U.S. 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
SEPTEMBER 30, 2003
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: 000-28083
NEXT GENERATION MEDIA CORP.
(Exact name of Company as specified in its charter)
Nevada 88-0169543
(State or jurisdiction of incorporation (I.R.S. Employer or
organization) Identification No.)
7644 Dynatech Court, Springfield, Virginia 22153
(Address of principal executive offices) (Zip Code)
Company's telephone number: (703) 644-0200
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Company was required to file such reports),
and (2) been subject to such filing requirements for the past 90
days. Yes X No
As of October 30, 2003, the Company had 11,523,397 shares of common
stock issued and outstanding.
TABLE OF CONTENTS
Part I - Financial Information Page
Review Report of Independent Certified Public Accountants
Condensed Consolidated Interim Financial Statements
Consolidated Statement of Earnings
Consolidated Statement of Financial Position
Consolidated Statement of Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
Part Ii - Other Information
Item 1. Legal Proceedings
Item 2. Changes In Securities And Use Of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission Of Matters To A Vote Of Security Holders
Item 5. Other Information
Item 6. Exhibits And Reports On Form 8-K
Signature
REVIEW REPORT
To the Board of Directors and Stockholders of
Next Generation Media Corporation
We have reviewed the accompanying condensed consolidated
statement of financial position of Next Generation Media Corporation
(a Nevada Corporation) as of September 30, 2003 and 2002, and the
related statements of earnings, stockholders' equity, and cash flows
for the three-month and six-month periods then ended, in accordance
with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
All information included in these condensed consolidated interim
financial statements is the representation of the management of Next
Generation Media Corporation.
A review of interim financial information consists principally
of inquiries of Company personnel and analytical procedures applied
to financial data. It is substantially less in scope than an audit
in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
consolidated financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying consolidated
financial statements in order for them to be in conformity with
accounting principles accepted in the United States.
Vienna, Virginia
November 10, 2003
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Next Generation Media Corporation
Condensed Consolidated
Interim Financial Statements
For The Nine Months Ended September 30, 2003
With Review Report of Independent
Certified Public Accountants
TURNER, JONES AND ASSOCIATES, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
Table of Contents Page
Condensed Consolidated Interim Financial Statements
Consolidated Statement of Earnings
Consolidated Statement of Financial Position
Consolidated Statement of Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Financial Statements
Next Generation Media Corporation
Condensed Consolidated Statement of Earnings (Unaudited)
For The Periods Ended
For the Three Months Ended For the Nine Months Ended
September 30 September 30 September 30 September 30
2003 2002 2003 2002
REVENUES (Note 1):
Coupon sales, net of discounts $ 1,882,813 $ 1,925,517 $ 5,471,375 $ 5,647,689
Franchise fees 88,350 54,600 146,050 84,300
Total revenues 1,971,163 1,980,117 5,617,425 5,731,989
COST OF GOODS SOLD:
Materials 249,464 243,085 799,561 847,269
Direct labor 418,048 507,837 1,273,468 1,391,008
Equipment repairs 8,096 20,090 28,269 44,302
Postage and delivery 572,544 588,214 1,679,436 1,772,239
Payroll taxes from direct labor 32,475 38,850 98,859 106,412
Total cost of goods sold 1,280,627 1,398,076 3,879,594 4,161,230
Gross margin 690,536 582,041 1,737,831 1,570,759
OPERATING EXPENSES:
401(k) administration fees 3,028 5,942
401(k) matching (Note 2) 10,500 - 31,500 -
Advertising (Note 1) 7,858 2,687 13,873 4,815
Amortization (Note 1) 33,922 33,921 101,765 101,764
Bad debt expense 7,500 7,500 22,500 22,500
Bank charges -
Commissions and fees 36,000 13,436 48,000 22,819
Credit card fees 5,580 11,942 5,371
Depreciation (Note 1) 40,155 41,340 120,465 124,308
Employee benefits 31,033 40,448 105,185 114,150
Insurance - other 3,846 8,067 14,113 38,526
Meals and entertainment 10,731 2,124 20,709 2,703
Office expense 5,964 5,196 15,720 23,679
Other expenses 13,336 2,836 60,627 7,721
Payroll 115,935 99,499 322,217 341,331
Payroll taxes 5,117 4,927 28,654 18,444
Postage and delivery 799 1,200 3,454 3,981
Professional fees 34,791 49,288 99,159 163,654
Property taxes 900 7,800 8,700 11,700
Rent and pass thru expenses 69,938 43,716 209,044 95,537
Repairs and maintenance 4,141 6,650 21,827 21,441
Telephone 6,907 11,392 23,081 34,179
Travel and conferences - 1,641 3,500
Utilities 16,405 27,531 43,486 49,293
Total operating expenses 464,385 409,558 1,333,604 1,211,416
Gain/(Loss) from operations 226,150 172,483 404,228 359,343
OTHER INCOME AND EXPENSES:
Interest income - -
Other income (expense) (1,033) - 116 -
Gain/(Loss) on equipment disposal - - - 2,230
Gain/(Loss) on account clean up - -
Gain/(Loss) on legal settlement (Note 11) 33,035 33,035
Interest expense (1,776) (7,341) (3,623) (16,882)
Total other income (expense) (2,810) 25,694 (3,507) 18,383
Net Income/(Loss) 223,340 198,177 400,720 377,726
Gain/(Loss) applicable to common
Shareholders 223,340 198,177 400,720 377,726
Basic gain/(loss) per common share (Note 1) 0.02 0.02 0.03 0.04
Weighted average common shares outstanding 11,523,397 10,223,397 11,523,397 9,021,016
Diluted gain per common share (Note 1) 0.02 0.02 0.03 0.03
Fully diluted common shares outstanding 12,863,397 12,093,547 12,863,397 10,906,214
See accompanying notes and accountant's review report
Next Generation Media Corporation
Consolidated Balance Sheets
For the Periods Ended
ASSETS
(Unaudited) (Audited)
September 30 December 31
2003 2002
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 183,377 $ 125,356
Accounts receivable, net of
uncollectible accounts (Note 1) 579,879 379,862
Notes receivable (Note 6) 341,108 321,108
Inventories (Note 1) 56,301 55,908
Prepaid expenses 52,829 64,857
Total current assets 1,213,493 947,091
PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 3):
Equipment 1,412,279 1,334,599
Furniture and fixtures 61,348 56,650
Leasehold improvements 80,644 78,921
Total property, plant and equipment 1,554,271 1,470,170
Less accumulated depreciation (1,189,842) (1,069,377)
Net property, plant and equipment 364,429 400,793
Intangibles, net of accumulated amortization (Note 1) 720,433 822,197
TOTAL ASSETS 2,298,356 2,170,081
See accompanying notes and accountant's review report
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable, current portion (Note 4) 82,897 127,151
Obligation under capital lease, current portion (Note 5) 8,953 -
Accounts payable 181,033 377,017
Accrued expenses 139,499 181,311
Sales tax payable 208,766 228,759
Total current liabilities 621,149 914,238
LONG TERM LIABILITIES:
Notes payable (Notes 4) 71,268 97,215
Obligation under capital lease (Note 5) 46,591 -
Total long term liabilities 117,859 97,215
Total liabilities 739,008 1,011,453
STOCKHOLDERS' EQUITY (Note 7):
Common stock, $.01 par value, 50,000,000 shares
authorized, 11,523,397 95,234 95,234
issued and outstanding
Additional paid in capital 7,343,744 7,343,744
Accumulated deficit (5,879,630) (6,280,350)
Net Income - Year to Date
Total stockholders' equity 1,559,348 1,158,628
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,298,356 2,170,081
See accompanying notes and accountant's review report
Next Generation Media Corporation
Consolidated Statements of Stockholders' Equity-Unaudited
Additional
Common Stock Paid In Accumulated
Shares Amount Capital Deficit Total
Balance: January 31, 2001 6,773,397 67,734 7,186,284 (6,483,873) $ 770,145
Common stock issued in exchange for
Services 3,450,000 34,500 148,500 - 183,000
Employee stock options - - 36,960 - 36,960
Cancellation of shares issued (700,000) (7,000) (28,000) - (35,000)
Net Income - Year to date - - - 203,523 203,523
Balance: December 31, 2002 9,523,397 95,234 7,343,744 (6,280,350) 1,158,628
Net Income - Year to date - - - 400,720 400,720
Balance: September 30, 2003 11,523,397 115,234 7,343,744 (5,879,630)1,579,348
Next Generation Media Corporation
Statement of Cash Flows - Unaudited
For The Three Months Ended
September 30 September 30
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 223,340 $ 198,177
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 74,077 75,261
(Increase) decrease in assets
Accounts receivable (134,088) (352,094)
Inventories 3,840 (17,612)
Deferred compensation - 73,921
Prepaids and other current assets (37,767) 33,908
Increase (decrease) in liabilities
Accounts payable (43,313) (58,523)
Accrued expenses (13,285) 50,473
Wages payable (108,338)
Severance payable (68,619)
Pension payable (3,167) (2,271)
Deferred revenue 218,843
Net cash flows (used) by operating activities 69,637 43,126
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (15,563) 3,193
Net cash provided/(used) by investing activities (15,563) 3,193
CASH FLOWS FROM FINANCING ACTIVITIES
Change in note payable (30,393) 112,020
Net borrowing under
Borrowing under capitol lease note 5 payable -
Net cash provided/(used) by financing activities (30,393) 112,020
NET INCREASE/(DECREASE) IN CASH 23,592 158,339
CASH, BEGINNING OF PERIOD 159,785 140,853
CASH, END OF PERIOD 183,377 299,192
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Income taxes - -
Interest 1,776 7,341
See accompanying notes and accountant's review report
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
included herein have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (SEC). The
interim condensed consolidated accounts of Next Generation Media
Corporation and its subsidiary (collectively, the Company). In the
opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair statement of the
financial position, results of operations and cash flows for the
interim periods presented have been made. The preparation of the
financial statements includes estimates that are used when accounting
for revenues, allowance for uncollectible receivables,
telecommunications expense, depreciation and amortization and certain
accruals. Actual results could differ from those estimates. The
results of operations for the three and nine month periods ended
September 30, 2003, are not necessarily indicative of the results to
be expected for the full year. Some information and footnote
disclosures normally included in financial statements or notes
thereto prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules and
regulations. The Company believes, however, that its disclosures are
adequate to make the information provided not misleading. You should
read these interim consolidated financial statements in conjunction
with the consolidated financial statements and notes thereto included
in the Company's 2002 Annual Report on Form 10-KSB40.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business:
Next Generation Media Corporation was incorporated in the State of
Nevada in November of 1980 as Micro Tech Industries Inc., with an
official name change to Next Generation Media Corporation in April of
1997. The Company, through its wholly owned subsidiary, United
Marketing Solutions, Inc., provides direct marketing products, which
involves the designing, printing, packaging, and mailing of public relations
and marketing materials and coupons for retailers who provide services. Sales
are conducted through a network of franchises that the Company supports
on a wholesale basis. At September 30, 2003, the Company had
approximately 44 active area franchise licenses located throughout
the United States.
Property and Equipment:
Property and equipment are stated at cost. The company uses the
straight-line method in computing depreciation for financial
statement purposes.
Expenditures for repairs and maintenance are charged to income, and
renewals and replacements are capitalized. When assets are retired
or otherwise disposed of, the cost of the assets and the related
accumulated depreciation are removed from the accounts.
Estimated useful lives are as follows:
Computers 3 years
Furniture, fixtures and equipment 10 years
Leasehold improvements are amortized over the lesser of the lease
term or the useful life of the property.
Depreciation expense for the three months ended September 30, 2003
and 2002 amounted to $40,155 and $41,340 respectively.
Intangibles:
The Company has recorded goodwill based on the difference between the
cost and the fair value of certain purchased assets and it is being
amortized on a straight-line basis over the estimated period of
benefit, which ranges from five (5) to ten (10) years. The Company
periodically evaluates the goodwill for possible impairment. The
analysis consists of a comparison of future projected cash flows to
the carrying value of the goodwill. Any excess goodwill would be
written off due to impairment. In addition, the Company has a
covenant not to compete, which is being amortized over five (5)
years. Amortization expense for the three months ended September 30,
2003 and 2002 amounted to $33,922 and $33,921 respectively.
Advertising Expense:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations for the three
months ended September 30, 2003 and 2002 was $7,858 and $2,687
respectively.
Revenue Recognition:
The Company recognizes revenue from the design production and
printing of coupons upon delivery. Revenue from initial franchise
fees is recognized when substantially all services or conditions
relating to the sale have been substantially performed. Franchise
support and other fees are recognized when billed to the franchisee.
Amounts billed or collected in advance of final delivery or shipment
are reported as deferred revenue.
Impairment of Long-Lived Assets:
The Company reviews the carrying values of its long-lived assets for
possible impairment on a periodic basis and whenever events or
changes in circumstances indicate that the carrying amount of the
assets should be addressed. The Company believes that no permanent
impairment in the carrying value of long-lived assets exists as of
September 30, 2003.
Comprehensive Income:
The Company has adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income". Comprehensive income as
defined includes all changes to equity except that resulting from
investments by owners and distributions to owners. The company has
no item of comprehensive income to report.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the
current year presentation.
New Accounting Pronouncements:
In June of 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities. The new standard requires that all companies record
derivatives on the balance sheet as assets or liabilities, measured
at fair value. Gains or losses resulting from changes in the values
of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The
Company does not use derivative instruments either in hedging or as
investments. The Company adopted this accounting standard, as
amended, on January 1, 2001. Accordingly, the Company believes it
will have no material impact on its financial position or results of
operations.
In December of 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, "Revenue Recognition in
Financial Statements" ("SAB 101"), which provides guidance related to
revenue recognition based on interpretations and practices followed
by the SEC. SAB 101 is effective in the quarter ended December 31,
2000, and requires companies to report any changes in revenue
recognition as a cumulative effect of a change in accounting
principle at the time of implementation in accordance with Accounting
Principles Board Opinion No. 20, "Accounting Changes". The Company
has assessed the impact of SAB 101 on its financial position and
results of operations and believes the effect to be minimal.
Use of Estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles 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.
Income Taxes:
The Corporation uses Statement of Financial Standards No. 109
"Accounting for Income Taxes" (SFAS No. 109) in reporting deferred
income taxes. SFAS No. 109 requires a company to recognize deferred
tax liabilities and assets for expected future income tax
consequences of events that have been recognized in the company's
financial statements. Under this method, deferred tax assets and
liabilities are determined based on temporary differences in
financial carrying amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which
temporary differences are expected to reverse.
Risks and Uncertainties:
The Company operates in an environment where intense competition
exists from other companies. This competition, along with increases
in the price of paper, can impact the pricing and profitability of
the Company.
Credit Risk:
The Company at times may have cash deposits in excess of federally
insured limits.
Accounts Receivable:
The Corporation grants credit to its customers, which includes the
retail sector and their own franchisees. The Company establishes an
allowance for doubtful accounts based upon on a percentage of
accounts receivable plus those balances the Company feels will be
uncollectible. Uncollectible accounts as of September 30, 2003 were
$304,697.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.
Loss Per Common Share:
The Company calculates its earnings per share pursuant to Statement
of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). Under SFAS No. 128, basic earnings per share is
computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding. Diluted
earnings per share reflect the potential dilution assuming the
issuance of common shares for all potential dilutive common shares
outstanding during the period.
As of September 30, 2003, the Company had financial obligations that
could create future dilution to the Company's common shareholders and
are not currently classified as common shares of the company. The
following table details such instruments and obligations and the
common stock comparative for each. The common stock number is based
on specific conversion or issuance assumptions pursuant to the
corresponding terms of each individual instrument or obligation.
Instrument or Obligation Common Stock
Stock options outstanding as of September 30, 2003
with a weighted average exercise price per share
of $0.57 1,340,000
Inventories:
Inventories consist primarily of paper, envelopes, and printing
materials and are stated at the lower of cost or market, with cost
determined on the first-in, first-out method.
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the parent company, Next Generation Media Corporation and
its subsidiaries as of September 30, 2003.
NOTE 2 - RETIREMENT PLAN
The company maintains a 401(k) defined contribution plan covering
substantially all employees. The Corporation may elect to contribute
up to 3% of each eligible employee's gross wages. Employees can
elect up to 12% of their salary to be contributed before income
taxes, up to the annual limit set by the Internal Revenue Code. The
Corporation accrued $10,500 and $ 0 in the three months ended
September 30, 2003 and 2002 respectively.
NOTE 3 - PROPERTY & EQUIPMENT
Property and Equipment consists of the following:
September 30, 2003
Equipment $1,412,279
Furniture and fixtures 61,348
Leasehold improvements 80,644
$1,554,271
Accumulated depreciation and amortization (1,189,842)
Net property and equipment 364,429
NOTE 4 - NOTES PAYABLE
Notes payable consists of the following:
September 30, 2003 Amount
Note payable to Capital York, unsecured with payments $ 22,500
inclusive of interest of $1,000 per month
Note payable to CIT Group, interest of 10% on principal only,
collateralized by the equipment of United Marketing Solutions,
Inc. 14,498
Note payable to PS Business Park, face amount of
$130,000, interest at 5%, payable over three years 59,390
Note payable to Western Washington no set repayment
schedule or interest, repayment is in the form of
production credits 13,777
Note payable to Xerox Corporation, face amount of
$14,500, payable over two years 1,500
Promissory note payable to former executive payable in
twenty-four monthly installments of $3,452 at 0% interest 42,500
$154,165
Less: Current portion 82,897
Long-term portion 71,268
NOTE 5 - OBLIGATION UNDER CAPITAL LEASE
The Company is obligated under a capital lease for the
acquisition of two platesetters. The lease calls for sixty monthly
payments of $1,219, inclusive of interest. 55,554
Current portion 8,953
46,591
NOTE 6 - NOTES RECEIVABLE
On June 30, 2000, the Company executed a promissory note with UNICO,
Inc. for $200,000 in conjunction with the sale of Independent News,
Inc. The note is outstanding and currently in default, the Company's
management considers the note collectible.
NOTE 7 - COMMON STOCK
During the three months ended September 30, 2003 and 2002, the
Company issued 0 and 200,000 shares respectively in exchange for
services rendered.
NOTE 8 - SEGMENT INFORMATION
The Company has one reportable segment for the three months ended
September 30, 2003: United Marketing Solutions. United was acquired
on April 1, 1999. United is a wholly owned subsidiary, with
different management teams and different products and services.
United operates a direct mail marketing business.
The accounting policies of the reportable segment is the same as
those set forth in the Summary of Accounting Policies. Summarized
financial information concerning the Company's reporting segment for
the three months ended September 30, 2003.
Three months ended
September 30, 2003 United Parent Eliminations Total
Revenue $1,971,163 $ 160,000 $(160,000) $1,971,163
Segment profit (loss) 112,433 110,907 0 223,340
Total assets 2,463,787 229,495 (394,926) 2,298,356
NOTE 9 - EMPLOYEE STOCK INCENTIVE PLAN
One December 26, 2001, the Company adopted the Employee Stock
Incentive Plan authorizing 3,000,000 shares at a maximum offering
price of $0.10 per share for the purpose of providing employees
equity-based compensation incentives.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following Management Discussion and Analysis should be read in
conjunction with the financial statements and accompanying notes
included in this Form 10-QSB.
Total revenue decreased to $1,971,163 in the quarter ended September
30, 2003 from $1,980,1117 in the third quarter of 2003, a decrease of
less than one percent. Total revenues decreased 2.0% to $5,617,425 in
the nine-month period ended September 30, 2003 from $5,731,989 in the
same period of 2003.
Total cost of goods sold decreased from $1,398,076 in the quarter
ended September of 2002 to $1,280,627 in the quarter ended September
of 2003, a reduction of 8.4%. The gross margin increased from
$582,041 in the quarter ended September of 2002 to $690,536 in the
quarter ended September 2003, an increase of 15.8%. There was a
corresponding nine-month increase in the gross margin from $1,570,759
in 2002 to $1,737,831 in 2003, an increase of 9.7%.
Total operating expenses increased to $464,385 in the quarter ended
September 30, 2003 from $409,558 in the third quarter of 2002. The
greatest percentage of this increase in expenses was due to an
increase of $16,436 in payroll expense and an increase in commissions
paid of $22,564. Total operating expenses increased to $1,333,604 in
the nine-month period ended September 30, 2003 from $1,211,416 in the
same period of 2002.
Total gain from operations for the quarter ending September 30, 2003
was $226,750 as compared to a gain of $172,483 for the quarter ending
September 30, 2002. The nine months ended September 30, 2003 had a
gain of $404,228 as compared to a gain of $359,343 for the same period
in 2002.
Cash used in operating activities was $69,637 for the period ended
September 30, 2003 compared to cash provided of $43,126 for the period
ended June 30, 2002.
Cash used in investing activities was $15,563 for the period ended
September 30, 2003, compared to $3,193 for the period ended September
30, 2002. This was primarily due to a purchase of property and
equipment.
Cash used by financing activities was $30,393 for the period ended
September 30, 2003, compared to cash used in financing activities of
$112,020 for the period ended September 30, 2002. This was primarily
due a change in a note payable.
While the Company has raised capital to meet its working capital and
financing needs in the past, additional financing may be required in
order to meet the Company's current and projected cash flow deficits
from operations. As previously mentioned, the Company has obtained
financing in the form of equity in order to provide the necessary
working capital. The Company currently has no other commitments for
financing. There are no assurances the Company will be successful in
raising the funds required.
The Company has issued shares of its common stock from time to time
in the past to satisfy certain obligations, and expects in the future
to also acquire certain services, satisfy indebtedness and/or make
acquisitions utilizing authorized shares of the capital stock of the
Company.
Quantitative And Qualitative Disclosures About Market Risk
In the normal course of business, operations of the Company may be
exposed to fluctuations in interest rates. These fluctuations can
vary the cost of financing, investing, and operating transactions.
Because the Company has only fixed rate short-term debt, there are no
material impacts on earnings due to fluctuations in interest rates.
New Accounting Pronouncements
In March 2000, the Financial Accounting Standards Board issued
interpretation No. 44 ("FIN 44"), "Accounting for Certain
Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25". FIN 44 clarifies the application of APB No. 25 for
(a) the definition of employee for purposes of applying APB No. 25,
(b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various
modifications to previously fixed stock option or award, and (d) the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 2, 2000 but certain conclusions
cover specific events that occur after either December 15, 1998 or
January 12, 2000. The adoption of FIN 44 did not have an affect on
the Company's financial statements but may impact the accounting for
grants or awards in future periods
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business
Combinations (FAS 141), and FAS 142, Goodwill and Other Intangible
Assets (FAS 142). FAS 141 addresses the initial recognition and
measurement of goodwill and other intangible assets acquired in a
business combination. FAS 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business
combination, whether acquired individually or with a group of other
assets, and the accounting and reporting for goodwill and other
intangibles subsequent to their acquisition. These standards require
all future business combinations to be accounted for using the
purchase method of accounting. Goodwill will no longer be amortized
but instead will be subject to impairment tests at least annually.
The Company is required to adopt FAS 141 and FAS 142 on a prospective
basis as of January 1, 2002; however, certain provisions of these new
standards may also apply to any acquisitions concluded subsequent to
June 30, 2001. As a result of implementing these new standards, the
Company will discontinue the amortization of goodwill as of December
31, 2001. The Company does not believe that the adoption of FAS 141
or 142 will have a material impact on its consolidated financial
statements.
In October 2001, the Financial Accounting Standards Board issued FAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
(FAS 144). FAS 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement
supersedes FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (FAS 121) and
related literature and establishes a single accounting model, based
on the framework established in FAS 121, for long-lived assets to be
disposed of by sale. The Company is required to adopt FAS 144 no
later than January 1, 2002. The Company does not believe that the
adoption of FAS 144 will have a material impact on its consolidated
financial statements.
Forward Looking Statements.
The foregoing Managements Discussion and Analysis of Financial
Condition and Results of Operations "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933, as
amended, and Rule 3b-6 under the Securities Act of 1934, as amended,
including statements regarding, among other items, the Company's
business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the
industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-
looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, including but
not limited to, those risks associated with economic conditions
generally and the economy in those areas where the Company has or
expects to have assets and operations; competitive and other factors
affecting the Company's operations, markets, products and services;
those risks associated with the Company's ability to successfully
negotiate with certain customers, risks relating to estimated
contract costs, estimated losses on uncompleted contracts and
estimates regarding the percentage of completion of contracts,
associated costs arising out of the Company's activities and the
matters discussed in this report; risks relating to changes in
interest rates and in the availability, cost and terms of financing;
risks related to the performance of financial markets; risks related
to changes in domestic laws, regulations and taxes; risks related to
changes in business strategy or development plans; risks associated
with future profitability; and other factors discussed elsewhere in
this report and in documents filed by the Company with the Securities
and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained in this Form 10-QSB will, in fact, occur. The
Company does not undertake any obligation to revise these forward-
looking statements to reflect future events or circumstances and
other factors discussed elsewhere in this report and the documents
filed or to be filed by the Company with the Securities and Exchange
Commission.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Trends, Risks and Uncertainties
The Company has sought to identify what it believes to be the most
significant risks to its business as discussed in "Risk Factors"
above, but cannot predict whether or to what extent any of such risks
may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an
investment decision with respect to the Company's stock.
Limited operating history; anticipated losses; uncertainly of future
results
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The
Company's prospects must be evaluated with a view to the risks
encountered by a company in an early stage of development,
particularly in light of the uncertainties relating to the business
model that the Company intends to market and the potential acceptance
of the Company's business model. The Company will be incurring costs
to develop, introduce and enhance its products, to establish
marketing relationships, to acquire and develop products that will
complement each other, and to build an administrative organization.
To the extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations
and financial condition will be materially adversely affected. There
can be no assurance that the Company will be able to generate
sufficient revenues from the sale of its products and services. The
Company expects that negative cash flow from operations may exist for
the next 12 months as it continues to develop and market its products
and services. If cash generated by operations is insufficient to
satisfy the Company's liquidity requirements, the Company may be
required to sell additional equity or debt securities. The sale of
additional equity or convertible debt securities would result in
additional dilution to the Company's shareholders.
Potential fluctuations in quarterly operating results may fluctuate
Significantly in the future as a result of a variety of factors, most
of which Are outside the Company's control including: the demand for
the Company's products and services; seasonal trends in demand and
pricing of products and services; the amount and timing of capital
expenditures and other costs relating to the expansion of the
Company's operations; the introduction of new services and products
by the Company or its competitors; price competition or pricing
changes in the industry; political risks and uncertainties involving
the world's markets; technical difficulties and general economic
conditions. The Company's quarterly results may also be significantly
affected by the impact of the accounting treatment of acquisitions,
financing transactions or other matters. Particularly the Company's
early stage of development, such accounting treatment can have a
material impact on the results for any quarter. Due to the foregoing
factors, among others, it is likely that the Company's operating
results will fall below the expectations of the Company or investors
in some future quarter.
Management of Growth
The Company may experience growth in the number of employees relative
to its current levels of employment and the scope of its operations.
In particular, the Company may need to hire sales, marketing and
administrative personnel. Additionally, acquisitions could result in
an increase in employee headcount and business activity. Such
activities could result in increased responsibilities for management.
The Company believes that its ability to increase its customer
support capability and to attract, train, and retain qualified
technical, sales, marketing, and management personnel, will be a
critical factor to its future success. In particular, the
availability of qualified sales and management personnel is quite
limited, and competition among companies to attract and retain such
personnel is intense. During strong business cycles, the Company may
experience difficulty in filling its needs for qualified sales, and
other personnel.
The Company's future success will be highly dependent upon its
ability to successfully manage the expansion of its operations. The
Company's ability to manage and support its growth effectively will
be substantially dependent on its ability to implement adequate
financial and management controls, reporting systems, and other
procedures and hire sufficient numbers of financial, accounting,
administrative, and management personnel. The Company is in the
process of establishing and upgrading its financial accounting and
procedures. There can be no assurance that the Company will be able
to identify, attract, and retain experienced accounting and financial
personnel. The Company's future operating results will depend on the
ability of its management and other key employees to implement and
improve its systems for operations, financial control, and
information management, and to recruit, train, and manage its
employee base. There can be no assurance that the Company will be
able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse
effect on the Company's business, results of operations, and
financial condition.
The Company's future success depends upon its ability to address
potential market opportunities while managing its expenses to match
its ability to finance its operations. This need to manage its
expenses will place a significant strain on the Company's management
and operational resources. If the Company is unable to manage its
expenses effectively, the Company's business, results of operations,
and financial condition will be materially adversely affected.
Risks associated with acquisitions
Although the Company does not presently intend to do so, as part of
its business strategy in the future, the Company could acquire assets
and businesses relating to or complementary to its operations. Any
acquisitions by the Company would involve risks commonly encountered
in acquisitions of companies. These risks would include, among other
things, the following: the Company could be exposed to unknown
liabilities of the acquired companies; the Company could incur
acquisition costs and expenses higher than it anticipated;
fluctuations in the Company's quarterly and annual operating results
could occur due to the costs and expenses of acquiring and
integrating new businesses or technologies; the Company could
experience difficulties and expenses in assimilating the operations
and personnel of the acquired businesses; the Company's ongoing
business could be disrupted and its management's time and attention
diverted; the Company could be unable to integrate successfully.
PART II.
ITEM 1. LEGAL PROCEEDINGS.
Other than as set forth below, the Registrant is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against the Registrant has been threatened.
The Company is subject to other legal proceedings and claims that
arise in the ordinary course of its business. Although occasional
adverse decisions or settlements may occur, the Company believes that
the final disposition of such matters will not have material adverse
effect on its financial position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Sales of Unregistered Securities.
The Registrant had no sales of unregistered securities during the
three-month period ending September 30, 2003.
Use of Proceeds.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were not any matters submitted requiring a vote of security
holders during the three-month period ending September 30, 2003.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. No reports on Form 8-K were filed
during the three-month period covered in this Form 10-QSB.
(b) Exhibits. Exhibits included or incorporated by reference
herein: See Exhibit Index.
EXHIBIT INDEX
Exhibit No. Description
3.1 Articles of Incorporation, under the name Micro Tech
Industries, Inc. (incorporated by reference in the filing
of the Company's annual report on Form 10KSB filed on April
15, 1998).
3.2 Amendment to the Articles of Incorporation (incorporated by
reference in the Company's quarterly report filed on Form
10 Q filed on May 15, 1997).
3.3 Amended and Restated Bylaws (incorporated by reference in
the filing of the Company's annual report on Form 10KSB
filed on November 12, 1999).
16.1 Letter on change in certifying accountant (incorporated by
reference in the filing of the Company's current report on
Form 8-K filed on January 5, 2001).
99.1 Certification pursuant of President to 18 U.S.C. Section
1350, as adopted to Section 906 of the Sarbanes Oxley Act of 2002.
99.2 Certification pursuant of Chief Financial Officer to 18
U.S.C. Section 1350, as adopted to Section 906 of the
Sarbanes Oxley Act of 2002.
CERTIFICATIONS
I, Darryl Reed, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Next
Generation Media Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations, and cash flows of the registrant as of, and for the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14 for the registrant
and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions, with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2003
/s/ Darryl Reed
Darryl Reed, President
CERTIFICATIONS
I, Phillip Trigg, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Next
Generation Media Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations, and cash flows of the registrant as of, and for the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14 for the
registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions, with regard to
significant deficiencies and material weaknesses.
Date: November 14, 2003
/s/ Phillip Trigg
Phillip Trigg, Treasurer
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Next Generation Media Corp.
Dated: November 14, 2003 By: /s/ Darryl Reed
Darryl Reed, President
Exhibit 99.1
In connection with the Quarterly Report of Next Generation Media
Corp. (the "Company") on Form 10-QSB for the period ending September
30, 2003 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Darryl Reed, President, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents,
in all material aspects, the financial condition and result of
operations on the Company.
By: /s/ Darryl Reed
Darryl Reed, President
Exhibit 99.2
In connection with the Quarterly Report of Next Generation Media
Corp. (the "Company") on Form 10-QSB for the period ending September
30, 2003 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Phillip Trigg, Treasurer, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents,
in all material aspects, the financial condition and result of
operations on the Company.
By: /s/ Phillip Trigg
Phillip Trigg, Treasurer