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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _______________ to _____________
Commission File Number 0-23365
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SONICPORT.COM, INC.
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(Exact name of small business issuer in its charter)
Nevada 84-1290152
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(State or other jurisdiction or (I.R.S. employer
incorporation of organization) identification number)
1641 20th Street
Santa Monica, California 90404
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 828-1999
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Common Stock, $.0001 par value
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
State issuer's revenues for its most recent fiscal year: $0
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 30, 2000 was $17,411,750 based upon the average of the
last available bid and asked price of the Common Stock of $1.4375 as of June 30,
2000.
The number of shares outstanding of the issuer's classes of Common Stock as of
June 30, 2000: Common Stock, $0.0001 par value 26,094,986 shares outstanding
DOCUMENTS INCORPORATED BY REFERENCE: SEE EXHIBITS INDEX
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PART I
ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SHAREHOLDERS AND PROSPECTIVE
SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER ANY FORWARD -
LOOKING STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY ONE OF THOSE
FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED
HEREIN. THESE FORWARD - LOOKING STATEMENTS INCLUDE PLANS AND OBJECTIVES OF
MANAGEMENT FOR FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES RELATING TO THE
PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS
RELATING TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS,
FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS,
AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS,
ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH
ARE BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE,
THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD -
LOOKING STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE
AND BUSINESS DEVELOPMENT, THE COMPANY MAY ALTER ITS MARKETING, CAPITAL
EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S
RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE
FORWARD LOOKING STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH STATEMENT
SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON
THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED.
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ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND OF THE COMPANY
Sonicport.com, Inc. (the "Company" or "Sonicport"), a development stage company,
was formed as an Internet-based service company. Sonicport is an Internet
marketing and technology infrastructure company that specializes in supporting
cost effective business-to-business and business-to-consumer revenue based
marketing initiatives. Through its various products and services, which include
proprietary products, Internet marketing and management client services as well
as an access to a full service Applications Service Provider (the "ASP") which
is currently provided by a third party (the Company plans to offer it through
its own operations center in the near future), Sonicport has pioneered a new
cost-effective and measurable methodology to help subscription-based online
services and dot-com companies build revenues by acquiring and retaining
subscribers.
The Company was originally incorporated in December, 1994 under the laws of the
state of Colorado as JLQ, Inc., to deal in the wholesale distribution of picture
frames, however, no revenues were derived from such business operations. In
1997, the Company changed its name to New World Publishing, Inc. The Company had
minimal activities until May, 1999. In May, 1999, the Company and Communications
Television, Inc., a California corporation ("CTV"), entered into an Agreement
and Plan of Reorganization (the "Reorganization Agreement") providing for the
reorganization of CTV with and into Sonicport, with CTV becoming a wholly-owned
subsidiary of the Company (the "Reorganization"). The terms of the
Reorganization provided for the exchange of all of the outstanding shares of
common stock of CTV for an aggregate of 19,020,167 common shares of voting stock
of the Company to the CTV shareholders on a pro rata basis, for the purpose of
effecting a tax-free reorganization pursuant to Sections 354 and 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended ("IRC"). The closing of the
Reorganization occurred as of May 18, 1999. The Company changed its name to
"Sonicport.com, Inc." as of October 18, 1999.
The Company changed its state of incorporation from Colorado to Nevada in
February, 2000. Such action was approved by Sonicport's shareholders on October
12, 1999.
Prior to the Reorganization, Communications Television, Inc., a California
corporation, was organized for the purpose of developing and operating extensive
subscriber-based virtual communities on the Internet.
The Company's registered office and principal place of business is located at
1641 20th Street, Santa Monica, California 90404, Attn. David Baeza, President
and CEO. The Company's telephone number is (310) 828-1999.
Unless the context requires otherwise, as used herein, any reference to the
Company includes the Company's subsidiary - Sonicport.com, Inc., a California
corporation.
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THE COMPANY'S BUSINESS
General
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Sonicport is an Internet marketing and technology infrastructure company that
specializes in supporting cost effective business-to-business and
business-to-consumer revenue based marketing initiatives. Through its various
products and services, Sonicport has pioneered a new cost-effective and
measurable methodology to help subscription-based online services and dot-com
companies build revenues by acquiring and retaining subscribers.
Products and services of Sonicport include:
< Proprietary products, which include a new product such as
SEEYOUONLINE.NET, the Company's first portal offering which
serves as a template for the Company's marketing capabilities
< An access to full service Application Service Provider ("ASP")
which is currently offered by a third party and which the Company
plans to provide in the near future. ASP provides web hosting;
software hosting; specialized programming; 24-hours a day, 7 days
a week customer and technical support; billing processing, and
customized reporting
< Vertical Evolution - client services of Sonicport, which offer
strategic Internet marketing and management services to other
dot-com companies. Through these services, Sonicport is able to
supply businesses with comprehensive marketing programs that are
anchored by sophisticated transactional-based software systems,
which are supported by a powerful ASP platform that allows for
real time advertising performance auditing.
The Company's customer acquisition and marketing strategies, along with their
internal portal products allow for a diverse group of revenue streams, including
revenues generated from strategic marketing services, database mining and
management for clients, inbound/outbound call centers, billing services and sale
of value added services and features. See also "Sources of Revenues".
Overview of The Company's Markets
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Industry Background - The Internet
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The Internet has emerged as a global medium enabling millions of people
worldwide to share information, communicate and conduct business electronically.
International Data Corporation ("IDC") estimates that the number of Web users
will grow from approximately 69 million worldwide in 1997 to approximately 320
million worldwide by the end of 2002. This growth is expected to be driven by
the large and growing number of PCs installed in homes and offices, the
decreasing cost of PCs, easier, faster and cheaper access to the Internet,
improvements in network infrastructure, the proliferation of Internet content
and the increasing familiarity and acceptance of the Internet by businesses and
consumers. The Internet possesses a number of unique characteristics that
differentiate it from traditional media: users communicate or access information
without geographic or temporal limitations; users access dynamic and interactive
content on a real-time basis; and users communicate and interact instantaneously
with a single individual or with entire groups of individuals. As a result of
these characteristics, Web usage is expected to continue to grow rapidly.
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The Internet content market, over the past five years, has experienced
phenomenal growth as a vehicle for consumer information, entertainment and
commerce. According to Jupiter Communications, Inc. ("Jupiter"), the U.S. online
household population has grown from 9.4 million in 1994 to a projected 61.3
million by year-end 2002 (or 58% of U.S. households). In 1998, U.S. households
online generated $7.8 billion in revenues; by 2003, Forrester Research, Inc.
("Forrester") forecasts that they will generate $108 billion in revenues, which
accrue from access fees, subscriptions, advertising, direct marketing and
transactions, including shopping. It is anticipated that the online advertising
market will grow dramatically in the near future.
Internet Service Providers
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The growth of the Internet has been coupled with an explosive growth in the ISP
market. According to IDC, the U.S.-based ISP market is projected to more than
triple in size from $10.7 billion in 1998 to $37.4 billion in 2003. As of the
end of 1998, there were over 4,850 providers in the United States, according to
Boardwatch magazine. These ISPs vary widely in their geographic coverage,
customer focus, and the nature and quality of their services. National providers
are typically full-service providers that offer a broad range of Internet access
and other services to businesses. Regional providers include the regional
telephone operators, competitive local exchange carriers and Internet access
providers. Local providers are typically closely-held start-ups or small
companies, serving a single market. The vast majority of ISPs are small, local
operations with fewer than 10,000 customers each. Forrester research indicates
that America OnLine ("AOL") dominates the ISP subscriber count with 44.3% of all
subscribers. AOL is followed by MSN and AT&T with about 4% each; EarthLink, IBM,
MindSpring and GTE with about 3% each and by WebTV, NetZero and Prodigy with
about 2% each. All other ISPs account for 28% of the market.
According to Boardwatch magazine there are approximately 40 national major
"backbone" providers, and there are 180 national dial-up providers. Dial-up
still provides the most cost-effective method of getting onto the Internet for
most consumers.
According to Forrester, speed will become more important to consumers in the
near term and may even offset the advantages of free access. Forrester projects
that by 2003, 36% of online households will access via cable and DSL. Perhaps
more significantly, by 2003, there will be 2.6 million new online households
that go directly to broadband. These consumers will exceed new dial-up consumers
by 1 million users as 62% of all online newcomers access via broadband.
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ONLINE ACCESS
Most online households (HHs) access the Internet via dial-up modem. However, the
advent of broadband applications has accelerated the growth and adoption of
faster speed connections. Jupiter Communications, Inc. ("Jupiter") reports that
in 1997, 99% of online HHs accessed the Internet via dial-up modem. By this
year, the percentage has dropped to 95% and it is projected to drop to 81% by
2002. The rise of cable modems is primarily responsible for this change, with
less than 1% of online HHs accessing the Internet this way in 1997, but 11%
projected to do so in 2002. DSL, a technology that dramatically increases the
digital capacity of ordinary telephone lines, is also an increasingly important
access technology, with no HHs connecting via DSL in 1997 and a projected 5%
accessing via DSL in 2002.
Online Advertising
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The Web is considered to be an attractive medium for advertisers. It enables
them to target their messages demographically and change the ads frequently in
response to market feedback. Forrester predicts that the online advertising
market will grow dramatically in the near term. In 1998, U.S. online ad spending
was $1.3 billion, by 2003 it is expected to reach $10.4 billion. Per capita
spending on online advertising will exceed that for magazines and radio by 2003.
Concerned about the effectiveness of their messages, advertisers are moving away
from banners and towards sponsorships, advertorials and integrated advertising.
As the Internet approaches mass-market status, CPMs are decreasing except in
highly targeted markets.
Direct Marketing
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Direct marketers also find the Web attractive because it permits the capture of
valuable customer demographic preference information that is stored in
increasingly complex databases. Utilizing these databases, online direct
marketers can target electronic offers of products and services directly to
consumers with the desired characteristics. Though direct marketers have
traditionally relied on print, mail and telemarketing to reach their customers,
the Internet has enabled them to increase response rates and decrease the cost
per transaction. The Direct Marketing Association estimates that spending on
Internet direct marketing will increase from $275 million in 1997 to $3.5
billion in 2002.
The Company - Products & Services
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The Company provides the following products and services to its clients to
ensure that all the key services necessary to support a successful Internet
business program are in place. Depending on the client's needs, Sonicport's
services can be offered as an individual service or packaged together as a
complete Internet business solution. Set forth below is a description of what
those products and services offer Sonicport's clients.
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1. Vertical Evolution
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Vertical Evolution is a client service provided by Sonicport, which offers
strategic Internet marketing and management services to other dot-com companies.
This service was created out of the need to provide complete turnkey and
comprehensive marketing and management programs for Sonicport clients. The
Company recognizes that most of its clients simply do not have the bandwidth or
the resources to develop and manage comprehensive marketing programs. Sonicport
lets its clients focus on developing their content and business relationships,
while Vertical Evolution management team comprised of experts in each
specialized field that is required to run a successful online business, provides
them with an efficient direct response marketing campaigns.
Vertical Evolution is comprised of two main components:
A. STRATEGIC PLANNING
All Vertical Evolution clients begin with a comprehensive 60 to 90 day strategic
analysis that includes market research, competitive analysis (direct and
indirect competition), creating or refining the product positioning, creating or
refining the unique selling proposition, reviewing the pricing strategies, and
researching relevant naming and trade marking issues. The strategic planning
process concludes with a strategic marketing plan, which includes acquisition
goals, key phase one marketing testing and rollout dates, web design and content
concepts, as well as revenue and cost projections. Once the plan is complete and
approved by the client, the Vertical Evolution account management team begins to
implement the plan using a wide array of proven tools and strategies.
B. DIRECT RESPONSE MARKETING SERVICES
As noted in the January 17, 2000, issue of DM magazine, Direct Response
marketing for the Internet has many advantages over other marketing techniques.
First, Direct Response Television (DRTV) drives transactions as opposed to just
generating traffic. Users come to a site ready to purchase. Second, sales volume
is predictable. As a result, Direct Response marketing is cost efficient and
flexible; customer response data can be analyzed at a number of levels and
adjustments implemented in very short time frames. With the necessary
infrastructure and relationships, DRTV offers measurable benefits. Once the
campaign is tested, there are a number of precision forecasting tools that can
give an accurate estimate of what worked. The results are measured on a variety
of criteria covering creative, cost per lead/order, messaging, and
station/demographic match-up. This is a key point in attracting prospective
business clients. Sonicport.com already has back-end support in place to handle
a significant amount of incoming calls and Web-traffic, further ensuring success
of campaigns.
Sonicport's Direct Response TV ("DRTV") marketing begins with the implementation
of a short form Direct Response television marketing campaign. The campaign can
include a variety of different TV spots, created in DRTV format of 60 and 120
seconds with a strong call to action. The commercials, designed for a two-week
run on a variety of nationwide cable networks and broadcast stations, will
typically each be tagged with a phone number designated to that spot and for the
network(s) on which it runs. The customized phone numbers allow the option of
simultaneously testing multiple offers in different regions of the country.
Furthermore, Sonicport tracks the television spots by satellite in order to know
how many times a spot ran, without the delay of waiting for station reports.
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Immediate feedback on the effectiveness of the spot, the offer, the media and
the day part can be derived via phone calls at Sonicport's call center site.
Based on such feedback, a potential client can make a prompt decision on which
TV commercial and what networks to fund further. Day parts will be selected
based on what timeslot produced the most calls. For those individuals who did
not place an order, a follow-up campaign through direct mail and email is
initiated to turn the potential customers into customers.
Web sites referenced in the television commercial are also tracked for overall
hits, unique visitors, and action taken, for example, buy, download, subscribe,
etc. By utilizing offer codes, visitors to the Web site can be tracked to what
media spot got them to take action and visit the site.
2. Proprietary Products/Portals
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SEEYOUONLINE.NET
SEEYOUONLINE.NET is Sonicport's first portal offering and serves as a template
for the Company's marketing capabilities and proof of concept. The site was
built to provide convenience to Internet user, who wants the Web to add real
value to their offline life. Time saving features that consumers use every day
make the site attractive for both new and sophisticated users. The site is being
promoted via a direct response TV campaign and features an ISP membership of an
introductory limited time offer of $9.95 per month that can be billed on the
telephone bill (no credit card required), transferable AOL buddy lists and
instant messaging, 24-hour customer service, 10 Web based email accounts, 20
megabytes of Web space, online call waiting/voice mail and no pop up ads on the
home page. The ISP set-up is designed for complete ease of use, with the
software automatically selecting dial up and TCP/IP settings, selection of dial
up numbers (to avoid toll calls), and easy selection of password and email
addresses. There are referral awards for every new customer a current member has
sign up for service (three month minimum sign-ups).
Since its launch in March, 2000, SEEYOUONLINE.NET has acquired over 34,000 gross
customers through its vertically integrated direct marketing campaign.
SEEYOUONLINE.net has secured over 140 affiliates and co-brands of which include
Carsdirect.com, Match.com, BuzzMe.com, iPING, 800webmall, Food.com, and others.
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SEEYOUONLINE.NET was able to reduce its acquisition costs by approximately 66%
by continually refining its marketing and technology.
SEEYOUONLINE.NET "click through rates" (rates measuring the
customers/subscribers who read the information on a product advertised on the
opening page of their Internet service provider) for specific products
offerings, have exceeded industry averages by up to 40%. Such higher rate shows
the effectiveness of SEEYOUONLINE.NET marketing strategy and greater likeliness
of such products being purchased.
3. Application Service Provider (ASP)
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Sonicport plans to offer a customizable, full service network operations center
("NOC"), supported by an extensive, secure infrastructure utilizing the latest
network operating technologies. Customers will be able to select from a variety
of service levels agreements ("SLA"), which encompass a number of client-care
options, including but not limited to basic hosting, technical support, customer
service, LEC billing and twenty-four hours a day and seven days a week system
monitoring, as well as traffic monitoring and real-time sales information.
Offering the client a choice in their SLA means that businesses can select the
amount of service they need for their business, broadening the field of
potential clients for Sonicport's business. Currently, Sonicport has an access
to NOC provided by a third party, which boasts a triple redundancy provider
structure.
Sonicport plans to provide clients with first-rate technical acumen, the most
advanced applications and the highest-performing operating systems, ensuring
that their online interests run smoothly and successfully. Sonicport's Network
Operations Center boasts a triple redundancy provider structure.
Sonicport's Core Strategy
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The Company's core strategy is to provide streamlined, unique Internet marketing
services via Sonicport's proprietary Direct Response marketing methods,
vertically targeted portals and many value added services. These services are
marketed to other Internet companies as a "one-stop-shop" agency and fill a
demand in the marketplace to supply businesses with comprehensive marketing
programs that provide a uniform approach to those companies marketing and
communications. The Company pulls together the most successful aspects of these
forms of media and targets consumers through both traditional and Internet
media.
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Sources and Strategies of Revenues
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The Company's all-encompassing marketing strategies allow for a diverse group of
revenue streams. Specifically, the Company expects to generate ongoing revenue
streams via three main business units:
1. Vertical Evolution - Business-to-Business Services
o STRATEGIC MARKETING AND MANAGEMENT SERVICES - offered to
Internet-oriented companies to generate customers and
visitor traffic to their sites. These services cover a
variety of avenues from strategic planning, research,
direct response marketing, public relations services, Web
site design and development as well as product positioning
and branding.
o DATABASE MINING AND MANAGEMENT FOR CLIENTS - also includes
recommendations for future Direct Response Marketing
programs.
o INBOUND/OUTBOUND CALL CENTER SERVICES
o BILLING SERVICES
o MEDIA COMMISSION - commission received by the Company for
media placement services to its clients
2. Proprietary Products - Business-to-Consumer Services
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o SUBSCRIPTION FEES AND ADVERTISING REVENUES - generated
from portals (like SeeYouOnline)
o SALE OF VALUE ADDED SERVICES AND FEATURES - placement of
products, services and or content on site, such as online
phone center, long distance phone rates, etc.
The Company's ability to convert inquires to solid sales is assisted by its
unique ability to utilize Local Exchange Carrier ("LEC") billing. In addition to
traditional credit card billing, the Company has the ability to offer billing
via LEC, or simply put, on a consumer's telephone bill. Sonicport has developed
a long-standing contractual relationship with a third party billing firm that
has contracts with LECs nationwide. For the consumer, LEC billing is an
attractive option because it places Internet services on the same bill as many
of their other telecommunications services and it does not require credit beyond
what the consumer has already established with the telephone company.
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Telephone billing is beneficial to Sonicport.com for three main reasons:
1) The telephone bill is the most consistently paid bill of all
consumer bills so default is minimal.
2) LEC billing allows Sonicport.com to sign up customers who do not
have credit cards and do not want to give checking account
information over the phone.
3) LEC billing facilitates the gathering of relevant customer
information that can be used in additional marketing efforts.
3. Applications Service Provider
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o BASIC HOSTING
o TECHNICAL SUPPORT
o CUSTOMER SERVICE
o MENU OF BILLING OPTIONS (fees charged for customizing of menu
options)
o 24/7 SYSTEM MONITORING
o TRAFFIC MONITORING
o REAL-TIME SALES INFORMATION (sales information and reporting)
Marketing
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Given the highly competitive nature of the Internet industry, a solid marketing
program will be critical to the success of the Company. The program will build
the Company's brand in order to become the provider of choice for consumers. The
Company's internal marketing efforts will once again be broken down into two
different strategies.
1. B2C Services (client and proprietary products)
----------------------------------------------
In order to market its consumer products and services, Sonicport will utilize
integrated direct response marketing including but not limited to DRTV, radio,
print, direct mail, telemarketing, and a mix of online and traditional media.
DIRECT RESPONSE TELEVISION ACQUISITION
Subscriber acquisition/product sales efforts will be focused on DRTV advertising
utilizing short-form commercials that will be tailored by demographic and
promotional offers. The Company believes that this is a highly flexible form of
advertising. Key geographic markets will be matched to the desired demographic
to focus on the target consumer for each campaign.
Designed to capture the highest percentage of calls and maximize revenues,
short-form television is the number one source of high volume, lead-generating
advertising. It is substantially more cost effective than the usual 30-second
commercial. The Company has created a series of 60 and 120-second commercials
that encourage consumers to dial a toll-free number to sign up for Internet
service.
The effectiveness of each television commercial is measured by utilizing a
sophisticated cost-per-call (CPC) and cost-per-enrollment (CPE) analysis.
Commercials that do not perform at optimum effectiveness are taken off the air
and re-edited. The same data reporting is also utilized to gauge the competency
of both the enrollment script and recorded preamble that callers hear when
responding to the commercial. An offer that does not meet the target CPC and CPE
will be replaced with a new offer.
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The Company has launched a limited national advertising campaign. Depending on
the project and based upon the continued analysis of cash flow, the
profitability of the creative, and the capital available for advertising, the
Company plans to spend between $300,000 and $500,000 per month on television
advertising.
Sonicport has the ability to purchase blocks of broadcast and cable television
media time in order to assure national coverage in selected time slots and
geographic markets.
TELEMARKETING - INBOUND & OUTBOUND
Telemarketing services are initially provided by outside vendors who provide
live sales representatives to answer incoming calls responding to the television
advertisements and direct mail solicitations. The sales reps promote the various
products, services and pricing while describing the various payment options
(credit card/check debiting/LEC billing). Outbound telemarketing is utilized to
re-contact previous responders, thus giving the Company an additional
opportunity to enroll those consumers who, for various reasons, opted not to
enroll during the initial call or hung up prior to giving their affirmation.
Information gathered via the telemarketing contact will be used to constantly
update and improve the selling message, thereby improving the effectiveness of
the creative, and making the buying decision faster and easier for the consumer.
The outbound telemarketing will not be implemented until after a successful test
of the television media.
DIRECT MAIL
Prior to consumers being billed for services, they will receive a direct mail
solicitation containing the pre-subscription agreement (if LEC billed) and
additional solicitations if appropriate.
Direct mail solicitations trigger additional revenue-generating calls from
consumers. The direct mail solicitations are designed to maximize the lifetime
value of the customer. The more the customers are contacted and kept engaged,
the longer they will maintain their subscription or lifetime value. Contained
within the direct mail solicitations are solicitations for various premium
product offerings.
A toll-free telephone number advertised on the product's direct mail piece is
answered by a live sales representative. The sales representatives will attempt
to sell the consumer various other products of which the Company receives a
percentage of the gross revenue.
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ONLINE ADVERTISING
Sonicport engages several types of Internet marketing including banner ads and
co-branded promotions with selected supplier partners. Utilizing similar
services to its television media buyers, Sonicport will purchase "Internet time"
through agencies such as DoubleClick and AdForce. Sonicport will gear Internet
advertising in much the same way that it uses Direct Response in that it will
target its advertisements depending upon placement and target audience.
Co-branding agreements have also proven to be a strong traffic driver for
Sonicport as well. When a co-branding agreement is reached, Sonicport develops a
page stemming from its portal that has the look and feel of a Sonicport portal
but shows the product offering of the co-branded company. In addition, the
co-branding partner offers links from its Website to Sonicport's portals,
bringing the affiliate relationship one step further. Several co-branding
agreements have already been entered into and are implemented on
SEEYOUONLINE.NET. Current agreements include: CarsDirect.com, Match.com and
BuzzMe.com. The Company engages several types of Internet marketing including
banner ads and co-branded promotions with selected supplier partners. Utilizing
similar services to its television media buyers, Sonicport will gear Internet
advertising in much the same way that it uses Direct Response in that it will
target its advertisements depending upon placement and target audience.
2. B2B Services
------------
Sonicport intends to market its business to business units, Vertical Evolution
and ASP through several avenues including: online and print advertising, trade
show presence, speaking engagements, networking, trade memberships, public
relations, word of mouth, affiliate programs and link swapping.
Competition
-----------
Sonicport.com's business model allows for several different types of
competition. While there is no known competition at this time for
Sonicport.com's overall business model, there are several individual sectors
where various components of the Company's business might face competition.
PORTALS
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The major portals (Yahoo, Lycos, Go, Excite and AltaVista) all began as search
engines and expanded to provide a wide variety of services to their users.
According to Media Metrix, the portals listed above are among the top 10 most
visited sites on the Internet. As a result, their valuations have risen into the
billions. While these sites have very good valuations from analysts, due to
their first-to-market advantage. These major portals are the front door to the
rest of the Web; however, many Internet users find them difficult to navigate
and much of the content irrelevant to their interests.
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Some of the more prominent sites in today's vertical portal marketplace are
ABC.com, CNET.com, CitySearch.com, Disney.com, ESPN.com, HomeArts.com,
ivillage.com, NewYorkTimes.com, MSNBC.com, Quicken.com, CBSSportsline.com, etc.
Targeted audiences such as these allow sites to charge higher advertising
cost-per-thousands (CPMs) and develop content around specific sponsorships of
interest to their audience.
While this latter group has a specifically defined target, they still approach
the market with an "everything and the kitchen sink" attitude that ends up being
too much and too confusing to the average consumer. Sonicport's customer
research has detailed that most users want to go to a site, get what they need,
and get out. Searching across the Web or across a page is tedious. Our vertical
portals are designed around key demographic and psychographic needs and include
the top 10 items that consumers use on a daily basis. Our goal is to produce an
online site that can add value to your offline life.
MARKETING/ADVERTISING COMPANIES
-------------------------------
While Sonicport's marketing programs are much more broad based than traditional
marketing or advertising firms, the Company does acknowledge that it may face
competition in individual sectors of the marketing world. Agencies have also
embarked into the Internet marketing world such as Agency.com, Razorfish, Black
Rocket, and Magnet, however, they do not utilize the same proprietary methods
that Sonicport uses to obtain and retain consumers. In addition, the Company
also faces some competition in the Direct Response marketing field from entities
like Williams Television and Infinity. The Sonicport advantage lies in its
"one-stop shop" method and its convenient consistency developed through its
marketing strategies.
INTERNET SERVICE PROVIDERS
--------------------------
The market for Internet service is competitive and highly fragmented. There are
no substantial barriers to entry and competition is expected to intensify.
Sonicport expects that competition in this market will result in new competitive
factors, primarily having to do with increased services provided by the ISPs.
Sonicport has already begun to implement many of these "sticky" features within
its ISP service. A short list of these services includes: instant messaging,
community message boards, personal Web-page hosting and voice-over-Internet
Protocol (voIP).
The primary competitive factors determining success in the Internet service
market are:
o reputation for reliability and service
o effective customer support
o pricing
o easy-to-use software
o geographic coverage
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The following types of companies compete in the Internet service market:
o established online commercial service providers such as AOL
o national long-distance carriers such as AT&T and MCI Worldcom C
national commercial ISPs such as EarthLink, MindSpring and
Prodigy
o computer hardware and software, and other technology companies
such as IBM and Microsoft
o numerous regional and local commercial ISPs which vary widely in
quality, service offerings and pricing
o cable operators providing access through a cable modem connected
to a user's personal computer, and services providing Internet
access through "set-top boxes" connected to a user's television,
such as WebTV
o local telephone companies and regional Bell operating companies
such as PacBell.
Companies that provide broadband access will likely become an ever more
significant competitive threat. These potential companies include long-distance
telephone companies, cable companies, utility companies, and wireless
communications companies. Broadband technologies enable consumers to transmit
and receive print, video, voice and data in digital form at significantly faster
access speeds than existing dial-up modems.
As the above list indicates, the many large national companies listed above have
substantially greater market presence and financial, technical, distribution and
other resources than the Company has. However, the Sonicport business model
utilizes its ISP as a value added service and does not solely base its revenue
generation upon the success of the ISP.
Strategic Partners: Operations and Customer Service
---------------------------------------------------
Sonicport has chosen to focus a majority of its management efforts on the
development and marketing functions of the business, its core strengths. As a
result, operations of Sonicport's ISP/portal support, telemarketing operators,
LEC Billing services, etc. are primarily outsourced with project management
provided by Sonicport.com. While Sonicport owns 96 points of presence throughout
the US, it looks to a host of partners to support its overall operations. These
strategic partners include:
West Interactive and Omega - telemarketing services for both inbound
and outbound programs.
Federal TransTel and Integratel - LEC (telephone) billing services.
IAS - application service provider, host of server equipment, billing
customer service, and technical support. IAS' President serves on
Sonicport's Board of Directors.
Direct Response Media - media buyer.
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ZipLink and MegaPop - dial up service providers.
Concentric - DSL service provider.
Leavitt/Bell Group - corporate public relations.
Porter, LeVay & Rose, Inc. - investor public relations.
Design Garden - provides interim designer and graphic artist expertise.
As Sonicport grows, each of these outsourced functions will be periodically
re-evaluated to determine if there is sufficient financial and/or strategic
reasons to bring the function in-house. It is Sonicport's preference to bring
customer interface functions in-house at the earliest possible time.
Sonicport's operations staff today is focused on SEEYOUONLINE.NET and the
Sonicport ISP performance, working with ZipLink and MegaPop on technical support
to customers. The Company's staff also manages the bank of toll-free numbers and
audits the media run schedules against the Neilson satellite reports tracking
television advertisement showings.
Customer service coordinates second level problems between the various partner
organizations and provides Sonicport specific training to IAS and call center
staff.
Patents and Trademarks - Intellectual Property
----------------------------------------------
The Company has filed applications for trademark registration for the names
"Sonicport"(TM) and "Vertical Evolution"(TM). The Company generally enters into
confidentiality or license agreements with its employees, consultants and
corporate partners, and generally controls access to and distribution of its
technologies, documentation and other proprietary information. Despite the
Company's efforts to protect its proprietary rights from unauthorized use or
disclosure, parties may attempt to disclose, obtain or use Sonicport's solutions
or technologies. The Company cannot be certain that the steps it has taken will
prevent misappropriation of its solutions or technologies.
Insurance
---------
The Company maintains a $3 million key-man life insurance policy on David Baeza,
the Company's President and Chief Executive Officer. The Company has a $5
million Errors & Omissions Liability policy, a $2 million Directors & Officers
Liability policy, and a $5 million general liability policy.
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Governmental Regulation
-----------------------
Sonicport is not currently subject to direct federal, state or local regulation,
and laws or regulations applicable to access to or commerce on the Internet,
other than regulations applicable to businesses generally.
Employees
As of the date of this report, the Company has 19 full-time employees; 7 in
marketing, 6 in corporate area and 6 in internet development. The Company is not
a party to any collective bargaining agreement with its employees.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. ONLY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT SHOULD MAKE AN INVESTMENT IN THESE SECURITIES. IN ADDITION TO THE
FACTORS SET FORTH ELSEWHERE IN THIS REPORT, PROSPECTIVE INVESTORS SHOULD GIVE
CAREFUL CONSIDERATION TO THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING THE SECURITIES OFFERED HEREBY.
LIMITED OPERATING HISTORY
Sonicport.com, Inc., previously known as Communications Television, Inc., a
California corporation ("CTV"), the Company's operating subsidiary, was
incorporated in July, 1998. As of May 18, 1999, CTV entered into a
Reorganization Agreement with New World Publishing, Inc., a Colorado publicly
trading corporation incorporated in 1994 (the "Company"), which at that time had
no operations or business. Thus, the Company has only a limited operating
history on which to base an evaluation of its business and prospects. The
Company's prospects must be considered in light of the risks, uncertainties,
expenses and difficulties frequently encountered by companies in their early
stages of development, particularly companies in new and rapidly evolving
markets such as providing Internet-related services. We cannot assure you that
we will be successful in meeting the challenges and addressing the risks that we
face in a new and rapidly expanding market such as Internet services and other
Internet related products and services.
NO ASSURANCE OF PROFITABILITY
The Company believes that the planned growth and profitability will depend in
large part on its ability to (i) promote its brand name, (ii) gain and expand
clients for whom the Company would provide its Internet services via its unique
marketing approach, (iii) retain subscribers through membership in targeted
vertical portals and (iv) sale of value-added services and features.
Accordingly, the Company intends to invest heavily in marketing and promotion,
development of its clients, development of its marketing technology and
operating infrastructure development.
EXPECTED POTENTIAL FLUCTUATIONS IN PLAN OF OPERATIONS
The Company expects that its operating results may fluctuate significantly as a
result of a variety of factors, many of which are outside the Company's control.
Factors that may affect the Company's quarterly operating results include: (i)
the Company's ability to attract and retain clients and maintain their
satisfaction; (ii) the Company's ability to manage the number of items listed on
its service; (iii) the announcement or introduction of new sites, services and
products by the Company or its competitors; (iv) the success of the Company's
brand building and marketing campaigns; (v) price competition; (vi) the level of
use of the Internet and online services; (vii) increasing consumer confidence in
and acceptance of the Internet and other online services; (viii) the Company's
ability to upgrade and develop its systems and infrastructure to accommodate
growth; (ix) the Company's ability to attract new personnel in a timely and
effective manner; (x) the timing, cost and availability of advertising in
traditional media and on other websites and online services; (xi) technical
difficulties or service interruptions; (xii) the amount and timing of operating
costs and capital expenditures relating to expansion of the Company's business,
operations and infrastructure; (xiii) consumer trends; (xiv) governmental
regulation by federal or local governments; and (xv) general economic conditions
as well as economic conditions specific to the Internet and online commerce
industries.
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As a result of the Company's start-up operations and the emerging nature of the
markets in which it competes, it is difficult for the Company to forecast its
revenues or earnings accurately. The Company's current and future expense levels
expectations are based largely on its investment plans and estimates of future
revenues and are, to a large extent, fixed. The Company may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall in revenues relative to the Company's
planned expenditures would have an immediate adverse effect on the Company's
business, results of operations and financial condition. Further, as a strategic
response to changes in the competitive environment, the Company may from time to
time make certain pricing, service or marketing decisions that could have a
material adverse effect on its business, results of operations and financial
condition.
MANAGEMENT OF POTENTIAL GROWTH
The Company anticipates that once it commences its operations, it may encounter
rapid expansion and will be required to address potential growth in its customer
base and market opportunities. This expansion is expected to place a significant
strain on the Company's management, operational and financial resources. To
manage the expected growth of its operations and personnel, the Company will be
required to improve existing and implement new transaction processing,
operational and financial systems, procedures and controls, and to expand, train
and manage its employee base. The Company also will be required to expand its
finance, administrative and operations staff. Further, the Company may be
required to enter into relationships with various strategic partners, websites
and other online service providers and other third parties necessary to the
Company's business. There can be no assurance that the Company's current and
planned personnel, systems, procedures and controls will be adequate to support
the Company's future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that Company management will
be able to identify, manage and exploit existing and potential strategic
relationships and market opportunities. The failure of the Company to manage
growth effectively could have a material adverse effect on the Company's
business, results of operations and financial condition.
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<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the continued services
and on the performance of its senior management and other key personnel. The
Company's performance also depends on the Company's ability to retain and
motivate its other officers and key employees. The loss of the services of any
of its executive officers or other key employees could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company does not have a long-term employment agreement with its CEO and
President at this time, however, it maintains a "key person" life insurance
policy for David Baeza, the Company's President and Chief Executive Officer in
the amount of $3 million. The Company's future success also depends on its
ability to identify, attract, hire, train, retain and motivate other highly
skilled technical, managerial, marketing and customer service personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to successfully attract, integrate or retain
sufficiently qualified personnel. The failure to retain and attract the
necessary personnel could have a material adverse effect on the Company's
business, results of operations and financial condition.
DEPENDENCE ON KEY VENDORS
The Company's performance is substantially dependent on the continued
relationship with its key vendors: Telephone Billing Ziplink, Omega, West, IAS,
Integratel and others. There can be no assurance that the Company will be able
to successfully maintain such relationships. The failure to retain continued
relationship with the Company's key vendors could have a material adverse effect
on the Company's business, results of operations and financial condition.
RISK OF CAPACITY CONSTRAINTS
The Company seeks to generate a high volume of traffic on the Sonicport service.
Accordingly, the satisfactory performance, reliability and availability of the
Company's website, processing systems and network infrastructure are critical to
the Company's reputation and its ability to attract and retain large numbers of
users while maintaining adequate customer service levels. Any substantial
increase in the volume of traffic on the Company's website will require the
Company to expand and upgrade its technology, transaction processing systems and
network infrastructure. There can be no assurance that the Company will be able
to accurately project the rate or timing of increases, if any, in the use of the
Sonicport service or timely expand and upgrade its systems and infrastructure to
accommodate such increases in a timely manner. Any failure to expand or upgrade
its systems could have a material adverse effect on the Company's business,
results of operations and financial condition.
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<PAGE>
RISK OF SYSTEM FAILURES
The Company's success with respect to its portals, and in particular its ability
to provide high quality customer service, will depend on the efficient and
uninterrupted operation of its computer and communications hardware systems.
These systems and operations are generally vulnerable to damage or interruption
from earthquakes, floods, fires, power loss, telecommunication failures,
break-ins, sabotage, intentional acts of vandalism and similar events. The
Company does not plan to initially have fully redundant systems (although it has
a certain level of redundancy protection), a formal disaster recovery plan or
alternative providers of hosting services and will not carry sufficient business
interruption insurance to compensate it for losses that may occur. Despite any
precautions taken by, and planned to be taken by the Company, the occurrence of
a natural disaster or other unanticipated problems could result in interruptions
in the services provided by the Company. In addition, failure to provide the
data communications capacity required by the Company, as a result of human
error, natural disaster or other operational disruption, could result in
interruptions in the Company's service. Any damage to or failure of the systems
of the Company could result in reductions in, or terminations of, the Sonicport
service, which could have a material adverse effect on the Company's business,
results of operations and financial condition. In the case of frequent or
persistent system failures, the Company's reputation and name brand could be
materially adversely affected.
COMPETITION
The market for Internet services is relatively new, intensely competitive,
rapidly evolving and subject to rapid technological change. While relatively
new, the market is already highly competitive and characterized by an increasing
number of entrants who have introduced or developed products and services
similar to those offered by us. The Company expects competition not only to
persist but to increase. Increased competition may result in price reductions,
reduced margins and loss of market share.
Our competitors can be divided into the following groups:
o interactive marketing firms;
o large systems integrators;
o specialty systems integrators;
o strategy consulting firms; and
o Internet services providers.
Many of our current and potential competitors have longer operating histories,
larger installed customer bases, greater name recognition, longer relationships
with clients and significantly greater financial, technical, marketing and
public relations resources than Sonicport does. At any time the Company's
current and potential competitors could increase their resource commitments to
Sonicport's markets. The Company expects to face additional competition from new
market entrants in the future as the barriers to entry into our business are
also relatively low. The Company's current or future competitors may also be
better positioned to address technological and market developments or may react
more favorably to technological changes. The Company competes on the basis of a
number of factors, including the attractiveness of the Internet services
offered, the breadth and quality of these services, creative design and systems
engineering expertise, pricing, technological innovation and understanding
clients' strategies and needs. Many of these factors are beyond the Company's
control. Existing or future competitors may develop or offer strategic Internet
services that provide significant technological, creative, performance, price or
other advantages over the services offered by Sonicport. As a result, the
Company's financial condition, operating results and business could be adversely
affected and the value of the investment in the Company could be reduced
significantly.
21
<PAGE>
The Company will be competing or expect to compete for users with the following
types of companies that provide access services:
o established online service and content providers, such as America
Online and The Microsoft Network;
o independent national Internet service providers, such as
EarthLink, MindSpring and Prodigy;
o national long-distance carriers, such as AT&T, GTE and MCI
WorldCom;
o local telephone companies and regional Bell operating companies,
such as Pacific Bell;
o numerous regional and local commercial Internet service
providers;
o computer hardware and software and other technology companies,
such as IBM and Microsoft;
o cable operators and online cable services, such as Excite@Home;
o Internet portals and search engines such as Yahoo!;
o other Internet service providers like NetZero; and
o non-profit or educational Internet service providers.
The Company expects that competition for users will continue to intensify for
the foreseeable future. Increased competition could result in additional sales
and marketing expenses and user-acquisition costs and could also result in
increased user turnover and decreased advertising revenues.
The Company may not be able to compete effectively if it is not able to offer
broadband Internet access to its users. The Company also faces competition from
companies that provide broadband Internet access, including local and
long-distance telephone companies, cable television companies, electric utility
companies, wireless communications companies and other Internet service
providers. Most of the Company's service is offered via dial-up modems which are
limited to access speeds of up to 56 kbps. Broadband technologies enable users
to transmit and receive print, video, voice and data in digital form at
significantly faster access speeds. While the market for broadband technologies
is still emerging, the Company believes it will continue to grow and pose an
increasingly significant source of competition. The Company may have to develop
new technologies or add broadband access services to remain competitive which
could require substantial time and expense. The Company cannot be certain that
it will succeed in adapting its Internet access service business to compete
effectively with these technologies. The telephone, cable and other companies
that own broadband networks may prevent the Company from delivering Internet
access through the wire and cable networks that they own. The availability and
terms of Internet service providers' access to these networks are under
regulatory and judicial review. The Company's ability to compete with telephone
and cable television companies that are able to support broadband transmission
may depend on future regulation to guarantee open access to the broadband
networks. However, in January 1999, the Federal Communications Commission
declined to take any action to mandate or otherwise regulate access by Internet
service providers to broadband cable facilities at this time. The Company does
not know whether local and state regulatory agencies will take any initiatives
to implement this type of regulation, and whether they will be successful in
establishing their authority to do so. Similarly, the FCC is considering
proposals that could limit the right of Internet service providers to connect
with their users over broadband local telephone lines.
22
<PAGE>
In addition to competing directly in the Internet access market, both cable and
telephone companies are also aligning themselves with Internet service providers
who would receive preferential or exclusive use of broadband local connections
to users. If broadband Internet access becomes the preferred mode by which users
access the Internet and the Company is unable to gain access to broadband
networks on reasonable terms, its ability to compete could be materially and
adversely affected.
RAPID TECHNOLOGICAL CHANGE
The market in which the Company competes is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
announcements, introductions and enhancements and changing customer demands.
These market characteristics are exacerbated by the emerging nature of the Web
and the apparent need of companies from a multitude of industries to offer
Web-based products and services. Accordingly, the Company's future success will
depend on its ability to adapt to rapidly changing technologies, to adapt its
services to evolving industry standards and to continually improve the
performance, features and reliability of its service in response to competitive
service and product offerings and evolving demands of the marketplace. The
failure of the Company to adapt to such changes would have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, the widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes could require
substantial expenditures by the Company to modify or adapt its services or
infrastructure, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
RISKS ASSOCIATED WITH FAILURE TO DEVELOP SONICPORT.COM BRAND
The Company believes that developing and maintaining the Sonicport brand is an
important aspect of attracting and maintaining clients. The importance of brand
recognition will increase as competition in the market for Internet services
increases. Building a brand requires a successful marketing effort and
successful delivery of product to clients. A single event involving client
dissatisfaction could tarnish the perception of brand name. There cannot be
assurances made that the strategy adopted and expenses incurred by the Company
will result in a stronger brand.
23
<PAGE>
DEPENDENCE UPON STRATEGIC RELATIONSHIPS
The Company has established strategic relationships with Telephone Billing
Ziplink, Omega, West, IAS, Integratel which may be terminated at any time. The
loss of any of these or other strategic relationships would deprive us of the
opportunity to:
o gain early access to leading-edge technology; o cooperatively market
products with these vendors; o cross-sell additional services; or o
gain enhanced access to vendor training and support.
DEPENDENCE ON THE GROWING DEMAND FOR INTERNET SOLUTIONS
If the usage and volume of commercial transactions on the Internet does not
continue to increase, demand for Sonicport services may decrease and our
financial condition, operating results and business could be materially and
adversely affected. The Company's future success depends on the continued
expansion of, and reliance of consumers and businesses on, the Internet and
related technical solutions. The Internet may not be able to support an
increased number of users or an increase in the volume of data transmitted over
it. As a result, the performance or reliability of the Internet may be adversely
affected as use increases. The improvement of the Internet in response to
increased demands will require timely improvement of the high speed modems and
other communications equipment that form the Internet infrastructure. The
Internet has already experienced outages and delays as a result of damage to
portions of its infrastructure. The effectiveness of the Internet may also
decline due to delays in the development or adoption of new technical standards
and protocols designed to support increased levels of activity. The Company
cannot assure you that the infrastructure, products or services necessary to
maintain and expand the Internet will be developed. Other factors that may
adversely affect Internet usage or e-commerce adoption include:
o actual or perceived lack of security of information;
o congestion of Internet traffic or other usage delays;
o inconsistent quality of service;
o increases in Internet access costs;
o increases in government regulation of the Internet;
o uncertainty regarding intellectual property ownership;
o reluctance to adopt new business methods;
o costs associated with the obsolescence of existing
infrastructure; and
o economic viability of e-commerce models.
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<PAGE>
LEGAL LIABILITY TO SONICPORT CLIENTS.
Many of Sonicport's engagements will involve the development and implementation
of Internet services that are important to our future clients' businesses. The
Company's failure or inability to meet a client's expectations in the
performance of services could injure our business reputation or result in a
claim for substantial damages against the Company regardless of its
responsibility for such failure. In addition, the services Sonicport will
provide for its clients may include confidential or proprietary client
information. Although the Company has implemented policies to prevent such
client information from being disclosed to unauthorized parties or used
inappropriately, any such unauthorized disclosure or use could result in a claim
against the Company for substantial damages. The Company's contractual
provisions attempting to limit such damages may not be enforceable in all
instances or may otherwise fail to protect the Company from liability for
damages.
ONLINE COMMERCE SECURITY RISKS
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. There can be no
assurance that advances in computer capabilities, new discoveries in the field
of cryptography, or other events or developments will not result in a compromise
or breach of the technology used by the Company to protect customer transaction
data. If any such compromise of the Company's security were to occur, it could
have a material adverse effect on the Company's reputation and, therefore, on
its business, results of operations and financial condition. Furthermore, a
party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the Company's
operations. The Company may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of transactions conducted on
the Internet and other online services and the privacy of users may also inhibit
the growth of the Internet and other online services generally, and the Web in
particular, especially as a means of conducting commercial transactions. To the
extent that activities of the Company involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
damage the Company's reputation and expose the Company to a risk of loss or
litigation and possible liability. There can be no assurance that the Company's
security measures will prevent security breaches or that failure to prevent such
security breaches will not have a material adverse effect on the Company's
business, results of operations and financial condition.
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DEPENDENCE ON THE WEB INFRASTRUCTURE
The success of Sonicport will depend in large part upon the development and
maintenance of the Web infrastructure, such as a reliable network backbone with
the necessary speed, data capacity and security, or timely development of
complementary products such as high speed modems, for providing reliable Web
access and services. Because global commerce and the online exchange of
information are new and evolving, it is difficult to predict with any assurance
whether the Web will prove to be a viable commercial marketplace in the long
term. The Web has experienced, and is expected to continue to experience,
significant growth in the numbers of users and amount of traffic. To the extent
that the Web continues to experience increased numbers of users, frequency of
use or increased bandwidth requirements of users, there can be no assurance that
the Web infrastructure will continue to be able to support the demands placed on
it by this continued growth or that the performance or reliability of the Web
will not be adversely affected. In addition, the Web could lose its viability
due to delays in the development or adoption of new standards and protocols to
handle increased levels of activity or due to increased governmental regulation.
There can be no assurance that the infrastructure or complementary products or
services necessary to make the Web a viable commercial marketplace for the long
term will be developed or that if they are developed, that the Web will become a
viable commercial marketplace for services such as those offered by the Company.
If the necessary infrastructure, standard or protocols or complementary
products, services or facilities are not developed, or if the Web does not
become a viable commercial marketplace, the Company's business, results of
operations and financial condition will be materially and adversely affected.
Even if the infrastructure, standards or protocols or complementary products,
services or facilities are developed and the Web becomes a viable commercial
marketplace in the long term, the Company might be required to incur substantial
expenditures in order to adapt its service to changing Web technologies, which
could have a material adverse effect on the Company's business, results of
operations and financial condition.
RISKS ASSOCIATED WITH INFORMATION DISSEMINATED THROUGH THE COMPANY'S SERVICE
The law relating to the liability of online services companies for information
carried on or disseminated through their services is currently unsettled. It is
possible that claims could be made against online services companies under both
United States and foreign law for defamation, libel, invasion of privacy,
negligence, copyright or trademark infringement, or other theories based on the
nature and content of the materials disseminated through their services. Several
private lawsuits seeking to impose such liability upon other online services
companies are currently pending. The imposition upon the Company and other
online services providers of potential liability for information carried on or
disseminated through their services could require the Company to implement
measures to reduce its exposure to such liability, which may require the Company
to expend substantial resources and/or to discontinue certain service offerings.
In addition, the increased attention focused upon liability issues as a result
of these lawsuits and legislative proposals could impact the growth of Internet
use.
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GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct federal, state or local
regulation, and laws or regulations applicable to access to or commerce on the
Internet, other than regulations applicable to businesses generally. However,
due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services covering issues such as
user privacy, freedom of expression, pricing, content and quality of products
and services, taxation, advertising, intellectual property rights and
information security. Congress has recently approved legislation that is
intended to regulate the distribution of "indecent" material over the Internet.
The nature of court review of such legislation and the manner in which it may be
interpreted and enforced cannot be fully determined and, therefore, could
subject the Company and/or its customers to potential liability, which in turn
could have an adverse effect on the Company's business, results of operations
and financial condition. The adoption of any such laws or regulations might also
decrease the rate of growth of Internet use, which in turn could decrease the
demand for the Sonicport service or increase the cost of doing business or in
some other manner have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, applicability to the
Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy is uncertain. The vast majority of such laws were adopted
prior to the advent of the Internet and related technologies and, as a result,
do not contemplate or address the unique issues of the Internet and related
technologies.
Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also recently
settled a proceeding with one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues could create uncertainty in the marketplace that could reduce demand for
the services of the Company or increase the cost of doing business as a result
of litigation costs or increased service delivery costs, or could in some other
manner have a material adverse effect on the Company's business, results of
operations and financial condition.
YEAR 2000 IMPLICATIONS
The Company has determined that there are no significant Year 2000 issues within
the Company's systems or services, and the Company has not experienced any such
issues thus far. However, the Company intends to utilize third-party equipment
and software that may not be Year 2000 compliant. Failure of such third-party
equipment or software to properly process dates for the year 2000 and thereafter
could require the Company to incur unanticipated expenses to remedy any
problems, which could have a material adverse effect on the Company's business,
results of operations and financial condition.
27
<PAGE>
POSSIBLE VOLATILITY OF STOCK PRICE
The trading price of the Common Stock might be highly volatile and could be
subject to wide fluctuations in response to factors such as actual or
anticipated variations in the Company's quarterly operating results,
announcements of technological innovations, or new services by the Company or
its competitors, changes in financial estimates by securities analysts,
conditions or trends in the Internet and online commerce industries, changes in
the market valuations of other Internet or online service companies,
announcements by the Company or its competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments, additions or
departures of key personnel, sales of Common Stock or other securities of the
Company in the open market and other events or factors, many of which are beyond
the Company's control. There can be no assurance that these trading prices and
valuations will be sustained. These broad market and industry factors may
materially and adversely affect the market price of the Common Stock, regardless
of the Company's operating performance. Market fluctuations, as well as general
political and economic conditions such as recession or interest rate or currency
rate fluctuations, may also adversely affect the market price of the Common
Stock.
CONTROL BY PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors (and their affiliates) , in the
aggregate, own more than 52.86 % of the Company's outstanding Common Stock. As a
result, such persons, acting together, have the ability to control all matters
submitted to stockholders of the Company for approval (including the election
and removal of directors and any merger, consolidation or sale of all or
substantially all of the Company's assets) and to control the management and
affairs of the Company. Accordingly, such concentration of ownership may have
the effect of delaying, deferring or preventing a change in control of the
Company, impede a merger, consolidation, takeover or other business combination
involving the Company or discourage a potential acquirer from making a tender
offer or otherwise attempting to obtain control of the Company, which in turn
could have an adverse effect on the market price of the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Report, there will be approximately 23,835,588 shares of
Common Stock outstanding, of which at least 21,829,148 will be restricted
securities ("Restricted Securities") under the Securities Act, a majority of
which are held by affiliates of the Company (excluding any shares to be issued
pursuant to this Offering, which shall also be "Restricted Securities"). These
Restricted Securities will be eligible for sale from time to time upon
expiration of applicable holding periods under Rule 144 under the Securities
Act. If such holders sell in the public market, such sales could have a material
adverse effect on the market price of the Company's Common Stock. In general,
under Rule 144, subject to the satisfaction of certain other conditions, a
person, including an affiliate of the Company, who has beneficially owned
restricted shares of Common Stock for at least one year is entitled to sell, in
certain brokerage transactions, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of outstanding
shares of the same class, or if the Common Stock is quoted on Nasdaq or a stock
exchange, the average weekly trading volume during the four calendar weeks
immediately preceding the sale. A person who presently is not and who has not
been an affiliate of the Company for at least three months immediately preceding
the sale and who has beneficially owned the shares of Common Stock for at least
two years is entitled to sell such shares under Rule 144 without regard to any
of the volume limitations described above.
28
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal executive offices are located at 1641 20th
Street, Santa Monica, California, 90404. The Company entered into a lease
agreement on June 4, 1999, with an unaffiliated third party consisting of 4,140
square feet of office space at said location. The term of the lease expires on
August 31, 2002. The lease cost is $8,715 per month plus pro rata taxes and
insurance. The lease is subject to yearly adjustment based on the increase in
the Consumer Price Index for Urban Consumers, U.S. City Index. The Company
believes that its current offices are adequate for its needs. Also, see Note 8
to the Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the Company or any of
its properties is subject, nor to the knowledge of the Company, are any such
legal proceedings threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 12, 1999, the Company held a special meeting of its shareholders. At
the meeting, the following proposals were approved by the Company's
shareholders: (i) the change of the Company's name to "Sonicport.com, Inc.";
15,534,490 shares voted for, none against, none abstained; (ii) the change of
the Company's independent certified public accountants to Singer, Lewak,
Greenbaum & Goldstein LLP; 15,534,490 shares voted for, none against and none
abstained; (iii) adoption of the Company's 1999 Incentive Stock Option Plan;
15,534,490 shares voted for, none against and none abstained; (iv) the change of
the Company's state of incorporation from Colorado to Nevada; 15,522,889 shares
voted for, 11,601 against and none abstained.
29
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock began trading on American Stock Exchange since April
18, 2000 under the symbol "SPO". Prior to April, 2000, the Company's common
stock has been listed on the Bulletin Board of the NASD's over-the-counter
market under the symbol "SONI" since October, 1999. The Company's previous
symbol was "ISPS" (since May 21, 1999), following the Reorganization of the
Company. Prior to the Reorganization, the Company's Common Stock had been traded
only sporadically under a symbol "NWPB."
The Company's high and low closing bid and ask information for the fiscal year
ended March 31, 2000, is listed below as provided by the National Quotations
Bureau, NASD OTC Bulletin Board and the American Stock Exchange ("AMEX").
Quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
CLOSING BID CLOSING ASK
1999 HIGH LOW HIGH LOW
---- ---- --- ---- ---
April 1 5.625 1.03125 6.125 3
through
June 30
July 1 5.8125 3.625 5.9375 3.9375
through
September 30
October 1 5.03125 4 5.15625 4.125
through
December 31
2000
----
January 3 4.4375 4 4.5625 4.03125
through
March 31
30
<PAGE>
The last reported closing bid price of Common Stock reported by AMEX was on June
30, 2000 at $1.4375 per share of Common Stock. As of June 30, 2000, there were
approximately 500 beneficial holders of the Company's Common Stock.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does not
anticipate paying any cash dividends in the future. The Company currently
intends to retain future earnings, if any, to fund the development and growth of
its business.
RECENT SALES OF UNREGISTERED SECURITIES
Debentures
On May 31, 1999, the Company sold $500,000 principal amount of 10 % Convertible
Debentures Due May 31, 2001 ("May Debentures") to private accredited investors.
The Company also sold in July, 1999, $275,000 principal amount of 10%
Convertible Debentures Due July 30, 2001 to a private accredited investor ("July
Debentures"). The conversion price of the May and July Debentures is the lesser
of $2.50 per share or 75% of the average closing bid price per share of the
Company's Common Stock for the five trading days prior to conversion date. In
August, 1999 the Company sold $250,000 principal amount of 10% Convertible
Debentures Due August 31, 2001 ("August I Debentures"). The conversion price of
the August I Debentures is the lesser of $2.00 per share or 75% of the average
closing bid price per share of the Company's Common Stock for the five trading
days prior to conversion date. Also in August, 1999 the Company sold $225,000
principal amount of 10% Convertible Debentures Due August 31, 2001 ("August II
Debentures") to nine accredited investors. The conversion price of the August II
Debentures is the lesser of $3.25 per share or 75% of the average closing bid
price per share of the Company's Common Stock for the five trading days prior to
conversion date. On October 15, 1999, the Company entered into a Subscription
Agreement for a 10% Convertible Promissory Note (the "October Note") for
$25,000. The holder of the October Note has the option to convert the October
Note at anytime after the closing date of the October Note. The October Note is
convertible at the lesser of $0.50 or 65% of the average closing bid price of
the Company's common stock for the five trading days prior to conversion. In
October and November, 1999, the Company sold a total of $400,000 principal
amount of 10% Convertible Debentures Due October 31, 2001 and November 4, 2001,
respectively, to a private accredited investor ("October Debentures"). The
conversion price of the October Debentures is the lesser of $1.50 per share or
75% of the average closing bid price per share of the Company's Common Stock for
the five trading days prior to conversion date. On December 15, 1999, the
Company entered into a Subscription Agreement for a 10% Convertible Promissory
Note (the "Dec15 Note") for $10,000. The holder of the Dec15 Note has the option
to convert the Dec15 Note at anytime after the closing date of the Dec15 Note.
The Dec15 Note is convertible at the lesser of $0.50 or 65% of the average
closing bid price of the Company's common stock for the five trading days prior
to conversion. On December 31, 1999, the Company entered into a Subscription
Agreement for a 10% Convertible Promissory Note (the "Dec31 Note") for $50,000.
The holder of the Dec31 Note has the option to convert the Dec31 Note at anytime
after the closing date of the Dec31 Note. The Dec31 Note is convertible at the
lesser of $2.50 or 75% of the average closing bid price of the Company's common
stock for the five trading days prior to conversion. In January, 2000, the
Company sold a total of $250,000 principal amount of 10% Convertible Debentures
Due February 28, 2002 to H. Joe Frazier, the Company's director. The conversion
price of Mr. Frazier's Debentures is the lesser of $2.50 per share or 75% of the
average closing bid price per share of the Company's Common Stock for the five
trading days prior to conversion date. The holders of the Debentures have also
certain registration rights under the terms of the respective Debentures. The
placement of the Debentures was under exemption from registration provided under
Section 4(2), 4(6) and Regulation D. See also Note 7 to the Consolidated
Financial Statements and Notes (the "Financial Statements").
31
<PAGE>
Notes
As of March 31, 2000, the Company also had $355,000 of 10% unsecured notes
outstanding due April 3, 2000. See Note 6 to the Financial Statements. The
Company received a bridge loan in the amount of $500,000 in December 1999 for
which it issued secured convertible notes. The principal amount and interest on
the bridge loan has been repaid in full by the Company in February, 2000.
Common Stock
In March, 2000, the Company completed the private placement of 1,259,560 shares
of its common stock offered to accredited investors only at $2.50 per share,
raising a total of $3,148,900.
Preferred Stock
In April, 2000, the Company sold 800,000 shares of its preferred stock at a
purchase price of $2.50 per share (Series A Convertible Preferred Stock) to a
private accredited investor in a private placement raising $2,000,000. The
Company subsequently redeemed 160,000 shares of Series A Convertible Preferred
Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Overview
Sonicport.com, Inc., a Nevada corporation ("Sonicport" or the "Company") is a
development stage Internet service company specializing in supporting cost
effective business-to-business and business-to-consumer revenue based marketing
initiatives. Through its various products and services, which include
proprietary products, an access to full service Applications Service Provider
(the "ASP") and Internet marketing and management client services, Sonicport has
pioneered a new cost-effective and measurable methodology to help
subscription-based online services and dot-com companies build revenues by
acquiring and retaining subscribers.
32
<PAGE>
As previously discussed, Sonicport was originally incorporated in December, 1994
under the laws of the state of Colorado as JLQ, Inc., to deal in the wholesale
distribution of picture frames, however, no significant revenues were derived
from such business operations. In 1997, the Company changed its name to New
World Publishing, Inc. The Company had minimal activities until May, 1999. In
May, 1999, the Company and Communications Television, Inc., a California
corporation ("CTV"), entered into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") providing for the reorganization of CTV with and
into Sonicport, with CTV becoming a wholly-owned subsidiary of the Company (the
"Reorganization"). The terms of the Reorganization provided for the exchange of
all of the outstanding shares of common stock of CTV for an aggregate of
19,020,167 common shares of voting stock of the Company to the CTV shareholders
on a pro rata basis, for the purpose of effecting a tax-free reorganization
pursuant to Sections 354 and 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended ("IRC"). The closing of the Reorganization occurred as of May 18,
1999. The Company changed its name to "Sonicport.com, Inc." as of October 18,
1999. Sonicport effected the change of its state of incorporation from Colorado
to Nevada in February, 2000.
General
The following discussion should be read in conjunction with "Selected
Consolidated Financial Data" and the Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Report.
Selected Financial Data
The following table contains selected financial data of the Company and is
qualified by the more detailed financial statements and the notes thereto
provided in this report. The financial data as of and for the year ended March
31, 2000, the period from July 20, 1998 (inception) to March 31, 1999, and the
period the period from July 20, 1998 (inception) to March 31, 2000 has been
derived from the Company's audited financial statements included in this report.
<TABLE>
<CAPTION>
===================== ================== ===================================== =====================================
Selected Financial Year Ended March Period from July 20, 1998 Period from July 20, 1998
Data 31, 2000 (inception) (inception)
to March 31, 1999 to March 31, 2000
--------------------- ------------------ ------------------------------------- -------------------------------------
<S> <C> <C> <C>
Total Operating $5,893,269 $1,442,538 $7, 335,807
Expenses
Interest Income $17,710 $692 $18,402
Net Loss ($9,205,016) ($1,689,222) ($10,894,238)
Basic and diluted ($.39) ($.09) ($.50)
loss per share
Total Assets $3,694,158 573,697 3,694,158
Total Current $1,448,202 448,500 1,448,202
Liabilities
Stockholders Equity $1,995,956 125,197 1,995,956
===================== ================== ===================================== =====================================
</TABLE>
33
<PAGE>
Results of Operations
---------------------
The Company has been in the developmental stage since its inception. The Company
incurred net losses of ($10,894,238) and ($9,205,016) during the period from
July 20, 1998 (inception) through March 31, 2000 and for the fiscal year ended
March, 31, 2000, respectively, and incurred a net loss of ($1,689,222) for the
period from July 20, 1998 (inception) to March 31, 1999. The losses are
primarily the result of the Company's incurring interest expense, development
costs and general and administrative expenses, with only interest income
realized during the periods. Development costs include the cost of developing
media advertising programs, and general and administrative costs include
compensation and benefits, professional fees, and other. The Company had
interest income of $18,402 and $17,710 during the period from July 20, 1998
(inception) through March 31, 2000 and for the fiscal year ended March, 31,
2000, respectively. The Company is currently seeking to raise funds to fully
implement its business plan.
As a result of the development stage nature of the Company's prior operations,
the Company is not reporting any impact on its operations from inflation or
changing prices.
Liquidity and Capital Resources
-------------------------------
As of the end of the reporting period, the Company had $1,208,585 in cash and
cash equivalents. Subsequent to March 31, 2000, the Company received $657,000
pursuant to a private placement of up to $5 million offered to accredited
investors. Under the terms of the private placement, the Company will issue up
to 264,000 shares of its restricted common stock and 132,000 warrants to
purchase its common stock. The Company also received $2,000,000 in a private
placement of its Series A Preferred Stock in April, 2000. In May 2000, 160,000
shares of the Series A Preferred Stock were redeemed by the Company.
The Company plans to raise funds for working capital and development of the
Company's operations. If the Company is unsuccessful in obtaining such funds,
the Company may be unable to continue in operation.
From the inception of the Company, July 20, 1998, through March, 2000, net cash
used in operations of ($4,854,913) , and net cash used in investing activities
of ($262,876) were financed primarily by the issuance of $355,000 in notes
payable, $750,000 in convertible notes payable, $1,216,050 in preferred stock
and $3,148,900 proceeds from the sales of the Company's common stock. During the
fiscal year ended March 31, 2000, net cash used in operations of ($3,934,822),
and net cash used in investing activities of ($198,071) were financed primarily
by the issuance of $750,000 in convertible notes payable and $3,148,900 in
common stock.
34
<PAGE>
Lack of Profitability, Potential Losses
---------------------------------------
From its inception in July 20, 1998, through March 31, 2000, the Company has
experienced aggregate net losses of ($10,894,238). Results of operations in the
future will be influenced by numerous factors including, among others,
expansion, the Company's ability to retain clients, to attract affiliates,
provide superior customer service and retain qualified personnel. The Company
may incur problems, delays, expenses, and difficulties during this stage, any of
which may be beyond the Company's control. These include, but are not limited
to, unanticipated regulatory compliance, marketing problems and intense
competition that may exceed current estimates. There is no assurance that the
Company will ever operate profitably.
Additionally, the Company's financial statements have been prepared on the basis
of a going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. The Company had not yet
generated revenues from its operations and, at March 31, 2000, had accumulated a
deficit from its operating activities. Continuation of the Company as a going
concern is dependent upon, among other things, obtaining additional capital,
meeting other obligations under various agreements and achieving satisfactory
levels of profitable operations. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
Capital Expenditures
--------------------
Capital expenditures for the fiscal year ended March 31, 2000 consisted
primarily of purchase of furniture and fixtures ($72,248), office equipment
($81,271) and leasehold improvements ($101,977). See also Note 5. The Company
believes that cash flow generated from its operations and its anticipated sales
of common stock should be sufficient to satisfy its working capital and capital
expenditure requirements for at least the next twelve months. The Company
expects to receive revenues from the fees generated by subscriptions to
SeeYouOnline.net, which was launched in April, 2000, and the Company anticipates
that the subscribers base will steadily increase generating more cash flow. The
Company also expects that its private placement of common stock should be able
to generate sufficient proceeds to satisfy not only its working capital and
expenditures, but also provide a tool for potential acquisitions of companies
with existing positive cash flow. No assurances can be given, however, that the
Company will be successful in such efforts.
Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company is not exposed to material risk based on interest rate fluctuation,
exchange rate fluctuation, or commodity price fluctuation.
YEAR 2000 DISCLOSURE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Computer programs
that have sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. The Company has undergone a system
redevelopment project to improve the efficiency of the system with respect to
changing its computer programs to properly identify a year in the year field.
35
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required to be included in
Item 7 are set forth in the Financial Statements Index.
<TABLE>
<S> <C>
Report of Singer Lewak Greenbaum & Goldstein LLP................................................................F-1
Consolidated Balance Sheet as of March 31, 2000..............................................................F-2 - F-3
Consolidated Statements of Operations for the year ended March 31, 2000, for the
period from July 20, 1998 (inception) to March 31, 1999, for the period from
July 20, 1998 (inception)
to March 31, 2000...............................................................................................F-4
Consolidated Statements of Stockholders' Equity for the year ended March 31,
2000, for the period from July 20, 1998 (inception) to March 31, 1999,
for the period from July 20, 1998 (inception) to March 31, 2000..............................................F-5 - F-7
Consolidated Statements of Cash Flows for the year ended March 31, 2000, for the
period from July 20, 1998 (inception) to March 31, 1999, for the period from
July 20, 1998 (inception)
to March 31, 2000...........................................................................................F-8 - F-11
Notes to Consolidated Financial Statements.................................................................F-12 - F-30
</TABLE>
36
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Sonicport.com, Inc.
(formerly New World Publishing, Inc.)
We have audited the accompanying consolidated balance sheet of Sonicport.com,
Inc. (formerly New World Publishing, Inc.) (a development stage company) and
subsidiary as of March 31, 2000, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended, and
for the period from July 20, 1998 (inception) to March 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sonicport.com,
Inc. (formerly New World Publishing, Inc.) and subsidiary as of March 31, 2000,
and the consolidated results of their operations and their consolidated cash
flows for the year then ended, and for the period from July 20, 1998 (inception)
to March 31, 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company incurred net losses of $9,205,016 and
$1,689,222 during the year ended March 31, 2000 and the period from July 20,
1998 (inception) to March 31, 1999, respectively, and it had negative cash flows
from operations of $3,934,822 and $920,091, respectively. These factors, among
others, as discussed in Note 2 to the financial statements, raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/S/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
May 18, 2000
F-1
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,208,585
Due from related parties 7,709
Prepaid media 975,000
Prepaid services 60,000
Prepaid expenses and other current assets 45,367
----------------
Total current assets 2,296,661
PROPERTY AND EQUIPMENT, net 1,351,068
OTHER ASSETS 46,429
----------------
TOTAL ASSETS $ 3,694,158
================
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
--------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 355,000
Current portion of convertible promissory notes 500,000
Accounts payable 427,393
Accrued expenses 108,352
Interest payable 46,707
Due to related parties 10,750
----------------
Total current liabilities 1,448,202
CONVERTIBLE PROMISSORY NOTES, net of current portion 250,000
----------------
Total liabilities 1,698,202
----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value
10,000,000 shares authorized
0 shares issued and outstanding -
Common stock, $0.0001 par value
90,000,000 shares authorized
23,835,588 shares issued and outstanding 2,384
Common stock committed
2,385,032 shares 6,107,550
Additional paid-in capital 6,780,260
Deficit accumulated during the development stage (10,894,238)
----------------
Total shareholders' equity 1,995,956
----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,694,158
================
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000,
THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 1999, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
---------------------------------------------------------------------------------------------------
<CAPTION>
For the For the
Period from Period from
For the July 20, 1998 July 20, 1998
Year Ended (Inception) (Inception)
March 31, to March 31, to March 31,
2000 1999 2000
---------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATING EXPENSES
General and administrative $ 5,708,800 $ 1,249,388 $ 6,958,188
Consulting - related parties 184,469 193,150 377,619
---------------- ---------------- ----------------
Total operating expenses 5,893,269 1,442,538 7,335,807
---------------- ---------------- ----------------
LOSS FROM OPERATIONS (5,893,269) (1,442,538) (7,335,807)
---------------- ---------------- ----------------
OTHER INCOME (EXPENSE)
Interest expense (3,329,457) (247,376) (3,576,833)
Interest income 17,710 692 18,402
---------------- ---------------- ----------------
Total other income (expense) (3,311,747) (246,684) (3,558,431)
---------------- ---------------- ----------------
NET LOSS $ (9,205,016) $ (1,689,222) $ (10,894,238)
================ ================ ================
BASIC AND DILUTED LOSS PER SHARE $ (0.39) $ (0.09) $ (0.50)
================ ================ ================
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING 23,355,109 19,613,949 21,822,440
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Common Additional During the
------------------ ------------------- Stock Paid-In Development
Shares Amount Shares Amount Committed Capital Stage Total
---------- ---------- ---------- --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 20, 1998 - $ - - $ - $ - $ - $ - $ -
INITIAL CAPITALIZATION 3,356,500 336 (336) -
PREFERRED STOCK ISSUED FOR
CASH 1,072,505 924,500 924,500
OFFERING COSTS (181,950) (181,950)
OPTIONS ISSUED FOR SERVICES
RENDERED 464,975 464,975
COMMON STOCK ISSUED FOR
Notes receivable from founders 15,994,648 1,599 5,295 6,894
Deferred financing costs 1,102,087 110 474,890 475,000
Services rendered 290,023 29 124,971 125,000
NET LOSS (1,689,222) (1,689,222)
---------- ---------- ---------- --------- ---------- ----------- ----------- -----------
BALANCE, MARCH 31, 1999 1,072,505 742,550 20,743,258 2,074 - 1,069,795 (1,689,222) 125,197
PREFERRED STOCK ISSUED FOR
CASH 549,303 473,500 473,500
COMMON STOCK COMMITTED
ISSUED FOR CASH 3,148,900 3,148,900
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Preferred Stock Common Stock Common Additional During the
------------------ ------------------- Stock Paid-In Development
Shares Amount Shares Amount Committed Capital Stage Total
---------- ---------- ---------- --------- ---------- ----------- ----------- -----------
COMMON STOCK COMMITTED
ISSUED FOR
Purchase of 96 Points of
Presence $ $ $1,125,000 $ $ $1,125,000
Purchase of prepaid media 975,000 975,000
STOCK ISSUANCE COSTS (900,666) (900,666)
OPTIONS ISSUED FOR SERVICES
RENDERED 630,120 630,120
OPTIONS ISSUED AS FINANCING
COSTS 453,750 453,750
OPTIONS ISSUED AS
COMPENSATION EXPENSE 17,500 17,500
WARRANTS ISSUED AS FINANCING
COSTS AND FOR SERVICES
RENDERED 623,318 623,318
INTEREST FROM FIXED CONVERSION
FEATURES 2,761,377 2,761,377
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Preferred Stock Common Stock Common Additional During the
------------------ ------------------- Stock Paid-In Development
Shares Amount Shares Amount Committed Capital Stage Total
---------- ----------- ---------- --------- ---------- ----------- ------------ -----------
COMMON STOCK ISSUED FOR
Conversion of preferred
stock (1,621,808) $(1,216,050) 1,621,808 $ 162 $ $ 1,215,888 $ $ -
Conversion of convertible
promissory notes 210,385 22 854,637 428,311 1,282,970
Cashless exercise of options 890,536 89 4,013 71,652 75,754
Services rendered 369,601 37 409,215 409,252
NET LOSS (9,205,016) 9,205,016)
---------- ----------- ---------- --------- ---------- ----------- ------------ -----------
BALANCE, MARCH 31, 2000 - $ - 23,835,588 $ 2,384 $ 6,107,550 $ 6,780,260 $(10,894,238) $1,995,956
========== =========== ========== ========= =========== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 2000,
THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 1999, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the For the
Period from Period from
For the July 20, 1998 July 20, 1998
Year Ended (Inception) (Inception)
March 31, to March 31, to March 31,
2000 1999 2000
---------------- ---------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (9,205,016) $ (1,689,222) $ (10,894,238)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 36,538 6,634 43,172
Amortization 750 223,940 224,690
Loss on disposal of property and equipment 3,571 - 3,571
Interest charges on convertible promissory
notes 2,761,377 - 2,761,377
Issuance of stock for services rendered 409,252 125,000 534,252
Issuance of options for services rendered 630,120 464,975 1,095,095
Issuance of options as financing costs 453,750 - 453,750
Issuance of options as compensation expense 17,500 - 17,500
Issuance of warrants as financing costs 73,778 - 73,778
Issuance of warrants for services rendered 27,450 - 27,450
Cashless exercise of stock options 75,754 - 75,754
(Increase) decrease in
Deferred financing costs 303,685 (37,000) 266,685
Prepaid services (625) (75,000) (75,625)
Prepaid expenses (27,449) (17,918) (45,367)
Other assets (47,179) - (47,179)
Increase (decrease) in
Accounts payable 376,470 50,923 427,393
Accrued expenses 81,775 27,577 109,352
Interest payable 93,677 - 93,677
---------------- ---------------- ---------------
Net cash used in operating activities (3,934,822) (920,091) (4,854,913)
---------------- ---------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
<TABLE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 2000,
THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 1999, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the For the
Period from Period from
For the July 20, 1998 July 20, 1998
Year Ended (Inception) (Inception)
March 31, to March 31, to March 31,
2000 1999 2000
---------------- ---------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment $ (255,495) $ (17,316) $ (272,811)
Repayment of (disbursement on) note receivable 45,000 (45,000) -
Net repayments from related parties 1,674 - 1,674
Advances from (payments to) related parties 10,750 (2,489) 8,261
---------------- ---------------- ----------------
Net cash used in investing activities (198,071) (64,805) (262,876)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - 370,000 370,000
Repayment on notes payable (15,000) - (15,000)
Proceeds from convertible promissory notes 1,985,000 - 1,985,000
Proceeds from committed common stock 3,148,900 - 3,148,900
Stock issuance costs (378,576) - (378,576)
Proceeds from preferred stock, net 473,500 742,550 1,216,050
---------------- ---------------- ----------------
Net cash provided by financing activities 5,213,824 1,112,550 6,356,374
---------------- ---------------- ----------------
Net increase in cash and cash equivalents 1,080,931 127,654 1,208,585
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 127,654 - -
---------------- ---------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,208,585 $ 127,654 $ 1,208,585
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID $ 46,583 $ 54,547 $ 101,130
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 2000,
THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 1999, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
--------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES During the
period from July 20, 1998 (inception) to March 31, 1999, the Company issued
1,102,087 shares of common stock valued at $475,000 to the holders of the notes
payable as additional financing costs.
During the period from July 20, 1998 (inception) to March 31, 1999, the Company
issued 174,014 shares of common stock valued at $75,000 to a third party for
services rendered in connection with the issuance of the preferred stock and
116,009 shares of common stock valued at $50,000 to a third party for services
rendered.
During the period from July 20, 1998 (inception) to March 31, 1999, the Company
issued 15,994,648 shares of common stock valued at $6,894 to founders of the
Company in exchange for notes receivable. These notes were repaid on June 30,
1999.
During the year ended March 31, 2000, the Company disposed of an asset with a
cost of $9,284 and accumulated depreciation of $5,713, incurring a loss on
disposal of property and equipment of $3,571.
During the year ended March 31, 2000, the Company's note holders converted
convertible promissory notes totaling $1,235,000 and accrued interest totaling
$47,970 into 210,385 restricted shares of common stock totaling $428,333 and
$854,637 of common stock committed.
During the year ended March 31, 2000, the Company issued 369,601 restricted
shares of common stock valued at $409,252 for services rendered.
During the year ended March 31, 2000, the Company issued stock options to
purchase 202,500 restricted shares of common stock. In relation to these
issuances, the Company recorded compensation expense and consulting expense
totaling $647,628.
During the year ended March 31, 2000, the Company recorded interest expense of
$2,761,377 related to the issuance of convertible promissory notes with
beneficial conversion features.
During the year ended March 31, 2000, the Company issued warrants to purchase
74,000 restricted shares of common stock to convertible note holders as
inducement to extend the maturity date of certain convertible promissory notes.
In relation to this transaction, the Company recorded financing costs of
$73,778.
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 2000,
THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 1999, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO MARCH 31, 2000
--------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
During the year ended March 31, 2000, the Company issued warrants to purchase
24,500 restricted shares of common stock for services rendered valued at
$27,450.
During the year ended March 31, 2000, 1,621,808 shares of preferred stock were
converted into 1,621,808 shares of common stock valued at $1,216,050.
During the year ended March 31, 2000, the Company committed to issue 50,000
restricted shares of common stock with piggyback registration rights and 250,000
restricted shares of common stock to purchase 96 Points of Presence valued at
$1,125,000.
During the year ended March 31, 2000, the Company issued warrants to purchase
289,000 restricted shares of common stock as finder's fees valued at $522,090.
During the year ended March 31, 2000, holders of options to purchase 1,015,078
restricted shares of common stock performed a cashless exercise of their
options. In relation to this transaction, 890,536 shares of common stock were
issued and 103,379 shares were recorded as common stock committed, with 21,163
shares used as payment for the exercise. In addition, the Company recorded an
expense of $75,754 related to the difference between the fair market value of
the stock on the exercise date and the exercise price.
During the year ended March 31, 2000, shareholders of 250,000 shares of the
Company's common stock issued options to purchase 250,000 outstanding shares of
the Company's common stock to holders of convertible promissory notes. The
Company recorded financing costs of $453,750 in relation to this transaction.
During the year ended March 31, 2000, the Company purchased media time in
exchange for 243,750 restricted shares of common stock valued at $975,000.
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BUSINESS
Sonicport.com, Inc. (the "Company") or "Sonicport"), a developmnet
stage company, was formed as an Internet-based service company.
Sonicport is an Internet marketing and technology infrastructure
company that specializes in supporting cost effective
business-to-business and business-to-consumer revenue based marketing
initiatives. Through its various products and services, which include
proprietary products, internet marketing and management client services
as well as an access to a full service Applications Service Provider
(the "ASP") which is currently provided by a third party (the Company
plans to offer it through its own operations center in the near
future), Sonicport has pioneered a new cost-effective and measurable
methodology to help subscription-based online services and dot-com
companies build revenues by acquiring and retaining subscribers.
As of May 18, 1999, Sonicport, previously known as New World
Publishing, Inc. ("New World"), a Colorado corporation, entered into an
Agreement and Plan of Reorganization with Communications Television,
Inc. ("CTV"), a California corporation (incorporated on July 20, 1998),
whereby all of the outstanding shares of common stock of CTV were
exchanged for an aggregate of 19,020,167 shares of New World. For
accounting purposes, the transaction has been treated as a
recapitalization of CTV, with CTV as the accounting acquirer (reverse
acquisition), and has been accounted for in a manner similar to a
pooling of interests. The operations of Sonicport have been included
with those of CTV from the acquisition date. On October 12, 1999, a
special meeting of the shareholders was held, and the following actions
were approved by the shareholders: (i) the change of name to
"Sonicport.com, Inc." from "New World Publishing, Inc." (ii) the
adoption of the 1999 Stock Option Plan, and (iii) the change of the
state of incorporation to Nevada from Colorado.
As of October 18, 1999, Sonicport changed its name from New World
Publishing, Inc. to Sonicport.com, Inc. In February 2000, Sonicport
effected its change of state of incorporation from Colorado to Nevada.
F-12
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BUSINESS (CONTINUED)
As of November 22, 1999, Communications Television Inc., a wholly owned
subsidiary of Sonicport, changed its name to Sonicport.com, Inc., a
California corporation.
New World was incorporated in Colorado on December 28, 1994. New World
had minimal assets and liabilities at the date of the acquisition and
did not have significant operations prior to the acquisition.
Therefore, no pro forma information is presented.
Effective July 23, 1999, Sonicport purchased 96 Points of Presence
("POP's"). Sonicport committed to issue 50,000 shares of restricted
common stock with piggyback registration rights and 250,000 restricted
shares to purchase the POP's. The shares issued were valued at
$1,125,000 using the closing price of Sonicport's common stock on July
23, 1999, the closing date of the acquisition. The closing price was $5
per share, discounted by 25% to reflect the issuance of restricted
stock.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Sonicport.com, Inc. and its wholly owned subsidiaries, Sonicport.com,
Inc. (the California corporation) and Sonicport POP's, Inc. (a
California corporation), (collectively, the "Company"). All
intercompany accounts and transactions have been eliminated.
Basis of Presentation
---------------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate
continuation of the Company as a going concern. However, during the
year ended March 31, 2000 and the period from July 20, 1998 (inception)
to March 31, 1999, the Company incurred net losses of $9,205,016 and
$1,689,222, respectively, and it had negative cash flows from
operations of $3,934,822 and $920,091, respectively. These factors
raise substantial doubt about the Company's ability to continue as a
going concern.
Recovery of the Company's assets is dependent upon future events, the
outcome of which is indeterminable. Successful completion of the
Company's development program and its transition to the attainment of
profitable operations is dependent upon the Company achieving a level
of sales adequate to support the Company's cost structure. In addition,
realization of a major portion of the assets in the accompanying
balance sheet is dependent upon the Company's ability to meet its
financing requirements and the success of its plans to generate
revenues.
F-13
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation (Continued)
---------------------
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts
and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
Management plans to achieve a level of sales adequate to support the
Company's cost structure. The Company believes that its subscription
base will grow considerably once its Internet service provider network
infrastructure has been launched and aggressive advertising can begin.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Cash Equivalents
-------------------------
For the purpose of the statements of cash flows, the Company considers
all highly liquid investments purchased with original maturities of
three months or less to be cash equivalents.
Property and Equipment
----------------------
Property and equipment are recorded at cost, less accumulated
depreciation and amortization. Depreciation and amortization are
provided using the straight-line method over estimated useful lives as
follows:
Furniture and fixtures 5 years
Office equipment 5 years
Computer equipment 3 years
Leasehold improvements Shorter of initial lease period
or useful life of asset
Maintenance and minor replacements are charged to expense as incurred.
Gains and losses on disposals are included in the results of
operations.
F-14
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Development Stage Enterprise
----------------------------
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises." The Company is devoting
substantially all of its present efforts to establish a new business,
and its planned principal operations have not yet commenced. All losses
accumulated since inception have been considered as part of the
Company's development stage activities.
Loss per Share
--------------
The Company calculates loss per share in accordance with SFAS No. 128,
"Earnings per Share." Basic loss per share is computed by dividing the
loss available to common shareholders by the weighted-average number of
common shares outstanding. Diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. Because the Company has
incurred net losses, basic and diluted loss per share are the same.
Income Taxes
------------
The Company accounts for income taxes under the asset and liability
method, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under
this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each
period-end based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable
income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The
provision for income taxes, if applicable, represents the tax payable
for the period and the change during the period in deferred tax assets
and liabilities.
Advertising expense
-------------------
Advertising costs are charged to expense as incurred. For the year
ended March 31, 2000 and the period from July 20, 1998 (inception) to
March 31, 1999, the Company recorded advertising expense of $118,991
and $100, respectively.
F-15
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Options
-------------
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes
and encourages the use of the fair value based method of accounting for
stock-based compensation arrangements under which compensation cost is
determined using the fair value of stock-based compensation determined
as of the date of grant and is recognized over the periods in which the
related services are rendered. The statement also permits companies to
elect to continue using the current implicit value accounting method
specified in Accounting Principles Bulletin ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," to account for stock-based
compensation. The Company has elected to use the implicit value based
method and has disclosed the pro forma effect of using the fair value
based method to account for its stock-based compensation.
Impairment of Long-Lived Assets
-------------------------------
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the
assets to future net cash flows expected to be generated by the assets.
If the assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
exceeds the fair value of the assets. To date, no impairment has
occurred.
Fair Value of Financial Instruments
-----------------------------------
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the
Company's financial instruments, including cash and cash equivalents,
accounts payable, and accrued expenses, the carrying amounts
approximate fair value due to their short maturities. The amounts shown
for notes payable and convertible promissory notes also approximate
fair value because current interest rates offered to the Company for
debt of similar maturities are substantially the same or the difference
is immaterial.
F-16
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
--------------------
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting comprehensive income
and its components in a financial statement. Comprehensive income as
defined includes all changes in equity (net assets) during a period
from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include
foreign currency translation adjustments and unrealized gains and
losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financials statements since the Company did
not have any of the items of comprehensive income in any period
presented.
Recently Issued Accounting Pronouncements
-----------------------------------------
In June 2000, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 138, "Accounting for Certain Instruments and Certain Hedging
Activities." This statement is not applicable to the Company.
In June 2000, the FASB issued SFAS No. 139, "Rescission of FASB
Statement No. 53 and Amendments to Statements No. 63, 89, and 121."
This statement is not applicable to the Company.
NOTE 3 - CASH AND CASH EQUIVALENTS
The Company maintains cash balances at financial institutions located
in California. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured balances
aggregated to $16,800 at March 31, 2000. The Company has not
experienced any losses in such accounts and believes it is not exposed
to any significant credit risk on cash and cash equivalents.
NOTE 4 - DUE FROM RELATED PARTIES
Due from related parties represents amounts advanced by the Company to
various officers and employees. These amounts are non-interest-bearing
and have no stated maturity dates. As of March 31, 2000, amounts due
from related parties totaled $7,709.
F-17
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 consisted of the following:
Furniture and fixtures $ 72,766
Office equipment 88,784
Computer equipment 1,125,000
Leasehold improvements 101,977
--------------
1,388,527
Less accumulated depreciation and amortization 37,459
--------------
TOTAL $ 1,351,068
==============
Depreciation and amortization expense for the year ended March 31, 2000
and the period from July 20, 1998 (inception) to March 31, 1999 was
$36,538 and $6,634, respectively. At March 31, 2000, the computer
equipment had not been put into service, and therefore, no depreciation
has been recorded.
During the year ended March 31, 2000, the Company disposed of property
and equipment with a cost of $9,284 and accumulated depreciation of
$5,713. The Company has recorded a loss on disposal of $3,571.
NOTE 6 - NOTES PAYABLE
Notes payable at March 31, 2000 consisted of the following:
Notes payable, interest at 10%, unsecured,
due April 3, 2000. $ 355,000
Less current portion 355,000
----------------
LONG-TERM PORTION $ -
================
On September 28, 1999, the due date of the notes was extended from
October 31, 1999 to April 3, 2000. As part of the extension of the due
date, the note holders were granted a total of 74,000 warrants for the
purchase of restricted shares of the Company's common stock. The
warrants have an exercise price of $2.94, vest immediately, and expire
on October 1, 2004. The Company recorded a finance charge of $73,778,
representing the difference between the Company's common stock price on
the extension date of $3.937 and the exercise price of the warrants. On
April 3, 2000, the Company paid off all outstanding principal and
interest related to the notes payable.
F-18
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 7 - CONVERTIBLE PROMISSORY NOTES
Convertible promissory notes at March 31, 2000 consisted of the
following:
Convertible promissory notes, interest at 10%,
unsecured, due May 31, 2001. $ 500,000
Convertible promissory notes, interest at 10%,
unsecured, due February 28, 2002 250,000
-------------
750,000
Less current portion 500,000
-------------
LONG-TERM PORTION $ 250,000
=============
On May 31, 1999, the Company entered into a Subscription Agreement for
10, 10% Convertible Promissory Notes (the "Notes") for $50,000 each.
The holders of the Notes have the option to convert the Notes at the
earlier of the effective date of a registration statement or 120 days
from the date of the Notes. The Notes are convertible at the lesser of
$2.50 or 75% of the average closing bid price of the Company's common
stock for the five trading days prior to conversion. The Company
incurred offering costs of $50,000 in connection with the issuance of
the Notes. The Company recorded deferred financing costs of $550,000,
representing the difference between the $2.50 exercise price of the
Notes and the Company's stock price of $5.25 on the issuance date. Such
costs were charged to interest expense during the three months ended
September 30, 1999 when the Notes first became eligible for conversion.
Interest is due on each Note on January 1 and July 1. Principal and any
unpaid interest are due on May 31, 2001 if the notes have not been
converted prior to such date by either party to the Notes.
A provision of the Subscription Agreement required the Company to file
a registration statement within 150 days of May 31, 1999. If a
registration statement was not filed within 150 days, the Company would
be liable to the holders of the Notes for liquidated damages at the
rate of 2% of the face value of the Notes for each delinquent 30-day
period. At March 31, 2000, the Company had recorded a finance charge of
$60,000 for the liquidated damages.
F-19
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 7 - CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On April 11, 2000, the holders of the Notes and the Company entered
into an amendment to the Subscription Agreement for the Notes. The
amendment waived the unpaid interest of $41,667 and converted the
principal of the Notes and liquidated damages into 224,000 restricted
shares of common stock of the Company at a conversion price of $2.50.
The Company has not recorded any additional financing costs because the
conversion price calculated on the conversion date was greater than
$2.50.
On July 8, 1999, the Company entered into a Subscription Agreement for
a 10% Convertible Promissory Note (the "July Note") for $275,000. The
holder of the July Note has the option to convert the July Note at
anytime after the closing date of the July Note. The July Note is
convertible at the lesser of $2.50 or 75% of the average closing bid
price of the Company's common stock for the five trading days prior to
conversion. The Company incurred offering costs of $26,250 in
connection with the issuance of the July Note. The Company recorded a
financing charge of $357,500, representing the difference between the
$2.50 exercise price of the July Note and the Company's stock price of
$5.75 on the issuance date. Interest is due on the July Note on January
1 and July 1. Principal and any unpaid interest are due on July 31,
2001 if the July Note has not been converted prior to such date by
either party to the July Note. On March 31, 2000, all principal and
unpaid interest related to the July Note were converted into 118,009
restricted shares of common stock of the Company at a conversion price
of $2.50.
On August 24, 1999, the Company entered into a Subscription Agreement
for a 10% Convertible Promissory Note (the "August Note") for $250,000.
The holder of the August Note has the option to convert the August Note
at anytime after the closing date of the August Note. The August Note
is convertible at the lesser of $2.00 or 75% of the average closing bid
price of the Company's common stock for the five trading days prior to
conversion. The Company incurred offering costs of $26,250 in
connection with the issuance of the August Note. The Company recorded a
financing charge of $296,875, representing the difference between the
$2.00 exercise price of the August Note and the Company's stock price
of $4.38 on the issuance date. Interest is due on the August Note on
March 1 and September 1. Principal and any unpaid interest are due on
August 31, 2001 if the August Note has not been converted prior to such
date by either party to the August Note. On March 31, 2000, all
principal and unpaid interest related to the August Note were converted
into 132,531 restricted shares of common stock of the Company at a
conversion price of $2.
F-20
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 7 - CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On August 25, 1999, the Company entered into a Subscription Agreement
for nine, 10% Convertible Promissory Notes (the "August Notes") for
$25,000 each. The holders of the August Notes have the option to
convert the August Notes at anytime after the closing date of the
August Notes. The August Notes are convertible at the lesser of $3.25
or 75% of the average closing bid price of the Company's common stock
for the five trading days prior to conversion. The Company incurred
offering costs of $17,500 in connection with the issuance of the August
Notes. The Company recorded a financing charge of $53,846, representing
the difference between the $3.25 exercise price of the August Notes and
the Company's stock price of $4.13 on the issuance date. Interest is
due on the August Notes on March 1 and September 1. Principal and any
unpaid interest are due on August 31, 2001 if the August Notes have not
been converted prior to such date by either party to the August Notes.
In August 1999, August Notes totaling $175,000 were converted into
54,829 shares of the Company's common stock at conversion prices
ranging from $3.17 to $3.25. On March 31, 2000, all principal and
unpaid interest related to the remaining August Notes were converted
into 15,384 restricted shares of common stock of the Company at a
conversion price of $3.09.
On October 15, 1999, the Company entered into a Subscription Agreement
for a 10% Convertible Promissory Note (the "October Note") for $25,000.
The holder of the October Note has the option to convert the October
Note at anytime after the closing date of the October Note. The October
Note is convertible at the lesser of $0.50 or 65% of the average
closing bid price of the Company's common stock for the five trading
days prior to conversion. The Company recorded a financing charge of
$187,500, representing the difference between the $0.50 exercise price
of the October Note and the Company's stock price of $4.25 on the
issuance date. Principal and any unpaid interest are due on April 15,
2000 if the October Note has not been converted prior to such date by
either party to the October Note. On March 31, 2000, all principal and
unpaid interest related to the October Note were converted into 52,292
restricted shares of common stock of the Company at a conversion price
of $0.50.
F-21
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 7 - CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On October 31, 1999 and November 4, 1999, the Company entered into a
Subscription Agreement for two, 10% Convertible Promissory Notes (the
"October and November Notes") for $200,000 each. The holder of the
October and November Notes has the option to convert the October and
November Notes at anytime after the closing date of the October and
November Notes. The October and November Notes are convertible at the
lesser of $1.50 or 75% of the average closing bid price of the
Company's common stock for the five trading days prior to conversion.
The Company recorded a financing charge of $716,665, representing the
difference between the $1.50 exercise price of the October and November
Notes and the Company's stock price of $4.25 and $4.13 on the
respective issuance dates. Interest is due on the October and November
Notes on April 1 and October 1. Principal and any unpaid interest are
due on October 31, 2001 and November 4, 2001, respectively, if the
October and November Notes have not been converted prior to such date
by either party to the October and November Notes. On December 31,
1999, principal and unpaid interest related to the October Note were
converted into 135,555 restricted shares of common stock of the Company
at a conversion price of $1.50. On March 31, 2000, principal and unpaid
interest related to the November note were converted into 138,742
restricted shares of common stock of the Company at a conversion price
of $1.50.
On December 15, 1999, the Company entered into a Subscription Agreement
for a 10% Convertible Promissory Note (the "Dec15 Note") for $10,000.
The holder of the Dec15 Note has the option to convert the Dec15 Note
at anytime after the closing date of the Dec15 Note. The Dec15 Note is
convertible at the lesser of $0.50 or 65% of the average closing bid
price of the Company's common stock for the five trading days prior to
conversion. The Company recorded a financing charge of $77,620,
representing the difference between the $0.50 exercise price of the
Dec15 Note and the Company's stock price of $4.28 on the issuance date.
Principal and any unpaid interest are due on June 15, 2001 if the Dec15
Note has not been converted prior to such date by either party to the
Dec15 Note. On March 31, 2000, all principal and unpaid interest
related to the Dec15 Note were converted into 20,583 restricted shares
of common stock of the Company at a conversion price of $0.50.
F-22
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 7 - CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On December 29, 1999, the Company entered into a Subscription Agreement
for 13, 15% Convertible Promissory Notes (the "Dec29 Notes") for an
aggregate of $500,000. The holders of the Dec29 Notes have the option
to convert the Dec29 Notes at anytime after the maturity date or within
10 days after the Company's notification of its intention to redeem the
Dec29 Notes. The Dec29 Notes are convertible at the rate of $2.50 per
share of common stock. The Company incurred offering costs of $50,000
in connection with the issuance of the Dec29 Notes. The Company
recorded deferred financing costs of $320,000, representing the
difference between the $2.50 exercise price of the Dec29 Notes and the
Company's stock price of $4.10 on the issuance date. Interest is due on
the Dec29 Notes on June 1 and December 1. Principal and any unpaid
interest are due on January 29, 2001 if the Dec29 Notes have not been
converted prior to such date by either party to the Dec29 Notes. In
February 2000, the Company paid off all outstanding principal and
interest related to the Dec29 Notes. Upon payoff, the related deferred
financing costs were charged to interest expense.
On December 31, 1999, the Company entered into a Subscription Agreement
for a 10% Convertible Promissory Note (the "Dec31 Note") for $50,000.
The holder of the Dec31 Note has the option to convert the Dec31 Note
at anytime after the closing date of the Dec31 Note. The Dec31 Note is
convertible at the lesser of $2.50 or 75% of the average closing bid
price of the Company's common stock for the five trading days prior to
conversion. The Company incurred offering costs of $6,500 in connection
with the issuance of the Dec31 Note. The Company recorded a financing
charge of $32,000, representing the difference between the $2.50
exercise price of the Dec31 Note and the Company's stock price of $4.10
on the issuance date. Interest is due on the Dec31 Note on April 1 and
October 1. Principal and any unpaid interest are due on December 31,
2001 if the Dec31 Note has not been converted prior to such date by
either party to the Dec31 Note. On January 12, 2000, all principal and
unpaid interest related to the Dec31 Note were converted to 20,000
restricted shares of common stock of the Company at a conversion price
of $2.50. Upon conversion, the related deferred financing costs were
charged to interest expense.
F-23
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 7 - CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On January 17 and January 26, 2000, the Company entered into a
Subscription Agreement for two, 10% Convertible Promissory Notes (the
"January Notes") for $100,000 and $150,000, respectively with a
director of the Company. The holder of the January Notes has the option
to convert the January Notes at anytime after the closing date of the
January Notes. The January Notes are convertible at the lesser of $2.50
or 75% of the average closing bid price of the Company's common stock
for the five trading days prior to conversion. The Company recorded a
financing charge of $169,374, representing the difference between the
$2.50 exercise price of the Note and the Company's stock price of $4.20
and $4.19 on the respective issuance dates. Interest is due on the
January Notes on April 1 and October 1. Principal and any unpaid
interest are due on February 28, 2002 if the January Notes have not
been converted prior to such date by either party to the January Notes.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Leases
------
The Company leased its corporate offices under a one-year operating
lease agreement that expired July 1, 1999. Rent expense was $33,000 and
$44,000 for the year ended March 31, 2000 and the period from July 20,
1998 (inception) to March 31, 1999, respectively.
The Company has entered into a three-year lease, commencing September
1, 1999 for new corporate offices. Rent expense under the new agreement
was $53,570 for the year ended March 31, 2000.
The Company leases a vehicle under a three-year operating lease
agreement. Rent expense for the year ended March 31, 2000 and the
period from July 20, 1998 (inception) to March 31, 1999 was $5,424 and
$2,082, respectively.
The Company is the lessee in various other operating leases.
F-24
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Leases (Continued)
------
Future minimum lease payments under these leases were as follows:
Year Ending
March 31,
---------
2001 $ 152,035
2002 150,952
2003 68,348
---------------
TOTAL $ 371,335
===============
Litigation
----------
The Company is involved in certain legal proceedings and claims which
arise in the normal course of business. Management does not believe
that the outcome of these matters will have a material adverse effect
on the Company's consolidated financial position or results of
operations.
NOTE 9 - SHAREHOLDERS' EQUITY
Preferred Stock
---------------
The Company has 10,000,000 authorized shares of no par value preferred
stock. The preferred stock may be issued in series, from time to time,
with such designations, rights, preferences, and limitations as the
Board of Directors may determine by resolution. During the year ended
March 31, 2000 and the period from July 20, 1998 (inception) to March
31, 1999, the Company issued 549,303 and 1,072,505 shares,
respectively, valued at $473,500 and $924,500, respectively, in a
private placement. The Company incurred offering costs of $0 and
$181,950 during the year ended March 31, 2000 and the period from July
20, 1998 (inception) to March 31, 1999, respectively, related to the
sale of the preferred stock. This preferred stock was converted into
common stock at the time of the reverse merger.
Stock Options
-------------
In August 1999, the Company implemented its 1999 Stock Option Plan (the
"Plan"). Under the Plan, the maximum aggregate number of shares which
may be optioned and sold is 2,200,000. The exercise price shall not be
less than the fair market value on the date of grant of the option and
shall not be less than 110% of the fair market value on the date of
grant to any 10% owners of the Company. These options vest in varying
increments over varying periods and expire five years from the date of
vesting.
F-25
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Options (Continued)
-------------
During the year ended March 31, 2000 and the period from July 20, 1998
(inception) to March 31, 1999, the Company granted 2,748,250 and
1,235,498 non-qualified stock options, respectively, to certain
employees and non-employees that may be exercised at prices ranging
between $0.44 and $10, and $0.04 and $0.43 per share, respectively.
These options vest in varying increments over varying period and expire
five years from the date of vesting.
The following table summarizes certain information relative to stock
options:
<TABLE>
<CAPTION>
1999 Stock Option Plan Outside of Plan
--------------------------------- ---------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
---------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Outstanding, July 20,
1998 - $ - - $ -
Granted 835,846 $ 0.08 399,652 $ 0.18
---------------- ---------------
Outstanding, March 31,
1999 835,846 $ 0.08 399,652 $ 0.18
Granted 1,698,000 $ 4.14 1,050,250 $ 3.73
---------------- ---------------
OUTSTANDING, MARCH 31,
2000 2,533,846 $ 2.80 1,449,902 $ 2.75
================ ===============
EXERCISABLE, MARCH 31,
2000 1,110,846 $ 1.11 667,402 $ 1.69
================ ===============
</TABLE>
F-26
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Options (Continued)
-------------
The weighted-average life of the options outstanding and exercisable at
March 31, 2000 is 3.09 years. The exercise prices for the options
outstanding at March 31, 2000 ranged from $0.04 to $10, and information
relating to these options is as follows:
<TABLE>
<CAPTION>
Weighted-
Average
Range of Stock Options Stock Options Remaining
Exercise Prices Outstanding Exercisable Contractual Life
--------------- ----------- ----------- ----------------
<S> <C> <C> <C>
$ 0.04 - 0.43 1,235,498 1,235,498 2.64 years
$ 0.44 - 1.00 25,000 25,000 3.33 years
$ 1.01 - 3.00 316,250 316,250 3.25 years
$ 3.01 - 10.00 2,407,000 201,500 3.13 years
------------------ ------------------
3,983,748 1,778,248
================== ==================
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost other than that required to be
recognized by APB Opinion No. 25 for the difference between the fair
value of the Company's common stock at the grant date and the exercise
price of the options has been recognized. Had compensation cost for the
Company's stock option plan been determined based on the fair value at
the grant date for awards consistent with the provisions of SFAS No.
123, the Company's net loss and loss per share for the year ended March
31, 2000 and the period from July 20, 1998 (inception) to March 31,
1999 would have been increased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
2000 1999
------------------ -----------------
<S> <C> <C>
Net loss as reported $ (9,205,016) $ (1,689,222)
Net loss, pro forma $ (10,433,570) $ (3,030,933)
Basic loss per share as reported $ (0.39) $ (0.09)
Basic loss per share, pro forma $ (0.45) $ (0.15)
</TABLE>
F-27
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Options (Continued)
-------------
The fair value of these options was estimated at the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for the year ended March 31, 2000 and the
period from July 20, 1998 (inception) to March 31, 1999: dividend
yields of 0% and 0%, respectively; expected volatility of 70% and 100%,
respectively; risk-free interest rates of 6.4% and 5.2%, respectively;
and expected lives of five and five years, respectively. The
weighted-average exercise price was $4.14 at March 31, 2000.
For options granted during the year ended March 31, 2000 and the period
from July 20, 1998 (inception) to March 31, 1999 where the exercise
price was less than the stock price at the date of the grant, the
weighted-average fair value of such options was $2.92 and $1.96,
respectively, and the weighted-average exercise price of such options
was $3.25 and $0.11, respectively.
For the year ended March 31, 2000 and the period from July 20, 1998
(inception) to March 31, 1999, the Company recorded unearned
compensation of $17,500 and $0, respectively, for options issued below
the deemed fair value for accounting purposes. This amount is being
charged to compensation expense.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-28
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 10 - INCOME TAXES
As of March 31, 2000, the Company had approximately $10,697,000 in net
operating loss carryforwards that may be offset against future taxable
income. No provision for income taxes for the year ended March 31, 2000
and the period from July 20, 1998 (inception) to March 31, 1999 is
required, except for minimum state taxes, since the Company incurred
losses during such periods. The deferred income tax benefit of the loss
carryforward is the only significant deferred income tax asset or
liability of the Company and has been offset by a valuation allowance
of the same amount since management does not believe the recoverability
of this deferred tax asset during the next fiscal year is more likely
than not. Accordingly, no deferred income tax benefit has been
recognized in these financial statements.
NOTE 11 - RELATED PARTY TRANSACTIONS
During the period from July 20, 1998 (inception) to March 31, 1999, the
Company received notes receivable for $6,894 from certain officers and
employees as payment for the founders' shares issued to them. These
notes were repaid on June 30, 1999.
During the year ended March 31, 2000 and the period from July 20, 1998
(inception) to March 31, 1999, the Company paid $0 and $79,250,
respectively, to a director for consulting services rendered.
During the year ended March 31, 2000 and the period from July 20, 1998
(inception) to March 31, 1999, the Company paid $151,500 and $113,900,
respectively, to a company whose owner is a director of the Company for
business management services rendered.
In January 2000, the Company sold $250,000 in convertible promissory
notes to a director of the Company (See Note 7.)
On March 1, 2000, the Company entered into a consulting agreement with
a member of the Advisory Board of the Company. The agreement is a
six-month agreement, renewable for a second six-month term. As
consideration for consulting services, the Company is to issue options
to purchase 7,500 shares of the Company's common stock at the beginning
of each quarter. As of March 31, 2000, the Company recorded consulting
expenses of $14,456 related to this consulting agreement.
During the year ended March 31, 2000, the Company paid consulting
expenses totaling $61,728 to the wife of a director of the Company.
NOTE 12 - YEAR 2000 ISSUE
The Company has completed a comprehensive review of its computer
systems to identify the systems that could be affected by ongoing Year
2000 problems. Upgrades to systems judged critical to business
operations have been successfully installed. To date, no significant
costs have been incurred in the Company's systems related to the Year
2000.
F-29
<PAGE>
SONICPORT.COM, INC.
(FORMERLY NEW WORLD PUBLISHING, INC.)
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
NOTE 12 - YEAR 2000 ISSUE (CONTINUED)
The Company has completed a comprehensive review of its computer
systems to identify the systems that could be affected by ongoing Year
2000 problems. Upgrades to systems judged critical to business
operations have been successfully installed. To date, no significant
costs have been incurred in the Company's systems related to the Year
2000.
Based on the review of the computer systems, management believes all
action necessary to prevent significant additional problems has been
taken. While the Company has taken steps to communicate with outside
suppliers, it cannot guarantee that they have all taken the necessary
steps to prevent any service interruption that may affect the Company.
NOTE 13 - SUBSEQUENT EVENTS
Subsequent to March 31, 2000, the Company paid off notes payable
totaling $355,000.
On April 11, 2000, convertible promissory note holders converted
$500,000 into 224,000 shares of common stock.
On April 11, 2000, the Company issued 800,000 shares of Series A
Convertible preferred stock for $2,000,000 to an investor. On May 19,
2000, 160,000 shares of the Series A convertible preferred stock was
redeemed by the Company.
Subsequent to year ended March 31, 2000, the Company sold 264,000
shares of common stock and 132,000 warrants for $657,000 related to a
Private Placement Memorandum dated April 3, 2000 offering up to
2,000,000 shares of common stock at $2.50 per share for $5,000,000.
Subsequent to year ended March 31, 2000, the Company issued options to
purchase 1,393,300 shares of the Company's common stock pursuant to the
1999 Stock Option Plan.
Subsequent to year ended March 31, 2000, the Company issued to
consultants and vendors options to purchase 79,500 shares of the
Company's common stock.
On April 1, 2000, the Company entered into a three-year consulting
agreement to provide certain consulting services. The agreement calls
for monthly payments of $5,000 in addition to the issuance on April 1,
2000 options to purchase 50,000 shares of the Company's common stock,
with options to purchase 20,000 shares per quarter.
F-30
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Board of Directors of the Company approved the engagement of Singer, Lewak,
Greenbaum & Goldstein LLP. ("SLGG") on July 6, 1999 to serve as the Company's
independent public auditor and to conduct the audit of the Company's financial
statements for the fiscal year 1998. The decision resulted from the fact that as
of May 18, 1999, the Company consummated a transaction, whereby the Registrant
acquired all of the issued and outstanding shares of Communications Television,
Inc., a California corporation ("CTV") in exchange for the issuance by the
Company of a total of 19,020,167 newly issued restricted shares of common voting
stock of the to CTV shareholders pursuant to the Agreement and Plan of
Reorganization. SLGG were previously engaged by CTV and had an established
working relationship.
The audit reports provided by the Company's previous auditor, Janet Loss,
C.P.A., P.C. for the previous fiscal years did not contain any adverse opinion
or disclaimer of opinion nor was any report modified as to uncertainty, audit
scope or accounting principles. There have been no past disagreements between
the Company and Janet Loss, C.P.A., P.C. on any matter of accounting principles
or practices, financial statement disclosure or auditing, scope or procedure.
37
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The officers and directors of the Company, their ages and present positions held
with the Company are as follows:
Directors, Officers and Advisory Board Members of the Company
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
David Baeza 34 President, Chief Executive Officer and Director
Stanton Dodson 35 Chairman of the Board of Directors
Richard Shapiro 41 Treasurer, Chief Financial Officer, Executive Vice
President and Secretary
John Cooper 40 Director
Raymond Wong 40 Director
H. Joe Frazier 65 Director
Joe Abrell 65 Director
Gerry Lawrence 50 Advisory Board
Duane Eberlein 61 Advisory Board
Greg Adalian 37 Advisory Board
</TABLE>
DAVID BAEZA, President, Chief Executive Officer and Director. Mr. Baeza is a
co-founder of the Company and has served as its President and CEO of the Company
since July 1998. Mr. Baeza has over 10 years experience in the
telecommunications industry. Prior to his position with the Company, Mr. Baeza
was the Chief Marketing Officer and Executive Vice President of CGI, a company
that specialized in direct marketing of subscription based services. Mr. Baeza
served as Director of Sales and Marketing for Federal TransTel, opening their
West Coast operations center in Los Angeles and substantially increasing their
annual gross sales. As Vice President of Sales for R.J.GORDON & Company (Inc.
500), Mr. Baeza was responsible for increasing the Merchant Bank Portfolio from
$10 million annually to $50 million annually. During his tenure at R.J.gordon,
Mr. Baeza created and served as President and Executive Director of the
Teleservices Industry Association, a non-profit agency that lobbied Capitol Hill
to amend the telecommunications bill. Mr. Baeza also designed the first national
AIDS/STD toll-free information line for the Center of Disease Control and
American Social Health Association. Additionally, Mr. Baeza designed successful
Direct Response television applications for Sony's Game Show Network and MTV
Europe. Mr. Baeza graduated with a Bachelor of Science degree in Finance from
California Polytechnic University and earned his MBA from Nova University in
Florida graduating summa cum laude.
38
<PAGE>
STANTON DODSON, Chairman of the Board of Directors. Mr. Dodson is a co-founder
of the Company and has served as the Chairman of the Board of Directors since
July 1998. Mr. Dodson has spent the last twelve years working as a financier
with software, multimedia and Internet companies, most recently serving as
President of the software-publisher, Global MediaNet Corporation (GMC) since
1994. He served as executive producer on some of that company's award-winning
titles including LEONARD NIMOY'S SCIENCE FICTION I & II; JACK ADVENTURE'S WITH
JIM VARNEY; THE BIBLE'S GREATEST STORIES: OLD AND NEW TESTAMENT, and the Martha
Stewart endorsed, GROWING GOOD ROSES. Mr. Dodson was also responsible for
developing a joint venture to build an online and educational tool for
entrepreneurs with Harvard Business School Publications. Mr. Dodson also
co-founded Transglobal Capital Corporation in 1994, a NASD-licensed securities
Broker-Dealer that he oversaw until he sold the business in 1997. From 1991 to
1994, Mr. Dodson founded and served as President of Ichor Communications, Inc, a
consulting company that advised entertainment and multimedia clients on equity
financing. The company was acquired by GMC in 1994.
Mr. Dodson attended the University of South Carolina, where he majored in
Business Administration with a concentration in Finance.
RICHARD SHAPIRO - Treasurer, Chief Financial Officer, Senior Vice-President and
Secretary. Mr. Shapiro joined the Company in July, 2000. Mr. Shapiro has more
than 17 years of experience in senior financial management positions. Most
recently, he served since 1994 as chief financial officer, director of human
resources and a board member of Allstate Communications, Inc., where he oversaw
all financial operations of this 450-employee telecommunications and financial
management company. He also served as chief operating officer of that company's
International Division. During and prior to his years at Allstate
Communications, Mr. Shapiro gained experience at both public and private
companies in a broad spectrum of financial management activities, including
merchant banking, taxation, SEC reporting and international business. He also
enjoys extensive knowledge of Internet-based business operations. Mr. Shapiro is
a 1983 graduate of California State University Northridge and actively
participates in several private foundations in the Los Angeles area.
JOHN COOPER, Director. Mr. Cooper has been a director of the Company since
April, 1999. Mr. Cooper has been the President and Chief Technical Officer of
Allstate Communications, Inc. (ACI) since 1997. Mr. Cooper joined ACI (a
privately held California corporation) in 1995 as its Chief Operating Officer.
ACI is a holding company specializing in out-bound business-to-business
telemarketing, audiotext, and the development and marketing of software to
financial institutions through US Dataworks, a Texas LLC. In 1985, Mr. Cooper
joined Real-Share, Inc., a data processing company that supplied transactional
services to TeleCheck franchises worldwide. Following Real-Share's acquisition
of TeleCheck Southwest in 1985, Mr. Cooper continued as a software developer in
Houston, Texas. In 1988, Mr. Cooper headed up the team that developed the
transaction processing system for the audiotext industry, under the name Shared
Global Systems, Inc. In 1989, Mr. Cooper was named as the first President of
Shared Global Systems. In 1992, TeleCheck franchises were bought by First
Financial Management (FFM). Mr. Cooper was promoted to Vice President of
Management of Information Services for TeleCheck while still serving as the
President of Shared Global Systems. In 1995, Shared Global Systems had grown by
a factor 10 and enjoyed twice the earnings-margin of its sister companies. FFM
was acquired that same year by First Data Company. Mr. Cooper received his B.S.
in Computer Science from Western Missouri State in 1984.
39
<PAGE>
H. JOE FRAZIER, Director. Mr. Frazier has been a director of the Company since
October, 1999. Mr. Frazier also serves as a director of Simon Transportation,
Inc., a NASDAQ listed company. Mr. Frazier served as the Chief Executive Officer
for Westinghouse Communities, Inc., a subsidiary of Westinghouse Electric
Corporation, from 1973 until 1993. Under Mr. Frazier's direction, Westinghouse
Communities, Inc. grew substantially in assets, revenue and enjoyed a 30% annual
growth in operating profits. In 1992, Mr. Frazier founded Full House Resort,
Inc., a NASDAQ listed company, where he functioned as a director of the company.
Prior to his twenty-year tenure at Westinghouse Communities, Inc., Mr. Frazier
had been a senior partner with Frazier, Tiballi & Schroeder. Mr. Frazier began
his career as a partner in the legal firm of Patterson, Maloney & Frazier in
1962. Mr. Frazier received his Bachelor of Arts degree in Accounting and Finance
from the University of Oklahoma and his Juris Doctor law degree from the
University of Miami.
JOE ABRELL, Director. Mr. Abrell has been a director of the Company since
October, 1999. Mr. Abrell is a communications expert having worked in the field
for 40 years. As a newspaper reporter, news magazine correspondent, television
journalist/executive, NFL executive and owner of a public relations/marketing
firm, he has experienced first hand all facets of the communications, marketing
and media industry. As Vice President of the Miami Dolphins, he was instrumental
in the building of Joe Robbie Stadium, now renamed Pro Player Stadium, as one of
the very few privately financed sports stadiums in the country. In 1963, he
became Director of Special News Projects for WTVJ, Miami, Florida, one of the
CBS network's most important affiliates. In 1969 he was appointed News Director
and in 1972 Director of Public Affairs. He also hosted the successful Miami
television news magazine program, Montage, until he left to join the Miami
Dolphins in 1984. Most recently he has worked to successfully launch PrimeCo
Personal Communications, one of the leaders in the new innovative wireless
technology, in the Florida market. He holds a Bachelor of Arts degree in
Journalism/Literature from Indiana University, a Masters degree in Political
Science from Columbia University, obtained while on the CBS News Fellowship, and
also a Juris Doctor law degree from the University of Miami.
RAYMOND WONG, Director. Mr. Wong has been a Director of the Company since
October, 1999. Mr. Wong is an Engineering Consultant, specializing in areas of
production design, prototype, manufacturing, production, quality and cost
management in semiconductor packaging and automated manufacturing. He also
consults on factory automation, manufacturing processes, assembly equipment
requirements and latest technology trends. In 1990, Mr. Wong started his own
consulting firm (WOSTECH Company). Throughout his career, he has worked for many
high profile corporations. From 1998 to 1999, Mr. Wong served as a Manufacturing
and Process Engineering Manager for Microwave dB Inc. He was an advisor to and
assisted in creating an $8 million state-of-the-art manufacturing facility. From
1997 to 1998, Mr. Wong served as a Sr. Staff Manufacturing Engineer for Hughes
Space and Communications Co., specializing in satellite communications
manufacturing. From 1988 to 1997, Mr. Wong served as an Engineering Manager for
M/A Com (AMP Inc.). He set up automated assembly lines that gave the company the
competitive edge it needed for market position. During this period the annual
sales went from $18 million to $60 million. From 1984 to 1988, Mr. Wong served
as Manufacturing/Process Engineering Specialist for TRW Semiconductor (Motorola
RF Div.). From 1980-1984, Mr. Wong served as a Sr. Electronic Design Engineer
for General Dynamics Corp. Mr. Wong currently serves on the Board of Directors
for Powerski International Corp. This Company is developing a new
sport/motorized jet board. Mr. Wong graduated with a Bachelor of Science degree
in Electrical Engineering from the University of Pittsburgh with a minor in
Computer Science.
40
<PAGE>
GERRY LAWRENCE, Advisory Board. Beginning in 1975, Mr. Lawrence was a Field
Sales Engineer for Intel, responsible for all Intel sales in the Northern
California Bay area. Mr. Lawrence quickly moved up within the sales ladder of
the company securing such positions over the years as District Sales Manager,
Regional Sales Manager, Product Marketing Manager, North American Distributor
Sales Manager and North American Distributor Marketing Manager. Mr. Lawrence's
accomplishments included management of all agreements with worldwide partners
for sourcing of Intel product lines and licensing of software. Mr. Lawrence's
most recent position of North American Distributor Marketing Manager required
him to be responsible for all marketing and sales programs for the Intel 486,
Pentium, Pentium Pro and Pentium II product lines, a billion dollar business.
During his tenure, Intel grew from a $100 million company to a $25 billion
annual revenue company. Mr. Lawrence received his B.S. in Engineering from the
United States Military Academy, West Point, his M.S. in Mechanical Engineering
from the University of Colorado and his M.S. in Materials Science from Stanford
University.
GREG ADALIAN, Advisory Board. Mr. Adalian is an expert in the field of telephony
hardware and software development and integration. He provides consulting
services to Tele-Marc Direct, Inc., an audio text service bureau, where he
designed, engineered and built a 458-seat call center with the capacity to
answer 30,000 simultaneous calls. Mr. Adalian was Co-Founder and Vice President
of Lo/Ad Communications, a domestic and international service bureau for
pay-per-call services. Lo/Ad Communications was the force behind the very first
interactive 900 service in the United States. The company built and maintained
audio text facilities in 22 U.S. cities and four foreign countries. A number of
years ago, Mr. Adalian founded the very successful INFOTEXT and RESPONSE TV
magazines. He attended Long Beach State University, where he majored in Biology.
DUANE EBERLEIN, Advisory Board. Mr. Eberlein is a finance and accounting
professional with industry, public accounting and business experience, with
expertise in public and private financing, SEC reporting, tax, FASB and other
accounting issues, computer systems and internal controls. Throughout his
career, he has had extensive experience with many high profile corporations.
Since 1998, Mr. Eberlein has served as a management consultant, providing
financial, accounting and tax services to clients in Southern California. He has
established a consulting practice providing clients with part-time and interim
CFO services. From 1994 to 1997 he was the Executive Vice President and CFO for
Inland Entertainment Corporation (currently known as Venture Catalyst, Inc.)
where he helped in taking the company public in 1995 and listing it on the
NASDAQ National Market System. Mr. Eberlein served as CFO for public and private
companies, including the Sands Hotel & Casino, with operations in Las Vegas,
Nevada, Atlantic City, New Jersey and San Juan, Puerto Rico. Mr. Eberlein's
public accounting experience includes seven years in "Big 5" accounting firms,
including two years as a partner with Ernst & Young.
41
<PAGE>
KEY EMPLOYEES AND CONSULTANTS
SYLVIA HANNA, Director of Internet Development. Ms. Hanna joined the Company in
September 1999. She is accomplished in all aspects of building strategic
alliances, staff development and management, facilities planning, administrative
services, and cost control. Her most recent position was with Cybernet Ventures,
Inc. where one of her key projects was the development of a vertically
integrated portal for men 25-40 years old. Ms. Hanna developed, staffed and
managed programming, web development and the business development departments.
She developed and negotiated strategic alliances for co-branding with
established online companies for content development. She has worked closely
with the programmers and negotiated with outside vendors to build a hardware
infrastructure to support mass data storage and throughput. Prior to her tenure
at Cybernet Ventures, Ms. Hanna was with Allstate Communications, Inc. where she
held several managerial positions and played an integral part in the company's
Internet Marketing and Development. She attended Cal State University
Northridge, where she majored in English.
MEKKI EL BOUSHI, Director of Technology. Mr. El Boushi joined the Company in
October, 1999. Prior to joining the Company, he was with Cybernet Ventures, a
portal development company, where he led the web development team overseeing all
aspects of technology design and implementation. From 1995 to 1999, Mr. El
Boushi served as an Astrophysicist for NASA's Jet Propulsion Laboratories (the
lead U.S. center for robotic exploration of the solar system) - Mission
Simulation & Instrument Modeling - designing and implementing key components of
the Mars Pathfinder mission and the Hubble Telescope. From 1993 to 1995, he
served as a Research Scientist for NASA's Jet Propulsion Laboratories - Mission
Ground System Office. Prior to this position, from 1990 to 1993, he served as a
Member of the Technical Staff - Mission Sequence and Profile for the Galileo
mission. Prior to his tenure with NASA, Mr. El Boushi served as Systems Engineer
for Gilbreath and Horning and as a Research Assistant at the Institute of
Geophysics and Planetary Physics at the University of California at os Angeles.
Mr. El Boushi received his M.S. in Physics from California State University of
Los Angeles and his B.S. in Geophysics and Space Physics from University of
California at Los Angeles.
42
<PAGE>
ROBIN ALLEN BEHAR, Director of Television Marketing. Ms. Behar joined the
Company in August 1999. She began her career in 1991 at Williams Worldwide as
Director of Marketing managing the agency's corporate direct response clientele
including DirecTV, Estee Lauder, Kal Kan, Bruan, Hoover, and Quaker State. In
1996, she joined Williams Worldwide Televison, the International sister company
of Williams Worldwide, as the International Brand Manager. She launched the
global marketing campaigns for Murad International Skin Care and Sobakawa
Pillow. In August of 1997, Ms. Behar was named Managing Director of Latin
America where she was responsible for all regional distribution sales and
strategic planning as well as direct marketing operations in Mexico City and Sao
Paolo. She holds a BA in Communication Studies from Cal State University
Northridge and an Italian Minor from CSUN/University at Florence, Italy.
LINDA BOORMAN, Vice President. Ms. Boorman has been with the Company since
August 1998. She began her career at R.J.gordon & Company (Inc. 500), a leader
in the information services industry. After leaving R.J.gordon & Company, Ms.
Boorman worked with Mr. Baeza to create a non-profit association for the benefit
of the information services industry. She left the association to assist in the
launch of the Los Angeles-based operations for Federal TransTel, Inc. Ms.Boorman
completed her Bachelor of Arts degree with a double major in Journalism and
Sociology at Baylor University in 1991.
43
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or paid
for all services rendered to the Company during the fiscal years ended March 31,
1999 and March 31, 2000 by those persons who served as Chief Executive Officer
and any Named Executive Officer who received compensation in excess of $100,000
during such years.
<TABLE>
SUMMARY COMPENSATION TABLE (US$)
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
-------------------------------- ------------
Other
Annual Securities All Other
Name and Salary Bonus Compensa- Underlying Compensa-
Principal Position Year ($)(1) ($)(3) tion ($)(4) Options (#) tion ($)
-------------------------- ---- ------------- ----------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
David Baeza, 2000 174,383 7,000 0 50,000
President and CEO
1999 63,333 0
Stanton Dodson, 2000 165,305 17,799 0 50,000
Chairman
1999 32,800
Bill Cooper 2000 134,646 0 0 27,500
Former Chief
Financial Officer
------------------------------------
</TABLE>
(1) No officers received or will receive any bonus or other annual
compensation other than salaries during fiscal year 1999 and 2000,
other than stated above. The table does not include any amounts for
personal benefits extended to officers of the Company, such as the cost
of automobiles, life insurance and supplemental medical insurance,
because the specific dollar amounts of such personal benefits cannot be
ascertained. Management believes that the value of non-cash benefits
and compensation distributed to executive officers of the Company
individually or as a group during fiscal year 2000 did not exceed the
lesser of US$50,000 or ten percent of such officers' individual cash
compensation or, with respect to the group, US$50,000 times the number
of persons in the group or ten percent of the group's aggregate cash
compensation.
44
<PAGE>
(2) No officers received or will receive any long term incentive plan
(LTIP) payouts or other payouts during fiscal year 2000.
(3) Bonus awarded based on performance.
Option Grants in Fiscal Year 2000
---------------------------------
The following table provides information on option grants to the Named Executive
Officers and the Company's directors in Fiscal Year 2000.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<CAPTION>
Percentage of
Number of Total Options
Securities Granted
Underlying to Employees Exercise Expiration
Name Options Granted in Fiscal Year Price ($/sh) Date
--------------------- --------------- -------------- -------------- -------------
<S> <C> <C> <C>
David Baeza 50,000 ** $4.40 8/17/04
Stanton Dodson 50,000 ** $4.40 8/17/04
John Cooper 25,000 ** $.50 7/1/04
15,000 $4.0625 10/1/04
15,000 $4.5156 1/1/05
15,000* $4.3430 4/3/05
15,000* $1.5000 7/3/05
Ray Wong 15,000 ** $4.0625 10/1/04
15,000 $4.5156 1/1/05
15,000* $4.3430 4/3/05
15,000* $1.5000 7/3/05
H. Joe Frazier 45,000 ** $4.0625 10/1/04
15,000 $4.5156 1/1/05
15,000* $4.3430 4/3/05
15,000* $1.5000 7/3/05
Joe Abrell 15,000 ** $4.0625 10/1/04
30,000 $4.3125 10/19/04
15,000 $4.5156 1/1/05
15,000* $4.3430 4/3/05
15,000* $1.5000 7/3/05
</TABLE>
* Options granted in 2001 Fiscal Year; not included in the percentage of
total options granted in Fiscal Year 2000.
** Less than 1%
45
<PAGE>
AGGREGATE FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options At
Name Held at Fiscal Year-End (#) Fiscal Year-End ($)(1)
Exercisable Unexercisable Exerciscable Unexercisable
<S> <C> <C> <C>
David Baeza 50,000 0 0 --
Stanton Dodson 50,000 0 0 --
John Cooper 55,000 0 $14,762 --
Ray Wong 30,000 0 $1,643 --
H. Joe Frazier 60,000 0 $10,082 --
Joe Abrell 60,000 0 $2,582 --
</TABLE>
----------
(1) Based on the difference between the option exercise price and the fair
market value per shared based on the closing price of $4.3438 reported
by the NASD OTC Bulletin Board on March 31, 2000.
The Company's 1999 Stock Option Plan is administered by the Compensation
Committee of the Board of Directors, which consists of Messrs. Cooper and
Frazier. The Compensation Committee determines to whom options are granted, the
number of shares subject to each option, the vesting schedule and the exercise
price. The exercise price may not be less than the fair market value of the
Common Stock on the date of grant. Options generally vest over five years and
have a duration of ten years. The exercise price may be paid in cash, by
delivering shares of Common Stock already owned by the option holder or by
complying with any other payment mechanism approved by the plan administrator.
Subject to certain limitations, the Compensation Committee may modify the terms
of and reprice outstanding options.
OPTION EXERCISES IN 2000
No Named Executive exercised any stock option in Fiscal Year 2000.
46
<PAGE>
1999 STOCK OPTION PLAN
DESCRIPTION
The Company's Board of Directors adopted the 1999 Stock Option Plan (the "Plan")
in August, 1999, which was approved by the Company's shareholders at the special
meeting of shareholders held on October 12, 1999. The Plan provides for the
grant to directors, officers, employees and consultants of the Company
(including its subsidiaries) of options to purchase up to an aggregate of
2,200,000 shares of Common Stock. Options granted under the Plan may be
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or nonqualified options.
The exercise price of incentive stock options may not be less than 100% of the
fair market value of the Common Stock as of the date of grant (110% of the fair
market value if the grant is to an employee who owns more than 10% of the total
combined voting power of all classes of capital stock of the Company). The Code
currently limits to $100,000 the aggregate value of Common Stock that may be
acquired in any one year pursuant to incentive stock options under the 1999 Plan
or any other option plan adopted by the Company. Nonqualified options may be
granted under the 1999 Plan at an exercise price of not less than 100% of the
fair market value of the Common Stock on the date of grant. Nonqualified options
also may be granted without regard to any restriction on the amount of Common
Stock that may be acquired pursuant to such options in any one year.
Options granted under the Plan may not be exercised more than ten years after
the grant (five years after the grant if the grant is an incentive stock option
to an employee who owns more than 10% of the total combined voting power of all
classes of capital stock of the Company).
PARTICIPATION IN THE 1999 PLAN
All of the Company's executive officers, directors, employees and consultants of
the Company and its subsidiary will be eligible to participate in the Plan. The
Company has granted a total of 2,533,846 options under the Plan as of March 31,
2000. The Company also issued other options outside the Plan.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The laws of the State of Nevada and the Company's Bylaws provide for
indemnification of the Company's directors for liabilities and expenses that
they may incur in such capacities. In general, directors and officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action or proceeding, actions that the indemnitee
had no reasonable cause to believe were unlawful.
47
<PAGE>
The Company has been advised that in the opinion of the Securities and Exchange
Commission, indemnification for liabilities arising under the Securities Act is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
COMPENSATION OF DIRECTORS
The Company reimburses each Director for reasonable expenses (such as travel and
out-of -pocket expenses) in attending meetings of the Board of Directors. Each
director has received certain options to purchase the Company's common stock as
compensation for his services as Director. In addition, Messrs. Eberlein and
Lawrence have also received certain options for their respective consulting
services for the Company. See "Executive Compensation - Options".
AUDIT COMMITTEE
The Company's Board of Directors established an Audit Committee, composed of the
three outside directors, Messrs. Frazier, Abrell and Mr. Wong. The principal
functions of the Audit Committee include making recommendations to the Board
regarding the selection of independent public accountants to audit annually the
books and records of the Company, reviewing the proposed scope of each audit and
reviewing the recommendations of the independent public accountants as a result
of their audit of the Company. The Audit Committee will also periodically review
the activities of the Company's accounting staff and the adequacy of the
Company's internal controls.
EMPLOYMENT AND RELATED AGREEMENTS
There are no employment agreements with Messrs. Baeza and Dodson at this time.
The Company anticipates that such agreements will be entered into in fiscal year
2001. The Company has entered into an employment agreement with a key employee,
Sylvia Hanna as of September 1, 1999, pursuant to which Ms. Hanna has been
retained as the Company's Director of Internet Business Development. Ms. Hanna
has also been granted 372,000 options to purchase the Company's Common Stock,
20,000 of which have been fully vested at the time of signing the employment
agreement and the remaining 352,000 are granted and vested over time for each
year of her employment with the Company. Ms. Hanna's employment agreement is for
a three year term, renewable at the parties mutual consent. The Company has also
entered into employment agreements with Mekki El Boushi and Linda Boorman. The
agreement with Mr. El Boushi is for a two-year term, and the agreement with Ms.
Boorman is for a two and half year term. Ms. Boorman and Mr. El Boushi have been
granted, respectively, a total of 200,000 options each pursuant to their
respective agreements with the Company. Such options are vested over the term of
their respective agreements.
48
<PAGE>
COMPENSATION AND AUDIT COMMITTEES; COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Board has a Compensation Committee comprised of Messrs. Cooper and Frazier,
and an Audit Committee comprised of Messrs. Frazier, Abrell and Wong, who may be
deemed to be outside/non-employee directors.
The Compensation Committee reviews and approves the annual salary and bonus for
each executive officer (consistent with the terms of any applicable employment
agreement), reviews, approves and recommends terms and conditions for all
employee benefit plans (and changes thereto) and administers the Company's stock
option plans and such other employee benefit plans as may be adopted by the
Company from time to time.
The Audit Committee reports to the Board regarding the appointment of the
independent public accountants of the Company, the scope and fees of the
prospective annual audit and the results thereof, compliance with the Company's
accounting and financial policies and management's procedures and policies
relative to the adequacy of the Company's system of internal accounting
controls.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 2000, the stock ownership of all
persons known to own beneficially five percent or more of the Company's Common
Stock and all directors and officers of the Company, individually and as a
group. Each person has sole voting and investment power over the shares
indicated, except as noted. Unless otherwise indicated, the address for each
stockholder is 1641 20th Street, Santa Monica, California 90404.
NAME AND ADDRESS SHARES OF PERCENT OF SHARES
OF BENEFICIAL OWNER COMMON STOCK OUTSTANDING
David Baeza(1) (3) 7,376,934 28.27%
Stanton Dodson(1) (4) 6,417,915 24.59%
Richard Shapiro (1) (5) 0 %
John Cooper (1) (6) 2,000 *%
Ray Wong(1)(7) 185,615 *%
Joe Abrell(1)(8) 0 0%
H.J. Joe Frazier(1)(9) 0 0%
Bill Cooper (10) 522,044 2.00%
All Officers and 13,981,464 52.86%
========== ======
Directors as a Group
(7 persons)
-------------------
* Less than 1%
49
<PAGE>
NAME AND ADDRESS OF SHARES OF PERCENT OF SHARES
BENEFICIAL OWNER PREFERRED STOCK OUTSTANDING
(11)
------------------------------ ------------------- ------------------------
Societe Financiere 640,000 100%
Privee, S.A
3, Rue Maurice, CH-1204
Geneve, Switzerland
Total 640,000 100%
======= ====
-------------------
* Less than 1%
(1) C/o Sonicport.com, Inc. address: 1641 20th Street, Santa Monica, CA
90404.
(2) Based on 26,094,986 shares outstanding as of June 30, 2000.
(3) Excludes 50,000 options exercisable at $4.40 per share granted to Mr.
Baeza under 1999 Plan, as herein defined. The options were fully vested
at the date of grant.
(4) Excludes 50,000 options exercisable at $4.40 per share granted to Mr.
Dodson under 1999 Plan, as herein defined. The options were fully
vested at the date of grant.
(5) Excludes 150,000 options exercisable at $1.50 per share granted to Mr.
Shapiro in July, 2000. The options were fully vested at the date of
grant. Mr. Shapiro has been granted an additional number of a total of
750,000 options, none of which will be vested in a less than a
six-months period.
(6) Excludes a total of 85,000 options exercisable at various exercise
prices per share (see page 44) granted to Mr. Cooper. The options were
fully vested at the date of grant. Also, does not include the 8,500
options granted to Shoshana Cooper, Mr. Cooper's wife for rendering
consulting services to the Company.
(7) Excludes 60,000 options exercisable at various exercise prices per
share (see page 44) granted to Mr. Wong. The options were fully vested
at the date of grant.
(8) Excludes 90,000 options exercisable at various exercise prices per
share (see page 44) granted to Mr. Abrell. The options were fully
vested at the date of grant.
(9) Excludes 90,000 options exercisable at various exercise prices per
share (see page 44). The options were fully vested at the date of
grant. Also, excludes 100,000 shares of common stock issuable upon
conversion of $250,000 Convertible Debenture.
(10) Excludes 27,500 options of which 20,000 are exercisable at $4.00 per
share, and 7,500 options are exercisable at $4.25 per share. Mr. Cooper
resigned as the Company's Chief Financial Officer in February, 2000.
Mr. Cooper's address is 8721 Santa Monica Blvd., # 148, Los Angeles,
California 92069. (1)
(11) The Company issued 800,000 shares of Series A Convertible Preferred
Stock to Societe Financiere Privee, S.A. pursuant to the resolution of
the Board of Directors of the Company dated April 11, 2000. Each share
of Series A Convertible Preferred Stock may be converted to Common
Stock of the Company at a conversion price equal to sixty percent (60%)
of the average closing bid price for a period of ten (10) trading days
immediately preceding the date of conversion based upon the conversion
value per share of Series A Convertible Preferred Stock of $2.50 (plus
any declared but unpaid dividends). The Company redeemed 160,000 shares
of Series A Convertible Preferred Stock.
50
<PAGE>
As used in this table, "beneficial ownership" is determined in accordance with
the rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to the shares shown.
The Company believes that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Shares of Common Stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for purposes
of computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for purposes of computing the percentage of any other
person.
As of June 30, 2000 there were approximately 187 shareholders of record and
approximately 500 beneficial owners. The percentage of beneficial ownership is
based upon 26,094,986 shares of Common Stock outstanding as of June 30, 2000 as
recorded by the transfer agent.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to this Offering, the Company sold certain convertible notes and
debentures to certain accredited investors for the purpose of funding ongoing
operations.
CONVERTIBLE DEBENTURES
On May 31, 1999, the Company sold $500,000 principal amount of 10 % Convertible
Debentures Due May 31, 2001 ("May Debentures") to private accredited investors.
The Company also sold in July, 1999, $275,000 principal amount of 10%
Convertible Debentures Due July 30, 2001 to a private accredited investor ("July
Debentures"). The conversion price of the May and July Debentures is the lesser
of $2.50 per share or 75% of the average closing bid price per share of the
Company's Common Stock for the five trading days prior to conversion date. In
August, 1999 the Company sold $250,000 principal amount of 10% Convertible
Debentures Due August 31, 2001 ("August I Debentures"). The conversion price of
the August I Debentures is the lesser of $2.00 per share or 75% of the average
closing bid price per share of the Company's Common Stock for the five trading
days prior to conversion date. Also in August, 1999 the Company sold $225,000
principal amount of 10% Convertible Debentures Due August 31, 2001 ("August II
Debentures") to nine accredited investors. The conversion price of the August II
Debentures is the lesser of $3.25 per share or 75% of the average closing bid
price per share of the Company's Common Stock for the five trading days prior to
conversion date. In October and November, 1999, the Company sold a total of
$400,000 principal amount of 10% Convertible Debentures Due October 31, 2001 and
November 4, 2001, respectively, to a private accredited investor ("October
Debentures"). The conversion price of the October Debentures is the lesser of
$1.50 per share or 75% of the average closing bid price per share of the
Company's Common Stock for the five trading days prior to conversion date. In
January, 2000, the Company sold a total of $250,000 principal amount of 10%
Convertible Debentures Due February 28, 2002 to H. Joe Frazier, the Company's
director. The conversion price of Mr. Frazier's Debentures is the lesser of
$2.50 per share or 75% of the average closing bid price per share of the
Company's Common Stock for the five trading days prior to conversion date. The
holders of the Debentures have also certain registration rights under the terms
of the respective Debentures. Also, see Note 7 to the Financial Statements.
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INDEBTEDNESS
As of March 31, 2000, the Company also had $355,000 of 10% unsecured notes
outstanding due April 3, 2000. See Note 6 to the Financial Statements attached
hereto.
BRIDGE LOAN
The Company received a bridge loan in the amount of $500,000 in December 1999
for which it issued secured convertible notes. The principal amount and interest
on the bridge loan has been repaid in full by the Company in February, 2000.
PRIVATE PLACEMENT
In March, 2000, the Company has completed a private placement to certain
accredited investors in the total amount of approximately $3,148,900. The
Company offered its Common Stock at $2.50 per share.
RELATED PARTY TRANSACTIONS
In September, 1999, the Company closed the acquisition of 96 Points of Presence
("POPs") together with voice hardware and software located at the 96 POPs from
Interactive Consumer Services, Inc. for 300,000 "restricted" shares of Common
Stock of the Company. The majority shareholder and president of Interactive
Consumer Services, Inc. is Greg Adalian, an Advisory Board member of the
Company. At the time of the acquisition of POPs, Mr. Adalian was not on the
Advisory Board of the Company.
The Company sold $250,000 in principal amount of Convertible Debentures to H.
Joe Frazier, the Company's director (see above - "Convertible Debentures").
On March 1, 2000, the Company entered into a consulting agreement with a member
of the Advisory Board of the Company. The agreement is a six-month agreement,
renewable for a second six-month term. As consideration for consulting services,
the Company is to issue options to purchase 7,500 shares of the Company's common
stock at the beginning of each quarter. As of March 31, 2000, the Company
recorded consulting expenses of $14,456 related to this agreement.
During the year ended March 31, 2000, the Company paid consulting fees totaling
$61,728 to the wife of a director of the Company.
It is the Company's current policy that all transactions with officers,
directors, 5% stockholders and their affiliates be entered into only if they are
approved by a majority of the disinterested directors, are on terms no less
favorable to us than could be obtained from unaffiliated parties and are
reasonably expected to benefit the Company.
The Company had the transactions with related companies as provided in the
Financial Statements, Note 11.
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PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
A. Financial Statements
--------------------
Consolidated balance sheet of Sonicport.com, Inc. and subsidiary as of March 31,
2000, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the fiscal year ended March 31, 2000, period from
July 20, 1998 to March 31, 1999 and period from July 20, 1998 to March 31, 2000.
B. Reports on Form 8-K
Forms 8-K, Item 4. Change in Certifying Accountants.
C. Other Exhibits
--------------
3.1(a) Articles of Incorporation of JLQ, Inc. (1)
3.1(b) Amendment to Articles of Incorporation of JLQ, Inc. (1)
3.1(c) Amendment to Articles of Incorporation of New World
Publishing, Inc. (1)
3.1(d) Amendment to Articles of Incorporation of Communications
Television, Inc. (1)
3.1(e) Articles of Incorporation of Sonicport.com, Inc. (Nevada) (1)
3.1(f) Articles of Merger of Sonicport.com, Inc. (1)
3.1(g) Certificate of Designation of Sonicport.com, Inc. (1)
3.2 Bylaws (1)
10.1 Lease Agreement (1)
10.2 Form of Option Agreement (1)
10.3 POPS Purchase Agreement (1)
10.4 1999 Stock Option Plan (1)
16 Letter from Accountant (1)
22.1 List of subsidiaries of the Company (1)
27 Financial Data Schedules (1)
-----------
(1) Previously filed.
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DOCUMENTS INCORPORATED BY REFERENCE
The Company is currently subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549; at its New York
Regional Office, Suite 1300, 7 World Trade Center, New York, New York 10048; and
its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of such materials can be obtained from the Public
Reference Section of the Commission at its principal office in Washington, D.C.,
at prescribed rates. In addition, such materials may be accessed electronically
at the Commission's site on the World Wide Web, located at http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports containing
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 1 to the
Registrant's annual report to be signed on its behalf by the undersigned,
thereunto duly authorized on July 24, 2000.
SONICPORT.COM, INC.
By: /s/ David Baeza
--------------------------------------------------
David Baeza, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 1 to the registrant's annual report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ David Baeza Date: July 24, 2000
---------------------------------------------------
David Baeza, President and Chief Executive Officer
/s/ Stanton Dodson Date: July 24, 2000
---------------------------------------------------
Stanton Dodson, Chairman
/s/ Richard Shapiro Date: July 24, 2000
---------------------------------------------------
Richard Shapiro, Chief Financial Officer and Secretary
/s/ John Cooper Date: July 24, 2000
---------------------------------------------------
John Cooper, Director
/s/ Raymond Wong Date: July 24, 2000
---------------------------------------------------
Raymond Wong, Director
55
