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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000
|_| 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 0-26886
-------
HTTP TECHNOLOGY, INC.
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Utah 13-3758042
------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
46 Berkeley Square, London, W1X 5DB, UNITED KINGDOM
--------------------------------------------------------------------------------
(Address of principal executive offices)
(011) 44-20-7598-4070
--------------------------------------------------------------------------------
(Issuer's telephone number)
Internet Holdings, Inc., 16 Curzon Street, Mayfair,
London W1Y 7FF UNITED KINGDOM
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court.
Yes |_| 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: As of November 13, 2000:
23,106,573 shares of Common Stock, par value $0.001 per share.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements for the Company's fiscal quarter ended
September 30, 2000 are attached to this Report, commencing at page F-1.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for historical information, the material contained in this
Management's Discussion and Analysis or Plan of Operation is forward-looking.
For the purposes of the safe harbor protection for forward-looking statements
provided by the Private Securities Litigation Reform Act of 1995, readers are
urged to review the list of certain important factors set forth in "Cautionary
Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995" contained in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999, as amended ("Fiscal 1999"),
which may cause actual results to differ materially from those described. These
risks and uncertainties include the rate of market development and acceptance of
positioning technology, the unpredictability of the Company's sales cycle, the
limited revenues and significant operating losses generated to date, and the
possibility of significant ongoing capital requirements. For the purposes of the
safe harbor protection for forward-looking statements provided by the Private
Securities Litigation Reform Act of 1995, readers are urged to review the list
of certain important factors set forth in "Cautionary Statement for Purposes of
the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of
1995".
HTTP Technology, Inc. and its subsidiaries (collectively referred to
as "HTTP" or the "Company") have had only a limited operating history upon which
an evaluation of the Company's prospects can be made. The Company's prospects
must be considered keeping in mind the risks, expenses, and difficulties
frequently encountered in the establishment of a new business in an ever
changing industry. There can be no assurance that the Company will be able to
achieve profitable operations.
The report of the Company's former independent accountants,
Callaghan Nawrocki LLP, on the Company's financial statements for the fiscal
year ended December 31, 1999, includes a statement that the Company is a
development stage company. During the quarter ended June 30, 2000, the Company
emerged from its development stage status by acquiring Radical Technology Plc.
The Company's intent was to acquire software development companies and as a
result of this acquisition the plan of operations has been initiated.
For purposes of the discussion contained herein, all information is
reported on a consolidated basis for the Company and its subsidiaries.
BUSINESS STRATEGY
The Company builds and markets its own software and network enabling
products. In addition, it has a venture capital division. HTTP's strategy is to
exploit its products through alliances and joint ventures with other
organizations. These may come from the collaborative network of our portfolio
companies or from separate ventures with third parties.
HTTP's investment division has a clear emphasis on capital growth,
balance sheet strength and the use of its operating subsidiaries to create cash
flow. The investments made by HTTP provide strong net assets and are a part of
HTTP's overall business strategy. As each company in which HTTP has invested
concludes a public offering or other event allowing HTTP to realize its
investment, HTTP will receive additional funds to invest in product development.
Radical Technology PLC ("RadTech"), a 94%-owned subsidiary of the
Company, was acquired in April 2000. RadTech is now fully integrated into the
Company's operations and provides consistent revenue from product sales. RadTech
has developed an advanced systems integration business with existing blue-chip
clients. Current RadTech clients include British Telecom, Ericsson, Texaco,
Eidos Interactive, and Computer Cab.
-2-
<PAGE>
We also acquired two technology investment companies in stock
acquisitions. The acquisitions include Core Ventures Limited ("Core"), a British
Virgin Island company, with investments and a strategic alliance with Red Cube
AG. Core was acquired in September 2000. Ferman AG, a Swiss based company, was
acquired in October, 2000. Ferman AG's principal assets include a 10% stake in
SGA (Schweizerische Gesellschaft fur Aktienhandel und Research AG), a Swiss
based equity management company, and a 4.8% stake in Top Tier Software, Inc., a
San Jose based software company that provides leading companies with
eBusiness-to-Business Enterprise Information Portal technology. Ferman AG's
strategy centers on identifying and investing in the most attractive early stage
to pre-IPO start-up companies globally.
RESULTS OF OPERATIONS
Quarter Ended September 30, 2000
The Company commenced operations under the current management on
October 18, 1999. As such, there is no comparable data for the quarter ended
September 30, 1999. The Company has relied heavily upon proceeds from the sale
of its securities to fund its operations.
The Company experienced a loss for the quarter ended September 30,
2000 of approximately ($2,174,000). Revenue for the period was approximately
$21,000 derived primarily from customized computer software consulting
associated with RadTech.
General and administrative expenses for the quarter ended September
30, 2000 were approximately $821,000. The major components of these expenses
were professional fees of approximately $275,000, directors' remuneration of
approximately $103,000 and public relations and marketing of approximately
$161,000. The professional fees are primarily related to legal costs associated
with the Company's acquisitions, the Company's application for NASDAQ National
Market and SEC filings. The Company incurred amortization expenses relating to
goodwill of approximately $460,000, which resulted from the Company's
acquisition of RadTech. The Company has decided to expense all software product
development costs, which has resulted in an expense of $1,051,000 in the quarter
ended September 30, 2000, due to management's reevaluation of its projects in
determining the point of technical feasibility.
The number of employees on September 30, 2000 was 43, an increase
from 3 as of the end of Fiscal 1999.
On September 20, 2000, the Company acquired all of the capital stock
of Core Ventures Ltd., a corporation organized under the laws of the British
Virgin Islands ("Core"). Under the terms of the agreement, the Company issued
1,800,000 shares of the Company's Common Stock, par value $.001 per share, of
which 1,520,000 were issued to Muca Group Ltd., for 100% of the outstanding
shares of Core. Dr. Alexander Nill, a director of the Company, is the sole
shareholder of Muca Group, Ltd. As part of the consideration for the issuance of
shares, Dr. Nill has guaranteed the value of Core, to be determined by an
independent appraisal on December 15, 2000, to be not less than $25 million. In
the event the net assets are lower than $25 million, Dr. Nill will pay the
difference in cash or marketable securities.
Nine Months Ended September 30, 2000
The Company's loss for the nine months ended September 30, 2000 was
approximately ($3,161,000). Operating revenue for the nine months ended
September 30, 2000 was approximately $225,000.
General and administrative expenses for the nine months ended
September 30, 2000 were approximately $1,867,000. Such expenses were primarily
comprised of approximately $627,000 for professional fees, directors'
remuneration of approximately $238,000 and public relations and marketing of
approximately $261,000. The Company has decided to expense all software product
development costs which has resulted in an expense of $1,051,000 in the nine
months ended September 30, 2000, due to management's reevaluation of its
projects in determining the point of technical feasibility.
-3-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000 and December 31, 1999, the Company had current
assets of approximately $15,530,000 and $702,000 respectively. At September 30,
2000 and December 31, 1999 the Company had cash and cash investments of
approximately $1,025,000 and $506,000, respectively. At September 30, 2000 and
December 31, 1999, the Company had other receivables of approximately
$14,115,000 and $1,000, respectively. The other receivables as of September 30,
2000 were primarily comprised of approximately $14,004,000 that represents part
of the guaranteed value of Core's net assets.
As of September 30, 2000, the Company had investments of
approximately $13,730,000. The largest investment was in Red Cube AG for
approximately $11,016,000, a leading voice-over IP company located in
Switzerland. The Company valued this investment based on a recent rights issue
by Red Cube AG, at 120 Swiss Francs, approximately $68, per share.
As of September 30, 2000, the Company had goodwill of approximately
$8,409,000. The goodwill was associated with the acquisition of RadTech and is
based on a purchase price of $8.20 per share. The purchase price is an estimate
and the Company has obtained an appraiser to provide an opinion as to the value
of this investment before year-end. The Company's policy is to amortize goodwill
over five years.
As of September 30, 2000, the Company had net fixed assets of
approximately $333,000. As of September 30, 2000, the Company had outstanding
obligations of approximately $574,000.
The Company intends to continue to acquire investments in software
development companies to further its business strategy. To date, the Company has
depended upon the sale of its equity to fund its operations. Since the end of
Fiscal 1999, the Company has raised approximately $5,000,000 in private
placements pursuant to an underwriting agreement completed on January 28, 2000.
The Company is in the process of raising up to $30,000,000 pursuant to an
exemption from registration under Regulation S under the Securities Act of 1933,
as amended.
RECENT DEVELOPMENTS
On October 5, 2000, the Company acquired all of the outstanding
capital stock of Ferman AG, a Swiss venture capital company ("Ferman"). The
Company paid the purchase price by issuing to the stockholders of Ferman an
aggregate of 2,550,000 shares of the Company's Common Stock. Dr. Alexander Nill,
and Martin Lechner, directors of the Company, were principal shareholders of
Ferman, and in consideration for the sale of their shares in Ferman, each
received 850,000 shares of the Company's Common Stock.
On October 12, 2000, the Company changed its name from Internet
Holdings, Inc. to HTTP Technology, Inc. This change was approved by the
stockholders of the Company at the Company's Annual Meeting held on October 10,
2000.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). This statement was amended by the issuance of SFAS 137 and SFAS 138,
which is effective for the Company beginning January 1, 2001 and requires that
all derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if so, the type of hedge
transaction. Management of the Company anticipates that the adoption of SFAS 133
will not have a material impact on the Company's financial position or its
results of operations.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements," which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 is effective for the
Company's fourth quarter of 2000. The Company does not expect the implementation
of SAB 101 to have a material effect on its financial position or results of
operations.
In March 2000, the FASB issued interpretation No. 44, "Accounting
for Certain Transactions Involving Stock Compensation, and Interpretation of APB
Opinion No. 25" (FIN. 44). The interpretation is intended to clarify certain
problems that have arisen in practice since the issuance of APB No. 25
"Accounting for Stock Issued to Employees." The effective date of the
interpretation is July 1, 2000. The provisions of the interpretation will apply
prospectively, but it will also cover certain events occurring after December
15, 1998 and after January 12, 2000. The adoption of FIN. 44 did not have an
effect on the current or historical consolidated financial statements.
PART II
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
(a) None.
(b) None.
-4-
<PAGE>
(c) On September 20, 2000, the Company acquired all of the capital stock
of Core Ventures Limited, a corporation organized under the laws of the British
Virgin Islands ("Core"). The Company paid the purchase price by issuing to the
stockholders of Core an aggregate of 1,800,000 shares (the "Shares") of the
Company's Common Stock. The Company issued the Shares in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act").
(d) None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On October 12, 2000, the Company changed its name from Internet
Holdings, Inc. to HTTP Technology, Inc. This change was approved by the
stockholders of the Company at the Company's Annual Meeting held on October 10,
2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------------------------------------------------------
Stock Purchase Agreement by and
Exhibit 10.1 between Internet Holdings, Inc. and
Troy, Ltd. dated September 7, 2000
(1)
--------------------------------------------------------
Exhibit 27 Financial Data Schedule
--------------------------------------------------------
(1) Incorporated herein by reference to the Company's
Current Report on Form 8-K, filed September 27, 2000.
(b) Reports on Form 8-K
Current Report on Form 8-K, filed August 18, 2000,
announcing the appointment of Charles Schwab, Jr. to the
Board of Directors.
Current Report on Form 8-K, filed September 27, 2000,
announcing the acquisition of all of the capital stock
of Core Ventures, Ltd.
-5-
<PAGE>
HTTP TECHNOLOGY, INC. and SUBSIDIARIES
Index to Consolidated Financial Statements (Unaudited)
as of and for the Quarter and Nine Months Ended September 30, 2000
Consolidated Balance Sheets as of September 30, 2000 (Unaudited)
and December 31, 1999 (Audited) .......................................... F-2
Consolidated Statements of Operations for the three months ended
September 30, 2000 (Unaudited), and the nine months ended
September 30, 2000 (Unaudited), .......................................... F-3
Consolidated Statement of Cash Flows for the nine months ended
September 30, 2000 (Unaudited) ........................................... F-4
Notes to Consolidated Financial Statements ............................... F-5
F-1
<PAGE>
HTTP TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,025,387 $ 506,149
Accounts receivable 179,127 --
Other receivables 14,114,768 1,474
Prepaid expenses 177,432 194,445
Unbilled services 32,796 --
------------ ------------
Total current assets 15,529,510 702,068
FIXED ASSETS, at cost, net of accumulated
depreciation of $46,404 333,076 --
INVESTMENTS 13,730,250 666,406
GOODWILL 8,409,106 --
SECURITY DEPOSITS 217,125 --
------------ ------------
$ 38,219,067 $ 1,368,474
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 363,852 $ --
Accrued expenses 210,388 85,591
------------ ------------
Total current liabilities 574,240 85,591
CONVERTIBLE NOTE -- 50,000
------------ ------------
Total liabilities 574,240 135,591
------------ ------------
MINORITY INTEREST 814 --
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 50,000,000 shares 20,556 11,359
authorized, 20,556,573 and 11,359,470 shares
issued and outstanding, respectively
Additional paid-in capital 41,999,410 1,217,362
Accumulated other comprehensive income (219,072) --
Retained earnings (accumulated deficit) (3,156,881) 4,162
------------ ------------
38,644,013 1,232,883
Less: Stock subscription receivable (1,000,000) --
------------ ------------
Total stockholders' equity 37,644,013 1,232,883
============ ============
$ 38,219,067 $ 1,368,474
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
<PAGE>
HTTP TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Nine Months Three Months
Ended Ended
September 30, September 30,
2000 2000
------------ ------------
<S> <C> <C>
REVENUES $ 224,546 $ 20,668
EXPENSES:
Selling, general and administrative charges 1,866,592 821,153
Software development costs 1,050,939 1,050,939
Amortization of goodwill 764,464 459,819
------------ ------------
3,681,995 2,331,911
Operating loss (3,457,449) (2,311,243)
OTHER INCOME:
Interest and other income 102,038 25,103
Net foreign exchange gains 130,177 40,558
------------ ------------
232,215 65,661
Net loss before minority interest (3,225,234) (2,245,582)
MINORITY INTEREST (64,191) (71,370)
------------ ------------
Net loss $ (3,161,043) $ (2,174,212)
============ ============
PER SHARE DATA:
Basic and diluted loss per share $ (0.18) $ (0.11)
============ ============
Weighted average number of common
shares outstanding 17,277,981 18,960,563
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
HTTP TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months
Ended
September 30,
2000
------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,161,043)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 46,404
Software Development Costs 1,050,939
Amortization of goodwill 764,464
Minority Interest in net earnings of subsidiary (64,191)
Changes in operating assets and liabilities, net of effects
from acquisitions of businesses
Decrease in accounts receivable 201,622
Increase in other receivables (109,495)
Decrease in prepaid expenses 17,013
Decrease in unbilled services 2,055
Increase in security deposits (217,125)
Increase in accounts payable 363,852
Decrease in accrued expenses (25,957)
------------
Net cash used in operating activities (1,131,462)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (987,587)
Purchase of investments and businesses, (2,242,109)
net of assets acquired ------------
Net cash used in investing activities (3,229,696)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares issued for cash 5,099,468
------------
Net cash provided by financing activities 5,099,468
------------
Unrealized foreign currency translation adjustment (219,072)
NET INCREASE IN CASH $ 519,238
============
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 506,149
------------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 1,025,387
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 8,000
NON CASH FINANCING ACTIVITIES
Issuance of shares for investment $ 34,816,245
Issuance of shares for convertible loan note 50,000
Common stock subscribed 1,000,000
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
(1) Formation and Business of the Company
Internet Holdings, Inc. ("HTTP" or the "Company") is a Utah
corporation that was incorporated on March 8, 1977 under the name Trolley
Enterprises, Inc. The Company changed its name from Internet Holdings, Inc. to
HTTP Technology, Inc. on October 10, 2000. HTTP develops and markets its own
software and network enabling technologies. It also has a venture capital
division. The Company recently acquired Radical Technology Plc, which will
enable the Company to generate revenues through the sale of already developed
software and intranet products, and Core Ventures Limited and Ferman AG,
investment companies.
(2) Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared pursuant to the rules of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Form 10-KSB. In the
opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments, which are of a normal recurring nature,
necessary for a fair presentation of the results for the periods presented. All
significant intercompany transactions have been eliminated in consolidation.
The results of operations presented for the nine months and quarter
ended September 30, 2000, are not necessarily indicative of the results to be
expected for any other interim period or any future fiscal year.
(3) Acquisition agreements
On March 3, 2000, the Company offered to acquire Radical Technology
Plc ("RadTech"). In connection therewith, it was stated that the Company
expected to issue 1,281,714 shares of common stock, then constituting
approximately 7.7% of its outstanding shares, to the stockholders of RadTech in
order to acquire 100% of the issued capital stock of RadTech. The offer was
announced as having become unconditional on April 21, 2000 when the Company
obtained acceptances from 76.73% of the outstanding shares of RadTech. As of
September 30, 2000, the Company had issued 1,197,103 shares of the Company's
Common Stock in exchange for 93.4% of RadTech's outstanding capital stock. The
consolidation of RadTech financials occurs from the first closing date on April
21, 2000. On consolidation the acquisition of RadTech resulted in goodwill of
$9,173,570. Goodwill is amortized over five years.
On March 24, 2000 the Company entered into an agreement to acquire
Core Ventures Limited ("Core"), a British Virgin Island venture capital company.
The Company completed this transaction on September 20, 2000. Under the terms of
the agreement, the Company issued 1,800,000 shares of the Company's Common Stock
of which 1,520,000 were issued to Muca Group Ltd., for 100% of the outstanding
shares of Core. Dr. Alexander Nill, a director of the Company, is the sole
shareholder of Muca Group, Ltd. As part of the consideration for the issuance of
shares, Dr. Nill has guaranteed the value of Core, to be determined by an
independent appraisal on December 15, 2000, to be not less than $25 million. In
the event the net assets are lower than $25 million, Dr. Nill will pay the
difference in cash or marketable securities. The consolidation of Core
financials occurs from September 30, 2000. As of September 30, 2000, the value
of the guarantee by Dr. Nill under "Other receivables" was approximately
$14,004,000.
On May 3, 2000 the Company entered into an agreement to acquire
Ferman AG, a Swiss venture capital company ("Ferman"). The Company concluded the
acquisition on October 5, 2000. Under the terms of the agreement, the Company
acquired all of the outstanding stock of Ferman in exchange for an aggregate of
2,550,000 shares of the Company's Common Stock.
The following unaudited pro forma consolidated statement of
operations data for the nine months and quarter ended September 30, 2000 give
effect to the acquisition of Core and RadTech, as if each of these acquisitions
had occurred on January 1, 2000 and July 1, 2000, respectively.
All of the following unaudited pro forma consolidated results of
operations give effect to purchase accounting adjustments. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of what operating results would have been had the acquisitions
actually taken place.
Nine Months Ended Three Months Ended
Pro forma: September 30, 2000 September 30, 2000
------------------ ------------------
Revenues ............................. $ 573,475 $ 224,546
Net loss ............................. $ (3,939,329) $ (3,161,043)
Basic and diluted net loss
per share ........................... $ (0.20) $ (0.15)
Weighted average shares outstanding .. 19,565,332 20,556,573
F-5
<PAGE>
(4) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). This statement was amended by the issuance of SFAS 137 and SFAS 138,
which is effective for the Company beginning January 1, 2001 and requires that
all derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if so, the type of hedge
transaction. Management of the Company anticipates that the adoption of SFAS 133
will not have a material impact on the Company's financial position or its
results of operations.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements," which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 is effective for the
Company's fourth quarter of 2000. The Company does not expect the implementation
of SAB 101 to have a material effect on its financial position or results of
operations.
In March 2000, the FASB issued interpretation No. 44, "Accounting
for Certain Transactions involving Stock Compensation, and Interpretation of APB
Opinion No. 25" (FIN. 44). The interpretation is intended to clarify certain
problems that have arisen in practice since the issuance of APB No. 25
"Accounting for Stock Issued to Employees." The effective date of the
interpretation is July 1, 2000. The provisions of the interpretation will apply
prospectively, but it will also cover certain events occurring after December
15, 1998 and after January 12, 2000. The adoption of FIN. 44 did not have an
effect on the current or historical consolidated financial statements.
(5) Stockholders' equity
On January 24, 2000, Palamon (Gestion) S.A. exercised its loan note
for $50,000 for 200,000 shares. The purpose of the loan note was to enable the
Company to file all outstanding reports required by the Securities Exchange Act,
and to search for suitable acquisition candidates in the Internet related
fields.
On January 28, 2000, the Company sold 5,000,000 shares of common
stock at a price of $1.00 per share pursuant to Regulation S. The Company has
agreed to register 25% of the shares under the Securities Act of 1933, as
amended. In consideration for underwriting the issue in full, the underwriter
received warrants to purchase up to 1,000,000 shares of common stock of the
Company at a price of $1.00 per share. On May 12, 2000, the underwriters
exercised all the warrants under a stock subscription agreement for $1,000,000.
On April 21, 2000, the Company issued 1,016,088 shares of common
stock in the first closing of the acquisition of RadTech. The purchase price
allocated to this transaction is based on $8.20 per share. The Company will have
an independent appraisal of the transaction to calculate the final purchase
price per share. As of September 30, 2000, the Company has issued 1,197,103
shares and acquired 93.4% of the outstanding shares of RadTech.
(6) Comprehensive Income
As of September 30, 2000, and for the nine months and quarter then
ended comprehensive income is comprised of a net loss from operations and the
net effect of foreign currency translation adjustments. This comprised a net
loss of approximately $3,161,000 and $2,174,000 and foreign currency translation
adjustments of approximately $219,000 and $61,000, resulting in comprehensive
loss of approximately $3,380,000 and $2,235,000, respectively.
(7) Fixed Assets
Fixed assets are stated at cost and are generally depreciated over
two to seven years.
(8) Research and Development
Research and development costs are expensed as incurred in
accordance with the Statement of Financial Accounting Standards (SFAS) 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed". The Company has decided to expense all software product development
costs, which has resulted in total expense of $1,051,000 for the nine months and
quarter ended September 30, 2000, respectively, due to management's reevaluation
of its projects in determining the point of technical feasibility.
(9) Employee Stock Options
On May 3, 2000, the Board of Directors approved the Company's
Combined Incentive and Nonqualified Stock Option Plan and has reserved 2,500,000
shares of its common stock for issuance upon exercise of options granted under
this plan. As of September 30, 2000, the Company has issued 1,168,000 options
for certain employees and directors of the Company at fair value.
(10) Subsequent Events
On May 3, 2000 the Company entered into an agreement to acquire
Ferman AG, a Swiss venture capital company ("Ferman"). The Company concluded the
acquisition on October 5, 2000. Under the terms of the agreement, the Company
acquired all of the outstanding stock of Ferman in
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<PAGE>
exchange for an aggregate of 2,550,000 shares of the Company's Common Stock.
On October 10, 2000 the Company held a stockholders meeting whereby
the Company's Combined Incentive and Nonqualified Stock Option Plan was approved
by the stockholders. The stockholders also approved the change of the Company's
name to HTTP Technology, Inc.
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<PAGE>
SIGNATURE
In accordance with 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.
HTTP TECHNOLOGY, INC.
By: /s/ STEFAN ALLESCH-TAYLOR
-------------------------------------
Stefan Allesch-Taylor
President and Chief Executive Officer
By: /s/ JASON E. FORSYTH
-------------------------------------
Jason E. Forsyth
Chief Financial Officer
Date: November 15, 2000
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