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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] 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 0-23462
MY WEB INC.COM
(Exact name of Small Business Issuer as Specified in its Charter)
NEVADA 88-0207089
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
BLOCK G, UNIT 606
PHILEO DAMANSARA 1
NO. 9 JALAN 16/11
OFF JALAN DAMANSARA
46350 PETALING JAYA
SELANGOR MALAYSIA
(Address of Principal Executive Offices)
(603) 460-9282
Issuer's Telephone Number, Including Area Code
--------------------------
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X__ No ____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes __X__ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 1, 1999, the
registrant had 10,838,630 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes ____ No __X__
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MY WEB INC.COM
FORM 10-QSB
For the Quarter Ended September 30, 1999
<TABLE>
<CAPTION>
Page
INDEX Number
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Balance Sheets at September 30, 1999 and at December 31, 1998 3
Condensed Consolidated Statements of Operations for the three month periods
ended September 30, 1999 and September 30, 1998 and
the nine month periods ended September 30, 1999 and
September 30, 1998 4
Condensed Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 1999 and September
30, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis 11
PART II
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
</TABLE>
Certain statements under the caption "Management's Discussion and Analysis"
and elsewhere in this Form 10-QSB constitute "forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are typically identified by their inclusion of phrases such
as "the Company anticipates," "the Company believes" and other phrases of
similar meaning. Such forward looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the company to be materially different from any
future results, performance or achievements express or implied by such
forward-looking statements. Such factors include, among others: general
economic and business conditions; competition; political changes in
international markets; operating costs; costs of capital equipment; changes in
foreign currency exchange rates; changes in business strategy or expansion
plans; quality of management; availability, terms and development of capital;
fluctuating interest rates; and other factors referenced in this Form 10-QSB.
2
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ITEM I. FINANCIAL STATEMENTS
MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December
September 30, 31, 1998
1999 (Proforma)
---- ---------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 2,369,490 $ 11,118
Accounts receivable, net 1,435,736 1,100,492
Inventories 5,452 --
Prepaid expenses and other current assets 402,406 6,176
----------- -----------
Total Current Assets 4,213,084 1,117,786
----------- -----------
Property and equipment, net 300,721 53,941
----------- -----------
$ 4,513,805 $ 1,171,727
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable, trade $ 791,799 $ 419,154
Other accounts payable 1,766,872 355,287
Due to directors 77,748 37,271
Other 8,837 --
----------- -----------
Total Current Liabilities 2,645,256 811,712
----------- -----------
Shareholders' Equity:
Common stock, par value $.01; authorized
100,000,000 shares; issued, 10,679,319 shares
in 1999 and 8,563,069 shares in 1998; outstanding
10,671,606 shares in 1999 and 8,555,356 in 1998 106,717 85,554
Additional paid-in capital 5,558,247 885,009
Retained earnings (deficit) (3,063,518) 123,173
Currency translation adjustment 824 --
----------- -----------
2,602,270 1,093,736
Less: Treasury stock, at cost 733,721 733,721
----------- -----------
Total Shareholders' Equity 1,868,549 360,015
----------- -----------
$ 4,513,805 $ 1,171,727
=========== ===========
</TABLE>
3
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MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---------------------------------------- ------------------------------------------
(Pro-forma) (Pro-forma)
<S> <C> <C> <C> <C>
Revenues:
Net Sales $ 3,007,200 $ 426,152 $ 5,891,834 $ 681,148
Interest and other 36,288 -- 77,989 --
------------ ------------ ------------ ------------
Total Revenues 3,043,488 426,152 5,969,823 681,148
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of sales 1,782,350 8,575 2,733,173 65,748
Sales and marketing 2,595,680 85,303 5,062,936 171,553
Product development 140,853 116,064 196,588 143,769
General administration 546,895 57,192 1,166,166 143,372
------------ ------------ ------------ ------------
Total Costs and
Expenses 5,065,778 267,134 9,158,863 524,442
------------ ------------ ------------ ------------
Income (Loss) before
income taxes (2,022,290) 159,018 (3,189,040) 156,706
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net Income (Loss) $ (2,022,290) $ 159,018 $ (3,189,040) $ 156,706
============ ============ ============ ============
Income (Loss) per share $ (0.19) $ 0.02 $ (0.32) $ 0.02
============ ============ ============ ============
Average number of
common shares
outstanding (post split) 10,671,606 8,555,356 10,044,384 8,555,356
============ ============ ============ ============
</TABLE>
4
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MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1999 1998
-----------------------------------
(Pro-forma)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $(3,189,040) $ 156,706
Adjustments:
Depreciation 21,147 8,951
Currency exchange - unrealized (538) --
Common stock issuance for
consulting services 4,400 --
Disposition of equipment 3,251 --
Working Capital Adjustments:
(Increase) Decrease in inventories (5,452) --
(Increase) Decrease in accounts
receivable, trade (337,478) (503,334)
(Increase) Decrease in prepaids
and other (396,251) --
Increase in accounts payable 1,787,892 291,493
----------- ----------
Cash Flows from Operating Activities (2,112,069) (46,184)
----------- ----------
Cash Flows from Investing Activities:
Acquisition of property and equipment (271,223) (19,444)
----------- ----------
Cash Flows from Financing Activities:
Proceeds on issuance of common stock 4,690,001 210,526
Proceeds (payments) on due to directors 40,477 (142,969)
Repayments on due to directors 11,186 --
----------- ----------
Cash Flows from Financing Activities 4,741,664 67,557
----------- ----------
Increase in cash and cash equivalents 2,358,372 1,929
Cash balance, beginning 11,118 55,656
----------- ----------
Cash balance, end $ 2,369,490 $ 57,585
=========== ===========
Supplementary Data:
Interest income received in operations $ 56,410 $ --
=========== ===========
</TABLE>
5
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MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying financial statements report the consolidated accounts of My
Web, Inc.com (formerly Asia Media Communications, Ltd.) and its wholly owned
subsidiaries, Tecnochannel Technologies, Sdn., Bhd. (a Malaysian corporation),
MyWeb Asia Pte. Ltd. (a Singaporean corporation), MyWeb Network System (Beijing)
Co. Ltd. (a Chinese corporation) and MyWeb Americas Inc. (a Delaware
corporation). Pursuant to the acquisition described in Note 4 hereto, the
Company has treated acquisition of Tecnochannel as a reverse acquisition and,
accordingly, has reported the pro forma effect in the 1998 statements in order
to achieve comparability in its operations and cash flows. The Company was
incorporated on February 20, 1985 pursuant to the laws of the State of Nevada,
and presently has an administrative office in San Francisco, California, and
operations offices in Kuala Lampur and Beijing.
NOTE 2: UNAUDITED FINANCIAL STATEMENTS
The consolidated financial statements as of September 30, 1999, and for the
periods ended September 30, 1999 and 1998, included herein are unaudited;
however, such information reflects all adjustments consisting of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair presentation of the information for such periods. The 1998 presentation as
pro-forma gives effect to the reverse acquisition in February, 1999, in order to
provide comparability in the presentation of operations and cash flows. In
addition, the results of operations for the interim periods are not necessarily
indicative of results for the entire year. The accompanying financial statements
are in condensed form and should be read in conjunction with the Company's
annual report filed on Form 10-KSB.
NOTE 3: STOCK SPLIT
On February 23, 1999, the Company effected a 1 (one) for 100 (one hundred)
reverse split of its outstanding common stock. Accordingly, the Company reduced
its common stock balance by $54,802 and transferred the amount to additional
paid-in capital. All references to common shares are based on the post split
amounts.
6
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MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: ACQUISITION
On February 24, 1999, the Company acquired 100% of the issued and outstanding
capital stock of Tecnochannel Technologies, Sdn., Bhd., a Malaysian Corporation,
("TSB"), in exchange for an aggregate of 8,500,000 shares of common stock. In
connection with such acquisition, the Company issued an aggregate of 440,000
shares of its common stock to GEM Ltd. for its services as financial advisor to
the Company.
TSB, which was formed in April, 1997 and operates under the trade name, "My
Web", has developed with Philips Consumer Electronics set-top boxes that enable
Internet access via the television set. The boxes are marketed and sold by
Philips and other third parties and include software developed by TSB.
Approximately 25,000 of the boxes are installed in Malaysia and Singapore and
10,000 are installed in China. In addition, TSB has developed and provides
enabling technologies to manufacturers and Internet service providers serving
non-personal computer devices, (such as the set-top boxes), to enhance the
functionalities of such devices. TSB also operates multiple Internet portals
providing localized interactive applications, such as e-commerce, to both
personal computer users and set-top box users.
The Company accounted for the acquisition as a purchase under a reverse
acquisition procedure whereby TSB's operations and retained earnings are
reported as continuous.
NOTE 5: CERTAIN TRANSACTIONS
Private placement completion:
In May, 1999, the Company completed a private placement for the sale of 526,250
shares of its common stock with aggregate proceeds amounting to $3,780,000. The
Company intends to utilize these funds in the future development of the business
described in the acquisition above.
7
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MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: CERTAIN TRANSACTIONS - CONTINUED
Exercise of option and warrant
In May 1999, a non- qualified stock option under the Company's 1999 Incentive
Program described in Note 7 below was granted and exercised to purchase 150,000
shares of the Company's common stock at $6.00 per share, or an aggregate of
$900,000.
In February 1999, Ocean Strategic Holdings Limited ("OSHL"), exercised its right
to purchase 500,000 common stock shares at $.01 per share pursuant to a warrant
to purchase up to 1,000,000 common shares acquired in August, 1997 for an
aggregate consideration of $50,000 in cash. On April 1, 1999, OSHL exercised its
right under such warrant to purchase an additional 400,000 common shares at $.01
per share. As discussed in Note 7 below, on August 4, 1999, OSHL exercised its
right to purchase the remaining 100,000 shares under the warrant.
NOTE 6: COMMITMENTS AND CONTINGENCIES
LICENSING AND REVENUE AGREEMENTS
In 1999 the Company entered into certain software license agreements in exchange
for fair value advertising and marketing arrangements in kind. The revenues
being recognized under these arrangements, $1,500,000 for the three months ended
September 30, 1999 and $3,500,000 for the nine months ended September 30, 1999,
are being amortized utilizing a straight line method over the one year term of
each respective agreement.
Option agreement:
Pursuant to a proposed acquisition in 1996 which was never completed, the
Company had granted its then subsidiary, AMC Holdings, an option to convert
certain preference shares in the acquisition agreement to 125,000 shares of the
Company's common stock. The proposed acquired company executed an agreement of
forbearance whereby it was agreed to never exercise such option. As management
is presently uncertain as to the legal binding effect of such an agreement upon
an innocent purchaser for value, and although management believes that no shares
will be required to be issued, an aggregate of 125,000 shares are reserved in
the event that the Company may be forced to issue such shares in the future.
8
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MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: COMMITMENTS AND CONTINGENCIES - CONTINUED
Marketing Agreement:
The Company executed a public relations consulting agreement which has a six
month term to provide such services defined therein. The Company is charging
approximately $327,000 of advanced fee over the agreement term. As of September
30, 1999, the entire advance has been charged to operations. Such fees included
the preparation of product and corporate literature, as well as services related
to media distribution.
1999 Incentive Program:
In February 1999, the Company's stockholders approved the adoption of the
Company's 1999 Incentive Program (the "Program") pursuant to which various
types of awards may be made. The aggregate number of common stock shares that
may be issued or transferred under the Program is 1,000,000 subject to certain
adjustments, provided that no award may be made under the Program that would
bring the total of all outstanding awards under the Program to more than 15% of
the total number of common stock shares at the time outstanding. An award was
made and exercised in May 1999. See Note 6 above. In addition, in May 1999, two
options were granted for 125,000 shares each, one exercisable in May 1999 at
$17.10 per share (120% of bid price) and the second option is exercisable in
November 1999 at 120% of the then bid price. The May 1999 option has not been
exercised.
1999 Non-Qualified Stock Option Plan:
In June, 1999, the directors of the Company adopted the 1999 Non-Qualified Stock
Option Plan (the "Plan") pursuant to which only non-qualified stock option may
be granted. The aggregate number of common stock shares that may be issued or
transferred under the Plan is 1,000,000, subject to certain adjustments,
provided that no option may be granted under the plan that would bring the total
of all outstanding options under the Plan to more than 15% of the total of
common shares at the time outstanding. As of the current date, no options have
been granted under this Plan.
9
<PAGE>
MY WEB, INC.COM
(FORMERLY ASIA MEDIA COMMUNICATIONS, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: SUBSEQUENT EVENT
In October, 1999, options were granted and exercised under the Company's 1999
Incentive Program and 1999 Non-Qualified Stock Option Plan to purchase an
aggregate of 150,000 and 250,000 shares, respectively, of the Company's common
stock.
10
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING ANALYSIS OF THE OPERATIONS AND FINANCIAL
CONDITION OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY
CONTAINED ELSEWHERE IN THIS FORM 10-QSB.
Overview
The Company was inactive during 1998 and until February 1999,
when it acquired all of the capital stock of Tecnochannel Technologies Sdn.,
Bhd., a Malaysian corporation ("TSB").
TSB, which was formed in April, 1997 and operates under the
trade name, "My Web," has developed with Philips Consumer Electronics set-top
boxes that enable Internet access via the television set. The boxes are marketed
and sold by third parties, primarily Philips Consumer Electronics, and include
software developed by TSB. Approximately 25,000 of the boxes have been installed
in Malaysia and Singapore and 10,000 in China. In addition, TSB has developed
and provides enabling technologies to manufacturers and Internet service
providers serving non-personal computer devices (such as the set-top boxes) to
enhance the functionalities of such devices. TSB also operates multiple Internet
portals providing localized interactive applications, such as e-commerce, to
users of both personal computers and set-top boxes.
The Company's current business plan is to devote all of its
resources to the development and expansion of TSB's business in China and other
emerging markets that have the following characteristics: a high percentage of
television usage; a high level of consumer demand for the Internet; a low
percentage of personal computer use; a low level of personal computer literacy;
a high cost of personal computers; and a pre-existing cable and
telecommunications infrastructure.
As discussed below, the three month period ended September 30,
1999 was characterized by increased revenues offset by increased expenses
incurred in connection with the Company's entry into China. The Company believes
it is well placed to capture a portion of the Internet users in China through
the deployment of the set-top boxes, as they offer easy and affordable Internet
access compared to PCs whose prices remain high relative to average income
levels. The Company has entered into strategic alliances with local Chinese
partners, i.e., manufacturers, content providers and Internet Service Providers,
for the deployment of the set-top boxes, and for MyWeb's localized portal site
in China. The Company has also embarked on an aggressive brand building strategy
in China that has resulted in an increase in expenses primarily relating to the
cost of acquiring Internet users in China and advertising and promoting the My
Web brand. The Company expects to continue to incur losses during the rollout of
its products and services in China.
Presented below is a discussion and analysis of (i) the Company's
actual results for the nine month period ended September 30, 1999 and pro forma
results for the nine month period ended September 30, 1998 and (ii) the
Company's actual financial condition as at September 30, 1999 and on an
unaudited pro forma basis as at December 31, 1998. The pro forma information
assumes that the Company acquired TSB on the date of inception of TSB (April 5,
1997) rather than on February 24, 1999. Management believes that a comparison of
such financial information is more meaningful than a comparison of historical
data for such periods because the Company was essentially inactive until
February 24, 1999, when it acquired TSB. However, the pro forma information is
not necessarily
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indicative of the results which would have occurred if the Company had acquired
TSB on April 5, 1997, nor is it indicative of the Company's future performance.
COMPARISON OF THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999 TO THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 1998 AND THE THREE MONTH PERIOD ENDED JUNE 30, 1999
Total Revenue
The Company recognizes revenues from software licensing agreements in exchange
for the fair value of advertising and marketing arrangements in kind. Such
revenues are amortized on a straight line basis over the respective one year
contracts. Revenues were $3,043,488, including $36,288 of interest and other
income, in the three month period ended September 30, 1999 (the "1999 Third
Quarter") compared to $1,731,840, including $33,514 of interest income, in the
three month period ended June 30, 1999 (the "1999 Second Quarter"), and
$426,151 in the three month period ended September 30, 1998 (the "1998 Third
Quarter"). The increase in revenues in the 1999 Third Quarter as compared to
the 1999 Second Quarter was primarily due to an increase in e-commerce
transactions and sales of set-top boxes. The increase in revenues in the 1999
Third Quarter as compared to the 1998 Third Quarter was primarily due to
software licensing revenue and e-commerce transactions, which commenced in 1999.
Revenues for the 1999 Third Quarter consisted of software license amortization
of $1,500,000, e-commerce transactions of $690,680 and sales of set-top boxes
of $816,520. No customer accounted for more than 10% of total revenues during
the 1999 Third Quarter except for Net China, HKNet and Hanqzhou Westlake
Electronics Import and Export Co. Ltd., which accounted for approximately 25%,
25% and 27%, respectively, of total revenues during such quarter. No customer
accounted for more than 10% of total revenues during the 1998 Third Quarter
except for Philips Consumer Electronics (and subsidiaries thereof), which
accounted for approximately 87% of total revenues during such quarter.
Cost of Sales
Cost of sales was $1,782,350 in the 1999 Third Quarter compared to $555,630 in
the 1999 Second Quarter, and $8,574 in the 1998 Third Quarter. The increase in
cost of sales of 221% in the 1999 Third Quarter compared to the 1999 Second
Quarter was due to an increase in cost of revenue for e-commerce transactions
and set-top boxes sold in line with the increase in revenue. The increase in
cost of sales of 20,688% in the 1999 Third Quarter compared to the 1998 Third
Quarter was primarily due to the cost of goods for e-commerce transactions and
set-top boxes and the increase in software licensing costs in line with the
increase in revenue over the same period.
Total Operating Expenses
Total operating expenses were $3,283,428 in the 1999 Third Quarter compared to
$2,070,728 in the 1999 Second Quarter and $258,559 in the 1998 Third Quarter.
The increase was primarily attributable to an increase in sales and marketing
expenses to $2,595,680 in the 1999 Third Quarter from $1,675,730 in the 1999
Second Quarter, an increase of 55%, and from $85,303 in the 1998 Third Quarter,
an increase of 2,943%.
Sales and marketing expenses consisted primarily of employee compensation, the
cost of acquiring internet users in Hong Kong and China, and advertising and
other promotion/marketing related expenses. The increase in absolute dollars
from the 1999 Second Quarter and 1998 Third Quarter is primarily attributable to
an increase in personnel, the costs associated with the Company's aggressive
12
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brand-building strategy in China and an increase in advertising and
promotion/marketing related expenses in China and the emerging market countries.
Product development expenses increased 46% from $96,502 in the 1999 Second
Quarter to $140,853 in the 1999 Third Quarter, and increased 21% from $116,064
in the 1998 Third Quarter. Product development expenses consist primarily of
employee compensation relating to developing and enhancing features of the MyWeb
online service properties development and the costs of outsourcing certain
research and development work. The increase in absolute dollars is primarily a
result of the increase in the number of engineers responsible for the product
development and the outsourcing certain research and development work. The
Company has expensed, as incurred, all internal product development costs and
expects to incur increased product development costs in absolute dollars in
future periods to remain competitive.
General administration expenses increased 83% from $298,496 in the 1999 Second
Quarter to $546,895 in the 1999 Third Quarter, and increased 856% from $57,192
in the 1998 Third Quarter. General administration expenses consist primarily of
employee compensation and fees for professional services. The increase in
absolute dollars is primarily a result of an increase in personnel, the
increased fees for professional services and the operational expenses of the
newly incorporated subsidiary in Beijing, China during the 1999 Third Quarter.
Net Profit (Loss)
The Company recorded a net loss of $2,022,290 or $0.19 per share for the 1999
Third Quarter compared to a net loss of $894,518 or $0.09 per share for the 1999
Second Quarter. The increase in net loss was primarily attributable to the
increase in cost of revenue, advertising and promotion/marketing related
expenses, and investments in the Company's brand-building strategy in China.
This was offset by the increase in revenue in the 1999 Third Quarter compared to
the 1999 Second Quarter.
Similarly, compared to the net profit of $159,018 in the 1998 Third Quarter, the
increase in net loss was primarily attributable to the increase in cost of
revenues, advertising and promotion/marketing related expenses, investments in
the Company's brand-building strategy in China and the roll out of MyWeb
services in China. This was offset by the increase in revenues in the 1999 Third
Quarter compared to the 1998 Third Quarter.
13
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COMPARISON OF THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 TO THE NINE MONTH
PERIOD ENDED SEPTEMBER 30, 1998
Total Revenue
Revenues increased from $681,148 in the nine month period ended September 30,
1998 (the "1998 Period") to $5,969,823, including interest and other income of
$77,989, in the nine month period ended September 30, 1999 (the "1999 Period"),
an increase of 776%. This increase was attributable to software licensing
revenue, sales of set-top boxes and e-commerce transactions, which commenced in
1999. Revenues for the 1999 Period consisted of e-commerce transactions of
$1,575,314, sales of set top boxes of $816,520 and software license amortization
of $3,500,000. Three customers, Net China, HKNet and Hanqzhou Westlake
Electronics Import & Export Co. Ltd., accounted for approximately 38%, 21%, and
14% respectively, of total revenues during the 1999 Period while one customer,
Philips Consumer Electronics (and subsidiaries thereof), accounted for
approximately 67% of revenue during the 1998 Period.
Cost of Sales
Cost of sales increased from $65,748 in the 1998 Period to $2,733,173 in the
1999 Period, an increase of 4,057%. The increase in cost of sales was
primarily due to the cost of goods for the e-commerce transactions, set-top
boxes and software licensing costs in the 1999 Period in line with the increase
in revenue over the same period.
Total Operating Expenses
Total operating expenses increased 1,301% from $458,694 in the 1998 Period to
$6,425,690 in the 1999 Period. The increase was primarily attributable to an
increase in sales and marketing expenses from $171,553 in the 1998 Period to
$5,062,936 in the 1999 Period, an increase of 2,851%.
The sales and marketing expenses consists primarily of the cost of acquiring
internet users in Hong Kong and China, and advertising and other
promotion/marketing related expenses. The increase in absolute dollars from the
1998 period is primarily attributable to the costs associated with the Company's
brand-building strategy in China and an increase in advertising and
promotion/marketing related expenses in China and the emerging market countries.
Product development expenses increased 37% from $143,769 in the 1998 Period to
$196,588 in the 1999 Period. Product development expenses consist primarily of
employee compensation relating to developing and enhancing features of the MyWeb
online service properties and the costs of outsourcing certain research and
development work. The increase in absolute dollars is primarily a result of the
increase in the number of engineers responsible for the product development and
the costs of outsourcing certain research and development work. The Company has
expensed, as incurred, all internal product development costs and expects to
incur increased product development costs in absolute dollars in future periods
to remain competitive.
General administration expenses increased 713% from $143,372 in the 1998 Period
to $1,166,166 in the 1999 Period. General administration expenses consist
primarily of employee compensation and
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fees for professional services. The increase in absolute dollars is primarily a
result of an increase in personnel and increased fees for professional services
and the operational expenses of the newly incorporated subsidiary in Beijing,
China during the 1999 Period.
Net Loss
The Company recorded a net loss of $3,189,040 or $0.32 per share for the 1999
Period compared to net income of $156,706 or $0.02 per share for the 1998
Period. The net loss in the 1999 Period was primarily attributable to the
increase in cost of revenues, general administration, advertising and
promotion/marketing related expenses and investments in the Company's
brand-building strategy in China.
Liquidity and Capital Resources
At September 30, 1999, the Company had cash and cash equivalents totaling
$2,369,490 compared to $57,585 at September 30, 1998. For the nine months ended
September 30, 1999, cash used in operating activities of $2,112,069 was
primarily due to the net loss of $3,189,040 for the 1999 Period.
Cash used in investing activities was $271,223 for the 1999 Period compared to
$19,444 for the 1998 Period. The capital expenditures of $271,223 for the 1999
Period consisted primarily of the purchase of computer hardware and software,
and other office equipment.
For the 1999 Period, cash provided by financing activities of $4,741,664 was
derived primarily from the private placement of shares of common stock in the
amount of $3,780,000 and the issuance of common stock pursuant to the exercise
of a stock option in the amount of $900,000.
15
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
16
<PAGE>
(b) Reports on form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, hereunto duly authorized.
MY WEB INC.COM
(Registrant)
By: s/s T.S. Wong
-----------------
T.S. Wong
President
Date: November 15, 1999
17
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<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,369,490
<SECURITIES> 0
<RECEIVABLES> 1,435,736
<ALLOWANCES> 0
<INVENTORY> 5,452
<CURRENT-ASSETS> 4,213,084
<PP&E> 342,480
<DEPRECIATION> 41,759
<TOTAL-ASSETS> 4,513,805
<CURRENT-LIABILITIES> 2,645,256
<BONDS> 0
<COMMON> 106,717
0
0
<OTHER-SE> 1,761,832
<TOTAL-LIABILITY-AND-EQUITY> 4,513,805
<SALES> 5,891,834
<TOTAL-REVENUES> 5,969,823
<CGS> 2,733,173
<TOTAL-COSTS> 9,158,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,189,040)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,189,040)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,189,040)
<EPS-BASIC> (.32)
<EPS-DILUTED> 0
</TABLE>
