|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDING SEPTEMBER 30, 1999
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-25667
foreignTV.com, Inc.
(Exact name of registrant as specified in
its charter)
| Delaware |
13-4037641 |
|
----------- |
-------------- |
|
| (State or other jurisdiction of
|
(I.R.S. Employer Identification No.) |
120 Fifth Avenue, Seventh
Floor, New York, NY 10011
-------------------------------------------------
(Address of principal executive offices)
(212) 993-9400
-------------
(Registrant's telephone number, including area code)
162 Fifth Avenue, Suite
1005A, New York, NY 10010
------------------------------------------------------------
(Former address that was changed since last report)
NOT APPLICABLE
------------------------------------------------------------
(Former name and former fiscal year if changed since last report)
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 filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, par value $ .01 per share, outstanding as of November 12, 1999 is 9,978,433 shares.
INDEX TO FORM 10-Q
September 30, 1999
| PART I. Financial Information |
Page # |
|||
| Item 1. |
Financial Statements (unaudited): |
|||
| Consolidated Balance Sheet |
||||
| September 30, 1999 |
3 |
|||
| Consolidated Statements of Operations |
||||
| Three months ended September 30, 1999 |
4 |
|||
| Six months ended September 30, 1999 |
5 |
|||
| Consolidated Statements of Cash Flows |
|
|||
| Six months ended September 30, 1999 |
6
|
|||
| Notes to Consolidated Financial Statements (unaudited) |
7 |
|||
| Management's Discussion and Analysis of Financial Condition and Results of Operations |
10 |
|||
| PART II. Other Information |
||||
| Item 6. |
Exhibits and Reports on Form 8-K |
13 |
||
| Signatures |
14 |
|||
foreignTV.com, Inc. and subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
(Unaudited)
| September 30, 1999 |
December 31, 1998 |
||||
| (Unaudited) | |||||
| ASSETS |
|||||
| CURRENT ASSETS | |||||
| Cash and cash equivalents | $ 1,137,323 | $
--
|
|||
| Marketable Securities | 4,482,422 | -- | |||
| Other current assets | 99,497 |
-- |
|||
| Total Current Assets | 5,719,242 | -- | |||
| LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET | 955,290 | -- | |||
| OTHER ASSETS | |||||
| Security deposits | 109,694 | -- | |||
| Deferred Operating Costs | -- |
6,670 |
|||
| Total Other Assets | 109,694 |
6,670 |
|||
| TOTAL ASSETS | $
6,784,226 |
$
6,670
|
|||
| LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|||||
| CURRENT LIABILITIES | |||||
| Accounts Payable | $ 152,549 | $
--
|
|||
| Accrued Expenses | 130,806 | -- | |||
| Due to related parties | -- |
6,670 |
|||
| Total Current Liabilities | 283,354 | 6,670 | |||
| COMMITMENTS AND CONTINGENCIES | -- | -- | |||
| STOCKHOLDERS' EQUITY | |||||
| Preferred stock $.01 par value | |||||
| 5,000 shares authorized | |||||
| Issued and outstanding -0- shares | -- | -- | |||
| Common stock, $.01 par value; | |||||
| 30,000,000 shares authorized, 9,978,433 and | |||||
| 8,300,000 issued and outstanding, respectively | 99,784 | 83,000 | |||
| Paid in capital | 8,786,269 | -- | |||
| Subscription receivable | -- | (83,000 | ) | ||
| Accumulated Deficit | (2,381,034 | ) | -- | ||
| Accumulated other comprehensive income | (4,147 | ) | -- |
||
| Total Stockholder's Equity | 6,500,872 |
-- |
|||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $
6,784,226 |
$
6,670
|
|||
See notes to consolidated financial statements
foreignTV.com, Inc. and subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended
September 30, 1999 |
|||
| |
|||
| Revenue | $
5,000
|
||
| Production, Selling, General and Administrative Expenses | 1,383,930 | ||
| |
|||
| Operating Loss | (1,378,930) | ||
| Other Income | |||
| Interest Income | 95,934 | ||
| Loss on Marketable Securities | (33,980) | ||
| |
|||
| Loss Before Taxes | (1,316,976) | ||
| Income Tax Expense | -- | ||
| |
|||
| Net Loss | $
(1,316,976)
|
||
| |
|||
| Other Comprehensive Income, net of tax: | |||
| Foreign currency translation adjustments | (4,147) | ||
| |
|||
| Comprehensive Income | $
(1,321,123)
|
||
| |
|||
| Weighted average shares of common stock | |||
| outstanding | 9,978,433 | ||
| Net loss per share | $ (0.13) | ||
| |
|||
See notes to consolidated financial statements
foreignTV.com, Inc. and subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Nine months ended
September 30, 1999 |
|||
| |
|||
| Revenue | $
5,000
|
||
| Production, Selling, General and Administrative Expenses | 2,418,208 | ||
| |
|||
| Operating Loss | (2,413,208) | ||
| Other Income | |||
| Interest Income | 123,305 | ||
| Loss on Marketable Securities | (90,451) | ||
| |
|||
| Loss Before Taxes | (2,380,353) | ||
| Income Tax Expense | 681 | ||
| |
|||
| Net Loss | $
(2,381,034)
|
||
| |
|||
| Other Comprehensive Income, net of tax: | |||
| Foreign currency translation adjustments | (4,147) | ||
| Comprehensive Income | $ (2,385,181) | ||
| |
|||
| Weighted average shares of common stock | |||
| outstanding | 9,139,217 | ||
| Net loss per share | $
(0.26)
|
||
| |
|||
| See notes to
consolidated financial statements
|
|||
foreignTV.com, Inc. and subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| Nine months ended
September 30, 1999 |
||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
|||
| Net loss | $(2,381,034 | )
|
||
| Depreciation | 58,127 | |||
| Amortization | 9,348 | |||
| Increase in other current assets | (99,497 | )
|
||
| Increase in other assets | (109,694 | )
|
||
| Increase in accounts payable | 152,549 | |||
| Increase in accrued expenses | 130,806 | |||
| |
||||
| NET CASH USED BY OPERATIONS | (2,239,396 | )
|
||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
| Purchases of capital expenditures | (1,022,765 | )
|
||
| Increase in marketable securities | (4,482,422 | )
|
||
| |
||||
| NET CASH USED BY INVESTING ACTIVITIES | (5,505,187 | )
|
||
| CASH PROVIDED BY FINANCING ACTIVITIES: | ||||
| Sale of common stock | 8,803,053 | |||
| Decrease in subscription receivable | 83,000 | |||
| Accumulated other comprehensive income | (4,147 | )
|
||
| |
||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 8,881,906 | |||
| |
||||
| NET INCREASE IN CASH | 1,137,323 | |||
| CASH, beginning of the period | -- | |||
| |
||||
| CASH, end of the period | $ 1,137,323 | |||
| |
||||
See notes to consolidated financial statements.
foreignTV.com, Inc and subsidiaries
(A Development Stage Enterprise)
Note 1. Basis of Presentation.
The accompanying unaudited consolidated financial statements of foreignTV.com, Inc. (the " Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q 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. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the nine months period ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. Per share data for the periods are based upon the weighted average number of shares of common stock outstanding during such periods, plus net additional shares issued upon exercise of options and warrants.
Note 2. Summary of Significant Accounting Policies.
Principles of consolidation.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany items and transactions have been eliminated in consolidation.
Cash and cash equivalents.
The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents.
Development Stage Enterprise.
Due to the start-up nature of the business, the financial statements are being presented as a development stage enterprise pursuant to Statement of Financial Accounting Standards No.7. The separate presentation of accumulated operations and cash flows have not been presented separately since such operations and cash flows of the Company also represent the accumulated operations and cash flows of the Company.
Property and Equipment.
Property and equipment are stated at cost. Maintenance and repairs are charged to expenses as incurred. Major betterment and improvements, which extend the useful life of the related item, are capitalized and depreciated. Depreciation is provided for over the estimated useful lives of the individual assets using accelerated and straight-line methods.
Fair value of financial instruments.
The carrying amounts reported in the balance sheet for cash, receivables, and accrued expenses approximate fair value based on the short-term maturity of these instruments.
Stock based compensation.
The Company accounts for employee stock options in accordance with APB Opinion No.25, "Accounting For Stock Issued To Employees" and has adopted the disclosure-only option under SFAS No.123, as of December 31, 1998.
Comprehensive income.
The Company adopted SFAS No. 130 Reporting Comprehensive Income. This statement establishes rules for the reporting of comprehensive income and its components. Comprehensive income consists of net income and foreign currency translation adjustments and is presented in the Statements of Operations.
Note 3. Common Stock.
In June 1999, the Company culminated the sale of 1,678,433 shares of common stock and 1,678,433 warrants for $10,070,598 in the Company's initial public offering. The expenses of the stock offering were recorded as a reduction of paid-in-capital.
Note 4. Subsidiaries.
The Company has formed wholly owned subsidiaries in France, Netherlands and Israel to facilitate the gathering of content for the Company's web site.
Note 5. Stock Options.
During the three-month fiscal period ending September 30, 1999 the Company issued to consultants 5-7 year options to purchase 210,000 shares of the Company's common stock at an exercise price of $6.00 per share, such price being in excess of the then market price of the Company's common stock. In addition, the Company issued or agreed to issue to employees of the Company options pursuant to its 1999 Stock Option Plan, options to purchase 82,000 shares of the Company's common stock at $6.00 per share.
Note 6. Commitments and Contingencies.
In April 1999 the Company signed a seven-year lease to rent premises for its offices in New York for approximately $13,250 a month. In lieu of a security deposit the lease is secured by a letter of credit for $79,500.
Beginning as of July 1, 1999, the Company guaranteed its French subsidiary's three-year lease agreement to rent premises for its offices in Paris, France for FFR 47,430 (currently equivalent to approximately $7,500) per month, which amount is index-linked, in accordance with the INSEE construction industry index in France.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We are in a developmental stage. We have not generated any material revenues to date. Our current business plan assumes that we will not derive any significant revenues from advertising, sales, e-commerce or other activities prior to April 2000.
Our company was founded on November 12, 1998. From inception until our initial public offering (IPO) became effective on April 13, 1999, our entire activity was to prepare for fundraising through an offering of our equity securities in the IPO. Substantially all of our expenses from the beginning of the year and throughout April, 1999 are attributable to deferred costs of our IPO, which we successfully completed on May 20, 1999. Our IPO resulted in our receipt of net proceeds of approximately $8.87 million. Funds from the net proceeds that are not being immediately used have been invested in short-term, investment grade, interest-bearing instruments. Due to fluctuations in the Federal interest rates, the investment grade securities held by us experienced a decline of $33,980 (approximately 0.76%) at the end of the three-month fiscal period ending September 30, 1999.
We intend to use, and have been using, the net proceeds from the IPO for the development of our primary site at foreignTV.com and for the development and establishment of additional Web sites, for the establishment of a European operations base and for program development of our international and niche sites. In addition to our efforts to build location-specific Web sites, such as parisTV.com and tokyoTVchannel.com, we intend to launch several niche channels during the next three-month fiscal period, including wildernessTV.com, trancemusicTV.com, railwayTV.com, foreignfilmTV.com, and filmnoirTV.com, by the end of November, 1999. We expect to substantially increase our expenditures to promote our proposed foreignTV.com network in an effort to develop advertising revenues and e-commerce tie-in commissions.
We commenced the delivery of streaming video media content on the primary site at foreignTV.com in mid-April 1999. Our primary site contains daily information and entertainment content from around the world, fashion videos, music videos, features, interviews, as well as other programming. We intend to launch several location-specific and niche Web sites by March 31, 2000, and additional Web sites at staged intervals thereafter, upon the successful completion of additional financing or if our proposed business generates sufficient cash flow. We believe that our success will depend largely on our ability to become a leading source for streaming media broadcasting of international and other niche programming on the Web. Accordingly, we intend to invest heavily in order to develop our network infrastructure, acquire content and in sales and marketing. We expect to continue to incur substantial operating losses for the foreseeable future.
During the three-month fiscal period quarter ending September 30, 1999, we continued to invest heavily in and incurred significant expenditures and costs for developing a network infrastructure required for large-scale streaming media broadcasts and in implementing our business plan. Among other activities, we concentrated on the following:
In view of the rapidly evolving nature of our business and our limited operating history, we believe that a description of our revenues and operating results are not necessarily meaningful and should not be relied upon as indications of future performance. Our business plan assumes that we will not derive any significant revenues from either advertising, sales, e-commerce or other activities prior to April 2000. Our business plan further assumes that we will continue to invest and disburse substantial funds to build the infrastructure of our large-scale streaming-video broadcasting business on the Web.
During the three-month fiscal period ending September 30, 1999, we hired a new Treasurer and Chief Financial Officer, Mr. Harold I. Berliner and appointed Mr. Graham Cannon, our Vice President, Marketing to serve also as our Chief Operations Officer.
Year 2000
We have performed a review of our Year 2000 preparedness relative to our software and computer hardware. We believe that we will not incur material costs in connection with becoming Year 2000 compliant. In addition we have received communications from our product and service providers stating that they are generally on target to become Year 2000 compliant in 1999 if they have not already done so. There can be no assurance that these third party product and service providers will complete their own Year 2000 compliant projects in a timely manner and that failure to do so would not have an adverse impact on our business.
Quantitative and Qualitative Information About Market Risk
We do not engage in trading market risk sensitive instruments and do not purchase hedging instruments or "other than trading" instruments that are likely to expose us to market risk, foreign currency exchange, commodity price or equity price risk. We have purchased no options and entered into no swaps. We have no bank borrowing facility which could subject us to the risk of interest rate fluctuations. The predominant share of our funds are invested in interest-bearing investment grade securities, the yield and value of which are subject to Federal interest rate fluctuations. Due to fluctuations in the Federal interest rates, the investment grade securities held by us experienced a decline of $33,980 (approximately 0.76%) at the end of the three-month fiscal period ending September 30, 1999.
Forward-Looking Statements
The Management's Discussion and Analysis above contains forward-looking statements within the meaning of Federal securities law. You can identify these statements because they use forward-looking terminology such as "may," "will," "expect," "anticipate," " estimate," "continue," "believe," " intend," or other similar words. These words, however, are not the exclusive means by which you can identify these statements. You can also identify forward-looking statements because they discuss future expectations, contain projections of results of operations or of financial conditions, characterize future events or circumstances or state other forward-looking information. We have based all forward-looking statements included in Management's Discussion and Analysis on information currently available to us, and we assume no obligation to update any such forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results could differ materially from those projected in the forward-looking statements.
We caution you that our business and financial performance are subject to substantial risks and uncertainties. Potential risks and uncertainties include, among others, those risk factors set forth in the Company's S-1 Registration Statement, as amended, as filed with the SEC, for the Company's initial public offering that became effective on April 13, 1999.
Item 6. Exhibits and Reports on Form 8-K
| (a) | Exhibits: |
| (10.1) | Employment Agreement with Harold I. Berliner |
|
| (10.2) | Employment Agreement with Elorian C. Landers |
|
| (27) | Financial Data Schedule |
| (b) | Reports on Form 8-K: |
| Items 4 and 7; on July 26, 1999 |
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrat has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| foreignTV.com, Inc. | |||
| (registrant) | |||
| Dated: November 12, 1999 | |
By: /s/ Harold I. Berliner | |
|
Harold
I. Berliner, Treasurer and
|
|||
|
|