May 22, 2000
JVWEB INC (JVWB.OB)
Quarterly Report (SEC form 10QSB)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The JVWeb business model to joint venture with existing companies to bring their brands on line requires a thorough understanding as to how the JVWeb financial statements can best be analyzed. Specifically, out of our four revenue centers that are evolving (see below), the buying and selling of our joint venture interests represents the most difficult to analyze. This is due to the nature of these interests, as joint ventures, are often only able to be reported at cost when JVWeb owns less than a fifty percent interest. Therefore, as our financial statements are analyzed, we recommend some weight be given to the balance sheet reporting of the increase in value of our varied holdings, as well as revenue, as an indication of our financial performance.
REVENUE MODEL
JVWeb is refining its revenue model into four distinct categories:
1. Joint ventures. As we have been announcing over the last year, we have entered into a number of joint ventures. Our strategy has been to target the establishment of ventures that feed off of each other, and represent an "internet eco-system", as a self-supporting network of e-commerce ventures. A more complete discussion of these various ventures and how they inter-relate is outlined below. We would like to emphasize that we see our core capability as creating on-line strategies that work. Therefore, we anticipate that our pace of developing on-line ventures will accelerate and we will be aggressively selling these ventures to major companies in search of on-line strategies that can work for them. Revenue Status: The status of the individual ventures is reported below.
2. Fee for Service. As we had announced recently, we have made a significant investment in a sales campaign to generate service revenue in the areas of web hosting, web development, and internet strategy consulting. To showcase our internet strategy capabilities, we feature our creation of our varied joint ventures, as well as the targeted strategies represented by www.crisis-communications.com, and www.webdisasterrecovery.com. In this campaign, we are making contact with hundreds of companies each month. We are presently one month into the campaign, and are now at the stage of establishing first appointments. We have noted already, however, that fully one half of the companies we are contacting, in the Houston Gulf Coast area, have not yet even developed a website! Therefore, we feel a strong market continues to exist for web development services. As we have a long-term commitment to this campaign, we are confident this revenue center will be a robust contributor to our revenue stream. Revenue Status: We are already generating a minimum of $10,000 in monthly revenue from this division, primarily from providing service to our joint venture partners. We feel we are on track to meet our goal of having this division generating a minimum of $30,000 in monthly revenue in the near term.
3. Integrated Sponsorships. JVWeb has made a core commitment to provide content programming as a specific value add to its various joint ventures. This is presently manifested in the two properties, www.ihomeline.com (and its companion site, www.ihomeline.co.uk), a radio and internet talk show centered on home remodeling, and our suite of media assets revolving around the sweepstakes industry. We have determined that our resources can best be deployed in developing programming that can be distributed in multiple channels, including radio, the internet, print, and (ultimately) video. As a result, we are building an inventory of advertising space that is available in the form of "integrated sponsorships" to national advertisers. More than just banner ads on a website, these integrated sponsorships allow the advertiser to reach its audience through a variety of mediums, often as content imbedded in the programming. This, we feel , offers superior value to the advertiser. We expect this inventory to grow dramatically over the next twelve months, as we build our programming and its corresponding distribution through the multiple channels as mentioned above. Revenue Status: We have met 20% of our internal goal of generating $30,000 in monthly revenue by this time. Although this is disappointing, we have also expanded our inventory of sponsorship ad space available to over $120,000, which far exceeds our goal of $60,000. Further, the Sweepstakes assets is expected to double this again, to an additional $120,000 in ad inventory, by mid-summer. We are adding a second sales person to handle this increase of inventory. As a result, we anticipate rapid actual revenue growth in this area.
4. Commerce. The ultimate goal is to generate commerce. JVWeb's view is that commerce is to be generated through a blend of traditional and on-line strategies. In that regard, we are presently concentrating our efforts in the following areas of commerce: a. On-line subscriptions. Whether driven by sponsors paying for
exposure, or subscribers paying for content, our present
ventures, specifically, 1) a suite of media assets centered on
the sweepstakes industry, and 2) a financial newsletter, are
well-suited for this application of commerce. Revenue Status:
We will be launching the two on-line subscription products
mentioned above in June. We expect, within three months of
start-up, the two newsletters combined will be generating a
minimum of $50,000 in monthly revenue.
b. Sale of merchandise. Through both www.ihomeline.com, and our soon
to be re-launched www.dadandme.com, we have branded
merchandise that can be sold. Revenue Status: We are
presently lining up retail partners for these two product
lines, and do not yet have a timetable for revenue generation.
c. Projects in process. We are actively engaged in developing, with
partners, additional commerce opportunities that we feel
will succeed in profitably generating revenue through commerce.
SPECIFIC VENTURES
The following ventures are all actively being developed:
1. Ihomeline, Inc.: This project encompasses both ihomeline.com, and the recently announced ihomeline.co.uk. JVWeb owns a 50% interest in ihomeline.com. It presently owns a 100% interest in ihomeline.co.uk, although it is contemplating contributing 50% into ihomeline.com, and is planning on bringing in 2Cs, its London-based strategic partner for the remaining 50%. Ihomeline is an integration of a radio talk show, that is syndicated nationwide, and a how-to website. JVWeb' value-add is in overall business management of the venture. We are presently syndicating a two minute version of the talk show, as a vignette, to over 300 radio stations nationwide. This is a primary component of our ad inventory referenced above in our integrated sponsorship package.
2. Linksxpress, Inc.: This project encompasses www.linksxpress.com in which JVWeb owns an 8% interest, and www.linksxpress.co.uk, in which JVWeb owns a 38% interest. Linksxpress is an e-commerce shopping mall, with unique navigation features. JVWeb's value add is in providing strategies to drive traffic to the site, such as the sweepstakes and ihomeline programming ventures.
3. Icrosspointe, Inc.: This project encompasses Icrosspointe.net, Inc., in which JVWeb owns an 8% interest, and Great Records, Inc., in which JVWeb owns a 50% interest. Icrosspointe is a Christian-based on-line community. JVWeb's value add is in providing strategies to drive traffic to the site, as well as co-venturing on projects into that community, such as www.dadandme.com, and e-charitable funding strategies, based on a JVWeb on-line model, www.holyfamilyshrine.org. Great Records, Inc. is a full-service record label, using the internet as a means of distributing the music. JVWeb's value add is in the on- line strategy for the venture, and overall business management support.
4. The National Sweepstakes Show, Inc.: JVWeb owns 58% of this entity, which includes a suite of media assets revolving around the sweepstakes industry. The assets include a newspaper supplement, Sweepstakes News, which is scheduled to debut this fall, a radio program, in which a demo can be heard at www.nationalsweepstakesshow.com, and an additional website, www.sweepstakesnews.com, which will be an on-line subscription based newsletter. JVWeb's value add is in overall business management of the project. This acquisition is a critical component of our overall strategy, in that it will be a primary solution to the question of how we will drive traffic to our various sites.
5. On-line Financial Newsletter: We have just completed the acquisition of a 60% interest in a suite of on-line financial newsletters. Through these newsletters we will be showcasing other public companies, who will pay the venture a fee for such activities. We will also be offering our other services, such as web hosting, web development and strategic internet consulting services to these companies.
6. Amp3, Inc. JVWeb has a 4.5% interest in this on-line music portal. We have no update on the status of this investment at this time.
7. Wholly-Owned Ventures: In addition to the above, we have, in inventory a number of domain names that are in various stages of development into operational websites. These projects involve strategies that JVWeb has created and is prepared to implement as the right combination of partners are brought together. The most current project involves a suite of family-related sites, including www.dadandme.com (a re-launch), www.momandme.net, and www.familylifestyles.com.
Our accounting policy has been to present the above investments at the conservative cost basis. Management feels that the ventures above, as a group, represent values materially greater than that represented on the balance sheet.
INCOME STATEMENT
1. Revenue: Gross revenues for the quarter primarily reflect the emergence of ourfee-for-service division. The source of those revenues was mainly derived from web development and consulting services performed on behalf of our joint ventures.
2. Cost of Operations: Our cost of operations for the quarter, $221,070, represents a 20% reduction in costs from the same period in the prior year. This reflects the efforts made to more efficiently streamline our operations towards the production of immediate revenue, with a corresponding reduction in research and development expenditures.
BALANCE SHEET
1. Current Assets. The prepaid professional fees of $227,000 reflects two substantial commitments made to sales. The first is the sales program to support the growth of our fee for service division, and the second is a campaign associated with our ihomeline joint venture. 2. Investments. As stated above, we conservatively report all of our investments in our joint ventures at cost. 3. Liabilities. The accounts payable of $58,000 reflect primarily commitments we are making on behalf of ihomeline, Inc.
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