<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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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
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Next Generation Media Corp.
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(Exact name of registrant as specified in its charter)
Nevada 88-0169543
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 N. Stafford St., Suite 2003
Arlington, VA 22203
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(Address of principal executive offices)
(Zip Code)
(703) 516-9888
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
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<PAGE> 2
The total number of issued and outstanding shares of the registrant's
common stock, par value $0.01, as of October 8, 1998 was 3,183,984.
Transitional Small Business Disclosure Format (Check one):
Yes No x
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<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS.
<PAGE> 4
NEXT GENERATION MEDIA
CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<PAGE> 5
NEXT GENERATION MEDIA
CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<PAGE> 6
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
1997 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $ - $ 16
Notes receivable (Note 3) - 367,500
Accounts receivable, less allowance for doubtful
accounts of $42,560 198,335 166,949
Accrued interest receivable 15,785 2,253
Deferred consulting fees (Note 5) - 316,667
Deferred loan costs, net of
accumulated amortization of $46,154 (Note 6) - 73,846
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 214,120 927,231
- --------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT 71,135 131,011
Less: Accumulated depreciation (3,354) (21,363)
- --------------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 67,781 109,648
- --------------------------------------------------------------------------------------------------------------------
OTHER
Intangibles, net of accumulated amortization of $12,529
and $40,119 192,648 165,058
Deferred acquisition costs - 39,233
Investment in UNICO (Note 4) - 25,537
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $474,549 $1,266,707
====================================================================================================================
</TABLE>
1
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NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
1997 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued against future deposits $ 44,821 $ 35,591
Notes payable, current portion (Note 6) 25,449 213,462
Accounts payable 248,666 296,625
Consulting fees payable (Note 5) - 400,000
Wages payable - 278,480
Due to shareholders 10,255 -
Accrued interest payable 235 4,867
Note payable to employee 11,669 -
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 341,095 1,229,025
LONG TERM DEBT
Due to employees 85,027 20,844
Due to shareholders 24,400 -
Note payable (Note 6) 27,505 27,505
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 478,027 1,277,374
- --------------------------------------------------------------------------------------------------------------------
COMMITMENTS (Note 13)
REDEEMABLE PREFERRED STOCK (Note 7) - 339,955
- --------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001, 930,000 shares authorized, 250,000 shares
allocated to Series A issued and
outstanding (Note 8) - 934,000
Common stock, $.01 par value, 50,000,000 authorized
3,113,450 and 3,430,318 issued and outstanding (Note 9) 31,134 34,301
Additional paid in capital (Note 9) 419,616 701,341
Accumulated deficit (95,178) (2,020,264)
Less stock subscription receivable (Note 10) (359,050) -
- --------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (3,478) (350,622)
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 474,549 $1,266,707
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statement.
2
<PAGE> 8
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------------- --------------------------------
1997 1998 1997 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ - $ 429,729 $ - $1,377,082
COST OF GOODS SOLD - 423,422 - 786,302
- --------------------------------------------------------------------------------------------------------------------
GROSS PROFIT - 6,307 - 590,780
- --------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Selling, general and administrative 16,653 153,408 41,705 1,041,990
Forgiveness of stock subscription
receivable and note receivable
(Note 8) - - - 329,996
Depreciation and amortization 1,250 15,962 3,333 42,956
- --------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 17,903 169,370 45,038 1,414,942
- --------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (17,903) (163,063) (45,038) (824,162)
- --------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 5,580 - 11,443 6,014
Other income (expense) (405) (4,795) (1,068) 16,853
Interest expense - (89,149) - (89,791)
- --------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) 5,175 (93,944) 10,375 (66,924)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS BEFORE EXTRAORDINARY ITEM $ (12,728) $ (257,007) $ (34,663) $ (891,086)
EXTRAORDINARY LOSS ON EXTINGUISHMENT
OF DEBT (Note 12) - - - (1,034,000)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS $(12,728) $ (257,007) $ (34,663) $(1,925,086)
- --------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER
COMMON SHARE BEFORE EXTRAORDINARY
ITEM $ (.004) $ (.07) $ (.02) $ (.27)
EXTRAORDINARY ITEM - - - $ (.32)
- --------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.004) $ (.07) $ (.02) $ (.59)
- --------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,950,889 3,408,307 2,234,222 3,251,741
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 9
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended September 30, 1997 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(34,663) $(1,925,086)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Extraordinary loss on debt extinguishment - 1,034,000
Depreciation and amortization 3,333 45,600
Forgiveness of subscription receivable - 329,996
Amortization of deferred consulting fees - 83,333
Amortization of deferred loan costs - 46,154
Discount on notes payable - 38,462
(INCREASE) DECREASE IN ASSETS
Accounts receivable - 31,386
Accrued interest receivable (10,509) (6,014)
Deferred acquisition costs (41,562) -
INCREASE (DECREASE) IN LIABILITIES
Accounts payable 79,267 47,959
Note payable 4,000 -
Wages payable - 278,480
Accrued interest payable 134 4,632
- --------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES - 8,902
- --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of property and equipment - (59,877)
Deferred acquisition costs - (39,233)
- --------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES - (99,110)
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in checks issued against future deposits - (9,230)
Proceeds from notes payable - 255,000
Issuance of notes receivable - (455,500)
Issuance of preferred stock 339,955
Net proceeds of loans from shareholders - 61,299
Repayment of note payable - (25,449)
Repayments of employee notes payable - (75,851)
- --------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES - 90,224
- --------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS
$ $
CASH AND CASH EQUIVALENTS, beginning of period - -
- --------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ - $ 16
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 10
NEXT GENERATION MEDIA CORPORATION
SUMMARY OF ACCOUNTING POLICIES
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. All significant
intercompany transactions have been eliminated.
BUSINESS The Company operates a newspaper publishing
DESCRIPTION business distributing free newspapers, supported
by local advertising in New Jersey. Primarily all
of its customers are located in New Jersey.
INTERIM FINANCIAL In the opinion of management, the interim
INFORMATION financial information as of June 30, 1998 and for
the nine months ended September 30, 1997 and 1998
contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair
presentation of the results for such periods.
Results for interim periods are not necessarily
indicative of results to be expected for an entire
year.
RISK AND The publishing industry is highly competitive.
UNCERTAINTIES The Company's revenue consists of amounts
received for advertising space in the newspaper.
Publication of the newspaper is dependent on
future advertising revenue or obtaining additional
outside financing. Management believes that it can
continue to meet capital requirements as they
arrive.
USE OF ESTIMATES The preparation of financial statements in
accordance with generally accepted accounting
principles requires management to make certain
estimates and assumptions, particularly regarding
valuation of accounts receivable, recognition of
liabilities, and disclosure of contingent assets
and liabilities at the date of the financial
statements. Actual results could differ from those
estimates.
CONCENTRATION Financial instruments that potentially subject the
OF CREDIT RISK Company to concentrations of credit risk consists
primarily of accounts receivable.
5
<PAGE> 11
NEXT GENERATION MEDIA CORPORATION
SUMMARY OF ACCOUNTING POLICIES
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.
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.
RECENT In March 1997, the Financial Accounting Standards
ACCOUNTING Board issued Statement of Financial Accounting
PRONOUNCEMENTS Standards No. 128, Earnings Per Share ("SFAS
128"). SFAS 128 provides a different method of
calculating earnings per share than is currently
used in APB Opin8ion 15. SFAS 128 provides for
the calculation of basic and diluted earnings per
share. Basic earnings per share includes no
dilution and is computed by dividing income
available to common stockholders by the weighted
average number of common shares outstanding for
the period. Diluted earnings per share reflects
the potential dilution of securities that could
share in the earnings of an entity, similar to
existing fully diluted earnings per share. The
Company adopted the provisions for computing
earnings per share set forth in SFAS 128 in
December 1997. There is no difference in basic
and diluted earnings per share.
6
<PAGE> 12
NEXT GENERATION MEDIA CORPORATION
SUMMARY OF ACCOUNTING POLICIES
In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income
("SFAS 130"), which establishes standards for
reporting and display of comprehensive income, its
components, and accumulated balances.
Comprehensive income is defined to include all
changes in equity except those resulting from
investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that
all items that are required to be recognized under
current accounting standards as components of
comprehensive income be reported in a financial
statement that is displayed with the same
prominence as other financial statements. The
Company presently has no items considered as
comprehensive income. Therefore, adopting SFAS
130 will not impact financial statement disclosure
in 1998.
Statement of Financial Accounting Standards No.
131, Disclosure about Segments of a Business
Enterprise ("SFAS 131"), establishes standards for
the way that public enterprises report information
about operating segments in interim financial
statements issued to the public. It also
establishes standards for disclosures regarding
products and services, geographic areas, and major
customers. SFAS 131 defines operating segments as
components of an enterprise about which separate
financial information is available that is
evaluated regularly by the chief operating
decision maker in deciding how to allocate
resources and in assessing performance. Presently,
the Company operates in one business segment.
7
<PAGE> 13
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 and is being
amortized on a straight line basis over ten years.
2. ACQUISITION On September 29, 1997, Pompton Valley Publishing
OF POMPTON Co. (PVP) sold to Independent News, Inc. (INI)
VALLEY all of its tangible property, all accounts
PUBLISHING CO. receivable, all intellectual property, certain
contracts, and all other business property. INI
assumed certain liabilities of PVP. In addition to
the assumption of certain liabilities, INI also
paid PVP 100,000 shares of the Company's common
stock and $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. In conjunction with
this transaction the Company has recorded
approximately $140,000 of goodwill that is being
amortized on a straight line basis over 5 years.
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 on January 1, 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 period and is not necessarily
indicative of results which may be obtained in the
future.
<TABLE>
<CAPTION>
Six months ended June 30, 1997 (Unaudited)
----------------------------------------------------------------
<S> <C>
Net sales $457,605
Net loss (40,575)
Loss per common share (.02)
================================================================
</TABLE>
8
<PAGE> 14
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. NOTES RECEIVABLE On May 12, 1998, the Company executed a promissory
note with UNICO, Inc. for $175,500 and assumed an
existing note receivable of $12,000. These notes
will be cancelled in conjunction with the proposed
acquisition of United Marketing Solutions
(Note 11) and have therefore been classified as
current assets.
During the three months ended September 30, 1998,
the Company loaned an additional amount of
$180,000 to UNICO, Inc.
4. INVESTMENT IN On May 12, 1998, the Company purchased 359,931
UNICO shares of common stock of UNICO, Inc. in exchange
for shares in the Company (Note 6). It is intended
that these shares will be transferred to T.C.
Equities, Ltd. in connection with the proposed
purchase of United Marketing Solutions, Inc.
(Note 10). Until such transfer, the Company is
accounting for its investment in UNICO, Inc. using
the cost method.
5. DEFERRED On July 15, 1998, the Company entered into a one
CONSULTING FEES year business consulting agreement with 20th
Century Associates, Inc. The Company is to issue
as consideration 200,000 shares of common stock,
which have been valued at $2 based on the
estimated current market price. The stock was not
issued at September 30, 1998 and therefore a
liability in the amount of $400,000 has been
recorded.
9
<PAGE> 15
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES PAYABLE Notes payable consist of the following:
<TABLE>
<CAPTION>
September 30, 1998
-------------------------------------------------------------------------------
<S> <C>
Note payable to a bank, interest at 16%, due on
February 6, 1999 $ 60,000
Notes payable, net of discount of $30,769, interest
at 12% (effective rate of 80%), due on October
14, 1998 (a) 69,231
Notes payable, net of discount of $30,769, interest
at 12% (effective rate of 80%), due on
November 5, 1998 (a) 69,231
Note payable, interest at 12%, due on
December 9, 1998 5,000
Note payable to a factor, interest at 8%, due
October 1, 1999 27,505
Advance from UNICO, Inc. 10,000
-------------------------------------------------------------------------------
240,967
Less: Current portion 213,462
-------------------------------------------------------------------------------
$ 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 the
estimated fair market value. The notes
payable were reduced and common stock and
additional paid in capital were increased in
the aggregate by $100,000.
The Company paid 20th Century Associates,
Inc. $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 amortized over the term of the
notes.
10
<PAGE> 16
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has verbally negotiated to extend the
term of these notes to March 31, 1999. Therefore,
the amortization of the note premium and the
deferred loan fees is based on the note terms
expiring on March 31, 1999.
7. REDEEMABLE On May 4, 1998, the Company issued 70,000 shares
PREFERRED STOCK of Redeemable Cumulative Convertible Series B
Preferred Stock par value $.01 with a redemption
price of $5.00 per share to T.C. Equities, Ltd.
The holder can redeem 35,000 shares after November
4, 1998, 17,500 shares after February 1998, and
the remaining 17,500 shares after May 4, 1999. The
Company also issued 250,000 warrants to T.C.
Equities, Ltd. for the purchase of one share of
common stock in the Company at an exercise price
of $.16 per warrant, valid for five years from May
4, 1998. Gross proceeds from the issuance, net of
expenses, were $339,955.
8. PREFERRED STOCK On March 18, 1998, the Company executed an
agreement with the holders of certain subordinated
debentures of UNICO, Inc. to purchase these
debentures totaling in the aggregate $1,034,000,
plus all of the outstanding shares of UNICO's
Series C Preferred Stock which they held in
exchange for $100,000 and 250,000 shares of the
Company's Convertible Cumulative Preferred Stock,
(the "Series A Preferred Stock"), par value $.01,
with a redemption price of $5 per share. Each
1 1/2 shares of the Company's 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.
The Series A Preferred Stock is callable at the
sole option of the Company at any time. The shares
have a $5 per share preference on liquidation or
dissolution of the Company. An amount of $934,000
was allocated to the Series A preferred stock
based on the dollar value of the subordinated
debentures purchased from the debentureholders.
9. COMMON STOCK 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 valued at $25,537.
11
<PAGE> 17
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
On May 7, 1998, the Company granted stock options
to purchase 150,000 shares of the Company's common
stock at an exercise price of $.50 to a director
and consultants to the Company. The options expire
on May 7, 2008.
During July 1998, the Company issued 50,000 shares
of common stock as a finder's fee to 20th Century
Associates, Inc. (Note 6). The common stock was
valued at $2 based on the estimated fair market
value.
During July and August 1998, the Company issued
50,000 shares of common stock in conjunction with
notes payable (Note 6). The common stock was
valued at $2 based on the estimated fair market
value.
10. STOCK SUBSCRIPTION On May 12, 1998, $156,145 of the stock
RECEIVABLE subscription receivable from Joel Sens, a
significant shareholder, was transferred into a
promissory note receivable from Gerard Bernier, a
director of UNICO, Inc. This note was subsequently
cancelled and recorded as compensation expense to
Mr. Bernier. Also, the stock subscription
receivable was reduced by $15,000 to reflect a
reduction in a note payable due Joel Sens. In
addition, the Company forgave $152,905, plus
accrued interest of $20,946 due from Joel Sens.
These amounts are recorded as compensation expense
to Mr. Sens. Finally, the remaining $35,000 was
transferred to a shareholder in exchange for his
cancellation of a note payable in the same amount.
11. INCOME TAXES The Company, based on the information currently
available, does not believe it will generate
taxable income, after considering net operating
loss carry-forwards, for the year ending December
31, 1998. Accordingly, the Company did not
recognize an income tax benefit for the period
ended September 30, 1998.
12
<PAGE> 18
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. EXTRAORDINARY LOSS On March 18, 1998, the Company entered into an
ON FORGIVENESS agreement with holders of certain subordinated
OF DEBT debentures of UNICO, Inc., to purchase these
debentures aggregating $1,034,000 (Note 8). This
transaction was executed on May 7, 1998. Effective
May 8, 1998, the Company canceled UNICO's
obligation to the Company arising from the
Company's assumption of UNICO's subordinated debt.
This release is effective regardless of the
ultimate outcome of the proposed Stock Purchase
Agreement and Plan of Merger (Note 14).
Accordingly, the Company wrote off the receivable
from UNICO, Inc. of $1,034,000 and classified it
as an extraordinary item in the accompanying
statement of operations.
13. COMMITMENTS On May 1, 1998, the Company entered into a
consulting agreement with Joel Sens, a significant
shareholder. The agreement is for a three year
period and provides for annual compensation of
$120,000. During the first year, amounts due in
excess of $60,000 will be deferred until the
redemption or conversion of the Company's Series A
and Series B preferred stock. If the conversion
does not take place by May 1, 1999, the deferred
compensation will be forfeited. After the first
year, the annual compensation will be $60,000 per
year until the conversion is completed.
14. PROPOSED STOCK The Company is currently negotiating an agreement
PURCHASE AGREEMENT to acquire all of the issued and outstanding stock
AND PLAN OF MERGER of United Marketing Solutions, Inc. (UMSI). UMSI
is engaged in the cooperative direct mail
marketing business and is a subsidiary of UNICO,
Inc. In accordance to the proposed plan of merger,
UMSI will be merged into a special purpose
subsidiary of the Company with UMSI as the
surviving corporation. In exchange for the capital
stock of UMSI, the Company will pay cash of
$172,665. In addition, the Company has agreed to
forgive the indebtedness of UNICO, Inc. in the
amount of $175,500 (Note 3) and to extinguish
certain debts of UNICO, Inc. up to $164,000.
Further, the Company will assume a secured loan
from Banc First not to exceed $450,000. In
addition, the Company has agreed to provide
additional consideration to TC Equities, Ltd., in
the form of the Series C. Preferred Stock it
purchased on March 18, 1998 (Note 7) and the
359,931 shares of common stock it purchased May
12, 1998 (Note 4). UMSI had sales of
approximately $5,500,000 and a net loss of
approximately $(600,000) for the year ended
December 31, 1997.
13
<PAGE> 19
NEXT GENERATION MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Quarterly Results of Operations
Management cannot fully assess material changes in the
registrant's results of operations with respect to the 1998 fiscal year to
September 30, 1998 from the corresponding year to date period of the preceding
fiscal year, for the reasons set forth in the registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1997.
The following discussion is based on assumptions made by
management as to the registrant's results of operations and financial condition
as of September 30, 1997 and for the period then ended as reported in the
registrant's Quarterly Report on Form 10-Q for that period. No assurances can be
given as to the accuracy of such assumptions. However, management has no
knowledge of any information that would make reliance on such assumptions
unwarranted.
As of September 30, 1997, the registrant had $405,719 in total
assets. As of September 30, 1998, the registrant had assets totaling $1,266,707.
This increase is due primarily to (1) an increase in notes receivable and (2) a
deferred consulting fee that will paid in the form of common stock. Secondary
causes in the increase include (1) an increase from $89,209 to $166,949 of
accounts receivable of the registrant's operating subsidiary, Independent News,
Inc. ("INI") and (2) an increase from $39,300 to $109,648 of net property and
equipment.
The registrant had current liabilities as of September 30,
1997 of $223,413. As of September 30, 1998, the registrant had current
liabilities of $1,277,374 and total liabilities of $1,266,707. The increase in
current liabilities is due primarily to increases in notes payable, consulting
fees payable and wages payable.
The registrant had revenues of $429,729 from operations during
the period covered by this report, all of which derived from the operations of
its sole operating subsidiary, INI. INI engages in the community newspaper
<PAGE> 21
publishing business in several townships in northern New Jersey. During the
quarter, the registrant incurred $169,370 of operating expenses resulting in an
operating loss of $163,063. The registrant had revenues of $5,580 in the three
month period through September 30, 1997.
The registrant had a net loss per share during the second
fiscal quarter of 1997 of $0.004 and a cumulative net loss per share during the
first nine months of fiscal 1997 of $0.022. During the period covered by this
report, the registrant had a net loss per share of $0.07 on both a basic and
diluted basis and a cumulative net loss per share during the first nine months
of 1998 of $0.59.
The registrant entered into two investment banking advisory
agreements during the third quarter of 1998 with 20th Century Associates, Inc.
and Lloyd Wade Securities, Inc. Pursuant to these agreements, the registrant
shall issue 200,000 shares of its common stock to each of these entities in
exchange for certain investment banking advice regarding alternative methods for
financing the registrant's activities, including through a private placement
offering of its securities.
Liquidity and Capital Resources
The registrant's principal sources of liquidity are
shareholder loans. However, during the period covered by this report, the
registrant's principal source of liquidity was loans entered into with third
party lenders. On July 14, 1998, August 5, 1998 and September 9, 1998, the
registrant borrowed $50,000, $50,000 and $5,000, respectively, from Tiffany
Productions, Inc. Also, on July 14, 1998 and August 5, 1998, the registrant
borrowed $50,000 and $50,000, respectively, from Capital York, Inc. The terms of
each of these loans is identical: (1) three month term, (2) accrued interest and
principal and (3) interest payable at a rate of 12% per annum. The registrant
paid a fee to an affiliate of the lenders and agreed to issue 25,000 shares of
common stock to an affiliate of each of the lenders in exchange for making the
loans. The net proceeds of the loans were transferred to Unico, Inc. as a
working capital loan.
As of the date of this report, the registrant is seeking to
extend the terms of the above-described loans, making all outstanding amounts
due and payable on March 31, 1999.
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The registrant has renegotiated the agreements by which the
registrant intends to consummate its acquisition of United Marketing Solutions,
Inc. from Unico, Inc. The details of the renegotiated terms are explained in a
current report filed on Form 8-K on the same date as the filing of this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 27 Financial data schedule.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the period
covered by this report.
<PAGE> 23
Pursuant to the requirements 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: January 7, 1999 By: s/s Larry Grimes
--------------------
Larry Grimes, President
(Duly Authorized Officer)
Date: January 7, 1999 By: s/s Kenneth Brochin
-----------------------
Kenneth Brochin, Treasurer
(Principal Financial Officer)
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Description Page
- ------- ----------- --------------
<S> <C> <C>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 536,702
<ALLOWANCES> 42,560
<INVENTORY> 0
<CURRENT-ASSETS> 927,231
<PP&E> 131,011
<DEPRECIATION> 21,363
<TOTAL-ASSETS> 1,266,707
<CURRENT-LIABILITIES> 1,229,025
<BONDS> 0
934,000
0
<COMMON> 34,301
<OTHER-SE> (350,622)
<TOTAL-LIABILITY-AND-EQUITY> 1,266,707
<SALES> 429,729
<TOTAL-REVENUES> 429,729
<CGS> 423,422
<TOTAL-COSTS> 169,370
<OTHER-EXPENSES> (93,944)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (257,007)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (257,007)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
