -----------
Comprehensive Income (Loss) $(1,790,650) $ (48,030)
=========== ===========
Income (Loss) per share of common stock outstanding,
computed on net loss - basic and fully diluted $ (0.22) $ (0.01)
=========== ===========
Weighted-average number of shares outstanding 8,236,426 5,941,250
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Statement of Changes in Shareholders' Equity
Years ended March 31, 2000 and 1999
Class A convertible Foreign
preferred stock Common stock Additional currency Stock
--------------------- ------------ paid-in translation Accumulated subscription
# shares stated value # shares par value capital adjustment deficit receivable # shares
-------- ------------ -------- --------- ------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
April 1, 1999,
as reported - $ - 6,911,165 $6,911 $926,021 $ - $(1,310,432) $ - -
Effect of 1 for 10
reverse stock split,
including rounding
and change in par
value to $0.00001
per share - - (6,219,915) (6,904) 6,904 - - - -
Effect of change
in par value to
$0.001 per share - - - 684 (684) - - - -
Effect of reverse
acquisition of
WorldWideWeb
Institute.com, Inc. - - 5,025,000 5,025 (4,025) - - (900) -
Effect of acquisition
of WorldWideWeb
Institute.com, Ltd - - - - 221,559 3,195 - - -
-------- ------------ -------- --------- -------- ----------- ----------- ------------ --------
Balances at
April 1, 1999,
as restated - - 5,716,250 5,716 1,149,775 3,195 (1,310,432) (900) -
Purchase of
treasury stock - - - - - - - 150 150
Sale of
treasury stock - - - - (2,000) - - (150) (150)
Net loss for the year - - - - - - (48,030) - -
-------- ------------ -------- --------- ------- ----------- ----------- ------------ --------
Balances at
March 31, 1999 - $ - 5,716,250 $5,716 $1,147,775 $3,195 $(1,358,462) $(900) -
========= ============ ========= ===== ========= ===== ========= ======== =======
</TABLE>
Treasury stock
----------------
cost Total
------- -------
Balances at
April 1, 1999,
as reported $ - $ (377,500)
Effect of 1 for 10
reverse stock split
including rounding
and change in par
value to $0.00001
per share - -
Effect of change
in par value to
$0.001 per share - -
Effect of reverse
acquisition of
WorldWideWeb
Institute.com, Inc. - 100
Effect of acquisition
of WorldWideWeb
Institute.com, Ltd - 224,754
------- --------
Balances at
April 1, 1999,
as restated - (152,646)
Purchase of
treasury stock (2,150) (2,000)
Sale of
treasury stock 2,150 -
Net loss for the year - (48,030)
------- ---------
Balances at
March 31, 1999 $ - $(202,676)
======= =========
- Continued -
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Statement of Changes in Shareholders'
Equity - Continued Years ended
March 31, 2000 and 1999
Class A convertible Foreign
preferred stock Common stock Additional currency Stock
-------------------- ---------------------- paid-in translation Accumulated subscription
# shares stated value # shares par value capital adjustment deficit receivable
------ ---------- ---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
March 31, 1999 - $ - 5,716,250 $5,716 $1,147,775 $3,195 $(1,358,462) $(900)
Issuance of common
stock for settlement
of contract with
former officer - - 1,800,000 1,800 16,200 - - -
Issuance of common
stock for consulting
fees - - 125,000 125 5,875 - - -
Sale of common
stock for cash - - 1,847,000 1,847 2,692,153 - - -
Issuance of common
stock upon exercise
of stock options - - 281,200 281 632,419 - - -
Sale of Series A
convertible
preferred stock 11,200 11,200,000 - - - - - -
Cost of raising capital - - - - (1,522,464) - - -
Change in foreign
currency translation
adjustment - - - - - (62,153) - -
Net loss for the year - - - - - - (1,728,497) -
------ ---------- ------------ ------ ---------- ------- ---------- ------
Balances at
March 31, 2000 11,200 $11,200,000 9,769,450 $9,769 $2,971,958 $(58,958) $(3,086,959) $(900)
====== ========== =========== ====== ========== ======== =========== =====
</TABLE>
Treasury stock
--------------------
# shares cost Total
------- -------- ------------
Balances at
March 31, 1999 - $ - $(202,676)
Issuance of common
stock for settlement
of contract with
former officer - - 18,000
Issuance of common
stock for consulting
fees - - 6,000
Sale of common
stock for cash - - 2,694,000
Issuance of common
stock upon exercise
of stock options - - 632,700
Sale of Series A
convertible
preferred stock - - 11,200,000
Cost of raising capital - - (1,522,464)
Change in foreign
currency translation
adjustment - - (62,153)
Net loss for the year - - (1,728,497)
------- -------- ------------
Balances at
March 31, 2000 - $ - $11,034,910
====== ======== ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Consolidated Statements of Cash Flows
Years ended March 31, 2000 and 1999
2000 1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ (1,728,497) $ (48,030)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 151,967 42,130
Unrealized foreign currency translation adjustment (62,153) --
Lawsuit settlement paid with transfer of assets 20,000 --
Common stock issued for consulting fees 24,000 --
Forgiveness of accrued compensation on employment contract (550,000) --
(Increase) Decrease in
Accounts receivable - trade and other 27,591 (51,251)
Refundable income taxes receivable (102,280) --
Prepaid expenses and other 29,411 (53,591)
Increase (Decrease) in
Accounts payable 242,346 50,381
Other accrued liabilities 48,586 95,160
Due to former officer/shareholder -- 152,500
Income taxes payable (50,750) 50,750
Deferred revenues 236,261 111,128
------------ ------------
Net cash provided by operating activities (1,713,518) 349,177
------------ ------------
Cash Flows from Investing Activities
Cash advanced for note receivable (21,691) --
Cash paid for marketing and customer lists (415,931) --
Cash invested in other entities (2,333,904) --
Advances to affiliates - net (466,732) (64,995)
Purchase of property and equipment (627,296) (219,558)
------------ ------------
Net cash used in investing activities (3,865,554) (284,553)
------------ ------------
Cash Flows from Financing Activities
Cash acquired in acquisition of Canadian subsidiary -- 160,006
Cash advanced by officers 274,163 --
Purchase of treasury stock -- (2,000)
Cash received on sale of preferred stock 11,200,000 --
Cash received on sale of common stock 2,694,000 --
Cash received on exercise of stock options 632,700 --
Cash paid to acquire capital (1,522,464) --
Cash paid for deferred offering costs (18,035) --
Payments on capital lease payable (1,379) (6,571)
------------ ------------
Net cash used in financing activities 13,258,985 151,435
------------ ------------
Increase in Cash and Cash Equivalents 7,679,913 216,059
Cash and cash equivalents at beginning of period 216,159 100
------------ ------------
Cash and cash equivalents at end of period $ 7,896,072 $ 216,159
============ ============
</TABLE>
- Continued -
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Consolidated Statements of Cash Flows - Continued
Years ended March 31, 2000 and 1999
2000 1999
------- -------
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ 9,721 $ 394
======= =======
Income taxes paid (refunded) $ -- $ --
======= =======
Supplemental Disclosure of Non-Cash
Investing and Financing Activities
Settlement of lawsuit with transfer of a patent $20,000 $ --
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements
Note A - Basis of Presentation
WorldWideWeb Institute.com, Inc. (Company) was incorporated on May 29, 1990 as
Interamerican Pharmaceutical Corporation under the laws of the State of Florida.
The Company changed its name to Spectrum Pharmaceutical Corporation in April
1991. The Company was originally formed to engage in the development and
marketing of certain products utilizing the chemical compound procaine
hydrochloride for the treatment of tinnitus, certain symptoms of Alzheimer's
Disease and cocaine addiction. The Company was assigned a patent covering its
products for the specifically named conditions and diseases. These operations
were not successful and abandoned in prior years.
On June 29, 1999, as filed on July 30, 1999, the Company amended its Articles of
Incorporation to issue up to 50,000,000 shares of $0.00001 par value Common
Stock and to effect a one (1) for ten (10) reverse stock split, with no
fractional shares being issued. The Company also changed its corporate name to
WorldWideWeb Institute.com, Inc.
On March 28, 2000, as filed in April 2000, the Company amended its Articles of
Incorporation to authorize the issuance of up to 2,000,000 shares of $0.001 par
value Preferred stock and to change the par value of its Common Stock from
$0.00001 to $0.001 per share. Concurrent with this Amendment, the Company filed
a Certificate of Designations, Preferences and Rights to designate a Series A
Convertible Preferred Stock consisting of 11,200 shares with a stated value of
$1,000 per share.
All issued and outstanding share amounts in the accompanying consolidated
financial statements have been restated to reflect the effect of the reverse
stock split and accompanying changes in the par value of Common Stock as of the
first day of the first period presented.
On July 2, 1999, the Company issued approximately 5,025,000 shares of
post-reverse split stock to acquire 100% of the issued and outstanding stock of
WorldWideWeb Institute, Inc. (a privately owned Florida corporation).
WorldWideWeb Institute, Inc. then became a wholly-owned operating subsidiary of
the Company.
A change in control of the Company and the simultaneous July 2, 1999 acquisition
of WorldWideWeb Institute, Inc. shared common ownership and management.
Accordingly, the acquisition was accounted for pursuant to Interpretation #39 of
Accounting Principles Board Opinion # 16, "Business Combinations", whereby the
combination of entities under common control are accounted for on an
"as-if-pooled" basis. The combined financial statements of the Company and its
wholly-owned subsidiary became the historical financial statements of the
Company as of the first day of the first period presented.
In the first quarter of Calendar 2000, the Company acquired 100.0% of the issued
and outstanding common stock of WorldWideWeb Institute.com, Ltd., a Canadian
corporation. The Company and/or it's Florida subsidiary had provided
significantly all of the necessary working capital for the Canadian operation
and the Florida subsidiary had owned approximately 20.0% of this operation since
its 1999 inception. Accordingly, the acquisition of this entity was accounted
for on an "as-if-pooled" basis due to the common control of this operation and
the related domestic entities.
Both subsidiaries, WorldWideWeb Institute.com, Inc. and WorldWideWeb
Institute.com, Ltd., are in the business of developing, maintaining and hosting
internet web sites for unrelated third party consumers. Additionally, the
Company is in the business of developing, licensing and/or leasing marketing
lists, based on either facsimile machine telephone numbers and/or e-mail
addresses, to other unrelated third party customers.
F-13
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note A - Basis of Presentation - Continued
The Company has a March 31 year-end and follows the accrual method of
accounting.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
During the years ended March 31, 2000 and 1999, respectively, the Company has a
concentration of revenues related to the production, maintenance and hosting of
internet web sites for unrelated third parties. In the event of technological
changes, hosting mediums and international network connections; the Company may
be at risk for a loss of revenues in future periods, which could have a
detrimental effect on the Company's operations. Management is cognizant of the
rapid changes in technology for the Internet and is instituting operational
changes to offset, if any, negative impact to its revenues as a result of
technology, hosting or access technologies.
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents and Currency translations
The Company and its operating subsidiaries maintain funds in United States
and/or Canadian financial institutions in either US dollar (US$) and Canadian
dollar (CN$) transaction accounts. All transactions of foreign subsidiaries
reflected in the accompanying financial statements have been converted into
US dollar equivalents, as of the end of each respective quarter at the Wall
Street Journal published exchange rate on the last day of the fiscal quarter,
for CN$ accounts and at historical amounts for US$ accounts.
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
2. Accounts Receivable and Revenue Recognition
In the normal course of business, the Company accepts checks or national
bankcards as payment for its internet web site development and hosting
services. Bankcard charges are normally paid by the clearing institution
within three to fourteen days from the date of presentation by the Company.
Because of the credit risk involved, if any, management has provided an
allowance for doubtful accounts which reflects its opinion of amounts which
will eventually become uncollectible. In the event of complete
non-performance, the maximum exposure to the Company is the recorded amount
of trade accounts receivable shown on the balance sheet at the date of
non-performance.
Revenues are recognized at the time that the various components of the
customer's web site development process are completed. Based on historical
statistics, all fees are earned and non-refundable within 15 working days
after work commences on a new site. All fees and charges for subsequent
changes and enhancements are recognized as revenues at the time the work is
completed by Company personnel, generally 5-10 working days from commencement
of the modifications to a customer's site.
F-14
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note B - Summary of Significant Accounting Policies - Continued
3. Property and Equipment
Property and equipment is recorded at cost and is depreciated on a
straight-line basis, over the estimated useful lives (generally 2.5 to 10
years) of the respective asset. Major additions and betterments are
capitalized and depreciated over the estimated useful lives of the related
assets. Maintenance, repairs, and minor improvements are charged to expense
as incurred.
4. Marketing and customer lists
Marketing and customer lists which are acquired for both internal Company use
and for rental and/or licensing to other unrelated entities are capitalized
and amortized over a 10 year period using the straight-line method.
5. Deferred offering costs
The Company completed the process of "going public" through a "reverse
acquisition" transaction with a publicly held "shell" company. Deferred
public offering costs represent accounting, legal and underwriting costs
incurred by the Company pertaining to an anticipated registration statement
to be filed with the U. S. Securities and Exchange Commission as required in
a transaction selling $11,200,000 in Class A Convertible Preferred Stock on
March 31, 2000. These costs will be charged against additional paid-in
capital upon successful completion of the registration statement, or charged
to expense if the terms and conditions of the Preferred Stock sale are
modified.
6. Income taxes
The Company and it's wholly-owned Florida subsidiary filed separate corporate
federal income tax returns through March 31, 1999. It is anticipated that
these two entities will file a consolidated federal income tax return in
future periods. Due to the changes in control occurring in 1999, the Company
has no net operating loss carryforwards from periods prior to the change in
control available to offset financial statement or tax return taxable income
in future periods.
The Company's Canadian subsidiary will, as necessary, file separate income
tax returns and corporate reports with the appropriate Canadian authorities.
The Company uses the asset and liability method of accounting for income
taxes. At March 31, 2000 and 1999, respectively, the deferred tax asset and
deferred tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily
non-deductible accrued compensation amounts payable to an officer in periods
prior to March 31, 1999and accumulated depreciation and amortization, accrued
vacation pay accruals, allowances for bad debts and other similar items with
statutory tax treatments per The Internal Revenue Code of 1976, as amended.
As of March 31, 2000 and 1999, the deferred tax asset was fully reserved.
F-15
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note B - Summary of Significant Accounting Policies - Continued
7. Income (Loss) per share
Basic earnings (loss) per share is computed by dividing the net income (loss)
by the weighted-average number of shares of common stock and common stock
equivalents (primarily outstanding options and warrants). Common stock
equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method. The
calculation of fully diluted earnings (loss) per share assumes the dilutive
effect of the exercise of outstanding options and warrants at either the
beginning of the respective period presented or the date of issuance,
whichever is later. As of March 31, 1999, the Company had no outstanding
warrants or options. As of March 31, 2000, the Company's outstanding warrants
and options were anti-dilutive due to the Company's net operating loss
position.
8. Research and development costs
The Company follows the requirements of Statement of Financial Accounting
Standards No. 2, as amended by No. 86, "Accounting for Computer Software to
be Sold, Leased or Otherwise Marketed" whereby "Costs incurred internally in
creating a computer software product shall be charged to expense when
incurred as research and development until technological feasibility has been
established for the product. Technological feasibility is established upon
the completion of a detail program design or, in its absence, completion of a
working model. Thereafter, all software production costs shall be capitalized
and subsequently reported at the lower of unamortized cost or net realizable
value. Capitalized costs are amortized based on current and future revenue
for each product with an annual minimum equal to the straight-line
amortization over the remaining estimated economic life of the product."
Payments made on prospective licensing agreements for software to be
developed by others are capitalized until such time that the product is
placed in service or abandoned. In the case of a product being placed in
service, the capitalized costs will be amortized over the estimated useful
life of the product, without regard to technological modifications, and the
related estimated revenue stream of the product. In the event that a product
is abandoned, the unamortized capitalized costs will be charged to operations
at the date of abandonment.
9. Deferred income
Revenues, and related direct costs, related to the preparation and
maintenance of web sites are deferred until such time that the site is
operational (generally 15 working days from inception).
10. Reclassifications
Certain Fiscal 1999 amounts have been reclassified to conform to the Fiscal
2000 financial statement presentations.
Note C - Note receivable
The Company has executed a $19,050 note receivable with a related entity. The
note, dated March 30, 2000, bears interest at 4.0% and is due on or before July
20, 2002. The note has an outstanding balance of approximately $21,691 at March
31, 2000.
F-16
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note D - Advances to related parties
The Company has advanced approximately $579,463 and $112,731 to related
entities. These advances are non- interest bearing and are repayable upon
demand. The Company holds options to acquire various interests in all of the
entities to which advances have been made.
Note E - Investments in other entities
The Company has invested in various related and unrelated entities. A summary of
these investments is as follows:
World Wide Web Institute of Australia Pty Ltd $ 459,440
World Wide Web Institute do Brazil Ltda. 617,875
Internet Sales Products, Inc. 601,573
Teklaunch, Inc. 267,522
ECCO-Net, Inc. 188,508
Low Cost Hosting.com, Inc. 140,003
---------
$2,274,921
World Wide Web Institute of Australia Pty Ltd is an Australian corporation
engaged in the development, maintenance and hosting of internet web sites for
unrelated third party consumers in Australia and the Pacific Rim. This entity is
owned 20.0% by the Company and 80.0% by members of the Company's Chairman of the
Board's family. This entity conducts business identical to that of the Company.
The Company has an option to acquire up to an additional 55.0% of this entity
for additional consideration of $200,000.
World Wide Institute do Brazil Ltda is a Brazilian corporation engaged in the
development, maintenance and hosting of internet web sites for unrelated third
party consumers in South America. This entity is owned 20.0% by the Company and
80.0% by other unrelated parties. This entity conducts business identical to
that of the Company. The Company has an option to transfer its holdings in this
entity to the controlling shareholders or to obtain up to a total of 80.0% of
this entity, as defined in the corresponding letter agreements.
Internet Sales Products, Inc. is a Florida corporation in the business of
network marketing. This entity provides marketing, an administrative
organization and product line using the Company's products that will provide
customers, on a worldwide basis, the ability to acquire a basic internet web
site, hosting and other bundled product services. This entity is owned 20.0% by
the Company and 80.0% by a current shareholder and former officer of the
Company. The Company has the option to convert any and all advances to and
investments in this entity to additional shares of this entity up to a total
ownership percentage of 90.0%. The conversion price related to any additional
shares is to be determined by an outside third party.
Teklaunch, Inc. is a Florida corporation in the internet solutions business,
including web site design and hosting, e-commerce and internet business
consulting. This entity is owned 20.0% by the Company and 80.0% by other
unrelated persons. In April 2000, the Company and Teklaunch, Inc. executed a
Stock Purchase Agreement whereby the Company was to acquire an additional 16.0%
(for a total ownership of approximately 36.0%) in this entity for the payment of
approximately $500,000 in cash or in-kind expenditures by the Company on
Teklaunch's behalf and to acquire an additional 48.0% (for a total ownership of
approximately 84.0%) in this entity for an additional payment of approximately
$100,000 in cash or in-kind expenditures on this entity's behalf.
F-17
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note E - Investments in other entities - continued
ECCO-Net, Inc. is a Texas corporation in the business of providing electronic
information services to the music industry. This entity and the Company are
engaged in the development, maintenance and support of an interactive
internet/intranet software package for the entertainment industry. This entity
is owned 10.0% by the Company and 90.0% by other unrelated persons.
Low Cost Hosting.com, Inc. is a Florida corporation in the business of providing
unrelated consumers with low cost virtual web site hosting, online site building
services, e-commerce capabilities with secured server transaction capability,
database integration and related technical support. This entity is owned 25.0%
by the Company and 75.0% by an unrelated person. Upon the investment by the
Company of approximately $250,000 in either cash or in-kind expenditures on this
entity's behalf, the Company will have a 10-year option to acquire the 75.0% of
the outstanding shares of this entity that the Company does not own at the sole
option of the Company.
Note F - Software license
The Company has a Software Development Agreement with an individual who is also
an employee of the Company to acquire an automated macro-driven web site
building tool (Tool) from a Florida corporation owned by the individual, who has
assigned the rights to the Tool to his corporation, for the exclusive use of the
Company. The Company, upon completion, will own all rights, patents, title and
interests in the Tool.
The costs capitalized in the accompanying consolidated financial statements
represent direct costs incurred by the Company on behalf of the employee to
develop the Tool, which will be amortized against operations, commencing on the
first day that the Tool is fully operational.
In addition to the allocated costs of development incurred by the Company on the
employee's behalf, the Company will pay the employee the following as further
compensation for development of the Tool: 1) $100,000 cash payable in
installments as set forth in the Software Development Agreement; 2) 50,000
shares of the Company's restricted, unregistered common stock; 3) a "put" option
on the 50,000 shares in 2) which may be exercised after November 30, 2001 at a
price of $10.00 per shares if the shares cannot be sold in the open market or if
the open market price is less than $10.00 per share; 4) 2.5% of the issued and
outstanding stock of Internet Sales Products, Inc. which is owned by the
Company; 5) 20.0% of any license fees received by the Company for the licensing
of the Tool to other web site development entities; 6) a royalty equal to 3.0%
of the total cost charged to a Company client for all Company developed web
sites generated using the Tool in excess of 100,000 web sites until such time
that a total of $5,000,000 has been paid to the employee. The Company and/or the
employee has the right to assign this Tool into a to-be-formed corporation,
tentatively known as Cross Country Logistics, Inc. and the employee has the sole
right and option to convert the right to receive any royalties from the use of
the Tool into a 10.0% ownership in the subsidiary operation.
In the event that the employee transfers the Tool into Cross Country Logistics,
Inc., the Company is obligated to acquire 100.0% of the issued and outstanding
stock of Cross Country Logistics, Inc. for a purchase price of approximately
$600,000 under similar terms, conditions and performance benchmarks as required
in the preceding Software Development Agreement.
F-18
<PAGE>
<TABLE>
<CAPTION>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note G - Capital Lease
The Company had a capital lease obligation for the acquisition of a telephone
system. This $7,950 lease was payable in monthly installments of approximately
$695, including accrued interest. Final payment was made in May 1999. The
balance due on this lease as of March 31, 2000 and 1999, respectively, was $-0-
and $1,379.
Note H - Due to officer/shareholder
The Company's Chairman of the Board has advanced approximately $274,000 to the
Company for working capital in prior periods. These advances are non-interest
bearing and are repayable upon demand.
Note I - Income Taxes
The components of income tax (benefit) expense for the years ended March 31,
2000 and 1999, respectively, are as follows:
2000 1999
-------- --------
Federal:
Current $(40,753) $42,000
Deferred - -
-------- --------
(40,753) 42,000
-------- --------
State:
Current (10,000) 9,228
Deferred - -
-------- --------
(10,000) 9,228
-------- --------
Total $(50,753) $51,228
======== ========
As of March 31, 2000, the Company has a net operating loss carryforward of
approximately $1,700,000 to offset future taxable income. If not fully utilized,
this carryforward will begin to expire in 2020.
The Company's income tax expense for the years ended March 31, 2000 and 1999,
respectively, differed from the statutory federal rate of 34 percent as follows:
2000 1999
--------- ---------
<S> <C> <C>
Statutory rate applied to earnings (loss) before income taxes $(538,237) $ 925
Increase (decrease) in income taxes resulting from:
State income taxes (10,000) 9,228
Non-deductible accrued officer compensation - 51,850
Other, including reserves for deferred tax asset 497,484 (10,775)
-------- ---------
Income tax expense $(50,753) $ 51,228
======== =========
</TABLE>
F-19
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note I - Income Taxes - Continued
The Company's deferred tax asset as of March 31, 2000 and 1999, respectively, is
as follows:
2000 1999
--------- -------
Net operating loss carryforwards $578,000 $ -
Valuation allowance (578,000) -
------- -------
Net deferred tax asset $ - $ -
======= =======
The valuation allowance estimate increased (decreased) by approximately $578,000
and $-0- for the years ended March 31, 2000 and 1999, respectively. Management
is of the opinion that it's valuation estimate is reasonably possible of
changing in future periods.
Note J - Convertible preferred stock
On March 28, 2000, as filed in April 2000, the Company amended its Articles of
Incorporation to authorize the issuance of up to 2,000,000 shares of $0.001 par
value Preferred stock and to change the par value of its Common Stock from
$0.00001 to $0.001 per share. Concurrent with this Amendment, the Company filed
a Certificate of Designations, Preferences and Rights to designate a Series A
Convertible Preferred Stock consisting of 11,200 shares with a stated value of
$1,000 per share.
On February 28, 2000, the Company sold 11,200 shares of Series A Convertible
Preferred Stock for total gross proceeds of $11,200,000. The transaction closed
on March 31, 2000. The Preferred Stock is convertible into shares of the
Company's common stock at a conversion rate of $4.50 per common share.
The underlying common shares are subject to a Registration Rights Agreement
whereby the Company is obligated to file a Form S-3 or other such Registration
Statement as available with the U. S. Securities and Exchange Commission on or
before 45 days after the closing date to register at least 3,500,000 shares of
the Company's common stock. In the event the Registration Statement is not
effective on or before 210 days after March 31, 2000, the Company shall pay
$15,000 per $1,000,000 in Preferred Stock outstanding per month, or part of a
month, that the effective date of the Registration Statement is later than the
210th day after March 31, 2000. The payment is to be made in cash or, at the
sole option of the holding Investor, common stock at the conversion rate of
$4.50 per share.
As a condition of the sale of the Series A Convertible Preferred Stock, the
Company agreed to a "lock up period" of 240 days from March 31, 2000 whereby the
Company cannot contract with any other party to obtain additional financing in
which any equity or equity-linked securities are issued without the express
written consent of the entity initiating the sale of the Preferred Stock.
At any time from March 31, 2000 until eighteen (18) months thereafter, the
Purchasers of the Preferred Stock have the right to purchase up to an additional
2,222,222 shares of common stock at a price of $7.50 per share.
The Company is obligated to designate and reserve an adequate number of common
shares to facilitate the conversion of the Preferred Stock at all times during
the period that the Preferred Stock is issued and outstanding.
F-20
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note K - Common stock transactions
On June 29, 1999, as filed on July 30, 1999, the Company amended its Articles of
Incorporation to issue up to 50,000,000 shares of $0.00001 par value Common
Stock and to effect a one (1) for ten (10) reverse stock split.
On March 28, 2000, as filed in April 2000, the Company amended its Articles of
Incorporation to authorize the issuance of up to 2,000,000 shares of $0.001 par
value Preferred stock and to change the par value of its Common Stock from
$0.00001 to $0.001 per share. Concurrent with this Amendment, the Company filed
a Certificate of Designations, Preferences and Rights to designate a Series A
Convertible Preferred Stock consisting of 11,200 shares with a stated value of
$1,000 per share.
All issued and outstanding share amounts in the accompanying consolidated
financial statements have been restated to reflect the effect of the reverse
stock split and accompanying changes in the par value of Common Stock as of the
first day of the first period presented.
On April 1, 1999, the Company issued 18,000,000 pre-reverse split shares
(1,800,000 post-reverse split shares) of unregistered, restricted common stock
to its former President in settlement of a consulting contract for providing
various services to the Company in preserving the corporate entity during
preceding years. This transaction was valued at approximately $18,000, which
approximates the "fair value" of the common stock issued and the agreed- upon
value of the services rendered.
On April 15, 1999, the Company issued 125,000 post-reverse split shares of
restricted, unregistered common stock in settlement of a consulting agreement,
valued at approximately $6,000, which approximates the value of the services
rendered and the "fair value" of the shares on the issue date, as compensation
for various services rendered to the Company for the purpose of identifying a
suitable merger candidate for the Company and for paying certain reactivation
expenses on behalf of the Company.
On July 2, 1999, the Company issued approximately 5,025,000 shares of
post-reverse split stock to acquire 100% of the issued and outstanding stock of
WorldWideWeb Institute, Inc. (a privately owned Florida corporation).
WorldWideWeb Institute, Inc. then became a wholly-owned operating subsidiary of
the Company.
On August 10, 1999, the Company sold an aggregate of 1,000,000 Units, consisting
of one (1) share of restricted, unregistered common stock and one (1) Warrant to
purchase an additional share of restricted, unregistered common stock at a price
of $2.25 per share through December 31, 2001, at a price of $1.00 per Unit under
a Stock Subscription Agreement for total proceeds of $1,000,000 to the Company
for working capital purposes.
In August 1999, the Company issued a Private Offering Memorandum selling up to
250,000 Units at a price of $2.00 per Unit. Each Unit consists of one (1) share
of restricted, unregistered common stock and one (1) Warrant entitling the
holder to purchase one (1) share of restricted, unregistered common stock at a
price of $2.25 per share through December 31, 2001. These Warrants are
designated to be registered in the Company's first Registration Statement under
The Securities Act of 1933 after the closing of this Private Offering
Memorandum. The Company sold 250,000 Units in this offering generating gross
proceeds of approximately $500,000.
F-21
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note K - Common stock transactions - Continued
On August 31, 1999, the Company issued a Private Placement Memorandum to sell
500,000 Units, with the provision for an additional 200,000 Units to allow for
oversubscriptions, at a price of $2.00 per Unit. Each Unit consists of one (1)
shares of restricted, unregistered common stock and one (1) Warrant entitling
the holder to purchase one (1) share of restricted, unregistered common stock at
a price of $2.25 per share through December 31, 2001. The common stock sold
under this Memorandum are subject to a "lock-up" agreement whereby the
purchasers are subject to the requirements of Rule 144 and a contractual
24-month holding period as agreed to between the purchaser and the Company. The
Warrants have no registration rights. The Company sold 597,000 Units in this
offering generating gross proceeds of approximately $1,194,000.
In December 1999, the Company modified the terms of the stock warrants sold in
the 250,000 Unit and 500,000 Unit offerings, respectively, whereby all holders
were offered an incentive to exercise the outstanding warrants. The Company, to
generate additional working capital, offered the holders of the $2.25 Warrants
the availability to receive a Replacement Warrant entitling the holder, upon
exercise of the initial Warrant, to purchase a share of restricted, unregistered
common stock at $8.00 per share for a two-year period from the exercise of the
initial Warrant. This offer was open for a 30-day period during January 2000.
Approximately 281,200 Warrants were exercised during this period generating
gross proceeds of approximately $632,700 to the Company and the Company issued
281,200 Replacement Warrants, which will expire at various dates during January
2002.
Note L - Stock Warrants
In connection with the March 31, 2000 sale of 11,200 shares of Series A
Convertible Preferred Stock, the Company issued a Stock Warrant to Zanett
Securities Corporation to purchase up to 250,000 shares of the Company's common
stock at the market price of the Company's common stock on the Preferred Stock
closing date of March 31, 2000 (approximately $11.82 per share). These shares
are to be registered in the S-4 Registration Statement or such other
Registration Statement as may be available to the Company as discussed
previously. This warrant expires on its third anniversary date, if not
exercised.
In connection with the March 31, 2000 sale of 11,200 shares of Series A
Convertible Preferred Stock, the Company issued a Stock Warrant to Hobbs
Melville Securities Corp. to purchase up to 100,000 shares of restricted,
unregistered common stock at a price of $4.00 per share in settlement of
cancellation of a Letter of Engagement by and between the Company and Hobbs
Melville Securities Corp.
On August 10, 1999, in connection with the sale of 1,000,000 shares of
restricted, unregistered common stock under a Stock Subscription Agreement, the
Company issued corresponding Warrants to purchase one (1) share of restricted,
unregistered common stock at a price of $2.25 per share through December 31,
2001.
In August, 1999, the Company issued a Private Offering Memorandum selling up to
250,000 Units at a price of $2.00 per Unit. Each Unit consists of one (1) share
of restricted, unregistered common stock and one (1) Warrant entitling the
holder to purchase one (1) share of restricted, unregistered common stock at a
price of $2.25 per share through December 31, 2001. These Warrants are
designated to be registered in the Company's first Registration Statement under
The Securities Act of 1933 after the closing of this Private Offering
Memorandum.
F-22
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note L - Stock Warrants - Continued
On August 31, 1999, the Company issued a Private Placement Memorandum to sell
500,000 Units, with the provision for an additional 200,000 Units to allow for
oversubscriptions, at a price of $2.00 per Unit. Each Unit consists of one (1)
shares of restricted, unregistered common stock and one (1) Warrant entitling
the holder to purchase one (1) share of restricted, unregistered common stock at
a price of $2.25 per share through December 31, 2001. The common stock sold
under this Memorandum are subject to a "lock-up" agreement whereby the
purchasers are subject to the requirements of Rule 144 and a contractual
24-month holding period as agreed to between the purchaser and the Company.
These Warrants have no registration rights.
In December 1999, the Company modified the terms of the outstanding stock
warrants sold in the preceding paragraphs whereby all holders were offered an
incentive to exercise the outstanding warrants. The Company, to generate
additional working capital, offered the holders of the $2.25 Warrants the
availability to receive a Replacement Warrant entitling the holder to purchase
an additional share of restricted, unregistered common stock at $8.00 per share
for a two-year period from the exercise of the initial Warrant. This offer was
open for a 30-day period during January 2000. Approximately 281,200 Warrants
were exercised during this period generating gross proceeds of approximately
$632,700 to the Company and the Company issued 281,200 Replacement Warrants,
which will expire at various dates during January 2002.
The following table summarizes the status of outstanding warrants as of March
31, 2000:
Warrants
outstanding Warrants
originally Exercise price
issued at March 31, 2000 per share
----------- ------------ --------------
August 1999 Warrants 1,000,000 1,000,000 $2.25
December 1999 Warrants 847,000 565,800 $2.25
January 2000 Replacement Warrants 281,200 281,200 $8.00
Preferred Stock Warrants 350,000 350,000 $4.00 - $11.82
----------- -----------
Totals at March 31, 2000 2,478,200 2,197,000
=========== ===========
Note M - Stock Options
In July 1999, the Company granted options to purchase 450,000 shares of the
Company's stock to its Chairman and controlling shareholder at an exercise price
of $5.00 per share, which approximated the closing price of the Company's stock
on the date of issuance, as amended by the Company's Board of Directors in
October 1999. The options vest pro-rata over a four-year period and are
exercisable at the anniversary date of the original July 1999 grant.
In October 1999, the Company granted options to purchase 75,000 shares each to
two separate Company officers and shareholders at an exercise price of $5.00 per
share, which approximated the closing price of the Company's stock on the date
of issuance. The options vest as follows: October 2000 - 37,500 shares; October
2001 - 37, 500 shares and also require each officer to be employed by the
Company through December 31, 2000. One of the officers left the Company prior to
March 31, 2000 and the granted options were terminated.
F-23
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note M - Stock Options - Continued
There were no exercise of any options during the period ended March 31, 2000 and
subsequent thereto. The following table summarizes all vested options granted
from July 1999 through March 31, 2000:
Options Options Options Options Exercise price
granted exercised terminated outstanding per share
--------- --------- ---------- ------------ ---------------
Chairman options 400,000 - - 400,000 $5.00
Officer options 75,000 - 37,500 37,500 $5.00
-------- ----- ------ ---------
Totals 1,200,339 - 37,500 437,500
========= ===== ====== =======
The weighted average exercise price of all issued and outstanding options at
March 31, 2000 was $5.00.
Had compensation cost for options granted been determined based on the fair
values at the grant dates, as prescribed by SFAS 123, the Company's net loss and
net loss per share would not have changed due to the fact that the exercise
price of the options was substantially equal to the market price at the grant
date.
The calculations to estimate the fair value of the options were made using the
Black-Scholes pricing model which required making significant assumptions. These
assumptions include the expected life of the options, which was determined to be
one year, the expected volatility, which was based on fluctuations of the stock
price over a 12 month period, the expected dividends, determined to be zero
based on past performance, and the risk free interest rate, which was estimated
using the bond equivalent yield of 6.0% at March 31, 2000, respectively.
Note N - Contingencies
Employment Agreement
On June 1, 1992, the Company entered into an Employment Contract (Contract) with
an individual to serve as the Company's President. The Contract required a
annual base salary, as specified to use the Contract's anniversary dates, as
follows:
June 1, 1992 to May 31, 1993 $ 85,000
June 1, 1993 to May 31, 1994 105,000
June 1, 1994 to May 31, 1995 115,000
June 1, 1995 to May 31, 1996 125,000
June 1, 1996 to May 31, 1997 135,000
June 1, 1997 to May 31, 1998 145,000
June 1, 1998 to May 31, 1999 155,000
Additionally, the Contract provided for discretionary bonuses, paid vacation and
sick leave time, use of a Company automobile or reimbursement for the use of a
personal automobile and various normal insurance coverage for life and health
coverages.
F-24
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note N - Contingencies - Continued
Employment Agreement - continued
Effective April 1, 1999, this individual and the Company executed an Agreement
whereby all accrued compensation under this Agreement were forgiven by the
individual with no further liability to the Company. Accordingly, the reversal
of these accruals resulted in a one-time income item of $550,000. Pursuant to
the Internal Revenue Code, none of these accrued amounts were eligible for
deduction for income tax purposes in the initial year of accrual and no income
tax effect is realized as a result of this forgiveness.
On June 10, 1999, effective June 1, 1999, the Company entered into an Employment
Agreement (Agreement) with an individual to serve as the Company's Chief
Executive Officer and President (CEO). The Agreement is for a term of five (5)
years and provides the CEO with an annual base salary of $250,000. The CEO may
also be paid a bonus equal to 25.0% of base salary for the period beginning with
the execution of the Agreement through March 31, 2004. The CEO is guaranteed a
minimum bonus of $50,000 for term of the Agreement and is subject to mutually
agreed-upon performance criteria. Further, the CEO is authorized to execute life
insurance policies on his own life in the amount of $1,600,000 and the Company
is responsible for the payment of premiums of said policies with these payments
being additional compensation to the CEO. This Agreement terminates
automatically upon either the death of the CEO or the CEO's voluntary separation
from the Company. In the event that the Company dismisses the CEO, the Company
is obligated to pay a lump sum severance equal to one year's base salary to the
CEO for full and complete settlement of the Agreement.
Effective April 4, 1999, the Company entered into a Letter Agreement with an
individual to serve as the Company's Chief Financial Officer (CFO). The Letter
Agreement requires a base salary of $10,000 per month and may be terminated by
the Company upon 60 days written notice. In the event that the Company's CFO is
terminated, the Company is obligated to pay the CFO a severance equal to the
base salary at the rate of one (1) week for each month served between April 1999
and the month of termination to a maximum of 16 weeks. Said payment is due upon
the first (1st) day of the month subsequent to the termination. Additionally,
the Company, upon notice of termination, is obligated to issue the CFO a Stock
Purchase Warrant to purchase up to 40,000 restricted, unregistered common stock
at a price equal to the average of the closing bid price of the Company's common
stock over the previous 10 trading days. Such Warrant shall contain a cash-less
exercise provision, no vesting conditions and piggyback registration rights.
Further, the Company has agreed, in the event of termination, to
contemporaneously execute, upon termination, a consulting contract with the CFO
whereby the CFO will be retained as a consultant and Director to the Company for
the succeeding 12 month period at a minimum rate of $5,000 per month, beginning
on the date that his severance compensation ceases.
F-25
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note N - Contingencies - Continued
Employment Agreement - continued
Effective March 6, 2000, the Company entered into an Employment Agreement with
an individual to serve as the Company's Chief Operating Officer and Executive
Vice President (COO). On April 19, 2000, the parties modified this agreement to
provide for a base salary of $150,000 per year and an annual performance bonus
of up to 50.0% of the base salary with a guaranteed bonus of $45,000 payable in
January 2001. The COO was granted the option to purchase up to 10,000 shares of
the Company's common stock from the Company's Chairman at a price of $1.50 per
share. This option expires on March 4, 2003 and 50.0% vests in June 2000 and the
remainder vests on the first anniversary date of this agreement. Further, the
COO was granted options to purchase up to 90,000 shares of the Company's common
stock at a price of $8.00 per share (as repriced on April 28, 2000). These
options expire on the seventh (7th) anniversary date of this agreement and vest
over a three year period, commencing on March 15, 2001. In the event that the
average price of the Company's common stock, as quoted, drop below $8.00 (as
repriced on April 28, 2000) for a period of more than six months, these options
will be canceled and replaced with identical options with an exercise price
equal to the then prevailing market price.
Litigation
The Company and its then President were defendants in a case initiated in August
1992 in Circuit Court for the 15th Judicial Circuit for Palm Beach County,
Florida seeking damages related to the termination of a partnership which was
the predecessor to the Company. In February 1999, this litigation was authorized
to be settled by the Company's Board of Directors through the transference of
the patent assigned to the Company to the plaintiff. In May 1999, this lawsuit
was settled through the physical transfer of the patent assigned to the Company.
Currently, the Company is not subject to any direct governmental regulation
other than the Securities Laws and Regulations applicable to all publicly owned
companies, and laws and regulations applicable to businesses generally. Few laws
or regulations are directly applicable to access to, or commerce on, the
Internet. Due to the increasing popularity and use of the Internet, it is likely
that a number of laws and regulations may be adopted at the local, state,
national or international levels with respect to the Internet. Any new
legislation could inhibit the growth in use of the Internet and decrease the
acceptance of the Internet as a communications and commercial medium, which
could in turn decrease the demand for its services or otherwise have a material
adverse effect on the Company's future operating performance.
The Company is the defendant in litigation styled Robert H. Braver v. Worldwide
Web Institute, Inc. et al. in the District Court of Cleveland County, Oklahoma
(Case No. CJ-99-1303-L) alleging that the Company unlawfully faxed information
to the plaintiff. Per the Company's legal counsel, "There is a statute under
which persons aggrieved by unwanted faxes and telephone calls may recover or may
be found guilty of a misdemeanor, punishable by a fine of not less than $500.00
nor more than $1,000.00 for each separate violation. There is also the Federal
Consumer Privacy Act which protects subscriber privacy rights." The Company is
vigorously defending itself in this action and anticipates no material impact to
either its operations, the results of operations, its financial condition or
liquidity based on the uncertainty of outcome, if any, of this litigation at
this time.
The Company is a plaintiff in two cases in Broward County Court alleging former
Company employee violations of non-compete, confidentiality and
non-circumvention agreements:
F-26
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note N - Contingencies - Continued
Litigation - continued
First, in WorldWideWeb Institute, Inc. v. USAWEB Technology, Inc., the
Company seeks the recovery of damages and injunctive relief in connection
with USAWEB's solicitation of employees to resign from the Company and
accept positions at USAWEB which the Company believes is in violation of
their non-compete and non-disclosure agreements with the Company. USAWEB
has filed a counterclaim through which it seeks the recovery of damages for
the Company's alleged tortious interference with its relationships with
employees and third parties.
Second, in WorldWideWeb Institute, Inc. et al., v. Carol Fletcher Hudson,
the Company is seeking damages and injunctive relief in connection with Ms.
Hudson's breach of a non-compete agreement and non-disclosure agreement.
WorldWideWeb Institute, Inc., a Canadian corporation, ("WorldWideWeb
Canada"), is seeking a declaration that Ms. Hudson is not entitled to stock
in WorldWideWeb Canada because she has failed to perform any duties on
behalf of the Company. Defendant has filed a counterclaim alleging that she
is entitled to an equity interest in the Company and WorldWideWeb Canada.
Ms. Hudson has also raised in her counterclaim a claim for intentional
infliction of emotional distress based upon the conduct of an officer of
the Company. This action is scheduled for trial in October, 2000. As
discovery has not been completed, the Company cannot predict the
probability of any outcome in the lawsuit.
The Company is involved in two other actions:
In WorldWideWeb Institute, Inc. v. Scott Christenson, the plaintiff seeks
the recovery of monies in connection with the Company's alleged failure to
perform its contractual obligations. The amount in controversy is less than
$5,000.00. The trial in this action is scheduled for August 11, 2000. The
Company cannot predict the probability of any outcome in the lawsuit.
The Company also is a plaintiff in a multi-part complaint for declaratory
relief and damages with its former Chief Technology Officer and Director,
Dana Williams. The case WorldWideWeb Institute.com, Inc. vs. Dana Williams,
alleges that Ms. Williams while an officer and director of the Company set
up and implemented plans to run a competing company. It also alleges breach
of fiduciary duty including solicitation of current and former employees
and misappropriation of trade secrets and other proprietary information,
and unjust enrichment. The suit demands monetary damages and assignment
back to the Company or cancellation of all shares.
Consulting Agreement
On April 1, 1999, the Company executed a consulting agreement with an
individual, who became an officer of the Company on May 20, 1999. This contract
was settled on April 15, 1999 with the issuance of 125,000 post- reverse split
shares of unregistered, restricted common stock, valued at approximately $6,000,
which approximates the value of the services rendered and the "fair value" of
the shares on the issue date, as compensation for various services rendered to
the Company for the purpose of identifying a suitable merger candidate for the
Company and for paying certain reactivation expenses on behalf of the Company.
F-27
<PAGE>
WorldWideWeb Institute.com, Inc.
(formerly Spectrum Pharmaceutical Corporation)
Notes to Consolidated Financial Statements - Continued
Note N - Contingencies - Continued
Placement Agent Agreement
In connection with the sale of 11,200 shares of Series A Convertible Preferred
Stock, the Company executed a Placement Agent Agreement. This Placement Agent
Agreement required a fee of 10.0% of the gross proceeds of the Preferred Stock
issue; a $50,000 non-accountable expense allowance and a stock purchase warrant
for 250,000 shares of common stock at the market price of the Company's common
stock on the closing date. This Agreement also limits the Company's ability to
negotiate with other investors, agents or other interested parties without the
permission and/or assistance of the Placement Agent. Further, the Placement
Agent shall approve all subsequent mergers, sales, consolidations, or financings
involving the company and which are, in the aggregate, in excess of $250,000.
Acquisitions
On March 28, 2000, the Company entered into a Stock Purchase Agreement to
acquire 100.0% of the issued and outstanding stock of Cross Country Logistics,
Inc. from its sole shareholder, who is also an employee of the Company. The sole
asset of Cross Country Logistics, Inc. is the assignment of ownership of an
automated macro- driven web site building tool (Tool) with a pending patent
application. The Company has incurred certain direct costs on the employee's
behalf related to the development of the Tool. In addition to the allocated
costs of development incurred by the Company on the employee's and/or Cross
Country Logistics, Inc.'s behalf, the Company will pay an aggregate purchase
price of $600,000 as follows: 1) $100,000 cash payable in installments as set
forth in the Stock Purchase Agreement and 2) 50,000 shares of the Company's
restricted, unregistered common stock to be issued as set forth in the Stock
Purchase Agreement. This transaction closed subsequent to March 31, 2000.
Note O - Subsequent Events
On July 11, 2000, the Company signed a letter of intent to merge with SkyBiz
International, Ltd., a privately- owned Hamilton Bermuda corporation with
operations in Tulsa Oklahoma. SkyBiz International Ltd is in the business of
worldwide sales of web sites to first time users, home-based businesses and many
other customers in more than 180 countries.
On April 28, 2000, the Company issued a Warrant to purchase 20,000 shares of the
Company's common stock to a member of the Board of Directors. The Warrant has an
exercise price of $8.00 per share and expires on April 30, 2003.
F-28
