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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 000-23269
METROMEDIA FIBER NETWORK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3168327
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
110 East 42nd Street
NEW YORK, NEW YORK 10017
(Address of principal executive office) (Zip Code)
(212) 687-9177
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ( ) No (X)
The number of shares outstanding of the registrant's common stock as of December
1, 1997 was:
CLASS NUMBER OF SHARES
A 18,724,144
B 4,221,159
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NUMBER
Item 1. Financial Statements
Consolidated Statements of Operations for the
Three Month and Nine Month Periods Ended
September 30, 1997 and 1996...................... 1
Consolidated Balance Sheets as of September 30,
1997 and December 31, 1996...................... 2
Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 1997
and 1996........................................ 3
Notes to Consolidated Financial Statements...... 4
Item 2. Management' s Discussion and Analysis of
Financial Condition and Results of Operations.... 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................. 14
Item 2. Changes in Securities and Use of Proceeds......... 15
Item 3. Defaults Upon Senior Securities................... 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information.................................. 16
Item 6. Exhibits and Reports on Form 8-K................... 16
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
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<S> <C> <C>
Three Months Ended Nine Months Ended
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ----------------------------
1997 1996 1997 1996
------------ ----------- -------------- -----------
REVENUE............................................................. $ 1,202,621 $ 100,809 $ 1,744,507 $ 182,844
EXPENSES:
Cost of sales.................................................. 1,310,207 230,879 2,647,155 665,880
Selling, general and administrative............................ 1,791,073 610,069 3,722,093 1,716,949
Consulting and employment incentives........................... 5,704,553 - 19,124,453 3,651,442
Depreciation and amortization.................................. 193,748 148,814 566,683 441,133
------------ ----------- -------------- -----------
LOSS FROM OPERATIONS................................................ (7,796,960) (888,953) (24,315,877) (6,292,560)
Interest income..................................................... 287,159 - 491,334 -
Interest expense (including financing costs)........................ (52,597) (1,312,208) (732,024) (3,120,164)
------------ ----------- -------------- -----------
NET LOSS............................................................ $ (7,562,398) $(2,201,161) $(24,556,567) $(9,412,724)
------------ ----------- -------------- -----------
------------ ----------- -------------- -----------
NET LOSS PER SHARE.................................................. $ (0.61) $ (0.17) $ (1.96) $ (0.82)
------------ ----------- -------------- -----------
------------ ----------- -------------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING............................................ 12,495,094 12,822,657 12,593,174 11,537,002
------------ ----------- -------------- -----------
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</TABLE>
SEE ACCOMPANYING NOTES.
1
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1997 1996
-------------- ---------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents.............................................................. $ 16,745,336 $ 464,324
Accounts receivable.................................................................... 342,946 180,790
Other current assets................................................................... 1,741,480 -
-------------- --------------
TOTAL CURRENT ASSETS............................................................... 18,829,762 645,114
Fiber optic transmission network and related
equipment, net........................................................................... 6,487,505 6,368,653
Property and equipment, net................................................................ 695,960 525,268
Restricted cash............................................................................ 550,000 -
Franchise costs, net....................................................................... 281,193 299,941
Other assets............................................................................... 2,152,730 138,530
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TOTAL ASSETS......................................................................... $ 28,997,150 $ 7,977,506
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable........................................................................ $ 858,550 $ 5,256,929
Accrued expenses........................................................................ 1,418,013 683,227
Current portion of deferred revenue..................................................... 721,855 -
Current portion of settlement agreement................................................. 90,000 115,000
Notes payable........................................................................... - 5,950,000
Notes payable-private placements........................................................ - 1,408,000
Due to related parties.................................................................. - 119,299
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TOTAL CURRENT LIABILITIES........................................................... 3,088,418 13,532,455
Settlement agreement, net of current portion............................................... 112,500 180,000
Deferred revenue, net of current portion................................................... 8,611,227 1,107,724
Other...................................................................................... - 15,243
Commitments and contingencies.............................................................. - -
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $.10 par value, authorized, 2,000,000
shares, none and 150,000 shares issued
and outstanding, respectively............................................................ - 15,000
Series B convertible preferred stock, $.01 par value;
8,403 and none, authorized, issued
and outstanding, respectively............................................................ 84 -
Common stock, $.01 par value; authorized 60,000,000
shares, 9,564,940 and 10,001,310 shares issued
and outstanding, respectively............................................................ 95,649 100,013
Additional paid-in capital................................................................. 58,609,389 8,766,506
Accumulated deficit.................................................................... (41,520,117) (15,739,435)
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TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)................................................ 17,185,005 (6,857,916)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)............................ $ 28,997,150 $ 7,977,506
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</TABLE>
SEE ACCOMPANYING NOTES.
2
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Nine Months Ended
SEPTEMBER 30,
-----------------------------------------
1997 1996
---------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................... $ (24,556,567) $ (9,412,724)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization...................................................... 566,683 441,133
Stock, options and warrants issued for services
and financing.................................................................... 19,344,489 5,560,036
Changes in operating assets and liabilities:
Accounts receivable.............................................................. (162,156) (459,983)
Due to related parties........................................................... (119,299) (38,846)
Prepaid expenses................................................................. (2,156,322) 3,504
Accounts payable and accrued expenses............................................ (3,663,593) 986,794
Settlement agreements............................................................ (92,500) (325,344)
Advance payments received from customers......................................... 8,225,358 532,827
Restricted Cash.................................................................. (550,000) -
Other............................................................................ (704,437) (12,597)
---------------- -------------------
NET CASH USED IN OPERATING ACTIVITIES.......................................... (3,868,344) (2,725,200)
---------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on fiber optic transmission
network and related equipment.................................................... (606,080) (510,034)
Deposit on fiber optic cable order................................................. (916,212) -
Capital expenditures on property and equipment..................................... (225,352) (17,483)
---------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES.......................................... (1,747,644) (527,517)
---------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock.......................................... 32,500,000 -
Proceeds from issuance of common stock............................................. 10,000 123,500
Dividends paid..................................................................... (76,562) -
Net (repayments) proceeds from notes payable-private placement..................... (1,408,000) 25,000
Net (repayments) proceeds from notes payable....................................... (5,950,000) 5,450,000
Proceeds from senior subordinated notes............................................ - 1,000,000
Purchase of common stock........................................................... (1,140,000) -
Purchase of preferred stock........................................................ (2,038,438) -
Repayment of notes payable-stockholder............................................. - (500,000)
Repayment to finance company....................................................... - (2,850,036)
---------------- -------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES....................................... 21,897,000 3,248,464
---------------- -------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... 16,281,012 (4,253)
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD...................................... 464,324 5,913
---------------- -------------------
CASH AND CASH EQUIVALENTS-END OF PERIOD............................................ $ 16,745,336 $ 1,660
---------------- -------------------
---------------- -------------------
SUPPLEMENTAL INFORMATION: INTEREST PAID............................................ $ 1,145,215 $ 1,175,617
---------------- -------------------
---------------- -------------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements in this filing under Form 10-Q have
been prepared in accordance with the United States Securities and Exchange
Commission Regulation S-X and consequently do not include all disclosures
required under generally accepted accounting principles. The interim
unaudited financial statements should be read in conjunction with the
audited Consolidated Financial Statements and accompanying Notes of
Metromedia Fiber Network, Inc. & Subsidiaries (the "Company") for the year
ended December 31, 1996 contained in the Company's Form S-1, effective
October 28, 1997. The Form S-1 includes information with respect to the
Company's significant accounting and financial reporting policies and other
pertinent information. The Company believes that all adjustments of a
normal recurring nature that are necessary for a fair presentation of the
results of the interim periods presented in this filing have been made. On
April 29, 1997, the Company effected a 3 for one stock split of the
outstanding shares of its common stock. On September 24, 1997, the Company
effected a .507 for one reverse stock split of the outstanding shares of
its common stock. The financial statements give retroactive effect to
these stock splits. The results of operations for interim periods are not
necessarily indicative of the results of operations for the full year.
Certain balances have been reclassified to conform to the current period
presentation.
2. ACTIVITIES DURING THE PERIOD
A. NAME CHANGE
On August 14, 1997, the name of the corporation was formally changed from
National Fiber Network, Inc. to Metromedia Fiber Network, Inc.
B. METROMEDIA INVESTMENT
On April 30, 1997, the Company sold an aggregate of 8,403.325 shares of
Series B convertible preferred stock, par value $0.01 per share (the
"Series B preferred stock"), to Metromedia Company and affiliates
("Metromedia") for an aggregate purchase price of $32.5 million (the
"Metromedia Investment"). Each share of the Series B preferred stock was
convertible into 507 shares of the Company's common stock.
A portion of the proceeds from the Metromedia Investment was used to repay
the Metromedia Loan, discussed below, and accrued interest thereon
($4,058,127), repay other short-term indebtedness ($3,485,000), and redeem
(for $2,115,000) all outstanding shares of the Company's preferred stock
(the "Series A preferred stock") and related warrants.
Through April 30, 1997, Metromedia loaned the Company an aggregate of
$4,000,000 (the "Metromedia Loan"). A portion of the proceeds from the
Metromedia Loan was used to fund an escrow account to repurchase, on behalf
of the Company, 588,470 shares of common stock of the Company and warrants
to purchase 207,883 shares of its common stock. Pursuant to the escrow
arrangement, such securities were pledged to Metromedia as security for the
Metromedia Loan. Upon repayment of the Metromedia Loan, the purchased
shares were released from escrow and delivered to the Company.
4
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. ACTIVITIES DURING THE PERIOD (CONTINUED)
C. RECAPITALIZATION
On April 29, 1997, the Company increased the authorized number of shares of
its common stock, par value $0.01 per share, to 60,000,000 shares and the
authorized number of shares of preferred stock, par value $0.01 per share,
to 2,000,000 shares.
On April 29, 1997, the Company effected a 3 for one stock split of the
outstanding shares of its common stock. The financial statements give
retroactive effect to this stock split.
On September 24, 1997, the Company effected a .507 for one reverse stock
split of the outstanding shares of its common stock. The financial
statements give retroactive effect to this stock split.
3. CONSULTING AND EMPLOYMENT INCENTIVES
The amounts shown represent the value of common stock, warrants and options
issued to key employees, officers, directors and consultants of the Company
in order to attract or retain their services. For the three and nine
months ended September 30, 1997, options to purchase 722,476 and 3,095,235
underlying shares of the Company's common stock, respectively, were granted
to key employees, officers and directors. The 1996 amount recorded
reflects the issuance of stock and warrants to consultants as consideration
for services rendered during 1996.
4. OTHER CURRENT ASSETS
Other current assets consist of the following:
SEPTEMBER 30, 1997
------------------
Deposits $ 916,212
Prepaid expenses 612,027
Other 213,241
------------
Total $ 1,741,480
------------
------------
Deposits as of September 30, 1997 represent an amount paid to a fiber optic
cable manufacturer for fiber optic cable orders which had not yet been
received by the Company as of September 30, 1997.
Prepaid expenses include the current portion of an amount paid in the third
quarter of 1997 to a rail transportation company which granted the Company
a long term, non-exclusive right-of-way to place a fiber optic network on a
portion of the rail company's property. A portion of the total
consideration for this right-of-way had been paid as of September 30, 1997.
Said prepaid amount is reflected in the Consolidated Balance Sheet as of
September 30, 1997 as other current assets and other assets. The remaining
consideration for this right-of-way was paid in November 1997.
5
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. RESTRICTED CASH
In 1997, the Company entered into agreements regarding the issuance of long
term standby letters of credit with a financial institution whereby the
financial institution required the Company to maintain collateral in the
form of an interest bearing cash balance with the financial institution in
the full amount of the standby letters of credit issued. The restricted
cash is invested in short-term time deposits of the issuing financial
institution and the interest earned on the time deposits is free of
restriction and released to the Company periodically.
6. OTHER ASSETS
Other assets consist of the following:
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
Prepaid expenses $1,586,669 $ 42,374
Other 566,061 96,156
---------- ----------
Total $2,152,730 $138,530
---------- ----------
---------- ----------
Prepaid expenses primarily represent amounts prepaid in the third quarter
of 1997 to a rail transportation company as described in the above footnote
entitled, "Other Current Assets."
7. NOTES PAYABLE
A. On April 18, 1995, the Company entered into a loan agreement with AT&T
Wireless for $500,000, bearing interest at 11% per annum, originally due
120 days from the date of the loan. Pursuant to a supplemental agreement
dated January 12, 1996, the parties agreed to extend the maturity date of
this loan to November 18, 1996. Pursuant to a second supplemental
agreement dated March 1997, the parties agreed to extend the maturity date
of the loan to June 30, 1997. In July 1997, the note along with all
accrued interest was paid in full.
On February 16, 1995, the Company issued to the above party a warrant
entitling the holder to purchase a total of 669,167 shares of the Company's
common stock. This warrant was canceled and replaced by a new warrant
issued on February 13, 1997 for 456,300 of shares of its common stock, with
an exercise price of $4.85 per share. The new warrant expires on February
13, 2000.
B. On September 24, 1996, the Company entered into a loan agreement with
Sterling Capital (the "Sterling Loan") for $550,000. The loan bore
interest at 10% per annum with an original maturity date of March 1, 1997.
The loan was secured by all of the Company assets and subordinated to a
loan to U.S. One, discussed below. As an incentive for the Sterling Loan,
the Company issued to Sterling warrants to purchase 94,302 shares of common
stock of the Company. The warrants can be exercised on the later of (i)
the third anniversary of the Sterling Loan or (ii) twelve months after the
Company has completed an initial public offering. On May 1, 1997, the loan
along with all accrued interest was paid in full with a portion of the
proceeds from the Metromedia Investment.
C. On April 16, 1996, the Company entered into an agreement with U.S. One
Communications ("U.S. One") providing for exclusive usage rights for 8 to
12 fibers of the Company's fiber optic transmission network. The initial
term of the agreement was for a period beginning April 1996 and expiring
December 2008. The agreement was renewable, at the option of U.S. One, for
an extended term of 13 years, expiring December 2021. Concurrent with the
execution of the above agreement for exclusive
6
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. NOTES PAYABLE (CONTINUED)
usage rights for fiber, the Company and U.S. One entered into a bridge
financing agreement (the "U.S. One Bridge Loan").
On April 30, 1997, the Company and U.S. One amended the above agreement for
exclusive usage rights for fiber (the "Amended Lease Agreement") to permit
U.S. One the exclusive right to use 888 fiber miles of the Company's fiber
optic network. Additionally, pursuant to the Amended Lease Agreement, U.S.
One received an option to acquire access from the Company of up to 1,620
additional fiber miles upon payment of a predetermined amount. In
accordance with the amended agreement, the following transactions occurred:
(i) all accrued interest from the inception of the U.S. One Bridge Loan was
waived by U.S. One, (ii) the $4,900,000 principal balance of the U.S. One
Bridge Loan was offset against $3,530,000 in a scheduled payment due from
U.S. One to the Company under the Amended Lease Agreement, and (iii) the
Company paid to U.S. One the difference of $1,370,000 on April 30, 1997
with a portion of the proceeds of the Metromedia Investment.
In connection with the execution of the aforementioned agreements for
exclusive usage rights for fiber and the U.S. One Bridge Loan, the Company
entered into a letter agreement with U.S. One providing for the sale of a
warrant to purchase common stock of the Company, subject to U.S. One
exercising its option under the Amended Lease Agreement for additional
fiber by a certain date. Under this arrangement, the warrant, if delivered
to U.S. One, is exercisable for a number of shares to be determined at the
Company's discretion, subject to a minimum number of 76,050 shares and a
maximum number of 456,300 shares. The per share exercise price is to be
determined pursuant to a formula, but in no event shall the aggregate
purchase price exceed $1,250,000.
On July 24, 1997, U.S. One filed for protection as a debtor-in-possession
under Chapter 11 of the U.S. Bankruptcy Code. Subsequently, Winstar
Acquisition Corporation acquired all of U.S. One's assets and have assumed
U.S. One's rights with respect to the Amended Lease Agreement and the
possible purchase of the above warrant.
8. NOTES PAYABLE - PRIVATE PLACEMENTS
A. In August 1995, the Company initiated a $600,000 private offering of
subordinated notes. These notes were scheduled to mature in March 1996 and
bore interest at an annual rate of 15%, payable quarterly in arrears. In
April 1996, the Company repaid $50,000 of this private placement debt. In
July 1997, the Company repaid the remaining principal amount of the
subordinated notes plus all accrued interest thereon.
B. In October 1995, the Company initiated a private offering of $858,000
of convertible subordinated notes. Through December 31, 1995, $783,000 of
such convertible notes were sold pursuant to this offering and an
additional $75,000 of notes were sold during January and February of 1996.
These notes were scheduled to mature between October 1, 1996 and February
28, 1997 and bore interest at an annual rate of 15%, payable at maturity.
In July 1997, the Company repaid the outstanding balance of the convertible
subordinated notes plus all accrued interest.
7
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. NOTES PAYABLE - PRIVATE PLACEMENTS (CONTINUED)
c. In March 1997, in consideration for the extension of the due dates of
both of the above mentioned notes, the Company issued purchase warrants to
the above mentioned noteholders to purchase an aggregate of 57,682 shares
of common stock, exercisable at 50% of the price at which common shares of
the Company would be offered to the public in any initial public offering
by the Company. Said warrants are excercisable for a period three years
following the date of such initial public offering. The Company has
recorded a non-cash charge of $220,036 for such issuance.
9. RELATED PARTY TRANSACTIONS
In 1997, the Company paid in full the outstanding balance of a loan made to
the Company in prior years by the Company's majority shareholder.
10. DEFERRED REVENUE
The Company's revenues are primarily derived from the lease of dark fiber
optic cable. Lease payments are structured as either prepayments or
monthly recurring charges. Prepayments are accounted for as deferred
revenue and recognized over the term of the respective customer lease
agreement. For nine months ended September 30, 1997, the Company has
received prepaid lease payments totaling $9 million.
11. STOCK TRANSACTIONS
In June 1996, the Company granted to its then legal counsel, as additional
consideration for services rendered, a four year warrant to purchase (at
$0.07 per share) 152,100 shares of the common stock of the Company. In
1996, the Company recorded a non-cash charge of $200,000 for such issuance.
On January 2, 1997, the above warrant was exercised in full for 152,100
shares of common stock of the Company.
12. STOCK OPTIONS
In 1997, the Company granted to key employees, officers and directors
options to purchase up to 3,095,235 shares of the common stock of the
Company. The options have exercise prices ranging from $1.97 to $7.63 per
share and expire ten years after date of grant. The Company has recorded a
non-cash charge of $19,124,453 to reflect the value of such grants.
13. COMMITMENTS AND CONTINGENCIES
A. In February 1997, a former investment advisor to the Company asserted a
claim against the Company in the amount of $305,731 pursuant to an
agreement made on June 27, 1995, for the payment of certain fees and
expenses. In September 1997, the Company paid the former investment
advisor $250,000 in full settlement of such claim plus any and all related
expenses.
B. On or about April 18, 1997, Howard Katz, Realprop Capital Corporation
and Evelyn Katz commenced an action against, among others, the Company,
Stephen A. Garofalo, Peter Sahagen and Peter Silverman in the United States
District Court for the Southern District Court of New York captioned KATZ,
ET AL. V. NATIONAL FIBER NETWORK, INC., ET AL., No. 97 Civ. 2764 (JGK) (the
"Katz Litigation"). On May 28, 1997, the plaintiffs filed an amended
complaint and on September 15,
8
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13. COMMITMENT AND CONTINGENCIES (CONTINUED)
1997, the plaintiffs filed a second amended complaint. The complaint as
amended alleges causes of action for, among other things, common law fraud,
violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder, breach of fiduciary duty and negligent
misrepresentation for alleged misrepresentations and omissions made in
connection with the repurchase of a right to purchase an aggregate of
264,631 shares of Class A common stock of the Company, which class of
shares was authorized in October 1997, as more fully described below under
the footnote entitled, "Initial Public Offering", and an option to purchase
warrants for the purchase of 207,888 shares of Class A common stock. The
amended complaint also contains allegations of corporate waste against the
Company and Stephen A. Garofalo. Plaintiffs seek, among other things,
compensatory damages of not less than $12 million, punitive damages in the
amount of $100 million and, in the alternative, rescission of the purchase
of the common stock and warrants by the Company. On June 11, 1997, various
defendants, including the Company and Stephen A. Garofalo moved to dismiss
the amended complaint. The Company intends to vigorously defend itself
against these allegations based on its belief that the Company acted
appropriately in connection with the matters at issue in this litigation.
No assurance can be made, though, that the Company will not determine that
the advantages of entering into a settlement outweigh the risk and expense
of protracted litigation or that ultimately the Company will be successful
in its defense of the allegations. If the Company is unsuccessful in its
defense of the allegations, an award of the magnitude being sought by the
plaintiffs in the Katz Litigation would have a material adverse effect on
the Company's financial condition or results of operations.
C. On or about October 20, 1997, Vento & Company of New York, LLC ("VCNY")
commenced an action against the Company, Stephen A. Garofalo, Peter
Silverman, the law firm of Silverman, Collura, Chernis & Balzano, P.C.,
Peter Sahagen, Sahagen Consulting Group of Florida (collectively, the
"Sahagen Defendants") and Robert Kramer, Birdie Capital Corp, Lawrence
Black, Sterling Capital LLC, Penrush Limited, Needham Capital Group, Arthur
Asch, Michael Asch and Ronald Kuzon (the "Kramer Defendants") in the United
States District Court for the Southern District of New York (No. 97 CIV
7751) (the "VCNY Litigation"). The complaint alleges causes of action for,
among other things, violation of Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder, fraud and fraudulent
concealment, breach of fiduciary duty and negligent misrepresentation and
omission made in connection with respect to the sale by VCNY of 1,368,900
shares of Class A common stock to Peter Sahagen and the Kramer Defendants
on January 13, 1997 (the "VCNY Sale"). The complaint also alleges a cause
of action for declaratory judgement asserting that certain "piggyback"
registration rights are applicable to shares of the Company's Class A
common stock which VCNY owns (or which may be rescinded to VCNY pursuant to
its requested remedies). The complaint further requests a declaratory
judgement that a stockholders' agreement between the Company, Stephen A.
Garofalo and VCNY be declared operative, which agreement indirectly
required VCNY, through designated directors, to approve significant
transactions, and, accordingly, the Metromedia Loan and the Metromedia
Investment should be rescinded and Mr. Vento should be reappointed as Chief
Executive Officer of the Company. The Company believes, among other
things, that the stockholder's agreement to which Mr. Vento was a party had
terminated and, as a result, Mr. Vento had no such rights to approve the
Metromedia Investment or the Metromedia Loan or to remain as Chief
Executive Officer of the Company. Plaintiff seeks, among other things, (i)
rescission of the VCNY Sale, or alternatively, damages in an amount not
presently ascertainable, but believed to be in the excess of $36 million,
together with interest thereon, (ii) punitive damages in the amount of $50
million, and (iii) the declaratory judgements discussed above. The Company
intends to vigorously defend itself against
9
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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
these allegations based on its belief that it acted appropriately in
connection with the matters at issue in this litigation. However, no
assurance can be made that the Company will not determine that the
advantages of entering into a settlement outweigh the risk and expense of
protracted litigation or that ultimately the Company will be successful in
its defense of the allegations. If the Company is unsuccessful in its
defense of the allegations, an award of the magnitude being sought by the
plaintiffs in the VCNY Litigation would have a material adverse effect on
the Company's financial condition or results of operations.
14. INITIAL PUBLIC OFFERING
A. On November 3, 1997, the Company completed the initial public offering
(the "IPO") of 9,108,000 shares of its Class A common stock, par value
$0.01 per share, at an offering price of $16 per share. The net proceeds
to the Company from the IPO, before deducting expenses of the IPO, were
approximately $135.5 million.
B. On October 28, 1997, the total authorized number of shares of common
stock of the Company was increased to 200 million shares, par value $0.01
per share, of which 180 million shares were designated Class A common stock
and 20 million shares were designated Class B common stock.
In addition, on October 28, 1997, a total of 9,564,940 shares of the common
stock of the Company, par value $0.01 per share, owned by stockholders
prior to the IPO, were exchanged for an equal number of shares of Class A
common stock. Also, 8,403.325 shares of the Company's Series B convertible
preferred stock, owned by stockholders prior to the IPO, were exchanged for
4,260,486 shares of Class B common stock, par value $0.01 per share. The
Company also reserved for issuance 4,260,486 shares of Class A common stock
for conversion of the Class B common stock and 1,000,000 shares of Class A
common stock for future issuances pursuant to the Company's 1997 Incentive
Stock Plan, also adopted on October 28, 1997, by a majority of the
shareholders of record as of that date. Further, on October 28, 1997, a
total of 39,327 shares of Class B common stock outstanding were converted
into an equivalent number of shares of Class A common stock.
As of October 28, 1997, no shares of the Company's Series A preferred stock
remained outstanding. In addition, immediately following the issuance of
the Class B common shares in exchange for all of the Company's outstanding
Series B preferred stock, there were no shares of the Company's Series B
preferred stock. On November 7, 1997, both the Series A and Series B
preferred stock of the Company were eliminated pursuant to actions by the
Board of Directors.
15. SUBSEQUENT EVENT
On November 26, 1997, the Company entered into a joint venture with Racal
Telecommunications, Inc. ("Racal") to form MFNRAC, L.L.C. (The "Joint
Venture"). The Joint Venture will enable the Company and Racal to provide
broadband transatlantic communication services to their respective
customers. The Company anticipates that initial service through the Joint
Venture, which will include fiber optic international leased lines, ranging
in capacity from 2Mb to 45Mb, will be available by April 1998. Racal is
part of the Racal Electronics Group which is headquartered in the United
Kingdom, and is one of Europe's leading telecommunication providers of
managed networks and support services.
10
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements and related notes. The following discussion contains certain
forward-looking statements that involve risks and uncertainties. Factors that
could cause or contribute to such risks and uncertainties include, but are not
limited to, general economic and business conditions, competition, changes in
methods of marketing and technology and various other factors beyond the
Company's control.
RESULTS OF OPERATIONS
The Company is a facilities-based provider of technologically advanced,
high-bandwidth, fiber optic communications infrastructure to carrier and
corporate/government customers. The Company currently operates a 62 route fiber
optic mile network within the New York/New Jersey metropolitan area which
consists of 12,418 fiber miles. The Company plans to expand its existing network
within the next two years to encompass approximately 229,000 fiber miles, or 643
route miles, concentrated in the northeastern United States. The planned
build-out will include intra-city fiber optic networks in Washington, D.C.,
Chicago and Philadelphia, as well as an inter-city network between New York City
and Washington, D.C. The Company also intends to expand its network to link New
York City with London, England, thereby providing a valuable connection between
two of the world's most important financial centers.
REVENUES
Revenues for the third quarter of 1997 were $1,202,621, or 1,093% greater than
revenues of $100,809 for the third quarter of 1996. For the nine months ended
September 30, 1997, the Company recorded revenues of $1,744,507, which were 854%
higher than revenues of $182,844 for the nine months ended September 30, 1996.
The increase in revenue for the three and nine months ended September 30, 1997
versus the three and nine months ended September 30, 1996 reflect higher one
time revenues associated with commencement of service to customers, as well as
an increase in the total number of customers served.
COST OF SALES
Cost of sales were $1,310,207 in the third quarter of 1997, a 467% increase over
cost of sales of $230,879 for the third quarter of 1996. For the nine months
ended September 30, 1997, cost of sales were $2,647,155, versus $665,880 for the
nine months ended September 30, 1996, an increase of 298%. Cost of sales
increased for the three and nine months ended September 30, 1997 as compared to
1996 due to costs associated with the commencement of service to customers, as
well as higher fixed costs associated with the build-out of the Company's
network. Cost of sales as percentages of revenue for the third quarters of 1997
and 1996 were 109% and 229%, respectively. For the nine months ended September
30, 1997 and September 30, 1996, cost of sales as percentages of revenue were
152% and 364%, respectively. Management anticipates revenue will increase more
rapidly than fixed costs and, accordingly, expects that cost of sales as a
percentage of revenue will continue to improve.
11
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased to $1,791,073 during the
third quarter of 1997, from $610,069 during the third quarter of 1996, an
increase of $1,181,004, or 194%. Selling, general and administrative expenses
for the nine months ended September 30, 1997 totaled $3,722,093, which was
$2,005,144, or 117%, higher than the $1,716,949 recorded for the nine months
ended September 30, 1996. The increase in selling, general and administrative
expenses for the three and nine months ended September 30, 1997 versus the three
and nine months ended September 30, 1996 resulted primarily from increased
overhead to accommodate the Company's anticipated growth.
CONSULTING AND EMPLOYMENT INCENTIVES
Consulting and employment incentives expenses for the three and nine months
ended September 30, 1997 were $5,704,553 and $19,124,453, respectively, compared
with $3,651,442 for the nine months ended September 30, 1996. There were no
such expenses for the three months ended September 30, 1996. Consulting and
employment incentives expense incurred in 1997 reflects the value of stock
options issued to key employees, officers and directors in order to attract or
retain their services. For the nine months ended September 30, 1996, the amount
recorded reflects the expense associated with issuance of stock and warrants to
consultants in consideration for services rendered.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense of $193,748 was recorded during the three
months ended September 30, 1997, versus $148,814 during the three months ended
September 30, 1996, an increase of $44,934, or 30%. For the nine months ended
September 30, 1997, depreciation and amortization expense was $566,683, versus
$441,133 for the nine months ended September 30, 1996, an increase of $125,550,
or 28%. The increases in depreciation and amortization expense resulted from
increased investment in the Company's fiber optic network.
INTEREST INCOME
Interest income was $287,159 and $491,334 during the three months ended
September 30, 1997 and the nine months ended September 30, 1997, respectively,
versus no interest income during the comparable 1996 periods. Interest income
during 1997 was derived from investment of the Company's excess cash. In 1996,
the Company had no excess cash to invest and, accordingly, earned no interest
income.
INTEREST EXPENSE (INCLUDING FINANCING COSTS)
Interest expense (including financing costs) decreased in the three months ended
September 30, 1997 to $52,597, versus $1,312,208 for the three months ended
September 30, 1996. For the nine months ended September 30, 1997 and 1996,
interest expense was $732,024 and $3,120,164, respectively. The decrease in
interest expense reflects the repayment of all of the Company's debt during the
nine months ended September 30, 1997 with the proceeds of the Metromedia
Investment, as well as lower financing costs.
NET LOSS
A net loss of $7,562,398 was recorded for the three months ended September 30,
1997, versus a net loss of $2,201,161 for the comparable period of 1996. For the
three months ended September 30, 1997 and 1996, the net loss per share was $0.61
and $0.17, respectively. For the nine months ended September 30,
12
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
1997 and 1996, the net loss was $24,556,567 and $9,412,724, respectively, or a
net loss per share of $1.96 and $0.82. The increase in net losses was primarily
attributable to costs associated with organizing to meet the growth objectives
of the Company. In particular, such costs include consulting and employment
incentives to attract and retain key employees, officers and directors, as well
as increased overhead to meet the Company's growth objectives.
LIQUIDITY AND CAPITAL RESOURCES
On November 3, 1997, the Company raised $135.5 million in an initial public
offering of its common stock, before deducting estimated expenses of $1,000,000.
The Company anticipates spending approximately $140.0 million through 1998 on
the build-out of its network. Management believes that the proceeds of the IPO,
plus cash on hand as of September 30, 1997 of $16,745,336, and cash generated
internally within the next fifteen months (including advance customer payments),
will be sufficient to fund the Company's planned build-out of its fiber optic
network and its other working capital needs through the year ended December 31,
1998. The Company may also consider from time-to-time the private or public
sale of additional equity or debt securities of the Company, depending upon
market conditions.
For the nine months ended September 30, 1997, the Company's operating activities
required $3,868,344 of cash, versus an operating cash requirement of $2,725,200
during the comparable period of 1996. The increased cash requirement was
primarily due to the reduction of outstanding payables which originated during
1996, as well as increased prepaid and operating expenses. For the nine months
ended September 30, 1997, operating cash requirements were in part funded by
$8,225,358 of advance payments received from customers. During the nine months
ended September 30, 1997, $1,747,644 of cash was utilized for investing
activities, $1,522,292 was expended on the build-out of the Company's network,
and $225,352 was expended on purchases of equipment. Cash flow from financing
activities during the nine months ended September 30, 1997 provided $21,897,000.
The Metromedia Investment of $32,500,000 on April 30, 1997 was utilized to repay
all the outstanding debt of the Company and to purchase all of the Company's
Series A preferred stock outstanding at April 30, 1997.
13
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
a) In February 1997, a former investment advisor to the Company asserted a
claim against the Company in the amount of $305,731 pursuant to an
agreement made on June 27, 1995, for the payment of certain fees and
expenses. In September 1997, the Company paid the former investment
advisor $250,000 in full settlement of such claim plus any and all related
expenses.
b) On or about April 18, 1997, Howard Katz, Realprop Capital Corporation and
Evelyn Katz commenced an action against, among others, the Company, Stephen
A. Garofalo, Peter Sahagen and Peter Silverman in the United States
District Court for the Southern District Court of New York captioned KATZ,
ET AL. V. NATIONAL FIBER NETWORK, INC., ET AL., No. 97 Civ. 2764 (JGK) (the
"Katz Litigation"). On May 28, 1997, the plaintiffs filed an amended
complaint and on September 15, 1997, the plaintiffs filed a second amended
complaint. The complaint as amended alleges causes of action for, among
other things, common law fraud, violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder,
breach of fiduciary duty and negligent misrepresentation for alleged
misrepresentations and omissions made in connection with the repurchase of
a right to purchase an aggregate of 264,631 shares of Class A common stock
of the Company, which class of shares was authorized in October 1997, and
an option to purchase warrants for the purchase of 207,888 shares of Class
A common stock. The amended complaint also contains allegations of
corporate waste against the Company and Stephen A. Garofalo. Plaintiffs
seek, among other things, compensatory damages of not less than $12
million, punitive damages in the amount of $100 million and, in the
alternative, rescission of the purchase of the common stock and warrants by
the Company. On June 11, 1997, various defendants, including the Company
and Stephen A. Garofalo moved to dismiss the amended complaint. The
Company intends to vigorously defend itself against these allegations based
on its belief that the Company acted appropriately in connection with the
matters at issue in this litigation. No assurance can be made, though,
that the Company will not determine that the advantages of entering into a
settlement outweigh the risk and expense of protracted litigation or that
ultimately the Company will be successful in its defense of the
allegations. If the Company is unsuccessful in its defense of the
allegations, an award of the magnitude being sought by the plaintiffs in
the Katz Litigation would have a material adverse effect on the Company's
financial condition or results of operations.
c) On or about October 20, 1997, Vento & Company of New York, LLC ("VCNY")
commenced an action against the Company, Stephen A. Garofalo, Peter
Silverman, the law firm of Silverman, Collura, Chernis & Balzano, P.C.,
Peter Sahagen, Sahagen Consulting Group of Florida (collectively, the
"Sahagen Defendants") and Robert Kramer, Birdie Capital Corp, Lawrence
Black, Sterling Capital LLC, Penrush Limited, Needham Capital Group, Arthur
Asch, Michael Asch and Ronald Kuzon (the "Kramer Defendants") in the United
States District Court for the Southern District of New York (No. 97 CIV
7751) (the "VCNY Litigation"). The complaint alleges causes of action for,
among other things, violation of Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder, fraud and fraudulent
concealment, breach of fiduciary duty and negligent misrepresentation and
omission made in connection with respect to the sale by VCNY of 1,368,900
shares of Class A common stock to Peter Sahagen and the Kramer Defendants
on January 13, 1997 (the "VCNY Sale"). The complaint also alleges a cause
of action for declaratory judgement asserting that certain "piggyback"
registration rights are applicable to shares of the Company's Class A
common stock which VCNY owns (or which may be rescinded to VCNY pursuant to
its requested remedies). The complaint further requests a declaratory
judgement that a stockholders' agreement
14
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
between the Company, Stephen A. Garofalo and VCNY be declared operative,
which agreement indirectly required VCNY, through designated directors to
approve significant transactions, and, accordingly, the Metromedia Loan and
the Metromedia Investment should be rescinded and Mr. Vento should be
reappointed as Chief Executive Officer of the Company. The Company
believes, among other things, that the stockholder's agreement to which Mr.
Vento was a party had terminated and, as a result, Mr. Vento had no such
rights to approve the Metromedia Investment or the Metromedia Loan or to
remain as Chief Executive Officer of the Company. Plaintiff seeks, among
other things, (i) rescission of the VCNY Sale, or alternatively, damages in
an amount not presently ascertainable, but believed to be in the excess of
$36 million, together with interest thereon, (ii) punitive damages in the
amount of $50 million, and (iii) the declaratory judgements discussed
above. The Company intends to vigorously defend itself against these
allegations based on its belief that it acted appropriately in connection
with the matters at issue in this litigation. However, no assurance can be
made that the Company will not determine that the advantages of entering
into a settlement outweigh the risk and expense of protracted litigation or
that ultimately the Company will be successful in its defense of the
allegations. If the Company is unsuccessful in its defense of the
allegations, an award of the magnitude being sought by the plaintiffs in
the VCNY Litigation would have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
1) The effective date of the registration statement on Form S-1 for which the
use of proceeds information was October 28, 1997. The
Commission file number assigned to the registration statement is 333-33653.
2) The offering commenced on October 28, 1997.
3) N/A
4)
i. The offering terminated after the sale of all registered securities.
ii. Salomon Brothers, Inc.
iii.Class A Common Stock
iv. 7,920,00 shares of Class A Common Stock were registered plus the Issuer
granted to the Underwriters a 30-day option to purchase up to an aggregate
of 1,188,000 additional shares of Class A Common Stock. The aggregate
price of the offering amount registered was $145,728,000; 9,108,000 shares
were sold and the Issuer raised $145,728,000 from such sale.
v. The amount of expenses incurred for the Issuer's account in connection with
the issuance and distribution of the securities registered, including
underwriting discounts and commissions, finders fees, expenses paid to or
for underwriters and other estimated expenses totaled $11,200,960.
Such payments were direct payments to persons other than directors,
officers, general partners of the Issuer for their associates; to persons
owning 10 percent or more of any class of equity securities of the Issuer;
and to affiliates of the Issuer.
15
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (CONTINUED)
vi. The estimated net offering proceeds to the Issuer, after deducting the
total expenses described in "(v)" above was $134,527,040.
vii.The net proceeds from the offering will be used primarily for capital
expenditures associated with the build-out of the MFN network, the
development and introduction of new services and for general corporate and
working capital purposes.
viii. N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Since June 30, 1997, the Company appointed John Kluge, David Rockefeller, Stuart
Subotnick, Howard M. Finklestein, Silvia Kessel, Arnold Wadler, and Leonard
White as Directors of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits
EXHIBIT #
11 Statement re Computation of Loss per Common Share
27. Financial Data Schedule for the period ended September 30, 1997
(b) Reports on Form 8-K
Not applicable.
16
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the United States Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
METROMEDIA FIBER NETWORK, INC.
(Registrant)
By: /S/ STEPHEN W. ELLIS
---------------------------------------
Stephen W. Ellis
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
December 12, 1997
17
<PAGE>
EXHIBIT 11
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
COMPUTATION OF LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended Three Months Ended
September 30, September 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
---------------- ------------- --------------- ---------------
NET LOSS
Net loss............................................. $ (7,562,398) $ (2,201,161) $(24,556,567) $ (9,412,724)
Deduct dividends on preferred shares................. - - 76,562 -
---------------- ------------- --------------- ---------------
Net loss applicable to common stock.................. $ (7,562,398) $ (2,201,161) $(24,633,129) $ (9,412,724)
---------------- ------------- --------------- ---------------
---------------- ------------- --------------- ---------------
SHARES
Weighted average number of
common shares outstanding............................ 9,564,940 9,892,503 9,663,020 8,606,848
Assuming conversion of warrants
and options outstanding.............................. 2,930,154 2,930,154 2,930,154 2,930,154
---------------- ------------- --------------- ---------------
Weighted average number of
shares outstanding as adjusted....................... 12,495,094 12,822,657 12,593,174 11,537,002
---------------- ------------- --------------- ---------------
---------------- ------------- --------------- ---------------
NET LOSS PER SHARE........................................ $ (0.61) $ (0.17) $ (1.96) $ (0.82)
---------------- ------------- --------------- ---------------
---------------- ------------- --------------- ---------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 16,745
<SECURITIES> 0
<RECEIVABLES> 343
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,830
<PP&E> 8,375
<DEPRECIATION> 1,192
<TOTAL-ASSETS> 28,997
<CURRENT-LIABILITIES> 3,088
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 17,089
<TOTAL-LIABILITY-AND-EQUITY> 28,997
<SALES> 1,745
<TOTAL-REVENUES> 1,745
<CGS> 0
<TOTAL-COSTS> 2,647
<OTHER-EXPENSES> 23,413
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 732
<INCOME-PRETAX> (24,557)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,557)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,557)
<EPS-PRIMARY> (1.96)
<EPS-DILUTED> (1.96)
</TABLE>
