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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 2-74785-B
Next Generation Media Corp.
(Exact name of registrant as specified in its charter)
Nevada 88-0169543
- ------------------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
900 N. Stafford St., Suite 2003
Arlington, VA 22203 (703) 516-9888
- ---------------------------------- ----------------
(Address of principal executive offices) (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01
par value
Indicate by check mark whether the registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- -----
Indicate by check mark if disclosure of delinquent filers to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
State issuer's revenues for its most recent fiscal year: $476,226.
The aggregate market value at January 16, 1998 of the Common Stock of
the issuer, its only class of voting stock, was $1,245,380, of which
$427,008.40 was held by non-affiliates, calculated on the basis of a recent
private sale of Common Stock as of December 30, 1997. The total number of
issued and outstanding shares of the issuer's common stock, par value $0.01, as
of January 16, 1998 was 3,113,450.
Documents incorporated by reference: None.
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PART I
ITEM 1. BUSINESS.
This Annual Report on Form 10-K contains certain forward-looking
statements with respect to the Company's business, financial condition and
results of operations. The words "estimate," "project," "intend," "expect,"
"anticipate" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in such forward-looking statements. Such risks include, but are
not necessarily limited to, the ability of the Company to compete in the
community newspaper business, the Company's ability to acquire new businesses
and generate new cash flows therefrom, and the Company's ability to obtain
additional capital to support its operations and growth.
Next Generation Media Corp. (the "Company") was incorporated on
November 21, 1980 under the laws of the State of Nevada in the name Micro Tech
Industries Inc. Pursuant to a Stock Purchase Agreement dated as of February 6,
1997, by and between Pocotopaug Investment, Inc. and Joel P. Sens, Mr. Sens
acquired control of 6,686,551 of the 8,008,890 outstanding shares of common
(equivalent to 668,655 shares after the March 19, 1997 reverse split)
stock (85.72%) of the Company for $50,000 in personal funds. In connection with
this transaction, John S. McAvoy, the then sole director of the Company
resigned effective as of the date of such transaction, and new members of the
board of directors were elected and new management appointed. Current
management believes that the Company was a "shell" company for at least five
years prior to February 6, 1997, without assets or liabilities. Current
management is unaware of any operating history of the Company prior to February
6, 1997.
Currently, the Company operates as a publicly owned holding company
with a single wholly owned operating subsidiary, Independent News Inc. ("INI").
The Company had no revenues from operations prior to its acquisition of certain
assets and liabilities of Pompton Valley Publishing Company, Inc. ("Pompton
Valley") as of September 29, 1997. These assets and liabilities were acquired
through INI which was formed to operate the acquired business. The acquisition
was funded with cash, with common stock of the Company and by means of INI's
assumption of certain of Pompton Valley's liabilities. The cash portion of the
purchase price was funded by means of a loan from Mr. Sens.
INI engages in the community newspaper publishing business. It
produces and issues weekly free newspapers distributed via the mail to
approximately 67,761 homes in northern New Jersey. INI generates all of its
revenues from the sale of advertisements which generally are placed by local
merchants in the communities which the newspapers serve. The newspapers
generally are identical in editorial content but are varied according to
advertising content. Therefore, a local merchant or other advertiser may
target the audience for its advertisements in a relatively close geographic
vicinity by placing advertisements in the version of the INI community
newspaper serving its local community. The New Jersey
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townships that INI's community newspapers serve include Wayne, Fairfield,
Lincoln Park, Pequannock, Pompton Plains, Montville, Towaco, Bloomingdale,
Riverdale, Butler, Kinnelon, Smoke Rise, Pompton Lakes, Little Falls, Totowa
and West Patterson.
INI had $476,226 in revenues and an operating loss of $26,866 from September
29, 1997 through December 31, 1997, representing substantially all of the
Company's revenues and operating losses for the year. Prior to the acquisition
of its community newspaper business through INI, the Company had no operating
revenues.
INI's working capital is provided primarily from operations. INI sales are
made by its sales representatives on credit with payment terms due in 30 days.
No single customer of INI represents 10% or more of its revenues.
The advertising business, including the community newspaper business, is
highly competitive with many firms competing in various forms of media and
possessing substantial resources. The Company's community newspaper business has
several direct competitors servings its local markets, although management
believes that INI has no direct competitor offering a 100% mailed (as opposed to
delivery) weekly newspaper. The circulation of other newspapers in the local
markets in which INI operates includes: The New Jersey Star Ledger, circulation
11,889, The Herald & News, circulation 8,983, The Record, circulation 8,131 and
The Suburban Trends, circulation 7,401.
INI had approximately twelve employees as of December 31, 1997. The Company
has a President and a Secretary/Treasurer who did not receive any compensation
in 1997.
The Company's business strategy is to grow through new acquisitions while
continuing to operate INI as a wholly-owned subsidiary. The Company is currently
considering new acquisitions that may occur in 1998, although no assurance can
be given. The success of such an acquisition is dependent upon a number of
factors including obtaining adequate financing, possibly through the sale of
securities, and successful negotiations with any such potential target
corporation.
ITEM 2. PROPERTIES.
The Company's principal property is a 3,500 square foot facility located in
Pompton Lakes, New Jersey. The building consists of two stories with the
administration and production unit on one level and sales staff on the other
level. INI has a five year lease on the property that runs through October,
2002.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved in any pending or, to management's knowledge,
threatened legal proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the fiscal year
to a vote of security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Current management has no knowledge of any sales of the Company's securities
prior to February 6, 1997. On February 6, 1997, Mr. Joel Sens acquired
6,686,551 shares (equivalent to 668,655 shares after the March 19, 1997 reverse
split) of the Company's common stock, par value $0.001, for $50,000, in a
transaction exempt from registration under Section 4(1) of the Securities Act
of 1933, as amended (the "Securities Act"). On March 19, 1997, the Company
executed a 10:1 reverse split of its common stock, increasing the par value of
the common stock to $0.01 per share. This transaction was exempt from
registration under Section 3(9) of the Securities Act. Also as of March 19,
1997, the Company's Board of Directors authorized the issuance of 2,150,000
additional shares of common stock to Mr. Sens in exchange for a promissory note
in the principal amount of $359.050.00, bearing interest at the rate of 5.83%
and due three years from the date of issuance. This offer and sale was a
private transaction exempt from registration under Section 4(2) of the
Securities Act.
On September 29, 1997, the Company issued 100,000 shares of common stock to
Joseph Pellegrino (27,500), Joseph Nicastro (27,500), Ron Higgins (15,000), Roy
Peragallo (15,000), Michele Koptyra (10,000) and Joseph Ouimet (5,000) as
partial payment for the community newspaper business purchased from Pompton
Valley that is now operated by INI. This transaction was exempt from
registration under Section 4(2) of the Securities Act.
On December 30, 1997, the Company consummated a transaction in which Mr.
Kevin Rubin acquired 62,500 shares of the Company's common stock for $25,000.
Mr. Rubin also receive 37,500 warrants exercisable for a period of two years
from the date of grant to purchase one share of common stock each at a price of
$0.60 per share. This transaction was exempt from registration under Section
4(2) of the Securities Act.
None of the above-described transactions were effected through an
underwriter, and none involved any underwriting discount or commission.
There is no established public trading market for the Company's common
stock. As of January 16, 1998, there were approximately 532 holders of the
Company's common stock.
There have been no cash dividends paid on the Company's common stock since
February 6, 1997, and current management is unaware of any dividend paid prior
to that date.
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The Company intends to retain all future earnings, if any, for use in the
development of its business, and the Company does not anticipate paying cash
dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The following statement of operations data for the year ended December 31,
1997 and balance sheet data as of December 31, 1997 are derived from the
Company's Consolidated Financial Statements, audited by BDO Seidman LLP,
independent certified public accountants, which are included elsewhere in this
Form 10-K. Management believes that the Company was a public shell until
February 6, 1997, the date when Mr. Joel Sens acquired a majority interest in
the Company and new management was appointed. Therefore, management believes
that the Company had no operating revenues, assets or liabilities prior to that
date. The data presented below therefore, is for fiscal year 1997, the only year
for which management believes the Company had revenues, assets or liabilities
out of the last five years.
YEAR ENDED
----------
DECEMBER 31, 1997
-----------------
(U.S. DOLLARS)
STATEMENT OF OPERATIONS
DATA:
Sales 476,226
Cost of sales 139,012
Gross profit(loss) 337,214
Operating expenses:
Selling, general and administrative 427,890
Depreciation and amortization 15,883
Total operating expenses 443,773
Operating income (loss) (106,559)
Financial income (expenses),
net
Other expenses (income) 11,381
Net income (loss) (95,178)
Basic and diluted income (loss) per share (0.04)
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YEAR ENDED
----------
DECEMBER 31, 1997
-----------------
(U.S. DOLLARS)
BALANCE SHEET DATA:
Total Assets 474,549
Long-term obligations 136,932
Capital Leases 0
Redeemable Preferred Stock 0
Cash Dividends Declared Per Share 0
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Management cannot fully assess material changes in the registrant's
financial condition from the end of the preceding year to the end of fiscal year
1997, or in the registrant's results of operations with respect to the 1997
fiscal year from the preceding fiscal years, for the following reasons.
Mr. Joel P. Sens purchased 6,686,551 shares (equivalent to 668,655 shares
after the March 19, 1997 reverse split) of the issuer's common stock, par value
$0.001, as of February 6, 1997, from Pocotopaug Investment, Inc. All
then-existing officers and directors resigned as of February 6, 1997, and all
current officers and a majority of the current directors were first appointed as
of February 6, 1997, in connection with that sale. To the best of management's
knowledge, no audited or unaudited financial statements for the issuer were
prepared by former management for all or any portion of fiscal year 1996 or any
recent preceding years.
The following discussion is based on assumptions made by management as to
the issuer's results of operations and financial condition as of December 31,
1996 and for the period then ended. No assurances can be given as to the
accuracy of such assumptions. However, management has no knowledge of any
information that would make reliance on such assumptions unwarranted.
Management assumes that the issuer had no assets as of December 31, 1996,
the end of its last fiscal year. The Company had total assets of $474,549
including $67,781 in net property and equipment and $192,648 in net intangible
assets, primarily goodwill, as of December 31, 1997.
Management assumes that the issuer had no current liabilities as of December
31, 1996. As of December 31, 1997, the company had $341,095 in current
liabilities. In addition, the Company had long term debt of $136,932 and a total
stockholders' equity deficit of $3,478 as of the end of the fiscal year.
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Management assumes that the issuer had no revenues or expenses during the
1996 fiscal year. As of the end of the fiscal year, the Company had $476,226 in
total revenues, all of which was generated by its subsidiary INI. The Company
incurred a net loss of $95,178 for fiscal year 1997, resulting in a basic and
diluted loss per common share of $0.04. The Company generated $95,957 in
financing activities in 1997 primarily from an increase in checks issued against
future deposits, proceeds of loans from shareholders and employees and proceeds
from an issuance of common stock. These gains from financing activities were
used to cover deficits in net cash used in operating activities of $46,803 and
net cash used in investing activities of $49,154.
The Company is currently considering new acquisitions that may occur in
1998, although no assurance can be given. If the Company is successful in
completing such an acquisition, management believes that its business, financial
condition and results of operations may change significantly. Any such
acquisition may be financed by issuance of stock of the Company but may also
require new capital resources. Failure of the Company to obtain new sources of
capital, through a public offering or private placement of its stock, or
otherwise, could materially adversely affect the Company's ability to make new
acquisitions and to continue operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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[NEXT GENERATION MEDIA
CORPORATION LOGO]
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
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NEXT GENERATION MEDIA
CORPORATION
CONTENTS
INDEPENDENT AUDITORS' REPORT 3
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets 4
Consolidated statements of operations 5
Consolidated statements of stockholders' equity 6
Consolidated statements of cash flows 7-8
Summary of accounting policies 9-11
Notes to consolidated financial statements 12-18
Independent Auditor's Report on Financial Statement 19
Schedule
Schedule II - Valuation and Qualifying Accounts 20
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
NEXT GENERATION MEDIA CORPORATION
We have audited the accompanying consolidated balance sheet of NEXT GENERATION
MEDIA CORPORATION as of December 31, 1997 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the financial position of NEXT GENERATION MEDIA
CORPORATION at December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
BDO Seidman, LLP
Washington, D.C.
April 13, 1998
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December 31, 1997
=========================================================================================================================
ASSETS
CURRENT
Accounts receivable, less allowance for doubtful
accounts of $42,560 $198,335
Accrued interest receivable 15,785
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 214,120
- -------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT (Note 1) 71,135
Less: Accumulated depreciation 3,354
- -------------------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 67,781
- -------------------------------------------------------------------------------------------------------------------------
OTHER
Intangibles, net (Note 3) 192,648
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER 192,648
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $474,549
=========================================================================================================================
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NEXT GENERATION MEDIA
CORPORATION
CONSOLIDATED BALANCE SHEET
December 31, 1997
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued against future deposits $ 44,821
Accounts payable 248,666
Notes payable (Note 4) 25,449
Due to shareholders (Note 6) 10,255
Accrued interest payable 235
Note payable-employee (Note 5) 11,669
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 341,095
- -------------------------------------------------------------------------------------------------------------------------
LONG TERM DEBT
Note payable - employees (Note 5) 85,027
Due to shareholders (Note 6) 24,400
Note payable (Note 4) 27,505
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LONG TERM DEBT 136,932
- -------------------------------------------------------------------------------------------------------------------------
Commitments (Note 11)
STOCKHOLDERS' EQUITY (Note 8)
Common stock, $.01 par value, 50,000,000 authorized
3,113,450 issued and outstanding 31,134
Additional paid in capital 419,616
Accumulated deficit (95,178)
Less stock subscription receivable (359,050)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (3,478)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $474,549
=========================================================================================================================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
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NEXT GENERATION MEDIA
CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
SALES $ 476,226
- ------------------------------------------------------------------------------------------------------------------------
COST OF GOODS SOLD 139,012
- ------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 337,214
- ------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Selling,general and administrative 427,890
Depreciation and amortization 15,883
- ------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 443,773
- ------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 16,719
Interest expense (5,338)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) 11,381
- ------------------------------------------------------------------------------------------------------------------------
NET LOSS (95,178)
- ------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.04)
- ------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING $2,452,839
========================================================================================================================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
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NEXT GENERATION MEDIA
CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional Stock
---------------------- paid-in Accumulated Subscription
Shares Amount capital deficit Receivable Total
===============================================================================================================================
BALANCE, January 1, 1997 - $ - $ - $ - $ - $ -
Acquisition of Microtech 800,889 8,009 41,991 - 50,000
Issuance of common stock 2,312,561 23,125 377,625 (359,050) 41,700
Net loss - - - (95,178) - (95,178)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 3,113,450 $ 31,134 $ 419,616 $ (95,178) $(359,050) $ (3,478)
===============================================================================================================================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
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NEXT GENERATION MEDIA
CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1997
===========================================================================================
OPERATING ACTIVITIES
Net loss $ (95,178)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 15,883
Provision for doubtful accounts 34,956
(INCREASE) DECREASE IN ASSETS
Accounts receivable (105,234)
Accrued interest receivable (15,785)
INCREASE (DECREASE) IN LIABILITIES
Accounts payable 118,320
Accrued interest payable 235
- -------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (46,803)
- -------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of property and equipment (34,154)
Covenant not to compete (15,000)
- -------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (49,154)
- -------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in checks issued against future deposits 44,821
Proceeds of loans from shareholders 40,255
Proceeds of loans from employees 46,600
Repayment of note payable (24,009)
Repayment of shareholder note (5,600)
Repayments of employee notes (31,110)
Proceeds from issuance of common stock 25,000
- -------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 95,957
- -------------------------------------------------------------------------------------------
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NEXT GENERATION MEDIA
CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1997
==========================================================================================
INCREASE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS, beginning of period -
- ------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ -
==========================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 4,169
Shares issued in exchange for note receivable 359,050
- ------------------------------------------------------------------------------------------
NONCASH INVESTING ACTIVITY
ACQUISITION:
Stock issued for acquisition $ 16,700
Book value of assets acquired less liabilities assumed (77,715)
- ------------------------------------------------------------------------------------------
94,415
Acquisition costs 45,762
- ------------------------------------------------------------------------------------------
Goodwill $ 140,177
=========================================================================================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
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NEXT GENERATION MEDIA
CORPORATION
SUMMARY OF ACCOUNTING POLICIES
BASIS OF The consolidated financial statements include the statements of Next Generation
PRESENTATION Media Corporation (the "Company") and its wholly owned subsidiary Independent
News, Inc. All intercompany transactions have been eliminated.
BUSINESS The Company operates a newspaper publishing business distributing free
DESCRIPTION newspapers, supported by local advertising in New Jersey. Primarily all of its
customers are located in New Jersey.
RISK AND The publishing industry is highly competitive. The Company's revenue consists of
UNCERTAINTIES amounts received for advertising space in the newspaper. Publication of the
newspaper is dependent on future advertising revenue or obtaining additional
outside financing. Management believes that it can continue to meet working
capital requirements as they arrive.
USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make certain estimates and
assumptions, particularly regarding valuation of accounts receivable,
recognition of liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could differ
from those estimates.
CONCENTRATION Financial instruments that potentially subject the Company to concentrations of
OF CREDIT RISK credit risk consist primarily of cash and accounts receivable. The Company
maintains its cash in bank deposit accounts, the balances of which, at times, may
exceed Federally insured limits. Exposure to credit risk is reduced by placing
such deposits in high quality financial institutions.
PROPERTY AND Property and equipment are recorded at cost. Depreciation is computed by using
EQUIPMENT both straight-line and accelerated methods over the estimated useful lives of the
assets.
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NEXT GENERATION MEDIA
CORPORATION
SUMMARY OF ACCOUNTING POLICIES
EARNINGS (LOSS) Loss per share for the years ended December 31, 1997, has been computed using the
PER COMMON SHARE weighted average number of shares outstanding. The outstanding stock options
were not considered in the computation because their inclusion would have been
anti-dilutive.
INCOME Income taxes are calculated using the liability method specified by Statement of
TAXES Financial Accounting Standards No. 109, "Accounting for Income Taxes". Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial purposes and the amounts
used for income tax purposes. The net deferred tax asset is reduced, if
necessary, by a valuation allowance for the amount of any tax benefits that,
based on available evidence, are not expected to be realized.
RECENT In March 1997, the Financial Accounting Standards Board issued Statement of
ACCOUNTING Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128"). SFAS 128
PRONOUNCEMENTS provides a different method of calculating earnings per share than is currently
used in APB Opinion 15. SFAS 128 provides for the calculation of basic and dilut
ed earnings per share. Basic earnings per share includes no dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earnings of an entity, similar to existing fully diluted earnings per share. The
Company adopted the provisions for computing earnings per share set forth in SFAS
128 in December 1997. There is no difference in basic and diluted earnings per
share.
In June 1997, the Financial Accounting Standards No. 130 Reporting Comprehensive
Income ("SFAS 130"), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
130 requires that all items that are required to be recognized under current
accounting standards as components of
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NEXT GENERATION MEDIA
CORPORATION
SUMMARY OF ACCOUNTING POLICIES
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.
Statement of Financial Accounting Standards No. 131, Disclosure about Segments of
a Business Enterprise ("SFAS 131"), establishes standards for the way that public
enterprises report information about operating segments in interim financial
statements issued to the public. It also establishes standards for disclosures
regarding products and services, geographic areas and major customers. SFAS 131
defines operating segments as components of an enterprise about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance.
Both SFAS 130 and SFAS 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for earlier
years to be restated. Management believes the impact, if any, would not be
material to the financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of these
standards.
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NEXT GENERATION MEDIA
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PROPERTY AND Property and equipment consists
EQUIPMENT of the following:
December 31, 1997
==================================================================================
Computers and office equipment $ 68,935
Leasehold improvements 2,200
----------------------------------------------------------------------------------
71,135
Less accumulated depreciation 3,354
----------------------------------------------------------------------------------
$ 67,781
==================================================================================
Depreciation charged to operations was $3,354
2. INTANGIBLE Intangible assets consist of the
ASSETS following items:
December 31, 1997
==================================================================================
Goodwill (Note 7) 190,177
Covenant not to compete 15,000
----------------------------------------------------------------------------------
205,177
Less accumulated amortization 12,529
----------------------------------------------------------------------------------
Intangible assets, net $ 192,648
==================================================================================
The covenant not to compete is being
amortized on a straight line basis
over its contractual term of four years.
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NEXT GENERATION MEDIA
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. NOTES Notes payable consist of the
PAYABLE following:
December 31, 1997
==================================================================================
Note to a factor with interest
at 8%, secured by the Company's
assets, due January 1, 1999 $ 27,505
Note to a factor with interest at
the lender's prime rate, secured
by the Company's assets, due
on April 15, 1996 25,449
----------------------------------------------------------------------------------
52,954
Less current portion 25,449
----------------------------------------------------------------------------------
$ 27,505
==================================================================================
Maturities of notes payable are as follows:
December 31,
==================================================================================
1998 $ 25,449
1999 27,505
----------------------------------------------------------------------------------
$ 52,954
==================================================================================
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NEXT GENERATION MEDIA
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. NOTES PAYABLE - Notes payable - employees are
EMPLOYEES loans for working capital
purposes. The notes bear no
interest and are due as follows:
December 31,
==================================================================
1998 $ 11,669
1999 85,027
------------------------------------------------------------------
$ 96,696
==================================================================
5. RELATED Amounts due to shareholders and
PARTY employees represent funds advanced
TRANSACTIONS to the Company for working capital,
and reimbursements due for expenses
paid on the Company's behalf.
6. INCOME Significant components of the
TAXES Company's deferred tax assets at
December 31, 1997, are as follows:
December 31, 1997
==================================================================================
Deferred tax assets
Net operating loss carryforwards for
income tax purposes $ 13,000
Reserve for doubtful accounts 8,500
----------------------------------------------------------------------------------
Total deferred tax assets 21,000
Less valuation allowance (21,500)
----------------------------------------------------------------------------------
Total $ -
==================================================================================
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23
NEXT GENERATION MEDIA
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management has provided a valuation allowance for net deferred tax assets as of
December 31, 1997, as they believe that it is more likely than not that the
entire amount of deferred tax assets will not be realized.
At December 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $65,000, which are available to
offset future federal taxable income, if any, through 2012.
The Company's estimated effective tax rate for the year ended December 31, 1997
is -0-. The rate is lower than federal and state statutory rates due to the
existence of net operating losses.
7. STOCKHOLDERS' At December 31, 1997, stock subscriptions receivable amounts to $359,050 and
EQUITY bears interest at 5.83%. Total interest income was $16,719 for the year ended
December 31, 1997. Proceeds from the note were used to purchase 2,150,000 shares
of the Company.
On March 19, 1997 the Board of Directors of the Company approved a 1 for 10
reverse stock split of common stock. The change in the Company's common stock
for the reverse stock split has been given retroactive effect for all periods
presented.
As of December 31, 1997, 37,500 stock options were granted to an unrelated third
party and are exercisable at $.60 per share anytime prior to December 31, 1999.
The options were not granted in exchange for good or services rendered,
accordingly, the Company did not record Compensation expense.
8. PURCHASE OF On February 6, 1997, an unrelated third party purchased 85.72% of the outstanding
MICROTECH stock of Microtech Industries, Inc., from its majority shareholder for $50,000 in
INDUSTRIES cash. Effective March 31, 1997 Microtech Industries changed its name to Next
Generation Media Corporation. Current management believes that prior to February
6, 1997, the Company was a "shell" company for at least five years without
assets and liabilities. Current management is unaware of any operating history
of the Company prior to
15
24
NEXT GENERATION MEDIA
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 6, 1997. As a result of the transaction, goodwill of $50,000 was
recorded and is being amortized on a straight line basis over ten years.
Accumulated amortization amounted to $5,583 at December 31, 1997.
9. ACQUISITION On September 29, 1997, Pompton Valley Publishing Co. (PVP) sold to Independent
OF POMPTON News, Inc. (INI) all of its tangible property, all accounts receivable, all
VALLEY intellectual property, certain contracts and all other business property. INI
PUBLISHING CO. assumed certain liabilities of PVP. In addition to the assumption of certain
liabilities, INI also paid PVP $15,000 in cash for a covenant not to compete and
100,000 shares of the Company's common stock. The shares were valued at $16,700
based on a recent stock sale. The acquisition was accounted for as a purchase.
In conjunction with this transaction the Company has recorded approximately
$140,000 of goodwill which is being amortized on a straight line basis over 5
years.
The following unaudited pro forma summary presents the combined results of
operations of the Company and the acquired business, as if the acquisition had
occurred at the beginning of 1997. The pro forma amounts give effect to certain
adjustments, including the amortization of intangibles. This pro forma summary
does not necessarily reflect the results of operations as they would have been if
the businesses had constituted a single entity during such periods and is not
necessarily indicitive of results which may be obtained in the future.
(UNAUDITED)
Year ended December 31, 1997
--------------------------------------------------------------
Net sales $1,549,042
Net (Loss) (183,896)
(Loss) per common share (.07)
==============================================================
16
25
NEXT GENERATION MEDIA
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS The Company entered into a lease
AND for office space in Pompton Lakes,
CONTINGENCIES New Jersey. The lease is a five
year lease commencing on January
1,1998. Annual future minimum
lease payments under this
operating lease are as follows:
Year ending December 31,
=============================================================================
1998 $ 21,600
1999 21,600
2000 21,600
2001 23,760
2002 23,760
-----------------------------------------------------------------------------
$ 112,320
=============================================================================
For the period ended December 31, 1997,
the Company occupied office space in
another location on a month to month
arrangement. Rent expense for the
period ended December 31, 1997 was $2,550.
The Company also leases telephones and
computer equipment under operating
leases. Annual future minimum lease
payments under these operating leases
are as follows:
Year ending December 31,
=================================================================================
1998 $ 11,290
1999 3,912
2000 3,260
---------------------------------------------------------------------------------
$ 18,462
=================================================================================
17
26
NEXT GENERATION MEDIA
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. SUBSEQUENT On March 18, 1998 the Company signed an agreement to acquire all of the
EVENTS outstanding Series C Preferred Stock and certain subordinated debt totaling
$1,034,000 in UNICO, Inc. ("Unico"), pending approval by 100% of the debt holders
and preferred shareholders. In exchange for Unico's preferred stock and debt,
the company will pay $100,000 and issue 250,000 shares of callable, cumulative,
preferred stock with a $5 face value. In addition, each 1.5 preferred shares
shall be accompanied by one warrant to purchase common shares. Such warrants
will have an exercise price of $.16 and be valid for 5 years from the date of
issue. In conjunction with this transaction, the Company has agreed to acquire
all of the outstanding common stock of United Coupon Corporation ("United"), a
wholly owned subsidiary of Unico, pending approval of Unico's shareholders in
April 1998. In exchange for such shares, the Company shall issue 200,000 common
shares. United had sales of $5,800,000 and an after tax loss of $(407,000) for
their fiscal year ended December 31, 1997.
Pending approval of the purchase of the Unico preferred stock and debts, the
Company agreed to issue 70,000 preferred shares , issue 250,000 warrants, and
transfer ownership of the preferred stock and debt in Unico to T.C. Capital Ltd.
of the Bahamas in exchange for $350,000. Such preferred shares shall have a
redemption price of $5 per share, pay a cumulative dividend of $.50 per share,
and be redeemable at the sole option of the holder within nine months from their
date of issue. The warrants will have an exercise price of $0.16 and be valid
for five years from the date of issue.
18
27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
NEXT GENERATION MEDIA CORPORATION
The audit referred to in our report to NEXT GENERATION MEDIA Corporation, dated
April 13, 1998 which is contained in Item 8 of this Form 10-K, includes the
audit of the financial statement schedule listed in the accompanying index for
the year ended December 31, 1997. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based upon our audit.
In our opinion, such schedule presents fairly, in all material respects, the
information set forth therein.
BDO Seidman, LLP
Washington, D.C.
April 13, 1998
19
28
NEXT GENERATION MEDIA
CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged to
Beginning of Costs and Balance at
Year Expenses Deduction End of Year
- --------------------------------------------------------------------------------------------------------------------------
Description
Allowance for doubtful
accounts receivable $ 13,500 $ 29,060 $ - $ 42,560
==========================================================================================================================
20
29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Lawrence Grimes 43 President and
Director
Kenneth Brochin 46 Secretary/Treasurer and
Director
Joel Sens 33 Director
Jeffrey Sens 33 Director
David Grossman 48 Director
Officers are appointed by and serve at the discretion of the Board of
Directors. Each officer has served since 1997. Each director holds office
until the next annual meeting of stockholders or until a successor has been
duly elected and qualified.
Lawrence Grimes has been the Company's President and a director since
February 1997. Mr. Grimes is the principal of W.B. Grimes & Co., a newspaper
brokerage business in Maryland with business throughout the United States.
Kenneth Brochin has been the Company's Secretary and Treasurer and a
director of the Company since February 1997. Dr. Brochin has been a dentist in
private practice for the past 22 years and is a Clinical Assistant Professor at
the Medical College of Ohio. Dr. Brochin is also a director and
President-elect of the Jewish Family Service Agency of Toledo. Dr. Brochin and
Joel Sens are brothers-in-law.
David Grossman has been a director of the Company since February 1997. Dr.
Grossman has been an internist in private practice for over 20 years and has
been the Medical Director for the city of Toledo, Ohio for the past four years.
Dr. Grossman is also a director of the Lucas County Mental Health Board, the
Jewish Family Service Agency of Toledo and the East Toledo Family Center.
Jeffrey Sens has been a director of the Company since February 1997. Mr.
Sens is the Director of Operations for Top Driver, Inc., a national driving
school business based in New York City. Prior to working at Top Driver, Mr.
Sens held a variety of senior operations management positions with prominent
consumer goods companies such as RJR Nabisco Corporation, Sara Lee Corporation
and President International Corp. Mr. Sens has a B.Sc. in industrial
engineering from the University of Toledo and an MBA from Clemson University.
Mr. Sens is a director of Palmetto Industries International Inc., a diversified
manufacturer and supplier of bulk packaging products for chemical and
pharmaceutical companies that Mr. Sens co-founded. Mr. Sens is the brother of
Joel Sens.
Joel Sens has been a director of the Company since March 1997. Mr. Sens is
an entrepreneur engaging in, among other things, transactions involving the
purchase and sale of barter and other businesses. In addition to these other
activities, Mr. Sens, who is the principal shareholder in the Company, assisted
the Company without compensation in the structuring of its acquisition through
INI of its community newspaper business and has also participated in the
structuring and negotiation of other transactions that were not or have not yet
been consummated. Mr. Sens is also a director of INI, the Company's sole
operating subsidiary.
8
30
On February 29, 1996, Joel Sens pled guilty in the federal court for the
Eastern District of Virginia to one count of failing to disclose the existence
of an asset worth approximately $7,000 on a statement of assets filed in a
personal bankruptcy case that had been subsequently voluntarily dismissed by
Mr. Sens. Mr. Sens received one year of probation and a fine of $1,000.
ITEM 11. EXECUTIVE COMPENSATION.
None of the executive officers of the Company received or accrued any
compensation in fiscal year 1997. The Company currently does not pay or accrue
salaries or fees to directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of January 16, 1998, certain information
as to the beneficial ownership of the common stock of (i) each of the Company's
directors and executive officers, (ii) directors and executive officers as a
group and (iii) all persons known by the Company to be the beneficial owners of
more than five percent of the outstanding common stock.
NAME OF BENEFICIAL ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE PERCENT OF
OWNER OF BENEFICIAL COMMON
OWNERSHIP STOCK(1)
Lawrence Grimes P.O. Box 442 89,820 common shares 2.9%
Clarksburg, MD 20871
Kenneth Brochin 2347 Underhill Road 350,000 common shares 11.1%
Toledo, OH 43615
David Grossman 5666 Ginger Tree Road 74,850 common shares 2.4%
Toledo, OH 43623
Jeffrey Sens Top Driver 44,910 common shares 1.4%
717 Fifth Avenue, 4th floor
New York, NY 10022
Joel Sens 900 N. Stafford Street 2,045,929 common shares 64.9%
Suite 2003
Arlington, VA 22203
Executive officers and 2,605,509 common shares 82.7%
directors as a group (5
persons)
(1) Percent is rounded to one decimal place. Ownership percentages assume
exercise of 37,500 warrants described in Item 5.
9
31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On April 1, 1997, the registrant consummated a transaction with Joel Sens
whereby Mr. Sens was issued 2,150,000 shares of common stock in exchange for a
secured promissory note in the principal amount of $359,050, bearing interest
at the rate of 5.83%. The principal shall be due in full on April 1, 2000.
Interest is due annually on April 1. Mr. Sens' obligations under this note are
secured by a pledge to the Company of the purchased shares.
On September 29, 1997, INI, a wholly-owned subsidiary of the Company,
assumed certain liabilities and contracts of Pompton Valley and purchased all
of the assets of Pompton Valley relating to or used by Pompton Valley in
connection with Pompton Valley's community newspaper publishing business. Mr.
Lawrence Grimes, the President and a director of the registrant, acted on
behalf of Pompton Valley as broker in the negotiation and consummation of this
transaction. In accordance with applicable Nevada law, the nature of Mr.
Grimes' relationship with Pompton Valley was fully disclosed to the directors
of the Company, and Mr. Grimes' vote was not counted for purposes of the
registrant's authorization of this transaction. Pursuant to the related asset
purchase agreement, INI agreed to pay any and all fees for services rendered by
Mr. Grimes to Pompton Valley.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
EXHIBIT
NUMBER DESCRIPTION LOCATION
------ ----------- --------
3.1 Articles of Incorporation (under the name Included herein.
Micro Tech Industries Inc.)
3.2 Amendment to the Articles of Incorporated by reference in the
Incorporation filing of the Company's quarterly
report on Form 10-Q filed on May
15, 1997.
3.3 Bylaws of the Company (under the name Included herein.
Micro Tech Industries Inc.)
10.1 Stock Purchase Agreement dated February Incorporated by reference in the
6, 1997 between Joel Sens and Pocotopaug filing of the Company's current
Investment, Inc. report on Form 8-K filed on
February 10, 1997.
10
32
10.2 Promissory Note and Pledge and Security Incorporated by reference in the
Agreement, each dated April 1, 1998 filing of the Company's quarterly
between Joel Sens and the Company. report on Form 10-Q filed on August
14, 1997.
10.3 Asset Purchase Agreement dated Incorporated by reference in the
September 29, 1997, among Independent filing of the Company's current
News, Inc., Next Generation Media Corp., report on Form 8-K filed on October
Pompton Valley Publishing Co., Joseph 8, 1997.
Nicastro and Joseph Pellegrino.
21.1 Subsidiaries of the Registrant Included herein.
24.1 Power of Attorney Included on the signature page
hereto.
27.1 Financial Data Schedule Included herein.
The registrant did not file any reports on Form 8-K during the last quarter
of the period covered by this report.
11
33
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NEXT GENERATION MEDIA CORP.
Date: April 15, 1998 By: /s/ Larry Grimes
---------------------------------
Lawrence Grimes, President
(principal executive officer)
Date: April 15, 1998 By: /s/ Kenneth Brochin
---------------------------------
Kenneth Brochin, Secretary and
Treasurer (principal financial
officer)
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Larry Grimes and Kenneth Brochin, and
each of them, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign this annual report on Form 10-K, and to file
the same with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Larry Grimes President and Director April 15, 1998
- ------------------
Lawrence Grimes
/s/ Kenneth Brochin Secretary, Treasurer and April 15, 1998
- --------------------- Director
Kenneth Brochin
/s/ David Grossman Director April 15, 1998
- --------------------
David Grossman
/s/ Jeffrey Sens Director April 15, 1998
- ------------------
Jeffrey Sens
/s/ Joel Sens Director April 15, 1998
- ---------------
Joel Sens
12
34
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION LOCATION/PAGE NUMBER
------ ----------- --------------------
3.1 Articles of Incorporation (under the name Micro Page
Tech Industries Inc.)
3.2 Amendment to the Articles of Incorporation Incorporated by reference in the filing of
the Company's Form 10-Q for the first
quarter, 1997, filed on May 15, 1997.
3.3 Bylaws of the Company
10.1 Stock Purchase Agreement dated February 6, 1997 Incorporated by reference in the filing of
between Joel Sens and Pocotopaug Investment, the Company's Form 8-K, filed on February
Inc. 10, 1997.
10.2 Promissory Note and Pledge and Security Incorporated by reference in the filing of
Agreement, each dated April 1, 1998 between Joel the Company's Form 10-Q for the second
Sens and the Company. quarter, 1997, filed on August 14, 1997.
10.3 Asset Purchase Agreement dated September 29, Incorporated by reference in the filing of
1997, among Independent News, Inc., Next the Company's Form 8-K, filed on October 8,
Generation Media Corp., Pompton Valley 1997.
Publishing Co., Joseph Nicastro and Joseph
Pellegrino.
21.1 Subsidiaries of the Registrant Page
24.1 Power of Attorney Page
27.1 Financial Data Schedule Page
13