U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the SECURITIES AND
EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the transition
period from ------- to ---------
Commission File No.33-55254-30
ZANDRIA CORPORATION
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(Name of Small Business Issuer in its Charter)
NEVADA 87-0438851
(State or other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
1450 Front Street, San Diego, California 92101
(Address of Principal Executive Offices)
(619) 615-3110
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
Securities under a plan confirmed by court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 32,198,596 shares as of June
30, 2000.
<PAGE>
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Page Numbers
Part I. Financial Information
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Item 1. Financial Statements (unaudited):
Balance Sheet as of June 30, 2000 2
Statement of Operations for the three months ended
June 30, 2000 3
Statement of Operations for the six months ended
June 30, 2000 4
Statements of Cash Flows for the six months ended
June 30, 2000 5
Item 2. Managements Discussion and Analysis or Plan of
Operation 6
Part II. Other Information
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Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security holders 9
Item 5. Other Information 9
Item 6. Exhibits and reports on form 8-K 9
SIGNATURES 01
1
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ZANDRIA CORPORATION AND ITS SUBSIDIARY LEVELRED.COM, INC.
CONSOLIDATED BALANCE SHEETS
30-Jun-2000 31-Dec-1999
--------------- -----------
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 200,196 $ -
Pepaids and Advances $ 35,400 $ -
--------------- -----------
Total Current Assets $ 235,596 $ -
Non-Current Assets:
Property and Equipment
net of Accum Depr $ 326,136 $ -
Other Non-Current Assets $ 103,953 $ -
-------------- -----------
Total Non-Current Assets $ 430,089 $ -
Total Assets $ 665,685 $ -
------------ ============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Current Liabilities
Accounts Payable $ 171,320.69 $ -
Accrued Liabilities $ 71,472.70 $ -
Payroll and Payroll Tax Accrual $ 25,213.99 $ -
Sales Fees Accrual $ - $ -
-------------------- -----------
Total Current Liabiliies $ 268,007 $ -
Total Liabilities $ 268,007 $ -
Shareholders' Equity
Common stock , par value $0.001
per share, 100,000,000 authorized,
32,198,596 issued and outstanding
as of 6/3/00 $ 32,199 $ 1,000
Additional Paid-in Capital $ 1,766,840 $ 1,000
Retained Earnings $ (103,071) $ (2,000)
Current Year Earnings $ (1,298,290) $ -
-------------- ----------
Total Shareholders' Equity $ 397,678 $ -
Total Liablities and
--------------------
Shareholders' Equity $ 665,685 $ -
-------------------- ============= ===========
2
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ZANDRIA CORPORATION AND ITS SUBSIDIARY LEVELRED.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ending
----------------------------------------
30-Jun-2000 30-Jun-1999
--------------- ----------------
Revenues $ - $ -
Cost of Goods Sold $ - $ -
--------------- ----------------
Gross Profit $ - $ -
Operating Expenses
Marketing and Sales $ 46,190 $ -
General and Administrative $ 935,552 $ -
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Total Operating Expenses $ 981,742 $ -
Operating Profit or (Loss) $ (981,742) $ -
Other Income or (Expense) $ 9,034 $ -
--------------- -----------------
Net Loss $ (972,708) $ -
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3
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ZANDRIA CORPORATION AND ITS SUBSIDIARY LEVELRED.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Six Months Ending
----------------------------------------
30-Jun-2000 30-Jun-1999
--------------- ----------------
Revenues $ - $ -
Cost of Goods Sold $ - $ -
--------------- ----------------
Gross Profit $ - $ -
Operating Expenses
Marketing and Sales $ 88,690 $ -
General and Administrative 1,224,176 -
--------------- -----------------
Total Operating Expenses $ 1,312,866 $ -
Operating Profit or (Loss) $ (1,312,866) $ -
Other Income or (Expense) $ 14,576 $ -
--------------- ----------------
Net Loss $ (1,298,290) $ -
-------- =============== ================
4
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ZANDRIA CORPORATION AND ITS SUBSIDIARY LEVELRED.COM, INC.
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
Six Months Ending
----------------------------------------
30-Jun-00 30-Jun-99
------------ ----------------
Cash Flows From Operating
Activities:
Net Loss $ (1,298,290) $ -
Depreciation & Amortization $ 24,789 $ -
Increase (descrease) in:
Prepaids and Advances $ (35,401) $ -
Accounts Payable $ 128,991 $ -
Accruals $ (267,125) $ -
------------ -----------------
Net Cash Used In Operating
Activities $ (1,447,036) $ -
------------ ----------------
Cash Flows Used in Investing
Activities:
Capital Purchases $ (362,261) $ -
Long Term Deposits $ (61,178) $ -
------------ -----------------
Net Cash Used in Investing
Activities $ (423,439) $ -
------------ ----------------
Cash Flows from Financing
Activities:
Parent Funding $ 538,750 $ -
Asset Purchase Agreement $ 800,000 $ -
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Total Cash Flows from
Financing Activities $ 1,338,750 $ -
------------ ----------------
Net Decrease in Cash and Cash
Equivalents $ (531,725) $ -
Cash and Cash Equivalents
Beginning Period $ 731,921 $ -
------------ ----------------
Cash and Cash Equivalents Ending
Period $ 200,196 $ -
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5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
On March 14, 2000 Zandria Corporation acquired the assets and assumed the
liabilities of Zandria Entertainment Networks, Inc., a privately held Nevada
corporation. Prior to this date, Zandria Corporation was named Longhorn, Inc.
The financial records of Longhorn, Inc. were audited as of December 31, 1999
(see 10KSB for 1999). In compliance with SEC requirements, an audit of the
financial records began on May 8, 2000 for the following entities:
Zandria Entertainment Networks, Inc. for the periods ending December 31,
1998, December 31, 1999 and March 31, 2000.
Zandria Corporation for the period ending March 31, 2000.
Levelred.com, Inc. (a wholly owned subsidiary of Zandria Entertainment
Networks, Inc.) for the periods ending December 31, 1999 and March 31,
2000.
As of the date of this filing, the audit has not yet been completed. However,
the unaudited financials presented in this filing are considered a fair and
reasonable representation of the financial statements currently under review.
Zandria Corporation (OTC:ZAND), whose name was changed on March 16, 2000 from
Longhorn, Inc. ("LNGH"), was originally incorporated under the laws of the state
of Utah on May 2 1986 and subsequently reorganized under the laws of Nevada on
December 30, 1993. The Company's reorganization plan was formulated for the
purpose of changing the state of domicile and provided that the Company form a
new corporation in Nevada which acquired the contractual obligations,
shareholder rights and identity of the Utah corporation. After this was
completed the Utah Corporation was dissolved. The company remained an unfounded
venture until March 14, 2000. On that date, Longhorn, Inc. acquired the assets
and assumed the liabilities of Zandria Entertainment Networks, Inc ("ZEN"), a
privately held Florida Corporation, in return for four million shares of LNGH
common stock. Immediately after this transaction the company's name was changed
to Zandria Corporation and executed a 6 for 1 forward split. This resulted in
Zandria Entertainment Networks owning twenty-four million shares of Zandria
Corporation ("ZAND") stock. This represents approximately 75% of the total
32,198,596 outstanding shares of ZAND. As of 3/31/00 and 6/30/00, of the
remaining 8,198,596 shares, no other entity was issued or held more than 5% of
the total outstanding shares.
After the shares of Zandria Corporation stock, held by Zandria Entertainment
Networks, are registered with the SEC and/or the required holding period ends so
that these shares become unrestricted, Zandria Entertainment Networks will be
dissolved upon the securing regulatory permission, if necessary, to allow the
shareholders of Zandria Entertainment Networks stock to exchange their shares of
stock and receive their prorated shares of Zandria Corporation stock.
6
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From November 1998 through the asset purchase transaction date of March 14,
2000, Zandria Entertainment Networks had been generating investor funding
through 504 and 506 private placement memorandums. These memorandums resulted in
gross proceeds of approximately $5.0 million. After deducting expenses related
to marketing, sales fees and other operational costs of Zandria Entertainment
Networks, the net proceeds of approximately $2.5 million were used to fund the
initial development of Levelred.com, and provide working capital for the daily
operations of Zandria Entertainment Networks (now Zandria Corporation). Through
June 30, 2000, Zandria has been the only funding resource for Levelred.com.
In order to direct the significant portion of the net funding proceeds to the
development of Levelred.com, the operational overhead of Zandria Corporation is
minimal. Zandria's staffing includes one person who is the CEO and CFO, and a
senior staff accountant. Its offices are located within the Levelred.com
facility.
The initial staffing development of Levelred.com began in November 1999. In
January 2000 the company moved into its current facility at 1450 Front Street,
San Diego, CA. After completing the required leasehold improvements, the
Internet site design and development began in February using a combination of
employed staff and outside services. Through February 15, 2000 the total funding
from Zandria Entertainment Networks was $841,000. This had been recorded as a
bridge loan. On February 16, a stock purchase agreement between Levelred.com,
Inc. and Zandria Entertainment Networks, Inc. resulted in the assignment of
3,000,000 shares of Levelred.com, Inc. stock to Zandria Entertainment Networks
for $750,000. An additional $50,000 was assigned for warrants to purchase
options. The remaining $41,000, and all further funding since February 16 has
been recorded as a line of credit until such time that the line of credit will
be repaid by Levelred.com, Inc. or converted to shares per the option agreement.
At March 31, 2000, the total funding from Zandria Entertainment Networks was
$1,064,750, of which $800,000 was for the purchase of stock and warrants, and
the remaining $264,750 recorded as a line of credit. As of June 30, 2000, total
funding is $1,338,750. Cash reserves as of June 30 are approximately $200,000.
On March 14, 2000 the asset purchase transaction took place between Zandria
Entertainment Networks and, what is now, Zandria Corporation. As part of the
asset purchase transaction, the stock purchase agreement was assigned to Zandria
Corporation. As of June 30 2000, Levelred.com, Inc. remains a wholly owned
subsidiary of Zandria Corporation.
The beta test launch of the site, www.levelred.com, was on June 15, 2000. The
purpose of this launch was to test and evaluate the development work completed
to date. The official launch date of the site was July 15, 2000. Site activity
statistics are maintained daily. Although the beta site was static in content,
the 30 days during beta testing yielded over 1.1 million hits with a visitor
duration of about 13 minutes. These statistics are anticipated to increase
substantially after the site officially launches.
7
<PAGE>
The Levelred.com business model began as an Internet site that would target the
21 to 34 age demographics. The content of the site was to focus on fashion,
nightlife events, music and culture. The objective was to develop a non-paying
membership base of over 1.0 million. The revenue model included retail sales,
advertising, licensing of member demographic data, and licensing of content. As
site development evolved it became evident that a greater emphasis needed to be
placed on more frequently changing content in order to draw visitors and repeat
visitors to the site. In addition, the video content needed to be expanded from
a primary focus of fashion and nightlife to include sports and interviews of
celebrities known within the demographics. This required the use of webcasting
technology. Webcasting technology now provides the site with live broadcast of
events, and video archiving for replay and licensing.
While maintaining focus for developing the Internet site and the related
e-commerce objectives, the company is evaluating further expansion into other
complimentary forms of content delivery. Most immediate opportunities include
off-line events and television. Off-line events is a component of Levelred that
manages the production of large party music events. Television will provide
Levelred with another channel to replay its webcast video content to a larger
market base. Other consideration is being given to radio broadcast and a print
publication that will complement the web site.
The significance of developing other Levelred business units of services and
content distribution is that it would allow the company to reach broader and
deeper into the target demographics. This could significantly expand the
opportunity to develop other channels of revenue generation. As such, the
revenue model would not be limited to the Internet site.
The launch will focus initially on the San Diego and Southern California
markets. After the launch within this geographic market, expansion of the site
is planned to proceed into the larger cities. Rather than expand immediately
into other US cities, the current plan is to develop alliances within major
cities, to include the US and international. By doing so, it is anticipated
Levelred will be able be able to reach a larger population of the demographics,
develop a greater variety of content, and increase the development of the
e-commerce model.
Funding reserves for Levelred are approaching a critical level. In late June a
private placement memorandum was distributed by Levelred Investments, Inc (LRI).
This company is not related to Levelred or Zandria. The purpose of this
memorandum is to generate $5.0 million of investor funding for LRI. Of this, LRI
has an option agreement with Levelred.com, Inc. to purchase 2.5 million shares
of Levelred.com. Inc. for $3.4 million. As of June 30, Levelred.com, Inc. has
not received any funds for the purchase of these options.
The exit strategy for Levelred.com, Inc. is to develop the company to an optimal
value level which would make it a candidate for an acquisition or IPO.
8
<PAGE>
With additional investor funding that the company hopes to secure in the future,
Zandria Corporation is intending to acquire startup Internet companies and
companies that provide synergistic services to Internet companies. This may
include technology based companies. Although it could be viewed that Zandria is
moving into an incubator model, the current strategy and limited financial
resources preclude Zandria from developing a full or partial service
infrastructure. The investment into developing an incubator is considered to be
significant. However, with its evolving network systems infrastructure and
resource alliances, Zandria plans to be able to acquire and host other startups
within its facility in San Diego, California, and in startups located elsewhere.
PART II
ITEM 1. LEGAL PROCEEDINGS
To the best knowledge of the officers and directors of the Company, neither
the Company nor any of its officers or directors is a party to any material
legal proceeding or litigation and such persons know of no other material legal
proceeding or litigation contemplated or threatened.
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
(a) Exhibits
Exhibit
Number Description
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27 Financial Data Schedule
(b) Reports on Form 8-K
None
9
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
ZANDRIA CORPORATION
Date: August 16, 2000 By: /s/ Michael J. Howard
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Michael J. Howard
Chief Financial Officer
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