10QSB/A 1 0001.txt QUARTERLY REPORT Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB/A [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 [ ] TRANSITION REPORT UNDER SECTION 14 OR 15(D) OF THE EXCHANGE ACT For the transition period from__________ to ___________ WATCHOUT! INC. (Name of Registrant as specified in its charter) WHITE CLOUD EXPLORATION INC. --------------------------------------------- (Former Name of Registrant) Utah 0-114244 84-0959153 ---- -------- ------------ (State or other jurisdiction of (Commission File No.) (IRS Employer incorporation or organization) Identification No.) 20283 State Road 7 Suite 400, Boca Raton, Florida 33428 ------------------------------------------------------- (Address and telephone number of principal executive offices) Check whether the issuer has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, (or such shorter period that the Registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity , as of the latest practicable date: June 30, 2000 -------------- CLASS Outstanding at June 30, 2000 ---------------------------- ----------------------------- Common stock $.001 Par Value 22,435,245 WATCHOUT! INC.
PART I: FINANCIAL INFORMATION PAGE ---- Consolidated Balance Sheets as of 3 June 30, 2000 and March 31, 2000 (Unaudited) and December 31, 1999 Consolidated Statements of Profit and Loss for the Six Month Period Ended June 30, 2000 and Six Month Period Ended June 30, 1999 (unaudited) and for the Twelve Months Ended December 31, 1999 4 Consolidated Statement of Cash Flows for the Period Ending June 30, 2000 And June 30, 1999 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) as of June 30, 2000 6-8 Management Discussion and Analysis of Financial Condition and Results of Operations 9
2 WatchOUT!, Inc. Balance Sheet As of June 30, 2000
(unaudited) (unaudited) (audited) Jun 30, '00 Mar 31, `00 Dec. 31, 99 ----------- ----------- ---------------- ASSETS Current Assets Checking/Savings Cash $ 143,911 $ 11,653 $ -- Accounts Receivable 279,890 2,028 Prepaid Expenses 2,500 2,500 ----------- ----------- ---------------- Total Current Assets 426,302 16,181 Other Assets Office Equipment 4,941 -- -- Investments 3,079,380 636,500 -- Organization Cost Amortization (7,625) (6,863) (6,100.00) Organization Costs 15,250 15,250 15,250.00 ----------- ----------- ---------------- Total Other Assets 3,091,946 644,887 9,150.00 ----------- ----------- ---------------- TOTAL ASSETS $ 3,518,248 $ 661,068 $ 9,150.00 =========== =========== ================ LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable & Accrued Ex 735,420 784,069 1,047,270.00 Due to Stockholders 35,000 35,000 466,445.00 Notes Payable 275,000 1,061,500 450,000.00 ----------- ----------- ---------------- Total Current Liabilities 1,045,420 1,880,569 1,963,715.00 ----------- ----------- ---------------- Shareholder's Equity (Deficit) Additional Paid in Capital 8,447,772 989,502 989,502.00 Preferred Stock, no par value 10,000,000 shares authorized no shares issued or outstanding Common Stock, $0.001 par value 22,435 15,205 15,030.00 50,000,000 shares authorized 22,435,245 issued and outstanding Accumulated Deficit (5,997,379) (2,224,208) (2,959,097.00) ----------- ----------- ---------------- Total Stockholders' Deficit 2,472,828 (1,219,501) (1,954,565.00) ----------- ----------- ---------------- TOTAL LIABILITIES & EQUITY $ 3,518,248 $ 661,068 $ 9,150.00 =========== =========== ================
The accompanying notes are an integral part of these financial statements 3 WatchOUT!, Inc. Statement of Profit & Loss For Six Months ended June 30, 2000
Six Months To Six Months to (unaudited) (unaudited) (audited) June 30, 2000 June 30, 1999 Dec. 31, 99 ------------- ------------- ------------ Revenues $ -- $ -- $ -- Operating expense Amortization expense 1,525 -- 3,050 Bank charges 431 -- Consulting fees 2,720,157 580 -- Dues and Subscriptions 942 -- -- Marketing and Promotion 13,200 -- -- Office Expense 1,704 -- -- Payroll Expenses 1,028,891 -- -- Employee benefits 950 -- -- Professional Fees 162,422 -- 9,080 Telephone & Communications 6,125 -- -- Travel 61,296 -- -- ------------ ------------ ------------ Total Operating Expense 3,997,643 (580) 12,130 Net Operating (Loss) (580) (12,130) Other Income (Expense) Forgiveness of debt 959,460 -- -- Interest 0 (13,500) (34,066) ------------ ------------ ------------ Total Other Income (Expense) 959,461 (13,500) (34,066) ------------ ------------ ------------ Net Income(loss) $ (3,038,183) $ (14,080) (46,196) ============ ============ ============ Weighted Average Common Shares 22,435,245 15,205,245 15,030,245 Income (loss)Per Share $ (0.14) $ (0.000) $ (0.00) ============ ============ ============
The accompanying notes are an integral part of this financial statement. 4 WatchOUT!, INC. Statement of Cash Flows For Six Months ended June 30, 2000
(unaudited) (unaudited) Six Months Ended Quarter Ended Jun. 30, 00 Jun. 30, 99 ----------- ----------- NET INCOME (loss) FOR THE PERIOD $(3,038,183) $ (580) ADJUSTMENTS Depreciation and amortization 1525 CASH FLOWS FROM OPERATING ACTIVITIES Decrease in accounts payable and accrued liabilities (220,450) 13,500 Increase in prepaid expenses (2,500) -- Increase in accounts receivable (279,890) ----------- ----------- Net cash provided (used) by operating activities (3,539,498) (14,080) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Payment for the purchase of investments (3,079,380) -- Purchase of Office equipment (4,941) ----------- ----------- Net cash used in investing activities (3,084,321) -- ----------- ----------- CASH FLOW FROM FINANCING Proceeds from debt instruments 1,761,500 -- Proceeds from common stock 7,465,675 -- Retirement of Debt (1,572,192) -- Net cash from financing activities 7,439,367 Forgiveness of debt (959,460) -- ----------- ----------- Net increase (decrease) in cash and cash equivalents 143,912 (580) Cash at the beginning of the period -- $ 580 ----------- ----------- Cash at the end of the period $ 143,912 $ =========== =========== Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest $ -- $ --
The accompanying notes are an integral part of this financial statement 5 WATCHOUT! INC. NOTES TO FINANCIAL STATEMENTS June 30, 2000 NOTE 1-Organization and summary of Significant Accounting Policies: Organization The company was incorporated July 22, 1983 under the laws of Utah for the purpose of obtaining, capital to seek potentially profitable business opportunities. Since inception, the Company has been engaged in organizational activities. In 1997, the Company acquired two entities: Watchout, a California Corporation, and Goldpoint International, a limited liability company. In November of 1998, the corporation changed it's name to Watchout!, Inc. The Company's fiscal year end is December 31. Pursuant to a stock exchange agreement between the Company and Cavalcade of Sports Network, Inc., a Nevada Corporation, ("Cavalcade"), the Company acquired from Cavalcade all the issued and outstanding shares of common stock of Cormax Business Solutions Ltd., an Alberta Canada company. As a result of the agreement, the shareholders of Cavalcade acquired ownership of a majority of the issued and outstanding shares of common stock of the Company. In conducting its due diligence on the stock exchange agreement, Cavalcade became aware of certain transactions that were not reflected in the 10QSB reports filed by Watchout! Inc. for the quarterly periods ended March 31, 2000 and June 30, 2000. The accompanying financial statements reflect indebtedness that was forgiven pursuant to an agreement that became effect February 11, 2000; transactions that took place through a corporation which was acquired by Wacthout! Inc.; and additional debt incurred in the first Six Months 0f 2000; and debt retired through the issuance of shares of the company and debt forgiveness. The Company's fiscal year end is December 31. Cash and Cash Equivalents: For the purpose of the statement of cash flows, cash and cash equivalents include cash in banks and money market accounts. Research & Development Research and development costs are expensed when incurred. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities at the date of the financial statements and the reported activities during the reporting period. Actual results may differ from those estimates. Income Taxes No provisions have been made for income taxes. As of December 31, 1999, the company had net operating loss (NOL) carryfowards for federal income tax purposes of approximately $2,959,047. These operating losses may be used to offset future taxable income. Unused carryfowards will expire in 2014. 6 WATCHOUT!, INC. NOTES TO FINANCIAL STATEMENTS June 30, 2000 NOTE 1- Organization and Summary of Significant Accounting Policies: (Continued) Income Taxes: The Financial Accounting Standards Board (FASB) has issued Statement of Financials Accounting Standard Number 109 ("SFAS 109"), "Accounting for Income Taxes", which requires a change from the deferred method to the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statements carrying amounts and the tax basis of existing assets and liabilities. At December 31, 1999, the company had net operating loss carryfowards of approximately $2,959,097 for federal income tax purposes. The carryfowards, if not utilized to offset taxable income will expire at the end of the indicated years: 2009 $ 102,487 2010 89,956 2011 895,058 2012 968,502 2013 856,896 2014 46,198 ---------- $2,959,097 ========== There was no provision or benefit for income taxes in fiscal 1999. NOTE 2-Investments: The company made investment totaling $679,380 during the period February 11 to April 15, 2000 in WirelessOn.com, a Canadian wireless communication company. This represents a eight (8%) ownership in WirelessOn.com. 7 WATCHOUT!, INC. NOTES TO FINANCIAL STATEMENTS June 30, 2000 The company made an investment in Micromatix.net. Two payments of $150,000 were made in exchange for 483,000 shares in Micromatix.net. Micromatix.net is a publicly traded company, traded on the OTCBB under the symbol "IMTL". On August 8, 2000 the board of directors of Micromatix.net approved a 7-1 reverse split and is now traded under the OTCBB symbol " IMTE". On February 25, 2000 the company entered into an agreement to make an investment in MJAC Communications(MJAC). In consideration for 2,500,000 shares of restricted stock, Watchout! was to receive a 51% ownership stake in MJAC. MJAC holds the marketing and licensing rights to become a level one Internet Service Provider in the greater Washington DC area. The Investment closed on May 8, 2000 and the parties subsequently agreed to terminate the agreement on June 8, 2000. NOTE 3- Notes Payable: Following is a summary of notes payable at June 30,2000 Note Payable to individual, 12%, unsecured due on demand 166,000 Note Payable to individual, 12%, unsecured, due on demand 84,000 Note Payable to individual, unsecured, due on demand 25,000 -------- $275,000 ======== NOTE 4 - Going Concern: The company has incurred net losses of $3,038,183. As of June 30,2000, current liabilities exceeded current assets by $619,118. In view of these matters, the future success of the Company is likely to depend on its ability to obtain additional capital and its ability to attain future profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. 8 ITEM II MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL CONDITION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION CONTAINED IN THIS REPORT CONTAINS "FORWARD-LOOKING STATEMENTS" THAT INVOLVE RISK AND UNCERTAINTIES. THESE STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD" OR "ANTICIPATES" OR THE NEGATIVE THEREOF OR SIMILAR EXPRESSIONS OR BY DISCUSSIONS OF STRATEGY. THE CAUTIONARY STATEMENTS MADE IN THIS REPORT SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS REPORT. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THIS REPORT. Results of Operations. The Company has not been profitable and has no revenues. Since the change in its management and the implementation of the Company's new business plan, the Company had devoted a substantial amount of its efforts and assets towards the investigation and consummation of joint ventures and acquisitions. The Company anticipates that it will continue to be dependent upon obtaining loans from its shareholders. Net losses increased from $14,080.00 to $3,038,183 (before a gain of $959,460 on forgiveness of debt)for the periods ending June 30, 1999 and March 31, 2000, respectively, reflecting the fact that the Company was dormant during the March 31, 1999 period. The most significant expenses incurred during the quarter ending June 30, 2000 were consulting fee of $2,720,157, payroll expense of $1,028,891 professional fees of $162,422, travel expenses of $61,296. There were no corresponding expenses for the same quarter of the previous year as the Company was dormant and conducted no operations. The Company can book revenues by acquiring a majority or wholly owned interest in a company that has revenues or by selling its interest in a minority owned entity at a profit. The Company is now principally focused upon the location of additional strategic alliances and acquisition targets. While the Company presently has no wholly or majority owned subsidiaries that have earnings, management believes that the Company will book revenues during the next six months. However, no assurances can be given in this regard. 9 Liquidity and Capital Resources December 13, 1999 as compared to June 30, 2000. Total cash and cash equivalents as of December 31, 1999 were $0.00 as compared to $143,912 as of June 30, 2000. Investments increased from $0.00 as of December 31, 1999 to $3,079,380 in June 30, 2000 reflecting the execution of the Company's new business plan. Accounts payable and accrued liabilities decreased from $1,047,270 to $735,420 as a result of the forgiveness of debt. Amounts due stockholders decreased from $466,445 to $35,000 reflecting forgiveness of debt. Notes payable Decreased to $ 275,000 due to conversion of debt to equity and the forgiveness of debt. March 31, 2000 as compared to June 30, 2000. Total cash and cash equivalents as of June 30, 2000 were $143,9123 as compared to $11,653 as of March 31, 2000, as a result of loans received by the Company. Investments increased from $636,500 as of March 31, 2000 to $3,079,380 reflecting the execution of the Company's new business plan. Notes payable were reduced from $1,061,500 at March 31, 2000 to $275,000 due to the conversion of equity and forgiveness of debt. Until the Company earns revenues and can operate profitably, it will continue to be dependent upon new equity financing, loans from its shareholders and others to remain viable. No assurances are given that the Company will obtain revenues, will be profitable thereafter or that it can continue to fund its operations. Current liabilities continue to exceed current assets. Demand for payment by our creditors could force us to seek bankruptcy protection. 10 PART II. OTHER INFORMATION AND SIGNATURES Item 1. Legal Proceedings: We are subject to a lawsuit filed by John Baker, Wayne E. Williams and Jagi Capital Group, Inc. against the company and others in the District Court of Tarrant County, Texas. (Case No. 48-183154-00). The suit seeks approximately $350,000 in damages in connection with the alleged failure to repay certain loans and pay a finder's fee. The allegations relate to events that transpired before current management took control of the Company. The Company is investigating the allegations and underlying facts and is currently discussing the settlement of the matter with the plaintiffs who filed the lawsuit. No assurance is given that the Company will be able to amicably settle the matter. If the matter proceeds to trial, an adverse ruling could have a materially detrimental effect on the company. Item 2. Change in Securities: During this quarter ended June 30, 2000, a total of 1,530,000 shares of common stock were issued by the Company to various consultants pursuant to an S-8 Registration Statement. The Company issued an additional 5,700,000 restricted shares of its common stock under Rule 144 pursuant to the investment in MJAC and to officers and consultants of the Company. 11 SIGNATURES Pursuant to 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. Watchout! Inc. BY: /s/ Todd Violette -------------------------------- Todd Violette, President Dated: This 20th day of November 2000. 12