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 March 31, 1999
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)
(225) 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 6-11-99
Common Stock,
$.0001 par value 11,505,120
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Internet Media Corporation
Consolidated Balance Sheets as of March 31, 1999
(unaudited), and December 31, 1998 (audited)
Consolidated Statement of Operations for the Three
Months Ended March 31, 1999 and 1998 (unaudited)
Consolidated Statement of Cash Flows Three Months Ended
March 31, 1999 and 1998 (unaudited)
Notes to Consolidated Financial Statements
INTERNET MEDIA CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
Three Months Ended
12/31/98 3/31/99
(audited) (unaudited)
ASSETS
CURRENT ASSETS
Cash $ 7,232 $ 78,612
Accounts receivable 1,033 126,617
Due from affiliate 0 1,614
Inventory 0 64,501
Prepaid expenses 0 20,019
Deposits 0 4,995
Total current assets 8,265 296,358
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $1,412
and $323,562,
respectively 247,267 795,058
INVESTMENTS 43,750 43,750
INTANGIBLES
Licenses and rights to
leases of licenses, net
of accumulated amorti-
zation of $4,475 and
$5,013, respectively 34,207 33,382
Acquired customer base,
net of accumulated
amortization of $0 and
1,008,724, respectively 0 17,148,308
Goodwill, net of
accumulated amortization
of $0 and $292,261,
respectively 0 4,979,361
34,207 22,161,051
Total assets $333,659 $23,296,217
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
- trade 0 96,355
Customer deposits 0 7,127
Accounts payable
- affiliate 10,069 10,069
Property dividends
payable 57,519 57,519
Taxes payable 0 22,454
Accrued expenses 0 41,879
Accrued interest
- majority stockholder 15,416 15,416
Notes payable to
majority stockholder 146,415 157,926
Accounts payable and
accrued expenses 19,652 0
Deferred tax liability 0 4,968,429
Deferred revenue 0 67,259
Total current
liabilities 249,071 5,444,433
LONG-TERM LIABILITIES
Notes payable 0 28,516
Leases payable 0 5,603
Total long-term
liabilities 0 34,119
Total liabilities 249,071 5,478,552
STOCKHOLDERS' EQUITY
Common stock, $.0001
par value, 100,000,000
shares authorized,
8,497,259 and
10,902,259 shares
issued and
outstanding,
respectively 850 1,090
Additional paid-in
capital 2,874,189 22,076,477
Deficit accumulated
during the
development stage (1,686,667) (2,773,093)
Subscriptions
receivable (860) (860)
Deferred consulting (1,102,924) (1,485,949)
84,588 17,817,665
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $333,659 23,296,217
INTERNET MEDIA CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
12/31/98 3/31/99
(audited) (unaudited)
Revenue $ 5,765 $536,054
Costs of goods sold 0 (201,600)
Gross profit 5,765 334,454
Operating Expenses
Depreciation and
amortization 2,645 1,324,028
Professional fees 239,573 22,193
Rent 3,182 18,523
Salary and
commissions 85,900 233,299
Contract services 0 20,696
Advertising 0 16,312
Other 11,326 77,552
Total operating
expenses 342,361 1,712,613
Operating loss $(336,861) (1,378,159)
Other income (expense)
Interest expense 0 (528)
Income (loss) before
income tax (336,861) (1,378,687)
Federal income
tax benefit 0 292,261
Net loss (336,861) (1,086,426)
Loss per common share $(.05) $(.11)
Weighted average number
of shares outstanding 6,780,054 10,160,259
INTERNET MEDIA CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended
12/31/98 3/31/99
(audited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(336,861) $(1,086,426)
Adjustment to
reconcile net loss
to net cash provided
(used) in operating
activities
Depreciation and
amortization 1,299 1,324,028
Increase (decrease)
in deferred
consulting fees
for stock 266,108 (383,025)
Changes in assets
and liabilities,
net of effects of
stock purchase of
CyberHighway, Inc.
Current assets 0 328,791
Current
liabilities 0 (249,114)
Decrease (increase)
in accounts payable 0 (125,584)
Decrease (increase)
in receivable
from affiliates 0 (1,614)
Decrease (increase)
in inventory 0 (64,501)
Decrease (increase)
in prepaid expenses 0 (20,019)
Decrease (increase)
in deposits 0 (4,825)
Increase in customer
deposits 0 7,127
Increase in accounts
payable - trade 51,900 76,703
Increase in taxes
payable 0 22,454
Increase accrued
expenses 0 41,879
Increase in deferred
revenue 0 67,259
Increase in leases
payable 0 5,603
Net cash used in
operating
activities (17,554) (61,264)
CASH FLOWS FROM
INVESTING ACTIVITIES
(Increase) in property
and equipment (12,444) (869,941)
Stock purchase of
net assets of
CyberHighway, Inc. 0 706,049
Net cash used in
investing
activities (12,444) (163,892)
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in note
payable to
stockholder 0 11,511
Issuance of common
stock for cash 0 290,000
Increase in open
account payable to
stockholder 30,000 0
Increase in long-term
note payable 0 28,516
Stock purchase of
CyberHighway, Inc.
liabilities 0 (30,912)
Net cash provided
by financing
activities 30,000 299,115
Net increase in cash 2 71,380
Cash, beginning of period 135 7,232
Cash, end of period 137 78,612
Noncash investing and financing activities for the three
months ended March 31, 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
Three Months Ended March 31, 1999
(Unaudited)
Note 1. Nature of Business, Organization and
Basis of Presentation
Internet Media Corporation (IMC) was incorporated as
Media Entertainment, Inc. in the State of Nevada on
November 1, 1996, to operate as a holding company in the
wireless cable television and community (low power)
television industries, as well as other segments of the
communications industry. In 1998 the Company changed
it's focus to concentrate in the Wireless Internet
communications industry. The Company has ceased efforts
to develop the wireless cable and low power television
business areas and has announced that assets from the
low power activities will be distributed to shareholders
in 1999. Therefore, management has not provided
separate segment information in these financial
statements.
Effective December 31, 1996, IMC acquired all of the
outstanding common stock of Winter Entertainment, Inc.,
a Delaware corporation incorporated on December 28, 1995
(WEI), and Missouri Cable TV Corp., a Louisiana
corporation incorporated on October 9, 1996 (MCTV). WEI
operates a community television station in Baton Rouge,
Louisiana; MCTV owns wireless cable television channels
in Poplar Bluff, Missouri, which system has been
constructed and is ready for operation, and Lebanon,
Missouri. Effective October 8, 1998, the Company formed
Santa Fe Wireless Internet, Inc. (Santa Fe), a New
Mexico corporation, to hold the assets acquired from
Desert Rain Internet Services. Santa Fe was organized
to provide Wireless Internet access. The acquisition of
WEI and MCTV by IMC was accounted for as a
reorganization of companies under common control. The
assets and liabilities acquired were recorded at
historical cost in a manner similar to a pooling of
interests. The acquisition of Santa Fe was accounted
for as a purchase whereby the cost is allocated to the
assets acquired.
In January 1999, the Company acquired all of the
outstanding capital stock of CyberHighway, Inc., an
Idaho corporation, in exchange for shares of Company
common stock. This acquisition was accounted for as a
purchase.
Note 2. Interim Consolidated Financial Statements
In the opinion of management, the accompanying
consolidated financial statements for the three months
ended March 31, 1999 and 1998, 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
inter-company 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 filed with the SEC. Certain reclassifications
and adjustments may have been made to the financial
statements for the comparative period of the prior
fiscal year to conform with the 1998 presentation. 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.
Effective January 29, 1999, the Company acquired
CyberHIghway, which acquisition has been accounted for
as a purchase and not as a pooling of interests.
Note 4. Notes Payable to Shareholder
March 31, 1999
(unaudited)
Notes payable to majority
stockholder, interest accrues
at 8%, due on demand and unsecured $157,926
Note 5. Stock Issuances
During the three months ended March 31, 1999, the
Company issued a total of 2,395,000 shares of common
stock, as follows:
A. 60,000 shares were issued in a private
offering, which share were sold for cash at
a price of $4.50 per share, or $270,000 in
the aggregate.
B. 2,000,000 shares were issued in exchange for
all of the capital stock of CyberHighway,
which shares were valued at $7.50 per share,
or $15,000,000 in the aggregate.
C. 325,000 shares were issued in payment of a
finder's fee arising out of the Company's
acquisition of CyberHighway, which shares
were valued at $7.50 per share, or
$2,437,500 in the aggregate.
Note 7. Subsequent Events
In May 1999, the Company sold 50,000 units of securities
in a private offering. Each unit was comprised of one
shares of common stock of the Company and one warrant to
purchase one share of the common stock of the Company at
an exercise price of $7.00 per share.
In June 1999, the Company received $180,000 from the
exercise of warrants, and an additional $160,000 is
expected to be received from the exercise of similar
warrants in the near future. The warrant exercise price
of the warrants being exercised is $2.00 per share.
In June 1999, the Company entered into an Investor
Relations Agreement with a consultant to the Company.
Under its agreement with the consultant, the Company has
issued 500,000 shares of common stock, which shares were
valued at $4.00 per share, or $2,000,000 in the
aggregate. The term of the agreement is five years.
The $2,000,000 in compensation is to amortized over the
entire term of the agreement.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations.
Background
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 in the wireless cable
and community (low power) television industries and
acquired Winter Entertainment, Inc., a Delaware
corporation ("WEI"), and Missouri Cable TV Corp., a
Louisiana corporation ("MCTV"), to this end. Due to
current market conditions in the wireless cable
industry, the Company has abandoned its efforts to
develop its wireless cable properties. In furtherance
of its plan to focus on the exploitation of its Wireless
Internet access products and expansion of its other
Internet services, the Company has agreed to assign all
of its community (low power) television properties to
New Wave Media Corp., in exchange for 1,500,000 shares
of such entity's common stock. The Company's Board of
Directors has declared a dividend with respect to all
1,500,000 New Wave Media Corp. shares.
In September 1998, the Company, through its subsidiary,
Santa Fe Wireless Internet, Inc., a New Mexico
corporation ("SFWI"), acquired the assets and going
business of Desert Rain Internet Services ("DSRT"), a
Santa Fe, New Mexico-based Internet Service Provider
(ISP), for $25,000 in cash. Subsequent to March 31,
1999, in June 1999, the Company, through SFWI, acquired
Santa Fe Trail Internet Plus, Inc., a New Mexico
corporation ("Trail"), another Santa Fe, New Mexico-
based ISP, for 100,000 shares of Company Common Stock.
The acquisition of Trail is not reflected in the
discussion below. During the quarter ended March 31,
1999, and until the acquisition of Trail, the Company
continued to operate DSRT under the "Desert Rain
Internet Services" trade name. Upon consummating the
acquisition of Trail, the operations of DSRT were
combined with those of Trail, and the Santa Fe, New
Mexico, operations of the Company operate under Trail's
trade name. Currently, the Company is negotiating for
the acquisition of numerous other ISPs located
throughout the United States. There is no assurance
that any such proposed acquisition will be consummated.
On January 29, 1999, the Company acquired all of the
outstanding capital stock of CyberHighway, Inc.
("CyberHighway"), a Boise, Idaho-based ISP with
approximately 27,000 subscribers, in exchange for
2,000,000 shares of Company Common Stock. The results
of operations discussed below include the operations of
CyberHighway from January 29, 1999 through March 31,
1999.
The Company's acquisition of CyberHighway fundamentally
altered the Company's outlook. Prior to this
acquisition, the Company's growth plan called for either
(1) the acquisition of small, local ISPs located in
certain key cities, then essentially "plugging-in" the
Company's US.RFTM Wireless Internet access system into
the acquired ISP's network system and marketing the
Wireless Internet access system or (2) the establishment
of strategic relationships by licensing local ISPs in
certain key cities to exploit the Company's US.RF
Wireless Internet access products. This growth
strategy, while proving effective, proved also to be
slow and relatively expensive.
With the acquisition of CyberHighway, not only did the
Company acquire approximately 27,000 dial-up Internet
access subscribers and a state-of-the-art Network
Operations Center, the Company also gained immediate
access to customers in over 230 markets in which a
CyberHighway-owned or affiliate-ISP provides Internet
services. The Company intends to establish a Wireless
Internet access system in nearly 50 of these
CyberHighway markets by the end of the third quarter of
1999. The Company continues to pursue aggressively the
acquisition of independent ISPs and licensing of
independent ISPs who would exploit the Company's US.RF
Wireless Internet access products.
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
Three Months Ended March 31, 1999, versus Three Months
Ended March 31, 1998.
General. During the three months ended March 31, 1998
("Fiscal 98"), substantially all of the Company's
revenues, $5,765 (unaudited), were generated by the
Company's Interent Segment, as were the revenues for the
three months ended March 31, 1999 ("Interim 99"). As
discussed above, during Interim 98, the Company
determined to cease, for the foreseeable future,
activities in its Wireless Cable Segment, in addition to
agreeing to dispose of all community-television-related
assets.
For Interim 99, the Company suffered a net loss of
$1,086,426 (unaudited) compared to a net loss of
$336,861 for Interim 98. The net loss for Interim 99 is
primarily attributable to depreciation and amortization
related to the Company's acquisition of CyberHighway.
The Company's net loss for Interim 98 is attributable in
large measure to the issuance of shares of Company
common stock pursuant to various consulting agreements.
During Interim 98, a total of 538,759 shares were issued
to consultants, which shares have been valued for
financial accounting purposes at $146,900, in the
aggregate. During Fiscal Interim 99, $383,025 was
expensed due to stock issuances under various consulting
agreements. For the remainder of the year to end
December 31, 1999 ("Fiscal 99"), the Company expects to
expense approximately $120,000 each month, due to stock
issuances under various consulting agreements.
Subsequent to Interim 99, the Company issued 500,000
shares of common stock under a consulting agreement,
which shares were valued at $4.00 per share, or
$2,000,000, in the aggregate. Approximately $33,000
will be expensed each month during the five year term of
such consulting agreement. In March 1998, the Company
issued a total of 80,000 shares of common stock to
certain of its directors. These shares were valued at
$.80 per share; prior to these issuances, the last
closing bid price for the common stock was $.56 per
share.
Internet Segment. During Interim 98, this segment
generated no material revenues and operated at a small
loss. During Interim 99, this segment generated all of
the Company's revenues and is expected to do so for the
foreseeable future.
Community Television and Wireless Cable Segments. As
described above, the Company has agreed to assign all of
its community television properties to New Wave Media
Corp. For Interim 98 and Interim 99, the Wireless
Cable Segment had no activity. As described above, the
Company has determined to cease, for the foreseeable
future, its Wireless Cable activities.
Liquidity and Capital Resources
March 31, 1998. From its inception (November 1996)
through June 1998, the Company required little capital
with which to operate and had, throughout such period of
time, a significant working capital deficit. In June
1998, the Company obtained the first funds of a total of
$340,000 in a private offering of its securities, which
drastically improved the Company's financial condition.
At March 31, 1999, the Company's working capital deficit
was $5,148,075 (unaudited) compared to a working capital
deficit of $240,806 at December 31, 1998. However,
$4,968,429 of the March 31, 1999, deficit is
attributable to a deferred tax liability item that arose
upon the Company's acquisition of CyberHighway.
Notwithstanding the deferred tax liability item, the
Company's liquidity position improved from December 31,
1998, to March 31, 1999, with the Company's deficit
decreasing from $240,806 to $179,646 (unaudited). After
March 31, 1999, in May 1999, the Company obtained
$150,000 from the sale of its securities. Also, the
Company has, as of the date of this Quarterly Report on
Form 10-QSB, received approximately $180,000 from the
exercise of certain warrants, with an additional
$160,000 scheduled to be received in the near future
from the exercise of similar warrants. Currently, the
Company enjoys substantial liquidity as it conducts is
operations. However, as discussed below, the Company
continues to attempt to secure additional capital with
which to pursue fully its business objectives.
Since inception, the Company's President, David M.
Loflin, has loaned to the Company a total of
approximately $187,000, which funds were used primarily
for operating expenses of the Company,$30,000 of which
has been repaid. Currently, the Company owes Mr. Loflin
a total of $157,425. The loans from Mr. Loflin bear
interest at 8% per annum and are payable on demand. The
Company does not currently have funds available to repay
any of the amounts owed to Mr. Loflin. Mr. Loflin has
advised the Company that he does not intend to make
further demand for repayment of such 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 affect on the Company.
The Company suffered an extreme lack of liquidity, and
attendant working capital deficit, until June 1998, when
it obtained the first funds of a total of $340,000
received under a private offering of its equity
securities. With the infusion of funds, the Company was
able to bring its accounts current and to proceed with
the acquisition of DSRT in Santa Fe, New Mexico, which
was acquired for $25,000 in cash. Until the acquisition
of CyberHighway in January 1999, the Company was unable
to accumulate working capital through operations;
rather, the funds obtained in the June 1998 private
offering provided working capital to the Company for the
last half of Fiscal 98.
In January 1999, the Company obtained $270,000 in a
private offering of its equity securities. This
infusion of funds allowed the Company again to bring its
accounts current and to purchase needed US.RF Wireless
Internet equipment for use in the Company's growth
strategy. Subsequent to March 31, 1999, in May 1999,
the Company obtained $150,000 in a private offering of
its equity securities, which funds were applied to
operating expenses of the Company and the purchase of
needed US.RF Wireless Internet equipment. In June 1999,
the Company received $180,000 from the exercise of
certain warrants; an additional $160,000 is expected to
be received from the exercise of similar warrants in the
near future. Approximately 40% of the funds received
from the exercise of the warrants will be used for
working capital and the balance of such funds will be
utilized for the purchase of needed US.RF Wireless
Internet equipment. Even with the recent influx of
cash, the Company continues to seek capital with which
to implement, on a full-scale basis, its growth
strategy. Without access to additional capital, the
Company's expected growth will be significantly impeded.
In addition, the Company expects that, prior to the
end of the Fiscal 99, warrants representing an
additional approximately $1,300,000 will be exercised,
although there is no assurance that such will be the
case.
Growth Strategy; Proposed Acquisitions. During the
past year, as the Company has refined its growth
strategy, it has determined that, for a purveyor of
Internet access to achieve the greatest growth and
economies of scale, it is necessary to offer traditional
dial-up Internet access and the Company's US.RF Wireless
Internet access products. Thus, to reach more Internet
users, the Company will continue to provide high quality
dial-up Internet access service, through CyberHighway,
as it deploys its Wireless Internet products in its
markets. The Company's growth strategy is based on its
ability to offer high quality Internet access through
traditional means, telephone-line based dial-up service,
and through its Wireless Internet access products.
US.RF Wireless Internet/CyberHighway Strategy. In
addition to establishing Wireless Internet access in
certain CyberHighway markets, the Company is attempting
to expand its Wireless Internet access system market
penetration by (1) licensing local, independent ISPs to
utilize the Company's US.RF Quick-Cell Wireless Internet
System in their particular markets, (2) locating local,
independent ISPs willing to become a CyberHighway
affiliate-ISP or (3) locating local, independent ISPs
who wish to license the Company's US.RF Quick-Cell
Wireless Internet System and become a CyberHighway
affiliate-ISP. Initial reaction to this growth strategy
from local, independent ISPs has been very positive.
However, there is no assurance that the Company will
possess sufficient capital with which to accomplish its
objectives. Currently, the Company is in need of
capital, in order to implement completely its growth
plan.
ISP Acquisitions; Hub and Spoke Concept. The
Company's growth strategy includes the acquisition of
relatively small local, independent ISPs in a certain
key city (or cities, depending on the size of a state)
in each state. Each of these acquired ISPs would be
converted into a CyberHighway affiliate-ISP and would
serve as a hub for the Company's operations in a
particular state. For example, in a state with a small
population, the Company would acquire a single ISP to
serve as the hub in that particular state, whereas, in a
heavily populated state with several urban centers, the
Company would likely acquire an ISP in each urban
center. An acquired ISP would serve as a hub to same-
state CyberHighway affiliate-ISPs, who would, through
telephone-line connections, be spokes in the
CyberHighway network system of affiliate-ISPs. The
Company believes that this hub and spoke concept is one
which will afford the Company the greatest opportunity
to achieve needed economies of scale in each of its
markets.
To facilitate anticipated ISP acquisitions, as well
as other potential Internet-related acquisitions, the
Company intends to file with the ("SEC") a shelf
registration statement, wherein the Company would
register up to 2,000,000 shares of its Common Stock for
use in acquisitions. There is no assurance that this
shelf registration statement will ever be declared
effective or that the Company will be able to negotiate
successfully any business acquisition.
Currently, the Company is negotiating for the
acquisition of several other ISPs located across the
United States. There is no assurance that any of such
proposed acquisitions will be consummated.
Wireless Internet Joint Venture - Monroe, Louisiana.
During the second quarter of 1998, the Company entered
into a joint venture agreement to implement the
Company's US.RF Wireless Internet access system in
Monroe, Louisiana. Because of internal problems with
the Company's joint venture partner, no joint venture
operations have commenced. It is the Company's
expectation that, later in 1999, it will take over the
joint venture operations and begin Wireless Internet
service in Monroe. However, no prediction in this
regard can be made.
Community Television Stations. In furtherance of its
plan to focus on the exploitation of its Wireless
Internet access products and expansion of its other
Internet services, the Company has agreed to assign all
of its community (low power) television properties to
New Wave Media Corp., in exchange for 1,500,000 shares
of such entity's common stock. The Company's Board of
Directors has declared a dividend with respect to all
1,500,000 New Wave Media Corp. shares.
Cash Flows from Operating Activities. During Interim
99, the Company's operating activities used $61,264
(unaudited). The use of cash in the current period is
primarily due to the Company's net loss of $1,086,426
(unaudited), which offset depreciation and amortization
of $1,324,028 (unaudited). The Company also experienced
a decrease in deferred consulting fees for stock of
$383,025 (unaudited) and an increase in accounts
receivable of $125,584 (unaudited). The Company
experienced a change in assets and liabilities arising
out of the acquisition of CyberHighway, which provided a
net increase in assets of $79,677 (unaudited). During
Interim 98, the Company's operations used cash of
$17,554 (unaudited). The use of cash in the prior
period was primarily due to the Company's net loss of
$336,861 (unaudited), which offset an increase in
deferred consulting fees for stock of $266,108
(unaudited). The Company intends to recognize
approximately $120,000 for consulting services performed
for stock each month during the remainder of Fiscal 99.
The Company expects that its operations will provide a
modest of amount of cash during the remainder of Fiscal
99, although no prediction in this regard can be made.
Cash Flows from Investing Activities. Investing
activities of the Company during Interim 99 used
$163,892 (unaudited), all of which was related to the
Company's acquisition of CyberHighway. Neither of the
items included in the Interim 99 cash flows from
investing activities involved actual cash transactions.
The Company's investing activities during Interim 98
used $12,444 (unaudited), all of which was for the
purchase of equipment. Although significant purchases
of equipment are expected to be made by the Company
throughout the remainder of Fiscal 99, the Company's
management is unable to predict the level of such
equipment purchases. It is not expected that investing
activities will provide cash during the remainder of
Fiscal 99.
Cash Flows from Financing Activities. Financing
activities of the Company provided $299,115 (unaudited)
in cash during Interim 99, compared to Interim 98 when
financing activities provided $30,000 (unaudited) in
cash. In the current period, the sale of equity
securities for $290,000 in cash provided substantially
all of the cash provided by the Company's financing
activities. All of the cash during the prior period
was the result of advances to the Company by a
shareholder on open account. The Company continues to
seek additional capital with which to pursue its entire
business objectives. However, no prediction as to the
level of such cash can be made by management, nor can
any assurance be made that any cash will be provided by
financing activities.
Non-Cash Investing Activities. During Interim 99, the
Company had no 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
With the acquisition of CyberHighway, the receipt of
$440,000 under two separate private offerings in January
and May 1999, and the recent receipt of $180,000 from
the exercise of warrants (with an additional $160,000
from the exercise of warrants expected to received in
the near future), the Company has become substantially
liquid and current operations will be sufficient to
maintain the Company's liquidity. Also, the Company
expects that, prior to the end of Fiscal 99, warrants
representing an additional approximately $1,300,000 will
be exercised, although there is no assurance that such
will be the case. However, the Company's current
operations, including the operations of its
subsidiaries, will not be insufficient, on their own, to
provide expansion capital with which the Company would
be able to pursue its growth strategy on a full-scale
basis. Although the Company continues to seek capital
with which to implement its complete business
objectives, there is no assurance that the Company will
ever secure capital necessary for its planned expansion.
Capital Expenditures
During the remainder of Fiscal 99, the Company expects
to apply substantially all of its available capital to
(1) the purchase of US.RF Wireless Internet equipment
and/or (2) the acquisition of one or more existing
local, independent ISPs, to convert to a CyberHighway
affiliate-ISP into which the Company can essentially
"plug-in" its US.RF Wireless Internet access system.
The Company currently is seeking between two and three
million dollars with which to implement, on a full-scale
basis, its growth strategy. Although the Company
expects that it will be able to secure sufficient
expansion capital, there is no assurance that such will
be the case.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not involved in any material legal
proceedings.
Item 2. Changes in Securities.
During the three months ended March 31, 1999, the
Company issued unregistered securities on three
occasions, as follows:
1. (a) Securities Sold. On January 25, 1999, the
Company issued a total of 60,000 shares of its Common
Stock and 60,000 common stock purchase warrants, with
one share and one warrant comprising a unit.
(b) Underwriters and Other Purchasers. Such units
were issued to Mike Cohn (30,000 units), Walter C.
Schiller (10,000 units), Michael R. Van Geons (10,000),
Harry P. Kunecki Trust, (5,000 units) and Frank L. Leyba
(5,000 units).
(c) Consideration. Such units were sold for cash at
$4.50 per unit.
(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. Each of the
warrants included in the units entitles the holder
thereof to purchase one share of Common Stock at an
exercise price of $7.00 per share for six months
following the date of their issuance. The warrants do
not confer upon the holders thereof voting or any other
rights as a shareholder of the Company. The warrants
are redeemable upon 30-days' written notice to their
holders for $.01 per Warrant at any time that (1) the
bid price of the Common Stock has equaled or exceeded
$10.00 per share for a period of 5 trading days
preceding the stated redemption date and (2) the shares
of Common Stock underlying the warrants shall have been
duly registered under the Securities Act of 1933, as
amended.
2. (a) Securities Sold. On January 29, 1999, the
Company issued a total of 2,000,000 shares of its Common
Stock.
(b) Underwriters and Other Purchasers. Such shares
were issued to Julius W. Basham, II (1,394,000 shares),
Wm. Kim Stimpson (303,000 shares) and David W. Brown
(303,000 shares).
(c) Consideration. Such shares were issued in payment
for all of the outstanding capital stock of
CyberHighway, Inc., an Idaho corporation.
(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 January 29, 1999, the
Company issued 325,000 shares of its Common Stock.
(b) Underwriters and Other Purchasers. Such shares
were issued to James Kaufman.
(c) Consideration. Such shares were issued as a
finder's fee.
(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.
During the three months ended March 31, 1999, the
Company filed a Current Report on Form 8-K, date
of
event reported, January 29, 1999, as amended on
April
14, 1999.
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: June 14, 1999.
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin
President and
Principal Financial
Officer