UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1996
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: 00021023
INTERACTION MEDIA CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 65-0542810
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1701 Ponce de Leon Boulevard, Coral Gables, Florida 33134
(Address of principal executive offices)
(305) 446-5900
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the 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 shares of Common Stock of the issuer outstanding as of November
18, 1996 was 2,250,000.
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INTERACTION MEDIA CORPORATION
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of December 31, 1995 and September 30, 1996 (unaudited)........... 3
Statements of Operations for the three months and nine months
ended September 30, 1995 and 1996 (unaudited), and cumulative
from January 1, 1995 (inception) through September 30, 1996 (unaudited)........... 4
Statements of Cash Flows for the nine months ended
September 30, 1995 and 1996 (unaudited), an cumulative
from January 1, 1995 (inception) through September 30, 1996 (unaudited)........... 5
Notes to Financial Statements....................................................... 6
Item 2 Plan of Operation.......................................................... 7
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K........................................... 11
Signatures ................................................................................. 12
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<CAPTION>
InterAction Media Corporation
(A Development Stage Company)
Balance Sheets
December 31, September 30,
1995 1996
(Unaudited)
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Assets
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Current
Cash $ 20,149 $ 2,012,207
Accounts receivable 2,075 65,839
Prepaid and other 11,278 4,000
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Total current assets 33,502 2,082,046
Property and equipment 1,458,026 2,423,420
Other 18,000 22,000
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$ 1,509,528 $ 4,527,466
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Liabilities and Stockholders' Equity
Current
Accounts payable $ 309,841 $ 673,110
Accrued liabilities 56,224 6,611
Deferred income 71,015 71,015
Current portion of capital lease obligations 267,755 248,421
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Total current liabilities 704,835 999,157
Notes payable 200,000 1,000,000
Long-term capital lease obligations 435,323 366,848
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Total liabilities 1,340,158 2,366,005
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Commitments and contingencies
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Stockholders' equity
Common stock $.005 par value, 10,000,000 authorized,
937,143 and 2,250,000 shares outstanding 4,686 11,250
Additional paid-in capital 1,795,314 5,897,703
Deficit accumulated during development stage (1,630,630) (3,747,492)
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Total stockholders' equity 169,370 2,161,461
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$ 1,509,528 $ 4,527,466
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See accompanying notes to financial statements.
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<CAPTION>
InterAction Media Corporation
(A Development Stage Company)
Statements of Operations
Three Months Nine months Cumulative
ended ended from
September 30, September 30, January 1, 1995
1995 1996 1995 1996 inception)
(Unaudited) (Unaudited) through
September 30,
1996
(Unaudited)
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Revenues $ -- $ -- $ -- $ -- $ --
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Costs and Expenses
Selling, general and administrative 320,550 507,131 921,909 1,119,013 2,311,904
Depreciation 9,342 248,854 20,737 598,723 661,157
Research and development 35,730 42,656 80,730 273,667 645,657
Interest expense (income) -- 45,951 (264) 125,459 128,774
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Total Costs and Expenses 365,622 844,592 1,023,112 2,116,862 3,747,492
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Net Loss $ (365,622) $ (844,592) $(1,023,112) $(2,116,862) $(3,747,492)
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Weighted Average Shares
Outstanding 971,250 1,696,793 971,250 1,381,506 --
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Net Loss Per Common Share $ (.38) $ (.50) $ (1.05) $ (1.53) $ --
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Supplemental Net Loss
Per Common Share $ -- $ (.48) $ -- $ (1.47) $ --
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See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
InterAction Media Corporation
(A Development Stage Company)
Statements of Cash Flows
Cumulative from January
Nine Months Ended 1, 1995 (inception)
September 30, through
1995 1996 June 30, 1996
(unaudited) (unaudited)
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Operating Activities:
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Net Loss $(1,023,112) $(2,116,862) $(3,747,492)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 20,737 598,723 661,157
(Increase) in accounts receivable (6,616) (63,764) (65,839)
(Increase) decrease in prepaid and other (4,000) 7,278 (4,000)
(Increase) in other (8,000) (4,000) (22,000)
Increase in accounts payable 62,444 363,269 673,110
(Decrease) in deferred liabilities -- (49,613) 6,611
Increase in deferred income -- -- 71,015
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Total adjustments 64,565 851,893 1,320,054
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Net cash used in operating activities (958,547) (1,264,969) (2,427,438)
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Investing Activities:
Capital Expenditures (435,719) (1,400,430) (2,080,551)
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Net cash used in investing activities (435,719) (1,400,430) (2,080,551)
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Financing Activities:
Net proceeds from issuance of common stock 1,475,000 4,108,953 5,908,953
Notes payable -- 800,000 1,000,000
Capital lease payments -- (251,496) (388,757)
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Net cash provided from financing activities 1,475,000 4,657,457 6,520,196
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Net increase in cash 80,734 1,992,058 2,012,207
Cash at beginning of period -- 20,149 --
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Cash and cash equivalents at end of period $ 80,734 $ 2,012,207 $ 2,012,207
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Supplemental disclosures:
Capital lease obligations incurred for new equipment $ -- $ 163,687 $ 1,004,026
Cash paid for interest $ -- $ 105,347 $ 105,347
Cash paid for taxes $ -- $ -- $ --
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See accompanying notes to financial statements.
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Interaction Media Corporation
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
1. Unaudited The interim financial statements presented in this report
Financial are unaudited, but, in the opinion of management, reflect
Statements all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such
information. Results for interim periods should not be
considered indicative of results for a full year.
These financial statements should be read in conjunction
with the financial statements and notes thereto, including
audited financial statements as of and for the year ended
December 31, 1995 included in the registration statement on
Form SB-2 of the Company which became effective on August
27, 1996.
2. Debt and In August 1996, the Company completed an initial public
Equity offering of its Common Stock pursuant to which it issued
Transactions 1,250,000 shares of Common Stock and warrants to purchase
1,250,000 shares of Common Stock at an exercise price of
$4.40 per share, for aggregate gross proceeds of $5,125,000
and net proceeds of approximately $3,990,000.
In September 1996, pursuant to the underwriter's
over-allotment option granted in connection with the initial
public offering, the Company issued additional warrants to
purchase 187,500 shares of Common Stock for gross proceeds
of $18,750 and net proceeds of approximately $16,000.
3. Notes In 1996, the Company borrowed $1,900,000 under a line of
Payable credit with a bank, in addition to $200,000 which was
outstanding at December 31, 1995. In August 1996, the
Company repaid $1,100,000 principal amount outstanding under
such line from the proceeds of the Company's initial public
offering.
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Item 2. Plan Of Operation
The following Plan of Operation contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward- looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in the Company's Prospectus dated August 27, 1996.
General
InterAction Media Corporation (the "Company") was organized to develop and
operate interactive multimedia kiosks installed on college and university
campuses nationwide. The Company's kiosk unit, called IKETM (an acronym for the
Interactive Kiosk Experience), combines computer touch screen technology and
sophisticated audio/video capabilities to provide students, staff and visitors
with an electronic, user-friendly device that disseminates information about
college and university services and activities as well as advertising materials
and coupons for a variety of products and services. The Company was organized in
December 1994, is in the development stage and has had limited operations to
date. Since its inception, the Company has been engaged principally in
organizational activities, including developing a business plan, entering into
contracts with schools and making arrangements with advertisers, hiring
personnel, developing software, engaging in market testing activities and
installing and operating kiosks on a limited number of campuses.
Business Development
The Company's proposed plan of operation and prospects will be largely
dependent upon the Company's ability to enter into agreements with a significant
number of colleges and universities as well as arrangements with national and
local advertisers and upon the successful operation of IKE. The Company intends
to continue to actively pursue opportunities to enter into school contracts and
advertising arrangements.
The Company's currently proposed plan of operation provides for the
Company's IKE(TM) kiosk unit to be installed on 135 campuses within the 12
months following the consummation of its initial public offering in August 1996
(the "IPO").
During the three months ended September 30, 1996, the Company finalized the
development of its IKE 2.0, upgraded four previously installed kiosks and
commenced delivery and installation of kiosks at 11 new locations. During such
period, an additional 11 kiosks were constructed and integrated for shipment.
During such period, the Company entered into agreements with seven additional
colleges and universities, providing for the installation of IKE kiosks on their
campuses in early 1997.
The Company has entered into arrangements with a number of national and
local advertisers to date. The Company continues to add arrangements with
national and local advertisers for promotions on the IKE kiosks. The Company
continues to enhance its software to help ensure the reliability and enhance the
functionality of IKE.
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The Company currently has 22 full-time employees, engaged in marketing,
computer programming, graphic arts and administration. The Company also engages
independent software developers and relies on freelance designers for multimedia
promotional development for IKE.
Results of Operations
The Company has generated no revenue to date. During the three months and
nine months ended September 30, 1996, the Company incurred net losses of
$844,592 and $2,116,862, respectively.
Selling, general and administrative expenses of the Company for the three
months and nine months ended September 30, 1996 increased by approximately
$187,000 (58%) and $197,000 (21%), respectively, from the comparable periods of
1995. These increases were primarily due to the addition of support staff to
develop and test the advertising and network software systems used for the IKE
kiosks, increased IKE kiosk installation staff and significant professional fees
related to the IPO.
Research and development expense for the three months and nine months ended
September 30, 1996 increased by approximately $7,000 (19%) and $193,000 (239%),
respectively, from the comparable periods of 1995. These increases were due to
further enhancements of the Company's network support systems for kiosk
operations.
Depreciation expense for the three months and nine months ended September
30, 1996 were approximately $249,000 and $599,000 respectively, compared to
$9,300 and $21,000 during the comparable periods of 1995. This increase was
primarily due to the construction of additional kiosks and the purchase of kiosk
equipment.
Interest expense for the three months and nine months ended September 30,
1996 were approximately $46,000 and $125,000, respectively, compared to no
interest expense during the comparable periods of 1995. This was due to the
Company's increased level of debt from that of the prior year. $1,100,000
principal amount of debt was repaid out of the proceeds of the IPO in August
1996.
Liquidity and Capital Resources
At September 30, 1996, the Company had a deficit accumulated during the
development stage of $(3,747,492), working capital of $1,082,889 and
stockholders' equity of $2,161,461.
The Company's material commitments for capital expenditures include the
purchase, integration and installation of 40 additional IKE kiosks (version
3.0), currently scheduled for installation during the months of November 1996
through March 1997 in schools currently under contract with the Company. The
sources of funds for these kiosks and subsequent kiosks will be the remaining
net proceeds of the IPO, anticipated advertising revenue and permanent financing
the Company will seek to obtain. No assurance can be given that such funds will
be available to the Company.
In August and September 1996, the Company consummated the IPO, pursuant to
which it issued 1,250,000 shares of Common Stock and 1,437,500 warrants to
purchase shares of Common Stock for aggregate gross proceeds of $5,143,750 and
net proceeds of approximately $4,000,000. Based on the Company's currently
proposed plans and assumptions relating to the implementation of its business
plan, the Company plans to have IKE installed on 135 campuses within 12 months
following the consummation of the IPO. The Company also anticipates, based on
currently proposed plans and assumptions relating to revenues from operations
(including assumptions regarding the progress and timing of installation of
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kiosks), that the net proceeds of the IPO, together with anticipated revenues
from operations, will be sufficient to satisfy the Company's estimated cash
requirements for the next 12 months. There can be no assurance that this will be
the case and the Company may be required to raise additional funds during the
next 12 months. The Company has no current arrangements with respect to, or
sources of, additional financing, except for a Loan Agreement with Northern
Trust Bank of Florida, N.A. ("Northern Trust") which expires in December 1997
and a Master Lease Agreement with Leasing Solutions, Inc. The Company is
exploring alternative financing arrangements, including alternative or
additional equipment lease financing and obtaining financing by granting a
security interest in its previously purchased equipment. There can be no
assurance that any such alternative or additional financing will be available to
the Company on favorable terms or at all.
In November 1995, the Company and Northern Trust entered into the Loan
Agreement, pursuant to which Northern Trust extended a Line of Credit to the
Company in the maximum amount of $1,500,000 which, as amended, expires December
31, 1997. Subsequently, the Line of Credit was increased to $2,400,000. The
amounts borrowed under the Line of Credit bear interest at Northern Trust's
prime rate and interest payments have been made by the Company on a monthly
basis. As of September 30, 1996, $1,000,000 principal amount is outstanding
under the Line of Credit which shall become due and payable on December 31,
1997. Amounts borrowed under the Line of Credit are required to be secured by
liquid collateral at specified rates. Amounts currently outstanding under the
Line of Credit are secured by various assets of the Chairman of the Board of
Directors of the Company and Ikera Investment Corporation, a company that is
controlled by the personal representatives of the estate of the Company's former
President. The amounts borrowed from Northern Trust have been used as working
capital for the operation of the Company's business. The Company used $1,100,000
of proceeds of the IPO to pay a portion of the Company's outstanding
indebtedness to Northern Trust and a certain amount of the foregoing security
was released. If there is no adverse change in the Company's financial condition
and if the Company is able to provide sufficient security, of which there can be
no assurance, the remaining amount of the Line of Credit may be available for
future borrowings until December 31, 1997. The loan agreement with Northern
Trust provides that the Company may not incur additional debt in excess of
$100,000 without the consent of Northern Trust.
In July 1995, the Company entered into a Master Lease Agreement with
Leasing Solutions, Inc. pursuant to which the Company finances the acquisition
of its kiosk equipment. The amount financed under this lease as of September 30,
1996 was approximately $615,269. The agreement has a term of three years which
automatically extends for successive 30 day periods after its expiration unless
either party gives the other party written notice at least 90 days prior to the
expiration of the original term or extended term, as the case may be. The
agreement provides that the Company's obligations under the Master Lease
Agreement must be secured by letters of credit in the aggregate amount of not
less than 30% or more than 36% of the cost of the equipment.
For the nine months ended September 30, 1996, net cash used in operations
was approximately $1,265,000. This was primarily attributable to a net loss of
approximately $2,117,000 less depreciation of approximately $599,000 net of an
increase in accounts payable of approximately $363,000.
For the nine months ended September 30, 1996, net cash used in investing
activities was approximately $1,400,000. This was primarily attributable to the
purchase of kiosks and related equipment.
For the nine months ended September 30, 1996, net cash used in financing
activities was approximately $4,657,000. This consisted primarily of net
proceeds from the issuance of common stock of approximately $4,109,000, the
proceeds of notes payable financing of approximately $800,000, less capital
lease payments of approximately $251,000.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter ended
September 30, 1996.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERACTION MEDIA CORPORATION
Date: November 18, 1996 By:/s/ Michael Burnstine
-------------------------
Michael Burnstine
President, Chief Operating Officer,
Chief Financial Officer and Treasurer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AT SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 2,012,207
<SECURITIES> 0
<RECEIVABLES> 65,839
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,082,046
<PP&E> 2,423,420
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,527,466
<CURRENT-LIABILITIES> 999,157
<BONDS> 0
5,908,953
0
<COMMON> 11,250
<OTHER-SE> (2,150,211)
<TOTAL-LIABILITY-AND-EQUITY> 4,527,466
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 872,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,459
<INCOME-PRETAX> (2,116,862)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,116,862)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,116,862)
<EPS-PRIMARY> (1.53)
<EPS-DILUTED> (1.53)
</TABLE>
