<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR QUARTERLY PERIOD ENDING JUNE 30, 2000
[_] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 001-15863
Medium4.com, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-4037641
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
120 Fifth Avenue, Seventh Floor, New York, NY 10011
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(Address of principal executive offices)
(212) 993-9400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
--- ---
The number of shares of Common Stock, par value $ .01 per share, outstanding as
of August 14, 2000 is 10,471,196 shares.
<PAGE>
Medium4.com, Inc.
-----------------
INDEX TO FORM 10-Q
June 30, 2000
PART I. Financial Information Page #
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheet
June 30, 2000 1
Consolidated Statements of Operations
Three months ended June 30, 2000 2
Six months ended June 30, 2000 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Six months ended June 30, 2000
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures
about Market Rate 10
PART II. Other Information
Item 2. Changes in Securities and Use of Proceeds 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------- -------------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 130,786 $ 103,364
Marketable securities 1,312,169 4,159,418
Subscription Receivable 427,450
Accounts receivable 81,500 12,800
Other current assets 307,412 378,824
------------------- -------------------
Total Current Assets 2,259,317 4,654,406
INVESTMENT IN AFFILIATE 159,000 159,000
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET 1,215,833 1,130,610
SOFTWARE, NET 1,059,611 354,582
OTHER ASSETS 346,178 183,458
------------------- -------------------
$ 5,039,939 $ 6,482,056
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 452,596 $ 256,394
Accrued expenses 143,498 233,307
Deferred revenue 475,000 -
------------------- -------------------
Total Current Liabilities 1,071,094 489,701
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,
10,471,196 and 10,178,433 issued and outstanding, respectively 104,712 101,784
Paid in capital 12,942,536 11,789,014
Accumulated deficit (7,547,308) (3,760,176)
Unearned compensation expense (1,515,154) (2,121,215)
Accumulated other comprehensive income (15,941) (17,052)
------------------- -------------------
Total Stockholder's Equity 3,968,845 5,992,355
------------------- -------------------
$ 5,039,939 $ 6,482,056
=================== ===================
</TABLE>
See notes to consolidated financial statements
1
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MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------
June 30, 2000 June 30, 1999
-------------------- --------------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUE $ 135,498 $ -
EXPENSES:
Production 172,695 -
Amortization of software 84,298 -
Selling, general and administrative expenses 1,761,789 955,789
------------------- -------------------
------------------- -------------------
Total expenses 2,018,783 955,789
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LOSS FROM OPERATIONS (1,883,285) (955,789)
OTHER INCOME
Interest income 22,034 27,371
Loss on marketable securities (3,692) (56,468)
------------------- -------------------
Total other income 18,342 (29,097)
------------------- -------------------
LOSS BEFORE TAXES (1,864,944) (984,886)
INCOME TAX EXPENSE - 681
------------------- -------------------
NET LOSS $ (1,864,944) $ (985,567)
=================== ===================
Other comprehensive income, net of tax:
Foreign currency translation adjustments
Comprehensive Income $ (1,864,944) $ (985,567)
=================== ===================
Weighted average shares of common stock
outstanding 10,381,196 9,418,955
Net loss per share $ (0.18) $ (0.10)
==================== ====================
</TABLE>
2
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MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 2000 June 30, 1999
----------------------- -----------------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUE $ 202,409 $ -
EXPENSES:
Production 318,212 -
Amortization of software 128,620 -
Selling, general and administrative expenses 3,588,682 1,034,253
----------------------- -----------------------
Total expenses 4,035,515 1,034,253
----------------------- -----------------------
LOSS FROM OPERATIONS (3,833,106) (1,034,253)
OTHER INCOME
Interest income 70,997 27,371
Loss on marketable securities (25,022) (56,468)
----------------------- -----------------------
Total other income 45,975 (29,097)
----------------------- -----------------------
LOSS BEFORE TAXES (3,787,132) (1,063,350)
INCOME TAX EXPENSE - 681
----------------------- -----------------------
NET LOSS $ (3,787,132) $ (1,064,031)
======================= =======================
Other comprehensive income, net of tax:
Foreign currency translation adjustments
Comprehensive Income $ (3,787,132) $ (1,064,031)
======================= =======================
Weighted average shares of common stock
outstanding 10,294,298 8,779,552
Net loss per share $ (0.37) $ (0.12)
======================= =======================
</TABLE>
See notes to consolidated financial statements
3
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MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
----------------------------------- Paid in Accumulated
Shares Amount Capital Deficit
--------------- ----------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Balance as of December 31, 1999 10,178,433 $ 101,784 $ 11,789,014 $ (3,760,176)
Receipt of stock subscription - - - -
Sale of common stock 292,763 2,928 1,153,522 -
Accumulated other comprehensive
income - - - -
Unearned Compensation
expense - - - -
Net loss - - - (3,787,132)
--------------- ----------------- -------------------- ------------------
10,471,196 $ 104,712 $ 12,942,536 $ (7,547,308)
=============== ================= ==================== ==================
<CAPTION>
Accumulated
Other Unearned Total
Comprehensive Compensation Stockholders
Income Expense Equity
-------------------- ----------------------- --------------------
<S> <C> <C> <C>
Balance as of December 31, 1999 $ (17,052) $ (2,121,215)$ 5,992,355
Receipt of stock subscription - - -
Sale of common stock - - 1,156,450
Accumulated other comprehensive
income 1,111 - 1,111
Unearned Compensation
expense - 606,061 606,061
Net loss - - (3,787,132)
-------------------- ----------------------- --------------------
$ (15,941) $ (1,515,154) $ 3,968,845
==================== ======================= ====================
</TABLE>
See notes to consolidated financial statements
4
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MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six months June 30,
2000 1999
------------ ------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(3,787,132) $(1,064,031)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 190,816 14,722
Amortization 128,620 --
Accounts receivable (68,700) --
Subscription receivable (427,450)
Other current assets 71,412 --
Other assets (162,720) 2,420
Accounts payable 196,202 --
Accrued expenses (89,809) 165,176
Due to related parties -- 12,980
Deferred revenue 475,000 --
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NET CASH USED BY OPERATIONS (3,473,761) (868,733)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital expenditures (1,109,688) (456,886)
Marketable securities 2,847,249 (4,448,509)
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NET CASH USED BY INVESTING ACTIVITIES 1,737,561 (4,905,395)
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CASH PROVIDED BY FINANCING ACTIVITIES:
Sale of common stock 1,156,450 8,872,053
Change in subscription receivable -- 83,000
Unearned compensation expense 606,061 --
Accumulated other comprehensive income 1,111 --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,763,622 8,955,053
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NET INCREASE IN CASH 27,422 3,180,925
CASH, beginning of the period 103,364 --
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CASH, end of the period $ 130,786 $ 3,180,925
============ ============
Supplemental disclosures of cash flow information:
Taxes paid $ 10,850 --
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
Medium4.com, Inc and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of
Medium4.com, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation (consisting of normal recurring accruals) have been included. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Operating results for
expected for the six months period ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. Per share data for the periods are based upon the weighted
average number of shares of common stock outstanding during such periods, plus
net additional shares issued upon exercise of options and warrants.
Note 2. Equity Transactions.
----------------------------
a. During the first quarter of 2000 the Company sold 47,500 shares of common
stock pursuant to a private placement at $3.00 per share. During the second
quarter of 2000, the Company sold 30,000 shares of common stock pursuant to
a private placement at $3.00 per share.
b. In March 2000, the Company entered into an "Investment Agreement", whereby
an unaffiliated entity has purchased 105,263 shares of common stock and
warrants to purchase another 105,263 shares of common stock for $9.00 per
share for a period of four years. In addition this entity was issued
warrants to purchase 600,000 shares of common stock for $1.00 per share
subject to certain performance criteria, hereafter referred to as the
"Performance Warrants". These Performance Warrants vest based on certain
future performance criteria, therefore will be valued at the time such
warrants vest based on the then trading prices of the Company's common
stock.
6
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c. In June 2000, the Company began offering the sale of equity units in the
Company pursuant to a Confidential Private Placement Memorandum. The Company
is seeking to raise $4,050,000 through the sale of units, which consist of
10,000 shares of common stock, 10,000 Series A redeemable common stock
purchase warrants exercisable into common stock at a purchase price of $7.00
per share for three years and 10,000 Series B redeemable common stock at a
purchase price of $11.00 per share for three years. An amount of $495,000
of this PPM, consisting of 11 units, has been sold and collected through
August 11, 2000.
Note 3. License Agreement
In May 2000, the Company entered into a master affiliate agreement with Windfire
International Corporation, Ltd. "Windfire", a British Virgin Islands
Corporation, pursuant to which we have granted Windfire the exclusive right for
an initial term of five years to grant licenses solely to persons and entities
acceptable to us for the establishment and operation within the nations of
Brunei, Indonesia, Kenya, Malaysia, the Philippines, Singapore, South Africa,
Tanzania, Thailand and Uganda of Internet sites that will comprise discrete
channels upon one or more of our network of web sites.
The master affiliate agreement requires Windfire to pay us a one time fee of
$1,500,000 , of which $500,000 has been received to date. Revenues are being
recognized on a straight line basis over the term of this agreement.
Windfire has also agreed to pay us commissions over the term of the master
affiliation agreement calculated upon specified percentages of annual gross
revenues, as defined in the agreement, received by Windfire from its licensees.
These commissions, which are payable on a quarter-annual basis, will range from
10% to 30% of annual gross revenues, depending on the specific nation for which
a license has been granted and the year during the term of the agreement to
which such revenues are attributable.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
We are a developmental stage company that was founded on November 12, 1998.
As of the end of the three-month fiscal period ended June 30, 2000, we had not
generated any material revenues. 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 is not necessarily meaningful and should not be
relied upon as indications of future performance. Our current business plan
assumes that we will not derive any significant revenues from advertising,
sales, e-commerce or other activities prior to January 2001. 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 World Wide Web.
Results of Operations
---------------------
Fiscal Quarter ended June 30, 2000
We sustained a net loss of $1.86 million for the three month fiscal
period ended June 30, 2000 on revenues of approximately $135,498. Such
revenues were derived from advertising, the production of infomercials and from
our affiliate program licensing fees.
The production costs for the development of our original content for the
three month period ended June 30, 2000, were approximately $172,695. This
amount includes the cost of (i) data communications, (ii) software license fees
and (iii) content license fees, where necessary in order to acquire additional
content. This amount, however, does not include the expenses of hiring and
compensating employees and others who handle production and delivery of our
content As our user traffic increases and as the number of services we offer
increases, we expect these expenditures to increase.
The balance of license fees, in the amount of $1,000,000, that are receivable
from Windfire International Corporation, Ltd., on account of the master
affiliate license agreement, were due and owing as of the date of this report.
We have been conducting discussions with Windfire in connection with their late
payment and have been assured that the amounts due will be forthcoming.
Our selling, general and administrative expenses were approximately $1.76
million for the three-month fiscal period ended June 30, 2000, consisting
primarily of $840,136 in personnel costs, $210,764 in professional and
consulting fees, $186,668 in rent, overhead, equipment and depreciation,
$1,606 in sales and marketing costs, and $332,615 in other 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 $184,507 for the three-
month fiscal period ended June 30, 2000. This was derived primarily from
depreciation relating to our leasehold improvements and furniture, computer and
camera equipment purchases.
8
<PAGE>
Our net losses were partially offset by interest earnings on our investment
grade securities, cash and cash equivalents amounting to approximately $22,034
in the three-month fiscal period ended June 30, 2000.
During the comparable three-month fiscal period in 1999, we expended a
total of $955,789 in selling, general and administrative expenses. Since we only
began our business operations during that second quarter of 1999, subsequent to
consummating our initial public offering, we do not believe that such results
are meaningful or provide a rational basis of comparison with this quarter's
results.
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 three private placements between
December 1999 and June 2000. Net proceeds from these sales have totaled
approximately $10.6 million, with $8.8 million raised in the IPO and $1.8
million raised in the two private placements.
For the three-month period ended June 30, 2000, we used approximately
$1.8 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 three-month period ended June 30, 2000, we used approximately
$1.1 million 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.
We believe that our success will depend largely on our ability to become a
leading source for streaming media broadcasting of international and other niche
programming on the Web. Accordingly, we intend to invest heavily in order to
develop our network infrastructure, acquire content and in sales and marketing.
We expect to continue to incur substantial operating losses for the foreseeable
future. During the three-month fiscal period ended June 30, 2000, we continued
to invest heavily in and incurred significant expenditures and costs for
expanding our network infrastructure required for large-scale streaming media
broadcasts and in implementing our business plan.
At June 30, 2000, we had $1.4 million of cash and cash equivalents. The
growth of our business, if sustained, may require us to raise additional
capital. We can give no assurance that we will be 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
9
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future as a consequence of the Year 2000 bug. We cannot quantify the amount of
our potential exposure, but do not believe it to be material.
Forward-Looking Statements
Management's Discussion and Analysis above 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
these statements by using forward-looking terminology such as "may," "will,"
"expect," "anticipate," "estimate," "predict", "contemplate", "continue,"
"believe," "intend," or other similar words. These words, however, are not the
exclusive means by which you can identify these statements. You can also
identify forward-looking statements because they discuss future expectations,
contain projections of results of operations or of financial conditions,
characterize future events or circumstances or state other forward-looking
information.
These forward-looking statements included in Management's Discussion and
Analysis are based on our beliefs as well as assumptions made using information
currently available to us, and we assume no obligation to update any such
forward-looking statements. We believe that the expectations reflected in such
forward-looking statements are based on reasonable assumptions. However,
because these statements reflect our current views concerning future events,
these statements involve certain risks, uncertainties and assumptions. Actual
future results may differ materially and significantly from the results
projected and discussed in the forward-looking statements.
We caution you that our business and financial performance are subject to
substantial risks and uncertainties. Potential risks and uncertainties include,
among others, those risk factors set forth in our S-1 Registration Statement, as
amended, for our initial public offering that became effective on April 13, 1999
and our Annual Report on Form 10-K, as amended, for the Fiscal Year ended
December 31, 1999.
Item 3.
Quantitative and Qualitative Information About Market Risk
We do not engage in trading market risk sensitive instruments and do not
purchase hedging instruments or "other than trading" instruments that are likely
to expose us to market risk, foreign currency exchange, commodity price or
equity price risk. We have purchased no options and entered into no swaps. We
have no bank borrowing facility which could subject us to the risk of interest
rate fluctuations. The predominant share of our funds are invested in interest-
bearing investment grade securities, the yield and value of which are subject to
Federal interest rate fluctuations. Due to fluctuations in the Federal interest
rates, the investment grade securities held by us experienced a decline of
$23,692 (approximately 0.28%) at the end of the three-month fiscal period ended
June 30, 2000.
10
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) Recent Sales of Registered Securities. During the second quarter of
2000 we privately sold 30,000 shares of common stock at $3.00 per share.
In June 2000, we privately sold to a single corporate purchaser
through a private placement 110,000 shares of common stock together with 110,000
Series A redeemable common stock purchase warrants, exercisable for a term of
three (3) years at an exercise price of $7.00 per share and 110,000 Series B
redeemable common stock purchase warrants, identical in all respects to the
Series A Warrants, but exercisable at an exercise price of $11.00 per share, for
an aggregate consideration of $495,000. We used Westminster Securities
Corporation and incurred commissions and expenses in connection with this
private placement of $67,550, not including certain legal and accounting costs.
We sold these securities 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, neither transaction involved any public offering.
Use of Proceeds. On April 13, 1999, we commenced an initial public offering
of our securities, SEC file number 333-71733, resulting in net proceeds to us of
$8,792,552.
From April 13, 1999 through June 30, 2000, we expended approximately $7.5
million of such net proceeds upon the development of our business, including
approximately $1.5 million for the payment of officers' salaries and consulting
fees. 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. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None.
11
<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.
(registrant)
Dated: August 11, 2000 By: /s/ Harold I. Berliner
----------------------
Harold I. Berliner, Treasurer and
Principal Financial and Accounting Officer
12
