MEDIUM4 COM INC, 10-K, 2000-03-30

MEDIUM4 COM INC
10-K, 2000-03-30
COMMUNICATIONS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[_]TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number 000-25667

Medium4.com, Inc.
(formerly known as foreignTV.com, Inc.)
(Exact Name of Registrant as Specified in Its Charter)

Delaware 13-4037641
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

120 Fifth Avenue, Seventh Floor, New York, NY 10011
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (212) 993-9400

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Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.01 Per Share
Redeemable Common Stock Purchase Warrants
(Title of Class)

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 [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant as of March 16, 2000 was approximately
$56,000,000.

Number of shares of common stock outstanding as of March 16, 2000:
10,178,433 shares.

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DOCUMENTS INCORPORATED BY REFERENCE

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Location in Form 10-K
Document in which Incorporated
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Portions of the proxy statement with respect to Part III
the 2000 annual meeting of stockholders to be
filed with the SEC not later than 120 days after
the close of the registrant's fiscal year
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Medium4.com, Inc.

FORM 10-K

Table of Contents

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Page
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PART I
Item 1. Business..................................................... I-1
Item 2. Properties................................................... I-11
Item 3. Legal Proceedings............................................ I-12
Item 4. Submission of Matters to a Vote of Security Holders.......... I-12

PART II
Market for Registrant's Common Equity and Related Stockholder
Item 5. Matters...................................................... II-1
Item 6. Selected Financial Data...................................... II-1
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations.................................... II-2
Quantitative and Qualitative Disclosures About Market Risks
Item 7A. of Operations................................................ II-6
Item 8 Financial Statements and Supplementary Data.................. II-6
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... II-6

PART III
Item 10. Directors and Executive Officers of the Registrant........... III-1
Item 11. Executive Compensation....................................... III-1
Security Ownership of Certain Beneficial Owners and
Item 12. Management................................................... III-1
Item 13. Certain Relationships and Related Transactions............... III-1

PART IV
Exhibits, Financial Statement Schedules, and Reports on Form
Item 14. 8-K.......................................................... IV-1

Signatures............................................................. S-1
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PART I

Item 1. Business

Introduction

We are one of the leading independent Internet broadcasters. We provide
streaming audio and video content over four Internet "television" networks,
which currently host nearly 40 distinct channels targeted to various market
segments. We provide, on-demand, over 150 constantly changing videos, ranging
from brief vignettes to full length features in a wide variety of subject
matters.

Since commencing our operations in April 1999, our business plan has evolved
from the establishment of a single "foreign TV" network and the production of
location-specific programming for viewing upon location-specific Web-sites, to
the creation and operation of four distinct Internet-only networks, each
consisting of numerous diverse "television" channels, offering unique content
and niche programming. We produce some of our programming internally and
purchase or license other programming from third parties.

Recent Developments

We initially concentrated our efforts upon the origination and acquisition
of international content in English, which we believed was not available in a
similar format on the Internet, for our foreignTV.com network. Seeking to
expand the breadth of our programming, we worked simultaneously to create
additional channels for aggregating content on three other networks. By the
end of 1999, we had launched three additional fully operational, uniquely
branded streaming video networks, each hosting and featuring numerous channels
of interest, with each channel offering thematic streaming media audio and
video content. We currently make available on a daily basis over 150 videos,
ranging from short clips of 2-3 minute duration to full-length feature movies.
We have also amassed a library of more than 1,000 digitized and encoded videos
for present and future use.

Our design strategy and content sensibilities are intended to facilitate
easy viewer access to streaming media content through a number of different
means, thereby enhancing traffic, viewership, and usage. Considering
www.foreignTV.com alone, we grew from less than 1,000 page views, when we
commenced our operations in April 1999, to more than 120,000 page views during
December 1999, representing over 39,000 unique users. According to our
internally generated statistics, by the end of February 2000, the number of
unique users, over all of our networks, exceeded 150,000 with approximately
1.4 million video/page views. At the current rate of growth, we expect by the
end of March 2000 to exceed 200,000 unique users per month, with over two
million video/page views monthly. We believe it is also significant that the
average time per viewer on four channels is approximately 13 minutes,
substantially longer than the industry average, indicating that our users are
viewing all or substantial portions of many of our programs.

To reflect the diversification of our programming, we changed our name in
December 1999 from foreignTV.com, Inc. to Medium4.com, Inc.. We believe our
new name also highlights our role, after traditional transmission, cable and
satellite television delivery, as the fourth medium for television
broadcasting.

Streaming Technology

All of our content can be accessed through streaming technology. Streaming
multimedia takes standard videotape formats and digitizes and compresses the
information using encoder software. When a user opens or accesses an audio or
video file, a portion of the data is downloaded in a matter of seconds into a
form of computerized holding pen or "buffer" when the data starts to play,
additional data is continuously downloaded to keep the holding pen full.
Streaming technology thereby enables the simultaneous transmission and
reception--or "broadcast"--of continuous "streams" of audio and video content.
Streaming also mitigates copyright issues of some content developers who do
not want their multimedia files to be downloaded and stored.

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Software is required to view streaming video, but many browsers currently
have built in players. Programs which play streaming multimedia clips, such as
Microsoft's Windows Media Player(TM) or RealNetwork's RealPlayer(TM), can be
downloaded from the Internet for free. Tens of millions of users have
downloaded programs for viewing streaming video since the technology has been
available. Microsoft and Nielsen NetRatings estimate that in November 1999
alone, approximately 16.7 million viewers used a streaming media player,
accounting for 23% of the total online audience for that month.

Streaming technologies have evolved to deliver audio and video over widely
used 56 kilobits per second ("kbps") narrow bandwidth modems. At such narrow
or "low bandwidth" the quality of audio streaming-- listening to a radio
station over the Internet--is comparable to ordinary FM radio reception.
However, the quality of video, which requires much more data to download than
audio streaming, is still inferior to that of conventional television. The
streaming technologies are scaling upwards to take advantage of higher speed
access that is provided by DSL, cable modems, T1 lines, and other emerging
broadband technologies. T1 lines now offer improved picture quality, though it
still does not rival the quality of a television broadcast. Bandwidth
technologies have yet to progress to the point of implementing a full-scale
video network which would allow a viewer to watch movies or television shows
over the Internet, of the same quality currently available over conventional,
cable or satellite television. However, we believe that in the near future
technological improvements to compression and bandwidth and the introduction
of multi-casting--where a broadcaster can send a single data stream to a
virtually unlimited number of users--will allow streaming video quality to
equal that of conventional tv broadcasting, and subsequently that the number
of viewers, will increase dramatically.

We believe that many of Fortune 1000 professionals already have broadband
web access at work, reflecting a general trend toward cable and other faster
Internet access. Moreover, it is estimated that by the end of the year 2002,
25% of all US households will use broadband connections, bringing the
broadband viewing public to over 50 million. We believe that increased viewers
to Internet sites utilizing streaming technology will give our channels a
competitive edge over sites that do not utilize such technology.

Streaming audio and video content over the Internet offers various
advantages not generally available through traditional media. By using the
Internet, streaming media content can be targeted at relatively low costs to a
geographically dispersed audience of customers. Streaming multimedia also
allows a user to view content on his or her own time "on demand," rather than
at time pre-scheduled by television network. Moreover, the borderless nature
of the Internet lets viewers watch beyond the geographic limits of traditional
broadcast media. We believe that once the picture quality over the Internet is
equivalent to that of television broadcasts, the average PC user will be drawn
to the convenience and ease of calling up a program over the Internet instead
of viewing traditional broadcast or cable television. In fact, reports
indicate that already 35% of Web use comes at the expense of traditional
television viewing. In addition, the Web enables access to audio and video
content in office buildings and other workplaces, where radios and televisions
are not widely used, but where Internet access is commonplace.

Internet broadcasting has required us to design, develop, implement and
integrate complex network elements, including video production, scalable
bandwidth, streaming licenses, equipment and technical expertise, web design
templating, and content publishing. The rapid evolution of streaming media
technologies and lack of standardization also requires us to support multiple
vendors.

The broadcasting technology used to transmit our content over the Internet
is licensed by us from leading streaming media broadcast hosts, and we
contract with Internet service providers for network support. Most of our
short pieces (up to approximately 10 minutes) are typically prepared for
streaming in six different formats:

. Low band (56 kbs) for Real Media Player

. Low band (56 kbs) for Windows Media Player

. Medium band (100 kbs)--for Real Media Player

. Medium band (100 kbs)--for Windows Media Player

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. High band (300 kbs)--for Real Media Player

. High band (300 kbs)--for Windows Media Player

Our longer pieces, such as full-length movies, are typically prepared only
in broadband format for the Windows Media Player, and are also featured as
part of the Windows Broadband Jumpstart initiative, discussed later.

Our Content Strategy

We have developed four networks, each hosting a collection of related
channels of interest. Each channel is branded with its own logo and
identifiable Internet address, the latter drawn from our library of more than
1,500 domain names, which distinctively reflects the content focus of the
channel and the specialized programming it offers.

The channels appearing on each network all share certain design, templating,
navigational and other features. This commonality of elements and style across
all channels and networks is intended to enhance our brands' identity and the
viewer's familiarity and loyalty to our channels which in turn should
encourage his or her return to our channels. At the same time, each channel
has its own unique style and design that is flexibly tailored to the audience
targeted by that channel. As a result, our networks provide a seamless
aggregation of different, yet related content channels, which creates focused
brand value for each individual channel and enhances the overall goodwill of
the networks.

Currently, all of our audio and video programming and content is available
to viewers of our channels and networks free of charge. We are reviewing and
testing the possibility of providing certain content on a pay-per-view or pay
per download basis.

Our Networks

Our first and cornerstone network is ForeignTV.com. This network currently
features the following five channels:

. WorldNewsTV.com offers viewers foreign newscasts in English from over
ten countries world-wide, including England, Ireland, Turkey, China,
Jordan, Iran, and Italy. It also features reports from the Reuters news
agency as well as original content, including exclusive interviews by
our chief correspondent, Peter Arnett, and the Company's "UN Insider"
Ian Williams. We also present special online video coverage of newsmaker
events in our "World Briefing" section, which is produced in conjunction
with the Council on Foreign Relations.

. WorldLifestyleTV.com is a destination for personalities, places and
events that defines global lifestyle with features, world travels of
renowned consultant Dr. Ruth Westheimer, runway shows of the latest
international fashions, and programs about clubs and restaurants
throughout the world.

. GlobalVillageTV.com features programs about local events, entertainment
and culture, with a strong human-interest appeal. It provides viewers
with a sense of what it is like to not only visit but actually live and
work in a particular location. Most of these programs are original
reports in English, from an American-style human-interest angle.

. ForeignFilmTV.com features full-length foreign feature films, including
those by Godard, Truffaut, and Fellini. This channel is showcased in
Microsoft's Broadband Initiative.

. AllWorldMusicTV.com is one of the Internet's leading streaming video
site for sounds from around the world featuring full length music
videos, reports and interviews of music stars throughout the world,
including famous international performers, such as the Gipsy Kings,
David Byrne, Miriam Makeba and Enrique Iglesias.

During the first two months of 2000, we added StMoritzTV.com and
AllChinaTV.com, the first of our location-specific foreignTV channels, to our
ForeignTV.com network.

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We produce our original content both through the use of freelance producers
located in various locations and from our employees located in New York and
around the world. We have developed methods and procedures for efficient
editing and publishing of material on templated areas on our channel sites.

We believe our original programming fills a void left by the conventional US
news media networks, that focus on wars, terrorist incidents, disasters and
the like. Our content on the network's channels, such as GlobalVillageTV.com
and WorldLifestyleTV.com, provides depth and perspective on international
locales that are not available on conventional news networks or even on travel
destination channels. The user traffic on ForeignTV.com has steadily increased
since its unveiling, continues to increase each month, and still accounts for
the majority of overall traffic on our four networks.

StreamingUSA.com features a series of in-depth city channels providing users
with entertaining programming and information on various U.S. locales. Our
original insider features consist primarily of in-house productions created by
our on-site correspondents. The following channels are currently offered on
the StreamingUSA.com network:

. ManhattanTV.com provides a video guide to the "city that never sleeps,"
taking the visitor behind the scenes to special events, restaurants, and
shows throughout New York.

. BlueHawaiiTV.com allows viewers to experience the fantasies and beauty
that Hawaii has to offer.

. MauiTV.com gives an in depth view of the second largest of the Hawaiian
Islands.

. LaLaTV.com features all aspects of the Los Angeles lifestyle from the
mountains to the beaches and from Hollywood to the nightlife on Sunset
Boulevard.

. SouthernRockTV.com is a music channel focusing on interviews and music
videos originating south of the Mason Dixon line.

. AmericanaTV.com focuses on homebred American music, featuring videos and
interviews with performers and songwriters.

. HotSouthbeachTV.com brings timely and up-to-date reports on favorite fun
spots in Miami.

. TexasTV.com features the history, lore, tales, tunes and people of
Texas.

NicheTV.com features a broad range of interest-specific channels. We believe
that as more and more television and other content channels are beamed into
people's homes, people will prefer channels that offer a particular subject
matter, such as a television station that solely broadcasts golf and golf-
related shows.

Although we originally planned to launch niche programming only after
completing two location specific ForeignTV.com channels, we determined that we
could accelerate the launch of several content-oriented channels
simultaneously with the launch of our other networks. These narrowly focused
niche channels target specific, geographically dispersed audiences and provide
attractive content to cater to viewer's desire for both information and
entertainment. The following channels are offered on the nicheTV.com network:

. BarkTV.com presents entertaining and instructive audio and video content
about man's best friend; everything from training tips to "puppy
palaces."

. RailwayTV.com is a definitive window into the world of railways.

. WildernessTV.com is a channel for adventure seekers and nature lovers,
targeting both outdoors enthusiasts and armchair travelers.

. FilmnoirTV.com presents full-length movies from the film noir genre and
is one of the major participants in the Microsoft Windows Media
Jumpstart initiative.

. ClassicHorrorTV.com features compilations of horror films.

. WesternTV.com combines our in-house compilation of the western classics
together with contemporary programming targeting enthusiasts of the
"western" genre.

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. WorldPoliceTV.com gives in depth insight into the police, their training
and methods, and presents compelling stories and interviews with law
enforcement personnel.

. SwordandSandalTV.com is another in our series of original compilations
depicting gladiators, mythological characters and fables.

. Year2000TV.com hosts well-known personalities who discuss their
perspectives and opinions about the millennium.

. ArtHistoryTV.com presents programming focused on the masters as well as
coverage of contemporary art shows.

. AnimationCityTV.com, a joint venture with Brilliant Digital
Entertainment, Inc., includes new and classic animated shorts, videos
and "webisodes," including the Kiss Immortals animated feature.

Medium4Music.com provides full-length music videos and recorded performances
together with information and interviews with leading artists. The name of
each channel, by means of its distinct domain name and Internet address, makes
clear to the user which category of music is presented:

. TranceMusicTV.com . MartiniTV.com
. AllClassicalMusicTV.com . RootsReggaeTV.com
. AllLatinMusicTV.com . GothTV.com
. BritRockTV.com . ClubMusicTV.com
. AllJazzTV.com . ClassicMusicVideoTV.com
. AlternaMusicTV.com . OldSchoolRap.com

Radio

In addition to the networks of audio-visual streaming media channels, we
recently launched the Web-based radio station ForeignTVRadio.com, which
broadcasts a high quality, updated selection of world music. Our radio station
also presents a list of our selections which is linked to our e-commerce site
to enable the listener to purchase his or her favorite music. Our radio
stations feature the hottest selling sounds from around the world, such as the
music of Andrea Bocelli, the Buena Vista Social Club and Enrique Iglesias.

Navigation on our Web-sites

Viewers can gain ready and easy access, free of charge, to our audio and
video content through a variety of different means:

. Access through our Networks: The viewer can access any channel upon one
of our four networks from that network's separate home page:

. By clicking on the channel logo;
. By clicking on the channel name appearing on the "channel changer"
at the side of the computer screen; or
. By clicking on the name of the channel at the bottom of the screen.

In addition, each network offers a featured video on the network home page,
which can be immediately viewed.

. Between Channels: Each channel is also directly accessible from any
other channel on the network. Thus, the viewer experiencing
AllLatinMusicTV.com is no more than one "click" away from
RootsReggaeTV.com.

. Between Networks: Each of our branded networks co-promotes the other
networks and facilitates easy navigation between them. Each network
contains hyperlinks to each of the other three networks, as well as to
our corporate home page, and to our e-commerce opportunities, sponsors,
and other features.

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. Direct access to Channel Site: Each channel on our networks can be
accessed through an identifiable, branded, Internet address, drawn from
our library of approximately 1,500 unique domain names, each of which
distinctively reflects the content focus of its corresponding channel.
Thus, a viewer seeking world news can point his or her browser to our
ForeignTV.com network's www.WorldNewsTV.com and find aggregated news
reports from throughout the world. The dog owner can find compelling
programming about his favorite pet on www.barktv.com. and a classic
music lover can go directly to AllClassicalMusicTV.com to experience
performances, interviews and other related content.

. Access through our corporate home page: The user who visits our home
page at www.medium4.com will find the logo of each of our four networks,
in addition to other informative facts and materials about us. Clicking
on the individual network logo or hyperlink takes the viewer directly to
the network home page. In addition, the viewer can navigate directly to
the channel of his or her choice by using the convenient drop down menu
that accompanies the description of each network.

. Access through Strategic Alliances: We have forged important strategic
alliances with Microsoft and other companies that operate portals
featuring streaming media content. The viewer who searches audio and
video streaming content on Microsoft's WindowsMedia.com guide will find
links to featured content on each of our networks. Similarly, our
content is showcased on various new platforms and software, such as
"gooey," which enables users to "chat" with other users viewing the same
content.

. Access through search engines: Viewers seeking content in their area of
interest will find easy access to our various channels through the use
of key words and description tags that enable Web search engines to lead
Web surfers to our channels.

We believe the combination of these overlapping methods to access our
content and navigate our channels will attract viewers, increase traffic on
our channels, and ensure a user-friendly viewing environment. A viewer does
not need not be conversant with computer technology to experience and enjoy
our content.

Internet Addresses--Domain Names for Present and Future Channels

The Company owns or licenses more than 1,500 unique Internet addresses or
domain names. We currently offer content or designate our individual channels,
networks and home pages on approximately 40 of these names. We also use some
alternate Internet addresses to point to existing channels, thereby further
protecting our brand and enhancing traffic to the channel.

The following is a representative sampling of our domain name library:

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Activity and
Geographic Names Genre Names Cultural names Niche Names E-Commerce Names
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AcapulcoTV.com AllAfricanMusic.com AllChurchTV.com 1920sTV.com AuctionsAway.com
Brazil-TV.com AllJazzTV.com BlackHistoryTV.com AllBikiniTV.com ForeignRadio.com
CancunTV.com AllNashvilleTV.com InspirationalTV.com CitylifeTV.com ForeignTVcomedy.com
Dublin-TV.com AllOperaTV.com JudaicaTV.com ClassicBoxingTV.com ForeignTVsports.com
Mideast-TV.com BluegrassTV.com UrthereTV.com Museum-TV.com Medium4Finance.co m
PalmSpringsTV.com BritrockTV.com YourAmericanTV.org TheatreTV.com Medium4Law.com
SeoulTV.com HeavymetalTV.com YourChurchTV.com VinyardTV.com Medium4Radio.com
TurkishTV.com MusicCityTV.com YourCompanyTV.com WorldScienceTV.com WorldBusinessTV.com
ZurichTV.com RatpackTV.com YourMosqueTV.com XtremeSportsTV.com YardSaleTV.com
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For the approximately 135 domain names that we license pursuant to exclusive
25-year arrangements with certain of our executive officers and their
affiliates, we are required to pay annual license fees beginning at $600 per
domain name, escalating to $2,500 per domain name through the 25th year. For
all other domain names, we are only required to pay an annual maintenance fee
of approximately $35 per name, or a current aggregate of approximately
$70,000. We intend to create programming for some but not all of the names
that we own or license. We have registered some of the names to prevent third
parties from acquiring Web addresses that are similar to our addresses,
thereby confusing our viewers and diluting the value of our name, networks,
channels and programming.

As part of our business strategy, we seek to protect the names that we
actually use, or plan to use, by applying for trademark registration.

Anticipated Revenue Sources

Advertising

We expect to derive revenues from the sale of advertising space on our
channels, using customized advertisements. We believe that we now have the
ability to brand entire sections of our networks and channel sites. Our
initial testing indicates the potential success of the following methods:

. rotating and permanent placement of buttons, logos and banners,
integrated gateway and multimedia banner ads.

. audio and video advertising integrated into our content.

. sponsorships sold for part or all of a channel.

. broadcasts of "infomercials."

We also have produced and broadcasted, and have recently begun exploratory
marketing of television-style "commercials" as part of our streaming media
content. We believe this style of advertising combines the strength of
traditional linear television with the power of targeted on-demand video
streaming. According to a recent Arbitron study, almost 70% of online tuners
click for content information which is related to these "webcasts" compared to
3%-5% for traditional banner advertisings. Moreover, the same study shows that
49% of a webcast audience makes a purchase through the webcast. According to
Rich Media Advertising Program (@Home, March 1999), broadband Internet
advertising outperforms narrow band advertising in all areas, and brand recall
is 34% higher in broadand advertising.

E-Commerce

In addition to advertising, we expect to derive revenues from e-commerce
tie-ins with e-commerce businesses. In November 1999, we began beta testing
our e-commerce on-line store, which was recently fully integrated across our
network and channel sites.

The Internet now offers new ways to conduct business. Commercial uses of the
Internet include, among others, business-to-business and business-to-consumer
transactions, product marketing, advertising, entertainment, electronic
publishing, electronic services and customer support. We believe that the
retail business currently conducted electronically will grow substantially and
that there will also be an increased demand for advertiser--supported and fee-
based Internet services, including audio and video advertising. In addition,
companies from many industries are publishing product and company information
to their business partners and customers on-line are providing customer
support via the Web, are permitting customers to immediately buy products on-
line, and are collecting customer feedback and demographic information
interactively.

We believe that retail sales over the Internet will grow substantially as
more people log onto the Internet in general, more services market and sell
their products and services on-line and safety concerns about transmitting
confidential data are addressed. According to Forrester Research, Inc.,
worldwide e-commerce sales will reach as high as $3.2 trillion in the year
2003 and on-line travel reservations will produce up to $29.5 billion in
revenue

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in the year 2003. By entering into alliances with e-commerce companies while
the industry is young, we hope to grow along with such companies, as the
industry matures.

In February 2000, we entered into the Amazon.com Associates' Program, the
leading selling program with over 400,000 members. Through our participation,
our viewers are given the opportunity to purchase books, compact disks, and
other goods that are featured and promoted on our channel sites by targeting
the offered merchandise on the basis of each channel's focus and
specialization. The initial results has shown an increasing trend both in the
number of times viewers access Amazon.com from our channels, and in the
percentage of viewers who subsequently purchase offered merchandise.

Affiliates Program

We established an affiliates program at the end of 1999. We have found
strong interest from overseas production and media organizations that may have
extensive traditional broadcasting or telecommunications experience but are
seeking branded relationships and expertise in order to develop online video
capabilities. For a monthly fee, our affiliates are entitled to utilize a site
from our collection of domain names. Affiliates are also entitled to use our
proprietary PLS(TM) streaming media technology solutions that include content
encoding, hosting and content streaming services. The affiliates program also
provides hands on training and technology-transfer in streaming media
encoding, delivery and hosting and affiliates have the right to use our
exclusive content, including specialized regional video, music and travel.
Affiliates are also entitled to access to traffic-driving links from our
network and channel pages and extensive marketing and promotional support.

In February 2000, we entered into agreements to establish an affiliate
program in Japan with Japan Digital Publishing, Inc. and in the Netherlands
with Scarlet Internet B.V. Under each of these affiliate agreements, we will
receive monthly licensing fees of $10,000 for terms of ten and five years,
respectively, as well as a portion of each affiliate's advertising and other
revenue.

Custom Channel

We have developed a custom channel package, which is intended to provide our
customers, ranging potentially from businesses and commercial services to
advocacy organizations and foreign governments, with their own online channel.
They will be able to control and manage their programming within an editorial
mix featuring our extensive consumer-focused on-demand video programming. The
custom channel package is similar to our affiliates' program, and exploits the
experience that we have developed in, among other areas, content production,
digitizing, encoding, hosting and streaming of audio-video programs. We are
hopeful that we will be able to announce our first custom channel sometime
during the first half of 2000.

PLS--Private Label Streaming(TM)

In order to develop and implement our business as an Internet broadcaster,
we have developed proprietary streaming media technology solutions--PLS-
Private Label Streaming(TM)--to provide back-end content encoding, hosting and
content streaming capabilities in connection with our audio and video content,
publishing and encoding.

We believe there is a significant marketplace demand, especially in the
business-to-business sector, for streaming media services. We would hope to
capitalize upon this demand by offering Private Label Streaming(TM) to this
sector, thereby tapping a potential revenue source.

In March 2000, we entered into an agreement with ECOutlook, Inc., an
application service provider and commerce portal, which affords us the
opportunity to offer our PLS services to ECOutlook's Fortune 1000 roster of
customers.

Syndication

We have also found that there is great demand for exclusive, encoded video
content from web companies and, increasingly, from other broadband providers.
In November 1999, we entered into an agreement with

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i-Syndicate, Inc., a leading syndicator of Web content, to syndicate our
extensive catalog of video content for monthly per program license fees. Our
relationship with i-Syndicate resulted in portions of our content being
prominently featured in i-Syndicate's national television advertising
campaign.

Pay Per View/Pay Per Download

In February 2000, we joined a music downloading initiative led by Microsoft
Corporation. Our relationship with Microsoft Windows Media and Tuff Gong
International, the foremost Reggae Record Label, allows Internet viewers to
download classic Reggae songs and view the videos for free. These songs
include timeless Bob Marley songs recorded by his son Ziggy Marley and
original songs from two-time Grammy nominee Steel Pulse and the International
Reggae superstar, Sister Carol.

This joint promotion was the first Internet venture for Tuff Gong, and marks
the first time ever that the label has sanctioned Bob Marley songs recorded by
other artists to be available for download on the Internet. Visitors to the
Windows Media Page (http://www.windowsmedia.com) can watch the complete
streaming videos and hear 30-second clips from the songs. They are then
directed to our RootsReggaeTV.com channel site for full free promotional
downloads of the entire songs. RootsReggaeTV.com also provides a link to the
Tuff Gong site where the visitor can get artist and product information.

Although this joint effort was promotional, it has served as a successful
model for future pay-per-download services, from which we expect to generate
revenue. We have already entered into discussions to provide certain record
labels with pay-per-download services. Such services will allow users to
download individual songs and compilations from our music channels for a fee.
Expanded services will also allow downloading of sheet music for certain songs
and music pieces that are available on our channels.

Strategic Relationships

We are a strategic partner in Microsoft's Jumpstart Initiative of leading
broadband content and technology companies. As part of our agreement with
Microsoft, and in consideration for a limited license to showcase our content,
Microsoft has agreed to pay for a portion of our streaming services costs and
to provide high-level strategic technical support and services. We are able to
provide our viewers with the ability to download Microsoft's Windows Media
Player(TM) for their own use and to employ its Windows Media Technology to
deliver our streaming video content. Microsoft, in turn, provides summaries of
some of our programming content on its Microsoft Network, MSN(R)'s Web Events
Internet site and enables MSN viewers to access our channels from such site by
means of a link.

In October 1999, we entered into an agreement with RealNetworks, Inc. to
showcase excerpts of our low-band content as a premier content partner in
RealNetworks' "Take 5 Program," which was implemented in January 2000.

We have also entered into a number of arrangements with content providers to
acquire content at terms and costs that, we believe, are advantageous to us.
Among others, we have relationships with several content providers that add
significant audio and video programs to our collection including for instance,
an agreement that we entered into in November 1999 with RockAmerica, Inc. to
license up to 5,000 music videos.

Network Marketing and Promotion

Our marketing efforts, which have included the hiring and training of a
marketing and public relations staff and the production of high-quality
professional video promotions, are currently concentrated in the following
areas:

. Targeted press releases and other public relations work, which has
resulted in numerous newspaper, journal and other articles about us in
general and various of our programs, channels, networks and other
activities in particular.

. Establishing relationships with other Internet companies, exchanging
banner ads with high-traffic Web sites, and showcasing our content on
portals, such as Microsoft's Windows Media(TM), Yack.com and
AllAboutJazz.com.

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. Postings to targeted news groups, portals, electronic bulletin boards
and other special interest groups that would have an interest in our
focused content.

. Mass e-mail campaigns that are targeted by channel, content, and
interest. To date, thousands of e-mail messages promoting our networks
and channels have been distributed to interested viewers.

. Distribution of brochures, pamphlets, stickers, and other promotional
material in point of sale distribution campaigns on college campuses, at
concerts, and other targeted events and places of interest.

. Industry standard search engine optimization to ensure that our
channels' ranking in major Web search engines will be prominent, to
attract traffic to our networks. This includes professional internal
review of the title, keywords and description tags on each of the Web
pages on our networks.

We believe that as we gain a larger share in the market for streaming video,
our networks will continue to gain in brand recognition, which in turn, may
translate into a steadily building user base with great potential value for
advertisers, e-commerce partners and content providers.

Competition

The market for Internet broadcasting is highly competitive and we expect
that such competition will continue to intensify. We presently compete with
several other Web sites, Internet portals and Internet broadcasters that
provide streaming audio and streaming video content to attract users. We
compete with on-line services, other Web site operators and advertising
networks, as well as traditional media such as television, radio and print,
for a share of advertisers' total advertising budgets and sales of advertising
spots. We believe that the principal competitive factors for attracting
advertisers include

. the number of users accessing our Web sites;

. the demographics of our users;

. our ability to deliver focused advertising and interactivity through our
Web sites;

. the overall cost-effectiveness and value of advertising on our network.

There is intense competition for the sale of advertising on high-traffic Web
sites, which has resulted in a wide range of rates quoted by different vendors
for a variety of advertising services, making it difficult to project levels
of Internet advertising that will be realized generally or by any specific
company. Any competition for advertisers among present and future Web sites,
as well as competition with other traditional media for advertising
placements, could result in significant price competition.

We also compete for traditional media advertising sales with national radio
and television networks, as well as local radio and television stations. Such
radio and television networks and stations in virtually all instances have
larger and more established sales organizations than ours. These companies may
also have greater name recognition and more established relationships with
advertisers and advertising agencies than us. Such competitors may be able to
undertake more extensive marketing campaigns, obtain a more attractive
inventory of ad spots, adopt more aggressive pricing policies and devote
substantially more resources to selling advertising inventory.

Moreover, we compete against a variety of businesses that provide content
through one or more mediums, such as print, radio, television, cable
television and the Internet. Some traditional media companies have begun to
establish a significant streaming media presence on the Internet, and may
expend resources to establish a more significant presence in the future. To
compete successfully, we have to provide sufficiently compelling and popular
content to attract viewers and support advertising intended to reach such
users. We believe that the principal competitive factors in attracting
Internet users include the quality of service and the relevance, timeliness,
depth and breadth of content and services offered.

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We also compete against a variety of content-based Internet companies that
aggregate and broadcast streaming video and audio, including music, music
videos, movie trailers, sports, news and business events, as well as full-
length movies. Some of the major Internet broadcasters are Broadcast.com,
Pseudo.com, AtomFilms.com, Launch.com, FasTV.com, Streamedia.com and Den.com.

We believe that based upon our niche programming, unique subject matters,
and our ability to market our name and services and differentiate ourselves
from other content providers, we will successfully attract a significant
number of viewers. However, we can give no assurance that streaming media
companies will not directly compete with our networks. As the Internet becomes
more ubiquitous, and quality streaming content becomes more accessible, there
will be additional competitors seeking to broadcast content over the Internet
which can detract from our actual and potential audience.

Intellectual Property

We regard our copyrights, trademarks, trade secrets and similar intellectual
property as significant to our growth and success. We rely upon a combination
of copyright and trademark laws, trade secret protection, confidentiality and
non-disclosure agreements and contractual provisions with our employees and
with third parties to establish and protect our proprietary rights. We have
applied for federal trademark protection for our networks and channels and
intend to apply for federal trademark protection for certain of the marks and
names that we use in the course of our business.

To protect the methods, systems and procedures that we developed for the
publishing of our content and our streaming operations, we have filed a
provisional patent application with the United States Patent and Trademark
Office in December 1999.

Government Regulation

There are few laws or regulations directly applicable to the Internet. For
example, the Digital Millennium Copyright Act, enacted into law in 1998,
protects certain qualifying online service providers from copyright
infringement liability, the Internet Tax Freedom Act, also enacted in 1998,
placed a three year moratorium on new state and local taxes on Internet access
and commerce, and under the Communications Decency Act, an Internet service
provider will not be treated as the publisher or speaker of any information
provided by another information content provider. The appeal of the Internet
makes it likely, however, that state or national laws may be implemented in
the future covering such issues as user privacy, defamatory speech, copyright
infringement, pricing and characteristics and quality of products and
services. Any new law or regulation may have the effect of limiting the use of
the Internet and its growth as a new medium to communicate.

Employees

As of December 31, 1999, we had 29 full-time employees. None of our
employees is subject to a collective bargaining agreement and we believe that
our relations with our current employees are good.

Item 2. Properties

We maintain our executive offices in premises of approximately 5,300 square
feet at 120 Fifth Avenue in New York City. We pay approximately $13,250 per
month in base rent. The lease expires in May 2006. We also sublet a small
office of approximately 300 square feet, at 162 Fifth Avenue for $600 per
month.

During most of 1999, we maintained offices and a production facility in Old
Greenwich, Connecticut at a monthly rental of $1,825 under a lease expiring in
May 2001. In December 1999, we discontinued our activities there and
consolidated them in New York City. We have since sublet this facility to
unaffiliated third parties.

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We also maintain offices of approximately 2,000 square feet at 153 rue de
Courcelles, Paris, France, to serve as our European operations center and to
allow for satellite feeds. We pay approximately $5,600 per month in base rent
for this facility under a lease expiring in July 2002.

We believe our facilities are adequate for our current purposes.

Item 3. Legal Proceedings

In October, 1999, Grant Construction Services, Inc. and Two Sons
Construction, Inc. filed a law suit in the Supreme Court of the State of New
York, claiming that they are owed a balance of $29,835 for certain
construction services at our executive offices. We filed an answer denying the
allegations in this complaint and asserted counterclaims for breach of
contract and damages attributable to the plaintiff's faulty work. This matter
is in the discovery stage. We believe that the plaintiffs' allegations are
without merit and intend to vigorously defend against the action and pursue
our counterclaims.

In December, 1999, we filed a lawsuit in the Supreme Court of the State of
New York, New York County, against Yeon S. Hong, a former officer and employee
that we had terminated for cause. We alleged that Mr. Hong had fraudulently
induced us to enter into an employment agreement with him. The defendant
removed the case to the United States District Court for the Southern District
of New York, where he filed an answer denying the allegations of our complaint
and asserted counterclaims against us demanding benefits under his employment
agreement, wages that he claims were due to him, and damages for alleged
discrimination under New York State law. This matter is in the pre-discovery
stage. We believe Mr. Hong's complaint to be without merit. We intend to
vigorously pursue our claims and to defend against Mr. Hong's counterclaims.

Item 4. Submission of Matters to a Vote of Security Holders

On Tuesday, December 28, 1999, a special meeting of our stockholders was
held to consider and vote upon a proposal to amend our certificate of
incorporation to change our name to "Medium4.com, Inc." Of the 9,978,433
shares outstanding, the holders of 9,401,140 shares were present in person or
by proxy. Of these, 9,398,840 shares were voted in favor of the proposal,
2,000 shares were voted against and 300 shares abstained.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Since June 8, 1999, our common stock and our redeemable common stock
purchase warrants have each been quoted on the OTC Bulletin Board. Prior to
that date, there was no public market for any of our securities.

The following table sets forth the range of the high and low bid quotations
for such securities for the periods indicated.

<TABLE>
<CAPTION>
Common Stock
Quarter Ended Common Stock Purchase Warrants
- ------------- -------------- ------------------
High Low High Low
------- ------ --------- --------
<S> <C> <C> <C> <C>
June 30, 1999 (beginning 6/8/99).............. $5 1/4 $4 1/2 1 3/16 5/8
September 30, 1999............................ $5 1/4 $3 1/2 1 1/4 11/16
December 31, 1999............................. $7 3/16 $3 7/8 1 5/16 3/4
</TABLE>

The above quotations represent prices between dealers and do not include
retail mark-up, markdown or commission. They do not necessarily represent
actual transactions.

On March 16, 2000, the last reported prices of our common stock and our
common stock purchase warrants were $5 1/2 and $ 7/8, respectively. On that
date, there were 169 and 80 recordholders of our common stock and warrants,
respectively, although we believe that there are other persons who are
beneficial owners held in street name.

We have never paid cash dividends. We intend to retain any future earnings
for the operation and the expansion of our business and do not anticipate
paying any cash dividends in the foreseeable future.

Between November 1999 and January 2000, we privately sold 200,000 shares of
our common stock to 40 "accredited" investors at $3.00 per share. No
underwriters were employed for this purpose. We sold these shares in reliance
upon the exemption from registration under the Securities Act of 1933 provided
by Section 4(2) of the Act, on the basis that this transaction did not involve
any public offering.

On April 13, 1999, we commenced an initial public offering of our
securities, SEC file number 333-71733. Utilizing Westminster Securities
Corporation as our exclusive agent, we offered for public sale 1,700,000
units, each unit consisting of one share of our common stock and one
redeemable warrant to purchase one additional share of our common stock at an
exercise price of $9.00 per share, at a price of $6.00 per unit. The offering
was terminated on June 3, 1999, by which time we had sold 1,678,433 units,
yielding us gross proceeds of $10,070,598. Offering costs, consisting
primarily of underwriting commissions and expenses, professional fees and
printing, aggregated $1,278,046, resulting in net proceeds to us of
$8,792,552.

From April 13, 1999 through December 31, 1999, we expended $3,872,851 of
such net proceeds upon the development of our business, as more fully set
forth in Part I of this report, including $644,696 for the payment of
officers' salaries. The balance of such net proceeds, inclusive of interest
thereon, have been utilized to purchase marketable securities, which will be
liquidated as required for the further development of our business and for
working capital purposes.

Item 6. Selected Financial Data

Our consolidated balance sheet and statement of operations set forth under
Part IV of this report on pps. F-2 and F-3 are incorporated herein by
reference.

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<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Background

We were founded on November 12, 1998 and should be considered as still in a
developmental stage. We have not generated any material revenues to date.

From our inception until our initial public offering in April 1999, our
entire activity was to prepare for fundraising through an offering of our
equity securities. Substantially all of our expenses from January 1, 1999
through April 1999 are attributable to deferred costs of our IPO. We received
net proceeds of approximately $8.87 million from our IPO. That portion of such
proceeds that were not immediately used were invested in short-term,
investment grade, interest-bearing instruments.

We commenced operations as soon as proceeds from the IPO became available,
preparing during the subsequent two months the groundwork for our operations,
choosing facilities for our operations and hiring our initial staff. We
commenced the delivery of streaming audio and video media content on our
primary website at www.foreignTV.com in mid-April 1999.

During our first full quarter of operations, we focused our efforts on
building a physical infrastructure along with strong executive, production and
technical teams and alpha and beta development of our online streaming media
networks and channels. By September 1999, we were situated in our facilities
in New York and Paris.

During our second full quarter of operations, we focused on perfecting our
commercial media streaming capabilities, worked to produce and acquire
compelling audio and video content to broadcast and established our revenue
structure.

As a result of these efforts, by December 1999, we had launched four full-
fledged Internet television networks with a current aggregate of 40 uniquely
branded channels, each channel having its own streaming media audio and video
content and a distinctive logo. Each channel can be accessed in various ways,
including from each of our networks or directly via its domain name.

Working to deliver on the high revenue potential of streaming media, we are
seeking to develop several revenue streams: advertising, sponsored content,
content licensing, e-commerce, affiliate relations, channel ownership, Private
Label Streaming(TM), and pay per view and pay per download content
distribution. We expect to substantially increase our expenditures to promote
our four networks in an effort to develop advertising revenues and e-commerce
tie-in commissions.

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.

Results of Operations

Year ended December 31, 1999

We sustained a net loss of $3.76 million for the year ended December 31,
1999 on revenues of approximately $45,800. Such revenues were derived entirely
from advertising and the production of infomercials.

The production costs for the development of our original content from the
period of May 1999, when we commenced production of the content offered on our
networks and channels to December 31, 1999, were approximately $1.10 million.
This amount includes the cost of (i) data communications, (ii) hiring and

II-2
<PAGE>

compensating operations personnel to handle production and delivery of our
content, (iii) software license fees and (iv) content license fees, where
necessary in order to acquire additional content. As our user traffic
increases and as the number of services we offer increases, we expect these
expenditures to increase.

Our selling, general and administrative expenses were approximately $2.77
million for the year ended December 31, 1999, consisting primarily of $663,476
in personnel costs, $381,034 in professional and consulting fees, $335,926 in
rent, overhead, equipment and depreciation, $124,823 in sales and marketing
costs, and $821,169 in general and administrative costs. Internet domain and
Web service costs, together with miscellaneous expenses, accounted for the
balance.

We had depreciation and amortization expense of $145,868 for the year ended
December 31, 1999. This was derived primarily from depreciation relating to
our leasehold improvements and furniture, computer and camera equipment
purchases.

Our net losses were partially offset by interest earnings on our investment
grade securities, cash and cash equivalents amounting to approximately
$206,320 in 1999.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through sales of
our common stock and warrants in our IPO and in a private placement between
December 1999 and March 2000. Net proceeds from these sales have totaled
approximately $9.5 million, with $8.78 million raised in the IPO and $712,000
raised in the private placement.

For the year ended December 31, 1999, we used approximately $3.87 million in
connection with our operating activities. Such amount was primarily
attributable to net losses, offset in part by increases in accounts payable,
accrued liabilities and deferred revenue.

For the year ended December 31, 1999, we used approximately $1.57 million in
1999 in connection with our investing activities, purchases of property and
equipment, production of encoded videos, which are treated as software
development, and registration costs relating to our library of domain names.

At December 31, 1999, we had $4.26 million of cash and cash equivalents. We
believe that current cash and cash equivalents, together with anticipated
revenues from our recently concluded affiliate agreements, will be sufficient
to meet our anticipated cash needs for working capital and capital
expenditures for the next twelve months. However, the growth of our business,
if sustained, may require us to raise additional capital. We can give no
assurance that we will able to obtain such additional financing, if needed, on
terms attractive to us, if at all. Failure to raise capital when needed could
adversely affect our future operations and prospects. If we raise additional
funds through the issuance of equity securities, then our current stockholders
would have their percentages of equity ownership of Medium4.com reduced.
Furthermore, such equity securities might have rights, preferences or
privileges senior to those of our common stock.

Year 2000

To date our systems and computer software and hardware have not experienced
any material disruption due to the onset of the Year 2000, and we have
completed our Year 2000 preparedness activities. However, we cannot assure
that we will not experience disruptions in the future as a consequence of the
Year 2000 issue. We cannot quantify the amount of our potential exposure, but
do not believe it to be material.

Forward Looking Statements

This report contains certain forward-looking statements and information
relating to us and to our present and future business operations within the
meaning of Federal securities law. We have identified forward-looking
statements in this prospectus using words such as "believes," "intends,"
"expects," "predicts," "may," "will," "should," "contemplates," "anticipates,"
or similar statements.

These statements are based on our beliefs as well as assumptions we made
using information currently available to us. Because these statements reflect
our current views concerning future events, these statements

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<PAGE>

involve certain risks, uncertainties and assumptions. Actual future results
may differ significantly from the results discussed in the forward-looking
statements.

Risk Factors

We have a limited operating history

We have a limited operating history on which to base an evaluation of our
business and prospects, having only commenced our initial business operations
in May 1999. Our prospects must be considered in light of the risks,
difficulties and uncertainties frequently encountered by companies in an early
stage of development, particularly companies in new and rapidly evolving
markets such as the market for Internet broadcasting, services and
advertising. These risks include our ability to:

. provide compelling and unique content to Internet users;

. successfully market and sell our services; and

. effectively develop new and maintain existing relationships with
companies in our affiliate program, advertisers, content providers,
business customers and advertising agencies and other persons with which
do business;

As we have so little history of operations, investors will be unable to
assess our future operating performance or our future financial results or
condition by comparing these criteria against their past or present
equivalents.

We expect to incur significant losses for the foreseeable future

We have yet to recognize any material revenues from services or advertising
and we have recorded a net loss for our first year of operation. We expect to
incur significant losses on both a quarterly and an annual basis for the
foreseeable future. There can be no assurance that we will ever achieve
profitability.

We will be unable to attract viewers to our networks and their channels if
the public rejects streaming technology

Our success will depend upon market acceptance of streaming technology as an
alternative to broadcast television. Without streaming technology, viewers
would not be able to initiate playback of our programming until such
programming is downloaded in its entirety, resulting in significant waiting
times. The acceptance of streaming technology will depend upon a number of
factors, including:

. market acceptance of streaming players such as Microsoft's Windows Media
Player(TM) and RealNetworks' RealPlayer; and

. technological improvements to the Internet infrastructure to allow for
improved video and audio quality and a reduction in Internet usage
congestion;

Early streaming technology suffered from poor audio quality, and current video
streaming is of lower quality than conventional media broadcasts. In addition,
Internet congestion may interrupt audio and video streams, resulting in user
dissatisfaction. Our prospects will be adversely affected if streaming media
technology fails to achieve or maintain broad acceptance.

We are dependent on providers of streaming media products

We rely on providers of streaming media products, such as Microsoft and
RealNetworks, to provide a broad base of users with streaming media software.
We currently license software products that enable the broadcast of streaming
media from such companies and others. We may need to acquire additional
licenses to meet our future needs. Users are currently able to download
electronically copies of Microsoft's Windows Media Player and RealNetwork's
RealPlayer software free of charge. If providers of streaming media products
substantially

II-4
<PAGE>

increase license fees charged to us for the use of their products or refuse to
license such products to us, our ability to provide streaming audio and video
will be adversely affected.

We may not be able to protect our proprietary rights

We regard our copyrights, trade secrets, trademarks, patents, and similar
intellectual property as significant to our growth and success. We rely upon a
combination of copyright and trademark laws, trade secret protection,
confidentiality and non-disclosure agreements and contractual provisions with
our employees and with third parties to establish and protect our proprietary
rights. We have applied for federal trademark protection for our networks and
other channels and brands and intend to apply for federal trademark protection
for other marks and names used in our business. Legal standards relating to
the validity, enforceability and scope of protection of certain proprietary
rights in Internet-related industries are uncertain and still evolving. We are
unable to assure investors as to the future viability or value of any of our
proprietary rights or those of other companies within the industry. We are
also unable to assure investors that the steps taken by us to protect our
proprietary rights will be adequate. Furthermore, we can give no assurance
that our business activities will not infringe upon the proprietary rights of
others, or that other parties will not assert infringement claims against us.

We will need significant additional financing to grow

We will require substantial additional financing in order to seek to expand
our operations and to become a meaningful competitor in the Internet broadcast
industry. We have no current definitive arrangements with respect to
additional financing and there can be no assurance that any such financing
will be available to us on commercially reasonable terms, or at all. Moreover,
if we raise this additional capital through borrowing or other debt financing,
we would incur substantial interest expense. Sales of additional equity
securities will dilute on a pro rata basis the percentage ownership of all
holders of common stock. Any inability to obtain additional financing will
materially adversely affect us, including possibly requiring us to
significantly curtail operations.

Government regulation of the Internet could slow its growth

We currently do not collect sales or other taxes with respect to the sale of
services or products in states and countries where we believe we are not
required to do so. One or more states or countries have sought to impose sales
or other tax obligations on companies that engage in online commerce within
their jurisdictions. A successful assertion by one or more states or countries
that we should collect sales or other taxes on products and services, or remit
payment of sales or other taxes for prior periods, could adversely affect our
business.

We are dependent on certain third party content providers

Our future success depends upon our ability to aggregate and deliver
compelling content over the Internet. Although we create our own content, we
also rely to some extent on third party content providers, such as television
stations and networks, businesses and other organizations, film producers and
distributors, and record labels for compelling and entertaining content. Our
ability to maintain and build relationships with content providers is critical
to our success. Although many of our agreements with third party content
providers are for initial terms of more than one year, such agreements may not
be renewed or may be terminated prior to the

II-5
<PAGE>

expiration of their terms if we do not fulfill our contractual obligations.
Our inability to secure licenses from content providers or [performance rights
societies] or the termination of a significant number of content provider
agreements would decrease the availability of content that we can offer users.
Such inability or termination may result in decreased traffic on our Web sites
and, as a result, decreased advertising revenue, which could adversely affect
our business.

Our agreements with certain of our content providers are nonexclusive, and
many of our competitors offer, or could offer, content that is similar to or
the same as that obtained by us from such nonexclusive content providers. Such
direct competition could dilute the value of the programming of our networks
and channels.

We may be subject to the SEC's "penny stock" rules if our common stock falls
below $5.00 per share

If the trading price of our common stock was to fall below $5.00 per share,
trading in our securities would be subject to the requirements of the SEC's
penny stock rules. These rules require the delivery prior to any penny stock
transaction of a disclosure schedule explaining the penny stock market and all
associated risks and impose various sales practice requirements on broker-
dealers who sell penny stocks to persons other than established customers and
accredited investors, which are generally defined as institutions or an
investor with a net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with the spouse. For these types of transactions
the broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to sale. In addition, broker-dealers must disclose commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit their
market price and liquidity.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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 not purchased options or entered into 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 $125,445, approximately 2.8%, at the end of the period ended
December 31, 1999.

Item 8. Financial Statements and Supplementary Data

The report of our independent auditors and our consolidated financial
statements and related notes thereto appear on pages F-1 through F-10 of this
report.

Item. 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

We refer you to our current report on Form 8-K, filed with the SEC on July
26, 1999, for certain information pertaining to our retention of Radin, Glass
& Co., LLP as our independent auditors, as well as certain information
attendant to the discharge of our prior independent auditor.

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<PAGE>

Part III

Item 10. Directors and Executive Officers of the Registrant

Item 10 is hereby incorporated by reference form our definitive Proxy
Statement to be filed within 120 days of December 31, 1999.

Item 11. Executive Compensation

Item 11 is hereby incorporated by reference form our definitive Proxy
Statement to be filed within 120 days of December 31, 1999.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 12 is hereby incorporated by reference from our definitive Proxy
Statement to be filed within 120 days of December 31, 1999.

Item 13. Certain Relationships and Related Transactions.

Item 13 is hereby incorporated by reference form our definitive Proxy
Statement to be filed within 120 days of December 31, 1999.

III-1
<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Financial Statements and Financial Statement Schedules:

(i) Financial Statements

Report of Independent Auditors

Consolidated Balance Sheet as of December 31, 1999

Consolidated Statements of Operations for the Years Ended December 31,
1999 and 1998

Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1999 and 1998

Consolidated Statements of Cash Flows for the Years ended December 31,
1999 and 1998

Notes to Consolidated Financial Statements

(ii) Financial Statement Schedules

All financial statement schedules are omitted because the conditions
requiring their filing do not exist or the information required thereby is
included in the financial statements filed, including the notes thereto.

(b) Reports on Form 8-K:

None.

<TABLE>
<C> <S>
3.1 Certificate of Incorporation of the Registrants, as amended (1)
3.2 By-laws of the Registrant (1)
4.1 Form of Certificate evidencing shares of Common Stock (1)
4.2 Form of Certificate evidencing Common Stock Purchase Warrants (1)
Form of Unit Purchase Option between Registrant and Westminster Securi-
4.3 ties Corporation (1)
4.4 Form of Warrant Agreement between Registrant and American Stock Transfer
& Trust Company, as warrant agent (1)
10.1 1999 Stock Option Plan (1)
License Agreement between Registrant and the Center for Contemporary Di-
10.2 plomacy, Inc. (1)
10.3 License Agreement between Registrant and Jonathan Braun (1)
10.4* Employment Agreement between Registrant and Jonathan Braun (1)
10.5* Employment Agreement between Registrant and Bruno Finel (1)
10.6* Employment Agreement between Registrant and Marc Leve (1)
10.7* Employment Agreement between Registrant and Graham Cannon (2)
10.8* Employment Agreement between Registrant and Harold Berliner (3)
10.9* Employment Agreement between Registrant and Elorian C. Landers (3)
10.10 Lease for premises at 120 Fifth Avenue, New York, New York (2)
Letter from Martin S. Weiselberg, CPA, regarding change in certifying
16.1 accountant(4)
21.1 Subsidiaries of the Registrant
27.1 Financial Data Schedule
</TABLE>
- --------
* Indicates management contract or compensatory plan or arrangement.

(1) Denotes documents filed as an exhibit to Registrant's Registration
Statement on Form S-1, as amended (File No. 333-71733), and incorporated
herein by reference.
(2) Denotes documents filed as an exhibit to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999, incorporated herein by
reference.
(3) Denotes document filed as an exhibit to Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, incorporated herein by
reference.
(4) Denotes document filed as an exhibit to Registrant's Current Report on
Form 8-K, filed July 26, 1999, incorporated herein by reference.

IV-1
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Medium4.com, Inc.

By: /s/ Jonathan Braun
----------------------------------
Jonathan Braun,
Chief Executive Officer

Dated: March 29, 2000

Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities indicated and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Jonathan Braun Chief Executive Officer and March 29, 2000
______________________________________ Director
Jonathan Braun
</TABLE>

<TABLE>
<S> <C> <C>
/s/ Harold I. Berliner Treasurer and Principal March 29, 2000
______________________________________ Financial and Accounting
Harold I. Berliner Officer

/s/ I. William Lane Chairman of the Board and March 29, 2000
______________________________________ Director
I. William Lane

/s/ Graham Cannon President & Chief Operating March 29, 2000
______________________________________ Officer
Graham Cannon

/s/ David Badner Executive Vice President and March 29, 2000
______________________________________ Director
David Badner

______________________________________ Senior Vice President--
Bruno Finel International Operations and
Director

/s/ Marc D. Leve Vice President--Legal Affairs, March 29, 2000
______________________________________ General Counsel, Secretary and
Marc D. Leve Director

______________________________________ Director
Stanley S. Canter

______________________________________ Director
Junichi Watanabe
</TABLE>

S-1
<PAGE>

INDEPENDENT AUDITOR'S REPORT

March 16, 2000

Shareholders and Directors
Medium4.com, Inc.

We have audited the accompanying consolidated balance sheets of Medium4.com,
Inc. as of December 31, 1999 and 1998, and the related consolidated statements
of operations, shareholders' equity and cash flows for the year ended December
31, 1999 and the period November 12, 1998 (inception) to December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Medium4.com, Inc. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the year ended December 31, 1999 and the
period November 12, 1998 (inception) to December 31, 1998 in conformity with
generally accepted accounting principles.

Radin, Glass & Co., LLP
Certified Public Accountants
New York, New York

F-1
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
----------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................. $ 103,364 $ --
Marketable securities................................. 4,159,418 --
Accounts receivable................................... 12,800 --
Other current assets.................................. 378,823 --
----------- --------
Total Current Assets................................ 4,654,406 --

INVESTMENT IN AFFILIATE................................. 159,000 --

LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET............... 1,130,610 --

SOFTWARE, NET........................................... 354,582 --

OTHER ASSETS............................................ 183,458 6,670
----------- --------
$ 6,482,056 $ 6,670
=========== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable...................................... $ 256,394 $ --
Accrued expenses...................................... 233,307 --
Due to related parties................................ -- 6,670
----------- --------
Total Current Liabilities........................... 489,701 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, 10,178,433 and 8,300,000 issued and
outstanding, respectively............................ 101,784 83,000
Paid in capital....................................... 11,789,014 --
Subscription receivable............................... -- (83,000)
Accumulated deficit................................... (3,760,176) --
Unearned compensation expense......................... (2,121,215) --
Accumulated other comprehensive income................ (17,052) --
----------- --------
Total Stockholder's Equity.......................... 5,992,355 --
----------- --------
$ 6,482,056 $ 6,670
=========== ========
</TABLE>

See notes to consolidated financial statements

F-2
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999

<TABLE>
<S> <C>
REVENUE........................................................... $ 45,800

EXPENSES:
Production...................................................... 1,101,059
Selling, general and administrative expenses.................... 2,771,792
-----------
Total expenses................................................ 3,872,851
-----------
LOSS FROM OPERATIONS.............................................. (3,827,051)

OTHER INCOME
Interest income................................................. 203,707
Loss on marketable securities................................... (125,445)
Other income.................................................... 2,613
-----------
Total other income............................................ 80,875
-----------
LOSS BEFORE TAXES................................................. (3,746,176)

INCOME TAX EXPENSE................................................ 14,000
-----------
NET LOSS.......................................................... $(3,760,176)
===========
Other comprehensive income, net of tax:
Foreign currency translation adjustments........................ (17,052)
Comprehensive Income.............................................. $(3,777,228)
===========
Weighted average shares of common stock outstanding............... 9,139,217
Net loss per share............................................ $ (0.41)
===========
</TABLE>

See notes to consolidated financial statements

F-3
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
Common Stock
-------------------
Accumulated
Additional Other Unearned Total
Paid in Accumulated Subscription Comprehensive Compensation Stockholders
Shares Amount Capital Deficit Receivable Income Expense Equity
---------- -------- ----------- ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
November 12,
1998
(inception)..... 8,300,000 $ 83,000 $ -- $ -- $(83,000) $ -- $ -- $ --
---------- -------- ----------- ----------- -------- -------- ----------- -----------
Balance as of
December 31,
1998............ 8,300,000 83,000 -- -- (83,000) -- -- --
Receipt of stock
subscription.... -- -- -- -- 83,000 -- -- 83,000
Sale of common
stock--initial
public
offering........ 1,678,433 16,784 8,766,768 -- -- -- -- 8,783,552
Sale of common
stock--private
placement....... 200,000 2,000 598,000 -- -- -- -- 600,000
Stock options
issued for
services........ -- -- 2,424,246 -- -- -- -- 2,424,246
Accumulated other
comprehensive
income.......... -- -- -- -- -- (17,052) -- (17,052)
Unearned
Compensation
expense......... -- -- -- -- -- -- (2,121,215) (2,121,215)
Net loss......... -- -- -- (3,760,176) -- -- -- (3,760,176)
---------- -------- ----------- ----------- -------- -------- ----------- -----------
10,178,433 $101,784 $11,789,014 $(3,760,176) $ -- $(17,052) $(2,121,215) $ 5,992,355
========== ======== =========== =========== ======== ======== =========== ===========
</TABLE>

See notes to consolidated financial statements

F-4
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Period Period
November 12, 1998 November 12, 1998
Year ended (inception) to (inception) to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss............... $(3,760,176) $ -- $(3,760,176)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation......... 125,001 -- 125,001
Amortization......... 20,867 -- 20,867
Stock options issued
for services........ 303,031 -- 303,031
Increase in accounts
receivable.......... (12,800) -- (12,800)
Increase in other
current assets...... (378,823) -- (378,823)
Increase in accounts
payable............. 256,394 -- 256,394
Increase in accrued
expenses............ 233,307 -- 233,307
Decrease in due to
related parties..... (6,670) 6,670 --
----------- ------- -----------
NET CASH USED BY
OPERATIONS.............. (3,219,869) 6,670 (3,213,199)
----------- ------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Deferred offering
costs................. -- (6,670) (6,670)
Increase in investment
in affiliate.......... (159,000) -- --
Increase in other
assets................ (176,788) -- --
Purchases of capital
expenditures.......... (1,631,060) -- (1,631,060)
Increase in marketable
securities............ (4,159,418) -- (4,159,418)
----------- ------- -----------
NET CASH USED BY
INVESTING ACTIVITIES.... (6,126,266) (6,670) (5,797,148)
----------- ------- -----------
CASH PROVIDED BY
FINANCING ACTIVITIES:
Sale of common stock... 9,383,552 83,000 9,466,552
Change in subscription
receivable............ 83,000 (83,000) --
Accumulated other
comprehensive income.. (17,052) -- (17,052)
----------- ------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES.... 9,449,500 -- 9,449,500
----------- ------- -----------
NET INCREASE IN CASH..... 103,364 -- 439,152
CASH, beginning of the
period.................. -- -- --
----------- ------- -----------
CASH, end of the period.. $ 103,364 $ -- $ 439,152
=========== ======= ===========
Supplemental disclosures
of cash flow
information:
Interest paid.......... $ -- $ --
Taxes paid............. -- --
Non cash financing
activities:
Stock options issued
for services.......... $ 2,424,246 $ --
</TABLE>

See notes to consolidated financial statements

F-5
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 1999 and the Period November 12, 1998
(Inception) to December 31, 1998

Note 1. Business

Medium4.com, Inc. and Subsidiaries (the "Company") formerly known as
foreignTV.com, Inc. is a Delaware corporation formed on November 12, 1998. The
Company was organized to develop opportunities as an Internet broadcaster of
international and niche content.

Note 2. Summary of Significant Accounting Principles

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 a cash equivalents. The
Company has cash held in excess of $100,000 which exceeds the FDIC insurance
limits and is therefore uninsured.

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 for the year ended December 31, 1999 of the Company also represent
the accumulated operations and cash flows of the Company. There were no
operations to report for 1998.

Leasehold Improvements and Equipment

Leasehold improvements and equipment are stated at cost. Maintenance and
repairs are charged to expenses as incurred. Depreciation is provided for over
the estimated useful lives of the individual assets using 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.

F-6
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Software Development Costs

The Company capitalized software development costs in accordance with SFAS
86 and SOP
97-2 and SOP 98-4. The Company has capitalized $354,583 of such software
development costs and will amortize such costs over 30 months on a straight
line basis.

Income Taxes

The Company utilizes the liability method of accounting for income taxes as
set forth in SFAS 109, "Accounting for Income Taxes." Under the liability
method, deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
The Company has a net operating loss carryforward of approximately $3,400,000,
which expire in the year 2020. The Company has recorded approximately
$1,200,000 valuation allowance on the deferred tax asset.

Loss Per Share

The Company has adopted SFAS 128, "Earnings per Share." Loss per common
share are computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period.

Accounting for Long-Lived Assets

The Company reviews long-lived assets, certain identifiable assets and any
goodwill related to those assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts
may not be recoverable. At December 31, 1999 and 1998 respectively, the
Company believes that there has been no impairment of long-lived assets.

Investment in Affiliate

Investments in affiliate represent a 20% ownership in foreignTV, Inc., which
management has recorded utilizing the cost method. See Note 9. Management does
not exercise significant influence over the operating or financial policies
over the affiliate.

Accounting estimates and assumptions

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.

Note 3. Marketable Securities

Marketable securities at December 31, 1999 consist of mutual fund shares
which are classified as available for sale securities.

F-7
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 4. Leasehold Improvements and Equipment

At December 31, 1999, leasehold improvements and equipment consist of the
following:

<TABLE>
<S> <C>
Leasehold improvements....................................... $ 329,643
Furniture & fixtures......................................... 307,143
Computer equipment........................................... 272,453
Camera equipment............................................. 76,446
Other equipment.............................................. 290,793
----------
1,276,478
Less: accumulated depreciation............................... 145,868
----------
$1,130,610
==========
</TABLE>

Leasehold improvements are depreciated over 5 years. Furniture, fixtures and
equipment are depreciated over 3 to 7 years.

Note 5. Other Assets

Included in other assets are security deposits of $112,413 and intangible
assets comprised of domain names which such costs of $86,880 are being
amortized over 24 months. The unamortized portion at December 31, 1999 was
$71,045.

Note 6. Equity Transactions

a. In November 1998, the founders of the Company issued 8,300,000 shares of
common stock to themselves for $83,000. Such monies were received in 1999.

b. In April and May 1999 the Company sold 1,678,433 shares of common stock
pursuant to an initial public offering registration at $6.00 per unit. Each
unit consisted of one share of common stock and one warrant to purchase one
share of common stock at an exercise price of $9.00. There are 1,678,433 of
such warrants outstanding as of December 31, 1999. The warrants will be
exercisable at any time, until they expire three years after the effective
date of the Proposed Offering. 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. In connection with the initial public offering
167,843 units were issued to the underwriter with an exercise price of $6.60
for one share of common stock and a warrant to purchase another share of
common stock at $9.00, expiring in May 2004. There were costs of $1,278,046
applied as a reduction to such offering proceeds.

c. During the fourth quarter of 1999, the Company sold 200,000 shares of
common stock for $3.00 per share pursuant to a private placement for the sale
of such unregistered securities. The Company received $459,000 of the sale of
stock proceeds in 1999 and the remaining $141,000 by January 14, 2000. The
$141,000 stock subscription is recorded as an other current asset.

Note 7. Stock Option Plan

The Company has two incentive stock option plans, which are authorized to
issue up to 500,000 and 1,000,000 shares of common stock, respectively,
subject to approval by the stockholders.

F-8
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

For disclosure purposes in accordance with SFAS No. 123, the fair value of
each stock option grant is estimated on the date of grant using the Black-
Scholes option-pricing model with the following weighted-average assumptions
used for stock options granted during the year ended December 31, 1999: annual
dividends of $0.00, expected volatility of 50% at December 31, 1999, risk-free
interest rate of 5.7% and expected life of five years for all grants. The
weighted-average fair value of the employee stock options granted during the
year ended December 31, 1999 was $3.19. The weighted-average fair value of the
unqualified stock options granted during the year ended December 31, 1999 was
$3.35 or $2,439,426, which $304,929 was recorded as compensation expense in
1999 and the remaining balance to be amortized over 21 months.

If the Company recognized compensation cost for the vested portion of the
employee stock option plan in accordance with SFAS No. 123, the Company's pro-
forma net loss and loss per share would have been approximately, $4,520,062
and $(.50) for the year ended December 31, 1999. The value of the employee
stock options not vested is $834,394. Such stock options predominately vest
over another two years.

The following tables summarize the changes in options outstanding and the
related price ranges for shares of the Company's common stock:

Employee Stock Option Plan:

<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
------- --------------
<S> <C> <C>
Outstanding at December 31, 1998................... -- --
Granted.......................................... 499,500 $6.30
Exercised........................................ -- --
Expired or cancelled............................. -- --
------- -----
Outstanding at December 31, 1999................... 499,500 $6.30
======= =====

Non-Employee Stock Option:

<CAPTION>
Weighted
Average
Shares Exercise Price
------- --------------
<S> <C> <C>
Outstanding at December 31, 1998................... -- --
Granted.......................................... 723,500 $6.61
Exercised........................................ -- --
Expired or cancelled............................. -- --
------- -----
Outstanding at December 31, 1999................... 723,500 $6.61
======= =====
</TABLE>

The non-employee stock options outstanding are fully vested. The
compensation expense attributed to the issuance of these stock options will be
amortized over 24 months. These stock options are exercisable for five years
from the grant date.

The employee stock option plan stock options are exercisable for five years
from the grant date and vest over various terms from three to five years. As
of December 31, 1999, 224,667 of these stock options were vested.

F-9
<PAGE>

MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 8. License Agreements

The Company entered into two license agreements with related parties 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 the 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 name 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. The 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.

Note 9. Commitments and Contingencies

a. The Company leases office space pursuant to a lease agreement, which
expires on May 30, 2006. The Company also leases space in certain countries
abroad.

The future minimum lease commitments are as follows:

Rent expense for the year ended December 31, 1999 was $180,161.

b. In April 1999, the Company entered into a one year consulting and finders
agreement with a foreign entity to render public and investor relations in
Asia, promote the business of Company and locate a Japanese strategic partner
among other services. The consultant will be compensated at a monthly rate
plus a fixed rate of non-accountable out of pocket expenses and a finders fee
of 7.5% of the value of a strategic partner relationship.

The consultant was paid $500,000 during 1999, which represents a $159,000
finders fee for the 20% equity ownership in foreignTV, Inc. (Japan), $218,750
of consulting fees and out of pocket expenses and $106,250 of prepaid
consulting fees and out-of-pocket expenses for 2000.

c. The Company also has employment agreements with several of their officers
and employees with terms up to five years. The terms of the agreements may
include cash, compensation, stock options, car allowance and other traditional
employee benefits.

d. The Company is subject to litigation from time to time arising in the
ordinary course of its business. The Company does not believe that any such
litigation is likely, individually or in the aggregate, to have a material
adverse effect on the financial condition of the Company.

F-10

<PAGE>

Exhibit 21.1

Medium4.com, Inc.
----------------
List of subsidiaries

% Beneficial
State / Jurisdiction of Ownership
----------------------- ------------
Name Organization
---- ------------
ForeignTV.com, LLC Delaware 100%
NicheTV.com, LLC Delaware 100%
StreamingUSA.com, LLC Delaware 100%
Medium4.Music.com, LLC Delaware 100%
Private Label Streaming, LLC Delaware 100%
SpecialReportsTV.com, LLC Delaware 100%
PublicAffairsTV.com, LLC Delaware 100%
Medium4Latino.com, LLC Delaware 100%
AllComedyTV.com, LLC Delaware 50%
ForeignTV.com, B.V. The Netherlands 100%
ForeignTV.com, SARL France 100%*
ForeignTV.com, Ltd. Israel 100%*
TelAvivTV.com, Ltd. Israel 100%*
ForeignTV, Inc. Japan 20%
- -----------------
*Denotes indirect ownership.

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1999 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001077634
<NAME> MEDIUM4.COM, INC.

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 103,364
<SECURITIES> 4,159,418
<RECEIVABLES> 12,800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,654,406
<PP&E> 1,276,478
<DEPRECIATION> 145,868
<TOTAL-ASSETS> 6,482,056
<CURRENT-LIABILITIES> 489,701
<BONDS> 0
0
0
<COMMON> 101,784
<OTHER-SE> 5,890,571
<TOTAL-LIABILITY-AND-EQUITY> 6,482,056
<SALES> 45,800
<TOTAL-REVENUES> 45,800
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,872,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,746,176)
<INCOME-TAX> 14,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,760,176)
<EPS-BASIC> (0.41)
<EPS-DILUTED> 0

</TABLE>