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 September 30, 1999
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)
(650) 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 November 5, 1999, 3,200,137 shares of the Registrant's common stock were
issued and outstanding.
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION.......................................................................... 2
ITEM 1. Financial Statements
Condensed Balance Sheet as of September 30, 1999 and
December 31, 1998..................................................................... 2
Condensed Statement of Operations for the Three and Nine Months Ended
September 30, 1999 and September 30, 1998............................................. 3
Condensed Statement of Cash Flows for the Three and Nine
Months Ended September 30, 1999 and September 30, 1998................................ 4
Notes to Condensed Financial Statements............................................... 5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk............................ 18
PART II OTHER INFORMATION............................................................................. 19
ITEM 6. Exhibits and Reports on Form 8-K..................................................... 19
SIGNATURES...................................................................................................... 20
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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HYPERMEDIA COMMUNICATIONS, INC.
BALANCE SHEET
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September 30, December 31,
1999 1998
------------ ------------
(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents $ 120,000 $ 182,000
Accounts receivable, net of allowance for
doubtful accounts of $116,000 and $75,000 611,000 642,000
Prepaid expenses and other assets 393,000 522,000
------------ ------------
Total current assets 1,124,000 1,346,000
Property and equipment, net 128,000 364,000
------------ ------------
$ 1,252,000 $ 1,710,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note payable - related party 2,636,000 400,000
Note payable - line of credit 182,000 350,000
Accounts payable 469,000 $ 564,000
Accrued liabilities 584,000 257,000
Deferred revenue 372,000 18,000
------------ ------------
Total current liabilities 4,243,000 1,589,000
------------ ------------
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 (17,342,000) (14,230,000)
------------ ------------
Total shareholders' equity (deficit) (2,991,000) 121,000
------------ ------------
$ 1,252,000 $ 1,710,000
============ ============
<FN>
See accompanying notes to these condensed financial statements.
</FN>
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HYPERMEDIA COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
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Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
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Revenues $803,000 $1,028,000 $2,921,000 $4,099,000
-------------- -------------- -------------- ---------------
Operating expenses:
Editorial 297,000 201,000 824,000 723,000
Production 447,000 378,000 1,238,000 1,262,000
Circulation 468,000 432,000 1,321,000 1,427,000
Sales and marketing 429,000 544,000 1,494,000 1,622,000
Product development 150,000 12,000 150,000 35,000
General and administrative 291,000 208,000 867,000 711,000
-------------- -------------- -------------- ---------------
Total operating expenses 2,082,000 1,775,000 5,894,000 5,780,000
-------------- -------------- -------------- ---------------
Loss from operations (1,279,000) (747,000) (2,973,000) (1,681,000)
Interest and other expense, net 66,000 (13,000) 139,000 (22,000)
-------------- -------------- -------------- ---------------
Net loss ($1,345,000) ($734,000) ($3,112,000) ($1,659,000)
============== ============== ============== ===============
Net loss per share, basic and diluted ($0.42) ($0.23) ($0.97) ($0.52)
============== ============== ============== ===============
Weighted average shares 3,200,137 3,200,137 3,200,137 3,200,137
============== ============== ============== ===============
<FN>
See accompanying notes to these condensed financial statements.
</FN>
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HYPERMEDIA COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine months ended
September 30,
-------------------------
1999 1998
----------- -----------
Cash flow from operating activities:
Net loss ($3,112,000) ($1,659,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 253,000 167,000
Allowance for doubtful accounts 41,000 51,000
Change in assets and liabilities:
Accounts receivable (10,000) 253,000
Prepaid expenses and other assets 129,000 (434,000)
Accounts payable (95,000) (327,000)
Accrued liabilities 327,000 (165,000)
Deferred revenue 354,000 265,000
----------- -----------
Net cash used in operating activities (2,113,000) (1,849,000)
----------- -----------
Net cash used in investing activities for:
Purchase of fixed assets (17,000) (129,000)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable - related party 2,236,000 --
Proceeds from notes payable - line of credit 182,000 --
Repayment of line of credit (350,000) --
Proceeds from issuance of Preferred Stock -- 1,921,000
----------- -----------
Net cash provided by financing activities 2,068,000 1,921,000
----------- -----------
Net increase (decrease) in cash and cash equivalents (62,000) (57,000)
Cash and cash equivalents at beginning of period 182,000 269,000
----------- -----------
Cash and cash equivalents at end of period $ 120,000 $ 212,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 33,000 $ 2,000
=========== ===========
See accompanying notes to these condensed financial statements.
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HYPERMEDIA COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The financial statements of HyperMedia Communications, Inc. (the
"Company") as of September 30, 1999 and for the three and nine months ended
September 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 the notes thereto included in the Company's annual report on Form 10-K. The
results of operations for the three and nine months ended September 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.
We announced September 1, 1999, that we were converting our business
model from traditional print publishing to an enhanced, Internet-based
information service designed to meet the growing information needs of
Internet-driven business professionals. As part of this strategy shift, we
ceased publication of NewMedia magazine in September in order to devote
additional resources to the development of a major new Web site designed to be a
daily news and information service for the Internet professional community. This
is a significant change in our business model and therefore our historical
trends may not be a good indicator of future performance. Readers should
carefully review all the information in this document including the risk factors
contained in the "Factors Affecting Operating Results and Market Price of Stock"
section of this report.
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-1, "Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). SOP 98-1 requires all cost related to the
development of internal use software other than those incurred during the
application development stage to be expensed as incurred. Costs incurred during
the application development stage are required to be capitalized and amortized
over the useful life of the software. SOP 98-1 is effective for our fiscal year
ending December 31, 1999. As a results of this guidance we are expensing our Web
site development and related costs as incurred.
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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 September 30, 1999 and 1998
and for the nine month periods ended September 30, 1999 and 1998, as their
effect is anti-dilutive.
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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, as amended, and Section 21E of the Securities Exchange
Act, as amended, that involve risks and uncertainties, including but not limited
to statements regarding the Company's strategy, plans, objectives, expectations,
intentions, financial performance, and revenue sources. The Company's actual
results may differ significantly from those anticipated or implied 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")
historically has provided 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
We announced September 1, 1999, that we were converting our business
model from traditional print publishing to an enhanced, Internet-based
information service designed to meet the growing information needs of
Internet-driven business professionals. As part of this strategy shift, we
ceased publication of NewMedia magazine in September in order to devote
additional resources to the development of a major new Web site designed to be a
daily news and information service for the Internet professional community. This
is a significant change in our business model and therefore our historical
trends may not be a good indicator of future performance. Readers should
carefully review all the information in this document including the risk factors
contained in the "Factors Affecting Operating Results and Market Price of Stock"
section of this report.
NewMedia Magazine ("NewMedia") was 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-
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month period. NewMedia's mission was 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 was derived primarily through the sale of advertisements in the
magazine.
We also produce 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.
We also publish newmedia.com, an award-winning Web site of news,
information, and product buying services for the digital content creation
market. The change in our publishing strategy will result in the complete
redesign of this Web site. The revised Web site is scheduled to launch in late
November of 1999. We intend to further enhance and develop our web site
presence.
In December 1998, we 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
Our revenues, consisting primarily of advertising in NewMedia magazine
were $803,000 for the quarter ended September 30, 1999 and $1,028,000 for the
quarter ended September 30, 1998 and $2,921,000 for the nine months ended
September 30, 1999 and $4,099,000 for the nine months ended September 30, 1998.
The decline in revenues for the quarter ended September 30, 1999 from
the same period last year is primarily due to a decline in advertising sales in
NewMedia. We believe 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 nine
months ended September 30, 1999 when compared to the same period a year ago.
Our total operating expenses were $2,082,000 for the quarter ended
September 30, 1999 and $1,775,000 for the quarter ended September 30, 1998, and
$5,894,000 for the nine months ended September 30, 1999 and $5,780,000 for the
nine months ended September 30, 1998. The increase in operating expenses for the
quarter ended September
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30, 1999 and the nine months then ended is primarily due to $280,000 in expenses
related to our decision to cease publication of NewMedia magazine. Increased
costs of $150,000 associated with the development of our new Web site, which
were expensed as incurred, as we convert our operations from a traditional print
publication business to an Internet based news and information model also
contributed to the increase in operating expenses over 1998. Excluding the
expenses associated with the change in our publishing strategy, expenses for the
quarter ended September 30, 1999 were $123,000 lower than the same period last
year. These expense reductions were primarily due to general cost control
measures. Excluding the expenses associated with the change in our publishing
strategy, expenses for the nine months ended September 30, 1999, were $316,000
lower than the same period last year. These expense reductions were primarily
due to lower production and circulation costs associated with the reduction in
issues published in 1999 and general cost control measures.
We reported a net loss of $1,345,000 for the quarter ended September
30, 1999 and a net loss of $734,000 for the quarter ended September 30, 1998.
The net loss for the first nine months of 1999 was $3,112,000 as compared to a
loss of $1,659,000 for the first nine months of 1998. For the quarter ended
September 30, 1999, the increased loss as compared to the same period in 1998
was due to a decline in advertising sales in NewMedia, higher operating expenses
resulting from the change in our publishing strategy and an increase in interest
expense. The increase in net loss for the first nine 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, which occurred in the first quarter, and a decline in
advertising sales in NewMedia magazine. Higher operating expenses resulting from
the change in our publishing strategy and an increase in interest expense also
contributed to the increase loss.
Editorial expenses, comprised principally of salaries and fees paid to
the writers for our publications, were $297,000 for the quarter ended September
30, 1999 and $201,000 for the quarter ended September 30, 1998, and $824,000 for
the nine months ended September 30, 1999 and $723,000 for the nine months ended
September 30, 1998. The increase in editorial expenses for the quarter ended
September 30, 1999 is primarily a result of $68,000 in nonrecurring expenses
associated with the change in our publishing strategy, $14,000 in consulting
fees related to the development of our new web site and $11,000 in fees paid to
writers for the NewMedia Business Solution Series, a series of custom-publishing
supplements to NewMedia magazine. For the first nine 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, which occurred in the first quarter.
Production expenses, including costs for design, materials and printing
of our publications, were $447,000 for the quarter ended September 30, 1999 and
$378,000 for the quarter ended September 30, 1998 and $1,238,000 for the nine
months ended September 30, 1999 and $1,262,000 for the nine months ended
September 30, 1998. The increase in production expenses for the quarter ended
September 30, 1999 over the same period last year was primarily due to $61,000
in nonrecurring expenses associated with the change in our publishing strategy.
For the first nine months of 1999 this increase was
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partially off-set by a decline in production expenses due to the reduction in
publishing frequency of NewMedia magazine from four issues to three per quarter,
which occurred in the first quarter.
Circulation expenses, consisting primarily of costs associated with
subscription fulfillment, mailing and the cost to acquire and certify the
company's subscribers, were $468,000 for the quarter ended September 30, 1999
and $432,000 for the quarter ended September 30, 1998, and $1,321,000 for the
nine months ended September 30, 1999 and $1,427,000 for the nine months ended
September 30, 1998. We capitalized our circulation development expenditures that
consist of external costs incurred by the company to acquire and certify its
list of qualified subscribers for each upcoming year and amortize them over a
12-month period. The increase in circulation expenses for the quarter ended
September 30, 1999 was primarily due $103,000 in nonrecurring expenses
associated with the change in our publishing strategy offset by general cost
control programs. The reduction in expense for the nine months ended September
30, 1999 as compared to the same period last year is primarily due to general
cost control programs, the reduction in publishing frequency of NewMedia
magazine from four issues per quarter to three, which occurred in the first
quarter and a smaller amount of circulation development expenditure amortization
during the period.
Sales and marketing expenses were $429,000 for the quarter ended
September 30, 1999 and $544,000 for the quarter ended September 30, 1998, and
$1,494,000 for the nine months ended September 30, 1999 and $1,622,000 for the
nine months ended September 30, 1998. The decline in expenses for both the
quarter ended September 30, 1999 and the first nine 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 and $18,000 in
nonrecurring expenses associated with the change in our publishing strategy.
Product development expenses were $150,000 for the quarter ended
September 30, 1999 and $12,000 for the quarter ended September 30, 1998, and
$150,000 for the nine months ended September 30, 1999 and $35,000 for the nine
months ended September 30, 1998. The increase in expenses in 1999 over the same
periods last year is related to our development of a major new web site. The
costs of this development are expensed as incurred. We continue to evaluate new
product opportunities and anticipate making 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 $291,000 for the quarter ended
September 30, 1999 and $208,000 for the quarter ended September 30, 1998 and
$867,000 for the nine months ended September 30, 1999 and $711,000 for the nine
months ended September 30, 1998. The increase in expense for both the quarter
and the first nine months of 1999 as compared to the same periods in 1998 was
due to increased general costs associated with running the business and $29,000
in nonrecurring expenses associated with the change in our publishing strategy.
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Interest and other expenses were $66,000 for the quarter ended
September 30, 1999 and ($13,000) for the quarter ended September 30, 1998, and
$139,000 for the nine months ended September 30, 1999 and $(22,000) for the nine
months ended September 30, 1998. The increase in expenses over 1998 was
primarily due to increased interest expense associated with our increased
borrowing in 1999.
Liquidity and Capital Resources
At September 30, 1999, we had a working capital deficit of
approximately ($3,119,000) and our principal source of liquidity consisted of
approximately $120,000 in cash and funds loaned to us by our major shareholder
MK Global Ventures, in association with its MK GVD Fund.
We signed an agreement in March 1999, with a new lender, which provided
a new line of credit. The revolving credit facility, which had a one-year term,
provided for borrowings of up to 80 % of eligible receivables not to exceed
$600,000. The credit facility was secured by our accounts receivable. Borrowings
accrue interest at the lender's reference rate of prime plus 4% per annum, which
at September 30, 1999 was 12.25%. At September 30, 1999, $182,000 was
outstanding under this facility. Due to the our decision to cease publication of
NewMedia Magazine, which was the source of the eligible receivables for the
credit facility, the remaining balance outstanding under the credit facility was
paid in full in October and the credit facility was subsequently terminated.
Borrowings from our 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 September 30, 1999, $638,000 in
principal and accrued interest that had become due during the quarter was rolled
over into a new 180 day note. At September 30, 1999, $2,636,000 was outstanding
under these notes. Repayments on these notes, if not refinanced, are scheduled
to begin October 1999 and continue through March 2000.
Capital expenditures for the first nine months of 1999 were $17,000
compared to $129,000 for the same period in 1998. These expenditures primarily
consist of desktop PC replacements and software upgrades. We anticipate that we
will need to make additional expenditure in this area in the future as we
continue to develop our new web site.
We expect that we will continue to require significant amounts of cash
to finance future operations. Net cash used in operating activities were
$2,113,000 for the nine months ended September 30, 1999 and $1,849,000 for the
nine months ended September 30, 1998. We are currently seeking additional
financing. However, there can be no assurance that we will be able to raise the
necessary funds on terms acceptable to us.
Thereafter, we anticipate that we 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,
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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. We have 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 us, or at all.
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 within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act, as amended, that involve risks and uncertainties, including but not limited
to statements regarding the Company's strategy, plans, objectives, expectations,
intentions, financial performance, and revenue sources. The Company's actual
results may differ significantly from those anticipated or implied 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.
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 Reports on Form 10-Q for the quarter ended
March 31, 1999 and June 30, 1999.
History of Losses and Accumulated Deficits
We have incurred total net losses of $17,342,000 from inception to
September 30, 1999, including net losses of $1,345,000 for the quarter ended
September 30, 1999. We expect to incur losses for the foreseeable future as we
transform our business model from a traditional print publisher to an
Internet-based information service designed to meet the growing needs of the
Internet-drive business professionals. There can be no assurance that our new
publishing strategy and our redesigned Web site will enable us to increase our
revenues or become profitable. Our potential future growth depends on many
factors, including the acceptance of the redesigned newmedia.com by the Internet
professional community, our ability to attract an increasing number of users to
newmediaocom, our ability to attract sufficient advertising customers to
newmediaocom, our ability to hire and retain a productive advertising sales
force, our ability to hire and retain a creative editorial staff, our ability to
manage the technical issues related to a major Web site and our ability to
successfully implement our marketing and product strategies. There can be no
assurance that we will be successful in any of these efforts.
Risks Associated with the Change in Publishing Strategy
The key element of our publishing strategy is to transform ourselves
from a traditional print publisher to an enhanced Internet-based information
service designed to meet the growing needs of the Internet-driven business
professionals. To accomplish this objective we must continually develop new and
interesting content and deliver it in such
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a way that the Internet professional community will find newmedia.com both a
rewarding and satisfying experience. This will require additional investments in
editorial staff, content creation and technology expenses. To the extent that
our site's content is not perceived as being interesting and compelling or our
site experiences technical difficulties our ability to attract Internet
professionals and sell advertising specifically targeted towards them will be
negatively impacted. Due to this shift in publishing strategy, investors should
consider the risks, expenses and difficulties that are encountered by Internet
based businesses in new and rapidly evolving markets.
Risks Associated with Redesigning our Web site And our Ability to Attract Users
We are redesigning our Web site to provide the Internet-driven business
professional with a rich and rewarding daily experience. If the look and feel
functionality of our redesigned Web site is not attractive to the Internet
professional community or if our content is not perceived as being interesting
and compelling we may be unable to attract sufficient users necessary to
generate revenues to achieve profitability.
Risks Associated with our Ability to Hire and Retain a Productive Sales Staff
Our ability to achieve future profitability depends upon our success in
hiring and retaining sales personnel in key markets and to successfully transfer
the productivity of our existing sales personnel from the traditional print
marketplace to Internet based sales. In October of 1999, we hired a new Sales
Director. We may hire additional personnel in coming months. However, new sales
personnel typically take from six to nine months to become fully productive and
our operating results during this time may be adversely affected by the hiring
of such personnel. In addition, there can be no assurance that our new sales
personnel will generate sufficient advertising revenue for us to become
profitable. Furthermore, any turnover in our personnel could have a material
adverse effect on our operating results.
Highly Competitive Market/Risks Associated with Attracting Advertisers
Revenues for newmedia.com, will for the near future consist primarily
of banner and sponsorship advertising. The Internet based advertising industry
is highly competitive and is continuing to evolve. Many of our competitors have
substantially greater financial, sales and marketing resources than us. If we
are unable to demonstrate strong acceptance of our Web site by the Internet
professional community, we may be unable to attract sufficient advertisers and
our revenues and operating results will be negatively impacted. Also, there can
be no assurance that we will not experience increased competition from new or
existing Web sites which would have a material adverse impact on the our ability
to increase our advertising revenues.
Risks Associated with our Ability to Hire and Retain a Creative Editorial Staff
and Outside Contributors
An element of our publishing strategy is to provide the Internet
professional community with a daily news and information service. To accomplish
this, we need to hire and retain a highly creative and motivated editorial staff
and outside contributors to continually develop original, interesting and
compelling content. If we are unable to
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retain or replace a significant number of our editorial staff or outside
contributors that leave our company, our operating results could be negatively
effected.
Dependence on Key Personnel
Our success depends to a large extent upon the efforts and abilities of
key managerial employees, including without limitation, the Chief Executive
Officer, President and Chief Financial Officer of the Company. Our success also
depends on the performance of key sales and other management personnel. The loss
of certain of these key managers could have a material adverse effect on us. We
have not entered into employment agreements with our executive officers and
carries no key man insurance on their lives. Our success will also depend upon
our ability to continue to attract and retain qualified employees. Competition
for such employees is intense, and there can be no assurance that we will be
successful in attracting or retaining such personnel.
Risks Associated with our Ability to Manage Growth and Implement our Marketing
and Product Strategies.
Our transition into an Internet-based information service business has
positioned us in a market that is growing rapidly and experiencing significant
growth in number of users and bandwidth. As we adapt to this changing
environment we will need to manage growth in a number of areas. On a technical
level, we will have to continually enhance and expand our Internet
infrastructure and maintain a reliable network. From a management perspective we
will have to implement and improve our managerial controls and procedures and
operating and financial systems. Additionally, as our business expands, we will
have to hire, train and manage a growing workforce. Also growth and the
competitive marketplace will require us to develop and implement new marketing
and product strategies. There can be no assurances that we have allowed for the
costs and risks associated with a rapidly growing and evolving market or that we
will be able to effectively manage the challenges that we will face. If we are
unable to effectively manage our growth our business and operating results could
be negatively impacted.
Year 2000 Issues may Disrupt our Operations
As an Internet based business we are very dependent on the successful
operation of our computers and systems, the computers and systems that make up
the Internet and the computers and systems of our users. If our computers or
systems experience year 2000 problems, we may be unable to delivery content to
our Web site. If this occurs we may loss readers and our business could suffer.
If the computers and systems that make up the Internet, including our Internet
Service Provider, experience year 2000 problems, our readers may be unable to
access our Web site and our business could suffer. If our readers' computers or
systems experience year 2000 problems, they may be unable to access our Web site
and our business could suffer.
Illiquidity of Trading Market; Risk of Penny Stock Status
Our Common Stock trades on the OTC Bulletin Board. In September 1998,
we were delisted from trading on the Nasdaq SmallCap Market, and in March 1999
we were delisted from trading on the Pacific Exchange. Because our Common Stock
was delisted
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from the Pacific Exchange, we have become subject to "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 our 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, our delisting from the Nasdaq
SmallCap Market and the Pacific Exchange and our 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 our securities and therefore has severely
adversely affect the market liquidity for our securities.
Effect of Preferred Stock Conversion, Dividend and Liquidation Features
Our Articles of Incorporation currently authorize us 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 September 30, 1999, is convertible into 8,744,163 shares
of our 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 $0.124 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 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 $0.0074 per annum (an aggregate of approximately $60,000 per
annum). If we have 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
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Series E Conversion Price. If the accumulated dividends were to convert as of
September 30, 1999, they would be convertible into 815,900 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 our 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 we do 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 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
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<PAGE>
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.
We also have 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
Our principal stockholders, MK Global Ventures II and their 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-person Board of Directors of the Company. Accordingly, the MK Entities
will be able to determine the composition of our Board of Directors, will retain
voting power to approve all matters requiring stockholder approval and will
continue to have significant influence over our affairs. This concentration of
ownership could have the effect of delaying or preventing a change in control of
the Company.
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
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<PAGE>
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 we have determined that most of our principle IT Systems are
Year 2000 compliant, certain of our internal systems have not been evaluated by
us. We have not yet made an assessment of the status of all of our Non-IT
Systems.
We presently estimate that the total cost of addressing our Year 2000
and leap year issues will be immaterial. These estimates were derived utilizing
numerous assumptions, including the assumption that we have already identified
our most significant Year 2000 and leap year issues and that the plans of our
third-party suppliers will be fulfilled in a timely manner without cost to us.
However, these assumptions may not be accurate, and actual results could differ
materially from those anticipated.
We have not determined the state of compliance of certain third-party
suppliers of services such as, long distance carriers, financial institutions
and electric companies, the failure of any one could severely disrupt our
ability to carry on our business as well as disrupt the business of our
customers. We could be affected through disruptions in the operation of the
enterprises with which we interact or from general widespread problems or an
economic crisis resulting from noncompliant Year 2000 systems. Despite our
efforts to address the Year 2000 effect on our internal systems and business
operations, such effect could result in a material disruption of our business or
have a material adverse effect on us or our business, financial condition, or
results of operations. We have 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.
Item 3. Quantitative and Qualitative Disclousure About Market Risk
We have no derivative financial instruments or derivative commodity
instruments in our cash and cash equivalents. Our transactions are generally
conducted and our accounts are denominated, in United States dollars. Thus we
are not exposed to significant foreign currency risk.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 $175,000 Subordinated Promissory Note, dated July 14, 1999
issued by the Registrant to MK GVD Fund.
4.2 $147,000 Subordinated Promissory Note, dated July 28, 1999
issued by the Registrant to MK GVD Fund.
4.3 $200,000 Subordinated Promissory Note, dated August 11, 1999
issued by the Registrant to MK GVD Fund.
4.4 $50,000 Subordinated Promissory Note, dated August 27, 1999
issued by the Registrant to MK GVD Fund.
4.5 $200,000 Subordinated Promissory Note, dated September 14,
1999 issued by the Registrant to MK GVD Fund.
4.6 $100,000 Subordinated Promissory Note, dated September 28,
1999 issued by the Registrant to MK GVD Fund.
4.7 $638,000 Subordinated Promissory Note, dated September 30,
1999 issued by the Registrant to MK GVD Fund.
27.1 Financial Data Schedule.
(b) A Form 8-K was filed September 15, 1999 which reported under Item 5
the Company's plans to convert its business model from a traditional
print publisher to an enhanced, internet-based information service,
that it was developing a major new web, that it planned to cease
publishing NewMedia magazine with the October issue and that it had
retained the services of an investment banker to act as the Company's
exclusive financial advisor.
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
19
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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: November 12, 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
July 14, 1999
$175,000
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 seventy-five thousand dollars ($175,000), 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 14 day of July, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
July 28, 1999
$147,000
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 forty-seven thousand dollars ($147,000), 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 July, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
August 11, 1999
$200,000
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 two hundred thousand dollars ($200,000), 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 August, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
August 27, 1999
$50,000
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 fifty thousand dollars ($50,000), 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 27 day of August, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
September 14, 1999
$200,000
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 two hundred thousand dollars ($200,000), 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 14 day of September, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
September 28, 1999
$100,000
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 thousand dollars ($100,000), 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 September, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
San Mateo, CA
September 30, 1999
$638,137
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 six hundred thirty-eight thousand and one hundred thirty-seven
dollars ($638,137), 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 September, 1999.
Hypermedia Communications, Inc.
By: __________________
Title: ________________
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<PERIOD-START> Jul-01-1999
<PERIOD-END> Sep-30-1999
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