U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2000
----------------------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number: 333-86347
NEWAGECITIES.COM, INC.
(Name of Small Business Issuer in Its Charter)
Florida 91-0927532
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1181 South Rogers Circle, Suite 5, Boca Raton, FL 33487
(Address of Principal Executive Offices) (Zip Code)
(561) 989-0808
(Issuer's Telephone Number, Including Area Code)
Check mark whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,305,158 share of Common Stock as of
August 4, 2000.
<PAGE>
NEWAGECITIES.COM, INC.
INDEX
Page
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheet - June 30, 2000 (unaudited) 2
Statements of Operations (unaudited) for the Three
Months and Six Months ended June 30, 2000 and 1999 3
Statements of Cash Flow (unaudited) for the Six
Months Ended June 30, 2000 and 1999 4
Notes to Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 7 - 8
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
1
<PAGE>
NEWAGECITIES.COM, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 31,949
Inventories 107,455
Prepaid expenses and other current assets 35,749
-----------------
TOTAL CURRENT ASSETS 175,153
FURNITURE AND EQUIPMENT, net 280,111
LICENSING AGREEMENT, net 428,854
GOODWILL, net 4,711,223
DEPOSITS AND OTHER ASSETS 41,076
-----------------
$ 5,636,417
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 106,552
Loans payable - shareholders 1,961,690
Current portion, capital leases payable 55,745
-----------------
TOTAL CURRENT LIABILITIES 2,123,987
-----------------
CAPITAL LEASES PAYABLE 107,492
-----------------
STOCKHOLDERS' EQUITY:
Common stock, $.02 par value, 45,000,000 shares
authorized; 6,349,158 shares issued and outstanding 126,983
Additional paid-in capital 8,106,558
Accumulated deficit (4,828,603)
-----------------
TOTAL STOCKHOLDERS' EQUITY 3,404,938
-----------------
$ 5,636,417
=================
See notes to consolidated financial statements.
2
<PAGE>
NEWAGECITIES.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months January 29, 1999
----------------------------------- Ended (Inception) through
2000 1999 June 30, 2000 June 30, 1999
---------------- ---------------- ----------------- ---------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
SALES $ 11,952 $ - $ 15,422 $ -
COST OF SALES 7,768 - 10,024 -
---------------- ---------------- ----------------- ---------------------
GROSS PROFIT 4,184 - 5,398 -
---------------- ---------------- ----------------- ---------------------
OPERATING EXPENSES:
Research and development - 258,750 - 258,750
General and administrative 429,055 145,541 892,961 145,641
Amortization of goodwill 470,000 - 927,500 -
Noncash compensation expense 146,950 439,250 640,450 439,250
---------------- ---------------- ----------------- ---------------------
1,046,005 843,541 2,460,911 843,641
---------------- ---------------- ----------------- ---------------------
OPERATING LOSS (1,041,821) (843,541) (2,455,513) (843,641)
INTEREST INCOME (EXPENSE) - 4,126 (483,576) 4,126
---------------- ---------------- ----------------- ---------------------
NET LOSS $ (1,041,821) $ (839,415) $ (2,939,089) $ (839,515)
================ ================ ================= =====================
BASIC LOSS PER SHARE OF COMMON STOCK $ (0.17) $ (0.23) $ (0.48) $ (0.29)
================ ================ ================= =====================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,251,491 3,600,158 6,183,158 2,900,079
================ ================ ================= =======================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
NEWAGECITIES.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months January 29, 1999
Ended June 30, (Inception) through
2000 June 30, 1999
--------------------- ----------------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,939,089) $ (839,515)
--------------------- ----------------------
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation and amortization 1,062,378 2,462
Common stock issued for services 640,450 698,000
Common stock issued for interest expense 490,692 -
Changes in assets and liabilities:
Inventories (10,382) (89,500)
Prepaid and other current assets (23,274) (1,485)
Other assets (6,198) (12,002)
Accrued expenses 24,442 10,655
--------------------- ----------------------
Total adjustments 2,178,108 608,130
--------------------- ----------------------
NET CASH USED IN OPERATING ACTIVITIES (760,981) (231,385)
--------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (71,639) (51,285)
--------------------- ----------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (71,639) (51,285)
--------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from shareholders 53,000 2,000
Principal payments on capital leases (8,500) -
Proceeds from issuance of common stock 7,500 599,700
--------------------- ----------------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 52,000 601,700
--------------------- ----------------------
NET DECREASE IN CASH (780,620) 319,030
CASH - beginning of period 812,569 -
--------------------- ----------------------
CASH - end of period $ 31,949 $ 319,030
===================== ======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Noncash investing and financing activities:
Common stock issued for acquisition $ 130,000 $ -
===================== ======================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
disclosures required for annual financial statements. These financial statements
should be read in conjunction with the consolidated financial statements and
related footnotes for the year ended December 31, 1999 included in the Form
10-KSB for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of June 30, 2000, and the results of operations and cash flows for
the three-month periods ended June 30, 2000 and 1999 and six month periods ended
June 30, 2000 and 1999 have been included.
The results of operations for the six-month period ended June 30, 2000, are not
necessarily indicative of the results to be expected for the full year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB as filed with the
Securities and Exchange Commission for the year ended December 31, 1999.
No pro-forma results of the operations of the Company and its subsidiary,
MemberNet, as if the acquisition had occurred on January 29, 1999, and for the
period ended June 30, 1999, has been presented since the activity of MemberNet
was immaterial.
ACQUISITION:
On March 24, 2000, the Company acquired all the assets and assumed all of the
outstanding capital lease obligations of Top Dog Video Productions, Inc. for
44,000 shares of the Company's common stock. These shares were valued at the
fair market value of $2.95 for an aggregate purchase price of $130,000. The
following table summarizes the acquisition:
Purchase price $ 130,000
Less: Fair market value of assets acquired (153,014)
Liabilities assumed 171,737
Goodwill $ 148,723
==============
No pro-forma results of the operations of the Company and its subsidiary, Top
Dog Video Productions, Inc., as if the acquisition had occurred on January 29,
1999, and for the period ended June 30, 1999, has been presented since the
activity of Top Dog Video Productions, Inc. was immaterial.
5
<PAGE>
STOCKHOLDERS' EQUITY:
In December 1999 the Company issued $1,041,300 of convertible notes payable. On
March 9, 2000, certain shareholders of the Company exchanged 1,024,500,
personally held shares of the Company in satisfaction of the convertible notes.
The Company recorded interest expense of $490,692 in this transaction.
Additionally, the shareholders exchanged 165,000, personally held shares, to two
consultants for services rendered. Such shares were valued at $3.00 per share
and the Company recorded compensation expense of $493,500.
The value of the shares exchanged by the shareholders is shown in the financial
statements as amounts due to shareholders. Such amounts will be subsequently
satisfied by the issuance of common stock by the Company.
In May 2000 the Company issued 200,000 of its common stock to consultants for
services rendered. Such shares were valued at their market value on the date of
issuance, ranging between $0.50 and $0.81. The Company recorded compensation
expense of $146,950 in relation to these stock issuances.
During May 2000, warrants to purchase 5,000 shares of the Company's common stock
were exercised at $1.25 per share aggregating proceeds of $7,500.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements of the Company and the notes thereto appearing
elsewhere.
Results of Operations - January 1, 1999 - June 30, 1999 (unaudited)
We generated no revenues during the six months ended June 30, 1999.
Operating expenses were $843,641 for the six months ended June 30, 1999. General
and administrative expenses of $145,641 consisted primarily of salaries of
$93,000 and professional fees of $20,000. Noncash compensation for common stock
issued for consulting services and research and development costs were $439,250
and $258,750, respectively.
Results of Operations - January 1, 2000 - June 30, 2000 (unaudited)
For the six months ended June 30, 2000, we generated revenues of $15,422
and for the quarter then ended revenues were $11,952. The cost of goods sold was
$10,024 resulting in a gross profit of $5,398 for the six months ended.
Operating expenses were $2,460,911 for the six months ended and $1,046,005 for
the quarter then ended. These expenses consisted mainly of general and
administrative expenses of $893,000 which were primarily attributable to the
amortization of intangibles of $113,000, salaries of $356,000, marketing and
advertising of $57,000, consulting and professional fees of $207,000 and rent
and office expenses of $81,000. Additionally, operating expenses consisted of
the amortization of goodwill of $927,500, which relates to the acquisition of
Membernet, Inc.and noncash compensation for common stock issued for consulting
services of $640,500 . Additionally, we recorded interest expense of $490,692
which is attributable to convertible notes payable which were satisfied on March
9, 2000, offset by interest income of $7,100. The increase in operating expenses
for the six months ended June 30, 2000 as compared to the six months ended June
30, 1999 was due to the full implementation of our business plan.
Liquidity, Capital Resources and Plan of Operations
We have financed our growth and cash requirements through borrowings
from existing shareholders of $1,961,690 We do not have any credit facilities
from financial institutions or private lenders other than equipment leases
totaling $163,237, these leases were assumed in the Top Dog Video Productions,
Inc. acquisition. We do not currently have any material commitments for capital
expenditures.
Cash used in operations for the six months ended June 30, 2000 was
approximately $761,000 attributable primarily to the net loss of approximately
$2,939,000 and increases in inventories and other assets of $40,000, offset by
an increase in accrued expenses of $24,000 and by the following noncash
expenses: depreciation and amortization of $1,062,000, stock issued for services
of $640,000 and interest of $491,000. Cash used in investing activities during
the period was approximately $72,000 which was for leasehold improvements to new
office space and the purchase of computer equipment and software. Cash provided
by financing activities was $52,000 which consisted of $53,000 in loans from
shareholders, $7,500 from the exercise of warrants, offset by $8,500 in
principal payments on capital leases. Total cash decreased by approximately
$781,000 during the six months ended June 30, 2000.
7
<PAGE>
Since our inception, our goal has been to design and operate a Web
portal focused on providing services and selling goods related to the New Age
market. The term "New Age" refers to a set of beliefs and practices that
originated in past time and includes aromatherapy, astrology, crystal energy,
eastern philosophy, natural health, psychics, UFOs and a host of other topics.
The internet has emerged as one of the fastest growing sectors of the economy
and is becoming a major part of the lives of a greater number of people which
includes a large number of online shoppers. Newagecities.com is creating a Web
site that serves as a doorway or portal to a range of information, products and
services specifically designed with the New Age community in mind. In order to
accomplish our goal, we have created, and continue to develop, a complex
computer network and e-commerce based system which will allow our clients to
receive our services and purchase New Age related products from their personal
computers. We have developed our computer systems and network so that they can
evolve into fully a operating system which will all newagecities.com to provide
services and market its product on a larger scale.
Our goal is to build newagecities.com into a leading online destination
for members of the New Age community. We believe that the execution of this
strategy will help newagecities.com to realize revenue growth through expanded
e-commerce offerings as well as advertising and marketing opportunities. The key
to implementing this strategy requires increasing our membership, building brand
recognition, the continued enhancement of the online features of our Web portal,
maintaining fresh content and integrating new technologies.
In order to continue to implement our business plan, newagecities.com
will need to continue to build strategic alliances with companies that provide
products and services that are important for us to achieve our goals. Based upon
our current sales, anticipated future product sales and cash on hand, we believe
that we may be required to raise additional capital in order to meet our cash
flow needs over the next twelve months. Should revenues not reach projected
levels or should unforeseen events arise, we may be required to secure
additional funds to meet our operating needs sooner than anticipated. Additional
funding may not be available to us on acceptable terms.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
In May 2000 the Company issued 200,000 shares of its common stock to
consultants for services rendered. Additionally, the Company issued
5,000 of common stock upon the exercise of warrants previously
issued.
Item 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable
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) Exhibits:
Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
2000.
9
<PAGE>
SIGNATURES
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 thereunto duly authorized.
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
Date: August 4, 2000 /s/Joseph Ardito Jr.
Chairman of the Board
Chief Executive Officer and Director
(Principal Executive Officer)
10
