NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
As filed with the Securities and Exchange Commission on March 18, 2002
Registration No. 333-45722
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT
(Amendment No. 2)
to
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
Colorado (7310) 84-1463284
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
200 9th Avenue North, Suite 210
Safety Harbor, Florida 34695
(727) 797-6664
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(Address and Telephone Number of Principal Executive Offices and Principal Place
of Business)
John D. Thatch, President
New Millennium Media International, Inc.
200 9th Avenue North, Suite 210
Safety Harbor, Florida 34695
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(Name, Address and Telephone Number of Agent for Service)
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Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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TABLE OF SECURITIES REGISTERED
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Title of each class of Amount to be Proposed maximum offering
securities to be registered registered* price per unit
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Common stock 432,000 (1) $1.50
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Common stock(a) 3,436,364 (2) $1.50
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Common stock(b) 220,000 (3) $1.50
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Common stock(c) 343,636 (4) $1.50
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Common stock(d) 600,000 (1)(5) $1.50
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Total 5,032,000
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*Note: Subsequent to the filing of the SB-2 registration statement the issuer
shares split 1:5. The Amounts stated in this schedule reflect this reverse
split.
Title of each class of securities to be registered:
(a) Swartz Investment Agreement purchase over three years.
(b) Shares of Common Stock issuable upon exercise by Swartz "Commitment
warrants" and "additional warrants".
(c) Shares of Common Stock issuable upon exercise by Swartz "Purchase
warrants".
(d) Shares of Common Stock issued upon conversion.
Proposed maximum offering price per unit:
(1) Based upon the average of the bid and asked prices of New Millennium Media
International, Inc. common stock as reported on the OTC Bulletin Board on
October 23, 2001 (within 5 business days of the SB-2 Post Effective
Amendment filing), pursuant to Rules
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457(c) and (g) of the Securities Act of 1933. Because the sale of these
securities will not result in direct proceeds to the Company no further
reference to these securities will be made in this prospectus.
(2) Issuable periodically over a 36 months term pursuant to the Swartz
Investment Agreement. Swartz Private Equity, LLC will purchase under
Regulation D up to 3,436,364 (post split number of shares) shares AT A
PRICE OF THE LESSER OF THE MARKET PRICE MINUS $0.10 OR 92% OF THE MARKET
PRICE for 20 days following each put date. There is no assurance that the
$25,000,000 maximum will ever be reached.
(3) Swartz has already received a "commitment warrant" ((b) above) to purchase
200,000 (post split number of shares) shares at signing the letter of
intent for an initial price of $1.50 (calculated to reflect post split
amount) per share and may thereafter be reset every 6 months. At the
earlier of March 15, 2001 or the date of the first put notice delivered to
Swartz, Swartz shall receive "additional warrants" (included in (b) above)
for additional shares and on the date of any reverse stock split and on
each one-year anniversary thereafter Swartz shall receive "additional
warrants" so that the sum of "commitment warrants" and "additional
warrants" may equal up to 4% of the number of fully diluted common
outstanding shares. The price shall be the same as that calculated for
"commitment warrants". To date Swartz has received a total of 242,274
warrants. See hereafter section Description of Securities, Warrants.
(4) Issuable to Swartz Private Equity, LLC upon the exercise of common stock
purchase warrants. The warrants are issuable to Swartz from time to time
when NMMI exercises its put right to sell shares of common stock to Swartz.
The exercise price of a warrant will initially be equal to 110% of the
market price for that put and thereafter may be reset every six months.
Each warrant initially will be immediately exercisable and have a term
beginning on the date of issuance and ending five years thereafter.
(5) Issued upon conversion of Series A Convertible Preferred stock issued to
Investment Management of America, Inc. The conversion ratio was 1:1.
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PROSPECTUS
New Millennium Media International, Inc.
200 9th Avenue North, Suite 210
Safety Harbor, Florida 34695
(727) 797-6664
This prospectus relates to the resale by the selling shareholders of up to
5,032,000 shares of common stock. The selling shareholders may sell the stock
from time to time in the over-the-counter market at the prevailing market price
or in negotiated transactions. Of the shares offered,
o up to 3,436,364 (post split number of shares) shares are issuable to
Swartz Private Equity, LLC over a three year period based on an
Investment Agreement dated May 19, 2000,
o up to 220,000 (post split number of shares) shares are issuable to
Swartz Private Equity, LLC upon the exercise of warrants issued to
Swartz under the Investment Agreement as "Commitment Warrants" and
"Additional Warrants",
o up to 343,636 (post split number of shares) shares are issuable to
Swartz Private Equity, LLC upon the exercise of warrants issued to
Swartz under the Investment Agreement as "Purchase Warrants",
We will receive no proceeds from the sale of the shares by the selling
shareholders. We may receive up to $25 million of proceeds from the sale of
shares to Swartz and we may receive additional proceeds from the sale to Swartz
of shares issuable upon the exercise of any warrants that may be exercised by
Swartz. There is no assurance that all or any portion of this $25,000,000
maximum will ever be reached.
Our common stock is quoted on the over-the-counter Electronic Bulletin Board
under the symbol NMMG; prior to the stock split the symbol was NMMI. On March
16, 2002, the average of the bid and asked prices of the common stock on the
Bulletin Board was $0.75 per share.
Investing in the common stock involves a high degree of risk. You should invest
in the common stock only if you can afford to lose your entire investment See
"Risk Factors" beginning on page 11 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities nor determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 18, 2002.
Please read this prospectus carefully. It describes our company, finances,
products and services. Federal and state securities laws require that we include
in this prospectus all the important information that you will need to make an
investment decision.
You should rely only on the information contained or incorporated by reference
in this prospectus to make your investment decision. We have not authorized
anyone to provide you with different information. The
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selling shareholders are not offering these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front page of
this prospectus.
The following table of contents has been designed to help you find important
information contained in this prospectus. We encourage you to read the entire
prospectus.
Table of Contents
Page Page
Prospectus Summary.................7 Where You Can Find More
Summary Financial Data.............9 Information....................24
Risk Factors......................10 Description of Business..........25
Use of Proceeds...................17 Management's Discussion and
Price Range of Common Stock.......21 Analysis or Plan of Operation..29
Dilution..........................18 Description of Property..........31
Plan of Distribution..............19 Certain Relationships and
Related Transactions...........32
Swartz Investment Agreement.......19 Market for Common Equity and
Additional Securities Being Related Stockholder Matters 32
Registered......................22 Executive Compensation...........33
Legal Proceedings.................22 Index to Financial Statements....34
Directors and Officers............22 Indemnification of Directors
Security Ownership of Certain and Officers...................54
Beneficial Owners and Expenses of Issuance and
Management......................23 Distribution...................54
Description of Securities.........23 Recent Sales of Unregistered
Interest of Named Experts Securities.....................55
and Counsel.....................24 Exhibits Index...................56
Disclosure of Commission Undertakings.....................57
Position of Indemnification Signatures.......................59
For Securities Act
Liabilities.....................25
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SUMMARY INFORMATION
This summary highlights information contained elsewhere in this prospectus. This
summary is not complete and does not contain all of the information you should
consider before investing in the common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section.
Our principal offices were located at 101 Philippe Parkway, Suite 300, Safety
Harbor, Florida 34695 until August 24, 2001 at which time the offices were
relocated to 200 9th Avenue North, Suite 210, Safety Harbor, Florida 34695,
(727) 797-6664, fax (727) 797-7770.
Some of the statements contained in this prospectus are forward-looking and may
involve a number of risks and uncertainties. Actual results and future events
may differ significantly based upon a number of factors, including:
o our significant historical losses and the expectation of continuing
losses;
o rapid technological change in the motion billboard industry;
o our reliance on key strategic relationships and accounts;
o the impact of competitive products, services and pricing;
o uncertain protection of our intellectual property rights and
o uncertainty of our exclusivity in the United States regarding our
purchase of "EyeCatcher" display boards.
In this prospectus, we refer to New Millennium Media International, Inc. as
"NMMI" or "we" or "Company". We refer to Swartz Private Equity, LLC as "Swartz".
Light emitting diode is abbreviated as "LED".
New Millennium Media International, Inc. was originally incorporated April 21,
1998 in Colorado under the name New Millennium Media International, Inc. On
April 27, 1998 Progressive Mailer Corp., a Florida corporation, merged into
NMMI. August 31, 1999 NMMI acquired Unergi, Inc., a Nevada corporation, by
merging Unergi into New Millennium Media, Inc., a Colorado corporation, a wholly
owned subsidiary of NMMI by way of a tax-free reorganization.
In July 1999 NASD enacted an eligibility rule that requires any public company
to be in full compliance with all of the financial reporting requirements of the
Securities Act. On January 25, 2000 NMMI received a thirty-day eligibility
symbol because of its failure to timely file the required certified financial
reports. On February 24, 2000 NMMI was "delisted" and placed on the "pink
sheets" National Quotation System. In order to obtain consulting services of
Scovel's corporate officer and in lieu of filing form 10 and bring current the
needed certified financial statements of NMMI by certified audit, the Company
elected to merge with a compliant shell corporation, Scovel Corporation. All the
outstanding shares of common stock of Scovel were exchanged for 500,000 shares
of common stock of NMMI. By virtue of the merger, NMMI acquired 100% of the
issued and outstanding common stock of Scovel. After the acquisition, Scovel was
liquidated. Thus, the Company completed the process of a merger with Scovel
Corporation wherein New Millennium Media International, Inc. was the surviving
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entity; however, the intended OTC Bulletin Board trading listing was not
achieved until NASD Form 211 was filed by NMMI. This transaction was not
significant to the financial statements of NMMI. NMMI was relisted OTC BB on
September 6, 2000.
OUR BUSINESS
NMMI does not currently have significant revenues from its display and
advertising business and there is no assurance that NMMI will receive such
revenues in the future. NMMI plans to install LED (light emitting diode) outdoor
displays in high traffic areas and form joint ventures with strategic partners
to place a large number of indoor "IllumiSign-Eyecatcher" patented motion
display boards. NMMI intends to secure highly visible sites throughout the
United States and Canada and provide superior service within the industry. The
new millennium will demand the highest digital quality and the most cost
efficient LED advertising boards available. We believe NMMI already has the
product available and subject to available financing, we are ready to introduce
the product to the consumer.
NMMI has United States and Canada distribution rights to an indoor frontlit
advertising board called the Illumisign-EyeCatcher Display. This is a patented
product that displays poster sizes from 11" x 17" to 48" x 72". These signs can
display up to 24 advertisements on a rotating basis. Each rotation can be set to
run from three seconds to one hour. From the sale of advertisements to be
displayed on the display boards, IllumiSign-EyeCatcher displays can generate
revenues up to $5,000 per month per display board. This revenue is predicated on
a maximum of at least 20 advertising posters sold at no less than $250 each per
month. Additionally, NMMI has the exclusive United States and Canada rights to
an indoor backlit advertising board designed and manufactured by AMS Controls,
Inc. There are a few minor exceptions to this exclusivity, namely, seventeen
accounts existing in the contract inventory of AMS Controls, Inc. at the time of
contracting with NMMI. We are marketing this new product as "EyeCatcher Powered
by Insight". This is a patented product, that ranges in poster size from 18" X
24" to 40" X 60". These signs can display up to 20 scrolling advertising images.
Each rotation can be set to run from three seconds to one hour. Like the
IllumiSign-EyeCatcher, this product has the potential to generate revenues from
the sale of advertisements up to $5,000 per month per display board. This
revenue is predicated on a maximum of 20 advertising posters sold at no less
than $250 each per month.
NMMI has a strategic relationship with E-Vision LED, Inc., a U.S. based company
whose affiliates manufacture LED displays. E-Vision will sell to NMMI the LED
boards at manufacturer's cost in exchange for which E- Vision will share in the
revenues that the LED boards produce. This LED board alliance allows NMMI to
purchase the highest quality product at a greatly reduced cost.
E-Vision's supplier has the capability to manufacture any size LED board
including boards for sporting events. These LED boards can operate any
commercial electronic format on any size board. Management believes this gives
NMMI a strong competitive advantage over other display boards for which the
advertisement must be reformatted that often takes weeks. E-Vision LED displays
will run any format on any size board with consistent color quality and clarity.
Color quality and clarity are very important to national advertisers who want
their
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colors and logos the same on all displays. E-Vision will assist NMMI with
training and support from the first board and will provide NMMI with ongoing
assistance in all aspects of programming, technical and software support. In
this relationship, E-Vision and its affiliates will supply NMMI, free of charge,
software upgrades as they become available.
OUR INVESTMENT AGREEMENT
We have entered into an Investment Agreement with Swartz Private Equity, LLC
("Swartz") to raise up to $25 million over a term ending 36 months after the
effective date of the registration statement through a series of sales of our
common stock to Swartz. The dollar amount of each sale is limited by our common
stock's trading volume. A minimum period of time must occur between sales. In
turn, Swartz will either sell our stock in the open market, sell our stock to
other investors through negotiated transactions or hold our stock in its own
portfolio. This prospectus covers the resale of our stock by Swartz either in
the open market or to other investors. There is no assurance that all or any
portion of this $25,000,000 maximum will ever be reached.
KEY FACTS
Total shares outstanding prior 7,116,863 as of June 30, 2001
to the offering, post split
Shares being offered for resale 4,000,000 (maximum)
to the public, post split
Total shares outstanding after 11,116,863
this offering, post split
Price per share to the public Market price at time of resale
Total proceeds raised by offering We have received proceeds from the sale
of shares that are presently
outstanding, we may receive up to $25
million from the sale to Swartz of
shares issuable upon the exercise of any
warrants issued to Swartz pursuant to
the Investment Agreement. There is no
assurance that all or any portion of
this $25,000,000 maximum will ever be
reached.
Use of proceeds from the sale We plan to use the proceeds for working
of the shares to Swartz capital and general corporate purposes.
OTC Bulletin Board Symbol NMMG
SUMMARY FINANCIAL DATA
The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
prospectus.
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Year Ended Nine Months Ended
December 31 September 30
----------- ------------
1999 2000 2000 2001
---- ---- ---- ----
(Unaudited) (Unaudited)
Revenues 49,176 149,400 102,864 229,182
Operating Expenses 495,161 1,158,213 592,756 1,088,304
Net Loss (445,985) (1,008,813) (489,892) (859,122)
Loss per share (0.03) (0.04) (0.104) (0.124)
Weighted average number
Of common shares
outstanding (post split 3,111,988 5,255,050 4,717,934 6,935,992
number of shares)
September 30, 2001
------------------
(Unaudited)
Balance Sheet Data:
Total assets........................................ 1,857,449
Total liabilities................................... 1,329,268
Shareholders' equity................................ 528,181
RISK FACTORS
An investment in the shares of Common Stock of New Millennium Media
International, Inc. offered hereby involves a high degree of risk. The
prospective investor should consider carefully the following risk factors, in
addition to the other information obtained by the investor in evaluating an
investment in shares of Common Stock offered hereby. If the Company does not
successfully manage these risks, its business, operating results and financial
condition will be materially adversely affected. The Company cannot assure you
that it will successfully address these risks or that its business strategy will
be successful. If the Company does not become profitable, you may lose your
entire investment. The materials provided to the investor contain
forward-looking statements that involve risks and uncertainties.
THE COMPANY HAS LIMITED OPERATING HISTORY
The Company has just begun to actively sell its advertising product and it has
very limited operating history available to evaluate its business and prospects.
Future revenues are dependent on the success of these sales efforts. Potential
investors should consider the Company's prospects in light of the following
risks, expenses and uncertainties that may be encountered.
IT IS UNCERTAIN THAT THE COMPANY WILL CONTINUE AS A GOING CONCERN
The Company has incurred recurring operating losses and negative cash flows and
has negative working capital. The Company has financed itself primarily through
the sale of its stock and related party borrowings. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
There can be no assurance that the Company will be successful in implementing
its plans, or if such plans are implemented, that the Company will be
successful.
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THE COMPANY IS UNDERCAPITALIZED AND MAY NEED TO RAISE ADDITIONAL CAPITAL THROUGH
ISSUING EQUITY OR CONVERTIBLE DEBT SECURITIES
The Company expects to grow in relation to its growth of sales. There is,
however, no certainty that the Company will achieve these growth results. The
amount and timing of operating costs and capital expenditures relating to
expansion of the Company's business, operations and infrastructure are key
elements to the success of NMMI. Because NMMI is undercapitalized, timing is
important. It is imperative that the Company has sufficient capital to operate
the daily ongoing business, but by the same token, it is just as important to
the ultimate success of the Company that there be sufficient capital for company
expansion. There is no assurance that there will ever be sufficient capital or
revenue to fully fund both of these vital elements. The Company may need to
raise additional funds in order to fund more rapid expansion, to develop new or
enhanced equipment (display boards, both indoor and outdoor and LED screens),
services, site locations and to respond to competitive pressures. If the Company
raises additional funds by issuing equity or convertible debt securities, the
percentage ownership of its stockholders will be diluted. Further, any new
securities could have rights, preferences and privileges senior to those of the
preferred stock and common stock. Other than as already mentioned above, the
Company currently does not have any commitments for additional financing. It
cannot be certain that additional financing will be available in the future to
the extent required or that, if available, it will be on terms acceptable to the
Company. If adequate funds are not available on acceptable terms, the Company
may not be able to fund its expansion, consummate acquisitions, develop or
enhance its products and services and respond to competitive pressures.
NO CERTAINTY OF COMPANY'S ABILITY TO ATTRACT AND RETAIN CUSTOMERS
The revenues derived through the display boards and LED screens are advertising
fees paid by the advertisers to NMMI for placing and displaying the
advertisements on the NMMI display boards and LED screens. In most instances
additional revenue is produced by the Company designing and/or printing the
advertisements that are to be displayed. This is the case in both the backlit
scrolling and the front-lit rotating display boards as well as the LED screens.
The display boards and the LED screens are designed to display up to
approximately twenty alternating advertisements. The success of the Company is
totally dependent on the Company's ability to attract and retain advertising
customers at a steady rate and to stimulate the sale of advertisements to be
displayed on the display boards and LED screen.
REVENUES DEPEND ON THE COMPANY'S ABILITY TO LOCATE, DEVELOP AND LEASE LOCATIONS
The Company's success is dependent on selecting the proper display boards in the
most suitable locations with the most dynamic advertising material for the
particular needs of the advertisers in order to offer its customers the quality
results that are necessary for a continuing lasting business relationship.
Certainly, some specific locations are better suited than others for a
particular market. Of equal importance are the demographics and volume of
traffic that will be exposed to the advertising media. This entails not only the
host site location, but also the specific location within the specific site. No
matter how much foot traffic passes by the front of a store, unless the
advertising media can be seen by the traffic, it is of little use and
consequence to
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the advertiser. The Company currently has agreements with its distributors,
advertisers and site locations. Unless the Company can locate, develop and
procure suitable advertising locations, there will be little hope to attract
advertising customers to generate sufficient revenues.
NO ASSURANCE THAT ADVERTISERS WILL CHOSE COMPANY'S PRODUCTS FOR THEIR
ADVERTISING NEEDS
There can be no assurance that advertisers will chose to deal through an agency
or distributor with whom the Company has a relationship or the advertisers may
deal directly with the owner of the site location for the placement of static
visual poster type advertisements or through a competitor of the Company rather
than through the Company's products. Accordingly, this could significantly
decrease the amount of our business, operating results and financial condition.
Substantially all of the Company's sales are dependent on the commissions
customarily paid by advertisers for ad placements. Consistent with industry
practices, these advertising sales people are not obligated to direct their
advertising customers to any particular agency or media of advertising.
Accordingly, advertisers can reduce current industry commission rates or
eliminate such commissions entirely and deal directly with the locations, which
would have a material adverse effect on Company business, operating results and
financial condition.
EQUIPMENT BREAKDOWN AND OTHER DOWNTIME WILL CAUSE CUSTOMER DISSATISFACTION AND
ADDED EXPENSE TO THE COMPANY
Because the Company's products are electronic and electromechanical, the LED and
the rotating display boards, have a potential for breakdown. NMMI trains each of
its distributor representatives regarding upkeep and maintenance of the
advertising machines. There is no assurance as to how much the routine servicing
of the machines will lengthen the longevity of the machines. The Company limits
the exposure to breakdowns by having the periodic maintenance procedure;
however, there will eventually be downtime. The impact of such downtime will be
problematic to the Company because the advertiser pays the Company a monthly fee
to have its advertisements seen by the public; a portion of the fee is paid to
the host venue and a portion to the sales distributor. When downtime occurs,
unless such downtime is immediately minimized, the advertisers' monthly
advertising fees will need to be adjusted accordingly. When advertisers are
paying for a specific number of advertising exposures per minute, a
non-functioning media machine will not fill the expectations of the advertising
customers. Ultimately, a succession of breakdowns will result in loss of the
advertising customers and loss of the site locations as well. Any vandalism or
intentional destruction or theft of the display boards will be another cause for
concern because such acts will most assuredly be an additional cause for
downtime with the same ultimate economic consequence to the Company. Because
NMMI does not manufacture the display board and LED screen equipment, the
quality cannot be assured. Ultimately, all of these matters have an affect on
the cash flow and will have an affect on the Company's plan for growth, as well.
COMPETITORS COULD BE MORE INNOVATIVE THAN THE COMPANY
As part of the Company's innovation plan, NMMI developed a kiosk housing for
placement of several display boards within a single fabricated self-contained
kiosk housing. Each distributor and sales representative is in periodic contact
with advertisers and site location owners all of
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whom have an interest in promoting the most reasonably visible and appealing
advertising media. Ideas are exchanged, many of which are implemented by NMMI in
one manner or another. There is, however, no assurance that competitors will not
be more aggressive in their innovative progression than is NMMI.
THE COMPANY CANNOT ASSURE CONSUMER AWARENESS AND RECOGNITION OF THE NMMI BRAND
NAME
Unless it can reasonably be established that the advertisers' sales increase to
the extent economically anticipated by the advertisers, there will be no renewal
of the advertisement contracts. The answer lies with the consumers and the
consumers' willingness to accept NMMI's advertising media by responding through
the purchase of the advertisers' products. The Company believes that
establishing, maintaining and enhancing its brand (NMMI brand) are critical
aspects of its efforts to attract and expand its advertising customer base. The
number of visual billboard advertisers that offer competing services, many of
which already have well-established brands, generally increase the importance of
establishing and maintaining brand name recognition. To attract and retain
advertiser customers and to promote and maintain its quality site locations, the
Company may find it necessary to increase substantially its financial commitment
to creating and maintaining a strong brand loyalty among customers. This will
require significant expenditures on advertising and marketing the Company's own
brand name. Each display board displays the Company's brand name, address and
phone number. If the Company is unable to provide high-quality advertisers,
displays, locations and customer support, or otherwise fails to promote and
maintain high quality advertising, or if it incurs excessive expenses in an
attempt to promote and maintain high quality, its business, operating results
and financial condition would be materially adversely affected.
PRODUCT, CONSUMER, LOCATION, TIMING AND ECONOMIC CONDITIONS INFLUENCE COMPANY
REVENUES
The advertising industry, especially visual display media, is dependent on
personal spending levels and habits of the consuming public. It is also
sensitive to changes in economic conditions and tends to increase during general
economic downturns and recessions. The advertising industry is also highly
susceptible to unforeseen events, such as new trend products, regional
necessities, discretionary spending, price fluctuation, weather patterns and
innovative advertising media. Any event that results in economic decline
generally would likely have an ultimate material adverse effect on the
advertising business, its operating results and financial condition. The economy
fluctuates both in time and geographical location depending on the type of
product and the region where the advertising is to take place. In either event,
because of the periodic change in the economy, the advertising industry will
change. It is a matter of advertising the right product to the right consumer at
the right location at the right time in the right economy. Each of these
variables has a reaction on the potential revenues to be earned by NMMI. There
is no assurance that any or all of these variables will exist to the advantage
of NMMI.
INFRASTRUCTURE MANAGEMENT AND MATCHING AN EMPLOYEE TO THE BEST SUITED TASKS
TAKES MANAGEMENT TIME; EMPLOYEE LONGEVITY IS ALWAYS AN ISSUE
As the Company continues to grow there is a continuing risk of misdirection of
management's attention from operational issues to more
12
subtle, but time-consuming issues such as personnel matters. Notwithstanding
contractual efforts to retain key personnel, there is always the reality that
key personnel could leave the Company. Management is charged with the
responsibility of recruiting competent personnel able to fulfill the required
talent requirement. It is not only the current ability of the personnel, but the
individuals must be able to adapt to an ever-changing market. A change in the
market is reflected in a change of products, consumer interests, consumer
demographics, economics, advertising media, as well as many additional
variables. Because a change in personnel entails a transition and transitions
require time and expense, it is management's position to employ personnel who
have a genuine interest and ability in progressing along with the changing times
and conditions. Replacing any single key personnel could, and generally does,
take several months. During this term it is necessary for other key personnel to
"fill-in" by assuming job related responsibilities for which such "fill-in's"
are not necessarily properly skilled or efficiently qualified; in addition to
taking away such "fill-in's" attention from otherwise customary daily prescribed
duties. This would cause overall temporary operational inefficiency that
certainly would have an ultimate negative effect on the Company's proposed
growth. Management cannot assure that any particular individual will remain with
the Company or that, in the future, the personnel will continue to be the most
suitable for the particular position.
INTENSE COMPETITION FROM EXISTING AND NEW ENTITIES MAY ADVERSELY AFFECT OUR
REVENUES AND PROFITABILITY
Many businesses compete with NMMI in some aspects of the motion display
industry. This competition includes traditional static print advertising, LED
and video advertising as well as billboard advertising. Many of NMMI's
competitors are national companies with existing track records that offer
products and services similar to those of NMMI. A few of these major competitors
are Eller Media owned by publicly traded Clear Channel Communications (CCU),
Infinity Group owned by publicly traded Viacom, Inc. (VIA) and JC Decaux. These
companies currently have name recognition in the billboard advertising industry.
NMMI is slightly different from most of its competition in that it operates in a
capacity that includes being the supplier of product, in some instances the
seller of product, the seller of all graphics for the product and the seller of
all advertisements for the product.
We expect competition to continue to intensify in the future. Many of our
competitors have significantly greater financial, technical, marketing and other
resources than we do. Some of our competitors also offer a wider range of
services than we offer. These competitors may be able to respond more quickly to
new or changing opportunities, technologies and customer requirements and may be
able to undertake more extensive promotional activities, offer more attractive
terms to customers and adopt more aggressive pricing policies. We cannot assure
that we will be able to compete effectively with current or future competitors
or that the competitive pressures faced by us will not harm our business.
Intense competition from existing and new entities may adversely affect our
revenues and profitability.
13
The development of the Company's motion display product business entails
significant business risks. The Company might not successfully use new
technologies effectively or adapt its existing capabilities, high technology
equipment and transaction producing efforts to customer requirements or emerging
industry standards. If it is unable, for technical, legal, financial or other
reasons, to adapt in a timely manner, in response to changing market conditions
or customer requirements, its business, financial condition and results of
operations could be adversely affected.
THERE IS NO ASSURANCE THAT STRATEGIC RELATIONSHIPS PRESENTLY BENEFICIAL TO THE
COMPANY WILL CONTINUE
The patent holder of the "IllumiSign-Eyecatcher" indoor front-lit display boards
granted to the Company a license to manufacture, operate, distribute and market
the "IllumiSign-Eyecatcher" indoor frontlit display boards in the United States
and Canada. AMS Controls, Inc. holds the patent for the "EyeCatcher Powered by
Insight", which is a scrolling backlit motion display board. AMS granted the
Company the exclusive (with minor exceptions) right to operate, distribute and
market the "EyeCatcher Powered by Insight" motion display boards in the United
States. The minor exceptions to this exclusivity relate to accounts with which
AMS had an existing business relationship at the time of contracting with NMMI.
Should either of these contracts be terminated, it could cause a material
adverse affect to the Company and its operations.
Management feels that strategic relationships provide an inexpensive, least
amount of capital up-front, manner of acquiring some products as well as
locating display boards and LED screens. The strategic relationship that NMMI
has with E-Vision LED, Inc. (See section entitled Business Overview) provides
NMMI with the opportunity to furnish expensive LED panels at dealer cost. In the
majority of motion display host venue sites the venue site owner participates in
the advertising revenue paid by the advertiser. This too is a strategic
relationship that allows for the placement of the display boards in prime
location at no up-front cost to NMMI. Many of our competitors follow a similar
business plan and there is no assurance that NMMI will continue to profit from
these relationships.
ZONING AND OTHER GOVERNMENT REGULATIONS COULD HAVE A DETRIMENTAL AFFECT ON THE
COMPANY'S LED SIGN BUSINESS
Many cities and states have regulations that prohibit LED signs on the basis
that the signs may be a distraction to passing drivers and may lead to an
increase in the number of traffic accidents. Such regulations together with
zoning and other government permit regulations are cause for additional expenses
and time delays. There is no assurance that the LED screen panels, erection
costs, advertising revenues will remain as quoted in the event of a lengthy
government zoning, permit or other regulatory proceeding; or that appropriate
zoning and/or permits will be granted for erection of the LED screens.
UNFORESEEN CATASTROPHES OR LIABILITIES WOULD HAVE A DISASTROUS EFFECT ON THE
COMPANY'S CASH FLOW AND PROFIT
The Company is insured against such unforeseen events for which insurance is
logically and economically available; however, there exists the reality of
potential catastrophes for which there is no "cash flow" protection such as loss
because of hurricane, electrical
14
lightning, other natural hostile elements that could cause damage to the office
facility, motion displays or LED billboards. Management has determined that it
is not economically feasible for the Company to insure against loss of cash flow
resulting from such calamity. These potential disasters along with other matters
that could cause a disruption of the Company's business most certainly would
have a disastrous effect on the Company's cash flow and ultimately on the
Company's profit.
THE COMPANY HAS INCURRED LOSSES AND EXPECTS TO INCUR SUBSTANTIAL NET LOSSES FOR
THE FORESEEABLE FUTURE
The Company has been operating at a loss and expects that operating losses and
negative cash flow will continue for the foreseeable future as it invests in
marketing and promotional activities, technology and equipment systems. The
Company's current and future expense levels are based predominantly on its
operating plans and estimates of future revenues. The Company may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues would likely have
an immediate material adverse effect on its business, operating results and
financial condition. Further, the Company currently intends to substantially
increase its operating expenses to purchase additional display boards, indoor
and outdoor, as well as develop additional site locations. It is intended that
the Company will be innovative in its choice of sites and the locations within
the sites.
The Company's future profitability depends on generating and sustaining high
revenue growth while maintaining reasonable expense levels. Slower revenue
growth than the Company anticipates or operating expenses that exceed its
expectations would adversely affect its business, operating results and
financial condition. The Company cannot be certain when or if it will achieve
sufficient revenues in relation to expenses to become profitable. If the Company
is unable to become profitable, you will lose your entire investment.
PURCHASERS OF THE COMMON STOCK IN THIS TRANSACTION WILL EXPERIENCE SUBSTANTIAL
DILUTION
Based upon the terms of the Swartz Investment Agreement, purchasers of the
common stock will experience a substantial dilution in net tangible book value
of the Company's Common Stock purchased. The stock issued in connection with the
Swartz transaction will be valued at the closing based upon the price per share
as required in the fully executed Swartz Investment Agreement. The Company
cannot presently ascertain the number of shares to be issued pursuant to the
Swartz Investment Agreement. Under the Swartz Investment Agreement this number
may be up to 4,000,000 (post split number of shares) shares, plus additional
shares as may be registered in the future. Consequently, purchasers of the
Company's stock may experience substantial dilution in the future.
OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION
The Company's common stock may be deemed a penny stock. Penny stocks generally
are equity securities with a price of less than $5.00 per share other than
securities registered on certain national securities exchanges or quoted on the
NASDAQ Stock Market, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system. The Company's securities may be subject to "penny stock rules" that
impose additional
15
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors (generally
those with assets in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 together with their spouse). For any transaction involving a penny
stock, unless exempt, the "penny stock rules" require the delivery, prior to the
transaction, of a disclosure schedule prescribed by the Commission relating to
the penny stock market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities. Monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. Consequently, the
"penny stock rules" may restrict the ability of broker-dealers to sell the
Company's securities. The foregoing required penny stock restrictions will not
apply to the Company's securities if such securities maintain a market price of
$5.00 or greater. As of the date of this filing, the trading price of New
Millennium's common stock is not in excess of $5.00 per share and there can be
no assurance that the price of the Company's securities will attain such a
level.
TRADING IN OUR COMMON STOCK ON THE OTC BULLETIN BOARD MAY BE LIMITED AND YOU MAY
HAVE DIFFICULTY RESELLING THE SHARES THAT YOU PURCHASE
The Company's common stock trades on the OTC Bulletin Board. The OTC Bulletin
Board is not an exchange and because trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on an
exchange or NASDAQ, you may have difficulty reselling any of the shares that you
purchase from the selling shareholder.
USE OF PROCEEDS
We could receive up to $25 million from Swartz upon Swartz's purchase of the
shares from us and we may receive additional proceeds from the sale to Swartz of
shares issuable upon the exercise of warrants issued or to be issued to Swartz
pursuant to the Investment Agreement. There is no assurance that this
$25,000,000 maximum will ever be reached. For more a detailed discussion of the
Swartz Investment Agreement see the section hereafter entitled Plan of
Distribution, Swartz Investment Agreement.
We intend to use the proceeds from the sale of the shares to Swartz and the
exercise of warrants by Swartz for working capital and general corporate
purposes, including acquisitions, funding anticipated operating losses, sales
and marketing expenses, purchase of additional equipment, working capital and to
fund payment obligations for contemplated acquisitions and corporate partnering
arrangements. We reserve the right to vary the use of proceeds among the
categories listed above because our ability to use the proceeds is dependent on
a number of factors, including the extent of market acceptance of our variety of
display boards, unexpected expenditures for further technical development, sales
and marketing efforts and the effects of competition.
To the extent we deem appropriate, we may acquire fully developed products or
businesses that, in our opinion, facilitate our growth and/or enhance the market
penetration or reputation of our products and services. To the extent that we
identify any such opportunities, an
16
acquisition may involve the expenditure of significant cash and/or the issuance
of our capital stock. We currently have no commitments, understandings or
arrangements with respect to any such acquisition.
Until we use the net proceeds of the offering, we will invest the funds in
investment grade, interest-bearing securities.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the OTC BB. The following table sets forth the
high and low bid prices of our common stock on the last day of each quarter
beginning with the first quarter of 1999 through the fourth quarter of 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
---- -------- -------
1999
----
First Quarter .313 .313
Second Quarter .406 .406
Third Quarter .125 .125
Fourth Quarter .120 .120
2000
----
First Quarter .875 .875
Second Quarter 1.000 1.000
Third Quarter .650 .430
Fourth Quarter .350 .220
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.
DILUTION
At September 30,2001, we had a net tangible book value of ($158,530) or
approximately ($0.019) per share of common stock. Net tangible book value per
share represents the amount of our total tangible assets less our total
liabilities, divided by the number of shares of common stock outstanding. After
giving effect to the receipt of the estimated net proceeds from our sale of the
offering price of $1.38 per unit (after deducting underwriting discounts and
estimated offering expenses payable by us) the net tangible book value as of
September 30, 2001, would have been approximately $5,361,470 or $.44 per share
of common stock. This would represent an immediate increase in the net tangible
book value per share of common stock of $.459 to existing shareholders and an
immediate dilution of $1.06 per share to new investors purchasing our units in
the offering. Dilution is determined by subtracting net tangible book value per
share after the offering from the offering price to investors.
17
The following table illustrates this per share dilution:
Assumed offering price per share of common
stock contained in our unit $1.50
Net tangible book value per share of common stock
before the offering ($0.019)
Increase attributable to new investors $ .459
Proforma net tangible book value after the offering $0.44
Dilution to new investors $1.06
Percentage of dilution to new investors 70.7%
The following table summarizes the number of shares of common stock newly issued
under this Registration Statement. The table reflects 200,000 commitment
warrants at $1.50 a share and 3,800,000 shares at $1.50.
The table, with respect to new investors, gives effect to 4,000,000 shares as if
issued September 30, 2001.
Share Purchased Consideration Paid Average Price
Percentage
Number Percentage Amount Per Share
------ ---------- ------ ---------
Existing Shareholders 8,181,161 67.16 $ 5,307,485 .65
New Investors 4,000,000 35.98 $ 6,000,000 1.50
---------- -----------
Total 12,181,861 100.00% $11,307,485 .93
There can be no assurance that $1.50 will be the consideration amount from new
investors, but is based on current market conditions of the stock.
PLAN OF DISTRIBUTION
SWARTZ INVESTMENT AGREEMENT
On May 19, 2000, we entered into an Investment Agreement with Swartz. The
Investment Agreement entitles us to issue and sell our common stock to Swartz
for up to an aggregate of $25 million from time to time during the three-year
period following the date of effectiveness of a registration statement covering
the resale of the shares to be put to Swartz. There is no assurance that all or
any portion of this $25,000,000 maximum will ever be reached. Each election by
us to sell stock to Swartz is referred to as a "put right".
Put rights. In order to invoke a put right, we must have an effective
registration statement on file with the SEC registering the resale of the shares
of common stock that may be issued as a consequence of the exercise of that put
right. We must also give at least 10, but not more than 20 business days advance
notice to Swartz of the date on which we intend to exercise a particular put
right and we must indicate the maximum number of shares of common stock that we
intend to sell to Swartz. At our option, we may also designate a maximum dollar
amount of common stock (not to exceed $2 million) that we will sell under the
put and/or a minimum purchase price per common share at which Swartz may
purchase shares under the put. The number of shares of common stock sold to
Swartz in a put may not exceed the lesser of: (i) 15% of the aggregate daily
reported trading volume of our common shares, excluding certain block trades of
our common stock during the twenty
18
business days after the date of our put notice, excluding trading days in which
the common stock trades below a minimum price, if any, that we specify in our
put notice: (ii) 15% of the aggregate daily reported trading volume of our
common shares during the twenty business days before the put date, excluding
certain block trades; or (iii) a number of shares that, when added to the number
of shares acquired by Swartz under the Investment Agreement during the thirty
one days preceding the put date, would exceed 9.99% of our total number of
shares of common stock outstanding (as calculated under Section 13(d) of the
Securities Exchange Act of 1934).
For each share of common stock purchased by Swartz, Swartz will pay us the
lesser of:
o The market price for such share, minus $.10 or
o 92% of the market price for the share; provided, however, that Swartz
may not pay us less than the designated minimum per share price, if
any, that we indicate in our notice.
Market price is defined as the lowest closing bid price for the common stock on
its principal market during the pricing period. The pricing period is defined as
the 20 business days immediately following the day we exercise the put right.
Warrants. Within five business days after the end of each pricing period, we are
required to issue and deliver to Swartz a warrant to purchase a number of shares
of common stock equal to 10% of the common shares issued to Swartz in the
applicable put. Each 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. Each warrant will be immediately exercisable and have a term
beginning on the date of issuance and ending five years thereafter.
Limitations and conditions precedent to our put rights. Swartz is not required
to acquire and pay for any shares of common stock with respect to any particular
put for which, between the date we give advance notice of an intended put and
the date the particular put closes:
o we have announced or implemented a stock split or combination of our
common stock;
o we have paid a common stock dividend;
o we have made a distribution of all or any portion of our assets or
evidences of indebtedness to the holders of our common stock; or
o we have consummated a major transaction, such as a sale of all or
substantially all of our assets or a merger or tender or exchange
offer that results in a change of control of NMMI.
Short sales. Swartz and its affiliates are prohibited from engaging in short
sales of our common stock unless Swartz has received a put notice and the amount
of shares involved in the short sale does not exceed the number of shares
specified in the put notice.
Cancellation of puts. We must cancel a particular put between the date of the
advance put notice and the last day of the pricing period if:
o we discover an undisclosed material fact relevant to Swartz's
investment decision;
19
o the registration statement registering resales of the common shares
becomes ineffective; or
o our shares are delisted from the then primary exchange.
If a put is canceled, it will continue to be effective, but the pricing period
for the put will terminate on the date notice of cancellation of the put is
given to Swartz. Because the pricing period will be shortened, the number of
shares Swartz will be required to purchase in the canceled put will be smaller
than it would have been had the put not been canceled.
Shareholder approval. Under the Investment Agreement, we may sell Swartz a
number of shares that is more than 20% of our shares outstanding on the date of
this prospectus. If we become listed on The NASDAQ Small Cap Market or NASDAQ
National Market, we may be required to obtain shareholder approval to issue some
or all of the shares to Swartz. As we are currently a Bulletin Board company, we
do not need shareholder approval.
Termination of Investment Agreement. We may terminate our right to initiate
further puts or terminate the Investment Agreement at any time by providing
Swartz with notice of such intention to terminate; however, any such termination
will not affect any other rights or obligations we have concerning the
Investment Agreement or any related agreement.
Restrictive covenants. During the term of the Investment Agreement and for a
period of 6 months after the Investment Agreement is terminated, we are
prohibited from engaging in certain transactions. These include the issuance of
any equity securities, or debt securities convertible into equity securities,
for cash in a private transaction without obtaining the prior written approval
of Swartz. We are also prohibited from entering into any private equity line
type agreements similar to the Investment Agreement without obtaining Swartz's
prior written approval.
Right of first refusal. Swartz has a right of first refusal, subject to another
first refusal obligation for which we are contractually obligated, to
participate in any private capital raising transaction of equity securities that
closes from the date of the Investment Agreement (July 9, 1999) through 6 months
after the Investment Agreement is terminated.
Swartz's right of indemnification. We have agreed to indemnify Swartz (including
its stockholders, officers, directors, employees, investors and agents) from all
liability and losses resulting from any misrepresentations or breaches we make
in connection with the Investment Agreement, our registration rights agreement,
other related agreements, or the registration statement.
Swartz is deemed to be "underwriters" within the meaning of Section 2(a)(11) of
the Securities Act any sale of these securities by Swartz will be subject to
prospectus delivery requirements.
20
ADDITIONAL SECURITIES BEING REGISTERED
We will receive no proceeds from the sale by the selling shareholders of the
additional securities being registered. We may receive up to $25 million of
proceeds from the sale of shares to Swartz and we may receive additional
proceeds from the sale to Swartz of shares issuable upon the exercise of any
warrants that may be exercised by Swartz. There is no assurance that all or any
portion of this $25,000,000 maximum will ever be reached.
LEGAL PROCEEDINGS
The Company is 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, is seeking to collect
payment of a promissory note in the principal amount of $50,000 plus interest
from February 1999 and attorney fees. January 24, 2001 the parties agreed to a
settlement by making periodic payments. The settlement was reduced to a judgment
on January 17, 2002 on which there is a balance owed of approximately $16,000.
This balance owed is recognized as a liability of the Company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
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 with NMMI, Mr. Thatch
dedicates his full time to his current position. He brings leadership, marketing
and strong management skills to the company.
21
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.
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 19%
of America, Inc.(2)
Officers and Directors 828,186 10%
(John "JT" Thatch)
(1) Based upon September 30, 2001 shareholder list, 8,181,861 outstanding
shares of common stock.
(2) Parker, Badolato and Gomes are officers, directors and majority
shareholders in Investment Management of America, Inc. and were officers
and directors of NMMI until January 2001.
DESCRIPTION OF SECURITIES
COMMON STOCK
Our articles of incorporation authorize us to issue up to 15,000,000 (post split
number of shares) shares of common stock, par value $.001 per share. Of the
15,000,000 shares of common stock authorized, as of September 30, 2001 there are
8,181,861 shares (post split number of shares) issued and outstanding.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors from funds legally available for such
dividends. We may not pay any dividends on the common stock until cumulative
dividends on the preferred stock have been paid in full. Currently there are no
preferred shares issued and outstanding. Upon liquidation, holders of shares of
common stock are entitled to a pro rata share in any distribution available to
holders of common stock. The holders of common stock have one vote per share on
each matter to be voted on by stockholders, but are not entitled to vote
cumulatively. Holders of common stock have no preemptive rights. All of the
outstanding shares of common stock are, and all of the shares of common stock
offered for resale in connection with the SB-2 registration statement will be,
validly issued, fully paid and non-assessable.
22
PREFERRED STOCK
Our articles of incorporation authorize us to issue up to 10,000,000 shares of
Preferred stock, par value $.001 per share. Currently there are no shares of
preferred stock issued and outstanding.
WARRANTS
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.
INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the securities offered hereby has been passed upon by Atlas
Pearlman, P. A., Attorneys at Law, Ft. Lauderdale, Florida.
The Condensed Balance Sheet, Condensed Statement of Operations and Condensed
Statement of Cash Flows as of September 30, 2001, for the period ended September
30, 2001 in this prospectus and the Balance Sheets, Statement of Operations,
Statement of Stockholders' (deficit) Equity and Statement of Cash Flows for the
period ending December 31, 2000 have been included herein in reliance on the
report of Richard J. Fuller, C.P.A., P.A., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.
We have filed herewith with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the securities offered under this prospectus.
This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement,
certain items of which are omitted in accordance with the rules and regulations
of the SEC. Statements contained in this prospectus as to the contents of any
contract or other documents are not necessarily complete and in each instance
reference is made to the copy of such contract or documents filed as an exhibit
to the registration statement, each such statement being qualified in all
respects by such reference and the exhibits and
23
schedules thereto. For further information regarding NMMI and the securities
offered under this prospectus, we refer you to the registration statement and
such exhibits and schedules which may be obtained from the SEC at its principal
office in Washington, D.C. upon payment of the fees prescribed by the SEC.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the federal securities
laws as may be permitted to directors and controlling persons of the issuer, the
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the law
and is, therefore, unenforceable. In the event a demand for indemnification is
made, the issuer will, unless in the opinion of its counsel that the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the law and will be governed by the final adjudication of
such issue.
ORGANIZATION WITHIN LAST FIVE YEARS
None.
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
24
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
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
25
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 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.
26
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.
NMMI signed a one-year with option for eight additional one-year terms marketing
agreement with Carson-Jensen-Anderson Enterprises, Inc. d/b/a EyeCatcher
Marketing Company through which agreement the Illumisign-Eyecatcher display
boards were to be marketed throughout the 50 United States. Effective May 10,
2001 NMMI and EyeCatcher Marketing Company reached an agreement whereby their
contractual relationship was terminated and NMMI received some of the assets of
EyeCatcher Marketing Company. The major advantage to NMMI of this settlement was
the cancellation of the marketing agreement that now allows NMMI to do all
marketing in-house. All marketing is now under the direct supervision and
control of the Company which is now equipped to oversee the marketing function.
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.
27
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 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
Since inception, we have funded our operations and investments in equipment
through cash from equity financings and borrowing from related parties; however,
there is no assurance that there will be proceeds from these sources in the
future.
Our cash and cash equivalents were $202 at September 30, 2001 with a comparative
increase for the prior comparable period. This is indicative to a lack of
financing activity during 2001. Generally, the Company has thus far been funded
by proceeds from common stock transactions that are not necessarily isolated
transactions. A compilation of these stock transactions appears in the Statement
of Cash Flows and Note 4 (Related Party Transactions) and Note 6 (Equity
Transactions) and the Condensed Statement of Cash Flows and Note 3 (Equity
Transactions) and Note 4 (Fair Value Information).
28
The Company is intending to receive additional financing through the Swartz
equity line. 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. See
the section above entitled "Swartz Investment Agreement". For more details
relating to this equity line see the section above entitled Plan of
Distribution, Swartz Investment Agreement.
RESULTS OF OPERATIONS
Income
------
The revenue for the calendar year 1999, $49,176, when compared to calendar year
2000, $149,400 shows an increase of approximately 204 percent. For the nine
months ending September 30, 2001 when compared to the same period in 2000 the
revenue has increased from $102,864 to $229,182, a 123 percent increase. 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 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
$577,025 (153%) for the 2000 calendar year compared to calendar 1999 and an
increase of $418,026 (81%) for the nine months ended September 30, 2001 compared
to the same period of 2000. This increase is due primarily to the Company
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 decreased by $31,795 from 1999 to 2000 (33%)and continues to
remain at approximately $48,000 for the first nine months of 2001. This interest
expense decreased primarily as a result of the Company negotiating equity
financing for debt transactions.
Depreciation and Amortization
-----------------------------
Depreciation and Amortization increased dramatically from 1999 to 2000, an
increase of $117,822 (511%) and an increase of 279% for the nine months of 2000
compared to the same term of 2001. 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
Furniture, Fixtures and Equipment. This change accounts for the marked increase
in the amounts shown in this line item from 1999 to 2000. The increase shown
from the
29
nine months of 2000 to the same term of 2001 is due primarily to an increase in
the number of machines and depreciable equipment purchase by the Company.
Total Costs and Expenses
------------------------
The Total Costs and Expenses have increased by $663,052, an increase of 134%,
from 1999 to 2000 and an increase of $495,584 (84%) for the nine months of 2000
compared to the same term of 2001. The following discussion describes
management's analysis of the salient issues relating to these Costs and
Expenses.
Basic and Fully Diluted Loss Per Common Share
---------------------------------------------
The Basic and Fully Diluted Loss Per Common Share difference from 1999 to 2000
calendar years is a 33% increase and the same distinction for the nine months of
2000 compared to nine months of 2001 is a 19% increase. 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. A major portion of the Costs and Expenses are
non-reoccurring costs. 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 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 notwithstanding the 33% ($0.01) increase in the Basic and
Fully Diluted Loss Per Common Share.
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
30
not repairable on-site will be repaired in-house at the Safety Harbor, Florida
facility.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was originally incorporated April 21, 1998 in Colorado under the
name New Millennium Media International, Inc. April 27, 1998 Progressive Mailer
Corp., a Florida corporation, merged into NMMI. August 31, 1999 Unergi, Inc., a
Nevada corporation, ("Unergi") merged into NMMI through a wholly owned
subsidiary of NMMI, see above the section entitled Description of Business,
Brief History. The Unergi merger was to obtain certain goodwill subsequent to
which time Unergi was liquidated. The valuation was determined by, in part, NMMI
stock and certain debt. This was a forward acquisition with the surviving
company being NMMI. Unergi shareholders received 70% of NMMI shares. As a part
of this merger, two founders and major shareholders of Unergi, Mark Western and
Cole Leary, were to receive a total of 3,000,000 shares of NMMI registered
common stock. In anticipation of a buy-back of these shares from the two
individuals, NMMI conveyed the shares intended for these two individuals to
another individual. NMMI failed to consummate the buy-back of these shares from
the two individuals and consequently found it necessary to acquire 3,000,000
shares of registered common stock to satisfy the obligation to the two
individuals. Toward this objective NMMI exchanged with Investment Management of
America, Inc. (hereafter "IMA") 3,000,000 shares of NMMI's Series A Preferred
stock in exchange for 3,000,000 shares of common stock owned by IMA with the
understanding that the 3,000,000 shares of Series A Preferred stock will be
granted voting rights and be convertible on a 1:1 ratio for shares of registered
common stock which common stock are included in this registration. The
"re-exchange" of these shares has occurred and NMMI replaced the 3,000,000 IMA
Series A Preferred shares with 3,000,000 shares of registered common stock that
are included in this registration. These transactions occurred pre-split and the
3,000,000 shares of common stock are included in this registration as 600,000
shares of post-split common stock.
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 328,186 shares of restricted common stock under this option.
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. The table above, PRICE
RANGE OF COMMON STOCK, sets forth the high and low bid prices of our common
stock for each quarter for the four quarters of 1999, 2000 and 2001. As of
September 30, 2001 there are in excess of 500 beneficial holders of record of
our common stock.
31
DIVIDEND POLICY
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.
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, 2001 120,000 -0- 10,000 10% of all Stock option Per month:
Pres./CEO expenses issued to be 500 medical
common stock determined 500 car
by Board 250 celphone
---------------------------------------------------------------------------------------------------------
DIRECTOR COMPENSATION
The NMMI directors receive no compensation.
EMPLOYMENT AGREEMENTS
NMMI has one written employment agreement, John Thatch, President and CEO, see
section entitled Certain Relationships and Related Transactions, above.
32
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
REVIEWED FINANCIAL STATEMENTS
Condensed Balance Sheet for September 30, 2001 and
December 31, 2000 F-35
Condensed Statements of Operations for quarter and nine
months ended September 30, 2001 and for quarter and
nine months ended September 30, 2000 F-36
Condensed Statements of Cash Flows for quarter and
nine months ended September 30,2001 and for quarter
and nine months ended September 30, 2000 F-37
Notes to the Condensed Financial Statements,
for quarter ended September 30, 2001 F-38
AUDITED FINANCIAL STATEMENTS
Report of Richard J. Fuller, C.P.A., P.A. F-40
Balance Sheet for December 31, 1999 and December 31,2000 F-41
Statements of Operations for year ended December
31, 1999 and year ended December 31, 2000 F-42
Statement of Stockholders' Deficit for period from
January 1, 1999 through December 31, 2000 F-43
Statements of Cash Flows for year ended December
31, 1999, year ended December 31, 2000 F-44
Notes to Financial Statements, December 31, 1999 and 2000 F-45
33
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED BALANCE SHEET
DECEMBER 31,
SEPTEMBER 30, 2000
2001 (AUDITED)
(UNAUDITED) (RESTATED)
----------- -----------
ASSETS
Current Assets:
Cash $ 202 $ --
Accounts Receivable 52,799 16,636
Inventories 3,255 3,255
Prepaid Assets 11,472 9,096
----------- -----------
Total Current Assets 67,728 28,987
----------- -----------
Furniture and Equipment-Net 1,103,010 924,148
----------- -----------
Other Assets
Other Assets 110,304 --
Goodwill, net of accumulated amortization of
$101,687 and $67,793, respectively, 2001 and 2000 576,407 610,301
----------- -----------
Total Other Assets 686,711 610,301
----------- -----------
$ 1,857,449 $ 1,563,436
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 109,897 $ 155,118
Notes payable 417,422 --
Related payables 801,949 658,110
----------- -----------
Total Current Liabilities 1,329,268 813,228
----------- -----------
Long-term Liabilities -- --
Stockholders' Equity
Common stock, par value $.001; 15,000,000 shares
authorized; 8,181,861 and 5,690,123 shares
issued and outstanding, respectively, 2001 and 2000 8,182 5,690
Common stock warrants; 242,274 issued and
outstanding; exercisable at $1.50 69,290 57,200
Common stock options; 50,000 issued and outstanding;
exercisable at $.005 per option 2,654 --
Preferred stock, par value $.001; shares authorized,
10,000,000 no shares issued and outstanding -- --
Additional paid in capital 5,299,303 2,769,445
Accumulated Deficit (2,941,248) (2,082,127)
----------- -----------
2,438,181 750,208
Less common stock subscribed (1,910,000) --
----------- -----------
Total Stockholders' Equity 528,181 750,208
----------- -----------
$ 1,857,449 $ 1,563,436
=========== ===========
34
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE FOR THE
FOR THE QUARTER FOR THE NINE MONTHS
QUARTER ENDED NINE MONTHS ENDED
ENDED 9/30/00 ENDED 9/30/00
9/30/01 (RESTATED) 9/30/01 (RESTATED)
----------- ----------- ----------- -----------
Income $ 10,441 $ 101,820 $ 229,182 $ 102,864
Costs and Expenses:
General and administrative $ 372,268 $ 158,382 $ 934,997 $ 516,971
Interest expense 21,216 16,000 47,959 48,000
Depreciation and amortization 35,116 15,719 105,348 27,785
----------- ----------- ----------- -----------
Total costs and expenses 428,600 190,101 1,088,304 592,756
----------- ----------- ----------- -----------
Loss from Operations (418,159) (88,281) (859,122) (489,892)
----------- ----------- ----------- -----------
Net Loss $ (418,159) $ (88,281) $ (859,122) $ (489,892)
=========== =========== =========== ===========
Basic and Fully Diluted Loss Per Common Share $ (0.055) $ (0.019) $ (0.124) $ (0.104)
=========== =========== =========== ===========
Weighted Average Number of Shares Outstanding 7,649,361 4,615,892 6,935,992 4,717,934
=========== =========== =========== ===========
35
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE FOR THE
FOR THE QUARTER FOR THE NINE MONTHS
QUARTER ENDED NINE MONTHS ENDED
ENDED 9/30/00 ENDED 9/30/00
9/30/01 (RESTATED) 9/30/01 (RESTATED)
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(418,159) $ (88,281) $(859,122) $(489,892)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 35,116 15,719 105,348 27,785
Fair value of shares issued for services 15,000 -- 91,685 2,500
Fair value of warrants / options issued for services 17,409 -- 17,409 57,200
(Increase) decrease in accounts receivable 78,776 (39,704) (36,163) (39,704)
(Increase) decrease in inventories -- 18,971 -- 221
(Increase) decrease in prepaid expenses (500) (47,859) (2,376) (54,074)
(Increase) decrease in other assets (110,304) -- (110,304) --
Increase (decrease) in accounts payable -- -- -- --
and accrued expenses 129,123 11,905 209,039 24,279
--------- --------- --------- ---------
Net cash provided by (used in) operating activities (253,539) (129,249) (584,484) (471,685)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (239,547) (295) (250,314) (5,378)
--------- --------- --------- ---------
Net provided by (used in) investing activities (239,547) (295) (250,314) (5,378)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - Related 10,000 -- 320,000 15,000
Proceeds from common stock transactions 465,000 -- 515,000 460,000
--------- --------- --------- ---------
Net cash provided by (used in) financing activities 475,000 -- 835,000 475,000
--------- --------- --------- ---------
Increase (Decrease) in cash and cash equivalents $ (18,086) $(129,544) $ 202 $ (2,063)
Cash and cash equivalents at beginning of period 18,288 129,544 -- 2,063
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 202 $ -- $ 202 $ --
========= ========= ========= =========
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 goodwill (500,000 shares for Scovel
Management, Inc. in accordance with FAS 123 $ -- $ -- $ -- $ 500
Fair value of services rendered (20,000 shares)
for amounts previously owed to secretary/treasurer 13,000 -- 13,000 --
in accordance with FAS 123
Fair value of equipment (LED truck, $450,000 net of debt
assumed of $107,000; 200,000 common stock shares) -- -- -- 343,000
36
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Basis of Presentation
--------------------------------------
In the opinion of management, all adjustments necessary to a fair statement of
the results for the unaudited three and nine month periods have been made. The
accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information in accordance with rules and regulations of the Securities and
Exchange Commission, including Rule 301(b) of Regulation SB and instructions to
Form 10-Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and should be read in conjunction with the Company's Annual Report
(Form 10-KSB) for the year ended December 31, 2000. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations
for the nine months ended September 31, 2001 are not necessarily indicative of
the operating results for the full fiscal year or any future period.
2. Going Concern Uncertainty
-------------------------
The financial statements are presented assuming the Company will continue as a
going concern. The Company has incurred recurring operating losses and negative
cash flows and has negative working capital. The Company has financed itself
primarily through the sale of its stock and related party borrowings. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
There can be no assurance that the Company will be successful in implementing
its plans, or if such plans are implemented, that the Company will achieve its
goals.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments to
reflect the possible future effect on the recoverability and classification of
assets or the amount and classification of liabilities that might result from
the outcome of this uncertainty.
3. Equity Transactions
-------------------
As approved at a Special Meeting of Stockholders on May 7, 2001, the Company
reverse split its common stock on a basis of 1 for 5 with a resulting decrease
in the number of common stock authorized to 15,000,000 shares. The Company has
restated its financial statements to reflect this common stock reverse split.
On June 4, 2001, the Company issued and held stock for consulting services to be
rendered to the Company (500,000 shares at $1.00 and 500,000 shares at $.75). As
of September 30, 2001 $410,000 remains. Also on July 12, 2001, the Company
issued and held 1,000,000 shares to its' investment banker, Swartz Private
Equity at $1.50 per share.
37
4. Restatement Information and Stock-Based Information
---------------------------------------------------
Fair value of shares issued based upon value of services rendered as indicated
in accordance with FASB No. 123 as restated consists of:
NO. OF QUARTER ENDED NINE MONTHS ENDED
------------------- -------------------
DESCRIPTION SHARES 9/30/01 9/30/00 9/30/01 9/30/00
--------------------------------------------------- ------- -------- -------- -------- --------
Shares issued to John D. Thatch for $.005
per share in consideration of accepting officer/
stockholder employment - net of rescission 500,000 $ -- $ -- $ -- $ 2,500
Shares issued to San Rafael Consulting Group
for $.25 per share for consulting services 600 -- -- 150 --
Shares issued to E-Vision LED Inc. for $.25
per share for consulting services 6,140 -- 1,535 --
Shares issued to Tim Daley for $.25
per share for consulting services 200,000 -- -- 50,000 --
Shares issued to Ray Oliver for $.25
per share for consulting services 100,000 -- -- 25,000 --
Shares issued to Joseph Maenza for consideration
of extension of payment at $1.00 15,000 15,000 15,000
-------- -------- -------- --------
$ 15,000 $ -- $ 91,685 $ 2,500
======== ======== ======== ========
38
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, 1999 and 2000, 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, 1999 and 2000 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, 1999 and 2000. 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 20, 2001
39
NEW MILLENNIUM MEDIA INTERNATIONAL, INC
BALANCE SHEETS
DECEMBER 31, 1999 AND DECEMBER 31, 2000
2000
1999 (Restated)
----------- -----------
ASSETS
Current Assets
Cash $ 2,063 $ --
Accounts receivable -- 16,636
Inventories 3,379 3,255
Prepaid expenses -- 9,096
----------- -----------
Total Current Assets 5,442 28,987
----------- -----------
Furniture and Equipment
Furniture, fixtures and equipment,net 549,447 924,148
----------- -----------
Other Asssets
Goodwill, net 655,007 610,301
Other intangibles 417 --
----------- -----------
Total Other Assets 655,424 610,301
----------- -----------
$ 1,210,313 $ 1,563,436
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 85,235 $ 81,556
Accrued expenses payable 129,289 73,562
Related payables 1,596,012 658,110
----------- -----------
Total Current Liabilities 1,810,536 813,228
----------- -----------
Long-term Liabilities -- --
Stockholders' (Deficit) Equity
Common stock, par value $.001; 25,000,000 and 75,000,000
shares authorized, 24,099,881 and 28,440,614 shares issued
and outstanding, respectively, 1999 and 2000 24,100 28,451
Common stock warrants (1,000,000 issued and outstanding;
exercisable at $.30 expiring March 21, 2005) -- 57,200
Preferred stock, par value $.001; shares authorized, 10,000,000
no shares issued and outstanding -- --
Additional paid in capital 448,991 2,746,684
Deficit (1,073,314) (2,082,127)
----------- -----------
Total Stockholders' (Deficit) Equity (600,223) 750,208
----------- -----------
$ 1,210,313 $ 1,563,436
=========== ===========
40
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
2000
1999 (RESTATED)
------------ ------------
Income $ 49,176 $ 149,400
Costs and Expenses:
General and administrative $ 141,847 $ 798,732
General and administrative -related 234,860 155,000
Interest expense - related 95,382 63,587
Depreciation and amortization 23,072 140,894
------------ ------------
Total costs and expenses 495,161 1,158,213
------------ ------------
Loss from Operations (445,985) (1,008,813)
------------ ------------
Net Loss $ (445,985) $ (1,008,813)
============ ============
Basic and Diluted Loss Per Common Share $ (0.03) $ (0.04)
============ ============
Weighted average common shares outstanding 15,559,940 26,275,250
============ ============
41
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH DECEMBER 31, 2000
COMMON STOCK COMMON ADDITIONAL TOTAL
-------------------------- STOCK PAID - IN STOCKHOLDERS'
SHARES AMOUNT WARRANTS CAPITAL DEFICIT EQUITY
----------- ----------- ----------- ----------- ----------- -----------
Balance, January 1, 1999 7,020,000 $ 7,020 $ 0 $ 403,115 $ (627,329) $ (217,194)
----------- ----------- ----------- ----------- ----------- -----------
Fair value of shares issued to Unergi 16,566,667 16,567 -- -- 16,567
Shares issued for cash 513,214 513 45,876 -- 46,389
Net loss for the period ended
December 31, 1999 -- -- -- -- (445,985) (445,985)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 24,099,881 $ 24,100 $ 0 $ 448,991 $(1,073,314) $ (600,223)
Fair value of shares issued for services
to officers - net of rescission (1,020,419) (1020) 3,520 -- 2,500
Fair value of 1,000,000 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 3,641,152 3,641 1,487,403 -- 1,491,044
Fair value of equipment (LED truck
$450,000) net of debt ($107,000) 200,000 200 342,800 -- 343,000
Fair value of stock issued for goodwill
of Scovel Management, Inc. 500,000 500 -- 500
Proceeds of stock issued for cash 1,030,000 1,030 463,970 -- 465,000
Net loss for the period ended
December 31, 2000 -- -- -- -- (1,008,813) (1,008,813)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 - (Restated) 28,450,614 $ 28,451 $ 57,200 $ 2,746,684 $(2,082,127) $ 750,208
=========== =========== =========== =========== =========== ===========
42
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
1999 2000
(RESTATED) (RESTATED)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (445,985) $(1,008,813)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 23,072 140,894
Fair value of shares issued for services of officers - net of recission -- 2,500
Fair value of warrants issued to investment bankers -- 57,200
Loss on disposition of fixed assets 5,891 --
(Increase) decrease in accounts receivable -- (16,636)
(Increase) decrease in inventories (3,379) (124)
(Increase) decrease in prepaid expenses -- (9,096)
Increase (decrease) in accounts payable and accrued expenses 139,337 (41,934)
Increase (decrease) in related parties payable 296,033 428,918
----------- -----------
Net cash provided by (used in) operating activities 14,969 (447,091)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (66,106) (19,972)
----------- -----------
Net provided by (used in) investing activities (66,106) (19,972)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock transactions 46,389 465,000
----------- -----------
Net cash provided by (used in) financing activities 46,389 465,000
----------- -----------
Increase (Decrease) in cash and cash equivalents $ (4,748) $ (2,063)
Cash and cash equivalents at beginning of period 6,811 2,063
----------- -----------
Cash and cash equivalents at end of period $ 2,063 $ --
=========== ===========
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 common stock (16,566,667 shares) issued for goodwill
of Unergi, Inc. ($677,594 net of debt assumed of $661,027) 16,567 --
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
43
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
1. Organization and summary of significant accounting policies
-----------------------------------------------------------
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows.
Nature of Business
------------------
The Company is in the business of developing and marketing advertising space in
special movable advertising display machines and LED display boards. The Company
provides two types of visual advertising including movable display boards and
LED display boards. NMMI sells advertising space while retaining ownership of
the boards.
The Company is no longer considered to be in the development stage for 2000. In
prior years, the Company had been in the development stage.
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 these 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.
44
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
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 allocate resources and in assessing performance. The Company has
evaluated this SFAS and does not believe it is applicable at this time.
Intangible assets
-----------------
In accordance with SOP 98-5, the Company currently expenses startup-up costs
including organization costs as incurred. Organization costs incurred prior to
the effective date of SOP 98-5, were amortized using the straight-line method
over their estimated useful lives of five years and are stated at cost less
accumulated amortization.
Under the purchase method of accounting, tangible and identifiable intangible
assets acquired and liabilities assumed are recorded at their estimated fair
values. The Company classifies 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.
The Company reviews for the impairment of long-lived assets and certain
identifiable intangibles annually. No such impairment losses have been
identified by the Company for the years presented.
45
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Inventories
-----------
Inventories consist primarily of supplies related to advertising machines and
are carried at the lower of cost (first-in, first-out) or market. Once the
advertising machines are available for rental and placed in service,
depreciation is recognized. During the year, the advertising machines of
$545,483 included in inventory for 1999 were removed from inventory and made
available for lease. When placed in boards available for lease, they are no
longer included in inventories. Starting in 2000, the Company's policy is to
lease all boards and they are included in furniture, fixtures and equipment.
Furniture and equipment
-----------------------
Furniture and equipment is stated at cost and depreciated using the
straight-line method, over the estimated useful lives of five to seven years.
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.
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 Equivalents
----------------
The Company considers all highly liquid debt instruments purchased with maturity
of three months or less to be cash equivalents.
46
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Concentrations of Credit Risk
-----------------------------
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash. The Company places its cash with high
quality financial institutions. At times during the year, the balance at any one
financial institution may exceed FDIC limits.
During the year, the Company negotiated the ability to manufacture the
advertising machines previously supplied principally by one foreign vendor.
2. Furniture, fixtures and equipment
---------------------------------
Furniture, fixtures and equipment is summarized as follows:
1999 2000
----------- -----------
Boards available for lease $ 545,483 $ 545,483
Equipment -- 468,730
Furniture & fixtures 4,249 5,490
----------- -----------
549,732 1,019,703
Less accumulated depreciation (285) (95,555)
----------- -----------
Net $ 549,447 $ 924,148
=========== ===========
Furniture, fixtures and equipment are depreciated over an estimated useful life
of 7 years using the straight-line method of depreciation. Once boards are
available for lease, they continue to be depreciated even if not under contract
for a period of time.
In regards to equipment, the acquisition of the LED truck is included at fair
value of the truck ($450,000) which was more reliably measurable and therefore
was the basis used in accordance with FAS 123.
3. Goodwill
On August 31, 1999 the Company acquired all the outstanding stock of Unergi,
Inc. In accordance with APB 16, the following is disclosed. The acquisition was
accounted for as a purchase. Consideration for the purchase was the issuance of
16,566,667 shares of $.001 par value stock of the Company and the assumption of
debt in the amount of $661,027. Because the sum of the fair value of tangible
and identifiable intangible assets was negligible, the cost of Unergi has been
recorded as goodwill. No other identifiable assets or operations were received.
The purchase price exceeded the fair value of the net assets acquired by
$677,594 that has been recorded as goodwill in accordance with FAS 123 and, in
accordance with APB 17 has been amortized over 15 years using the straight-line
method.
47
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
On March 9, 2000, the Company acquired 100% of the issued and outstanding common
stock of Scovel, Inc. in exchange for 500,000 shares of the Company in order to
obtain goodwill of Scovel valued at $500 in accordance with FASB No. 123.
Goodwill consists of the following:
1999 2000
--------- ---------
Goodwill in connection with acquisition
of Fair value of stock in exchange
for Unergi, Inc. accounted for as a
purchase with 16,566,667 common
shares issued at $.001 par value
given limited trading and
marketability of approximately 70%
of stock ($16,567) and the
assumption of debt of $661,027. $ 677,594 $ 677,594
Fair value of stock in exchange for
Scovel Management, Inc. accounted
for as a purchase with 500,000
common shares issued at $.001 par
value given limited trading value
of stock and agreed upon value of
shell company (Scovel) whose
Intangible value included listing
on OTC BB -- 500
--------- ---------
677,594 678,094
Less accumulated amortization (22,587) (67,793)
--------- ---------
Net $ 655,007 $ 610,301
========= =========
All assets were intangible with goodwill providing value in accordance with APB
No. 16 amortized over 15 years. No other assets were acquired other than the
fair market value adjustment of goodwill determined based upon fair value of
debt assumed and par value of stock given the limited trading market for NMMI
stock.
48
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
4. Related party transactions
--------------------------
Related party payables consists of the following:
1999 2000
---------- ----------
Note due stockholder/former officer at 10% $ 641,152 $ --
Accounts payable to stockholders, non-interest bearing 954,860 249,860
$100,000 convertible note payable, with interest accrued
@10%, (convertible $1.00 of debt into common stock) -- 102,500
$125,000 convertible note payable, with interest accrued
@ 15%, secured by equipment (convertible $1.00 of debt
into common stock) -- 143,750
$162,000 convertible note payable, with interest accrued
@ 8%, to officer/stockholder (convertible $.10 of debt
into preferred stock) -- 162,000
---------- ----------
$1,596,012 $ 658,110
========== ==========
During the year 2000, the Company issued common stock at fair value in
settlement of certain debt owed to stockholders and a former officer. The
Company issued 641,152 shares in settlement of the debt owed to a
stockholder/officer, in the principal amount of $641,152 plus accrued interest
of $154,204 totaling $795,356. Further, the Company issued 670,000 shares in
settlement of the debt owed to a stockholder, in the principal amount of
$670,000 plus settlement charges of $25,688 totaling $695,688. Fair value of
stock issued was book value of the debt relieved plus accrued interest and
settlement charges totaling $1,491,044 in accordance with FAS 123. Excess of par
value in the amount of $1,487,403 was recorded as additional paid in capital.
Also, during the year 2000, the Company was successful in a lawsuit against
prior officers of the Company to rescind 3,520,419 shares. No gain or loss was
recognized on this rescission and the Company issued 2,500,000 shares to its
present officer/director. Fair value of the common stock issued has been
reported net of rescission under FAS 123.
The Company disputes a payable to a prior officer, but has recorded the debt for
financial statement purposes as a related party liability in the amount of
$249,860 based upon the full amount of the prior officer's demand.
49
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
5. Income Taxes
------------
The Company has available net operating loss carryforwards of $1,950,000 that
expire through 2020.
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:
1999 2000
----------- -----------
DEFERRED TAX ASSETS:
NET OPERATING LOSS CARRYFORWARDS $ 870,000 $ 1,950,000
VALUATION ALLOWANCE FOR DEFERRED TAX ASSET (870,000) (1,950,000)
----------- -----------
$ -- $ --
=========== ===========
6. Equity Transactions
-------------------
On August 31, 1999, pursuant to an Agreement and Plan of merger, the Company
acquired all the issued and outstanding stock of Unergi, Inc. (a Nevada company)
in exchange for fair value of 16,566,667 shares of the Company's $.001 par value
common stock. Unergi was liquidated and the goodwill of $677,594 was capitalized
and amortized over 15 years.
On March 9, 2000, the Company acquired 100% of the issued and outstanding common
stock of Scovel, Inc. (a Delaware company) office in the amount of $500 in
exchange for fair value of 500,000 shares of the Company.
On May 19, 2000, the Company entered into an agreement with Swartz Private
Equity (Swartz) 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. As part of this agreement, and in accordance with FAS
123, the following information is disclosed. The Company has issued 1,000,000
initial commitment warrants, expiring March 21, 2005 to purchase 1,000,000
shares of the Company's common stock. The initial exercise price of these
commitment warrants is $.30 per share of common stock. 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 at the grant date (as to 250,000 warrants the grant
date of March 21, 2000, 500,000 warrants as of 10 days subsequent and as to
250,000 warrants upon the effectiveness of the Registration Statement) to be
$57,200 that was charged to expense in 2000.
50
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Equity Transactions - Cont'd
----------------------------
of commitment warrants issued to be $57,200 that is charged to expense in 2000.
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, 2000, 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.
51
8. Restatement Information
-----------------------
Information concerning restatement of net loss in accordance with APB Opinion # 20:
PER SHARE
2000 AMOUNTS
----------- -----------
Net loss as previously reported $ (946,613) $ (0.04)
Fair value of common stock warrants (1,000,000 issued and outstanding;
exercisable at $.30 expiring March 21, 2005 57,200 --
Common stock, 10,000 shares subscribed at $.50 per share not previously
reported 5,000 --
----------- -----------
Net Increase in loss previously reported 62,200 --
----------- -----------
Net loss as restated $(1,008,813) $ (0.04)
=========== ===========
52
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 7-109-101 et seq. of the Colorado Business Corporation Act, as amended
from time to time provides that a corporation may indemnify directors, officers,
employees or agents of the corporation against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement in connection with
threatened, pending or completed actions, suits or proceedings brought against
them by reason of their service in such capacity, including, under certain
circumstances, actions brought by or in the right of the corporation, and may
purchase insurance or make other financial arrangements on behalf of any such
persons for any such liability.
The Company's By-laws are silent regarding the issue of corporate
indemnification of NMMI officers, directors, agents and employees.
Article VIII of the Company's Articles of Incorporation provides for
indemnification and advance expenses to a director or officer in connection with
a proceeding to the fullest extent permitted or required by and in accordance
with the Colorado Business Corporation Act. This Article permits the
Corporation, as determined by the Board of Directors, in a specific instance or
by resolution of general application to indemnify and advance expenses to an
employee, fiduciary or agent in connection with a proceeding to the extent
permitted or required by and in accordance with the Colorado Business
Corporation Act.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated amounts of all expenses
payable by the registrant in connection with the Post Effective Amendment to the
SB-2 Registration Statement The expenses relating to the filing of the SB-2
Registration Statement are stated in the appropriate schedule in the SB-2
Registration Statement that was filed.
SEC filing fee .................................................. $ paid
Legal fees ...................................................... 3,000.00
Accounting fees and expenses .................................... 5,000.00
Miscellaneous ................................................... 3,066.00
-----------
Total ...................................................... $ 11,066.00
===========
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RECENT SALES OF UNREGISTERED SECURITIES
In December 1998 the company sold to HNC Associates (an accredited investor)
100,000 shares of common stock at a price of $0.40 per share. The company relied
on Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transaction did not involve a public offering.
In February 2000 the company issued an option to purchase 500,000 shares of
common stock, exercisable for two years at a price of $1.00 per share to William
H. Simon in connection with consulting services and negotiations involving
E-Vision LED, Inc. The company relied on Section 4 (2) of the Securities Act of
1933 as the basis for an exemption from registration because the transaction did
not involve a public offering.
In February 2000 the Company sold 400,000 shares of common stock at a price of
$.50 per share to one individual who is an accredited investor. The Company
relied on Rule 506 of Regulation D and Section 4(2) of the Securities Act of
1933 as the basis for an exemption from registration because the transactions
did not involve any public offering.
In March 2000 the company issued 500,000 shares of common stock to Gerry Ghini
in connection with the merger of Scovel Corporation. The company relied on
Section 4 (2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transaction did not involve a public offering.
In March 2000 the company issued an option to purchase 100,000 shares of common
stock, exercisable for two years at a price of $2.25 per share to Eric Kennedy
in connection with consulting services provided to the company. The company
relied on Section 4 (2) of the Securities Act of 1933 as the basis for an
exemption from registration because the transaction did not involve a public
offering.
In March 2000 the Company issued warrants to purchase 1,000,000 shares of common
stock, exercisable for five years at a per share price equal to the lowest
closing bid price for the five trading days immediately preceding March 6, 2000
with reset adjustments to Swartz Private Equity, LLC in consideration for
Swartz's commitment to enter into an investment agreement for the purchase of up
to $25,000,000 of common stock of the Company. There is no assurance that all or
any portion of this $25,000,000 maximum will ever be reached.
In March, April and May 2000 the Company sold an aggregate of 520,000 shares of
common stock at a price of $.50 per share to twenty individuals, all of whom
were accredited investors. The Company relied on Rule 506 of Regulation D and
Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transactions did not involve any public offering.
54
EXHIBITS INDEX
NOTE: ALL LISTED EXHIBITS HAVE PREVIOUSLY BEEN FILED.
3.1 Articles of Incorporation of NMMI as amended.
3.1(a) Designation of Preferred Stock.
3.2 Bylaws of NMMI.
4.1 Investment Agreement dated May 19, 2000 by and between the Registrant
and Swartz Private Equity, LLC.
4.2 Form of "Commitment Warrant" to Swartz Private Equity, LLC for the
purchase of 1,000,000 shares common stock in connection with the
offering of securities.
4.3 Form of "Purchase Warrant" to purchase common stock issued to Swartz
Private Equity, LLC from time to time in connection with the offering
of securities.
4.4 Warrant Side-Agreement by and between the Registrant and Swartz
Private Equity, LLC.
4.5 Registration Rights Agreement between NMMI and Swartz Private Equity,
LLC related to the registration of the common stock to be sold
pursuant to the Swartz Investment Agreement.
4.6 Letter Agreement between NMMI and Swartz Institutional Finance
relating to the private placement of up to two million dollars of
common stock.
4.7 Employees Stock Option Plan adopted by board of Directors resolution
dated June 26, 2000.
5.1 Legal Opinion of Atlas Pearlman, P.A., Suite 1700, 350 East Las Olas
Boulevard, Ft. Lauderdale, Florida 33301.
10.1 Investment Management of America, Inc. contract with NMMI regarding
the 3,000,000 shares of Preferred stock.
10.2 Agreement of Merger effective April 30, 1998 between Progressive
Mailer Corporation and NMMI in which NMMI was the survivor
corporation.
10.3 Asset Purchase Agreement dated April 8, 1998 whereby PMC acquired the
assets of LuFam Technologies, Inc.
10.4 Amended and Restated Agreement and Plan of Merger dated August 31,
1999 between NMMI and Unergi, Inc. in which NMMI was the survivor
corporation.
10.5 Agreement and Plan of Merger dated March 9, 2000 between NMMI and
Scovel Corporation wherein NMMI acquired all of the shares of stock of
Scovel.
10.6 Exclusive Distribution Contract with Multiadd.
55
10.7 Agreement with E-Vision Technologies, LLC.
10.9 Marketing Agreement dated May 10, 2000 wherein NMMI grants to
Carson-Jensen-Anderson Enterprises, Inc. marketing rights for the
Illumisign-Eyecatcher display boards.
10.9(a) Compromise and Settlement Agreement between Carson-Jensen-Anderson,
Inc. terminating the marketing rights agreement for the
Illumisign-Eyecatcher display boards.
10.10 Office Lease Agreement between St. James Properties, Inc. and NMMI.
10.11 Office Lease Agreement between Abdi Boozar-Jomehri d/b/a Safety Harbor
Centre and NMMI.
21.1 List of Subsidiaries.
23.1 Consent of Legal Counsel (included in Exhibit 5.1).
23.2 Consent of Independent Auditors.
27.1 Financial Data Schedule.
99.1 Trademark "registration pending" documentation by the United States
Department of Commerce, Patent and Trademark Office for the name
"Illumisign-EyeCatcher" for electric sign products.
99.2 Employment Agreement between Registrant and John Thatch,
President/CEO.
UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
56
"Calculation of Registration Fee" table in the effective
registration statement;
(iii)To include any additional or changed material information on the
plan of distribution;
(2) For determining liability under the Securities Act of 1933, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b) (1)
or (4) or 497 (h) under the Securities Act as part of this
registration statement as of the time the Commission declared it
effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
57
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Post Effective
Registration Statement to be signed on its behalf by the undersigned in the City
of Safety Harbor, Florida on March 18, 2002.
New Millennium Media International, Inc.
By: /s/ John Thatch
--------------------------
John Thatch, President/CEO
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and as of
the dates indicated.
Signature Title Date
------------------ ------------------- ----------------
/s/ John Thatch President and Chief March 18, 2002
------------------ Executive Officer
John Thatch (Principal Executive
Officer)
58