<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999.
( ) TRANSITION REPORT PURSUANT SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-23365
SONICPORT.COM, INC.
(Exact name of small business as specified in its charter)
Nevada 84-1290152
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1641 20th Street, Santa Monica, CA 90404
(Address of principal executive offices)
(310) 828-1999
(Issuer's telephone number)
------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
Yes (X) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
------------------------------------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of December 31, 1999: 23,641,663 shares of common stock, $0.0001 par
value.
Transitional Small Business Disclosure Format (check one) : Yes ( ) No (X)
<PAGE>
SONICPORT.COM, INC.
INDEX TO FORM 10-QSB QUARTERLY REPORT
TABLE OF CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited):
Consolidated Balance Sheet as of December 31, 1999........... 1
Consolidated Statement of Operations for the three months
ended December 31, 1999, for the three months ended
December 31, 1998, and for the period from
July 20, 1998 (inception) to December 31, 1999............... 2
Consolidated Statement of Operations for the nine months ended
December 31, 1999, for the period from July 20, 1998 (inception)
to December 31, 1998 and for the period from July 20, 1998
(inception) to December 31, 1999............................. 3
Consolidated Statement of Cash Flows for the nine months ended
December 31, 1999, for the period from July 20, 1998 (inception)
to December 31, 1998, and for the period from July 20, 1998
(inception) to December 31, 1999............................. 4
Notes to Consolidated Financial Statements................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION................................. 14
PART II - OTHER INFORMATION................................................ 16
Exhibits and Reports on Form 8-K
(A) Exhibits - None
(B) Reports on Form 8-K
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1999
December 31,
1999
----
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 272,260
Prepaid services 125,000
Prepaid media 975,000
Prepaid expenses and other current assets 207,933
------------
Total current assets 1,580,193
FURNITURE, FIXTURES AND EQUIPMENT, NET 1,328,782
DEFERRED FINANCING COSTS 402,000
------------
$ 3,310,975
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 238,486
Accrued expenses 16,570
Interest payable 56,761
Due to related parties 75,351
Notes payable 355,000
Convertible promissory notes, current portion 525,000
------------
Total current liabilities 1,267,168
LONG TERM DEBT
Convertible promissory notes, net of current portion 1,335,000
------------
Total liabilities 2,602,168
------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock, $0.0001 par value
100,000,000 shares authorized
23,641,663 shares issued and outstanding 2,364
Common stock committed, $0.0001 par value,
679,305 shares committed but not yet issued 2,303,333
Additional paid-in capital 5,939,401
Deficit accumulated during the development stage (7,536,291)
------------
Total shareholders' equity 708,807
------------
$ 3,310,975
============
The accompanying notes are an integral part of these financial statements.
1
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<TABLE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999,
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO DECEMBER 31, 1999
<CAPTION>
For the
For the For the period from
three months three months July 20,1998
ended ended (inception) to
December 31, December 31, December 31,
1999 1998 1999
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
SALES $ 6,508 $ - $ 8,274
------------- ------------- -------------
OPERATING EXPENSES
General and administrative 1,094,015 163,298 4,448,002
Consulting - related parties - - 193,150
------------- ------------- -------------
Total operating expenses 1,094,015 163,298 4,641,152
------------- ------------- -------------
LOSS FROM OPERATIONS (1,087,507) (163,298) (4,632,878)
------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (1,021,753) (1,094) (2,908,501)
Interest income 665 13 5,088
------------- ------------- -------------
Total other income (expense) (1,021,088) (1,081) (2,903,413)
------------- ------------- -------------
NET LOSS $ (2,108,595) $ (164,379) $ (7,536,291)
============= ============= =============
BASIC LOSS PER SHARE $ (.09) $ (.01) $ (.36)
============= ============= =============
WEIGHTED-AVERAGE COMMON
SHARES OUTSTANDING 23,580,377 16,291,958 21,179,901
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999,
FOR THE PERIOD JULY 20, 1998 (INCEPTION) TO DECEMBER 31, 1998, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO DECEMBER 31, 1998
<CAPTION>
For the For the
For the period from period from
nine months July 20,1998 July 20,1998
ended (inception) to (inception) to
December 31, December 31, December 31,
1999 1998 1999
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
SALES $ 8,274 $ - $ 8,274
------------- ------------- -------------
OPERATING EXPENSES
General and administrative 3,198,614 615,918 4,448,002
Consulting - related parties 40,250 193,150
------------- ------------- -------------
Total operating expenses 3,198,614 658,168 4,641,152
------------- ------------- -------------
LOSS FROM OPERATIONS (3,190,340) (656,168) (4,632,878)
------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (2,661,125) (118,266) (2,908,501)
Interest income 4,396 13 5,088
------------- ------------- -------------
Total other income (expense) (2,656,729) (118,253) (2,903,413)
------------- ------------- -------------
NET LOSS $ (5,847,069) $ (774,421) $ (7,536,291)
============= ============= =============
BASIC LOSS PER SHARE $ (.26) $ (.05) $ (.36)
============= ============= =============
WEIGHTED-AVERAGE COMMON
SHARES OUTSTANDING 22,596,668 15,860,472 21,179,901
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999,
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO DECEMBER 31, 1998, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO DECEMBER 31, 1999
<CAPTION>
For the For the
For the period from period from
nine months July 20,1998 July 20,1998
ended (inception) to (inception) to
December 31, December 31, December 31,
1999 1998 1999
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,847,069) $ (774,422) $ (7,536,291)
Depreciation 16,980 866 23,614
Amortization 553,060 89,225 777,000
Interest charges on convertible promissory notes 2,240,005 2,240,005
Issuance of stock for services rendered 140,000 100,000 265,000
Issuance of warrants for services rendered 19,500 19,500
Issuance of options for services rendered 458,563 56,975 923,538
Finance charge on notes payable 73,778 73,778
(Increase) decrease in
Accounts receivable (45,000)
Deferred financing costs (170,000) (27,126) (207,000)
Prepaid services (75,000)
Prepaid expenses and other (190,015) (12,200) (207,933)
Increase (decrease) in
Accounts payable 187,563 58,481 238,486
Accrued interest 60,094 60,094
Accrued expenses (11,007) 10,508 16,570
------------- ------------- -------------
Net cash used in operating activities (2,468,548) (542,693) (3,388,639)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment (210,080) (17,316) (227,396)
Proceeds from related parties 75,351 9,383
Payments to related parties (1,285) (2,489)
Repayment of note receivable 45,000 (31,996) 45,000
Disbursement of note receivable (45,000)
Repayments from related parties 9,383 - 75,351
------------- ------------- -------------
Net cash used in investing activities (80,346) (50,597) (145,151)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable (10,000) (10,000)
Proceeds from notes payable 20,000 421,302 390,000
Proceeds from convertible promissory notes 2,210,000 2,210,000
Proceeds from preferred stock, net 473,500 235,280 1,216,050
------------- ------------- -------------
Net cash provided by financing activities 2,693,500 656,582 3,806,050
------------- ------------- -------------
Net increase in cash and cash equivalents 144,606 63,292 272,260
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 127,654 - -
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 272,260 $ 63,292 $ 272,260
============= ============= =============
INTEREST PAID $ 21,500 $ 2,152 $ 26,668
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)(Continued)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999,
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO DECEMBER 31, 1998, AND
FOR THE PERIOD FROM JULY 20, 1998 (INCEPTION) TO DECEMBER 31, 1999
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
SUMMARY OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the period from July 20, 1998 (inception) to December 31, 1998 the
Company issued 951,275 shares of common stock valued at $410,000 to the holders
of the notes payable as additional financing costs. During the nine months ended
December 31, 1999 the Company issued an additional 11,601 shares valued at
$5,000 to the holders of the notes payable as additional financing costs.
During the period from July 20, 1998 (inception) to December 31, 1998, 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
58,005 shares of common stock valued at $25,000 to a third party for services
rendered.
During the period from July 20, 1998 (inception) to December 31, 1998, 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 prior to
December 31, 1999.
During the three and nine months ended December 31, 1999, convertible promissory
notes payable plus accrued interest totaling $228,333 and $378,333,
respectively, were exchanged for 143,444 restricted shares and 190,384
restricted shares, respectively, of the Company's common stock.
During the three months ended December 31, 1999, the Company purchased media
time in exchange for 243,750 restricted shares of the Company's common stock
valued at $975,000.
During the nine months ended December 31, 1999, the Company purchased 96 Points
of Presence in exchange for 300,000 restricted shares of the Company's common
stock valued at $1,125,000.
During the nine months ended December 31, 1999, the Company issued 300,000
restricted shares and 40,000 restricted shares of common stock valued at
$120,000 and $210,000, respectively, to third parties as prepayment for services
to be rendered.
During the nine months ended December 31, 1999, the Company converted 1,621,808
shares of preferred stock valued at $1,216,050, net of offering costs of
$181,850, into restricted shares of the Company's common stock.
5
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1999
NOTE 1 - ORGANIZATION AND BUSINESS
Sonicport.com, Inc. ("Sonicport" or the "Company"), a Nevada publicly-traded
corporation, is an Internet marketing company specializing in vertically
targeted portals and hubs centered around demographic lifestyles. The portals
provide consumers with relevant content, shopping and news that reflect
consumers' preferences and attitudes, while also offering consumers services
such as Internet access, online voice mail and an Internet phone message center.
The Company believes that these products and services will add value to the
customer's daily activities, keep barriers to exit high and provide Sonicport
with strong recurring revenue streams. To build traffic and drive awareness,
Sonicport has developed short-form direct response television campaigns that
combine traditional direct response TV with high-end commercial branding. This
allows Sonicport to attract a motivated audience that uses the core products
regularly and who have the desire to know more about products and services that
will enhance their lifestyle. The vertical positioning of products and services
creates a targeted and receptive audience that attracts strategic alliances from
both "dot com" and "brick and mortar" companies eager to offer their products to
consumers in a format more persuasive and less limiting than traditional banner
advertising.
As of May 18, 1999, Sonicport.com, Inc., previously known as New World
Publishing, Inc., a Colorado corporation, entered into an Agreement and Plan of
Reorganization with Communications Television, Inc., a California corporation
(incorporated on July 20, 1998)("CTV"), whereby all of the outstanding shares of
common stock of CTV were exchanged for an aggregate of 19,020,167 shares of New
World Publishing, Inc. 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.com, Inc. have been included with those
of CTV from the acquisition date. On October 12, 1999, a special meeting of the
stockholders was held and the following actions were approved by the
stockholders: (i) the change of the Company's name to "Sonicport.com, Inc." from
New World Publishing, Inc. (ii) adoption of the 1999 Company's Incentive Stock
Option Plan, (iii) the change of the Company's state of incorporation to Nevada
from Colorado, and (iv) the change in the Company's firm of independent
certified public accountants to Singer, Lewak, Greenbaum & Goldstein LLP.
As of October 18, 1999 the Company changed its name from New World Publishing,
Inc. to Sonicport.com, Inc. In February, 2000 the Company effected its change of
state of incorporation from Colorado to Nevada.
As of November 22, 1999, Communications Television Inc., a wholly-owned
subsidiary of the Company, changed its name to Sonicport.com, Inc.(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, the Company purchased 96 Points of Presence (POP's).
The Company issued 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 the Company's
common stock on July 23, 1999, the closing date of the acquisition. The closing
price was $5.00 per share, discounted by 25% to reflect the issuance of
restricted stock.
6
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all normal, recurring adjustments considered necessary for a fair
presentation have been included. The financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's report on Form 8-K/A for the period from July 20, 1998 (inception)
to June 30, 1999. The results of operations for the three and nine month periods
ended December 31, 1999 are not necessarily indicative of the results that may
be expected for the year ended March 31, 2000.
Loss per Share
- --------------
The Company calculates loss per share in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share". Basic loss per
share is computed by dividing the net 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. Diluted loss per share is not presented because
common stock equivalents are anti-dilutive.
Income Taxes
- ------------
The Company accounts for income taxes under the asset and liability method of
accounting. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is required when it is less likely than not that the Company will be
able to realize all or a portion of its deferred tax assets.
7
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Sonicport.com,
Inc. (Nevada corporation - Parent) and its wholly-owned subsidiary,
Sonicport.com, Inc. (California corporation) (collectively, the "Company"). All
inter-company accounts and transactions have been eliminated.
Furniture, Fixtures and Equipment
- ---------------------------------
Furniture, fixtures 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 to 7 years
Leasehold improvements Lesser of initial lease period
or useful life of asset
Computer equipment 3 years
Maintenance and minor replacements are charged to expense as incurred. Gains and
losses on disposals are included in the results of operations. Leasehold
improvements are amortized over the lease period of the useful life of the
asset, whichever is shorter.
NOTE 3 - FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment consisted of the following:
December 31,
1999
----
(Unaudited)
Furniture and fixtures $ 61,406
Office equipment 82,601
Computer equipment 1,125,000
Leasehold improvements 83,389
------------
1,352,396
Less accumulated depreciation and amortization (23,614)
------------
Total $ 1,328,782
============
8
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
DECEMBER 31, 1999
NOTE 4 - NOTES PAYABLE
Notes payable consisted of the following:
December 31,
1999
----
(Unaudited)
Notes payable, interest at 10%, unsecured, due
April 3,2000 (1) $ 355,000
Less current portion (355,000)
------------
Long-term portion $ -
============
(1) 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 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.
9
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
DECEMBER 31, 1999
NOTE 5 - CONVERTIBLE PROMISSORY NOTES
Convertible promissory notes consisted of the following:
December 31,
1999
----
(Unaudited)
Convertible promissory note payable, interest
at 10%, unsecured, due May 31, 2001 (1) $ 500,000
Convertible promissory note payable, interest
at 10%, unsecured, due July 31, 2001 (2) 275,000
Convertible promissory note payable, interest
at 10%, unsecured, due August 31, 2001 (2) 250,000
Convertible promissory notes payable, interest
at 10%, unsecured, due August 31, 2001 (3) 50,000
Convertible promissory note payable, interest
at 10%, unsecured, due October 31, 2001 (4) 200,000
Convertible promissory note payable, interest
at 10%, unsecured, due April 15, 2000 (5) 25,000
(Current)
Convertible promissory note payable, interest
at 10%, unsecured, due June 15, 2001 (6) 10,000
Convertible promissory notes payable, interest
at 15%, secured, due January 29, 2001 (7) 500,000
(Current)
Convertible promissory note payable, interest
at 10%, unsecured, due December 31, 2001 (8) 50,000
------------
1,860,000
Less current portion (525,000)
------------
Long-term portion $ 1,335,000
============
(1) On May 31, 1999, the Company entered into a Subscription Agreement for ten,
10% Convertible Promissory Notes (the "Notes") for $50,000 each. The Company
incurred offering costs of $50,000 in connection with the issuance of the Notes.
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. 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.
(2) On July 8, 1999 and August 24, 1999, the Company entered into Subscription
Agreements for 10% Convertible Promissory Notes (the "Notes") for $275,000 and
$250,000, respectively. The Company incurred offering costs of $52,500 in
connection with the issuance of the Notes. Interest is due on each Note on
January 1 and July 1, respectively, if the Notes have not been converted prior
to such date by either party to the Notes. The holders of the Notes have the
option to convert the Notes at anytime after the closing 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.
(3) On August 25, 1999, the Company entered into Subscription Agreements for
nine, 10% Convertible Promissory Notes (the "Notes") for $25,000 each. The
Company incurred offering costs of $17,500 in connection with the issuance of
the Notes. Interest is due on each Note on March 1 and September 1. Principal
and any unpaid interest are due on August 31, 2001 if the Notes have not been
converted prior to such date by either party to the Notes. The holders of the
Notes have the option to convert the Notes at anytime after the closing date of
the Notes. The 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. On August 31, 1999 seven of the Notes totaling
$175,000 were exchanged for 54,829 restricted shares of the Company's common
stock.
11
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
DECEMBER 31, 1999
(4) On October 31, 1999 and November 4, 1999, the Company entered into
Subscription Agreements for two, 10% Convertible Promissory Notes (the "Notes")
for $200,000 each. The Company incurred offering costs of $35,000 in connection
with the issuance of the Notes. Interest is due on each Note on October 1 and
April 1. Principal and any unpaid interest are due on October 31, 2001 and
November 4, 2001, respectively, if the Notes have not been converted prior to
such date by either party to the Notes. The holders of the Notes have the option
to convert the Notes at anytime after the closing date of the Notes. The 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. On
December 31, 1999 the November 4, 1999 note plus accrued interest was exchanged
for 135,555 restricted Shares of the Company's common stock.
(5) On October 15, 1999, the Company entered into a Subscription Agreement for a
10% Convertible Promissory Note (the "Note") for $25,000. Principal and interest
is due on the Note on April 15, 2000, if the Note has not been converted prior
to such date by either party to the Note. The holder of the Note has the option
to convert the Note at anytime after the closing date of the Note. The Note is
convertible at the lesser of $.50 or 65% of the average closing bid price of the
Company's common stock for the five trading days prior to conversion.
(6) On December 15, 1999, the Company entered into Subscription Agreements for a
10% Convertible Promissory Note (the "Note") for $10,000. Principal and interest
is due on the Notes on June 15, 2001, if the Note has not been converted prior
to such date by either party to the Note. The holders of the Note has the option
to convert the Note at anytime after the closing date of the Note. The Note is
convertible at the lesser of $.50 or 65% of the average closing bid price of the
Company's common stock for the five trading days prior to conversion.
(7) On December 29, 1999, the Company entered into Subscription Agreements for
thirteen, 15% Convertible Promissory Notes (the "Notes") for an aggregate of
$500,000. The Company incurred offering costs of $52,000 in connection with the
issuance of the Notes. Interest is due on each Note on June 1 and December 1.
Principal and any unpaid interest are due on January 29, 2001, if the Notes have
not been converted prior to such date by either party to the Notes. The holders
of the Notes have the option to convert the Notes at anytime after the maturity
date, or within 10 days after the Company's notification of its intention to
redeem the Notes. The Notes are convertible at the rate of $2.50 per share of
common stock. The Company deposited 250,000 shares of common stock to be used as
conversion securities as may be applicable in the Escrow Account. These shares
would be released from Escrow upon conversion. These shares are not counted as
issued and outstanding. In February 2000, the principal amount of the Notes and
accrued interest was paid in full.
(8) On December 31, 1999, the Company entered into Subscription Agreements for
one, 10% Convertible Promissory Note (the "Note") for $50,000. The Company
incurred offering costs of $6,500 in connection with the issuance of the Note.
Interest is due on the Note on October 1 and April 1. Principal and any unpaid
interest are due on December 31, 2001, if the Note has not been converted prior
to such date by either party to the Note. The Note is convertible at the lessor
of $2.50 or 75% of the average closing bid price of the Company's common stock
for the five days prior to conversion.
In accordance with generally accepted accounting principles, the difference
between the conversion prices and the Company's stock price on the date of
issuance of the Notes is considered to be interest expense and is recognized in
the statement of operations during the period from the issuance of the debt to
the time at which the debt first becomes convertible. In connection with the
issuance of the Notes, the Company recorded deferred financing costs of $402,000
as a current asset and interest expense of $2,661,125 in the accompanying
statement of operations for the nine months ended December 31, 1999.
NOTE 6 - SHAREHOLDERS' EQUITY
Stock Options
- -------------
During the nine months ended December 31, 1999, the Company granted 640,000
stock options under its 1999 Incentive Stock Option Plan and 668,750 stock
options outside the plan to certain employees and non-employees that may be
exercised at prices ranging between $0.50 and $10.00 per share. These options
vest over periods ranging from the date of grant to three years from the date of
grant and expire five years from the date of grant.
12
<PAGE>
SONICPORT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
DECEMBER 31, 1999
NOTE 7 - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company granted 60,000 stock options to
certain members of the Board of Directors. The options have an exercise price
equal to the company's stock price on the date of grant, and vest immediately
and expire 5 years from date of grant.
Subsequent to December 31, 1999, the Company entered into two agreements for
two, 10% Convertible Promissory Notes totaling $250,000, convertible into the
lesser of $2.50 per common share or 75% of the average closing bid of the
Company's common stock for the five trading days prior to conversion. Interest
is due on April 1 and October 1. All unpaid interest and principal is payable on
February 28, 2002 if the Notes have not been converted prior to that date by
either party to the Notes. The holders of the Notes have the option to convert
the Notes at anytime after the closing date of the Notes.
Subsequent to December 31, 1999, the Company received $3,136,000 under the terms
of a $3.3 million private placement. Under the terms of the private placement,
the Company will issue up to 1,320,000 shares of its restricted common stock to
accredited investors.
In January 2000, a $50,000 Convertible Promissory Note was exchanged for 20,000
shares of the Company's restricted common stock.
13
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: 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. THE 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.
Overview of the Company's Business
Sonicport.com, Inc., a Nevada corporation ("Sonicport" or the "Company") is an
Internet marketing company specializing in vertically targeted portals and hubs
centered around demographic lifestyles. The portals provide consumers with
relevant content, shopping and news that reflect consumers' preferences and
attitudes, while also offering consumers services such as Internet access,
online voice mail and an Internet phone message center. The Company believes
that these products and services will add value to the customer's daily
activities, keep barriers to exit low and provide Sonicport with strong
recurring revenue streams. To build traffic and drive awareness, Sonicport has
developed short-form direct response television campaigns that combine
traditional direct response TV with high-end commercial branding. This allows
Sonicport to attract a motivated audience that uses the core products regularly
and who have the desire to know more about products and services that will
enhance their lifestyle. The vertical positioning of products and services
creates a targeted and receptive audience that attract strategic alliances from
both "dot com" and "brick and mortar" companies eager to offer their products to
consumers in a format more persuasive and less limiting than traditional banner
advertising. Front-end, customer acquisition campaigns are supported by back-end
programs that consist of in-bound and out-bound telemarketing, accounts
receivable management, and Internet development. The result is a multi-leveled
marketing program that provides quality, repeat customers, marketing data and
revenue generation. Sonicport markets their own vertical lifestyle portals, but
marketing programs can be customized and co-branded for other Internet
properties.
Sonicport was previously known as New World Publishing, Inc., a Colorado
corporation. Sonicport effected the change of its state of incorporation from
Colorado to Nevada in February, 2000.
14
<PAGE>
ITEM 2. Management Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Results of Operations
The Company has been in the developmental stage since its inception. The Company
incurred net losses of $2,108,595 and $5,847,069 during the three months and
nine months ended December, 31, 1999, respectively, and incurred a net loss of
$7,536,291 for the period from July 20, 1998 (inception) to December 31, 1999.
The losses are primarily the result of the Company's incurring interest expense,
development costs and general and administrative expenses, with only nominal
revenue 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
revenues of $6,508 and $8,274 during the three and nine months ended December
31, 1999, respectively. The Company is seeking to raise funds to fully implement
its business plan.
Liquidity and Capital Resources
As of the end of the reporting period, the Company had $272,260 in cash and cash
equivalents. Subsequent to December 31, 1999, the Company received $3,136,000
pursuant to a private placement of up to $3.3 million offered to accredited
investors. Under the terms of the private placement, the Company will issue up
to 1,320,000 shares of its restricted common stock.
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 December 31, 1999, net
cash used in operations of $3,388,639, and net cash used in investing activities
of $145,141 were financed primarily by the issuance of $390,000 in notes
payable, $2,210,000 in convertible notes payable and $1,216,050 in preferred
stock. During the nine months ended December 31, 1999, net cash used in
operations of $2,468,548, and net cash used in investing activities of $80,346
were financed primarily by the issuance of $2,210,000 in convertible notes
payable and $473,500 in preferred stock.
Year 2000 Compliance
The Company conducted a comprehensive review of its computer systems to identify
the systems that could have been affected by the Year 2000 issue and implemented
a plan to resolve any resulting problems.
The Company's concerns from the Year 2000 issue was whether computer systems
would properly recognize date-sensitive information after the change to the Year
2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. The Company is dependent on computer
processing in the conduct of its business activities.
The Company has not experienced any system difficulties arising from the Year
2000 issue, nor has it experienced any difficulty with the systems of third
parties with which the Company does business. The Company incurred only nominal
costs in resolving potential problems arising from the Year 2000 issue.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
No legal proceedings of a material nature to which the Company is a party were
pending during the reporting period, and the Company had minimal cash and cash
equivalents. There was no significant change in working capital during this
fiscal year.
ITEM 2. Changes in Securities. None.
ITEM 3. Defaults upon Senior Securities. None.
ITEM 4. Submission of Matter 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.
ITEM 5. Other Information. None.
ITEM 6. Exhibits and Reports on Form 8-K. None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SONICPORT.COM, INC.
(Registrant)
Date: February 14, 2000 /S/ David Baeza
---------------------------
David Baeza, CEO and
President
Date: February 14, 2000 /S/ William Cooper
---------------------------
William Cooper,
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the nine months ended December 31, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 272,260
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,580,193
<PP&E> 1,328,782
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,310,975
<CURRENT-LIABILITIES> 1,267,168
<BONDS> 0
0
0
<COMMON> 2,364
<OTHER-SE> 706,443
<TOTAL-LIABILITY-AND-EQUITY> 3,310,975
<SALES> 8,274
<TOTAL-REVENUES> 8,274
<CGS> 0
<TOTAL-COSTS> 3,198,614
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,661,125
<INCOME-PRETAX> (5,847,069)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,847,069)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,847,069)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
