-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TNQ541JnaTtp0pGchC4CoCiu7qph9rhlcaz9AC07KcvE1REzWpeLDz4YXXFYpAKb zZj0u8bOq8WejPhRDAjsLg== 0000950153-00-000210.txt : 20000215 0000950153-00-000210.hdr.sgml : 20000215 ACCESSION NUMBER: 0000950153-00-000210 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FTM MEDIA INC CENTRAL INDEX KEY: 0001004991 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 841295270 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27745 FILM NUMBER: 540036 BUSINESS ADDRESS: STREET 1: 6991 EAST CAMELBACK ROAD STREET 2: #D103 CITY: SCOTTSDALE, STATE: AZ ZIP: 85251 BUSINESS PHONE: 4804250099 MAIL ADDRESS: STREET 1: 11 SUNDIAL CIRCLE #17 STREET 2: P O BOX 3463 CITY: CAREFREE STATE: AZ ZIP: 85377 FORMER COMPANY: FORMER CONFORMED NAME: REDWOOD BROADCASTING INC DATE OF NAME CHANGE: 19961003 FORMER COMPANY: FORMER CONFORMED NAME: INTELLIGENT FINANCIAL HOLDING CORP DATE OF NAME CHANGE: 19951215 10QSB 1 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____________ to ____________ Commission file number 33-80321 FTM MEDIA, INC. (Exact Name of Registrant as Specified in its Charter) Colorado 84-1295270 (State or other jurisdiction I.R.S. Employer of incorporation or organization) Identification number 6991 East Camelback Road, #D103, Scottsdale, AZ 85251 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (480) 425-0099 Securities to be registered under Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.004 par value Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ x ] No [ ] The number of shares of the registrant's $.004 par value Common Stock outstanding as of December 31, 1999 was 6,514,000 2 INDEX
PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheet as of December 31, 1999 and March 31, 1999............................................ 3 Consolidated Statements of Operations for the Three months ended December 31, 1999 and December 31, 1998 and nine months ended December 31, 1999 and December 31, 1998....................... 4 Consolidated Statements of Cash Flows for the Nine months ended December 31, 1999 and December 31, 1998............................................................................ 5 Notes to Consolidated Financial Statements...................................... 6 Item 2. Management's Discussion and Analysis or Plan of Operations.............................................................. 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings...................................................... 27 Item 2. Changes in Securities.................................................. 27 Item 3. Defaults under Senior Securities....................................... 27 Item 4. Submission of Matters to a vote of security holders.................... 27 Item 5. Other Matters.......................................................... 27 Item 6. Exhibits and Reports on Form 8-K....................................... 27 Signatures............................................................. 28
3 FTM MEDIA, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, 1999 March 31, 1999 (unaudited) (audited) ASSETS Current Assets Cash and Cash Equivalents 400,621 2,027,833 Accounts Receivable 24,208 0 Notes Receivable 1,193,700 0 Prepaid Expenses 200,228 23,968 ---------- ---------- Total Current Assets 1,818,757 2,051,801 Property and Equipment - Net of Accumulated Depreciation 1,947,170 70,499 Other Assets Lease Deposits 102,173 20,535 Web Site Design In Progress 0 131,568 Goodwill - Net of Amortization 70,661 76,550 ---------- ---------- Total Assets 3,938,761 2,350,953 ---------- ---------- LIABILITIES AND STOCKHOLDERS DEFICIT Liabilities Accounts Payable 1,166,579 208,101 Accrued Expenses 41,798 64,820 Short Term Portion of Notes Payable 2,542,636 0 ---------- ---------- Total Liabilities 3,751,013 272,921 Minority Interest Preferred Stock of Subsidiary 438,747 415,889 Common Stock of Subsidiary 1,997,060 2,771,261 ---------- ---------- Total Minority Interest 2,435,807 3,187,150 Stockholders Deficit Preferred Stock - $.04 Par, 2,500,000 shares authorized 273,504 issued and outstanding 10,974 0 Common Stock - $.004 Par, 12,500,000 shares authorized 6,514,000 shares issued and outstanding 26,056 25,278 Additional Paid In Capital 2,502,522 0 Deficit accumulated During Development stage (4,787,613) (1,134,396) ---------- ---------- Total Stockholders Deficit (2,248,059) (1,109,118) ---------- ---------- Total Liabilities and Stockholders Equity 3,938,761 2,350,953 ========== ==========
4 FTM MEDIA, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS
3 months 3 months 9 months 9 months ended ended ended ended 12/31/99 12/31/98 12/31/99 12/31/98 Revenues E-Commerce 30,828 0 30,828 0 Local Advertising 14,831 0 14,831 0 Total Revenues 45,659 0 45,659 0 Cost of Goods Sold Website development costs 1,166,693 0 2,484,530 0 E-Commerce costs 86,745 0 113,437 0 Total COGS 1,253,438 0 2,597,967 0 Net Income (1,207,779) 0 (2,552,308) 0 Capital Formation Expense 56,650 0 199,438 0 Consulting Fees 114,686 30,000 341,586 30,000 Contract Labor (9,935) 0 25,673 0 Depreciation and Amortization 115,024 0 228,743 0 Education & Training 6,207 0 14,365 0 Employment Fees and Costs 20,781 0 34,968 0 Insurance 35,154 0 91,659 0 Legal and Accounting Fees 99,969 0 360,619 0 Media & Public Relations 18,040 0 51,762 0 Office and Computer supplies 16,762 0 41,548 0 Other 78,413 0 136,994 0 Payroll 119,413 0 341,122 0 Payroll Taxes and Benefits 20,673 0 54,864 0 Rent 54,318 0 128,708 0 Sales & Marketing 172,854 0 321,928 0 Telephone 7,392 0 38,821 0 Travel and Entertainment 45,281 0 99,392 0 Total Expenses 971,682 0 2,512,188 0 Loss Before other Income (2,179,462) (30,000) (5,064,496) (30,000) Other Expenses Interest Expense net of interest income (31,218) 0 (13,958) 0 Loss Before Provision of Income Taxes (2,210,680) (30,000) (5,078,454) (30,000) Provision for Income taxes 0 0 0 0 --------------------------------------------- Loss Before minority interest (2,256,339) (30,000) (5,078,454) (30,000) Minority Interest 655,289 0 1,425,239 0 Net Loss (1,557,391) (30,000) (3,653,215) (30,000) ============================================= Basic Loss Per common share (0.242) (0.004) (0.573) (0.004) Weighted Average number of common shares 6,439,498 6,319,542 6,379,811 6,319,542
5 FTM MEDIA, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS
9 months 9 months ended ended December 31, 1999 December 31, 1998 (unaudited) (unaudited) OPERATING ACTIVITIES Net Income (loss) (3,653,215) (30,000) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 228,743 0 Decrease in Capitalized development costs 131,568 0 Minority Interest (1,425,239) 0 Increase in liquidation value - minority interest 22,858 0 Changes in Operating Assets & Liabilities Increase in Accounts Receivable & Unbilled revenue (24,208) 0 Increase in Prepaid assets (176,260) 0 Increase in Notes Receivable (1,193,700) 0 Increase in Deposits (81,638) 0 Increase in Accounts Payable 958,478 30,000 Decrease in Accrued Expenses (23,022) 0 Increase in short term notes payable 82,636 0 Net Cash Flow from Operating Activities (5,152,999) 0 INVESTMENT ACTIVITIES Acquisition of Fixed Assets (2,099,300) 0 Financing Activities Private Placement - Common Stock of subsidiary 360,036 0 Private Placement - Sale of Preferred Stock 1,649,998 0 Sale of Common Stock 1,353,054 0 Payment of Preferred Dividends (198,000) 0 Private Placement - Notes 2,460,000 0 ----------------------------------- Net Cash Flow from financing 5,625,088 0 ----------------------------------- Net increase in Cash and Cash Equivalents (1,627,212) 0 Cash and Cash Equivalents beginning of year 2,027,833 2,796 Cash and Cash Equivalents 12/31 400,621 2,796
6 FTM MEDIA, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 1. General The accompanying unaudited financial statements of FTM Media, Inc. formerly Redwood Broadcasting, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and article 10 of Regulation S-X. Accordingly they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The balance sheet at March 31, 1999 has been derived from audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair presentation of the financial position and operating results for the interim periods. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's annual report on Form 10-KSB for the fiscal year ended March 31, 1999. Results of operations for interim periods are not necessarily indicative of results which may be expected for the year as a whole. 2. Nature of Operations and Summary of Significant Accounting Policies FTM Media, Inc. The Corporation was formed in December 1994 pursuant to the laws of the State of Colorado with the name Redwood Broadcasting, Inc. On July 19, 1999 at a special meeting of shareholders, the shareholders approved changing the name of the Corporation to FTM Media, Inc. On December 31, 1998, substantially all of the assets and liabilities of FTM/Redwood were transferred to a wholly owned subsidiary. The common stock of the subsidiary was then to be distributed to the FTM/Redwood shareholders. As a result of this and the reverse acquisition of the Corporation by Interactive Radio Group, Inc. (INRG), the prior operations of FTM/Redwood are not reflected in these financial statements. Accordingly the financial statements reflect the operating activity of FTM/Redwood beginning with the acquisition of the majority interest in INRG. The Corporation is in the development stage as its operations involve the raising of capital, market research and start up production. Because it is in the development stage, the Corporation has had minimal revenue from product sales, which is not regarded as typical for normal operating periods. On January 7, 2000 pursuant to the approval of a majority of shareholders the Corporation consummated its merger into its wholly owned subsidiary FTM Media, Inc. a Delaware Corporation (FTM Delaware), with FTM Delaware to be the surviving Corporation. All shareholders of FTM Media, Inc of Colorado will receive one share of FTM 7 Media, Inc of Delaware in exchange for one share of FTM Media of Colorado common stock. Interactive Radio Group, Inc. Interactive Radio Group, Inc. was formed in February 1994 pursuant to the laws of the State of Delaware. The company was inactive until April, 1998 when it began its business of designing and hosting Internet websites for radio stations. The acquisition of the majority interest in INRG by FTM/Redwood was accounted for as a reverse acquisition, resulting in the historic operations of INRG being treated as the historical operations of the Corporation. Accordingly the accompanying historic financial statements have been restated to reflect the financial position, results of operations and cash flows for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented. Cybermusic Acquisition Corp. Cybermusic Acquisition Corp. was formed in February, 1996 pursuant to the laws of the State of Delaware. Cybermusic was acquired by INRG and became a wholly owned subsidiary in December, 1998. Cybermusic's principal business of designing websites for radio stations has been carried on by INRG since the acquisition. The acquisition of Cybermusic by INRG was accounted for as a reverse acquisition, resulting in the historic operations of Cybermusic being treated as the historical operations of the Corporation. Accordingly the accompanying historic financial statements have been restated to reflect the financial position, results of operations and cash flows for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented. Method of Accounting The Corporation maintains its books and prepares its financial statements on the accrual basis of accounting. Cash and Cash Equivalents Cash and cash equivalents include time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. The Company maintains cash and cash equivalents at financial institutions which periodically may exceed federally insured amounts. Fixed Assets and Depreciation Fixed Assets are stated at cost, less accumulated depreciation computed using the straight line method over the estimated useful lives as follows: Computer Equipment and Software 3-5 years Office Furniture 5 years Automobiles 5 years Leasehold Improvements 7-16 months 8 Maintenance and repairs are charged to expense. The cost of assets retired or disposed of and their related accumulated depreciation are removed from the accounts. Web Site Design - In progress The Corporation had previously capitalized its costs incurred in developing its websites for radio stations. The Company now charges to expense all such costs. The Company has expensed all such previously capitalized costs. Goodwill Goodwill has been capitalized and is being amortized over ten years. Net Loss Per Common Share Net income (loss) per common share is computed in accordance with SFAS 128, "Earnings Per Share" by dividing the income available to common stockholders by the weighted average number of common shares outstanding for each period after reflecting the recapitalization. The effects of conversion of Convertible Preferred Stock were not included in the calculation of diluted loss per share because the Corporation has experienced losses in all of the periods presented and therefore the effect would be anti-dilutive. Income Taxes The Corporation accounts for income taxes in accordance with SFAS 109 "Accounting for Income Taxes", using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities. The method uses enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives immediate effect to changes in income tax rates upon enactment. Deferred tax assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards. Deferred income tax expense represents the change in net deferred assets and liability balances. The Corporation had no material deferred tax assets or liabilities for the period presented. 3. Stockholder's Equity 1. During June and July, 1999 the Corporation received $1,600,000 in a private placement of 273,504 shares of $.04 par value Series B Convertible Preferred Stock. Pursuant to the terms of the Series B Convertible Preferred Stock, the Corporation in June and July 1999 paid $192,000 in dividends to the holders of the Series B Convertible Preferred Stock. The rights, privileges and restrictions of the Series B Convertible Preferred Stock are as follows: a. The stock ranks senior to Common Stock and any other class or series of capital stock of the Corporation with respect to liquidation, dissolution or winding up of the business. 9 b. Holders of the Series B Convertible Preferred Stock are entitled to receive annual dividends in the amount of $.702 per share payable on each semi-annual anniversary of the Series B Convertible Preferred Stock Issue Date. The dividends payable for the twelve month period immediately following the Series B Convertible Preferred Stock Issue Date shall be paid on the Series B Convertible Preferred Stock Issue Date. c. Holders of the Series B Convertible Preferred Stock have no voting rights except for those minimum voting rights required by the Business Corporation Act of the State of Colorado, in which case the Series B Convertible Preferred Stock shall vote together with the Common Stock as a single class, unless the Business Corporation Act of the State of Colorado requires that the Series B Convertible Preferred Stock has the right to vote separately as a single class. d. Holders of the Series B Convertible Preferred Stock have the option to convert their Series B Convertible Preferred Stock to common shares anytime at an amount equal to $5.85 divided by the conversion price. The conversion price shall be equal to $5.85 minus the aggregate amount of accrued dividends per share which are then unpaid for fifteen days or more multiplied by .64103. e. The Corporation may cause each share of Series B Convertible Preferred Stock to be automatically converted into shares of common stock at an amount equal to $5.85 minus the aggregate amount of accrued dividends per share which are then unpaid for fifteen days or more multiplied by .64103. as of any date on which the closing price for each of the twenty trading days preceding such date equals or exceeds $8.35 per share. Such conversion cannot occur prior to the first anniversary of Series B Convertible Preferred Stock Issue Date. f. In the case of a capital reorganization or reclassification of outstanding shares of Common Stock or in case of any merger of the Corporation into another corporation or in case of a sale or conveyance to another corporation of all or substantially all of the assets or property of the Corporation each share of Series B Convertible Preferred Stock shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion, the kind and amount of shares of stock and other securities and property receivable upon the consummation of such transaction by a holder of that number of shares of Common Stock into which one share of Series B Convertible Preferred Stock was convertible immediately prior to such transaction. 2. As incentives for certain employees to accept employment with the Corporation, the Corporation issued 192,100 shares of the Corporation's 10 $.004 par value common stock in exchange for Secured Recourse Notes in the amount of $916,700. These Notes accrue no interest and are secured by the underlying common stock. As part of the terms of the Employment Agreements, the Corporation will forgive the notes upon the Employee's one-year anniversary of employment. If an employee leaves the Corporation's employ prior to his/her one-year anniversary, the former Employee has five (5) business days to satisfy the note or the Corporation transfer the stock to the Corporation as full payment of the note. 4. Notes Receivable Notes Receivable consist of $902,700 of notes received from certain employees in conjunction with the issuance of the Corporation's common stock and $291,000 of notes received from certain employees in conjunction with the issuance of INRG's common stock as employment signing bonuses. Such notes accrue no interest and are secured by the underlying stock. As part of the terms of the Employment Agreements, the Corporation will forgive the notes upon the Employee's one-year anniversary of employment. If an employee leaves the Corporation's employ prior to his/her one year anniversary, the former Employee has five (5) business days to satisfy the note or the Corporation transfer the stock to the Corporation as full payment of the note. 5. Fixed Assets Fixed Assets are recorded at cost and consisted of the following at December 31, 1999 and March 31, 1999:
12/31/99 3/31/99 -------- ------- Computer Equipment 1,858,886 56,548 Office Equipment 234,622 16,065 Automobiles 14,500 0 Leasehold Improvements 64,131 0 --------- --------- 2,172,139 72,613 Less Accumulated Depreciation 224,969 2,114 --------- --------- Net Fixed Assets 1,947,170 70,499
Depreciation expense for the quarters ended December 31, 1999 and March 31, 1999 was $113,061 and 0 and for the nine months ended December 31, 1999 and March 31, 1999 $222,854 and 0 respectively 6. Goodwill The Corporation acquired goodwill with INRG's purchase of Cybermusic. Goodwill is being amortized over ten years and consisted of the following at December 31, 1999 and March 31, 1999.
1999 1998 ------ ------ Goodwill 78,513 78,513 Less: Accumulated Amortization 7,852 1,963 ------ ------ Net Goodwill 70,661 76,550
11 Amortization expense for quarters ended December 31, 1999 and March 31, 1999 was $1,963 and 0 and for the nine months ended December 31, 1999 and March 31, 1999 was $5,869 and 0 respectively 7. Notes Payable Notes Payable consist at December 31, 1999 of the following: i) a note payable to AICCO, for the payment of insurance premiums, with interest at 8.95% payable in monthly installments of principal and interest $10,976.99 through February 2000 with the remaining balance due at that date. The balance as of December 31, 1999 was $32,636 ii) $200,000 Convertible Note payable to a non-related entity, with interest accruing at a rate of 6% per annum, payable when the note is retired. The note is due on March 15, 2000, but the Company has the right to prepay without penalty. Noteholder, may, at his discretion, elect to receive all or any portion of the outstanding principal and accrued interest, in the Company's common stock or other securities, under the same terms and conditions as Company is offering such common stock or securities to other investors. The note is secured by Company equipment in an amount not to exceed $500,000. Along with the Note, Noteholder received 40,000 warrants to purchase the Company's common stock for three years at an exercise price of $8 per share. iii) $1,700,000 of Convertible Notes payable to non-related entities with interest accruing at a rate of 10% per annum which is payable when the note is retired. These notes are due between May 1, 2000 and June 7, 2000, but the Company has the right to prepay the notes without penalty. At Company's option, the due date of the principal amount of this notes and interest can be extended for successive thirty day periods, upon the payment in cash on or prior to such due date an amount equal to 1% of the then outstanding principal amount of the note. Noteholders may elect to receive all or any portion of the outstanding principal and accrued interest, in common stock or our other securities, under the same terms and conditions that Company is offering such common stock or securities to other investors. Along with the Note, Noteholders received 340,000 warrants to purchase the Company's common stock for three years at an exercise price of $8 per share. iv) $550,000 of Convertible Notes payable mostly to non-related entities (See Section 9 "Related Party Transactions") with interest accruing at a rate of 10% per annum which is payable when the notes are retired. The notes are due between December 22, 2000 and December 31, 2000 but Company has the right to prepay without penalty. Note Holders may demand repayment of all or any unpaid portion of the Note on March 1, 2000, or from time to time convert in whole or in part any 12 unpaid portion of the principal amount of the Note, including any accrued interest thereon (Conversion Amount), into a number of fully paid and nonassessable Shares of the Company's common stock equal to the number determined by dividing (A) Conversion Amount by (B) $7.50. In the event that this formula results in a fractional share, the resulting number of shares will be rounded down to the nearest whole share. Along with the Note, Noteholders received 110,000 warrants to purchase the Company's common stock for three years at an exercise price of $8 per share. v) $60,000 of Notes, without interest, payable to Ron Conquest, the Company's Chief Executive Officer and Greg Mastroieni a Director and Consultant to the Company. 8. Minority Interest The minority interest in INRG has two components: 1. Preferred Stock of Subsidiary INRG issued 40,637 shares of series A Preferred Stock, par value $.001 to the former shareholders of Cybermusic, upon acquisition in December 1998, The minority interest in the Preferred stock of INRG was recorded at the stocks liquidation value of $10 per share and goodwill was recorded for $78,513. Rights, privileges and restrictions of the Series A Preferred Stock are as follows: a. The stock ranks senior to Common Stock and any other class or series of capital stock of the Corporation with respect to liquidation, dissolution or winding up of the business. b. Holders of the stock are not entitled to receive dividends or other distributions except upon liquidation, dissolution or winding up of the business. c. Holders of the stock have a right to vote with the Common stockholders as a single class unless the Delaware General Corporation Law requires the Series A Preferred stockholders to vote separately as a class. d. Holders have the option to convert their stock to common shares equal to the Series A Preferred Stock liquidation value anytime after September 30, 2000, or to common stock of a parent corporation if more than 80% of the issued and outstanding Common Stock of INRG is owned by another corporation. e. Holders may redeem their stock for cash equal to the liquidation value anytime after December 7, 2001. INRG may elect to redeem any or all of the outstanding shares of series A Preferred stock anytime, at the liquidation value. f. The liquidation value of each share of Series A Preferred Stock is $10, increased with interest compounded annually at 7.5% 13 for three years commencing on the issuance date. The Corporation recorded interest expense on the liquidation value in the amount of $22,857 during the nine months ended December 31, 1999. The Series A Preferred Stock liquidation value consisted of the following at December 31, 1999: Liquidation value at issuance $406,370 Accrued interest to date 32,377 -------- Total Liquidation Value $438,747
2. Common Stock of Subsidiary On March 31, 1999, FTM/Redwood acquired 90.85% of the issued and outstanding Common Stock of INRG. The remaining 9.15% of Common Stock represented a minority interest in INRG. The parent corporation and the minority interest share pro rata in the net income or loss of INRG. During March and April, 1999, subsequent to the acquisition, INRG received $3,243,933 from a private placement offering for 1,080,628 common shares. The $3,243,933 of stock purchased is included on the balance sheet under Minority Interest - Common Stock of Subsidiary. During the first two quarters, INRG received Secured Notes in the amount of $291,000 in connection with the issuance of 97,000 shares of the INRG's common stock. These notes carry no interest and are secured by the underlying common stock. With the issuance of these shares the minority interest in INRG increased to 26.87% and will increase further if additional common shares are issued. The $291,000 of stock purchased is included on the balance sheet under Minority Interest - Common Stock of Subsidiary. 9. Related Party Transactions The Corporation has entered into a management agreement to pay consulting fees on a monthly basis to Ingenious Enterprises, Inc. a Nevada corporation in the amount of $120,000 annually commencing October 1, 1998 on behalf of the services provided by Ron Conquest. Conquest, an employee of Ingenious Enterprises, Inc. is the President, Chief Executive Officer and a Director of the Corporation. Effective January 1, 2000, the consulting fees were increased to $180,000 annually. Consulting fees paid pursuant to this agreement during the nine months ended December 31, 1999 and December 31, 1998 were $90,000 and $30,000 respectively. The Corporation has entered into a management agreement to pay consulting fees on a monthly basis to EchoMedia in the amount of $75,000 annually commencing February 1, 1999 on behalf of the 14 services provided by Greg Mastroieni. Mastroieni, the owner of EchoMedia is a member of the Board of Directors of the Corporation. Consulting fees paid pursuant to this agreement during the nine months ended December 31, 1999 and December 31, 1998 were $56,250 and 0 respectively. The Corporation has entered into a management agreement to pay consulting fees on a monthly basis to Four Score Entertainment, Inc. in the amount of $75,000 annually commencing February 1, 1999 on behalf of the services provided by Jeffrey Pollack. Pollack, an employee of Four Score Entertainment, Inc. was, until January 12, 2000 a member of the Board of Directors of the Corporation. Consulting fees paid pursuant to this agreement during the quarters ended December 31, 1999 and December 31, 1998 were $56,250 and 0 respectively. The Corporation has entered into a management agreement to pay consulting fees on a monthly basis to BW Productions in the amount of $120,000 annually commencing February 1, 1999 on behalf of the services provided by Robert Wilson. Wilson, an employee of BW Productions is Vice Chairman and a member of the Board of Directors of the Corporation. Consulting fees paid pursuant to this agreement during the quarters ended December 31, 1999 and December 31, 1998 were $90,000 and 0 respectively. On August 27, 1999, the Corporation purchased from Unicorp, Inc. an automobile for $14,500. Greg Mastroieni, the President of Unicorp, Inc. is a member of the Board of Directors of the Corporation. On December 22, 1999, Robert Buziak, who was elected to the Board of Directors of the Company on January 12, 2000 purchased from the Company for $98,000, a $100,000 Note with interest accruing at a rate of 10% per annum which is payable when the note is retired. The note is due December 22, 2000 but Company has the right to prepay without penalty. Mr. Buziak may demand repayment of all or any unpaid portion of the Note on March 1, 2000, or from time to time convert in whole or in part any unpaid portion of the principal amount of the Note, including any accrued interest thereon (Conversion Amount), into a number of fully paid and nonassessable Shares of the Company's common stock equal to the number determined by dividing (A) Conversion Amount by (B) $7.50. In the event that this formula results in a fractional share, the resulting number of shares will be rounded down to the nearest whole share. Along with the Note, Mr. Buziak received 20,000 warrants to purchase the Company's Common stock at an exercise price of $8 per share for three years. On October 29, 1999 Ron Conquest, the Company's Chief Executive Officer and Greg Mastroieni a Director and Consultant to the Company lent to the Company $200,000 without interest. As of December 31, 15 1999 the Company owed $60,000 to Messrs. Conquest and Mastroieni. The Company subsequent to December 31, 1999 repaid Mr. Conquest a further $30,000. 10. Income Taxes The Corporation has approximately $4,787,613 of consolidated net operating loss carryforwards for federal tax purposes as of December 31, 1999, which are available to offset future taxable income and expire during the years 2011 through 2020. The corporation has not fully reserved for any future tax benefits from the net operating loss carryforwards since it has not generated any revenues to date. 11. Year 2000 The Corporation's computer systems are currently year 2000 complaint. The Corporation is not aware of any material risks associated with its vendors regarding year 2000 compliance, however there is no guarantee that such risks do not exist and will not have an adverse effect on operations. It is not anticipated that any impact would be material, however the cost of a potential impact is not determinable. The Company is unaware of any adverse effect as a result of Year 2000. 12. Subsequent Events 1. On January 7, 2000 pursuant to the approval of a majority of shareholders the Corporation's consummated its merger into its wholly owned subsidiary FTM Media, Inc. a Delaware Corporation (FTM Delaware), with FTM Delaware to be the surviving Corporation. All shareholders of FTM Media, Inc of Colorado will receive one share of FTM Media, Inc of Delaware in exchange for one share of FTM Media of Colorado common stock. 2. On October 18, 1999 the Corporation filed a form S-4 with the Securities and Exchange Commission so that the Corporation can register approximately 2,153,000 shares of it's common stock. The purpose of this share issuance is so that the Corporation can effectuate the purchase of the minority interest in INRG, by exchanging 1.25 shares of the Corporation's common stock in exchange for each share of INRG commons stock not held by the corporation. On December 30,1999 and January 4, 2000, the Company filed Amendments to the aforementioned S-4. On January 7, 2000, SEC declared such S-4 effective. 3. On October 18, 1999 the Corporation filed an application with the National Association of Securities Dealers (NASD) so as to have the Corporation's common stock listed for trading on the NASDAQ SmallCap Stock Market. On December 2, 1999 NASD replied to the Company's application requesting additional information. On February 9, 2000, the Company responded to NASD's request. 4. On January 12, 2000 the Board of Directors of the Company accepted the resignations of Jeffrey Pollack and Vickie Collier from 16 the Board of Directors and also Ms. Collier's resignation as Company's General Manager. At the same Board meeting the Corporation elected Robert Buziak to the Company's Board of Directors and promoted David Kendrick to President and Chief Operating Officer. Mr. Kendrick previously was the Company's Vice President of Sales and Marketing. 5. Subsequent to December 31, 1999, the Company issued $200,000 of Convertible Notes payable to non-related entities with interest accruing at a rate of 10% per annum which is payable when the notes are retired. The notes are due between January 6, 2000 and January 10, 2001 but Company has the right to prepay without penalty. Note Holders may demand repayment of all or any unpaid portion of the Note on March 1, 2000, or from time to time convert in whole or in part any unpaid portion of the principal amount of the Note, including any accrued interest thereon (Conversion Amount), into a number of fully paid and nonassessable Shares of the Company's common stock equal to the number determined by dividing (A) Conversion Amount by (B) $7.50. In the event that this formula results in a fractional share, the resulting number of shares will be rounded down to the nearest whole share. Along with the Notes, Noteholders received 40,000 warrants to purchase the Company's common stock for three years at an exercise price of $8 per share. 6. On January 27,2000, Frank Wood, The Company's Chairman purchased from the Company for $98,000, a $100,000 Note with interest accruing at a rate of 10% per annum which is payable when the note is retired. The note is due January 27, 2001 but Company has the right to prepay without penalty. Mr. Wood may demand repayment of all or any unpaid portion of the Note on March 1, 2000, or from time to time convert in whole or in part any unpaid portion of the principal amount of the Note, including any accrued interest thereon (Conversion Amount), into a number of fully paid and nonassessable Shares of the Company's common stock equal to the number determined by dividing (A) Conversion Amount by (B) $7.50. In the event that this formula results in a fractional share, the resulting number of shares will be rounded down to the nearest whole share. Along with the Note, Mr. Wood received 20,000 warrants to purchase the Company's Common stock for three years at an exercise price of $8 per share. 7. On February 1 and 2, 2000 the Company issued $350,000 of Convertible Notes payable to certain employees and their family of Spencer Trask Securities, Inc., with interest accruing at a rate of 10% per annum which is payable when the note is retired. The notes are due on the earlier of February 1, 2001 or completion of a financing in an amount of $3,000,000 or more but company has right to prepay without penalty. Holders may from time to time convert in whole or in part any unpaid portion of the principal amount of the Note, including any accrued interest thereon (Conversion Amount), into a number of fully paid and 17 nonassessable Units of the Company's common stock equal to the number determined by dividing (A) Conversion Amount by (B) $7.50. In the event that this formula results in a fractional share, the resulting number of shares will be rounded down to the nearest whole share. Units consist of one share of Company Common Stock along with one Class A warrant and one Class B warrant. 8. During January, 2000 the Company signed an agreement with Spencer Trask Securities, Inc. regarding a proposed private placement of the Company's securities. The Company proposes to sell between 800,00 and 1,600,000, consisting of one share of Company Common stock and one Class A warrant and one Class B warrant for a unit price of $7.50. As of this date the Company had not commenced the selling of the proposed securities. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview The following is a discussion of the consolidated financial condition and results of operations of the Company as of and for the two fiscal periods ended December 31, 1999 and December 31, 1998. This discussion should be read in conjunction with the Consolidated Financial Statements of the Company and the notes related thereto included in the Company's Form 10-KSB for the fiscal year ended March 31, 1999. The forward looking statements included in Management's Discussion and Analysis of Financial Condition and Results of Operations, which reflect Management's best judgement based on factors currently known, involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward looking statements as a result of a number of factors, including but not limited to those discussed herein. Introduction The Company was incorporated on February 22, 1994. Prior to March 1998, the Company had not engaged in any form of commercial business activity. In March 1998, the Company's principal business focus became the Internet and the production of interactive, multi-media, 2-D/3-D Internet Web Sites for the Radio Industry. On December 7, 1998, the Company acquired Cybermusic in the Cybermusic Merger. The business of Cybermusic consisted primarily of developing a network of linked, interactive, multi-media, 2-D/3-D Internet Web Sites to be operated by the Company for participating Radio Stations (the "FTM Internet Network"). The Company's business plan is to develop, operate and maintain the FTM Internet Network, perform related services and provide Internet access to participating Radio Stations in order to produce new sources of revenue for the Radio Stations. It is expected that the Internet Web Site for participating Radio Stations will feature multi-media interactive capability, streaming audio and video, local and national chat, games, P1 targeting and music sampling. The Company also expects to provide market and audience research with daily and weekly analysis, licenses, e-commerce, and technical support/customer service through a Company run operations center available seven days per week. The Company will initially seek to build the FTM Internet Network through obtaining the participation of Radio Stations owned by CBS/Infinity Broadcasting. On March 9, 1998 the Company entered into the CBS Agreement pursuant to which Infinity Broadcasting will arrange for the Company to meet with the general managers of Radio Stations owned by CBS/Infinity Broadcasting for the purpose of discussing the participation of such Radio Stations in the FTM Internet Network(s). 19 The Company anticipates three initial sources of revenue which are: (1) the sale of radio advertising units received from Radio Stations in the top twenty five U.S. markets in exchange for the Company's various Web site products and services and for participation in the FTM Internet Network, (2) the sale of local and national advertising, "integrated interactive advertising and sponsorships" on the FTM Internet Network of Radio Station Internet Web site, and (3) the sale of merchandise, in addition to other e-commerce activities generated within the Company's Internet Network. The Company acknowledges increasing competition for limited advertising dollars on the Internet and seeks to differentiate itself through the sale of sponsorships and "integrated advertising." Integrated advertising is a unique program that involves advertisers in the creation of a message allowing them to better target a specific audience or audience segment. The Company's growth strategy depends, in part, on its ability to increase advertising revenue by the ongoing introduction of new and enhanced Internet products and services to its flagship Internet Network and Web site. In addition, the Company will attempt to increase advertising revenue through the introduction of new and enhanced Internet products and services to its Internet Network and Web site by the creation of new features, promotions, games and simulations, in order to provide sponsors and advertisers with even greater ability to target a specific audience. CBS AGREEMENT Pursuant to the CBS Agreement, CBS/Infinity Broadcasting will provide, until March 2003, access and assistance to the Company to contact Radio Stations owned and/or operated by CBS/Infinity for the purposes of soliciting such stations to (1) participate in the FTM Internet Network, (2) to engage the Company to develop, operate and maintain World Wide Web sites for such stations and to provide related services and (3) to engage the Company to function as an Internet access Provider for such stations in order for the station to generate new sources of revenue. In exchange for such rights and assistance, the Company has agreed to (i) use commercially reasonable efforts to provide unimpeded and uninterrupted access and operability of World Wide Web site to the Participating Stations, (ii) propose to its shareholders that, for so long as CBS/Infinity Broadcasting continues to own at least ten percent (10%) of the issued and outstanding shares of the Company's Common Stock (on a fully diluted basis), a representative designated by CBS Radio or Infinity be elected to the Company's board of directors, and to use its best efforts to cause all of its insiders and affiliates to vote their shares in favor of the election of said representative, and (iii) allow CBS Infinity Broadcasting to audit the Company's books and records not more than once each calendar year on behalf of those stations who participate in the FTM Internet Network with respect to the accounting statements tendered to such Radio Stations under their agreements with the Company. 20 OTHER POTENTIAL INTERNET PRODUCTS AND SERVICES The Company anticipates that advertising revenues generated from the sale of Internet Web site advertising and sponsorships will represent only a portion of the Company's operating revenues and profits, and further, the Company believes that its future success will depend, in part, on its ability to generate revenues and profits from other sources. The Company intends to explore other opportunities to increase revenues through new game platforms, co-branding relationships, cross-licensed technologies, merchandise opportunities, specialized CD-ROM's, classified advertising, personals, archiving fees, specialty Web-based-only entertainment events, emerging artist management, publishing and music distribution, and market specific consumer research. The Company's business is still in the very early stages of development. The Company is in discussions with various CBS/Infinity Broadcasting affiliated Radio Stations along with non CBS/Infinity Broadcasting Radio Stations regarding the providing of Internet products and services, but does not yet have binding agreements with any Radio Stations to provide such products and services. In addition, while the Company has developed prototypes of Radio Station Internet Web sites for Los Angeles Radio Station "KROQ", San Francisco Radio Stations "KITS" and "KCBS" Chicago Radio Station "B96" and Boston Radio Station "WBCN", the prototypes developed do not incorporate all of the currently available technical features that the Company expects to include in its fully operational Internet Web site. The Company has generated minimal revenues and has limited operating history upon which an evaluation of the prospects for the acceptance of its Internet products and services and the related sale of Internet advertising may be based. THE MARKET Consumer household usage of the Internet is growing exponentially. The market for interactive multimedia Web sites, promotions, games, information, and online commerce is a rapidly growing segment of the United States economy. An estimate of 1999 Web use by Nielsen Media Research current Web users at 92 million persons, up from 70 million in 1998. A January 1999 Arbitron/Edison Media Research survey of Arbitron's Fall '98 diarykeepers found that 57% of United States households have a computer, and more than half of all Americans are currently online (at home, work, school, or other locations). As the Internet becomes more accessible, functional, and widely used by consumers and businesses, its commercial potential continues to grow dramatically in terms of both e-commerce and ad spending. The number of people making purchases online has jumped 40% in the last nine months, up to 28 million people, according to a recent Nielsen/ CommerceNet study. The overlap between potential Web users and radio listeners is significant, according to the recent Arbitron/Edison study. Fully 82% of partisan 21 Alternative Rock listeners have computers at home, compared to the 57% of total homes. Of those PC-owning Alternative Rock listeners, 91% already have Internet access. In fact, most young people - the most active radio listeners -- are online. Fully 81% of those 12-17 and 71% of those 18-24 are online. Penetration is high among older listeners also, as well over half of those 25-54 are online. Broadcast advertising is one of the most powerful drivers of Web traffic. Radio is well positioned to capitalize on this, because of its convenience, reach, and devoted audience. According to Arbitron/Edison, two-thirds of those surveyed had heard a station promote its Web site on-air, and a third had actually visited a station Web site (rising to 44% among Modern Rock listeners). Consumer-focused Internet companies (such as AOL, eBay, Amazon, and Priceline.com) clearly believe that radio listeners can drive listeners to their sites. Online companies spent more than $37 million on traditional radio advertising during the first quarter of 1999, up from just $6 million in the same period a year ago, according to a recent Competitive Media/Industry Standard report. PaineWebber recently upgraded its estimate of total 1999 online companies' advertising spending to $800 million. PaineWebber expects 40% of the increase to go to radio, for a total of $320 million in 1999 radio ad revenues. PaineWebber estimates the dot-coms' 1999 offline advertising breakdown will be 40% radio, 40% TV, and 20% other media. SALES AND MARKETING Our sales and marketing activities are directed toward two principal groups, major market radio stations and national advertisers. Our affiliate stations are largely responsible for generating local ad sales and driving listeners to their web sites. RADIO STATIONS We will present our Web site services to the managers of targeted Top 25 market radio stations, through our team of Radio and Internet experts. We will emphasize the following features and benefits: - Two-thirds of the advertising space on each radio station Web site will be dedicated to "local" advertising. Because we share in this revenue, we will take an active role in training and supporting local station sales personnel; - As we build station Web sites in the Top 25 markets, we aim to become a lifestyle demographic "vertical portal." While emphasis will always remain focused on the individual radio station Web sites, each "vertical portal" with local entry points which will become an advertising and marketing vehicle for national advertisers. Participation in a "national portal" creates significant new revenue sources for each radio station. 22 - Our Web site services are "turn-key" and include all Web site development, ongoing maintenance, content refreshing, and technology upgrades. Through our "turn-key" Web sites, individual radio stations will be able to offer Web site services far superior than they could afford to do individually; - Each Web site we create and manage will be customized for each participating radio station; - Our radio station Web sites will be equipped with a sophisticated tracking and reporting system that will provide each station with timely and accurate loyal listener data and demographics. Our key marketing executives have already begun to make in-person presentations to the general managers and program directors of the top 25 market radio stations that fit our affiliate profile. NATIONAL ADVERTISERS Our marketing efforts to national advertisers will be through advertising agencies and, to a lesser extent, direct sales. We will focus on communicating to advertisers the benefits of individually targeted, interactive ad on our network of Web sites. These advertisements can be closely matched to a consumer's lifestyle and demographics and allow consumer interaction, and are believed to be more effective at building brand equity and generating sales and revenue than traditional banner ads. RADIO STATION LISTENERS/WEB TRAFFIC Radio station listeners will be directed to the radio station's Web site through on-air mentions, radio station off-air events such as concerts and remote broadcasts, radio station related print media and promotional materials, and other radio station advertising media such as billboards. Additionally, we have marketing, promotional and database specialists within the Company who will work closely with each radio station to maximize the effectiveness of each of the above-referenced outreach programs. COMPETITION FTM's direct competitors include: - - OnRadio - OnRadio supplies basic, template-based Web sites to radio stations in exchange for the radio station providing a "link" to OnRadio national content. There is also a banner ad revenue split, and the participating radio stations barter some advertising time to OnRadio in exchange for its services. OnRadio has been in operation for more than three years and operates over 600 radio station web sites, mostly in small and medium-sized markets. 23 - - AMFMi - AMFMi is the in house web development group for AMFM inc. As such, AMFMi assists AMFM affiliates in establishing web sites. AMFMi was formed as an in-house Web development group with goals very similar to FTM's. AMFM is currently being acquired by Clear Channel Communications Inc. - - FIMC/RadCity - First Internet Media Corporation offers stations a market-exclusive licensing arrangement for each "RadCity," a local web portal comprised of third-party information providers. The strategy is currently being tested in six small markets and one major city (San Francisco). - - Magnitude Network - Owned by Web investment firm CMGI, Magnitude has about 200 radio station web sites, primarily in small to medium markets. Services include traffic data tracking, Web hosting, update tools, station-branded listener e-mail, streaming audio, and content drawn from third-party suppliers such as Rolling Stone/Jam TV. - - Radio Data Group, Inc. - RDG is owned by CBS, Clear Channel, and Colfax Communications. RDG helps radio stations set up Web sites and markets radio-oriented Web site software to them. Its software package includes ad tracking, invoicing, ad placements, and Web site administration, among other programs. RDG claims to have created "over 250" Web sites. - - MP3Radio.com - Cox Enterprises and MP3 have recently created this joint venture company that builds radio station sites using templates The content of each site, currently 20 in number, is identical and MP3 driven. We anticipate that the number of direct and indirect competitors will increase significantly in the future. The market for Internet products and services is growing exponentially and there are relatively few barriers to entry into the marketplace. There can be no assurance that our current or potential competitors will not develop Internet products and services comparable or superior to those to be developed by us or adapt more quickly than us to new technologies, evolving industry trends or changing Internet user preferences. Increased competition could result in price reductions, reduced margins or loss of market share. In addition, if we expand internationally, we may face new competition in these marketplaces. There can be no assurance that the Company's current or potential competitors will not develop Internet products and services comparable or superior to those to be developed by the Company or adapt more quickly than the Company to new technologies, evolving industry trends or changing Internet user preferences. Increased competition could result in price reductions, reduced margins or loss of market share, any of which would materially and adversely affect the Company's business, prospects, financial condition or operating results. In addition, as the Company expands internationally it may face new competition. There can be no assurance that the Company will be able to compete successfully against current and future competitors, or that competitive pressures faced by the Company will not 24 have a material adverse effect on its business, prospects, financial condition or operating results. GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES The Company is subject to various laws and governmental regulations applicable to businesses generally. The Company believes it is currently in material compliance with such laws and that such laws do not have a material adverse impact on its operations. In addition, although there are currently few laws or regulations directly applicable to access to or commerce on the Internet, due to the increasing popularity and use of the Internet, it is possible that more stringent federal, state, local and international laws and regulations may be adopted with respect to the Internet. A variety of issues may prompt such regulations including problems involving participant privacy and expression, consumer protection, pricing, payment methodologies, financing practices, intellectual property, information security, anti-competitive practices, the convergence of traditional channels with Internet commerce, characteristics and quality of products and services and the taxation of subscription fees or gross receipts of Internet service providers. The enactment or enforcement of such laws or regulations or others in the future may increase the Company's cost of doing business or decrease the growth of the Internet, which could in turn decrease the demand for the Company's Internet products and services, increase the Company's costs, or otherwise have an adverse effect on the Company's business, financial condition or operating results. Moreover, the applicability to the Internet of existing laws in various jurisdictions including laws and regulations relating to matters such as property ownership, libel and personal privacy is uncertain, may take years to resolve and could expose the Company to substantial liability for which the Company might not be indemnified by content providers or other third parties. Any such new legislation or regulation or the application of existing laws and regulations to the Internet could have a material adverse effect on the Company's business, prospects, financial condition or operating results. The Company's use of prizes associated with its features, promotions, games and simulations may be subject to federal, state, local and international laws governing lotteries and gambling. Such laws vary from jurisdiction to jurisdiction and are complex and uncertain. The Company seeks to design its prizing structure to fall within exemptions from such laws, but there can be no assurance that the Company's prizing structure will be exempt from all applicable laws. Failure to comply with applicable laws could have a material adverse affect on the Company's business, prospects, financial condition or operating results. Liquidity and Capital Resources - December 31, 1999 compared to March 31, 1999 At December 31, 1999, the Company had total assets of $3,938,761 representing an increase in the total assets of $1,587,808 over total assets at March 31, 1999. Total Liabilities increased to $3,751,013 at December 31, 1999 from $272,921 at March 31, 1999. Minority Interest decreased to $2,435,807 at December 31, 1999 from 25 $3,187,150 at March 31, 1999. Total Stockholders Deficit increased to $2,248,059 at December 31, 1999 from $1,109,118 at March 31, 1999. Total current assets at December 31, 1999 were $1,818,757, which consisted of cash and cash equivalents of $400,621, employee note receivables in the amount of $1,193,700, Accounts Receivable of $24,208 and prepaid expenses of $200,228. Total current liabilities at December 31, 1999 were $3,751,013 consisting of accounts payable of $1,161,579 and the current portion of note payables in the amount of $2,542,636. Working capital at December 31, 1999 was $(1,932,256) compared to $1,778,880 at March 31, 1999. This represented a decrease in the Company's Working Capital position of $3,711,136. At December 31, 1999 the Company reported total assets of $3,938,761 which consisted of $1,818,757 of current assets described above, $1,947,170 of Net Property and Equipment, $102,173 of Lease Deposits and $70,661 of Net Goodwill. Total liabilities at December 31, 1999 are comprised entirely of the current liabilities described above. Minority interest at December 31, 1999 totaled $2,435,807, which consisted of Preferred Stock of a subsidiary in the amount of $438,747 and Common Stock of a subsidiary in the amount of $1,997,060. At December 31, 1999, the Company reported a Stockholders Deficit of $2,248,059. This represents an increase of $1,131,941 over March 31, 1999 Stockholders Deficit of $1,109,118. This decrease was the result of the sale of 273,504 shares of Series B Convertible Preferred Stock in which the Company received $1,600,000, increased by the payment of $192,000 of dividends to the shareholders of Series B Convertible Preferred Stock, decreased by the issuance of 192,100 shares of Common Stock to employees in which the corporation received notes in the amount of $916,700 and increased by the net loss for the nine months of $3,653,215. Results of Operations - Three Months Ended December 31, 1999 compared to the Three Months Ended December 31, 1998 Net Revenues for the three months ended December 31, 1999 were $45,659 compared to net revenue of 0 for the same period a year ago. This is attributable to the Company continuing to be in its development stage and therefore not yet generating any significant revenue from operations. Cost of goods Sold for the three months ended December 31, 1999 were $1,253,438 compared to Cost of Goods Sold of 0 for the same period a year ago. Operating expenses for the three months ended December 31, 1999 were $971,682, which consisted of general and administrative expenses of $683,804, sales and marketing expenses of $172,854 and depreciation and amortization of $115,024. Operating expenses for the three months ended December 31, 1998 were 30,000. 26 The Company recorded net interest expense (interest expense offset by interest income) of $31,218 for the quarter ended December 31, 1999. The interest expense was money interest paid or accrued on company liabilities less interest earned on the Company's Cash and Cash Equivalents. As a result of the foregoing the Company posted a net loss of $2,210,680 before minority interest. The minority interest in the Company's net loss was $652,289 resulting in a net loss to the Company of $1,557,391 for the three months ended December 31, 1999 or $(.242) per share compared to a net loss of 30,000 for the three months ended December 31, 1998 or $(.004) per share. Results of Operations - Nine Months Ended December 31, 1999 compared to the Nine Months Ended December 31, 1998 Net Revenues for the nine months ended December 31, 1999 were $45,659 compared to net revenue of 0 for the same period a year ago. This is attributable to the Company continuing to be in its development stage and therefore not yet generating any significant revenue from operations. Cost of goods Sold for the nine months ended December 31, 1999 were $2,597,967 compared to Cost of Goods Sold of 0 for the same period a year ago. Operating expenses for the nine months ended December 31, 1999 were $2,890,330 which consisted of general and administrative expenses of $1,961,517, sales and marketing expense of 321,928 and depreciation and amortization of $228,743. Operating expenses for the nine months ended December 31, 1998 consisted of general and administrative expense of $30,000. The Company recorded net interest expense (interest expense offset by interest income) of $13,958 for the nine months ended December 31, 1999. The interest expense was money interest paid or accrued on company liabilities less interest earned on the Company's Cash and Cash Equivalents. As a result of the foregoing the Company posted a net loss of $5,078,454 before minority interest. The minority interest in the Company's net loss was $1,425,439 resulting in a net loss to the Company of $3,653,215 for the nine months ended December 31, 1999 or $(.573) per share compared to a net loss of 30,0000 for the nine months ended December 31, 1998 or $(.004) per share. 27 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders On October 15, 1999, the Corporation at a Special Meeting of Shareholders approved: i) The merger of the Corporation with FTM Media, Inc of Delaware a wholly owned subsidiary of the Corporation, with FTM of Delaware being the surviving entity. ii) The adoption of the FTM Media, Inc. 1999 stock option plan No other matters were submitted to a vote of security holders Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. Exhibit Name 27 Financial Data Schedule (b) The Company filed a form 8-K on November 5,1999 reporting that at an October 15, 1999 Special Meeting of Stockholders of FTM Media, Inc., a Colorado corporation (the "Company"), the Company's stockholders voted to approve the reincorporation of the Company from Colorado to Delaware by the adoption of a Plan and Agreement of Merger pursuant to which the Company will be merged with and into FTM Media, Inc., a Delaware corporation ("FTM Delaware")(the "Reincorporation Merger"). In addition to the Reincorporation Merger discussed above, the Board of Directors of the Company, as the majority shareholder of Interactive Radio Group, Inc., a Delaware corporation ("INRG"), authorized its approval of the merger of 28 INRG with and into FTM Delaware (the "INRG Merger"). In this INRG Merger, (i) each holder of INRG common stock will receive 1.25 shares of FTM Delaware common stock for each share of INRG common stock that they own, and (ii) each holder of INRG Series A Preferred Stock will be converted into the Series A preferred stock of FTM Delaware that they own, with substantially similar terms. The INRG Merger will result in the elimination of the minority interest in INRG (c) The Company filed a form 8-K on January 25, 2000 reporting that at an October 15, 1999 Special Meeting of Stockholders of FTM Media, Inc., a Colorado corporation ("FTM Colorado"), FTM Colorado's stockholders voted to approve the reincorporation of FTM Colorado from Colorado to Delaware by the adoption of a Plan and Agreement of Merger pursuant to which FTM Colorado was to be merged with and into FTM Media, Inc., a Delaware corporation ("FTM Delaware") (the "Reincorporation Merger"). The Reincorporation Merger was closed on January 7, 2000. In addition to the Reincorporation Merger discussed above, FTM Colorado, as the majority shareholder of Interactive Radio Group, Inc., a Delaware corporation ("INRG"), authorized its approval of the merger of INRG with and into FTM Delaware (the "INRG Merger"). In this INRG Merger, (i) each holder of INRG common stock received 1.25 shares of FTM Delaware common stock for each share of INRG common stock that they owned, and (ii) each holder of INRG Series A Preferred Stock was converted into Series A preferred stock of FTM Delaware with substantially similar terms. FTM Colorado owned approximately 72% of the outstanding shares of INRG's common stock before the INRG Merger. The INRG Merger resulted in the elimination of the minority interest in INRG. The INRG Merger was consummated on January 7, 2000, after the consummation of the Reincorporation Merger. In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and dates indicated. Signature Title Date /s/ Ron Conquest Chief Executive Officer February 10,2000 /s/ Scott M. Manson Chief Financial and February 10, 2000 Accounting Officer 29 EXHIBIT INDEX 27 Financial Data Schedule EX-27 2 EX-27
5 1,000 U.S. DOLLARS 9-MOS MAR-31-1999 DEC-31-1999 1 401 0 1218 0 0 1819 2172 225 3939 3751 0 11 0 26 (2282) 3939 45 45 2598 2512 0 0 14 (3653) 0 (3653) 0 0 0 (3653) (0.57) (0.57)
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