<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 2-74785-B
---------
Next Generation Media Corp.
----------------------------------------------
(Name of small business issuer in its charter)
Nevada 88-0169543
- -------------------- ------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8380 Alban Road
Springfield, Virginia 22150 (703) 913-0416
- --------------------------------- --------------
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act: none
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes No X
----- -----
Check if there is no disclosure of delinquent filers to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $1,808,713.
-----------
<PAGE> 2
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. As of November 5, 1999, the aggregate market value of the
Common Stock of the issuer held by non-affiliates was $5,648,928, calculated on
the basis of a recent private sale of Common Stock as of September 21, 1999. The
aggregate market value of the Preferred Stock of the issuer held by
non-affiliates, based on its conversion into Common Stock (at the assumed Common
Stock price used in the prior calculation) as of November 5, 1999, was
$800,000. There is no established public trading market for either the Common
Stock or the Preferred Stock.
The total number of issued and outstanding shares of the issuer's common
stock, par value $0.01, as of November 5, 1999 was 4,260,818.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Forman (Check one): Yes ; No X .
--- ---
<PAGE> 3
PART I
ITEM 1. BUSINESS.
THIS ANNUAL REPORT ON FORM 10K CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITH RESPECT TO THE ISSUER'S BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. THE WORDS "ESTIMATE," "PROJECT," "INTEND," "EXPECT,"
"ANTICIPATE" AND SIMILAR EXPRESSION ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS INCLUDE, BUT ARE NOT
NECESSARILY LIMITED TO, THE ABILITY OF THE ISSUER'S ABILITY TO ACQUIRE NEW
BUSINESSES AND GENERATE NEW CASH FLOWS THERE FROM, AND THE ISSUER'S ABILITY TO
OBTAIN ADDITIONAL CAPITAL TO SUPPORT ITS OPERATIONS AND GROWTH.
Introduction. Next Generation Media Corp. (the "Company" or the "issuer")
was incorporated on November 21, 1980 under the laws of the State of Nevada in
the name Micro Tech Industries Inc. On February 6, 1997, an unrelated third
party purchased 85.72% of the outstanding stock of Microtech Industries, Inc.
from its majority shareholder for $50,000 in cash. Effective March 31, 1997,
Microtech Industries changed its name to Next Generation Media Corporation.
Current management believes that prior to February 6, 1997, the Company was a
"shell" company for at least five years without assets and liabilities. Current
management is unaware of any operating history of the Company prior to February
6, 1997.
Reporting Period Principal Services. During the reporting period, the
Company operated as a publicly owned holding company with a single wholly owned
operating subsidiary, Independent News Inc. ("INI"). INI engages in the
community newspaper publishing business. It produces and issues weekly free
newspapers distributed via the mail to approximately 68,000 homes in northern
New Jersey. INI generates all of its revenues from the sale of advertisements
that generally are placed by local merchants in the communities that the
newspapers serve. The newspapers are generally identical in editorial content
but are varied according to advertising content. The New Jersey townships that
INI's community newspapers serve include Wayne, Fairfield, Lincoln Park,
Peuannok, Pompton Plains, Montville, Towaco, Bloomingdale, Riverdale, Butler,
Kinnelon, Smoke Rise, Pompton Lakes, Little Falls, Totowa and West Patterson.
The Company acquired the community newspaper business operated by INI in
September 1997. INI had $1,808,713 in revenues and an operating loss of $72,040
during the reporting period. INI had assets of $374,138 as of December 31, 1998.
Future Acquisitions and New Products and Services. The Company's business
strategy is to grow through new acquisitions. The Company is currently exploring
the possibility of selling the community newspaper business operated by INI in
order to repay debt and to facilitate future acquisitions.
<PAGE> 4
Subsequent to the reporting period, the Company acquired United Marketing
Solutions, Inc. ("United") as of April 1999. Originally founded in 1981 as
United Coupon Corporation, United has operated within the cooperative direct
mail industry for 17 years. United has diversified and expanded its product
lines and markets to evolve from a coupon company to a full-service marketing
provider specializing in three of the fastest growing communications mediums:
direct mail, direct marketing and internet marketing. United offers advertising
and marketing products and services through a network of franchisees in 17
states, with the largest concentration being in the northeast United States.
United provides full-service design, layout, printing, packaging and
distribution of marketing products and promotional coupons sold by the franchise
network to local market businesses, service providers and professionals as
resources to help them generate trial and repeat customers. United's core
product, the cooperative coupon envelope, reaches in excess of 25 million
mailboxes per year with a estimated 500 million coupons.
In 1999, United introduced an Internet web site, www.ishopol.com,
marketed as "iSHOPoL - AMERICA'S ONLINE SHOPPING SITE" ("iSHOPol"). iSHOPoL
provides a directory of local businesses and professionals with coupons, display
ads, combination ads (display ads with coupons), and multi-page websites. Users
have access to a variety of useful information options and entertaining
activities including a white pages directory, weather reports, an online arcade,
fun sites (horoscopes and entertainment), lottery results and real estate
classified ads by market. United is in the process of integrating iSHOPoL with
its other product offerings, providing a complete direct marketing and
advertising link which management expects to be unique in the online electronic
commerce industry. Management expects that synergy resulting from common
marketing, advertising and management with its United subsidiary will enhance
the Company's profitability potential.
Competition. The Company's current and proposed future lines of business
are highly competitive. First, the advertising business, including the community
newspaper business, is highly competitive with many firms competing in various
forms of media and possessing substantial resources. The Company's community
newspaper business has several direct competitors servings its local markets,
although management believes that INI has no direct competitor offering a 100%
mailed (as opposed to delivery) weekly newspaper. The circulation of other
newspapers in the local markets in which INI operates includes: The New Jersey
Star Ledger, circulation approximately 12,000, The Herald & News, circulation
approximately 9,000, The Record, circulation approximately 8,000 and The
Suburban Trends, circulation approximately 7,500.
In addition, the Company's new lines of business entered into after the
reporting period are highly competitive. The direct mail industry is highly
fragmented and includes a large number of small and independent cooperative
direct mailers in addition to competition from companies for whom coupon
advertising is not their primary line of business. In addition, several large
firms - notably Val-Pak Direct Marketing Systems, Inc., Money Mailer and Advo,
Inc. - are direct competitors of United in its direct mail marketing business.
Concerning United's Internet business, there is intense competition
<PAGE> 5
among web-based advertisers and many of United's competitors are larger and
significantly better capitalized. No assurance can be given that the Company
will be successful in attracting the number of Internet customers necessary to
implement its business strategy involving iSHOPoL.
Government Regulation. United, which was acquired after the reporting
period, is subject to state regulation as a franchiser. Management believes that
United is in substantial compliance with applicable state franchise laws.
Employees. At the end of the reporting period, INI had approximately
twelve employees, and the Company had a President and Secretary/Treasurer,
neither of whom performed any services or were salaried employees during the
reporting period. United, which was acquired after the reporting period, employs
approximately 92 individuals.
ITEM 2. PROPERTIES
INI operates a 3,500 square foot facility located in Pompton Lakes, New
Jersey. The building consists of two stories with the administration and
production unit on one level and the sales staff on the other level. INI has a
five year lease on the property that runs through October, 2002.
United operates a 64,000 square foot facility located in Springfield,
Virginia. The building consists of two levels with the administrative, sales,
and creative offices on one level and the production unit on the other level.
United currently has a ten year lease that runs through August of 2005.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any pending or, to management's knowledge,
threatened legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of fiscal year 1998
to a vote of the security holders.
<PAGE> 6
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There was no public trading market for the issuer's securities in 1998 or
in 1999 to date. As of November 5, 1999, there were approximately 633 holders
of record of the Company's common stock.
There have been no cash dividends paid on the Company's common stock
since February 6, 1997, and management is unaware of any dividends paid prior to
that date. The Company is restricted in its ability to pay dividends on its
common stock in the future by the terms of its Series A and Series B Preferred
Stock, each of which carry cumulative dividends that must be paid prior to any
payment of dividends on the common stock. Management presently intends to retain
all future earnings not required to be paid to the holders of the Series A and
Series B Preferred Stock, and does not anticipate paying cash dividends to the
holders of common stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Total revenues increased 276%, to $1,808,713 in 1998 from $481,316 in
1997. Total revenues are generated by the Company's subsidiary, INI, and
increased as the Company purchased INI in September 1997. Total revenues for
1998 increased 17% over pro forma revenues for 1997 of $1,549,042, primarily due
to an increase in volume.
Total operating expenses increased 731%, to $4,884,517 in 1998 from
$587,875 in 1997. Printing costs, postage and delivery, other production costs,
selling expenses, and depreciation and amortization, which aggregate to
$1,349,619, increased 306%, from $332,602 in 1997, which is comparable to the
increase in total revenues discussed above. The Company recorded compensation
expense relating to the issuance of stock options of $2,126,870 in 1998. The
Company also forgave stock subscriptions receivable aggregating $329,996 from
two directors. General and administrative expenses increased 322%, to $1,078,032
in 1998 from $255,273. This was due to the inclusion of INI's results for a full
year and increased compensation expense and professional fees at the parent
company level.
Interest expense increased 2,491%, to $138,324 in 1998 from $5,338 in
1997. This is due to new borrowings of $265,000 in 1998 and an effective
interest rate of 80% on two loans arising from the issuance of stock, in
addition to the stated interest rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied primarily on funds generated from the issuance of
preferred and common stock and from the issuance of notes payable to finance its
<PAGE> 7
operations and expansion. The Company's working capital deficit increased during
1998 to $(381,528), primarily due to the increase in notes payable due within
one year and an increase in wages payable. As of December 31, 1998, the Company
had cash of $326, compared to $0 at December 31, 1997.
Cash used in operating activities was $231,247 in 1998, compared to
$46,803 in 1997. This was primarily due to the net loss of $(3,207,705), offset
by non-cash charges relating to the issuance of stock options of $2,126,870 and
forgiveness of stock subscriptions receivable of $329,996. Also, wages payable
increased by $244,616.
Cash used in investing activities was $132,108 in 1998, compared to
$49,154 in 1997. The capital expenditures related to deferred acquisition costs
and leasehold improvements.
Cash provided by financing activities was $363,681 in 1998, compared to
$95,957 in 1997. The increase was the result of proceeds from notes payable in
the amount of $265,000, net proceeds from the issuance of common stock of
$130,000, and net proceeds from the issuance of preferred stock of $339,955,
offset by the issuance of notes receivable in the amount of $345,500.
The Company has experienced a significant loss in 1998 and has deficits
in working capital and stockholder's equity. The Company and its subsidiaries
have significant short-term cash commitments coupled with limited working
capital. Due to these factors, the Company's independent certified public
accountants have included an explanatory paragraph in their report stating that
these factors raise substantial doubt about the Company's ability to continue as
a going concern.
The Company's ability to continue as a going concern is dependent on its
ability to generate sufficient cash flow to meet its obligations on a timely
basis, to obtain additional financing or refinancing as may be required and
ultimately to obtain profitability. The Company is actively pursuing additional
equity financing through a private placement to accredited investors. From March
1999 through July 1999 the Company has raised in excess of $600,000 of equity
financing. Management is also considering the sale of additional equity
securities under appropriate market conditions to ensure the continuation of the
Company's operations and long-term growth. The Company has retained the services
of an investment banker to assist in identifying potential mergers or
acquisition opportunities that would increase cash flow from operations. There
is no assurance that the Company will be successful in these efforts.
In April 1999, the Company acquired 100% of the issued and outstanding
capital stock of United Marketing Solutions Inc. for cash (obtained through
private sales of common stock to unrelated investors) and the assumption of debt
totaling $912,703.
The Company has no unused capital resources.
<PAGE> 8
YEAR 2000 COMPLIANCE
The Company has assessed both the cost of addressing and the costs of
consequences of incomplete or untimely resolution of the Year 2000 issue. The
Company has reviewed its internal systems and has upgraded and replaced such
systems with applications, in the normal course of business, that are Year 2000
compliant. To date, the costs of such upgrades have been minimal. The Company
plans to conduct a survey of its critical vendors concerning their year 2000
compliance within the next sixty days.
The Company currently utilizes off the shelf software and uses no
internally developed software in the operation of its business. The software
embedded in the Company's products is not date sensitive and as such is not
subject to the Year 2000 issue. Accordingly, the Company has determined that its
estimated costs related to the Year 2000 issue are not anticipated to be
material to the Company's business, operations or financial condition. The
Company will, within the next sixty days, develop a contingency plan to be
utilized in the event that its management information systems fail due to a Year
2000 related issue.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, operations of the Company may be
exposed to fluctuations in interest rates. These fluctuations can vary the cost
of financing, investing, and operating transactions. Because the Company has
only fixed rate short term debt, there are no material impact on earnings of
fluctuations in interest rates.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting For Derivative
Instruments" ("SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS 133
requires that an entity recognize all derivatives as either assets of
liabilities and measure those instruments at fair market value. Under certain
circumstances, a portion of the derivative's gain or loss is initially reported
as a component of other comprehensive income and subsequently classified into
income when the transaction affects earnings. The Company will be required to
adopt SFAS 133 by January 1, 2001. Presently, the Company does not use
derivative instruments either in hedging activities or as investments.
Accordingly, the Company believes that adoption of SFAS 133 will have no
material impact on its financial position or results of operations.
ITEM 7. FINANCIAL STATEMENTS
<PAGE> 9
NEXT GENERATION MEDIA CORPORATION
CONTENTS
INDEPENDENT AUDITORS' REPORT F2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets F3-F4
Consolidated statements of operations F5
Consolidated statements of stockholders' deficit F6
Consolidated statements of cash flows F7-F8
Summary of accounting policies F9-F10
Notes to consolidated financial statements F11-F22
F-1
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
NEXT GENERATION MEDIA CORPORATION
We have audited the accompanying consolidated balance sheets of NEXT GENERATION
MEDIA CORPORATION as of December 31, 1998 and 1997 and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NEXT GENERATION MEDIA
CORPORATION at December 31, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company incurred significant losses in prior years
which are expected to continue in the future. These losses have made it
difficult for the Company to meet its obligations as they become due. Also, the
Company has deficits in working capital and stockholders' equity. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are discussed in Note 1.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
BDO Seidman, LLP
Washington, D.C.
November 3, 1999
<PAGE> 11
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 1997
==========================================================================================================================
<S> <C> <C>
ASSETS
CURRENT
Cash $ 326 $ -
Notes receivable from UNICO (Note 4) 175,500 -
Accounts receivable, less allowance for doubtful
accounts of $65,534 and $42,560 122,443 198,335
Accrued interest receivable 2,253 15,785
Deferred loan costs, net of
accumulated amortization of $53,577 (Note 8) 66,423 -
Deferred offering costs (Note 17) 185,520 -
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 552,465 214,120
- --------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET (Note 5) 170,572 67,781
- --------------------------------------------------------------------------------------------------------------------------
OTHER
Deferred acquisition costs (Note 11) 1,094,167 -
Intangibles, net of accumulated amortization of $49,315
and $12,529 (Note 6) 155,862 192,648
Investment in UNICO (Note 7) 25,537 -
- --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,998,603 $474,549
==========================================================================================================================
</TABLE>
F-3
<PAGE> 12
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 1997
=====================================================================================================================
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Checks issued against future deposits $ 28,919 $ 44,821
Notes payable, current portion (Note 8) 237,153 25,449
Current obligations under capital leases (Note 9) 41,425 -
Accounts payable and accrued expenses 236,523 248,901
Wages payable 244,616 -
Due to related parties (Note 10) 129,570 131,351
Deferred revenue 15,787 -
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 933,993 450,522
LONG TERM DEBT
Obligations under capital leases (Note 9) 18,339 -
Notes payable (Note 8) - 27,505
Accrued dividends (Notes 11 and 12) 96,569 -
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,048,901 478,027
- ---------------------------------------------------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK SERIES A, par value $.01,
redemption value $6 per share,500,000 shares authorized,
250,000 shares issued and outstanding (Note 11) 782,292 -
REDEEMABLE PREFERRED STOCK SERIES B, par value $.01,
redemption value $5 per share, 500,000 shares authorized
70,000 shares issued and outstanding (Note 12) 233,333 -
- ---------------------------------------------------------------------------------------------------------------------
COMMITMENTS (Note 16)
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value, 50,000,000 authorized,
3,629,318 and 3,113,450 issued and outstanding (Note 13) 36,291 31,134
Additional paid in capital (Note 13) 3,625,363 419,616
Accumulated deficit (3,727,577) (95,178)
Less stock subscription receivable (Note 14) - (359,050)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (65,923) (3,478)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $1,998,603 $ 474,549
=====================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-4
<PAGE> 13
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31, 1998 1997
===========================================================================================================================
<S> <C> <C>
REVENUES:
Advertising revenues $1,505,241 $ 430,952
Classified revenues 225,070 48,066
Commission income 78,402 2,298
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 1,808,713 481,316
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Printing costs 375,143 101,187
Postage and delivery 504,181 125,337
Other production costs 195,622 50,507
Selling expenses 182,534 39,688
General and administrative expenses 1,078,032 255,273
Compensation expense relating to the issuance of stock and stock options
(Note 13) 2,126,870 -
Forgiveness of stock subscription receivable (Note 14) 329,996
Depreciation and amortization 92,139 15,883
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 4,884,517 587,875
- ---------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (3,075,804) (106,559)
- ---------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 6,014 16,719
Other income (expense) 4,409 -
Interest expense (Note 8) (138,324) (5,338)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (127,901) 11,381
- ---------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAX EXPENSE (3,203,705) (95,178)
INCOME TAX EXPENSE (NOTE 15) (4,000) -
- ---------------------------------------------------------------------------------------------------------------------------
NET LOSS (3,207,705) (95,178)
- ---------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends (96,569) -
Preferred stock deemed dividends (328,125) -
- ---------------------------------------------------------------------------------------------------------------------------
Loss applicable to common shareholders $(3,632,399) $(95,178)
===========================================================================================================================
BASIC AND DILUTED LOSS PER COMMON SHARE $ (1.09) $ ( .04)
- ---------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,319,201 2,452,839
===========================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE> 14
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock
----------------------------- Additional Stock
Paid-in Accumulated Subscription
Shares Amount Capital Deficit Receivable Total
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 - $ - $ - $ - $ - $ -
Acquisition of Microtech 800,889 8,009 41,991 - - 50,000
Issuance of common
stock 2,312,561 23,125 377,625 - (359,050) 41,700
Net loss - - - (95,178) - (95,178)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, December
31, 1997 3,113,450 31,134 419,616 (95,178) (359,050) (3,478)
Fair value of warrants
issued in connection
with issuance of
redeemable preferred
stock - - 476,622 - - 476,622
Deemed dividend in
connection with
redeemable referred
stock - - - (328,125) - (328,125)
Preferred stock
dividends - - - (96,569) - (96,569)
Forgiveness of stock
subscription
receivable 329,996 329,996
Repayment of stock
subscription receivable - - - - 29,054 29,054
Issuance of stock and
stock options to
shareholders and directors - - 2,126,870 - - 2,126,870
Common stock issued in
exchange for services 440,368 4,402 473,010 - 477,412
Issuance of common
stock through a private
placement 75,500 755 129,245 - - 130,000
Net loss - - - (3,207,705) - (3,207,705)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, December
31, 1998 3,629,318 $36,291 $3,625,363 $(3,727,577) $ - $(65,923)
===========================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-6
<PAGE> 15
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 18)
<TABLE>
<CAPTION>
Years ended December 31, 1998 1997
===================================================================================================================
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(3,207,705) $ (95,178)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Compensation expense relating to the issuance of stock
and stock options 2,126,870 -
Forgiveness of stock subscription receivable 329,996 -
Depreciation and amortization 92,139 15,883
Provision for doubtful accounts 34,974 34,956
Amortization of deferred loan costs 53,577 -
Amortization of discount on notes payable 44,648 -
Interest on capital lease obligations 6,066 -
(INCREASE) DECREASE IN ASSETS
Accounts receivable 12,176 (105,234)
Accrued interest receivable (6,014) (15,785)
INCREASE (DECREASE) IN LIABILITIES
Accounts payable (5,377) 118,320
Wages payable 244,616 -
Deferred revenue 15,787 -
Consulting fees payable 27,000 -
Accrued interest payable - 235
- -------------------------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (231,247) (46,803)
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of property and equipment (32,108) (34,154)
Deferred acquisition costs (100,000) -
Other - (15,000)
- -------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (132,108) (49,154)
===================================================================================================================
</TABLE>
F-7
<PAGE> 16
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 18)
<TABLE>
<CAPTION>
Years ended December 31, 1998 1997
==========================================================================================================================
<S> <C> <C>
FINANCING ACTIVITIES
Checks issued against future deposits $ (15,902) $ 44,821
Proceeds from notes payable 265,000 -
Issuance of notes receivable (345,500) -
Proceeds from issuance of common stock 130,000 25,000
Proceeds from issuance of preferred stock and warrants 339,955 -
Net advances from related parties 67,173 50,145
Payments of capital lease obligation (31,596) -
Repayment of note payable (25,449) (24,009)
Loan fees (20,000) -
- --------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 363,681 95,957
- --------------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH 326 -
CASH, beginning of period - -
- --------------------------------------------------------------------------------------------------------------------------
CASH, end of period $ 326 $ -
==========================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-8
<PAGE> 17
NEXT GENERATION MEDIA CORPORATION
SUMMARY OF ACCOUNTING POLICIES
BUSINESS The Company operates a newspaper publishing business
DESCRIPTION distributing free newspapers, supported by local
advertising throughout New Jersey. In 1998 and 1997,
the Company operated in one business segment.
BASIS OF The consolidated financial statements include the
PRESENTATION statements of Next Generation Media Corporation (the
"Company") and its wholly owned subsidiary
Independent News, Inc. ("INI"). All significant
intercompany transactions have been eliminated.
PROPERTY AND Property and equipment are stated at cost.
EQUIPMENT Depreciation is computed over estimated useful lives
of three to five years by the straight-line method
for financial reporting purposes. Leasehold
improvements are amortized over the term of the
lease.
LONG-LIVED ASSETS - The Company reviews the carrying values of its
IMPAIRMENTS AND long-lived and identifiable intangible assets for
DISPOSALS possible impairment whenever events or changes in
circumstances indicate that the carrying amount of
the assets may not be recoverable. Any long-lived
assets held for disposal are reported at the lower of
their carrying amounts or fair value less cost to
sell.
INTANGIBLES Intangibles include goodwill and a covenant not to
compete. Goodwill is amortized on a straight-line
basis over five to ten years. The covenant not to
compete is amortized over five years.
REVENUE RECOGNITION Revenue from newspaper advertising is recognized upon
publication.
INCOME TAXES Income taxes are calculated using the liability
method specified by Statement of Financial Accounting
Standards No. 109, "Accounting For Income Taxes".
Deferred income tax reflects the net tax effect of
temporary differences between the carrying amounts of
assets and liabilities for financial purposes and the
amounts used for income tax purposes. The net
deferred tax asset is reduced, if necessary, by a
valuation allowance for the amount of any tax
benefits that, based on available evidence, are not
expected to be realized.
F-9
<PAGE> 18
NEXT GENERATION MEDIA CORPORATION
SUMMARY OF ACCOUNTING POLICIES
COMPREHENSIVE The Company has adopted Statement of Financial
INCOME Accounting Standards No. 130, "Reporting
Comprehensive Income". Comprehensive income as
defined includes all changes to equity except that
resulting from investments by owners and
distributions to owners. The Company has no items of
comprehensive income to report.
LOSS PER COMMON SHARE Loss per share has been computed using the weighted
average number of shares outstanding. The
outstanding stock options were not considered in the
computation because their inclusion would have been
anti-dilutive.
USE OF ESTIMATES The preparation of financial statements in conformity
IN THE PREPARATION with generally accepted accounting principles
OF FINANCIAL requires management to make estimates and assumptions
STATEMENTS 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.
RISKS AND The local newspaper publishing industry is highly
UNCERTAINTIES competitive. Advertising revenue generally fluctuates
based on local economic conditions. In recent years
the local publishing industry has experienced
consolidation of smaller newspaper businesses into
larger, better capitalized companies. These larger
newspaper publishing companies attempt to increase
market share by reducing advertising rates which, if
successful, would have an adverse impact on the
Company.
RECENT In June 1998, the Financial Accounting Standards
ACCOUNTING Board issued Statement of Financial Accounting
PRONOUNCEMENTS Standards No. 133, "Accounting For Derivative
Instruments" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133
requires that an entity recognize all derivatives as
either assets or liabilities and measure those
instruments at fair market value. Under certain
circumstances, a portion of the derivative's gain or
loss is initially reported as a component of other
comprehensive income and subsequently reclassified
into income when the transaction affects earnings.
The Company will be required to adopt SFAS 133 by
January 1, 2001. Presently, the Company does not use
derivative instruments either in hedging activities
or as investments. Accordingly, the Company believes
that adoption of SFAS 133 will have no material
impact on its financial position or results of
operations.
RECLASSIFICATIONS Certain prior year amounts have been reclassified to
conform to the current year presentation.
F-10
<PAGE> 19
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GOING CONCERN The consolidated financial statements have been
prepared assuming that the Company will continue as a
going concern. The Company incurred a significant net
loss in 1998 which is expected to continue in the
future. These losses have made it difficult for the
Company to meet its obligations as they become due.
Also, the Company has deficits in working capital and
stockholders' equity. These factors raise substantial
doubt about the Company's ability to continue as a
going concern. The financial statements do not
contain any adjustments that might result from the
outcome of these uncertainties.
The Company's ability to continue as a going concern
is dependent upon its ability to generate sufficient
cash flow to meet its obligations on a timely basis,
to obtain additional financing or refinancing as may
be required and ultimately to attain profitability.
The Company is actively pursuing additional equity
financing through a private placement to accredited
investors. From March 1999 through July 1999, the
Company has raised in excess of $600,000 through the
sale of various equity securities. Management is
also considering the sale of additional equity
securities under appropriate market conditions to
ensure the continuation of the Company's operations
and long-term growth. The Company has retained the
services of investment banking counselors to assist
in identifying potential mergers or acquisition
opportunities that would increase cash flow from
operations. There is no assurance that the Company
will be successful in these efforts.
In April 1999, the Company completed the acquisition
of United Marketing Solutions, Inc. ("United"), a
profitable company that has operated within the
cooperative direct mail industry for 17 years. The
Company believes that consolidated cash flow from
operations in fiscal 1999 will be enhanced as a
result of its acquisition of United (see Note 17).
2. PURCHASE OF On February 6, 1997, an unrelated third party
MICROTECH purchased 85.72% of the outstanding stock of
INDUSTRIES Microtech Industries, Inc. from its majority
shareholder for $50,000 in cash. Effective March 31,
1997, Microtech Industries changed its name to Next
Generation Media Corporation. Current management
believes that prior to February 6, 1997, the Company
was a "shell" company for at least five years
without assets and liabilities. Current management
is unaware of any operating history of the Company
prior to February 6, 1997. As a result of the
transaction, goodwill of $50,000 was recorded.
F-11
<PAGE> 20
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITION On September 29, 1997, Pompton Valley Publishing Co.
OF POMPTON (PVP) sold to INI all of its tangible property, all
VALLEY accounts receivable, all intellectual property,
PUBLISHING CO. certain contracts, and all other business property.
INI assumed certain liabilities of PVP. In addition
to the assumption of certain liabilities, the
Company contributed 100,000 shares of its common
stock and INI paid $15,000 in cash for a covenant
not to compete. The shares were valued at $16,700
based on a recent stock sale. The acquisition was
accounted for as a purchase. Net assets were
recorded at fair value and the Company recorded
goodwill of $140,000 related to the acquisition. The
financial statements include the operations of INI
subsequent to the acquisition date.
The following unaudited pro forma summary presents
the combined results of operations of the Company
and the acquired business, as if the acquisition had
occurred at the beginning of 1997. The pro forma
amounts give effect to certain adjustments,
including the amortization of intangibles. This pro
forma summary does not necessarily reflect the
results of operations as they would have been if the
businesses had constituted a single entity during
such periods and is not necessarily indicative of
results which may be obtained in the future.
<TABLE>
<CAPTION>
Year ended December 31, 1997
================================================================
<S> <C>
Total revenues $ 1,549,042
Net (loss) (183,896)
(Loss) per common share (.07)
----------------------------------------------------------------
</TABLE>
4. NOTES RECEIVABLE On May 12, 1998, the Company executed a promissory
note with UNICO, Inc. for $175,500. The note bears
interest at a rate of 5.83% and is due on May 12,
2001. The note for $175,500 will be cancelled in
conjunction with the acquisition of United
(see Note 17).
5. PROPERTY AND Property and equipment consists of the following:
EQUIPMENT
<TABLE>
<CAPTION>
December 31, 1998 1997
=========================================================================
<S> <C> <C>
Furniture and fixtures $ 41,788 $27,428
Computer equipment 129,997 41,507
Leasehold improvements 56,600 2,200
-------------------------------------------------------------------------
228,385 71,135
Less accumulated depreciation
and amortization 57,813 3,354
-------------------------------------------------------------------------
$170,572 $67,781
=========================================================================
</TABLE>
F-12
<PAGE> 21
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Depreciation expense was $55,354 and $3,354 for the
years ended December 31, 1998 and 1997,
respectively.
Computer equipment recorded under capital leases
amounted to $85,294. Accumulated amortization on
those assets was $18,783 at December 31, 1998.
6. INTANGIBLE Intangible assets consist of the following items:
ASSETS
<TABLE>
<CAPTION>
December 31, 1998 1997
================================================================================
<S> <C> <C>
Goodwill (Notes 2 and 3) $190,177 $190,177
Covenant not to compete (Note 3) 15,000 15,000
--------------------------------------------------------------------------------
205,177 205,177
Less accumulated amortization 49,315 12,529
--------------------------------------------------------------------------------
Intangible assets, net $155,862 $192,648
================================================================================
</TABLE>
Amortization expense was $36,786 and $12,529 for the
years ended December 31, 1998 and 1997,
respectively.
7. INVESTMENT IN In May 1998, the Company purchased 359,931 shares of
UNICO common stock (approximately a 6% ownership interest)
of UNICO, Inc., an unrelated third party. The
Company accounts for this investment using the cost
method in accordance with generally accepted
accounting principles. In April 1999, the Company
acquired United which was a wholly owned subsidiary
of UNICO, Inc. (see Note 17).
F-13
<PAGE> 22
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. NOTES PAYABLE Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 1997
=========================================================================================
<S> <C> <C>
Note payable to a bank, interest
at 16%, due on February 6, 1999,
collateralized by the assets of INI $ 60,000 $ -
Notes payable, net of discount of
27,676, interest at 18% (effective
rate of 67%), due on October 14,
1998, unsecured (a) 72,324 -
Notes payable, net of discount of
$27,676, interest at 18% (effective
rate of 67%), due on November
5, 1998, unsecured (a) 72,324 -
Note payable, interest at 12%, due
on December 9, 1998, unsecured 5,000 -
Note to a factor with interest at 8%,
collateralized by the assets of INI,
due January 1, 1999 27,505 27,505
Note to a factor with interest at the
lender's prime rate, collateralized
by the assets of INI, due on April 5, 1996 - 25,449
-----------------------------------------------------------------------------------------
237,153 52,954
Less: Current portion 237,153 25,449
-----------------------------------------------------------------------------------------
$ - $27,505
=========================================================================================
</TABLE>
(a) In conjunction with the issuance of these
notes, the Company issued 50,000 shares,
which have been valued at $2 based on
private sales to unrelated investors. The
notes payable were reduced and common stock
and additional paid in capital were
increased in the aggregate by $100,000.
The Company paid $20,000 and issued 50,000
shares of common stock as a finder's fee
for introducing the Company to the above
noteholders. These costs have been deferred
and are being recorded as interest expense
over the term of the notes. Interest
expense of $53,577 was recognized through
December 31, 1998.
F-14
<PAGE> 23
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The note holders have verbally agreed to extend the
term of these notes on a month-to-month basis. The
amortization of the note premiums and the deferred
loan fees are based on an estimated repayment date
of July 31, 1999.
9. OBLIGATIONS UNDER The Company leases computer equipment under capital
CAPITAL LEASES leases. Following is a summary of future minimum
lease payments under capital leases:
<TABLE>
<CAPTION>
Year ending December 31,
============================================================================
<S> <C>
1999 $51,565
2000 21,212
----------------------------------------------------------------------------
Total minimum lease payments 72,777
Imputed interest (13,013)
----------------------------------------------------------------------------
Present value of minimum capital lease payments 59,764
----------------------------------------------------------------------------
Less: current portion (41,425)
----------------------------------------------------------------------------
$18,339
============================================================================
</TABLE>
10. DUE TO RELATED Due to related parties consists of the following:
PARTIES
<TABLE>
<CAPTION>
1998 1997
=============================================================================
<S> <C> <C>
Advances made by former shareholders of INI $94,070 $ 96,696
Consulting fees payable 27,000 -
Net advances from directors and shareholders 8,500 34,655
-----------------------------------------------------------------------------
Total $129,570 $131,351
=============================================================================
</TABLE>
In May 1998, a significant shareholder entered into
a consulting agreement with the Company. The
agreement has a two-year term and provides for
annual compensation of $78,000. An amount of $27,000
is payable at December 31, 1998 in accordance with
this agreement.
F-15
<PAGE> 24
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. REDEEMABLE On May 7, 1998, the Company executed an agreement
PREFERRED STOCK with the holders of certain subordinated debentures
SERIES A of UNICO, Inc. to purchase these debentures, with an
outstanding balance of $1,034,000, in exchange for
$100,000 in cash and 250,000 shares of the Company's
Callable Cumulative Convertible Preferred Stock,
(the "Series A Preferred Stock"), par value $.01.
The Series A Preferred Stock is callable at the
option of the holder five years from the date of
issuance at $6 per share. The fair market value of
the preferred stock was determined to be $2.75 per
share based on an independent appraisal.
Accordingly, the Company recorded the Series A
Preferred Stock at $687,500.
The Company will record a deemed dividend to
increase the carrying value of the preferred stock
to the redemption value of $1,500,000 over the
period from the date of issuance to the redemption
due. The deemed dividend was $94,792 for the year
ended December 31, 1998.
The shares have a conversion price which is the
lesser of $4.50 and 110% of the price of the common
stock in a public or private offering. The shares
have a $5 per share preference on liquidation or
dissolution of the Company.
The Series A Preferred Stock pays a dividend of $.30
per share per annum for the first six months and
$.50 per annum thereafter and are not payable until
eighteen months following the date of issue.
Accrued dividends amounted to $73,459 at December
31, 1998.
Each 1 1/2 shares of the Company's Series A
Preferred Stock was accompanied by one stock
purchase warrant (subject to adjustment) which
entitles the holder to purchase one share of the
Company's common stock for $0.16, valid for five
years from May 7, 1998. Based on private sales of
common stock to unrelated investors, the fair market
value of each warrant was determined to be $2.
Accordingly, the Company recorded additional paid in
capital related to these warrants of $306,667.
Effective May 8, 1998, the Company canceled UNICO's
obligation to the Company arising from its
assumption of UNICO's subordinated debt. The
assumption of UNICO's subordinated debt was required
to complete the acquisition of United (See Note 17).
Therefore, the total of cash paid and the value
assigned to the preferred stock and warrants has
been recorded as a deferred acquisition cost.
F-16
<PAGE> 25
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. REDEEMABLE In May 1998, the Company issued 70,000 shares of
PREFERRED STOCK Redeemable Cumulative Convertible Preferred Stock,
SERIES B (the "Series B Preferred Stock") par value $.01 with
a redemption price of $5.00 per share. The original
agreement was amended and restated in December 1998.
Under the restated agreement, the holder can redeem
the Series B Preferred Stock after May 4, 1999. The
Company also issued 250,000 warrants for the
purchase of one share of common stock at an exercise
price of $.16 per warrant, valid for five years from
May 1998. Gross proceeds from the original issuance,
net of expenses, were $339,955. In conjunction with
amending the original agreement, the Company sold
1,800,000 shares of common stock of UNICO, Inc. to
the preferred stockholder for $1. The fair market
value at the date of the transaction of these shares
was determined to be $170,000. This amount has been
recorded as an additional reduction of proceeds in
conjunction with the issuance of the Series B
Preferred Stock. Thus, adjusted net proceeds are
$169,955.
Based on private sales of common stock to unrelated
investors at $2, the fair market value of the
warrants was determined to be in excess of the net
proceeds and therefore the entire net proceeds have
been allocated to the warrants.
The Company will record a deemed dividend to
increase the carrying value of the preferred stock
to the redemption value of $350,000 over the period
from the date of issuance to the redemption date.
The deemed dividend was $233,333 for the year ended
December 31, 1998.
The Series B Preferred Stock has a conversion price
which is the lesser of $4.50 and 110% of the price
of the common stock in a public or private offering.
The shares have a $5 per share preference on
liquidation or dissolution of the Company.
The Series B Preferred Stock pays a dividend of $.50
per annum which is only payable upon redemption of
the Series B Preferred Stock. Accrued dividends
amounted to $23,110 at December 31, 1998.
13. COMMON STOCK On March 19, 1997, the Board of Directors of the
Company approved a 1 for 10 reverse stock split of
common stock. The change in the Company's common
stock for the reverse stock split has been given
retroactive effect for all periods presented.
In accordance with a consulting agreement with a
significant shareholder, on May 1, 1998 the
shareholder was granted 250,000 options to purchase
shares of common stock at a price of $.02 per share.
The market value of the stock was determined to be
$2 based on private stock sales to unrelated
investors. Accordingly, the Company recorded
compensation expense of $495,000 in 1998.
F-17
<PAGE> 26
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 7, 1998, the Company granted 450,000 options
to a significant shareholder to purchase shares of
common stock at a price of $.50 per share. The
market value of the stock was determined to be $2
based on private sales to unrelated investors. The
Company recorded compensation expense of $675,000.
On May 12, 1998, the Company issued 79,281 shares of
common stock in exchange for a note receivable in
the amount of $12,000, plus accrued interest of
$1,400, and 359,931 common shares of UNICO, Inc.
stock with a fair value of $25,537.
Also on May 12, 1998, the Company issued 137,587
shares of common stock in exchange for the
cancellation of various notes payable to officers of
the Company amounting to $45,954. The market value
of the stock was determined to be $2 based on
private sales to unrelated investors. The Company
recorded compensation expense of $229,220 based on
the difference between the fair market value of the
stock and the consideration.
During July and August 1998, the Company issued
100,000 shares of common stock in conjunction with
notes payable (Note 8). The common stock was valued
at $2 based on private sales to unrelated investors.
During December 1998, the Company issued 75,500
shares of common stock through a private placement
to various individual investors at $2 per share. Net
proceeds from the private placement amounted to
$75,520.
During December 1998, the Company granted 367,500
options to directors to purchase shares of common
stock at a price of $.02 per share. The market value
of the stock was determined to be $2 based on
private sales to unrelated investors. The Company
recorded compensation expense of $727,650.
The following summary represents activity under the
Company's stock option plan:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Shares Price Date
====================================================================================
<S> <C> <C> <C>
At January 1, 1997 - - -
Options granted 37,500 $.60 12-31-99
------------------------------------------------------------------------------------
Balance outstanding
December 31, 1997 37,500
Options granted 250,000 $.02 05-01-08
Options granted 450,000 $.50 05-07-08
Options granted 367,500 $.02 12-30-08
------------------------------------------------------------------------------------
Balance outstanding and
exercisable - December 31, 1998 1,105,000 - -
====================================================================================
</TABLE>
F-18
<PAGE> 27
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has adopted the disclosure only
provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"), but it continues to
measure compensation cost for the stock options
using the intrinsic value method prescribed by APB
Opinion No. 25. As allowable under SFAS 123, the
Company used the "Minimum Value" method to measure
the compensation cost of stock options, granted in
1998 and 1997. For the options granted in 1997, the
following assumptions were used: risk-free interest
rate of 5.80%, a dividend payout rate of zero, and
an expected option life of two years. For the
options granted in 1998, the following assumptions
were used: risk-free interest rate of 5.67%,
volatility of 45%, a dividend payout rate of zero,
and an expected option life of ten years. There were
no adjustments made in calculating the fair value to
account for non-transferability.
Under these assumptions, the fair value of stock
options granted in 1997 is $0.18. The fair value of
stock options granted in 1998 ranges from $0.33 to
$1.99.
Because the Company's employee stock options have
characteristics significantly different from those
of traded options, and because changes in the
subjective input assumptions can materially affect
the fair value estimate, in management's opinion,
the existing models do not necessarily provide a
reliable single measure of the fair value of its
employee stock options.
If the Company had elected to recognize compensation
cost based on the value at the grant dates with the
method prescribed by SFAS 123, net income would have
been changed to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
=========================================================
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
---------------------------------------------------------
<S> <C> <C> <C> <C>
Loss applicable to common
shareholder $(3,632,399) $(3,783,705) $(95,178) $(101,790)
Basic and diluted loss per share $ (1.09) $ (1.14) $ (.04) $ (.04)
============================================================================================
</TABLE>
14. STOCK SUBSCRIPTION On May 12, 1998, $156,145 of the stock subscription
RECEIVABLE receivable from a significant shareholder of the
Company was transferred into a promissory note
receivable from a director of UNICO, Inc. and was
subsequently canceled. Also, the Company forgave
$152,905, plus accrued interest of $20,946 due from
the director. These amounts aggregate to $329,996,
which has been included in operating expenses in
the accompanying statement of operations.
F-19
<PAGE> 28
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. INCOME TAXES Significant components of the Company's deferred tax
assets at December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
December 31, 1998 1997
============================================================================
<S> <C> <C>
DEFERRED TAX ASSETS
Net operating loss carryforwards
for income tax purposes $ 889,000 $ 13,000
Reserve for doubtful accounts 22,000 8,500
----------------------------------------------------------------------------
TOTAL DEFERRED TAX ASSETS 911,000 21,500
Less valuation allowance (911,000) (21,500)
----------------------------------------------------------------------------
TOTAL $ - $ -
============================================================================
</TABLE>
Management has provided a valuation allowance for
net deferred tax assets as of December 31, 1998 and
1997, as they believe that it is more likely than
not that the entire amount of deferred tax assets
will not be realized.
At December 31, 1998, the Company had net operating
loss carryforwards for federal income tax purposes
of approximately $1,000,000, which are available to
offset future federal taxable income, if any,
through 2018.
16. COMMITMENTS AND The Company has a lease for office space in Pompton
CONTINGENCIES Lakes, New Jersey. The lease has a sixty-four month
term commencing on September 15, 1997. Annual future
minimum lease payments under this operating lease
are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
=========================================================
<S> <C>
1999 $21,600
2000 21,600
2001 23,760
2002 23,760
---------------------------------------------------------
$90,720
=========================================================
</TABLE>
Rent expense for the year ended December 30, 1998
and 1997 was $19,800 and $2,550, respectively.
F-20
<PAGE> 29
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS Between March and June 1999, the Company issued
331,500 shares of common stock at $2 per share
through private sales to unrelated investors. Net
proceeds, after both cash and non-cash issuance cost
amounted to $443,693. The Company deferred expenses
of $185,520 related to one of these private stock
offerings which was in progress at December 31,
1998.
On April 1, 1999, the Company acquired all of the
outstanding common stock of United for $336,665 in
cash and the assumption of debt totaling $912,702.
United is engaged in the cooperative direct mail
marketing business. The Company will account for the
acquisition using the purchase method. The following
unaudited pro forma summary presents the
consolidated results of operations as if the
acquisition had been completed at January 1, 1998.
These results do not necessarily reflect what would
have occurred had the acquisition actually been made
as of such dates and is not necessarily indicative
of results which may be obtained in the future.
<TABLE>
<CAPTION>
Year ended December 31, 1998
---------------------------------------------------------------------------
<S> <C>
Revenues $ 7,563,126
Net loss (3,692,392)
Net loss applicable to common
shareholders (4,117,086)
Basic and diluted loss per common
share attributable to common
shareholders (1.23)
===========================================================================
</TABLE>
F-21
<PAGE> 30
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
18. SUPPLEMENTAL
CASH FLOW
INFORMATION 1998 1997
===============================================================================
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the year for
interest $ 40,099 $ 4,169
NON-CASH FINANCING ACTIVITIES:
Common stock issued in exchange
for services 477,412 -
Common stock issued in exchange
for note receivable - 359,050
Preferred stock issued for future
acquisition 687,500
Warrants issued for future
acquisition 306,667 -
Deemed preferred stock dividends 328,125 -
NON-CASH INVESTING ACTIVITIES:
Equipment acquired under capital
leases 85,294 -
Leasehold improvements acquired
through barter 40,472 -
ACQUISITION:
Stock issued for acquisition $ - $ 16,700
Book value of assets acquired
less liabilities assumed - 77,715
-------------------------------------------------------------------------------
- 94,415
Acquisition costs - 45,762
Goodwill $ - $140,177
===============================================================================
</TABLE>
F-22
<PAGE> 31
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and officers. The directors and executive officers of the
Company, as of the date of this filing, are as follows:
Name Age Position
- ---- --- --------
Gerard Bernier 49 President and Director
Kenneth Brochin 47 Secretary/Treasurer and Director
Leon Zajdel 51 Director
Peter Collins 55 Director
Steve Kronzek 49 Director
Officers are appointed by and serve at the discretion of the Board of
Directors. Directors are elected to fill vacancies by the Board of Directors and
at each annual meeting. Each officer and director holds office until the next
annual meeting of shareholders or until a successor has been duly elected and
qualified with the exception of Gerard Bernier, the Company's President, who was
appointed to a two year term as of April 1, 1999.
Gerard Bernier has been the Company's President and a director since April 1999.
Gerard Bernier is United's founder and is its chief executive officer. He has
been a director of United since November 1981, and Chief Executive Officer since
August 1985. Prior to 1981, Mr. Bernier was an executive with various
advertising and manufacturing companies. Prior to starting United, he founded,
successfully operated and sold three other small businesses.
Kenneth Brochin has been the Company's Secretary and Treasurer and a director
since February 1997. Dr. Brochin has been a dentist in private practice for 24
years and is a Clinical Assistant Professor at the Medical College of Ohio. Dr.
Brochin is also a director and President-elect of the Jewish Family Service
Agency of Toledo.
<PAGE> 32
Steve Kronzek has been a director of the Company since April 1999. Mr. Kronzek
was a founding partner in November 1977 and has continued as partner of the
accounting firm of Kronzek & Company, located in Washington, DC. Since January
1992, he has served as an independent accountant for United Marketing Solutions,
Inc., the Company's subsidiary acquired after the reporting period.
Peter Collins has been a director of the Company since May of 1998. Mr. Collins
is a representative of Renaissance Capital Partners, placed on the Board of
Directors pursuant to the rights of the Class A Preferred shareholders. Mr.
Collins is an entrepreneur who for the past five years has invested in small
businesses.
Leon Zajdel has been a director of the Company since April 1999. Mr. Zajdel was
founder and has served as President of Energy Guard Corp., a manufacturer and
retailer of replacement windows, located in Beltsville, MD, since 1972.
Involvement in Certain Legal Proceedings. Mr. Joel Sens is an
entrepreneur engaging in, among other things, transactions involving the
purchase and sale of barter and other businesses. In addition to his other
activities, Mr. Sens, who is a principal shareholder in the Company, assisted
the Company in the structuring of its acquisition through INI of its community
newspaper business and has also participated in the structuring and negotiation
of other transactions involving the Company, including the acquisition of United
subsequent to the reporting period.
On February 29, 1996, Mr. Sens pleaded guilty in the federal court for
the Eastern District of Virginia to one count of failing to disclose the
existence of an asset worth approximately $7,000 on a statement of assets filed
in a personal bankruptcy case that had been subsequently dismissed by Mr. Sens.
Mr. Sens received one year probation and a fine of $1,000.
Compliance with Section 16(a) of the Exchange Act. The issuer's common
stock is not registered pursuant to Section 12 of the Exchange Act; therefore,
information required by Item 405 is not applicable.
ITEM 10. EXECUTIVE COMPENSATION
None of the executive officers of the Company performed any services or
received or accrued any compensation in fiscal year 1998. The Company did not
pay or accrue salary or fees for directors in fiscal year 1998.
Gerard Bernier, the Company's current President, pursuant to a two year
employment agreement entered into subsequent to the reporting period, was issued
an option to purchase 250,000 shares of common stock of the Company at a price
of $0.02 per share, as compensation for serving as President of the Company in
addition to Mr. Bernier's compensation as President and CEO of United. Mr.
Bernier will be entitled to receive an additional option to purchase 100,000
shares of common stock upon the one year anniversary of any subsequent
reappointment by the Board of Directors. In his role
<PAGE> 33
as President and CEO of United, Mr. Bernier has a written employment agreement
for an initial term running through March 31, 2001 pursuant to which he is
entitled to a salary of $140,000 (annually adjusted for cost of living) and a
bonus equal to 5% of pre-tax and pre-extraordinary item profits of United so
long as such profits exceed a $350,000 threshold. In addition, Mr. Bernier is to
receive certain other benefits including $150,000 in life insurance and an
automobile allowance.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AS OF NOVEMBER 5, 1999.
<TABLE>
<CAPTION>
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
(1) (2) (3) (4)
Amount and
Name and Address of Beneficial Nature of
Title of Class Owner Beneficial Percent of Class(1)
Ownership
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
<S> <C> <C> <C>
Gerard Bernier
Common Stock 8380 Alban Road
Springfield, VA 22150 1,335,000(2) 28.6%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Joel Sens
Common Stock 900 N. Stafford St.
Suite 2003
Arlington, VA 22203 1,198,272(2) 25.7%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Kenneth Brochin
Common Stock 2347 Underhill Road
Toledo, OH 43615 627,000(3) 13.9%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Renaissance Capital Partners I
Series A Preferred Stock 8080 N. Central Expressway
Suite 210 - LB59
Dallas, TX 75206-1857 155,096 62.0%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Harlon Morse Fentress Trust, c/o
Series A Preferred Stock Duncan-Smith Investments, Inc.
311 Third Street
Suite 300
San Antonio, TX 78205 16,325 6.5%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Duncan-Smith Investments, Inc.
Series A Preferred Stock 311 Third Street
Suite 300
San Antonio, TX 78205 13,769 5.5%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
T.C. Equities, Ltd.
Series B Preferred Stock Charlotte House
Nassau
Bahamas 70,000 100.0%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
</TABLE>
(1)Rounded to the nearest one tenth of one percent.
(2)Includes options to purchase 400,000 shares of common stock.
(3)Includes options to purchase 247,500 shares of common stock.
<PAGE> 34
(b) SECURITY OWNERSHIP OF MANAGEMENT AS OF NOVEMBER 5, 1999.
<TABLE>
<CAPTION>
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
(1) (2) (3) (4)
Amount and
Name and Address of Beneficial Nature of
Title of Class Owner Beneficial Percent of Class(1)
Ownership
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
<S> <C> <C> <C>
Gerard Bernier
Common Stock 8380 Alban Road
Springfield, VA 22150 1,335,000(2) 28.6%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Kenneth Brochin
Common Stock 2347 Underhill Road
Toledo, OH 43615 627,000(3) 13.9%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Leon Zajdel
Common Stock 11820 Enid Drive
Potomac, MD 20854 18,747(4) 0.4%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Peter Collins
Common Stock 500 E. 77th Street
Suite 1819
New York, NY 10162 10,000(4) 0.2%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Steve Kronzek
Common Stock 8380 Alban Road
Springfield, VA 22150 10,000(4) 0.2%
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
Directors and Executive Officers as a 1,981,247(5) 40.1%
Common Stock Group
- ---------------------------- ------------------------------------- ----------------------------- -------------------------------
</TABLE>
(1)Rounded to the nearest one tenth of one percent.
(2)Includes options to purchase 400,000 shares of common stock.
(3)Includes options to purchase 247,500 shares of common stock.
(4)Includes options to purchase 10,000 shares of common stock.
(5)Includes options to purchase 677,500 shares of common stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 30, 1998, the issuer entered into amended and restated
transaction documents in order to consummate the acquisition of United (the
"Acquisition"). This event was reported on a current report on Form 8-K filed by
the issuer on January 8, 1999, the contents of which are incorporated herein by
reference. Mr. Gerard Bernier, the president and a director of the issuer, had a
material interest in the Acquisition transactions. Prior to assuming his duties
as president and a director of the issuer, Mr. Bernier was president and a
director of UNICO, Inc., a Delaware corporation ("Unico"), and the corporate
parent of United. On May 1, 1998, Mr. Bernier sold 168,744 shares of common
stock of Unico to the issuer. These shares were subsequently transferred to the
controlling shareholder of Unico as partial consideration for the purchase of
United. On December 30, 1998, Mr. Bernier and others entered into an Amended and
Restated Stock
<PAGE> 35
Purchase and Shareholder Agreement (the "Shareholder Agreement") pursuant to
which Mr. Joel Sens - at the time the majority shareholder of the issuer - sold
935,000 shares of common stock of the issuer to Mr. Bernier in exchange for a
non-recourse secured promissory note in the amount of $156,145. Mr. Sens
subsequently transferred this promissory note to the issuer in payment of
certain indebtedness of Mr. Sens to the issuer for the same amount. Prior to his
appointment as President of the issuer, the issuer engaged Mr. Bernier as a
consultant to implement the Acquisition. In consideration for his role as
consultant, the issuer forgave the obligation of $156,145 of Mr. Bernier and
paid additional compensation to Mr. Bernier equivalent to the income tax
incurred as a result of this forgiveness of indebtedness. As a result, Mr.
Bernier no longer holds an interest in Unico and is the current holder of
935,000 shares of common stock of the issuer.
Mr. Joel Sens, pursuant to the Shareholder Agreement, sold 935,000 shares
of common stock of the issuer to Mr. Bernier as of December 30, 1998. In
addition, the issuer and Mr. Sens netted certain obligations between them. This
resulted in Mr. Sens owing the issuer $187,905 and the issuer owing Mr. Sens
approximately $22,199. In exchange for the debt owed to Mr. Sens, Mr. Sens
accepted payment in the form of 66,464 shares of common stock of the issuer.
These shares were valued at $2.00 per share for financial statement
presentation, based on private sales to unrelated investors. The issuer forgave
$152,905 of the debt owing to it from Mr. Sens and granted Mr. Sens a special
bonus equivalent to the income tax incurred as a result of this forgiveness of
indebtedness, in recognition of Mr. Sens' contribution to the Company's
business. The issuer then transferred the remaining $35,000 of debt owing by Mr.
Sens to Dr. Kenneth Brochin, a director of the issuer, in satisfaction of a debt
owing from the issuer to Dr. Brochin for certain advances of working capital.
On May 1, 1998, Mr. Leon Zajdel, a former director of Unico and a current
director of the issuer, sold 13,187 shares of common stock of Unico to the
issuer in exchange for 8,747 shares of common stock of the issuer. The issuer
subsequently transferred to the principal shareholder of Unico as partial
consideration for the purchase of United.
On December 30, 1998, T.C. Equities, the holder of 70,000 shares of
Series B Preferred Stock of the issuer, entered into a series of transactions
with the issuer as part of the Acquisition. T.C. Equities, in exchange for the
Series B Preferred Stock, an option to purchase 250,000 shares of common stock
of the issuer at a price of $0.16 per share, and the common stock of Unico
acquired by the issuer from Messrs. Bernier, Zajdel and others, provided
financing for the Acquisition. As a result of these transactions, T.C. Equities
acquired a controlling interest in Unico.
<PAGE> 36
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
<S> <C> <C>
3.1 Articles of Incorporation (under the name Incorporated by reference in the filing of the
Micro Tech Industries Inc.) Company's annual report on Form 10-KSB filed
on April 15, 1998.
3.2 Amendment to the Articles of Incorporation Incorporated by reference in the filing of the
Company's quarterly report on Form 10-Q filed
on May 15, 1997.
3.3 Amended and Restated Bylaws of the Company Included herein.
10.1 Amended and Restated Stock Purchase Agreement Incorporated by reference in the filing of
and Plan of Merger among Unico, UMSI, United the Company's current report on Form 8-K
Marketing Merger Corp. and the registrant filed on January 8, 1999.
dated as of December 30, 1998.
10.2 Amended and Restated Stock Purchase and Incorporated by reference in the filing of the
Shareholders Agreement among Gerard R. Company's current report on Form 8-K filed on
Bernier, Joel P. Sens, Lawrence Grimes, January 8, 1999.
Kenneth Brochin, David Grossman, Jeffrey
Sens and the registrant dated as of
December 30, 1998.
10.3 Amended and Restated Escrow Agreement among Incorporated by reference in the filing of the
T.C. Equities Ltd., the Law Office of Shane Company's current report on Form 8-K filed on
Henty Sutton, P.C. and the registrant dated January 8, 1999.
as of December 30, 1998.
10.4 Amended and Restated Stock Purchase Agreement Incorporated by reference in the filing of the
between T.C. Equities Ltd. and the registrant Company's current report on Form 8-K filed on
dated as of December 30, 1998. January 8, 1999.
10.5 Amended and Restated Securities Subscription Incorporated by reference in the filing of the
Agreement between T.C. Equities Ltd. and the Company's current report on Form 8-K filed on
registrant dated as of December 30, 1998. January 8, 1999.
10.6 Stock Purchase Agreement among T.C. Equities Incorporated by reference in the filing of the
Ltd., Unico, Inc. and the registrant dated as Company's current report on Form 8-K filed on
of December 30, 1998. January 8, 1999.
21.1 Subsidiaries of the Registrant Included herein.
24.1 Power of Attorney Included on the signature page hereto.
27.1 Financial Data Schedule Included herein.
</TABLE>
<PAGE> 37
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NEXT GENERATION MEDIA CORP.
Date: November 8, 1999 By: /s/ Gerard R. Bernier
---------------------------------------
Gerard R. Bernier, President and Director
(principal executive officer)
Date: November 8, 1999 By: *
-----------------------------------------
Kenneth Brochin, Secretary, Treasurer and
Director
Date: November 8, 1999 By: *
-----------------------------------------
Leon Zajdel, Director
Date: November 8, 1999 By: *
-----------------------------------------
Peter Collins, Director
Date: November 8, 1999 By: *
-----------------------------------------
Steve Kronzek, Director
Date: November 8, 1999 By: *
-----------------------------------------
Frank A. Miller, Chief Financial Officer
Date: November 8, 1999 By: */s/ Gerard R. Bernier
-----------------------------------------
Gerard R. Bernier, Attorney-in-fact
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Gerard R. Bernier his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
this annual report on Form 10-KSB, and to file the same with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact
<PAGE> 38
and agent, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Company and the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Kenneth Brochin Secretary, Treasurer and Director October 26, 1999
- --------------------
Kenneth Brochin
/s/ Leon Zajdel Director October 18, 1999
- --------------------
Leon Zajdel
/s/ Peter Collins Director October 26, 1999
- --------------------
Peter Collins
/s/ Steve Kronzek Director October 25, 1999
- --------------------
Steve Kronzek
/s/ Frank A. Miller Chief Financial Officer October 25, 1999
- ----------------------
Frank A. Miller
</TABLE>
<PAGE> 39
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION/PAGE NUMBER
- ------ ----------- --------------------
<S> <C> <C>
3.1 Articles of Incorporation (under the name Micro Incorporated by reference in the filing of the Company's
Tech Industries Inc.) annual report on Form 10-KSB filed on April 15, 1998.
3.2 Amendment to the Articles of Incorporation Incorporated by reference in the filing of the Company's
quarterly report on Form 10-Q filed on May 15, 1997.
3.3 Amended and Restated Bylaws of the Company Page
10.1 Amended and Restated Stock Purchase Agreement and Incorporated by reference in the filing of the Company's
Plan of Merger among Unico, UMSI, United Marketing current report on Form 8-K filed on January 8, 1999.
Merger Corp. and the registrant dated as of
December 30, 1998.
10.2 Amended and Restated Stock Purchase and Incorporated by reference in the filing of the Company's
Shareholders Agreement among Gerard R. Bernier, current report on Form 8-K filed on January 8, 1999.
Joel P. Sens, Lawrence Grimes, Kenneth Brochin,
David Grossman, Jeffrey Sens and the registrant
dated as of December 30, 1998.
10.3 Amended and Restated Escrow Agreement among T.C. Incorporated by reference in the filing of the Company's
Equities Ltd., the Law Office of Shane Henty current report on Form 8-K filed on January 8, 1999.
Sutton, P.C. and the registrant dated as of
December 30, 1998.
10.4 Amended and Restated Stock Purchase Agreement Incorporated by reference in the filing of the Company's
between T.C. Equities Ltd. and the registrant current report on Form 8-K filed on January 8, 1999.
dated as of December 30, 1998.
10.5 Amended and Restated Securities Subscription Incorporated by reference in the filing of the Company's
Agreement between T.C. Equities Ltd. and the current report on Form 8-K filed on January 8, 1999.
registrant dated as of December 30, 1998.
10.6 Stock Purchase Agreement among T.C. Equities Ltd., Incorporated by reference in the filing of the Company's
Unico, Inc. and the registrant dated as of current report on Form 8-K filed on January 8, 1999.
December 30, 1998.
21.1 Subsidiaries of the Registrant Page
24.1 Power of Attorney Included on the signature page hereto.
27.1 Financial Data Schedule Page
</TABLE>
<PAGE> 1
EXHIBIT 3.3
NEXT GENERATION MEDIA CORP.
(a Nevada corporation)
AMENDED AND RESTATED
BY-LAWS
As adopted by the Stockholders on January 20, 1999.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE/SECTION Page
- --------------- ----
<S> <C>
I. DEFINITIONS .................................................................1
1.01 Definitions ...........................................................1
1.02 Offices ...............................................................1
II. OFFICE ......................................................................1
2.01 Principal Office .......................................................1
2.02 Registered Office .....................................................1
2.03 Other Offices .........................................................2
III. MEETINGS OF STOCKHOLDERS ....................................................2
3.01 Annual Meetings .......................................................2
3.02 Special Meetings ......................................................2
3.03 Place of Meetings .....................................................2
3.04 Notice of Meetings ....................................................2
3.05 Waiver of Notice ......................................................2
3.06 Adjournment of Meeting ................................................3
3.07 Quorum ................................................................3
3.08 Stockholder Proposals .................................................3
3.09 Organization ..........................................................4
3.10 Conduct of Business ...................................................4
3.11 List of Stockholders ..................................................4
3.12 Closing of Transfer Books or Fixing of Record Date ....................5
3.13 Voting of Shares ......................................................5
3.14 Inspectors ............................................................5
3.15 Proxies ...............................................................6
3.16 Consent of Stockholders in Lieu of Meeting ............................6
IV. DIRECTORS ...................................................................6
4.01 General Powers ........................................................6
4.02 Number ................................................................6
4.03 Nomination of Directors ...............................................6
4.04 Election of Directors and Term of Office ..............................7
4.05 Resignations ..........................................................8
4.06 Removal ...............................................................8
4.07 Vacancies .............................................................8
4.08 Chairman of the Board .................................................8
4.09 Compensation ..........................................................8
4.10 Corporate Opportunities ...............................................8
V. MEETINGS OF DIRECTORS .......................................................9
5.01 Regular Meetings ......................................................9
5.02 Place of Meetings .....................................................9
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
5.03 Meetings by Telecommunications ........................................9
5.04 Special Meetings ......................................................9
5.05 Notice of Special Meetings ............................................9
5.06 Waiver by Presence ....................................................9
5.07 Quorum ...............................................................10
5.08 Conduct of Business ..................................................10
5.09 Action by Consent.....................................................10
5.10 Presumption of Assent ................................................10
VI. COMMITTEES .................................................................10
6.01 Committees of the Board ..............................................10
6.02 Selection of Committee Members .......................................10
6.03 Conduct of Business ..................................................10
6.04 Authority ............................................................11
6.05 Minutes ..............................................................11
VII. OFFICERS ...................................................................11
7.01 Officers of the Corporation ..........................................11
7.02 Election and Term ....................................................11
7.03 Compensation of Officers .............................................11
7.04 Removal of Officers and Agents .......................................11
7.05 Resignation of Officers and Agents ...................................12
7.06 Bond .................................................................12
7.07 President ............................................................12
7.08 Vice-Presidents ......................................................12
7.09 Secretary ............................................................12
7.10 Assistant Secretaries ................................................12
7.11 Treasurer ............................................................13
7.12 Assistant Treasurers .................................................13
7.13 Delegation of Authority ..............................................13
7.14 Actions with Respect to Securities of Other Corporations .............13
7.15 Vacancies ............................................................13
VIII. CONTRACTS, LOANS, DRAFTS, DEPOSITS AND ACCOUNTS ............................14
8.01 Contracts ............................................................14
8.02 Loans ................................................................14
8.03 Drafts ...............................................................14
8.04 Deposits .............................................................14
8.05 General and Special Bank Accounts ....................................14
IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER .................................14
9.01 Certificates for Shares ..............................................14
9.02 Transfer of Shares ...................................................15
9.03 Lost, Stolen, Destroyed and Mutilated Certificates ...................15
9.04 Regulations ..........................................................15
9.05 Holder of Record .....................................................15
9.06 Treasury Shares.......................................................16
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C>
X. INDEMNIFICATION ............................................................16
10.01 Action Other Than By or In the Right of the Corporation .............16
10.02 Actions By or In the Right of the Corporation .......................16
10.03 Determination of Right of Indemnification............................17
10.04 Indemnification Against Expenses of Successful Party ................17
10.05 Advance of Expenses .................................................17
10.06 Other Rights and Remedies ...........................................17
10.07 Insurance ...........................................................17
10.08 Constituent Corporations ............................................17
10.09 Other Insurance .....................................................18
10.10 Public Policy .......................................................18
XI. NOTICES ....................................................................18
11.01 General .............................................................18
11.02 Waiver of Notice ....................................................18
XII. MISCELLANEOUS ..............................................................19
12.01 Facsimile Signatures ................................................19
12.02 Corporate Seal ......................................................19
12.03 Fiscal Year .........................................................19
XIII. AMENDMENTS .................................................................19
</TABLE>
iv
<PAGE> 5
BY-LAWS
OF
NEXT GENERATION MEDIA CORP.
(A Nevada Corporation)
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Unless the context clearly requires otherwise,
in these Bylaws:
(a) "Articles of Incorporation" means the Articles of
Incorporation of NEXT GENERATION MEDIA CORP., as filed with the Secretary of
State of the State of Nevada and includes all amendments thereto and
restatements thereto subsequently filed.
(b) "Board" means the board of directors of the Corporation.
(c) "Bylaws" means these bylaws as amended and restated by the
Stockholders on January 8, 1999, and includes amendments subsequently adopted by
the Board or by the Stockholders.
(d) "Corporation" means Next Generation Media Corp.
(e) "Section" refers to sections of these Bylaws.
(f) "Stockholder" means stockholders of record of the Corporation.
SECTION 1.02. OFFICES. The title of an office refers to the person or
persons who at any given time perform the duties of that particular office for
the Corporation.
ARTICLE II
OFFICES
SECTION 2.01. PRINCIPAL OFFICE. The Corporation may locate its principal
office within or without the state of incorporation as the Board may determine.
SECTION 2.02. REGISTERED OFFICE. The registered office of the Corporation
required by law to be maintained in the state of incorporation may be, but need
not be,
<PAGE> 6
identical with the principal office of the Corporation. The Board may change the
address of the registered office from time to time.
SECTION 2.03. OTHER OFFICES. The Corporation may have offices at such
other places, either within or without the state of incorporation, as the Board
may designate or as the business of the Corporation may require from time to
time.
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 3.01. ANNUAL MEETINGS. The Stockholders of the Corporation shall
hold their annual meetings for the purpose of electing directors and for the
transaction of such other proper business as may come before such meetings at
such time, date and place as the Board shall determine by resolution.
SECTION 3.02. SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called only by the Board or a committee of the Board
duly designated and whose powers and authority include the power to call such
meetings, pursuant to a resolution adopted by a majority of the members of the
Board or Committee then in office.
SECTION 3.03. PLACE OF MEETINGS. The Stockholders shall hold all meetings
at such places, within or without the State of Nevada, as the Board or a
committee of the Board shall specify in the notice or waiver of notice for such
meetings.
SECTION 3.04. NOTICE OF MEETINGS. Except as otherwise required by law,
the Board or a committee of the Board shall give notice of each meeting of
Stockholders, whether annual or special, not less than 10 nor more than 60 days
before the date of the meeting. The Board or a committee of the Board shall
deliver a notice to each Stockholder entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his address as it appears on the records of the Corporation,
or by transmitting a notice thereof to him at such address by telegraph,
facsimile transmission or other electronic media authorized by law. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the Stockholder at his address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant Secretary or of the
Transfer Agent of the Corporation that he has given notice shall constitute, in
the absence of fraud, prima facie evidence of the facts stated therein.
Every notice of a meeting of the Stockholders shall state the place, date
and hour of the meeting and, in the case of a special meeting, also shall state
the purpose or purposes of the meeting. Furthermore, if the Corporation will
maintain the list at a place other than where the meeting will take place, every
notice of a meeting of the
<PAGE> 7
Stockholders shall specify where the Corporation will maintain the list of
Stockholders entitled to vote at the meeting.
SECTION 3.05. WAIVER OF NOTICE. Whenever these Bylaws require written
notice, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall constitute the equivalent
of notice. Attendance of a person at any meeting shall constitute a waiver of
notice of such meeting, except when the person attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. No written waiver of notice need specify either the business to be
transacted at, or the purpose or purposes of any regular or special meeting of
the Stockholders, directors or members of a committee of the Board.
SECTION 3.06. ADJOURNMENT OF MEETING. When the Stockholders adjourn a
meeting to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Stockholders may transact
any business which they may have transacted at the original meeting. If the
adjournment is for more than 30 days or, if after the adjournment, the Board or
a committee of the Board fixes a new record date for the adjourned meeting, the
Board or the committee of the Board shall give notice of the adjourned meeting
to each Stockholder of record entitled to vote at the meeting.
SECTION 3.07. QUORUM. Except as otherwise required by law, the holders of
a majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes at any
meeting of the Stockholders. In the absence of a quorum at any meeting or any
adjournment thereof, the holders of a majority of the shares of stock entitled
to vote who are present, in person or by proxy, or, in the absence therefrom of
all the Stockholders, any officer entitled to preside at, or to act as secretary
of, such meeting may adjourn such meeting to another place, date or time.
If the chairman of the meeting gives notice of any adjourned special
meeting of Stockholders to all Stockholders entitled to vote thereat, stating
that those present shall constitute a quorum, then, except as otherwise required
by law, those present at such adjourned meeting shall constitute a quorum and a
majority of the votes cast at such meeting shall determine all matters.
SECTION 3.08. STOCKHOLDER PROPOSALS.
a. CONDITION OF SUBMISSION TO STOCKHOLDERS. No proposal for a
stockholder vote shall be submitted by a stockholder (a "Stockholder Proposal")
to the Corporation's stockholders unless the stockholder submitting such
proposal (the "Proponent") shall have filed a written notice (a "Proposal
Notice") setting forth with particularity (1) the names and business addresses
of the Proponent and all persons or entities (the "Persons") acting in concert
with the Proponent; (2) the name and address of the Proponent and the Persons
identified in clause (1), as they appear on the
<PAGE> 8
Corporation's books (if they so appear); (3) the class and number of shares of
the Corporation beneficially owned by the Proponent and the Persons identified
in clause (1); (4) a description of the Stockholder Proposal containing all
material information relating thereto; and (5) such other information as the
Board of Directors reasonably determines is necessary or appropriate to enable
the Board of Directors and stockholders of the Corporation to consider the
Stockholder Proposal. The presiding officer at any stockholders' meeting may
determine that any Stockholder Proposal was not made in accordance with the
procedures prescribed in these Amended and Restated Bylaws (the "Bylaws") or is
otherwise not in accordance with law, and if it is so determined, such officer
shall so declare at the meeting and the Stockholder Proposal shall be
disregarded.
b. STOCKHOLDER PROPOSAL NOTICE. Proposal Notices shall be
delivered to the Secretary at the principal executive office of the Corporation
not later than 120 days in advance of the anniversary date of the Corporation's
proxy statement for the previous year's annual meeting or, in the case of
special meetings, at the close of business on the seventh day following the date
on which notice of such meeting is first given to stockholders.
SECTION 3.09. ORGANIZATION. Such person as the Board may have designated
or, in the absence of such a person, the highest ranking officer of the
Corporation who is present shall call to order any meeting of the Stockholders,
determine the presence of a quorum and act as chairman of the meeting. In the
absence of the Secretary or an Assistant Secretary of the Corporation, the
chairman shall appoint the secretary of the meeting.
SECTION 3.10. CONDUCT OF BUSINESS. The chairman of any meeting of
Stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as he deems in order. Unless otherwise determined by the Chairman, at
each meeting of stockholders, the chairman of the meeting shall fix and announce
the date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at the meeting and shall determine the
order of business and all other matters of procedure. Except to the extent
inconsistent with any such rules and regulations as adopted by the Board of
Directors, the chairman of the meeting may establish rules, which need not be in
writing, to maintain order for the conduct of the meeting, including, without
limitation, restricting attendance to bona fide stockholders of record and their
proxies and other persons in attendance at the invitation of the chairman and
making rules governing speeches and debates. The chairman of the meeting acts in
his or her absolute discretion and his or her rulings are not subject to appeal.
SECTION 3.11. LIST OF STOCKHOLDERS. At least 10 days before every meeting
of Stockholders, the Secretary shall prepare a list of the Stockholders entitled
to vote at the meeting or any adjournment thereof, arranged in alphabetical
order, showing the address of each Stockholder and the number of shares
registered in the name of each Stockholder. The Corporation shall make the list
available for examination by any Stockholder, for any
<PAGE> 9
purpose germane to the meeting, either at a place within the city where the
meeting will take place or at the place designated in the notice of the meeting.
The Secretary shall produce and keep the list at the meeting during the
entire duration of the meeting, and any Stockholder who is present may inspect
the list at the meeting. The list shall constitute presumptive proof of the
identity of the Stockholders entitled to vote at the meeting and the number of
shares each Stockholder holds.
A determination of Stockholders entitled to vote at any meeting of
Stockholders pursuant to this Section shall apply to any adjournment thereof.
SECTION 3.12. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. In
order that the Corporation may determine the stockholders entitled (i) to notice
of or to vote at any meeting of stockholders or any adjournments thereof, (ii)
to receive payment of any dividend or other distribution, or allotment of any
rights, or (iii) to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the Board of
Directors, in advance, may fix a date as the record date for any such
determination, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty (60) days nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to the
date of any other action. A determination of the stockholders of record entitled
to notice of or to vote at a meeting of the stockholders shall apply to any
adjournment of the meeting taken pursuant to Section 3.06 hereof; provided,
however, that the Board of Directors, in its discretion, may fix a new record
date for an adjourned meeting. Only stockholders determined to be stockholders
of record on the record date so fixed shall be entitled to notice of, or to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend or other distribution, or allotment of rights, or to exercise such
rights in respect of such change, conversion or exchange of stock, or to
participate in any such other lawful action, as the case may be, notwithstanding
any transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
SECTION 3.13. VOTING OF SHARES. Unless otherwise provided in a resolution
or resolutions providing for any class or series of Preferred Stock pursuant to
the Amended and Restated Articles of Incorporation or by the Nevada Revised
Statutes, each Stockholder shall have one vote for every share of voting stock
registered in his name on the record date for the meeting. The Corporation shall
not have the right to vote treasury stock of the Corporation, nor shall another
corporation have the right to vote its stock of the Corporation if the
Corporation holds, directly or indirectly, a majority of the shares entitled to
vote in the election of directors of such other corporation. Persons holding
stock of the Corporation in a fiduciary capacity shall have the right to vote
such stock. Persons who have pledged their stock of the Corporation shall have
the right to vote such stock unless in the transfer on the books of the
Corporation the pledger expressly empowered the pledgee to vote such stock. In
that event, only the pledges, or his proxy, may represent such stock and vote
thereon.
<PAGE> 10
A plurality of the votes cast shall determine all elections and, except
when the law requires otherwise, a majority of the votes cast shall determine
all other matters.
The Stockholders may vote by voice vote on all matters. However, upon
demand by a Stockholder entitled to vote, or his proxy, the Stockholders shall
vote by ballot. In that event, each ballot shall state the name of the
Stockholder or proxy voting, the number of shares voted and such other
information as the Corporation may require under the procedure established for
the meeting.
SECTION 3.14. INSPECTORS. At any meeting in which the Stockholders vote
by ballot, the chairman may appoint a Inspector or Inspectors. Each Inspector
shall subscribe an oath to execute the duties of a Inspector at such meeting
faithfully, with strict impartiality and according to the best of his ability.
The Inspector or Inspectors shall decide the qualification of the voters and
shall report the number of shares represented at the meeting and entitled to
vote on any question, shall conduct and accept the votes, and, when the
Stockholders have completed voting, ascertain and report the number of shares
voted respectively for and against the question. The Inspector or Inspectors
shall prepare a subscribed, written report and shall deliver the report to the
Secretary of the Corporation. A Inspector need not be a Stockholder of the
Corporation, and any officer of the Corporation may be a Inspector on any
question other than a vote for or against a proposal in which he has a material
interest.
SECTION 3.15. PROXIES. A Stockholder may exercise any voting rights in
person or by his proxy appointed by an instrument in writing, which he or his
authorized attorney-in-fact has subscribed and which the proxy has delivered to
the secretary of the meeting.
A proxy is not valid after the expiration of 11 months from the date of
its execution, unless the person executing it specifies thereon the length of
time for which it is to continue in force, or limits its use to a particular
meeting. No proxy shall be valid after 10 years from the date of its execution.
The attendance at any meeting of a Stockholder who previously has given a
proxy shall not have the effect of revoking the same unless he notifies the
Secretary in writing prior to the voting of the proxy.
SECTION 3.16. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. The
Stockholders may take any action which they could take at any annual or special
meeting without a meeting, prior notice and a vote only if the affirmative vote
of the holders of at least 66-2/3% of the voting power of all of the shares of
capital stock of the Corporate then entitled to vote generally in the election
of directors, voting together as a single class sign a consent in writing,
setting forth the action taken.
ARTICLE IV
BOARD OF DIRECTORS
<PAGE> 11
SECTION 4.01. GENERAL POWERS. The Board shall manage the property,
business and affairs of the Corporation.
SECTION 4.02. NUMBER. The number of directors who shall constitute the
Board shall equal not less than three nor more than 15, as the Board may
determine by resolution from time to time.
SECTION 4.03. NOMINATION OF DIRECTORS.
a. ELIGIBILITY. Only persons who are selected and recommended by
the Board of Directors or the committee of the Board of Directors designated to
make nominations, or who are nominated by stockholders in accordance with the
procedures set forth in this Section 4.03, shall be eligible for election, or
qualified to serve, as directors. Nominations of individuals for election to the
Board of Directors of the Corporation at any annual meeting or any special
meeting of stockholders at which directors are to be elected may be made by any
stockholder of the Corporation entitled to vote for the election of directors at
that meeting by compliance with the procedures set forth in this Section 4.03.
Nominations by stockholders shall be made by written notice (a "Nomination
Notice"), which shall set forth the following information: (1) as to each
individual nominated, (i) the name, date of birth, business address and
residence address of such individual, (ii) the business experience during the
past five years of such nominee, including his or her principal occupations and
employment during such period, the name and principal business of any
corporation or other organization in which such occupations and employment were
carried on, and such other information as to the nature of his or her
responsibilities and level of professional competence as may be sufficient to
permit assessment of his or her prior business experience, (iii) whether the
nominee is or has ever been at any time a director, officer or owner of 5% or
more of any class of capital stock, partnership interests or other equity
interest of any corporation, partnership or other entity, (iv) any directorships
held by such nominee in any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange
Act or any company registered as an investment company under the Investment
Company Act of 1940, as amended; and (v) whether, in the last five years, such
nominee has been convicted in a criminal proceeding or has been subject to a
judgment, order, finding or decree of any federal, state or other governmental
entity, concerning any violation of federal, state or other law, or any
proceeding in bankruptcy, which conviction, order, finding, decree or proceeding
may be material to an evaluation of the ability or integrity of the nominee; and
(2) as to the Person submitting the Nomination Notice and any Person acting in
concert with such Person, (i) the name and business address of such Person, (ii)
the name and address of such Person as they appear on the Corporation's books
(if they so appear) and (iii) the class and number of shares of the Corporation
that are beneficially owned by such Person. A written consent to being named in
a proxy statement as a nominee, and to serve as a director if elected, signed by
the nominee, shall be filed with any Nomination Notice. If the presiding officer
at any stockholders' meeting determines that a nomination was not made in
accordance with the
<PAGE> 12
procedures prescribed by these Bylaws, he shall so declare to the meeting and
the defective nomination shall be disregarded.
b. STOCKHOLDER NOMINATION NOTICE. Nomination Notices shall be
delivered to the Secretary at the principal executive office of the Corporation
not later than 120 days in advance of the anniversary date of the Corporation's
proxy statement for the previous year's annual meeting or, in the case of
special meetings, at the close of business on the seventh day following the date
on which notice of such meeting is first given to stockholders.
SECTION 4.04. ELECTION OF DIRECTORS AND TERM OF OFFICE. The Stockholders
of the Corporation shall elect the directors at the annual or adjourned annual
meeting (except as otherwise provided herein for the filling of vacancies). The
directors initially designated as Class I directors shall serve for a term
ending on the date of the 1999 annual meeting of shareholders, the directors
initially designated as Class II directors shall serve for a term ending on the
date of the 2000 annual meeting of shareholders, and the directors initially
designated as Class III directors shall serve for a term ending on the date of
the 2001 annual meeting of shareholders. At each annual meeting of shareholders,
the successors to the class of directors whose ters then shall expire shall be
identified as being of the same class as the directors they succeed and elected
to hold office for a term expiring at the third succeeding annual meeting of
shareholders. Notwithstanding the foregoing, each director shall hold office
until such director's successor shall have been duly elected or until such
director's earlier death, resignation, or removal. In the event of any change in
the number of directors, the Board of Directors shall apportion any newly
created directorships among, or reduce the number of directorships in, such
class or classes as shall equalize, as nearly as possible, the number of
directors in each class.
SECTION 4.05. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any resignation shall take effect upon receipt or at the time
specified in the notice. Unless the notice specifies otherwise, the
effectiveness of the resignation shall not depend upon its acceptance.
SECTION 4.06. REMOVAL. Except as may be provided in a resolution or
resolutions providing for any class or series of Preferred Stock with respect to
any directors elected by the holders of such class or series, any director, or
the entire Board of Directors, may be removed from office at any time, but only
by the affirmative vote of the holders of at least 66-2/3% of the voting power
of all of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
SECTION 4.07. VACANCIES. Any vacancies in the Board of Directors for any
reason and any newly created directorships resulting by reason of any increase
in the number of directors may be filled only by the Board of Directors, acting
by a majority of the remaining directors then in office, although less than a
quorum, or by a sole remaining director, and any directors so appointed shall
hold office until the next election
<PAGE> 13
of the class for which such directors have been chosen and until their
successors are elected and qualified.
SECTION 4.08. CHAIRMAN OF THE BOARD. At the annual meeting of the Board,
the directors may elect from their number a Chairman of the Board of Directors.
The Chairman shall preside at all meetings of the Board, shall determine any
deadlocks in voting and shall perform such other duties as the Board may direct.
The Board also may elect a Vice Chairman and other officers of the Board, with
such powers and duties as the Board may designate from time to time.
SECTION 4.09. COMPENSATION. The Board may compensate directors for their
services and may provide for the payment of all expenses the directors incur by
attending meetings of the Board.
SECTION 4.10. CORPORATE OPPORTUNITIES. The officers and directors of the
Corporation shall be subject to the doctrine of corporate opportunities only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined by the Board of Directors as evidenced by
resolutions appearing in the Corporation's minutes. When such areas of interest
are delineated, all such business opportunities within such areas of interest
which come to the attention of an officer or director of the Corporation shall
be promptly disclosed to the Corporation and made available to it. The Board of
Directors may reject any opportunity presented to it and thereafter any officer
or director may avail himself or herself of such opportunity. Until such time as
the Corporation, through its Board of Directors, has designated as area of
interest, the officers and directors of the Corporation shall be free to engage
in such area of interest on their own and the doctrine of corporate
opportunities shall not limit the rights of any officer or director of this
Corporation to continue a business existing prior to the time that such area of
interest is designated by the Corporation. This provision shall not be construed
to release any employee of the Corporation (other than an officer or director)
from the duties which he may have to the Corporation.
ARTICLE V
MEETINGS OF DIRECTORS
SECTION 5.01. REGULAR MEETINGS. The Board may hold regular meetings at
such places, dates and times as the Board shall establish by resolution. If any
day fixed for a meeting falls on a legal holiday, the Board shall hold the
meeting at the same place and time on the next succeeding business day. The
Board need not give notice of regular meetings.
SECTION 5.02. PLACE OF MEETINGS. The Board may hold any of its meetings
in or out of the state of Nevada, at such places as the Board may designate, at
such places as the notice or waiver of notice of any such meeting may designate,
or at such places as the persons calling the meeting may designate.
<PAGE> 14
SECTION 5.03. MEETINGS BY TELECOMMUNICATIONS. The Board or any committee
of the Board may hold meetings by means of conference telephone or similar
telecommunications equipment that enable all persons participating in the
meeting to hear each other. Such participation shall constitute presence in
person at such meeting.
SECTION 5.04. SPECIAL MEETINGS. The Chairman of the Board, the President
or a majority of the directors then in office may call a special meeting of the
Board. The person or persons authorized to call special meetings of the Board
may fix any place, either in or out of the State of Nevada as the place for the
meeting.
SECTION 5.05. NOTICE OF SPECIAL MEETINGS. The person or persons calling a
special meeting of the Board shall give written notice to each director of the
time, place and date of the meeting of not less than three days if by mail and
not less than 24 hours if by telegraph or in person. A director may waive notice
of any special meeting, and any meeting shall constitute a legal meeting without
notice if all the directors are present or if those not present sign either
before or after the meeting a written waiver of notice, a consent to such
meeting or an approval of the minutes of the meeting. A notice or waiver of
notice need not specify the purposes of the meeting or the business which the
Board will transact at the meeting.
SECTION 5.06. WAIVER BY PRESENCE. Except when expressly for the purpose
of objecting to the legality of a meeting, a director's presence at a meeting
shall constitute a waiver of notice of such meeting.
SECTION 5.07. QUORUM. One-third of the directors then in office shall
constitute a quorum for all purposes at any meeting of the Board. In the absence
of a quorum, a majority of directors present at any meeting may adjourn the
meeting to another place, date, or time, without further notice.
SECTION 5.08. CONDUCT OF BUSINESS. The Board shall transact business in
such order and manner as the Board may determine. Except as the law requires
otherwise, the Board shall determine all matters by the vote of a majority of
the directors present. The directors shall act as a Board, and the individual
directors shall have no power as such.
SECTION 5.09. ACTION BY CONSENT. The Board or a committee of the Board
may take any required or permitted action without a meeting if all members of
the Board or committee sign a written consent and file the consent with the
minutes of the proceedings of the Board.
SECTION 5.10. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors when a vote on any matter is
taken is deemed to have assented to the action taken unless he or she votes
against or abstains from the action taken or unless, at the beginning of the
meeting or promptly upon arrival, the director objects to the holding of the
meeting or transacting specified business at the
<PAGE> 15
meeting. Any such dissenting votes, abstentions or objections shall be entered
in the minutes of the meeting.
ARTICLE VI
COMMITTEES
SECTION 6.01. COMMITTEES OF THE BOARD. The Board may designate by a vote
of a majority of the directors then in office committees of the Board. The
committees shall serve at the pleasure of the Board and shall possess such
lawfully delegable powers and duties as the Board may confer.
SECTION 6.02. SELECTION OF COMMITTEE MEMBERS. The Board shall elect by a
vote of a majority of the directors then in office a director or directors to
serve as the member or members of a committee. By the same vote, the Board may
designate other directors as alternative members who may replace any absent or
disqualified member at any meeting of a committee. In the absence or
disqualification of any member of any committee and any alternate member in his
place, the member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
appoint by unanimous vote another member of the Board to act at the meeting in
the place of the absent or disqualified member.
SECTION 6.03. CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as the law or these Bylaws require otherwise. Each
committee shall make adequate provision for notice of all meetings to members.
One-third of the members shall constitute a quorum, unless the committee
consists of one or two members. In that event, one member shall constitute a
quorum. A majority vote of the members present shall determine all matters. A
committee may take action without a meeting if all the members of the committee
consent in writing and file the consent or consents with the minutes of the
proceedings of the committee.
SECTION 6.04. AUTHORITY. Any committee, to the extent the Board provides,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
affixation of the Corporation's seal to all instruments which may require or
permit it. However, no committee shall have any power or authority in regard to
amending the Articles of Incorporation, adopting an agreement of merger or
consolidation, recommending to the Stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property, recommending to the
Stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending these Bylaws of the Corporation. Unless a resolution of the Board
expressly provides, no committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
<PAGE> 16
SECTION 6.05. MINUTES. Each committee shall keep regular minutes of its
proceedings and report the same to the Board when required.
ARTICLE VII
OFFICERS
SECTION 7.01. OFFICERS OF THE CORPORATION. The officers of the
Corporation shall consist of a President, a Secretary, a Treasurer and such
Vice-Presidents, Assistant Secretaries, Assistant Treasurers, and other officers
as the Board may elect from time to time. The same person may hold at the same
time any two offices, except the offices of President and Secretary, President
and Assistant Secretary, Vice President and Secretary, or Vice President and
Assistant Secretary.
SECTION 7.02. ELECTION AND TERM. The Board shall elect the officers of
the Corporation. Each officer shall hold office until his death, resignation,
retirement, removal or disqualification, or until his successor shall have been
elected and qualified.
SECTION 7.03. COMPENSATION OF OFFICERS. The Board shall fix the
compensation of all officers of the Corporation. No officer shall serve the
Corporation in any other capacity and receive compensation therefor, unless the
Board authorizes such additional compensation.
SECTION 7.04. REMOVAL OF OFFICERS AND AGENTS. The Board may remove any
officer or agent it has elected or appointed whenever the Board judges that such
removal will serve the best interest of the Corporation. However, such removal
shall not prejudice the contractual rights of the person removed, if any.
SECTION 7.05. RESIGNATION OF OFFICERS AND AGENTS. Any officer or agent
the Board has elected or appointed may resign at any time by giving written
notice to the Board, the Chairman of the Board, the President or the Secretary
of the Corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified. Unless otherwise
specified in the notice, the Board need not accept the resignation to make it
effective.
SECTION 7.06. BOND. The Board may require by resolution any officer,
agent, or employee of the Corporation to give bond to the Corporation, with
sufficient sureties conditioned on the faithful performance of the duties of his
respective office or agency. The Board also may require by resolution any
officer, agent or employee to comply with such other conditions as the Board may
require from time to time.
SECTION 7.07. PRESIDENT. The President shall be the principal executive
officer of the Corporation and, subject to the Board's control, shall supervise
and control all of the business and affairs of the Corporation. When present, he
shall sign, with the Secretary, an Assistant Secretary, or any other officer or
agent of the Corporation which the Board
<PAGE> 17
has authorized, deeds, mortgages, bonds, contracts or other instruments which
the Board has authorized an officer or agent of the Corporation to execute.
However, the President shall not sign any instrument which the law, these Bylaws
or the Board expressly require some other officer or agent of the Corporation to
sign and execute. In general, the President shall perform all duties incident to
the office of President and such other duties as the Board may prescribe from
time to time.
SECTION 7.08. VICE PRESIDENTS. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice Presidents in the
order of their length of service as Vice Presidents, unless the Board determines
otherwise, shall perform the duties of the President. When acting as the
President, a Vice President shall have all the powers and restrictions of the
Presidency. Any Vice President may sign, with the Secretary, an Assistant
Secretary, or any other officer or agent of the Corporation which the Board has
authorized, certificates for shares of the Corporation. A Vice President shall
perform such other duties as the President or the Board may assign to him from
time to time.
SECTION 7.09. SECRETARY. The Secretary shall: (a) keep the minutes of the
meetings of the Stockholders and of the Board in one or more books for-that
purpose; (b) give all notices which these Bylaws or the law requires; (c) serve
as custodian of the records and seal of the Corporation; (d) affix the seal of
the Corporation to all documents which the Board has authorized execution on
behalf of the Corporation under seal; (e) maintain a register of the address of
each Stockholder of the Corporation; (f) sign, with the President, a Vice
President, or any other officer or agent of the Corporation which the Board has
authorized, certificates for shares of the Corporation; (g) have charge of the
stock transfer books of the Corporation; and (h) perform all duties which the
President or the Board may assign to him from time to time.
SECTION 7.10. ASSISTANT SECRETARIES. In the absence of the Secretary or
in the event of his death, inability or refusal to act, the Assistant
Secretaries in the order of their length of service as Assistant Secretary,
unless the Board determines otherwise, shall perform the duties of the
Secretary. When acting as the Secretary, an Assistant Secretary shall have the
powers and restrictions of the Secretary. Any Assistant Secretary may sign, with
the President, a Vice President, or any other officer or agent of the
Corporation which the Board has authorized, certificates for shares of the
Corporation. An Assistant Secretary shall perform such other duties as the
President, Secretary or Board may assign from time to time.
SECTION 7.11. TREASURER. The Treasurer shall: (a) have responsibility for
all funds and securities of the Corporation; (b) receive and give receipts for
moneys due and payable to the Corporation from any source whatsoever; (c)
deposit all moneys in the name of the Corporation in depositories which the
Board selects; and (d) perform all of the duties which the President or the
Board may assign to him from time to time.
The Treasurer shall prepare, or have prepared, a true statement of the
Corporation's financial condition as of the close of each fiscal year. The
Treasurer shall
<PAGE> 18
file the statement at the Corporation's principal place of business within four
months after the end of the fiscal year. The Treasurer shall keep the statement
available for inspection at that place for a period of at least ten years. The
statement shall contain, when applicable, a statement of the then current
conversion rate of any outstanding securities. The statement also shall include,
when applicable, a statement of the number of shares subject to options and the
exercise price of the options.
SECTION 7.12. ASSISTANT TREASURERS. In the absence of the Treasurer or in
the event of his death, inability or refusal to act, the Assistant Treasurers in
the order of their length of service as Assistant Treasurer, unless the Board
determines otherwise, shall perform the duties of the Treasurer. When acting as
the Treasurer, an Assistant Treasurer shall have the powers and restrictions of
the Treasurer. An Assistant Treasurer shall perform such other duties as the
Treasurer, the President or the Board may assign to him from time to time.
SECTION 7.13. DELEGATION OF AUTHORITY. Notwithstanding any provision of
these Bylaws to the contrary, the Board may delegate the powers or duties of any
officer to any other officer or agent.
SECTION 7.14. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless the Board directs otherwise, the President shall have the power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of Stockholders of or with respect to any action of Stockholders of any
other corporation in which the Corporation holds securities. Furthermore, unless
the Board directs otherwise, the President shall exercise any and all rights and
powers which the Corporation possesses by reason of its ownership of securities
in another corporation.
SECTION 7.15. VACANCIES. The Board may fill any vacancy in any office
because of death, resignation, removal, disqualification or any other cause in
the manner which these Bylaws prescribe for the regular appointment to such
office.
ARTICLE VIII
CONTRACTS, LOANS, DRAFTS,
DEPOSITS AND ACCOUNTS
SECTION 8.01. CONTRACTS. The Board may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. The Board may make such
authorization general or special.
SECTION 8.02. LOANS. Unless the Board has authorized such action, no
officer or agent of the Corporation shall contract for a loan on behalf of the
Corporation or issue any evidence of indebtedness in the Corporation's name.
<PAGE> 19
SECTION 8.03. DRAFTS. Such persons as the Board shall determine shall
issue all checks, drafts and other orders for the payment of money, notes and
other evidences of indebtedness issued in the name of or payable by the
Corporation.
SECTION 8.04. DEPOSITS. The Treasurer shall deposit all funds of the
Corporation not otherwise employed in such banks, trust companies or other
depositories as the Board may select or as any officer, assistant, agent or
attorney of the Corporation to whom the Board has delegated such power may
select. For the purpose of deposit and collection for the account of the
Corporation, the President or the Treasurer (or any other officer, assistant,
agent or attorney of the Corporation whom the Board has authorized) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
payable to the order of the Corporation.
SECTION 8.05. GENERAL AND SPECIAL BANK ACCOUNTS. The Board may authorize
the opening and keeping of general and special bank accounts with such banks,
trust companies or other depositories as the Board may select or as any officer,
assistant, agent or attorney of the Corporation to whom the Board has delegated
such power may select. The Board may make such special rules and regulations
with respect to such bank accounts, not inconsistent with the provisions of
these Bylaws, as it may deem expedient.
ARTICLE IX
CERTIFICATES FOR SHARES AND THEIR
TRANSFER
SECTION 9.01. CERTIFICATES FOR SHARES. Every owner of stock of the
Corporation shall have the right to receive a certificate or certificates,
certifying to the number and class of shares of the stock of the Corporation
which he owns. The Board shall determine the form of the certificates for the
shares of stock of the Corporation. The Secretary, transfer agent, or registrar
of the Corporation shall number the certificates representing shares of the
stock of the Corporation in the order in which the Corporation issues them. The
President or any Vice President and the Secretary or any Assistant Secretary
shall sign the certificates in the name of the Corporation. Any or all
certificates may contain facsimile signatures. In case any officer, transfer
agent or registrar who has signed a certificate, or whose facsimile signature
appears on a certificate, ceases to serve as such officer, transfer agent or
registrar before the Corporation issues the certificate, the Corporation may
issue the certificate with the same effect as though the person who signed such
certificate, or whose facsimile signature appears on the certificate, was such
officer, transfer agent or registrar at the date of issue. The Secretary,
transfer agent, or registrar of the Corporation shall keep a record in the stock
transfer books of the Corporation of the names of the persons, firms or
corporations owning the stock represented by the certificates, the number and
class of shares represented by the certificates and the dates thereof and, in
the case of cancellation, the dates of cancellation. The Secretary, transfer
agent, or registrar of the Corporation shall cancel every certificate
<PAGE> 20
surrendered to the Corporation for exchange or transfer. Except in the case of a
lost, destroyed or mutilated certificate, the Secretary, transfer agent, or
registrar of the Corporation shall not issue a new certificate in exchange for
an existing certificate until he has canceled the existing certificate.
SECTION 9.02. TRANSFER OF SHARES. The holder of record of shares of the
Corporation's stock, or his attorney-in-fact authorized by power of attorney
duly executed and filed with the Secretary, transfer agent or registrar of the
Corporation, may transfer his shares only on the stock transfer books of the
Corporation. Such person shall furnish to the Secretary, transfer agent, or
registrar of the Corporation proper evidence of his authority to make the
transfer and shall properly endorse and surrender for cancellation his existing
certificate or certificates for such shares. Whenever the holder of record of
shares of the Corporation's stock makes a transfer of shares for collateral
security, the Secretary, transfer agent, or registrar of the Corporation shall
state such fact in the entry of transfer if the transferor and the transferee
request.
SECTION 9.03. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Board may direct the Secretary, transfer agent, or registrar of the Corporation
to issue a new certificate to any holder of record of shares of the
Corporation's stock claiming that he has lost such certificate, or that someone
has stolen, destroyed or mutilated such certificate, upon the receipt of an
affidavit from such holder to such fact. When authorizing the issue of a new
certificate, the Board, in its discretion, may require as a condition precedent
to the issuance that the owner of such certificate give the Corporation a bond
of indemnity in such form and amount as the Board may direct.
SECTION 9.04. REGULATIONS. The Board may make such rules and regulations,
not inconsistent with these Bylaws, as it deems expedient concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. The Board may appoint, or authorize any officer or officers to
appoint one or more transfer agents, or one or more registrars, and may require
all certificates for stock to bear the signature or signatures of any of them.
SECTION 9.05. HOLDER OF RECORD. The Corporation may treat as absolute
owners of shares the person in whose name the shares stand of record as if that
person had full competency, capacity and authority to exercise all rights of
ownership, despite any knowledge or notice to the contrary or any description
indicating a representative, pledge or other fiduciary relation, or any
reference to any other instrument or to the rights of any other person appearing
upon its record or upon the share certificate. However, the Corporation shall
treat any person furnishing proof of his appointment as a fiduciary as if he
were the holder of record of the shares.
SECTION 9.06. TREASURY SHARES. Treasury shares of the Corporation shall
consist of shares which the Corporation has issued and thereafter acquired but
not canceled. Treasury shares shall not carry voting or dividend rights.
<PAGE> 21
ARTICLE X
INDEMNIFICATION
SECTION 10.01. ACTION OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body, against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not create, of itself, a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
SECTION 10.02. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or as a member of any committee or similar
body, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest of the Corporation, except that the
Corporation shall make no indemnification in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
SECTION 10.03. DETERMINATION OF RIGHT OF INDEMNIFICATION. The Corporation
shall not indemnify any person under Section 10.01 or Section 10.02, in the
absence of a court order, unless authorized in the specific case upon a
determination that the director, officer, employee or agent has met the
applicable standard of conduct set forth in Section 10.01 or Section 10.02. One
of the following shall make the determination: (a) the Board,
<PAGE> 22
by a majority vote of a quorum of directors not a party to the action, suit or
proceeding; (b) absent a quorum or at the direction of a quorum of disinterested
directors, independent legal counsel, by a written opinion; or (c) the
Stockholders.
SECTION 10.04. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 10.01 or Section 10.02 of these Bylaws, or in defense of any claim,
issue or matter therein, the Corporation shall indemnify him against expenses
(including attorneys' fees) which he actually and reasonably has incurred in
connection therewith.
SECTION 10.05. ADVANCE OF EXPENSES. The Corporation may pay expenses
incurred in defending a civil or criminal action, suit or proceeding in advance
of the final disposition of such action, suit or proceeding upon specific
authorization by the Board and upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount if the Corporation
ultimately determines that the Corporation should not indemnify him pursuant to
the provisions of this Article.
SECTION 10.06. OTHER RIGHTS AND REMEDIES. The indemnification provided by
this Article shall not be deemed exclusive and is declared expressly to be
nonexclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaws, agreement, vote of Stockholders or disinterested
directors or otherwise, both as to actions in his official capacity and as to
actions in another capacity while holding such office, and shall continue as to
any person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 10.07. INSURANCE. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article.
SECTION 10.08. CONSTITUENT CORPORATIONS. For the purposes of this
Article, references to "the Corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise or as a member of any committee or similar body, shall
stand in
<PAGE> 23
the same position under the provisions of this Article with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its existence had continued.
SECTION 10.09. OTHER INSURANCE. The Corporation shall reduce the amount
of the indemnification of any person pursuant to the provisions of this Article
by the amount which such person collects as indemnification (a) under any policy
of insurance which the Corporation purchased and maintained on his behalf or (b)
from another corporation, partnership, joint venture, trust or other enterprise.
SECTION 10.10. PUBLIC POLICY. Nothing contained in this Article, or
elsewhere in these Bylaws, shall operate to indemnify any director or officer if
such indemnification is contrary to law, either as a matter of public policy, or
under the provisions of the Federal Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, or any other applicable state or
Federal law.
ARTICLE XI
NOTICES
SECTION 11.01. GENERAL. Whenever these Bylaws require notice to any
Stockholder, director, officer or agent, such notice does not mean personal
notice. A person may give effective notice under these Bylaws in every case by
depositing a writing in a post office or letter box in a postpaid, sealed
wrapper, or by dispatching a prepaid telegram addressed to such Stockholder,
director, officer or agent at his address on the books of the Corporation.
Unless these Bylaws expressly provide to the contrary, the time when the person
sends notice shall constitute the time of the giving of notice.
SECTION 11.02. WAIVER OF NOTICE. Whenever the law or these Bylaws require
notice, the person entitled to said notice may waive such notice in writing,
either before or after the time stated therein.
<PAGE> 24
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. FACSIMILE SIGNATURES. In addition to the use of facsimile
signatures which these Bylaws specifically authorize, the Corporation may use
such facsimile signatures of any officer or officers, agents or agent, of the
Corporation as the Board or a committee of the Board may authorize.
SECTION 12.02. CORPORATE SEAL. The Board may provide for a suitable seal
containing the name of the Corporation, of which the Secretary shall be in
charge. The Treasurer, any Assistant Secretary, or any Assistant Treasurer may
keep and use the seal or duplicates of the seal if and when the Board or a
committee of the Board so directs.
SECTION 12.03. FISCAL YEAR. The Board shall have the authority to fix and
change the fiscal year of the Corporation.
ARTICLE XIII
AMENDMENTS
The Board of Directors shall have the power by the affirmative vote of
the majority of the members of the Board of Directors then in office to adopt,
amend, alter, change and repeal any bylaws of the Corporation; provided,
however, the Board may not adopt or alter any provision of these Bylaws fixing
the number, qualifications, classifications or term of office of the directors
adopted by the stockholders. In addition to any requirements of the Nevada
Revised Statutes (and notwithstanding the fact that a lesser percentage may be
specified by the Nevada Revised Statutes), the affirmative vote of the holders
of at least 66-2/3% of the voting power of all of the shares of capital stock of
the Corporation then entitled to vote generally in the election of directors,
voting together as single class, shall be required for the stockholders of the
Corporation to adopt, amend, alter, change or repeal any bylaws of the
Corporation. No bylaws hereafter adopted shall invalidate any prior act of the
directors that would have been valid if such new bylaws had not been adopted.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE ISSUER
NAME OF SUBSIDIARY STATE OF INCORPORATION
- ------------------ ----------------------
Independent News, Ins. Delaware
United Marketing Merger Corp. Virginia
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 326
<SECURITIES> 0
<RECEIVABLES> 122,443
<ALLOWANCES> 108,094
<INVENTORY> 0
<CURRENT-ASSETS> 552,465
<PP&E> 170,572
<DEPRECIATION> 55,354
<TOTAL-ASSETS> 1,998,603
<CURRENT-LIABILITIES> 933,993
<BONDS> 0
233,333
782,292
<COMMON> 36,291
<OTHER-SE> (102,214)
<TOTAL-LIABILITY-AND-EQUITY> 1,998,603
<SALES> 1,808,713
<TOTAL-REVENUES> 1,808,713
<CGS> 1,074,946
<TOTAL-COSTS> 4,884,517
<OTHER-EXPENSES> 127,901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138,324
<INCOME-PRETAX> (3,203,705)
<INCOME-TAX> 4,000
<INCOME-CONTINUING> (3,207,705)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,207,705)
<EPS-BASIC> (1.09)
<EPS-DILUTED> (1.09)
</TABLE>
