FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1999
AND
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26699
-------------------------------------------------------------
Reliant Interactive Media Corp.
formerly Reliant Corporation
-------------------------------------------------------------
Nevada 87-0411941
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
13535 Feather Sound Drive -Suite 220, Clearwater, Florida 33762
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 299-0020
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 5,885,271
Yes [X] No [ ] (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.)
As of September 30, 1999 the number of shares outstanding of the Registrant's
Common Stock was 5,885,271.
<PAGE>
PART I: FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
Item 1. Financial Statements.
- -------------------------------------------------------------------------------
Attached hereto and incorporated herein by this reference are consolidated
unaudited financial statements (under cover of Exhibit F3Q) for the three months
and nine months ended September 30, 1999, and the year ended December 31, 1998.
These financial reports are supplemented by unaudited financial statements for
the three and six months ended June 30, 1999 (under cover of Exhibit F2Q), and
for the three months ended March 31, 1999 (under cover of Exhibit F1Q).
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------------------
(a) Plan of Operation.
(1) Plan of Operation for the next twelve months.
(i) Cash Requirements and of Need for additional funds, twelve months.
This Company has been a "a development stage company" with only limited
capital resources, and is now in transition as an operating entity with
substantial revenues. It may be necessary for the Company to seek additional
capital over time to optimize the accomplishment its business plan. It is the
judgment of Management that increasing revenues from operations will maintain
this Company in a position of substantial liquidity; however it is forseeable
that the Company will seek additional capital in order to accelerate its growth
and realize its potential more rapidly. This Company is expected to generate
enough sales revenues to satisfy its cash requirements for the next twelve
months, although there is no assurance that this can be achieved. In the last
three quarters, revenues have increased, relieving the urgency for additional
capital from necessary to desirable. It remains desirable for the simple reason
that the more money the company has available, the more projects it can
undertake and the more media and inventory it can buy.
The fact remains that, in all likelihood, unless the Company is successful
in generating continuing investor interest, and in securing additional
investment, or possibly debt-financing arrangements, the business of the
Company, however promising, cannot expand toward its full potential, and may not
achieve the optimum profitability expected. The Company's business plan is
ambitious, and although its products and services enjoy a certain synergy with
each other, the sheer number of projects, each with its own focus and potential
market, will require that Company grow and expand its operations over time. Its
failure to grow in a timely manner would be expected to leave incentive openings
for other competitors to fill. For that reason, the need to grow and expand
operations, it is likely that this Company will pursue additional capital in the
year 2000, notwithstanding that its present capital resources including growing
revenues are sufficient for current operations and modest growth at a
respectable level of profitability.
(ii) Summary of Product Research and Development.
The Company's product development/marketing department is the most vital
component of the Company. Kevin and Tim Harrington, along with Mel Arthur,
actively participate on a daily basis in the ongoing effort to research and
develop new products that may be suited for direct response television marketing
and subsequent marketing through non-infomercial distribution channels. This
group develops new product ideas from a variety of sources, including inventors,
suppliers, trade shows, industry conferences, strategic alliances with
manufacturing and consumer product companies and the Company's ongoing review of
new developments within its targeted product categories. As a result of
management's prominence in the infomercial and retail television industry, it
also receives
unsolicited new product proposals from independent third parties. During the
evaluation phase of product development, the Company evaluates the suitability
of the product for television demonstration and explanation as well as the
anticipated perceived value of the product to consumers, determines whether an
adequate and timely supply of the product can be obtained and analyzes whether
the estimated profitability of the product satisfies the Company's criteria.
The Company is devoting attention to the development and products
specifically targeted at markets outside of North America. The Company will
review its infomercial library on an ongoing basis to select those products
which it believes will be successful in Europe and/or Asia and/or its other
international markets. When a product which was initially sold domestically is
selected for international distribution, the infomercial is dubbed and product
literature is created in the appropriate foreign languages. In addition, a
review of the product's and the infomercial's compliance with the local laws is
completed. The Company's licensed distributor then begins airing the infomercial
internationally. The Company also airs shows and distributes products of other
independent domestic infomercial companies.
The Company obtains the rights to new products created by third parties
through various licensing arrangements generally involving royalties related to
sales of the product. The amount of the royalty is negotiated and generally
depends upon the level of involvement of the third party in the development and
marketing of the product. The Company generally pays the smallest royalty to a
third party that only provides a product concept. A somewhat higher royalty to a
third party that has fully developed and manufactured a product. The Company
also obtains the rights to sell products which have already been developed,
manufactured and marketed through infomercials produced by other companies. In
such cases, the Company generally pays a higher royalty rate to the third party
because of the relatively small amount of the Company's resources required to
develop the product. The Company generally seeks exclusive worldwide rights to
all products in all means of distribution. In some cases, the Company does not
obtain all marketing and distribution rights, but seeks to receive a royalty on
sales made by the licensor pursuant to the rights retained by the licensor.
(iii) Expected purchase or sale of plant and significant equipment.
None.
(iv) Expected significant change in the number of employees. Not
known.
(b) Discussion and Analysis of Financial Condition and Results of Operations.
In 1998, the company closed the year with a loss, with minimal revenues, in
pre-launch development mode, but these results are not deemed to reflect true
business operations. In 1998, the company had significant expenses that resulted
in a loss for the year. Management believes that revenues will continue to
increase in fourth quarter of 1999, but to achieve the continued growth of the
Company's business, advertising, promotional and production expenses will remain
significant. While the upside potential from successful infomercial marketing is
tremendous, the risk of failure is always present. Some of the projects may
fail, or all may fail. If some are successful, the success may offset the losses
from others significantly or may not. Accordingly, there can be no assurance
that substantial profitability will be sustained in the next twelve months.
Development Stage/Going Concern. There are two material thresholds in the
transition of this Company, from Development Stage to Going Concern. The first
is the commencement of limited operations, during 1998, and the first quarter of
1999. The second is the achievement of substantial revenues and the dawn of
profitability, corresponding to the second quarter of 1999. While the
Harringtons began some limited operations in 1998, their two companies were not
acquired as subsidiaries until August of that year. The Harringtons honored
certain non-compete agreements, with HSN Direct, a division of Home Shopping
Network, which expired in December of 1998. During the interim period, the
Harringtons located, developed and prepared for production and rollout of
various
products. For that reason, full-fledged operations were not launched until April
of 1999. While the affairs of the Company improved consistently, from 1998, the
second quarter of 1999 was the first profitable quarter, and is the first
quarter of unlimited operations. For these reasons, management refers to this
Company as in its Development Stage for 1998, and for the first quarter of 1999,
and as an operating company and a going concern during the second quarter of
1999.
Revenues are Increasing. There were no revenues in 1997. Sales in 1998 were
$120,234, which was $60,118 for the first half, and $60,116, for the second
half. Corresponding amounts for the first quarter, second and third quarters of
1999, were $352,483, $3,135,013 and $5,918,342, respectively. The significance
of these figures is not only that revenues have increased exponentially, due to
operations, but that the Company has achieved profitability during the second
quarter, the three months ended June 30, 1999, and has sustained it for the
three months ended September 30, 1999.
1998 operations have been characterized as limited. They consisted of the
sale of cigarette lighters and the marketing of a single non-infomercial
television show. In 1998, Gross Margins, after cost of goods sold, was only 45%;
whereas,that margin has been stable between 85% to 86% of Gross Sales, for the
first half of 1999. This improvement is largely due to the difference between
limited operations, and the economy and efficiency of unlimited operations,
beginning in April of 1999. It is also attributable to the marketing of
different products from those currently offered by the Company.
Interest Income and Expense reflected on the Company's financial statements
refer to the company's ownership of a certificate of deposit, pledged against a
loan. The interest income from the CD is shown. The interest expense for the
loan is shown.
Loss on Impairment of goodwill, of $750,000, refers to the issuance of
1,500,000 shares of common stock during the first quarter of 1999, at $0.50 per
share, below market value. This treatment was recommended by the Company's
Independent Auditor. While this item increases the loss for the nine months
ended September 30, 1999, it has no effect upon the second and third quarter
profitable results from operations.
Operating Expenses would be expected to increase with increasing
operations. Expenses in 1998 were attributable to the marketing of different
products than those which form the core of the Company's current business. In
general, expenses have decreased as a percentage of sales.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and December 31, 1998
<PAGE>
The accompanying notes are an integral part of these consolidated financial
statements.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
------
September 30, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 189,025 $122,257
Accounts receivable, net 797,686 -
Inventory 104,459 27,342
Prepaids 100,000 -
Employee advances 9,610 -
----------- ---------
Total Current Assets 1,200,780 149,599
----------- ---------
PROPERTY AND EQUIPMENT
Machinery and equipment 25,925 25,925
Office furniture and equipment 45,292 45,292
----------- ---------
Total Property and Equipment 71,217 71,217
Less accumulated depreciation (18,286) (10,258)
----------- ---------
Net Property and Equipment 52,931 60,959
----------- ---------
OTHER ASSETS
Deposits - 12,773
Other assets 20,000 -
Prepaid advertising 1,537,387 85,302
Patent and trademark costs 26,668 26,668
----------- ---------
Total Other Assets 1,584,055 124,743
----------- ---------
TOTAL ASSETS $2,837,766 $335,301
=========== =========
</TABLE>
<PAGE>
The accompanying notes are an integral part of these consolidated financial
statements.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
September 30, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,019,575 $ 73,192
Accrued expenses 43,516 5,418
Payable - related parties 96,952 -
Notes payable - related parties, current portion 500,000 -
Notes payable, current portion 40,000 40,000
------------ ------------
Total Current Liabilities 1,700,043 118,610
------------ ------------
LONG-TERM DEBT
Notes payable - related parties 87,500 87,500
------------ ------------
Total Long-Term Debt 87,500 87,500
------------ ------------
TOTAL LIABILITIES 1,787,543 206,110
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY
Common stock: 50,000,000 shares authorized of $0.001
par value, 6,135,440 and 3,373,570 shares issued
and outstanding, respectively 6,135 3,374
Additional paid-in capital 3,157,724 1,359,985
Accumulated deficit (2,113,636) (1,234,168)
------------ ------------
Total Stockholders Equity 1,050,223 129,191
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 2,837,766 $ 335,301
============ ============
</TABLE>
<PAGE>
The accompanying notes are an integral part of these consolidated financial
statements.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
September 30 September 30
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $5,918,342 $ 31,125 $9,155,832 $ 91,243
COST OF GOODS SOLD 817,272 17,223 1,331,677 50,551
----------- ----------- ----------- -----------
GROSS MARGIN 5,101,070 13,902 7,824,155 40,692
----------- ----------- ----------- -----------
OPERATING EXPENSES
Depreciation 2,676 1,657 8,028 4,971
Bad debt expense 948 - 18,358 -
General and administrative 1,299,014 176,696 3,396,841 508,088
Research and development 10,465 9,621 40,620 30,345
Production and media costs 2,778,243 - 4,301,954 -
Marketing 585,515 127,211 860,510 203,721
Rent 15,205 10,917 45,157 35,031
----------- ----------- ----------- -----------
Total Operating Expenses 4,692,066 326,102 8,671,468 782,156
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 409,004 (312,200) (847,313) (741,464)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest expense (12,450) (3,159) (32,511) (7,675)
Interest income 261 102 356 102
----------- ----------- ----------- -----------
Total Other Income (Expenses) (12,189) (3,057) (32,155) (7,573)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES 396,815 (315,257) (879,468) (749,037)
INCOME TAXES - - - - -
----------- - - ----------- -----------
NET INCOME (LOSS) $ 396,815 $ (315,257) $ (879,468) $ (749,037)
=========== =========== =========== ===========
BASIC INCOME (LOSS) PER SHARE $ 0.07 $ (0.11) $ (0.17) $ (0.30)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,815,222 2,817,235 5,207,545 2,520,451
=========== =========== =========== ===========
</TABLE>
<PAGE>
<BTB>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
-------------------------------------------------
<BTB>
<S> <C> <C> <C> <C>
Balance, December 31, 1997 2,369,600 $2,370 $ 377,719 $ (99,255)
Capital contributions, 1998 - - 340,020 -
Common stock issued in recapitalization
of Reliant Corporation 570,400 570 (570) -
Common stock issued for cash at an
average price of $1.56 per share 329,770 330 513,170 -
Common stock issued for services
valued at $1.25 per share 103,800 104 129,646 -
Net loss for the year ended
December 31, 1998 - - - (1,134,913)
--------- ------ ----------- ------------
Balance, December 31, 1998 3,373,570 3,374 1,359,985 (1,234,168)
Common stock issued for cash at an
average price of $0.86 per share
(unaudited) 1,098,000 1,098 938,902 -
Common stock issued for services
valued at $1.15 per share (unaudited) 43,700 43 50,457 -
Fractional shares issued in the reverse
stock split (unaudited) 170 - - -
Common stock issued for services
valued at $0.50 per share (unaudited) 100,000 100 49,900 -
Common stock issued for investment
in Tony Little Website at $0.50 per
share (unaudited) 20,000 20 9,980 -
Common stock issued for acquisition
of TPH Marketing, Inc. valued at
$0.50 per share (unaudited) 1,500,000 1,500 748,500 -
Net loss for the nine months ended
September 30, 1999 (unaudited) - - - (879,468)
--------- ------ ----------- ------------
Balance, September 30, 1999
(unaudited) 6,135,440 $6,135 $3,157,724 $(2,113,636)
========= ====== =========== ============
<PAGE>
</TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<BTB>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 396,815 $(315,257) $ (879,468) $(749,037)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 2,676 1,657 8,028 4,971
Amortization of prepaid advertising 99,952 - 145,626 -
Bad debt 948 - 18,358 -
Loss on impairment - - 750,000 -
Common stock issued for services 50,000 - 100,500 -
Changes in assets and liabilities:
Accounts receivable 249,041 - (816,044) -
Prepaids and advances (108,560) - (109,610) -
Inventory (30,146) - `(77,117) -
Deposits - 2,909 12,773 12,773
Prepaid expenses (1,185,327) - (1,597,711) -
Other assets (10,000) - (10,000) -
Cash overdraft (91,647) - - -
Accounts payable 457,600 18,520 946,383 55,100
Accrued expenses (381) - 38,098 -
------------ ---------- ------------ ----------
Net Cash Used in Operating
Activities (169,029) (292,171) (1,470,184) (676,193)
------------ ---------- ------------ ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Patent and trademark costs - - - (26,668)
------------ ---------- ------------ ----------
Net Cash Used in Investing Activities - - - (26,668)
------------ ---------- ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payments) from notes payable 358,054 - 596,952 -
Proceeds from issuance of common
stock - 95,000 940,000 195,000
Proceeds from additional capital
contribution - 89,140 - 340,020
------------ ---------- ------------ ----------
Net Cash Provided by Financing
Activities $ 358,054 $ 184,140 $ 1,536,952 $ 535,020
------------ ---------- ------------ ----------
</TABLE>
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $189,025 $(108,031) $ 66,768 $(167,841)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 150,195 122,257 210,005
-------- ---------- -------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $189,025 $ 42,164 $189,025 $ 42,164
======== ========== ======== ==========
Cash Payments For:
Income taxes $ - $ - $ - $ -
Interest $ 2,450 $ $ 32,511 $ -
Non-Cash Financing Activities:
Common stock issued for services $ 50,000 $ - $100,500 $ -
Common stock issued for other assets $ 10,000 $ - $ 10,000 $ -
Common stock issued for subsidiary $ - $ - $750,000 $ -
</TABLE>
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at September 30, 1999
and 1998 and for all periods presented have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company s December 31, 1998 audited
consolidated financial statements. The results of operations for periods ended
September 30, 1999 and 1998 are not necessarily indicative of the operating
results for the full years.
NOTE 2 - REVERSE STOCK SPLIT
On March 23, 1999, the Company completed a reverse stock split on a 1 share for
5 share basis. No shareholder was reduced to less than 100 shares. All
references to shares issued and outstanding have been restated to reflect the
reverse stock split.
NOTE 3 - COMMON STOCK TRANSACTIONS
During the first quarter of 1999, the Company sold 248,000 post-split shares
(1,240,000 pre-split shares) of its common stock for $390,000 or an average
price of $1.57 per share ($0.31 per share pre-split). The Company also issued
38,200 post-split shares (191,000 pre-split shares) of its common stock for
services rendered, valued at $47,750 or $1.25 per share ($0.25 per share
pre-split). The shares were valued at the market price of the stock at the time
of issuance.
During the second quarter of 1999, the Company sold 600,000 shares of its common
stock for $300,000 or $0.50 per share. In addition, the Company sold 250,000
shares of its common stock to a related company for $250,000 or $1.00 per share.
The Company also issued 5,500 shares of its common stock for services rendered,
valued at $2,750 or $0.50 per share, the market price of the stock at the time
of issuance.
During the third quarter of 1999, the Company issued 100,000 shares of its
common stock for services rendered, valued at $50,000 or $0.50 per share, the
market price of the stock at the time of issuance.
On May 26, 1999, the Company purchased a fifty-one percent (51%) interest in the
Tony Little Web Site. The Company paid $10,000 cash and issued 20,000
post-split shares of common stock. The stock was valued at $10,000 or $0.50 per
share, the market price of the stock at the time of issuance.
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 3 - COMMON STOCK TRANSACTIONS (Continued)
On May 3, 1999, the Company acquired TPH Marketing, Inc. (TPH). The Company
acquired 100% of TPH and TPH became a wholly-owned subsidiary. The Company
issued 1,500,000 post-split shares of its common stock in the acquisition. The
shares were valued at $750,000 or $0.50 per share, the market price of the stock
at the time of the acquisition. The acquisition is accounted for as a
combination under the purchase method of accounting with acquired assets and
liabilities recorded at their fair market values resulting in goodwill of
$750,000 since TPH had no assets and liabilities at the date of acquisition.
The resulting goodwill is being written off in the first quarter of 1999 with a
charge to operating expenses in the amount of $750,000. Activity from the date
of acquisition to September 30, 1999 has been included in the statement of
operations.
NOTE 4 - OUTSTANDING STOCK OPTIONS
The following summarizes the date exercisable, expiration date and exercise
price of the Company s outstanding options to purchase common stock at September
30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date Exercisable Expiration Date Exercise Price Number
---------------- --------------- --------------- -------
December 30, 1999 June 30, 2004 $ 2.50 105,000
June 30, 2000 June 30, 2004 $ 4.00 105,000
December 30, 2000 June 30, 2004 $ 6.00 105,000
June 30, 2001 June 30, 2004 $ 7.50 105,000
-------
Total Options Outstanding 420,000
===============
</TABLE>
The options were granted as compensation and additional bonuses to certain
officers of the Company. These options were issued with an exercise price above
the market value of the stock at the date of issuance.
NOTE 5 - FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments requires disclosure of the fair value of
financial instruments held by the Company. SFAS 107 defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties. The following methods and
assumptions were used to estimate fair value:
The carrying amount of cash equivalents, accounts receivable and accounts
payable approximate fair value due to their short-term nature.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and December 31, 1998
<PAGE>
The accompanying notes are an integral part of these consolidated financial
statements.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
------
September 30, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 189,025 $122,257
Accounts receivable, net 797,686 -
Inventory 104,459 27,342
Prepaids 100,000 -
Employee advances 9,610 -
----------- ---------
Total Current Assets 1,200,780 149,599
----------- ---------
PROPERTY AND EQUIPMENT
Machinery and equipment 25,925 25,925
Office furniture and equipment 45,292 45,292
----------- ---------
Total Property and Equipment 71,217 71,217
Less accumulated depreciation (18,286) (10,258)
----------- ---------
Net Property and Equipment 52,931 60,959
----------- ---------
OTHER ASSETS
Deposits - 12,773
Other assets 20,000 -
Prepaid advertising 1,537,387 85,302
Patent and trademark costs 26,668 26,668
----------- ---------
Total Other Assets 1,584,055 124,743
----------- ---------
TOTAL ASSETS $2,837,766 $335,301
=========== =========
</TABLE>
<PAGE>
The accompanying notes are an integral part of these consolidated financial
statements.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
<BTB><S>
LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
September 30, December 31,
1999 1998
------- -------
(Unaudited)
<C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,019,575 $ 73,192
Accrued expenses 43,516 5,418
Payable - related parties 96,952 -
Notes payable - related parties, current portion 500,000 -
Notes payable, current portion 40,000 40,000
------------ ------------
Total Current Liabilities 1,700,043 118,610
------------ ------------
LONG-TERM DEBT
Notes payable - related parties 87,500 87,500
------------ ------------
Total Long-Term Debt 87,500 87,500
------------ ------------
TOTAL LIABILITIES 1,787,543 206,110
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY
Common stock: 50,000,000 shares authorized of $0.001
par value, 6,135,440 and 3,373,570 shares issued
and outstanding, respectively 6,135 3,374
Additional paid-in capital 3,157,724 1,359,985
Accumulated deficit (2,113,636) (1,234,168)
------------ ------------
Total Stockholders Equity 1,050,223 129,191
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 2,837,766 $ 335,301
============ ============
</TABLE>
<PAGE>
The accompanying notes are an integral part of these consolidated financial
statements.
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
<BTB><S>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET SALES $5,918,342 $ 31,125 $9,155,832 $ 91,243
COST OF GOODS SOLD 817,272 17,223 1,331,677 50,551
----------- ----------- ----------- -----------
GROSS MARGIN 5,101,070 13,902 7,824,155 40,692
----------- ----------- ----------- -----------
OPERATING EXPENSES
Depreciation 2,676 1,657 8,028 4,971
Bad debt expense 948 - 18,358 -
General and administrative 1,299,014 176,696 3,396,841 508,088
Research and development 10,465 9,621 40,620 30,345
Production and media costs 2,778,243 - 4,301,954 -
Marketing 585,515 127,211 860,510 203,721
Rent 15,205 10,917 45,157 35,031
----------- ----------- ----------- -----------
Total Operating Expenses 4,692,066 326,102 8,671,468 782,156
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 409,004 (312,200) (847,313) (741,464)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest expense (12,450) (3,159) (32,511) (7,675)
Interest income 261 102 356 102
----------- ----------- ----------- -----------
Total Other Income (Expenses) (12,189) (3,057) (32,155) (7,573)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES 396,815 (315,257) (879,468) (749,037)
INCOME TAXES - - - -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 396,815 $ (315,257) $ (879,468) $ (749,037)
=========== =========== =========== ===========
BASIC INCOME (LOSS) PER SHARE $ 0.07 $ (0.11) $ (0.17) $ (0.30)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,815,222 2,817,235 5,207,545 2,520,451
=========== =========== =========== ===========
</TABLE>
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity
<TABLE>
<CAPTION>
<BTB><S>
Additional
Common Stock Paid-in Accumulated
-------------
Shares Amount Capital Deficit
<BTB> ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 2,369,600 $2,370 $ 377,719 $ (99,255)
Capital contributions, 1998 - - 340,020 -
Common stock issued in recapitalization
of Reliant Corporation 570,400 570 (570) -
Common stock issued for cash at an
average price of $1.56 per share 329,770 330 513,170 -
Common stock issued for services
valued at $1.25 per share 103,800 104 129,646 -
Net loss for the year ended
December 31, 1998 - - - (1,134,913)
--------- ------ ----------- ------------
Balance, December 31, 1998 3,373,570 3,374 1,359,985 (1,234,168)
Common stock issued for cash at an
average price of $0.86 per share
(unaudited) 1,098,000 1,098 938,902 -
Common stock issued for services
valued at $1.15 per share (unaudited) 43,700 43 50,457 -
Fractional shares issued in the reverse
stock split (unaudited) 170 - - -
Common stock issued for services
valued at $0.50 per share (unaudited) 100,000 100 49,900 -
Common stock issued for investment
in Tony Little Website at $0.50 per
share (unaudited) 20,000 20 9,980 -
Common stock issued for acquisition
of TPH Marketing, Inc. valued at
$0.50 per share (unaudited) 1,500,000 1,500 748,500 -
Net loss for the nine months ended
September 30, 1999 (unaudited) - - - (879,468)
--------- ------ ----------- ------------
Balance, September 30, 1999
(unaudited) 6,135,440 $6,135 $3,157,724 $(2,113,636)
========= ====== =========== ============
</TABLE>
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<BTB><S>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 396,815 $(315,257) $ (879,468) $(749,037)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 2,676 1,657 8,028 4,971
Amortization of prepaid advertising 99,952 - 145,626 -
Bad debt 948 - 18,358 -
Loss on impairment - - 750,000 -
Common stock issued for services 50,000 - 100,500 -
Changes in assets and liabilities:
Accounts receivable 249,041 - (816,044) -
Prepaids and advances (108,560) - (109,610) -
Inventory (30,146) - (77,117) -
Deposits - 2,909 12,773 12,773
Prepaid expenses (1,185,327) - (1,597,711) -
Other assets (10,000) - (10,000) -
Cash overdraft (91,647) - - -
Accounts payable 457,600 18,520 946,383 55,100
Accrued expenses (381) - 38,098 -
------------ ---------- ------ -
Net Cash Used in Operating
Activities (169,029) (292,171) (1,470,184) (676,193)
------------ ---------- ------------ ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Patent and trademark costs - - - (26,668)
------------ ---------- ------------ ----------
Net Cash Used in Investing Activities - - - (26,668)
------------ ---------- ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payments) from notes payable 358,054 - 596,952 -
Proceeds from issuance of common
stock - 95,000 940,000 195,000
Proceeds from additional capital
contribution - 89,140 - 340,020
------------ ---------- ------------ ----------
Net Cash Provided by Financing
Activities $ 358,054 $ 184,140 $ 1,536,952 $ 535,020
------------ ---------- ------------ ----------
</TABLE>
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
<BTB><S>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $189,025 $(108,031) $ 66,768 $(167,841)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 150,195 122,257 210,005
---- ---------- -------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $189,025 $ 42,164 $189,025 $ 42,164
======== ========== ======== ==========
Cash Payments For:
Income taxes $ -$- $ - $ -
Interest $12,450 $ $ 32,511 $ -
Non-Cash Financing Activities:
Common stock issued for services $50,000 $ - $100,500 $ -
Common stock issued for other assets $10,000 $ - $ 10,000 $ -
Common stock issued for subsidiary $ - $ - $750,000 $ -
</TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at September 30, 1999
and 1998 and for all periods presented have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company s December 31, 1998 audited
consolidated financial statements. The results of operations for periods ended
September 30, 1999 and 1998 are not necessarily indicative of the operating
results for the full years.
NOTE 2 - REVERSE STOCK SPLIT
On March 23, 1999, the Company completed a reverse stock split on a 1 share for
5 share basis. No shareholder was reduced to less than 100 shares. All
references to shares issued and outstanding have been restated to reflect the
reverse stock split.
NOTE 3 - COMMON STOCK TRANSACTIONS
During the first quarter of 1999, the Company sold 248,000 post-split shares
(1,240,000 pre-split shares) of its common stock for $390,000 or an average
price of $1.57 per share ($0.31 per share pre-split). The Company also issued
38,200 post-split shares (191,000 pre-split shares) of its common stock for
services rendered, valued at $47,750 or $1.25 per share ($0.25 per share
pre-split). The shares were valued at the market price of the stock at the time
of issuance.
During the second quarter of 1999, the Company sold 600,000 shares of its common
stock for $300,000 or $0.50 per share. In addition, the Company sold 250,000
shares of its common stock to a related company for $250,000 or $1.00 per share.
The Company also issued 5,500 shares of its common stock for services rendered,
valued at $2,750 or $0.50 per share, the market price of the stock at the time
of issuance.
During the third quarter of 1999, the Company issued 100,000 shares of its
common stock for services rendered, valued at $50,000 or $0.50 per share, the
market price of the stock at the time of issuance.
On May 26, 1999, the Company purchased a fifty-one percent (51%) interest in the
Tony Little Web Site. The Company paid $10,000 cash and issued 20,000
post-split shares of common stock. The stock was valued at $10,000 or $0.50 per
share, the market price of the stock at the time of issuance.
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 3 - COMMON STOCK TRANSACTIONS (Continued)
On May 3, 1999, the Company acquired TPH Marketing, Inc. (TPH). The Company
acquired 100% of TPH and TPH became a wholly-owned subsidiary. The Company
issued 1,500,000 post-split shares of its common stock in the acquisition. The
shares were valued at $750,000 or $0.50 per share, the market price of the stock
at the time of the acquisition. The acquisition is accounted for as a
combination under the purchase method of accounting with acquired assets and
liabilities recorded at their fair market values resulting in goodwill of
$750,000 since TPH had no assets and liabilities at the date of acquisition.
The resulting goodwill is being written off in the first quarter of 1999 with a
charge to operating expenses in the amount of $750,000. Activity from the date
of acquisition to September 30, 1999 has been included in the statement of
operations.
NOTE 4 - OUTSTANDING STOCK OPTIONS
The following summarizes the date exercisable, expiration date and exercise
price of the Company s outstanding options to purchase common stock at September
30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Date Exercisable Expiration Date Exercise Price Number
- ------------------------------------ --------------- --------------- ------
December 30, 1999 June 30, 2004 $ 2.50 105,000
June 30, 2000 June 30, 2004 $ 4.00 105,000
December 30, 2000 June 30, 2004 $ 6.00 105,000
June 30, 2001 June 30, 2004 $ 7.50 105,000
-------
Total Options Outstanding 420,000
=======
</TABLE>
The options were granted as compensation and additional bonuses to certain
officers of the Company. These options were issued with an exercise price above
the market value of the stock at the date of issuance.
NOTE 5 - FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments requires disclosure of the fair value of
financial instruments held by the Company. SFAS 107 defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties. The following methods and
assumptions were used to estimate fair value:
The carrying amount of cash equivalents, accounts receivable and accounts
payable approximate fair value due to their short-term nature.
