_________________________________________________________________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 1, 1998
DYNAMICWEB ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 0-10039 22-2267658
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
271 Route 46 West, Building F,
Suite 209, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 244-1000
N/A
(Former name or former address, if changed since last report.)
_________________________________________________________________
_________________________________________________________________
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) The financial statements of Design Crafting, Inc., the
business acquired, are included herein at Exhibit 99.1.
(b) The pro forma financial information is included herein
at Exhibit 99.2.
(c) The following exhibits are filed herewith:
99.1 Audited Financial Statements of Design Crafting,
Inc. for the Fiscal Years Ended September 30, 1997
and 1996.
99.2 Pro Forma Financial Information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this Form 8-K/A to be
signed on its behalf by the undersigned hereunto duly authorized.
DYNAMICWEB ENTERPRISES, INC.
Dated: July 15, 1998
By /s/ Steve Vanechanos, Jr.
Steve Vanechanos, Jr.
President
<PAGE>
EXHIBIT INDEX
Exhibit Number
99.1 Audited Financial Statements of Design Crafting, Inc.
for the Fiscal Years Ended September 30, 1997 and 1996.
99.2 Pro Forma Financial Information.
EXHIBIT 99.1
DESIGN CRAFTING, INC.
FINANCIAL STATEMENTS
September 30, 1997 <PAGE>
Contents
Page
Financial Statements
Independent auditors' report.......................... 1
Balance sheet as of September 30, 1997................ 2
Statements of income for the years ended
September 30, 1997 and 1996........................... 3
Statement of changes in stockholder's equity
for each of the years ended September 30, 1997
and 1996............................................... 4
Statements of cash flows for the years ended
September 30, 1997 and 1996............................ 5
Notes to financial statements........................... 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Design Crafting, Inc.
We have audited the accompanying balance sheet of Design
Crafting, Inc. as of September 30, 1997, and the related
statements of income, changes in stockholder's equity and cash
flows for each of the years in the two year period then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of
Design Crafting, Inc. as of September 30, 1997, and the results
of its operations and its cash flows for each of the years in the
two-year period then ended, in conformity with generally accepted
accounting principles.
/s/ Richard A. Eisner & Company, LLP
Florham Park, New Jersey
July 10, 1998
<PAGE>
Balance Sheet
September 30, 1997
ASSETS
Current assets:
Cash $ 5,015
Accounts receivable 56,812
Prepaid expenses and other current assets 468
Total current assets 62,295
Equipment, net of accumulated depreciation of $6,662 4,602
$66,897
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $30,597
Taxes payable - current 1,480
Taxes payable - deferred 6,195
Total current liabilities 38,272
STOCKHOLDER'S EQUITY
Common stock, no par value, authorized 1,000
shares issued and outstanding 100 shares 1,000
Retained earnings 27,625
Total stockholder's equity 28,625
$66,897
<PAGE>
Statements of Income
Year Ended
September 30,
1997 1996
Revenues - services $462,541 $311,363
Cost of services 384,244 241,427
Gross profit 78,297 69,936
Expenses:
Selling, general and administrative 65,772 58,905
Income before taxes 12,525 11,031
Income taxes 3,250 2,870
Net income $ 9,275 $ 8,161
<PAGE>
Statements of Changes in Stockholder's Equity
<TABLE>
<CAPTION>
Common Stock
Number of Retained
Shares Amount Earnings Total
<S> <C> <C> <C> <C>
Balance, October 1, 1995 100 $1,000 $10,189 $11,189
Net income -- -- 8,161 8,161
Balance, September 30, 1996 100 1,000 18,350 19,350
Net income -- -- 9,275 9,275
Balance, September 30, 1997 100 $1,000 $27,625 $28,625
</TABLE>
<PAGE>
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,275 $ 8,161
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,948 648
Deferred income taxes 1,390 2,700
Changes in:
Accounts receivable (867) (29,993)
Prepaid expenses and other current assets 718 687
Accounts payable and accrued expenses (10,249) 18,691
Taxes payable 1,310 (725)
Net cash provided by operating activities 4,525 169
Cash flows from investing activities:
Purchase of equipment (6,902) (1,296)
Net decrease in cash (2,377) (1,127)
Cash, beginning 7,392 8,519
Cash, ending $ 5,015 $ 7,392
Supplemental disclosure of cash flow information:
Cash paid for:
Income taxes $ 550 $ 895
</TABLE>
<PAGE>
Note A - Summary of Significant Accounting Policies and Basis of
Presentation
[1] Operations:
Design Crafting, Inc. (the "Company") is a software
developer and provides services primarily to customers in
the distribution, retail and financial industries.
In 1997, two customers and in 1996 one customer accounted
for approximately 91% and 99% of revenues, respectively. As
of September 30, 1997, two customers represented 100% of
accounts receivable. No allowance for bad debts is required.
[2] Revenue recognition:
Revenue is recognized as the work is performed and services
are provided at the customer's locations.
[3] Use of estimates:
The financial statements were prepared on an accrual basis
in conformity with generally accepted accounting principles;
estimates and assumptions were utilized to quantify certain
components of the financial statements in the absence of
specific amounts of the respective assets, liabilities,
revenues and expenses. Actual results could differ from
those estimates.
[4] Equipment:
Equipment is recorded at cost less accumulated depreciation.
Depreciation is provided using accelerated and
straight-line methods over the estimated lives of the assets
(2 to 3 years).
[5] Income taxes:
The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standard No. 109
Accounting for Income Taxes ("SFAS 109") which requires use
of the liability method of Accounting for Income Taxes. The
liability method measures deferred income taxes by applying
enacted statutory rates in effect at the balance sheet date
to the differences between the tax bases of assets and
liabilities and their reported amounts in the financial
statements. Deferred income taxes arise from temporary
differences resulting primarily from income and expense
items being reported on an accrual basis for financial
statement purposes and on a cash basis for tax purposes. As
a result, the Company had deferred federal and state
liabilities of $6,195 as of September 30, 1997.
Note B - Employee Benefit Plans
The Company has a qualified simplified employee pension (SEP)
under Section 408(k) of the Internal Revenue Code. Employer
contributions under a SEP are discretionary and are excluded from
the participants taxable income to the extent of 15% of the
participant's compensation subject to limits. The Company's
contributions to the plan were $25,742 and $7,573 for the years
ended September 30, 1997 and 1996, respectively.
Note C - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
Wages $18,486
Payroll taxes 2,544
Employee benefit plan 7,796
Other 1,771
$30,597
Note D - Income Taxes
Year Ended
September 30,
1997 1996
Current tax expenses:
Federal $1,120 $ 20
State 740 150
1,860 170
Deferred tax expenses:
Federal 830 1,700
State 560 1,000
1,390 2,700
Provision for taxes $3,250 $2,870
The differences between the statutory income tax rate of 34% and
the income taxes reported on the statement of income and retained
earnings are as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996
<S> <C> <C> <C> <C>
Statutory rate $ 4,259 34% $ 3,751 34%
Reduction due to graduated
income tax rate (2,380) (19) (2,096) (19)
State taxes, net of federal benefit 1,105 9 978 9
Other 266 2 237 2
Provision for taxes $ 3,250 26% $ 2,870 26%
</TABLE>
Note E - Business Combination
On May 1, 1998, the Company completed a merger with Dynamicweb
Enterprises, Inc. (Dynamicweb) by exchanging all of its issued
and outstanding stock for 92,500 shares of common stock of
Dynamicweb with a provision for up to an additional 10,000 shares
to be calculated under a formula based on the value at closing
and the realization of certain assets within 120 days of the
closing.
EXHIBIT 99.2
Unaudited Pro Forma Condensed Financial Statements
On May 1, 1998, DynamicWeb Enterprises, Inc. (the "Company")
completed a stock-for-stock exchange transaction with Design
Crafting, Inc. ("Design") which will be accounted for as a
pooling of interests. The following unaudited pro forma
condensed consolidated statement of operations for the year ended
September 30, 1997 and the unaudited pro forma consolidated
balance sheet as of September 30, 1997 are adjusted to give
effect to the combination with Design by the issuance by the
Company of 92,500 of its common shares in exchange for 100% of
the Design shares as if such transaction had occurred on
October 1, 1996.
The unaudited condensed pro forma consolidated balance sheet and
statement of operations should be read in conjunction with the
notes thereto and the audited financial statements of the Company
and Design and the notes thereto. The pro forma information is
not necessarily indicative of what the financial position and
results of operations would have been had the transactions
occurred earlier, nor do they purport to represent the future
financial position or results of operations of DynamicWeb
Enterprises, Inc.
Unaudited Pro Forma Condensed Financial Statement Adjustments
(1) The pro forma information includes the issuance of
92,500 shares of the Company's common stock on May 1, 1998. It
does not reflect any contingently issuable shares, up to 10,000,
that may be issued in the event that the Company collects certain
amounts from the realization of certain assets reported on the
Design Crafting, Inc. balance sheet as of May 1, 1998.
(2) The pro forma weighted average number of shares
outstanding is as follows:
(a) Includes 654,597 shares of the Company's common
stock contributed by certain of the Company's shareholders in
exchange for 125,000 warrants.
(b) Includes the 92,500 shares issued in connection
with the exchange transaction as if they were outstanding for the
entire period presented.
(3) Elimination of the current federal income tax
liability.
<PAGE>
Pro Forma Financial Statements
<TABLE>
<CAPTION>
Historical
DynamicWeb
Enterprises, Inc. Design
and Subsidiaries Crafting, Inc.
as of as of Pro Forma Pro Forma
September 30, 1997 September 30, 1997 Adjustments Consolidated
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 188,270 $ 5,015 $ 193,285
Accounts receivable, less allowance for doubtful accounts 100,425 56,812 157,237
Prepaid and other current assets 20,738 468 21,206
Total current assets 309,433 62,295 371,728
Property and equipment 284,512 4,602 289,114
Patents and trademarks, less accumulated amortization 21,808 21,808
Customer list, less accumulated amortization 83,333 83,333
Deferred registration costs 128,169 128,169
Other assets and fees 60,461 60,461
$ 887,716 $66,897 $ 954,613
=========== ======= ===========
LIABILITIES
Current liabilities:
Accounts payable $ 182,340 $ 182,340
Accrued expenses 165,941 $30,597 196,538
Current maturities of long-term debt 7,925 7,925
Loan payable - banks 24,049 24,049
Loans from stockholders 117,163 117,163
Deferred revenue 15,065 15,065
Subordinated notes payable 840,873 840,873
Taxes payable - current 1,480 $(1,120)(3) 360
Taxes payable - deferred 6,195 6,195
Total current liabilities 1,353,356 38,272 (1,120) 1,390,508
Long-term debt, less current maturities 185,811 185,811
1,539,167 38,272 (1,120) 1,576,319
CAPITAL DEFICIENCY
(1,000)(1)
Common stock 214 1,000 9 (1) 223
Additional paid-in capital 3,530,324 991 (1) 3,531,315
Unearned portion of compensatory stock options (204,000) (204,000)
Accumulated deficit (3,577,989) 27,625 1,120 (3) (3,549,244)
(251,451) 28,625 1,120 (221,706)
Less treasury stock (400,000) (400,000)
Total capital deficiency (651,451) 28,625 1,120 (621,706)
$ 887,716 $66,897 $ 0 $ 954,613
=========== ======= ======= ===========
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Financial Statements
Historical
DynamicWeb
Enterprises, Inc. Design
and Subsidiaries Crafting, Inc.
For the Year Ended For the Year Ended Pro Forma
September 30, 1997 September 30, 1997 Adjustments Pro Forma
(Unaudited)
<S> <C> <C> <C> <C>
Net sales:
System sales $ 116,106 $ 116,106
Services 521,071 $462,541 983,612
637,177 462,541 1,099,718
Cost of sales:
System sal 40,323 40,323
Services 213,180 384,244 597,424
253,503 384,244 637,747
Gross profit 383,674 78,297 461,971
Expenses:
Selling, general and administrative 1,854,686 65,772 1,920,458
Research and development 234,808 234,808
2,089,494 65,772 2,155,266
Operating income (loss) (1,705,820) 12,525 (1,693,295)
Purchased research and development (713,710) (713,710)
Interest expense (770,041) (770,041)
Interest income 5,068 5,068
Income (loss) before income taxes (3,184,503) 12,525 (3,171,978)
Income tax (expense) benefit 21,700 (3,250) $ 1,120(3) 19,570
Net income (loss) $(3,162,803) $ 9,275 $ 1,120 (3,152,408)
=========== ========= ======= ===========
Pro forma net loss per pro forma weighted
average number of shares outstanding $ (2.13)
==========
Pro forma weighted average number of
shares outstanding 1,386,383(2) 92,500(2) 1,478,883
=========== ====== ===========
</TABLE>
