UNITED STATES 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 the quarterly period ended March 31, 2001 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: 000-27582 SPEEDUS.COM, Inc. (Exact name of registrant as specified in its charter) Delaware 13-3853788 ------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 140 58th Street, Suite 7E Brooklyn, New York 11220 -------------------------- ------------ (Address of principal executive offices) (Zip Code) 718-567-4300 ---------------------- (Registrant's telephone number, including area code) Not Applicable ---------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| The number of outstanding shares of the registrant's common stock, par value $.01 per share, as of May 7, 2001 was 20,333,438. SPEEDUS.COM, Inc. INDEX TO FORM 10-Q Page(s) PART I -- FINANCIAL INFORMATION ITEM 1 -- Financial Statements Consolidated Balance Sheets as of March 31, 2001 (unaudited) and December 31, 2000........................................... 3 Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2001 and 2000...................... 4 Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2001 and 2000...................... 5 Notes to Consolidated Financial Statements (unaudited).......... 6-7 ITEM 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 8-10 ITEM 3 -- Quantitative and Qualitative Disclosures About Market Risk...... 10 PART II -- OTHER INFORMATION ITEM 1 -- Legal Proceedings............................................... 11 ITEM 2 -- Changes in Securities........................................... 11 ITEM 3 -- Defaults Upon Senior Securities................................. 11 ITEM 4 -- Submission of Matters to a Vote of Security Holders............. 11 ITEM 5 -- Other Information............................................... 11 ITEM 6 -- Exhibits and Reports on Form 8-K................................ 11 Signature Page............................................................ 12 2 ITEM 1. Financial Statements SPEEDUS.COM, Inc. CONSOLIDATED BALANCE SHEETS March 31, December 31, 2001 2000 ------------ ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 43,242,854 $ 38,594,815 Marketable securities 66,996 68,166 Due from broker 1,315,772 624,790 Prepaid expenses and other 6,345 62,098 Due from affiliates 93,112 93,112 Accounts and other receivables 95,408 94,816 ------------ ------------ Total current assets 44,820,487 39,537,797 Property and equipment, net of accumulated depreciation of $9,240,790 and $9,198,902 7,976,965 8,659,977 Goodwill, net of accumulated amortization of $1,790,613 and $1,185,724 5,444,000 6,048,889 Other intangible assets, net of accumulated amortization of $235,179 and $173,214 2,134,821 2,196,786 Other assets 1,037,373 1,184,735 ------------ ------------ Total assets $ 61,413,646 $ 57,628,184 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 300,250 $ 270,202 Accrued liabilities 1,506,532 1,532,542 Securities sold and not purchased 2,955,051 952,032 Other current liabilities 18,439 18,005 ------------ ------------ Total current liabilities 4,780,272 2,772,781 Commitments and Contingencies -- -- Stockholders' equity: Common stock ($.01 par value; 40,000,000 shares authorized; 21,184,838 and 21,034,838 shares issued) 211,848 210,348 Preferred stock ($.01 par value; 20,000,000 shares authorized): Series A Junior Participating ($.01 par value; 4,000 shares authorized; no shares issued -- -- and outstanding) Additional paid-in-capital 90,290,932 90,292,432 Treasury stock (at cost; 883,700 and 309,800 shares) (1,004,034) (305,741) Accumulated deficit (32,865,372) (35,341,636) ------------ ------------ Stockholders' equity 56,633,374 54,855,403 ------------ ------------ Total liabilities and stockholders' equity $ 61,413,646 $ 57,628,184 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 3 SPEEDUS.COM, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended March 31, ---------------------------- 2001 2000 ------------ ------------ Revenues $ 24,504 $ 35,402 ------------ ------------ Expenses: Selling, general and administrative 2,022,662 1,244,773 Depreciation and amortization 1,384,225 833,023 ------------ ------------ Total operating expenses 3,406,887 2,077,796 ------------ ------------ Operating loss (3,382,383) (2,042,394) Unrealized gains/(losses) on investments 5,006,645 (118,515) Interest and investment income 872,014 719,420 Equity in loss of associated company (20,012) (233,314) Interest expense and financing fees -- (3,679) ------------ ------------ Earnings/(loss) before provision for income taxes 2,476,264 (1,678,482) Provision for income taxes -- -- ------------ ------------ Net earnings/(loss) $ 2,476,264 $ (1,678,482) ============ ============ Per share: Basic earnings/(loss) per common share $ 0.12 $ (0.08) ============ ============ Weighted average common shares outstanding 20,323,766 19,788,357 ============ ============ Diluted earnings/(loss) per common share $ 0.12 $ (0.08) ============ ============ Weighted average common shares outstanding 20,451,256 19,788,357 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 4 SPEEDUS.COM, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three months ended March 31, ---------------------------- 2001 2000 ------------ ------------ Cash flows from operating activities: Net earnings/(loss) $ 2,476,264 $ (1,678,482) Adjustments to reconcile net earnings/(loss) to net cash used in operating activities: Depreciation and amortization 1,384,225 833,023 Stock based compensation 326,500 83,500 Equity in loss of associated company 20,012 233,314 Changes in assets and liabilities: Marketable securities 1,170 (605,696) Due from broker (690,982) -- Prepaid expenses and other 55,753 -- Accounts and other receivables (592) 282 Other assets 850 (9,369) Accounts payable 30,048 (100,143) Accrued liabilities (26,010) 84,427 Securities sold and not purchased 2,003,019 -- Other current liabilities 434 (138,937) ------------ ------------ Net cash provided by/(used in) operating activities 5,580,691 (1,298,081) ------------ ------------ Cash flows from investing activities: Investment in associated company (200,000) (233,314) Property and equipment additions (34,359) (762,608) Intangible assets -- (270,000) ------------ ------------ Net cash used in investing activities (234,359) (1,265,922) ------------ ------------ Cash flows from financing activities: Repurchase of stock (698,293) -- Proceeds from exercise of stock options -- 1,433 Repayment of notes payable -- (42,187) ------------ ------------ Net cash used in financing activities (698,293) (40,754) ------------ ------------ Net increase/(decrease) in cash and cash equivalents 4,648,039 (2,604,757) Cash and cash equivalents, beginning of period 38,594,815 44,613,101 ------------ ------------ Cash and cash equivalents, end of period $ 43,242,854 $ 42,008,344 ============ ============ Supplemental Cash Flow Disclosures: Cash paid for interest during the period $ -- $ 4,313 ============ ============ Non cash transactions: Common stock issued for intangible assets $ -- $ 1,800,000 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 5 SPEEDUS.COM, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying unaudited consolidated financial statements include the accounts of SPEEDUS.COM, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements do not include all information and notes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the Company's 2000 audited consolidated financial statements and notes thereto on Form 10-K. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. Marketable Securities All marketable securities are defined as trading securities under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." At March 31, 2001, marketable securities consisted of publicly traded equity securities and were recorded at fair market value. Their original cost was $73,000, unrealized losses were $6,000 and the carrying value was $67,000. During the quarters ended March 31, 2001 and 2000, realized gains in the amounts of $306,000 and $106,000, respectively, were recorded and included in Interest and Investment Income in the accompanying Consolidated Statements of Operations. Securities sold but not purchased The Company may sell equity securities it does not own in anticipation of declines in the fair market values of the securities. When the Company effects such transactions, it must borrow the securities it sold in order to deliver them and settle the trades. The amounts shown on the balance sheet as 'Securities sold but not purchased' represent the value of these securities at fair market value. At March 31, 2001, the Company had sold securities it had not purchased. The aggregate proceeds were $7,968,000, unrealized gains were $5,013,000 and the market value of the securities was $2,955,000. Earnings Per Share Basic and diluted earnings/(loss) per common share are determined in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". For the quarters ended March 31, 2001 and 2000, basic and diluted net earnings/(loss) available for common shareholders was equal to net earnings/(loss). For the quarter ended March 31, 2001, the weighted average common shares for diluted earnings per share were determined by adding weighted average shares in the amounts of 5,693 and 121,797 for the assumed exercise of stock options and warrants, respectively, to the weighted average shares outstanding for basic earnings per share for a total of 20,451,256 weighted average shares outstanding for diluted earnings per share. For the quarter ended March 31, 2000, stock options and warrants have been excluded from the diluted loss per share since their effect would be antidilutive. 2. Acquisition and Investment in Associated Company a. On June 30, 2000, the Company purchased the remaining 55% interest in Speedia, LLC that it did not already own. The Company issued an aggregate of 950,000 shares of its Common Stock to Speedia's selling shareholders, Starpoint Solutions, Inc. (formerly TIS Worldwide, Inc.) and Daniel Doyon (collectively, the "Sellers"). This acquisition was accounted for using the purchase method of accounting. The results of operations of Speedia have been included in the consolidated statements of operations for the periods subsequent to June 30, 2000. The excess of the purchase price, valued at approximately $6.8 million (including the value of contingent shares, as discussed below), over the fair value of the net assets acquired was approximately $7.2 million which has been recorded as goodwill and is being amortized over a period of 3 years. At December 31, 2000, the Company was obligated to issue in the aggregate an additional 183,334 shares of its Common Stock to the Sellers since 90% of VisionStar Incorporated was not effectively contributed to the Company within 6 months from June 30, 2000. VisionStar, a company whose majority shareholder is Shant S. Hovnanian, a co-founder and Chairman and Chief Executive Officer of the Company, holds a license from the FCC, granted in May 1997, to construct, launch and operate a Ka-band telecommunications satellite positioned over the continental United States. A Special Committee of the Company's Board of Directors 6 was evaluating Mr. Hovnanian's offer for the contribution of his interest in VisionStar to the Company. On September 22, 2000, the Company announced that discussions on the offer of Mr. Hovnanian have been terminated. In addition, an aggregate of an additional 183,334 shares will be issued to the Sellers if the Company's share price does not reach $10 per share within 180 days from February 9, 2001. Unaudited pro forma operating results of the Company for the three months ended March 31, 2000, as though the acquisition of SPEEDIA had occurred on January 1, 2000, with adjustment to give effect to the amortization of goodwill, are as follows: Revenues $ 59,695 Operating loss $ (3,087,783) Net loss $ (2,579,252) Basic and diluted net loss per share $ (0.12) b. In January 2001, the Company and Siemens Corporate Research, Inc., a subsidiary of Siemens Corporation, co-invested in a new company, Zargis Medical Corp. Zargis was formed to develop and market advanced diagnostic decision support products and services for primary care physicians and other Healthcare professionals. Speedia Wireless, a wholly owned subsidiary of the Company, has signed an exclusive contract with Zargis to design and develop the wireless applications for Zargis, as well as provide transaction processing to support the commercial rollout of Zargis' cardiac diagnostic products. 3. Stockholders' Equity On January 11, 2001, the Company's Board of Directors adopted a stockholder rights plan in which preferred stock purchase rights (the "Rights") will be distributed as a dividend at the rate of one Right for each share of the Company's Common Stock. Each Right generally will entitle stockholders, in certain circumstances, to buy one one-ten thousandth of a newly issued share of Series A Junior Participating Preferred Stock of the Company at an exercise price of $50.00. The Rights generally will be exercisable and transferable apart from the Common Stock only if a person or group acquires beneficial ownership of 17% or more of the Common Stock or commences a tender or exchange offer upon consummation of which such person or group would beneficially own 17% or more of the Common Stock. If any person becomes the beneficial owner of 17% or more of the Company's Common Stock, then each Right not owned by a 17% or more stockholder or certain related parties will entitle its holder to purchase, at the right's then-current exercise price, shares of Common Stock (or, in certain circumstances as determined by the Board, cash, other property, or other securities) having a value of twice the Right's exercise price. In addition, if, after any person has become a 17% or more stockholder, the Company is involved in a merger or other business combination transaction with another person in which its Common Stock is changed or converted, or sells 50% or more of its assets or earning power to another person, each Right will entitle its holder to purchase, at the Right's then-current exercise price, shares of common stock of such other person having a value of twice the Right's exercise price. The Company will generally be entitled to redeem the Rights at $.01 per Right at any time until the tenth day following public disclosure that a person or group has become the beneficial owner of 17% or more of the Company's common stock. The Rights will expire on January 26, 2011. 4. Legal Proceedings The Company is subject to various claims and proceedings that occur in the ordinary course of business. The Company believes it has substantial defenses to a material portion of these claims and is prepared to pursue litigation if a reasonable and structured settlement cannot be reached with the parties. Based on information currently available, the Company believes that none of these current claims or proceedings, either individually or in the aggregate, will have a material effect on its business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations should be read in conjunction with the corresponding discussion and analysis included in the Company's Report on Form 10-K for the year ended December 31, 2000. 7 Information Relating to Forward-Looking Statements This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or current expectations of the Company or its officers with respect to, among other things, the ability of the Company to make capital expenditures, the ability to incur additional debt, as necessary, to service and repay such debt, if any, as well as other factors that may effect the Company's financial condition or results of operations. Forward-looking statements may include, but are not limited to, projections of revenues, income or losses, capital expenditures, plans for future operations, financing needs or plans, compliance with covenants in loan agreements, plans for liquidation or sale of assets or businesses, plans relating to products or services of the Company, assessments of materiality, predictions of future events, and the ability to obtain additional financing, including the Company's ability to meet obligations as they become due, and other pending and possible litigation, as well as assumptions relating to the foregoing. All statements in this Form 10-Q regarding industry prospects and the Company's financial position are forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Operations We are developing and providing wireless data services that enable and enhance the use of Internet-based content on mobile devices. We currently provide on a promotional basis wireless e-mail and Internet content, including directories, financial data, sports, news and entertainment, to consumers. We have expanded our wireless data services to include products and services that enable businesses to communicate efficiently and effectively with their mobile workforce and customers in real time through a wide variety of mobile computing and communications devices. In addition, we maintain a web site that provides Internet users with information about high-speed Internet access. We also own fixed wireless spectrum in the New York City metropolitan area that we may commercialize in the future to support high-speed, or broadband, Internet access service. We changed our business focus in November 1998, terminating our subscription television service. Since changing our focus, we have yet to generate any revenue from our wireless data products and services business. Since 1999, our only significant source of revenue was $550,000 received from XO Communications, Inc. as discussed below. The balance of revenues in 1999 and 2000, generally subscriber fees from our pilot program for high-speed Internet service and co-hosting revenues from the use of our Data Center, have not been material and future revenues from this and our mobile wireless business are uncertain. We have generated operating losses and negative operating cash flows since our inception and expect to continue to do so in the future. From 1992 until November 1998, we operated a 49-channel analog subscription television service utilizing 1,300 MHz of spectrum under a LMDS license from the FCC. The FCC commercial operating license was awarded to us in recognition of our efforts in developing and deploying LMDS technology, and for spearheading its regulatory approval at the FCC. In September 1997, our pioneer LMDS license was renewed as a standard LMDS license through February 1, 2006. The license provides that the spectrum may be used for a wide variety of fixed wireless purposes, including wireless local loop telephony, high-speed Internet access and two-way teleconferencing. The license covers 1,150 MHz of spectrum in the 28 GHz range encompassing the New York Primary Metropolitan Statistical Area, a region which includes the five boroughs of New York City as well as the New York Counties of Westchester, Rockland, and Putnam. Under FCC authorization, the license includes an additional 150 MHz of spectrum until the first Ka band satellite is launched, an event which is not expected to occur prior to 2002. In November 1998, we assigned an 850 MHz portion of our license to WinStar Communications, Inc. as an alternative source of financing that was needed at the time. In connection with this assignment, we terminated our subscription television service because we no longer had sufficient spectrum to deliver those services. As a result, while we were able to repay, repurchase and redeem debt (in the aggregate amount of approximately $11.2 million) and preferred stock (approximately $4.6 million) in connection with the 1998 assignment as required under those indentures and substantially strengthen our financial position, we eliminated the only source of revenues that we had at the time. In October 1999, we assigned a 150Mhz portion of our license to XO. From July 1999 to October 1999, pending regulatory approval of the license assignment, XO made monthly payments of approximately $172,000 to us. We are an emerging growth company with no certainty as to the amount of future cash flows from operations. Our SPEED411(SM) portal, which is located at www.speedus.com and www.speed411.com, promotes high-speed Internet access on a nationwide basis by providing users with information on how to get high-speed access and how to take advantage of offerings available to high-speed users. The portal will give us an opportunity to generate revenues from Web site advertising, referral fees and commissions on product sales. Revenues to date from these sources have not been material. Currently, we are also conducting a limited pilot program of our SPEED(SM) broadband super high-speed Internet service and, at March 31, 2001, had less than 100 subscribers. A full marketing effort will not commence until new LMDS equipment becomes 8 commercially available with cost and performance that allow implementation of SPEED(SM) service on an economically attractive basis. We cannot determine when this will occur and this equipment may never be available to us on this basis. Revenues from our high-speed Internet service would consist of subscriber fees, as well as the sales and installations of modems; however, the pricing structure of the service could change in response to market and other competitive conditions. Revenues to date from these sources have not been material. We estimate that the total annual cost of the pilot program is approximately $500,000. Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000 Revenues decreased $10,000 from $35,000 for the three months ended March 31, 2000 to $25,000 for the three months ended March 31, 2001. The revenues for these periods reflect the early results of the Company's pilot program to connect its first Internet subscribers and co-hosting revenues from use of the Company's Data Center. The Company intends to continue this pilot program until a final determination can be made on the availability of equipment on an economically attractive basis. We cannot determine when this will occur and this equipment may never be available to us on this basis. We estimate that the total annual cost of the pilot program is approximately $500,000. Selling, general and administrative expenses increased $778,000 from $1,245,000 for the three months ended March 31, 2000 to $2,023,000 for the three months ended March 31, 2000. This increase is primarily attributable to the June 30, 2000 acquisition of the remaining 55% interest in Speedia, a facilities-based wireless application service provider, which the Company did not already own. This acquisition was accounted for using the purchase method of accounting. The results of operations of Speedia are included in the consolidated statements of operations beginning with the quarter ended September 30, 2000. Selling, general and administrative expenses also increased as a result of increases in compensation expense as a result of additions to senior management, including research and development and the Company's Portal, and legal expenses in connection with Intellectual Property matters. Depreciation and amortization increased $551,000 from $833,000 for the three months ended March 31, 2000 to $1,384,000 for the three months ended March 31, 2001. $605,000 of this net increase is a result of amortization of the goodwill resulting from the Speedia acquisition on June 30, 2000 discussed above. This goodwill is being amortized over a period of three years. Unrealized gains/(losses) on investments increased $5,126,000 from net unrealized losses of $119,000 for the three months ended March 31, 2000 to net unrealized gains of $5,007,000 for the three months ended March 31, 2001. The amount of these unrealized gains or losses will fluctuate based upon changes in the market value of the underlying investments and are not necessarily indicative of the results that may be expected for any future periods. Interest and investment income increased $153,000 from $719,000 for the three months ended March 31, 2000 to $872,000 for the three months ended March 31, 2001. $200,000 of this net increase is the result of an increase in the amount of realized gains from investments. Realized gains were $106,000 for the three months ended March 31, 2000 compared to $306,000 for the three months ended March 31, 2001. Equity in loss decreased $213,000 from $233,000 for the three months ended March 31, 2000 to $20,000 for the three months ended March 31, 2001. The 2000 period primarily reflects the Company's 45% interest in Speedia's operations, accounted for under the equity method. As discussed above, subsequent to June 30, 2000, upon the acquisition of the remaining 55% interest in Speedia, the results of operations of Speedia are included in the consolidated statements of operations. The 2001 period reflects the Company's current 50% interest in Zargis Medical Corp.'s operations, accounted for under the equity method. In January 2001, the Company and Siemens Corporate Research, Inc., a subsidiary of Siemens Corporation, acquired equal stakes in Zargis, formerly Sound Diagnostics, Inc., as a result of their seed funding of Zargis. Zargis was formed to develop and market advanced diagnostic decision support products and services for primary care physicians and other Healthcare professionals. Zargis is currently focusing on technology to assist the primary care physician in the detection of valvular heart disease, by identifying cases that might otherwise go undetected and by improving the recognition of innocent heart murmurs, thereby reducing the number of unnecessary referrals for more expensive diagnostic evaluations. Speedia has signed an exclusive contract with Zargis to design and develop the wireless applications, as well as provide transaction processing to support the commercial rollout of Zargis' cardiac diagnostic products. Net earnings amounted to $2,476,000 for the three months ended March 31, 2001 compared to a net loss of $1,678,000 for the three months ended March 31, 2000, primarily as a result of the unrealized gains from investments recognized by the Company during the 2001 period. These results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for any future periods. Liquidity and Capital Resources The Company has recorded operating losses and negative operating cash flows in each year of its operations since inception, primarily due to the start-up costs in connection with the commercial roll-out of the Company's system, slower than anticipated consumer acceptance of the Company's now terminated subscription television services and expenses incurred in connection with the LMDS rulemaking proceeding. The Company believes that consummation of the spectrum assignments in November 1998 and October 1999 for net proceeds of approximately $15.5 million and $19.8 million, respectively, after the repayment and repurchase of debt (in the aggregate amount of approximately $11.2 million) and redemption of preferred stock (approximately $4.6 million) in connection with the 1998 assignment 9 as required under those indentures and the sale of Common Stock in July 1999 for net proceeds of approximately $19.8 million have provided sufficient liquidity to finance its current level of operations and expected capital requirements through the 2001 fiscal year. However, the Company does not expect to have a positive operating cash flow until such time as it substantially increases its Internet customer base and/or forms a strategic alliance for use of its Internet capabilities in the future. We cannot predict when this will occur. We have no material non-cancelable commitments and the amount of future capital funding requirements will depend on a number of factors that we cannot quantify, including the success of our business, the extent to which we expand our high-speed Internet service if suitable equipment becomes available and the types of services we offer, as well as other factors that are not within our control, including competitive conditions, government regulatory developments and capital costs. Internet broadcast stations used in our pilot high-speed Internet service had an original cost of approximately $500,000 each. Until new equipment becomes available, if at all, we cannot predict whether new broadcast stations would be necessary or what they would cost at that time. Our wireless data services for mobile devices business is more adaptable for future growth and future capital funding requirements would generally not be material. Generally, our wireless data services will be priced based on the amount of ongoing service usage that our customers utilize, either in the form of a monthly fee for each registered user, or a fee for each wireless transaction that is delivered through our services. Additionally, there are initial set-up fees that will vary greatly depending on the amount of time and materials that we incur in tailoring the services for each customer. Our selling costs will increase as we market these products. However, most of the costs associated with our wireless data services are labor related and these costs will only be incurred as new business is signed. The hardware cost associated with maintaining the services will not increase significantly with added customers. The lack of additional capital in the future could have a material adverse effect on the Company's financial condition, operating results and prospects for growth. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's financial instruments at March 31, 2001 consist primarily of cash equivalents, which are subject to interest rate risk, and marketable securities and securities sold and not repurchased, which are subject to equity price risk. The carrying value of cash equivalents approximates market value since these highly liquid, interest earning investments have short maturities. There was no significant investment in marketable securities, which consist of publicly traded equity securities classified as trading securities and were recorded at fair market value. Securities sold and not repurchased are carried at the fair market value of the securities. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Note 4 to the accompanying consolidated financial statements is incorporated herein by reference. ITEM 2. CHANGES IN SECURITIES Note 3 to the accompanying consolidated financial statements is incorporated herein by reference. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 27* Financial Data Schedule b. Current Reports on Form 8-K: The Company filed a Current Report on Form 8-K on January 16, 2001 for an event specified in Item 5 of such report. * Filed herewith 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPEEDUS.COM, Inc. Date: May 15, 2001 By: /s/ Shant S. Hovnanian ------------------------------------ Shant S. Hovnanian Chairman of the Board and Chief Executive Officer Date: May 15, 2001 By: /s/ Angela M. Vaccaro ------------------------------------ Angela M. Vaccaro Controller and Chief Accounting Officer