<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
<TABLE>
<CAPTION>
FINANCIALWEB.COM, INC.
- ------------------------------------------------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter, as amended)
<S> <C>
Nevada 93-1202428
---------------------------------------------- ----------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 Park Place, Altamonte Springs, Florida 32701
---------------------------------------------- ----------------------------------------------
(Address of principal executive offices) (Zip code)
(407) 834-4443
----------------------------------------------
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered each class is to be registered
N/A N/A
---------------------------------------------- ----------------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
----------------------------------------------------------------------------------------------------------
(Title of class)
</TABLE>
<PAGE>
FINANCIALWEB.COM, INC.
FORM 10-SB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I......................................................................................... 1
ITEM 1 - DESCRIPTION OF BUSINESS............................................................... 1
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATIONS..................................................................................... 12
ITEM 3 - DESCRIPTION OF PROPERTY............................................................... 14
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 15
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.......................... 16
ITEM 6 - EXECUTIVE COMPENSATION................................................................ 19
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.................................. 20
ITEM 8 - LEGAL PROCEEDINGS..................................................................... 20
ITEM 9 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............................. 20
ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES.............................................. 21
ITEM 11 - DESCRIPTION OF SECURITIES............................................................ 22
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS............................................ 23
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS............................................ 23
ITEM 13 - FINANCIAL STATEMENTS................................................................. 25
ITEM 14 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE........................................................................... 25
ITEM 15 - FINANCIAL STATEMENTS AND EXHIBITS.................................................... 25
</TABLE>
i
<PAGE>
PART I
ITEM 1- DESCRIPTION OF BUSINESS
Corporate History
FinancialWeb.com, Inc. ("FWEB," "FinancialWeb," or the "Company") is a
publicly traded company (OTC BB: FWEB). It was originally incorporated in Utah
as Vital Technologies, Inc., in 1983, then redomiciled in the State of Nevada in
1988. The Company was inactive from 1991 through 1996. Prior to its association
with current management, the Company was known as Peppermint Park Productions,
Inc., a development stage company with no significant assets.
In March of 1997, the Company focused on the development of Internet media
publishing and communications, at which time it adopted the name Axxess, Inc.,
and elected a new management team. On January 4, 1999, the Company adopted its
current name, in order to more accurately reflect its core business.
Business and Properties
Industry Overview
The Internet is rapidly growing into a significant global medium for
communications, news, information and commerce, particularly in the United
States. An estimated 25% of U.S. households now use the Internet, which is
projected to rise to 33% in 1999 and to 66% by 2003/1/. Some 55% of the U.S.
adult population (108 million) accessed the Internet during the final three
months of 1998, up from 40% in the first three months of the year/2/.
The Internet offers advertisers the ability to target their messages and to
make changes quickly and frequently in response to market factors, current
events and consumer feedback. Ad effectiveness is measured by the number of
"impressions" delivered to customers and the "click-through" rate to
advertisers' web sites. This level of targetability, flexibility, and
measurability is not available through traditional print or broadcast media.
Online advertising revenue was estimated at $266.9 million in 1996, $907
million in 1997/3/, and $2.1 billion in 1998. Web ad revenue of $5.5 billion is
predicted for 1999, which represents a 161.9% increase over last year/4/. Online
ad spending is expected to reach $7.1 billion by 2002/5/, and will climb to an
estimated $15 billion by 2003/6/. Online advertising is showing significantly
stronger yearly growth than television advertising/7/, has proven to be
efficacious/8/, and continues to gain ground on print advertising, as people
move from the newspaper to the Internet for news and information. Its 240%
projected growth rate has dwarfed cable television's 15.5% growth rate/9/.
- ------------------------------
/1/ Yankee Group survey, March, 1999.
/2/ INTECO Corp. survey, January, 1999.
/3/ Fox Market Wire: "1997 a Breakthrough Year of Online Advertising", April 8,
1998, citing figures compiled by Coopers and Lybrand.
/4/ Simba Information report: "Web Advertising 1998-1999 Market Analysis and
Forecast", February, 1999 (including $2.1 billion figure for 1998); earlier
reports predicted $3.8 billion in ad revenues by the year 2000 (6th E Overview
Report of eMarketer, August, 1998). Another study by eMarketer estimates ad
revenues as follows: 1998: $1.5 billion, 1999: $2.61 billion, 2000: $4.2
billion, 2001: $6.7 billion, 2002: $8.9 billion. (CyberAtlas: Advertising:
"Increase in Ad Spending Predicted" March 25, 1999).
/5/ Supra
/6/ PC World: "Online Advertising to Increase Tenfold", August 21, 1998, citing
Forrester Research, Inc. report.
/7/ Internet Advertising Bureau, press release, April 8, 1998, citing figures
compiled by Coopers & Lybrand.
/8/ The Ipsos-ASI/AOL study of February 1999 shows that consumers are as likely
to remember an online banner ad as a television commercial; the Netratings
survey of October, 1998, concludes that "Web banner ads significantly increase
the audience reach of a product", and the February, 1999 study of online brand
loyalty by Cyber Dialogue, found that one third of consumers have changed their
perception of a brand because of online advertising.
/9/ Coopers and Lybrand report, April 1998.
1
<PAGE>
More than 38% of all U.S. financial household assets are in stocks, an
all-time high/10/. Dubbed "America's new national pastime"/11/, trading stocks
has become an online hobby for some 2.4 million American households/12/. The
number of online investors increased by 2.2 million in 1998, to more than
5.2 million/13/. The online brokerage industry as a whole accumulated
3.6 million new accounts in 1998, to end the year with 7.3 million accounts,
representing some 4.4 million investors/14/. Internet financial sites are
uniquely suited to provide on-line traders with essential information, since
print media cannot offer real-time data and broadcasters offer limited depth of
content. Many analysts believe the Internet has substantially stimulated the
recent surge in trading activity, which rose 34% in the final three months of
1998 and comprised one of every seven trades/15/.
The growing availability of online trading services and instant stock
information is allowing investors to bypass traditional stockbrokers and take
control of their own portfolios/16/. This investment population is growing/17/,
and represents a valuable demographic for potential advertisers. Online
investors have an average net worth of over $236,000, and on average have
invested more than $90,000 of their assets online/18/.
While many financial-oriented Internet sites have been developed, the
Company believes that a significant opportunity exists for an online "one-stop
shop" for investors that features unique editorial content and proprietary
analytical features, creating a targeted and demographically desirable audience
that is highly attractive to advertisers.
General Business
FWEB pursues commercial opportunities in the Internet publishing business.
The Company continues to enhance its online destination for financial
information through a network of Internet sites under the brand
"FinancialWeb(TM)." The sites provide visitors with extensive and useful
financial and investment information free of charge.
The business strategy is to gain market share by enhancing existing Company
sites, developing new Company sites, and acquiring and improving popular online
news and financial publications, market data services and related applications.
Further, the Company plans to aggressively market the content, features and
brand awareness of its products to online consumers in order to gain market
share. An easy-to-use site with strong content that is easy to download are the
core ingredients necessary to build and maintain a loyal, online audience./19/.
On March 22, 1999, FWEB entered into an agreement with Blue Hyper Media Inc. of
New York, N.Y., to redesign its site, in furtherance of its policy of close
adherence to the aforementioned criteria.
- -------------------------
/10/ Ned Davis Research report, March, 1999.
/11/ Cyber Atlas: Finance: "Online Investing Goes Mainstream", March 11, 1999.
/12/ Forrester Technographics Report, March 1999.
/13/ NFO Interactives study: "Online Brokerage Market: Consumers, Web Sites and
Competition," 2nd Edition, December , 1998.
/14/ Cyber Atlas: Finance: "More Than 5 Million Invest Online", February 11,
1999, citing Piper Jaffray research.
/15/ Bloomberg News: "One Third Increase in Online Traders", January 29, 1999,
citing a Credit Suisse First Boston Corp. report.
/16/ Survey results show that 40% of Americans who access the Internet do so to
obtain product information, 27% to obtain investment data and advice, and 14%
for online services. (Find/SVP: "US Internet Users Prefer Local Content",
September, 1997). Forty percent of the over 13 million US adults over the age
of 50 who have Internet access use it to help them make better investment
decisions. ( SeniorNet and Charles Schwab, Inc. study, October, 1998.)
/17/ In ZDNeT's Internet Trak Survey of January, 1999 5.1 million people said
they are very likely to trade stocks or bonds online, a 70% increase over the 3
million who traded during the 3 months before the survey was conducted.
/18/ See note 11.
/19/ Respondents cited high quality content (75%), ease of use (66%), quick
download time (58%) and frequent updates (54%) as the principal reasons for
returning to a web site. (Forrester Research: "Strong Content Means a Loyal
Audience", January 27, 1999).
2
<PAGE>
The Company plans to generate revenues principally through the sale of
advertising and sponsorships, and from the sale of products and services
marketed through its Internet sites. Additional revenues in the form of
licensing fees and commissions are anticipated through the sale of ancillary and
value-added products developed by the Company or by third parties.
FWEB's presence on the Internet currently consists of eighteen (18) web
sites united as a network under the domain name "www.FinancialWeb.com." In
addition to FinancialWeb.com, these sites include: "The SmallCap Investor" (TM),
"Quote Central" (TM), "Stock Detective" (TM), "Wall Street Guru" (TM), "Rapid
Research" (TM), "StockTools" (TM), "InvesToons" (TM), "NewsVest" (TM), "Mr.
EDGAR" (TM), "YourFunds.com" (TM), "Annual Reports OnLine" (TM), "Strike Price"
(TM), FinancialWeb University" (TM), "Bull Mart" (TM), "The Bear Tracker" (TM),
and "IPO Zone" (TM). Two additional sites offering financial information are
under development for inclusion in the FinancialWeb.com family. For the month
ending June 30, 1999, the sites generated 3,303,813 page views. The Company
intends to improve these sites through the expansion of editorial content and
market data features, marketing the sites to potential new users, raising
awareness of the FinancialWeb.com brand, and acquiring sites with substantial
established traffic and related content.
FWEB develops content and programs for its web sites from available data,
information and software platforms and its own proprietary technology, research
and editorial resources. The Company believes that the basic technology
platforms required to implement its business plan are readily available at cost-
effective rates due to the increasing competition among computer equipment
manufacturers, Internet service providers and local and national
telecommunications companies. Nevertheless, FWEB recognizes the need for
independence. The Company maintains its own servers and Internet connections for
data development and control purposes and will seek additional external server
and Internet connections for enhanced systems redundancy. In addition, FWEB has
developed internal software to add value to FWEB's products and services and
create proprietary assets.
As the need for future software development programming, as well as sales
and administrative support, grows in significance, FWEB believes that the hiring
and retention of talented personnel will be the key to a more successful
enterprise. In order to achieve these personnel needs, FWEB has located its
corporate headquarters and base of operations in Altamonte Springs, Florida. The
Company believes this location's proximity to Orlando, Florida, provides an
attractive source of educated personnel at competitive wages. Within a year,
FWEB anticipates increasing its staff from 24, in July 1999, to approximately
35-50 full time employees. Further, the nature of its business allows FWEB the
option of retaining or contracting for personnel in such areas as editorial,
graphic arts and programming through telecommuting.
Overview
FWEB presently operates a network of eighteen (18) Internet sites united
under the domain name "www.FinancialWeb.com." In 1998, FWEB upgraded these sites
and released FinancialWeb version 2.0, which resulted in integration of standard
navigation and design elements among all FinancialWeb sites. Management believes
this has improved cross-site traffic and enhanced the network organization of
the related financial sites, which can be generally separated into two
complementary categories: editorial and market data.
Market data include, but are not limited to, the following:
. Delayed stock, bond, options and mutual fund quotes for all U.S.
exchanges;
. Real-time stock quotes for all U.S. exchanges during market hours;
. Portfolio tracking tools for stocks and options;
. Fundamental and technical stock screening tools;
. A variety of charting features including intra-day charts, one- and
five-year charts, plus a custom charting feature which allows for
overlaying charts of up to five securities at a time;
. Mutual fund reports and fund screening tools;
. Daily earnings announcements;
3
<PAGE>
. Analyst recommendations and opinions;
. News on individual securities;
. General market news wire stories;
. Major indices;
. Industry groupings;
. Stock market gainers and losers;
. Historical stock and options price and volume data;
. Economic announcements;
. Stock splits;
. SEC filings
. IPO Data
Management believes that this collective offering of market data is
currently competitive with that offered by other leading financial sites.
Management intends to further cater to its target audience by making available
additional market data information, such as advanced portfolio tracking tools,
advanced custom charting features, stock and bond guides, commodities quotes and
charts, and insider transaction data.
The role of editorial content is considered equally important in attracting
and retaining site visitors. Unique and proprietary editorial content is often a
lightning rod for publicity and a principal attraction for branding,
distribution and syndication. FWEB provides such content through its in-house
research, reporting and editorial staff, as well as independent contractors and
contributors. FWEB's Editor-in-Chief oversees the publication of all editorial
content.
FWEB's Stock Detective (www.stockdetective.com) site illustrates the
potential of unique editorial content. Stock Detective, which publishes original
investigative reports uncovering potential securities fraud and articles
educating investors to the dangers of excessively risky and potentially
fraudulent investments, has been featured by CBNC, Smart Money, Forbes,
Money.com and CBS MarketWatch. This publicity increases awareness of
FinancialWeb.com among its target audience while enhancing its reputation among
current users. Other original content featured on other FWEB sites includes
"Daily Guru," "The 5 O'clock Shadow," "Your Funds Daily" and "Small Cap Story
Stocks" (daily columns); "Joe Knows" (weekly); and "The SmallCap Investor Stock
of the Month" and "Bear of the Month." (monthly)
To supplement its original editorial content, FWEB provides original and
reprinted or syndicated content through independent contributors on a regular
recurring basis and from time to time as special features. Regular contributors
include well-known experts Ralph Acampora, Senior Technical Analyst at
Prudential Securities; Charles Carlson, author and syndicated financial
columnist; Al Frank, editor of The Prudent Speculator newsletter; Sheldon
Jacobs, editor of The No-Load Fund Investor newsletter; and Douglas Pike,
cartoonist and financial humorist. Occasional contributors Mark Hulbert, Forbes
columnist and editor of The Hulbert Financial Digest; James Oberweis, editor of
the Oberweis Report newsletter; Lynn O'Shaughnessy, veteran mutual fund writer;
and Geraldine Weiss, publisher of the Investment Quality Trends newsletter.
FinancialWeb intends to increase its use of well-known financial columnists and
attract and retain talented editorial staff in order to increase the quantity
and quality of its original editorial content.
Over time, FWEB has successfully acquired and incorporated web sites such
as "The SmallCap Investor" and "StockTools" into its financial information
family and intends to continue such acquisitions in the future. As of this
writing, there are no plans, agreements or understandings regarding any
specifically identified acquisitions. The Company also plans to develop
additional sites to enhance its utility to its target audience. In 1999, FWEB
expects to launch several new additions to the FinancialWeb network including:
"StreetChat," a live chat and message board service; and "The Higher Yield,"
providing research and editorial commentary on bonds and other fixed-income
products.
4
<PAGE>
Individual Web Sites
--------------------
The following is a description of existing and planned web sites:
Organizational Web Site
-----------------------
FINANCIALWEB HOME PAGE (www.FinancialWeb.com)
LAUNCHED: March 1997
DESCRIPTION: The FinancialWeb home page serves primarily as a table of contents
to the various sites comprising the FinancialWeb network and to highlights new
features and editorial content to aid in the navigation of the sites. Its name
and address are designed to attract first-time visitors to the various
FinancialWeb sites and become a "bookmark" for Internet users. The domain name
was purchased by FWEB from its original registrant in 1997.
Current Web Sites Offering Market Data
--------------------------------------
STRIKE PRICE (www.strikeprice.com)
LAUNCHED: November 1998
DESCRIPTION: Presently, there are few sites on the Internet offering
comprehensive information for options investors. FWEB has developed Strike Price
to fill this gap, and believes that the site may become a leading options web
site by offering extensive options quote information, including delayed options
strings, option quotes, option portfolio monitoring and alert features, plus
original and contributed options editorial and educational information. Options
quote data is provided under agreements with North American Quotations and S&P
Comstock.
ANNUAL REPORTS ONLINE (www.AROL.com)
LAUNCHED: August 1998
DESCRIPTION: While many corporations offer their annual reports on their own
web sites and distributors will forward requested reports via the mail, Annual
Reports OnLine (AROL) provides an efficient central "hosting" location that
allows investors to quickly access several annual reports at once. AROL
reproduces the company's annual report in full with pictures, graphs and text,
and provides instant access to each company's current stock quote via FWEB's
Quote Central data engine and fundamental data via FWEB's Rapid Research web
site.
5
<PAGE>
YOURFUNDS.COM (www.yourfunds.com.)
LAUNCHED: August 1998
DESCRIPTION: A full 44% of U.S. households own mutual funds, according to a USA
Today/Gallup poll conducted in early 1999. YourFunds.com provides editorial
coverage of the mutual fund industry and a searchable database providing
detailed, comprehensive data on thousands of mutual funds. Fund data is
accessible through a variety of directory and fund screening applications on the
site. Editorial content currently includes regular columns contributed by George
Benigno, YourFunds.com editor and former research editor at Mutual Fund
Magazine; Joseph Duarte, editor of The Wall Street Detective web site; and
Sheldon Jacobs. The site was developed in-house and data content is obtained
through a non-exclusive, non-transferable and worldwide license with ValueLine
Publishing in exchange for an annual fee.
MR. EDGAR (www.mredgar.com)
LAUNCHED: April 1998
DESCRIPTION: A free alternative to accessing the SEC's EDGAR, Mr. EDGAR
provides access to SEC filings in easy-to-use, browser formatted web pages.
Content for Mr. EDGAR is provided by Parties Corporation, publisher of the
FreeEDGAR.com web site. While Mr. EDGAR is essentially a private-label version
of FreeEDGAR.com, it provides FinancialWeb with an alternative to referring
visitors away its own sites to obtain the same information.
STOCKTOOLS (www.stocktools.com)
LAUNCHED: February 1998
DESCRIPTION: StockTools was acquired from its original developer in February
1998. With nearly one-half million monthly page views, StockTools was one of the
first public web sites to provide free quote and graph pages inclusive of all
U.S. and Canadian stock exchanges. StockTools' proprietary programs include
"Graph Wizard," a stock graphing tool allowing a user to graph a security
against up to four other securities or industry groups. StockTools also offers a
free historical stock data tool as well as a portfolio management tool.
StockTools is scheduled for significant feature upgrades, including additional
advanced graphing capabilities that will compete with graphing features offered
by other stock sites. Data content is obtained through a non-exclusive license
with North American Quotations.
RAPID RESEARCH (www.rapidresearch.com)
LAUNCHED: December 1997
DESCRIPTION: Completely developed in-house by FWEB's technical staff, Rapid
Research offers two stock screening modules and detailed fundamental stock
reports for approximately 8,000 listed equity securities on all U.S. exchanges.
Each Rapid Research stock report contains over 150 points of current and
historical fundamental performance data and comparative performance data
encompassing up to five years. Each report also contains an interactive
price/volume chart with five years of data. Using Java technology, the user can
zoom in on a portion of the chart for an expanded view and can point to a data
bar for a "pop-up" view of the underlying chart values. The renewable, non-
exclusive license with Media General requires a monthly fee and continues
through September 2000 under its present terms. Rapid Research has received
favorable publicity from CNBC, the Wall Street Journal, Barron's and
TheStreet.com.
QUOTE CENTRAL (www.quotecentral.com)
LAUNCHED: April 1997
6
<PAGE>
DESCRIPTION: Quote Central provides a variety of detailed and historical stock
and index quote information and links those quotes to additional information
about each security to its charts, news, research, fundamental data and other
corresponding information on the FinancialWeb network. Delayed quotes are
available for securities listed on all U.S. and Canadian exchanges and free
real-time quotes are available during market hours for all securities listed on
the U.S. exchanges. Quote Central also provides users with free portfolio
tracking tools, symbol searching tools and comparative quote data, including
intra-day market leaders and laggards. FinancialWeb plans to integrate a new
product called "FinancialWeb Anywhere" that would include portable quote and
portfolio data to be emailed, faxed or delivered to a user's pager or other
digital communications. Quote data is provided to FWEB under agreements with
North American Quotations and S&P Comstock.
IPO-ZONE (www.ipo-zone.com)
LAUNCHED: July 1999
DESCRIPTION: FWEB's newest site is "IPO Zone", which provides timely and
comprehensive information about upcoming offerings, new issues and the progress
of recent IPOs. In addition, management plans to feature articles and columns
about IPO markets and investing in IPOs by staff writers and independent
contributors.
Current Web Sites Offering Editorial Content
--------------------------------------------
BULL MART (www.bullmart.com)
LAUNCHED: December 1998
DESCRIPTION: FWEB management believes that its visitor demographics, consistent
with the nature of the sites' content, can be characterized as having
significant disposable income. As the Internet is increasingly used as a point-
of-purchase marketplace, the Company believes BullMart can capitalize on the
purchasing power of its target audience by selling financially related goods
such as books and software. Revenues from Bull Mart sales will be derived from
commissions, markup or from gross sales for products distributed by FinancialWeb
and in cooperation with various merchandising partners. FWEB has contracted with
Amazon.com, Enews and T. Shipley for sales of books, magazines and business
accessories.
FINANCIAL WEB UNIVERSITY (www.fwuniversity.com)
LAUNCHED: September 1998
DESCRIPTION: An increasing number of consumers accessing the Internet are
relative novices to the ways of investing. Others are eager to enhance or hone
their skills. FinancialWeb University (FWU) seeks to appeal to both groups while
enhancing the attraction of every web site in the FinancialWeb family. Presently
in an early stage of development, FWU will be segregated into three categories:
an interactive glossary, the FWU's University curriculum and a question-and-
answer forum. FWU will seek contributions from leading financial analysts and
personalities to lend additional credibility and attraction to FWU. Planned
curriculum will consist of a four-tier "college" divided into freshman,
sophomore, junior and senior courses. Each course will be followed by an
interactive, on-line exam and the student's progress will be tracked through his
or her own cyber-transcript, complete with grades and a cumulative grade-point
average. Students completing the curriculum and a final exam will be awarded a
virtual diploma that can be printed from the user's browser.
NEWSVEST (www.newsvest.com)
LAUNCHED: July 1998
DESCRIPTION: While financial news sites are common, FinancialWeb integrates
such content into its existing web sites and on a separate branded site,
NewsVest.com. By integrating news to other sites and features, management
believes visitors are likely to stay longer within the FinancialWeb network,
thus increasing page views. Additionally, by having its own branded news site,
FWEB hopes to attract new users and compete for market share with established
online and off-line news distributors by offering unique or convenient features.
Raw news data is
7
<PAGE>
provided through a non-exclusive license from the Comtex Scientific Corporation
in exchange for a monthly fee.
THE BEAR TRACKER (www.beartracker.com)
LAUNCHED: February 1998
DESCRIPTION: This site offers researched editorial content targeted to investors
seeking "contrary" or short sell investment strategies. BearTracker's main
feature is a monthly article centering on a short sell evaluation of a widely
followed stock. Additional articles suggest other short sell candidates and
provide educational content about short selling. BearTracker is licensed by
FinancialWeb.com, Inc. under an agreement with its owner and editor for a
monthly fee.
INVESTOONS (www.investoons.com)
LAUNCHED: February 1998
DESCRIPTION: Launched in February 1998, FWEB has obtained an exclusive license
with Douglas Pike, for his "Doubtful Accounts" cartoon. Additional cartoons and
text-based humor, including financial parodies, jokes and related content, are
featured or being developed. The license expires on December 19, 1999.
WALL STREET GURU (www.wallstreetguru.com)
LAUNCHED: October 1997
DESCRIPTION: Wall Street Guru offers a free and searchable database of stock
recommendations from dozens of top investment analysts and editors covering
thousands of securities. Wall Street Guru also includes a daily service that
provides brokerage upgrades and downgrades, public-company earnings
announcements, market headlines and commentaries, plus regular and special
articles from well-known financial analysts and editors including Ralph
Acampora, Charles Carlson and Al Frank.
STOCK DETECTIVE (www.stockdetective.com)
LAUNCHED: May 1997
DESCRIPTION: Stock Detective is an investigative and educational news journal
featuring original content dedicated to exposing potential investment scandals
and stock fraud. The site has been featured in Money, Forbes, CNBC, Smart Money
and Worth magazines, and has become a point-of-entry for first time visitors to
the FinancialWeb network. In addition, the Stock Detective has gone offline as a
monthly column in OnLine Investor magazine.
THE SMALLCAP INVESTOR (www.smallcapinvestor.com)
LAUNCHED: December 1995.
DESCRIPTION: The SmallCap Investor is the oldest site in the FinancialWeb
network. The SmallCap Investor features comprehensive information on small- and
micro-capitalization stocks, including research, IPO information, educational
tools, a Stock of the Month selection and its own trademarked stock index called
The MicroCap50. A companion newsletter, started in April 1997, is e-mailed
weekly to over 20,000 subscribers. The newsletter adds revenues by providing
special merchandise and subscription offers to its readers. The SmallCap
Investor has been featured in articles in Individual Investor magazine and
Barron's. The SmallCap Investor site was purchased in 1997.
Ancillary Content Web Sites
---------------------------
CELEBRITY SLUG FEST (www.slugfest.com)
LAUNCHED July 1999
DESCRIPTION: An ancillary site concept used to draw visitors interested in
entertainment and games, Celebrity SlugFest features downloadable games
portraying a variety of celebrity characters which users can play against in a
simulated boxing match. Celebrity SlugFest was available online for
approximately two years and had as many as 3 million monthly page views before
it was temporarily discontinued. The site's content and domain name were
acquired by FWEB from its creator who is also developing additional financial-
theme celebrity characters for inclusion in FWEB's InvesToons Internet site.
Financial Web Sites in Development (in order of proposed development)
---------------------------------------------------------------------
8
<PAGE>
STREET CHAT (www.streetchat.com)
ESTIMATED LAUNCH: Fall 1999
DESCRIPTION: Internet discussion applications, both live "chat" and "message
boards," have proven successful in generating substantial traffic for several
web sites. However, chat rooms have become ubiquitous and many have little or no
significant activity. Nevertheless, FWEB believes it can successfully offer
discussion applications by offering access to targeted interests through its own
sites that have gained audience traffic and loyalty.
THE HIGHER YIELD (www.higheryield.com)
ESTIMATED LAUNCH: Fall 1999
DESCRIPTION: Management believes there is little information about fixed-income
securities, including corporate and municipal bonds, on the Internet. At the
same time, most off-line resources are expensive and less timely. With a large
portion of the population approaching retirement, the demand for information
about fixed-income investments is expected to increase significantly.
Alternatively, when interest rates increase or equity markets sour, investors
often turn attention to fixed-income opportunities. The Company plans to develop
Higher Yield to provide an extensive data base of bond information, including
detailed reports, quotes, screening tools, performance data and editorial and
educational content.
9
<PAGE>
Status of Publicly Announced New Products or Services
On April 7, 1999, FWEB entered into a contract with DailyStocks Inc. and
Mike Onghai to purchase the web sites known as "DailyStocks.com" and
"DailyStocks.net", with closing to take place on or about May 23, 1999. The
Seller requested a delay in closing in order to modify the transaction in
certain respects, to which the Company acceded. After failing to receive the
modification documents within a reasonable time, the Company issued a Time of
the Essence letter to the Seller, setting the closing date for July 15, 1999.
The Seller did not appear at the time and place scheduled for closing. The
Company will pursue arbitration under the Purchase Agreement and is confident
that it will prevail. (Exhibit 10.11)
Competitive Business Conditions
Because of the Internet's relative infancy, rapidly changing
characteristics and low cost of entry, significant competition exists and will
continue to exist in the area of Internet publishing. Currently, competitive
force comes from on-line networks, search engines and financial Internet
publishers. Examples of these competitors are as follows: networks (America
Online, Microsoft Network, etc.); search engines (Yahoo, Infoseek, etc.); and
financial Internet publishers (Hoover's, Wall Street City, The Wall Street
Journal Interactive, CBS MarketWatch, Motley Fool, TheStreet.com, etc.). The
Company believes some of these are as comprehensive as the FinancialWeb network
of sites, but require subscriptions and payments for certain information. FWEB
management does not presently know of any other vertically integrated Internet
publishing network of financial sites offering as much information, free of
charge, as the Company. As investors increase their use of the Internet, FWEB
believes it can draw new Internet users and acquire users from competitors.
Dependence on Outside Suppliers
One of the key components of FWEB's sites is the development of new and
proprietary products. FWEB currently licenses a portion of its data and
applications from external information vendors for redistribution. These
licensing agreements provide FWEB's web publications with sophisticated and
extensive news and market data content. By further developing its own
proprietary content, FWEB hopes to reduce its dependency on third-party
information providers while continuing to build content, circulation and
revenues.
REVENUE SOURCES
Banner Advertising.
The competition for advertising dollars is intense, but the dollars
available are growing. Jupiter Communications, a leading Internet research firm,
estimates that Web advertising in the U.S. will grow from $940 million in 1997
to over $7.6 billion by the year 2002. Ad rates for many web sites have remained
stable at $10 to $50 per 1,000 pages viewed, but significant discounting is
prevalent in the market. Because FWEB's financial content attracts a competitive
market demographic, it can generally command a higher advertising rate per ad
unit than web sites with content focused on less wealthy users. FWEB's rate of
$40 per 1,000 pages viewed has received little or no resistance from potential
or present ad buyers, but management has offered discounts in exchange for such
items as extended contracts.
OEM Products, Licensing & Redistribution.
As an Original Equipment Manufacturer (OEM) of financial content web pages
and Internet sites, FWEB believes it can increase available advertising page
inventory, enhance its brand recognition and earn revenues from creating and
hosting private label and co-branded web pages and web sites. Markets for these
products include other businesses wanting to provide financial information on
their own sites, including stock quotes, portfolio tools and other market data
and editorial content. The Company believes these businesses include, but are
not limited to, stock brokerages, mutual fund companies, insurance companies,
newspaper publishers, magazines, Internet Service providers (ISPs), universities
and libraries. Revenue models may vary, ranging from fee-only-based models to
joint ventures based on advertising revenue sharing.
E-Commerce & Subscriptions.
Analysts expect that, within seven years, as much as 10% of all retail
sales transactions will occur over the Internet. The Internet as a point-of-sale
commerce vehicle provides profit opportunity for all online publishers and
content providers. Thus, FWEB views its web sites not only as hosts for
advertisers and a source of OEM products, but also as an e-commerce portal
trafficked by hundreds of thousands of consumers with significant disposable
incomes. FWEB's initial foray into e-commerce is the creation of Bull Mart, an
online store catering specifically to the needs of consumers visiting the
FinancialWeb network of sites. FWEB hopes to develop additional e-commerce
sites or joint ventures which will take advantage of the captive audience of
consumers visiting FinancialWeb sites.
Further revenue may be earned through the distribution and sale of branded
financial information products and services to individual consumers and
businesses. Management believes such products will be necessary to meet
10
<PAGE>
the evolving needs of its target audience and will provide a means of leveraging
the brand identity of FWEB. Examples of branded products include applications of
live-streaming quotes, news and analysis that are not dissimilar to products
which are currently sold by established financial information companies. These
premium services would offer certain enhanced features to end users.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY, AGREEMENTS AND
LABOR CONTRACTS
Perhaps the singular most important and costly part of developing Internet
publications is the acquisition of content. FWEB's long-term goal is to create
increasing amounts of original, proprietary content. Currently, FWEB has several
licensing agreements with owners of copyrighted published materials to add to
the current content on the FinancialWeb web sites. These include: (1) a
Distributor Agreement with Media General Financial Services (MGFS) that grants
the Company a non-exclusive license to install, market and distribute selected
elements of MGFS's database of common stock information in exchange for monthly
fees; (2) a Distributor Agreement with North American Quotations, Inc. that
grants the Company a non-exclusive license to receive and redistribute real-time
and delayed quote data from U.S. and Canadian exchanges in exchange for monthly
royalties and fees; (3) a Distributor Agreement with S&P Comstock that grants
the Company a non-exclusive license to receive and redistribute real-time and
delayed quote data from U.S. and Canadian exchanges in exchange for monthly
fees; (4) a Distributor Agreement with Comtex Scientific Corporation that grants
the Company a non-exclusive right to market and distribute Comtex news data in
exchange for monthly fees; (5) a Distributor Agreement with ValueLine Publishing
that grants the Company a non-exclusive, non-transferable and worldwide license
to promote, distribute and market ValueLine data in exchange for an annual fee;
(6) a Content Licensing Agreement with Douglas Pike that expires December 19,
1999, and grants the Company an exclusive license to install, market and
distribute editorial content known as "Doubtful Accounts" in exchange for a
monthly royalty fee; (7) a Content Licensing Agreement with Nathaniel Cohen that
grants the Company an exclusive license to install, market and distribute
editorial content known as "Bear Tracker" in exchange for a portion of the
advertising revenues associated with his articles; and (8) a Linking Agreement
with Partes Corporation that grants the Company a non-exclusive license and
right to market and distribute Partes' SEC EDGAR data in exchange for a
licensing fee.
GOVERNMENT APPROVAL AND REGULATION
There are currently few laws or regulations specifically regulating the
Internet. However, the government is grappling with the effect of the emergence
of the Internet, and laws and regulations may be adopted in the future
addressing issues such as user privacy, pricing, usage and distribution. For
example: the Telecommunications Act sought to prohibit transmitting certain
types of information and content over the Web; the Federal Communications
Commission has been asked to regulate Internet services in a manner similar to
long distance telephone carriers and to impose access fees on these companies;
and the Securities and Exchange Commission has discussed the appropriateness of
information distributed over the Internet regarding publicly traded companies
and has discussed problems associated with chat rooms and message board services
in particular. Regulation in these and other areas could result in increased
costs of transmitting data over the Internet or the imposition of other
restrictions adversely affecting FWEB. Moreover, it may take years to determine
the extent to which existing laws relating to issues such as property ownership,
libel and personal privacy are applicable to the Internet.
RESEARCH AND DEVELOPMENT EXPENSES
FWEB does not presently budget or isolate its research and development
costs. These costs are generally included in overhead as they are attributed
principally to salary and other expenses associated with maintaining programming
personnel who spend varying amounts of time dedicated to both research and
development of new online features and applications and to the administration
and maintenance of those sites and applications.
11
<PAGE>
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAW
FWEB is not aware of any significant present or future impact on its
business due to compliance with environmental laws.
EMPLOYEES
As of June 30, 1999, FWEB employed twenty-three (23) persons, including
twenty-one (21) full-time employees; three (3) are executives of FWEB. The
Company is not a party to any material labor contract or collective bargaining
agreement. To date, FWEB has experienced no labor stoppages and management
believes that relations with employees are satisfactory.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATIONS
The following discussion contains forward-looking statements that are
subject to significant risks and uncertainties. There are several important
factors that could cause actual results to differ materially from historical
statements. The Company has sought to identify the most significant risks to its
business, but cannot predict whether or to what extent any of such risks may be
realized nor can there be any assurance that the Company has identified all
possible risks that might arise.
OVERVIEW
The Company researches, develops and publishes audio/visual, electronic
and print media. From March of 1997 to date, the Company's operating activities
have related primarily to developing its Internet products, recruiting personnel
and purchasing operating assets.
The Company has yet to achieve significant revenue and its ability to
generate significant revenue is uncertain. Further, in view of the rapidly
evolving nature of the Internet industry and a limited operating history, the
Company has little experience forecasting its revenues. Therefore, the Company
believes that period-to-period comparisons of its financial results are not
necessarily meaningful and you should not rely upon them as an indication of
future performance. To date, the Company has incurred substantial costs to
create, introduce and enhance its services, to develop content, and to grow its
business. As a result, it has incurred operating losses in each fiscal quarter
since it was formed. The Company expects operating losses and negative cash
flows to continue for the foreseeable future as it intends to significantly
increase its operating expenses to expand its business. It may also incur
additional costs and expenses related to content creation, technology, marketing
or acquisitions of businesses and technologies to respond to changes in this
rapidly changing industry. These costs could have an adverse effect on the
Company's future financial condition or operating results.
RESULTS OF OPERATIONS
NET REVENUE
Net revenues are primarily derived from the sale of advertising on the
Company's web sites. The Company earned net revenues for the fiscal years ended
December 31, 1997 and 1998 of $68,977 and $159,529, respectively. Net revenues
of $5,335 and $67,335 respectively were earned for the three months ended March
31, 1998 and March 31, 1999. The 130% increase in revenues for the annual period
ended December 31, 1998 and the 1162% increase in revenue for the three month
period ended March 31, 1999 over the comparable period in 1998 were due
primarily to increases in the number of banner and sponsorship ads placed on our
web sites. The increases were caused by an increase in the number of
advertisers, as well as increased users on the Company's Web sites and resultant
page views with advertisements contained on those pages.
The Company's advertising customers purchase advertising under short-term
contracts. They can cease advertising on short notice without penalty.
Advertising revenues would be adversely affected if the Company were unable to
renew advertising contracts with existing customers or obtain new customers. The
Company expects to continue to derive a majority of net revenues from selling
advertisements. The market for Web advertising is intensely competitive, and
advertising rates could be subject to pricing pressure in the future. If the
Company were forced to reduce its advertising rates as a result of such
competition or if it were to experience a drop in traffic for other reasons,
future revenues could be adversely affected.
The Company believes that future revenues will result largely from the sale
of advertising space on the Company's web sites, related sponsorship programs,
as well as co-branding and private labeling services.
COST OF REVENUES
12
<PAGE>
Cost of revenue primarily consists of costs related to data feeds over
telephone lines, sums paid to content providers, web site infrastructure costs,
and programming. For the fiscal years ended December 31, 1997, and 1998, the
Company incurred costs of revenues of $54,454 and $218,562, respectively. Cost
of revenues for the three months ended March 31, 1998 and 1999 were $14,669 and
$130,855, respectively. The 300% increase in costs of revenues for the annual
period ended December 31, 1998 and the 792% increase in cost of revenue for the
three month period ended March 31, 1999 over the comparable period in 1998 was
due principally to significant costs associated with the acquisition of
additional data contracted and utilized on the Company's web sites. The Company
expects that future costs of revenues will increase due to the additional
network communications lines required to accommodate increased traffic on our
sites, increased equipment and programming costs, and increased costs for
writers who contribute editorial content.
PRODUCT DEVELOPMENT EXPENSES
Product development expenses consist principally of website and other
software engineering, hardware and software expenses, certain non-recoverable
advances to editorial contributors, telecommunications and satellite feed
charges, and the cost of computer operations, including related salaries, rent,
and depreciation, that support the Company's business.
The Company began its development efforts in March 1997, incurring costs
related to software and hardware engineering, graphic design and editorial
content development of the Company's Internet sites. The Company is dependent
upon raising additional financing in order to continue or increase its product
development activities and website acquisition. The level of product development
and website acquisition that the Company pursues will be substantially impacted
by the amount of additional financing, if any, that the Company is able to
obtain.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist of executive management,
accounting, legal, and expenditures for applicable overhead costs, including
related rent, insurance, and depreciation. For the fiscal years ended December
31, 1997 and December 31, 1998, the Company incurred selling, general and
administrative expenses of $382,465 and $1,564,058 respectively. Selling,
General and Administrative expenses for the three months ended March 31, 1999
and 1998 were $196,681 and $690,751, respectively. The $1,181,593 increase
(308%) in selling, general and administrative expenses for the annual period
ended December 31, 1998 and the $494,070 increase (251%) in selling, general and
administrative expenses for the three month period ended March 31, 1999 over the
comparable period in 1998 resulted primarily from the following items: a)
$434,572 and $174,499 respective increases in payroll and payroll taxes expensed
to acquire the additional staff necessary to develop and maintain the Company's
web sites; b) $399,298 increase and $12,590 decrease, respectively, in outside
consulting fees paid for assistance in developing additional sources of
capitalization as well as assistance in developing the Company's web sites; c)
$67,233 and $205,327 increases in professional fees paid for services such as
legal fees, accounting fees and web site design fees; d) $64,846 and $11,438
increases in amortization and depreciation of the Company's substantial property
and equipment acquisitions; e) $37,249 and $21,357 increases in rent due to the
Company's leasing of additional office facilities necessitated by the increase
in personnel.
A major component of Selling, General and Administrative expenses is the
amortization of the $200,000 of prepaid consulting fees originally recorded
pursuant to a consulting services agreement dated March 8, 1997. The Company
exchanged 400,000 common shares, at the then fair market value of $.50 a share,
totaling $200,000 for consulting services. The prepaid consulting services are
amortized over the 36 month term of the agreement. Amortization of these
consulting fees amounted to $55,556 for the fiscal year ended December 31, 1997
and $66,667 for the fiscal year ended December 31, 1998. The interim financial
statements for the periods ending March 31, 1998 and March 31, 1999 include
amortization of these prepaid consulting fees amounting to $5,555 and $16,667,
respectively.
The Company is dependent upon raising additional financing in order to
continue or increase the level of sales and marketing activities from that
undertaken by the Company to date. The level of sales and marketing activities
that the Company pursues will be substantially impacted by the amount of
additional financing, if any, that the Company is able to raise. Assuming that
adequate funding is available, the Company currently intends, among other
matters, to promote its web sites through strategic alliances, external
advertising, web site direct promotion, and trade shows. The Company expects
that the costs related to such activities will consist principally of
advertising, personnel, and consulting expenses.
The Company expects general and administrative expenses to continue to
increase in absolute dollars as the Company expands its staff and incurs
additional costs related to the growth of its business.
FUTURE OUTLOOK
FWEB continues to focus on increasing market share by meeting users'
demands for a wider range of frequently updated, high quality financial
information on web sites which are easy to use and quick to download.
Meanwhile, the dissemination of financial information over the Internet has
been characterized by frequent product introductions and increased competition.
Currently, the Company's objective is to continue to grow as a competitive
force in the market by enhancing its unique, proprietary, financial content,
while at the same time improving its site design and delivery systems.
The Company expects to experience significant challenges in future periods
which may cause fluctuations in operating results due to a variety of factors,
including, but not limited to: (a) the Company's ability to create, license, and
deliver compelling financial and other content; (b) the level of traffic on the
Company's websites (c) the Company's ability to upgrade and develop its systems
and infrastructure in a timely and effective manner: (d) technical difficulties,
system downtime or telecommunications server interruption; (e) the Company's
ability to attract customers at a steady rate and maintain customer
satisfaction; (f) the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business, operations, and
infrastructure; (g) the implementation of marketing programs, key agreements and
strategic alliances; (h) the seasonality of advertising sales; (i) the success
of Company promotions and sales programs (j) the level of returns experienced by
the Company; and (k) general economic conditions and economic conditions
specific to the Internet, online commerce, and the financial industry.
FWEB's increasingly complex activities have led to the implementation of
projects designed to address factors (a) through (k), above. Since May of 1999,
the following projects have been undertaken:
1) The Company's Internet infrastructure and content development processes
have become 100% redundant, i.e., there now exists automatic rollover to a
redundant component in the event of any primary component failure. Security has
also been enhanced through the installation of a state-of-the art firewall which
prevents unauthorized access to the Company's systems by "hackers" and others.
These improvements have resulted in a higher quality system, thus providing
users with more reliable access to the Company's web sites.
2) The Company's web sites are in the advanced stage of redesign, which are
due to come online by the fall of 1999. This will provide users with sites which
are faster to download by approximately 50%, easier to navigate through the use
of a search tool, and with more streamlined and logically ordered content.
3) The Company has signed an agreement with Sprint Corp. to co-locate its
server equipment at the Sprint Advanced Network Service Center in Winter Park,
Fl. beginning September 2, 1999. This arrangement provides the Company with
the ability to quickly increase its band with capacity for the delivery of
information directly from the Internet's backbone. It eliminates several system
failure points, and reduces cost related to telephone line transmissions and in-
house monitoring personnel. The additional cost of the co-location at Sprint is
offset by the aforementioned cost reductions.
The Company expects that by the fall of 1999 it will have the ability to
provide Internet products to end users which are significantly easier to
understand and navigate, as well as faster to download. The Company will have a
bandwith capacity of over 100 million page views per month, as opposed to the
current monthly capacity of approximately 10 million page views. This will
enable the Company to increase market share into the foreseeable future, as well
as to offer co-branded and private label sites and other services to much larger
entities within the Internet information industry.
Although the Company believes that the above described advances will assist in
enabling it to compete as a provider of financial information over the Internet,
negative cash flows and operating losses are expected to continue into the
foreseeable future.
LIQUIDITY AND CAPITAL RESOURCES
The Company received $560,000 and $1,526,653 from its financing activities for
the fiscal years ended 1997 and 1998. Net cash used by operating activities for
those years was $356,672 and $1,044,413, respectively. The Company anticipates
modest increases in revenues as it continues marketing its banner advertising.
However, on going development and maintenance of its 18 web sites will
undoubtedly result in operating losses in the immediate future. The Company's
notes payable total $2,975,436. These notes will become due and payable between
December 13, 1999, and April, 2000, according to the terms of each note, unless
the note holders exercise their rights to convert any portion of their balances
to common stock pursuant to the provisions of their convertible instruments.
The Company is working with its financial advisor, Allen & Co, Incorporated, as
well as with other financial consultants to identify additional sources of
capital, and obtain funding. No specific sources have been identified regarding
funding to date.
The Company has approximately $700,000 cash on hand, which is considered
sufficient to continue current operations for at least 3 months. Cash on hand as
of March 31, 1999 totaled $442,000. Cash receipts totaling $1,475,000 have been
collected since March 31, 1999, including $125,000 of revenues and $1,350,000
pursuant to issuance of new convertible debt. Expenditures in the same period
totaled $1,230,000 including 386,000 relating to nonrecurring items such as
professional fees regarding this registration, equipment purchases, domain site
acquisitions and finders fees and $844,000 for the current business operations.
The Company's financial statements have been presented on the basis of a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$1,666,592 and $372,266 for the years ended December 31, 1998 and 1997,
respectively, and cumulative losses through March 31, 1999 amounting to
$2,829,010. At March 31, 1999 the Company has a working capital deficit of
$1,349,965. The Company's continuation as a going concern is dependent upon its
ability to obtain suitable, sufficient financing or equity investment.
Additionally, the Company will require funds to maintain and expand its sales
and marketing, research and development activities and its strategic alliances
and web site acquisitions. As indicated, management is in the process of
pursuing additional equity financing, although there is no assurance that such
efforts will be successful. Adequate funds for these and other purposes, whether
through additional equity financing, debt financing or other sources, may not be
available when needed or on terms acceptable to the Company, or may result in
significant dilution to existing stockholders. The inability to obtain
sufficient funds from operations and external sources would have a material
adverse effect on the Company's business, results of operations and financial
condition.
RISKS ASSOCIATED WITH THE YEAR 2000
The Year 2000 issue is the result of computer programs written using
two digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations,
13
<PAGE>
including, among others, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
Since the Company's systems and software are relatively new, management
does not expect Year 2000 issues related to its own internal systems to be
significant and does not anticipate that it will incur significant operating
expenses or be required to invest heavily in computer systems improvements to be
Year 2000 compliant. As the Company makes arrangements with significant
suppliers and service providers, the Company intends to determine the extent to
which the Company's interface systems may be vulnerable should those third
parties fail to address and correct their own Year 2000 issues. The Company
anticipates that this will be an ongoing process as it implements supplier and
service provider arrangements through 1999. There can be no assurance that the
systems of suppliers or other companies on which the Company relies will be
converted in a timely manner and will not have a material adverse effect on the
Company's systems. Additionally, there can be no assurance that the computer
systems necessary to maintain the viability of the Internet or any of the Web
sites that direct consumers to the Company's websites will be Year 2000
compliant. As part of the Company's Year 2000 compliance plan, the Company is
developing plans to operate its websites from different systems and/or at a
different location in the event of any significant disruption as a result of the
Year 2000 issues. The Company believes it is taking the steps necessary,
regarding Year 2000 compliance, with respect to matters within its control.
However, no assurance can be given that the Company's systems will be made Year
2000 compliant in a timely manner or that the Year 2000 problem will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
ITEM 3 - DESCRIPTION OF PROPERTY
OFFICE SPACE
FWEB leases approximately 3,700 square feet of office space at 201 Park
Place, Altamonte Springs, Florida, 32701 for $4,400 per month. The lease is for
one year, but is renewable at FWEB's option for an additional year. Currently,
the facility is adequate for the Company's operations, but Management expects
that additional facilities will be needed prior to the expiration of the lease.
OTHER
FWEB owns or leases various computer equipment, telecommunications
equipment, furniture and office machinery at its location on Altamonte Springs.
The Company has leased a 1999 Acura automobile for 24 months, expiring October
2000.
14
<PAGE>
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following individuals hold five percent (5%) or more of the
outstanding voting stock of the Company. No other individual or any group is
known to the Company to be the beneficial owner of more than five percent (5%)
if any class of the Company's voting securities.(1)
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNER CLASS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Masada I, L.P. (2) 690,385 12.65%
c/o Howard Schwartz, Esq.
Boca Corp Center
2101 Corporate Blvd. Ste. 204
Boca Raton, FL 33431
Common John J. Katsock, Jr. 1,030,374 (3) 17.05%
277 Park Avenue
27th Floor
New York, NY 10172
Common Kevin A. Lichtman (4) 907,000 16.61%
201 Park Place #321
Altamonte Springs, FL 32701
Common Glenn B. Laken (5) 980,247 15.46%
30 S. Wacker, Ste. 1606
Chicago, Il 60606
Common Frank Musolino 1,000,000 pursuant to a promissory 15.48%
1623 North Riverhills Dr. note convertible at $.50 per share
Temple Terrace, FL 33617
Common Allen & Company Incorporated (6) 979,321 pursuant to a warrant 17.94%
711 5th Avenue exercisable at $4.00 per share
New York, New York 10022
Common Hampton Venture Capital I, L..P. (7) 457,000 owned directly 8.37%
c/o FinancialWeb.com, Inc.
201 Park Pl. #321
Altamonte Springs, FL 32701
Common Cacique Partners, LP (8) 402,000 owned directly 7.37%
c/o FinancialWeb.Com, Inc.
201 Park Place
Altamonte Springs, FL 32701
Common Web Venture Capital, Inc. (9) 301,000 owned directly 5.52%
c/o FinancialWeb.com, Inc.
201 Park Pl. #321
Altamonte Springs, FL 32701
(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and
includes voting or investment power with respect to the securities. Common stock subject to options or warrants that
are currently exercisable or exercisable within 60 days are deemed to be outstanding and to be beneficially owned by
the person holding such options or warrants for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless
otherwise indicated by footnote, the persons named in the table have sole voting and sole investment power with
respect to all shares of common stock shown as beneficially owned by them, subject to applicable community property
laws. All are U.S. citizens to the best of the Company's knowledge unless otherwise indicated. Percentage of
beneficial ownership is based on shares of common stock outstanding as of June 30, 1999.
(2) Masada I, L.P. is a Delaware general partnership devoted to business consulting, whose General Partner is
International Holding Corp. Inc. (IHC), which is a Delaware holding company. The officers and director of IHC are:
Scott Augustine, Esq., President, Chairman of the Board and sole director, and Carol Bernstein, Secretary.
(3) Includes 400,000 shares issued upon the partial exercise of a warrant, 520,998 shares issuable upon exercise of
the remainder of the warrant, 62,500 shares issuable upon the conversion of certain notes payable, and 46,886 other
shares.
(4) Includes 500,000 shares owned directly, 402,000 shares controlled as general partner of Cacique Partners, LP, and
5,000 shares owned by his wife Rocio Lichtman, of which shares he disclaims beneficial ownership.
(5) Includes 100,000 shares issued upon the partial exercise of a warrant, and 880,247 shares issuable upon exercise of
the remainder of the warrant.
(6) Allen & Company Incorporated (ACI) is a New York Corporation, and is an investment banker and Broker-Dealer
registered under section 15 of the Act. Allen Holding Inc (AHI) is a Delaware Corporation, and a parent holding
company in accordance with Rule 13d-1(b) (ii) (G). The officers and directors of AIC and AHI are: Herbert A. Allen -
President, Managing Director, Director, Chief Executive Officer, Herbert A. Allen III - Vice President, Director,
Grace Allen - Director, Glenn A. Andreas III - Vice President -Elect, Eran S. Ashany - Vice President, Director,
Edmund M. Bleich - Vice President, Jay B. Bockhaus - Vice President - Elect, Denise Calvo-Silver - Vice President,
Director, Dominick J. Cantalupo - Co-Chief, Operations Officer, Vice President, Marvyn Carton - Director - Emeritus,
Gaetano J. Casillo - Chief Compliance Officer, Vice President, Toby R. Coppel - Vice President - Elect, Robert H.
Cosgriff - Chief Administrative Officer, Executive Vice President, Managing Director, Director, Richard M. Crooks,
Jr. - Director, Thalia V. Crooks - Vice President, Director, Mary L. Cullen - Vice President, Secretary, Director,
Robert A. Dean - Vice President, Director, Orin F. Devereux - Vice President, Director, Daniel Englander - Vice
President - Elect, Howard M. Felson - Assistant Secretary, Vice President, Controller, Anthony J. Ferrante -
Treasurer, Richard I. Fields - Executive Vice President, Managing Director, Director, Paul A. Gould - Executive Vice
President, Managing Director, Director, John G. Hall -Vice President, Director, George N. Jeppson - Vice President -
Elect, John H. Josephson - Vice President, Director, Clarke R. Keough - Vice President, Director, Donald R. Keough -
Chairman of the Board, Managing Director, Director, Kavsh A. Khosrowshahi - Vice President, Director, LeRoy Kim -
Vice President, Neal Kopp - Vice President, Terry Allen Kramer - Director, Irwin H. Kramer - Executive Vice
President, Director, Suzanne G. Kucera - Vice President, Director, Robert J. Kurz - Vice President, Andreas L.
Lazar - Vice President - Elect, William P. Leimkuhler -Assistant Secretary, Vice President, General Counsel, Jonathan
A. Lipton - Vice President - Elect, Dan Lufkin -Special Advisor to the Board of Directors, Executive Vice President,
Managing Director, Director, James C. Maiden, Jr. - Vice President, Terence C. McCarthy - Co-Chief Operations
Officer, Vice President, Robert C. Miller - Vice President, Director, Kenneth L. Miltonberger - Chief Technology
Officer, Terrence C. Morris - Vice President, Brian J. Murphy - Vice President, Director, Louis J. Mustacchio - Vice
President, Walter T. O'Hara, Jr. - Executive Vice President, Managing Director, Director, Christine R. Olenchalk -
Vice President, Nancy B. Peretsman - Executive Vice President, Managing Director, Director, Patrick S. Perry - Vice
President, Director, Eugene Protash - Vice President, Assistant Secretary, James W. Quinn - Director, Vice President,
James S. Rubin - Vice President - Elect, Daniel J. Sapadin - Vice President - Elect, Philip D. Scaturro - Executive
Vice President, Managing Director, Director, John A. Schneider - Executive Vice President, Managing Director,
Director, Daniel J. Selmonosky - Vice President, Director, Enrique F. Senior - Executive Vice President, Managing
Director, Director, Joseph E. Sheehan - Vice President -Elect, Stanley S. Shuman - Executive Vice President, Managing
Director, Director, John M. Simon - Executive Vice President, Managing Director, Director, Kenneth M. Siskind - Vice
President - Elect, Ian G. Smith - Vice President -Elect, Everett K. Wallace - Vice President - Elect, Dennis J.
Warfied - Vice President, Chief Information Officer, Kim M. Wieland - Executive Vice President, Managing Director,
Director, Chief Financial Officer, Edward D. Weinberger - Director.
(7) Hampton Venture Capital I, L.P. is a Delaware limited partnership whose general partner is Butch, Inc., which is a
Delaware corporation whose sole director and officer is Frances Gluck.
(8) Cacique Partners, L.P. is a Delaware limited partnership, whose general partner is Kevin Lichtman.
(9) Web Venture Capital, Inc. is a British Virgin Islands Corporation with two directors: Robert Sharp and David
Singleton, both of whom are citizens of the United Kingdom. The corporation has no officers.
</TABLE>
15
<PAGE>
(b) The following includes beneficial ownership information as of June 30,
1999 for all current executive officers and directors and all who served as
directors or executive officers in 1997 and 1998. Tabular information is
provided for outstanding securities plus any securities that a person has a
right to acquire within 60 days pursuant to options, warrants, conversion
privileges or other rights.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNER CLASS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Kevin A. Lichtman, 907,000 (1) 16.61%
President/Director
201 Park Place
Altamonte Springs, FL 32701
Common Jeffrey Grossman 110,000 2.0%
Vice President/Director
(March 1997 to March 1999)
201 Park Place
Altamonte Springs, FL 32701
Common Martin Averbuch 50,000 (2) 0.92%
Director
c/o FinancialWeb.com, Inc.
201 Park Place
Altamonte Springs, FL 32701
Common John D. Bergen 55,000 (3) 1.09%
Director
1789 Wrightstown Road
Newtown, PA 18940
Common James P. Gagel 9,454 (4) 0.17%
Executive Vice President/Director
201 Park Place
Altamonte Springs, FL 32701
Common All directors and executive 1,032,454 20.79%
officers as a group (7 persons)
(1) Includes 500,000 shares owned directly, 402,000 shares controlled as general partner of Cacique Partners, LP.
and 5,000 shares owned by his wife Rocio Lichtman, of which shares he disclaims beneficial ownership.
(2) Pursuant to a Director Service Agreement, Mr. Averbuch has options to purchase 100,000 shares of Common Stock
vesting 25,000 on execution and 25,000 for each quarter of service, exercisable at $5.00 per share.
(3) Includes 5,000 shares owned directly and 50,000 options exercisable in the next 60 days under a Director
Service Agreement that grants a total of 100,000 options vesting 25,000 on execution and 25,000 for each quarter of service
exercisable at $5.00 per share. Mr. Bergen also owns a limited partnership interest in Prime Equity Fund, L.P., which is a
beneficial owner of Common Stock and an entity controlled by John J. Katsock, Jr.
(4) Mr. Gagel has also been granted an option to purchase 25,000 shares of Common Stock for $3.94 a share exercisable as of
12/1/99.
</TABLE>
(c) Management knows of no arrangements that may result in a change of
control of the Company.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following persons are directors, executive officers, promoters and control
persons of the Company as of June 30, 1999.
Name Age Title Term of Office
Kevin A. Lichtman 39 President Indefinite
16
<PAGE>
Chairman of the Board 3 Years
James Gagel 43 Executive Vice-President Indefinite
General Counsel Indefinite
Director 3 Years
Martin Averbuch 47 Director 2 Years
John D. Bergen 56 Director 2 Years
John Keating 38 Vice President Marketing Indefinite
Carl Surran 41 Managing Editor Indefinite
KEVIN A. LICHTMAN. Mr. Lichtman has been President and Chairman of the
Board of FWEB since March 3, 1997. From 1995 to 1997 Mr. Lichtman was Director
of Marketing for a financial public relations firm. From 1990 to 1995, Mr.
Lichtman was National Sales Manager of a financial publishing company. From 1987
to 1990, Mr. Lichtman was an investor correspondent with the National
Corporation for Housing Partnerships. Mr. Lichtman has over 14 years experience
in publishing and corporate communications. Mr. Lichtman has been involved in
the development, management and marketing of financial publications, trade shows
and electronic media. Mr. Lichtman holds a bachelors degree in Government and
Politics from the University of Maryland.
JAMES GAGEL. Mr. Gagel was named a Director and Secretary of FWEB on
February 5, 1998, and holds the position of Executive Vice President and General
Counsel. He oversees daily operations and is also responsible for matters
pertaining to corporate governance, contracts, acquisitions, intellectual
property, licensing, libel law, labor issues, insurance, litigation, laws of the
Internet and compliance with local, state and federal laws. Prior to joining
FWEB, Mr. Gagel was in private practice in Washington, D.C., where he
specialized in representing development stage companies in domestic and
international markets. A former Fulbright Scholar, Mr. Gagel is a graduate of
Duke University and Rutgers University Law School. He is a member of the bars of
New York, New Jersey, the District of Columbia, and is awaiting admission to the
Florida Bar.
MARTIN AVERBUCH. Mr. Averbuch was named a director of FWEB on March 24,
1999. He is currently President and CEO of Adirondack Trading Partners, LLC, a
consortium formed to finance the International Securities Exchange. Mr. Averbuch
is a founder of the International Securities Exchange the first fully electronic
options exchange in the United States. Mr. Averbuch was with E*TRADE Group, Inc.
between August 1993 and August 1998 and served in various capacities, including,
Vice President On-Line Ventures, Vice President Special Projects, and President
of E*TRADE Capital, Inc. a subsidiary of E*TRADE Group, Inc. In addition, Mr.
Averbuch has served on the Advisory Board of Roundtable Partners LLC, and is
currently on the Board of Directors for Knight/Trimark Group, Inc. Mr. Averbuch
has experience in international business development as well as entrepreneurial
experience in several manufacturing companies. Mr. Averbuch served as a
professor at Hofstra University in the Department of Finance from 1977 to 1978.
He received a B.S. in Economics from the Wharton School of Finance at the
University of Pennsylvania in 1974 and M.B.A. and J.D. degrees from the
University of Chicago in 1977.
JOHN D. BERGEN. Mr. Bergen was named a director of FWEB on March 24, 1999.
Mr. Bergen is currently President of the Council of Public Relations Firms. He
joined the Council from CBS Corporation, where he directed the company's
external and internal communications, including public and investor relations,
government affairs, corporate marketing, and employee communications. Mr. Bergen
previously served as President and Chief Executive Officer of GCI Group, the
International Public Relations and Government Affairs arm of Grey Advertising.
He taught English, philosophy and ethics at West Point and was a strategic
planner in the Pentagon and chief speech writer to Secretary of Defense Caspar
Weinberger during the Reagan administration. Mr. Bergen completed his master's
degree in English at Indiana University and completed his undergraduate work at
West Point. He is the editor of the Corporate Communications sections of the
Management Handbook, published by the
17
<PAGE>
American Management Association, and an author of a Test for Technology, a book
on electronic warfare and technology in the Vietnam war.
JOHN KEATING. Mr. Keating is Vice president of Sales and Marketing. He is
principally responsible for managing and expanding the Company's advertising
revenue. Mr. Keating brings marketing and sales experience in both the
publishing and financial services industries. Prior to joining the Company in
1998, Mr. Keating was President of Guidera Communications Corporation. Mr.
Keating holds a Bachelors degree from Wilkes University in Wilkes-Barre,
Pennsylvania.
CARL SURRAN. Mr. Surran is the Editor-in-chief at FWEB and brings 18 years
of experience to the Company. Prior to joining FWEB, Mr. Surran served as
editor-in-chief of Personal Investing News, and International Money &Politics.
Previously, he edited several nationally-distributed financial newsletters.
Mr. Surran also served as an aid to U.S. Senator Paula Hawkins from 1981-87.
Mr. Surran is a graduate of Duke University with an MBA from Rollins College.
Mr. Gagel is Mr. Lichtman's brother-in-law. As of June 30, l999, there
were no other family relationships among the directors and executive officers.
Further, no director, executive officer, promoter or control person has been
involved in any legal proceedings during the past five years that are material
to an evaluation of the ability or integrity of such director, person nominated
to become a director, executive officer, promoter or control person of the
Company. None of the individuals listed in this Item 5 has had a bankruptcy
petition filed by or against any business of which such person was a general
partner or executive officer either at the time of such bankruptcy, if any, or
within two years prior to that time. No director, executive officer, promoter or
control person was or has been convicted in a criminal proceeding or is subject
to a pending criminal proceeding or subject to any order, judgment, or decree,
not subsequently reversed, suspended, or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, borrowing, or otherwise
limiting his or her involvement in any type of business, securities or banking
activities. No director, executive officer, promoter or control person has been
found by a court of competent jurisdiction in a civil action to have violated
federal or state securities or commodities laws.
18
<PAGE>
ITEM 6 - EXECUTIVE COMPENSATION
The following table sets forth the compensation that the Company paid
during its last two fiscal years to its chief executive officer and the most
highly compensated executive officers and directors. No information has been
shown for executive officers and directors receiving less than $100,000
compensation in the last fiscal year. The current executive officers have only
served since 1997. The Company has conducted its present business since that
time.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual compensation Long term compensation
Awards Payouts
Securities
Restricted stock underlying Other
Name and principal position Year Salary Bonus Total award(s) options/SARs Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
($) ($) ($) ($) (#)
(a) (b) (c) (d) (e) (f) (g)
Kevin A. Lichtman,
President 1997 $120,000 5,000
1998 $135,000 13,749.72 (1)
(1) 1999 Acura leased by the Company at approximately $625 per month beginning October 1998.
</TABLE>
EMPLOYMENT CONTRACTS
On April 1, 1997, the Company entered into an Employment Agreement with
Kevin A. Lichtman, the President of FWEB for a term of three (3) years subject
to renewal. The agreement was amended on November 4, 1998. Pursuant to the
Agreement the Company pays to Mr. Lichtman a gross salary of One Hundred Twenty
Thousand ($120,000) Dollars per annum for the first year, One Hundred Thirty-
Five Thousand ($135,000) Dollars for the second year and One Hundred Fifty
Thousand ($150,000) Dollars each year thereafter. In addition to the annual wage
the Company is to provide hospitalization and medical coverage, which shall
cover Mr. Lichtman and his family, and reimbursement for all reasonable expenses
incurred by him in the performance of his duties. Mr. Lichtman is entitled to
three (3) weeks paid vacation each year. In the event that during the term of
his employment, should he become incapacitated he will continue to receive his
salary for a period of three (3) months. In the event of termination, his salary
and benefits are guaranteed for sixteen (16) months, regardless of employment
status. Mr. Lichtman would also be reimbursed for all reasonable job search
costs.
On December 1, 1998, the Company entered into an employment agreement with
James P. Gagel, the Executive Vice President, Secretary and General Counsel of
FWEB for a term of three (3) years subject to renewal. The agreement was amended
on February 1, 1999. Pursuant to the amendment, the Company pays to Mr. Gagel a
gross salary of $86,000 per annum for the first year, $98,000 per annum for the
second year, and $112,000 per annum for each year thereafter. In addition to the
annual wage, the Company is to provide hospitalization and medical coverage for
Mr. Gagel and reimburse all reasonable expenses incurred by him in the
performance of his duties. Mr. Gagel is entitled to fifteen (15) days paid
vacation each year. In the event of termination, Mr. Gagel's salary and benefits
are guaranteed for eighteen (18) months, regardless of employment status. Mr.
Gagel was also given an option to purchase 25,000 shares of Common Stock on
December 1, 1998 at a closing price of $3.94 per share, 25,000 shares at the
closing price of December 1, 1999, and 25,000 shares at the closing price of
December 1, 2000.
19
<PAGE>
On February 9, 1998, the Company entered into an Employment Agreement with
John Keating, the Vice President in charge of Sales and Marketing. Mr. Keating
is employed at will by the Company and receives a commission on the gross amount
of the revenue from the sales of advertising, website design, and in-site
hosting services attributed to Mr. Keating's efforts, with a minimum annual
salary. In addition, Mr. Keating is entitled to receive a bonus if certain
performance goals are met.
On July 21, 1997, the Company entered into an Employment Agreement with
Carl Surran, the Managing Editor of the Company. Mr. Surran is an employee at
will but the agreement specifies his annual salary
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On March 3, 1997, the Company purchased the Internet web site "The SmallCap
Investor" and the domain "financialweb.com" from Jeffrey A. Grossman for $60,000
and 10,000 shares of Common Stock. Mr. Grossman was a Vice President and a
director of the Company until March 2, 1999.
The Company owes $150,436 in principal amount under a promissory note
payable to The Harmat Organization, Inc., at an annual interest rate of 9.75%,
which is due upon the Company's raising of at least $5,000,000 or on
December 14, 1999 whichever comes first.
ITEM 8 - LEGAL PROCEEDINGS
Currently, there are two claims against the Company.
The first complaint was filed on November 19, 1998 by Great White Marine
and Recreation, Inc., (Great White) and Colin Alvis Smith against FWEB and Lynn
Duke in the 74th Judicial District Court of McLennan County, Texas. The suit
claims that FWEB and Ms. Duke defamed the plaintiffs by publishing information
alleging that the plaintiffs had engaged in dishonest and criminal acts. The
allegedly defamatory statements were published by FWEB on its StockDetective.com
web site on October 29, 1998 and November 2, 1998. The plaintiffs claim
unspecified damages. FWEB management believes that it has meritorious defenses
and that it will successfully defend the suit.
The second complaint was filed by Ziasun Technologies, Inc. against FWEB
and Lynn Duke in the Circuit Court for Seminole County, Florida on or about June
3, 1999, and alleges that FWEB and Ms. Duke defamed the plaintiffs by publishing
an article on its Stock Detective web site on April 28, 1999 indicating that
Ziasun misled investors, concealed information and otherwise engaged in improper
conduct. The Plaintiff claims unspecified damages. FWEB management believes that
it has meritorious defenses and that it will successfully defend the suit.
ITEM 9 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At the time of filing, only a limited market existed for common shares of
the Company. As of June 30, 1999, the Company had outstanding 5,457,839 shares
of Common Stock with a par value of $ .001 per share.
20
<PAGE>
According to the records of the Company's transfer agent, AlphaTech Stock
Transfer, a total of 2,103,979 of those shares were freely tradeable over the
counter, and 3,353,860 were restricted shares.
(a) The Common Stock has been traded on the over the counter market since
March of 1997. The high and low bid prices, in fraction and decimal form,
for 1997, 1998 and the first two quarters of 1999 are as follows:
1997
----
High Low
1st Quarter (March 3 to March 31) 10 (10.000) 6 (6.000)
2nd Quarter 7 1/2 (7.500) 5 (5.000)
3rd Quarter 8 5/8 (8.625) 6 (6.000)
4th Quarter 8 3/4 (8.750) 1/4 (0.250)
1998
----
High Low
1st Quarter 3 5/8 (3.625) 5/16 (0.3125)
2nd Quarter 7/8 (0.875) 1/4 (0.250)
3rd Quarter 3 1/2 (3.500) 3/8 (0.375)
4th Quarter 11 1/8 (11.125) 2 1/4 (2.250)
1999
----
High Low
1st Quarter 27 3/4 (27.750) 10 1/2 (10.500)
2nd Quarter 20 1/4 (20.250) 12 1/4 (12.250)
The quotations above reflect interdealer prices without retail markup, mark down
or commission, and may not represent actual transactions.
(b) As of June 30, 1999, the Company had 170 Shareholders of record of its
common stock.
(c) FWEB has not previously paid cash dividends on its Common Stock. The
payment of cash dividends from current earnings is not prohibited by any
agreements to which FWEB is a party, but is subject to the discretion of the
Board of Directors and will be dependent upon many factors, including FWEB's
earnings, its capital needs and its general financial condition. FWEB currently
does not intend to pursue a policy of payment of dividends, but rather to
utilize profits, if any, to finance the development and expansion of its
business.
ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES
From March of 1997 through March of 1998, the Company sold a total of
1,200,000 shares of its Common Stock, $.001 par value, at a price of $.50 per
share. These shares were sold under Rule 504 of Regulation D of the Securities
Act of 1933 for a total consideration of $600,000. The proceeds were used for
working capital and the acquisition of web sites. The shares were sold by the
Company and no commissions or discounts were paid.
In July of 1998, the Company sold an additional 400,000 shares of its
Common Stock, $.001 par value, under Rule 504 at a price of $1.00 per share. No
commissions or discounts were paid and the proceeds of $400,000 were used by the
Company for working capital and web site acquisitions.
21
<PAGE>
The exemption under Rule 504, is available to any issuer who is not a
reporting company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended, or not a development stage company that either
has no specific business plan or purpose or has indicated that its business plan
is to engage in a merger or acquisition with an unidentified company or
companies, or other entity or person. Rule 504 allowed companies to sell up to
$1,000,000 of its securities within a 12-month period in an exempt transaction
to an unlimited number of investors without regard to the investment
sophistication of the investor. In the registration provisions which require the
delivery of a prospectus before sale, there was no restriction on resale of the
securities by investors. Thus, the Common Stock issued under the Rule 504
exemption was "free-trading" and not restricted under federal law.
In March of 1997, the Company issued 10,000 shares of its Common Stock,
$.001 par value, to Jeffrey Grossman as part of the consideration for "The
SmallCap Investor" web site and domain name "financialweb.com". Also in March of
1997, the Company issued 1,000 shares of its Common Stock to Gene Homicki under
a Domain Purchase Agreement as part of the consideration for the Internet web
site and domain name "financialweb.com." In May of 1998, the Company issued
100,000 shares of its Common Stock to Randall B. Shepardson under the terms of a
Purchase Agreement as part of the consideration for the Internet web site and
domain name "stocktools.com." The Company relied upon the private placement
exemption under Section 4(2) of the Act, including Rule 506 of Regulation D, for
these transactions. Both Mr. Homicki and Mr. Shepardson are sophisticated
investors, in that both asked questions and received answers from
representatives of FWEB concerning the terms and conditions pursuant to which
the securities were being offered, examined Company documents, were aware of the
limitations on resale imposed by Rule 144, understood the speculative nature of
the securities, and represented that they had no present or future need to sell
the securities. They manifested their ability to evaluate the merits and risks
of the investments, both through the financial information products that they
created and transferred to the Company, as well as through their discussions
regarding same prior to the transactions.
In December of 1998, 100,000 shares of Common Stock, $.001 were issued to
Rock Company, Inc. in full settlement of $292,367.12 of debt. Pursuant to a
warrant agreement exercised on December 28, 1998, the Company issued 800,000
shares of Common Stock to Masada I, L.P. The warrant was modified on March 7,
1999, which resulted in the cancellation of the 800,000 share certificate
previously issued and the issuance of a new certificate for 775,385 shares
pursuant to a cashless formula based on the closing price of $8.125 on December
28, 1998. On December 15, 1998, 175,000 shares of Common Stock were issued to
The Harmat Organization, Inc. pursuant to the exercise of a warrant at $.25 per
share. The Company cancelled $43,750 of its outstanding debt to The Harmat
Organization, Inc. in exchange for the total exercise price. As consideration
for financial services under a letter agreement dated August 20, 1998, the
Company promised Spencer Trask Securities, Inc. a warrant to purchase 200,000
shares of Common Stock at $.50 per share. This letter agreement is currently in
dispute and no warrant certificate has been issued. On March 31, 1999, the
Company signed an engagement letter with Allen & Company Incorporated as its
exclusive financial advisor. Under this agreement, Allen & Company Incorporated
will receive warrants to purchase 979,321 shares of Common Stock at $4.00 per
share. The Company relied upon the private placement exemption under Section
4(2) of the Act, including Rule 506 of Regulation D, for both the original
warrant issuances and their subsequent exercise. The warrants were issued to
"accredited investors" as that term is defined by Rule 501 of the Securities Act
for investment purposes, without solicitation or advertisement by the
Company.
In December 1998, the Company executed a promissory note for $500,000 in
principal amount, payable to Frank Musolino and convertible into Common Stock at
an exercise price of $.50 per share, subject to adjustment. In January
of 1999 the Company issued two warrants for 1,000,000 shares of Common Stock
each exercisable at $4.00 per share to Glenn B. Laken and to John J. Katsock,
Jr., respectively, under the terms of Consulting Agreements with those
individuals. In February of 1999 the Company executed promissory notes for
$500,000 in principal amount convertible at $4.00 per share subject to
adjustment, and in March of 1999 an additional $1,500,000 in principal amount at
the same conversion price. The Company paid a commission of $150,000 on the
placement of the March notes. FWEB also executed two notes in March each for
$150,000 in principal amount, convertible at $4.50 per share. In May of 1999,
the Company issued 100,000 shares of common stock to Mr. Laken and 400,000
shares of common stock to Mr. Katsock pursuant to cashless exercise of the
warrants held by them. The Company has relied upon the private placement
exemption under Section 4(2) of the Act including Rule 506 of Regulation D for
the above transactions. These notes and warrants were sold to "accredited
investors" as that term is defined by Rule 501, for investment purposes, without
solicitation or advertisement by the Company.
In 1998 the Company issued 118,000 shares of Common Stock to employees
under compensation arrangements. The Company relied on Rule 701 and the private
placement exemptions of the Act for these issuances. The issued shares had a
market value of $.625 per share, as determined by the closing price on the May
18, 1998 issuance date, for a total value of $73,750. In May of 1999, the
Company issued 9,454 shares of common stock to James Gagel, as directors
remuneration, pursuant to an option to purchase 10,000 shares of FWEB stock at
$.75, the closing price on February 5, 1998, the day the option was granted. The
exercise was cashless. The Company relied on Rule 701 and the private placement
exemptions of the Act for this issuance.
In summary, the outstanding shares of common stock consist of the
following:
<TABLE>
<CAPTION>
Description Shares
- ----------- ------
<S> <C>
Beginning Balance as of December 31, 1996 80,000
Founders Shares 1,989,000
Stock sales March, 1997 through March, 1998 1,200,000
Stock sale July, 1998 400,000
Stock issued for The SmallCap Investor web site, March 1997 10,000
Stock issued for financialweb.com domain name, March, 1997 1,000
Stock issued for stocktools.com web site, May, 1998 100,000
Stock issued in full settlement of debt, December, 1998 100,000
Stock issued pursuant to warrant exercise, December 1998 800,000
Cancellation of 800,000 share certificate and issuance of 775,385
Share certificate, March, 1999 (24,615)
Stock issued pursuant to warrant exercise, December 1998 175,000
Stock issued pursuant to employment agreements, May, 1998 118,000
---------
TOTAL SHARES OUTSTANDING AS OF MARCH 31, 1999 4,948,385
=========
Stock issued pursuant to warrant exercise, May, 1999 100,000
Stock issued pursuant to warrant exercise, May, 1999 400,000
Stock issued pursuant to employment agreement, May, 1999 9,454
---------
TOTAL SHARES OUTSTANDING AS OF JUNE 30, 1999 5,457,839
=========
</TABLE>
ITEM 11 - DESCRIPTION OF SECURITIES
The Company is authorized to issue 100,000,000 shares of common stock, par
value $.001 per share. As of June 30, 1999, 5,457,839 shares of common stock are
outstanding, held of record by approximately 170 persons. The holders of common
stock are entitled to one vote for each share held of record on all matters to
be voted on by stockholders. There is cumulative voting with respect to the
election of directors, with the result that the holders of less than 50% of the
shares voting for the election of directors can elect some of the directors. The
holders of
22
<PAGE>
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of the funds legally available therefor. In the event of
the liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining available for
distribution after payment of liabilities and after provision has been made for
each class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
Common Stock, except by agreement.
Various registration rights are outstanding with respect to the Common
Stock. The Company has agreed to register the shares issuable upon exercise of a
warrant held by John J. Katsock Jr., within 30 days after the effectiveness of
this Form 10-SB. Some of the convertible notes entered into in March of 1999
provide for demand registration of the underlying shares. All the convertible
noteholders have the right to "piggy-back" onto a registration of the Company's
securities, other than in connection with a merger or pursuant to Form S-8
or S-4. Masada I, L.P., The Harmat Organization, Inc., Frank Musolino, Gary
Gould, Alcott Simpson & Co., Inc., Rock Company, Inc. and Stewart International
Investments, Ltd. also have piggy-back registration rights. In a few cases the
Company is liable for a loss of profit to the holders of such registrable
securities, if it does not timely file a registration statement or expeditiously
prepare amendments or supplements thereto. With respect to the shares issuable
upon exercise of the warrant held by Glenn B. Laken and John J. Katsock, Jr.,
the Company might also be required to redeem any issued shares at market price
or any warrants at the difference between exercise price and market price, if it
does not timely file a registration statement for the underlying shares.
The Company through its Board of Directors is also authorized to issue up
to 10,000,000 shares of Preferred Stock, none of which are currently
outstanding. The Preferred Stock when issued may have dividend, voting,
liquidation and other rights superior to the Common Stock.
The Company has never paid any dividends. Future dividends, if any, will be
contingent upon the Company's revenues and earnings, if any, capital
requirements and general financial condition subsequent to the consummation of a
business combination. The payment of dividends is within the discretion of the
Company's Board of Directors. The Company presently intends to retain all
earnings, if any, for use in the Company's business operations and accordingly,
the Board does not anticipate declaring any dividends in the foreseeable future.
However, there are no current restrictions on the payment of dividends either by
contract or regulation.
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated in Nevada. Under Sections 78.7502 and 78.751 of
the Nevada Revised Statutes, a Nevada Company may, under specified
circumstances, indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by a director,
officer, employee or agent of the Company in connection with the action, suit or
proceeding, provided that such provision shall not eliminate or limit the
liability of an individual applying for indemnification if, unless otherwise
ordered by a court, a final adjudication establishes that (i) his acts or
omissions involved intentional misconduct, fraud, or a knowing violation of the
law and (ii) the act or omission was material to the cause of action.
FWEB's Articles of Incorporation and Bylaws provide that the Company may
indemnify its officers, directors, employees and agents to the fullest extent
permissible under Nevada law. Directors and officers shall be, and employees and
agents may be, upon adoption of a resolution of the Board of Directors,
indemnified if made a party or threatened to be made a party, or involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, or any appeal of such an
action or any inquiry or investigation that could lead to such an action,
against judgments, penalties (including excise and similar taxes and punitive
damages), fines, settlements and reasonable expenses (including, without
limitation, attorneys' fees) actually incurred in connection with such action.
The Board of Directors has the option of making any indemnification payments in
advance and to purchase and maintain insurance to protect itself and its
officers, directors, employees and agents. These indemnification rights are
non-exclusive, but they will not eliminate or limit
23
<PAGE>
the liability of any directors, officer, employee or agent to the extent that
such person is found liable for: (i) a breach of a duty of loyalty to the
Company or its members; (ii) an act or omission not in good faith that
constitutes a breach of duty to the Company or involves intentional misconduct
or a knowing or reckless violation of the law; (iii) a transaction from which
the director, officer, employee or agent received an improper benefit, whether
or not the benefit resulted from an action taken within the scope of the
individual's duties; or (iv) an act or omission for which liability is expressly
provided by an applicable statute.
The Company currently maintains a Directors and Officers liability
insurance policy with an annual aggregate limit of $5,000,000.
24
<PAGE>
ITEM 13 - FINANCIAL STATEMENTS
(a) Annual Financial Statements
Following are annual financial statements for the years ended 1997 and
1998. The Company has conducted its current business since March of 1997.
(b) Interim Financial Statements
Following are interim financial statements for the period ending March 31,
1999.
25
<PAGE>
FINANCIALWEB.COM, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
26
<PAGE>
FINANCIALWEB.COM, INC.
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
Auditor's Report 3
Balance Sheets - Restated 4
Statements of Operations - Restated 5 - 6
Statements of Cash Flows - Restated 7
Statements of Changes in Stockholders' Equity - Restated 8
Notes to Financial Statements - Restated 9 - 14
27
<PAGE>
Jere J. Lane
Certified Public Accountant
2901 NW 112 Avenue
Coral Spring, FL 33065
Tele: (954) 340-2848 / Fax: (954) 340-7519
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders' of
FinancialWeb.com, Inc.
f/k/a Axxess, Inc.
201 Park Place, Suite 321
Altamonte Springs, FL 32701
I have audited the accompanying balance sheets of FinancialWeb.com, Inc., f/k/a
Axxess, Inc. (the Company) as of December 31, 1998 and 1997, and the related
statements of operations, cash flows and stockholders' equity for the years then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion of these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the consolidated 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. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly in all
respects the financial position of FinancialWeb.com, Inc., f/k/a Axxess, Inc.,
as of December 31, 1998 and 1997 and the results of its operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying restated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has suffered losses from operations and has a
net capital deficiency, raising substantial doubt about its ability to continue
as a going concern without additional capitalization. Management's plans in
regard to these matters are also described in the notes to the financial
statements. These financial statements do not include any adjustments that might
result from this uncertainty.
/s/ Jere J. Lane
April 14, 1999, except for Restatement Note, as to
which the date is July 16, 1999
Coral Springs, Florida
28
<PAGE>
FINANCIALWEB.COM, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Restated -- See Notes
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
1998 1997
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 322,480 $ 82,802
Prepaid Expenses 113,515 147,389
Deposits 5,580 2,150
-------------- --------------
Total Current Assets 441,575 232,341
PROPERTY AND EQUIPMENT 188,745 46,540
OTHER ASSETS:
Intellectual Property 186,947 62,833
-------------- --------------
TOTAL ASSETS $ 817,267 $ 341,714
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued Expenses $ 266,203 $ 150,436
Notes Payable 750,436 260,000
-------------- --------------
Total Current Liabilities 1,016,639 410,436
-------------- --------------
TOTAL LIABILITIES 1,016,639 410,436
STOCKHOLDERS' EQUITY:
Common Stock, $.001 Par Value, 100,000,000 Shares Authorized,
4,973,000 and 2,680,000 Shares, Respectively, Issued and Outstanding 4,973 2,680
Additional Paid-In Capital 2,070,395 336,746
Stock subscription receivable (200,000) --
Accumulated (Deficit) (2,074,740) (408,148)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY (199,372) (68,722)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 817,267 $ 341,714
============== ==============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
29
<PAGE>
FINANCIALWEB.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Restated -- See Notes
- ----------------------------------------------------------------------------------------------------------
1998 1997
------------ ---------
<S> <C> <C>
NET REVENUES $ 159,529 $ 68,977
Cost of Revenues 218,562 54,454
----------- ---------
GROSS MARGIN (59,033) 14,523
Selling, General and Administrative Expenses 1,564,058 382,465
Interest Expense 43,501 4,324
----------- ---------
NET (LOSS) $(1,666,592) $(372,266)
=========== =========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
30
<PAGE>
FINANCIALWEB.COM, INC.
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Restated -- See Notes
- -----------------------------------------------------------------------------------------------------------
1998 1997
----------- ---------
BASIC (LOSS) PER COMMON SHARE
(Loss) available to Common Stockholders $(1,666,592) $(372,266)
=========== =========
Weighted Weighted
Shares Fraction Average Shares Fraction Average
Dates Outstanding Outstanding of Period Shares Outstanding of Period Shares
----------- --------- ------ ------------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
January 1 - February 5 2,680,000 36 / 365 264,329 80,000 36 / 365 7,890
February 6 - March 2 2,880,000 25 / 365 197,260 80,000 25 / 365 5,479
March 3 - March 26 2,880,000 24 / 365 189,370 2,080,000 24 / 365 136,767
March 27 - April 23 2,880,000 28 / 365 220,932 2,380,000 28 / 365 182,575
April 24 - May 19 3,098,000 26 / 365 220,679 2,380,000 26 / 365 169,534
May 20 - July 14 3,498,000 56 / 365 536,679 2,380,000 56 / 365 365,151
July 15 - September 8 3,498,000 56 / 365 536,679 2,680,000 56 / 365 411,178
September 9 -November 30 3,898,000 83 / 365 886,395 2,680,000 83 / 365 609,425
December 1 - December 14 3,998,000 14 / 365 153,348 2,680,000 14 / 365 102,795
December 15 - December 27 4,173,000 13 / 365 148,627 2,680,000 13 / 365 95,452
December 28 - December 31 4,973,000 4 / 365 54,499 2,680,000 4 / 365 29,370
------------ ------------
Weighted-average shares 3,408,797 2,115,616
============ ============
BASIC (LOSS) PER COMMON SHARE $(0.49) $(0.18)
====== ======
The equation for computing basic loss per common share is:
Loss available to common stockholders / Weighted-average shares
</TABLE>
The accompanying notes are an integral part of
the financial statements.
31
<PAGE>
FINANCIALWEB.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Restated -- See Notes
- -----------------------------------------------------------------------------------------------------------------
1998 1997
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(1,666,592) $(372,266)
Adjustments to reconcile Net (Loss)
to Net Cash Used by Operating Activities
Depreciation and Amortization 76,143 12,697
Stock issued for employee services 73,750 -
Stock Warrants issued for Non-Employee Compensation 326,075 -
(Increase) Decrease in Prepaid Expenses 33,874 (147,389)
(Increase) in Deposits (3,430) (2,150)
Decrease in Loans Receivable - 2,000
Increase in Accrued Expenses 115,767 150,436
----------- ---------
Net Cash Used by Operating Activities (1,044,413) (356,672)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (242,562) (122,070)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Notes Payable 490,436 260,000
Stock Issuances 1,236,217 300,000
(Increase) in stock subscription receivable (200,000) -
----------- ---------
Net Cash Flows from Financing Activities 1,526,653 560,000
----------- ---------
NET DECREASE IN CASH 239,678 81,258
CASH AT BEGINNING OF YEAR 82,802 1,544
----------- ---------
CASH AT DECEMBER 31, 1998 AND 1997 $ 322,480 $ 82,802
=========== =========
SUPPLEMENTAL INFORMATION:
Amortization of prepaid consulting fees acquired in exchange for
shares of common stock $ 66,667 $ 55,556
=========== =========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
32
<PAGE>
FINANCIALWEB.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Restated - See Notes
----------------------------------------------------------------------------------------------------------------
Additional Stock Total
Common Paid-In Subscription Accumulated Stockholders'
Shares Stock Capital Receivable Deficit Equity
------------ --------- ------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
RETROACTIVELY
RESTATED FOR
REVERSE STOCK SPLIT 80,000 $ 80 $ 39,346 $ (35,882) $ 3,544
Net (Loss) for
the Year Ended
December 31, 1997 (372,266) (372,266)
Private Placement 200,000 200 99,800 100,000
of 200,000 Shares
Stock Issued to
Officers and
Directors 2,000,000 2,000 (2,000) -
Stock Issued for
Services 400,000 400 199,600 200,000
---------- --------- ----------- ----------- ----------
2,680,000 2,680 336,746 (408,148) (68,722)
Net (Loss) for
the Year Ended
December 31, 1998 (1,666,592) (1,666,592)
Private Placement of
1,100,000 Shares 1,100,000 1,100 991,267 992,367
Stock Issued for
Services 118,000 118 73,632 73,750
Stock Issued for
Intellectual Property 100,000 100 99,900 100,000
Stock Issued pursuant
to Exercises
of Warrants 975,000 975 568,850 (200,000) 369,825
---------- --------- ----------- --------- ----------- ----------
4,973,000 $ 4,973 $ 2,070,395 $(200,000) $(2,074,740) $ (199,372)
========== ========== =========== ========= =========== ==========
</TABLE>
33
<PAGE>
FINANCIALWEB.COM, INC.
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION BACKGROUND
FinancialWeb.com, Inc., f/k/a Axxess, Inc. , designs, develops, purchases and
manages internet based business publications. The Company's corporate offices
are in Altamonte Springs, Florida.
The Company was incorporated on May 16, 1983 in the State of Utah under the name
of Vital Technologies, Inc., then re-domiciled itself in Nevada in 1988. The
Company was inactive from 1991 through 1996. On March 3, 1997 the Company
changed its name to Axxess, Inc., reverse split the issued and outstanding
shares in a one for twenty-five transaction, changed directors and entered the
business of multimedia publishing and communications. On January 4, 1999 the
Company adopted its current name, in order to more accurately reflect its core
business.
Basis of Presentation and Continued Existence
The Company's financial statements have been presented on the basis of a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$1,666,592 and $372,266 for the years ended December 31, 1998 and 1997,
respectively, and cumulative losses since inception of $2,074,740. At December
31, 1998, the Company has a working capital deficit of $575,064. The Company's
continuation as a going concern is dependent upon its ability to obtain
suitable, sufficient financing or equity investment. There is no assurance that
the Company will be successful in this endeavor. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash -- The Company considers all highly liquid debt instruments purchased with
a maturity of ninety days or less to be the equivalent of cash for financial
statement purposes.
Prepaid Expenses -- Prepaid Expenses are stated at cost. Amortization is
computed over the estimated period of benefit, normally less than one year. The
Company recorded Prepaid Consulting Fees, pursuant to an agreement dated March
8, 1997 wherein consulting services for the thirty six months ended March 7,
2000 were exchanged for shares of common stock.
Property and Equipment -- Property and Equipment are stated at cost.
Depreciation is calculated on the various asset classes over their estimated
useful lives as follows:
Equipment, Furniture and Fixtures 5 - 7
Computer Equipment 5
Intellectual Property -- Intellectual Property is stated at cost. Amortization
is computed using the straight-line method over five years.
Stock Options, Warrants and Compensation -- The Company accounts for stock
options and warrants granted as compensation at the fair market value of the
stock on the close of business on the day granted pursuant to the provisions of
Financial Accounting Standards Board Statement 123.
Revenue and Cost Recognition -- Revenues and the related Cost of Revenues are
recognized upon publication of the customer's advertising on the Company's web
sites or for design services pursuant to agreement.
Income Taxes -- The Company accounts for income taxes pursuant to Statement of
Financial Accounting Standards No. 109. Under such standard, deferred taxes are
computed based on the tax liability or benefit in future years of the reversal
of temporary differences in the recognition of income or deduction of expenses
between financial and tax reporting purposes. The principal item resulting in
the difference is depreciation. The net difference, if any, between the
provision for taxes and taxes currently payable is reflected in the balance
sheet as deferred income taxes. Deferred tax assets and/or liabilities are
classified as current or noncurrent based on the classification of the related
asset or liability for financial reporting purposes, or on the expected reversal
date for deferred taxes that are not related to an asset or liability. A
valuation allowance is provided for deferred tax assets that do not meet a "more
likely than not" criterion.
Use of Estimates -- Management of the Company uses estimates and assumptions in
preparing financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities as well as revenues and expenses. Actual results could
vary from the estimates management has utilized.
34
<PAGE>
FINANCIALWEB.COM, INC.
NOTES TO FINANCIAL STATEMENTS
PREPAID EXPENSES
Prepaid Expenses includes consulting fees, professional fees and rent paid in
advance. On March 8, 1997 the Company entered into a consulting agreement for
various advisory services. The Company tendered 400,000 shares of $.001 par
value common stock, valued at $.50 per share, for the services, which are being
amortized over the term of the agreement.
Prepaid Expenses consists of the following as of December 31, 1998:
Consulting Fees $ 77,777
Professional Fees 22,700
Prepaid Automobile Lease 13,038
--------
Prepaid Expenses $113,515
========
PROPERTY AND EQUIPMENT
Property and Equipment consists of the following as of December 31, 1998:
Equipment, Furniture and Fixtures $ 39,276
Computer Equipment 177,607
--------
Total Property and Equipment 216,883
Less: Accumulated Depreciation 28,138
--------
Property and Equipment $188,745
========
INTELLECTUAL PROPERTY
Intellectual Property consists of the following as of December 31, 1998:
Internet Web Sites $237,650
SQL Data Base 10,000
--------
Total Intellectual Property 247,650
Less: Accumulated 40,723
Amortization --------
$186,947
Intellectual Property ========
35
<PAGE>
FINANCIALWEB.COM, INC.
NOTES TO FINANCIAL STATEMENTS
NOTES PAYABLE
Notes Payable including Accrued Interest consists of the following as of
December 31, 1998:
Note payable, due December 14, 1999, including $2,667
accrued interest thereon at 12% $502,667
Note payable, due on demand, including
$611 accrued interest thereon at 9.75% 151,047
Note Payable, due August 12, 1999, including
$1,869 accrued interest thereon at 9.75% 51,869
Note Payable, due on demand , including
$5,063 accrued interest thereon at 9.75% 30,063
Note Payable, due on demand, including $1,063 imputed
interest thereon at 9.75% 26,063
--------
Total Notes Payable and Accrued Interest $761,709
========
INCOME TAXES
The Company neither incurred an expense for nor benefit from any current or
deferred income taxes for the year ended December 31, 1998, based on the more
likely than not criterion of Statement of Financial Accounting Standards No.
109. The Company has approximately $1,600,000 of loss carryforwards to offset
future taxable income expiring through the year 2013.
CAPITAL STOCK TRANSACTIONS
Preferred Stock -- During the year ended December 31, 1997 the Company
authorized a class of Preferred Stock consisting of 10,000,000 shares at $.001
par value, with characteristics to be determined later by the Board of
Directors. No Preferred stock has been issued as of the date of this financial
statement.
Common Stock Issuances -- During the year ended December 31, 1998 the Company
issued 1,100,000 shares of its $.001 par value common stock through private
placements, 118,000 shares of its $.001 par value common stock to employees in
exchange for services, 100,000 shares of its $.001 par value common stock for a
web site and 975,000 shares of its $.001 par value common stock pursuant to
tendered warrants.
Stock Purchase Warrants -- On August 15, 1997 the Company authorized and issued
to The Harmat Organization , Inc. the rights to purchase ("warrants") 1,000,000
shares of the $.001 par value common stock of FinancialWeb.com, Inc. on payment
of $.50 per share so purchased, subject to certain terms and conditions. The
warrants were issued simultaneous with a loan agreement wherein Harmat agreed to
provide funds for FinancialWeb. The original warrants were subsequently returned
to the Company as part
36
<PAGE>
FINANCIALWEB.COM, INC.
NOTES TO FINANCIAL STATEMENTS
of a new agreement between the parties. On July 13, 1998 the Company issued to
Harmat the rights to purchase 175,000 shares of the $.001 par value common stock
of FinancialWeb.com, Inc. on payment of $.25 per share so purchased , subject to
certain terms and conditions. The warrants were recorded at the fair market
value of the Company's common stock ($.687) on the close of business on the date
issued. All of the warrants were exercised on December 15, 1998 by The Harmat
Organization.
Stock Purchase Warrants -- On July 1, 1998 the Company authorized and issued to
Masada I, L.P. the rights to purchase ("warrants") 800,000 shares of the $.001
par value common stock of FinancialWeb.com, Inc. on payment of $.25 per share so
purchased, subject to certain terms and conditions. The warrants were issued in
connection with a consulting agreement executed on that date wherein Masada I,
L.P. agreed to provide certain advisory services related to identifying and
negotiating mergers and acquisitions, reviewing acquisition documents, reviewing
and negotiating licensing agreements and assisting in identifying capital and
lending sources. The warrants were recorded at the fair market value of the
Company's common stock $.562 on the close of business on the date issued. All
of the warrants were exercised on December 28, 1998 by Masada I, L.P.
Convertible Debt -- On December 14, 1998 the Company received $500,000 pursuant
to the provisions of a convertible note agreement, wherein, the note holder has
the option to convert the principal and accrued interest of any portion of the
note at the rate of $.50 of principal for each share of Common Stock which price
per share shall be payable by surrender of such portion of the convertible note.
COMMITMENTS AND CONTINGENCIES
Employment Agreements -- The Company has employment agreements with its officers
providing for base salaries totaling $305,083, $214,500 and $170,834 in the
years ending December 31, 1999, 2000 and 2001 respectively. Additionally, the
Company had an agreement with a consultant totaling $10,000 per month that
expired in March, 1999.
Facilities Lease -- FinancialWeb.com, Inc. leases its office space pursuant to
an agreement dated September 30, 1998. The lease commenced October 1, 1998 for a
period of one year with an additional one year option available to the Company.
Monthly payments amount to $4,119 in the initial year and $4,325 in the option
year. Rent expense for the years ended December 31, 1997 and 1998 was $11,043
and $48,292, respectively.
Litigation -- The Company is presently defending two separate claims brought by
plaintiffs alleging defamation resulting from published reports on
FinancialWeb's StockDetective.com web site. In management's opinion, based on
the advice of legal counsel, the ultimate outcome of these lawsuits will not
have a material adverse effect on the Company's financial statements.
Disputes -- The Company is currently disputing the validity of a letter
agreement with a consultant wherein the consultant was to receive the right to
purchase ("warrants") 200,000 shares of the $.001 par value common stock off
FinancialWeb.com, Inc. on payment of $.50 per share. No warrant certificate has
been issued regarding this agreement as of the date of these financial
statements.
SUBSEQUENT EVENTS
Subsidiaries -- On February 3, 1999 the Company filed Articles of Incorporation
for SlugFest.com, Inc. and StockDetective.com, Inc., Nevada subsidiaries, each
authorized to issue 100,000 shares of their respective no par common stock and
10,000 shares of their respective no par preferred stock.
37
<PAGE>
FINANCIALWEB.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Convertible Debt -- On February 11, 1999, March 24, 1999 and April 14, 1999 the
Company received, net of commissions, $500,000, $300,000 and $1,350,000 pursuant
to several new 9.75% one year convertible notes amounting to $500,000, $300,000
and $1,500,000, respectively. The note holders have the option to convert the
principal and accrued interest of any portion of the notes at the rate of $4.00
of principal for each share of Common Stock, which price per share shall be
payable by surrender of such portion of the convertible notes.
Stock Purchase Warrants -- Pursuant to various post year ended December 31, 1998
agreements the Company authorized and issued additional rights to purchase
("warrants") shares of the $.001 par value common stock of FinancialWeb.com,
Inc. as follows:
<TABLE>
<CAPTION>
Exercise
Number of Date of Expiration Price
Description Warrants Issue Date per Share
- ------------------------ --------------- ---------------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Consulting Agreement 1,000,000 January 6, 1999 January 5, 2000 $4.00
Consulting Agreement 1,000,000 January 6, 1999 January 5, 2000 $4.00
Directors Services 100,000 March 24, 1999 March 23, 2004 $5.00
Financial Advisor 979,321 March 31, 1999 March 30, 2009 $4.00
</TABLE>
Stock Subscription Receivable -- The Company issued 800,000 shares of common
stock to Masada I, L.P., pursuant to a warrant agreement exercised on December
28, 1998 at $.25 per share. The $200,000 Stock Subscription Receivable resulting
from this transaction was subsequently cancelled in accordance with a new
agreement dated March 7, 1999, the original certification for 800,000 shares was
returned to the Company, and a new certificate for 775,385 shares was issued
pursuant to a cashless exercise formula based on the closing price of the stock
($8.125) on the December 28, 1998 exercise date.
Restated Financial Statements
The Company restated its audited financial statements as follows:
Common stock issued as founders' shares in 1997, with a par value of $2,000,
was reclassified as a reduction in Additional Paid-In Capital rather than as
a Discount on Common Stock, and the previously recorded amortization of
Discount amounting to $833 was reversed.
Stock Subscriptions Receivable of $200,000 was reclassified in 1998 as a
reduction in Stockholders' Equity rather than as a Current Asset.
The 118,000 common shares issued to employees for services rendered were
recorded as additional compensation in 1998 at the fair market value of the
shares ($.562) at issuance. The revisions to Additional Paid-In Capital and
the 1998 Selling, General and Administrative Expenses for the shares issued
to employees amounted to $73,632.
The difference between the exercise price ($.25) of the 175,000 stock
purchase warrants issued to The Harmat Organization, Inc. and the 800,000
stock purchase warrants issued to Masada I, L.P. and the fair value of the
shares when the warrants were granted was recorded as an expense (consulting
fees) in 1998. The revisions to Additional Paid-In Capital and the 1998
Selling, General and Administrative Expenses for the stock purchase warrants
amounted to $76,475 and $249,600, respectively.
The Statement of Stockholders' Equity was revised to include a column for
the number of common Shares.
The Balance Sheets, Statements of Operations, Statements of Cash Flows and
Statements of Stockholders' Equity were each changed accordingly for the
effects of the enumerated restated items.
38
<PAGE>
ITEM 14 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has had no disagreements with its accountants regarding
accounting or financial disclosure matters.
ITEM 15 - FINANCIAL STATEMENTS AND EXHIBITS
(a) List of Financial Statements
Auditor's Report Fiscal Year Ended December 31, 1998
Audited Balance Sheet for the Fiscal Year Ended December 31, 1998 and
1997
Audited Statement of Operations for the December 31, 1998 and 1997
Audited Statement of Cash Flows for the December 31, 1998 and 1997
Audited Statement of Changes In Stockholders' Equity for December 31,
1998 and 1997
Notes to 1998 and 1997 Financial Statements
(b) List of Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER -----------
-------
<S> <C>
3.1* - Amended and Restated Articles of Incorporation of
FinancialWeb.com, Inc.
3.2* - Bylaws of FinancialWeb.com, Inc.
4.1 - Articles IV, VI & VII of the Amended and Restated Articles of
Incorporation of FinancialWeb.com, Inc. (see Exhibit 3.1)
4.2 - Articles 2, 6, and 7 of the Bylaws of FinancialWeb.com, Inc. (see
Exhibit 3.2)
4.3* - Purchase Agreement with Jeffrey A. Grossman, dated March 3, 1997
4.4* - Registration Rights Agreement with Alcott Simpson & Co., Inc.,
dated March 10, 1997
4.5* - Registration Rights Agreement with Stewart International
Investments, Ltd., dated March 10, 1997
4.6* - Warrant to Purchase Common Stock for Masada I, L.P. and
Registration Rights Agreement, dated July 1, 1998
4.7* - Warrant to Purchase Common Stock for The Harmat Organization,
Inc. and Registration Rights Agreement, dated July 13, 1998
4.8* - Registration Rights Agreement with Alcott Simpson & Co., Inc.,
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
dated July 17, 1997
4.9* - Registration Rights Agreement with Rock Company, Inc., dated July
17, 1997
4.10* - Convertible Note payable to Frank Musolino due December 14, 1999
4.11* - Warrant Agreement with Glenn B. Laken, dated January 6, 1999
4.12* - Warrant Agreement with John J. Katsock, dated March 10, 1999
4.13* - Convertible Note payable to Larry Riesberg , dated February 12, 1999
4.14* - Convertible Note payable to Donald Sliter, dated February 12, 1999
4.15* - Convertible Note payable to Steven Muslin, dated February 12, 1999
4.16* - Convertible Note payable to Dr. Thwack, an Illinois general
partnership, dated February 12, 1999
4.17* - Convertible Note payable to Steven F. Story, Revocable Trust of
8/9/95, dated March 25, 1999
4.18* - Convertible Note payable to Banning Enterprises Ltd., dated March
25, 1999
4.19* - Convertible Note payable to Anson McCoy Beard, Jr, dated March
30, 1999
4.20* - Convertible Note payable to the Prime Equity Fund, L.P., dated
March 30, 1999
4.21* - Convertible Note payable to Adel R.B. Kellel, dated March 30, 1999
4.22* - Convertible Note payable to Dogwood Bonsai Opportunity Fund,
L.P., dated March 30, 1999
4.23* - Convertible Note payable to Adel R.B. Kellel, dated March 30, 1999
4.24* - Convertible Note payable to Bluewater Consulting, Inc., dated March
30, 1999
4.25* - Consulting Agreement with registration rights, with Gary Gould,
dated March 1, 1999
4.26* - Director Services Agreement with Martin Averbuch, dated March 24,
1999
10.1* - Employment Agreement with Kevin Lichtman dated April 1, 1997,
and amendment thereto, dated November 4, 1998
10.2* - Employment Agreement with James P. Gagel dated December 1,
1998, and amendment thereto, dated February 1, 1999
10.3* - Employment Agreement with Jeffrey Abbott, dated October 1, 1998
10.4* - Employment Agreement with John Keating, dated February 9, 1998
10.5* - Employment Agreement with Carl Surran, dated July 21, 1997
10.6 - Director Services Agreement with Martin Averbuch, dated March 24,
1999 (see Exhibit 4.26)
10.7 - Asset Purchase Agreement with Jeffrey A. Grossman, dated March 3,
1997 (see Exhibit 4.3)
10.8* - Asset Purchase Agreement with Gene Homicki, dated March 3, 1997
10.9* - Asset Purchase Agreement with Randall Shepardson, dated January
11, 1998
10.10* - Asset Purchase Agreement with Patrick Welsh, dated February 17,
1999
10.11* - Asset Purchase Agreement with Michael Onghai and Daily Stocks,
Inc., dated April 7, 1999
10.12* - License Agreement with Thomson Investors Network, dated
September 15, 1997
10.13* - License Agreement with Media General Financial Services, Inc.,
dated September 17, 1997
10.14* - License Agreement with Douglas Pike, dated December 3, 1997
10.15* - License Agreement with Nathaniel Cohen, dated December 23, 1997
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.16* - License Agreement with North American Quotations, Inc., dated
February 24, 1998
10.17* - License Agreement with Comtex Scientific Corporation, dated
February 25, 1998
10.18* - License Agreement with Partes Corporation, dated April 1, 1998
10.19* - License Agreement with ValueLine Publishing, Inc., dated June 1,
1998
10.20* - License Agreement with SportsTicker Enterprises, L.P., dated August
13, 1998
10.21* - License Agreement with InfoSeek Corporation, dated August 28,
1998
10.22* - License Agreement with S&P Comstock, Inc., dated October 4, 1998
10.23* - License Agreement with Weathernews, Inc., dated December 1, 1998
10.24* - Distribution Agreement with Pace Financial Network, LLC, dated
March 15, 1999
10.25* - Consulting Agreement with Spencer Trask Securities Inc., dated July
2, 1998, and amendment thereto, dated August 20, 1998
10.26* - Consulting Agreement with Glenn B. Laken, dated January 6, 1999
10.27* - Consulting Agreement with John J. Katsock, dated March 10, 1999
10.28* - Consulting Agreement with Allen & Company Incorporated, dated
March 31, 1999
10.29 - Convertible Note payable to Larry Riesberg, dated February 12, 1999
(see Exhibit 4.13)
10.30 - Convertible Note payable to Donald Sliter, dated February 12, 1999
(see Exhibit 4.14)
10.31 - Convertible Note payable to Steven Muslin, dated February 12, 1999
(see Exhibit 4.15)
10.32 - Convertible Note payable to Dr. Thwack, an Illinois general
partnership, dated February 12, 1999 (see Exhibit 4.16)
10.33 - Convertible Note payable to Steven F. Story, Revocable Trust of
8/9/95, dated March 25, 1999 (see Exhibit 4.17)
10.34 - Convertible Note payable to Banning Enterprises Ltd., dated March
25, 1999 (see Exhibit 4.18)
10.35 - Convertible Note payable to Anson McCoy Beard, Jr., dated March
30, 1999 (see Exhibit 4.19)
10.36 - Convertible Note payable to Prime Equity Fund, L.P., dated March
30, 1999 (see Exhibit 4.20)
10.37 - Convertible Note payable to Adel R. B. Kellel, dated March 30, 1999
(see Exhibit 4.21)
10.38 - Convertible Note payable to Dogwood Bonsai Opportunity Fund,
L.P., dated March 30, 1999 (see Exhibit 4.22 )
10.39 - Convertible Note payable to Adel R.B. Kellel, dated March 30, 1999
(see Exhibit 4.23)
10.40 - Convertible Note payable to Bluewater Consulting, Inc., dated March
30, 1999 (see Exhibit 4.24)
10.41* - Promissory Note payable to The Harmat Organization, Inc., dated
December 15, 1998
21* - Subsidiaries
27* - Financial Data Schedule
</TABLE>
* - Previously Filed
43
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
FINANCIALWEB.COM, INC.
Date: August 18, 1999 By: /s/ James Gagel
--------------------------------------
James Gagel, Executive Vice President
44
<PAGE>
FINANCIALWEB.COM, INC. & SUBSIDIARIES
BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
ASSETS
CURRENT ASSETS
CASH-COLONIAL BANK $442,269
PREPAID CONSULTING FEES 61,111
PREPAID EXPENSES-OTHER 11,175
--------
TOTAL CURRENT ASSETS $ 514,555
PROPERTY & EQUIPMENT
COMPUTER EQUIPMENT 208,933
OFFICE FURNITURE & EQUIP 47,277
--------
TOTAL PROPERTY & EQUIPMENT 256,210
ACCUMULATED DEPRECIATION (40,232)
--------
NET PROPERTY & EQUIPMENT 215,978
OTHER ASSETS
INTELLECTUAL PROPERTY 247,650
ACCUMULATED AMORTIZATION (73,085)
SECURITY DEPOSITS 5,780
TOTAL OTHER ASSETS 180,345
----------
TOTAL ASSETS $ 910,878
==========
<PAGE>
FINANCIALWEB.COM, INC. & SUBSIDIARIES
BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 123,839
PAYROLL TAXES PAYABLE 33,402
ACCRUED EXPENSES 206,843
NOTES PAYABLE 1,500,436
-----------
TOTAL CURRENT LIABILITIES $1,864,520
----------
TOTAL LIABILITIES 1,864,520
STOCKHOLDERS' EQUITY
COMMON STOCK 4,948
ADDITIONAL PAID-IN CAPITAL 1,870,420
RETAINED EARNINGS (2,074,739)
NET INCOME OR (LOSS) (754,271)
-----------
TOTAL STOCKHOLDERS' EQUITY (953,642)
----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 910,878
==========
<PAGE>
FINANCIALWEB.COM, INC. & SUBSIDIARIES
BALANCE SHEET--SUPPLEMENTAL SCHEDULE
MARCH 31, 1999
(UNAUDITED)
SUPPORTING SCHEDULE
ACCRUED EXPENSES
ACCRUED CONSULTING FEES $ 168,625
ACCRUED EXPENSE REIMBURSEMENT 3,930
ACCRUED INTEREST-HARMAT 4,278
ACCRUED INTEREST-MUSLIN 1,135
ACCRUED INTEREST-MUSOLINO 17,667
ACCRUED INTEREST-RIESBERG 567
ACCRUED INTEREST-ROCK 5,672
ACCRUED INTEREST-SHEPARDSON 1,063
ACCRUED INTEREST-SLITER 2,771
ACCRUED INTEREST-THWACK 1,135
----------
TOTAL ACCRUED EXPENSES $ 206,843
==========
NOTES PAYABLE
NOTE PAYABLE-BANNING $ 150,000
NOTE PAYABLE-HARMAT 150,436
NOTE PAYABLE-MUSLIN 100,000
NOTE PAYABLE-MUSOLINO 500,000
NOTE PAYABLE-RIESBERG 50,000
NOTE PAYABLE-ROCK 25,000
NOTE PAYABLE-SHEPARDSON 25,000
NOTE PAYABLE-SLITER 250,000
NOTE PAYABLE-STORY 150,000
NOTE PAYABLE-THWACK 100,000
----------
TOTAL NOTES PAYABLE $1,500,436
==========
<PAGE>
FINANCIALWEB.COM, INC. & SUBSIDIARIES
INCOME STATEMENT
(UNAUDITED)
3 MONTHS ENDED 3 MONTHS ENDED
3/31/99 3/31/98
-------------- --------------
INCOME
BANNER ADVERTISING $ 67,335 $ 5,335
-------- -------
TOTAL INCOME 67,335 5,335
COST OF SALES
COST OF SALES-DATA 97,330 6,850
CONTRACT PROGRAMMING 23,420 0
SUBCONTRACTORS 6,458 0
COMMUNICATIONS 3,647 6,317
SUPPLIES/PARTS-REPAIRS 0 1,502
-------- -------
TOTAL COST OF SALES 130,855 14,669
-------- -------
GROSS PROFIT (63,520) (9,334)
OCCUPANCY EXPENSE
RENT 30,192 8,835
REPAIRS & MAINTENANCE 3,535 0
UTILITIES 224 208
-------- -------
TOTAL OCCUPANCY EXPENSE 33,951 9,043
SALES/MARKETING EXPENSE
ADVERTISING 10,726 604
BUSINESS GIFTS/PROMOTIONS 0 212
DUES & SUBSCRIPTIONS 8,340 3,248
MEETINGS & SEMINARS 195 110
T&E-MEALS & ENTERTAINMENT-50 2,770 1,204
T&E-TRAVEL & LODGING-100% 10,165 5,894
VEHICLE EXPENSE-GENERAL 1,162 0
VEHICLE EXPENSE-LEASE 1,863 0
-------- -------
TOTAL SALES/MARKETING EXPENSE 35,221 11,272
<PAGE>
FINANCIALWEB.COM, INC. & SUBSIDIARIES
INCOME STATEMENT
(UNAUDITED)
3 MONTHS ENDED 3 MONTHS ENDED
3/31/99 3/31/98
-------------- --------------
GENERAL & ADMIN EXPENSE
PAYROLL-OFFICER-KL 33,750 10,000
PAYROLL-OFFICER-JG 18,333 8,750
PAYROLL-OFFICE 46,896 4,208
PAYROLL-PROGRAMMING 135,829 50,700
PAYROLL-TEMPORARY 7,587 1,707
PAYROLL-TAXES 22,770 15,301
AMORTIZATION 12,383 7,388
BANK CHARGES 36 62
CONSULTING FEES 35,326 47,916
DEPRECIATION 12,095 5,652
EMPLOYEE PLACEMENT FEE 15,000 0
EQUIPMENT RENTAL 3,074 339
FURNITURE RENTAL 0 559
INSURANCE-GENERAL 1,923 2,651
INSURANCE-HEALTH 10,183 1,252
INTEREST EXPENSE 25,873 6,498
OFFICE EXPENSE-GENERAL 8,544 4,588
OFFICE EXPENSE-POSTAGE 2,622 376
OFFICE EXPENSE-PRINTING 2,278 1,697
PROF FEES-ACCOUNTING 1,990 86
PROF FEES-LEGAL 203,223 2,500
PROF FEES-PROGRAMMING 3,200 500
TAXES & LICENSES 1,005 811
TELEPHONE/COMMUNICATIONS 17,659 2,825
--------- ---------
TOTAL GENERAL & ADMIN EXP 621,579 176,366
--------- ---------
TOTAL EXPENSES 690,751 196,681
--------- ---------
NET INCOME OR (LOSS) $(754,271) $(206,015)
========= =========
<PAGE>
FINANCIALWEB.COM, INC. & SUBSIDIARIES
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 & 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES 3/31/99 3/31/98
-------------- ------------
NET LOSS $(754,271) $(206,015)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
AMORTIZATION 12,383 7,388
DEPRECIATION 12,095 5,652
CHANGE IN ASSET & LIABILITY ITEMS
DECREASE IN OTHER CURRENT ASSETS 41,229 19,612
INCREASE IN OTHER ASSETS (200.00) (73,750)
INCREASE IN ACCOUNTS PAYABLE 105,197
INCREASE (DECREASE) IN OTHER CURRENT LIABILITIES (7,319) 31,742
--------- ---------
NET CASH USED IN OPERATIONS (590,886) (215,371)
CASH FLOWS FROM INVESTING ACTIVITIES
PURCHASE OF PROPERTY AND EQUIPMENT
COST OF PROPERTY AND EQUIPMENT (39,327) (63,317)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (39,327) (63,317)
CASH FLOWS FROM FINANCING ACTIVITIES
NEW BORROWINGS
INCREASE IN NOTE PAYABLES 800,000 125,000
STOCK ISSUANCES 100,100
DEBT REDUCTION
DECREASE IN NOTE PAYABLES (50,000) (10,000)
--------- ---------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 750,000 215,100
NET DECREASE IN CASH 119,787 (63,588)
CASH - BEGINNING OF PERIOD 322,482 82,803
--------- ---------
CASH - END OF PERIOD $ 442,269 $ 19,215
========= =========
<PAGE>
FINANCIALWEB.COM, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIODS ENDED
MARCH 31, 1999 AND MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL STOCK TOTAL
COMMON COMMON PAID-IN SUBSCRIPTION ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL RECEIVABLE DEFICIT EQUITY
------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AS OF DECEMBER 31, 1997 2,680,000 $2,680 336,746 (408,148) $ (68,722)
NET INCOME OR (LOSS) FOR THE
PERIOD ENDED MARCH 31, 1998 (206,014) (206,014)
PRIVATE PLACEMENT OF 200,000
SHARES 200,000 200 99,800 100,000
STOCK ISSUED FOR INTELLECTUAL
PROPERTY 100,000 100 100
--------- ------ --------- ---------- ---------
BALANCES AS OF MARCH 31, 1998 2,980,000 $2,980 436,546 (614,162) $(174,636)
========= ====== ========= ========== =========
BALANCES AS OF DECEMBER 31, 1998 4,973,000 $4,973 2,070,395 (200,000) (2,074,739) $(199,371)
CASHLESS EXERCISE OF WARRANTS (24,615) (25) (199,975) 200,000 0
NET INCOME OR (LOSS) FOR THE
PERIOD ENDED MARCH 31, 1999 (754,271) (754,271)
--------- ------ --------- -------- ---------- ---------
BALANCES AS MARCH 31, 1999 4,948,385 $4,948 1,870,420 0 (2,829,010) $(953,642)
========= ====== ========= ======== ========== =========
</TABLE>
<PAGE>
FINANCIALWEB.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
ORGANIZATION BACKGROUND
FinancialWeb.com, Inc., f/k/a/ Axxess, Inc., designs, develops, purchases and
manages internet based business publications. The Company's corporate offices
are in Altamonte Springs, Florida.
The Company was incorporated on May 16, 1983 in the State of Utah under the name
of Vital Technologies, Inc., then re-domiciled itself in Nevada in 1988. The
Company was inactive from 1991 through 1996. On March 3, 1997 the Company
changed its name to Axxess, Inc., reverse split the issued and outstanding
shares in a one for twenty-five transaction, changed directors and entered the
business of multimedia publishing and communications. On January 4, 1999 the
Company adopted its current name, in order to more accurately reflect its core
business.
BASIS OF PRESENTATION AND CONTINUED EXISTENCE
The Company's financial statements have been presented on the basis of a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$1,666,592 and $372,266 for the years ended December 31, 1998 and 1997,
respectively, and cumulative losses since inception of $2,829,010. At March 31,
1999, the Company has a working capital deficit of $1,349,965. The Company's
continuation as a going concern is dependent upon its ability to obtain
suitable, sufficient financing or equity investment. There is no assurance that
the Company will be successful in this endeavor. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The Balance Sheet as of March 31, 1999, the Income Statements for the three
months ended March 31, 1999 and 1998, the Statements of Cash Flows for the three
months ended March 31, 1999 and 1998 and the Statements of Stockholders' Equity
for the periods ended March 31, 1999 and 1998 have been prepared by the Company.
In the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations, cash flows and stockholders' equity
have been made.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these interim financial statements be
read in conjunction with the restated financial statements and accompanying
notes for the year ended December 31, 1998.
