<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
or
[ ] Transition report under Section 13 or 15(d) of the Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM__________________ 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.)
1100 NEW YORK AVENUE, NW, MEZZANINE 20005
----------------------------------- -----
LEVEL, WASHINGTON, DC (Zip Code)
---------------------
(Address of Principal Executive Offices)
(202) 737-2277
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(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:
49,812,738 SHARES OF COMMON STOCK, PAR VALUE $0.00001, AS OF AUGUST 10, 2000
----------------------------------------------------------------------------
(Title of Class)
Transitional Small Business Disclosure Format(check one): YES [ ] NO [X]
<PAGE>
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
INDEX
PART I FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet as of June 30, 2000 and December 31, 1999.
Consolidated Statement of Operations for the quarters ended June 30, 2000 and
June 30, 1999, six months ended June 30, 2000, the period from March 23, 1999
(inception) to June 30, 1999, and for the period March 23, 1999 (inception) to
June 30, 2000.
Consolidated Statement of Cash Flows for the six months ended June 30, 2000, the
period from March 23, 1999 (inception) to June 30, 1999, and for the period
March 23, 1999 (inception) to June 30, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PART II: OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
Current Assets:
<S> <C> <C>
Cash $ 1,732 $ 123,080
Prepaid Expenses 1,000 5,900
------------ ------------
Total Current Assets 2,732 128,980
Property and Equipment (Net of Accumulated Depreciation
of $42,492 and $8,779) 220,910 254,623
Intangibles - Internet Domain Names (Net of Accumulated
Amortization of $54,528 and $32,806) 113,722 173,194
Security Deposit 35,000 35,000
------------ ------------
Total Assets $ 372,364 $ 591,797
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current Liabilities:
Accounts Payable $ 915,451 $ 1,001,070
Capitalized Lease Obligations 47,600 28,560
Notes and Loans Payable - Related Parties 1,417,344 921,498
------------ ------------
Total Current Liabilities 2,380,395 1,951,128
Capitalized Lease Obligations - Net of Current Portion 75,917 107,474
------------ ------------
Total Liabilities 2,456,312 2,058,602
------------ ------------
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, 10,588,308 and 9,235,808 Shares Issued and Outstanding 106 92
Additional Paid-In Capital 6,339,899 9,156,788
Deficit Accumulated in the Development Stage (7,925,858) (6,039,027)
Deferred Compensation ( 498,095) (4,584,658)
Total Stockholders' Deficit (2,083,948) (1,466,805)
------------ ------------
Total Liabilities and Stockholders' Deficit $ 372,364 $ 591,797
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
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 SIX MONTHS MARCH 23, 1999 MARCH 23, 1999
----------------------------- --------------- -------------- --------------
JUNE 30, ENDED (INCEPTION) TO (INCEPTION) TO
----------------------------- --------------- -------------- --------------
2000 1999 JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000
----------------------------- --------------- -------------- --------------
Revenues $ 3,604 $ - $ 3,604 $ - $ 3,604
-------------- ---------- -------------- ------------- --------------
Costs and Expenses:
<S> <C> <C> <C> <C> <C>
Selling, General and Administrative Expenses 1,105,330 97,139 1,579,729 107,723 6,712,089
Website Development Costs 94,795 17,000 195,211 17,000 1,044,775
Loss on Sale of Internet Domain Names - - 11,861 - 11,861
Interest Expense 20,958 - 39,810 - 55,328
Depreciation and Amortization 30,863 - 63,824 - 105,409
-------------- ---------- -------------- ------------- --------------
Total Costs and Expenses 1,251,946 114,139 1,890,435 124,723 7,929,462
-------------- ---------- -------------- ------------- --------------
Net Loss $(1,248,342) $(114,139) $(1,886,831) $(124,723) $(7,925,858)
=============== =========== =============== ============== ==============
Earnings Per Common Share - Basic:
Weighted Average Common Shares Outstanding 9,794,352 86,813 9,529,730 79,800
=============== =========== =============== ==============
Net Loss Per Common Share - Basic $( .13) $( 1.31) $( .20) $( 1.56)
=============== ============ =============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
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
-------------- --------------
SIX MONTHS ENDED (INCEPTION) TO (INCEPTION) TO
---------------- -------------- --------------
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000
---------------- -------------- --------------
Cash Flows from Operating Activities:
<S> <C> <C> <C>
Net Loss $(1,886,831) $( 124,723) $(7,925,858)
Adjustment to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 63,824 - 105,409
Stock Based Compensation 570,338 - 4,559,794
Stock Issued for Services & Other Consideration 193,750 - 193,750
Loss on Sale of Internet Domain Names 11,861 - 11,861
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Prepaid Expenses 4,900 ( 15,000) ( 1,000)
Increase in Security Deposits - - ( 35,000)
Increase (Decrease) in Accounts Payable (85,619) 16,227 915,451
------- ------ -------------
Net Cash Used by Operating Activities: (1,127,777) (123,496) (2,175,593)
---------- --------- ------------
Cash Flows from Investing Activities:
Capital Expenditures - - ( 253,402)
Purchase of Intan - Internet Domain Names ( 15,000) ( 151,000) ( 221,000)
Deposits Paid - ( 18,333) -
Proceeds on Sale of Internet Domain Names 40,000 - 40,000
Net Assets Acquired in Reverse Acquisition - - 65,666
------------ ------------- --------------
Net Cash Provided (Used) by Investing
Activities 25,000 ( 169,333) ( 368,736)
------------ ------------- --------------
Cash Flows from Financing Activities:
Capitalized Lease Obligations (Payments) ( 12,517) - 123,517
Sale of Common Stock - Private Offerings 500,000 - 923,000
Expenses of Private Offerings ( 2,500) - ( 62,500)
Proceeds of Borrowings from Related Parties 495,846 144,786 1,410,344
Sale of Common Stock - Related Parties - - 100
Exercise of Stock Options 600 - 600
Issuance of Note Payable - Related Party - 151,000 151,000
------------ ------------- --------------
Net Cash Provided by Financing Activities 981,429 295,886 2,546,061
------------ ------------- --------------
Increase in Cash ( 121,348) 3,057 1,732
Cash - Beginning of Period 123,080 - -
------------ ------------- --------------
Cash - End of Period $ 1,732 $ 3,057 $ 1,732
============ ============= ==============
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 $ - $ 7,500
============ ============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
POLITICS.COM, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 six months ended June 30, 2000, the Company
borrowed an aggregate of $495,846 from the Company's Chairman of the Board and
other affiliates. These loans bear interest at 6% per annum and are payable on
demand.
NOTE 3 - STOCKHOLDERS' DEFICIT
Pursuant to a subscription agreement dated March 22, 2000, as
amended in July, 2000 (the "Subscription Agreement"), 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 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
$.50, 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 June 2000, the Company issued 200,000 shares of common
stock pursuant to the terms of the Subscription Agreement which 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 pursuant to the Subscription
Agreement. In connection with the issuance, the Company recognized a charge of
$162,500.
Effective June 8, 2000, the Company adopted its 2000
Non-Qualified Stock Option Plan (the "2000 Plan"). Under the 2000 Plan,
non-qualified stock options to purchase
<PAGE>
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 consideration of services
rendered. 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.
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.
NOTE 5 - SUBSEQUENT EVENTS
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 consideration of services rendered to the
Company. The stock option was exercised in July 2000 and the Company issued
170,000 shares of common stock.
On July 26, 2000, the Company issued 40,100,000 shares of its
common stock, $0.00001 par value per share, to Medinex Systems, Inc., a Delaware
corporation formerly known as Netivation.com, Inc. ("Medinex"), representing the
amount of consideration specified in the Asset Purchase Agreement between the
Company and Medinex dated July 14, 2000, in exchange for the transfer to the
Company of 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 politically-related assets
(the "Acquisition"). The shares issued to Medinex are "restricted securities"
(within the meaning of Rule 144 under the Securities Act of 1933, as amended)
and are subject to a six (6) month contractual restriction on transfer. In
connection with the Acquisition, Howard R. Baer and Kevin C. Baer (and their
affiliates), (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.
Immediately prior to the Acquisition, the Company was
controlled by Howard R. Baer and Kevin C. Baer. As a result of the Acquisition,
Medinex gained control of the Company by acquiring 40,100,000 shares of the
Company's common stock, $0.00001 par value per share, which represents just more
than 80% of the issued and outstanding capital stock of the Company. The
determination of the number of shares of the Company's common stock, $0.00001
par value per share, issued to Medinex in connection with the Acquisition was
the result of arm's-length negotiations between the Company and Medinex, based
upon the Company's and Medinex's evaluation of the fair market value of the
acquired assets.
The physical assets acquired by the Company were used by
Medinex in connection with its Internet politics and public policy business,
which includes content, products and services designed for candidates for
political office, voters, political organizations, political
<PAGE>
action committees and lobbyists. The Company intends to continue such use of the
physical assets acquired.
As part of the Acquisition, Howard R. Baer and Kevin C. Baer
have resigned from their positions as officers and directors of the Company, the
size of the Board of Directors has been reduced from five (5) to three (3)
members, and Anthony J. Paquin and Glen Hughlette have been appointed as
directors until the next annual meeting of the stockholders of the Company. Glen
Hughlette has additionally been elected to serve as CEO, president, secretary
and treasurer of the Company. The Company plans to expand the size of its Board
of Directors to seven (7), and the Board of Directors will elect the four (4)
persons nominated by Howard R. Baer, Anthony J. Paquin , and Glen Hughlette to
fill the resulting vacancies.
In July 2000, the Company sold the Internet domain name
"Elections.com" for $100,000 in cash.
In July 2000, Howard R. Baer assumed all of the Company's
obligations under certain outstanding options to issue up to an aggregate of
419,000 shares of the Company's common stock.
In July 2000, the Company issued an aggregate of 119,725
shares of common stock in consideration of the cancellation of outstanding
options to purchase an aggregate of 812,925 shares of common stock.
In July 2000, the Company amended the Subscription Agreement
referred to in Note 3 to the financial statements included with this report to,
among other things, terminate outstanding warrants to purchase 700,000 shares of
the Company's common stock.
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. is the successor-by-merger of B&E
Securities Management, Inc., a Maryland corporation which was inactive from
around 1971 until its merger with and into Lone Oak, Inc. in February 1997. Lone
Oak, Inc. had no significant operations since its inception until July 1999. In
April 1999, Lone Oak, Inc. sold its wholly-owned subsidiary, D&E Flight
Simulators, Inc. for $5,000. In July 1999, Lone Oak, Inc. acquired all of the
issued and
<PAGE>
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 in exchange for an aggregate
of 40,100,000 shares of our common stock, $0.00001 par value per share.
Following the acquisition, Medinex owned just more than 80% of our issued and
outstanding capital stock.
In connection with the Medinex transaction, Howard R. Baer and Kevin C.
Baer have resigned from their positions as officers and directors of the
Company, the size of the Board of Directors has been reduced from five (5) to
three (3) members, and Anthony J. Paquin and Glen Hughlette have been appointed
as directors until the next annual meeting of the stockholders of the Company.
Glen Hughlette has additionally been elected to serve as CEO, president,
secretary and treasurer of the Company. The Company plans to expand the size of
its Board of Directors to seven (7), and the Board of Directors will elect the
four (4) persons nominated by Howard R. Baer, Anthony J. Paquin , and Glen
Hughlette to fill the resulting vacancies. In addition, Howard R. Baer and Kevin
C. Baer (and their affiliates), (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 our common stock, $0.00001
par value per share.
The physical assets we acquired as part of the Medinex transaction were
used by Medinex in connection with its Internet politics and public policy
business, which includes content, products and services designed for candidates
for political office, voters, political organizations, politic action committees
and lobbyists. We intend to continue such use of the physical assets acquired.
PLAN OF OPERATION
From inception to June 30, 2000, we received approximately $145,000
from Howard R. Baer, our former Chairman, for the initial funding of
Politics.com-Nevada. In addition, at June 30, 1999, we issued a promissory note,
payable on demand, in the principal amount of $151,000, with an interest rate of
10% per annum, to Howard R. Baer as consideration for the purchase of the
Internet domain names "elections.com," "gop.com" and "politics.com." From July
1, 1999 to December 31, 1999, we borrowed an aggregate of approximately $769,000
from Howard R.
<PAGE>
Baer, Carriage House Capital LLC (an affiliate of Howard R. Baer), Kevin C. Baer
and Northeast Investments (an affiliate of Kevin C. Baer). Of these advances,
approximately $292,000 were evidenced by promissory notes that were payable on
demand. Since January 1, 2000 through June 30, 2000, we have borrowed, in the
aggregate, an additional amount equal to $495,846 from Howard R. Baer, Carriage
House Capital LLC and Kae Y. Park (Howard R. Baer's spouse). These borrowings
were unsecured and bear interest at the rate of 6% per annum. In connection with
the closing of the Medinex transaction, Howard R. Baer, Carriage House Capital
LLC, Kevin C. Baer, Northeast Investments and Kae Y. Park cancelled all of the
foregoing indebtedness of the Company owing to them, except for $100,000 owing
to Howard R. Baer.
Since July 1, 1999, we have raised an aggregate of $923,000 in private
placements.
Notwithstanding the consummation of the Medinex transaction and the
funds we raised in the private placements, we are currently experiencing a
severe working capital deficiency and are incurring significant losses and
negative cash flow. As of June 30, 2000, our working capital deficiency was
approximately $2,400,000, which represents an increase of approximately $578,000
from December 31, 1999. After giving effect to the cancellation of indebtedness
in the amount of approximately $1,400,000 as described above, our working
capital deficiency would have been approximately $950,000. During the six months
ended June 30, 2000, we incurred net losses of approximately $1,900,000,
including net losses of $1,200,000 for the current quarter. At this time, we are
not generating any significant revenue, but are incurring substantial costs and
expenses in connection with our business operations. From December 31, 1999 to
June 30, 2000, our operations used approximately $1,100,000. From December 31,
1999 to June 30, 2000, our financing activities generated approximately
$1,000,000, which includes indebtedness to related parties of approximately
$500,000, which we have used to pay our operating expenses.
As of June 30, 2000, our cash balances were approximately $2,000, and,
as noted above, we had a working capital deficiency of $2,400,000 (approximately
$950,000 after giving effect to the cancellation of indebtedness referred to
above). Based on current cash on hand, we need to raise additional funds
immediately. We expect to remedy the working capital deficit by raising
additional capital in the form of either debt or equity financings. We cannot
assure you that we will raise sufficient funds to remedy the working capital
deficit or fund our operations. If we are unable to raise sufficient capital to
remedy the working capital deficit and fund our continuing operations, there
will be a material adverse effect on our business and our ability to continue as
a going concern.
As of June 30, 2000, we do not intend to make significant capital
expenditures during the next twelve (12) months. We do, however, have
commitments to spend approximately $110,000 per year for each of the next
three years for our office space in New York. We also anticipate that we will
expend approximately $260,000 for Web site development over the next twelve
months. During the next twelve months we do not expect there to be any
significant change in the number of our employees, other than in connection
with the Medinex transaction.
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
<PAGE>
a going concern opinion because we:
- have generated no revenues;
- have a severe working capital deficiency; and
- have significant net losses.
Based upon our current budget and business planning, we believe that we
will need to raise additional capital to continue our operations over the next
twelve months and that we will need to raise or generate such amount during the
next twelve months to eliminate our auditor's going concern opinion. Because we
are a development stage company, however, we cannot assure you that we will be
able to generate internally or raise sufficient funds to continue our
operations, or that our accountant's will not issue another going concern
opinion. To date, we have generated minimal revenue and have incurred
substantial losses. Further, although we have raised approximately $900,000 in
private placements, we have since used substantially all of these funds in our
operations. We have agreed to pay our 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. As of June 30, 2000, we owe our Web site developer
approximately $276,000. Our failure to raise sufficient additional funds, either
through additional financing or continuing operations, may have a material
adverse effect on our business and financial condition.
<PAGE>
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 July 2000, we issued 40,100,000 shares of our
common stock, $0.00001 par value per share, to Medinex in exchange for 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. The 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 and/or Section 4(2) of
the Act.
In June 2000, we issued 50,000 shares of our common stock to a third
party in consideration of services rendered. On June 23, 2000 we issued 200,000
shares of our common stock to a third party as compensation for our not having a
registration statement effective under the Act with respect to certain shares
sold to such party in a private offering.
Except as otherwise specified, the foregoing sales were exempt from the
registration provisions of the Act pursuant to Section 4(2) of the Act. 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; in each case there
was a limited number of investors; the investors were provided information about
the issuer and given an opportunity to ask questions of and receive answers from
management of the issuer; and the issuer took reasonable steps to ensure that
the purchasers were not an "underwriter" within the meaning of Section 2(11) of
the Securities Act of 1933. No underwriters or brokers were involved in any of
the aforementioned transaction nor were any discounts or commissions paid.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
A Special Meeting in Lieu of an Annual Meeting of the stockholders of
the Company was held on June 15, 2000. At such Special Meeting, the stockholders
of the Company elected four directors to serve on the Board of Directors of the
Company until the next Annual Meeting of Stockholders. The names of the four
directors and the votes cast were as follows:
<PAGE>
<TABLE>
<CAPTION>
-------------------------- ---------------- --------------------- -------------------------------
DIRECTOR'S VOTES
NAME
-------------------------- ---------------- --------------------- -------------------------------
FOR Against Abstained/broker non-votes
-------------------------- ---------------- --------------------- -------------------------------
<S> <C> <C> <C>
Howard R. Baer 7,890,255 0 1,000
-------------------------- ---------------- --------------------- -------------------------------
Kevin C. Baer 7,890,255 0 1,000
-------------------------- ---------------- --------------------- -------------------------------
Burt Alimansky 7,890,255 0 1,000
-------------------------- ---------------- --------------------- -------------------------------
Brian Wadsworth 7,890,255 0 1,000
-------------------------- ---------------- --------------------- -------------------------------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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.**
<PAGE>
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.**
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.**
<PAGE>
10.14 2000 Non-Qualified Stock Option Plan of the Company*
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.*
10.16 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.**
27 Financial Data Schedule.*
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* 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.
(b) Reports on Form 8-K
8-K filed on August 10, 2000 with respect to the Medinex transaction.
<PAGE>
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: AUGUST 14, 2000 BY:/s/ Glen Hughlette
-----------------------------------
GLEN HUGHLETTE
PRESIDENT
