**UNITED STATES**
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-QSB/A

 

 

(Mark One)

[X] QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THEQUARTERLY PERIOD ENDED September 30, 2002

 

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THETRANSITION PERIOD FROM ______________ TO ________________

 

Commission File Number 333-5278-NY

 
 
**WITNET INTERNATIONAL****, INC.**
(Exact name of small business issuer as specified in charter)
 

 

          NEVADA                                                                                                                                                          87-0772357

      (State or other                                                                                                                                                   (IRS Employer

     jurisdiction of incorporation)                                                                                                                         Identification No.)

 

 
Suite 404, 357 Bay Street, Toronto, Ontario M5H 2T7

(Address of principal executive offices)

 
 
(416) 367-8273
(Issuer's telephone number)

 
 

The Company had 96,475,021 shares of common stock as of November18, 2002

 

Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]
 

**Part I - FinancialInformation**

 

**WITNET INTERNATIONAL INC.**
CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED AUGUST 31, 2002

UNAUDITED

 

**CONTENTS**

 Consolidated Interim Balance Sheet 1Consolidated Interim Statement of Equity 2Consolidated Interim Statement of Earnings3Notes to Consolidated Interim Financial Statements 4 - 5    
 

**WITNET INTERNATIONAL INC.**
Consolidated Interim Balance Sheet

August 31, 2002

Unaudited

 
 **2002** 
2001**ASSETS**   **     Current**                Cash and Cash Equivalents   **$             9,391** $            2,562             Short-term financial instruments**115,731** -             Accounts receivables**252,977** 104,979             Accounts receivable - other**1,917** 250,136             Short-term loans**26,850** 766,888             Loans to shareholders and directors**28,182** 50,635             Prepaid income taxes**8,082**     1,918 **443,130** 1,177,118    **     Investment****1,998** 78,200**     Guarantee Deposits****25,159** 281,520**     Capital Assets****55,398**     243,810     **$    525,685**     $  1,780,648    **LIABILITIES**        **Current**                Short-term borrowing - affiliated companies**$    598,237** $     846,515             Short-term borrowing from directors**128,897** 24,704             Accounts payable**264,079**     296,557 **991,213** 1,167,776         **Loans Payable****150,000**     150,000 **1,141,213**     1,317,776    **SHAREHOLDERS' DEFICIENCY**   **     Capital Stock****528,932** 486,286     **Capital Surplus****2,175,226** 2,201,380     **Accumulated Other    Comprehensive (Loss) Income****(41,747)**320,203     **Deficit****(3,277,939)**     (2,544,997) **(615,528)**     462,872     **$    525,685**     $  1,780,648    
1

**WITNET INTERNATIONAL INC.**
Consolidated InterimStatement of Equity

Three Months Ended August 31, 2002

Unaudited

 
 **2002**     2001    **Deficit - beginning of period****$  (2,749,602)**     $  (2,308,214)         Net loss**(528,337)** (236,783)    **Deficit - end of period****$     (3,277,939)** $     (2,544,997)    
 

2

**WITNET INTERNATIONAL INC.**
Consolidated InterimStatement of Earnings

Three-Month andSix-Month Periods Ended August 31, 2002 and 2001

Unaudited

 
 
**Six Months Ended**

**August 31, 2002** 
Six Months 

Ended

August 31, 2001 
**Three Months**

**Ended**

**August 31, 2002** 
Three Months

Ended

August 31, 2001        **Revenue**            Merchandise**$           84,676** $  1,299,906 **$            1,108** $    820,329     Service fees**188,657** 81,246 **102,857** 74,210     Interest income**4,472**     11,553 **3,448**     9,991 **277,805**     1,392,705 **127,413**     904,530        **Expenses**            Cost of Merchandise**40,250** 1,083,852 **12,356** 683,984     Operating Expenses**553,358** 394,687 **643,029** 453,087     Interest Expenses**6,573**     4,258 **365**     4,242 **600,181**     1,482,797 **655,750**     1,141,313        **Net Loss****$       (322,376)** $       (90,092) **$     (528,337)** $     (236,783)        Net loss per share**(0.0034)**     (0.0009) **(0.0055)**     (0.0025)        
3

**WITNET INTERNATIONAL INC.**
Notes to ConsolidatedInterim Financial Statements

Three Months Ended August 31, 2002

Unaudited

 
**1.    Summary of Significant Accounting Policies 

 **
*General*

 

Witnet Co. Ltd., the "Accounting Parent", which carries onthe business of the company, is located in 113-3 Banpo-dong, Seocho-gu, Seoul,Korea and was incorporated on November 8, 1999 to engage in the business ofsoftware development and system integration. Beginning in 1997, Korea and othercountries in the Asia Pacific region experienced a severe contraction insubstantially all aspects of their economies. This situation is commonlyreferred to as the 1997 Asian Financial Crisis. In response to this situation,the Korean government and the private sector began implementing structuralreforms to historical business practices.

 

The Korean economy continues to experience difficulties,particularly in the areas of restructuring private enterprises and reforming thebanking industry. The Korean government continues to apply pressure to Koreancompanies to restructure into more efficient and profitable firms. The bankingindustry is currently undergoing consolidation and uncertainty exists withregard to the continued availability of financing. The Company may be eitherdirectly or indirectly affected by the situation described above. Theaccompanying financial statements reflect management's current assessment of theimpact to date of the economic situation on the financial position of theCompany. Actual results may differ materially from management's currentassessment.

 

*Interim Financial Information*

 

The accompanying unaudited consolidated interim financialstatements have been prepared by the Company, in accordance with generallyaccepted accounting principles pursuant to Regulation S-B of the Securities andExchanges Commission. Certain information and footnote disclosures normallyincluded in audited financial statements prepared in accordance with generallyaccepted accounting principles have been condensed or omitted. In the opinion ofmanagement, the consolidated interim financial statements reflect alladjustments, including normal recurring adjustments, necessary for fairpresentation of the interim periods presented. The results of operations for thethree months ended August 31, 2002 are not necessarily indicative of results ofoperations to be expected for the full year. 

 

*Basis of Consolidation*

 

These consolidated financial statements include the accountsof the Company and its wholly owned subsidiary, Witnet Co. Ltd., afterelimination of all intercompany transactions and balances. The acquisition wasaccounted for as a recapitalization of Witnet Co. Ltd. (See note 2).

 

*Cash and Cash Equivalents*

 

Cash and cash equivalents include cash and highly-liquidinvestments with original maturities of 90 days or less.

 

4

 
**1.    Summary of Significant Accounting Policies (Cont'd.)

 

*Foreign Currency Translation*

 

Witnet maintains its books and records in Korean won. Balancesheet accounts are translated using closing exchange rates in effect at thebalance sheet date and income and expense accounts are translated using anaverage exchange rate prevailing during each reporting period. No representationis made that the Korean won could have been, or could be, converted into UnitedStates dollars at the rates on the respective dates and or at any other certainrates. Adjustments resulting from the translation are included in theaccumulated other comprehensive income (loss) in stockholders' equity.

 

*Earnings Per Share*

 

Basic and diluted earnings per share is computed pursuant toSFAS No. 128. Basic earnings per share are computed by dividing net earnings bythe weighted average shares outstanding during the reporting period. Dilutedearnings per share are computed similar to basic earnings per share except thatthe weighed average shares outstanding are increased to include additionalshares from the assumed exercise of stock options, if dilutive. The number ofadditional shares is calculated by assuming that outstanding stock options wereexercised and that the proceeds from such exercises were used to acquire sharesof common stock at the option price during the reporting period.

 

*Use of Estimates*

 

The preparation of financial statements, in conformity withgenerally accepted accounting principles, requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during the reportingperiod. The most significant estimates for the Company include: the fair valuesof identifiable assets acquired in business combinations; provisions for thecredit risk exposure in amounts of capital assets, goodwill and productdevelopment costs; and valuation allowances against future income tax assets.Actual results could differ from those estimates.

 

 
**2.    Organization

 **
On June 28, 2002 there was a reverse takeover whereby WitnetInternational Inc. (formerly New Cinema Partners Inc. ("NCPP")), the legalparent, issued 55,000,000 common shares in return for all outstanding commonshares of Witnet Co. Ltd., (the acquirer for accounting purposes). As a resultof this transaction, the former shareholders of Witnet Co. Ltd. receivedapproximately 63% ownership of NCPP. After the transaction the company had96,475,021 common shares issued and outstanding.

 

The acquisition of Witnet by NCPP was accounted for as therecapitalization of Witnet. The pre-acquisition financial statements of Witnetare now the historical financial statements of the Company. The equity accountsand number of weighted average shares outstanding have been retroactivelyrestated to give effect to the recapitalization. 

 

Prior to the acquisition, the intangible assets of NCPP werewritten down to $nil to reflect its fair market value.

 

5

**Item 2. Management's Discussion and Analysis or Plan of Operation.**

The Company has been a development stage enterprise from its inception in February 18, 1999. As disclosed in Form 8-K current reports filed by the Company, the Company has completed the acquisition of Witnet Co. Ltd., a private Korean software company which is now the Company's primary operating subsidiary. The Company has changed its name to Witnet International, Inc. and will change its fiscal year end to December 31, the year end of Witnet Co. Ltd. Accordingly, the Company is filing an amended Form 10QSB for the quarterly period ending on September 30, 2002 in anticipation for the change in fiscal year-end. 

In connection with the acquisition of Witnet, the Company filed a Form 14C Information Statement with the SEC and mailed the Information Statement to the Shareholders of the Company. As described in the Information Statement, the Company will now pursue the business of Witnet Co. Ltd. and will continue the base of operations in Seoul, South Korea and continue the marketing of its primary wireless internet related products, "Mobilick", "X-Stan" and "X- Soloman" in South Korea and Japan and will commence marketing of those products in North America and Europe.

 Additionally, the Company will continue to enter into service related business however, will attempt to maximize the profitability of such engagements by reducing the number of its permanent employees and rather engage special teams for such service engagements. Historically the Company had maintained full time employees on staff in anticipation of service work and this method has proven to be a financial burden and generally not profitable. Additionally, the company's main focus will be on the marketing of its primary product "Mobilick" in an effort to benefit from the investment made to date in the development of the product. 

The Company will reduce its Research and Development spending and refocus on marketing of its main products. As a result the Company will reduce the number of employees through the reduction of R&D staff. The Company has commenced marketing of its products in North America and should start to see results of this activity by the first quarter of 2003. 

The Company expects that it will employee fourteen (14) full time employees, and four (4) outside consultants during the next twelve months. Also, the Company intends to conduct a private placement financing to assist in its operations through debt and or equity financing. The financing is intended to extend its marketing efforts over the next twelve months. 

**CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995**

Our actual results and actual plan of operations may differ materially from what is stated above. From time to time, the Company will make written and oral forward-looking statements about matters that involve risk and uncertainties that could cause actual results to differ materially from projected results. Important factors that could cause actual results to differ materially include, among others: 

       -    general domestic economic and political conditions;  

       -    changes in laws and government regulations, includingwithout limitation regulations of the Securities 

             and Exchange Commission; 

       -    availability and timing of receipt of necessary outside capital; and 

       -    other risk factors described from time to time in the Company's filings with the Securities and 

             Exchange Commission. 

Many of these factors are beyond the Company's ability to control and predict. Investors are cautioned not to place undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update its forward-looking statements, whether as a result of receiving new information, the occurrence of future events or otherwise. 

 

**PART II -- OTHER INFORMATION**

 

Item 6. Exhibits and Reports on Form 8-K. 

The Company has filed the following Form 8-K current reports:

 

 1. September 16, 2002 re acquisition of Witnet Co. Ltd., name change. 

 

 2. November 18, 2002 re year end change to December 31. 

 

**SIGNATURES**

 

 In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

 

 

**WITNET INTERNATIONAL, INC.**

(Registrant) 

 

Date: March 19, 2003

 

/s/ Jason Chung, CFO                                           /s/ Mun Su Hun

Jason Chung, CFO                                                Mun Su Hun, President

 

6

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATIONS**

****

 I, Jason Chung, certify that: 

1.    I have reviewed this quarterly report on Form 10-QSB of Witnet International Inc.;

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material face necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 

4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: 

     a.    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; 

     b.    evaluated the effectiveness of the registrant's disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the"Evaluation Date"); and 

 

    c.    presented in this quarterly our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 

5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): 

     

     a.    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 

     

     b.    any fraud, whether or not material, that involves management or other employees who

have a significant role in the registrant's internal controls; and 

6.    The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent, evaluation, including anycorrective actions with regard to significant deficiencies and materialweaknesses. 

 

Date:     March 19, 2003

 

 /s/ Jason Chung 

Jason Chung, Chief Financial Officer 

7

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATIONS**

****

 I, Mun Su Hun, certify that: 

1.    I have reviewed this quarterly report on Form 10-QSB of Witnet International Inc.;

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material face necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 

4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: 

     a.    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; 

     b.    evaluated the effectiveness of the registrant's disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the"Evaluation Date"); and 

 

    c.    presented in this quarterly our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 

5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): 

     

     a.    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 

     

     b.    any fraud, whether or not material, that involves management or other employees who

have a significant role in the registrant's internal controls; and 

6.    The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent, evaluation, including anycorrective actions with regard to significant deficiencies and materialweaknesses. 

 

Date:     March 19, 2003

 

 /s/ Mun Su Hun

Mun Su Hun, President 

8**