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 June 30, 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.
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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) 969-1010
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(Registrant's telephone number, including area code)
Not applicable
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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 August 10, 2001, the registrant had a total of 12,647,702 common shares
outstanding.
INTERMEDIA MARKETING SOLUTIONS, INC.
Index to Form 10-QSB
June 30, 2001
PART I. FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet at June 30, 2001 3
Consolidated Statements of Operations for the three and six months ended
June 30, 2001 and 2000 4
Consolidated Statements of Cash Flows for the six months
Months ended June 30, 2001 and 2000 5
.
Note to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 7
PART II. OTHER INFORMATION 11
Not Applicable
INTERMEDIA MARKETING SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(UNAUDITED)
June 30, 2001
Assets
--------
Current assets:
Cash and cash equivalents $ 357,615
Accounts receivable, net of allowance for doubtful accounts
of $672,087 3,020,619
Inventories 1,257,133
Prepaid expenses and other current assets 685,012
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Total current assets 5,320,379
Equipment and leasehold improvements, net 1,588,844
Goodwill 91,660
Other assets 117,566
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Total assets $7,118,449
===============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $2,305,349
Deferred income taxes payable 2,412,425
Lines of credit 69,362
Deferred revenue 1,757,794
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Total current liabilities 6,544,930
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 (946,795)
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Total stockholders' equity 573,519
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Total liabilities and stockholders' equity $ 7,118,449
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See notes to unaudited consolidated financial statements
3
INTERMEDIA MARKETING SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE, SIX MONTHS ENDED JUNE 30,
-------------------------------- ------------------------------
2000 2001 2000 2001
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Revenues $ 2,926,325 4,814,153 $ 4,910,060 $ 8,308,080
Cost of revenues 762,064 2,119,637 1,374,271 3,726,997
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Gross Margin 2,164,261 2,694,516 3,535,789 4,581,083
Operating Expenses:
Selling 686,478 699,473 1,686,468 1,688,335
General and administrative 1,349,421 1,278,131 2,187,827 1,804,069
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Total operating expenses 2,035,899 1,977,604 3,874,295 3,492,404
Operating income (loss) 128,362) 716,912 (338,506) 1,088,679
Income tax 49,000 313,165 (120,000) 461,872
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Net Income (loss) $ 79,362 $ 403,747 $(218,506) $ 626,807
============= ============= ============= =============
Net Income (loss) per Common Share-Basic $ .01 $ .03 $ (.02) $ .05
============= ============= ============= =============
Net Income (loss) per Common Share-Diluted $ .01 $ .03 $ (.02) $ .05
============= ============= ============= =============
Weighted Average Number of Common
Shares-Basic 12,514,702 12,614,702 12,514,702 12,614,702
============= ============= ============= =============
Weighted Average Number of Common
Shares-Diluted 12,514,702 12,614,702 12,514,702 12,614,702
============= ============= ============= =============
See notes to unaudited consolidated financial statements
4
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) (218,506) $ 626,807
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 167,408 131,180
Provision for deferred income taxes (120,000) 461,808
Amortization for deferred compensation 68,172 --
Provision for bad debts 80,000 122,801
Changes in operating assets and liabilities:
(Increase)decrease in accounts receivable 622,878 (1,106,544)
(Increase) decrease in inventories 16,768 (495,398)
(Increase) decrease in prepaid expenses
and other current assets (70,050) (50,097)
Increase in other assets (20,478) (21,745)
Decrease in accounts payable and accrued expenses (57,521) 1,215,375)
Increase in deferred revenue 148,271 (395,112)
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Net cash provided by operating activities 616,942 489,075
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (135,630) (552,819)
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Net cash used in investing activities (135,630) (552,819)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft (197,349) --
Common stock registration fees (2,187)
Repayment of capital lease obligations- related parties (167,182) --
Repayment of capital lease obligations (9,971) --
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Net cash provided by (used in) financing activities (376,689) --
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Net decrease in cash and cash equivalents 104,623) (63,744)
Cash and cash equivalents, beginning of period 450,157 421,359
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Cash and cash equivalents, end of period $ 554,780 $ 357,615
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Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 925 $ --
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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)
June 30, 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 and six months ended June 30, 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"),
formally Site2shop.com, Inc., audited financial statements for the year ended
December 31, 2000 included in the company's annual report as filed on Form
10-KSB.
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
2. SUBSEQUENT EVENTS
On July 19, 2001 the Company obtained a revolving line of credit with Merrill
Lynch Business Financial Services, Inc. Terms of the line include an interest
rate equal to the One-Month LIBOR rate plus 3.4%, as of July 31, 2001 the rate
would be 7.46%. The total facility if for $750,000 and has a term of one year.
As of July 31, 2001 there was $250,000 outstanding on the line of credit. The
line of credit will be used for working capital needs.
3. RECENT ACCOUNTING PRONOUCEMENTS
In July 2001, FASB issued SFAS No. 141, "Business Combinations." SFAS 141
requires the purchase method of accounting for business combinations initiated
after June 30, 2001 and eliminates the pooling-of-interests method. We believe
that the adoption of SFAS No. 141 will not have a significant impact on our
financial statements.
In July 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets",
which is effective for fiscal years beginning after December 15, 2001. SFAS No.
142 requires, among other things, the discontinuance of goodwill amortization.
In addition, the standard includes provision upon adoption for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles. We are
currently assessing but have not yet determined the impact of SFAS No. 142 on
our financial position and results of operations.
6
INTERMEDIA MARKETING SOLUTIONS, INC.
PART I. ITEM 2- MANAGEMENT'S DISCUSSION OR PLAN OF OPERATIONS
June 30, 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 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 client's 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
COMPARISION OF THE THREE MONTHS ENDED JUNE 30, 2001 TO THE THREE MONTHS
ENDED JUNE 30, 2000.
Total revenues for the three months ended June 30, 2001 were $4,814,153, an
increase of $1,887,828 over $2,926,325 for the prior comparable period in 2000.
The increase is attributable to the increase in revenues from the TV shopping
division of approximately $1,350,000 and an increase in the education
7
division of approximately $550,000. A portion of the increase in the shopping
division was a result of new offices opened after the second quarter of 2000,
resulting in additional revenue of approximately $210,000. 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 $2,119,637 or 44% of revenues versus $762,064 or
26% 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. Also a large portion of
the revenue booked in 2001 was a result of direct response commercial airtime,
which has a cost of goods percent of 75% versus 35% for other revenue sources.
Selling expenses were $699,473 during the three months ended June 30, 2001, an
increase of $12,995 from the prior comparable period in 2000. Selling expenses
in 2001 were 15% of net revenues as compared to 24% 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.
General and administrative expenses were $1,278,131 during the three months
ended June 30, 2001, a decrease of $71,290 from the prior comparable period in
2000. Administrative expenses in 2001 were 27% of net revenues as compared to
46% 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
with the increase of administrative expenses would be lower on a percentage
basis as compared to the increase in revenues.
COMPARISION OF THE SIX MONTHS ENDED JUNE 30, 2001 TO THE SIX MONTHS ENDED
MARCH 31, 2000.
Total revenues for the six months ended June 30, 2001 were $8,308,080, an
increase of $3,398,020 over $4,910,060 for the prior comparable period in 2000.
The increase is attributable to the increase in revenues from the TV shopping
division of approximately $2,600,000 and an increase in the education division
of approximately $800,000. A portion of the in the shopping division was a
result of new offices opened after the first quarter of 2000, resulting in
additional revenue of approximately $640,000. 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 $3,726,997, or 45% of revenues versus $1,374,271
or 28% 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. Also a large
portion of the revenue booked in 2001 was a result of direct response commercial
airtime, which has a cost of goods percent of 75% versus 35% for other revenue
sources.
Selling expenses were $1,688,478 during the six months ended June 30, 2001, a
decrease of $1,867 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
8
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.
General and administrative expenses were 1,804,069 during the six months ended
June 30, 2001, a decrease of $383,758 from the prior comparable period in 2000.
Administrative expenses in 2001 were 22% of net revenues as compared to 45% 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 with
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 lower mainly because of management not taking incentive bonuses in
2001 versus $375,000 in 2000.
Liquidity and Capital Resources
The Company generated $489,275 from operating activities in 2001 as opposed to
$616,942 during the same period in 2000. The 2001 result is mainly attributable
to a net income of $626,807 that is approximately $845,000 above the prior
comparable period. The increase and decreases in operating assets and
liabilities resulted in a net decrease to cash flow of $127,000 as compared to
the same six months last year. Cash used in investing activities totaled
$552,819 in 2001 primarily as a result of capital expenditures relating to
purchase of production equipment, construction of a new studio and the upgrade
of computer hardware and software in order to promote and upgrade the Company's
website and MIS infrastructure. At June 30, 2001, the Company's backlog for
contracts signed and work has not begun or contracts partially completed and
work is to be done totaled $3,756,000 as compared to $5,940,000 at June 30,
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. On July 19, 2001 the
Company obtained a revolving line of credit with Merrill Lynch Business
Financial Services, Inc. Terms of the line include an interest rate equal to the
One-Month LIBOR rate plus 3.4%, as of July 31, 2001 the rate would be 7.46%. The
total facility if for $750,000 and has a term of one year. As of July 31, 2001
there was $250,000 outstanding on the line of credit. The line of credit will be
used for working capital needs.
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, additional 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
9
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.
10
PART II. OTHER INFORMATION
Not Applicable
11
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.
(Formerly "Site2shop.com, Inc.")
(Registrant)
/s/ Mark Alfieri /s/ Brad Hacker
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Mark Alfieri Brad Hacker
President Chief Financial Officer
Dated: August 10, 2001
12