10QSB 1 0001.txt QUARTERLY REPORT FOR THIRD QUARTER 2000 U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the six month period ended June 30, 2000. [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. For the transition period from ------------ to -------------- Commission File Number: 0-5367 eWeb21 Corp. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) DELAWARE 11-1717709 ------------------------------------------------------------------- (State or other jurisdiction (I.R.S.Employer incorporation or organization Identification No.) 21st Floor, Technomart 546-4 Kui-dong, Kwangjin-gu, Seoul #143-721 Korea ------------------------------------------- (Address of principal executive offices) +82 2 2204 3619 --------------------------- (Issuer's telephone number) (Not Applicable) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: 15,849,343 shares of common stock as of November 15, 2000 Transitional Small Business Disclosure Format Yes [ ] No [X] PART I FINANCIAL INFORMATION PART I FINANCIAL INFORMATION Item 1. Financial Statements The condensed financial statements for the period ended September 30, 2000 included herein have been prepared by eWeb21 Corp. (formerly D-Lanz Development Group, Inc.) (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). In the opinion of management, the statements include all adjustments necessary to present fairly the financial position of the Company as of September 30, 2000, and the results of operations and cash flows for the nine month period ended September 30, 2000. The Company's results of operations during the nine months of the Company's fiscal year are not necessarily indicative of the results to be expected for the full fiscal year. The financial statements included in this report should be read in conjunction with the financial statements and notes thereto in the the Company's form 8-K filed as of April 30, 2000. 2 eWeb21 Corp. (a development stage company) CONSOLIDATED BALANCE SHEET Septmber 30, December 31, 2000 1999 Unaudited ------------------------------ Assets Current assets Cash and cash equivalents $ 22,661 $3,731,223 Accounts receivable 823,041 1,481,872 Short term loans receivable 516,521 Advance payments 193,832 2,205,786 ---------- --------- Total current assets 1,039,534 7,935,402 Property and equipment Vehicles 144,668 Equipment, furniture and fixtures 122,046 1,154,287 Less accumulated depreciation (7,000) (302,228) Net property and equipment 115,046 996,727 Other assets Guarantee deposit 235,444 1,769,674 Government security deposit 87 90 Capitalized computer software 1,141,745 Intangible assets 4,076 77,894 Total other assets 239,607 2,989,403 ----------- ------------ Total assets $1,394,187 $11,921,532 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued expenses $ 752,813 $1,173,239 Short-term borrowings 519,273 1,878,520 Deferred income 49,417 363,136 Due to affiliated company 898,224 ---------- ---------- Total current liabilities 1,321503 4,313,119 Stockholders' equity Common Stock authorized 50,000,000 shares, $0.001 par value each. 15,000 15,000 Additional paid capital 68,146 2,518,833 Common stock subscribed 9,688,014 Currency translation adjustment 3,850 (6,054) Deficit accumulated during the development stage (14,312) (4,607,380) ---------- ------------ Total stockholders' equity 72,684 7,608,413 ----------- ------------ Total liabilities and stockholders' equity $1,394,187 $11,921,532 =========== ============ See accompanying notes to financial statements 3 eWweb21 Corp. (a development stage company) CONSOLIDATED STATEMENT OF OPERATIONS
For the period For the period from inception, For the nine from inception, October 11, months ended October 11, 1999, 1999, to September 30, to September 30, December 31, 1999 2000 2000 Unaudited Unaudited ------------------------------------------------------ Revenue $409,892 $4,365,337 $4,775,229 Cost of services 348,408 3,390,087 3,738,495 -------- --------- --------- Gross profit 61,484 975,250 1,036,734 Operations: Selling, general and administrative expenses 69,018 5,454,784 5,523,802 Depreciation -0- -0- -0- ------ --------- ---------- Total expense 69,018 5,454,784 5,523,802 Income (Loss) from operations and before corporate income taxes (7,535) (4,479,534) (4,487,068) Corporate income taxes 6,925 6,925 Other income and expenses Interest income 147 11,822 11,969 Interest expense (88,666) (88,666) Foreign currency transaction loss-net (29,446) (29,446) Other net (7,244) (7,244) ---------- ------------ ------------ 147 (113,534) (113,387) Net income (loss) $(14,312) $(4,593,068) $(4,607,380) ---------- ------------ ------------ Net income (loss) per share - basic 0.00 $(0.10) Number of shares outstanding - basic 14,999,343 14,999,343 ========== ===========
See accompanying notes to financial statements. 4 eWeb21 Corp. (a development stage company) STATEMENT OF CASH FLOWS
For the period from For the period from inception, October For the inception , October 11, 1999, to nine months ended 11, 1999, to December 31, September 30, 2000 September 30, 2000 1999 Unaudited Unaudited ------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (14,312) $(4,593,068) $4,607,380 Adjustments to reconcile net profit (loss) to cash used in Depreciation of property and equipment 7,000 295,228 302,228 Non-cash payment for consulting fees 2,450,687 Increase in accounts receivable (823,041) (658,821) (1,481,872) Increase in advance payments (191,479) (2,011,954) (2,205,786) Accounts payable and accrued expenses 750,460 420,426 1,173,239 Deferred income 49,417 313,719 363,136 -------- ----------- ----------- TOTAL CASH FLOWS FROM OPERATIONS (221,955) (3,783,783) (3,922,602) CASH FLOWS FROM INVESTING ACTIVITIES Increase in guarantee deposit (235,444) (1,534,230) (1,769,674) Increase in short term loans receivable (516,521) (516,521) Increase in computer software (1,141,745) Increase in other investment assets (87) (3) (90) Purchase of vehicles, equipment, furniture and fixtures (122,046) (1,176,909) (1,298,955) Increase in intangible assets (4,076) (73,818) (77,894) Currency translation adjustment 3 ,850 (9,904) (6,054) --------- ----------- ----------- TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (357,803) (4,453,140) (4,810,933) CASH FLOWS FROM FINANCING ACTIVITIES Due to affiliated company 898,224 898,224 Increase in short term borrowings, net 519,273 1,359,247 1,878,520 Sale and subscriptions of common stock 83,146 9,688,014 9,688,014 --------- ---------- ----------- TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 602,419 11,945,485 12,464,758 NET INCREASE (DECREASE) IN CASH 22,661 3,708,562 3,731,223 CASH BALANCE BEGINNING OF PERIOD 22661 -0- --------- ----------- ----------- CASH BALANCE END OF PERIOD $ 22,661 $3,731,223 $3,731,223 ========== =========== ===========
See accompanying notes to financial statements. 5 eWeb21 Corp. (a development stage company) STATEMENT OF STOCKHOLDERS EQUITY
Deficit accumulated Additional Common Currency during Date Preferred Preferred Common Common paid in Stock translation development stock stock stock stock capital Subscribed adjustment stage Total --------- --------- --------- -------- ------- ---------- ------------ ------------ ------ Balance 12-31-1999 -0- $ -0- 14,999,343 $15,000 $2,518,833 $ 3,850 $(14,312) $ 72,684 Unaudited Sale of common stock to be delivered 9,688,014 9,688,014 Currency translation adjustment (9,904) (9,904) Net loss (4,593,068) (4,593,068) ------ ------- ---------- -------- ---------- ---------- -------- ------------ ----------- Balance September 30, 2000 -0- $ -0- 14,999,343 $15,000 $2,518,833 $9,688,014 $(6,054) $(4,607,380) $7,608,413
See accompanying notes to financial statements. 6 eWeb21 Corp. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 NOTE A--BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted principles for interim financial information as set forth in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all necessary adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results of eWeb21 Corp. (formerly D- Lanz Development Group, Inc.) (the "Company") for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. NOTE B--EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share". Statement No. 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share exclude any dilutive effects of options, warrants, and convertible securities. Dilutive earnings per share is very similar to the previously reported fully diluted earnings per share. The Company adopted Statement No. 128 and has retroactively applied the effects thereof for all periods presented. The impact on the per share amounts previously reported was not significant. NOTE C--Foreign Currency Transactions The functional currency is the Korean Won. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at the balance sheet date and reported in U. S. Dollars. with the resulting gains and losses recognized in current results of operations. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at W1,110.3 to US$1, the rate of exchange on September 30, 2000. Revenue, expenses, gains and losses from foreign currency transactions are converted at the exchange rate in effect on the date on which the transaction occurred. All foreign exchange transaction gains and losses are included in the results of operations. Balance sheet accounts, principally in Korean currency, are translated at the current exchange rate as of the balance sheet date. The resulting translation adjustment is recorded as a separate component of shareholders' equity. 7 NOTE D -- REORGANIZATION OF THE COMPANY During April, 2000, D-Lanz Development Group, Inc., completed a series of transactions as follows: a. Reverse Split In April, 2000, the Company reversed split the number of shares of common stock outstanding in a ration of 100 to 1 restating the number of shares of common stock outstanding from 11,900,000 to 120,000. b. Formation of Subsidiary The Company formed a subsidiary with the name Global Agri-Med Technologies, Inc. and on March 31, 2000 and in April, 2000 assigned the License rights to certain patented technology to manufacture and market for the countries of Chile and Singapore a temperature sensing device and diagnostic direct reading, digital device to screen the breast for abnormalities, including cancer and transferred the other assets and debts of the Company to this subsidiary. c. Reverse Merger of eWeb21 Corporation and Recapitalization of the Company In April, 2000, the Company completed a reverse acquisition with eWeb21, Inc., a Korean corporation, which has been accounted for as the issuance of 11,880,000 shares of common stock by a private company for the net assets of the Company, accompanied by a recapitalization pursuant to an Agreement of Business Combination, the ("Agreement"), which was entered into in March, 2000. Accordingly, the financial statements of eWeb21, Inc. became the consolidated financial statements of the Company. The consolidated balance sheet as of September 30, 2000 consists of the unaudited balance sheet of the Company as at September 30, 2000 and the unaudited balance sheet of eWeb21 at September 30, 2000 and the unaudited related statements of income, cash flows and stockholders' equity for the nine months ended September 30, 2000 and the unaudited related statements of income, cash flows and stockholders' equity for eWeb21, Inc. for the nine months ended September 30, 2000. d. Change of Corporation Name Subsequent to the date of the financial statements the Company changed its name to eWeb21 Corp. NOTE E - INCOME TAXES The Company provides for the tax effects of transactions reported in the financial statements. The provision if any, consists of taxes currently due plus deferred taxes related primarily to differences between the basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities, if any, represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. As of December 31, 1999 and September 30, 2000, the Company had no material current tax liability, deferred tax assets, or liabilities to impact on the Company's financial position because the deferred tax asset related to the Company's net operating loss carry forward and was fully offset by a valuation allowance. 8 At September 30, 2000, the Company has net operating loss carry forwards for income tax purposes of $4,607,380. These carry forward losses are available to offset future taxable income, if any, and expire in the year 2005. The components of the net deferred tax asset as of September 30, 2000 are as follows: Deferred tax asset: Net operating loss carry forward $ 1,566,509 Valuation allowance $(1,566,509) Net deferred tax asset $ -0- The Company recognized no income tax benefit from the loss generated for the period from the date of inception to September 30, 2000. SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company's ability to realize benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company has yet to recognize significant revenue from the sale of its products, the Company believes that a full valuation allowance should be provided. NOTE F - COMMITMENTS AND CONTINGENCIES (a) Lease agreements The Company has located its operating and administrative facilities at 21F Techno-mart 546-4 Kui-dong, Kwanggin-gu, Seoul, Korea pursuant to a lease agreement dated on Jan 1, 2000 for a term of 2 years with minimum annual rental payments as follows: According to a lease terms and conditions, eWeb21, Inc. has paid a lease deposit ($1,345,677) when it made the lease contract. (b) Consulting Agreements The Company has entered in an consulting agreement with Samil Accounting corporation for a period of one year with an annual consulting fee of $5,400. (c) Retirement and Severance Benefits The Company's retirement and severance program is that which is required under Korean legislation. Each employee is entitled to a lump-sum payment based on a number of factors when they leave the Company. The employees are fully vested in these amounts and are entitled to receive the amounts immediately upon separation. The management of the Company believes that the amount of the Company's retirement and severance liability as of September 30, 2000 is immaterial due to the Company's short period of operation and, therefore, did not reflect the corresponding amount of liability on the accompanying balance sheet in accordance with Korean GAAP. 9 Under U.S. GAAP, in accordance with the consensus in the Financial Accounting Standards Board ("FASB") Emerging Issues Task Force ("EITF") Issue No. 88-1, the basis of provision for allowance for retirement and severance benefits liability is adequately disclosed. (d) Stock Option Plan The Company adopted the 2000 Equity Incentive Plan (hereinafter referred to as the "Plan"), is (1)to provide a special incentive to selected individuals who have made contributions to the business and success of the Company and its subsidiaries (2) to provide special incentives to selected individuals who had previously made contributions to the business and success of eWeb21, Inc. (a private, wholly-owned subsidiary of the eWeb21 Corp.) and who previously had been awarded special incentive options which were never exercised and which now have been cancelled. The Plan is designed to accomplish this purpose by offering such individuals by offering them an opportunity to participate in the Company's future performance through awards of Options, Restricted Stock and Stock Bonuses (collectively "Awards"). The Plan is administered by a committee (the "Committee") to be established by the board of directors of the Company (the "Board") or the Board acting as the Committee. As of September 30, 2000, the Company issued 1,600,000 options. The Company has reserved 1,600,000 shares of stock pending conversion of the options into shares of common stock. NOTE G - COMMON STOCK SUBSCRIBED As of September 30, 2000, the Company's subsidiary eWeb21, Inc. has received an aggregate of $9,688,014 through various private placements completed prior to the date of the Company's reorganization and will be issued shares of common stock of the Company at a price as yet to be determined. 10 NOTE H - SEGMENT AND REGIONAL INFORMATION All of the Company's operations are currently represented by Promoweb software sales. Sales and costs by geographic area for the period from January 1, 2000 to September 30, 2000 are as follows:
Sales of services Sales of merchandises Total Won(thousand) U.S.dollar Won(thousand) U.S.dollar Won(thousand) U.S.dollar eWeb Korea Sales W 1,738,598 $ 1,552,735 W3,029,628 $ 2,705,750 W 4,768,226 $ 4,258,485 Costs of sales 1,401,264 1,251,463 2,302,517 2,056,370 3,703,781 3,307,833 Gross Profit W 337,334 $ 301,272 W 727,111 $ 649,380 W 1,064,445 $ 950,652 eWeb Japan Sales W 38,812 $ 34,663 W 77,655 $ 69,353 W 116,467 $ 104,016 Costs of slaes 30,635 27,360 59,018 52,709 89,653 80,069 Gross Profit W 8,177 $ 7,303 W 18,637 $ 16,644 W 26,814 $ 23,947 eWeb Australia Sales W 1,170 $ 1,045 W 2,005 $ 1,791 W 3,175 $ 2,836 Costs of sales 923 824 1,524 1,361 2,447 2,185 Gross Profit W 247 $ 221 W 481 $ 430 W 728 $ 651 Total Sales W 1,778,580 $1,588,443 W3,109,288 $ 2,776,894 W 4,887,868 $ 4,365,337 Costs of sales 1,432,822 1,279,647 2,363,059 2,110,440 3,795,881 3,390,087 Gross Profit W 345,758 $ 308,796 W 746,229 $ 666,454 W 1,091,987 $ 975,250
The balances of significant asset and liability accounts of service centers as of September 30 of 2000 are as follows:
Won (thousands) eWeb Korea eWeb Japan eWeb Australia Total Accounts receivable W 1,493,408 W 155,310 W 3,569 W 1,652,287 Accounts payable - 117,050 2,713 119,763
U.S. dollars eWeb Korea eWeb Japan eWeb Australia Total Accounts receivable $ 1,340,543 $ 138,128 $ 3,201 $ 1,481,872 Accounts payable - 104,978 2,433 107,411
11 NOTE I - COMPREHENSIVE INCOME Under U.S. GAAP, the Company applies the provisions of Statement of Financial Accounting Standards ("SFAS") No.130, which requires the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) for period presented. As of September 30, 2000, the Company does not have any other comprehensive income (loss) items that are required for disclosure under U.S. GAAP and total comprehensive income (loss) is equal to net loss for the period from January 1, 2000 to September 30, 2000. NOTE J - COMMON STOCK For the period from January 1, 2000 to September 30, 2000, the Company sold an aggregate of 549,214 shares of common stock for an aggregate consideration of W2,746,070,000 ($2,450,687) Item 2. Management's Discussion and Analysis of Plan of operation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 The following discussion relates to the results of our operations to date, and our financial condition: This FORM 10QSB contains forward looking statements relating to our Company's future economic performance, plans and objectives of management for future operations, projections of revenue mix and other financial items that are based on the beliefs of, as well as assumptions made by and information currently known to, our management. The words "expects, intends, believes, anticipates, may, could, should" and similar expressions and variations thereof are intended to identify forward-looking statements. The cautionary statements set forth in this section are intended to emphasize that actual results may differ materially from those contained in any forward looking statement. 12 Development stage activities. The Company has been a development stage enterprise from its inception Octtober 11, 1999 to September 30, 2000. The Company is in the process of developing a web site on the World Wide Web for the purpose of selling health care products and sharing its expertise by doing consulting. On April 15, 2000, the Company entered into an Agreement of Business Combination with the eWeb21, Inc., a Korean corporation, whereby, the Company issued 14,880,000 shares of common stock for all the issued and outstanding shares of common stock of eWeb. The transaction has been accounted for as th issuance of shares of common stock by a private company for the net assets of the Company, accompanied by a recapitalization. Accordingly, the financial statements of eWeb become the financial statements of the Company. During this period, management devoted the majority of its efforts to initiating the process of the web site design and development, developing Internet relationships such as communications service links, customers and other Internet Presence Providers to enhance the Companies offerings, developing and testing its marketing strategy and finding a management team to begin the process of: completing its marketing goals; furthering its research and development for its products; completing the documentation for and selling initial shares through the Company's private placements; completing a reverse merger with Eweb21 Corp; and completing the documentation for the Company's initial public offering. These activities were funded by the Company's management through the initial sale of shares of eWeb's common stock aggregating $20,000; investments from stockholders through the sale of 215,521 shares of common stock of eWeb aggregating $9,688,014 and borrowing an aggregate of $1,878,520 on a short term basis. The Company has not yet generated sufficient revenues during its limited operating history to fund its ongoing operating expenses, repay outstanding indebtedness, or fund its web site and product development activities. There can be no assurance that development of the web site will be completed and fully tested in a timely manner and within the budget constraints of management and that the Company's marketing research will provide a profitable path to utilize the Company's marketing plans. Further investments into web site development, marketing research as defined in the Company's operating plan will significantly reduce the cost of development, preparation, and processing of purchases and orders by enabling the Company to effectively compete in the electronic market place. For the next 12 months, the Company plans to devote the majority of its efforts to (i) obtaining financing to build administrative and service facilities to market its software, services and products, (ii) pursuing and finding a management team to continue the process of completing its marketing goals and to develop new markets. The Company anticipates it will be able to expand its operations. The Company anticipates that its results of operations may fluctuate for the foreseeable future due to several factors, including the timing of the introduction of the Company's products into its target markets; whether and when new products are successfully developed by the Company, market acceptance of current or new products, competitive pressures on pricing, changes in the mix of products sold. Operating results would also be adversely affected by a downturn in the market for current technology it improved technology is introduced. Because the Company is continuing to increase its operating expenses for personnel and other general and administrative expenses, the Company's operating results would be adversely affected if its sales did not correspondingly increase. The Company's limited operating history makes accurate prediction of future operating results difficult or impossible. 13 The Company's results of operations for the nine months ended September 30, 2000 should be viewed with considerable caution due to the following factors: 1) Results of operations for the period from inception, October 11, 1999, to December 31, 1999 and for the nine months ended September 30, 2000 do not reflect a full year's worth of revenues but rather 51 days of revenues as the Company since only commenced generating revenues beginning October 11 of 1999. 2) Inherent in any acquisitions are costs which arise from integration of operations into the Company's existing business operations. Many of these may be viewed as one-time, non- recurring charges which are not likely to be repeated in future performance periods. The Company plans to invest heavily in marketing and promotion, the hiring of additional employees and the enhancement of our websites and operational infrastructure. Therefore, it expectz to incur increasing sales and marketing, product development and general and administrative expenses. As a result, it will need to generate higher revenue to achieve and maintain profitability, although it may never be able to do so. If its revenue growth is slower than anticipated, or our operating expenses exceed our expectations, its losses will be significantly greater. Due to these factors, the September 30, 2000 results of operations discussed below may not be an accurate indication of future performance. In addition, comparison of results for the nine months ended September 30, 2000 with those for the nine months ended September 30, 1999 are difficult to make due to the basic dissimilarity between a developing stage company and a company that has commenced substantial business operations beginning in October 11, 1999. Results of Operations for the nine months ended September 30, 2000. NET SALES. Revenues consist of consist of Promoweb product sales and services, net of any discounts and reserves for expected returns. Revenue were aggregated $4,365,337 for the nine months ended September 30, 2000. These minimal revenues primarily resulted from expanded marketing efforts and the introduction of new product lines. During this period, the Company has expanded its operations into the geographic areas of Korea, Japan and Australia. Direct costs. Direct costs consist of telecommunications charges in respect of providing internet connection services to customers. These costs are expensed as incurred. For the nine months ended September 30, 2000, these costs aggregated $3,390,087. Selling, general and administrative expenses. Sales and marketing expenses consist primarily of advertising costs, order processing and fulfillment costs, credit card costs and the salary and benefits of our sales, marketing and customer service personnel. Advertising costs include online marketing efforts, print advertising and direct marketing campaigns. Sales and marketing expenses aggregated $1,976,457 for the nine months ended September 30, 2000. The Company intends to continue to pursue an aggressive marketing strategy to attract new customers. Therefore, it expects sales and marketing expenses to increase significantly in future periods. Other income and expense, net other income (expense), net consists primarily of earnings on our cash and cash equivalents of $11,822, and interest payments on our loan and lease agreements of $88,666 and foreign currency transaction loss-net of $29,446. 14 BENEFIT (PROVISION) FOR INCOME TAXES. As a result of the pre-tax loss recorded for the period from inception, October 11, 1999 to September 30, 2000, the Company not recorded a benefit for Federal income taxes. Instead the Company recognized no income tax benefit from the losses generated for the period from inception, October 11, 1999 to September 30, 2000. SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company's ability to realize benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company has yet to recognize significant revenue from the sale of its products and services, the Company believes that a full valuation allowance should be provided. The Company will continue to assess the likelihood of realization of such assets; however, if future events occur which make the realization of such assets more likely than not, the Company will record a tax benefit. Liquidity and Capital Resources. The Company's cash balance at December 31, 1999 and September 30, 2000 is $22,661 and $3,731,223 respectively. Working capital at December 31, 1999 and September 30, 2000 is negative at December 31, 1999 by $327,309 and positive at at September 30, 2000 by $3,622,283. For the period from inception, October 11, 1999, to December 31, 2000, working capital was provided by sale of shares of common stock aggregating $83,146 and an increase in short term borrowings of $519,273. The Company expended cash through the purchase of other assets of $122,046; payment of a guarantee deposit for rent for $235,444, software development costs of $4,076, and cash used in operations of $220,908. For the nine months ended September 30, 2000, the Company sold shares of its common stock for an aggregate consideration opf 9,688,014 and increased short term borrowings by $1,359,247. Cash was used by the Company through operations of $3,783,783, increasing the Company's guarantee deposit by an additional $1,534,230, increasing short term loans receivable by $516,521, purchase of intangible assets of $73,818, purchase of fixed assets of $1,176,909, payment of monies for software development costs of $1,241,745 and a loss of currency transaction adjustment of $9,904. 15 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. eWeb21 Corp. /s/Hyo-Sung Choi ---------------- Hyo-Sung Choi, Chief Financial Officer Dated: November 30, 2000 16