SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
April 19, 2000
-------------------------------------------------
(Date of Report (Date of earliest event reported)
eWeb21 Corp.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-5367 11-1717709
--------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
21st Floor, Technomart 546-4
Kui-dong, Kwangjin-gu, Seoul, Korea #143-7212
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: +82 2 2204 3619
D-LANZ DEVELOPMENT GROUP, INC.
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 1. Change in Control of Registrant
(a) The Registrant has had a change in control. On April 19, 2000, the
Registrant acquired all the capital stock of Eweb21, Inc., a Korean
corporation, in exchange for 14,880,000 shares of the Registrant's common
stock, whereby control of the registrant has changed to the controlling
stockholders of Eweb21, Inc.
(b) There are no arrangements by which a change in control will occur in the
future.
Item 2. Acquisition of Capital Stock
On April 19, 2000, the Registrant acquired all the capital stock of Eweb21,
Inc., a Korean corporation, in exchange for 14,880,000 shares of the
Registrant's common stock, whereby control of the Company has changed to the
controlling stockholders of Eweb21, Inc. Eweb21, Inc.'s business provides
services on the internet under the names Eweb Mail, Eweb Commerce, Eweb Wizard
and Eweb Find for over 60,000 on-line distributors through offices in London,
U.K., Seoul, Korea, Tokyo, Japan and Sydney, Australia.
The Agreement of Business Combination By Stock Exchange is attached to the
Registrant's is attached to the Registrant's Form 8-K filed with the Commission
on May 23, 2000. as Exhibit 1.
For the next 12 months, the Registrant plans to devote the majority of its
efforts to (i) obtaining financing to expand Eweb21 Inc.'s distributor base,
(ii) hire necessary personnel; (iii) improve its web portal site and expand
product offerings and (iv) acquire assets needed to continue that expansion.
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrant's Certifying Public Accountant.
Not applicable.
Item 5. Other events.
None reported.
Item 6. Resignations of Registrant's Officers and Directors.
On April 19, 2000, as a condition of, and as result of, the above mentioned
acquisition, Roger L. Fidler and Jay Hait resigned their positions as officers
and directors of the corporation after appointing their replacements. The copies
of the letters of resignation of Mr. Fidler and Mr. Hait were attached as
Exhibit 2a and 2b to the Form 8K filed with the Commission on May 23, 2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Pro-forma Consolidated Financial Statement of D-Lanz Development Group, Inc.
giving effect to transfer of certain assets to Global Agri-Med Technologies,
Inc.
Pro-forma Consolidated Financial Statement of D-Lanz Development Group, Inc.
giving effect to the exchange of common stock for all the all the capital stock
of eWeb21, Inc., a Korean corporation.
Audited Financial statements for eWeb21, Inc., a Korean corporation, for the
period from inception (October 11, 1999) to December 31, 1999
Unaudited financial statements of eWeb21, Inc., a Korean corporation, as of
March 31, 2000.
Item 8. Change in Fiscal Year: Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: November 3, 2000
eWeb21 Corp.
By:/s/Paul Lambert
-----------------------
Paul Lambert
Chief Executive Officer
<PAGE>
EXHIBIT 4
D-LANZ DEVELOPMENT GROUP, INC.
Pro-forma
Consolidated Financial Statement of D-Lanz Development Group, Inc.
giving effect to transfer of certain assets
to Global Agri-Med Technologies, Inc.
(Unaudited)
The following unaudited proforma combined condensed financial statements
present a combined balance sheet and related statements of income, cash flows
and stockholders' equity of D-Lanz Development Group, Inc. (the "Company"),
Global Agri-Med Technologies, Inc. ("Agri-Med") giving effect to the spin off of
Global Agri-Med Technologies, Inc. and as if the reverse pooling method of
accounting for the proposed spin off pursuant to an Agreement of Sale, the
("Agreement"), which was dated on April 1, 2000.
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
The pro forma combined condensed balance sheet as of April 1, 2000 and the
related statements of income for the three months ended April 1, 2000 giving
effect to the proposed transactions as if they had been in effect throughout the
periods presented. The information shown is based upon numerous assumptions and
estimates and is not necessarily indicative of the results of future operations
of the combined entities or the actual results that would have occurred had the
transaction been consummated during the periods indicated. These statements
should be read in conjunction with the consolidated financial statements of the
Company, and the financial statements of Agri-Med included herein.
<PAGE>
D-LANZ DEVELOPMENT GROUP, INC.
(a development stage company)
PROFORMA BALANCE SHEET
<TABLE>
<CAPTION>
Unaudited
Global Agri-Med Adjustments
D-Lanz Technologies, to reflect spin D-Lanz
Development Inc. off to Agri-Med Development
Group, Inc. Technologies, Inc. Group, Inc.
<S> <C> <C> <C> <C>
Assets
Current assets
Cash $ 292 $ (292) $ -0-
--------- ---------- ----------
Total current assets 292 (292) -0-
Other assets
Organization costs 475
License agreement 252,500 (252,500) -0-
--------- ------- ----------
Total other assets 252,500 $ 475 (252,500) -0-
--------- ------- ---------- --------
Total assets $ 252,792 $ 475 $ (252,792) $ -0-
========= ======= =========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses $ 420,250 $ 420,250
Officer loan payable 23,091 23,091 -0-
--------- ---------- -------
Total current liabilities 443,341 443,341
Stockholders' equity
Preferred stock authorized
50,000,000 shares; $.001 per
share each. At March 31, 2000
there are -0- shares out-
standing
Common Stock authorized
50,000,000 shares, $0.001
par value each.
At March 31, 2000, there were
11,900,000 shares outstanding 11,900 500 11,900
Additional paid in capital 1,470,151 252,500 1,217,651
Deficit accumulated during
the development stage (1,672,600) (25) (443,049) (1,229,551)
----------- ----- --------- -----------
Total stockholders' equity (190,549) 475 (190,549) -0-
----------- ----- -----------
Total liabilities and
stockholders' equity $ 252,792 $ 475 $252,792 $ -0-
============ ====== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-1
<PAGE>
D-LANZ DEVELOPMENT GROUP, INC.
(a development stage company)
PROFORMA STATEMENT OF OPERATIONS
Unaudited
MARCH 31, 2000
<TABLE>
<CAPTION>
Adjustments to
D-Lanz Global Agri-Med reflect spin off D-Lanz
Development Technologies. to Agri-Med Development
Group, Inc. Inc. Technologies, Inc. Group, Inc.
---------- ------- ----------------- ----------
<S> <C> <C> <C> <C>
Revenue
$ -0- $ -0- $ -0- $ -0-
Costs of goods sold -0- -0- -0- -0-
------ ------ ------ ------
Gross profit -0- -0- -0- -0-
Operations:
General and administrative 402,311 2,250 -0- 402,311
Non cash expenses-consulting fees
Depreciation and amortization -0- 25 -0- -0-
-------- ------ ----- --------
Total expense 402,311 2,275 -0- 402,311
Loss from operations (402,311) (2,275) -0- (402,311)
Other income
Interest income
Interest expense (340) (340)
-------- ----------
Total other income (340) (340)
Net income (loss) $(402,651) $ (2,275) $ -0- $(402,651)
========== ========== ======= ==========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
Note 1 -
During April, 2000, D-Lanz Development Group, Inc., (the "Company")
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, 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, Inc. and Recapitalization of the Company
In April, 2000, the Company completed a reverse merger with eWeb21, Inc.
(eWeb) giving effect to the reverse acquisition 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 dated on March,
2000. Accordingly, the financial statements of Company became the consolidated
financial statements of eWeb21 Corporation.
The pro forma combined condensed balance sheet as of March 31, 2000
consists of the Unaudited balance sheet of the Company as at March 31, 2000 and
the unaudited balance sheet of eWeb at March 31, 2000 and the unaudited related
statements of income, cash flows and stockholders equity for the three months
ended March 31, 2000 and the unaudited related statements of income, cash flows
and stockholders equity for eWeb for the three months ended March 31, 2000
giving effect to the proposed transactions as if they had been in effect
throughout the periods presented.
<PAGE>
EXHIBIT 5
D-LANZ DEVELOPMENT GROUP, INC.
Pro-forma Consolidated Financial Statement of D-Lanz Development Group, Inc.
giving effect to the exchange of common stock for all the all the capital stock
of eWeb21, Inc., a Korean corporation.
(Unaudited)
The following unaudited proforma combined condensed financial statements
present a combined balance sheet and related statements of income, cash flows
and stockholders' equity of D-Lanz Development Group, Inc. (the "Company") and
eWeb21, Inc., a Republic of Korea corporation giving effect to the reverse
acquisition 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 dated on March 31, 2000. Accordingly, the financial
statements of Company became the consolidated financial statements of eWeb21
Corporation.
The pro forma combined condensed balance sheet as of March 31, 2000 and the
related statements of income, cash flows and stockholders' equity for the three
months ended March 31, 2000 giving effect to the proposed transactions as if
they had been in effect throughout the periods presented. The information shown
is based upon numerous assumptions and estimates and is not necessarily
indicative of the results of future operations of the combined entities or the
actual results that would have occurred had the transaction been consummated
during the periods indicated. These statements should be read in conjunction
with the consolidated financial statements of the Company, and the financial
statements of eWeb21 Corporation.
D-Lanz Development Group, Inc.
(a development stage company)
(Unaudited)
PROFORMA BALANCE SHEET
March 31, 2000
<TABLE>
<CAPTION>
Consolidated
D-Lanz D-Lanz
Development eWeb21, Development
Group, Inc. Inc. Adjustments Group, Inc.
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ -0- $ 1,389,482 $ -0- $ 1,389,482
Accounts receivable 960,898 960,898
Short term loans receivable 276,137 276,137
Other current assets 660,951 660,951
---------- ---------- --------- -----------
Total current assets -0- 3,287,468 -0- 3,287,468
Property and equipment
Vehicles 64,303 64,303
equipment, furniture and
fixtures 605,957 605,957
Less accumulated depreciation (73,580) (73,580)
----------- ----------
Net property and equipment 596,680 596,680
Other assets
Software development costs 368,346 368,346
Guarantee deposit 1,295,852 1,295,852
Government security deposit 90 90
Intangible asset 41,697 41,697
--------- ------------
Total other assets 1,705,985 1,705,985
---------- ------------
Total assets $ -0- $ 5,590,133 $ -0- $ 5,590,133
========= ============ ======== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses $ 340,382 $ 340,382
Short term borrowing 2,870,388 2,870,388
Deferred income 271,458 271,458
---------- ----------
Total current liabilities 3,482,228 3,482,228
Stockholders' equity
Preferred stock authorized
50,000,000 shares, $.001 par value
each. At March 31, 2000 there are
-0- shares outstanding
Common Stock authorized 50,000,000
shares, $0.001 par value each.
At March 31, 2000, there were
119,343 shares outstanding with
14,880,000 shares being issued. 11,900 2,475,877 (2,472,777) 15,000
Common stock subscribed 1,490,231 1,490,231
Additional paid in capital (11,900) 2,472,777 2,460,877
Currency translation adjustment 17,203 17,203
Deficit accumulated during the
development stage -0- (1,875,406) (1,875,406)
--------- ----------- -----------`
Total stockholders' equity -0- 2,107,905 2,107,905
--------- ---------- ---------
Total liabilities and
stockholders' equity $ -0- $ 5,590,133 $ -0- $5,590,133
======== =========== ======= ==========
</TABLE>
See accompanying notes to financial statements.
F-1
<PAGE>
D-Lanz Development Group, Inc.
(a development stage company)
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 2000
<TABLE>
<CAPTION>
Consolidated
Consolidated D-Lanz
Development eWeb21, Development
Group, Inc. Inc. Adjustments Group, Inc.
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue $ -0- $1,378,958 $1,378,958
Costs of services -0- 1,062,407 1,062,407
---------- ----------
Gross profit -0- 316,551 316,551
Operations:
Selling, general and
administrative expenses 666,283 672,116
Depreciation expense -0- -0-
Non cash payment for
consulting fees 1,480,154 1,480,154
---------- ---------
Total expense -0- 2,146,437 2,146,437
Income (Loss) from operations
and before corporate (1.829,886) (1,829,886)
income taxes
Corporate income taxes
Other income and expenses
Interest income 1,037 1,037
Interest expense (16,048) (16,048)
Foreign currency transaction
loss-net (16,853) (16,853)
Other net 241 241
-------- --------
(31,208) (31,208)
Net income (loss) $ -0- $(1,861,094) $ -0- $(1,861,094)
========= ============ ======== ============
Net income (loss) per share -basic $ 0.00 $ (1.37) $ 0.00 $ (1.37)
========= ============ ======== =============
Number of shares outstanding-basic 1,360,000 1,360,000 1,360,000 1,360,000
========== ========== ========== =============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
Note 1 -
During April, 2000, D-Lanz Development Group, Inc., (the "Company")
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 eWeb2, Inc. and Recapitalization of the Company
In April, 2000, the Company completed a reverse merger with eWeb21, Inc.
("eWeb") giving effect to the reverse acquisition 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 dated on March,
2000. Accordingly, the financial statements of Company became the consolidated
financial statements of eWeb21, Inc.
The pro forma combined condensed balance sheet as of March 31, 2000
consists of the Unaudited balance sheet of the Company as at March 31, 2000 and
the unaudited balance sheet of eWeb at March 31, 2000 and the unaudited related
statements of income, cash flows and stockholders' equity for the three months
ended March 31, 2000 and the unaudited related statements of income, cash flows
and stockholders' equity for eWeb for the three months ended March 31, 2000
giving effect to the proposed transactions as if they had been in effect
throughout the periods presented.
<PAGE>
EXHIBIT 6
Audited Financial statements for eWeb21, Inc., a Korean corporation, for the
period from inception (October 11, 1999) to December 31, 1999
eWeb21, Inc.
Financial Statements
As of December 31, 1999
(With Independent Auditors' Report)
Sejong Accounting Corporation
SEJONG ACCOUNTING CORPORATION
Sejong Accounting Corporation
6th floor, Dong-in Building, 1606-2 Seocho-dong,
Seocho-gu, Seoul 137-070, Korea
Telephone +82 2 523 3367
Facsimile +82 2 523 2305
Independent Auditors' Report
The Board of Directors and Stockholders
eWeb21, Inc. (a development stage company) :
We have audited the accompanying balance sheet of eWeb21, Inc. ("the
Company") as of December 31, 1999 and the related statements of operations and
retained earnings and cash flows for the period from inception, October 11,
1999, to December 31, 1999. 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 audits in accordance with auditing standards generally
accepted in the United States of America. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of eWeb21, Inc. (a development
stage company) at December 31, 1999, and the results of its operations and
retained earnings and cash flows for the period from inception, October 11,
1999, to December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that
eWeb21 Corporation (a development stage company) will continue as a going
concern. As more fully described in note1, the Company has incurred operating
losses since the date of inception and requires additional capital to continue
operations. The operations of the Company, and those of other companies in the
Republic of Korea have also been significantly affected, and will continue to be
affected for the foreseeable future, by the country's unstable economy caused by
the currency devaluation, volatile stock markets and slowdown in growth in the
Asia-Pacific region. While the Korean economy has recently shown signs of
improvement, there are still uncertainties in the region that may affect future
operations. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from those uncertainties. Management's plans as to
these matters are described in Note 1. The financial statements do not include
any adjustments to reflect the possible effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of eWeb21 Corporation (a development
stage company) to continue as a going concern.
Seoul, Korea
February 25, 2000
<PAGE>
eWeb21, Inc.
Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
Won (thousands) U.S. dollars (note 1(i))
--------------- ------------------------
Assets
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents (note 1(C)) W 25,955 $ 22,661
Accounts receivable 942,711 823,041
Prepaid assets (note 2) 222,015 193,832
-------------- -------------
Total current assets 1,190,681 1,039,534
Property and equipment: (note 3)
Equipments and furniture 139,791 122,046
Less accumulated depreciation (8,018) (7,000)
--------------- --------------
Net property and equipment 131,773 115,046
Other assets
Guarantee Deposits 269,677 235,444
Government Securities 100 87
Capitalized Computer Software (Note 1(f)) 4,669 4,076
---------- ------------
Total other assets 274,446 239,607
---------- -----------
W 1,596,900 $ 1,394,187
============ =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Balance Sheet, Continued
<TABLE>
<CAPTION>
Won (thousands) U.S. dollars (note 1(i))
--------------- ------------------------
<S> <C> <C>
Liabilities and Stockholders' equity
Current liabilities:
Accounts payable and accrued expenses W 862,271 $ 752,813
Short-term borrowings (note 4) 594,775 519,273
Deferred income 56,602 49,417
---------------- --------
Total current liabilities 1,513,648 1,321,503
Stockholders' equity:
Common stock of W 5,000 par value
Authorized - 80,000 shares
Issued and outstanding 20,000 shares
at December 31, 1999 (note 11) 100,000 83,146
Currency translation adjustment - 3,850
Accumulated deficit (16,748) (14,312)
--------------- --------------
Total stockholders' equity 83,252 72,684
Commitment and contingencies (note 6) - -
------------- -----------
W 1,596,900 $ 1,394,187
============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Statement of Operations
For the period from October 11, 1999 to December 31, 1999
<TABLE>
<CAPTION>
Won
(thousands, except
earnings per share) U.S. dollars (note 1(i))
------------------- ------------------------
<S> <C> <C>
Sales (note 1(k)) W 479,664 $ 409,892
Costs of sales 407,715 348,408
--------------- --------
Gross profit 71,949 61,484
Selling and administrative expenses: 80,765 69,018
-------------- -------------
Operating gain (loss) (8,816) (7,534)
Other income (deductions):
Interest income 171 146
Other, net 1 1
-------------- -------------
172 147
-------------- -------------
Loss before income taxes (8,644) (7,387)
Income taxes (note 5) 8,104 6,925
-------------- -------------
Net income (loss) W (16,748) $ (14,312)
=================== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Statement of Stockholders' Equity
For the period from October 11, 1999 to December 31, 1999
<TABLE>
<CAPTION>
Currency
Won (thousands) Common Accumulated translation
Stock deficit adjustment Total
---------- ------------ ----------- -------
<S> <C> <C> <C> <C>
Initial capitalization of 20,000 shares W 100,000 - W 100,000
on October 11, 1999
Net income (loss) - (16,748) (16,748)
--------- ----------- ----------
Balance at December 31, 1999 100,000 (16,748) - W 83,252
========= =========== ======== ===========
</TABLE>
<TABLE>
U.S.Dollars Currency
----------- Common Accumulated translation
Stock deficit adjustment Total
---------- ------------ ----------- -------
<S> <C> <C> <C> <C>
Initial capitalization of 20,000 shares $ 83,146 - $ 83,146
on October 11, 1999
Net income (loss) - (14,312) 3,850 (10,462)
---------- ---------- --------- -----------
Balance at December 31, 1999 $ 83,146 (14,312) 3,850 $ 72,684
=========== ========== ========= == =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Statement of Cash Flows
For the period from October 11, 1999 to December 31, 1999
<TABLE>
<CAPTION>
Won (thousands) U.S. dollars (note 1(j))
--------------- ------------------------
<S> <C> <C>
Net Income W (16,748) $ (14,312)
Cash flows from operating activities:
Depreciation of property and equipment 8,018 7,000
Increase in accounts receivable (942,711) (823,041)
Increase in advance payments (219,320) (191,479)
Increase in accounts payable 801,304 699,585
Increase in other payables 32,476 28,353
Increase in withholdings 2,315 2,022
Increase in deferred income 56,602 49,417
Increase in currency translation adjustment - 3,850
Other, net 23,481 20,500
------------- -------------
Net cash used in operating activities: (254,583) (218,105)
-------------- --------------
Cash flows from investing activities:
Increase in investment securities (100) (87)
Increase in guarantee deposit (269,677) (235,444)
Purchase of equipment and furniture (139,791) (122,046)
Increase in development costs (4,669) (4,076)
------------- --------------
Net cash used in investing activities (414,237) (361,653)
-------------- --------------
Cash flows from financing activities:
Increase in short-term borrowings, net 594,775 519,273
Issuance of common stock 100,000 83,146
------------- -------------
Net cash provided by financing activities 694,775 602,419
------------- -------------
Increase in cash and cash equivalents 25,955 22,661
Cash and cash equivalents at beginning of year - -
------------- -------------
Cash and cash equivalents at end of year W 25,955 $ 22,661
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Notes to Financial Statements
December 31, 1999
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements
(a) Business overview
eWeb21, Inc. (the "Company") was incorporated in the Republic of Korea on
October 11, 1999 to engage primarily in an internet website and software
development of e-marketing, e-commerce, e-design and e-advertising products and
services. The products and services were developed to meet the needs of
companies in the niche market of e-level marketing such as Promoweb (e-level
marketing), C3 Shopping Store (e-commerce), Wizard (e-design), and
Find (e-advertising).
(b) Basis of Presenting Financial Statements
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$14,312 for the period from inception October 11, 1999, to December 31, 1999.
These factors indicate that the Company's continuation as a going concern
is dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the completion of a public offering and with the
resulting increase in working capital, the Company will be able to continue to
develop the Company's marketing program to develop its internet presence and
experience an increase in revenue. The Company will require substantial
additional funds to finance its business activities on an ongoing basis and will
have a continuing long-term need to obtain additional financing. The Company's
future capital requirements will depend on numerous factors including, but not
limited to, continued progress developing its software, initiating marketing
penetration and signing distributors to internet contracts. The Company plans to
engage in such ongoing financing efforts on a continuing basis.
The financial statements presented consist of the balance sheet of the
Company as at December 31, 1999 and the related statements of operations,
stockholders equity and cash flows for the period from inception, October 11,
1999, to December 31, 1999.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and with banks, overnight
repurchase agreements and certificates of deposit with initial terms less than
three months when purchased with cash. For purposes of the statement of cash
flows, the Company considers financial instruments with original maturities of
three months or less to be cash equivalents.
(d) Allowance for Doubtful Accounts
Allowance for doubtful accounts is estimated based on management's judgment
and an analysis of portfolio quality and past experience.
(e) Property and Equipment
Property and equipment are stated at cost. Significant additions or
improvements extending useful lives of assets are capitalized. However, normal
maintenance and repairs are charged to expense when incurred.
Depreciation is computed by the declining-balance method using rates based
on estimated useful lives of the respective assets as follows:
Estimated
useful lives
Equipment and furniture 5
(f) Software Development Costs
Under SFAS No.86, "Accounting for the Costs of Computer Software to Be
Sold, Leased, or Otherwise Marketed", capitalization of software development
costs begins upon the establishment of technological feasibility of the product,
which the Company has defined as the completion of beta testing of a working
product. The establishment of technological feasibility and the on going
assessment of the recoverability of these costs require considerable judgment by
management with respect to certain external factors, including, but not limited
to, anticipated future gross product revenue, estimated economic life and
changes in software and hardware technology. As of December 31, 1999, the
Company has capitalized $4,076 in software development costs.
(g) Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". SOP 98-1 is effective
for financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use including the requirement to capitalize specified costs and
amortization of such costs.
(h) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and length of
service when they leave the Company. The Company's estimated liability under the
plan, which would be payable if all employees left on the balance sheet date, is
to be accrued in the accompanying balance sheet.
As of December 31, 1999, none of the Company's employees have been with the
Company for more than one year and accordingly, no provision has been recorded
for retirement and severance benefits.
(i) 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 US 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 W1,145.4 to
US$1, the rate of exchange on December 31, 1999. 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.
(j) Contingent Liabilities
Contingent losses are generally recognized as liability when probable
and reasonably estimable.
(k) Revenue Recognition
The revenue of the Company consist of product sale and services of internet
website software. The product sale of the software is recognized when the
Company confirms and authorizes each new sub domain name. The service of the
software is recognized on a prorata basis during the service period.
The revenue of the Company's sales through C3 (Cyber Consumer Centre:
Shopping Mall ) is recognized when members or cyber dealers order any products
through our C3 mall and the actual delivery is done.
(l) Costs of Sales
Cost of sales relating to the internet website software consist of
commission and hosting costs.
(m) Selling and Marketing Costs
Selling and marketing costs are expensed as incurred and totaled W23,065
thousands(US$19,710) for the period from inception, October 11, 1999 to December
31, 1999. These costs are reported under selling, general and administrative
expenses on the statement of operating.
(n) Income Taxes
Income tax on the earnings or loss for the year comprises current and
deferred tax. Income tax is recognized in the statement of operations except to
the extent that it relates to items recognized directly to equity, in which case
it is recognized in equity.
Deferred tax is provided using the asset and liability method, providing
for temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and their respective tax basis. The amount of
deferred tax provided is based on the expected manner of realization or
settlement of the carrying amounts of assets and liabilities, using tax rates
enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is probable
that future taxable earnings will be available against which the unused tax
losses and credits can be utilized. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be
realized.
(o) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make a number of estimates
and assumptions that affect the amounts reported in the financial statements and
related notes to financial statements. Actual results could differ from those
estimates.
(p) Accounting for Derivative Instruments and Hedging Activities
SFAS No.133, "Accounting for Derivative Instruments and Hedging
Activities", requires the recognition of all derivatives as either assets or
liabilities and the measurement of those instruments at fair value. SFAS No.137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of SFAS No.133", issued in August 1999, postpones for one year
the mandatory effective date for adoption of SFAS No. 133 to January 1, 2001.
The Company does not currently engage in derivative trading or hedging
activities; hence, SFAS No.133 and SFAS No.137 will not have a material impact
on its financial position or results of operations.
(2) Prepaid Assets
Prepaid assets at December 31, 1999 are summarized as follows:
<TABLE>
Won (thousands) U.S. dollars
--------------- ------------
<S> <C> <C>
Advance payment W 219,320 $ 191,479
VAT receivable 2,657 2,320
Prepaid income taxes 38 33
-------- -----------
W 222,015 $ 193,832
========= ==========
</TABLE>
(3) Property and Equipment
Property and Equipment for the Company consisted of the following at
December 31, 2000:
<TABLE>
Won (thousands)
Asset Acquisition Accumulated
Cost Depreciation Balance
<S> <C> <C> <C> <C>
Equipment and furniture 139,791 8,018 131,773
U.S. dollars
-----------------------
Acquisition Accumulated
Asset Cost Depreciation Balance
Equipment and furniture 122,046 7,000 115,046
</TABLE>
(4) Short-term Borrowings
Short-term borrowings at December 31, 1999 are summarized as follows:
<TABLE>
Lender Annual Interest Rate Won (thousands) U.S. dollars
<S> <C> <C> <C> <C>
Sea-Hyoung Oh 0.0% W 594,570 $ 519,094
Others 0.0% 205 179
-------------- ------------
W 594,775 $ 519,273
============== ============
</TABLE>
(5) 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.
The Company is subject to corporate income tax and resident surtax
normally at an aggregate rate of 30.8% on taxable income over W100,000 thousands
and 17.6% on taxable income up to W100,000 thousands.
(6) Commitments and Contingencies
(a) Agreements with service centers
Under the terms of the Company's service agreement with its service
centers, the Company is obligated to update any information
necessary for the operations of the service centers, provide
analysis and guidance to the service centers' business, and arrange
a formal consultations to discuss the performance and operation of
the service centers. Also, the Company must administer the
operation of a worldwide commission calculation system and arrange
global network incentives. The agreement is valid for five years
from the commencement date, unless otherwise terminated in
accordance with the terms and conditions of the agreement. The
service centers may, at their option, renew the agreement for
periods of five years unless breach of the agreement has taken
place.
(b) 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 31, 2000 for a term of 2 years with
minimum annual rental payments as follows:
For the period from inception, October 11, 1999, to December 31, 1999,
rent expense was $15,443.
According to a lease terms and conditions of Korea, the Company has
paid lease deposit ($1,212,700) when the Company made lease contract.
The Company could get full refund when the lease contract expired.
Therefore the actual lease cost might be more than above figures.
(c) Consulting Agreements
The Company has entered in an consulting agreement with Samil
Accounting corporation for a period of 1 years with annual consulting
fee of $5,400.
(d) Retirement and Severance Benefits
The Company's retirement and severance program is that which is
required under Korean legislation. As disclosed in note 1(h), 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 December 31, 1999
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.
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.
(7) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
(a) Cash and cash equivalents, accounts receivable, short-term borrowings,
and accounts payable:
The carrying amount approximates fair value because of the nature or
short maturity of those instruments.
(b) Other Investments:
The fair value of other investments such as government securities
which are recorded in other assets is estimated based on quoted market
prices for those or similar investment. The estimated fair value of
the Company's other investment at December 31, 1999 is summarized as
follows:
<TABLE>
<CAPTION>
Won (thousands) U.S. dollars
-------------------------------- -------------------------
Carrying amount Fair value Carrying amount Fair value
--------------- --------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
Other investment W 100 65 $ 87 57
</TABLE>
(8) Segment and Regional Information
All of the Company's operations are currently represented by Promoweb
software services. Revenues and costs by geographic area for the period from
October 11, 1999 to December 31, 1999 are as follows:
Korea
Sales of services Sales of merchandises Total
---------------------- ----------------------- ------------
Won(thousand) U.S.dollar Won(thousand) U.S.dollar Won(thousand) U.S.dollar
Revenues W 51,159 $ 43,717 W 428,505 $ 366,175 W 479,664 $409,892
Costs of service 43,485 37,160 364,230 311,248 407,715 348,408
-------- ------- --------- -------- --------- --------
Gross Profit(Loss)W7,674 $ 6,557 W 64,275 $ 54,927 W 71,949 $ 61,484
======= ======= ======== ======= ======== =======
(9) 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. Such a presentation is not required under
Korean GAAP. As of December 31, 1999, 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 October 11, 1999 to December 31, 1999.
(10) Related Party Transactions
a. Inssuance of Shares of Common Stock
On October 11, 1999, the Company sold an aggregate of 20,000 shares of
common stock for an aggregate consideration of W100,000 thousands
(US$83,146) or $4.16 per share as follows: 10,000 shares of common
stock to Sea-Hyoung Oh; 5,000 shares of common stock to Paul Lambert
and 5,000 shares of common stock to Edward George Spear.
(11) Common Stock
(a) Description
The Company was incorporated in the Republic of Korea on October 11,
1999 and is authorized to issue 80,000 shares of common stock, $4.16
par value each share.
(b) Issuance of Shares of Common Stock.
On October 11, 1999, the Company sold an aggregate of 20,000 shares of
common stock for an aggregate consideration of W100,000
thousands(US$83,146) or $4.16 per share as follows: 10,000 shares of
common stock to Sea-Hyoung Oh(President); 5,000 shares of common stock
to Paul Lambert(Chairman) and 5,000 shares of common stock to Edward
George Spear.
(12) Economic Environment
The Republic of Korea is believed to have overcome the economic crisis
that began in late 1997 in Korea and in the Asia Pacific region in general.
Nevertheless, it would be premature to be complacent about the economic
recovery given, among other factors, the remaining residual effects of the
crisis, which could have a continuing impact on the economy.
The accompanying financial statements reflect management's current
assessment of the impact to date of the economic situation on the financial
position of the Company. Actual results could differ from management's current
assessments and such differences could be material
(13) Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management and from the net proceeds of private placements for its
continued existence. The Company will also be dependent upon its ability to
raise additional capital to complete its marketing plans, acquire additional
equipment, management talent, and working capital to engage in any profitable
business activity. Since its organization, the Company's activities have been
limited to the preliminary development of its website, development of its
infrastructure for basic staffing and management, hiring personnel and acquiring
equipment and office space, development of its internet technology and
preparation of documentation and the sale of a registered offering through its
parent Company D-Lanz.
EXHIBIT 7
Unaudited financial statements of eWeb21, Inc., a Korean corporation, as of
March 31, 2000.
eWeb21, Inc.
Notes to Financial Statements, Continued
Financial Statements
As of March 31, 2000
(With Independent Accountants' Review Report)
Sejong Accounting Corporation
SEJONG ACCOUNTING CORPORATION
Sejong Accounting Corporation
6th floor, Dong-in Building, 1606-2 Seocho-dong,
Seocho-gu, Seoul 137-070, Korea
Telephone +82 2 523 3367
Facsimile +82 2 523 2305
Independent Accountants' Review Report
To the Shareholders and Board of Directors of
eWeb21,Inc. (a development company)
We have reviewed the accompanying balance sheet of eWeb21, Inc. (a
development stage company) as of March 31, 2000 and the related statement of
operations and of cash flows for the three month period ended on March 31, 2000.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated interim financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1999, and the related statements
of operations, of changes in shareholders' equity and of cash flows for the year
then ended (not presented herein), and in our report dated February 25, 2000, we
expressed an unqualified opinion on financial statements. In our opinion, the
balance sheet information as of December 31, 1999, is fairly stated, in all
material respects in relation to the balance sheet from which it has been
derived.
The accompanying financial statements have been prepared assuming that a
development stage company will continue as a going concern. The Company has
incurred operating losses since the date of inception and requires additional
capital to continue operations. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans as to
these matters are described in Note 1. The financial statements do not include
any adjustments to reflect the possible effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of a development stage company to
continue as a going concern.
Seoul, Korea
May 13, 2000
<PAGE>
eWeb21, Inc.
Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
Won (thousands) U.S. dollars (note 1(i))
--------------- ------------------------
Assets
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents (note 1(c)) W 1,539,963 $ 1,389,482
Accounts receivable 1,064,963 960,898
Short-term loans receivable (note 2) 306,043 276,137
Prepaid assets (note 3) 732,533 660,951
-------------- -------------
Total current assets 3,643,502 3,287,468
-------------- -------------
Property and equipment : (note 4)
Vehicles 71,267 64,303
Equipments and furniture 671,582 605,957
Less accumulated depreciation (81,549) (73,580)
--------------- --------------
Net property and equipment 661,300 596,680
-------------- -------------
Other assets
Guarantee deposits 1,436,193 1,295,852
Government securities 100 90
Capitalized computer software(note1(f)) 408,238 368,346
Intangible assets 46,212 41,697
----------- ----------
Total other assets 1,890,743 1,705,985
----------- -----------
W 6,195,545 $ 5,590,133
================ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Balance Sheet, Continued
<TABLE>
<CAPTION>
Won (thousands) U.S. dollars (note 1(i))
--------------- ------------------------
Liabilities and Stockholders' equity
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses W 377,246 $ 340,382
Short-term borrowings (note 5) 3,181,251 2,870,388
Deferred income 300,857 271,458
--------------- -------------
Total current liabilities 3,859,354 3,482,228
--------------- -------------
Stockholders' equity:
Common stock of W 5,000 par value
Authorized - 3,000,000 shares
Issued and outstanding 556,331shares
at March 31, 2000 (note 12) 2,781,655 2,475,877
Common stock subscribed 1,665,780 1,490,231
Currency translation adjustment - 17,203
Accumulated deficit (2,111,244) (1,875,406)
--------------- --------------
Total stockholders' equity 2,336,191 2,107,905
-------------- -------------
Commitment and contingencies (note 7) - -
---------------- -------------
W 6,195,545 $ 5,590,133
============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Statement of Operations
For the period from January 1, 2000 to March 31, 2000
<TABLE>
<CAPTION>
Won
(thousands, except
earnings per share) U.S. dollars (note 1(i))
------------------- ------------------------
<S> <C> <C>
Sales (note 1(k)) W 1,551,893 $ 1,378,958
Costs of sales 1,195,645 1,062,407
-------------- -------------
Gross profit 356,248 316,551
Selling and administrative expenses 749,843 666,283
Non cash payment for consulting fee 1,665,780 1,480,154
-------------- -------------
2,415,623 2,146,437
-------------- -------------
Operating gain(loss) (2,059,375) (1,829,886)
Other income (deductions):
Interest income 1,167 1,037
Interest expenses (18,060) (16,048)
Foreign currency transaction profit 467 415
Foreign currency transaction loss (18,966) (16,853)
Other, net 271 241
-------------- -------------
(35,121) (31,208)
--------------- --------------
Loss before income taxes (2,094,496) (1,861,094)
Income taxes (note 6) - -
-------------- -------------
Net income(loss) W (2,094,496) $ (1,861,094)
================ ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Statement of Stockholders' Equity
For the period from January 1, 2000 to March 31, 2000
<TABLE>
<CAPTION>
Won(thousands) Common Common stock Accumulated Currency
stock subscribed deficit translation Total
------- ------------ ----------- adjustment -------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 W 100,000 - (16,748) W 83,252
of 20,000 shares
Net loss for the period ended - - (2,094,496) (2,094,496)
March 31, 2000
Issuance of common stock 2,681,655 1,665,780 - 4,347,435
--------- ---------- ---------- ----------
of 536,331 shares
Balance at March 31, 2000 W 2,781,655 1,665,780 (2,111,244) - W 2,336,191
========== ========== ============ --------- ==========
</TABLE>
<TABLE>
<CAPTION>
Currency
U.S.Dollars Common Common stock Accumulated translation
stock subscribed deficit adjustment Total
----------- ---------- ------------- ---------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 83,146 - (14,312) $ 68,834
of 20,000 shares
Net loss for the period ended - - (1,861,094) (1,861,094)
March 31, 2000
Issuance of common stock 2,392,731 1,490,231 - 17,203 3,900,165
---------- ---------- ----------- ------- ----------
of 536,331 shares
Balance at March 31, 2000 $ 2,475,877 1,490,231 (1,875,406) 17,203 $ 2,107,905
========== ========== ============ ======= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Statement of Cash Flows
For the period from January 1, 2000 to March 31, 2000
<TABLE>
<CAPTION>
Won (thousands) U.S. dollars (note 1(j))
------------ ------------------------
<S> <C> <C>
Net Income W (2,094,496) $(1,861,094)
Cash flows from operating activities:
Depreciation of property and equipment 73,531 66,580
Amortization of intangible asset 1,936 1,720
Non-cash payment for consulting fee 1,665,780 1,480,154
Loss on foreign currency transactions, net 18,499 16,438
Increase in accounts receivable (121,785) (137,857)
Increase in advance payments (400,294) (358,144)
Decrease in accounts payable (728,672) (628,704)
Increase in withholdings 24,503 22,176
Increase in other payables 84,545 77,233
Increase in deferred income 244,255 222,041
Increase in currency translation adjustment - 48,626
Other, net 7,983 7,889
------------- -------------
Net cash used in operating activities: (1,224,215) (1,042,942)
-------------- --------------
Cash flows from investing activities:
Increase in short-term loans, net (308,617) (276,137)
Increase in other investment assets (1,166,515) (1,102,018)
Purchase of vehicles (71,267) (64,303)
Purchase of tools, furniture and fixtures (531,791) (483,911)
Increase in software development costs (403,569) (364,270)
Purchase of intangible assets (48,149) (43,444)
-------------- --------------
Net cash used in investing activities (2,529,908) (2,334,083)
-------------- --------------
Cash flows from financing activities:
Increase in short-term borrowings, net 2,586,476 2,351,115
Issuance of common stock 1,015,875 902,500
Increase in common stock subscribed 1,665,780 1,490,231
------------- -------------
Net cash provided by financing activities 5,268,131 4,743,846
------------- -------------
Increase in cash and cash equivalents 1,514,008 1,366,821
Cash and cash equivalents at beginning of year 25,955 22,661
------------- -------------
Cash and cash equivalents at end of year W 1,539,963 $ 1,389,482
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
eWeb21, Inc.
Notes to Financial Statements
March 31, 2000
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements
(a) Business overview
eWeb21, Inc. (the "Company") was incorporated in the Republic of Korea on
October 11, 1999 to engage primarily in an internet website and software
development of e-marketing, e-commerce, e-design and e-advertising products and
services. The products and services were developed to meet the needs of
companies in the niche market of e-level marketing such as Promoweb(e-level
marketing), C3 Shopping Store(e-commerce), Wizard(e-design), and
Find(e-advertising).
(b) Basis of Presenting Financial Statements
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$1,861,094 for the period from January 1, 2000, to March 31, 2000.
These factors indicate that the Company's continuation as a going concern
is dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the completion of a public offering and with the
resulting increase in working capital, the Company will be able to continue to
develop the Company's marketing program to develop its internet presence and
experience an increase in revenue. The Company will require substantial
additional funds to finance its business activities on an ongoing basis and will
have a continuing long-term need to obtain additional financing. The Company's
future capital requirements will depend on numerous factors including, but not
limited to, continued progress developing its software, initiating marketing
penetration and signing distributors to internet contracts. The Company plans to
engage in such ongoing financing efforts on a continuing basis.
The financial statements presented consist of the balance sheet of the
Company as at March 31, 2000 and the related statements of operations,
stockholders equity and cash flows for the period from January 1, 2000 to March
31, 2000.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and with banks, overnight
repurchase agreements and certificates of deposit with initial terms less than
three months when purchased with cash. For purposes of the statement of cash
flows, the Company considers financial instruments with original maturities of
three months or less to be cash equivalents.
(d) Allowance for Doubtful Accounts
Allowance for doubtful accounts is estimated based on management's judgment
and an analysis of portfolio quality and past experience.
(e) Property and Equipment
Property and equipment are stated at cost. Significant additions or
improvements extending useful lives of assets are capitalized. However, normal
maintenance and repairs are charged to expense when incurred.
<PAGE>
Depreciation is computed by the declining-balance method using rates based
on estimated useful lives of the respective assets as follows:
Estimated
useful lives
Vehicles 5
Equipments and furniture 5
Software purchased 5
(f) Software Development Costs
Under SFAS No.86, "Accounting for the Costs of Computer Software to Be
Sold, Leased, or Otherwise Marketed", capitalization of software development
costs begins upon the establishment of technological feasibility of the product,
which the Company has defined as the completion of beta testing of a working
product. The establishment of technological feasibility and the on going
assessment of the recoverability of these costs require considerable judgment by
management with respect to certain external factors, including, but not limited
to, anticipated future gross product revenue, estimated economic life and
changes in software and hardware technology. As of March 31, 2000, the Company
has capitalized W408,238thousand($368,346) in software development costs.
(g) Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". SOP 98-1 is effective
for financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use including the requirement to capitalize specified costs and
amortization of such costs.
(h) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and length of
service when they leave the Company. The Company's estimated liability under the
plan, which would be payable if all employees left on the balance sheet date, is
to be accrued in the accompanying balance sheet.
As of March 31, 2000, none of the Company's employees have been with the
Company for more than one year and accordingly, no provision has been recorded
for retirement and severance benefits.
(i) 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 US 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 W1,108.3 to
US$1, the rate of exchange on March 31, 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.
<PAGE>
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.
(j) Contingent Liabilities
Contingent losses are generally recognized as liability when probable and
reasonably estimable.
(k) Revenue Recognition
The revenue of the Company consist of product sale and services of internet
website software. The product sale of the software is recognized when the
Company confirms and authorizes each new sub domain name. The service of the
software is recognized on a prorata basis during the service period.
The revenue of the Company's sales through C3 (Cyber Consumer Centre:
Shopping Mall) is recognized when members or cyber dealers order any products
through our C3 mall and the actual delivery is done.
(l) Cost of sales
Cost of sales relating to the internet website software consist of
commission and hosting costs.
(m) Selling and Marketing Costs
Selling and marketing costs are expensed as incurred
W113,073thousand($100,472) for the period from January 1, 2000 to March 31,
2000. Those costs are reported under selling, general and administrative
expenses on the statement of operations.
(n) Income Taxes
Income tax on the earnings or loss for the year comprises current and
deferred tax. Income tax is recognized in the statement of operations except to
the extent that it relates to items recognized directly to equity, in which case
it is recognized in equity.
Deferred tax is provided using the asset and liability method, providing
for temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and their respective tax basis. The amount of
deferred tax provided is based on the expected manner of realization or
settlement of the carrying amounts of assets and liabilities, using tax rates
enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable earnings will be available against which the unused
tax losses and credits can be utilized. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be
realized.
<PAGE>
(o) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make a number of estimates
and assumptions that affect the amounts reported in the financial statements and
related notes to financial statements. Actual results could differ from those
estimates.
(p) Unaudited Financial Information
In the opinion of Management, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of the Company as at March
31, 2000 and the results of its operations and its cash flows for the three
months ended March 31, 2000. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
SEC's rules and regulations of the Securities and Exchange Commission. The
results of operations for the periods presented are not necessarily indicative
of the results to be expected for the full year.
(q) Accounting for Derivative Instruments and Hedging Activities
SFAS No.133, "Accounting for Derivative Instruments and Hedging
Activities", requires the recognition of all derivatives as either assets or
liabilities and the measurement of those instruments at fair value. SFAS No.137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of SFAS No.133", issued in August 1999, postpones for one year
the mandatory effective date for adoption of SFAS No. 133 to January 1, 2001.
The Company does not currently engage in derivative trading or hedging
activities; hence, SFAS No.133 and SFAS No.137 will not have a material impact
on its financial position or results of operations.
(2) Short-term Loans Receivable
The details of the Company's balance of short-tem loans receivable as of
March 31, 2000 are as follows:
Won(thousands) U.S.dollars
eWeb Internationl PTY 294,143 $ 265,400
short-term loans to employees 11,900 10,737
------- -------
W 306,043 $ 276,137
======= =======
(3) Prepaid Assets
Prepaid assets at March 31, 2000 are summarized as follows:
Won (thousands) U.S. dollars
--------------- ------------
Advance payment W 609,148 $ 549,623
Advance expenses 122,343 110,388
Accrued revenue 1,007 909
Prepaid income taxes 35 31
---------- ----------
W 732,533 $ 660,951
============ ==========
<PAGE>
(4) Property and equipment
Property and equipment for the Company consist of the followings at
March 31, 2000.
Won(thousands)
Acquisition Accumulated
Assets costs Depreciation Balance
Vehicles 71,267 W 2,679 W 68,588
Equipments and furniture 671,582 78,870 592,712
--------- -------- ---------
Total W 742,849 W 81,549 W 661,300
========= ======== ========
US dollars
Acquisition Accumulated
Assets costs Depreciation Balance
Vehicles $ 64,303 $ 2,417 $ 61,886
Equipments and furniture 605,957 71,163 534,794
--------- --------- ---------
Total $ 670,260 $ 73,580 $ 596,680
========= ========== =========
(5) Short-term Borrowings
Short-term borrowings at March 31, 2000 are summarized as follows:
<TABLE>
<CAPTION>
Lender Annual Interest Rate Won (thousands) U.S. dollars
------------------ -------------------- --------------- ------------
<S> <C> <C> <C>
Prime Mutual Savings and 13.0% W 1,140,000 $ 1,028,602
Finance Company
Sea-Hyoung Oh 0.0% W 2,041,251 $ 1,841,786
--------------- -------------
Total W 3,181,251 $ 2,870,388
=============== =============
</TABLE>
(6) 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.
<PAGE>
The Company is subject to corporate income tax and resident surtax normally
at an aggregate rate of 30.8% on taxable income over W100,000 thousands and
17.6% on taxable income up to W100,000 thousands
The components of the net deferred tax asset as of March 31, 2000 are as
follows:
Deferred tax asset:
Won(thousands) U.S.dollars
Net operating loss carry forward 72,174 64,130
Valuation allowance (72,174) (64,130)
---------- ----------
Net deferred tax asset - -
========== ==========
(7) Commitments and Contingencies
(a) Agreements with service centers
Under the terms of the Company's service agreement with its service
centers, the Company is obligated to update any information necessary
for the operations of the service centers, provide analysis and
guidance to the service centers' business, and arrange a formal
consultations to discuss the performance and operation of the service
centers. Also, the Company must administer the operation of a
worldwide commission calculation system and arrange global network
incentives.
(b) 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 January 1, 2000 for a term of 2 years with
minimum annual rental payments as follows:
For the period from January 1, 2000 to March 31, 2000, rent expense
was $24,065.
According to a lease terms and conditions of Korea, the Company has
paid lease deposit (U$1,212,700) when the Company made lease contract.
The Company could get full refund when the lease contract expired.
Therefore the actual lease cost might be more than above figures.
(c) Consulting Agreements
The Company has entered in an consulting agreement with Samil
Accounting Corporation for a period of 1 years with annual consulting
fee of $5,400.
(d) Retirement and Severance Benefits
The Company's retirement and severance program is that which is
required under Korean legislation. As disclosed in note 1(h), 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.
<PAGE>
The management of the Company believes that the amount of the
Company's retirement and severance liability as of March 31, 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.
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.
(8) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
(a) Cash and cash equivalents, accounts receivable, short-term borrowings,
and accounts payable:
The carrying amount approximates fair value because of the nature or
short maturity of those instruments.
(b) Other Investments:
The fair value of other investments such as government securities
which are recorded in other assets is estimated based on quoted market
prices for those or similar investment. The estimated fair value of
the Company's other investment at March 31, 2000 is summarized as
follows:
Won (thousands) U.S. dollars
---------------------- ---------------------
Carrying amount Fair value Carrying amount Fair value
--------------- --------------- ----------------- ---------
Other investment W 100 65 $ 90 58
(9) 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 March 31, 2000 are as follows:
eWeb Korea
Sales of services Sales of merchandises Total
---------------------- ----------------------- ------------
W = won (thousands) $ = US Dollar (thousands)
Sales W 278,778 $ 247,712 W1,216,941 $1,081,332 W1,495,719 $1,329,044
Costs
of sales 227,885 202,491 924,875 821,812 1,152,760 1,024,303
-------- -------- -------- -------- --------- --------
Gross
Profit W 50,893 $ 45,221 W 292,066 $ 259,520 W 342,959 $ 304,741
======== ======= ======== ======== ======== ========
<PAGE>
eWeb Japan
Sales of services Sales of merchandises Total
---------------------- ----------------------- ------------
W = won (thousands) $ = US Dollar (thousands)
Sales W 8,222 $ 7,306 W 45,780 $ 40,678 W 54,002 $ 47,984
Costs of slaes 6,437 5,719 34,793 30,916 41,230 36,635
------- ------- --------- -------- -------- -------
Gross Profit W 1,785 $ 1,587 W 10,987 $ 9,762 W 12,772 $ 11,349
======= ======= ======== ====== ======= ========
eWeb Australia
Sales of services Sales of merchandises Total
Sales W 167 $ 148 W 2,005 $ 1,782 W 2,172 $ 1,930
Costs
of sales 131 115 1,524 1,354 1,655 1,469
------- ------- -------- -------- --------- --------
Gross
Profit W 36 $ 33 W 481 $ 428 W 517 $ 461
====== ====== ======= ====== ======= =======
Total
Sales of services Sales of merchandises Total
---------------------- ----------------------- ------------
Sales W287,167 $ 255,166 W 1,264,726 $ 1,123,792 W 1,551,893 $ 1,378,958
Costs
of sales 234,453 208,325 961,192 854,082 1,195,645 1,062,407
-------- -------- --------- -------- ---------- ----------
Gros
Profit W 52,714 $46,841 W 303,534 $ 269,710 W 356,248 $ 316,551
======= ======== ======== ======== ======== ========
<PAGE>
The balances of significant asset and liability accounts of service
centers as of March 31 of 2000 are as follows:
<TABLE>
<CAPTION>
Won (thousands)
eWeb Korea eWeb Japan eWeb Australia Total
<S> <C> <C> <C> <C>
Accounts receivable W 968,926 92,027 4,010 W 1,064,963
Accounts payable - 75,510 3,048 78,558
U.S. dollars
eWeb Korea eWeb Japan eWeb Australia Total
Accounts receivable $ 874,245 83,035 3,618 $ 960,898
Accounts payable - 68,131 2,750 70,881
</TABLE>
(10) 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. Such a presentation is not required under
Korean GAAP. As of March 31, 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 March 31, 2000.
(11) Related Party Transactions
a. Inssuance of Shares of Common Stock
As of March 31, 2000, the Company issued an aggregate of 556,331
shares of common stock for an aggregate consideration of
W2,781,655 thousands(U$2,475,877) as follows:
239,922 shares to Sea-Hyoung Oh for W450,000
thousands(US$396,261) cash and W749,610 thousands(U$670,612) in
additional consulting fee; 133,289 shares to Paul Lambert and
Edward George Spear W250,000 thousands(U$220,496) cash and
W416,445 thousands (U$372,558) in additional consulting fee
respectively ; 26,656 shares to Hyo-Sung Choi for W50,000
thousands(U$44,731) cash and W83,280 thousands ($74,503) in
additional consulting fee.
b. Software Development
For the period January 1, 2000 to March 31, 2000, the Company
paid approximately $314,465 to eWeb Ltd. for the development of
computer software. eWeb Ltd. is partnership between Paul Lambert,
Charlie Oh and Edward George Spear.
<PAGE>
(12) Common Stock
(a) Description
The Company was incorporated in the Republic of Korea on October
11, 1999 and is authorized to issue 3,000,000 shares of common
stock, $4.16 par value each share.
(b) Issuance of Shares of Common Stock.
(1) On October 11, 1999, the Company sold an aggregate of 20,000
shares of common stock for an aggregate consideration of
$83,146 or $4.16 per share as follows: 10,000 shares of
common stock to Sea-Hyoung Oh (President); 5,000 shares of
common stock to Paul Lambert (Chairman) and 5,000 shares of
common stock to Edward Spear.
(2) For the period from January 1, 2000 to March 31, 2000, the
Company sold an aggregate of 536,331 shares of common stock
for an aggregate consideration of W2,681,655
thousand($2,392,731).
(13) Economic Environment
The Republic of Korea is believed to have overcome the economic crisis that
began in late 1997 in Korea and in the Asia Pacific region in general.
Nevertheless, it would be premature to be complacent about the economic recovery
given, among other factors, the remaining residual effects of the crisis, which
could have a continuing impact on the economy.
The accompanying financial statements reflect management's current
assessment of the impact to date of the economic situation on the financial
position of the Company. Actual results could differ from management's current
assessments and such differences could be material
(14) Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management and from the net proceeds of private placements for its
continued existence. The Company will also be dependent upon its ability to
raise additional capital to complete its marketing plans, acquire additional
equipment, management talent, and working capital to engage in any profitable
business activity. Since its organization, the Company's activities have been
limited to the preliminary development of its website, development of its
infrastructure for basic staffing and management, hiring personnel and acquiring
equipment and office space, development of its internet technology and
preparation of documentation and the sale of a registered offering through its
parent Company D-Lanz.
<PAGE>
