-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PjIM1wH8u3lUxnaJobCcadIJVYkapYvnu6fbcsicf2Ggs8ZWiGeOBg8xrLOHpWx3 E0RTxKyrxrX4kkj9VuEjyw== 0000912057-01-518682.txt : 20010606 0000912057-01-518682.hdr.sgml : 20010606 ACCESSION NUMBER: 0000912057-01-518682 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20010605 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HTTP TECHNOLOGY INC CENTRAL INDEX KEY: 0001001601 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133758042 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-26888 FILM NUMBER: 1654579 BUSINESS ADDRESS: STREET 1: 46 BERKELEY SQUARE CITY: LONDON UNITED KINGDO ZIP: W1Y 7FF BUSINESS PHONE: 2124064700 MAIL ADDRESS: STREET 1: C/O LAW OFFICE OF BECKMAN MILLMAN & SAND STREET 2: 116 JOHN STREET CITY: NEW YORKMELVILLE STATE: NY ZIP: 10038 FORMER COMPANY: FORMER CONFORMED NAME: INTERNET HOLDINGS INC DATE OF NAME CHANGE: 19980520 FORMER COMPANY: FORMER CONFORMED NAME: CHINA BIOMEDICAL GROUP INC DATE OF NAME CHANGE: 19951003 10QSB/A 1 a2045312z10qsba.txt FORM 10QSB/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-QSB/A-2 /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 COMMISSION FILE NUMBER 0-26886 ------------------------ HTTP TECHNOLOGY, INC. (Exact name of small business issuer as specified in its charter) DELAWARE 13-4148725 (State or other jurisdiction of incorporation (I.R.S. Employer Identification No.) or organization)
------------------------ 46 BERKELEY SQUARE, MAYFAIR, LONDON UNITED KINGDOM W1J 5AT (Address of principal executive offices) 011 44 207 598 4070 (Issuer's telephone number, including area code) ------------------------ Check whether the issuer (1) 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 / / No. /X/ As of August 14, 2000, the issuer has 37,474,888 shares (post-split) of its common stock outstanding. Transitional Small Business Disclosure Format (check one) Yes / / No. /X/ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE REGARDING AMENDMENT AND RESTATEMENT The Quarterly Report on Form 10-QSB of HTTP Technology, Inc., formerly known as Internet Holdings, Inc. ("HTTP" or the "Company"), for the quarter ended June 30, 2000, filed on August 14, 2000, and subsequently amended on August 17, 2000, is hereby amended and restated in its entirety. This amendment and restatement is necessary to reflect the impact of the revised accounting treatment, under the requirements of Emerging Issues Task Force Issue No. 96-18 (EITF 96-18), for (1) the issuance of shares of the Company's Common Stock, par value $0.001 per share, to a service provider in December 1999, as reflected in the Company's Annual Report on Form 10-KSB/A-1 for the fiscal year ended December 31, 1999, filed on April 17, 2001, and (2) the issuance of warrants to purchase shares of the Company's Common Stock to a service provided in connection with the issuance of shares to a third party in January 2000, as reflected in the Company's Quarterly Report on Form 10-QSB/A-1 for the quarter ended March 31, 2000, filed on May 15, 2001. This amendment and restatement is also necessary to reflect the impact of the acquisition of HTTP Software, Plc (formerly Radical Technology, Plc ("RadTech")) during the quarter. The shares of the Company's Common Stock, par value $0.001 per share, issued in conjunction with the RadTech acquisition were originally valued based on management's best estimate of fair value, which included a 25% discount from the market price due to lack of marketability. However, Emerging Issues Task Force Issue No. 99-12 (EITF 99-12) requires that the shares be recorded based on the market price of the securities over a reasonable period of time before and after the two companies have reached agreement on the purchase price and the proposed transaction is announced. The application of EITF 99-12 results in a revision of the price per share from $4.10 to $5.00, resulting in additional goodwill of approximately $2,251,000. As a result of these adjustments, as of June 30, 2000, total assets of the Company were revised from $15,427,195 to $18,295,859, total stockholders' equity was revised from $14,796,829 to $17,639,130, total operating loss was revised from $1,146,206 to $1,914,041, net loss was revised from $986,831 to $1,754,666 and basic/diluted loss per share was revised from $0.03 to $0.05. On October 10, 2000, the Company's stockholders approved a change of the Company's name from Internet Holdings, Inc. to HTTP Technology, Inc. On December 19, 2000, persons or entities holding an aggregate of 70.3% of the then outstanding shares of the Company's Common Stock approved by written consent the reincorporation of the Company from Utah to Delaware. On February 5, 2001, the Company effected a 2-for-1 forward split of its Common Stock. Although each of these events occurred subsequent to the period covered by this Quarterly Report, they have been reflected in this amendment and restatement. 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The information required by this Item is included on pages F-1 to F-8 of this Quarterly Report. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PLAN OF OPERATION HTTP Technology, Inc. (formerly Internet Holdings, Inc.) ("HTTP" or "the Company") builds and markets its own software and network enabling products. In addition, it has a venture capital division. The objective of HTTP is to create strong repeat revenues from its products and to forge alliances and joint-ventures with other organizations. HTTP's operating strategy includes integrating its three division platform and the companies contained therein into a collaborative network, which leverages its collective knowledge and resources, with a clear emphasis on capital growth, balance sheet strength and the use of its operating subsidiaries to create cash flow. HTTP will provide operational assistance, capital support, industry expertise, and a strategic network of business relationships to maximize the long-term market potential for its partner companies and its own operating subsidiaries. HTTP IT Limited invests in and/or acquires IT and software development companies. HTTP Software PLC (formerly Radical Technology PLC ("RadTech")) now a wholly owned subsidiary, of the Company, was acquired earlier this year. RadTech has an advanced systems integration business with existing blue-chip clients, while at the same time it also develops its own software products. RadTech's core products include: RADNeT: a software framework with multi-level security for building, integrating, and presenting Internet, Extranet, and Intranet solutions. PLANNeT: a Web-based multi-project tool. With this knowledge management system, key information about critical projects can be seen at a glance. This product has been nominated for a Digital Britain Award. DOCUNeT: an easy Internet deployment tool than enables any organization to gain the benefits of improved communication that an Internet can offer; and gives control to the people who use the Internet. YOURCALLS.NeT: a newly developed Web-based call analysis system for mobile telephony airtime providers. The system is currently in test with a world-leading service provider. Current RadTech clients include: British Telecom; Schroders; Ericsson; Texaco; Eidos Interactive; Computer Cab; and other leading companies. During the quarter ended June 30, 2000, the Company emerged from its development stage status by acquiring Radical Technology Plc. The Company's intent was to acquire software development companies as investments and as a result of this acquisition the plan of operations has been initiated. HTTP Communications Limited is involved in a diverse range of telecommunications activities with an initial focus on Central and Eastern Europe. Projects include supplying satellite access for Internet and Internet-related companies on a global scale, developing terrestrial (PSTN) and wireless connectivity to supply customers with voice and data services, and a number of Internet content projects. To date, the Company has signed a strategic alliance and is creating a joint venture with RedCube AG, the largest voice-over IP company in Europe and one of the largest in the world, to supply satellite access to nine countries on a revenue-sharing basis. 3 HTTP CAPITAL LIMITED is a venture capital company that has agreed to acquire two other technology companies which hold investments in companies which the vendors have guaranteed the net assets to be worth no less than $67 million. The merging of the Company's former Equity, Industrial, and Ventures divisions into HTTP Capital Limited brings together an extensive network of specialists and investments. HTTP Capital Limited focuses on investment opportunities in the Internet and Information Technology industry sectors and plans to focus its investments specifically in the following areas: Infrastructure Service Providers--which includes strategic consulting and systems integration; Internet applications; and software providers. Communications--which includes enhanced IP services; wireless application protocol technologies; broadband technologies; and satellite communications services. Digital Infrastructure--which includes bandwidth provisioning, embedded systems, and networking technologies. B2B E-Commerce--which includes B2B exchanges; market aggregations; supply chain dis-intermediaries; enabling technologies; media and content; content management and syndication; and content localization and globalization. To date, the Company has raised $5 million to implement its business strategy. The Company is in the process of raising up to $30 million in a Regulation S offering under the Securities Act of 1933, as amended. Further funding will be necessary for the Company to continue its plan of operations in the future. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 The Company experienced a loss for the quarter ended June 30, 2000 of approximately $1,058,000. Revenue for the period was approximately $204,000 derived primarily from consulting services provided by RadTech, which was acquired during April 2000. Selling, general and administrative expenses for the quarter ended June 30, 2000 were approximately $1,036,000. The major components of these expenses were professional fees of approximately $567,000 and Directors' remuneration of approximately $122,000. The professional fees were primarily related to the amortization of the deferred costs attributable to a consulting agreement entered into in December 1999. The Company recorded amortization of goodwill of approximately $380,000, which resulted from the Company's acquisition of RadTech. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2000 The Company's loss for the six months ended June 30, 2000 was approximately ($1,755,000). Operating revenue for the six months ended June 30, 2000 was approximately $204,000. Selling, general and administrative expenses for the six months ended June 30, 2000 were approximately $1,738,000. Such expenses were primarily comprised of approximately $1,045,000 for professional fees, directors' remuneration of approximately $135,000 and public relations and marketing of approximately $100,000. The professional fees consisted primarily of non-cash consulting charges of $693,000 associated with a consulting contract entered into in December 1999. LIQUIDITY AND CAPITAL RESOURCES During the first half of 2000, the Company used cash of approximately $657,000 in operations. Cash used in operations before changes in working capital items was approximately $651,000. The cash used for working capital is primarily related to security deposits. 4 Net cash used in investing activities was approximately $2,956,000 for the six months ended June 30, 2000. This was comprised of costs incurred in developing software to be sold for outside use and investments in the following companies: - An 11% investment in Eurindia Plc, an equity management company which seeks to invest in small to medium sized Indian information technology services companies, for L400,000 (approximately $636,800). - A 5% investment in Compaer AG, a supplier of online insurance for both business-to-business and business-to-consumer markets in Germany for DM2.5 million (approximately $1,211,000). Net cash provided by financing activities totalled $5,000,000 during the six months ended June 30, 2000 as a result of the sale of 10,000,000 shares of common stock at a price of $.50 per share pursuant to Regulation S. The Company has agreed to register 25% of the shares under the Securities Act of 1933, as amended. In consideration for underwriting the issue in full, the underwriter received warrants to purchase up to 2,000,000 shares of common stock of the Company at $0.50 per share. These warrants had a fair value of approximately $4,428,000 and have been reflected as an issuance cost of the shares. On May 12, 2000, the underwriters exercised all the warrants. At June 30, 2000 and December 31, 1999 HTTP had current assets of approximately $3,127,000 and $2,088,000 respectively. At June 30, 2000 and December 31, 1999 HTTP had cash and cash investments of approximately $1,839,000 and $506,000 respectively. As of June 30, 2000, HTTP had investments of approximately $2,923,000. The largest investment was in Compaer AG, one of the largest on-line insurance brokers in Germany, for approximately $1,211,000. As of June 30, 2000, HTTP had goodwill of approximately $11,011,000. The goodwill was associated with the acquisition of RadTech and is based on a purchase price of $5.00 per share. The purchase price is an estimate and the Company plans to obtain an appraiser's opinion as to the value of this investment. The Company's policy is to amortize goodwill over five years. As of June 30, 2000, the Company had fixed assets of approximately $285,000. As of June 30, 2000, the Company had outstanding obligations of approximately $591,000. On May 25, 2000 the Company issued a private placement memorandum to raise up to $30 million through the sale of shares of common stock at a price of $6.25 per share pursuant to an exemption from registration under Regulation S promulgated under the Securities Act. 5 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On January 6, 2000, the Company entered into an underwriting agreement with Panther Capital Ltd. to sell shares of common stock and warrants of the Company pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended. For a detailed description of this offering, reference is made to the Company's reports on Form 8-K filed January 31, 2000 and February 7, 2000. 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 Reports on Form 8-K The Company has filed reports on Form 8-K for events which occurred during the three months ended June 30, 2000: (i) The Company filed a report on Form 8-K on April 16, 2000. Such report discloses that on March 31, 2000, the Company appointed Jason E. Forsyth as Finance Director and Giorgio L. Laurenti as a Director. (ii) The Company filed a report on Form 8-K on May 23, 2000. Such report discloses that on March 3, 2000, the Company offered to acquire all of the issued and outstanding shares of Radical Technology Plc in a stock-for-stock transaction. Such report also discloses that on May 3, 2000, the Company entered into a Heads of Terms contract to acquire 51% of the equity of Ferman AG, an investment company domiciled in Switzerland. Such report also discloses that on January 8, 2000, the Company entered into an underwriting agreement with Panther Capital Ltd. to sell shares of common stock and warrants of the Company pursuant to an exemption from registration under Regulation S of the Securities Act, as amended. Such report also discloses that on May 12, 2000, the Company appointed Martin Lechner, Rajeev Misra, Dr. Alexander Nill and Dr. Stefan Fleissner as Directors. (iii) The Company filed a report on Form 8-K on June 15, 2000. Such report discloses that on June 14, 2000, the Company accepted the resignation of Rajeev Misra. (iv) The Company filed a report on Form 8-K on June 30, 2000. Such report discloses that on June 26, 2000, the Company and its independent auditors mutually agreed to terminate their relationship as such. Such report further discloses that on June 26, 2000, the Company engaged Arthur Andersen as its independent auditors. 6 HTTP TECHNOLOGY, INC (FORMERLY INTERNET HOLDINGS, INC.) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 2000 1999 ----------- ------------ (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 1,838,797 $ 506,149 Accounts receivable....................................... 419,730 -- Other receivables......................................... 16,088 1,474 Prepaid expenses.......................................... 796,358 1,580,055 Unbilled services......................................... 56,082 -- ----------- ---------- Total current assets.................................... 3,127,055 2,087,678 FIXED ASSETS, at cost, net of accumulated depreciation of $24,049................................................... 284,727 -- INTANGIBLE ASSETS, at cost, net of accumulated amortization of $0..................................................... 727,837 -- INVESTMENTS, at cost........................................ 2,923,283 666,406 GOODWILL, net of accumulated amortization of $379,675....... 11,010,573 -- SECURITY DEPOSITS........................................... 222,384 -- ----------- ---------- $18,295,859 $2,754,084 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses..................... $ 590,864 $ 85,591 ----------- ---------- Total current liabilities............................... 590,864 85,591 CONVERTIBLE NOTE............................................ -- 50,000 ----------- ---------- Total liabilities....................................... 590,864 135,591 ----------- ---------- MINORITY INTEREST........................................... 65,865 -- STOCKHOLDERS' EQUITY: Common stock, $.001 par value, 100,000,000 shares authorized, 37,474,888 and 22,718,940 shares issued and outstanding, respectively............................... 37,474 22,718 Additional paid-in capital................................ 20,440,987 2,626,003 Stockholder receivable.................................... (1,000,000) Accumulated other comprehensive loss...................... (54,437) -- Accumulated deficit....................................... (1,784,894) (30,228) ----------- ---------- Total stockholders' equity.............................. 17,639,130 2,618,493 ----------- ---------- $18,295,859 $2,754,084 =========== ==========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-1 HTTP TECHNOLOGY, INC. (FORMERLY INTERNET HOLDINGS, INC.) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS THREE MONTHS ENDED ENDED JUNE 30, 2000 JUNE 30, 2000 ------------- ------------- REVENUES.................................................... $ 203,878 $ 203,878 EXPENSES: Selling, general and administrative charges............... 1,738,244 1,035,596 Amortization of goodwill.................................. 379,675 379,675 ----------- ----------- 2,117,919 1,415,271 Operating loss............................................ (1,914,041) (1,211,393) OTHER INCOME: Interest and other income................................. 76,935 73,570 Net foreign exchange gains................................ 89,619 86,913 ----------- ----------- 166,554 160,483 MINORITY INTEREST........................................... (7,179) (7,179) ----------- ----------- Net loss.................................................. $(1,754,666) $(1,058,089) =========== =========== PER SHARE DATA: Basic and diluted loss per share.......................... $ (0.05) $ (0.03) =========== =========== Weighted average number of common shares outstanding...... 32,854,890 32,854,890 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-2 HTTP TECHNOLOGY, INC. (FORMERLY INTERNET HOLDINGS, INC.) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.................................................... $(1,754,666) Adjustments to reconcile net loss to net cash Used in operating activities Depreciation............................................ 24,049 Amortization of goodwill................................ 379,675 Non-cash consulting expenses............................ 692,805 Minority Interest in net earnings of subsidiary......... 7,179 Changes in operating assets and liabilities, net of effects from Acquisitions of businesses Increase in other receivables........................... (14,614) Decrease in prepaid expenses............................ 90,892 Increase in accounts receivable......................... (29,758) Increase in work in progress............................ (20,387) Increase in security deposits........................... (222,384) Increase in accounts payable and accrued expenses....... 190,211 ----------- Net cash used in operating activities................. (656,998) ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets.................................... (441,758) Capitalized software development costs...................... (257,282) Purchase of investments..................................... (2,256,877) ----------- Net cash used in investing activities................. (2,955,917) ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Shares issued for cash...................................... 5,000,000 ----------- Net cash provided by financing activities............. 5,000,000 ----------- Effect of exchange rates on cash and cash equivalents....... (54,437) NET INCREASE IN CASH and CASH EQUIVALENTS................... $ 1,332,648 =========== CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD................ 506,149 ----------- CASH & CASH EQUIVALENTS, END OF PERIOD...................... $ 1,838,797 =========== NON CASH FINANCING ACTIVITIES Issuance of shares for acquisition.......................... $ 9,659,387 Issuance of shares for convertible loan note................ 50,000 Common stock subscribed..................................... 1,000,000 Stock issuance costs paid in warrants....................... 4,428,000
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-3 HTTP TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) RESTATEMENT OF PREVIOUSLY REPORTED RESULTS HTTP Technology, Inc.'s (formerly Internet Holdings, Inc.) previously filed Form 10-QSB Quarterly Report dated August 17, 2000 for the quarter ended June 30, 2000 is hereby amended and restated in its entirety. The amendment and restatement is necessary to reflect: 1. The accounting treatment for the issuance of stock to a service provider in December 1999, which is described in more detail in Footnote 1 to the consolidated financial statements included in the Company's Form 10-KSB/A-1 filed on April 17, 2001. 2. The accounting treatment of shares issued to a service provider in connection with the issuance of shares to a third party. See footnote 1 of the unaudited consolidated financial statements included in the Company's Form 10-QSB/A-1 for the quarter ended March 31, 2000 filed on May 15, 2001 for more details. 3. The valuation of shares of the Company's Common Stock issued in conjunction with the RadTech acquisition. These were originally valued based on management's best estimate of fair value which included a 25% discount from the market price due to lack of marketability. EITF 99-12 requires that the shares be recorded based on the market price of the securities over a reasonable period of time before and after the two companies have reached agreement on the purchase price and the proposed transaction is announced. The application of EITF 99-12 results in a revision of the price per share from $4.10 to $5.00. As a result of these adjustments, total assets have been revised from $15,427,195 to $18,295,859 as of June 30, 2000, total shareholders' equity was revised from $14,796,829 to $17,639,130 as of June 30, 2000, total operating loss was revised from $789,961 to $1,211,394 for the three-month period ended June 30, 2000 and from $1,146,206 to $1,914,041 for the six-month period ended June 30, 2000, net loss was revised from $636,657 to $1,058,089 for the three-month period ended June 30, 2000 and $986,831 to $1,754,666 for the six-month period ended June 30, 2000 and the basic/diluted loss per share was revised from $0.02 to $0.03 for the three-month period ended June 30, 2000 and $0.03 to $0.05 for the six-month period ended June 30, 2000. Since these restatements involve non-cash consideration they have no effect on the Company's cash position or shares in issue. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules of the Securities and Exchange Commission (the "SEC"). 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 such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Form 10-KSB. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the periods presented. All significant intercompany transactions have been eliminated in consolidation. F-4 HTTP TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) The results of operations presented for the three and six month periods ended June 30 2000, are not necessarily indicative of the results to be expected for any other interim period or any future fiscal year. During the quarter ended June 30, 2000, the Company emerged from its development stage status by acquiring Software. The Company's intent was to acquire software development companies as investments and as a result of this acquisition the plan of operations has been initiated. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of HTTP Technology, Inc. and its subsidiaries in which it has a controlling interest. Subsidiaries acquired are consolidated from the date of acquisition. All inter-company accounts and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS The Company considers investments with original maturities of three months or less to be cash equivalents. INVESTMENTS Investments consist of equity ownership in various corporations. The Company records these investments at historical cost, subject to any provision for impairment. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is calculated on the various asset classes over their estimated useful lives, which range from two to seven years, except leasehold improvements which are depreciated over their lease term. Expenditures for maintenance and repairs are charged against operations as incurred. EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED Excess of purchase price over net assets acquired ("goodwill") represents the excess of acquisition purchase price over the fair value of the net assets acquired. To the extent possible, a portion of the excess purchase price is assigned to identifiable intangible assets. Goodwill is being amortized on a straight-line basis over five years. The balance of goodwill, net of amortization, at June 30, 2000, was approximately $11,011,000. The Company anticipates that the final allocation may result in the write-off of certain in-process research and development costs. Any other changes to the preliminary estimates will be reflected as an adjustment to goodwill and other identifiable tangible and intangible assets. IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The Company evaluates the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company's assessment for impairment of an asset involves estimating the future cash flows expected to F-5 HTTP TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) result from use of the asset and its eventual disposition. An impairment loss recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. The evaluation of the impairment for the "excess of purchase price over net assets acquired" at an entity level includes consideration of all operations which benefit directly from the acquired business on a net cash flows basis. Therefore, where acquired businesses have been integrated into the Company's operations, the impairment evaluation is made at the level of the Company as a whole. REVENUE RECOGNITION Revenue is recognized when the service is performed, in accordance with the terms of the contractual arrangement, persuasive evidence of an arrangement exists, the fee is fixed and determinable and collection is reasonably assured. The Company's principal revenues are from consulting services. The services provided are associated with customized software development, consultancy and service contracts. INTANGIBLE ASSETS (CAPITALIZED SOFTWARE DEVELOPMENTS COSTS) Costs incurred in connection with the develoment of software products that are intended for sale are accounted for in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed". Costs incurred prior to technological feasibility being established for the product are expensed as incurred. Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product. Amortization commences when the product is available for general relese to customers. As of June 30, 2000, there is approximately $728,000 of capitalized costs included in the accompanying consolidated balance sheet. There has been no amortization expense recorded through June 30, 2000. STOCK OPTIONS The Company accounts for stock options under the provisions of Accounting Principles Board Opinion ("APB") No. 25. Where options are issued to acquire a fixed number of shares with a fixed exercise price the intrinsic value measured at the grant date is amortized over the vesting period of the options. Options issued to non-employees are accounted for in accordance with the fair value method under SFAS No. 123. This requires the use of an option pricing model, to determine the fair value of the option. The measurement date is the earlier of either of the following: - The date at which a commitment for performance is reached (a performance commitment) or - The date at which the counter party's performance is complete. ACQUISITION AGREEMENTS On March 3, 2000, the Company offered to acquire Radical Technology Plc ("RadTech"). In connection therewith, it is expected that the Company will issue 2,563,428 shares of common stock, F-6 HTTP TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) then constituting approximately 7.7% of the Company's outstanding shares, to the stockholders of RadTech in order to acquire 100% of the issued capital stock of RadTech. On April 21, 2000 (the "first closing"), the Company began to issue shares to acquire RadTech. RadTech's financials are consolidated from the first closing date. As of June 30, 2000, the Company acquired 92% of the outstanding shares of RadTech for 2,355,948 shares of the Company's stock at an estimated average price per share of $5.00, thus allocating a purchase price for Radical Technology Plc of approximately $12,057,000. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the assets acquired and liabilities assumed have been recorded at their fair values as of the dates of the acquisitions. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed of approximately $11,390,000 has been assigned to goodwill at the date of acquisition. The allocation of purchase price has been based on preliminary estimates. The Company anticipates that the final allocation may result in the write off of certain in-process research and development costs. Any other changes to the preliminary estimates will be reflected as an adjustment to goodwill and to other identifiable intangibles. Results of operations have been included in the accompanying consolidated financial statements since the date of acquisition. The unaudited pro forma consolidated statement of operations gives effect to the acquisition as if it had occurred at the beginning of the period:
SIX MONTHS ENDED JUNE 30, 2000 ---------------- Pro forma: Revenues.................................................... $ 510,594 Net loss.................................................... $(2,810,403) Basic and diluted net loss per share........................ $ (0.09) Weighted average shares outstanding......................... 32,854,890
The unaudited pro forma consolidated financial information does not purport to represent what the Company's financial position or results of operations would actually have been if these transactions had occurred at such dates or to project the Company's future results of operations. On March 24, 2000, the Company entered into an agreement to acquire Core Ventures Limited. Core Ventures Limited, a British Virgin Island Venture Capital company, is a subsidiary of Troy Limited, a Grand Cayman Corporation. The terms of the agreement include the issuance of 3,600,000 common shares of Internet Holdings, Inc. for all of the outstanding shares of Core Ventures Limited. The vendors have guaranteed that on December 15, 2000 the value of Core Ventures Limited will not be less than $25 million. The acquisition is conditional on the completion of the due diligence process. Management believe that this deal is probable. INVESTMENTS On April 13, 2000 the Company made an 11% investment in Eurindia Plc, an equity management company which seeks to invest in small to medium sized Indian information technology services companies, for L400,000 (approximately $636,800). This has been reflected at cost in the accompanying consolidated balance sheet. On April 17, 2000 the Company made a 5% investment in Compaer AG, a supplier of online insurance for both business-to-business and business-to-consumer markets in Germany, for F-7 HTTP TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) DM2.5million (approximately $1,211,000). This has been reflected at cost in the accompanying consolidated balance sheet. On April 19, 2000 the Company purchased a 1% holding in Strategic Intelligence PLC-Ltd, a market research company, for cash of 441,000 Singapore dollars (approximately $262,000). STOCKHOLDERS' EQUITY On January 24, 2000 Palamon (Gestion) S.A exercised its convertible loan note for $50,000 for 400,000 shares. The purpose of the loan note was to enable the Company to file all outstanding reports required by the Securities Exchange Act, and to search for suitable acquisition candidates in the Internet related fields. On January 28, 2000, the Company sold 10,000,000 shares of Common Stock at a price of $0.50 per share pursuant to Regulation S. The Company has agreed to register 25% of the shares under the Securities Act of 1933, as amended. In consideration for underwriting the issue in full, the underwriter received warrants to purchase up to 2,000,000 shares of Common Stock of the Company at a price of $0.50 per share. These warrants had a fair value of approximately $4,428,000 and have been reflected as an issuance cost of the shares. On May 12, 2000, the underwriters exercised all the warrants in exchange for a payable to the Company. The receivable is reflected in stockholders equity as of June 30, 2000. COMPREHENSIVE INCOME For the three months and six months ended June 30, 2000, comprehensive income is comprised of a net loss from operations and the net effect of foreign currency translation adjustments. This comprised a net loss of approximately $1,058,000 and foreign currency translation adjustment of approximately $54,000 resulting in comprehensive loss of approximately $1,112,000 for the three-month period ended June 30, 2000. This comprised a net loss of approximately $1,755,000 and foreign currency translation adjustment of approximately $54,000 resulting in comprehensive loss of approximately $1,809,000 for the six-month period ended June 30, 2000. EMPLOYEE STOCK OPTIONS On May 3, 2000, the Board of Directors approved a combined incentive and nonqualified stock option plan and has reserved 2,500,000 shares of its Common Stock for issuance upon exercise of options granted under this plan. As of June 30, 2000, the Company has issued 1,268,000 options to employees. There was no compensation cost recorded related to these stock options. SUBSEQUENT EVENTS On July 24, 2000, the Company completed its acquisition of Radical Technology Plc by placing the dissenting shareholders, comprising 107,086 HTTP shares, in a trust to be monitored by Radical Technology's transfer agent. The issuance of this stock will result in an additional purchase price of approximately $535,000 as an adjustment to goodwill, which will be amortized over five years. (9) Recent accounting pronouncements-- In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement, which was amended by the issuance of SFAS 137 and SFAS 138, is effective for the Company beginning January 1, 2001 and F-8 HTTP TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) requires that all derivative instruments be recorded on the balance sheet at their fair value. The statement requires changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. The Company does not expect that the adoption of this standard will have any material effect on its results of operations, cash flows or financial position. F-9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. HTTP TECHNOLOGY, INC. By: /s/ STEFAN ALLESCH-TAYLOR ----------------------------------------- Stefan Allesch-Taylor PRESIDENT, CEO AND DIRECTOR June 4, 2001 By: /s/ JASON FORSYTH ----------------------------------------- Jason Forsyth CHIEF FINANCIAL OFFICER AND DIRECTOR
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