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, 1999 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, 1999 were $220,825.
The aggregate market value of the voting stock held by non-affiliates of the
registrant on October 8, 1999 was $1,248,000. The number of shares outstanding
of the registrant's Common Stock, $.01 par value, as of October 8, 1999 was
9,490,557.
Transitional Small Business Disclosure format (Check one): YES [ ] NO [X]
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INDEX
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Page Number
PART I.
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Items 1. & 2. Business and Properties. _____
Item 3. Legal Proceedings. _____
Item 4. Submission of Matters to a Vote of Security Holders. _____
PART II.
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. _____
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations. _____
Item 7. Financial Statements. _____
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. _____
PART III.
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act. _____
Item 10. Executive Compensation. _____
Item 11. Security Ownership of Certain Beneficial Owners and
Management. _____
Item 12. Certain Relationships and Related Transactions. _____
PART IV.
Item 13. Exhibits and Reports on Form 8-K. _____
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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.
At the time the Company was formed, electronic commerce opportunities
were expected to arise in several different ways. However, the Company expected
primarily to offer products, services, content and advertising by means of sites
on the World Wide Web (the "Web") of the Internet. The Company expected that the
products, services, content and advertising would usually be offered by joint
ventures between the Company and established businesses although occasionally
they would be offered directly by the Company itself. In the case of joint
ventures, the Company expected to contribute technical expertise and (in certain
instances) financial assistance in developing the joint ventures' Web sites,
while the joint venture partners would be responsible for furnishing the joint
ventures' products or services, the content for the joint ventures' Web sites,
and the related business expertise. This area of the Company's business is
referred to herein as the brands-under-management division. The Company also
expected secondarily to develop a fee-for-service division to sell the
technological, marketing and other abilities that the Company had acquired or in
the future may acquire. From time to time the Company has given a greater
emphasis to one of these division over the other. The Company's business
continues in a developmental stage.
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://www.jvweb.com. Information contained in the Company's
Web site shall not be deemed to be a part of this Annual Report.
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. Our extremely limited operating history makes an evaluation of us
and our future extremely difficult. The Company was incorporated in October
1997. Upon incorporation, the Company continued preliminary work commenced by
the founder of the Company several months earlier. In view of the length of its
operating history, you may have difficulty in evaluating the Company and its
business and prospects. You must consider our business and prospects in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development. This is particularly true of companies in new
and rapidly evolving markets such as electronic commerce. Such risks include an
evolving and unpredictable business model and the management of possible rapid
growth. To address these risks, we must successfully undertake most of the
following activities:
* Continue to develop the strength and quality of our operations
* Maximize the value delivered to our clients
* Enhance our current and future brands
* Develop and increase our customer bases
* Implement and successfully execute our business and marketing
strategy
* Continue to develop and upgrade our technology and transaction
-processing systems
* Respond to competitive developments
* Identify and pursue suitable electronic commerce opportunities
* Identify and enter into binding agreements with suitable joint
venture partners
* Create and constantly improve our Web sites
* Provide superior customer service and order fulfillment
* Attract, retain and motivate qualified personnel.
* Identify and consummate suitable acquisitions
There can be no assurance that we will be successful in undertaking such
activities. Our failure to address successfully our risks could materially and
adversely affect our business, prospects, financial condition and results of
operations. Moreover, the Company has incurred net losses since inception. As of
June 30, 1999, we had an accumulated deficit of $1,311,827.
2. Quarterly, seasonal and other fluctuations in our business and
operating results may materially and adversely affect the trading price of our
Common Stock. We expect that our operating results will fluctuate in the future
due to a number of factors. We do not control many of these factors. These
factors include the following:
* The level of usage of the Internet * Demand for our products,
services and advertising * Our ability to attract new customers at a
steady rate * The productivity of our fee-for-service division * Our
ability to attract and retain personnel with the
necessary strategic, technical and creative skills
required to service clients effectively
* Our ability to pursue suitable electronic commerce
opportunities, enter into suitable joint ventures and
consummate suitable acquisitions at a steady rate
* The rate at which we add or lose advertisers
* The rate at which we or our competitors introduce new
products, services or Web sites
* Pricing changes for Web-based products, services and
advertising
* Technical difficulties affecting our Web sites
* The amount and timing of capital expenditures and other costs
relating to the expansion of our operations
* Costs relating to our marketing programs and acquisitions
* Client budgetary cycles
* Government regulation and legal developments regarding the use
of the Internet
* General economic conditions and economic conditions specific
to the Internet and Web sites.
To respond to changes in our competitive environment, we may occasionally make
certain service, marketing or supply decisions or acquisitions. We may benefit
from these decisions or acquisitions in the long run. However, in the short run,
such decisions or acquisitions could materially and adversely affect our
quarterly results of operations and financial condition. We also expect that
(like other retailers) we may experience seasonality in our businesses in the
future. Due to all of the foregoing factors, in some future quarter our
operating results may fall below the expectations of investors and any
securities analysts who follow our Common Stock. In such event, the trading
price of our Common Stock could be materially adversely affected. Further, we
believe that period-to-period comparisons of our financial results may not be
very meaningful. Accordingly, you should not conclude that such comparisons
indicate future performance.
3. We expect to have future capital needs, and the procurement of
additional financing to meet these needs is uncertain. We currently have no
constant and continual flow of revenues. Our future liquidity and capital
requirements will depend upon numerous factors, including the success of our
existing and future services and the success of our Web sites. We anticipate
that during fiscal 2000 we will need 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 us. Furthermore, debt financing (if available and undertaken) may
involve restrictions limiting our operating flexibility. Moreover, if we issue
equity securities to raise additional funds, the following results will or may
occur:
* The percentage ownership of our existing stockholders will be reduced
* Our stockholders may experience additional dilution in net book value
per share
* The new equity securities may have rights, preferences or
privileges senior to those of the holders of our Common Stock.
We can not now predict our additional capital requirements because of the
uncertainty of our actual capital requirements. However, to pursue our business
plan as desired, we believe that our future capital requirements will exceed our
current financial position. We expect to finance our operations for fiscal 2000
through cash flow from operations, proceeds from the exercise of certain
outstanding warrants and options to purchase shares of our Common Stock, and the
possible private placement of our equity securities. We are looking for sources
of additional capital. However, there can be no assurance that we will find such
sources. If adequate funds are not available on acceptable terms, we may be
prevented from pursing future opportunities, responding to competitive pressures
or continuing our business as we have during fiscal 1999. Our failure to pursue
future opportunities, respond properly to competitive pressures or continue our
business in an appropriate manner could materially and adversely affect our
business, results of operations and financial condition.
4. We depend heavily on the Internet, and any adverse development with
regard to the Internet could materially adversely affect us. Our future success
substantially depends upon continued growth in the use of the Internet and the
Web. Such growth seems necessary to support the sale of our products, services
and advertising. Rapid growth in the use of 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, if Internet use continues to
grow significantly, there can be no assurance that the Internet infrastructure
will remain adequate for supporting the increased demands placed upon it. The
Internet could lose its viability due to either:
* Delays in the development or adoption of new standards
and protocols required to handle increased levels of Internet
activity; or
* Increased governmental regulation
Changes in or insufficient availability of telecommunications services to
support the Internet also could slow response times and adversely affect usage
of the Web and our Web sites. The failure of the Internet use to continue to
grow, or failure of the Internet infrastructure to support effectively growth
that may occur, could materially adversely affect our business, operating
results and financial condition.
5. We are exposed to numerous risks due to potential future
technological change. The Internet and electronic markets involve certain
characteristics that expose our existing and future Web sites, technologies,
service practices and methodologies to the risk of obsolescence. These
characteristics included the following:
* Rapid changes in technology
* Rapid changes in user and customer requirements
* Frequent new service or product introductions embodying new
technologies
* The emergence of new industry standards and practices
Our performance will partially depend on our ability to license leading
technologies, enhance our 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 we will use new technologies
effectively or adapt our Web sites to consumer, vendor, advertising or emerging
industry standards. Our inability (for technical, legal, financial or other
reasons) to adapt in a timely manner to changing market conditions or customer
requirements could materially adversely affect our business, results of
operations and financial condition.
6. We rely on a number of third parties, and such reliance exposes us
to a number of risks. Our operations will depend on a number of third parties,
some of which are specifically discussed herein. We will have limited control
over these third parties. We will probably not have many long-term agreements
with many of them. We do not own a gateway onto the Internet. Instead, we now
and presumably always will rely on a network operating center to connect our Web
sites to the Internet. We also will rely on a variety of technology that we will
license from third parties. Our loss of or inability to maintain or obtain
upgrades to any of these technology licenses could result in delays. These
delays could materially adversely affect our business, results of operations and
financial condition, until equivalent technology could be identified, licensed
or developed and integrated. Furthermore, we will depend on hardware suppliers
for prompt delivery, installation and service of servers and other equipment
used to deliver our products and services. Our inability to maintain
satisfactory relationships with such third parties on acceptable commercial
terms, or the failure of such third parties to maintain the quality of products
and services they provide at a satisfactory standard, could materially adversely
affect our business, results of operations and financial condition. In addition,
we will also depend upon Web browsers for access to the products, services and
advertising that we will offer.
7. We rely to a great extent on a specific strategic relationship, the
loss of which could materially adversely affect us. We have developed a critical
strategic relationship with Lernout En Hauspie, a company based in Germany,
regarding several business relationships relating to our fee-for-service
division. We have entered into a legally binding agreement with Lernout En
Hauspie, but there can be no assurance that this agreement would guarantee in
practice our realization of the benefit of the bargain we tried to achieve by
this agreement. The loss of our strategic relationship with Lernout En Hauspie
could materially adversely affect our business, results of operations and
financial condition.
8. The success of our business depends to a great extent on the
recruitment and retention of Internet professionals, and currently competition
for these professionals is extremely intense. Our fee-for-service division is
labor intensive. Accordingly, the success of this division partially depends on
our and our subcontractors' abilities to identify, hire, train and retain
consulting professionals who can provide the Internet strategy, technology,
marketing, audience development and creative skills required by clients. There
is currently a shortage of such personnel. This shortage is likely to continue
for the foreseeable future. We and our subcontractors will have to compete
intensely with other companies for qualified personnel. There can be no
assurance that we and our subcontractors will attract, assimilate or retain
other highly qualified technical, marketing and managerial personnel in the
future. The inability to attract and retain the necessary technical, marketing
and managerial personnel could materially and adversely affect our business,
results of operations and financial condition.
9. The acceptance of the Internet as a medium for commerce is
uncertain, and the failure of the Internet to gain such acceptance could
materially adversely affect us. For our business plan to succeed, a broad base
of consumers, vendors and advertisers must adopt the Internet as a medium for
commerce. We intend to target consumers, vendors and advertisers who have
historically used traditional means of commerce to conduct business. Most of our
customers, vendors and advertisers will have only limited experience with the
Web as a commercial medium and may not find the Web as an effective medium for
transacting business. Moreover, critical issues concerning the commercial use of
the Internet remain unresolved and may affect the growth of Internet use or the
attractiveness of conducting commerce by means of Web sites. These critical
issues include the following:
* Ease of access
* Security
* Reliability
* Cost and quality of service
* Development of the necessary infrastructure (such as a
reliable network backbone)
* Timely development and commercialization of performance
improvements (including high speed modems)
10. Electronic commerce is a developing market and involves
considerable uncertainty. 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 considerably uncertain. There exist few proven
services and products. Since the market for electronic commerce on the Internet
is new and evolving, predictions of the size and future growth (if any) of this
market are difficult. Moreover, no standards have yet been widely accepted for
the measurement of the effectiveness of Web-based advertising. 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. Moreover, there can be
no assurance that we will effectively transition to any other forms of Web-based
advertising if they develop. Furthermore, certain advertising filter software
programs are available that limit or remove advertising from an Internet user's
desktop. If generally adopted by users, such software may materially and
adversely affect the viability of advertising on the Internet. Our business,
results of operations and financial condition could be materially adversely
affected if any of the following events occur:
* The markets for our electronic commerce fail to develop * The markets
for our electronic commerce develop more slowly than expected * The
markets for our electronic commerce become saturated with competitors *
Our electronic commerce fails to achieve market acceptance
11. The success of our business depends to a great extent on our
ability to select excellent business opportunities. An integral part of our
business strategy is the identification and pursuit of potentially successful
electronic commerce opportunities. There can be no assurance that we will be
able to identify successful electronic commerce opportunities or that we will be
able to pursue these opportunities successfully even if identified. Some of the
business opportunities that we have pursued in the past have failed to meet our
expectations and have had to be abandoned. There is no specific criterion for
selecting electronic opportunities. Accordingly, we will have significant
flexibility in selecting such opportunities. Our failure to select good
electronic commerce opportunities could materially and adversely affect our
business, results of operations and financial condition.
12. We have no assurance that our brands will be accepted. While we
expect to offer the brands of other persons, we also intend to develop our own
brands. We believe 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 our brands will depend largely on our success in establishing and
maintaining a position as a leader in Internet commerce and in providing high
quality products and services. There can be no assurance that we will succeed in
this regard. To attract and retain customers, vendors and advertisers and to
promote and maintain our brands in response to competitive pressures, we may
need to increase our marketing and advertising budgets or otherwise to increase
substantially our financial commitment to creating and maintaining brand loyalty
among vendors and consumers. Our business, results of operations and financial
condition could be materially adversely affected if any of the following events
occur:
* We are unable to provide high quality products, services and
advertising
* We otherwise fail to promote and maintain our brands * We are unable
to achieve or maintain a leading position in
Internet commerce
* We incur significant expenses in attempting to achieve or
maintain a leading position in Internet commerce or to promote
and maintain our brands
13. Our failure to develop appealing content and graphic could
materially adversely affect us. Content and (to a lesser degree) graphic
development relating to our Web sites are key elements to the success of our
brands-under-management division. If these sites fail to have solid content
(which is modified on a continual basis) and appealing graphics, we expect that
consumers, vendors and advertisers will not be attracted to, or will discontinue
to visit and utilize, the sites. We expect that (as a consequence) we will fail
to develop successfully our brands. We have relied and will continue to rely
substantially on content and graphic development efforts of third parties. There
can be no assurance that our current or future third-party providers will
effectively implement our Web sites, or that their efforts will result in
significant revenue to us. Any failure to develop and maintain high-quality and
successful Web sites could materially and adversely affect our business, results
of operations and financial condition.
14. Electronic commerce involves a number of security risks. A
significant barrier to electronic commerce and communications is the secure
transmission of confidential information over public networks. We will rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication necessary for 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 compromise or breach the algorithms we use to protect
customer transaction data. Any such compromise of our security could materially
and adversely affect our business, results of operations and financial
condition. A party able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our operations. We may need 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
our activities or the activities of third party contractors involve the storage
and transmission of proprietary information (such as credit card numbers),
security breaches could expose us to a risk of loss or litigation and possible
liability. There can be no assurance that our security measures will prevent
security breaches or that failure to prevent such security breaches will not
materially and adversely affect our business, results of operations and
financial condition.
15. We expect to rely extensively on merchandise vendors and third
party manufacturers over whom we will have little control. We expect that we
will depend entirely upon vendors and third party manufacturers to supply
merchandise for sale through our Web sites. We expect that the availability of
merchandise is and will be unpredictable. We expect that we will generally have
no long-term contracts or arrangements with our vendors and manufacturers that
guarantee the availability of merchandise. There can be no assurance of the
following:
* That our current and future vendors and manufacturers will
continue to sell merchandise to or manufacture merchandise for
us or otherwise provide merchandise for sale through our Web
sites
* That we will be able to establish new vendor or manufacturer
relationships that ensure merchandise will be available.
We will also rely on many of our vendors, manufacturers and joint venture
partners to process and ship merchandise to customers. We will have limited
control over the shipping procedures of our vendors, manufacturers and our joint
venture partners. Shipments by these vendors, manufacturers and joint venture
partners may be subject to delays. We expect that most merchandise we will sell
will carry a warranty supplied either by the manufacturer or the vendor, and we
will not be legally obligated to accept merchandise returns. Nonetheless, we may
voluntarily accept returns from customers. We may or may not receive
reimbursements from our vendors or manufacturers for accepting such returns. Our
business, results of operations and financial condition could be materially
adversely affected by any of the following events:
* We are unable to develop and maintain satisfactory
relationships with vendors and manufacturers on
acceptable commercial terms
* We are unable to obtain sufficient quantities of merchandise
* The quality of service provided by our vendors and
manufacturers falls below a satisfactory standard
* Our level of returns exceeds our expectations
16. We are exposed to the risk of system failure, and such a failure
could materially adversely affect us. Our success largely depends upon
communications hardware and computer hardware provided 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 our security
measures, our servers are also vulnerable to computer viruses, physical or
electronic break-ins and similar disruptive problems. The occurrence of any of
these problems could lead to interruptions, delays, loss of data or cessation in
service to users of our services and products. We do not presently have
redundant systems or a formal disaster recovery plan, although we are currently
in the processing of developing these. We do not now and will not for the
foreseeable future maintain business interruption insurance. Any system failure
that interrupts or increases response times of our Web sites could result in
less traffic to such sites. If sustained or repeated, such failure could reduce
the attractiveness to consumers, vendors and advertisers of our products,
services and advertising. In addition, a key element of our strategy is to
generate a high volume of visits to and activity with respect to our Web sites.
An increase in the volume of visits to our Web sites could strain the capacity
of the software or hardware we use. This strain could lead to slower response
time or system failures. Such events could adversely affect sales of products,
services and advertising and the number of impressions received by advertising
and thus our advertising revenues.
17. Our success depends to a great extent on our ability to protect our
intellectual property. The development of our brands depends significantly on
the protection of our trademarks and trade names. We have registered the
"JVWeb", "Dad & me", "familylifestyle" and "crisis communications" trademarks in
the United States. We also claim common law trade name rights in these and other
names. Nonetheless, there can be no assurance that we will be able to secure
significant protection for these trademarks. Our current and future competitors
or others may adopt product or service names similar to our trademarks, thereby
impeding our ability to build brand identity and possibly leading to customer
confusion. Our inability to protect our trademarks and trade names might
materially and adversely affect our business, results of operations and
financial condition. In addition, in the future third parties may claim certain
aspects of our business infringe their intellectual property rights. While we
are not currently subject to any such claim, any future claim (with or without
merit) could result in one or more of the following:
* Significant litigation costs
* Diversion of resources, including the attention of management
* Our agreement to certain royalty and licensing arrangements
Any of these developments could materially and adversely affect our business,
results of operations and financial condition. In the future, we may also need
to file lawsuits to enforce our intellectual property rights, to protect our
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. Such costs and diversion could
materially and adversely affect our business, results of operations and
financial condition.
18. We could be materially adversely affected by future regulatory
changes and certain current regulations applicable to our business. We are not
currently subject to direct regulation by any government agency in the United
States, other than regulations applicable to businesses generally. 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. Such a development could materially and adversely affect our
business, results of operations and financial condition. In addition, because
our products and services will be available and sold over the Internet in
multiple states and foreign countries and because we expect to sell to numerous
consumers resident in such states and foreign countries, such a jurisdiction may
claim that we are required to qualify to do business as a foreign entity in such
jurisdiction. We are qualified to do business in only two states. Our failure to
qualify to do business as a foreign entity in a jurisdiction where we are
required to do so could subject us to taxes and penalties for the failure to
qualify. Any application of laws or regulations of a jurisdiction in which we
are not currently qualified could materially and adversely affect our business,
results of operations and financial condition.
19. Because of the nature of our business, we are exposed to a number
of sources of other potential liabilities. Certain of our services will involve
the development, implementation and maintenance of applications that are
critical to the operations of our clients' businesses. Our failure or inability
to meet a client's expectations in the performance of our services could injure
our business reputation or result in a claim for substantial damages against us,
regardless of our responsibility for such failure. We will attempt to limit
contractually our damages arising from negligent acts, errors, mistakes or
omissions in rendering our services. However, there can be no assurance that any
contractual protections will be enforceable in all instances or would otherwise
protect us from liability for damages. In addition, Internet users will be able
to download certain materials from our Web sites and subsequently distribute the
materials to others. Because of this, claims could be asserted against us (with
or without merit) in the future 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, we could be liable for
any of the following:
* Libel for any defamatory information we provided about a
person
* Any losses incurred by a person in reliance on incorrect
information we negligently provided
* Copyright and trademark infringement resulting from
information we provided
Moreover, we expect that we may agree with third parties to provide links to
such third parties' Web sites. A claimant might successfully argue that by
providing such links, we are liable for wrongful actions by such third parties
through such Web sites, for such matters as the following:
* Defamation
* Negligence
* Copyright and trademark infringement
* Losses resulting from the products and services sold by the
third party.
We are in the process of procuring general liability insurance. Even if we
procure this insurance, the insurance may not cover all potential claims or may
not adequately indemnify us for all liability to which we are imposed. Any
liability or legal defense expenses not covered by insurance or exceeding our
insurance coverage could materially and adversely affect our business, operating
results and financial condition.
20. Our obligation to indemnify our officers and directors could
prevent our recovery for losses caused by them. Our Bylaws provide that we must
indemnify each director, officer, agent and/or employee to the maximum extent
provided for in the General Corporation Law of Delaware. Further, we have
purchased and maintain insurance on behalf of such persons. Such insurance may
cover certain matters for which we do not have the power to indemnify such
persons. Consequently, because of the actions of officers, directors, agents and
employees, we could incur substantial losses and be prevented from recovering
such losses from such persons. Further, the United States Securities and
Exchange Commission maintains that indemnification is against the public policy
expressed in the Securities Act of 1933 (the "Act"), and is therefore
unenforceable.
21. We are exposed to intense competition. The electronic commerce
market (particularly on the Internet) is new, rapidly evolving and intensely
competitive. Most of our current and potential competitors have longer operating
histories, larger customer bases, longer relationships with clients and
significantly greater financial, technical, marketing and public relations
resources than we do, and could decide at any time to increase their resource
commitments to our market. We expect competition to intensify in the future.
There can be no assurance that existing or future competitors will not develop
or offer services that provide significant performance, price, creative or other
advantages over those we offer. Such a development could materially adversely
affect our business, results of operations and financial condition. In addition,
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. As a result of their larger size,
our competitors may be able to secure merchandise from vendors on more favorable
terms than we can. Moreover, 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 we can. Any of these circumstances
could materially adversely affect our business, results of operations and
financial condition.
22. Future acquisitions could expose us to numerous risks. As part of
our business strategy, we may acquire complementary companies, products,
services or technologies. Any acquisition would be accompanied by the risks
commonly encountered in an transaction. Such risks include the following;
* Difficulty of assimilating the operations and personnel of th
acquired companies
* Potential disruption of our ongoing business
* Inability of management to maximize our financial and
strategic position through the successful
incorporation of acquired businesses and technologies
* Additional expenses associated with amortization of acquired
intangible assets
* Maintenance of uniform standards, controls, procedures and
policies
* Impairment of relationships with employees, customers,
vendors and advertisers as a result of any integration
of new management personnel
* Potential unknown liabilities associated with acquired
businesses
There can be no assurance that we would be successful in overcoming these risks
or any other problems encountered in connection with such acquisitions. Due to
all of the foregoing, any future acquisition may materially and adversely affect
our business, results of operations, financial condition and cash flows.
Although we do not expect to use cash for acquisitions, we may be required to
obtain additional financing if we choose to use cash in the future. There can be
no assurance that such financing will be available on acceptable terms. In
addition, if we issue stock to complete any future acquisitions, existing
stockholders will experience further ownership dilution.
23. We rely heavily upon certain directors and officers, and our
limited management resources may not be sufficient for the future. We
substantially depend upon the efforts and skills of Greg J. Micek, a director
and the President of the Company. The loss of Mr. Micek's services, or his
inability to devote sufficient attention to our operations, could materially and
adversely affect our operations. We do 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. Our success in attracting additional qualified
personnel will depend on many factors, including our ability to provide them
with competitive compensation arrangements, equity participation and other
benefits. There is no assurance that we will be successful in attracting highly
qualified individuals in key management positions.
24. Our management has limited experience in certain aspects of our
business. We believe that we have ample experience to manage our fee-for-service
division. However, our brands-under-management division requires management
experience of a different nature. We expect that we will generally have little
or no direct experience in the management or operation of the types of
businesses represented by the products and services we will offer through our
brands-under-management division (either directly or through joint ventures) by
means of Web sites. In the case of joint ventures, we expect that our joint
venture partners will have a requisite level of experience. However, there can
be no assurance that we will be familiar enough with the joint venture's
proposed business to ascertain this. Because of our lack of experience, we may
be more vulnerable than others to certain risks. We also may be more vulnerable
to errors in judgment that could have been prevented by more experienced
management. As a result, our lack of previous experience could materially and
adversely affect our future operations and prospects.
25. A certain stockholder of the Company has control of the Company,
and cumulative voting and preemptive rights are denied to stockholders. Greg J.
Micek, a director and the President of the Company, owns approximately 60.1% 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 outstanding shares of Common Stock (currently
Mr. Micek) may elect all of our Board of Directors after completion of the
offering. There are no preemptive rights in connection with our Common Stock.
Thus, the percentage ownership of existing stockholders may be diluted if we
issue additional shares in the future.
26. The Company's authorized preferred stock exposes stockholders to
certain risks. Our Certificate of Incorporation authorizes the issuance of up to
10,000,000 shares of Preferred Stock, par value $.01 per share. No shares of
Preferred Stock were issued as of June 30, 1999. 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 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. Preferred stock authorized
in series allows our Board of Directors to hinder or discourage an attempt to
gain control of the Company by a merger, tender offer at a control premium
price, proxy contest or otherwise. Consequently, the Preferred Stock could
entrench our management. The market price of our Common Stock could be
materially and adversely affected by the existence of the Preferred Stock.
27. Our Common Stock has a limited float and limited trading market.
Our Common Stock trades in the United States only in the over-the-counter market
on the OTC Electronic Bulletin Board. Public trading of our Common Stock
commenced on June 30, 1998. Thus far, the prices at which our 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 our Common Stock will trade in the future,
although they may continue to fluctuate significantly. Prices for our Common
Stock will be determined in the marketplace and may be influenced by many
factors, including the following:
* The depth and liquidity of the markets for our Common Stock
* Investor perception of us and the industry in which we
participate
* General economic and market conditions
In addition to the preceding, only approximately 38.3% of the shares of Common
Stock outstanding are held by persons not affiliated with the Company. This
limited float may decrease the liquidity of our Common Stock from what it would
be in a more active trading market. It could also cause holders of our 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 our Common Stock.
We believe that the initial limited float will be eased to some extent over time
as, if and when the following events occur:
* Certain warrants to purchase our Common Stock are exercised * Shares
of Common Stock subject to legal or contractual restrictions become
freely tradeable * Freely tradeable shares are issued in connection
with acquisitions * We undertake additional public offerings of
additional shares of Common Stock
28. We have outstanding a large number of shares of Common Stock that
are eligible for sale under certain circumstances, and sales, or even the mere
possibility of sales, of these shares may materially adversely of Common Stock .
Approximately 9,490,557 shares of Common Stock are issued and outstanding. We
believe that approximately 7,750,000 of these shares are "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
before such sale. The vast majority of the restricted shares have been
outstanding for over one year and thus are 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 depress the price of
our Common Stock. Also, if substantial, such sales might also adversely affect
our ability to raise additional equity capital. However, most of the
approximately 7,750,000 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. We have the ability and the obligation to issue additional shares
of Common Stock in the future, and such future issuance may materially adversely
affect stockholders. We have registered an aggregate of 5,000,000 shares of
Common Stock for issuance in possible future business combination transactions.
All of these shares are still available for issuance in the future. For
issuances of shares in connection with acquisitions, our Board of Directors will
determine the timing and size of the issuances and the consideration required
therefor. Our Board of Directors intends to use its reasonable business judgment
to fulfill its fiduciary obligations to our then existing stockholders in
connection with any such issuance. Nonetheless, future issuances of additional
shares could cause immediate and substantial dilution to the net tangible book
value of shares of Common Stock issued and outstanding immediately before such
transaction. Any future decrease in the net tangible book value of such issued
and outstanding shares could materially and adversely affect the market value of
the shares. In addition, we have outstanding certain warrants to purchase shares
of Common Stock. We also have the obligation to issue additional such warrants
in the future. These warrants permit the holders to purchase shares of Common
Stock at specified prices. These purchase prices may be less than the then
current market price of our Common Stock. A total of approximately 7.5 million
additional shares of Common Stock would be issued if all of the warrants
currently outstanding (and we are obligated to issue in the future) were
exercised. Any shares of Common Stock issued pursuant to these warrants would
further dilute the percentage ownership of existing stockholders. The terms on
which we could obtain additional capital during the life of these warrants may
be adversely affected because of such potential dilution.
30. The trading price of our Common Stock entails additional regulatory
requirements, which may negatively affect such trading price. The trading price
of our Common Stock has been below $5.00 per share. As a result of this price
level, trading in our Common Stock is subject to the requirements of certain
rules promulgated under the Securities Exchange Act of 1934. These rules 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,
before 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 determine the
suitability of the penny stock for the purchaser and receive the purchaser's
written consent to the transaction before sale. The additional burdens imposed
upon broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in our Common Stock affected. As a consequence, the
market liquidity of our Common Stock could be severely limited by these
regulatory requirements.
31. Stockholders have no guarantee of dividends. The holders of our
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, we have
paid no 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 our business operations. If we obtain additional financing,
our ability to declare any dividends will probably be limited contractually.
32. The Company may have exposure to potential Year 2000 problems. We
believe that we have no potential internal Year 2000 problems. Nonetheless, we
recognize that the computer systems of financial institutions and other vendors
with which we will do business could have Year 2000 problems that could
adversely affect us. However, we have no greater exposure to these types of
problems than other businesses in general. Nonetheless, we 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, we have instituted a program of carefully screening persons and
companies with which we 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. Apparently, few businesses (especially small, emerging
and mid-sized businesses) 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.
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. 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. 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 -We depend
heavily on the Internet, and any adverse development with regard to the Internet
could materially adversely affect us, -We are exposed to numerous risks due to
potential future technological change, -- The acceptance of the Internet as a
medium for commerce is uncertain, and the failure of the Internet to gain such
acceptance could materially adversely affect us, -- Electronic commerce is a
developing market and involves considerable uncertainty, -- Electronic commerce
involves a number of security risks, -We are exposed to the risk of system
failure, and such a failure could materially adversely affect us, -- We could be
materially adversely affected by future regulatory changes and certain current
regulations applicable to our business, and -- Because of the nature of our
business, we are exposed to a number of sources of other potential liabilities.
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 are 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.
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 of at least two
particular types. The first type of opportunities presented is to offer
products, services and content 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. The second type of
opportunities presented is to provide Internet services to persons offering or
proposing to offer products, services, content or advertising in electronic
commerce or offering. Because these two types of opportunities are very
distinct, the Company has established two divisions to pursue these
opportunities separately. These divisions are the Company's
brands-under-management division and the Company's fee-for-service division.
From time to time the Company has given a greater emphasis to one of these
division over the other.
Fee-For-Services Division
The Company's fee-for-services division provides clients with the
vision, expertise and resources required to develop new strategies and improve
business processes for electronic commerce. To capitalize on the opportunity
presented by the rapid growth in electronic commerce, the Company has developed
certain internal capabilities relating to electronic commerce and Internet
services. Moreover, the Company has formed and continues to form certain
strategic relationships with third parties to supplement the Company's internal
capabilities to ensure that the Company offers a full, integrated ensemble of
strategic, technical and creative skills required for electronic commerce and
Internet services. In each consulting engagement, the client can contract for
the specific services it requires, depending on the nature of the engagement and
the capabilities of the client's organization. The Company expects to bill most
of its engagements on a time and materials basis, although it may work on a
fixed-price basis.
The Company's fee-for-services division has been divided into three
distinct functional areas. The first functional area of the Company's
fee-for-services division provides strategic Internet services consulting. The
services provided by this area of the fee-for-services division include the
following:
* strategy consulting regarding business and marketing
strategies best suited for pursuing the client's business in
electronic commerce
* creation of a system or process design that defines the roles
that the system or process will perform for meeting the
client's strategic requirements
* development of a testable version of the client's system
including all necessary programs and components and a
compelling user interface for the system to enable it to
attract and hold the attention of the client's target audience
while conforming to the client's brand image and marketing
campaigns
* testing of the system in preparation of deployment into a full
production system and installation of the system after all
tests are completed
* audience development to increase Web site traffic,
strengthening brand awareness and generating sales leads
* maintenance of the Web site and its content, and provision of
technical support
While at one time the Company had planned on organizing a subsidiary that would
employ a number of strategic Internet service consultants, the Company now plans
on adding additional strategic Internet service consultants on a more gradual
basis as qualified personnel can be hired.
The second functional area of the Company's fee-for-services division
involves Web site development. This area developed out of a strategic alliance
that the Company formed during August 1998 with Heitmann S.A.C., a subsidiary of
Lernout & Hauspie Speech Products ("L&H"), an international leader in the
development of advanced speech technology for various commercial applications
and products. In this connection, the Company and L&H have entered into a
legally binding agreement with regard to their relationship. This agreement is
not exclusive, and the Company expects to explore similar joint venture
arrangements with other Web developers. As an outgrowth of the Company's Web
site development services, the Company has developed a web-based communications
service for targeting Advertising and Public Relations Agencies in North
America. The Company's niche-marketing plan for this service was launched from
the Company's New York satellite office in February 1999. Advertising and public
relations agencies headquartered in New York City were introduced to the new
high-tech, highly customized service. The Company expanded the marketing plan to
San Francisco and London in March 1999. L&H will be primarily responsible for
providing the actual Web site development services, while the Company will be
primarily responsible for marketing the service. The Company expects to bill for
these services on a time and materials basis. Fees received will be split
equally between the Company and L&H. The Company is offering its web-based
communication services over the Web site "crisis-communications.com", which was
recently developed.
The third functional area of the Company's fee-for-services division
provides Web hosting services. In this connection, the Company has entered into
a Web hosting agreement with GTE Internetworking, a division of GTE Corporation.
Under the terms of this agreement, GTE makes available to the Company GTE's Web
Advantage Service from GTE's worldwide secure global data-center based in
Phoenix. GTE's Web Advantage Service is a high-performance, highly reliable,
cost-effective Web hosting service. Under the terms of this agreement, the
Company has access to a bandwidth of up to 10.0 Mbit/sec. This agreement allows
the Company to expand and contract its use of GTE's services as the Company's
traffic fluctuates. The charges that the Company will owe pursuant to the
agreement will depend on the Company's usage. The initial term of this agreement
is for one year. This agreement is renewable by the Company and is terminable by
the Company upon 60 days prior written notice. The Company believes that the GTE
agreement provides suitable Web hosting capacity for the foreseeable future. The
Company also believes that providing hosting services is critical because
hosting is an entry level service and creates the opportunity for offering and
selling additional services. The Company is already providing Web hosting
services to a major European government agency with a possible increase in Web
hosting work for other agencies of this government. The Company will offer its
Web hosting services over the Web site "webcatservers.com", which is now under
development.
The Company's objective regarding the fee-for-services division is to
become and remain a leading Internet services provider. The Company's strategy
to achieve this objective includes the following elements:
Strengthen Position as an Internet Services Provider. The Company is
continuing to strengthen its position as an Internet services provider
in order to provide clients with superior Internet solutions. The
Company intends to continue identifying, reviewing and integrating the
latest Internet technologies and accumulating and deploying the best
demonstrated practices for electronic commerce.
Developing Brand. In a fragmented industry that lacks brands strongly
identified with Internet services providers the Company believes that
it will need to build a well-recognized brand for its fee-for-services
division. The Company's brand development program will be designed to
reinforce the message that the Company's fee-for-services division can
provide a complete range of services to build and deploy e-commerce
solutions. The Company intends to build and differentiate its
fee-for-services division brand 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.
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. Few of these strategic relationships have yet
resulted in legal binding relationships. While the Company intends to
develop the ability to render many of 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.
Brands-Under-Management Division
This division was formed for purposes of pursuing electronic commerce
opportunities involving the sale of products and services in electronic commerce
and the offering of content and advertising over the Internet. Although the
Company expects to undertake some of these electronic commerce opportunities
alone, the Company believes that it will undertake most of these 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
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 $250,000 at the high end. In order to
provide this financial assistance, the Company will have to procure funds from
various sources, which are discussed above in "RISK FACTORS - We expect to have
future capital needs, and the procurement of additional financing to meet these
needs is uncertain." There can be no assurance that the Company will be
successful in procuring these funds. From time to time the Company has given a
greater emphasis to one of these division over the other. Although the Company
is not as actively seeking joint venture opportunities as it once had, the
Company intends to consider attractive joint venture electronic commerce
opportunities as they are presented and as funds are available. As of the
present, the Company does not have funds available to pursue any meaningful
joint venture electronic commerce opportunity not now under consideration.
Nonetheless, the Company's limited experience thus far indicates that for the
foreseeable future the Company will have an ample array of joint venture
prospects to consider if and when funds become available.
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 will consider both commerce-driven or
content-driven opportunities.
The Company is currently undertaking one brands-under-management
project, the iHomeline.com project. The iHomeline.com project involves a
50%-owned subsidiary (the "iHomeline.com Subsidiary") that intends to create,
own and operate World Wide Web sites whose objectives are to foster communities
of consumers, manufacturers, services providers and advertisers interested in
the examination, purchase, sale or offer of home-related content, products,
services or advertising. The Company's partner in the iHomeline.com project is
Jim Neidner. Mr. Neidner is the President of Neidner Construction/Remodeling
Inc. based in Houston, Texas, and has over 27 years experience in the custom
home construction and remodeling business. For more than four years, Mr. Neidner
has co-hosted Home Line Talk Radio, a weekly Houston radio talk show dealing
with topics of interest to homeowners. The iHomeline.com Web sites will offer
relevant, informative and entertaining content of interest to consumers of
home-related products and services. The goal of these Web sites is to appeal to
manufacturers, services providers and advertisers of home-related products and
services to induce them to offer products, services and advertising on these Web
sites and to pay for the opportunity to do so. Each iHomeline.com Web site is
expected to feature worldwide, live broadcasts of talk shows focusing on
home-related topics, do-it-yourselfers educational and reference materials, chat
rooms, auctions, a service for referrals to home-related professionals, home
plans and blueprints that can be purchased on-line, and possibly real estate,
mortgage loan, furniture and travel-related brokerage services. The initial
iHomeline.com Web site will target the Houston, Texas metropolitan area. Its
development is subject to the procurement of adequate financing, which is
currently being sought. The initial iHomeline.com Web site is expected to be
operational 30 days after the procurement of adequate financing. After achieving
a satisfactory result with the initial iHomeline.com Web site, the iHomeline.com
Subsidiary intends to expand the iHomeline.com model to other targeted
geographical areas in the United States of America by creating additional
iHomeline.com Web sites, each focusing on a particular targeted geographical
area. The iHomeline.com Subsidiary's goal is to create a national infrastructure
of iHomeline.com Web sites that can eventually feature national (as well as
local) content, products, services or advertising. The iHomeline.com project is
subject to numerous risks, including, without limitation, the inability to raise
necessary capital, the inability to create a satisfactory initial iHomeline.com
Web site and the inability to develop a national infrastructure of iHomeline.com
Web sites.
When a joint venture prospect is presented in the future, 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) will either
accept or reject the prospect. This decision will be 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 size of the initial budget in
relation to 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 will enter 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. 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.
Other Electronic Commerce Opportunities
In addition to the development of the Company's fee-for-services and
brands-under-management divisions, the Company intends to consider other
electronic commerce opportunities presented to it. The Company intends to select
only those opportunities (if any) that present the greatest likelihood of
success.
Acquisitions
The Company originally intended 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 had registered 5,000,000 shares of Common
Stock for this purpose. The Company does not now intend to conduct an active
acquisition program, but may consider select acquisitions on a case-by-case
basis. The Company does not now have any possible acquisitions under
consideration.
The Company has not developed, nor does it currently intend to develop,
a valuation model and a standardized transaction structure it will use. 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 that any
acquisition would assume the form of a merger in exchange for shares of Common
Stock.
Any acquisition is expected to 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. 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.
Acquisitions also a number of 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 also materially and adversely
affect 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, any individual future acquisition may materially and adversely affect
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
With respect to the Company's fee-for-service division, the Company's
marketing efforts are dedicated to demonstrating to key decision makers in
prospective clients the benefits of electronic commerce and the use of Internet
solutions, and the effectiveness of the Company's services. The Company's
marketing program strives to accomplish the following:
* Enhance the Company's Brand. The continued strengthening of
the Company's brand is crucial to the achievement of the
Company's objective of becoming a recognized provider of
Internet professional services. The Company's brand
development efforts are designed to reinforce the message that
the Company can provide a complete range of services to build
and deploy electronic commerce and Internet solutions.
* Develop Marketing and Sales Tools. The Company has developed
marketing and sales materials to be used in connection with
the Company's business generation efforts. These materials
center upon a brochure regarding the Company's web-based
communication service. These materials are designed to
increase the effectiveness of the sales and marketing efforts
of the Company.
* Generate Client Leads. The Company's marketing campaigns are
intended to generate client leads through the use of multiple
forms of media, with in-person sales calls comprising the
primary form at this time. In fiscal 1999, the Company
conducted a marketing campaign regarding its web-based
communication service. This campaign was directed to large
public relations agencies based in New York, San Francisco
and London. Currently, the Company's marketing campaign
regarding its web-based communication service is on hold
pending the possible redefinition of the Company's
relationship with L&H. The Company is currently formulating
a marketing campaign for the iHomeline.com project. The
commencement of these marketing campaigns is currently
indefinite.
In the future, the Company may employ a variety of other media, program
and product development, business development and promotional activities to
market its fee-for-service division. For example, the Company may place
advertisements on various Web sites. These advertisements should usually take
the form of banners that encourage readers to click through directly to the
Company's Web sites. The Company also may 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 may engage in a coordinated program of
print advertising in specialized and general circulation newspapers and
magazines. The Company hopes that in the future it will receive free publicity
such in the form of 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!
With respect to the Company's brands-under-management division, 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 highly customized notices to customers at their 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.
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 the Company's 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
In general, the market for Internet professional services and
electronic commerce are relatively new, intensely competitive, rapidly evolving
and subject to rapid technological change. The Company expects competition to
persist, intensify and increase in the future. Barriers to entry are minimal,
and new competitors can enters these markets at a relatively low cost. Most of
the Company's current and potential competitors have longer operating histories,
larger client bases, longer relationships with clients and significantly greater
financial, technical, marketing and public relations resources than the Company
and could decide at any time to increase their resource commitments to the
Company's markets. In addition, these markets are subject to continuing
definition, and, as a result, the core business of certain of the Company's
competitors may better position them to compete in these markets as they mature.
Competition of the type described above could materially adversely affect the
Company's business, results of operations and financial condition.
With regard to the Company's fee-for-services division, the Company
believes that the principal competitive factors in its market are strategic
expertise, technical knowledge and creative skills, brand recognition,
reliability of the delivered solution, client service and price. There can be no
assurance that existing or future competitors will not develop or offer services
that provide significant performance, price, creative or other advantages over
those offered by the Company, which could have a material adverse effect on the
Company's business, results of operations and financial condition. The Company
has no patented technology that would preclude or inhibit competitors from
entering the Internet professional services market.
With regard to the Company's brands-under-management division, 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. Nonetheless, 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. 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. 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 to ten employees within the
next year, excluding employees of any 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 and a small amount of rack space for
servers in GTE's data-center based in Phoenix on a year-to-year 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.
The Company's common stock (the "Common Stock") is traded on the OTC
Bulletin Board under the symbol "JVWB". As of June 30, 1999, the Company had
approximately 235 holders of record. Trading in the Common Stock commenced on
June 30, 1998. Presented below are the high and low closing prices of the Common
Stock for the periods indicated: <TABLE> <CAPTION>
High(1) Low(1)
<S> <C> <C>
Fiscal year ending June 30, 1999:
Fourth Quarter $1.81 $ .43
Third Quarter $ .78 $ .36
Second Quarter $ .562 $ .125
First Quarter $1.250 $ .406
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.
</TABLE>
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
In general, JVWeb is structured to pursue two main business activities: 1) the
joint venturing of Brands that have strong on-line commerce potential, and 2)
the building of a strong fee for service division to deepen our capabilities. In
the fourth quarter of fiscal YE 6/30/99, management initiated the operation and
generation of revenue in its fee for service division. It also entered into its
first joint venture relationship, involving www.ihomeline.com.
The overall performance of the company over the last year had a number of
disappointing elements to it. The unwinding of the Wall Street Whispers
transaction, despite management's belief as to it being the right decision at
the time, represented a loss of momentum. The considerable effort in
establishing our New York presence, initiating the web-based crisis services,
and lack of anticipated support from our European services group, combined to
cause us to fall considerably short of our goals for this program. We continue
to strive for success in this area, and do have some promising opportunities.
However, if those opportunities do not materialize into revenue generating
business, we may need to abandon this area. Our hosting facility in Phoenix,
co-located with GTE, remains a viable asset of the company, although the
European hosting opportunities are proving difficult to acquire.
In the fourth quarter, we entered into a 5% equity position with an on-line
music website. We invested considerable efforts with that business in the fourth
quarter, as they were one of the sponsors of Woodstock, held in July. As a
result of that effort, JVWEb has gained considerable industry and technical
knowledge in the entire electronic downloading of music phenomenon. We are
presently aggressively pursuing opportunities to capitalize on that knowledge.
Promising areas of pursuit remain our core business strategy of joint venturing
with viable brands. The www.ihomeline.com website is now completing its
demonstration site, and is expected to be available for viewing in the near
future. We are actively discussing with two other brands for similar
relationships. This area is anticipated to remain our primary pursuit for the
upcoming year. Our hosting capability in Phoenix remains a viable part of our
core strategy, and is an attraction to prospective joint venture partners as we
had anticipated.
Our lack of overall funding seriously hindered our development efforts in
pursuing our joint venture strategies. Despite that, we successfully established
the joint venture surrounding the www.ihomeline.com project. We are continuing
to look for creative strategies to establish joint ventures, emphasizing our
business strengths and core competencies. We anticipate some success in pursuing
this strategy in the upcoming year. However, we will continue to be hampered by
having access to only minimal funding capabilities.
Also as a general point of reference, the internet commerce environment, in
which we operate, continues to be higly volatile. Business dynamics change
almost daily. We are affected by these changing dynamics on a daily basis. For
example, the large public relations firms that we targeted in the spring and
summer clearly have a great need for our crisis services. However, as we pursued
those relationships, technology contributed to providing these agencies with
internal solutions (or at least the perception of an internal solution), which
hindered our marketing efforts.
INCOME STATEMENT
Revenue. The company generated meaningful consulting revenues in the fourth
quarter, primarily through one engagement. Unfortunately, the unpredictable
nature of internet business forces has contributed to serious questions as to
the collectibility of that invoice. Revenue for web-hosting began in April,
1999, and we are hopeful it will grow as new customers are added.
General and Administrative Expenses. A material percentage of the G&A
expenditures represented travel and other marketing costs associated with the
establishment of a presence in New York and California, as well as the research
costs with evaluating various joint venture opportunities. Remaining G&A
expenditures were related to the costs of being a public company, including the
associated costs of maintaining a fully reporting status with the S.E.C.
BALANCE SHEET
Current Assets: Cash balance reported was due primarily to shareholder
contributions. The short term note receivable was to a primary client, and was
guaranteed by a principal shareholder of that client.
Notes Payable to founding shareholder. On June 30, 1999, the founding
shareholder purchased the outstanding loans advanced to the company by other
related parties.
CAPITAL REQUIREMENTS
As stated above, the founding shareholder has been, and continues to provide,
minimum funding requirements for the company, although he is under no obligation
to do so. If the founding shareholder would decide to discontinue funding, the
company would be required to seek alternative financing, which would be
uncertain. Management is continually evaluating the performance of the company
over this next fiscal year. Alternative business strategies may be considered
this next year if business operations fail to produce desired results, of if
necessary financing becomes unavailable.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The report 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-9
hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL 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 44 Director, President
Lewis E. Ball 68 Director, Treasurer & Secretary
Kevin Dotson 34 Key Consultant
</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.
Kevin Dotson has served as a key consultant to the Company since December
1, 1997. Since 1995, Mr. Dotson has owned MicroVision Solutions, an Internet
consulting and Web development company. From 1994 to 1995, he worked as a data
entry specialist for Columbia/HCA SMBC in Houston. Earlier he had served in the
United States Army for five years training military personnel on computer
systems. Mr. Dotson attended Arizona State University.
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 the only failure of one of the Company's officer, director
or greater than ten percent stockholder to comply with all such applicable
filing requirements was the failure of Greg J. Micek, a director and the
President of the Company, to file timely Form 4's and a Form 5 (required by
virtue of his failure to file the Form 4's) with respect to exchanges occurring
in fiscal 1999 of certain shares held by him for certain promissory notes held
by another party against the Company. Subsequently, Mr. Micek filed a Form 5
with respect to such exchanges.
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 years ended June 30, 1999 or 1998 exceeding $100,000).
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
(a) (b) (c) (e) (g)
Fiscal
Name and Year Other Annual Securities Underlying
Principal Position Ended Salary Compensation Options (number of shares)
<S> <C> <C> <C> <C>
Greg J. Micek 6/30/99 (2) -0- -0-
Chief Executive 6/30/98 (2) -0- 2,000,000
Officer and
President
- -----------------
</TABLE>
(1) The Columns designated by the SEC for the reporting of certain bonuses,
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
voluntary elected not to receive any portion of his salary during
fiscal 1999 or fiscal 1998.
Stock Option Grants
The Company did not grant any stock options during the fiscal year
ended June 30, 1999.
Option Exercises/Value of Unexercised Options
The following table sets forth the number of securities underlying
options exercisable at June 30, 1999, and the value at June 30, 1999 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, 1999 In-the-Money Options at
(Numbers of Shares) June 30, 1999
Name Exercisable Exercisable
<S> <C> <C>
Greg J. Micek 2,000,000 $1,550,000(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
$.875 per share closing bid price of the Common Stock on the OTC
Bulletin Board on June 30, 1999.
Other Plans
The Company has no other deferred compensation, pension or retirement
plans in which executive officers participate.
Compensation Agreement with Key Personnel
The Company has entered into an employment agreement (the "Micek
Employment Agreement") with Greg J. Micek, a Director and the President of the
Company. The Micek Employment Agreement has a term of three years and will
expire in accordance with its terms in November 2000. Under the Micek 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 Micek
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 Micek Employment Agreement by the Company with
cause or by Mr. Micek without cause.
The Company has entered into a consulting agreement and two stock
option agreements (collectively, the "Dotson Agreements") with Kevin Dotson, a
person who provides Internet consulting services to the Company. The Company
pays to Mr. Dotson $5,000 in cash per month. Pursuant to one of the Dotson
Agreement, the Company issued to Mr. Dotson fully-vested options to purchase
120,000 shares of Common Stock at a purchase price per share of $.10 and 20,000
shares of Common Stock at a purchase price per share of $.25. Pursuant to
another Dotson Agreement, the Company issued to Mr. Dotson options to purchase
200,000 shares of Common Stock at a purchase price per share of $.25. Of these
200,000 shares, the option vested with respect to 8,000 shares on the date of
the grant, and the option will vest with respect to an additional 8,000 shares
every 30 days thereafter until the option is fully vested. As of June 30, 1999,
Mr. Dotson had become vested with respect to 112,000 of these optioned shares.
Each option issued under a Dotson Agreement has a term of five years after the
date it is issued or vested, whichever occurs last.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of June 30, 1999 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>
Beneficial Ownership
Name and Address of Prior to Offering(1)
Beneficial Owner Number Percent
<S> <C> <C> <C>
Greg J. Micek 7,750,000(2) 68.0%
5444 Westheimer, Suite 2080
Houston, Texas 77056
Lewis E. Ball 110,000 1.2%
6122 Valley Forge
Houston, Texas 77057
All directors and officers 7,860,000(3) 69.0%
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 Annual
Report.
(2) Includes 5,750,000 shares owned outright and 2,000,000 shares that may
be purchased pursuant an option currently exercisable.
(2) Includes 5,860,000 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 terms and conditions of Mr. Micek's employment with the Company and
the grant of a stock option to him in this connection are discussed in the
subsection captioned "Compensation Agreement with Key Personnel" immediately
preceding.
Between October 1997 and early June 1999, John J. Micek, Jr. loaned
$200,000 to the Company. John J. Micek, Jr. is the father of Greg J. Micek, a
director and the President of the Company. Such loans were represented by a
number of demand promissory notes bearing interest at a rate of nine percent per
annum. During fiscal 1999, Greg J. Micek acquired from John J. Micek, Jr. all of
these promissory notes in exchange for 300,000 shares of the Company's common
stock held by him. As of June 30, 1999, the total balance owed to Greg J. Micek
on these promissory notes was approximately $_____________.
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. In consideration of services provided to the Company, the Company
issued to Mr. Ball 20,000 shares of Common Stock.
PART IV.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
<TABLE>
1. Consolidated Financial Statements:
<S> <C>
Report of Independent Auditors .......................................................................F-1
Consolidated Balance Sheets as of June 30, 1999 ..................................................... F-2
Consolidated Statements of Income for the years ended June 30, 1999 and 1998 ...................... F-3
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1999 and 1998 ........ .F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1999 and 1998 .................. F-5
Notes to Consolidated Financial Statements ......................................................... F-6
</TABLE>
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
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.
4.04 Second Amendment to Agreement dated April 15, 1998 between the Company and American Stock Transfer Company
& Trust Company is incorporated herein by reference from the Company's Registration Statement on Form
SB-2/A (SEC File No. 333-74381) filed March 15, 1999, Item 27, Exhibit 4.04.
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.
10.12 Consulting Services Agreement dated February 15, 1999 by and
between the Company and Tanye Capital Corp. is incorporated
herein by reference from the Company's Registration Statement
on Form SB-2/A (SEC File No.
333-74381) filed March 15, 1999, Item 27, Exhibit 10.12.
10.13 Master Services Agreement dated March 1999 between the Company and Lernout & Hauspie Speech Products,
S.A./N.V.
10.14 Exchange Agreement dated April 12, 1999 between the Company and AMP3.com, LLC
21.01 Subsidiaries of Registrant
23.01 Consent of Malone & Bailey, PLLC
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 4.02.
</TABLE>
(b) Reports on Form 8-K
The Registrant filed no report on Form 8-K during the last
quarter of its 1999 fiscal year.
<PAGE>
INDEPENDENT AUDITORS' 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, 1999, and the related statements of expenses,
stockholders' equity, and cash flows for year then ended. 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,
1999, and the results of its operations and its cash flows for year then ended
in conformity with generally accepted accounting principles.
MALONE & BAILEY, PLLC
Houston, Texas
October 10, 1999
F-1
<PAGE>
JVWeb, Inc.
Balance Sheet
As of June 30, 1999
ASSETS
<TABLE>
<S> <C>
Cash $ 42,724
Note receivable 50,333
Prepaid professional fees 32,713
Prepaid insurance 45,224
Total Current Assets 170,894
Office equipment and furniture (net of
$1,700 accumulated depreciation) 2,690
AMP3.com LLC Investment 100,000
Total Assets $ 273,584
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable $ 54,751
Notes payable to founding shareholder 161,638
Note payable to insurance company 34,510
Total Liabilities 250,899
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, 9,327,557 shares issued and
outstanding 93,276
Paid-in capital 1,241,236
Accumulated deficit stage (1,311,827)
Total Stockholders' Equity 22,685
Total Liabilities & Stockholders' Equity $ 273,584
</TABLE>
See notes to financial statements.
F-2
<PAGE>
JVWeb, Inc.
Income Statement
For the Year Ended June 30, 1999 and the Period from
October 28, 1997 (Inception)
Through June 30, 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
REVENUES $ 220,825 $ 190
COST OF SALES 53,286 48
Gross Margin 167,539 142
EXPENSES
General and administrative 1,295,154 174,338
Depreciation 1,463 530
1,296,617 174,868
Operating (Loss) (1,129,078) (174,726)
INTEREST INCOME (EXPENSE) ( 8,129) 106
Net Deficit $(1,137,207) $(174,620)
NET LOSS PER COMMON SHARE $( 0.14) $( 0.02)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,968,402 6,681,250
</TABLE>
See notes to financial statements.
F-3
<PAGE>
JVWeb, Inc.
Statement of Stockholders' Equity
Period from October 28, 1997 (Inception)
Through June 30, 1999
<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
inceptionto 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
Shares issued for cash 939,597 9,396 325,816 335,212
Shares issued for
Services 1,042,900 10,429 704,355 714,784
Deposit shares returned ( 70,000) ( 700) 700
Fractional shares issued 45,060 451 ( 451)
Shares issued for
investment 200,000 2,000 98,000) 100,000
Net deficit $(1,137,207)$(1,137,207)
Balances,
June 30, 1999 9,327,557 $93,276 $ 1,241,236 $(1,311,827) $ 22,685
</TABLE>
See notes to financial statements.
F-4
<PAGE>
JVWeb, Inc.
Statement of Cash Flows
For the Year Ended June 30, 1999 and the Period from
October 28, 1997 (Inception)
Through June 30, 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOW FROM OPERATIONS
Net deficit $(1,137,207) $(174,620)
Adjustments to reconcile net
deficit to cash provided from
operating activities
Depreciation 1,170 530
Common stock for services 714,784 60,000
Writeoff of deposit on purchase
of a subsidiary 25,000
Changes in:
Employee advances 2,550 ( 2,550)
Inventory 5,305 ( 5,305)
Prepaid expenses ( 58,337) ( 19,500)
Accounts payable 46,936 7,481
NET CASH USED BY OPERATING ACTIVITIES (399,799) (133,964)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of office equipment & furniture ( 4,390)
Increase in loan receivable ( 50,000)
Deposit on purchase of subsidiary ( 25,000)
NET CASH USED BY INVESTING ACTIVITIES ( 50,000) ( 29,390)
CASH FLOW FROM FINANCING ACTIVITIES
Change in notes payable
to founding shareholder 123,638 38,000
Proceeds from notes payable 34,510 1,250
Payments on notes payable ( 1,250)
Issuance of common stock 335,212 124,516
NET CASH FROM FINANCING ACTIVITIES 492,110 163,766
NET INCREASE IN CASH 42,311 412
CASH AT BEGINNING OF YEAR 412
CASH AT END OF YEAR $ 42,723 $ 412
</TABLE>
See notes to financial statements.
F-5
<PAGE>
JVWEB, INC
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. The Company also provides internet consulting
services.
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.
Revenue and cost recognition. Revenue from consulting is recognized when
services are rendered. Advertising costs are expensed as incurred.
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. As of June 30, 1999, and 1998, respectively, inventory was $
0 and $5,305.
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.
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 - AMP-3.COM, LLC INVESTMENT
On April 12, 1999, the Company agreed to exchange 200,000 shares of Company
common stock for a 5% ownership interest in AMP-3.com, LLC ("AMP-3"), a Texas
limited liability start-up company providing Internet music retail sales and
promotion services to the music industry.
In April 1999, the Company agreed to provide consulting services to AMP-3.
During April through June, the Company invoiced AMP-3 $218,589 for consulting
services and related out-of-pocket expenses, with a further $9,800 in services
performed in July. AMP-3 has not paid or agreed to pay these charges. No further
services have been rendered.
On June 1, 1999, the Company loaned $50,000 to AMP-3 in exchange for an 8%
unsecured convertible subordinated promissory note due August 31, 1999. The note
was convertible into a .5% interest in AMP-3 anytime before August 31, 1999, and
no conversion was elected. The note was not paid at that time, and no
arrangements for payment have been made. Payment was guaranteed individually by
a stockholder of AMP-3.
F-6
<PAGE>
JVWEB, INC
NOTES TO FINANCIAL STATEMENTS
NOTE B - AMP-3.COM, LLC INVESTMENT (Continued)
AMP-3's financial situation is undetermined. The 5% investment is carried at
cost, as management believes the near-term collection prospects are good. The
$218,589 account receivable is fully reserved by an equivalent charge to an
allowance for bad debts, although management believes that the likelihood of
eventual collection is good. The $50,000 cash investment is carried at full
value because of the positive prospects of AMP-3 and the implied solvency of
their guaranteeing stockholder.
NOTE C - RELATED PARTY TRANSACTIONS
The founding shareholder contributed $69,516 cash for the initial common stock
issued. The founding shareholder has loaned the Company $161,638 and $23,000
individually and $0 and $15,000 from a related company as of June 30, 1999 and
1998, respectively. The balance is due upon demand and accrues interest at 9%.
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 accrued or 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 on October 30, 2002.
NOTE D - TIME FINANCIAL INVESTMENT
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
paid $55,000 ($25,000 as of June 30, 1998) in cash, and issued 70,000 returnable
shares of the Company's common stock on June 29, 1998. As of October 29, 1998,
the purchase transaction had been abandoned. The $55,000 deposit was written off
and the shares were returned to the Company.
NOTE F - NOTE PAYABLE TO INSURANCE COMPANY
The Company financed its insurance program with an insurance note payable in
nine monthly installments of $5,122, including interest at 9%, due by June 30,
1999.
F-7
<PAGE>
JVWEB, INC
NOTES TO FINANCIAL STATEMENTS
NOTE G - 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
$3,000 and $1,500 per month in the years ended June 30, 1999 and 1998,
respectively.
NOTE H - CONSULTING AGREEMENTS
The Company has entered into four consulting agreements by which options to
purchase the Company's common stock at stipulated prices ranging from $.10 to
$1.00 per share were issued. 980,000 and 250,000 options were issued during the
years ended June 30, 1999 and June 30, 1998, respectively. The options are
subject to forfeiture on a prorata basis should the services terminate prior to
the term of the agreement. Pursuant to two of the agreements, a variable monthly
cash retainer is also paid. Additionally, 140,000 shares of stock were issued to
these consultants during the year ended June 30, 1999. The Company is obligated
to issue an additional 50,000 shares of stock to one of these consultants over
the next year.
The Company has entered into five 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 stipulated rate of shares per hour. During the
years ended June 30, 1999 and 1998, respectively, 105,250 and 55,000 options
have been granted under these agreements. 20,000 shares were issued to one of
these consultants as additional compensation.
The Company entered into another consulting agreement which it canceled in
August 1998. The Company issued 20,000 and 50,000 shares during the years ended
June 30, 1999 and 1998 respectively under this agreement and has no further
liability to this consultant.
The Company entered on March 31, 1999 a two year agreement with one consultant
for business services for $25,000 per quarter, payable in shares. 75,000 S-8
shares have been issued pursuant to this agreement.
F-8
<PAGE>
JVWEB, INC
NOTES TO FINANCIAL STATEMENTS
NOTE H - CONSULTING AGREEEMENTS (Continued)
The Company issued 96,000 options and 420,000 shares to consultants whose
agreements began and terminated during the year ended June 30, 1999.
NOTE I - STOCK OPTIONS
Beginning at inception, the Company adopted the disclosure requirements of FASB
Statement 123, Accounting for Stock Based Incentive Plans. The Company has
granted options pursuant to its stock option plan. Grants are made at
management's discretion, and are compensation for services. Additionally, the
Company issues warrants from time to time . The stock option plan and warrants
issuances are administered by the Board of Directors of the Company, who have
substantial discretion to determine which persons, amounts, time, price,
exercise terms, and restrictions, if any. Both options and warrants carry
certain anti-dilution provisions concerning stock dividends or splits, mergers
and reorganizations.
The Company uses the intrinsic value method of calculating compensation expense,
as described and recommended by Accounting Principles Board (APB) Opinion No. 25
(Accounting for Stock Issued to Employees) and permitted by FASB Statement 123.
Accordingly, no compensation expense has been recognized for the stock options
during the years ended June 30, 1999 and 1998.
Summary information on each are as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Share Share
Options Price Warrants Price
<S> <C> <C> <C>
Year ended June 30, 1998:
Granted and outstanding 2,541,250 $0.12 1,500,000 $1.00
Year ended June 30, 1999:
Granted 985,000 0.53
Exercised 432,400 0.26 26,262 1.00
--------- ----- --------- -------
Outstanding at
June 30, 1999 3,093,850 $ 0.23 1,473,738 $ 1.00
========= ======== ========= =======
</TABLE>
9
<PAGE>
<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.
October 13, 1999
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.
Name Title Date
/s/ Greg. J. Micek Director and President October 13, 1999
Greg J. Micek (Principal Executive Officer
and Principal Financial Officer)
/s/ Lewis E. Ball Director October 13, 1999
- --------------------------------
<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.
4.04 Second Amendment to Agreement dated April 15, 1998 between the Company and American Stock Transfer Company
& Trust Company is incorporated herein by reference from the Company's Registration Statement on Form
SB-2/A (SEC File No. 333-74381) filed March 15, 1999, Item 27, Exhibit 4.04.
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.
10.12 Consulting Services Agreement dated February 15, 1999 by and
between the Company and Tanye Capital Corp. is incorporated
herein by reference from the Company's Registration Statement
on Form SB-2/A (SEC File No.
333-74381) filed March 15, 1999, Item 27, Exhibit 10.12.
10.13 Master Services Agreement dated March 1999 between the Company and Lernout & Hauspie Speech Products,
S.A./N.V.
10.14 Exchange Agreement dated April 12, 1999 between the Company and AMP3.com, LLC
21.01 Subsidiaries of Registrant
23.01 Consent of Malone & Bailey, PLLC
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 4.02.
</TABLE>
EXHIBIT 10.13
MASTER SERVICES AGREEMENT
This MASTER SERVICES AGREEMENT ("Agreement"), is entered into effective
March , 1999 (the "Effective Date"), by and between JVWeb, Inc., a Delaware
corporation, having a principal place of business at 5444 Westheimer Road, Suite
2080, Houston, TX 77056 ("JVWeb"), and Lernout & Hauspie Speech Products,
S.A./N.V., a corporation organized under the laws of Belgium, having a principal
place of business at Sint-Krispijnstraat 7, 8900 Ieper, Belgium ("L&H").
1. SERVICES.
(a) Work Orders.. JVWeb may wish to have L&H perform services for it as a
subcontractor from time to time in connection with services that JVWeb provides
for its customers (the "Customers"). Such services shall be documented in a Work
Order signed by authorized representatives of both parties. For purposes of this
Agreement, "Services" shall mean the services performed under a Work Order. Each
Work Order shall become part of this Agreement upon its execution by both
parties.
(b) General Nature of Services. The Services will consist of Web page design and
maintenance services and related crisis services, each as further described on
Exhibits A-C and in the applicable Work Order.
(c) Conduct of Services. All work shall be performed in a workmanlike and
professional manner to JVWeb's reasonable satisfaction, in conformity with the
applicable performance standards on Exhibit A, and in any applicable Work Order,
and any materials provided shall be free from defects in materials and
workmanship. Any nonconformity with the foregoing standards shall be corrected
by L&H at its expense. All work product delivered to JVWeb or the Customer shall
be free from any and all liens or encumbrances at the time of delivery. Time is
of the essence in the performance of the Services.
(d) Commencement and Progress of Work. L&H agrees to commence the work on the
date specified in the Work Order and to perform all work diligently thereafter
to completion. Except as otherwise provided in Exhibit C or the applicable Work
Order, if, in the opinion of JVWeb, L&H is not meeting the deadlines set forth
in the Work Order, JVWeb may give L&H notice in writing allowing L&H forty-eight
(48) hours within which to supply necessary services and material described
therein to meet the Work Order deadlines. Should L&H fail or refuse to comply
with the written request, JVWeb may terminate this Agreement and/or the
applicable Work Order pursuant to the provisions in Section 6. If the Customer,
at any time, orders JVWeb to suspend work, JVWeb may order L&H to suspend work
until such time as JVWeb directs L&H to proceed. This Agreement shall remain in
effect during the period of suspension or delay and JVWeb shall not be liable to
L&H therefor. L&H waives any right to make any claim against JVWeb or Customer
for any delay in its commencement or progress, suspension or interruption in
said work, whether caused by JVWeb, Customer, governmental agencies, other
subcontractors or suppliers or any other party.
(e) Method of Performing Services. L&H will determine the method, details, and
means of performing the work to be carried out for JVWeb under each Work Order.
JVWeb shall have no right to, and shall not, control the manner or determine the
method of accomplishing such work. JVWeb may, however, require L&H's personnel
to observe at all times the security and safety policies of JVWeb or the
Customer for whom L&H is performing the Services under the applicable Work
Order. In addition, JVWeb shall be entitled to exercise a broad general power of
supervision and control over the results of work performed by L&H to ensure
satisfactory performance. This power of supervision shall include the right to
inspect, stop work, make suggestions or recommendations as to the details of the
work, and request modifications to the scope of the Work Order.
(f) Use of Subcontractors. L&H may not use any subcontractor to perform the
Services without the prior written approval of JVWeb. All such subcontractors
must agree in writing to be bound by this Agreement and L&H shall remain
responsible for all work performed by its subcontractors
(g) Assignment of Personnel. JVWeb may interview the personnel L&H assigns to
JVWeb's work. L&H personnel may also be subject to security investigation, and
may be rejected or removed from a project upon request by JVWeb, with or without
cause.
(h) Changes. No charges shall be made for any extra work or changes unless such
changes are approved in advance by an authorized representative of JVWeb. If any
change, alteration, deviation or extra work is performed, whether requested by
Customer or not, without the prior written approval by JVWeb, JVWeb shall have
no liability or responsibility for the work performed or any expenses incurred
or payments sought in connection with such change, deviation, alteration or
extra work. L&H acknowledges that this provision may not be waived orally or by
course of dealing or conduct of the parties. If a Change Order results in
reducing the amount or cost of the work described in the Work Order, JVWeb shall
be entitled to a corresponding credit in the amounts payable under the Work
Order.
(i) Reporting. The general manager of each party who is responsible for the
performance of the Services is identified on Exhibit A. In addition, each party
may designate a project manager under an individual Work Order for purposes of
reporting on the day-to-day performance of the Services. Each party shall direct
communications relating to the Services or an individual Work Order to the
appropriate designated manager of the other party. JVWeb and L&H shall develop
appropriate administrative procedures for performance of the Services and for
progress reporting.
(j) Place of Work. L&H's personnel will determine the appropriate location for
the performance of the Services. JVWeb agrees to provide reasonable access to
its facilities to permit L&H or its personnel in order to perform Services and
will use diligent efforts to obtain such consent, when required, from the
Customers.
(k) Workplace Requirements. L&H agrees to observe JVWeb's and Customer's rules
and policies relating to security of, access to, and use of the premises, and
relating to the safety and health of personnel.
(l) Loaned Materials. Any documents, tools, equipment, or other materials
supplied to L&H by JVWeb are for use in performing the Services only and must be
returned in the same condition supplied (reasonable wear and tear excepted) upon
completion or termination . L&H shall not remove from JVWeb' or Customer's
premises any property of JVWeb or Customer, including, but not limited to,
proprietary or confidential information, without the prior written consent of
JVWeb.
(m) Most Favored Customer. L&H will offer the Services to JVWeb and provide such
Services at the lowest price that L&H charges any purchaser of its services for
the same or comparable services. Not more frequently than annually and upon
reasonable advance notice, JVWeb shall have the right to audit L&H's records in
order to confirm its compliance with this provision. Such auditor shall be
independent and bound by the provisions of Section 4 (Confidential Information)
hereof and shall be reasonably acceptable to L&H. JVWeb shall be responsible for
all costs associated with said audit unless the audit discloses a breach of this
provision, in which event L&H shall be responsible for the audit costs.
(n) Exclusivity. During the term of this Agreement, L&H will perform Services in
the United States (or under agreements originating within the United States
regardless of where the Services are performed) exclusively through JVWeb. This
provision shall apply only to the Services and shall not apply to speech
recognition products or any related services offered by L&H or any of its
affiliated entities.
2. PRICES, CONSIDERATION AND PAYMENT TERMS.
(a) Prices. Attached to Exhibit A as Schedule A-1 is a list summarizing the
prices that L&H charges for its services as of the Effective Date. Except as
otherwise provided on the applicable Work Order, L&H will charge and JVWeb will
pay the prices stated on Schedule A-1 for the Services. Subject to the
limitation in Section 1(m), L&H may change the prices listed on Schedule A-1
upon not less than sixty (60) days written notice to JVWeb, provided that any
increase in prices shall not be effective with respect to any outstanding Work
Order which does not permit JVWeb to pass such increases through to its
Customer.
(b) Consideration. In consideration of the Services, JVWeb will pay L&H as
follows:
(i) General Web Page Design and Maintenance Services. With respect to any
Services other than Crisis Services which are performed in the United
States or under an agreement which originates in the United States
(regardless of where the Web site is located or where the services are
actually performed), JVWeb will pay L&H the amount specified in Schedule
A-1 to Exhibit A or the price to which the parties otherwise agree in the
individual Work Order.
(ii) Crisis Services. With respect to any Crisis Services which are performed in
the United States or under an agreement which originates in the United States
(regardless of where the Web site is located or where the services are actually
performed), JVWeb will pay L&H fifty percent (50%) of the gross revenue that
JVWeb receives for Crisis Services performed under agreements originating in the
United States (regardless of where the Web site is located or where the services
are actually performed).
(iii) Hosting Services. In addition to the compensation that L&H receives
directly in connection with the performance of the Services, JVWeb will pay L&H
fifty percent (50%) of all profits that it receives in connection with its
performance of Web site hosting services for any Customer who also receives
Services from L&H.
(c) Payment Terms.
(i) Payment by Invoice. For Services other than Crisis Services or for any
other expenses or services for which L&H claims payment, L&H will submit
invoices to JVWeb not more frequently than biweekly. Such invoices shall be
for the costs incurred since the prior invoice and shall indicate in
reasonable detail the basis for the claim for payment. Subject to Section
10 (c), payment in full for any undisputed invoice is due within thirty
(30) days of the date of such invoice.
(ii) Quarterly Payment for Crisis Services. JVWeb will make payments to L&H for
Crisis Services for which JVWeb has received revenue during each calendar
quarter within thirty (30) days after the close of such quarter. JVWeb will
include with such payment a report indicating the basis for payment in
reasonable detail such that L&H can independently calculate the amount due
for that period.
(d) Expenses. Subject to payment by JVWeb of those costs and expenses which are
made part of a Work Order, L&H shall be responsible for all costs and
expenses incident to the performance of Services, including all costs
incurred by L&H to do business.
3. TREATMENT OF L&H PERSONNEL
(a) Compensation of L&H Personnel. L&H shall be solely responsible for payment
of compensation to its personnel. L&H shall pay and report, for all personnel
assigned to JVWeb's work, federal and state income tax withholding, social
security taxes, and unemployment insurance applicable to such personnel as
employees of L&H. L&H shall bear sole responsibility for any health or
disability insurance, retirement benefits, or other welfare or pension benefits,
if any, to which such personnel may be entitled. L&H agrees to defend,
indemnify, and hold harmless JVWeb and each of its Customers, and their
respective officers, directors, employees and agents, and the administrators of
their respective benefit plans, from and against any claims, liabilities, or
expenses relating to such compensation, tax, insurance, or benefit matters;
provided that JVWeb shall (1) promptly notify L&H of each such claim when and as
it comes to JVWeb's attention; (2) cooperate with L&H in the defense and
resolution of such claim; and (3) not settle or otherwise dispose of such claim
without L&H's prior written consent, such consent not to be unreasonably
withheld.
(b) Workers' Compensation. Notwithstanding any other workers' compensation or
insurance policies maintained by JVWeb or its Customers, L&H shall procure
and maintain workers' compensation coverage sufficient to meet the
statutory requirements of every state in which L&H personnel are engaged in
JVWeb's work.
(c) L&H Agreements With Personnel. L&H shall obtain and maintain in effect
written agreements with each of its personnel who participate in any of
JVWeb's work under any Work Order. Such agreements shall contain terms
sufficient for L&H to comply with all provisions of this Agreement, and
shall confirm that such personnel shall have no status as employees of
JVWeb and no claim under any JVWeb benefit plan.
(d) State and Federal Taxes. As neither L&H nor its personnel are JVWeb's
employees, JVWeb shall not take any action or provide L&H's personnel with
any benefits or commitments inconsistent with any of such undertakings by
L&H. In particular, JVWeb will not (1) withhold FICA (Social Security) from
L&H's payments, (2) make state or federal unemployment insurance
contributions on behalf of L&H or its personnel, (3) withhold state and
federal income tax from payment to L&H, (4) make disability insurance
contributions on behalf of L&H, or (5) obtain workers' compensation
insurance on behalf of L&H or its personnel.
4. CONFIDENTIALITY
L&H shall maintain in strict confidence, and shall use and disclose
only as authorized by JVWeb, all JVWeb or Customer information of a
competitively sensitive or proprietary nature that it receives in connection
with the work performed for JVWeb pursuant to each Work Order. L&H shall require
its personnel to agree in writing to do likewise. JVWeb shall take reasonable
steps to identify for the benefit of L&H and its personnel any information of a
competitively sensitive or proprietary nature, including by using
confidentiality notices in written material where appropriate. These
restrictions shall not be construed to apply to (1) information generally
available to the public; (2) information released by JVWeb generally without
restriction; (3) information independently developed or acquired by L&H or its
personnel without reliance in any way on other protected information of JVWeb;
or (4) information approved for the use and disclosure of L&H or its personnel
without restriction. Notwithstanding the foregoing restrictions, L&H and its
personnel may use and disclose any information (1) to the extent required by an
order of any court or other governmental authority or (2) as necessary for it or
them to protect their interest in this Agreement, but in each case only after
JVWeb has been so notified and has had the opportunity, if possible, to obtain
reasonable protection for such information in connection with such disclosure.
5. INTELLECTUAL PROPERTY; OWNERSHIP OF WORK PRODUCT
(a) Ownership of Intellectual Property and Work Product. JVWeb, its Customers,
and L&H shall retain all ownership rights in the materials and the intellectual
property owned by each of them prior to the commencement of the Services and
nothing herein shall be construed as constituting an assignment or transfer of
such rights. With respect to any work product that L&H or its personnel develops
or creates in connection with the performance of the Services, all copyrights,
patents, trade secrets, or other intellectual property rights associated with
any ideas, concepts, techniques, inventions, processes, or works of authorship
shall belong exclusively to JVWeb or its Customers and shall, to the extent
possible, be considered a work made for hire for JVWeb within the meaning of
Title 17 of the United States Code. L&H automatically assigns, and shall cause
its personnel automatically to assign, at the time of creation of the work
product, without any requirement of further consideration, any right, title, or
interest it or they may have in such work product, including any copyrights or
other intellectual property rights pertaining thereto. Upon request of JVWeb,
L&H shall take such further actions, and shall cause its personnel to take such
further actions, including execution and delivery of instruments of conveyance,
as may be appropriate to give full and proper effect to such assignment.
(b) License to L&H Pre-Existing Works. To the extent that preexisting work or
materials owned or licensed by L&H are included in any work product, L&H
grants to JVWeb or its Customer, as applicable, an irrevocable,
nonexclusive, perpetual worldwide, royalty-free right and license to use,
execute, reproduce, display, perform, and distribute (internally and
externally) copies of, and prepare derivative works based on, such work and
materials, and the right to authorize others to do any of the foregoing.
(c) L&H Tools. Notwithstanding Section 5(a), any routines, libraries, tools,
methodologies, processes, or technologies created, adapted, or used by L&H
in its business generally, including all associated intellectual property
rights (collectively, the "Development Tools") shall be and remain the sole
property of L&H, and JVWeb or its Customers shall have no interest in or
claim to such Development Tools except as necessary to exercise its rights
in the work product. Subject to the intellectual property rights of JVWeb
and/or its Customers, nothing in this Agreement shall be construed to
preclude L&H from acquiring, developing, marketing, or enhancing for itself
or others similar technology performing the same or similar functions as
the technology used or created pursuant to this Agreement.
(d) Residual Rights of Personnel. Notwithstanding Section 5(a), L&H and its
personnel shall be free to use and employ its and their general skills,
know-how, and expertise, and to use, disclose, and employ any generalized
ideas, concepts, know-how, methods, techniques, or skills gained or learned
during the course of any assignment, so long as it or they acquire and
apply such information without disclosure of any confidential or
proprietary information of JVWeb or its Customer and without any
unauthorized use or disclosure of Work Product.
6. TERM AND TERMINATION
(a) Term. The term of this Agreement shall commence on the date set forth above
and shall continue for a minimum period of three (3) years, and thereafter
for as long as JVWeb seeks or obtains services from L&H unless either party
expressly terminates it by not less than sixty (60) days' notice to the
other party.
(b) Termination.
(i) Termination of Work Order by Customer. If a Customer requires JVWeb to
terminate the applicable Work Order without cause, it may do so upon ten
(10) days prior written notice, and in such event JVWeb shall pay to L&H
the reasonable value of L&H's prior performance, if any, up to the
termination date, which payment shall be no more than the rate specified in
the applicable Work Order prorated to reflect the percentage of work that
is completed as of the date of such termination; or, if the Work Order is
performed as a lump-sum contract, the reasonable value shall be L&H's cost
of work and materials to date, plus ten percent (10) per cent, but shall
not exceed the contracted lump sum. In the event of such termination, L&H
shall not be entitled to any payment for anticipated profits or
compensation for uncompleted portions of the work hereunder.
(ii) Termination for Breach. In addition to the foregoing, if either party
defaults in the performance of any of its material obligations under the
Agreement and the default remains uncured for a period of thirty (30) days
after receipt by such party of written notice thereof from the other party,
then the injured party, in addition to any other rights and remedies
available, may terminate the applicable Work Order and/or this Agreement at
any time by giving notice thereof in writing to the defaulting party. Any
termination by L&H of this Agreement under this Section 6(b)(iii) will be
subject to L&H's obligation to complete performance under any Work Order
where work is in progress and where L&H's cessation of work would cause
JVWeb to default under the agreement with a Customer.
(iii)Bankruptcy. Either party may terminate this Agreement in the event that the
other party files for bankruptcy or becomes an involuntary participant in a
bankruptcy proceeding, if such proceedings are not dismissed within ninety
(90) days after commencement; or such party announces that it has ceased or
intends to cease to do business.
(iv) Termination of Work Orders. JVWeb may, at its sole option, terminate any
Work Order, or any portion thereof, upon thirty (30) days' advance written
notice. Upon receipt of such notice, L&H shall advise JVWeb of the extent
to which performance has been completed through such date, and collect and
deliver to JVWeb whatever work product then exists in the manner requested
by JVWeb. L&H shall be paid for all work performed through the date of
termination.
(v) Survival of Obligations Upon Termination. In addition to any provisions
which survive termination of this Agreement in accordance with their
express terms, all provisions of this Agreement which by their nature would
be useful to the interpretation or the enforcement of rights and remedies
under this Agreement after its termination shall survive termination.
7. INDEMNITY
(a) Generally. To the fullest extent permitted by law, L&H shall defend,
indemnify and hold harmless JVWeb and the Customer (including their affiliates,
parents and subsidiaries and their agents, officers and employees) from and
against all claims, damages, loss and expenses (including attorney's fees)
arising out of or resulting from the performance or nonperformance of this
Agreement (including any Exhibit or Work Order) by L&H, including, but not
limited to, any action alleging a breach of warranty (express or implied) or
defect or negligence or poor workmanship relating to work performed by L&H, or
not performed by L&H where the work should have been performed by L&H; or
alleging failure to comply with applicable laws, regulations and ordinances,
including, without limitation, any fines, penalties or corrective measures; or
alleging that any Services or work product that L&H provides infringes any
patent, copyright, trade secret, trademark, or any other intellectual property
or proprietary right.
(b) No Limitation of Liability for Suits by Employees. In any and all claims
against JVWeb or the Customer (including their affiliates, parents and
subsidiaries and their agents, officers and employees) by L&H's direct or
indirect employees or anyone for whose acts L&H may be liable under
worker's compensation acts, disability benefit acts or other employee
benefit acts, the indemnification obligation in Section 7.1 shall not be
limited in any way with respect to the amount or type of damages,
compensation or benefits payable by or for L&H under such acts.
(c) Procedure. Upon becoming aware of any claim, action or proceeding involving
an indemnification obligation by L&H hereunder, JVWeb will promptly notify
L&H of such claim, action or proceeding and will give L&H full and complete
authority to defend and/or settle the matter. L&H shall not be responsible
for any compromise made by JVWeb without the prior written consent of L&H.
In any instance where the outcome of a claim of infringement of an
intellectual property right is a finding of infringement and the use of the
material is enjoined, or if, in the opinion of L&H, such material is likely to
become the subject of a valid claim of infringement, L&H, at its own election
and at its own expense shall (a) procure for JVWeb (or the Customer, as
applicable) the right to continue using the allegedly infringing material; (b)
modify the material so that it becomes non-infringing while still conforming
with any applicable specifications; or (c) replace such materials with
non-infringing materials which still conform with any applicable specifications.
If L&H cannot comply with any of the foregoing measures, L&H will reimburse
JVWeb for the materials in such amount as adequately compensates it.
8. ASSURANCES
(a) No Conflict. As of the Effective Date, L&H does not, and during the term of
hereof, L&H will not have any obligations to any third party that will in
any way limit or restrict its ability to perform its obligations to JVWeb
and the Customers hereunder. L&H agrees that it will not disclose to JVWeb
or any Customer, or make use in the performance of any work hereunder, any
trade secrets, or other proprietary information of any third party, unless
L&H may do so without L&H, JVWeb, or the Customer incurring any obligation
(past or future) to such third party for such work or any future
application thereof.
(b) No Solicitation. During the term of this Agreement and for a period of six
(6) months thereafter, L&H shall not, either directly or indirectly,
solicit, entice, or persuade any employees of JVWeb or a Customer to
terminate their employment with JVWeb (or the Customer) for any reason.
(c) Customers. L&H shall not, without the prior written consent of JVWeb, at
any time during or for the period of six (6) months immediately following a
JVWeb sales lead or Customer bid proposal or the final completion of the
work resulting from a JVWeb sales lead or Customer bid proposal (whichever
is later) either on its own behalf or on behalf of any other person, firm,
company or organization directly or indirectly induce or seek to induce any
Customer or prospective Customer not to do business, or to cease doing
business under any agreement, with JVWeb.
9. LIMITATION OF LIABILITY
IN NO EVENT WILL JVWEB BE LIABLE TO L&H FOR ANY DAMAGES FOR DELAY, LOST
PROFITS, OR OTHER SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES ARISING
OUT OF OR IN CONNECTION WITH PERFORMANCE OF THIS AGREEMENT, EVEN IF IT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. The foregoing limitation of
liability includes delays that are directly the fault of the Customer or JVWeb,
or any third party.
10. RELATIONSHIP OF AGREEMENT TO AGREEMENT WITH CUSTOMER
(a) Customer Approval of Terms. The parties recognize that Work Orders to this
Agreement are subject to the approval of the Customer of corresponding
terms in its agreement with JVWeb.
(b) Terms and Conditions of Agreement with Customer. This Agreement incorporates
by reference, where applicable, all of the requirements, representations,
obligations, remedies and liabilities that are imposed on JVWeb under its
agreement with the Customer wherever it is reasonably contemplated or necessary
for such to be imposed on L&H thereunder, including, without limitation, all
provisions with respect to warranties, termination, default, liquidated damages,
reprocurement costs, audits, delivery, performance schedules and force majeure,
as well as any other provisions set forth in the applicable Customer agreement
to the extent they relate to the services and materials to be provided
hereunder. L&H further agrees to abide by the requirements, make the
representations and accept the obligations, remedies and liabilities that are
imposed on JVWeb under such Customer agreement, where it is contemplated or
necessary for such to be imposed on a L&H thereunder. The applicable provisions
shall be set forth in the Work Order.
(c) Payment Conditioned Upon Receipt of Revenue. Notwithstanding the obligation
of the Customer to pay JVWeb for Services under the Customer Agreement,
under no circumstance shall JVWeb be obligated to pay L&H for such Services
until it receives payment from Customer therefor.
11. DISPUTE RESOLUTION
(a) Generally. The parties desire to resolve certain disputes, controversies and
claims arising out of this Agreement without litigation. Accordingly, except in
the case of (i) a dispute, controversy or claim relating to a breach or alleged
breach on the part of either party of the provisions of Section 5, (ii) a suit,
action or proceeding to compel L&H to comply with its obligations to indemnify
JVWeb pursuant to Section 7 of this Agreement or (iii) a suit, action or
proceeding to compel either party to comply with the dispute resolution
procedures set forth in this Section 11, the parties agree to use the following
alternative procedure as their sole remedy with respect to any dispute,
controversy or claim arising out of or relating to this Agreement or its breach.
The term "Arbitrable Dispute" means any dispute, controversy or claim to be
resolved in accordance with the dispute resolution procedure specified in this
Section 11.
(b) Informal Resolution. At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Arbitrable Dispute arising under this Agreement. The
parties intend that these negotiations be conducted by nonlawyer, business
representatives. The discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may utilize other
alternative dispute resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the representatives for
purposes of these negotiations shall be treated as confidential information
developed for purposes of settlement, shall be exempt from discovery and
production, and shall not be admissible in the arbitration described below or in
any lawsuit without the concurrence of all parties. Documents identified in or
provided with such communications, which are not prepared for purposes of the
negotiations, are not so exempted and may, if otherwise admissible, be admitted
in evidence in the arbitration or lawsuit.
(c) Arbitration. If the negotiations do not resolve the Arbitrable Dispute
within sixty (60) days of the initial written request, the Arbitrable Dispute
shall be submitted to binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association presided over by a single arbitrator
selected pursuant to those rules. A party may demand such arbitration, in
accordance with the procedures set out in those rules, at the office of the
American Arbitration Association closest to the other party. Discovery shall be
controlled by the arbitrator and shall be permitted to the extent set out in
this Section. Each party may submit in writing to a party, and that party shall
so respond, to a maximum of any combination of thirty-five (35) (none of which
may have subparts) of the following: interrogatories, demands to produce
documents and requests for admission. Each party is also entitled to take the
oral deposition of up to two (2) individuals of another party. Additional
discovery may be permitted upon mutual agreement of the parties. The arbitration
hearing shall be commenced within sixty (60) days of the demand for arbitration
and the arbitration shall be held in a mutually acceptable location. The
arbitrator shall control the scheduling so as to process the matter
expeditiously. The parties may submit written briefs. The arbitrator shall rule
on the Arbitrable Dispute by issuing a written opinion within thirty (30) days
after the close of hearings. The times specified in this Section may be extended
upon mutual agreement of the parties or by the arbitrator upon a showing of good
cause. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction.
(d) Costs. Each party shall bear its own cost of these procedures. A party
seeking discovery shall reimburse the responding party the cost of production of
documents (to include search time and reproduction time costs). The parties
shall equally share the fees of the arbitration and the arbitrator. The
arbitrator may award attorneys' fees to the prevailing party as set forth in
Section 12 (l).
12. GENERAL PROVISIONS
(a) Entire Agreement of the Parties. This Agreement supersedes any and all
agreements, either oral or written, between the parties hereto with respect
to the subject matter hereof and contains all the covenants and agreements
between the parties with respect thereto. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been made by any party, or anyone acting on
behalf of any party, that are not embodied herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be
valid or binding. Any modification of or amendment to this Agreement will
be effective only if it is in writing signed by both parties.
(b) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the United States of America and the State of
Texas as applied to agreements entered into and fully performed therein by
residents thereof. The parties hereby exclude the applicability of the
United Nations Convention on Contracts for the International Sale of Goods.
(c) Jurisdiction and Venue. L&H hereby submits to the binding jurisdiction of
the courts of the State of Texas and the federal courts having jurisdiction
over Texas for any dispute arising under this Agreement which may be
adjudicated in a court of law pursuant to Section 11 hereof and agrees that
it will not object to venue for any such action in Houston, Texas.
(d) Order of Precedence. To the extent practicable, this Agreement and any Work
Order relating to it are to be construed as supplementing one another.
Where a conflict arises which may only be resolved by giving precedence to
one document, the Work Order will govern as to performance of the parties
under that Work Order.
(e) Subcontracting and Assignment. L&H agrees that it will not subcontract or
assign any of the work hereunder without submitting the identity of such
subcontractor to JVWeb and without obtaining the prior written approval of
JVWeb thereto. Subject to the foregoing restrictions, the provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
heirs, executors, administrators, successors and assigns of each party
hereto. Any subcontract by L&H shall include and incorporate all of the
provisions of this Agreement and any applicable Work Order and the parties
thereto shall agree to be bound by such provisions.
(f) Relationship. L&H is an independent contractor of JVWeb under this
Agreement, and nothing contained in this Agreement will be construed to (a) give
either party the power to direct and control the day-to-day activities of the
other, or (b) constitute the parties as partners, joint venturers, co-owners, or
otherwise as participants in a joint or common undertaking. L&H, its agents and
employees, will have no power or authority to certify, represent, act on behalf
of, bind, or otherwise create or assume any obligation on behalf of JVWeb for
any purpose whatsoever. L&H may not make any representations or certifications
to any governmental body concerning the status of JVWeb. Any representations and
certifications made by L&H shall be solely concerning the status of L&H. All
financial obligations associated with L&H's business are the responsibility of
L&H. All agreements between L&H and its customers are L&H's exclusive
responsibility. L&H will be solely responsible for, and will indemnify and hold
JVWeb free and harmless from, any and all claims, damages or lawsuits arising
out of the acts of L&H, its employees, servants, agents, or any of them.
(g) Severability and Waiver. The partial or complete invalidity of one of more
provisions of this Agreement or the Work Orders to be performed hereunder
shall not affect the validity or continuing force and effect of any other
provision. The failure of either party to insist, in any one or more
instances, upon the performance of any of the terms, covenants or
conditions of this Agreement, or to exercise any right herein, shall not be
construed as a waiver or relinquishment of such term, covenant, condition
or right as respects further performance.
(h) Legal Compliance and Approvals. L&H shall perform its obligations hereunder
in compliance with all applicable city, county, state and federal
ordinances, codes, rules, laws, regulations and requirements. L&H is
responsible for understanding and complying with all applicable codes and
ordinances and complying with other requirements of city and county
agencies and departments.
(i) No Discrimination. L&H agrees that in the performance of this Agreement it
will not discriminate or permit discrimination against any person or group
of persons on the grounds of sex, race, color, religion, or natural origin
in any manner prohibited by the laws of the United States.
(j) Construction of Agreement. This Agreement is the product of negotiation by
the parties and their attorneys and shall not be construed against either
party as the drafting party.
(k) Notices. All notices, authorizations, and requests in connection with this
Agreement shall be deemed given (i) five (5) business days after they are
deposited with the local national mail of the sender, first-class postage
prepaid; or (ii) the three (3) business day after they are sent by air
express courier; and addressed as follows:
<TABLE>
<CAPTION>
JVWeb: L&H:
<S> <C> <C>
JVWeb, Inc. Lernout & Hauspie Speech Products, S.A./N.V.
5444 Westheimer Road Sint-Krispijnstraat 7
Suite 2080 8900 Ieper, Belgium
Houston, TX 77056 Attention: Douglas Imre
Attention: Gregory J. Micek, President
With a copy to: With a copy to:
Lernout & Hauspie Speech Products, S.A./N.V.
Sint-Krispijnstraat 7
8900 Ieper, Belgium
Attention: Robert Wooliams
</TABLE>
or to such other address as a party may subsequently designate in writing.
(l) Public Announcements. Neither party shall make public information
concerning the existence of this Agreement or any Work Order hereunder
through press releases or other disclosures without the prior review and
written consent of the other party, which consent shall not be unreasonably
withheld. The terms of this Agreement shall at all times remain
confidential.
(m) Attorneys' Fees. In the event of a dispute arising out of this Agreement,
the prevailing party shall be entitled to recover its attorneys' fees.
(n) Insurance. L&H shall at its own expense effect and maintain for the
duration of the Agreement such insurance as required by any applicable law
and as appropriate in respect of its obligations under the Agreement. Such
insurance shall include third party liability insurance and, where
appropriate, professional indemnity insurance, each with an indemnity limit
of not less than $1,000,000 for each and every claim.
(o) Continued Performance During Disputes. In the event of any controversy as
to the duties and rights of the parties under this Agreement, or under any
change order or order for additional work issued by JVWeb, L&H shall
continue work, and shall complete work under any Work Order then in
progress.
(p) Force Majeure. Neither party will be liable for any failure or delay in
performing any of its obligations under the Agreement that is due to causes
beyond its reasonable control, such as acts of God, the public enemy, war,
strikes, or walk-outs, except that L&H is not excused for any default or
delay resulting from a strike or walk-out against L&H as a member of an
employees association or as a result of area wide bargaining and is not
excused for delays resulting from weather conditions that can be normally
anticipated for the area and time of year.
(q) Parties in Interest. This Agreement is enforceable only by L&H and JVWeb.
The terms of this Agreement are not a contract or assurance regarding
compensation, continued employment, or benefit of any kind to any of L&H's
personnel assigned to JVWeb's work, or any beneficiary of any such
personnel, and no such personnel, or any beneficiary thereof, shall be a
third-party beneficiary under or pursuant to the terms of this Agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the Effective Date.
JV WEB, INC. LERNOUT & HAUSPIE SPEECH PRODUCTS, S.A./N..V.
Greg J. Micek, President
Name
Title
<PAGE>
EXHIBIT A
1. Services. L&H shall provide the following services to the Customers: (a)
General Web Page Design and Maintenance Services. The Web page design and
maintenance services shall include, without limitation, services relating to
business information consultancy, Web page design, implementation, testing,
management, and maintenance, as further described in Exhibit B. (b) Crisis
Services. The Crisis services shall include 24/7 crisis response to Web site
errors meeting the performance and response standards set forth on Exhibit C. 2.
General Performance Specifications. In addition to any other specifications set
forth in the Agreement or under an applicable Work Order, all L&H work product
delivered to JVWeb or the Customer shall meet the following requirements: (a)
The work product, as incorporated into JVWeb's or the Customer's materials, as
applicable, will be fully compatible (without modification, loss of performance,
loss of use, or work or expense on the part of JVWeb) with changes to inputs,
outputs, data or other Information in relation to dates arising in the year 2000
and beyond; and (b) The work product will continue to be free of defects
appearing one hundred eighty (180) days of its acceptance arising from faulty
design, workmanship, materials or L&H negligence; and (c) L&H shall have taken
all reasonable steps in the preparation and delivery of the work product to
ensure that the work product is not infected by viruses, including, without
limitation, testing the work product using the latest commercially available
detection software to test the Deliverables and any updates for viruses. For the
purposes of this paragraph "viruses" shall include "logic-bombs" as they may be
generally understood within the computing industry from time to time. 3.
Managers. (a) JVWeb:
[insert contact information here.]
(b) L&H:
[insert contact information here.]
4. L&H Prices. L&H prices are attached hereto as Schedule A-1.
<PAGE>
EXHIBIT B
- --------------------------------------------------------------------------------
L&H Bidding and Proposal Procedures
- --------------------------------------------------------------------------------
================================================================================
L&H Reference:
================================================================================
Prepared by L&H
Date 13 October 1999
Contact Bob Woolliams
Tel: 01473 623232
This document and any information or descriptive matter set out herein is the
confidential and copyright property of L&Hn S.A.C. (a wholly owned subsidiary of
L&H), and must not be loaned, copied, or used for tendering or any other purpose
without prior written permission. (C)
<PAGE>
(C) Lernout & Hauspie 1 Exhibit B, page 1 c:\my
documents\word\jvw\10k699\l&hagt.doc
Exhibit B, page 1
c:\my documents\word\jvw\10k699\l&hagt.doc
<TABLE>
<S> <C>
1. Executive Summary.................................................................................2
2. Phase 1 -Business Information Consultancy.........................................................3
3. Phase 2 -design and build.........................................................................8
4. Site marketing and launch.........................................................................9
5. Site management..................................................................................10
6. Costing..........................................................................................11
7. Commercial.......................................................................................12
</TABLE>
Executive Summary
This section would define the identified requirements of the client,
the solution recommended by L&H, and purpose of the proposal, including
a brief outline of the two phases (see below).
Phase 1 - Business Information Consultancy
The purpose of the business information consultancy varies according to
the scale of the project: where a client needs to place very specific
information on-line, it would consist simply of a functional
requirement capture. Where the project is larger and broader in nature,
it could include a full range of business information audit activities.
In all cases the deliverables from Phase 1 will be used to develop a
detailed scope of supply for Phase 2. Any prices supplied to the client
for design and build during Phase 1 would be estimated prices.
Define audiences, internal and external
The purpose of this activity is to establish who the web-site is aimed
at, and how the needs of the target audience will affect the look and
feel, functionality and navigation structure.
This phase would also be used to determine if the web-site was required
in more than one language, and if so, how the multi-lingual elements of
the project would be handled.
The deliverable would be a brief, summary report, outlining L&H's
understanding of the site's audiences and any multilingual issues. L&H
would then request that the client sign off the report, to confirm that
L&H's understanding of these issues was correct and complete.
Develop branding - look and feel
The purpose of this activity is to establish the graphical identity
that should be created for the web-site. It includes gaining an
understanding of the client's brand identity and corporate style, or,
where no brand exists, identifying the work that is required to create
a brand on behalf of the client.
Once an understanding of brand has been gained, L&H would normally
produce concept visuals, demonstrating the proposed colour scheme, look
and feel, use of imagery, etc. L&H would ask that the concept visuals
be signed off before the project progresses. While some minor design
changes are inevitable following the sign off, the client's signature
indicates an acceptance of the general look and feel.
Define roles and responsibilities
The purpose of defining roles and responsibilities is to ensure that
when development work starts, key roles have been identified. These may
include the client, the client's representative on technical matters,
and members of the company that own particular types of information
(such as sales information, marketing information, etc.).
It will also include defining the roles of the L&H project team - this
would be especially important where the project was being developed in
multiple offices, or if the project was being developed in conjunction
with a strategic partner.
The ultimate objective would be to ensure that all parties involved in
the project understand who has ownership of what development processes.
This allows effective project management. The deliverable from this
would be a contact details list, for distribution to client staff and
L&H personnel. It would briefly summarise the roles of all designated
contacts, their areas of special responsibilities, and for L&H
contacts, escalation procedures for dealing with any problems.
Develop publishing model
The objective here is to define how the roles defined above interact
with each other. The result should be a publishing model (a diagram
depicting a process) that allows both rapid publishing of information,
and appropriate oversight for the client and the L&H project manager.
This diagram would be delivered in conjunction with the contact list
that is a deliverable of the `Defining roles and responsibilities'
stage. The client would be asked to sign-off both items to indicate
their acceptance of the process and the roles of individuals involved.
Audit content
The objective of this exercise is to establish how much information the
client wishes to publish on the web-site initially, and how much of
this information needs to be created / converted from legacy data or
paper. The total quantity of content being published has an obvious
influence on the price.
Facts that should be ascertained include:
o Total quantity of content
o How much of that content is in existence
o What form existing content is available in
o What content has to be created
o What content has to be converted from legacy data / paper
o Whether the client requires assistance in creating that content
The deliverable from this phase is a register of available content and
content to be created. This content register will act as an important
document for tracking the progress of the project in Phase 2.
The client will be asked to sign off the content asset register
content creation register, including the assessment of the total
quantity of content to be included in the site.
Develop information structure - define navigation
The information and navigation structure can be developed following the
assessment of the quantity of information that will be published on the
site, and sign-off of look and feel.
The structure will be influenced by the audiences identified for the
site, and the content identified for the site. The deliverable from
this stage would be a diagram illustrating the way information would be
structured within the site, and how users would move from one section
to another. The diagram would also indicate what quantities of
information would be included within each section of the web-site.
The client would then be requested to sign-off the site structure
diagrams.
Develop functional specification
There are two crucial technical aspects of developing a web project:
o Functional specification - this defines what the web-site will do (its
functionality)
o Technical specification - this defines how the defined functionality
will be achieved
In order to develop the functional specification, L&H would work with
the client to answer a series of questions, covering all aspects of
web-site functionality. These would cover a wide variety of issues,
including:
o Target web-browsers (if any)
o Target screen resolution (if any)
o Multimedia functionality required (if any)
o E-commerce functionality required (if any)
o Dynamic publishing functionality required (if any)
o Database integration functionality required (if any)
o What editor the client wishes to use to edit the site following delivery, if
any (e.g. FrontPage, etc.)
o What feedback functionality is required, if any (e.g. forms, forums,
etc.)
o What search functionality is required (if any)
o Any other functionality that the client requires or technologies that they
would like to see used - this could cover anything from digital
certificates or streaming media to integration with legacy database
systems.
When all of this information had been gathered, L&H would ask the
client to sign-off the functional specification - this would be a brief
description of what the web-site will do, complete with a listing of
all functional information gathered. Client acceptance of the
functional specification will allow L&H to develop a technical
specification (see below).
L&H would of course provide all assistance to the client in determining
the functional specification, explaining or demonstrating any and all
issues that might prove problematic.
Technical specification
The technical specification for the web-site is an internal document
for use by L&H. The technical specification will be designed to best
achieve the desired functionality, using the best and most appropriate
technologies.
The technical specification will be available for the client to see at
any time.
Develop project plan
A project plan will be developed, identifying the major stages of the
development, key project dependencies, milestones and sign-off points,
and predicting a finish date for the project based on an assumed
start-date.
The client will be asked to sign-off the project plan, indicating their
acceptance of the timescales, project elements and project dependencies
involved in developing the project.
The client will be asked to sign off on project deliverables as they
are delivered, so that the project can move to the next phase.
Fixed price costing for build and implementation
Following the completion of all appropriate elements for Phase 1, L&H
would be in a position to submit a detailed specification for Phase 2.
This would be developed into a proposal for the client that included a
fixed price and a detailed scope of supply for the project.
Phase 2 - design and build
Creation of shell and graphics
The Phase 1 exercise should have broadly identified the number of page
types that will be required (e.g. home page, first level page, second
level page, etc.). HTML shells will be created for each of these page
types.
This will demonstrate the proposed look and feel for the site (use of
graphics and icons, etc.), how the pages will look and how the
navigation will work.
These shells will be made available to the client for comments, and
when all design and navigation change requests have been incorporated,
the client will be asked to sign them off. Significant changes
subsequent to this sign-off would be considered a variation of the
project.
Integration of content
When the HTML page-types for the web-site have been signed off, they
can be populated with the content that has been provided by the client.
This includes all page information, associated documents, PDFs, etc.
L&H will incorporate all supplied content into the HTML shells, and
incorporate all graphics and downloadable files.
Site testing against target specification
L&H will test the system against the target specification defined in
Phase 1. This will include testing the system in all specified browsers
and screen resolutions.
When the system has been fully tested, and any elements of the system
that fail to meet the functional specification have been amended, the
client will be asked to sign off the system, indicating their
acceptance of the system.
Following sign-off, the system would be covered by L&H's standard
28-day warranty, during which period minor errors or technical problems
would be fixed by L&H (this would not include the addition of any new
content or extra functionality).
Site marketing and launch
L&H would offer a variety of site marketing and launch support
activities to a client:
Registration with search engines
L&H would offer to register the site with Internet search engines and
directories. To take advantage of this, the client would be asked to
submit keywords, a brief company description and contact details for
the client that would be used when registering the site. The client
would be asked to sign-off these details, and to indicate their
understanding that L&H could in no way guarantee the subsequent
performance of the search engines with regard to the web-site in
question.
This activity could be included within the scope of the Phase 2
proposal, or submitted to the client as a separate, costed proposal.
PR and promotion
L&H have the capability to provide various types of support to
companies launching a web-site. This could include advice on public
relations and ways of promoting the web-site, provision of printed
design materials for employees or customers, or design of
banner-adverts for deployment on the World Wide Web.
These activities could be included within the scope of the Phase 2
proposal, or submitted to the client as a separate, costed proposal. In
either case, they would be properly scoped and costed, in terms of
deliverables or hours of effort, and a mechanism would be included to
record customer acceptance once the work had been carried out.
Site management
L&H have the capability to take full responsibility for the
administration of the web-site following delivery, including:
o Updating and amending the site
o Archiving of material on the site
o Dealing with site design and management related queries generated from
the site
o Dissemination of weekly statistics concerning site use, etc.
Should the client require L&H to maintain the web-site, L&H would
normally define the expectations, responsibilities, response times and
charges involved in the maintenance and support of the web-site in a
separate, costed Service Level Agreement, following the completion of
Phase 2 of the project (see Appendix A).
This Service Level Agreement would define procedures for publishing on
the web-site, and the roles and responsibilities of the client and L&H.
It would also define what site usage statistics the client required,
how frequently these were to be generated and what format they would be
presented to the client in. L&H's charges for the complete range of
services would be presented, and if L&H personnel were to work on
client premises, all issues pertaining to that situation would be
considered, and arrangements agreed.
The client would be asked to sign-off the Service Level Agreement
before site maintenance could begin.
Costing
L&H are happy to break down all charges for the purposes of its
clients. The breakdown can include:
o How personnel resources have been allocated for the project
o Daily or hourly rates for different types of personnel
o Materials expenditure anticipated for a project
o Costs by phase
o Costs by activity
o Overtime rates where applicable
How these costs would be broken down in an individual proposal would
normally depend on the nature of the project.
Commercial
Intellectual Property
Subject to any pre-existing third party rights the intellectual
property rights in any project would normally vest with the client.
Validity
Proposals are normally valid for a period of 28 days from the date of
the proposal.
Variance
L&H reserve the right to submit a variation request if the scope of the
work, as outlined in the proposal, changes.
Part Invoicing
L&H reserve the right to invoice on a monthly basis for completed
elements of any proposed project.
<PAGE>
EXHIBIT C
CRISIS SERVICES
Performance and response standards. [To be added]
EXHIBIT 10.14
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as
of this the 12th day of April, 1999 ("effective date") by and between AMP3.COM,
LLC, a Texas limited liability company (the "Company"), and JVWeb, Inc. a
Delaware corporation ("JVWeb").
Recitals:
WHEREAS, the Company desires to issue and sell to JVWeb shares
representing a five percent (5%) membership interest in the Company at the time
of issue ("Interest") in consideration and exchange for an aggregate of 200,000
shares ("Shares") of $.01 par value common stock of JVWeb ("Common Stock"), and
JVWeb desires to acquire the Company Interest in exchange for issuance of the
Shares by JVWeb, upon the terms, provisions and conditions set forth herein; and
WHEREAS, the Company and JVWeb desire to set forth in writing the
terms, provisions and conditions pertaining to the sale and issuance of Units to
JVWeb and the exchange and issuance of the Shares to the Company;
Agreement:
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and other good and valuable consideration (the receipt, adequacy and
sufficiency of which are hereby acknowledged by each of the parties hereto),
each of the Company and JVWeb hereby agrees as follows:
1. The Exchange. Subject to the terms and conditions of this Agreement,
at the Closing (i) the Company shall issue and sell the Interest to JVWeb, and
JVWeb shall purchase and accept the Interest from the Company; and (ii) in
consideration and exchange for the Interest JVWeb shall issue and sell the
Shares to the Company, and the Company shall purchase and accept the Shares from
JVWeb.
2. Closing. The purchase, sale and exchange of the Interest and the
Shares, respectively, shall take place simultaneously with the execution of this
Agreement at the offices of J. Rolfe Johnson, P.C., 1900 West Loop South, Suite
1174, Houston, Texas 77027, at 10:00 am. local time, on April ___, 1999, or at
such other time and place as the Company and JVWeb shall mutually agree (which
time and place are referred to in this Agreement as the "Closing"). At the
Closing, the Company shall deliver, or cause to be delivered, duly executed by
the Company, to JVWeb the following:
(a) This Agreement; and
(b) A certificate evidencing the Interest in the name of
JVWeb; and JVWeb shall deliver, or cause to be
delivered, duly executed as appropriate, to the
Company the following:
(a) This Agreement;
(b) A stock certificate evidencing the Shares in the name
of the Company; and
(c) An amendment to or counterpart of the Regulations of
the Company.
3. General Representations and Warranties.
(a) JVWeb hereby represents and warrants to the Company that
JVWeb has been duly organized, is validly existing and is in good standing in
the jurisdiction in which it was incorporated; JVWeb has full right, power and
authority to execute and deliver this Agreement and all other agreements,
documents and instruments to be executed in connection herewith and perform
JVWeb's obligation hereunder and thereunder; the execution and delivery by JVWeb
of this Agreement and all other agreements, documents and instruments to be
executed by JVWeb in connection herewith have been authorized by all necessary
corporate action by JVWeb; when this Agreement and all other agreements,
documents and instruments to be executed by JVWeb in connection herewith are
executed by JVWeb and delivered to the Company, this Agreement and such other
agreements, documents and instruments will constitute the valid and binding
agreements of JVWeb enforceable against JVWeb in accordance with their
respective terms; neither the execution and delivery of this Agreement or any
other agreements, documents and instruments to be executed in connection
herewith nor the consummation of the transactions contemplated hereby or thereby
will (i) violate, conflict with or result in the breach or termination of; or
otherwise give any other contracting party the right to terminate, or constitute
a default (by way of substitution, novation or otherwise) under the terms of;
any contract to which JVWeb is a party or by which JVWeb is bound or by which
any of the assets of JVWeb is bound or affected, (ii) violate any judgment
against, or binding upon, JVWeb or upon the assets of JVWeb, (iii) result in the
creation of any lien, charge or encumbrance upon any assets of JVWeb pursuant to
the terms of any such contract, or (iv) violate any provision in the charter
documents, bylaws or any other agreement affecting the governance and control of
JVWeb; there are no actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or threatened against,
involving or affecting any of the assets of JVWeb, this Agreement, or the
transactions contemplated hereby, and there are no outstanding orders, writs,
injunctions or decrees of any court, governmental agency or arbitration tribunal
against, involving or affecting any assets of JVWeb, this Agreement, or the
transactions contemplated hereby; no consent or approval from any person on the
part of JVWeb is required in connection with the execution and delivery of this
Agreement other than board of director approval of JVWeb, which has already been
obtained; that JVWeb has delivered to the Company copies of certain documents
and reports as filed by JVWeb with the Securities and Exchange Commission
("Commission") and other disclosure documents listed and described on Exhibit A
attached hereto and made a part hereof; which together provide all material
information concerning JVWeb and do not omit any material information necessary
to make information provided not misleading; that when issued and delivered to
the Company, the Shares shall be duly authorized, validly issued, fully paid and
non-assessable Shares of Common Stock of JVWeb; and the representations and
warranties made immediately above and elsewhere herein are material to the
Company and are being relied upon by the Company in connection with its decision
to issue and sell the Interest to JVWeb pursuant to this Agreement.
(b) The Company hereby represents and warrants to JVWeb that
the Company has full right, power and authority to execute and deliver this
Agreement and all other agreements, documents and instruments to be executed by
the Company in connection herewith and perform the Company's obligation
hereunder and thereunder; the Company has been duly organized, and is validly
existing and in good standing as a limited liability company in the State of
Texas; the execution and delivery by the Company of this Agreement and all other
agreements, documents and instruments to be executed by the Company in
connection herewith have been authorized by all necessary entity action; when
this Agreement and all other agreements, documents and instruments to be
executed by the Company in connection herewith are executed by the Company and
delivered to JVWeb, this Agreement and such other agreements, documents and
instruments will constitute the valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms;
neither the execution and delivery of this Agreement or any other agreements,
documents and instruments to be executed in connection herewith nor the
consummation of the transactions contemplated hereby or thereby will (i)
violate, conflict with or result in the breach or termination of; or otherwise
give any other contracting party the right to terminate, or constitute a default
(by way of substitution, novation or otherwise) under the terms of; any contract
to which the Company is a party or by which the Company is bound or by which any
of the assets of the Company is bound or affected, (ii) violate any judgment
against, or binding upon, the Company or upon the Company's assets, (iii) result
in the creation of any lien, charge or encumbrance upon any of the Company's
assets pursuant to the terms of any such contract, or (iv) violate any provision
in the charter documents, bylaws or any other agreement affecting the governance
and control of it; there are no actions, suits, claims or legal, administrative
or arbitration proceedings or investigations pending or threatened against,
involving or affecting any of the Company's assets, this Agreement, or the
transactions contemplated hereby, and there are no outstanding orders, writs,
injunctions or decrees of any court, governmental agency or arbitration tribunal
against, involving or affecting any of the Company's assets, this Agreement, or
the transactions contemplated hereby; no consent or approval from any person is
required on the part of the Company in connection with the execution and
delivery of this Agreement other than approval by the managers and members of
the Company, which has been obtained; and when issued to JVWeb pursuant to this
Agreement, the Interest shall be duly authorized, validly issued, fully paid and
non-assessable (except as provided in the Regulations of the Company) at the
time of issue; and the representations and warranties made immediately above and
elsewhere herein are material to JVWeb and are being relied upon by JVWeb in
connection with JVWeb's decision to purchase the Interest pursuant to this
Agreement.
4. Securities Representations and Warranties.
(a) JVWeb hereby represents and warrants to the Company that
it is familiar with the business and financial condition, properties, operations
and prospects of the Company, it has been given full access to all material
information concerning the condition, properties, operations and prospects of
the Company, it has had an opportunity to ask such questions of and to receive
such information from, the Company as it has desired and to obtain any
additional information necessary to verify the accuracy of the information and
data received, and it is satisfied that there is no material information
concerning the condition, properties, operations and prospects of the Company,
of which it is unaware; JVWeb has such knowledge, skill and experience in
business, financial and investment matters so that it is capable of evaluating
the merits and risks of an acquisition of its Shares of Common Stock; JVWeb has
reviewed its financial condition and commitments and that, based on such review,
it is satisfied that it (i) has adequate means of providing for contingencies,
(ii) has no present or contemplated future need to dispose of all or any of the
Interest acquired to satisfy existing or contemplated undertakings, needs or
indebtedness, (iii) is capable of bearing the economic risk of the ownership of
the Interest to be issued to it for the indefinite future, including recognition
of any tax allocations to JVWeb as a member of the Company, and (iv) has assets
or sources of income which, taken together, are more than sufficient so that it
could bear the loss of the entire value of the Interest being issued to it;
JVWeb is acquiring the Interest solely for its own beneficial account, for
investment purposes, and not with a view to, or for resale in connection with,
any distribution of the Interest; JVWeb understands that the Interest has not
been registered under the Securities Act of 1933 (the "Act") or any state
securities laws and therefore the Interest is and shall be "restricted" under
such laws; JVWeb has not offered or sold any portion of the Interest and has no
present intention of reselling or otherwise disposing of any portion of the
Interest either currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any predetermined event or
circumstance; that there is no obligation on the part of the Company to register
the Interest except as provided herein; that there is no market for the Interest
and none is likely to develop; and that transfer of the Interest is further
restricted by the terms of the Regulations of the Company.
(b) The Company hereby represents and warrants to JVWeb that
it has been given full access to all information concerning the condition,
properties, operations and prospects of JVWeb that it has requested, it has had
an opportunity to ask such questions of and to receive such information from,
JVWeb as it has desired and to obtain any additional information necessary to
verify the accuracy of the information and data received; the Company has such
knowledge, skill and experience in business, financial and investment matters so
that it is capable of evaluating the merits and risks of an acquisition of its
shares of JVWeb Common Stock; the Company has reviewed its financial condition
and commitments and that, based on such review, it is satisfied that it (i) has
adequate means of providing for contingencies, (ii) has no present or
contemplated future need to dispose of all or any of its Shares of JVWeb Common
Stock to satisfy existing or contemplated undertakings, needs or indebtedness,
(iii) is capable of bearing the economic risk of the ownership of the Shares of
JVWeb Common Stock to be issued to it for the indefinite future, and (iv) has
assets or sources of income which, taken together, are more than sufficient so
that it could bear the loss of the entire value of the Shares of JVWeb Common
Stock being issued to it; the Company is acquiring its Shares of JVWeb Common
Stock solely for its own beneficial account, for investment purposes, and not
with a view to, or for resale in connection with, any distribution of its Shares
of JVWeb Common Stock; the Company understands that its Shares of JVWeb Common
Stock have not been registered under the Act or any state securities laws and
therefore its Shares of JVWeb Common Stock are "restricted" under such laws
until such time as they are registered; and the Company has not offered or sold
any portion of its Shares of JVWeb Common Stock and has no present intention of
reselling or otherwise disposing of any portion of its shares of JVWeb Common
Stock either currently or after the passage of a fixed or determinable period of
time or upon the occurrence or non-occurrence of any predetermined event or
circumstance (other than the registration thereof).
5. Securities Registration. The following provisions set forth the
agreement and circumstances under which each of the Company and JVWeb,
respectively (the Company and JVWeb being herein severally referred to as the
"Registrant," as the case may be), shall be required to register the Company
shares evidencing the Interest or the JVWeb Shares of Common Stock,
respectively, (the Interest and the Shares being herein severally referred to as
the "Registrable Securities," as the case may be) with the Commission under the
Act for resale ("registration") by or at the request of JVWeb or the Company, as
holder of the Securities as the case may be (herein respectively referred to as
the "Holder"):
(a) Company Registration. If at any time after the effective
date hereof, the Registrant shall determine to register any of its securities
(including any shares evidencing the membership interests of the Company or any
shares of Common Stock of JVWeb, or any other securities into which such
securities may have been or may be converted or exchanged, collectively herein
referred to as "Securities," for its own account or for the account of others
(on Form SB-2, Form S-1 or Form S-3 or any similar form of general applicability
promulgated by the Commission), other than a registration relating solely to
employee benefit plans or a Rule 145 transaction, or a registration on any
registration form which does not include substantially the same information as
would be required to be included in a registration statement covering the sale
of the Registrable Securities, the Registrant shall:
(i) Promptly give to the Holder written notice thereof; and
(ii) Use its best efforts to include in such registration (and
any necessary qualification under state securities laws
reasonably requested by the Holder), and in any underwriting
involved therein, all the Registrable Securities specified in
a written request or requests, made within twenty (20) days
after the mailing of such written notice from the Registrant,
by the Holder.
(b) Underwriting. If the registration of which the Registrant
gives notice is for a registered public offering involving an underwriting, then
the right of any Holder to registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting . Notwithstanding any other provision
of this Section, if the representative of the underwriters in good faith advises
the Registrant in writing that marketing factors require a limitation on the
number of shares to be underwritten, the representative may exclude all or part
of the Registrable Securities to be included in, the registration and
underwriting.
(c) Expenses of Registration. The expenses of registration,
including, without limitation, all registration and filing fees, printing
expenses, fees and expenses of counsel for the Registrant and the Holder, and
accountants fees incurred in connection with any registration shall be borne by
the Registrant. Holder shall bear any underwriting discounts and selling
expenses applicable to the sale of Registrable Securities of such Holder.
(d) Indemnification by Holders. The Holder shall protect,
indemnify and hold the Registrant, and its officers, directors, shareholders,
attorneys, accountants, employees, affiliates, successors and assigns, harmless
from any and all demands, claims, actions, causes of actions, lawsuits,
proceedings, investigations, judgments, losses, damages, injuries, liabilities,
obligations, expenses and costs (including costs of litigation and attorneys'
fees), arising out of or based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in or incorporated by reference into
the registration statement under which the Registrable Securities are
registered, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any material violation by the
Holder of any rule or regulation promulgated under Act applicable to the Holder
and relating to action or inaction by the Holder in connection with any such
registration; provided, however, that the liability of the Holder shall be
limited to liabilities arising solely out of a misrepresentation or alleged
misrepresentation with respect to information concerning the Holder furnished in
writing by the Holder for inclusion in the registration statement, and not
otherwise.
(e) Indemnification by Registrant. The Registrant shall
protect, indemnify and hold the Holder and its officers, directors,
shareholders, attorneys, accountants, employees, affiliates, successors and
assigns, harmless from any and all demands, claims, actions, causes of actions,
lawsuits, proceedings, investigations, judgments, losses, damages, injuries,
liabilities, obligations, expenses and costs (including costs of litigation and
attorneys' fees), arising out of or based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in or incorporated by
reference into the registration statement under which Registrable Securities are
registered, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any material violation by
Registrant of any rule or regulation promulgated under the Act applicable to
Registrant and relating to action or inaction by Registrant in connection with
any such registration; provided, however, that Registrant shall have no
liability to the Holder to the extent that any such liability shall arise solely
out of a misrepresentation or alleged misrepresentation with respect to
information concerning the Holder furnished to Registrant by the Holder for
inclusion in the registration statement.
(f) Indemnification Procedure. Promptly after receipt by an
indemnified party of notice of the threat or commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party hereunder, notify each such indemnifying party in writing
thereof, but the omission so to notify an indemnifying party shall not relieve
it from any liability which it may have to any indemnified party to the extent
that the indemnifying party is not prejudice as a result thereof In case any
such action shall be brought against any indemnified party and it shall notify
an indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison with counsel so elected; provided, however, that, if the
defendants in any such action include both an indemnified party and an
indemnifying party and the related indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be believed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred. No indemnifying party
will be subject to any liability for any settlement made without consent which
shall not be unreasonably withheld. No indemnifying party will consent to the
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim or
litigation.
(g) Registrant Reporting Obligations. With a view to making
available the benefits of certain rules and regulations of the Commission which
may at any time permit the sale of the Registrable Securities to the public
without registration, including Rule 144 promulgated under the Act, the
Registrant agrees to:
(i) Use its best efforts to facilitate the sale of
the Registrable Securities to the public, without registration under
the Act, pursuant to Rule 144 under the Act;
(ii) Use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under
the Act at all times;
(iii) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the
Registrant under the Act and the Securities Exchange Act of 1934, as
amended.
(iv) Take action to enable the Holder to utilize Form S-3
for the sale of Registrable Securities; and
(v) So long as the Holder owns any Registrable Securities to
furnish to the Holder forthwith upon request a written statement by the
Registrant as to its compliance with the reporting requirements of said
Rule 144, and of the Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Registrant, and such other
reports and documents so filed by the Registrant as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without
registration.
The Company shall not have any obligation as a Registrant pursuant to this
paragraph, unless and until after the initial registration statement has been
duly filed under the Act or the Exchange Act and the Company has otherwise
become subject to the reporting requirements referred to in this paragraph.
(h) Transfer of Registration Rights. The rights of Holder
hereunder, including the right to cause the Registrant to register Registrable
Securities granted herein, is personal to the Holder and may not be assigned or
otherwise conveyed by any Holder, without the prior written consent of the
Registrant, except to a successor in interest resulting from reorganization of
the Holder.
6. General Indemnification.
(a) All representations and warranties made herein by a party
hereto shall survive all transactions provided for or contemplated herein.
(b) The Company shall protect, indemnify and hold JVWeb, and
its officers, directors, shareholders, attorneys, accountants, employees,
affiliates, successors and assigns, harmless from any and all demands, claims,
actions, causes of actions, lawsuits, proceedings, judgments, losses, damages,
injuries, liabilities, obligations, expenses and costs (including costs of
litigation and attorneys' fees), arising from any breach of any agreement,
representation or warranty made by the Company in this Agreement.
(c) JVWeb shall protect, indemnity and hold the Company, and
its officers, directors, shareholders, attorneys, accountants, employees,
affiliates, successors and assigns, harmless from any and all demands, claims,
actions, causes of actions, lawsuits, proceedings, judgments, losses, damages,
injuries, liabilities, obligations, expenses and costs (including costs of
litigation and attorneys' fees), arising from any breach of any agreement,
representation or warranty made by JVWeb in this Agreement.
7. General.
(a) THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS VALIDITY,
INTERPRETATION, PERFORMANCE, AND ENFORCEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) Any controversy arising out of or relating to this
Agreement or any modification or extension thereof, including any claims for
breach, for damages, and/or for recision or reformation, shall be settled by
binding arbitration in Harris County, Texas according to the rules and
regulations of the American Arbitration Association, Commercial Arbitration
Rules.
(c) This Agreement contains the entire understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings, inducements, or
conditions, express or implied, oral or written, except as herein contained.
This Agreement may not be modified or amended other than by an agreement in
writing signed by all parties affected.
(d) The express terms hereof control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms
hereof. The section headings in this Agreement are for convenience only; they
form no part of this Agreement and shall not affect its interpretation.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
(f) The parties hereto hereby agree that time is of the
essence for all purposes of this Agreement.
(g) Any notices to be given hereunder by any party to the
other parties may be effected either by personal delivery in writing, or by
mail, registered or certified, postage prepaid with return receipt requested,
addressed to the one or more parties to be notified at the addresses set forth
beneath such parties' respective signatures below.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of, though not necessarily on, the effective date.
AMP3.COM, LLC, JVWeb, Inc.,
a Texas limited liability company a Delaware corporation
By:______________________________ By:________________________
Michael A. Sharp, President Greg J. Micek, President
Address: 1525 Lakeville Address: 5444 Westheimer
Suite 108 Suite 2080
Kingwood, Texas 77339 Houston, Texas 77056
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary informaiton extracted from Part I
of Form 10KSB for the year ended June 30, 1999 and is qualified in its entirety.
</LEGEND>
<CIK> 0001051902
<NAME> JVWeb, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 45724
<SECURITIES> 0
<RECEIVABLES> 50333
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 170894
<PP&E> 4390
<DEPRECIATION> 1700
<TOTAL-ASSETS> 273584
<CURRENT-LIABILITIES> 250899
<BONDS> 0
0
0
<COMMON> 93276
<OTHER-SE> (70591)
<TOTAL-LIABILITY-AND-EQUITY> 273584
<SALES> 220825
<TOTAL-REVENUES> 220825
<CGS> 53286
<TOTAL-COSTS> 53286
<OTHER-EXPENSES> 1296617
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8129
<INCOME-PRETAX> (1137207)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1137207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1137207)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
