U.S. SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
Commission File Number 0-25433
KWIKWEB.COM, INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 88-0377059
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
374 N. Coast Highway, Suite F-14, Encinitas, California 92024
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(Address of principal executive offices) (Zip Code)
760-436-5436
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
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 [ ]
As of November 19, 2001, the Registrant had 4,500,000 shares of its common
stock, par value $0.001, issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Page
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Unaudited Condensed Consolidated Balance Sheet at September 30, 2001..........2
Unaudited Condensed Consolidated Statement of Operations for the
three-month and nine-month periods ended September 30, 2001 and 2000........3
Unaudited Condensed Consolidated Statement of Cash Flows for the
nine-month period ended September 30, 2001 and 2000.........................4
Notes to Condensed Consolidated Financial Statements..........................5
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KWIKWEB.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
SEPTEMBER 30,
ASSETS 2001
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CURRENT ASSETS
Cash and equivalents $ 27,715
Accounts receivable, net of allowance for doubtful
accounts of $4,170 23,630
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TOTAL CURRENT ASSETS 51,345
COMPUTER EQUIPMENT, LESS ACCUMULATED DEPRECIATION
OF $3,110 3,890
INVESTMENTS IN AFFILIATES 13,750
INTERNET DOMAIN NAMES AND WEB SITES 209,681
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$ 278,666
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 35,027
Accrued interest - related party 31,626
Deferred revenue 50,000
Due to related parties 794,550
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TOTAL CURRENT LIABILITIES 911,203
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COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value; 25,000,000 shares
authorized, 4,500,000 shares issued and outstanding 4,500
Additional paid-in capital 960,902
Accumulated deficit (1,597,939)
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Total stockholders' deficit (632,537)
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$ 278,666
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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KWIKWEB.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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2001 2000 2001 2000
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REVENUES $ 21,424 $ - $ 77,987 $ -
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COSTS AND EXPENSES
Cost of revenue 8,538 - 43,661 -
Research and development 100,284 4,113 100,284 103,425
Selling, general and administrative 121,788 217,869 537,183 422,237
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TOTAL EXPENSES 230,610 221,982 681,128 525,662
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LOSS FROM OPERATIONS (209,186) (221,982) (603,141) (525,662)
INTEREST - RELATED PARTY 14,373 76 31,626 165
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GAIN ON TRANSFER OF ASSETS TO
KWIK COMMERCE - - - 62,769
LOSS BEFORE MINORITY INTERESTS (223,559) (222,058) (634,767) 463,058
MINORITY INTERESTS - - 11,250 -
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NET LOSS $ (223,559) $ (222,058) $ (623,517) $ 463,058
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BASIC AND DILUTED NET LOSS PER SHARE $ (0.05) $ (0.04) $ (0.13) $ (0.06)
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BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 4,500,000 6,022,500 4,488,889 8,599,927
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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KWIKWEB.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR NINE MONTHS ENDED
SEPTEMBER 30,
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2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(623,517) $(463,058)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 1,749 -
Issued common stock for services 11,250 146,720
Gain on transfer of assets - (62,769)
Contributed capital - salary - 10,000
Minority interest (11,250) -
(Increase) decrease in accounts receivable (23,630) -
Increase in other assets - (126,245)
Decrease (increase) in prepaid expenses - 6,371
Increase (decrease) in accounts payable 21,031 (3,897)
(Decrease) increase in accrued liabilities 31,626 8,045
Increase in deferred revenue 50,000 -
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Net cash used by operating activities (542,741) (484,833)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of domain names and web sites (78,407) -
Purchases of equipment - (7,000)
Investment in Minority Business Alliance - (25,000)
Advances to related parties (9,000) -
Repayment of advances to related parties 21,500 -
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Net cash used by investing activities (65,907) (32,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Transfer of notes payable to affiliate - 94,000
Common stock issued for cash 100,000 -
Advances from related parties 516,550 192,000
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Net cash provided by financing activities 616,550 286,000
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Net (decrease) increase in cash 7,902 (230,833)
CASH, BEGINNING OF PERIOD 19,813 234,895
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CASH, END OF PERIOD $ 27,715 $ 4,062
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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KWIKWEB.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED)
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Background
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KwikWeb.com, Inc., a Nevada corporation, was formed on October 9, 1997.
In August 1999, Kwik Web, Inc. and G.P. Properties, Inc. ("G.P.
Properties") agreed to merge whereby G.P. Properties issued 6,000,000
shares of common stock in exchange for all of the outstanding common
shares of Kwik Web, Inc. G. P. Properties, a public shell Nevada
Corporation formed in 1989, retained all its 3,510,000 shares of common
stock. G.P. Properties had no assets, liabilities or operations and
management of Kwik Web, Inc. retained control of the merged entity.
Accordingly, Kwik Web, Inc. was deemed the accounting acquiror of G.P.
Properties. The Company began the development of proprietary software
that allows on-line users to easily create and build their own
customized websites using a user friendly "point and click" format. In
January 2000, the Company changed its name to KwikWeb.com, Inc. In June
2000, the Company formed Internet Properties Development Corp., a
wholly owned subsidiary, to pursue the development and incubation of
emerging Internet-based business. In August 2000, the Company completed
a reorganization whereby it transferred its website design and
management activities to Kwik Commerce, Inc. in exchange for 2,500,000
shares of Kwik Commerce common stock and the cancellation of 6,000,000
KwikWeb.com, Inc. common shares previously held by Ric Kaestner and
Alex Tsakiris. The Company is engaged in the business of providing
domain-name registry operations and services and operating consumer
information portals on the Internet. The Company also seeks to develop
and incubate emerging Internet-based businesses.
The accompanying consolidated financial statements include the accounts
of KwikWeb.com, Inc., its wholly-owned subsidiaries Kwik Web, Inc.,
Wireless Properties Development Corp., Faciliforce Inc., Internet
Properties Development Corp. and its majority-owned subsidiary Basic
Fusion, Inc. (collectively, the "Company"). All material intercompany
transactions and balances have been eliminated.
Interim periods
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The accompanying unaudited consolidated financial statements have been
prepared in accordance with instructions of Form 10-QSB and do not
include all of the information required by generally accepted
accounting principles for complete financial statements. In the opinion
of the Company's management, all necessary adjustments (consisting of
normal recurring adjustments) for a fair presentation have been
included. Operating results for the three and nine months ended
September 30, 2001, are not necessarily indicative of results for any
future period. These statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended
December 31, 2000 included in the Company's Form 10-KSB.
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KWIKWEB.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED)
2. COMMON STOCK
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In January 2001, the Company sold 1,000 units, each unit consisting of
100 shares of its common stock and a warrant to purchase an additional
20 shares of its common stock at an exercise price of $2.00 per share,
to its Chairman. This issuance was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof, and there was
no underwriter involved in the transaction.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Our business is to provide Internet domain-name registry operations and
services, operate consumer information portals on the Internet, and provide
facilities management services for commercial real estate owners. We have begun
operations for our registry operations and services division, and we are
operating our consumer information portals. We have not yet begun providing
facilities management services.
We are a holding company, and we operate through our wholly-owned
subsidiaries, Internet Properties Development Corp. and Faciliforce, Inc., and
our majority-owned subsidiary, Basic Fusion, Inc. We also seek to develop
emerging businesses. We currently own minority interests in three companies:
.KIDS Domains, Inc., Minority Business Alliance, LLC and Kwik Commerce, Inc.
We recently achieved meaningful revenue from the sale of second-level
domain names and from providing consulting services to .KIDS Domains. We have
also commenced revenue-producing operations in our registry operations and
services division. We have not generated any revenue in any
of our other lines of business.
From our inception to 1999, we were engaged in the business of
developing residential financial analysis software. From August 1999 to August
2000, we were engaged in the business of developing software applications for
the creation of Internet websites. As of August 2000, we had divested our
financial software and Internet website software operations.
We began implementing our current business in August 2000. To date, our
activities in our registry operations and solutions division have consisted of
developing our basic registry operation solution, hiring personnel, and
commencing marketing and sales of our solution. We have also acquired additional
office space and established a DNS server in Virginia. In addition, in
connection with our purchase of certain assets from Seniors.com, Inc., we
acquired the rights to the second-level domain name "seniors.com," and we have
begun operating a second-level domain name registry for the sale of third-level
domain names in the following form: "example.seniors.com." We have recently
completed the "sunrise period" for the "seniors.com" registry, where we allowed
priority registration of third-level domain names to those entities who could
establish intellectual property rights in connection with the proposed domain
name. As a result of the completion of the sunrise period, we have commenced
operation of the seniors.com second-level domain name registry.
In our consumer information portals division, we have acquired and
begun operating certain consumer information portals. In our facilities
management services division, we have developed the basic business model for the
division.
In addition to the activities within our three main divisions, we have
acquired certain Internet domain-names, some of which are resold to third
parties. We may continue to resell these domain names in the future. We have
also acquired minority equity interests in certain emerging-growth businesses,
including .KIDS Domains and Minority Business Alliance.
We have also entered into a letter of intent to purchase the remaining
outstanding interest in .KIDS Domains; however, we have not entered into a
definitive agreement with respect to that proposed purchase. To date, .KIDS
Domains has submitted an application to ICANN to be the operator and registry of
a ".kids" top-level domain. ICANN did not grant this application; however, it
reserved the right to consider the application in the future. In addition, .KIDS
Domains has entered into an agreement with New.net to be the exclusive registry
within the New.Net system for ".kids" second-level domain names on the New.net
system.
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We intend to generate revenue through the following:
o sales of our registry operations solutions, services, gateways
systems and upgrades;
o sales of second and third-level domain names;
o advertising income from third party advertisers at our
consumer information portals;
o sponsorship sales from third party sponsors at our consumer
information portals; and
o service fees derived from outsourcing commercial real estate
facilities management services.
In the event we consummate the acquisition of .KIDS Domains, we also
intend to generate revenue through the sale of second-level domain names within
the ".kids" top-level domain.
RESULTS OF OPERATIONS
REVENUES
We recognized $21,424 and $77,987 in revenue for the three-month and
nine-month periods ended September 30, 2001, respectively, compared to $0 for
the same periods in fiscal 2000, respectively. The revenues resulted from the
sales of second-level domain names and consulting fees paid to us by .KIDS
Domains, Inc., an affiliated company. Our ability to increase revenue for the
remainder of the fiscal year is dependent on our ability to successfully
implement our plan of operation.
GROSS PROFIT
Gross profit was $12,886 and $34,326 for the three-month and nine-month
periods ended September 30, 2001, respectively, compared to $0 for the same
periods in fiscal 2000, respectively.
RESEARCH & DEVELOPMENT EXPENSE
Research and development expenses were $100,284 for both the
three-month and the nine-month periods ended September 30, 2001, respectively,
compared to $4,113 and $103,425 for the same periods in fiscal 2000,
respectively. The research and development expenses in 2001 have been incurred
in connection with the development of our registry operation solutions,
while our research and development expenses in 2000 were incurred in connection
with our former web hosting business, which we discontinued in 2000. We may
increase research and development in connection with implementing our plan of
operation in future periods.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE
Selling, general, and administrative expenses were $121,788 and
$537,183 for the three-month and nine-month periods ended September 30, 2001,
respectively, compared to $217,689 and $422,237 for the same respective periods
in fiscal 2000.
INTEREST
We incurred $14,373 and $31,626 in interest in the three-month and
nine-month periods ending September 30, 2001, respectively, compared to $76 and
$165 for the same periods in 2000, respectively. The interest accrued on
outstanding debt held by related parties, including our chairman, H. Page Howe,
and certain of his affiliates.
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PLAN OF OPERATION
We have begun to market our registry operation solutions, which include
a proprietary software solution to allow registries of top-level domains to
automate their registry databases and increase scalability as their business
grows. We are marketing our solution primarily to registry operators of
country-code top level domains. We have recently begun generating revenues in
our registry operations and services division from a software solution license
sale.
Over the next 12 months, we intend to continue to offer outsourced
registry services, turn-key registry solutions, payment gateways for registries,
enhanced billing systems and multilingual domain name services. In addition, we
intend to provide our registry operator clients with customer support for our
software solution. In order to provide our solution, we have established a DNS
server in Virginia, and we intend to establish three more global DNS servers in
California, Europe and Australia. Due to lack of bandwidth availability, we no
longer intend to establish a DNS server in Africa. Through these DNS servers, we
believe we will have the ability to access and service the servers and host the
registries for whom we provide solutions from one geographic location. We have
also hired an additional employee in our registry solutions division (bringing
the total number of employees in that division to 3) for additional development
and testing of our software solutions, for customer support and for marketing,
and we intend to hire up to 2 additional employees.
.KIDS Domains recently entered into a definitive agreement with New.net
to be the exclusive registry within the New.net system for the ".kids" top-level
domain. .KIDS Domains intends to commence marketing efforts for sale of
second-level domain names within the ".kids" top-level domain. .KIDS Domains may
hire additional marketing personnel in order to further its marketing efforts
for the ".kids" top-level domain.
In addition, Internet Properties Development Corp. recently entered
into a definitive agreement with New.net to be the exclusive registry within the
New.net system for the ".golf" top-level domain. Internet Properties Development
Corp. intends to commence marketing efforts for sale of second-level domain
names within the ".golf" top-level domain. Internet Properties Development Corp.
may hire additional marketing personnel in order to further its marketing
efforts for the ".golf" top-level domain.
Within our Consumer Information Portals division, we continually update
our content available on the information portals. We also intend to offer
advertising space on the portals and offer sponsorships for the portals. We will
no longer continue to offer products on an e-commerce, resale basis on our
portals.
Within our Facilities Management Services division, we intend to begin
marketing our facilities management services to seek to enter into service
agreements with commercial real estate owners.
LIQUIDITY AND CAPITAL RESOURCES
Since 1999, we have financed our activities through the sale of our
securities and the issuance of short-term notes to related parties. As of
September 30, 2001, we had a working capital deficit of $859,858.
We have financed our operations during the nine-month period ending
September 30, 2001 by the issuance of 1,000 units, each unit consisting 100
shares of our common stock and a warrant to purchase an additional 20 shares of
our common stock at an exercise price of $2.00 per share, to H. Page Howe, our
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chairman, for a purchase price of $100 per unit. In addition, we have
issued short-term notes in the aggregate principal amount of $516,550 to related
parties, including Mr. Howe and entities with whom Mr. Howe is affiliated. We
believe that we will require significant additional capital in order to continue
to fund the development and marketing of our registry operations solutions and
consumer information portal divisions. We anticipate that we will need
approximately $200,000 in additional working capital over the next 9 months in
order to sustain operations and fund the development and marketing of our
registry operations solutions and consumer information portal divisions. If we
are unable to obtain additional financing in sufficient amounts or on acceptable
terms, we may not be able to continue as a going concern.
However, our expectations regarding our capital requirements are
based on certain assumptions concerning the costs involved in further developing
our software solutions, marketing, retention of key personnel, and time and
expense involved in commencing revenue producing operations. These assumptions
concern future events and circumstances which our officers believe to be
significant to our operations and upon which our working capital requirements
will depend. Some assumptions will invariably not materialize and some
unanticipated events and circumstances occurring subsequent to the date of this
prospectus may affect other assumptions. As a result, our actual working capital
requirements may vary from our presently anticipated working capital
requirements, and the variations may be material. In the event that we require
additional working capital, there can be no assurance that we will be able to
obtain sufficient additional capital in order to fund our working capital
requirements in a timely manner.
SAFE HARBOR
This report contains various forward-looking statements that are based
on our beliefs, assumptions which we have made, and information currently
available to us. When used in this report, we intend the words "believe,"
"expect," "anticipate," "estimate," and similar expressions to identify
forward-looking statements. Such statements are subject to certain risks,
uncertainties and assumptions referred to herein, including, without limitation,
the early stage nature of our operations and the risks and uncertainties
concerning the market acceptance of our services and products; technological
changes; increased competition; and general economic conditions. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, or projected. We caution potential investors not to
place undue reliance on any such forward-looking statements, all of which only
speak as of the date made.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K.
(a) Exhibits
10.1 Basic Fusion License and Maintenance Agreement made
and entered into as of July 3, 2001.*
*to be filed by amendment.
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KWIKWEB.COM, INC.
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(Registrant)
Dated: November 19, 2001 By: /S/ Matthew Hayes
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Matthew Hayes
President
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