SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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, FLORIDA 33487
-------------------------
(Address of Principal Executive Offices)(Zip Code)
(561) 989-0808
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Securities Exchange Act of
1934:
Title of Each Class Name of Each Exchange on Which Registered
None None
Securities registered under Section 12(g) of the Securities Exchange Act of
1934:
COMMON STOCK, PAR VALUE $.02 PER SHARE
(Title of Class)
Check whether the registrant: (1) 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 [ ] No [X]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
State registrant's revenues for the year ended December 31, 1999: $2,672.
State the aggregate market value of the voting stock held by non-affiliates of
the registrant on March 31, 2000 computed by reference to the closing bid price
of its Common Stock as reported by the OTC Bulletin Board on that date ($2.00):
$8,841,316
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the registrant's Common Stock, par value
$.02 per share (the "Common Stock") as of March 31, 2000, was 6,100,158.
Transitional Small Business Disclosure Format (check one):Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
None.
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This Annual Report Form 10-KSB contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements,
other than statements of historical facts, included in or incorporated by
reference into this Form 10-KSB, are forward-looking statements. In addition,
when used in this document the words "anticipate," "estimate," "intends,"
"project" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Although the Company believes that the expectations we include in
such forward-looking statements are reasonable, we cannot assure you that these
expectations will prove to be correct.
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
Newagecities.com, Inc. is a development stage company whose goal is to
become a leading provider of Internet Community-building and electronic commerce
services for the New Age population and to create a demographically targeted Web
site on the Internet focused on the New Age community. The New Age population
consists of many millions of people interested in a variety of different areas,
including aromatherapy (mood changing aromas), astrology, crystal energy,
eastern philosophy, natural health, psychics, and a host of other topics.
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.
Newagecities.com features a broad set of easy-to-use tools designed to
create an online community of members. Members represent the core audience of
newagecities.com and its most valuable users. The site also features extensive
e-commerce capabilities. We offer a large selection of New Age related products
as well as the chance for other retailers and users to sell products as well.
Newagecities.com also offers high quality audio and video psychic readings
online.
Our background
Psychicnet.com, inc. was formed on January 29, 1999 to provide "New
Age" services and products on the Internet. On April 6, 1999, Psychicnet was
acquired by Virginia City Gold Mines, Inc., an Idaho corporation, for 2,700,000
shares of common stock. The exchange was completed through an Agreement and Plan
of Reorganization between Psychicnet and Virginia City. Virginia City had no
operations at the time of the acquisition. The exchange was accounted for as a
reverse acquisition under the purchase method for business combinations.
Subsequent to the exchange, Virginia City changed its name to newagecities.com,
Inc., its present corporate name. We expect to reincorporate into the State of
Florida in the near future.
Industry background and growth of Internet
The Internet has emerged as one of the fastest growing sectors of the
economy. As computer and Internet access prices decrease, the number of online
shoppers increases. In a recent study of online shoppers, Ernst & Young found
that 10% of the households they surveyed had purchased goods online in 1998 (The
Second Annual Ernst & Young Internet Shopping Survey; Ernst &
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Young, 1999), with that number expected to increase substantially in the coming
years. Additionally, more and more retailers are preparing to enter the world of
online shopping, recognizing the additional sales potentials and larger customer
access base.
The Internet has opened the door to new worlds for many and offers the
opportunity to reach millions of people with a product, service or idea. It
enables people to interact in ways that were not possible before with
traditional communication media. It also offers new and effective methods for
online retailers to connect with their customers and for advertisers to reach
highly targeted markets.
The New Age population and market
The term "New Age" is typically used to refer to a set of beliefs and
practices that originated in centuries past. These include aromatherapy,
astrology, crystal energy, eastern philosophy, natural health, psychics, UFOs
and a host of other topics. Although each of these areas is distinct from the
others, they are all considered within the umbrella concept of "New Age."
Although the term "New Age" has come in and out of vogue over the
years, the ideas that it represents have shown a steady growth in public
interest. Often items that fall into the New Age genre are classified within a
more mainstream category. The book sensation, The Celestine Prophecy, by James
Redfield, is a prime example. The book has sold over 7 million copies to date
and is clearly a "New Age" title, although it is commonly classified as fiction.
Other best- selling book examples include Conversations with God, by Neale
Donald Walsch, as well as the myriad of best-sellers by Deepak Chopra. These and
other New Age books are found on the shelves (and Web sites) of all major book
retailers in various sections of the store, including psychology, religion,
self-help, philosophy, UFOs, etc. Overall, it is clear that the market for New
Age products can be quite substantial. In fact, preliminary results of a
forthcoming study (New Editions New Age Consumer Survey, Sophia Tarla, Ph.D.,
New Editions Retailers) reveal the following encouraging facts about New Age
consumers:
o The average age is 44, with a majority between the ages of 30 and 59.
o Two-thirds have college degrees and 41% have completed post-graduate work.
o The average New Age consumer spends over $1,000 annually on New Age items.
o The New Age consumer base is estimated at over 38 million.
o New Age industry sales average over $44 billion dollars annually.
These statistics represent values for the United States only. We have
no information on the potential international market.
The average New Age consumer is also very close to the average Internet
consumer. Ernst & Young recently released a survey of online shopping (The
Second Annual Ernst & Young Internet Shopping Survey; Ernst & Young, 1999) which
highlighted the following facts about online shoppers:
o 68% are over 40 years old
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o 94% have had some college background
o 46% generate $50,000 plus in annual income
The need for a New Age online destination
The New Age population is a large and under served market segment that
desires interaction, communication, a sense of community and an environment that
caters to their particular needs. New Age consumers build their own communities
off-line. We believe they are interested in extending these communities onto the
Internet because of the opportunity for interaction on a larger scale.
For many in the New Age community there is also a need for access to
products and services that are not commonly available. Most New Age products are
purchased at small retail stores that specialize in this industry. However, in
many areas where these stores are not present, New Age consumers are somewhat
limited to those products available in more mainstream outlets. Even those that
have New Age stores in their vicinity are often disappointed because these
stores can only stock a small amount of products.
We believe that creating an online destination specifically designed
for New Age consumers is crucial to marketing to this population. The rapid
growth in the number of New Age consumers has created a marketplace for products
and services that outside advertisers should attempt to reach. Newagecities.com
offers a means for these advertisers to reach this market in a manner not
possible in more traditional advertising media.
The Newagecities.com solution
We believe our company can serve as the conduit between the New Age
community and the Internet. We have created a Web portal where members of this
community can interact, be entertained and shop in an environment that caters
specifically to their needs and desires. Newagecities.com integrates community
and commerce through a network of different Web sites and features focused
primarily on the New Age devotee and by offering updated content and a forum for
community interaction.
Newagecities.com enables visitors to create their own place within our
Web site. We offer users the ability to join and become involved in what we hope
will be an important site for the New Age community. They will be provided with
free disk storage space and publishing tools to quickly and easily create their
own pages within any of the site's topically organized categories. Members will
be encouraged to keep their areas current and interactive through the use of
chat and bulletin board services to be provided by us.
Newagecities.com has designed a broad range of e-commerce capabilities
to offer products to New Age consumers. There are a variety of company owned
stores available, each focused on a different New Age area. In addition, we will
offer people the opportunity to open mini-shops, where they can market their own
wares as well as selected products from our database of products. Mini-shops
will be easy for a user to set up and provide a marketplace for Web users to buy
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and sell online to other users and visitors in an easy to navigate environment
with newagecities.com deriving a percentage of all sales.
We will also allow people who do not own Web stores to offer products
that our stores or any of the other mini-stores offers via an affiliate program.
An affiliate program will allow anyone with a Web page to list an item for sale
on their existing page. The product can then be purchased through
newagecities.com, with the Web page owner receiving a commission.
An additional unique feature of newagecities.com is our "See and Hear"
psychics. Using the latest in "streaming" technology, users can receive an
online psychic reading complete with audio and video. The users both see and
hear the psychic during the reading, creating a bond and ensuring a more
intimate and emotional experience during a reading. The sophistication of this
technology sets newagecities.com apart from any competition and assures repeat
business and recommendations to other clients. Because of the unique nature and
high-quality of this service, newagecities.com expects to build a strong
word-of-mouth advertising campaign for this product
Newagecities.com has launched an Internet-only radio station at the Web
site address "newagesound.com." The station offers continuous (24 hours a day)
New Age music and programming. Newagesound.com is available to anyone with
Internet access. We are using advanced streaming technology to provide high
quality and accessibility for all users. We have available a full audio studio
as well as the ability to broadcast large amounts of data directly through one
of our direct high-speed connections to the Internet.
Newagesound.com generates revenues through product and advertising
sales. Advertising will be sold for both "on-air" commercials and on the Web
site. Web site advertising takes the form of banners or other graphics with
links back to the advertisers' sites. Product sales consist of New Age CDs.
Strategy
Our goal is to build newagecities.com into a leading online destination
for members of the New Age community. We believe that successful execution of
this strategy will help newagecities.com realize revenue growth through expanded
e-commerce offerings as well as advertising and marketing opportunities. We
believe the key elements to our success are as follows:
o Increasing Membership - One of the most valuable assets of any Web site is
its members. Typically members account for a large percentage of all
product purchases. Members also offer a target demographic category of
users for us as well as other advertisers and marketers. Membership is free
and simply requires that the user list some basic information, such as name
and e-mail address. Membership benefits include access to areas reserved
for members, special members-only services and discounts on selected
products. It is our intention to increase membership by actively marketing
and promoting the site, as well as constantly refreshing and updating the
content and other features.
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o Building Brand Recognition - The key to attracting increased numbers of
users to our site is to build brand recognition. Our strategy for enhancing
brand recognition consists of maximizing our exposure to the New Age
population through both on and offline advertising and marketing
opportunities.
o Enhancing Online Features - In order to encourage more visits and increased
lengths of stay, we will constantly be updating our content, products list
and service offerings. We are continually seeking new features to bring in
user traffic and keep their attention.
o Fresh Content - To encourage return visits, much of the content available
on newagecities.com is updated on a regular basis. Items such as daily
horoscopes, new item reviews and updated articles keep people coming back,
offering additional opportunities for advertising and product sales.
o New Features - New Internet technologies and interactive Web software will
be introduced all the time. To the extent that any of these new
developments complement our existing features and meet our strategic goals,
they will be implemented on the site.
Strategic alliances
We believe that one of the keys to our possible success will be
building strategic alliances with companies that provide products and services
that are important for us to reach our goals. To that end, we have already
entered into agreements with QSound Labs, Inc., Virtacon Corporation,
FinalThoughts.com , as well as an agreement for the acquisition of Member Net,
Inc.
Our alliance with QSound Labs provides us with licenses for Internet
Store and AffiliateDirect. Internet Store is the e-commerce software that will
serve as the backbone for all of our online shopping activities. Our online
stores are created using this software. In addition, Internet Store allows us to
offer other merchants the chance to open their own online stores.
AffiliateDirect is the software that allows Web page owners to sell any of our
products on their pages and earn a commission. We believe that Internet Store
and AffiliateDirect are already two of the most complete and easy-to-use
packages of their kind available. In addition, QSound has agreed to customize
the software to our specifications. QSound Labs will receive 3% of Web site
revenues generated from product sales using their software. In addition, they
received 400,000 shares of common stock and options to purchase 125,000 shares
of our common stock exercisable at $2.25 per share over a five year term, which
has been valued at $671,250.
Virtacon Corporation, formerly Virtual Financial Corp., is an Internet
development and public relations firm. Virtacon's designers and programmers
created our basic technology and design. In our initial stages of operations,
all of our Web content was housed at Virtacon. Virtacon received 150,000 shares
of common stock and options to purchase 75,000 shares of common stock
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exercisable at $2.25 per share over a five-year term for their services and work
product, which has been valued at $258,750.
We have recently formed a content partnership with FinalThoughts.com,
Inc, operators of the finalthoughts.com Web site. Under the terms of this
agreement, we will be providing content for use in their spirituality section
with links back to newagecites.com sites.
In 1999 we completed our acquisition of Member Net, Inc. of Chatsworth,
California. Member Net brings with it an existing Web site geared toward New Age
consumers, "www.mindbodysoul.com." Mindbodysoul.com contains a great deal of
content that complements that of newagecities.com and is being incorporated into
our site. Along with the additional content, mindbodysoul.com has an existing
membership base of over 60,000 people as well as approximately 500,000 page
views per month. The additional members and page views should increase our
revenues by allowing us to sell product to more people and offer more page views
for advertiser and sponsor purchases. In connection with the merger the
stockholders of Member Net received 2,5000,00 shares of common stock and
warrants to purchase 1,000,000 shares of common stock exercisable at $1.75 per
share, which were valued at $490,000.
Mindbodysoul.com also brings with it licenses for software that will
help us to bring in new visitors and keep the ones we have staying longer. One
of these licenses is for an Internet search engine, which we would cater
specifically to the New Age community. The search engine would contain a catalog
of New Age destinations on the Internet, allowing users to search by keyword or
category. Because the search engine will focus exclusively on New Age resources,
it will be easier for members of the New Age community to find relevant Web
sites and information. A second piece of software we would seek to license is
browser-based e-mail. With this software, users would be able to sign up for
their own newagecities.com e-mail address for free (i.e.
[email protected]). Users will be able to check their e-mail from any
place in the world with Internet access, using standard Web browser software
such as Microsoft's Internet Explorer(R) or Netscape's Navigator(R). Each time
they check their newagecities.com e-mail, they need to return to the site. These
two pieces of software could ensure a constant flow of site traffic and
opportunities to present advertising banners for us and other paid sponsors.
The newagecities.com network
Newagecities.com consists of a number of individual sections, each with
its own theme, content and product line. Each section includes its own set of
chat rooms and discussion boards, as well as the opportunity to purchase
products directly related to the section theme. These sections include the
following.
o Crystal Warehouse - devoted to people interested in Crystals. This section
includes information about specific crystals, their geological properties
and metaphysical uses as well as the opportunity to purchase Crystals.
o New Age Forum - dedicated to the modern devotee of the New Age. Information
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and products from a variety of areas including aromatherapy, healing,
meditation, yoga and other metaphysical disciplines.
o Present Alternative - created to supply information and products for those
interested in metaphysics and practices of other cultures including Far
Eastern, Tibetan, Egyptian, South American, Australian and Indonesian.
o Books N' Things - a comprehensive Alternative, Magic and Occult Superstore
of New Age related books and music.
o Shaman's Gate - a haven for those interested in Native American and other
indigenous peoples' practices, beliefs and ceremonial items which may be
purchased.
o Psychic Internetwork - home of our "See and Hear" Psychics. People prepay
for blocks of time with a psychic that they can see and hear over the
Internet using streaming technology.
Newagecities expects to generate revenues from a variety of sources. We
expect about 40% of our Year 2000 revenues to be realized directly through the
sale of products listed on our stores. Almost 50% of sales is expected to be
generated by psychics and other services. We also expect no more than 10% of our
revenues to be generated via commissions on sales through the "mini-shops" owned
by others. Finally, we expect that a nominal percentage of our revenues will be
generated from the sale of advertising and sponsorships throughout our content
areas.
Advertisers and sponsors
Newagecities.com expects to be able to market to either the entire New
Age niche, or to specific sectors within that market. As a result, we are
exploring relationships with marketers who wish targeted access to these people.
Advertisers will have access to this population via standard online marketing
vehicles such as banner advertisements on Web pages. In addition, we are seeking
sponsorship relationships with advertisers that wish to increase advertising
effectiveness and brand recognition. Sponsorship arrangements are typically for
longer lengths of time and involve higher dollar values. They also usually
involve more than simple banner advertising and integration of the sponsors
brand industry into a Web site section. We are currently assembling a sales and
marketing team, one of whose tasks will be to better understand the needs of our
customers and to help market towards these needs.
Marketing and promotions
Like most Internet companies, our marketing plan calls for both on and
off-line marketing. Off-line marketing will cover a full range of media
including television, radio, print, and event sponsorships. We are currently
seeking alliances with industry specific magazines that will provide us
increased exposure to a wide audience and a cost-effective means of advertising
to our target market. Similar ventures with other media companies are also being
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explored. We will also be working with mini-shop owners who own (physical)
retail stores to assist them in marketing their online stores and, by
association, newagecities.com to their existing customer base.
Online marketing includes ad placement in major search engines, keyword
based advertising in search engines as well as advertising purchases on other
relevant and popular online destinations such as America On Line, the GO Network
and the Microsoft Network. We are currently negotiating bulk discounts on
advertising rates because of the anticipated volume of our advertising needs
along with those of our strategic partners. Additionally, we hope to be able to
benefit from the marketing of individual Web pages and "mini-shops" that the
site's users house with newagecities.com. An affiliate program will offer a
unique opportunity to market our products and brand our name through other sites
on the Web.
International markets
We expect that some portion of our traffic and revenue generation will
result from markets outside of the United States. Many New Age ideas originated
outside the U.S., and now the Internet makes it easier for cultures and ideas to
spread globally. Additionally, many markets outside of the U.S. have no access
to the range of products and services offered at newagecities.com.
Technology
Our office contains a Windows NT network made up of computers purchased
through Dell. All of our Web content is being housed on IBM compatible servers
at our facility. All of our machines are Year 2000 compliant. Our Web servers
are connected directly to an OC-12, one of the fastest possible connections to
the Internet. All of our computers and our Internet connections have redundant
systems in place to ensure reliability.
Product fulfillment
To accommodate our users' demand for products, newagecities.com has
negotiated distribution arrangements with most of our vendors. As product
distributors, we will benefit from better pricing, allowing us to offer
discounted prices to clients on the site as well as the ability to wholesale to
other retailers, both on and offline. Products will be shipped from our
warehouse facility in Boca Raton, Florida. In the future we expect to arrange
with our major suppliers to ship directly from their facilities to our
customers.
Competition
We have found no Web sites devoted to the New Age community that
contain the breadth and depth of information, interaction, entertainment and
merchandise available at newagecities.com. Several content areas of
newagecities.com are currently available at other sites, however, we believe
they lack the completeness of our site. The ability to offer high quality "See &
Hear" psychics appears to be unique to newagecities.com. Other sites offering
psychic readings either do so via phone, email or video with text chat.
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The market for members, visitors, Internet advertising and online
product is rapidly evolving and competition is sure to increase. With the rapid
expansion of the New Age community and the limited number of barriers to entry,
we expect additional competition to arrive over time. Some of our potential
competitors may be larger, better funded and more technically capable than us.
Increased competition may lead to pricing pressures on our advertising and
product rates which could have adverse material effects on us.
Employees
Newagecities.com currently has twelve full-time employees. Four persons
are in management and provide services in the areas of marketing and business
development, finance and technology, one person is in administration, six
persons are employed in operations and technology, and one person is in
warehousing. No employee of newagecities.com is covered by a collective
bargaining agreement nor is represented by a labor union. Newagecities.com
considers its employee relations to be good.
ITEM 2. DESCRIPTION OF PROPERTIES
We currently lease facilities consisting of approximately 5,145 square
feet of office and warehouse space in Boca Raton, Florida. The lease is for a
five-year period. The first year's rent is $43,732.50, the second is $45,919 and
third, fourth and fifth are $48,215, $50,626, and $53,157, respectively, plus
newagecities' proportionate share of taxes, insurance and operating expenses on
the building.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material legal proceeding, nor are any of our
officers, directors or affiliates a party adverse to us in any legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock is traded over-the-counter and quoted on the OTC
Electronic Bulletin Board under the symbol "NACT". The reported high and low bid
prices for the common stock are shown below for the period from April 14, 1998,
the date our common stock began trading on the OTC Electronic Bulletin Board,
through December 31, 1999. The prices do not always represent actual
transactions. The following information gives effect to a 1:80 reverse stock
split of our outstanding common stock completed on April 6, 1999. As of March
31, 2000, we had 1,038 stockholders of record.
Period High Low
Quarter ended June 30, 1998 $3.20 $ .80
Quarter ended September 30, 1998 $2.48 $ .80
Quarter ended January 31, 1998 $4.80 $ 1.60
Quarter ended March 31, 1999 $5.60 $ 1.60
Quarter ended June 30, 1999 $8.00 $ 2.50
Quarter ended September 30, 1999 $3.75 $ 1.37
Quarter ended December 31, 1999 $2.88 $ 1.50
On March 31, 2000, the closing bid price of our common stock was $2.00.
We have never paid cash dividends on our common stock. We intend to
keep future earnings, if any, to finance the expansion of our business. We do
not anticipate that any cash dividends will be paid in the foreseeable future.
ITEM 6. 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.
During the 12-month period immediately following the date of this
Prospectus, our goal is to design and begin to operate a Web portal focused on
providing services and selling goods related to the New Age concept. 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
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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 must create, with the assistance of various consultants, 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 are developing our computer systems and network so that they can
evolve into a fully operating system which will allow newagecities.com to
provide services and market its products 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 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, enhancing the online features of our Web portal, maintaining fresh
content and integrating new technology.
In order to implement our business plan, newagecities.com will need to
build strategic alliances with companies that provide products and services that
are important for us to achieve our goals. To this end, newagecities.com has
completed licensing arrangements for and entered into an agreement which has
provided us with a Web page incorporating a "New Age Look".
To further advance our strategic plan, in December 1999,
newagecities.com consummated its acquisition of Member Net, Inc. which has an
existing Web site geared towards New Age consumers. Along with this content, the
acquisition provides newagecities.com with access to an existing membership base
of over 60,000 people as well as approximately 500,000 individual web page views
per month. The membership base offers us a targeted market to approach for sales
of our products and services. The additional page views gives us the opportunity
to sell advertising to others seeking access to our target market.
Member Net has a license agreement for the use of its Internet software
which extends until January 26, 2005. Under this agreement, the licensor is
entitled to 50% of all advertising revenue generated from the use of the
software. We cannot determine the future impact of this licensing agreement at
this time. Member Net's product sales will not be covered by this licensing fee.
Member Net has also entered into three one-year consulting agreements involving
total payments of $30,000.
Newagecities.com commenced active operations in April 1999. We began
receiving limited revenues beginning in August 1999, apart from any revenues
derived from the acquisition of Member Net, which has limited revenues, and
which is expected to be completed in the near future. For the period January 29,
1999 (inception) through December 31, 1999, newagecities.com had revenues of
$2,672 from sales of music CDs and operating expenses totaling $1,293,859,
representing essentially all of our net loss which totaled $1,939,134 for that
period. Operating expenses consisted of research and development charges of
$258,750, general and administrative expenses of $675,859 and non-cash charges
associated with compensation of $359,250. We funded these research and
development expenses through issuance of 150,000 shares of our common stock and
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warrants to purchase 75,000 shares. Our general and administrative expenses
consisted primarily of payroll and professional fees.
For the year ended December 31, 1998, Member Net had revenues of
$26,768, and income of $-0-. For the nine months ended September 30, 1999,
Member Net had revenues of $13,807, and a net loss of $135. The loss for this
period reflects a substantial increase in the cost of sales of $28,641 due to
increased business activities and sales efforts. Member Net's revenues were
generated from the sale of e-mail psychic readings, dream profiles and
astrological charts as well as commissions earned via banner ads.
At December 31, 1999, newagecities.com had current assets of $922,117
and a working capital deficit of $(201,293). Substantially all of the working
capital was obtained as a result of a private offering conducted between March
and April 1999 which resulted in the receipt of net proceeds of approximately
$600,000 and the issuance by newagecities.com of 300,000 shares at $2.00 per
share. At December 31, 1999, the Company had a cash balance of $812,569. Our
current financial resources will not be sufficient for us to accomplish our
goal. Over the next 12 months, our management estimates that we will need to
raise approximately $1.5 million and hopefully up to $3 million primarily to
further develop our computer network infrastructure ($170,000), acquire products
for sale to our New Age customers ($480,000), advertising ($500,000), marketing
($200,000) and for expanding our staff ($150,000). These funds will need to be
raised through a private placement of our securities, strategic investments or
public financing. Revenues from operations are expected to provide only limited
resources during this 12-month period.
Newagecities.com had an accumulated deficit of approximately $1,900,000
at December 31, 1999, and has incurred significant recurring operating losses.
These factors raise substantial doubt about our ability to continue as a going
concern without the raising of additional debt and/or equity financing to fund
operations. As we describe below, we are actively pursuing new debt and/or
equity financing and continually evaluating our financial position and
profitability. However, while we have raised additional funds, these
arrangements may not be sufficient to satisfy our needs, and we may not be able
to successfully implement our business strategy.
In November 1999, newagecities.com received a loan of $50,000 from an
existing stockholder and issued a secured promissory note collateralized by
equipment and inventory to the noteholder. Newagecities.com also issued a
warrant to purchase up to 50,000 shares of its common stock to this noteholder
exercisable at $1.50 per share on or prior to June 30, 2005.
On December 21, 1999, newagecities.com received net proceeds of
$952,498 and issued its promissory notes in the aggregate principal amount of
$1,041,300 to certain non-U.S. investors under Regulation S of the Securities
Act of 1933. The notes are due on April 30, 2000 and bear interest at the rate
of 8% per year payable at the time that principal is paid. The notes are
convertible into a total of 822,700 shares of common stock of newagecities.com.
With this funding, we will have the opportunity now to launch our
13
<PAGE>
advertising program on both the Internet and in trade magazines as well increase
our inventory of products. This should produce current revenues prior to April
30, 2000. In addition, it also allows us to increase our customer base and our
industry status, which should also help us to attract further capital as well as
to further increase our potential for advertising revenue. We cannot assure you,
however, that all this will take place or that we will be able to extend the
maturity dates of the notes if necessary. If we are not able to raise sufficient
additional capital or extend the maturity dates for the above loans, we may be
required to suspend or terminate our operations.
Impact of Year 2000
The year 2000 issue relates to whether computer systems will properly
recognize and process information relating to dates in and after the Year 2000.
These systems could fail or produce erroneous results if they cannot adequately
process dates beyond the Year 1999 and are not corrected. We have only limited
hardware and software in use, we have reviewed all software and hardware used
internally by us in all support systems to determine whether they are Year 2000
compliant. All of our existing software has been upgraded by the manufacturer or
was recently purchased and is Year 2000 compliant.
As of March 31, 2000, we have experienced no disruptions or failures to
our normal operations as a result of the transition into calendar year 2000, and
we have received no information to the effect that any third party with whom we
have any material relationship has experienced any such disruption or failure.
ITEM 7. FINANCIAL STATEMENTS
See "Index to Financial Statements" for the financial statements
included in this Form 10-KSB.
14
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
newagecities.com, Inc.:
Independent Auditors' Report F-2
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Consolidated Statement of Stockholders' Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F- 14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
newagecities.com, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of
newagecities.com, Inc. and Subsidiaries (A Development Stage Enterprise) as of
December 31, 1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period January 29, 1999 (Inception)
through December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 amount 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 audit provides 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
newagecities.com, Inc. and Subsidiaries (A Development Stage Enterprise) as of
December 31, 1999, and the results of its operations and its cash flows for the
period January 29, 1999 (Inception) through December 31, 1999, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 3 to
the consolidated financial statements the Company has an accumulated deficit of
approximately $1,939,000 at December 31, 1999, and has incurred significant
operating losses which raise substantial doubt about its ability to continue as
a going concern without the raising of additional debt and/or equity financing
to fund operations. Management's plans in regard to these matters are described
in Note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
March 1, 2000
F-2
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS:
Cash $ 812,569
Inventories 97,073
Prepaid expenses and other current assets 12,475
-----------
TOTAL CURRENT ASSETS 922,117
FURNITURE AND EQUIPMENT, net 77,118
LICENSING AGREEMENT, net 540,728
DEFERRED FINANCING COSTS 116,802
GOODWILL 5,490,000
DEPOSITS AND OTHER ASSETS 36,222
-----------
$ 7,182,987
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 82,110
Convertible notes payable 1,041,300
-----------
TOTAL CURRENT LIABILITIES 1,123,410
-----------
STOCKHOLDERS' EQUITY:
Common stock, $.02 par value, 45,000,000 shares
authorized; 6,100,158 shares issued and outstanding 122,003
Additional paid-in capital 7,876,708
Accumulated deficit (1,939,134)
-----------
TOTAL STOCKHOLDERS' EQUITY 6,059,577
-----------
$ 7,182,987
===========
See notes to consolidated financial statements.
F-3
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 29,1999 (INCEPTION) TO DECEMBER 31, 1999
SALES $ 2,672
COST OF SALES 1,763
-----------
909
-----------
OPERATING EXPENSES:
Research and development 258,750
General and administrative 675,859
Noncash compensation expense 359,250
-----------
1,293,859
-----------
OPERATING LOSS (1,292,950)
INTEREST EXPENSE, NET 646,184
-----------
NET LOSS $(1,939,134)
===========
BASIC LOSS PER SHARE OF COMMON STOCK $ (0.54)
===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,599,757
===========
See notes to consolidated financial statements.
F-4
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Total
---------------------- Additional
Number of Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
----------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 29, 1999 (Inception) 400,158 $ 8,003 $ (8,003) $ -- $ --
Issuance of common stock pursuant
to share exchange agreement 2,200,000 44,000 (44,000) -- --
Issuance of shares and warrants for
licensing agreement 400,000 8,000 663,250 -- 671,250
Sale of common stock 300,000 6,000 530,841 -- 536,841
Common stock and warrants issued for
services and financings 300,000 6,000 640,000 -- 646,000
Beneficial conversion feature of
convertible notes payable -- -- 605,000 -- 605,000
Issuance of common stock and warrants
for acquisition 2,500,000 50,000 5,440,000 -- 5,490,000
Warrants issued for debt -- -- 49,620 -- 49,620
Net loss -- -- -- (1,939,134) (1,939,134)
----------- --------- ---------- ---------- -----------
Balance, December 31, 1999 6,100,158 $122,003 $ 7,876,708 $(1,939,134) $ 6,059,577
=========== ========= ========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 29,1999 (INCEPTION) TO DECEMBER 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,939,134)
-----------
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation and amortization 139,928
Common stock issued for services 618,000
Beneficial conversion feature recorded
as interest expense 605,000
Warrants issued for debt 49,620
Changes in assets and liabilities:
Increase in inventories (97,073)
Increase in other current assets (12,475)
Increase in deferred financing costs (88,802)
Increase in other assets (36,222)
Increase in accrued expenses 82,110
-----------
Total adjustments 1,260,086
-----------
NET CASH USED IN OPERATING ACTIVITIES (679,048)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (86,524)
-----------
NET CASH USED IN INVESTING ACTIVITIES (86,524)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes payable 1,041,300
Proceeds from sale of capital stock 536,841
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,578,141
-----------
NET INCREASE IN CASH 812,569
CASH - beginning of period --
-----------
CASH - end of period $ 812,569
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Noncash investing and financing activities:
Common stock and warrants issued for licensing agreement $ 671,250
===========
Common stock and warrants issued for services and financing $ 646,000
===========
Common stock and warrants issued for acquisition $ 5,490,000
===========
Beneficial conversion feature recorded as additional
paid in capital $ 605,000
===========
Warrants issued for debt $ 49,620
===========
See notes to consolidated financial statements.
F-6
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 29, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
Pyschicnet.Com, Inc. ("Psychic") was formed on January 29, 1999 to provide "New
Age" services and products on the internet.
On April 6, 1999, Psychic was acquired by Virginia City Gold Mines, Inc.
("VCGM"), an Idaho corporation, for 2,200,000 shares of VCGM stock (the
"Exchange"). The Exchange was completed pursuant to the Agreement and Plan of
Reorganization between Psychic and VCGM. The Exchange has been accounted for as
a reverse acquisition under the purchase method for business combinations.
Accordingly, the combination of the two companies is recorded as a
recapitalization of Psychic, pursuant to which Psychic is treated as the
continuing entity. Subsequent to the Exchange, with the approval of the Board of
Directors, VCGM changed its name to newagecities.com, Inc. (the "Company").
The Company has adopted a December 31 year end.
On December 15, 1999 the Company completed the acquisition of MemberNet, Inc.
("MemberNet"), a California company formed in 1999.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION - The financial statements include
the accounts of the Company and its wholly-owned subsidiaries.
All material intercompany transactions have been eliminated.
B. FURNITURE AND EQUIPMENT - Furniture and equipment are carried
at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the various assets.
C. INVENTORIES - Inventories consisting of "New Age" related
products are stated at the lower of average cost or market.
D. INCOME TAXES - Income taxes are accounted for under Statement
of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which is an asset and liability approach that
requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial
statements or tax returns.
E. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts
reported in the balance sheet for cash and accrued expenses
approximate their fair market value based on the short-term
maturity of these instruments.
F-7
<PAGE>
F. 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 revenue
and expenses during the reporting period. Actual results could
differ from those estimates.
G. IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews
long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the
carrying amounts may not be recovered. At December 31, 1999,
the Company believes that there has been no impairment of its
long-lived assets.
H. COMPREHENSIVE INCOME/LOSS - The Company has adopted Statement
of Financial Accounting Standards No. 130 ("SFAS 130)
"Reporting Comprehensive Income". Comprehensive income is
comprised of net loss and all changes to the statements of
stockholders' equity, except those due to investments by
stockholders, changes in paid-in capital and distribution to
stockholders. Comprehensive income/loss and net loss for the
period ended December 31, 1999 were the same.
I. RESEARCH AND DEVELOPMENT - Research and development costs are
expensed as incurred. These costs primarily consists of fees
paid for the development of the Company's software. Research
and development costs for the period ended December 31, 1999
were $258,750.
J. STOCK BASED COMPENSATION - The Company accounts for stock
transactions in accordance with APB No. 25, "Accounting for
Stock Issued to Employees." In accordance with Statement of
Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," the Company adopted
the pro forma disclosure requirements of SFAS 123.
K. NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133 - "Accounting
for Derivative Instruments and Hedging Activities" which is
effective for fiscal quarters beginning after June 15, 1999.
This statement establishes accounting and reporting standards
for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging
activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. This
statement amends SFAS No. 52 - "Foreign Currency
Translation", and supersedes SFAS No. 80 - "Accounting for
Future Contracts", No. 105 - "Disclosure of Information
about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentration of Credit Risk",
No. 107 - "Disclosure about Fair Value of Financial
Instruments". The Company adopted SFAS No. 133 in fiscal
2000. Management believes that the impact of SFAS No. 133
will not be significant to the Company.
F-8
<PAGE>
In December 1999, the SEC issued Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements, ("SAB
101""). SAB 101 requires that four basic criteria must be met
before revenue can be recognized: (1) persuasive evidence of
an arrangement exists, (2) delivery has occurred or services
have been rendered, (3) the fee is fixed and determinable, and
(4) collectibility is reasonably assured. The Company is
required to comply with SAB 101 transactions entered into on
or after February 1, 2000, but does not expect it to have a
material impact on the Company's consolidated financial
position or results of operation.
K. LICENSING AGREEMENTS - Licensing agreements are stated at
cost, less accumulated amortization. Amortization is computed
using the straight-line method over an estimated life of three
years based upon management's expectations relating to the
life of the technology and current competitive market
conditions. The estimated life is reevaluated each year based
upon changes in these factors. Amortization for the year
ending December 31, 1999 was $130,522.
M. EARNINGS PER SHARE - The Company has adopted the provisions of
Financial Accounting Standards No. 128, "Earnings Per Share".
Basic net loss per share is based on the weighted average
number of shares outstanding. Potential common shares included
in the computation are not presented in the financial
statements as their effect would be anti-dilutive.
N. GOODWILL - Goodwill resulting from acquisition of MemberNet is
being amortized on a straight line basis over 3 years.
O. REVENUE RECOGNITION - The Company's revenues from
advertisements placed on the website are recognized at the
time advertisements are displayed on the website. Revenues
from the sale of products are recorded when the goods are
shipped or transmitted via E-mail.
2. FURNITURE AND EQUIPMENT
Furniture and equipment are as follows:
Estimated Life
-------------------
Office furniture 7 Years $ 12,110
Computer equipment 5 Years 64,904
Retail equipment 5 Years 9,510
-------
86,524
Less: Accumulated depreciation 9,406
-------
$ 77,118
=======
F-9
<PAGE>
3. BASIS OF PRESENTATION
The Company has an accumulated deficit of approximately $1,890,000 at
December 31, 1999, and has incurred significant operating losses which
raise substantial doubt about its ability to continue as a going
concern without the raising of additional debt and/or equity financing
to fund operations. Management is actively pursuing new debt and/or
equity financing and continually evaluating the Company's
profitability, however any results of their plans and actions cannot be
assured. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
4. LICENSING AGREEMENT
The Company acquired a licensing agreement from a software development
company for the use of its e-commerce software. The license was
acquired for 400,000 shares of the Company's common stock. Such shares
of common stock were valued at the fair market value of $1.60 (based on
the Reg D 504 offering during April 1999 of $2.00 per share less a 20%
discount for restrictions on the resale of such shares). The Company
also issued warrants to purchase 125,000 shares of the Company's common
stock exercisable at $2.25 per share over a five year period. The
warrants have been valued at $31,250 which has been included in the
value of licenses. In addition the software development company will
receive 3% of Web site revenues generated from product sales using
their software.
MemberNet has entered into a license agreement for the use of its
internet software. Under the terms of the Agreement the licensor is
entitled to 50% of all advertising revenue generated from the use of
the software.
5. COMMITMENTS
The Company leases certain office and warehouse space under operating
leases commencing January 2000. The leases expires January 2005.
Minimum rental commitments are as follows:
2000 $ 43,000
2001 $ 46,000
2002 $ 48,000
2003 $ 51,000
2004 $ 53,000
The Company has entered into three employment agreements with its
officers in April 1999. All three of the agreements are for two years
and expire in March 2001. The agreement with its Chief Executive
Officer, provides for an annual salary of $85,000 and $106,000 in years
ended 2000 and 2001, respectively. The agreement with the President of
the Company,
F-10
<PAGE>
provides for an annual salary of $60,000 and $75,000, respectively. The
agreement with the Company's Chief Financial Officer, calls for an
annual salary of $50,000 and $62,500, respectively. All of the above
contracts provide for a bonus of up to 25% of the prior years annual
salary. Prior to the establishment of an independent compensation
committee the bonuses are based on certain performance criteria. After
the committee is formed the bonuses will be at the discretion of the
committee. Additionally, the above officers will receive 20,000 options
to purchase shares of the Company's common stock at $2.00 per share at
the end of each contract year.
MemberNet has entered into three one year consulting agreements
commencing December 1999 for a total of $30,000.
6. INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires the recognition of deferred tax assets and
liabilities for both the expected impact of differences between the
financial statements and tax basis of assets and liabilities, and for
the expected future tax benefit to be derived from tax loss and tax
credit carryforwards. SFAS 109 additionally requires the establishment
of a valuation allowance to reflect the likelihood of realization of
deferred tax assets.
The provision (benefit) for income taxes differs from the amounts
computed by applying the statutory federal income tax rate to income
(loss) before provision for income taxes, the reconciliation is as
follows:
Taxes (benefit) computed at statutory rate $ (776,000)
Effect of permanent differences 509,000
Income tax benefit not utilized 267,000
--------
Net income tax benefit $ -
========
The Company has a net operating loss carryforward for tax purposes
totaling approximately $665,000 at December 31, 1999 expiring in the
year 2014.
Listed below are the tax effects of the items related to the Company's
net tax liability:
Tax benefit of net operating loss carryforward $ 267,000
Valuation Allowance (267,000)
--------
Net deferred tax asset recorded $ -
========
F-11
<PAGE>
7. STOCKHOLDERS' EQUITY
On April 6, 1999 the Company declared a 1 for 80 reverse stock split.
The financial statements for all periods presented have been
retroactively adjusted for the stock split.
The Company has completed a private placement of 500,000 shares of its
common stock at $2.00 per share. The Company issued 300,000 of these
shares for gross proceeds of $600,000 (net proceeds of $536,841) and
issued 200,000 shares (see below) for services rendered to the Company.
In April 1999, the Company issued 150,000 shares of common stock to a
consultant who provides both website development and public relations
services. These shares were valued at the fair market value of $1.60
(based on Reg D 504 offering during April 1999 of $2.00 per share less
a 20% discount for restrictions on the resale of such shares). The
Company also issued to the consultant warrants to purchase 75,000
shares of common stock exercisable at $2.25 per share. Such warrants
have been valued at $18,750. The Company has expensed the total amount
of $258,750 as research and development.
In April 1999, the Company issued 50,000 shares of common stock to a
broker dealer for consulting services rendered on behalf of the
Company. These shares were also valued at the fair market value of
$1.60 (based on Reg D 504 offering during April 1999 of $2.00 per share
less a 20% discount for restrictions on the resale of such shares). The
Company has charged the total amount of $80,000 to Additional Paid in
Capital.
Additionally, in April 1999, the Company issued 100,000 shares to a
consultant for services rendered. These shares were valued at the fair
market value of $1.60 (based on Reg D 504 offering during April 1999 of
$2.00 per share less a 20% discount for restrictions on the resale of
such shares). Such issuance was recorded as non-cash compensation
expense.
In March through May 1999, the Company granted warrants to various
consultants and employees to purchase an aggregate of 563,000 shares of
common stock at a price of $2.25 per share. Such warrants were valued
at $140,000 and recorded as non-cash compensation expense.
In June 1999, the Company granted warrants to various consultants to
purchase an aggregate of 237,000 shares of common stock at a price of
$2.25 per share. Such warrants were valued at $59,250 and recorded as
non-cash compensation expense.
In November 1999 the Company granted 50,000 warrants exercisable at
$1.50 per share on or prior to June 30, 2005 to a stockholder in
connection with a $50,000 loan which was repaid prior to year end.
F-12
<PAGE>
8. STOCK WARRANTS
A summary of outstanding warrants at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Shares Range of Remaining Average
Underlying Exercise Contractual Exercise
Warrants Price Life Price
--------------- --------------- ---------------- ----------
<S> <C> <C> <C> <C>
Outstanding at beginning of period - $ - $ -
Granted 2,250,000 1.50-2.50 2 - 4.5 yrs. 2.00
Exercised - - -
--------------- --------------- ---------------- ----------
Outstanding at December 31, 1999 2,250,000 $ 1.50-2.50 $ 2.00
=============== =============== ==========
</TABLE>
In November 1999, 120,000 options were granted. In 1999, had
compensation cost for the Plan been determined based on the fair value
at the grant dates for awards under the Plan, the Company's net loss
and net loss per share would have increased to the pro forma amounts
indicated below:
As Pro
Reported Forma
---------- ------------
Net loss ($1,939,134) ($1,992,642)
Basic and diluted net loss per share ($0.54) ($0.55)
The fair value of each option grant is estimated on the date of grant
using the Black Scholes option-pricing method with the following
weighted average assumptions used for grants in 1999; dividend yield
0%, expected volatility 20%, risk-free interest rate 6.00%, expected
lives in years 3.
The weighted average fair value of stock options granted during the
year ended December 31, 1999 was $2.00.
9. CONVERTIBLE NOTES PAYABLE
On December 21, 1999, newagecities.com and Subsidiaries received net
proceeds of $952,498 and issued its promissory notes in the aggregate
principal amount of $1,041,300 to certain non - U.S. investors under
Regulation S of the Securities Act of 1933. The notes are due on April
30, 1999 and bear interest at the rate of 8% per year payable at the
time that principal is paid. The notes are convertible into a total of
822,700 shares of common stock of newagecities.com. Additionally, the
Company issued 200,000 warrants to purchase the Company's common stock
to the holders' of these notes exercisable at $2.50 per share on or
before June 30, 2005. Such warrants were valued at $28,000. Units of
the notes representing a principal amount of $801,000 are secured by a
pledge of 650,000 shares by two of the principal officers of the
Company.
In connection with the financing the Company has recorded a beneficial
conversion feature of $605,000, which is included in interest expense
in the statement of operations.
F-13
<PAGE>
10. ACQUISITION
In December 1999, the Company acquired all of the outstanding shares
of common stock of MemberNet for 2,500,000 shares of the Company's
common stock, exercisable at $1.75 per share, and 1,000,000 warrants
to purchase shares of the Company's common stock, with the acquisition
being accounted for as a purchase business combination. These shares
were valued at the fair market value of $2.00 (based on Reg D 504
offering during April 1999 of $2.00). A final allocation of the
purchase price is dependent upon valuations and other studies that are
not yet complete. Accordingly the purchase price allocation is
preliminary and has been recorded as goodwill.
The computation is as follows:
Net book value of assets acquired $ -
Purchase price:
Common stock 5,000,000
Warrants 490,000
-----------
Total purchase price 5,490,000
-----------
Goodwill $ 5,490,000
===========
No pro-forma results of the operations of the Company and MemberNet, as
if the acquisition had occurred on January 29, 1999, has been presented
since the activity of MemberNet was immaterial.
F-14
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors and Executive Officers
The following table includes the names, positions held and ages of our
executive officers and directors.
NAME AGE POSITION
- ---- --- --------
Joseph Ardito, Jr. 42 Chairman and Chief Executive Officer
Dr. Kenneth Shenkman 34 President and Director
Stanley Siegel 67 Chief Financial Officer, Secretary,
Treasurer and Director
Cory W. Smith 29 Chief Technology Officer
Mr. Ardito has served as a director, Chairman of the Board of Directors
and Chief Executive Officer of newagecities.com since March 1999. Mr. Ardito
previously worked in the following positions:
<TABLE>
<CAPTION>
DATES AND POSITION BUSINESS OR ACTIVITY
<S> <C>
Between 1990 and 1998-Owner Present Alternative, Boca Raton, Florida.
This retail store sold New Age products and
psychic readings
.
1986 to 1991 - Vice President and Partner Professional Accounting Services Corp. New York,
New York. This is an accounting firm where Mr.
Ardito headed the marketing and client relations
departments, oversaw bookkeeping and income tax
departments and led the computer integration
division
Dr. Shenkman has served as a director and President of newagecities.com since
March 1999.
Dr. Shenkman previously worked in the following positions:
15
<PAGE>
September 1997 - April 1999-Consultant As independent consultant, Dr. Shenkman
has been an independent computer and
Internet consultant and trainer.
January 1999 - March 1999-Director of Arc Communications, Inc., Tinton Falls,
Internet Marketing New Jersey. This company is engaged in
designing Web sites.
July 1995 - September 1998-Vice President Operations Computer Coach, Inc., Boca Raton, Florida.
This company engages in computer training
and Internet web design
Stanley Siegel is the father-in law of Mr. Ardito. Mr. Siegel has served as a
director, Chief Financial Officer, Secretary and Treasurer of newagecities.com
since March 1999. Mr. Siegel previously worked in the following positions:
1955 - 1996 Director of Human Resources, Head of
Special Accountings Department and
Accountant. United Merchants and
Manufacturers, Inc.
Mr. Smith was appointed Chief Technology Officer in October, 1999. Mr. Smith
previously worked in the following positions:
Between May 1999 to September, 1999 - Bidnow.com, inc., Boca Raton, Florida
Interim Director of Technology This is a start-up Internet auction company
August 19, 1998 to May 1999 - Web Enabled Technologies Equifax Corporation, St. Petersburg, Florida
Manager
January 1996 to August 1998 - Senior Online Designed and Miami Herald Online, Miami, Florida
Project Manager
May 1996 to January 1999 - Director of Technology Alton Entertainment Corp. (Internet Division Miami
Beach, Florida
September 1995 to May 1996 - Creative Director Internet Communication of America, Inc. Miami, Florida
</TABLE>
16
<PAGE>
Our directors are elected at each annual meeting of stockholders. Our
directors hold office until the next annual meeting of stockholders. Executive
officers are elected by and serve at the discretion of the Board of Directors.
Member Net has the right to designate for nomination the names of three
prospective directors. We have not received the name of designees at this time.
Board Committees
We plan to establish an audit committee, which will be responsible for
making recommendations concerning the engagement of independent public
accountants, reviewing the plans and results of the audit engagement with the
independent public accountants, approving professional services provided by the
independent public accountants and reviewing the adequacy of our internal
accounting controls. The Audit Committee will be comprised of designees of
Member Net, who will not be management employees, and Mr. Siegel. We will
organize an independent compensation committee which will evaluate compensation
programs for management and other employees as well as individual salary
arrangement with our executive officers. This committee will also be composed of
designees of Member Net or other independent directors added to our Board of
Directors.
Employment Agreements
We entered into two-year employment agreements with Messrs. Ardito,
Shenkman and Siegel. No employment agreement has been prepared for Mr. Smith at
this time. The terms of the agreements are as follows:
JOSEPH ARDITO: Mr. Ardito is to receive an annual salary of $85,000
beginning April 1, 1999 and ending March 31, 2000 and $106,000 annual salary for
the period April 1, 2000 and ending March 31, 2001. Mr. Ardito is entitled to a
bonus of up to 25% of his annual salary each year. On April 1, 1999, Mr. Ardito
was granted options to purchase a total of 40,000 shares of common stock at an
exercise price of $2.00 per share. These options expire on March 31, 2003, and
may be exercised for up to 20,000 shares beginning March 31, 2000 and as to the
remaining 20,000 shares beginning March 31, 2001.
KENNETH SHENKMAN: Dr. Shenkman is to receive an annual salary of
$60,000 beginning April 1, 1999 and ending March 31, 2000 and $75,000 annual
salary for the period April 1, 2000 and ending March 31, 2001. On April 1, 1999,
Dr. Shenkman was granted options to purchase a total of 40,000 shares of common
stock at an exercise price of $2.00 per share. These options expire on March 31,
2003, and may be exercised for up to 20,000 shares beginning March 31, 2000 and
as to the remaining 20,000 shares beginning March 31, 2001.
STANLEY SIEGEL: Mr. Siegel is to receive an annual salary of $50,000
beginning April 1, 1999 and ending March 31, 2000 and $62,500 annual salary for
the period April 1, 2000 and ending March 31, 2001. On April 1, 1999, Mr. Siegel
was granted options to purchase a total of 40,000 shares of common stock at an
exercise price of $2.00 per share. These options expire on March 31, 2003, and
may be exercised for up to 20,000 shares beginning March 31, 2000 and as to the
17
<PAGE>
remaining 20,000 shares beginning March 31, 2001.
Each of the employment agreements terminates on April 2001. The
officers are to devote full time and efforts to our business. Their agreements
also have non-disclosure covenants during the term of employment and for a
period of two years after the term of their employment. We may terminate each
employment agreement for cause.
Until an independent compensation committee is formally established to
administer the above bonus program, no bonus will be paid to these executives
for the initial year under their contracts unless the following objective
criteria are met. The bonus will be based as follows:
o At least 10,000 new member sign-ups by March 31, 2000;
o At least six communities (these are unique content areas or subjects of
interest) are available at our website;
o e-commerce capabilities are introduced with at least 5,000 products
available for sale;
o Availability of live see and hear psychics at our website;
o At least ten merchant-owned "mini-shops" opened;
o At least three other company-owned websites are up and running.
In the event that any of these six criteria are not met, the amount of
the bonus will be reduced by 16.7% from the maximum allowed. If for some reason
an independent compensation committee is not organized by the second year of the
employment contract, then the criteria for earning the bonus will be doubled.
Key-man life insurance
We do not have key-man life insurance on our officers or directors.
Limitation on liability and indemnification matters
The Idaho Business Corporation Act allows us to indemnify our officers
and directors from liability incurred in furtherance of their duties under
certain circumstances. In criminal proceedings, Idaho law states that we may
indemnify an officer or director if he or she acted in good faith and reasonably
believed that his or her conduct was in the best interests of the corporation if
he or she had no reasonable cause to believe his or her conduct was unlawful. In
addition, Idaho law requires us to indemnify directors, who succeed on the
merits of any defense proceeding or in any defense proceeding to which he or she
was party because he or she was a director of the corporation for reasonable
expenses incurred in connection with the proceeding. If we chose to indemnify
18
<PAGE>
our officers and directors in accordance with the provisions of the Idaho
Business Corporation Act, our financial resources may be significantly affected.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, may be permitted to our directors, officers and controlling persons
pursuant to the above, we are aware that in the opinion of the Securities and
Exchange Commission, this indemnification is against public policy as expressed
in the securities laws, and is, therefore unenforceable.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
The Company is not subject to Section 16(a) of the Securities Exchange
Act of 1934, which requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's outstanding Common Stock
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information relating to all compensation
awarded to, earned by or paid by us during the past three fiscal years to: (a)
our Chief Executive Officer; and (b) each of our executive officers who earned
more than $100,000 during the fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
Fiscal Other Annual LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Options/ (#) Payouts Compensation
- --------------------------- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Joseph Ardito, CEO 1999 $78,465 - - 40,000 - -
</TABLE>
Option Grants in Last Fiscal Year
The following table sets forth information concerning our grant of
options to purchase shares of our common stock during the fiscal year ended
December 31, 1999 to (a) our Chief Executive Officer; and (b) each of our
executive officers who earned more than $100,000 during the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
Percent of
Number of Total Options/
Securities SARs Granted
Underlying To Employees Exercise Or
Options/SARs In Fiscal Base Price
Name Granted (#) Year ($/Sh) Expiration Date
<S> <C> <C> <C> <C> <C> <C>
Joseph Ardito, CEO 400,000/-0- 33% $2.00 -0-/-0-
</TABLE>
19
<PAGE>
Option Exercises and Holdings
The following table contains information with respect to the exercise
of options to purchase shares of common stock during the fiscal year ended
December 31, 1999 to (a) our Chief Executive Officer; and (b) each of our
executive officers who earned more than $100,000 during the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Options/SARs Options/SARs
On Value At FY-End (#) At FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Ardito, CEO -0- -0- 20,000/20,000 -0-/-0-
</TABLE>
Long-Term Incentive Plans Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Number Performance
of Shares or Other Estimated Future Payouts Under
Units or Period Until Non-Stock Price-Based Plans
------------------------------
Other Rights Maturation Threshold Target Maximum
Name (#) or Payout ($or #) ($or #) ($ or #)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph Ardito, CEO - - - - -
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, information known
to us relating to the beneficial ownership of shares of common stock by: each
person who is the beneficial owner of more than five percent of the outstanding
shares of common stock; each director; each executive officer; and all executive
officers and directors as a group.
Unless otherwise indicated, the address of each beneficial owner in the
table set forth below is care of Newagecities.com, Inc., 1181 South Rogers
Circle, Suite 5, Boca Raton, Florida 33487. The address for Messrs. Quan,
Gallagher, Muhlfeld and Gould is c/o Member Net, Inc., 9610 DeSoto Avenue,
Chatsworth, CA 91311.
We believe that all persons named in the table have sole voting and
20
<PAGE>
investment power with respect to all shares of common stock beneficially owned
by them.
Under the securities laws, a person is considered to be the beneficial
owner of securities that can be acquired by him within 60 days from the date of
this prospectus upon the exercise of options, warrants or convertible
securities. We determine beneficial owner's percentage ownership by assuming
that options, warrants or convertible securities that are held by him, but not
those held by any other person and which are exercisable within 60 days of the
date of this prospectus, have been exercise or converted. As of March 31, 2000,
there were 6,100,158 shares of our common stock issued and outstanding. The
issued and outstanding shares do not include 850,000 shares of our common stock
issuable upon the exercise of warrants issued in connection with our private
placement, or warrants to purchase 1,000,000 shares issued to the stockholders
of Member Net in connection with that acquisition.
<TABLE>
<CAPTION>
Names and Address of Number of shares Percentage of shares
Beneficial Owner Beneficially Owned Beneficially Owned
<S> <C> <C>
Joseph Ardito 1,220,000(1) 18.5%
Kenneth Shenkman 369,500(2) 5.8%
Stanley Siegel 90,000(3) 1.5%
Q-Sound Labs 525,000(4) 8.6%
James Warner 225,000(5) 3.7%
CALP II Limited Partnership 632,700(6) 10.8%
New Amsterdam Investment Trust 240,000(7) 3.9%
Nolan Quan 1,006,250(8) 15.8%
John Gallagher 853,125(9) 13.4%
Robert Gould 743,750(10) 11.8%
Bruce Muhlfeld 437,500(11) 7.0%
All executive officers and
directors as a group (3 persons) 1,679,500 24.3%
- -----------------
</TABLE>
(1) The number of shares owned by Joseph Ardito also includes 20,000 shares
held by his wife directly, 22,000 shares held by his wife as custodian
for two minor children and 470,000 shares issuable to Mr. Ardito to
replace shares delivered by Mr. Ardito to satisfy a portion of the
Company's outstanding indebtedness. Mr. Ardito disclaims beneficial
ownership of the shares held by his wife. The table includes 20,000
under options that are currently exercisable, but does not include
20,000 shares under options that may be exercised beginning March 31,
2001.
(2) The table includes 20,000 under options that are currently exercisable
and 219,500 shares issuable to Dr. Shenkman to replace shares delivered
by Dr. Shenkman to satisfy a portion of the Company's outstanding
indebtedness. The table does not include (a) 26,000 shares of our
common stock beneficially owned by Mr. Shenkman's parents, (b) 6,750
shares of our common stock issuable upon the exercise of warrants owned
by Mr. Shenkman's parents, and (c) 20,000 shares under options that may
be exercised beginning March 31, 2001.
(3) The number of shares beneficially owned by Stanley Siegel includes (a)
20,000 shares owned by his wife, (b) 20,000 shares under options that
are currently exercisable and (c) 70,000 shares issuable to Mr. Seigel
to replace shares delivered by Mr. Siegel to satisfy a portion of the
Company's outstanding indebtedness. The table does not include 20,000
shares under options that may be exercised beginning March 31, 2001.
21
<PAGE>
(4) Does not include warrants to purchase 15,000 shares of our common stock
issued to David Gallagher, President of Q-Sound Labs.
(5) Mr. Warner's address is 4910 Blue Lake Drive, Boca Raton, Florida 33431
These include 200,000 shares of Virtacon Corporation for which he has
sole voting and dispositive authority.
(6) CALP II Limited Partnership's address is Box HM 1737, Hamilton, HM 6X,
Bermuda. These include 632,700 shares that may be issued following
conversion of convertible promissory notes. CALP II Limited Partnership
is owned 80% by Canadian Advantage Limited Partnership and 20% by
Advantage Bermuda Fund. Canadian Advantage Limited Partnership is owned
in turn by Messrs. Marc Valentine and Ian McKinnon, all of whom have an
address at Box HM 1737 Hamilton, HM 6X, Bermuda.
(7) New Amsterdam Investment Trust's address is Box N-65, Nassau, Bahamas.
These include 190,000 shares that may be issued following conversion
of convertible promissory notes and 50,000 shares that may be issued
on exercise of warrants. New Amsterdam Investment Trust is owned by
Mr. Adrian C. Jones, Charlotte House, Box N-65, Nassau, Bahamas.
(8) Includes 287,500 shares issuable upon exercise of warrants issued in
connection with our acquisition of Member Net, Inc.
(9) Includes 243,750 shares issuable upon exercise of warrants issued in
connection with our acquisition of Member Net, Inc.
(10) Includes 212,500 shares issuable upon exercise of warrants issued in
connection with our acquisition of Member Net, Inc.
(11) Includes 125,000 shares issuable upon exercise of warrants issued in
connection with our acquisition of Member Net, Inc.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the organization of Psychicnet.com, Inc., Messrs.
Ardito, Shenkman and Siegel received shares of common stock in connection with
the formation of Psychicnet.com. On March 8, 1999, we acquired Psychicnet.com,
Inc., and as result of this transaction, 1,900,000 shares, 400,000 shares and
100,000 shares of our common stock were exchanged with Joseph Ardito, Kenneth
Shenkman and Stanley Siegel, respectively. Thereafter, Messrs. Ardito, Shenkman
and Siegel transferred an aggregate of 180,000, 35,000 and 30,000 shares of
common stock respectively to various family members and friends without
consideration and solely in appreciation of their relationships. Since at
organization, Psychicnet had no value and newagecities.com had highly limited
value at the time newagecities.com acquired the stock of Psychicnet from our
current management, we believe that the share issuance was fair and reasonable
to us.
Mr. Ardito also transferred 400,000 shares of common stock to Q-Sound
Labs valued at $1.60 per share in exchange for Q-Sound software licenses. In
22
<PAGE>
addition to the 400,000 shares of our common stock Q-Sound received from Mr.
Ardito, Q-Sound also received warrants to purchase 125,000 shares of our common
stock at $2.25 per share. Mr. David Gallagher, president of Q-Sound, separately
received warrants to purchase 15,000 shares of our common stock at $2.25 per
shares for agreeing to serve on our Board of Advisors if it is constituted.
Since this transaction was the result of arms-length bargaining and the price
per share of $1.60 for restricted stock corresponded to our stock offering under
Rule 504 of $2.00, we believe this transaction was fair and reasonable.
In February 1999, the individuals serving as officers and directors of
newagecities.com at that time purchased an aggregate of 700,000 shares of common
stock from newagecities.com at $.01 per share. The proceeds were used to pay
expenses associated with the acquisition of Psychicnet.com. Since our current
management was not involved with the original company (which changed its name to
newagecities.com, Inc. following the acquisition), it is difficult to evaluate
whether this transaction was fair to shareholders. However, since newagecities
had only nominal value at this time, we believe that the transaction was fair
and reasonable.
During March and June 1999, we issued 6,000 shares of our common stock
to the parents of Dr. Shenkman for $12,000 or $2.00 per share as part of our
Rule 504 offering.
In April 1999, we made a $40,000 interest free loan to Mr. Joseph
Ardito, an officer and director. The loan was repaid by Mr. Ardito in June 1999.
Inasmuch as the transactions involving officers and directors of
newagecities.com and its predecessor, Psychicnet.com, occurred during a start-up
phase or prior to active operations, it is difficult to evaluate whether these
transactions represented arm's length transactions. We are unable to judge
whether these transactions were as favorable to newagecities.com as those that
could have been secured in arm's length transactions, but no operations would
have begun if these transactions had not occurred. However, given the above
circumstances, and the difficulties in developing a start-up operation facing
large hurdles, we believe these transactions were fair and reasonable to
newagecities.com.
On July 30, 1999, the Company entered into a Merger Agreement and Plan
of Reorganization dated as of June 21, 1999 with Member Net, Inc. which provides
for the merger of Member Net into a wholly-owned subsidiary of newagecities.com.
The merger was consummated in December 1999. The five stockholders of Member Net
received from newagecities, a total of 2,500,000 shares of common stock and
warrants to purchase 1,000,000 shares of common stock exercisable at an exercise
price of $1.75 per share on or prior to June 30, 2001.
On December 21, 1999, we issued promissory notes in the principal
amount of $1,041,300 under Regulation S to non-U.S. investors and received net
proceeds of $952,498. The notes mature April 30, 2000. The notes are convertible
into a total of 822,700 shares of our common stock. Units of the notes
representing a principal amount of $801,000 are secured by a pledge of 650,000
shares by two of the principal officers of newagecities.com. Thomson Kernaghan &
23
<PAGE>
Co. Limited, which acquired $801,000 principal amount of promissory note as
agent for a non-U.S. investor, received a commission of $80,100 and also
received a warrant to purchase 150,000 shares of our common stock exercisable at
$2.50 per share on or prior to January 21, 2002. In addition, if during this
exercise period, our common stock trades for less than $1.26 for 20 consecutive
trading days, then we must also issue an additional warrant to purchase 150,000
shares during the same exercise period at the same exercise price. The investor
for units of promissory notes in the principal amount of $240,300 received
warrants to purchase 50,000 shares of our common stock for the same term and at
the same exercise price, but without the additional warrant. We are obligated to
register all of the underlying shares by April 30, 2000. If we do not, then we
are to pay a penalty equal to 2% of the invested amount for each month after
April 30.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS:
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
2 Agreement and Plan of Reorganization between Virginia City Gold Mines, Inc.
and Psychicnet.com, Inc. dated March 8, 1999(1)
3.1 Articles of Incorporation(1)
3.2 Articles of Amendment to the Articles of Incorporation(1)
3.3 Articles of Amendment to the Articles of Incorporation(1)
3.4 Bylaws(1)
10.1 Employment Agreement between newagecities.com, Inc. and Joseph Ardito(1)
10.2 Employment Agreement between newagecities.com, Inc. and Kenneth Shenkman(1)
10.3 Employment Agreement between newagecities.com, Inc. and Stanley Siegel(1)
10.4 Lease Agreement between newagecities.com, Inc. and R. A. La Pointe(1)
10.5 Internet Consulting/Marketing Agreement between Psychicnet.com, Inc. and
Virtual Financial Corp.(1)
10.6 License Agreement between newagecities, Inc. and Q Sound Labs, Inc.(1)
10.7 Merger Agreement and Plan of Reorganization(1)
10.8 Lease Agreement between newagecities.com, Inc. and R.A. La Pointe(1)
10.9 Note, Security Agreement and Warrant between newagecities.com, Inc. and Marc Siegel.(1)
27 Financial Data Schedule(2)
- -------------------------
</TABLE>
(1) Incorporated by reference to exhibits with the corresponding number
filed with our registration statement on form SB-2 (File No. 333-86347)
(2) Filed herewith.
24
<PAGE>
B. REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
25
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Boca Raton, Florida on April 13,
2000.
NEWAGECITIES.COM, INC.
By: /s/ Joseph Ardito, Jr.
Joseph Ardito, Jr.
Chairman and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Joseph Ardito, Jr. Chairman of the Board, Chief April 13, 2000
- ------------------------------------
Joseph Ardito, Jr. Executive Officer and Director
(Principal Executive Officer)
/s/ Kenneth Shenkman President and Director April 13, 2000
- ------------------------------------
Kenneth Shenkman
/s/ Stanley Siegel Chief Financial Officer, April 13, 2000
- ------------------------------------
Stanley Siegel Secretary and Treasurer
(Principal Accounting and
Financial Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001091164
<NAME> newagecities.com, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-29-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 812,569
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 97,073
<CURRENT-ASSETS> 922,117
<PP&E> 86,524
<DEPRECIATION> 9,406
<TOTAL-ASSETS> 7182,987
<CURRENT-LIABILITIES> 1,123,410
<BONDS> 0
0
0
<COMMON> 122,003
<OTHER-SE> (90,511)
<TOTAL-LIABILITY-AND-EQUITY> 5,937,574
<SALES> 2,672
<TOTAL-REVENUES> 2,672
<CGS> 1,763
<TOTAL-COSTS> 1,293,859
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 646,184
<INCOME-PRETAX> (1,939,134)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,939,134)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,939,134)
<EPS-BASIC> (.54)
<EPS-DILUTED> (.54)
</TABLE>
