As filed with the Securities and Exchange Commission on August 14, 2002
Registration No. _______________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------------------
For quarter ended June 30, 2002
Commission File Number 0-29195
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
Colorado (7310) 84-1463284
--------------------------------------------------------------------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
200 9th Avenue North, Suite 210
Safety Harbor, Florida 34695
(727) 797-6664
--------------
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
John D. Thatch, President
New Millennium Media International, Inc.
200 9th Avenue North, Suite 210
Safety Harbor, Florida 34695
(Name, Address and Telephone Number of Agent for Service)
Indicate by check mark whether the registrant (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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of June 30, 2002 there were 9,733,047 shares of the Company's common stock
issued and outstanding.
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
INDEX
Page
Part I Financial Information................................................3
Item 1 Financial Statements ......................................3
Condensed Balance Sheet....................................3
Condensed Statement of Operations..........................4
Condensed Statement of Cash Flows..........................5
Notes to the Condensed Financial Statements................6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations..............8
Overview...................................................8
Critical Accounting Policies...............................8
Liquidity and Capital Resources............................9
Material Changes in Financial Condition....................9
Results of Operations......................................9
Net Loss..................................................10
Trends and Events.........................................10
Item 3 Quantitative and Qualitative Disclosures
About Market Risk.........................................11
Part II Other Information...................................................11
Item 1 Legal Proceedings.........................................11
Item 2 Changes in Securities and Use of Proceeds.................11
Common Stock Transferred..................................11
Warrants Issued...........................................12
Use of Proceeds...........................................12
Item 3 Defaults Upon Senior Securities...........................12
Item 4 Submission of Matters to a Vote of Security Holders.......12
Item 5 Other Information.........................................12
Item 6 Exhibits and Reports on Form 8-K..........................13
Signatures....................................................................13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED BALANCE SHEET
JUNE 30, DECEMBER 31,
2002 2001
(UNAUDITED) (AUDITED)
------------ ------------
ASSETS
Current Assets:
Cash $ 2,755 $ 47,239
Accounts Receivable 70,024 23,395
Inventory -- --
Prepaid Assets 21,728 47,227
------------ ------------
Total Current Assets 94,507 117,861
------------ ------------
Property and Equipment
Property and Equipment - net 1,383,769 1,461,824
------------ ------------
Other Assets
Intangible assets - net 100,000 665,095
Other assets 52,662 13,986
------------ ------------
Total Other Assets 152,662 679,081
------------ ------------
$ 1,630,938 $ 2,258,766
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 435,835 $ 520,377
Notes and loans payable 577,760 612,697
Related party payables 985,919 809,554
------------ ------------
Total Current Liabilities 1,999,514 1,942,628
------------ ------------
Long-term Liabilities -- --
Stockholders' Equity
Common stock, par value $.001; 15,000,000 shares
authorized; 9,733,047 and 8,610,047 shares issued
and outstanding, respectively, 2002 and 2001 9,733 8,610
Common stock warrants 70,890 69,290
Common stock options; none and 25,000 issued and outstanding,
respectively, 2002 and 2001 exercisable at $.005 per option -- 1,175
Preferred stock, par value $.001; 10,000,000 shares authorized,
no shares issued and outstanding -- --
Additional paid in capital 5,830,192 5,336,697
Accumulated Deficit (4,446,016) (3,266,259)
------------ ------------
1,464,799 2,149,513
Less common stock subscribed (1,833,375) (1,833,375)
------------ ------------
Total Stockholders' Equity (368,576) 316,138
------------ ------------
$ 1,630,938 $ 2,258,766
============ ============
See accompanying notes.
2
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
FOR THE FOR THE FOR THE FOR THE
QUARTER QUARTER SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
6/30/02 6/30/01 6/30/02 6/30/01
------------ ------------ ------------ ------------
Revenues $ 247,820 $ 74,991 $ 459,247 $ 218,741
Costs and Expenses:
General and administrative 461,784 309,091 922,794 562,729
Interest expense 34,310 15,559 64,119 26,743
Depreciation and amortization 43,629 35,116 86,996 70,232
------------ ------------ ------------ ------------
Total costs and expenses 539,723 359,766 1,073,909 659,704
------------ ------------ ------------ ------------
Loss before cumulative effect of change
in accounting principle (291,903) (284,775) (614,662) (440,963)
Cumulative effect of change in accounting principle -- -- (565,095) --
------------ ------------ ------------ ------------
Net Loss $ (291,903) $ (284,775) $ (1,179,757) $ (440,963)
============ ============ ============ ============
Basic and diluted loss per common share:
Loss before cumulative effect of change
in accounting principle $ (0.031) $ (0.043) $ (0.067) $ (0.069)
Cumulative effect of change in
accounting principle -- -- (0.062) --
------------ ------------ ------------ ------------
Net Loss $ (0.031) $ (0.043) $ (0.129) $ (0.069)
============ ============ ============ ============
Weighted Average Number of Shares Outstanding 9,442,547 6,556,861 9,171,547 6,403,491
============ ============ ============ ============
See accompanying notes.
3
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
FOR THE FOR THE FOR THE FOR THE
QUARTER QUARTER SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
6/30/02 6/30/01 6/30/02 6/30/01
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (291,903) $ (284,775) $ (1,179,757) $ (440,963)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Cumulative effect of change in accounting principle -- -- 565,095 --
Depreciation and amortization 43,629 35,116 86,996 70,232
Fair value of shares issued for services 20,000 25,000 134,650 76,685
Fair value of options issued 3,576 -- 7,033 --
Fair value of warrants issued 1,600 -- 1,600 --
(Increase) decrease in accounts receivable (18,770) (38,706) (46,629) (114,939)
(Increase) decrease in prepaid expenses (7,500) (1,876) 25,500 (1,876)
(Increase) decrease in other assets (36,348) -- (39,026) --
Increase (decrease) in accounts payable
and accrued expenses (102,529) 36,464 (87,471) 79,916
Increase (decrease) in related party payables 165,836 -- 213,917 --
------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities (222,409) (228,777) (318,092) (330,945)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (7,940) (6,062) (7,940) (10,767)
------------ ------------ ------------ ------------
Net provided by (used in) investing activities (7,940) (6,062) (7,940) (10,767)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 186,198 250,000 241,198 310,000
Proceeds from common stock transactions 40,000 -- 40,000 50,000
Proceeds from exercise of common stock options -- -- 350 --
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities 226,198 250,000 281,548 360,000
------------ ------------ ------------ ------------
Increase (decrease) in cash and cash equivalents $ (4,151) $ 15,161 $ (44,484) $ 18,288
Cash and cash equivalents at beginning of period 6,906 3,127 47,239 --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 2,755 $ 18,288 $ 2,755 $ 18,288
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest -- -- -- --
Cash paid during the year for income taxes -- -- -- --
Supplemental schedule of noncash investing
and financing activities:
Fair value of shares issued (1,000 shares) to
purchase property and equipment $ 1,000 $ -- $ 1,000 $ --
Conversion of short-term debt to equity 168,660 13,000 310,758 13,000
See accompanying notes.
4
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
----------------------
The accompanying unaudited condensed statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information in accordance with rules and regulations of the
Securities and Exchange Commission, including the instructions to Form
10-Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and should be read in conjunction with the Company's Annual
Report (Form 10-KSB) for the year ended December 31, 2001. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
results of operations for the six months ended June 30, 2002 are not
necessarily indicative of the operating results for the full fiscal year or
any future period.
2. Going Concern Uncertainty
-------------------------
The financial statements are presented assuming the Company will continue
as a going concern. The Company has incurred recurring operating losses and
negative cash flows and has negative working capital. The Company has
financed itself primarily through the sale of its stock and related party
borrowings. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
There can be no assurance that the Company will be successful in
implementing its plans, or if such plans are implemented, that the Company
will achieve its goals. Further, the Company has not received approval from
the SEC concerning filing of its Post Effective Amendment of an SB-2, which
is necessary for the Company to effect its agreement with Swartz Private
Equity and obtain necessary funding for operations.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments
to reflect the possible future effect on the recoverability and
classification of assets or the amount and classification of liabilities
that might result from the outcome of this uncertainty.
3. Effect of Recent Accounting Pronouncements
------------------------------------------
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and (SFAS) No. 142, Goodwill and Other Intangible Assets.
SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations and prohibits the use of the pooling-of-interests
method. Further, Statement No. 141 changes the criteria to recognize
intangible assets apart from goodwill. The adoption of Statement No. 141
did not have a material effect on the company's financial position or
results of operations.
SFAS No. 142 changes the accounting for goodwill from an amortization
method to an impairment-only approach. Thus, amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. Those intangible assets that will continue to
be classified as goodwill or as other intangibles with indefinite lives are
no longer amortized. Finite lived intangibles will continue to be amortized
over their estimated useful lives.
Under Statement No. 142, all intangible assets, including goodwill that
results from business combinations, are periodically (at least annually)
evaluated for impairment, with any resulting impairment loss being charged
against earnings. Any impairment loss that is recognized as a result of
completing the transitional impairment testing in the year of adoption is
treated as a cumulative effect of a change in accounting principle and
recognized in these interim financial statements. Statement No. 142
prescribes a two-step process for impairment testing of goodwill: (i) the
determination of impairment, based upon the fair value of a reporting unit
as compared to its carrying value, and (ii) if there is an impairment, this
step measures the amount of impairment loss by comparing the implied fair
value of goodwill with the carrying amount of that goodwill. The Company
completed its step one impairment analysis during the current quarter,
which indicated that the carrying value was greater than the fair value and
that an impairment existed. The Company also completed step two of the
testing during the first quarter allocating the fair value of the reporting
unit considering the sources of recognized goodwill in making the initial
assignment as well as the reporting units to which the related acquired net
assets were assigned. As a result of using the fair value approach, an
impairment charge of $ 565,095 has been recognized.
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Effect of Recent Accounting Pronouncements Continued
----------------------------------------------------
In accordance with Statement No. 142, the effect of this change is
reflected prospectively. The following table reflects the results of
operations adjusted as though the adoption of SFAS No. 141 and 142 occurred
as of January 1, 2001:
FOR THE QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------------- -------------------------------------------
2002 2001 2002 2001
-------------------------------------------- -------------------------------------------
NO. OF NO. OF NO. OF NO. OF
SHARES / SHARES / SHARES / SHARES /
OPTIONS AMOUNT OPTIONS AMOUNT OPTIONS AMOUNT OPTIONS AMOUNT
-------- -------- -------- -------- -------- -------- -------- --------
COMMON STOCK:
Conversion of short-term
debt to equity 335,000 $168,660 20,000 $ 13,000 560,000 $310,758 20,000 $ 13,000
Shares issued for services 40,000 20,000 100,000 25,000 307,000 134,650 306,740 76,685
-------- -------- -------- --------
$188,660 $ 38,000 $445,408 $ 89,685
======== ======== ======== ========
COMMON STOCK OPTIONS:
Options issued for services 125,000 $ 3,576 -- $ -- 175,000 $ 7,033 -- $ --
======== ======== ======== ========
4. Fair value information
----------------------
Fair value of shares issued as indicated in accordance with FASB No. 123 as
restated consists of:
FOR THE QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2002 2001 2002 2001
------------ --------- ------------ ---------
Net loss before cumulative effect of accounting change:
As reported $ (291,903) $(284,775) $ (614,662) $(440,963)
Goodwill amortization -- 11,298 -- 22,596
------------ --------- ------------ ---------
Net loss after cumulative effect
of accounting change $ (291,903) $(273,477) $ (614,662) $(418,367)
============ ========= ============ =========
Basic and diluted loss per common share before
cumulative effect of accounting change:
As reported $ (0.031) $ (0.043) $ (0.067) $ (0.069)
============ ========= ============ =========
As adjusted $ (0.031) $ (0.042) $ (0.067) $ (0.065)
============ ========= ============ =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Management's discussion and analysis contains various "forward looking
statements." Such statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate," or "continue" or use of
negative or other variations or comparable terminology.
We caution that these statements are further qualified by important factors that
could cause actual results to differ materially from those contained in the
forward-looking statements, that these forward-looking statements are
necessarily speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred to
in such forward-looking statements.
OVERVIEW
New Millennium Media International, Inc. (NMMI) is engaged in activities in the
advertising business. The primary activity of the Company currently involves
several types of visual advertising: The IllumiSign-EyeCatcher front-lit motion
display boards, the IllumiSign-EyeCatcher back-lit motion display boards, plasma
screens and LED display boards. NMMI sells advertising space on these display
boards on a contractual yearly basis, payable monthly or in the case of the LED
boards, on an event basis. In certain instances we sell and continue to sell
motion display boards. The criteria that determines the sale rather than leasing
the displays is two fold: (i) sales in foreign countries where recovery of the
displays in the event of non-payment would be a major expense and recovery of
the display economically impractical and, (ii) sales to customers in large
quantity where leasing the displays is determined to be nearly impossible and
the customer retains the displays for its own benefit and the customer intends
to place the displays in non-competition with the business model of the Company.
The Company is continuing to devote substantially all of its present efforts to
implementing its operational and marketing plans designed to establish new
business accounts for its mobile LED boards and the motion display boards.
NMMI continues to incur significant losses from operations. We incurred losses
from operations of $291,903 for the quarter ended June 30, 2002 compared to
$284,775 for the same term of 2001and the loss for the first six months of 2002
was $614,662 compared to $440,963 for the first six months of 2001. As of June
30, 2002, we had an accumulated deficit of $ 4,446,016.
CRITICAL ACCOUNTING POLICIES
Our financial statements and related financial information are based on the
application of accounting principles generally accepted in the United States
(GAAP). The preparation of financial statements under GAAP requires management
to make estimates and assumptions that affect the reported amount of revenue and
expenses during the periods. We believe our use of estimates and underlying
accounting assumptions adhere to GAAP and are consistently and conservatively
applied. Estimates have been made by management in several areas including, but
not limited, to accounts receivable allowances, valuation of long-lived and
intangible assets including goodwill. We have based our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances and review valuations based on estimates for
reasonableness and conservatism on a consistent basis. Actual results may differ
materially from these estimates under different assumptions or conditions.
As discussed in Note 3 to the financial statements, we adopted FASB No. 142,
Goodwill and Other Intangible Assets, as of January 1, 2002 and have performed
the required impairment tests of goodwill and indefinite intangible assets and
have recognized an impairment loss of $565,095 resulting from the cumulative
effect of the change in accounting principle during the six months ended June
30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations and investments in equipment
primarily through equity financings and borrowing from related parties that are
not necessarily isolated transactions; however, there is no assurance that there
will be proceeds from such transactions in the future.
MATERIAL CHANGES IN FINANCIAL CONDITION
As shown on the attached Condensed Balance Sheet, the Property and Equipment net
has decreased only slightly, 5%, during the first 6 months period of 2002
compared to the first six months of 2001 due to depreciation expense; however,
the Total Other Assets shows a decrease of $526,419, 77%. This is primarily
because of the $565,095 of Intangible Assets decrease to zero that was caused by
the impairment of goodwill under a recent Financial Accounting Standards Board
Statement. A detailed explanation of this issue is included in Note 3, Effect of
Recent Accounting Pronouncements in the Notes to the Condensed Financial
Statements attached hereto. The increase in Total Current Liabilities during
these first six months of 2002 is relatively insignificant, $56,886,
approximately 2.9%. The Total Stockholders' Equity decreased $684,714, a
decrease of 216% for this 6 months period due to these losses.
RESULTS OF OPERATIONS
Revenue
The comparative revenue for the second quarter of 2002 compared to the same
period for 2001 shows an increase of $172,829, 230% for the first two quarters
of 2002 compared to 2001 the increase is $240,506, 110%. This increase is due
primarily to the contract rental of the mobile LED unit and the increase of
advertising revenue generated by the EyeCatcher motion displays. The Company
continues lease the motion displays and to sell the displays on a limited basis,
see the section captioned "Overview" above. The Graphic Arts Department
continues to be a revenue source for the Company for both the lease and sale of
the motion displays. The Company retains the rights to print the display posters
for the motion displays whether they are leased or sold. As the Company installs
additional display boards, additional advertisements are sold. Generally, this
is cumulative, i. e., as the display boards are placed, the advertisements are
sold for a term of several months or yearly. Even though the advertisement
contracts expire, many are renewed with a minimal amount of sales effort so long
as the display board continues to produce revenue with no additional effort. No
additional effort is generally necessary to place the display board because it
remains in place at the host venue.
General and Administrative Costs and Expenses
There was an increase in the General and Administrative Costs and Expenses of
$152,693, 49%, for the second quarter comparison of 2002 and 2001 and an
increase of $360,065, 64%, for the first two quarters comparison of 2002 and
2001. These increases are due primarily to the Company continuing to grow,
adding employees, providing
employee incentives, employee benefits, management consulting, interest,
depreciation and royalty allowance for the IllumiSign-EyeCatcher front-lit
licensing agreement. The current staffing of the Company is expected to be
sufficient to carry the Company through its growth during the next six to twelve
months at the present rate of growth.
Interest Expense
Interest Expense increased by $18,751, 121%, for the second quarter of 2002
compared to the same period of 2001 and $37,376, 140%, for the first two
quarters comparison for those same years. This interest expense increased
primarily as a result of the Company continuing to finance its operation through
borrowing funds.
Depreciation
Depreciation and amortization increased by $8,513, 24%, for the second quarter
and $16,764, 24%, for the first two quarters of 2002 and 2001. This increase
continues to be the result of additional advertising boards being available for
lease.
Total Costs and Expenses
The Total Costs and Expenses have increased by $179,957, an increase of 50% in
this second quarter of 2002 when compared to the second quarter of 2001 and
$414,205, 63%, for the first six months comparison for these years. This is the
effect of the Company continuing to grow and add EyeCatcher motion displays and
support personnel as described above under the heading General and
Administrative Costs and Expenses. Many of these costs and expenses are
non-recurring startup expenses.
Loss Before Cumulative Effect of Change in Accounting Principle
This loss increased 3%, $7,128, for the second quarter comparison and 39%,
$173,699 for the first two quarters comparison for years 2002 and 2001. This
operational loss is principally due to the continuing Company growth which
requires additional display boards and equipment as well as the in-house
personnel necessary to provide operational support.
Cumulative Effect of Change in Accounting Principle
For a detailed explanation of this issue please see Note 3, Effect of Recent
Accounting Pronouncements, in the Notes to the Condensed Financial Statements
attached hereto.
Basic and Fully Diluted Loss Per Common Share
The Basic Loss Per Common Share before cumulative effect of change in accounting
principle for the second quarter of 2002 compared to the same quarter of 2001
decreased from $(0.043) to $(0.031), a comparative Basic Loss Per Common Share
decrease of approximately 28%. For the first six months comparison there was a
decrease in the loss per share of $(0.002), 3%. This decrease in loss per common
share is a function of the increase in the number of Weighted Average Number of
Shares Outstanding. As stated above, a major portion of the Costs and Expenses
are non-reoccurring start-up costs. Compared to a year ago, we are now fully
staffed and beginning to produce income. We are continuing to concentrate on
establishing new business and increasing sales relating to the IllumiSign
EyeCatcher backlit and front-lit display board and the LED display sign truck.
Cumulative Effect of Change in Accounting Principle
The $(0.062) Cumulative Effect of Change in Accounting Principle cannot be
compared to any earlier period. For a detailed analysis of this principle,
please see Note 3, Effect of Recent Accounting Pronouncements, in the Notes to
the Condensed Financial Statements attached hereto.
Net Loss and Weighted Average Common Shares Outstanding
The Net Loss has decreased by 28%, $0.012, for the 2002 and 2001 quarters ending
June 30 and has increased 87% for the six months ending June 30. This six months
increase is due primarily to the change in accounting principle as noted above
and in Note 4, Fair Value Information, in the Notes to the Condensed Financial
Statements attached hereto. The Weighted Average Common Shares Outstanding
increased by 2,885,686 shares for the comparison of the second quarters of 2001
to 2002 and 2,768,056 for the first two quarters comparison.
TRENDS AND EVENTS
Over the past approximately six months we have been engaged in a slight change
in our operations model primarily in that we have agreed to sell
IllumiSign-EyeCatcher motion displays in limited circumstances. This change in
Company policy is described above in the section entitled "Overview". Management
feels that this is a positive change in that the Company now has the opportunity
to earn additional revenue in foreign countries as well as certain United States
based advertising entities that otherwise would purchase from competitors of the
Company or not use motion displays at all. Thus far, all purchasers of the
displays have agreed to purchase all of the advertising posters from the
Company. This sale of in-house printed posters is an additional source of
Company revenue.
Although forward looking with no real assurance that the future will unfold as
anticipated by management, the Company management certainly feels that the
current trend of the Company is toward an increased number of motion displays in
place and a continuing increase in the number of bookings for the mobile LED
unit. In the opinion of management, the cumulative effect of these events is a
positive trend. Thus far the Company has continued to grow at a slow, but steady
pace, there is, however, no real assurance that this positive trend will
continue.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Registrant is a Small business issuer as defined by these Regulations and need
not provide the information required by this Item 3.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is presently negotiating the settlement of an ongoing litigation in
Great Britain with the individual patent owner who licenses to the Company the
current manufacture and sale of the front-lit IllumiSign EyeCatcher display.
This litigation is described as Maurice Grosse and New Millennium Media
International, Inc., Claim Number HQ02X01340 in the High Court of Justice,
Queen's Bench Division. These settlement negotiations are progressing and should
be concluded in the next few months. This litigation was initiated as a result
of the Company deciding to phase out distribution of the IllumiSign-EyeCatcher
front-lit displays in deference to the more modern back-lit displays.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
COMMON STOCK TRANSFERRED
The company relied on Section 4(2) of the Securities Act of 1933 as the basis
for an exemption from registration regarding the following transfers to
accredited investors because they did not involve a public offering.
April 4, 2002 (75,000 shares) and June 27, 2002 (50,000 shares) the Company
transferred an aggregate of 125,000 shares of not registered common stock to
seven Accredited Investors (as that term is defined in Regulation D promulgated
under the Securities Act of 1933, as amended) in consideration for their
respective loans to the Company of $250,000. The essential terms of the loan
agreement are that the Company will pay 5% per annum interest and if the loans
are not repaid within 60 days, then for each $25,000 loaned to the Company, the
Company shall transfer to the lender 5,000 shares of not registered common stock
for $25. Because these shares are considered as partial interest payment, for
accounting purposes they are valued at $5,756 that includes $2,055 for interest
that accrued on 50,000 shares during the first quarter of 2002, but which were
unexercised until the second quarter of 2002. Although the loans were made at
different dates, the dates range from April 4, 2001 through June 14, 2001 and
the issued shares are accounted for accordingly.
April 10, 2002 the Company issued 40,000 shares of restricted common stock as
payment in full for the purchase of ten IllumiSign-EyeCatcher displays.
May 20, 2002 the Company issued 215,000 shares of restricted common stock to an
Accredited Investor (as that term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended) in consideration for the investor's
payment to the Company of $40,000 and the investor's conversion to 135,000
shares of Company restricted common stock of a March 2001 $60,000 loan to the
Company plus accrued interest of $8,660.
In accordance with the terms of the Company Employee Stock Option Plan, on June
18, 2002 the Company issued 200,000 shares of Company Employees Stock Option
Plan stock to an employee in consideration for $100,000.
June 27, 2002 the Company issued 1,000 shares of restricted common stock to an
Accredited Investor (as that term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended) along with $2,000 cash in consideration
for the conveyance to the Company of a late model van intended to be used by the
Company to transport IllumiSign-EyeCatcher displays.
WARRANTS ISSUED
May 9, 2002 the Company issued to an Accredited Investor (as that term is
defined in Regulation D promulgated under the Securities Act of 1933, as
amended) a warrant to purchase up to 25,000 shares of Company common stock at a
strike price of $0.75 per share for a term of one year after the May 9, 2002
issuance of the warrant. Utilizing the Black Scholes formula, assuming a 1 year
life, no expected dividends, volatility of 50% and interest rate of 3%, the
Company determined that the fair value of this warrant for the quarter ended
June 30, 2002 to be $1,600.
USE OF PROCEEDS
The proceeds from these transactions (Common Stock Transferred) were used for
working capital and general corporate purposes, including acquisitions, funding
anticipated operating losses, sales and marketing expenses, purchase of
additional inventory, working capital and to fund payment obligations for
contemplated acquisitions, corporate partnering arrangements and lawsuit
settlement. We reserve the right to vary the use of proceeds among these
categories because our ability to use the proceeds is dependent on a number of
factors, including the extent of market acceptance of our variety of display
boards, unexpected expenditures for further technical development, sales and
marketing efforts and the effects of competition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
On March 19, 2002 the Company filed an amended Form 10-KSB/A for year-end 2001
and filed a second amended Post Effective Amendment to Form SB-2 Registration
Statement for Small Business Issuers the original of which was filed September
13, 2000. On April 22, 2002 the Securities and Exchange Commission commented on
the second amended Post Effective Amendment. A third amended Post Effective
Amendment to Form SB-2 Registration Statement for Small Business Issuers is
currently in process.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (SECT. 249.308 OF THIS CHAPTER).
Financial Statements are incorporated in the body of this report.
No reports on Form 8-K have been filed during the quarter for which this report
is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Signed and submitted this 14 day of August 2002.
New Millennium Media International, Inc.
(Registrant)
by:___/s/______________________________
John Thatch as President/CEO