--------------------------------------------------------------------------------
Tim Harrington
PRESIDENT
Reliant Interactive Media Corporation
2701 Rocky Pointe Dr. #200
Tampa, Florida 33607
(Name and Address of Person Authorized to Receive Notices
and Communications on Behalf of the Person Filing Statement)
--------------------------------------------------------------------------------
WITH A COPY TO:
KARL E. RODRIGUEZ, ESQ
24843 Del Prado, #318
Dana Point, CA 92629
(949) 248-9561
fax (949) 248-1688
--------------------------------------------------------------------------------
FORM 10-Q-SB
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 June 30, 2000
Commission File Number: 0-26699
Reliant Interactive Media Corp.
formerly Reliant Corporation
Nevada 87-0411941
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
2701 N. Rocky Point Dr., Suite 200, Tampa, Florida 33607
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 282-1717
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 7,015,971
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 June 30, 2000 the number of shares outstanding of the Registrant's Common
Stock was 7,015,971.
1
<PAGE>
PART I: FINANCIAL INFORMATION
Attached hereto and incorporated herein by this reference are the following
financial statements:
Exhibit FINANCIAL STATEMENTS
00QF-2 Un-Audited Financial Statements for the six months ended June 30,
2000
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(A) PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.
CASH REQUIREMENTS AND OF NEED FOR ADDITIONAL FUNDS. We are a development
stage company with operations and revenues. We are in the zone of marginal
profitability, but have only limited capital resources. While revenues are
increasing significantly, it may be necessary for us to seek additional capital
over time to optimize the accomplishment of our business plan. The following
disclosure treats our interim funding for the year now past, and our plans and
arrangements for future funding. Without regard to whether current revenues
might be sufficient to maintain liquidity, new projects must be undertaken to
generate future revenues. Every media-marketing project has a useful life, some
longer or shorter than others, but all eventually run their course. We do not
consider it prudent to be passive about generating new projects, and we have
determined that significant new funds are highly desirable, and possibly
necessary to aggressively approach operations in the second half of year 2000.
We have entered into two letter agreements with Institutional Equity
Corporation ( IEC ):
First, an engagement letter for IEC to conduct a private placement for us,
to raise a minimum of $500,000 and a maximum of $2,000,000 (to be in reliance on
Regulation D, Rule 506, and section 4(2) of the Securities Act of 1933). Units
consisting of 10,000 shares each are to be sold for $20,000 each. This placement
has been opened and was to be completed by March 31, 2000, but has been extended
by a maximum of 90 additional days. IEC is to be paid a fee equal to 10% of the
proceeds and has the right to acquire up to 100,000 shares of common stock, at
$3.00 per share, for every million dollars raised, or a proportional fractional
adjustment. This right to acquire shares lasts until 18 months from the closing
of the placement. The placement is on a best efforts basis. There is no guaranty
that any shares will be placed.
Second, a firm commitment has been received from IEC to raise $10,000,000
in a registered offering of securities. The structure of this offering has not
been determined. Gross underwriting discounts of approximately 10% of the
offering price and a 2% non-accountable expense allowance is to be paid to IEC
from these offering proceeds. A $50,000 fee has been paid towards an advance of
$100,000 to be applied against the gross underwriting commissions. This $50,000
fee was funded by a loan of that amount from Oasis Entertainment's Fourth Movie
Project, Inc., a shareholder of Reliant. The loan is payable in six months from
December 1, 1999, and bears 10% interest per annum. The expenses of IEC in
connection with this offering will also be reimbursed from the offering proceeds
and are estimated to be $650,000. IEC will also receive warrants for 10% of the
securities purchased by underwriters, good for four years, at an exercise price
of 120% of the offering price.
Third, as of the date of this filing, the private placement is still open,
and at this date a total of $700,000.00 has been placed in escrow, all of which
2
<PAGE>
has been received in the year 2000. A minimum of $500,000.00 was required in
order to satisfy the escrow and release funds. The funds have now been disbursed
and the 10% commission paid.
We believe that our present arrangements will provide sufficient working
capital to continue operations for the next twelve months. There can be no
guaranty that unrealized funding will be realized.
SUMMARY OF PRODUCT RESEARCH AND DEVELOPMENT
Our product development/marketing department is our most vital component.
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 our 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,
we evaluate 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 our criteria.
We are devoting attention to the development and products specifically
targeted at markets outside of North America. We 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 completed. Our licensed distributor
then begins airing the infomercial internationally. We also air shows and
distributes products of other independent domestic infomercial companies.
We obtain 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. We generally pay the smallest royalty to a third party that only
provides a product concept. A somewhat higher royalty is paid to a third party
that has fully developed and manufactured a product. We also obtain the rights
to sell products which have already been developed, manufactured and marketed
through infomercials produced by other companies. In such cases, we generally
pay a higher royalty rate to the third party because of the relatively small
amount of our resources required to develop the product. We generally seek
exclusive worldwide rights to all products in all means of distribution. In some
cases, we do not obtain all marketing and distribution rights, but seek to
receive a royalty on sales made by the licensor pursuant to the rights retained
by the licensor.
EXPECTED PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT. None.
EXPECTED SIGNIFICANT CHANGE IN THE NUMBER OF EMPLOYEES. None.
3
<PAGE>
(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
During the final quarter of 1999, sales continued to grow from projects in
place, led by those developed in the previous quarters and the new computer
infomercial. In the first quarter of the current year 2000, the increase in
revenues and profitability has been demonstrated.
RESULTS OF OPERATIONS. Sales in the first quarter of 1999 were $352,477,
rising to $20,131,204 in the current quarter. In 1998, costs of sales were
$66,664, and gross profit was $53,580. First Quarter comparisons for 1999/2000
quarters show the following:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31. . . 1999 2000
------------------------------------
Net Sales . . 352,477 20,131,204
--------- ----------
Cost of Sales 284,523 16,354,755
Gross Profit. 67,954 3,785,449
--------- ----------
Operating
Expenses. . . 699,101 3,663,584
--------- ----------
Result of
Operations. . (631,147) 121,865
====================================
</TABLE>
It is apparent that the cost of sales has remained virtually constant at
81% of sales, and that a 19% margin of gross profit has been maintained. It is
also apparent that operating expenses have improved from 198% of sales in the
1999 quarter down to 18% in the current quarter, with resulting profitability
indicated.
Second Quarter comparisons for 1999/2000 quarters show the following:
<TABLE>
<CAPTION>
<S> <C> <C>
June 30 . . . 1999 2000
-------------------------------------
Net Sales . . 2,885,013 18,804,606
---------- ----------
Cost of Sales 1,602,622 15,604,612
Gross Profit. 1,282,391 3,199,994
---------- ----------
Operating
Expenses. . . 1,907,561 2,926,015
---------- ----------
Result of
Operations. . (625,170) 273,979
</TABLE>
4
<PAGE>
Second Quarter six month comparisons for 1999/2000 quarters show the
following:
<TABLE>
<CAPTION>
<S> <C> <C>
June 30 . . . 1999 2000
--------------------------------------
Net Sales . . 3,237,490 38,935,810
----------- ----------
Cost of Sales 1,887,145 31,950,367
Gross Profit. 1,350,345 6,985,443
----------- ----------
Operating
Expenses. . . 2,606,662 6,589,599
----------- ----------
Result of
Operations. . (1,256,317) 395,844
</TABLE>
The trend toward profitability has continued in the six months ended June
30, 2000. Operating income (shown in the tables as results of operations)
expressed as a percentage of Net sales shows: (three months) 273,979/18,804,606
= 1.5%; (six months) 395,844/38,935,810 = 1.0%. These compare to net losses in
1999 periods. While profitability has been achieved, the margin of profitability
of less than 2% is not so substantial as to give lasting comfort to our
management. We have not yet approached our potential profitability in the
opinion of management. We have not achieved a sufficient momentum of successes
to assure future profitability. One very successful program may defer the
expenses of several failures. The number of attempts is therefore material to
the probability of significant improvement in the ultimate margin of
profitability. This analysis leads to conclusion that we will require
supplemental capital to maintain and increase the number of its projects, in
order to continue our improvement beyond its present marginal profitability, or
that we will have to find ways to increase its margin of profitability.
Product sales are expected to increase in direct proportion to our ability
to acquire media time to promote them. Promotional advertising drives sales in
our business. It is for this reason that increasing revenues do not provide
assurance that markets have been saturated with as much advertising as would be
productive. For this reason, additional capital, whether or not necessary for
fundamental survival, is desired and important for optimum growth. Management is
of the opinion that additional internal capital would relieve the burden of
debt service and materially improve profitability.
Cost of goods sold included the total cost of acquiring actual products for
resale and costs and expenses related to sales. Returns and allowances are
deducted from sales.
It follows that a mature analysis requires the cautionary statement, that
there is no assurance that we will achieve substantially greater profitability,
and that to do so, we must expand our operations with more projects (some of
which may succeed, some may not); and to expand operations, we must augment our
capital resources.
Management believes that revenues and growth will continue to increase,
but to achieve the continued growth of our 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 in proportion to the rate of growth achieved
by this quarterly comparison.
5
<PAGE>
There can be no assurance that we will be successful in raising capital
through private placements or otherwise. Even if we are successful in raising
capital through the sources specified, there can be no assurances that any such
financing would be available in a timely manner or on terms acceptable to us and
our current shareholders. Additional equity financing could be dilutive to our
then existing shareholders, and any debt financing could involve restrictive
covenants with respect to future capital raising activities and other financial
and operational matters.
Please see Part II, Item 6 for preliminary information concerning the
probable acquisition of Reliant Interactive Media Corp. (us) by TeleServices
Internet Group, Inc. ("TSIG") (OTCBB:TSIG)
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no proceedings, legal, enforcement or administrative, pending,
threatened or anticipated involving or affecting this Issuer, except as
disclosed herein. We had been named as a defendant in California state court
action seeking damages for rent based upon an oral lease/agreement. Management
has cross-complained against certain third parties believed to be responsible.
Management has settled the claim against it for the nominal sum of $4,750. As of
this date our cross-complaint is still pending. As of this date, this matter is
not deemed to have any material impact upon us or our financial condition.
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
We have not changed Auditors, but our Auditors have changed the name of
their firm, from Jones & Jensen to HJ & Associates, LLC. There has been no
disagreement with any auditor as to any item or matter relating to our audit or
audit procedure.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On June 26, 2000, TeleServices Internet Group, Inc., known as TSIG.com,
announced that it has entered into a definitive agreement to acquire Reliant
interactive Media Corporation, subject to approval by Reliant Shareholders. A
copy of that News Release was attached and filed as an Exhibit to a Form 8-KSB
filed on June 26, 2000.
This acquisition is subject to shareholders approval, however, elements of
the transaction are yet to be resolved. An Information Statement will be filed
as soon as practical, which will provide details of the proposed transaction. We
expect to report further information in current reports on Form 8-KSB, as
available.
EXHIBIT INDEX
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Exhibit FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
00QF-2 Un-Audited Financial Statements for the six months ended June 30,
2000
--------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-Q Report for the Quarter ended June 30, 2000 has been signed below by
the following persons on behalf of the Registrant and in the capacity and on the
date indicated.
Dated: June 30, 2000
RELIANT INTERACTIVE MEDIA CORP.
formerly Reliant Corporation
by
/s/Kevin Harrington /s/Tim Harrington
Kevin Harrington Tim Harrington
chairman and ceo/director president and coo/director
/s/Mel Arthur /s/Karl E. Rodriguez
Mel Arthur Karl E. Rodriguez
executive vice president/director secretary/director
6
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 00FQ-2
UN-AUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
7
<PAGE>
--------------------------------------------------------------------------------
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
--------------------------------------------------------------------------------
8
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
June 30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents (Note 1) . . $ 23,480 $ 26,404
Restricted cash (Note 1) . . . . . . . . 2,497,213 983,795
Accounts receivable - net (Note 1) . . . 277,120 0
Receivables - other (Note 4) . . . . . . . . . 0 800,076
Inventory (Note 1) . . . . . . . . . . . . . 48,479 57,762
Employee advances . . . . . . . . . . . . . . 18,066 10,923
Prepaid expenses . . . . . . . . . . . . . . 418,750 229,128
--------- ------------
Total Current Assets . . . . . . $ 3,283,108 $ 2,108,088
============ ============
PROPERTY AND EQUIPMENT (Note 1)
Machinery and equipment . . . . . . . . . . 36,625 36,625
Office furniture and equipment . . . . . . 45,292 45,292
Leasehold improvements . . . . . . . . . . . 37,239 0
--------- ------------
Total Property and Equipment . . . . 119,156 81,917
Less: Accumulated depreciation . . . . . (34,304) (24,092)
--------- ------------
Net Property and Equipment . . . . . . 84,852 57,825
--------- ------------
OTHER ASSETS
Deferred stock offering costs (Note 1) . . . . 50,000 50,000
Deposits . . . . . . . . . . . . . . . . . . . 79,885 12,773
Prepaid advertising (Note 1) . . . . . . . 966,282 607,166
Patent costs (Note 1) . . . . . . . . . . . 26,668 26,668
--------- ------------
Total Other Assets . . . . . . . . . 1,122,835 696,607
--------- ------------
TOTAL ASSETS . . . . . . . . . $ 4,490,795 $ 2,862,520
============ ============
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . $ 760,643 $ 944,926
Accrued expenses . . . . . . . . . . . . . . 166,022 166,793
Payables - other (Note 4) . . . . . . . . 92,034 0
Allowance for sales returns (Note 1) . . . . 595,368 462,677
Notes payable-current portion (Note 7) . . . 318,474 112,439
Notes payable-related parties (Note 6) . . . 360,156 360,156
Line of credit (Note 8) . . . . . . . . . . . . 0 132,148
--------- ------------
Total Liabilities . . . . . . . . . . 2,292,697 2,179,139
============ ============
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of $0.001
par value, 7,015,971 and 6,310,271 shares issued
and outstanding, respectively . . . . . . . 7,016 6,310
Additional paid-in capital . . . . . . . 4,377,393 3,245,049
Accumulated deficit . . . . . . . . . . (2,186,311) (2,567,978)
--------- ------------
Total Stockholders' Equity 2,198,098 683,381
--------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,490,795 $ 2,862,520
============ ============
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the SixMonths Ended
June 30, June 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------
NET SALES . . . . . . $ 18,804,606 $ 2,885,013 $ 38,935,810 $ 3,237,490
COST OF SALES . . . . 15,604,612 1,602,622 31,950,367 1,887,145
------------ ------------ ------------ ------------
GROSS PROFIT . . . . . . 3,199,994 1,282,391 6,985,443 1,350,345
------------ ------------ ------------ ------------
OPERATING EXPENSES
Depreciation . . . . . . . . 5,727 2,676 10,212 5,352
General and administrative 2,009,958 1,815,485 3,948,251 2,296,363
Selling and marketing . . 668,033 72,399 2,142,012 274,995
Royalties . . . . . . . . . 184,196 0 398,811 0
Rent . . . . . . . . . . . . 58,101 17,001 90,313 29,952
------------ ------------ ------------ ------------
Total Operating Expenses 2,926,015 1,907,561 6,589,599 2,606,662
============ ============ ============ ============
OPERATING INCOME (LOSS) . . 273,979 (625,170) 395,844 (1,256,317)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES)
Interest expense . . (4,055) (14,941) (16,122) (20,061)
Interest income . . . 1,775 95 1,945 95
------------ ------------ ------------ ------------
Total Other
Income (Expenses) . . . . . (2,280) (14,846) (14,177) (19,966)
============ ============ ============ ============
INCOME (LOSS) BEFORE
INCOME TAXES . . . . . . . 271,699 (640,016) 381,667 (1,276,283)
INCOME TAXES . . . . . . . . . 0 0 0 0
------------ ------------ ------------ ------------
NET INCOME (LOSS) . . $ 271,699 $ (640,016) $ 381,667 $(1,276,283)
============ ============ ============ ============
BASIC INCOME (LOSS) PER
SHARE (Note 11). . . . . $ 0.04 $ (0.13) $ 0.06 $ (0.29)
FULLY DILUTED INCOME (LOSS) PER
SHARE (Note 11) . . . $ 0.04 $ (0.13) $ 0.06 $ (0.29)
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
--------------------------------------------------------------------------------
Balance, December
31, 1998 . . . . . . . 3,373,570 $ 3,374 $ 1,359,985 $(1,234,168)
Common stock issue
for cash . . . . . . . . 1,098,000 1,098 938,902 0
Common stock issued
for services . . . . . . . 338,700 338 197,662 0
Fractional shares issued in the
reverse stock split . . . . . . 1 0 0 0
Common stock issued for acquisition
of TPH Marketing, Inc. 1,500,000 1,500 748,500 0
Net loss for the year ended
December 31, 1999 . . . . . . . . 0 0 0 (1,333,810)
------------ ------------ ------------ ------------
Balance,
December 31, 1999 . . . . 6,310,271 6,310 3,245,049 (2,567,978)
Capital withdrawals
(unaudited) . . . . . . . . . . . 0 0 (166,100) 0
Common stock issued for services
(unaudited) . . . . . . . . 205,700 206 398,944 0
Common stock issued for cash
(unaudited) . . . . . . . 500,000 500 999,500 0
Stock offering costs
(unaudited) . . . . . . . . . . . 0 0 (100,000) 0
Net income for the six months
ended June 30, 2000
(unaudited) . . . . . . . . . . . 0 0 0 381,667
------------ ------------ ------------ ------------
Balance, June 30, 2000
(unaudited) . . . . . . 7,015,971 $ 7,016 $ 4,377,393 $(2,186,311)
============= ========== ============ ============
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) . $ 271,699 $ (640,016) $ 381,667 $(1,276,283)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation . . . . . . . . 5,727 2,676 10,212 5,352
Bad debts . . . . . . . . . . . 0 17,410 0 17,410
Amortization of
prepaid advertising . . . 173,045 0 367,655 0
Allowance for
sales returns . . . . . (112,431) 0 132,691 0
Common stock issued
for services . . . . . . 341,400 752,750 399,150 800,500
Changes in assets and liabilities:
Restricted cash .,.,., (1,384,498) 0 (1,513,418) 0
Receivables . . . . . . 1,071,403 (799,855) 522,956 (1,065,085)
Inventory . . . . . . . . . 2,962 (64,313) 9,283 (36,971)
Deposits . . . . . . . . . . . 0 0 (67,112) 12,773
Prepaids and advances . (196,808) 20,396 (196,765) (1,050)
Prepaid advertising . . (303,286) (378,647) (726,771) (366,710)
Other assets . . . . . . . . . 0 (10,000) 0 (10,000)
Cash overdraft . . . . . . . . 0 91,647 0 91,647
Accounts payable . . . (1,000,085) 410,408 (92,249) 488,783
Accrued expenses . . . . . . (483) (321) (771) 38,479
------------ ------------ ------------ ------------
Net Cash Used in
Operating Activities . (1,131,355) (597,865) (773,472) (1,301,155)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of
property and equipment . . . . 0 0 (37,239) 0
------------ ------------ ------------ ------------
Net Cash Used in
Investing Activities . . . . . 0 0 (37,239) 0
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
------------ ------------ ------------ ------------
Proceeds from notes
payable . . . . . . . . 278,750 0 278,750 0
Capital withdrawals . . (27,600) 0 (166,100) 0
Proceeds from notes
payable-related parties . . . 0 0 0 247,177
Payments on notes
payable-related parties .(72,715) (8,279) (72,715) (8,279)
Payments on line of credit. . 0 0 (132,148) 0
Proceeds from issuance
of common stock. . . . 1,000,000 550,000 1,000,000 940,000
Stock offering costs (100,000) 0 (100,000) 0
------------ ------------ ------------ ------------
Net Cash Provided by Financing
Activities $ 1,078,435 $ 541,721 $ 807,787 $ 1,178,898
------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . $ (52,920) $ (56,144) $ (2,924) $ (122,257)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD . . 76,400 56,144 26,404 122,257
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD . . $ 23,480 $ 0 $ 23,480 $ 0
============ ============ ============ ============
Cash payments for:
Income taxes . $ 0 $ 0 $ 0 $ 0
Interest . . . $ 4,055 $ 14,941 $ 16,122 $ 20,061
Non-cash financing activities:
Common stock issued
for services . . . . $ 341,400 $ 752,750 $ 399,150 $ 800,500
Common stock issued
for other assets . . $ 0 $ 10,000 $ 0 $ 10,000
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Reliant Interactive Media Corporation (formerly Reliant Corporation) (the
Company) was organized under the laws of the State of Utah on July 30, 1984.
The Company subsequently ceased its original business activity in 1993 and was
not engaged in any business activity but was seeking potential investments or
business acquisitions and consequently was considered a development stage
company as defined in SFAS No. 7 until January 1, 1999. At the time of the
acquisition, the Company was a non-operating public shell with nominal assets.
The Company changed its name from Reliant Corporation to Reliant Interactive
Media Corporation (Reliant) in August 7, 1998.
Kevin Harrington Enterprises, Inc. (KHE) was organized under the laws of the
State of Florida on June 15, 1995.
Cigar Television Network, Inc. (CTN) was organized under the laws of the State
of Florida on April 1, 1998.
On July 21, 1998, the Company completed an agreement and plan of reorganization
whereby Reliant issued 11,848,000 shares of its common stock in exchange for all
of the outstanding common stock of KHE and CTN. Kevin Harrington, Chairman and
CEO of the Company, was the controlling shareholder of both KHE and CTN at the
time of the reorganization. Immediately prior to the agreement and plan of
reorganization, the Company had 2,852,000 shares of common stock issued and
outstanding. The reorganization was accounted for as a recapitalization of KHE
and CTN because the shareholders of KHE and CTN controlled the Company
immediately after the acquisition. Therefore, KHE and CTN are treated as the
acquiring entities. Accordingly, there was no adjustment to the carrying value
of the assets or liabilities of KHE and CTN. Reliant is the acquiring entity
for legal purposes and KHE and CTN are the surviving entities for accounting
purposes. On August 7, 1998, the shareholders of the Company authorized a
reverse stock split of 1-for-5 prior to the agreement and plan of
reorganization. All references to shares of common stock have been
retroactively restated.
New Accounting Pronouncement
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets and liabilities, measured at fair market value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting changes in
fair value or cash flows. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The adoption of this statement had
no material impact on the Company's financial statements.
15
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
Cash and Cash Equivalents
For purposes of financial statement presentation, the Company considers all
highly liquid investments with a maturity of three months or less, from the date
of purchase, to be cash equivalents.
Inventory
Inventory is stated at the lower of cost or market determined by the first-in,
first-out method or market. Inventory is made up of finished goods held for
sale by the Company.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Expenditures for small tools, ordinary maintenance and repairs are charged to
operations as incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line method over estimated useful
lives as follows:
Leasehold improvement 5 years
Office furniture and equipment 5 to 7 years
Machinery and equipment 5 to 7 years
Depreciation expense for the six months ended June 30, 2000 and 1999 was $10,212
and $5,352, respectively.
Patent Costs
These costs will be amortized on the straight-line method over their remaining
lives beginning when the patents are received which is expected to be in 2000.
Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful accounts of
$14,019 at June 30, 2000 and December 31, 1999.
16
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Prepaid Advertising
Prepaid advertising consisted of the following:
June 30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
Production costs of infomercials $ 1,537,750 $ 810,979
Production costs of tv shows 52,430 52,430
Subtotal 1,590,180 863,404
Less: accumulated amortization (623,898) (256,243)
------------- -----------
Net prepaid advertising $ 966,282 $ 607,166
============= ===========
These advertising costs are amortized over the useful life of the
infomercials and tv shows which is estimated at 18 months. The production costs
begin amortizing when they begin broadcasting. Each product that has production
costs is evaluated at year end for the recoverability of those costs.
Production costs of products that are no longer being sold are fully expensed in
the year that sales cease. Amortization expense relating to prepaid advertising
was $367,655 for the six months ended June 30, 2000 and is included in selling
and marketing expense.
Credit Risks
The Company maintains its cash accounts primarily in one bank in Florida. The
Federal Deposit Insurance Corporation insures accounts to $100,000. The
Company's accounts occasionally exceed the insured amount.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Reliant
Interactive Media Corporation (Reliant), Kevin Harrington Enterprises, Inc.
(KHE) (a wholly-owed subsidiary), TPH Marketing, Inc. (TPH) (a wholly-owned
subsidiary), and Cigar Television Network, Inc. (CTN) (a wholly-owned
subsidiary). All significant intercompany accounts and transactions have been
eliminated in the consolidation.
17
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Under the provisions of SFAS No. 109, the Company's policy is to provide
deferred income taxes related to property and equipment, inventories, net
operating losses and other items that result in differences between the
financial reporting and tax basis of assets and liabilities.
No provision for federal income taxes has been made at June 30, 2000 due to
accumulated operating losses. The Company has accumulated approximately
$2,100,000 of net operating losses as of June 30, 2000, which may be used to
reduce taxable income and income taxes in future years. The use of these losses
to reduce future income taxes will depend on the generation of sufficient
taxable income prior to the expiration of the net operation loss carryforwards.
Accordingly, a valuation allowance has been provided for the net operating
losses in full. The carryforwards expire in 2019. KHE and CTN operated as S
corporations prior to their acquisition in 1998. The results of their
operations since acquisition have been included in the net operating income at
June 30, 2000.
Revenue Recognition
Revenue is recognized upon shipment of goods to the customer. The Company has
adopted a returns policy whereby the customer can return any goods received
within 30 days of receipt for a full refund. The Company makes an allowance for
returns based on past history and experience. At June 30, 2000 and December 31,
1999, the allowance was $595,368 and $462,677, respectively.
Restricted Cash
The Company uses the services of an independent fulfillment center (the Center)
to receive and process orders for the Company. The Center collects payments
from charge cards or checks. The Center has set up a cash reserve for potential
charge card chargebacks and returns of product for refund. The chargeback
reserve is 3% of all charge card sales and any chargebacks are credited out of
this reserve. The reserve for returns is 7% on all sales and any returns are
refunded out of this reserve. The total cash reserved at June 30, 2000 and
December 31, 1999 was $2,497,213 and $983,795, respectively, and has been
classified as restricted cash.
Deferred Stock Offering Costs
Deferred stock offering costs are recorded at cost. The costs will be charged
to paid-in capital upon completion of the specific offering.
Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements include all of the
adjustments which, in the opinion of management, are necessary for a fair
presentation. Such adjustments are of a normal recurring nature.
18
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
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 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company has entered into an employment agreement with Kevin Harrington, CEO
of the Company. Mr. Harrington will receive an annual salary of $120,000 and it
will increase by $12,000 each year over the life of the agreement. In addition,
Mr. Harrington shall receive 100,000 shares of the Company's common stock for
each $10,000,000 in gross revenues of the Company with a maximum of 3,000,000
shares to be issued. No shares have been issued at June 30, 2000 as a result of
this revenue performance bonus. The employment agreement ends on December 1,
2003.
The Company has entered into an employment agreement with Tim Harrington,
President of the Company. Mr. Harrington will receive an annual salary of
$120,000 and it will increase by $12,000 each year over the life of the
agreement. In addition, Mr. Harrington shall receive 100,000 shares of the
Company's common stock for each $10,000,000 in gross revenues of the Company
with a maximum of 2,000,000 shares to be issued. No shares have been issued at
June 30, 2000 as a result of this revenue performance bonus. The employment
agreement ends on December 1, 2003.
The Company has entered into an employment agreement with Mel Arthur, Executive
Vice President of the Company. Mr. Arthur will receive an annual salary of
$120,000. In addition, Mr. Arthur shall receive 100,000 shares of the Company's
common stock for each $10,000,000 in gross revenues of the Company with a
maximum of 900,000 shares to be issued. No shares have been issued at June 30,
2000 as a result of this revenue performance bonus. The employment agreement
ends on December 31, 2003.
Office Lease
The Company entered into a five (5) year non-cancelable office lease beginning
March 1, 2000. Payments are currently $13,422 per month through August 2000 and
increase to $14,902 in September 2000. Future minimum lease payments under the
lease are as follows:
Year ending Operating
December 31, Lease
-------------------------------------
2000 $ 140,143
2001 185,304
2002 193,079
2003 200,854
2004 208,629
2005 and thereafter 34,988
-------------------------------------
Total lease payments $ 962,997
=====================================
19
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 4 - RECEIVABLES (PAYABLES) - OTHER
The Company uses the services of a fulfillment center (Center) located in
Dallas, Texas. The Center receives, processes and ships orders on behalf of the
Company. The Center also collects payment on the products it sells for the
Company. At June 30, 2000, the Company owed the Center $92,034 and at December
31, 1999, the Center owed the Company $800,076. These amounts result from
payments received less amounts due the Center for the services it rendered to
the Company.
NOTE 5 - EQUITY TRANSACTIONS
During the first quarter of 1999, the Company sold 248,000 post-split shares of
its common stock for $390,000 or an average price of $1.57 per share. The
Company also issued 38,200 post-split shares of its common stock for services
rendered, valued at $47,750 or $1.25 per share. 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 25,500 shares of its common stock for services rendered,
valued at $12,750 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.
During the fourth quarter of 1999, the Company issued 175,000 shares of its
common stock for services rendered, valued at $87,500 or $0.50 per share, the
market price of the stock at the time of issuance.
On May 3, 1999, the Company acquired TPH Marketing, Inc. (TPH). TPH's two (2)
shareholders are the Company's CEO and his brother, making this a related party
transaction. 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. TPH had no financial
statements or assets and liabilities at the time of acquisition. The essence of
the arrangement was to provide Kevin Harrington and Tim Harrington additional
compensation in the form of common stock through the purchase of TPH. As a
result, the shares are being shown as issued for compensation expense with a
charge to operating expenses in the amount of $750,000.
20
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 5 - EQUITY TRANSACTIONS (Continued)
During the first quarter of 2000, the Company issued 35,000 shares of its common
stock for services rendered, valued at $57,750 or $1.65 per share, the market
price of the stock at the time of issuance. In addition, three shareholders of
the Company withdrew $138,500 against capital previously contributed by them to
the Company. The original contributions were recorded as additional paid-in
capital and the withdrawals are a reduction in the same account.
During the second quarter of 2000, the Company issued 500,000 shares of its
common stock for cash of $1,000,000 or $2.00 per share. The Company paid
$100,000 in stock offering costs as a result of the stock offering. The Company
also issued 170,700 shares of its common stock for services rendered, valued at
$341,400 or $2.00 per share, the market price of the stock at the time of
issuance. In addition, shareholders of the Company withdrew $27,600 against
capital previously contributed by them to the Company. The original
contributions were recorded as additional paid-in capital and the withdrawals
are a reduction in the same account.
NOTE 6 - NOTES PAYABLE - RELATED PARTIES
Notes payable - related parties consisted of the following:
June30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
Note payable to a shareholder, unsecured,
interest at 8.0%, interest payments due quarterly
beginning March 31, 1999, principal balance due
December 31, 2000. $ 35,156 $ 35,156
Note payable to a shareholder, unsecured, interest
at 8.0%, interest payments due quarterly beginning
March 31, 1999, principal balance due December
31, 2000. 50,000 50,000
Note payable to a related company, unsecured,
interest at 10%, principal and interest balance
due on demand. 125,000 125,000
Note payable to a related company, unsecured,
interest at 10%, principal and interest balance
due on demand. 100,000 100,000
Note payable to a related company, unsecured,
interest at 10%, principal and interest balance
due June 1, 2000. 50,000 50,000
--------- ---------
Total notes payable - related parties 360,156 360,156
Less: current portion (360,156) (360,156)
--------- ---------
Long-term notes payable - related parties $ 0 $ 0
21
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 6 - NOTES PAYABLE - RELATED PARTIES (Continued)
Maturities of notes payable - related parties are as follows:
Period Ending
June 30,
---------------
2001 . . . . . . . . . . . . . . . . . . . . . . . . . $ 360,156
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 360,156
=============
NOTE 7 - NOTES PAYABLE
Notes payable consisted of the following:
June 30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
Note payable to Nations Bank, secured by stock,
interest at 10%, interest payments due monthly,
principal balance due on demand. . . . . . $ 39,724 $ 39,724
Note payable to a company, unsecured, interest
at 8.0%, interest payments due monthly, principal
balance due July 8, 2000. . . . . . . . . . . . . . 0 72,715
Note payable to an individual, secured by inventory
of the Company, interest at 3.0% per month until
paid, balance due on demand. . . . . . . . . . 278,750 0
----------- -----------
Total notes payable . . . . . . . . . . . . . . 318,474 112,439
Less: current portion . . . . . . . . . . . . . (318,474) (112,439)
----------- -----------
Long-term notes payable . . . . . . . . . . $ 0 $ 0
=========== ===========
Maturities of notes payable are as follows:
Period Ending
June 30,
---------------
2001 . . . . . . . . . . . . . . . . . . . . . . . . . $ 318,474
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
-------------
Total $ 318,474
=============
NOTE 8 - LINE OF CREDIT
The Company has a line of credit with Nations Bank of $150,000. As of June 30,
2000 and December 31, 1999, the balance owed was $-0- and $132,148,
respectively. Borrowings under the line of credit are guaranteed by the Company
and bear interest at 9.5%.
22
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 9 - FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 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 instruments 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. The carrying
amount of long-term debt approximates fair value based on the borrowing rate
(10.0%) currently held by the Company for a bank loan.
NOTE 10 - OUTSTANDING STOCK OPTIONS
The Company applies Accounting Principles Board ("APB") Option 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
all stock option plans. Under APB Option 25, compensation cost is recognized
for stock options granted to employees when the option price is less than the
market price of the underlying common stock on the date of grant.
FASB Statement 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
requires the Company to provide proforma information regarding net income and
net income per share as if compensation costs for the Company's stock option
plans and other stock awards had been determined in accordance with the fair
value based method prescribed in SFAS No. 123. The Company estimates the fair
value of each stock award at the grant date by using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants,
respectively; dividend yield of zero percent for all years; expected volatility
of 32 percent for all years; risk-free interest rates of 10.0 percent and
expected lives of 4.0 years.
Under the accounting provisions of SFAS No. 123, the Company's net income (loss)
would have been changed by the pro forma amounts indicated below:
June30,
2000 1999
--------------------------------------------------------------------------------
Net income (loss):
As reported $ 381,667 $ (1,276,283)
Pro forma $ 328,195 $ (1,276,283)
Basic income (loss) per share:
As reported $ 0.06 $ (0.29)
Pro forma $ 0.05 $ (0.29)
During the initial phase-in period of SFAS 123, the effect on pro forma results
are not likely to be representative of the effects on pro forma results in
future years since options vest over several years and additional awards could
be made each year.
23
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 10 - OUTSTANDING STOCK OPTIONS (Continued)
A summary of the status of the Company's stock option plans as of June 30, 2000
and changes during the year is presented below:
June 30,
2000
--------------------------------------------------------------------------------
Weighted
Average
Shares Exercise
Price
--------------------------------------------------------------------------------
Outstanding, December 31, 1999
Granted 420,000 5.00
Canceled 0 0
Exercised 0 0
-----------------------
Outstanding, June 30, 2000 420,000 $ 5.00
-----------------------
Exercisable, June 30, 2000 210,000 $ 3.25
-----------------------
Weighted average fair value of options $ 2.12
==========
Outstanding Exercisable
--------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 6/30/00 Life Price at 6/30/00 Price
--------------------------------------------------------------------------------
$ 2.50 105,000 4.00 $ 2.50 105,000 $ 2.50
4.00 105,000 4.00 4.00 105,000 4.00
6.00 105,000 4.00 6.00 0 0
7.50 105,000 4.00 7.50 0 0
$ 2.50-7.50 420,000 4.00 $ 5.00 210,000 $ 3.25
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.
Additional stock options are available to Kevin Harrington, Tim Harrington and
Mel Arthur based on the stock trading performance of the Company's common stock.
If the Company's shares are trading at a price of $15.00 per share, 256,500
options will be granted at an exercise price of $7.50 per share. If the
Company's shares are trading at a price of $20.00 per share, 256,500 options
will be granted at an exercise price of $7.50 per share. If the Company's
shares are trading at a price of $25.00 per share, 327,000 options will be
granted at an exercise price of $7.50 per share. As of June 30, 2000, the
Company's common stock has not reached any of the performance measurements
mentioned above.
24
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 11 - BASIC AND DILUTED EARNINGS PER SHARE
The computation of basic and diluted income per share of common stock is based
on the weighted average number of shares outstanding during the period of the
financial statements as follows:
For the Six Months Ended For the Six Months Ended
June 30, 2000 June 30, 1999
Income Shares Per-Share Loss Shares Per-Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
--------------------------------------------------------------------------------
Basic Earnings (Loss) Per Share
Income available to
common stockholders
$ 381,667 6,500,548 $ 0.06 $ (1,276,283) 4,434,995 $ (0.29)
Effect of Dilutive Securities
Common stock options
0 420,000 0 0 0 0
--------------------------------------------------------------------------------
Diluted Earnings (Loss) Per Share
Income available to
common stockholders
plus assumed conversions
$ 381,667 6,920,548 $ 0.06 $ (1,276,283) 4,434,995 $ (0.29)
================================================================================
For the Three Months Ended For the Three Months Ended
June 30, 2000 June 30, 1999
Income Shares Per-Share Loss Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic Earnings (Loss) Per Share
Income available to
common stockholders
$ 271,699 6,684,778 $ 0.04 $ (640,016) 5,095,192 $ (0.13)
======= ========
Effect of Dilutive Securities
Common stock options
0 420,000 0 0 0 0
--------------------------------------------------------------------------------
Diluted Earnings (Loss) Per Share
Income available to
common stockholders
plus assumed conversions
$ 271,699 7,104,778 $ 0.04 $ (640,016) 5,095,192 $ (0.13)
Options to purchase 420,000 shares of commonstock were outstanding at
June30,2000 (see Note 10). These options expire on June 30, 2004 and were
issued with an exercise price equal to or above the market value of the stock
at the date ofissuance and have been included in the computation of diluted
earnings per share.
25
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999
NOTE 12 - SUBSEQUENT EVENTS
The Company has entered into an Agreement and Plan or Reorganization (Agreement)
with TeleServices Internet Group, Inc. (TSIG). As part of the Agreement, the
Company will transfer its assets, liabilities and business operations to As Seen
On Tv pc.com, Inc. (ASOT) in exchange for shares of stock of this private
company. TSIG will then acquire 100% of the stock of ASOT in exchange for
shares of TSIG common stock. The Agreement is subject to majority shareholder
approval and can be canceled by either party involved if TSIG's stock is trading
below a certain price level at the time the Agreement is finalized.
26
<PAGE>
