<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27757
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Asia Web Holdings, Inc.
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(Exact Name of registrant as specified in its charter)
Delaware 33-0529299
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1947 Camino Vida Roble, Suite 102, Carlsbad, California 92008
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(Address of principal executive offices)
(760) 804-0023
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(Registrant's telephone number, including area code)
Acubid.com, Inc.
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(Former name, former address and former fiscal year, if
changed since last report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 52,803,160
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
ACUBID.COM, INC.
<PAGE>
FORM 10-QSB
Table of Contents
ITEM No.
--------
PART I FINANCIAL INFORMATION
1. Financial Statements .................................................1
Balance Sheet as of May 31, 2000 (unaudited)
and August 31, 1999.................................1
Statements of Operations for the Nine and Three Months Ended
May 31, 2000 and May 31, 1999 (Unaudited)...........2
Statements of Shareholders' Equity for the Nine Months
Ended May 31, 2000 (Unaudited)......................3
Statements of Cash Flows for the Nine Months Ended
May 31, 2000 and May 31, 1999 (Unaudited).........4-5
Notes to the Financial Statements (Unaudited)......................6-16
2. Management's Discussion and Analysis or Plan of Operation............17
PART II OTHER INFORMATION
1. Legal Proceedings....................................................23
2. Changes in Securities................................................23
3. Defaults Upon Senior Securities......................................26
4. Submission of Matters to a Vote of Security Holders..................26
5. Other Information....................................................28
6. Exhibits and Reports on Form 8-K.....................................28
SIGNATURES....................................................................30
i
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
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<TABLE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
CONDENSED BALANCE SHEETS
MAY 31, 2000 AND AUGUST 31, 1999
ASSETS
<CAPTION>
May 31, August 31,
2000 1999
--------------- ---------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 161,770 $ 4,093,919
Short-term investments (Note 1) 2,390,402 -
Inventory (Note 1) 182,389 188,953
Prepaid expenses and other 69,269 60,000
Due from affiliates 270,144 -
--------------- ---------------
Total current assets 3,063,974 4,342,872
PROPERTY AND EQUIPMENT, net of accumulated
depreciation 179,181 196,487
OTHER ASSETS 6,053 14,742
--------------- ---------------
TOTAL ASSETS $ 3,249,208 $ 4,554,101
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 45,415 $ 121,602
Accrued liabilities (Note 1) 57,142 88,962
Due to related parties 13,290 13,290
--------------- ---------------
Total current liabilities 115,847 223,854
--------------- ---------------
OTHER PAYABLE - 53,437
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
6% REDEEMABLE CUMULATIVE CONVERTIBLE
PREFERRED STOCK; par value $.001; 10,000,000
shares authorized; no shares issued and outstanding
at May 31, 2000, 3,800,000 Series A shares issued
and outstanding at August 31, 1999 (Note 4) - 3,800,000
--------------- ---------------
SHAREHOLDERS' EQUITY (Notes 2, 5 and 6)
Common stock; par value of $0.001 per share;
50,000,000 shares authorized; 8,803,160 and
5,738,151 shares issued and outstanding at
May 31, 2000 and August 31, 1999, respectively 8,805 5,739
Additional paid-in capital 13,558,943 9,300,786
Accumulated deficit (10,434,387) (8,829,715)
--------------- ---------------
Total shareholders' equity 3,133,361 476,810
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,249,208 $ 4,554,101
=============== ===============
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED
MAY 31, 2000 AND 1999
(UNAUDITED)
<CAPTION>
Nine Months Ended Three Months Ended
May 31, May 31,
-------------------------------- --------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 19,306 $ 55 $ 1,842 $ 25
Cost of revenues (Note 1) 137,153 (2,325) 41,324 (796)
--------------- --------------- --------------- ---------------
Gross profit (loss) (117,847) 2,380 (39,482) 821
--------------- --------------- --------------- ---------------
Operating Costs and Expenses
Selling, general and administrative,
excluding depreciation, including
$232,000 in the form of common
stock issued to employees and
others for services provided in the
nine months ended May 31, 2000 1,530,750 1,049,619 586,518 1,012,727
Depreciation 67,807 463 22,603 -
--------------- --------------- --------------- ---------------
Total operating costs and expenses 1,598,557 1,050,082 609,171 1,012,727
--------------- --------------- --------------- ---------------
Loss from operations (1,716,401) (1,047,702) (648,603) (1,011,906)
--------------- --------------- --------------- ---------------
Other Income
Interest and dividend income 69,896 - 51,317 -
Other investment income 41,836 - - -
--------------- --------------- --------------- ---------------
Total other income 111,732 - 51,317 -
--------------- --------------- --------------- ---------------
Loss before provision for income taxes
and extraordinary item (1,604,672) (1,047,702) (597,286) (1,011,906)
Provision for income taxes - (800) - -
Extraordinary gain on settlement of debt - 72,745 - 72,745
--------------- --------------- --------------- ---------------
Net loss (1,604,672) (975,757) (597,286) (939,161)
Distribution to converting preferred
shareholders in form of common stock 788,960 - - -
--------------- --------------- --------------- ---------------
Net loss applicable to common
shareholders $ (2,393,632) $ (975,757) $ (597,286) $ (939,161)
=============== =============== =============== ===============
Net loss applicable to common shares -
basic and diluted
Net loss $ (0.34) $ (0.29) $ (0.07) $ (0.19)
=============== =============== =============== ===============
Weight average number of common shares 7,097,389 3,364,679 8,778,157 4,942,953
=============== =============== =============== ===============
See accompanying notes to financial statements.
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</TABLE>
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<TABLE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MAY 31, 2000
(UNAUDITED)
<CAPTION>
Common Stock
--------------------------------- Additional
Paid-In Accumulated
Shares Amount Capital Deficit Total
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, September 1, 1999 5,738,151 $ 5,739 $ 9,300,786 $ (8,829,715) $ 476,810
Net loss for the period - - - (1,604,672) (1,604,672)
Settlement of liabilities by the
issuance of common stock 57,739 58 60,879 - 60,937
Issuance of shares of common
stock for services 88,500 89 224,947 - 225,036
Exercise of stock warrants 25,000 25 11,225 - 11,250
Preferred stock dividends - - (59,250) - (59,250)
Exchange of series A preferred
shares for common stock 2,893,770 2,894 4,020,356 - 4,023,250
--------------- --------------- --------------- --------------- ---------------
Balance, May 31, 2000
(Unaudited) 8,803,160 $ 8,805 $ 13,558,943 $ (10,434,387) $ 3,133,361
=============== =============== =============== =============== ===============
See accompanying notes to financial statements.
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</TABLE>
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<TABLE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
<CAPTION>
2000 1999
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,393,632) $ (975,757)
--------------- ---------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 67,807 8,051
Shares issued for services 7,500 187,211
Common shares issued as inducement
to preferred shareholders 788,960 -
Value of common stock and stock operations
issued for services 225,306 689,700
Extraordinary gain on settlement of debt - (72,745)
Debt settlement expense - 56,015
Changes in assets and liabilities:
Inventory 6,564 (1,136)
Prepaid expenses and other (580) (4,930)
Accounts payable (76,187) (35,090)
Accrued liabilities (8,090) 7,301
Due from (to) related parties - 18,123
Other - 11,540
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Total adjustments 1,011,280 864,040
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Net cash used in operating activities (1,382,352) (111,717)
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CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment (50,501) (5,688)
Increase in short-term investments (2,390,402) -
--------------- ---------------
Cash used in investing activities (2,440,903) (5,688)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock in a private placement - 499,500
Proceeds from issuance of redeemable preferred
stock in a private placement 150,000 -
Proceeds from exercise of warrants 11,250 495,000
Increase in due from affiliates (270,144) -
--------------- ---------------
Cash provided (used) by financing activities (108,894) 994,500
--------------- ---------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (3,932,149) 877,095
CASH AND CASH EQUIVALENTS - beginning 4,093,919 9,871
--------------- ---------------
CASH AND CASH EQUIVALENTS - end $ 161,770 $ 886,966
=============== ===============
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
May 31,
---------------------------
2000 1999
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Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued for settlement of liabilities:
Common stock $ 53,385 -
Additional paid in capital $ 52 -
Long-term liability $ 53,437 -
Common stock issued in exchange for preferred
stock and accrued dividends $ 4,023,250 -
See accompanying notes to financial statements.
-5-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF COMPANY'S BUSINESS
Asia Web Holdings, Inc. (formerly Acubid.Com Inc.) (the "Company") was
formed in Canada in 1983. It was subsequently incorporated under the laws
of the state of Delaware in September 1993.
Subsequent to August 31, 1999, management made a determination to
substantively discontinue the Company's AcuVision Product Line. In
addition, during fiscal 1999, the Company changed its name from
International AcuVision Systems, Inc. to Acubid.Com Inc. and expanded its
business objective to include the development of a premier website to
facilitate the buying and selling of high-end collectibles. The Company
has accumulated an inventory of rare and hard to find items, which it has
been auctioning to the public over its website. In addition, the Company
has developed and implemented the technological requirements needed to
act as a broker to provide a venue for sellers and dealers to display
their collectibles to potential purchasers throughout the world via the
AcuBid.Com website.
BUSINESS COMBINATION
On March 13, 2000 and as amended on March 24, 2000, the Company entered
into a Stock Purchase Agreement with Adisatrya Surya Sulisto ("Seller" or
"Sulisto"), owner of at least 90% of the issued and outstanding shares of
Jaring Data Interaktif, ("JDI") wherein and whereby, the Company, through
its wholly owned subsidiary, Acubid Acquisition Corp., was to purchase
90% of the issued and outstanding shares of JDI in exchange for
44,000,000 shares of the Registrant's Common Stock.
The Agreement also provided that Seller contemplated entering into an
arrangement with the Selim K. Zilkha Trust ("Zilkha" or the "Trust")
wherein the Trust would purchase 5,000,000 shares of Registrant's Common
Stock in exchange for a $10,000,000 capital infusion in the Registrant.
It was contemplated that this Private Placement would close
simultaneously with the closing under the Agreement and after the Company
receives appropriate investment representations from Zilkha.
-6-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS COMBINATION (CONTINUED)
Pursuant to a Sale and Purchase Agreement dated June 12, 2000, between
Adisatrya Suryo Sulisto and Alanberg Pte. Ltd., a Singapore corporation,
("Alanberg" or "Seller"), Alanberg assumed all of the duties, rights and
obligations of Sulisto under the Amended and Restated Stock Purchase
Agreement.
By June 19, 2000, all required Indonesian regulatory approval and all
conditions precedent had been fulfilled and the transaction closed on
that date. At the closing, the Company delivered to Alanberg certificates
representing 44,000,000 shares of the Registrant's Common Stock in
exchange for 180,000,000 shares or 90% of the issued and outstanding
shares of JDI's stock. No other consideration was paid for 90% of the
issued and outstanding shares of JDI stock.
BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments, except as noted elsewhere in the notes to the
condensed financial statements) necessary to present fairly its financial
position as of May 31, 2000 and the results of its operations for the
three and nine months ended May 31, 2000 and 1999. These statements are
condensed and therefore do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. The statements should be read in
conjunction with the financial statement and footnotes included in the
Company's annual report on Form 10-KSB for the year ended August 31,
1999. The results of operations for the three and nine months ended May
31, 2000 are not necessarily indicative of the results to be expected for
the full year.
REVENUE RECOGNITION
Revenues derived from placement fees charged for the listing of items on
the Company's on-line auction site are recognized at the time an item is
listed, while those related to success fees are recognized at the time
the auction is successfully concluded.
PRODUCT DEVELOPMENT COSTS
Product development costs include expenses incurred by the Company to
develop, enhance, manage, monitor and operate the Company's website.
Product development costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term, highly liquid investments
with original maturities of three months or less. The Company has no
requirements for compensating balances. At May 31, 2000, cash balances in
excess of federally insured limits amounted to approximately $75,000.
-7-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES
Approximately $2,300,000 is maintained in a liquid asset management
account which invests primarily in investment grade short-term commercial
paper, corporate bonds and taxable auction rate notes.
The Company accounts for its marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115). The Company has classified all investment securities as trading
securities which are measured at fair value in the financial statements
with unrealized gains and losses included in results of operations. Net
unrealized holding gains of approximately $47,363 have been included in
results of operations for the nine months ended May 31, 2000. All
investment securities have a maturity date which is less than one year
from May 31, 2000.
INVENTORY
Inventory, consisting of sports memorabilia and other collectibles is
stated at the lower of cost or market. Inventory cost is determined by
using the first-in, first-out method. Substantially all inventory
consists of goods held for sale. The Company's management monitors
inventory for slow moving items and makes necessary valuation adjustments
when required. During the nine and three months ended May 31, 2000, the
Company recorded valuation adjustments of approximately $123,000 with
respect to such items.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the expected lives, which range from three to
five years. Expenditures for normal maintenance and repairs are charged
to operations. Renewals and betterments that materially extend the life
of the assets are capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its long-lived assets for potential impairment
whenever circum-stances indicate that the carrying amount of an asset is
not recoverable. The estimated undiscounted cash flows associated with
the assets are compared to the carrying amounts to determine if a
write-down to fair value is required. The Company has determined that
there was no such impairment present at May 31, 2000.
INCOME TAXES
The Company accounts for current and deferred income taxes using the
liability method. Under this method deferred income tax liabilities and
assets 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. Deferred tax
assets and/or liabilities are classified as current and noncurrent based
on the classification of the related asset or liability for financial
reporting purposes, or based on the expected reversal date for deferred
taxes that are not related to an asset or liability. Valuation allowances
are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
-8-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company accounts for the value of financial instruments using the
fair value method.
The estimated fair value amounts of all financial instruments have been
determined by the Company using available market information and
appropriate valuation methodologies. Fair value is described as the
amount at which the instrument could be exchanged in a current
transaction between informed willing parties, other than in a forced
liquidation. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amount that the Company could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have material effect on the estimated fair
value amounts. The Company is not a party to any derivative instruments.
The Company does not have any off balance sheet financial instruments.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
Cash and equivalents, accounts receivable, inventory, other
current assets, accounts payable, and certain other current
liability amounts are reported in the balance sheet at approximate
fair value due to the short-term maturities of these instruments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ("SFAS") No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, established accounting and disclosure
requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. SFAS No. 123 allows the use of
Accounting Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, which is the intrinsic value method of accounting as
described below, for options granted to employees, provided the pro forma
discloses requirements of SFAS No. 123 are adopted.
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in APB No. 25. Compensation cost for stock
options granted employees, if any, is measured as the excess of the
quoted market price of the Company's stock at the date of grant over the
amount an employee must pay to acquire the stock. Restricted stock is
recorded as compensation cost over the requisite vesting periods based on
the market value on the date of grant. The Company accounts for stock and
stock options issued and granted to non-employees in accordance with the
provisions of SFAS No. 123 and records compensation as the fair value of
the underlying security issued.
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ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMMON SHARES AND PER SHARE AMOUNTS
In March 1999, the Company effected a one-for-two reverse stock split.
All common shares and per share amounts have been adjusted to give effect
to that stock split.
LOSS PER COMMON SHARE
The Company adopted the Financial Accounting Standards Board SFAS No.
128, EARNINGS PER SHARE. This pronouncement replaced the previously
reported primary and fully dilutive earnings per share with basic and
diluted earnings per share. Loss per common share has been calculated in
accordance with the requirements of this statement for the nine and three
month periods May 31, 2000 and 1999.
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding
for the year. Diluted earnings per share reflects the potential dilution
that could occur if dilutive securities and other contracts to issue
common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the Company's earnings.
Diluted loss per share does not consider the potentially dilutive
securities on an "as if converted" basis, as the effect of their
inclusion would be anti-dilutive.
ADVERTISING COSTS
Advertising costs are charged to operations as they are incurred.
2. SALE OF PREFERRED STOCK IN JUNE 2000
The Company's Articles of Incorporation authorize the issuance of
10,000,000 shares of preferred stock, $0.001 par value. The Company's
Board of Directors has authority, without action by the shareholders, to
issue all or any portion of the authorized but unissued preferred stock
in one or more series and to determine the voting rights, preferences as
to dividends and liquidation, conversion rights, and other rights of such
series. On June 20, 2000 the Company filed the Certificate of
Designations of the Series B Preferred with the Delaware Secretary of
State. The preferred shares have a stated value of $10.00 per share, rank
senior to all other securities of the Registrant, including common shares
and later authorized classes, have a liquidation preference, and are
convertible, at any time into five common shares for each preferred
share. The preferred shares also contain an economic anti-dilution
provision in the event that the Registrant sells common stock at a more
advantageous price than two dollars per share within ten years of the
issuance of the preferred shares.
-10-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
2. SALE OF PREFERRED STOCK IN JUNE 2000 (CONTINUED)
On June 20, 2000, the Company and Alanberg entered into Amendment No. 1
to the Amended and Restated Stock Purchase Agreement ("Amendment No. 1")
which amended the provisions of Article III of the Agreement. Amendment
No. 1 provided that Seller was to arrange for Zilkha to purchase
1,000,000 shares of Registrants Series B Preferred Stock (convertible
into 5,000,000 common shares) at $10.00 per share (the "Preferred
Shares"). Amendment No. 1 also provided for Zilkha to receive a warrant
to purchase an additional 5,000,000 shares of common stock exercisable at
$2.00 per share for the first three years after the closing of the
transaction and $4.00 per share for an additional two years thereafter.
Additionally, Zilkha received a second warrant to purchase an additional
2,000,000 shares of common stock exercisable at $5.00 per share for five
years after the closing of the transaction.
On June 23, 2000, the Company closed the private placement transaction
with Zilkha, issuing 1,000,000 shares of Series B Preferred Stock and the
two warrants described above, in exchange for $10,000,000.
3. OTHER AGREEMENTS
An agreement between William Millard and the Company was entered into on
June 14, 2000. In return for his serving as a Director of Asia Web
Holdings, Inc. for the next five years, Mr. Millard was granted options
to purchase 500,000 shares of common stock. These options are
non-qualified options and vest at a rate of 100,000 per year, the first
vesting commenced immediately with the signing of the agreement. The
exercise price for the options is $2.00 per share.
A services agreement between Tjahjono Soerjodibroto and Asia Web Holding,
Inc. was entered into on June 28, 2000. The services agreement, granted
Mr. Soerjodibroto options to purchase 150,000 shares of common stock.
These options are non-qualified options and vest at a rate of 30,000 per
year, the first vesting commencing at the end of the first year of
service. The exercise price for the options is $2.00 per share.
An employment agreement between Michael Schaffer and the Comapny was
entered into on June 1, 2000. In the employment agreement, Mr. Schaffer
was granted options to purchase 500,000 shares of common stock. Of those
500,000 options, 300,000 are non-qualified options and subject to the
terms of a Stock Option Agreement also executed on June 1, 2000. The
remaining 200,000 options are incentive equity options and subject to the
terms of the Company's Incentive Equity Plan. The non-qualified options
vest at a rate of 150,000 per year, the first vesting commenced
immediately with the signing of the employment agreement. The exercise
price for the non-qualified options is $2.50 per share. The incentive
equity options vest at a rate of 40,000 per year, the first vesting
commenced immediately with the signing of the employment agreement. The
exercise price for the incentive equity options is $2.50 per share.
-11-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
3. OTHER AGREEMENTS (CONTINUED)
An employment agreement between Waddy Stephenson and the Company was
entered into on June 1, 2000. In the employment agreement, Mr. Stephenson
was granted options to purchase 100,000 shares of common stock. These
options are incentive equity options, subject to the terms of the
Company's Incentive Equity Plan, and vest at a rate of 40,000 per year,
the first vesting commenced immediately with the signing of the
employment agreement. The exercise price for the options is $2.50 per
share.
An agreement between Terry Giles and the Company was entered into on June
14, 2000. In return for his serving as a Director of Asia Web Holdings,
Inc. for the next five years, Mr. Giles was granted options to purchase
500,000 shares of common stock. These options are non-qualified options
and vest at a rate of 100,000 per year, the first vesting commenced
immediately with the signing of the agreement. The exercise price for the
options is $2.00 per share.
4. Private Placement of 6% Cumulative Convertible Redeemable
Preferred Stock
In July 1999, the Company initiated a private placement to sell 400 units
at $10,000 per unit. Each unit consisted of 10,000 shares of 6%
cumulative convertible preferred stock and warrants to purchase 5,000
shares of the Company's common stock. Dividends are payable
semi-annually. Each preferred share was convertible into .666 common
shares in the first year, .4 shares in the second year, and .285 shares
thereafter. No preferred shares could utilize the conversion feature
until six months after the offering had been concluded. The warrants to
purchase common shares are exercisable at $2.00 per share in the first
year and $3.00 per share thereafter. The warrants expire five years from
the date of issue. The Company raised approximately $3,950,000 from this
offering, of which $3,800,000 had been subscribed and received as of
August 31, 1999 and $150,000 was received during the nine months ended
May 31, 2000. Pursuant to the terms of the preferred stock, the Company
was not permitted to declare or pay any dividends on its common stock
unless all preferred dividends due have been paid.
In January 2000, the Company commenced an exchange offer with its
preferred share-holders. Pursuant thereto, the Company agreed to exchange
each outstanding preferred share for common stock in the ratio set forth
in the preferred stock purchase agreement, .666 common shares for each
outstanding preferred share. Additionally, as an incentive to the
preferred shareholders, the Company agreed to issue additional common
share for every 10 common shares issued in the exchange.
As of May 31, 2000, all 3,950,000 of these preferred shares were
exchanged, which resulted in the issuance of 2,893,770 common shares. The
number of shares issued as "incentive" shares amounted to 263,070. For
accounting purposes, these shares have been recorded as a distribution to
the preferred shareholders (net of accrual dividends due the preferred
shareholders which were cancelled in connection with exchange offer).
-12-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
5. STOCKHOLDERS' EQUITY
COMMON SHARES ISSUED FOR SERVICES AND SETTLEMENT OF DEBT
During the nine months ended May 31, 2000, the Company issued 88,500
shares of its common stock for services provided to the Company. The
shares were valued at the market value of the Company's common stock on
the date that they were issued.
In October 1999, the Company agreed to issue a total of 57,739 shares of
its common stock to a consultant as settlement of an amount due.
WARRANTS
In November 1997, the Company issued debentures with detachable,
non-transferable warrants to purchase 87,500 shares of its common stock.
These warrants were immediately exercisable on issuance and expired in
November 1999.
The Company issued 1,975,000 common stock purchase warrants in connection
with the issuance of its 6% convertible redeemable preferred stock (Note
2). The warrants, which expire five years from the date of the preferred
stock offering, can be exercised commencing six months after the offering
for a period of twelve months for $2.00 per share. Thereafter, until they
expire, the warrants can be exercised for $3.00 per share.
The following summarizes information about warrants granted and
outstanding at May 31, 2000 and 1999, and changes during the each of the
related nine month periods.
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Warrants Price Warrants Price
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Outstanding,
beginning of period 1,935,000 $ 1.97 100,000 $ 1.18
Granted 75,000 2.00 87,500 0.56
Exercised - - - -
Cancelled/expired (35,000) - - -
--------------- --------------- --------------- ---------------
Outstanding, end of period 1,975,000 $ 2.00 187,500 $ 0.89
=============== =============== =============== ===============
</TABLE>
-13-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
6. STOCK OPTIONS AND INCENTIVE EQUITY PLANS
STOCK OPTIONS
The Company granted options to purchase shares of its common stock as
indicated below. The options were fully vested on the dates of grant.
During 1999, the Company granted options to certain employees, directors
and consultants to purchase 735,000 shares of common stock at exercise
prices ranging from $.45 to $2.50 per share. The options expire between
two and three years from the time of the grant. As of August 31, 1999,
100,000 options had been exercised. No options were exercised during the
nine months ended May 31, 2000.
The following summarizes information about stock options granted and
outstanding at May 31, 2000 and 1999, and changes during each of the
related nine month periods.
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Outstanding,
beginning of period 635,000 $ .75 - $ -
Granted 50,000 1.44 - -
Exercised (25,000) .50 - -
Cancelled/expired (90,000) 2.51 - -
--------------- --------------- --------------- ---------------
Outstanding, end of period 570,000 $ 0.55 - $ -
=============== =============== =============== ===============
</TABLE>
INCENTIVE EQUITY PLANS
During August 1999, the Company adopted its 1999 Incentive Equity Plan
("Incentive Plan") and the 1999 Stock Option Plan for Non-Employee
Directors ("Directors Plan").
Officers, including officers who are members of the Board of Directors,
and other key employees of and consultants to the Company may be selected
by the Committee to receive benefits under the Incentive Plan.
The Incentive Plan authorizes the granting of options to purchase shares
of common stock ("Option Rights"), stock appreciation rights
("Appreciation Rights"), restricted shares ("Restricted Shares"),
deferred shares ("Deferred Shares"), performance shares ("Performance
Shares") and performance units ("Performance Units").
Subject to adjustment as provided in the Incentive Plan, the number of
shares of common stock that may be issued or transferred, plus the amount
of shares of common stock covered by outstanding awards granted under the
Incentive plan, shall not in the aggregate exceed 1,500,000 shares. The
number of Performance Units granted under the Incentive plan shall not in
the aggregate exceed 100,000. The number of shares of common stock
granted under the Incentive Plan to any individual in any calendar year
shall not in the aggregate exceed 100,000. As of May 31, 2000, no options
have been granted pursuant to the incentive equity plans.
-14-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
6. STOCK OPTIONS AND INCENTIVE EQUITY PLANS (CONTINUED)
OPTION RIGHTS
The Company may grant Option Rights that entitle the optionee to purchase
shares of common stock at a price less than, equal to or greater than
market value on the date of grant.
The exercise price for nonqualified stock options granted may not be less
than 85% of the fair market value per share of common stock on the date
of grant. The exercise price for ISOs may not be less than the fair
market value per share of common stock on the date, and ISOs granted to
persons owning more than 10% of the Company's voting stock must have an
exercise price of not less than 110% of the fair market value per share
of common stock on the date of grant. All options granted must be
exercised within ten years of grant, except that ISOs granted to 10% or
more stockholders must be exercised within five years of grant. The
aggregate market value (as determined as of the date of grant) of the
common stock for which any optionee may be awarded ISOs which are first
exercisable by such optionee during any calendar year may not exceed
$100,000.
APPRECIATION RIGHTS
Appreciation Rights granted under the Incentive Plan may be either
free-standing or granted in tandem with Option Rights. An Appreciation
Right represents the right to receive from the Company the difference
("Spread"), or a percentage thereof not in excess of 100 percent, between
the base price per share of common stock in the case of a free-standing
Appreciation Right, or the option price of the related Option Right in
the case of a tandem.
Appreciation Right, and the market value of the common stock on the date
of exercise of the Appreciation Right. Tandem Appreciation Rights may
only be exercised at a time when the related Option Right is exercisable
and the Spread is positive, and the exercise of a tandem Appreciation
Right requires the surrender of the related Option Right for
cancellation.
A free-standing Appreciation Right must have a base price that is at
least equal to the fair market value of a share of common stock on the
date of grant, must specify certain other criteria that are necessary
before the Appreciation Right becomes exercisable and may not be
exercised more than 10 years from the date of grant.
RESTRICTED SHARES
An award of Restricted Shares involves the immediate transfer by the
Company to a participant of ownership of a specific number of shares of
common stock in consideration of the performance of services, or, as and
to the extent determined by the Company, the achievement of certain
objectives. The participant is entitled immediately to voting, dividend
and other ownership rights in the shares. The transfer may be made
without additional consideration from the participant or in consideration
of a payment by the participant that is less than the market value of the
shares on the date of grant, as the Committee may determine.
-15-
<PAGE>
ASIA WEB HOLDINGS, INC.
(FORMERLY ACUBID.COM INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
6. STOCK OPTIONS AND INCENTIVE EQUITY PLANS (CONTINUED)
DEFERRED SHARES
An award of Deferred Shares constitutes an agreement by the Company to
deliver shares of common stock to the participant in the future in
consideration of the performance of services, subject to the fulfillment
of such conditions during the deferral period (as defined in the
Incentive Plan) as the Company may specify.
THE DIRECTORS PLAN
The Directors Plan will be administered by a committee ("Committee") of
the Board of Directors, consisting of no less than two members of the
Board. Only members of the Board of Directors who are not employees of
the Company (each a "Director") will be eligible to participate in the
Directors Plan.
Subject to adjustment as described below, the number of shares issued or
transferred, plus the number of shares covered by outstanding options
under the Director Plan shall not exceed 250,000 shares of common stock.
Shares of common stock covered by an option, which is cancelled or
terminated, will again be available to be issued or to be the subject of
a stock option granted under the Directors Plan.
The exercise price of the options granted is equal to the fair market
value per share of common stock on the date of grant. Options granted
under the Directors Plan shall become exercisable to the extent of 20% of
the common shares subject thereto on the Date of Grant and to the extent
of an additional 20% of the common shares subject thereto after each of
the first four anniversaries of such date, for so long as the Optionee
continues to serve as a member of the Board.
-16-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following "Management's Discussion and Analysis or Plan
of Operation" includes "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. This Act provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this Form 10-Q are forward- looking. In particular, any statements that
we make in this Form 10-Q regarding industry prospects or our future results of
operations or financial position are forward-looking statements. Forward-looking
statements reflect our current expectations and are inherently uncertain. Our
actual results may differ significantly from our expectations.
Plan of Operation: Overview
During the quarter ending May 31, 2000, the Company remained an online auction
house and received shareholder approval during the quarter to acquire PT Jaring
Data Interaktif ("JDI"), an Indonesian Internet Service and Content Provider.
This acquisition, completed on June 19, 2000, marked a significant change in the
Company's direction. Prior to the acquisition, the Company's focus had been on
expanding its market share of the Internet auction business, directly competing
with eBay, Yahoo, and Amazon.com. Although the Company still plans to continue
its auction site after the acquisition, its business model has changed so that
its revenue is not completely dependant on its ability to compete with the large
auction sites. The current model of the Company can be summarized as follows:
(a) To enter into emerging Internet markets through acquisitions and strategic
alliances with Internet corporations from those markets that focus on Internet
subscriptions and/or content development. It is expected that the acquisitions
themselves will be profitable, or stand a strong probability of becoming
profitable, through some combination of Internet subscriber premium service, web
hosting fees, and web development fees, as well as through advertising revenue.
These acquisitions and strategic alliances are collectively referred to as
"partners."
(b) To provide managerial and technical support to its partners increasing
their ability to compete in regional and international markets.
(c) To utilize these new markets to increase the traffic to the Company's
online auction site as well as other developed e-commerce and information sites.
(d) To utilize the technical staff maintained by its partners to provide
cost effective Internet solutions to businesses worldwide.
-17-
<PAGE>
It is believed that through a combination of the above services that the Company
can become profitable.
PT JARING DATA INTERAKTIF
On January 24, 2000, the Company entered into a Memorandum of
Understanding with JDI an Indonesian corporation, to acquire 90% of JDI in
exchange for up to 44 million shares of the Company's Common Stock.
Subsequently, a formal Stock Purchase Agreement was signed on March 13, 2000 and
amended on March 24, 2000. Shareholder approval of the acquisition was obtained
at the annual shareholder meeting held on May 22, 2000 and the acquisition was
completed on June 19, 2000.
The Amended and Restated Stock Purchase Agreement signed on
March 24, 2000 was amended once again on June 20, 2000 changing some and
clarifying other terms of a private placement that was contemplated in the
earlier agreement. The private placement of 1,000,000 shares of Series B
Preferred Stock at $10.00 per share ($10,000,000) (the "Private Placement") was
complete on June 23, 2000.
JDI, together with its subsidiary PT Media Lintas Antarbuana,
operates as an Indonesian Internet Service and Content Provider that aims to be
a leader in the Internet industry throughout Indonesia and ultimately Southeast
Asia, providing users and customers a comprehensive suite of services including
quality Internet access, multimedia content production and deployment, website
design and development, e-commerce solutions, as well as Internet hosting and
server co-location.
Although the acquisition of JDI was not completed until after
the end of the quarter, since the completing acquisition was the most
significant task of the quarter, a short summary of its operations during the
quarter is provided.
Between February 2000 and June 2000, JDI signed up
approximately 8000 dial-up Internet subscribers. Beginning in August 2000, JDI
plans to charge these subscribers approximately $10.00 per month. JDI is
presently developing a plan to offer wireless broadband Internet access in
addition to this traditional dial-up access.
During the quarter, JDI continued the development of an
Indonesian Internet portal. This portal provides JDI subscribers a wide range of
information and Internet services, including: web based email, message boards,
online facsimiles, news and other information sources (e.g., health, lifestyle,
finance, government and social issues, horoscopes). Additional services, such as
chat rooms, customization, web hosting, web-based file storage, and search
engines are also being developed. Additionally, JDI has been developing and
hosting web sites for several other Indonesian businesses.
-18-
<PAGE>
After the completion of the JDI acquisition and the Private
Placement, the Company is now poised to develop and expand the business of JDI.
The proceeds from the Private Placement are specifically earmarked for that
purpose. The Company, along with its subsidiary JDI, is presently developing a
business plan for JDI to determine the best course of action in expanding its
business. Although the details of this business plan are not yet final, they
focus on the following issues:
(a) Expansion of JDI's Internet access services to include wider access of
services within Indonesia and also to include a better class of services through
wireless broadband.
(b) To expand the wide range of content available on the Internet portal.
(c) To market the Internet services provided by JDI.
ONLINE AUCTION HOUSE AND OTHER E-COMMERCE SOLUTIONS
The Company's online auction house competes for a share of
the online auction business dominated presently by eBay, Amazon.com and Yahoo.
To date, the Company's revenues have been derived from listing fees, commissions
received from the sale of items on its site and sales of items for its own
account. None of these revenues have been significant.
Ultimately, for the Company's Consumer-to-Consumer online
auction house to be successful, the Company would have to generate enough
traffic to its site to convince potential sellers that hosting their auction on
the Company's auction site would bring in the best price for the item being
auctioned. This provides a significant barrier for new online auction houses to
compete with eBay, the largest of the online auction houses. Amazon.com and
Yahoo have had some success because those sites had an existing consumer base
that could be directed to the online auction house section of the site.
In this quarter, the Company has neither made attempt to
expand its auction site nor any attempt to increase the traffic to its auction
site. Instead the Company has been focusing its efforts into completing the
acquisition of JDI and the concomitant change in business direction into what
the Company believes to be a more profitable direction. With the completion of
that transaction, the Company plans to explore different avenues that could
transition its auction site into a profitable endeavor. Any such transition
would involve advantages (e.g., advertising, web site development, web site
linking) that could be derived from its newly acquired partners. It should be
noted that any expansion to the Company's own web site will remain secondary to
the development of JDI for the next six months.
-19-
<PAGE>
In relation to the Company's own web site, the Company has
incurred no research and development costs in the three months ending May 31,
2000 with the exception of salaries for a technical staff of two. In addition to
maintaining the web site, the technical staff also spent time in Indonesia
supporting JDI. Additionally, an outside consultant was hired for a month to
provide technical support to JDI. The Company does not expect that the technical
staff required to support its web site will change over the next twelve months,
but it is expected that additional research and development costs related to
technical support provided to JDI will be incurred. The level of effort expected
for this additional support is a possible increase in the Company's technical
staff by one or two persons.
To support its own web site, the company will require no
additional equipment to meet user demand at foreseeable levels of operation. At
some point, additional servers and equipment will be required.
At present levels of operation, management does not believe
that the number of key employees working directly for the Company will change
significantly within the next twelve months.
RESULTS OF OPERATIONS
Results of Operations- for the Nine and Three Months Ended
----------------------------------------------------------
May 31, 2000 Compared to the Nine and Three Months Ended May 31, 1999:
----------------------------------------------------------------------
Revenues
--------
Auctions were commenced in August of 1999 and in the three
and the nine months ended May 31, 2000, $1,842 and $19,306, respectively, of
revenue was derived from these operations. There were no significant revenues in
the Three and Nine Month Period ended February 28, 1999. The Company expects
that no significant changes the Company's online auction house nor its revenues
from that site will occur in the next quarter. The Company plans to maintain the
online auction house at its present level until it determines how the site fits
within its new business direction.
Operating Costs and Expenses:
Selling General and Administrative, Excluding Depreciation-
Selling, general and administrative costs and expenses,
excluding depreciation were $573,196 and $1,530,750, respectively, in the three
months and nine months ended May 31, 2000 compared to $1,012,727 and $1,049,619,
respectively in the three and nine months ended May 31, 1999. Thus, selling,
general, and administration costs decreased by $439,531 and increased by
-20-
<PAGE>
$490,131 for the three months and nine months ended May 31,2000 as compared to
the three and nine months ended May 31, 1999, respectively. The primary factors
related to the higher costs were costs associated with the technical development
of the Company's Web site, increased salaries, rent for larger facilities,
increased marketing and increases in all other administrative costs, such as
phone, postage, mail and other items, including the items discussed below.
Common Stock issued and Stock Options Granted as Compensation,
Included in Selling, General and Administrative Expenses.
Common Stock and Stock Options were granted to officers,
directors, and consultants in the three and nine months ended May 31, 2000 and
1999. The Company accounted for options granted in accordance with SFAS No. 123
and APB No. 25, as appropriate. Charges related to the stock issuances and
options granted were nil and $232,000 during the three and nine months ended May
31, 2000 and $877,000 during the three and nine months ended May 31, 1999..
Depreciation Expense-
Depreciation expense was $ 22,603 and $67,807 in the three
and nine months ended May 31, 2000, respectively, as compared to the three and
nine months ended May 31, 1999. Accordingly, depreciation expense increased by
$67,344 and $22,609 during the nine and three month periods ended May 31, 2000
as compared to the relevant 1999 periods. The increases are as a result of
depreciation related to the Company's acquisition of equipment related to the
development of its web site.
Investment Income-
Investment income the three and nine months ended May 31,
2000 in the amount of $51,317 and $111,732 was derived from interest earned on
bank deposits and earnings on short term investments. Such amounts for the
comparable 1999 period were nil. The Company derived most of the investment
income in 2000 due to its investment in high yield funds.
LIQUIDITY AND CAPITAL RESOURCES: Prior to May 31, 2000, the
Company had raised $5,025,471 since the change in business direction in February
1999. The Company's balance sheet at May 31, 2000 reflects cash of approximately
$161,670, marketable securities of approximately $2,390,402 and other current
receivables from related parties in the amount of $270,144.
Cash on the balance sheet declined by approximately
$3,932,000 during the nine months ended May 31, 2000 due, in part, to
redeployment into short term investments. Cash used in operating activities
amounted to approximately $1,369,000 during this period. Cash was used to fund
the Company's net loss for the period, partially offset by operating charges not
requiring the use of cash, including charges related to the issuance of shares
-21-
<PAGE>
of common stock for services received and depreciation. Increasing the use of
cash in the period were reductions in accounts payable and accrued expenses,
offset partially by decreases in inventory and prepaid expenses.
Financing activities utilized $109,000 during the nine months
ended May 31, 2000 as the Company completed and received the final proceeds
related to the issuance of its Series A preferred stock in September 1999,
offset by advances to our new subsidiary.
Investing activities used $2,441,000 as the Company sought to
increase the investment yield of its excess funds by investing such amounts in
higher yielding bond funds.
Without regard to the JDI acquisition, discussed above, and
only as to the Company as it is presently operating, at current operating rates
the Company believes that it can satisfy its cash requirements over the next
twelve months without the use of the $10,000,000 raised in the Private
Placement. However, the Company's longer term capital requirements beyond the
next 12 months will depend on many factors, including, but not limited to, the
rate of market acceptance of the Company's services, the Company's ability to
develop, maintain and expand its user base, the level of resources required to
expand the Company's business model and other factors, some of which may be
beyond the Company's control.
With respect to the JDI acquisition, the Company raised
$10,000,000 through the Private Placement, to fund the operation and expansion
of JDI's business. The Company is presently evaluating JDI's operations and
expansion plans to determine the best use of the proceeds from the Private
Placement and to determine JDI's capital requirements over the next 12 months.
YEAR 2000 ISSUES Many current installed computer systems and
software products are coded to accept only two digit entries in the date code
field and cannot reliably distinguish dates beginning on January 1, 2000 from
dated prior to the year 2000. Many companies' software and computer systems may
need to be upgrade or replaced in order to correctly process dates beginning in
2000 and to comply with the "Year 2000" requirements. The Company has reviewed
its internal programs and has determined that there are no significant Year 2000
issues within the Company's systems or services. However, the Company utilizes
third-party equipment and software that may not be Year 2000 compliant although
the Company believes that the third-party systems that are material to its
business are Year 2000 compliant based on representations made by these
suppliers. Failure of such third-party equipment or software to process properly
dates to the year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a materially
adverse effect on the Company's business, results of operations and financial
condition.
PART II
-22-
<PAGE>
ITEM 1. LEGAL PROCEEDINGS.
As of the date of this filing, there are no material legal
proceedings pending, other than the matter of KURT BEVAQUA VS. ACUBID.COM, INC.,
San Diego Superior Court Case No. 744718, previously reported in the Company's
report on Form 10-Q file April 13, 2000.
ITEM 2. CHANGES IN SECURITIES.
(a) Not Applicable.
(b) The Company's Articles of Incorporation authorize the
issuance of 10,000,000 shares of preferred stock, $0.001 par value. The
Company's Board of Directors has authority, without action by the shareholders,
to issue all or any portion of the authorized but unissued preferred stock in
one or more series and to determine the voting rights, preferences as to
dividends and liquidation, conversion rights, and other rights of such series.
On June 20, 2000, Registrant filed the Certificate of Designations of the Series
B Preferred with the Delaware Secretary of State. The Preferred Shares have a
Stated Value of $10.00 per share, rank senior to all other securities of the
Registrant, including common shares and later authorized classes, have a
liquidation preference, and are convertible, at any time into five common shares
for each preferred share. The Preferred Shares also contain an Economic
Anti-Dilution provision in the event that the Registrant sells Common Stock at a
more advantageous price than Two Dollars per share within ten years of the
issuance of the Preferred Shares.
On June 23, 2000, the Company closed the Private Placement
transaction with the Selim Zilkha Trust in exchange for $10,000,000, issuing
1,000,000 shares of Series B Preferred Stock and the two warrants to purchase an
additional 7,000,000 shares of common stock above for a minimum of an additional
$20,000,000.
(c) During the three month period ending May 31, 2000,
the Company has sold the following securities without registering them under the
Securities Act of 1933 (the "Securities Act"):
None (1)
(1) The following transactions occurred after the close of the three month
period ending May 31, 2000 and are being reported as subsequent events:
-23-
<PAGE>
On March 13, 2000, the Registrant entered into a Stock
Purchase Agreement with Adisatrya Surya Sulisto ("Seller" or "Sulisto"), owner
of at least 90% of the issued and outstanding shares of Jaring Data Interaktif,
("JDI") wherein and whereby, the Registrant, through its wholly owned
subsidiary, Acubid Acquisition Corp., was to purchase 90% of the issued and
outstanding shares of JDI in exchange for 44,000,000 shares of the Registrant's
Common Stock. The Stock Purchase Agreement also contemplated that an additional
5,000,000 shares of the Registrant's common stock would be issued to the Seller
in the event that the Seller raised an additional $10,000,000 in capital for the
Registrant.
On March 24, 2000, Registrant entered into an Amended and
Restated Stock Purchase Agreement (the "Agreement") which replaced the Stock
Purchase Agreement executed March 13, 2000. This Agreement did not differ
significantly from the March 13, 2000 Stock Purchase Agreement and essentially
clarified certain terms of the original agreement and expanded the
representations and warranties made by the Registrant and Seller. Again, in this
Agreement, the Registrant, through its wholly owned subsidiary, Acubid
Acquisition Corp., was to purchase 90% of the issued and outstanding shares of
JDI from Seller in exchange for 44,000,000 shares of the Registrant's common
stock.
The Agreement also provided that Seller contemplated entering
into an arrangement with the Selim K. Zilkha Trust ("Zilkha" or the "Trust")
wherein the Trust would purchase 5,000,000 shares of Registrant's Common Stock
in exchange for a $10,000,000 capital infusion in the Registrant. It was
contemplated that this Private Placement would close simultaneously with the
closing under the Agreement and after Registrant receives appropriate investment
representations from Zilkha.
Pursuant to a Sale and Purchase Agreement dated June 12,
2000, between Adisatrya Suryo Sulisto and Alanberg Pte. Ltd., a Singapore
corporation, ("Alanberg" or "Seller"), Alanberg assumed all of the duties,
rights and obligations of Sulisto under the Amended and Restated Stock Purchase
Agreement.
By June 19, 2000, all required Indonesian regulatory approval
and all conditions precedent had been fulfilled and the Transaction closed on
that date. At the closing, Registrant delivered to Alanberg certificates
representing 44,000,000 shares of the Registrant's Common Stock in exchange for
180,000,000 shares or 90% of the issued and outstanding shares of JDI's stock.
No other consideration was paid for 90% of the issued and outstanding shares of
JDI stock.
On June 20, 2000, Registrant and Alanberg entered into
Amendment No. 1 to the Amended and Restated Stock Purchase Agreement ("Amendment
No. 1") amended the provisions of Article III of the Agreement. Amendment No. 1
provided that Seller was to arrange for Zilkha to purchase 1,000,000 shares of
Registrants Series B Preferred Stock (convertible into 5,000,000 common shares)
at $10.00 per share (the "Preferred Shares"). Amendment No. 1 also provided that
-24-
<PAGE>
Zilkha was to receive a Warrant to purchase an additional 5,000,000 shares of
Common Stock exercisable at $2.00 per share for the first three years after the
closing of the Transaction and $4.00 per share for an additional two years
thereafter. Additionally, Zilkha was to receive a second warrant to purchase an
additional 2,000,000 shares of Common Stock exercisable at $5.00 per share for
five years after the closing of the Transaction.
On June 23, 2000, the Company closed the Private Placement
transaction with Zilkha, issuing 1,000,000 shares of Series B Preferred Stock
and the two warrants described above, in exchange for $10,000,000.
An employment agreement between Michael Schaffer and the
Registrant was entered into on June 1, 2000. In the employment agreement, Mr.
Schaffer was granted options to purchase 500,000 shares of common stock. Of
those 500,000 options, 300,000 are non-qualified options and subject to the
terms of a Stock Option Agreement also executed on June 1, 2000. The remaining
200,000 options are incentive equity options and subject to the terms of the
Company's Incentive Equity Plan. The non-qualified options vest at a rate of
150,000 per year, the first vesting commenced immediately with the signing of
the employment agreement. The exercise price for the non-qualified options is
$2.50 per share. The incentive equity options vest at a rate of 40,000 per year,
the first vesting commenced immediately with the signing of the employment
agreement. The exercise price for the incentive equity options is $2.50 per
share.
An employment agreement between Waddy Stephenson and the
Registrant was entered into on June 1, 2000. In the employment agreement, Mr.
Stephenson was granted options to purchase 100,000 shares of common stock. These
options are incentive equity options, subject to the terms of the Company's
Incentive Equity Plan, and vest at a rate of 40,000 per year, the first vesting
commenced immediately with the signing of the employment agreement. The exercise
price for the options is $2.50 per share.
An agreement between Terry Giles and the Registrant was
entered into on June 14, 2000. In return for his serving as a Director of Asia
Web Holdings, Inc. for the next five years, Mr. Giles was granted options to
purchase 500,000 shares of common stock. These options are non-qualified options
and vest at a rate of 100,000 per year, the first vesting commenced immediately
with the signing of the agreement. The exercise price for the options is $2.00
per share.
An agreement between William Millard and the Registrant was
entered into on June 14, 2000. In return for his serving as a Director of Asia
Web Holdings, Inc. for the next five years, Mr. Millard was granted options to
purchase 500,000 shares of common stock. These options are non-qualified options
and vest at a rate of 100,000 per year, the first vesting commenced immediately
with the signing of the agreement. The exercise price for the options is $2.00
per share.
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<PAGE>
A services agreement between Tjahjono Soerjodibroto and Asia
Web Holdings, Inc. was entered into on June 28, 2000. The services agreement,
granted Mr. Soerjodibroto options to purchase 150,000 shares of common stock.
These options are non-qualified options and vest at a rate of 30,000 per year,
the first vesting commencing at the end of the first year of service. The
exercise price for the options is $2.00 per share.
The securities discussed in this section were valued at fair
market which was determined by the trading value of the company stock on or
about the date the agreements were entered into, not the dates of issuance. The
securities discussed in this section were deemed exempt pursuant to Section 4(2)
of the Securities Act of 1933.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Stockholders was held on
May 22, 2000.
(b) The following directors were elected at the meeting:
Michael Schaffer; Waddy Stephenson; Tjahjono
Soerjodibroto; William Millard; Terry Giles; Raj
Singam; Gordon Holterman; and, Bosko Djordjevic. With
the exception of Michael Schaffer and Waddy
Stephenson who were continuing as directors, the
election of all other directors was contingent on the
closing of the transaction described in (c)(1) below.
Until that transaction closed on June 19, 2000,
Lawrence Schaffer continued as a member of the Board
of Directors.
(c) The following matters were voted on at the meeting:
(1) Approval and adoption of the Amended and
Restated Stock Purchase Agreement, dated as
of March 24, 1999 (the "Agreement"), by and
among Acubid, Acubid Acquisition Corporation
("Acquisition Corp."), PT Jaring Data
Interaktif ("JDI") and Adisatrya Suryo
Sulisto ("Sulisto") or his assignee pursuant
to which Acubid, through Acquisition Corp.,
would purchase 90% of the issued and
outstanding shares of JDI from Sulisto in
exchange for 44,000,000 shares of Acubid
common stock, par value $.001 per share (the
"Common Stock")This agreement also
contemplated that at the time of the
Acquisition, Selim K. Zilkha Trust
("Zilkha") who had indicated an interest in
acquiring shares of the Registrant if the
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<PAGE>
Acquisition is completed, would purchase
5,000,000 shares of Common Stock at $2.00
per share for an aggregate purchase price of
$10,000,000.
VOTES CAST:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
5,186,741 4,450 4,110 2,657,328
66.1% * 0.1% * 0.1% * 33.8% *
(2) Approval and adoption of amendments to the
Company's Certificate of Incorporation to
increase the number of authorized shares of
Common Stock from 50,000,000 to 100,000,000
shares and change the name of the Company to
Asia Web Holdings, Inc.;
VOTES CAST:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
7,838,769 9,160 4,700 None
99.8% * 0.1% * 0.05% * 0.0% *
(3) The election of the Michael Schaffer; Waddy
Stephenson; Tjahjono Soerjodibroto; William
Millard; Terry Giles; Raj Singam; Gordon
Holterman; and, Bosko Djordjevic to the
Board of Director for a term of one year and
effective upon Closing;
<TABLE>
<CAPTION>
VOTES CAST:
NOMINEE FOR(%) * WITHHELD(%)* BROKER NON-VOTES(%)*
------- -------- ------------ --------------------
<S> <C> <C> <C>
Michael Schaffer 7,848,149 (99.9%) 950 (0.0%) 0 (0.0%)
Waddy Stephenson 7,848,149 (99.9%) 50 (0.0%) 0 (0.0%)
Gordon C. Holterman 7,848,149 (99.9%) 50 (0.0%) 0 (0.0%)
Terry Giles 7,848,149 (99.9%) 50 (0.0%) 0 (0.0%)
Raj Singam 7,848,149 (99.9%) 50 (0.0%) 0 (0.0%)
Tjahjono Soerjodibroto 7,848,149 (99.9%) 100 (0.0%) 0 (0.0%)
Bosko Djordjevic 7,848,149 (99.9%) 50 (0.0%) 0 (0.0%)
William H. Millard 7,848,149 (99.9%) 50 (0.0%) 0 (0.0%)
</TABLE>
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<PAGE>
(4) Approval and adoption of the 1999 Incentive
Equity Plan;
VOTES CAST:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
5,135,524 25,927 33,840 2,657,328
65.4% * 0.3% * 0.4% * 33.8% *
(5) Approval and adoption of the 1999 Stock
Option Plan for Non-Employee Directors;
VOTES CAST:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
5,132,204 27,407 35,690 2,657,328
65.4% * 0.3% * 0.5% * 33.8% *
(6) The ratification of the appointment of
Israeloff, Traattner & Co., P.C. as the
Registrants independent auditors for the
fiscal year ending August 31, 2000.
VOTES CAST:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
7,831,309 4,020 17,300 0
99.7% * 0.1% * 0.2% * 0.0% *
* Represents the percentage of all stockholder present at the meeting and voting
by proxy.
(d) Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description
------- -----------
2.1 Stock Purchase Agreement Executed March 13, 2000
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<PAGE>
(Filed with Form 8-K on March 29, 2000)
2.2 Amended and Restated Stock Purchase Agreement
Executed March 24, 2000 (Filed with Form 8-K on
March 29, 2000 and Registrant's Definitive Proxy
filed on May 3, 2000)
2.3 Amendment No. 1 to the Amended and Restated Stock
Purchase Agreement Executed June 20, 2000 (Filed with
Form 8-K on July 5, 2000)
4.1 Certificate of Designations of the Series B Preferred
Stock Filed June 20, 2000 (Filed with Form 8-K on
July 5, 2000)
4.2 Warrant 1 Dated June 20,2000 granted Selim Zilkha
Trust (Filed with Form 8-K on July 5, 2000)
4.3 Warrant 2 Dated June 20,2000 granted Selim Zilkha
Trust (Filed with Form 8-K on July 5, 2000)
10.1 Employment Agreement with Michael Schaffer dated June
1, 2000 (Filed with Form 8-K on July 5, 2000)
10.2 Stock Option Agreement with Michael Schaffer dated
June 1, 2000 (Filed with Form 8-K on July 5, 2000)
10.3 Employment Agreement with Waddy Stephenson dated June
1, 2000 (Filed with Form 8-K on July 5, 2000)
10.5 Director's Compensation Agreement dated June 14, 2000
with Terry Giles (Filed with Form 8-K on July 5,
2000)
10.6 Director's Compensation Agreement dated June 14, 2000
with William Millard (Filed with Form 8-K on July 5,
2000)
10.7 Director's Compensation Agreement dated June 28, 2000
with Tjahjono Soerjodibroto (Filed with Form 8-K on
July 5, 2000)
10.8 Purchase and Sale Agreement dated June 12, 2000
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<PAGE>
between Adisatrya Suryo Sulisto and Alanberg Pte Ltd,
a Singapore Corporation (Filed with Form 8-K on
July 5, 2000)
27 Financial Data Schedule
(b) There were no reports filed on Form 8-K for the
period ending May 31, 2000
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Asia Web Holdings, Inc.
July 13, 2000 /s/ Lawrence Schaffer
----------------------------
By: Lawrence Schaffer
Its: Chief Financial Officer
/s/ Lawrence Schaffer
----------------------------
By: Lawrence Schaffer
Its: President
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