SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended: Sept 30, 2003.
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act.
Commission file number: 0-09358
SHOWINTEL NETWORKS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0441388
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
8000 Centerview Parkway, Cordova, TN 38018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901)-757-0195
--------------
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 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.
X Yes No
- ----- ------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: 33,294,555
TABLE OF CONTENTS
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Item Page
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PART I -FINANCIAL STATEMENTS
1. Financial Statements....................................................
2. Management's Discussion and Analysis or Plan of Operation...............
3. Controls and Procedures.................................................
PART II - OTHER INFORMATION
1. Legal Proceedings.......................................................
2. Changes in Securities and Use of Proceeds...............................
3. Defaults Upon Senior Securities.........................................
4. Submission of Matters to a Vote of Security Holders.....................
5. Other Information
6. Exhibits and Reports on Form 8-K .......................................
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(Unaudited)
ASSETS
Current assets
Cash $ --
-----------
Total current assets --
Fixed assets, net 82,327
-----------
Total assets $ 82,327
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses $ 219,902
Due to stockholder 190,381
Loans payable 110,000
Convertible loan payable 10,000
-----------
Total current liabilities 530,283
Total liabilities 530,283
Commitments and contingencies --
Stockholders' deficit
Common stock - $.001 par value, 100,000,000 shares
authorized, 33,294,555 shares issued and outstanding 33,295
Additional paid-in capital 3,093,677
Prepaid consulting services paid common stock and warrants --
Unamortized loan fees --
Other receivable (32,500)
Accumulated deficit (3,542,428)
-----------
Total stockholders' deficit (447,956)
-----------
Total liabilities and stockholders' deficit $ 82,327
===========
See Accompanying Notes to Financial Statements
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
For the period
from April 19, 2001
For the three months ended For the nine months ended (Date of Inception)
September 30, September 30, through
2003 2002 2003 2002 September 30, 2003
------------ ------------ ------------ ------------ ------------
Revenues $ 1,563 $ -- $ 88,728 $ -- $ 121,595
Cost of revenues -- -- 47,112 -- 71,243
------------ ------------ ------------ ------------ ------------
Gross profit 1,563 -- 41,616 -- 50,352
General and administrative expenses
Bad debt 16,863 -- 16,863 -- 16,863
Consulting fees 67,930 443,004 205,248 1,218,135 2,302,972
Depreciation 12,730 5,512 26,286 10,107 52,402
Other general and administrative expenses 102,892 73,691 510,262 103,847 1,053,699
------------ ------------ ------------ ------------ ------------
Total general and administrative
expenses 200,415 522,207 758,659 1,332,089 3,425,936
------------ ------------ ------------ ------------ ------------
Loss from operations (198,852) (522,207) (717,043) (1,332,089) (3,375,584)
Other income (expense)
Interest income -- 807 191 1,651 4,960
Gain on sale of fixed assets -- -- -- -- 1,123
Loss related to rescission of UniGuest
acquisitiON (24,669) -- (24,669) -- (24,669)
Bad debt related to note receivable (91,269) -- (91,269) -- (91,269)
Bad debt related to due from UniGuest (25,000) -- (25,000) -- (25,000)
Interest expense (521) -- (4,207) -- (31,989)
------------ ------------ ------------ ------------ ------------
Total other income (expense) (141,459) 807 (144,954) 1,651 (166,844)
Loss before provision for income tax (340,311) (521,400) (861,997) (1,330,438) (3,542,428)
Income tax provisions -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss $ (340,311) $ (521,400) $ (861,997) $ (1,330,438) $ (3,542,428)
============ ============ ============ ============ ============
Basic and diluted loss per common share $ (0.01) $ (0.02) $ (0.03) $ (0.06) $ (0.17)
============ ============ ============ ============ ============
Basic and diluted weighted average
common shares outstanding 32,347,866 22,260,783 30,601,809 21,674,260 21,129,169
============ ============ ============ ============ ============
See Accompanying Notes to Financial Statements
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
Common Stock
------------------------ Additional Prepaid
Number paid-in Consulting Unamortized
of Shares Amount capital Services Loan Fees
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2002 28,894,000 $ 28,894 $ 2,728,265 $ (35,018) $ --
Issuance of common stock for services,
$0.11 per share 177,000 177 19,293 -- --
Issuance of common stock for services,
$0.10 per share 300,000 300 29,700 -- --
Issuance of common stock for services,
$0.10 per share 200,000 200 19,800 -- --
Issuance of common stock for cash, $0.10 per share 30,000 30 2,970 -- --
Issuance of common stock for reduction in due to 580,000 580 57,420 -- --
stockholder, $0.10 per share
Issuance of common stock to the Company's President
and majority stockholder for services, $0.11 per share 880,000 880 95,920 -- --
Issuance of common stock related to loan fees, $0.09 650,000 650 57,850 -- (58,500)
per share
Issuance of common stock to the Company's President
and majority stockholder for services, $0.04 per share 1,383,555 1,384 58,939 -- --
Issuance of common stock related to loan fees, $0.04
per share 200,000 200 8,520 -- (8,720)
Issuance of warrants for 300,000 shares of common -- -- 15,000 -- (15,000)
stock related to loan fees
Expensed portion of prepaid consulting services -- -- -- 35,018 --
Current period amortization of loan fees -- -- -- -- 82,220
Other receivable related to rescission of UniGuest
acquisition -- -- -- -- --
Net loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2003 (Unaudited) 33,294,555 $ 33,295 $ 3,093,677 $ -- $ --
=========== =========== =========== =========== ===========
Total
Other Accumulated Stockholders'
Receivable Deficit Equity
----------- ----------- -----------
Balance, December 31, 2002 $ -- $(2,680,431) $ 41,710
Issuance of common stock for services,
$0.11 per share -- -- 19,470
Issuance of common stock for services,
$0.10 per share -- -- 30,000
Issuance of common stock for services,
$0.10 per share -- -- 20,000
Issuance of common stock for cash, $0.10 per share -- -- 3,000
Issuance of common stock for reduction in due to -- -- 58,000
stockholder, $0.10 per share
Issuance of common stock to the Company's President
and majority stockholder for services, $0.11 per share -- -- 96,800
Issuance of common stock related to loan fees, $0.09 -- -- --
per share
Issuance of common stock to the Company's President
and majority stockholder for services, $0.04 per share -- -- 60,323
Issuance of common stock related to loan fees, $0.04
per share -- -- --
Issuance of warrants for 300,000 shares of common -- -- --
stock related to loan fees
Expensed portion of prepaid consulting services -- -- 35,018
Current period amortization of loan fees -- -- 82,220
Other receivable related to rescission of UniGuest
acquisition (32,500) -- (32,500)
Net loss -- (861,997) (861,997)
----------- ----------- -----------
Balance, September 30, 2003 (Unaudited) $ (32,500) $(3,542,428) $ (447,956)
=========== =========== ===========
See Accompanying Notes to Financial Statements
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(Unaudited)
For the period from
April 19, 2001 (Date
For the nine months ended of Inception) through
September 30, September 30, September 30,
2003 2002 2003
----------- ----------- -----------
Cash flows from operating activities:
Net loss $ (861,997) $(1,330,438) $(3,542,428)
Adjustments to reconcile net loss to
net cash used by operating activities:
Stock based compensation 261,611 1,218,135 2,085,224
Depreciation 26,286 10,107 52,402
Bad debt related to note receivable 86,500 -- 86,500
Bad debt related to due from UniGuest 25,000 -- 25,000
Loss related rescission of UniGuest acquisition 24,669 -- 24,669
Amortization of loan fees 82,220 -- 82,220
Gain on sale of fixed assets -- -- (1,123)
Changes in operating assets and liabilities:
Change in accounts receivable (16,402) -- (35,702)
Change in interest receivable 4,769 (1,651) --
Change in prepaid expenses -- 2,827 --
Change in other assets -- (23,565) --
Change in accounts payable and accrued expenses 37,564 48,240 186,093
Change in stocks payable to consultants -- (119,156) --
----------- ----------- -----------
Net cash used by operating activities (329,780) (195,501) (1,037,145)
Cash flows from investing activities:
Loan related to note receivable -- (46,500) (66,500)
Proceeds from sale of fixed assets -- -- 3,950
Decrease in cash due to rescission of acquisition (15,432) -- (15,432)
Purchase of fixed assets -- (84,136) (141,548)
----------- ----------- -----------
Net cash used by investing activities (15,432) (130,636) (219,530)
Cash flows from financing activities:
Change in due to stockholder 245,092 51,137 610,950
Advance from loans payable 85,000 75,000 185,000
Advance from convertible loan payable 10,000 -- 10,000
Proceeds from issuance of common stock 3,000 200,000 450,725
----------- ----------- -----------
Net cash provided by financing activities 343,092 326,137 1,256,675
----------- ----------- -----------
Net change in cash (2,120) -- --
Cash, beginning of period 2,120 -- --
----------- ----------- -----------
Cash, end of period $ -- $ -- $ --
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ -- $ -- $ --
=========== =========== ===========
Cash paid for interest $ -- $ -- $ --
=========== =========== ===========
Schedule of non-cash financing activities:
Issuance of common stock for reduction in due to
stockholder $ 58,000 $ -- $ 58,000
=========== =========== ===========
Issuance of common stock related to loan fees $ 58,500 $ -- $ 58,500
=========== =========== ===========
Issuance of common stock related to loan fees $ 8,720 $ -- $ 8,720
=========== =========== ===========
Issuance of warrants for 300,000 shares of common
stock related to loan fees $ 15,000 $ -- $ 15,000
=========== =========== ===========
See Accompanying Notes to Financial Statements
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The interim financial statements present the balance sheet, statements of
operations, stockholders' equity and cash flows of Showintel Networks, Inc. and
its subsidiary. All significant intercompany balances have been eliminated in
consolidation.
The interim financial information is unaudited. In the opinion of management,
all adjustments necessary to present fairly the financial position as of
September 30, 2003 and the results of operations and cash flows presented herein
have been included in the consolidated financial statements. Interim results are
not necessarily indicative of results of operations for the full year.
The accompanying financial statements have been prepared in accordance with
Securities and Exchange Commission requirements for interim financial
statements. Therefore, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. The financial statements should be read in
conjunction with the Form 10-KSB for the year ended December 31, 2002 of the
Company.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2 - GOING CONCERN
The Company incurred a net loss of approximately $3,542,000 for the period from
April 19, 2001 (Date of Inception) through September 30, 2003. The Company's
current liabilities exceed its current assets by approximately $530,000 as of
September 30, 2003. The Company's net cash used by operating activities
approximated $1,037,000 for the period from April 19, 2001 (Date of Inception
for Showintel Networks, Inc.) through September 30, 2003. These factors create
substantial doubt about the Company's ability to continue as a going concern.
The Company's management plans to complete the development of the infrastructure
necessary to deliver the video-streaming technology in order to fully commence
its operations and therewith generate future revenues. The Company will also
seek additional sources of capital through the issuance of debt and equity
financing, but there can be no assurance that the Company will be successful in
accomplishing its objectives.
The ability of the Company to continue as a going concern is dependent on
additional sources of capital and the success of the Company's plan. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - RESCISSION OF UNIGUEST ACQUISITION
UniGuest of Tennessee, Inc. - In September 2002, the Company acquired 100% of
the outstanding capital stock of UniGuest of Tennessee, Inc. ("UGT Transaction")
in consideration of 500,000 shares of the Company's common stock totaling
$32,500.
The Company accounted for its 100% ownership interest in UGT using the purchase
method of accounting under APB No. 16. At the date of the acquisition, UGT had a
deficit equity balance totaling $4,065 therefore the purchase price amount in
excess of fair value of net assets was allocated to goodwill totaling $36,565.
As discussed in Note 10, due to differences between management of UniGuest and
the Company, the UGT Transaction was rescinded and the 500,000 shares of the
Company's common stock that were issued in consideration for the UGT Transaction
were cancelled during October 2003. The rescission has been included in the
financial statements as of and for the three and nine months ended September 30,
2003. The Company removed approximately $15,400 in cash, $35,700 in accounts
receivable, $5,000 in fixed assets, net, $36,600 in goodwill and $10,600 in
accounts payable and accrued liabilities. As of September 30, 2003 the Company
recorded Other receivable totaling $32,500 for the common stock issued in
consideration for the UGT Transaction. Further, the Company recognized a loss
related to rescission of UniGuest acquisition totaling $24,669 and bad debt
related to due from UniGuest totaling $25,000.
NOTE 4 - NOTE RECEIVABLE
On July 16, 2001, the Company entered into an agreement to loan a principal sum,
with a maximum of $500,000, to See/Saw Communications, Inc., in exchange for a
convertible promissory note, which is convertible to a 10-15% membership
interest in the entity. The President of See/Saw Communications, Inc. serves as
an Advisory Board Member for the Company, see Note 8. The percentage of
membership interest would be determined by the exercise date based upon the loan
amount outstanding, with conversion rights executed before February 22, 2003,
resulting up to a 10% interest and execution after the said date would result up
to a 15% interest. The note is due in yearly anniversary payments of interest at
8% per annum with the outstanding principal due on August 22, 2006.
As of September 2003, the Company evaluated the note receivable and interest
receivable totaling $86,500 and $4,769, respectively, and determined that it was
doubtful that the Company could collect the balances. Accordingly, the Company
recorded bad debt related to note receivable totaling $91,269 for the entire
outstanding balance of the note and interest receivable.
NOTE 5 - DUE TO STOCKHOLDER
Due to stockholder totaling $190,381 as of September 30, 2003 consisted of the
following:
Unreimbursed expenses to a stockholder 15,417
Loan from the Company's President
and majority stockholder 90,964
Accrued wages for the Company's
President and majority stockholder 84,000
---------------
$ 190,381
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - LOANS PAYABLE
In February 2003, the Company borrowed funds from a company totaling $15,000
maturing June 2004, unsecured, and bearing a simple interest rate of 9%.
In March 2003, the Company borrowed funds from an individual totaling $10,000,
which is due on demand, unsecured, and bearing no interest.
During September 2002, a company alleged it entered into a loan agreement with
the Company during February 2002 totaling $54,000. The Company is defending on
the basis the Company issued 89,000 shares of common stock in consideration of
this balance. The Company is negotiating this balance and has recognized a
liability of $25,000 as loan payable.
In June 2003, the borrowed funds from two individuals totaling $60,000 which
matured September 18, 2003, unsecured, and bearing interest at 12%.
Additionally, the Company issued 650,000 and 200,000 shares of its common stock
and warrants for 300,000 shares of common stock. The shares and warrants related
to these borrowed funds are deemed loan origination fees totaling $82,220. The
Company has recorded the issuance of stock and warrants totaling $82,220, of
which the entire balance has been expensed as of September 30, 2003. The Company
is currently negotiating new terms to these loans.
NOTE 7 - CONVERTIBLE LOAN PAYABLE
In August 2003, the Company borrowed funds from an individual totaling $10,000,
maturing in August 2004, unsecured, and bearing interest at 12%. The individual
is entitled to convert all or any portion of the principal balance into shares
of the Company's common stock at a conversion price of $0.20 per share. Further,
the individual has the option of receiving payment of accrued interest in cash
or 50,000 shares of the Company's common stock.
NOTE 8 - CONSULTING SERVICES
In September 2002, the Company entered into a consulting agreement with a
company to provide investor relations for a period of twelve months in
consideration of 300,000 shares of the Company's common stock and warrants to
purchase 200,000 shares of common stock with an weighted average exercise price
of $0.75. The Company has valued this transaction at $25,000 under SFAS No. 123.
The Company has issued both the common stocks and warrants as of September 30,
2003. The Company has recorded expenses of $5,209 and $17,709 for the three and
nine months ended September 30, 2003.
In September 2002, the Company entered into a consulting agreement with a
company to provide consulting and public relations for a period of thirteen
months in consideration of 200,000 shares of the Company's common stock and
warrants to purchase 300,000 shares of common stock with an weighted average
exercise price of $0.75. The Company has valued this transaction at $25,000
under SFAS No. 123. The Company has issued both the common stocks and warrants
as of September 30, 2003. The Company has recorded expenses of $5,771 and
$17,309 for the three and nine months ended September 30, 2003.
SHOWINTEL NETWORKS, INC.
(FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 - COMMON STOCK
In February 2003, the Company issued 177,000 shares of its common stock for
services at $0.11 per share.
In February 2003, the Company issued 300,000 shares of its common stock for
services at $0.10 per share.
In March 2003, the Company issued 200,000 shares of its common stock for
services at $0.10 per share.
In March 2003, the Company issued 30,000 shares of its common stock for cash at
$0.10 per share.
In April 2003, the Company issued 580,000 shares of its common stock in
satisfaction of a $58,000 reduction of due to stockholder.
In June 2003, the Company issued 880,000 shares of its common stock to the
President and majority stockholder for services at $0.11 per share.
In August 2003, the Company issued 1,383,555 shares of its common stock to the
President and majority stockholder for services at $0.04 per share.
NOTE 10 - SUBSEQUENT EVENT
Rescission of Acquisition of UniGuest - Due to differences between management of
UniGuest and the Company, the UGT Transaction was rescinded and the 500,000
shares of the Company's common stock that were issued in consideration for the
UGT Transaction were cancelled during October 2003.
Agreements with individual - During October 2003, the Company issued 5,000,000
shares of its common stock to an individual for cash totaling $150,000 pursuant
to a Common Stock Purchase Agreement ("Purchase Agreement"). The Purchase
Agreement also grants the individual an option to purchase an additional
3,333,000 shares of the Company's common stock at $0.03 per share. The option is
fully vested upon grant. Additionally, the Purchase Agreement establishes that
the Company and the individual will enter into an Employment Agreement, which
was completed during October 2003.
The Employment Agreement became effective during October 2003, whereby the
Company employed the individual as an operations manager for the term of three
years. The individual is entitled to compensation of $15,000 per month with the
option to receive payment in the Company's common stock. Such shares would be
determined by the bid price on the last day of the month preceding the date the
salary was due. The Employment Agreement terminates during October 2006.
However, the Company at its option may terminate the agreement but shall pay the
individual's accrued salary, unreimbursed expenses, and all other compensation
and benefits through the first six months or the termination date, whichever is
greater.
Also during October 2003, the Company entered into a Consulting Agreement with
this same individual whereby the individual would provide other services not set
forth in the Employment Agreement in exchange for 1,000,000 shares of the
Company's common stock totaling $109,000. The Consulting Agreement terminates
during October 2006.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results and events could differ materially from those projected,
anticipated, or implicit, in the forward-looking statements as a result of the
risk factors set forth below and elsewhere in this report. With the exception of
historical matters, the matters discussed herein are forward looking statements
that involve risks and uncertainties. Forward-looking statements include, but
are not limited to, the date of introduction or completion of our products,
projections concerning operations and available cash flow. Our actual results
could differ materially from the results discussed in such forward-looking
statements. The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes thereto appearing elsewhere herein.
The Company
- -----------
Founded in February 2000 and Incorporated in April 2001, Showintel Networks,
Inc. ("Showintel") is a Nevada-domiciled, Tennessee-based publicly traded
company (SWNW.OB) that has developed a proprietary digital out-of-home media
network. The network is centrally managed and is applicable over the growing
digital signage industry in any location where a message needs real time
display.
Showintel has developed a proprietary system to distribute video content which
may include advertisement, movie trailers, public information or sponsorship
programming via broadband connection for viewing in public locations. The
Content Management System ("CMS") developed by Showintel facilitates advertising
and video content to be transmitted in digital files, replacing the soon-to-be
antiquated utilization of photographic slides, VCR tape and DVDs. The primary
focus of deployment for Showintel technology is within movie theaters; however,
Showintel is actively seeking further deployment in other industries. Showintel
has two types of clients, the "location partner," and the advertiser who wishes
to reach the patrons that visit the location partner's venues.
The Company has current in ten theater locations across the country, with
ongoing negotiations to secure an additional 800 theater facilities and numerous
retail locations. Further, Showintel has executed co-marketing and joint venture
agreements with strategic partners that augment its own sales and marketing team
and that enables the company to simultaneously penetrate additional markets. The
company is also pursuing opportunities to expand into other markets via
acquisitions of synergetic companies.
Showintel is generating revenues by selling and marketing the advertisement that
is displayed on its network, licensing of its content management system and
sales of proprietary hardware. Recent developments have provided opportunities
for Showintel to market its proprietary hardware, network installations, network
operations and content management as an application service provider. These
potential sales will not require capital outlays by Showintel.
Primary Market for Showintel Networks, Inc. and Industry Conditions for Theater
Installations According to the Motion Picture Association, in 2002 the theater
market encompassed 6,050 separate locations in the United States with 487
separate owners. There were 35,280 screens in these locations, of which only 124
were equipped with digital projection. Over $15 billion dollars was spent in
2002 on advertising in the theater with most of the revenue generated from
on-screen ad placement. The lobby presentation of advertising is in its infancy
with less than $50 million in total revenue in 2002.
The System was originally developed to digitally distribute advertisement and
movie trailers via broadband connection for viewing in movie theater lobbies.
The Content Management System ("CMS") developed by Showintel facilitates
advertising and trailer content by the transmission of digital files, thus
replacing the soon-to-be antiquated methodology of photographic slides and/or
VCR tape. While Showintel is focused on the theater industry, various
opportunities have recently surfaced to allow a diversification into the several
other industries. Such diversification should stabilize the business.
Additionally, the Company is seeking to develop programming specific to
Showintel to enhance the viewership and entertainment value of the content being
displayed in the public venues.
The Showintel network replaces the old loop technology that uses VCR tapes and
DVDs running in continuous loops. Traditionally, content providers such as
producers and advertisers must present their materials to a production house
30-60 days in advance of a showing. The content must be incorporated into a play
list showing all the subject matter to be displayed during a specific time
frame. Once the play list is completed and the master file edited, the master is
sent to a production house to be reproduced into VHS or DVD format and then sent
out to the various businesses to be played on the house VCR or DVD player.
BUSINESS RISKS
- --------------
Availability of Capital
- -----------------------
While the content management system is functional, there are no assurances the
Company will be successful in penetrating the target markets. Due to low cash
reserves, additional funds are required within the next few months to complete
installation of equipment needs at the sites under contract in order to proceed
with the company's business plan. The Company intends to rise funding through
various financial arrangements in debt or equity. There is no guarantee that
additional financing will be available when required, or available at all, in
order to proceed with the business plan. If the Company is unsuccessful in
securing additional capital investments needed in order to continue with
operations, the stockholders may lose their entire investment.
Change in Technology Environment and Access
- -------------------------------------------
The Company is utilizing existing and self developed technology for its
operations. The Company has developed software and systems to compliment
existing technology and provide flexibility if existing technology changes.
There is no assurance that the existing technology will perform in a standard
sufficient for the Company to maintain competitiveness or be available at the
time the company anticipates a need. The Company is addressing these matters by
negotiating proprietary development ventures with industry leaders in software
and hardware development for the digital signage industry.
Competition
- -----------
The Company recognizes that delays in funding have created a window of
opportunity for potential competitors to establish relationships in the
industry. A continued delay in funding increases the likelihood that competitors
may increase market share sufficiently to diminish the capacity of the Company
to operate profitably. However, the company is addressing the potential
competition by negotiating with potential joint venture partners for proprietary
programming, equipment and systems that promises to be the forefront efforts in
the industry.
Control by Officers and Directors Over Affairs of Showintel May Override Wishes
- --------------------------------------------------------------------------------
of Other Stockholders.
- ---------------------
The Company's officer and director, David V. Lott, beneficially own
approximately 57% of the outstanding shares of Showintel common stock. As a
result, Mr. Lott has the ability to exercise significant influence over all
matters requiring stockholder approval. Accordingly, it could be difficult for
investors to effectuate control over the affairs of Showintel. Therefore, it
should be assumed that David V. Lott, by virtue of his stock holdings, will be
able to control the affairs and policies of Showintel.
In addition, all decisions with respect to the management of Showintel will be
made exclusively by David V. Lott. Investors will only have rights associated
with stockholders to make decisions effecting Showintel. The success of
Showintel, to a large extent, will depend on the quality of the directors and
officers of Showintel. Accordingly, no person should invest in the shares unless
he is willing to entrust all aspects of management to David V. Lott and any
future officers and directors.
Showintel As A Company
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Showintel has had limited operations since its organization, however, the
company is starting to realize revenues from operations. The Company is still
considered a development stage company in that significant market share or
revenues have not been obtained as of this filing. The revenue has grown on a
quarterly basis and company believes that cash flow will soon be sufficient to
handle the company operations and growth without additional outside capital
infusion.
Limitations on Liability, and Indemnification, of Directors and Officers May
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Result in Expenditures by Company.
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The articles of incorporation of Showintel provide that the personal liability
of a director or officer of Showintel to Showintel or the Shareholders for
damages for breach of fiduciary duty as a director or officer shall be limited
to acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law. In addition, the articles and the bylaws of Showintel provide
for indemnification of officers and directors of Showintel. Also, the Nevada
Revised Statutes provide for permissive indemnification of officers and
directors and Showintel may provide indemnification under such provisions. Any
limitation on the liability of any director, or indemnification of directors,
officer, or employees, could result in substantial expenditures being made by
Showintel in covering any liability of such persons or in indemnifying them.
Potential Conflicts of Interest May Affect Ability of Officers and Directors to
Make Decisions in the Best Interests of Company.
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David Lott may have other interests to which he devotes his time, either
individually or through partnerships and corporations in which he has or may
have an interest, hold an office, or serve on boards of directors, and he may
continue to do so notwithstanding the fact that management time may be necessary
to the business of Showintel. As a result, conflicts of interest may exist
between Showintel and David Lott which may not be susceptible to resolution.
In addition, conflicts of interest may arise in the area of corporate
opportunities which cannot be resolved through arm's length negotiations. All of
the potential conflicts of interest will be resolved only through exercise of
David Lott of such judgment as is consistent with his fiduciary duties to
Showintel.
No Cumulative Voting May Affect Ability of Some Shareholders to Influence
Management of Company.
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Holders of the shares of common stock of Showintel are not entitled to
accumulate their votes for the election of directors or otherwise. Accordingly,
the holders of a majority of the shares present at a meeting of shareholders
will be able to elect all of the directors of Showintel, and the minority
shareholders will not be able to elect a representative to Showintel board of
directors.
Sale of Shares Eligible For Future Sale Could Adversely Affect the Market Price.
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All of the approximate 17,007,000 shares of common stock which are currently
held, directly or indirectly, by management have been issued in reliance on the
private placement exemption under the Securities Act of 1933. Such shares will
not be available for sale in the open market without separate registration
except in reliance upon Rule 144 under the Securities Act of 1933. In general,
under Rule 144 a person, or persons whose shares are aggregated, who has
beneficially owned shares acquired in a non-public transaction for at least one
year, including persons who may be deemed affiliates of Showintel, as defined,
would be entitled to sell within any three- month period a number of shares that
does not exceed the greater of 1% of the then outstanding shares of common
stock, or the average weekly reported trading volume during the four calendar
weeks preceding such sale, provided that current public information is then
available. If a substantial number of the shares owned by these shareholders
were sold under Rule 144 or a registered offering, the market price of the
common stock could be adversely affected.
Company Requires Additional Funding In Order to be Successful.
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The company is expecting to generate sufficient revenues to cover operational
expenses in the short term; however, Showintel is seeking three hundred thousand
dollars ($300,000.00) as a buffer for unexpected operational expenses and the
ability to address expansion opportunities in 2003. Monthly operating costs are
estimated at fifty thousand dollars ($50,000.00), with installation per theater
ranging from two thousand to ten thousand dollars ($2,000.00 - $10,000.00)
depending upon the availability of plasma screens in the theaters.
Employees
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As of Sept 30, 2003, the Company had four employees.
David V. Lott, President, has worked full-time since the company's founding.
The Company hired John Fraier on a two month trial basis on March 15, 2003, to
provide consulting services in regard to the Company's capitalization structure,
business model evaluation and development, SEC compliance, and human resources
development. Mr. Fraier was not retained after completion of the two month
contractual term due to financial constraints upon the Company. Upon securing
additional operational financing, the Company intends to re-hire Mr. Fraier, as
well as additional employees as needed by company operations.
The Company has hired three support individuals in IT, Operations and Finance.
Salaries are being accrued by agreement between the Company and the individuals.
These individuals have expressed an interest to convert their accrued salaries
into equity in the company in the near future.
As an effort to reduce corporate operational expense, the Company, uses various
outside agencies for sales on an industry standard commission basis.
RESULTS OF OPERATIONS
A. Results of Operations:
Revenues
--------
Total revenues from operations decreased to $1,563 during third
quarter 2003. This decrease is primarily due to rescission of the acquisition
agreement with UniGuest of Tennessee. Further, revenue generation has been
hampered by the inability of SeeSaw Communications to acquire national
advertisers for the Showintel systems. Effective, July 27, 2003, the contract
with SeeSaw expired and was not renewed. The company is generating sales
internally and has been successful in its first efforts with advertising spots.
Advertising revenue will begin with the showing of the Navy "Person In Me"
advertisement being shown in selected theaters starting Oct 6, 2003.
The company has additionally expanded its revenue stream sources
from solely advertising sales to also include hardware sales, network
installations, third party content management and third party marketing. The
company anticipates that this inclusion of ASP services will accelerate the
company revenue growth and penetration into various markets.
During the third quarter ending Sept 30, 2003, the Company realized
proceeds of $98,000 from various activities discussed in the financial notes.
Expenses
--------
Total expenses from continuing operations were $200,415 during the
third quarter 2003. The expensing of stock options and stock issuance accounted
for the majority of this expense... The company booked depreciation of
$12,730.00. The company has determined that the funds provided SeeSaw
Communications over the last 2 years will be uncollectible. Therefore, the
Company has taken a one time charge for the loan due in the amount of $91,269.
Also, the Company has adjusted its books to reflect the removal of the assets of
UniGuest and one time charges of $15,400 in cash, $35,700 in accounts
receivables, $5,000 in fixed assets, $36,500 in good will, bad debt of $25,000
and rescission loss of $24,669 have been recorded. The Company has also recorded
a receivable of $32,500 for the return of stock to the Company. The company
continues to maintain a tight control on expenditures that are not capital
related.
Operating Loss
--------------
On a pre-tax basis, the company had a loss of _$340,311 quarter ending
Sept 30, 2003, from continuing operations. Loss per common share from continuing
operations, basic and diluted, was $.01 per share.
B. Liquidity and Capital Resources
-------------------------------
The Company has incurred substantial losses from continuing operations,
sustained substantial operating cash outflows, and has a working capital deficit
as of Sept 30, 2003. Management believes such losses and negative operating cash
flows will continue for the balance of the fiscal year 2003 unless adequate
capital funding is obtained. The Company continues to seek additional financing,
however, there is no assurance the Company will obtain additional financing or
achieve profitable operations or cash flow in the near future.
Historically, the Company has sustained its operations primarily from
the use of management's personal financial resources. The Company is seeking
financing from public and private equity or debt offerings. While the Company is
in negotiations with several sources of funds there have been no commitments to
date.
ITEM 3. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and
procedures by David V. Lott, the Company's President, as of a date within 90
days of the filing date of this quarterly report, such officer has concluded the
Company's disclosure controls and procedures are effective in ensuring that
information required to be disclosed by the Company in the reports it files or
submits under the Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized, and reported, within the time period specified by the
Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any pending litigation that would
materially affect the structure or operations of the company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 10, the Company received $10,000 from an investor in the form
of a convertible note with an expiration date of Dec 31, 2005 and a conversion
price of $.20 per share. The note bears an annual interest rate of 9%. The
proceeds were used for legal work in preparation for a 15c-211 filing.
Pursuant to Board Resolution of August 1, 2003, the Company agreed to
issue up to 5 million shares to David V. Lott for services rendered. Mr. Lott
has accepted no compensation and has continually financed the company since its
inception out of personal funds. The Board has agreed to the additional shares
to Mr. Lott in consideration of his support of the company. As of this filing,
the company has issued 2,813,555 to Mr. Lott.
In accordance with the rescission of the acquisition agreement with
UniGuest of Tennessee, the Company has cancelled 500,000 shares issued to Mr.
Shawn Thomas and Mattamy, LTD.
A total of two hundred thousand shares were issued to two individuals
in accordance with a promissory note between the parties and the company.
As a matter of clarification, the Company believes the cancellation of
shares issued into an escrow account with International Forex Finance have not
been properly disclosed. In Feb 2002, twenty five million shares of common stock
were placed in escrow with International Forex Finance in advance of anticipated
line of credit. A formal agreement was executed between the Company and
International Forex Finance in Sept 2002 to be closed in Oct 2002. At closing,
the terms of the line of credit were changed such that the Company could not
accept them. Therefore, the line of credit was cancelled. The Company
subsequently cancelled all shares issued to escrow with International Forex
Finance.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On Sept 19, 2003 the Company filed a Preliminary 14c filing to effect a
name change required per the settlement between Intel Corporation and Showintel
Networks, Inc dated Jan 15, 2003. The Pre14c filing stated that the new name
would be Limelight Media Group, Inc. Subsequently to this quarter, the Company
has filed a Final 14c and has made the necessary applications to officially
change its name, ticker symbol and cusip effective Nov 5, 2003.
ITEM 5. OTHER INFORMATION
The exclusive ad agency agreement with SeeSaw Communications expired
on July 27, 2003. The company chose not to extend the contract and is currently
handling advertising sales internally. The company believes the funds issued to
SeeSaw under a Convertible Note dated July 27, 2001 is uncollectible. Therefore,
the Company is taking a onetime charge to reflect this bad debt.
Newbridge Securities has filed a Form 15c-211 to seek a relisting of
the Company stock on the Nasdaq Over-the-counter Bulletin Board Market. NASD has
responded with two letters seeking more information and is currently awaiting
this quarterly filing to complete the process of relisting the company stock.
At the quarterly Board of Directors meeting held on Oct 6, 2003, the
Company decided it would be in the best interest of the Company and UniGuest of
Tennessee to rescind the acquisition agreement dated Sept 1, 2002 and cancel all
issued shares related to the acquisition. The Company will be taking a one time
charge for the effect on the Company balance sheet.
On July 15, 2003, the Company entered into a Strategic Alliance
Agreement with Bluepoint Technologies, Inc. The Agreement provides that the
software of Bluepoint Technologies and the services of Showintel shall be
marketed by collectively as an Industry Partnership and Preferred Provider
Agreement.
On Sept 15, 2003, the Company entered into a Joint Venture Agreement
with Pot O' Gold Multi-Cinema Productions, Inc. The Joint Venture shall be a
Tennessee LLC with the name of Stage Front Media LLC. Pot O' Gold and Showintel
will own an equal percentage as members of the LLC. According to the LLC,
Showintel will provide technology and content management services while Pot O'
Gold will focus on advertising sales. Pot O' Gold was formed in 1985 and has
been successful in marketing advertising opportunities in theaters since its
formation. Under the agreement, the parties may complete a formal acquisition
agreement whereby once $200,000 in monthly gross revenue is achieved in the
joint venture then Showintel may acquire Pot O' Gold as a wholly owned
subsidiary via a stock exchange.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
99.1 Certification of David V. Lott
99.2 Strategic Alliance Agreement between Bluepoint Technologies
and the Company
99.3 Joint Venture Agreement between Pot O' Gold Multi-Cinema
Productions, Inc and the Company.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Showintel Networks, Inc.
By /s/ David V. Lott
-----------------------------------------
David V. Lott, Sole Officer and Director.
Date:___Oct 30, 2003____________