U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-28083
NEXT GENERATION MEDIA CORP.
(Exact name of Company as specified in its charter)
Nevada 88-0169543
(State or jurisdiction of incorporation (I.R.S. Employer or
organization) Identification No.)
7644 Dynatech Court, Springfield, Virginia 22153
(Address of principal executive offices) (Zip Code)
Company's telephone number: (703) 644-0200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Company was required to file such reports),
and (2) been subject to such filing requirements for the past 90
days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Company'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 [ ].
The Company had $7,821,606 in revenue for the fiscal year ended on
December 31, 2004. The aggregate market value of the voting stock
held by non-affiliates of the Company as of March 31, 2005: Common
Stock, par value $0.001 per share -- $1,473,276. As of December 31,
2004, the Company had 10,523,397 shares of common stock issued and
outstanding, of which 4,661,672 were held by non-affiliates.
TABLE OF CONTENTS
PART I
ITEM 1. Description of Business....................
ITEM 2. Description of Property...................
ITEM 3. Legal Proceedings.....................
ITEM 4. Submission of Matters to a Vote of Security Holders.
PART II
ITEM 5. Market for Common Equity and Other Shareholder Matters..
ITEM 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations................
ITEM 7. Financial Statements....................
ITEM 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..............
PART III
ITEM 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section
16(a) of the Exchange Act...................
ITEM 10. Executive Compensation..................
ITEM 11. Security Ownership of Certain Beneficial
Owners and Management....................
ITEM 12. Certain Relationships and Related Transactions.........
ITEM 13. Exhibits and Reports on Form 8-K...............
ITEM 14. Controls and Procedures..................
Signatures.................................
PART I.
RISK FACTORS AND CAUTIONARY STATEMENTS
Forward-looking statements in this report are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. The Company wishes to advise readers that actual results
may differ substantially from such forward-looking statements.
Forward-looking statements include statements concerning underlying
assumptions and other statements that are other than statements of
historical facts. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by the statements, including, but not
limited to, the following: the ability of the Company to provide for
its obligations, to provide working capital needs from operating
revenues, to obtain additional financing needed for any future
acquisitions, to meet competitive challenges and technological
changes, and other risks detailed in the Company's periodic report
filings with the Securities and Exchange Commission.
ITEM 1. BUSINESS.
Introduction
Next Generation Media Corporation (the "Company") was incorporated on
November 21, 1980, under the laws of the State of Nevada under the
name Micro Tech Industries, Inc. On February 6, 1997, an unrelated
third party purchased 85.72% of the outstanding stock of Micro Tech
Industries, Inc. from its majority shareholder for $50,000 in cash.
Effective March 31, 1997, Micro Tech Industries, Inc. changed its
name to Next Generation Media Corporation. Management believes that
prior to February 6, 1997, the Company was a "shell" company for at
least five years without assets and liabilities. Management is
unaware of any operating history prior to February 6, 1997.
Reporting Period Principle Services
During the reporting period, the Company operated as a holding
company with one wholly-owned operating subsidiary, United Marketing
Solutions, Inc. ("United").
The Company acquired United on April 1, 1999. Originally founded in
1981 as United Coupon Corporation, United has operated within the
cooperative direct mail industry for twenty years. United has
diversified and expanded its product lines and markets to evolve from
a coupon company to a full-service marketing provider specializing in
two communication mediums: direct mail and direct marketing. United
offers advertising and marketing products and services through a
network of franchisees in more than twenty states, with the largest
concentration being in the northeast United States. United provides
full-service design, layout, printing, packaging and distribution of
marketing products and promotional coupons sold by the franchise
network to local market businesses, services providers and
professionals as resources to help them generate "trial and repeat"
customers. United's core product, the cooperative coupon envelope,
reaches in excess of eighteen million mailboxes per year with an
estimated four hundred million coupons.
Competition
The Company's current and future lines of business are highly
competitive. Firstly, the advertising business is highly competitive
with many firms competing in various forms of media and possessing
substantial resources. The direct mail industry is highly fragmented
and includes a large number of small and independent cooperative
direct mailers in addition to competition from companies for whom
coupon advertising is not their primary line of business. In
addition, several large firms, notably Val-Pak Direct Marketing
Systems, Inc., Money Mailer and Advo, Inc., are direct competitors of
United in its direct mail marketing business.
Government Regulation
United is subject to state regulation as a franchiser, requiring
United to file periodic state registration documents pertaining to
the offering of area and regional franchise licenses. Management
believes that United is in substantial compliance with the applicable
state franchise laws.
Employees
As of December 31, 2004, the Company, through United, had
approximately 68 employees. The Company does not have any collective
bargaining agreements covering any of its employees, has not
experienced any material labor disruption and is unaware of any
efforts or plans to organize its employees. The Company considers
relations with its employees to be good.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's principal executive and administrative offices are
located at 7644 Dynatech Court, Springfield, Virginia 22153. The
current yearly rent for this new facility is expected to be
approximately $267,892 per year for a term scheduled to expire in
2006. The Company considers these offices to be adequate and suitable
for its current needs.
ITEM 3. LEGAL PROCEEDINGS
Other than as set forth below, the Company is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against the Company has been threatened. The
Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. Although occasional adverse
decisions or settlements may occur, the Company believes that the
final disposition of such matters will not have material adverse
effect on its financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the last quarter of fiscal year-ended December 2004, the
Company did not submit any matters to a vote of security holders.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
The Company's Common Stock has been and is currently traded on the
over-the-counter market and quotations are published on the OTC
Bulletin Board under the symbol "NGMC" and began trading on June 11, 2001.
The following table sets forth the range of high and low bid prices
of the Common Stock for each fiscal quarterly period. Prices reported
represent prices between dealers, do not include retail markups,
markdowns or commissions and do not represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 2004
High Low
Quarter Ended December 31, 2004 0.17 0.10
Quarter Ended September 30, 2004 0.22 0.13
Quarter Ended June 30, 2004 0.30 0.11
Quarter Ended March 31, 2004 0.40 0.22
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 2003
High Low
Quarter Ended December 31, 2003 0.28 0.075
Quarter Ended September 30, 2003 0.17 0.013
Quarter Ended June 30, 2003 0.06 0.025
Quarter Ended March 31, 2003 0.10 0.012
The ability of individual stockholders to trade their shares in a
particular state may be subject to various rules and regulations of
that state. A number of states require that an issuer's securities be
registered in their state or appropriately exempted from registration
before the securities are permitted to trade in that state.
Presently, the Company has no plans to register its securities in any
particular state. Further, most likely the Company's shares will be
subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
commonly referred to as the "penny stock" rule. Section 15(g) sets
forth certain requirements for transactions in penny stocks and Rule
15g-9(d)(1) incorporates the definition of penny stock as that used
in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity
security that has a market price less than $5.00 per share, subject
to certain exceptions. Rule 3a51-1 provides that any equity security
is considered to be a penny stock unless that security is: registered
and traded on a national securities exchange meeting specified
criteria set by the Commission; authorized for quotation on The
NASDAQ Stock Market; issued by a registered investment company;
excluded from the definition on the basis of price (at least $5.00
per share) or the issuer's net tangible assets (at least $2 million);
or exempted from the definition by the Commission. If the Company's
shares are deemed to be a penny stock, trading in the shares will be
subject to additional sales practice requirements of broker-dealers
who sell penny stocks to persons other than established customers and
accredited investors, generally persons with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse.
For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such securities
and must have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the
delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock market. A broker-dealer also
must disclose the commissions payable to both the broker-dealer and
the registered representative, and current quotations for the
securities. Finally, monthly statements must be sent disclosing
recent price information for the penny stocks held in the account and
information on the limited market in penny stocks. Consequently,
these rules may restrict the ability of broker-dealers to trade
and/or maintain a market in the Company's Common Stock and may affect
the ability of stockholders to sell their shares.
Holders of Common Equity
As of March 30, 2005, there were approximately 600 shareholders of
record of the Company's common stock.
Dividend Information
The Company has not declared or paid cash dividends on its Common
Stock or made distributions in the past, and the Company does not
anticipate that it will pay cash dividends or make cash distributions
in the foreseeable future, other than non cash dividends described
below. The Company currently intends to retain and invest future
earnings, if any, to finance its operations.
Transfer Agent
The transfer agent and registrar for our common stock is OTR Transfer
Agency.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
When used in this Form 10-KSB and in our future filings with the
Securities and Exchange Commission, the words or phrases will likely
result, management expects, or we expect, will continue, is
anticipated, estimated or similar expressions are intended to
identify forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are cautioned not
to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. These statements are
subject to risks and uncertainties, some of which are described
below. Actual results may differ materially from historical earnings
and those presently anticipated or projected. We have no obligation
to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect anticipated events or
circumstances occurring after the date of such statements.
General Overview
The Company acquired United on April 1, 1999. Originally founded in
1981 as United Coupon Corporation, United has operated within the
cooperative direct mail industry for twenty years. United has
diversified and expanded its product lines and markets to evolve from
a coupon company to a full-service marketing provider specializing in
two communication mediums: direct mail and direct marketing. United
offers advertising and marketing products and services through a
network of franchisees in more than twenty states, with the largest
concentration being in the northeast United States. United provides
full-service design, layout, printing, packaging and distribution of
marketing products and promotional coupons sold by the franchise
network to local market businesses, services providers and
professionals as resources to help them generate "trial and repeat"
customers. United's core product, the cooperative coupon envelope,
reaches in excess of eighteen million mailboxes per year with an
estimated four hundred million coupons.
Results of Operations
The Company's revenues are difficult to forecast and may vary
significantly from quarter to quarter and year to year. In addition,
the Company's expense levels for each quarter are, to a significant
extent, fixed in advance based upon the Company's expectation as to
the net revenues to be generated during that quarter. The Company
therefore is generally unable to adjust spending in a timely manner
to compensate for any unexpected shortfall in net revenues. Further
as a result of these factors any delay in product introductions,
whether due to internal delays or delays caused by third party
difficulties, or any significant shortfall in demand in relation to
the Company's expectations, would have an almost immediate adverse
impact on the Company's operating results and on its ability to
maintain profitability in a quarter.
Comparison of the Year Ended December 31, 2004 with the Year Ended
December 31, 2003
During the year ending December 31, 2004 the Company experienced
significant growth in revenues with sales of $7,821,606 compared to
$7,046,252 in the year ending December 31, 2003. Additionally, the
Company had other income of $188,673 due to the settlement of debt.
Cost of revenues consists of materials, labor costs and applied
overhead expenses. Cost of revenues as a percentage of net revenues
were 67% in the year ended December 31, 2004, down from 69% for the
year ended December 31, 2003. The cost of goods sold percentage will
fluctuate from quarter to quarter because absorbed overhead increases
when volume is decreasing and because labor ratios are less than
optimized in manufacturing processes when revenues are lower. As
revenues increases, cost of goods sold as a percentage of revenue
should become more and more favorable for the company. The overall
increase in the cost of goods sold during 2004 is directly
attributable to the increase in net revenues.
General and administrative (operating) expenses increased during 2004
from $2,052,064 in 2003 to $2,750,037 in 2004. Franchise development
and training expenses increased from $177,812 in 2003 to $410,962 in
2004. The addition of key management personnel increased
administrative payroll from $680,396 in 2003 to $850,744 in 2004.
Recognition of the anticipated performance of the INI Promissory Note
and the write-down of the Tool Kit receivable resulted in an increase
in bad debt expense from $30,000 in 2003 to $240,000 in 2004.
Net Income (Loss)
The Company realized net income of $48,526 for the year ended
December 31, 2004 as compared to net income of $162,432 for the year
ended December 31, 2003.
Liquidity and Capital Resources
The Company has relied primarily on funds generated from revenues,
the issuance of common stock and use of its line of credit to finance
its operations and expansion. Cash and cash equivalents at December
31, 2004 was $395,575 and $123,013 at December 31, 2003. The assets
of the Company decreased slightly from $2,030,406 at December 31,
2003 to $1,924,672 at December 31, 2004, due largely to an increase
in accumulated depreciation. For the year ended December 31, 2004,
we generated a cash flow surplus of $430,791 from operating
activities. The net cash used in financing activities was $81,255
while making repayment on notes payable. The Company has used its
working capital to finance ongoing operations and the marketing of
its products.
New Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities." Interpretation 46
changes the criteria by which one company includes another entity in
its consolidated financial statements. Previously, the criteria were
based on control through voting interest. Interpretation 46 requires
a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. A company that
consolidates a variable interest entity is called the primary
beneficiary of that entity. The consolidation requirements of
Interpretation 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply
to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain of the disclosure requirements
apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. The
Company does not expect the adoption to have a material impact to the
Company's financial position or results of operations.
In April 2003, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS 149 amends SFAS No. 133 to
provide clarification on the financial accounting and reporting of
derivative instruments and hedging activities and requires that
contracts with similar characteristics be accounted for on a
comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The adoption of
SFAS 149 will not have a material impact on the Company's results of
operations or financial position.
In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND
EQUITY. SFAS 150 establishes standards on the classification and
measurement of certain financial instruments with characteristics of
both liabilities and equity. The provisions of SFAS 150 are effective
for financial instruments entered into or modified after May 31, 2003
and to all other instruments that exist as of the beginning of the
first interim financial reporting period beginning after June 15,
2003. The adoption of SFAS 150 will not have a material impact on the
Company's results of operations or financial position.
Forward Looking Statements.
The foregoing Managements Discussion and Analysis of Financial
Condition and Results of Operations "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933, as
amended, and Rule 3b-6 under the Securities Act of 1934, as amended,
including statements regarding, among other items, the Company's
business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the
industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-
looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, including but
not limited to, those risks associated with economic conditions
generally and the economy in those areas where the Company has or
expects to have assets and operations; competitive and other factors
affecting the Company's operations, markets, products and services;
those risks associated with the Company's ability to successfully
negotiate with certain customers, risks relating to estimated
contract costs, estimated losses on uncompleted contracts and
estimates regarding the percentage of completion of contracts,
associated costs arising out of the Company's activities and the
matters discussed in this report; risks relating to changes in
interest rates and in the availability, cost and terms of financing;
risks related to the performance of financial markets; risks related
to changes in domestic laws, regulations and taxes; risks related to
changes in business strategy or development plans; risks associated
with future profitability; and other factors discussed elsewhere in
this report and in documents filed by the Company with the Securities
and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained in this Form 10-KSB will, in fact, occur. The
Company does not undertake any obligation to revise these forward-
looking statements to reflect future events or circumstances and
other factors discussed elsewhere in this report and the documents
filed or to be filed by the Company with the Securities and Exchange
Commission.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Trends, Risks and Uncertainties
The Company has sought to identify what it believes to be the most
significant risks to its business as discussed in "Risk Factors"
above, but cannot predict whether or to what extent any of such risks
may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an
investment decision with respect to the Company's stock.
Limited operating history; anticipated losses; uncertainly of future
results
The Company has a moderately limited operating history upon which an
evaluation of the Company and its prospects can be based. The
Company's prospects must be evaluated with a view to the risks
encountered by a company in varying stages of development,
particularly in light of the uncertainties relating to the business
model that the Company intends to market and the potential acceptance
of the Company's business model. The Company will be incurring costs
to develop, introduce and enhance its products, to establish
marketing relationships, to acquire and develop products that will
complement each other, and to build an administrative organization.
To the extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations
and financial condition will be materially adversely affected. There
can be no assurance that the Company will be able to generate
sufficient revenues from the sale of its products and services. If
cash generated by operations is insufficient to satisfy the Company's
liquidity requirements, the Company may be required to sell
additional equity or debt securities. The sale of additional equity
or convertible debt securities would result in additional dilution to
the Company's shareholders.
Potential fluctuations in quarterly operating results may fluctuate
significantly in the future as a result of a variety of factors, most
of which are outside the Company's control including: the demand for
the Company's products and services; seasonal trends in demand and
pricing of products and services; the amount and timing of capital
expenditures and other costs relating to the expansion of the
Company's operations; the introduction of new services and products
by the Company or its competitors; price competition or pricing
changes in the industry; political risks and uncertainties involving
the world's markets; technical difficulties and general economic
conditions. The Company's quarterly results may also be
significantly affected by the impact of the accounting treatment of
acquisitions, financing transactions or other matters. Such
accounting treatment can have a material impact on the results for
any quarter. Due to the foregoing factors, among others, it may be
that the Company's operating results will fall below the expectations
of the Company or investors in some future quarter.
Management of Growth
The Company may experience growth in the number of employees relative
to its current levels of employment and the scope of its operations.
In particular, the Company may need to hire sales, marketing and
administrative personnel. Additionally, acquisitions could result in
an increase in employee headcount and business activity. Such
activities could result in increased responsibilities for management.
The Company believes that its ability to increase its customer
support capability and to attract, train, and retain qualified
technical, sales, marketing, and management personnel, will be a
critical factor to its future success. In particular, the
availability of qualified sales and management personnel is quite
limited, and competition among companies to attract and retain such
personnel is intense. During strong business cycles, the Company may
experience difficulty in filling its needs for qualified sales, and
other personnel.
The Company's future success will be highly dependent upon its
ability to successfully manage the expansion of its operations. The
Company's ability to manage and support its growth effectively will
be substantially dependent on its ability to implement adequate
financial and management controls, reporting systems, and other
procedures and hire sufficient numbers of financial, accounting,
administrative, and management personnel. The Company is in the
process of establishing and upgrading its financial accounting and
procedures. There can be no assurance that the Company will be able
to identify, attract, and retain experienced accounting and financial
personnel. The Company's future operating results will depend on the
ability of its management and other key employees to implement and
improve its systems for operations, financial control, and
information management, and to recruit, train, and manage its
employee base. There can be no assurance that the Company will be
able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse
effect on the Company's business, results of operations, and
financial condition.
The Company's future success depends upon its ability to address
potential market opportunities while managing its expenses to match
its ability to finance its operations. This need to manage its
expenses will place a significant strain on the Company's management
and operational resources. If the Company is unable to manage its
expenses effectively, the Company's business, results of operations,
and financial condition will be materially adversely affected.
Risks associated with acquisitions
Although the Company does not presently intend to do so, as part of
its business strategy in the future, the Company could acquire assets
and businesses relating to or complementary to its operations. Any
acquisitions by the Company would involve risks commonly encountered
in acquisitions of companies. These risks would include, among other
things, the following: the Company could be exposed to unknown
liabilities of the acquired companies; the Company could incur
acquisition costs and expenses higher than it anticipated;
fluctuations in the Company's quarterly and annual operating results
could occur due to the costs and expenses of acquiring and
integrating new businesses or technologies; the Company could
experience difficulties and expenses in assimilating the operations
and personnel of the acquired businesses; the Company's ongoing
business could be disrupted and its management's time and attention
diverted; the Company could be unable to integrate successfully.
ITEM 7. FINANCIAL STATEMENTS.
Comparative Audited Financial Statements as of and for the year ended
December 31, 2004, and for the year ended December 31, 2003 are
presented in a separate section of this report following Part IV.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Other than as presented below, there were no changes in or
disagreements with Accountants on Accounting and Financial Disclosure.
ITEM 8A. CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we
file under the Exchange Act is accumulated and communicated to our
management, including our principal executive and financial officers,
as appropriate to allow timely decisions regarding required disclosure.
Evaluation of disclosure and controls and procedures. As of the end
of the period covered by this Annual Report, we conducted an
evaluation, under the supervision and with the participation of our
chief executive officer and chief financial officer, of our
disclosure controls and procedures (as defined in Rules 13a-15(e) of
the Exchange Act). Based on this evaluation, our chief executive
officer and chief financial officer concluded that our disclosure
controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commission rules and forms.
Changes in internal controls over financial reporting. There was no
change in our internal controls, which are included within disclosure
controls and procedures, during our most recently completed fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, our internal controls.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND COMPLIANCE WITH SECTION
16(A) OF THE EXCHANGE ACT.
Officers and Directors.
The names and respective positions of the directors, executive
officers, and key employees of the Company are set forth below; there
are no other promoters or control persons of the Company. The
directors named below will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected and
have qualified. Directors are are elected or re-elected at
stockholders' meeting. Officers will hold their positions at the will
of the board of directors, absent any employment agreement. There are
no arrangements, agreements or understandings between non-management
shareholders and management under which non-management shareholders
may directly or indirectly participate in or influence the management
of the Company's affairs. The directors and executive officers of the
Company are not a party to any material pending legal proceedings.
Darryl Reed, President/CEO/Director
Mr. Darryl Reed is the current President of the Company. His
background includes seven years in the financial services industry.
Mr. Reed formerly was with New York Life Insurance Company, a major
insurance company, and certain of its subsidiaries since October
1995. Such subsidiaries included #1A Eagle Strategies Corp., a
registered investment adviser, where Mr. Reed worked from April 1997
until May 2000. Mr. Reed held several licenses in the financial
services industry, including Series 7, 63 and 65. He has a BS in
Finance from the University of Florida and an MS from the American
College, Philadelphia, PA.
Leon Zajdel, Director, Chairman of the Board
Leon Zajdel has been a director of the Company since April 1999. Mr.
Zajdel was founder and has served as President of Energy Guard Corp.,
a manufacturer and retailer of replacement windows, located in
Beltsville, MD, since 1972.
Phillip Trigg, Treasurer, Secretary and Director
Phillip Trigg has been secretary and treasurer since November 2000.
Mr. Trigg has served with United Marketing Solutions since August
1995 in a variety of positions including Senior Vice President of
Franchise Sales and Business Development and COO.
Melissa Held, Director
Ms. Held was appointed to the Board of Directors in November 2002.
She possesses an extensive background in financial management and
real estate. Ms. Held was with Merrill Lynch in a variety of
positions over the past eight years, as a Sales Associate from 1994
to 1998, as a Senior Specialist, Interactive Technology from 1998 to
2000 and as Asst. Vice President, Consultative Training Services from
2000 to present. Ms. Held has a BA in Communications from Hollins
College (1993).
Fernando Mathov, Director
Mr. Mathov was appointed to the Board of Directors in February 2003.
He possesses an extensive background as a project manager, systems
engineer and consultant in the telecommunications industry with
various companies. Currently Mr. Mathov holds two positions, as a
Technical Solutions Manager from 1997 to the present at Media and
Entertainment Vertical EMC Corporation, and as a Project Manager at
Informix Software from 1994 to the present. Mr. Mathov has a BS
in Computer Science (1989) and an MBA in Management Science (1991),
both from Virginia Polytechnic Institute and State University.
(b) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons holding 10% or more
of the Company's common stock to file reports regarding their
ownership and regarding their acquisitions and dispositions of the
Company's common stock with the Securities and Exchange Commission.
Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the fiscal year ended December 31, 2004
and subsequently, the Company is unaware that any required reports
were not timely filed.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth certain information relating to the
compensation paid by the Company during the last three fiscal years
to the Company's President. No other executive officer of the Company
received total salary and bonus in excess of $100,000 during the
fiscal year ended December 31, 2004 and prior.
Annual compensation Long-term Compensation
Awards Payouts
Name and Other Restricted Securities
principal annual stock underlying LTIP All other
position Year Salary Bonus compensation award(s) options/SARs(1) payouts compensation
($) ($) ($) ($) (#) ($) ($)
Darryl Reed, 2004 180,000 0 0 0 0 0 0
President 2003 165,000 0 0 0 0 0 0
2002(2) 150,000 0 0 0 0 0 0
(1) As of October 1, 2001, the Company agreed to begin compensating
Mr. Reed at a yearly rate of $150,000, but only paid Mr. Reed
approximately $5,000 through the end of the year, leaving a balance
due of approximately $30,000.
(2) Subsequent to the fiscal year end, the Company entered into a
formal three-year employment agreement with Mr. Reed. Terms include
an initial year at $150,000, with an increase of ten percent per
year, along with 300,000 stock options at a strike price of $0.02,
along with annual cash and stock bonuses based upon performance, a
car allowance and life and medical insurance.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of shares of the Company's common stock as of December 31,
2004 (issued and outstanding) by (i) all stockholders known to the
Company to be beneficial owners of more than ten percent of the
outstanding common stock; and (ii) all directors and executive
officers of the Company as a group:
Title of Class Name and Address of Amount of Percent of
Beneficial Owner (1) Beneficial Class
Ownership (2)
Common Stock Darryl Reed 3,001,546 29%
Common Stock Leon Zajdel 478,747 4.6%
Common Stock Melissa Held 100,000 1.0%
Common Stock Phillip Trigg 200,000 2.0%
Common Stock Fernando Mathov 100,000 1.0%
All five persons listed above, together 3,880,292 37.6%
(1) The address for all persons listed is 7644 Dynatech Court,
Springfield, VA, 22153. Each person has sole voting power and
sole right to dispose as to all of the shares shown as
beneficially owned by them except as footnoted.
Insurance Plans
The Company makes available to all full-time employees medical and
dental plan benefits. Employees are eligible to participate in
company insurance plans when they complete 90 days of service with
the Company.
Other Benefit Plans
401(k) Plan. The Company makes available a 401(k) Savings Plan (the
"401(k) Plan"), a federally-qualified, tax-deferred plan administered
by a third party. The 401(k) Plan provides participants with savings
or retirement benefits based on employee deferrals of compensation,
as well as any matching and other discretionary contributions made by
the Company. Employees are eligible to participate in the 401(k) Plan
when they complete one month of service with the Company and have
attained the age of 18. The employee can defer up to 15% of the
compensation amount earned within a calendar year, not to exceed the
ceiling set forth annually by the Internal Revenue Service. The
Company matches the employee's contribution to the 401(k) Plan
dollar-for-dollar up to 3% of the employee's annual salary.
Participants become vested in any employer contributions to the
401(k) Plan after two years of service at a rate of 20% for each
completed year of service. A participant is always 100% vested in his
or her salary reduction contributions to the 401(k) Plan.
Stock Option Plan.
The Company has also filed a Stock Option Plan for Employees on Form
S-8 in December 2001. The Company had not issued any Stock Options
pursuant to the Plan included therein to any employees as of December 31, 2004.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the past two years, and as not otherwise disclosed of in any
other filing, there have not been any transactions that have occurred
between the Company and its officers, directors, and five percent or
greater shareholders, unless listed below.
Certain of the officers and directors of the Company are engaged in
other businesses, either individually or through partnerships and
corporations in which they have an interest, hold an office, or serve
on a board of directors. As a result, certain conflicts of interest
may arise between the Company and its officers and directors. The
Company will attempt to resolve such conflicts of interest in favor
of the Company. The officers and directors of the Company are
accountable to it and its shareholders as fiduciaries, which requires
that such officers and directors exercise good faith and integrity in
handling the Company's affairs. A shareholder may be able to
institute legal action on behalf of the Company or on behalf of
itself and other similarly situated shareholders to recover damages
or for other relief in cases of the resolution of conflicts is in any
manner prejudicial to the Company.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Exhibits.
Exhibits included or incorporated by reference in this document are
set forth in the Exhibit Index.
Index to Financial Statements and Schedules. Page
Audit Report of Independent Certified Public Accountants
Financial Statements
Balance Sheets
Statements of Operations and Retained Earnings
Statements of Cash Flows
Notes to Financial Statements
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth fees billed to us by our auditors
during the years ended December 31, 2004 and 2003 for: (i) services
rendered for the audit of our annual financial statements and the
review of our quarterly financial statements, (ii) services by our
auditor that are reasonably related to the performance of the audit
or review of our financial statements and that are not reported as
Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for
services rendered.
December 31, 2004 December 31, 2003
(i) Audit Fees $40,000 $40,000
(ii) Audit Related Fees $0 $0
(iii) Tax Fees $0 $0
(iv) All Other Fees $0 $0
Total fees $40,000 $40,000
AUDIT FEES. Consists of fees billed for professional services
rendered for the audit of the Company's consolidated financial
statements and review of the interim consolidated financial
statements included in quarterly reports and services that are
normally provided by our auditors in connection with statutory and
regulatory filings or engagements.
AUDIT-RELATED FEES. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit
or review of the Company's consolidated financial statements and are
not reported under "Audit Fees." There were no Audit-Related services
provided in fiscal 2004 or 2003.
TAX FEES. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning. There were no tax services
provided in fiscal 2004 or 2003.
ALL OTHER FEES. Consists of fees for products and services other than
the services reported above. There were no management consulting
services provided in fiscal 2004 or 2003.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-
AUDIT SERVICES OF INDEPENDENT AUDITORS
The Company currently does not have a designated Audit Committee, and
accordingly, the Company's Board of Directors' policy is to pre-
approve all audit and permissible non-audit services provided by the
independent auditors. These services may include audit services,
audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services and is
generally subject to a specific budget. The Board of Directors may
also pre-approve particular services on a case-by-case basis.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the date indicated:
Signature Title Date
/s/Darryl Reed President/Director March 31, 2005
Darryl Reed
/s/Phillip Trigg Treasurer, Secretary/Director March 31, 2005
Phillip Trigg
/s/Mellisa Held Director March 31, 2005
Melissa Held
/s/ Fernando Mathov Director March 31, 2005
Fernando Mathov
/s/ Leon Zajdel Chairman of the Board March 31, 2005
Leon Zajdel
CERTIFICATIONS
Exhibit 31.1 Certification of President and Chief Executive Officer
pursuant to Rules 13A-14 and 15D-14 of the Securities Exchange Act of 1934.
I, Darryl Reed, certify that:
1. I have reviewed this annual report on Form 10-KSB of Next
Generation Media Corp.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations, and cash flows of the registrant as of, and for the
periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14 for the
registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or
persons performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions,
with regard to significant deficiencies and material weaknesses.
Date: March 31, 2005
/s/ Darryl Reed
Darryl Reed, President
Exhibit 31.2 Certification of Principal Accounting Officer pursuant to
Rules 13A-14 and 15D-14 of the Securities Exchange Act of 1934.
I, Phillip Trigg, certify that:
1. I have reviewed this annual report on Form 10-KSB of Next
Generation Media Corp.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations, and cash flows of the registrant as of, and for the
periods presented in this annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14 for
the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or
persons performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions, with regard to
significant deficiencies and material weaknesses.
Date: March 31, 2005
/s/ Phillip Trigg
Phillip Trigg, Treasurer
Exhibit 32.1 Certification pursuant of Chief Executive Officer to 18
U.S.C. Section 1350, as adopted to Section 906 of the
Sarbanes Oxley Act of 2002.
In connection with the Annual Report of Next Generation Media Corp.
(the "Company") on Form 10-KSB for the year ending December 31, 2004
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Darryl Reed, President, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents,
in all material aspects, the financial condition and result of
operations on the Company.
By: /s/ Darryl Reed
Darryl Reed, President
Exhibit 32.2 Certification pursuant of Chief Financial Officer to 18
U.S.C. Section 1350, as adopted to Section 906 of the
Sarbanes Oxley Act of 2002.
In connection with the Annual Report of Next Generation Media Corp.
(the "Company") on Form 10-KSB for the year ending December 31, 2004
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Phillip Trigg, CFO, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents,
in all material aspects, the financial condition and result of
operations on the Company.
By: /s/ Phillip Trigg
Phillip Trigg, Treasurer
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 2004 AND 2003
FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
NEXT GENERATION MEDIA CORP.
NEXT GENERATION MEDIA CORP.
Index to Financial Statements Page
Audit Report of Independent Certified Public Accountants
Financial Statements
Consolidated Balance Sheet
Consolidated Statements of Income
Consolidated Statements of Stockholders' Deficit
Consolidated Statements of Cash Flows
Notes to Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Next Generation Media Corporation
7644 Dynatech Court
Springfield, VA 22153
We have audited the accompanying consolidated balance sheet of
Next Generation Media Corporation (a Nevada Incorporation) as of
December 31, 2004, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the two years in the
period ended December 31, 2004. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit according to generally accepted auditing
standards in the United States of America. 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Next Generation Media Corporation as of December 31,
2004, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 2004, in conformity
with accounting principles generally accepted in the United States of
America.
Turner & Jones
Vienna, Virginia
March 23, 2005
Next Generation Media Corporation
Consolidated Balance Sheet
As of December 31, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 395,575
Accounts receivable, net of
uncollectible accounts 325,698
Notes receivable, net 85,833
Trade notes receivable 46,587
Inventories 103,380
Employee loans and advances 2,074
Deposits 41,200
Prepaid expenses and other current assets 24,438
Total current assets 1,024,785
PROPERTY, PLANT AND EQUIPMENT:
Equipment 1,443,587
Furniture and fixtures 65,093
Leasehold improvements 76,363
Computer Equipment/Software 53,887
Vehicles 9,200
Total property, plant and equipment 1,648,130
Less: accumulated depreciation (1,320,701)
Net property, plant and equipment 327,429
OTHER ASSETS:
Intangibles, net of accumulated amortization 550,828
Trade notes receivable 21,630
Total other assets 572,458
TOTAL ASSETS 1,924,672
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Obligation under capital leases, current portion 18,595
Notes payable 13,998
Accounts payable 169,105
Accrued expenses 206,006
Deferred revenue 29,000
Pension payable 6,558
Sales tax payable 4,299
Total current liabilities 447,561
LONG TERM LIABILITIES:
Obligation under capital leases 61,851
Total long term liabilities 61,851
Total liabilities 509,412
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 50,000,000 shares
authorized, 10,523,397 issued and outstanding 105,234
Additional paid in capital 7,379,744
Accumulated deficit (6,069,718)
Total stockholders' equity 1,415,260
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY 1,924,672
See accompanying notes and accountant's audit report
Next Generation Media Corporation
Consolidated Statements of Income
For The Years Ended December 31, 2004 and 2003
2004 2003
REVENUES:
Coupon and postage sales, net of discounts $ 7,369,106 $6,841,202
Franchise fees 452,500 205,050
Total revenues 7,821,606 7,046,252
COST OF GOODS SOLD:
Materials 1,005,385 984,996
Direct labor 1,651,461 1,482,768
Equipment repairs 31,001 18,435
Postage and delivery 2,263,296 2,132,143
Payroll taxes 126,273 113,527
Group Insurance 117,855 129,010
Other costs 10,973 15,890
Total cost of goods sold 5,206,244 4,876,769
Gross margin 2,615,362 2,169,483
GENERAL AND ADMINISTRATIVE EXPENSES:
401(k) administration fees 7,121 5,942
401(k) matching 40,000 42,000
Advertising 46,170 39,593
Amortization 135,684 135,686
Bad debt expense 240,000 30,000
Bank charges 31,148 21,311
Commissions and fees 8,194 9,759
Depreciation 129,329 121,995
Franchise development 281,364 121,196
Insurance 52,288 50,123
Meals and entertainment 4,671 9,326
Office expense 92,777 70,683
Other expenses 5,096 1,505
Administrative payroll 850,744 680,396
Administrative payroll taxes 74,900 57,368
Professional fees 127,105 140,525
Franchise training and support 129,598 56,616
Employee training and relocation 35,742 15,879
Computer maintenance and support 43,859 13,614
Rent and pass thru expenses 282,640 273,453
Repairs and maintenance 5,859 14,258
Taxes & licenses 17,340 12,347
Temporary help 5,024 26,584
Utilities 83,692 86,173
Vehicle expenses 19,692 15,732
Total general and administrative 2,750,037 2,052,064
Income (Loss) from operations (134,675) 117,419
OTHER INCOME AND EXPENSES:
Gain or settlement of debt 188,673 -
Other income (expense) 717 23,254
Interest expense (6,189) (5,448)
Lawsuit settlement - 27,207
Total other income (expense) 183,201 45,013
Income (Loss) before provision for income tax 48,526 162,432
Provision for income tax: - -
Net income 48,526 162,432
Income (loss) applicable to common shareholders 48,526 162,432
Basic income/(loss) per common share 0.005 0.016
Weighted average common shares outstanding 10,523,397 10,222,985
Diluted income/(loss) per common share 0.003 0.011
Fully diluted common shares outstanding 14,213,397 13,739,149
See accompanying notes and accountant's audit report
Next Generation Media Corporation
Consolidated Statements of Stockholders' Equity
Additional
Common Stock Paid In Accumulated
Shares Amount Capital Deficit Total
December 31, 2002 9,523,397 95,234 $7,343,744 ($6,280,350) $1,158,628
Common stock issued in exchange
for services 1,000,000 10,000 36,000 - 46,000
Net Income - - - 162,106 162,106
December 31, 2003 10,523,397 105,234 7,379,744 (6,118,244) 1,366,734
Net Income - - - - -
December 31, 2004 10,523,397 105,234 7,379,744 6,069,718 1,415,260
See accompanying notes and accountant's audit report
Next Generation Media Corporation
Statements of Cash Flows
For The Years Ended December 31, 2004 and 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48,526 $ 162,106
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock issued for services - 46,000
Depreciation and amortization 265,013 257,680
(Increase)/decrease in assets
Receivables 252,786 (77,398)
Inventories (36,970) (10,502)
Deferred compensation - -
Prepaids and other current assets (21,278) 64,256
Increase/(decrease) in liabilities
Accounts payable 45,497 (227,646)
Accrued expenses 50,003 (41,424)
Deferred revenue 29,000 (4,688)
Pension payable 1,599 (21,075)
Sales tax payable (203,385)
Net cash flows provided/(used) by
operating activities 430,791 147,309
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (81,255) (96,705)
Net cash used by investing activities (81,255) (96,705)
Borrowing under capital lease 42,047 60,063
Repayment of notes payable and capital lease (119,021) (113,010)
Net cash provided by financing activities (76,974) (52,947)
NET INCREASE (DECREASE) IN CASH 272,562 (2,343)
CASH, BEGINNING OF PERIOD 123,013 125,356
CASH, END OF PERIOD 395,575 123,013
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Income taxes - -
Interest 6,189 6,196
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Common stock issued for services - 46,000
See accompanying notes and accountant's audit report
Next Generation Media Corporation
Notes to Financial Statements
December 31, 2004 and 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business:
Next Generation Media Corporation was incorporated in the State of
Nevada in November of 1980 as Micro Tech Industries, with an official
name change to Next Generation Media Corporation in April of 1997.
The Company, through its wholly owned subsidiary, United Marketing
Solutions, Inc., provides direct marketing products, which involves
the designing, printing, packaging, and mailing of public relations
and marketing materials and coupons for retailers who provide
services. Sales are conducted through a network of franchises that
the Company supports on a wholesale basis. At December 31, 2004, the
Company had approximately 53 active area franchise license agreements
located throughout the United States.
Property and Equipment:
Property and equipment are stated at cost. The company uses the
straight line method in computing depreciation for financial
statement purposes.
Expenditures for repairs and maintenance are charged to income, and
renewals and replacements are capitalized. When assets are retired
or otherwise disposed of, the cost of the assets and the related
accumulated depreciation are removed from the accounts.
Estimated useful lives are as follows:
Furniture, fixtures and equipment 7-10 years
Leasehold Improvements 10 years
Vehicles 5 years
Computer & Software 5 years
Depreciation expense for the years ended December 31, 2004 and 2003
amounted to $129,329 and $121,995 respectively.
Intangibles:
The Company has recorded goodwill based on the difference between the
cost and the fair value of certain purchased assets and it is being
amortized on a straight-line basis over the estimated
period of benefit, which ranges from five (5) to ten (10) years. The
Company periodically evaluates the goodwill for possible impairment
by comparing future projected cash flows to the carrying value of the
goodwill. Any excess goodwill would be written off due to
impairment. In addition, the Company has a covenant not to compete,
which is being amortized over five (5) years.
Advertising Expense:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations for the years
ended December 31, 2004 and 2003 were $46,170 and $39,593 respectively.
Revenue Recognition:
The Company recognizes revenue from the design, production and
printing of coupons upon delivery. Revenues from initial franchise
fee is recognized when substantially all services or conditions
relating to the sale have been substantially performed. Franchise
support and other fees are recognized when billed to the franchisee.
Amounts billed or collected in advance of final delivery or shipments
are reported as deferred revenue.
Impairment of Long-Lived Assets:
The Company reviews the carrying values of its long-lived assets for
possible impairment on a periodic basis and whenever events or
changes in circumstances indicate that the carrying amount of the
assets should be addressed. The Company believes that no permanent
impairment in the carrying value of long-lived assets exists for
either of the two years ending December 31, 2004 and 2003.
Comprehensive Income:
The Company has adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income." Comprehensive income as
defined includes all changes to equity except that resulting from
investments by owners and distribution to owners. The Company has no
item of comprehensive income to report.
New Accounting Pronouncements:
In November of 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others", an
interpretation of FASB Statements No. 5, 57, and 107 and rescission
of FASB Interpretation No. 34. This interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees
that is has issued. It also claries that a guarantor is requested to
recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The
initial recognition and initial measurement provisions are applicable
on a prospective basis to guarantees issued or modified issued or
modified after December 31, 2002 and the disclosure provisions were
effective for the year ended December 31, 2002. The adoption of this
interpretation did not have a material effect on the Company's
consolidated results of operations, financial condition or cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." This statement establishes standards for the classification
and measurement of certain financial instruments with characteristics
of both liabilities and equity. With the exception of certain
measurement criteria deferred indefinitely by the FASB, SFAS No. 150
is effective for financial instruments entered into or modified after
May 31, 2003 and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The implementation of
SFAS No. 150 did not have a material impact on the Company's
consolidated results of operations, financial condition, or cash flows.
Use of Estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Income Taxes:
The Corporation uses Statement of Financial Standards No. 109
Accounting for Income Taxes (SFAS No. 109) in reporting deferred
income taxes. SFAS No. 109 requires a company to recognize deferred
tax liabilities and assets for expected future income tax
consequences of events that have been recognized in the company's
financial statements. Under this method, deferred tax assets and
liabilities are determined based on temporary differences in
financial carrying amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which
temporary differences are expected to reverse.
Risks and Uncertainties:
The Company operates in an environment where intense competition
exists from other companies. This competition, along with increases
in the price of paper, can impact the pricing and profitability of
the Company.
Accounts Receivable:
The Corporation grants credit to its customers, which includes the
retail sector and their own franchisees. The Company establishes an
allowance for doubtful accounts based upon on a percentage of
accounts receivable plus those balances the Company believes will be
uncollectible. Allowance for uncollectible accounts as of December
31, 2004 was $173,427.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.
Earnings Per Common Share:
The Company calculates its earnings per share pursuant to Statement
of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128"). Under SFAS No. 128, basic earnings per share are
computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding. Dilated
earnings per share reflects the potential dilution assuming the
issuance of common shares for all potential dilative common shares
outstanding during the period. The Company had 3,690,000 options
issued and outstanding as of December 31, 2004 and 2003 to purchase stock.
Inventories:
Inventories consist primarily of paper, envelopes, and printing
materials and are stated at the lower of cost or market, with cost
determined on the first-in, first-out method.
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the parent company, Next Generation Media Corporation and
its subsidiary United Marketing Solutions, Inc. for the years ended
December 31, 2004 and 2003. All inter-company balances and
transactions have been eliminated in consolidation.
NOTE 2 - RETIREMENT PLAN
The company maintains a 401(k) defined contribution plan covering
substantially all employees. The Corporation may contribute up to 3%
of each eligible employee's gross wages. Employees can elect up to
15% of their salary to be contributed before income taxes up to the
annual limit set by the Internal Revenue Code. The Corporation
contributed $34,928 net of forfeitures for 2003. The Company
estimates it will contribute $40,000 for 2004.
NOTE 3 - NOTES PAYABLE
Notes payable at December 31, 2004 consists of:
Obligation to CIT Group, bearing interest at 10%, the loan is
payable in fifty-six monthly installments of $500, including
interest, and is collateralized by the property and equipment of
the Company. Balance outstanding at December 31, 2004 was
$6,498.
Unsecured note payable to Capital York calling for payments of
$1,000 per month inclusive of interest. Balance at December 31,
2004 was $7,500.
The 5 year schedule of maturities is as follows:
2005 13,998
2006 0
Thereafter 0
13,998
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Future minimum annual lease payments for capital and operating leases
as of December 31, 2004 are:
Operating Capital
2005 282,780 25,800
2006 280,006 25,800
2007 23,409 25,800
2008 0 17,988
Thereafter 0 0
Total 586,195 95,388
Rent expense for the years ended December 31, 2004 and 2003 was
$282,640 and $273,453, respectively.
The Company has entered into various employment contracts. The
contracts provided for the award of present and/or future shares of
common stock and/or options to purchase common stock at fair market
value of the underlying options at date of grant or vesting. The
contracts can be terminated without cause upon written notice within
thirty to ninety days.
The Company is party to various legal matters encountered in the
normal course of business. In the opinion of management and legal
counsel, the resolution of these matters will not have a material
adverse effect on the Company's financial position or the future
results of operations.
NOTE 5 - INCOME TAXES
Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Management has provided a valuation allowance for the total net
deferred tax assets as of December 31, 2004 and 2003, as they believe
that it is more likely than not that the entire amount of deferred
tax assets will not be realized.
The company filed a consolidated return, with a tax liability of $0
for the year 2004. At December 31, 2004, the Company had net
operating loss carry forwards for federal income tax purposes of
approximately $2,409,509 which are available to offset future taxable
income, if any, on a scheduled basis through 2018.
NOTE 6 - OBLIGATION UNDER CAPITAL LEASE
The Company acquired machinery under the provisions of a long-term
leases. For financial reporting purposes, minimum lease payments
relating to the machinery have been capitalized.
The future minimum lease payments under capital leases and net
present value of the future minimum lease payments as of December 31,
2004 are as follows:
Total minimum lease payments $95,388
Amount representing interest 14,942
Present value of net minimum lease payments 80,446
Current portion 18,595
Long-term capital lease obligation 61,851
NOTE 7 - COMMON STOCK
In 2003, the Company issued 2,350,000 options to purchase shares of
common stock at $0.01 per share to members of the Company's Board of
Directors and the employees. The options were issued at the then
fair market value of the underlying shares. In addition, the Company
issued 1,000,000 shares of common stock valued at $46,000 to various
consultants and employees for services rendered.
NOTE 8 - NOTE AND TRADE RECEIVABLE
On June 30, 2000, the Company executed a promissory note with UNICO,
Inc. for $200,000 in Conjunction with the sale of Independent News, Inc. The
note is outstanding and currently in default; the Company's management
considers a portion of the note collectible. Accordingly, an
allowance for uncollectible accounts of $160,000 has been established.
NOTE 9 - INTANGIBLE ASSETS
Intangible assets consist of the following items:
Goodwill $1,341,850
1,341,850
Less accumulated amortization (791,022)
Intangible assets, net $ 550,828
Amortization expense for the years ended December 31, 2004 and
December 31, 2003 were $135,684 and $135,686, respectively.
NOTE 10 - DEFERRED REVENUE
During 2004, the Company received $29,000 for services to be
performed in 2005. When the services were performed, the amount was
recognized as income in 2005.
NOTE 11 - PUBLIC STOCK LISTING
Next Generation Media Corporation common stock began trading on the
OTC Bulletin Board on June 11, 2001, under the symbol NGMC.
NOTE 12 - SEGMENT INFORMATION
The Company has one reportable segment for the twelve-month periods
ended December 31, 2004 and 2003: United Marketing Solutions. United
was acquired on April 1, 1999. The entity is a wholly owned
subsidiary. United operates a direct mail marketing business. The
accounting policies of the reportable segments are the same as those
set forth in the Summary of Accounting Policies. Summarized
financial information concerning the Company's reporting segments for
the periods ending December 31, 2004 and 2003 are presented below:
NOTE 14 - SEGMENT INFORMATION
Year Ended
December 31, 2003 Segment Parent Eliminations Total
Revenue 7,031,940 310,000 310,000 7,031,940
Segment profit/(loss) 96,345 65,761 0 162,106
Total assets 2,017,090 1,357,213 (1,343,896) 2,030,406
Year Ended
December 31, 2004 Segment Parent Eliminations Total
Revenue 7,821,762 418,000 418,000 7,821,762
Segment profit/(loss) 83,324 (34,798) 0 48,526
Total assets 1,958,152 1,246,720 1,820,200 1,924,672
NOTE 15 - RECLASSIFICATIONS
Certain amounts on the 2003 financial statements have been
reclassified to conform with the 2004 presentation.