UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: May 2, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period __________________________to__________________________
Commission File Number: 0-25002
WHAT A WORLD!, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 59-3200879
------------------------------ ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
P.O. Box 20125
TAMPA, FLORIDA 33622
-------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (813) 577-9366
N/A
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(Former Name, Former Address, and Former Fiscal Year, if Changed Since
Last Report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At June 12, 1998, there were
2,118,125 shares outstanding of common stock, $.01 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
<PAGE>
WHAT A WORLD!, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheets - January 31, 1998 and May 2, 1998 .............. 3
Condensed Statements of Operations for the Thirteen Weeks Ended
May 3, 1997 and May 2, 1998 .............................................. 4
Condensed Statements of Cash Flows for the Thirteen Weeks Ended
May 3, 1997 and May 2, 1998 .............................................. 5
Notes to Condensed Financial Statements .................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................................. 8
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K ................................ 12
SIGNATURES ............................................................... 13
2
<PAGE>
<TABLE>
<CAPTION>
WHAT A WORLD!, INC.
CONDENSED BALANCE SHEETS
JANUARY 31, MAY 2,
1998 1998
ASSETS ----------- ------------
------ (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 130,713 $ 74,315
Certificate of deposit -0- -0-
Inventories -0- -0-
Prepaid expenses and other current assets 6,873 7,400
----------- -----------
Total current assets 137,586 81,715
PROPERTY AND EQUIPMENT, net 2,500 2,125
OTHER ASSETS -0- -0-
----------- -----------
Total assets $ 140,086 $ 83,840
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 30,000 -0-
Accrued expenses 60,950 $ 51,450
Current maturities of capital lease obligations 1,518 1,556
----------- -----------
Total current liabilities 92,468 53,006
CAPITAL LEASE OBLIGATIONS 1,849 1,445
STOCKHOLDERS' EQUITY:
Common stock 21,181 21,181
Additional paid-in capital 4,538,782 4,538,782
Accumulated deficit (4,514,194) (4,530,574)
----------- -----------
Total stockholders' equity 45,769 29,389
----------- -----------
Total liabilities and stockholders' equity $ 140,086 $ 83,840
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
WHAT A WORLD!, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
13 WEEKS ENDED
MAY 3, 1997 MAY 2, 1998
----------- -----------
CONTINUING OPERATIONS:
General and administrative expenses $ 38,975 $ 16,380
----------- -----------
Loss from continuing operations (38,975) (16,380)
DISCONTINUED OPERATIONS
Loss from discontinued operations (405,642) -0-
Loss on disposal of assets (673,411) -0-
----------- -----------
NET LOSS $(1,118,028) $ (16,380)
=========== ===========
Net loss from continuing operations per weighted
average common and common equivalent share -
basic and diluted $ (.02) $ (.01)
Net loss from discontinued operations per
weighted average common and common equivalent
share - basic and diluted (.19) N/A
Net loss on disposal of assets per weighted
average common and common equivalent share -
basic and diluted (.32) N/A
Net loss per weighted average common and common
equivalent share - basic and diluted $ (.53) $ (.01)
=========== ===========
Weighted average common and common equivalent
shares outstanding 2,118,125 2,118,125
The accompanying notes are an integral part of these statements.
4
<PAGE>
<TABLE>
<CAPTION>
WHAT A WORLD!, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
13 WEEKS ENDED
MAY 3, 1997 MAY 2, 1998
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,118,028) $ (16,380)
Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities:
Depreciation and amortization 33,054 375
Loss on disposal of assets 673,411
Changes in operating assets and liabilities-
Decrease in inventories 198,015 -0-
Decrease (increase) in prepaid expenses and
other current assets 35,547 (527)
Decrease in other assets -0- -0-
Decrease in accounts payable and accrued (321,907) (39,500)
expenses
Decrease in deferred rent -0- -0-
----------- ---------
Net cash and cash equivalents (used in)
operating activities (499,908) (56,032)
INVESTING ACTIVITIES:
Proceeds from Sale Agreement 517,795 -0-
----------- ---------
Net cash provided by investing activities 517,795 -0-
FINANCING ACTIVITIES:
Payments made on capital lease obligations (16,189) (366)
----------- ---------
Net cash and cash equivalents used in
financing activities (16,189) (366)
----------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 1,698 (56,398)
CASH AND CASH EQUIVALENTS, beginning of period 1,294,189 130,713
----------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 1,295,887 $ 74,315
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 6,176 $ 110
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
WHAT A WORLD!, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MAY 2, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying unaudited condensed interim financial statements of What A
World!, Inc. (the "Company") have been prepared in accordance with the
instructions to Form 10-QSB and do not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended January 31, 1998,
which are included in the Company's Annual Report on Form 10-KSB filed on May
18, 1998 as amended by the Company's Form 10-KSB/A (Amendment No. 1) as filed on
May 28, 1998.
FISCAL YEAR
The Company's Fiscal Year ends on the Saturday closest to January 31.
NET LOSS PER WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARE
Net loss per weighted average common and common equivalent share is computed by
dividing net loss by the weighted average number of shares of common stock
outstanding and dilutive common equivalent shares from stock options and
warrants using the treasury stock method.
2. 1994 STOCK OPTION PLAN:
Following the approval by the Board of Directors and Stockholders of the
Company, effective May 21,1996, the 1994 Stock Option Plan (the "Stock Option
Plan") was amended to add 300,000 shares to the previously authorized 260,000
shares that were subject to options under the Stock Option Plan. The amendment
resulted in a total of 560,000 shares of common stock available to grant under
the Stock Option Plan.
As of May 2, 1998, 520,000 options were outstanding under the Stock Option Plan.
6
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3. DISCONTINUED OPERATIONS:
In February 1997, the Company's Board of Directors approved the sale of
substantially all the Company's operating assets and to discontinue the
Company's retail business. Accordingly, the Company has accounted for and
presented its financial information consistent with discontinued operations,
which considers all activity related to the support and operation of the
specialty retail business as discontinued operations following the Company's
Board of Directors' decision to approve the sale of assets.
The Company operated its chain of mall-based specialty gift retail stores until
March 10, 1997. On March 7, 1997, the Company and Natural Wonders, Inc. (the
"Buyer") entered into an Asset Purchase Agreement (the "Sale Agreement")
pursuant to which the Company agreed, subject to stockholder approval, to
transfer to the Buyer substantially all of its operating assets (including
specified inventories, fixed assets and tangible personal property, intangible
personal property and contract rights and store leases) in consideration for the
payment by buyer of $517,795 in cash, and the assumption by the buyer of certain
liabilities. In conjunction with the Sale Agreement and in order to immediately
implement the benefits of the Sale Agreement (and to reduce operating losses
which were continuing to be incurred by the Company), the Company and the Buyer
entered into an agreement, effective March 10, 1997 through the closing of the
Sale Agreement, pursuant to which the Buyer operated the Company's specialty
retail gift business.
The net losses of these operations related to the Sale for the thirteen weeks
ended May 3, 1997 are included in the condensed statements of income under
"Discontinued Operations". The net loss reflected in the condensed
statements of income includes the write-down of the assets of the retail
operation to the net realizable values and the cost of disposing these
operations. This loss on the disposal of assets is $(673,411).
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company was incorporated in July 1993 and, until May 1997, operated
as a mall-based specialty retailer of a wide assortment of products which
targeted customers having an active interest in nature, the environment,
education, wildlife, the outdoors, and science. On May 22, 1997, at a special
meeting of the Company's stockholders to vote upon the sale of substantially all
the operating assets of the Company (the "Sale") to Natural Wonders, Inc. (the
"Buyer"), the Sale was approved by more than a majority of the outstanding
shares and the closing of the Sale took place on the same day. Under the terms
of the Sale, the Buyer paid the Company $517,795 in return for substantially all
the operating assets of the Company and the Buyer assumed certain liabilities of
the Company, including liabilities relating to all the store leases. For
accounting purposes, the Sale transaction resulted in a loss on disposal of
assets for the thirteen weeks ended May 3, 1997 of $673,411.
The description contained herein of the Sale transaction is qualified in
its entirety by reference to the agreements included as exhibits to the 10-QSB
for the period ended May 3, 1997, as filed with the Securities and Exchange
Commission on June 20, 1997, and incorporated herein by reference.
The Company was organized in July 1993, opened its first store in August
1993, and until the Sale, operated twelve stores. All of the Company's twelve
stores were in operation for over one year at the consummation of the Sale.
Consummation of the Sale terminated the Company's specialty retail
operations. The Company presently has no operating business. The Company intends
to look for acquisition candidates for a new business for the Company.
Accordingly, the Company has a limited operating history upon which an
evaluation of its performance and prospects can be made.
The Company will explore any opportunities which arise in the future
which it believes are in the best interests of the Company's stockholders. Such
opportunities include selling the stock of the Company to raise capital to make
an acquisition or merging with a privately-held company. Any such acquisition
would depend on the availability of attractive acquisition candidates and the
Company's ability to finance any such acquisition. There can be no assurance any
acquisition will be accomplished.
The Company has used cash proceeds from the Sale to repay debt, fund
transactional expenses and pay ongoing general and administrative costs. The
Company intends to use the remainder of the net proceeds for general corporate
purposes and to seek acquisition candidates.
The Company's future operations are subject to various risk factors
including the following: funds available to the Company may not be adequate for
it to acquire an interest in any chosen property, business or opportunity and
there is no assurance funds will be available from any source and, if not
available, the Company will limit its operations to those that can be financed
from existing assets; any business activity the Company undertakes may require
substantial capital which may be difficult to obtain or not available in light
of the Company's financial condition; the Company presently has no business to
generate income; the Company has no operating history in any new line of
business and there can be no assurance that any future activities will be
profitable; the success of the Company will depend on the operations, financial
condition and management of the company or companies, if any, with which the
Company may merge or which it may acquire; the consummation of a business
combination may involve a
8
<PAGE>
change in officers and directors of the Company, and the issuance of securities
of the Company to stockholders of any target concern would result in substantial
dilution of present stockholders of the Company and may result in stockholders
of a target company obtaining a controlling interest in the Company; the loss of
part or of the entirety of the Company's management could have a material
adverse effect on the viability of the Company; any specific business
opportunity may involve an unproven product, technology or marketing strategy
the ultimate success of which cannot be assured; conflicts of interests may
arise with respect to business activities since directors and officers of the
Company may be affiliated with businesses which may in the future engage in
various transactions with the Company; the Company may engage outside advisors
in order to supplement the business experience of the Company's management;
management does not anticipate that the Company will pay dividends in the
foreseeable future; other entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company and
consequently the Company is at a competitive disadvantage in identifying
possible merger or acquisition candidates; there can be no assurance the Company
will be successful in identifying and evaluating suitable merger or acquisition
candidates and in concluding a transaction on terms favorable to the Company or,
if concluded, whether any transaction will result in a financial return to the
Company's stockholders; the Company has not engaged in market research to
determine that demand exists for a merger or acquisition transaction with the
Company; the Company may be unable to diversify and the Company may be subject
to economic fluctuations within a particular business or industry; the Board of
Directors has the power to issue shares of common stock, and any additional
issuance would have the effect of further reducing the percentage ownership of
existing stockholders; and the Company, in the event it engages in business
combinations which result in it holding passive investments in a number of
entities, could be subject to regulation under the Investment Company Act of
1940 and any violation of such Act would subject the Company to material adverse
consequences.
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of the factors described herein,
including, but not limited to, the factors described in the foregoing paragraph.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MAY 2, 1998 COMPARED TO THE THIRTEEN WEEKS ENDED MAY 3,
1997
CONTINUING OPERATIONS
General and administrative expenses ("G&A") decreased to approximately
$16,000 for the thirteen weeks ended May 2, 1998 (the "First Quarter of Fiscal
1998") from approximately $39,000 for the thirteen weeks ended May 3, 1997 (the
"First Quarter of Fiscal 1997"). The primary components of G&A are miscellaneous
corporate overhead expenses, including insurance, transfer agent and printing
fees, professional fees, and wages (including fringe). The decrease in G&A is
the result of the reduction of expenses following the Sale.
DISCONTINUED OPERATIONS
For purposes of accounting for the Sale and the resulting presentation
as discontinued operations, including restating the prior comparable periods,
the Company is treating all activity which related to the support and operation
of the Company's specialty retail operation as discontinued operations. The loss
from discontinued operations was $0 in the First Quarter of Fiscal 1998 as
compared to approximately $406,000 for the First Quarter of Fiscal 1997. The
primary components of discontinued operations include net sales, cost of sales,
selling expenses, certain general and administrative expenses (expenses that
ceased in conjunction with the Sale which had related to the support and
operation of the Company's specialty retail business), interest and other
income, and interest expense. Consummation of the Sale terminated the Company's
specialty retail operations. The Company presently has no operating business.
9
<PAGE>
The Company had no additional activity in regard to the disposal of
assets in the First Quarter of Fiscal 1998 as compared to a loss of
approximately $673,000 for the First Quarter of Fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing capital requirements are anticipated to be
for funding its limited operations and exploring any opportunities to effect an
acquisition, whether by merger, exchange of capital stock or other business
combination. There can be no assurance that any such transaction will be
effected. In view of the limited resources of the Company, consideration may be
given to additional equity or debt placement to fund merger and acquisition
activities as well as to fund working capital for general corporate purposes
that might be required to effectuate the Company's business objective.
The Company had working capital of approximately $29,000 and $45,000 at
May 2, 1998 and January 31, 1998, respectively. In order to fund its capital and
operating requirements, the Company had in the past been primarily dependent (i)
on cash proceeds received from loans from certain members of the Board of
Directors, from the Company's initial public offering in November 1994 (the
"Offering") and, prior thereto, from sales of equity securities to David B.
Cornstein, the Company's Chairman of the Board of Directors, David F. Miller,
the Company's current President, and Edward J. Munley, the Company's former
President, each of whom is a director and founder of the Company (collectively,
the "Original Stockholders"), and (ii) on loans from others. The Company has
used cash proceeds from the Sale to repay debt, fund transactional expenses and
pay ongoing general and administrative costs. The Company will use the remainder
of the net proceeds for general corporate purposes and to seek acquisition
candidates.
During the First Quarter of Fiscal 1998, cash decreased by approximately
$56,000 to approximately $74,000. The overall decrease in cash resulted
primarily from the Company's paying ongoing general and administrative costs,
repayment of debt, and the loss of the Company's main source of cash flow as a
result of the Company's discontinuing its retail operations. The Company repaid
approximately $400 in indebtedness during the period.
During the First Quarter of Fiscal 1997, cash increased by approximately
$2,000 to approximately $1,296,000. The overall increase in cash resulted
primarily from the Company's accounting for the receipt of the proceeds of the
Sale as if it had occurred in the First Quarter of Fiscal 1997. The Company
repaid approximately $16,000 in indebtedness during the period.
The Company currently does not maintain any lines of credit or cash
borrowings to finance its reduced capital requirements. Upon payment of
primarily all the Company's capital lease obligations, the Company terminated
its $100,000 letter-of-credit which had served as collateral for said
obligations.
During the First Quarter of Fiscal 1998, the Company did not maintain
any inventories as a result of the Company's having discontinued its retail
operations in the second quarter of 1997.
During the First Quarter of Fiscal 1997, the Company's inventories
decreased to $0 from approximately $1,207,000 at February 1, 1997. The decrease
was primarily a result of the Company`s accounting for the sale of $1,009,000 of
inventory to the Buyer in the First Quarter of Fiscal 1997.
The Company has used and expects to continue to use, to the extent
available, any remaining cash to finance its losses from its remaining limited
operations. The Company is not presently generating any cash flow to support its
current corporate overhead expense and anticipates operating at a loss for
fiscal 1998.
10
<PAGE>
The Company has no current arrangements with respect to, or sources of,
additional financing, and it cannot be anticipated that any of the officers,
directors or stockholders will provide any portion of the Company's future
financing requirements. There can be no assurance that additional financing will
be available to the Company on commercially reasonable terms, or at all. Any
inability to obtain additional financing could have a materially adverse effect
on the Company, including possibly requiring the Company to significantly
curtail, and possibly causing the Company to cease, its operations. Any equity
financing may involve substantial dilution to the interests of the Company's
then-existing stockholders. Further, there can be no assurance that, even if the
Company effectuates a business combination, the Company will achieve
profitability or positive cash flow.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 Statement re Computation of Per Share Earnings (not
required because the relevant computations can be
clearly determined from material contained in the
financial statements included herein).
27 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K:
The Company filed with the Securities and Exchange
Commission on May 14, 1998 a Current Report on Form
8-K and filed on June 9, 1998 a Current Report on
Form 8-K/A, both regarding the dismissal of Arthur
Andersen LLP as the Company's independent
accountants and the engagement of Kirkland, Russ,
Murphy, and Tapp as the Company's new independent
accountants.
12
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
What A World!, Inc.
Date: June 12, 1998 By: /s/ DAVID F. MILLER
-------------------
David F. Miller
President
(Principal Executive Officer)
Date: June 12, 1998 By: /s/ BRIAN S. LAPPIN
-------------------
Brian S. Lappin
Vice President of Finance
(Principal Financial and
Accounting Officer)
- -------------------------------------------------------------------------------
13
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 74,315
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81,715
<PP&E> 7,500
<DEPRECIATION> (5,375)
<TOTAL-ASSETS> 83,840
<CURRENT-LIABILITIES> 53,006
<BONDS> 0
0
0
<COMMON> 21,181
<OTHER-SE> 8,208
<TOTAL-LIABILITY-AND-EQUITY> 83,840
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,380)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,380)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
