SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000.
[ ] TRANSITION REPORT PURSUANT SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ________________
Commission File Number: 033-22264-FW
Interruption Television, Inc.
(Exact name of small business as specified in its charter)
Nevada 33-0840184
- --------------------- ----------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11 Ann Siang Road
Singapore 069691
(Address of principal executive offices)
(11)-(65)-327 1090
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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
- ---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable dated : December 31, 2000 - 19,938,266
shares of common stock
Transitional Small Business Disclosure Format (check one):
Yes No
- ---- ----
INTERRUPTION TELEVISION, INC.
INDEX
PAGE
----
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statement of Income for the three months and six months
ended December 31, 2000 and 1999 (Unaudited) 3
Consolidated Balance Sheet at December 31, 2000 and
June 30, 2000 (Unaudited) 4
Consolidated Statements of Cash Flows and Stockholders' Equity
for the six months ended December 31, 2000 and 1999 (Unaudited) 5-6
Notes to Consolidated Financial Statements 7-10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
PART II -OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 12
ITEM 2 - CHANGES IN SECURITIES 12
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5 - OTHER INFORMATION 12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE PAGE 13
2
INTERRUPTION TELEVISION, INC. AND SUBSIDIARIES
----------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
-------------------------------------------------------
FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Amounts expressed in thousands United States Dollars
except earnings per share)
For the For the For the For the
three three three three
months months months months
ended ended ended ended
December December December December
31, 2000 31, 1999 31, 2000 31, 2000
------------ ------------ ------------ ------------
Net sales 8 (17) 8 14
Cost of sales 120 56 237 34
------------ ------------ ------------ ------------
Gross (112) (73) (229) (20)
profit
Selling, General and
Administrative expenses 194 27 526 56
------------ ------------ ------------ ------------
Operating income (loss) before
interest and income taxes (306) (100) (755) (76)
Interest expense 14 - 28 -
------------ ------------ ------------ ------------
Operating income (loss) before
income tax (320) (100) (783) (76)
Provision for income taxes - - - -
------------ ------------ ------------ ------------
Net income (loss) (320) (100) (783) (76)
============ ============ ============ ============
Earnings per share (0.016) (0.006) (0.039) (0.005)
Weighted average of shares
outstanding 19,938,266 17,012,666 19,938,266 17,012,666
The accompanying notes are an integral part of these consolidated statements.
3
INTERRUPTION TELEVISION, INC. AND SUBSIDIARIES
-------------------------------------------------
CONSOLIDATED BALANCE SHEET (UNAUDITED)
--------------------------------------
DECEMBER 31, 2000 AND JUNE 30, 2000
(Amounts expressed in thousands United States Dollars)
December 31, June 30,
2000 2000
----------- -----------
ASSETS
Current assets
Cash - 200
Accounts receivable, net of uncollectibles 6 102
Rental deposits 39 15
Due from directors 147 159
----------- -----------
Total current assets 192 476
Property and equipment
Office equipment 65 25
Furniture and fixtures 13 13
Leasehold improvements 2 2
----------- -----------
Total 80 40
Accumulated depreciation (16) (12)
----------- -----------
Total 64 28
Other assets-film library
Planet Ex 410 410
Extreme Asia 4 4
----------- -----------
Total assets 670 918
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft 11 -
Accounts payable 309 215
Accrued expenses 63 37
Interest payable 32 4
Taxes payable 80 80
Loans from third parties 866 795
Loans from shareholders 306 4
----------- -----------
Total current liabilities 1,667 1,135
Shareholders' equity
Preferred common stock 100,000 shares
authorized, none issued
Common stock 50,000,000 shares authorized
par value $0.001, 19,938,266 and 17,012,266
issued and outstanding at December 31 and
June 30, 2000 respectively
Par value 20 17
Paid in surplus 303 303
Retained earning (deficit) (1,320) (537)
----------- -----------
Total shareholders' equity (997) (217)
Total liabilities and shareholders' equity 670 918
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
4
INTERRUPTION TELEVISION, INC. AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Amounts expressed in thousands United States Dollars)
(Amounts in thousands)
For the six For the six
months ended months ended
December 31, December 31,
2000 1999
----------- -----------
Cash flows from operating activities:
Net Income (loss) (783) (76)
Depreciation and amortization 4 7
Stock issued for services 3
(Increase) decrease in operating assets :
Accounts receivable, net 96 236
Deposits and prepayments (24) -
Amount due from director 12 (134)
Increase (decrease) in operating liabilities :
Accounts payable 94 (56)
Accrued expenses 65 -
----------- -----------
Net cash used in operating activities (533) (23)
Cash flows from investing activities:
Acquisition of Fixed Assets (40) (11)
Capitalized Production costs - (299)
----------- -----------
Net cash (used in) provided by (573) (333)
investing activities
Cash flows from financing activities:
Loans from third parties and shareholders 373 347
----------- -----------
Net cash provided by financing 373 347
activities
Net increase (decrease) in cash (200) 14
Cash at the beginning of period 200 (10)
----------- -----------
Cash at the end of period - 4
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
5
INTERRUPTION TELEVISION, INC. AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
-----------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Amounts expressed in thousands United States Dollars)
COMMON STOCK
-------------------------------------------- Retained
Paid in earnings Total
Shares Par Value surplus (deficit) equity
------------ ------------ ------------ ------------ ------------
Balance June 30, 1999 17,012,666 17 303 (490) (170)
Net income (76) (76)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999
17,012,666 17 303 (566) (246)
============ ============ ============ ============ ============
Balance at June 30, 2000 17,012,666 17 303 (537) (217)
Stock issued for consulting
services in connection with
acquisition of July 20, 2000 at
nominal par value 2,504,000 3 3
Effect of exchange reorganization
421,600
Net income (loss) (783) (783)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 2000
19,938,266 20 303 (1,320) (997)
============ ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated statements.
6
INTERRUPTION TELEVISION, INC
----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 2000
(UNAUDITED)
(Amounts expressed in thousands United States Dollars)
1. ORGANIZATION AND PRINCIPLE ACTIVITIES
Interruption Television, Inc. ("the Company") was incorporated in the state of
Nevada on January 29, 1997. The Company changed its name from Time Financial
Services, Inc. to Interruption Television Inc. In July, 2000 following the share
exchange transaction between the Company and the shareholders of Interruption
Television Pte Limited, a Singapore corporation, and a wholly-owned subsidiary
of the Company. The Company maintains its head office in Singapore where it
coordinates sales, marketing, purchasing and administrative functions.
During the period from April 1, 1997 to July 19, 2000 the Company was engaged in
marketing financial information systems, software and on-line subscription
financial data through a wholly-owned subsidiary Time Lending, California. On
July 19, 2000 the Company sold and transferred all assets and liabilities and
all shares of Time Lending, California to a third party buyer.
As of July 20, 2000, the Company acquired all of the issued and outstanding
common stock of ITV, Inc. ("ITV") a Nevada corporation , which owns 100% of the
shares of Interruption Television Pte Ltd. a company incorporated in Singapore,
in exchange for 17,012,666 shares of the Company's Common Stock of par value
$0.001 each (approximately 85% of the shares now outstanding), after the
shareholders approved one for three reverse stock split on July 20, 2000, issued
to the shareholders of ITV. As a part of the share exchange transaction, an
additional 2,504,000 shares were issued to several persons instrumental in the
acquisition as consultant fees.
Interruption Television Pte Limited ("ITPL"), the operating company, is
incorporated in Singapore, and is principally engaged in the conceptualization
and production of television programs for worldwide distribution across multiple
media platforms. Additionally, the Company drives traffic from its branded
programs on traditional television medium to multiple media platforms and seeks
sponsorship opportunities for this traffic.
2. BASIS OF PRESENTATION
The acquisition on July 20, 2000, of ITV (accounting acquirer) by the Company
(non-operating shell) is considered in substance to be a capital transaction and
is accounted for as a reverse acquisition, except that no goodwill or other
intangible are recorded. On this basis, the historical financial statements
prior to June 30, 2000 represent the consolidated financial statement of the
Company and its subsidiary ITV. The historical stockholders' equity accounts of
the Company as of June 30, 2000 represent the 17,012,666 shares of common stock
issued in connection with the acquisition. The original 421,600 shares of common
stock outstanding prior to the exchange reorganization are reflected as an
addition in the stockholders' equity account of the Company as of July 20, 2000.
The 2,504,000 shares of common stock issued for consulting fees are reflected in
the stockholders' equity as of July 20, 2000.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Capitalized Production Costs
Capitalized Production costs comprises materials, direct labor, sub-contractors'
costs and an appropriate proportion of production overheads in developing
commercial films for showing on television. These costs are amortized over 5
years commencing from the date of commercial production.
Any capitalized production costs that cannot reasonably be recovered from
related future revenue is written-off to the profit and loss account.
b. Fixed Assets
Fixed assets are recorded at cost. Gains or losses on disposals are reflected in
current operations. Depreciation for financial reporting purposes is provided
using the straight-line method over the estimated useful lives of the assets as
follows:
Office Equipment 3-5 years
Furniture and fixtures 3-5 years
Leasehold Improvements 3-5 years
Fully depreciated assets are retained in the accounts until they are no longer
in use. Any gain or loss on disposal of fixed assets is recognized in the profit
and loss account currently.
7
c. Net sales
Net sales represent the income taken from contracts signed and programs that
have gone to air.
d. Income taxes
The tax expense is determined on the basis of tax effect accounting using the
liability method and it is applied to all significant timing differences, which
arise from the differences in accounting and tax treatment of certain income and
expense items. A deferred tax benefit is not recognized in the accounts unless
there is a reasonable expectation of realization
e. Operating leases
Operating leases represent those leases under which substantially all the risks
and rewards of ownership of the leased assets remain with the lessors. Rental
payments under operating leases are charged to expense on the straight-line
basis over the period of the relevant leases.
f. Foreign currency translation
Foreign currency transactions are converted at exchange rates approximating
those ruling at transaction dates. Foreign currency monetary assets as at
year-end are converted at rates of exchange approximating those ruling at that
date. Exchange differences are recognized in the profit and loss account
currently.
g. Revenue Recognition
Income from production of programs is recognized upon initial airing of the
program on any given broadcaster.
h. Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in Singapore requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
i. Fair value of financial instruments
The Company's financial instruments consist of cash, trade receivables,
short-term borrowings, operating leases and trade payables. The book values of
these instruments are considered to be representative of their fair values.
4. LOANS FROM THIRD PARTIES
a. The convertible note payable to Sarmatan Development Ltd. in
the amount of $500,000 is at 9% interest due May 25, 2001. As
part of the terms of the convertible note payable to Sarmatan
Development Ltd. the note can be converted to common stock if
not paid by the original due date November 25, 2000 at 75% of
the closing bid price as reported on the National Association
of Securities Dealers OTC Bulletin Board market. Although the
note has not been paid the holder has not converted any of the
note to common stock. This loan is secured against the
production library owned by Interruption Television Pte.
Limited, a 100% subsidiary of Interruption Television Inc.
b. The Company has two notes payable in the amount of $50,000
each were given to former shareholders of the Company in
compensation for services rendered in connection with the
reverse merger. The Notes were due November 2000 and bear
interest of 12%. The note agreement also requires the Company
to issue to the holders of the notes 3,750 shares a month
after October 20, 2000 until such time as the note is paid.
c. The company has $266,000 loan from a previous shareholder of
the company. This loan is repayable monthly over the four
month period to 30 April 2001. This loan is secured over the
receivables of Interruption Television Pte. Limited and is
currently being renegotiated.
5. WARRANTS
On July 11, 2000 the Company issued a warrant to Sarmatan Development Ltd. to
purchase 500,000 shares of common stock at an exercise price equal to 75% of the
bid price of the common stock on the day after the closing of the acquisition,
as reported on the National Association of Securities Dealers OTC Bulletin
Board. The price in accordance with the terms of the warrant was $0.5625 on July
21, 2000. Sarmatan Development Ltd. has until July 21, 2003 to exercise the
warrant.
8
6. INCOME TAXES
The Operating Company, Interruption Television Pte. Limited is subject to
Singapore tax at a rate of 25.5%. The company made profits in the year ended
March 31, 1999 on which tax was charged. These taxes can not be recovered
through the utilization of future losses.
7. OPERATING LEASE COMMITMENTS
As at the balance sheet dates, the Company has the following outstanding lease
commitments in respect of its office premise payable as follows:-
As at December 31, 2000 As at June 30, 2000
$ $
Within one year 50 50
After one year nil nil
8. RELATED PARTY TRANSACTIONS
Amounts due to and from shareholders and directors as at December 31, 2000 and
June 30, 2000 were as follows:
a. Due from directors
As at December 31, 2000 As at June 30, 2000
$ $
Danny McGill 147 159
----- -----
The amounts due from directors are unsecured, non-interest bearing and without
pre-determined repayment terms.
b. Loans from shareholders as at 31 December 2000
Loans from shareholders have no fixed repayment date but have a floating charge
over the assets of Interruption Television Pte. Limited that have not been
already secured by the loan agreements with third Parties (see note 4.).
Interest is payable on this loan at 8% per annum.
9. OTHER INFORMATION
a. Sales
All Company sales are generated from Singapore.
b. Assets
Substantially all of the Company's assets are located in Singapore.
c. Major customers
No individual customers accounting for more than 5% of the Company's sales.
10. OPERATING RISKS
a. Country risk
The Company's operations are conducted in Singapore. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in Singapore, and by the general
state of the Singapore economy.
9
11. Other supplemental information
The following items were included in the statements of operations:
6 Months Ended Dec 31, 2000 6 Months Ended Dec 31, 1999
$ $
Auditor's remuneration 6 4
Depreciation of Fixed Assets 4 2
Director's Remuneration 72 52
Consulting fees in connection
with reorganization 200
10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 THE 1995 ACT SHAREHOLDERS AND
PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER
ANY FORWARD - LOOKING STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY
ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED HEREIN. THESE FORWARD - LOOKING STATEMENTS INCLUDE PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES
RELATING TO THE PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY.
ASSUMPTIONS RELATING TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG
OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE
BUSINESS DECISIONS, AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE
DEVELOPMENT PROJECTS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT
ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE
COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD - LOOKING
STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE
INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE RESULTS
CONTEMPLATED IN ANY OF THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN WILL BE
REALIZED. BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT, THE IMPACT OF
WHICH MAY CAUSE THE COMPANY TO ALTER ITS MARKETING, CAPITAL EXPENDITURE PLANS OR
OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN
LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD - LOOKING
STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE
REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE
OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED.
Overview of Company's Business:
Interruption Television, Inc. (formerly "Time Financial
Services, Inc.") (the "Company") was incorporated on January 29, 1997. Its
wholly-owned operating subsidiary was incorporated on September 25, 1997 in
Singapore under the name of "Interruption Television Pte Ltd" ("ITV -
Singapore"). On July 20, 2000, the Company completed the acquisition of 100% of
the outstanding common stock of ITV, Inc., a Nevada corporation ("ITV"), in
exchange for 17,012,666 shares of the Company's Common Stock (approximately 85%
of the shares now outstanding). ITV is a holding company of ITV-Singapore, and a
wholly-owned subsidiary of the Company.
The stock issuances were made pursuant to a Share Exchange Agreement
("Agreement") between the Company and ITV. The terms of the Agreement were the
result of negotiations between the managements of the Company and ITV.
The Company, conceptualizes, produces and distributes television
programming for worldwide distribution on various media platforms, from
traditional television broadcasters, either terrestrial or cable/satellite to
Internet and broadband. The Company also uses a unique marketing system, driving
traffic from brand built television programs on traditional television mediums
and seeks sponsorship opportunities through directing this traffic. Currently,
these programs include, Kamal's Planet Ex, MuchMusic and Extreme Asia with plans
for further programming in the future. These programs are licensed to global
broadcasters including Columbia Tristar International Television. MuchMusic is
currently sponsored by Coca Cola Far East Ltd.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Selling, general and administrative expenses totaled $322 for the six months
ended December 31, 2000. Selling, general and administrative expenses constitute
of administrative and personnel costs to support the increase in sales and
production capacity. In addition the Company expended $200,000 in the
reorganization as discussed in Note 1 to the financial statements.
OPERATING LOSS. Operating loss from operations was $783 in part due to the
additional $200,000 expended in the reorganization and writing down the value of
the library to a conservative Net Realizable Value.
INTEREST EXPENSES. Interest expense was $28 for the six months to December 31
2000 and is due to the borrowing the Company has had to make in order to finance
future production and sales.
PROVISION FOR INCOME TAXES. There are no provisions for income taxes for the six
months ended December 31 2000 and in the six months ended December 31, 1999 as
the Company made taxable losses in both periods.
11
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31 2000, the Company's operations absorbed
cash resources of $100.
The Company's capitalized production costs remained at $414 at December 31 2000.
The Company anticipates that additional investment in connection with the
continuing expansion and improvement of programme production.
The Company anticipates that its operating cash flow, combined with cash on
hand, bank lines of credit and other external credit sources, and credit
facilities provided by affiliates or related parties, are adequate to satisfy
the Company's working capital requirements for the year ending June 30 2001.
FOREIGN EXCHANGE. All of the Company's sales are denominated either in
U.S. Dollars or Singapore Dollars. The largest portion of the Company's expenses
are denominated in Singapore Dollars.
12
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
NONE
ITEM 2 - CHANGES IN SECURITIES
NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5 - OTHER INFORMATION
NONE
ITEM 6 - EXHIBITS
8-K
NONE FILED IN THE QUARTER ENDED DECEMBER 31, 2000
13
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Interruption Television Inc.
(Registrant)
Date: February 20, 2001 /s/ Danny McGill
----------------------------------
President
Date: February 20, 2001 /s/ Jeffery Lim
----------------------------------
Treasurer and CFO