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 SEPTEMBER 30, 1997
Commission File Number 0-8146
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
(Exact name of registrant as specified in charter)
UTAH 87-0280886
State or other jurisdiction of (I.R.S. 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 September 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
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Balance Sheets - (restated)
September 30 March 31
1997 1997
(unaudited) (audited)
ASSETS
Current Assets
Cash and Cash Equivalents $ 56,617 $ 18,112
Accounts Receivable - Trade 955,843 983,352
Inventory 442,310 181,060
Other Receivables - Advances 164,605 127,971
Total Current Assets 1,619,375 1,310,495
Property, Plant, and Equipment
(at cost) net 720,037 784,039
Long Term Notes Receivable 423,187 419,774
TOTAL ASSETS $ 2,762,599 $ 2,514,308
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable - Trade $ 1,540,469 $ 875,734
Bank Line of Credit 708,966 725,000
Other Accrued Expenses 565,500 113,185
Current Maturities of
Long-term Debt 174,026 174,026
Current Portion of Obligations
Under Capital Leases 41,097 41,097
Total Current Liabilities 3,030,058 1,929,042
Long Term Notes
Notes Payable 415,792 506,806
Obligations under Capital
Leases For Equipment 161,955 182,044
Total Long Term Notes 577,747 688,850
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 shares;
10,764,733 shares issued
and outstanding
Additional paid-in capital (1,046,058) (1,046,058)
Accumulated Deficit ( 875,621) ( 133,999)
Total Stockholders Equity ( 845,206) ( 103,584)
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 2,762,599 $ 2,514,308
The accompanying notes are an integral part of these financial statements.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Statements of Operation - (restated)
(UNAUDITED)
For the Six Months For the Three Months
Ended September 30 Ended September 30
1997 1996 1997 1996
Net Revenues:
Hardware, Software & Peripherals $1,138,797 $ 212,771 $ 320,163 $ 157,944
Service, Support & Integration 514,617 186,858 221,470 114,399
Network Installation 365,821 1,753,059 247,818 655,212
2,019,235 2,152,688 789,451 927,555
Cost of Goods Sold
Hardware, Software & Peripherals 681,063 179,164 278,859 132,673
Service, Support & Integration 334,502 121,457 143,956 74,359
Network Installation 254,104 1,139,489 173,779 425,888
1,269,669 1,440,110 596,594 632,920
Gross Margin 749,556 712,578 192,857 294,635
Selling, General & Administrative 1,385,787 858,460 846,710 471,851
Operating Income (Loss) ( 636,231) ( 145,882) ( 653,853) ( 206,115)
Other Income (Expense) ( 105,391) ( 99,893) ( 82,928) ( 30,589)
Net Income (Loss) ( 741,622) ( 245,775) ( 736,791) ( 236,704)
Earnings (Loss) Per Share $ (0.069) $ (0.025) $ (0.069) $ (0.024)
Weighted average number of shares
Outstanding used in earnings
(loss) per share calculation 10,764,733 9,784,733 10,764,733 9,784,733
The accompanying notes are an integral part of these financial statements.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Statements of Stockholders' Equity - (restated)
For the Year Ended March 31, 1997 (Audited)
and Six Months Ended September 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
six months
ended
September 30,
1997 (741,622)(741,622)
Balance
September 30,
1997 10,764,733 1,076,473 (1,046,058)(875,621)(845,206)
The accompanying notes are an integral part of these financial statements.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Statements of Cash Flow (restated)
For the Six Months Ended September 30
(UNAUDITED)
1997 1996
Cash Flows from Operating
Activities:
Net (Loss) $( 741,622) $( 245,775)
Adjustments to reconcile net income
to net cash, provided by operating
activities:
Depreciation expense 78,316
Change in accounts receivable ( 9,125) ( 416,650)
Change in inventory ( 261,250) 483,617
Change in accounts payable 664,735 ( 179,080)
Change in accrued expenses 452,315 ( 1,473)
Net Cash Provided by
Operating Activities 183,369 ( 359,361)
Cash Flows from Investment Activities:
Investment in property & equipment ( 14,314) ( 186,744)
Investment in other assets ( 3,413) ( 61,932)
Net Cash provided by (Used by)
Investing Activities ( 17,727) ( 248,676)
Cash Flows from Financing Activities:
Proceeds from Line of Credit ( 16,034)
Change in long term debt ( 91,014) 791,984
Change in capital lease obligations ( 20,089)
Net Cash Provided by (Used by)
Financing Activities ( 127,137) 791,984
Net Increase in Cash 38,505 183,947
Cash at Beginning of Period 18,112 9,104
Cash at End of Period $ 56,617 $ 193,051
Supplemental disclosures:
Cash paid for interest $ 54,594 $ 31,200
The accompanying notes are an integral part of these financial statements.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)
September 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).
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)
September 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.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)
September 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:
September 30, 1997 March 31, 1997
Balance Sheet: As Reported As Restated As Reported As Restated
Goodwill $ 713,779 $ -0- $ 751,329 $ -0-
Additional paid-in capital 5,600,652 (1,046,058) 5,600,652 (1,046,058)
Accumulated deficit (6,808,552) ( 875,621) (5,746,125) ( 133,999)
For the Six Months Ended For the Three Months Ended
September 30, 1997 September 30, 1997
Statement of Operation As Reported As Restated As Reported As Restated
Selling, General &
Administrative $ 1,327,349 $ 1,385,787 $ 596,594 $ 846,710
Net Loss (1,062,427) ( 741,622) ( 598,239) ( 736,791)
Earnings (Loss) Per Share (.155) (.069) (.088) (.069)
Weighted average number of
shares outstanding used in
earnings (loss) per share
calculation 6,833,533 10,764,733 6,833,533 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 September 30, 1997 the
Company owed $709,000 on the line of credit. The amount due to
Bank One under the credit line was reduced in October and November
1997 by $500,000. 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 has working agreements with two other banking institutions.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)
September 30, 1997
(Continued)
NOTE 3. SUBSEQUENT EVENTS
On November 18, 1997, the Company received $2,120,000 completing
the Private Placement of 400,000 shares of Series B Preferred Stock
$2 par value for a purchase price of $5.30 per share. The Company
received $371,000 in October 1997 from two individuals under senior
convertible notes payable secured by common stock. Total expenses
of the Private Placement including broker fees, commissions, and
legal and accounting expenses totaled $508,000.
NOTE 4. GOING CONCERN
As shown in the accompanying consolidated financial statements, the
Company has incurred a net loss in the current quarter of $736,791
and as of that date, the Company's current liabilities exceeded its
current assets by $1,410,683. At September 30, 1997, the Company
owes accounts payable with dates due in excess of ninety (90)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 the expenses related to operations and
capital improvements. The Company received a net $1,818,000 from
the Private Placement of Series B Preferred Shared in November
1997. The Company has signed a letter of intent for $1 million on a
firm commitment basis to be received during December, 1997 and up
to an additional $ 5,000,000 under a debt instrument during the
first quarter of calendar 1998. In addition, the Company plans a
secondary offering during fiscal calendar 1998. The financial
statements do not include any adjustments that might be necessary
if the Company is unable to continue as a gong 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. More complete
discussions can be found in the Company's Annual Report on Form 10-
KSB/A for the fiscal year ended March 31, 1997.
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. Therefore, the operating results for any particular period are not
necessarily indicative of the results that may occur in any future period.
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 emphasizing hardware sales
to intensifying sales of technical services.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 Compared to Three Months
Ended September 30, 1996
Net sales for the 1997 fiscal Second Quarter were $789,451 versus
$927,555 for the 1996 fiscal Second Quarter. A decrease of 15
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 $596,594 in the 1997 fiscal Second Quarter Versus
$632,920 in the 1996 fiscal Second Quarter, a decrease of 6
percent. The decrease was the result of greater service sales
effected in 1997 requiring less inventory cost.
The buildup in inventory at September 30, 1997 includes work in
process for a Texas independent school district contract to be
completed no later than November 30, 1997.
The Company's gross margin in the 1997 Second Quarter was 24%
versus 31% in the 1996 fiscal Second Quarter, an decrease of 7
percent. This decrease was due to a decrease in network installations which
typically have a higher margin.
Selling general and administrative expenses increased to $846,710
in the 1997 fiscal Second Quarter from $471,851 in the 1996 fiscal
Second Quarter, and increase to 80 percent. This increase is
primarily due to additional management personnel salaries.
Six Months Ended September 30, 1997 Compared to Six Months Ended
September 30, 1996.
Net sales for the 1997 six months ended September 30, 1997 were
$2,019,235 versus $2,152,688 for the six months ended September 30,
1996. A decrease of 6 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 $1,269,669 resulting in a gross margin of 37% for the six
months ended September 30, 1997 versus cost of sales of $1,440,110 resulting in
a gross margin of 33% for the six months ended September 30, 1996 a increase of
6 percent. The increase 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 $1,385,787
in the six months ended September 30, 1997 from $858,460 in the six
months ended September 30, 1996, an increase of 61 percent. This
increase is primarily due to additional management personnel.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had a working capital deficit of
$1,410,683 compared to a deficit of $618,547 at September 30,
1996. This decrease in the Company's working capital deficit was
primarily due to increase in borrowings and payables.
The Company received $470,000 in proceeds from outsiders in the form of bridge
financing during the three months ended September 30, 1997. Additional funding
of $215,750 was received through November 17,1997.
The company has financed its operations primarily through
borrowings. As of September 30, 1997, the Company's sources of
internal financing were limited. It is not expected that internal
sources of liquidity will improve until net cash is provided by
operating activities which is expected in early 1998, 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 $2,000,000 to be funded over the next 90 days and
a debt offering of $3 to $5 million beginning on or before January
30, 1998.
PART II: Other Information
Item 2: Changes in Securities
On November 17, 1997 the Company completed the private placement
(the "private Placement") of 400,000 shares of Series B Preferred
Stock, par value $2 per share (the "Series B 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
contracts in place at November 15, 1997 and the successful
completion of the private placement-funding, revenues for calendar
1998 should exceed $15,000,000.
The company is obligated under contract 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 was held to change the name of the company to Micro-
Media Solutions, Inc.
Item 5: Other Matters
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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