U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-QSB
Quarterly Report under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For quarterly period ended June 30, 1997
Commission file number 10039
DYNAMICWEB ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2267658
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
271 Route 46 West, Building F
Suite 209, Fairfield, New Jersey 07004
(Address of Principal Executive Offices)
(973) 244-1000
(Registrant's telephone number, including area code)
_________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
As of June 30, 1997, there were 7,667,285 shares of Common Stock,
$0.0001 par value, of the registrant outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheets as at
June 30, 1997 (unaudited) and September 30,
1996
Condensed Consolidated Statements of
Operations for the three and nine months
ended June 30, 1997 and 1996 (unaudited)
Condensed Consolidated Statements of Cash
Flows for the nine months ended June 30, 1997
and 1996 (unaudited)
Notes to Condensed Financial Statements
<PAGE>
DYNAMICWEB ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
A S S E T S 1997 1996
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . $ 95,818 $ 174,403
Accounts receivable, less allowance for
doubtful accounts. . . . . . . . . . . 209,035 70,518
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . 31,213 32,068
Total current assets. . . . . . . 336,066 276,989
Property and equipment, net . . . . . . . . 278,763 239,889
Patents and trademarks, net . . . . . . . . 23,257 19,299
Customer list, net. . . . . . . . . . . . . 88,333
Deferred financing fees . . . . . . . . . . 72,000
Deferred registration costs . . . . . . . . 75,000
T O T A L . . . . . . . . . . . . $ 873,419 $ 536,177
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . $ 175,165 $ 34,581
Accrued expenses and other . . . . . . . 78,904 18,487
Current maturities of long-term debt . . 8,370 12,434
Loan payable - bank. . . . . . . . . . . 14,750
Deferred revenue . . . . . . . . . . . . 18,073 11,330
Notes payable - bridge financing . . . . 300,000
Total current liabilities . . . . 595,262 76,832
Long-term debt, less current maturities . . 188,084 197,661
Total liabilities . . . . . . . . 783,346 274,493
Stockholders' equity:
Common stock - $.0001 par value;
50,000,000 authorized, 7,667,285 and
6,548,511 shares issued and outstanding
at June 30, 1997 and September 30,
1996 (excludes shares issuable in
connection with a private placement
Note E). . . . . . . . . . . . . . . . 795 655
Additional paid-in capital . . . . . . . 2,236,074 676,215
Accumulated deficit. . . . . . . . . . . (2,146,796) (415,186)
Total stockholders' equity. . . . 90,073 261,684
T O T A L . . . . . . . . . . . . $ 873,419 $ 536,177
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
<PAGE>
DYNAMICWEB ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales:
System sales . . . . . . . . . . $ 38,371 $ 26,783 $ 98,254 $ 107,317
Services . . . . . . . . . . . . 182,929 69,588 399,841 241,100
T o t a l . . . . . . . . 221,300 96,371 498,095 348,417
Cost of sales:
System sales . . . . . . . . . . 10,015 13,110 33,640 55,800
Services . . . . . . . . . . . . 51,936 17,936 126,990 62,434
T o t a l . . . . . . . . 61,951 31,046 160,630 118,234
Gross profit. . . . . . . . . . . . 159,349 65,325 337,465 230,183
Expenses:
Selling, general and
administrative . . . . . . . . 361,589 230,639 1,006,246 460,631
Research and development . . . . 71,451 8,479 164,024 15,229
T o t a l . . . . . . . . 433,040 239,118 1,170,270 475,860
Operating (loss). . . . . . . . . . (273,691) (173,793) (832,805) (245,677)
Purchased research and development
(Note C). . . . . . . . . . . . . 25,000 (713,710)
Interest expense (including
amortization of debt discount
and deferred financing fees of
$186,000 for three and nine
months ended June 30, 1997). . . (200,310) (4,066) (210,585) (14,950)
Interest income . . . . . . . . . . 1,362 4,436 3,790 5,494
Net (loss) before benefit for
income taxes . . . . . . . . . . (447,639) (173,423) (1,753,310) (255,133)
Benefit for income taxes. . . . . . 21,700
NET (LOSS). . . . . . . . . . . . . $(447,639) $(173,423) $(1,731,610) $(255,133)
Net (loss) per common share . . . . $(.06) $(.03) $(.23) $(.04)
Weighted-average number of shares
outstanding. . . . . . . . . . . 7,850,649 6,537,186 7,483,693 6,315,729
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
<PAGE>
DYNAMICWEB ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net (loss). . . . . . . . . . . . . . . . . . . . . . . . . $(1,731,610) $(255,133)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Depreciation and amortization . . . . . . . . . . . . . 34,415 9,919
Purchased research and development. . . . . . . . . . . 713,710
Common stock issued for services. . . . . . . . . . . . 10
Deferred income taxes . . . . . . . . . . . . . . . . . (21,700)
Amortization of debt discount and deferred
financing fees. . . . . . . . . . . . . . . . . . . . 186,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable. . . . . . (20,371) 4,635
(Increase) decrease in prepaid expenses and other
current assets. . . . . . . . . . . . . . . . . . . 855 (5,610)
Increase in accounts payable. . . . . . . . . . . . . 137,280 13,764
Increase in accrued expenses. . . . . . . . . . . . . 5,395 9,922
Increase in deferred revenue. . . . . . . . . . . . . 6,743 520
Net cash (used in) operating activities . . . . . . (689,283) (221,973)
Cash flows from investing activities:
Acquisition of property and equipment . . . . . . . . . . . (66,152) (19,087)
Proceeds from sale of equipment . . . . . . . . . . . . . . 1,954
Acquisition of patents and trademarks . . . . . . . . . . . (4,251) (17,992)
Cash acquired upon acquisition of subsidiary. . . . . . . . 15,235
Net cash (used in) investing activities . . . . . . (53,214) (37,079)
Cash flows from financing activities:
Payment of long-term debt . . . . . . . . . . . . . . . . . (7,838) (9,892)
Proceeds from loan - bank . . . . . . . . . . . . . . . . . 4,750
Proceeds from issuance of common stock. . . . . . . . . . . 250,000 597,750
Loan from officer/stockholder . . . . . . . . . . . . . . . 50,000
Payment of officer/stockholder loan . . . . . . . . . . . . (50,000)
Proceeds from sale of units consisting of notes and common
stock . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Payment of deferred registration costs. . . . . . . . . . . (75,000)
Payment of deferring financing fees . . . . . . . . . . . . (108,000)
Net cash provided by financing activities . . . . . 663,912 587,858
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . (78,585) 328,806
Cash and cash equivalents - beginning of period. . . . . . . . 174,403 45,164
CASH AND CASH EQUIVALENTS - END OF PERIOD. . . . . . . . . . . $ 95,818 $ 373,970
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
<PAGE>
DYNAMICWEB ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental disclosures of noncash investing and financing
activities:
The Company acquired Software Associates, Inc. on
November 30, 1996 for 860,000 shares of the Company's stock in
exchange for all of the stock issued and outstanding of Software
Associates, Inc. (Note C).
During the nine months ended June 30, 1997, the Company sold
equipment for approximately $10,000 which had a net book value of
approximately $10,000 and related debt of approximately $8,000.
The accompanying notes are an integral part
of these condensed financial statements.
<PAGE>
DYNAMICWEB ENTERPRISES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(NOTE A) - Basis of Presentation and the Company:
Basis of presentation:
The accompanying unaudited condensed financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-QSB and Article 3 of Regulations S-B.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included.
Operating results for the nine-month period ended June 30, 1997
are not necessarily indicative of the results that may be
expected for the year ending September 30, 1997.
The balance sheet at September 30, 1996 has been derived
from the audited financial statements at that date but does not
include all the information and footnotes required by generally
accepted accounting principles for complete financial statements.
For further information, refer to the audited financial
statements and footnotes thereto included in the annual report on
Form 10-KSB.
The accompanying financial statements include the accounts
of DynamicWeb Enterprises, Inc. ("DWE") and its wholly owned
subsidiaries, Megascore, Inc., DynamicWeb Transaction Systems,
Inc. ("DWTS") and Software Associates, Inc. (collectively the
"Company"). All significant intercompany balances and
transactions have been eliminated.
The Company:
DWE is in the business of facilitating electronic commerce
transactions between business entities, developing, marketing and
supporting software products and other services that enable
businesses to engage in electronic commerce utilizing the
Internet and traditional Electronic Data Interchange ("EDI").
DWE offers electronic commerce solutions in EDI and Internet-
based transactions processing.
Megascore, Inc. is a full-service systems integrator
specializing in distribution, accounting and point-of-sale
computer software consulting services for suppliers and
retailers.
DWTS, formerly a division of Megascore, Inc. was established
as a separate legal entity on October 31, 1995. On February 7,
1996 DWTS issued all of its shares of its common stock to
Megascore, Inc. On September 30, 1996, DynamicWeb Enterprises,
Inc. acquired all the common stock of Megascore, Inc. for 50,000
shares of its common stock. The transaction was accounted for as
a combination of entities under common control. The accompanying
financial statements retain the historical accounting basis for
the net assets of Megascore, Inc. and gives effect to the
operations of Megascore, Inc. for all periods presented.
On March 26, 1996 DWTS was acquired by Seahawk Capital
Corporation ("Seahawk"), a publicly held corporation which had
431,369 shares of common stock outstanding and no assets. Prior
to the acquisition, Seahawk distributed all of its assets to its
shareholders. In the acquisition, the shareholders of DWTS
received 4,913,631 shares of Seahawk's common stock. The
acquisition is being accounted for as if DWTS were the acquiring
entity. The shares of Seahawk are accounted for as being
outstanding for all periods presented. In connection with the
acquisition, 735,000 shares were issued to a finder and 75,000
shares were issued for legal fees. At the conclusion of this
transaction, there were 6,155,000 shares outstanding.
On May 14, 1996, Seahawk changed its name to DynamicWeb
Enterprises, Inc. and concurrently increased the authorized
number of shares of its common stock to 50,000,000 at a $.0001
par value. The accompanying financial statements give
retroactive effect to the above transaction.
On November 30, 1996, the Company acquired Software
Associates, Inc. (Note C).
On March 7, 1997, the Board of Directors, approved a reverse
stock split for each share of common stock to be converted into
.2608491 of one share and authorized 5,000,000 shares of
preferred stock to be effected when a public offering occurs.
Cash is to be issued to the stockholders for any fractional
shares. The stockholders approved these transactions on June 12,
1997 and the accompanying financial statements do not give
retroactive effect to the above transactions.
Net loss per share of common stock:
Net loss per share of common stock is based upon the
weighted average number of shares outstanding, plus an assumed
286,632 shares issuable in the Company's April, 1996 private
placement (see Note E).
(NOTE C) - Acquisition:
On November 30, 1996, the Company entered into a stock
purchase agreement with Software Associates, Inc. and its sole
shareholder (the "SA Agreement") whereby the Company acquired all
the issued and outstanding common stock of Software Associates,
Inc. Software Associates, Inc. is an EDI service bureau engaged
in the business of helping companies realize the benefits of
expanding their data processing and electronic communications
infrastructures through the use of EDI. The Company exchanged
860,000 shares of its common stock for all of the issued and
outstanding shares of Software Associates, Inc. The Company
further agreed to issue up to 1,140,000 additional shares of its
common stock in the event that the average closing bid price of
the Company's common stock does not equal $3.375 per share for
the five trading days immediately prior to January 30, 1999. In
connection with this transaction, the Company incurred
approximately $25,000 of professional fees. The results of
operations includes Software Associates, Inc. from December 1,
1996 through June 30, 1997.
The SA Agreement also requires that the Company issue
options for the purchase of 25,000 shares of its common stock to
employees of Software Associates, Inc.
In connection with the acquisition, the Company entered into
a five year employment contract with the sole
shareholder/President of Software Associates, Inc. The agreement
provides for an annual salary of approximately $136,000 and
includes a discretionary bonus as determined by the Company's
Board of Directors.
Software Associates, Inc. leases its office space from a
partnership whose partner is the Executive Vice President of the
Company. Annual rental payments are approximately $38,000 and
the lease expires on June 30, 2018. Software Associates, Inc.
has guaranteed the debt (United States Small Business
Administration guaranteed loan) of the condominium office space
which was approximately $249,000 as at November 30, 1996; the
debt matures in August 2019.
The purchase price was recorded as follows:
Current assets . . . . . . $133,381
Fixed assets . . . . . . . 5,167
Purchased research and
development . . . . . . 713,710
Customer list. . . . . . . 100,000
Current liabilities. . . . (67,258)
Total. . . . . . $885,000
The purchased research and development was charged to
operations upon acquisition. The acquisition was accounted for
as a purchase.
The condensed unaudited pro forma information of the Company
for the nine months ended June 30, 1997 and Software Associates,
Inc. for the two months ended November 30, 1996 is as follows as
if the acquisition of Software Associates, Inc. occurred on
October 1, 1996. In addition, the pro forma adjustments are
computed assuming the transaction was consummated at the
beginning of the fiscal period presented giving effect to events
directly attributable to the transaction and expected to have
continuing impact. A material nonrecurring charge representing
purchased research and development in the amount of $713,710 will
be charged to operations but has been omitted from the pro forma
results. The pro forma information is not necessarily indicative
of the results that would have been reported had the acquisition
occurred September 30, 1996, nor is it indicative of the
Company's future results:
<TABLE>
<CAPTION>
H i s t o r i c a l
Nine Two
Months Ended Months Ended
June 30, November 30,
1997 1996
DynamicWeb Software
Enterprises, Associates, Pro Forma Pro Forma
Inc. Inc. Adjustments Results
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . $ 498,095 $ 126,967 $ 625,062
Cost of sales. . . . . . . . . . . . . . . . . . 160,630 28,615 189,245
Gross profit . . . . . . . . . . . . . . . . . . 337,465 98,352 435,817
Expenses:
Selling, general and administrative . . . . . (1,006,246) (66,527) $(8,000) (1,080,773)
Research and development. . . . . . . . . . . (164,024) (164,024)
T o t a l. . . . . . . . . . . . . . . (1,170,270) (66,527) (8,000) (1,244,797)
Operating (loss) income. . . . . . . . . . . . . (832,805) 31,825 (8,000) (808,980)
Interest income. . . . . . . . . . . . . . . . . 3,790 3,790
Interest expense . . . . . . . . . . . . . . . . (210,585) (61) (210,646)
Benefit (provision) for income taxes . . . . . . 21,700 (12,700) 9,000
Net (loss) income before nonrecurring charge . . $(1,017,900) $ 19,064 $(8,000) $(1,006,836)
Per share data:
(Loss) before nonrecurring charge . . . . . . $(.13)
Weighted average common shares outstanding. . 6,815,854 860,000 7,675,854
</TABLE>
(NOTE D) - Proposed Public Offering:
On February 1, 1997, the Company signed a letter of intent with
an underwriter with respect to a proposed public offering of the
Company's securities. The Company expects to incur significant
additional costs in this connection therewith. In the event that
the offering is not successfully completed, such costs will be
charged to expense.
(NOTE E) - Bridge Financing:
On April 30, 1997, pursuant to Regulation D, the Company
completed a private placement whereby it sold 24 units for an
aggregate amount of $600,000. The placement agent is entitled to
a fee and nonaccountable expense allowance aggregating $78,000 or
13% of the private placement offering. The Company incurred
$30,000 of deferred financing cost. Each unit consists of a
$25,000 promissory note bearing interest at 8% and 11,943 shares
of the Company's common stock. The notes are due at the earlier
of the closing of the proposed public offering as described in
Note D[2] or when the Company obtains an aggregate financing of
$2,000,000 excluding expenses or March 31, 1999. The number of
shares of common stock included in a unit will be adjusted for
the reverse stock split as described in Note A and by a formula
as defined in the Private Placement Memorandum. The formula
represents 286,632 shares issuable if the anticipated public
offering occurs at a price of $6.00 per share.
The fair value assigned to the common stock is $450,000 and
$150,000 is allocated to the promissory notes. Debt discount of
$450,000 and deferred financing costs of $108,000 are amortized
and charged to operations over the expected completion of the
Company's proposed public offering date of October 31, 1997. As
of June 30, 1997, $186,000 was amortized and charged to
operations. The effective interest rate is approximately 191%.
(NOTE F) - Stock Option Plans:
[1] On April 28, 1997, the Board of Directors adopted and
on June 12, 1997 the stockholders approved a stock option plan
for outside directors (the "Director Plan") under which
nonqualified stock options may be granted to its outside
directors to purchase up to 300,000 shares of the Company's
common stock. Directors will be granted an option to purchase
15,000 of the Company's common stock at fair market value at the
earlier of the public offering or September 30, 1997 and at each
subsequent annual meeting of shareholders at which directors are
elected. Options may be exercised for ten years and one month
after the date of grant and may not be exercised during an
eleven-month period following the date of grant unless there is a
change in control, as defined in the Director Plan or the
compensation committee waives the eleven-month continuous service
requirement. As of June 30, 1997, no options have been issued
under the Director Plan.
[2] On March 7, 1997 the Board of Directors adopted and on
June 12, 1997 the stockholders approved the Company's 1997
employee stock option plan (the "Plan"), amended by the Board of
Directors on April 29, 1997, under which incentive stock option
and nonqualified stock options may be granted to purchase up to
900,000 shares of the Company's common stock. Grants to any one
employee shall not exceed 250,000 options during any twelve-month
period. Incentive stock options are to be granted at a price not
less than the fair market value, or 110% of fair market value to
an individual who owns more than ten percent of the voting power
of the outstanding stock. Nonqualified stock options are to be
granted at a price determined by the Company's compensation
committee. As of June 30, 1997, no options have been issued
under the Plan.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis should be read in
conjunction with the financial statements included in this report
and in conjunction with the description of the Company's Business
included in the Company's Form 10-KSB for the year ended
September 30, 1996. It is intended to assist the reader in
understanding and evaluating the financial position of the
Company.
This discussion contains, in addition to historical
information, forward looking statements that involve risks and
uncertainty. The Company's actual results could differ
materially from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such
differences include those discussed in the Company's Form 10-KSB
for the year ended September 30, 1996.
The financial statements included in this report are the
Company's consolidated result of operations for the Company's and
its three subsidiaries, DynamicWeb Transaction Services Inc.
(DWTS), Megascore, Inc. (Megascore) and Software Associates, Inc.
(Software Associates).
Financial Condition
As of June 30, 1997, the Company had cash of $95,818, total
current assets of $336,066 and a working capital deficiency of
$259,196.
The Company had a net loss of $447,639 and $1,731,610,
respectively, for the three months and nine months ended June 30,
1997, and negative operating cash flow for the nine months ended
June 30, 1997 of $689,283, which negative cash flow was primarily
funded by a $250,000 private placement of common stock that
closed in November, 1996, and from a $600,000 private placement
of 24 units consisting of common stock and promissory notes that
closed in April, 1997.
Results of Operation
The Company recognized net sales of $221,300 for the quarter
ended June 30, 1997 and $498,095 for the nine months ended
June 30, 1997, compared to $96,371 and $348,417 for the three and
nine months ended June 30, 1996. The increase in sales was
attributable to sales of the Company's new EDI/Internet products
and services offered through Software Associates, Inc., a
subsidiary acquired on November 30, 1996, sales of upgrades for
customized software, and a royalty payment for a proprietary list
of internet domains names.
The Company had an increase in system sales, to $38,371 for
the quarter ended June 30, 1997 from $26,783 in 1996, which was
due to sales of custom software related the Company's new EDI
Service Bureau and sales of upgrades for customized software.
However, system sales declined for the nine months ended June 30,
1997 to $98,256 from $107,317 for the prior year. This decline
was attributable to ongoing efforts, before the acquisition of
Software Associates, to migrate away from some of the Company's
historical products and to focus on the Company's electronic
commerce services. System sales include sales of hardware and
software to customers.
Service sales increased to $182,929 for the three months
ended June 30, 1997 from $69,588 for the three months ended
June 30, 1996. Service sales also increased from $241,100 for
the nine months in 1996 as compared to $399,841 for the nine
months in fiscal 1997. In each case, the increase was due
largely to transaction processing through the Company's new EDI
Service Bureau, and the rollout of EDIxchange, and a royalty
payment for an internet domain list.
Cost of system sales was $10,015 for the quarter and $33,640
for the nine months ended June 30, 1997, for a gross profit of
73.9% and 65.8% respectively. This compares to cost of system
sales of $13,110 and $55,800, for gross profit of 51.1% and 48%
in 1996. The increase in profitability is attributable to sales
of higher margin customized EDI software to facilitate
transaction processing through the EDI Service Bureau.
Cost of services was $51,936 in 1997 for the quarter and
$126,990 for the nine months ended June 30, 1997, for a gross
profit of 71.6% and 68.2%. This compares to cost of services of
$17,936 and $62,434, for gross profit of 74.2% and 74.1% in 1996.
The decrease in profit margins on service sales is attributable
to the costs associated with the addition of new employees who
were added to increase the Company's EDI/Internet capabilities,
in anticipation of the growth in demand for the Company's
EDI/Internet services.
Quarterly selling, general and administrative expenses
increased by $130,950, from $230,639 in 1996 to $361,589 in 1997.
For the nine month period, they increased by $545,615 from
$460,631 in 1996 to $1,006,246 in 1997. The increase is
attributable to the higher marketing expenses, salaries and
office expenses associated with the Company's increased effort to
market its EDI/Internet services and to implement an outreach
program directed at the electronic commerce community.
Management expects the outreach program to provide the Company
with access and introductions to talent and expertise within the
electronic commerce community, with the intention to assist the
Company in its marketing, recruiting, and operations. There is
no assurance that the outreach program will be successful.
Research and development expenses increased $62,972 for the
quarter, from $8,479 in 1996 to $71,451 in 1997, and by $148,795
for the nine months ended June 30, from $15,229 in 1996 to
$164,024 in 1997. The increase is attributable to expanded
development of existing services, and ongoing development of new
services (EC Integrator and ShipTrac).
Purchased research and development for the nine months ended
June 30, 1997 of $713,710 resulted for the purchase price
allocation of Software Associates, Inc.
Interest expense increased from $4,066 in 1996 to $200,310
in 1997 for the three months ended June 30 and from $14,950 in
1996 to $210,585 in 1997 for the nine months ended June 30. The
increase is primarily attributable to the amortization of debt
discount and deferred financing fees of $186,000 and interest
expense of $8,000. Both are related to the $600,000 private
placement that closed in April, 1997.
Liquidity and Capital Resources
The capital resources available to the Company, including
the $600,000 of proceeds received from the private placement in
April 1997, are not adequate to finance the Company's activities
for the full year ended September 30, 1997. The Company will
require substantial additional financing in order to continue its
operations. There is no assurance, however, that the Company
will receive additional financing.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities
Holders
(a) On June 12, 1997, the Company held its 1997 Annual
Meeting of Shareholders. At such meeting, the shareholders voted
upon the following five matters:
1. To elect the members of the Board of
Directors.
2. To approve an amendment and restatement of
the Company's Certificate of Incorporation.
3. To approve the Company's 1997 Employee Stock
Option Plan.
4. To approve the Company's 1997 Stock Option
Plan For Outside Directors.
5. To ratify the selection of Richard A. Eisner
& Company, LLP, Certified Public Accountants,
as the Company's independent auditors for the
year ending September 30, 1997.
Management did not solicit proxies for that meeting.
(b) At the annual meeting the following individuals
were elected to the Company's Board of Directors:
Steve L. Vanechanos, Jr.
Steve L. Vanechanos, Sr.
Kenneth R. Konikowski
F. Patrick Ahearn, Jr.
Denis Clark
Frank DiPalma
Robert Droste
No other person continued as a director of the Company.
(c) The number of votes cast for, against, or
withheld, and the number of abstentions and broker non-votes, as
to each matter identified in paragraph (a) above, is set forth
below:
<TABLE>
<CAPTION>
Votes Votes Against,
Matter For Withheld or Absentions** Non-Votes
<S> <C> <C> <C>
1. Election of 4,937,189 0 3,016,728
Directors*
2. Amendment and 4,937,189 0 3,016,728
Restatement of
Certificate of
Incorporation
3. 1997 Employee 4,937,189 0 3,016,728
Stock Option Plan
4. 1997 Plan for 4,937,189 0 3,016,728
Outside Directors
5. Ratification of 4,937,189 0 3,016,728
Independent
Auditors
</TABLE>
* All of the seven directors (who are identified in
paragraph (a) above) received these same votes.
** No shares which were present at the meeting voted
against, or withheld their vote or abstained from
voting on, any of the matters.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities
Exchange of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
DynamicWeb Enterprises, Inc.
(Registrant)
August 8, 1997 By: /s/ Steve Vanechanos, Jr.
(Date) Steve Vanechanos, Jr.
President and Chief Executive
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 95,818
<SECURITIES> 0
<RECEIVABLES> 269,963
<ALLOWANCES> 60,928
<INVENTORY> 0
<CURRENT-ASSETS> 336,066
<PP&E> 387,760
<DEPRECIATION> 108,997
<TOTAL-ASSETS> 873,419
<CURRENT-LIABILITIES> 595,262
<BONDS> 0
0
0
<COMMON> 795
<OTHER-SE> 89,278
<TOTAL-LIABILITY-AND-EQUITY> 873,419
<SALES> 221,300
<TOTAL-REVENUES> 221,300
<CGS> 61,951
<TOTAL-COSTS> 433,040
<OTHER-EXPENSES> (25,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200,310
<INCOME-PRETAX> (447,639)
<INCOME-TAX> 0
<INCOME-CONTINUING> (447,639)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (447,639)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
