<PAGE>
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
or
/ / Transition 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 (I.R.S. Employer
of incorporation or organization) Identification No.)
162 Fifth Avenue, Suite 1005A, New York, NY 10010
(Address of principal executive offices)
(212) 206-1121
(Registrant's telephone number, including area code)
Former name, former address 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 such
filing requirements for the past 90 days. /X/ Yes / / No
Applicable only to Issuers Involved in Bankruptcy
Proceeding During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d0 of the Securities
Exchange Act 1934 subsequent to the distribution of securities under a plan
confirmed by a court. / / Yes / / No
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
10,000,000 shares of Common Stock at May 20, 1999
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Part 1 - Financial Information
Item 1. Financial Statements
The condensed financial statements included herein have been prepared by
foreignTV.com,Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. While certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulation, the Company believes that the
disclosures made herein are adequate to make the information presented not
misleading.
<PAGE>
foreignTV.com,Inc.
(a corporation in the development stage)
BALANCE SHEET
(Unaudited)
March 31, 1999
ASSETS
------
Current Assets
Cash $ 12,851
Subscriptions receivable 400
Deferred Offering Costs 118,166
--------
Total Assets $131,417
========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Due To Officer $112,631
Due to Affiliate 14,250
--------
Total Current Liabilities $126,881
--------
Commitments and Contingencies -
Shareholders' equity
Preferred Stock, $.01 par value;
Authorized 5,000 shares, -
issued and outstanding: -0- shares
Common Stock, $.01 par value;
Authorized 30,000,000 shares, 83,000
issued and outstanding: 8,300,000 shares
Additional paid in Capital -
Accumulated Deficit $(78,464)
--------
Total Shareholders' Equity 4,536
--------
$131,417
========
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
foreignTV.com,Inc.
(a corporation in the development stage)
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31, 1999
Operating Expenses
Officer's compensation $ 41,098
Licensing fees 19,650
Rent 7,119
Telephone 5,779
Office 4,818
--------
Total operating expenses $ 78,464
--------
Net loss $(78,464)
========
The accompanying Notes are an integral part of these Financial Statement
<PAGE>
foreignTV.com,Inc.
(a corporation in the development stage)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
For the Period from November 12, 1998 (date of inception)
to March 31, 1999
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Paid Deficit During Total
-------------------------- in Development Shareholder's
Shares Amount Capital Stage Equity
---------- -------- ---------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Beginning Balance - - - - -
Issuance of Common
Stock for
Subscriptions 8,300,000 83,000 $ - - $ 83,000
Less subscriptions
receivable (83,000) - - (83,000)
Balance at
December 31, 1998 8,300,000 - - - -
--------- ------- -------- -------- --------
Subscriptions received 83,000 - - 83,000
Net loss for the quarter
ended March 31, 1999 $(78,464) 78,464
========
Balance at
March 31, 1999 8,300,000 $ 83,000 - $(78,464) $ 4,536
========= ======== ======== ========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements
<PAGE>
foreignTV.com,Inc.
(a corporation in the development stage)
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (78,464)
Changes in assets and liabilities
Prepaid offering Costs (94,132)
Due from shareholder 105,961
Due from affiliate 14,250
---------
Net cash used in operating activities (52,385)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of common stock 65,236
---------
NET INCREASE IN CASH 12,851
CASH, beginning of period -
CASH, end of period $ 12,851
=========
Supplemental cash flow disclosure
Payments made by officers on
behalf of the company $ 17,364
The accompanying Notes are an integral part these Financial Statements
<PAGE>
ForeignTV.com
NOTES TO FINANCIAL STATEMENTS
1 - Organization
foreignTV.com, Inc. (the "Company"), a Delaware corporation in the development
stage, was founded on November 12, 1998. The Company was organized to develop
opportunities as an Internet broadcaster specializing in international content
not available from other sources. The Company proposes to develop a network of
Internet web sites, using domain names that will be licensed or otherwise
acquired to offer viewers foreign newscasts and other programming produced in
various locations throughout the world.
The Company is currently in the development stage. Substantially all
activities of the Company to date relates to its formation and proposed fund
raising. For the period from November 12, 1998 (date of inception) through March
31, 1999 there were no material operations or cash activities on the part of the
Company.
The Company's ability to commence operations is contingent upon its ability to
obtain financing through an initial public offering of the Company's securities
(the "IPO"). Note 8 discusses the details of the proposed IPO.
2 - Summary of Significant Accounting Policies
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting For Income Taxes"
("SFAS 109"). SFAS 109 requires a company to recognize deferred income tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in a company's financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based
on the difference between the financial statement carrying amounts and the tax
basis of assets and liabilities using enacted tax rates in effect in the year in
which the differences are expected to reverse. At March 31, 1999 there were no
such differences.
Use Of Estimates
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 reported
period. Actual results could differ from those estimates.
Effect Of Recently Issued Accounting Standards
In June 1997 the Financial Accounting Standards Board ("FASB") issued two
new disclosure standards.
SFAS No. 130 ("SFAS No. 130") "Reporting Comprehensive Income" established
standards for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investment by owners and distributions to
owners.
SFAS No. 131 ("SFAS No. 131") "Disclosure About Segments of an Enterprise
and
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Related Information", which supersedes SFAS No. 14 "Financial Reporting for
Segments of a Business Enterprise", establishes standards for the way that
public enterprises report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. The Company's results of operations and
financial position will be unaffected by implementation of these new standards.
During February 1998 the FASB issued SFAS No. 132 ("SFAS No. 132")
"Employers Disclosure about Pensions and Other Postretirement Benefits", which
standardizes the disclosure requirements for pension and other postretirement
benefits. The adoption of SFAS No. 132 in 1998 is not expected to impact the
Company's current disclosure.
3 - Preferred Stock
The Company is authorized to issue preferred stock and to fix the rights,
preferences, privileges, and restrictions thereof, including dividend rights,
conversion rights, voting rights, redemption terms and liquidation preferences.
4 - Subscription Receivables
During the quarter ended March 31, 1999 and subsequently, substantially all
stock subscriptions were paid in full.
5 - Due To Officers
Amounts due to Officers are non-interest bearing and due on demand.
6 - License Agreements
The Company entered into two license agreements with related parties
beginning January 1, 1999 for the sole and absolute use of certain Internet
domain names. One of the agreements is with an officer and director of the
Company and other is with a not-for-profit organization whose board of directors
is substantially identical to that of the Company. The term of the agreements is
twenty five years through December 31, 2023 with an additional renewal period of
twenty five years thereafter. The agreements require the Company to pay license
fees which begin at $600 per domain names and escalate to $2,500 per domain name
through the twenty fifth year of the agreement. Thereafter, the fee increase is
based on the Consumer Price Index, This agreement with the not-for-profit
organization also requires the Company to provide office space, on its premises,
for up to four employees of the not-for-profit organization for up to three
years.
7 - Stock Option Plan
The Company's Board of Directors has approved a stock option plan. (the
"Plan"). The Plan, which is subject to shareholder approval, provides for
issuance of up to 400,000 options (the "Options") to acquire shares of the
Company's Common Stock.
The Options are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986 or as options which are not intended to meet the
requirements of such section ("Nonstatutory Stock Options"). The Options may be
granted under the Plan to persons who, in the case of Incentive Stock Options,
are key employees (including officers) of the Company or, in the case of
Nonstatutory Stock Options, are key employees (including officers) and
nonemployee directors of the Company, except that Nonstatutory Stock Options may
not be granted to a holder of more than
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10% of the total voting power of the Company.
The exercise price of all Incentive Stock Options granted under the Plan
must be at least equal to the fair market value of such shares on the date of
grant or, in the case of Incentive Stock Options granted to the holder of 10% or
more of the Company's Common Stock. at least 110% of the fair market value of
such shares on the date of grant. The exercise price of all Nonstatutory Stock
Options granted under the Plan shall be determined by the Board of Directors of
the Company at the time of grant. The maximum exercise period for which the
Options may be granted is ten years from the date of grant (five years in the
case of Incentive Stock Options granted to an individual owning more than 10% of
the Company's Common Stock). The aggregate fair market value (determined at the
date of the option grant) of such shares with respect to which Incentive Stock
Options are exercisable for the first time by the holder of the option during
any calendar year shall not exceed $100,000.
The FASB issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123"), which will require
companies either to reflect in their financial statements or reflect as
supplemental disclosure the impact on eamin2s and earnings per share of the fair
value of stock based compensation using certain pricing models for the option
component of stock option plans. As of March 31, 1999, no options have been
granted under the Plan. Disclosure, as required SFAS 123, will be made upon the
issuance of options.
8 - Proposed Initial Public Offering
The proposed IPO calls for the Company to offer for public sale up to
1,700,000 units (the "Units") at a price of $6.00 per Unit. Each Unit consists
of one share of Common Stock, $.01 par value, and one redeemable warrant. Each
warrant entitles the holder to purchase from the Company one share of Common
Stock at an exercise price of $9.00. The warrants will be exercisable at any
time, until they expire three years after the effective date of the proposed
IPO. The warrants may be redeemed by the Company. in whole or in part, at any
time upon at least 30 days prior written notice to the registered holders, at a
price of $.05 per warrant, provided that the closing bid price of the Common
Stock was at least $12.00 for the 20 consecutive trading days ending on the
third business day preceding the date of the Company's giving of notice of
redemption to the warrant holders, and provided there is then a current
registration statement in effect for the shares underlying the warrants.
The Units are being offered for public sale on the Company's behalf by the
Underwriter, as the Company's exclusive agent, on a "best efforts, all or none
basis as to the first 850,000 Units and, if such 850,000 Units are sold, on a
"best efforts" basis as to the remaining 850,000 units. The Underwriter has not
committed to purchase any of the Units for its own account.
In connection with the proposed IPO, the Company will sell to the
Underwriter, for nominal consideration, warrants to purchase Units (the
"Underwriter's Unit Warrants") at the rate of one Underwriter's Unit Warrant for
each ten Units sold in the Proposed Offering, up to a maximum of 170,000
Underwriter's Unit Warrants. The units issuable upon exercise of the
Underwriter's Unit Warrants are substantially identical to the Units. The
Underwriter's Unit Warrants are exercisable at $9.90 per unit.
As of March 31, 1999 the Company had recorded deferred charges of $107,472
relating to various expenses incurred in connection with the proposed IPO. Upon
consummation of the proposed IPO these costs will be charged to equity. Should
the proposed IPO prove to be unsuccessful these deferred costs, as well as any
other additional expenses that may be incurred, will be charged to operations.
<PAGE>
9 - Operating Leases
The Company has agreed to indemnify certain of its officers for space used
by the Company in their respective offices on a month to month basis. Rent
expense for the three months ended March 31, 1999 amounted to $7,119.
10 - Contingency
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter an expense allowance on a non-accountable
basis equal to 1 1/2% of the gross proceeds derived from the sale of the Units.
11- Subsequent Event
On May 20, 1999, the Company successfully consummated the IPO when it
completed the sale of 1,700,000 Units, from which it derived net proceeds, after
payment of underwriting commissions and offering expenses, of approximately $8.9
million.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are in a developmental stage. We have not generated any revenues to
date. Our business plan assumes that we will not derive any significant
revenues from either advertising sales or e-commerce prior to April 2000. Our
entire activity since our inception has been to prepare for our proposed
fundraising through an offering of our equity securities.
Substantially all of our expenses through March 31, 1999 are attributable
to deferred costs of our IPO, which we successfully completed on May 20, 1999,
resulting in our receipt of net proceeds of approximately $8.9 million.
We intend to use the net proceeds from the IPO for the development of our
primary site at foreignTV.com and for the development and establishment of four
Web sites, for the establishment of a European operations base and for program
development. Our initial location-specific Web sites are expected to be london-
TV.com, parisTV.com, berlinTV.com and the tokyoTVchannel.com., for a total of
five sites. 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 broadcasting on the primary site at foreignTV.com in mid-April
1999. Our primary site contains daily news briefings from locations around the
world as well as other programming. We intend to launch four location-specific
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 becomes profitable.
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 complaint. In addition we have
received communications form our 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 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, either interest rate, foreign currency exchange,
commodity price or equity rice 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.
<PAGE>
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report, as amended, to be signed on its behalf
by the undersigned thereunto duly authorized
foreignTV.com, Inc.
(registrant)
Dated: May 20, 1999 By: /s/ Jonathan Braun
------------------
Jonathan Braun
Vice Chairman
(Principal Executive Officer)
By: /s/ Marc D. Leve
----------------
Marc D. Leve
Treasurer
(Principal Financial Officer and
Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,851
<SECURITIES> 0
<RECEIVABLES> 400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 131,417
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 126,881
<BONDS> 0
0
0
<COMMON> 83,000
<OTHER-SE> (78,464)
<TOTAL-LIABILITY-AND-EQUITY> 131,417
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 78,464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (78,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> (78,464)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,464)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
