As filed with the Securities and Exchange Commission on April 15, 2002
Registration No. ________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Amended)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
------------------------------------------------
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 Classification Code Number) Identification No.)
organization)
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)
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
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)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock
The issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year ended December 31, 2001
were $363,802.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which common equity was
sold, or the average bid and asked price of such common equity, as of December
31, 2001 was $3,890,930 (calculated by excluding restricted shares, which
includes shares owned beneficially by affiliates, directors and officers). See
Item 11. The total number of shares of issuer's common equity outstanding as of
December 31, 2001 was 8,610,047 shares.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of December 31, 2001, the
registrant had 8,610,047 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into the following parts
of this Form 10-KSB: certain information required in Part I of this Form 10-KSB
is incorporated from the issuer's Registration Statement for Small Business
Issuers filed September 13, 2000, as amended by Post Effective Amendment that
was filed March 19, 2002, amended Form 10-KSB that was filed March 19, 2002,
amended Form 10-QSB that was filed October 24, 2001, and certain information
required in Parts I and II of this Form 10-KSB is incorporated from its Form S-8
filed June 4, 2001.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BRIEF HISTORY
New Millennium Media International, Inc. is a Colorado corporation organized on
April 21, 1998. NMMI's principal place of business is located at 200 9th Avenue
North, Suite 210, Safety Harbor, Florida 34695. NMMI is the successor by merger
to Progressive Mailer Corp. (hereafter "PMC"), a corporation organized in
Florida on February 5, l997. In March 1997 and April 1998, PMC conducted
offerings of its common stock pursuant to the exemption from registration
afforded by Rule 504 of Regulation D under the Securities Act of l933, as
amended. On November 3, l997, PMC received clearance from the NASD to have its
common stock listed on the OTC Bulletin Board.
Effective April 8, 1998, pursuant to an Asset Purchase Agreement, PROGRESSIVE
MAILER CORPORATION, a publicly traded Florida corporation, in consideration for
six million four hundred thousand (6,400,000) shares of Progressive Mailer
Corporation common stock, purchased certain designated assets of LUFAM
TECHNOLOGIES, INC., a privately held California corporation. These acquired
assets of Lufam Technologies were valued at the net fair market value that is
not a business combination under SFAS 141 as no exchange of control occurred. On
November 3, 1997 PMC received clearance from the NASD to have its common stock
listed on the OTC Electronic Bulletin Board pursuant to PMC's application
submitted to the NASD pursuant to NASD Rule 6740 and Rule 15c2-11 under the
securities Exchange Act of 1934.
Effective April 27, 1998, pursuant to a merger agreement, PROGRESSIVE MAILER
CORPORATION, a publicly trading Florida corporation, merged with NEW MILLENNIUM
MEDIA INTERNATIONAL, INC., a privately held Colorado corporation (NMMI). This
merger qualified as a statutory merger and provided for all of the issued and
outstanding shares of stock in Progressive Mailer Corporation to be converted on
a one for one ratio for common stock of NMMI. It was further provided that NMMI
would be the surviving entity. As a part of this merger the domicile of
Progressive Mailer Corporation was authorized to be changed from Florida to
Colorado.
Effective August 31, 1999 UNERGI, INC., a privately held Nevada corporation,
merged into NEW MILLENNIUM MEDIA, INC., a wholly owned subsidiary of NMMI, which
merger qualified as a tax free reorganization under section 368(a) of the
Internal Revenue Code of 1986 as amended. The merger required that New
Millennium, Inc. be the surviving entity and all of the issued and outstanding
shares of stock in Unergi, Inc. be prorata converted to 16,566,667 shares of
common stock of NMMI.
Effective March 9, 2000 SCOVEL CORPORATION, a Delaware corporation, merged into
NMMI in a transaction intended to qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986 as amended. Prior to the
merger Scovel Corporation had filed with the Securities and Exchange Commission
a registration statement in form 10-SB which became effective pursuant to the
Securities Exchange Act of 1934 on February 9, 2000 and was at the time of
merger a reporting company pursuant to Section (g) hereunder. At the time of the
merger Scovel Corporation had timely filed and was current on all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange Act
of 1934. NMMI was the surviving entity resulting from the merger. All of the
issued and outstanding shares of Scovel Corporation were converted into 500,000
shares of restricted common shares of NMMI. No assets were transferred to NMMI
from Scovel other than goodwill that was valued based upon the fair value of the
500,000 shares of NMMI stock because of the lack of marketability of the stock
under FAS 141.
NMMI is a fully reporting company which common stock is traded on the OTC
Bulletin Board operated by NASDAQ under the symbol NMMG.
BUSINESS OVERVIEW
For years the billboard industry has seen several consolidations with large
corporate owners acquiring smaller (fewer than 50 billboards) independent
operators. The purpose of these consolidations is to provide a platform for the
corporate owners to attract large regional and national advertisers. Billboard
advertising has evolved from painted signs without lights, to lighted signs, to
vinyl covered signs, to prism boards (three sided boards which rotate three
1
ads), to LED (light emitting diode) signs. Presently the plasma signs are used
indoors and generally do not have a screen size larger than 48 inches.
Advertisers soon learned that rotating signs attract the attention of viewers
more effectively than static signs. The most prominent LED display sign is in
Times Square in New York City. Despite the effectiveness of LED outdoor
advertising, the billboard industry is moving slowly to the LED display sign
because most large companies have a substantial investment in static signs. The
cost to change a traditional static board to an LED display is approximately
$1,000.000 to $2,000.000 depending on the size of the LED sign. This, of course,
includes the electronics necessary to operate the sign from remote locations. In
many instances, because of the additional weight of the LED sign, it is
necessary to erect an entire new foundation along with accompanying supports.
Another reason is that LED signs may only be installed in certain traffic areas
because many cities and states have regulations that prohibit LED and prism
signs on the basis that the signs may be distracting to passing drivers and may
lead to an increase in the number of traffic accidents. NMMI has targeted
markets where this may not be an issue.
There are two reasons for the changes in outdoor advertising. First,
technological improvements have made the prism and LED boards affordable.
Second, moving ads have a much greater impact on viewers than static ads. In a
digital society there must be an effective way for advertisers to display their
product in its true form. The competition in indoor advertising is limited. Most
indoor companies sell single poster board advertisements of different sizes and
place them in theaters, malls, airports and other similar venue locations.
NMMI provides several types of visual advertising: The Illumisign-Eyecatcher
front-lit movable display boards, the "EyeCatcher Powered by Insight" back-lit
scrolling movable display boards, plasma screens and LED display boards. We
retain ownership of all types of the machines and sell the advertising space on
a monthly basis.
NMMI has United States distribution and manufacturing rights of the
IllumiSign-Eyecatcher front-lit movable display boards. This board is steel
encased, front lighted, and displays poster type ads. These mechanical devises
come in various sizes ranging from 11 inches by 17 inches to 4 feet by 6 feet.
Each machine is capable of rotating up to 24 posters at preprogrammed intervals
ranging from 3 seconds to one hour.
Additionally, NMMI has the exclusive U.S. rights to an indoor backlit
advertising board designed and manufactured by AMS Controls, Inc. called the
"EyeCatcher Powered by Insight". There are a few minor exceptions to this
exclusivity that relate to accounts with which the manufacturer had an existing
business relationship at the time of contracting with NMMI. We are marketing
this new product as "EyeCatcher Powered by Insight". This is a patented product,
which ranges in poster size from 18" X 24" to 40" X 60". These signs can display
from 10 to 20 scrolling advertising images. Each rotation can be set to run from
three seconds to one hour. Because the poster material in both of these machines
is critical to the functionality as well as the longevity of the poster, it is
necessary for the advertisers to rely on our graphic arts department to develop
and supply the necessary posters. These motion displays are then placed in
various sites in stores, shopping malls, movie theaters and anywhere else where
indoor poster type advertising is feasible. NMMI is the owner of the
registration of the trademark, "IllumiSign-Eyecatcher" for electric sign
products in the United States Department of Commerce, Patent and Trademark
Office.
The LED display boards are generally placed out doors either freestanding or
affixed onto the sides of buildings or located in athletic stadiums. The LED
boards range in size from 8 feet by 10 feet to 20 feet by 30 feet and even
larger in customized designs. They are capable of
2
displaying a near infinite number of stationary or full motion images. Because
the images need to be programmed into the LED boards, it is necessary that our
graphic arts department be involved in both the design and set up of the
intended displays.
NMMI has a strategic relationship with E-Vision LED, Inc., a U.S. based company
whose affiliates manufacture these high quality LED units (See above heading
Risk Factors, subheading Strategic Relationships). E-Vision will sell the LED
boards to NMMI for a less than retail price and will share in the revenues that
the LED boards produce. This allows NMMI to procure the highest quality LED
display boards at a greatly reduced cost. Because these LED boards can run any
commercial format on any sized board, we feel that NMMI has a strong competitive
advantage over other similar display boards for which the visual display must be
reformatted. Formatting often takes weeks. E-Vision LED displays will run
consistent color quality and clarity. These LED boards have the potential to
display countless images in full color both static and full motion. Color
quality and clarity are very important to national advertisers who want
consistency of colors on all boards. E-Vision will assist NMMI with training and
support from the first board and with ongoing assistance in all aspects of
programming, technical and software support. Because of this strategic
relationship, E-Vision and its affiliates will supply NMMI, free of charge,
software upgrades as they become available.
In relation to these various types of display media, NMMI is capable of
providing advertisers with visual communications and media services in both
indoor and outdoor environments. We offer a comprehensive range of visual
movable board solutions designed to improve clients' advertising needs and
processes including professional services such as strategic site location,
consulting and analysis as well as poster design and development. This enables
us to locate boards and sell advertising on a national level that will benefit
NMMI in placing boards throughout the United States.
Employees
NMMI has twelve full time employees. None of our employees is represented by a
labor union. We consider our relations with our employees to be good. Because a
major portion of our business involves nationwide site location and procurement
as well as sales and marketing of advertising space, it is advantageous for us
to outsource this segment of our business through strategic partnering and
subcontracting distributors. We intend to utilize in-house employees and plan to
add additional staff as needed to handle all other phases of our business
including graphic arts, warehousing, distribution, purchasing, distribution,
shipping, accounting and bookkeeping.
ITEM 2. DESCRIPTION OF PROPERTY
NMMI owns no real estate. On March 29, 2001 the Company signed a lease with
Safety Harbor Centre for five years with an option for five additional years.
The lease became effective August 27, 2001, the date that the Company began
occupancy of the new facility. This leased facility is slightly larger than the
prior leased premises and will support a more efficient use of the floor space
as well as additional space for expansion. Many of the machines will continue to
be shipped directly to the site location and for those machines that require
more detailed installation such as the LED boards, the machines will be shipped
directly to the installer. Machines that are in need of repair will be repaired
on-site whenever possible. Those machines that are not repairable on-site will
be repaired in-house at the Safety Harbor, Florida facility.
3
ITEM 3. LEGAL PROCEEDINGS
None. The Company was a defendant in a lawsuit filed on November 5, 1999 in the
Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County,
Florida, Case Number 99-26073 CA 10. The plaintiff, Joseph Maenza, was seeking
to collect payment of a promissory note in the principal amount of $50,000 plus
interest from February 1999 and attorney fees. This lawsuit has been settled and
satisfied in full.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to security holders for a vote during the course
of the fourth quarter of the last fiscal year. May 7, 2001 the shareholders
voted to amend the Articles of Incorporation to decrease the number of
authorized shares of common stock from 75,000,000 to 15,000,000, the 1:5 split.
This amendment to the Articles of Incorporation became effective May 18, 2001
and the Company trading symbol was changed from NMMI to NMMG. See the Definitive
Proxy Statement filed April 18, 2001 for additional information.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NMMI is a fully reporting company which common stock is traded on the OTC
Bulletin Board operated by NASDAQ under the symbol NMMG. Prior to May 18, 2001
the Company's common stock traded under the symbol "NMMI". The shares have
historically not been eligible for listing on any securities exchange or under
the NASDAQ system. As of December 31, 2001, we reported 8,610,047 outstanding
shares of common stock, $.001 par value and no outstanding shares of preferred
stock. There were in excess of 500 shareholders and reported beneficial owners
of record of the Company's common stock listed by the Company's transfer agent
as of December 31, 2001.
For additional information relating to Common Equity Matters please see
hereafter in this filing Notes to the Financial Statement, December 31, 2000 and
2001, Note 6, Equity Transactions and Note 7, Stock Options and Warrants.
We have not paid any dividends on our common stock since inception. We expect to
continue to retain all earnings generated by our operations for the development
and growth of our business and do not anticipate paying any cash dividends to
our shareholders in the foreseeable future. The payment of future dividends on
the common stock and the rate of such dividends, if any, will be determined by
our Board of Directors in light of our earnings, financial condition, capital
requirements and other factors.
The table below sets forth the high and low bid prices of our common stock for
each quarter for the four quarters of 2000 and 2001. The quotations set forth
below reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.
Year High Bid Low Bid
---- -------- -------
2000
----
First Quarter .875 .875
Second Quarter 1.000 1.000
Third Quarter .650 .430
Fourth Quarter .350 .220
4
2001
----
First Quarter .080 .080
Second Quarter* 1.700 1.350
Third Quarter 1.170 1.110
Fourth Quarter .580 .470
*Note: On May 18,2001 the issuer shares split 5:1. The second quarter
prices reflect the post split prices.
There are outstanding warrants to purchase 242,274 (post split number of shares)
shares of our common stock at a price of $1.50 per share and may be reset every
6 months thereafter. These warrants were issued to Swartz on March 21, 2000
(200,000 shares), April 17, 2001 (16,796 shares) and July 17, 2001 (25,478
shares) in consideration of Swartz's commitment to enter into the Investment
Agreement. The warrants expire on May 25, 2004, April 17, 2006 and July 17,
2006, respectively. By contract, the holders of the warrants have the right to
have the common stock issuable upon exercise of the warrants included on any
registration statement we file, other than a registration statement covering an
employee stock plan or a registration statement filed in connection with a
business combination or reclassification of our securities. The shares of common
stock to support these warrants are included in the SB-2 registration statement
filed September 13, 2000 and as amendment filed March 18, 2002.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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
The Company is no longer a development stage company as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises." We have generated our cash needs through equity financings
and loans from officers and stockholders. As an operational company, we devote
substantially all of our efforts to securing and establishing new business. We
have engaged in limited activities in the advertising business, but no
significant revenues have been generated to date. The primary activity of the
Company currently involves several types of visual advertising: The
Illumisign-Eyecatcher front-lit movable display board, "EyeCatcher Powered by
Insight" back-lit movable display boards, plasma screens and LED display boards.
We retain ownership of all types of the machines and sell the advertising space
on a monthly basis. 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. The Company presently conducts all marketing in-house and continues to
use the
5
EyeCatcherPlus logo, marketing material and website. Using this business model,
management feels that there will be a net effect of "cutting out the middle man"
and increasing Company revenues.
LIQUIDITY AND CAPITAL RESOURCES
Generally, the Company has thus far funded our operations and investments in
equipment through cash from equity financings and borrowing from private parties
as well as related parties; however, there is no assurance that there will be
proceeds from these sources in the future. For a further explanation of these
loan transactions please see hereafter in this filing Notes to the Financial
Statement, December 31, 2000 and 2001, Note 4, Notes and Loans Payable; Note 5,
Related Party Payables and Note 6, Equity Transactions.
The attached Balance Sheet shows that our Stockholders' Equity has decreased
from $750,208 to 316,138, a decrease of $434,070 from calendar year 2000 to year
2001. This is due in large part to an increase of common stock subscribed in the
amount of $1,833,375 and an increase of additional paid in capital of 2,567,252.
The increase in current liabilities from $813, 228 to $1,942,628 is principally
due to the Company continuing to fund its operation through arm's length
borrowing (Notes Payable $612, 697) and Related Parties borrowing ($809,554).
The Accounts Payable and Accrued Expenses ($520,377) increase from $93,118 is
primarily the result of the Company now being fully operational; i. e.,
equipment purchased by the Company, but not yet paid and payment received by the
Company for equipment purchases for which the equipment has not yet been
delivered. Additionally, the day-to-day operation of the business incurs
temporary liabilities in the Accounts Payable. For a further explanation of
these property and equipment transactions please see hereafter in this filing
Notes to the Financial Statement, December 31, 2000 and 2001, Note 2, Property
and Equipment.
The Company is intending to receive additional financing through the Swartz
equity line; however, there can be no assurance that we will receive financing
from Swartz. On May 19, 2000 the Company entered into an investment agreement
with Swartz Private Equity, LLC to raise up to $25 million through a series of
sales of common stock. The dollar amount of each sale is limited by the trading
volume and a minimum period of time must occur between sales. In order to sell
shares to Swartz, there must be an effective registration statement on file with
the SEC covering the resale of the shares by Swartz and we must meet certain
other conditions. The agreement is for a three-year period ending May 2003. We
believe that our available equity financing arrangement with Swartz will be
sufficient to meet our working capital and capital expenditure liquidity
requirements for at least the next two years. However, there can be no assurance
that we will receive financing from Swartz, that we will not require additional
financing within this time frame or that such additional financing, if needed,
will be available on terms acceptable to us, if at all. A detailed description
of the Swartz equity line agreements can be found in the SB-2 Registration
Statement filed September 13, 2000 and amendment thereof filed October 24, 2000.
RESULTS OF OPERATIONS
Income
------
The revenue for the calendar year 2000, $148,102, when compared to calendar year
2001, $363,802 shows an increase of approximately 146 percent. This increase is
due primarily to receipt of additional revenues from the mobile LED truck unit
that continues to increase event bookings. Also, as the Company installs
additional EyeCatcher 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 and
6
the display board continues to produce revenue with no additional effort
necessary to place the display board because it remains in place at the host
venue so long as it continues to produce revenue for the host venue.
General and Administrative Costs and Expenses
---------------------------------------------
There was an increase in the General and Administrative Costs and Expenses of
$320,916 (34%) for the 2000 calendar year compared to calendar 2001. This
increase is due primarily to the Company continuing to grow after becoming fully
operational in year 2000. This category in the Costs and Expenses includes all
operational expenses other than interest and depreciation expenses. By the
Company being fully operational this line item includes such items as rent,
salaries, office expenses and sales expenses.
Interest Expense
----------------
Interest Expense increased by $13,204 from 2000 to 2001 (21%). This interest
expense increased primarily as a result of the Company financing its operational
growth through borrowing, debt transactions.
Depreciation and Amortization
-----------------------------
Depreciation and Amortization increased from 2000 to 2001, an increase of
$56,899 (40%). A major basis of this increase is because, starting in year 2000,
the Company's policy changed from including the EyeCatcherPlus display machines
in the Inventory line item to including them in the Property and Equipment line
item. In this line item (Property and Equipment) the display machines can now be
depreciated. For a further itemization of the property and equipment, please see
hereafter in this filing, Notes to the Financial Statement, December 31, 2000
and 2001, Note 2, Property and Equipment.
Total Costs and Expenses
------------------------
The Total Costs and Expenses have increased by $391,019, an increase of 34%,
from 2000 to 2001. The discussion above describes management's analysis of the
salient issues relating to these Costs and Expenses.
Loss from Operations
--------------------
The net Loss from Operations for the period from 2000 ($1,008,813) to 2001
($1,184,132) shows an increase of 17%. As noted above, the Income for the same
period increased by $215,700, an increase of 146%. In the past two years the
Company has reduced this Loss from Operations by 60%. It should be noted,
however, that there is no assurance that this positive trend will continue.
Basic and Fully Diluted Loss Per Common Share
---------------------------------------------
The Basic and Fully Diluted Loss Per Common Share difference from 2000 to 2001
calendar years shows a 10.5% decrease. The loss per common share is a function
of the Costs and Expenses versus Income. In the opinion of management, this is a
positive trend the basis of which is discussed item-by-item immediately above.
We are now fully staffed and producing income. We are continuing to concentrate
on establishing new business and increasing sales relating to the
IllumiSign-Eyecatcher, the "EyeCatcher Powered by Insight" backlit display board
and the LED display sign truck.
TRENDS AND EVENTS
In May of 2001 we changed our operations model primarily in that we have
regained the marketing role in-house. Management feels that this is a positive
change in that the Company
7
now has total control of all marketing activities. The Company continues to
allocate geographical areas to distributors who, in turn, focus on their
respective areas.
The Company outgrew its leased office and warehouse space and in August 2001
moved to new quarters that has sufficient space for growth. The new expanded
warehouse area now has sufficient space to handily store the various type and
size display boards as well as a work area for refurbishing and repairing. When
the mobile LED screen truck is not in use, it is placed in a specially built
truck bay within the new warehouse area.
Although there is no real assurance that this trend will continue, in the
opinion of management, the cumulative effect of these events as described above
is a positive trend as reflected in the 10.5% decrease in the Basic and Fully
Diluted Loss Per Common Share.
ITEM 7. FINANCIAL STATEMENTS
Financial Statements are incorporated by reference herein and attached as an
exhibit.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following are officers and directors of the Company.
Name Age Position
---- --- --------
John Thatch 40 Chief Executive Officer, President
and Director
Jennifer Freeman 28 Corporate Secretary
All directors hold office until the next annual meeting of shareholders of the
Company and until their successors are elected and qualified. Officers hold
office until the first meeting of directors following the annual meeting of
shareholders and until their successors are elected and qualified, subject to
earlier removal by the Board of Directors.
John "JT" Thatch, President/CEO and Director
Mr. Thatch, age 40 years, has served as President, Chief Executive Officer and
Director of New Millennium Media International since January 2000. During this
time he has overseen all functions of the company, including day-to-day
operations. Mr. Thatch has over 15 years of entrepreneurial business experience
that includes over 7 years as the principal in Bay Area Auto Sales, an
automotive dealership, that specialized in sales of reconditioned vehicles. He
was the founder and General Partner for Last Chance Finance, Ltd. that owned and
operated over 18 offices specializing in alternative vehicle financing. Over the
past 10 years Mr. Thatch has been President and majority shareholder of Superior
Management of Tampa, Inc., a privately owned company, that owns property and
commercial leases. Other than for nominal time spent on corporate and personal
real estate holdings that have no business relationship
8
with NMMI, Mr. Thatch dedicates his full time to his current position. He brings
leadership, marketing and strong management skills to the company.
ITEM 10. EXECUTIVE COMPENSATION
The following table lists the cash remuneration paid or accrued during 1999,
2000 and 2001 to John Thatch, president and CEO. Except for John Thatch, none of
our executive officers and directors received compensation of $100,000 or more
in 1999, 2000 and 2001.
---------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
---------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus Other Annual Restricted Securities LTIP All Other
Principle ($) ($) Compensation Stock Award(s) Underlying Payouts Compensation
Position ($) ($) Options/SARs ($) ($)
(#)
---------------------------------------------------------------------------------------------------------
John Thatch, 10% of all Stock option Per month:
Pres./CEO 2000 140,000 10,000 issued common to be determined 500 medical
expenses stock by Board 500 car
250 celphone
---------------------------------------------------------------------------------------------------------
Director Compensation
No Director is specially compensated for the performance of duties in that
capacity or for his/her attendance at Director meetings.
Employment Agreements
NMMI has one written employment agreement, John Thatch, President and CEO, see
Item 12, below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of the date of this filing by: (i) each
shareholder known by us to be the beneficial owner of 5% or more of the
outstanding common stock, (ii) each of our directors and (iii) all directors and
executive officers as a group. Except as otherwise indicated, we believe that
the beneficial owners of the common stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable. Shares of
common stock issuable upon exercise of options and warrants that are currently
exercisable or exercisable within 60 days of filing this document have been
included in the table.
9
Name and Address Amount and Nature Percent of Class (1)
of Beneficial of Beneficial
Owner Ownership
------------- ----------------- ----------------
John Thatch 828,186 10%
President/CEO
and Director
Investment Management 1,576,416 18%
of America, Inc.(2)
(1) Based upon December 31, 2001 shareholder list, 8,610,047 outstanding shares
of common stock.
(2) Gerald Parker, Andrew Badolato and Antonio Gomes are officers, directors
and majority shareholders in Investment Management of America, Inc. and
were officers and directors of NMMI until January 2001.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth below, none of our directors or officers, nor any proposed
nominee for election as one of our directors or officers, nor any person who
beneficially owns, directly or indirectly, shares carrying more than 10% of the
voting rights attached to our outstanding shares, nor any relative or spouse of
any of the foregoing persons has any material interest, direct or indirect, in
any transaction in any presently proposed transaction which has or will
materially affect the Company.
On November 2, 1999 NMMI signed an executive employment contract with John
Thatch employing that individual as President and Chief Executive Officer for
three years with a salary of $140,000 for the first year and $120,000 for the
second and third years. As an inducement to encourage the executive to become
employed with NMMI, it was in the best interest of NMMI to include in the
employment package a provision in the executive employment contract giving John
Thatch the option to purchase, at a price of par value, 10% of any and all
additionally authorized and issued shares of stock. To date John Thatch has
purchased 828,186 shares of restricted common stock under this option.
ITEM 13. EXHIBITS AND REPORTS
Indemnification of Directors and Officers
The Colorado General Corporation Act provides that each existing or former
director and officer of a corporation may be indemnified in certain instances
against certain liabilities which he or she may incur, inclusive of fees, costs
and other expenses incurred in connection with such defense, by virtue of his or
her relationship with the corporation or with another entity to the extent that
such latter relationship shall have been undertaken at the request of the
corporation; and may have advanced such expenses incurred in defending against
such liabilities upon undertaking to repay the same in the event an ultimate
determination is made denying entitlement to indemnification. The Company's
bylaws incorporate the statutory form of indemnification by specific reference.
The Company has never acquired or applied for any policy of directors' and
officers' liability insurance as a means of offsetting its obligation for
indemnity.
10
Reports to Shareholders
We intend to voluntarily send annual reports to our shareholders, which will
include audited financial statements. We are a reporting company, and file
reports with the Securities and Exchange Commission (SEC), including this Form
10-KSB as well as quarterly reports under Form 10-QSB. The public may read and
copy any materials filed with the SEC at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The
company files its reports electronically and the SEC maintains an Internet site
that contains reports, proxy and information statements and other information
filed by the company with the SEC electronically. The address of that site is
http://www.sec.gov.
The company also maintains an Internet site, which contains information about
the company, news releases and summary financial data. The address of that site
is http://www.nmmimedia.com.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, which are furnished herein as of March
20, 2001, have been audited by Richard J. Fuller, CPA, Clearwater, Florida,
independent auditors, as described in its reports with respect thereto.
The following list sets forth a brief description of each of the Company's
financial statements and exhibits being filed as a part of this Form 10 KSB, as
well as the page number on which each statement or exhibit commences:
Audited Fiscal Year End December 31, 2001
Index to Financial Statements F-2
Independent Auditor's Report F-3
Balance Sheet, December 31, 2000
and December 31, 2001 F-4
Statement of Operations for each of
the years ended December 31, 2000
and 2001 F-5
Statement of Shareholder's (Deficit) Equity
from January 1, 2000 through
December 31, 2001 F-6
Statement of Cash Flows for each of the
years ended December 31, 2000
and 2001 F-7
Notes to Financial Statements F-8
11
SIGNATURES
Pursuant to the requirements 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.
April 15, 2002 New Millennium Media International, Inc.
By: ___/s/____________________________
John "JT" Thatch, President/CEO
12
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
FINANCIAL STATEMENTS
as of year end December 31, 2000
INDEX
Index to Financial Statements................................................F-2
Independent Auditors' Report.................................................F-3
Balance Sheets ..............................................................F-4
Statements of Operations ....................................................F-5
Statements of Stockholders' (Deficit) Equity ................................F-6
Statements of Cash Flows.....................................................F-7
Notes to the Financial Statements............................................F-8
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
New Millennium Media International, Inc.
Safety Harbor, Florida
We have audited the balance sheets of New Millennium Media International, Inc.
as of December 31, 2000 and 2001, and the related statements of operations,
stockholders' (deficit) equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Millennium Media
International, Inc. at December 31, 2000 and 2001 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses for the years ended
December 31, 2000 and 2001. This condition raises substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Richard J. Fuller, CPA, PA
Clearwater, Florida
March 31, 2002
F-3
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
BALANCE SHEETS
December 31, 2000 and December 31, 2001
2000
(RESTATED) 2001
------------ ------------
ASSETS
Current Assets
Cash $ -- $ 47,239
Accounts receivable 16,636 23,395
Prepaid expenses 12,351 47,227
------------ ------------
Total Current Assets 28,987 117,861
------------ ------------
Property and Equipment
Property and Equipment - net 924,148 1,461,824
------------ ------------
Other Asssets
Intangible Assets-net 610,301 665,095
Other assets -- 13,986
------------ ------------
Total Other Assets 610,301 679,081
------------ ------------
$ 1,563,436 $ 2,258,766
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses $ 93,118 $ 520,377
Notes and loans payable $ 62,000 $ 612,697
Related party payables 658,110 809,554
------------ ------------
Total Current Liabilities 813,228 1,942,628
------------ ------------
Long-term Liabilities -- --
Stockholders' (Deficit) Equity
Common stock, par value $.001; 15,000,000 shares
authorized, 5,690,121 and 8,610,047 shares issued
and outstanding, respectively, 2000 and 2001 5,690 8,610
Common stock warrants (200,000 and 242,274;
exercisable at $1.50, respectively, 2000 and 2001) 57,200 69,290
Common stock options; 25,000 issued and
outstanding; 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 2,769,445 5,336,697
Deficit (2,082,127) (3,266,259)
------------ ------------
750,208 2,149,513
Less common stock subscribed -- (1,833,375)
------------ ------------
Total stockholders' (deficit) equity 750,208 316,138
------------ ------------
$ 1,563,436 $ 2,258,766
============ ============
See accompanying notes and accountant's report.
F-4
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001
2000
(Restated) 2001
------------ ------------
Income $ 148,102 $ 363,802
Costs and Expenses:
General and administrative $ 952,434 $ 1,273,350
Interest expense 63,587 76,791
Depreciation and amortization 140,894 197,793
------------ ------------
Total costs and expenses 1,156,915 1,547,934
------------ ------------
Loss from Operations (1,008,813) (1,184,132)
------------ ------------
Net Loss $ (1,008,813) $ (1,184,132)
============ ============
Basic and Diluted Loss Per Common Share $ (0.19) $ (0.17)
============ ============
Weighted average common shares outstanding 5,255,049 7,150,084
============ ============
See accompanying notes and accountant's report.
F-5
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE PERIOD FROM JANUARY 1, 2000 THROUGH DECEMBER 31, 2001
COMMON STOCK COMMON COMMON ADDITIONAL COMMON TOTAL
--------------------- STOCK STOCK PAID - IN STOCK STOCKHOLDERS'
SHARES AMOUNT WARRANTS OPTIONS CAPITAL DEFICIT SUBSCRIBED EQUITY
---------- ---------- -------- ------- ---------- ------- ---------- ------------
BALANCE, JANUARY 1, 2000 - (RESTATED) 4,819,974 $ 4,820 $ -- $ -- $ 468,271 $(1,073,314) $ -- $ (600,223)
Fair value of shares issued for
services to officers - net of
rescission (204,083) (204) 2,704 -- 2,500
Fair value of 200,000 warrants issued
to investment bankers -- -- 57,200 -- -- 57,200
Shares issued:
Fair value of stock issued in
settlement of debt to
stockholders'/officers in
accordance with FASB 123 728,230 728 1,490,316 -- 1,491,044
Fair value of equipment (LED truck
$450,000) net of debt ($107,000) 40,000 40 342,960 -- 343,000
Fair value of stock issued for
goodwill of Scovel Management,
Inc. 100,000 100 400 -- 500
Proceeds of stock issued for cash 206,000 206 464,794 -- 465,000
Net loss for the period ended
December 31, 2000 -- -- -- -- -- (1,008,813) (1,008,813)
---------- --------- -------- ------- ---------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 2000 -
(RESTATED) 5,690,121 5,690 57,200 2,769,445 (2,082,127) -- 750,208
Fair value of 42,274 warrants issued
to investment bankers 12,090 12,090
Issuance of 25,000 Stock Options 1,175 1,175
Shares issued:
Fair value of stock issued for
services 634,926 635 108,868 109,503
Common stock issued for cash 1,100,000 1,100 923,900 (333,375) 591,625
Exercise of common stock options
for cash ($500) and other fair
value of borrowing cost 150,000 150 7,519 7,669
Fair value of stock issued in
settlement of debt in accordance
with FASB 123 35,000 35 27,965 28,000
Shares issued (900,000 held by
Company) for investment banker 1,000,000 1,000 1,499,000 (1,500,000) --
Net loss for the period ended
December 31, 2001 (1,184,132) (1,184,132)
---------- --------- -------- ------- ---------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 2001 8,610,047 $ 8,610 $ 69,290 $ 1,175 $5,336,697 $(3,266,259) $(1,833,375) $ 316,138
========== ========= ======== ======= ========== =========== =========== ===========
See accompanying notes and accountant's report.
F-6
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001
2000
(RESTATED) 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,008,813) $ (1,184,132)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 140,894 197,793
Fair value of shares issued for services 2,500 124,504
Fair value of warrants / options issued for services 57,200 20,434
(Increase) decrease in accounts receivable (16,636) (6,758)
(Increase) decrease in prepaid expenses (9,220) (38,559)
(Increase) decrease in intangible assets -- (100,000)
(Increase) decrease in other assets -- (10,304)
Increase (decrease) in accounts payable and accrued expenses (41,934) 448,977
------------ ------------
Net cash provided by (used in) operating activities (876,009) (548,045)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (19,972) (690,263)
------------ ------------
Net provided by (used in) investing activities (19,972) (690,263)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable -- 570,000
Reduction of debt -- (41,022)
Proceeds from notes payable - related parties 428,918 164,444
Proceeds from common stock transactions 465,000 591,625
Proceeds from exercise of common stock options -- 500
------------ ------------
Net cash provided by (used in) financing activities 893,918 1,285,547
------------ ------------
Increase (Decrease) in cash and cash equivalents $ (2,063) $ 47,239
Cash and cash equivalents at beginning of period 2,063 --
------------ ------------
Cash and cash equivalents at end of period $ -- $ 47,239
============ ============
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 common stock (500,000 shares) issued for
goodwill of Scovel Management, Inc. $ 500 $ --
Fair value of equipment (LED truck, $450,000 net of debt
assumed of $107,000; 200,000 common stock shares issued) 343,000 --
Fair value of common stock (3,641,152 shares )issued in settlement
of related party debt based upon debt of $1,491,044 1,491,044 --
Fair value of shares issued (20,000 shares) for amounts previously
owed to secretary / treasurer -- 13,000
See accompanying notes and accountant's report.
F-7
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
New Millennium Media International, Inc. (the Company) is a developer and
marketer of advertising space in special movable advertising display
machinery and LED display boards. The Company is a provider of visual
advertising through movable display boards and LED equipment.
BASIS OF PRESENTATION
---------------------
The financial statements have been prepared using the accrual method of
accounting. Revenues are recognized when earned and expenses when incurred.
Revenues are earned when services have been performed and advertising
equipment has been leased to customers during a period of time in which
services have been rendered, the price for services is fixed and
determinable and collectibility is reasonably assured.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity 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.
GOING CONCERN UNCERTAINTY
-------------------------
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.
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.
COMPREHENSIVE INCOME
--------------------
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The
Company does not have any items requiring disclosure of comprehensive
income.
SEGMENTS OF BUSINESS REPORTING
------------------------------
Statement of Financial Accounting Standards (SFAS) No. 131, establishes
standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customer. SFAS 131 defines operating segments as components of a company
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
F-8
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D.
---------------------------------------------------------------------
allocate resources and in assessing performance. The Company has evaluated
this SFAS and does not believe it is applicable at this time.
INTANGIBLE ASSETS
-----------------
Intangible assets represent acquisition costs in excess of net tangible
assets of businesses purchased and consists primarily of client lists and
goodwill. Under the purchase method of accounting, the Company records the
excess of the purchase price, including estimated fees and expenses related
to the merger, over the net assets acquired as goodwill. The estimated fair
values and useful lives of assets acquired and liabilities assumed are
based on a preliminary valuation and are subject to final valuation
adjustments which may cause some of the intangibles to be amortized over a
shorter life than the goodwill amortization period of 15 years.
In June 2001, the Financial Accounting Standards Board (FASB) finalized
SFAS No. 141, "Business Combinations" (SFAS 141), and SFAS No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 requires all
business combinations initiated after June 30, 2001 to be accounted for
using the purchase method. It also requires that the Company recognize
acquired intangible assets, apart from goodwill, if the intangible assets
meet certain criteria. Upon adoption, the Company must reclassify the
carrying amounts of intangible assets and goodwill based on criteria in
SFAS 141.
SFAS 142 establishes new guidelines for accounting for goodwill and other
intangible assets. It requires that companies no longer amortize goodwill,
but instead test goodwill for impairment at least annually. In addition,
SFAS 142 requires that the Company (1) identify reporting units for the
purpose of assessing potential future impairments of goodwill, (2) reassess
the useful lives of other existing recognized intangible assets, and (3)
cease amortization of intangible assets in accordance with the guidance in
SFAS 142. SFAS 142 must be applied in fiscal years beginning after December
31, 2001 to all goodwill and other intangible assets recognized after that
date, regardless of when those assets were initially recognized. In
accordance with SFAS 142, the Company must complete a transitional goodwill
impairment test six months after adoption and reassess the useful lives of
other intangible assets within the first interim quarter after adoption.
INCOME TAXES
------------
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS No. 109). Under SFAS No. 109, deferred
income tax assets and liabilities are determined based upon differences
between financial reporting and tax basis of assets and liabilities and are
measured using currently enacted tax rates. SFAS No. 109 requires a
valuation allowance to reduce the deferred tax assets reported if, based on
the weight of the evidence, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
BASIC AND DILUTED LOSS PER COMMON SHARE
---------------------------------------
Basic loss per common share is based on the weighted average number of
shares outstanding during the period. The computation of diluted loss per
common share is similar to basic earnings per share, except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the potentially dilutive common shares
had been issued. Diluted loss per common share is not presented since the
result is antidilutive.
F-9
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
All financial instruments are held for purposes other than trading. The
following methods and assumptions were used to estimate the fair value of
each financial instrument for which it is practicable to estimate that
value:
For cash, cash equivalents and notes payable, the carrying amount is
assumed to approximate fair value due to the short-term maturities of these
instruments.
CASH AND CASH EQUIVALENTS
-------------------------
The Company considers all highly liquid investments having an original
maturity of three months or less as cash equivalents.
2. PROPERTY AND EQUIPMENT
----------------------
Property and equipment is summarized as follows:
2000 2001
------------ ------------
Boards available for lease $ 545,483 $ 670,483
Equipment 460,319 497,445
Graphic Equipment 8,412 22,229
Furniture & fixtures 5,490 9,034
LED Truck (under construction) -- 510,776
------------ ------------
1,019,704 1,709,967
Less accumulated depreciation (95,555) (248,141)
------------ ------------
Net $ 924,149 $ 1,461,826
============ ============
The company capitalizes the cost of property and equipment and uses the
straight-line method of depreciation over estimated useful lives of five to
seven years once available for use. Upon retirement or other disposal of
property and equipment, the cost and related accumulated depreciation are
eliminated from the asset and accumulated depreciation accounts,
respectively. The difference, if any, between the net asset amount and
proceeds is adjusted to Company earnings.
F-10
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
3. INTANGIBLE ASSETS
-----------------
At the end of 2000 and 2001, the Company's gross and net amount of
intangible assets were as follows:
2000 2001
------------ ------------
Goodwill - gross $ 678,094 $ 678,094
Less accumulated amortization (67,793) (112,999)
------------ ------------
Goodwill - net 610,301 565,095
Research and Development -- 100,000
------------ ------------
610,301 665,095
============ ============
The amortization period for goodwill is 15 years in accordance with APB No.
16. Research and development consists of costs related to the development
of video prototype equipment. The Company evaluates such costs for
impairment when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows resulting from the use of these assets. When
any such impairment exists, the related assets will be written down to fair
value.
4. NOTES AND LOANS PAYABLE
-----------------------
Notes and loans payable consists of the following:
2000 2001
---------- ----------
$250,000 notes payable, with interest accrued
@ 5% and certain rights to purchase 25,000
shares of common stock @ $.005 after 30 day
maturity and 12,500 shares each and every
month thereafter $ -- $ 257,969
$60,000 convertible notes payable, with
interest accrued @ 12% (convertible $.10 of
debt into common stock) -- 65,839
$250,000 convertible note payable, with
interest accrued @ 12% (convertible $1.00 of
debt into common stock) -- 257,911
Loans payable, unsecured 62,000 30,978
---------- ----------
$ 62,000 $ 612,697
========== ==========
F-11
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
5. RELATED PARTY PAYABLES
----------------------
Related party payables consists of the following:
2000 2001
---------- ----------
Payable to stockholders, non-interest bearing $ 249,860 $ 249,860
$100,000 convertible note payable, with
interest accrued @10%, (convertible $1.00 of
debt into common stock) 102,500 112,750
$125,000 convertible note payable, with
interest accrued @ 15%, secured by equipment
(convertible $1.00 of debt into common stock) 143,750 165,312
$162,000 convertible notes payable, with
interest accrued @ 8%, to officer/stockholder
(convertible $.10 of debt into preferred
stock) 162,000 281,632
---------- ----------
$ 658,110 $ 809,554
========== ==========
The Company disputes a payable to a prior officer but has recognized the
debt for financial statement purposes in the amount of $249,860.
6. EQUITY TRANSACTIONS
-------------------
Under an agreement with Swartz Private Equity (Swartz) the Company entered
into an agreement to provide an equity line of up to $25,000,000 during the
three year period following the effective date of September 28, 2000 of the
registration statement covering the Swartz Agreement. The Company may sell
stock to Swartz under a "put right". The Company is required to issue and
deliver to Swartz "additional warrants" to purchase a number of shares of
common stock equal to 10% of the common shares issued to Swartz in each
applicable put. Each "additional warrant" will be exercisable at a price
that will initially equal 110% of the market price for that put and
thereafter may be reset every six months. The warrants are immediately
exercisable and have a term expiring 5 years thereafter. Certain provisions
of the Agreement provide that Swartz shall receive the "additional
warrants" so that the sum of "commitment warrants" and "additional
warrants" may equal up to 4.0% of the fully diluted shares of the Company's
common stock. During 2000, as part of this agreement, the Company has
issued 200,000 initial "commitment warrants", expiring March 21, 2005 to
purchase 200,000 shares of the Company's common stock. During 2001, the
Company issued 16,796 and 25,478 "additional warrants" to expiring April
17, 2006 and July 17, 2006, respectively, to purchase 42,274 additional
shares of the Company's common stock. The initial exercise price of these
"commitment warrants" and "additional warrants" is $1.50. Utilizing the
Black Scholes formula, assuming a 5 year life, no expected dividends,
volatility of 35% and interest rate of 6%, the Company determined that the
fair value of "commitment warrants" issued to be $57,200 and the fair value
of the "additional warrants" issued to be $12,090 which was charged to
expense in 2000 and 2001, respectively.
F-12
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
7. STOCK OPTIONS AND WARRANTS
--------------------------
On June 26, 2000, the Company's Board of Directors adopted the New
Millennium Media International, Inc. 2000 Stock Option Plan (the "Plan").
The Plan provides for the issuance of incentive stock options (ISO's) to
any individual who has been employed by the Company for a continuous period
of at least six months. The Plan also provides for the issuance of Non
Statutory Options (NSO's) to any employee who has been employed by the
Company for a continuous period of at least six months, any director or
consultant to the Company. The total number of shares of common stock
authorized and reserved for issuance under the Plan is 3,000,000 shares.
The Board shall determine the exercise price per share in the case of an
ISO at the time an option is granted and shall be not less than the fair
market value or 110% of fair market value in the case of a ten percent or
greater stockholder. In the case of an NSO, the exercise price shall not be
less than the fair market value of one share of stock on the date the
option is granted. Unless otherwise determined by the Board, ISO's and
NSO's granted under the Plan have a maximum duration of 10 years. As of
December 31, 2001, no options have been granted under the Plan.
Also, in February 2000, the Company issued options to purchase 500,000
shares at $1.00 expiring in two years and in March 2000, the Company issued
options to purchase 100,000 shares at $2.25 expiring in two years.
Utilizing the Black Scholes formula, the Company has determined that the
fair value of these options granted has no effect on loss or loss per
share.
8. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company conducts its operations from facilities that are leased under a
five-year non-cancelable operating lease expiring in April 30, 2006. There
is an option to renew the lease for an additional five years and subject to
rental escalation at the beginning of the second year, at the Consumers
Price Index or 3% per annum, whichever is higher.
The following is a schedule of future minimum lease payments required under
the above operating lease as of December 31, 2001:
Year Ending December 31, 2001
-----------
2002 $ 133,971
2003 137,990
2004 142,130
2005 146,394
2006 49,397
-----------
$ 609,882
===========
Rental expense amounted to $86,659 and $135,726 in 2000 and 2001
respectively. No long-term lease commitment existed at the end of 2000.
F-13
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
9. INCOME TAXES
------------
The Company has available net operating loss carry forwards of $3,100,000,
which expire through 2021.
After consideration of all the evidence, both positive and negative,
management has determined that a full valuation allowance is necessary to
reduce the deferred tax assets to the amount that will more likely than not
be realized. Accordingly, components of the Company's net deferred income
taxes are as follows:
2000 2001
----------- -----------
Deferred tax assets:
Net operating loss carry forwards $ 1,950,000 $ 3,100,000
Valuation allowance for deferred tax asset (1,950,000) (3,100,000)
----------- -----------
$ -- $ --
=========== ===========
F-14