UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE ______
- -------- SECURITIES EXCHANGE ACT OF 1934
- --------
For quarterly period ended September 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- -------- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 001-14889
HOME WEB, INC.
--------------
(exact name of registrant as specified in its charter)
Nevada 77-0454933
- -------------------------------- -------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
200 Camino Aguajito, #200
Monterey, California 93940
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (831) 375-6209
---------------
Indicate by check mark whether the registrant: (1) has filed all reports
required by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing for the
past 90 days.
__X__Yes No ______
The number of shares of the Registrant's Common Stock, $.001 par value, as of
September 30, 1999 was 27,147,000, outstanding.
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HOME.WEB, INC.
FORM 10-QSB, QUARTER ENDED SEPTEMBER 30, 1999
INDEX
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheet................................................................. 3
Statement of Operations....................................................... 4
Statement of Stockholder's Equity............................................. 5
Statement of Cash Flows....................................................... 6
Summary of Accounting Policies ............................................... 7
Notes to Financial Statements ........................................... 8-10
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
Item 2 Management's Discussion and Analysis . . . . . . . . . . . . . . 11-12
PART II OTHER INFORMATION
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 2 Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3 Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . 12
Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . 12
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
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PART I -- FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements.
<TABLE>
<CAPTION>
HOME.WEB, INC.
(A Development Stage Company)
BALANCE SHEET
SEPTEMBER 30, 1999
<S> <C>
ASSETS September 30,
1999 (Unaudited)
Current assets
Cash in bank $ 0
Non-trade receivable 1,450
-----------------
Total current assets 1,450
Equipment
Coolers and equipment 40,308
Office equipment 9,841
-----------------
50,149
Accumulated depreciation (9,248)
-----------------
Total equipment 40,901
Other assets
Trade name 11,000
-----------------
Total other assets 11,000
TOTAL ASSETS $ 53,351
=================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 17,641
California Franchise Tax payable 3,116
Loan from affiliate 2,825
-----------------
Total current liabilities 23,582
Shareholders' equity
Capital stock 27,507
Paid in capital 1,347,493
Deficit accumulated during
development stage
(1,345,231)
-----------------
Total shareholders' equity 29,769
-----------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 53,351
=================
</TABLE>
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<TABLE>
<CAPTION>
HOME.WEB, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDING SEPTEMBER 30, 1999 and 1998
<S> <C> <C> <C> <C> <C>
The Three The Three The Nine The Nine Deficit
Months Months Months Months Accumulated
Period Ended Period Ended Period Ended Period Ended During the
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998 Development Stage
-------------- -------------- -------------- -------------- ------------------
Sales $ 0 $ 1,300 $ 528 $ 6,066 $ 18,887
Cost of Sales 0 1,246 523 5,293 15,091
---------- ------------- ------------- ------------- -----------
Gross Margin 0 54 5 773 3,796
Expenses
Advertising 178 785 849
Amortization 1,244 2,228 1,584
Consulting fees 4,781 5,500 21,696 11,196
Equipment rental 66 2,339 2,339
Depreciation 1,321 1,669 3,963 4,263 9,248
Licenses and taxes 145 140 370
Office help 2,039 1,591 11,791 12,432
Office supplies 3 3,737 588 7,524 3,679
Postage 79 589 754
Travel, meals 736 54 2,022 2,679
and entertainment
Rent, utilities and 1,003 248 1,931 3,591
telephone
Organization and 15,318 41,674
start up costs
Compensation
due stock issuance 1,254,500
----------- -------------- -------------- -------------- -----------
Total expenses 1,324 15,532 27,407 55,308 1,344,895
----------- -------------- -------------- -------------- -----------
(Loss) from operations (1,324) (15,478) (27,402) (54,535) (1,341,099)
Other income (expense)
Interest 50 50
Nondeductible penalties 716 882
State tax expense 1,600 966 3,200
----------- -------------- -------------- -------------- -----------
Total other expenses 0 2,316 1,016 4,132
----------- -------------- -------------- -------------- -----------
Net loss $ (1,324) $ (15,478) $ (29,718) $ (55,551) $ (1,345,231)
=========== ============== ============== ============== ===========
Loss per share
of common stock $ (0.0004) $ (0.0006) $ (0.0010) $ (0.0020) $ (0.0490)
Weighted average of
shares outstanding 27,157,000 25,741,031 27,157,000 25,741,031 27,157,000
============ ============== ============== ============== ===========
</TABLE>
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<TABLE>
<CAPTION>
HOME.WEB, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION THROUGH SEPTEMBER 30, 1999
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Common During the
Common Stock Paid in Development
Shares Amounts Capital Stage Total
------------ ------------ -------------- --------------- -----------
Balance,
December 31, 1998 27,497,000 $ 27,497 $ 1,347,003 $ (1,315,513) $ 58,987
Common stock issued 10,000 10 490 500
Net loss for the period
ended June 30, 1999 (29,718) (29,718)
----------- ---------- ------------- -------------- ------------
27,507,000 $ 27,507 $ 1,347,493 $ (1,345,231) $ 29,769
=========== ========== ============= ============== ============
</TABLE>
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<TABLE>
<CAPTION>
HOME.WEB, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS INDIRECT METHOD
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<S> <C> <C> <C> <C> <C>
June 30, 1999
Cash Flows
Accumulated
Three Months Three Months Nine Months Nine Months During
Ended Ended Ended Ended The Development
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998 Stage
-------------- -------------- -------------- -------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,324) $ (15,478) $ (29,718) $ (55,551) $ (1,345,231)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,321 2,922 3,963 6,491 9,248
Stock issued for services 1,254,500
Expensing of organization costs 2,366 2,366
Attorney fees for stock 500 500
Increase in accounts receivable 66 (1,500) (1,450)
Increase in current liabilities 0 174 22,792 9,290 23,592
--------- --------- --------- ---------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES (3) (12,316) (97) (41,270) (56,475)
INVESTING ACTIVITIES
Increase in other assets 11,000 13,376
Purchase of equipment 500 31,554 50,149
--------- --------- --------- ---------- -----------
NET CASH USED IN INVESTING ACTIVITIES 500 42,554 63,525
FINANCING ACTIVITIES
Sale of common stock 10,100 83,400 120,000
--------- --------- --------- ---------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (3) (2,716) (97) (424) 0
Cash and cash equivalents at the beginning of
the period
3 2,716 97 267 0
--------- --------- --------- ---------- -----------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $ 0 $ 0 $ 0 $ (157) $ 0
========= ========= ========= ========== ===========
</TABLE>
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HOME.WEB, INCORPORATED
----------------------
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies
September 30, 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 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
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, 27,147,000
outstanding as of September 30, 1999.
Stock Options
- -------------
Stock that is issued for services rendered is recorded at the fair value of the
stock in the year that the stock is given and recorded as an expense in the same
year.
Material Adjustments
- --------------------
Management represents that all material adjustments to the financial statements
have been made.
7
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HOME.WEB, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
Note A:Background
- -----------------
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 September 30, 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 September 30, 1999.
For the nine month period ending September 30, 1998 the Company paid to Monterey
Ventures a total of $ 12,550 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 September 30, 1998 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: current tax benefit of $ 4,458 for September 30, 1999 and $8,333 as
of September 30, 1998 resulting from a net loss before income taxes, and
deferred tax expenses of $ 4,458 and $8,333 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.
8
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HOME.WEB, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE C:Public stock offering
- ----------------------------
During the periods ending September 30, 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 September 30, 1999 was
10,000 shares of stock issued to the corporate counsel in exchange for legal
services to the corporation.
During the period of Septemebr 30, 1998 there were various transactions to
thirty three different accredited and/or sophisticated investors. Total proceeds
from these transactions were $ 120,000.
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 at $.001. The options
to be exercised are 1,250,000 and have no expiration date. These options are
considered compensatory and the expense was recognized in the prior year.
During the period ended September 30, 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 September
30, 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 September 30, 1999 and 1998 was
$3,963 and $4,263 respectively.
9
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HOME. WEB, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 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 September 30, 1999, the Company had net losses from operating activities
which raise substantial doubt about its ability to continue as a going concern.
The Company is in the process of raising initial working capital through a
public offering of its common stock, which is expected to provide liquidity
until operations become profitable. 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.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
- --------------------------------------------------------------------------------
During the third quarter, there was no significant change in the Company's
financial condition or operations. THew Company has received revenues of $528.00
for the year to date. The Company has negotiated a line of credit in the amount
of $150,000 from Monterey Ventures, Inc. which is expected to carry the Company
through the year end. To date, the Company has not drawn upon the line of
credit. It has executed an agreement to supply its line of products to Internet
Foods, Inc. It has begun to receive holiday orders from Internet Foods, Inc.
These orders will be reflected in the Company's fourth quarter results. In
addition, it will be introducing its own gourmet brands at trade shows next
year. During the next twelve months additional funds may be received if revenues
are not sufficient. Management believes the line of credit and revenues expected
will provide adequate cash for operations.
No material commitments for capital expenditures were made during the third
quarter and none are expected in the fourth quarter. There is no research and
development underway or planned.
The heavy fourth quarter, seasonal selling period should have an impact on short
term revenues.
There were no changes in the mix of sources between equity, debt and off-balance
sheet financing arrangements.
The Company has planned to introduce its own trademarked line of goods in the
fourth quarter of 1999. However, the Company decided to postpone introduction of
its "Carmel Valley Farms" and "Salinas Valley Farms" brands of gourmet foods
until the first quarter of 2000. No other unanticipated events or transactions
affected projected income.
The Company will introduce both its "Carmel Valley Farms" and "Salinas Valley
Farms" brands of gourmet foods product at its exhibit at the annual Fancy Foods
Trade Show in San Francisco (January 23, 2000). This is one of the largest
food-specialty shows in the United States. Then, the Company plans to attend the
next major trade show in Philadelphia (June of 2000).
The Company is in the process of hiring a sales and marketing manager who has
had extensive experience in the food industry. In addition, the introduction of
its branded gourmet food products should stimulate sales.
The Company anticipates that its selling costs will increase because of (1) the
planned addition of a national sales and marketing manager; and (2) increased
participation in industry trade shows.
11
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There have been no material increases in net sales or revenue (historically, the
fourth quarter is the period of heaviest sales).
The Company has been a developmental stage company for the past three years and,
therefore has not felt the effect of inflation. The primary inflationary concern
involves milk pricing. Should short pricing increase, the Company will have
increased all of its sales.
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings.
- --------------------------
None
Item 2. Changes in Securities.
- ------------------------------
None
Item 3. Defaults Upon Senior Securities.
- ----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
None
Item 5. Other Information.
- --------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
None
Signature Page
- --------------
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HOME.WEB, INC.
/S/ Dennis Davis
-------------------------------
Dennis Davis
President
Dated: November 18, 1999
12
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