U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the six month period ended June 30, 2000.
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
For the transition period from ------------ to --------------
Commission File Number: 0-5367
eWeb21 Corp.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 11-1717709
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(State or other jurisdiction (I.R.S.Employer
incorporation or organization Identification No.)
21st Floor, Technomart
546-4 Kui-dong, Kwangjin-gu,
Seoul #143-721 Korea
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(Address of principal executive offices)
+82 2 2204 3619
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(Issuer's telephone number)
(Not Applicable)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
15,849,343 shares of common stock as of November 15, 2000
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements for the period ended September 30, 2000
included herein have been prepared by eWeb21 Corp. (formerly D-Lanz Development
Group, Inc.) (the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission"). In the
opinion of management, the statements include all adjustments necessary to
present fairly the financial position of the Company as of September 30, 2000,
and the results of operations and cash flows for the nine month period ended
September 30, 2000.
The Company's results of operations during the nine months of the Company's
fiscal year are not necessarily indicative of the results to be expected for the
full fiscal year.
The financial statements included in this report should be read in
conjunction with the financial statements and notes thereto in the the Company's
form 8-K filed as of April 30, 2000.
2
<PAGE>
eWeb21 Corp.
(a development stage company)
CONSOLIDATED BALANCE SHEET
Septmber 30,
December 31, 2000
1999 Unaudited
------------------------------
Assets
Current assets
Cash and cash equivalents $ 22,661 $3,731,223
Accounts receivable 823,041 1,481,872
Short term loans receivable 516,521
Advance payments 193,832 2,205,786
---------- ---------
Total current assets 1,039,534 7,935,402
Property and equipment
Vehicles 144,668
Equipment, furniture and fixtures 122,046 1,154,287
Less accumulated depreciation (7,000) (302,228)
Net property and equipment 115,046 996,727
Other assets
Guarantee deposit 235,444 1,769,674
Government security deposit 87 90
Capitalized computer software 1,141,745
Intangible assets 4,076 77,894
Total other assets 239,607 2,989,403
----------- ------------
Total assets $1,394,187 $11,921,532
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 752,813 $1,173,239
Short-term borrowings 519,273 1,878,520
Deferred income 49,417 363,136
Due to affiliated company 898,224
---------- ----------
Total current liabilities 1,321503 4,313,119
Stockholders' equity
Common Stock authorized
50,000,000 shares,
$0.001 par value each. 15,000 15,000
Additional paid capital 68,146 2,518,833
Common stock subscribed 9,688,014
Currency translation adjustment 3,850 (6,054)
Deficit accumulated during the
development stage (14,312) (4,607,380)
---------- ------------
Total stockholders' equity 72,684 7,608,413
----------- ------------
Total liabilities and stockholders' equity $1,394,187 $11,921,532
=========== ============
See accompanying notes to financial statements
3
<PAGE>
eWweb21 Corp.
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the period For the period
from inception, For the nine from inception,
October 11, months ended October 11, 1999,
1999, to September 30, to September 30,
December 31, 1999 2000 2000
Unaudited Unaudited
------------------------------------------------------
<S> <C> <C> <C>
Revenue $409,892 $4,365,337 $4,775,229
Cost of services 348,408 3,390,087 3,738,495
-------- --------- ---------
Gross profit 61,484 975,250 1,036,734
Operations:
Selling, general and administrative expenses 69,018 5,454,784 5,523,802
Depreciation -0- -0- -0-
------ --------- ----------
Total expense 69,018 5,454,784 5,523,802
Income (Loss) from operations and before
corporate income taxes (7,535) (4,479,534) (4,487,068)
Corporate income taxes 6,925 6,925
Other income and expenses
Interest income 147 11,822 11,969
Interest expense (88,666) (88,666)
Foreign currency transaction loss-net (29,446) (29,446)
Other net (7,244) (7,244)
---------- ------------ ------------
147 (113,534) (113,387)
Net income (loss) $(14,312) $(4,593,068) $(4,607,380)
---------- ------------ ------------
Net income (loss) per share - basic 0.00 $(0.10)
Number of shares outstanding - basic 14,999,343 14,999,343
========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
eWeb21 Corp.
(a development stage company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the period from For the period from
inception, October For the inception , October
11, 1999, to nine months ended 11, 1999, to
December 31, September 30, 2000 September 30, 2000
1999 Unaudited Unaudited
-------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (14,312) $(4,593,068) $4,607,380
Adjustments to reconcile net profit (loss)
to cash used in
Depreciation of property and equipment 7,000 295,228 302,228
Non-cash payment for consulting fees 2,450,687
Increase in accounts receivable (823,041) (658,821) (1,481,872)
Increase in advance payments (191,479) (2,011,954) (2,205,786)
Accounts payable and accrued expenses 750,460 420,426 1,173,239
Deferred income 49,417 313,719 363,136
-------- ----------- -----------
TOTAL CASH FLOWS FROM OPERATIONS (221,955) (3,783,783) (3,922,602)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in guarantee deposit (235,444) (1,534,230) (1,769,674)
Increase in short term loans receivable (516,521) (516,521)
Increase in computer software (1,141,745)
Increase in other investment assets (87) (3) (90)
Purchase of vehicles, equipment,
furniture and fixtures (122,046) (1,176,909) (1,298,955)
Increase in intangible assets (4,076) (73,818) (77,894)
Currency translation adjustment 3 ,850 (9,904) (6,054)
--------- ----------- -----------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (357,803) (4,453,140) (4,810,933)
CASH FLOWS FROM FINANCING ACTIVITIES
Due to affiliated company 898,224 898,224
Increase in short term borrowings, net 519,273 1,359,247 1,878,520
Sale and subscriptions of common stock 83,146 9,688,014 9,688,014
--------- ---------- -----------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 602,419 11,945,485 12,464,758
NET INCREASE (DECREASE) IN CASH 22,661 3,708,562 3,731,223
CASH BALANCE BEGINNING OF PERIOD 22661 -0-
--------- ----------- -----------
CASH BALANCE END OF PERIOD $ 22,661 $3,731,223 $3,731,223
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
eWeb21 Corp.
(a development stage company)
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
accumulated
Additional Common Currency during
Date Preferred Preferred Common Common paid in Stock translation development
stock stock stock stock capital Subscribed adjustment stage Total
--------- --------- --------- -------- ------- ---------- ------------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance 12-31-1999 -0- $ -0- 14,999,343 $15,000 $2,518,833 $ 3,850 $(14,312) $ 72,684
Unaudited
Sale of common stock
to be delivered 9,688,014 9,688,014
Currency translation
adjustment (9,904) (9,904)
Net loss (4,593,068) (4,593,068)
------ ------- ---------- -------- ---------- ---------- -------- ------------ -----------
Balance September 30, 2000 -0- $ -0- 14,999,343 $15,000 $2,518,833 $9,688,014 $(6,054) $(4,607,380) $7,608,413
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
eWeb21 Corp.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted principles for interim financial information
as set forth in Article 10 of Regulation S-X. 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
necessary adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results of
eWeb21 Corp. (formerly D- Lanz Development Group, Inc.) (the "Company") for the
nine months ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2000.
NOTE B--EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share". Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share exclude any dilutive
effects of options, warrants, and convertible securities. Dilutive earnings per
share is very similar to the previously reported fully diluted earnings per
share. The Company adopted Statement No. 128 and has retroactively applied the
effects thereof for all periods presented. The impact on the per share amounts
previously reported was not significant.
NOTE C--Foreign Currency Transactions
The functional currency is the Korean Won. Monetary assets and liabilities
denominated in foreign currencies are translated into Korean Won at the balance
sheet date and reported in U. S. Dollars. with the resulting gains and losses
recognized in current results of operations. Monetary assets and liabilities
denominated in foreign currencies are translated into Korean Won at W1,110.3 to
US$1, the rate of exchange on September 30, 2000. Revenue, expenses, gains and
losses from foreign currency transactions are converted at the exchange rate in
effect on the date on which the transaction occurred. All foreign exchange
transaction gains and losses are included in the results of operations. Balance
sheet accounts, principally in Korean currency, are translated at the current
exchange rate as of the balance sheet date. The resulting translation adjustment
is recorded as a separate component of shareholders' equity.
7
<PAGE>
NOTE D -- REORGANIZATION OF THE COMPANY
During April, 2000, D-Lanz Development Group, Inc., completed a series of
transactions as follows:
a. Reverse Split
In April, 2000, the Company reversed split the number of shares of common
stock outstanding in a ration of 100 to 1 restating the number of shares of
common stock outstanding from 11,900,000 to 120,000.
b. Formation of Subsidiary
The Company formed a subsidiary with the name Global Agri-Med Technologies,
Inc. and on March 31, 2000 and in April, 2000 assigned the License rights to
certain patented technology to manufacture and market for the countries of Chile
and Singapore a temperature sensing device and diagnostic direct reading,
digital device to screen the breast for abnormalities, including cancer and
transferred the other assets and debts of the Company to this subsidiary.
c. Reverse Merger of eWeb21 Corporation and Recapitalization of the Company
In April, 2000, the Company completed a reverse acquisition with eWeb21,
Inc., a Korean corporation, which has been accounted for as the issuance of
11,880,000 shares of common stock by a private company for the net assets of the
Company, accompanied by a recapitalization pursuant to an Agreement of Business
Combination, the ("Agreement"), which was entered into in March, 2000.
Accordingly, the financial statements of eWeb21, Inc. became the consolidated
financial statements of the Company.
The consolidated balance sheet as of September 30, 2000 consists of the
unaudited balance sheet of the Company as at September 30, 2000 and the
unaudited balance sheet of eWeb21 at September 30, 2000 and the unaudited
related statements of income, cash flows and stockholders' equity for the nine
months ended September 30, 2000 and the unaudited related statements of income,
cash flows and stockholders' equity for eWeb21, Inc. for the nine months ended
September 30, 2000.
d. Change of Corporation Name
Subsequent to the date of the financial statements the Company changed its
name to eWeb21 Corp.
NOTE E - INCOME TAXES
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1999 and September 30,
2000, the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carry forward and was
fully offset by a valuation allowance.
8
<PAGE>
At September 30, 2000, the Company has net operating loss carry forwards
for income tax purposes of $4,607,380. These carry forward losses are available
to offset future taxable income, if any, and expire in the year 2005.
The components of the net deferred tax asset as of September 30, 2000 are
as follows:
Deferred tax asset:
Net operating loss carry forward $ 1,566,509
Valuation allowance $(1,566,509)
Net deferred tax asset $ -0-
The Company recognized no income tax benefit from the loss generated for
the period from the date of inception to September 30, 2000. SFAS No. 109
requires that a valuation allowance be provided if it is more likely than not
that some portion or all of a deferred tax asset will not be realized. The
Company's ability to realize benefit of its deferred tax asset will depend on
the generation of future taxable income. Because the Company has yet to
recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
NOTE F - COMMITMENTS AND CONTINGENCIES
(a) Lease agreements
The Company has located its operating and administrative facilities at 21F
Techno-mart 546-4 Kui-dong, Kwanggin-gu, Seoul, Korea pursuant to a lease
agreement dated on Jan 1, 2000 for a term of 2 years with minimum annual rental
payments as follows:
According to a lease terms and conditions, eWeb21, Inc. has paid a lease
deposit ($1,345,677) when it made the lease contract.
(b) Consulting Agreements
The Company has entered in an consulting agreement with Samil Accounting
corporation for a period of one year with an annual consulting fee of $5,400.
(c) Retirement and Severance Benefits
The Company's retirement and severance program is that which is required
under Korean legislation. Each employee is entitled to a lump-sum payment based
on a number of factors when they leave the Company. The employees are fully
vested in these amounts and are entitled to receive the amounts immediately upon
separation.
The management of the Company believes that the amount of the Company's
retirement and severance liability as of September 30, 2000 is immaterial due to
the Company's short period of operation and, therefore, did not reflect the
corresponding amount of liability on the accompanying balance sheet in
accordance with Korean GAAP.
9
<PAGE>
Under U.S. GAAP, in accordance with the consensus in the Financial
Accounting Standards Board ("FASB") Emerging Issues Task Force ("EITF") Issue
No. 88-1, the basis of provision for allowance for retirement and severance
benefits liability is adequately disclosed.
(d) Stock Option Plan
The Company adopted the 2000 Equity Incentive Plan (hereinafter referred to
as the "Plan"), is (1)to provide a special incentive to selected individuals who
have made contributions to the business and success of the Company and its
subsidiaries (2) to provide special incentives to selected individuals who had
previously made contributions to the business and success of eWeb21, Inc. (a
private, wholly-owned subsidiary of the eWeb21 Corp.) and who previously had
been awarded special incentive options which were never exercised and which now
have been cancelled. The Plan is designed to accomplish this purpose by offering
such individuals by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock Bonuses
(collectively "Awards").
The Plan is administered by a committee (the "Committee") to be established
by the board of directors of the Company (the "Board") or the Board acting as
the Committee.
As of September 30, 2000, the Company issued 1,600,000 options. The Company
has reserved 1,600,000 shares of stock pending conversion of the options into
shares of common stock.
NOTE G - COMMON STOCK SUBSCRIBED
As of September 30, 2000, the Company's subsidiary eWeb21, Inc. has
received an aggregate of $9,688,014 through various private placements completed
prior to the date of the Company's reorganization and will be issued shares of
common stock of the Company at a price as yet to be determined.
10
<PAGE>
NOTE H - SEGMENT AND REGIONAL INFORMATION
All of the Company's operations are currently represented by Promoweb
software sales. Sales and costs by geographic area for the period from January
1, 2000 to September 30, 2000 are as follows:
<TABLE>
<CAPTION>
Sales of services Sales of merchandises Total
Won(thousand) U.S.dollar Won(thousand) U.S.dollar Won(thousand) U.S.dollar
<S> <C> <C> <C> <C> <C> <C>
eWeb Korea
Sales W 1,738,598 $ 1,552,735 W3,029,628 $ 2,705,750 W 4,768,226 $ 4,258,485
Costs of sales 1,401,264 1,251,463 2,302,517 2,056,370 3,703,781 3,307,833
Gross Profit W 337,334 $ 301,272 W 727,111 $ 649,380 W 1,064,445 $ 950,652
eWeb Japan
Sales W 38,812 $ 34,663 W 77,655 $ 69,353 W 116,467 $ 104,016
Costs of slaes 30,635 27,360 59,018 52,709 89,653 80,069
Gross Profit W 8,177 $ 7,303 W 18,637 $ 16,644 W 26,814 $ 23,947
eWeb Australia
Sales W 1,170 $ 1,045 W 2,005 $ 1,791 W 3,175 $ 2,836
Costs of sales 923 824 1,524 1,361 2,447 2,185
Gross Profit W 247 $ 221 W 481 $ 430 W 728 $ 651
Total
Sales W 1,778,580 $1,588,443 W3,109,288 $ 2,776,894 W 4,887,868 $ 4,365,337
Costs of sales 1,432,822 1,279,647 2,363,059 2,110,440 3,795,881 3,390,087
Gross Profit W 345,758 $ 308,796 W 746,229 $ 666,454 W 1,091,987 $ 975,250
</TABLE>
The balances of significant asset and liability accounts of service centers
as of September 30 of 2000 are as follows:
<TABLE>
<CAPTION>
Won (thousands)
eWeb Korea eWeb Japan eWeb Australia Total
<S> <C> <C> <C> <C>
Accounts receivable W 1,493,408 W 155,310 W 3,569 W 1,652,287
Accounts payable - 117,050 2,713 119,763
</TABLE>
<TABLE>
<CAPTION>
U.S. dollars
eWeb Korea eWeb Japan eWeb Australia Total
<S> <C> <C> <C> <C>
Accounts receivable $ 1,340,543 $ 138,128 $ 3,201 $ 1,481,872
Accounts payable - 104,978 2,433 107,411
</TABLE>
11
<PAGE>
NOTE I - COMPREHENSIVE INCOME
Under U.S. GAAP, the Company applies the provisions of Statement of
Financial Accounting Standards ("SFAS") No.130, which requires the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) for period presented. As of September 30, 2000, the Company does not
have any other comprehensive income (loss) items that are required for
disclosure under U.S. GAAP and total comprehensive income (loss) is equal to net
loss for the period from January 1, 2000 to September 30, 2000.
NOTE J - COMMON STOCK
For the period from January 1, 2000 to September 30, 2000, the Company sold
an aggregate of 549,214 shares of common stock for an aggregate consideration of
W2,746,070,000 ($2,450,687)
Item 2. Management's Discussion and Analysis of Plan of operation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
The following discussion relates to the results of our operations to date,
and our financial condition:
This FORM 10QSB contains forward looking statements relating to our
Company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.
12
<PAGE>
Development stage activities.
The Company has been a development stage enterprise from its inception
Octtober 11, 1999 to September 30, 2000. The Company is in the process of
developing a web site on the World Wide Web for the purpose of selling health
care products and sharing its expertise by doing consulting.
On April 15, 2000, the Company entered into an Agreement of Business
Combination with the eWeb21, Inc., a Korean corporation, whereby, the Company
issued 14,880,000 shares of common stock for all the issued and outstanding
shares of common stock of eWeb. The transaction has been accounted for as th
issuance of shares of common stock by a private company for the net assets of
the Company, accompanied by a recapitalization. Accordingly, the financial
statements of eWeb become the financial statements of the Company.
During this period, management devoted the majority of its efforts to
initiating the process of the web site design and development, developing
Internet relationships such as communications service links, customers and other
Internet Presence Providers to enhance the Companies offerings, developing and
testing its marketing strategy and finding a management team to begin the
process of: completing its marketing goals; furthering its research and
development for its products; completing the documentation for and selling
initial shares through the Company's private placements; completing a reverse
merger with Eweb21 Corp; and completing the documentation for the Company's
initial public offering. These activities were funded by the Company's
management through the initial sale of shares of eWeb's common stock aggregating
$20,000; investments from stockholders through the sale of 215,521 shares of
common stock of eWeb aggregating $9,688,014 and borrowing an aggregate of
$1,878,520 on a short term basis. The Company has not yet generated sufficient
revenues during its limited operating history to fund its ongoing operating
expenses, repay outstanding indebtedness, or fund its web site and product
development activities. There can be no assurance that development of the web
site will be completed and fully tested in a timely manner and within the budget
constraints of management and that the Company's marketing research will provide
a profitable path to utilize the Company's marketing plans. Further investments
into web site development, marketing research as defined in the Company's
operating plan will significantly reduce the cost of development, preparation,
and processing of purchases and orders by enabling the Company to effectively
compete in the electronic market place.
For the next 12 months, the Company plans to devote the majority of its
efforts to (i) obtaining financing to build administrative and service
facilities to market its software, services and products, (ii) pursuing and
finding a management team to continue the process of completing its marketing
goals and to develop new markets. The Company anticipates it will be able to
expand its operations. The Company anticipates that its results of operations
may fluctuate for the foreseeable future due to several factors, including the
timing of the introduction of the Company's products into its target markets;
whether and when new products are successfully developed by the Company, market
acceptance of current or new products, competitive pressures on pricing, changes
in the mix of products sold. Operating results would also be adversely affected
by a downturn in the market for current technology it improved technology is
introduced. Because the Company is continuing to increase its operating expenses
for personnel and other general and administrative expenses, the Company's
operating results would be adversely affected if its sales did not
correspondingly increase. The Company's limited operating history makes accurate
prediction of future operating results difficult or impossible.
13
<PAGE>
The Company's results of operations for the nine months ended September 30,
2000 should be viewed with considerable caution due to the following factors:
1) Results of operations for the period from inception, October 11, 1999,
to December 31, 1999 and for the nine months ended September 30, 2000 do not
reflect a full year's worth of revenues but rather 51 days of revenues as the
Company since only commenced generating revenues beginning October 11 of 1999.
2) Inherent in any acquisitions are costs which arise from integration of
operations into the Company's existing business operations. Many of these may be
viewed as one-time, non- recurring charges which are not likely to be repeated
in future performance periods.
The Company plans to invest heavily in marketing and promotion, the hiring
of additional employees and the enhancement of our websites and operational
infrastructure. Therefore, it expectz to incur increasing sales and marketing,
product development and general and administrative expenses. As a result, it
will need to generate higher revenue to achieve and maintain profitability,
although it may never be able to do so. If its revenue growth is slower than
anticipated, or our operating expenses exceed our expectations, its losses will
be significantly greater.
Due to these factors, the September 30, 2000 results of operations
discussed below may not be an accurate indication of future performance. In
addition, comparison of results for the nine months ended September 30, 2000
with those for the nine months ended September 30, 1999 are difficult to make
due to the basic dissimilarity between a developing stage company and a company
that has commenced substantial business operations beginning in October 11,
1999.
Results of Operations for the nine months ended September 30, 2000.
NET SALES. Revenues consist of consist of Promoweb product sales and
services, net of any discounts and reserves for expected returns. Revenue were
aggregated $4,365,337 for the nine months ended September 30, 2000. These
minimal revenues primarily resulted from expanded marketing efforts and the
introduction of new product lines. During this period, the Company has expanded
its operations into the geographic areas of Korea, Japan and Australia.
Direct costs. Direct costs consist of telecommunications charges in respect
of providing internet connection services to customers. These costs are expensed
as incurred. For the nine months ended September 30, 2000, these costs
aggregated $3,390,087.
Selling, general and administrative expenses. Sales and marketing expenses
consist primarily of advertising costs, order processing and fulfillment costs,
credit card costs and the salary and benefits of our sales, marketing and
customer service personnel. Advertising costs include online marketing efforts,
print advertising and direct marketing campaigns. Sales and marketing expenses
aggregated $1,976,457 for the nine months ended September 30, 2000. The Company
intends to continue to pursue an aggressive marketing strategy to attract new
customers. Therefore, it expects sales and marketing expenses to increase
significantly in future periods.
Other income and expense, net other income (expense), net consists
primarily of earnings on our cash and cash equivalents of $11,822, and interest
payments on our loan and lease agreements of $88,666 and foreign currency
transaction loss-net of $29,446.
14
<PAGE>
BENEFIT (PROVISION) FOR INCOME TAXES. As a result of the pre-tax loss
recorded for the period from inception, October 11, 1999 to September 30, 2000,
the Company not recorded a benefit for Federal income taxes. Instead the Company
recognized no income tax benefit from the losses generated for the period from
inception, October 11, 1999 to September 30, 2000. SFAS No. 109 requires that a
valuation allowance be provided if it is more likely than not that some portion
or all of a deferred tax asset will not be realized. The Company's ability to
realize benefit of its deferred tax asset will depend on the generation of
future taxable income. Because the Company has yet to recognize significant
revenue from the sale of its products and services, the Company believes that a
full valuation allowance should be provided. The Company will continue to assess
the likelihood of realization of such assets; however, if future events occur
which make the realization of such assets more likely than not, the Company will
record a tax benefit.
Liquidity and Capital Resources.
The Company's cash balance at December 31, 1999 and September 30, 2000 is
$22,661 and $3,731,223 respectively. Working capital at December 31, 1999 and
September 30, 2000 is negative at December 31, 1999 by $327,309 and positive at
at September 30, 2000 by $3,622,283. For the period from inception, October 11,
1999, to December 31, 2000, working capital was provided by sale of shares of
common stock aggregating $83,146 and an increase in short term borrowings of
$519,273. The Company expended cash through the purchase of other assets of
$122,046; payment of a guarantee deposit for rent for $235,444, software
development costs of $4,076, and cash used in operations of $220,908.
For the nine months ended September 30, 2000, the Company sold shares of
its common stock for an aggregate consideration opf 9,688,014 and increased
short term borrowings by $1,359,247. Cash was used by the Company through
operations of $3,783,783, increasing the Company's guarantee deposit by an
additional $1,534,230, increasing short term loans receivable by $516,521,
purchase of intangible assets of $73,818, purchase of fixed assets of
$1,176,909, payment of monies for software development costs of $1,241,745 and a
loss of currency transaction adjustment of $9,904.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
eWeb21 Corp.
/s/Hyo-Sung Choi
----------------
Hyo-Sung Choi,
Chief Financial Officer
Dated: November 30, 2000
16
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