SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from _______ to ______
Commission file number 000-24223
FRONTLINE COMMUNICATIONS CORPORATION
(Exact name of Small Business issuer as specified in its Charter)
Delaware 13-3950283
(State or other jurisdiction (I.R.S Employer
Of incorporation or organization) Identification number)
One Blue Hill Plaza, P.O. Box 1548, Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)
(914) 623-8553
(Issuer's Telephone Number, including Area Code)
Indicate by a 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 twelve 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 last 90 days.
Yes _X_ No___
As of August 10, 1999, there were outstanding 3,583,952 shares of the issuer's
Common Stock, $ .01 par value.
<PAGE>
INDEX
Page
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis or Plan
Of Operations 7
Part II Other information 10
Signatures 12
<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998 (1)
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 1,649,818 $ 1,994,711
Accounts receivable, net of allowance for doubtful accounts 51,572 3,327
Prepaid expenses and other 222,375 202,081
------------ ------------
Total current assets 1,923,765 2,200,119
Property and equipment, net 1,376,482 981,785
Intangibles, net 3,748,821 3,081,326
Other 169,900 23,173
============ ============
$ 7,218,968 $ 6,286,403
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 427,881 $ 301,162
Deferred revenue 584,606 614,852
Current portion of capitalized lease obligation 122,335 38,569
------------ ------------
Total current liabilities 1,134,822 954,583
Capitalized lease obligations and notes payable- net of current portion 420,322 284,433
------------ ------------
Total liabilities 1,555,144 1,239,016
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 authorized, 10 issued and
outstanding
Common Stock, $.01 par value, authorized 25,000,000 and 10,000,000, respectively,
3,715,572 and 3,361,364 issued, respectively and 3,3484,052 and
and 3,129,844 outstanding, respectively 37,156 33,614
Additional paid-in capital 12,655,811 9,121,533
Accumulated deficit (6,727,530) (3,843,647)
Note receivable (37,500)
Treasury stock, at cost, 231,520 shares (264,113) (264,113)
------------ ------------
Total stockholders' equity 5,663,824 5,047,387
============ ============
$ 7,218,968 $ 6,286,403
============ ============
</TABLE>
(1) The balance sheet at December 31, 1998 is derived from audited financial
statements at that date. See notes to condensed consolidated financial
statements.
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<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 758,561 $ 124,113 $ 1,415,418 $ 246,173
Cost of revenues 513,797 126,620 948,005 223,364
----------- ----------- ----------- -----------
Gross profit 244,764 (2,507) 467,413 22,809
Operating expenses:
Selling, general and administrative 1,434,288 237,305 2,678,606 356,676
Non-cash compensation charge 712,220 712,220
----------- ----------- ----------- -----------
Loss from operations (1,901,744) (239,812) (2,923,413) (333,867)
Other income (expense):
Interest income 35,817 1,836 55,595 19,051
Interest expense (6,061) (27,846) (16,065) (24,174)
=========== =========== =========== ===========
Net loss $(1,871,988) $ (265,822) $(2,883,883) $ (338,990)
=========== =========== =========== ===========
Loss per share-basic and diluted $ (0.54) $ (0.12) $ (0.87) $ (0.15)
=========== =========== =========== ===========
Weighted average number of shares
outstanding- basic and diluted 3,437,861 2,212,240 3,330,357 2,212,240
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended
June 30, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net loss $(2,883,883) $ (338,990)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 720,355 33,534
Non-cash compensation charge 712,220
Changes in assets and liabilities
Accounts receivable (32,782) (7,186)
Prepaid expenses and other (20,294) (18,088)
Other assets (146,727)
Accounts payable and accrued expenses 97,102 (234,840)
Deferred revenue (30,246) 10,110
----------- -----------
Net cash (used) by operating activities (1,584,255) (555,460)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (262,857) (90,636)
Acquisition of businesses (451,661)
----------- -----------
Net cash used in investing activities (714,518) (90,636)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock, net 1,770,000 5,812,346
Proceeds from exercise of stock options 215,000
Principal payments on capitalized lease obligations (31,120)
Deferred registration costs 231,071
Purchase of Treasury Stock (264,113)
Repayments of stockholder and bank loans (378,989)
----------- -----------
Net cash provided by financing activities 1,953,880 5,400,315
----------- -----------
Net increase (decrease) in cash and cash equivalents (344,893) 4,754,219
Cash and cash equivalents, beginning of period 1,994,711 39,725
=========== ===========
Cash and cash equivalents, end of period $ 1,649,818 $ 4,793,944
=========== ===========
Supplemental information:
Approximate interest paid during the period $ 16,000
===========
</TABLE>
The Company entered into capital lease obligations in the aggregate amount of
approximately $180,000 during the six months ended June 30, 1999.
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<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
NOTE A- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 (b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. The results for the interim periods are not
necessarily indicative of the results that may be attained for an entire year or
any future periods. For further information, refer to the Financial Statements
and footnotes thereto in the Company's annual report on Form 10-KSB for the
fiscal year ended December 31, 1998.
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
NOTE B- LOSS PER SHARE
The Company has adopted SFAS No. 128, "Earning per Share", which provides
for calculation of "basic" and "diluted" earning per share. Basic earnings per
share includes no dilution and is computed by weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect, in
periods in which they have dilutive effect, the effect of common shares issuable
upon exercise of stock options and warrants. Diluted earnings per share amounts
have not been reported because the Company has a net loss and the impact of the
assumed conversion of preferred stock and exercise of stock options and warrants
would be anti-dilutive.
NOTE C-CAPITAL STOCK
In March 1999, the Company sold 158,856 shares of its Common Stock to two
investors for an aggregate purchase price of $2,000,000, with net proceeds to
the Company of $1,770,000. The Company also issued warrants to purchase an
aggregate of 21,662 shares of Common Stock at an exercise price of $13.85 per
share. The Company granted repricing rights with respect to the shares, and
anti-dilution rights with respect to the warrants, subject to an aggregate
maximum issuance of 450,000 shares.
In May 1999, an officer of the Company exercised options granted under the
Company's stock option plan and acquired 15,000 shares of Common Stock for
$37,500. The payment was made by an interest bearing secured promissory note.
The amounts due under the note are secured by certain personal assets of the
officer in addition to shares of Common Stock acquired by the officer.
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<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
In June 1999, the Company's shareholders approved an amendment to the
Certificate of Incorporation of the Company increasing the number of authorized
shares of Common Stock to 25,000,000.
The Company issued 60,436 shares of its Common Stock for acquisition of
businesses. See Note D.
NOTE D- ACQUISITIONS OF BUSINESSES
In May 1999, the Company acquired substantially all of the assets of
channel I Shop.com and, acquired all of the issued and outstanding stock of
WebPrime, Inc. The aggregate consideration consisted of $155,000 in cash
(including transaction-related costs) and 50,436 shares of Common Stock
(approximately $675,000. The acquisitions resulted in intangibles of $813,000,
which are being amortized over their expected benefit period of 3 years. In
addition, the Company issued 10,000 shares of its Common Stock as a purchase
price adjustment to a business it acquired in 1998. $ 128,000 representing the
value of the additional consideration was adjusted to the cost of related
intangibles.
NOTE E- NON-CASH COMPENSATION CHARGE
The Company granted to certain employees options to purchase an aggregate
amount of 245,768 shares of its Common Stock which required shareholder approval
prior to its issuance. The shareholders approved the issuance in June 1999, and
accordingly the approval date is deemed to be the grant date. Since the fair
market value of the shares at the grant date exceeded the exercise price,
compensation costs have been recognized during the three months ended June
30,1999 for the options that are vested.
NOTE F- SUBSEQUENT EVENTS
In July 1999, the Company sold 99,900 shares of its Common Stock to two
investors for an aggregate purchase price of $1,000,000. The Company also issued
warrants to purchase an aggregate of 13,625 shares of Common Stock at an
exercise price of $11.01 per share. The Company granted repricing rights with
respect to the shares, and anti-dilution rights with respect to the warrants,
subject to an aggregate maximum issuance of 225,000 shares.
Subsequent to June 30, 1999, the Company acquired communications equipment
in the aggregate amount of approximately $1.5 million from a major
telecommunications equipment manufacturer. The manufacturer provided the
financing through a lease. As per the terms of the lease, the Company is
required to pay approximately $58,000 a month for 30 months commencing from
December 1999. In addition, the Company anticipates incurring approximately
$300,000 for the installation of the equipment and related professional
services.
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<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
In July 1999, the Company entered into a stock purchase agreement to
purchase all of the outstanding stock of Sovernet, Inc. ("Sovernet") from its
three shareholders (the "Sellers"). Sovernet is in the business of providing
internet services, including dial-up access, web hosting and design and web page
development services to individuals and businesses in Vermont and New Hampshire.
Sovernet's current subscriber base is 15,000. The transaction is subject to the
Company securing adequate financing to fund the purchase, and other customary
closing conditions. The Company paid a $250,000 deposit to the Sellers which is
only refundable under certain limited circumstances as set forth in the stock
purchase agreement. The Company anticipates that the closing will occur on or
about September 30,1999. However, there cannot be any assurance that the closing
will occur at that time or that the closing will occur at all.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:
The statements contained herein which are not historical facts are "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Exchange Act. These "forward looking
statements" are subject to risks and uncertainties, including but not limited
to, risks associated with the Company's future growth and operating results, the
ability of the Company to successfully integrate newly acquired subscribers,
business entities and personnel into its operations, changes in consumer
preference and demographics, technological change, competitive factors,
unfavorable general economic conditions, Year 2000 compliance and other factors
described herein. The Company assumes no obligation to update the
forward-looking information. Actual results may vary significantly from such
forward-looking statements.
The Company's revenues are derived primarily from providing Internet access
services to individual and business subscribers. Revenues are comprised
principally of recurring revenues from the Company's customer base,
non-recurring start-up fees for modem and leased line connections and from
various ancillary services. The Company charges subscription fees, which are
billed monthly or quarterly, in advance, typically pursuant to pre-authorized
credit card accounts.
The Company acquired all of the issued and outstanding capital stock of
WOWFactor, Inc. in October 1998. In addition, the Company acquired substantially
all of the assets of Roxy Systems, Inc. d/b/a Magic Carpet, US Online, Inc. and
Webspan Communications, Inc. in the fourth quarter of 1998. In May 1999, the
Company acquired substantially all of the assets of channel I Shop.com and,
acquired all of the issued and outstanding stock of WebPrime, Inc. All of the
acquisitions were accounted for using the purchase method of accounting with the
results of each acquisition included in the consolidated financial statements
from the respective acquisition date.
RESULTS OF OPERATIONS
Comparison of the three and six months ended June 30, 1999 and 1998
Revenues: Revenues increased for the three months and six months ended June 30,
1999 by $634,448 or 511.2% and by $ 1,169,245 or 475%, respectively, over the
same periods of prior year. The increase was attributable to an expanded
subscriber base. The Company had approximately 15,000 and 2,000 subscribers at
June 30, 1999 and 1998, respectively. The increase in subscriber base was
principally due to acquisitions.
Cost of Revenues: For the three month period ended June 30, 1999 cost of
revenues increased by $387,177 to $513,797. For the six month period ended June
30, 1999 cost of revenues increased by $724,641 to $948,005. The increase in
cost of revenues was due to increased communication, depreciation and technical
personnel expenses incurred to support the increased subscriber base and in
anticipation of future subscriber growth. The Company expects these costs to
increase in absolute dollars as additional subscribers are added.
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<PAGE>
Operating Expenses: For the three month period ended June 30, 1999, operating
expenses excluding non-cash compensation costs increased by $1,196,983 to
$1,434,288. For the six month period ended June 30, 1999 operating expenses
excluding non-cash compensation costs increased by $2,321,930 to $2,678,606. The
increase in operating expenses was primarily attributable to higher payroll,
amortization, depreciation, advertising, promotion, and professional fees
incurred in 1999 due to the increased revenue base and in anticipation of future
growth. In June 1999, the Company had 65 employees compared to 10 in June 1998.
Management anticipates future increases in operating expenses related to
advertising, promotion, payroll, depreciation and professional fees.
The Company granted to certain employees options to purchase an aggregate
amount of 245,768 shares of its Common Stock which required shareholder approval
prior to its issuance. The shareholders approved the issuance in June 1999, and
accordingly the approval date is deemed to be the grant date. Since the fair
market value of the shares at the grant date exceeded the exercise price,
compensation costs of $712,220 have been recognized during the three months
ended June 30,1999 for the options that are vested.
Interest Income: Interest income net of interest expense increased by $55,766
and $32,571 for the three and six month periods, respectively. The increase in
interest income was due to investment of unutilized proceeds of the Company's
initial public offering and Match 1999 private offering.
Net Loss: The Company has incurred significant losses and anticipates that it
will continue to incur losses until sufficient revenues are generated to offset
the substantial up-front expenditures and operating costs associated with
attracting and retaining additional subscribers. For the three months ended June
30, 1999 and 1998, the Company incurred net losses of $1,871,988 and $265,822,
respectively. For the six months ended June 30, 1999, the Company incurred net
losses of $2,883,883 and $338,990, respectively. There can be no assurance that
the Company will be able to attract and retain a sufficient number of
subscribers to significantly increase its revenues or ever achieve profitable
operations.
Liquidity and Capital Resources
The Company's working capital at June 30, 1999 was $788,943 compared to
$1,245,536 at December 31, 1998. The decrease in working capital was due to
operating losses though offset by the proceeds from the private sale of the
Company's Common Stock in March 1999.
In March 1999, the Company sold 158,856 shares of its Common Stock to two
investors for an aggregate purchase price of $2,000,000, with net proceeds to
the Company of $1,770,000. The Company also issued warrants to purchase an
aggregate of 21,662 shares of Common Stock at an exercise price of $13.85 per
share. The Company granted repricing rights with respect to the shares, and
anti-dilution rights with respect to the warrants, subject to an aggregate
maximum issuance of 450,000 shares.
In July 1999, the Company sold 99,900 shares of its Common Stock to two
investors for an aggregate purchase price of $1,000,000. The Company also issued
warrants to purchase an aggregate of 13,625 shares of Common Stock at an
exercise price of $11.01 per share. The Company granted repricing rights with
respect to the shares, and anti-dilution rights with respect to the warrants,
subject to an aggregate maximum issuance of 225,000 shares
-8-
<PAGE>
The Company's capital expenditures, excluding purchase of communications
equipment ( See Note F) for 1999 are expected to range between $300,000 to
$500,000. The Company's primary capital requirements are to fund acquisition of
subscriber bases and related Internet businesses, establish additional POPs,
install network equipment, lease space for consolidated POPs, and working
capital. To date, the Company has financed its capital requirements primarily
through issuance of debt and equity securities. The Company currently does not
have any lines of credit. The availability of capital resources is dependent
upon prevailing market conditions, interest rates, and financial condition of
the Company. The Company will require additional cash resources in connection
with its continued expansion.
Year 2000
The "Year 2000" problem involves the ability of computer hardware and
software systems to accurately recognize and process date sensitive information
when the year changes to 2000. Systems that do not properly recognize such
information could generate wrong data or fail.
The Company has undertaken a two-phase process to evaluate its internal
status with respect to the Year 2000 problem. In the first phase, the Company
conducted an assessment of its systems including both IT systems and non-IT
systems such as hardware embedded technology, for Year 2000 compliance. The
Company utilized certain employees in its evaluation of possible Year 2000
problems. The costs and expenses of such employees have not been material. To
date, the Company has not discovered Year 2000 issues in the course of its
assessment that would have a material adverse effect on its business, results of
operations or financial condition; however, the Company cannot assure that all
Year 2000 issues were discovered during the assessment or that it will not
discover additional Year 2000 issues that could have such an effect.
Phase two of the Company's process will involve taking any needed
corrective action to bring systems into compliance and develop a contingency
plan in the event any non-compliant critical systems remain by January 1,2000.
As part of phase two, the Company will attempt to quantify the impact, if any,
of the failure to complete any necessary corrective action. Although the Company
cannot currently estimate the magnitude of such impact, if systems material to
its operations have not been made Year 2000 compliant upon completion of this
phase, the Year 2000 issue could materially adversely affect the Company. To
date, the costs incurred with respect to phase two have not been material.
Future costs are difficult to estimate; however, the Company does not currently
anticipate that such costs will be material.
Concurrently with the analysis of the Company's internal systems, the
Company has begun to survey third-party entities with which it transacts
business, including critical vendors and financial institutions, for Year 2000
compliance. With respect to the most critical vendors, the Company is in the
process of evaluating the Year 2000 preparedness of its telecommunications
providers, on which the Company is reliant for the network services crucial to
Web hosting and Internet connectivity services. The Company is actively working
to mitigate any potential impact by maintaining diverse providers for such
network services. However, failure of any one provider may have material adverse
impact on the Company's operations.
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<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
During the three months ended June 30, 1999, the Company issued 34,916
shares of its Common Stock upon exercise of options granted under the
Company's 1997 Stock Option Plan. In addition, the Company issued
60,346 shares of its Common Stock for acquisition of businesses during
the three months ended June 30, 1999. The foregoing securities were
issued in private offerings pursuant to an exemption from registration
offered by section 4(2) of the Securities Act of 1933.
Use of Proceeds
In May 1998, the Company consummated an initial public offering of
1,840,000 shares of Common Stock and warrants to purchase 1,840,000
shares of Common Stock and received net proceeds of approximately
$5,800,000, after payment of underwriting discounts and commissions,
fees and offering expenses. Since May 19, 1998 (the date of closing of
the initial public offering) through June 30, 1999, the Company used
approximately $1,934,000 of the net proceeds for acquisitions and
related expenses, $264,118 for a stock repurchase; $443,000 for the
repayment of indebtedness (including $ 185,848 to affiliates); $
629,000 for equipment and POP upgrade; and approximately $596,000 for
marketing, promotional and Web development expenses. The balance was
utilized to fund the operating losses.
Item 4. Submission of Matters to Vote of Security Holders. The Company held an
annual meeting of stockholders on June 28, 1999, at which the
following matters were voted upon:
1. Election of five directors.
2. Amendment to the company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock of the
Company from 10,000,000 to 25,000,000.
3. Approval of the amendment to the Company's 1997 Stock Option Plan
to increase the number of shares reserved for issuance thereunder
from 500,000 to 1,400,000.
The results of the meeting were as follows:
Broker
DIRECTORS FOR WITHHELD NON-VOTES
Stephen J. Cole-Hatchard 2,305,697 14,950 0
Nicko Feinberg 2,305,697 14,950 0
Michael Olbermann 2,304,797 15,850 0
Ronald C. Signore 2,305,697 14,950 0
Ronald Shapss 2,305,697 14,950 0
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<PAGE>
Broker
FOR AGAINST ABSTAIN NON-VOTES
Proposal 2 2,289,932 27,886 2,829 0
Proposal 3 1,028,074 21,933 13,382 1,257,258
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation, as amended. Exhibit 27
Financial Data Schedule
(b) Reports on Form 8-K--None
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<PAGE>
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 thereunto duly authorized.
August 13, 1999
By:______________________________________________
Stephen J. Cole-Hatchard
Chief Executive Officer and President
By:______________________________________________
Vasan Thatham
Principal Financial Officer and Vice President
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EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
FRONTLINE COMMUNICATIONS CORPORATION
----------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
-----------------------------------------
The undersigned, being Chief Executive Officer of Frontline Communications
Corporation (the "Corporation"), a corporation existing under the laws of the
State of Delaware, does hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation has been amended
as follows by striking out the whole of Article FOURTH thereof as it now exists
and inserting in lieu and instead thereof a new Article FOURTH, reading as
follows:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is Twenty-Six Million
(26,000,000) shares, of which Twenty-Five Million (25,000,000) shares shall
be Common Stock, par value $.01 per share, and One Million (1,000,000)
shares shall be Preferred Stock, par value $.01 per share.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby expressly
authorized to provide, by
<PAGE>
resolution or resolutions duly adopted by it prior to issuance, for the
creation of each such series and to fix the designation and the powers,
preferences, rights, qualifications, limitations and restrictions relating
to the shares of each such series. The authority of the Board of Directors
with respect to each series of Preferred Stock shall include, but not be
limited to, determining the following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value if different from the par
value thereof;
(b) whether the shares of such series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the
terms of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and
the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any
other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary
or involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to
and manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or other corporate purposes and the terms and provisions
relating to the operation thereof;
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<PAGE>
(g) whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or any other
series of Preferred Stock or any other securities and, if so, the
price or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and
conditions of conversion or exchange;
-3-
<PAGE>
(h) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the Corporation of, the
Common Stock or shares of stock of any other class or any other series
of Preferred Stock;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other
series of Preferred Stock or of any other class; and
(j) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations
and restrictions, thereof.
The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding. All shares
of any one series of Preferred Stock shall be identical in all respects
with all other shares of such series, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereof shall be cumulative."
SECOND: Such amendment has been duly adopted in accordance with Sections
222 and 242 of the General Corporation Law of the State of Delaware by the vote
of a majority of the stockholders entitled to vote at a meeting duly called and
held.
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<PAGE>
IN WITNESS WHEREOF, I have signed this Certificate this 28th day of June
1999.
FRONTLINE COMMUNICATIONS CORPORATION
By: /s/ Stephen J. Cole Hatchard
---------------------------------------
Name: Stephen J. Cole-Hatchard
Title: Chief Executive Officer
<PAGE>
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 thereunto duly authorized.
August 13, 1999
By: /s/ Stephen J. Cole-Hatchard
-----------------------------------------------
Stephen J. Cole-Hatchard
Chief Executive Officer and President
By: /s/ Vasan Thatham
-----------------------------------------------
Vasan Thatham
Principal Financial Officer and Vice President
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
FINANCIAL STATEMENTS INCLUDED IN FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,649,818
<SECURITIES> 0
<RECEIVABLES> 51,572
<ALLOWANCES> 25,526
<INVENTORY> 0
<CURRENT-ASSETS> 1,923,765
<PP&E> 1,649,962
<DEPRECIATION> 273,480
<TOTAL-ASSETS> 7,218,968
<CURRENT-LIABILITIES> 1,134,822
<BONDS> 0
0
0
<COMMON> 36,827
<OTHER-SE> 5,626,997
<TOTAL-LIABILITY-AND-EQUITY> 7,218,968
<SALES> 0
<TOTAL-REVENUES> 1,415,418
<CGS> 948,005
<TOTAL-COSTS> 3,390,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,883,883)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,883,883)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,883,883)
<EPS-BASIC> (0.87)
<EPS-DILUTED> (0.87)
</TABLE>
