UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1997
Commission File Number 0-8164
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 (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 December 31, 1997: 10,764,733
Part I: Financial Information Item 1: Financial Statements
Index to Financial Statements
Page
Balance Sheets 3
Statements of Operation 5
Statements of Stockholders' Equity 6
Statements of Cash Flows 7
Notes to Financial Statement 8
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Balance Sheets
ASSETS
December 31 March 31
1997 1997
(unaudited) (audited)
Current Assets
Cash and Cash Equivalents $ 19,696 6,840
Accounts Receivable - Trade 576,852 1,383,207
Inventory 346,521 181,060
Other Receivables - Advances 159,905 127,971
Total Current Assets 1,102,974 1,699,078
Property, Plant and
Equipment (at cost) - Net 691,881 723,783
Other Assets
Goodwill 707,521 751,329
Deposits 15,000 17,430
Long Term Notes Receivable 434,796 476,914
Total Other Assets 1,157,317 1,245,673
Total Assets $ 2,952,172 3,668,534
The accompanying notes are an integral part of these financial statements.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS EQUITY
December 31 March 31
1997 1997
(unaudited) (audited)
Current Liabilities
Payroll Taxes Payable $ 2,054 $ 51,637
Accounts Payable - Trade 651,712 869,198
Bank Line of Credit 204,765 724,890
Other Accrued Expenses 24,000 203,971
Current Portion - Obligation
Under Capital Leases 52,921 52,921
Current Portion - Long Term Debt 160,060 160,060
Total Current Liabilities 1,095,512 2,062,677
Long Term Notes
Notes Payable 403,840 495,882
Obligations Under Capital
Leases for Equipment 70,078 153,975
Senior Convertible Notes 371,000
Other Long Term Liabilities 685,450 25,000
Total Long Term Notes 1,530,368 674,857
Stockholders Equity
Preferred Stock, Series B, $5.30
stated value; Authorized
10,000,000 shares 420,000
issued & outstanding 840,000 -
Common Stock at $.10 par value;
Authorized 50,000,000 common shares
10,764,733 issued & outstanding 1,076,473 1,076,473
Additional paid-in capital 6,986,652 5,600,652
Accumulated Deficit (8,576,833) (5,746,125)
Total Stockholders Equity 326,292 931,000
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY $ 2,952,172 $ 3,668,534
The accompanying notes are an integral part of these financial statements.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
Consolidated Statements of Operation
(UNAUDITED)
For the Nine Months For the Three Months
Ended December 31 Ended December 31
1997 1996 1997 1996
Net Revenues $2,050,746 $3,861,502 $720,261 $1,111,109
Cost of Goods Sold 1,643,949 2,734,380 582,621 738,203
Gross Margin 406,797 1,127,122 137,640 372,906
Selling, General
and Administrative 2,573,293 1,330,097 686,953 429,999
Operating (Loss) (2,166,496) (202,975) (549,313) (57,093)
Other Income (Expense) (664,212) (33,385) (515,271) 66,508
Net Income/(Loss) $(2,830,708) $(236,360) $(1,064,584) $ 9,415
Earnings Per Share:
On Common Stock and
Common Equivalent
Shares (.220) (.019) (.083) .001
On a Fully Diluted
Shares Basis (.184) (.016) (.069) .001
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
For the Year Ended March 31, 1997 (Audited)
and Nine Months Ended December 31, 1997 (Unaudited)
<TABLE>
<C> <S>
.. Preferred Stock Common Stock Additional Accumulated Treasury
Shares Amount Shares Amount Paid In Deficit Stock Total
<S>
Capital
<S> <C> <C> <S> <C> <S> <C> <S> <C> <S> <C>
______ ______ _________ ________ ________ _________ _______ _______
Balance
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1996 39,473 $78,946 418,733 $ 41,873 $4,801,107 $(5,546,995) $(1,000) $(626,069)
Common stock
Issued in exchange
for preferred shares
at approximately
$3.95 per share (39,473) (78,946) 20,000 2,000 76,946 - - -
Common stock
issued for services
under S-8 - - 500,000 50,000 - - - 50,000
Common stock
issued for debt
of approximately
$17,58 per share - - 516,000 51,600 722,599 - - 774,199
Common stock
issued for
acquisition of
Micro-Media
Solutions, Inc. - - 9,310,000 931,000 931,000
Cancellation of
Treasury Stock 1,000 1,000
Net Loss for the
year ended
March 31, 1997 - - - - - (199,130) - (199,130)
Balance
March 31, 1997 - - 10,764,733 1,076,473 5,600,652 (5,746,125) - 931,000
Series B, $5.30
Stated Value
Preferred Stock
Issued in Private
Placement 420,000 840,000 1,386,000 2,226,000
Net loss for
the Nine months
ended December
31, 1997 - - - - - (2,830,708) - (2,830,708)
Balance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <S><C> <C>
December 31, 1997 420,000 $840,000 10,764,733 $1,076,473 $6,986,652 $(8,576,833)$ - $ 326,292
</TABLE>
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
For the Nine Months Ended December 31
(UNAUDITED)
1997 1996
Cash Flows from Operating
Activities:
Net Income (Loss) $ (2,830,708) $ (236,360)
Adjustments to reconcile
net loss to net cash,
provided by operating
activities:
Amortization and
Depreciation expense 148,587 86,096
Change in accounts
receivable 806,355 (224,423)
Change in inventory (165,461) 270,519
Change in accounts payable (217,486) 120,429
Change in accrued and
other liabilities (229,554) 24,795
Net Cash Provided by (Used by)
Operating Activities (2,488,267) 41,056
Cash Flows from Investment Activities:
Investment in property
& equipment (72,877) (367,270)
Change in other assets 12,614 (428,082)
Net Cash Provided by (Used by)
Investing Activities (60,263) (795,352)
Cash Flows from Financing Activities:
Net change in Line of Credit (520,125) 275,000
Increase of long term debt 253,958 493,037
Increase in Other long term
Liabilities 685,450 -
Change in capital lease
obligations (83,897) -
Proceeds from issuance of
Preferred Stock 2,226,000 -
Net Cash Provided by (Used by)
Financing Activities 2,561,386 768,037
Net Increase (Decrease) in Cash 12,856 13,741
Cash at Beginning of Period 6,840 9,104
Cash at End of Period $ 19,696 $ 22,845
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
December 31, 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.
In the opinion of management, all adjustments consisting of normal recurring
adjustments, necessary for the fair presentation of financial position and
results of operations for the interim periods presented have been reflected
herein. 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 have been omitted.
Nature of Business and Organization
MICRO-MEDIA SOLUTIONS, INC. formerly MOUNTAIN STATES RESOURCES CORPORATION
(MSRC), (the "Company") was organized under the laws of the State of Utah on
April 15, 1969. On June 23, 1997 MSRC entered into a reverse merger
Agreement (the "Merger") and plan of reorganization with the shareholders of
Micro-Media Solutions, Inc. in which MSRC acquired 100% of the common stock
of MSI. As part of the Merger, MSRC changed its name to Micro-Media
Solutions, Inc. (MSI) on September 29, 1997. The name change was approved by
the stockholders. The transaction was accounted for as a purchase.
MSI is an Austin, Texas technology corporation formed to provide computer
hardware, software programming, system support, maintenance, media
duplication, and kitting to the public and private sectors. MSI is a
minority owned business and is HUB certified to do business with state and
corporate clients.
MSI is a business solutions technology integrator with infrastructure design
and implementation services. MSI's computer networking services includes
system integration and local and wide-area networks.
Principles of Consolidation
The consolidated financial statements for 1997 and 1996 include the accounts
and transactions of MSRC and MSI. All significant inter-company accounts and
transactions have been eliminated in the accompanying consolidated financial
statements. MSRC, however, did not have any material balance sheet accounts
or account balances, with the exception of a net operating loss of
approximately $5.7 million. MSRC, a development stage company, 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 #7. Since then, MSRC had actively sought new business
opportunities. The significant account balances were those of MSI's.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
(Continued)
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.
Loss/Earnings Per Common Share Calculation
The loss/earnings on Common and Common Equivalent shares is computed on
the basis of the weighted average number of Common shares and Common
Equivalent shares outstanding during the period (12,895,845 shares).
The Preferred Series B stock which is initially convertible into 10 Common
Shares is included in this calculation. The weighted average number of common
shares does not include 300,000 shares of common stock that is subject
to transfer between holders. The Company may be obligated to issue additional
shares equivalent in amount in the future if agreement is not reached
regarding the transfer of such shares. The weighted average number of common
shares does not include 70,000 shares of Series B Stock and 10,268 Common
shares to be issued to the holders of the Senior Convertible Debt effective
December 31, 1997. The computation for Fully Diluted Basis Loss/Earnings
Per Share is calculated using the weighted average number of Common and
Common Equivalent shares and assumed conversion of Common Stock Warrants
issued to holders of the Preferred Series B Stock (except for 420,000
warrants to be issued to the holders of the Senior Convertible Debt
effective December 31, 1997) (15,415,845 shares). 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 a 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 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
December 31, 1997
(Continued)
Goodwill
On June 23, 1997, Micro-Media Solutions, Inc. (MSI) merged with Mountain
States Resource Corporation (MSRC). Pursuant to the terms of the Merger,
MSRC issued approximately 9,310,000 shares of its common stock in exchange
for all of the outstanding shares of MSI. The name of the surviving
corporation was changed to MSI. The Merger resulted in a change of control
and was accounted for as a purchase. A new basis of accounting was
established for the assets and liabilities and reflects the allocation on
the basis of their fair values. Goodwill of approximately $751,000 was
recorded to the extent the purchase price exceeded the fair value of the
identifiable net assets. Goodwill is being amortized on a straight line
basis over ten years.
NOTE 2. SHORT-TERM BORROWINGS.
The Company has two outstanding promissory notes in the total amount of $200,000
payable to a third party. These notes bear interest at a rate of 20% per anum.
The Company has refused to make payment on theses notes due to a number of
disputes among the Company, the third party, and a former consultant to the
Company. The third party filed suit against the Company to enforce the notes.
The Company filed an answer and denies liability. The Company also filed a
separate lawsuit against both the third party and the former consultant in
connection with the global dispute among the parties. The Company intends to
defend vigorously the third party's claim under the notes and to pursue
vigorously its own claims against the third party and the former consultant.
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 December 31, 1997 the Company owed $205,000 on the line
of credit. 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 they would not renew the credit line. The Company has working
agreements with two other banking institutions.
NOTE 3. CAPITAL TRANSACTIONS
On November 18, 1997, the Company received gross proceeds of $2,120,000 from the
Private Placement (Phase I) of 400,000 shares of Series B, 5% Cumulative
Convertible Non-Voting Preferred Stock, Stated value $5.30 per share. The
Company issued 20,000 shares of the Series B Preferred Stock as agreed for
payment of commission fees of the Private Placement (Phase I). Each share of
Preferred B stock is initially convertible into ten shares of the Company's
Common Stock. Each Preferred B share was issued six Class A Warrants exercisable
for a two year period beginning January 31 1998. The exercise price for each
warrant is $1.50 per share and will entitle the holder to one share of the
Company's Common Stock. Total expenses of the Private Placement including
broker fees,commissions, and legal and accounting expenses totaled $408,000.
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
(Continued)
The Company received $371,000 in October 1997 from two individuals under
Senior Convertible Debt (the "Senior Convertible Debt") secured by common
stock.
NOTE 4. SUBSEQUENT EVENTS
On February 4, 1998, the Company received $1,000,000 completing the Private
Placement (Phase II) of 94,340 shares of Series C, 6% Cumulative Convertible
Non-Voting Preferred Stock for a purchase price of 10.60 per share. The
Company issued 4,717 shares of Series C, 6% Cumulative Convertible Non-Voting
Preferred Stock as agreed for payment of commission fees of the Private
Placement (Phase II). Each share of Preferred C stock is initially convertible
into ten shares of the Company's Common Stock. Total expense of the Private
Placement including broker fees, commissions, and legal and accounting fees
totaled $180,000.
The holders of the Senior Convertible Debt have requested conversion of the
debt into 420,000 Class A Warrants and 70,000 shares of Series B, 5% Cumulative
Convertible Non-Voting Preferred Stock, Stated value $5.30 per share. The
Class A Warrants will be exercisable at a price of $0.795 per share. Accrued
interest on the Senior Convertible Debt will be paid through the issuance of
10,286 shares of Common Stock. The Company is in the process of fulfilling the
request to be effective December 31, 1997.
On February 5, 1998, the Company arranged for a line of credit in the amount
of $750,000 from Compass Bank. This credit facility is secured by deposits
at Compass Bank. An additional line of credit in the amount of $500,000 is
being requested and will be secured by receivables.
NOTE 5. CONTINGENCIES AND LEGAL MATTERS
MSI is engaged in various litigation and has a number of unresolved claims
pending. While the amounts claimed are not material and the ultimate
liability in respect to such litigation and claims cannot be determined at
this time, MSI is of the opinion that such liability is not to be of material
importance in relation to its accounts.
NOTE 6. GOING CONCERN
As shown in the accompanying consolidated financial statements, the Company
has incurred a net loss in the current quarter of $1,065,000 and as of that
date, the Company's current assets exceeded its current liabilities by
$7,000. At December 31, 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
MICRO-MEDIA SOLUTIONS, INC.
FORMERLY MOUNTAIN STATES RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
(Continued)
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 $2,189,000 from capital
transactions during the quarter ending December 31, 1997. An additional net
$870,000 has been received in the first quarter of 1998. The Company has
signed a letter of intent for up to an additional $ 5,000,000 under a debt
instrument to be receive no later than April 30, 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.
CAUTIONARY STATEMENT REGARDING FACTORS THAT
MAY AFFECT FUTURE RESULTS
This Quarterly Report contains forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, with respect
to the financial condition, results of operations and business of Micro-Media
Solutions, Inc., and its subsidiary ("Company", or "Registrant"). Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially and adversely from those set forth in
the forward-looking statements, including without limitation the availability
of financial resources adequate to the Company's short-,medium- and long-term
needs, the Company's dependence on the timely development, pre-production
qualification, manufacture, introduction and customer acceptance of new
higher-speed, higher-margin products, the ability of the Company to
successfully implement its strategy of diversifying into the system service
business, the various effects on revenue, margins, inventories and operation
expenses of repositioning the Company's product lines and overall business,
the effects of building and maintaining product inventories, product returns
and credit risks with customers, the Company's dependence on distributors and
resellers for certain product sales to end-users, the impact on revenue,
margins and inventories of rapidly changing technology, competition, downward
pricing pressures and allocations of product among different distribution
channels, the effects of routine price degradation over time in each of the
Company's product lines, varying customer demand for the Company's products,
supply and manufacturing constraints and costs, the Company's dependence on
outside suppliers for components and certain manufacturing services, changes
in plans, programs or expenses for research, development, sales or marketing,
the Company's ability to build and maintain adequate staff infrastructures in
the areas of product development, sales and marketing, finance, accounting
and administration, supplier disputes, customer warranty claims, general
economic conditions, and the other risks and uncertainties described from
time to time in the Company's public announcements and SEC filings, including
without limitation the Company's Forms 8-k, 10-QSB, and 10-KSB respectably.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any written or oral
forward-looking statement that may be made from time to time by or on behalf of
the Company.
The information contained in this Quarterly Report is not a complete description
of the Company's business or the risk associated with an investment in the
Company. More complete discussions can be found in the Company's Annual Report
on Form 10-KSB for the fiscal year ended March 31, 1997.
GENERAL
The Company is considered a leading computer networking service provider to
commercial and government markets. Revenue is recognized by the Company when
services are performed. Research and development costs are charged to expenses
as incurred. Among the principal costs to market and sell the Company's
products are advertising and promotion costs, sales, salaries and commissions,
and general and administrative expenses.
RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 Compared to Three Months Ended
December 31, 1996
Net sales for the 1997 fiscal Second Quarter were $789,451 versus $1,273,489
for the 1996 fiscal Second Quarter. A decrease of 38 percent. The decrease
is primarily due to increase in focus toward service contracts instead of
hardware sales.
Cost of sales was $596,594 in the 1997 fiscal Second Quarter Versus $1,007,752
in the 1996 fiscal Second Quarter, a decrease of 41 percent. The decrease was
the result of greater service sales effected in 1997 requiring less inventory
cost.
The decrease in inventory at December 31, 1997 includes a decrease in work in
process for a Texas independent school district contract that was completed
December 1997.
The Company's gross margin in the 1997 Third Quarter was 24% versus 21% in
the 1996 fiscal Third Quarter, an increase of 3 percent. This increase was
due to the higher service sales resulting in higher margins.
Selling general and administrative expenses increased to $687,821 in the 1997
fiscal Third Quarter from $471,851 in the 1996 fiscal Third Quarter, and
increase to 46 percent. This increase is primarily due to additional
management personnel salaries.
Nine Months Ended December 31, 1997 Compared to Nine Months Ended December
31, 1996.
Net sales for the 1997 Nine months ended December 31, 1997 were $2,019,235
versus $2,750,393 for the Nine months ended December 31, 1996. A decrease of
27 percent. The decrease is primarily due to the increased focus toward service
contracts instead of hardware sales.
Cost of sales was $1,648,922 in the Nine months ended December 31, 1997 versus
$1,996,177 in the Nine months ended December 31, 1996, a decrease of 17 percent.
The decrease was the result of greater service sales effected in 1997.
The Company's gross margin in the Nine months ended December 31, 1997 was
18% versus 27% in the Nine months ended December 31, 1996, a decrease of
9 percent. This decrease was due to lower revenues.
Selling general and administrative expenses increased to $1,327,349 in the
Nine months ended December 31, 1997 from $900,098 in the Nine months ended
December 31, 1996, an increase of 47 percent. This increase is primarily due
to additional management personnel and time expended by the Company on
proposals for new contracts.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had a working capital of $7,462 compared
to working capital deficit of $363,599 at December 31, 1996. This increase
in the Company's working capital was primarily due to decrease in borrowings
and payables.
The Company received $3,282,450 in proceeds from outsiders in the form of
a private placement, bridge financing and issuing senior convertible debt
during the three months ended December 31, 1997. Additional funding of
$870,000 was received through February 4, 1998.
The company has financed its operations primarily through borrowings. As of
December 31, 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
a debt offering of $3 to $5 million beginning on or before April 30, 1998.
PART II: Other Information
Item 2: Changes in Securities
On November 17, 1997, the Company completed the private placement (Phase I)
(The "private Placement") of 420,000 shares of Series B Preferred Stock,
Stated Value $5.30 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.
On February 4, 1998, the Company completed the private placement of 99,057
Shares of Series C, 6% Cumulative Convertible Non-Voting 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 December 31,
1997 and the successful completion of the private placement-funding, revenues
for fiscal year 1999 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
was held to change the name of the company to Micro-Media Solutions, Inc.
Item 5: Other Matters
On June 11, 1997, the Company's board of directors replaced Jones & Jensen,
Salt Lake City, Utah as its principal accountant with Salazar & Associates,
Austin, Texas.
The report of Jones and Jensen on the Company's financial statements for the
last two fiscal years did not contain an adverse opinion or a disclaimer of
opinion, nor was such opinion qualified or modified as to certainty, audit
scope, or accounting principles. During the Company's two most recent fiscal
years and subsequent interim periods preceding the replacement of Jones &
Jensen, the Company had no disagreements with Jones & Jensen on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. During the Company's two most recent fiscal
years and subsequent interim periods preceding the retention of Salazar &
Associates, neither the Company nor anyone on the Company's behalf, consulted
Salazar & Associates regarding any matter.
In January 1998, the Company's management made arrangements to replaced
Salazar & Associates, Austin, Texas, as its principal accountant with
Ernst & Young LLP, Austin, Texas. The retention of Ernst & Young, LLP
as principal auditors will be ratified at the next meeting of the Board
of Directors.
The report of Salazar & Associates on the Company's financial statements for
the fiscal year ended March 31, 1997 did not contain an adverse opinion or a
disclaimer of opinion, nor was such opinion qualified or modified as to
certainty, audit scope, or accounting principles. During the Company's most
recent fiscal year and subsequent interim periods preceding the replacement
of Salazar & Associates, the Company had no disagreements with Salazar &
Associates on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. During the Company's
most recent fiscal year and subsequent interim periods preceding the
retention of Ernst & Young, neither the Company nor anyone on the Company's
behalf, consulted Salazar & Associates regarding any matter.
The Company has retained the firm of Novokov, Davidson & Flynn, Dallas,
Texas as corporate legal counsel to represent the Company in all matters
except for items relating to the private placement. The firm of Vial,
Hamilton, Koch & Knox represents the Company in the private placement.
The Company is now listed on Standard & Poor's Market Access Service
as of December 1997 which prominently displays the investment merit of over
the counter (OTC) bulletin board companies in some of the most widely
distributed information vehicles in the financial and investment communities.
PR Newswire has been selected as the firm for dissemination of news releases.
PR Newswire is the world's leader in the electronic distribution of full
Text corporate, association, and institutional news releases to the media and
financial community
The Board of Directors at its February meeting will be adding two new
members to the board as required by the private placement agreement.
Ernesto M Chavarria, President of ITBR, Inc. has 25 years experience
in international business development.
Blandida Cardenas, Associate Professor at LBJ Institute, University
of Texas, Former Commissioner of United States Commission of Civil
Rights and Former Director Of Office of Minorities in Higher Education.
The Company has entered into Employment agreements with its senior executive
officers for a period ending on March 31, 2001 subject to two(2) one year
extensions. These agreements grant the executives stock options to purchase
an aggregate of 150,000 shares at a price ranging from $1.50 to $2.25 per share.
These agreements also included specific bonus plans based on performance,
revenues and common stock value.
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________________ By ___________________________________________
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
Jose G. Chavez Chairman of the Board of
Directors and President
Mitchell Kettrick Vice-President and Director
Stephen Hoelscher, CPA Comptroller
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