<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 33-80321
FTM MEDIA, INC.
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1295270
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
6991 East Camelback Road, #D103, Scottsdale, AZ 85251
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (480) 425-0099
Securities to be registered under Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.004 par value
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 Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]
The number of shares of the registrant's $.004 par value Common Stock
outstanding as of December 31, 1999 was 6,514,000
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<S> <C>
Consolidated Balance Sheet as of
December 31, 1999 and March 31, 1999............................................ 3
Consolidated Statements of Operations for the
Three months ended December 31, 1999 and December 31, 1998 and
nine months ended December 31, 1999 and December 31, 1998....................... 4
Consolidated Statements of Cash Flows for the Nine months
ended December 31, 1999 and December 31,
1998............................................................................ 5
Notes to Consolidated Financial Statements...................................... 6
Item 2. Management's Discussion and Analysis or
Plan of Operations.............................................................. 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 27
Item 2. Changes in Securities.................................................. 27
Item 3. Defaults under Senior Securities....................................... 27
Item 4. Submission of Matters to a vote of security holders.................... 27
Item 5. Other Matters.......................................................... 27
Item 6. Exhibits and Reports on Form 8-K....................................... 27
Signatures............................................................. 28
</TABLE>
<PAGE> 3
FTM MEDIA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 March 31, 1999
(unaudited) (audited)
ASSETS
<S> <C> <C>
Current Assets
Cash and Cash Equivalents 400,621 2,027,833
Accounts Receivable 24,208 0
Notes Receivable 1,193,700 0
Prepaid Expenses 200,228 23,968
---------- ----------
Total Current Assets 1,818,757 2,051,801
Property and Equipment - Net of Accumulated Depreciation 1,947,170 70,499
Other Assets
Lease Deposits 102,173 20,535
Web Site Design In Progress 0 131,568
Goodwill - Net of Amortization 70,661 76,550
---------- ----------
Total Assets 3,938,761 2,350,953
---------- ----------
LIABILITIES AND STOCKHOLDERS DEFICIT
Liabilities
Accounts Payable 1,166,579 208,101
Accrued Expenses 41,798 64,820
Short Term Portion of Notes Payable 2,542,636 0
---------- ----------
Total Liabilities 3,751,013 272,921
Minority Interest
Preferred Stock of Subsidiary 438,747 415,889
Common Stock of Subsidiary 1,997,060 2,771,261
---------- ----------
Total Minority Interest 2,435,807 3,187,150
Stockholders Deficit
Preferred Stock - $.04 Par, 2,500,000 shares authorized
273,504 issued and outstanding 10,974 0
Common Stock - $.004 Par, 12,500,000 shares authorized
6,514,000 shares issued and outstanding 26,056 25,278
Additional Paid In Capital 2,502,522 0
Deficit accumulated During Development stage (4,787,613) (1,134,396)
---------- ----------
Total Stockholders Deficit (2,248,059) (1,109,118)
---------- ----------
Total Liabilities and Stockholders Equity 3,938,761 2,350,953
========== ==========
</TABLE>
<PAGE> 4
FTM MEDIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
3 months 3 months 9 months 9 months
ended ended ended ended
12/31/99 12/31/98 12/31/99 12/31/98
<S> <C> <C> <C> <C>
Revenues
E-Commerce 30,828 0 30,828 0
Local Advertising 14,831 0 14,831 0
Total Revenues 45,659 0 45,659 0
Cost of Goods Sold
Website development costs 1,166,693 0 2,484,530 0
E-Commerce costs 86,745 0 113,437 0
Total COGS 1,253,438 0 2,597,967 0
Net Income (1,207,779) 0 (2,552,308) 0
Capital Formation Expense 56,650 0 199,438 0
Consulting Fees 114,686 30,000 341,586 30,000
Contract Labor (9,935) 0 25,673 0
Depreciation and Amortization 115,024 0 228,743 0
Education & Training 6,207 0 14,365 0
Employment Fees and Costs 20,781 0 34,968 0
Insurance 35,154 0 91,659 0
Legal and Accounting Fees 99,969 0 360,619 0
Media & Public Relations 18,040 0 51,762 0
Office and Computer supplies 16,762 0 41,548 0
Other 78,413 0 136,994 0
Payroll 119,413 0 341,122 0
Payroll Taxes and Benefits 20,673 0 54,864 0
Rent 54,318 0 128,708 0
Sales & Marketing 172,854 0 321,928 0
Telephone 7,392 0 38,821 0
Travel and Entertainment 45,281 0 99,392 0
Total Expenses 971,682 0 2,512,188 0
Loss Before other Income (2,179,462) (30,000) (5,064,496) (30,000)
Other Expenses
Interest Expense net of interest income (31,218) 0 (13,958) 0
Loss Before Provision of Income Taxes (2,210,680) (30,000) (5,078,454) (30,000)
Provision for Income taxes 0 0 0 0
---------------------------------------------
Loss Before minority interest (2,256,339) (30,000) (5,078,454) (30,000)
Minority Interest 655,289 0 1,425,239 0
Net Loss (1,557,391) (30,000) (3,653,215) (30,000)
=============================================
Basic Loss Per common share (0.242) (0.004) (0.573) (0.004)
Weighted Average number of common shares 6,439,498 6,319,542 6,379,811 6,319,542
</TABLE>
<PAGE> 5
FTM MEDIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
9 months 9 months
ended ended
December 31, 1999 December 31, 1998
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (loss) (3,653,215) (30,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 228,743 0
Decrease in Capitalized development costs 131,568 0
Minority Interest (1,425,239) 0
Increase in liquidation value - minority interest 22,858 0
Changes in Operating Assets & Liabilities
Increase in Accounts Receivable & Unbilled revenue (24,208) 0
Increase in Prepaid assets (176,260) 0
Increase in Notes Receivable (1,193,700) 0
Increase in Deposits (81,638) 0
Increase in Accounts Payable 958,478 30,000
Decrease in Accrued Expenses (23,022) 0
Increase in short term notes payable 82,636 0
Net Cash Flow from Operating Activities (5,152,999) 0
INVESTMENT ACTIVITIES
Acquisition of Fixed Assets (2,099,300) 0
Financing Activities
Private Placement - Common Stock of subsidiary 360,036 0
Private Placement - Sale of Preferred Stock 1,649,998 0
Sale of Common Stock 1,353,054 0
Payment of Preferred Dividends (198,000) 0
Private Placement - Notes 2,460,000 0
-----------------------------------
Net Cash Flow from financing 5,625,088 0
-----------------------------------
Net increase in Cash and Cash Equivalents (1,627,212) 0
Cash and Cash Equivalents beginning of year 2,027,833 2,796
Cash and Cash Equivalents 12/31 400,621 2,796
</TABLE>
<PAGE> 6
FTM MEDIA, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. General
The accompanying unaudited financial statements of FTM Media, Inc. formerly
Redwood Broadcasting, Inc. have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and article 10 of Regulation S-X. Accordingly they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The balance
sheet at March 31, 1999 has been derived from audited consolidated financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying financial statements are unaudited and reflect all adjustments
which are in the opinion of management necessary for a fair presentation of the
financial position and operating results for the interim periods. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's annual report on Form 10-KSB for the fiscal year
ended March 31, 1999. Results of operations for interim periods are not
necessarily indicative of results which may be expected for the year as a whole.
2. Nature of Operations and Summary of Significant Accounting Policies
FTM Media, Inc.
The Corporation was formed in December 1994 pursuant to the
laws of the State of Colorado with the name Redwood Broadcasting, Inc.
On July 19, 1999 at a special meeting of shareholders, the shareholders
approved changing the name of the Corporation to FTM Media, Inc. On
December 31, 1998, substantially all of the assets and liabilities of
FTM/Redwood were transferred to a wholly owned subsidiary. The common
stock of the subsidiary was then to be distributed to the FTM/Redwood
shareholders. As a result of this and the reverse acquisition of the
Corporation by Interactive Radio Group, Inc. (INRG), the prior
operations of FTM/Redwood are not reflected in these financial
statements. Accordingly the financial statements reflect the operating
activity of FTM/Redwood beginning with the acquisition of the majority
interest in INRG. The Corporation is in the development stage as its
operations involve the raising of capital, market research and start up
production. Because it is in the development stage, the Corporation has
had minimal revenue from product sales, which is not regarded as
typical for normal operating periods. On January 7, 2000 pursuant to
the approval of a majority of shareholders the Corporation consummated
its merger into its wholly owned subsidiary FTM Media, Inc. a Delaware
Corporation (FTM Delaware), with FTM Delaware to be the surviving
Corporation. All shareholders of FTM Media, Inc of Colorado will
receive one share of FTM
<PAGE> 7
Media, Inc of Delaware in exchange for one share of FTM Media of
Colorado common stock.
Interactive Radio Group, Inc.
Interactive Radio Group, Inc. was formed in February 1994
pursuant to the laws of the State of Delaware. The company was inactive
until April, 1998 when it began its business of designing and hosting
Internet websites for radio stations. The acquisition of the majority
interest in INRG by FTM/Redwood was accounted for as a reverse
acquisition, resulting in the historic operations of INRG being treated
as the historical operations of the Corporation. Accordingly the
accompanying historic financial statements have been restated to
reflect the financial position, results of operations and cash flows
for all periods presented as if the recapitalization had occurred at
the beginning of the earliest period presented.
Cybermusic Acquisition Corp.
Cybermusic Acquisition Corp. was formed in February, 1996
pursuant to the laws of the State of Delaware. Cybermusic was acquired
by INRG and became a wholly owned subsidiary in December, 1998.
Cybermusic's principal business of designing websites for radio
stations has been carried on by INRG since the acquisition. The
acquisition of Cybermusic by INRG was accounted for as a reverse
acquisition, resulting in the historic operations of Cybermusic being
treated as the historical operations of the Corporation. Accordingly
the accompanying historic financial statements have been restated to
reflect the financial position, results of operations and cash flows
for all periods presented as if the recapitalization had occurred at
the beginning of the earliest period presented.
Method of Accounting
The Corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
Cash and Cash Equivalents
Cash and cash equivalents include time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities
of three months or less. The Company maintains cash and cash
equivalents at financial institutions which periodically may exceed
federally insured amounts.
Fixed Assets and Depreciation
Fixed Assets are stated at cost, less accumulated depreciation
computed using the straight line method over the estimated useful lives
as follows:
Computer Equipment and
Software 3-5 years
Office Furniture 5 years
Automobiles 5 years
Leasehold Improvements 7-16 months
<PAGE> 8
Maintenance and repairs are charged to expense. The cost of assets
retired or disposed of and their related accumulated depreciation are
removed from the accounts.
Web Site Design - In progress
The Corporation had previously capitalized its costs incurred
in developing its websites for radio stations. The Company now charges
to expense all such costs. The Company has expensed all such previously
capitalized costs.
Goodwill
Goodwill has been capitalized and is being amortized over ten
years.
Net Loss Per Common Share
Net income (loss) per common share is computed in accordance
with SFAS 128, "Earnings Per Share" by dividing the income available to
common stockholders by the weighted average number of common shares
outstanding for each period after reflecting the recapitalization. The
effects of conversion of Convertible Preferred Stock were not included
in the calculation of diluted loss per share because the Corporation
has experienced losses in all of the periods presented and therefore
the effect would be anti-dilutive.
Income Taxes
The Corporation accounts for income taxes in accordance with
SFAS 109 "Accounting for Income Taxes", using the asset and liability
approach, which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of such
assets and liabilities. The method uses enacted statutory tax rates in
effect for the year in which the temporary differences are expected to
reverse and gives immediate effect to changes in income tax rates upon
enactment. Deferred tax assets are recognized, net of any valuation
allowance, for temporary differences and net operating loss and tax
credit carry forwards. Deferred income tax expense represents the
change in net deferred assets and liability balances. The Corporation
had no material deferred tax assets or liabilities for the period
presented.
3. Stockholder's Equity
1. During June and July, 1999 the Corporation received $1,600,000 in a
private placement of 273,504 shares of $.04 par value Series B
Convertible Preferred Stock. Pursuant to the terms of the Series B
Convertible Preferred Stock, the Corporation in June and July 1999 paid
$192,000 in dividends to the holders of the Series B Convertible
Preferred Stock. The rights, privileges and restrictions of the Series
B Convertible Preferred Stock are as follows:
a. The stock ranks senior to Common Stock and any other
class or series of capital stock of the Corporation
with respect to liquidation, dissolution or winding
up of the business.
<PAGE> 9
b. Holders of the Series B Convertible Preferred Stock
are entitled to receive annual dividends in the
amount of $.702 per share payable on each semi-annual
anniversary of the Series B Convertible Preferred
Stock Issue Date. The dividends payable for the
twelve month period immediately following the Series
B Convertible Preferred Stock Issue Date shall be
paid on the Series B Convertible Preferred Stock
Issue Date.
c. Holders of the Series B Convertible Preferred Stock
have no voting rights except for those minimum voting
rights required by the Business Corporation Act of
the State of Colorado, in which case the Series B
Convertible Preferred Stock shall vote together with
the Common Stock as a single class, unless the
Business Corporation Act of the State of Colorado
requires that the Series B Convertible Preferred
Stock has the right to vote separately as a single
class.
d. Holders of the Series B Convertible Preferred Stock
have the option to convert their Series B Convertible
Preferred Stock to common shares anytime at an amount
equal to $5.85 divided by the conversion price. The
conversion price shall be equal to $5.85 minus the
aggregate amount of accrued dividends per share which
are then unpaid for fifteen days or more multiplied
by .64103.
e. The Corporation may cause each share of Series B
Convertible Preferred Stock to be automatically
converted into shares of common stock at an amount
equal to $5.85 minus the aggregate amount of accrued
dividends per share which are then unpaid for fifteen
days or more multiplied by .64103. as of any date on
which the closing price for each of the twenty
trading days preceding such date equals or exceeds
$8.35 per share. Such conversion cannot occur prior
to the first anniversary of Series B Convertible
Preferred Stock Issue Date.
f. In the case of a capital reorganization or
reclassification of outstanding shares of Common
Stock or in case of any merger of the Corporation
into another corporation or in case of a sale or
conveyance to another corporation of all or
substantially all of the assets or property of the
Corporation each share of Series B Convertible
Preferred Stock shall thereafter be convertible into,
in lieu of the Common Stock issuable upon such
conversion, the kind and amount of shares of stock
and other securities and property receivable upon the
consummation of such transaction by a holder of that
number of shares of Common Stock into which one share
of Series B Convertible Preferred Stock was
convertible immediately prior to such transaction.
2. As incentives for certain employees to accept employment
with the Corporation, the Corporation issued 192,100 shares of the
Corporation's
<PAGE> 10
$.004 par value common stock in exchange for Secured Recourse Notes in
the amount of $916,700. These Notes accrue no interest and are secured
by the underlying common stock. As part of the terms of the Employment
Agreements, the Corporation will forgive the notes upon the Employee's
one-year anniversary of employment. If an employee leaves the
Corporation's employ prior to his/her one-year anniversary, the former
Employee has five (5) business days to satisfy the note or the
Corporation transfer the stock to the Corporation as full payment of
the note.
4. Notes Receivable
Notes Receivable consist of $902,700 of notes received from
certain employees in conjunction with the issuance of the Corporation's
common stock and $291,000 of notes received from certain employees in
conjunction with the issuance of INRG's common stock as employment
signing bonuses. Such notes accrue no interest and are secured by the
underlying stock. As part of the terms of the Employment Agreements,
the Corporation will forgive the notes upon the Employee's one-year
anniversary of employment. If an employee leaves the Corporation's
employ prior to his/her one year anniversary, the former Employee has
five (5) business days to satisfy the note or the Corporation transfer
the stock to the Corporation as full payment of the note.
5. Fixed Assets
Fixed Assets are recorded at cost and consisted of the
following at December 31, 1999 and March 31, 1999:
<TABLE>
<CAPTION>
12/31/99 3/31/99
-------- -------
<S> <C> <C>
Computer Equipment 1,858,886 56,548
Office Equipment 234,622 16,065
Automobiles 14,500 0
Leasehold Improvements 64,131 0
--------- ---------
2,172,139 72,613
Less Accumulated Depreciation 224,969 2,114
--------- ---------
Net Fixed Assets 1,947,170 70,499
</TABLE>
Depreciation expense for the quarters ended December 31, 1999
and March 31, 1999 was $113,061 and 0 and for the nine months ended
December 31, 1999 and March 31, 1999 $222,854 and 0 respectively
6. Goodwill
The Corporation acquired goodwill with INRG's purchase of
Cybermusic. Goodwill is being amortized over ten years and consisted of
the following at December 31, 1999 and March 31, 1999.
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Goodwill 78,513 78,513
Less: Accumulated Amortization 7,852 1,963
------ ------
Net Goodwill 70,661 76,550
</TABLE>
<PAGE> 11
Amortization expense for quarters ended December 31, 1999 and
March 31, 1999 was $1,963 and 0 and for the nine months ended December
31, 1999 and March 31, 1999 was $5,869 and 0 respectively
7. Notes Payable
Notes Payable consist at December 31, 1999 of the following:
i) a note payable to AICCO, for the payment of insurance
premiums, with interest at 8.95% payable in monthly
installments of principal and interest $10,976.99
through February 2000 with the remaining balance due
at that date. The balance as of December 31, 1999 was
$32,636
ii) $200,000 Convertible Note payable to a non-related
entity, with interest accruing at a rate of 6% per
annum, payable when the note is retired. The note is
due on March 15, 2000, but the Company has the right
to prepay without penalty. Noteholder, may, at his
discretion, elect to receive all or any portion of
the outstanding principal and accrued interest, in
the Company's common stock or other securities, under
the same terms and conditions as Company is offering
such common stock or securities to other investors.
The note is secured by Company equipment in an amount
not to exceed $500,000. Along with the Note,
Noteholder received 40,000 warrants to purchase the
Company's common stock for three years at an exercise
price of $8 per share.
iii) $1,700,000 of Convertible Notes payable to
non-related entities with interest accruing at a rate
of 10% per annum which is payable when the note is
retired. These notes are due between May 1, 2000 and
June 7, 2000, but the Company has the right to prepay
the notes without penalty. At Company's option, the
due date of the principal amount of this notes and
interest can be extended for successive thirty day
periods, upon the payment in cash on or prior to such
due date an amount equal to 1% of the then
outstanding principal amount of the note. Noteholders
may elect to receive all or any portion of the
outstanding principal and accrued interest, in common
stock or our other securities, under the same terms
and conditions that Company is offering such common
stock or securities to other investors. Along with
the Note, Noteholders received 340,000 warrants to
purchase the Company's common stock for three years
at an exercise price of $8 per share.
iv) $550,000 of Convertible Notes payable mostly to
non-related entities (See Section 9 "Related Party
Transactions") with interest accruing at a rate of
10% per annum which is payable when the notes are
retired. The notes are due between December 22, 2000
and December 31, 2000 but Company has the right to
prepay without penalty. Note Holders may demand
repayment of all or any unpaid portion of the Note on
March 1, 2000, or from time to time convert in whole
or in part any
<PAGE> 12
unpaid portion of the principal amount of the Note,
including any accrued interest thereon (Conversion
Amount), into a number of fully paid and
nonassessable Shares of the Company's common stock
equal to the number determined by dividing (A)
Conversion Amount by (B) $7.50. In the event that
this formula results in a fractional share, the
resulting number of shares will be rounded down to
the nearest whole share. Along with the Note,
Noteholders received 110,000 warrants to purchase the
Company's common stock for three years at an exercise
price of $8 per share.
v) $60,000 of Notes, without interest, payable to Ron
Conquest, the Company's Chief Executive Officer and
Greg Mastroieni a Director and Consultant to the
Company.
8. Minority Interest
The minority interest in INRG has two components:
1. Preferred Stock of Subsidiary
INRG issued 40,637 shares of series A Preferred Stock, par
value $.001 to the former shareholders of Cybermusic, upon
acquisition in December 1998, The minority interest in the
Preferred stock of INRG was recorded at the stocks
liquidation value of $10 per share and goodwill was
recorded for $78,513. Rights, privileges and restrictions
of the Series A Preferred Stock are as follows:
a. The stock ranks senior to Common Stock and any other
class or series of capital stock of the Corporation
with respect to liquidation, dissolution or winding
up of the business.
b. Holders of the stock are not entitled to receive
dividends or other distributions except upon
liquidation, dissolution or winding up of the
business.
c. Holders of the stock have a right to vote with the
Common stockholders as a single class unless the
Delaware General Corporation Law requires the Series
A Preferred stockholders to vote separately as a
class.
d. Holders have the option to convert their stock to
common shares equal to the Series A Preferred Stock
liquidation value anytime after September 30, 2000,
or to common stock of a parent corporation if more
than 80% of the issued and outstanding Common Stock
of INRG is owned by another corporation.
e. Holders may redeem their stock for cash equal to the
liquidation value anytime after December 7, 2001.
INRG may elect to redeem any or all of the
outstanding shares of series A Preferred stock
anytime, at the liquidation value.
f. The liquidation value of each share of Series A
Preferred Stock is $10, increased with interest
compounded annually at 7.5%
<PAGE> 13
for three years commencing on the issuance date. The
Corporation recorded interest expense on the
liquidation value in the amount of $22,857 during
the nine months ended December 31, 1999. The Series
A Preferred Stock liquidation value consisted of the
following at December 31, 1999:
<TABLE>
<S> <C>
Liquidation value at issuance $406,370
Accrued interest to date 32,377
--------
Total Liquidation Value $438,747
</TABLE>
2. Common Stock of Subsidiary
On March 31, 1999, FTM/Redwood acquired 90.85% of
the issued and outstanding Common Stock of INRG. The
remaining 9.15% of Common Stock represented a
minority interest in INRG. The parent corporation
and the minority interest share pro rata in the net
income or loss of INRG.
During March and April, 1999, subsequent to the
acquisition, INRG received $3,243,933 from a private
placement offering for 1,080,628 common shares. The
$3,243,933 of stock purchased is included on the
balance sheet under Minority Interest - Common Stock
of Subsidiary.
During the first two quarters, INRG received Secured
Notes in the amount of $291,000 in connection with
the issuance of 97,000 shares of the INRG's common
stock. These notes carry no interest and are secured
by the underlying common stock. With the issuance of
these shares the minority interest in INRG increased
to 26.87% and will increase further if additional
common shares are issued. The $291,000 of stock
purchased is included on the balance sheet under
Minority Interest - Common Stock of Subsidiary.
9. Related Party Transactions
The Corporation has entered into a management agreement to pay
consulting fees on a monthly basis to Ingenious Enterprises,
Inc. a Nevada corporation in the amount of $120,000 annually
commencing October 1, 1998 on behalf of the services provided
by Ron Conquest. Conquest, an employee of Ingenious
Enterprises, Inc. is the President, Chief Executive Officer
and a Director of the Corporation. Effective January 1, 2000,
the consulting fees were increased to $180,000 annually.
Consulting fees paid pursuant to this agreement during the
nine months ended December 31, 1999 and December 31, 1998 were
$90,000 and $30,000 respectively.
The Corporation has entered into a management agreement to pay
consulting fees on a monthly basis to EchoMedia in the amount
of $75,000 annually commencing February 1, 1999 on behalf of
the
<PAGE> 14
services provided by Greg Mastroieni. Mastroieni, the owner of
EchoMedia is a member of the Board of Directors of the
Corporation. Consulting fees paid pursuant to this agreement
during the nine months ended December 31, 1999 and December
31, 1998 were $56,250 and 0 respectively.
The Corporation has entered into a management agreement to pay
consulting fees on a monthly basis to Four Score
Entertainment, Inc. in the amount of $75,000 annually
commencing February 1, 1999 on behalf of the services provided
by Jeffrey Pollack. Pollack, an employee of Four Score
Entertainment, Inc. was, until January 12, 2000 a member of
the Board of Directors of the Corporation. Consulting fees
paid pursuant to this agreement during the quarters ended
December 31, 1999 and December 31, 1998 were $56,250 and 0
respectively.
The Corporation has entered into a management agreement to pay
consulting fees on a monthly basis to BW Productions in the
amount of $120,000 annually commencing February 1, 1999 on
behalf of the services provided by Robert Wilson. Wilson, an
employee of BW Productions is Vice Chairman and a member of
the Board of Directors of the Corporation. Consulting fees
paid pursuant to this agreement during the quarters ended
December 31, 1999 and December 31, 1998 were $90,000 and 0
respectively.
On August 27, 1999, the Corporation purchased from Unicorp,
Inc. an automobile for $14,500. Greg Mastroieni, the President
of Unicorp, Inc. is a member of the Board of Directors of the
Corporation.
On December 22, 1999, Robert Buziak, who was elected to the
Board of Directors of the Company on January 12, 2000
purchased from the Company for $98,000, a $100,000 Note with
interest accruing at a rate of 10% per annum which is payable
when the note is retired. The note is due December 22, 2000
but Company has the right to prepay without penalty. Mr.
Buziak may demand repayment of all or any unpaid portion of
the Note on March 1, 2000, or from time to time convert in
whole or in part any unpaid portion of the principal amount of
the Note, including any accrued interest thereon (Conversion
Amount), into a number of fully paid and nonassessable Shares
of the Company's common stock equal to the number determined
by dividing (A) Conversion Amount by (B) $7.50. In the event
that this formula results in a fractional share, the resulting
number of shares will be rounded down to the nearest whole
share. Along with the Note, Mr. Buziak received 20,000
warrants to purchase the Company's Common stock at an exercise
price of $8 per share for three years.
On October 29, 1999 Ron Conquest, the Company's Chief
Executive Officer and Greg Mastroieni a Director and
Consultant to the Company lent to the Company $200,000 without
interest. As of December 31,
<PAGE> 15
1999 the Company owed $60,000 to Messrs. Conquest and
Mastroieni. The Company subsequent to December 31, 1999 repaid
Mr. Conquest a further $30,000.
10. Income Taxes
The Corporation has approximately $4,787,613 of consolidated
net operating loss carryforwards for federal tax purposes as
of December 31, 1999, which are available to offset future
taxable income and expire during the years 2011 through 2020.
The corporation has not fully reserved for any future tax
benefits from the net operating loss carryforwards since it
has not generated any revenues to date.
11. Year 2000
The Corporation's computer systems are currently year 2000
complaint. The Corporation is not aware of any material risks
associated with its vendors regarding year 2000 compliance,
however there is no guarantee that such risks do not exist and
will not have an adverse effect on operations. It is not
anticipated that any impact would be material, however the
cost of a potential impact is not determinable. The Company is
unaware of any adverse effect as a result of Year 2000.
12. Subsequent Events
1. On January 7, 2000 pursuant to the approval of a
majority of shareholders the Corporation's
consummated its merger into its wholly owned
subsidiary FTM Media, Inc. a Delaware Corporation
(FTM Delaware), with FTM Delaware to be the surviving
Corporation. All shareholders of FTM Media, Inc of
Colorado will receive one share of FTM Media, Inc of
Delaware in exchange for one share of FTM Media of
Colorado common stock.
2. On October 18, 1999 the Corporation filed a form S-4
with the Securities and Exchange Commission so that
the Corporation can register approximately 2,153,000
shares of it's common stock. The purpose of this
share issuance is so that the Corporation can
effectuate the purchase of the minority interest in
INRG, by exchanging 1.25 shares of the Corporation's
common stock in exchange for each share of INRG
commons stock not held by the corporation. On
December 30,1999 and January 4, 2000, the Company
filed Amendments to the aforementioned S-4. On
January 7, 2000, SEC declared such S-4 effective.
3. On October 18, 1999 the Corporation filed an
application with the National Association of
Securities Dealers (NASD) so as to have the
Corporation's common stock listed for trading on the
NASDAQ SmallCap Stock Market. On December 2, 1999
NASD replied to the Company's application requesting
additional information. On February 9, 2000, the
Company responded to NASD's request.
4. On January 12, 2000 the Board of Directors of the
Company accepted the resignations of Jeffrey Pollack
and Vickie Collier from
<PAGE> 16
the Board of Directors and also Ms. Collier's
resignation as Company's General Manager. At the same
Board meeting the Corporation elected Robert Buziak
to the Company's Board of Directors and promoted
David Kendrick to President and Chief Operating
Officer. Mr. Kendrick previously was the Company's
Vice President of Sales and Marketing.
5. Subsequent to December 31, 1999, the Company issued
$200,000 of Convertible Notes payable to non-related
entities with interest accruing at a rate of 10% per
annum which is payable when the notes are retired.
The notes are due between January 6, 2000 and January
10, 2001 but Company has the right to prepay without
penalty. Note Holders may demand repayment of all or
any unpaid portion of the Note on March 1, 2000, or
from time to time convert in whole or in part any
unpaid portion of the principal amount of the Note,
including any accrued interest thereon (Conversion
Amount), into a number of fully paid and
nonassessable Shares of the Company's common stock
equal to the number determined by dividing (A)
Conversion Amount by (B) $7.50. In the event that
this formula results in a fractional share, the
resulting number of shares will be rounded down to
the nearest whole share. Along with the Notes,
Noteholders received 40,000 warrants to purchase the
Company's common stock for three years at an exercise
price of $8 per share.
6. On January 27,2000, Frank Wood, The Company's
Chairman purchased from the Company for $98,000, a
$100,000 Note with interest accruing at a rate of 10%
per annum which is payable when the note is retired.
The note is due January 27, 2001 but Company has the
right to prepay without penalty. Mr. Wood may demand
repayment of all or any unpaid portion of the Note on
March 1, 2000, or from time to time convert in whole
or in part any unpaid portion of the principal amount
of the Note, including any accrued interest thereon
(Conversion Amount), into a number of fully paid and
nonassessable Shares of the Company's common stock
equal to the number determined by dividing (A)
Conversion Amount by (B) $7.50. In the event that
this formula results in a fractional share, the
resulting number of shares will be rounded down to
the nearest whole share. Along with the Note, Mr.
Wood received 20,000 warrants to purchase the
Company's Common stock for three years at an exercise
price of $8 per share.
7. On February 1 and 2, 2000 the Company issued $350,000
of Convertible Notes payable to certain employees and
their family of Spencer Trask Securities, Inc., with
interest accruing at a rate of 10% per annum which is
payable when the note is retired. The notes are due
on the earlier of February 1, 2001 or completion of a
financing in an amount of $3,000,000 or more but
company has right to prepay without penalty. Holders
may from time to time convert in whole or in part any
unpaid portion of the principal amount of the Note,
including any accrued interest thereon (Conversion
Amount), into a number of fully paid and
<PAGE> 17
nonassessable Units of the Company's common stock
equal to the number determined by dividing (A)
Conversion Amount by (B) $7.50. In the event that
this formula results in a fractional share, the
resulting number of shares will be rounded down to
the nearest whole share. Units consist of one share
of Company Common Stock along with one Class A
warrant and one Class B warrant.
8. During January, 2000 the Company signed an agreement
with Spencer Trask Securities, Inc. regarding a
proposed private placement of the Company's
securities. The Company proposes to sell between
800,00 and 1,600,000, consisting of one share of
Company Common stock and one Class A warrant and one
Class B warrant for a unit price of $7.50. As of this
date the Company had not commenced the selling of the
proposed securities.
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
The following is a discussion of the consolidated financial condition
and results of operations of the Company as of and for the two fiscal
periods ended December 31, 1999 and December 31, 1998. This discussion
should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes related thereto included in the
Company's Form 10-KSB for the fiscal year ended March 31, 1999.
The forward looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations, which
reflect Management's best judgement based on factors currently known,
involve risks and uncertainties. Actual results could differ materially
from those anticipated in these forward looking statements as a result
of a number of factors, including but not limited to those discussed
herein.
Introduction
The Company was incorporated on February 22, 1994. Prior to March 1998,
the Company had not engaged in any form of commercial business
activity. In March 1998, the Company's principal business focus became
the Internet and the production of interactive, multi-media, 2-D/3-D
Internet Web Sites for the Radio Industry.
On December 7, 1998, the Company acquired Cybermusic in the Cybermusic
Merger. The business of Cybermusic consisted primarily of developing a
network of linked, interactive, multi-media, 2-D/3-D Internet Web Sites
to be operated by the Company for participating Radio Stations (the
"FTM Internet Network"). The Company's business plan is to develop,
operate and maintain the FTM Internet Network, perform related services
and provide Internet access to participating Radio Stations in order to
produce new sources of revenue for the Radio Stations. It is expected
that the Internet Web Site for participating Radio Stations will
feature multi-media interactive capability, streaming audio and video,
local and national chat, games, P1 targeting and music sampling. The
Company also expects to provide market and audience research with daily
and weekly analysis, licenses, e-commerce, and technical
support/customer service through a Company run operations center
available seven days per week.
The Company will initially seek to build the FTM Internet Network
through obtaining the participation of Radio Stations owned by
CBS/Infinity Broadcasting. On March 9, 1998 the Company entered into
the CBS Agreement pursuant to which Infinity Broadcasting will arrange
for the Company to meet with the general managers of Radio Stations
owned by CBS/Infinity Broadcasting for the purpose of discussing the
participation of such Radio Stations in the FTM Internet Network(s).
<PAGE> 19
The Company anticipates three initial sources of revenue which are: (1)
the sale of radio advertising units received from Radio Stations in the
top twenty five U.S. markets in exchange for the Company's various Web
site products and services and for participation in the FTM Internet
Network, (2) the sale of local and national advertising, "integrated
interactive advertising and sponsorships" on the FTM Internet Network
of Radio Station Internet Web site, and (3) the sale of merchandise, in
addition to other e-commerce activities generated within the Company's
Internet Network.
The Company acknowledges increasing competition for limited advertising
dollars on the Internet and seeks to differentiate itself through the
sale of sponsorships and "integrated advertising." Integrated
advertising is a unique program that involves advertisers in the
creation of a message allowing them to better target a specific
audience or audience segment. The Company's growth strategy depends, in
part, on its ability to increase advertising revenue by the ongoing
introduction of new and enhanced Internet products and services to its
flagship Internet Network and Web site. In addition, the Company will
attempt to increase advertising revenue through the introduction of new
and enhanced Internet products and services to its Internet Network and
Web site by the creation of new features, promotions, games and
simulations, in order to provide sponsors and advertisers with even
greater ability to target a specific audience.
CBS AGREEMENT
Pursuant to the CBS Agreement, CBS/Infinity Broadcasting will provide,
until March 2003, access and assistance to the Company to contact Radio
Stations owned and/or operated by CBS/Infinity for the purposes of
soliciting such stations to (1) participate in the FTM Internet
Network, (2) to engage the Company to develop, operate and maintain
World Wide Web sites for such stations and to provide related services
and (3) to engage the Company to function as an Internet access
Provider for such stations in order for the station to generate new
sources of revenue. In exchange for such rights and assistance, the
Company has agreed to (i) use commercially reasonable efforts to
provide unimpeded and uninterrupted access and operability of World
Wide Web site to the Participating Stations, (ii) propose to its
shareholders that, for so long as CBS/Infinity Broadcasting continues
to own at least ten percent (10%) of the issued and outstanding shares
of the Company's Common Stock (on a fully diluted basis), a
representative designated by CBS Radio or Infinity be elected to the
Company's board of directors, and to use its best efforts to cause all
of its insiders and affiliates to vote their shares in favor of the
election of said representative, and (iii) allow CBS Infinity
Broadcasting to audit the Company's books and records not more than
once each calendar year on behalf of those stations who participate in
the FTM Internet Network with respect to the accounting statements
tendered to such Radio Stations under their agreements with the
Company.
<PAGE> 20
OTHER POTENTIAL INTERNET PRODUCTS AND SERVICES
The Company anticipates that advertising revenues generated from the
sale of Internet Web site advertising and sponsorships will represent
only a portion of the Company's operating revenues and profits, and
further, the Company believes that its future success will depend, in
part, on its ability to generate revenues and profits from other
sources. The Company intends to explore other opportunities to increase
revenues through new game platforms, co-branding relationships,
cross-licensed technologies, merchandise opportunities, specialized
CD-ROM's, classified advertising, personals, archiving fees, specialty
Web-based-only entertainment events, emerging artist management,
publishing and music distribution, and market specific consumer
research.
The Company's business is still in the very early stages of
development. The Company is in discussions with various CBS/Infinity
Broadcasting affiliated Radio Stations along with non CBS/Infinity
Broadcasting Radio Stations regarding the providing of Internet
products and services, but does not yet have binding agreements with
any Radio Stations to provide such products and services. In addition,
while the Company has developed prototypes of Radio Station Internet
Web sites for Los Angeles Radio Station "KROQ", San Francisco Radio
Stations "KITS" and "KCBS" Chicago Radio Station "B96" and Boston Radio
Station "WBCN", the prototypes developed do not incorporate all of the
currently available technical features that the Company expects to
include in its fully operational Internet Web site. The Company has
generated minimal revenues and has limited operating history upon which
an evaluation of the prospects for the acceptance of its Internet
products and services and the related sale of Internet advertising may
be based.
THE MARKET
Consumer household usage of the Internet is growing exponentially. The
market for interactive multimedia Web sites, promotions, games,
information, and online commerce is a rapidly growing segment of the
United States economy. An estimate of 1999 Web use by Nielsen Media
Research current Web users at 92 million persons, up from 70 million in
1998. A January 1999 Arbitron/Edison Media Research survey of
Arbitron's Fall '98 diarykeepers found that 57% of United States
households have a computer, and more than half of all Americans are
currently online (at home, work, school, or other locations).
As the Internet becomes more accessible, functional, and widely used by
consumers and businesses, its commercial potential continues to grow
dramatically in terms of both e-commerce and ad spending. The number of
people making purchases online has jumped 40% in the last nine months,
up to 28 million people, according to a recent Nielsen/ CommerceNet
study.
The overlap between potential Web users and radio listeners is
significant, according to the recent Arbitron/Edison study. Fully 82%
of partisan
<PAGE> 21
Alternative Rock listeners have computers at home, compared to the 57%
of total homes. Of those PC-owning Alternative Rock listeners, 91%
already have Internet access. In fact, most young people - the most
active radio listeners -- are online. Fully 81% of those 12-17 and 71%
of those 18-24 are online. Penetration is high among older listeners
also, as well over half of those 25-54 are online.
Broadcast advertising is one of the most powerful drivers of Web
traffic. Radio is well positioned to capitalize on this, because of its
convenience, reach, and devoted audience. According to Arbitron/Edison,
two-thirds of those surveyed had heard a station promote its Web site
on-air, and a third had actually visited a station Web site (rising to
44% among Modern Rock listeners).
Consumer-focused Internet companies (such as AOL, eBay, Amazon, and
Priceline.com) clearly believe that radio listeners can drive listeners
to their sites. Online companies spent more than $37 million on
traditional radio advertising during the first quarter of 1999, up from
just $6 million in the same period a year ago, according to a recent
Competitive Media/Industry Standard report. PaineWebber recently
upgraded its estimate of total 1999 online companies' advertising
spending to $800 million. PaineWebber expects 40% of the increase to go
to radio, for a total of $320 million in 1999 radio ad revenues.
PaineWebber estimates the dot-coms' 1999 offline advertising breakdown
will be 40% radio, 40% TV, and 20% other media.
SALES AND MARKETING
Our sales and marketing activities are directed toward two principal
groups, major market radio stations and national advertisers. Our
affiliate stations are largely responsible for generating local ad
sales and driving listeners to their web sites.
RADIO STATIONS
We will present our Web site services to the managers of targeted Top
25 market radio stations, through our team of Radio and Internet
experts. We will emphasize the following features and benefits:
- Two-thirds of the advertising space on each radio station Web
site will be dedicated to "local" advertising. Because we share in this
revenue, we will take an active role in training and supporting local
station sales personnel;
- As we build station Web sites in the Top 25 markets, we aim to
become a lifestyle demographic "vertical portal." While emphasis will
always remain focused on the individual radio station Web sites, each
"vertical portal" with local entry points which will become an
advertising and marketing vehicle for national advertisers.
Participation in a "national portal" creates significant new revenue
sources for each radio station.
<PAGE> 22
- Our Web site services are "turn-key" and include all Web site
development, ongoing maintenance, content refreshing, and technology
upgrades. Through our "turn-key" Web sites, individual radio stations
will be able to offer Web site services far superior than they could
afford to do individually;
- Each Web site we create and manage will be customized for each
participating radio station;
- Our radio station Web sites will be equipped with a
sophisticated tracking and reporting system that will provide each
station with timely and accurate loyal listener data and demographics.
Our key marketing executives have already begun to make in-person
presentations to the general managers and program directors of the top
25 market radio stations that fit our affiliate profile.
NATIONAL ADVERTISERS
Our marketing efforts to national advertisers will be through
advertising agencies and, to a lesser extent, direct sales. We will
focus on communicating to advertisers the benefits of individually
targeted, interactive ad on our network of Web sites. These
advertisements can be closely matched to a consumer's lifestyle and
demographics and allow consumer interaction, and are believed to be
more effective at building brand equity and generating sales and
revenue than traditional banner ads.
RADIO STATION LISTENERS/WEB TRAFFIC
Radio station listeners will be directed to the radio station's Web
site through on-air mentions, radio station off-air events such as
concerts and remote broadcasts, radio station related print media and
promotional materials, and other radio station advertising media such
as billboards.
Additionally, we have marketing, promotional and database specialists
within the Company who will work closely with each radio station to
maximize the effectiveness of each of the above-referenced outreach
programs.
COMPETITION
FTM's direct competitors include:
- - OnRadio - OnRadio supplies basic, template-based Web sites to radio
stations in exchange for the radio station providing a "link" to OnRadio
national content. There is also a banner ad revenue split, and the
participating radio stations barter some advertising time to OnRadio in
exchange for its services. OnRadio has been in operation for more than
three years and operates over 600 radio station web sites, mostly in small
and medium-sized markets.
<PAGE> 23
- - AMFMi - AMFMi is the in house web development group for AMFM inc. As such,
AMFMi assists AMFM affiliates in establishing web sites. AMFMi was formed
as an in-house Web development group with goals very similar to FTM's. AMFM
is currently being acquired by Clear Channel Communications Inc.
- - FIMC/RadCity - First Internet Media Corporation offers stations a
market-exclusive licensing arrangement for each "RadCity," a local web
portal comprised of third-party information providers. The strategy is
currently being tested in six small markets and one major city (San
Francisco).
- - Magnitude Network - Owned by Web investment firm CMGI, Magnitude has about
200 radio station web sites, primarily in small to medium markets. Services
include traffic data tracking, Web hosting, update tools, station-branded
listener e-mail, streaming audio, and content drawn from third-party
suppliers such as Rolling Stone/Jam TV.
- - Radio Data Group, Inc. - RDG is owned by CBS, Clear Channel, and Colfax
Communications. RDG helps radio stations set up Web sites and markets
radio-oriented Web site software to them. Its software package includes ad
tracking, invoicing, ad placements, and Web site administration, among
other programs. RDG claims to have created "over 250" Web sites.
- - MP3Radio.com - Cox Enterprises and MP3 have recently created this joint
venture company that builds radio station sites using templates The content
of each site, currently 20 in number, is identical and MP3 driven.
We anticipate that the number of direct and indirect competitors will
increase significantly in the future. The market for Internet products
and services is growing exponentially and there are relatively few
barriers to entry into the marketplace. There can be no assurance that
our current or potential competitors will not develop Internet products
and services comparable or superior to those to be developed by us or
adapt more quickly than us to new technologies, evolving industry
trends or changing Internet user preferences. Increased competition
could result in price reductions, reduced margins or loss of market
share. In addition, if we expand internationally, we may face new
competition in these marketplaces.
There can be no assurance that the Company's current or potential
competitors will not develop Internet products and services comparable
or superior to those to be developed by the Company or adapt more
quickly than the Company to new technologies, evolving industry trends
or changing Internet user preferences. Increased competition could
result in price reductions, reduced margins or loss of market share,
any of which would materially and adversely affect the Company's
business, prospects, financial condition or operating results. In
addition, as the Company expands internationally it may face new
competition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, or that
competitive pressures faced by the Company will not
<PAGE> 24
have a material adverse effect on its business, prospects, financial
condition or operating results.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is subject to various laws and governmental regulations
applicable to businesses generally. The Company believes it is
currently in material compliance with such laws and that such laws do
not have a material adverse impact on its operations. In addition,
although there are currently few laws or regulations directly
applicable to access to or commerce on the Internet, due to the
increasing popularity and use of the Internet, it is possible that more
stringent federal, state, local and international laws and regulations
may be adopted with respect to the Internet. A variety of issues may
prompt such regulations including problems involving participant
privacy and expression, consumer protection, pricing, payment
methodologies, financing practices, intellectual property, information
security, anti-competitive practices, the convergence of traditional
channels with Internet commerce, characteristics and quality of
products and services and the taxation of subscription fees or gross
receipts of Internet service providers. The enactment or enforcement of
such laws or regulations or others in the future may increase the
Company's cost of doing business or decrease the growth of the
Internet, which could in turn decrease the demand for the Company's
Internet products and services, increase the Company's costs, or
otherwise have an adverse effect on the Company's business, financial
condition or operating results. Moreover, the applicability to the
Internet of existing laws in various jurisdictions including laws and
regulations relating to matters such as property ownership, libel and
personal privacy is uncertain, may take years to resolve and could
expose the Company to substantial liability for which the Company might
not be indemnified by content providers or other third parties. Any
such new legislation or regulation or the application of existing laws
and regulations to the Internet could have a material adverse effect on
the Company's business, prospects, financial condition or operating
results.
The Company's use of prizes associated with its features, promotions,
games and simulations may be subject to federal, state, local and
international laws governing lotteries and gambling. Such laws vary
from jurisdiction to jurisdiction and are complex and uncertain. The
Company seeks to design its prizing structure to fall within exemptions
from such laws, but there can be no assurance that the Company's
prizing structure will be exempt from all applicable laws. Failure to
comply with applicable laws could have a material adverse affect on the
Company's business, prospects, financial condition or operating
results.
Liquidity and Capital Resources - December 31, 1999 compared to March 31, 1999
At December 31, 1999, the Company had total assets of $3,938,761 representing an
increase in the total assets of $1,587,808 over total assets at March 31, 1999.
Total Liabilities increased to $3,751,013 at December 31, 1999 from $272,921 at
March 31, 1999. Minority Interest decreased to $2,435,807 at December 31, 1999
from
<PAGE> 25
$3,187,150 at March 31, 1999. Total Stockholders Deficit increased to $2,248,059
at December 31, 1999 from $1,109,118 at March 31, 1999.
Total current assets at December 31, 1999 were $1,818,757, which consisted of
cash and cash equivalents of $400,621, employee note receivables in the amount
of $1,193,700, Accounts Receivable of $24,208 and prepaid expenses of $200,228.
Total current liabilities at December 31, 1999 were $3,751,013 consisting of
accounts payable of $1,161,579 and the current portion of note payables in the
amount of $2,542,636. Working capital at December 31, 1999 was $(1,932,256)
compared to $1,778,880 at March 31, 1999. This represented a decrease in the
Company's Working Capital position of $3,711,136.
At December 31, 1999 the Company reported total assets of $3,938,761 which
consisted of $1,818,757 of current assets described above, $1,947,170 of Net
Property and Equipment, $102,173 of Lease Deposits and $70,661 of Net Goodwill.
Total liabilities at December 31, 1999 are comprised entirely of the current
liabilities described above.
Minority interest at December 31, 1999 totaled $2,435,807, which consisted of
Preferred Stock of a subsidiary in the amount of $438,747 and Common Stock of a
subsidiary in the amount of $1,997,060.
At December 31, 1999, the Company reported a Stockholders Deficit of $2,248,059.
This represents an increase of $1,131,941 over March 31, 1999 Stockholders
Deficit of $1,109,118. This decrease was the result of the sale of 273,504
shares of Series B Convertible Preferred Stock in which the Company received
$1,600,000, increased by the payment of $192,000 of dividends to the
shareholders of Series B Convertible Preferred Stock, decreased by the issuance
of 192,100 shares of Common Stock to employees in which the corporation received
notes in the amount of $916,700 and increased by the net loss for the nine
months of $3,653,215.
Results of Operations - Three Months Ended December 31, 1999 compared to the
Three Months Ended December 31, 1998
Net Revenues for the three months ended December 31, 1999 were $45,659 compared
to net revenue of 0 for the same period a year ago. This is attributable to the
Company continuing to be in its development stage and therefore not yet
generating any significant revenue from operations.
Cost of goods Sold for the three months ended December 31, 1999 were $1,253,438
compared to Cost of Goods Sold of 0 for the same period a year ago.
Operating expenses for the three months ended December 31, 1999 were $971,682,
which consisted of general and administrative expenses of $683,804, sales and
marketing expenses of $172,854 and depreciation and amortization of $115,024.
Operating expenses for the three months ended December 31, 1998 were 30,000.
<PAGE> 26
The Company recorded net interest expense (interest expense offset by interest
income) of $31,218 for the quarter ended December 31, 1999. The interest expense
was money interest paid or accrued on company liabilities less interest earned
on the Company's Cash and Cash Equivalents.
As a result of the foregoing the Company posted a net loss of $2,210,680 before
minority interest. The minority interest in the Company's net loss was $652,289
resulting in a net loss to the Company of $1,557,391 for the three months ended
December 31, 1999 or $(.242) per share compared to a net loss of 30,000 for the
three months ended December 31, 1998 or $(.004) per share.
Results of Operations - Nine Months Ended December 31, 1999 compared to the Nine
Months Ended December 31, 1998
Net Revenues for the nine months ended December 31, 1999 were $45,659 compared
to net revenue of 0 for the same period a year ago. This is attributable to the
Company continuing to be in its development stage and therefore not yet
generating any significant revenue from operations.
Cost of goods Sold for the nine months ended December 31, 1999 were $2,597,967
compared to Cost of Goods Sold of 0 for the same period a year ago.
Operating expenses for the nine months ended December 31, 1999 were $2,890,330
which consisted of general and administrative expenses of $1,961,517, sales and
marketing expense of 321,928 and depreciation and amortization of $228,743.
Operating expenses for the nine months ended December 31, 1998 consisted of
general and administrative expense of $30,000.
The Company recorded net interest expense (interest expense offset by interest
income) of $13,958 for the nine months ended December 31, 1999. The interest
expense was money interest paid or accrued on company liabilities less interest
earned on the Company's Cash and Cash Equivalents.
As a result of the foregoing the Company posted a net loss of $5,078,454 before
minority interest. The minority interest in the Company's net loss was
$1,425,439 resulting in a net loss to the Company of $3,653,215 for the nine
months ended December 31, 1999 or $(.573) per share compared to a net loss of
30,0000 for the nine months ended December 31, 1998 or $(.004) per share.
<PAGE> 27
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
On October 15, 1999, the Corporation at a Special Meeting of
Shareholders approved:
i) The merger of the Corporation with FTM Media, Inc of
Delaware a wholly owned subsidiary of the
Corporation, with FTM of Delaware being the surviving
entity.
ii) The adoption of the FTM Media, Inc. 1999 stock option
plan
No other matters were submitted to a vote of security holders
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Exhibit Name
27 Financial Data Schedule
(b) The Company filed a form 8-K on November 5,1999
reporting that at an October 15, 1999 Special Meeting
of Stockholders of FTM Media, Inc., a Colorado
corporation (the "Company"), the Company's
stockholders voted to approve the reincorporation of
the Company from Colorado to Delaware by the adoption
of a Plan and Agreement of Merger pursuant to which
the Company will be merged with and into FTM Media,
Inc., a Delaware corporation ("FTM Delaware")(the
"Reincorporation Merger"). In addition to the
Reincorporation Merger discussed above, the Board of
Directors of the Company, as the majority shareholder
of Interactive Radio Group, Inc., a Delaware
corporation ("INRG"), authorized its approval of the
merger of
<PAGE> 28
INRG with and into FTM Delaware (the "INRG Merger").
In this INRG Merger, (i) each holder of INRG common
stock will receive 1.25 shares of FTM Delaware common
stock for each share of INRG common stock that they
own, and (ii) each holder of INRG Series A Preferred
Stock will be converted into the Series A preferred
stock of FTM Delaware that they own, with
substantially similar terms. The INRG Merger will
result in the elimination of the minority interest in
INRG
(c) The Company filed a form 8-K on January 25, 2000
reporting that at an October 15, 1999 Special Meeting
of Stockholders of FTM Media, Inc., a Colorado
corporation ("FTM Colorado"), FTM Colorado's
stockholders voted to approve the reincorporation of
FTM Colorado from Colorado to Delaware by the
adoption of a Plan and Agreement of Merger pursuant
to which FTM Colorado was to be merged with and into
FTM Media, Inc., a Delaware corporation ("FTM
Delaware") (the "Reincorporation Merger"). The
Reincorporation Merger was closed on January 7, 2000.
In addition to the Reincorporation Merger discussed
above, FTM Colorado, as the majority shareholder of
Interactive Radio Group, Inc., a Delaware corporation
("INRG"), authorized its approval of the merger of
INRG with and into FTM Delaware (the "INRG Merger").
In this INRG Merger, (i) each holder of INRG common
stock received 1.25 shares of FTM Delaware common
stock for each share of INRG common stock that they
owned, and (ii) each holder of INRG Series A
Preferred Stock was converted into Series A preferred
stock of FTM Delaware with substantially similar
terms. FTM Colorado owned approximately 72% of the
outstanding shares of INRG's common stock before the
INRG Merger. The INRG Merger resulted in the
elimination of the minority interest in INRG. The
INRG Merger was consummated on January 7, 2000, after
the consummation of the Reincorporation Merger.
In accordance with the Exchange Act, this report has
been signed below by the following persons on behalf of the
Registrant and in the capacities and dates indicated.
Signature Title Date
/s/ Ron Conquest Chief Executive Officer February 10,2000
/s/ Scott M. Manson Chief Financial and February 10, 2000
Accounting Officer
<PAGE> 29
EXHIBIT INDEX
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 401
<SECURITIES> 0
<RECEIVABLES> 1218
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1819
<PP&E> 2172
<DEPRECIATION> 225
<TOTAL-ASSETS> 3939
<CURRENT-LIABILITIES> 3751
<BONDS> 0
11
0
<COMMON> 26
<OTHER-SE> (2282)
<TOTAL-LIABILITY-AND-EQUITY> 3939
<SALES> 45
<TOTAL-REVENUES> 45
<CGS> 2598
<TOTAL-COSTS> 2512
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> (3653)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3653)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3653)
<EPS-BASIC> (0.57)
<EPS-DILUTED> (0.57)
</TABLE>
