-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AVqlDinlRDv+lOp3a6nKSqcQzkdYs/mL4Sb3SvyXP5nDuUvht9VDXpb4jV/EeHVZ OHeqqCkeeeq58Ra8WlMLvQ== 0001094891-99-000140.txt : 19991123 0001094891-99-000140.hdr.sgml : 19991123 ACCESSION NUMBER: 0001094891-99-000140 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLDS INC CENTRAL INDEX KEY: 0000001961 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 221848316 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24115 FILM NUMBER: 99762258 BUSINESS ADDRESS: STREET 1: 15 UNION WHARF CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6177258900 MAIL ADDRESS: STREET 1: 15 UNION WHARF CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: ACADEMIC COMPUTER SYSTEMS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER INDUSTRIES LTD DATE OF NAME CHANGE: 19690318 10QSB 1 QUARTERLY REPORT FOR 9/30/99 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB X Quarterly report pursuant to Section 13 or 15(d) of the Securities Act - ---- of 1934 For the quarterly period ended September 30, 1999 _____ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________________ to ______________________ Commission File number 2-31876 WORLDS INC. ------------ (Exact Name of Small Business Issuer as Specified in its Charter) New Jersey 22-184316 ------------------------------ ---------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 15 Union Wharf, Boston, Massachusetts 0210 ------------------------------------------ (Address of Principal Executive Offices) (617) 725-8900 --------------------------------------------- (Issuer's Telephone Number Including Area Code) ------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report 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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: At November 12, 1999, Issuer had outstanding 17,636,631 shares of Common Stock. INDEX Page ---- PART I: FINANCIAL INFORMATION..................................................3 Item 1. Financial Statements..............................................3 Balance Sheets (unaudited) at September 30, 1999 and December 31, 1998.................................................4 Statements of Operations (unaudited) for the three months ended September 30, 1999 and September 30, 1998 and for the nine months ended September 30, 1999 and September 30, 1998 and cumulative period from April 8, 1997 to September 30, 1999................................................5 Statements of Stockholders' Equity (Deficit) from April 8, 1997 to September 30, 1999...............................6 Statements of Cash Flows (unaudited) for the nine months ended September 30, 1999 and September 30, 1998 and cumulative period from April 8, 1997 to September 30, 1999........7 Summary of Accounting Policies....................................8 Notes to Financial Statements (unaudited)........................13 Item 2. Management's Discussion and Analysis or Plan of Operations.......17 PART II. OTHER INFORMATION ...................................................24 Item 2. Sale of Unregistered Securities..................................24 Item 6. Exhibits and Reports on Form 8-K.................................26 SIGNATURES....................................................................27 2 PART I : FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WORLDS INC., doing business as WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) ================================================================================ FINANCIAL STATEMENTS PERIODS ENDED SEPTEMBER 30, 1998 AND 1999 3 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEETS ================================================================================ December 31, 1998 September 30, 1999 ------------------------------------------------------------------ --------------------------- ---------------------- ASSETS (unaudited) CURRENT: Cash and cash equivalents $ 1,581,764 $ 2,044,722 Accounts receivable - 106,355 Prepaid expenses and other current assets 53,486 32,229 Inventory 58,516 162,556 ------------------------------------------------------------------ --------------------------- ---------------------- TOTAL CURRENT ASSETS 1,693,766 2,345,862 PROPERTY, EQUIPMENT AND SOFTWARE DEVELOPMENT COSTS, NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION 214,246 651,176 OTHER ASSETS (NOTE 5) - 703,095 ------------------------------------------------------------------ --------------------------- ---------------------- $ 1,908,012 $ 3,700,133 ------------------------------------------------------------------ --------------------------- ---------------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT: Accounts payable $ 319,906 $ 107,721 Accrued expenses 446,333 831,351 Current maturities of notes payable 246,648 269,148 ------------------------------------------------------------------ --------------------------- ---------------------- TOTAL CURRENT LIABILITIES 1,012,887 1,208,220 LONG-TERM PORTION, NOTES PAYABLE 1,875,018 1,852,518 ------------------------------------------------------------------ --------------------------- ---------------------- TOTAL LIABILITIES 2,887,905 3,060,738 ------------------------------------------------------------------ --------------------------- ---------------------- CONTINGENCIES (NOTE 4) STOCKHOLDERS' EQUITY (DEFICIT) (NOTES 2 AND 3): Common stock, $.001 par value - shares authorized 30,000,000; outstanding 18,031,996 and 17,542,281 18,032 17,542 Additional paid-in capital 8,401,970 12,801,091 Deficit accumulated during the development stage (9,335,152) (12,179,238) ------------------------------------------------------------------ --------------------------- ---------------------- (915,150) 639,395 Treasury stock, at cost, 113,465 shares in 1998 (Notes 2 and 4) (64,743) -- ------------------------------------------------------------------ --------------------------- ---------------------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (979,893) 639,395 ------------------------------------------------------------------ --------------------------- ---------------------- $ 1,908,012 $ 3,700,133 ------------------------------------------------------------------ --------------------------- ----------------------
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 4 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS (UNAUDITED) =============================================================================== Cumulative period from Three months ended Nine months ended April 8, 1997 September 30, September 30, (inception) to ---------------------- ---------------------------- September 30, 1998 1999 1998 1999 1999 (a) --------- ------------ ------------ ------------ --------------- NET REVENUES $ - $ 148,682 $ 16,132 $ 241,607 $ 272,137 COSTS AND EXPENSES: Cost of revenues - (98,428) (25,101) (168,783) (198,062) Selling, general and administrative (683,969) (962,228) (1,991,494) (2,852,723) (6,178,456) Research and development (353,504) - (887,932) - (992,932) Acquired research and development - - - - (6,135,538) --------- ------------ ------------ ------------ ------------- OPERATING LOSS (1,037,473) (911,974) (2,888,395) (2,779,899) (13,232,851) OTHER INCOME (EXPENSES): Gain resulting from reversal of certain predecessor liabilities - - - - 810,140 Interest income 37,825 20,053 114,817 38,019 175,618 Interest expense (35,656) (33,284) (107,768) (102,206) (230,468) --------- ------------ ------------ ------------ ------------- LOSS BEFORE EXTRAORDINARY ITEM (1,035,304) (925,205) (2,881,346) (2,844,086) (12,477,561) EXTRAORDINARY ITEM - GAIN ON DEBT SETTLEMENT 20,893 - 172,547 - 298,323 --------- ------------ ------------ ------------ ------------- NET LOSS $(1,014,411) $ (925,205) $ (2,708,799) $ (2,844,086) $(12,179,238) =========== ============ ============ ============ ============ LOSS PER SHARE (BASIC AND DILUTED): Loss before extraordinary item $ (.06) $ (0.06) $ (.17) $ (0.16) Extraordinary item - - .01 - ----------- ------------ ------------ ------------ NET LOSS PER SHARE (BASIC AND DILUTED) $ (.06) $ (0.06) $ (.16) $ (0.16) =========== ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted 17,868,531 16,083,709 16,917,657 17,300,203 =========== ============ ============ ===========
- -------------- (a) Includes the results of Predecessor and Academic (from December 4, 1997) which were merged into the Company on December 3, 1997. SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 5 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) ================================================================================ PERIOD FROM APRIL 8, 1997 (INCEPTION) TO SEPTEMBER 30, 1999 - -------------------------------------------------------------------------------- Deficit accumulated Total Common stock Additional during the Treasury Stockholders' ----------------------- paid-in development (equity) Shares Amount capital Stage Stock (deficit) ------------ ---------- -------------- ---------------- ---------- -------------- BALANCE, JANUARY 1, 1998 16,119,996 $16,120 $ 6,661,582 $ (6,686,471) $ $ (8,769) Sale of shares in private offering memorandum (January 1998) 30,000 30 26,470 - - 26,500 Sale of shares in public offering of common stock, net (June 1998) 1,832,000 1,832 1,713,968 - - 1,715,800 Conversion of 113,465 shares to certain stockholders (June 1998) - - - - (64,743) (64,743) Conversion of employee stock options into shares (October 1998) 50,000 50 (50) - - - Net loss for the year ended December 31, 1998 - - - (2,648,681) - (2,648,681) ---------- -------- ----------- ------------- --------- ------------ BALANCE, DECEMBER 31, 1998 18,031,996 18,032 8,401,970 (9,335,152) (64,743) (979,893) Issuance of warrants for consulting services (April 1999) - - 465,000 - - 465,000 Contribution of 1,500,000 shares by founders to treasury (April 1999) - - - - - - Exercise of stock options (April 1999) 75,000 75 74,925 - - 75,000 Issuance of shares for content supply agreement (June 1999) 93,750 93 374,907 - - 375,000 Issuance of shares to agent for supply agreement (July 1999) 50,000 50 199,950 - - 200,000 Sale of shares in private offering memorandum, net (June through September 1999) 885,000 885 3,263,089 - - 3,263,974 Issuance of options for consulting services (August and September 1999) - - 4,400 - - 4,400 Issuance of shares for legal and consulting services (September 1999) 20,000 20 79,980 - - 80,000 Cancellation of treasury shares (September 1999) (1,613,465) (1,613) (63,130) - 64,743 - Net loss for the nine months ended September 30, 1999 (unaudited) - - - (2,844,086) - (2,844,086) ---------- -------- ----------- ------------ --------- ---------- BALANCE, SEPTEMBER 30, 1999 (UNAUDITED) 17,542,281 $17,542 $12,801,091 $(12,179,238) $ - $ 639,395 ========== ======== =========== ============ ========= ===========
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 6 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS (UNAUDITED) ================================================================================ Cumulative period from April 8, 1997 Nine months ended September 30, (inception) to ------------------------------- September 30, 1998 1999 1999 ------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,708,799) $ (2,844,086) $(12,179,238) ------------- ------------ ------------ Adjustments to reconcile net loss to net cash used in operating activities: Loss on disposal of fixed assets - - 54,041 Depreciation and amortization 136,012 160,113 306,188 Gain resulting from reversal of certain predecessor liabilities - - (810,140) Gain on debt settlement (172,547) - (298,323) Acquired research and development - - 6,135,538 Issuance of warrants for consulting services - 465,000 465,000 Issuance of options for consulting services - 4,400 4,400 Issuance of shares for legal and consulting services - 80,000 80,000 Changes in operating assets and liabilities, net of effects from merger with Predecessor and Academic: Trade receivable 538 (106,355) (106,355) Inventory - (104,040) (162,556) Prepaid expenses and other assets 29,403 (106,838) 7,567 Accounts payable and accrued expenses (10,306) 172,833 539,023 ------------- ------------ ------------- TOTAL ADJUSTMENTS (16,900) 565,113 6,214,383 ------------- ------------ ------------- NET CASH USED IN OPERATING ACTIVITIES (2,725,699) (2,278,973) (5,964,855) ------------- ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (14,590) (23,178) (51,765) Additions to software development costs - (573,865) (733,865) ------------- ------------ ------------- NET CASH USED IN INVESTING ACTIVITIES (14,590) (597,043) (785,630) ------------- ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock to founding stockholders - - 204,000 Proceeds from sale of common stock in private offering memorandum 26,500 3,263,974 6,985,150 Proceeds from exercise of options - 75,000 75,000 Proceeds from sale of common stock in public offering 1,715,800 - 1,715,800 Payment of conversion price of shares to certain stockholders (64,743) - (64,743) Payments on note payable (116,000) - (120,000) ------------- ------------ ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,561,557 3,338,974 8,795,207 ------------- ------------ ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,178,732) 462,958 2,044,722 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,541,829 1,581,764 - ------------- ------------ ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,363,097 $ 2,044,722 $ 2,044,722 ============= ============ =============
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 7 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) SUMMARY OF ACCOUNTING POLICIES ================================================================================ Definitions The Company is the resulting entity of two contemporaneous mergers (the "Mergers") of Worlds Inc., a Delaware corporation ("Predecessor"), with and into Worlds Acquisition Corp., a Delaware corporation ("WAC"), and WAC with and into Academic Computer Systems, Inc., a New Jersey corporation ("Academic"), which changed its name to Worlds Inc. (see Note 2). While Academic was the legal entity that survived the mergers, WAC was the accounting acquiror in both mergers. The Company's fiscal year-end is December 31. The term the "Company," as used herein, refers to the consolidated entity resulting from the two contemporaneous mergers, as well the pre-merger Predecessor, WAC and Academic; however, Predecessor, WAC and Academic are hereinafter sometimes referred to separately as the context requires. The Company is doing business as Worlds.com. Nature of Business WAC was incorporated on April 8, 1997 to design, develop and market three-dimensional ("3D") music oriented Internet sites on the World Wide Web. These web sites are utilizing 3D technologies developed by Predecessor. Basis of The accompanying financial statements are unaudited; Presentation however, in the opinion of management, all adjustments necessary for a fair statement of financial position and results for the stated periods have been included. These adjustments are of a normal recurring nature. Selected information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Results for interim periods are not necessarily indicative of the results to be expected for an entire fiscal year. It is suggested that these condensed financial statements be read in conjunction with the audited financial statements and accompanying notes for the Company for the year ended December 31, 1998 and for the Predecessor for the period ended December 3, 1997. 8 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) SUMMARY OF ACCOUNTING POLICIES ================================================================================ The financial statements include the results of Predecessor and Academic from December 4, 1997, the date of the Mergers (the "Merger Date"). The financial statements have been prepared in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting, and Reporting by Development Stage Enterprises," which requires development stage enterprises to employ the same accounting principles as operating companies. Fair Value of The carrying amounts of financial instruments, including Financial cash and short-term debt, approximated fair value as of Instruments September 30, 1999 because of the relatively short maturity of the instruments. The carrying value of long-term debt, including the current portion, approximates fair value as of September 30 1999, based upon estimates for similar debt issues. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Cash Cash and cash equivalents are comprised of highly liquid Equivalents money market instruments, which have original maturities of three months or less at the time of purchase. Property and Property and equipment are stated at cost. Depreciation is Equipment calculated using the straight-line method over the estimated useful lives of the assets, which range from two to five years. 9 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) SUMMARY OF ACCOUNTING POLICIES ================================================================================ Revenue Revenue from technology development and licensing contracts Recognition is recognized upon the attainment of contractual milestones (approximating the percentage-of-completion method). Cash received in advance of revenues earned is recorded as deferred revenue. Inventory Inventory consists of merchandise held for resale and is valued at the lower of cost or market on a first-in, first-out (FIFO) basis. Software In accordance with the provisions of SFAS No. 86, Development Cost "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed", software development costs incurred by the Company subsequent to establishing technological feasibility of the resulting product or enhancement and until the product is available for general release to customers are capitalized and carried at the lower of unamortized cost or net realizable value. Net realizable value is determined based on estimates of future revenues to be derived from the sale of the software product reduced by the costs of completion and disposing of the product. During the fourth quarter of 1998, technological feasibility of the Company's software was established. In this regard, $160,000 was capitalized and included in property, equipment and software development as of December 31, 1998. During the nine months ended September 30, 1999, a further $574,000 was capitalized in this regard. Amortization of the costs capitalized commenced in the first quarter of 1999, based on current and anticipated future revenues for each product or enhancement with an annual minimum equal to straight-line amortization over the remaining estimated economic life of the product or enhancement. Research and Research and development costs are expensed as incurred. Development Costs 10 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) SUMMARY OF ACCOUNTING POLICIES ================================================================================ Income Taxes The Company uses the liability method of accounting for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred income tax assets and liabilities are recognized based on the temporary differences between the financial statement and income tax bases of assets, liabilities and carryforwards using enacted tax rates. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Loss Per Share In 1997, the Financial Accounting Standards Board's ("FASB") SFAS No. 128, "Earnings per Share," replaced the calculation of primary and fully diluted earnings (loss) per share with basic and diluted earnings (loss) per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. The loss per share amounts have been presented to conform to SFAS No. 128 requirements. The common stock equivalents which would arise from the exercise of stock options and warrants are excluded from calculation of diluted loss per share since their effect is anti-dilutive. Therefore, the amounts reported for basic and diluted loss per share are the same. Stock-Based In October 1995, the FASB issued SFAS No. 123, "Accounting Compensation for Stock-Based Compensation". SFAS No. 123 encourages entities to adopt the fair value method in place of the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", for all arrangements under which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to employees in amounts based on the price of its stock. The Company has not adopted the fair value method encouraged by SFAS No. 123 and will continue to account for such transactions in accordance with APB No. 25. 11 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) SUMMARY OF ACCOUNTING POLICIES ================================================================================ Comprehensive Effective January 1, 1998, the Company adopted SFAS No. 130, Income "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Adoption of the standard has had no effect on financial statement disclosures since there were no items of comprehensive income during the periods presented. 12 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS =============================================================================== 1. Going Concern As discussed in Notes 2 and 3, the Company completed a private placement during the fourth quarter of 1997 raising gross proceeds of $4,415,000, consummated a merger agreement during December 1997 with a development stage enterprise, Predecessor, completed a public offering in June 1998 raising gross proceeds of $1,832,000, and completed a private placement during the third quarter of 1999, raising gross proceeds of $3,540,000. Predecessor had not generated significant revenues from operations and had an accumulated deficit from inception to the Merger Date of $21,236,139 and a capital deficit of $4,135,538. The acquisition of Predecessor by the Company was accounted for as a purchase. Accordingly, $6,135,538, the portion of the purchase allocable to in-process research and development projects that had not reached technological feasibility and had no probable alternative future uses, was expensed by the Company at the date of merger. 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 had minimal revenues from operations since the series of merger transactions. The Company anticipates that it currently has only a portion of the funds necessary to complete product development and commercialization. There can be no assurance that the Company will be able to obtain the substantial additional capital resources necessary to pursue its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company is pursuing sources of additional financing and there can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all. Any inability to obtain additional financing will have a material adverse effect on the Company, including possibly requiring the Company to significantly curtail or cease operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 13 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS =============================================================================== 2. The Mergers On December 3, 1997, Predecessor was merged with and into WAC in a series of related transactions which included a simultaneous capital transaction between the Company and Academic (the "Mergers") and a private offering of WAC's securities (the "Private Placement"). In both the merger with Predecessor and the capital transaction with Academic, WAC was the acquiror for accounting purposes. The acquisition of Predecessor was accounted for as a purchase whereby all of the common and preferred stock of Predecessor were exchanged for 1,999,996 shares of WAC. The shares issued to Predecessor common and preferred shareholders were valued at $1.00 per share which represented the share value in the private placement that occurred during this time period (see Note 3); a purchase price of approximately $2,000,000. The exchange ratio was determined after extensive negotiation between management of Predecessor and WAC. Predecessor was a development stage company, had not generated significant revenues from operations and had an accumulated deficit from inception to December 3, 1997 of $21,236,139 and a capital deficit of $4,135,538. The assets acquired of Predecessor (cash, prepaid expenses, property and equipment) were recorded at fair market value which approximated book value at December 3, 1997, and, as discussed in Note 1 above, since technological feasibility of the various Predecessor technologies acquired had not been established, the excess purchase price over Predecessor's capital deficit of $6,135,538 was expensed as acquired research and development. Academic was an inactive company with no operations. The value assigned to the 910,000 shares in the capital transaction with Academic on December 3, 1997 represented Academic's net tangible assets (primarily cash) of $558,026. During June 1998, 113,465 shares of common stock were converted at $0.57 per share ($64,743) as a result of certain stockholders dissenting with respect to the Academic/WAC capital transaction of December 3, 1997. Such reacquired shares had been classified as treasury stock and were cancelled during the third quarter of 1999. While no trading market existed for the securities of Academic, the Company's common stock is traded on the Bulletin Board. 14 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS =============================================================================== 3. Private The Private Placement called for WAC to offer for sale a Placements maximum of 50 units (57-1/2 with the over-allotment), each and Public consisting of 120,000 shares of WAC's common stock (the Offering "Units") at a price of $120,000 per Unit. In connection with the Private Placement, the placement agent was to receive one warrant to purchase one share of WAC's common stock at $1 per share for every $40 of gross proceeds from the sale of the Units. On November 21, 1997, WAC sold 31.67 Units with gross proceeds of $3,800,000 (3,800,000 shares) (the "Initial Private Placement Closing") and the placement agent was issued 425,000 shares of common stock. On December 31, 1997, the Company sold 4.88 Units with gross proceeds of $585,000 (585,000 shares). On January 2, 1998, a further 30,000 shares were issued with gross proceeds of $30,000. Cumulative net proceeds, after commissions and expenses of the offering, aggregated $3,721,176. WAC agreed to include the shares of common stock underlying the Units sold in the Private Placement (the "Private Placement Shares") in a registration statement to be filed with the Securities and Exchange Commission (the "SEC"). Such registration statement was declared effective on May 1, 1998. During June 1998, WAC sold 1,832,000 shares in a public offering of its stock and received gross proceeds of $1,832,000. Net proceeds, after commissions of this offering, aggregated $1,715,800. During the second and third quarters of 1999, the Company sold 885,000 shares in a private offering and received gross proceeds of $3,540,000. Broker-dealers assisting the Company in the sale of its securities were issued warrants to purchase 48,000 shares of common stock of the Company. Net proceeds, after commissions and expenses of this offering, aggregated $3,263,974. 15 WORLDS.COM (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS =============================================================================== 4. Contingencies On March 23, 1999, the Company entered into a three-year financial advisory and consulting agreement (that became effective during April 1999) with a consulting firm controlled by the Company's Chairman that provides for an annual fee of $120,000, escalating to $300,000 annually if the Company raises $5 million in cash and the market value of the Company's issued and outstanding common stock is no less than $100 million. In addition, the Company granted warrants to such firm to purchase 1,000,000 shares of common stock at $.50 per share. Such warrants were valued at $465,000 and charged to selling, general and administrative expenses in the quarter ended June 30, 1999. The warrants are exercisable through April 13, 2006 and contain anti-dilution provisions and both "demand" and "piggy-back" registration rights. Further, in connection with the above consulting agreement, three founding stockholders of WAC contributed 1,500,000 shares to the capital of the Company. Such shares had been classified as treasury stock and were cancelled during the third quarter of 1999. 5. Content Supply During June 1999, the Company entered into a content supply Agreement agreement for a 3D internet site offered by an Internet service provider (the "Provider"). Under the terms of the agreement, the Company paid $125,000 and issued 93,750 shares of common stock upon signing (included in other assets aggregating $500,000). The brokerage agent of such agreement was issued 50,000 sshares of common stock during July 1999 ($200,000). A further $125,000 was paid and 93,750 shares were issued during November 1999 upon launch of the site. 16 ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION OR PLAN OF OPERATION. Forward-Looking Statements When used in this Form 10-QSB and in future filings by the Company with the Commission, the words or phrases "will likely result," "management expects" or "the Company expects," "will continue," "is anticipated," "estimated" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. The following discussion should be read in conjunction with the financial statements and related notes which are included under Item 1. Statements made below which are not historical facts are forward-looking statements. Forward-looking statements involve a number of risks and uncertainties including, but not limited to, general economic conditions, our ability to complete development and then market our products, competitive factors and other risk factors as stated in other of our public filings with the Securities and Exchange Commission. Background Our predecessor was formed in April 1994 to design, develop and commercialize 3D multi-user tools and technologies for the Internet market. From inception through 1997, our predecessor's operations were limited and consisted primarily of start-up activities, including recruiting personnel, raising capital, custom production work, and research and development. In the third quarter of 1996, our predecessor launched its first commercial user-oriented 3D chat site, Worlds Chat 1.0, and began selling the client interface software through direct sales channels. These sales were nominal. In October 1996, our predecessor introduced its first commercial toolset for developing 3D multi-user applications. In the first quarter of 1997, after an unsuccessful effort to raise capital, our predecessor became insolvent and terminated most of its personnel, and management sought to sell the Company and/or its technology. Our predecessor did not generate significant revenues. While we have completed development and market testing of our base technology and have introduced our first Internet sites, we will not generate significant revenues until after we successfully attract and retain a significant number of paying community members, sponsors, advertisers and e- commerce customers. We anticipate continuing to incur significant losses until, at the earliest, we generate sufficient revenues to offset the substantial up-front expenditures and operating costs associated with developing and further commercializing our proposed products. There can be no assurance that we will be able to attract and retain a sufficient number of paying subscribers and advertisers to generate significant revenues or achieve profitable operations or that our products and services will prove to be commercially viable. We classify our expenses into three broad groups: (1) research and development; (2) cost of revenues; and (3) selling, general and administration. Historical revenues prior to 1998 were generated primarily through production service activities and sales of technology licenses. Current revenues are 17 generated primarily through VIP membership sign-ups and e-commerce sales from our online recording artist merchandise stores. Software development costs, consisting primarily of salaries and related expenses, incurred prior to establishing technological feasibility are expensed in accordance with Financial Accounting Standards Board (FASB) Statement No. 86. In accordance with FASB 86, we will capitalize software development costs at such time as the technological feasibility of the product has been established. We began capitalizing our software costs in the fourth quarter of 1998 with the commercial release of three products, AnimalHouse.com, BowieWorld and Worlds Ultimate 3D Chat. For the first nine months of 1999, approximately $574,000 of such expenditures were capitalized. Plan of Operation During the fourth quarter of 1998, we completed the development of our Gamma development tool kit. This technology is the foundation of our existing and planned product offerings. To date, we have introduced six products based on this technology: o Our first product release was AnimalHouse.com, a 3D environment created for Universal/Hyundai, targeting the college market. Our 3D technology is encoded on an enhanced CD with audio tracks of 10 Universal musical artists and distributed to college students through a variety of Universal distribution outlets. Our agreement with Universal called for the manufacture and distribution by Universal of up to 1,000,000 CDs. o Our second product release was for David Bowie's BowieNet, the first artist created ISP, or Internet service provider. Our product is named BowieWorlds and has been released in the US as well as the U.K. by UltraStar Internet Services LLP, the owners of BowieNet. o Our third product release was Worlds Ultimate 3D Chat which is being primarily marketed via our web site, Worlds.com, and our e-commerce site, WorldsStore.com. Worlds Ultimate 3D Chat is built on our Gamma platform and incorporates e-commerce, voice-to-voice chat, articulated, customizable avatars (personification of the on-line user) and video and audio streaming. We also reached an agreement with BowieNet, to have Worlds Ultimate 3D Chat software distributed on CD- ROM to BowieNet members. o Our fourth product release was made pursuant to our agreement with Hansonopoly Inc. in May, 1999. We integrated our 3D technology on a CD+ that was distributed in June and July 1999 to members of the Hanson fan club. o Our fifth product release was made in October 1999. We created and host NYYankeesWorld.com, the first 3D virtual reality world to be created for a major sports team. o Our sixth product release was made in October 1999. We created and packaged more than 700,000 enhanced CDs containing our Worlds Ultimate 3D Chat software with the November 1999 issue of GQ. We have also been actively pursuing strategic alliances with a number of companies that can provide exposure and distribution of our products and technology. We recently entered into agreements with three major companies in the Internet arena. These companies are: 18 o Excite, the number three portal site on the Internet. We provide Excite with select e-commerce content; o Road Runner, the high-speed online service owned by Time Warner, MediaOne Group, Microsoft, Compaq Computers and Advance/ Newhouse. We provide Road Runner with a co-branded 3D environment accessible by Road Runner subscribers through its music channel; and o Freeserve, the leading Internet service provider in the United Kingdom. We provide Freeserve with co-branded 2D and 3D interactive chat environments accessible by Freeserve subscribers. We currently have eleven full-time employees and are working with six independent software contractors who were former employees of our predecessor. We do not anticipate hiring additional employees or purchasing additional plant or equipment other than that needed on a day-to-day basis until product sales increase significantly and/or additional financing is obtained. In June and August 1999, we consummated two tranches of a private placement, selling an aggregate of 59 units. Each unit cost $60,000 and consisted of 15,000 shares of common stock and warrants to purchase 7,500 shares of common stock. At September 30, 1999, we had raised gross proceeds of $3,540,000 in the private placement. Results of Our Operations Nine Months Ended September 30, 1999 Compared to the Nine Months Ended September 30, 1998 The following data extracted from the attached unaudited financial statements compares the results of our operations for the nine months ended September 30, 1999 to the nine months ended September 30, 1998. Nine months ended September 30, -------------------------------- (Unaudited) 1999 1998 ---- ---- Net Revenue ............................. $ 241,607 $ 16,132 Costs & Expenses: Cost of revenues .................. ( 168,783) ( 25,101) Selling, general & administrative.. (2,852,723) (1,991,434) Research & development............. - ( 887,932) Operating Loss.......................... $ (2,779,899) $ (2,888,395) Other Income (Expense): Interest Income................... 38,019 114,817 Interest expense.................. ( 102,206) ( 107,768) Loss before extraordinary item.......... (2,844,086) 2,881,346 Extraordinary item-- gain on debt settlement. - 172,547 Net Loss............................... $ (2,844,086) $ (2,708,799) In the first nine months of 1999, we continued to upgrade our core technology and began production on new projects in anticipation of reaching 19 agreements with other entities with whom we are in negotiation. No assurance can be given that any negotiations will lead to the consummation of any additional agreements. In the first nine months of 1999, we continued the implementation of our new business plan. Significant expenditure was incurred towards completion of the Gamma technology and also with legal and professional fees. Revenues are nominal and are derived primarily from Worlds sales from our 33 e-commerce web sites that currently operate artists and artist-related merchandise stores, such as DavidBowieStore.com, RickyMartinStore.com, U2Store.com, EltonJohnStore.com, BruceSpringsteenStore.com and others. In addition, Worlds reasized revenue from its VIP subscription services on Worlds Ultimate 3-D Chat, Freeserve and Roadrunner. Nominal revenue was realized from licensing royalties for Worlds technology from third party licensces. Revenue was $241,607 and had associated direct costs of $168,783 for the nine months ended September 30, 1999, compared to $16,132 in revenue and $25,101 of direct costs for the same period in 1998. Selling, general and administrative expenses were $2,852,723 for the nine months ended September 30, 1999. This represented an increase of $861,229 from $1,991,494 compared to the nine months ended September 30, 1998. This increase was directly attributable to the higher costs associated with maintaining our new-commerce site, retaining expert software developers to improve and upgrade our existing products. We incurred no research and development costs during the nine months ended September 30, 1999 as compared to $887,932 for the nine months ended September 30, 1998. This is directly attributable to the fact that since our technology is now technologically feasible, (i.e., it works), all expenses for research and development are now capitalized. For the first nine months of 1999, $573,865 of such expenditures were capitalized. Other income included $38,019 of interest income in the nine months to September 30, 1999 earned from the remainder of the proceeds of our share offerings as compared to $114,817 in the nine months ended September 30, 1998. Other expenses included interest expense of $102,206 directly attributable to our predecessor's notes payable in the nine months to September 30, 1999. Interest expense in the nine months to September 30, 1998 was $107,768. As a result of the foregoing we incurred a net loss of $2,844,086 for the nine months ended September 30, 1999, compared to a loss of $2,708,799 for the nine months ended September 30, 1998, an increase of $135,287. The loss in the 1998 period was after an extraordinary gain of $172,547. Three Months Ended September 30, 1999 Compared with Three Months Ended September 30, 1998 Three Months Ended ------------------------------ 9/30/99 9/30/98 ------- ------- Net Revenue ............................ $ 148,682 $ -- Costs & Expenses: Cost of revenues .................. ( 98,428) -- Selling, general & administrative.. (962,228) (683,969) Research & development............. - (353,504) Operating Loss.......................... $ (911,974) $ (1,037,473) Other Income (Expense): Interest Income.................... 20,053 37,825 Interest expense................... (33,284) (35,656) Loss before extraordinary item.......... (925,205) (1,035,304) Extraordinary Item-- gain on debt settlement. - 20,893 Net Loss................................ $ (925,205) $ 1,014,411 20 Revenues are nominal and are derived primarily from Worlds sales from our 33 e-commerce web sites that currently operate artists and artist-related merchandise stores, such as DavidBowieStore.com, RickyMartinStore.com, U2Store.com, EltonJohnStore.com, BruceSpringsteenStore.com and others. In addition, Worlds reasized revenue from its VIP subscription services on Worlds Ultimate 3-D Chat, Freeserve and Roadrunner. Nominal revenue was realized from licensing royalties for Worlds technology from third party licensces. Revenue was $148,682 and had associated direct costs of $98,428 for the three months ended September 30, 1999, compared to none in revenue and none of direct costs for the same period in 1998. Selling, general and administrative expenses were $962,228 for the three months ended September 30, 1999. This represented an increase of $278,259 from $683,969 compared to the three months ended September 30, 1998. This increase was directly attributable to the higher costs associated with maintaining our new e-commerce site, retaining expert software developers to improve and upgrade our existing products and costs involved in beginning work on some of the new projects discussed above. We incurred no research and development costs during the three months ended September 30, 1999 as compared to $353,504 for the three months ended September 30, 1998. This decrease is directly attributable to the fact that since our technology is now technologically feasible, i.e., it works, all expenses previously charged to research and development are capitalized. For the first quarter of 1999, $214,000 for the second and third quarters $225,000 and $135,000, respectively of such expenditures were capitalized. Other income included $20,053 of interest income in the three months to September 30, 1999 earned from the remainder of the proceeds of our share offerings as compared to $37,825 in the three months ended September 30, 1998. Other expenses included interest expense of $33,284 directly attributable to the Predecessor's notes payable in the three months to September 30, 1999. Interest expense in the three months to September 30, 1998 was $35,656. As a result of the foregoing we incurred a net loss of $925,205 for the three months ended September 30, 1999, compared to a loss of $1,014,411 for the three months ended September 30, 1998, an decrease of $89,206. The loss in the 1998 period was after an extraordinary gain of $20,893. See Statement of Operations on Page 5. Liquidity and Capital Resources of the Company Net cash provided from financing activities, net of operating and investing activities from January 1, 1999 through September 30, 1999 was $462,958. At September 30, 1999, we had working capital of $1,137,642 and cash and cash equivalents in the amount of $2,044,722. On December 3, 1997, the Mergers were deemed to close as well as the first round of a private placement of our common stock raising gross proceeds of $3.8 million, by selling 3.8 million shares, of which we netted approximately $3,000,000. We also acquired approximately an additional $560,000 from one of the other parties to the mergers. In addition, as a result of the Mergers by operation of law, we assumed predecessor's then liabilities of approximately $4.6 million, the majority of which has since been paid or renegotiated. At September 30, 1999, our total liabilities were approximately $3,061,000 million, including the long term portion of notes payable of $1,852,000. 21 Prior to the Mergers, we had 910,000 shares outstanding. Effective December 31, 1997, we closed on an additional $585,000 of gross proceeds from the private offering, of which we netted $529,000, and issued an additional 585,000 shares of common stock and on January 2, 1998 received an additional $30,000, of which we netted $26,500, and issued an additional 30,000 shares. In June 1998, we closed on a secondary offering of $1,832,000 gross proceeds, of which we netted $1,715,800 by selling 1,832,000 shares at $1.00 per share. In June and August 1999, we consummated two tranches of a private placement, selling an aggregate of 59 units. Each unit cost $60,000 and consisted of 15,000 shares of common stock and warrants to purchase 7,500 shares of common stock. At September 30, 1999, we had raised gross proceeds of $3,540,000. Our capital requirements relating to the commercialization of our technology and the development of our web sites and related content have been and will continue to be significant. Satisfactory completion of product development and commercialization will require capital resources substantially greater than what we have now currently available to us. During the periods that we experience net losses, we expect to be dependent upon sales of our capital stock and debt securities to finance our working capital requirements. Based upon our current plans and assumptions relating to our business plan, we anticipate that our existing capital resources will satisfy our capital requirements through at least March 2000. However, if our plans change or our assumptions prove to be inaccurate, we may need to seek additional financing sooner than currently anticipated or curtail our operations. Accordingly, we will need to raise additional capital during 2000, which may be in the form of equity or debt financing. Any issuance of equity securities would dilute the interest of our shareholders. Additionally, if we incur debt, our company will become subject to risks that interest rates may fluctuate and cash flow may be insufficient to pay the principal and interest on any such debt. While we hope to raise additional financing, we have no current arrangements with respect to, or sources of, additional financing and there can be no assurance that any such financing, particularly the significant amounts of financing that would be required, will be available to us on commercially reasonable terms, or at all. Any inability to obtain additional financing will have a material adverse effect on our business, including possibly requiring us to significantly curtail or cease operations. Effect of Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which requires companies to recognize all derivatives as either assets or liabilities in the 22 statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The Company does not presently enter into any transactions involving derivative financial instruments and, accordingly, does not anticipate the new standard will have any effect on its financial statements. Year 2000 Disclosure We are Year 2000 compliant and we do not anticipate any internal problems. In the event any internal problems should arise, we have many expert computer technicians on our payroll and we believe that we will be able to satisfactorily address any such problems. However, we are dependent on the integrity of the Internet being maintained to derive income from the sale of merchandise on our own e-commerce site and through links to the products we create. We have employed a redundancy system as a safeguard to protect the viability of our site by having our site hosted by two of the larger Internet Service Providers. Thus, in the event one of our hosts should fail, we could continue uninterrupted on the other Internet Service Provider. We have been advised that our hosts are addressing the Year 2000 issue and hope to be compliant. We use Wells Fargo to process our e-mail transactions. Wells Fargo processes a significant portion of all Internet e-commerce transactions and if it fails due to Year 2000 problems we will be negatively impacted, but not likely more than many other e-commerce vendors. In summary, we are totally dependent upon third parties for hosting and processing our e-commerce activities and while we cannot control the actions of these third parties, we believe that given our redundant safeguards, the availability of other hosts and processors to switch to in the event our current hosts and/or processor crashes and the fact that we only see nominal revenue from our e-commerce at this time, we do not believe that our profitability or operations will be materially affected by the Year 2000 problem. 23 PART II: OTHER INFORMATION ITEM 2: SALES OF UNREGISTERED SECURITIES
Consideration received and description of Underwriting or other Exemption If option, warrant or discounts to market from convertible security, Date of Number price offered to registration terms of exercise or Sale Title of Security Sold Purchasers claimed conversions -------- ----------------- ------ ---------------------- ------------ ------------------------ 6/25/99 Units: Each unit 41 $60,000 per unit in 4(2) Warrant underlying consisting 15,000 connection with private Units Exercisable until shares of Common placement 6/30/02 at an exercise Stock and warrants price of $5.00 per to purchase 7,500 share. shares of Common Stock 6/25/99 Common Stock 93,750 Issued in connection 4(2) N/A with agreement with Internet service provider 7/28/99 Common Stock 50,000 Issued to brokerage 4(2) N/A agent for services in connection with agreement with Internet service provider 8/10/99 Common Stock 120,000 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3 1997 Stock Option on 9/3/01 and 1/3 on Plan; no cash 9/3/02. Exercisable for consideration received five years from date of by Company until grant at an exercise exercise price of $2.46 per share. 8/10/99 Common Stock 345,000 Options granted under 4(2) Vest monthly based 1997 Stock Option upon number of hours Plan; no cash worked. Exercisable for consideration received five years from date of by Company until grant at an exercise exercise price of $2.46 per share. 9/3/99 Common Stock 274,500 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3 1997 Stock Option on 9/3/01 and 1/3 on Plan; no cash 9/3/02. Exercisable for consideration five years from date of received by Company grant at an exercise until exercise price of $4.00 per share. 9/3/99 Common Stock 50,000 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3 1997 Stock Option on 9/3/01; 1/3 on Plan; no cash 9/3/02. Exercisable for consideration received five years from date of by Company until grant at an exercise exercise price of $7.50 per share. 9/3/99 Common Stock 50,000 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3 1997 Stock Option on 9/3/01; 1/3 on Plan; no cash 9/3/02. Exercisable for consideration received five years from date of by Company until grant at an exercise exercise price of $10.00 per share.
24
Consideration received and description of Underwriting or other Exemption If option, warrant or discounts to market from convertible security, Date of Number price offered to registration terms of exercise or Sale Title of Security Sold Purchasers claimed conversions -------- ----------------- ------ ---------------------- ------------ ------------------------ 6/26/99- Units: Each unit 18 $60,000 per unit in 4(2) Warrants underlying 9/13/99 consisting 15,000 connection with private Units exercisable until shares of Common placement 6/30/02 at an exercise Stock and warrants price of $5.00 per to purchase 7,500 share. shares of Common Stock 6/26/99- Units: Each unit 11/3 Issued to professionals 4(2) Warrants underlying 9/13/99 consisting 15,000 and consultants for Units exercisable until shares of Common services rendered in 6/30/02 at an exercise Stock and warrants connection with private price of $5.00 per to purchase 7,500 placement share. shares of Common Stock 6/26/99- Warrants to 48,000 Issued to broker- 4(2) Exercisable until 9/13/99 purchase Common dealers in consideration 6/30/02 at an exercise Stock for selling Units in price of $5.00 per private placement share. - ------------------- -------------------- ------------ ------------------------ -------------- -----------------------
25 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27. Financial Data Schedule (9/30/99) (b) Reports on Form 8-K None 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WORLDS INC. ----------- (Registrant) Dated: November 19, 1999 By: /s/Thomas Kidrin ------------------------- Thomas Kidrin President and Chief Financial and Accounting Officer 27 EXHIBIT INDEX Exhibit Number Description Page 27 Financial Data Schedule (9/30/99) 29 -- 28 EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. The schedule contains summary information extracted from the financial statements of Worlds Inc. for the nine months ended September 30, 1999 and is qualified in its entirety by reference to such financial statements.
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 2,044,722 0 106,355 0 162,556 2,345,862 1,194,644 543,468 3,700,133 1,208,220 0 0 0 17,542 621,853 3,700,133 241,607 241,607 168,783 168,783 2,852,723 0 102,206 (2,844,086) 0 (2,844,086) 0 0 0 (2,844,086) (.16) (.16)
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