UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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Or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number:
0-26093
INTERMEDIA MARKETING SOLUTIONS,INC.(FORMERLY "SITE2SHOP.COM, INC.")
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(Exact name of registrant as specified in its charter)
Nevada 88-0382813
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2001 West Sample Road, Suite 101, Pompano Beach, Florida 33064
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(Address of principal executive offices)(Zip Code)
(954)969-1199
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(Registrant's telephone number, including area code)
SITE2SHOP.COM,INC.
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(Former name former address and former fiscal year,if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 X No
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As of May 10, 2001, the registrant had a total of 12,614,702 common shares
outstanding.
INTERMEDIA MARKETING SOLUTIONS, INC.
(formerly "Site2shop.com, Inc.")
Index to Form 10-QSB
March 31, 2001
PART I. FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet at March 31, 2001 3
Consolidated Statements of Operations for the three months ended
March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 7
PART II. OTHER INFORMATION 9
Not Applicable
2
INTERMEDIA MARKETING SOLUTIONS, INC. AND SUBSIDIARIES
(FORMERLY "SITE2SHOP.COM, INC.")
Consolidated Balance Sheet
(UNAUDITED)
March 31, 2001
Assets
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Current assets:
Cash and cash equivalents $ 361,457
Accounts receivable, net of allowance for doubtful accounts
of $549,286 2,559,856
Inventories 1,010,552
Prepaid expenses and other current assets 769,515
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Total current assets 4,701,380
Equipment and leasehold improvements, net 1,228,246
Goodwill 82,663
Other assets 165,321
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Total assets $6,177,610
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $1,070,318
Deferred income taxes payable 2,099,624
Lines of credit 69,362
Deferred revenue 2,781,515
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Total current liabilities 6,020,819
Stockholders' equity:
Common stock, $.001 par value:
Authorized 150,000,000 shares; issued and outstanding,
12,614,702 shares, 12,615
Additional paid-in capital 1,615,565
Deferred compensation (107,866)
Accumulated deficit (1,363,523)
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Total stockholders' equity 156,791
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Total liabilities and stockholders' equity $ 6,177,610
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See notes to unaudited consolidated financial statements
3
INTERMEDIA MARKETING SOLUTIONS, INC. AND SUBSIDIARIES
(FORMERLY "SITE2SHOP.COM, INC.")
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
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2000 2001
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Revenues $ 1,983,735 $ 3,493,927
Cost of revenues 612,207 1,215,201
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Gross Margin 1,371,528 2,278,726
Operating Expenses:
Selling 668,578 694,973
General and administrative 1,169,818 1,211,986
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Total operating expenses 1,838,396 1,906,959
Operating income (loss) (466,868) 371,767
Income tax (169,000) 148,707
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Net Income (loss) $(297,868) $ 223,060
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Net Income (loss) per Common Share-Basic $ (.02) $ .02
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Net Income (loss) per Common Share-Diluted $ (.02) $ .02
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Weighted Average Number of Common
Shares-Basic 12,508,850 12,614,702
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Weighted Average Number of Common
Shares-Diluted 12,508,850 12,614,702
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See notes to unaudited consolidated financial statements
3
INTERMEDIA MARKETING SOLUTIONS, INC. AND SUBSIDIARIES
(FORMERLY "SITE2SHOP.COM, INC.")
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
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2000 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (297,868) $ 223,060
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 75,553 71,557
Provision for deferred income taxes (169,000) 149,007
Amortization for deferred compensation 34,073 --
Provision for bad debts 49,275 (116,286)
Changes in operating assets and liabilities:
(Increase)decrease in accounts receivable 120,444 (399,394)
(Increase) decrease in inventories 1,265 (248,817)
(Increase) decrease in prepaid expenses
and other current assets 1,244 (134,600)
Increase in other assets (22,759) (69,500)
Decrease in accounts payable and accrued expenses (272,524) (30,940)
Increase in deferred revenue 559,433 628,609
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Net cash provided by operating activities 79,136 72,696
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (38,966) (132,598)
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Net cash used in investing activities (38,966) (132,598)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft 33,905 --
Repayment of capital lease obligations- related parties (167,182) --
Repayment of capital lease obligations (4,909) --
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Net cash provided by (used in) financing activities (138,186) --
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Net decrease in cash and cash equivalents (98,016) (59,902)
Cash and cash equivalents, beginning of period 450,157 421,359
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Cash and cash equivalents, end of period $ 352,141 $ 361,457
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Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 539 $ --
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Interest- related party $ 8,095 $ --
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Taxes $ 1,077 $ 1,238
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Non-cash financing activities:
Common stock issued for future services and acquisitions $ 68,399 $ --
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See Notes to Unaudited Consolidated Financial Statements
5
INTERMEDIA MARKETING SOLUTIONS, INC.
(Formerly "Site2shop.com, Inc.")
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2001
1. BASIS OF PRESENTATION AND OPERATIONS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-QSB and
Items 303 and 310(b) of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all normal and
recurring adjustments which are necessary for a fair presentation of the
Company's financial position, results of operations and cash flows as of the
dates and for the periods presented. The consolidated results of operations for
the three months ended March 31, 2001 are not necessarily indicative of the
results to be expected for the full year. For further information, refer to the
financial statements and footnotes thereto included in the Intermedia Marketing
Solutions, Inc. ("Intermedia Marketing Solutions" or the "Company") audited
financial statements for the year ended December 31, 2000.
On April 25, 2001 the Company announced the corporate name change to Intermedia
Marketing Solutions, Inc. The objective of the name change is to bring the
Company's name more in line with its corporate focus. The company has developed
into a vertically integrated full-service media company performing all aspects
of television production and distribution
6
INTERMEDIA MARKETING SOLUTIONS, INC.
(Formerly "Site2shop.com, Inc.")
PART I. ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
March 31, 2001
(UNAUDITED)
The following discussion of the results of the operations and financial
condition of Intermedia Marketing Solutions, Inc. ("Intermedia Marketing
Solutions" and the "Company") should be read in conjunction with Intermedia
Marketing Solutions Unaudited Condensed Consolidated Financial Statements and
Notes thereto included elsewhere in this report and the Company's Audited
Consolidated Financial Statements and Notes thereto for the year ended December
31, 2000.
Overview
The Company is an integrated multimedia marketing-solutions company.
Site2shop.com, its consumer shopping division, markets and sells unique, newly
launched, and nationally branded consumer products using their integrated media
approach through 30-minute shop-at-home television programs, a retail store, and
e-commerce web sites. The company's Tricom Pictures division produces television
programs to educate viewers on breakthroughs, emerging trends, innovations, and
lifestyles. These two divisions are related in that both deal with the Company
marketing the clients products to the consumers. The company's third division is
a full service state-of-the-art multimedia production facility that produces
television, print and web material for Integrated Media Solutions, its divisions
as well as other clients. All programs and commercials are distributed to
national audiences through a combination of any and all of the following: ABC
affiliates, NBC affiliates, CBS affiliates, FOX affiliates, UPN affiliates and
WB affiliates (collectively "network affiliates"), independent television
stations and targeted cable networks. Products and services featured on the
shopping divisions shows and direct response commercials are sold through its
telephone call centers, the Company's websites, other e-commerce websites and
the Company's retail stores.
Part of the Company's strategy is to grow through the opening of new offices
domestically and the expansion of the number of distribution opportunities for
the participants on the Company's television programs. The Company's expansion
and growth plans will depend on its ability to identify appropriate targets and
markets and obtain the necessary financing to bring these plans to fruition.
Further, the success of the Company's efforts will depend on its ability to
identify these opportunities, attract highly qualified personnel and manage
geographically dispersed operations. There can be no assurances that the Company
will be successful in its plan of operational expansion nor the management of
such growth.
Results of Operations
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2001 TO THE THREE MONTHS ENDED
MARCH 31, 2000.
Total revenues for the three months ended March 31, 2001 were $3,493,927, an
increase of $1,510,192 over $1,983,735 for the prior comparable period in 2000.
The increase is attributable to the increase in revenues from the TV shopping
division of approximately $1,250,000 and an increase in the education division
of approximately $250,000. A portion of the shopping division increase was as a
result of new offices opened after the first quarter of 2000, resulting in
additional revenue of approximately $410,000. The increase in revenue is
attributable to production efficiencies whereby the company was able to produce,
edit and air more completed phases than in the comparable quarter last year.
These projects were a result of an increase in contracts signed and booked in
the second half of 2000 mainly as a result of new sales offices opened in 2000.
Cost of Revenues increased to $1,215,201, or 35% of revenues versus $612,207 or
31% for the prior comparable period. The increase in expenses is attributable to
an increase in revenue and the associated production and airing costs with this
revenue. On a percentage basis the increase is a result of a reduced pricing
structure of the education division which has resulted in more sales and gross
margins however at a lower rate on a percentage basis.
Selling expenses were $694,973 during the three months ended March 31, 2001, an
increase of $26,395 from the prior comparable period in 2000. Selling expenses
in 2001 were 20% of net revenues as compared to 34% in 2000. The reductions of
selling expenses on a percentage basis is a result of fixed costs remaining
constant from year to year and with the increase of selling expenses would be
lower on a percentage basis as compared to the increase in revenues. On a dollar
to dollar basis selling expenses are higher as compared to last year primarily
as a result of commissions paid on higher revenues.
7
General and administrative expenses were $1,211,986 during the three months
ended March 31, 2001, an increase of $42,168 from the prior comparable period in
2000. Administrative expenses in 2001 were 35% of net revenues as compared to
59% in 2000. The reductions of administrative expenses on a percentage basis is
a result of increases to fixed costs remaining minimal from year to year and
the increase of administrative expenses would be lower on a percentage basis as
compared to the increase in revenues. On a dollar to dollar basis administrative
expenses are higher mainly because of rent expenses for new offices not opened
in 2000.
Liquidity and Capital Resources
The Company generated $72,696 from operating activities in 2001 as opposed to
$79,136 during the same period in 2000. The 2001 result is mainly attributable
to a net income of $223,060 that is approximately $520,000 above the prior
comparable period. The increase and decreases in operating assets and
liabilities resulted in a net increase to cash flow of less than $6,000 as
compared to the same three months last year. Cash used in investing activities
totaled $132,598 in 2001 primarily as a result of capital expenditures relating
to purchase of production equipment and the upgrade of computer hardware and
software in order to promote and upgrade the Company's website and MIS
infrastructure. At March 31, 2001, the Company's backlog for contracts signed
and work has not begun or contracts partially completed and work is to be done
totaled $4,816,000 as compared to $5,220,000 at March 31, 2000. The decrease is
mainly a result of more deferred revenue becoming sales as a result of improved
efficiencies in the production department and a larger portion of contract being
completed on a percentage basis.
The Company believes that cash and cash equivalents and cash generated from its
current level of operations to be sufficient to meet its working capital
requirements over the balance of the current year. The Company continues to seek
opportunities for growth either through the opening of new offices, enhancing
and increasing production capacity, acquisitions, additional distribution
channels of its shows, participants products and services and any and all
combinations thereof, and in connection therewith, may seek to raise cash in the
form of equity, bank debt or other debt financing, or may seek to issue stock as
consideration for acquisition targets or expansion capital.
The Company currently has no outstanding material commitments for capital
expenditures. The Company's primary requirements for capital will be the cost of
revenue, strategic acquisitions, marketing and sales costs associated with the
Company's national and international expansion into new target markets, and
general and administrative expenses associated with the Company's business plan.
The Company anticipates, based on currently proposed plans and assumptions
relating to operations (including the anticipated costs associated with, and
timetable for, its proposed expansion), that cash flows from operations will be
sufficient to satisfy the Company's contemplated cash requirements for at least
12 months. In the event that the Company's plans change, its assumptions change
or prove to be inaccurate or if its existing capital and cash flow otherwise
prove to be insufficient (due to unanticipated expenses, delays, problems,
difficulties or otherwise), the Company could be required to seek additional
financing or may be required to curtail its expansion or other activities. In
the event that the Company requires additional financing, the Company may seek
to raise capital through the sale of its equity securities, including at prices
which may represent significant discounts from the market price of the Common
Stock.
CAUTIONARY STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis or Plan of Operation contains
various "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which represent the Company's expectations and beliefs
concerning future events. The Company cautions that these statements are further
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements, including, without
limitation, the following: the Company's ability to manage growth, acceptance of
the Internet as a means for commerce, market demand for e-commerce, decline in
demand for the Company's services; increases in expenses and costs of sales and
the effect of general economic conditions and factors affecting the industries
the company markets its service to and the ability of the Company to recruit and
retain qualified management and employees. These statements by their nature
involve substantial risks and uncertainties and actual events or results may
differ as a result of these and other factors.
8
PART II. OTHER INFORMATION
Not Applicable
9
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized.
Intermedia Marketing Solutions, Inc.
(Registrant)
/s/ Mark Alfieri
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Mark Alfieri
President
/s/ Brad Hacker
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Brad Hacker
Chief Financial Officer
Dated: May 10, 2001
10