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| MEDE.OB > SEC Filings for MEDE.OB > Form 10QSB on 9-Aug-2004 | All Recent SEC Filings |
9-Aug-2004
Quarterly Report
Forward-Looking Statements
This Quarterly Report contains forward-looking statements about our business, financial condition and prospects that reflect management's assumptions and beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our management's assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements.
The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, managements' ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.
There may be other risks and circumstances that management may be unable to
predict. When used in this quarterly report, words such as, "believes,"
"expects," "intends," "plans," "anticipates," "estimates" and similar
expressions are intended to identify forward-looking statements, as defined in
Section 21E of the Securities Exchange Act of 1934, although there may be
certain forward-looking statements not accompanied by such expressions.
General
Media and Entertainment.com, Inc. is a media distribution solutions company. We believe that our software and network establishes a new standard for media distribution of digital information via the Internet, ATM, SDI, HDTV, digital cable, cable TV and satellite. Our network enables users to view, interact, and listen to all types of audio, online video and digital TV, in full screen format, at high speed, high quality, and greatly reduced cost, reducing the need for expensive high-speed connections.
We are pursuing the commercialization of our products, which we believe establishes a new standard for media distribution of digital content and information seamless compatibility with all major networks, copyright enforcement, multi-tier encryption (move files in a secure environment), wireless viewing capabilities for laptops and hand held products, such as cellular telephones and PDA devices. Media and Entertainment.com and Winsonic facilities-based products and services in out of franchise markets enable communications companies such as Verizon to partner with Winsonic and us to provide services to their customers. Other services include high-end consulting services in the areas of programming, audio research and engineering, as well as digital transport world wide telecommunications services for film and television.
Winsonic Digital Cable Systems Network (WDCSN) concentrates on carrier-class high-speed connectivity solutions that bring together a first-class facility around the country along with network, multimedia, and content distribution communication services to its customers, without requiring substantial capital investments. Verizon and Level 3 have teamed with Winsonic to implement a high-end facilities-based infrastructure to aid and facilitate voice transport, audio, video, data, media and broadcast content over protocol-independent multi-layered communication systems.
To better understand the effects of this changing landscape,evidenced by cable industry consolidation, cross industry completion and technical standards, we have examined the underlying drivers, both from a market and technology viewpoint. The market dynamics underlying the local distribution of video, voice and data are a result of historically non-competing industries, including cable, long distance and regional telephone operating companies. Changes in government regulation and the consumer demand for choice are driving the new environment.
Winsonic has built upon its long-term business model that incorporates reliable technical support and service levels. This offers network resilience and sustainable growth for its infrastructure and customer base. This business model is expected to provide multiple revenue streams enabling Winsonic to fully realize its expansion position and potential. The result is one of the most comprehensive and cost effective product portfolios for the industry: one which establishes a reputation as an established and respected facilities-based media and entertainment distribution service and network provider.
The network provides WinSonic Digital Cable's customers an enhanced gateway to national and international communication lines. With the network as a foundation, WinSonic provides their customers sophisticated, state of the art application software and hardware solutions tailored to meet their specific needs. These applications include but are not limited to: Carrier solutions for regional phone companies such as special software that provides networks the capability of accommodating all software platforms as well custom hardware platforms that facilitate consumer, medical, commercial, and government applications.
Custom application development for Voice over internet protocol, standard national and international communications, PDA, audio/video transport, e-commerce, radio frequency devices, television and satellite broadcast. Building out digital television networks that accommodate, high definition television, streaming video and real time interactive networks.
WinSonic Digital's objective is to maximize product performance while reducing
cost through technology innovation. For a more detailed explanation of Winsonic
Digital's capabilities we invite you to visit the WinSonic website at:
www.winsonic.net.
Winsonic Digital Media Group will be guided by Chairman and CEO Winston Johnson. With over 30 years experience in the telecommunications industry Mr. Johnson is well qualified to lead Winsonic Digital Cable Media Group. Mr. Johnson began his career in the music, computer science and communications industries in the 1970's and pioneered technological innovations in music, computer and sound engineering known as the WinSonic Process. The WinSonic Process is a digital compression technology that provides superior sounding product and enables record and film companies the ability to record and distribute high-end voice, data, text, audio and video files throughout the world. For the previous twelve months Mr. Johnson served as Chairman and CEO of Media and Entertainment.com, Inc. in tandem with his responsibilities as Chairman and CEO of Winsonic Holdings, Inc. Mr. Johnson co-founded UB Networks which under his guidance went public and was eventually sold to Lucent. Mr. Johnson received a BS from FAMU and gained extensive experience from FSU, UCLA, Berkley, Stetson University, Dartmouth, NASA,USC ETC, Nortel and Cisco.
On July 18, 2003, Media and Entertainment.com Inc. executed a Stock Purchase Agreement (the "SPA") and a Services Agreement with Winsonic Holdings, Ltd. ("Winsonics") for Winsonics to acquire 60% of the Company's Common Stock on a fully diluted basis. Winsonics is a privately held California corporation whose predecessor was founded in 1996 to create a new global communications infrastructure for the delivery of converged communications services, e.g., voice, data, video, audio, streaming media and broadcast content over protocol independent multi-layered communications systems, known as Winsonic Digital Cable Systems Network. As a carriers' communications solutions provider, Winsonics offers facilities based products and services to communications companies such as Verizon, SBC, Time Warner, MCI, Level 3, AOL, MSN and Sony.
On December 11, 2003, the parties executed an Addendum to the SPA, which, as amended, by the July 16, 2004 Agreement and Plan of Reorganization, provides for us to acquire 100% of the equity of Winsonic in exchange for the number of shares of our common stock yielded by dividing the audited valuation of all Winsonic contracts by $.60 (the "Winsonic Acquisition") less the 2 million shares already delivered to Winston Johnson, as described below. Under the Addendum, Winsonic returned to the Company's treasury 28 million of the 30 million shares previously issued under the SPA. We delivered 10 million new shares of common stock currently held in escrow for the benefit of Winsonic pending the closing of our acquisition of all of the equity of Winsonic. The closing of the transaction is dependent upon the completion by August 13, 2004, unless further extended, of a satisfactory due diligence review of Winsonic, an audit of Winsonic's financial statements, and other customary closing conditions.
Under the SPA, Winston Johnson, founder and sole shareholder of Winsonics, was elected Chairman and CEO of Media and Entertainment.com, Inc. In addition, under a five year Services Agreement, Winston Johnson is providing services to the Company in exchange for 2 million shares of our common stock. Under the Services Agreement, Mr. Johnson is providing non-exclusive electronic access from Winsonic's pressed digital audio, video, data transmission and storage systems to the Winsonic Digital Cable Systems Network ("WDSCSN") nationwide networks via optical circuits having bandwidth of at least OC-12 or greater.
Material Changes in Results of Operations
For the six months ended June 30, 2004, we incurred a net loss of $2,141,003 on revenues of $0. Total expenses for the six-month period, primarily representing selling, general and administrative expenses of $2,130,008, were $2,139,729, compared to $35,816 for the comparable period last year. This resulted primarily from the Company issuing 2,132,244 shares of Common Stock to individuals in exchange for services valued at $2,068,276. We have scaled back our operations since we did not receive revenues from contracts we entered into previously. Until such time as we are able to obtain additional financing, we have taken appropriate measures to reduce our overhead.
Material Changes in Financial Condition
As of June 30, 2004, we had a working capital deficit of $180,000, compared to a deficit of $400,007 at December 31, 2003.
For the six months ended June 30, 2004, we experienced a net increase in cash of $26,335. This resulted primarily from a sale of common stock to and a loan from a director, officer, and shareholder. We have cut back our operations to match our projected available cash. Our ability to implement our growth strategy is dependent upon expanding current revenues from sales of our products and services and obtaining additional financing.
If we are unable to generate sufficient sustainable revenues or obtain additional financing to meet our financial obligations, we will have to further reduce our operations, and we will not be able to continue as a going concern. Our independent accountants have indicated in their review report, dated July 30, 2004, that there is substantial doubt about our ability to continue as a going concern without increased revenues and additional financing.
For the six months ended June 30, 2004, we used $2,141,003 in operating activities, compared to $49,332 used in the comparable period last year, as a result of our net loss primarily offset by the issuance of shares in exchange for services.
For the three months ended June 30, 2004, we used $0 in investing activities, compared to $1,614 used in the comparable period last year.
For the six months ended June 30, 2004, we had net cash provided by financing activities of $98,300, in the form of a sale of common stock to a director, officer and shareholder in the amount of $70,000 and a loan from the same individual in the amount of $28,300.
Continuing Operations
Our priorities for the next twelve months of operations are to continue to develop and subsequently market our products and services to establish our business in the compression technology software industry. We are focused on our organizational activities, raising capital and establishing a business presence with vendors, business owners and referral sources. As we generate revenue from our activities, we may elect to hire salaried or hourly employees to operate certain aspects of our business.
We may be unable to compete successfully, and the competitive pressures we may face may have an adverse effect on our business, results of operations and financial condition. Additionally, intensified competition could force us out of business. We require additional capital, which we intend to raise through one or more public or private offerings of equity and/or debt. There are no preliminary loan agreements or understandings between us, our officers, directors or affiliates or lending institutions. We have no arrangements or commitments for accounts and accounts receivable financing. We cannot guarantee you that any such financing can be obtained or, if obtained, that it will be on reasonable terms.
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