<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, 2000
------------------
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.
--------------------------------
(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.)
8380 Alban Road
Springfield, VA 22150
------------------------------
(Address of principal executive offices)
(Zip Code)
(703) 913-0416
--------------------
(Registrant's telephone number, including area code)
--------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has 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
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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 September 26, 2000 was 6,206,897.
ITEM 1. FINANCIAL STATEMENTS
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED BALANCE SHEETS
FOR THE PERIODS ENDED
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 128,073 $ 263,517
Accounts receivable, less
allowance for doubtful accounts 572,786 546,421
Inventories 132,333 107,094
Deferred charges 122,267 184,844
Note receivable 200,000 0
Prepaid expenses and other
current assets 202,555 68,177
---------- ----------
Total current assets 1,358,014 1,170,053
Property and equipment, net 1,050,613 1,431,632
Intangibles, net of accumulated
amortization 1,165,864 934,447
Deposits 2,857 8,105
---------- ----------
Total assets $3,577,348 $3,544,237
========== ==========
</TABLE>
2
<PAGE> 3
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Current liabilities:
Notes payable, current portion $ 705,583 $ 714,632
Current obligations under
capital leases 0 19,427
Accounts payable 677,321 753,609
Accrued expenses 244,304 532,358
Wages payable 108,338 252,885
Due to related parties 36,288 143,466
Deferred revenue 0 95,941
---------- ----------
Total current liabilities 1,771,834 2,512,318
Notes payable, long term portion 207,730 5,501
Deferred rent 0 57,674
Accrued dividends 0 255,319
---------- ----------
Total liabilities 1,979,564 2,830,812
Redeemable preferred stock Series
A, par value $0.01, redemption
value $6.00 per share, 500,000
shares authorized, 2,635 and
250,000 shares issued and
outstanding 10,540 944,792
Redeemable preferred stock Series
B, par value $0.01, redemption
value $5.00 per share, 500,000
shares authorized, 0 shares
issued and outstanding 0 325,000
Stockholders' deficit:
Common stock, $0.01 par value,
50,000,000 authorized, 6,206,897
and 4,416,818 issued and
outstanding 62,069 44,166
Additional paid in capital 6,954,629 5,181,562
Accumulated deficit (5,429,454) (5,782,095)
---------- ----------
Total stockholders' deficit 1,597,784 (556,367)
---------- ----------
Total liabilities and
stockholders' deficit $3,577,348 $3,544,237
========== ==========
</TABLE>
3
<PAGE> 4
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATION
FOR THE PERIODS ENDED
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------
September 30 September 30 September 30 September 30
2000 1999 2000 1999
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Coupon sales $1,636,310 $1,532,603 $5,663,771 $3,572,009
Franchise fees 0 26,500 0 75,000
Other revenue 0 163,105 0 402,291
Advertising revenues 0 438,802 945,431 1,312,509
Classified revenues 0 75,714 119,512 186,643
Commission income 0 13,702 4,325 60,012
---------- ---------- ---------- ----------
Total revenues 1,636,310 2,250,426 6,733,039 5,608,464
---------- ---------- ---------- ----------
Operating expenses:
Printing costs 700,549 636,376 2,646,798 1,740,007
Postage and delivery 489,716 933,740 1,979,993 1,892,825
Other production costs 0 51,210 168,380 287,766
Selling expenses 0 54,657 300,462 177,311
General and
administrative
expenses 435,760 728,383 1,557,119 1,533,291
Depreciation and
amortization 130,546 150,342 457,380 325,284
Franchise sales
and development 45,459 58,135 174,133 122,984
Compensation expense
relating to the
issuance of stock
options 0 26,953 0 210,703
---------- ---------- ---------- ----------
Total operating
expenses 1,802,030 2,639,796 7,284,265 6,290,171
---------- ---------- ---------- ----------
Income from operations (165,720) (389,370) (551,226) (681,707)
</TABLE>
4
<PAGE> 5
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATION
FOR THE PERIODS ENDED
(continued)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
--------------------------- -------------------------
September 30 September 30 September 30 September 30
2000 1999 2000 1999
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Other income (expense):
Other income 0 94 0 694
Interest expense (12,810) (71,041) (31,320) (190,579)
Gain on sale of
subsidiary 0 0 1,047,820 0
---------- ---------- ---------- ----------
Total other
income
(expense) (12,810) (70,947) 1,016,500 (189,885)
---------- ---------- ---------- ----------
Income before income
tax expense (178,530) (460,317) 465,274 (871,592)
Preferred stock
dividends (549) (39,375) (58,466) (119,375)
Preferred stock
deemed
dividends 0 (40,625) (54,167) (238,542)
---------- ---------- ---------- ----------
Gain (loss)
applicable to
common
shareholders $ (179,079) $ (540,317) $ 352,641 $(1,229,509)
========== ========== ========= ===========
Basic earnings per
common share $(0.03) $(0.13) $0.06 $(0.31)
Fully diluted
earnings per
share $(0.03) $(0.11) $0.05 $(0.22)
Weighted average
common shares
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C>
outstanding 6,206,897 4,169,622 5,562,504 3,990,997
</TABLE>
6
<PAGE> 7
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
September 30 September 30
2000 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 352,641 $ (871,592)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Compensation expense relating
to the issuance of stock
and stock options 0 210,703
Stock issued for services 4,500 100,000
Depreciation and amortization 457,380 325,282
Amortization of deferred
consulting fees 0 100,000
Provision for doubtful accounts 0 19,994
Amortization of deferred
loan costs 0 66,423
Amortization of discount on
notes payable 0 19,994
(Increase) decrease in assets:
Accounts receivable (26,365) (326,230)
Inventories (25,239) 109,386
Prepaids and other current
assets (134,378) (1,752)
Deferred expenses 62,577 0
Note receivables (200,000) 0
Increase (decrease) in
liabilities:
Accounts payable (76,288) (67,444)
Accrued expenses (288,054) (24,488)
Wages payable (144,547) (16,136)
Deferred revenue (95,941) 20,984
Deferred rent (57,674) 3,477
---------- -----------
Cash used in operating activities (397,557) (330,447)
---------- -----------
Investing activities:
Cash paid for acquisition of
United, less cash acquired 0 (178,159)
Acquisition of property and
equipment, net of disposals 40,538 (44,148)
Due to related parties (107,178) 0
---------- -----------
Cash used in investing activities (66,640) (222,307)
---------- -----------
</TABLE>
7
<PAGE> 8
NEXT GENERATION MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(continued)
<TABLE>
<CAPTION>
September 30 September 30,
2000 1999
------------ ------------
<S> <C> <C>
Financing activities:
Checks issued against future
deposits 0 (28,919)
Net borrowings under line of
credit 0 100,000
Net proceeds from issuance of
common stock 15,000 695,344
Capital contribution 0 100,000
Net advances from related parties 0 23,011
Redemption of Preferred Series A 0 (25,000)
Payments of capital lease
obligations (19,427) (23,290)
Repayment of notes payable 193,180 (216,588)
Exercise of options 40,000 0
Stock issued for asset purchases 425,000 0
Cancellation of Preferred Series B (325,000) 0
---------- -----------
Cash provided by financing
activities 328,753 624,558
---------- -----------
Increase (decrease) in cash (135,444) 71,804
Cash and cash equivalents,
beginning of period 263,517 326
---------- -----------
Cash and cash equivalents,
end of period $ 128,072 $ 72,130
========== ===========
Supplemental disclosures:
Redemption of Preferred Series A $ 944,792
Stock issued in payment of
indebtedness 77,923
Stock issued in payment of
preferred dividend 294,295
</TABLE>
8
<PAGE> 9
NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Summary of Significant Accounting Policies
The accompanying unaudited interim condensed consolidated financial
statements included herein have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (SEC). The interim
condensed consolidated financial statements include the consolidated accounts of
Next Generation Media Corporation and its majority owned subsidiaries
(collectively, the Company). In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair statement of
the financial position, results of operations and cash flows for the interim
periods presented have been made. The preparation of the financial statements
includes estimates that are used when accounting for revenues, allowance for
uncollectible receivables, telecommunications expense, depreciation and
amortization and certain accruals. Actual results could differ from those
estimates. The results of operations for the nine months ended September 30,
2000, are not necessarily indicative of the results to be expected for the full
year. Some information and footnote disclosures normally included in financial
statements or notes thereto prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations. The Company believes, however, that its disclosures are adequate to
make the information presented not misleading. You should read these interim
condensed consolidated financial statements in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1999 Annual
Report on Form 10-KSB40.
9
<PAGE> 10
NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Summary of Significant Accounting Policies (continued)
Intangibles. The Company has recorded goodwill based on the
difference between the cost and the fair value of certain purchased assets and
it is being amortized on a straight-line basis over the estimated period of
benefit, which ranges from five (5) to ten (10) years. The Company periodically
evaluates the goodwill for possible impairment. The analysis consists of a
comparison of future projected cash flows to the carrying value of the goodwill.
Any excess goodwill would be written off due to impairment. In addition, the
Company has a covenant not to compete which is being amortized over five (5)
years.
Impairment of Long-Lived Assets. The Company reviews the carrying
values of its long-lived assets for possible impairment on a periodic basis and
whenever events or changes in circumstances indicate that the carrying amount of
the assets should be addressed. The Company believes that no permanent
impairment in the carrying value of long-lived assets exist at September 30,
2000.
Revenue Recognition. The Company recognizes revenue from the
design production and printing of coupons upon delivery. Revenue from initial
franchise fees are recognized when substantially all services or conditions
relating to the sale have been substantially performed. Franchise support and
other fees are recognized when billed to the franchisee. Amounts billed or
collected in advance of final delivery or shipment are
10
<PAGE> 11
NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Summary of Significant Accounting Policies (continued)
reported as deferred revenue. Revenue from newspaper advertising is recognized
upon publication.
Comprehensive Income. The Company has adopted Statement of Financial
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 item of
comprehensive income to report.
Earnings Per Share. The Company calculates its earnings per share
pursuant to Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS No. 128"). Under SFAS No. 128, basic earnings per share is
computed by dividing reported earnings available to common stockholders by
weighted average shares outstanding. Diluted earnings per share reflects the
potential dilution assuming the issuance of common shares for all potential
dilutive common shares outstanding during the period. The Company had 1,225,167
options and outstanding at September 30, 2000 to purchase common stock.
As of September 30, 2000, the Company had several financial instruments
or obligations that could create future dilution to the Company's common
shareholders and are not currently classified as outstanding common shares of
the Company. The following table details such instruments and obligations and
the common stock comparative for each. The common stock number is
11
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Summary of Significant Accounting Policies (continued)
based on specific conversion or issuance assumptions pursuant to the
corresponding terms of each individual instrument or obligation.
<TABLE>
<CAPTION>
Instrument or Obligation Common Stock
------------------------ ------------
<S> <C>
Stock options outstanding as of March 31,
2000 with a weighted average exercise price
per share of $0.86 1,225,167
Series A Redeemable Preferred Stock,
250,000 shares outstanding and
accrued dividends as of March 31, 2000
with a redemption value $6.00 per share 8,550
---------
Total 1,233,717
=========
</TABLE>
Use of Estimates in the Preparation of Financial Statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties. The Company operates in environments where
intense competition exists from other companies. This competition, along with
increases in the price of paper and printing costs, can impact the Company's
pricing and profitability.
12
<PAGE> 13
NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Summary of Significant Accounting Policies (continued)
New Accounting Pronouncements. In June, 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The new standard requires that all companies record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. Management is currently assessing the impact of
SFAS No. 133 on the consolidated financial statements of the Company. The
Company will adopt this accounting standard, as amended, on January 1, 2001, as
required.
In December, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements"
("SAB 101"), which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 is effective in the
quarter ended December 31, 2000, and requires companies to report any changes in
revenue recognition as a cumulative effect of a change in accounting principle
at the time of implementation in accordance with Accounting Principles Board
Opinion No. 20, "Accounting Changes". The Company is currently assessing the
impact of SAB 101 on its financial position and results of operations.
13
<PAGE> 14
NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Summary of Significant Accounting Policies (continued)
Reclassifications. Certain prior year amounts have been reclassified to
conform to the current year presentation.
2. Purchase of United Marketing Solutions, Inc.
On April 1, 1999, the Company acquired all of the outstanding common
stock of United for cash of $336,665 and assumption of debt. In addition, the
Company accounted for certain debt forgiveness to UNICO, the former parent of
United, as additional consideration and, accordingly, such amounts increased the
goodwill related to the acquisition by $1,295,204. United is engaged in the
cooperative direct mail marketing business. The acquisition was accounted for as
a purchase. Net assets were recorded at fair value and the Company recorded
goodwill of $912,259 related to the acquisition. The financial statements
include the operations of United subsequent to the acquisition date.
3. Investment in UNICO
In May, 1998, the Company purchased 359,931 shares of common stock
(approximately a six percent (6%) ownership interest) of UNICO, Inc., an
unrelated third party. The Company accounted for this investment using the cost
method in accordance with generally accepted accounting principles. In April,
1999, this
14
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
investment was sold in conjunction with the acquisition of United (Note 2).
4. Sale of Independent News, Inc.
On June 30, 2000, the Company sold its entire interest in Independent
News, Inc. (INI) in exchange for a promissory note, assumption of indebtedness
and cancellation of remaining outstanding Series B Preferred Stock for a total
sales price of $1,057,00.
5. Redeemable Preferred Stock Series A
On May 7, 1998, the Company executed an agreement with the holders of
certain subordinated debentures of UNICO, Inc. to purchase these debentures,
with an outstanding balance of $1,034,000, in exchange for Callable Cumulative
Convertible Preferred Stock, (the "Series A Preferred Stock"), par value $0.01.
The Series A Preferred Stock is callable at the option of the holder five (5)
years from the date of issuance at $6.00 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
15
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
5. Redeemable Preferred Stock Series A (continued)
redemption period from the date of issuance to the redemption due.
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 $5.00 per share preference on liquidation or dissolution of the Company.
The Series A Preferred Stock pays a dividend of $0.30 per share per annum
for the first six (6) months and $0.50 per annum thereafter and are not payable
until eighteen (18) months following the date of issue. Accrued dividends
amounted to $198,459 and $73,459 at December 31, 1999 and 1998.
Each one and one-half (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 (1) share of the Company's common
stock for $0.16, valid for five (5) 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 $2.00. Accordingly, the Company recorded additional
paid in capital related to these warrants of $306,667.
16
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
5. Redeemable Preferred Stock Series A (continued)
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
(Note 2). Therefore, the total of cash paid and the value assigned to the
preferred stock and warrants of $1,094,167 had been recorded as a deferred
acquisition cost at December 31, 1998 and was included in the cost of the
acquisition in 1999 (see Note 2).
On May 1, 2000, all but 2,635 shares of the Series A Preferred Stock were
converted to 661,404 shares of common stock.
6. Redeemable Preferred Stock Series B
In May, 1998, the Company issued 70,000 shares of Redeemable Cumulative
Convertible Preferred Stock, (the "Series B Preferred Stock") par value $0.01
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 (1) share of common stock at an
exercise price of $0.16 per warrant, valid for five (5) 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 one
dollar ($1.00). The fair market
17
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
6. Redeemable Preferred Stock Series B (continued)
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 the Series
B Preferred Stock. Thus, adjusted net proceeds are $169,955.
Based on private sales of common stock to unrelated investors at $2.00,
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 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 $5.00 per share preference on liquidation or
dissolution of the Company.
The Series B Preferred Stock pays a dividend of $0.50 per annum which is
only payable upon redemption of the Series B Preferred Stock.
During the six months ended September 30, 2000, all
18
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
outstanding shares of Series B Preferred Stock were canceled as part of the
consideration received in the sale of INI.
7. Common Stock
On June 13, 2000, the Company issued 31,169 shares of common stock valued
at $77,923 in full payment of a related party note payable.
On May 1, 2000, certain shareholders of the Company entered into a stock
purchase agreement whereby they exchanged common and preferred stock and options
to purchase common stock representing approximately fifty two percent (52%) of
the Company's fully diluted common shares for common shares and, in certain
instances, options to purchase common shares of The BigHub.com, Inc. As part of
this transaction, the Company obtained a loan from The BigHub.com, Inc. in the
amount of $500,000 which was used in part to liquidate certain trade payables
and accrued liabilities.
Also, on May 1, 2000, the Company issued 756,992 to redeem all
outstanding Series A Preferred Stock plus all accrued and unpaid dividends.
From March to May, 1999, the Company issued 331,500 shares of common stock
through a private placement to various individual invests at $2.00 per
share. Net proceeds from the private
NEXT GENERATION MEDIA CORPORATION
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
7. Common Stock (continued)
placement after deductions for both cash and non-cash issuance expenses,
amounted to $385,943.
In April, 1999, the Company issued 200,000 shares of common stock in
exchange for consulting services to be rendered over a one (1) year period. The
common stock was valued at $2.00 based on private sales to unrelated investors.
During April, 1999, a majority shareholder contributed $100,000 to
additional paid in capital in exchange for 100,000 shares of stock or $1.00 per
share. The market value was determined to be $2.00 based on private sales to
unrelated investors. The Company recorded compensation expense of $100,000.
During June, 1999, the Company issued 122,500 options to employees and
directors to purchase common stock at a price of $0.50 per share. These options
vested immediately. In addition, 92,500 options were issued to purchase common
stock at a price of $0.50 per share which vest over a two (2) year period. The
market value of the stock was determined to be $2.00 based on private sales to
unrelated investors. The Company recorded compensation expense of $183,750 in
relation to the vested options and deferred the remaining $138,750 for unvested
options, which will be recorded as compensation expense over the vesting period.
20
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
8. Segment Information
The Company has two reportable segments for the nine months ended
September 30, 2000: United and INI. United was acquired on April 1, 1999.
Each entity is a wholly-owned subsidiary, with different management teams
and different products and services. INI operates a newspaper publishing
business and United operates a direct mail marketing business. The
accounting policies of the reportable segments are the same as those set
forth in the Summary of Accounting Policies. Summarized financial
information concerning the Company's reporting segments for the nine
months ended September 30, 1999 and 2000 is presented below.
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 2000 September 30, 1999
---------------------- ----------------------
United INI United INI
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $6,733,039 $ 618,106 $5,608,464 $1,030,946
Segment
profit (loss) 352,641 81,420 (1,229,509) (6,731)
Total assets 3,577,348 0 3,544,237 439,697
</TABLE>
21
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NEXT GENERATION MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
OTHER INFORMATION
During the quarter ended September 30, 2000, the Company named Turner, Jones &
Associates of Vienna, Virginia as the auditing firm for the Company. Turner,
Jones & Associates replace BDO Seidman, LLP as the auditing firm. On October 3,
2000, Gerard R. Bernier tendered his resignation as President and CEO of the
Company. Mr. Bernier also resigned as Chairman of the Board of the Company. Mr.
Chet Howard and Mr. Frank Denny tendered their resignation as Board members of
the Company on November 9, 2000 and November 10, 2000 respectively.
22
<PAGE> 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Total revenue decreased 27% to $1,636,310 in the quarter ended September
30, 2000 from $2,250,426 in the third quarter of 1999. The sale of the
newspapers, which occurred in the second quarter of 2000, resulted in the loss
of advertising revenue, which more than offset the $103,707 increase in coupon
sales in the quarter ended September 30, 2000 as compared to coupon sales in the
quarter ended September 30, 1999. Total revenues increased 20% to $6,733,039 in
the nine month period ended September 30, 20000 from $5,608,464 in the same
period of 1999. This increase was due mainly to the acquisition of United
Marketing Solutions, Inc. ("United") by the issuer in April of 1999. Total
revenue decreased 11% to $6,733,039 for the period ended September 30, 2000 from
$7,565,105 on a pro forma basis for the same period in 1999.
Total operating expenses decreased 32% to $1,802,030 in the quarter ended
September 30, 2000 from $2,639,796 in the third quarter of 1999. Printing costs,
postage and delivery, other production costs, selling expenses, and depreciation
and amortization, which aggregated to $1,366,270, decreased 27.5% from
$1,884,460 in the comparable 1999 period. General and Administrative expenses
decreased 40.2% to $435,760 from $728,383 in the third quarter of 1999. These
decreases are due primarily due to decreases in production expense and
compensation expense related to the issuance of stock options. Total operating
expenses increased 15.8% to $7,284,265 in the nine-month period ended September
30, 2000 from $6,290,171 in the same period of 1999. Printing costs, postage and
delivery, other production costs, selling expenses, and depreciation and
amortization, which aggregate to $5,727,146 increased 26% from $4,546.177 in the
period ended September 30, 1999. General and Administrative expenses increased
1.6%, to $1,557,119 from $1,533,291 in the period ended September 30, 1999.
These increases are comparable to the increase in revenue and are a result of
the acquisition of United. Total operating expenses decreased 14.6%, to
$7,284,265 for the period ended September 30, 2000 from $8,528,459 on a pro
forma basis for the same period in 1999.
Interest expense decreased to $12,810 in the third quarter of 2000 from
$71,041 in the comparable 1999 period. Interest expense decreased to $31,320 in
the nine-month period ended September 30, 2000 from $190,579 in the comparable
1999 period. These decreases were due primarily to repayment of outstanding note
payables from 1998.
Cash used by operating activities was $397,557 for the period ended
September 30, 2000 compared to $330,447 for the
23
<PAGE> 24
period ended September 30, 1999. This was primarily due to a decrease in
accounts payable, wages payable, and accrued expenses offset by a net income of
$352,641 and non-cash charges relating to depreciation and amortization.
Cash Provided by investing activities was $328,753 for the period ended
September 30, 2000, compared to cash provided by financing activities of
$624,558 for the period ended September 30, 1999. This decrease was primarily
due to a decrease in the proceeds received from the issuance of common stock,
repayments of notes payable and the use of common stock in the purchase of
assets offset by the cancellation of the Preferred Series B shares.
The Company has a net loss per share, on a basic and diluted basis,
during the first three quarters of 1999 of $.31. During the period covered by
this report, the Company has a net gain per share of $.06 on a basic earnings
basis and a gain of $.05 on a fully diluted earnings basis.
24
<PAGE> 25
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended September 30, 2000, the Company had no change in
the number of shares outstanding.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
------ ----------- --------
<S> <C> <C>
3.1 Articles of Incorporation (under the name Incorporated by reference in the
Micro Tech Industries Inc.) filing of the 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 Incorporated by reference in the
filing of the Company's annual
report on Form 10-KSB filed on
November 12, 1999.
27.1 Financial Data Schedule Included herein.
(b) Reports on Form 8-K:
None filed during the reporting period.
</TABLE>
25
<PAGE> 26
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: December 8, 2000 By: /s/ Leon Zajdel
-------------------------
Leon Zajdel, Director
Date: December 8, 2000 By: /s/ Steve Kronzek
-------------------------
Steve Kronzek, Director
26
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
------- ----------- --------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
