<PAGE>
ANNUAL REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
---------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________to________________________
Commission file number____________________________________________________
Streamedia Communications, Inc.
-------------------------------
(Exact name of small business issuer in its charter)
Delaware 22-3622272
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
244 West 54th Street New York, New York 10019
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 445-1700
--------------
Securities registered under
Section 12(b) of the Act: None
Title of each class Name of each exchange on which
registered
- -------------------------------- ------------------------------
- -------------------------------- ------------------------------
Check whether the issuer (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
twelve 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____.
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes ___________ No ______________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of common
equity, as of the last practicable date: As of May 12, 2000, the Company had
4,742,004 shares of Common Stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): ________ _______
<PAGE>
ITEM I. FINANCIAL INFORMATION
Part 1 - Financial Information
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1 - Financial Statements
Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999 F-2
Statements of Operations for the three months ended March 31, 2000 and 1999, and
Cumulative from Inception (January 13, 1998) through
March 31, 2000 (unaudited) F-3
Statement of Stockholders' Equity (Deficit) for the three months ended
March 31, 2000 (unaudited) F-4
Statements of Cash Flows for the three months ended March 31, 2000 and 1999, and
Cumulative from Inception (January 13, 1998) through March 31, 2000 (unaudited) F-5
Notes to Financial Statements F-6 - F-11
- -----------------------------
</TABLE>
<PAGE>
Streamedia Communications, Inc.
(A Development Stage Company)
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999 (a)
----------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,224,756 $ 6,693,061
Licenses, net of accumulated amortization of $171,000 and $79,000
at March 31, 2000 and December 31, 1999, respectively 300,840 392,363
Prepaid expenses 125,729 142,207
------------ -----------
Total current assets 4,651,325 7,227,631
PROPERTY AND EQUIPMENT
Computer equipment and software 1,406,368 751,297
Software development costs 430,914 150,513
Leasehold improvements 277,062 127,352
Furniture and fixtures 21,977 19,841
---------- -------------
2,136,321 1,049,003
Less accumulated depreciation and amortization (298,254) (167,494)
----------- ------------
1,838,067 881,509
OTHER ASSETS 23,666 7,000
------------ --------------
$ 6,513,058 $ 8,116,140
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of capital lease obligations $ 31,740 $ 31,740
Accounts payable and accrued expenses 623,184 429,265
Accrued license fees 436,941
Accrued software costs 137,231 304,519
Accrued payroll 106,334 137,747
Accrued offering costs 64,500
Accrued professional fees 73,385 43,623
Accrued consulting fees 41,921 132,144
------------- ------------
Total current liabilities 1,013,795 1,580,479
CAPITALIZED LEASE OBLIGATIONS, less current maturities 21,696 24,234
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized - 100,000
shares; none issued and outstanding
Common stock, $.001 par value; authorized - 20,000,000 shares; issued and
outstanding - 4,730,044 and 4,624,844 shares at
March 31, 2000 and December 31, 1999, respectively 4,730 4,625
Additional paid-in capital 11,299,228 10,720,846
Deficit accumulated during development stage (5,826,391) (4,214,044)
---------- -----------
Total stockholders' equity 5,477,567 6,511,427
----------- -----------
$ 6,513,058 $ 8,116,140
=========== ===========
</TABLE>
(a) Retroactively restated to combine the financial positions of Streamedia
Communications, Inc. (Streamedia) with Eons Ahead Inc., which was
acquired by Streamedia in March 2000 and accounted for as a pooling of
interests.
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
Streamedia Communications, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
(a)
Cumulative
from January 13,
1998 (date of
Three months ended March, 31 Inception) to
------------------------------- ---------------
2000 1999 (a) March 31, 2000
----------- --------- ---------------
<S> <C> <C> <C>
Revenue $ 7,344 $ 20,841 $ 237,769
------------- --------- ------------
Operating expenses
Payroll and related expenses 767,463 156,224 2,162,935
Product development 23,024 542,501
General and administrative 894,441 87,838 2,815,747
------- --------- ----------
Total operating expenses 1,684,928 244,062 5,521,183
---------- -------- ---------
Operating loss (1,677,584) (223,221) (5,283,414)
----------- -------- ----------
Other income (expense)
Interest expense (6,576) (619,410)
Interest income 71,813 76,433
------------ ------------- ------------
Total other income (expense) 65,237 - (542,977)
------------ ------------- -----------
Net loss $(1,612,347) $(223,221) $(5,826,391)
========== ======== ==========
Basic and diluted loss per common share $(.34) $(.07) $(1.93)
==== ==== =====
Weighted average shares outstanding, basic and diluted 4,730,044 3,385,104 3,015,827
========= ========= =========
</TABLE>
(a) Retroactively restated to combine the results of operations of
Streamedia with Eons Ahead Inc., which was acquired by Streamedia in
March 2000 and accounted for as a pooling of interests.
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Streamedia Communications, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during
Preferred stock Common stock paid-in development
Shares Amount Shares Amount capital stage Total
------ ------ ------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 (a) 4,624,844 $4,625 $10,720,846 $(4,214,044) $ 6,511,427
Issuance of common stock for services 7,700 8 39,105 39,113
Issuance of common stock pursuant
to the exercise of stock options 37,500 37 74,963 75,000
Issuance of common stock in
connection with the overallotment
option of the initial public offering,
net of underwriting discounts of
$40,800 40,000 40 299,160 299,200
Compensatory stock option expense 88,288 88,288
Issuance of common stock for business 20,000 20 76,866 76,886
acquisition
Net loss for the period (1,612,347) (1,612,347)
--------- --------- --------- ----- ----------- ---------- ----------
Balance at March 31, 2000 - $ - 4,730,044 $4,730 $11,299,228 $(5,826,391) $ 5,477,567
========= ======== ========= ===== ========== ========== ==========
</TABLE>
(a) Retroactively restated to combine the financial positions of Streamedia
with Eons Ahead Inc., which was acquired by Streamedia in March 2000
and accounted for as a pooling of interests.
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
Streamedia Communications, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Cumulative
From January 13,
Three months ended March 31, 1998 (date of
------------------------------- Inception) to
2000 1999(a) March 31, 2000(a)
----------- ---------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(1,612,347) $(223,221) $(5,826,391)
Adjustments to reconcile net loss to net cash used in
Operating activities
Common stock issued for services 39,113 12,000 231,113
Stock option granted for services 20,250 834,650
Compensatory stock option expense 88,288 294,538
Amortization of debt discount 272,250
Amortization and write-off of deferred financing costs 231,500
Depreciation and amortization 222,282 793 469,546
Changes in operating assets and liabilities
Prepaid expenses and other current assets 16,478 (597,861)
Other assets (16,666) (3,989) (23,666)
Accounts payable and accrued expenses 193,920 16,739 623,184
Accrued license fees (436,941)
Accrued software costs (167,288) 137,231
Accrued payroll and bonus (31,413) 14,017 106,334
Accrued offering costs (64,500)
Accrued professional fees 29,762 (7,900) 73,385
Accrued consulting fees (90,223) (38,500) 41,921
----------- --------- ------------
Net cash used in operating activities (1,829,535) (209,811) (3,132,266)
----------- -------- ----------
Cash flows from investing activities
Purchase of property and equipment (1,010,432) (16,767) (2,003,462)
---------- ------- ----------
Net cash used in investing activities (1,010,432) (16,767) (2,003,462)
---------- ------- ----------
Cash flows from financing activities
Issuance of common stock, net of associated costs 299,200 456,500 828,809
Issuance of common stock in Offering, net of associated
Costs 8,446,777
Proceeds from the exercise of stock options 75,000 75,000
Proceeds of notes payable and common stock warrants, net
of associated costs 1,583,500
Repayments of notes payable (1,815,000)
Deferred offering costs (174,500) 50,000
Conversion of Stockholder loan into capital 27,117 193,936
Principal payments on capital lease obligations (2,538) (2,538)
------------ ------------- --------------
Net cash provided by financing activities 371,662 309,117 9,360,484
----------- -------- ----------
Net (decrease) increase in cash (2,468,305) 82,539 4,224,756
Cash at beginning of period 6,693,061 9,691 -
---------- ---------- ----------
Cash at end of period $ 4,224,756 $ 92,230 $ 4,224,756
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
(a) Retroactively restated to combine the financial positions of Streamedia
with Eons Ahead Inc., which was acquired by Streamedia in March 2000
and accounted for as a pooling of interests.
F-5
<PAGE>
Streamedia Communications, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(unaudited)
NOTE A - BASIS OF PRESENTATION
The interim unaudited financial statements include the accounts of
Streamedia Communications, Inc. ("Streamedia" or the "Company") and the
accounts of companies acquired in business combinations accounted for under
(1) the purchase method from their respective acquisition date and (2) the
pooling of interests method, giving retroactive effect for all periods
presented. See Note C for the effects of the pooling on previously reported
revenues, net loss and loss per share resulting from the business
combination with Eons Ahead, Inc., which was acquired by the Company during
March 2000 and accounted for as a pooling of interests.
The balance sheet as of March 31, 2000 and the related statements of
operations for the three-month periods ended March 31, 2000 and 1999,
stockholders' equity for the three-month period ended March 31, 2000 and
cash flows for the three-month periods ended March 31, 2000 and 1999 have
been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal, recurring accrual adjustments)
necessary to present fairly the financial position as of March 31, 2000 and
for all periods presented have been made.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Annual Report on Form 10-KSB for the year
ended December 31, 1999. Results of operations for the period ended March
31, 2000 are not necessarily indicative of the operating results expected
for the full year.
NOTE B - NATURE OF OPERATIONS
Streamedia was incorporated in the State of Delaware and is positioning
itself as a vertically-integrated New Media content generator, enabler and
aggregator. The Company's two divisions are Streamedia Networks and
Business Services. In December 1999, the Company completed its initial
public offering (the "Offering"). The net proceeds from the Offering were
approximately $8,447,000.
F-6
<PAGE>
Streamedia Communications, Inc
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2000
(unaudited)
NOTE B (continued)
The Company is in the development stage. Streamedia Networks consist of
a suite of topical broadcast networks to deliver or "stream" live and on-demand
audio and video programming. The Streamedia Networks sites intend to offer
programming in Streamedia Communications, Inc. areas such as, but not limited
to, business, sports, women's issues, parenting, travel, education, religion,
politics, health, teen and children's interests, shopping, real estate, music,
technology, personal fitness, movies, entertainment and lifestyles, The Company
has chosen "Crime Broadcast," "Sports Style," "Motion Arts" and "Women on the
Edge" as its initial network launches. The Streamedia Networks will include
StreamWire which will consist of a series of focused, subject-oriented, edited
news and information products, such as wires devoted to NASDAQ or Amex-listed
companies.
Streamedia Business Services division will market Internet and intranet
broadcasting services to a wide spectrum of enterprises, such ads, but not
limited to, businesses, associations, electronic publishers and "off-line"
media generators, who are attempting to obtain an Internet broadcast
presence.
The division will attempt to deliver multimedia and text through a variety
of push, poll and proprietary electronic mail mechanisms. The Company's
operations are subject to certain risks and uncertainties, including actual
and potential competition by entities with greater financial resources,
experience and market presence, risks associated with the development of
the Internet markets, risks associated with consolidation in the industry,
the need to manage growth and expansions, certain technology and regulatory
risks and dependence upon sole and limited suppliers.
The accompanying financial statements have been prepared on the basis that
the Company will continue as a going concern which assumes the realization
of assets and settlement of liabilities in the normal course of business.
Since its inception, the Company has been engaged in organizational and
pre-operating activities. Further, the Company has generated nominal
revenues and incurred losses. Continuation of the Company's existence is
dependent upon its ability to obtain additional capital, secure and execute
strategic alliances to develop news and information content and sustain
profitable operations. The uncertainty related to these conditions raises
substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
F-7
<PAGE>
Streamedia Communications, Inc
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2000
(unaudited)
NOTE C - BUSINESS COMBINATIONS
During March 2000, the Company completed the acquisition of Eons Ahead,
Inc. ("Eons") through a stock-for-stock merger. Under the terms of the
acquisition, accounted for as a pooling of interests, the Company exchanged
129,354 shares of Company common stock for all of Eons common stock. Eons
is a technology-based company, incorporated on January 13, 1998, which
designs, markets and develops strategies for other entities.
The reconciliation below details the effects of the pooling on previously
reported revenues, net loss and loss per share of the separate companies
for the three months ended March 31, 2000 and 1999 and cumulative from
January 13, 1998 (date of inception) to March 31, 2000.
<TABLE>
<CAPTION>
Cumulative
from January
13, 1998 (date
of inception)
to March 31,
Three months ended 2000
------------------------------------- --------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C> <C>
Revenues
Streamedia $ -- $ -- $ --
Eons 7,344 20,841 237,769
----------- ----------- ------------
Combined $ 7,344 $ 20,841 $ 237,769
=========== =========== ============
Net loss
Streamedia $(1,580,970) $ (189,725) $(5,662,642)
Eons (31,377) (33,496) (163,749)
----------- ----------- ------------
Combined $(1,612,347) $ (223,221) $(5,826,391)
=========== =========== ============
Loss per share
Streamedia $ (.33) $ (.06) $ (1.88)
Eons (.01) (.01) (.05)
----------- ----------- ------------
Combined $ (.34) $ (.07) $ (1.93)
=========== =========== ============
</TABLE>
On March 31, 2000, the Company purchased certain web site domains and
production assets from Kudzu NewMedia and Bijou Cafe. Com (collectively,
"Bijou") for 20,000 shares of the Company's stock, valued on the effective date
of agreement at approximately $76,000, representing the fair market value of the
assets acquired.
F-8
<PAGE>
Streamedia Communications, Inc
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2000
(unaudited)
NOTE C (continued)
The acquisition was accounted for as a purchase, and accordingly, the
statements of operations include the results of operations of Bijou since
acquistion. The operations of Bijou are not significant to the Company's
operations.
NOTE D - LOSS PER SHARE
Basic and diluted net loss per share are presented in conformity with SFAS
No. 128, "Earnings Per Share" and SEC Staff Accounting Bulletin No. 98
("SAB 98"). Under SFAS No. 128 and SAB 98, basic net loss per share is
computed by dividing net income (loss) by the weighted-average number of
common shares outstanding for the period. It also requires a reconciliation
of the numerator and denominator of the basic net loss per share to the
numerator and denominator of the diluted net loss per share. As of March
31, 2000, the calculation of diluted net loss per share excludes an
aggregate of 3,045,500 shares of common stock issuable upon exercise of
warrants and employee stock options, as the effect of such shares would be
antidilutive for all periods presented.
NOTE E - STOCKHOLDERS' EQUITY (DEFICIT)
Initial Public Offering
On December 27, 1999, the Company completed its Offering, which consisted
of 1,200,000 units, each unit consisting of one share of common stock and
one redeemable warrant, at an offering price of $8.50 per unit. Each
redeemable warrant entitles the holder to purchase one share of common
stock at $12.75 per share, at any time from issuance until December 21,
2004. Such warrants are redeemable by the Company, with the prior written
consent of the underwriter, at a redemption price of $.05 commencing May
17, 2000 provided that the closing price of the common stock is at least
$12.75 per share for 10 (ten) consecutive trading days. In addition, there
was an overallotment option for 180,000 units, of which 40,000 units were
exercised by the underwriter in January 2000, for net aggregate proceeds of
approximately $299,000.
During the three months ending March 31, 2000, the Company issued 7,700
shares of common stock at their fair market value on the date of issuance,
amounting to approximately $39,000, to consultants for services rendered.
F-9
<PAGE>
Streamedia Communications, Inc
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2000
(unaudited)
NOTE E (continued)
In August 1999, the Company's Board of Directors granted stock options
pursuant to the Company's 1999 Incentive and Nonstatutory Option Plan (the
"1999 Plan") to an employee to purchase 110,000 shares of common stock at
an exercise price of $2.00 per share (a price below the estimated fair
market value of the Company's common stock of $7.50 on the date of
issuance). Of the 110,000 options, 75% vest ratably over three years from
the date of grant for which compensation expense of $453,750 is
recognizable over such period. The remaining 25% of such options vest upon
achieving certain performance based criteria, which is expected to occur
during the year ending December 31, 2000. Compensation expense for these
options will be recognized based on the intrinsic value of such options at
the time the performance based criteria is achieved. Compensation expense
relating to these options of approximately $88,000 was recognized for the
three months ending March 31, 2000.
For the three months ended March 31, 2000, the Company's Board of
Directors granted stock options under the 1999 plan to certain employees to
purchase an aggregate of 154,000 shares of common stock at exercise prices
representing the fair market value of the underlying common stock at the
time of the respective grants. Additionally, options to purchase 37,500
shares of common stock were exercised, aggregating $75,000 in proceeds to
the Company.
F-10
<PAGE>
Streamedia Communications, Inc
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(unaudited)
ITEM 2. MANANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Financial
Statements and Notes thereto which appear elsewhere in this document. The
results shown herein are not necessarily indicative of the results to be
expected in any future periods. This discussion contains forward-looking
statements based on current expectations, which involve risks and uncertainties.
Actual results and the timing of events could differ materially from the
forward-looking statements as a result of a number of factors. Readers, however,
should carefully review factors set forth in other reports or documents that we
file from time to time with the Securities and Exchange Commission.
OVERVIEW
We were organized in the State of Delaware on April 29, 1998. From the date of
our inception through the present, we have considered ourselves a development
stage company. Our primary activities to date have consisted of the following:
F-11
<PAGE>
Securing financing to begin the operating phase
We completed our Initial Public Offering on December 27, 1999. Prior to this
date we completed only limited build-out and development of our technological
infrastructure and recruited only a select few technical and managerial
employees. Subsequent to the completion of the offering we began an extensive
effort to develop a state-of-the-art infrastructure for video and audio
streaming and to recruit and hire technical personnel to design, implement, and
maintain these systems. The initial phase of this build-out is expected to be
completed in the second quarter of 2000.
Building of streaming infrastructure and the web sites
The streaming infrastructure consists of various local and wide area networks
capable of streaming and storing large amounts of audio and video files. We have
implemented networked environments for development, staging, and actual
broadcast to the public over the Internet. The system combines a sophisticated
network architecture to develop and deliver our content as well as an extensive
system to store files to be streamed.
Recruiting technical and broadcast production talent
The area of streaming video and audio over the Internet is new and complex.
There is an extremely limited pool of talent available with expertise in this
field. We have spent a great deal of time recruiting and interviewing talent for
these positions. We have had success in attracting and retaining individuals
with the necessary talents and experience. We have approximately 35 employees
the majority of which are Network Producers, Video Editing Technicians, Digital
Asset Technicians, Web Designers, Web Developers, Programmers, and LAN and
Database Administrators.
Developing and refining our business model
We have devoted time to refining our business model prior to commencing actual
operations. Our business model has been built around multiple lines of product
and services with multiple revenue sources. We originally contemplated four
business lines, which have since been consolidated into two main revenue
divisions built around the types of clients that each division services. The
Streamedia Networks target the Internet users and our Business Services division
is aimed at corporate clients.
Establishing a network of industry partners
The Internet industry has been built around establishing partnering arrangements
with competitors and collaborators alike. In furtherance of our plan and
objectives, we have established partnering arrangements with Real Networks,
Inc., Real Media, Inc., EMC2 , Inc., Virage, Inc., Vignette, Inc., Screaming
Media, Inc., Accrue Software, Inc., COMTEX Scientific Corp., Intraware, Inc.,
Video Corporation of America, Inc., and Waterfront Communications.
<PAGE>
Planning and developing of the Streamedia Networks
The Streamedia Networks are the showcase of our abilities in webcasting,
streaming audio and video, and web site design and development. We have
evaluated, acquired, and installed hardware and software associated with the
development of the Networks including ad servers, syndication servers, database
servers, multimedia delivery, Internet broadcasting, online content syndication,
media asset management, online advertising and customer management.
Planning and developing our Business Services
Our business services are designed to provide technology and consulting
expertise and services to traditional media companies, traditional businesses
with media assets, and online businesses and web sites. Our Streamedia Digital
Solutions includes encoding services, digital security, video indexing,
broadcasting production, and web design. In developing our business services
area, we have acquired and installed hardware and software that allows us to
perform these services for other companies.
COMPARISION OF RESULTS FOR THE QUARTER ENDED MARCH 31, 2000, COMPARED TO THE
QUARTER ENDED MARCH 31, 1999.
On March 31, 2000, we acquired Eons Ahead, Inc., a New York web design firm. The
financial statements presented with this discussion reflect this transaction as
a "pooling of interests" of Eons Ahead Inc., which was incorporated on January
13, 1998. The discussion that follows, and all future discussions, will
exclusively address the financial statements of the "pooled" Company and
retroactively combine the financial positions of Streamedia with Eons Ahead,
Inc.
REVENUE. Total revenue decreased $13,497 to $7,344 in the first quarter of
Fiscal 2000 as compared to $20,841 for the same period of 1999. These revenues
are primarily due to our acquisition of Eon Ahead, Inc., which was accounted for
as a pooling of interests and had nominal revenues for the first quarters of
1999 and 2000.
OPERATING EXPENSES. Total operating expenses increased $1,440,866 or by 590% in
the first quarter or 1999. This was due to recruiting, hiring, and training of
additional technical and administrative employees, costs to support the web site
operations, development of our infrastructure, implementation of systems,
including our video storage systems, Internet service provider costs, and
development of our business to business service model.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES. We incurred net losses every quarter since our
inception. During the Fiscal quarter ended March 31, 2000, we had net losses of
$1,612,347 an increase of 622% as compared to net losses of $223,221 in the
Fiscal quarter ended March 31, 1999.
We have financed our operations primarily through sales of equity securities and
the private placement of debt instruments. Through March 31, 2000, we raised
approximately $12.8 million from the sale of common stock and the placement of
debt (before underwriting discounts and offering costs). We completed our
initial public offering on December 27, 1999, and repaid $1,878,125 in debt and
interest. On March 31, 2000, our principal source of liquidity was approximately
$4,225,000 of cash and cash equivalents and money market accounts.
During this Fiscal year, we plan to implement several business strategies. These
include substantially adding to our library of broadcast content and data feeds;
enhancing our ability to deliver audio and video to large numbers of concurrent
listeners and viewers, who may be attuned to dozens or even hundreds of
different programming clips; continue developing and incrementally launch our
series of multimedia portals (the Streamedia Networks and StreamWire); and
strengthening a "syndication," or content distribution, program.
To accomplish these objectives, we need to:
o Make substantial investments in capital equipment, such as web servers,
storage devices, and other specialized computer and communications
equipment,
o Contract for sufficient bandwidth,
o Devise a powerful Internet infrastructure, and
o Hire or otherwise contract with highly specialized personnel to develop,
configure, administer, and operate our sites, broadcast equipment and
infrastructure.
We plan to launch, over time, additional web sites at as many as possible of the
over 300 registered Internet addresses we currently own, and additional domains
we may purchase. We further plan to expand StreamWire as a component of the
Streamedia Networks, and subsequently develop these print resources more fully.
Should we fail to launch additional sites, or to develop or acquire sufficient
content for those we do launch, we might not be successful in attracting viewers
and listeners, without which our business would be impaired. Should we encounter
difficulty in hiring appropriately skilled personnel, additional site launches
may be delayed, further impairing our business.
While we are building and subsequently launching Network and Channel sites, we
will be purchasing, or otherwise producing or acquiring, audio and video
content. Such content needs to
<PAGE>
be prepared for delivery via a process known as encoding. The encoding process
is required to prepare the content for streaming, or broadcasting, over the
Internet.
We plan to acquire additional content. Current industry conditions render it
difficult to secure "exclusive" rights to numerous classes of content suitable
for broadcasting over the Internet. To the extent to which we cannot capture
exclusive broadcast rights, we will be in competition with other web sites
attempting to attract audiences by offering some of the same programming.
We are planning to begin an initiative to distribute various proprietary and
licensed Internet programming to traditional and content venues, such as
television and home video. We expect to begin this syndication in the second or
third Fiscal quarter of 2000.
We anticipate that any rise in our industry stature, such as by launching a
series of successful sites, selling business to business services, and supplying
third party sites with programming, will assist us to further market business to
business webcast services, and thereby proportionately increase our revenue. We
expect expenditures to rise in proportion to each phase of our build out. While
we anticipate increased revenues concurrent with the build out, delays in
product development or the institution of marketing programs could result in the
risk of prolonged absence of revenues, profits, or working capital.
During the quarter ended March 31, 2000, we increased our property and equipment
assets by expending $1,010,432. This represents a substantial portion of our
technical capital infrastructure. Furthermore, we estimate that we will spend an
additional $700,000 completing our infrastructure. We expect to complete this
build-out in the second quarter of Fiscal 2000, at which time we anticipate that
the monthly rate of capital consumption will significantly decrease.
Nevertheless, we believe that to accomplish our business objectives we will have
to continue to expand our operations. However, our limited operating history
makes predictions of our future results of operations difficult to access. We
have incurred net losses in each Fiscal period since our inception and, as of
March 31, 2000, we had an accumulated deficit of $5,826,391. To date, we have
not generated any significant revenues, and we may never achieve profitable
operations. Indeed, our history of operating losses raises doubt about our
ability to continue operations. Based upon our projected costs for the year 2000
and our past operating losses, we will need to obtain sufficient additional
financing or other working capital to fund our operations. If we do not obtain
additional financing or working capital, we believe that scaling back our
planned expansion and reducing costs, through reduction of our planned sales,
marketing and advertising budgets, and if necessary, reduction of payroll
expenses our existing cash and cash equivalents will be sufficient to meet our
working capital and capital expenditure requirements through at least the end of
2000. Thereafter, if cash generated by operations is insufficient to satisfy our
liquidity requirements, we may need to sell additional equity or debt securities
to continue as a going concern.
<PAGE>
PART 11
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We were not a party to any significant legal proceedings as of March 31, 2000,
or as of the date of this filing.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTED SECURITIES
On March 31, 2000, we acquired Eons Ahead, Inc., a New York boutique web design
firm. In that acquisition, we issued 129,354 shares of our restricted common
stock to the three shareholders of Eons Ahead, Inc. This issuance of these
shares was exempt from registration under Section 4(2) of the Securities Act of
1933 because the sale did not involve any public offering of our stock.
On March 31, 2000, we acquired the certain web site domains and production
assets from Kadzu NewMedia and Bijou Cafe.com for 20,000 shares of our
restricted common stock at a value on the effective date of $76,000. These
shares, when issued, are exempt from registration under Section 4(2) of the
Securities Act of 1933, as this sale does not involve a public offering of our
stock.
On January 12, 2000, we issued 700 shares of our restricted common stock to a
consultant in exchange for services. On March 9, 2000, we issued 7,000 shares of
our restricted common stock to Atlantic Pacific Music as a consulting fee. These
shares, when issued, are exempt from registration under Section 4(2) of the
Securities Act of 1933, as these sales do not involve public offerings of our
stock.
On March 10, 2000, we sold 37,500 shares of unregistered common stock to a
former employee, pursuant to the exercise of stock options issued in 1999 in
accordance with our stock option plan. These shares were exempt from
registration pursuant to Rule 701 of the Securities Act of 1933, as the options
were issued prior to the effective date of our registration statement.
USE OF PROCEEDS
As a result of our initial public offering we received $8,446,777 in net total
proceeds. As of March 31, 2000, we have used $115,158 for construction of plant,
building and facilities; $1,878,125 repayment of indebtedness; $1,726,766 for
hardware, video equipment, software, and associated licenses; $1,265,131 for
burdened payroll; and $493,194 for technical and financial consultants.
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During this period covered by this report there have been no special meetings or
an annual meeting of our shareholders. Our annual meeting of shareholders is
scheduled for May 17, 2000.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report.
There are no exhibits to be filed as part of this report.
(b) Reports of Form 8-K
There were no reports on Form 8-K filed by the Company during the
quarter ended March 31, 2000.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Streamedia Communications, Inc.
Date: May 15, 2000 By: /s/ Nicholas Malino
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Nicholas Malino
