UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 1997
Commission File Number 0-8146
(MOUNTAIN STATES RESOURCES CORPORATION)
(Exact name of registrant as specified in charter)
UTAH 87-0280886
State or other jurisdiction of (IRS Employer I.D. No.)
Incorporation or organization
501 Waller St., Austin, Texas 78702
(Address of principal executive offices)
Issuer's telephone number, including area code (512) 476-6925
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
Securities registered pursuant to section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, None
Par Value $.10
Check whether the Issuer (1) filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes ( ) No (X) (2) Yes (X) No ( )
Number of shares of common stock outstanding at June 30, 1997:
10,764,733.
Part I: Financial Information Item 1:
Consolidated Financial Statements
Index to Consolidated Financial Statements Page
Consolidated Balance Sheets 3
Consolidated Statements of Operation 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Stockholders' Equity 6
Notes to Consolidated Financial Statements 7
MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Balance Sheets - (restated)
June 30 March 31
1997 1997
(unaudited) (audited)
ASSETS
Current Assets
Cash and Cash Equivalents $ 29,923 $ 18,112
Accounts Receivable - Trade 1,492,423 983,352
Inventory 570,549 181,060
Other Receivables - Advances 195,080 127,971
Total Current Assets 2,287,975 1,310,495
Property, Plant, and Equipment
(at cost) net 773,028 784,039
Long Term Notes Receivable 419,774 419,774
TOTAL ASSETS $ 3,480,777 $ 2,514,308
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable - Trade $ 1,387,651 $ 875,734
Bank Line of Credit 871,140 725,000
Other Accrued Expenses 488,584 113,185
Current Maturities of
Long-term Debt 174,026 174,026
Current Portion of Obligations
Under Capital Leases 41,097 41,097
Total Current Liabilities 2,962,498 1,929,042
Long Term Notes
Notes Payable 460,895 506,806
Obligations under Capital
Leases For Equipment 165,799 182,044
Total Long Term Notes 626,694 688,850
Stockholders Equity
Preferred stock at $2 par value;
Authorized 10,000,000 shares;
None issued or outstanding
Common stock at $.10 par value; 1,076,473 1,076,473
Authorized 50,000,000;
10,764,733 shares issued
and outstanding
Additional paid-in capital (1,046,058) (1,046,058)
Accumulated Deficit ( 138,830) ( 133,999)
Total Stockholders Equity ( 108,415) ( 103,584)
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 3,480,777 $ 2,514,308
The accompanying notes are an integral part of these financial
statements.
MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Statements of Operation - (restated)
For the Three Months Ended June 30
(UNAUDITED)
1997 1996
Net Revenues:
Hardware, Software & Peripherals $ 818,634 $ 54,827
Service, Support & Integration 293,147 72,459
Network Installation 118,003 1,097,847
1,229,784 1,476,905
Cost of Goods Sold
Hardware, Software & Peripherals 402,204 46,491
Service, Support & Integration 190,546 47,098
Network Installation 80,325 713,601
673,075 988,425
Gross Margin 556,709 488,480
Selling, General and Administrative 539,077 428,246
Operating Income (Loss) 17,632 60,233
Other Income (Expense) ( 22,463) ( 69,304)
Net Income (Loss) ( 4,831) 9,071
Earnings (Loss) Per Share $ (.00) $ .00
Weighted average number of shares
Outstanding used in earnings
(loss) per share calculation 10,764,733 9,784,733
The accompanying notes are an integral part of these financial
statements.
MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Statements of Stockholders' Equity - (restated)
For the Year Ended March 31, 1997 (Audited)
and Quarter Ended June 30, 1997 (unaudited)
Additional
Common Stock paid in Accumulated
Shares Amount Capital Deficit Total
Balance
March 31,
1996 9,784,733 978,473 (1,046,058) 348,386 280,801
Common stock
issued for
services 500,000 50,000 50,000
Common stock
options
exercised 480,000 48,000 48,000
Net Loss for
the year
ended
March 31,
1997 (482,385)(485,385)
Balance
March 31,
1997 10,764,733 1,076,473 (1,046,058)(133,999)(103,584)
Net loss
for the
Three months
ended
June 30, 1997 ( 4,831)( 4,831)
Balance
June 30,
1997 10,764,733 1,076,473 (1,046,058)(138,830)(108,415)
The accompanying notes are an integral part of these financial
statements.
MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Statement of Cash Flow - (restated)
For the three months ended June 30
(unaudited)
1997 1996
Cash Flows from Operating Activities:
Net Income (Loss) $( 4,831) $ 123,377
Adjustments to reconcile net income
to net cash, provided by operating
activities:
Depreciation expense 29,746 13,845
Change in accounts payable 511,917 850,474
Change in inventory ( 389,489) ( 36,011)
Change in accounts receivable ( 509,071) ( 516,538)
Change in accrued expenses ( 375,399) ( 43,234)
Net Cash Provided by
Operating Activities 13,671 391,911
Cash Flows from Investment Activities:
Investment in property & equipment ( 18,735) 222,358
Investment in other assets ( 67,109) 118,993
Net Cash provided by (Used by)
Investing Activities ( 85,844) 341,351
Cash Flows from Financing Activities:
Proceeds from Line of Credit 146,140
Change in long term debt ( 45,911) ( 605,820)
Change in capital lease obligations( 16,245) ( 109,163)
Net Cash Provided by (Used by)
Financing Activities 83,984 ( 714,983)
Net Increase in Cash 11,811 18,279
Cash at Beginning of Period 18,112 29,554
Cash at End of Period 29,923 47,833
Supplemental disclosures:
Cash paid for interest $ 27,297 $ 15,600
The accompanying notes are an integral part of these financial
statements.
MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)
June 30, 1997
(unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting
principals and the rules of the Securities and Exchange Commission
(the SEC), and should be read in conjunction with the audited
financial statements and notes thereto contained in the Company's
latest annual Report filed with the SEC on Form 10-KSB/A. In the
opinion of management, all adjustments consisting of normal
recurring adjustments, necessary for the fair presentation of
financial position and the results of operations for the interim
periods presented have been reflected here in. The results of
operation are not necessarily indicative of the results to be
expected for the full year. Notes to the financial statements
which would substantially duplicate the disclosure contained in
the audited financial statements for the year ended March 31,
1997, as reported in the Form 10-KSB/A have been omitted.
Nature of Business and Organization
Micro-Media Solutions, Inc. (formerly Mountain States Resources
Corporation, ("MSRC")), was organized under the laws of the State
of Utah on April 15, 1969. MSRC began operations in April 15, 1969,
as a mining, mineral extraction and oil and gas exploration company.
MSRC discontinued its operations in 1993 and became a development
stage company as described in the Statement of Financial Accounting
Standards No.7, "Accounting and Reporting by Development Stage
Enterprises". On June 23, 1997, the then shareholders of Micro-Media
Solutions, Inc.,(MSI-Texas), entered into an agreement and plan of
reorganization with MSRC whereby MSRC acquired all of the issued and
outstanding stock of MSI-Texas in exchange for 9,310,000 shares of Common
Stock of MSRC. The transaction was accounted for as a recapitalization.
As part of the reorganization, MSRC changed its name to Micro-Media
Solutions, Inc., (a Utah Corporation), ("MSI") (the "Company").
MSI-Texas is an Austin, Texas, based technology corporation formed
to provide computer hardware, software programming, system installation and
support, maintenance, media duplication, and kitting to the public and private
sectors. In addition, MSI-Texas is certified by the State of Texas
as a Historically Underutilized Business (HUB).
MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)
JUNE 30, 1997
(Continued)
Principles of Consolidation
The consolidated financial statements for the years ended March 31,
1998 and 1997, include the accounts and transactions of MSI and
MSI-Texas. All significant inter-company accounts and transactions
have been eliminated in the accompanying consolidated financial
statements. MSI, however, did not have any material asset or
liability accounts or account balances. With the exception of
MSI's equity accounts, the significant account balances belong
to MSI-Texas.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash
equivalents.
Earnings (Loss) Per Share
The earnings (loss) per share is computed on the basis of the
weighted average number of shares outstanding during the period.
All historical per share data has been restated to reflect stock
splits and the effect of the merger transaction of Micro-Media
Solutions, Inc.
Use of Estimates and Certain Concentrations
Management of the Company has made a number of estimates and
assumptions relating to the valuation and reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these consolidated financial statements in
conformity with generally accepted accounting principles.
Although actual results could differ from those estimates,
Management believes its estimates are reasonable. Certain
components, subassemblies and software included in the Company's
computer systems are obtained from sole suppliers or limited
number of suppliers. The company relies, to a certain extent, upon
its suppliers' abilities to enhance existing products in a timely
and cost-effective manner, to develop new products to meet
changing customer needs and to respond to emerging standards and
other technological developments in the computer industry. The
Company's reliance on a limited number of suppliers involves
several risks, including the possibility of shortages and/or
increases in costs of components and subassemblies, and the risk
of reduced control over delivery schedules.
The computer and telecommunications industries. The Company has a
large number of customers on which it performs ongoing credit
evaluations and generally does not require collateral from its
customers. Historically, the Company has not experienced
significant losses related to receivables from individual
customers or groups of customers in any particular industry of
geographic area.
MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Restated)
JUNE 30, 1997
(Continued)
Restated Financial Statements
The accompanying financial statements have been restated from the
statements originally issued. These statements have been restated to
report the transaction between MSRC and MSI-Texas as a recapitalization.
The original financial statements reported the transaction as a purchase.
Changes in the financial statements are as follows:
June 30, 1997 March 31, 1997
Balance Sheet: As Reported As Restated As Reported As Restated
Goodwill $ 732,594 $ -0- $ 751,329 $ -0-
Additional paid-in capital 5,600,652 (1,046,058) 5,600,652 (1,046,058)
Accumulated deficit (6,052,946) ( 138,830) (5,746,125) ( 133,999)
For the Three Months Ended
June 30, 1997
Statement of Operation As Reported As Restated
Selling, General &
Administrative $ 557,812 $ 539,077
Net Loss ( 23,566) ( 4,831)
Earnings (Loss) Per Share (.01) .00
Weighted average number of
shares outstanding used in
earnings (loss) per share
calculation 10,764,733 10,764,733
Certain amounts previously reported have been reclassified for
presentation purposes in the restated financial statements. These amount
are not material to the financial statements. Restated financial statements and
Form 10KSB/A for March 31, 1997 have previously been filed with the SEC.
NOTE 2. SHORT-TERM BORROWINGS.
The Company owes $200,000 payable in cash to a third party due
November 8, 1997 at 20% for borrowings used for acquisition into
Mountain States Resources Corporation.
The Company had a secured credit agreement with Bank One providing
for borrowings of up to $725,000, based on the amount of the
Company's eligible receivables. As of June 30, 1997 the Company
owed $700,000 on the line. Under the agreement, the Company is
subject to certain financial and other covenants including certain
financial ratios.
The credit agreement matured on August 18, 1997 and Bank One
notified the company that the bank would not renew the credit
line. The Company is currently searching for a new banking
relationship and has tentative agreements with two banking
institutions.
MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Restated)
JUNE 30, 1997
(Continued)
Note 3. GOING CONCERN
As shown in the accompanying consolidated financial statements,
the Company has incurred a net loss in the current quarter of
$4,831 and as of that date, the Company's current liabilities
exceeded its current assets by $674,523. At June 30, 1997, the
Company owes accounts payable with dates due in excess of thirty
(30) days. These factors create an uncertainty about the
Company's ability to continue as a going concern. The ability of
the Company to continue as a going concern is dependent on the
Company's attaining additional financing to fund expenses related
to operations and capital improvements. The Company has signed a
letter of intent for $4 million on a firm commitment basis with
$1,060,000 to be received during October, 1997, $1,060,000 to be
received during January 1998, and an additional $2,000,000 during
calendar 1998. In addition, the Company plans a secondary
offering during fiscal 1998. The financial statements do not
include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
Part I: Financial Information Item 2: Management's Discussion and
analysis of financial condition and results of operations
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of the Company's results of operations and financial condition.
This discussion should be read in conjunction with the
Consolidated Financial Statements appearing in Item 1.
GENERAL
Micro-Media Solutions, Inc. (formerly Mountain States Resources
Corporation, ("MSRC")), was organized under the laws of the State
of Utah on April 15, 1969. MSRC began operations in April 15, 1969,
as a mining, mineral extraction and oil and gas exploration company.
MSRC discontinued its operations in 1993 and became a development
stage company as described in the Statement of Financial Accounting
Standards No.7, "Accounting and Reporting by Development Stage
Enterprises". On June 23, 1997, the then shareholders of Micro-Media
Solutions, Inc.,(MSI-Texas), entered into an agreement and plan of
reorganization with MSRC whereby MSRC acquired all of the issued and
outstanding stock of MSI-Texas in exchange for 9,310,000 shares of Common
Stock of MSRC. The transaction was accounted for as a recapitalization.
As part of the reorganization, MSRC changed its name to Micro-Media
Solutions, Inc., (a Utah Corporation), ("MSI") (the "Company").
MSI-Texas is an Austin, Texas, based technology corporation formed
to provide computer hardware, software programming, system installation and
support, maintenance, media duplication, and kitting to the public and private
sectors. In addition, MSI-Texas is certified by the State of Texas
as a Historically Underutilized Business (HUB).
Among the principal cost to market and sell the Company's products are
advertising and promotion cost, salaries and commissions, general and
administrative expenses. The Company's operation results may be subject to
fluctuations on a quarterly and an annual basis as a result of various
factors, including, but not limited to, fluctuating market pricing for
computer and semiconductor memory products, industry competition, seasonal
government purchasing cycles, and working capital restrictions on
manufacturing and production.
The Company's revenues consist of hardware sales, software sales and the
delivery of technical services, including installing and maintaining network
systems. The technical service sales of the Company typically yield a higher
gross margin than the hardware and software sales of the Company. This is
due, in part, to the intense competition in the hardware and software sales
sector from Original Equipment Manufactures and distributors. As a result,
the Company, is attempting to strategically reposition itself from
emphasising hardware sales to intensifying sales of technical services.
RESULTS OF OPERATIONS
1997 First Quarter and 1996 First Quarter.
Net sales for the 1997 First Quarter were $1,229,784 versus
$1,476,905 for the 1996 First Quarter. A decrease of 16.7
percent. The decrease is primarily due as a result of the completion of a large
network installation project without any new projects cued to follow.
Cost of sales was $673,075 resulting in a gross margin of 45.3% in the 1997
First Quarter versus sales of $988,425 resulting in a gross margin of 33.1% in
the 1996 First Quarter, a decrease of 31.9 percent. The decrease was the
result of lower net sales and increase in service related sales which
typically have a higher margin.
Selling general and administrative expenses increased to $539,077
in the 1997 First Quarter from $428,246 in the 1996 First Quarter,
an increase of 25.9 percent. This increase is primarily due to
additional management personnel.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital deficit of
$674,523, compared to a working capital deficit of $618,547
at June 30, 1996. The Company's working capital is not expected
to improve until later in the fiscal year.
The company has financed its growth primarily through borrowings.
As of June 30, 1997, the Company's sources of internal and
external financing were limited. It is not expected that internal
sources of liquidity will improve until net cash is provided by
operating activities, and until such time, the company will rely
upon external sources for liquidity. The Company has signed a
letter of intent with an investment banking firm for $4,000,000 to
be funded over the next sixteen months beginning with $1,060,000
on or before October 30, 1997.
PART II: Other Information
Item 2: Changes in Securities
The company is currently engaged in the private placement (the "Private
Placement") of up to 4,000,000 shares of common stock, par value $.10 per
share (the "Common Stock") and up to 4,000,000 shares of Series A Preferred
Stock, par value $.10 per share (the "Series A Preferred Stock"), all to
"accredited investors" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended.
The Company plans to use the proceeds from the sale of the Shares for working
capital, repayment of indebtedness and hiring of new personnel for recently
received new contracts based upon those in place at September 15, 1997 and
the successful completion of the private placement-funding revenue for
calendar 1998, which should exceed $15,000,000.
The company is obligated to issue up to 1,500,000 shares of common stock to
employees and consultants.
Item 4: Submission of matters to a vote of the security holders
On September 26, 1997, a special meeting of the security holders
of the Company will be held to change the name of the company to
Micro-Media Solutions, Inc.
Item 5: Other Matters
None
Item 6: Exhibits and Reports on Form 8K
(a) Exhibits
None.
(b) Reports on Form 8K
None.
SIGNATURES
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.
Date 10/20/98 By /S/ Jose G. Chavez
Jose G. Chavez, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of this Registrant and in the capacities and on the
dates indicated.
Signature Capacity Date
/s/ Jose G. Chavez 10/20/98
Jose G. Chavez President and Chairman
of the Board of Directors
/s/ Mitchell Kettrick 10/20/98
Mitchell Kettrick Vice-President and
Director
/s/ David Hill 10/20/98
David Hill Chief Financial Officer
/s/ Ernesto Chavarria 10/20/98
Ernesto Chavarria Director
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