<PAGE>
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 June 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:
24,806,953
NUMBER OF COMMON STOCK SHARES OUTSTANDING
On August 21, 2000
Traditional Small Business Disclosure Format (Check One):
[X] Yes [ ] No
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
PART II
ITEM 1. LEGAL PROCEEDINGS.
ITEM 2. CHANGES IN SECURITIES.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 5 OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.
SIGNATURES
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
BALANCE SHEET
June 30, 2000
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 223,070
Prepaid consulting fees 750,500
Other receivables 5,298
-------------
TOTAL CURRENT ASSETS 978,868
-------------
PROPERTY AND EQUIPMENT - at cost, net 3,510,123
OTHER ASSETS:
Intangible assets 4,195,144
Other deposits 1,610,000
Security deposits 83,400
-------------
5,888,544
-------------
$ 10,377,535
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,207,013
Accrued expenses 59,591
Current portion of capital leases payable 319,949
-------------
TOTAL CURRENT LIABILITIES 1,586,553
CAPITAL LEASES PAYABLE, net of current portion 762,075
COMMITMENT AND CONTINGENCIES -
STOCKHOLDERS' EQUITY:
Common Stock, $.001 par value; 50,000,000 shares
authorized; 24,841,884 shares issued and outstanding 24,842
Additional paid-in capital 30,860,196
Less: Common stock subscription receivable (800,000)
Deficit accumulated during the development stage (22,056,131)
-------------
TOTAL STOCKHOLDERS' EQUITY 8,028,907
-------------
$ 10,377,535
=============
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
<TABLE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<CAPTION>
Cumulative
During the
Development Stage
Three Months Ended June 30, Six Months Ended June 30, (February 15, 1990
----------------------------- ----------------------------- (inception) to
2000 1999 2000 1999 June 30, 2000)
------------- ------------- ------------- ------------- -----------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ 1,624
OPERATING EXPENSES:
Advertising and marketing 327,392 - 745,369 - 745,369
Bonus and incentives 96,772 - 5,952,348 - 5,952,348
Consulting fees 3,518,795 62,625 3,658,791 100,125 3,658,791
Professional fees 984,801 60,186 2,075,152 60,186 2,075,152
Wages and salaries 1,267,463 - 1,460,690 - 1,460,690
Other general and administrative expenses 1,386,092 53,034 1,538,546 158,227 7,723,169
------------- ------------- ------------- ------------- -------------
TOTAL OPERATING EXPENSES 7,581,315 175,845 15,430,896 318,538 21,615,519
------------- ------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (7,581,315) (175,845) (15,430,896) (318,538) (21,615,519)
INTEREST EXPENSE, net (8,474) - (8,474) - (3,846)
------------- ------------- ------------- ------------- -------------
NET LOSS $ (7,589,789) $ (175,845) $(15,439,370) $ (318,538) $(21,619,365)
============= ============= ============= ============= =============
LOSS PER COMMON SHARE, basic and diluted $ (0.33) $ (0.02) $ (0.80) $ (0.04) $ (10.92)
============= ============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, basic and diluted 22,795,846 8,726,647 19,244,495 8,576,647 1,980,077
============= ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<CAPTION>
Cumulative
During the
Development Stage
Three Months Ended June 30, Six Months Ended June 30, (February 15, 1990
---------------------------- ---------------------------- (inception) to
2000 1999 2000 1999 June 30, 2000)
------------- ------------- ------------- ------------- -----------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (7,589,789) $ (175,845) $(15,439,370) $ (318,538) $(21,619,365)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for loan losses - - - - 955,000
Amortization and depreciation 87,831 - 91,956 - 227,956
Common stock issued and warrants
granted for services 3,850,001 - 10,341,886 100,500 13,607,141
Changes in assets and liabilities:
Other receivables 59,702 - (5,298) (375) (5,298)
Prepaid expenses (500) 62,625 48,000 - 48,000
Accounts payable and accrued expenses 1,034,756 98,645 1,221,111 174,612 1,614,885
------------- ------------- ------------- ------------- -------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES (2,557,999) (14,575) (3,741,715) (43,801) (5,171,681)
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits (785,000) - (818,400) - (818,400)
Purchase of intangible assets (18,344) - (18,344) - (18,344)
Capital expenditures (1,873,515) - (2,392,798) - (2,392,798)
------------- ------------- ------------- ------------- -------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (2,676,859) - (3,229,542) - (3,229,542)
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of loans payable - related party (193,801) - (194,475) - (194,475)
Proceeds from issuance of note payable - 14,306 - 44,306 5,000
Payments of capital leases payable (64,036) - (64,036) - (64,036)
Proceeds from the exercise of warrants
and issuance of common stock 4,012,653 - 7,446,403 - 8,876,180
------------- ------------- ------------- ------------- -------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 3,754,816 14,306 7,187,892 44,306 8,622,669
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (1,480,042) (269) 216,635 505 223,070
CASH AT BEGINNING OF PERIOD 1,703,112 1,063 6,435 289 -
------------- ------------- ------------- ------------- -------------
CASH AT END OF PERIOD $ 223,070 $ 794 $ 223,070 $ 794 $ 223,070
============= ============= ============= ============= =============
Supplemental Disclosure of Non-Cash Flow Investing and Financing Activities
Issuance of common stock as payment for future
advisory services $ 750,000 $ - $ 750,000 $ - $ 750,000
============= ============= ============= ============= =============
Issuance of common stock for deposit on building $ 875,000 $ - $ 875,000 $ - $ 875,000
============= ============= ============= ============= =============
Issuance of common stock from leasehold improvements $ 2,983 $ - $ 2,983 $ - $ 2,983
============= ============= ============= ============= =============
Capital leases payable from purchase of computer
equipment and software $ 1,146,060 $ - $ 1,146,060 $ - $ 1,146,060
============= ============= ============= ============= =============
Warrants granted in the purchase of computer
equipment and software $ 60,238 $ - $ 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 $ - $ 800,000
============= ============= ============= ============= =============
Issuance of common stock from 10% stock dividend $ 55,875 $ - $ 438,391 $ - $ 438,391
============= ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
F-3
</TABLE>
<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 six
months ended June 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. NEW 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 the 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 is 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 June 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
3. OTHER RECEIVABLES
-----------------
At June 30, 2000, included in other receivables is a balance due from
Cactus Consulting International Inc., ("CCI") (wholly owned by Jan
Olivier, a shareholder and Chief Executive Officer of the Company) for
$2,839. The loan is for past services performed by CCI and is
non-interest bearing, unsecured and has no specific due date for
repayment.
4. PROPERTY AND EQUIPMENT
----------------------
At June 30, 2000, property and equipment is as follows:
Computer equipment and internal use software $ 1,919,757
Leasehold improvements 94,667
Office furniture and equipment 131,357
Computer equipment held under capital leases 1,456,298
--------------
3,602,079
Less: Accumulated depreciation and amortization (91,956)
--------------
$ 3,510,123
==============
5. INTANGIBLE ASSETS
-----------------
At June 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 will commence
amortization on July 11, 2000, the date the websites were placed in
service.
F-5
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
6. CAPITAL LEASES PAYABLE
----------------------
On May 19, 2000, the Company entered into agreements to lease computer
equipment and software. The Company made an initial payment for
$250,000 and granted 17,835 warrants valued at $60,238 (see Note 7
(y)). In addition, the minimum futures lease payments under capital
leases as of June 30, 2000 for each of the next four years are as
follows:
Year end December 31,
2000 $ 181,271
2001 435,050
2002 435,050
2003 181,271
---------------
Total minimum lease payments $ 1,232,642
Less: Amounts representing interest (150,618)
---------------
Present value of net minimum lease payments 1,082,024
Less: Current portion 319,949
---------------
$ 762,075
===============
The capital leases are payable in monthly installments range from
$8,044 to $28,200 per month, including interest at 9.16%. The interest
rate was imputed based on the lower of Company's incremental borrowing
rate at the inception of each lease or the lessor's implicit rate of
return.
7. 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 5).
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.
F-6
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY (Continued)
--------------------------------
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 six months
ended June 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 June 30, 2000, the 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 June 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 six months ended June 30,
2000, the Company has raised $6,866,403. 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 7 (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. During the second quarter 2000, the
warrant holders exercised their right to purchase
529,730 shares of restricted common stock for
$1,059,460.
F-7
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY (Continued)
--------------------------------
iv. During the six months ended June 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 six months ended June 30, 2000, the
warrant holders exercised their right to purchase
112,800 shares of restricted common stock for
$451,200.
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 June 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.
F-8
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY (Continued)
--------------------------------
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 June 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.
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
F-9
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY (Continued)
--------------------------------
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.
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
until October 26, 2000 (See Note 9 (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.
F-10
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY (Continued)
--------------------------------
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 China and Asian markets. The Company valued
these shares at $7.50 and recorded a prepaid expense for
$750,000.
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.
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
6). 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
6.75%; and expected life of 3 years. The Company valued these
warrants at approximately $3.38 or $60,238 and recorded the
amount to computer equipment held under capital leases. None
of these warrants have been exercised as of June 30, 2000.
F-11
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
8. STOCK OPTION PLAN
-----------------
a. 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 Stock Plan as of June 30, 2000.
During the second quarter 2000, the Company granted 503,100
options, subject to shareholder approval, under the 2000 Stock
Plan to employees at an exercise price equal to the fair
market value on the date of grant.
The following is a summary of the options granted:
Range of Number of
Exercise Options Option
Prices Issued Values
--------------- ----------- ------------
$ 4.00 - 4.13 28,500 $ 117,125
5.00 - 5.90 116,700 611,164
6.00 - 6.88 231,000 1,469,620
7.00 - 7.94 95,800 699,866
$ 8.81 - 9.50 31,100 285,836
----------- ------------
503,100 $ 3,183,611
=========== ============
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 June 2001. At
June 30, 2000, there were 4,496,900 options available for
grant under the 2000 Stock Plan.
9. COMMITMENTS AND CONTINGENCIES
-----------------------------
a. In February and March 2000, the Company entered into lease
agreements for office space expiring in 2003. Future minimum
lease payments, excluding escalation charges, under these
non-cancelable leases are as follows:
Year Ending December 31,
2000 $ 167,337
2001 92,457
2002 98,245
2003 12,245
-----------------
$ 370,284
=================
F-12
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(Formerly Ranes International Holding, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
9. COMMITMENTS AND CONTINGENCIES (Continued)
-----------------------------------------
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, 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 7 (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 expires on
October 26, 2000.
10. MATERIAL SUBSEQUENT EVENTS
--------------------------
a. On August 8, 2000, the Company entered into lease agreements
to lease computer equipment and software. The Company made an
initial payment for $250,000 during June 2000, and has
recorded the payment as a deposit in the accompanying balance
sheet. The minimum futures lease payments under capital leases
for each of the next four years are as follows:
Year end December 31,
2000 $ 148,398
2001 445,194
2002 445,194
2003 296,796
-------------
Total minimum lease payments $ 1,335,582
Less: Amount representing interest (160,522)
-------------
Present value of net minimum lease payments $ 1,175,060
=============
The capital leases are payable in monthly installments range
from $8,281 to $28,818 per month, including interest at 8.51%.
The interest rate was imputed based on the lower of Company's
incremental borrowing rate at the inception of each lease or
the lessor's implicit rate of return.
b. On July 28, 2000, the Company entered into an agreement with
Cisco Systems Capital Corporation to provide financing for
hardware and software. The amount available for financing
under this agreement is a maximum of $2,000,000. Purchases
financed under this agreement will bear interest based
F-13
<PAGE>
10. MATERIAL SUBSEQUENT EVENTS (Continued)
--------------------------------------
on the weekly average of the three-year Treasury Note
(currently 6.18%). As of August 8, 2000, the Company has
purchased $251,289 of equipment under this arrangement.
F-14
<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, Internet
company whose primary 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. We also
intend to utilize information we gather concerning consumer preferences and
demographics to offer advertising services, develop in-house proprietary
heuristics, web-hosting and site development capabilities, and package, market
and sell our commercialization services to other Web entrepreneurs.
Our Internet business plan was developed during the latter part of
1999. The Company has begun generating revenues since our launch of our Web
site, Whats4free.com on July 11, 2000. 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 fees paid by regional partners for exclusivity rights and new
client introductions,
o sale of services based on database and related information
concerning consumers and providers,
o fees from a membership program,
o development and hosting of partner Web sites, and
o partner ISP support fees.
We have incurred significant losses since the adoption of our Internet
business plan. These losses resulted primarily from costs related to developing
our Web site including equipment and infrastructure development, retention of
key personnel, developing or acquiring technologies to be used in our business
and general corporate overhead. We expect to continue incurring net losses for
the foreseeable future, based in part on the following:
o We will incur substantial marketing expense in order to
advertise and promote our Web site, to establish a consumer
and provider base and to increase the usage of our Web site.
o Increased usage of our Web site will lead to increased
operating expenses and require additional capital expenditures
on new computer equipment, software and technology.
<PAGE>
o Our operating expenses are expected to adjust down as we begin
to stabilize our plan of reorganization. However these costs
are still expected to be material and may increase after the
adjustment as we expand the technical capabilities of our Web
site, solicit potential advertisers and undertake to monitor
usage of our Web site and develop consumer and provider
profiles for our database.
If our revenue growth is slower than anticipated or our operating
expenses exceed our expectations, our losses will be significantly greater than
anticipated. We may never achieve or sustain profitability.
RECENT DEVELOPMENTS
During August 2000, we announced to all employees that management
intends to reorganize and restructure the Company. We requested all employees to
take a temporary unpaid leave-of-absence until such a reorganization plan can be
established. 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. There is no assurance that
such changes will allow us to achieve profitability at a future date.
PLAN OF OPERATIONS
KEY BUSINESS OBJECTIVES. Our plan of operations for the next twelve
months is to focus our efforts on:
o reorganizing and restructuring the Company;
o stabilizing our Web-site operations;
o identifying opportunities that will materialize as a result of
the positioning of our Internet offering;
o strengthening alliances with our service providers and
increasing the number and scope of our strategic partnerships;
o enhancing our Web-site offerings; and
o initiating advertising and promotional campaigns for our Web
site.
FINANCING AND PERSONNEL. We continue to seek staged funding during our
development process. The initial phases of that process has been completed with
closure of seed funding of approximately $7.4 million. We have contracted with
all potential critical resources (employees and consultants), created and
implemented tasks for them to develop the Web site which launched on July 11,
2000. Our staff was comprised of approximately 150 employees at June 30, 2000.
As a result of the reorganization, it is expected that approximately 40% of
personnel who have been asked to take a leave-of-absence will be asked back to
join the company. There can be no assurance that these employees will re-join
the company.
EQUIPMENT ACQUISITIONS. We are committed to the utilization of industry
standard platforms. Strategic alliances and core infrastructure components have
been negotiated with Cisco, Sun, Oracle, EMC and others. We have contracted to
implement Oracle database and financial systems, which will run on Sun servers,
with communications supported by Cisco, and storage by EMC. Citrix will be used
for customer solutions. During our current restructuring, it is anticipated that
various contracts and commitments will be renegotiated to better reflect the
on-going operations and positioning of the Company. As we expect to continue to
negotiate alliances with certain hardware, software and other service providers,
it is expected that most of these negotiations will be, in part, through the
exchange of common stock for goods or services.
FUTURE CAPITAL REQUIREMENTS. Currently, we are unable to meet neither
our immediate cash needs nor our cash requirements during the next twelve
months. We are currently seeking additional funding, including funding from
strategic partners and investment banking, venture capital sources and private
placements, to cover our immediate needs as well as our requirements for the
next twelve months. During our current restructuring, we must raise enough
capital to fund our immediate obligations of approximately $1.6 million plus
future cash requirements to continue our operations. If we are unable to meet
these requirements, we may not be able to continue operations. We continue to
rely upon our ability to raise capital by the sale of our common stock, the
barter of our common stock for required operating and promotional products and
services, and the incurrence of indebtedness to fund operations.
<PAGE>
RESULTS OF OPERATIONS:
Revenues
We did not record revenues during the quarters ended June 30, 2000 or
June 30, 1999.
Advertising Expense
Advertising expenses consist primarily of marketing and promotional
costs related to developing our brand and generating interest in our Web site
launch, as well as personnel and other costs. Advertising expense was $327,392
for the three months ended June 30, 2000 and $745,369 for the six month ended
June 30, 2000. We did not purchase any advertising during the corresponding
period of 1999, as we had no activities or business plan at that time. >From
time to time, we have retained the services of various companies in exchange for
shares of our common stock and expect to continue to do so in the future.
Bonus and Incentives
Bonuses and incentives expenses are non-cash charges arising from the
issuance of restricted common stock to our employees at the fair value of these
shares as of the date of issuance. Bonus and incentives was $96,772 for the
three months ended June 30, 2000 and $5,952,348 for the six months ended June
30, 2000. This increase was primarily due to the grants of signing bonuses, paid
in the form of restricted common stock, to key individuals retained by us during
these periods ending June 30, 2000. 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. The 2000 Stock Option Plan had no effect on the financial statements
for the period ended June 30, 2000.
Consulting Fees
Consulting fees consist primarily of fees paid to all outside
consultants for services for computer hardware/software, investor relations,
business analyst, and any other services provided to us by a contracted
consultant. Consulting fees for the three-months ended June 30, 2000 increased
to $3,518,795 from $62,625 for the three-month period ended June 30, 1999. For
the six months ended June 30, 2000, these expenses increased to $3,658,791 from
$100,125 for the six-month period ended June 30, 1999. A majority of this
expense incurred during 2000 was incurred in the form of exchanges of our common
stock for services.
Professional Fees
Professional fees consist primarily of fees paid to lawyers,
accountants and other professional advisors for services relating to our start
up and establishing procedures as well as for the preparation for the launch of
our Web site. Professional fees for the three-months ended June 30, 2000
increased to $984,801 from $60,186 for the three-month period ended June 30,
1999. These expenses increased to $2,075,152 for the six-month period ended June
30, 2000. A portion of this expense was incurred in the form of exchanges of our
common stock for services.
Wages and Salaries
The increase in wages and salaries is primarily associated with the
increase in the number of employees from approximately 60 at March 31, 2000 to
approximately 150 at June 30, 2000. Wages and salary expenses for the
three-month period ended June 30, 2000 increased to $1,267,463, and to
$1,460,690 for the six month period ended June 30, 2000. We did not have any
employees during the corresponding period of 1999.
<PAGE>
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 June 30, 2000 increased to $1,386,092, from $53,034 for the
three-month period ended March 31, 1999; and the expenses for the six month
period ended June 30, 2000 increased to $1,538,546 from $158,227 for the six
month period ended June 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 our Web site on July 11,
2000.
Interest and Taxes; Tax Loss Carryover
Interest expense of $8,474 was incurred during the three-month period
and the six-month period ending June 30, 2000. There was no interest for
corresponding periods 1999. We began our lease commitments during June 2000
whereby payments have been accrued beginning July 1, 2000. We have and had no
debentures or other financing liabilities during these periods. We have a net
operating loss carryover as of December 31, 1999 of approximately $5,991,000
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
Our net loss for the six -month period ended June 30, 2000 was
$15,439,370, compared to a net loss of $318,538 for the six-month period ended
June 30, 1999. In addition, the net loss for the three-month period ended June
30, 2000 was $7,589,789, compared to a net loss of $175,845 for the comparable
period ending June 30, 1999. This increase is primarily due to the issuance of
stock in exchange for signing bonus grants to newly retained officers and
employees, 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 we did not achieve material
revenues in either period. We anticipate that losses will continue as we carry
out our plan of operations until such time we can stabilize our operations. In
particular, we have recently increased our advertising expenses associated with
carrying out a marketing plan promoting our business and Web site. There can be
no assurance that these advertising expenses will result in increased revenues.
LIQUIDITY AND CAPITAL RESOURCES
We have relied almost exclusively on equity financing to fund our
operations and capital expenditures. In the six-month period ending June 30,
2000, our operating working capital (defined as current assets less current
liabilities) was a negative $607,685 from 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 our outstanding accounts payable and accrued expenses
from $45,799 at December 31, 1999 to $1,266,604 at June 30, 2000. In addition,
we entered into a capital lease agreement increasing the current liabilities by
$319,949. Although our cash position and prepaid expenses increased from
December 31, 1999, however, the overall increase in liabilities has caused a
negative working capital position at June 30, 2000. We are currently unable to
satisfy our current obligations unless additional funding can be raised, and may
seek protection under the bankruptcy laws to cover our immediate needs to
continue operating.
During the six months ending June 30, 2000, we have raised $7,446,403.
In addition, we exchanged common stock 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.
We have the option to purchase the building, which we leased in April
2000, of approximately 23,400 square feet, however, we cannot be certain we will
purchase by the expiration date of the option agreement date October 26, 2000.
Should we decide to negotiate the purchase of the office building, the purchase
price will be $2,575,000, of which we have currently satisfied $1,360,000 of
this price in cash and stock, leaving a balance of approximately $1,215,000,
which may be funded through cash or an independent financing arrangement. There
is no assurance that we will be able to complete the purchase of the building by
the expiration date.
<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, we withdrew our application until such
time as our company has reorganized 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.
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.
<PAGE>
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
$3,776,993, 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 June 30, 2000, 225,600 warrants were
exercised for $451,200, of which $443,200 was received during
the second quarter 2000.
All shares were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933.
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.
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.
<PAGE>
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 $18,200. 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.
<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
June 30, 2000, 80,000 restricted shares were exercised for
$80,000. 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.
<PAGE>
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.
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.
<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 to
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.
<PAGE>
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:
10.1 Austin C. Burrell Employment Agreement dated January 19, 2000.
10.2 Avery Martinez Employment Agreement dated March 8, 2000.
10.3 Wynn J. Bott Employment Agreement dated January 19, 2000.
10.4 Michael Dillon Employment Agreement dated February 21, 2000.
27 Financial Data Schedule
B. Reports on Form 8K
a. None
================================================================================
<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: August 24, 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
