SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ------ Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
_____ 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 1-11624
HyperMedia Communications, Inc.
-------------------------------
(Exact name of registrant as specified in its charter)
California 94-3104247
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Mariner's Island Blvd., Suite 365,
San Mateo, California 94404
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(415) 573-5170
(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 such
filing requirements for the past 90 days. Yes X No
----- -----
As of August 4, 1997, 3,200,137 shares of the Registrant's common stock were
issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
HYPERMEDIA COMMUNICATIONS, INC.
BALANCE SHEET
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 110,000 $ 107,000
Accounts receivable, net of allowance for
doubtful accounts of $108,000 and $180,000 1,296,000 1,294,000
Prepaid expenses and other assets 475,000 557,000
------------ ------------
Total current assets 1,881,000 1,958,000
Property and equipment, net 532,000 622,000
Intangibles and other assets 0 4,000
------------ ------------
$ 2,413,000 $ 2,584,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 734,000 $ 822,000
Accrued liabilities 282,000 326,000
Deferred revenue 151,000 33,000
Note payable 225,000 335,000
------------ ------------
Total current liabilities 1,392,000 1,516,000
------------ ------------
Shareholders' equity:
Convertible Preferred Stock, $.001 par value; 10,064,516
shares authorized; 8,197,110 and 8,146,766 shares 1,307,000 1,209,000
issued and outstanding
Common Stock, $.001 par value; 50,000,000 shares
authorized; 3,200,137 and 3,019,004 shares 10,427,000 10,377,000
issued and outstanding
Accumulated deficit (10,713,000) (10,518,000)
------------ ------------
Total shareholders' equity 1,021,000 1,068,000
------------ ------------
$ 2,413,000 $ 2,584,000
============ ============
<FN>
See the accompanying notes to these condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
HYPERMEDIA COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 1,801,000 $ 2,408,000 $ 3,716,000 $ 4,583,000
----------- ----------- ----------- -----------
Expenses:
Editorial 284,000 332,000 575,000 676,000
Production 471,000 586,000 947,000 1,366,000
Circulation 532,000 497,000 1,096,000 1,029,000
Sales and marketing 384,000 911,000 804,000 1,404,000
Product development 10,000 5,000 19,000 12,000
General and administrative 210,000 174,000 453,000 403,000
----------- ----------- ----------- -----------
Total expenses 1,891,000 2,505,000 3,894,000 4,890,000
----------- ----------- ----------- -----------
Loss from operations (90,000) (97,000) (178,000) (307,000)
Interest and other expense, net 7,000 2,000 17,000 6,000
----------- ----------- ----------- -----------
Net loss $ (97,000) $ (99,000) $ (195,000) $ (313,000)
=========== =========== =========== ===========
Net loss per common share $ (0.03) $ (0.03) $ (0.06) $ (0.10)
and equivalents (Note 2) =========== =========== =========== ===========
Weighted average common shares
and equivalents 3,200,137 3,019,004 3,200,137 3,019,004
=========== =========== =========== ===========
<FN>
See the accompanying condensed notes to these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
HYPERMEDIA COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
(Decrease) Increase in Cash
(UNAUDITED)
<CAPTION>
Six months ended June 30,
--------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net loss $(195,000) $(313,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 119,000 119,000
Allowance for doubtful accounts (73,000) (131,000)
Other 20,000 42,000
Change in assets and liabilities:
Accounts receivable 71,000 203,000
Prepaid expenses and other assets 61,000 (29,000)
Accounts payable (88,000) 47,000
Accrued liabilities (44,000) (38,000)
Deferred revenue 118,000 (82,000)
--------- ---------
Net cash used in operating activities (11,000) (182,000)
--------- ---------
Net cash used in investing activities for purchase of
fixed assets (24,000) (72,000)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 98,000 211,000
Proceeds from issuance of common stock 50,000 2,000
Repayment of note payable (110,000) --
--------- ---------
Net cash provided by financing activities 38,000 213,000
--------- ---------
Net increase (decrease) in cash 3,000 (41,000)
Cash at beginning of period 107,000 275,000
--------- ---------
Cash at end of period $ 110,000 $ 234,000
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 17,000 $ 6,000
========= =========
</TABLE>
<PAGE>
HYPERMEDIA COMMUNICATIONS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The financial statements of HyperMedia Communications, Inc. (the "Company") as
of June 30, 1997 and 1996 and for the three and six months then ended are
unaudited, and in the opinion of management, all adjustments (consisting of only
normal recurring items) necessary for the fair presentation of the financial
position and results of operations for the interim periods have been included.
These financial statements should be read in conjunction with the Financial
Statements for the year ended December 31, 1996 and notes thereto included in
the Company's Form 10-K. The results of operations for the three and six months
ended June 30, 1997 are not necessarily indicative of the results expected for
the entire year.
The preparation of these 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 2 - NET INCOME (LOSS) PER SHARE
Net loss per common share is based upon the weighted average number of
outstanding shares of Common Stock. Common stock equivalent shares from
Convertible Preferred Stock (using the if-converted method) and stock options
and warrants (using the treasury stock method) have been excluded from the
computation for the three month periods ending June 30, 1997 and 1996 and for
the six month periods ended June 30, 1997 and 1996 as their effect is
anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS supersedes
Accounting Principles Board Opinion No. 15, "Earnings Per Share" and is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. Under SFAS 128, the pro forma net loss per share for
the three month period ended June 30, 1997 was $(0.03) and for the six month
period ended June 30, 1997 was $(0.06) for both basic and diluted earnings per
share.
NOTE 3 - STATEMENT OF SHAREHOLDER'S EQUITY
In 1996, the Board of Directors approved the issuance of the Series G Preferred
Stock. The Series G Preferred Stock ranks pari passu with the Series F Preferred
Stock. 50,344 Series G Preferred Stock shares were issued during the quarter
ended June 30, 1997.
<PAGE>
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
This section and other parts of this Quarterly Report on Form 10-Q contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ significantly from those anticipated in these
forward-looking statements as a result of the factors set forth below and in
"Factors Affecting Operating Results and Market Price of Stock". Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. Forward-looking statements are indicated by an
asterisk (*).
General
HyperMedia Communications, Inc. (the "Company" or "HyperMedia") publishes
NewMedia Magazine ("NewMedia"), the first periodical publication dedicated
solely to the professional market for new media technology. "New media" is a
term applied to a wide array of digital communications technologies, including
Internet development tools and services, desktop and portable personal
computers, workstations, servers, audio/video compression and editing equipment,
graphics hardware and software, high-density storage devices, and video
conferencing systems. Professional new media technology is actively employed in
a broad range of communications-related businesses and disciplines such as
publishing, advertising, sales, marketing, film production, broadcasting, game
development, education, and training. Many large multinational technology
corporations are developing and marketing products specifically targeted to the
professional market.
HyperMedia also publishes Hyperstand, an electronic service on the Internet for
professionals who develop new media content and applications, particularly World
Wide Web sites. The Company also produces an annual awards competition, the
NewMedia INVISION Awards program, which honors professionals who employ new
media technology in the development of communications applications.
NewMedia is published 16 times per year and is distributed to more than 215,000
professionals who develop new media content and applications for the business,
government, education and consumer markets. According to a recent analysis
conducted by the Company of NewMedia subscriber demographic data, the average
subscriber to the publication has represented that they are personally involved
in the purchase of over $500,000 worth of new media-related hardware, software,
and services in a twelve-month period.* The magazine's primary mission is to
rate and review new professional-level products used in the development of new
media content and applications.
- ---------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
Results of Operations
The Company's gross revenues were $1,801,000 and $2,408,000 for the quarters
ended June 30, 1997 and 1996, respectively, and $3,716,000 and $4,583,000 for
the six months then ended. There were two principal reasons for these decreases.
First, in 1996, the NewMedia INVISION Awards program was part of Spring Comdex
held in June 1996 and generated sponsorship (and associated) revenue of
approximately $580,000. In 1997, the NewMedia INVISION Awards program will be a
three-day festival presented November 10-12, 1997, at the Center for the Arts in
Yerba Buena Gardens in San Francisco. * Sponsors for the event include
Microsoft, Silicon Graphics, Ziff-Davis TV, Macromedia and others. Consequently,
revenues from the 1997 program will not be recognized until the fourth quarter.
* Second, the Company's revenues in the quarters ended March 31, 1996 and June
30, 1996 reflected one-time advertising promotions from polybagging campaigns by
online services. The costs of these promotions were passed through to the
customer and resulted in a disproportionate increase in revenues.
Excluding the revenues associated with the one-time promotions and the impact of
the change in dates and venue for the NewMedia INVISION Awards program, net
revenue in NewMedia Magazine increased in the second fiscal quarter of 1997 by
10% and in the first six months of 1997 by 5% as compared to the year earlier
comparable periods. This increase in the second quarter of 1997 was primarily
attributable to strong advertising in the systems category from customers
including DEC, IBM, Silicon Graphics and others, who are targeting the digital
professional market that NewMedia Magazine serves. In the second quarter of
1997, systems advertising in NewMedia Magazine grew by 65 percent as compared to
the second quarter of 1996. In the 1996 IntelliQuest Computer Industry Media
Study (CIMS(TM)), NewMedia Magazine led other major technology publications in
the percent of readers who make volume purchases of Pentium Pro desktop
computers and workstations.
The Company's total expenses were $1,891,000 and $2,505,000 for the quarters
ended June 30, 1997 and 1996, respectively, and $3,894,000 and $4,890,000 for
the six months then ended. After factoring out the one-time advertising
promotions, change in dates and venue for the NewMedia INVISION Awards program
and variable costs, corporate expenses decreased very slightly for the quarter
ended June 30, 1997 and by approximately 5% for the six months then ended. The
decrease in corporate expenses year-over-year for both periods was primarily due
to continued expense control programs.
The net loss of $195,000 for the first six months of 1997 decreased by 38% as
compared to the loss of $313,000 for the first six months of 1996. The Company
posted a net loss of $97,000 in the second quarter of 1997 as compared to a net
loss of $99,000 for the same period of 1996. The increase in NewMedia Magazine
net revenue combined with continued strong cost controls in the first half of
1997 resulted a $118,000, or 38%, decrease in net loss for the first six months
of 1997 as compared to the similar period in 1996.
- ---------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
Editorial expenses, comprised principally of salaries and fees paid to the
writers for the Company's publications, were $284,000 and $332,000 for the
quarters ended June 30, 1997 and 1996, respectively, and $575,000 and $676,000
for the six months then ended. The reductions in editorial expenses are
primarily attributable to cost control programs and the sale of the Macromedia
User Journal ("MUJ") in the third quarter of 1996, partially offset by increased
expenses associated with Hyperstand. Editorial expenses represented 16% and 14%
of revenue for the quarters ended June 30, 1997 and 1996, respectively. The
Company expects editorial costs to rise in the balance of 1997 as a result of
higher paid contributor and staffing costs associated with NewMedia and the
expansion of the Internet World Wide Web site, Hyperstand. *
Production expenses, including costs for design, materials and printing of the
Company's publications, were $471,000 and $586,000 for the quarters ended June
30, 1997 and 1996, respectively and $947,000 and $1,366,000 for the six months
then ended. The decrease in production expenses for the second fiscal quarter
and first six months of 1997 as compared to the same quarter and six months of
1996 is primarily attributable to the absence in 1997 of the one time advertiser
promotion costs associated with polybagging issues of NewMedia for various
online services in 1996. Net production expenses for NewMedia, excluding one
time advertiser promotion costs, decreased primarily as a result of decreased
year-over-year paper costs. Production expenses represented 26% of revenue in
the second quarter of 1997 compared to 24% for the same period in 1996. Net
production expenses are expected to increases for the balance of 1997 as a
result of projected increase in advertising pages and increased paper prices. *
Circulation expenses, consisting primarily of costs associated with subscription
fulfillment, mailing and the direct mail promotions of the Company's
publications, were $532,000 and $497,000 for the quarters ended June 30, 1997
and 1996, respectively, and $1,096,000 and $1,029,000 for the six months then
ended. The Company currently capitalizes its circulation development
expenditures and amortizes them over a 12 month period. The increases of
$35,000, or 7%, in the second quarter of 1997 as compared to the same quarter in
1996 and $67,000, or 7%, in the first six months of 1997 as compared to the
first six months of 1996 are primarily attributable to the larger amount of
circulation development expenditure amortization included in the first quarter
and first six months of 1997 as compared to the same periods in 1996 as a result
of the Company's publishing strategy to increase the minimum readership
qualifications to receive the magazine. As a result of these new criteria, the
purchasing power of new media products and services of the average subscriber
increased to more than $500,000 at the end of 1996 from less than $200,000 for
1995, an increase of approximately 150 percent. The Company intends to maintain
the higher minimum readership qualifications throughout 1997. * Circulation
expenses represented 30% of revenues for the second quarter of 1997 as compared
to 21% of revenues for the same period of 1996. The Company expects circulation
expenses to remain relatively flat for the balance of 1997.*
- ---------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
Sales and marketing expenses were $384,000 and $911,000 for the quarters ended
June 30, 1997 and 1996, respectively, and $804,000 and $1,404,000 for the six
months then ended. The decrease of $600,000, or 43%, for the first six months of
1997 as compared to 1996 is primarily attributable to the change in dates and
venue for the NewMedia INVISION Awards program. In 1996, the NewMedia INVISION
Awards program was part of Spring Comdex held during the second quarter of 1996.
In 1997, the NewMedia INVISION Awards program will be a three-day festival
presented November 10-12, 1997, at the Center for the Arts in Yerba Buena
Gardens in San Francisco. Sponsors for the event include Microsoft, Silicon
Graphics, Ziff-Davis TV, Macromedia and others. After excluding the impact of
the change in dates for the NewMedia INVISION Awards program, sales and
marketing expenses were relatively comparable in the second quarters of 1997 and
1996. Sales and marketing expenses represented 21% of revenue for the second
quarter of 1997 as compared to 38% of revenue for the same period of 1996. Sales
and marketing expenses are expected to increase during the balance of 1997, both
for the NewMedia INVISION Awards program and for larger commission costs
associated with increased advertising pages, higher sales and marketing
management compensation expenses, and higher expenditures on sales and marketing
programs. *
Product development expenses, consisting of costs incurred in the development of
new products, including the Internet World Wide Web site, Hyperstand, were
$10,000 and $5,000 for the quarters ended June 30, 1997 and 1996, respectively,
and $19,000 and $12,000 for the six months then ended. The Company plans to
continue its product development efforts during 1997. *
General and administrative expenses were $210,000 and $174,000 for the quarters
ended June 30, 1997 and 1996, respectively, and $453,000 and $403,000 for the
six months then ended. The increase of $50,000, or 12%, in the first six months
of 1997 as compared to 1996 and $36,000, or 21%, in the second quarter of 1997
as compared to the same period in 1996 reflects increased bad debt expense
offset by lower consulting costs. General and administrative expenses
represented 12% of revenue for the second quarter of 1997 as compared to 7% for
the same period in 1996. ~General and administrative costs are expected to grow
in the balance of 1997 with expected increases in general and administrative
expenses that accompany anticipated revenue growth.*
- ----------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
Liquidity and Capital Resources
At June 30, 1997, the Company had approximately $489,000 in net working capital
and its principal sources of liquidity consisted of approximately $110,000 in
cash and a $1 million line of credit limited to 70% of qualified accounts
receivable. At June 30, 1997, there was $225,000 outstanding under this line of
credit. As a result of the conditions of the line of credit and financial
results of the 1997 second fiscal quarter, the Company had unused borrowing
capacity of $498,000. Partial usage of unused borrowing capacity could be
restricted by financial operating covenants.
The Company expects that it will continue to require significant amounts of cash
to finance operations.* The Company has not committed to make significant
capital expenditures, but may make such expenditures in the future.* The Company
believes that the existing cash balances, together with cash generated from
operations and borrowings available under its line of credit, will be sufficient
to meet its cash requirements through at least the end of 1997.* There can be no
assurance, however, that the Company's anticipation of its future cash
requirements will be correct. Thereafter, the Company may seek to raise
additional working capital, primarily through sales of debt or equity
securities, prior to the end of 1997 if it can raise such capital on acceptable
terms.*
The Company signed an agreement in July 1996 with an associated amendment in
November 1996 with its largest shareholder, MK Global Ventures in association
with its MK GVD Fund, to invest in additional capital of the Company to finance
operations. Under the Series G Preferred Stock Purchase Agreement, MK GVD Fund
agreed to invest up to $250,000 on or before June 30, 1997. The price per share
of this Series G Preferred Stock, which the Company has not registered under the
Securities Act of 1933, as amended, was 85% of the fair market value of the
Company's common stock based on the average of the closing bid price per share
for the ten trading days ending five business days before the closing of the
investment. In June 1997, the Company issued 50,344 shares of Series G Preferred
Stock under this agreement at a price of $1.99 per share, for aggregate proceeds
of approximately $100,000.
- ---------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
Factors Affecting Operating Results and Market Price of Stock
This section and other parts of this Quarterly Report on Form 10-Q contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ significantly from those anticipated in these
forward-looking statements as a result of the factors set forth below and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of these date hereof.
Forward-looking statements are indicated by an asterisk (*).
Among the factors that could cause actual results to differ materially are those
listed below and those listed from time to time in the Company's SEC reports
including but not limited to the annual report on Form 10-K for the year ended
December 31, 1996 and quarterly report on Form 10-Q for the quarter ended March
31, 1997.
History of Losses and Accumulated Deficits
The Company incurred total net losses of $10,713,000 from inception in August
1989 to June 30, 1997, including net losses of $291,000 for the year ended
December 31, 1996, net losses of $98,000 for the quarter ended March 31, 1997
and net losses of $97,000 for the quarter ended June 30, 1997. The Company
expects to incur losses for at least the third quarter of 1997 as it continues
to promote and expand its current publications and develop and launch new
products.* There can be no assurance that during 1997 or thereafter the Company
will be able to increase its revenues or become profitable. The Company's
potential future growth depends on many factors, including the ability of the
Company to attract sufficient advertising customers for NewMedia, maintain the
circulation base of NewMedia, control its costs and successfully implement its
marketing and product strategy.* There can be no assurance that the Company will
be successful in any of these efforts.
New Publishing Strategy; Sales and Marketing Strategy
The key elements of the Company's publishing strategy are to focus on the
professional market for new media technology, to publish at a frequency of 16
times per year, to maintain the stringent minimum qualification criteria that
potential subscribers were required to meet in 1996 in order to qualify for a
subscription, and to maintain the guaranteed circulation base of 215,000
qualified NewMedia readers.* There can be no assurance that the Company's
publishing strategy will result in increased revenues or in profitability.
Certain components of production, circulation and editorial expenses associated
with this publishing strategy will increase.* The Company has been undergoing an
advertising category transition since the second half of 1995, away from the
consumer market and toward the above mentioned professional market for new media
technology. To replace these consumer market advertisers and to grow advertising
revenues, the Company needs to sell advertisements oriented to the professional
market for new media technology. There can be no assurance that the Company will
be able to sell a sufficient number of advertisements to the professional market
to make its strategy successful. Until the circulation direct mail (and
associated) campaigns for qualified readers using the new qualification criteria
is completed, there can be no assurance that the estimated purchasing power of
new media products and services will be maintained with a reasonable level of
circulation expenditures. As a result, the Company does not expect growth in
NewMedia advertising revenues until at least the third quarter of 1997, if at
all.*
- ---------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
Highly Competitive Market
Revenues from NewMedia are derived primarily from the sale of advertising
in the magazine and will continue to be derived primarily from such sales in the
foreseeable future.* The technology publishing industry is highly competitive.
Many of the Company's competitors have substantially greater financial, sales
and marketing resources than the Company. Although the market for new media
products is an evolving market, the Company competes for advertising revenue
with numerous magazines and newspapers, including personal computer magazines.
There can be no assurance that the Company will not experience increased
competition from new or existing technology periodicals or other media, such as
the Internet. Such increased competition, if experienced, would have a material
adverse impact on the Company's ability to increase its advertising revenues.
Growth of New Media Market
NewMedia is targeted toward professionals users of new media products and
services in connection with computers. The computer industry has historically
been characterized by business cycles. To the extent that the computer industry
or professional new media market experiences a significant downturn, the Company
would expect a similar downturn in its business. The professional market for new
media products and services is in the early stages of development, and
predictions as to its size and the factors which will affect it are
inconclusive. To the extent that the professional new media market does not
develop as quickly as the Company anticipates or that it experiences a
significant downturn following growth, the Company's ability to generate revenue
or profits may be adversely affected. Furthermore, even if the professional new
media market does develop as anticipated, there can be no assurance that the
demand for NewMedia will also increase.
Dependence on Key Personnel
The Company's success depends to a large extent upon the efforts and
abilities of key managerial employees, including without limitation, Richard
Landry, Todd Hagen and Dan Ruby, the Chief Executive Officer, Chief Financial
Officer and Vice President, Editorial, respectively, of the Company. The loss of
any of these key managers could have a material adverse effect on the Company.
The Company has not entered into employment agreements with its executive
officers and carries no key man insurance on their lives. The success of the
Company's business will also depend upon its ability to continue to attract and
retain qualified employees. There can be no assurance that the Company will be
successful in attracting or retaining such personnel.
- ---------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
Possible Delisting of Securities from Nasdaq System
The Common Stock is listed on the Nasdaq SmallCap Market and the Pacific
Stock Exchange. The Company's failure to meet Nasdaq's listing maintenance
criteria in the future for any reason may result in the discontinuance of the
inclusion of the Company's securities on Nasdaq. In order to remain quoted on
Nasdaq, under the current Nasdaq rules, a company must maintain $2,000,000 in
assets, a $200,000 market value of the public float and $1,000,000 in total
capital and surplus. In addition, continued inclusion requires two market-makers
and a minimum bid price of $1.00 per share except that if a company falls below
such minimum bid price, it will remain eligible for inclusion in Nasdaq if the
market value of the public float is at least $1,000,000 and the Company has
$2,000,000 in capital and surplus. In November 1996, Nasdaq announced proposed
revisions to the listing and maintenance requirements, which would increase the
requirements for continued listing on the Nasdaq Market. Under the proposed
rules, a listed company will no longer be able to remain listed if its minimum
bid price falls below $1.00. In addition, the Company will have to maintain a
$1,000,000 market value or public float and either $2,000,000 net tangible
assets, $35,000,000 market capitalization or net income in two of its last three
years of $500,000. In the event of Nasdaq delisting, trading, if any, in the
Company's securities may then continue to be conducted on the OTC Electronic
Bulletin Board or in the non-Nasdaq over-the-counter market. As a result, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of the Company's securities.
- ---------------
* This statement is a forward looking statement reflecting current expectations.
There can be no assurance that the Company's actual performance will meet the
Company's current expectations. Investors are strongly encouraged to review the
sections entitled "Factors Affecting Operating Results and Market Price of
Stock" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors that could affect future
performance.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 22, 1997.
The results of the items submitted for vote were as follows:
1. Election of directors to serve until the next annual meeting.
Nominee Votes for Withheld
------- --------- --------
Patrick Ferrell 2,725,020 11,400
John Griffin 2,724,020 12,400
Michael Kaufman 2,725,170 11,250
Greg Lahann 2,725,170 11,250
Richard Landry 2,725,020 11,400
2. Ratification and approval of an amendment to the 1994
Director Option Plan increasing the aggregate number
of shares of Common Stock reserved for issuance
thereunder by 100,000 to 250,000.
Votes for: 2,587,275
Votes against: 133,395
Abstain: 15,750
Non-votes: 282,588
3. Ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending
December 31, 1997.
Votes for: 2,720,870
Votes against: 12,300
Abstain: 3,250
Non-votes: 0
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Company during the fiscal
quarter ended June 30, 1997.
Items 1, 2, 3, and 5 are not applicable and have been omitted.
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.
Date: August 12, 1997 HyperMedia Communications, Inc.
By: /s/ Todd Hagen
----------------------------------
Todd Hagen
Vice President of Finance and
Administration and Chief Financial
Officer (Principal Financial and
Accounting Officer)
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