SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) of the
SECURITIES ACT OF 1934
For The quarterly period ended September 30, 2000
Commission File Number 0-19693
WHAT'S FOR FREE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 87-0485320
--------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7418 East Helm Drive, Scottsdale, Arizona 85260
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (480) 443-1111
Securities registered under Section 12(b) of
the Exchange Act: None Securities registered
under Section 12(g) of the Exchange Act:
Common Stock, Par Value $0.001 Per Share
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the 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.
X Yes ____ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
27,784,006
NUMBER OF COMMON STOCK SHARES OUTSTANDING
On September 30, 2000
Traditional Small Business Disclosure Format (Check One):
X Yes ____ No
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS. F-1 - F-15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION. 1 - 4
PART II
ITEM 1. LEGAL PROCEEDINGS. 5
ITEM 2. CHANGES IN SECURITIES. 5 - 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 10
ITEM 5 OTHER INFORMATION. 10
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K. 10
SIGNATURES 11
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
BALANCE SHEET
September 30, 2000
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 38,108
Prepaid consulting fees 750,000
Deferred financing costs 212,616
Other receivables 2,459
---------------
TOTAL CURRENT ASSETS 1,003,183
---------------
PROPERTY AND EQUIPMENT - at cost, net 6,715,631
OTHER ASSETS:
Intangible assets 3,880,987
Other deposits 1,360,000
Security deposits 83,400
---------------
5,324,387
---------------
$ 13,043,201
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 300,000
Current portion of capital leases payable 3,368,673
Loans payable - shareholders 249,970
Accounts payable 2,573,509
Accrued expenses and other current liabilities 201,370
---------------
TOTAL CURRENT LIABILITIES 6,693,522
---------------
CAPITAL LEASES PAYABLE, net of current portion -
COMMITMENT AND CONTINGENCIES -
STOCKHOLDERS' EQUITY:
Common Stock, $.001 par value; 50,000,000 shares
authorized; 27,784,006 shares issued and outstanding 27,784
Additional paid-in capital 34,024,383
Less: Common stock subscription receivable (800,000)
Deficit accumulated during the development stage (26,902,488)
---------------
TOTAL STOCKHOLDERS' EQUITY 6,349,679
---------------
$ 13,043,201
===================
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
During the
Development Stage
(February 15, 1990)
Three Months Ended September 30, Nine Months Ended September 30, (inception)to
-------------------------------- --------------------------------
2000 1999 2000 1999 September 30, 2000)
---------- --------------- ---------- ----------- ---------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ 1,624
OPERATING EXPENSES:
Advertising and marketing 681,725 - 1,378,599 - 1,410,599
Bonus and incentives 316,880 - 6,258,544 - 6,258,544
Consulting fees 350,039 65,125 1,457,021 165,250 2,490,744
Depreciation and amortization 724,236 - 816,192 - 816,192
Finders fees and referrals 219,500 - 1,790,002 - 1,790,002
Professional fees 318,785 45,000 1,397,757 155,028 2,448,575
Public relations 46,878 - 2,138,228 - 2,138,228
Wages and salaries 1,123,245 - 2,586,236 - 2,586,236
Other general and
administrative expenses 1,034,833 51,614 2,412,626 159,999 6,474,808
---------- --------------- ---------- ----------- -------------
TOTAL OPERATING EXPENSES 4,816,121 161,739 20,235,205 480,277 26,412,304
---------- --------------- ---------- ----------- -------------
LOSS FROM OPERATIONS (4,816,121) (161,739) (20,235,205) (480,277) (26,412,304)
INTEREST EXPENSE, net (44,102) - (48,224) - (48,224)
----------- --------------- ---------- ----------- -------------
NET LOSS $(4,860,223) $ (161,739) $(20,283,429) $(480,277) $ (26,460,528)
============ ============== ============= ============ ==============
LOSS PER COMMON SHARE,
basic and diluted $ (0.19) $ (0.02) $ (0.95) $ (0.06) $ (10.44)
============ ============== ============= ============ ===============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING,
basic and diluted 25,469,803 8,726,647 21,379,653 8,576,647 2,533,400
============ ============== ============= ============ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During the
Development
Three Months Ended Nine Months Ended Stage
September 30, September 30, (February 15, 1990
------------------------ ------------------------- (inception)to
2000 1999 2000 1999 September 30, 2000)
------------------------ ------------------------- ------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Loss $ (4,860,223)$ (161,739) $ (20,283,429)$ (480,277) $ (26,460,528)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for loan losses - - - - 955,000
Amortization and depreciation 724,236 - 816,192 - 952,192
Common stock issued and warrants granted for
services 1,419,991 - 11,761,877 100,500 15,027,132
Changes in assets and liabilities:
Other receivables - - (2,459) - (2,459)
Prepaid expenses 500 65,125 48,500 64,750 48,500
Accounts payable and accrued expenses
1,833,421 95,850 3,291,092 270,462 3,489,981
---------- -------- ------------ -------- -----------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES (882,075) (764) (4,368,227) (44,565) (5,990,182)
---------- -------- ------------ -------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits - - (875,000) - (875,000)
Purchase of intangible assets - - (18,344) - (18,344)
Capital expenditures
(1,689,596) - (4,258,817) - (4,082,394)
--------- ------- ------------ -------- -----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (1,689,596) - (5,152,161) - (4,975,738)
--------- ------- ------------ -------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of loans payable - related party 91,601 - (120,059) - (102,874)
Proceeds from note and loans payable 549,970 - 549,970 44,306 554,970
Payments of capital leases payable - - (69,386) - (69,386)
Proceeds from the exercise of warrants and
issuance of common stock 1,745,138 - 9,191,536 - 10,621,318
--------- ------- ------------ ------- -----------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 2,386,709 - 9,552,061 44,306 11,004,028
--------- ------- ------------ ------- -----------
NET INCREASE (DECREASE) IN CASH (184,962) (764) 31,673 (259) 38,108
CASH AT BEGINNING OF PERIOD 223,070 794 6,435 289 -
--------- ------- ------------ ------- -----------
CASH AT END OF PERIOD $ 38,108 $ 30 $ 38,108 $ 30 $ 38,108
========= ======== ========== ======== ============
Supplemental Disclosure of Non-Cash Flow Investing and Financing Activities
Issuance of common stock as payment for future
advisory services $ - $ - $ 750,000 $ - $ 750,000
========= ======== ============ ======== ==========
Issuance of common stock for deposit on building $ - $ - $ 875,000 $ - $ 875,000
========= ======== ============ ======== ==========
Issuance of common stock from leasehold improvements $ - $ - $ 2,983 $ - $ 2,983
========== ======== ============ ======== ==========
Capital leases payable from purchase of computer
equipment and software $ - $ - $ 1,146,060 $ - $ 1,146,060
========== ======== ============ ======== ===========
Warrants granted in the purchase of computer
equipment and software $ - $ - $ 60,238 $ - $ 60,238
========== ======== ============ ======== ===========
Issuance of common stock from purchase of intangible
assets $ - $ - $ 3,500,000 $ - $ 3,500,000
========== ======== ============ ======== ===========
Issuance of common stock for subscriptions receivable $ - $ - $ 800,000 $ - $ 800,000
========== ======== ============ ======== ===========
Issuance of common stock from 10% stock dividend $ - $ - $ 438,391 $ - $ 438,391
========== ======== ============ ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principals
for interim financial information, without being audited, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the nine
months ended September 30, 2000, are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. The
unaudited condensed financial statements should be read in conjunction
with the financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31,
1999.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Property and Equipment - Property and equipment are stated at
cost. Depreciation is calculated on the straight-line method
based upon the estimated useful lives of t he respective
assets. Property and equipment are being depreciated over a
period of three to seven years. Maintenance, repairs and
minor renewals are charged to operations as incurred, whereas
the cost of significant betterments is capitalized. Leasehold
improvements are amortized over the lesser of the lease terms
or the assets' useful lives. Upon the sale or retirement of
property and equipment, the related costs and accumulated
depreciation are eliminated from the accounts and gains or
losses are reflected in operations.
In March 1998, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position 98-1 ("SOP
98-1"), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 is effective
for all fiscal periods beginning after December 15, 1998. SOP
98-1 requires the capitalization of certain costs, including
payroll costs, incurred in connection with the development or
purchase of software for internal use. The adoption of this
accounting standard did not have a material effect on the
condensed financial statements.
b. Impairment of Long-Lived Assets - In the event that facts and
circumstances indicate that the cost of an asset may be
impaired, an evaluation of recoverability would be performed.
If an evaluation were required, the estimated future
undiscounted cash flows associated with the assets would be
compared to the asset's carrying amount to determine if a
write-down to market value is required. At September 30, 2000,
the Company does not believe that impairment has occurred.
F-4
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
c. Reclassifications - Certain reclassifications have been made
to the September 1999 interim financial statements to conform
to the September 2000 presentation.
3. PROPERTY AND EQUIPMENT
At September 30, 2000, property and equipment is as follows:
Computer equipment and internal use software $ 2,778,392
Leasehold improvements 102,225
Office furniture and equipment 140,457
Computer equipment held under capital leases 4,213,261
----------------
7,234,335
Less: Accumulated depreciation and amortizatio 518,704
----------------
$ 6,715,631
================
4. INTANGIBLE ASSETS
At September 30, 2000, the Company has several domain names for a total
of $4,195,144. The Company has accounted for these costs in accordance
with Emerging Issues Task Force No. 2000-2, "Accounting for Website
Development Costs," and Accounting Principles Board Opinion No. 17,
"Intangible Assets". In addition, the Company has estimated the useful
life of the intangible assets to be three years and has commenced
amortization on July 11, 2000, the date the websites were placed in
service. Amortization expense charged to operations for the nine months
ended September 30, 2000, was $314,157.
5. RELATED PARTY TRANSACTIONS
At September 30, 2000, included in accrued expenses is a balance due to
Cactus Consulting International Inc., ("CCI") (wholly owned by Jan
Olivier, a shareholder and Chief Executive Officer of the Company) for
$88,400. The payable is for past services performed by CCI.
F-5
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
6. NOTES PAYABLE
The Note was due on October 15, 2000 and bears interest at a rate of
10% per annum. The Note is secured by computer equipment and internal
use software with an approximate net carrying value of $2,558,000.
The Company is in default under this arrangement since the amount due
on October 15, 2000 was not repaid.
7. CAPITAL LEASES PAYABLE
At September 30, capital leases payable consists of:
2000
-------------
Capital lease obligations payable in monthly
installments ranging from $8,044 to $28,210 per
month, including interest at 9.16% and maturing
on May 5, 2003; secured by specific equipment and
software with a carrying value of $1,294,487(a) $ 1,085,359
Capital lease obligations payable in monthly
installments ranging from $8,281 to $28,818 per
month, including interest at 8.51% and maturing
on August 1, 2003; secured by specific equipment
and software with a carrying value of $1,385,475 (b) 1,175,060
Capital lease obligations payable in monthly
installments from $2,353 to $26,028 per month
including interest from 13.48% to 15.99% and
maturing on various dates through October, 2000;
secured by specific equipment and software with a
carrying value of $1,108,254 (c) 1,108,254
-------------
3,368,673
Less: Current portion 3,368,673
-------------
$ -
=============
a. On May 19, 2000, the Company entered into agreements to lease
computer equipment and software which required an initial
payment for $250,000 and grant of 17,835 warrants valued at
$60,238 (see Note 9 (y)).
b. On August 8, 2000, the Company entered into agreements to
lease computer equipment and software which an initial payment
of $250,000 and grant of 18,255 warrants valued at $61,656
(see Note 9 (gg)).
c. On August 4, 2000, the Company entered into an agreement with
a vendor to provide up to $2,000,000 in lease financing for
computer equipment and software. As of September 30, 2000, the
Company has purchased $1,108,254 of equipment and entered into
a maintenance contract for $61,717 under this arrangement. In
addition, the Company granted 80,000 warrants valued at
$101,960 (see Note 9 (hh)).
At September 30, 2000, the Company was in default on these capital
leases as a result of non-payment of monthly installments. Therefore,
the lessors are demanding payment of the entire obligations, and
accordingly, the entire amount of the capital lease payable has been
included in current liabilities.
F-6
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
8. LOANS PAYABLE - SHAREHOLDERS
The loans payable to shareholders are non-interest bearing, have no
specific due date for repayment and are uncollateralized.
9. STOCKHOLDERS' EQUITY
a. In January 2000, the Company acquired rights to certain domain
names in exchange for the issuance of 2,000,000 shares of
restricted common stock valued at $1.75 per share and recorded
an intangible asset for $3,500,000 (see Note 4).
b. On January 27, 2000, the Company granted warrants to an
investor relations firm for services. The total value of the
warrants granted was $210,960 and was recorded to professional
fees. The valuation of the warrants were based on the
Black-Scholes option pricing model with the following weighted
average assumptions used: annual dividend of $0; expected
volatility of 50%; stock price of $1.66; risk free interest
rate of 6%; and expected lives of 3 months to 1 year.
The following is a summary of the warrants granted on January
27, 2000:
i. A warrant to purchase 100,000 shares at an exercise
price of $0.50 per share was granted. These warrants
were valued at $116,340 and during the nine months
ended September 30, 2000, these warrants were
exercised for $50,000.
ii. A warrant to purchase 100,000 shares at an exercise
price of $1.00 per share was granted. The warrant was
valued at $69,820. As of September 30, 2000, the
F-7
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
warrant holder exercised their right to purchase
80,000 shares of common stock for $80,000. The
remaining shares of common stock available under the
warrant expired on July 27, 2000.
iii. A warrant to purchase 100,000 shares at an exercise
price $2.00 per share was granted. This option
expires January 27, 2001, and as of September 30,
2000, they have not yet been exercised. The warrant
was valued at $24,800.
c. During the first quarter 2000, the Company initiated four
private placements under Regulation D, Rule 506 of the
Securities Act of 1933. During the nine months ended September
30, 2000, the Company has raised $7,616,541 from these private
placements. The following is a summary of the private
placements:
i. On February 15, 2000, the Company issued 500,000
shares of restricted common stock at $0.25 per share
or $125,000. In addition, the Board of Directors
declared a 10% stock dividend for 50,000 shares of
the restricted common stock to the holders and valued
the stock dividend at $0.25 per share or $12,500 (see
Note 9 (d)).
ii. On February 15, 2000, the Company issued 239,500
shares of restricted common stock at $0.50 per share
for $119,750.
iii. In March 2000, the Company issued 1,335,000 units at
$1.00 per share for $1,335,000. Each unit consists of
one share of restricted common stock plus one warrant
to purchase one share of common stock at an exercise
price of $2.00 per share and these warrants expire on
February 5, 2001. At September 30, 2000, the warrant
holders had exercised their right to purchase 902,797
shares of restricted common stock for $1,805,594.
iv. During the nine months ended September 30, 2000,
the Company issued 1,525,331 units at $3.00 per share
for $3,775,993 and a promissory note for $800,000.
The promissory note has been recorded as common stock
subscription receivable in the accompanying balance
sheet. Each unit consists of one share of restricted
common stock plus one warrant to purchase one share
of common stock at an exercise price of $4.00 per
share and the warrants expire on April 1, 2001.
During the nine months ended September 30, 2000, the
warrant holders exercised their right to purchase
113,800 shares of restricted common stock for
$455,200.
F-8
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
d. On January 6, 2000, the Company authorized a 10% stock
dividend to stockholders of record as of January 31, 2000. As
a result, a total of 1,469,635 shares of restricted common
stock were authorized for distributions. On March 30, 2000,
1,283,385 shares of restricted common stock valued at $382,516
were distributed. During the second quarter, the remaining
186,250 shares valued at $55,875 were distributed.
e. During February and March 2000, the Company issued 375,000
shares of restricted common stock to various advisors. These
shares were valued at $223,275 and recorded to professional
fees.
f. On January 10, 2000, the Company issued 75,000 shares of
restricted common stock plus granted warrants to purchase
100,000 shares of restricted common stock at $0.50 per share
expiring January 10, 2002. The common stock and warrants were
valued at $60,675 and $43,570, respectively, and recorded to
advertising expenses.
The warrants value were determined based on the Black-Scholes
option pricing model with the following weighted average
assumptions used: annual dividend of $0; expected volatility
of 40%; stock price of $0.86; risk free interest rate of
6.25%; and expected life of 2 years. During the second quarter
2000, the warrants were exercised for $50,000 and the Company
issued 100,000 shares of restricted common stock.
g. On January 13, 2000, the Company contracted with a company for
advertising at a cost of $298,000. As of September 30, 2000,
the Company had paid $111,111 and issued 125,000 shares of
restricted common stock, and granted a warrant to purchase
50,000 shares of common stock at $2.00 per share expiring
January 31, 2001. The common stock and warrant were valued at
$94,375 and $16,545, respectively, and recorded as advertising
expenses.
The warrant's value was determined based on the Black-Scholes
option pricing model with the following weighted average
assumptions used: annual dividend of $0; expected volatility
of 40%; stock price of $1.94; risk free interest rate of 6%;
and expected life of 1 year. At September 30, 2000, the
warrant holder had not exercised the warrant.
h. On February 15, 2000, the Company issued 3,000 shares of
restricted common stock in exchange for network consulting
services. These shares were valued at $5,625 and recorded to
consulting expenses.
i. On March 17, 2000, the Company issued 50,000 shares of
restricted common stock to a consultant for strategic planning
services. These shares were valued at $18,263 and recorded to
consulting expenses.
F-9
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
j. During the first quarter 2000, the Company issued 155,000
shares of restricted common stock to employees as incentives
for joining the Company. These shares were valued at $690,830.
In addition, 1,350,000 shares of restricted common stock were
issued to executive officers of the Company as a bonus for
joining the Company. These shares were valued at $4,947,584
and recorded to bonus and incentive expenses.
k. During the first quarter 2000, the Company granted 300,000
warrants to settle a dispute with a consultant over payment
for services performed. These warrants were valued at $0.02
per share based on the Black-Scholes option pricing model with
the following weighted average assumptions used: annual
dividend of $0; expected volatility of 40%; stock price of
$1.93; risk free interest rate of 6%; and expected life of 1
year. The Company recorded $6,000 to consulting expenses.
These warrants are exercisable at $4.00 per share and expire
on February 1, 2001.
During the second quarter 2000, the Company paid the
consultant $200,000 and issued 100,000 shares of common stock.
In addition, 200,000 of the 300,000 warrants granted in the
settlement were forfeited. Therefore, the Company reduced the
amount recorded for the warrants from $6,000 to $2,000. The
Company valued the issuance of the restricted common stock at
$5.63 per share and recorded $563,000 to consulting expense.
l. On May 19, 2000, the Company granted 100,000 warrants for
consulting services. The warrant holder has the right to
purchase 100,000 shares of restricted common stock with an
exercise price of $4.00 per share and the warrants expire on
February 1, 2001. These warrants were valued at $0.02 per
share based on the Black-Scholes option pricing model with the
following weighted average assumptions used: annual dividend
of $0; expected volatility of 40%; stock price of $1.93; risk
free interest rate of 6%; and expected life of 1 year. The
Company recorded $2,000 to consulting expenses.
On May 19, 2000, the warrant holder exercised his right to
purchase 100,000 shares of common stock for $400,000.
m. On February 15, 2000, 50,000 shares of common stock were
issued to an attorney for prior legal services. These shares
were valued at $1.75 per share or $87,500 and recorded to
legal fees.
On March 22, 2000, the Company issued 25,000 shares of common
stock for legal services valued at $11.25 or $281,250 and
recorded to legal fees.
F-10
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
n. On April 12, 2000, the Company issued 200,000 shares of common
stock in exchange for consulting services. These services were
valued at $1,825,000 and recorded to consulting expenses.
o. On April 24, 2000, the Company issued 25,000 shares of
restricted common stock for advertising services. These
services were valued at $9.25 per share or $231,250 and
recorded to advertising expenses.
p. On May 12, 2000, the Company entered into an agreement that
provides the Company the right to purchase an office building
(See Note 11 (c)). In exchange for the right, the Company
issued 140,000 shares of restricted common stock valued at
$6.25 per share and has recorded a deposit for $875,000 in
the accompanying balance sheet.
q. On June 14, 2000, the Company issued 25,000 shares of
restricted common stock for sales consulting services. The
common stock was valued at $103,125 and recorded to consulting
expense.
r. On June 8, 2000, the Company issued 100,000 shares of
restricted common stock to a consultant for investor
relation's services performed during April and May 2000. These
services were valued at $5.25 per share and the Company
recorded a consulting expense for $525,000.
s. On May 1, 2000, the Company entered into an agreement with
Technology Alliance Group, LLC ("TAG") to provide consulting
services related to planning, implementation and ongoing
support of information technology solutions. The terms of the
agreement are for 30 days, continuing on an hourly basis
thereafter. During the second quarter 2000, the Company paid
$37,145 for services performed and issued 12,000 shares of
restricted common stock valued at $5.75, or $69,000 and the
Company recorded a consulting expense for $106,145.
t. During June 2000, the Company issued 100,000 shares of
restricted common stock to an individual who was appointed
special advisor for the development of the Company's planned
entrance into the Asian markets. The Company valued these
shares at $7.50 and recorded a prepaid expense for $750,000.
As of September 30, 2000, advisory services have not
commenced.
u. During June 2000, the Company issued 5,075 shares of
restricted common stock for network consulting services. The
Company valued these shares at $16,375 and recorded to
consulting expenses.
v. During June 2000, the Company issued 17,500 shares of
restricted common stock to an employee as a bonus. The Company
valued these shares at $72,188 and recorded to compensation
expenses.
F-11
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
w. On June 30, 2000, the Company issued 40,200 shares of
restricted common stock for services. The Company valued these
shares at $252,496 and recorded to recruiting expenses.
x. On June 30, 2000, the Company issued 475 shares of restricted
common stock for construction services. The Company valued
these shares at $2,983 and recorded to leasehold improvements.
y. On May 19, 2000, the Company granted 17,835 warrants with
an exercise price of $5.00 per share and an expiration date
of June 1, 2003. These warrants were granted in connection
with a lease agreement for computer equipment and software
(see Note 7 (a)). These warrants were valued based on the
Black-Scholes option pricing model with the following weighted
average assumptions used: annual dividend of $0; expected
volatility of 40%; stock price of $7.01; risk free interest
rate of 6.00%; and expected life of 3 years. The Company
valued these warrants at approximately $3.38 or $60,238 and
recorded the amount to deferred financing costs. None of
these warrants have been exercised as of September 30, 2000.
z. On August 23,2000, the Company issued 70,000 shares of
restricted common stock to employees of the Company as a bonus
for work performed. These shares were valued at $316,880 and
recorded to bonus and incentives expenses.
aa. On August 23, 2000, the Company issued 35,000 shares of
restricted common stock to a marketing consultant in exchange
for past services performed. These shares were recorded at
$84,210 and recorded to marketing expense.
bb. On August 24, 2000, the Company issued 93,000 shares of
restricted common stock to 70 employees terminated on August
24, 2000. These shares were valued at $1.69 or $156,984 and
were recorded to employee bonuses.
cc. On September 1, 2000, the Company issued 300,000 shares of
common stock to a consultant for services relating to
management, strategic planning and marketing. These shares
were valued at $421,800 and recorded to consulting expenses.
Furthermore, the agreements calls for an additional
compensation of 200,000 shares of common stock to be issued
when the next registration statement is filed by the Company.
The agreement expires on September 1, 2001.
dd. On September 1, 2000, the Company issued 20,000 shares of
common stock for early termination of the public relations
agreement. These shares are valued at $28,120 and recorded to
public relations expense.
F-12
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
ee. During the third quarter 2000, the Company entered into private
placement agreements as follows:
i. On September 11, 2000, the Company issued 100,000
shares of restricted common stock at $0.75 per share
for $75,000.
ii. During August 2000, the Company issued 700,000 and
500,000 shares of restricted common stock for $0.60
and $0.50 per share, respectively, for an aggregate
of $920,000.
ff. On September 21, 2000, the Company issued the following shares of
common stock for services performed:
i. 200,000 shares of common stock to a consultant of the
Company for services performed. These shares were
valued at $206,200 or $1.031 per share and the
Company recorded the amount to consulting expense.
ii. 50,000 shares of common stock to an attorney
representing the Company for services performed.
These shares were valued at $42,200 or .84 per share
and the Company recorded the amount to professional
fees.
gg. On August 8, 2000, the Company granted 18,255 warrants with an
exercise price of $5.00 per share and an expiration date of May 31,
2003. These warrants were granted in connection with a lease agreement
for computer equipment and software (see Note 7 (b)). These warrants
were valued based on the Black-Scholes option pricing model with the
following weighted average assumptions used: annual dividend of $0;
expected volatility of 40%; stock price of $7.01; risk free interest
rate of 6.00%; and expected life of 3 years. The Company valued these
warrants at approximately $3.38 or $61,656 and recorded the amount to
deferred financing costs. None of these warrants have been exercised
as of September 30, 2000.
hh. On July 28, 2000, the Company entered into an agreement with a vendor
to provide financing for computer hardware and software (see Note 7
(c)). On July 31, 2000, the Company granted warrants to purchase of
80,000 shares of restricted common stock at $3.00 per share expiring
July 31, 2005. These warrants were valued based on the Black-Scholes
option pricing model with the following weighted average assumptions
used: annual dividend of $0; expected volatility of 40%; stock price
of $2.88; risk free interest rate of 6.75%; and expected life of 5
years. The Company valued these warrants at approximately $1.28 or
$101,960 and recorded the amount to deferred financing costs. None of
these warrants have been exercised as of September 30, 2000.
F-13
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
10. STOCK OPTION PLAN
On April 1, 2000, the Company adopted a stock option plan ("2000 Stock
Plan") for employees, officers, directors and consultants to the
Company. The plan is pending approval from the shareholders, which
must be obtained before April 1, 2001. The Company's Board of
Directors has approved the awards under the 2000 Plan as of September
30, 2000.
During the second quarter 2000, the Company granted 503,100 options
with exercise prices ranging from $4.00 to 9.50 per share under the
2000 Stock Plan to employees at an exercise price equal to the fair
market value on the date of grant. During the third quarter 2000, the
Company cancelled 234,700 of theses options granted with exercise
prices ranging from $4.00 to 9.50 per share.
Options granted under the 2000 Stock Plan vest one-year after the date
of grant. The options granted under the 2000 Stock Plan become
exercisable during April through September 2001. At September 30,
2000, there were 4,731,600 options available for grant under the 2000
Stock Plan.
11. COMMITMENTS AND CONTINGENCIES
a. The Company leases office space and other under operating
leases expiring in various years through 2003. Future minimum
lease payments, excluding escalation charges, under these
leases are as follows:
Year Ending December 31,
2000 $ 173,938
2001 144,257
2002 98,245
2003 12,245
-----------------
$ 428,685
=================
b. On April 20, 2000, the Company entered into a lease agreement
for office space for six months. Rent during the term is
$15,104 per month plus 100% of common area maintenance
expenses. The Company paid $50,000 in April 2000 and recorded
a security deposit.
c. On May 12, 2000, the Company entered into an agreement
granting them the right to purchase an office building.
During the second quarter 2000,
F-14
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
the Company made a non-refundable deposit for $485,000 and
issued 140,000 shares of restricted common stock valued at
$875,000 (see Note 9 (p)). The Company has recorded the
payments totaling $1,360,000 as a deposit in the accompanying
balance sheet. If the Company exercises its option to purchase
the building, the deposit will be applied to the purchase
price of the building. The option originally expired on
October 26, 2000, and the Company has extended the expiration
date to December 31, 2000.
d. During January through March 2000, the Company entered into
three-year employment agreements with four of the Company's
officers. The agreements provided for minimum annual salaries,
adjusted annually upon reviews and incentives as determined by
the Board of Directors. At September 30, 2000, the total
annual commitment for all four executives, excluding
incentives, was $690,000.
During November 2000, three officers of the Company resigned
and as a result their employment agreements were terminated.
The remaining employment agreement provides for the same terms
as discussed above, except that the total annual commitment,
excluding incentives, was $150,000.
e. The Company has pending legal actions and claims as a result
of events occurring in the normal course of business. Outside
counsel for the Company has advised that at this stage in the
proceedings they cannot offer an opinion as to the probable
outcomes. The Company believes that the suits are without
merit and plans to vigorously defending its positions.
F-15
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward-Looking Statements and Factors That May Affect Results
Except for the historical information contained herein, this Report
contains forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. Words such as "believe," "expect," "intend,"
"anticipate," "estimate," "project," and similar expressions identify
forward-looking statements, which speak only as of the date the statement was
made. Those statements may include projections of revenues, income or loss,
capital expenditures, plans for future operations, financing needs or plans, and
plans relating to our Web site, products or services, as well as assumptions
relating to the foregoing.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking statements. Additional risk factors that
could cause actual results to differ materially from those expressed in such
forward-looking statements are set forth in Exhibit 99, which is attached hereto
and incorporated by reference into this Quarterly report on Form 10-QSB. What's
For Free undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. This Report should be read in conjunction with our Report
on Form 10-KSB for the fiscal year ended December 31, 1999.
Overview
What's For Free Technologies, Inc. is a development stage, marketing
company whose business objective is to provide innovative, online marketing
channels for businesses, charitable organizations and advertising firms focusing
on promotional offers of free products and services utilizing the internet. The
Company intends to utilize information it gathers concerning consumer
preferences and demographics to offer specific advertising services.
The Company's marketing business plan was developed during the latter
part of 1999 and re-structured in October 2000 in order to focus on the
Company's marketing strategy. It is the Company's intention to generate revenues
from the Web site in a number of areas, including:
o fees for customer acquisition from Partners,
o sales of banner advertising on the Web-site,
o e-commerce revenues through sales of products and services that are not
offered for free,
o support of charitable and related not-for-profit activities,
o sale of demographic services based on data and related information
concerning consumers and providers,
The Company has incurred significant losses since the adoption of its
initial marketing business plan. These losses resulted primarily from costs
related to developing of a Web site including equipment and infrastructure
development, retention of key personnel, developing or acquiring technologies to
be used in the business and general corporate overhead. The Company expects to
continue incurring net losses for the foreseeable future, based in part on the
following:
o Marketing expense in order to advertise and promote the Web site,
to establish a consumer and provider base and to increase the
usage of the Web site. This effort will be supported by
affiliation with companies who can direct traffic to the Web site.
o The operating expenses are expected to adjust down as the Company
begins to stabilize its plan of restructuring and reorganization.
If the revenue growth is slower than anticipated or the operating
expenses exceed the Company's expectations, the resulting losses will increase
the deficit situation. For this reason, the Company may not achieve or sustain
profitability in the foreseeable future.
-1-
<PAGE>
Recent Developments
During August 2000, the Company announced a restructuring and
reorganization effort in order to stream line its operation and reduce
significantly its burn rate. All employees were requested to take a temporary
unpaid leave-of-absence until such a reorganization plan could be initiated. It
is the Company's intention to dramatically reduce its workforce and overhead as
it prepares to transition out of the development stage and progress into the
operational phase of its business. However, there is no assurance that such
changes will allow the Company to achieve profitability in the near future.
Plan of Operations
Key business objectives. The Company's plan of operations for the next
twelve months is to focus its efforts on:
o Reorganizing and restructuring the Company;
o Stabilizing the Web-site operations;
o Identifying opportunities that will materialize as a result of the
positioning of its marketing offerings;
o Strengthening certain alliances with service providers and increasing
the number and scope of strategic partnerships;
o Enhancing Web-site offerings; and
o Initiating advertising and promotional campaigns for the Web site.
o Gathering demographic data for global business expansion.
Financing and personnel. The Company continues to seek staged funding
during its development process. The initial phases of that process has been
completed with funding of approximately $9.2 million. The Company has contracted
with potential critical resources (employees and consultants), created and
implemented tasks for them to re-engineer the Web site. As a result of the
reorganization, the Company has reduced its work force to less than 40 people.
Equipment acquisitions. The Company is committed to the utilization of
industry standard platforms. As a result of its restructuring, various contracts
and commitments will be renegotiated to better reflect the on-going operations
and positioning of the Company.
Future capital requirements. Currently, the Company is not able to meet
all of its cash needs nor its cash requirements for the next twelve months.
Therefore, the Company is currently seeking additional funding, including
funding from strategic partners and investment banking, venture capital sources
and private placements, to cover the immediate needs as well as the requirements
for the next twelve months. During the current restructuring, the Company must
raise enough capital to fund its outstanding liabilities of approximately $4.8
million plus future cash requirements to continue its operations. The Company
continues to rely upon its ability to raise capital to fund operations.
Results of Operations:
Revenues
The Company did not record revenues during the quarters ended September
30, 2000 or September 30, 1999.
Advertising Expense and Public Relations
Advertising expenses consist primarily of marketing and promotional
costs related to developing our brand and generating interest in the Company's
Web site, as well as personnel and other costs. Advertising expense was $681,725
for the three months ended September 30, 2000 and $1,378,599 for the nine month
ended September 30, 2000. The Company did not purchase any advertising during
the corresponding period of 1999, as there were no activities or business plan
at that time. From time to time, the Company has retained the services of
various companies in exchange for shares of common stock and expects to continue
to do so in the future.
Public relations was $46,878 for the three months ended September 30,
2000 and $2,138,228 for the nine months ended September 30, 2000. The Company
did not engage any firms to provide public relations services in the
corresponding period of 1999. The Company has paid for these services primarily
by issuing common stock an the granting of warrants.
-2-
<PAGE>
Bonus and Incentives
Bonuses and incentives expenses are non-cash charges arising from the
issuance of restricted common stock to employees at the fair value of these
shares as of the date of issuance. Bonus and incentives was $316,880 for the
three months ended September 30, 2000 and $6,258,544 for the nine months ended
September 30, 2000. This increase was primarily due to the grants of bonuses,
paid in the form of restricted common stock, to individuals retained during this
period ending September 30, 2000 and individuals let go as a result of the
restructuring. During the first six months of the year 2000 bonuses were paid to
individuals as incentive to join the work force of the Company and as incentives
to retain key employees. These bonuses were primarily in the form of restricted
common stock. There was no activity for the corresponding periods of 1999.
In addition, during the second quarter 2000, the Company adopted a
Stock Option Plan whereby, among other things, the Company may issue stock
options to employees and/or non-employees as bonus incentives. During the second
quarter of 2000, 503,100 stock options were issued to employees of the Company
as Incentive Stock Options and issued to them at fair market value on the date
granted. 234,700 stock options were forfeited as a result of the restructuring
at September 30, 2000. The 2000 Stock Option Plan had no effect on the financial
statements for the period ended September 30, 1999.
Consulting Fees
Consulting fees consist primarily of fees paid to outside consultants
for services for computer hardware/software, investor relations, business
analyst, and any other services provided by a contracted consultant. Consulting
fees for the three-months ended September 30, 2000 was $350,039 and $65,125 for
the three-month period ended September 30, 1999. For the nine months ended
September 30, 2000, these expenses increased to $1,457,021 from $165,250 for the
nine-month period ended September 30, 1999. A majority of this expense incurred
during 2000 was incurred in the form of exchanges of common stock for services.
Professional Fees and Finders Fees
Professional fees consist primarily of fees paid to lawyers,
accountants and other professional advisors for services relating to the
Company's start up and establishing procedures as well as for the preparation
for the launch of the Company's Web site. Professional fees for the three-months
ended September 30, 2000 increased to $318,785 from $45,000 for the three-month
period ended September 30, 1999. These expenses increased to $1,397,757 for the
nine-month period ended September 30, 2000 compared with $155,028 for nine-month
period ended September 30, 1999. A portion of this expense was incurred in the
form of exchanges of common stock for services.
Finders Fees were $219,500 and $1,790,002 for the three and nine months
ended September 30, 2000, respectively. These expenses primarily represent
payments for introductions to agents for private placement arrangements.
Wages and Salaries
The wages and salaries remained at approximately the same level for the
quarter ended September 30, 2000 as for the quarter ended June 30, 2000, as the
restructuring's effect did not become fully effective until after September 30,
2000, when the number of employees dropped from approximately 150 at June 30,
2000 to approximately 40 at September 30, 2000. Wages and salary expenses for
the three-month period ended September 30, 2000 was $1,123,245, and $2,586,236
for the nine-month period ended September 30, 2000. The Company did not have any
employees during the corresponding period of 1999.
General and Administrative Expenses
General and administrative expenses principally consist of overhead
costs related to general management and office expenses, finance, and human
resource functions. General and administrative expenses for the three-month
period ended September 30, 2000 was $1,034,833, and $51,614 for the three-month
period ended September 30, 1999; and the expenses for the nine-month period
ended September 30, 2000 increased to $2,412,626 from $159,999 for the
nine-month period ended September 30, 1999. This increase is due to an increase
in office expense as a result of the expansion of office space, adding on
another office location and other costs associated with the launch of the
Company's Web site on July 11, 2000.
Interest and Taxes; Tax Loss Carryover
Interest expense of $44,102 was incurred during the three-month period
and $48,224 for the nine-month period ending September 30, 2000. There was no
interest for corresponding periods 1999. Lease commitments commenced during June
2000 whereby payments have been accrued beginning July 1, 2000. The Company has
-3-
<PAGE>
had in addition to the capital lease commitments for $3,368,673 short-term and
notes payable aggregating loans of $549,970. No debentures or other financing
liabilities existed during prior periods. A net operating loss carryover as of
December 31, 1999 of approximately $5,991,000 will be available to offset future
taxable income, if any. In the event of ownership changes aggregating 50% or
more in any three-year period, the amount of loss carryovers that become
available for utilization in any year may be limited. If not utilized against
future taxable income, the net operating loss carryovers will expire between the
years 2005 and 2014.
Net Loss
The net loss for the three-month period ended September 30, 2000 was
$4,860,223 compared to a net loss of $161,739 for the three-month period ended
September 30, 1999. In addition, the net loss for the nine-month period ended
September 30, 2000 was $20,283,429 compared to a net loss of $480,277 for the
comparable period ending September 30, 1999. This increase is primarily due to
the issuance of stock in exchange for signing bonus grants to newly retained
officers and employees, termination incentives and retaining incentives for
returning employees during the restructuring period, consulting and professional
fees, in addition to an increase in legal and professional fees associated with
our establishment of company policies and procedures. These losses reflect the
fact that the Company did not achieve material revenues in either period. It is
anticipated that losses will continue as the Company's plan of operations is
carried out until such time the operation stabilizes. In particular the
increased advertising expenses associated with carrying out a marketing plan
promoting the Company's business and Web site. There can be no assurance that
these advertising expenses will result in increased revenues.
Liquidity and Capital Resources
The Company has relied exclusively on equity financing to fund its
operations and capital expenditures. In the nine-month period ending September
30, 2000, the working capital (defined as current assets less current
liabilities) was a negative $5,690,339 versus a negative working capital of
$185,339 at December 31, 1999. This increase in negative working capital was
primarily a result of an increase in the outstanding accounts payable and
accrued expenses from $45,799 at December 31, 1999 to $2,774,879 at September
30, 2000. In addition, the capital lease agreements and short-term bridge loans
and notes payable increased the current liabilities by $3,918,643. Although the
cash position, prepaid expenses and deferred financing costs increased from
December 31, 1999, however, the overall increase in liabilities has caused a
negative working capital position at September 30, 2000. The Company is
currently unable to satisfy the current obligations unless additional funding
can be raised. As a result, the Company has furloughed all of its employees due
to its inability to fund payroll.
During the nine-months ending September 30, 2000, the Company has
raised $9,191,536. In addition, common stock was exchanged for a note receivable
of $800,000 and prepaid consulting services of $750,000. All of the offerings
have been completed of which all monies have been used towards the purchase of
computer equipment and software, Web design, materials, consultants and
operating capital needs to initiate the Company's entry into the internet
marketplace.
The Company has an option to purchase the office building which was
leased in April 2000. It houses the Company's operations and contains
approximately 23,400 square feet. Should the Company decide to negotiate the
purchase of the office building, the purchase price will be $2,575,000, of which
$1,360,000 has been paid in cash and stock, leaving a balance of approximately
$1,215,000. There is no assurance that the Company will be able to complete the
purchase of the building by the expiration date, however, there are provisions
in the agreement to extend the option date.
-4-
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company has not been involved in any litigation during the period covered by
this report.
Item 2. Changes in Securities.
Market Information
Prior to May 1, 1995, there was no public market for the Company's common stock.
Since May 1, 1995, the National Quotation Bureau, Inc has quoted the Company's
common stock in the National Daily Quotation Service ("Pink Sheets") published
daily. The Company's trading symbol was changed from "BFTI" to "BFTK" in
connection with the Company's December 2, 1996, reverse stock split; then again
to "RIHI" with the name change and the 1 for 100 reverse stock split in January
1998. Effective December 28, 1999, the Company began trading under the symbol
"WFFT" and quotations are available through the Electronic Bulletin Board.
A 1 for 3 reverse stock split was effective December 2, 1996. A 1 for 100
reverse stock split was authorized on January 17, 1998 and effective on March 6,
1998. The authorized stock remained at 50,000,000 shares of common stock. All
figures in this Quarterly Report give effect to such reverse stock splits, and
previously stated numbers of shares are appropriately restated, unless otherwise
indicated. All statements in this annual report should be read in conjunction
with and are qualified by the other information and financial statements
(including the notes thereto) appearing elsewhere in this Quarterly Report and
the previously filed Annual Report.
On April 13, 2000, the Company filed an application to be listed on the American
Stock Exchange, but on August 16, 2000, the Company withdrew its application and
was put it on hold until such time as the company has completed its
reorganization and the operations have stabilized.
Dividends
The Company paid a 10% stock dividend on its common stock on March 30, 2000 for
shareholders of record as of January 31, 2000. All stock issued for this
dividend was restricted. The Company had no earnings, consequently, has never
paid cash dividends on its common stock and does not intend to do so in the near
future. The Company's present policy is to apply available working capital to
expansion and acquisition.
-5-
<PAGE>
Recent Sales of Unregistered Securities; Use of Proceeds from Registered
Securities
1. During the first quarter of 2000, the Company conducted four private
offerings under Rule 506 of Regulation D of the Securities Act of 1933.
As of June 30, 2000, the following details out the monies raised:
a. On February 15, 2000, the Company issued 500,000 shares of restricted
common stock at $0.25 per share or $125,000. In addition, the Board of
Directors declared a 10% stock dividend for 50,000 shares of restricted
common stock to the holders valued at $0.25 per share or $12,500.
b. On February 15, 2000, the Company issued 239,500 shares of restricted
common stock at $0.50 per share for $119,750.
c. As of March 3, 2000, the Company issued 1,335,000 units at $1.00 per
share. The offering includes 1,335,000 shares of restricted common
stock plus one warrant for each share of common stock, for $1,335,000.
The warrants may be exercised any time prior to February 5, 2001 at
$2.00 per share. During the second quarter 2000, the warrant holders
exercised their right to purchase 529,730 shares of restricted common
stock for $1,059,460.
d. During the six months ended June 30, 2000, the Company issued 1,525,331
shares of common stock at $3.00 per unit for $3,775,993, plus a
promissory note receivable for $800,000 recorded to subscription
receivable in the stockholders equity section of the balance sheet. The
offering consisted of 1,850,000 shares of restricted common stock plus
one warrant for each share of common stock, for the purchase of an
additional share of restricted common stock. The warrants may be
exercised any time prior to April 1, 2001 at an exercise price of
$4.00. At September 30, 2000, 1,011,599 warrants have been exercised
for $2,250,798, of which $1,799,598 was received during the third
quarter 2000.
2. On February 15, 2000 the Company issued shares of common stock, as
follows:
No. Of
Purchaser Ref. Shares
--------- ---- ------
Scott Dahne (a) 250,000
Russell Williams (b) 25,000
Walter Williams (b) 25,000
James Hinton, Jr. (c) 1,000,000
John & Vanessa Kirk (c) 1,000,000
News USA (d) 125,000
Kaufman & Associates (e) 75,000
WAVZ Research (f) 3,000
a. For services performed as Chairman of the Advisory Board and as a
Strategic and Operational Advisor to the Company. These shares
were recorded at the low bid price of approximately $0.41 or
$102,000 on January 4, 2000, the date agreed to join the company.
b. For services performed as Technical Advisors and Strategic and
Operational Advisors to the Company on Internet security,
e-commerce development, and emerging Internet technologies. These
shares were recorded at the low bid price of approximately $1.81
or $90,600 on February 4, 2000, the date they became advisors to
the Company.
c. In January 2000, the Company purchased the licensing agreement
plus all remaining license rights for Whats4Free.com for an
additional 2,000,000 shares of common stock valued at the low bid
price on February 11, 2000, the date of the agreement, of $1.75 or
$3,500,000. Use of the license gives the right to use the property
for commercial purposes including the distinguishing marks for and
in connection with providing advertising services on the Web Sites
and providing search services and links to other Web sites
directly to the public.
d. Shares issued for advertising services for the Company in exchange
for common stock valued on January 13, 2000, the date of the
agreement, at the low bid price of approximately $0.76 or $94,375.
This Nationwide publicity agreement guarantees over 31,200
favorable media story placements in newspapers and on radio
stations across the nation.
-6-
<PAGE>
e. Shares issued as a finder's fee for finding the sellers of
Whats4Free.com and future services in assisting the Company in
locating possible business acquisitions, joint ventures or other
strategic relationships. These shares were valued on the low bid
price on the date of the agreement, January 10, 2000, of
approximately $0.81 or $60,675. In addition, the consultant was
granted 100,000 warrants to purchase restricted common stock at
$0.50 per share, expiring January 10, 2002. (See 18 below).
f. Shares were issued in exchange for network consulting services,
and were valued on the date of the agreement, February 7, 2000 at
the low bid price of approximately $1.88 or $5,625.
All shares were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933.
3. On February 15, 2000, the Company issued 50,000 shares of its common stock
to Pat Passenheim, the Company's legal counsel, in exchange for legal
services. These shares were issued pursuant to services performed and were
registered with the Securities and Exchange Commission on Form S-8 on
August 8, 1998. These shares are valued at the at the low bid price on the
date of issuance of $1.75 or $87,500.
4. On March 17, 2000, the Company issued a combined total of 75,000 restricted
shares of its common stock to two new members of the Advisory Board, Terry
Gardner and Alan D. Liker, for services as Advisors to the Company. These
shares were valued on January 4, 2000, the date of their agreements, and at
the low bid price of approximately $0.41 or $30,675. All shares were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933.
5. On March 17, 2000, the Company issued 50,000 restricted shares of its
common stock to a previous consultant, now an employee, Ryan Dyck, for
strategic planning, valued at the low bid price on the date of the
agreement or approximately $0.36 per share or $18,263. Such shares were
issued pursuant to the exemption from registration under Section 4(2) of
the Securities Act of 1933.
6. On March 20, 2000, the Company issued 92,500 restricted shares of common
stock to five employees of the Company as a signing bonus to join the
Company. These shares were valued using the low bid price on the date they
agreed to join the Company or $492,220 in aggregate. Such shares were
issued pursuant to the exemption from registration under Section 4(2) of
the Securities Act of 1933.
7. On March 22, 2000, the Company issued 25,000 restricted shares of common
stock to a legal firm, for legal services performed in conjunction with
private offering memorandum. These shares were issued pursuant to services
performed as required under the 1997 Retainer Stock Plan for Non-Employee
Directors and Consultants ("the 1997 Stock Plan"). These shares were
registered with the Securities and Exchange Commission on August 8, 1998,
on Form S-8. These shares are valued on March 22, 2000 at the low bid price
of $11.25 or an aggregate of $281,250.
8. On March 30, 2000, the Company issued, in aggregate, 873,385 restricted
shares of common stock to approximately 563 shareholders as a 10% Stock
Dividend to shareholders of record on January 31, 2000. Such shares were
valued on the record date at $0.30 per share or $262,016. Such shares were
issued pursuant to the exemption from registration under Section 4(2) of
the Securities Act of 1933.
9. During the first quarter of 2000, ten employees of the Company agreed to
signing bonus to join the Company, in exchange for an aggregate of
1,412,500 shares of restricted common stock valued on the date they agreed
to join the company, for an aggregate value of $5,146,220:
No. Of
Name Position/Affiliation Shares Total Value
---- -------------------- ------ -----------
Michael Dillon Officer since 2/00 350,000 $ 634,550
Avery Martinez Officer since 3/7/00 1,000,000 $ 4,313,000
Other Employees Employee 62,500 $ 198,670
Such shares were issued on April 12, 2000, pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933.
-7-
<PAGE>
10. On January 27, 2000, the Company granted warrants to Junyor Investment
Holding Corp. an Investor Relations firm in Canada, as part of the contract
for services. The total value of the warrants granted was $210,960, based
on the Black-Scholes option pricing model. The warrants granted are as
follows:
o Three-month warrant to purchase 100,000 shares at $0.50 per share
or $50,000. This warrant expired on April 27, 2000. During the
second quarter 2000, these warrants were exercised in full and
100,000 restricted shares of common stock were issued to various
individuals. These warrants were valued at approximately $1.16 or
$116,340.
o Six-month warrant to purchase 100,000 shares at $1.00 per share or
$100,000. This option expires July 27, 2000 and as of September
30, 2000, 86,000 restricted shares were exercised for $86,000.
These warrants were valued at approximately $.70 or $69,820.
o A one-year warrant to purchase 100,000 restricted shares at $2.00
per share or $200,000. This option expires January 27, 2001, and
as of June 30, 2000, they have not been exercised. These warrants
were valued at approximately $.25 or $24,800.
All shares were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933.
11. On April 24, 2000, The Board of Directors of the Company issued 385,000
restricted shares of common stock to the following, as payment of the 10%
stock dividend authorized to shareholders of record on January 31, 2000:
No. Of
Name Position/Affiliation Shares
---- -------------------- ------
Wynn J. Bott Officer 35,000
Dr. Claus Bartak-Wagner Director 10,000
Raymond A. Triphan Prior Director 15,000
C. Austin Burrell Officer & Director 100,000
Richard Schmidt Officer & Director 25,000
Cactus Consulting International, Inc. Related Party * 200,000
* Cactus Consulting International, Inc. ("CCI"), is wholly owned by Jan J.
Olivier, the Company's CEO and Chairman of the Board.
Such shares were valued at $0.30 per share or $115,500 and were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933.
12. On April 4, 2000, the Company agreed to issue 200,000 shares of common
stock in exchange for corporate consulting services from Performance
Capital Corporation. These shares were issued pursuant to services
performed and filed on a Form S-8 with the Securities and Exchange
Commission on August 8, 1998.
These services were valued at $1,825,000 or approximately $9.13 per share,
the low bid price on the date the stock was issued. The shares were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933.
13. On April 24, 2000, the Company issued 25,000 shares of restricted common
stock to Eric, David & Son's Inc. in exchange for advertising services.
These services were valued at $231,250 or $9.25 per share, the low bid
price on the date the stock was issued and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933.
14. During the first quarter of 1999, the Company granted 300,000 warrants to a
consultant for prior services. These warrants are exercisable at $4.00 per
share and expire on February 1, 2001. During the first quarter 2000, the
Company paid the consultant $200,000 and exercised 100,000 of the warrants
issuing 100,000 shares of common stock valued at $5.63 per share or
$563,000, booked to consulting services. The consultant has forfeited his
rights to the remaining warrants granted. During the first quarter 2000,
the Company valued these warrants using the Black-Scholes option pricing
model. The valuation of the warrants calculated to $0.02 per share or
$2,000, recorded to consulting fees.
-8-
<PAGE>
These warrants were filed in an S-8 March 12, 1999 with the Securities and
Exchange Commission.
15. During May 2000, Company granted 100,000 warrants for consulting services.
The warrant holder has the right to purchase 100,000 shares of restricted
common stock with an exercise price of $4.00 per share, expiring on
February 1, 2001. These warrants were valued at $.02 per share or $2,000
based on the Black-Scholes option pricing model. On May 19, 2000, the
holder exercised his right to purchase 100,000 shares of common stock for
$400,000. These warrants were filed in an S-8 March 12, 1999 with the
Securities and Exchange Commission.
16. On May 12, 2000, the Company entered into an Option Agreement granting the
Company the right to purchase the office building currently occupied by the
Company. The Company exchanged 140,000 shares of restricted common stock
valued at $6.25 per share or $875,000 to the sellers of the building as a
commitment to purchase the office building. This commitment expires October
26, 2000. These shares were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933.
17. On January 10, 2000, the Company agreed to retain a consultant, Waterfall
Services, Inc., to provide sales consulting to the Company in exchange for
a salary plus common stock. On April 17, 2000, the company granted 25,000
restricted shares of restricted common stock valued at the low bid price of
approximately $4.13 or $103,125 for past services and recorded to
consulting fees. These shares were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933.
18. On May 19, 2000, 100,000 warrants previously granted to a consultant (see 2
(e) above) were exercised and 100,000 shares of common stock at $0.50 per
share or $50,000 was issued. The warrants were previously valued at $43,570
based on the Black-Scholes option pricing model. These shares were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933.
19. On June 14, 2000, the Company granted 100,000 restricted shares of common
stock to a consultant, Doug Rohatensky, for prior investor relation's
services performed for the Company. These services were valued at the low
bid price of $5.25 or $525,000 and expensed to Consulting Services. These
shares were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933.
20. On June 14, 2000, the Company issued 12,000 restricted shares of common
stock to three members of Technology Alliance Group, LLC ("TAG") for
professional consulting services relating to planning, implementation and
ongoing support of information technology solutions for the Company. May 1,
2000, the Company entered into an agreement with TAG for 30 days,
continuing on an hourly basis thereafter. These shares were valued at
$5.75, the low bid price on the date of the agreement, or $69,000. These
shares were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933.
21. On June 27 2000, the Company issued the following shares of common stock:
o 100,000 restricted shares of common stock to Frank K. C. Chen, who was
appointed Special Advisor for the Company's future China and Asian
operations. These shares were valued at the low bid price of $7.50 on
the date of grant or $750,000 and recorded as a prepaid expense.
o 17,500 restricted shares of common stock to an employee of the company
as stock incentives/ bonus. These shares were valued at the low bid
price of the stock on the date of the employee's review, or $72,188.
These shares were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933.
-9-
<PAGE>
22. At June 30, 2000, the Company agreed to issue the following shares of
common stock:
WAVZ Research (a) 5,075
Terry R. Button (b) 40,200
Resterra (c) 475
------------
Subtotal 45,750
Stock Dividend:
James Hinton 48,000
John & Vanessa Kirk 72,000
Scott Dahne 25,000
Terry Gardner 2,500
Alan Liker 5,000
Ryan Dyck 5,000
Robert Toledo 1,750
Jennifer LoPresti 1,000
Randall Libero 1,000
------------
Subtotal (d) 161,250
Total Shares 207,000
============
(a) For network consulting services, in lieu of past services for invoices
due totaling $16,375 and recorded to computer consulting services.
(b) A finder's fee recorded at the low bid price of approximately $6.28 or
$252,496 and recorded to recruiting/finders fees.
(c) For leasehold improvements, valued at the closing bid price of
approximately $6.28 or $2,983.
(d) These shareholders were entitled to the 10% stock dividend authorized
for all shareholders of record at January 31, 2000. The shares were
recorded at $0.30 per share or $48,375 recorded to stock dividend.
These shares were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933.
23. On May 19, 2000, the Company contracted with a computer leasing company to
purchase $1,091,760 worth of computer hardware for its infrastructure
development related to its Web site. The computer leasing company was
granted the option to purchase 17,835 warrants at $5.00 each. The total
value of the warrants granted was $60,238 based on the Black-Scholes option
pricing Model and was recorded to capital leased equipment on the Balance
Sheet. None of these warrants were exercised during the second quarter
2000.
Item 3. Defaults Upon Senior Securities.
None - Non-applicable
Item 4. Submission of Matters to a Vote of Security Holders.
There have been no matters submitted to a vote of security holders.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
27 Financial Data Schedule
B. Reports on Form 8K
a. None
-10-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: December 22, 2000 What's For Free Technologies Inc.
By:/s/Jan J. Olivier
------------------------------
Jan J. Olivier
Chief Executive Officer,
Director
By:/s/Wynn J. Bott
------------------------------
Wynn J. Bott
Chief Financial Officer
-11-
