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 quarterly period ended March 31, 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
D-LANZ DEVELOPMENT GROUP, INC.
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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.)
400 GROVE STREET GLEN ROCK, NEW JERSEY
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(Address of principal executive offices)
201-457-1221
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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:
11,900,000 common shares as of June 30, 2000
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements for the periods ended June 30, 2000
included herein have been prepared by 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 June 30, 2000, and the results of
operations and cash flows for the six month periods ended June 30, 1999 and
2000.
The Company's results of operations during the six 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 Company's
Annual Report on Form 10-KSB for the fiscal years ended December 31, 1999 and
the Company's form 8-K filed as of April 30, 2000.
2
<PAGE>
D-LANZ DEVELOPMENT GROUP, INC.
(a development stage company)
CONSOLIDATED BALANCE SHEET
June 30,
December 31, 2000
1999 Unaudited
------------ -----------
Assets
Current assets
Cash and cash equivalents $22,661 $35,965
Short-term financial instruments 538,213
Accounts receivable 823,041 1,204,528
Short term loans receivable 566,047
Other current assets 197,908 1,459,250
--------- ---------
Total current assets 1,043,610 3,804,003
Property and equipment
Vehicles 144,694
Equipment, furniture and fixtures 122,046 825,263
Less accumulated depreciation (7,000) (175,191)
-------- ---------
Net property and equipment 115,046 794,766
Other assets
Guarantee deposit 235,444 1,345,277
Government security deposit 87 90
Capitalized computer software 894,424
Intangible assets 4,076 54,509
------- ----------
Total other assets 235,531 2,294,300
Total assets $1,394,187 $6,893,069
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 752,813 $ 485,634
Short-term borrowings 519,273 1,022,604
Deferred income 98,833 818,233
--------- ---------
Total current liabilities 1,370,919 2,326,471
Stockholders' equity
Common Stock authorized 50,000,000 shares,
$0.001 par value each. 15,000 15,000
Additional paid capital 6,206,423
Currency translation adjustment 68,146 (3,798)
Deficit accumulated during the
development stage (62,681) (1,661,027)
Total stockholders' equity 23,268 4,566,598
Total liabilities and stockholders' equity $1,394,187 $6,893,069
See accompanying notes to financial statements
3
<PAGE>
D-LANZ DEVELOPMENT GROUP, INC,
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the period For the period
from inception, For the six from inception ,
October 11, months ended October 11, 1999,
1999, to June 30, to June 30,
December 31, 1999 2000 2000
Unaudited Unaudited
------------- --------- ----------
<S> <C> <C> <C>
Revenue $87,435 $1,642,634 $1,730,069
Costs of services 74,320 1,282,808 1,357,128
------- ---------- -----------
Gross profit 13,115 359,826 372,941
Operations:
Selling, general and
administrative expenses 69,018 1,907,439 1,976,457
Depreciation -0- -0- -0-
------ --------- ----------
Total expense 69,018 1,907,439 1,976,457
Income (Loss) from operations and
before corporate income taxes (55,903) (1,547,613) (1,603,516)
Corporate income taxes 6,925 6,925
Other income and expenses
Interest income 147 10,485 10,632
Interest expense (49,091) (49,091)
Foreign currency transaction loss-net (7,956) (7,956)
Other net (4,171) (4,171)
147 (50,733) (50,586)
Net income (loss) $(62,681) $(1,598,346) $(1,661,027)
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>
D-LANZ DEVELOPMENT GROUP, INC.
(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,
11, 1999, to six months ended 1999, to
December 31, June 30, 2000 June 30, 2000
1999 Unaudited Unaudited
----------------- ---------------- ----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (62,681) $ (1,598,346) $ (1,661,027)
Adjustments to reconcile net profit (loss) to cash used in
Depreciation of property and equipment 7,000 168,191 175,191
Amortization of intangible asset 4,311 4,311
Increase in accounts receivable (823,041) (381,487) (1,204,528)
Increase in advance payments (193,832) (1,265,418) (1,459,250)
Accounts payable and accrued expenses 752,813 (267,179) 485,634
Deferred income 98,833 719,400 818,233
--------- ----------- -----------
TOTAL CASH FLOWS FROM OPERATIONS (220,908) (2,620,528) (2,841,436)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in guarantee deposit (235,444) (1,109,833) (1,345,277)
Increase in short-term loans receivable (566,047) (566,047)
Short term investments (538,213) (538,213)
Increase in other investment assets (87) (3) (90)
Purchase of intangible asset (54,741) (54,741)
Purchase of vehicles, equipment, furniture and fixtures (122,046) (847,911) (969,957)
Increase in software development costs (4,076) (894,427) (898,503)
Currency translation adjustment 2,803 (6,601) (3,798)
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (358,850) (4,017,776) (4,376,626)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short term borrowings, net 519,273 503,331 1,022,604
Sale of common stock 83,146 6,148,277 6,231,423
--------- ----------- -----------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 602,419 6,651,608 7,254,027
NET INCREASE (DECREASE) IN CASH 22,661 (13,304) 35,965
CASH BALANCE BEGINNING OF PERIOD 22,661 -0-
------- --------- ---------
CASH BALANCE END OF PERIOD $ 22,661 $ 35,965 $ 35,965
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
D-LANZ DEVELOPMENT GROUP, INC.
(a development stage company)
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Currency Deficit
Preferred Preferred Common Common Additional translation accumulated during
Date stock stock Stock Stock paid in adjustment development stage Total
capital
-------- --------- ------ -------- ------- -------- ------------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance 12-31-1999 -0- $-0- 11,934,300 $11,900 $1,470,151 $(1,269,949) $212,102
Unaudited
Loss (402,651) (402,651)
---- --------- ----------
Balance 3-31-2000 -0- $-0- 11,934,300 $11,900 $1,470,151 $(1,672,600) $(190,549)
Proforma effect of spin of (252,500) 443,049 190,549
License rights to Global Agri-
Med Technologies, Inc. (1,229,551)
Effect of 100 to 1 reverse split (11,814,957) (11,780) 11,780 -0-
Proforma effect of issuance of
shares to eWeb21 Corporation 14,880,000 14,880 6,206,543 (3,798) (1,661,027) (1,661,027)
---------- ------ --------- ------- ----------- ----------
Balances June 30, 2000 -0- $-0- 14,999,343 $15,000 $6,206,423 $(3,798) ($1,661,027) $4,566,598
=== ==== ========== ======= ========== ======== ============ ==========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
D-LANZ DEVELOPMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 D-
Lanz Development Group, Inc. (the "Company") for the six months ended June 30,
1999 and 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 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 W1,110.3 to
US$1, the rate of exchange on June 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.
NOTE D - REORGANIZATION OF THE COMPANY
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 eWeb21 Corporation and Recapitalization of the Company
In April, 2000, the Company completed a reverse merger with eWeb21
Corporation ("eWeb21") 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 consolidated balance sheet as of June 30, 2000 consists of the
Unaudited balance sheet of the Company as at June 30, 2000 and the unaudited
balance sheet of eWeb21 at June 30, 2000 and the unaudited related statements of
income, cash flows and stockholders' equity for the six months ended June 30,
2000 and the unaudited related statements of income, cash flows and
stockholders' equity for eWeb21 for the six months ended June 30, 2000.
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 June 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.
At June 30, 2000, the Company has net operating loss carry forwards for
income tax purposes of $1,661,027. 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 June 30, 2000 are as
follows:
Deferred tax asset:
Net operating loss carry forward $ 564,749
Valuation allowance $ (564,791)
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 June 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 of Korea, we have paid lease
deposit ($1,345,677) when we made lease contract. We could get full refund when
the lease contract expired. Therefore the actual lease cost might be more than
above figures.
(b) Consulting Agreements
The Company has entered in an consulting agreement with Samil Accounting
corporation for a period of 1 years 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. As disclosed in note 1(i), 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 June 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.
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.
NOTE G - COMMON STOCK SUBSCRIBED
As of June 30, 2000, the Company's subsidiary eWeb21 has received an
aggregate of $5,179,523 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.
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 SIX MONTHS ENDED JUNE 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.
Development stage activities.
The Company has been a development stage enterprise from its inception June
23, 1997 to June 30, 1999. 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 Corporation ("eWeb"), 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 $6,231,423 and borrowing an aggregate of
$1,022,604 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 that with the
completion of a public offering, the Company 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.
The Company's results of operations for the six months ended June 30, 2000
should be viewed with considerable caution due to the following factors:
1) Results of operations for the period from iception, October 11, 1999, to
December 31, 1999 and for the six months ended June 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.
We plan to invest heavily in marketing and promotion, the hiring of
additional employees and the enhancement of our websites and operational
infrastructure. Therefore, we expect to incur increasing sales and marketing,
product development and general and administrative expenses. As a result, we
will need to generate higher revenue to achieve and maintain profitability,
although we may never be able to do so. If our revenue growth is slower than
anticipated, or our operating expenses exceed our expectations, our losses will
be significantly greater.
Due to these factors, the June 30, 2000 results of operations discussed
below may not be an accurate indication of future performance. In addition,
comparison of results for the six months ended June 30, 200 with those for the
six months ended June 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 six months ended June 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 $1,642,634 for the six months ended June 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 six months ended June 30, 2000, these costs aggregated
$1,282,808.
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 six months ended June 30, 2000. We intend to
continue to pursue an aggressive marketing strategy to attract new customers.
Therefore, we expect 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 $10,632, and interest
payments on our loan and lease agreements of $49,091 and foreign currency
transaction loss-net of $7,956.
BENEFIT (PROVISION) FOR INCOME TAXES. As a result of the pre-tax loss
recorded for the period from inception, October 11, 1999 to June 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 June 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 June 30, 2000 is
$22,661 and $35,965 respectively. Working capital at December 31, 1999 and June
30, 2000 is negative at December 31, 1999 by $327,309 and positive at at June
30, 2000 by $1,477,532. 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 six months ended June 30, 2000, the Company sold share of common
stock for an aggregate consideration opf 6,148,2777 and increased short term
borrowings by $503,331. Cash was used by the Company through operations of
$2,260,528, increasing the Company's guarantee deposit by an additional
$1,109,833, increasing short term loans receivable by $566,047, investing in
money market by $538,213, purchase of intangible assets of $54,741, purchase of
fixed assets of $847,911, payment of monies for software development costs of
$894,427 and a loss of currency transaction adjustment of $6,601.
Management believes that it will be able to fund the Company and the
initial cost of the offering from personal resources until the completion of the
initial public offering. The Company is initiating an initial public offering of
1,500,000 Units at $30.00 per Unit for an aggregate of $45,000,000. The Company
will defer the expenses of the Offering until the Offering is completed and the
offering expenses will be deducted from proceeds received therefrom.
<PAGE>
