FORM 10-Q-SB-A2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[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
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Reliant Interactive Media Corp.
formerly Reliant Corporation
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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: 6,135,440
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 6,135,440.
<PAGE>
PART I: FINANCIAL INFORMATION
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Item 1. Financial Statements.
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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).
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Item 2. Management's Discussion and Analysis or Plan of Operation.
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(a) Plan of Operation.
(1) Plan of Operation for the next twelve months.
Cash Requirements and of Need for additional funds, twelve months
We are "a development stage Company" and have only limited capital
resources. While revenues are increasing significantly, it is necessary for the
Company to seek additional capital over time to optimize the accomplishment its
business plan. The following disclosure treats our interim funding for the year
now past, and our plans and arrangements for future funding.
On or about February 23, 1999, the Company received $330,000.00 for the
sale of 1,000,000 new investment shares of common stock (before the second
reverse split) from six highly sophisticated investors. For information about
these investors, please refer to Item 4 of Part II, RECENT SALES OF UNREGISTERED
SECURITIES. This special investment program was specifically targeted to
infomercial production, by means of a special royalty arrangement with the
investors: the investors will receive an aggregate of 5% of the gross revenues
(as defined by agreement) from sales generated by four specified infomercials
produced, until 120% of the investment has been returned to the investors.
Thereafter, the percentage received by these investors will be reduced to an
aggregate of 4%. The price was arrived at in arms-length negotiations in the
context of the entire transaction. The Company expects to value the 1,000,000
shares at the investment price of $330,000.00 and to treat royalty payments to
investors as expenses, in the same manner as if royalty payments were not
connected with the purchase of shares.
These 1,000,000 shares are included in the earnings per share analysis,
found in the financial statements of this Registrant.
On or about March 24, 1999, the Company made an agreement with Oasis
Entertainment's Fourth Movie Project, Inc. (a related party transaction) to
provide funding in the amount of $250,000.00 for use specifically in the
production of three additional infomercials. Oasis is to receive 250,000 shares
(after the second reverse-split) of common stock upon completion of the funding
in April, plus a royalty of 2% of the adjusted gross revenues derived on all
products designated in the agreement until Oasis has been paid $625,000.00, and
thereafter 1% thereof in perpetuity. This transaction is deemed to be a related
party for the reason that, and only for the reason that, Karl Rodriguez is the
fourth Director of this registering Company and is also Secretary and a Director
of Oasis Entertainment's Fourth Movie Project, Inc. These 250,000 shares have
been authorized, but not issued yet. The Company expects to value the shares at
$250,000.00. The Registrant will treat royalty payments to investors as
expenses, in the same manner as if royalty payments were not related to purchase
of shares. The shares are treated as if issued for earnings per share
calculations.
2
<PAGE>
We were able to generate enough sales revenues to satisfy our cash
requirements through the end of 1999. Our evaluation of the next twelve months
is different.
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 year 2000.
The Registrant has 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
had been opened and must be completed by March 31, 2000, unless 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. 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.
While there is no guaranty that funding plans will materialize as expected,
we believe that our present arrangements will provide sufficient working capital
to optimize operations for the next twelve months.
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.
3
<PAGE>
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.
Expected purchase or sale of plant and significant equipment. None.
Expected significant change in the number of employees. None.
(b) Discussion and Analysis of Financial Condition and Results of Operations.
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, with continued
improvement throughout that year. 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.
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. Revenues increased significantly in 1999; however such
increase should not be considered dramatic, for 1999 was the first real year of
operation under our present business plan. The first quarter was one in which
the Harringtons put in place personnel and selected the first products to
produce.
4
<PAGE>
The second quarter was one in which we aired two successful shows (Trash or
Treasure and Sobakawa Insoles). We also aired other shows which were not so
successful in that quarter. It is not to be expected that every project would be
a stellar success, and two successes in a single quarter is considered a good
result by us.
During the third quarter, we increased staff with a producer and associate
producer for our infomercials, to have better continuity and control of the
details of our production activities. These are two new salaried individuals.
Several other shows were tested during this period. Two of them became
successful (Wonder Steamer and Pest Offense). We also developed our successful
computer infomercial.
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.
Management believes that revenues and growth will continue to increase, 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 in proportion to the
rate of growth achieved in 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, and second quarter of 1999,
were $352,483 and $3,135,013. 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.
Thus the sales of the first half of 1999 total $3,477,490. The increase in
the second 1999 quarter reflects the launching of full operations in April, more
completely reflected by the end of the second half of 1999. The significance of
these figures is not only that revenues have increased exponentially, due to
operations, but that the Company has achieved marginal profitability during the
second quarter, the three months ended June 30, 1999.
Revenues have improved in every quarter of operations in 1999. We expect
them to continue to improve in the next twelve months. Although certain
expenses, such as production and media costs are related to revenue creation and
would rise in some proportion to revenues, there are other expenses that are not
expected to rise proportionally. General and administrative expenses would not
rise as projects increase and revenues improve. We are able to generate
increasing revenues without significant increase in employees, as production and
fulfillment activities are generally out-sourced. The Company has new products
to sell each period, in additions to others, so that the number of products
increase from period to period. For the first quarter there were 5, for the
second 8, the third 8, and the fourth 10 products for sale. We just recently
initiated marketing of products on QVC home shopping channel. On QVC we are
beginning to sell some products in the traditional short-form live segment that
are seen on television shopping networks. These new revenues are insubstantial
as of the end of 1999, but are expected to become a significant component of
total revenues as more products are sold and exposure increases on the shopping
network.
5
<PAGE>
Product sales are expected to increase in direct proportion to our ability
to acquire media time to promote them. 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.
Cost of goods sold included the total cost of acquiring actual products
acquired for resale. Returns and allowances are deducted from sales.
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.
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General and Administrative Expenses $ Sales % of Sales
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all of 1998 792,533 120,234 659.16
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first quarter 1999 337,843 352,483 95.85
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second quarter 1999 1,010,984 3,135,013 32.25
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third quarter 1999 1,299,014 5,918,342 21.95
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These figures reflect a continuing improvement in this relationship, due
to expanding operations, additional products and customers. These expenses do
not rise proportionally as revenues increase. General & Administrative expenses
include the following: fulfillment costs; sales commissions; royalties;
automobile expense; banking fees; consulting fees; insurance; office supplies;
postage & delivery; professional fees; salaries and wages; telephone; and travel
& entertainment.
================================================================================
Research and Development $ Sales % of Sales
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all of 1998 41,449 120,234 34.47
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first quarter 1999 4,754 352,483 1.35
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second quarter 1999 25,401 3,135,013 0.81
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third quarter 1999 10,465 5,918,342 0.18
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These figures reflect that Research and Development is trending downward as
a decreasing percentage of sales. Research and Development costs should remain
constant as they represent costs associated with development of new infomercial
promotional projects, rather than new technologies. It does not include
royalties on rights acquired. It does not include the cost of acquiring products
for resale. It does not include production and media costs or marketing. It
involves searching for new products, obtaining rights to sell them, and possible
refinement in the products, to achieve more economic manufacture and resale at
attractive pricing. At any given time, there are one or two products/projects
under development. While the costs are expected to remain substantially
constant, they would be expected to decrease as a percentage of sales.
6
<PAGE>
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Production and Media Costs $ Sales % of Sales
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all of 1998 -0- 120,234 0.00
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first quarter 1999 355,279 352,483 100.79
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second quarter 1999 1,168,432 3,135,013 37.27
================================================================================
third quarter 1999 2,778,243 5,918,342 46.94
================================================================================
These expenses were not a factor in 1998, due to the differing nature of
products marketed. These figures for 1999 reflect an improvement in the ratio of
these expenses to sales, even as total costs increase with expanding operations.
Production and media costs, consisting of the cost of producing media
productions and the costs of buying media slots, are estimated to settle in the
range of 40% to 50% of sales, overall. This average allows for less successful
or unsuccessful projects. Media expenses for successful projects will be between
35% and 46% of sales, proportionally.
================================================================================
Marketing $ Sales % of Sales
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all of 1998 339,877 120,234 282.68
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first quarter 1999 202,596 352,483 57.48
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second quarter 1999 72,399 3,135,013 2.31
================================================================================
third quarter 1999 585,515 5,918,342 9.89
================================================================================
These figures reflect an improvement in the ratio of these expenses to
sales, even as total costs increase with expanding operations. Marketing,
consisting of consumer relations and internet promotion is expected to decrease,
as a percent of sales over time. Marketing includes Telemarketing expense, other
marketing expenses and prepaid advertising. It does not include media buys in
direct infomercial advertising for immediate product fulfillment. Those items
are production and media expenses.
================================================================================
Rent $ Sales % of Sales
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all of 1998 48,226 120,234 40.11
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first quarter 1999 12,951 352,483 3.67
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second quarter 1999 17,001 3,135,013 0.54
================================================================================
third quarter 1999 15,205 5,918,342 0.26
================================================================================
We had leased initially approximately four thousand (4,000) square feet of
office space pursuant to a year lease for our Clearwater, Florida, principal
executive offices. The lease, which commenced in 1999, provided for monthly rent
of $6,750.42, or annual rent payments of $81,005.04 The facility encompassed 25
separate offices and a board room. Some additional space was later taken at a
monthly rent of $16,400.00, which annualized to $196,800.00.
7
<PAGE>
We have entered into a new lease for Suite 200, Island Center, 2701 N.
Rocky Point Drive, Tampa Florida 33607, dated January 13, 2000, and commenced
February 25, 2000. The premises leased constitutes 5,923 square feet on the
second floor, and an additional 1,080 square feet of unallocated space in the
building. We estimate that rent expenses will be about $40,000 per quarter, for
the next year and increase approximately 4% per year over the five year term of
the lease, net of subleases, and will continue to decrease as a percentage of
sales.
================================================================================
Total Operating Expenses $ Sales % of Sales
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all of 1998 1,228,714 120,234 1,021.94
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first quarter 1999 915,099 352,483 259.62
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second quarter 1999 2,314,303 3,135,013 73.82
================================================================================
third quarter 1999 5,918,342 0.00
================================================================================
This comparison shows that total operating expenses are declining as a
percentage of sales, even as total expenses are increasing with expanded
operations. These tables also illustrate the significance of the second
operating quarter of 1999, when operations turned decisively favorable. Total
operating expenses as a percent of sales will remain in the range of 75% to 80%,
as sales increase. The largest single segment, and most material factor, is in
the direct operating area of infomercial production and media costs. These
operations are not only the major area of expense, but it is these activities
which drive sales. It is generally reliable in this industry that higher media
costs are required for increased sales.
Profitability, as indicated previously, appeared in the second quarter of
1999.
================================================================================
Operating Income (Loss) $ Sales % of Sales
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all of 1998 (1,134913) 120,234 (943.92)
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first quarter 1999 (631,147) 352,483 (179.06)
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second quarter 1999 374,830 3,135,013 11.96
================================================================================
third quarter 1999 396,815 5,918,342 6.70
================================================================================
The achievement of profitability, in the second quarter, does not guaranty
that the trend to increasing profitability will follow. However, it appears to
management that operations are expanding in an orderly and promising manner, and
that expenses are being managed appropriately. Profitability has improved with
sales. As most other costs remain constant, or decrease, as percent of sales,
total profitability, as such a percentage, will fluctuate inversely with the
cost of goods sold. Product costs, as distinguished from infomercial production
and media costs, must be kept under control to maintain real profitability.
While higher media profile and quality of infomercial production tend to
increase sales, increased cost of products sold would have a depressing effect
upon profitability. On the one hand, Infomercial products need to be
attractively priced. On the other, the cost of producing the products must be
controlled and managed well.
8
<PAGE>
Gross Margins on the financial statements indicate the amount by which
Sales exceed the Cost of Goods Sold. In view of the insubstantial nature of 1998
activities, and their lack of relationship to current products and marketing
methods, the comparison of 1998 to 1999 periods is not believed to be materially
instructive or useful. It is clear, however, from the Registrant's Financial
Statements, that the Gross Margins during the three months last ended September
30, 1999, represent more than half of the total for the nine months so ended.
Management believes that this last analysis is the most salient indicator
of increasing profitability.
Balance Sheet. As previously stated the dramatic increase in corporate
financial condition during 1999, as compared to 1998, is not considered
instructive. The 1999 activities should be viewed as the start-up of a new mode
of business activity in 1999, with some apparent success and improvement in the
financial condition of the Registrant, due particularly to increasingly
successful operations. Fortunes may change, however, and no assurance ever
exists that profitable trends will continue, or that the future will be like the
past. A company's initial growth may not be indicative of a sustainable rate of
continued growth. While the Registrant has not yet achieved its potential, there
can be no certain prediction at what level its growth may slow, or when, if at
all, it may reach an optimum level of operations.
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.
Conclusion. While this Company is presently able to manage its present
phase of development, for a indefinite interim, it cannot regard its financial
condition as optimal. Unless events in the future are favorable, both in terms
of profit from operations now being undertaken, and also favorable in attracting
investor interest, the Company may not be able to sustain a stable growth
pattern for the Company. These remarks should be understood in context,
discussed elsewhere, that increasing revenues are expected to provide
substantially all of the requirements for continued operations at present levels
and for some possible growth. This company must grow to reach its full
potential. For this reason, stability at its present levels is not considered
optimal for long-term growth.
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. The Registrant has 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 intends to defend this action vigorously and does not
consider this action to be meritorious, as against it, or a significant
financial exposure to it in any case.
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
9
<PAGE>
None
Item 5. Other Information
This Issuer has filed to Register its common stock under ss.12(g) of the
Securities Exchange Act of 1934. While its Registration is effective for
purposes of invoking its reporting requirements, its Form 10-SB has not cleared
final comments by the Staff of the Securities and Exchange Commission, and is
not yet in its final form. Persons accessing this Company's Form 10-SB filings,
on EDGAR or otherwise, should exercise caution and be aware that certain changes
in the final form may occur.
Item 6. Exhibits and Reports on Form 8-K
None
Exhibit Index
Financial Statements and Documents
Furnished as a part of this Registration Statement
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).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-Q Report for the Quarter ended September 30, 1999 has been signed below
by the following persons on behalf of the Registrant and in the capacity and on
the date indicated.
Dated: March 8, 2000
Reliant Interactive Media Corp.
formerly Reliant Corporation
by
/s/ /s/
- --------------------------------- ----------------------------------
Kevin Harrington Tim Harrington
CHAIRMAN AND CEO/DIRECTOR PRESIDENT AND COO/DIRECTOR
/s/ /s/
- --------------------------------- ----------------------------------
Mel Arthur Karl E. Rodriguez
EXECUTIVE VICE SECRETARY/DIRECTOR
PRESIDENT/DIRECTOR
10
<PAGE>
Exhibit F3Q
UN-AUDITED FINANCIAL STATEMENTS
for the three months and nine months ended September 30, 1999
11
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and December 31, 1998
12
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
September 30, December 31,
1999 1998
------------- -----------
(Unaudited)
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
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
13
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -----------
(Unaudited)
<S> <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>
The accompanying notes are an integral part of these
consolidated financial statements.
14
<PAGE>
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>
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>
The accompanying notes are an integral part of these
consolidated financial statements.
15
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated
Shares Amount Capital Deficit
----------- ----------- ----------- -----------
<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)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
16
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(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>
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>
The accompanying notes are an integral part of these
consolidated financial statements.
17
<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>
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>
The accompanying notes are an integral part of these
consolidated financial statements.
18
<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.
19
<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.
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
=========
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.
20
<PAGE>
Exhibit F2Q
UN-AUDITED FINANCIAL STATEMENTS
for the three and six months ended June 30, 1999
21
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and December 31, 1998
22
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
CURRENT ASSETS
Cash $ -- $ 122,257
Accounts receivable, net 1,047,675 --
Inventory 64,313 27,342
----------- -----------
Total Current Assets 1,111,988 149,599
----------- -----------
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 (15,610) (10,258)
----------- -----------
Net Property and Equipment 55,607 60,959
----------- -----------
OTHER ASSETS
Deposits 1,050 12,773
Other assets 20,000 --
Prepaid advertising 452,012 85,302
Patent and trademark costs 26,668 26,668
----------- -----------
Total Other Assets 499,730 124,743
----------- -----------
TOTAL ASSETS $ 1,667,325 $ 335,301
=========== ===========
23
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Cash overdraft $ 91,647 $ --
Accounts payable 561,975 73,192
Accrued expenses 43,897 5,418
Payable - related party 38,898 --
Notes payable - related parties, current portion 200,000 --
Notes payable, current portion 40,000 40,000
----------- -----------
Total Current Liabilities 976,417 118,610
----------- -----------
LONG-TERM DEBT
Notes payable - related parties 87,500 87,500
----------- -----------
Total Long-Term Debt 87,500 87,500
----------- -----------
TOTAL LIABILITIES 1,063,917 206,110
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of $0.001
par value, 6,035,440 and 3,373,570 shares issued
and outstanding, respectively 6,035 3,374
Additional paid-in capital 3,107,824 1,359,985
Accumulated deficit (2,510,451) (1,234,168)
----------- -----------
Total Stockholders' Equity 603,408 129,191
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,667,325 $ 335,301
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $ 2,885,013 $ 30,059 $ 3,237,490 $ 60,118
COST OF GOODS SOLD 445,880 16,664 514,405 33,328
----------- ----------- ----------- -----------
GROSS MARGIN 2,439,133 13,395 2,723,085 26,790
----------- ----------- ----------- -----------
OPERATING EXPENSES
Depreciation 2,676 1,657 5,352 3,314
Bad debt expense 17,410 -- 17,410 --
General and administrative 1,010,984 165,696 1,347,827 331,392
Research and development 25,401 10,362 30,155 20,724
Production and media costs 1,168,432 -- 1,523,711 --
Marketing 72,399 38,255 274,995 76,510
Rent 17,001 12,057 29,952 24,114
----------- ----------- ----------- -----------
Total Operating Expenses 2,314,303 228,027 3,229,402 456,054
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 124,830 (214,632) (506,317) (429,264)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Loss on impairment of goodwill -- -- (750,000) --
Interest expense (14,941) (2,258) (20,061) (4,516)
Interest income 95 -- 95 --
----------- ----------- ----------- -----------
Total Other Income (Expenses) (14,846) (2,258) (769,966) (4,516)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES 109,984 (216,890) (1,276,283) (433,780)
INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 109,984 $ (216,890) $(1,276,283) $ (433,780)
=========== =========== =========== ===========
BASIC INCOME (LOSS) PER SHARE $ 0.02 $ (0.08) $ (0.27) $ (0.15)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated
Shares Amount Capital Deficit
----------- ----------- ----------- -----------
<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 and Cigar
Television Network, Inc. 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 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 six months ended
June 30, 1999 (unaudited) -- -- -- (1,276,283)
----------- ----------- ----------- -----------
Balance, June 30, 1999 (unaudited) 6,035,440 $ 6,035 $ 3,107,824 $(2,510,451)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 109,984 $ (216,890) $(1,276,283) $ (433,780)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 2,676 1,657 5,352 3,314
Bad debt 17,410 -- 17,410 --
Loss on impairment -- -- 750,000 --
Common stock issued for services 2,750 -- 50,500 --
Changes in assets and liabilities:
Accounts receivable (799,855) -- (1,065,085) --
Prepaids and advances 20,396 -- (1,050) --
Inventory (64,313) -- (36,971) --
Deposits -- 4,932 12,773 9,864
Prepaid expenses (378,647) -- (366,710) --
Other assets 10,000 -- 10,000 --
Cash overdraft 91,647 -- 91,647 --
Accounts payable 410,408 18,290 488,783 36,580
Accrued expenses (321) -- 38,479 --
----------- ----------- ----------- -----------
Net Cash Used in Operating
Activities (597,865) (192,011) (1,301,155) (384,022)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Patent and trademark costs -- (6,885) -- (26,668)
----------- ----------- ----------- -----------
Net Cash Used in Investing Activities -- (6,885) -- (26,668)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payments) from notes payable (8,279) -- 238,898 --
Proceeds from issuance of common
stock 550,000 100,000 940,000 100,000
Proceeds from additional capital
contribution -- 68,991 -- 250,880
----------- ----------- ----------- -----------
Net Cash Provided by Financing
Activities $ 541,721 $ 168,991 $ 1,178,898 $ 350,880
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ (56,144) $ (29,905) $ (122,257) $ (59,810)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 56,144 180,100 122,257 210,005
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ -- $ 150,195 $ -- $ 150,195
=========== =========== =========== ===========
Cash Payments For:
Income taxes $ -- $ -- $ -- $ --
Interest $ 14,941 $ -- $ 20,061 $ --
Non-Cash Financing Activities:
Common stock issued for services $ 2,750 $ -- $ 50,500 $ --
Common stock issued for subsidiary $ -- $ -- $ 750,000 $ --
Common stock issued for other assets $ 10,000 $ -- $ 10,000 $ --
</TABLE>
28
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 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 June 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 June 30, 1999 and 1998 are not necessarily indicative of
the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the relation of assets and liquidation of liabilities in
the normal course of business.
The Company has incurred significant losses since inception and has
had no significant operating revenues until 1999. The Company believes
it can meet and exceed its operating expenses through increased sales
in 1999.
NOTE 3 - 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 4 - 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.
29
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 1999 and December 31, 1998
NOTE 4 - COMMON STOCK TRANSACTIONS (Continued)
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.
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 5 - 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 June 30, 1999.
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
=======
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 6 - 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.
30
<PAGE>
Exhibit F1Q
UN-AUDITED FINANCIAL STATEMENTS
for the three months ended March 31, 1999
31
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and December 31, 1998
32
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
March 31, December 31,
1999 1998
--------- ---------
(Unaudited)
CURRENT ASSETS
Cash $ 56,144 $ 122,257
Accounts receivable 265,230 --
Prepaids and advances 21,446 --
Inventory -- 27,342
--------- ---------
Total Current Assets 342,820 149,599
--------- ---------
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 (12,934) (10,258)
--------- ---------
Net Property and Equipment 58,283 60,959
--------- ---------
OTHER ASSETS
Deposits -- 12,773
Prepaid advertising 73,365 85,302
Patent and trademark costs 26,668 26,668
--------- ---------
Total Other Assets 100,033 124,743
--------- ---------
TOTAL ASSETS $ 501,136 $ 335,301
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 151,567 $ 73,192
Accrued expenses 44,218 5,418
Payable - related party 247,177 --
Notes payable - current portion 40,000 40,000
----------- -----------
Total Current Liabilities 482,962 118,610
----------- -----------
LONG-TERM DEBT
Notes payable - shareholders 87,500 87,500
----------- -----------
Total Long-Term Debt 87,500 87,500
----------- -----------
TOTAL LIABILITIES 570,462 206,110
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000 shares authorized of $0.001
par value, 5,159,940 and 3,373,570 shares issued
and outstanding, respectively 5,160 3,374
Additional paid-in capital 2,545,949 1,359,985
Deficit accumulated during the development stage (2,620,435) (1,234,168)
----------- -----------
Total Stockholders' Equity (Deficit) (69,326) 129,191
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 501,136 $ 335,301
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the Three Months Ended June 15,
March 31, 1995 Through
------------------------------ March 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
SALES $ 352,477 $ 30,059 $ 472,711
COST OF GOODS SOLD 68,525 16,664 135,179
----------- ----------- -----------
GROSS MARGIN 283,952 13,395 337,532
----------- ----------- -----------
OPERATING EXPENSES
Depreciation 2,676 1,657 12,934
General and administrative 692,122 165,696 1,547,098
Research and development 4,754 10,362 46,203
Marketing 202,596 38,255 567,620
Rent 12,951 12,057 69,213
----------- ----------- -----------
Total Operating Expenses 915,099 228,027 2,243,068
----------- ----------- -----------
OPERATING LOSS (631,147) (214,632) (1,905,536)
----------- ----------- -----------
OTHER INCOME (EXPENSES)
Loss on impairment of goodwill (750,000) -- (750,000)
Interest expense (5,120) (2,258) (14,153)
Interest income -- -- 296
Other income -- -- 48,958
----------- ----------- -----------
Total Other Income (Expenses) (755,120) (2,258) (714,899)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (1,386,267) (216,890) (2,620,435)
INCOME TAXES -- -- --
----------- ----------- -----------
NET LOSS $(1,386,267) $ (216,890) $(2,620,435)
=========== =========== ===========
BASIC LOSS PER SHARE $ (0.38) $ (0.38)
=========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES 3,625,859 570,400
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Additional Accumulated
Common Stock Paid-in During the
----------------------------- Development
Shares Amount Capital Stage
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, June 15, 1995 -- $ -- $ -- $ --
Shares issued to the founders at
inception at $0.0008 per share 2,369,600 2,370 (370) --
Net loss from inception on June 15,
1995 through December 31, 1995 -- -- -- (2,000)
----------- ----------- ----------- -----------
Balance, December 31, 1995 2,369,600 2,370 (370) (2,000)
Capital contributions, 1996 -- -- 34,401 --
Net loss for the year ended
December 31, 1996 -- -- -- (32,329)
----------- ----------- ----------- -----------
Balance, December 31, 1996 2,369,600 2,370 34,031 (34,329)
Capital contributions, 1997 -- -- 343,688 --
Net loss for the year ended
December 31, 1997 -- -- -- (64,926)
----------- ----------- ----------- -----------
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 and Cigar
Television Network, Inc. 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)
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
----------------------------- Paid-in Development
Shares Amount Capital Stage
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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 $1.57 per share
(unaudited) 248,000 248 389,752 --
Common stock issued for services
valued at $1.25 per share (unaudited) 38,200 38 47,712 --
Fractional shares issued in the reverse
stock split (unaudited) 170 -- -- --
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 three months ended
March 31, 1999 (unaudited) -- -- -- (1,386,267)
----------- ----------- ----------- -----------
Balance, March 31, 1999 (unaudited) 5,159,940 $ 5,160 $ 2,545,949 $(2,620,435)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended June 15,
March 31, 1995 Through
------------------------------ March 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,386,267) $ (216,890) $(2,620,435)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 2,676 1,657 12,934
Loss on impairment 750,000 -- 750,000
Common stock issued for services 47,750 -- 177,500
Changes in assets and liabilities:
Accounts receivable (265,230) -- (265,230)
Prepaids and advances (21,446) -- (21,446)
Inventory 27,342 -- --
Deposits 12,773 4,932 --
Prepaid expenses 11,937 -- (73,365)
Accounts payable 78,375 18,290 151,567
Accrued expenses 38,800 -- 44,218
----------- ----------- -----------
Net Cash Used in Operating Activities (703,290) (192,011) (1,844,257)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment -- -- (71,217)
Patent and trademark costs -- (19,783) (26,668)
----------- ----------- -----------
Net Cash Used in Investing Activities -- (19,783) (97,885)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 247,177 -- 374,677
Proceeds from issuance of common stock 390,000 -- 905,500
Proceeds from additional capital contribution -- 181,889 718,109
----------- ----------- -----------
Net Cash Provided by Financing Activities 637,177 181,889 1,998,286
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (66,113) (29,905) 56,144
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 122,257 210,005 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 56,144 $ 180,100 $ 56,144
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended June 15,
March 31, 1995 Through
------------------------ March 31,
1999 1998 1999
-------- --------- --------
<S> <C> <C> <C>
Cash Payments For:
Income taxes $ -- $ -- $ --
Interest $ 5,120 $ -- $ 8,735
Non-Cash Financing Activities:
Common stock issued for services $ 47,750 $ -- $177,500
Common stock issued for subsidiary $750,000 $ -- $750,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
39
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 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 March 31, 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 March 31, 1999 and 1998 are not necessarily indicative
of the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the relation of assets and liquidation of liabilities in
the normal course of business. The Company has incurred operating
losses from its inception through December 31, 1998. It has not
established revenues sufficient to cover its operating costs and to
allow it to continue as a going concern. Management believes that
revenues will continue to increase in 1999 allowing the Company to
cover its product development and marketing costs. It is also the
intent of the Company to complete a limited offering of its common
stock in 1999 to help cover its operating expenses. In the interim,
shareholders of the Company have committed to meet its operating
needs.
40
