SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
THIRD AMENDMENT TO
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
HOME.WEB, INC.
--------------
(Name of Small Business Issuer in its charter)
NEVADA 77-0454933
- ------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
603 Mar Vista Drive, Monterey, California 93940
- ----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (831) 375-6209
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
----
Securities to be registered under Section 12(g) of the Act:
Common Stock Par Value $0.001
-----------------------------
(Title of class)
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TABLE OF CONTENTS
Page
COVER PAGE 1
TABLE OF CONTENTS 2
PART I 3
DESCRIPTION OF BUSINESS 3
DESCRIPTION OF PROPERTY 10
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES 11
REMUNERATION OF DIRECTORS AND OFFICERS 12
SECURITY OWNERSHIP OF MANAGEMENT AND 12
CERTAIN SECURITYHOLDERS
INTEREST OF MANAGEMENT AND OTHERS IN 13
CERTAIN TRANSACTIONS
SECURITIES BEING OFFERED 14
PART II 15
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S 15
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
LEGAL PROCEEDINGS 15
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 15
RECENT SALES OF UNREGISTERED SECURITIES 16
INDEMNIFICATION OF DIRECTORS AND OFFICERS 16
PART F/S 16
FINANCIAL STATEMENTS 16
PART III 17
INDEX TO EXHIBITS 17
DESCRIPTION OF EXHIBITS 17
SIGNATURES 18
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PART I
The issuer has elected to follow Form 10-SB, Disclosure Alternative 2 and
is filing this Form 10- SB on a voluntary basis under the Exchange Act in order
to commence trading on the OTC Bulletin Board. Management of the issuer feels it
can provide guidance in following the compliance requirements of the Exchange
Act and is desirous of moving the Company forward in its business plan.
ITEM 6. DESCRIPTION OF BUSINESS
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Home.Web, Inc. ("Home Web," the "Company") is a development stage
company. The Company was incorporated in Nevada on September 15, 1995 with
authorized capital of ten million (10,000,000) shares of common stock, par value
$0.001 per share. From incorporation until May 1, 1997, the Company was
inactive, although the current board of directors held meetings that were
necessary in order to pre-plan the organization of the Company and to establish
a definitive business plan prior to commencing operations on May 1, 1997. The
Board also commenced forming its plan to proceed into the gourmet food market
prior to the May 1, 1997 commencement date. By the time of its May 1, 1997
commencement of operations and Rule 504 offering, the Company had a specific
business plan, which it disclosed in the offering materials, and which it has
followed.
From May 1997, the Company has been a development stage company
specializing in a variety of hand-made Monterey Jack cheeses. The Company
selected the product line and the method of marketing to use and made many basic
decisions regarding the amount of products to be offered, the colors of the
packaging and other details. Test marketing has also been done on a limited
basis. The Company is satisfied with its test market results on the cheese
products and will now be expanding sales efforts. The Company will also proceed
with a plan to expand its wholesale line, as outlined below, and is seeking
candidates for manufacturing, distribution and promotion of its products. No
retail activities will be entered into by the Company; rather, Home Web will
continue to source products and sell them wholesale.
On May 1, 1997, the Company commenced an offering, pursuant to
Regulation D of the Securities Act of 1933 (the "Act"), Rule 504, of up to
2,400,000 shares of its common stock at a price of $0.05 per share. This
offering was conducted in order to raise money for working capital and inventory
and was broken down as follows: $12,000 for working capital, $58,000 for
inventory, $15,000 for consulting fees, $20,000 for legal and accounting fees
and $15,000 for offering-related costs. On September 24, 1998, the offering was
completed with all shares being sold and issued for a total of $120,000, less
offering costs of $15,000 being received by the Company. A closing Form D was
filed September 24, 1998. The consulting fees of $15,000 were paid to Monterey
Ventures, Inc. for assistance in completing the business plan for the Company.
The professional assistance provided was in the areas of corporate structure,
finance, management structure, time-line projections, future funding assistance
and marketing.
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In June 1997, the Company increased its authorized capital to fifty
million (50,000,000) shares of common stock, par value $0.001 per share.
Home.Web does not plan to conduct any offering of securities in 1999.
The Company will, instead, establish its sales history before any other stock
offering will be considered. The only circumstances under which the Company may
conduct an offering sooner is if an opportunity arises to expand the Company by
acquiring a business with established product sales and distribution.
The Company signed a Purchasing Agreement with Internet Food Company,
Inc. ("Internet Food Company") on May 6, 1999. According to the terms of this
agreement, the Company will sell a variety of cheeses and gourmet food products
to Internet Food Company and will advertise on its web site. Home Web will also
develop special private label products for Internet Food Company. There are no
minimum purchase requirements in this contract and no guarantees that any
products will be purchased.
The going concern opinion of the independent accountant, as disclosed
in the Company's Independent Auditors Report attached to Part F/S, is as
follows:
"As of December 31, 1998, the Company had net losses from operating
activities which raise substantial doubt about its ability to continue
as a going concern.
The Company has obtained a commitment for up to $150,000 from a
significant shareholder, Monterey Ventures, Inc for funding over the
next twelve months. The funds would be paid distributed in increments
per requests from the Company on an "as needed" basis. Under the
agreement, the Company can repay the borrowed funds in increments as
the Company receives payment from its' customers. Also in the credit
agreement is any funds needed for longer than twelve months would be
considered long term debt. This type of funding, if needed, would be
structured for a twenty four or thirty-six month payoff not to exceed
$25,000 in requests in the first year of operations.
The Company has signed an agreement with Internet Food Company to
purchase its' products. Internet Food Company has already penetrated
the hotel and gift basket market and has further developed a web site
to market its goods. The two companies are in the process of
identifying specific products that Home Web. Inc.
would supply wholesale.
The Company's ability to continue as a going concern is dependent upon
a successful public offering and ultimately achieving profitable
operations. There is no assurance that the Company will be successful
in its efforts to raise additional proceeds or achieve profitable
operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty."
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Home Web plans to penetrate the gourmet/specialty foods market and to
maximize sales by wholesaling products to gourmet food stores, small grocery
chain stores and hotels. The product is currently sold through California
Season's, a chain of retail stores, catalog and direct mail order, as well as
business and corporate sales programs.
The Company selected Monterey, California as its location because it
was the original home of Monterey Jack cheese. David Jacks of Monterey first
produced and marketed Monterey Jack cheese in 1882. Management believes that
this cheese is the only native California cheese and one of only two cheeses
native to the United States. To the best of the Company's knowledge,
furthermore, the Monterey Cheese Company is the only company offering handmade
Monterey Jack cheese made in Monterey, California.
The Company outsources the production of its cheese products to Sonoma
Cheese Factory ("Sonoma"). Sonoma is one of the oldest hand-rolled cheese
processing plants in California and is one of only two such plants still in
existence. Due to the quality of the cheeses produced by Sonoma and the fact
that it is difficult to duplicate hand-rolled cheeses, the Company will continue
to outsource its products for the foreseeable future. There is no written
agreement between Sonoma and the Company; instead, the Company purchases the
product from Sonoma on a cash-on-delivery basis. Sonoma ships the cheese without
labels, which the Company puts on upon delivery. If Sonoma is unable to satisfy
the Company's supply requirements, a back-up supply source is available. This is
a manufacturing wholesale, retail cheese company in Sonoma doing business as
Sonoma Foods, Inc. Sonoma Foods, Inc. will be able to supply the Company with
products promptly, on the same terms and at the same cost as the Sonoma Cheese
Factory.
Product
- -------
Home Web, under the label "Monterey Jack Cheese," currently offers
twelve varieties of creamy, handmade cheeses in three pound wheels, one pound
wheels, nine ounce wedges and three ounce wedges. The varieties of cheese
include hand-rolled, original Monterey Jack, Dry Jack, Caraway, Pesto, Hot
Pepper Jack, Habanero Jack, Garlic Jack, Lite Jack, Cheddar, Chili Cheddar,
Vidalia Onion Jack and Teleme.
The Company's own research has shown that there is a niche demand for
its products because the cheeses are from Monterey and are of handmade quality.
The cheeses have been market-tested by the Company indicating consumer
acceptance. Current vendors offering these cheeses to the public include the
California Seasons chain of three retail stores, the California Seasons'
catalog, several luxury hotels in the Monterey and Big Sur area, a number of
Monterey convention groups, a distributor in Idaho, a chain of five upscale
gourmet food markets in the Los Angeles area, the Monterey Peninsula Airport
Gift Shop, a Carmel Valley, California store and several more retail stores.
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Government Regulations
- ----------------------
Home Web is a wholesaler of its products and, therefore, the only
regulation to which it is subject is the inclusion of ingredients on product
labels, and then only if the Company produces its own labels for the product.
Should the Company store its cheeses, it will be required to keep the product at
certain temperatures. The Company does not currently plan to store its products,
but, rather, will have the cheese products delivered directly to the customer.
Market
- ------
The size of the gourmet and specialty food industry has increased in
the past six years, with sales in 1995 estimated at 33.7 billion dollars by the
National Association of Specialty Foods Trade, Inc. (NASFT). "Pak Facts," a New
York resource firm, forecasts retail sales will top 47 billion dollars by the
year 2000.
Competition
- -----------
National chains, regional chains and local stores all carry lines of
cheese. Very rarely do these stores stock handmade Monterey Jack cheese. The
problem the chains have is that they are limited to the amount of products they
are able to stock because of the current mass of other non- specialty food
products they must display. This allows the Company the opportunity to offer a
variety of Monterey Jack cheese products not found in chain stores, supermarkets
and delicatessens.
Management's Discussion and Analysis and Plan of Operations
- -----------------------------------------------------------
When used in this discussion, the words "believes", "anticipates",
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties,
which would, could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to republish revised forward- looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. Readers are also urged to carefully review
and consider the various disclosures made by the Company which attempt to advise
interested parties of the factors which affect the Company's business, in this
report, as well as the Company's periodic reports on Forms 10-K, 10Q and 8-K
filed with the Securities and Exchange Commission.
Results of Operations
- ---------------------
The Company had revenues of $528 for the three-month period ending March 31,
1999 compared to $0 for the three-month period ending March 31, 1998. To date,
the Company has not relied on any revenues for funding its activities and it
does not expect to receive significant revenues from operation in the immediate
future.
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For the three-month period ending March 31, 1999, the Company's general and
administrative expenses increased to $17,759 compared to $0 for the
corresponding period in 1998. The 1999 amount increase is due to the
commencement of operations.
The Company's net loss was $18,554, for the first quarter of 1999 compared
to a net loss of $0 for the corresponding period in 1998. This increase was
primarily due to the commencement of operations.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1999, the Company's cash balance was $82, compared to $0 as
of March 31, 1998.
The Company's future funding requirements will depend on numerous factors.
These factors include the Company's ability to sell sufficient quantities of its
products to become profitable and the Company's ability to compete against other
better capitalized corporations who offer alternative or similar products.
Due to the "start up" nature of the Company's business, the Company expects
to incur losses as it expands its business. While the Company has enough cash to
fund its early stage expansion plans, the Company may choose to raise additional
funds through private or public equity investment in order to expand the range
and scope of its business operations. Even if the Company does not have an
immediate need for additional cash, it may seek access to the public equity
markets if and when conditions are favorable. There is no assurance that such
additional funds will be available for the Company to finance its operations on
acceptable terms, if at all.
In order to implement the strategic plan and meet the Company's
anticipated working capital needs, the Company estimates that it will require
$150,000 in capital ($125,000 for short-term financing and $25,000 for Salinas
Valley and Carmel Valley product development). The short-term financing would
include accounts receivable. The Company has a commitment for funding from
Monterey Ventures, Inc. ("MVI") for up to $150,000 to implement the Company's
current plans. MVI will supply short-term and long-term capital financing, which
would be for product development expenses. These funds will be distributed in
increments per requests from Home.Web, Inc. to Monterey Ventures, Inc. on an "as
needed" basis. This agreement to fund has been added as an exhibit. The funds
will be used for purchasing product on COD shipments, such as a large order of
cheese, or prepaying if the product is drop shipped to the customer. It is
anticipated that revenues will be generated during the holiday season in October
and November of 1999 and the requirements for funds from Monterey Ventures, Inc.
will be minimal. Under the agreement with Monterey Ventures, Inc., the Company
can repay the borrowed funds as payment is received from customers. This
accommodation is a short term line of credit. This type of funding, if needed,
could be structured for a payoff not to exceed $25,000 in requests in the first
year of operations and would be used for equipment or product purchases or
research and development. The Company will only be charged interest on any funds
used at commercially competitive rates. Because the products are outsourced, the
need for capital will be modest. The general cost would
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be in the graphic design for labeling and financing accounts receivable. Any
additional expenses, such as legal and accounting costs, will be paid through
this credit accommodation until the Company's revenues are able to cover these
expenses.
Home Web does not plan to conduct any offering of securities until it
has established its sales history. The only circumstances under which the
Company may conduct an offering sooner is if an opportunity arises to expand the
Company by acquiring a business with established product sales and distribution.
Additional potential sources of funds if the Company requires additional income
include factor agreements, lease agreements for equipment, to reduce costs and
private financing from major shareholders.
Plan of Operations
- ------------------
The Company has formulated a plan of operations for the next twelve
months as detailed below. In the Company's opinion, the proceeds from future
funding will satisfy its cash requirements for twelve months. During the next
six months those funds will need to be raised. The Company has no engineering,
management or similar report that has been prepared or provided for external use
by the issuer or underwriter.
By the end of fiscal 1999, the Company plans to have successfully
introduced two new product lines and labels to the gourmet food market. The
Company feels it is the proper time to bring new gourmet "niche" food products,
because the cheese line is now fully developed and ready for marketing. Carmel
Valley Farms and Salinas Valley Farms will be the two new gourmet food lines and
labels. Carmel Valley will feature wine jellies and jams and Salinas Valley will
feature artichoke products, salsa, spices, hot sauce and pasta sauce. The
marketing will be directed towards companies located in tourist areas or which
sell to tourists through local outlets. The Company will also private label
items as requested by its customers. The Company's management anticipates that
wine jellies will do exceptionally well in wineries that have gift shops. The
Company expects to have at least some of these new products available by
September 30, 1999. This will allow the Company to participate in the Food and
Beverage Show in San Francisco, California, in November 1999 and to be prepared
for the holiday food ordering season in October and November.
In order to implement the strategic plan and meet the Company's
anticipated working capital needs, the Company estimates that it will require
$150,000 in capital ($125,000 for short-term financing and $25,000 for Salinas
Valley and Carmel Valley product development). The short-term financing would
include accounts receivable. The Company has a commitment for funding from
Monterey Ventures, Inc. ("MVI") for up to $150,000 to implement the Company's
current plans. MVI will supply short-term and long-term capital financing, which
would be for product development expenses. These funds will be distributed in
increments per requests from Home.Web, Inc. to Monterey Ventures, Inc. on an "as
needed" basis. This agreement to fund has been added as an exhibit. The funds
will be used for purchasing product on COD shipments, such as a large order of
cheese, or prepaying if the product is drop shipped to the customer. It is
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anticipated that revenues will be generated during the holiday season in October
and November of 1999 and the requirements for funds from Monterey Ventures, Inc.
will be minimal. Under the agreement with Monterey Ventures, Inc., the Company
can repay the borrowed funds as payment is received from customers. This
accommodation is a short term line of credit. This type of funding, if needed,
could be structured for a payoff not to exceed $25,000 in requests in the first
year of operations and would be used for equipment or product purchases or
research and development. The Company will only be charged interest on any funds
used at commercially competitive rates. Because the products are outsourced, the
need for capital will be modest. The general cost would be in the graphic design
for labeling and financing accounts receivable. Any additional expenses, such as
legal and accounting costs, will be paid through this credit accommodation until
the Company's revenues are able to cover these expenses.
Home Web does not plan to conduct any offering of securities until it
has established its sales history. The only circumstances under which the
Company may conduct an offering sooner is if an opportunity arises to expand the
Company by acquiring a business with established product sales and distribution.
Additional potential sources of funds if the Company requires additional income
include factor agreements, lease agreements for equipment, to reduce costs and
private financing from major shareholders.
Despite these low cash reserves, additional funds may be required in
order to proceed with the business plan outlined above. These funds would be
raised through additional private placements or other financial arrangements,
including debt or equity. There is no assurance that such additional financing
will be available when required in order to proceed with the business plan or
that the Company's ability to respond to competition or changes in the market
place or to exploit opportunities will not be limited by lack of available
capital financing. If the Company is unsuccessful in securing the additional
capital needed to continue operations within the time required, the Company will
not be in a position to continue operations and the stockholders may lose their
entire investment.
Employees
- ---------
The Company currently has one full-time employee and no part-time
employees, although Cornelia Davis, a director of the Company and the wife of
its President, assists the Company occasionally on a part-time basis as needed.
Home Web will have four full-time employees by the end of 1999. The President
will perform a multitude of company functions, along with a shipping person and
a salesperson. A second shipping employee would be added prior to the holiday
season rush. A full-time office manager will be added in the second year, which
would include bookkeeping, as well as accounts receivable and payable. The
Company also anticipates hiring additional temporary help during the holiday
season, as necessary.
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Year 2000 Issues
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The Year 2000 issue arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with 20 instead of 19. If not
corrected, many computer applications could fail or create erroneous results.
Management has initiated a comprehensive program to prepare the
Company's systems for the year 2000. The Company is actively engaged in testing
and fixing applications to ensure they are Year 2000 ready. The Company does not
separately track the internal costs incurred for the Year 2000 project, but such
costs are principally the related payroll costs for certain corporate staff. The
Company currently does not expect remediation costs to be material nor does it
expect any significant interruption to its operations because of Year 2000
problems. Additionally, the Company is currently upgrading its computers and
will be purchasing new computers within the next sixty days. All of the computer
equipment and software that the Company will be purchasing are Y2K Compliant.
The Company has contacted all third parties with which it has
significant relationships, to determine the extent to which the Company could be
vulnerable to failure by any of them to obtain Year 2000 compliance. Responses
received as of this date have indicated Year 2000 issues are not material to
third parties. Contingency plans have been established to select alternate
vendors. To date, the Company is not aware of any significant third parties with
a Year 2000 issue that could materially impact the Company's operations,
liquidity or capital resources. The Company has no means, however, of ensuring
that third parties will be Year 2000 ready and the potential effect of
third-party non-compliance is currently not determinable.
The Company has devoted and will continue to devote the resources
necessary to ensure that all Year 2000 issues are properly addressed. There can
be no assurance, however, that all Year 2000 problems are detected. Further,
there can be no assurance that the Company's assessment of its third party
relationships could be accurate. Some of the potential worst-case scenarios that
could occur include (1) corruption of data in the Company's internal systems and
(2) failure of government and insurance companies' reimbursement programs. If
any of these situations were to occur, the Company's operations could be
temporarily interrupted. The Company intends to develop Year 2000 contingency
plans for continuing operations in the event such problems arise.
ITEM 7. DESCRIPTION OF PROPERTY
- ------- -----------------------
The Company leases office space from its President at a rate of $250 per
month on a month-to-month basis. These offices are located at 603 Mar Vista
Drive, Monterey, California, 93940.
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ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
- ------- -------------------------------------------------------
The following information sets forth the names of the officers and
directors of the Company, their present positions with the Company and
biographical information.
Dennis Davis. (Age 47). President, Chief Executive Officer, Director. Mr. Davis
has been involved with the Company since April 1997 as its President, CEO and
Director. From 1994 to the present, he has been self-employed as an independent
consultant specializing in financial matters, creating and developing business
plans, strategic planning and assisting privately-owned and public companies
with financing, acquisition financing and liquidity options. Mr. Davis also
serves on the Monterey Golf Foundation committee, a non-profit organization that
is responsible for the AT&T Pro-Am Golf Tournament. Before becoming a
consultant, Mr. Davis was in the banking industry for fifteen years and has
management and planning experience. His banking career included, at various
times, the positions of Administrator of the Lending Department, Vice President,
Senior Commercial Loan Officer, Vice President responsible for the Real Estate
and Construction Department, Vice President responsible for the Loan Adjustment
Department and Branch Manager. Mr. Davis also spent eight years as the managing
general partner for a grocery and liquor retail outlet with gross sales of one
million dollars per year. Currently, Mr. Davis is also a director and officer of
Monterey, Ventures, Inc., a Monterey, California-based financing corporation,
with which he has been involved since 1997. He is the husband of Cornelia Davis,
an officer and director of the Company.
Cornelia Davis. (Age 34). Secretary, Treasurer, Director. Ms. Davis is the
President of CDIC Financial Services, a financial and business consulting
company. Her past experience includes capital formation for private and public
companies, including acquisition financing and other financing options. Ms.
Davis also specializes in assisting companies with sales, marketing and
promotion. She has spent the past year contracted as a consultant with
Professional Detailing, Inc., a contract pharmaceutical company operating out of
New Jersey, where she helps with sales, marketing and promotions. In 1996 and
1997 she worked in marketing and promotions for CUC International, which
produces an annual publication involving the entertainment industry. From 1992
to 1995, she consulted for a retail golf company in the position of investor
relations coordinator. Prior to this, Ms. Davis was the Business Development
Director of Chicago Title Company. She also was the founder of Yavapai Land Fund
Mutual, an Arizona real estate investment company. Ms. Davis received a B.A.
degree in Organization and Communication from Arizona State University with a
minor in Human Resources and has been a director and the Secretary of the
Company since June 1, 1997. She is the wife of Dennis Davis, the President and a
director of the Company.
Florence G. Roberts. (Age 48). Director. Ms. Roberts is currently a consultant
for Monterey Season's, Inc., a gourmet and specialty foods company. She is
assisting this company with its business strategies and capital formation. Since
1006, Ms. Roberts has been actively involved in the management of rental
properties on the Monterey Peninsula and has sold art work for local galleries
on a free-lance basis. From 1989 to 1996, Ms. Roberts owned and operated
"Lonesome
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Dove," a retail store in Carmel, California which specialized in the sale of
western wear and Indian artifacts. Ms. Roberts received her B.A. in English from
Illinois State Normal University in 1972 and attended Anthony School of Real
Estate in Pacific Grove, California, in 1974. She has been a director of the
Company since June 1996.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
- ------- --------------------------------------
The following table sets forth certain information as to the
compensation awarded to the Company's executive officers and directors for the
fiscal year ended December 31, 1998 and for the fiscal year which will end on
December 31, 1999. No other compensation was paid or will be paid to any such
officers other than the cash compensation set forth below.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Other Restricted
Annual Stock Options/ LTIP All Other
Name Title Year Salary Bonus Compensation Awarded SARs (#) payouts ($) Compensation
- ---- ----- ---- ------ ----- ------------ ------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis Davis Pres, Dir. 1998 $0 $0 $0 -0- -0- -0- $700.00
Cornelia Davis Treas, 1998 $0 $0 $0 -0- -0- -0- $0
Sec., Dir
Florence Dir 1998 $0 $0 $0 -0- -0- -0- $0
Roberts
</TABLE>
In fiscal 1998, the aggregate amount of compensation paid to all
executive officers and directors as a group for services in all capacities was
approximately $700.00. No compensation will be paid executive officers and
directors for services in fiscal 1999.
ITEM 10. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The following table sets forth, as of January 31, 1999, the
beneficial ownership of the Company's Common Stock by each person known by the
Company to beneficially own more than 5% of the Company's Common Stock,
including options, outstanding as of such date and by the officers and directors
of the Company as a group. Except as otherwise indicated, all shares are owned
directly.
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<TABLE>
<CAPTION>
Name and address of Amount and Nature Percent
Title of Class beneficial owner of beneficial owner of class
- -------------- ---------------- ------------------- --------
<S> <C> <C> <C>
Common stock Dennis Davis 15,250,000 56.2%
P.O. Box 653
Pacific Grove, CA 93950
Common stock Cornelia Davis 5,100,000 18.8%
P.O. Box 653
Pacific Grove, CA 93950
Common stock Florence G. Roberts 4,050,000 14.9%
20 Paso Del Rio
Carmel Valley, CA 93924
Common stock Monterey Ventures, Inc.* 1,550,000 5.7%
380 Foam Street, Suite 210
Monterey, CA 93940
Common stock Directors and Officers 24,400,000 89.9%
as a group (3 persons)
</TABLE>
* Dennis Davis is an officer and director of Monterey Ventures, Inc. and owns
2.5% of its outstanding stock.
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
- -------- ---------------------------------------------------------
The Company maintains its executive offices on a shared basis
with its President and Chief Executive Officer.
The Company has retained the services of Monterey Ventures, Inc.
(MVI), a private firm that specializes in assisting companies with investment
banking services. The Company has executed an Investment Banking Agreement that
calls for MVI to provide guidance and consultation to the Company, primarily in
the areas of preparing the private placement offering memorandum, corporate
finance and public market development. The Company will pay a cash fee of
$10,000 as compensation for services to be rendered by MVI. It is further noted
that Dennis Davis, an executive officer and director of the Company, is also an
equity member of MVI, as he owns 45,000 shares of stock of MVI or 2.5% of the
outstanding common stock, and thus stands to benefit personally from this
Investment Banking Agreement. Also, as a part of this Investment Banking
Agreement, the Company has agreed to issue a stock option agreement that will
allow MVI to
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purchase up to 750,000 shares of the Company's common stock at an exercise price
of $.01 per share. The Company has not adopted any policies regarding affiliated
transactions. All such transactions to date have been at arms-length.
ITEM 12. SECURITIES BEING OFFERED
- -------- ------------------------
No sale of securities is authorized by this filing. The common
stock of the Company is being registered under Section 12(g) of the Securities
Exchange Act of 1934.
The Company has 50,000,000 common shares authorized. Each share
of Common Stock is entitled to share pro rata in dividends and distributions
with respect to the Common Stock when, as and if declared by the Board of
Directors from funds legally available therefor. No holder of any shares of
Common Stock has any pre-emptive right to subscribe for any of the Company's
securities. Upon dissolution, liquidation or winding up of the Company, the
assets will be divided pro rata on a share-for-share basis among holders of the
shares of Common Stock after-any required distribution to the holders of the
preferred stock. All shares of Common Stock outstanding are fully paid and
non-assessable and the shares will, when issued upon payment therefore as
contemplated hereby, be fully paid and non-assessable.
Each shareholder of Common Stock is entitled to one vote per
share with respect to all matters that are required by law to be submitted to
shareholders. The shareholders are not entitled to cumulative voting in the
election of directors. Accordingly, the holders of more than 50% of the shares
voting for the election of directors will be able to elect all the directors if
they choose to do so. The Company has 1,250,000 shares reserved for its
directors and consultants under a Stock Option Plan approved by the board of
directors in June 1997 for issuance at $0.01 per share until December 31, 1999.
The optionees and numbers of shares optioned are as follows:
Monterey Ventures, Inc. 750,000
Cornelia Davis 100,000
Florence G. Roberts 50,000
Dennis Davis 250,000
Janice Demianew 100,000
As of January 31, 1999, the following of the above-referenced
options been exercised:
Janice Demianew 100,000
Florence G. Roberts 50,000
Monterey Ventures, Inc. 750,000
14
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
- ------- -------------------------------------------------------------------
OTHER STOCKHOLDER MATTERS
-------------------------
There is currently no public market for the Company's stock. The
Company has never paid dividends. At present, the Company does not anticipate
paying dividends on its Common Stock in the foreseeable future and intends to
devote any earnings to the development of the Company's business. As of March
31, 1999, the Company had 27,157,000 shares of common stock and 350,000 options
for common stock outstanding and there were sixty-six (66) shareholders of
record.
ITEM 2. LEGAL PROCEEDINGS
- ------- -----------------
There are no legal proceedings pending or threatened against the
Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------- ---------------------------------------------
The Company has had no changes in or disagreements with its
Accountants since inception.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- ------- ---------------------------------------
The Company offered for sale a Private Placement Memorandum
pursuant to Regulation D, Rule 504 which was begun on May 1, 1997 and completed
on September 24, 1998. This offering was for 2,400,000 shares of common stock at
$0.05 per share for a total offering of $120,000. All shares were sold to a
total of 36 accredited and 27 unaccredited investors. The proceeds from this
offering were used for working capital, legal and accounting fees, consulting
fees and inventory.
At the organizational meeting of the board of directors, each
officer of the Company was authorized to receive shares of common stock of the
Company in exchange for services provided. This amount totaled 24,000,000
shares. Fair value of the stock was established at the par value of $.05, since
there were sales to outside, third-party investors at the par value amount.
These shares were issued in reliance upon Section 4(2) of the Securities Act of
1933.
In 1997, the Company also voted to grant options to its officers
and to Monterey Ventures, Inc., an affiliated company, as well as to one
employee of Monterey Ventures, Inc. as compensation for product and marketing
services provided to the Company. These options are exercisable at $0.01 per
share and consist of a total of 1,250,000 options with an expiration date of
December 31, 1999. The options are not compensatory, nor do they represent
services rendered. The options were issued in reliance upon Section 4(2) of the
Securities Act of 1933. To date, all
15
<PAGE>
options have been exercised except for 250,000 options held by Dennis Davis and
100,000 options held by Cornelia Davis.
The options issued to Monterey Ventures, Inc. totaled 750,000
options at $0.01 per share with an expiration date of December 31, 1999 in
exchange for assisting the Company by covering overhead costs on the offering.
The options were issued for work performed in lieu of compensation. Monterey
Ventures, Inc. was also sold 50,000 shares as part of the Company's May 1, 1997
504 offering. MVI purchased these shares at the purchase price of $0.05 per
share - the same price as all other investors.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ------- -----------------------------------------
So far as permitted by the Nevada Revised Statutes, the Company's
Articles of Incorporation provide that the Company will indemnify its Directors
and Officers against expenses and liabilities they may incur and defend, settle
or satisfy any civil or criminal action brought against them on account of their
being or having been Company Directors or Officers unless, in any such action,
they are adjudged to have acted with gross negligence or to have engaged in
willful misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 19-314,
as amended, (collectively, the "Acts") may be permitted to directors, officers
or controlling persons pursuant to foregoing provisions, the Company has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Acts and is,
therefore, unenforceable.
PART F/S
FINANCIAL STATEMENTS
16
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Index to Financial Statements
Page
----
Independent Auditor's Report............................................... 2
Balance Sheet, December 31, 1997........................................... 3
Statement of Operations, (inception)
Through December 31, 1997 ............................................... 4
Statement of Shareholders' Equity
December 31, 1997 ....................................................... 5
Statement of Cash Flows,
Ended December 31, 1997 ................................................. 6
Summary of Significant Accounting Policies ................................ 7-8
Notes to Financial Statements ............................................. 9-11
<PAGE>
HAWKINS ACCOUNTING
CERTIFIED PUBLIC ACCOUNTANT 341 MAIN STREET SALINAS CA 93901
(931) 758-1694 FAX (831) 758-1699
To the Board of Directors and Shareholders
Home Web, Incorporated
Monterey, California
INDEPENDENT AUDITOR'S REPORT
I have audited the balance sheet of Home Web, Incorporated (a development stage
company) as of December 31, 1997 and the related statements of operation,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the arnounts and assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation, I believe that my audit provides reasonable basis for
my opinion.
In my opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Home Web,
Incorporated, as of December 31, 1997 and the results of operations and its cash
flows from inception through December 31, 1997 then ended in conformity with
generally accepted accounting principles.
The accumulated deficit during the development stage for the period then ended
is $1,220,492 and cash flows of $267.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note H to the financial
statements, the Company has incurred net losses since inception, which raises
substantial doubt about its ability to continue as a going concern, The
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
/s/ Hawkins Accounting
Reissued July 8, 1999
February 5, 1999
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
BALANCE SHEET
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash in bank-First National $ 267
Accounts receivable 1,400
-----
Total Current Assets 1,667
Equipment
Coolers and equipment 13,850
Office equipment 4,745
-----
18,595
Accumulated depreciation (1,022)
------
Total Equipment 17,573
Other assets
Organizational expenses 3,960
Trade name
------
Accumulated amortization (792)
----
Total Other Assets 3,168
TOTAL ASSETS $ 22,408
======
LIABILITIES AND CAPITAL
Current liabilities
Contract payable 5,500
California Franchise Tax 800
---
Total Current Liabilities 6,300
TOTAL LIABILITIES 6,300
Common stock 24,732
Paid in capital 1,211,868
Deficit accumulated during development stage (1,220,492)
----------
TOTAL CAPITAL 16,108
TOTAL LIABILITIES AND CAPITAL $ 22,408
===========
</TABLE>
See accompanying notes and accountant's report
3
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the year ending December 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Development
Stage
-----
<S> <C> <C>
Revenue
Sales $ 11,094 $ 11,094
Cost of sales 9,375 9,375
----- -----
Gross margin 1,719 1,719
Expenses
Advertising 64 64
Amortization 792 792
Consulting fees 1,200 1,200
Equipment rental
Depreciation 1,022 1,022
License and taxes
Meals and entertainment 546 546
Office help
Office supplies 369 389
Postage 52 62
Travel 57 57
Telephone and utilities 213 213
Rent 1,200 1,200
Business start up costs 15,676 15,876
Compensation due stock issuance 1,200,000 1,200,000
--------- ---------
Total expenses 1,221,411 1,221,411
--------- ---------
(Loss) from operations (1,219,692) (1,219,692)
Other income (expense)
Interest
Nondeductible penalties
State tax expense (800) (800)
---- ----
Total other expenses (800) (800)
---- ----
Net loss $ (1,220,492) $ (1,220,492)
============= =============
Loss per share
of common stock $ (0.0762) $ (0.0762)
============= =============
Weighted average of
shares outstanding 16,024,783 16,024,783
========== ==========
</TABLE>
See accompanying notes and accountant's report
4
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Deficit
Common Stock Paid in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
Stock issued for services 24,000,000 $ 24,000 1,176,000 $ $ 1,200,000
May 5, 1997 20,000 20 980 1,000
May 27, 1997 150,O0O 150 7,350 7,500
June 3, 1997 60,000 50 2,450 2,500
July 21, 1997 20,000 20 980 1,000
August 1, 1997 20,000 20 980 1,000
August 6, 1997 12,000 12 588 600
August 8, 1997 20,000 20 980 1,000
August 11, 1997 12,000 12 588 600
August 22, 1997 10,000 10 490 500
August 25, 1997 10,000 10 490 500
September 4, 1997 20,000 20 980 1,000
September 10, 1997 20,0OO 20 980 1,000
September 16, 1997 20,000 20 980 1,000
September 17, 1997 20,000 20 980 1,000
September 26, 1997 10,000 10 490 500
Seiptember 30, 1997 10,000 10 490 500
October 2, 1997 10,000 10 490 500
October 7, 1997 47,000 47 2,303 2,350
October 16, 1997 10,000 10 490 500
October 24, 1997 20,000 20 980 1,000
October 27, 1997 25,000 25 1,225 1,250
November 10, 1997 80,000 80 3,920 4,000
November 13, 1997 16,000 16 784 800
December 12, 1997 100,000 100 4,900 5,000
Net loss (1,220,492) (1,220,492)
---------- --------- --------- ----------- -----------
24,732,000 $ 24,732 1,211,868 $ (1,220,492) $ 16,108
========== ========= ========= ============= ============
</TABLE>
See accompanying notes and accountants report
5
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
STATEMENT OF CASH FLOWS - INDIRECT METHOD
For the year ending December 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Development
Stage
-----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (20,492) $ (20,492)
Adjustment to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 1,814 1,814
Increase in accounts receivable (1,400) (1,400)
Increase in accounts payable and other liabilities 6,300 6,300
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES (13,778) (13,778)
INVESTING ACTIVITIES
Increase in other assets 3,960 3,960
Purchase of property, plant and equipment 18,595 18,595
------ ------
NET CASH USED IN INVESTING ACTIVITIES 22,555 22,555
FINANCING ACTIVITIES
Sale of common stock 36,600 36,600
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 267 267
Cash and cash equivalents at beginning of the year 0 0
- -
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 267 $ 267
=========== ===========
Supplemental schedule of noncash operating and
financing activities
The Company issued 24,000,000 shares of common
stock with a par value of $.001 and a market
value of $.05 for compensation of services of
$1,200,000.
</TABLE>
See accompanying notes and accountant's report
6
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies
December 31, 1997
Development Stage Company
- -------------------------
Home Web, Inc. (the "Company") is a development stage company, as defined
in the Financial Accounting Standards Board No. 7. The Company is devoting
substantially all of its present efforts in securing and establishing a new
business, and although planned principal operations have commenced,
substantial revenues have yet to be realized.
Use of estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
Cash equivalents
- ----------------
For the purpose of the statement of cash flows, the company comsiders all
highly liquid debt instruments purchased with the original maturity of
three months or less to be cash equivalents.
Organization and Business Start Up and Amortization
- ---------------------------------------------------
Organization costs are recorded at cost. Amortization is calculated by the
straight-line method over a period of sixty months. Amortization for the
year ending December 31, 1997 was $ 792.
Income Taxes
- ------------
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the recorded book basis and
tax basis of assets and liabilities for financial and income tax reporting.
The deferred tax assets and liabilities represent the future tax return
consequences of those diffierences, which will either be taxable or
deductible when the assets and liabilities are recovered or settle.
Deferred taxes are also recognized for operating losses that are available
to offset future taxable income and tax credits that are available to
offset future federal income taxes.
Common Stock
- ------------
Common stock is at $.001 par value, with 50,000,000 shares authorized,
24,732,000 outstanding as of December 31, 1997.
7
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Summary of Significant Accounting Policies (Con't)
December 31, 1997
Stock options
- -------------
Stock that is issued in exchange for services rendered to the Company, is
recorded at the fair value of the stock in the year that the stock is
issued and recorded as an expense in the same year.
8
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997
Note A: Backgound
- -----------------
The Company was incorporated under the laws of the State of Nevada on
September 15, 1995. The principal activities of the Company, from the
beginning of the development stage, have been organizational matters and
the sale of stock. The Company was formed to sell wholesale gourmet and
specialty cheese on the Internet. During the period ending December 31,
1997 the Company had sales and incurred expenses against those sales, but
the activity was immaterial for the purposes of SFAS No. 7. The Company had
no activity until May 1997.
Note B: Related Party Transactions
- ----------------------------------
The company entered into an agreement with Monterey Ventures, Inc ("MVI"),
an affiliated company and a shareholder, whereby, MVI will provide
investment banking and other consulting services to the Company. The
agreement is for $10,000 of which $4,700 was paid in 1997. The Company also
paid rent to MVI under a rental agreement $1,200 during the year ending
December 31, 1997. Total other reimbursements to MVI for office expenses,
phone services etc. amounted to $ 1,279 for the year.
During the year the Company paid one of its founders $2,400 for consulting
services to the Company.
Note C: Income taxes
- --------------------
The benefit for income taxes from operations consisted of the following
components: curront tax benefit of $697 resulting from a net loss before
income taxes, and deferred tax expenses of $697 resulting from a valuation
allowance recorded against the deferred tax asset resulting from net
operating losses. Net operating loss carryforward will expire in 2013.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At the time, the allowance will either be increased or reduced;
reduction would result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer required.
9
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997
NOTE C: Income taxes (con't)
- ----------------------------
The income tax returns were filed without taking into consideration the
$1,200,000 deduction for the issuance of common stock for compensation of
services. Net operating losses that are being carried forward are only the
amounts that are represented by cash flows. No deferred tax asset has been
set up to book the tax benefit of the $1,200,000 stock for services.
NOTE D: Public stock offering
- -----------------------------
During the period ended December 31, 1997, pursuant to an exemption under
Rule 504 Regulation D of the Securities Act of 1933, as amended (the Act),
the Company sold solely to accredited and/or sophisticated investors, its
common stock. Each share has a par value of $.001. The stock was sold
during various times during the year to 30 different investors buying a
total of 732,000 common shares of the Company's stock. Total proceeds, from
the offerings, as of the period ended December 31, 1997 were $36,600.
Note E: Stock options
- ---------------------
At the organizational meeting of the board of directors it was voted on
that the officers of the Company be given shares of common stock in
exchange for services provided. That amount was 24,000,000 shares. Fair
value of the stock was established at $.05 since there were sales to
outside third party investors at that amount. The company recognized
$1,200,000 of compensation expense for the year ended December 31, 1997.
Options were also granted to officers of the corporation and MVI, an
affiliated company and one employee of MVI. The options are to exercised at
$.01 for MVI and $.001 for the officers and the employee and total
1,250,000 with an expiration date of December 31, 1999. These options are
not for services rendered so no provision has been made to account for
these.
Note F: Property, equipment and depreciation
- --------------------------------------------
Property and equipment are recorded at cost. Maintenance and repairs are
expensed as incurred; major renewals and betterments are capitalized. When
items of property and equipment are sold or retired, the related costs and
accumulated depreciation are removed from the accounts and any gain or loss
is included in income.
Depreciation expense for the period ending December 31, 1997 was $1,022.
10
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997
NOTE G: Commitments
- -------------------
During the year, the Company had a purchase commitment to purchase coolers,
equipment and certain intangible assets froin a nonaffiliated company. For
the period ended December 31, 1997, the outstanding amount that the Company
still owed was $ 42,458.
NOTE H: Going concern
- ---------------------
As of December 31, 1997, the Company had net losses from operating
activities which raise substantial doubt about its ability to continue as a
going concern.
The Company has obtained a commitment for up to $150,000 from a significant
shareholder, Motiterey Ventures, Inc for funding over the next twelve
months. The funds would be paid distributed in increments per requests from
the Company on an "as needed" basis. Under the agreement, the Company can
repay the borrowed funds in increments as the Company receives payment from
its' customers. Also in the credit agreement is any funds needed for longer
than twelve months would be considered long term debt. This type of
funding, if needed, would be structured for a twenty four or thirty-six
month payoff not to exceed $ 25,000 in requests in the first year of
operations.
The Company has signed an agreement with Internet Food Company to purchase
its' products. Internet Food Company has already penetrated the hotel and
gift basket market and has further developed a web site to market its
goods. The two companies are in the process of identifying specific
products that Home Web. Inc. would supply wholesale.
The Company's ability to continue as a going concern is dependent upon a
successful public offering and ultimately achieving profitable operations.
There is no assurance that the Company will be successful in its efforts to
raise additional proceeds or achieve profitable operations. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
11
<PAGE>
HOME.WEB, INCORPORATED
----------------------
(A Development Stage Company)
Monterey, Cafifornia
FINANCIAL STATEMENTS
with
INDEPENDENT AUDITOR'S REPORT
December 31, 1998
Prepared By:
HAWKINS ACCOUNTING
CERTEFIED PUBLIC ACCOUNTANT
SALINAS, CALIFORNIA
<PAGE>
HOME.WEB, INCORPORATED
(A Development Stage Company)
Index to Financial Statements
Page
----
Independent Auditor's Report ...................................... 2
Balance Sheet, December 31, 1998 .................................. 3
Statement of Operations, (inception)
Through December 31, 1998 ........................................ 4
Statement of Shareholders' Equity
December 31, 1998 ................................................ 5-6
Statement of Cash Flows,
Ended December 31, 1998 .......................................... 7
Summary of Significant Accounting Policies ......................... 8-9
Notes to Financial Statements ...................................... 10-13
<PAGE>
HAWKINS ACCOUNTING
CERTIFIED PUBLIC ACCOUNTANT 341 MAIN STREET SALINAS CA 93901
(831) 759-1694 FAX (831) 759-1699
To the Board of Directors and Shareholders
Home Web, Incorporated
Monterey, California
INDEPENDENT AUDITOR'S REPORT
I have audited the balance sbeet of Home Web, Incorporated (a development stage
company) as of December 31, 1998 and the related statements of operations,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides reasonable basis for my
opinion.
In my opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Home Web,
Incorporated, as of December 31, 1998 and the results of operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
The accumulated deficit during the development stage is $ 1,261,013 and cash
flows of $97.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note H to the financial
statements, the Company has incurred net losses since inception, which raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
/s/ Hawkins Accounting
Reissued July 8, 1999
January 13, 1999
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash in bank-First National $ 97
Accounts receivable 1,450
-----
Total Current Assets 1,547
Equipment
Coolers and equipment 40,308
Office equipment 9,841
-----
50,149
Accumulated depreciation (5,285)
------
Total Equipment 44,864
Other assets
Organizational expenses 3,960
Trade name 11,000
------
14,960
Accumulated amortization (1,584)
-------
Total Other Assets 13,376
------
TOTAL ASSETS $ 59,787
======
LIABILITIES AND CAPITAL
Current liabilities
California Franchise Tax 800
---
Total Current Liabilities 800
TOTAL LIABILITIES 800
Common stock 27,147
Paid in capital 1,292,853
Deficit accumulated during development stage (1,261,013)
----------
TOTAL CAPITAL 58,987
TOTAL LIABILITIES AND CAPITAL $ 59,787
===========
</TABLE>
See accompanying notes and accountant's report
3
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the year ending December 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Development
Stage
-----
<S> <C> <C>
Revenue
Sales $ 7,265 $ 18,359
Cost of sales 5,193 14,568
----- ------
Gross margin 2,072 3,791
Expenses
Advertising 785 849
Amortization 792 1,584
Consulting fees 4,496 5,696
Equipment rental 2,339 2,339
Depreciation 4,263 5,285
License and taxes 225 225
Meals and entertainment 302 848
Office help 10,841 10,841
Office supplies 2,783 3,172
Postage 621 673
Travel 1,720 1,777
Telephone and utilities 1,030 1,243
Rent 900 2,100
Business start up costs 10,480 26,356
Compensation due stock issuance 1,200,000
------ ---------
Total expenses 41,577 1,262,988
------ ---------
(Loss) from operations (39,505) (1,259,197)
Other income (expense)
Interest (50) (50)
Nondeductible penalties (166) (166)
State tax expense (800) (1,600)
---- ------
Total other expenses (1,016) (1,816)
------ ------
Net loss $ (40,521) $ (1,261,013)
=============== ==============
Loss per share
of common stock $ (0.0021) $ (0.0474)
=============== ==============
Weighted average of
shares outstanding 26,563,959 26,563,959
========== ==========
</TABLE>
See accompanying notes and accountant's report
4
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Deficit
Common Stock Paid in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
December 31, 1997 24,732,000 $ 24,732 1,211,868 $ (1,220,492) $ 16,108
Options exercised 750,000 750 6,760 7,500
Options exercised 150,000 150 150
January 5, 1998 7,000 7 343 350
January 6, 1998 10,000 10 490 50O
January 20, 1998 10,000 10 490 500
January 21, 1998 60,000 60 2,940 3,O0O
February 2, 1998 140,000 140 6,860 7,000
February 4, 1998 40,000 40 1,960 2,000
February 6, 1998 20,000 20 980 1,000
February 9, 1998 20,000 20 980 1,000
February 13, 1998 20,000 20 980 1,OO0
February 17, 1998 70,000 70 3,430 3,500
February 23, 1998 120,000 120 5,680 6,000
February 27, 1996 100,000 100 4,900 5,000
March 6, 1998 110,000 110 5,390 5,500
March 13, 1998 14,000 14 686 700
April 8, 1998 10,000 10 490 500
April 27, 1998 110,00O 100 4,900 5,000
May 4, 1998 130,000 130 6,370 6,500
May 15, 1998 12,000 12 588 600
May 6, 1998 20,000 20 980 1,000
June 19, 1998 50,000 50 2,450 2,500
June 25, 1998 60,000 60 2,940 3,000
June 26, 1998 60,000 60 2,940 3,000
June 30, 1998 140,000 140 6,860 7,000
July 7, 1998 20,000 20 980 1,000
</TABLE>
See accompanying notes and accountant's report
5
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Deficit
Common Stock Paid in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
July 10, 1998 100,000 100 4,900 5,000
July 23,1998 10,000 10 490 500
July 27, 1998 62,000 62 3,038 3,100
Net loss for year (40,521) (40,521)
---------- ------- --------- -------- --------
27,147,000 27,147 1,292,853 $ (1,261,013) $ 58,987
========== ====== ========= ============ =========
</TABLE>
See accompanying notes and accountant's report
6
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
STATEMENT OF CASH FLOWS - INDIRECT METHOD
For the year ending December 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Development
Stage
-----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (40,521) $ (61,013)
Adjustment to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 5,055 6,869
Increase in accounts receivable (50) (1,450)
Decrease in accounts payable (5,500) 800
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES (41,016) (54,794)
INVESTING ACTIVITIES
Increase in other assets 11,000 14,960
Purchase of property, plant and equipment 31,554 50,149
------ ------
NET CASH USED IN INVESTING ACTIVITIES 42,554 65,109
FINANCING ACTIVITIES
Sale of common stock 83,400 120,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (170) 97
Cash and cash equivalents at beginning of the year 267 0
- -
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 97 $ 97
============ ===========
</TABLE>
See accompanying notes and accountant's report
7
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies
December 31, 1998
Development Stage Company
- -------------------------
Home Web, Inc. (the "Company") is a development stage company, as defined
in the Financial Accounting Standards Board No. 7. The Company is devoting
substantially all of its present efforts in securing and establishing a new
business, and although planned principal operations have commenced,
substantial revenues have yet to be realized.
Use of estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
Cash equivalents
- ----------------
For the purpose of the statement of cash flows, the company comsiders all
highly liquid debt instruments purchased with the original maturity of
three months or less to be cash equivalents.
Organization and Business Start Up and Amortization
- ---------------------------------------------------
Organization costs are recorded at cost. Amortization is calculated by the
straight-line method over a period of sixty months. Amortization for the
year ending December 31, 1998 was $ 792.
Income Taxes
- ------------
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the recorded book basis and
tax basis of assets and liabilities for financial and income tax reporting.
The deferred tax assets and liabilities represent the future tax return
consequences of those diffierences, which will either be taxable or
deductible when the assets and liabilities are recovered or settle.
Deferred taxes are also recognized for operating losses that are available
to offset future taxable income and tax credits that are available to
offset future federal income taxes.
Common Stock
- ------------
Common stock is at $.001 par value, with 50,000,000 shares authorized,
27,147,000 outstanding as of December 31, 1998.
8
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Summary of Significant Accounting Policies (Con't)
December 31, 1998
Stock options
- -------------
Stock that is issued in exchange for services rendered to the Company, is
recorded at the fair value of the stock in the year that the stock is
issued and recorded as an expense in the same year.
9
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
Note A: Backgound
- -----------------
The Company was incorporated under the laws of the State of Nevada on
September 15, 1995. The principal activities of the Company, from the
beginning of the development stage, have been organizational matters and
the sale of stock. The Company was formed to sell wholesale gourmet and
specialty cheese on the Internet. During the period ending December 31,
1998 the Company had sales and incurred expenses against those sales, but
the activity was immaterial for the purposes of SFAS No. 7. The Company had
no activity until May 1997.
Note B: Related Party Transactions
- ----------------------------------
The company entered into an agreement with Monterey Ventures, Inc ("MVI"),
an affiliated company and a shareholder, whereby, MVI will provide
investment banking and other consulting services to the Company. The
agreement is for $10,000 of which $5,500 was paid in 1998. The Company also
paid rent to MVI under a rental agreement $900 during the year ending
December 31, 1998. Total other reimbursements to MVI for office expenses,
phone services etc. amounted to $ 5,790 for the year.
During the year the Company paid one of its founders $500 for consulting
services to the Company.
Note C: Income taxes
- --------------------
The benefit for income taxes from operations consisted of the following
components: curront tax benefit of $6,078 resulting from a net loss before
income taxes, and deferred tax expenses of $6,078 resulting from a
valuation allowance recorded against the deferred tax asset resulting from
net operating losses. Net operating loss carryforward will expire in 2014.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At the time, the allowance will either be increased or reduced;
reduction would result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer required.
10
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE C: Income taxes (con't)
- ----------------------------
The income tax returns were filed without taking into consideration the
$1,200,000 deduction for the issuance of common stock for compensation of
services in the prior year. Net operating losses that are being carried
forward are only the amounts that are represented by cash flows. No
deferred tax asset has been set up to book the tax benefit of the
$1,200,000 stock for services.
NOTE D: Public stock offering
- -----------------------------
During the period ended December 31, 1998, pursuant to an exemption under
Rule 504 Regulation D of the Securities Act of 1933, as amended (the Act),
the Company sold solely to accredited and/or sophisticated investors, its
common stock. Each share has a par value of $ .001. The stock was sold
during various times during the year to 30 different investors buying a
total 1,515,000 of common shares of the Company's stock. Total proceeds,
from the offerings, as of the period ended December 31, 1998 were $ 83,400.
Note E: Stock options
- ---------------------
It was voted upon at the organizational meeting during 1997 to grant
options to officers of the corporation and MV1, an affiliated company along
with one of the employees of MV1. These options are to be exercised at
$.001 to the officers of the corporation and the employee and $.01 to MVI.
The total amount of shares is 1,250,000 with an expiration date of December
31, 1999. These options do not represent services rendered and are not
compensatory.
During the year ended December 31, 1998 MVI exercised its stock options as
did one of the shareholders and the employee of MVI. Two of the remaining
founders did not exercise their options during the year. These options
total 350,000 shares. These shares will be accounted for in the year they
are exercised.
Note F: Property, equipment and depreciation
- --------------------------------------------
Property and equipment are recorded at cost. Maintenance and repairs are
expensed as incurred; major renewals and betterments are capitalized. When
items of property and equipment are sold or retired, the related costs and
accumulated depreciation are removed from the accounts and any gain or loss
is included in income.
Depreciation expense for the period ending December 31, 1998 was $4,263.
10
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE G: Major Customer
- ----------------------
The Company had a purchase commitment to purchase the Company's merchandise
from a nonaffiliated company. This customer is also to take physical
possession of the Company's major assets and use those assets in the
ordinary course of its business. Terms are discussed more fully in Note H.
NOTE H: Going concern
- ---------------------
As of December 31, 1998, the Company had net losses from operating
activities which raise substantial doubt about its ability to continue as a
going concern.
The Company has obtained a commitment for up to $150,000 from a significant
sharebolder, Monterey Ventures, Inc for funding over the next twelve
months. The funds would be paid distributed in increments per requests
frona the Company on an "as needed" basis. Under the agreement, the Company
can repay the borrowed funds in increments as the Company receives payment
from its' customers. Also in the credit agreement is any funds needed for
longer than twelve months would be considered long term debt, This type of
funding, if needed, would be structured for a twenty-four or thirty-six
month payoff not to exceed $25,000 in requests in the first year of
operations,
The Company has signed an agreement with Internet Food Company to purchase
its products. Internet Food Company has already penetrated the hotel and
gift basket market and has further developed a web site to market its
goods. The two companies are in the process of identifying specific
products that Home Web. Inc. would supply wholesale.
The Company's ability to continue as a going concern is dependent upon a
successful public offoring and ultimately achieving profitable operations.
There is no assurance that the Company will be succcssful in its efforts to
raise additional proceeds or achieve profitable operations. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
12
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
Note I: Implementation of SOP 98-5
- ------- --------------------------
The Company elects to account for the expensing of the start up costs of
the Company effective with the year beginning January 1, 1999.
13
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
Index to Financial Statements
Page
Accountant's Review Report 2
Balance Sheet, March 31, 1999 3
Statement of Operations, Three months
Ending March 31, 1999 4
Statement of Shareholders' Equity
March 31, 1999 5
Statement of Cash Flows,
March 31, 1999 6
Summary of Significant Accounting Policies 7-8
Notes to Financial Statements 9-11
<PAGE>
HAWKINS ACCOUNTING
CERTIFIED PUBLIC ACCOUNTANT 341 MAIN STREET SALINAS CA 93901
(831) 758-1694 FAX (831) 758-1699
To the Board of Directors and Shareholders
Home Web, Incorporated
Monterey, California
I have reviewed the accompanying balance sheet of Home Web, Incorporated as of
March 31, 1999, and the related statements of income and retained earnings and
cash flows for the three months then ended March 31, 1999 and March 31, 1998, in
accordance with Statements on Standards for Accounting and review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Home Web, Incorporated.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Accumulated deficit during the development stage of through the three months
ended March 31, 1999 is $1,279,567 and cash flows of $82.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note H to the financial
statements, the Company has incurred net losses since inception, which raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
/s/ Hawkins Accounting
Reissued July 8, 1999
April 1, 1999
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
BALANCE SHEET
March 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash in bank-First National $ 82
Accounts receivable 1,450
-----
Total Current Assets 1,532
Equipment
Coolers and equipment 40,308
Office equipment 9,841
-----
50,149
Accumulated depreciation (6,606)
------
Total Equipment 43,543
Other assets
Trade name 11,000
------
Total Other Assets 11,000
TOTAL ASSETS $ 56,075
======
LIABILITIES AND CAPITAL
Current liabilities
Accounts payable 13,442
Loand from affiliate 100
California Franchise Tax 1,600
---
Total Current Liabilities 15,142
TOTAL LIABILITIES 15,142
Common stock 27,157
Paid in capital 1,293,343
Deficit accumulated during development stage (1,279,567)
----------
TOTAL CAPITAL 40,933
TOTAL LIABILITIES AND CAPITAL $ 56,075
===========
</TABLE>
See accompanying notes and accountant's report
3
<PAGE>
HOME WEB, INCORPORATED
----------------------
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the three months ending March 31, 1999 and 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Development
1999 1998 Stage
---- ---- -----
<S> <C> <C> <C>
Revenue
Sales $ 528 $ 1,100 18,887
Cost of sales 523 1,046 15,091
--- ----- ------
Gross margin 5 54 3,796
Expenses
Advertising 143 849
Amortization 492 1,684
Consulting fees 1,000 13,000 6,696
Equipment rental 1,311 2,339
Depreciation 1,321 1,248 6,806
License and taxes 140 225
Meals and entertainment 302 848
Office help 6,005 10,841
Office Supplies 120 1,638 3,292
Postage 379 673
Travel 30 1,777
Rent 2,100
Business start up costs 26,356
Compensation due stock issuance 1,200,000
Telephone and utilities 748 1,243
Development stage expense 12,952 12,952
Organization costs 2,366 2,366
----- ------ -----
Total expenses 17,759 25,436 1,280,747
------ ------ ---------
(Loss) from operations (17,754) (25,382) (1,276,951)
Other income (expense)
Interest (50) (50)
Nondeductible penalties (166)
State tax expense (800) (800) (2,400)
---- ---- ------
Total other expenses (800) (850) (2,616)
---- ---- ------
Net loss $ (18,554) $ (26,232) $ 1,279,567
============= ============ ===========
Loss per share
of common stock $ (0.0007) $ (0.0010) $ (0.0471)
============= ============= ==========
Weighted average of
shares outstanding 27,157,000 25,510,834 27,157,000
========== ========== ==========
</TABLE>
See accompanying notes and accountant's report
4
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
March 31, 1999
<TABLE>
<CAPTION>
Accumulated
Deficit
Common Stock Paid in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1998 27,147,000 $ 27,147 1,292,853 $ (1,261,013) $ 58,987
Options exercised 0 0
Common stock issued 10,000 10 490 500
Net loss for the
period ended
December 31, 1998 (18,554) (18,554)
---------- --------- --------- ------- -------
27,157,000 $ 27,157 1,293,343 $ (1,279,567) $ 40,933
========== ========= ========= ============= =========
</TABLE>
See accompanying notes and accountant's report
5
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
STATEMENT OF CASH FLOWS - INDIRECT METHOD
For the three months ending March 31, 1999 and 1998
<TABLE>
<CAPTION>
March 31, 1999
Deficit
Accumulated
During
Development
1999 1998 Stage
---- ---- -----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (15,630) $ (26,232) $ (76,701)
Adjustment to reconcile net income to net cash
provided by operating activities
Depreciation 1,321 1,740 8,190
Increase in accounts receivable (66) (1,450)
Increase in current liabilities 14,352 4,650 15,152
NET CASH PROVIDED BY OPERATING ACTIVITIES (15) (20,008) (54,809)
INVESTING ACTIVITIES
Increase in other assets 14,960
Purchase of property, plant and equipment 28,459 50,149
NET CASH USED IN INVESTING ACTIVITIES 28,459 65,109
FINANCING ACTIVITIES
Sale of common stock 49,300 120,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15) 833 82
Cash and cash equivalents at the beginning
of the period 97 267 0
CASH AND CASH EOUIVALENTS AT THE END OF THE PERIOD $ 82 $ 1,100 $ 82
Supplemental schedule of noncash operating
and financing activities
The Company issued 10,000 shares of
common stock with a par value of $.001
and a market value of $.05 for legal
fees. Total expense $500 The Company
expensed in the current year in accordance
with SOP 198-05 organization costs with
a net book value of $ 2,366.
</TABLE>
See accompanying notes and accountant's report
6
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
Summary of Significant Accounting Policies
March 31, 1999
Development Stage Company
- -------------------------
Home Web, Inc. (the "Company") is a development stage company, as defined
in the Financial Accounting Standards Board No. 7, The Company is devoting
substantially all of its present efforts in securing and establishing a new
business, and although planned principal operations have commenced,
substantial revenues have yet to be realized.
Use of estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
Cash equivalents
- ----------------
For the purpose of the statement of cash flows, the company considers all
highly liquid debt instruments purchased with the original maturity of
three months or less to be cash equivalents.
Organization and Business Start Up and Amortization
- ---------------------------------------------------
Organization costs were expensed during the period ending March 31, 1999 in
accordance with SOP 98-5. Management made the election to expense the costs
for years beginning January 1, 1999.
Income Taxes
- ------------
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related pristarily to differences between the recorded book basis and
tax basis of assets and liabilities for financial and income tax reporting.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settle.
Deferred taxes are also recognized for operating losses that are available
to offset future taxable income and tax credits that are available to
offset future federal income taxes.
Common Stock
- ------------
Common stock is at $.001 par value with 50,000,000 shares authorized,
27,157,000 outstanding as of March 31, 1999.
7
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
Summary of Significant Accounting Policies (Con't)
March 31, 1999
Stock options
- -------------
Stock that is issued in exchange for services rendered to the Company, is
recorded at the fair value of the stock in the year that the stock is
issued and recorded as an expense in the same year.
Material Adjustments
- --------------------
Management represents that all material adjustments to the financial
statements have been made.
8
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
Notes to Financial Statements
March 31, 1999
Note A: Backgound
- -----------------
The Company was incorporated under the laws of the State of Nevada on
September 15, 1995. The principal activities of the Company, from the
beginning of the development stage, have been organizational matters and
the sale of stock. The Company was formed to sell wholesale gourmet and
specialty cheese on the Internet. During the period ending March 31, 1999
the Company had sales and incurred expenses against those sales, but the
activity was immaterial for the purposes of SFAS No. 7.
Note B: Related Party Transactions
- ----------------------------------
There were no material related party transactions for the three month
period ending March 31, 1999.
For the three month period ending March 31, 1999 the Company paid to
Monterey Ventures a total of $7,210 for overhead expenses such as office
help and computer equipment. Monterey Ventures has a management contract
with the Company and is a shareholder in the Company.
During the period of March 31, 1999 the Company paid one of its founders
$500 for consulting services to the Company.
Note C: Income taxes
- --------------------
The benefit for income taxes from operations consisted of the following
components: curront tax benefit of $2,783 for March 31, 1999 and $3,935 as
of March 31, 1998 resulting from a net loss before income taxes, and
deferred tax expenses of $2,783 and $3,935 respectively resulting from a
valuation allowance recorded against the deferred tax asset resulting from
net operating losses. Net operating loss carryforward will expire in 2013.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At the time, the allowance will either be increased or reduced;
reduction would result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer required.
9
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE C: Public stock offering
- -----------------------------
During the periods ending March 31, 1999 and 1998, pursuant to an exemption
under Rule 504 of Regulation D of the Securities Act of 1933, as amended
(the Act), the Company sold solely to accredited and/or sophisticated
investors, its common stock. The only transaction during the period of
March 31, 1999 was 10,000 shares of stock issued to the corporate counsel
in exchange for legal services to the corporation.
During the period of March 31, 1998 there were various transactions to
fifteen different accredited and/or sophisticated investor. Total proceeds
from these transactions were $ 49,300.
Note D: Stock options
---------------------
It was also voted upon at the organizational meeting during 1997 to grant
options to officers of the corporation and MVI, an affiliated company along
with one of the employees of MVI. The options can be exercised by MVI at
$.01 and $.001 for the officers and the employee. The options to be
exercised are 1,250,000 and have an expiration date of December 31, 1999.
These options are not compensatory and do not represent services rendered.
Therefore, no provision has been made to account for these options until
exercised by the parties.
During the period ended March 31, 1998 MVI exercised its stock options as
did one of the founders and a key employee of MVI. Two of the remaining
founders did not exercise their options during the year.
There were no options exercised during the three-month period ending March
31, 1999.
Note E: Property, equipment and depreciation
- --------------------------------------------
Property and equipment are recorded at cost. Maintenance and repairs are
expensed as incurred; major renewals and betterments are capitalized. When
items of property and equipment are sold or retired, the related costs and
accumulated depreciation are removed from the accounts and any gain or loss
is included in income.
Depreciation expense for the period ending March 31, 1999 and 1998 was
$1,321 and $1,428 respectively,
10
<PAGE>
HOME WEB, INCORPORATED
----------------------
( A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE F: Major customer
- ----------------------
The Company had a purchase commitment to purchase the Company's merchandise
from a non-affiliated company. This customer is also to take physical
possession of the Company's major assets and use those assets in the
ordinary course of its business. Terms are discussed more fully in Note G.
NOTE G: Going concern
- ---------------------
As of March 31, 1999, the Company had net losses from operating activities
which raise substantial doubt about its ability to continue as a going
concern.
The Company has obtained a commitment for up to $ 150,000 from a
significant shareholder, Monterey Ventures, Inc for funding over the next
twelve months. The funds would be paid distributed in increments per
requests from the Company on an "as needed" basis. Under the agreement, the
Company can repay the borrowed funds in increments as the Company receives
payment from its customers. Also in the credit agreement is any funds
needed for longer than twelve months would be considered long term debt.
This type of funding, if needed, would be structured for a twenty-four or
thirty-six month payoff not to exceed $25,000 in requests in the first year
of operations.
The Company has signed an agreement with Internet Food Company to purchase
its products. Internet Food Company has already penetrated the hotel and
gift basket market and has further developed a web site to market its
goods. The two companies are in the process of identifying specific
products that Home Web. Inc. would supply wholesale.
The Company's ability to continue as a going concern is dependent upon a
successful public offering and ultimately achieving profitable operations.
There is no assurance that the Company wdl be successful in its efforts to
raise additional proceeds or achieve profitable operations. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
11
<PAGE>
PART III
EXHIBITS
ITEM 1. INDEX TO EXHIBITS
- ------- -----------------
Exhibit 3
3a. Articles of Incorporation and Amendments*
3b. Bylaws*
Exhibit 10
10a. Investment Banking Agreement*
10b Purchasing Agreement*
10c Loan Commitment Letter*
Exhibit 23
23a. Consent of Accountant
Exhibit 27
Financial Data Schedule
Exhibit 99
99a. Stock Option Agreement*
99b. Private Placement Memorandum dated July 1, 1997*
99c. Meeting Minutes dated June 1, 1997*
99d. Meeting Minutes dated June 20, 1997*
99e. Meeting Minutes dated September 1, 1997*
99f. Meeting Minutes dated December 18, 1997*
99g. Meeting Minutes dated June 30, 1998*
99h. Meeting Minutes dated September 14, 1998*
* indicates previously submitted exhibit
ITEM 2. DESCRIPTION OF EXHIBITS
- ------- -----------------------
As listed in the above Index, the appropriate exhibits are being
filed. The additional exhibits are marked and filed. The issuer is not a
Canadian issuer and is not filing a written consent and power of attorney.
17
<PAGE>
SIGNATURES
The issuer has duly caused this offering statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Monterey, State of California, on July 12, 1999.
HOME.WEB, INC.
/s/ Dennis Davis
-----------------------
Dennis Davis, President
This offering statement has been signed by the following persons
in the capacities and on the dates indicated.
/s/ Dennis Davis July 12, 1999
- ---------------------------------------- --------------------
Dennis Davis, Director Date
/s/ Cornelia Davis July 12, 1999
- ---------------------------------------- --------------------
Cornelia Davis, Director Date
/s/ Florence Grigsby Roberts July 12, 1999
- ---------------------------------------- --------------------
Florence Grigsby Roberts, Director Date
18
<PAGE>
HAWKINS ACCOUNTING
CERTIFIED PUBLIC ACCOUNTANT 341 MAIN STREET SALINAS CA 93901
(831) 759-1694 FAX (831) 759-1699
July 8, 1999
CONSENT OF INDEPENDENT AUDITOR
------------------------------
As the independent auditor for Home.Web, Incorporated, I hereby consent to the
incorporation by reference in this Form 10SB Statement and any amendments
thereto of my report, relating to the financial statements and financial
statement schedules of Home.Web, Incorporated for the years ended December 31,
1998 and 1997 included on Form 10SB and amendments. Reporst are dated January
13, 1999 for the year ended December 31, 1998 and February 5, 1999, both reports
were reissued July 8, 1999.
I further consent to the incorporation of my review report and financial
statements by reference in the Form 10-QSB and amendments thereto. These
statements cover the period for March 31, 1999 and 1998. Report date of April 1,
199 and reissued July 8, 1999.
/s/ Hawkins Accounting
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 MAR-31-1999
<CASH> 267 97 82
<SECURITIES> 0 0 0
<RECEIVABLES> 1,400 1,450 1,450
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 1,667 1,547 1,532
<PP&E> 17,553 50,149 43,543
<DEPRECIATION> (1,022) (5,285) (6,606)
<TOTAL-ASSETS> 22,408 59,787 56,075
<CURRENT-LIABILITIES> 5,500 800 15,142
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 24,732 27,147 27,157
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 22,408 59,787 56,075
<SALES> 11,094 7,265 528
<TOTAL-REVENUES> 11,094 7,265 528
<CGS> 9,375 5,193 523
<TOTAL-COSTS> 9,375 5,193 523
<OTHER-EXPENSES> 1,221,411 41,577 17,759
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 (50) 0
<INCOME-PRETAX> (1,219,692) (39,505) (17,754)
<INCOME-TAX> (800) (800) (800)
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (1,220,492) (40,521) (18,554)
<EPS-BASIC> (0.076) (0.002) (0.001)
<EPS-DILUTED> (0.072) (0.002) (0.001)
</TABLE>
