U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ FORM 10-QSB Quarterly Report under Section 13 or 15(d) of the Securities and Exchange Act of 1934 For quarterly period ended June 30, 1997 Commission file number 10039 DYNAMICWEB ENTERPRISES, INC. (Exact name of registrant as specified in its charter) New Jersey 22-2267658 (State or other Jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 271 Route 46 West, Building F Suite 209, Fairfield, New Jersey 07004 (Address of Principal Executive Offices) (973) 244-1000 (Registrant's telephone number, including area code) _________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of June 30, 1997, there were 7,667,285 shares of Common Stock, $0.0001 par value, of the registrant outstanding. PART I FINANCIAL INFORMATION Item 1. Condensed Financial Statements Condensed Consolidated Balance Sheets as at June 30, 1997 (unaudited) and September 30, 1996 Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 1997 and 1996 (unaudited) Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 1997 and 1996 (unaudited) Notes to Condensed Financial Statements DYNAMICWEB ENTERPRISES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30, A S S E T S 1997 1996 (Unaudited) Current assets: Cash and cash equivalents. . . . . . . . $ 95,818 $ 174,403 Accounts receivable, less allowance for doubtful accounts. . . . . . . . . . . 209,035 70,518 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 31,213 32,068 Total current assets. . . . . . . 336,066 276,989 Property and equipment, net . . . . . . . . 278,763 239,889 Patents and trademarks, net . . . . . . . . 23,257 19,299 Customer list, net. . . . . . . . . . . . . 88,333 Deferred financing fees . . . . . . . . . . 72,000 Deferred registration costs . . . . . . . . 75,000 T O T A L . . . . . . . . . . . . $ 873,419 $ 536,177 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . $ 175,165 $ 34,581 Accrued expenses and other . . . . . . . 78,904 18,487 Current maturities of long-term debt . . 8,370 12,434 Loan payable - bank. . . . . . . . . . . 14,750 Deferred revenue . . . . . . . . . . . . 18,073 11,330 Notes payable - bridge financing . . . . 300,000 Total current liabilities . . . . 595,262 76,832 Long-term debt, less current maturities . . 188,084 197,661 Total liabilities . . . . . . . . 783,346 274,493 Stockholders' equity: Common stock - $.0001 par value; 50,000,000 authorized, 7,667,285 and 6,548,511 shares issued and outstanding at June 30, 1997 and September 30, 1996 (excludes shares issuable in connection with a private placement Note E). . . . . . . . . . . . . . . . 795 655 Additional paid-in capital . . . . . . . 2,236,074 676,215 Accumulated deficit. . . . . . . . . . . (2,146,796) (415,186) Total stockholders' equity. . . . 90,073 261,684 T O T A L . . . . . . . . . . . . $ 873,419 $ 536,177
The accompanying notes are an integral part of these condensed financial statements. DYNAMICWEB ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended June 30, June 30, 1997 1996 1997 1996 Net sales: System sales . . . . . . . . . . $ 38,371 $ 26,783 $ 98,254 $ 107,317 Services . . . . . . . . . . . . 182,929 69,588 399,841 241,100 T o t a l . . . . . . . . 221,300 96,371 498,095 348,417 Cost of sales: System sales . . . . . . . . . . 10,015 13,110 33,640 55,800 Services . . . . . . . . . . . . 51,936 17,936 126,990 62,434 T o t a l . . . . . . . . 61,951 31,046 160,630 118,234 Gross profit. . . . . . . . . . . . 159,349 65,325 337,465 230,183 Expenses: Selling, general and administrative . . . . . . . . 361,589 230,639 1,006,246 460,631 Research and development . . . . 71,451 8,479 164,024 15,229 T o t a l . . . . . . . . 433,040 239,118 1,170,270 475,860 Operating (loss). . . . . . . . . . (273,691) (173,793) (832,805) (245,677) Purchased research and development (Note C). . . . . . . . . . . . . 25,000 (713,710) Interest expense (including amortization of debt discount and deferred financing fees of $186,000 for three and nine months ended June 30, 1997). . . (200,310) (4,066) (210,585) (14,950) Interest income . . . . . . . . . . 1,362 4,436 3,790 5,494 Net (loss) before benefit for income taxes . . . . . . . . . . (447,639) (173,423) (1,753,310) (255,133) Benefit for income taxes. . . . . . 21,700 NET (LOSS). . . . . . . . . . . . . $(447,639) $(173,423) $(1,731,610) $(255,133) Net (loss) per common share . . . . $(.06) $(.03) $(.23) $(.04) Weighted-average number of shares outstanding. . . . . . . . . . . 7,850,649 6,537,186 7,483,693 6,315,729
The accompanying notes are an integral part of these condensed financial statements. DYNAMICWEB ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended June 30, 1997 1996 Cash flows from operating activities: Net (loss). . . . . . . . . . . . . . . . . . . . . . . . . $(1,731,610) $(255,133) Adjustments to reconcile net (loss) to net cash (used in) operating activities: Depreciation and amortization . . . . . . . . . . . . . 34,415 9,919 Purchased research and development. . . . . . . . . . . 713,710 Common stock issued for services. . . . . . . . . . . . 10 Deferred income taxes . . . . . . . . . . . . . . . . . (21,700) Amortization of debt discount and deferred financing fees. . . . . . . . . . . . . . . . . . . . 186,000 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable. . . . . . (20,371) 4,635 (Increase) decrease in prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . 855 (5,610) Increase in accounts payable. . . . . . . . . . . . . 137,280 13,764 Increase in accrued expenses. . . . . . . . . . . . . 5,395 9,922 Increase in deferred revenue. . . . . . . . . . . . . 6,743 520 Net cash (used in) operating activities . . . . . . (689,283) (221,973) Cash flows from investing activities: Acquisition of property and equipment . . . . . . . . . . . (66,152) (19,087) Proceeds from sale of equipment . . . . . . . . . . . . . . 1,954 Acquisition of patents and trademarks . . . . . . . . . . . (4,251) (17,992) Cash acquired upon acquisition of subsidiary. . . . . . . . 15,235 Net cash (used in) investing activities . . . . . . (53,214) (37,079) Cash flows from financing activities: Payment of long-term debt . . . . . . . . . . . . . . . . . (7,838) (9,892) Proceeds from loan - bank . . . . . . . . . . . . . . . . . 4,750 Proceeds from issuance of common stock. . . . . . . . . . . 250,000 597,750 Loan from officer/stockholder . . . . . . . . . . . . . . . 50,000 Payment of officer/stockholder loan . . . . . . . . . . . . (50,000) Proceeds from sale of units consisting of notes and common stock . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 Payment of deferred registration costs. . . . . . . . . . . (75,000) Payment of deferring financing fees . . . . . . . . . . . . (108,000) Net cash provided by financing activities . . . . . 663,912 587,858 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . (78,585) 328,806 Cash and cash equivalents - beginning of period. . . . . . . . 174,403 45,164 CASH AND CASH EQUIVALENTS - END OF PERIOD. . . . . . . . . . . $ 95,818 $ 373,970
The accompanying notes are an integral part of these condensed financial statements. DYNAMICWEB ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Supplemental disclosures of noncash investing and financing activities: The Company acquired Software Associates, Inc. on November 30, 1996 for 860,000 shares of the Company's stock in exchange for all of the stock issued and outstanding of Software Associates, Inc. (Note C). During the nine months ended June 30, 1997, the Company sold equipment for approximately $10,000 which had a net book value of approximately $10,000 and related debt of approximately $8,000. The accompanying notes are an integral part of these condensed financial statements. DYNAMICWEB ENTERPRISES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) (NOTE A) - Basis of Presentation and the Company: Basis of presentation: The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 3 of Regulations S-B. 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 adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the nine-month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending September 30, 1997. The balance sheet at September 30, 1996 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the audited financial statements and footnotes thereto included in the annual report on Form 10-KSB. The accompanying financial statements include the accounts of DynamicWeb Enterprises, Inc. ("DWE") and its wholly owned subsidiaries, Megascore, Inc., DynamicWeb Transaction Systems, Inc. ("DWTS") and Software Associates, Inc. (collectively the "Company"). All significant intercompany balances and transactions have been eliminated. The Company: DWE is in the business of facilitating electronic commerce transactions between business entities, developing, marketing and supporting software products and other services that enable businesses to engage in electronic commerce utilizing the Internet and traditional Electronic Data Interchange ("EDI"). DWE offers electronic commerce solutions in EDI and Internet- based transactions processing. Megascore, Inc. is a full-service systems integrator specializing in distribution, accounting and point-of-sale computer software consulting services for suppliers and retailers. DWTS, formerly a division of Megascore, Inc. was established as a separate legal entity on October 31, 1995. On February 7, 1996 DWTS issued all of its shares of its common stock to Megascore, Inc. On September 30, 1996, DynamicWeb Enterprises, Inc. acquired all the common stock of Megascore, Inc. for 50,000 shares of its common stock. The transaction was accounted for as a combination of entities under common control. The accompanying financial statements retain the historical accounting basis for the net assets of Megascore, Inc. and gives effect to the operations of Megascore, Inc. for all periods presented. On March 26, 1996 DWTS was acquired by Seahawk Capital Corporation ("Seahawk"), a publicly held corporation which had 431,369 shares of common stock outstanding and no assets. Prior to the acquisition, Seahawk distributed all of its assets to its shareholders. In the acquisition, the shareholders of DWTS received 4,913,631 shares of Seahawk's common stock. The acquisition is being accounted for as if DWTS were the acquiring entity. The shares of Seahawk are accounted for as being outstanding for all periods presented. In connection with the acquisition, 735,000 shares were issued to a finder and 75,000 shares were issued for legal fees. At the conclusion of this transaction, there were 6,155,000 shares outstanding. On May 14, 1996, Seahawk changed its name to DynamicWeb Enterprises, Inc. and concurrently increased the authorized number of shares of its common stock to 50,000,000 at a $.0001 par value. The accompanying financial statements give retroactive effect to the above transaction. On November 30, 1996, the Company acquired Software Associates, Inc. (Note C). On March 7, 1997, the Board of Directors, approved a reverse stock split for each share of common stock to be converted into .2608491 of one share and authorized 5,000,000 shares of preferred stock to be effected when a public offering occurs. Cash is to be issued to the stockholders for any fractional shares. The stockholders approved these transactions on June 12, 1997 and the accompanying financial statements do not give retroactive effect to the above transactions. Net loss per share of common stock: Net loss per share of common stock is based upon the weighted average number of shares outstanding, plus an assumed 286,632 shares issuable in the Company's April, 1996 private placement (see Note E). (NOTE C) - Acquisition: On November 30, 1996, the Company entered into a stock purchase agreement with Software Associates, Inc. and its sole shareholder (the "SA Agreement") whereby the Company acquired all the issued and outstanding common stock of Software Associates, Inc. Software Associates, Inc. is an EDI service bureau engaged in the business of helping companies realize the benefits of expanding their data processing and electronic communications infrastructures through the use of EDI. The Company exchanged 860,000 shares of its common stock for all of the issued and outstanding shares of Software Associates, Inc. The Company further agreed to issue up to 1,140,000 additional shares of its common stock in the event that the average closing bid price of the Company's common stock does not equal $3.375 per share for the five trading days immediately prior to January 30, 1999. In connection with this transaction, the Company incurred approximately $25,000 of professional fees. The results of operations includes Software Associates, Inc. from December 1, 1996 through June 30, 1997. The SA Agreement also requires that the Company issue options for the purchase of 25,000 shares of its common stock to employees of Software Associates, Inc. In connection with the acquisition, the Company entered into a five year employment contract with the sole shareholder/President of Software Associates, Inc. The agreement provides for an annual salary of approximately $136,000 and includes a discretionary bonus as determined by the Company's Board of Directors. Software Associates, Inc. leases its office space from a partnership whose partner is the Executive Vice President of the Company. Annual rental payments are approximately $38,000 and the lease expires on June 30, 2018. Software Associates, Inc. has guaranteed the debt (United States Small Business Administration guaranteed loan) of the condominium office space which was approximately $249,000 as at November 30, 1996; the debt matures in August 2019. The purchase price was recorded as follows: Current assets . . . . . . $133,381 Fixed assets . . . . . . . 5,167 Purchased research and development . . . . . . 713,710 Customer list. . . . . . . 100,000 Current liabilities. . . . (67,258) Total. . . . . . $885,000 The purchased research and development was charged to operations upon acquisition. The acquisition was accounted for as a purchase. The condensed unaudited pro forma information of the Company for the nine months ended June 30, 1997 and Software Associates, Inc. for the two months ended November 30, 1996 is as follows as if the acquisition of Software Associates, Inc. occurred on October 1, 1996. In addition, the pro forma adjustments are computed assuming the transaction was consummated at the beginning of the fiscal period presented giving effect to events directly attributable to the transaction and expected to have continuing impact. A material nonrecurring charge representing purchased research and development in the amount of $713,710 will be charged to operations but has been omitted from the pro forma results. The pro forma information is not necessarily indicative of the results that would have been reported had the acquisition occurred September 30, 1996, nor is it indicative of the Company's future results:
H i s t o r i c a l Nine Two Months Ended Months Ended June 30, November 30, 1997 1996 DynamicWeb Software Enterprises, Associates, Pro Forma Pro Forma Inc. Inc. Adjustments Results Net sales. . . . . . . . . . . . . . . . . . . . $ 498,095 $ 126,967 $ 625,062 Cost of sales. . . . . . . . . . . . . . . . . . 160,630 28,615 189,245 Gross profit . . . . . . . . . . . . . . . . . . 337,465 98,352 435,817 Expenses: Selling, general and administrative . . . . . (1,006,246) (66,527) $(8,000) (1,080,773) Research and development. . . . . . . . . . . (164,024) (164,024) T o t a l. . . . . . . . . . . . . . . (1,170,270) (66,527) (8,000) (1,244,797) Operating (loss) income. . . . . . . . . . . . . (832,805) 31,825 (8,000) (808,980) Interest income. . . . . . . . . . . . . . . . . 3,790 3,790 Interest expense . . . . . . . . . . . . . . . . (210,585) (61) (210,646) Benefit (provision) for income taxes . . . . . . 21,700 (12,700) 9,000 Net (loss) income before nonrecurring charge . . $(1,017,900) $ 19,064 $(8,000) $(1,006,836) Per share data: (Loss) before nonrecurring charge . . . . . . $(.13) Weighted average common shares outstanding. . 6,815,854 860,000 7,675,854
(NOTE D) - Proposed Public Offering: On February 1, 1997, the Company signed a letter of intent with an underwriter with respect to a proposed public offering of the Company's securities. The Company expects to incur significant additional costs in this connection therewith. In the event that the offering is not successfully completed, such costs will be charged to expense. (NOTE E) - Bridge Financing: On April 30, 1997, pursuant to Regulation D, the Company completed a private placement whereby it sold 24 units for an aggregate amount of $600,000. The placement agent is entitled to a fee and nonaccountable expense allowance aggregating $78,000 or 13% of the private placement offering. The Company incurred $30,000 of deferred financing cost. Each unit consists of a $25,000 promissory note bearing interest at 8% and 11,943 shares of the Company's common stock. The notes are due at the earlier of the closing of the proposed public offering as described in Note D[2] or when the Company obtains an aggregate financing of $2,000,000 excluding expenses or March 31, 1999. The number of shares of common stock included in a unit will be adjusted for the reverse stock split as described in Note A and by a formula as defined in the Private Placement Memorandum. The formula represents 286,632 shares issuable if the anticipated public offering occurs at a price of $6.00 per share. The fair value assigned to the common stock is $450,000 and $150,000 is allocated to the promissory notes. Debt discount of $450,000 and deferred financing costs of $108,000 are amortized and charged to operations over the expected completion of the Company's proposed public offering date of October 31, 1997. As of June 30, 1997, $186,000 was amortized and charged to operations. The effective interest rate is approximately 191%. (NOTE F) - Stock Option Plans: [1] On April 28, 1997, the Board of Directors adopted and on June 12, 1997 the stockholders approved a stock option plan for outside directors (the "Director Plan") under which nonqualified stock options may be granted to its outside directors to purchase up to 300,000 shares of the Company's common stock. Directors will be granted an option to purchase 15,000 of the Company's common stock at fair market value at the earlier of the public offering or September 30, 1997 and at each subsequent annual meeting of shareholders at which directors are elected. Options may be exercised for ten years and one month after the date of grant and may not be exercised during an eleven-month period following the date of grant unless there is a change in control, as defined in the Director Plan or the compensation committee waives the eleven-month continuous service requirement. As of June 30, 1997, no options have been issued under the Director Plan. [2] On March 7, 1997 the Board of Directors adopted and on June 12, 1997 the stockholders approved the Company's 1997 employee stock option plan (the "Plan"), amended by the Board of Directors on April 29, 1997, under which incentive stock option and nonqualified stock options may be granted to purchase up to 900,000 shares of the Company's common stock. Grants to any one employee shall not exceed 250,000 options during any twelve-month period. Incentive stock options are to be granted at a price not less than the fair market value, or 110% of fair market value to an individual who owns more than ten percent of the voting power of the outstanding stock. Nonqualified stock options are to be granted at a price determined by the Company's compensation committee. As of June 30, 1997, no options have been issued under the Plan. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the financial statements included in this report and in conjunction with the description of the Company's Business included in the Company's Form 10-KSB for the year ended September 30, 1996. It is intended to assist the reader in understanding and evaluating the financial position of the Company. This discussion contains, in addition to historical information, forward looking statements that involve risks and uncertainty. The Company's actual results could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed in the Company's Form 10-KSB for the year ended September 30, 1996. The financial statements included in this report are the Company's consolidated result of operations for the Company's and its three subsidiaries, DynamicWeb Transaction Services Inc. (DWTS), Megascore, Inc. (Megascore) and Software Associates, Inc. (Software Associates). Financial Condition As of June 30, 1997, the Company had cash of $95,818, total current assets of $336,066 and a working capital deficiency of $259,196. The Company had a net loss of $447,639 and $1,731,610, respectively, for the three months and nine months ended June 30, 1997, and negative operating cash flow for the nine months ended June 30, 1997 of $689,283, which negative cash flow was primarily funded by a $250,000 private placement of common stock that closed in November, 1996, and from a $600,000 private placement of 24 units consisting of common stock and promissory notes that closed in April, 1997. Results of Operation The Company recognized net sales of $221,300 for the quarter ended June 30, 1997 and $498,095 for the nine months ended June 30, 1997, compared to $96,371 and $348,417 for the three and nine months ended June 30, 1996. The increase in sales was attributable to sales of the Company's new EDI/Internet products and services offered through Software Associates, Inc., a subsidiary acquired on November 30, 1996, sales of upgrades for customized software, and a royalty payment for a proprietary list of internet domains names. The Company had an increase in system sales, to $38,371 for the quarter ended June 30, 1997 from $26,783 in 1996, which was due to sales of custom software related the Company's new EDI Service Bureau and sales of upgrades for customized software. However, system sales declined for the nine months ended June 30, 1997 to $98,256 from $107,317 for the prior year. This decline was attributable to ongoing efforts, before the acquisition of Software Associates, to migrate away from some of the Company's historical products and to focus on the Company's electronic commerce services. System sales include sales of hardware and software to customers. Service sales increased to $182,929 for the three months ended June 30, 1997 from $69,588 for the three months ended June 30, 1996. Service sales also increased from $241,100 for the nine months in 1996 as compared to $399,841 for the nine months in fiscal 1997. In each case, the increase was due largely to transaction processing through the Company's new EDI Service Bureau, and the rollout of EDIxchange, and a royalty payment for an internet domain list. Cost of system sales was $10,015 for the quarter and $33,640 for the nine months ended June 30, 1997, for a gross profit of 73.9% and 65.8% respectively. This compares to cost of system sales of $13,110 and $55,800, for gross profit of 51.1% and 48% in 1996. The increase in profitability is attributable to sales of higher margin customized EDI software to facilitate transaction processing through the EDI Service Bureau. Cost of services was $51,936 in 1997 for the quarter and $126,990 for the nine months ended June 30, 1997, for a gross profit of 71.6% and 68.2%. This compares to cost of services of $17,936 and $62,434, for gross profit of 74.2% and 74.1% in 1996. The decrease in profit margins on service sales is attributable to the costs associated with the addition of new employees who were added to increase the Company's EDI/Internet capabilities, in anticipation of the growth in demand for the Company's EDI/Internet services. Quarterly selling, general and administrative expenses increased by $130,950, from $230,639 in 1996 to $361,589 in 1997. For the nine month period, they increased by $545,615 from $460,631 in 1996 to $1,006,246 in 1997. The increase is attributable to the higher marketing expenses, salaries and office expenses associated with the Company's increased effort to market its EDI/Internet services and to implement an outreach program directed at the electronic commerce community. Management expects the outreach program to provide the Company with access and introductions to talent and expertise within the electronic commerce community, with the intention to assist the Company in its marketing, recruiting, and operations. There is no assurance that the outreach program will be successful. Research and development expenses increased $62,972 for the quarter, from $8,479 in 1996 to $71,451 in 1997, and by $148,795 for the nine months ended June 30, from $15,229 in 1996 to $164,024 in 1997. The increase is attributable to expanded development of existing services, and ongoing development of new services (EC Integrator and ShipTrac). Purchased research and development for the nine months ended June 30, 1997 of $713,710 resulted for the purchase price allocation of Software Associates, Inc. Interest expense increased from $4,066 in 1996 to $200,310 in 1997 for the three months ended June 30 and from $14,950 in 1996 to $210,585 in 1997 for the nine months ended June 30. The increase is primarily attributable to the amortization of debt discount and deferred financing fees of $186,000 and interest expense of $8,000. Both are related to the $600,000 private placement that closed in April, 1997. Liquidity and Capital Resources The capital resources available to the Company, including the $600,000 of proceeds received from the private placement in April 1997, are not adequate to finance the Company's activities for the full year ended September 30, 1997. The Company will require substantial additional financing in order to continue its operations. There is no assurance, however, that the Company will receive additional financing. PART II OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Securities Holders (a) On June 12, 1997, the Company held its 1997 Annual Meeting of Shareholders. At such meeting, the shareholders voted upon the following five matters: 1. To elect the members of the Board of Directors. 2. To approve an amendment and restatement of the Company's Certificate of Incorporation. 3. To approve the Company's 1997 Employee Stock Option Plan. 4. To approve the Company's 1997 Stock Option Plan For Outside Directors. 5. To ratify the selection of Richard A. Eisner & Company, LLP, Certified Public Accountants, as the Company's independent auditors for the year ending September 30, 1997. Management did not solicit proxies for that meeting. (b) At the annual meeting the following individuals were elected to the Company's Board of Directors: Steve L. Vanechanos, Jr. Steve L. Vanechanos, Sr. Kenneth R. Konikowski F. Patrick Ahearn, Jr. Denis Clark Frank DiPalma Robert Droste No other person continued as a director of the Company. (c) The number of votes cast for, against, or withheld, and the number of abstentions and broker non-votes, as to each matter identified in paragraph (a) above, is set forth below:
Votes Votes Against, Matter For Withheld or Absentions** Non-Votes 1. Election of 4,937,189 0 3,016,728 Directors* 2. Amendment and 4,937,189 0 3,016,728 Restatement of Certificate of Incorporation 3. 1997 Employee 4,937,189 0 3,016,728 Stock Option Plan 4. 1997 Plan for 4,937,189 0 3,016,728 Outside Directors 5. Ratification of 4,937,189 0 3,016,728 Independent Auditors
* All of the seven directors (who are identified in paragraph (a) above) received these same votes. ** No shares which were present at the meeting voted against, or withheld their vote or abstained from voting on, any of the matters. Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K Not applicable SIGNATURES In accordance with the requirements of the Securities Exchange of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DynamicWeb Enterprises, Inc. (Registrant) August 8, 1997 By: /s/ Steve Vanechanos, Jr. (Date) Steve Vanechanos, Jr. President and Chief Executive Officer