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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934
For The fiscal year ended December 31, 1999
Commission File Number 0-19693
WHATSFORFREE TECHNOLOGIES, INC.
FORMERLY RANES INTERNATIONAL HOLDING, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 87-0485320
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7430 East Butherus Drive, Suite #B, 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
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State issuer's revenues for its most recent fiscal year. None.
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of such common equity, as
of a specified date within 60 days prior to the date of filing.
Based on the average of the high and low bid and ask prices for the Registrant's
shares of common stock of $9.469 on March 17, 2000, such market value is
calculated net of 7,736,625 affiliate shares (i.e., excluding shares held by
executive officers, directors, and control persons as defined in Rule 405) which
equals $90,903,034. There is only one class of common stock outstanding.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. As of March 17, 2000, there
were 17,336,692 shares of common stock outstanding.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE (5) YEARS:
Check whether the Registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
[ ] Yes [ ] No.
DOCUMENTS INCORPORATED BY REFERENCE: See Item 13. Exhibits and Reports on Form
8-K in Part III
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TABLE OF CONTENTS
PART I
ITEM 1 DESCRIPTION OF BUSINESS
ITEM 2. DESCRIPTION OF PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT:
WhatsForFree Technologies, Inc. (formerly Ranes International Holding, Inc.)
("the Company" or "we") is a development stage company that was incorporated
under the laws of the state of Nevada on February 15, 1990, as Partisan
Corporation.
1. On March 10, 1995, the Company's name was changed to Bio Fluorescent
Technologies, Inc. as it targeted the medical and health care
industry.
2. On March 6, 1998, the Company again changed its corporate name to
Ranes International Holding, Inc. and the Company broadened its search
for an industry to become a participant.
3. On December 28, 1999, the Company changed its corporate name to
WhatsForFree Technologies, Inc. ("WFFT") and is a marketing and
branding company focused on "free" products and services arena.
The Company was inactive through February 1995; prior to such time, there was no
activity other than that of capitalization efforts through the transfer of
shares of common stock in private placements.
The Company's initial business plan was based on developing, licensing or
otherwise acquiring state-of-the-art advanced diagnostic testing and screening
technology and equipment capable of early detection of human immune system
disorders such as HIV-1, HIV-2 and Hepatitis B. From February 1995 to July 1996,
the Company supported, through a license agreement, a development stage
diagnostic technology, which was settled September 25, 1997, with prejudice, to
the Company's favor. The development project costs have been written off.
In May 1996, we reorganized our management team and revised the Company's
business plan to include expansion of the Company's core market and technology
application by exploring the possibility of acquiring other technologies,
products or businesses compatible with the Company's goal to become operational
in the shortest period possible.
Up until December 1999, the Company had been vigorously pursuing industries and
other possible merger candidates. The Company has aligned itself with several
important corporate strategic partners to implement its business model, and has
attracted management and advisory teams consistent with it's business plan.
On January 17, 1998, the Company authorized a 1 for 100 reverse stock split
effective March 6, 1998. The authorized stock remained at 50,000,000 shares of
common stock. Unless otherwise indicated, the number of shares referred to in
this filing, have been restated to reflect the reverse stock split. On February
4, 1998, the Company issued 5,000,000 shares of common stock to a related
company creditor in exchange for $100,000 of accrued liability. In addition, the
Company issued 3,000,000 shares of common stock in exchange for services, and
200,000 shares of common stock for cash at $.50 a share. During 1999, the
Company issued 300,000 shares of common stock and warrants, in exchange for
services valued at $100,500. The warrants were exercisable at $4.00 per share
for two years beginning February 1, 1999. All issuances were made in accordance
with exemptions from registration pursuant to section 4(2) of the Securities Act
of 1933, as amended.
CURRENT BUSINESS OF ISSUER:
During 1999, the Company continued concentrating its efforts on becoming
operational by licensing or otherwise acquiring technologically advanced
state-of-the-art products. We explored the possibility of acquiring other
technologies, products or businesses compatible with our goal to become
operational in the shortest period possible.
PRINCIPAL PRODUCT/SERVICE
WhatsForFree Technologies, Inc., is an Internet-based marketing and branding
company whose mission is to provide corporations, partnerships and organizations
with a new and innovative pathway for promotion of their products and services.
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This pathway helps organizations enhance their marketing efforts and reach
consumers with the following goals:
o increased awareness of their brands,
o improved performance of their promotional activities,
o creation of numerous cross-promotional opportunities and strategies.
Through the Company's Internet site which is currently being created,
organizations that grant consumers and businesses access to the available free
products and services are able to more effectively and efficiently target
specific communities in a focused and timely manner. In turn, they have the
opportunity to create excitement about and interest in their products and
services at both the national and regional levels.
SERVICE
WFFT has designed its website to be the central gateway/portal for those wishing
to access free products and services available in the Company's markets. WFFT
has created a user-friendly opening web page designed to quickly target the
interest of the consumer.
The Company will offer ancillary services related to the value of the
information gathered on consumer preferences and demographics. In addition to
the free products and services the Company offers, we will sell advertising
services, develop and operate related websites, package, market and sell
commercialization services to other web entrepreneurs, and more.
REVENUE
The Company expects to generate revenue in a number of areas including:
o Sale of Banner Advertising on the Website
o E-Commerce revenues from other than free products and services
o Support of Charitable and Related Not-For-Profit Activities
o Marketing and advertising fees from affiliates
COMPETITION
There are a number of active "free" Websites. These include other public
companies that have been in business for a number of years and that are well
positioned and well capitalized. There are few barriers to entry by other new
competitors.
The Company has focused on what they believe to be their closest competitors, as
follows:
FreeShop.com (NASDAQ symbol "FSHP") is an Internet leader in direct marketing
services. At FreeShop, consumers can discover and try new products by choosing
from a broad selection of free and trial offers organized according to interest
categories. Unlike traditional direct marketing environments in which marketers
communicate to massive groups in search of new customers, FreeShop delivers the
targeted customers that merchant's desire. Consumers seek out products of
interest through specific selection, in essence, initiating a relationship with
that marketer.
General Information - FreeShop started in December 1994 as The Free Offer Store.
The Free Offer Store provided an interactive, risk-free environment connecting
marketers with self-selected prospects. FreeShop launched in 1995. A new
generation of motivated online shoppers emerged, turning to FreeShop for
specific information that matched their interests. To date, FreeShop has
generated over six million transactions for hundreds of nationally recognized
advertisers, launching a concept that empowers the consumer.
FreeShop could be considered one of the top sites for free and trial offers.
With over 500,000 transactions per month and over three million visits per
month, they are ranked among the top 500 sites for visitors by Media Matrix.
FreeShop offers eighteen main categories with six additional categories with
links to other sites. FreeShop also offers a Newsletter twice weekly and sent to
over 1.5 million members with news on their promotions.
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FreeShop has established promotional relationships with other websites such as
Snap, Go2Net, and Lycos. In addition, they created an Associate Program which
encourages website owners to create a link to FreeShop on their site. Associates
earn $.05/click and 30-50 percent of the fees generated from orders placed
through the link. Free Shop FreeShop helps allies profit from and incorporate
the concept of free into their websites. Allies include FreeShop in their site
and vice versa. In addition, FreeShop has a variety of alliance methods with
major players such as MSNBC, PC World, Snap, Key Bank, and MSN among others.
FreeShop Revenues
o Banner Advertising - Advertisers can place banners on the site.
Locations are across the top, along the sides and on individual pages.
o Sponsors - Similar to advertising, sponsors can pay for banner like
spots on the site, which has a built in link to their
site/product/service.
o Lead Generation Fees - FreeShop charges a fee when consumers order an
offer through the FreeShop site.
FreeShop Strengths
o Categories - Organized and cover a wide variety of topics, products
and services. Prominently listed next to the category is the number of
offers that is updated daily.
o Offers - FreeShop has over 1,000 offers available at any given time.
There are also specialty offers such as the Top Ten List, New Offers
and Seasonal Offers that help the site to remain fresh and interesting
to new, occasional and heavy users.
o Strategic Alliances - FreeShop has allied itself with a number of
highly visible websites and companies, which allows FreeShop to
leverage their brand awareness in its favor.
o Site Design - The site is easily navigated and provides options to
visit all other locations on the site.
o Email Newsletter- The newsletter is a great way to inform users of new
and updated offerings and remind them that the site still provides
great free products and services. The trivia contest also provides an
additional free promotion.
Other Competitors:
Other players in the industry who are of consequence are as follows:
o BeFree.com (BFRE - NASDAQ) - BeFree considers itself a performance
marketing website where affiliates can develop their own sales
channels through affiliate and email marketing programs. BeFree offers
complimentary sites that provide the tools and advice to effectively
develop a comprehensive affiliate marketing strategy through BeFree.
BeFree claims to have developed 1.1 billion promotions with its
affiliates in Q3, 1999. They also claim to develop six times as many
click-throughs to its affiliates than the nearest competitor, and
currently they have 2.9 million active affiliates.
o Free.com - Free is also an Internet direct marketer. The business
model and site design appear to be very similar to FreeShop. Free.com
does have a search engine (the other two do not), which helps direct
users to targeted offers. They publish a periodic newsletter that
makes members aware of the latest happenings. The site has 5,900 links
and the counter reads five million-plus visits.
The key to consumer visits to our site may be the thousands of free samples that
are available to the consumer. There can be no assurance that we will create a
demand for consumers to visit the site nor can investors be assured that such
visits to the site will generate enough revenue to sustain a profitable
business.
MARKETING
The Company has adopted a traditional multi-tiered "demand pull" marketing
strategy. Each segment of the Company's markets requires a highly targeted
approach to that segment's needs. Free samples have been used for many years to
introduce consumers to products. Beginning with bulk consumer products, the move
has recently included the very successful positioning of AOL through give-away
of its software first on floppy discs, then on CD ROM.
The Company will seek to attract important corporate strategic partners to
operate its regional units.
We believe that the potential for growth of the Internet in all of North America
exceeds current estimates for the potential global market. The Company continues
to search for potential providers of free products and services. By capturing a
significant portion of the "free" market segment of the Internet, we believe we
can create rapid value growth for the Company.
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The Company's Sales Unit will focus on satisfying the demand crystallized by the
marketing efforts of the Company.
MARKETING - CHARITABLE AND NOT-FOR-PROFIT
WFFT offers a unique integration of corporate and non-profit donations to their
affiliates' incentive programs. Through marketing strategies, WFFT can channel
proceeds in many forms and act as the donation facilitator to local and national
charities. WFFT enhances the ability of donors to closely tie their charitable
giving to the targeted communities from which they draw their workers and
customers.
WFFT intends to obtain the support of these charitable groups through tasteful,
targeted and measurable efforts. These efforts will lead participants in WFFT's
charitable giving activities to a market/brand identity, to a more effective
delivery of benefits to the needy, and to an increased consumer/charitable giver
loyalty.
DEPENDENCE ON OUTSIDE RESOURCES
The Company's success could be affected by non-performance of third party
resources. It will seek to manage this risk by minute attention to detail, and
milestone driven critical path management of its service contracts.
INTELLECTUAL PROPERTIES - LICENSES
In December 1999, the Company purchased from a Canadian group, the "right to
use" the license agreement in the states of Arizona, California and the Province
of British Columbia for WhatsForFree.com and all other related links, websites,
the uniform resource locators and all of the computer software which comprises
the foregoing, in exchange for 1,200,000 shares of common stock valued at the
closing price of $0.564 or $676,800, (see "FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA" in Part II, Item 7). 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. 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 websites
and providing search services and links to other websites directly to the
public. All stock issued in exchange for this license is restricted pursuant to
rules promulgated under the Securities Act of 1933.
We regard our copyrights, service marks, trademarks, trade secrets, proprietary
technology and similar intellectual property as critical to our success, and we
rely on trademark and copyright law, trade secret protection and confidentiality
and license agreements with our employees, customers, independent contractors,
partners and others to protect our intellectual property rights. We have filed
for the registration for the trademark WhatsForFree in the United States.
The Company has purchased the following domain names which is in the process of
being transferred into the Company's name:
o Whats4Free.com o WhatsForFree.com
o Whats4Free.net o WhatsForFree.net
o Whts4Free.org o WhatsForFree.org
The Company is negotiating and intends to contract with a related company for
additional domain names.
Domain names are generally regulated by Internet regulatory bodies. The
regulation of domain names in the United States and in foreign countries is
subject to change. Regulatory bodies could establish additional top-level
domains, appoint additional domain name registrars or modify the requirements
for holding domain names. As a result, we may be unable to acquire Whats4Free
and WhatsForFree top level domain names in all of the countries in which we may
desire to conduct business in the future. The relationship between regulations
governing domain names and laws protecting trademarks and similar intellectual
property rights is unclear. Therefore, we could be unable to prevent third
parties from acquiring domain names that infringe or otherwise decrease the
value of our trademarks and other proprietary rights. It is likely there are
online companies in other countries using domain names that potentially infringe
on our trademarks.
The Company may be required to obtain additional approvals to refine, develop,
market and deliver new services. We may be unable to obtain any such license on
commercially reasonable terms or at all. In addition, there is no guaranty that
rights granted by any licenses will be valid and enforceable.
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LETTER OF INTENT
During the first quarter 2000, the Company entered into a letter of intent with
a financial service company, NOW Check Cashing, Inc. ("NCCI") of Atlanta,
Georgia. The Company will pay an as-yet undetermined amount in exchange for cash
plus 500,000 shares of common stock. A binding agreement will be subject to
completion of an independent audit in which NCCI must meet certain financial
requirements acceptable to the Board of Directors, prior the acquisition
becoming finalized. It is expected the audit will be completed by April 2000.
NCCI is a financial services company that presently offers a limited range of
financial services to over 10,000 customers in the Metropolitan Atlanta area.
NCCI is licensed by the State of Georgia Banking Commission, operates two
centers in Atlanta, and handles over $30 million in gross deposits per year.
This acquisition is expected to increase WFFT's exposure to its target markets,
which includes the Hispanic communities within major U.S. Centers. NCCI will
offer a wide range of traditional banking services including check cashing, wire
transfers (in co-operation with Western Union), secured credit cards and money
orders (in co-operation with Travelers Co.). With the addition of NCCI to WFFT's
Internet Technology, Bi-lingual, multi-cultural Internet services will be
offered to NCCI clients in existing and future facilities and on-line via the
Internet.
The Company continues to further pursue and evaluate other possible acquisitions
of other related technologies at this time.
RISK
DEVELOPMENT STAGE INTERNET COMPANY
The Company has the inherent risks related to development stage and Internet
based companies. During 2000, management feels it has assembled a management
team with the skills specific to the management of early stage, rapid growth
companies. The Company also bears the risks particularly associated with "rapid
growth" start-ups and with the Internet. The Company has a limited operating
history and may face difficulties encountered by early stage companies in
Internet-related Businesses as well the difficulties of ascertaining the affects
of seasonality, if any. The Company is in a market whose growth is being fueled
by a completely new economic paradigm. The world is going through a shift from
an Industrial Society to an Information Society. Such paradigm shifts create
massive dislocation and uncertainty. Although we believe the Company will
weather this shift because of its ability to alter its focus and efforts to deal
with the affecting markets, there can be no assurances.
LIMITED HISTORY
The Company is faced with the following risks include uncertainties about our
ability to:
o attract a larger number of consumers to our website;
o sign up new clients and add new and compelling content to our website;
o manage our expanding operations;
o adapt to potential decreases in online advertising rates;
o successfully introduce new products and services;
o continue to develop and upgrade our technology and minimize technical
difficulties and system downtime;
o create and maintain the loyalty of our customers and clients;
o maintain our current, and develop new, strategic relationships and
alliances; and
o attract, retain and motivate qualified personnel.
Any serious or repeated problems with the performance of our website could lead
to the dissatisfaction of consumers or our marketer clients. The amount of
traffic anticipated to hit our website, is expected to increase over time. The
systems that support our website must be able to accommodate an increased volume
of traffic. The website may experience slow response times and other systems
problems for a variety of reasons. If we do not effectively address any capacity
constraints or system failures, our business could be adversely affected.
We have not achieved profitability and expect to continue to incur operating
losses for the near future. We incurred net losses of $1,686,496 and $1,076,088
for the year ended December 31, 1999 and 1998 respectively. As of December 31,
1999, our accumulated deficit was $6,178,371. During 2000, we increased our
operating expenses and capital expenditures in order to accelerate our growth.
We expect further increases in operating and capital expenditures.
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See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
MANAGING GROWTH
The Company may not be successful in managing their growth. To be successful,
the Company must continue to expand the size and scope of our business while
retaining the ability to react quickly to the requirements of our marketer
clients. We must also implement new technologies and respond to initiatives by
new and existing competitors. The attractiveness of our website to consumers
will be based in part on our ability to provide a broad variety of high quality
offers. A number of other websites give consumers access to similar offers. We
face competition from these websites as well as a variety of other online and
offline competitors. If we are unsuccessful in acquiring and renewing a
continuing array of free, trial and promotional offers for our website, traffic
on our site will likely decrease. As a result, our website will become less
attractive to marketers and our ability to generate revenue from marketer
clients will be adversely affected.
MANAGEMENT TEAM
The Company has attempted to increase its ability to manage growth by assembling
a strong management team. While the Company has no operating history, and this
management group has not worked with each other before as a single unit, we
believe the credentials of the management team demonstrates sufficient expertise
to positively skew its opportunities for success. We have grown from zero
employees on December 31, 1999 to 11 in March 2000. We have hired numerous
leased employees, and anticipate hiring many more leased employees, which may
grow the Company to over 100 workers by the end of 2000. We have recently hired
key management personnel and will face a challenge integrating them and other
employees into our existing operations. In addition, we plan to continue to
expand our sales, and marketing, customer support and research and development
departments. Future growth will place a significant strain on our management
systems and resources. Furthermore, we expect we will need to continue to
improve our financial and managerial controls and our reporting systems and
procedures. These changes in systems and controls may prove to be ineffective or
inadequate.
PUBLICLY TRADING
The Company is a fully reporting publicly traded Nevada Corporation. It is
subject to the regulatory risks on any public company. The Company will conduct
itself in accordance with all of the regulatory requirements imposed on it,
subject to the advice of counsel.
OUTSIDE RESOURCES
The Company is dependent on outside funding from the private equity capital
market, and it depends on continuing support of the small capitalization equity
market. Any reduction in the level of equity funding for new companies can
adversely affect the company's valuation, increasing dilution for each stage of
development funding, and/or making such funding unavailable. While we can give
no assurances, the Company believes the support for Internet related funding
would continue through its development and maturation phases. There can be no
assurance that the Company will not become subject to the risks associated with
a business on the Internet, including, but not limited to, regulatory controls
imposed by governments, and other restrictions applied to businesses on the
internet, regulatory and economic developments, of which could have an adverse
effect on the Company's operating results.
COMPETITION
The Company may be unable to compete successfully with current or future
competitors. We face intense competition from many companies in a number of
categories, both offline and online, to provide marketing and advertising
services for marketer clients. We expect competition from online competitors to
increase significantly because there are no substantial barriers to entry in our
industry. Increased competition could result in price reductions for online
advertising space and marketing services, reduced gross margins and loss of our
market share.
Many of our existing competitors (see "COMPETITORS" above), as well as a number
of potential new competitors, have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than WFFT. These advantages may allow them to
respond more quickly and effectively to new or emerging technologies and changes
in customer requirements. It may also allow them to engage in more extensive
research and development, undertake more far-reaching marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to potential
employees, strategic partners and advertisers. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services to address the needs of our prospective clients.
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Online marketing is a rapidly developing concept, and new types of products and
services may emerge that are more attractive to consumers and marketers than the
types of services we offer. As a result, it is possible that new competitors
will emerge and rapidly acquire significant market share.
LITIGATION
While we have, and will continue to take all steps to protect our intellectual
property rights, we cannot assure that our efforts to prevent misappropriation
or infringement of our intellectual property will be successful. These steps may
include costly litigation. An adverse determination in any litigation of this
type could require significant changes to the structure and operation of our
online services and features or to license alternative technology from another
party. Implementation of any of these alternatives could be costly and time
consuming and may not be successful. Any intellectual property litigation would
likely result in substantial costs and diversion of resources and management
attention.
Our success largely depends on our trademark (the Company applied for their
trademark in January 2000) and internally developed technologies, which we seek
to protect through a combination of trademark, copyright and trade secret laws.
Despite actions we have taken to protect our intellectual property rights, it
may be possible for third parties to copy or otherwise obtain and use our
intellectual property without authorization or to develop similar technology
independently. In addition, legal standards relating to the validity,
enforceability and scope of protection of intellectual property rights in
Internet-related businesses are uncertain and still evolving. We may be unable
to maintain the value of our intellectual property rights in the future.
As of December 1999, we hold the Internet domain name "whats4free.com". Domain
names generally are regulated by Internet regulatory bodies. The regulation of
domain names in the United States and in foreign countries is subject to change.
Regulatory bodies could establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. As a result, we may be unable to acquire additional top-level domain
names in all of the countries in which we may desire to conduct business in the
future. The relationship between regulations governing domain names and laws
protecting trademarks and similar intellectual property rights is unclear.
Therefore, we may be unable to prevent third parties from acquiring domain names
that infringe upon or otherwise decrease the value of our trademark applied for
and other intellectual property rights. We believe there are online companies in
other countries using domain names that potentially infringe on our trademarks.
We may be unable to prevent them from using these domain names and this use may
decrease the value of our trademark.
We may need to obtain licenses from others to refine, develop, market and
deliver new services. We may be unable to obtain any such license on
commercially reasonable terms if at all. Rights granted pursuant to any licenses
may not be valid and enforceable.
LITIGATION FOR INFORMATION DISPLAYED ON WEBSITE
The Company intends to monitor the content of the website. Despite these
efforts, we may be subjected to claims for defamation, negligence, copyright or
trademark infringement and various other claims relating to the nature and
content of materials on our website. These types of claims have been brought,
sometimes successfully, against online services in the past. We could also face
claims based on the content that is accessible from our website through links to
other websites. Any litigation would likely result in substantial costs and
diversion of resources and management attention.
LITIGATION - SECURITY AND PRIVACY BREACHES
We could be subject to litigation and liability if third parties were able to
penetrate our network security or otherwise misappropriate our users' personal
or credit card information. This liability could include claims for unauthorized
purchases with credit card information, impersonation or other similar fraud
claims. It could also include claims for other misuses of personal information,
such as for unauthorized marketing purposes. In addition, the Federal Trade
Commission and other states and federal agencies have been investigating various
Internet companies regarding their use of personal information. We could be
subject to investigations and enforcement actions by these or other agencies.
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The need to transmit confidential information securely has been a significant
barrier to electronic commerce and communications over the Internet. Any
compromise of security could deter people from using the Internet in general,
or, specifically, from using the Internet to conduct transactions that involve
transmitting confidential information, such as purchases of goods or services.
Many marketers seek to market their products and services on our website because
they want to encourage people to use the Internet to purchase their goods or
services. Internet security concerns could frustrate these efforts. In addition,
the Company's relationships with consumers may be adversely affected if the
security measures we use to protect their personal information are ineffective.
We cannot predict whether events or developments will result in a compromise or
breach of the technology we use to protect a customer's personal information.
Furthermore, our computer servers may be vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions. We may need to expend
significant additional capital and other resources to protect against a security
breach or to alleviate problems caused by any breaches. We may be unable to
prevent or remedy all security breaches. If any of these breaches occur, we
could lose marketing clients and visitors to our website.
ON-LINE MARKETING
The demand for online marketing may not develop to a level sufficient to support
our continued operations or may develop more slowly than we expect. We expect to
derive almost all of our revenues from contracts with marketer clients under
which we provide online marketing services through our website and email. The
Internet has not existed long enough as a marketing medium to demonstrate its
effectiveness relative to traditional marketing methods. Marketers that have
historically relied on traditional marketing methods may be reluctant or slow to
adopt online marketing. Many marketers have limited or no experience using the
Internet as a marketing medium. In addition, marketers that have invested
substantial resources in traditional methods of marketing may be reluctant to
reallocate these resources to online marketing. Those companies that have
invested a significant portion of their marketing budgets in online marketing
may decide after a time to return to more traditional methods if they find that
online marketing is a less effective method of promoting their products and
services than traditional marketing methods.
We do not know if accepted industry standards for measuring the effectiveness of
online marketing will develop. An absence of accepted standards for measuring
effectiveness could discourage companies from committing significant resources
to online marketing. There are a variety of pricing models for marketing on the
Internet. We cannot predict which, if any, will emerge as the industry standard.
Absence of such a standard makes it difficult to project our future pricing and
revenues.
Email marketing is also vulnerable to potential negative public perception
associated with unsolicited email, known as "spam." Although we do not send
unsolicited email, public perception, press reports or governmental action
related to spam could reduce the overall demand for email marketing in general.
Online marketing is characterized by rapidly changing technologies, frequent new
product and service introductions, short development cycles and evolving
industry standards. We may incur substantial costs to modify our services or
infrastructure to adapt to these changes and to maintain and improve the
performance, features and reliability of our services. We may be unable to
successfully develop new services on a timely basis or achieve and maintain
market acceptance.
GOVERNMENT REGULATIONS
We are not currently subject to direct federal, state or local regulation in the
United States other than regulations applicable to businesses generally or
directly applicable to electronic commerce. The adoption of such laws could
create uncertainty in use of the Internet and reduce the demand for all products
and services. It is possible laws and regulations may be proposed or adopted
with respect to the Internet covering issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic commerce may prompt calls for more stringent consumer
protection laws. The adoption of such consumer protection laws could create
uncertainty in Internet usage and reduce the demand for all products and
services.
In addition, we are not certain how our business may be affected by the
application of existing laws governing issues such as property ownership,
copyrights, encryption and other intellectual property issues, taxation, libel,
obscenity and export or import matters. It is possible that future applications
of these laws to our business could reduce demand for our service, increase the
cost of doing business because of litigation costs, or increased service
delivery costs.
10
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Because our services are available over the Internet in multiple states and
foreign countries, other jurisdictions may claim that we are required to qualify
to do business in each state or foreign country. We are qualified to do business
only in Arizona. Our failure to qualify in other jurisdictions when we are
required to do so could subject us to taxes and penalties and could restrict our
ability to enforce contracts in those jurisdictions.
MILLENNIUM YEAR 2000
In January 2000, the Company purchased new computers along with a new software
programs and a new network system. The Company keeps current with all updates
and revisions with respect to all software used by the Company. It is
anticipated that all other software updates the Company uses reflect the
required revisions to accommodate transactions in the year 2000 and thereafter.
We do not anticipate any problem in dealing with computer entries in the year
2000 or thereafter, with any computers currently used at our facilities in
Scottsdale, Arizona.
EMPLOYEES
The Company has conducted its office administration and support services by
means of agreements with service and consulting companies. These agreements
(other than the Chief Executive's management agreement) completed their
contracts on March 31, 1998. The Company did not renew any of these contracts.
We have issued only temporary service agreements pending the location of
products or merger possibilities. On August 31, 1998, the Company issued a
public relations agreement with a company controlled by the Chief Executive
Officer to provide investment public relations consulting for 36 months
beginning September 1, 1998. As of December 31, 1999, the Company had no
employees. During the first quarter 2000, the Company began hiring employees. It
is anticipated that the Company will have in excess of 100 employees by the end
of 2000. No employees are subject to a collective bargaining agreement. See Part
III, Item 9 "DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT".
DEPENDENCE ON KEY MANAGEMENT
The Company is dependent on its key managers. The market is very competitive for
the services of such individuals, and in turn, the Company feels it must be
competitive in its compensation, benefit and other employee plans. The Company
will seek to aggressively expand its back-ups for every position through an
aggressive management and personal development program. During the first quarter
2000, the Company has assembled a management team, which has had experience with
more than three hundred technology start-up and development stage situations.
This team's expertise spans every area believed to materially impact the
company's product development opportunity. We do not have employment agreements
with any of our key personnel except with the Chief Executive Officer, Jan J.
Olivier, nor do we have key-person insurance for any of our employees at this
time. Definitive employment agreements for key officers and directors are in
process. The Company is in the process of obtaining medical insurance for all
employees.
LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law ("NGCL") allows the Company
to indemnify any person who is or was made a party to, or is or was threatened
to be made a party to, any pending, completed, or threatened action, suit or
proceeding by reason of the fact that he or she is or was a director, officer,
employee or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise. The NGCL permits the
Company to advance expenses to an indemnified party in connection with defending
any such proceeding, upon receipt of an undertaking by the indemnified party to
repay those amounts if it is later determined that the party is not entitled to
indemnification.
The foregoing provision may reduce the likelihood of derivative litigation
against directors and officers and discourage or deter shareholders from suing
directors or officers for breaches of their duties to the Company, even though
such an action, if successful, might otherwise benefit the Company and its
shareholders. In addition, to the extent that the Company expends funds to
indemnify directors and officers, funds will be unavailable for operational
purposes.
During 1999, the Company did not have Directors and Officers insurance. The
Company is making efforts to obtaining sufficient Directors and Officers
insurance during the first quarter of 2000.
11
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTIES
During the 1999 year, the Company maintained its principal executive office in
the rented office facilities located in central Scottsdale, Arizona as a portion
of the consulting company controlled by the Chief Executive Officer. During
January 2000, the Company relocated their offices to north Scottsdale, Arizona
where they occupied the following office locations:
1) 2,912 square feet in Scottsdale, Arizona where the Registrant maintains
their administrative offices. Rent of $3,761 ($15.50 per square foot,
annualized) plus rental taxes is paid monthly for the first year beginning
February 1, 2000, and is increased to $4,004 for months 13 - 24 and
increased to $4,247 per month until the lease expires on January 31, 2003.
2) 2,898 square feet is occupied at the same complex, in Scottsdale, Arizona
where operations, technical and customer service is maintained. Rent of
$3,391 ($14.04 per square foot, annualized) plus rental taxes is paid
monthly beginning March 15, 2000, and is increased to $3,767 through months
13 - 24, and increased to $3,999.24 per month until the lease expires on
March 14, 2003.
All of the properties leased by the Company are in good working condition. The
Company has secured insurance for the property located at the above locations,
through Wick Pilcher Insurance, Inc. for an annual premium of $4,682. The policy
is for one year beginning March 10, 2000. The policy covers the following:
o personal property at replacement cost of up to $80,000,
o $1,000,000 maximum of general liability for each occurrence, and
o $1,000,000 maximum liability coverage of automobiles personally owned
by officers and directors and rented automobiles.
The Registrant does not own any real estate, nor is the Registrant engaged in
the business of investing in real estate or real estate mortgages.
ITEM 3. LEGAL PROCEEDINGS
The Company has not been involved in any litigation other than minor collection
efforts and judgments that are being satisfied, as funds are available.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the solicitation
of proxies or otherwise during the fiscal year ending 1999 and 1998 covered by
this report.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED OTHER STOCKHOLDER MATTERS
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 referred to in Item 1 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 operated by the National Association of Securities
Dealers, Inc. The Company's authorized common stock consists of 50,000,000
shares, $.001 par value per share. On March 17, 2000, there were 17,336,692
shares of common stock outstanding.
12
<PAGE>
The following table sets forth the range of high and low bid quotations for the
Company's common stock for each quarterly period indicated, as reported by
brokers and dealers making a market in the capital stock. Such quotations
reflect inter-dealer prices without retail markup, markdown or commission, and
do not necessarily represent actual transactions:
--------------------------------------------------------------------
COMMON STOCK
--------------------------------------------------------------------
QUARTER ENDED HIGH BID LOW BID
====================================================================
31-Mar-98 $ 0.06 $ 0.04
--------------------------------------------------------------------
30-Jun-98 $ 4.55 $ 0.06
--------------------------------------------------------------------
30-Sep-98 $ 4.32 $ 1.82
--------------------------------------------------------------------
31-Dec-98 $ 2.16 $ 0.06
--------------------------------------------------------------------
31-Mar-99 $ 4.03 $ 0.12
--------------------------------------------------------------------
30-Jun-99 $ 4.21 $ 0.23
--------------------------------------------------------------------
30-Sep-99 $ 0.37 $ 0.11
--------------------------------------------------------------------
31-Dec-99 $ 0.76 $ 0.06
--------------------------------------------------------------------
31-Mar-00* $10.81 $ 0.36
--------------------------------------------------------------------
* Calculated for the period January 1, 2000 to March 17, 2000.
On March 17, 2000, the high, low and closing bid price of the Company's common
stock, as reported on the OTC Bulletin Board by NASDAQ Trading and Marketing
Services, were $ 10.81, $ 8.13 and $ 9.63 respectively.
HOLDERS
The approximate number of stockholders of record of the Registrant's common
stock as of the close of business on March 17, 2000 was 615, including brokerage
houses holding stock for an unknown number of stockholders. The Company's
transfer agent and registrar for the common stock is National Stock Transfer
Co., Salt Lake City, Utah.
DIVIDENDS
The Registrant intends to pay a 10% stock dividends on its common stock on March
30, 2000 for shareholders of record as of January 31, 2000. The Registrant has
never paid cash dividends on its common stock and does not intend to do so in
the near future. The Registrant currently intends to retain its earnings, if
any, for the operation and expansion of its business. 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. On November 5, 1997, the Company issued 21,500 shares of its common
stock to Cactus Consultants International, Inc. ("CCI") in connection
with accrued consulting services rendered to the Company by Jan J.
Olivier, the President and Director of the Company. Such shares were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933. These shares reduced the outstanding
debt due CCI by $43,000.
13
<PAGE>
2. In December 31, 1997 the Company issued 143,027 shares of its common
stock to five individuals and/or companies for consulting services
and/or for services rendered by officers and directors of the Company
as follows:
No. Of
Purchaser Shares
--------- ------
Ray TripHahn (a) 5,000
BRADERLUX A.R.L. (b) 2,750
QUIDQUIA Management Corp (c) 2,997
Coast Northwest Inc. (d) 45,318
Cactus Consultants International Inc. (e) 86,962
(a) For services performed while Director and Officer of the Company. Mr.
TripHahn resigned his positions with the Company on January 23, 2000. In
addition, Mr. Ray TripHahn was issued 375 options which he has exercised
and was recorded at $50,000 in 1997.
(b) Beneficial interest/ wholly owned by Director and Officer A. Richard
Bullock. Shares were recorded at $4.00 per share.
(c) For services performed by management system consultants during 1996 and
1997.
(d) Beneficial interest/wholly owned by Director and Officer Jan J. Olivier.
Shares issued to satisfy outstanding debt due Cactus Consultants
International, Inc. of $347,848.
All shares were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933.
3. On February 18, 1998, the Company issued 50,000 shares of its common stock
to CCI. On April 2, 1998, the Company issued an additional 4,950,000 shares
of its common stock to CCI, for a total of 5,000,000 shares of common
stock, to satisfy $100,000 of debt due CCI for services rendered to the
Company by Jan J. Olivier. Such shares were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933.
4. On May 4, 1998, the Company issued 3,000,000 shares of its common stock to
Consultants pursuant to services performed as required under the 1997
Retainer Stock Plan for Non-Employee Directors and Consultants ("the 1997
Stock Plan"). On August 10, 1998, the Company filed, with the Securities
and Exchange Commission, Form S-8 covering 5,000,000 shares of common stock
issued pursuant to the 1997 Stock Plan.
See Part III Item 10 "EXECUTIVE COMPENSATION", Stock Option Plans.
5. On November 10, 1998, the Company issued 200,000 shares of common stock to
an investor, for $0.50 per share or $100,000. Such shares were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933.
6. On March 19, 1999, the Company issued 300,000 shares of common stock and
600,000 warrants to John T. Moran in exchange for consulting services
valued at $100,500. The 300,000 shares issued John T. Moran have been
registered under the Securities Act of 1933 in a Registration Statement
filed March 12, 1999 and declared effective on March 12, 1999. On February
1, 2000 300,000 of the warrants expired. The remaining 300,000 warrants may
be exercised at $4.00 per share prior to February 1, 2001.
7. On November 26, 1999, the Company agreed to issue 2,000,000 shares of
common stock to Cactus Consulting Inc. in exchange for prior accrued
services of Jan J. Olivier, the Company's Chief Executive Officer, valued
at the low bid price of $0.25 or $500,000. Such shares were issued pursuant
to the exemption from registration under Section 4(2) of the Securities Act
of 1933.
14
<PAGE>
8. On December 7, 1999, the Company agreed to issue the following shares of
common stock:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
CURRENT POSITION WITH THE
NAME COMPANY NO. OF SHARES
------------------------------------------------------------------------------------
<S> <C> <C> <C>
C. Austin Burrell Officer & Director (a) 1,000,000
------------------------------------------------------------------------------------
Richard H. Schmidt Officer & Director (a) 250,000
------------------------------------------------------------------------------------
Wynn J. Bott Officer (a) 350,000
------------------------------------------------------------------------------------
Raymond TripHahn Resigned Officer & Director (b) 150,000
------------------------------------------------------------------------------------
Dr. Claus G. J. Wagner-Bartak Officer & Director (b) 100,000
------------------------------------------------------------------------------------
</TABLE>
(a) Stock exchanged for their commitment to join the Company as an Officer
and/or Director in January 2000
(b) Stock exchanged for prior services performed for the Company.
These shares were valued at the low bid price on the date of the
Treasury report of $.564 or $1,043,400. Such shares were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933.
9. In December 1999, the Company purchased the "right to use" the license
agreement in the states of Arizona and California in the United States
and the Province of British Columbia for WFFT in exchange for 1,200,000
shares of common stock valued at the closing price of $0.564 or
$676,800. Such shares were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933.
OFFERING MEMORANDUM
During the first quarter 2000, the Company has offered three Offering
Memorandum's raising $1,579,750 in funds which are expected to be used towards
the purchase of materials, consultants and operating needs to initiate the
Company's entry into the internet marketplace:
1. The Company issued 500,000 shares of common stock at $0.25 per share
in an Offering dated January 10, 2000. $125,000 was received during
January 2000. All the shares were issued on February 15, 2000 plus
their 10% stock dividend (see Item 5. "MARKET PRICE OF AND DIVIDENDS
ON THE REGISTRANT'S COMMON EQUITY AND RELATED OTHER STOCKHOLDER
MATTERS").
2. The Company issued 239,500 shares of common stock at $0.50 per share
in an Offering dated January 28, 2000 of which $119,750 was received
in January 2000. All of the shares were issued on February 15, 2000.
3. The Company agreed to issued 1,335,000 Units, equivalent to one share
of common stock at $1.00 per share plus one Warrant for an additional
share of common stock. The Offering is dated February 23, 2000 of
which $1,335,000 was received during the first quarter 2000. These
shares are expected to be issued during March 2000. The Warrants may
be exchanged any time prior to February 5, 2001 at an exercise price
of $2.00 which, if all exercised, will aggregate $2,670,000 to the
Company.
15
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the financial condition and results of operations of
the Company contains forward-looking statements within the meaning of section
27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act
of 1934. In some cases, you can identify forward-looking statements by our use
of words such as "may," "will," "should," "could," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue" or the
negative or other variations of these words, or other comparable words or
phrases. Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements or other future events.
Moreover, neither we nor anyone else assumes responsibility for the accuracy and
completeness of forward-looking statements. We are under no duty to update any
of our forward-looking statements after the date of this filing. You should not
place undue reliance on forward-looking statements. Management's discussion and
analysis should be read in conjunction with the financial statements and the
notes thereto.
Overview
During 1999, the Company had been continuously pursuing business opportunities
and possible merger candidates in an attempt to meet the goals of its business
plan. During December 1999, the Company purchased the "rights to" the license
agreement for WhatsForFree.com and all other related links and websites and
changed its name to WhatsForFree Technologies, Inc. ("WFFT").
WhatsForFree Technologies, Inc., is an Internet-based marketing and branding
company whose mission is to provide corporations and organizations with a new
and innovative pathway for promotion of their products and services. This
pathway helps organizations enhance market and consumer awareness of their
brands, improve performance of their general promotion activities, and create
numerous cross-promotional opportunities and strategies. Through the Internet,
organizations that grant consumers and businesses free products and services are
able to more effectively and efficiently target specific communities in a
focused and timely manner. In turn, they have the opportunity to create
excitement about and interest in their products and services at both the
national and regional levels.
WFFT offers unique, non-traditional marketing and brand identity opportunities
for its clients, advertising firms, and direct corporate accounts. The Company
is committed to the utilization of industry standard platforms. Strategic
alliances and core infrastructure components are currently being negotiated with
Cisco, Sun, Oracle, EMC and Q-west. The Company is expected to purchase
significant computer equipment during the second quarter 2000. The Company will
utilize an Oracle database and accounting system running on Sun servers, with
communications supported by Cisco and Q-west, and storage by EMC. Citrix will be
used for customer solutions. For the development of the Company's website, the
Company is utilizing a graphics based unit, which specializes in the development
of web page graphic designs. The Company has retained the services of a
value-oriented media service company that is highly successful in the
media-positioning arena for early and development stage companies. These
affiliations are expected to be negotiated, in part, through the exchange of
common stock. In addition, The Company anticipates the affiliation of a number
of charitable and not for profit organizations as a result of its willingness to
operate as an agency on their behalf.
The branded Internet portal is currently under construction and can be located
at http://www.whats4free.com. It will serve as the central gateway to free
products and services for all demographic sectors of the market. The research
and development process is continuous throughout the life of the website.
Over the past few months, WFFT has been successful in attracting an outstanding
management and advisory team. On December 31, 1999, the Company had no
employees. Beginning January 2000, the Company was able to secure employment
with most of its key officers and directors. In addition, the Company began
hiring employees for the various departments. On March 17, 2000, the Company had
over 30 employees of which approximately 20 are leased from an outside service.
The Company anticipates in excess of 100 employees by December 31, 2000. The
Company is currently negotiating for additional office space to accommodate the
anticipated growth.
16
<PAGE>
The Company has entered into a letter of intent with NOW Check Cashing, Inc.
("NCCI") out of Atlanta, Georgia. This acquisition is contingent upon approval
by the Board of Directors upon the completion of an independent audit of NCCI's
financial statements covering a period of three years. It is expected that this
acquisition will increase WFFT's exposure to its target markets, which includes
minority communities within major U.S. Centers. NCCI will offer a wide range of
traditional banking services including check cashing, wire transfers (in
co-operation with Western Union), secured credit cards and money orders (in
co-operation with Travelers Co.). With the addition of NCCI to WFFT's Internet
Technology, Bi-lingual, multi-cultural Internet services will be offered to NCCI
clients in existing and future facilities and on-line via the Internet.
The Company will continue to pursue alliances with various corporate strategic
partners which are technology related in an effort to implement the Company's
business plan.
Results of Operations
Results of the year ended December 31, 1999 compared with year ended 1998.
Net loss from operations increased 56% to $(1,686,496) for the year ended
December 31, 1999 from $(1,080,563) for the year ended December 31, 1998 due
entirely to an increase in selling, general and administrative expenses of
$605,933 in 1999. The increase was due to 56% increase in professional services
during 1999. In 1999, approximately 42% of selling, general and administrative
expenses were paid or payable to a company owned by the President and Chief
Executive Officer of the Company. In 1998, approximately 38% of selling, general
and administrative expenses was paid or payable to this related party. The
Company relies upon its ability to raise capital by the issuance of its common
stock for required operating and promotional product and services, and to incur
indebtedness to fund operations.
Losses per share increased to $(.195) per share for 1999 from $(.137) per share
in 1998. The decreased performance resulted primarily from the increase in net
loss per share. There was a dilutive effect on net loss per share as a result in
issuing an additional 5,349,899 shares of common stock during 1999.
Note 2 of the financial statements and the report of the independent auditors
raise substantial doubt about the Company's ability to continue as a going
concern. Management believes that the purchase of a licensing right to use
technology and focus on Internet-based marketing and branding of free products
and services and will ultimately result in the Company achieving profitability.
Revenues:
There were no revenues during the year ended December 31, 1999 and 1998 as
management spent most of the year identifying a suitable operating company.
Operating Income / (Loss):
Operating loss (defined as income before interest expense and taxes) for the
year ended December 31, 1999 increased 57% to $(1,686,496) for the year ended
December 31, 1999 from $(1,076,088) for the year ended December 31, 1998 due
entirely to an increase in selling, general and administrative expenses to
$1,686,496 in 1999 from $1,080,563. The increase was due to 57% increase in
professional services during 1999.
17
<PAGE>
Interest and Taxes:
No interest expense was incurred during the years ended December 31, 1999 and
1998. The Company has 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.
EARNING OUTLOOK
Financial Position & Liquidity and Capital Resources:
- -----------------------------------------------------
Since December 31, 1998, operating working capital (defined as receivables and
inventories less accounts payable and accrued liabilities) decreased $42,596.
CHANGE IN OPERATING WORKING CAPITAL
Cash $ 6,146
Prepaid expenses (126,500)
Accounts payable 10,794
Payable to related parties 66,964
------------
Change in Operating Working Capital $ (42,596)
============
Cash increased $6,146 as a result of $100,500 of proceeds from the issuance of
common stock, less cash used for operating activities of $94,354.
Prepaid expenses consist of un-amortized consulting fees. Payables to related
parties aggregated $189,475 as of December 31, 1999 and decreased from $256,439
as of December 31, 1998. This is primarily a result of the issuance of 2,000,000
shares of common stock in exchange for $500,000 of indebtedness. The amount is
due to a company owned by the President and Chief Executive Officer of the
Company for consulting and public relations services.
Century Date Change
- -------------------
The Company did not incur any substantial cost relating to computer programs
that did not differentiate between the year 1900 and the year 2000 because they
were written using two digits rather than four to define the applicable year.
Financing
- ---------
The Company relies upon its ability to raise capital by the sale of its common
stock, to barter stock for required operating and promotional product and
services, and to incur indebtedness to fund operations.
The Company is following a traditional staged funding and development process
tied to achievement of specific corporate milestones. As of March 17, 2000, the
Company will have raised a total of $1,579,750 seed capital, which has been used
to initiate corporate organization and structure, and product/strategic plan
development. During the latter part of March 2000, the Company will raise an
additional $5 Million in a private offering for the Phase 1 launch. Prior to the
scheduled May 22, 2000 Phase 2 launch, the Company is expected to raise a total
of $20 Million to support both Phase 2 and subsequent developments.
The Company anticipates a $30 to $40 million private placement of senior
securities within 60 to 90 days of the Phase 2 launch. It is anticipated that
these funds will come from corporate strategic partnership investments, and/or
investment banking/venture sources and be used to fund the growth of the
Company.
Item 3: Quantitative and Qualitative Disclosure about Market Risk
- -----------------------------------------------------------------
We believe we do not have material market risk exposure. We do not own any
derivative instruments or engage in any hedging transactions. We have a minimal
amount of outstanding long-term debt and currently invest our excess cash in
short-term commercial paper.
18
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Contents
Page
Report of Independent Auditors.......................................... F1-F2
Financial Statements:
Balance sheets..................................................... F-3
Statements of operations........................................... F-4
Statements of changes in stockholders' equity (deficit)............ F-5
Statements of cash flows........................................... F-6
Notes to financial statements.......................................F7-F15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
WhatsForFree Technologies, Inc.
We have audited the accompanying balance sheets of WhatsForFree Technologies,
Inc. (formerly Ranes International Holding, Inc.) (A Development Stage
Enterprise) as of December 31, 1999 and 1998, and the related statements of
operations, changes in stockholders' equity (deficit), and cash flows for each
of the three years in the period ended December 31, 1999 and for the cumulative
period from February 15, 1990 (inception) through December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The 1997 financial statements were audited by another auditor whose
report dated February 15, 1998 expressed any unqualified opinion on those
statements; but included an emphasis paragraph on the Company's ability to
continue as a going concern.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of WhatsForFree Technologies, Inc.
(formerly Ranes International Holding, Inc.) (A Development Stage Enterprise) as
of December 31, 1999 and 1998 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 and for
the cumulative period from February 15, 1990 (inception) through December 31,
1999 in accordance with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred recurring net losses from
operating activities and has relied on the issuance of its common stock for
working capital. These factors, and others, raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to this
matter are also described in Note 2. The financial statements do no include any
adjustments that might result from the outcome of this uncertainty.
/s/ Timothy L. Steers, CPA
Timothy L. Steers, Certified Public Accountant, LLC
March 17, 2000
Portland, OR
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of
Bio Fluorescent Technologies, Inc.
Scottsdale, Arizona
We have audited the accompanying balance sheets of Bio-Fluorescent Technologies,
Inc. (A Development Stage Company) as of December 31, 1997 and 1996 and the
related statements of operations, changes in stockholders' equity and cash flows
for the years then ended and for the period from February 15, 1990 (inception)
to December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits. We did not audit the financial
statements of BioFluorescent Technologies, Inc. for the period from inception to
December 31, 1995. Such statements are included in the cumulative amounts from
February 15, 1990 (inception) to December 31, 1997 totals of the statements of
operations and cash flows and reflect total loss from operations and net loss of
41% of the cumulative amount totals. Those statements were audited by other
auditors whose reports have been furnished to us and our opinion, insofar as it
relates to the amounts for the period from February 15, 1990 (inception) to
December 31, 1995 is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bio-Fluorescent Technologies,
Inc. at December 31, 1997 and 1996 and the results of its operations, and its
cash flows for the years then ended and for the period from February 15, 1990
(inception) to December 31, 1997 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in the development
stage and has experienced negative cash flow from operations since inception.
Furthermore, the Company has not obtained the financing required to fund its
planned operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 8. The accompanying financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
/s/ J. Paul Kenote, CPA
- -----------------------
J. Paul Kenote, CPA, P.C.
Portland, Oregon
February 15, 1998
F-2
<PAGE>
<TABLE>
WHATSFORFREE TECHNOLOGIES, INC
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Balance Sheets
<CAPTION>
December 31
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 6,435 $ 289
Prepaid expenses 48,500 175,000
------------ ------------
54,935 175,289
Licensing rights 676,800 -
------------ ------------
$ 731,735 $ 175,289
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Current liability - accounts payable $ 45,799 $ 56,593
Payables to related parties 189,475 256,439
Notes payable to related parties 5,000 5,000
Contingencies - -
Stockholders' equity (deficit):
Common stock, $.001 par value; shares authorized
50,000,000, shares issued and outstanding 13,776,595
in 1999 (8,426,696 in 1998) 13,777 8,427
Additional paid-in capital 6,656,055 4,340,705
Deficit accumulated during development stage (6,178,371) (4,491,875)
------------ ------------
Total stockholders' equity (deficit) 491,461 (142,743)
------------ ------------
$ 731,735 $ 175,289
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
WHATSFORFREE TECHNOLOGIES, INC
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Statements of Operations
<CAPTION>
Cumulative
activity during
development stage
Years ended December 31 February 15, 1990
--------------------------------------------------- (inception) through
1999 1998 1997 December 31, 1999
--------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ 1,624 $ 1,624
Selling, general and
administrative expenses 1,686,496 1,080,563 676,557 6,184,623
--------------- -------------- ---------------- -----------------
Loss from operations (1,686,496) (1,080,563) (674,933) (6,182,999)
Interest income, net - 4,475 46 4,628
--------------- -------------- ---------------- -----------------
Loss before benefit for
income taxes (1,686,496) (1,076,088) (674,887) (6,178,371)
Benefit for income taxes - - - -
--------------- -------------- ---------------- -----------------
Net loss $ (1,686,496) $ (1,076,088) $ (674,887) $ (6,178,371)
=============== ============== ================ =================
Net loss per share $ (.195) $ (.137) $ (.086) $ (5.691)
=============== ============== ================ =================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Statements of Changes in Stockholders' Equity (Deficit)
Period from January 1, 1997 through December 31, 1999
<CAPTION>
Deficit
Common accumulated
Common stock Additional stock during Total
--------------------------- paid-in subscription development stockholders'
Shares Amount capital receivable stage equity (deficit)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 61,794 $ 62 $ 3,183,963 $ (128,000) $ (2,740,900) $ 315,125
Shares issued - - - 128,000 - 128,000
Shares issued for cash at
$133 per share 375 - 50,000 - - 50,000
Shares issued in exchange
for indebtedness 164,527 165 614,942 - - 615,107
Net loss - - - - (674,887) (674,887)
------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 1997 226,696 227 3,848,905 - (3,415,787) 433,345
Shares issued in exchange
for indebtedness 5,000,000 5,000 95,000 - - 100,000
Shares issued in exchange
for services rendered and
to be rendered 3,000,000 3,000 297,000 - - 300,000
Shares issued for cash at
$.50 per share 200,000 200 99,800 - - 100,000
Net loss - - - - (1,076,088) (1,076,088)
------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 1998 8,426,696 8,427 4,340,705 - (4,491,875) (142,743)
Warrant issued or to be issued
in exchange for services
rendered and to be rendered 300,000 300 100,200 - - 100,500
Shares issued in exchange for
services rendered 1,849,899 1,850 1,041,550 - - 1,043,400
Shares issued in exchange for
indebtedness 2,000,000 2,000 498,000 - - 500,000
Shares issued in exchange for
licensing rights 1,200,000 1,200 675,600 - - 676,800
Net loss - - - - (1,686,496) (1,686496)
------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 1999 13,776,595 $ 13,777 $ 6,656,055 $ - $ (6,178,371) $ 491,461
============= ============= ============= ============= ============= =============
See accompanying notes.
F-5
</TABLE>
<PAGE>
<TABLE>
WHATSFORFREE TECHONOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Statements of Cash Flows
<CAPTION>
Cumulative
activity during
development stage
Years ended December 31 February 15, 1990
------------------------------------------ (inception) through
1999 1998 1997 December 31, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,686,496) $ (1,076,088) $ (674,887) $ (6,178,371)
Adjustments to reconcile net loss to net
cash provide by (used for)operating activities:
Provision for losses - 500,000 55,000 955,000
Amortization - - - 136,000
Common stock issued in exchange for services 1,143,900 400,000 615,107 3,265,255
Deferred income taxes (573,000) (195,699) (260,641) (2,099,000)
Valuation allowance for deferred income taxes 573,000 195,699 260,641 2,099,000
Changes in operating assets and liabilities:
Receivable - 43,436 - -
Prepaid expenses - - 6,331 -
Checks outstanding in excess of cash in bank - (47) 47 -
Payables 448,242 27,988 (57,925) 393,774
------------- ------------- ------------- -------------
(94,354) (104,711) (56,327) (1,428,342)
Cash flows from financing activities:
Proceeds from note payable - 5,000 - 5,000
Proceeds from common stock 100,500 100,000 50,000 1,429,777
------------- ------------- ------------- -------------
100,500 105,000 50,000 1,434,777
------------- ------------- ------------- -------------
Net increase
(decrease) in cash 6,146 289 (6,327) 6,435
Cash at beginning of period 289 - 6,327 -
------------- ------------- ------------- -------------
Cash at end of period $ 6,435 $ 289 $ - $ 6,435
============= ============= ============= =============
</TABLE>
See accompanying notes.
F-6
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
1. Operations and summary of significant accounting policies
---------------------------------------------------------
OPERATIONS: WhatsForFree Technologies, Inc. (the "Company") was
incorporated under the laws of the state of Nevada on February 15, 1990
as Partisan Corporation. On March 10, 1995, the Company's name was
changed to Bio-Fluorescent Technologies, Inc., to Ranes International
Holding, Inc. on March 6, 1998, then to WhatsForFree Technologies, Inc.
on December 28, 1999.
DEVELOPMENT STAGE ENTERPRISE: The Company is currently considered to be
in the development stage and therefore has adopted the accounting and
reporting standards of Financial Accounting Standards Board Statement
No. 7, "Accounting and Reporting by Development Stage Enterprises".
The Company's initial business plan was based on developing, licensing
or otherwise acquiring state-of-the-art advanced diagnostic testing and
screening technology and equipment capable of early detection of human
immune system disorders such as HIV-1, HIV-2 and Hepatitis B. From
February 1995 to July 1996, the Company supported, through a license
agreement, a development stage diagnostic technology, was settled
September 25, 1997, with prejudice, to the Company's favor.
Accordingly, the Company wrote-off the unamortized cost of the project
in 1996.
In May 1996, the Company reorganized its management team and revised
its business development plan to focus on a "growth by acquisition"
strategy. From July 1996 until December 1999, the Company has been
actively pursuing acquisition possibilities.
In December 1999, the Company purchased the right to use technology and
focus on Internet-based marketing and branding of free products and
services.
CASH AND CASH EQUIVALENTS: The company considers all highly liquid
investments with a maturity of three months or less at the date of
acquisition to be cash equivalents. Supplemental disclosure of non-cash
transactions were as follows:
<TABLE>
<CAPTION>
Years ended December 31
---------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Common stock issued or to be issued in
exchange for services rendered or to be
rendered $ 1,143,900 $ 300,000 $ -
Common stock issued in exchange for
indebtedness $ 500,000 $ 100,000 $ 615,107
Common stock issued in exchange for
licensing rights $ 676,800 $ - $ -
</TABLE>
F-7
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
1. Operations and summary of significant accounting policies (continued)
--------------------------------------------------------------------
LICENSING RIGHTS: Licensing rights consist of costs for the right to
use WhatsForFree Technology in the United States and British Columbia,
Canada and will be amortized over three years, the expected economic
benefit of the licensing right.
STOCK BASED COMPENSATION: The Company accounts for stock based
compensation under Statement of Financial Accounting Standards No. 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS 123"). SFAS 123
defines a fair value based method of accounting for stock based
compensation. However, SFAS 123 allows an entity to continue to measure
compensation cost related to stock and stock options issued to
employees using the intrinsic method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES" ("APB 25"). Entities electing to remain with the
accounting method of APB 25 must make pro forma disclosures of net
income and earnings per share, as if the fair value method of
accounting defined in SFAS 123 had been applied. The Company has
elected to account for its stock based compensation to employees under
APB 25 and has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation cost is recognized for the stock options.
INCOME TAXES: Income taxes are accounted for and reported using an
asset and liability approach. Deferred income tax assets and
liabilities are computed annually for differences between the financial
statement and tax basis of assets and liabilities that will result in
taxable or deductible amounts in the future. Taxes are computed based
on enacted tax laws and rates applicable to the periods in which the
differences are expected to effect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable
or refundable for the period plus or minus the change during the year
in deferred tax assets and liabilities.
Deferred tax assets result from net operating losses not yet utilized
for tax purposes. Valuation allowances have been provided for those
deferred tax assets as their utilization are uncertain.
REPORTING COMPREHENSIVE INCOME: The Company reports and displays
comprehensive income and its components as separate amounts in the
financial statements with the same prominence as other financial
statements. Comprehensive income includes all changes in equity during
the year that results from recognized transactions and other economic
events other than transactions with owners.
F-8
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
1. Operations and summary of significant accounting policies (continued)
--------------------------------------------------------------------
NET LOSS PER COMMON SHARE: Net loss per share is computed by dividing
net loss by the weighted-average number of common shares outstanding
during the periods. The weighted-average number of common stock shares
outstanding was 8,665,923 for the year ended December 31, 1999;
(7,865,052 for 1998; 58,676 for 1997; and 1,085,597 for the cumulative
period from February 15, 1990 (inception) through December 31, 1999).
SIGNIFICANT RISKS AND UNCERTAINTIES: The process of preparing financial
statements in conformity with generally accepted accounting principles
requires the use of estimates and assumptions regarding certain types
of assets, liabilities, revenues and expenses. Management of the
Company has made certain estimates and assumptions regarding the
utilization of net operating losses for income tax purposes and
recoverability of the licensing rights. Such estimates and assumptions
primarily relate to unsettled transactions and events as of the date of
the financial statements. Accordingly, upon settlement, actual results
may differ from estimated amounts.
RECLASSIFICATIONS: Certain amounts in the 1998 financial statements
have been reclassified to conform to the 1999 presentation.
2. Continued operations
--------------------
The Company has incurred net operating losses since inception, and
through December 31, 1999 business development costs have aggregated
approximately $6,185,000. These expenditures have been funded primarily
with the proceeds from the private sales of equity securities as well
as with the issuance of common stock in exchange for services and
indebtedness. Since inception, management activities have been devoted
substantially to raising capital, identifying business opportunities,
or acquiring assets in order to generate revenues. These factors raise
substantial doubt about the Company's ability to continue as a going
concern.
In December 1999, the Company purchased the right to use technology and
focus on Internet-based marketing and branding of free products and
services. In March 2000, the Company entered into a letter of intent
with a financial services company that offers a limited range of
financial services from two centers in the Atlanta, Georgia area.
Management of the Company believes that the licensing agreement and
possible alliance with the financial services company will increase
exposure to its target markets.
Through March 17, 2000, the Company has issued 2,074,500 shares of its
common stock and has received approximately $1,580,000 through private
placement offerings. The Company also intends to offer additional
shares of its common stock through private placement offerings until it
achieves profitability.
F-9
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
2. Continued operations (continued)
-------------------------------
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and
classification of assets or the amount and classification of
liabilities that might result should the Company be unable to continue
as a going concern.
3. Notes payable to related parties
--------------------------------
Notes payable to related parties are non-interest bearing and due on
demand. The Company expects to exchange shares of its common stock for
the amount of the notes.
4. Stock option plans
------------------
In 1996, the Company adopted an Incentive Stock Plan for Employees,
Directors and Consultants. Under the Plan the Company may grant options
to its employees, directors, consultants and advisors for up to 8,667
shares of common stock. The exercise price for stock granted pursuant
to a tax-qualified option plan is to be greater than or equal to the
market price of the Company's stock on the date of grant. The exercise
price of stock granted pursuant to a non-qualified stock option plan is
to be greater than or equal to 85% of the market price of the Company's
common stock on the date of grant. If options are granted to
individuals who at the time own 10% or more of the common stock of the
Company, the option price shall be no less than 110% of the market
price of the Company's common stock on the date of grant. The maximum
term for an option is ten years. Options are granted at the discretion
of the Board of Directors. No options were granted during the year
ended December 31, 1999, 1998 and 1997. However, options to purchase
2,500 shares of the Company's common stock that where previously
granted where reissued at a price of $.445 per share in connection with
the renewal of a consulting agreement with the President and Chief
Executive Officer of the Company.
In 1997, the Company adopted a Retainer Stock Plan for Non-Employees,
Directors and Consultants and reserved 5,000,000 shares of its common
stock for issuance under the Plan. Under the Plan, options may be
granted at the greater of par value or the market value of the
Company's common stock on the date of grant. The maximum term for an
option is ten years. Options are granted at the discretion of the Board
of Directors. During 1998, the Company granted options to purchase
3,000,000 shares of its common stock under the Plan. The options were
exercised in 1998.
F-10
<PAGE>
4. Stock option plans (continued)
-----------------------------
A summary of the Company's stock option plans as of December 31, 1999
and 1998 and changes during the three years in the period ended
December 31, 1999 are presented below:
<TABLE>
<CAPTION>
Weighted average
Shares exercise price
------ --------------
<S> <C> <C>
Outstanding at January 1, 1997 6,634 $ 165
======
Granted -
Exercised (375)
Forfeited (167) $ 450
=======
Expired -
-----------
Outstanding at January 1, 1998 6,092 $ 156
=======
Granted 3,000,000 $ .10
=======
Exercised (3,000,000)
Forfeited -
Expired (1,967) $ (159)
------------ =======
Outstanding at December 31, 1998 4,125 $ 154
=======
Granted -
Exercised -
Forfeited (1,625) $ 134
=======
Expired -
------------
Outstanding at December 31, 1999 2,500 $ .445
============= =======
</TABLE>
As of December 31, 1999, all outstanding options where exercisable at
an exercise price of $.445 per share which, if exercised, would
aggregating proceeds of $1,113.
5. Income taxes
------------
Deferred income taxes consisted of the following :
<TABLE>
<CAPTION>
December 31
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Deferred tax assets - net operating loss carryovers $ 2,099,000 $ 1,526,000
Valuation allowance (2,099,000) (1,526,000)
--------------- ---------------
Net deferred income taxes $ - $ -
=============== ===============
</TABLE>
F-11
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
5. Income taxes (continued)
-----------------------
The benefit for income taxes consisted of the following:
<TABLE>
<CAPTION>
Cumulative
activity during
development stage
Years ended December 31 February 15, 1990
---------------------------------------------- (inception) through
1999 1998 1997 December 31, 1999
------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Federal:
Currently payable $ - $ - $ - $ -
Deferred (573,000) (195,699) (260,641) (2,099,000)
------------- -------------- ------------- -------------
(573,000) (195,699) (260,641) (2,099,000)
Change in valuation
allowance 573,000 195,699 260,641 (2,099,000)
------------- -------------- ------------- -------------
Benefit for
income taxes $ - $ - $ - $ -
============= ============== ============= =============
</TABLE>
The Company has 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.
6. Operating lease commitments
---------------------------
In February and March 2000, the Company entered into three year
operating lease agreements for its office facilities.
Aggregate future lease payments under these non-cancelable leases are
as follows for the years ending subsequent to December 31, 1999:
Years ending December 31:
-------------------------
2000 $ 76,713
2001 92,457
2002 98,245
2003 12,245
-----------
Total minimum future lease payments $ 279,660
===========
F-12
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
7. Contingencies
-------------
The State of Nevada's Revised Statue provides that a corporation that
has been reinstated to a status of good standing continues to be liable
for past acts and errors and omissions, whether engaged in directly or
through its former officers and directors. Management of the Company
does not believe any past acts, errors and omissions or unasserted
claims' and assessments exist or have occurred, however they are
contingently liable for such matters. No provisions for losses, if any,
have been provided in the accompanying financial statements because of
the uncertainty of such matters.
8. Related party transactions
--------------------------
In April 1999, the Company renewed for an additional three years an
agreement with its President and Chief Executive Officer for consulting
services. Under the agreement, this Officer provides management
services and office support services, including office personnel,
supplies and the maintenance of the Company's principal executive
office in Scottsdale, Arizona. In consideration of these services, the
Company is obligated to pay to a company owned by this individual:
$15,000 in the form of a consulting fee, $1,500 per month for the tax
burden of the consulting fee, 1% of the Company's gross revenues
payable quarterly, and for reimbursement of all reasonable and
necessary business expenses.
In August 1998, another three year agreement was entered into with the
company owned by the President and Chief Executive Officer of the
Company for public relations services. Under the terms of this
agreement, the Company is obligated to pay this related company $15,000
per month, plus certain other costs. The agreement contains renewal
provisions.
During 1999, the Company agreed to issued 2,000,000 shares of its
common stock in exchange for $500,000 of indebtedness it owed to this
related party (5,000,000 shares of its common stock in exchange for
$100,000 of indebtedness in 1998, and 164,527 shares of its common
stock in exchange for $615,107 of indebtedness in 1997). The Company
also paid this related party approximately $19,500 ($94,600 during
1998). As of December 31, 1999, the Company owed this related party
$189,475 ($256,439 at December 31, 1998), which is included in the
accompanying balance sheets as payable to related parties.
F-13
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
9. Recently issued accounting pronouncements
-----------------------------------------
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: In June 1998, SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" was
issued. The Statement requires that derivatives be carried on the
balance sheet at fair value and changes in the fair value of
derivatives be recognized in income when they occur, unless the
derivatives qualify as hedges in accordance with the Standard. If a
derivative qualifies as a hedge, the Company can elect to use hedge
accounting. The type of accounting to be applied varies depending on
the nature of the exposure that is being hedged, and the Standard
defines three hedge risks: change in fair value, change in cash flows
and change in foreign currency.
A fair-value hedge represents the hedge of an exposure to changes in
the fair value of an asset, liability or an unrecognized firm
commitment. Changes in fair-value hedges are recognized in earnings, as
well as the gain or loss on the hedged item attributable to the hedged
risk. Certain criteria must be met in order for a hedging relationship
to qualify as a fair-value hedge.
A cash-flow hedge is a hedge of an exposure to variability in cash
flows that is attributable to a particular risk. That exposure may be
associated with an existing recognized asset or liability or a
forecasted transaction. The effective portion of a hedging instrument's
gain or loss is initially reported as a component of other
comprehensive income and is reclassified as a component of income in
the same period or periods during which the hedge forecasted
transaction affects earnings. As in fair-value hedges, certain criteria
must be met in order for a hedging relationship to qualify as a
cash-flow hedge.
A foreign-currency hedge can be a fair-value hedge or a cash-flow hedge
of a foreign currency exposure; therefore it follows the same
principles as those that apply to the accounting for non-foreign hedges
with some particularities defined in the Standard.
This Standard is effective for fiscal years beginning after June 15,
1999 and cannot be applied retroactively. Management believes that the
adoption of this Standard will not have a material effect on the
Company's financial position or results of operations.
Cost of computer software developed for internal use: In March 1998,
the American Institute of Certified Public Accountants issued Statement
of Position 98-1, "Accounting for the Cost of Computer Software
Developed for Internal Use" ("SOP 98-1"). SOP 98-1 became effective for
the Company's financial statements beginning January 1, 1999. SOP 98-1
requires the capitalization of eligible costs of specified activities
related to computer software developed or obtained for internal use.
The adoption of SOP 98-1 had no effect on the Company's financial
position or results of operations.
F-13
<PAGE>
WHATSFORFREE TECHNOLOGIES, INC.
(formerly Ranes International Holding, Inc.)
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
10. Other subsequent events
-----------------------
In January 2000, the Company acquired the remaining worldwide rights to
the Internet-based marketing and branding of free products and services
for WhatsForFree in exchange for the issuance of 2,000,000 shares of
its common stock.
In January 2000, the Company offered 500,000 shares of its common stock
in a private placement for $125,000. Management of the Company believes
the offering is exempt from registration under Regulation D of the
United States Securities and Exchange Commission (the "SEC") Act of
1993, as amended. The shares were issued in February 2000.
Also in January 2000, the Company offered 239,500 shares of its common
stock in a private placement for $119,750. Management of the Company
believes the offering is exempt from registration with the SEC under
Regulation D of the 1993 Act, as amended. The shares were issued in
February 2000.
During February 2000, the Company offered 1,335,000 units, consisting
of one share of common stock priced at $1.00 per share and one warrant
for the purchase of one share of common stock at $2.00 per share
exercisable until February 15, 2001. Management of the Company believes
the offering is exempt from registration with the SEC under Regulation
D of the 1993 Act, as amended. As of March 17, 2000, the Company had
received an aggregate of $1,335,000 from this offering.
The Company authorized a 10% stock dividend to stockholders of record
as of January 31, 2000. The stock dividends are expected to be issued
on March 30, 2000.
F-15
<PAGE>
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective March 26, 1999, the Company engaged Timothy L. Steers, Certified
Public Accountant, LLC from Portland, Oregon, as its independent auditors for
the fiscal year ended December 31, 1998 to replace the firm of J. Paul Kenote,
CPA, P.C., who discontinued offering auditing services. The decision to change
accountants was approved by the Board of Directors of the Company.
The reports of J. Paul Kenote, CPA, P.C. on the Company's financial statements
for the fiscal years ended December 31, 1997 did not contain an adverse opinion
or a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. It did, however, include a paragraph on
the Company's ability to continue as a going concern.
In connection with the audit of the Company's financial statements for the
fiscal years ended December 31, 1999 and 1998, there were no disagreements with
Timothy L. Steers, Certified Public Accountants, LLC.
The Company has authorized its prior auditors to respond fully to any inquires
from their successors.
19
<PAGE>
PART III
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 Amendment to the Annual 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 Annual
Report and the previously filed Annual Report.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and positions of the directors
and executive officers of the Company as of March 17, 2000. A summary of the
background and experience of each of these individuals is set forth after the
table.
<TABLE>
<CAPTION>
- ------------------------------------ ------- --------------------------------------- --------------------------------
Period Served as Director
NAME Age Position (1) or Executive Officer
- ------------------------------------ ------- --------------------------------------- --------------------------------
<S> <C> <C> <C>
Jan J. Olivier 59 Chairman; Chief Executive Director and Officer since
Officer; Director 4/96 (President until 1/00)
- ------------------------------------ ------- --------------------------------------- --------------------------------
C. Austin Burrell 53 President, Secretary, Chief Officer and Director
Operating Officer, Director since 1/00
- ------------------------------------ ------- --------------------------------------- --------------------------------
Dr. Claus G. J. Wagner-Bartak 61 Treasurer, Director Officer and Director
since 9/28/98
- ------------------------------------ ------- --------------------------------------- --------------------------------
Richard H. Schmidt 47 Executive Vice President Officer since 1/00,
Charitable Activities; Director Director since 2/00
- ------------------------------------ ------- --------------------------------------- --------------------------------
Wynn J. Bott 60 Chief Financial Officer Officer since 1/00
- ------------------------------------ ------- --------------------------------------- --------------------------------
Michael C. Dillon 52 Executive Vice President - Officer since 2/00
Sales
- ------------------------------------ ------- --------------------------------------- --------------------------------
Avery Martinez 43 Executive Vice President - Officer since 3/7/00
Chief Technical Officer
- ------------------------------------ ------- --------------------------------------- --------------------------------
</TABLE>
(1) The Company's directors are elected at the annual meeting of stockholders
and hold office until their successors are elected and qualified or until the
director resigns. The Company requires at least three (3) Directors which are to
be appointed annually and as needed by the Board of Directors and serve at the
pleasure of the Board.
BUSINESS EXPERIENCE:
JAN J. OLIVIER has been a Director and the President and Chief
Executive Officer of the Company since April 1996 and has served as a business
consultant to the Company since March 1995. Since 1989 and 1993, respectively,
Mr. Olivier has owned Your Choice International, Inc., a marketing consulting
company, and Cactus Consultants International, Inc., a financial consulting
firm. From April 1983 until July 1987, Mr. Olivier was the President of Olivier
Management Corp.; a NASDAQ listed company that conducted international merchant
banking activities and had offices in New York, Zurich, Miami and Seattle. Mr.
Olivier has over 30 years of national and international business experience and
has served on the boards of directors of several companies.
20
<PAGE>
C. AUSTIN BURRELL was appointed Director, President, Secretary and
Chief Operating Officer in January 2000. Mr. Burrell is an experienced
technology and management generalist who has worked with over 150 companies
since 1983. His experience information sciences, the Internet, health care and
pharmaceuticals, global finance and banking, development stage funding,
marketing, strategic planning and more. His experience on Wall Street covered a
wide range of assignments, including Investment Banking, Pension Fund
Consulting, Strategic Planning, Research, Due Diligence, Product Development,
Information and Technology Consulting, Quantitative Analysis, Derivatives,
Indexes and more. Mr. Burrell's extensive knowledge and experience base is
focused on insuring strong leadership in the areas of product development,
corporate finance, and administration.
DR. CLAUS G.J. WAGNER-BARTAK has been a Director and Treasurer of the
Company since September 28, 1998. Dr. Wagner-Bartak is listed in the Canadian
"Who's Who" as an accomplished, internationally-recognized scientist and
business executive since 1983. He held positions with B.A. Technologies Inc. as
Director and Chief Operating Officer (previously President and CEO), Energy
Dynamics Inc. as President, and with Manco Information Technology, Inc. as
Managing Director, and as Director with CasinoBuilders.com, in addition to
multiple career executive positions in the business arena. Dr. Wagner-Bartak has
received international recognition and acclaim for his scientific leadership.
Personal achievement awards include the Engineering Medal of the Professional
Engineering Association of Ontario, multiple awards from NASA including the
hallmark Public Service Medal, and the prestigious Dauphin Award.
RICHARD H. SCHMIDT joined the Company as Executive Vice President of
Charitable Activities in January 2000. In February 2000, Mr. Schmidt was
appointed Director to the Company. During the past three years, Mr. Schmidt was
owner and President of a service company called Valley Tree Services, Inc. Prior
to and simultaneously to that time, Mr. Schmidt worked as the President of a
not-for-profit company called About My Father's Business, Inc. working various
projects throughout several nations. Mr. Schmidt is an internationally
recognized humanitarian with more than twenty years of experience in managing
leadership and business development for both "for profit" and "not for profit"
Section 501(c) 3 corporations. Mr. Schmidt has provided assistance to those
entities including strategic planning, marketing, leadership training, and fund
raising, in addition to leading various multi-million dollar relief efforts in
2nd and 3rd World countries. Mr. Schmidt's worldwide network of contacts and his
proven business management skills will be utilized by WFFT to benefit provider
corporations in their efforts to obtain maximum value from their targeted
charitable giving activities.
WYNN J. BOTT became Chief Financial Officer to the Company on January
14, 2000. Mr. Bott has owned his own consulting business for over 20 years, Wynn
Bott Consulting, CPA. Wynn is a financial professional, with more than
twenty-five years of corporate, tax, consulting and public accounting
experience. Mr. Bott has extensive experience with the accounting requirements
imposed on public companies, which he has assisted throughout his career. In
addition, he is familiar with the software and hardware requirements necessary
to support mandated record keeping and reporting for Federal and State agencies.
Mr. Bott will act as the Chief Administrative Officer in addition to his duties
as the Chief Financial Officer. Mr. Bott holds a CPA and obtained his MBA from
Arizona State University.
MICHAEL C. DILLON - On 2/24/00, Mike announced he will be joining WFFT
as Executive Vice President - Sales and Marketing. Mr. Dillon has a record of
performance in high technology systems marketing, sales, service/support and
operations. He holds experience in commercial and technical markets and all
domestic and international distribution channels including direct, VAR,
distributor, OEM, telemarketing, catalog, national accounts and the Internet.
Most recently, Mr. Dillon was the Co-founder and VP of Worldwide Sales and
Marketing for PrintConnect.net, a Business-to-Business E-Commerce company
providing Internet solutions for the printing and publishing industry. Prior to
founding PrintConnect.net, Mr. Dillon was the Senior Vice President of Worldwide
Sales and Marketing at PrePress Solutions, a manufacturer of high-speed network
solutions for the digital publishing industry. As the #2 executive in this
company of over 200 employees, Mr. Dillon was involved in all aspects of
operations. Mr. Dillon has also held a variety of Sales and Marketing positions
at various high technology corporations, including Delphax Systems, Apollo
Computer, Digital Equipment Corporation, and Honeywell Information Systems. Mr.
Dillon holds an Engineering degree from the University of Toronto, and has
received formal Sales, Marketing and Management training at Digital, Honeywell,
and through the University of Southern California's Executive Program.
21
<PAGE>
AVERY MARTINEZ - In March 2000, Mr. Martinez announced he will be
joining WFFT as Executive Vice President, Chief Technology Officer. For the past
five years, Mr. Martinez previously served as Chief Technology Officer and
co-founder of Internet Crossing. Prior to Internet Crossing, Mr. Martinez served
as a technology integrator with various companies, including National Business
Group and Computer Business Systems, Inc. Mr. Martinez has been recognized by
Microsoft as Solution Partner of the Year in 1996 and currently serves on the
Cisco Business Advisory Council. Mr. Martinez has developed the network
infrastructure, engine design, and many proprietary components of the company's
properties. He has 20 years experience in technology with a B.S. in Business.
Mr. Martinez attended UCLA and Long Beach State University. Prior to joining the
company, Martinez has partnered with Deloitte & Touche, Hewlett Packard,
Microsoft and Cisco on enterprise network projects.
MANAGEMENT CONSULTANTS
1. On a contract/leasing basis, the Company has retained Creative Business
Resources for a fee of 2% of gross wages paid monthly for the period
beginning January 24, 2000, on an at-will basis. The services include the
assistance of several technical individuals to search the Internet for
companies and or technologies that would be compatible with the Company's
goals of becoming an operational company in the shortest possible time
frame.
2. The Company has contracted with Jan J. Olivier his management services to
the Company including his duties as President (until Jan-00), Chief
Executive Officer and Manager of the Company. The Management Services
contract was entered on May 1, 1996, and on April 30, 1999, it was renewed
to May 1, 2002. The Company pays Cactus Consultants Inc. ("CCI") directly
for Mr. Olivier's management services for the fee of $180,000 per year, or
$15,000 per month. In addition, it was agreed that an additional 10% or
$1,500 be paid to CCI for the payroll burden taken on by CCI as a result of
the consulting status. CCI is wholly owned by Jan J. Olivier. In addition,
the Company has contracted with CCI for the public relation and investor
relation activities. The Company has agreed to pay CCI $15,000 per month,
or $180,000 annually for three years beginning August 31, 1998 expiring
August 31, 2001. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in
Part III, Item 12 and "EXECUTIVE COMPENSATION" in Part III, Item 10.
3. On January 3, 2000, the Company contracted with Junyor Investments Holdings
Corp., a public relations company out of Canada, to perform the all the
international investor relations services as well as the administrative
duties, for a monthly fee of $8,000 plus reimbursement of all out-of-pocket
expenses. The contract is for 12 months, automatically renewing for another
12-month term unless written notice of termination of the agreement is
received within 30 days prior to renewal.
Beginning as early as December 1999, the Company hired a majority of their key
management team on a contract/consultant basis until such time that payroll
could be established. During March 2000, the Company payroll was established for
the Company and all such individuals, except Mr. Jan Olivier, have become
employees of the Company.
OTHER COMMITTEES:
During the first quarter of 2000, two committees were established to assist the
Company on a going-forward basis:
1) Advisory Board
--------------
SCOTT DAHNE was appointed Chairman of the Advisory Board, where he will
influence WFFT's corporate direction at both the strategic and operational
level. Scott is an accomplished business-consulting professional with over 20
years experience in the areas of Business Systems Integration, Engineering, and
General Business Management. In addition, Scott has "Big Six" consulting
experience, having practiced in the Business Systems Consulting Group at
Deloitte & Touche, LLP. specializing in the application of business
reengineering methods and information technology to help businesses grow and
prosper in their selected markets. Prior to his experience at Deloitte & Touche,
Scott spent 2 years as a Research Fellow at the Logistics Management Institute
consulting to the Office of the Secretary of Defense in systems and
manufacturing issues. Scott also worked with Westinghouse Electric Corporation,
Litton Industries, and Texas Instruments, where he developed, planned, organized
and implemented large, multi-faceted technical projects in manufacturing and
advanced information systems technology. Scott holds an MBA from the University
of Phoenix, an M.S. in Technical Management from Johns Hopkins University and a
B.A. in Chemistry from Western Maryland College.
22
<PAGE>
2) Business & Technology Advisors
------------------------------
Walter and Russell Williams will jointly advise WFFT in the areas of Internet
security, e-commerce development, and emerging Internet technologies. For the
past 20 years, these brothers have been developing technology and software
applications for startup companies. Most recently, the brothers have teamed to
found Walrus Corporation, an Arizona company developing interactive Internet
applications.
RUSSELL WILLIAMS - In 1984 Russell started WIT Enterprises Inc., a technology
consulting company. WIT provided advanced technical consulting services in the
areas of product development and engineering to many large clients. These
included The Toro Company, Calsonic International, Kwickset Lock Company, Weiser
Lock, Schlage Lock, and Ford Aerospace. Following his tenure with WIT, Russell
joined Calsonic International as the US-based Manager of Engineering Computer
Systems. At Calsonic, Russell coordinated all CAD systems and office automation
between the US engineering offices in five states. Currently Russell serves as
the President of Interactive Development Systems, Inc. (IDS), an Arizona
company, which he founded in 1994. IDS provides engineering design and
prototyping services for automotive and consumer products, specializing in rapid
product development and prototype systems.
WALTER WILLIAMS - Walter Williams has served as the Executive Vice President of
Technology for Statim Technologies and as the VP of Development for MEBSoft
Computer Corporation. Currently, Walter is the Director of Research and
Development for the Institute for Fair Elections, where he has personally
developed software to detect election fraud. His work with the Institute has
been featured in the Wall Street Journal, Readers Digest, LA Times, 60 Minutes,
Washington Journal, and many other regional and national news broadcasts. Mr.
Williams brings extensive experience in executive management of technologies for
startup companies.
ALAN LIKER - Mr. Liker will provide legal stability and expertise as WFFT moves
into rapidly expanding regional, national and international markets. Recognized
as an expert in international law, corporate governance, and taxation, Mr. Liker
recently served on the Board of Directors of Budget Rent-A-Car Worldwide. He has
also served as the Principal Advisor for the Shaklee Family, and currently
serves on the US Parent Board of Herbalife, as well as six other foreign
subsidiaries, including Japan. In addition, Mr. Liker was a principal at Xerox
Development Corporation, where he had a major responsibility for the FCC's
adoption of the landmark X-Ten rulemaking, covering document distribution, data
transmission, and teleconferencing.
In addition to his experience as a Law professor at Harvard Law School and UCLA,
he taught law at USC, and has been admitted to practice law in both New York and
California. Mr. Liker is a founding member of the Pacific Rim Law Group, where
he was instrumental in the facilitation of expansion efforts for many
multinational corporations.
23
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the period beginning January 1997 through the fiscal year ending December
31, 1999, the following persons, who were directors, officers or beneficial
owners of more than 10% of common stock of the Company, that failed to file, or
failed to file on a timely basis, reports required by Section 16(a) of the
Securities Exchange Act of 1934:
<TABLE>
<CAPTION>
FILING DATE TO DATE
NAME POSITION STATUS WITH CO. STATUS FORMS BE FILED FILED
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jan J. Olivier Director & Officer Current Filed late 4 A 3/16/00
A. Richard Bullock Director & Officer Resigned 6/98 Filed late 4 A 3/22/00
Raymond TripHahn Director & Officer Resigned 12/99 Filed late 4 A 3/21/00
Dr. Claus W. Bartak Director & Officer Current Filed late 3 2/25/00 3/27/00
Hawkshead Securities LTD More than 10% of Stock Shareholder Filed late 3 A 3/17/00
Keswick Securities More than 10% of Stock Shareholder Filed late 3 A 3/17/00
Puffin Corporation More than 10% of Stock Shareholder Filed late 3 A 3/17/00
Ravensworth Securities Corp More than 10% of Stock Shareholder Filed late 3 A 3/17/00
Appointed Subsequent to December 31, 1999:
Wynn J. Bott Officer Appointed Jan-00 Filed late 3 2/25/00 3/14/00
C. Austin Burrell Director & Officer Appointed Jan-00 Filed late 3 3/2/00 3/14/00
Richard H Schmidt Director & Officer Appointed Jan-00 Filed late 3 3/2/00 3/14/00
</TABLE>
24
<PAGE>
A= Filer inadvertently failed to file required forms timely. The Form 3 or 4
filed includes all transactions which were previously unreported throughout the
year. A Form 5 was required to be filed and was not. However, all transactions
required to be filed on the Form 5 have now been included on Form's 3 and 4,
respectively.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the persons who
served in the capacity of president during the three most recently completed
fiscal years. The Company did not have any executive officers whose total annual
salary and bonus exceeded $100,000 for services rendered in all capacities to
the Company during the fiscal years from inception to year ended December 31,
1999, except for its President/CEO/Director in 1997, 1998 and 1999 (see (1)
below).
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation Awards
-------------------------
---------------
Salary/
Bonus/ Other Annual Restricted
Name and Principal Position Year Directors Compensation Stock Award(s)
Fee
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JAN J. OLIVIER
(various positions held beginning 2/96 to current)
1999 $19,450 $500,000 None
Director, President, Chief Executive Officer(1) 1998 $24,500 $100,000 None
1997 None $390,848 None
----------------------------------------------------------------------------------------------------
A. RICHARD BULLOCK
(various positions held from 2/95 - 6/98)
1999 N/A N/A N/A
Director, Secretary, Treasurer (2) 1998 None None None
1997 None $22,987 None
----------------------------------------------------------------------------------------------------
RAY TRIPHAHN
(positions held from 2/95 - 1/00)
1999 None $84,600 None
Director, Vice President, Secretary (3) 1998 None None None
1997 None $70,000 None
----------------------------------------------------------------------------------------------------
DR. CLAUS W. BARTAK
(positions held 2/98 to current)
1999 None $56,400 None
Director, Treasurer (4) 1998 None None None
1997 N/A N/A N/A
----------------------------------------------------------------------------------------------------
</TABLE>
The transfer of shares issued to directors and officers is restricted
pursuant to applicable securities laws, although some recipients have
registration rights in respect of their shares, as noted herein. The
aggregate number and dollar value (based on closing price on the date
specified) of stock holdings of officers and directors as of March 17, 2000
were 3,776,625 shares and $36,350,016, respectively. There is no set policy
for the Directors to receive compensation for services as a member of the
Board of Directors, however, from time to time, the Company will issue
shares for such services. The Company reappointed several new Officers and
Directors of the Company in January and February 2000 (see "NEW
OFFICERS/DIRECTOR" below).
(1) In April 1996, Mr. Jan J. Olivier was appointed to the office of President,
Chief Executive Officer and Director, superseding Mr. Clayton M. Harman.
Mr. Jan J. Olivier is not an employee of the Company. All compensation paid
to him was and is for his consulting services and is paid to Cactus
Consultants International, Inc. ("CCI"), a company wholly owned by Mr.
Olivier. His Management Consultant Agreement, which was entered on May 1,
1996, and on April 30, 1999, was renewed to May 1, 2002, states for the
Company to pay him a consulting fee of $15,000 per month. In addition, he
is to receive 1% of the Company's gross sales payable quarterly, 1,667
Stock Options to purchase at $0.445 per share, with a reload of 833 Options
at the same price (under the 1996 Stock Plan, see "STOCK OPTIONS" below),
and he is reimbursed for all reasonable and necessary business expenses
incurred in the discharge of his consulting duties. The Company agreed to
pay Mr. Olivier an additional 10% of the $15,000 per month for the payroll
tax burden associated with his compensation.
25
<PAGE>
In 1998, the Company agreed to a public relations monthly fee of $15,000
for services performed by CCI, expiring on August 31, 2001. See Part III,
Item 9., "DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - MANAGEMENT
CONSULTANTS".
The Company has been accruing the aforementioned expenses monthly and in
lieu of payment in cash, the Company agreed to the following stock
transfers to satisfy portions of the liability:
o On November 5, 1997, CCI received 21,500 shares of common stock (of
the Company in exchange for Mr. Olivier's accrued services totaling
$43,000.
o On December 31, 1997, CCI received 86,962 shares of common stock of
the Company in exchange for Mr. Olivier's accrued services totaling
$347,848.
o On January 17, 1998, CCI received 5,000,000 shares of common stock of
the Company in exchange for the accrued liability incurred for
services performed for the Company. The Company reduced the debt owed
CCI by $100,000 in exchange for these shares.
o On November 26, 1999, the Board of Directors agreed to issue CCI
2,000,000 shares of common stock at $0.25 per share, the closing price
on November 26, 1999, or $500,000. The shares were applied to the
accrued balance through November 30, 1999 ($651,260), for services
rendered.
During 1999 and 1998, the Company paid cash of $19,450 and $24,500
respectively, to CCI for prior services. The balance due CCI at December
31,1999 is $189,475.
(2) On December 31, 1997, A. Richard Bullock received 6,747 shares of common
stock of the Company in exchange for his Director and Officer services
incurred during 1997. The shares were received as compensation for his
services performed as Director and Officer of the Company, and was recorded
at the value of $22,987 or $4.00 per share. These shares are held in
corporate or trust names wholly owned by Mr. Bullock (2,750 shares in
Braderlux.A.R.L. and 2997 in Quidquia Management Corp). Mr. Bullock
resigned as Director and Officer of the Company in June 1998.
(3) On December 31, 1997, Ray TripHahn received 5,375 shares of common stock of
the Company in exchange for his Director and Officer services incurred
during 1997, of which 375 of the shares received were stock options
exercised under the 1996 Stock Incentive Plan and recorded at a value of
$50,000. The balance of 5,000 shares was for services performed for his
Director and Officer positions, and was recorded at $20,000. Mr. TripHahn
resigned as Director and Officer of the Company on January 23, 2000. During
December 1999, the Company agreed to issue Mr. TripHahn 150,000 shares of
common stock valued $0.564 per share, the low bid price on the date of the
Treasury report, or $84,600 for his services performed during 1999. At
December 31, 1999, Mr. TripHahn has 355,375 shares of which 200,000 shares
were acquired in a transaction unrelated to the Company.
(4) During December 1999, the Company agreed to issue Dr. Claus G. J.
Wagner-Bartak 100,000 shares of common stock valued $0.564 per share, the
low bid price on the date of the Treasury report, or $56,400 for his
services performed during 1999.
STOCK OPTION PLANS
The Company has two Stock Option Plans currently in place:
1) In 1997, the Company adopted a Retainer Stock Plan for Non-Employees,
Directors and Consultants ("1997 Stock Plan"). The purposes of the Plan is
to:
a) enable the Company to promote the interests of the Company and its
shareholders by attracting and retaining non-employee Directors and
Consultants capable of furthering the future success of the Company
and
b) by aligning their economic interests more closely with those of the
Company's shareholders, by paying their retainer or fees in the form
of shares of the Company's common stock.
Under this 1997 Stock Plan, the Company has registered on Form S-8 a total
of 5,000,000 shares of common stock. Each stock option shall expire on the
earlier of the date provided by the option term or the date which is 10
years and one day after the date of the grant. The Option price per share
for any Stock Option awarded shall not be less than the greater of par
value or the Fair Market Value of the share of common stock on the date the
Stock Option is awarded. No one person shall receive more than 500,000
Options in any calendar year.
26
<PAGE>
During 1998, the Company issued 3,000,000 shares of common stock from this
1997 Stock Plan to consultants of the Company for prior services performed
for the Company. See Part I, Item 5 "MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND RELATED OTHER STOCKHOLDER MATTERS". As of
December 31, 1999, there were 2,000,000 shares available under this 1997
Stock Plan.
2) Effective August 29, 1996, the Company adopted a Stock Incentive Plan for
Employees, Directors and Consultants of the Company ("1996 Stock Incentive
Plan"). The purpose of this Stock Incentive Plan is to:
o attract and retain the best available personnel for positions of
responsibility within the Company,
o provide additional incentives to Employees of the Company,
o provide "Directors", "Consultants" and "Advisors" of the Company with
an opportunity to acquire a proprietary interest in the Company to
encourage their continued provision of services to the Company, and to
provide such persons with incentives and rewards for superior
performance more directly linked to the profitability of the Company's
business and increases in shareholder value, and
o generally, to promote the success of the Company's business and the
interests of the Company and all of its stockholders, through the
grant of options to purchase shares of the Company's common stock and
other incentives. No Option shall be granted after August 29, 2006.
The term of the Option shall be five years, and in no way exceed ten
years from the Date of Grant. The Option price shall be no less than
100% of the Fair Market Value ("FMV") per share on the Date of Grant,
and for a Nonqualified Stock Option, no less than 85% of the FMV on
the Date of Grant. If at the time of Grant a Participant is a 10% or
more Stockholders, the Option price shall be no less than 110% of the
FMV per share on the Date of Grant. The maximum number of shares of
common stock, which may, in the aggregate, be optioned and sold or
otherwise awarded under the plan, is 8,667.
Upon the renewal of Jan J. Olivier Management Consulting Agreement in April
1999, the Company agreed to the renewal of 1,667 stock options and a reload
of 833 options at a price of $0.445 per share, (see "EXECUTIVE
COMPENSATION" in this section above), which were issued pursuant to the
Company's 1996 Stock Incentive Plan. These options have not been exercised.
At December 31, 1999, the balance of shares available under the 1996 Stock
Incentive Plan is 5,792.
NEW OFFICERS/DIRECTORS
In an effort to entice certain Officers to work for the Company, in December
1999, the Company agreed to the following:
o C. Austin Burrell: 1,000,000 shares of common stock valued at $564,000
and calculated by using the closing bid price of $0.564 on the date
the Treasury Order was issued. On January 23, 2000, Mr. C. Austin
Burrell joined the Company as President, Secretary and Chief Operating
Officer, and was elected as a Director of the Company. Mr. Burrell
also receives a salary for his services.
o Wynn J. Bott: 350,000 shares of common stock valued at $197,400 and
calculated by using the closing bid price of $0.564 on the date of the
Treasury Order was issued. On January 14, 2000, Mr. Wynn Bott joined
the Company as an Officer in the capacity of Chief Financial Officer.
In addition, Mr. Bott receives a salary for his services.
o Richard H. Schmidt: 250,000 shares of common stock valued at $141,000
and calculated by using the closing bid price of $0.564 on the date
the Treasury Order was issued. In January 2000, Mr. Richard H. Schmidt
joined the Company as an Officer in the capacity of Executive Vice
President, Charitable Activities. In February 2000, Mr. Schmidt was
appointed a Director to the Company.
See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the
next section Item 11, Part III.
27
<PAGE>
Subsequent to the year ending December 31, 1999, the Company added the following
Officers and/or Directors:
o In February 2000, Mr. Michael C. Dillon joined the Company as an
Officer in the capacity of Executive Vice President of Sales. Mr.
Dillon receives a salary for his services in addition to a certain
number of common stock undetermined at this time.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of
common stock of the Company on March 17, 2000 by each director and executive
officer, by all directors and executive officers as a group and by all persons
known by the Company to be the beneficial owners of more than five percent (5%)
of the Company's common stock.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Shares of Common Stock Beneficially owned
Common Stock (1)
- -----------------------------------------------------------------------------------------------------
Number of Shares Percent of
Name and Address Beneficially held Ownership as of
March 17, 2000
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Jan J. Olivier (2) 2,076,625 11.9%
- -----------------------------------------------------------------------------------------------------
C. Austin Burrell (3) 1,000,000 5.8%
- -----------------------------------------------------------------------------------------------------
Dr. Claus W. Bartak (4) 100,000 .6%
- -----------------------------------------------------------------------------------------------------
Richard H. Schmidt (5) 250,000 1.4%
- -----------------------------------------------------------------------------------------------------
Wynn J. Bott (6) 350,000 2.0%
- -----------------------------------------------------------------------------------------------------
Hawkshead Securities 990,000 5.7%
- -----------------------------------------------------------------------------------------------------
Keswick Securities 990,000 5.7%
- -----------------------------------------------------------------------------------------------------
Puffin Corp. 990,000 5.7%
- -----------------------------------------------------------------------------------------------------
Ravensworth Securities Corp. 990,000 5.7%
- -----------------------------------------------------------------------------------------------------
Cactus Consultants International, Inc. (2) 2,076,604 11.9%
- -----------------------------------------------------------------------------------------------------
All directors and executive officers as a group 3,676,625 21.3%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) The percentage calculation for each person or group, reflects the addition
to the number of shares beneficially owned by such person or group and to
the aggregate outstanding shares, the number of shares that the person or
group involved has the right to acquire within 60 days pursuant to options,
warrants, conversion privileges or other rights.
(2) This total includes 20 shares held by Jan J. Olivier, 2,076,604 shares held
by Cactus Consultants International, Inc., of which Jan J. Olivier is the
controlling person, and one (1) share held by Ruth Olivier (Ruth Olivier is
Jan J. Olivier's spouse).
28
<PAGE>
(3) C. Austin Burrell was appointed President, Chief Operating Officer,
Secretary and Director on January 23, 2000.
(4) Dr. Claus W. Bartak was appointed Treasurer and Director in September 1998.
(5) Richard H. Schmidt was appointed to Executive Vice President Charitable
Activities in January 2000 and Director in February 2000.
(6) Wynn J. Bott was appointed to Chief Financial Officer on January 14, 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999 and 1998, the Company issued the following shares of common stock to
current or prior Officers and Directors of the Company, relatives of those
Officers and Directors and other related parties, as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
RELATIONSHIP TO CURRETS DATE NO. OF SHARES DOLLAR
NAME THE COMPANY STATUS/RELATIONSHIP REF. ISSUED ISSUED VALUE *
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jan J. Olivier Officer & Director Current (a) 3/4/98 20 $0.02
Ruth Olivier N/A Jan Olivier's Wife 3/4/98 1 $0.001
-- ------
Total 21 $0.021
-------------------------------------------------------------------------------------------------------------
Ray TripHahn Director Prior (b) 12/31/97 5,375 $70,000
A Le Roy Anderson Trust N/A Trust FBO Ray TripHahn
-------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Company valued these shares at par value of $0.001. The shares were
issued for compensation for services performed as an Officer or Director
of the Company, or services performed as an independent consultant to the
Company.
(b) The shares were issued for compensation for services performed as an
Officer or Director of the Company, or services performed as an
independent consultant to the Company. See Item 10 "EXECUTIVE
COMPENSATION" #3, for a more specific description of share transactions
to the Officer and Director of the Company.
Jan J. Olivier, through his wholly owned company, Cactus Consulting
International, Inc. ("CCI"), provided substantially all of the Company's
corporate management and administrative services during the years ended December
31, 1999 and 1998, for which the Company accrued to CCI $441,480 and $342,820,
respectively and paid cash to CCI of $19,450 in 1999 and $94,600 in 1998,
respectively. The accounts payable balances on December 31, 1999 and 1998 were
$189,475 and $256,439 respectively. On January 17, 1998, CCI received 5,000,000
shares of common stock of the Company in exchange for the accrued liability
incurred for services performed for the Company. The Company reduced the debt
owed CCI by $100,000 in exchange for these shares. On November 26, 1999, the
Company agreed to issue CCI 2,000,000 shares of common stock at $0.25 per share,
the low bid price on the date of the Treasury report, or $500,000. The shares
were issued for prior services accrued under the Management Consulting
agreement. The Company's President, Jan J. Olivier, controls CCI as owner of the
company and may be considered a promoter of the Company.
29
<PAGE>
ITEM 13. EXHIBITS AND REPORTS
The Company filed an 8K on February 17, 2000 regarding the change of address of
the corporate offices of the registrant and the change in company name from
Ranes International Holding, Inc. to WhatsForFree Inc.
Other Exhibits:
3.1 Articles of Incorporation of Registrant, including all amendments. *
3.2 By-Laws of Registrant, as amended to date. *
16 Letter on change in certifying accounting, J. Paul Kenote, Certified
Public Accountant, P.C. ****
23(a) Consent of J. Paul Kenote, Certified Public Accountant, P.C. **
23(b) Consent of Timothy L. Steers, CPA, LLC.**
27 Financial Data Schedule **
================================================================================
* Incorporated by reference from the Registrant's Registration Statement
filed on June 4, 1996.
** Filed with this registration statement.
*** Incorporated by reference from the Registrant's prior 1998 10K-SB filing on
November 22, 1999.
**** Incorporated by reference from the Registrant's prior 1998 10KSB Amended on
November 24, 1999.
30
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: March 27, 2000 WhatsForFree Technologies Inc.
(Formerly Ranes International Holding, Inc.).
(Registrant)
By: /s/ Jan J. Olivier
------------------------------------------
Jan J. Olivier
Chief Executive Officer, Director
By: /s/ Wynn J Bott
------------------------------------------
Wynn J. Bott
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
Chairman of the Board and Chief Executive
/s/ Jan J. Olivier Officer March 27, 2000
--------------------------
Jan J. Olivier
President, Secretary, Chief Operating Officer
/s/ C. Austin Burrell and Director March 27, 2000
- -----------------------------
C. Austin Burrell
/s/ Dr. Clause W. Wagner-Bartak Treasurer and Director March 27, 2000
- -------------------------------
Dr. Clause W. Wagner-Bartak
/s/ Richard H. Schmidt Executive Vice President, Charitable Activities March 27, 2000
- ----------------------------- and Director
Richard H. Schmidt
</TABLE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Form 10-KSB of WhatsForFree
Technologies, Inc. (formerly Ranes International Holding, Inc.) (A Development
Stage Enterprise) of our report dated March 17, 2000, relating to the balance
sheets of WhatsForFree Technologies, Inc. (formerly Ranes International Holding,
Inc.) (A Development Stage Enterprise) as of December 31, 1999 and the related
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period then ended, and for the cumulative period from
February 15, 1990 (inception) through December 31, 1999.
We also consent to the addition of the financial statement schedule, listed it
the accompanying Index to Financial Statements and Financial Statement Schedule,
to the financial statements covered by our report dated March 17, 2000.
/s/ J. Paul Kenote, CPA
- -----------------------
J. Paul Kenote, CPA, P.C.
Portland, Oregon
March 17, 2000
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference in this Form 10-KSB of WhatsForFree
Technologies, Inc. (formerly Ranes International Holding, Inc.) (A Development
Stage Enterprise) of our report dated March 17, 2000, relating to the balance
sheets of WhatsForFree Technologies, Inc. (formerly Ranes International Holding,
Inc.) (A Development Stage Enterprise) as of December 31, 1999 and the related
statement of operations, stockholders' equity, and cash flows for each of the
three years in the period then ended, and for the cumulative period from
February 15, 1990 (inception) through December 31, 1999.
We also consent to the addition of the financial statement data schedule, listed
in the accompanying Index to Financial Statements and Financial Statement
Schedule, to the financial statements covered by our report dated March 17,
2000.
/s/ Timothy L. Steers, CPA, LLC
TIMOTHY L. STEERS
CERTIFIED PUBLIC ACCOUNTANT, LLC
Portland, Oregon
March 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,435
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,935
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 731,735
<CURRENT-LIABILITIES> 45,797
<BONDS> 0
0
0
<COMMON> 13,777
<OTHER-SE> 6,656,055
<TOTAL-LIABILITY-AND-EQUITY> 731,735
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,686,496
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,686,496)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,686,496)
<EPS-BASIC> (.195)
<EPS-DILUTED> (.195)
</TABLE>
