<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
or
[ ] Transition report under Section 13 or 15(d) of the Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM TO_________________ TO ___________________
COMMISSION FILE NUMBER 0-27591
POLITICS.COM, INC.
(Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 33-0836078
------------------------------- ----------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2530 S. RURAL ROAD, TEMPE, AZ 85282
----------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(602) 731-9100
--------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [
]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
11,049,045 shares of Common Stock, par value $0.00001, as of November 9, 2000
-----------------------------------------------------------------------------
(Title of Class)
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
<PAGE> 2
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
INDEX
PART I FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet as of September 30, 2000.
Consolidated Statement of Operations for the quarters ended September 30, 2000
and September 30, 1999, and for the nine months ended September 30, 2000, the
period from March 23, 1999 (inception) to September 30, 1999, and for the period
March 23, 1999 (inception) to September 30, 2000.
Consolidated Statement of Cash Flows for the nine months ended September 30,
2000, and for the period from March 23, 1999 (inception) to September 30, 1999,
and for the period March 23, 1999 (inception) to September 30, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PART II: OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash $ 700
-----------
Total Current Assets 700
Property and Equipment (Net of Accumulated Depreciation
of $28,014) 124,798
Intangibles - Internet Domain Names (Net of Accumulated
Amortization of $52,819) 77,681
Security Deposit 35,000
-----------
Total Assets $ 238,179
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable $ 924,659
Capitalized Lease Obligations 47,600
Notes and Loans Payable - Related Parties 1,362,344
-----------
Total Current Liabilities 2,334,603
Capitalized Lease Obligations - Net of Current Portion 69,393
-----------
Total Liabilities 2,403,996
-----------
Commitments and Contingencies
Stockholders' Deficit:
Preferred Stock, $.00001 Par Value; 20,000,000 Shares
Authorized, None Issued --
Common Stock, $.00001 Par Value; 50,000,000 Shares
Authorized, 10,949,033 Shares Issued and Outstanding 110
Additional Paid-In Capital 6,514,393
Deficit Accumulated in the Development Stage (8,680,320)
-----------
Total Stockholders' Deficit (2,165,817)
-----------
Total Liabilities and Stockholders' Deficit $ 238,179
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Period For the Period
Three Months Ended Nine Months March 23, 1999 March 23, 1999
September 30, Ended (Inception) to (Inception) to
2000 1999 September 30, 2000 September 30, 1999 September 30, 2000
------------ ------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,075 $ -- $ 5,679 $ -- $ 5,679
------------ ------------ ------------ ------------ -----------
Costs and Expenses:
Selling, General and
Administrative Expenses 701,953 3,853,911 2,281,682 3,961,634 7,414,042
Website Development Costs -- 528,354 195,211 545,354 1,044,775
Gain on Sale of Internet
Domain Names (74,834) -- (62,973) -- (62,973)
Interest Expense 22,431 6,220 62,241 6,220 77,759
Loss on Abandonment 79,256 -- 79,256 -- 79,256
Depreciation and Amortization 27,731 15,639 91,555 15,639 133,140
------------ ------------ ------------ ------------ ------------
Total Costs and Expenses 756,537 4,404,124 2,646,972 4,528,847 8,685,999
------------ ------------ ------------ ------------ ------------
Net Loss $ (754,462) $ (4,404,124) $ (2,641,293) $ (4,528,847) $ (8,680,320)
============ ============ ============ ============ ============
Earnings Per Common Share -
Basic:
Weighted Average Common
Shares Outstanding 10,878,006 8,500,901 9,984,094 4,067,663
============ ============ ============ ============
Net Loss Per Common Share -
Basic $ (.07) $ (.52) $ (.26) $ (1.11)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Period For the Period
March 23, 1999 March 23, 1999
Nine Months Ended (Inception) to (Inception) to
September 30, 2000 September 30, 1999 September 30, 2000
------------------ ------------------ ------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Loss $(2,641,293) $(4,528,847) $(8,680,320)
Adjustment to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 91,555 15,639 133,140
Stock Based Compensation 884,813 3,435,675 4,874,269
Stock Issued for Services and Other Consideration 337,111 -- 337,111
Loss on Abandonment of Property and Equipment 79,256 -- 79,256
Gain on Sale of Internet Domain Names (62,973) -- (62,973)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Prepaid Expenses 5,900 (8,409) --
Increase in Security Deposits -- (35,000) (35,000)
Increase (Decrease) in Accounts Payable (76,411) 619,236 924,659
----------- ----------- -----------
Net Cash Used by Operating Activities: (1,382,042) (501,706) (2,429,858)
----------- ----------- -----------
Cash Flows from Investing Activities:
Capital Expenditures -- -- (253,402)
Purchase of Intangibles - Internet Domain Names (15,000) (206,000) (221,000)
Deposits Paid -- -- --
Proceeds on Sale of Internet Domain Names 140,000 -- 140,000
Net Assets Acquired in Reverse Acquisition -- 65,666 65,666
----------- ----------- -----------
Net Cash Provided (Used) by Investing
Activities 125,000 (140,334) (268,736)
----------- ----------- -----------
Cash Flows from Financing Activities:
Capitalized Lease Obligations (Payments) (19,041) -- 116,993
Sale of Common Stock - Private Offerings 500,000 136,500 923,000
Expenses of Private Offerings (2,500) (60,000) (62,500)
Proceeds of Borrowings from Related Parties 532,846 434,786 1,447,344
Payments on Borrowings from Related Parties (92,000) -- (92,000)
Sale of Common Stock - Related Parties -- 100 100
Exercise of Stock Options 3,000 -- 3,000
Proceeds of Contributed Capital 212,357 -- 212,357
Issuance of Note Payable - Related Party -- 151,000 151,000
----------- ----------- ----------
Net Cash Provided by Financing Activities 1,134,662 662,386 2,699,294
----------- ----------- ----------
Increase (Decrease) in Cash (121,380) 20,346 700
Cash - Beginning of Period 123,080 -- --
----------- ----------- ----------
Cash - End of Period $ 700 $ 20,346 $ 700
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
For the Period For the Period
March 23, 1999 March 23, 1999
Nine Months Ended (Inception) to (Inception) to
September 30, 2000 September 30, 1999 September 30, 2000
------------------ ------------------ ------------------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Information:
Cash Paid for Interest $ -- $ -- $ --
========== ========== ==========
Cash Paid for Income Taxes $ -- $ -- $ --
========== ========== ==========
Non-Cash Financing Activities:
Issuance of 6,990,000 Shares of Common Stock
Upon Conversion of Indebtedness $ -- $ 144,000 $ 144,000
========== ========= ==========
Issuance of 3,333 Shares of Common Stock
to Vendor $ -- $ -- $ 10,000
========== ========= ==========
Issuance of 2,500 shares of common stock
to purchase Internet Domain Name $ 7,500 $ -- $ 7,000
========== ========= ==========
Reduction of Deferred Compensation pursuant to
termination or cancellation of unvested warrants
and options $4,501,220 $ -- $4,501,220
========== ======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows for the periods presented.
The results for interim periods are not necessarily indicative of the
results to be obtained for a full fiscal year.
NOTE 2 - Notes and Loans Payable - Related Parties
During the nine months ended September 30, 2000, the Company borrowed
an aggregate of $532,846 from the Company's Chairman of the Board and other
affiliates. These loans bear interest at 6% per annum and are payable on demand.
In addition, during the quarter ended September 30, 2000, the Company repaid
$92,000 of these loans.
NOTE 3 - Stockholders' Deficit
In March 2000 the Company sold 500,000 shares of its Common Stock and
issued a warrant to purchase 700,000 shares of its Common Stock, at an exercise
price of $1.00 per share, for an aggregate purchase price of $500,000. The
warrants expire five years from the date of grant. The subscription agreement
between the Company and the investor provides, among other things, in the event
that the Company in any non-public offering sells any Common Stock at a price
per share, or any warrant with an exercise price per share, that is less than
$1.00, then for no additional consideration, the Company shall immediately
transfer to the investor that number of shares of Common Stock of the Company
equal to the difference between (1) the number of shares which would have been
subscribed for under the subscription agreement, inclusive of the shares
underlying the warrant, at the lesser price per share of such subsequently sold
securities and (2) the number of the shares subscribed to under the subscription
agreement, inclusive of the shares underlying the warrant. In July 2000, the
subscription agreement was amended to, among other things, terminate the
outstanding warrants to purchase 700,000 shares of Common Stock of the Company.
In June 2000 the Company issued 200,000 shares of common stock pursuant
to the terms of a subscription agreement that provided for the issuance of such
shares in the event that the Company did not have a registration statement
effective by June 22, 2000 with respect to the shares and Warrant shares issued
in the private placement. In connection with the issuance, the Company
recognized a charge of $162,500.
<PAGE> 8
POLITICS.COM, INC. AND SUBSIDIARY(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
NOTE 3 (Continued)
Effective June 8, 2000 the Company adopted its 2000 Non-Qualified Stock
Option Plan ("the 2000 Plan"). Under the 2000 Plan, both
non-qualified and incentive stock options to purchase shares of the Company's
common stock may be granted to key employees and other persons. A total of
2,500,000 shares have been reserved for issuance under the 2000 Plan.
During June 2000 the Company granted non-qualified stock options under
the 2000 Plan to purchase an aggregate of 600,000 shares of common stock at an
exercise price of $.001 per share. In connection with this grant, the Company
recognized a stock based compensation charge of $486,900. The stock option was
exercised in June 2000 and the Company issued 600,000 shares of common stock.
On July 17, 2000 the Company granted non-qualified stock options under
the 2000 Plan to purchase 170,000 shares of common stock with an exercise price
of $.01 per share. In connection with the grant, the Company recognized a stock
based compensation charge of $232,050. These stock options were exercised in
July 2000.
In July 2000 the Company issued 119,725 shares of common stock as
consideration for the cancellation of an aggregate of 812,925 common stock
purchase options. In connection with the issuance of these shares, the Company
recognized a charge of $142,173.
In July 2000 the Company granted non-qualified stock options to two
individuals to purchase an aggregate of 70,000 shares of common stock with an
exercise price of $.01 per share. In connection with the grants, the Company
recognized a stock based compensation charge of $82,425. These stock options
were exercised in July 2000.
NOTE 4 - Sale of Internet Domain Names
In January 2000 the Company sold the internet domain names gop.com and
gop.net to a third party. In July 2000 the Company sold the internet domain name
elections.com to a third party.
NOTE 5 - Loss on Abandonment
Loss on abandonment represents the loss recognized on the abandonment
of leasehold improvements of the Company's former New York City office
facilities (see Note 7).
<PAGE> 9
POLITICS.COM, INC. AND SUBSIDIARY(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
NOTE 6 - Medinex Transaction
In July 2000, the Company acquired from Medinex Systems, Inc., a
Delaware corporation formerly known as Netivation.com, Inc. ("Medinex"), all of
the issued and outstanding capital stock of Raintree Communications Corporation,
Public Disclosure, Inc., Net.Capitol, Inc., and U.S. Congress Handbook, Inc.,
along with certain other political-related assets (collectively, the "Assets")
in exchange for an aggregate of 40,100,000 shares of the Company's common stock,
$0.00001 par value per share (the "Transaction"). In October 2000, however, the
Company and Medinex, by mutual agreement, voided the Transaction ab initio (that
is, at its inception).
In order to restore the parties to their respective positions
immediately prior to the consummation of the Transaction, the parties agreed
that Medinex would (i) be responsible for all liabilities incurred by the
Company after July 26, 2000 through the unwinding of the Transaction, (ii) pay
the Company (or its designee) approximately $125,000 to pay certain of the
Company's liabilities, and (iii) host and provide basic maintenance of the
"Politics.com" website for up to 6 months; and that the Company would (i) pay to
Medinex an amount equal to 50% of the amount by which the net proceeds from any
sale of the "Politics.com" URL (and related technology) exceed $500,000, and
(ii) issue to Medinex 100,000 shares of its common stock. As of September 30,
2000, the Company recorded contributed capital of $212,347 from Medinex,
representing expenditures paid by Medinex on behalf of the Company.
Since the Transaction was voided at its inception (July 26, 2000), the
financial statements of the Company do not reflect the Assets or any related
results of operations.
NOTE 7 - Subsequent Events
In October 2000 the Company agreed to surrender all right, title and
interest in and to the leasehold that it was occupying in New York City.
The Company has decided to sell the "Politics.com" URL, website and
related technology, as the Company believes that such assets will not generate
the revenues and profits needed to bring substantial value to the Company's
shareholders. The Company is no longer pursuing its political business. The
Company has decided to instead pursue potential acquisitions of other, more
growth oriented businesses.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of our plan of operation for the next twelve
(12) months should be read in conjunction with our financial statements, any
notes related thereto, and the other financial data included elsewhere herein.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of certain factors discussed
herein. The terms "we," "our," or the "Company" as used hereafter shall refer to
Politics.com, Inc., a Delaware corporation and its wholly-owned subsidiary,
Politics.com, Inc., a Nevada corporation.
OVERVIEW AND RECENT DEVELOPMENTS
Politics.com, Inc., a Delaware corporation, was incorporated on January
17, 1997, as Lone Oak, Inc. Lone Oak, Inc. had no significant operations since
its inception until July 1999, when it acquired all of the issued and
outstanding common stock of Politics.com, a Nevada corporation
("Politics.com-Nevada"), in exchange for an aggregate of 7,000,000 shares of
common stock of Lone Oak, Inc. Following the acquisition, the former
stockholders of Politics.com-Nevada owned approximately 77% of the issued and
outstanding common stock of Lone Oak, Inc. Accordingly, the transaction was
accounted for as a reverse acquisition, with Politics.com-Nevada being deemed
the acquiror and Lone Oak, Inc. being deemed the acquired company. On July 27,
1999, Lone Oak, Inc. changed its name to Politics.com, Inc.
Since Lone Oak, Inc. had no significant operations prior to the
acquisition of Politics.com-Nevada, we believe that the operations of Lone Oak,
Inc. prior to the acquisition of Politics.com-Nevada are not material or
relevant to an analysis of the Company as it exists today.
In July 2000, we acquired from Medinex Systems, Inc., a Delaware
corporation formerly known as Netivation.com, Inc. ("Medinex"), all of the
issued and outstanding capital stock of Raintree Communications Corporation,
Public Disclosure, Inc., Net.Capitol, Inc., and U.S. Congress Handbook, Inc.,
along with certain other political-related assets (collectively, the "Assets")
in exchange for an aggregate of 40,100,000 shares of our common stock, $0.00001
par value per share (the "Transaction"). In October 2000, however, the Company
and Medinex, by mutual agreement, voided the Transaction ab initio (that is, at
its inception). The Transaction and its subsequent recission are described
below.
Following the Transaction, Medinex owned just more than 80% of our
issued and outstanding capital stock. The physical assets acquired from Medinex
were used in connection with Medinex's Internet politics and public policy
business, which included content, products and services designed for candidates
for political office, voters, political organizations, politic action committees
and lobbyists. We intended to continue such use of the physical assets acquired.
In connection with the Transaction, Howard R. Baer and Kevin C. Baer
resigned from their positions as officers and directors of the Company, the size
of the Board of Directors was reduced from five (5) to three (3) members, and
Anthony J. Paquin and Glen Hughlette were
<PAGE> 11
appointed as directors of the Company until the next annual meeting of the
stockholders of the Company. Glen Hughlette had additionally been elected to
serve as Chief Executive Officer, President, Secretary and Treasurer of the
Company. In addition, Howard R. Baer and Kevin C. Baer (and their affiliates, as
applicable), (i) cancelled in the aggregate approximately $1,400,000 of
indebtedness owed to them by the Company and (ii) surrendered to the Company an
aggregate of 1,166,307 shares of the Company's common stock, $0.00001 par value
per share.
As noted above, in October 2000, pursuant to a subsequent written
agreement between Medinex and the Company effective as of July 26, 2000, the
Company and Medinex agreed to void the Transaction ab initio (that is, at its
inception), with the effect that (i) Medinex remained the owner of all of the
Assets, (ii) the 40,100,000 shares of common stock of the Company issued to
Medinex in connection with the Transaction are restored to the status of
authorized but unissued shares, (iii) the approximate $1,400,000 of indebtedness
owed to Howard R. Baer and Kevin C. Baer (and their affiliates) previously
cancelled is restored as an obligation of the Company, and (iv) the aggregate
amount of 1,166,307 shares of Company common stock, $0.00001 par value per
share, previously surrendered by Howard R. Baer and Kevin C. Baer (and their
affiliates) is restored to the status of issued and outstanding. In connection
with the unwinding of the Transaction, Anthony J. Paquin and Glen Hughlette
resigned as officers and directors of the Company and Howard R. Baer was
appointed Chairman of the Board and President and Kevin C. Baer was appointed as
a Director and as Treasurer and Secretary. Since the Transaction has been
unwound from its inception, neither the Assets nor any associated operations are
included in the Company's financial statements included in this Report.
In order to restore the parties to their respective positions
immediately prior to the consummation of the Transaction, the parties agreed
that Medinex would (i) be responsible for all liabilities incurred by the
Company after July 26, 2000 through the unwinding of the Transaction, (ii) pay
the Company (or its designee) approximately $125,000 to satisfy certain of the
Company's liabilities, and (iii) host and provide basic maintenance of the
"Politics.com" website for up to 6 months; and that the Company would (i) pay to
Medinex an amount equal to 50% of the amount by which the net proceeds from any
sale of the "Politics.com" URL (and related technology) exceed $500,000, and
(ii) issue to Medinex 100,000 shares of its common stock.
As previously disclosed, the Company has decided to sell the
"Politics.com" URL, website and related technology, as the Company believes that
such assets will not generate the revenues and profits needed to bring
substantial value to the Company's shareholders. The Company is no longer
pursuing its political business. The Company has decided to instead pursue
potential acquisitions of other, more growth oriented businesses.
PLAN OF OPERATION
Since our inception, we have financed our operations through borrowings
from Howard R. Baer (our Chairman) (and his affiliates) and private sales of our
equity securities.
Notwithstanding the funds we have raised, we are currently experiencing
a severe working capital deficiency and are incurring significant losses and
negative cash flow. We are
<PAGE> 12
currently unable to pay our obligations as they become due. As of
September 30, 2000, our working capital deficiency was approximately $2,334,000,
which represents an increase of approximately $512,000 from December 31, 1999.
During the nine months ended September 30, 2000, we incurred net losses of
approximately $2,641,000, including net losses of $754,000 for the current
quarter. At this time, we are not generating any revenue, but continue to incur
substantial costs and expenses. We do not anticipate that our political business
will generate any revenue and we are currently seeking to sell the URL
"Politics.com" and the related website. From December 31, 1999 to September 30,
2000, our operations used approximately $1,382,000 in cash. From December 31,
1999 to September 30, 2000, our financing activities generated approximately
$1,135,000, which includes net borrowings from related parties of approximately
$441,000, which we have used to pay our operating expenses.
As of September 30, 2000, our cash balance was approximately $700, and,
as noted above, we had a working capital deficiency of $2,334,000. Based on
current cash on hand, we need to raise additional funds immediately in order to
continue as a going concern. We will attempt to remedy the working capital
deficit by raising additional capital in the form of either debt or equity
financings and/or by seeking the potential acquisition of a more growth oriented
business. We cannot assure you that we will be able to raise sufficient funds
(or complete such an acquisition) to remedy the working capital deficit or
continue as a going concern. If we are unable to raise sufficient capital to
remedy the working capital deficit and fund our costs and expenses or complete
an acquisition, there will be a material adverse effect on us and our ability to
continue as a going concern.
As of September 30, 2000, we do not intend to make significant capital
expenditures during the next twelve months, nor do we expect there to be any
significant change in the number of our employees.
Our auditor's report for the year ended December 31, 1999 indicates
that certain factors raise substantial doubt about our ability to continue as a
going concern. Our auditors issued a going concern opinion because we:
- had generated no revenues;
- had a severe working capital deficiency; and
- had significant net losses.
Based upon our current budget and business planning, we need to raise
additional capital immediately in order to continue as a going concern.
Currently, we are unable to pay our obligations as they come due. Because we are
a development stage company, we cannot assure you that we will be able to
generate internally or raise sufficient capital to fund our costs and expenses,
or that our accountant's will not issue another going concern opinion. To date,
we have generated virtually no revenue and have incurred substantial losses and
negative cash flows. Further, although we have been able to raise capital
through borrowings (from affiliates) and sales of equity securities, we have
since used all of these funds in our operations.
We have agreed to pay our former web site developer 25% of the proceeds
of any offering of our securities until such time as our account with the Web
site developer is current.
<PAGE> 13
As of September 30, 2000, our Web site developer claims we owe it
approximately $276,000. Our Chairman has guaranteed the Company's obligation to
make certain payments to its former Web site developer. Such Web site developer
has commenced litigation against the Company's Chairman to enforce such
guaranty. Although we are not currently a party to such litigation, we could be
made a party in the future. The outcome of any such litigation would be
uncertain and could have a material adverse effect on our financial condition.
Our failure to raise sufficient additional funds, either through
additional financing or continuing operations, will have a material adverse
effect on our business and financial condition.
As noted above, the Company has determined to sell its URL
"Politics.com" (and the related website and technology), as the Company does not
believe that such assets will generate sufficient revenues and profits so as to
bring substantial value to the Company's shareholders. We cannot assure you that
we will be able to sell the URL on acceptable terms or at all. We are no longer
pursuing our political business. Therefore, we do not anticipate that our
political business will generate any revenue in the future. Accordingly, we are
seeking to acquire a growth oriented business that will have the potential to
bring substantial value to the Company's shareholders. Thus, unless and until we
are able to complete such an acquisition, we do not expect to generate any
revenue; we will however continue to incur costs and expenses. We cannot assure
you that we will be able to consummate any such acquisition. If we sell the URL
"Politics.com" prior to making any acquisition, we will not have any significant
operating assets or business operations.
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
Dividend Restrictions.
As previously discussed in Part I, Item 2 hereof (Management's
Discussion and Analysis or Plan of Operation), we are currently experiencing a
serve working capital deficiency and are incurring significant losses. As such
we are unlikely to declare dividends for the foreseeable future.
Recent Sales of Unregistered Securities.
As discussed above, in October 2000, we issued 100,000 shares of our
common stock, $0.00001 par value per share, to Medinex in connection with the
unwinding of the Transaction. This transaction was exempt from the registration
provisions of the Securities Act of 1933, as amended (the "Act"), pursuant to
Rule 506 of Regulation D thereunder.
In July 2000, we issued 119,725 shares of our common stock, $0.00001
par value per share, to various third parties in consideration of the
cancellation of outstanding options to purchase an aggregate of 812,925 shares
of our common stock. This transaction was exempt from the registration
provisions of the Act pursuant to Section 4(2) thereof.
The facts we relied upon in making the determination that the foregoing
transactions were exempt from registration were as follows: the securities were
not offered or sold by means of a general solicitation or advertising; there
were a limited number of investors; the investors were either "accredited" or
"sophisticated" and were provided information about the issuer and given an
opportunity to ask questions of and receive answers from management of the
issuer; and we took reasonable steps to ensure that the purchasers were not an
"underwriter" within the meaning of Section 2(11) of the Act. No underwriters or
brokers were involved in any of the aforementioned transaction nor were any
discounts or commissions paid.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2 Asset Purchase Agreement between Politics.com, Inc. and Medinex
Systems, Inc. dated July 26, 2000, filed as Exhibit 2 to the
Company's Form 8-K filed on August 10, 2000.**
2.1 Agreement to Unwind the Asset Purchase Agreement between
Politics.com, Inc. and Medinex Systems, Inc. dated effective as of
<PAGE> 15
July 26, 2000, filed as Exhibit 2.1 to the Company's Form 8-K/A
filed on October 10, 2000.**
3.1 Articles of Incorporation, as amended, of the Company, filed as
Exhibit 2.1 to the Company's Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on October 8,
1999 (the "Form 10").**
3.2 Bylaws of the Company, filed as Exhibit 2.2 to the Company's Form
10.**
4.1 Specimen Certificate of Common Stock, filed as Exhibit 3.1 to the
Company's Form 10.**
4.2 Promissory Note issued by Politics.com-Nevada in favor of Howard
R. Baer dated June 30, 1999, filed as Exhibit 3.2 to the Company's
Form 10.**
4.3 Promissory Note issued by Politics.com-Nevada in favor of Carriage
House Capital, LLC dated November 1, 1999, filed as Exhibit 3.3 to
Amendment No. 1 to the Company's Form 10-SB filed with the
Securities and Exchange Commission on December 29, 1999 (the
"Amended Form 10").**
4.4 Promissory Note issued by Politics.com-Nevada in favor of Kevin C.
Baer dated November 1, 1999, filed as Exhibit 3.4 to the Company's
Amended Form 10.**
4.5 Promissory Note issued by Politics.com-Nevada in favor of
Northeast Investments dated November 1, 1999, filed as Exhibit 3.5
to the Company's Amended Form 10.**
10.1 Contract of Sale between Politics.com, Inc., a Nevada corporation,
and Howard R. Baer dated June 30, 1999, filed as Exhibit 6.1 to
the Company's Form 10.***
10.2 Contract of Sale between Politics.com, Inc., a Nevada corporation,
and Kurt Ehrenberg dated August 17, 1999, filed as Exhibit 6.2 to
the Company's Form 10.**
10.3 1999 Combination Stock Option Plan, filed as Exhibit 6.3 to the
Company's Form 10.**
10.4 Form of Non-Qualified Stock Option Agreement between Politics.com,
Inc., a Delaware corporation, and Brian Wadsworth dated as of July
27, 1999, filed as Exhibit 6.4 to the Company's Form 10.**
<PAGE> 16
10.5 Form of Non-Qualified Stock Option Agreement, filed as Exhibit 6.5
to the Company's Form 10.**
10.6 Form of Incentive Stock Option Agreement, filed as Exhibit 6.6 to
the Company's Form 10.**
10.7 Stock Purchase Agreement by and among Lone Oak, Inc., a Delaware
corporation, and Howard R. Baer and Kevin C. Baer dated July 22,
1999, filed as Exhibit 6.7 to the Company's Form 10.**
10.8 Employment Letter dated July 29, 1999, as amended September 7,
1999, filed as Exhibit 6.8 to the Company's Form 10.** ***
10.9 Lease Agreement between Renaissance 632 Broadway LLC and
Politics.com, Inc. dated October 29, 1999, filed as Exhibit 6.9 to
the Company's Amended Form 10.**
10.10 1999 Advisory Council Stock Option Plan, filed as Exhibit 6.10 to
the Company's Amended Form 10.**
10.11 Form of Advisory Council Engagement and Option Agreement, filed as
Exhibit 6.11 to the Company's Amended Form 10.**
10.12 Services Agreement between Touchscreen Media Group and
Politics.com, Inc. dated October 29, 1999, as supplemented on
December 2, 1999, filed as Exhibit 6.12 to the Company's Amended
Form 10.**
10.13 Individual Limited Guaranty by Howard R. Baer in favor of
Touchscreen Media Group dated December 2, 1999, filed as Exhibit
6.13 to the Company's Amended Form 10.**
10.14 2000 Non-Qualified Stock Option Plan of the Company, filed as
Exhibit 10.14 to the Company's 10-QSB for the quarter-ended June
30, 2000.**
10.15 Subscription Agreement and Warrant between Schoemann Venture
Capital, LLC and Politics.com, Inc. dated March 22, 2000, as
amended by that certain Letter Agreement dated July 17, 2000,
filed as Exhibit 10.15 to the Company's 10-QSB for the
quarter-ended June 30, 2000.**
27 Financial Data Schedule.*
--------------------------------------------------------------------------------
* Filed herewith.
<PAGE> 17
** In accordance with Rule 12b-32 under the Securities Exchange Act of 1934,
as amended, reference is made to the documents previously filed with the
Securities and Exchange Commission, which documents are hereby incorporated
by reference.
*** Management Contract or Compensatory Plan or Arrangement.
(b) Reports on Form 8-K
8-K filed on August 10, 2000 with respect to the Medinex transaction.
8-K/A filed on October 10, 2000 with respect to the unwinding of the
Medinex transaction.
<PAGE> 18
SIGNATURES
In accordance with the Exchange Act, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
POLITICS.COM, INC.
Date: November 14, 2000 By: /s/ Howard R. Baer
-------------------------------
Howard R. Baer
President
<PAGE> 19
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2 Asset Purchase Agreement between Politics.com, Inc. and Medinex
Systems, Inc. dated July 26, 2000, filed as Exhibit 2 to the
Company's Form 8-K filed on August 10, 2000.**
2.1 Agreement to Unwind the Asset Purchase Agreement between
Politics.com, Inc. and Medinex Systems, Inc. dated effective as of
July 26, 2000, filed as Exhibit 2.1 to the Company's Form 8-K/A
filed on October 10, 2000.**
3.1 Articles of Incorporation, as amended, of the Company, filed as
Exhibit 2.1 to the Company's Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on October 8,
1999 (the "Form 10").**
3.2 Bylaws of the Company, filed as Exhibit 2.2 to the Company's Form
10.**
4.1 Specimen Certificate of Common Stock, filed as Exhibit 3.1 to the
Company's Form 10.**
4.2 Promissory Note issued by Politics.com-Nevada in favor of Howard
R. Baer dated June 30, 1999, filed as Exhibit 3.2 to the Company's
Form 10.**
4.3 Promissory Note issued by Politics.com-Nevada in favor of Carriage
House Capital, LLC dated November 1, 1999, filed as Exhibit 3.3 to
Amendment No. 1 to the Company's Form 10-SB filed with the
Securities and Exchange Commission on December 29, 1999 (the
"Amended Form 10").**
4.4 Promissory Note issued by Politics.com-Nevada in favor of Kevin C.
Baer dated November 1, 1999, filed as Exhibit 3.4 to the Company's
Amended Form 10.**
4.5 Promissory Note issued by Politics.com-Nevada in favor of
Northeast Investments dated November 1, 1999, filed as Exhibit 3.5
to the Company's Amended Form 10.**
10.1 Contract of Sale between Politics.com, Inc., a Nevada corporation,
and Howard R. Baer dated June 30, 1999, filed as Exhibit 6.1 to
the Company's Form 10.***
<PAGE> 20
10.2 Contract of Sale between Politics.com, Inc., a Nevada corporation,
and Kurt Ehrenberg dated August 17, 1999, filed as Exhibit 6.2 to
the Company's Form 10.**
10.3 1999 Combination Stock Option Plan, filed as Exhibit 6.3 to the
Company's Form 10.**
10.4 Form of Non-Qualified Stock Option Agreement between Politics.com,
Inc., a Delaware corporation, and Brian Wadsworth dated as of July
27, 1999, filed as Exhibit 6.4 to the Company's Form 10.**
10.5 Form of Non-Qualified Stock Option Agreement, filed as Exhibit 6.5
to the Company's Form 10.**
10.6 Form of Incentive Stock Option Agreement, filed as Exhibit 6.6 to
the Company's Form 10.**
10.7 Stock Purchase Agreement by and among Lone Oak, Inc., a Delaware
corporation, and Howard R. Baer and Kevin C. Baer dated July 22,
1999, filed as Exhibit 6.7 to the Company's Form 10.**
10.8 Employment Letter dated July 29, 1999, as amended September 7,
1999, filed as Exhibit 6.8 to the Company's Form 10.** ***
10.9 Lease Agreement between Renaissance 632 Broadway LLC and
Politics.com, Inc. dated October 29, 1999, filed as Exhibit 6.9 to
the Company's Amended Form 10.**
10.10 1999 Advisory Council Stock Option Plan, filed as Exhibit 6.10 to
the Company's Amended Form 10.**
10.11 Form of Advisory Council Engagement and Option Agreement, filed as
Exhibit 6.11 to the Company's Amended Form 10.**
10.12 Services Agreement between Touchscreen Media Group and
Politics.com, Inc. dated October 29, 1999, as supplemented on
December 2, 1999, filed as Exhibit 6.12 to the Company's Amended
Form 10.**
10.13 Individual Limited Guaranty by Howard R. Baer in favor of
Touchscreen Media Group dated December 2, 1999, filed as Exhibit
6.13 to the Company's Amended Form 10.**
10.14 2000 Non-Qualified Stock Option Plan of the Company, filed as
Exhibit 10.14 to the Company's 10-QSB for the quarter-ended June
30, 2000.**
<PAGE> 21
10.15 Subscription Agreement and Warrant between Schoemann Venture
Capital, LLC and Politics.com, Inc. dated March 22, 2000, as
amended by that certain Letter Agreement dated July 17, 2000,
filed as Exhibit 10.15 to the Company's 10-QSB for the
quarter-ended June 30, 2000.**
27 Financial Data Schedule.*
--------------------------------------------------------------------------------
* Filed herewith.
** In accordance with Rule 12b-32 under the Securities Exchange Act of 1934,
as amended, reference is made to the documents previously filed with the
Securities and Exchange Commission, which documents are hereby incorporated
by reference.
*** Management Contract or Compensatory Plan or Arrangement.
