As filed with the Securities and Exchange Commission on May __, 2000.
Registration No. 333-___________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WARPRADIO.COM, INC.
(Name of Small Business Issuer in its Charter)
Nevada
(State or jurisdiction of incorporation or organization)
4832
(Primary Standard Industrial Classification Code Number)
87-0538158
(I.R.S. Employer Identification Number)
6535 South Dayton Street, Suite 3000
Greenwood Village, CO 80111
(303) 799-9118
(Address and telephone number of principal executive offices)
Denise A. Sutton
Chief Executive Officer
6535 South Dayton Street, Suite 3000
Greenwood Village, CO 80111
(303) 799-9118
(Name, address and telephone number of agent for service)
Copies to:
Gary A. Agron, Esq.
5445 DTC Parkway, Suite 520
Englewood, CO 80111
(303) 770-7254
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
<PAGE>
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to Offering Price Aggregate Registration
Securities to Be Registered Be Registered Per Share Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value 1,123,626 $2.25 $2,528,158.50 $668.00
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This registration statement registers the resale of 1,123,626 shares of
common stock offered by the selling stockholders.
In addition to the number of shares set forth above, the amount to be
registered includes any shares of our common stock issued as a result of stock
splits, stock dividends and similar transactions in accordance with Rule 416.
The Proposed Maximum Offering Price Per Share and the Proposed Maximum
Aggregate Offering Price in the table above are estimated solely for the purpose
of calculating the registration fee pursuant to Rule 457(c) promulgated under
the Securities Act of 1933. These estimates were calculated based on the closing
price for our common stock on the NASDAQ Over-the-Counter Bulletin Board Trading
System on May 9, 2000 of $2.25 per share.
We hereby amend this registration statement on such date or dates as may be
necessary to delay its effective date until we shall file a further amendment
which specifically states that this registration statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933
or until the registration statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a), may
determine.
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The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Dated ________________, 2000
1,123,626 SHARES OF COMMON STOCK
WARPRADIO.COM, INC.
Our selling stockholders are offering up to 1,123,626 shares of our common
stock at prevailing market prices.
Our common stock is listed on the NASDAQ Over-the-Counter Bulletin Board
Trading System under the symbol "WRPR." On May 9, 2000, the closing sale price
of our common stock, as quoted on the Bulletin Board, was $2.25 per share.
Investing in our common stock involves risks. See "Risk Factors" beginning
on page 3.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is ____________, 2000.
<PAGE>
TABLE OF CONTENTS
About this Prospectus........................................................1
Summary......................................................................1
Risk Factors ................................................................3
Use of Proceeds.............................................................12
Market Price and Dividend Information.......................................13
Capitalization..............................................................13
Selected Consolidated Financial Data........................................14
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................14
Business....................................................................17
Management..................................................................23
Executive Compensation......................................................24
Security Ownership of Executive Officers, Directors and
Beneficial Owners of Greater than 5% of Our Common Stock...............26
Selling Stockholders........................................................26
Plan of Distribution........................................................29
Related Party and Other Material Transactions...............................30
Description of Capital Stock................................................30
Shares Eligible for Future Sale.............................................31
Experts.....................................................................32
Legal Matters...............................................................32
Where You Can Find More Information.........................................32
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . .F-1
<PAGE>
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We
have not authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should
not rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
We furnish our stockholders with annual reports containing consolidated
financial statements audited by an independent accounting firm.
SUMMARY
This summary highlights material information regarding our company and the
offering contained in this prospectus. However, this summary is not complete and
may not contain all of the information that may be important to you. You should
read the entire prospectus carefully, including the financial data and related
notes, before making an investment decision. Unless otherwise specifically
stated, the information in this prospectus assumes that holders of our
securities have not exercised any options or warrants which are currently
outstanding.
Our Business
We own and operate an Internet site on the World Wide Web that broadcasts
"streaming" radio station programming 24 hours a day, seven days a week.
Streaming is technology that permits the simultaneous transmission and playback
of digitized audio streams over the Internet. We currently offer live,
uninterrupted radio programming from more than 179 radio stations across the
United States free of charge and have non-binding commitments to add an
additional 69 radio stations to our service in the next three months. Our
listeners benefit from the ability to receive local radio programming online
without the use of a traditional radio and outside the listener's geographic
area, allowing them to select from dozens of stations and formats. While
listening to our radio programming, users can continue to perform other tasks on
their computers.
Radio stations that join our Web site deliver continuous, live audio feeds
to our servers through the use of a computer, an Internet connection and a
soundboard connection dedicated exclusively to delivery of the audio feeds over
the Internet. We have developed a unique barter arrangement with the radio
stations available on our Web site. In exchange for streaming the station's
programming live over the Internet and providing each station with its own
informational site on our Web site, we receive two minutes of prime time
advertising time per day. In addition, we have entered into licensing agreements
with Broadcast Music, Inc. and the American Society of Composers, Authors and
Publishers, whereby we have agreed to assume all Internet license and royalty
fees traditionally paid by radio stations for each song they broadcast. We
believe that these are the only such arrangements of their kind and that they
afford us a distinct advantage over our competitors who must pass along
additional licensing and royalty fees to radio stations. We earn revenue by
reselling the advertising time we receive from the radio stations on our Web
site and by selling banner and other promotional advertisements on our Web site.
There can be no assurance that we will be able to resell our bartered
advertising time.
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Strategy
We believe that in order to achieve success as an Internet audio
broadcaster we must:
o cost-effectively aggregate diverse and compelling content;
o implement a network capable of streaming audio programming to large
audiences 24 hours a day, seven days a week;
o enhance brand awareness; and
o develop an attractive, heavily trafficked advertising medium.
By providing broadcasters with royalty-free, continuous audio streaming to
hundreds of thousands of Internet listeners in exchange for two minutes of prime
time advertising per day, we are able to eliminate many of the barriers we
believe prevent most radio stations from broadcasting on the Internet.
Continuously streaming audio over the Internet is extremely capital- and
time-intensive and, as a result, an unattractive and infeasible option for most
radio stations. Indeed, broadcasting audio on the Internet requires that radio
stations design, develop, integrate and maintain complex network elements,
including extensive bandwidth, streaming licenses, equipment and technical
expertise. Our streaming program, however, allows broadcasters and their
advertisers to reach a vast and diverse audience without expending any capital
or labor.
History
We were organized under the laws of the State of Nevada on March 23, 1995,
under the name HomeQuest, Inc. We marketed educational and nutritional products
through a network marketing plan. In June 1995, we assumed the operations of New
Horizon Education and in August 1995 we purchased New Horizon Education. In
March 1998, we (a) sold our operations, inventory, related fixed assets and
other intangible assets and (b) issued 594,444 shares to an investor in exchange
for cash and debt assumption of $377,400.
Pursuant to an Agreement and Plan of Reorganization between us and Web
Audio & Radio Portal, Inc., a Colorado corporation, which was completed on
September 30, 1999, we (a) acquired all of the outstanding common stock of Web
Audio from the stockholders of Web Audio in exchange for the issuance of
7,500,000 shares of our common stock, including 6,369,500 shares which were
issued to Denise A. Sutton, our Chief Executive Officer, (b) reverse split our
common stock on the basis of one share for each 7.2 shares outstanding, (c)
purchased all of the stock of Web Audio and (d) changed our name to
"Warpradio.com, Inc." All share information in this prospectus reflects the
reverse stock split.
Description of Selling Stockholders
Through this prospectus, we are registering the resale of up to 1,123,626
shares of our common stock by our selling stockholders, all of whom acquired the
shares in a private placements of our securities between April 1999 and December
1999. As of May 8, 2000, we had 10,228,796 shares of common stock outstanding.
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Forward-Looking Statements
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us which are discussed in the Risk Factors
section below as well as throughout this prospectus. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
prospectus might not occur.
Summary of Consolidated Financial Data
The following summary of historical consolidated financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our audited consolidated financial
statements and related notes thereto included elsewhere in this prospectus.
Period Ended
Statement of Operations: December 31, 1999
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Revenue ...................................... $ 1,089
Operating expenses ........................... 1,583,399
Net income (loss) ............................ (1,594,684)
Weighted average
number of shares
outstanding .............................. 8,191,819
Net income (loss)
per share .................................. (.19)
Balance Sheet at December 31, 1999:
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Working capital .............................. $ 624,932
Total assets ................................. 743,782
Total liabilities ............................ 37,178
Stockholders' equity ......................... 706,604
RISK FACTORS
Purchase of the shares of common stock offered by this prospectus involve a
high degree of risk and represent a highly speculative investment. You should
not purchase these shares if you cannot afford the loss of your entire
investment. In addition to the other information contained in this prospectus,
you should carefully consider the following risk factors in evaluating our
company, our business prospects and an investment in our shares of common stock.
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Risks Particular to Our Company
We Have A Limited Operating History, Have Incurred Ongoing Losses and
Expect Future Losses. We commenced operations in March 1999, reported a net loss
of $1,594,684 for the period ended December 31, 1999 and expect a net loss for
the foreseeable future. As of December 31, 1999, we had an accumulated deficit
of $1,594,684 and a net worth of $706,604. Accordingly, we have a limited
operating history on which to base an evaluation of our business and prospects.
We and our prospects must be considered in light of the risks, difficulties and
uncertainties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets such as
the market for Internet broadcasting, business services and advertising. To
achieve and sustain profitability, we believe that we must, among other things
o provide compelling and unique content to Internet users;
o effectively develop new and maintain existing relationships with
advertisers and broadcasters;
o continue to develop and upgrade our technology and network
infrastructure;
o respond to competitive developments;
o successfully introduce enhancements to our existing products and
services to address new technologies and standards;
o sell our inventory of radio ad spots; and
o attract, retain and motivate qualified personnel.
There can be no assurance that we will be successful in addressing these
risks, and failure to do so could have a material adverse effect on our
continued viability. Additionally, our limited operating history makes the
prediction of future operating results difficult or impossible. We expect to
continue to incur significant losses on a quarterly and annual basis for the
foreseeable future. For these and other reasons, there can be no assurance that
we will ever achieve profitability or, if profitability is achieved, that it can
be sustained. See "Consolidated Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Our Future Revenues Are Unpredictable and We Expect That Our Operating
Expenses Will Increase. Because of our limited operating history and the
emerging nature of the markets in which we compete, we are unable to accurately
forecast our revenues. The market for our services and the long-term acceptance
of Web-based advertising are uncertain. We currently intend to substantially
increase our operating expenses in order to, among other things,
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o expand our distribution network capacity;
o fund increased sales and marketing activities;
o acquire additional content;
o develop and upgrade technology; and
o purchase equipment for operations.
To the extent we are unsuccessful in increasing our revenues, we may be
unable to appropriately adjust spending in a timely manner to compensate for any
unexpected revenue shortfall.
Our Operating Results May Fluctuate Significantly. Our operating results
may fluctuate significantly in the future as a result of a variety of factors,
many of which are outside our control. Factors that may affect our operating
results include:
o the cost of acquiring and the availability of content;
o demand for Internet advertising;
o seasonal trends in Internet and advertising placements;
o the advertising cycles for, or the addition or loss of, individual
advertisers;
o the level of traffic on our Web site;
o the amount and timing of capital expenditures and other costs relating
to the expansion of our operations;
o price competition or pricing changes in Internet broadcasting services
and in Internet advertising;
o the level of and seasonal trends in the use of the Internet;
o technical difficulties or system downtime;
o the cost to acquire sufficient bandwidth or to integrate efficient
broadcast technologies, such as multicasting, to meet our needs;
o the introduction of new products or services by us or our competitors;
and
o general economic conditions and economic conditions specific to the
Internet, such as electronic commerce and online audio.
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Any one of these factors could cause our revenues and operating results to
vary significantly in the future. In addition, as a strategic response to
changes in the competitive environment, we may from time to time make certain
pricing, service or marketing decisions or acquisitions that could cause
significant declines in our operating results.
We also believe that Internet advertising sales generally are lower in the
first and third calendar quarters of each year, and that advertising
expenditures fluctuate significantly with economic cycles. As a result, we
believe that our revenues from Web-based advertising sales could be affected by
these seasonal and cyclical factors and may adversely affect our ability to earn
revenue.
We May Be Unable to Sell Our Bartered Advertising Time. We barter our
streaming services to radio stations in exchange for advertising time on the
radio stations. Thereafter, we seek to sell the advertising time to third party
advertisers. There can be no assurance that we will be able to sell the bartered
advertising time, in which event our cash flow, revenue and earnings, if any,
will be negatively effected.
We Are Subject to Extreme Competition Which Could Reduce Our Revenue and
Adversely Affect Our Operations. Competition among Web sites that broadcast
streaming audio content is intense and is expected to increase significantly in
the future. We compete with Internet service providers, radio stations and
networks that aggregate audio content as well as originate their own Internet
broadcasts. We expect competition to intensify and the number of competitors to
increase significantly in the future. Because the operations and strategic plans
of existing and future competitors are undergoing rapid change, it is extremely
difficult for us to anticipate which companies are likely to offer competitive
services in the future. We also compete with online service providers, other Web
site operators and advertising networks, as well as traditional media such as
television, radio and print for a share of advertisers' total advertising
budgets.
We believe that the principal competitive factors for attracting
advertisers include:
o the number of users accessing our Web site;
o the demographics of our users;
o our ability to deliver focused advertising and interactivity through
our Web site; and
o the overall cost-effectiveness and value of the advertising offered by
us.
There can be no assurance that we will be able to compete successfully or
that the competitive pressures faced by us, including those described above,
will not have a material adverse effect on our ability to earn revenue. Most of
our competitors have larger and more established sales organizations than us,
greater name recognition and more established relationships with advertisers and
advertising agencies than us. These competitors may be able to undertake more
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extensive marketing campaigns, obtain a more attractive inventory of ad spots,
adopt more aggressive pricing policies and devote substantially more resources
to selling advertising inventory. We believe that the number of companies
selling Web-based advertising and the available inventory of advertising space
have recently increased substantially. Accordingly, we may also face increased
pricing pressure for the sale of advertisements on our Web site. Reduction in
our Web-based advertising revenues would have a material adverse effect on our
continued viability.
We Depend on Radio Stations and Performance Rights Societies for Content.
Our future success depends in large part upon our ability to aggregate and
deliver streaming audio broadcast from radio stations over the Internet.
Accordingly, we rely on radio stations to provide our content. Our ability to
maintain existing relationships with radio stations and to build new
relationships with radio stations is critical to the success of our business.
Although many of our agreements with radio stations are for initial terms of
more than one year, the radio stations may choose not to renew the agreements or
may terminate the agreements prior to the expiration of their terms if we fail
to fulfill our contractual obligations. Our inability to secure agreements with
radio stations or performance rights societies, such as Broadcast Music, Inc.
and the American Society of Composers, Authors and Publishers, or the
termination of a significant number of radio station agreements would decrease
the availability of content that we can offer our users. The Broadcast Music
agreement expires June 30, 2000 and the American Society of Composers agreement
expires December 31, 2000. Upon expiration, there can be no assurance that we
will be able to extend the agreements on the same or any other terms
satisfactory to us. This may result in decreased content and traffic on our Web
site and, as a result, decreased advertising revenue.
Our Agreements with Certain Radio Stations Are Non-Exclusive. Our
agreements with certain radio stations are nonexclusive, allowing many of our
competitors the ability to offer the same content now offered by us from such
nonexclusive radio stations. This direct competition could have a material
adverse effect on our ability to attract users and generate revenue.
Our License Fees May Increase in the Future. Our license fees payable to
radio stations, performance rights societies and other licensing agencies may
increase in the future. There also can be no assurance that the radio stations,
performance rights societies and other licensing agencies will enter into
agreements with us on terms acceptable to us. If we are required to pay
increased licensing fees, such increased payments could inhibit our ability to
utilize our bartering arrangement and earn revenue by reselling advertising
time.
Acceptance of Streaming Audio is Uncertain and Subject to Many Obstacles. Our
success depends on the market acceptance of streaming audio technology provided
by companies such as Microsoft Corporation and RealNetworks. Prior to the advent
of streaming technology, Internet users could not initiate the playback of audio
clips until the content was downloaded in its entirety, resulting in significant
waiting times. As a result, live broadcasts of audio content over the Internet
or intranets were not possible. Early streaming audio technology suffered from
poor audio quality. In addition, congestion over the Internet may interrupt
audio streams, resulting in unsatisfying user experiences. In order to receive
streamed audio adequately, users generally must have multimedia personal
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computers with certain microprocessor requirements and at least 28.8 kbps
Internet access and streaming audio software. Users typically electronically
download such software and install it on their computers. Such installation may
require technical expertise that some users do not possess. In addition, older
versions of certain Web browsers may need to be reconfigured in order to receive
streaming audio from our Web site. Furthermore, in order for users to receive
streaming media over corporate intranets, information systems managers may need
to reconfigure such intranets. Because of bandwidth constraints on corporate
intranets, some information systems managers may block reception of streamed
audio. Widespread adoption of streaming audio technology depends on overcoming
these obstacles, improving audio quality and educating customers and users in
the use of streaming audio technology.
We May Be Unable to Generate Advertising Revenue. Our ability to generate
advertising revenue will depend on, among other factors,
o pricing of advertising on competitors' Web sites;
o the amount of traffic on our Web site;
o our ability to achieve and demonstrate user and member demographic
characteristics that are attractive to advertisers; and
o our establishment and maintenance of desirable advertising sales
agency relationships.
Our Potential Growth Could Strain Our Resources. We have rapidly and
significantly expanded our operations and anticipate that significant expansion
of our operations will continue to be required. We expanded from two employees
in March 1999, to 19 employees in December 1999, and we expect to increase our
personnel significantly in the near future. Our recent growth has placed, and is
expected to continue to place, a significant strain on our managerial,
operational and financial resources and systems. To manage our growth, we must
implement, improve and effectively utilize our operational, management,
marketing and financial systems and train and manage our employees. Many of our
senior management have only recently joined us. These individuals have not
previously worked together and are in the process of integrating as a management
team. There can be no assurance that we will be able to effectively manage the
expansion of our operations or that our current personnel, systems, procedures
and controls will be adequate to support our operations.
Our Website is Subject to System Failures. The performance, reliability and
availability of our Web site and network infrastructure are critical to our
reputation and ability to attract and retain users, advertisers and content
providers. All of our network infrastructure is located at a single, leased
facility in Greenwood Village, Colorado. Our systems and operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, Internet breakdowns, break-ins, tornadoes and
similar events. We do not presently have back-up facilities or systems or a
formal disaster recovery plan and do not carry sufficient business interruption
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insurance to compensate us for losses that may occur. Services based on
sophisticated software and computer systems often encounter development delays
and the underlying software may contain undetected errors that could cause
system failures when introduced. Any system error or failure that causes
interruption in availability of content or an increase in response time could
result in a loss of potential or existing business services customers, users,
advertisers or content providers and, if sustained or repeated, could reduce the
attractiveness of our Web site to such entities or individuals. In addition,
because our Web advertising revenues are directly related to the number of
advertisements delivered by us to users, system interruptions that result in the
unavailability of our Web site or slower response times for users would reduce
the number of advertisements delivered and reduce revenues. A sudden and
significant increase in traffic on our Web site could strain the capacity of the
software, hardware and telecommunications systems deployed or utilized by us,
which could lead to slower response times or system failures.
Our Operations Are Dependent Upon Content and Connectivity Providers. Our
operations are dependent upon receipt of timely feeds from our content
providers, and any failure or delay in the transmission or receipt of such
feeds, whether due to failure of our systems, our content providers or
otherwise, could disrupt our operations. We are also dependent upon Web
browsers, Internet service providers and online service providers to provide
Internet users connectivity to our Web site. Users may experience difficulties
accessing or using our Web site due to system failures or delays unrelated to
our systems. These difficulties may negatively affect audio quality or result in
intermittent interruption in programming. In addition, we rely on third party
Internet service providers to provide hosting services with respect to some of
our content providers. Any sustained failure or delay could reduce the
attractiveness of our Web site to users, advertisers and content providers.
We Depend On Providers of Streaming Audio Products. We depend on providers
of streaming audio products, such as Microsoft and RealNetworks, to provide a
broad base of listeners with streaming audio software. We currently license
software products that enable the broadcast of streaming audio from these
companies and may need to acquire additional licenses from them to meet our
future needs. Users are currently able to download electronically copies of the
Microsoft's Media Player and RealNetworks' RealPlayer software free of charge.
If providers of streaming audio products substantially increase license fees
charged to us for the use of their products, refuse to license such products to
us or begin charging users for copies of their player software, such actions
could reduce our listeners and the value of advertising on our Web site.
Our Networks Are Vulnerable to Security Failures. Despite the
implementation of security measures, our networks may be vulnerable to
unauthorized access, computer viruses and other disruptive problems and security
failures. A party who is able to circumvent security measures could
misappropriate proprietary information or cause interruptions in our Internet
operations. Internet service providers and online service providers have in the
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past experienced, and may in the future experience, interruptions in service as
a result of the accidental or intentional actions of Internet users, current and
former employees or others. We may be required to expend significant capital or
other resources to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Although we intend to continue to
implement and utilize security measures, there can be no assurance that measures
implemented by us will not be circumvented in the future. Eliminating computer
viruses and alleviating other security problems may require interruptions,
delays or cessation of service to users accessing our Web site.
We Must Adapt to Technological Changes in Order to Grow Our Business. The
market for Internet broadcast services is characterized by rapid technological
developments, frequent new product introductions and evolving industry
standards. The emerging character of these products and services and their rapid
evolution will require us to effectively use leading technologies, continue to
develop our technological expertise, enhance our current services and continue
to improve the performance, features and reliability of our network
infrastructure. Changes in network infrastructure, transmission and content
delivery methods and underlying software platforms and the emergence of new
broadband technologies, such as digital subscriber lines and cable modems, could
dramatically change the structure and competitive dynamic of the market for
streaming media solutions. In particular, technological developments or
strategic partnerships that accelerate the adoption of broadband access
technologies or advancements in streaming and compression technologies may
require us to expend resources to address these developments. There can be no
assurance that we will be successful in responding quickly, cost effectively and
sufficiently to these or other such developments. In addition, the widespread
adoption of new Internet technologies or standards could require substantial
expenditures by us to modify or adapt our Web site and services.
We Must Retain Our Current Personnel and Hire Additional Personnel In Order
to Grow Our Business. Our performance and development is substantially dependent
on the continued services of certain members of senior management, including
Denise A. Sutton, Chief Executive Officer, and James H. Comstock, President, as
well as on our ability to retain and motivate our other officers and key
employees. We do not have "key person" life insurance policies on any of our
officers or other employees. Our future success also depends on our continuing
ability to attract and retain highly qualified technical personnel and
management. Competition for such personnel is intense and there can be no
assurance that we will be able to retain our key management and technical
employees or that we will be able to attract or retain additional qualified
technical personnel and management in the future. Competition for such personnel
is intense and there can be no assurance that we will be able to retain our key
management and technical employees or that we will be able to attract or retain
additional qualified technical personnel and management in the future.
We Are Subject to Costly Government Regulation and Legal Uncertainties.
Although there are currently few laws and regulations directly applicable to the
Internet, it is likely that new laws and regulations will be adopted in the
United States and elsewhere covering issues such as music licensing, broadcast
license fees, copyrights, privacy, pricing, sales taxes and characteristics and
quality of Internet services. The adoption of restrictive laws or regulations
could slow Internet growth or expose us to significant liabilities associated
with content available on our Web site. The application of existing laws and
regulations governing Internet issues such as property ownership, libel and
personal privacy is also subject to substantial uncertainty. There can be no
assurance that current or new government laws and regulations, or the
application of existing laws and regulations, including laws and regulations
governing issues such as property ownership, content, taxation, defamation and
personal injury, will not expose us to significant liabilities, significantly
slow Internet growth or otherwise cause a material adverse effect on our ability
to earn revenue.
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A Change of Control or Takeover of Our Company Will Be Difficult to
Achieve. Certain provisions of our articles of incorporation and bylaws may have
the effect of delaying, deferring or preventing a change of control of our
company. There are no preemptive rights in connection with our common stock.
Cumulative voting in the election of directors is not allowed. Accordingly, the
holders of a majority of the shares of our common stock, present in person or by
proxy, will be able to elect all of our directors. We have indemnification
provisions for our directors and officers that provide that we will indemnify
them against losses that they may incur in investigations and legal proceedings
resulting from their services to us, which may be broad enough to include
services in connection with takeover defense measures. Such provisions may have
the effect of preventing changes in our management.
We Do Not Intend to Pay Dividends. At the present time we do not anticipate
paying dividends on our common stock in the foreseeable future. Future dividends
will depend on our earnings, if any, our financial requirements and other
factors. Investors who anticipate the need of an immediate income from their
investment in our common stock should refrain from the purchase of our
securities.
Risks Related to the Offering
Shares of Our Common Stock Which Are Eligible for Future Sale by Our
Stockholders May Decrease the Price of Our Common Stock. As of May 8, 2000 we
had 10,228,796 shares of common stock outstanding, including _________ shares
which are free trading, _________ shares which are "restricted" but may be sold
commencing April 2000 under Rule 144 and 1,123,626 shares which are restricted
but are being registered by this prospectus. If holders of our securities sell
substantial amounts of our common stock, then the market price of our common
stock could decrease.
There Is No Significant Trading Market for Our Common Stock. Our common
stock is not eligible for trading on any national or regional exchange. Our
common stock is traded on a limited basis on the NASDAQ Over-the-Counter
Bulletin Board Trading System, which is commonly referred to as the Bulletin
Board, pursuant to Rule 15c2-11 of the Securities Exchange Act of 1934. This
market tends to be highly illiquid, in part because there is no national
quotation system by which potential investors can trace the market price of
shares except through information received or generated by a limited number of
broker-dealers that make a market in that particular stock. There is a greater
chance of market volatility for securities that trade on the Bulletin Board as
opposed to a national exchange or quotation system. This volatility may be
caused by a variety of factors, including:
o the lack of readily available price quotations;
o the absence of consistent administrative supervision of "bid" and
"ask" quotations;
o lower trading volume; and
o market conditions.
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In a volatile market, we may experience wide fluctuations in the market
price of our securities. These fluctuations may have an extremely negative
effect on the market price of our securities and may prevent you from obtaining
a market price equal to your purchase price when you attempt to sell our
securities in the open market. In these situations, you may be required to
either sell our securities at a market price which is lower than your purchase
price, or to hold our securities for a longer period of time than you planned.
Because Our Common Stock Is Classified As "Penny Stock," Trading Is
Limited, and Our Common Stock Price Could Decline. Because our common stock
falls under the definition of "penny stock," the trading in our common stock is
limited because broker-dealers are required to provide their customers with
disclosure documents prior to allowing them to participate in transactions
involving our common stock. These disclosure requirements are burdensome to
broker-dealers and may discourage them from allowing their customers to
participate in transactions involving our common stock.
"Penny stocks" are equity securities with a market price below $5.00 per
share other than a security that is registered on a national exchange, included
for quotation in the NASDAQ system, or whose issuer has net tangible assets of
more than $2,000,000 and has been in continuous operation for greater than three
years. Issuers who have been in operation less than three years must have net
tangible assets of at least $5,000,000.
Rules promulgated by the Securities and Exchange Commission under Section
15(g) of the Exchange Act require broker-dealers engaging in transactions in
"penny stocks" to first provide to their customers a series of disclosures and
documents, including:
o a standardized risk disclosure document identifying the risks inherent
in investment in "penny stocks;"
o all compensation received by the broker-dealer in connection with the
transaction;
o current quotation prices and other relevant market data; and
o monthly account statements reflecting the fair market value of the
securities. In addition, these rules require that a broker-dealer
obtain financial and other information from a customer, determine that
transactions in "penny stocks" are suitable for such customer and
deliver a written statement to such customer setting forth the basis
for this determination.
In addition, under the Exchange Act and the regulations thereunder, any
person engaged in a distribution of shares of our common stock offered by this
prospectus may not simultaneously engage in market making activities with
respect to the common stock during the applicable "cooling off" periods prior to
the commencement of this distribution.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our common
stock being offered by this prospectus.
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MARKET PRICE AND DIVIDEND INFORMATION
Our common stock has traded on the over-the-counter Bulletin Board and on
the pink sheets under the symbol WRPR since September. Prior to September 1999,
our common stock traded on the Bulletin Board under the symbol HOMQ. The
following table sets forth the high and low closing bid prices for our common
stock for the periods indicated. The prices below also reflect inter-dealer
quotations, without retail mark-up, mark-down or commissions and may not
represent actual transactions.
Quarter ended Low bid High bid
------------- ------- --------
3/31/97 $ 36.00 $ 86.40
6/30/97 $ 14.40 $ 72.00
9/30/97 $ 14.40 $ 39.60
12/31/97 $ 4.50 $ 21.60
3/31/98 $ 3.60 $ 9.00
6/30/98 $ 3.15 $ 14.40
9/30/98 $ 4.50 $ 11.70
12/31/98 $ .90 $ 4.50
3/31/99 $ 1.35 $ 1.80
6/30/99 $ 1.80 $ 2.70
9/30/99 $ 1.80 $ 2.70
12/31/99 $ .90 $ 6.00
3/31/99 $ 2.00 $ 5.00
As of March 21, 2000, we had approximately 194 stockholders of record.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
December 31, 1999
-----------------
Stockholders' Equity:
Preferred Stock, 7,000,000 $.001 par value shares
authorized, no shares issued ............... $ --
Common Stock, 50,000,000 $.001 par value shares
authorized, 10,228,796 shares outstanding .. 10,229
Additional paid-in capital .......................... 2,291,059
Deficit Accumulated during the development stage .... (1,594,684)
-----------
Total Stockholders' Equity ................. 706,604
-----------
Total Capitalization ....................... $ 706,604
===========
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SELECTED CONSOLIDATED FINANCIAL DATA
The following table of selected consolidated financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our audited consolidated financial statements and
related notes thereto included elsewhere in this prospectus.
Period Ended
Statement of Operations: December 31, 1999
- ------------------------ -----------------
Revenue ................................................ $ 1,089
Operating expenses ..................................... 1,583,399
Net income (loss) ...................................... (1,594,684)
Weighted average
number of shares
outstanding ........................................ 8,191,819
Net income (loss)
per share ............................................ (.19)
Balance Sheet at December 31, 1999:
- -----------------------------------
Working capital ........................................ $ 624,932
Total assets ........................................... 743,782
Total liabilities ...................................... 37,178
Stockholders' equity ................................... 706,604
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following section contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
This discussion of our financial condition and results of operations for the
period from March 16, 1999 (inception) to December 31, 1999 should be read in
conjunction with our financial statements, the notes related thereto and the
other financial data included elsewhere in this prospectus.
Results of Operations
We are a development stage company that commenced operations on March 16,
1999. Our operations to date have been limited to organizing our company,
raising operating capital, hiring employees and commencing streaming services.
As of December 31, 1999, we had an accumulated deficit of $1,594,684 and a net
worth of $706,604. Accordingly, we have a limited operating history on which to
base an evaluation of our business and prospects. Moreover, we have no prior
periods to compare to the period ended December 31, 1999. Our limited operating
history also makes the prediction of future operating results difficult or
impossible. We expect to continue to incur significant losses on a quarterly and
annual basis for the foreseeable future. For these and other reasons, there can
be no assurance that we will ever achieve profitability or, if profitability is
achieved, that it can be sustained.
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For the period ended December 31, 1999, we earned revenue of $1,098 and
incurred a loss from operations of $1,582,301, comprised primarily of the
following:
o Stock compensation expense of $669,268 paid to employees as additional
compensation and $ 70,474 paid to consultants;
o Salaries of $341,134 paid to officers and employees.
o Advertising expense of $45,449, marketing and promotion expense of
$62,125, production expense of $38,310 and Internet service fees of
$69,596.
We have rapidly and significantly expanded our operations and anticipate
that significant expansion of our operations will continue to be required in
order to address potential market opportunities. We expanded from two employees
in March 1999, to 19 employees by December 31, 1999, and we expect to increase
our personnel significantly in the near future. Our recent growth has placed,
and is expected to continue to place, a significant strain on our managerial,
operational and financial resources and systems.
Liquidity and Capital Resources
We anticipate that in the near term we will incur significant continuing
losses due to ongoing substantial operating expenses offset by negligible
revenue. We currently barter an average of two minutes of advertising inventory
per day Monday through Sunday with each contracted radio station that uses our
streaming services. We presently expect future revenues to stem from sales of
this bartered advertising time.
Currently, we have commitments under non-cancelable operating leases for
office facilities requiring payments of $8,374 per month until November 2000 and
then of $8,507 until October 2002.
Since inception, we have received $550,000 to fund operations from the
issuance of convertible promissory notes which were converted to common stock at
$1.00 per share in October 1999. During the period from March 16, 1999
(inception) to December 31, 1999, we incurred interest expense of $15,359 on
these convertible promissory notes.
In December 1999, we sold 500,000 shares of our common stock for $2.00 per
share resulting in gross proceeds of $1,000,000.
We expect to incur significantly higher costs, particularly marketing and
advertising costs, products content and development costs, general and
administrative costs and additional technology and equipment purchase costs in
order to expand our business. We expect to expend the largest portion of
existing capital on increasing our technical staff, adding key management level
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employees and purchasing additional technology and equipment. In the event
revenue is insufficient to meet our operating expenses, we will seek additional
funding through debt or equity offerings. We currently have no commitments for
any such funding and cannot assure we will be able to obtain such funding if
otherwise required to do so.
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BUSINESS
Our Business
We own and operate an Internet site on the World Wide Web that broadcasts
"streaming" radio station programming 24 hours a day, seven days a week.
Streaming is technology that permits the simultaneous transmission and playback
of digitized audio streams over the Internet. We currently offer live,
uninterrupted radio programming from more than 158 radio stations across the
United States free of charge and have non-binding commitments to add an
additional 59 radio stations to our service in the next three months. Our
listeners benefit from the ability to receive local radio programming online
without the use of a traditional radio, and outside the listener's geographic
area, allowing users to select from dozens of stations and formats. While
listening to our radio programming, users can continue to perform other tasks on
their computers.
Radio stations that join our Web site deliver continuous, live audio feeds
to our servers through the use of a computer, an Internet connection and a
soundboard connection dedicated exclusively to delivery of the audio feeds over
the Internet. We have developed a unique barter arrangement with the radio
stations available on our Web site. In exchange for streaming the station's
programming live over the Internet and providing each station with its own
informational site on our Web site, we receive two minutes of prime time
advertising time per day. In addition, we have entered into licensing agreements
with Broadcast Music, Inc. and the American Society of Composers, Authors and
Publishers, whereby we have agreed to assume all Internet license and royalty
fees traditionally paid by radio stations for each song they broadcast. Under
the license agreements, we pay license fees to the performance rights societies
based upon a percentage of our gross revenues with a minimum annual fee of $500.
We believe that these are the only such arrangements of their kind and that they
afford us a distinct advantage over our competitors who must pass along
additional licensing and royalty fees to radio stations. We earn revenue by
reselling the advertising time we receive from the radio stations on our Web
site and by selling banner and other promotional advertisements on our Web site.
There can be no assurance that we will be able to sell our bartered advertising
time.
We have developed and implemented an extensive streaming audio aggregation
and distribution network designed to ensure the broadcast quality of the content
received from broadcasters and distributed to users. We are capable of
simultaneously receiving audio content from hundreds of broadcasters through
Internet network connections to our servers. The audio streams are constantly
monitored for quality and encoded by converting from an audio signal into a
digital stream prior to distribution. We employ multicasting technology which
sends one signal to multiple users around the world to transmit streaming audio
to the Internet where listeners access the broadcast through their own network
connections. This network is designed to efficiently and securely broadcast live
audio programming to a virtually unlimited audience.
In order to augment the number of radio stations available on our Web site
and expand our broadcast audience, we currently utilize a majority of the
advertising we receive under licensing agreements with radio stations to promote
our own brand name. We believe that this is initially a cost-effective means by
which to enhance brand awareness, increase demand for our service and attract
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advertisers. By demonstrating to broadcasters and advertisers our broad-based
distribution and the ability to deliver associated traffic, we believe that our
Web site provides an attractive platform for broadcasters and advertisers
seeking to target specific users with rich, compelling content and advertising
solutions.
The Internet and Streaming Radio
The Internet has grown rapidly in recent years, spurred by developments
such as easy-to-use Web browsers, the availability of multimedia personal
computers and the emergence of compelling Web-based content and commerce
applications. International Data Corporation, an independent Internet market
research firm, expects the number of Internet users to grow 29% per year from
approximately 142 million worldwide in 1998 to exceed 500 million by the end of
2003. In 1998, approximately 150 million devices were used to access the
Internet. By the year 2002, International Data Corporation estimates that the
number of Internet devices is expected to increase to more than 720 million, a
compound annual growth rate of 37%. A number of factors are expected to fuel the
growth of the Internet, including:
o the increasing number of computers installed in homes and offices;
o the decreasing cost of computers;
o lower cost and more efficient Internet access;
o improving network equipment;
o expanding Internet content; and
o increasing familiarity with and acceptance of the Internet as a
resource for consumers and businesses.
The Internet has quickly evolved from a relatively simple mechanism for the
delivery of text-based Web pages and electronic mail to a multimedia platform,
providing an interactive world of information, entertainment and commerce. The
resulting convergence of every day computer applications with communication,
entertainment and commerce platforms permits the Internet to deliver content in
such areas as music, sports, games, hobbies and shopping opportunities. The
development of streaming audio media allows the Internet to broadcast music,
information, advertising and other content to hundreds of thousands of
simultaneous listeners worldwide. Streaming audio combines the Internet's
interactivity with traditional, more passive radio listening. According to a
study performed in January 1999 by The Arbitron Company, 27% of Internet users
have listened to Internet radio. The development of the Internet as a broadcast
medium suggests a comparison to traditional radio.
Broadcasting audio content over the Internet offers certain opportunities
that are not generally available from traditional media. Currently available
analog technology and government regulations limit the ability of radio stations
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to broadcast beyond certain geographic areas. Radios are not widely used in
office buildings and other workplaces, where Internet access has become
commonplace. Through the Internet, audio programming can be delivered to a large
number of computer users who can listen to music from the broadcaster's Internet
site while working on other applications. Moreover, Internet users can interact
with the broadcast content by responding to advertising, voting in polls and
obtaining additional information.
In addition, atmospheric conditions and physical barriers can interfere
with traditional radio transmissions. By contrast, Internet broadcasters
transmit music and information using audio streaming technology, which has
inherent advantages over traditional radio broadcasts, such as permitting the
continuous transmission of music to a virtually unlimited geographic region.
Because audio streams are transmitted in digitized form over telephone lines,
they are unaffected by atmospheric or structural barriers. They may, however, be
limited by Internet traffic and other factors unique to the Internet, such as a
user's or broadcaster's computer hardware or software. At times when bandwidth
which is the range of frequencies utilized by the Internet, is not available,
Internet audio quality may not be as clear as traditional broadcast radio.
However, as bandwidth increases, Internet audio quality is expected to improve
and become comparable to, or even better than, the quality of traditional
broadcast radio.
Moreover, traditional broadcasters are limited in their ability to measure
or identify in real time the listeners of a program because they typically rely
upon reports from companies, such as The Arbitron Company, that use statistical
sampling methods to determine the size and demographic profile of the station's
audience. As a result, traditional radio broadcasts generally must appeal to a
broad spectrum of listeners to capture the widest possible market for their
advertising. These companies periodically capture information regarding
listening habits from a cross section of the market and then estimate the
popularity of competing radio stations in the market. Web site audience traffic
measurements, by contrast, are not limited to statistical sampling and can
provide a more reliable measurement of listener traffic. Web sites or servers
communicate and respond to incoming requests from Internet users. These servers
can record listener and audience information on server log files and provide
current and exact measurements of the number of listeners and the length of time
listeners spend on a Web site. Internet broadcasters can provide highly specific
information about a program's audience to content providers and advertisers. By
using the Internet, targeted streaming audio content can be broadcast to a
geographically dispersed audience of customers, suppliers, employees and
stockholders at relatively low costs.
In short, the convergence of the Internet's capabilities and attributes has
accelerated the demand for live audio programming, leading to rapidly growing
economic opportunities in Web-based broadcasting.
Strategy
We believe that in order to achieve success as an Internet audio
broadcaster we must:
o cost-effectively aggregate diverse and compelling content;
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o implement a network capable of streaming audio programming to large
audiences 24 hours a day, seven days a week;
o enhance brand awareness; and
o develop an attractive, heavily trafficked advertising medium.
By providing broadcasters with royalty-free, continuous audio streaming to
hundreds of thousands of Internet listeners in exchange for two minutes of prime
time advertising per day, we are able to eliminate many of the barriers we
believe prevent most radio stations from broadcasting on the Internet.
Continuously streaming audio over the Internet is extremely capital- and
time-intensive and, as a result, an unattractive and infeasible option for most
radio stations. Indeed, broadcasting audio on the Internet requires that radio
stations design, develop, integrate and maintain complex network elements,
including extensive bandwidth, streaming licenses, equipment and technical
expertise. Our licensing program, however, allows broadcasters and their
advertisers to reach a vast and diverse audience without expending any capital
or labor whatsoever.
Competition
Competition among Web sites that broadcast streaming audio content is
intense and is expected to increase significantly in the future. We compete with
Internet service providers, radio stations and networks that aggregate audio
content as well as originate their own Internet broadcasts. We expect
competition to intensify and the number of competitors to increase significantly
in the future. Because the operations and strategic plans of existing and future
competitors are undergoing rapid change, it is extremely difficult for us to
anticipate which companies are likely to offer competitive services in the
future. We also compete with online service providers, other Web site operators
and advertising networks, as well as traditional media such as television, radio
and print for a share of advertisers' total advertising budgets.
We believe that the principal competitive factors for attracting
advertisers include:
o the number of users accessing our Web site;
o the demographics of our users;
o our ability to deliver focused advertising and interactivity through
our Web site; and
o the overall cost-effectiveness and value of the advertising offered by
us.
There can be no assurance that we will be able to compete successfully or
that the competitive pressures faced by us, including those described above,
will not have a material adverse effect on our ability to earn revenue. Most of
our competitors have larger and more established sales organizations than us,
greater name recognition and more established relationships with advertisers and
advertising agencies than us. These competitors may be able to undertake more
extensive marketing campaigns, obtain a more attractive inventory of ad spots,
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adopt more aggressive pricing policies and devote substantially more resources
to selling advertising inventory. We believe that the number of companies
selling Web-based advertising and the available inventory of advertising space
have recently increased substantially. Accordingly, we may also face increased
pricing pressure for the sale of advertisements on our Web site. Reduction in
our Web-based advertising revenues would have a material adverse effect on our
continued viability.
Marketing and Sales
We market our streaming audio services directly to radio stations
throughout the United States through our executive officers and through
telemarketing efforts. Radio advertising spots obtained from radio stations in
exchange for our streaming audio services are primarily marketed for us by
WinStar Global Media, Inc.
Government Regulation and Laws that Impact Our Business
Although there are currently few laws and regulations directly applicable
to the Internet, it is likely that new laws and regulations will be adopted in
the United States and elsewhere covering issues such as music licensing,
broadcast license fees, copyrights, privacy, pricing, sales taxes and
characteristics and quality of Internet services. The adoption of restrictive
laws or regulations could slow Internet growth or expose us to significant
liabilities associated with content available on our Web site. The application
of existing laws and regulations governing Internet issues such as property
ownership, libel and personal privacy is also subject to substantial
uncertainty. There can be no assurance that current or new government laws and
regulations, or the application of existing laws and regulations, including laws
and regulations governing issues such as property ownership, content, taxation,
defamation and personal injury, will not expose us to significant liabilities,
significantly slow Internet growth or otherwise cause a material adverse effect
on our ability to earn revenue.
In November 1995, the Digital Performance Right in Sound Recordings Act of
1995 was enacted. The Sound Recordings Act provides that the owners of sound
recordings have certain exclusive performance rights in such recordings, and, if
applicable to us, could require us to pay additional licensing fees for its
broadcasts. We believe, however, that our broadcasts are exempt from such fees
under the Sound Recordings Act. No assurance, however, can be given that our
belief is correct, particularly because the Sound Recordings Act has not yet
been sufficiently interpreted. An interpretation of the Sound Recordings Act on
this or other provisions of the Act that is adverse to us could impose
significant additional licensing fees and other costs on our business.
We currently do not collect sales or other taxes with respect to the sale
of services or products in states and countries where we believe we are not
required to do so. One or more states or countries have sought to impose sales
or other tax obligations on companies that engage in online commerce within
their jurisdictions. A successful assertion by one or more states or countries
that we should collect sales or other taxes on products and services, or remit
payment of sales or other taxes for prior periods, could significantly increase
our costs and expenses of operating our business.
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The Communications Decency Act of 1996 was enacted in 1996. Although those
sections of the Decency Act that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over the
Internet were held to be unconstitutional by the U.S. Supreme Court, there can
be no assurance that similar laws will not be proposed and adopted. Although we
do not currently distribute the types of materials that the Decency Act may have
deemed illegal, the nature of such similar legislation and the manner in which
it may be interpreted and enforced cannot be fully determined, and legislation
similar to the Decency Act could subject us to potential liability, which in
turn could have an adverse effect on our business, financial condition and
results of operations. Such laws could also damage the growth of the Internet
generally and decrease the demand for our products and services, which could
adversely affect our ability to earn revenue.
Employees
As of the date hereof, we have 19 full-time employees and one part-time
employee.
Facilities
We lease 2,709 square feet of office space at 6535 South Dayton Street,
Suite 3000, Greenwood Village, CO 80111. We currently pay $8,374 per month for
the office space and beginning November 1, 2000, we will pay $8,507 per month on
a lease which expires on October 31, 2002. We own no property.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding our executive officers
and directors:
Officer/Director
Name Age Position Since
---- --- -------- -----
Denise A. Sutton 42 Chief Executive Officer, Secretary and 1999
Director
James H. Comstock 47 President and Chief Operating Officer 2000
Jo Saari Hadley 45 Vice President 1999
Directors hold office for a period of one year from their election at the
annual meeting of stockholders and until their successors are duly elected and
qualified. Officers are elected by, and serve at the discretion of, our board of
directors. None of the above individuals has any family relationship with any
other.
The following is a summary of the business experience of each of our
executive officers and directors:
Denise A. Sutton - Chief Executive Officer, Secretary and Director. Ms.
Sutton has served as our Chief Executive Officer, Secretary and the sole member
of our board of directors since March 1999. From October 1995 to February 1999,
Ms. Sutton managed Webster Audio Products, Inc., a radio production company in
Greenwood Village, Colorado. Ms. Sutton served as an internal auditor for
Joslins from September 1994 to August 1996 and was a Schwab 500 Representative
with Charles Schwab from January 1992 to July 1994.
James H. Comstock - President and Chief Operating Officer. Mr. Comstock has
served as our President and Chief Operating Officer since January 3, 2000. From
August 1998 to November 1999, Mr. Comstock served as Vice President and General
Manager, Technology & Operations for RMI.Net, a Colorado-based nationwide
commerce solutions provider. From November 1997 to July 1998, Mr. Comstock was
Chief Executive Officer and a consultant for TTTeam, Inc., a Denver, Colorado,
consulting company concentrating on technology start-ups and turn-around
situations. From June 1995 to November 1997, Mr. Comstock served as Chief
Technology Officer for Williams Communications Group/ITC Media Conferencing, a
national multimedia teleconferencing company. Mr. Comstock holds a B.S. in
Computer Science, a B.A. in Math and a B.A. in German from Ohio University.
Jo Saari Hadley - Vice President. Ms. Hadley has served as our Vice
President since March 1999. From May 1997 to March 1999, Ms. Hadley was an
independent contractor with Webster Audio Products, Inc. Ms. Hadley founded and
operated The Well Wisher, a gift basket and balloon business in Denver, Colorado
from August 1994 to April 1997 and was a Veterinary Technician for Centaurion
Animal Hospital from January 1991 to July 1994.
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EXECUTIVE COMPENSATION
None of our executive officers received compensation in excess of $100,000
for the years ended December 31, 1998 or 1999. The following table indicates all
compensation received the by our Chief Executive Officer in 1998 and 1999.
Summary Compensation Table
Annual Compensation (1)
------------------------------
(a) (e) (f)
Name and Principal (b) (c) (d) Stock Other Annual
Position Year Salary($) Bonus($) Options Compensation($)
-------- ---- --------- -------- ------- ---------------
Howard Ruff,
President 1999 0 0 0 0
Denise A. Sutton,
Chief Executive 1999 39,000 5,000 0 0
Officer
- -----------
Our director does not receive compensation for attending board meetings but
is reimbursed for out-of-pocket expenses incurred in connection therewith, if
any.
Stock Option Plan and Stock Option Grants
In October 1999, our stockholders adopted our 1999 Employee Stock Option
Plan. Stock options issued under the stock option plan are non-qualified and are
issuable to any of our officers, directors, key employees or consultants.
Our board of directors initially reserved 1,000,000 shares of common stock
for issuance under the stock option plan. Our stock option plan is administered
by our full board of directors, which determines which individuals shall receive
stock options, the time period during which the stock options may be exercised,
the number of shares of our common stock that may be purchased under each stock
option and the stock option price.
No stock options may be transferred by an optionee other than by will or
the laws of descent and distribution, and during the lifetime of an optionee,
the stock option may only be exercisable by the optionee. The exercise date of a
stock option granted under our stock option plan cannot be later than ten years
from the date of grant. Any stock options that expire unexercised or that
terminate upon an optionee's ceasing to be employed by us become available once
again for issuance. Shares issued upon exercise of a stock option will rank
equally with other shares then outstanding.
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As of the date hereof, 575,000 stock options have been granted under our
stock option plan, exercisable at prices ranging from $1.00 to $5.00 per share,
including an aggregate of 375,000 options issued to Denise A. Sutton and James
H. Comstock.
Liability and Indemnification of Officers and Directors
Our articles of incorporation and bylaws provide for indemnification of our
officers, directors and controlling persons. Our articles provide that no
director or officer shall be personally liable to us or our stockholders for
monetary damages for any breach of fiduciary duty by such person as a director
or officer. Notwithstanding the foregoing sentence, a director or officer shall
be liable to the extent provided by Nevada law, for acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law or for the
payment of dividends in violation of Section 78.300 of the Nevada Revised
Statutes.
Our bylaws provide that any person made a party to or involved in any
civil, criminal or administrative action, suit or proceeding by reason of the
fact that such person or such person's testator or intestate is or was a
director, officer, or employee of our company, or of any corporation which such
person, the testator, or intestate served as such at our request, shall be
indemnified by us against expenses reasonably incurred by such person or imposed
on such person in connection with or resulting from the defense of such action,
suit, or proceeding and in connection with or resulting from any appeal thereon,
except with respect to matters as to which it is adjudged in such action, suit
or proceeding that such officer, director, or employee was liable to us, or to
such other corporation, for negligence or misconduct in the performance of such
person's duty. The term "expense" includes all obligations incurred by such
person for the payment of money, including, without limitation, attorney's fees,
judgments, awards, fines, penalties and amounts paid in satisfaction of judgment
or in settlement of any such action, suit, or proceeding, except amounts paid to
us or such other corporation by such person.
Section 78.751 of the Nevada Revised Statutes allows us to indemnify any
person who was or is threatened to be made a party to any threatened, pending,
or completed action, suit or proceeding, by reason of the fact that he or she is
or was a director, officer, employee or agent of our company, or is or was
serving at our request as a director, officer, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise.
-25-
<PAGE>
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND
BENEFICIAL OWNERS OF GREATER THAN 5% OF OUR COMMON STOCK
The following table sets forth information with respect to the beneficial
ownership of our common stock owned, as of December 31, 1999, by:
o each holder of more than 5% of our common stock;
o our director;
o our executive officers; and
o our director and all of our executive officers as a group.
For purposes of computing the percentages under the table below, it is
assumed that all options and warrants to acquire our common stock which have
been issued to the directors, executive officers and holders of more than 5% of
our common stock and fully vested or will become fully vested within 60 days of
the date of this prospectus have been exercised by these individuals and the
appropriate number of shares of our common stock have been issued to these
individuals. Except as otherwise noted, the persons named in the table owns the
shares beneficially and of record and has sole voting and investment power with
respect to all shares shown as owned by her. Ms. Sutton's address is in care of
our company at 6535 South Dayton Street, Suite 3000, Greenwood Village, Colorado
80111.
Number of Shares Percentage
Name Beneficially Owned of Class
---- ------------------ --------
Denise A. Sutton 6,569,500 (1) 62.4%
James H. Comstock 100,000 (2) *
The director and all officers as a group 6,669,500 (1)(2) 63.3%
(3 persons)
(1) Includes 125,000 stock options held by Ms. Sutton and 75,000 stock options
held by Ms. Sutton's husband, John W. Sutton. Ms. Sutton disclaims any
beneficial ownership of the stock options held by Mr. Sutton.
(2) Includes 100,000 stock options held by Mr. Comstock.
* Less than 1%
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders and the
number of shares of our common stock beneficially owned by the selling
stockholders as of the date of this prospectus. All shares of common stock owned
by each shareholder are being offered for sale pursuant to this prospectus.
The following shares may be offered from time to time by the selling
stockholders named below. However, the selling stockholders are under no
obligation to sell all or any portion of these shares of our common stock. In
addition, the selling stockholders are not obligated to sell such shares of our
common stock immediately under this prospectus. Since the selling stockholders
may sell all or part of the shares of common stock offered in this prospectus,
we cannot estimate the number of shares of our common stock that will be held by
the selling stockholders upon termination of this offering.
-26-
<PAGE>
None of the selling stockholders is an officer or director of our company
and each owns less than 1% of our outstanding shares. The address of each
selling stockholder is in care of our company at 6535 South Dayton Street, Suite
3000, Greenwood Village, Colorado 80111.
Number of Shares
of Common Stock
Owned Before Offering
Name and Offered for Sale
- ---- --------------------
AEH Trust B CB Humph 10,000
Mark A. Anderson 15,000
Dwaine J. Baldwin 8,000
BDB Holdings, Ltd. 10,000
Dave Begg 5,137
Harris Block 15,541
Steve Boone 25,000
Kyle and Lela Bush 25,000
Oress Paul Chacon 2,039
Gary R. Clayton 46,890
Michael Coffey 51,000
Timothy P. Colleran 14,096
Nancy Cuprisin 10,262
M.E. Dobesh 7,205
Barbara J. Drew TTEE 17,815
Tony Dorsett 35,000
James Dyer 18,020
Lynn Eaton 5,129
Eischeid 15,000
Fair Market Value 60,586
Michael Flax 30,000
Keven Falduto 27,041
Anthony Frasca 30,789
Everetta L. Frasca 5,263
Avrohom Friesel 36,162
Galloping Goose Prop 15,000
J. Curtis Garrett 7,500
Sherry Snyder Gater 2,960
Stephen Gomes 17,815
Michael Hathaway 1,018
Charles B. Humphrey 25,000
Jolie D. Humphrey 5,000
William Jasperson 10,000
Eric D. Kayser 5,147
George Khalifeh 11,283
Charles Kirby 20,553
-27-
<PAGE>
Konczak Corp. 15,000
Charles LeClaire 7,162
Scott MacBride 10,277
Jeff Maier 15,621
Charlotte Maier 6,200
Pat McNulty 1,000
Terald McPherson 5,134
Gene and Joan Meek 7,523
Steven Mize 10,000
Greg Nahm 64,932
Brian O'Keefe 8,521
James Peters, Jr 1,028
David Potarf 3,079
John Ranay 4,599
Harold Rayle & Maggie R 30,000
SB Irons Trust Humphrey 10,000
Reg Schleider 7,500
Rick Schleider 10,000
Rob Schleider 10,000
Robert Schleider 7,500
Lewis Schwartz 10,462
Lewis Schwartz IRA 15,000
Sky Walker Imaging 1,000
Jeffrey Stone 25,000
Soraya Taban 3,060
Mandana Tanner 4,074
Ahmad Tehrani 5,099
Marvin Timmons 25,000
Top Ten LLC 29,859
Ken Vannatta 6,200
Alan Watson 2,220
Leonard Weiss 15,000
Jan Welcome 5,270
West Hazmat Rem. Serv 5,110
H. Ron White 25,000
Mark Whitver 30,529
Zenith Petroleum Corp. 33,416
-28-
<PAGE>
PLAN OF DISTRIBUTION
The shares of our common stock which the selling stockholders or their
pledgees, donees, transferees or other successors in interest are offering for
resale will be sold from time to time in one or more of the following
transactions:
o block transactions;
o transactions on the Bulletin Board or on such other market on which
our common stock may from time to time be trading;
o privately negotiated transactions;
o through the writing of options on the shares;
o short sales; or
o any combination of these transactions.
The sale price to the public in these transactions may be:
o the market price prevailing at the time of sale;
o a price related to the prevailing market price;
o negotiated prices; or
o such other price as the selling stockholders determine from time to
time.
In the event that we permit or cause this prospectus to lapse, the selling
stockholders may sell shares of our common stock pursuant to Rule 144 under the
Securities Act of 1933. The selling stockholders will have the sole and absolute
discretion not to accept any purchase offer or make any sale of these shares of
our common stock if they deem the purchase price to be unsatisfactory at any
particular time.
The selling stockholders or their pledges, donees, transferees or other
successors in interest, may also sell these shares of our common stock directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. These broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of these shares of our common stock for whom such
broker-dealers may act as agents or to whom they sell as principal, or both. As
to a particular broker-dealer, this compensation might be in excess of customary
commissions. Market makers and block purchasers purchasing these shares of our
common stock will do so for their own account and at their own risk. It is
possible that a selling stockholder will attempt to sell shares of our common
stock in block transactions to market makers or other purchasers at a price per
share which may be below the prevailing market price of our common stock. There
can be no assurance that all or any of these shares of our common stock offered
hereby will be issued to, or sold by, the selling stockholders. Upon effecting
the sale of any of these shares of our common stock offered under this
prospectus, the selling stockholders and any brokers, dealers or agents, hereby,
may be deemed "underwriters" as that term is defined under the Securities Act of
1933 or the Securities Exchange Act of 1934, or the rules and regulations
thereunder.
-29-
<PAGE>
Alternatively, the selling stockholders may sell all or any part of the
shares of our common stock offered hereby through an underwriter. No selling
stockholder has entered into any agreement with a prospective underwriter and
there is no assurance that any such agreement will be entered into. If a selling
stockholder enters into an agreement or agreements with an underwriter, then the
relevant details will be set forth in a supplement or revision to this
prospectus.
The selling stockholders and any other persons participating in the sale or
distribution of these shares of our common stock will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
thereunder including, without limitation, Regulation M. These provisions may
restrict activities of, and limit the timing of purchases and sales of any of
these shares of our common stock by, the selling stockholders. Furthermore,
pursuant to Regulation M, persons engaged in a distribution of securities are
prohibited from simultaneously engaging in market making and other activities
with respect to the securities for a specified period of time prior to the
commencement of the distributions, subject to specified exceptions or
exemptions. These regulations may affect the marketability of these shares of
our common stock.
We will pay substantially all of the expenses incident to the registration
and offering of our common stock, other than commissions or discounts of
underwriters, broker-dealers or agents.
RELATED PARTY AND OTHER MATERIAL TRANSACTIONS
In March 1998, we entered into an agreement with Phoenix Ink, LLC, a
company owned by Howard Ruff, a former officer and shareholder of our company.
Pursuant to the agreement, we issued 4,600,000 shares of our common stock to
Phoenix in consideration for Phoenix purchasing our assets and assuming the
liabilities and providing us with $50,000 in cash. Also, in March 1998, we sold
an additional 22,227 shares of our common stock to Phoenix for $40,000, or $.25
per share.
In March 1998, we transferred inventory, certain fixed assets, trademarks
and other intangible assets with a book value of $143,395 to William Turnbull, a
former consultant of our company, in payment of $27,340 we owed Mr. Turnbull in
accrued wages.
In April 1998, we issued 594,444 shares of our common stock to Phoenix to
retire $377,000 of our debt held by Phoenix.
In August 1999, we sold 4,166,667 shares of our common stock to Ken
Edwards, a former officer of our company, for $30,000 ($.001 per share). In
connection with our September 30, 1999 acquisition of Web Audio, Mr. Edwards
gratuitously reconveyed 3,666,667 shares to us.
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 50,000,000 shares of common stock, $.001 par
value per share, and 7,000,000 shares of preferred stock, $.001 par value per
share. As of May 8, 2000, 10,228,796 shares of our common stock were
outstanding. No preferred stock is currently outstanding.
-30-
<PAGE>
Common Stock
All shares of our common stock have equal voting rights and are not
assessable. Voting rights are not cumulative and, therefore, the holders of more
than 50% of our common stock could, if they chose to do so, elect all of our
directors. Upon liquidation, dissolution or winding up of our company, our
assets, after the payment of liabilities, will be distributed pro rata to the
holders of our common stock. The holders of our common stock do not have
preemptive rights to subscribe for any of our securities and have no right to
require us to redeem or purchase their shares. The shares of our common stock
currently outstanding are validly issued, fully paid and non-assessable.
Preferred Stock
Our preferred stock may be issued in series from time to time with such
designation, rights, preferences and limitations as our board of directors may
determine be resolution. The rights, preferences and limitations of separate
series of preferred stock may differ with respect to such matters as may be
determined by our board of directors, including, without limitation, the rate of
dividends, method and nature of payment of dividends, terms of redemption,
amounts payable on liquidation, sinking fund provisions (if any), conversion
rights (if any) and voting rights.
Dividends
Holders of our common stock are entitled to share equally in dividends
when, as and if declared by our board of directors, out of funds legally
available therefore. No dividend has been paid on our common stock since
inception, and none is contemplated in the foreseeable future.
Transfer Agent
Interwest Transfer Company, 1981 E. Murray-Holladay Road, P.O. Box 17136,
Salt Lake City, Utah 84117 is our transfer agent.
SHARES ELIGIBLE FOR FUTURE SALE
As of May 8, 2000, we had 10,228,796 shares of our common stock
outstanding, including _____ shares which are free trading shares which can be
sold commencing April 2000 under Rule 144 and 1,123,626 shares which are
restricted shares but are being registered by this prospectus.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who owns shares that were purchased from us, or any
affiliate, at least one year previously, including a person who may be deemed
our affiliate, is entitled to sell within any three-month period, a number of
shares that does not exceed the greater of:
o 1% of the then outstanding shares of our common stock; or
o the average weekly trading volume of our common stock during the four
calendar weeks preceding the date on which notice of the sale is filed
with the Securities and Exchange Commission.
-31-
<PAGE>
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us. Any
person who is not deemed to have been our affiliate at any time during the 90
days preceding a sale, and who owns shares within the definition of "restricted
securities" under Rule 144 under the Securities Act that were purchased from us,
or any affiliate, at least two years previously, is entitled to sell such shares
under Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
In addition to the outstanding shares of our common stock described above,
as of the date of this prospectus, we have 575,000 shares of common stock
reserved for issuance upon the exercise of outstanding options. The shares of
our common stock underlying these securities are free trading upon exercise.
Future sales of restricted common stock under Rule 144 or otherwise or of
the shares which we are registering under this prospectus could negatively
impact the market price of our common stock. We are unable to estimate the
number of shares that may be sold in the future by our existing stockholders or
the effect, if any, that sales of shares by such stockholders will have on the
market price of our common stock prevailing from time to time. Sales of
substantial amounts of our common stock by existing stockholders could adversely
affect prevailing market prices.
EXPERTS
Our consolidated financial statements for the period from March 16, 1999
(inception) to December 31, 1999 included in the registration statement and this
prospectus have been included in reliance on the report of Angell & Deering,
independent certified public accountants, given on the authority of Angell &
Deering as experts in accounting and auditing.
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for us
by the Law Office of Gary A. Agron, Englewood, Colorado.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form SB-2 under the Securities Act of 1933
with respect to our common stock offered by this prospectus. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits to the registration statement. For further information with
respect to our company and the common stock offered hereby, reference is made to
the registration statement and the exhibits filed as part of the registration
statement. We also file periodic reports with the Securities and Exchange
Commission, including quarterly reports, annual reports which include out
audited financial statements and proxy statements. The registration statement,
including exhibits thereto, and all of our periodic reports may be inspected
without charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
-32-
<PAGE>
Public Reference Section of the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Securities and Exchange
Commission's regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade Center, 13th
Floor, New York, New York 10048 after payment of fees prescribed by the
Securities and Exchange Commission. You may obtain additional information
regarding the operation of the Public Reference Section by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains a World Wide Web site which provides online
access to reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission at the address: http://www.sec.gov.
-33-
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
WARPRADIO.COM, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements Page
- -------------------- ----
Independent Auditors' Report F-2
Consolidated Balance Sheet as of December 31, 1999 F-3
Consolidated Statement of Operations for the period from
March 16, 1999 (date of inception) to December 31, 1999 F-4
Consolidated Statement of Changes in Stockholders' Equity
for the period from March 16, 1999 (date of inception) to
December 31, 1999 F-5
Consolidated Statement of Cash Flows for the period from
March 16, 1999 (date of inception) to December 31, 1999 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
WarpRadio.com, Inc.
We have audited the accompanying consolidated balance sheet of Web Audio & Radio
Portal, Inc. and Subsidiary dba WarpRadio.com, Inc. (a development stage
company) as of December 31, 1999 and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the period from
March 16, 1999 (date of inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Web Audio & Radio
Portal, Inc. and Subsidiary dba WarpRadio.com, Inc. as of December 31, 1999 and
the results of their operations and their cash flows for the period from March
16, 1999 (date of inception) to December 31, 1999 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $1,594,684 during the period ended December
31, 1999. As discussed in Note 1 to the financial statements, the Company's
significant operating losses raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Angell & Deering
--------------------
Angell & Deering
Certified Public Accountants
Denver, Colorado
January 26, 2000
F-2
<PAGE>
WARPRADIO.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
------
Current Assets:
Cash and cash equivalents $ 662,110
-----------
Total Current Assets 662,110
-----------
Property and Equipment, at cost:
Office equipment 78,680
Furniture 3,405
-----------
82,085
Less accumulated depreciation (6,084)
-----------
Net Property and Equipment 76,001
-----------
Other Assets:
Deposits 5,671
-----------
Total Other Assets 5,671
-----------
Total Assets $ 743,782
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable - trade $ 21,769
Accrued expenses:
Payroll taxes 15,409
-----------
Total Current Liabilities 37,178
-----------
Commitments and Contingencies --
Stockholders' Equity:
Preferred stock: $.001 par value, 7,000,000 shares
authorized, none issued or outstanding --
Common stock: $.001 par value, 50,000,000 shares
authorized, 10,228,796 shares issued and outstanding 10,229
Additional paid in capital 2,291,059
Deficit accumulated during the development stage (1,594,684)
-----------
Total Stockholders' Equity 706,604
-----------
Total Liabilities and Stockholders' Equity $ 743,782
===========
The accompanying notes are an integral
part of these consolidated financial statements.
F-3
<PAGE>
WARPRADIO.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 16, 1999 (INCEPTION) TO DECEMBER 31, 1999
Revenue $ 1,098
-----------
Operating Expenses:
Stock compensation 739,742
Depreciation 6,084
Selling, general and administrative 837,573
-----------
Total Operating Expenses 1,583,399
-----------
Loss From Operations (1,582,301)
-----------
Other Income (Expense):
Interest and other income 2,976
Interest expense (15,359)
-----------
Total Other Income (Expense) (12,383)
-----------
Net Income (Loss) $(1,594,684)
===========
Net Income (Loss) Per Basic and
Diluted Share of Common Stock $ (.19)
Weighted Average Number of Basic and
Diluted Common Shares Outstanding 8,191,819
The accompanying notes are an integral
part of these consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
WARPRADIO.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MARCH 16, 1999 (INCEPTION) TO DECEMBER 31, 1999
Deficit
Accumulated
Common Stock Additional During the
------------------- Paid in Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance at March 16, 1999 (inception) -- $ -- $ -- $ --
Shares of common stock issued in March
1999 for services valued at $.0004 per
share 7,319,500 7,320 (4,118) --
Shares of common stock issued in July
1999 for services valued at $.004 per
share 180,500 180 610 --
Issuance of common stock in
recapitalization 1,500,000 1,500 (1,500) --
Shares issued in October 1999 for
conversion of convertible notes payable
and accrued interest into common stock
valued at $1.00 per share 565,296 565 564,731 --
Issuance of common stock in November
1999 and December 1999 private
placement at $2.00 per share (net of
costs of $3,750) 500,000 500 995,750 --
Shares of common stock issued in
December 1999 for services valued
at $4.50 per share 163,500 164 735,586 --
Net loss for the period -- -- -- (1,594,684)
----------- ----------- ----------- -----------
Balance at December 31, 1999 10,228,796 $ 10,229 $ 2,291,059 $(1,594,684)
=========== =========== =========== ===========
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
</TABLE>
<PAGE>
WARPRADIO.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 16, 1999 (INCEPTION) TO DECEMBER 31, 1999
Cash Flows From Operating Activities:
Net income (loss) $(1,594,684)
Adjustments to reconcile net income (loss) to net
cash (used) by operating activities:
Depreciation 6,084
Common stock issued for services 739,742
Changes in assets and liabilities:
Accounts payable 21,769
Accrued expenses 30,705
-----------
Net Cash (Used) By Operating Activities (796,384)
-----------
Cash Flows From Investing Activities:
Capital expenditures (82,085)
Deposits (5,671)
-----------
Net Cash (Used) By Investing Activities (87,756)
-----------
Cash Flows From Financing Activities:
Proceeds from borrowing 550,000
Issuance of common stock 1,000,000
Offering costs incurred (3,750)
-----------
Net Cash Provided By Financing Activities 1,546,250
-----------
Net Increase in Cash and Cash Equivalents 662,110
Cash and Cash Equivalents at Beginning of Period --
-----------
Cash and Cash Equivalents at End of Period $ 662,110
===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 63
Income taxes --
Supplemental Disclosure of Noncash Investing and
Financing Activities:
Conversion of convertible notes payable and accrued
interest into common stock $ 565,296
The accompanying notes are an integral
part of these consolidated financial statements.
F-6
<PAGE>
WARPRADIO.COM INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
------------------------------------------
Description of Business
-----------------------
Web Audio & Radio Portal, Inc., dba WarpRadio.Com, Inc., (the
"Company") was organized on March 16, 1999 as a Colorado corporation.
The Company is in the development stage as is more fully defined in
Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting
and Reporting by Development Stage Enterprises". Planned principal
operations of the Company have not yet commenced and activities to
date have been primarily organizational in nature.
On September 28, 1999, the Company executed an Agreement and Plan of
Reorganization (the "Agreement") to merge with HomeQuest, Inc.
("HomeQuest"), a shell company. Under the terms of the Agreement,
HomeQuest issued 7,500,000 shares of its common stock for all of the
issued and outstanding shares of the Company's common stock. HomeQuest
had 1,500,000 shares of common stock outstanding at the date of the
merger. The merger was effective September 30, 1999. Since the
Company's stockholders owned approximately 83% of the outstanding
shares of common stock after the merger, the Company is treated as the
acquiror for accounting purposes, whereas HomeQuest is the acquiror
for legal purposes. In September 1999, HomeQuest changed its name to
WarpRadio.com, Inc. ("Warp"). The merger has been treated as a
recapitalization of the Company similar to a reverse acquisition. All
share amounts and earnings per share amounts have been retroactively
restated for the recapitalization. The historical financial statements
prior to September 30, 1999 are those of the Company.
The Company offers radio stations streaming of their programs on the
Internet to a worldwide audience. With the capability to bring live
local radio programming from the backyard to the world instantly, the
Company brings the world's radio programming to everyone. The service
is offered through a barter agreement to exchange the streaming
services for advertising time. Through the Company's search portal
which lists all United States stations, and the latest streaming
technology, web surfers can reach, find and listen to the stations of
their choice.
Additionally, the Company intends to look at a number of other areas
of exposure and marketing to enhance its image through special
promotions and joint ventures. The Company is also pursuing e-commerce
products for the consumer and strategic alliances with
business-to-business relationships.
The Company has adopted a calendar year end.
Basis of Presentation
---------------------
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amount and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a
timely basis and to obtain additional financing as may be required,
and to increase sales to a level where the Company becomes profitable.
F-7
<PAGE>
WARPRADIO.COM INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies (Continued)
------------------------------------------------------
Basis of Presentation (Continued)
---------------------------------
The Company's continued existence is dependent upon its ability to
achieve its operating plan. Management's plan consists of the
following:
1. Obtain additional debt financing.
2. Obtain additional equity capital through a private placement or
public offering of the Company's common stock.
3. Achieve the Company's operating plan to provide audio streaming
services to radio stations and others and achieve a level of
sales that will result in positive cash flow to the Company.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
Stock Split
-----------
On September 21, 1999, the Company's shareholders adopted a resolution
approving a 2.2857 for one stock split of the issued and outstanding
common shares, effective September 21, 1999. All share information and
per share data have been retroactively restated to reflect the stock
split.
Property and Equipment
----------------------
Depreciation of the primary asset classifications was calculated based
on the following estimated useful lives using the straight-line
method.
Classification Useful Life in Years
-------------- --------------------
Office equipment 5
Furniture 7
Depreciation of property and equipment charged to operations was
$6,084 for the period ended December 31, 1999.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company considers
all highly liquid investments with a maturity of three months or less
at the date of purchase to be cash equivalents.
Revenue Recognition
-------------------
The Company's streaming service is offered through a barter agreement
to exchange the streaming services for advertising time. Advertising
time that is received under the barter transaction is subsequently
sold through a third party Distributor for cash (Note 8). Revenue is
recognized when the sale of the advertising time is completed by the
Distributor in the amount of the cash to be received.
Advertising
-----------
The Company advertises primarily through radio and print media. The
Company's policy is to expense advertising costs, including production
costs, as incurred.
F-8
<PAGE>
WARPRADIO.COM INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies (Continued)
------------------------------------------------------
Advertising (Continued)
-----------------------
Advertising expense charged to operations was $45,449 for the period
ended December 31, 1999.
Stock-Based Compensation
------------------------
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation". The Company will
measure compensation expense for its stock-based employee compensation
plan using the intrinsic value method prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees".
Long-Lived Assets
-----------------
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", the Company reviews for the
impairment of long-lived assets and certain identifiable intangibles,
whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. An impairment loss would be
recognized when the estimated future cash flows is less than the
carrying amount of the assets. No impairment losses have been
identified by the Company.
Income Taxes
------------
Deferred income taxes are provided for temporary differences between
the financial reporting and tax basis of assets and liabilities using
enacted tax laws and rates for the years when the differences are
expected to reverse.
Net Income (Loss) Per Share of Common Stock
-------------------------------------------
Basic earnings per share is calculated using the average number of
common shares outstanding. Diluted earnings per share is computed on
the basis of the average number of common shares outstanding plus the
dilutive effect of outstanding stock options using the "treasury
stock" method.
Estimates
---------
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Commitments and Contingencies
-----------------------------
Leases
------
The Company leases its office facilities under a noncancellable
operating lease. The following is a schedule of future minimum lease
payments at December 31, 1999 under the Company's operating lease
which has a remaining noncancellable lease term in excess of one year:
F-9
<PAGE>
WARPRADIO.COM INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Commitments and Contingencies (Continued)
-----------------------------------------
Leases (Continued)
------------------
Year Ending
December 31,
------------
2000 $ 98,051
2001 102,084
2002 85,070
--------
Total Minimum Lease Payments $285,205
========
Rent expense charged to operations was $32,720 for the period ended
December 31, 1999.
3. Income Taxes
------------
The components of the provision for income taxes for the period ended
December 31, 1999 are as follows:
Current:
Federal $--
State --
-----
Total --
-----
Deferred:
Federal --
State --
-----
Total --
-----
Total Provision For Income Taxes $--
=====
The provision (benefit) for income taxes reconciles to the amount
computed by applying the federal statutory rate to income before the
provision (benefit) for income taxes as follows:
Federal statutory rate 34%
State income taxes, net of federal benefits 3
Valuation allowance (37)
-----
Total --%
=====
The following is a reconciliation of the provision for income taxes to
income before provision for income taxes computed at the federal
statutory rate of 34%.
Income taxes at the federal statutory rate $(542,193)
State income taxes, net of federal benefits (49,993)
Valuation allowance 592,186
---------
Total $ --
=========
Significant components of deferred income taxes as of December 31,
1999 are as follows:
F-10
<PAGE>
WARPRADIO.COM INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Income Taxes (Continued)
------------------------
Net operating loss carry forward $ 595,000
---------
Total Deferred Tax Asset 595,000
---------
Accelerated depreciation (3,000)
---------
Total Deferred Tax Liability (3,000)
Less valuation allowance (592,000)
---------
Net Deferred Tax Asset $ --
=========
The Company has assessed its past earnings history and trends and
expiration dates of carryforwards and has determined that it is more
likely than not that no deferred tax assets will be realized. A
valuation allowance of $592,000 as of December 31, 1999 is maintained
on deferred tax assets which the Company has not determined to be more
likely than not realizable at this time. The net change in the
valuation allowance for deferred tax assets was an increase of
$592,000 for the period ended December 31, 1999. The Company will
continue to review this valuation on a quarterly basis and make
adjustments as appropriate.
As of December 31, 1999 the Company had net operating loss
carryforwards of approximately $1,600,000. The net operating losses
can be carried forward twenty years to offset future taxable income.
The net operating loss carryforwards expire in 2019.
4. Preferred Stock
---------------
The authorized preferred stock of the company consists of 7,000,000
shares, $.001 value. The preferred stock may be issued in series from
time to time with such designation, rights, preferences and
limitations as the Board of Directors of the Company may determine by
resolution. The rights, preferences and limitations of separate series
of preferred stock may differ with respect to such matters as may be
determined by the Board of Directors, including without limitation,
the rate of dividends, method and nature of payment of dividends,
terms of redemption, amounts payable on liquidation, sinking fund
provisions (if any), conversion rights (if any), and voting rights.
Unless the nature of a particular transaction and applicable statues
require approval, the Board of Directors has the authority to issue
these shares without shareholder approval.
5. Private Placement
-----------------
In December 1999, the Company completed a private placement of its
common stock. A total of 500,000 shares of common stock were sold at a
purchase price of $2.00 per share resulting in gross proceeds to the
Company of $1,000,000.
6. Stock Compensation
------------------
During 1999, the Company issued shares of common stock with a fair
market value of $669,268 to employees as additional compensation. In
addition, shares of common stock with a fair market value of $70,474
were issued to consultants for services. The total fair market value
of $739,742 was charged to operations.
F-11
<PAGE>
WARPRADIO.COM INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. License Agreements
------------------
In June 1999, the Company entered into a web site music performance
agreement with Broadcast Music, Inc. ("BMI") for a non-exclusive
license to perform publicly within the United States as part for the
Company's web site to transmit over the Internet all musical works,
the rights to public performance licenses of which BMI controls. The
Agreement is for a one year period and expires June 30, 2000.
The license fee is based one of two formulas, at the Company's option,
with a minimum annual fee of $500, as follows:
1. 1.75% of the Company's gross revenues generated by the Company's
web site during the term of the Agreement.
2. The greater of 2.5% of Music Area Revenues, as defined in the
Agreement, or .25% of the Company's gross revenues generated by
the Company's web site during the term of the Agreement.
In July 1999, the Company entered into a license agreement with the
American Society of Composers, Authors and Publishers ("ASCAP") for a
license to publicly perform, by means of web site transmissions, non
dramatic renditions of the separate musical compositions in ASCAP's
repertory. The Agreement is effective June 1, 1999 and expires on
December 31, 1999. ASCAP has agreed to an interim license fee of
$20,000 for the period and the interim license fee is subject to
retroactive adjustment as agreed by ASCAP and the Company or as
determined by the Court. If the parties do not reach an agreement on
final fees by December 31, 1999, the parties will either agree upon
interim license fees for the period beginning January 1, 2000, or such
interim license fees as may be fixed by the Court.
The Company originally entered into an agreement with ASCAP in June
1999 which provided for a license fee calculated on a rate schedule
based on the Company's clients' web sites available to web site users
accessing the Company's web site. The agreement was revised as an
interim license based on terms of ASCAP's consent decree with the
United States.
8. Distribution Agreement
----------------------
On November 1, 1999 the Company entered into an exclusive Distribution
Agreement with WinStar Global Media, Inc. ("WinStar"). Under the terms
of the Distribution Agreement, WinStar has been engaged, on an
exclusive basis, to distribute radio advertising time that the Company
receives from radio stations in exchange for the Company's streaming
services. WinStar bills and collects for the advertising time sold.
Amounts collected by WinStar are paid to the Company net of a 20%
commission. The Distribution Agreement expires on March 31, 2001 and
shall renew for successive one year terms unless terminated by either
party upon not less than ninety days written notice.
9. Concentration of Credit Risk and Major Customers
------------------------------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments. The Company places its cash equivalents and short term
investments with high credit quality financial institutions and limits
its credit exposure with any one financial institution. The Company's
F-12
<PAGE>
WARPRADIO.COM INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Concentration of Credit Risk and Major Customers (Continued)
------------------------------------------------------------
cash in its banks exceed the federally insured limits. The Company's
revenue is generated from sales of advertising time received in
exchange for streaming services provided to radio stations. The
advertising time is sold through an exclusive Distribution Agreement
with WinStar, which subjects the Company to significant financial
exposure.
10. Fair Value of Financial Instruments
-----------------------------------
Disclosures about Fair Value of Financial Instruments for the
Company's financial instruments are presented in the table below.
These calculations are subjective in nature and involve uncertainties
and significant matters of judgment and do not include income tax
considerations. Therefore, the results cannot be determined with
precision and cannot be substantiated by comparison to independent
market values and may not be realized in actual sale or settlement of
the instruments. There may be inherent weaknesses in any calculation
technique, and changes in the underlying assumptions used could
significantly affect the results. The following table presents a
summary of the Company's financial instruments as of December 31,
1999:
Carrying Estimated
Amount Fair Value
------ ----------
Financial Assets:
Cash and cash equivalents $662,110 $662,110
The carrying amounts for cash and cash equivalents, accounts payable
and accrued expenses approximate fair value because of the short
maturities of these instruments.
F-13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Incorporated by reference to the Registrant's Registration Statement on
Form 10-SB, file number 33-28089 (January 15, 2000).
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. (1)
SEC Registration Fees.........................$ 668
NASD Filing Fee...............................$ 0
Blue Sky Filing Fees..........................$ 0
Blue Sky Legal Fees...........................$ 0
Printing Expenses.............................$ 5,000
Legal Fees and Expenses.......................$ 25,000
Accounting Fees...............................$ 10,000
Transfer Agent Fees...........................$ 0
Miscellaneous Expenses........................$ 9,332
Total................................$ 50,000
(1) All expenses, except the SEC registration fee are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Between January 1997 and March 1997, the following persons exercised
options to purchase 84,375 shares of our common stock at $4.82 per share:
Name Number of Shares
- ---- ----------------
Peter Ely 16,666
Richard Giacolette 4,861
James McCourt 10,555
John Trip 4,861
Dennis Stripling 9,375
Joseph A. Satrape 4,861
Rodney Baker 2,083
Stripling IRA 4,861
Lane Tarrant 4,166
Billy Nelson 2,083
Robert Smith 2,083
Ronald Proffer 2,083
Robert F. Troy 1,041
David Reed 4,166
Michael Plaani 6,250
Bruce Barber 1,041
Joseph T. Satrape 1,041
II-1
<PAGE>
In May 1997, we sold 1,389 shares of our common stock to William Wittmann
for $25,000 ($18.00 per share). In January 1998, we issued 3,761 shares of our
common stock to Steven White in consideration for services rendered to us valued
at $5,076 ($1,35 per share). In March 1998, our remaining assets and assuming
full responsibly for all our remaining liabilities providing us with $50,000 in
cash. In March 1998, we sold 22,227 shares of our common stock to 1st Zamora
Corporation for $40,000 (.25 per share). In March 1998, we sold 22,227 shares of
our common stock to Phoenix for $40,000 ($.25 per share). In April 1998, we
issued, 27,777 shares of our common stock to New Horizon Education, Inc. to
retire preferred stock held by New Horizon valued at $3,000 ($.11 per share). In
April 1998, we issued 594,444 shares of our common stock to Phoenix to retire
$377,400 our debt held by Phoenix.
Between April 1999 and October 1999, we raised $550,000 from the issuance
of promissory notes to the following persons in the corresponding amounts:
Name Amount ($)
- ---- ----------
Greg Nahm 75,000
Jan Welcome 5,000
Jeff Maier 38,000
Gene & Joan Meek 10,000
Lewis Schwartz 10,000
Anthony Frasca 20,000
Top Ten LLC 20,000
Keven Falduto 20,000
Brian O'Keefe 10,000
Eric Kayser 5,000
M.E. Dobesh 7,000
Nancy Cuprisin 10,000
Avrohom Friesel 40,000
Terald McPherson 5,000
James Peters, Jr. 1,000
Scott MacBride 10,000
Charles Kirby 20,000
Lynn Eaton 5,000
Dave Begg 5,000
George Khalifeh 11,000
John Ranay 4,500
West Hazmat Rem. 5,000
Michael Hathaway 1,000
David Potarf 5,000
Ahmad Tehrani 5,000
Soraya Taban 3,000
Oress Paul Chacon 2,000
Manadana Tanner 4,000
Fair Mkt Value 60,500
Charles LeClaire 10,000
Zenith Petroleum Co 33,000
Barbara J. Drew 50,000
Harris Block 5,000
Gary Clayton 11,000
Timothy Colleran 14,000
M.C. Whitver 10,000
II-2
<PAGE>
The notes mature one year from the date of issuance and bear interest at
the rate of 10% per annum which is payable on the maturity date. Subsequently,
in October 1999 all of the promissory note were converted into common stock at
the exercise price of $1.00 per share. All of the purchasers of promissory notes
were friends or business associates of the officers and directors of our company
and sophisticated investors able to bear the loss of their entire investment and
the purchasers were advised by us that the securities were restricted from
resale.
In August 1999, we sold 4,166,667 shares of our common stock to Ken Edwards
for $30,000 ($.001 per share). Pursuant to the Agreement and Reorganization, our
outstanding securities in September 1999 on the basis of 1:7.2 and issued
7,500,000 post-split shares of our common stock to the stockholders of WARP to
purchase all of the stock of WARP.
Between October 1999 and December 1999, we sold 500,000 shares of our
common stock to the following persons in the corresponding share amounts at
$2.00 per share:
Name Number of Shares
- ---- ----------------
Mark A. Anderson 15,000
Dwaine J. Baldwin 8,000
BDB Holdings, LTD 10,000
Steve Boone 25,000
Kyle & Lela Bush 25,000
Michael Coffey 43,500
Tony Dorsett 35,000
Eischeid 15,000
Keven Falduto 6,000
Michael Flax 30,000
Anthony Frasca 15,000
Galloping Goose Properties, LLC 15,000
Charles B. Humphrey 25,000
AEH Trust B, C.B. Humphrey Trust 10,000
SB Irons Trust. Humphrey Child. 10,000
Jolie D Humphrey 5,000
William Jaspersen 10,000
Konczak Corp. Profit Sharing Plan 15,000
Gene & Joan Meek 5,000
Steven Mize 10,000
Reg Schleider 7,500
Rick Schleider 10,000
Rob Schleider 10,000
Robert Schleider, Jr. 7,500
J Curtis Garrett 7,500
Debra Garrett Lewis Schwartz IRA 15,000
Jeffrey Stone 25,000
Marvin Timmons 25,000
Top Ten LLC 15,000
Kenneth Vanatta 5,000
Leonard Weiss 15,000
H. Ron White 25,000
All of the purchasers of our common stock were accredited investors friends
or business associates of the officers and directors of our company and were
able to bear the loss of their entire investment. Restrictive legends were
placed on all certificates representing the shares. All of the shares of were
issued in accordance with the exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended and/or Regulation D promulgated
thereunder.
II-3
<PAGE>
ITEM 27. EXHIBIT INDEX
Exhibit No. Title
----------- -----
5.01 Opinion of Gary A. Agron regarding legality
23.01 Consent of Gary A. Agron (see 5.01, above)
23.02 Consent of Angell & Deering
27.01 Financial Data Statement
II-4
<PAGE>
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes:
(a) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registration of expenses incurred or paid by a director, officer
or controlling person to the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) That subject to the terms and conditions of Section 13(a) of the
Securities Exchange Act of 1934, it will file with the Securities and Exchange
Commission such supplementary and periodic information, documents and reports as
may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
(c) That any post-effective amendment filed will comply with the applicable
forms, rules and regulations of the Commission in effect at the time such
post-effective amendment is filed.
(d) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(e) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(f) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing Form SB-2 and has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Greenwood Village, Colorado, on May 11, 2000.
WARPRADIO.COM, INC.
By: /s/ Denise A. Sutton
------------------------
Denise A. Sutton, Chief Executive Officer
Pursuant to the requirements of the Securities Act, as amended, this
Registration Statement has been signed below by the following persons on the
dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Denise A. Sutton Chief Executive Officer, Secretary May 11, 2000
- --------------------- and Director
Denise A. Sutton
/s/ James H. Comstock President and Chief Operating May 11, 2000
- --------------------- Officer
James H. Comstock
/s/ Jo Saari Hadley Vice President May 11, 2000
- ---------------------
Jo Saari Hadley
II-6
<PAGE>
EXHIBIT INDEX
Exhibit No. Title
- ----------- -----
5.01 Opinion of Gary A. Agron regarding legality
23.01 Consent of Gary A. Agron (see 5.01, above)
23.02 Consent of Angell & Deering
27.01 Financial Data Statement
May 11, 2000
WarpRadio.com, Inc.
6535 South Dayton Street, Suite 3000
Greenwood Village, Colorado 80111
Ladies and Gentlemen:
We have assisted in the preparation and filing by WarpRadio.com, Inc. (the
"Company") of a Registration Statement on Form SB-2 (the "Registration
Statement") with the Securities and Exchange Commission relating to 1,123,626
shares of $.001 par value Common Stock (the "Shares") of the Company.
We have examined such records and documents and have made such examination of
laws as we considered necessary to form a basis for the opinions set forth
herein. In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity with the originals of all documents submitted to us as copies
thereof. Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized and validly issued and are fully paid and
nonassessable.
The foregoing assumes that all requisite steps have been and will be taken to
comply with the requirements of the Securities Act of 1933, as amended, and
applicable state laws relating to the offer and sales of securities. We consent
to the filing of a copy of this opinion in the Registration Statement and the
use of our opinion in connection therewith.
Very truly yours,
/s/ Gary A. Agron
-----------------
Gary A. Agron
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use, in this Registration Statement on Form SB-2, of
our report dated January 26, 2000, relating to the consolidated financial
statements of WarpRadio.com, Inc. for the period from March 16, 1999 (date of
inception) to December 31, 1999 and the reference to our firm under the caption
"Experts" in the Prospectus contained in said Registration Statement.
/s/ ANGELL & DEERING
--------------------
ANGELL & DEERING
Certified Public Accountants
Denver, Colorado
May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-16-1999
<PERIOD-END> DEC-31-1999
<CASH> 662,110
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 662,110
<PP&E> 82,085
<DEPRECIATION> 6,084
<TOTAL-ASSETS> 743,782
<CURRENT-LIABILITIES> 37,178
<BONDS> 0
0
0
<COMMON> 10,229
<OTHER-SE> 696,375
<TOTAL-LIABILITY-AND-EQUITY> 743,782
<SALES> 0
<TOTAL-REVENUES> 1,098
<CGS> 0
<TOTAL-COSTS> 1,583,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,359
<INCOME-PRETAX> (1,594,684)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,594,684)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.19)
</TABLE>
