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U.S. SECURITIES AND 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 quarterly period ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 0-27556
YOUTHSTREAM MEDIA NETWORKS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-4082185
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation of Organization)
28 West 23rd Street, New York, New York 10010
(Address of Principal Executive Offices) (Zip Code)
(212) 622-7300
(Registrant's Telephone Number, Including Area Code)
Check 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 such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
_________ _______
At February 9, 2001 there were 29,449,967 shares of Common Stock, $.01 par value
outstanding.
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YOUTHSTREAM MEDIA NETWORKS, INC.
FORM 10-Q
INDEX
Page
PART I--FINANCIAL INFORMATION Number
------
Item 1 Financial Statements
Consolidated balance sheets - December 31, 2000
(unaudited) and June 30, 2000.......................... 1
Consolidated statements of operations - three and
six months ended December 31, 2000 and 1999
(unaudited)............................................ 2
Consolidated statements of cash flows - six
months ended December 31, 2000 and 1999
(unaudited)............................................ 3
Consolidated statement of stockholders' equity -
six months ended December 31, 2000
(unaudited)............................................ 4
Notes to consolidated financial statements................ 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8
PART II--OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K................................ 11
Signatures............................................................. 12
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YOUTHSTREAM MEDIA NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31, June 30,
2000 2000
--------------- ---------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 10,341 $ 18,232
Marketable debt securities, at amortized cost 20,037 25,189
Accounts receivable, net of allowance for doubtful accounts of $257
and $404 at December 31, 2000 and June 30, 2000, respectively 6,118 4,631
Inventories 1,473 1,471
Prepaid expenses 5,601 5,372
Deposits and other current assets - 2,905
--------- ----------
Total current assets 43,570 57,800
Property and equipment, net of accumulated depreciation of $4,997
and $3,593 at December 31, 2000 and June 30, 2000, respectively 7,913 8,165
Deferred financing costs, net of accumulated amortization of $721 and
$355 at December 31, 2000 and June 30, 2000, respectively 3,759 3,963
Intangible assets, net of accumulated amortization of $3,844
and $2,468 at December 31, 2000 and June 30, 2000, respectively 17,746 13,709
Restricted cash 1,328 1,328
Net non-current assets of discontinued operations - 191,091
Other assets 332 389
--------- ----------
Total assets $ 74,648 $ 276,445
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,455 $ 1,589
Accrued employee compensation 1,604 895
Other accrued expenses 1,578 2,424
Net current liabilities of discontinued operations 6,540 2,187
Deferred revenues 1,666 665
Current portion of deferred purchase price - 45
Current portion of capitalized lease obligations 85 83
Current portion of long-term debt 1,423 1,275
--------- ----------
Total current liabilities 14,351 9,163
Net non-current liabilities of discontinued operations 638 -
Capitalized lease obligations 71 106
Long-term debt 18,959 18,709
Deferred rent 357 353
Deferred purchase price 2,838 3,700
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized, no shares
issued and outstanding - -
Common stock, $.01 par value, 100,000 shares authorized,
29,174 shares and 28,031 shares issued and outstanding
at December 31, 2000 and June 30, 2000, respectively 292 280
Additional paid-in capital 328,178 321,980
Accumulated deficit (291,036) (77,846)
--------- ----------
Total stockholders' equity 37,434 244,414
--------- ----------
Total liabilities and stockholders' equity $ 74,648 $ 276,445
========= ==========
See notes to consolidated financial statements
1
YOUTHSTREAM MEDIA NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
Three months ended Six months ended
December 31, December 31,
------------------------- ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net Revenues $ 7,291 $ 6,601 $ 17,858 $ 16,962
Operating Expenses:
Cost of goods sold 271 136 1,629 1,522
Selling, general and administrative expenses 8,447 5,616 16,832 12,498
Corporate expenses 2,064 1,015 3,692 1,888
Depreciation and amortization 1,419 834 2,736 1,708
--------- ------- --------- --------
Total operating expenses 12,201 7,601 24,889 17,616
--------- ------- --------- --------
Loss from operations (4,910) (1,000) (7,031) (654)
Equity loss in investment - (1,248) - (2,040)
Interest income 552 345 1,300 572
Other income (14) - 10 -
Interest expense (796) (240) (1,592) (489)
--------- ------- --------- --------
Loss before provision for income taxes (5,168) (2,143) (7,313) (2,611)
Provision for income taxes 72 44 300 92
--------- ------- --------- --------
Loss from continuing operations (5,240) (2,187) (7,613) (2,703)
Income (loss) from discontinued operations (15,767) 43 (40,606) 150
Loss on disposal of discontinued operations,
including provision of $5,175 for
operating losses during phase-out period (164,971) - (164,971) -
--------- ------- --------- --------
Net Loss $(185,978) $(2,144) $(213,190) $ (2,553)
========= ======= ========= ========
Per share of common stock basic and diluted:
Loss from continuing operations $ (0.18) $ (0.12) $ (0.26) $ (0.16)
Loss from operation of discontinued operations (0.54) - (1.40) 0.01
Loss on disposal of discontinued operations (5.66) - (5.68) -
--------- ------- --------- --------
Net loss per basic and diluted common share $ (6.38) $ (0.12) $ (7.34) $ (0.15)
========= ======= ========= ========
Weighted average basic and diluted common
shares outstanding 29,172 17,584 29,034 16,757
========= ======= ========= ========
See notes to consolidated financial statements
2
YOUTHSTREAM MEDIA NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
----------------------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(213,190) $ (2,553)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Loss (income) from discontinued operations 40,606 (150)
Loss on disposal of discontinued operations 164,971 -
Net change in assets and liabilities of discontinued operations (9,795) 1,041
Bad debt expense (147) 58
Depreciation and amortization 2,736 1,708
Gain on sale of equipment (9) -
Amortization of deferred financing costs 366 91
Deferred rent 4 -
Amortization of original issue discount on Subordinated Notes 59 18
Changes in assets and liabilities net of acquisitions:
Increase in accounts receivable (1,090) (3,362)
Increase in due from affiliate - (4,043)
(Increase) decrease in inventory (2) 237
(Increase) decrease in prepaid expenses (228) 40
Decrease (increase) in deposits and other current assets 2,905 (626)
(Decrease) increase in accounts payable (268) 1,148
Increase (decrease) in accrued employee compensation 446 (71)
(Decrease) increase in other accrued expenses (891) 158
Increase (decrease) in deferred revenues 1,001 (441)
--------- --------
Net cash (used in) operating activities (12,526) (6,747)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (865) (3,263)
Proceeds from sale of equipment 37 -
Sale of investments in marketable debt securities 5,152 -
Other assets 58 -
Payment for business acquisitions (net of cash acquired) (99) (457)
--------- --------
Net cash provided by (used in) investing activities 4,283 (3,720)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock and exercise of warrants and
options 127 55,034
Net proceeds from issuance of warrants in connection with long-term
debt 35 -
Repayment of capitalized lease obligations (149) -
Proceeds from long-term debt 965 -
Repayment of long-term debt (626) (336)
--------- --------
Net cash provided by financing activities 352 54,698
--------- --------
(Decrease) increase in cash and equivalents (7,891) 44,231
Cash and equivalents at beginning of period 18,232 7,046
--------- --------
Cash and equivalents at end of period $ 10,341 $ 51,277
========= ========
Supplemental cash flow information
Cash paid for interest $ 1,538 $ 383
========= ========
Cash paid for income taxes $ 142 $ 89
========= ========
Noncash Financing Activities
Issuance of warrants in connection with long-term debt $ 162 $ -
========= ========
Issuance of common stock in connection with acquisitions $ 5,886 $ 6,573
========= ========
See notes to consolidated financial statements
3
YOUTHSTREAM MEDIA NETWORKS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 2000 TO DECEMBER 31, 2000
(IN THOUSANDS)
(UNAUDITED)
COMMON STOCK ADDITIONAL
---------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
Balances at June 30, 2000 28,031 $ 280 $321,980 $ (77,846) $ 244,414
Issuance of warrants in connection with long-term debt - - 197 - 197
Issuance of common stock upon exercise of stock options 45 1 126 - 127
Issuance of common stock in connection with
acquisition of Teen.com 944 9 5,211 - 5,220
Issuance of common stock in connection with
acquisition of HelloXpress 53 1 293 - 294
Issuance of common stock in connection with
acquisition of Invino 101 1 371 - 372
Net loss - - - (213,190) (213,190)
------ ------ -------- --------- ---------
Balances at December 31, 2000 29,174 $ 292 $328,178 $(291,036) $ 37,434
====== ====== ======== ========= =========
See notes to consolidated financial statements
4
YOUTHSTREAM MEDIA NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
YouthStream Media Networks, Inc. ("YouthStream"), and its wholly-owned
subsidiaries, (collectively, the "Company"). The Company's operations consist of
Network Event Theater, Inc. ("NET"), American Passage Media, Inc. ("American
Passage"), Campus Voice, Inc. ("Campus Voice"), Beyond the Wall, Inc. ("Beyond
the Wall"), Trent Graphics, Inc. ("Trent") and W3T.com, Inc. ("Teen.com"). In
December 2000, the Company discontinued the operations of CommonPlaces, LLC
("CommonPlaces"), sixdegrees, inc., ("sixdegrees"), CollegeWeb.com, Inc.
("CollegeWeb") and Invino Corporation ("Invino") see note 2 - Discontinued
Operations. All significant intercompany transactions have been eliminated.
The Company is a media, marketing services, promotions, and retail company
targeting the teenage and young adult marketplace, particularly high school,
college and university audiences. Through the combination of a unique portfolio
of targeted media and retail properties the Company provides integrated,
cost-effective solutions to advertisers and sponsors looking to reach young
adults. The Company's portfolio of retail and media services include:
o Trent, an on-campus seller of wall posters to students at colleges and
universities throughout the country, which also operates a growing
number of retail poster stores complementing its on-campus presence;
o Nationwide sampling, promotion and event marketing campaigns targeting
teens and young adults;
o A national network of movie theaters on college campuses and expertise
conducting film screenings at dozens of major college campuses;
o HotStamp, a national free postcard advertising brand targeting teenagers
and young adults;
o A leading college newspaper advertising placement service reaching
virtually every college newspaper in the nation;
o Editorial wall media networks in high schools, middle schools and on
college campuses;
o A unique "Ads as Art" poster catalog distributed on campuses nationwide;
and
o Teen.com, an online community for teenagers.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for an
interim period are not necessarily indicative of the results that may be
expected for the year ended June 30, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto included in Company's
Form 10-KSB for the fiscal year ended June 30, 2000.
2. DISCONTINUED OPERATIONS
In December 2000, the Company announced its decision to discontinue the
operations of the sixdegrees subsidiary and exit its Application Service
Provider ("ASP") business. The ASP business includes the technology that was
acquired and further developed by CommonPlaces, CollegeWeb and Invino. The
Company determined that the ASP business was not aligned with its long-term
vision and strategy. The Company shut down its sixdegrees website on December
30, 2000, and final disposal of the ASP business should occur prior to June 30,
2000. In connection with the discontinuance of these businesses, the Company
incurred a one-time charge of $165 million, related primarily to the write-off
of one-time goodwill, other net assets and an accrual for estimated losses
during the phase-out period. The discontinuation of sixdegrees and the disposal
of the ASP business represent the disposal of a business segment under
Accounting Principles Board ("APB") Opinion No. 30. Accordingly, results of
these operations have been classified as discontinued and prior periods have
been restated. For business segment reporting purposes, the sixdegrees and ASP
business results were previously classified as the segment "Online".
Net revenues and losses from discontinued operations are as follows (in
thousands):
Three months ended Three months ended Six months ended Six months ended
December 31, 2000 December 31, 1999 December 31, 2000 December 31, 1999
----------------- ----------------- ----------------- -----------------
Net revenues $ 219 $ - $ 401 $ -
========= === ========= ====
(Loss) income from discontinued operations $ (15,767) $43 $ (40,606) $150
Loss on disposal of discontinued operations (164,971) - (164,971) -
--------- --- --------- ----
Net (loss) income from discontinued
operations $(180,738) $43 $(205,577) $150
========= === ========= ====
5
YOUTHSTREAM MEDIA NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000
(UNAUDITED)
3. ACQUISITIONS
In July 2000, the Company acquired Teen.com pursuant to a merger agreement among
the Company, a wholly-owned subsidiary of the Company, and Teen.com. Teen.com is
a family-friendly Web destination for teens and is ranked as one of the top
websites visited by 13 to 19 year-olds. The purchase price consisted of 944,000
shares of the Company's common stock, including 50,000 shares issued to the
broker, valued at approximately $5.2 million or approximately $5.53 per share,
the then current market price.
The following unaudited pro forma information is presented as if the Company had
completed the acquisition of Teen.com as of July 1, 2000 and 1999, respectively,
and exclude those acquisitions that were discontinued (in thousands):
Six months ended December 31,
2000 1999
---- ----
Net revenue $17,982 $17,706
Loss from continuing operations (7,707) (3,709)
Loss from continuing operations
per basic and diluted common
share (0.27) (0.21)
Weighted average common shares
outstanding basic and diluted 29,068 17,701
The pro forma information above is not necessarily indicative of the results of
operations that would have occurred had the acquisition been made at the
beginning of the respective periods.
4. LONG-TERM DEBT
A summary of long-term debt is as follows (in thousands):
December 31, June 30,
2000 2000
---- ----
Note Payable to Bank (A) $ 1,406 $ 1,739
Subordinated notes - Private Placement (B) 5,000 5,000
Note Payable to Finance Company (C) 1,477 1,768
Subordinated Notes - Private Placement (D) 12,000 12,000
Subordinated Notes - Private Placement (E) 1,000 -
Other 8 9
------- -------
20,891 20,516
Less unamortized original
issue discount attributed
to subordinated notes 509 532
------- -------
20,382 19,984
Less current portion 1,423 1,275
------- -------
$18,959 $18,709
======= =======
(A) This loan is secured by all of the assets of Campus Voice, Beyond the Wall
and American Passage (the "Borrowers") and is guaranteed by NET. This loan is
payable in equal monthly installments, commencing in February 1998, over a
maximum of six years. Interest is payable monthly at a rate of interest of 275
basis points above LIBOR for U.S. dollar deposits of one month maturity.
The Borrowers are also party to an interest rate exchange agreement originally
converting $3.0 million of the aforementioned floating rate debt to a fixed
rate. The balance of the interest rate agreement at December 31, 2000 was
$1,056,000. Under the interest rate exchange agreement, the Borrowers are
required to pay interest at a fixed rate of 9.11% on the notional amount covered
by the interest rate exchange agreement. In return, the Company receives
interest payments on the same notional amount at the prevailing LIBOR rate plus
275 basis points. The interest rate exchange agreement terminates in June 2002.
(B) In July 1998, the Company issued Subordinated Notes to accredited investors
in the aggregate amount of $5,000,000 less an original discount of $188,000.
These notes bear interest at 11% per annum and are due in July 2003. In
connection with the issuance of the Subordinated Notes, the Company issued
375,000 warrants to the accredited investors for $188,000, and 150,000 warrants
to the placement agent. Each warrant, which expires in July 2003, entitles the
holder to purchase one share of the Company's common stock for $4.125, the
market price of the Company's common stock at the date of issuance. Based on an
independent appraisal, the 525,000 warrants were valued at $740,000. The value
of the warrants and closing costs of $314,000 have been recorded as deferred
financing costs and are being amortized over the term of the Subordinated Notes.
The original issue discount of $188,000 is also being amortized over the term of
the related debt.
(C) In March 2000, the Company issued a note to a finance company in the amount
of $1,971,000. The note bears interest at the rate of 11.95% per annum and is
payable in 36 equal monthly payments commencing in March 2000. The note is
secured by certain equipment owned by NET.
6
YOUTHSTREAM MEDIA NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000
(UNAUDITED)
(D) In June 2000, the Company issued a subordinated note to an accredited
investor in the amount of $12,000,000, less an original issue discount of
$420,000. The note bears interest at 11% per annum and is due in June 2005. In
connection with the issuance of the subordinated note, the Company issued
1,020,000 warrants to an accredited investor in exchange for $420,000. Each
warrant, which expires in June 2005, entitles the holder to purchase one share
of the Company's common stock for $5.9375, the market price of the Company's
common stock at the date of issuance. Based on an independent appraisal, the
1,020,000 warrants were valued at $3,346,000. The value of the warrants and
closing costs of $494,000 were recorded as deferred financing costs and are
being amortized over the term of the subordinated note. The original issue
discount of $420,000 is being amortized over the term of the related debt.
(E) In July 2000, the Company issued a subordinated note to an accredited
investor in the amount of $1,000,000, less an original issue discount of
$35,000. The note bears interest at 11% per annum and is due in July 2005. In
connection with the issuance of the subordinated note, the Company issued 60,000
warrants to an accredited investor in exchange for $35,000. Each warrant, which
expires in July 2005, entitles the holder to purchase one share of the Company's
common stock for $3.75, the market price of the Company's common stock at the
date of issuance. Based on an independent appraisal, the 60,000 warrants were
valued at $197,000. The value of the warrants was recorded as deferred financing
costs and is being amortized over the term of the subordinated note. The
original issue discount of $35,000 is being amortized over the term of the
related debt.
5. STOCKHOLDERS' EQUITY
For the six months ending December 31, 2000, options were exercised resulting in
the issuance of approximately 45,000 shares of common stock resulting in net
proceeds to the Company of approximately $127,000.
6. SEGMENT INFORMATION
During the second quarter of fiscal year 2001, in connection with the decision
to discontinue the Company's online segment, the Company revised its reporting
of the remaining businesses. The Company's segments are now media and retail.
The media segment represents the Company's media, marketing and promotional
services provided to advertisers by NET, American Passage, Campus Voice, Beyond
the Wall and Teen.com. The retail segment consists of on-campus and retail store
poster sales provided by Trent. The prior periods' segments have been restated
to reflect the Company's internal reorganization (in thousands).
Three months ended Three months ended
December 31, 2000 December 31, 1999
-------------------------------- -----------------------------------
Media Retail Total Media Retail Total
----- ------ ----- ----- ------ -----
Net revenues $ 6,155 $1,136 $ 7,291 $ 5,774 $ 827 $ 6,601
Depreciation and amortization 1,252 167 1,419 697 137 834
Loss from operations (3,180) (1,730) (4,910) (512) (488) (1,000)
Capital expenditures 319 63 382 1,044 268 1,312
Six months ended Six months ended
December 31, 2000 December 31, 1999
-------------------------------- -----------------------------------
Media Retail Total Media Retail Total
----- ------ ----- ----- ------ -----
Net revenues $10,289 $7,569 $17,858 $10,974 $5,988 $16,962
Depreciation and amortization 2,406 330 2,736 1,436 272 1,708
Loss from operations (7,107) 76 (7,031) (1,268) 614 (654)
Capital expenditures 613 252 865 2,336 927 3,263
December 31, 2000 June 30, 2000
-------------------------------- -----------------------------------
Media Retail Total Media Retail Total(a)
----- ------ ----- ----- ------ -----
Identifiable assets $64,853 $9,795 $74,648 $75,481 $9,873 $85,354(a)
(a) June 30, 2000 excludes net non-current assets of discontinued operations
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements and related notes thereto. The following discussion contains certain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, but are not limited to,
the ability to obtain financing, integration of acquisitions, the management of
growth, changing consumer tastes and general economic conditions. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
The Company's consolidated financial statements reflect reclassifications for
prior periods due to the discontinued operation of the online segment. The
Company revised its reporting segments from online and offline to media and
retail. The following analysis incorporates reclassifications of prior periods
due to discontinued operations and revision of the reporting segments. The
following financial analysis compares the three months and the six months ended
December 31, 2000 (unaudited) to the three months and the six months ended
December 31, 1999 (unaudited).
RESULTS OF OPERATIONS
For the three months ended December 31, 2000, net revenues were $7.3 million as
compared to $6.6 million for the three months ended December 31, 1999. The
increase of $0.7 million was due to an increase of $0.4 million in the media
segment and $0.3 million in the retail segment. The media segment increase of
$0.4 million was related to an increase of $0.3 million due to the acquisition
of Teen.com and $1.3 million increase related to other media operations
partially offset by the loss of contributed media revenues of $1.2 million.
Contributed media revenues related to media and marketing services provided to
CommonPlaces in exchange for equity prior to the merger with the Company. The
retail segment increase of $0.3 million was primarily due to additional retail
store locations.
For the six months ended December 31, 2000, net revenues were $17.9 million as
compared to $17.0 million for the six months ended December 31, 1999. The
increase of $0.9 million was due to an increase of $1.6 million in the retail
segment offset by a decrease of $0.7 million in the media segment. The retail
segment increase of $1.6 million was due primarily to increased revenue at the
fall poster shows and additional retail store locations. The media segment
decrease of $0.7 million was due primarily to the loss of contributed media
revenues of $2.0 million, offset by an increase of $1.3 million in media
revenues of which $0.6 million was due to the acquisition of Teen.com.
Contributed media revenues related to media and marketing services provided to
CommonPlaces in exchange for equity prior to the merger with the Company.
For the three months ended December 31, 2000, cost of goods sold were $0.3
million as compared to $0.1 million for the three months December 31, 1999. The
increase of $0.2 million was due to increased revenues in the retail segment.
For the six months ended December 31, 2000, cost of goods sold were $1.6 million
as compared to $1.5 million for the six months December 31, 1999. The increase
of $0.1 million was due to increased revenues in the retail segment.
For the three months ended December 31, 2000, selling, general and
administrative expenses were $8.4 million as compared to $5.6 million for the
three months ended December 31, 1999. The increase of $2.8 million was due to an
increase of $1.5 million in the retail segment and $1.3 million in the media
segment. The retail segment increase of $1.5 million was due primarily to a $1.1
million compensation expense related to certain amendments to employment
agreements entered in connection with the acquisition of Trent and the remaining
$0.4 primarily due to additional store locations. The media segment increase of
$1.3 million was due to the acquisition of Teen.com, which accounted for $0.7
million of the increase with the remaining increase of $0.6 million due to
increased costs to support increased revenues in the media segment.
For the six months ended December 31, 2000, selling, general and administrative
expenses were $16.8 million as compared to $12.5 million for the six months
ended December 31, 1999. The increase of $4.3 million was due to an increase of
$2.1 million in the retail segment and $2.2 million in the media segment. The
retail segment increase of $2.1 million was due primarily to a $1.1 million
compensation expense related to certain amendments to employment agreements
entered in connection with the acquisition of Trent and the remaining $1.0
million due to increased expenses related to increases in revenue and increased
store locations. The media segment increase of $2.2 million was due to the
acquisition of Teen.com, which accounted for $1.2 million of the increase with
the remaining increase of $1.0 million due to increased costs to support
increased revenues in the media segment.
For the three months ended December 31, 2000, corporate expenses were $2.1
million as compared to $1.0 million for the three months ended December 31,
1999. The increase of $1.1 million was primarily due to accrued severance to
former employees, increased corporate personnel and expenses required to support
the Company's efforts to evaluate potential establishment of operations in the
People's Republic of China similar to its United States operations.
For the six months ended December 31, 2000, corporate expenses were $3.7 million
as compared to $1.9 million for the six months ended December 31, 1999. The
increase of $1.8 million was primarily due to accrued severance to former
employees, increased corporate personnel and expenses required to support the
Company's efforts to evaluate potential establishment of operations in the
People's Republic of China similar to its United States operations.
For the three months ended December 31, 2000, depreciation and amortization
expenses were $1.4 million as compared to $0.8 million for the three months
ended December 31, 1999. The increase of $0.6 million was primarily due to the
acquisition of Teen.com.
For the six months ended December 31, 2000, depreciation and amortization
expenses were $2.7 million as compared to $1.7 million for the six months ended
December 31, 1999. The increase of $1.0 million was primarily due to the
acquisition of Teen.com.
For the three months ended December 31, 2000, there was no equity loss in
investment as compared to $1.2 million for the three months ended December 31,
1999. Equity loss in investment represented the Company's minority interest
share of the loss in CommonPlaces.
8
For the six months ended December 31, 2000, there was no equity loss in
investment as compared to $2.0 million for the six months ended December 31,
1999. Equity loss in investment represented the Company's minority interest
share of the loss in CommonPlaces.
For the three months ended December 31, 2000, interest income was $0.5 million
as compared to $0.3 million for the three months ended December 31, 1999. The
increase of $0.2 million was due to interest income earned on increased cash
balances resulting from the issuance of debt and the sale of common stock.
For the six months ended December 31, 2000, interest income was $1.3 million as
compared to $0.6 million for the six months ended December 31, 1999. The
increase of $0.7 million was due to interest income earned on increased cash
balances resulting from the issuance of debt and the sale of common stock.
For the three months ended December 31, 2000, interest expense was $0.8 million
as compared to $0.2 million for the three months ended December 31, 1999. The
increase of $0.6 million was primarily related to the increase in long-term
debt.
For the six months ended December 31, 2000, interest expense was $1.6 million as
compared to $0.5 million for the six months ended December 31, 1999. The
increase of $1.1 million was primarily related to the increase in long-term
debt.
For the three and six months ended December 31, 2000, loss from discontinued
operations was $15.8 million and $40.6 million, respectively. The loss from
discontinued operations represents the discontinuance of the online segment and
the loss primarily represents amortization of goodwill and depreciation, of
approximately $14.0 million, and operating expenses, of approximately $1.8
million for the three months ended December 31, 2000. For the six months ended
December 31, 2000, amortization of goodwill and depreciation was approximately
$32.7 million, and operating expenses were approximately $7.9 million.
For the three and six months ended December 31, 2000, loss on disposal of
discontinued operations was $165.0 million. The loss on disposal primarily
represents the write-down of net assets, including goodwill of the online
segment and provision for operating losses during phase-out period. The final
disposal should occur prior to June 30, 2001.
The following unaudited proforma information is presented for purposes of
restating the Company's prior period results to reflect the impact of
discontinued operations (in thousands):
Three months Three months Three months Three months Twelve months Three months
ended ended ended ended ended ended
September 30, December 31, March ,31 June 30, June 30, September 30,
1999 1999 2000 2000 2000 2000
---- ---- ---- ---- ---- ----
Net Revenues $10,361 $ 6,601 $ 7,069 $ 4,190 $ 28,221 $ 10,567
Income (loss) from operations 346 (1,000) (1,031) (5,636) (7,321) (2,121)
Loss before provision for taxes (468) (2,143) (1,673) (5,246) (9,530) (2,145)
Loss from continuing operations (516) (2,187) (1,765) (5,555) (10,023) (2,373)
Income (loss) from discontinued
operations 107 43 (14,780) (25,235) (39,865) (24,839)
------- ------- -------- -------- -------- --------
Net loss $ (409) $(2,144) $(16,545) $(30,790) $(49,888) $(27,212)
======= ======= ======== ======== ======== ========
Per share of common stock basic
and diluted
Loss from continuing operations $ (0.04) $ (0.12) $ (0.08) $ (0.21) $ (0.47) $ (0.08)
Income (loss) from discontinued
operations 0.01 - (0.64) (0.99) (1.89) (0.86)
------- ------- -------- -------- -------- --------
Net loss $ (0.03) $ (0.12) $ (0.72) $ (1.20) $ (2.36) $ (0.94)
======= ======= ======== ======== ======== ========
Weighted average basic and diluted
shares outstanding 15,929 17,584 23,091 25,561 21,111 28,897
======= ======= ======== ======== ======== ========
9
LIQUIDITY AND CAPITAL RESOURCES
In July 2000, the Company realized net proceeds of approximately $1,000,000 from
the sale of an 11% Subordinated Note and warrants to purchase 60,000 shares of
the Company's common stock.
In December 2000, the Company announced the discontinuation of its online
business segment. As a result of this decision, the Company's future cash
requirements to operate these businesses will be significantly reduced.
The Company used approximately $12.5 million in its operating activities in the
first six months of fiscal year 2001 as compared to $6.7 million in the first
six months of fiscal year 2000. The increase of approximately $5.8 million
represents the increase in net loss, accounts receivable and other assets and
the decrease in short-term liabilities offset by the increase in depreciation
and amortization. Cash provided by investing activities in the first six months
of fiscal year 2001 of approximately $4.3 million is composed primarily of sale
of investments in marketable securities offset by capital expenditures. Cash
provided by financing activities in the first six months of fiscal year 2001 of
approximately $0.4 million is primarily attributable to the issuance of
long-term debt offset by repayments of capitalized lease obligations and
long-term debt.
The Company's primary capital requirements with respect to its operations are to
fund corporate overhead including expenses in evaluating opportunities in China,
expansion of its retail store locations, its network of campus theaters and
postcard distribution. As of December 31, 2000, the Company had approximately
$10.3 million in cash and cash equivalents. The Company believes that such
amounts plus an additional amount of $20.0 million, which represents investments
in marketable debt securities with maturities of less than one year, will be
sufficient to fund working capital, including debt service and interest
requirements. In the event that the Company's plans and assumptions for each of
its operations, with regard to the Company's ability to fund operations, working
capital, capital expenditures and debt repayments, prove to be inaccurate, the
Company could be required to seek additional financing.
The Company's ability to improve its operations will be subject to prevailing
economic conditions and to legal, financial, business, regulatory, industry and
other factors, many of which are beyond the Company's control. The Company may
also seek additional debt or equity financing to fund the cost of its retail
expansion, to expand its network of campus theaters, to develop or acquire
additional media and marketing services businesses or to fund its operations. To
the extent that the Company finances its requirements through the issuance of
additional equity securities, any such issuance would result in dilution to the
interests of the Company's stockholders.
Additionally, to the extent that the Company incurs indebtedness or issues debt
securities in connection with financing activities, the Company will be subject
to all of the risks associated with incurring substantial indebtedness,
including the risk that interest rates may fluctuate and cash flow may be
insufficient to pay principal and interest on any such indebtedness. The Company
has no current arrangements with respect to, or sources of, additional
financing. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, if at all.
10
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
Current report on Form 8-K filed December 20, 2000 announcing
write-off during second quarter.
Current report on Form 8-K filed January 24, 2001 attaching analyst
report from SM Berger & Company.
11
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
February 13, 2001
YOUTHSTREAM MEDIA NETWORKS, INC.
BY: /s/ JAMES G. LUCCHESI
____________________________
JAMES G. LUCCHESI
President and
Chief Executive Officer
BY: /s/ IRWIN ENGELMAN
____________________________
IRWIN ENGELMAN
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
12