U.S. SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: September 30, 2002
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-15863
MEDIUM4.COM, INC.
-----------------
(Exact name of Registrant as specified in its charter)
Delaware 13-4037641
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1220 COLLINS AVENUE, MIAMI BEACH, FL 33139
------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(305) 538-0955
--------------
(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 filing
requirements for the past 90 days.
Yes_X_ No___
The number of shares of Common Stock, par value $ .01 per share, outstanding
as of September 30, 2002 is 49,797,556.
PART I--FINANCIAL INFORMATION
Item 1. Financial Information
MEDIUM4.Com Inc.
CONTENTS
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Page
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FINANCIAL STATEMENTS
Balance Sheets as of September 30, 2002 and December 31, 2001 .....F-2
Statements of Operations - For the Three Months Ended
September 30, 2002 and 2001, Nine Months Ended September 30,
2002 and 2001, Cumulative November 12, 1998 (inception) to
September 30, 2002 ................................................F-3
Statement of Stockholder's Deficiency - For the Nine Months
Ended September 30, 2002 Cumulative November 12, 1998
(inception) to September 30, 2002 ............................F-4 A & B
Statements of Cash Flows - Cumulative November 12, 1998
(inception) to September 30, 2002 .................................F-5
NOTES TO FINANCIAL STATEMENTS ..............................................F-6
MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
September 30, December 31,
2002 2001
------------ ------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash ............................................. $ - $ 18,380
Other current assets ............................. - 376
------------ ------------
Total Current Assets ............................. - 18,756
INVESTMENT IN AFFILIATE .......................... - 100,000
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET ........ - 93,511
OTHER ASSETS ..................................... - 27,569
------------ ------------
$ - $ 239,836
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable ................................. $ 181,419 $ 343,960
Accrued expenses ................................. 30,000 211,843
Loan payable - related party ..................... 563,858 243,479
Deferred Revenue ................................. - 305,000
------------ ------------
Total Current Liabilities ........................ 775,277 1,104,281
STOCKHOLDERS' DEFICIENCY
Series A Preferred stock $.01 par value 5,000
shares authorized, -0- and 1,000 issued and
outstanding, respectively (liquidation
value of $1,000,000) ........................... - 10
Common stock, $.01 par value; 75,000,000
shares authorized, 51,822,556 and 29,672,556
issued and outstanding, respectively ........... 518,226 296,726
Paid in capital .................................. 18,680,224 18,664,745
Deficit accumulated during development stage ..... (19,702,280) (19,530,138)
Unearned compensation expense .................... (221,447) (245,788)
Treasury stock ................................... (50,000) (50,000)
------------ ------------
Total Stockholder's deficiency ................... (775,277) (864,446)
------------ ------------
$ - $ 239,836
============ ============
See notes to consolidated financial statements.
F-2
MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
November 12,
1998
Three Months Ended Nine Months Ended (inception)
September 30, September 30, to
------------------------- --------------------------- September 30,
2002 2001 2002 2001 2002
----------- ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
REVENUE .................................... $ 180,000 $ 447,272 406,046 $ 727,303 1,777,049
COST OF SALES (exclusive of depreciation and
amortization shown separately below) ..... - 147,948 - 157,448 471,866
----------- ------------ ------------ ------------ ------------
GROSS PROFIT ............................... 180,000 299,324 406,046 569,855 1,305,183
EXPENSES:
Production ................................. - - 24,815 53,622 2,761,057
Selling, general and administrative expenses 40,806 1,977,078 621,353 3,819,149 17,038,429
Write down of fixed assets ................. 87,137 - 87,137 - 672,059
Depreciation and amortization .............. 3,599 198,042 54,127 648,075 751,997
----------- ------------ ------------ ------------ ------------
Total expenses ............................. 131,542 2,175,120 787,432 4,520,846 21,223,542
----------- ------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS .............. 48,458 (1,875,796) (381,386) (3,950,991) (19,918,359)
OTHER INCOME (EXPENSE):
Interest income ............................ - - - 390 291,868
Write down of capitalized development costs - - - - (534,498)
Write down of investments .................. - - - - (59,000)
Loss on marketable securities .............. - - - - (125,445)
Other income ............................... 209,211 - 209,244 6,164 227,222
----------- ------------ ------------ ------------ ------------
Total other income (expense) ............... 209,211 - 209,244 6,554 (199,853)
----------- ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE TAXES ................. 257,669 (1,875,796) (172,142) (3,944,437) (20,118,212)
INCOME TAX EXPENSE ......................... - - - - 14,000
----------- ------------ ------------ ------------ ------------
NET INCOME (LOSS) .......................... $ 257,669 $ (1,875,796) (172,142) $ (3,944,437) (20,132,212)
=========== ============ ============ ============ ============
Other comprehensive income, net of tax:
Foreign currency translation adjustments ... - - - - (17,052)
Comprehensive Income ....................... $ 257,669 $ (1,875,796) $ (172,142) $ (3,944,437) $(20,149,264)
=========== ============ ============ ============ ============
Weighted average shares of common stock
outstanding ................................ 37,055,889 17,892,196 31,887,556 15,354,596
Net income (loss) per share ................ $ 0.01 $ (0.10) (0.01) $ (0.26)
=========== ============ ============ ============
See notes to consolidated financial statements.
F-3
MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIENCY
Preferred Stock Common Stock Additional
------------------- ----------------------- Paid in Accumulated
Shares Amount Shares Amount Capital Deficit
------- --------- ---------- ----------- ------------ ------------
Balance as of November 12, 1998
(inception) ............................ - $ - 8,300,000 $ 83,000 $ - $ -
------- --------- ---------- ----------- ------------ ------------
Balance as of December 31, 1998 ........... - - 8,300,000 83,000 - -
Receipt of stock subscription ............. - - - - - -
Sale of common stock - initial
public offering ........................ - - 1,678,433 16,784 8,766,768 -
Sale of common stock -
private placement ...................... - - 200,000 2,000 598,000 -
Stock options issued for services ......... - - - - 2,424,246 -
Accumulated other comprehensive
income ................................. - - - - - -
Unearned Compensation
expense ................................ - - - - - -
Net loss .................................. - - - - - (3,760,176)
------- --------- ---------- ----------- ------------ ------------
Balance as of December 31, 1999 ........... - $ - 10,178,433 $ 101,784 $ 11,789,014 $ (3,760,176)
Proceed from sale of common
stock, net of expenses ................. - - 1,727,763 17,278 1,363,104 -
Stock issued for services ................. - - 360,000 3,600 356,400 -
Stock options issued for services ......... - - - - 1,489,625 -
Accumulated other comprehensive
income ................................. - - - - - -
Unearned Compensation
expense ................................ - - - - - -
Net loss .................................. - - - - - (9,531,071)
------- --------- ---------- ----------- ------------ ------------
Balance as of December 31, 2000 ........... - $ - 12,266,196 $ 122,662 $ 14,998,143 $(13,291,247)
Proceeds from sale of preferred ........... 1,000 10 - - 995,990 -
stock
Proceed from sale of common ............... - - 2,821,360 28,214 446,562 -
stock
Stock issued for services ................. - - 14,585,000 145,850 2,224,050 -
Treasury Stock ............................ - - - - - -
Unearned Compensation
expense ................................ - - - - - -
Net loss .................................. - - - - - (6,238,892)
------- --------- ---------- ----------- ------------ ------------
Balance as of December 31, 2001 (audited) . 1,000 $ 10 29,672,556 $ 296,726 $ 18,664,745 $(19,530,139)
Proceeds from conversion of preferred ..... (1,000) (10) 20,000,000 200,000 (199,990) -
shares
Proceed from sale of common ............... - - 25,000 250 2,000 -
stock
Stock issued for services ................. - - 2,125,000 21,250 148,750 -
Contribution of capital ................... - - - - 64,719 -
Unearned Compensation ..................... - - - - - -
expense
Net loss .................................. - - - - - (172,142)
------- --------- ---------- ----------- ------------ ------------
Balance as of September 30, 2002(unaudited) - $ - 51,822,556 $ 518,226 $ 18,680,224 $(19,702,280)
======= ========= ========== =========== ============ ============
See notes to consolidated financial statements.
F-4 A
MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIENCY
Accumulated
Other Unearned Total
Subscription Comprehensive Treasury Compensation Stockholders
Receivable Income Stock Expense Equity
----------- ----------- ----------- ----------- -----------
Balance as of November 12, 1998
(inception) ............................ $ (83,000) $ - $ - $ - $ -
----------- ----------- ----------- ----------- -----------
Balance as of December 31, 1998 ........... (83,000) - - - -
Receipt of stock subscription ............. 83,000 - - - 83,000
Sale of common stock - initial
public offering ........................ - - - - 8,783,552
Sale of common stock -
private placement ...................... - - - - 600,000
Stock options issued for services ......... - - - - 2,424,246
Accumulated other comprehensive
income ................................. - (17,052) - - (17,052)
Unearned Compensation
expense ................................ - - - (2,121,215) (2,121,215)
Net loss .................................. - - - - (3,760,176)
----------- ----------- ----------- ----------- -----------
Balance as of December 31, 1999 ........... $ - $ (17,052) $ - $(2,121,215) $ 5,992,355
Proceed from sale of common
stock, net of expenses ................. - - - - 1,380,382
Stock issued for services ................. - - - - 360,000
Stock options issued for services ......... - - - - 1,489,625
Accumulated other comprehensive
income ................................. - 17,052 - - 17,052
Unearned Compensation
expense ................................ - - - 720,547 720,547
Net loss .................................. - - - - (9,531,071)
----------- ----------- ----------- ----------- -----------
Balance as of December 31, 2000 ........... $ - $ - $ - $(1,400,668) $ 428,890
Proceeds from sale of preferred ........... - - - - 996,000
stock
Proceed from sale of common ............... - - - - 474,776
stock
Stock issued for services ................. - - - - 2,369,900
Treasury Stock ............................ - - (50,000) - (50,000)
Unearned Compensation
expense ................................ - - - - -
Net loss .................................. - - - 1,154,880 (5,084,012)
----------- ----------- ----------- ----------- -----------
Balance as of December 31, 2001 (audited) . $ - $ - $ (50,000) $ (245,788) $ (864,445)
Proceeds from conversion of preferred ..... - - - - -
shares
Proceed from sale of common ............... - - - - 2,250
stock
Stock issued for services ................. - - - (160,000) 10,000
Contribution of capital ................... - - - - 64,719
Unearned Compensation ..................... - - - 184,341 184,341
expense
Net loss .................................. - - - - (172,142)
----------- ----------- ----------- ----------- -----------
Balance as of September 30, 2002(unaudited) $ $ - $ (50,000) $ (221,447) $ (775,277)
=========== =========== =========== =========== ===========
See notes to consolidated financial statements.
F-4 B
MEDIUM4.COM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
Cumulative
November 12,
1998
Nine Months Ended September 30, (inception) to
-------------------------------- September 30,
2002 2001 2002
------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................ $ (172,142) $ (3,944,437) $(19,702,280)
Adjustments to reconcile net loss to net cash used in
operating activites:
Depreciation ........................................ 5,038 291,607 770,605
Amortization ........................................ 1,336 356,469 675,936
Impairment of fixed assets .......................... - - 250,000
Write down of fixed assets .......................... 87,137 - 422,059
Write down of sofware development costs ............. - - 534,498
Equity based compensation ........................... 194,341 1,093,433 2,069,768
Common stock and options issued for services ........ - 867,000 4,522,556
Other current assets ................................ 376 10,324 -
Other assets ........................................ 27,570 226,010 -
Accounts payable .................................... (162,541) (112,187) 181,419
Accrued expenses .................................... (181,843) 748,300 30,000
Deferred revenue .................................... (305,000) (476,000) -
------------ ------------ ------------
NET CASH USED IN OPERATIONS ......................... (505,728) (939,481) (10,245,439)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliate ............................. 100,000 - -
Purchases of capital expenditures ................... - (330) (2,653,098)
------------ ------------ ------------
NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES . 100,000 (330) (2,653,098)
------------ ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES:
Loan payable - related party ........................ 320,379 435,349 563,858
Sale of common stock ................................ 2,250 454,000 11,240,960
Sale of preferred stock ............................. - - 996,000
Purchase of treasury stock .......................... - - (50,000)
Contribution of capital ............................. 64,719 - 64,719
Change in subscription receivable ................... - - 83,000
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........... 387,348 889,349 12,898,537
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH ..................... (18,380) (50,462) -
CASH, beginning of the period ....................... 18,380 50,462 -
------------ ------------ ------------
CASH, end of the period ............................. $ - $ - -
============ ============ ============
Supplemental disclosures of cash flow information:
Interest paid ....................................... $ - $ - -
Taxes paid .......................................... - - -
Non cash financing activities:
Common stock and options issued for services ........ $ 160,000 $ -
Conversion of preferred stock to common stock ....... $ 200,000 $ -
See notes to consolidated financial statements.
F-5
Medium 4. Com Inc.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
1. Basis of Presentation:
The accompanying unaudited financial statements of Medium 4. Com Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
prepare them for inclusion as part of the Form 10QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
statements for the periods ended September 30, 2002 and 2001 are unaudited and
include all adjustments necessary to a fair statement of the results of
operations for the periods then ended. All such adjustments are of a normal
recurring nature. The results of the Company's operations for any interim period
are not necessarily indicative of the results of the Company's operations for a
full fiscal year. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report (Form 10K) filed with
the Securities and Exchange Commission for the year ended December 31, 2001.
2. Going Concern
These financial statements have been prepared assuming the Company will continue
as going concern. The Company has suffered recurring losses amounting to $20.0
million.
3. Advances
A related party advanced $385,098 to the Company during the period of January 1,
2002 to September 30, 2002.
4. Revenues
Revenues relates to the recognition of deferred revenues on a license fee which
the Company has no further obligations to render services or support the
licensing arrangement. During the second quarter ended June 30, 2002, the
Company received $200,000 from its affiliate for fees and the purchase of the
investment in affiliate of $100,000. The $100,000 in fees and sale of investment
were recorded in the third quarter, when the paperwork was finalized to support
the fees earned.
5. New Accounting Developments
In June 2002, the Financial Accounting Standards Board issued SFAS No. 146 on
"Accounting for Costs Associated with Exit or Disposal Activities". The Company
is reviewing the requirements and implications of adopting such standards by
December 31, 2002. This Statement addresses financial and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The Company currently does not believe
adopting such standards will have a material effect on the presentation of the
financial statements.
F-6
6. Reclassifications
Certain reclassifications have been made to the prior period financial
statements in order to conform with the 2002 presention.
7. Stockholder's Equity
During the third quarter ended September 30, 2002, the following equity events
occurred;
- The preferred shareholders exercised their right to convert
the 1000 outstanding preferred shares into 20,000,000 shares
of common stock.
- 125,000 shares were issued for services rendered, such shares
were valued at $10,000 and expensed.
- 2,000,000 shares were recorded as outstanding due to a
contractual obligation to render future consulting services
over the next six months. These shares were valued at $160,000
and will be amortized ratably over the next six months.
- 25,000 shares were issued to satisfy a debt obligation of the
Company, such shares were valued at $2,250.
- A director and shareholder contributed $64,719 to capital.
8. Settlement Agreements
As of September 30, 2002, the following agreements were settled;
- Medium4.com, Inc. (the "Issuer") and Mr. David Badner, a
private investor in the Issuer ("Badner"), terminated his
Consulting Agreement dated as of December 1, 2001, pursuant to
which Badner provided consulting services to the Issuer at a
rate of $15,000 per month.
- Inter Asset Japan LBO No. 1 Fund, a Japanese limited
partnership ("IAJ") and a major stockholder of the Issuer,
acquired the right, title and interest of Badner in a
Convertible Promissory Note of the Issuer dated May 30, 2002.
The principal of this Promissory Note was $563,857 as of
September 30, 2002, none of which had been converted into
shares of the Issuer's Common Stock pursuant to its terms. The
purchase price by IAJ to Badner was $563,857, essentially the
equivalent of the outstanding principal amount of the
Promissory Note.
- The Issuer and Mr. Jonathan Braun, President and Chief
Executive Officer of the Issuer ("Braun"), executed a Release
and Indemnity Agreement pursuant to which Braun has resigned
as a director of the Issuer, and will resign as President and
CEO, and all other executive capacities of the Issuer
effective with the filing of the Issuer Form 10-Q for the
quarter ended September 30, 2002.
F-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
In view of the evolving nature of our business and our limited
operating history, we believe a description of our revenues and operating
results is not necessarily meaningful and should not be relied upon as
indications of future performance.
Effective September 30, 2002, Inter Asset Japan LBO No. 1 Fund, a
Japanese limited partnership ("IAJ") and a major stockholder of the Company,
consummated a series of related transactions pursuant to which IAJ together with
its affiliates became our majority shareholder. With the help of IAJ, we are
revising our business plan to expand our business avenues in the area of media
technology. We anticipate shifting our revenue model from broadband
entertainment channels and revenues derived from advertising, to a renewed focus
on developing media technology products and services and on licensing revenues.
To this end, we may develop such media technology products and services
internally, or acquire them from other parties. We do not anticipate revenues
from such activities prior to the second quarter of 2003.
Attaining our new business objectives will require additional capital
investments. Our new majority shareholder, IAJ, has preliminarily indicated that
it will support us financially in the short term until such time as we generate
enough cash flow from new business activities to be self-sufficient. IAJ has
made no formal commitment as yet, but it is anticipated that such support may
take the form of additional capital investment, mezzanine debt financing, or a
combination of the two. Any such financial support will likely result in
additional dilution on a pro rata basis of the percentage ownership of all
holders of common stock other than IAJ. Any inability to obtain additional
financing will materially adversely affect us, including possibly requiring us
to cease business operations.
Results of Operations
Fiscal period ended September 30, 2002
We sustained a net income of $257,669 for the three-month fiscal period ended
September 30, 2002 on revenues of approximately $280,000 compared to a net loss
of $1,875,796 for the three-month fiscal period ended September 30, 2001 on
revenues of approximately $447,272. We sustained a net loss of $172,142 for the
nine-month fiscal period ended September 30, 2002 on revenues of approximately
$406,046 compared to a net loss of $3,944,437 for the nine-month fiscal period
ended September 30, 2001 on revenues of approximately $727,303. Revenues for
the current period relate to the recognition of deferred revenues on a license
fee which the Company has no further obligations to render services or support
the licensing arrangement. During the second quarter ended June 30, 2002, the
Company received $200,000 from its affiliate ForeignTV Japan as a $100,000 final
payment under all licensing agreements it has executed with the Company and a
$100,000 for the purchase of the Company's equity interest in the ForeignTV
affiliate, which was recorded at a value of $100,000 prior to the sale of such
equity interest. Such monies have been recognized in the current quarter upon
the completion of formal documents to support the fees earned and the sale of
the equity interest.
2
We incurred no production costs for in the three-month period ended September
30, 2002, because we have suspended the production of all original content
pending the refocusing of our business activities away from original programming
to media technology products and services and on licensing revenues. Productions
costs in the nine-month period ended September 30, 2002 were approximately
$24,815, roughly half the $53,662 expended in the nine-month period ended
September 30, 2001. Production costs for the nine-month period nine-month period
ended September 30, 2002 include the cost of (i) data communications, (ii)
software license fees; (iii) content license fees, where necessary in order to
acquire additional content; and (iv) the expense of hiring and compensating
employees and independent contractors who handle production and delivery of our
content.
Our selling, general and administrative expenses were approximately $40,806 for
the three-month period ended September 30, 2002, compared to $1,977,078 for the
three-month period ended September 30, 2001. Our selling, general and
administrative expenses were approximately $621,353 for the nine-month period
ended September 30, 2002, compared to $3,819,149 for the nine-month period
ended September 30, 2001. For the current period, the expenses consisted
primarily of employee and independent contractor expense, rent, overhead,
equipment and depreciation, professional and consulting fees, sales and
marketing costs, and other general and administrative costs such Internet
domain and Web service costs. The difference in the current periods compared to
the prior periods is primarily due to the reduction of staff and the
scaling-back of operations effectuated in second half of 2001. The Company
recorded $209,211 of other income during the quarter ended September 30, 2002
relating to the forgiveness of indebtedness due to negotiated settlements with
several creditors.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through
sales of our equity securities in our initial public offering, from several
private placements and by means of non-interest bearing loans and capital
contributions from an affiliated person. Net proceeds from these sales have
totaled approximately $12.2 million, with $8.8 million raised in the initial
public offering and the balance raised in the private placements.
For the nine months ended September 30, 2002, we used approximately
$505,728 in connection with our operating activities. Such amount was primarily
attributable to net losses, accounts payable and accrued expenses, offset in
part by equity based compensation, write down of fixed assets, depreciation and
amortization, and increases in accounts payable.
At September 30, 2002, we had no cash. We will require financial
support from our majority shareholder in the anticipated form of interest
bearing loans and/or additional capital contributions or additional investment
from the sale of our securities to be able to continue our operations and to
achieve our new business objectives. We do not know if additional investment or
financing, in excess of what is currently anticipated, will be available to us
or, if it is available, whether it will be available on commercially reasonable
terms. Any inability to obtain additional financing will materially adversely
affect us, including possibly requiring us to cease business operations.
3
PART II - OTHER INFORMATION
Item 5. Changes in Securities and Use of Proceeds.
(c) Effective September 30, 2002, Inter Asset Japan LBO No. 1 Fund, a
Japanese limited partnership ("IAJ") and a major stockholder of the
Company converted (the "Conversion") 1,000 shares of the Company's
Series A Convertible Preferred Stock (the "Preferred Shares") for
20,000,000 shares of the Company's Common Stock (the "Conversion
Shares"). IAJ had acquired the Preferred Shares from the Company on
October 30, 2001 in a private transaction for an aggregate
consideration of $1,000,000. The source of funds used for the purchase
of the Series A Convertible Preferred Stock was the working capital of
IAJ. No additional consideration was due from or paid by IAJ for the
exercise of its right to convert the Preferred Shares to the Conversion
Shares.
Also effective September 30, 2002, IAJ acquired the right, title and
interest of David Badner ("Badner"), a private investor in and
consultant to the Company, in a Convertible Promissory Note of the
Company (the "Badner Promissory Note") dated May 30, 2002 in the
principal amount of $563,857. The outstanding principal amount of the
Badner Promissory Note is presently convertible into shares of the
Common Stock of the Company at a conversion price of $.10 per share, or
an aggregate of 5,638,570 shares. The source of funds used for the
purchase of the Badner Promissory Note was the working capital of IAJ.
As of the date of this report, none of the principal amount of the
Badner Promissory Note had been converted into shares of the Company's
Common Stock.
The number of shares of Common Stock of the Company outstanding as of
September 30, 2002 was issued 49,797,556 and another 2,025,000 shares
were under contract to issue, based upon information provided by the
Company. Together with shares of Common Stock owned by two other
affiliates of IAJ--(PBAA Fund Ltd., a an open ended limited liability
investment company incorporated in the British Virgin Islands and Terra
Firma Fund Ltd. an open ended limited liability investment company
incorporated in the British Virgin Islands--IAJ and its affiliates
beneficially own 37,109,800 shares of Common Stock in the aggregate, or
approximately 74.52% of the outstanding Common Stock. Should IAJ choose
to convert the $563,857 in currently outstanding principal of the
Badner Promissory Note at the conversion price of $.10 per share, for
an aggregate of 5,638,570 shares of Common Stock, IAJ and its
affiliates would in the aggregate beneficially own 42,748,370 shares of
Common Stock, or approximately 77.11%% of the outstanding Common Stock.
4
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(i) Agreement and Assignment dated as of September 25,
2002 by and among David Badner, Inter Asset Japan
Co., Ltd. and Medium4.com, Inc. (incorporated by
reference from the Company's Current Report on Form
8-K filed October 7, 2002).
(ii) Release and Indemnity dated as of September 25, 2002
by and among Jonathan Braun, Inter Asset Japan Co.,
Ltd. and Medium4.com, Inc. (incorporated by reference
from the Company's Current Report on Form 8-K filed
October 7, 2002).
(iii) 99.1 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K on October 7,
2002 to report a change in control of the Company.
5
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.
Dated: October 18, 2002 Medium4.com, Inc.
(Registrant)
By: /s/ JONATHAN BRAUN
-------------------------
Jonathan Braun, Chairman
and Principal Executive,
Financial and Accounting
Officer