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, 2002
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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
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Commission File Number:0-26093
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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 of incorporation or organization)
(IRS Employer Identification No.)
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 May 6, 2002, the registrant had a total of 12,647,702 common
shares outstanding.
INTERMEDIA MARKETING SOLUTIONS, INC.
Index to Form 10-QSB
March 31, 2002
PART I. FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet at March 31, 2002 3
Consolidated Statements of Operations for the three months ended
March 31, 2002 and 2001 4
Consolidated Statements of Cash Flows for the three months
Months ended March 31, 2002 and 2001 5
Note 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
Consolidated Balance Sheet
(UNAUDITED)
March 31, 2002
Assets
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Current assets:
Cash and cash equivalents $ 185,961
Accounts receivable, net of allowance for doubtful accounts
of $667,964 2,034,658
Inventories 1,891,069
Prepaid expenses and other current assets 835,640
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Total current assets 4,947,328
Equipment and leasehold improvements, net 1,117,225
Goodwill 67,663
Other assets 181,580
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Total assets $6,313,796
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $1,296,954
Deferred income taxes payable 1,829,486
Lines of credit 1,224,177
Deferred revenue 1,880,312
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Total current liabilities 6,230,929
Stockholders' equity:
Common stock, $.001 par value:
Authorized 150,000,000 shares; issued and outstanding,
12,647,702 shares, 12,648
Additional paid-in capital 1,626,392
Accumulated deficit (1,556,173)
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Total stockholders' equity 82,867
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Total liabilities and stockholders' equity $ 6,313,796
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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 MARCH,
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2001 2002
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Revenues $ 3,493,927 2,423,723
Cost of revenues 1,215,201 982,425
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Gross Margin 2,278,726 1,441,298
Operating Expenses:
Selling 694,973 622,254
General and administrative 1,211,986 1,189,666
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Total operating expenses 1,906,959 1,811,920
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Operating income (loss) 371,767 (370,622)
Interest Expense -- (14,375)
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Net Income Before Taxes 371,767 (384,997)
Income tax expense (Benefit) 148,707 (153,999)
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Net Income (loss) $ 223,060 $ (230,998)
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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 12,614,702 12,647,702
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Weighted Average Number of Common
Shares-Diluted 12,614,702 12,647,702
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See notes to unaudited consolidated financial statements
4
INTERMEDIA MARKETING SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
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2001 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 223,060 $ (230,998)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 71,557 174,946
Provision for deferred income taxes 149,007 (153,999)
Provision for bad debts (116,286) --
Changes in assets and liabilities:
(Increase) decrease in Accounts receivable (399,394) 528,376
Increase in Inventories (248,817) (98,818)
Increase in Prepaid expenses and other current assets (134,600) (31,585)
Increase in Other assets (69,500) (15,500)
Increase in Accounts payable and accrued expenses (30,940) (367,517)
Decrease in Deferred revenue 628,609 196,908
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Net cash provided by operating activities 72,696 1,813
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (132,598) (152,949)
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Net cash used in investing activities (132,598) (152,949)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Line of Credit -- 198,133
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Net cash provided by (used in) financing activities -- 198,133
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Net increase (decrease) in cash and cash equivalents (59,902) 46,997
Cash and cash equivalents, beginning of period 421,359 138,964
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Cash and cash equivalents, end of period $ 361,457 $ 185,961
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Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest $ 925 $ 14,375
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Taxes $ 1,238 $ --
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See Notes to Unaudited Consolidated Financial Statements
5
INTERMEDIA MARKETING SOLUTIONS, INC.
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
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, 2002 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, 2001.
6
INTERMEDIA MARKETING SOLUTIONS, INC.
PART I. ITEM 2- MANAGEMENT'S DISCUSSION OR PLAN OF OPERATIONS
March 31, 2002
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 10-KSB for the year
ended December 31, 2001.
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, 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.
Historically 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. In addition financial constraints
may make this strategy extremely difficult to achieve.
Results of Operations
COMPARISION OF THE THREE MONTHS ENDED MARCH 31, 2002 TO THE THREE MONTHS
ENDED MARCH 31, 2001.
Total revenues for the three months ended March 31, 2002 were $2,423,723, a
decrease of $1,070,204 from $3,493,927 for the prior comparable period in 2001.
The decrease is attributable to a decrease in revenues from the TV shopping
division of approximately $600,000 and the education division of $500,000 in the
quarter as a result of fewer contracts written in the third and fourth quarter
last year due to advertising revenue, across the nation being significantly
down.
Cost of Revenues decreased to $982,425, or 40% of revenues versus $1,215,201 or
35% for the prior comparable period. The increase in expenses on a percentage
basis is a result of lower sales as compared to the amount of fixed costs
directly related to cost of sales. The decrease on a dollar for dollar basis is
a result of less airtime and a reduction in personnel as compared to last year.
Selling expenses were $622,254 during the three months ended March 31, 2002, a
decrease of $72,219 from the prior comparable period in 2001. This reduction is
a result of less commission paid to sales personnel due to fewer sales. Selling
expenses in 2002 were 25 % of net revenues as compared to 20% in 2001. The
increase of selling expenses on a percentage basis is a result of fixed costs
remaining constant from year to year and with the decrease of selling expenses
would be lower on a percentage basis as compared to the decrease in revenues.
General and administrative expenses were $1,189,666 during the three months
ended March 31, 2002, a decrease of $22,320 from the prior comparable period in
2001. General and administrative expenses in 2002 were 49% of net revenues as
compared to 35% in 2001. The increase of general and administrative expenses on
a percentage basis is a result of fixed costs remaining constant from year to
year and with the decrease of general and administrative expenses being lower on
a percentage basis as compared to the decrease in revenues.
7
Liquidity and Capital Resources
The Company generated $16,188 from operating activities in 2002 as opposed to
$72,696 during the same period in 2001. The increase and decreases in operating
assets and liabilities resulted in a net increase to cash flow of approximately
$56,000 as compared to the same three months last year. Cash used in investing
activities totaled $152,949 in 2002 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, 2002, the Company's backlog for contracts signed
and work not begun or contracts partially completed and work is to be done
totaled $4,534,000 as compared to $5,220,000 at March 31, 2001. This 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.
Based on the current state of the economy and the events of September 11, the
Company has experienced a severe reduction in its business and future cash
flows. The Company believes despite these events that cash flows from operations
could be sufficient to satisfy the Company's contemplated cash requirements for
at least the next year. In the event that the Company is unable to sufficiently
meet cash flow, the Company could be required to seek additional financing.
In the event that the Company requires additional financing, the Company may
seek to raise cash in the form of strategic partners or in combination with
equity financing, additional bank debt or other debt financing to raise capital
through the sale of its equity securities, potentially at prices which may
represent significant discounts from the market price of the Common Stock.
The Company anticipates based on current backlog of contracts and assumptions
relating to operations, the Company's revenues and net income for the year ended
December 31, 2002 will be less than the prior year. This mainly is a result of
economic conditions and events occurring during the past 12 months. The current
state of the economy has resulted in less contracts signed 2002 as compared to
the same period in 2001 reducing the Company's backlog. As a result of the
decrease in new contracts and reduced backlog the company may be required to
reduce personnel and close divisions in order to meet its cash needs for the
rest of the year.
8
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, decrease in advertising budgets, 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.
9
PART II. OTHER INFORMATION
Not Applicable
10
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 /s/ Brad Hacker
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Mark Alfieri Brad Hacker
President Chief Financial Officer
Dated: May 6, 2002
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