Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
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 No. 333-26385
Internet Media Corporation
(Exact Name of Small Business Issuer
as Specified in its Charter)
NEVADA 72-1346591
(State or Other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
(Address of Principal Executive Offices,
including Zip Code)
(504) 922-7744
(Issuer's telephone number, including area code)
Indicate by check mark whether 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 Registrant as
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes [ ] No [ X ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest
practicable date:
Class Outstanding as of 9-14-98
Common Stock, $.0001 par value 7,715,120
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Internet Media Corporation
Page
Consolidated Balance Sheets as of
June 30, 1998 (unaudited), and
December 31, 1997 3
Consolidated Statement of Operations
for the Three Months Ended June 30,
1998 and 1997 (unaudited), and the
Six Months Ended June 30, 1998 and
1997 (unaudited) 5
Consolidated Statement of Cash Flows
for the Six Months Ended June 30,
1998 and 1997 (unaudited) 6
Notes to Consolidated Financial Statements 8
INTERNET MEDIA CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
12/31/97 6/30/98
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 0 $ 37,278
Accounts receivable 224 224
Total current assets 224 37,502
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $1,412
and $1,764, respectively 210,472 215,120
INTANGIBLES
Organization costs, net
of accumulated amorti-
zation of $134 and $190,
respectively 435 379
Licenses and rights to
leases of licenses, net
of accumulated amorti-
zation of $2,625 and
$2,907, respectively 25,125 24,843
25,560 25,222
TOTAL ASSETS $236,256 $277,844
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft 116 0
Notes payable to
stockholder 116,282 285,223
Accounts payable 65,105 0
Accounts payable -
affiliate 10,069 10,068
Accrued interest 6,835 12,823
Accrued Expenses 531 531
Total current
liabilities 198,938 308,645
STOCKHOLDERS' EQUITY
Common stock, $.0001 par
value, 100,000,000
shares authorized,
6,424,000 and 6,962,759
shares issued and
outstanding,
respectively 642 695
Additional paid-in
capital 998,466 1,126,113
Deficit accumulated
during the
development stage (649,041) (1,032,776)
Subscriptions
receivable (860) (860)
Deferred compensation (311,889) (123,973)
37,318 (30,801)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $236,256 $277,844
INTERNET MEDIA CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
(unaudited) (unaudited)
Revenue $ 0 $ 598 $ 0 $ 822
Expenses
Depreciation
and amorti-
zation 345 584 690 1,168
Professional
fees 127,592 114,325 288,766 188,506
Rent 0 4,036 115 7,862
Salary 19,888 8,230 64,688 13,457
Other 21,582 5,197 29,476 6,235
169,407 132,372 383,735 217,228
Net loss (169,407) (131,774) (383,735) (216,406)
Loss per
common
share $(.024) $(.021) $(.056) $(.035)
Weighted
average
number
of shares
out-
standing 6,839,626 6,170,000 6,839,626 6,137,778
INTERNET MEDIA CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended Six Months Ended
6/30/98 6/30/97
(unaudited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(383,734) $(216,406)
Adjustment to
reconcile net loss
to net cash used in
operating activities
Depreciation 352 352
Amortization 338 816
Recognition of
services performed
for stock 315,615 156,250
Changes in:
accounts payable (65,106) 85
prepaids 0 (910)
accrued
liabilities 5,988 6,188
Net cash used
in operating
activities (126,547) (53,625)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of equipment (5,000) (762)
Investment in
joint venture 0 (13,100)
Purchase of leases
and rights to leases
of licenses 0 (5,000)
Net cash used
in investing
activities (5,000) (18,862)
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in note
payable to stockholder 198,941 33,000
Issuance of common
stock 0 50,000
Decrease in
subscriptions
receivable 0 1,300
Payment on note
payable to stockholder (30,000) 0
Net cash provided
by financing
activities 168,941 84,300
Net increase in cash 37,394 11,813
Cash, beginning of
period 0 14,502
Cash, end of period 37,394 26,315
Noncash investing and financing activities for the six
months ended June 30, 1997 (unaudited), include 150,000
shares issued for consulting and legal services to be
performed, valued at $375,000 for financial reporting
purposes.
Noncash investing and financing activities for the six
months ended June 30, 1998 (unaudited):
- - 400,000 shares issued for consulting and legal
services to be performed valued at $40,000.
- - 36,092 shares issued for communications consulting
services to be performed valued at $34,400.
- - 22,667 shares issued for internet and communications
consulting services valued at $8,500.
INTERNET MEDIA CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 1998
(Unaudited)
Note 1. Nature of Business, Organization and
Basis of Presentation
Beginning in October 1997, the Company's Board of Directors
determined that the Company's business segment development
priority would be: (1) Wireless Internet; (2) Community
Television; and (3) Wireless Cable. During the second
quarter of 1998, the Company's Board of Directors determined
that, for the foreseeable future, the Company would abandon
its efforts to develop its wireless cable properties, due to
current market conditions.
The Company's primary focus is on the development and
exploitation of its proprietary Wireless Internet Access
System. In February 1998, the Company obtained its first
Wireless Internet customer in Baton Rouge, Louisiana.
Substantially all of the Company's business efforts and
resources will, for the foreseeable future, be committed to
its Wireless Internet business segment. In exploiting its
Wireless Internet business opportunity, it is the Company's
plan either (1) to acquire an existing hard-wire dependent,
dial-up Internet Service Provider [ISP] in a particular
market and "plug-in" its proprietary Wireless Internet
Access System or (2) construct a Wireless Internet Access
System in a particular market. The Company is seeking
capital with which to exploit its Wireless Internet
technology.
In July 1998, the Company changed its name to "Internet
Media Corporation". The Company was incorporated on
November 1, 1996, under the name "Media Entertainment,
Inc.", to act as a holding company primarily in the wireless
cable and community (low power) television industries. To
this end, the Company acquired Winter Entertainment, Inc.
(WEI), which owns and operates a community (low power)
television station in Baton Rouge, Louisiana, and Missouri
Cable TV Corp. (MCTV), which owns the licenses necessary to
operate wireless cable systems in Poplar Bluff and Lebanon,
Missouri, has acquired licenses and leases of licenses
necessary to operate wireless cable systems in Port Angeles,
Washington, Astoria, Oregon, Sand Point, Idaho, The Dalles,
Oregon, and Fallon, Nevada, and has acquired licenses
necessary to operate community (low power) television
stations in Monroe/Rayville, Louisiana, Bainbridge, Georgia,
and Natchitoches, Louisiana.
In September 1998, the Company acquired Desert Rain Internet
Services ("DSRT"), a Santa Fe, New Mexico-based ISP, with
approximately 140 customers. The Company acquired DSRT for
cash. In July 1998, the Company executed an agreement to
acquire an ISP located in St. George, Utah, for cash. In
August 1998, the Company executed an agreement to acquire an
ISP located in Santa Fe, New Mexico, for cash and stock.
Note 2. Interim Consolidated Financial Statements
In the opinion of management, the accompanying consolidated
financial statements for the six months ended June 30, 1998
and 1997, reflect all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the
financial condition, results of operations and cash flows of
the Company, including subsidiaries, and include the
accounts of the Company and all of its subsidiaries. All
material intercompany transactions and balances are
eliminated.
The financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these unaudited financial
statements be read in conjunction with the financial
statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1997. The results of operations for the interim periods are
not necessarily indicative of the results to be obtained for
the entire year.
Note 3. Acquisitions
Effective December 31, 1996, the Company acquired WEI and
MCTV by issuing 2,157,239 shares of common stock in
exchange for all the common stock of each company. The
majority shareholder of the Company was also the sole
shareholder of WEI and the majority shareholder of MCTV.
Therefore, the acquisitions have been accounted for at
historical cost in a manner similar to a pooling of
interests. The consolidated statement of operations
includes the Company and its predecessors WEI and MCTV from
inception of WEI.
Note 4. Notes Payable to Shareholder
June 30, 1998
(unaudited)
Notes payable to majority
stockholder, interest accrues at
8%, due on demand and unsecured $285,223
In addition, during the six months ended June 30, 1998, the
same stockholder advanced to the Company a total of $168,941
on open account, at 8% per annum, which is payable on
demand.
Note 5. Joint Venture
During the six months ended June 30, 1998, the Company
incurred no further costs relating to a joint venture formed
to exploit the Company's Wireless Internet technology, which
joint venture has never had operations and, since December
31, 1997, has been abandoned.
Note 6. Stock Issuances
During the six months ended June 30, 1998, the Company
issued a total of 538,759 shares of common stock, as
follows:
A. 400,000 shares were issued to prepay legal services,
which shares were valued at $.10 per share, or $40,000
in the aggregate.
B. 36,092 shares were issued in payment of financial public
relations and communications consulting services, which
shares were valued at $.953125 per share, or $34,400, in
the aggregate.
C. 22,667 shares were issued to prepay internet and
communications consulting services, which shares were
valued at $.375 per share, or $8,500, in the aggregate.
D. 80,000 shares were issued to four of the directors of
the Company in payment for services rendered by such
persons in their capacities as directors. These shares
were valued at $.80 per share, or $64,000, in the
aggregate. However, for financial reporting purposes,
such shares were valued at $.56 per share, the last
closing bid price, as reported by the OTCBB, prior to
the issuances.
Note 7. Private Offering
In April 1998, the Company entered into a selling agreement
with Centex Securities, Inc., La Jolla, California, with
respect to the private sale of 600,000 units of securities
of the Company, at an offering price of $2.00 per unit.
Each unit is comprised of two shares of common stock of the
Company and one warrant to purchase one share each of the
common stock of the Company at an exercise price of $2.00
per share. There is no assurance that such private offering
will be successfully completed. As of the date hereof,
$340,000 has been received under such private offering.
Note 8. Subsequent Events
A. In July 1998, the Company changed its name to "Internet
Media Corporation".
B. Subsequent to June 30, 1998, the Company issued a total
of 710,000 shares of common stock, as follows:
1. 400,000 shares were issued to prepay consulting and
legal services, which shares were valued at $1.00
per share, or $400,000 in the aggregate.
2. 300,000 shares were issued in payment of financial
public relations consulting services, which shares
were valued at $1.10 per share, or $330,000, in the
aggregate.
3. 10,000 shares were issued under a Business
Acquisition Agreement, which shares were valued at
$1.00 per share, or $10,000, in the aggregate.
C. In September 1998, the Company acquired DSRT. The
acquisition was made for $25,000 in cash. The Company
intends to file a Current Report on Form 8-K with
respect to its acquisition of DSRT.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Background
The Company's primary focus is on the development and
exploitation of its proprietary Wireless Internet Access
System. In February 1998, the Company obtained its first
Wireless Internet customer in Baton Rouge, Louisiana.
Substantially all of the Company's business efforts and
resources will, for the foreseeable future, be committed to
its Wireless Internet business segment. In exploiting its
Wireless Internet business opportunity, it is the Company's
plan either (1) to acquire an existing hard-wire dependent,
dial-up Internet Service Provider [ISP] in a particular
market and "plug-in" its proprietary Wireless Internet
Access System or (2) construct a Wireless Internet Access
System in a particular market. The Company is seeking
capital with which to exploit its Wireless Internet
technology.
In July 1998, the Company changed its name to "Internet
Media Corporation". The Company was incorporated on
November 1, 1996, under the name "Media Entertainment,
Inc.", to act as a holding company primarily in the wireless
cable and community (low power) television industries. To
this end, the Company acquired Winter Entertainment, Inc.
(WEI), which owns and operates a community (low power)
television station in Baton Rouge, Louisiana, and Missouri
Cable TV Corp. (MCTV), which owns the licenses necessary to
operate wireless cable systems in Poplar Bluff and Lebanon,
Missouri, has acquired licenses and leases of licenses
necessary to operate wireless cable systems in Port Angeles,
Washington, Astoria, Oregon, Sand Point, Idaho, The Dalles,
Oregon, and Fallon, Nevada, and has acquired licenses
necessary to operate community (low power) television
stations in Monroe/Rayville, Louisiana, Bainbridge, Georgia,
and Natchitoches, Louisiana. The Company has, for the
foreseeable future, abandoned its efforts to develop its
wireless cable properties, due to current market conditions.
In September 1998, the Company acquired Desert Rain Internet
Services ("DSRT"), a Santa Fe, New Mexico-based ISP, with
approximately 140 customers. The Company acquired DSRT for
cash. In July 1998, the Company executed an agreement to
acquire an ISP located in St. George, Utah, for cash. The
St. George ISP has over 1,400 customers. The closing under
the acquisition agreement is scheduled for the middle of
September 1998. In August 1998, the Company executed an
agreement to acquire an ISP located in Santa Fe, New Mexico,
for cash and stock. This Santa Fe ISP has approximately
1,400 customers. The closing under the acquisition
agreement is scheduled for October 1998.
Because the Company, WEI and MCTV were combined in a
reorganization of entities under common control, the
presentation contained in the financial statements of the
Company has been prepared in a manner similar to the
pooling-of-interests method. In this regard, reference is
made to Notes 1 and 3 of the Company's financial statements
appearing elsewhere herein. The following discussion
reflects such financial statement presentation.
Results of Operations
Six Months Ended June 30, 1998, versus Six Months Ended June
30, 1997. The Company had no revenues from operations for
the six months ended June 30, 1998 ("Interim 98"), compared
to revenues of $822 (unaudited) for the six months ended
June 30, 1997 ("Interim 97"). The Company expects that,
during the third quarter of 1998, the Wireless Internet
Segment will generate revenues from operations, following
its acquisition of Desert Rain Internet Services, a Santa
Fe, New Mexico-based ISP. The Company's net loss of
$383,735 (unaudited) is attributable in large part to the
issuance of 538,759 shares pursuant to various consulting
agreements, which shares were valued at a total of $146,900.
During Interim 98, approximately $270,816 of the Company's
pre-paid consulting expenses (including previously issued
shares for consulting services) was expensed. Similar
expenses will be incurred during the remainder of Fiscal 98.
Wireless Internet Segment. This Segment did not exist
during Interim 97. The sale of a single Wireless DataLink
System has accounted for all of this Segment's revenues,
occurring in the fourth quarter of Fiscal 97. The Company
continues to market its proprietary Wireless DataLink
System, although the Company's primary focus during the
remainder of Fiscal 98 will be on the exploitation of its
proprietary Wireless Internet System.
Acquisition. In September 1998, the Company acquired
DSRT, a Santa Fe, New Mexico-based ISP. The acquisition was
made for $25,000 in cash. DSRT will provide revenues from
operations during the final month of the third quarter of
Fiscal 98. However, no prediction as the amount of such
revenues can be made. The Company intends to file a Current
Report on Form 8-K with respect to its acquisition of DSRT.
Acquisition Agreements. In July 1998, the Company
executed an agreement to acquire an ISP located in St.
George, Utah, for cash. The St. George ISP has over 1,400
customers. The Company does not currently possess capital
with which to acquire the St. George ISP. (See "Liquidity
and Capital Resources" below).
In August 1998, the Company executed an agreement to
acquire an ISP located in Santa Fe, New Mexico, for cash and
stock. This Santa Fe ISP has approximately 1,400 customers.
The Company does not currently possess capital with which to
acquire this Santa Fe ISP. (See "Liquidity and Capital
Resources" below).
Acquisition Letters of Intent. During the third quarter
of Fiscal 1998, the Company executed letters of intent to
acquire ISPs located in Wichita Falls and Midland, Texas,
and Canon City, Colorado, these in addition to the
previously executed letter of intent to acquire a Baton
Rouge, Louisiana-based ISP. There is no assurance that the
Company will be able to reach a definitive agreement with
any of the four ISPs or that the Company will ever possess
sufficient capital to complete the acquisition of any of
these ISPs. (See "Liquidity and Capital Resources" below).
Marketing Agreement. During Interim 98, the Company
entered into a marketing agreement with a Baton Rouge,
Louisiana, dial-up ISP, and has begun to place customers
onto its Wireless Internet system, which marketing agreement
will remain in place until such time as the proposed
acquisition of such dial-up ISP is consummated, of which
there is no assurance. (See "Liquidity and Capital
Resources" below). Should the proposed acquisition be
abandoned, the Company expects that it will continue to
operate under its marketing agreement with such dial-up ISP.
(See "Liquidity and Capital Resources" below).
Joint Venture. Also, the Company has entered into a
joint venture agreement to develop a Wireless Internet
system in Monroe, Louisiana. The Company expects that this
joint venture will begin to produce revenues during the
third quarter of Fiscal 98.
Community Television Segment. No revenues from the
operations of the Community Television Segment for Interim
98 were generated compared to revenues of $822 (unaudited)
for Interim 97. The Company expects that this segment's
revenues will remain below Interim 98 levels for the
remainder of Fiscal 98 and for all of Fiscal 99.
Management's expectation is based on the Board of Directors'
decision to focus all of the Company's resources on the
exploitation of its Wireless Internet technology.
Wireless Cable Segment. The Company has determined that,
for the foreseeable future, it will not devote any resources
to the development of its Wireless Cable assets, due to
industry conditions.
Liquidity and Capital Resources
June 30, 1998. The Company remained in a substantially
illiquid position throughout Interim 98. At June 30, 1998,
the Company's working capital deficit was $271,143
(unaudited), compared to a working capital deficit at
December 31, 1997, of $198,714 (audited). This continued
deterioration in the Company's working capital deficit is
attributable to the fact that no material revenues were
generated by Company operations, during Interim 98, nor any
sales of shares of stock consummated. During Interim 98,
one of the Company's officers, David M. Loflin, advanced to
the Company a total of $198,941, which funds were used
primarily for operating expenses of the Company and the
purchase of equipment. Such advances were made on open
account, bear interest at 8% per annum and are payable on
demand. As of the date of this Quarterly Report on Form 10-
QSB, the Company owed Mr. Loflin a total of $285,223, plus
accrued and unpaid interest of approximately $12,823.
During Interim 98, the Company repaid $30,000 of such loans
to Mr. Loflin. The Company does not currently possess funds
necessary to repay the remaining loans. Mr. Loflin has
advised the Company that he does not intend to make demand
for repayment of the loans for the foreseeable future.
Nevertheless, should Mr. Loflin make such demand for
repayment, the Company could be unable to satisfy such
demand, which would have a materially adverse effect of the
Company. In addition, none of the officers of the Company
will be paid a salary, and such persons have agreed to work
without pay, until such time as payment of such officers'
salaries would have no adverse affect on the Company's
financial condition.
Since the end of Interim 98, the Company has received
$340,000 from the sale of shares of its Common Stock,
pursuant to a private offering. The balance of the
offering, $260,000, is expected to be received in the near
future. Management basis its expectations on discussions
with the brokerage firm who is handling the private offering
on the Company's behalf. However, no prediction as to the
timing of the receipt of the additional funds, nor can any
assurance be made that any such funds will, in fact, be
received by the Company. Without such additional funding,
the Company will be unable to consummate the acquisition of
ISPs located in St. George, Utah, and Santa Fe, New Mexico.
During Interim 98, the Company issued shares of its Common
Stock on four occasions:
A. 400,000 shares were issued to prepay legal services,
which shares were valued at $.10 per share, or $40,000 in
the aggregate.
B. 36,092 shares were issued in payment of financial
public relations and communications consulting services,
which shares were valued at $.953125 per share, or $34,400,
in the aggregate.
C. 22,667 shares were issued to prepay internet and
communications consulting services, which shares were valued
at $.375 per share, or $8,500, in the aggregate.
D. 80,000 shares were issued to four of the directors of
the Company in payment for services rendered by such persons
in their capacities as directors. These shares were valued
at $.80 per share, or $64,000, in the aggregate. On the
date of such issuances, the last closing bid price, as
reported by the OTCBB, for the common stock of the Company
was $.56 per share.
Subsequent to Interim 98, the Company has issued shares of
its Common Stock on three occasions:
A. 400,000 shares were issued to prepay consulting and
legal services, which shares were valued at $1.00 per share,
or $400,000 in the aggregate.
B. 300,000 shares were issued in payment of financial
public relations consulting services, which shares were
valued at $1.10 per share, or $330,000, in the aggregate.
C. 10,000 hares were issued under a Business Acquisition
Agreement, which shares were valued at $1.00 per share, or
$10,000, the aggregate.
Current Private Offering. The Company, through Centex
Securities, Inc., La Jolla, California, is currently
conducting a private offering of units of its securities, in
a maximum amount of $600,000. Each unit consists of two
shares of Company common stock and one warrant to purchase
one share of Company common stock at an exercise price of
$2.00 per share. Each unit is offered at a purchase price
of $2.00. To date, the Company has received $340,000 from
the sale of shares of its Common Stock, pursuant to a
private offering. The balance of the offering, $260,000, is
expected to be received in the near future. Management
basis its expectations on discussions with the brokerage
firm who is handling the private offering on the Company's
behalf. However, no prediction as to the timing of the
receipt of the additional funds, nor can any assurance be
made that any such funds will, in fact, be received by the
Company. Without such additional funding, the Company will
be unable to consummate the acquisition of ISPs located in
St. George, Utah, and Santa Fe, New Mexico.
Wireless ISP Markets. In general, for the development of
any of its proposed Wireless ISP markets, the Company will
be required to purchase approximately $25,000 of equipment.
Thereafter, the amount of marketing funds needed will vary
from market to market, depending on the size of a particular
market. It can be expected, however, that the initial
marketing budget will range approximately from $10,000 to
$150,000. These estimates are not based on a specific study
or market research conducted by the Company, but are based,
instead, on the business experience of the Company's
management, as well as general and informal market surveys
conducted by the Company and others. There is no assurance
that such estimates will be accurate.
The Company's strategy calls, first, for the
identification of a satisfactory market. Next, the Company
attempts to identify an existing dial-up ISP for
acquisition. Should such an acquisition be completed, the
Company will essentially "plug-in" its Wireless Internet
system into the acquired ISP's system. Should an
acquisition not be available in a particular market, the
Company will build-out and start-up an all-wireless system.
There is no assurance that funding will be available to the
Company at such times as it attempts acquire an ISP or
build-out and start-up any one of its targeted Wireless ISP
markets.
Acquisition. In September 1998, the Company acquired
DSRT, a Santa Fe, New Mexico-based ISP. The acquisition was
made for $25,000 in cash. DSRT will provide revenues from
operations during the final month of the third quarter of
Fiscal 98. However, no prediction as the amount of such
revenues can be made. The Company intends to file a Current
Report on Form 8-K with respect to its acquisition of DSRT.
Acquisition Agreements. In July 1998, the Company
executed an agreement to acquire an ISP located in St.
George, Utah, for cash. The St. George ISP has over 1,400
customers. The Company does not currently possess capital
with which to acquire the St. George ISP.
In August 1998, the Company executed an agreement to
acquire an ISP located in Santa Fe, New Mexico, for cash and
stock. This Santa Fe ISP has approximately 1,400 customers.
The Company does not currently possess capital with which to
acquire this Santa Fe ISP.
Acquisition Letters of Intent. During the third quarter
of Fiscal 1998, the Company executed letters of intent to
acquire ISPs located in Wichita Falls and Midland, Texas,
and Canon City, Colorado, these in addition to the
previously executed letter of intent to acquire a Baton
Rouge, Louisiana-based ISP. There is no assurance that the
Company will be able to reach a definitive agreement with
any of the four ISPs or that the Company will ever possess
sufficient capital to complete the acquisition of any of
these ISPs.
Marketing Agreement. During Interim 98, the Company
entered into a marketing agreement with a Baton Rouge,
Louisiana, dial-up ISP, and has begun to place customers
onto its Wireless Internet system, which marketing agreement
will remain in place until such time as the proposed
acquisition of such dial-up ISP is consummated, of which
there is no assurance. Should the proposed acquisition be
abandoned, the Company expects that it will continue to
operate under its marketing agreement with such dial-up ISP.
Joint Venture. During Interim 98, the Company entered
into a joint venture agreement to implement the Company's
Wireless Internet System in Monroe, Louisiana. The Company
expects that this joint venture will begin to produce
revenues during the fourth quarter of Fiscal 98.
Cash Flows from Operating Activities. During Interim 98,
the Company's operations used cash of $126,547 (unaudited).
The use of cash in the current period is primarily due to
the Company's net loss of $383,735 (unaudited), which offset
a recognition of services performed for stock. The Company
intends to recognize approximately $88,000 for services
performed for stock each quarter during the remainder of
Fiscal 98. The Company's use of cash in operations during
Interim 97 is attributable primarily to the Company's net
loss for such interim period. Without the successful
completion of the its currently on-going private offering,
the Company's management does not expect that operations for
all of Fiscal 98 will generate positive cash flow. However,
management is unable to predict the level of cash flow to be
generated during such period of time, due to the uncertainty
of the level and timing of funding, if any, with which to
commence its proposed Wireless Internet operations. Without
any such funding, it can be expected that the Company will
not be able to generate positive cash flow from operations.
Cash Flows from Investing Activities. Investing
activities of the Company during Interim 98 used $5,000
(unaudited), which was for the purchase of equipment. In
comparison, investing activities of the Company during
Interim 97 used $18,862 (unaudited), including $7,622
(unaudited) for the purchase of equipment, $13,100
(unaudited) for an investment in a joint venture that was,
during the first quarter of Fiscal 98, abandoned, and $5,000
(unaudited) for the purchase of licenses and rights to
leases of licenses. The Company's management is unable to
predict whether investing activities will provide cash
during the remainder of Fiscal 98. This uncertainty is due
to uncertainty as to the success of the currently on-going
private offering of the Company or the securing of other
financing commitment. Absent any such funding, it is
expected that investing activities will continue to use the
Company's cash.
Cash Flows from Financing Activities. Financing
activities of the Company provided $168,941 (unaudited) in
cash during Interim 98, compared to Interim 97 when
financing activities provided $84,300 (unaudited) in cash.
All of the cash during the current period was the result of
advances to the Company by a shareholder on open account.
The sale of 20,000 shares of Company Common Stock for a
total of $50,000 in cash and loans from a shareholder
($33,000) provided substantially all of the balance of cash
from financing activities, during Interim 97. The Company's
currently on-going private offering of securities is the
primary means of securing capital presently available to the
Company. To date, the Company has received $340,000 from
the sale of shares of its Common Stock, pursuant to a
private offering. The balance of the offering, $260,000, is
expected to be received in the near future. Management
basis its expectations on discussions with the brokerage
firm who is handling the private offering on the Company's
behalf. However, no prediction as to the timing of the
receipt of the additional funds, nor can any assurance be
made that any such funds will, in fact, be received by the
Company. Thus, cash provided by financing activities will
be substantially higher during the third quarter of Fiscal
98. However, no prediction as to the level of such cash can
be made by management.
Non-Cash Investing Activities. During Interim 98, the
Company's non-cash investing and financing activities
included the following: (A) the issuance of 400,000 shares
of Common Stock in consideration of consulting and legal
services to be performed, which shares were valued at
$40,000, in the aggregate; (B) the issuance of 36,092 shares
of Common Stock in consideration of consulting services to
be performed, which shares were valued at $.953125 per
share, or $34,400, in the aggregate; and (C) the issuance of
22,667 shares of Common Stock in consideration of internet
and communications consulting services to be performed,
which shares were valued at $.375 per share, or $8,500, in
the aggregate.
Management's Plans Relating to Future Liquidity
It is management's opinion that the Company will be unable
to improve its current liquidity position without a further
infusion of cash in an amount of not less than $200,000.
For the remainder of Fiscal 98, the Company's current
operations will be unable, on their own, to alleviate the
Company's current lack of liquidity. Management believes it
will be able to mitigate the effects of its current
financial condition should it receive up to $260,000 upon
the successful completion of its currently on-going private
offering of securities, of which there is no assurance, or
the Company will pursue and other means of financing its
plan of business that may become available. No prediction
can be made as to the likelihood that the company will be
successful in obtaining needed financing. However,
management believes that it will be successful in obtaining
needed funding in the near term. This belief is based on
management's discussions with the selling agent for its
currently on-going private offering of securities. Should
one of the described financing transactions be consummated,
of which there is no assurance, the Company's management
believes that the operations that are commenced with the
obtained funds will be able to generate sufficient cash flow
to sustain the Company's activities through Fiscal 98.
There is no assurance that such will be the case.
Capital Expenditures
During the remainder of Fiscal 98 and the first half of
Fiscal 99, the Company expects to apply substantially all of
its available capital to the acquisition of existing dial-up
ISPs and/or build-out and start-up of one or more of its
Wireless ISP markets. Currently, the Company is under
contract to acquire an existing ISP in St. George, Utah, and
will be required to deliver approximately $250,000 at the
closing thereunder. Also, the Company is under contract to
acquire an existing ISP in Santa Fe, New Mexico, and will be
required to deliver $50,000 at the closing thereunder.
There is no assurance that any of the necessary capital for
such proposed transactions will be available, although
management of the Company anticipates that it will be able
to complete the Santa Fe acquisition in the near future,
after discussions with the brokerage firm who is handling
the Company's currently ongoing private offering.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In September 1998, the Company notified Tre Vega, a
consultant to the Company, of its intention to institute
arbitration proceedings for Mr. Vega's failure to perform
under a consulting agreement with the Company. The Company
intends to pursue various causes of action against Mr. Vege,
including, without limitation, breach of contract,
violations of the Texas Deceptive Trade Practices Act,
securities fraud, common law fraud and tortious interference
with beneficial business relationships. For damages, the
Company intends to seek, among other things, the return of
40,000 shares of Company Common Stock issued to Mr. Vega
under the consulting agreement, a ruling that the consulting
agreement is void or voidable, the cancellation of certain
bonus compensation (shares of Company Common Stock)
described in the consulting agreement, unspecified monetary
damages and attorneys' fees. No specific date has been set
with respect to the institution of the arbitration
proceeding against Mr. Vega. Counsel to the Company is of
the opinion that the Company will be successful in such an
arbitration proceeding, although no assurances in this
regard can be given.
Item 2. Changes in Securities.
During the three months ended June 30, 1998, the Company
issued no securities.
Subsequent to June 30, 1998, the Company has issued
unregistered securities on three occasions, as follows:
1. (a) Securities Sold. On July 31, 1998, the Company
issued 10,000 shares of its Common Stock.
(b) Underwriters and Other Purchasers. Such shares
were issued to Craig Boothe.
(c) Consideration. Such shares were issued in under
a Business Acquisition Agreement.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provision of
Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Not applicable.
2. (a) Securities Sold. On September 4, 1998, the
Company issued 400,000 shares of its Common Stock.
(b) Underwriters and Other Purchasers. Such shares
were issued to Newlan & Newlan, Attorneys at Law.
(c) Consideration. Such shares were issued in
payment of consulting and legal services.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provision of
Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Not applicable.
3. (a) Securities Sold. On September 7, 1998, the
Company issued 300,000 shares of its Common Stock.
(b) Underwriters and Other Purchasers. Such shares
were issued to Capital Financial Consultants, Inc.
(c) Consideration. Such shares were issued in
payment of consulting services.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provision of
Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Not applicable.
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 and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on From 8-K.
No Current Report on Form 8-K was filed during the
three months ended June 30, 1998.
Subsequent to June 30, 1998, on July 29, 1998, the
Company filed a Current Report on Form 8-K in which the
Company reported a change of corporate name.
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: September 17, 1998.
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin
President and
Principal Financial Officer