FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000.
Commission file number: 000-28089
WARPRADIO.COM, INC.
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(Name of Small Business Issuer in its charter)
Nevada 87-0538158
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6535 South Dayton Street, Suite 3000
Greenwood Village, Colorado 80111
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(Address of principal executive offices)
(Zip Code)
(303) 799-9118
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(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.001 Par Value, 10,619,907 shares as of November 13, 2000.
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PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
WARPRADIO.COM, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
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Current Assets:
Cash and cash equivalents $ 82,217
Accounts receivable - trade 102,152
Accrued interest receivable - stockholder 1,137
Note receivable - stockholder 20,500
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Total Current Assets 206,006
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Property and Equipment, at cost:
Office equipment 217,047
Furniture 16,547
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233,594
Less accumulated depreciation (34,084)
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Net Property and Equipment 199,510
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Other Assets:
Deposits 8,417
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Total Other Assets 8,417
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Total Assets $ 413,933
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Accounts payable:
Trade $ 22,332
Stockholder 7,000
Accrued expenses:
Payroll taxes 113,852
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Total Current Liabilities 143,184
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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, 10,619,907 shares issued and outstanding 10,620
Additional paid in capital 3,457,682
Accumulated deficit (3,197,553)
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Total Stockholders' Equity 270,749
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Total Liabilities and Stockholders' Equity $ 413,933
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See notes to unaudited condensed
consolidated financial statements.
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<TABLE>
<CAPTION>
WARPRADIO.COM, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months
Ended Nine Months
September 30, Ended Inception To
------------------- September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 84,455 $ -- $ 260,400 $ --
------------ ------------ ------------ ------------
Operating Expenses:
Stock compensation 20,573 790 850,214 3,992
Depreciation 14,000 1,882 28,000 3,302
Selling, general and administrative 355,287 338,140 991,480 487,838
------------ ------------ ------------ ------------
Total Operating Expenses 389,860 340,812 1,869,694 495,132
------------ ------------ ------------ ------------
Loss From Operations (305,405) (340,812) (1,609,294) (495,132)
------------ ------------ ------------ ------------
Other Income (Expense):
Interest income 414 -- 7,160 --
Interest expense (6) (9,575) (736) (9,575)
------------ ------------ ------------ ------------
Total Other Income (Expense) 408 (9,575) 6,424 (9,575)
------------ ------------ ------------ ------------
Net Income (Loss) $ (304,997) $ (350,387) $ (1,602,870) $ (504,707)
============ ============ ============ ============
Net Income (Loss) Per Basic and
Diluted Share of Common Stock $ (.03) $ (.05) $ (.16) $ (.07)
Weighted Average Number of Basic and
Diluted Common Shares Outstanding 10,484,455 7,516,304 10,314,886 7,507,538
See notes to unaudited condensed
consolidated financial statements.
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<PAGE>
WARPRADIO.COM, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended Inception to
September 30, September 30,
2000 1999
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Cash Flows From Operating Activities:
Net income (loss) $(1,602,870) $ (504,707)
Adjustments to reconcile net income (loss) to net
cash (used) by operating activities:
Depreciation 28,000 3,302
Common stock issued for services -- 3,992
Compensation from issuance of stock options 850,214 --
Changes in assets and liabilities:
Accounts receivable (102,152) --
Accrued interest receivable (1,137) --
Accounts payable 563 48,137
Accrued expenses 98,443 17,520
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Net Cash (Used) By Operating Activities (728,939) (431,756)
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Cash Flows From Investing Activities:
Capital expenditures (151,508) (62,254)
Deposits (2,746) --
Loan to stockholder (20,500) --
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Net Cash (Used) By Investing Activities (174,754) (62,254)
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Cash Flows From Financing Activities:
Proceeds from borrowing 7,000 500,000
Issuance of common stock 352,000 --
Offering costs paid (35,200) --
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Net Cash Provided By Financing Activities 323,800 500,000
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Net Increase (Decrease) in Cash and Cash Equivalents (579,893) 5,990
Cash and Cash Equivalents at Beginning of Period 662,110 --
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Cash and Cash Equivalents at End of Period $ 82,217 $ 5,990
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 736 $ --
Income taxes -- --
See notes to unaudited condensed
consolidated financial statements.
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</TABLE>
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WARPRADIO.COM, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying financial information of the Company is prepared in accordance
with the rules prescribed for filing condensed interim financial statements and,
accordingly, does not include all disclosures that may be necessary for complete
financial statements prepared in accordance with generally accepted accounting
principles. The disclosures presented are sufficient, in management's opinion,
to make the interim information presented not misleading. All adjustments,
consisting of normal recurring adjustments, which are necessary so as to make
the interim information not misleading, have been made. Results of operations
for the nine months ended September 30, 2000 are not necessarily indicative of
results of operations that may be expected for the year ending December 31,
2000. It is recommended that this financial information be read with the
complete financial statements included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999 previously filed with the Securities
and Exchange Commission.
Development Stage
The Company emerged from the development stage in May 2000.
Per Share Information
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," which specifies the method of computation,
presentation and disclosure for earnings per share. SFAS No. 128 requires the
presentation of two earnings per share amounts, basic and diluted.
Basic earnings per share is calculated using the weighted average number of
common shares outstanding. Diluted earnings per share is computed on the basis
of the weighted average number of common shares outstanding plus the dilutive
effect of outstanding stock options using the "treasury stock" method. Stock
options to purchase 731,000 shares of common stock at September 30, 2000 were
not included in the computation of diluted earnings per share because the
Company had a net loss and their effect would be anti-dilutive.
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ITEM 2. Management's Discussion and Analysis or Plan of Operation.
Introduction
The following section contains forward-looking statements that involve
risks and uncertainties. Our results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors.
This discussion of the Company's financial condition and results of
operations for the three and nine months ending September 30, 2000, should be
read in conjunction with the Company's financial statements herein.
Results of Operations
Three months ended September 30, 2000 versus three months ended September
30, 1999
Revenues were $84,455 for the three months ended September 30, 2000. No
revenues were generated in fiscal year 1999. Revenues consist predominantly of
radio advertising sales. The increase in revenue is attributed to the increase
in radio stations contracted by the Company, and its ability to resell the
inventory to national advertisers.
Operating expenses increased to $389,860 for 2000, compared to $340,812 for
1999. Stock compensation, depreciation and selling, general and administrative
(SG&A) expenses were all higher than the comparable period a year ago,
reflecting the growth in the Company's operations.
Net loss for 2000 was $304,997 compared to $350,387 for 1999. The decline
of $45,390 was due to the increase in revenues offset by a smaller increase in
operating expenses.
Nine months ended September 30, 2000 versus nine months ended September 30,
1999
Revenues were $260,400 for 2000. No revenues were generated in 1999.
Revenues consist predominantly of radio advertising sales. The increase in
revenue is attributed to the increase in radio stations contracted by the
Company and its ability to resell the inventory to national advertisers.
Operating expenses increased to $1,869,694 in 2000, compared to $495,132
for 1999. The increase of $1,374,562 was due to non-cash stock compensation
expense of $850,214 for the issuance of employee stock options, and an increase
of $503,642 in SG&A. The increase in SG&A is due to the expansion of our sales
representative and technical support staff. Depreciation expense was also higher
over the comparable period a year ago, reflecting the investment in equipment
for the expansion of the Company's business.
Net loss for 2000 was $1,602,870 compared to $504,707 for 1999. The
increase of $1,098,163 was due to the increase in operating expenses offset by
the increase in revenues.
Additionally, the limited operating history of the Company makes the
prediction of future operating results difficult or impossible. The Company
expects 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 the Company will ever achieve profitability or, if profitability
is achieved, that it can be sustained.
The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion of its operations will continue to be
required in order to address potential market opportunities. The Company expects
to increase its personnel significantly in the near future. The Company's recent
growth has placed, and is expected to continue to place, a significant strain on
its managerial, operational and financial resources and systems.
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Liquidity and Capital Resources
The Company anticipates that in the near term it will incur continuing
losses due to ongoing operating expenses exceeding revenues. The Company
currently barters an average of two minutes of advertising inventory per day
Monday through Sunday with each contracted radio station that uses the Company's
streaming services. The Company presently expects future revenues to stem from
sales of bartered advertising time.
Accounts receivable grew to $102,152 as of September 30, 2000. The increase
in revenue consisted of agency-placed advertising revenue accounts. The increase
in accounts receivable was due to the increase in advertising sales for the
period. Advertising revenues placed by an agency typically are collected in a 90
days period.
The Company purchased equipment for the first nine months ended September
30, 2000 for the amount of $151,508. The Company realized a need for increasing
its hardware infrastructure to facilitate additional demands on the servers used
to stream audio feeds. The Company feels to be competitive it needs from time to
time to purchase state of the art equipment to enhance the services provided to
radio stations.
Currently, the Company has commitments under a non-cancelable operating
lease for office facilities requiring payments of $8,374 per month until
November 2000, and then of $8,507 until October 2002.
As of September 30, 2000, the Company was in arrears on payroll taxes in
the amount of $113,852 due to significant negative cash flow. The payroll taxes
are expected to be paid in the fourth quarter of 2000 as additional equity or
debt financing is raised.
To fund future operations we are currently in the process of raising funds
through a private financing and have received $352,000 in equity financing at
$0.90 per share during the third quarter, an increase in the number of shares
outstanding by 391,111, and anticipate up to $1 million before the end of 2000.
The Company is negotiating to raise additional capital for expansion and working
capital either through debt or equity securities to strategic partners. There
can be no assurance that additional financing, will be available on terms
attractive to us. Our failure to raise capital when needed could have a material
adverse effect on our business, results of operations and financial condition.
If additional funds are raised through the issuance of equity securities, the
percentage ownership of our then current shareholders will be reduced.
Furthermore, these equity securities might have rights, preferences or
privileges senior to those of our common stock.
Recently Issued Accounting Standards
The Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) 101, "Revenue Recognition in Financial Statements," in December
1999. The SAB summarizes certain of the SEC staff's view in applying generally
accepted accounting principles to revenue recognition in financial statements.
In June 2000, the SEC issued SAB 101B, which delays the implementation of SAB
101 until no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. The Company does not believe the adoption of this SAB
will have a material impact on its financial statements.
In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation (FIN) 44, "Accounting for Certain Transactions Involving Stock
Compensation," which clarifies the application of APB 25 for certain issues. The
interpretation is effective July 1, 2000, except for the provisions that relate
to modifications that directly or indirectly reduce the exercise price of an
award and the definition of an employee, which are effective after December 15,
1998. The Company does not believe the adoption of FIN 44 will have a material
impact on its financial statements.
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PART II. OTHER INFORMATION.
ITEM 1. Legal proceedings.
None.
ITEM 2. Changes in securities.
None.
ITEM 3. Defaults upon senior securities.
None.
ITEM 4. Submission of matters to a vote of security holders.
None.
ITEM 5. Other information.
None.
ITEM 6. Exhibits and reports on Form 8-K.
The Registrant filed no exhibits and reports on Form 8-K during the three-month
period covered by this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: November 13, 2000 WarpRadio.com, Inc.
(Registrant)
/s/ Denise Sutton
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Denise Sutton
Chief Executive Officer and Director
/s/ Steven P. Eschbach
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Steven P. Eschbach, CFA
Chief Financial Officer
(Principal Accounting Officer)
