SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
November 16, 1999
CDBEAT.COM, INC.
----------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
----------------------------------------------------------
(State or other jurisdiction of incorporation)
333-70663 06-1529524
(Commission File Number) (I.R.S. Employer Identification No.)
29 West 57th Street, 9th Floor, New York, New York 10019
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 583-0300
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits. The Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 1, 1999 by CDBeat.com, Inc., is hereby amended to include
the following financial statements and pro forma financial information, which
were previously omitted from such Current Report on Form 8-K.
(a) Financial Statements of Business Acquired. The following financial
statements for Cakewalk LLC are submitted herewith:
Page of Form 8-K/A-1
Independent Auditors Report 2
Consolidated Balance Sheets as of
December 31, 1998 and 1997 3
Consolidated Statements of Operations for the
years ended December 31, 1998 and 1997 4
Consolidated Statement of Changes in Members'
Equity for the years ended December 31, 1998 and 1997 5
Consolidated Statements of Cash Flows for the
years ended December 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Unaudited Consolidated Balance Sheet as of
September 30, 1999 13
Unaudited Consolidated Statement of Operations for the
nine months ended September 30, 1998 and 1997 14
Unaudited Consolidated Statement of Changes in Members' Equity
for the nine months ended September 30, 1998 15
Unaudited Consolidated Statement of Changes in Members' Equity
for the nine months ended September 30, 1999 16
Unaudited Consolidated Statement of Cash Flows for the nine
months ended September 31, 1999 and 1998 17
Notes to Unaudited Consolidated Financial Statements 18
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cakewalk LLC:
We have audited the accompanying consolidated balance sheets of Cakewalk LLC and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, changes in members' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cakewalk LLC and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
November 16, 1999
2
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 8,901 $ 74,410
Accounts receivable, net 1,466,735 11,136
Other receivables 7,580 17,490
Inventory 1,047,445 260,710
Royalty advances 111,543 138,229
Prepaid expenses and other current assets 7,262 27,044
----------- -----------
Total current assets 2,649,466 529,019
----------- -----------
PROPERTY AND EQUIPMENT:
Furniture and fixtures, net 10,119 11,426
Equipment, net 34,663 30,686
----------- -----------
Total property and equipment, net 44,782 42,112
----------- -----------
OTHER ASSETS
Product masters and copyrights, net of
accumulated amortization of
$1,496,956 in 1998 and $480,356
in 1997 (Note 5) 4,724,500 4,222,502
Loan acquisition costs and other intangible
assets, net of accumulated amortization of
$87,094 in 1998 and zero in 1997 319,508 39,000
----------- -----------
Total other assets 5,044,008 4,261,502
----------- -----------
Total assets $ 7,738,256 $ 4,832,633
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other current liabilities $ 1,368,955 $ 491,988
Copyrights and artists' royalties payable 490,048 133,474
Licensing advances - current 354,231 177,750
Revolving credit 677,000 --
Current portion of long-term debt -- 192,000
Shareholder loans -- 512,895
----------- -----------
Total current liabilities 2,890,234 1,508,107
LONG-TERM DEBT - NONCURRENT 3,000,000 2,543,600
LICENSING ADVANCES-- NONCURRENT 375,297 270,453
SUBORDINATED DEBT:
Notes payable to shareholders 517,418 --
Less- Unamortized discount based on imputed
interest rate of 15% 59,560 --
----------- -----------
Notes payable less unamortized discount 457,858 --
----------- -----------
COMMITMENTS (Note 4)
MEMBERS' EQUITY:
Class A Units 2,609,678 2,602,000
Class B Units 2,208,853 --
Discount on subordinated debt 67,925 --
Accumulated deficit (3,871,589) (2,091,527)
----------- -----------
Total members' equity 1,014,867 510,473
----------- -----------
Total liabilities and members' equity $ 7,738,256 $ 4,832,633
=========== ===========
The accompanying notes are an integral part of these
consolidated balance sheets.
3
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------- -----------
NET SALES $ 4,183,676 $ 1,198,742
COST OF SALES 1,806,889 845,982
----------- -----------
Gross profit 2,376,787 352,760
----------- -----------
SELLING EXPENSES 889,330 --
GENERAL AND ADMINISTRATIVE EXPENSES 1,751,185 1,138,208
DEPRECIATION AND AMORTIZATION 1,103,372 450,687
----------- -----------
3,743,887 1,588,895
----------- -----------
(Loss) Income from operations (1,367,100) 1,236,135
INTEREST EXPENSE, NET 412,962 254,637
----------- -----------
Net loss $(1,780,062) $(1,490,772)
=========== ===========
The accompanying notes are an integral part of
these consolidated statements.
4
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Members' Discount on Total
Contributed Class A Class B Subordinated Accmulated Members'
Capital Units Units Debt Debt Deficit
----------- ----------- ---------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ 1,851,000 $ -- $ -- $ -- $ (600,755) $ 1,250,245
Capital contributions 751,000 -- -- -- -- 751,000
Net loss -- -- -- -- (1,490,772) (1,490,772)
----------- ----------- ---------- ------- ----------- -----------
BALANCE, December 31, 1997 2,602,000 -- -- -- (2,091,527) 510,473
Conversion of shareholders' loan to
capital contribution 52,898 -- -- -- -- 52,898
Conversion of members' contributed
capital to Class A Units (2,654,898) 2,654,898 -- -- -- --
Issuance of Class A Units in
acquisition of affiliate entities -- 325,000 -- -- -- 325,000
Issuance of Class A Units in repayment
of loan due to shareholder -- 100,000 -- -- -- 100,000
Issuance of Class B Units, net of
issuance costs - -- -- 2,208,853 -- -- 2,208,853
Redemption of Class A Units -- (470,220) -- -- -- (470,220)
Discount on subordinated debt based
on imputed interest rate of 15% -- -- -- 67,925 -- 67,925
Net loss -- -- -- -- (1,780,062) (1,780,062)
----------- ----------- ---------- ------- ----------- -----------
BALANCE, December 31, 1998 $ -- $ 2,609,678 $2,208,853 $67,925 $(3,871,589) $ 1,014,867
=========== =========== ========== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,780,062) $(1,490,772)
Adjustments to reconcile net loss to net cash used in operating
activities-
Depreciation and amortization 1,103,372 450,687
Non-cash interest expense and other financing costs 86,860 --
Increase in reserve for returns 60,549 30,000
(Increase) decrease in receivables (1,506,238) (58,625)
Decrease (increase) in other assets 19,783 (12,719)
(Increase) in inventory (786,735) (260,710)
Decrease in royalty advances 26,686 61,961
Increase in other noncurrent assets (29,082) --
Increase in payables and other current liabilities 1,252,018 540,464
Increase in advances received 281,327 353,202
----------- -----------
Net cash used in operating activities (1,271,522) (386,512)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (21,794) (38,752)
Acquisition of music rights in business combination (1,518,598) (1,135,358)
Acquisition of intangibles -- (39,000)
Net cash used in investing activities (1,540,392) (1,213,110)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 3,000,000 735,600
Proceeds from loan from shareholder -- 115,022
Proceeds from shareholders' contribution -- 751,000
Payment of long-term borrowings (2,735,600) --
Proceeds from revolving line of credit 677,000 --
Proceeds from subordinated debt 498,850 --
Increase in loan acquisition costs (332,478) --
Proceeds from issuance of Class B Units 2,500,000 --
Costs associated with issuance of Class B Units (291,147) --
Repayment of loan due to shareholder (100,000) --
Redemption of Class A Units (470,220) --
----------- -----------
Net cash provided by financing activities 2,746,405 1,601,622
----------- -----------
Net (decrease) increase in cash (65,509) 2,000
CASH, beginning of year 74,410 72,410
----------- -----------
CASH, end of year $ 8,901 $ 74,410
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for
lnterest $ 311,708 $ 207,804
Taxes 13,335 10,427
NONCASH INVESTING AND FINANCING ACTIVITIES:
Increase of shares in repayment of loan due
to shareholder $ 100,000 --
Increase of shares for business acquired 325,000 --
</TABLE>
The accompanying notes are an integral part of
these consolidated statements.
6
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Cakewalk LLC ("Cakewalk," or the "Company") is an independent record company
specializing in the catalogue or reissue segment of the recorded music industry.
Cakewalk seeks to acquire classic, timeless recordings by established,
world-class artists who have been underperforming or underutilized with the
intention of recompiling, repackaging, remarketing and ultimately selling music
compact discs.
Property, Equipment and Depreciation
Propertv and equipment are carried at cost, less accumulated depreciation.
Depreciation is recognized using the straight-line method over the estimated
useful lives of the assets, which approximates 5 to 7 years.
Royalty Advances
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 50,
"Financial Reporting in the Record and Music Industry," advances to artists and
producers are capitalized as an asset when the current popularity and past
performance of the artist or producer provides a sound basis for estimating the
probable future recoupment of such advances from earnings otherwise payable to
the artist or producer.
Product Masters
Product masters, which primarily include the Company's catalogue of sound
recordings and copyrights, are amortized over their future estimated useful
lives, using a method that reasonably relates to the amount of net revenue
expected to be realized.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
transactions and accounts are eliminated in consolidation.
7
<PAGE>
Licensing Advances
Licensing advances represent the balance of advances received less revenues
earned in connection with licensing agreements.
Inventory
Inventory consists of compact discs, packaging and inserts and is valued at the
lower of cost or market, determined on a first-in, first-out basis, or net
realizable value. The cost of finished goods includes all direct product costs.
Income Taxes
The Company is a limited liability company taxed as a partnership for federal
and state income tax purposes and, as a result, its earnings are taxable
directly to the members.
Use of 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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Long-Lived Assets
The Company's policy is to record long-lived assets at cost, amortizing these
costs over the expected useful lives of the related assets. In accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," these assets are reviewed on a periodic
basis for impairment whenever events or changes in circumstances indicate the
carrying amounts of the assets may not be realizable. Furthermore, the assets
are evaluated for continuing value and proper useful lives by comparison to
expected future cash flows. For the years ended December 31, 1998 and 1997,
there was no material impairment of the long-lived assets of the Company.
Revenue Recognition
Income from the sale of compact discs is recognized upon shipment to the
customer. However, in accordance with industry practice, substantially all sales
are made with return privileges. The Company provides for estimated future
returns by establishing a provision for sales returns.
License income is recognized proportionately over the term of the license
agreement or on the basis of actual sales of the license, whichever results in
the higher amount.
8
<PAGE>
2. PROPERTY AND EQUIPMENT
Property and equipment as of December 31. 1998 and 1997, comprise of the
following:
1998 1997
-------- --------
Office furniture and fixtures $ 13,486 $ 12,430
Equipment 62,792 42,054
-------- --------
76,278 54,484
Less- Accumulated depreciation (31,496) (12,372)
-------- --------
$ 44,782 $ 42,112
======== ========
For the years ended December 31, 1998 and 1997, depreciation expense amounted to
$19,124 and $12,039, respectively.
3. LONG-TERM DEBT
At December 31, 1998, long-term debt consists of the following:
Term loan (a) $ 3,000,000
Subordinated debt (b) 517,418
-----------
Total long-term and subordinated debt $ 3,517,418
===========
(a) In February 1998, the Company refinanced its existing credit
agreement and entered into another credit agreement for a $3,000,000
term loan facility (the "Term Loan") and a $700,000 revolving credit
facility (the "Revolver," and collectively, the "Credit Agreement").
The Credit Agreement also included a $250,000 sub-allotment for
letters of credit. The Term Loan and the Revolver bore an interest
rate equal to the Euro Basic Rate plus 3.25%. Each of the facilities
provided under the Credit Agreement matured on December 31, 2000 and
required the Company to comply with specified covenants and certain
financial ratios. At December 31, 1998, the Company was not in
compliance with the required Earnings Before Interest, Taxes,
Depreciation and Amortization covenant.
In July 1999, through its newly created wholly owned subsidiary
Cakewalk BRE LLC, the Company refinanced the Credit Agreement and
entered into a new credit agreement for $5.5 million (the "$5.5
Million Credit Agreement"). The $5.5 Million Credit Agreement bears
interest at 10.09% and matures June 2009. The $5.5 Million Credit
Agreement requires the Company to maintain certain financial ratios.
For the period July 15, 1999 through June 15, 2000, the Company is
required to make monthly payments of interest only; commencing July
15, 2000, the Company will make 107 equal monthly installment
payments of principal and interest in the amount of $77,701. In
conjunction with the $5.5 Million Credit Agreement, the Company
issued warrants to the lender to purchase up to 15% of the equity of
the Company calculated on a fully diluted basis. See Subsequent
Event note 9.
9
<PAGE>
In accordance with SFAS No. 6, "Consolidated Classification of
Short-Term Obligations Expected to Be Refinanced," as a result of
the refinancing discussed above, $1.4 million due in 1999 under the
Credit Agreement has been classified as Long-Term Debt - Noncurrent
in the accompanying Balance Sheets.
(b) In August 1998. the Company issued promissory notes totaling
$498,850 to its existing shareholders (collectively the "Promissory
Notes"). The Promissory Notes, which are subordinated to the credit
facilities described above, have a stated interest rate of 10% and
mature in August 2001. The Company also issued 1,995,400 warrants to
its existing shareholders on a pro rata basis based upon each
individual shareholder's then current percentage ownership of the
Company. Immediately subsequent to the issuance of the warrants,
each individual shareholder's percentage ownership of the Company
remained unchanged. As a result, no value has been assigned to the
warrants in the accompanying financial statements. Consequently, the
Company recorded a discount on the Promissory Note of approximately
$68,000, based upon a fair value interest rate of 15%. In accordance
with the terms of the Promissory Notes, interest expense due to the
holders of the notes that has not been paid increases the principal
amount of the Promissory Notes. At December 31, 1998, approximately
$18,600 of accrued interest expense was added to the face of the
Promissory Notes in the accompanying Consolidated Balance Sheets. In
June 1999, the Company repaid $271,354, in principal and interest to
the Promissory Note holders.
Interest expense for the years ended December 31, 1998 and 1997 was
$413,407 and $254,637, respectively.
At December 31, 1998, future principal payments of long-term debt were
approximately as follows:
1999 $ --
2000 3,000,000
2001 498,850
----------
$3,498,850
==========
4. COMMITMENTS
The Company leases its office space at an annual rental of $51,012. The lease
expires April 30, 2001.
Minimum rental commitments on the Company's noncancelable operating lease at
December 31, 1998, are as follows:
1999 $ 42,282
2000 42,282
2001 98,658
--------
$183,222
========
10
<PAGE>
5. PRODUCT MASTERS AND COPYRIGHTS
Other assets consist of the following at December 31, 1998 and 1997 (000's
omitted):
1998 1997
------- -------
Muse-Landmark $ 3,573 $ 3,573
Tom Jones 920 920
Judy Garland 1,654 210
Night Eagle 75 --
------- -------
6,222 4,703
Less-Accumulated amortization (1,497) (480)
------- -------
$ 4,725 $ 4,223
======= =======
6. CHANGE IN DISTRIBUTOR
On December 31, 1997, the Company discontinued its domestic distribution
agreement with MS Distributing and entered into a new two-year domestic
distribution agreement with Ryko Distribution Partners on January 1, 1998. Under
the new agreement, Ryko Distribution Partners charge selling expenses and
distribution fees separately.
7. ACQUISITIONS
In February 1998, the Company issued Class A Units valued at $325,000 to acquire
100% of the outstanding shares of Cakewalk Productions and Productions II
(collectively the "Affiliates"). Prior to the Company's acquisition of the
Affiliates, the Affiliates were 100% owned by a shareholder of the Company.
Where applicable, the net assets of the Affiliates were recorded at their
respective fair market values.
8. CONVERSION OF MEMBERSHIP INTERESTS
Effective February 13, 1998 (the "Effective Date"), the Company amended and
restated its operating agreement. In conjunction therewith, the membership
interests of the Company's owners were converted into Class A Units and Class B
Units. Class A Units represent all membership interests outstanding immediately
prior to the Effective Date; Class B Units represent the aggregate 1,111,111
shares issued at $2.25 per share.
9. SUBSEQUENT EVENT
On November 16, 1999, the Company contributed substantially all assets and
liabilities of the Company to 32 Records LLC, a newly formed, wholly-owned
subsidiary of CD Beat.com Inc. ("CDBeat"), in exchange for approximately 46% of
the issued and outstanding shares of common stock of CDBeat, a development stage
company that intends to provide branded, interactive information and programming
as well as merchandise to music enthusiasts over the Internet. The Company
received, and subsequently distributed to its members, an aggregate of 8,307,785
shares of common stock of CDBeat. In conjunction with this business combination,
the warrants issued
11
<PAGE>
with the $5.5 Million Credit Agreement were revised such that they are
exercisable for an aggregate of 1,466,080 shares of common stock of CDBeat.
12
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 781,944
Accounts receivable, net 1,794,217
Other receivables 56,541
Inventory 1,469,511
Royalty advances 73,567
Prepaid expenses and other current assets --
-----------
Total current assets 4,175,780
-----------
PROPERTY AND EQUIPMENT:
Furniture and fixtures, net 7,858
Equipment, net 21,116
-----------
Total property and equipment, net 28,974
-----------
OTHER ASSETS (Note 5):
Product masters and copyrights, net of accumulated
amortization of $2,510,306 in 1999 3,711,150
Loan acquisition costs and other intangible assets,
net of accumulated amortization of 291,310 in 1999 679,971
-----------
Total other assets 4,391,121
-----------
Total assets 8,595,875
===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 786,504
Copyrights and artists' royalties payable 939,547
Licensing advances - current 379,007
Other current liabilities 50,464
Notes payable 175,554
-----------
Total current liabilities 2,331,076
LONG-TERM DEBT - NONCURRENT 3,694,814
SUBORDINATED DEBT:
Notes payable to shareholders 278,196
Less- unamortized discount 21,290
-----------
Note payable less unamortized discount 256,906
-----------
Total noncurrent liabilities 3,951,720
-----------
Total liabilities 6,282,796
-----------
COMMITMENTS (Note 4)
MEMBER'S EQUITY:
Class A Units 2,609,678
Class B Units 2,208,853
Warrants 1,851,473
Discount on subordinated debt 67,925
Accumulated deficit (4,424,850)
-----------
Total members' equity 2,313,079
-----------
Total liabilities and members' equity $ 8,595,875
===========
The accompanying notes are an integral part of this consolidated balance sheet.
13
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(unaudited)
1999 1998
----------- -----------
NET SALES $ 5,075,044 $ 2,491,683
COST OF SALES 2,157,808 1,132,912
----------- -----------
Gross profit 2,917,236 1,358,771
----------- -----------
SELLING EXPENSES 1,035,373 521,274
GENERAL AND ADMINISTRATIVE EXPENSES 1,362,766 1,221,556
DEPRECIATION AND AMORTIZATION 1,094,607 867,861
----------- -----------
3,492,746 2,610,691
----------- -----------
Loss from operations (575,510) (1,251,920)
INTEREST EXPENSE, net 637,917 281,357
----------- -----------
NET (LOSS) BEFORE EXTRAORIDNARY ITEMS (1,213,427) (1,533,277)
EXTRAORDINARY ITEM ON LOAN EXTINGUISHMENT 660,166 --
----------- -----------
NET (LOSS) $ (553,261) $(1,533,277)
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
14
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Members' Discounted on Total
Contributed Class A Class B Subordinated Accumulated Members'
Capital Units Units Debt Deficit Equity
----------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ 2,602,000 $ -- $ -- $ -- $(2,091,527) $ 510,473
Conversion of shareholders' loan to
capital contribution 52,898 -- -- -- 52,898
Conversion of members' contributed
capital to Class A Units (2,654,898) 2,654,898 -- -- --
Issuance of Class A Units in acquisition
of affiliate entities -- 325,000 -- -- 325,000
Issuance of Class A Units in repayment
of loan due to shareholder -- 100,000 -- -- -- 100,000
Issuance of Class B Units, net of
issuance costs -- -- 2,208,853 -- -- 2,208,853
Redemption of Class A Units -- (470,220) -- -- (470,220)
Discount on subordinated date based
on imputed interest rate of 15% -- -- -- 67,925 -- 67,925
Net loss -- -- -- -- (1,533,277) (1,533,277)
----------- ----------- ---------- ---------- ----------- -----------
BALANCE, September 30, 1998 $ -- $ 2,609,678 $2,208,853 $ 67,925 $(3,624,804) $ 1,261,652
=========== =========== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
15
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Discounted Total
Class A Class B Subordinated Accumulated Members'
Units Units Warrants Debt Deficit Equity
---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 $2,609,678 $2,208,853 $ -- $ 67,925 $(3,871,589) $ 1,014,867
Issuance of warrants in conjunction with
long-term debt, at fair value -- -- 1,851,473 -- -- 1,851,473
Net loss -- -- -- -- (553,261) (553,261)
---------- ---------- ---------- ----------- ----------- -----------
BALANCE, September 30, 1999 $2,609,678 $2,208,853 $1,851,473 $ 67,925 $(4,424,850) $ 2,313,079
========== ========== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
16
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (553,261) $(1,533,276)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization 1,094,607 867,861
Non-cash interest expense and other financing costs 256,545 55,686
Increase in reserve for returns 57,020 19,583
Increase in receivables (383,463) (823,819)
Decrease in other assets 7,262 27,045
Increase in inventory (422,066) (827,557)
Decrease in royalty advances (9,162) (18,505)
Increase in payables and other current liabilities 93,066 947,906
(Decrease) increase in advances received (350,522) 48,566
----------- -----------
Net cash used in operating activities (209,974) (1,236,510)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (853) (17,458)
Acquisition of music rights in business combination -- (1,412,098)
----------- -----------
Net cash used in investing activities (853) (1,429,556)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in partners' contributions -- 477,898
Proceeds from long-term borrowings 2,500,000 264,400
(Payment of) proceeds from revolving line of credit (677,000) 472,971
(Payment of) proceeds from subordinated debt (239,222) 504,670
Increase in loan acquisition costs (588,178) (354,018)
Increase in preferred members interest -- 2,500,000
Increase in cost of members capital -- (291,147)
Repayment of loan due to shareholder -- (512,898)
Payment for treasury shares -- (470,220)
Payment for notes receivable (50,000) --
Increase in discount on subordinated debt 38,270 --
----------- -----------
Net cash provided by financing activities 983,870 2,591,656
----------- -----------
Net increase (decrease) in cash 773,043 (74,410)
CASH, beginning of period 8,901 74,410
----------- -----------
CASH, end of period $ 781,944 $ --
=========== -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period-
Interest $ 329,398 $ 182,590
Taxes $ 4,774 $ 3,150
NONCASH INVESTING AND FINANCING ACTIVITIES:
Increase of shares in repayment of loan due to shareholder $ -- $ 100,000
Increase of shares for business acquired $ -- $ 325,000
Issuance of warrants in conjunction with long-term $ 1,851,473 $ --
debt, at fair value
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
17
<PAGE>
CAKEWALK LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Cakewalk LLC ("Cakewalk," or the "Company") is an independent record company
specializing in the catalogue or reissue segment of the recorded music industry.
Cakewalk seeks to acquire classic, timeless recordings by established,
world-class artists who have been underperforming or underutilized with the
intention of recompiling, repackaging, remarketing and ultimately selling music
compact discs.
Property, Equipment and Depreciation
Property and equipment are carried at cost, less accumulated depreciation.
Depreciation is recognized using the straight-line method over the estimated
useful lives of the assets, which approximates 5 to 7 years.
Royalty Advances
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 50,
"Financial Reporting in the Record and Music Industry," advances to artists and
producers are capitalized as an asset when the current popularity and past
performance of the artist or producer provides a sound basis for estimating the
probable future recoupment of such advances from earnings otherwise payable to
the artist or producer.
Product Masters
Product masters, which primarily include the Company's catalogue of sound
recordings and copyrights, are amortized over their future estimated useful
lives, using a method that reasonably relates to the amount of net revenue
expected to be realized.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
transactions and accounts are eliminated in consolidation.
18
<PAGE>
Licensing Advances
Licensing advances represent the balance of advances received less revenues
earned in connection with licensing agreements.
Inventory
Inventory consists of compact discs, packaging and inserts and is valued at the
lower of cost or market, determined on a first-in, first-out basis, or net
realizable value. The cost of finished goods includes all direct product costs.
Income Taxes
The Company is a limited liability company taxed as a partnership for federal
and state income tax purposes and, as a result, its earnings are taxable
directly to the members.
Use of 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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Long-Lived Assets
The Company's policy is to record long-lived assets at cost, amortizing these
costs over the expected useful lives of the related assets. In accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," these assets are reviewed on a periodic
basis for impairment whenever events or changes in circumstances indicate the
carrying amounts of the assets may not be realizable. Furthermore, the assets
are evaluated for continuing value and proper useful lives by comparison to
expected future cash flows. For the nine months ended September 30, 1999 and
1998, there was no material impairment of the long-lived assets of the Company.
Revenue Recognition
Income from the sale of compact discs is recognized upon shipment to the
customer. However, in accordance with industry practice, substantially all sales
are made with return privileges. The Company provides for estimated future
returns by establishing a provision for sales returns.
License income is recognized proportionately over the term of the license
agreement or on the basis of actual sales of the license, whichever results in
the higher amount.
19
<PAGE>
2. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 1999 comprise the following:
1999
--------
Office furniture and fixtures $ 13,486
Equipment 63,644
--------
77,130
Less- Accumulated depreciation (48,156)
--------
$ 28,974
========
For the years ended September 31, 1999 and 1998, depreciation expense amounted
to $16,661 and $13,211, respectively.
3. LONG-TERM DEBT
At September 30, 1999, long-term debt consists of the following:
Term loan (a) $3,694,814
Subordinated debt (b) 256,906
----------
Total long-term and subordinated debt $3,951,720
==========
(a) In July 1999, through its newly created wholly owned subsidiary
Cakewalk BRE LLC, the Company refinanced their existing credit
agreement and entered into a new credit agreement for $5.5 million
(the "$5.5 Million Credit Agreement"). The $5.5 Million Credit
Agreement bears interest at 10.09% and matures July 2009. The $5.5
Million Credit Agreement requires the Company to maintain certain
financial ratios. For the period July 15, 1999 through June 15,
2000, the Company is required to make monthly payments of interest
only; commencing July 15, 2000, the Company will make 107 equal
monthly installment payments of principal and interest in the amount
of $77,701. In conjunction with the $5.5 Million Credit Agreement,
the Company issued warrants to the lender to purchase up to 15% of
the equity of the Company calculated on a fully diluted basis. In
conjunction with the business combination on November 16, 1999 (see
Subsequent Event Note 8), these warrants were revised such that they
are exercisable for an aggregate of 1,466,080 shares of common stock
of CDBeat. This fair value of these warrants calculated using the
Black Scholes pricing model, is $1,851,473 and has been recognized
as debt issuance costs.
(b) In August 1998, the Company issued promissory notes totaling
$498,850 to its existing shareholders (collectively the "Promissory
Notes"). The Promissory Notes, which are subordinated to the credit
facilities described above, have a stated interest rate of 10% and
mature in August 2001. The Company also issued 1,995,400 warrants to
its existing shareholders on a pro rata basis based upon each
individual shareholder's then current percentage ownership of the
Company. Immediately subsequent to the issuance of the warrants,
each individual shareholder's percentage ownership of the Company
20
<PAGE>
remained unchanged. As a result, no value has been assigned to the
warrants in the accompanying financial statements. Consequently, the
Company recorded a discount on the Promissory Note of approximately
$68,000, based upon a fair value interest rate of 15%. In accordance
with the terms of the Promissory Notes, interest expense due to the
holders of the notes that has not been paid increases the principal
amount of the Promissory Notes. At September 30, 1999, approximately
$29,000 of accrued interest expense was added to the face of the
Promissory Notes in the accompanying Consolidated Balance Sheet. In
June 1999, the Company repaid $271,354, in principal and interest to
the Promissory Note holders.
Interest expense for the nine months ended September 30, 1999 and
1998 was $637,917 and $281,357, respectively.
4. OTHER ASSETS
Other assets consist of the following at September 30, 1999 (000's omitted):
1999
------
Product Masters:
Muse-Landmark $3,573
Tom Jones 920
Judy Garland 1,653
Night Eagle 75
------
6,221
Less- Accumulated amortization 2,510
------
$3,711
======
5. CHANGE IN DISTRIBUTOR
During September 1997, the Company discontinued its domestic distribution
agreement with MS Distributing and entered into a new two-year domestic
distribution agreement with Ryko Distribution Partners on January 1, 1998. Under
the new agreement, the Company has been charged selling expenses.
21
<PAGE>
6. ACQUISITIONS
In February 1998, the Company issued Class A Units valued at $325,000 to acquire
100% of the outstanding shares of Cakewalk Productions and Productions II
(collectively the "Affiliates"). Prior to the Company's acquisition of the
Affiliates, the Affiliates were 100% owned by a shareholder of the Company.
Where applicable, the net assets of the Affiliates were recorded at their
respective fair market values.
7. CONVERSION OF MEMBERSHIP INTERESTS
Effective February 13, 1998 (the "Effective Date"), the Company amended and
restated its operating agreement. In conjunction therewith, the membership
interests of the Company's owners were converted into Class A Units and Class B
Units. Class A Units represent all membership interests outstanding immediately
prior to the Effective Date; Class B Units represent the aggregate 1,111,111
shares issued at $2.25 per share.
8. SUBSEQUENT EVENT
On November 16, 1999, the Company contributed substantially all assets and
liabilities of the Company to 32 Records LLC, a newly formed, wholly-owned
subsidiary of CD Beat.com Inc. ("CDBeat"), in exchange for approximately 46% of
the issued and outstanding shares of common stock of CDBeat, a development stage
company that intends to provide branded, interactive information and programming
as well as merchandise to music enthusiasts over the Internet. The Company
received, and subsequently distributed to its members, an aggregate of 8,307,785
shares of common stock of CDBeat. In conjunction with this business combination,
the warrants issued with the $5.5 Million Credit Agreement were revised such
that they are exercisable for an aggregate of 1,466,080 shares of common stock
of CDBeat.
22
<PAGE>
(b) Pro Forma Financial Information. The following unaudited pro forma financial
information gives effect to the Company's business combination with Cakewalk
LLC, which was completed on November 16, 1999. The unaudited pro forma balance
sheet gives effect to the combination of the Company and Cakewalk LLC as if such
transaction had been completed on September 30, 1999. Such unaudited pro forma
balance sheet is derived from the Company's unaudited balance sheet as of
September 30, 1999 included in its Quarterly Report on Form 10-QSB for the nine
months ended September 30, 1999 which is incorporated herein by reference and
Cakewalk's unaudited balance sheet as of September 30, 1999.
The pro forma income statements present unaudited pro forma results of
operations for the year ended December 31, 1998 and for the nine months ended
September 30, 1999. For purposes of the unaudited pro forma income statements,
the combination of the Company and Cakewalk LLC are included as if such
transaction had been completed on the first day of the periods presented. The
historical income statements for the year ended December 31, 1998 have been
derived from the audited financial statements of the Company included in its
Registration Statement on Form SB-2, Registration Number 333-70663 which is
oncorporated herein by reference, and Cakewalk's audited income statement for
the year ended December 31, 1998, and the historical income statements for the
nine months ended September 30, 1999 have been derived from the unaudited
financial statements of the Company included in its Quarterly Report on Form
10-QSB for the nine months ended September 30, 1999 which is incorporated herein
by reference and the unaudited income statement of Cakewalk LLC for the nine
months ended September 30, 1999.
These unaudited pro forma financial statements may not be indicative of
the results that actually would have occurred if the transaction referred to
above had been in effect on the dates indicated or the results that may be
obtained in the future.
Page of Form 8-K/A-1
Unaudited Pro Forma Balance Sheet as of
September 30, 1999 24
Unaudited Pro Forma Income Statement for
the nine months ended September 30, 1999 25
Unaudited Pro Forma Income Statement for
the year ended December 31, 1998 26
Notes to Unaudited Pro Forma Financial
Statements 27
23
<PAGE>
CDBEAT.COM, INC. AND CAKEWALK LLC
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
Cakewalk LLC CDbeat.com, Inc. COMBINED ADJUSTMENTS CONSOLIDATED
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets $ 4,175,780 $ 23,834 $ 4,199,614 $ 1,000,000 (7)
(50,000) (6) $ 5,149,614
Property and equipment, net 28,974 12,102 41,076 41,076
Other Assets 4,391,121 4,391,121 3,909,546 (3) 8,300,667
--------------------------------------------------------------- ------------
TOTAL ASSETS $ 8,595,875 $ 35, 936 $ 8,631,811 $ 4,859,546 $ 13,491,357
=============================================================== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities $ 2,331,076 $ 239,284 $ 2,570,360 $ (50, 000) (6) $ 2,520,360
Noncurrent Liabilities 3,951,720 3,951,720 3,951,720
--------------------------------------------------------------- ------------
TOTAL LIABILITIES 6,282,796 239,284 6,522,080 (50, 000) 6,472,080
--------------------------------------------------------------- ------------
SHAREHOLDERS' EQUITY
CAKEWALK LLC- Capital
Capital 4,886,457 4,886,457 (4,886,457) (4)
Paid--in capital 1,851,473 1,851,473 (1,851,473) (8)
Accumulated deficit (4,424,851) (4,424,851) 4,424,851 (9) --
----------- ------------------------
2,313,079 2,313,079 (2,313,079)
----------- ------------------------
Cdbeat Shareholders' Equity
Convertible Preferred Stock, $.001 par
value, 10,000,000 shares authorized
Class C preferred stock, 50,000 shares
issued and outstanding 50 50 (50) (1) --
-------------------------------------------------
Common stock, $.001 par value 4,496 4,496 500 (1)
20,000,000 shares authorized, 18,081,650 (3, 049) (2)
issued and outstanding 8,316 (3)
7,819 (7)
-------------------------------------------------
4,496 4,496 13,586 18,082
-------------------------------------------------
Paid-in capital 1,094,857 1,094,857 (450) (1)
(1,302,751) (5)
992, 181 (7)
4,886,457 (4)
3,049 (2)
3,901,230 (3)
1,851,473 (8)
-------------------------------------------------
1,094,857 1,094,857 10,331,189 11,426,046
-------------------------------------------------
Accumulated deficit (1,302,751) (1,302,751) 1,302,751 (5)
(4, 424, 851) (9)
-------------------------------------------------
(1,302,751) (1,302,751) (3,122, 100) (4,424,851)
-------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2,313,079 (203, 348) 2,109,731 4,909,546 7,019,277
--------------------------------------------------------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,595,875 $ 35,936 $ 8,631,811 $ 4,859,546 $ 13,491,357
=============================================================== ============
</TABLE>
24
<PAGE>
CDBEAT.COM, INC. AND CAKEWALK LLC
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
Cakewalk LLC Cdbeat.com, Inc. COMBINED ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net Sales $ 5,075,044 $ 5,075,044 $ 5,075,044
Cost of Sales 2,157,808 2,157,808 2,157,808
----------- ------------ ------------
Gross Profit 2,917,236 2,917,236 2,917,236
----------- ------------ ------------
EXPENSES
Selling 1,035,373 1,035,373 1,035,373
General and administrative 1,362,766 $ 1,179,227 2,541,993 $ 586,430 (11)
826,107 (12) 3,954,530
Depreciation and amortization 1,094,607 1,515 1,096,122 586,432 (10) 1,682,554
------------------------------------------------------------- ------------
Total expenses 3,492,746 1,180,742 4,673,488 1,998,969 6,672,457
------------------------------------------------------------- ------------
Loss from operations (575, 510) (1,180,742) (1,756,252) (1,998,969) (3,755,221)
Interest expense (income), net 637,917 (2,065) 635,852 635,852
------------------------------------------------------------- ------------
Loss before extraordinary item (1,213,427) (1,178,677) (2,392,104) (1,998,969) (4,391,073)
Extraordinary Item - Gain on Loan 660,166
Extinguishment 660,166 660,166
------------------------------------------------------------- ------------
Net loss $ (553,261) $ (1,178,677) $ (1,731,938) $ (1,998,969) $ (3,730,907)
============================================================= ============
Loss per share:
Pro forma basic and diluted loss per share - before extraordinary item $ (0.24)
Pro forma basic and diluted loss per share - extraordinary item 0.03
------------
Pro forma basic and diluted loss per share $ (0.21)
============
Shares used in computing pro forma basic and diluted loss per share-before
extraordinary item, extraordinary item, and basic and diluted loss per share 18,081,650
============
</TABLE>
25
<PAGE>
CDBEAT.COM, INC. AND CAKEWALK LLC
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE YEAR ENDING DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
Cakewalk LLC Cdbeat.com, Inc. COMBINED ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net Sales $ 4,183,676 $ 4,183,676 $ 4,183,676
Cost of Sales 1,806,889 1,806,889 1,806,889
------------ ----------- ------------
Gross Profit 2,376,787 2,376,787 2,376,787
------------ ----------- ------------
EXPENSES
Selling 889,330 889,330 889,330
General and administrative 1,751,185 $ 124, 813 1,875,998 $ 586,430 (14)
785,022 (15) 3,247,450
Depreciation and amortization 1,103,372 -- 1,103,372 521,273 (13) 1,624,645
-------------------------------------------------------------------------- ------------
Total expenses 3,743,887 124,813 3,868,700 1,892,725 5,761,425
-------------------------------------------------------------------------- ------------
Loss from operations (1,367,100) (124,813) (1,491,913) (1,892,725) (3,384,638)
Interest expense(income), net 412,962 (739) 412,223 412,223
-------------------------------------------------------------------------- ------------
Net Loss $ (1,780,062) $ (124,074) $(1,904,136) $ 1,892,725 $ (3,796,861)
========================================================================== ============
Pro forma basic and diluted loss per share $ (0.21)
============
Shares used in computing pro forma basic and diluted loss per share 18,081,650
============
</TABLE>
26
<PAGE>
CDBEAT.COM, INC. AND CAKEWALK LLC
Notes to Pro Forma Financial Statements (Unaudited)
(1) Basis of Presentation
The pro forma balance sheet combines the balance sheet of Cdbeat.com, Inc. (the
"Company") and Cakewalk LLC ("Cakewalk") as of September 30, 1999, assuming the
business combination had been completed as of the balance sheet date. The pro
forma income statement as of December 31, 1998, combines the income statement of
the Company for the period from inception (May 8, 1998) until December 31, 1998
with the income statement of Cakewalk for the year ended December 31, 1998. The
pro forma income statement as of September 30, 1999 combines the income
statements of the Company and Cakewalk for the nine months ended September 30,
1999. Both pro forma income statements reflect the business combination as if it
had occurred on the first day of the periods presented.
The historical balance sheets used in the presentation of the pro forma
financial statements have been derived from the Company's and Cakewalk's
unaudited financial statements as of September 30, 1999. The historical income
statements for the year ended December 31, 1998, have been derived from the
companies' audited financial statements, and the historical income statements
for the nine months ended September 30, 1999, have been derived from the
unaudited financial statements of the companies.
(2) Unaudited Pro Forma Adjustments
A description of the adjustments included in the unaudited pro forma financial
statements are as follows:
(1) Reflects the conversion of 50,000 shares of the Company's Class C
Preferred Stock to 500,000 shares of the Company's Common Stock.
(2) Reflects the surrender of 3,049,424 shares of Common Stock held by
management of the Company.
(3) Reflects the estimated fair market value of software acquired in
conjunction with the business combination of the Company and
Cakewalk.
(4) Reflects the elimination of Cakewalk's capital account.
(5) Reflects the elimination of the Company's accumulated deficit.
(6) Reflects the elimination of the $50,000 loan made by Cakewalk to the
Company.
(7) Reflects the aggregate $1 million investment by Atlantis Equities,
Inc. and Dylan LLC in exchange for an aggregate of 7,819,092 shares
of Common Stock of the Company.
27
<PAGE>
(8) Reflects the reclassification of Cakewalk's paid-in capital to
paid-in capital of the Company.
(9) Reflects the reclassification of Cakewalk's accumulated deficit to
accumulated deficit of the Company.
(10) Reflects the amortization expense (calculated using a 5-year
estimated useful life) of software acquired in conjunction with the
business combination of the Company and Cakewalk.
(11) Reflects consulting expense for options granted for 293,215 shares
of Common Stock of the Company as payment for services rendered in
connection with the business combination of the Company and
Cakewalk.
(12) Reflects compensation expense for options granted for 1,955,750
shares of Common Stock of the Company to an officer of the Company
upon consummation of the business combination of the Company and
Cakewalk.
(13) Reflects the amortization expense (calculated using a 5-year
estimated useful life) of software acquired in conjunction with the
business combination of the Company and Cakewalk.
(14) Reflects consulting expense for options granted for 293,215 shares
of Common Stock of the Company as payment for services rendered in
connection with the business combination of the Company and
Cakewalk.
(15) Reflects compensation expense for options granted for 1,955,750
shares of Common Stock of the Company to an officer of the Company
upon consummation of the business combination of the Company and
Cakewalk.
28
<PAGE>
(c) Exhibits. The following Exhibits are filed herewith:
Regulation S-K
Exhibit Number
- --------------
2 (a)* Contribution Agreement, dated as of October 29, 1999 between
CDBeat.com, Inc. and Cakewalk LLC.
2 (b)* Amendment Agreement, dated as of November 16, 1999 by and among
Atlantis Equities, Inc., Dylan LLC, CDBeat.com, Inc. Cakewalk LLC
and 32 Records LLC.
10* Employment Agreement, dated as of November 16, 1999 between
CDBeat.com, Inc. and Robert Miller.
23.1** Consent of Arthur Andersen LLP
23.2** Consent of Kingery, Crouse & Hohl, P.A.
99* Voting Agreement, dated as of November 16, 1999 between Robert
Miller and Dylan LLC.
- -------------------------
* Previously filed as part of this Current Report on Form 8-K on December 1,
1999.
** Filed herewith.
29
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CDBEAT.COM, INC.
By: /s/ Robert Miller
-----------------
Robert Miller, President
Dated: January 31, 2000
30
<PAGE>
EXHIBIT INDEX
Regulation S-K
Exhibit Number
- --------------
2 (a)* Contribution Agreement, dated as of October 29, 1999 between
CDBeat.com, Inc. and Cakewalk LLC.
2 (b)* Amendment Agreement, dated as of November 16, 1999 by and
among Atlantis Equities, Inc., Dylan LLC, CDBeat.com, Inc. Cakewalk
LLC and 32 Records LLC.
10* Employment Agreement, dated as of November 16, 1999 between
CDBeat.com, Inc. and Robert Miller.
23.1** Consent of Arthur Andersen LLP
23.2** Consent of Kingery, Crouse & Hohl, P.A.
99* Voting Agreement, dated as of November 16, 1999 between Robert
Miller and Dylan LLC.
- -------------------------
* Previously filed as part of this Current Report on Form 8-K on December 1,
1999.
** Filed herewith.
31
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K of our report dated November 16, 1999 included in
Registration Statement File No. 333-70663. It should be noted that we have not
audited any financial statements of the company subsequent to December 31, 1998
or performed any audit procedures subsequent to the date of our report."
Arthur Andersen LLP
New York, New York
January 27, 2000
Exhibit 23.2
[Letterhead of Kingery, Crouse & Hohl, P.A.]
January 27, 2000
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Form 8K of our
report dated February 16, 1999 (except for Note J as to which the Date is May
1, 1999), with respect to the financial statements of CDbeat.com, Inc. as of
and for the period May 8, 1998 (date of incorporation) to December 31, 1998,
filed with the Securities and Exchange Commission as part of the registration
statement on Form SB-2.
/s/ KINGERY CROUSE & HOHL, P.A.
