U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
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: 000-28083
NEXT GENERATION MEDIA CORP.
(Exact name of Company as specified in its charter)
Nevada 88-0169543
(State or jurisdiction of incorporation (I.R.S. Employer or
organization) Identification No.)
7644 Dynatech Court, Springfield, Virginia 22153
(Address of principal executive offices) (Zip Code)
Company's telephone number: (703) 644-0200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Company was required to file such reports),
and (2) been subject to such filing requirements for the past 90
days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB [ ].
The Company had $7,325,085 in revenue for the fiscal year ended on
December 31, 2002. The aggregate market value of the voting stock
held by non-affiliates of the Company as of April 4, 2003: Common
Stock, par value $0.001 per share -- $562,403. As of April 4, 2002,
the Company had 9,673,397 shares of common stock issued and
outstanding, of which 9,373,397 were held by non-affiliates.
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business....................
ITEM 2. Description of Property...................
ITEM 3. Legal Proceedings.....................
ITEM 4. Submission of Matters to a Vote of Security Holders
PART II
ITEM 5. Market for Common Equity and Other Shareholder Matters
ITEM 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
ITEM 7. Financial Statements....................
ITEM 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
ITEM 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section
16(a) of the Exchange Act
ITEM 10. Executive Compensation..................
ITEM 11. Security Ownership of Certain Beneficial
Owners and Management
ITEM 12. Certain Relationships and Related Transactions.........
ITEM 13. Exhibits and Reports on Form 8-K...............
Signatures.................................
PART I.
RISK FACTORS AND CAUTIONARY STATEMENTS
Forward-looking statements in this report are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. The Company wishes to advise readers that actual results
may differ substantially from such forward-looking statements.
Forward-looking statements include statements concerning underlying
assumptions and other statements that are other than statements of
historical facts. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by the statements, including, but not
limited to, the following: the ability of the Company to provide for
its obligations, to provide working capital needs from operating
revenues, to obtain additional financing needed for any future
acquisitions, to meet competitive challenges and technological
changes, and other risks detailed in the Company's periodic report
filings with the Securities and Exchange Commission.
ITEM 1. BUSINESS.
Introduction
Next Generation Media Corporation (the "Company") was incorporated on
November 21, 1980, under the laws of the State of Nevada under the
name Micro Tech Industries, Inc. On February 6, 1997, an unrelated
third party purchased 85.72% of the outstanding stock of Micro Tech
Industries, Inc. from its majority shareholder for $50,000 in cash.
Effective March 31, 1997, Micro Tech Industries, Inc. changed its
name to Next Generation Media Corporation. Management believes that
prior to February 6, 1997, the Company was a "shell" company for at
least five years without assets and liabilities. Management is
unaware of any operating history prior to February 6, 1997.
Reporting Period Principle Services
During the reporting period, the Company operated as a holding
company with one wholly-owned operating subsidiary, United Marketing
Solutions, Inc. ("United").
The Company acquired United on April 1, 1999. Originally founded in
1981 as United Coupon Corporation, United has operated within the
cooperative direct mail industry for twenty years. United has
diversified and expanded its product lines and markets to evolve from
a coupon company to a full-service marketing provider specializing in
three communication mediums: direct mail, direct marketing and
Internet marketing. United offers advertising and marketing products
and services through a network of franchisees in twenty states, with
the largest concentration being in the northeast United States.
United provides full-service design, layout, printing, packaging and
distribution of marketing products and promotional coupons sold by
the franchise network to local market businesses, services providers
and professionals as resources to help them generate "trial and
repeat" customers. United's core product, the cooperative coupon
envelope, reaches in excess of eighteen million mailboxes per year
with an estimated four hundred million coupons.
Competition
The Company's current and future lines of business are highly
competitive. Firstly, the advertising business is highly competitive
with many firms competing in various forms of media and possessing
substantial resources. The direct mail industry is highly fragmented
and includes a large number of small and independent cooperative
direct mailers in addition to competition from companies for whom
coupon advertising is not their primary line of business. In
addition, several large firms, notably Val-Pak Direct Marketing
Systems, Inc., Money Mailer and Advo, Inc., are direct competitors of
United in its direct mail marketing business. Concerning United's
Internet business, there is intense competition among web-based
advertisers and many of United's competitors are larger and
significantly better capitalized than the Company. No assurances can
be made that the Company will be successful in attracting the number
of Internet customers necessary to implement its Internet business
strategy.
Government Regulation
United is subject to state regulation as a franchiser, requiring
United to file periodic state registration documents pertaining to
the offering of area and regional franchise licenses. Management
believes that United is in substantial compliance with the applicable
state franchise laws.
Employees
As of December 31, 2002, the Company, through United, had
approximately 72 employees. The Company does not have any collective
bargaining agreements covering any of its employees, has not
experienced any material labor disruption and is unaware of any
efforts or plans to organize its employees. The Company considers
relations with its employees to be good.
ITEM 2. PROPERTIES.
The Company's principal executive and administrative offices are
located at 7644 Dynatech Court, Springfield, Virginia 22153. The
Company recently relocated to this address to reduce operating
expenses. The current yearly rent for this new facility is expected
to be approximately $267,892 per year for a term scheduled to expire
in 2006. The Company considers these offices to be adequate and
suitable for its current needs.
ITEM 3. LEGAL PROCEEDINGS.
Other than as set forth below, the Company is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against the Company has been threatened.
The Company is subject to legal proceedings and claims that arise in
the ordinary course of its business. Although occasional adverse
decisions or settlements may occur, the Company believes that the
final disposition of such matters will not have material adverse
effect on its financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were not any matters that were submitted during the fourth
quarter of the fiscal year 2002 to a vote of the security holders.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
(a) The Company's Common Stock has been and is currently traded on
the over-the-counter market and quotations are published on the OTC
Bulletin Board under the symbol "NGMC". The first date of trading on
the OTCBB was June 11, 2001. Only information from June 11, 2001 is
included in the chart below.
The following table sets forth the range of high and low bid prices
of the Common Stock for each fiscal quarterly period. Prices reported
represent prices between dealers, do not include retail markups,
markdowns or commissions and do not represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 2002
High Low
Quarter Ended December 31, 2002 .05 .011
Quarter Ended September 30, 2002 .08 .015
Quarter Ended June 30, 2002 .11 .035
Quarter Ended March 31, 2002 .40 .065
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 2001
High Low
Quarter Ended December 31, 2001 .23 .055
Quarter Ended September 30, 2001 .85 .10
Quarter Ended June 30, 2001 2.75 .60
Quarter Ended March 31, 2001 N/A N/A
The ability of individual stockholders to trade their shares in a
particular state may be subject to various rules and regulations of
that state. A number of states require that an issuer's securities be
registered in their state or appropriately exempted from registration
before the securities are permitted to trade in that state.
Presently, the Company has no plans to register its securities in any
particular state. Further, most likely the Company's shares will be
subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
commonly referred to as the "penny stock" rule. Section 15(g) sets
forth certain requirements for transactions in penny stocks and Rule
15g-9(d)(1) incorporates the definition of penny stock as that used
in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity
security that has a market price less than $5.00 per share, subject
to certain exceptions. Rule 3a51-1 provides that any equity security
is considered to be a penny stock unless that security is: registered
and traded on a national securities exchange meeting specified
criteria set by the Commission; authorized for quotation on The
NASDAQ Stock Market; issued by a registered investment company;
excluded from the definition on the basis of price (at least $5.00
per share) or the issuer's net tangible assets (at least $2 million);
or exempted from the definition by the Commission. If the Company's
shares are deemed to be a penny stock, trading in the shares will be
subject to additional sales practice requirements of broker-dealers
who sell penny stocks to persons other than established customers and
accredited investors, generally persons with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse.
For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such securities
and must have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the
delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock market. A broker-dealer also
must disclose the commissions payable to both the broker-dealer and
the registered representative, and current quotations for the
securities. Finally, monthly statements must be sent disclosing
recent price information for the penny stocks held in the account and
information on the limited market in penny stocks. Consequently,
these rules may restrict the ability of broker-dealers to trade
and/or maintain a market in the Company's Common Stock and may affect
the ability of stockholders to sell their shares.
Holders of Common Equity
As of April 4, 2003, there were approximately 594 shareholders of
record of the Company's common stock.
Dividend Information
The Company has not declared or paid cash dividends on its Common
Stock or made distributions in the past, and the Company does not
anticipate that it will pay cash dividends or make cash distributions
in the foreseeable future, other than non cash dividends described
below. The Company currently intends to retain and invest future
earnings, if any, to finance its operations.
Transfer Agent
The Company has designated OTR Transfer Agency as its transfer agent
for the common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following Management Discussion and Analysis should be read in
conjunction with the financial statements and accompanying notes
included in this Form 10-KSB.
Year Ended December 31, 2002 Compared To Year Ended December 31, 2001
Total revenues increased approximately 2.0%, from $7,325,085 in 2001
to $7,223,285 in 2002. The Company explains the increase by the
further development of its business plan in coordination with
increasing franchisees. Total operating expenses decreased
approximately 10%, from $7,909,826 in 2001 to $7,141,502 in 2002.
Printing costs, postage and delivery, other production costs, selling
expenses, franchise development expense, and depreciation and
amortization, which aggregate to $5,369,828, stayed approximately
constant as in 2001, which is comparable to the increase in total
revenues discussed above. General and administrative expenses
decreased approximately 32% from $2,618,765 in 2001 to $1,771,674 in
2001. This decrease is primarily due to a reduction in rent and pass
through expenses, as well as bad debt expense.
Year Ended December 31, 2001 Compared To Year Ended December 31, 2000
Total revenues decreased approximately 16.9%, from $8,578,677 in 2000
to $7,132,118 in 2001. A significant portion of this decrease is
attributable to the sale of INI. Total operating expenses decreased
approximately 12.5%, from $9,032,124 in 2000 to $7,909,826 in 2001.
Printing costs, postage and delivery, other production costs, selling
expenses, franchise development expense, and depreciation and
amortization, which aggregate to $5,291,061, decreased approximately
13%, from $6,075,275 in 2000, which is comparable to the increase in
total revenues discussed above. General and administrative expenses
decreased approximately 11.5% from $2,956,849 in 2000 to $2,618,765 in
2001. This decrease is primarily due to a reduction in payroll and
other general and administrative expenses. Interest expense decreased
approximately 52.5% from $62,058 in 2000 to $29,486 in 2001.
LIQUIDITY AND CAPITAL RESOURCES
Year Ended December 31, 2002 Compared To Year Ended December 31, 2001
The Company has relied primarily on funds generated from the issuance
of common stock and use of its line of credit to finance its
operations and expansion. As of December 31, 2002, the Company had
cash and cash equivalents of $125,356, compared to $199,305 at
December 31, 2001. Cash provided in operating activities was $73,962
in 2002, compared to cash used by operating activities of $563,760 in
2001. This was primarily due to the increase in receivables to
$138,056, a decrease in accounts payable to $485,612 and an increased
use of payment for services through the use of common stock of the
Company, from $54,590 in 2001 to $148,000 in 2002. Cash used in
investing activities was $112,758 in 2002, compared to cash provided
of $57,312 in 2001. The change was primarily due to the removal of
goodwill in the sale of a subsidiary of $180,800 and an increase in
that due to related parties of $122,288 in 2001, coupled with the
purchase of new equipment in 2002. Cash used by financing activities
was $35,153 in 2002, compared to $558,554 in 2001. The decrease was
primarily due to the settlement of a note payable of $500,000.
Year Ended December 31, 2001 Compared To Year Ended December 31, 2000
The Company has relied primarily on funds generated from the issuance
of common stock and use of its line of credit to finance its
operations and expansion. As of December 31, 2001, the Company had
cash of $199,305, compared to $136,787 at December 31, 2000. Cash
provided in operating activities was $563,760 in 2001, compared to
cash provided of $1,971,817 in 2000. This was primarily due to the net
income loss of $896,995, depreciation and amortization of $334,345, a
decrease in accounts receivable of $1,010,156, and a decrease in
accrued expenses of $416,230. Cash provided in investing activities
was $57,312 in 2001, compared to cash used of $2,658,109 in 2000. The
change was primarily due to the removal of goodwill in the sale of a
subsidiary of $180,800 and an increase in that due to related parties
of $122,288. Cash used by financing activities was $558,554 in 2001,
compared to $559,562 in 2000. The decrease was primarily due to the
settlement of a note payable of $500,000 and repayment of a long-term
note payable of $60,504.
While the Company has raised capital to meet its working capital and
financing needs in the past, additional financing may be required in
order to meet the Company's current and projected cash flow deficits
from operations. As previously mentioned, the Company has obtained
financing in the form of equity in order to provide the necessary
working capital. The Company currently has no other commitments for
financing. There are no assurances the Company will be successful in
raising the funds required.
The Company has issued shares of its common stock from time to time
in the past to satisfy certain obligations, and expects in the future
to also acquire certain services, satisfy indebtedness and/or make
acquisitions utilizing authorized shares of the capital stock of the
Company. During the year ended December 31, 2002, the Company issued
2,750,000 shares of common stock for services rendered.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, operations of the Company may be
exposed to fluctuations in interest rates. These fluctuations can vary
the cost of financing, investing, and operating transactions. Because
the Company has only fixed rate short-term debt, there are no material
impacts on earnings due to fluctuations in interest rates.
New Accounting Pronouncements
In March 2000, the Financial Accounting Standards Board issued
interpretation No. 44 ("FIN 44"), "Accounting for Certain
Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25". FIN 44 clarifies the application of APB No. 25 for
(a) the definition of employee for purposes of applying APB No. 25,
(b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various
modifications to previously fixed stock option or award, and (d) the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 2, 2000 but certain conclusions
cover specific events that occur after either December 15, 1998 or
January 12, 2000. The adoption of FIN 44 did not have an affect on
the Company's financial statements but may impact the accounting for
grants or awards in future periods
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business
Combinations (FAS 141), and FAS 142, Goodwill and Other Intangible
Assets (FAS 142). FAS 141 addresses the initial recognition and
measurement of goodwill and other intangible assets acquired in a
business combination. FAS 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business
combination, whether acquired individually or with a group of other
assets, and the accounting and reporting for goodwill and other
intangibles subsequent to their acquisition. These standards require
all future business combinations to be accounted for using the
purchase method of accounting. Goodwill will no longer be amortized
but instead will be subject to impairment tests at least annually.
The Company is required to adopt FAS 141 and FAS 142 on a prospective
basis as of January 1, 2002; however, certain provisions of these new
standards may also apply to any acquisitions concluded subsequent to
June 30, 2001. As a result of implementing these new standards, the
Company will discontinue the amortization of goodwill as of December
31, 2001. The Company does not believe that the adoption of FAS 141
or 142 will have a material impact on its consolidated financial
statements.
In October 2001, the Financial Accounting Standards Board issued FAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
(FAS 144). FAS 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement
supersedes FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (FAS 121) and
related literature and establishes a single accounting model, based
on the framework established in FAS 121, for long-lived assets to be
disposed of by sale. The Company is required to adopt FAS 144 no
later than January 1, 2002. The Company does not believe that the
adoption of FAS 144 will have a material impact on its consolidated
financial statements.
Forward Looking Statements.
The foregoing Managements Discussion and Analysis of Financial
Condition and Results of Operations "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933, as
amended, and Rule 3b-6 under the Securities Act of 1934, as amended,
including statements regarding, among other items, the Company's
business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the
industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-
looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, including but
not limited to, those risks associated with economic conditions
generally and the economy in those areas where the Company has or
expects to have assets and operations; competitive and other factors
affecting the Company's operations, markets, products and services;
those risks associated with the Company's ability to successfully
negotiate with certain customers, risks relating to estimated
contract costs, estimated losses on uncompleted contracts and
estimates regarding the percentage of completion of contracts,
associated costs arising out of the Company's activities and the
matters discussed in this report; risks relating to changes in
interest rates and in the availability, cost and terms of financing;
risks related to the performance of financial markets; risks related
to changes in domestic laws, regulations and taxes; risks related to
changes in business strategy or development plans; risks associated
with future profitability; and other factors discussed elsewhere in
this report and in documents filed by the Company with the Securities
and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained in this Form 10-KSB will, in fact, occur. The
Company does not undertake any obligation to revise these forward-
looking statements to reflect future events or circumstances and
other factors discussed elsewhere in this report and the documents
filed or to be filed by the Company with the Securities and Exchange
Commission.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Trends, Risks and Uncertainties
The Company has sought to identify what it believes to be the most
significant risks to its business as discussed in "Risk Factors"
above, but cannot predict whether or to what extent any of such risks
may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an
investment decision with respect to the Company's stock.
Limited operating history; anticipated losses; uncertainly of future
results
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The
Company's prospects must be evaluated with a view to the risks
encountered by a company in an early stage of development,
particularly in light of the uncertainties relating to the business
model that the Company intends to market and the potential acceptance
of the Company's business model. The Company will be incurring costs
to develop, introduce and enhance its products, to establish marketing
relationships, to acquire and develop products that will complement
each other, and to build an administrative organization. To the
extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations
and financial condition will be materially adversely affected. There
can be no assurance that the Company will be able to generate
sufficient revenues from the sale of its products and services. The
Company expects that negative cash flow from operations may exist for
the next 12 months as it continues to develop and market its products
and services. If cash generated by operations is insufficient to
satisfy the Company's liquidity requirements, the Company may be
required to sell additional equity or debt securities. The sale of
additional equity or convertible debt securities would result in
additional dilution to the Company's shareholders.
Potential fluctuations in quarterly operating results may fluctuate
Significantly in the future as a result of a variety of factors, most of which
Are outside the Company's control including: the demand for the Company's
products and services; seasonal trends in demand and pricing of products and
services; the amount and timing of capital expenditures and other
costs relating to the expansion of the Company's operations; the
introduction of new services and products by the Company or its
competitors; price competition or pricing changes in the industry;
political risks and uncertainties involving the world's markets;
technical difficulties and general economic conditions. The Company's
quarterly results may also be significantly affected by the impact of
the accounting treatment of acquisitions, financing transactions or
other matters. Particularly the Company's early stage of development,
such accounting treatment can have a material impact on the results
for any quarter. Due to the foregoing factors, among others, it is
likely that the Company's operating results will fall below the
expectations of the Company or investors in some future quarter.
Management of Growth
The Company may experience growth in the number of employees relative to its
current levels of employment and the scope of its operations. In particular,
the Company may need to hire sales, marketing and administrative personnel.
Additionally, acquisitions could result in an increase in employee headcount
and business activity. Such activities could result in increased
responsibilities for management. The Company believes that its ability to
increase its customer support capability and to attract, train, and retain
qualified technical, sales, marketing, and management personnel, will
be a critical factor to its future success. In particular, the
availability of qualified sales and management personnel is
quite limited, and competition among companies to attract and retain
such personnel is intense. During strong business cycles, the Company
may experience difficulty in filling its needs for qualified sales,
and other personnel.
The Company's future success will be highly dependent upon its ability
to successfully manage the expansion of its operations. The Company's
ability to manage and support its growth effectively will be
substantially dependent on its ability to implement adequate financial
and management controls, reporting systems, and other procedures and
hire sufficient numbers of financial, accounting, administrative, and
management personnel. The Company is in the process of establishing
and upgrading its financial accounting and procedures. There can be
no assurance that the Company will be able to identify, attract, and
retain experienced accounting and financial personnel. The Company's
future operating results will depend on the ability of its management
and other key employees to implement and improve its systems for
operations, financial control, and information management, and to
recruit, train, and manage its employee base. There can be no
assurance that the Company will be able to achieve or manage any such
growth successfully or to implement and maintain adequate financial
and management controls and procedures, and any inability to do so
would have a material adverse effect on the Company's business,
results of operations, and financial condition.
The Company's future success depends upon its ability to address
potential market opportunities while managing its expenses to match
its ability to finance its operations. This need to manage its
expenses will place a significant strain on the Company's management
and operational resources. If the Company is unable to manage its
expenses effectively, the Company's business, results of operations,
and financial condition will be materially adversely affected.
Risks associated with acquisitions
Although the Company does not presently intend to do so, as part of
its business strategy in the future, the Company could acquire assets
and businesses relating to or complementary to its operations. Any
acquisitions by the Company would involve risks commonly encountered
in acquisitions of companies. These risks would include, among other
things, the following: the Company could be exposed to unknown
liabilities of the acquired companies; the Company could incur
acquisition costs and expenses higher than it anticipated;
fluctuations in the Company's quarterly and annual operating results
could occur due to the costs and expenses of acquiring and integrating
new businesses or technologies; the Company could experience
difficulties and expenses in assimilating the operations and personnel
of the acquired businesses; the Company's ongoing business could be
disrupted and its management's time and attention diverted; the
Company could be unable to integrate successfully.
ITEM 7. FINANCIAL STATEMENTS.
Financial statements as of and for the year ended December 31, 2002,
and for the year ended December 31, 2001 are presented in a separate
section of this report following Part IV.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not Applicable
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND COMPLIANCE WITH SECTION
16(A) OF THE EXCHANGE ACT.
Officers and Directors.
The names, ages, and respective positions of the directors, executive
officers, and key employees of the Company are set forth below; there
are no other promoters or control persons of the Company. The
directors named below will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected and
have qualified. Directors are elected for a one-year term at the
annual stockholders' meeting. Officers will hold their positions at
the will of the board of directors, absent any employment agreement.
There are no arrangements, agreements or understandings between non-
management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence
the management of the Company's affairs. The directors and executive
officers of the Company are not a party to any material pending legal
proceedings and, to the best of their knowledge, no such action by or
against them has been threatened.
Darryl Reed, President/CEO/Director
Mr. Darryl Reed is the current President of the Company. His
background includes seven years in the financial services industry.
His primary career has been with New York Life Insurance Company, a
major insurance company, and certain of its subsidiaries since
October 1995. Such subsidiaries included #1A Eagle Strategies Corp.,
a registered investment adviser, where Mr. Reed worked from April
1997 until May 2000. Mr. Reed holds several licenses in the
financial services industry, including Series 7, 63 and 65. He has a
BS in Finance from the University of Florida and an MS from the
American College, Philadelphia, PA. He is also the President, CEO
and a director of Pre-Settlement Funding Corporation.
Leon Zajdel, Director, Chairman of the Board
Leon Zajdel has been a director of the Company since April 1999. Mr.
Zajdel was founder and has served as President of Energy Guard Corp.,
a manufacturer and retailer of replacement windows, located in
Beltsville, MD, since 1972.
Phillip Trigg, Treasurer, Secretary and Director
Phillip Trigg has been secretary and treasurer since November 2000.
Mr. Trigg has served with United Marketing Solutions since August
1995 in a variety of positions including Senior Vice President of Franchise
Sales and Business Development and COO.
Melissa Held, Director
Ms. Held was appointed to the Board of Directors in November 2002.
She possesses an extensive background in financial management and
real estate. Ms. Held has served with Merril Lynch in a variety of
positions over the past eight years, as a Sales Associate from 1994
to 1998, as a Senior Sepcialist, Interactive Technology from 1998 to
2000 and as Asst. Vice President, Consultative Training Services from
2000 to present. Ms. Held has a BA in Communications from Hollins
College (1993).
Fernando Mathov, Director
Mr. Mathov was appointed to the Board of Directors in February 2003.
He possesses an extensive background as a project manager, systems
engineer and consultant in the telecommunications industry with
various companies. Currently Mr. Mathov holds two positions, as a
Technical Solutions Manager from 1997 to the present at Media and
Entertainment Vertical EMC Corporation, and as a Project Manager at
Informix Software from 1994 to the present. Mr. Mathov has a BS in
Computer Science (1989) and an MBA in Management Science (1991), both
from Virginia Polytechnic Institute and State University.
(b) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons holding 10% or more
of the Company's common stock to file reports regarding their
ownership and regarding their acquisitions and dispositions of the
Company's common stock with the Securities and Exchange Commission.
Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the Forms 5 with respect to the fiscal
year ended December 31, 2002 and subsequently, the Company is unaware
that any required reports were not timely filed.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth certain information relating to the
compensation paid by the Company during the last three fiscal years
to the Company's Chief Executive Officer. No other executive officer
of the Company received total salary and bonus in excess of $100,000
during the fiscal year ended December 31, 2002 and prior.
Summary Compensation Table
Annual compensation Long-term compensation
Awards Payouts
Name and Other Restricted Securities All
principal Salary Bonus Annual Stock Underlying LTIP other
position Year $ $ Compensation Awards Options payouts compen
$ $ (SAR'S) sations
# $ $
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Darryl Reed, 2002 $150,000 0 0 0 0 0 0
President(2) 2001 $ 36,000(1) 0 0 0 0 0 0
(1) As of October 1, 2001, the Company agreed to begin compensating
Mr. Reed at a yearly rate of $150,000, but only paid Mr. Reed
approximately $5,000 through the end of the year, leaving a balance
due of approximately $30,000.
(2) Subsequent to the fiscal year end, the Company entered into a
formal three-year employment agreement with Mr. Reed. Terms include
an initial year at $150,000, with an increase of ten percent per
year, along with 300,000 stock options at a strike price of $0.02,
along with annual cash and stock bonuses based upon performance, a
car allowance and life and medical insurance.
Insurance Plans
The Company makes available to all full-time employees medical and
dental plan benefits. Employees are eligible to participate in
company insurance plans when they complete 90 days of service with the
Company.
Other Benefit Plans
401(k) Plan. The Company makes available a 401(k) Savings Plan (the
"401(k) Plan"), a federally-qualified, tax-deferred plan administered
by a third party. The 401(k) Plan provides participants with savings
or retirement benefits based on employee deferrals of compensation, as
well as any matching and other discretionary contributions made by the
Company. Employees are eligible to participate in the 401(k) Plan when
they complete one month of service with the Company and have attained
the age of 18. The employee can defer up to 15% of the compensation
amount earned within a calendar year, not to exceed the ceiling set
forth annually by the Internal Revenue Service. The Company matches
the employee's contribution to the 401(k) Plan dollar-for-dollar up to
3% of the employee' annual salary. Participants become vested in any
employer contributions to the 401(k) Plan after two years of service
at a rate of 20% for each completed year of service. A participant is
always 100% vested in his or her salary reduction contributions to the
401(k) Plan.
Stock Option Plan.
The Company has also filed a Stock Option Plan for Employees on Form
S-8 in December 2001. The Company had not issued any Stock Options
pursuant to the Plan included therein to any employees as of December
31, 2002.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of shares of the Company's common stock as of April 4, 2003
(issued and outstanding) by (i) all stockholders known to the Company
to be beneficial owners of more than ten percent of the outstanding
common stock; and (ii) all directors and executive officers of the
Company as a group:
Title of Name and Address Amount of Percent of
Class of Beneficial Owner (1) Beneficial Class
Ownership (2)
Common Stock Darryl Reed 225,000(3) 2.33%
7644 Dynatech Court
Springfield,
Virginia 22153
Common Stock Leon Zajdel 58,747 0.6%
7644 Dynatech Court
Springfield,
Virginia 22153
Common Stock Melissa Held 0 0.0%
7644 Dynatech Court
Springfield,
Virginia 22153
Common Stock Phillip Trigg 25,000 0.2%
7644 Dynatech Court
Springfield,
Virginia 22153
Common Stock Fernando Mathov 0 0.00%
7644 Dynatech Court
Springfield,
Virginia 22153
Common Stock Shares of all directors and 308,747 3.13$
executive officers as a
group (5 persons)
(1) Each person has sole voting power and sole dispositive power as
to all of the shares shown as beneficially owned by them.
(2) Other than as footnoted below, none of these security holders has
the right to acquire any amount of the shares within sixty days from
options, warrants, rights, conversion privilege, or similar
obligations. The amount owned is based on issued common stock, as
well as stock options that are currently exercisable.
(3) Not included within this amount are any stock options pursuant to
the Employment Agreement signed in January 2002.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the past two years, and as not otherwise disclosed of in any
other filing, there have not been any transaction that have occurred
between the Company and its officers, directors, and five percent or
greater shareholders, unless listed below.
Certain of the officers and directors of the Company are engaged in
other businesses, either individually or through partnerships and
corporations in which they have an interest, hold an office, or serve
on a board of directors. As a result, certain conflicts of interest
may arise between the Company and its officers and directors. The
Company will attempt to resolve such conflicts of interest in favor
of the Company. The officers and directors of the Company are
accountable to it and its shareholders as fiduciaries, which requires
that such officers and directors exercise good faith and integrity in
handling the Company's affairs. A shareholder may be able to
institute legal action on behalf of the Company or on behalf of
itself and other similarly situated shareholders to recover damages
or for other relief in cases of the resolution of conflicts is in any
manner prejudicial to the Company.
PART IV.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Exhibits.
Exhibits included or incorporated by reference in this document are
set forth in the Exhibit Index.
Index to Financial Statements and Schedules. Page
Audit Report of Independent Certified Public Accountants
Consolidated Balance Sheets........
Consolidated Statements of Income..........
Consolidated Statements of Stockholders' Equity.........
Consolidated Statements of Cash Flows..........
Notes to Financial Statements
Reports on Form 8-K.
There were no reports on Form 8-K filed during the last quarter of
the fiscal year covered by this report.
CERTIFICATION
I, Darryl Reed, certify that:
1. I have reviewed this report on Form 10-KSB of Next Generation
Media Corp.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14 for the registrant
and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions,
with regard to significant deficiencies and material weaknesses.
Date: April 4, 2003
/s/ Darryl Reed
Darryl Reed, President
CERTIFICATION
I, Phillip Trigg, certify that:
1. I have reviewed this report on Form 10-KSB of Next Generation
Media Corp.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for the periods presented in
this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14 for the
registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions, with regard to
significant deficiencies and material weaknesses.
Date: April 4, 2003
/s/ Phillip Trigg
Phillip Trigg, Treasurer
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Next Generation Media Corp.
Dated: April 4, 2003 By: /s/ Darryl Reed
Darryl Reed, 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 the Company and in the capacities and on the date indicated:
Signature Title Date
/s/ Darryl Reed President//CEO/Director April 4, 2003
Darryl Reed
/s/Phillip Trigg Secretary/Treasurer April 4, 2003
Phillip Trigg
/s/Leon Zadjel Director April 4, 2003
Leon Zajdel
/s/ Melissa Held Director April 4, 2003
Melissa Held
/s/ Fernando Mathov Director April 4, 2003
Fernando Mathov
EXHIBIT INDEX
Exhibit Description
No.
3.1 Articles of Incorporation, under the name Micro Tech
Industries, Inc. (incorporated by reference in the filing
of the Company's annual report on Form 10KSB filed on April
15, 1998).
3.2 Amendment to the Articles of Incorporation (incorporated by
reference in the Company's quarterly report filed on Form
10 Q filed on May 15, 1997).
3.3 Amended and Restated Bylaws (incorporated by reference in
the filing of the Company's annual report on Form 10KSB
filed on November 12, 1999).
16.1 Letter on change in certifying accountant (incorporated by
reference in the filing of the Company's current report on
Form 8-K filed on January 5, 2001).
99.1 Certification pursuant of President to 18 U.S.C. Section
1350, as adopted to Section 906 of the Sarbanes Oxley Act of
2002.
99.2 Certification pursuant of Treasurer to 18 U.S.C.
Section 1350, as adopted to Section 906 of the Sarbanes
Oxley Act of 2002.
Exhibit 99.1
In connection with the Report of Next Generation Media Corp. (the
"Company") on Form 10-KSB for the period ending December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Darryl Reed, President, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents,
in all material aspects, the financial condition and result of
operations on the Company.
By: /s/ Darryl Reed
Darryl Reed, President
Exhibit 99.2
In connection with the Report of Next Generation Media Corp. (the
"Company") on Form 10-QSB for the period ending December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Phillip Trigg, Treasurer, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents,
in all material aspects, the financial condition and result of
operations on the Company.
By: /s/ Phillip Trigg
Phillip Trigg, Treasurer
Next Generation Media Corporation
Financial Statements
For The Years Ended December 31, 2002 and 2001
With Audit Report of Independent
Certified Public Accountants
TURNER, JONES AND ASSOCIATES, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
Table of Contents Page
Audit Report of Independent Certified Public Accountants 2
Financial Statements
Consolidated Balance Sheet 3
Consolidated Statements of Income 5
Consolidated Statements of Stockholders' Deficit 7
Consolidated Statements of Cash Flows 8
Notes to Financial Statements 10
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Next Generation Media Corporation
7644 Dynatech Court
Springfield, VA 22153
We have audited the accompanying consolidated balance sheet of
Next Generation Media Corporation (a Nevada Incorporation) as of
December 31, 2002, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the two years in the
period ended December 31, 2002. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit according to generally accepted auditing
standards of the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Next Generation Media Corporation as of December 31,
2002, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 2002, in conformity
with accounting principles generally accepted in the United States of
America.
Vienna, Virginia
March 10, 2003
Next Generation Media Corporation
Consolidated Balance Sheet
As of December 31, 2002
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 125,356
Accounts receivable, net of
uncollectible accounts (Notes 1 and 9) 379,862
Notes receivable (Note 9) 275,275
Accrued interest receivable 45,833
Inventories (Note 1) 55,908
Prepaid expenses and other current assets 64,857
Total current assets 947,091
PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 3):
Equipment 1,334,599
Furniture and fixtures 56,650
Leasehold improvements 78,921
Total property, plant and equipment 1,470,170
Less accumulated depreciation (1,069,377)
Net property, plant and equipment 400,793
Intangibles, net of accumulated amortization (Note 10) 822,197
TOTAL ASSETS 2,170,081
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable, current portion (Note 4) 127,151
Accounts payable 377,017
Accrued expenses 181,311
Sales tax payable 228,759
Total current liabilities 914,238
LONG TERM LIABILITIES:
Notes payable (Note 4) 97,215
Total long term liabilities 97,215
Total liabilities 1,011,453
STOCKHOLDERS' EQUITY (Note 8):
Common stock, $.01 par value,
50,000,000 shares authorized, 9,523,397 issued and
outstanding 95,234
Additional paid in capital 7,343,744
Accumulated deficit (6,280,350)
Total stockholders' equity 1,158,628
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,170,081
See accompanying notes and accountant's audit report
Next Generation Media Corporation
Consolidated Statements of Income
For The Years Ended December 31, 2002 and 2001
2002 2001
REVENUES (Note 1) :
Coupon sales, net discounts $ 7,223,285 $ 7,111,133
Franchise fees 101,800 20,985
Total revenues 7,325,085 7,132,118
COST OF GOODS SOLD:
Materials 1,081,976 1,072,534
Direct labor 1,850,059 1,793,148
Equipment repairs 64,605 47,751
Postage and delivery 2,231,852 2,239,494
Payroll taxes 141,336 138,134
Total cost of goods sold 5,369,828 5,291,061
Gross margin 1,955,257 1,841,057
GENERAL AND ADMINISTRATIVE EXPENSES:
401(k) administration fees 1,400 2,200
401(k) matching (Note 2) 20,572 -
Advertising (Note 1) 6,818 24,796
Amortization (Note 10) 135,685 135,685
Bad debt expense 58,905 462,619
Bank charges 190 110
Commissions and fees 11,697 34,321
Credit card fees 6,897 6,616
Depreciation (Notes 1 and 3) 166,122 198,660
Employee benefits 143,867 162,526
Insurance 37,361 44,280
Meals and entertainment 12,353 1,239
Office expense 34,189 24,150
Officers compensation 332,278 298,715
Other expenses 24,293 33,129
Payroll 121,936 140,407
Payroll taxes 22,716 42,627
Postage and delivery 4,852 6,113
Professional fees 255,892 182,409
Property taxes 18,442 28,100
Rent and pass thru expenses (Note 5) 180,607 620,578
Repairs and maintenance 30,894 11,481
Telephone 48,188 48,755
Travel and conferences 28,818 23,341
Utilities 66,702 67,908
Website hosting - 18,000
Total general and administrative 1,771,674 2,618,765
Gain/(Loss) from operations 183,583 (777,708)
OTHER INCOME AND EXPENSES:
Gain/loss of settlements (65,000) (57,332)
Forgiveness of debt 105,535 26,683
Interest expense (22,825) (29,486)
Interest income - 36,000
Gain/loss on disposal of equipment 2,230 (95,152)
Total other income (expense) 19,940 (119,287)
Gain/(Loss) before provision for income tax 203,523 (896,995)
Provision for income tax (Note 9): - -
Net income 203,523 (896,995)
Gain/(loss) applicable to common shareholders 203,523 (896,995)
Basic income/(loss) per common share (Note 1) 0.02 (0.14)
Weighted average common shares outstanding 9,239,698 6,326,829
Diluted income/(loss) per common share (Note 1) 0.02 NA
Fully diluted common shares outstanding 11,051,368 7,776,284
See accompanying notes and accountant's audit report
Next Generation Media Corporation
Consolidated Statements of Stockholders' Deficit
Additional
Common Stock Paid In Accumulated
Shares Amount Capital Deficit Total
Balance: December 31, 2000 6,206,897 $ 62,069 $ 7,135,409 $ (5,586,878) 1,610,600
Common stock issued in
exchange for services 300,000 3,000 33,000 - 36,000
Exercise of stock options 97,500 975 975 - 1,950
Common stock issued in
exchange for services 169,000 1,690 16,900 - 18,590
Net loss - - - (896,995) (896,995)
Balance: December 31, 2001 6,773,397 67,734 7,186,284 (6,483,873) 770,145
Common stock issued in
exchange for services 1,450,000 14,500 70,500 - 85,000
Employee stock options - - 36,960 - 36,960
Common stock issued in
exchange for services 2,000,000 20,000 78,000 - 98,000
Cancellation of issued shares
due to non performance (Note 8) (700,000) (7,000) (28,000) - (35,000)
Net Income - - - 203,523 203,523
Balance: December 31, 2002 9,523,397 95,234 7,343,744 (6,280,350) 1,158,628
Next Generation Media Corporation
Statement of Cash Flows
For The Years Ended December 31, 2002 and 2001
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 203,523 $ (896,995)
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock issued for services 148,000 54,590
Depreciation and amortization 298,656 334,345
(Increase)/decrease in assets
Receivables (138,056) 1,010,156
Inventories (5,930) 90,386
Deferred compensation 73,921 -
Net change in accumulated depreciation
and equipment due to disposal - 102,112
Prepaids and other current assets (56,752) 41,240
Increase/(decrease) in liabilities
Accounts payable (485,612) 303,964
Accrued expenses 132,598 (416,230)
Wages payable - (27,219)
Deferred revenue (96,386) (32,589)
Net cash flows provided/(used) by
operating activities 73,962 563,760
CASH FLOWS FROM INVESTING ACTIVITIES:
Removal of goodwill in sale of subsidiary - 180,800
Due to related parties - (122,288)
Purchase of equipment (112,758) (1,200)
Net cash used by investing activities (112,758) 57,312
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from issuance of options 36,960 1,950
Removal of note due to legal settlement (Note 7) - (500,000)
Repayment of note payable (72,113) (60,504)
Net cash provided by financing activities (35,153) (558,554)
NET INCREASE (DECREASE) IN CASH (73,949) 62,518
CASH, BEGINNING OF PERIOD 199,305 136,787
CASH, END OF PERIOD 125,356 199,305
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Income taxes - -
Interest 22,825 29,486
See accompanying notes and accountant's audit report
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business:
Next Generation Media Corporation was incorporated in the State of
Nevada in November of 1980 as Micro Tech Industries, with an official
name change to Next Generation Media Corporation in April of 1997.
The Company, through its wholly owned subsidiary, United Marketing
Solutions, Inc., provides direct marketing products, which involves
the designing, printing, packaging, and mailing of public relations
and marketing materials and coupons for retailers who provide
services. Sales are conducted through a network of franchises that
the Company supports on a wholesale basis. At December 31, 2002, the
Company had approximately 37 active area franchise operations located
throughout the United States.
Property and Equipment:
Property and equipment are stated at cost. The company uses the
straight line method in computing depreciation for financial
statement purposes.
Expenditures for repairs and maintenance are charged to income, and
renewals and replacements are capitalized. When assets are retired
or otherwise disposed of, the cost of the assets and the related
accumulated depreciation are removed from the accounts.
Estimated useful lives are as follows:
Equipment 5 years
Furniture, fixtures and equipment 7 years
Leasehold Improvements 39 years
Depreciation expense for the years ended December 31, 2002 and 2001
amounted to $166,122 and $198,660 respectively.
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 by
comparing 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.
Advertising Expense:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations for the years
ended December 31, 2002 and 2001 were $6,818 and $24,796
respectively.
Revenue Recognition:
The Company recognizes revenue from the design, production and
printing of coupons upon delivery. Revenues from initial franchise
fees is 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 shipments
are reported as deferred revenue.
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 exists for
either of the two years ending December 31, 2002 and 2001.
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 distribution to owners. The Company has no
item of comprehensive income to report.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the
current year presentation.
New Accounting Pronouncements:
In June of 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. The
Company does not use derivative instruments either in hedging or as
investments. The Company will adopt this accounting standard, as
amended, on January 1, 2001. The standard has no material impact on
the financial statements for the periods ending December 31, 2002 and 2001.
In December of 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
periodically assesses the impact of SAB 101 on its financial position
and operations.
Use of Estimates:
The preparation of financial statements in accordance 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.
Income Taxes:
The Corporation uses Statement of Financial Standards No. 109
Accounting for Income Taxes (SFAS No. 109) in reporting deferred
income taxes. SFAS No. 109 requires a company to recognize deferred
tax liabilities and assets for expected future income tax
consequences of events that have been recognized in the company's
financial statements. Under this method, deferred tax assets and
liabilities are determined based on temporary differences in
financial carrying amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which
temporary differences are expected to reverse.
Risks and Uncertainties:
The Company operates in an environment where intense competition
exists from other companies. This competition, along with increases
in the price of paper, can impact the pricing and profitability of
the Company.
Accounts Receivable:
The Corporation grants credit to its customers, which includes the
retail sector and their own franchisees. The Company establishes an
allowance for doubtful accounts based upon on a percentage of
accounts receivable plus those balances the Company feel will be
uncollectible. Uncollectible accounts as of December 31, 2002 were
$256,604.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.
Earnings Per Common 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 are
computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding. Dilated
earnings per share reflects the potential dilution assuming the
issuance of common shares for all potential dilative common shares
outstanding during the period. The Company had 1,562,500 and
1,575,167 options issued and outstanding as of December 31, 2002 and
2001 to purchase stock. Stock options have been excluded as common
stock equivalents in the diluted earnings per share for 2001 because
they are anti-dilative.
Inventories:
Inventories consist primarily of paper, envelopes, and printing
materials and are stated at the lower of cost or market, with cost
determined on the first-in, first-out method.
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the parent company, Next Generation Media Corporation and
its subsidiaries for the periods ended December 31, 2002 and 2001.
NOTE 2 - RETIREMENT PLAN
The company maintains a 401(k) defined contribution plan covering
substantially all employees. The Corporation may contribute up to 3%
of each eligible employee's gross wages. Employees can elect up to
12% of their salary to be contributed before income taxes up to the
annual limit set by the Internal Revenue Code. The Corporation
contributed $20,572 and $0 in 2002 and 2001 respectively.
NOTE 3 - PROPERTY, PLANT & EQUIPMENT
Property, Plant and Equipment consists of the following:
December 31, 2002
Furniture, fixtures and equipment $56,650
Computer equipment 1,334,599
Leasehold improvements 78,921
$1,470,170
Accumulated depreciation and amortization (1,069,377)
Net property and equipment 400,793
NOTE 4 - NOTES PAYABLE AND LINE OF CREDIT
Notes payable consists of the following:
December 31, 2002
Obligation to CIT Group, bearing interest at 10%, the loan is payable
in
fifty-six monthly installments of $500, including interest, and
is collateralized by the property and equipment of the Company. $ 19,389
Note payable to BancFirst, collateralized by the Company's
property and equipment. Terms are twenty-four monthly
installments of $8,200 principal plus accrued interest. $ 31,281
Promissory note payable to former executive, payable in
twenty-four installments of $3,452 at 0% interest. $ 74,375
Obligation to PS Business Parks bearing interest at 5%. The loan
is payable in thirty-six monthly installments of $3,896,
including interest, and is collateralized by the property and
equipment of the Company. 92,321
Obligation to Xerox in twenty-four monthly installments of $500.
The obligation is collateralized by the good faith of the
Company. 7,000
Total Notes Payable $224,366
Less: Current portion $127,151
Long-term portion $ 97,215
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company changed the location of its corporate headquarters and
main operating facility on February 1, 2002.
Future minimum payments required under the lease are as follows:
Year Ending December 31, Amount
2003 $248,924
2004 258,881
2005 269,237
2006 280,006
2007 23,409
$1,080,457
Rent expense for the years ended December 31, 2002 and 2001 were
$180,607 and $620,578.
The Company is party to various legal matters encountered in the
normal course of business. In the opinion of management and legal
counsel, the resolution of these matters will not have a material
adverse effect on the Company's financial position or the future
results of operations.
NOTE 6 - INCOME TAXES
Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax
bases. Management has provided a valuation allowance for net
deferred tax assets as of December 31, 2002 and 2001, as they believe
that it is more likely than not that the entire amount of deferred
tax assets will not be realized.
The company filed a consolidated return, with a tax liability of $0
for the year 2002. At December 31, 2002, the Company had net
operating loss carry forwards for federal income tax purposes of
approximately $2,650,000, which are available to offset future
taxable income, if any, on a scheduled basis through 2022.
NOTE 7 - BIGHUB SETTLEMENT
On February 6, 2001, a settlement was reached between TheBigHub.com
("Big Hub"), the Company, and major shareholders of the Company. As
part of the settlement, Big Hub returned all but 242,732 shares of
the Company's common stock to the major shareholders involved, and
all stock options. The major shareholders retain their shares and
options in Big Hub. Big Hub forever releases and discharges the
Company from all obligations relating to the $622,288 dollars
advanced to the Company. The Company forever releases and discharges
Big Hub from all obligations relating to $199,620 owed to the Company
from Big Hub. Additionally, the Company releases Big Hub from all
obligations in regards to the promised delivery of the "Tool Kit
Technology" (never delivered). Big Hub retains the 250,000 shares of
the Company's common stock transferred to the Big Hub as original
consideration of promised delivery of "Tool Kit Technology". The
Company agrees to provide audited financial statements to Big Hub on
a consolidated basis. The major shareholders of the Company, Big
Hub, and the Company agree to release, acquit, and further discharge
all parties involved as a result of this agreement.
NOTE 8 - COMMON STOCK
In 2002, the Company issued 3,450,000 shares of common stock valued
at $173,000 in exchange for consulting services. 700,000 of those
shares valued at $35,000 were later cancelled for non-performance.
Net issuance for consulting expenses for the year ending 2002 were
2,750,000 shares of common stock valued at $138,000.
On October 11, 2001, an option holder exercised options for 97,500
shares for $1,950. In 2001, the Company issued 469,000 shares of
common stock valued at $54,590 in exchange for consulting services,
public relations, and website development services.
NOTE 9 - NOTE AND TRADE RECEIVABLE
On June 30, 2000, the Company executed a promissory note with UNICO,
Inc. for $200,000 and a trade receivable for $270,000 in conjunction
with the sale of Independent News, Inc. Both the note and trade
receivable are outstanding and currently in default. The Company's
management considers both collectible. An allowance for
uncollectible accounts of $100,000 and $135,000 has been established.
NOTE 10 - INTANGIBLE ASSETS
Intangible assets consist of the following items:
December 31, 2002
Goodwill $1,326,850
Covenant not to compete 15,000
1,341,850
Less accumulated amortization 519,653
Intangible assets, net 822,197
Amortization expense for the years ended December 31, 2002 and
December 31, 2001 were $135,685 and $135,685.
NOTE 11 - DEFERRED REVENUE
During the 2001, the Company received $96,386 for services to be
performed in 2002. When the services were performed, the amount was
recognized as income in 2002.
NOTE 12 - PUBLIC STOCK LISTING
Next Generation Media Corporation common stock began trading on the
OTC Bulletin Board on June 11, 2001, under the symbol NGMC. This is
the company's first public listing.
NOTE 13 - SEGMENT INFORMATION
The Company has one reportable segment for the twelve month periods
ended December 31, 2002 and 2001: United Marketing Solutions. United
was acquired on April 1, 1999. The entity is a wholly-owned
subsidiary. 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 periods ending December 31, 2002 and 2001 are presented below:
Year Ended
December 31, 2002 Segment Parent Eliminations Total
Revenue 7,325,085 0 0 7,325,085
Segment profit/(loss) 658,769 (455,246) 0 203,523
Total assets 2,258,545 293,784 (382,249) 2,170,081
Year Ended
December 31, 2001 Segment Parent Eliminations Total
Revenue 7,132,118 0 0 7,132,118
Segment profit/(loss) (175,848) (721,147) 0 (896,995)
Total assets 1,859,751 825,609 (382,249) 2,303,111
NOTE 14 - LIQUIDITY AND FUTURE PROSPECTS
As of December 31, 2001 the Company had a large portion of its trade
payable and accrued liabilities significantly past due. The Company
had negative working capital and therefore the independent auditor
report was issued as a going concern. In 2002, the Company
drastically reduced it operating expenses, operated at a profit,
removed large amounts of debt and greatly improved its financial
standing. Therefore the Company is no longer considered a going
concern and the independent auditor's report reflects the change.
NOTE 16 - RECLASSIFICATIONS
Certain amounts on the 2001 financial statements have been
reclassified to conform with the 2002 presentation.
EXHIBIT INDEX
Exhibit Description
No.
3.1 Articles of Incorporation, under the name Micro Tech
Industries, Inc. (incorporated by reference in the filing
of the Company's annual report on Form 10KSB filed on April
15, 1998).
3.2 Amendment to the Articles of Incorporation (incorporated by
reference in the Company's quarterly report filed on Form
10 Q filed on May 15, 1997).
3.3 Amended and Restated Bylaws (incorporated by reference in
the filing of the Company's annual report on Form 10KSB
filed on November 12, 1999).
16.1 Letter on change in certifying accountant (incorporated by
reference in the filing of the Company's current report on
Form 8-K filed on January 5, 2001).
21.1 Subsidiaries of the Company (included herein).
23.1 Consent of Certified Public Accountants (included herein).
24.1 Power of Attorney (included herein on the signature page).