<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/x/ Quarterly Report Pursuant to Section 13 or 15(d)
Securities Exchange Act of 1934
for Quarterly Period Ended March 31, 2000
-OR-
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities And Exchange Act of 1934
for the transaction period from ___________ to _________
Commission File Number 333-70663
Spinrocket.com, Inc.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1529524
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
29 West 57th Street, 9th Floor, New York, New York 10019
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(Address of principal executive offices, Zip Code)
(212) 583-0300
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(Registrant's telephone number, including area code)
Check whether the issuer (1) 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 / /
The number of outstanding shares of the registrant's common stock,
par value $.01 as of May 18, 2000 is 21,293,006.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (unaudited)..................................
Consolidated Balance Sheets ............................3
Consolidated Income Statements .........................4
Consolidated Statements of Cash Flows...................5
Consolidated Statement of Shareholders' Equity..........6
Notes To Consolidated Financial Statements .............7
Item 2. Management's Discussion and Analysis..............................8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................................9
Item 2. Changes in Securities and Use of Proceeds..........................9
Item 3. Defaults Upon Senior Securities....................................9
Item 4. Submission of Matters to a Vote of Security Holders................9
Item 5. Other Information..................................................9
Item 6. Exhibits and Reports on Form 8-K...................................9
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
SPINROCKET.COM, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- --------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,083,824 $ 556,799
EQUIPMENT:
Equipment, net of accumulated depreciation of $3,458 and $2,222 16,836 18,072
OTHER ASSETS (Note 3):
Cost of acquired software, net of accumulated amortization
of $350,000 and $130,318 3,850,000 3,779,228
Other assets 42,361 38,750
Assets of discontinued operations 7,253,314 7,616,940
Goodwill, net of accumulated amortization of $34,950 in 2000 664,050 583,000
------------ ------------
Total Other Assets 11,809,725 12,017,918
------------ ------------
Total Assets $ 14,910,385 $ 12,592,789
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 259,795 $ 291,318
Liabilities of discontinued operations 6,198,321 6,229,969
------------ ------------
Total Current Liabilities 6,458,116 6,521,287
------------ ------------
SHAREHOLDERS' EQUITY (Note 4):
Preferred Stock, $.001 par value
10,000,000 shares authorized, 2,661,352 Series D issued
and outstanding 2,661 --
Common Stock, $.001 par value
20,000,000 shares authorized, 18,081,650 issued
and outstanding 18,082 18,082
Paid in capital 16,941,942 13,572,426
Deferred compensation (430,536) (583,539)
Accumulated deficit (8,079,880) (6,935,467)
------------ ------------
Total Shareholders' Equity 8,452,269 6,071,502
------------ ------------
Total Liabilities and Shareholders' Equity $ 14,910,385 $ 12,592,789
============ ============
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
3
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SPINROCKET.COM, INC.
Consolidated Income Statements (unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 2000 1999
- ------------------------------------ ------------- ------------
<S> <C> <C>
General and administrative expenses $ (902,706) $ --
------------ ------------
Loss from continuing operations before
income tax benefit (902,706) --
Income tax benefit (116,000) --
------------ ------------
Loss from continuing operations (786,706) --
Loss from discontinued operations,
after income taxes ($0) (357,707) (353,254)
------------ ------------
Net loss $ (1,144,413) $ (353,254)
============ ============
Net loss per common share- basic and diluted:
Loss from continuing operations $ (.04) $ --
Loss from discontinued operations (.02) (.09)
------------ ------------
Net loss per common share- basic and diluted $ (.06) $ (.09)
============ ============
Weighted average shares outstanding:
basic and diluted 18,081,650 3,890,756
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
SPINROCKET.COM, INC.
Consolidated Statements of Cash Flows (unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 2000 1999
- ------------------------------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(1,144,413) $ (353,254)
Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities-
Loss from discontinued operations 357,707 353,254
Depreciation and amortization 255,868
Amortization of deferred compensation 153,003
Consulting expenses associated with issuance of stock options 83,986
Income tax benefit (116,000)
Increase in non-current assets (3,611)
Decrease in current liabilities (57,252)
----------- -----------
Net cash used in operations (470,712) --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Series D Preferred Stock 2,997,737
----------- -----------
Net cash provided by financing activities 2,997,737 --
----------- -----------
Net increase in cash and cash equivalents 2,527,025 --
CASH AND CASH EQUIVALENTS, January 1 556,799 --
----------- -----------
CASH AND CASH EQUIVALENTS, March 31 $ 3,083,824 $ --
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Increase in cost of acquired software $ 290,454 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
SPINROCKET.COM, INC.
Consolidated Statement of
Shareholders' Equity (unaudited)
<TABLE>
<CAPTION>
Total
Preferred Common Paid in Deferred Accumulated Shareholders'
Three months ended March 31, 2000 Stock Stock Capital Compensation Deficit Equity
- --------------------------------- ----- ----- ------- ------------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1999 $ - $ 18,082 $13,572,426 $ (583,539) $(6,935,467) $ 6,071,502
Adjustment of cost of 290,454 290,454
acquired software (Note 3)
Issuance of 2,661,352 shares 2,661 2,995,076 2,997,737
of Series D
Amortization of deferred 153,003 153,003
compensation
Issuance of options for 83,986 83,986
consulting services
Net loss (1,144,413) (1,144,413)
-----------------------------------------------------------------------------------
BALANCE, March 31, 2000 $ 2,661 $ 18,082 $16,941,942 $ (430,536) $(8,079,880) $8,452,269
===================================================================================
The accompanying notes are an integral part of this consolidated statement.
</TABLE>
6
<PAGE>
SPINROCKET.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
1. As used in these financial statements, the term the "Company" refers to
Spinrocket.com, Inc. (formerly known as CDBeat.com, Inc.) and its
consolidated subsidiaries.
2. The December 31, 1999 consolidated balance sheet presented herein was
derived from the audited December 31, 1999 consolidated financial statements
of the Company. Reference should be made to the Company's consolidated
financial statements for the year ended December 31, 1999 for a description
of the accounting policies, which have been continued without change. Also,
reference should be made to the notes to the Company's December 31, 1999
consolidated financial statements for additional details of the Company's
consolidated financial condition, results of operations and cash flows. The
details in those notes have not changed except as a result of normal
transactions in the interim. Certain amounts in the 1999 consolidated
financial statements have been reclassified to conform with the current
period's presentation. All adjustments (of a normal recurring nature) which
are, in the opinion of management, necessary to a fair presentation of the
results of the interim period have been included.
As previously disclosed in the Company's December 31, 1999 Form 10-KSB,
on March 30, 2000, the Company decided that it will exit the business
conducted by 32 Records LLC ("32 Records") by March 2001 and
recharacterized 32 Records as a discontinued operation for financial
reporting purposes. 32 Records intends to continue its operations until it
can either (i) sell the business or assets in an orderly fashion, or
(ii) close or surrender the business to the lender.
3. As previously reported in the Company's December 31, 1999 Form 10-KSB, the
Company completed a business combination in November 1999 with Cakewalk LLC
in a transaction accounted for by the purchase method wherein Cakewalk LLC
was deemed to be the acquiror and Spinrocket the acquiree. A portion of the
purchase price had been allocated to assets acquired and liabilities assumed
based on the estimated fair market value at the date of acquisition and the
balance of $3,909,546 was recorded as cost of acquired software. The
allocation of the $3,909,546 to acquired software was preliminary and
subject to the completion of an independent valuation. The results of the
completed valuation, which valued the acquired software at $4.2 million,
have been reported in the consolidated financial statements and the
software is being amortized using the straight-line method over its
estimated useful life of five years.
4. On March 31, 2000, the Company raised approximately $3 million (net of
Placement Agent fees) through the private placement of 2,661,352 shares of
the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock") at a price of $1.28 per share. On April 19, 2000, the Company
converted the Series D Preferred Stock into shares of Common Stock at a
ratio of one share of Common Stock for one share of Series D Preferred Stock
and amended its charter to authorize the issuance of up to 40 million shares
of Common Stock. At the second closing on April 28, 2000, the Company
received approximately $.6 million (net of Placement Agent fees) and issued
550,004 shares of Common Stock.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
On April 19, 2000, CDBeat.com, Inc. changed its name to Spinrocket.com. Inc.
("Spinrocket" or the "Company").
As previously reported in the Company's Form 10-KSB for the year ended
December 31, 1999 ("Form 10-KSB"), the Company completed a business
combination in November 1999 with Cakewalk LLC in a transaction accounted for
by the purchase method wherein Cakewalk LLC was deemed to be the acquiror and
Spinrocket the acquiree. A portion of the purchase price had been allocated
to assets acquired and liabilities assumed based on the estimated fair market
value at the date of acquisition and the balance of $3,909,546 was recorded
as cost of acquired software. The allocation of the $3,909,546 to acquired
software was preliminary and subject to the completion of an independent
valuation. The results of the completed valuation, which valued the acquired
software at $4.2 million, have been reported in the consolidated financial
statements and the software is being amortized using the straight-line method
over its estimated useful life of five years.
RESULTS OF OPERATIONS
Quarter ended March 31, 2000
As previously disclosed in the Company's Form 10-KSB, the operations of
32 Records LLC have been recorded as discontinued operations in the
consolidated financial statements.
The Company had no revenues from continuing operations in the first
quarter of 2000.
In the first quarter of 2000 and 1999 the Company reported the following:
2000 1999
------------- -----------
Loss from continuing operations $ 786,706 $ -
Loss from discontinued operations 357,707 353,254
------------- -----------
Net loss $ 1,144,413 $ 353,254
============= ===========
Basic and diluted loss per share:
Loss from continuing operations $ .04 $ --
Loss from discontinued operations .02 .09
------------- -----------
Net loss $ .06 $ .09
============= ===========
The Company reported a loss from continuing operations of $786,706, which
includes general and administrative expenses of approximately $903,000, offset
by an income tax benefit of $116,000. General and administrative expenses
include expenses of which approximately $104,000 was for software; $135,000 for
professional fees; $108,000 for salary-related expenses; $255,000 for
amortization of acquired software and goodwill, and $237,000 for expenses
associated with issuance of stock options.
LIQUIDITY AND CAPITAL RESOURCES
PRIVATE PLACEMENT
On March 31, 2000, the Company raised approximately $3 million (net of
Placement Agent fees) through the private placement of 2,661,352 shares of
the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock") at a price of $1.28 per share. On April 19, 2000, the Company
converted the Series D Preferred Stock into shares of Common Stock at a ratio
of one share of Common Stock for one share of Series D Preferred Stock and
amended its charter to authorize the issuance of up to 40 million shares of
Common Stock. At the second closing on April 28, 2000, the Company received
approximately $.6 million (net of Placement Agent fees) and issued 550,004
shares of Common Stock.
LOAN DEFAULT
As previously disclosed in the Company's Form 10-KSB, 32 Records LLC ("32
Records") was, and continues to be, in default under the Management Agreement
among 32 Records LLC, Cakewalk BRE LLC (the "BRE") and Entertainment Finance
International, Inc. ("EFI"). As a result of these defaults EFI, as the holder
of $5,500,000 principal amount of indebtedness issued by the BRE, has the
right to accelerate the maturity date of such indebtedness and exercise other
remedies. EFI was previously notified of these defaults and, as of the date
hereof, has neither taken any such action nor indicated an intention to do
so. At the time the loan was granted in June 1999, the lender required the
establishment of a new subsidiary, the BRE, into which the assets and
liabilities of 32 Records were transferred as security for the lender.
Accordingly, the lender in the event of a declaration of default may seek to
take over the business of 32 Records, but it does not have recourse to the
Company's assets not included in the BRE.
8
<PAGE>
Management anticipates a probable inability to meet the obligations under the
terms of the loan. Hence, 32 Records' ability to continue as a going concern
is dependent on its ability to renegotiate the loan agreement and/or secure
additional financing.
On March 30, 2000, the Company decided that it will exit the business conducted
by 32 Records by March 2001 and recharacterized 32 Records as a discontinued
operation for financial reporting purposes. 32 Records intends to continue its
operations until it can either (i) sell the business or assets in an orderly
fashion, or (ii) close or surrender the business to EFI.
PART II -- OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Not applicable
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
PRIVATE PLACEMENT
On March 31, 2000 the Company raised approximately $3 million (net of
Placement Agent fees) through the private placement of 2,661,352 shares of
the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock") at a price of $1.28 per share (the "Private Placement"). The Company
engaged Matrix U.S.A., LLC as Placement Agent to assist in the Private
Placement. On April 19, 2000, the Company converted the Series D Preferred
Stock into shares of Common Stock at a ratio of one share of Common Stock for
one share of Series D Preferred Stock and amended its charter to authorize
the issuance of up to 40 million shares of Common Stock. The private
placement was made to "accredited investors" as that term is defined in
Regulation D promulgated under the Securities Act of 1933, as amended. At the
second closing on April 28, 2000, the Company received approximately $.6
million (net of Placement Agent fees) and issued 550,004 shares of Common
Stock.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
As previously disclosed in the Company's Form 10-KSB for the year
ending December 31, 1999, 32 Records LLC ("32 Records"), a wholly owned
subsidiary of the Company was, and continues to be, in default under the
Management Agreement among 32 Records, Cakewalk BRE LLC (the "BRE"), a wholly
owned subsidiary of 32 Records and Entertainment Finance International, Inc.
("EFI"). As a result of these defaults EFI, as the holder of $5,500,000
principal amount of indebtedness issued by the BRE, has the right to
accelerate the maturity date of such indebtedness and exercise other
remedies. EFI was previously notified of these defaults and, as of the date
hereof, has neither taken any such action nor indicated an intention to do
so. At the time the loan was granted in June 1999, the lender required the
establishment of a new subsidiary, the BRE, into which the assets and
liabilities of 32 Records were transferred as security for the lender.
Accordingly, the lender in the event of a declaration of default may seek to
take over the business of 32 Records, but it does not have recourse to the
Company's assets not included in the BRE.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 - OTHER INFORMATION
Not applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
Exhibit 27.1 Financial Data Schedule
(b) Not applicable
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
SPINROCKET.COM, INC.
Dated: May 22, 2000 By: /s/ Robert Miller
-----------------
Robert Miller
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Alan L. Schaffer
--------------------
Alan L. Schaffer
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
10
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<PAGE>
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<PERIOD-TYPE> 3-MOS
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<PERIOD-END> MAR-31-2000
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