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 AND EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
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 of Organization) Identification No.)
1181 South Rogers Circle, Suite 5
Boca Raton, Florida 33487
(Address of Principal Executive Offices) (Zip Code)
(954) 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: 8,003,658 shares of Common Stock as of
November 1, 2000.
<PAGE>
NEWAGECITIES.COM, INC.
INDEX
Page
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 2000 (unaudited) 2
Statements of Operations (unaudited) for the Three
Months and Nine Months Ended September 30, 2000
and 1999 3
Statements of Cash Flow (unaudited) for the Nine Months
Ended September 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis or Plan of Operations 7-8
PART II OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
<PAGE>
NEWAGECITIES.COM, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Inventories $ 107,881
Prepaid expenses and other current assets 35,749
---------------------
TOTAL CURRENT ASSETS 143,630
FURNITURE AND EQUIPMENT, net 271,452
LICENSING AGREEMENT, net 372,917
GOODWILL, net 4,241,435
DEPOSITS AND OTHER ASSETS 35,924
---------------------
$ 5,065,358
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 12,004
Accrued expenses 141,070
Loans payable - shareholder 140,900
Current portion, capital leases payable 55,745
---------------------
TOTAL CURRENT LIABILITIES 349,719
---------------------
CAPITAL LEASES PAYABLE 107,492
---------------------
STOCKHOLDERS' EQUITY:
Common stock, $.02 par value, 45,000,000 shares
authorized; 8,003,658 shares issued and outstanding 160,073
Additional paid-in capital 10,145,958
Accumulated deficit (5,697,884)
---------------------
TOTAL STOCKHOLDERS' EQUITY 4,608,147
---------------------
$ 5,065,358
=====================
See notes to consolidated financial statements.
2
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<TABLE>
<CAPTION>
NEWAGECITIES.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended September 30, Nine Months January 29, 1999
---------------------------------- Ended (Inception) through
2000 1999 September 30, 2000 September 30, 1999
--------------- ---------------- -------------------- --------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
SALES $ 9,254 $ 748 $ 24,676 $ 748
COST OF SALES 6,076 712 16,100 712
--------------- ---------------- -------------------- --------------------
GROSS PROFIT 3,178 36 8,576 36
--------------- ---------------- -------------------- --------------------
OPERATING EXPENSES:
Research and development - - - 258,750
General and administrative 57,457 242,182 950,418 387,723
Amortization of goodwill 644,095 - 1,571,595 -
Noncash compensation expense 163,800 - 804,250 439,250
--------------- ---------------- -------------------- --------------------
865,352 242,182 3,326,263 1,085,723
--------------- ---------------- -------------------- --------------------
OPERATING LOSS (862,174) (242,146) (3,317,687) (1,085,687)
INTEREST INCOME (EXPENSE) (7,107) 2,628 (490,683) 6,754
--------------- ---------------- -------------------- --------------------
NET LOSS $ (869,281) $ (239,518) $ (3,808,370) $ (1,078,933)
=============== ================ ==================== ====================
BASIC LOSS PER SHARE OF COMMON STOCK $ (0.12) $ (0.07) $ (0.58) $ (0.34)
=============== ================ ==================== ====================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,452,158 3,600,158 6,606,158 3,133,439
=============== ================ ==================== ====================
</TABLE>
See notes to consolidated financial statements.
3
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<TABLE>
<CAPTION>
NEWAGECITIES.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months January 29,
Ended September 30, 1999 (Inception) through
2000 September 30, 1999
-------------------------- --------------------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,808,370) $ (1,078,933)
-------------------------- --------------------------
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization 1,597,589 79,819
Common stock issued for services 804,250 698,000
Common stock issued for interest expense 490,692 -
Changes in assets and liabilities:
Inventories (10,808) (93,440)
Prepaid and other current assets (23,274) (1,485)
Other assets 298 (13,741)
Accrued expenses 58,960 25,732
-------------------------- --------------------------
Total adjustments 2,917,707 694,885
-------------------------- --------------------------
NET CASH USED IN OPERATING ACTIVITIES (890,663) (384,048)
-------------------------- --------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (73,810) (57,053)
-------------------------- --------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (73,810) (57,053)
-------------------------- --------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft 12,004 -
Loans from shareholders 140,900 -
Principal payments on capital leases (8,500) -
Proceeds from issuance of common stock 7,500 599,700
-------------------------- --------------------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 151,904 599,700
-------------------------- --------------------------
NET DECREASE IN CASH (812,569) 158,599
CASH - beginning of period 812,569 -
-------------------------- --------------------------
CASH - end of period $ - $ 158,599
========================== ==========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Noncash investing and financing activities:
Common stock issued for acquisition $ 130,000 $ -
========================== ==========================
Common stock and warrants issued for license $ - $ 671,250
========================== ==========================
</TABLE>
See notes to consolidated financial statements.
4
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NEWAGECITIES.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION:
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 September 30, 2000, and the results of operations and cash flows
for the three-month periods ended September 30, 2000 and 1999 and the nine month
periods ended September 30, 2000 and 1999 have been included.
The results of operations for the nine-month period ended September 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 Form 10-KSB as filed with the Securities and
Exchange Commission for the year ended December 31, 1999.
No pro-forma results of operations of the Company and its subsidiary, MemberNet,
Inc., as if the acquisition had occurred on January 29, 1999, and for the period
ended September 30, 2000, has been presented since the activities of the
subsidiary 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
============================
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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 September 30, 2000, has been presented since the
activity of Top Dog Video Productions, Inc. was immaterial.
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 was recorded by the
Company as an amount due to shareholders. On September 8, 2000, 1,024,500 shares
were issued to such shareholders to satisfy this short-term advance.
During the nine-months ended September 30, 2000, the Company issued 830,000
shares of its common stock to consultants for services rendered. Such shares
were valued at their market value on the date of issuance, ranging between $0.26
and $0.81. The Company recorded compensation expense of $310,750 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>
MANAGEMENTS 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 - September 30, 1999 (unaudited)
We generated $748 in revenues during the nine-months ended September
30, 1999. These revenues consisted sales of product via internet orders. The
cost of such sales was $712 with a gross margin of 5%. Operating expenses were
$1,085,723 for the nine-months ended September 30, 1999. General and
administrative expenses of $387,723 consisted primarily of salaries of
approximately $200,000, professional fees of $40,000, travel related expenses of
$10,000 and office expenses of $100,000. 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 - September 30, 2000 (unaudited)
For the nine-months ended September 30, 2000, we generated revenues of
$24,676 and for the quarter then ended revenues were $9,254. The cost of goods
sold was $16,100 resulting in a gross profit of $8,576 for the nine-months
ended. Operating expenses were $3,326,263 for the nine-months ended and $865,352
for the quarter then ended. These expenses consisted mainly of general and
administrative expense of $950,418 which was primarily attributable to the
amortization of intangibles of $174,000, salaries of $399,183, marketing and
advertising of $57,000, consulting and professional fees of approximately
$230,000 and rent and office expenses of $90,000. Additionally, operating
expenses consisted of the amortization of goodwill of $1,571,595, which relates
to the acquisition of MemberNet, Inc. and Top Dog Video Productions, Inc., and
noncash compensation for common stock issued for consulting services of
$804,250. Additionally, we recorded interest expense of 490,692 which is
attributable to the convertible notes payable which were satisfied on March 9,
2000. The increase in operating expenses for the nine-months ended September 30,
2000 as compared to the nine-months ended September 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 the
borrowings from existing shareholders of approximately $141,000, along with the
repayment to these shareholders in shares of the Company's common stock. 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 nine-months ended September 30, 2000
was approximately $890,000 attributable primarily to the net loss of
approximately $3,808,000 and increases in inventories and prepaid and other
current assets of 34,000, offset by an increase in accrued expenses of $59,000
and the following noncash expenses: depreciation and amortization of $1,598,000,
stock issued for services of $804,000 and interest of 491,000. Cash used in
investing activities during the period was approximately $73,000 which was for
7
<PAGE>
leasehold improvements to new office space and the purchase of computer
equipment and software. Cash provided by financing activities was $152,000 which
consisted of a bank overdraft of $12,000, loans from shareholders of $141,000,
proceeds from the exercise of warrants of $7,500, offset by principal repayments
on capital lease of $8,500. Total cash decreased by approximately $813,000
during the nine-months ended September 30, 2000.
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 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 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 it is necessary to raise additional capital in order to meet our current
cash flow needs. 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
During the nine-months ended September 30, 2000, the Company issued
830,000 shares of its restricted common stock to consultants for
services rendered. Additionally, the Company issued 5,000 shares of
common stock upon the exercise of previously issued warrants.
In September 2000, the Company issued 1,024,500 shares to existing
shareholders of the Company to satisfy outstanding short-term
advances.
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
September 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.
Date: November 27, 2000 /s/ Joseph Ardito Jr.
Chairman of the Board
Chief Executive Officer and Director
(Principal Executive Officer)
10
