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, 1999
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or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to .
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Commission File Number 1-11624
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HyperMedia Communications, Inc.
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(Exact name of registrant as specified in its charter)
California 94-3104247
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Mariner's Island Blvd., Suite 365,
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San Mateo, California 94404
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(Address of principal executive offices) (Zip Code)
(650) 573-5170
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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 such
filing requirements for the past 90 days. Yes X No
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As of August 5, 1999, 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
<CAPTION>
June 30, December 31,
1999 1998
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and Cash equivalents $ 33,000 $ 182,000
Accounts receivable, net of allowance for
doubtful accounts of $106,000 and $75,000 572,000 642,000
Prepaid expenses and other assets 467,000 522,000
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Total current assets 1,072,000 1,346,000
Property and equipment, net 292,000 364,000
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$ 1,364,000 $ 1,710,000
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 753,000 $ 564,000
Accrued liabilities 339,000 257,000
Deferred revenue 19,000 18,000
Note payable - related party 1,726,000 400,000
Note payable - line of credit 173,000 350,000
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Total current liabilities 3,010,000 1,589,000
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Shareholders' equity (deficit):
Convertible Preferred Stock, $.001 par value; 10,064,516
shares authorized;8,512,191 shares
issued and outstanding 3,924,000 3,924,000
Common Stock, $.001 par value; 50,000,000 shares
authorized; 3,200,137 shares issued and
outstanding 10,427,000 10,427,000
Accumulated deficit (15,997,000) (14,230,000)
------------ ------------
Total shareholders' equity (deficit) (1,646,000) 121,000
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$ 1,364,000 $ 1,710,000
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<FN>
See the accompanying notes to these condensed financial statements.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
HYPERMEDIA COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three months ended June 30, Six months ended June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 948,000 $ 1,329,000 $ 2,118,000 $ 3,083,000
----------- ----------- ----------- -----------
Operating expenses:
Editorial 258,000 239,000 527,000 522,000
Production 386,000 381,000 791,000 884,000
Circulation 428,000 471,000 853,000 995,000
Sales and marketing 543,000 553,000 1,065,000 1,079,000
Product development -- 11,000 -- 23,000
General and administrative 319,000 232,000 576,000 503,000
----------- ----------- ----------- -----------
Total operating expenses 1,934,000 1,887,000 3,812,000 4,006,000
----------- ----------- ----------- -----------
Loss from operations (986,000) (558,000) (1,694,000) (923,000)
Interest and other expense, net 42,000 (3,000) 73,000 2,000
----------- ----------- ----------- -----------
Net loss ($1,028,000) ($ 555,000) ($1,767,000) ($ 925,000)
=========== =========== =========== ===========
Net loss per share, basic and diluted (Note 2) ($ 0.32) ($ 0.17) ($ 0.55) ($ 0.29)
=========== =========== =========== ===========
Weighted average shares 3,200,137 3,200,137 3,200,137 3,200,137
=========== =========== =========== ===========
<FN>
See the accompanying notes to these condensed financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
HYPERMEDIA COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
(UNAUDITED)
<CAPTION>
Six months ended June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net loss ($1,767,000) ($ 925,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 86,000 114,000
Allowance for doubtful accounts 31,000 33,000
Change in assets and liabilities:
Accounts receivable 39,000 (4,000)
Prepaid expenses and other assets 55,000 (51,000)
Accounts payable 189,000 (284,000)
Accrued liabilities 82,000 (126,000)
Deferred revenue 1,000 23,000
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Net cash used in operating activities (1,284,000) (1,220,000)
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Net cash used in investing activities for:
Purchase of fixed assets (14,000) (87,000)
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Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 1,925,000
Proceeds from notes payable - related party 1,326,000 --
Proceeds from notes payable - line of credit 173,000 --
Repayment of line of credit (350,000) --
----------- -----------
Net cash provided by financing activities 1,149,000 1,925,000
----------- -----------
Net increase (decrease) in cash (149,000) 618,000
Cash at beginning of period 182,000 269,000
----------- -----------
Cash at end of period $ 33,000 $ 887,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 19,000 $ 2,000
=========== ===========
<FN>
See the accompanying notes to these condensed financial statements.
</FN>
</TABLE>
3
<PAGE>
HYPERMEDIA COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The financial statements of HyperMedia Communications, Inc. (the "Company") as
of June 30, 1999 and for the three and six months ended June 30, 1999 and 1998
are unaudited, and in the opinion of management, include 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.
These financial statements should be read in conjunction with the Financial
Statements for the year ended December 31, 1998 and notes thereto included in
the Company's annual report on Form 10-K. The results of operations for the
three and six months ended June 30, 1999 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 - BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per 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 ended June 30, 1999 and 1998 and for the
six month periods ended June 30, 1999 and 1998 as their effect is anti-dilutive.
4
<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 within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act, that involve risks
and uncertainties, including but not limited to those statements that have been
identified by an asterisk (*) and other statements regarding the Company's
strategy, financial performance, and revenue sources. 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.
General
HyperMedia Communications, Inc. (the "Company" or "HyperMedia"), provides
integrated information services to the corporate digital content market.
"Digital content" is information created using computer-based video, audio,
graphics, animation and Internet technologies. Companies use digital content in
building brand awareness through marketing, advertising, promotions, corporate
presentations and sales and technical training. Corporate digital content
creators utilize 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. Digital media output is actively employed in a broad range
of businesses and disciplines, such as brand identity (including presentations,
training and collateral), advertising, publishing, brand merchandising,
entertainment, and electronic commerce
HyperMedia publishes NewMedia Magazine ("NewMedia"), the largest publication
serving the corporate digital content market, serving more than 215,000 digital
content professionals. According to a recent analysis conducted for the Company
by BPA International ("BPA") of NewMedia subscriber demographic data, the
average subscriber to the publication has represented that they are personally
involved in the purchase of approximately $1,000,000 worth of digital
content-related hardware, software and services in a twelve-month period.
NewMedia's mission is to give its readers the tools to be successful digital
content professionals by identifying the newest products, technologies and
strategies that will keep their businesses competitive.* Revenue from NewMedia
is derived primarily through the sale of advertisements in the magazine.
- ---------------------
* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
5
<PAGE>
HyperMedia also produces the NewMedia INVISION Awards Festival, the largest
juried digital media competition in the world. The program seeks out the highest
achievements in digital content creation for business, entertainment, marketing,
government and education. The 1998 NewMedia INVISION Festival included its
gallery of award-winning entries, an evening International showcase of digital
content produced on four continents and a two-day Digital Insight conference.
HyperMedia also publishes newmediaocom, an award-winning World Wide Web site of
news, information, and product buying services for the digital content creation
market. The Company intends to further enhance and develop its web site
presence.*
In December 1998, HyperMedia launched the NewMedia Business Solutions Series, a
series of custom-published supplements to NewMedia magazine that focuses on
emerging technologies and trends in the field of digital content.
Custom-published supplements include paid, sponsored editorial content plus
advertising, and are written to the specifications of one or more sponsors.
Results of Operations
The Company's revenues, consisting primarily of advertising in NewMedia magazine
were $948,000 and $1,329,000 for the quarters ended June 30, 1999 and 1998,
respectively, and $2,118,000 and $3,083,000 for the six months then ended,
respectively.
The decline in revenues for the quarter ended June 30, 1999 from the same period
last year is primarily due to a decline in advertising sales in NewMedia. The
Company believes that the decrease in advertising revenue is related to a number
of market factors, including the migration of digital content development from
CD-ROM based media to the Internet, shifts in the Macintosh hardware and
software market as digital content creators make a transition toward increased
use of Windows based workstations and an industry wide decline in digital media
advertising.*
Additionally a reduction in the publishing frequency of NewMedia magazine from
four issues to three per quarter, which occurred in the first quarter
contributed approximately $400,000 to the revenue decline for the six months
ended June 30, 1999 when compared to the same period a year ago.
The Company's total operating expenses were $1,934,000 and $1,887,000 for the
quarters ended June 30, 1999 and 1998, respectively and $3,812,000 and 4,006,000
for the six months then ended, respectively. Lower production and circulation
costs associated with the reduction in issues published in 1999 and general cost
control measures contributed to a 5% decline in expenses for the six months
ended June 30, 1999
- ---------------------
* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
6
<PAGE>
over the same period last year. Expenses for the quarter ended June 30, 1999
were up 2% over the same period last year due to increased general costs
associated with running the business.
The Company reported a net loss for the quarter ended June 30, 1999 and 1998 of
$1,028,000 and $555,000, respectively. The net loss for the first six months of
1999 was $1,767,000 as compared to a loss of $925,000 for the first six months
of 1998. For the quarter ended June 30, 1999, the increased loss as compared to
the same period in 1998 was due to a decline in advertising sales in NewMedia,
slightly higher expenses and an increase in interest expense The increase in net
loss for the first six months of 1999 as compared to the same period in 1998 is
primarily a result of reduced revenues due to the change in the publishing
frequency of NewMedia magazine from four issues to three per quarter and a
decline in advertising sales in NewMedia partially offset by reduced expenses.
Higher interest expense resulting from an increase in borrowing also contributed
to the increase loss.
Editorial expenses, comprised principally of salaries and fees paid to the
writers for the Company's publications, were $258,000 and $239,000 for the
quarters ended June 30, 1999 and 1998, respectively and $527,000 and $522,000
for the six months then ended. The increase in editorial expenses for the
quarter ended June 30, 1999 and the six months then ended as compared to 1998,
is primarily a result of the additional fees paid to writers for the NewMedia
Business Solution Series, a series of custom-publishing supplements to NewMedia
magazine. For the first six months of 1999 this increase was partially off-set
by a decline in editorial expenses due to the reduction in publishing frequency
of NewMedia magazine from four issues to three per quarter.
Production expenses, including costs for design, materials and printing of the
Company's publications, were $386,000 and $381,000 for the quarters ended June
30, 1999 and 1998, respectively and $791,000 and $884,000 for the six months
then ended. The decrease in production expenses for the first six months of 1999
as compared to 1998, is primarily due to the reduction in publishing frequency
of NewMedia magazine from four issues per quarter to three.
Circulation expenses, consisting primarily of costs associated with subscription
fulfillment, mailing and the cost to acquire and certify the company's
subscribers, were $428,000 and $471,000 for the quarters ended June 30, 1999 and
1998, respectively and $853,000 and $995,000 for the six months then ended. The
Company capitalizes its circulation development expenditures which consist of
external costs incurred by the company to acquire and certify its list of
qualified subscribers for each upcoming year and amortizes them over a 12-month
period. The decrease in circulation expenses for the first six months of 1999 as
compared to the same period in 1998 is primarily due to the reduction in
publishing frequency of NewMedia magazine from four issues per quarter to three
and a smaller amount of circulation development expenditure amortization
included in the quarter versus the same period in 1998. General cost control
programs also contributed to the decrease in expenses. For the quarter ended
June 30, 1999, the reduction in expenses as compared to the same period in 1998
is due to smaller amount of circulation development expenditure amortization
included in the quarter versus the same period in 1998 and general cost control
programs.
7
<PAGE>
Sales and marketing expenses were $543,000 and $553,000 for the quarters ended
June 30, 1999 and 1998, respectively, and $1,065,000 and $1,079,000 for the six
months then ended. The decline in expenses for both the quarter ended June 30,
1999 and the first six months of 1999, as compared to the same periods in 1998
was due to reduced commission expense on lower revenues and general cost control
programs. This expense reduction was partially offset by higher compensation and
consulting expenses.
Product development expenses were $0 and $11,000 for the quarters ended June 30,
1999 and 1998, respectively and $0 and $23,000 for the six months then ended.
These expenses consisted of costs incurred in the development of new products,
including the World Wide Web site, newmedia.com. The Company continues to
evaluate new product opportunities and may make addition expenditures during the
remainder of 1999*. However, there can be no assurance that such products, if
developed, will be profitable.
General and administrative expenses were $319,000 and $232,000 for the quarters
ended June 30, 1999 and 1998, respectively and $576,000 and $503,000 for the six
months then ended. The increase in expense for both the quarter and the first
six months of 1999 as compared to the same periods in 1999 was due to increased
general costs associated with running the business.
Interest and other expenses were $42,000 and ($3,000) for the quarter ended June
30, 1999 and 1998, respectively and $73,000 and $2,000 for the six months then
ended. These expenses were primarily interest expense associated with the
Company's increased borrowing in 1999.
- ---------------------
* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
8
<PAGE>
Liquidity and Capital Resources
At June 30, 1999, the Company had a working capital deficit of
approximately ($1,938,000) and its principal source of liquidity consisted of
approximately $33,000 in cash, a revolving credit facility and funds loaned to
it by its major shareholder MK Global Ventures, in association with its MK GVD
Fund.
The Company signed an agreement in March 1999 with a new lender which provides a
new line of credit. The revolving credit facility, which has a one year term,
provides for borrowings of up to 80 % of eligible receivables not to exceed
$600,000. The credit facility is secured by the Company's accounts receivable.
Borrowings accrue interest at the lenders reference rate of prime plus 4 % per
annum, which at June 30, 1999 was 11.75 %. At June 30, 1999 $173,000 was
outstanding under this facility and an additional $111,000 was available for
borrowing.
Borrowings from its major shareholder accrue interest at a rate of 10 % per
annum and are secured by the assets of the Company. Principal and accrued
interest is due and payable on demand, by the lender, which demand may be made
at any time, but in no event shall the principle and interest be paid later than
180 days after the date of the borrowing. On June 30, 1999, $422,000 in
principle and accrued interest that had become due during the quarter were
rolled over into a new 180 day note. At June 30, 1999, $1,726,000 was
outstanding under these notes. Repayments on these notes, if not refinanced, are
scheduled to begin July 1999 and continue through December 1999.
Capital expenditures for 1999 were $14,000 compared to $87,000 for 1998. These
expenditures primarily consist of desktop PC replacements and software upgrades.
The Company has not made or committed to make significant capital expenditures
in 1999 but may make such expenditures in the future.*
The Company expects that it will continue to require significant amounts of cash
to finance future operations. During the six months ended June 31, 1999 and
1998, net cash used in operating activities totaled $1,284,000 and $1,220,000
respectively. The Company is currently seeking additional financing. However,
there can be no assurance that the Company will be able to raise the necessary
funds on terms acceptable to the Company.
- ---------------------
* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
9
<PAGE>
Thereafter, the Company anticipates that it may need to raise additional working
capital, primarily through sales of debt or equity securities. * The terms of
the Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock, Series J Preferred
Stock and outstanding warrants grant the holders thereof certain preferential
rights including conversion and/or registration rights, which may have a
dilutive effect on existing shareholders and may therefore limit the
availability of financing, particularly equity financing. The Company has no
commitments for any such financing, and there can be no assurance that any such
debt or equity financing will be available on terms acceptable to the Company,
or at all.
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* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
10
<PAGE>
Factors That May Affect 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 the 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 in the Company's SEC reports, including but not
limited to the annual report on Form 10-K for the year ended December 31, 1998
and the Company's quarterly report on Form 10-Q for the quarter ended March 31,
1999.
History of Losses and Accumulated Deficits
The Company incurred total net losses of $15,997,000 from inception to
June 30, 1999 including net losses of $1,028,000 for the quarter ended June 30,
1999. The Company expects to incur losses for the remainder of 1999, as it
continues to promote and expand its current publications and develop and launch
new products.* There can be no assurance that 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, have a productive advertising sales force that includes recently-hired
sales people, control its costs, and successfully implement its marketing and
product strategy in relation to the corporate digital content creation
marketplace.* There can be no assurance that the Company will be successful in
any of these efforts.
1999 Publishing Strategy; Sales and Marketing Strategy
The key elements of the Company's 1999 publishing strategy are to focus
on the professional market for digital content creation, to maintain the
stringent minimum qualification criteria that potential subscribers were
required to meet in order to qualify for a subscription, and to maintain the
guaranteed circulation base of 215,000 qualified NewMedia readers.* In addition,
the Company is focusing on custom publishing activities, online advertising and
its event business to increased revenues.* Certain components of production,
marketing and editorial expenses associated with these strategies will
increase.* There can be no assurance that the Company's strategy will result in
increased revenues or in profitability.* The Company has been undergoing an
advertising category transition since the second half of 1995, away from the
consumer
- ---------------------
* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
11
<PAGE>
market toward the above mentioned professional market for digital content
creation. To replace these consumer market advertisers and to grow advertising
revenues, the Company needs to sell advertisements oriented to the professional
market for digital content creation. 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.
Illiquidity of Trading Market; Risk of Penny Stock Status
The Company's Common Stock trades on the OTC Bulletin Board. In
September 1998, the Company was delisted from trading on the Nasdaq SmallCap
Market, and in March 1999 the Company was delisted from trading on the Pacific
Exchange. Because the Company's Common Stock was delisted from the Pacific
Exchange, the Company has become subject to the Commission's "penny stock" rules
and therefore an investor will find it more difficult to dispose of, or to
obtain accurate quotations as to the price of, the Company's securities.
The "penny stock" rules under the Securities Exchange Act of 1934, as amended,
also impose additional sales practice and market making requirements on
broker-dealers who sell and/or make a market in such securities. For
transactions covered by the penny stock rules, a broker-dealer must make special
suitability determinations for purchasers and must have received the purchasers'
written consent to the transactions prior to sale. In addition, for any
transaction involving a penny stock, unless exempt, the rules require delivery
prior to any transaction in a penny stock of a disclosure schedule prepared by
the Commission relating to the penny stock market. Disclosure is also required
to be made about commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities.
Finally, monthly statements are required to be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the Company's delisting from the
Nasdaq SmallCap Market and the Pacific Exchange and its becoming subject to the
rules on penny stocks has likely affected the ability or willingness of
broker-dealers to sell and/or make a market in the Company's securities and
therefore has severely adversely affect the market liquidity for the Company's
securities.
Effect of Preferred Stock Conversion, Dividend and Liquidation Features
The Company's Articles of Incorporation currently authorize the
Company to issue 10,064,516 shares of preferred stock, of which 8,512,191 shares
of preferred stock are currently issued and outstanding (the "Preferred Stock").
The Preferred Stock, as of June 30, 1999, is convertible into 8,712,782 shares
of the Company's Common Stock. The liquidation, dividend and conversion features
of the currently outstanding Preferred Stock are as follows.
The Series E Preferred Stock has a liquidation preference per share equal to
$.124 per share and all accumulated and unpaid dividends. After December 31,
1999, the shares of Series E Preferred Stock are convertible into such number of
shares of Common Stock as
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is determined by dividing $0.124 by the Series E Conversion Price in effect at
the time of the conversion. The Series E Conversion Price is currently $0.478
and as a result of the issuance of the Series J Preferred Stock would be
convertible into 2,092,050 shares of Common Stock, if it were currently
convertible. Accordingly, each share of Series E Preferred will be convertible
into approximately 0.3 shares of Common Stock. The Series E Preferred Stock also
has price-based antidilution rights. Pursuant to the price-based antidilution
rights (and subject to certain exceptions), if the Company issues shares at a
price below the Series E Conversion Price, the Series E Conversion Price is
reduced to the price at which the Company issues the shares.
The Series E Preferred also has cumulative dividend rights which accrue at a
rate of $.0074 per annum (an aggregate of approximately $60,000 per annum). If
the Company has accumulated unpaid dividends on the Series E Preferred at the
time the Series E Preferred converts to Common Stock the dividends convert to
Common Stock at the effective Series E Conversion Price. If the accumulated
dividends were to convert as of June 30, 1999, they would be convertible into
784,519 shares of Common Stock.
Each of the Series F Preferred Stock, Series G Preferred and Series H Preferred
Stock, were issued at prices discounted at 85% of the average closing bid price
of the Company's Common Stock as reported on the Nasdaq SmallCap Market for the
10 trading days ending 5 business days before the closing of the sale (the
"Formula Price") of the Shares, and each such Series was initially convertible
into one share of Common Stock. The Series I Preferred Stock was issued at a
price discounted at 10 times the Formula Price and was initially convertible
into 10 shares of Common Stock. The Series J Preferred Stock was issued at a
price discounted at 20 times the Formula Price and each share of Series J
Preferred Stock is convertible into 20 shares of Common Stock.
The Series F Preferred, Series G Preferred, Series H Preferred, Series I
Preferred and Series J Preferred Stock are entitled to dividends in the amount
of five percent (5%) of the Initial Sales Price of Series F Preferred, Series G
Preferred, Series H Preferred, Series I Preferred and Series J Preferred Stock
per fiscal year only if declared by the Board of Directors. The dividends are
not cumulative and no rights accrue to the holders of these series of preferred
stock in the event the Corporation does not declare or pay dividends. The
liquidation preference per share is equal to $3.039 per share for the Series F
Preferred, $0.478 per share for the Series G Preferred, $0.478 per share for the
Series H Preferred, $4.78 per share for the Series I Preferred and $9.56 per
share for the Series J Preferred Stock, plus all declared but unpaid dividends.
No dividends have been declared on the Preferred Stock. Shares of Series F
Preferred, Series G Preferred, Series H Preferred, Series I Preferred and Series
J Preferred Stock are convertible into a number of shares of Common Stock equal
to the initial sales price of each respective series of Preferred Stock divided
by the appropriate conversion price. The initial sales price was $3.039 for the
Series F Preferred, $1.992 for the Series G Preferred, $2.136 for the Series H
Preferred, $15.62 for the Series I Preferred and $12.38 for the Series J
Preferred. The conversion prices of each of the Series F Preferred, Series G
Preferred, Series H Preferred, Series I Preferred and Series J Preferred is
subject to adjustment in the event of subdivisions, splits, combinations,
consolidations or reclassification of Common Stock and similar events and, for
approximately one year after the final sale of each Series in the event the
Company issues shares of Common Stock at a price below the applicable
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<PAGE>
conversion price ("price-based antidilution"). The price-based antidilution
feature has expired for the Series F Preferred Stock, the Series G Preferred
Stock, the Series H Preferred Stock, and the Series I Preferred Stock and will
expire on June 30, 1999 for the Series J Preferred Stock.
The issuance of 57,531 shares of Series J Preferred at $9.56 per share in June
1998 was equivalent to an issuance at $0.478 per share of Common Stock and
caused the conversion prices of each of the Series E Preferred, Series G
Preferred, Series H Preferred, Series I Preferred and Series J Preferred to be
adjusted to $0.478 per share. Accordingly, each share of Series F Preferred is
convertible into 1 share of Common Stock, each share of Series G Preferred is
convertible info 4.2 shares of Common Stock, each share of Series H Preferred is
convertible into 4.5 shares of Common Stock, each share of Series I Preferred is
convertible into 32.7 shares of Common Stock and each share of Series J
Preferred is convertible into 24.1 shares of Common Stock. All shares of Series
F Preferred, Series G Preferred, Series H Preferred, Series I Preferred and
Series J Preferred Stock then outstanding shall automatically convert into
shares of Common Stock upon the election of at least 67% of the authorized,
issued and outstanding shares of each respective Series of Preferred Stock to
convert shares of Series F Preferred, Series G Preferred, Series H Preferred,
Series I Preferred and Series J Preferred Stock into Common Stock.
The Company also has 1,552,325 shares of additional authorized preferred stock
that could be issued in the future with terms that are more favorable to the
holder than those that have been previously issued. The Articles of
Incorporation provide that the Board of Directors is authorized to fix the
number of shares of any series of Preferred Stock and to determine or alter the
rights, preferences, privileges, and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issue of
shares of that series. Additionally, the Board of Directors may authorize the
issuance of additional series of Preferred Stock. The Board of Directors may
therefore issue additional Preferred Stock with voting, liquidation and
conversion rights that could adversely affect the voting power and liquidation
rights of the holders of Common Stock. When and if such preferred stock is
issued or converted there will be considerable dilution to the then existing
Common stockholders. In the event the Company issues preferred stock with a
purchase price of less than $0.478 per share the Series E conversion price will
be further adjusted so that more shares of Common Stock will be issued upon
conversion of the Series E Preferred Stock. This will cause additional dilution
to the voting power and liquidation rights of the holders of Common Stock.
Control By Principal Stockholders
The Company's principal stockholders, MK Global Ventures II and its
affiliate MK GVD Fund (together, the "MK Entities"), together beneficially own
over 83% of the outstanding Common Stock (assuming conversion of all outstanding
Preferred Stock in Common Stock). In addition, the MK Entities have two
representatives on the three-
14
<PAGE>
person Board of Directors of the Company. Accordingly, the MK Entities will be
able to determine the composition of the Company's Board of Directors, will
retain voting power to approve all matters requiring stockholder approval and
will continue to have significant influence over the affairs of the Company.
This concentration of ownership could have the effect of delaying or preventing
a change in control of the Company.
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 near 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 digital content creation and Internet 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.
Risks Associated with Sales and Marketing Strategy
The Company's ability to achieve future profitability depends upon the
success of the Company's strategy to retain sales personnel in key markets and
to increase the productivity of existing sales personnel.* In July 1998, the
Company hired a new Publisher. The Company also hired additional advertising
personnel in the first and second quarters of 1998. Additionally, the Company
completed a realignment of its sales force. As part of these changes, the
company dedicated specific sales personnel to new revenue opportunities in
custom publishing, online advertising, and conferences and focused it remaining
sale personnel on strategic accounts and vertical technology selling. New sales
personnel typically take from six to nine months to become fully productive, and
therefore the Company's operating results during such time may be adversely
affected by the hiring of such personnel. In addition, there can be no assurance
that such new sales personnel will achieve sufficient advertising revenue to
become profitable for the Company after the first six to nine months or at all.
Any failure of one or more of the new personnel to become productive will have a
material adverse effect on the Company's operating results. Furthermore, the
Company's revenues from advertising sales depends upon a small number of key
sales personnel. Any inability of such personnel to maintain or increase
existing sales levels, or any turnover in such personnel, would have a material
adverse effect on the Company's operating results.
- ---------------------
* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
15
<PAGE>
Uncertainty of Growth of the Professional Market for Digital Content
Creation
NewMedia is targeted toward professional users of digital content
creation 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 digital content creation market
experiences a significant downturn, the Company would expect a similar downturn
in its business. The professional market for digital content creation 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 digital content creation 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 digital content creation market
does develop as anticipated, there can be no assurance that the demand for
NewMedia will also increase.*
Year 2000 Compliance
Many computer systems and software and electronic products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. In addition, certain systems and products do not correctly
process "leap year" dates. As a result, in the next 12 months, computer systems
and software ("IT System") and other property and equipment not directly
associated with information systems ("Non-IT Systems"), such as elevators,
phones, other office equipment used by many companies, including the company's
customers and potential customers of the Company, may need to be upgraded,
repaired or replaced to comply with such "Year 2000" and "leap year"
requirements.
Although the company has determined that most of its principle IT Systems are
Year 2000 compliant, certain of such internal systems have not been evaluated by
the Company. The Company has not yet made an assessment of the status of its
Non-IT Systems.
The Company presently estimates that the total cost of addressing their Year
2000 and leap year issues will be immaterial.* These estimates were derived
utilizing numerous assumptions, including the assumption that they have already
identified their most significant Year 2000 and leap year issues and that the
plans of its third-party suppliers will be fulfilled in a timely manner without
cost to the Company. However, these assumptions may not be accurate, and actual
results could differ materially from those anticipated.
- ---------------------
* 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Factors Affecting Operating Results and Market
Price of Stock" for a discussion of factors that could affect future
performance.
16
<PAGE>
The Company believes that the purchasing patterns of companies that subscribe to
NewMedia as well as the Company's advertising clients may be affected by Year
2000 issues, as companies expend significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase advertising in publications like
NewMedia, which could result in a material adverse effect on the Company's
business, operating results and financial condition.
The Company has not determined the state of compliance of certain third-party
suppliers of services such as phone companies, long distance carriers, financial
institutions and electric companies, the failure of any one of which could
severely disrupt the Company's ability to carry on its business as well as
disrupt the business of the Company's customers. The Company could be affected
through disruptions in the operation of the enterprises with which the Company
interacts or from general widespread problems or an economic crisis resulting
from noncompliant Year 2000 systems. Despite the Company's efforts to address
the Year 2000 effect on its internal systems and business operations, such
effect could result in a material disruption of its business or have a material
adverse effect on the Company or the Company's business, financial condition, or
results of operations. The Company has not developed a contingency plan to
respond to any of the foregoing consequences of internal and external failures
to be Year 2000 and leap year compliant.
Dependence on Key Personnel and Sales Personnel
The Company's success depends to a large extent upon the efforts and
abilities of key managerial employees, including without limitation, Richard
Landry, John Topping, and Kenneth Klein, the Chief Executive Officer, President,
and Chief Financial Officer, respectively, of the Company. The Company's success
also depends on the performance of key sales personnel. The loss of certain of
these key managers or sales personnel 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. Competition for such employees is
intense, and there can be no assurance that the Company will be successful in
attracting or retaining such personnel.
17
<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 June 7,
1999. 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
------- --------- --------
Michael Kaufman 2,912,634 39,550
Greg Lahann 2,912,634 39,550
Richard Landry 2,902,634 49,550
2. Ratify the appointment of PricewaterhouseCoopers LLP
as independent accountants of the Company for the
fiscal year ending December 31, 1999.
Votes for: 2,919,684
Votes against: 27,400
Abstain: 5,100
Non-votes: 247,953
18
<PAGE>
Item 5. Other Information
Proposals of shareholders of the Company that are intended to be presented by
such shareholders at the Company's 2000 Annual Meeting of Shareholders, which
are not eligible for inclusion in the proxy statement and form of proxy relating
to that meeting, must be received by the Company no later than March 23, 2000.
If such shareholders fail to comply with the foregoing notice provision, then
the proxy holders will be allowed to use their voting discretionary authority
when the proposal is raised at the 2000 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 $129,000 Subordinated Promissory Note, dated April
13, 1999 issued by the Registrant to MK GVD Fund.
4.2 $85,000 Subordinated Promissory Note, dated April 28,
1999 issued by the Registrant to MK GVD Fund.
4.3 $125,000 Subordinated Promissory Note, dated May 12,
1999 issued by the Registrant to MK GVD Fund.
4.4 $149,000 Subordinated Promissory Note, dated May 26,
1999 issued by the Registrant to MK GVD Fund.
4.5 $130,000 Subordinated Promissory Note, dated June 11,
1999 issued by the Registrant to MK GVD Fund.
4.6 $86,000 Subordinated Promissory Note, dated June 28,
1999 issued by the Registrant to MK GVD Fund.
4.7 $422,000 Subordinated Promissory Note, dated June 30,
1999 issued by the Registrant to MK GVD Fund.
27.1 Financial Data Schedule.
(b) No reports on Form 8-K were filed by the Company during the
fiscal quarter ended June 30, 1999.
Items 1,2 and 3 are not applicable and have been omitted.
19
<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.
Date: August 13, 1999 HyperMedia Communications, Inc.
By: \s\ Kenneth Klein
------------------
Kenneth Klein, Vice President of Finance
and Administration, Chief Financial Officer
and Secretary
(Principal Financial and Accounting Officer)
20
San Mateo, CA
April 13, 1999
$129,000
SECURED PROMISSORY NOTE
For value received, the undersigned, Hypermedia Communications, Inc., a
California corporation ("Borrower") promises to pay MK GVD Fund ("Lender") the
principal sum of one hundred and twenty nine thousand dollars ($129,000), with
interest from the date hereof at a rate of ten percent (10%) per annum, which
amount shall be secured by all of the assets of Borrower. Said principal shall
be due and payable on demand by Lender, which demand may be made at any time,
but in no event shall the principal be paid later than one hundred eighty (180)
days after the date of this Note. This Note may be prepaid at any time without
penalty.
In the event of liquidation, merger, sale, or winding up of the company, Lender
shall be entitled to receive, prior and in preference to any other holders of
debt or equity securities, (except as provided in item 1. below), the principal
value of this Note plus accrued interest.
The following is a statement of the rights of the Borrower of this Note and the
conditions to which this Note is subject, to which the Borrower and Lender, by
the acceptance of this Note agree:
1. Subordination - Creditor subordinates to Business Finance ("BF") any
security interest or lien that Creditor may have in any property of Borrower.
All Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to BF now existing or hereafter arising.
2. Security Interest - Borrower hereby grants to Lender a security
interest in all assets of Borrower to secure repayment of the indebtedness
represented by this Note. Borrower hereby represents and agrees that it will
take all actions contemplated above including the execution of a UCC1 financing
statement, which for the purposes of such execution, Borrower hereby appoints
Lender as its attorney-in-fact to execute such UCC1 financing statement.
3. Attorneys' Fees - If any action or proceeding shall be commenced to
enforce this Note or any right arising in connection with this Note, the
prevailing party in such action or proceeding shall be entitled to recover from
the other party the reasonable attorneys' fees, costs, and expenses incurred by
such prevailing party in connection with such action or proceeding or
negotiation to avoid such action or proceeding. In the event that any provision
of this Note should be deemed unlawful or unenforceable, such provision shall be
struck and the remainder hereof shall be enforced to the fullest extent of the
law.
4. Governing Law - This Note is issued in and shall be interpreted
under the laws of the State of California.
Issued this 13 day of April, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
April 28, 1999
$85,000
SECURED PROMISSORY NOTE
For value received, the undersigned, Hypermedia Communications, Inc., a
California corporation ("Borrower") promises to pay MK GVD Fund ("Lender") the
principal sum of eighty-five thousand dollars ($85,000), with interest from the
date hereof at a rate of ten percent (10%) per annum, which amount shall be
secured by all of the assets of Borrower. Said principal shall be due and
payable on demand by Lender, which demand may be made at any time, but in no
event shall the principal be paid later than one hundred eighty (180) days after
the date of this Note. This Note may be prepaid at any time without penalty.
In the event of liquidation, merger, sale, or winding up of the company, Lender
shall be entitled to receive, prior and in preference to any other holders of
debt or equity securities, (except as provided in item 1. below), the principal
value of this Note plus accrued interest.
The following is a statement of the rights of the Borrower of this Note and the
conditions to which this Note is subject, to which the Borrower and Lender, by
the acceptance of this Note agree:
1. Subordination - Creditor subordinates to Business Finance ("BF") any
security interest or lien that Creditor may have in any property of Borrower.
All Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to BF now existing or hereafter arising.
2. Security Interest - Borrower hereby grants to Lender a security
interest in all assets of Borrower to secure repayment of the indebtedness
represented by this Note. Borrower hereby represents and agrees that it will
take all actions contemplated above including the execution of a UCC1 financing
statement, which for the purposes of such execution, Borrower hereby appoints
Lender as its attorney-in-fact to execute such UCC1 financing statement.
3. Attorneys' Fees - If any action or proceeding shall be commenced to
enforce this Note or any right arising in connection with this Note, the
prevailing party in such action or proceeding shall be entitled to recover from
the other party the reasonable attorneys' fees, costs, and expenses incurred by
such prevailing party in connection with such action or proceeding or
negotiation to avoid such action or proceeding. In the event that any provision
of this Note should be deemed unlawful or unenforceable, such provision shall be
struck and the remainder hereof shall be enforced to the fullest extent of the
law.
4. Governing Law - This Note is issued in and shall be interpreted
under the laws of the State of California.
Issued this 28 day of April, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
May 12, 1999
$125,000
SECURED PROMISSORY NOTE
For value received, the undersigned, Hypermedia Communications, Inc., a
California corporation ("Borrower") promises to pay MK GVD Fund ("Lender") the
principal sum of one hundred twenty-five thousand dollars ($125,000), with
interest from the date hereof at a rate of ten percent (10%) per annum, which
amount shall be secured by all of the assets of Borrower. Said principal shall
be due and payable on demand by Lender, which demand may be made at any time,
but in no event shall the principal be paid later than one hundred eighty (180)
days after the date of this Note. This Note may be prepaid at any time without
penalty.
In the event of liquidation, merger, sale, or winding up of the company, Lender
shall be entitled to receive, prior and in preference to any other holders of
debt or equity securities, (except as provided in item 1. below), the principal
value of this Note plus accrued interest.
The following is a statement of the rights of the Borrower of this Note and the
conditions to which this Note is subject, to which the Borrower and Lender, by
the acceptance of this Note agree:
1. Subordination - Creditor subordinates to Business Finance ("BF") any
security interest or lien that Creditor may have in any property of Borrower.
All Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to BF now existing or hereafter arising.
2. Security Interest - Borrower hereby grants to Lender a security
interest in all assets of Borrower to secure repayment of the indebtedness
represented by this Note. Borrower hereby represents and agrees that it will
take all actions contemplated above including the execution of a UCC1 financing
statement, which for the purposes of such execution, Borrower hereby appoints
Lender as its attorney-in-fact to execute such UCC1 financing statement.
3. Attorneys' Fees - If any action or proceeding shall be commenced to
enforce this Note or any right arising in connection with this Note, the
prevailing party in such action or proceeding shall be entitled to recover from
the other party the reasonable attorneys' fees, costs, and expenses incurred by
such prevailing party in connection with such action or proceeding or
negotiation to avoid such action or proceeding. In the event that any provision
of this Note should be deemed unlawful or unenforceable, such provision shall be
struck and the remainder hereof shall be enforced to the fullest extent of the
law.
4. Governing Law - This Note is issued in and shall be interpreted
under the laws of the State of California.
Issued this 12 day of May, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
May 26, 1999
$149,000
SECURED PROMISSORY NOTE
For value received, the undersigned, Hypermedia Communications, Inc., a
California corporation ("Borrower") promises to pay MK GVD Fund ("Lender") the
principal sum of one hundred and forty nine thousand dollars ($149,000), with
interest from the date hereof at a rate of ten percent (10%) per annum, which
amount shall be secured by all of the assets of Borrower. Said principal shall
be due and payable on demand by Lender, which demand may be made at any time,
but in no event shall the principal be paid later than one hundred eighty (180)
days after the date of this Note. This Note may be prepaid at any time without
penalty.
In the event of liquidation, merger, sale, or winding up of the company, Lender
shall be entitled to receive, prior and in preference to any other holders of
debt or equity securities, (except as provided in item 1. below), the principal
value of this Note plus accrued interest.
The following is a statement of the rights of the Borrower of this Note and the
conditions to which this Note is subject, to which the Borrower and Lender, by
the acceptance of this Note agree:
1. Subordination - Creditor subordinates to Business Finance ("BF") any
security interest or lien that Creditor may have in any property of Borrower.
All Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to BF now existing or hereafter arising.
2. Security Interest - Borrower hereby grants to Lender a security
interest in all assets of Borrower to secure repayment of the indebtedness
represented by this Note. Borrower hereby represents and agrees that it will
take all actions contemplated above including the execution of a UCC1 financing
statement, which for the purposes of such execution, Borrower hereby appoints
Lender as its attorney-in-fact to execute such UCC1 financing statement.
3. Attorneys' Fees - If any action or proceeding shall be commenced to
enforce this Note or any right arising in connection with this Note, the
prevailing party in such action or proceeding shall be entitled to recover from
the other party the reasonable attorneys' fees, costs, and expenses incurred by
such prevailing party in connection with such action or proceeding or
negotiation to avoid such action or proceeding. In the event that any provision
of this Note should be deemed unlawful or unenforceable, such provision shall be
struck and the remainder hereof shall be enforced to the fullest extent of the
law.
4. Governing Law - This Note is issued in and shall be interpreted
under the laws of the State of California.
Issued this 26 day of May, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
June 11, 1999
$130,000
SECURED PROMISSORY NOTE
For value received, the undersigned, Hypermedia Communications, Inc., a
California corporation ("Borrower") promises to pay MK GVD Fund ("Lender") the
principal sum of one hundred and thirty thousand dollars ($130,000), with
interest from the date hereof at a rate of ten percent (10%) per annum, which
amount shall be secured by all of the assets of Borrower. Said principal shall
be due and payable on demand by Lender, which demand may be made at any time,
but in no event shall the principal be paid later than one hundred eighty (180)
days after the date of this Note. This Note may be prepaid at any time without
penalty.
In the event of liquidation, merger, sale, or winding up of the company, Lender
shall be entitled to receive, prior and in preference to any other holders of
debt or equity securities, (except as provided in item 1. below), the principal
value of this Note plus accrued interest.
The following is a statement of the rights of the Borrower of this Note and the
conditions to which this Note is subject, to which the Borrower and Lender, by
the acceptance of this Note agree:
1. Subordination - Creditor subordinates to Business Finance ("BF") any
security interest or lien that Creditor may have in any property of Borrower.
All Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to BF now existing or hereafter arising.
2. Security Interest - Borrower hereby grants to Lender a security
interest in all assets of Borrower to secure repayment of the indebtedness
represented by this Note. Borrower hereby represents and agrees that it will
take all actions contemplated above including the execution of a UCC1 financing
statement, which for the purposes of such execution, Borrower hereby appoints
Lender as its attorney-in-fact to execute such UCC1 financing statement.
3. Attorneys' Fees - If any action or proceeding shall be commenced to
enforce this Note or any right arising in connection with this Note, the
prevailing party in such action or proceeding shall be entitled to recover from
the other party the reasonable attorneys' fees, costs, and expenses incurred by
such prevailing party in connection with such action or proceeding or
negotiation to avoid such action or proceeding. In the event that any provision
of this Note should be deemed unlawful or unenforceable, such provision shall be
struck and the remainder hereof shall be enforced to the fullest extent of the
law.
4. Governing Law - This Note is issued in and shall be interpreted
under the laws of the State of California.
Issued this 11 day of June, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
June 28, 1999
$86,000
SECURED PROMISSORY NOTE
For value received, the undersigned, Hypermedia Communications, Inc., a
California corporation ("Borrower") promises to pay MK GVD Fund ("Lender") the
principal sum of eighty-six thousand dollars ($86,000), with interest from the
date hereof at a rate of ten percent (10%) per annum, which amount shall be
secured by all of the assets of Borrower. Said principal shall be due and
payable on demand by Lender, which demand may be made at any time, but in no
event shall the principal be paid later than one hundred eighty (180) days after
the date of this Note. This Note may be prepaid at any time without penalty.
In the event of liquidation, merger, sale, or winding up of the company, Lender
shall be entitled to receive, prior and in preference to any other holders of
debt or equity securities, (except as provided in item 1. below), the principal
value of this Note plus accrued interest.
The following is a statement of the rights of the Borrower of this Note and the
conditions to which this Note is subject, to which the Borrower and Lender, by
the acceptance of this Note agree:
1. Subordination - Creditor subordinates to Business Finance ("BF") any
security interest or lien that Creditor may have in any property of Borrower.
All Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to BF now existing or hereafter arising.
2. Security Interest - Borrower hereby grants to Lender a security
interest in all assets of Borrower to secure repayment of the indebtedness
represented by this Note. Borrower hereby represents and agrees that it will
take all actions contemplated above including the execution of a UCC1 financing
statement, which for the purposes of such execution, Borrower hereby appoints
Lender as its attorney-in-fact to execute such UCC1 financing statement.
3. Attorneys' Fees - If any action or proceeding shall be commenced to
enforce this Note or any right arising in connection with this Note, the
prevailing party in such action or proceeding shall be entitled to recover from
the other party the reasonable attorneys' fees, costs, and expenses incurred by
such prevailing party in connection with such action or proceeding or
negotiation to avoid such action or proceeding. In the event that any provision
of this Note should be deemed unlawful or unenforceable, such provision shall be
struck and the remainder hereof shall be enforced to the fullest extent of the
law.
4. Governing Law - This Note is issued in and shall be interpreted
under the laws of the State of California.
Issued this 28 day of June, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
June 30, 1999
$421,861
SECURED PROMISSORY NOTE
For value received, the undersigned, Hypermedia Communications, Inc., a
California corporation ("Borrower") promises to pay MK GVD Fund ("Lender") the
principal sum of four hundred twenty-one thousand eight hundred and sixty-one
dollars ($421,861), with interest from the date hereof at a rate of ten percent
(10%) per annum, which amount shall be secured by all of the assets of Borrower.
Said principal shall be due and payable on demand by Lender, which demand may be
made at any time, but in no event shall the principal be paid later than one
hundred eighty (180) days after the date of this Note. This Note may be prepaid
at any time without penalty.
In the event of liquidation, merger, sale, or winding up of the company, Lender
shall be entitled to receive, prior and in preference to any other holders of
debt or equity securities, (except as provided in item 1. below), the principal
value of this Note plus accrued interest.
The following is a statement of the rights of the Borrower of this Note and the
conditions to which this Note is subject, to which the Borrower and Lender, by
the acceptance of this Note agree:
1. Subordination - Creditor subordinates to Business Finance ("BF") any
security interest or lien that Creditor may have in any property of Borrower.
All Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to BF now existing or hereafter arising.
2. Security Interest - Borrower hereby grants to Lender a security
interest in all assets of Borrower to secure repayment of the indebtedness
represented by this Note. Borrower hereby represents and agrees that it will
take all actions contemplated above including the execution of a UCC1 financing
statement, which for the purposes of such execution, Borrower hereby appoints
Lender as its attorney-in-fact to execute such UCC1 financing statement.
3. Attorneys' Fees - If any action or proceeding shall be commenced to
enforce this Note or any right arising in connection with this Note, the
prevailing party in such action or proceeding shall be entitled to recover from
the other party the reasonable attorneys' fees, costs, and expenses incurred by
such prevailing party in connection with such action or proceeding or
negotiation to avoid such action or proceeding. In the event that any provision
of this Note should be deemed unlawful or unenforceable, such provision shall be
struck and the remainder hereof shall be enforced to the fullest extent of the
law.
4. Governing Law - This Note is issued in and shall be interpreted
under the laws of the State of California.
Issued this 30 day of June, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
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