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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
HOUSTON INTERWEB DESIGN, INC.
(Exact name of registrant as specified in its charter)
Commission file number: 000-67871
Texas 76-0532709
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1770 St. James Place, Suite 420 77056
(Address of Principal Executive Office) (Zip Code)
713-627-9494
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(Registrant's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
As of October 31, 2000 registrant had 18,265,050 shares of Common Stock
outstanding.
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HOUSTON INTERWEB DESIGN, INC.
FORM 10-QSB REPORT INDEX
10-QSB PART AND ITEM NO.
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Part I Financial Information
Item 1. Financial Statements (Unaudited)
Balance Sheet as of October 31, 2000.......................... 3
Income Statements October 31, 2000 and 1999................... 4
Statements of Cash Flows for October 31, 2000
and 1999...................................................... 5
Notes to Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 6
Part II Other Information
Item 1. Deleted....................................................... 8
Item 2. Deleted....................................................... 8
Item 3. Deleted....................................................... 8
Item 4. Deleted....................................................... 8
Item 5. Deleted....................................................... 8
Item 6. Exhibits and Reports on Form 8-K.............................. 9
Signature............................................................... 10
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HOUSTON INTERWEB DESIGN, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
31-Oct-00
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<S> <C>
ASSETS
Current Assets
Cash................................................. $ 8,977
Accounts receivable-trade............................ 103,143
Other................................................ 725
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Total Current Assets.............................. 112,845
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Furniture and Computer equipment, net of
accumulated depreciation of $35,070 ............... 50,242
Goodwill, net of accumulated amortization of
$128,090........................................... 243,750
Other................................................ 707
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TOTAL ASSETS...................................... $ 407,544
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable..................................... $ 185,065
Accrued expenses..................................... 263,146
Unearned revenue..................................... 10,575
Due to affiliates.................................... 1,041,781
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Total Current Liabilities......................... 1,500,568
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Stockholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares
authorized, no shares issued or outstanding........
Common Stock, no par value, 50,000,000 shares
authorized, and 18,265,050 shares issued and
outstanding....................................... 4,894,705
Subscription receivable.............................. (7,050)
Retained (deficit)................................... (5,980,678)
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Total Stockholders' Equity (Deficit).............. (1,093,024)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. $ 407,544
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</TABLE>
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PART I
HOUSTON INTERWEB DESIGN, INC.
INCOME STATEMENTS
<TABLE>
<CAPTION>
For Three Months
Ended October 31,
---------------------------------
2000 1999
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<S> <C> <C>
REVENUES
Affiliates.......................................................... $ - $ 142,983
Nonaffiliates....................................................... 492,699 349,041
TOTAL REVENUES................................................... 492,699 492,024
EXPENSES
Cost of Revenues.................................................... 328,869 381,588
Selling............................................................. 34,976 37,924
General and Administrative ......................................... 271,478 350,517
Depreciation and Amortization ...................................... 23,810 28,877
Interest Expense.................................................... 2,748 -
Interest (Income)................................................... (1) (665)
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TOTAL EXPENSES................................................... 661,881 798,241
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NET (LOSS)............................................................. $ (169,183) $ (306,217)
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NET LOSS PER SHARE, BASIC AND DILUTED.................................. $ (0.01) $ (0.02)
AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED.......................... 17,827,425 17,389,800
</TABLE>
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HOUSTON INTERWEB DESIGN, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For Three Months
Ended October 31,
--------------------------
2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities
Net (loss)............................................................................................ $(169,183) (306,217)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization......................................................................... 23,810 28,877
Common stock issued for services...................................................................... 56,668 424,500
Changes in:
Accounts Receivable-trade............................................................................. (48,574) (279,072)
Other current assets.................................................................................. - (330,976)
Accounts payable...................................................................................... (81,722) 35,543
Accrued expenses...................................................................................... 124,960 61,197
Customer Deposits..................................................................................... (12,048) 9,250
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Cash flows (used by) Operating Activities............................................................. (106,089) (356,897)
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Cash flow from Investing and Financing activities
Purchase of assets.................................................................................... - (64,736)
Common stock sale..................................................................................... 7,500 375,000
Short-term notes...................................................................................... 88,910 (252,084)
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Cash flows provided (used by) investing and financing activities...................................... 96,410 58,181
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Net increase in cash.................................................................................. (9,679) (298,716)
Cash Balance -- Beginning of the period............................................................... 18,655 412,614
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Cash Balance -- End of the period..................................................................... $ 8,977 113,898
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</TABLE>
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NOTE A - PRESENTATION
The unaudited consolidated financial statements of Houston Interweb Design, Inc.
have been prepared in accordance with generally accepted accounting principles
and the rules of the Securities and Exchange Commission ("SEC"), and should be
read in conjunction with the audited financial statements and note thereto
contained in the Company's latest Annual Report filed with the SEC on Form 10-
KSB. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Notes
to the financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
2000 as reported in the Form 10-KSB, have been omitted.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained herein and other information contained in this
report may be based, in part, on management's estimates, projections, plans and
judgments. As such, these are forward looking statements and involve a number of
risks and uncertainties. A number of factors, which could cause actual results
to differ significantly include: general economic conditions, competitive market
influences, technology changes, and other influences beyond the control of
management.
GENERAL
The Company recognizes revenue as services are provided, in accordance with
customer agreements. For the quarter ended October 31, 2000, approximately 70%
of the Company's total revenues were derived from three customers Enron,
National Education Association and Riverway Bank. Royalty income from software
licensing agreements is recognized as it is earned per the individual terms of
each royalty agreement, and is generally comprised of a minimum amount plus a
stated percentage of the applicable licensee's sales. The Company uses the
direct write-off method in accounting for bad debts, the results of which are
not materially different from the allowance method.
The Company accounts for property and equipment at cost with depreciation
calculated using the straight-line method over its estimated useful lives
ranging from five to ten years. When assets are retired or otherwise removed
from the accounts, any resulting gain or loss is reflected in income for the
period. The cost of maintenance and repairs is charged to expense as incurred
and significant renewals and improvements are capitalized.
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The Company utilizes the liability method in accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using anticipated tax rates and laws that will be
in effect when the differences are expected to reverse. The reliability of
deferred tax assets are evaluated annually and a valuation allowance is provided
if it is likely that the deferred tax assets will not give rise to future
benefits in the Company's tax returns.
Results of Operations
Results of operations for the period three months ended October 31, 1999
compared with the results of operations for three months ended October 31, 2000.
Revenues increased from $492,024 for the three months ended October 31, 1999
to $492,699 for the three months ended October 31, 2000.
Revenues from affiliates decreased from $142,983 for the three months ended
October 31, 1999 to $0 for the three months ended October 31, 2000. While
revenues from non-affiliates increased from $349,041 for the three months ended
October 31, 1999 to $492,699 for the three months ended October 31, 2000. The
increase of $143,657 or 41% is due to increase in third-party clients as the
company continues to grow.
Cost of Revenues decreased from $381,588 for the three months ended October
31, 1999 to $328,869 for the three months ended October 31, 2000. The decrease
of $52,719 or 13.82% is due to increased efficiency of operations.
Selling expenses decreased from $37,924 for the three months ended October 31,
1999 to $34,976 for the three months ended October 31, 2000. The decrease of
$2,948 or 7.77% is due to decrease in advertising expense.
General and administrative expenses decreased from $350,517 for the three
months ended October 31, 1999 to $271,478 for the three months ended October 31,
2000. The decrease of $79,039 or 22.55% is due to decrease in accounting fees
and salary expenses.
Depreciation and amortization decreased from $28,877 for the three months
ended October 31, 1999 to $23,810 for the three months ended October 31, 2000.
The decrease of $5,067 or 17.55% is due to decrease in goodwill amortization
associated with acquisition of Axis Technologies. In July 2000, the company re-
evaluated goodwill associated with acquisition of Axis Technologies that
resulted in a decrease of goodwill by $128,360.
Interest expense increased from $0 for the three months ended October 31, 1999
to $2,748 for the three months ended October 31, 2000. The increase is due to
increase in short-term convertible loans.
The Company had a net loss of $306,217 for the period three months ended
October 31, 1999 compared with a net loss of $169,183 for the three months ended
October 31, 2000. The decrease net loss of $137,034 or 45% was due to decrease
in salary expenses and increase in operational efficiency. Net loss per share of
common stock of $ (.02) for the three months ended October 31, 1999, compared to
$ (.01) for three months ended October 31, 2000.
The Company may in the future experience significant fluctuations in its
results of operations. Such fluctuations may result in volatility in the price
and/or value of the Company's common stock. Results of operations may fluctuate
as a result of a variety of factors, including demand for the Company's design
and creation of Internet web sites, the introduction of new products and
services, the timing of significant marketing programs, the success of reseller
and license agreements, the number and timing of the hiring of additional
personnel, competitive conditions in the industry and general economic
conditions. Shortfalls in revenues may adversely and disproportionately affect
the Company's results of operations because a high percentage of the Company's
operating expenses are relatively fixed. Accordingly, the Company believes that
period to period comparisons of results of operations should not be relied upon
as an indication of future results of
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operations. There can be no assurance that the Company will be profitable. Due
to the foregoing factors, it is likely that in one or more future periods the
Company's operating results will be below expectations.
The Company had a working capital deficit of $1,387,723 and a stockholders'
equity deficit of $1,093,024 at October 31, 2000. The company's financing
activities generated sufficient cash to meet its obligations on a timely basis
and to refinance its debt however internal cash flows are not sufficient to fund
operations internally.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2000, the Company's primary source of liquidity was
$8,977 of cash and $103,143 of accounts receivable.
Net cash used by operating activities for three months ended October 31, 1999
was $356,897 as compared to net cash used in operating activities of $106,089
for the three months ended October 31, 2000. The decrease in net cash used was
primarily attributed to improved cash collection cycle, increases in accrued
expenses and decreases in other current assets.
Net cash flow from financing and investing activities increased from $58,181
for the three months ended October 31, 1999 to $96,410 for the three months
ended October 31, 2000.
The Company's internally generated cash flows from operations have
historically been and continue to be insufficient for its cash needs. As of
October 31, 2000, the Company's sources of external and internal financing were
limited. It is not expected that the internal source of liquidity will improve
until significant net cash is provided by operating activities, and until such
time, the Company will rely upon external sources for liquidity. Until the
Company can obtain monthly sales levels of approximately $120,000 which would be
sufficient to fund current working capital needs, there is uncertainty as to the
ability of the Company to expand its business and continue its current
operations. Management believes that the Company will be able to satisfy its
cash requirements for the next 12 months. Historically, revenues have covered
costs. Management believes that projected revenues from licensees will cover
costs. There is no assurance that the current working capital will be sufficient
to cover cash requirements for the balance of the current fiscal year or to
bring the Company to a positive cash flow position. Lower than expected earnings
resulting from adverse economic conditions or otherwise, could restrict the
Company's ability to expand its business as planned, and if severe enough may
shorten the period in which the current working capital may be expected to
satisfy the Company's requirements, force curtailed operations, or cause the
Company to sell assets.
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PART II
Pursuant to the Instructions to Part II of the Form 10-QSB, Items 1 and 3-5
are omitted.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are to be filed as part of this Form 10-QSB:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
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3.1/1/ Amended and Restated Articles of Incorporation
3.2/1/ Articles of Amendment to the Articles of Incorporation
3.3/1/ By-Laws of the company
3.4/1/ Articles of Correction to the Amended and Restated Articles of
Incorporation
3.5/1/ Articles of Correction to the Articles of Amendment to the
Articles of Incorporation
4.1/1/ Form of Specimen of common stock
10.1/1/ Letter Agreement between the company and PinkMonkey.com, Inc.
10.2/1/ Software License and Marketing Agreement between the company and
Websource Media, L.L.C.
10.3/1/ Software Reseller Agreement between the company and Harry Bauge
10.4/1/ Letter Agreement between the company and Harry Bauge
10.5/1/ Agreement between the company and NetTrade Online, L.L.C.
10.6/1/ Employment Agreement between the company and Harry White
10.7/1/ Employment Agreement between the company and Richard Finn
10.8/1/ Employment Agreement between the company and Lee Magness
10.9/1/ Lease Agreement
27.1/2/ Financial Data Schedule
____________________________
/1/ Filed as an Exhibit to the company's registration statement on Form SB-2
(File No. 67871) on June 15, 1999, and herein incorporated by reference.
/2/ Filed herewith.
(b) There have been no reports filed on Form 8-K.
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SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the undersigned, thereunto duly authorized.
Houston Interweb Design, Inc.
Date: December 15, 2000 /s/ Harry L. White
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Harry L. White
President and Chief Executive Officer
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