UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1998 Commission File Number 0-24001
JVWEB, INC.
(Name of small business issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
76-0552098
(I.R.S. Employer Identification No.)
5444 Westheimer, Suite 2080
Houston, Texas 77056
(713) 622-9287
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.01 Par Value
Indicate by check mark whether registrant (1) has filed all reports to be filed
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 requirements for
the past 90 days.
YES [X] NO [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended June 30, 1998 were $ 0.
The aggregate market value of the voting stock held by non-affiliates of the
registrant on September 22, 1998 was $ 523,123, based on the closing price of
such stock of $.5625 on such date. The number of shares outstanding of the
registrant's Common Stock, $.01 par value, as of September 22, 1998 was 7.23
million.
Transitional Small Business Disclosure format (Check one): YES [ ] NO [X]
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INDEX
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Page Number
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PART I.
Items 1. & 2. Business and Properties. 3
Item 3. Legal Proceedings. 29
Item 4. Submission of Matters to a Vote of Security Holders. 29
PART II.
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. 29
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 30
Item 7. Financial Statements. 32
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 32
PART III.
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act. 32
Item 10. Executive Compensation. 33
Item 11. Security Ownership of Certain Beneficial Owners and
Management. 35
Item 12. Certain Relationships and Related Transactions. 36
PART IV.
Item 13. Exhibits and Reports on Form 8-K. 37
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ITEMS 1 and 2. BUSINESS AND PROPERTIES.
INTRODUCTION
JVWeb, Inc. (the "Company") was incorporated on October 28, 1997 under
the laws of the State of Delaware. The Company was formed for purposes of
pursuing electronic commerce opportunities. On May 20, 1998, the Company became
publicly-held through the distribution by LS Capital Corporation ("LS Capital")
of certain of its shares of the Company's common stock to LS Capital's
stockholders.
Electronic commerce opportunities are expected to arise in several
different ways. First, the Company expects to offer products, services, content
and advertising by means of sites on the World Wide Web (the "Web") of the
Internet. The Company is currently developing a Web site to offer already
identified products, and is in the processing of acquiring an on-line financial
publication to offer content. The Company expects to develop additional Web
sites in the future to offer products and services yet to be identified and to
provide content (also yet to be identified) and advertising in connection
therewith. (For a description of the Company's current projects, see "BUSINESS
AND PROPERTIES - Current Projects.") Although the Company may offer products,
services, content and advertising directly (such as in the case of the initial
Web site now being developed and the on-line publication being acquired), the
Company believes that it is much more likely to offer products, services,
content and advertising through joint ventures with established businesses. In
the case of joint ventures, the Company expects to contribute technical
expertise and (in certain instances) financial assistance in developing the
joint ventures' Web sites, while the joint venture partners will be responsible
for furnishing the joint ventures' products or services, the content for the
joint ventures' Web sites, and the related business expertise. In addition, the
Company expects to acquire other companies to be identified in the future.
Acquisition candidates are expected to include emerging electronic commerce
companies, traditional companies with good prospects for significant electronic
commerce, and Internet service companies capable of enhancing the Company's
Internet resources. The Company also intends to develop a fee-for-service
division to sell the technological, marketing and other abilities that the
Company now has or in the future may acquire.
The address of the Company is 5444 Westheimer, Suite 2080, Houston,
Texas 77056, and its telephone number is 713/622-9287. The Company's own Web
site is located at http://wwwjvweb.com. Information contained in the Company's
Web site shall not be deemed to be a part of this Annual Report. Unless the
context indicates otherwise, the term "Company" shall include JVWeb, Inc., the
joint ventures in which it becomes a venturer, and its future subsidiaries.
<PAGE>
RISK FACTORS
In addition to the other information in this Annual Report, the
following risk factors, among others, should be considered carefully in
evaluating the Company and its business.
1. Extremely Limited Operating History. The Company was incorporated in
October 1997 and at that time continued preliminary work commenced by the
founder of the Company several months earlier. Accordingly, there is no
meaningful operating history upon which to base an evaluation of the Company and
its business and prospects. The Company's business and prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as electronic commerce. Such
risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, identify and pursue suitable
electronic commerce opportunities; identify and enter into binding agreements
with suitable joint venture partners; identify and consummate suitable
acquisitions; develop and increase the Company's customer bases; implement and
successfully execute the Company's business and marketing strategy; continue to
develop and upgrade the Company's technology and transaction-processing systems;
create and constantly improve the Company's Web sites; provide superior customer
service and order fulfillment; respond to competitive developments; and attract,
retain and motivate qualified personnel. There can be no assurance that the
Company will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
2. Fluctuations in Operating Results. The Company's operating results
are expected to fluctuate in the future due to a number of factors, many of
which are outside the Company's control. These factors include the level of
usage of the Internet; demand for products, services and advertising offered on
the Company's Web sites; the Company's ability to pursue suitable electronic
commerce opportunities, enter into suitable joint ventures and consummate
suitable acquisitions at a steady rate; the Company's ability to attract new
customers at a steady rate; the addition or loss of advertisers; the
introduction of new products, services or Web sites by the Company or its
competitors; pricing changes for Web-based products, services and advertising;
technical difficulties with respect to the Company's Web sites; costs relating
to acquisitions; and general economic conditions and economic conditions
specific to the Internet and Web sites. As a strategic response to changes in
the competitive environment, the Company may from time to time make certain
service, marketing or supply decisions or acquisitions that, while beneficial in
the long run, could have a material adverse effect on the Company's quarterly
results of operations and financial condition. The Company also expects that it
like other retailers may experience seasonality in its businesses in the future.
Due to all of the foregoing factors, in some future quarter the Company's
operating results may fall below the expectations of investors and any
securities analysts who follow the Common Stock. In such event, the trading
price of the Common Stock would likely be materially adversely affected.
Further, the Company believes that period-to-period comparisons of its financial
results may not necessarily be meaningful and should not be relied upon as an
indication of future performance.
3. Future Capital Needs; Uncertainty of Additional Financing. The
Company currently has no constant and continual flow of revenues. The Company's
future liquidity and capital requirements will depend upon numerous factors,
including the success of the Company's Web sites. The Company may be required to
raise additional funds through public or private financing, strategic
relationships or other arrangements. There can be no assurance that such
additional funding, if needed, will be available on terms acceptable to the
Company, or at all. Furthermore, debt financing (if available) may involve
restrictive covenants, which may limit the Company's operating flexibility with
respect to certain business matters. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the stockholders of
the Company will be reduced, stockholders may experience additional dilution in
net book value per share, and such equity securities may have rights,
preferences or privileges senior to those of the holders of the Company's Common
Stock. While the Company's need for additional capital can not now be precisely
ascertained because of the uncertainty of the actual growth of the Company,
management believes that the future capital needs of the Company, in order to
pursue the Company's business plan as desired, will exceed the Company's current
financial position. The Company expects to finance its operations for fiscal
1999 through cash flow from operations, proceeds from the exercise of certain
outstanding warrants to purchase shares of Common Stock, and the possible
private placement of the Company's equity securities. The Company is looking for
sources of additional capital, but there can be no assurance that such sources
can be found or that, if found, the terms of such capital will be commercially
acceptable to the Company. If adequate funds are not available on acceptable
terms, the Company may be unable to take advantage of future opportunities or
respond to competitive pressures, any of which could have a material adverse
effect on the Company's business, results of operations and financial condition.
4. Dependence on the Internet. The Company's future success
substantially depends upon continued growth in the use of the Internet and the
Web in order to support the sale of the products, services and advertising
offered by the Company on its Web sites. Rapid growth in the use of and interest
in the Internet and the Web is a recent phenomenon. There can be no assurance
that communication or commerce over the Internet will become more widespread. In
addition, to the extent that the Internet continues to experience significant
growth in the number of users and level of use, there can be no assurance that
the Internet infrastructure will continue to be able to support the demands
placed upon it by such potential growth or that the performance or reliability
of the Web will not be adversely affected by this continued growth. In addition,
the Internet could lose its viability due to delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
also could result in slower response times and adversely affect usage of the Web
and the Company's Web sites. If use of the Internet does not continue to grow,
or if the Internet infrastructure does not effectively support growth that may
occur, the Company's business, operating results and financial condition would
be materially adversely affected.
5. Uncertain Acceptance of the Internet as a Medium for Commerce. The
success of the Company's business plan will depend upon the adoption of the
Internet as a medium for commerce by a broad base of consumers, vendors and
advertisers. The Company's target markets are expected to be comprised of
consumers, vendors and advertisers who have historically used traditional means
of commerce to conduct business. Most of the Company's customers, vendors and
advertisers will have only limited experience with the Web as a commercial
medium and may not find such a medium to be an effective way to transact
business. For the Company to be successful, these consumers, vendors and
advertisers must accept and utilize novel ways of conducting business. Moreover,
critical issues concerning the commercial use of the Internet, such as ease of
access, security, reliability, cost and quality of service, development of the
necessary infrastructure (such as a reliable network backbone) and timely
development and commercialization of performance improvements (including high
speed modems), remain unresolved and may affect the growth of Internet use or
the attractiveness of conducting commerce by means of Web sites. The Company's
ability to generate significant revenues will depend upon, among other things,
consumer, vendor and advertiser acceptance of the Web as an effective and
sustainable commercial medium. There can be no assurance that there will be
broad acceptance of the Internet as an effective medium for commerce by
consumers, vendors and advertisers will develop successfully or achieve
widespread acceptance.
6. Developing Market. The electronic market for products, services and
advertising has only recently begun to develop and is rapidly changing. As is
typical for a new and rapidly evolving market, demand for products, services and
advertising over the Internet is subject to a high level of uncertainty, and
there exist few proven services and products. Since the market for electronic
commerce on the Internet is new and evolving, predictions of the size of this
market or its future growth rate, if any, are difficult. Moreover, no standards
have yet been widely accepted for the measurement of the effectiveness of
Web-based advertising, and there can be no assurance that such standards will
develop sufficiently to support Web-based advertising as a significant
advertising medium. In addition, there can be no assurance that advertisers will
determine that banner advertising offered on Web sites is an effective or
attractive advertising medium, and there can be no assurance that the Company
will effectively transition to any other forms of Web-based advertising, should
they develop. Furthermore, certain advertising filter software programs are
available that limit or remove advertising from an Internet user's desktop. Such
software, if generally adopted by users, may have a materially adverse effect
upon the viability of advertising on the Internet. Moreover, there can be no
assurance that consumers and vendors will determine that the electronic medium
is an effective way to conduct commerce. If the markets for the Company's
electronic commerce fail to develop, develop more slowly than expected or become
saturated with competitors, or if the Company's electronic commerce does not
achieve market acceptance, the Company's business, results of operations and
financial condition will be materially adversely affected.
7. Opportunity Selection. Probably the most integral part of the
Company's business strategy is the identification and pursuit of potentially
successful electronic commerce opportunities. There can be no assurance that the
Company will be able to identify successful electronic commerce opportunities or
that the Company will be able to pursue these opportunities successfully even if
identified. There is no specific criterion for selecting electronic
opportunities. Accordingly, management will have significant flexibility in
selecting such opportunities. The failure of management to select good
electronic commerce opportunities would probably have a material adverse effect
on the Company's business, results of operations and financial condition.
8. Uncertain Acceptance of Brands. While the Company expects to offer
the brands of other persons, the Company also intends to develop its own brands.
The Company believes that, due to the growing number of Internet sites and the
relatively low barriers to entry, the importance of brand recognition will
increase as more companies engage in commerce over the Internet. Development and
awareness of the Company's brands will depend largely on the Company's success
in establishing and maintaining positions as leaders in Internet commerce and in
providing high quality products and services, which cannot be assured. In order
to attract and retain customers, vendors and advertisers and to promote and
maintain the Company's brands in response to competitive pressures, the Company
may find it necessary to increase its marketing and advertising budgets or
otherwise to increase substantially its financial commitment to creating and
maintaining brand loyalty among vendors and consumers. If the Company is unable
to provide high quality products, services and advertising or otherwise fail to
promote and maintain its brands, or if the Company is unable to (or incurs
significant expenses in an attempt to) achieve or maintain a leading position in
Internet commerce or to promote and maintain its brands, the Company's business,
results of operations and financial condition will be materially adversely
affected.
9. Content and Graphic Development. Content and (to a lesser degree)
graphic development relating to the Company's Web sites are key elements to the
Company's success. If these sites fail to have solid content (which is modified
on a continual basis) and appealing graphics, the Company expects that it will
fail to develop successfully its brands, and consumers, vendors and advertisers
will not be attracted to, or will not continue to visit and utilize, the sites.
The Company has relied and will continue to rely substantially on content and
graphic development efforts of third parties. There can be no assurance that the
Company's current or future third-party providers will effectively implement
these properties, or that their efforts will result in significant revenue to
the Company. Any failure to develop and maintain high-quality and successful Web
sites could have a material adverse effect on the Company's business, results of
operations and financial condition.
10. Internet Commerce Security Risks. A significant barrier to
electronic commerce and communications is the secure transmission of
confidential information over public networks. The Company will rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication necessary to effect secure transmission of
confidential information. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments will not result in a compromise or breach of the algorithms used by
the Company to protect customer transaction data. If any such compromise of the
Company's security were to occur, it could have a material adverse effect on the
Company's business, results of operations and financial condition. A party who
is able to circumvent the Company's security measures could misappropriate
proprietary information or cause interruptions in the Company's operations. The
Company may be required to expend significant capital and other resources to
protect against the threat of such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of Internet transactions and
the privacy of users may also inhibit the growth of the Internet generally, and
the Web in particular, especially as a means of conducting commercial
transactions. To the extent that activities of the Company or third party
contractors involve the storage and transmission of proprietary information,
such as credit card numbers, security breaches could expose the Company to a
risk of loss or litigation and possible liability. There can be no assurance
that the Company's security measures will prevent security breaches or that
failure to prevent such security breaches will not have a material adverse
effect on the Company's business, results of operations and financial condition.
11. Risks Associated with Technological Change. The Internet and
electronic markets are characterized by rapid technological change, changes in
user and customer requirements, frequent new service or product introductions
embodying new technologies and the emergence of new industry standards and
practices that could render the Company's existing Web sites and technology
obsolete. The Company's performance will depend, in part, on its ability to
license leading technologies, enhance its existing services, and respond to
technological advances and emerging industry standards and practices on a timely
and cost-effective basis. The development of Web sites entails significant
technical and business risks. There can be no assurance that the Company will be
successful in using new technologies effectively or adapting its Web sites to
consumer, vendor, advertising or emerging industry standards. If the Company is
unable, for technical, legal, financial or other reasons, to adapt in a timely
manner in response to changing market conditions or customer requirements, the
Company's business, results of operations and financial condition would be
materially adversely affected.
12. Risk of System Failure; Single Site. The Company's success largely
depends upon communications hardware and computer hardware made available by a
third party in a facility located in Arizona. Like all computer systems, this
system is vulnerable to damage from earthquake, fire, floods, power loss,
telecommunications failures, break-ins and similar events. Despite the security
measures of the Company, its servers are also vulnerable to computer viruses,
physical or electronic break-ins and similar disruptive problems, which could
lead to interruptions, delays, loss of data or cessation in service to users of
the Company's services and products. The Company does not presently have
redundant systems or a formal disaster recovery plan. The Company's does not now
and will not for the foreseeable future maintain business interruption
insurance. Any system failure that causes interruption or an increase in
response time of the Company's Web sites could result in less traffic to such
sites and, if sustained or repeated, could reduce the attractiveness to
consumers, vendors and advertisers of the products, services and advertising
offered by the Company. In addition, a key element of the Company's strategy is
to generate a high volume of visits to and activity with respect to the
Company's Web sites. An increase in the volume of visits to the Company's Web
sites could strain the capacity of the software or hardware deployed by the
Company, which could lead to slower response time or system failures, and
adversely affect sales of products, services and advertising and the number of
impressions received by advertising and thus the Company's advertising revenues.
13. Reliance on Merchandise Vendors and Third Party Manufacturers. The
Company expects that it will entirely depend upon vendors and third party
manufacturers to supply it with merchandise for sale through its Web sites, and
the availability of merchandise is and will continue to be unpredictable. The
Company expects that it will generally have no long-term contracts or
arrangements with its vendors and manufacturers that guarantee the availability
of merchandise for its businesses. There can be no assurance that the Company's
current and future vendors and manufacturers will continue to sell merchandise
to or manufacture merchandise for the Company or otherwise provide merchandise
for sale through the Company's Web sites or that the Company will be able to
establish new vendor or manufacturer relationships that ensure merchandise will
be available. The Company will also rely on many of its vendors, manufacturers
and its joint venture partners to process and ship merchandise to customers. The
Company will have limited control over the shipping procedures of its vendors,
manufacturers and its joint venture partners, and shipments by these vendors,
manufacturers and joint venture partners may be subject to delays. Although most
merchandise sold by the Company is expected to carry a warranty supplied either
by the manufacturer or the vendor and the Company will not be legally obligated
to accept merchandise returns, the Company may be voluntarily constrained to
accept returns from customers for which the Company may not receive
reimbursements from its vendors or manufacturers. If the Company is unable to
develop and maintain satisfactory relationships with vendors and manufacturers
on acceptable commercial terms, if the Company is unable to obtain sufficient
quantities of merchandise, if the quality of service provided by such vendors
and manufacturers falls below a satisfactory standard or if the Company's level
of returns exceeds its expectations, the Company's business, results of
operations and financial condition will be materially adversely affected.
14. Reliance on Other Third Parties. In addition to its merchandise
vendors and manufacturers, the Company's operations will depend on a number of
third parties. The Company will have limited control over these third parties
and will probably have no long-term relationships with any of them. The Company
does not own a gateway onto the Internet, but instead now and presumably always
will rely on an Internet service provider to connect the Company's Web sites to
the Internet. The Company also will rely on a variety of technology that it will
license from third parties. The loss of or inability of the Company to maintain
or obtain upgrades to any of these technology licenses could result in delays,
which would materially adversely affect the Company's business, results of
operations and financial condition, until equivalent technology could be
identified, licensed or developed and integrated. Furthermore, the Company will
depend on hardware suppliers for prompt delivery, installation and service of
servers and other equipment used to deliver the Company's products and services.
If the Company is unable to maintain satisfactory relationships with such third
parties on acceptable commercial terms, or the quality of products and services
provided by such third parties falls below a satisfactory standard, the
Company's business, results of operations and financial condition will be
materially adversely affected. In addition, the Company will also depend upon
Web browsers for access to the products, services and advertising offered by it.
15. Protection of Intellectual Property. The development of the
Company's brands depends to a significant degree on the protection of its
trademarks and trade names. The Company has registered the "JVWeb", "Dad & me",
and "familylifestyle" trademarks in the United States and claims common law
trade name rights in these and other names. Nonetheless, there can be no
assurance that the Company will be able to secure significant protection for
these trademarks. Current and future competitors of the Company or others may
adopt product or service names similar to the Company's trademarks, thereby
impeding the Company's ability to build brand identity and possibly leading to
customer confusion. The inability of the Company to protect its trademarks and
trade names might have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the Company may in
the future receive notices from third parties claiming infringement by aspects
of the Company's businesses. While the Company is not currently subject to any
such claim, any future claim, with or without merit, could result in significant
litigation costs and diversion of resources, including the attention of
management, and require the Company to enter into royalty and licensing
agreements, which could have a material adverse effect on the Company's
business, results of operations and financial condition. In the future, the
Company may also need to file lawsuits to enforce the Company's intellectual
property rights, to protect the Company's trade secrets, or to determine the
validity and scope of the proprietary rights of others. Such litigation, whether
successful or unsuccessful, could result in substantial costs and diversion of
resources, which could have a material adverse effect on the Company's business,
results of operations and financial condition.
16. Regulatory Concerns. The Company is not currently subject to direct
regulation by any government agency in the United States, other than regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet. Due to
the increasing popularity and use of the Internet, a number of laws and
regulations may be adopted with respect to the Internet, covering issues such as
user privacy, pricing and characteristics and quality of products and services.
Such legislation could dampen the growth in use of the Web generally and
decrease the acceptance of the Web as a communications and commercial medium,
and could thereby have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, several
telecommunications carriers are seeking to have telecommunications over the Web
regulated by the Federal Communications Commission (the "FCC") in the same
manner as other telecommunications services. For example, America's Carriers
Telecommunications Association has filed a petition with the FCC for this
purpose. In addition, because the growing popularity and use of the Web has
burdened the existing telecommunications infrastructure and many areas with high
Web use have begun to experience interruptions in phone service, local telephone
carriers, such as Pacific Bell, have petitioned the FCC to regulate Internet
service providers and online service providers in a manner similar to long
distance telephone carriers and to impose access fees on Internet service
providers and online service providers. If either of these petitions is granted,
or the relief sought therein is otherwise granted, the costs of communicating on
the Web could increase substantially, potentially slowing the growth in use of
the Web, which could in turn decrease the demand for the products, services and
advertising offered by the Company. Any new legislation or regulation or the
application of existing laws and regulations to the Internet could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, as the Company's products and services will be
available and sold over the Internet in multiple states and foreign countries,
and as the Company will sell to numerous consumers resident in such states and
foreign countries, such a jurisdiction may claim that the Company is required to
qualify to do business as a foreign entity in such jurisdiction. The Company is
qualified to do business in only two states, and failure by the Company to
qualify to do business as a foreign entity in a jurisdiction where it is
required to do so could subject the Company to taxes and penalties for the
failure to qualify. Any application of laws or regulations of a jurisdiction in
which the Company is not currently qualified could have a material adverse
effect on the Company's business, results of operations and financial condition.
17. Other Potential Liability. Because materials may be downloaded from
the Company's Web sites and may be subsequently distributed to others, there is
a possibility that claims could be asserted against the Company on a variety of
legal theories (including defamation, negligence and copyright and trademark
infringement) depending on the nature and content of such materials. For
example, the Company could be liable for libel for any defamatory information it
provided about a person, for any losses incurred by a person in reliance on
incorrect information negligently provided by the Company and for copyright and
trademark infringement resulting from information provided by the Company.
Moreover, the Company expects that it will enter into agreements with third
parties whereby the Company may provide links to such third parties' Web sites.
A claimant might successfully argue that by providing such links, the Company is
liable for wrongful actions by such third parties through such Web sites, such
as defamation, negligence and copyright and trademark infringement, as well as
losses resulting from the products and services sold by the third party. The
Company is in the process of procuring general liability insurance. Even if the
Company is successful in procuring this insurance, the insurance may not cover
all potential claims or may not be adequate to indemnify the Company for all
liability that may be imposed. Any imposition of liability or legal defense
expenses that are not covered by insurance or is in excess of insurance coverage
could have a material adverse effect on the Company's business, operating
results and financial condition.
18. Possible Forfeiture of Assets. On July 31, 1998, the Company
entered into an agreement to acquire all of the assets of an on-line daily
financial publication for a purchase price of $140,000. The Company made several
payments on the purchase price. The Company has a remaining balloon installment
in the amount of $85,000. The Company does not now have funds available to pay
this final installment. The Company is working to assure that it has cash
available to make timely this payment, but there can be no assurance that the
Company will be successful in this regard. The failure to make timely this final
installment could result in a forfeiture of the assets being acquired as well as
all amounts theretofore paid on the purchase price. The loss of these assets and
amounts of monies could have a material adverse effect on the Company. For more
information on this transaction and the related risk, see "BUSINESS AND
PROPERTIES - Current Projects - Wall Street Whispers."
19. Indemnification of Officers and Directors for Securities
Liabilities. The Bylaws of the Company provide that the Company shall indemnify
any director, officer, agent and/or employee as to those liabilities and on
those terms and conditions as are specified in the General Corporation Law of
Delaware. Further, the Company may purchase and maintain insurance on behalf of
any such persons whether or not the Company would have the power to indemnify
such person against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from such
officers, directors, agents and employees for losses incurred by the Company as
a result of their actions. Further, the Commission takes the position that
indemnification is against the public policy as expressed in the Act, and is,
therefore, unenforceable.
20. Competition. The electronic commerce market, particularly on the
Internet, is new, rapidly evolving and intensely competitive, and the Company
expects competition to intensify in the future. Certain current competitors have
established, and certain other current competitors (as well as future
competitors) may in the future establish, cooperative relationships among
themselves or directly with vendors to obtain exclusive or semi-exclusive
sources of merchandise. Accordingly, new competitors or alliances among
competitors and vendors may emerge and rapidly acquire market share. Increased
competition may result in reduced operating margins, loss of market share and a
diminished brand franchise, any one of which could materially adversely affect
the Company's business, results of operations and financial condition. Most of
the Company's current and potential competitors have and will have significantly
greater financial, technical, marketing and other resources than the Company. As
a result, they may be able to secure merchandise from vendors on more favorable
terms than the Company, and they may be able to respond more quickly to changes
in customer preferences or to devote greater resources to the development,
promotion and sale of their merchandise than the Company can.
21. Management of Potential Growth. The Company expects to expand its
operations rapidly and significantly. This rapid growth is expected to place a
significant strain on the Company's management, operational and financial
resources. In order to manage the expected growth of its operations, the Company
will be required to expand existing operations (particularly with respect to
customer service and merchandising); to improve on a timely basis existing and
implement new operational, financial and inventory systems, procedures and
controls, including improvement of its financial and other internal management
systems; and to train, manage and expand its employee base. Further, the
Company's management will be required to maintain relationships with various
merchandise vendors, freight companies, warehouse operators, other Web sites and
services, Internet service providers and other third parties and to maintain
control over the strategic direction of the Company in a rapidly changing
environment. If the Company is unable to manage growth effectively, the
Company's business, results of operations and financial condition will be
materially adversely affected.
22. Potential Acquisitions. As part of its business strategy, the
Company expects to acquire complementary companies, products, services or
technologies. There can be no assurance that the Company will be able to
identify additional suitable acquisition candidates or that the Company will be
able to acquire such candidates on acceptable terms. In addition, the successful
implementation of this strategy depends on the Company's ability to identify
suitable acquisition candidates, acquire such companies on acceptable terms and
integrate their operations successfully with those of the Company. Any such
transactions would be accompanied by the risks commonly encountered in such
transactions. Such risks include, among other things, the difficulty of
assimilating the operations and personnel of the acquired companies; the
potential disruption of the Company's ongoing business; the inability of
management to maximize the financial and strategic position of the Company
through the successful incorporation of acquired businesses and technologies;
additional expenses associated with amortization of acquired intangible assets;
the maintenance of uniform standards, controls, procedures and policies; the
impairment of relationships with employees, customers, vendors and advertisers
as a result of any integration of new management personnel; and the potential
unknown liabilities associated with acquired businesses. There can be no
assurance that the Company would be successful in overcoming these risks or any
other problems encountered in connection with such acquisitions. Due to all of
the foregoing, the Company's pursuit of an overall acquisition strategy or any
future acquisition may have a material adverse effect on the Company's business,
results of operations, financial condition and cash flows. Although the Company
does not expect to use cash for acquisition consideration, to the extent the
Company chooses to do so in the future, the Company may be required to obtain
additional financing, and there can be no assurance that such financing will be
available on favorable terms, if at all. In addition, if the Company issues
stock to complete any future acquisitions, existing stockholders will experience
further ownership dilution. Finally, Greg J. Micek, a director, the president
and the controlling stockholder of the Company owning approximately 73.1% of the
Common Stock considered on a fully diluted basis, has indicated that he intends
to maintain control of the Company, and that in this connection, he expects that
he will not cause the Company to enter into any acquisition that causes him to
lose such control. Consequently, the size of any acquisitions that the Company
may make in the foreseeable future can be expected to be limited by Mr. Micek's
expressed intentions.
23. Reliance Upon Directors and Officers and Limited Management
Resources. The Company substantially depends upon the efforts and skills of Greg
J. Micek, a director and the President of the Company. The loss of the services
of Mr. Micek, or his inability to devote sufficient attention to the operations
of the Company, would have a materially adverse effect on the Company's
operations. The Company does not maintain key man life insurance on Mr. Micek.
In addition, there can be no assurance that the current level of management is
sufficient to perform all responsibilities necessary or beneficial for
management to perform. The Company's success in attracting additional qualified
personnel will depend on many factors, including its ability to provide them
with competitive compensation arrangements, equity participation and other
benefits. There is no assurance that the Company will be successful in
attracting highly qualified individuals in key management positions.
24. Lack of Relevant Experience by Management. The Company expects that
its management will generally have little or no direct experience in the
management or operation of the types of businesses represented by the products
and services that the Company will offer by means of Web sites, either directly
or through joint ventures. In the case of joint ventures, the Company expects
that its joint venture partners will have a requisite level of experience, but
there can be no assurance that the Company's management will be familiar with
the joint venture's proposed business enough to ascertain this. Management's
lack of experience may make the Company more vulnerable than others to certain
risks, and it may also cause the Company to be more vulnerable to business risks
associated with errors in judgment that could have been prevented by more
experienced management. As a result, management's lack of previous experience
could have a material adverse effect on the future operations and prospects of
the Company.
25. Control, Cumulative Voting, and Preemptive Rights. Greg Micek, a
director and the President of the Company, owns approximately 86.5% of the
outstanding Common Stock (considered on an undiluted basis). Cumulative voting
in the election of Directors is not provided for. Accordingly, the holder or
holders of a majority of the shares of Common Stock (namely Mr. Micek) is
able to elect all of the Company's Board of Directors. There are no preemptive
rights in connection with the Common Stock. Thus, stockholders may be diluted
in their percentage ownership of the Company in the event additional shares are
issued by the Company in the future.
26. Preferred Stock. The Company's Certificate of Incorporation
authorized the issuance of up to 10,000,000 shares of Preferred Stock, par value
$.01 per share, of which none were issued as of September 3, 1998. The
authorized Preferred Stock constitutes what is commonly referred to as "blank
check" preferred stock. This type of preferred stock allows the Board of
Directors from time to time to divide the Preferred Stock into series, to
designate each series, to fix and determine separately for each series any one
or more relative rights and preferences and to issue shares of any series
without further stockholder approval. One of the effects of the existence of
authorized but unissued shares of preferred stock authorized in series may be to
enable the Company's Board of Directors to render it more difficult, or to
discourage an attempt, to gain control of the Company by means of a merger,
tender offer at a control premium price, proxy contest or otherwise and protect
the continuity of or entrench the Company's management, which concomitantly may
have a potentially adverse effect on the market price of the Common Stock.
27. Limited Trading Market; Limited Float. The Common Stock trades only
in the over-the-counter market on the OTC Electronic Bulletin Board. Public
trading of the shares of Common Stock in this market commenced only recently,
and such trading is still in the process of developing. The volume of trading in
the Common Stock has been extremely light. The Company is exerting efforts to
increase investor awareness and interest in the Company with a view to
increasing the volume of trading and perhaps even the prices at which the Common
Stock is traded. Thus far, the prices at which the Common Stock has traded have
fluctuated fairly widely on a percentage basis. See "MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS." There can be no assurance as to
the prices at which the Common Stock will trade in the future, although they may
continue to fluctuate significantly. Prices for the Common Stock will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the markets for the Common Stock, investor perception
of the Company and the industry in which the Company participates, and general
economic and market conditions. In addition to the preceding, only approximately
9.6% of the shares of Common Stock outstanding are held by persons not
affiliated with the Company. The limited float resulting from the foregoing
facts may make the Common Stock less liquid than it would be in a more active
trading market, possibly causing holders of the Common Stock to retain their
shares longer than they may want. The resulting limited liquidity may also have
the effect of depressing the price of the Common Stock. The Company believes
that the initial limited float will be eased to some extent over time as certain
warrants to purchase the Company are exercised, as shares of Common Stock
subject to legal or contractual restrictions become freely tradeable, as freely
tradeable shares are issued in connection with acquisitions, and if the Company
elects to effect additional public offerings of additional shares of Common
Stock.
28. Potential Future Sales Pursuant to Rule 144. Approximately 7.23
million shares of Common Stock are issued and outstanding, approximately 6.55 of
which are believed to be "restricted securities" as that term is defined in Rule
144 promulgated under the Act. Rule 144 provides in general that a person (or
persons whose shares are aggregated) who has satisfied a one-year holding
period, may sell within any three month period, an amount which does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Most of
the restricted shares will have been outstanding for over one year near the end
of October 1998 and thus will then be eligible for sale under Rule 144. Rule 144
also permits the sale of shares, under certain circumstances, without any
quantity limitation, by persons who are not affiliates of the Company and who
have beneficially owned the shares for a minimum period of two years. Hence, the
possible sale of these restricted shares may, in the future dilute an investor's
percentage of freely tradeable shares and may have a depressive effect on the
price of the Company's securities and such sales, if substantial, might also
adversely effect the Company's ability to raise additional equity capital.
However, most of the approximately 6.55 shares believed to be "restricted
securities" are held by affiliates of the Company and must (by law) be sold
subject to the volume limitations of Rule 144 described above, thus restraining
the number of shares that can sold in any period of time.
29. Risk of Potential to Dilution Future Share Issuances; Outstanding
Warrants. The Company has registered an aggregate of 5,000,000 shares of Common
Stock to be offered by the Company on a continuous or delayed basis in the
future in connection with anticipated business combination transactions. Nearly
all of these shares are still available for issuance in the future. Moreover,
the Company has registered an aggregate of 1,000,000 shares of Common Stock,
which the Company may issue to outside consultants to compensate them for
services provided to the Company. Again, nearly all of these shares are still
available for issuance in the future. The issuance of shares in connection with
acquisitions and to consultants and the consideration or services to be received
therefor will be entirely within the discretion of the Company's Board of
Directors. Although the Board of Directors intends to utilize its reasonable
business judgment to fulfill its fiduciary obligations to the Company's then
existing stockholders in connection with any such issuance, future issuance of
additional shares could cause immediate and substantial dilution to the net
tangible book value of those shares of Common Stock that are issued and
outstanding immediately prior to such transaction. Any future decrease in the
net tangible book value of such issued and outstanding shares could have a
material effect on the market value of the shares. In addition, the Company has
outstanding certain warrants to purchase shares of Common Stock. The Company
also has the obligation to issue additional such warrants in the future. These
warrants confer on the holder the ability to purchase shares of Common Stock at
specified prices, which may be less than the then current market price of the
Common Stock. A total of 7.5 million additional shares of Common Stock would be
issued if all of the warrants that are currently outstanding, and that the
Company is obligated to issue, were to be exercised. Any shares of Common Stock
issued pursuant to these warrants would further dilute the percentage ownership
in the Company held by existing stockholders. The terms on which the Company
could obtain additional capital during the life of these warrants may be
adversely affected because of such potential dilution and because the holders
thereof might be expected to convert or exercise them if the market price of the
Common Stock exceeds their conversion or exercise price, a time when the Company
would, in all likelihood, be able to obtain equity capital on terms more
favorable than those provided for by the warrants.
30. Risks Relating to Low-Priced Securities. The trading prices of the
Common Stock has been below $5.00 per share. As a result of this price level,
trading in the Common Stock is subject to the requirements of certain rules
promulgated under the Exchange Act which require additional disclosure by
broker-dealers in connection with any trades generally involving any non-NASDAQ
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The additional burdens imposed upon broker-dealers by
such requirements may discourage broker-dealers from effecting transactions in
the Common Stock affected, which could severely limit the market liquidity of
the Common Stock.
31. No Dividends. The holders of the Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors out of
funds legally available therefore. To date, the Company has not paid any cash
dividends. The Board of Directors does not intend to declare any dividends in
the foreseeable future, but instead intends to retain all earnings, if any, for
use in the Company's business operations. If the Company obtains additional
financing, restrictions are likely to be placed on the Company's ability to
declare any dividends.
32. Potential Year 2000 Problems. The Company believes that it has no
potential internal Year 2000 problems. Nonetheless, the Company recognizes that
the computer systems of financial institutions and other vendors with which the
Company will do business could have Year 2000 problems that could affect the
Company. However, the Company has no greater exposure to these types of problems
than other businesses in general. Nonetheless, the Company could be materially
adversely affected by these problems in ways that can not now be quantified.
However, to avoid being adversely affected by the Year 2000 problems of other
persons, the Company has instituted a program of carefully screening persons and
companies with which it will do a material amount of business and monitoring
their efforts to avoid their own Year 2000 problems.
<PAGE>
BUSINESS
Industry Background
The Internet is an increasingly significant global medium for
communications, content and online commerce. Growth in Internet usage has been
fueled by a number of factors, including the large and growing installed base of
personal computers in the workplace and home, advances in the performance and
speed of personal computers and modems, improvements in network infrastructure,
easier and cheaper access to the Internet and increased awareness of the
Internet among businesses and consumers.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium. The
Internet and other online services are evolving into a unique sales and
marketing channel, just as retail stores, mail-order catalogs and television
shopping have done. In theory, electronic retailers have virtually unlimited
electronic shelf space and can offer customers a vast selection through
efficient searches and retrieval interfaces. Moreover, electronic retailers can
interact directly with customers by frequently adjusting their featured
selections, editorial insights, shopping interfaces, pricing and visual
presentations. Beyond the benefits of selection, purchasing is more convenient
than shopping in a physical retail store because electronic shopping can be done
24 hours a day and does not require a trip to a store. Web sites can present
advertising and marketing materials in new and compelling fashions, display
products and services in electronic catalogs, offer products and services for
sale electronically, process transactions and fulfill orders, provide customers
with rapid and accurate responses to their questions, and gather customer
feedback efficiently. The minimal cost to develop and maintain a Web site, the
ability to reach and serve a large and global group of customers electronically
from a central location, and the potential for personalized low-cost customer
interaction, provide additional economic benefits for electronic retailers.
Unlike traditional retail channels, electronic retailers do not have the
burdensome costs of managing and maintaining expensive retail real estate and a
significant retail store infrastructure or the continuous printing and mailing
costs of catalog marketing. Furthermore, electronic retailers are generally able
to conduct their businesses with fewer employee than traditional retailers.
Because of these advantages over traditional retailers, electronic retailers
have the potential to build large, global customer bases quickly and to achieve
superior economic returns over the long term. An increasingly broad base of
products and services is successfully being sold electronically, including
computers, travel services, brokerage services, automobiles, music and books. If
this trend continues, the migration from traditional shopping to electronic
shopping will effect dramatic changes in retailing as it has heretofore been
conducted.
In addition to the offering of products and services through electronic
commerce, the Internet has created a new medium for disseminating content, such
as the content historically delivered by newspapers, magazines and journals.
Electronic dissemination of content offers numerous advantages over historical
mediums of content dissemination. First, the content can be provided to
consumers more quickly, as the delays required by printing and delivery are
avoided. For example, a magazine that ordinarily is mailed for delivery on a
particular day can be made available electronically as soon as the magazine is
otherwise ready for print, at least one day before anticipated delivery. In
addition, content can be updated on a real time basis so that only current (and
no outdated) content appears. Moreover, the electronic content can be linked
instantaneously to related content of interest. While newspapers, magazines and
journals can offer only still-shot photography, electronic commerce can offer
moving and even live pictures much akin to television. Equally (if not most)
important, electronic content can be distributed at a much lower cost compared
to historical mediums because electronic dissemination does not involve printing
and delivery costs. The new medium of content dissemination provided by the
Internet has in turn lead to new forms of advertising, especially banner
advertisements that appear as Web sites are displayed. As the presence on the
Web of suppliers of content and advertising increases, the new forms of
advertising such as the banner advertisements should increase in prominence as
well, thus creating additional revenue opportunities.
Although businesses are pursuing electronic commerce rapidly and at
increasing rates, the basic differences of electronic commerce from historical
commerce require companies to take fundamentally new approaches. A number of
Internet professional services firms have emerged to assist businesses with the
development and implementation of their electronic commerce strategies. However,
these firms tend to be small and focused on a particular aspect of electronic
commerce, apparently lacking the necessary depth and integration of strategic,
technical and creative skills to meet all the electronic commerce needs of a
business. After analyzing the very fragmented Internet service industry,
management has concluded that:
1. Most traditional advertising and marketing agencies have
neither a proven track record of success in the area of
electronic commerce and lack the extensive technical skills
(such as application development, and legacy system and
database integration) required to solve increasingly complex
electronic commerce problems.
2. Most vendors of computer and technology products and services
lack the creative and marketing skills required to build
audiences and deliver unique and compelling content, and are
further constrained by their need to recommend their
proprietary brands.
3. Internet access service providers, whose core strength is in
providing Internet access and site hosting, typically lack
both the necessary creative and application development
skills.
Management believes that to provide fully competent Internet services,
a service provider must possesses a full range and integration of strategic,
technical and creative skills required for electronic commerce.
Businesses seeking to realize the benefits provided by electronic
commerce face a formidable series of challenges presented by the need to link
business and marketing strategies, new and rapidly changing technologies and
continuously updated content. The establishment and maintenance of a Web site to
pursue electronic commerce requires significant technical expertise in a number
of areas, such as electronic commerce systems, security and privacy
technologies, application and database programming, mainframe and legacy
integration technologies and advanced user interface and multimedia production.
Marketing expertise in a number of areas (including the development of
audiences, greater search engine presence, and broader ranges of links to the
site) is also required. Few businesses (especially small, emerging and mid-sized
businesses) appear to have the time, money, and strategic, technical and
creative skills to implement an electronic commerce strategy on their own. In
addition, management believes that the novelty, complexity and rapid development
of electronic commerce has left many businesses (especially small, emerging and
mid-sized businesses) bewildered and reluctant to act, despite a strongly felt
need to become involved in electronic commerce.
Furthermore, the Company believes that most firms providing services to
develop and implement electronic commerce strategies charge on a flat-fee or
time and materials basis. Under these pricing approaches, the service firm
profits from providing the services regardless of whether or not the client
business profits from the services provided. Accordingly, the interests of the
client and the service provider are not aligned because the client bears the
entire loss of a failed electronic commerce strategy while the service provider
bears none of this risk. Management believes that these pricing approaches
engender a suspicion that the service provider may not be candidly assessing a
client's electronic commerce potential, lest the service provider dissuade the
prospective client and miss an opportunity for a fee. While a business
contemplating an electronic commerce strategy may be concerned about missing a
business opportunity that may be necessary to bolster or preserve the business'
competitive posture, the business is equally concerned about avoiding a
worthless investment in money, time and business readjustment. Management
believes that flat-fee and time and materials pricing approaches further inhibit
businesses' willingness to undertake electronic commerce strategies.
Overall the Company believes that electronic commerce presents
excellent business opportunities for the foreseeable future. Because of the
relative novelty of electronic commerce, the Company believes that the market
for electronic commerce is fairly wide-open, although market leadership has
already been established in a number of respects. Nonetheless, plenty of
opportunities still exist, especially with regard to small, emerging and
mid-sized businesses. The Company believes that customer unfamiliarity and the
fragmented state of the electronic commerce market creates an opportunity for a
company with fully integrated strategic, technical and creative Internet skills
that can assist businesses while sharing the risk imposed by electronic commerce
strategies. Prior to the present, the number of consumers with Internet access
was probably too small for small, emerging and mid-sized businesses (the
Company's target prospects) to participate successfully in electronic commerce.
The Company believes that the present represents an excellent time to enter into
new markets created by electronic commerce at a time when entry is easier and
market position can be better established than it may be if entry were attempted
further into the future.
Despite the Company's optimism about the future of electronic commerce,
the pursuit of a plan of a business plan based on electronic commerce is not
without considerable risks. For more information about these risks, see
"BUSINESS AND PROPERTIES - RISK FACTORS - Dependence on the Internet, -
Uncertain Acceptance of the Internet as a Medium for Commerce, - Developing
Market, - Internet Commerce Security Risks, - - Risks Associated with
Technological Change, - Risk of System Failure; Single Site, - Regulatory
Concerns, and - Other Potential Liability."
The JVWeb Solution
The Company was founded to seek out and capitalize on business
opportunities presented by electronic commerce. The Company believes that the
anticipated migration from traditional shopping to electronic shopping, and the
anticipated increase in the electronic dissemination of content, will present
for the foreseeable future excellent business opportunities to sell products and
services that are now either not available at all or are available only to a
limited extent in electronic commerce, and to offer new forms of advertising
made available by the Internet. While the Company may pursue some of these
opportunities on its own, the Company expects that it will pursue most of these
opportunities with joint venture partners who have established businesses,
products and services. The Company intends to offer to prospective joint venture
partners technical Internet expertise (and in certain instances financial
assistance) for an ownership interest in the resulting electronic business, in
lieu of an up-front payment of cash. The Company believes that, because of the
strongly perceived need to be engaged in electronic commerce and the hesitancy
of many established businesses to pursue electronic commerce on their own (due
to their unfamiliarity with electronic commerce and the unique way of
approaching it and the concern about bearing a substantial loss from a failed
electronic commerce strategy), the Company should have for the foreseeable
future an ample array of joint venture prospects. The Company also intends to
develop a full, integrated ensemble of strategic, technical and creative skills
required for electronic commerce. Currently, the Company relies on third party
vendors to provide these skills. However, the Company intends actively to seek
acquisitions to give these skills to the Company internally.
Key components of the Company's solution to the question of
capitalizing on the anticipated growth in electronic commerce, the migration of
traditional shopping to electronic shopping, and the increase in the electronic
dissemination of content, include:
Identification and Selection of Electronic Commerce
Opportunities. Although the number of businesses engaging in electronic
commerce by means of Web sites is growing rapidly, the number of
businesses that have not yet engaged, and the number of products and
services that have not been offered and content not made available, in
electronic commerce remain very large. The Company intends to maintain
an active program of locating electronic commerce opportunities, and to
select only those opportunities that present the greatest likelihood of
success.
Joint Ventures. Although the Company expects to undertake some
electronic commerce opportunities alone, the Company believes that it
will undertake most electronic commerce opportunities through joint
ventures with established, profitable businesses whose products,
services or content (in most cases) are not currently being offered
electronically. The Company would furnish expertise in electronic
commerce (and in certain instances financial assistance) for an equity
interest in the resulting electronic business, in lieu of an up-front
payment of cash. Because of the Company's willingness to enter into
such an arrangement, the Company expects to be an attractive joint
venture partner for many established business seeking to become engaged
in electronic commerce. This willingness will allow selected businesses
to enter into electronic commerce with minimal financial investment and
risk, while providing the Company with a substantial potential return
for its services and financial contributions. The Company's limited
experience thus far indicates that for the foreseeable future the
Company will have an ample array of joint venture prospects. The
Company expects that for the foreseeable future the financial
assistance that the Company will provide to a joint venture in which it
participates may range from fairly minimal amounts to approximately
$100,000 at the high end. In order to provide this financial
assistance, the Company will have to procure funds from various
sources, which are discussed in "RISK FACTORS - - Future Capital Needs;
Uncertainty of Additional Financing" above. There can be no assurance
that the Company will be successful in procuring these funds.
Electronic Store Economics. By pursuing electronic
opportunities as the Company expects, the Company will in effect become
an electronic retailer. Electronic retailers enjoy meaningful
structural economic advantages relative to traditional retailers. They
enjoy significantly improved inventory turnover, avoid investment in
expensive retail real estate and realize reduce personnel requirements.
Further, electronic retailers serve a global market through centralized
operations, allowing their investments in Web sites, content, marketing
and technology to be leveraged over a relatively large sales base.
Beyond the benefits of selection, purchasing products and services from
an electronic retailer is more convenient than shopping in a physical
retail store because the electronic retailer is open 24 hours a day and
shopping does not require a trip to a store. Products can be shipped
directly to the customer's home or office. The Company believes that
customers may buy more products and services because they have more
hours to shop and can act immediately on a purchase impulse. Because an
electronic retailer has a global reach, it can deliver an extremely
broad selection to customers in rural, international or other locations
that cannot support traditional retailers offering comparable products
and services. Web sites may include not only the content and
applications dealing directly with products and services and their
purchase, but also stimulating content to inform and entertain
customers while shopping, thus encouraging the shopper to return for
more visits and to make more purchases. Over time, the Company can
accumulate substantial preference and behavioral information that will
allow it to customize targeted sales efforts and to provide value-added
services to its customers.
Content Opportunities. The Company also expects to pursue
opportunities created by the relatively new ability to disseminate
content electronically. Many businesses that disseminate content (such
as newspapers, magazines and journals) continue to use historical
delivery methods, primarily print. Electronic dissemination of content
offers numerous advantages over historical methods of content
dissemination, such as quicker delivery, more up-to-date content, more
flexible presentation using such techniques as live video, audio and
links to related content, and much lower costs of production.
Electronic content dissemination has lead to new forms of advertising,
such as banner advertisements. In addition, providing content
electronically on a limited, sample basis is expected to increase sales
of the underlying hardcopy content. The Company intends to seek joint
ventures with existing content providers to provide their content
electronically to increase subscription and advertising revenues.
Acquisitions. The Company intends actively to seek
acquisitions to develop a full, integrated ensemble of strategic,
technical and creative skills required for electronic commerce.
Currently, the Company relies on third party vendors to provide these
skills. However, the Company foresees great benefits by being able to
provide these skills internally. While a small number of companies
providing integrated Internet skills are already well-established and
growing, management believes that the market for integrated Internet
services is currently underserved.
<PAGE>
Strategy
The Company's objective is to take advantages of electronic commerce
opportunities. The Company plans to attain this goal through the following key
strategies:
Electronic Commerce Opportunities. The Company intends to seek
attractive electronic commerce opportunities for it to undertake on its
own or through joint ventures with established businesses. The Company
intends to maintain a program of actively seeking electronic commerce
opportunities and selecting only those opportunities that present the
greatest likelihood for success. The Company's success will depend on
its ability to identify and successful pursue electronic commerce
opportunities as they arise.
Create Customer Loyalty by Delivering a Compelling Value
Proposition. In connection with the Company's commerce-driven
opportunities, the Company's goal is to deliver to the Company's
customers the benefits of electronic commerce and by maintaining
relentless customer focus. The Company will strive to offer its
customers compelling value through innovative use of technology, broad
selection, high-quality content, a high level of customer service,
competitive pricing and personalized services. In addition, the Company
will seek to offer its customers a high-quality shopping experience
through informative and entertaining content, as well as simple and
efficient navigation capabilities.
Build Strong Brand Recognition. The Company's strategy is to
develop, promote, advertise and increase the brand equity and
visibility of its products, services and advertising through excellent
service and a variety of marketing and promotional techniques,
including advertising on other Web sites and other media, conducting an
ongoing public relations campaign and developing business alliances and
partnerships.
Create a Superior Economic Model. Because the Company will not
be burdened by the costs or legacy of physical store networks, related
personnel, and printing and delivering of content, the Company believes
it will have an inherent economic advantage relative to traditional
retailers and providers of content. The Company's goal is to capitalize
on this advantage by aggressively driving revenue growth to achieve
economies of scale and by incorporating technological advances
throughout its Web sites.
Maintain Technology Focus and Expertise. A state-of-the-art
interactive commerce platform is necessary to enhance the Company's
service offering, leverage the unique characteristics of retailing and
electronic content delivery, and enable a superior economic model. The
Company will be committed to developing, acquiring and implementing
technology-driven enhancements to its Web sites and
transaction-processing systems. Among other technology objectives, the
Company intends to provide increasingly valuable personalized service
programs, make user interfaces as intuitive, engaging and fast as
possible and continuously improve the efficiency of its fulfillment
activities.
Pursue Incremental Revenue Opportunities. The Company intends
to leverage its brands, electronic commerce experience, operating
infrastructures and customer bases to broaden its presence and develop
additional revenue opportunities. In addition, the Company will
consider developing incremental revenue opportunities through
affiliated or related Web sites, related product areas, geographic
expansion or acquisition of complementary businesses, products or
technologies. Finally, the Company's customer demographic and
substantial site traffic create a meaningful opportunity for
advertising sales, the sale of demographic information and the sale of
links to other sites to be featured on the Company's sites.
Strengthen Electronic Commerce Abilities. The Company intends
to continue to build a critical mass of strategic, technical and
creative talent primarily through acquisitions in order to strengthen
its electronic commerce abilities. The Company intends to continue
efforts to identify, review and integrate the latest electronic
commerce technologies and accumulating and deploying the best
demonstrated practices for developing and implementing electronic
commerce strategies.
Develop Additional Strategic Relationships. The Company has
developed a number of informal strategic relationships with
advertisement agencies, web developers, site content managers, site
hosts and other persons whose services are necessary to develop and
implement an electronic commerce strategy. None of these strategic
relationships has yet resulted in a legal binding relationship. While
the Company intends to develop the ability to render these services
internally, the Company also intends to continue developing strategic
relationships so that the Company can have adequate access to such
services for the foreseeable future. The Company expects that it may
ultimately acquire some of the firms with which it establishes
strategic relationships.
Attract and Retain Exceptional Employees. The Company believes
that versatile and experienced employees provide significant advantages
in the rapidly evolving market in which it will compete. The Company is
committed to building a talented employee base and to attracting an
experienced management team.
Opportunity Selection
Management believes that opportunities in electronic commerce are
either commerce-driven or content-driven. Commerce-driven opportunities involve
the sale of products and services through electronic mediums, such as electronic
stores. Content-driven opportunities involve the provision of content (such as
that historically provided by newspapers, magazines and journals) through
electronic mediums, the attraction of consumers to such content, and the
offering of advertising (and even products and services) in connection with the
provision of such content. The Company expects to pursue both commerce-driven or
content-driven opportunities.
Currently the Company learns of all its electronic commerce
opportunities through word-of-mouth referrals. For the present, the Company has
been able to learn of a sufficient number of electronic commerce opportunities
by this means. However, in the future as the Company grows, the Company intends
to advertise for joint venture prospects primarily through the Internet, once
regulatory constraints have been complied with. Moreover, the Company may engage
investment bankers, brokers and other intermediaries to locate these prospects
as well.
Once a joint venture prospect is presented, a thorough study will be
undertaken of the prospect's strategic market position, business requirements
and existing systems and capabilities, to determine the likelihood that the
prospect's business will succeed in electronic commerce. After the study, the
Company's site management team (composed of the site administrator, web
marketing consultant, financial controller and project manager) accepts or
rejects the prospect. This decision is based on a number of factors, such as the
prospect's historical or prospective ability to fulfill orders, the lack of a
clearly perceived electronic commerce strategy, the lack of perceived electronic
market interest and the need for an initial budget too high to warrant the
related risk. Currently, the Company intends to charge a $2,500 application fee
to defer the costs of screening a prospect. If the Company decides not to pursue
a joint venture with the prospect, the Company will develop a basic Web site for
the prospect in consideration of the application fee.
If a prospect is accepted, the Company enters into negotiations with
the prospect to formalize an on-going joint venture relationship. The Company
expects that the joint ventures it forms will assume the form of corporations or
limited liability companies organized in Delaware (a favorable state for
corporations), Texas (the state in which the Company is headquartered), or
another favorable jurisdiction. The Company expects that it will own between 20%
to 80% of the outstanding equity interests in each joint venture depending on
the relative contributions of the venturers. The documentation governing the
joint venture will delineate the respective responsibilities of the Company and
its joint venture partner. In the case of the Company, these responsibilities
are expected to include the contribution of necessary strategic, technical and
creative skills and (in certain instances) financial assistance in developing
the joint venture's Web site. (For the present, the Company will act as the
coordinating consultant and will utilize third party vendors in providing the
foregoing skills; however, the Company intends to acquire these skills
internally, primarily through acquisitions.) The joint venture partner's
responsibilities will include the furnishing of the joint ventures' products or
services, the content for the joint ventures' Web sites, and the related
business expertise. The Company expects that it and its joint venture partner
will have management authority with respect to the respective areas for which
they have responsibility. The capital contributions of the venturers should be
fairly minimal, and will be worked out on a case-by-case basis. The Company
expects that as the joint ventures with commerce-driven Web sites receive
revenues, such revenues will be first used to reimburse the joint venture
partner for the costs of providing the joint venture's product or services, then
such revenues will be used to pay other joint venture expenses, and then the
remainder will be distributed to the venturers in accordance with their
percentage ownership. A similar scheme will be used for joint ventures with
content-driven Web sites, except that the joint ventures' revenues are expected
to result from additional advertising and additional subscription to the
underlying hardcopy publication resulting from the Web sites. The Company
expects that the documentation governing the joint venture will include a
buy-sell arrangement whereby either the Company or its joint venture partner may
terminate its relationship with the other by setting the price and terms of the
purchase of one of the venturer's interest and allowing the other venturer to
elect to sell to or buy out the venturer setting the price and terms for such
price and upon such terms. The Company also expects that the terms of the joint
ventures will be renewable on an annual basis and the documentation governing
the joint venture will provide for the sale of the joint venture's business upon
dissolution either to a third party, or to the Company or its joint venture
partner at an appraised price.
The Company expects that for the foreseeable future the financial
assistance that the Company will provide to a joint venture in which it
participates may range from fairly minimal amounts to approximately $100,000 at
the high end. In order to provide this financial assistance, the Company will
have to procure funds from various sources, which are discussed in "RISK FACTORS
- - - Future Capital Needs; Uncertainty of Additional Financing" above. There can
be no assurance that the Company will be successful in procuring these funds.
Web Sites
The proper development and implementation of a Web site for a business
involves a number of steps. First, a thorough study is undertaken to determine
the likelihood that the business will succeed in electronic commerce. Once the
study determines that the business is likely to succeed in electronic commerce,
a strategy for developing a Web site is developed by a team composed of the
business principals, advertising agency, web developer and content site manager.
A domain name is agreed upon and obtained. The Web site is then "story boarded"
or laid out conceptually and graphically. A web developer develops the structure
of the Web site, including electronic commerce systems; host integration;
implementation of third-party applications and security technologies; and
integration of hardware, software and Internet access products. A compelling
user interface is created to attract and hold the attention of the target
audience while conforming to brand images and marketing campaigns. A
relationship with a third-party vendor is established to provide secure,
state-of-the-art, high-availability Web site hosting and integrated services for
e-mail and secure electronic commerce. Once operational, a Web site requires
ongoing support services for content maintenance, site administration, technical
problems, assistance with the hosting environment, and software support. As the
Web site nears completion, electronic marketing objectives are developed to
establish and increase Web site traffic, strengthen brand awareness and generate
sales leads. Electronic media planning and purchasing, and electronic public
relations is undertaken. This is followed by efforts to optimize the Web site's
search engine presence, increase site access through hyperlink recruitment and
disseminate key messages to Internet newsgroups, mailing lists and forums.
Typically a Web site starts as a basic site costing several thousand dollars. It
can then become increasingly more complex through the addition of more Web
pages, links and commercial capability. Ultimately, an extremely complex Web
site can cost several million dollars.
<PAGE>
Electronic Retail Stores
Many, if not most, of the Company's commerce-driven Web sites are
expected to assume the form of an electronic retail store. Customers enter an
electronic retail store through a Web site and, in addition to ordering products
and services, can conduct targeted searches, browse from among highlighted
selections, read content provided, register for personalized services,
participate in promotions and check order status.
Browsing. As a customer proceeds through the store, he or she
encounters graphic images of featured products and services. Clicking
with the mouse on any of these images pulls up more information about
the featured product and service, as well as a button which, if clicked
on, adds the product or service to the customer's order. The Company's
electronic stores are expected to offer visitors a variety of
highlighted subject areas and special features. To enhance the shopping
experience and increase sales, the Company are expected to feature
various products and services on a rotating basis throughout the store.
These images of featured products and services appear one or two at a
time, in addition to whatever material the customer specifically
requested.
Ordering. To purchase a product or service, customers simply
click on a button to add the product or service to their virtual
shopping baskets. Customers can add and subtract products and services
from their shopping baskets as they browse, prior to making a final
purchase decision, just as in a physical store. To execute orders,
customers click on the buy button and are prompted to supply shipping
and credit card details, either by e-mail, fax or telephone. This
information will be stored on a secure server and need not be provided
again by repeat customers. The personal password allows repeat
customers to automatically access their previously provided shipping
and credit card information. The Company's system will automatically
confirm each order by e-mail to the customer shortly after the order is
placed and will advise customers by e-mail shortly after orders are
shipped.
Availability and Fulfillment. The Company does not expect to
carry very much inventory but will rely almost exclusively on its joint
venture partners and third party vendors and manufacturers for
fulfillment of orders. Orders will be received by the Company's site
administrator, who will then notify and direct the related joint
venture partner or third party vendor to fulfill the order. Most of the
Company's products are expected to be available for immediate shipment,
while others are available for shipment within 48 to 72 hours.
Customers will be permitted to select from a variety of delivery
options, including overnight and various international shipping
options, as well as gift-wrapping services. The Company will use e-mail
to notify customers of order status under various conditions. The
Company will seek to provide rapid and reliable fulfillment of customer
orders.
Content. The Company's electronic retail stores are expected
to offer numerous forms of content to entertain and engage shoppers,
enhance the customer's shopping experience and encourage purchases.
These forms will include articles by experts on subjects in which
visitors to the Company's Web sites are expected to be interested, chat
rooms in which visitors can communicate with each other and with
selected persons in whom visitors are expected to be interested, and
contests in which visitors have a chance to win a prize.
Electronic Community. By creating an electronic community, the
Company hopes to provide customers with an inviting and familiar
experience that will encourage them to return frequently to the
Company's Web sites and to interact with other users, and that will
promote loyalty and repeat purchase. In addition to the content of the
Web sites, the Company intends to establish chat rooms in which
visitors to the Web sites, who presumably will have something in common
with each other, can communicate with each other in real time. Experts
and authors of the content featured on the Company's Web sites are
expected to participate in these chat rooms, thus giving visitors the
opportunity to engage in a dialogue and acquire information in which
they are interested.
Customer Service and Personalized Services. The Company
believes that its ability to establish and maintain long-term
relationships with its customers and encourage repeat visits and
purchases depends, in part, on the strength of its customer support and
service operations and staff. Furthermore, the Company values frequent
communication with and feedback from its customers in order to
continually improve its electronic stores and its services. The Company
will offer e-mail addresses to enable customers to request information
and to encourage feedback and suggestions. The Company will maintain a
team of customer support and service personnel for handling general
customer inquiries, answering customer questions about the ordering
process, and investigating the status of orders, shipments and
payments. The Company will also offer a toll-free line for customers
who are reluctant to enter their credit card numbers through the Web
site. The Company will automate certain of the tools used by its
customer support and service staff, and the Company intends to pursue
actively on-going enhancements to and automation of its customer
support and service systems and operations. The Company currently
expects to notify its customers electronically by e-mail as orders are
received and shipped. The Company also expects to notify its customers
by e-mail of products, services and other matters in which they may be
interested. The Company also expects to notify its customers
electronically by e-mail on a regular basis as to promotions the
Company is then running.
Collaborative Filtering. The Company intends to add a
collaborative filtering service to its personalized service offerings
in the future. The collaborative filtering service will function as an
expert reviewer that develops a relationship with customers, helping
them to find products and services they may like based on their
preferences.
Current Projects
Dad&me.com
The Company's first project was the development of its wholly-owned Web
site known as "www.dadandme.com." This site became operational on March 20,
1998, and continues to be developed. The Company has not yet aggressively
marketed this site, and does not intend to do so until it completes development
of the site and has entered into certain co-marketing agreements now being
negotiated. This site is dedicated to fortifying and enhancing fatherhood and
offering products sold under the "Dad & me" logo. The concept originated from a
series of children books written by Greg J. Micek, a director and the President
of the Company. All authorship rights pertaining to these books have been
assigned to a subsidiary of the Company. This www.dadandme.com site will feature
content and products addressed specifically to fathering issues. Initial
products will number approximately 20 and are expected to include T-shirts,
sweatshirts, polo shirts, pen and pencil sets, books, mugs and picture frames.
The www.dadandme.com Web site features articles on parenting and a chat room in
which visitors can communicate with each other and with an authority on
children. The Company is using www.dadandme.com as a test site for future Web
sites to be developed by the Company. Several other Web sites currently under
consideration are expected to commence full-scale development after
www.dadandme.com becomes fully operational. The Company expects that
www.dadandme.com will eventually be link with another Web site,
www.familylifestyle.com, a Web site expected (through links) to serve as a hub
for a series of commercial sites dedicated to family issues and products. In
this regard, the Company has entered into an agreement to become the exclusive
on-line distributor for "Frogletz", Chameleon Casual's line of children's play
clothing.
Wall Street Whispers
On July 31, 1998, the Company entered into an agreement (the "WSW
Agreement") to acquire all of the assets (collectively, the "Assets") comprising
a financial publication know as "Wall Street Whispers" (the "Publication"). The
Publication is an on-line daily financial publication that summarizes
information from over 15 analysts sources under contract. The WSW Agreement
provides that title to the Assets will be transferred to the Company upon full
payment of the purchase price for the Assets (the "Purchase Price"). The
Purchase Price for the Assets is $140,000. The Company made a downpayment toward
the Purchase Price in the amount of $25,000 and three additional installments
each in the amount of $10,000. The WSW Agreement provides that the Company must
pay a final balloon installment in the amount of $85,000 by October 15, 1998.
The Company does not now have funds available for the October 15th payment.
However, the Company has the ability to issue shares of the Company's common
stock to pay the outstanding amount in lieu of the payment of cash. Shares of
the Company's common stock issued as payment are credited against the
outstanding balance in the manner provided for in the WSW Agreement. There can
be no assurance that the issuance of shares will satisfy the Company's payment
obligations. The Company is also working to assure that it has cash available to
make timely the October 15th payment. The WSW Agreement provides that, if the
Company fails to pay timely the required installments when due, the sellers may
immediately terminate the WSW Agreement and be freed from their obligations to
transfer ownership of the Assets to the Company. In such event, the Company will
forfeit all payments made on the Purchase Price thus far. In addition, under the
WSW Agreement, the sellers are obligated to obtain certain third party consents
to the transfer of the Assets. If the sellers fail to obtain these consents by
the time the Company stands ready to pay the remaining balance of the Purchase
Price, the Company may immediately terminate the WSW Agreement and be freed from
its obligation to acquire ownership of the Assets. Moreover, the Company will
also be entitled to a full refund of all payments made on the Purchase Price
thus far.
Heitmann S.A.C.
The Company has formed a strategic alliance with Heitmann S.A.C.
("Heitmann"), a company based in the United Kingdom. Heitmann has designed,
written, translated and communicated technical information for over 25 years,
working with some of the world's largest multinationals. Because it has a
network of 11 offices across Europe and two production facilities in the United
States and works in the world's 25 most used languages, Heitmann has a broad
geographical reach. Heitmann has a particular emphasis in new media distribution
and deploys proprietary expertise in the publishing of Internet and Intranet
technologies. Since 1994 Heitmann has produced over 2,000 successful interactive
information projects. Pursuant to their strategic alliance, Heitmann will
provide Web development and other Internet related technical services on behalf
of the Company, and the Company will market these technical capabilities on a
fee for service basis in the United States. This new strategic partnership is an
outgrowth of the relationship between the two companies that has solidified over
time with the assistance provided by Heitmann in the creation of the Company's
showcase websites www.jvweb.com and www.dadandme.com. These projects
demonstrated the ability of the two companies to use Internet tools to complete
Web projects across international boundaries. The Company and Heitmann have not
entered into a legally binding agreement with regard to their relationship, but
they intend to explore, through their strategic alliance, the basis for entering
into a legally binding agreement in the future.
Acquisitions
The Company intends to pursue an active acquisition program in an
effort to foster the Company's growth over and above the growth that can be
achieved internally. The Company believes that there are a number of potential
acquisition candidates that satisfy its acquisition objectives. The Company is
currently discussing the acquisitions of several companies. These companies are
engaged in a variety of businesses (such as advertising services, web hosting,
merchandise fulfillment and web development and integration) that would further
enable the Company to provide Internet and electronic commerce services. Each of
the companies with which the Company is currently engaged in discussions has
annual revenues of less than $250,000. The Company has not yet reached an
agreement in principle with regard to the acquisition of any of these companies.
There is no assurance that any acquisitions will result from discussions with
any of these companies. Acquisition candidates are expected to include emerging
electronic commerce companies, traditional companies with good prospects for
significant electronic commerce, and Internet service companies capable of
enhancing the Company's Internet resources. Some of these may include the
Company's joint venture partners and third party vendors.
Management will be dedicated to identifying potential acquisition
candidates. The Company may in the future retain the services of investment
bankers, brokers and other intermediaries to assist in identifying potential
acquisition candidates. Management will also engage in negotiations and due
diligence activities with each acquisition candidate to explore whether it meets
the Company's operating strategy, and will work to complete the acquisition of
suitable candidates. The Company will stress to each acquisition candidate the
advantages of merging with the Company, including the benefits of being part of
an organization committed to growth. Following the closing of each acquisition,
the Company intends to move rapidly to integrate the acquired company into the
Company's operations.
The Company has not developed, nor does it currently intend to develop,
a valuation model and a standardized transaction structure it will use on a
consistent basis for its anticipated acquisitions. Instead, the Company
anticipates considering each acquisition on a case-by-case basis. However, the
Company expects that the purchase price for acquisition candidate will be based
on quantitative factors, including historical revenues, profitability, financial
condition and contract backlog, and the Company's qualitative evaluation of the
candidate's management team, operational compatibility and customer base.
Nonetheless, the Company expects to acquire suitable candidates through mergers
in exchange for shares of Common Stock, and 5,000,000 shares of Common Stock
have been register in this connection and for this purpose.
The acquisitions are expected to be accounted for using the
pooling-of-interests method of accounting. However, some acquisitions may be
accounted for using the purchase method of accounting. Under this method of
accounting, for each acquisition, a portion of the purchase price would be
allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed based on their respective fair values on the acquisition
date. This portion would include both (i) amounts allocated to in-process
technology and immediately charged to operations and (ii) amounts allocated to
completed technology and amortized on a straight-line basis over the estimated
useful life of the technology of six months. The portion of the purchase price
in excess of tangible and identifiable intangible assets and liabilities assumed
would be allocated to goodwill and amortized on a straight-line basis over the
estimated period of benefit, which ranges from one to two years. The results of
operations of the acquired entity would be consolidated with those of the
Company as of the date the Company acquires effective control of the acquired
entity, which generally would occur prior to the formal legal closing of the
transaction and the physical exchange of acquisition consideration. In addition,
the Company may grant stock options to employees of an acquired company to
provide them with an incentive to contribute to the success of the Company's
overall organization. As a result of both the purchase accounting adjustments
and charges for the stock options just described, the Company may incur
significant non-cash expenses related to its acquisitions.
The successful implementation of the Company's acquisition strategy
depends on the Company's ability to identify suitable acquisition candidates,
acquire such companies on acceptable terms and integrate their operations
successfully with those of the Company. There can be no assurance that the
Company will be able to do so. Moreover, in pursuing acquisitions the Company
may compete with companies with similar acquisition strategies. Most of these
competitors will be larger and have greater financial and other resources than
the Company. Competition for these acquisition targets could also result in
increased prices for acquisition targets and a diminished pool of companies
available for acquisition. Acquisitions also involve a number of other risks,
including adverse effects on the Company's reported operating results from
increases in goodwill amortization, acquired in-process technology, stock
compensation expense and increased compensation expenses resulting from newly
hired employees, the diversion of management attention, risks associated with
the subsequent integration of acquired businesses, potential disputes with the
sellers of one or more acquired entities and the failure to retain key acquired
personnel. Client satisfaction or performance problems with an acquired firm
could also have a material adverse impact on the reputation of the Company as a
whole, and any acquired company could significantly fail to meet the Company's
expectations. Due to all of the foregoing, the Company's pursuit of an overall
acquisition strategy or any individual completed, pending or future acquisition
may have a material adverse effect on the Company's business, results of
operations, financial condition and cash flows. If the Company issues Common
Stock to complete future acquisitions as it expects to, there will be ownership
dilution to existing stockholders. In addition, to the extent the Company
chooses to pay cash consideration in such acquisitions, the Company may be
required to obtain additional financing and there can be no assurance that such
financing will be available on favorable terms, if at all.
Intellectual Property
The Company regards its service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to its success, and relies
on trademark law, trade secret protection and confidentiality and/or license
agreements with its employees, customers, partners and others to protect its
proprietary rights. The Company pursues the registration of its trademarks and
service marks in the U.S., and has applied for the registration of certain of
its trademarks and service marks. Effective trademark, service mark, and trade
secret protection may not be available in every country in which the Company's
products and services are made available electronically. The Company may license
to third parties in the future certain of its proprietary rights, such as
trademarks. While the Company will attempt to ensure that the quality of its
brands are maintained by such licensees, there can be no assurance that such
licensees will not take actions that might materially adversely affect the value
of the Company's proprietary rights or reputation, which could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate or that third parties
will not infringe or misappropriate the Company's trademarks, trade dress and
similar proprietary rights. In addition, there can be no assurance that other
parties will not assert infringement claims against the Company. The Company may
be subject to legal proceedings and claims from time to time in the ordinary
course of its business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by the
Company and its licensees. Such claims, even if not meritorious, could result in
the expenditure of significant financial and managerial resources.
Market and Marketing
The Company's objective is to take advantages of electronic commerce
opportunities. The Company's marketing will be focused on developing a flow of
potential electronic commerce opportunities for the Company's consideration, and
developing sales of the products, services and advertising offered through the
electronic commerce opportunities selected by the Company.
Currently, the Company learns of all of its potential electronic
commerce opportunities through word-of-mouth referrals. In the future, the
Company intends to advertise for electronic commerce opportunities on the
Internet once regulatory constraints have been complied with, and the Company
may engage intermediaries and brokers to locate these prospects as well. One way
or the other, the Company intends to maintain an active program of locating
electronic commerce opportunities.
With respect to the Company's products and services offered through Web
sites, the Company's marketing strategies will be designed to strengthen its
brand names, increase customer traffic to its Web sites, build strong customer
loyalty, maximize repeat purchases and develop incremental revenue
opportunities. The Company intends to build customer loyalty by creatively
applying technology to deliver personalized programs and service, as well as
creative and flexible merchandising. The Company will be able to provide
increasingly targeted and customized services by using the extensive customer
preference and behavioral data obtained as a result of its experience. The
Internet allows rapid and effective experimentation and analysis, instant user
feedback and efficient "redecorating of the store for each and every customer,"
all of which the Company intends to incorporate in its merchandising. In
contrast to traditional direct-marketing efforts, the Company's personalized
notification services will send customers highly customized notices at
customers' request. By offering customers a compelling and personalized value
proposition, the Company will seek to increase the number of visitors that make
a purchase, to encourage repeat visits and purchases and to extend customer
retention. Loyal, satisfied customers also generate word-of-mouth advertising
and awareness, and are able to reach thousands of other customers and potential
customers because of the reach of electronic commerce
The Company will employ a variety of media, program and product
development, business development and promotional activities to achieve these
goals. The Company intends to place advertisements on various Web sites. These
advertisements usually take the form of banners that encourage readers to click
through directly to the Company's Web sites. The Company also intends to enter
into co-marketing agreement pursuant to which links to the Company's Web sites
will be featured on other, non-Company Web sites. The Company also intends to
engage in a coordinated program of print advertising in specialized and general
circulation newspapers and magazines. In the future it may begin advertising in
other media. This activity will be undertaken with the hope of the Company being
featured in a wide variety of television shows, articles and radio programs and
widely-read portions of the Internet, such as portions included on Netscape and
Yahoo!
Technology
The Company has implemented a broad array of site management, customer
interaction, transaction-processing and fulfillment services and systems using
commercially available, licensed technologies. The Company's current strategy is
to license commercially available technology whenever possible rather than seek
internally developed solutions.
The Company will use a set of applications for accepting and validating
customer orders, organizing, placing and managing orders with vendors, receiving
product and assigning it to customer orders, and managing shipment of products
and services to customers based on various ordering criteria. These applications
will also manage the process of accepting, authorizing and charging customer
credit cards. In addition, the Company's systems will allow it to maintain
ongoing automated e-mail communications with customers throughout the ordering
process at a negligible incremental cost. These systems will automate many
routine communications entirely, facilitate management of customer e-mail
inquiries and allow customers (on a self-service basis) to check order status,
change their e-mail address or password, and check subscriptions to personal
notification services.
A group of systems administrators and network managers will monitor and
operate the Company's Web sites, network operations and transaction-processing
systems. The continued uninterrupted operation of the Company's Web sites and
transaction-processing systems is essential to its businesses, and the site
operations staff is expected to ensure, to the greatest extent possible, the
reliability of the Company's Web sites and transaction-processing systems.
Competition
The electronic commerce market is new, rapidly evolving and intensely
competitive, the Company expects such competition to intensify in the future.
Barriers to entry are minimal, and current and new competitors can launch new
Web sites at a relatively low cost. The Company expects that it will encounter
fierce competition with regard to any product or service that it offers in the
future. Competitive pressures created by any current or future competitors could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations. The Company believes that the principal
competitive factors in its markets will be brand recognition, selection,
personalized services, convenience, price, accessibility, customer service,
quality of editorial and other site content and reliability and speed of
fulfillment, and the Company intends to compete vigorously in all of these
aspects. The Company expects that most of its current and potential competitors
will have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and other resources
than the Company. In addition, electronic retailers may be acquired by, receive
investments from or enter into other commercial relationships with larger,
well-established and well-financed companies as use of the Internet and
electronic commerce increases. Certain of the Company's competitors may be able
to secure merchandise from vendors on more favorable terms, devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
or inventory availability policies and devote substantially more resources to
their Web sites and systems development than the Company. Increased competition
may result in reduced operating margins, loss of market share and a diminished
brand franchise. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on its
business, prospects, financial condition and results of operations. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company. In addition, companies that control access
to transactions through network access or Web browsers could promote the
Company's competitors or charge the Company a substantial fee for inclusion.
Employees
The Company currently has only one employee, Greg J. Micek. Mr. Micek
currently devotes all of his business time and attention to the Company. The
Company expects that it may have as many as five employees within the next year,
excluding employees of acquired businesses. Although the competition for
employees is fairly intense, the Company does not now foresee problems in hiring
additional qualified employees to meet its labor needs.
Facilities
The Company currently leases a small amount of office space for its
corporate offices on a month-to-month basis. The Company also owns the
intellectual property rights in its domain names and Web sites.
The Company does not own any significant tangible property.
ITEM 3. LEGAL PROCEEDINGS
Since the date of its organization through the date of this Annual
Report, the Company has not been involved in any legal proceedings. There can be
no assurance, however, that the Company will not in the future be involved in
litigation incidental to the conduct of its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
As of June 30, 1998, the Company had 216 holders of record. Trading in the
Common Stock commenced on June 30, 1998. Since trading commenced in the Common
Stock, the sales prices of the Common Stock have ranged from a low of $.75 to a
high of $1.25. Presented below are the high and low closing bid prices of the
Common Stock for the periods indicated:
High(1) Low(1)
Fiscal year ended June 30, 1998:
Fourth Quarter $.75 $.75
- ---------------
(1) Reflects sole trade to occur during fiscal 1998 on June 30, 1998,
the date trading in the Common Stock commenced.
The Company has never paid cash dividends, and has no intentions of
paying cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion provides information to assist in the
understanding of the Company's financial condition and results of operations,
and should be read in conjunction with the financial statements and related
notes appearing elsewhere herein.
Summary
Significant progress has been made in the initial developments of
JVWeb, Inc., since its inception on November 11, 1997. Our focus centered upon
exploiting a potentially exploding segment of business commerce, on-line
commerce. We fully believe that, over the next few years, "e-commerce" will
mature into a broad and deep channel through which significant worldwide
commerce will flow. JVWeb's premise is that businesses will migrate to the web
as this channel of distribution is exploited. Small to medium sized companies
can participate on the same-leveled playing field as larger organizations. As
this migration occurs, the average business owner is confronted with an array of
alternatives in developing a business strategy for exploiting commerce on the
Internet. That business owner's knowledge of technology is simply inadequate to
support the financial and human investment required to be successful.
Compounding the challenge, the typical web developer lacks the business
sophistication to assist the owner in making those critical decisions, which can
make the difference between success and failure. Therefore, JVWeb as a strategic
Internet services provider becomes the "partner" in developing and implementing
electronic commerce strategy. To that end, we are building an organization that
takes advantage of this emerging commerce channel. We have identified where we
want to deploy our capabilities, and we will be pursuing this in two main areas:
Through expanding our ability to deliver on our promise, and through the
e-commerce projects we select.
We have also concentrated on building our capacity to simultaneously
implement a business structure that will absorb rapid growth. Our filing with
the Securities and Exchange Commission to become a public company as a spin-off
of an existing public company, LS Capital Corporation became effective on May
12, 1998. The distribution of the shares occurred on May 20, 1998 and trading
commenced in June, 1998.
As our financial statement shows, we invested our initial capital on
the development of our first operating website, dadandme.com, which became
operational in April, 1998. We also acquired domain names for jvweb.com and a
third web site address, www.familylifestyle.com as we anticipate expanding our
web presence in 1998.
We have also continued to absorb the costs of filing to become a public
company, which is reflected in the expenditures for this year ending June 3,
1998.
We anticipate further development efforts to continue in the upcoming
first quarter of fiscal 1999. We are also projecting our first revenues from
operations to initiate in this same quarter.
Period Ending June 30, 1998
The Company currently has cash on hand only sufficient to operate
throughout fiscal 1999 on a fairly minimal scale. In order for the Company to
pursue its business plan in the manner it prefers, the Company expects that it
will need to raise additional funds in amounts that can not now be precisely
ascertained due to the uncertainty of the actual growth of the Company. There
can be no assurance that the Company will be successful in raising the funds
that it needs. See "BUSINESS AND PROPERTIES - RISK FACTORS - Future Capital
Needs; Uncertainty of Additional Financing."
The Company does not anticipate performing any research and development
in the next twelve months, other than that which is performed in the normal
course of business as it develops its electronic commerce capabilities, such as
the testing of new, widely-available software for use in the Company's
electronic commerce pursuits. There are no expected purchases or sales of any
plant or significant equipment. The Company does not anticipate any significant
changes in its number of employees, other than through any possible
acquisitions.
In November, 1997, the Company sold 500,000 shares of common stock and
1,500,000 Class A warrants to LS Capital Corporation at a purchase price of
$5,000 pursuant to the related spin-off agreement.
In March, 1998, the Company issued 200,000 shares of common stock
to a private investor at a purchase price of $.25 per share.
Subsequent to the year end, but prior to this filing, the Company
reported the receipt of $50,000 from a shareholder, in the form of a loan
convertible to common stock, on August 13, 1998. An additional $50,000, in the
same manner and from the same source, is expected around the middle of
September.
Business Operations
As the Company initiates its business operations in the upcoming first
quarter ending 9/30/98, business operations are developing in the following
areas. The first area involves the development of an e-commerce presence through
company-owned Brands. In this regard, the Company is engaged in rolling out two
brands under its control. The first brand, as announced on July 31, 1998,
involves the Company's contract to acquire an on-line financial newsletter, Wall
Street Whispers. The Company is presently making a concentrated effort to absorb
this publication and is actively and aggressively marketing to increase its
subscriber base.
The second brand, as announced on July 30, 1998, involves the Company's
having acquired the on-line rights to distribute the line of frogletz children's
clothes from Chameleon Casuals. This is part of a substantial effort by the
Company to roll-out its "community-to-commerce" web commerce strategy with
dadandme.com. The Company expects to make significant progress over the next
fiscal year to establish this brand as a material contributor to its business.
The second operational area, which involves its relationship in two key
areas with Heitmann S.A.C, announced on June 30, 1998, is involved in building a
fee-for-service division. The Company has just recently, on September 2, 1998,
completed hosting a visit from Heitmann, in which significant business
opportunities were discussed. The Company is putting a primary emphasis on
building a fee-for-service division, with Heitmann S.A.C as a key supplier of
web creation services to prospective clients of the Company. The Company is
exploiting an opportunity to serve significant customers that are requesting
access to the customized web-related services that are being built for the
on-line marketing of the Company's own brands. These services include
web-hosting, web-site development and maintenance, and an array of strategic
internet services (SIS) that the Company has assembled for its own use. The
Company believes that this fee-for service division will be a significant
contributor to its business over the next year. For example, a typical
customized package of services for a particular client could involve
web-hosting, web development and maintenance, and other SIS resources could
involve annual per client revenue of up to $300,000. The company is presently
actively pursuing this type of fee-for-service business, although it cannot
provide any assurances that it will, in fact, acquire any of the projects at
this time.
The second key contribution that Heitmann S.A.C is providing in this
emerging fee-for-service division, involves the Company's commitment to building
web-hosting capabilities, as an identified core competency of a strategic
internet services company. The Company has been informed by Heitmann that, for
various technical and business reasons, Heitmann would like to work through the
Company to provide U.S. based web-hosting services for Heitmann's European
client base. Heitmann presently works through a number of European vendors to
provide this service, and finds the rates in Europe to be significantly greater
than can be obtained in the U.S. As a result, as well as through the Company's
own independent determination of the need to expand its capabilities to provide
this service, the Company has engaged a consultant to assist in locating a
web-hosting service to align with to provide this service for U.S. and European
clients. Heitmann has provided the Company with a 12 month proforma of projected
revenue to be derived from its client base. Although the Company declines to
disclose the projection, it will state that a typical customer is presently
paying between $1,000 and $8,000(US) monthly for web-hosting services in Europe.
The Company, and Heitmann, believe such services can be provided by the Company,
in the U.S.
at a significant less rate.
As a third operational thrust for the Company, the above operational
developments will provide the focus required for the Company's pursuit of
selected acquisitions to build its service capabilities. The Company is actively
engaged in discussions with targeted companies to acquire both "back-end"
support in, for example, web-hosting and other technical services, as well as
"front-end" support of brand marketing capabilities with selected advertising
and public relations firms.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The reports of Company's Independent Auditors appear at Page F-1
hereof, and the Financial Statements of the Company appear at Page F-2 through
F-____ hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
DISCLOSURE.
Not applicable.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Positions
<S> <C> <C> <C>
Greg J. Micek 43 Director, President
Lewis E. Ball 66 Director, Treasurer & Secretary
</TABLE>
Greg J. Micek has served as a Director and President of the Company
since inception. Since 1983, Mr. Micek has been a principal of The Micek Group,
a business consulting firm. In this connection, from June 1996 to June 1997 he
served as President and Chief Executive Officer of HyperDynamics Corporation
(formerly Ram-Z Enterprises, Inc.), a publicly traded company focusing on
technology acquisitions. In addition, from 1992 to 1994 Mr. Micek served as the
Project Manager for the City of Austin's Small Contractor Support Network, and
from 1991 to 1992, he served as a business reorganization consultant for Parker
Brothers, Inc. Mr. Micek received a Bachelor of Arts and a Doctorate of
Jurisprudence from Creighton University.
Lewis E.Ball has served as a director of the Company since November 15,
1997. He has been a financial consultant to a number of companies since 1993.
From June 1996 to January 1997, Mr. Ball served as the Chief Financial Officer
of HyperDynamics Corporation (formerly Ram-Z Enterprises, Inc.). Mr. Ball has
many years of industry experience as a Chief Financial Officer and Director of
several major public companies, including Stewart & Stevenson Services, Inc. and
Richmond Tank Car Company (from 1983 to 1993). He is a Certified Public
Accountant and a Certified Management Accountant. Mr. Ball earned a Bachelor of
Business Administration in Finance from the University of Texas at Austin,
followed by post-graduate studies in accounting at the University of Houston.
The authorized number of directors of the Company is presently fixed at
two. Each director serves for a term of one year that expires at the following
annual stockholders' meeting. Each officer serves at the pleasure of the Board
of Directors and until a successor has been qualified and appointed. Currently,
directors of the Company receive no remuneration for their services as such, but
the Company will reimburse the directors for any expenses incurred in attending
any directors meeting.
There are no family relationships, or other arrangements or
understandings between or among any of the directors, executive officers or
other person pursuant to which such person was selected to serve as a director
or officer.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers and directors, and person
who own more than ten percent of a registered class of the Company's equity
securities, file reports of ownership and changes in ownership with the
Securities and Exchange Commission and furnish the Company with copies of all
such Section 16(a) forms. Based solely on its review of the copies of such forms
received by it and written representations from certain reporting person, the
Company believes that, during the period of May 12, 1998 (the date of the
effectiveness of the Company's registration under the Exchange Act) through June
30, 1998, each of its officers, directors and greater than ten percent
stockholders complied with all such applicable filing requirements.
ITEM 10. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer for services in all capacities to the Company (no
executive officer of the Company had total annual salary and bonus for the
fiscal year ended June 30, 1998 exceeding $100,000).
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
(a) (b) (c) (g)
Fiscal
Name and Year Securities Underlying
Principal Position Ended Salary Options (number of shares)
<S> <C> <C> <C>
Greg J. Micek 6/30/98 (2) 2,000,000
Chief Executive
Officer and
President
</TABLE>
- -----------------
(1) The Columns designated by the SEC for the reporting of certain bonuses,
other annual compensation, long-term compensation, including awards of
restricted stock, long term incentive plan payouts, and all other
compensation, have been eliminated as no such bonuses, awards, payouts
or compensation were awarded to, earned by or paid to any specified
person during any fiscal year covered by the table.
(2) Mr. Micek is entitled to an annual salary of $60,000; however,
he voluntarily elected not to receive any portion of his salary during
fiscal 1998.
Stock Option Grants
The following table sets forth information pertaining to stock options
granted during the fiscal year ended June 30, 1998. The Company has not granted
stock appreciation rights ("SAR's") of any kind.
<PAGE>
Option Grants in the Last Fiscal Year
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Percentage of Total
Underlying Options Granted
Options Employees Exercise Expiration
Name Granted in Fiscal Year Price Date
<S> <C> <C> <C> <C>
Greg J. Micek 2,000,000 100% $.10 December 1, 2002
</TABLE>
Option Exercises/Value of Unexercised Options
The following table sets forth the number of securities underlying
options exercisable at June 30, 1998, and the value at June 30, 1998 of
exercisable in-the-money options remaining outstanding as to the Chief Executive
Officer of the Company. No SAR's of any kind have been granted.
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year End Option Values
<TABLE>
<CAPTION>
(a) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised
Options at June 30, 1998 In-the-Money Options at
(Numbers of Shares) June 30, 1998
Name Exercisable Exercisable
<S> <C> <C>
Greg J. Micek 2,000,000 $130,000(2)
</TABLE>
- ---------------------
(1) The Columns designated by the SEC for the reporting of the number of
shares acquired on exercise, the value realized, and the number and
value of unexercisable options have been eliminated as no options were
exercised and no unexercisable options existed during the fiscal year
covered by the table.
(2) The price of the Common Stock used for computing this value was the
$.75 per share closing bid price of the Common Stock on the OTC
Bulletin Board on June 30, 1998.
Other Plans
The Company has no other deferred compensation, pension or retirement
plans in which executive officers participate.
Compensation Agreement with Officers
The Company has entered into an employment agreement (the "Employment
Agreement") with Greg J. Micek, a Director and the President of the Company. The
Employment Agreement has a term of three years and will expire in accordance
with its terms in November 2000. Under the Employment Agreement, Mr. Micek is to
receive an annual salary of $60,000, although as of September 18, 1998, he not
yet received any payment from the Company on his salary. Mr. Micek is also
entitled to participate in any and all employee benefit plans hereafter
established for the employees of the Company. The Employment Agreement contains
a covenant not to compete barring Mr. Micek from engaging in the electronic
commerce business anywhere in the world for one year after the termination of
the Employment Agreement by the Company with cause or by Mr. Micek without
cause.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of June 30, 1998 information
regarding the beneficial ownership of Common Stock (i) by each person who is
known by the Company to own beneficially more than 5% of the outstanding Common
Stock; (ii) by each director; and (iii) by all directors and officers as a
group.
<TABLE>
<CAPTION>
Name and Address of Shares Beneficially Owned
Beneficial Owner Number Percent
<S> <C> <C>
Greg J. Micek 8,200,000(2) 73.1%
5444 Westheimer, Suite 2080
Houston, Texas 77056
Lewis E. Ball 100,000 *
6122 Valley Forge
Houston, Texas 77057
All directors and officers 8,300,000(3) 74.0%
as a group (two persons)
</TABLE>
(1) Includes shares Stock beneficially owned pursuant to options and
warrants exercisable within 60 days after the date of this
Prospectus.
(2) Includes 6,200,000 shares owned outright and 2,000,000 shares that
may be purchased pursuant an option currently exercisable.
(2) Includes 6,300,000 shares owned outright and 2,000,000 shares that
may be purchased pursuant an option currently exercisable.
* Less than one percent.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with the organization of the Company, the Company issued
to Mr. Micek 6.2 million shares of Common Stock in consideration of a payment of
$62,000.
The Company has entered into a stock option agreement (the "Anderson
Option Agreement") with Dudley R. Anderson, the former Treasurer and Secretary
of the Company. The Anderson Option Agreement provides that, for providing
consulting services to the Company, the Company shall issue to Mr. Anderson
options to purchase shares of Common Stock, at a purchase price per share equal
to the fair market value, on any day on which Mr. Anderson provides consulting
services to the Company. The number of shares with respect to which Mr. Anderson
will be issued options will depend on the number of hours of consulting services
that he provides on any particular day. Mr. Anderson will be issued an option to
purchase 250 shares (on any day on which he consults for up to four hours), 500
shares (on any day on which he consults for more than four hours and up to eight
hours), 750 shares (on any day on which he consults for more than eight hours
and up to ten hours) and 1,000 shares (on any day on which he consults for more
than ten hours). Notwithstanding the preceding, the maximum number of shares,
with respect to which Mr. Anderson may be granted options pursuant to the
Anderson Option Agreement, is 250,000. Each option issued under the Anderson
Option Agreement will have a term of five years after the date it is issued. As
of September 14, 1998, Mr. Anderson had been issued under the Anderson Option
Agreement options to purchase 42,250 shares of Common Stock. On August 4, 1998,
Mr. Anderson resigned from his positions as Treasurer and Secretary of the
Company to pursue other opportunities. He and the Company mutually agreed to
terminate the Anderson Option Agreement.
As a finder's fee for making the introductions leading to the
investment of LS Capital in the Company and for a payment of $.01 per share, the
Company issued to Lewis E. Ball, a director of the Company, 100,000 shares of
Common Stock.
The Company has entered into an agreement with Kevin Dotson, a person
who provides Internet consulting services to the Company. In this agreement, the
Company agreed to issue options to purchase shares of Common Stock on the same
terms as provided for in the Anderson Option Agreement, including the per-share
purchase price and the maximum limit on the number of option shares. As of
September 14, 1998, Mr. Dotson had been issued under his agreement options to
purchase 340,000 shares of Common Stock. The exact number of shares of Common
Stock with respect to which options will be issued to Mr. Dotson can not now be
determined.
The Company has entered into an agreement with Cherie Dunn, who will
provide market strategy and brand development consulting services to the
Company. In this agreement, the Company agreed to issue options to purchase
5,000 shares of Common Stock at a purchase price per share of $.10 and 65,000
shares of Common Stock at a purchase price per share of $.25. Certain of the
$.25 optioned shares are subject to forfeiture upon the occurrence of certain
events.
PART IV.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. Financial Statements:
<TABLE>
<S> <C>
Independent Auditor's Report ........................................................................F-1
Balance Sheet as of June 30, 1998 .................................................................. F- 2
Income Statement for the period from October 28, 1997 (Date of Inception)
through June 30, 1998 ................................................................... F- 3
Statement of Stockholders' Equity for the period from October 28, 1997 (Date of
Inception) through June 30, 1998 .........................................................F- 4
Statement of Cash Flows for the period from October 28, 1997 (Date of Inception)
through June 30, 1998 .................................................................. F- 5
Notes to Financial Statements .......................................................................F- 6
2. Financial Statement Schedules:
None
</TABLE>
<PAGE>
3. Exhibits:
The following exhibits are filed with this Annual Report or are
incorporated herein by reference:
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.01 Certificate of Incorporation of the Company is incorporated herein by reference from
the Company's Registration Statement on Form SB-2 (SEC File No. 333-41635) filed
December 29, 1997, Item 27, Exhibit 3.01.
3.02 Bylaws of the Company is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 3.02.
4.01 Specimen Common Stock Certificate is incorporated herein by reference from the
Company's Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December
29, 1997, Item 27, Exhibit 4.01.
4.02 Warrant Agreement dated December 15, 1997 between the Company and American Stock
Transfer & Trust Company is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 4.02.
4.03 First Amendment to Agreement dated March 31, 1998 between the Company and American
Stock Transfer Company & Trust Company is incorporated herein by reference from
Amendment No. 2 to the Company's Registration Statement on Form SB-2/A (SEC File No.
333-41635) filed April 21, 1998, Item 27, Exhibit 4.03.
10.01 Agreement dated November 15, 1997 between the Company and LS Capital Corporation is
incorporated herein by reference from the Company's Registration Statement on Form
SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.01.
10.02 Employment Agreement dated December 1, 1997 by and between the Company and Greg J.
Micek is incorporated herein by reference from the Company's Registration Statement on
Form SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.02.
10.03 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Greg J. Micek is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.03.
10.04 Stock Option Agreement dated December 17, 1997 executed by the Company in favor of
Dudley R. Anderson is incorporated herein by reference from Amendment No. 1 to the
Company's Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.04.
10.05 Stock Option Agreement dated December 1, 1997 executed by the Company in favor of
Kevin Dotson is incorporated herein by reference from Amendment No. 1 to the Company's
Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed February 27,
1998, Item 27, Exhibit 10.05.
10.06 Stock Option Agreement dated December 1, 1997 executed by the Company in favor of G-2
Advertising is incorporated herein by reference from Amendment No. 1 to the Company's
Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed February 27,
1998, Item 27, Exhibit 10.06.
10.07 First Amendment dated April 14, 1998 to Agreement dated
November 15, 1997 between the Company and LS Capital
Corporation is incorporated herein by reference from Amendment
No. 2 to the Company's Registration Statement on Form SB-2/A
(SEC File No. 333-41635) filed April 21, 1998, Item 27,
Exhibit 10.07.
10.08 Agreement dated April 20, 1998 between the Company and LS
Capital Corporation is incorporated herein by reference from
Amendment No. 2 to the Company's Registration Statement on
Form SB-2/A (SEC File No. 333-41635) filed April 21, 1998,
Item 27, Exhibit 10.08.
10.09 Asset Purchase Agreement dated July 31, 1998 by and among
Market Data Corporation and Time Financial Services, Inc. (as
sellers) and the Company (as purchaser) is incorporated herein
by reference from the Company's (SEC File No. 0-24001) Current
Report on Form 8-K dated July 31, 1998, Item 7(c), Exhibit
10.01.
10.10 Agreement dated August 3, 1998 by and between Equitrust Mortgage Corporation and the
Company is incorporated herein by reference from the Company's Current Report on Form
8-K dated July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit 10.02.
10.11 Promissory Note dated August 3, 1998 in the original principal
amount of $50,000 made payable by the Company to the order of
Equitrust Mortgage Corporation is incorporated herein by
reference from the Company's Current Report on Form 8-K dated
July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit
10.02.
21.01 Subsidiaries of Registrant
99.01 The Company's 1998 Consultant Compensation Plan is incorporated herein by reference
from the Company's Registration Statement on Form S-8 (SEC File No. 333-55979) filed
June 3, 1998, Item 8, Exhibit
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K dated July 31, 1998,
reporting on the Registrant's agreement to acquire all of the
assets of an on-line daily financial publication known as
"Wall Street Whispers."
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
JVWeb, Inc.
Houston, Texas
We have audited the accompanying balance sheet of JVWeb, Inc., a Delaware
corporation, as of June 30, 1998, and the related statements of expenses,
stockholders' equity, and cash flows for the period from inception (October 28,
1997) to June 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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 disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of JVWeb, Inc., as of June 30,
1998, and the results of its operations and its cash flows for the initial
period then ended in conformity with generally accepted accounting principles.
MALONE & BAILEY, PLLC
Houston, Texas
September 10, 1998
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Balance Sheet
As of June 30, 1998
ASSETS
<TABLE>
<S> <C>
Cash $ 412
Employee advance 2,550
Inventory 5,305
Prepaid legal expenses 19,500
Total Current Assets 27,767
Office equipment and furniture (net of $530
accumulated depreciation) 3,860
Deposit on purchase of subsidiary 25,000
Total Assets $ 56,627
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable $ 7,481
Notes payable to founding shareholder 38,000
Note payable 1,250
Total Liabilities 46,731
Preferred stock, $0.01 par, 10,000,000
shares authorized, no shares issued or
outstanding -
Common stock, $0.01 par, 50,000,000 shares
authorized, 7,170,000 shares issued and
outstanding 71,700
Paid-in capital 112,816
Accumulated deficit during
the development stage (174,620)
Total Stockholders' Equity 9,896
Total Liabilities & Stockholders' Equity $ 56,627
</TABLE>
See notes to financial statements.
F -2
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Income Statement
Period from October 28, 1997 (Date of Inception)
Through June 30, 1998
<TABLE>
<S> <C>
REVENUES $ 190
COST OF SALES 48
Gross Margin 142
EXPENSES
General and administrative 174,338
Depreciation 530
174,868
Operating (Loss) (174,726)
INTEREST INCOME 106
Net Deficit Accumulated During
Development Stage $(174,620)
NET LOSS PER COMMON SHARE $( 0.02)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,681,250
</TABLE>
See notes to financial statements.
F - 3
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
Period from October 28, 1997 (Date of Inception)
Through June 30, 1998
<TABLE>
<CAPTION>
Accumulated
Deficit
During the
Common Stock Paid-in Development
Shares Amount Capital Stage Totals
<S> <C> <C> <C> <C> <C>
Shares issued at inception
to founding shareholder
for cash 6,200,000 $ 62,000 $ 7,516 $ 69,516
Shares issued for cash 700,000 7,000 48,000 55,000
Shares issued for services 200,000 2,000 58,000 60,000
Shares issued as a deposit
on purchase of subsidiary 70,000 700 129,300 130,000
Returnable shares (130,000) (130,000)
Net (deficit) (174,620) (174,620)
Balances, June 30, 1998 7,170,000 $ 71,700 $ 112,816 $(174,620) $ 9,896
</TABLE>
See notes to financial statements.
F-4
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Statement of Cash Flows
Period from October 28, 1997 (Date of Inception)
Through June 30, 1998
<TABLE>
<S> <C>
CASH FLOW FROM OPERATIONS
Net deficit $ (174,620)
Adjustments to reconcile net deficit to
cash provided from operating activities
Depreciation 530
Common stock issued for services 60,000
Increase in employee advance ( 2,550)
Increase in inventory ( 5,305)
Increase in prepaid legal expenses ( 19,500)
Increase in accounts payable 7,481
NET CASH USED BY OPERATING ACTIVITIES (133,964)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of office equipment & furniture ( 4,390)
Deposit on purchase of subsidiary ( 25,000)
NET CASH USED BY INVESTING ACTIVITIES ( 29,390)
CASH FLOW FROM FINANCING ACTIVITIES
Notes payable to founding shareholder 38,000
Note payable 1,250
Issuance of common stock 124,516
NET CASH PROVIDED BY FINANCING ACTIVITIES 163,766
NET INCREASE IN CASH 412
CASH ON JUNE 30, 1998 $ 412
</TABLE>
See notes to financial statements.
F - 5
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations. JVWeb, Inc. ("Company") was formed October 28, 1997 as a
Delaware corporation. The Company was formed to market and develop internet
sites as commercial sales outlets.
Use of estimates. The preparation of 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 those estimates.
Cash and cash equivalents. For purposes of the cash flow statement, the Company
considers highly liquid investments with maturities less than 90 days as cash
and cash equivalents.
Inventories consist of imprinted sportswear and ad-specialty items. Inventories
are stated at the lower of cost, determined on the first-in, first-out (FIFO)
method, or market.
Office equipment and furniture are valued at cost. Maintenance and repair costs
are charged to expense as incurred. Gains and losses on disposition of property
and equipment are reflected in income. Depreciation is computed on the
straight-line method for financial reporting purposes, based on estimated useful
lives of 3 to 5 years.
Revenue and cost recognition. Revenues from merchandise sales are recognized
when the merchandise is sold. All merchandise is sold over the internet using
credit card payments. Advertising costs are expensed as incurred.
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 depreciation differences.
NOTE B - DEVELOPMENT STAGE OPERATIONS AND RELATED PARTY
TRANSACTIONS
The founding shareholder contributed $69,516 cash for the initial common stock
issued. The founding shareholder also loaned the Company $23,000 individually
and $15,000 from a related company, both of which are due upon demand and accrue
interest at 6%.
The Company entered into a three-year employment agreement with the founding
shareholder in October 1997 which named him President of the Company and
provided an annual salary of $60,000. The Company has not paid any wages to
date.
In October 1997, the Company granted 2,000,000 stock options to purchase the
Company's common stock at $0.10 per share to the founding shareholder. The
options may be exercised at any time and expire in five years.
F - 6
<PAGE>
NOTE C - PREPAID LEGAL EXPENSES
In early May 1998, the Company issued 20,000 common stock options at their
estimated fair market value of $0.25 per share to its attorney for services
rendered. In late June 1998, the Company issued 50,000 shares to the same
attorney. These shares are valued at their estimated fair value of $0.75 per
share. As of June 30, 1998, $18,000 has been recorded as legal expense with the
remainder of $19,500 shown as prepaid legal expense.
NOTE D - NOTE PAYABLE
The Company borrowed $1,250 from a former consultant. The loan is due upon
demand and interest accrues at 6%.
NOTE E - OPERATING LEASES
The Company is obligated on a corporate office lease in Houston, Texas and on an
electronic web site lease in Arizona on a month-to-month basis for a total of
$1,500 per month.
NOTE F - CONSULTING AGREEMENTS
The Company has entered into two consulting agreements by which 250,000 options
to purchase the Company's common stock at $0.25 per share have been issued, and
a variable monthly cash retainer is paid. The options are subject to forfeiture
on a prorata basis should the services terminate prior to the term of the
agreement.
The Company has entered into four consulting agreements by which options to
purchase the Company's common stock at prices approximating fair market value on
the date of grant are issued at a rate of 100 shares per hour. As of June 30,
1998, 105,250 options have been granted under these agreements.
The Company entered into another consulting agreement which it canceled in
August 1998. The Company issued 50,000 shares as compensation under this
agreement, and does not believe it is liable for any additional amounts.
NOTE G - STOCK OPTIONS
As permitted under Statement of Financial Accounting Standards (SFAS) No. 123
(Accounting for Stock-Based Compensation), the Company has continued to apply
Accounting Principles Board (APB) Opinion No. 25 (Accounting for Stock Issued to
Employees) and related interpretations. Accordingly, no compensation expense has
been recognized for the stock options. The Company has granted options pursuant
to its stock option plan. Grants are made at management's discretion, and are
compensation for services. As of June 30, 1998 a total of 4,041,250 options were
outstanding and exercisable with the following exercise prices:
2,233,250 at $ 0.10
1,500,000 at 1.00
308,000 at 0.25
Outstanding options expire in 5 years from date of grant, and are 100%
exercisable at date of grant.
F - 7
NOTE H - FINANCING
As of September 10, 1998, the Company has not achieved significant sales volume.
Only temporary equity financing has been secured to date.
NOTE I - SUBSEQUENT EVENTS
The Company entered into an Asset Purchase Agreement in July 1998 with Time
Lending Services, Inc. to purchase all the assets of a publication called "Wall
Street Whispers." The purchase price of the publication is $140,000. The Company
has paid $45,000 ($25,000 as of June 30, 1998) in cash, and issued 70,000 shares
of the Company's common stock on June 29, 1998. The balance of the purchase
price, $95,000, is due by October 15, 1998. Any proceeds realized from the sale
of the common stock by the seller will be deducted from the balance due, and any
shares not sold will be returned to the Company once the balance due has been
paid in full.
NOTE I - SUBSEQUENT EVENTS (Continued)
The Company received $50,000 in August 1998 from Equitrust Mortgage Corporation
("Equitrust") pursuant to an agreement dated August 3, 1998 which states if the
Company files a registration statement (SB-2) within 90 days from the date of
the loan, the note will automatically convert into 200,000 shares of the
Company's common stock. Further, upon registration, Equitrust will purchase
another 200,000 shares for $50,000. The Company received a $5,000 deposit on
this transaction in August 1998. Further, Equitrust has an option to purchase an
additional 100,000 shares of common stock for $25,000.
The Company entered into two consulting agreements in July 1998. The term of
both agreements is six months, and 75,000 shares will be issued as payment for
the consulting services.
The Company entered into two consulting agreements in August 1998. The term of
both agreements is one year, and a total of 101,900 shares will be issued in
monthly installments as payment for the consulting services.
In August 1998, the Company agreed to issue an additional 45,060 shares of its
common stock to an existing corporate shareholder without additional
compensation. The shareholder had distributed shares of the Company to its
shareholders as a dividend, which resulted in short positions which the Company
agreed to cover.
F - 8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, JVWeb, Inc. has duly caused this annual report on Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized.
September 23, 1998 JVWEB INC.
By: /s/ Greg J. Micek
Greg J. Micek
Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Greg. J. Micek Director and President September 23, 1998
Greg J. Micek (Principal Executive Officer
and Principal Financial Officer)
/s/ Lewis E. Ball Director 23, 1998
</TABLE>
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
3.01 Certificate of Incorporation of the Company is incorporated herein by reference from the
Company's Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December
29, 1997, Item 27, Exhibit 3.01.
3.02 Bylaws of the Company is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 3.02.
4.01 Specimen Common Stock Certificate is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 4.01.
4.02 Warrant Agreement dated December 15, 1997 between the Company
and American Stock Transfer & Trust Company is incorporated
herein by reference from the Company's Registration Statement
on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 4.02.
4.03 First Amendment to Agreement dated March 31, 1998 between the Company and American Stock
Transfer Company & Trust Company is incorporated herein by reference from Amendment
No. 2 to the Company's Registration Statement on Form SB-2/A (SEC File No. 333-41635)
filed April 21, 1998, Item 27, Exhibit 4.03.
10.01 Agreement dated November 15, 1997 between the Company and LS Capital Corporation is
incorporated herein by reference from the Company's Registration Statement on Form
SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.01.
10.02 Employment Agreement dated December 1, 1997 by and between the Company and Greg J.
Micek is incorporated herein by reference from the Company's Registration Statement on
Form SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.02.
10.03 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Greg J. Micek is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.03.
10.04 Stock Option Agreement dated December 17, 1997 executed by the Company in favor of
Dudley R. Anderson is incorporated herein by reference from Amendment No. 1 to the
Company's Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.04.
10.05 Stock Option Agreement dated December 1, 1997 executed by the Company in favor of
Kevin Dotson is incorporated herein by reference from Amendment No. 1 to the Company's
Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed February 27,
1998, Item 27, Exhibit 10.05.
10.06 Stock Option Agreement dated December 1, 1997 executed by the Company in favor of G-2
Advertising is incorporated herein by reference from Amendment No. 1 to the Company's
Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed February 27,
1998, Item 27, Exhibit 10.06.
10.07 First Amendment dated April 14, 1998 to Agreement dated
November 15, 1997 between the Company and LS Capital
Corporation is incorporated herein by reference from Amendment
No. 2 to the Company's Registration Statement on Form SB-2/A
(SEC File No. 333-41635) filed April 21, 1998, Item 27,
Exhibit 10.07.
10.08 Agreement dated April 20, 1998 between the Company and LS
Capital Corporation is incorporated herein by reference from
Amendment No. 2 to the Company's Registration Statement on
Form SB-2/A (SEC File No. 333-41635) filed April 21, 1998,
Item 27, Exhibit 10.08.
10.09 Asset Purchase Agreement dated July 31, 1998 by and among
Market Data Corporation and Time Financial Services, Inc. (as
sellers) and the Company (as purchaser) is incorporated herein
by reference from the Company's (SEC File No. 0-24001) Current
Report on Form 8-K dated July 31, 1998, Item 7(c), Exhibit
10.01.
10.10 Agreement dated August 3, 1998 by and between Equitrust Mortgage Corporation and the
Company is incorporated herein by reference from the Company's Current Report on Form
8-K dated July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit 10.02.
10.11 Promissory Note dated August 3, 1998 in the original principal
amount of $50,000 made payable by the Company to the order of
Equitrust Mortgage Corporation is incorporated herein by
reference from the Company's Current Report on Form 8-K dated
July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit
10.02.
21.01 Subsidiaries of Registrant
99.01 The Company's 1998 Consultant Compensation Plan is incorporated herein by reference
from the Company's Registration Statement on Form S-8 (SEC File No. 333-55979) filed
June 3, 1998, Item 8, Exhibit 4.2.
</TABLE>
SUBSIDIARIES OF THE REGISTRANT
dadandme, inc.
