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EX-32 - EXHIBIT 32 - NEXT GENERATION MANAGEMENT CORP. | ex32.htm |
EX-31.2 - EXHIBIT 31.2 - NEXT GENERATION MANAGEMENT CORP. | ex31-2.htm |
EX-31.1 - EXHIBIT 31.1 - NEXT GENERATION MANAGEMENT CORP. | ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2009 OR
|
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR
THE TRANSITION PERIOD FROM ______________ TO
______________
|
COMMISSION
FILE NUMBER: 000-33039
NEXT
GENERATION MEDIA CORPORATION
(Exact
name of Company as specified in its charter)
Nevada
|
88-0169543
|
(State
of incorporation)
|
(I.R.S.
Employer)
|
Identification
No.)
|
7516 G
Fullerton Road, Springfield, Virginia 22153
(Address
of principal executive offices) (Zip Code)
Company's
telephone number: (703) 644-0200
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $0.001 Par Value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
o
Yes
|
x
No
|
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
x
Yes
|
o
No
|
Indicate
by check mark whether the Company (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Company was required to
file such reports), and (2) been subject to such filing requirements for the
past 90 days. Yes x No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K o.
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
(Do
not check if a smaller reporting company)
|
|
Smaller
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No x
The
aggregate market value of the voting stock held by non-affiliates of the Company
as of April 14, 2010: Common Stock, par value $0.001 per share -- $47,055. As of
April 14, 2010, the Company had 12,373,397 shares of common stock issued and
outstanding, of which 9,373,397 were held by non-affiliates.
There are
no documents incorporated by reference in this Form 10-K.
TABLE OF
CONTENTS
PART
I
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PAGE
|
|
|
|
|
ITEM
1.
|
Description
of Business
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3
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ITEM
1A.
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Risk
Factors
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4
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ITEM
1B.
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Unresolved
Staff Comments
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4
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ITEM
2.
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Description
of Properties
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4
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ITEM
3.
|
Legal
Proceedings
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4
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ITEM
4.
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Submission
of Matters to a Vote of Security Holders
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6
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PART
II
|
||
ITEM
5.
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Market
for Common Equity and Other Shareholder Matters
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6
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ITEM
6.
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Selected
Financial Data
|
8
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ITEM
7.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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8
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ITEM
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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11
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ITEM
8.
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Financial
Statements and Supplementary Data
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16
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ITEM
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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16
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ITEM
9A(T).
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Controls
and Procedures
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16
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ITEM
9B.
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Other
Information
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19
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PART
III
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||
ITEM
10.
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Directors,
Executive Officers, and Corporate Governance
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19
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ITEM
11.
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Executive
Compensation
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20
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ITEM
12.
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Security
Ownership of Certain Beneficial Owners and Management
|
24
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ITEM
13.
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Certain
Relationships and Related Transactions And Director
Independence
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24
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ITEM
14.
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Principal
Accountant Fees and Services
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25
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PART
IV
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||
ITEM
15.
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Exhibits
and Financial Statements
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26
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Signatures
|
26
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PART
I.
CAUTIONARY
NOTE CONCERNING FORWARD-LOOKING STATEMENTS:
Certain
statements in this Form 10-K constitute forward-looking statements within the
meaning of the Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements include
all statements that do not relate solely to the historical or current facts, and
can be identified by the use of forward looking words such as "may", "believe",
"will", "expect", "expected", "project", "anticipate", "anticipated”,
“estimates", "plans", "strategy", "target", "prospects" or
"continue". These forward looking statements are based on the current
plans and expectations of our management and are subject to a number of
uncertainties and risks that could significantly affect our current plans and
expectations, as well as future results of operations and financial condition
and may cause our actual results, performances or achievements to be materially
different from any future results, performances or achievements expressed or
implied by such forward-looking statements. This Form 10-K contains important
information as to risk factors under Item 1A. In making these
forward-looking statements, we claim the protection of the safe-harbor for
forward-looking statements contained in the Private Securities Reform Act of
1995. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, there can be no assurance that such
expectations will prove to have been correct. We do not assume any
obligation to update these forward-looking statements to reflect actual results,
changes in assumptions, or changes in other factors affecting such
forward-looking statements.
ITEM 1.
BUSINESS.
Introduction
Next
Generation Media Corporation (the "Company") was incorporated on November 21,
1980, under the laws of the State of Nevada under the name Micro Tech
Industries, Inc. On February 6, 1997, an unrelated third party
purchased 85.72% of the outstanding stock of Micro Tech Industries, Inc. from
its majority shareholder for $50,000 in cash. Effective March 31, 1997, Micro
Tech Industries, Inc. changed its name to Next Generation Media
Corporation. Management believes that prior to February 6, 1997, the
Company was a "shell" company for at least five years without assets and
liabilities. Management is unaware of any operating history prior to
February 6, 1997.
Reporting Period Principle
Services
During
the reporting period, the Company operated as a holding company with one
wholly-owned operating subsidiary, United Marketing Solutions, Inc.
("United").
The
Company acquired United on April 1, 1999. Originally founded in 1981
as United Coupon Corporation, United has operated within the cooperative direct
mail industry for twenty years. United has diversified and expanded
its product lines and markets to evolve from a coupon company to a full-service
marketing provider specializing in two communication mediums: direct mail and
direct marketing. United offers advertising and marketing products
and services through a network of franchisees in more than twenty states, with
the largest concentration being in the northeast United States. United provides
full-service design, layout, printing, packaging and distribution of marketing
products and promotional coupons sold by the franchise network to local market
businesses, services providers and professionals as resources to help them
generate "trial and repeat" customers.
3
ITEM 1A.
RISK FACTORS.
An
investment in our common stock involves risks and uncertainties. While we
attempt to identify and mitigate risks to our business to the extent practical
under the circumstances, some level of risk and uncertainty will always be
present. You should consider the following factors carefully in
addition to the other information contained in this form 10-K before deciding to
purchase our securities.
Competition
The
Company's current and future lines of business are highly
competitive. First, the advertising business is highly competitive
with many firms competing in various forms of media and possessing substantial
resources. The direct mail industry is highly fragmented and includes
a large number of small and independent cooperative direct mailers in addition
to competition from companies for whom coupon advertising is not their primary
line of business. In addition, several large firms, notably Val-Pak
Direct Marketing Systems, Inc., Money Mailer and Advo, Inc., are direct
competitors of United in its direct mail marketing business.
Government
Regulation
United is
subject to state regulation as a franchiser, requiring United to file periodic
state registration documents pertaining to the offering of area and regional
franchise licenses. Management believes that United is in substantial
compliance with the applicable state franchise laws.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
There are
no unresolved staff comments for this filer.
ITEM 2.
PROPERTIES.
The
Company's principal offices are located at 7516G Fullerton Road, Springfield, VA
22153.
ITEM 3.
LEGAL PROCEEDINGS.
Other
than as set forth below, the Company is not a party to any material pending
legal proceedings and, to the best of its knowledge, no such action by or
against the Company has been threatened. The Company is subject to legal
proceedings and claims that arise in the ordinary course of its
business. Although occasional adverse decisions or settlements may
occur, the Company believes that the final disposition of such matters will not
have material adverse effect on its financial position, results of operations or
liquidity. As indicated in the cases below, the Company intends to
aggressively pursue any franchisees that violate their franchise agreements. The
Company is awaiting notice of service on additional suits filed against
franchisees and Company anticipates additional suits will be filed in the
future.
4
In the
United States District Court, Southern District of Iowa, filed on February 2,
2009, COLORFX sued United Marketing Solutions, Inc. for breach of contract in
that the Defendant has failed to pay to Plaintiff $128,409.73. The case No. is
4:09-C-00039. United Marketing Solutions, Inc. intends to defend itself against
COLORFX.
In the
Iowa District Court for Polk County, filed on February 3, 2009, in Case No. CL
111876, Rees Associates, Inc. sued United Marketing Solutions, Inc. for breach
of contract in failing to pay to the Plaintiff $161,587.69. United Marketing
Solutions, Inc. intends to defend itself against Rees Associates,
Inc.
In the
Circuit Court of Fairfax County, filed in April 2009, in Civil Action No:
2009-6401, United Marketing Solutions, Inc. sued Roger Homan for breach of
contract, statutory business conspiracy and tortious
interference. Judgment was rendered against Homan in the amount of
Five Hundred and Fifty One Thousand Nine Hundred and Sixty-Six Dollars and
Twenty-Three Cents, ($551,966.23).
In the
Circuit Court for Fairfax County, filed on July 15, 2009, in Case No.
2009-10209, General Electric Capital Corporation sued United Marketing
Solutions, Inc. for breach of contract in failing to remit lease payments to the
Plaintiff in the amount of $192,980.01. United Marketing Solutions, Inc. intends
to defend itself against General Electric Capital Corporation.
In the
Circuit Court of Fairfax County, filed in November 2009, in Civil Action No:
2009-15875, United Marketing Solutions, Inc. sued Angie M. Fowler and Timothy P.
Fowler for breach of contract and tortious interference. United Marketing is
seeking compensatory damages of no less than $500,000, plus punitive damages
awarded by the Court plus prejudgment interest, attorney fees and such other and
further relief as deemed appropriate.
In the Circuit Court of Fairfax County, filed in April 2009, in Civil Action No: 2009-6410, United Marketing Solutions, Inc. sued Sheila D. Callo and Fernando A. Callo for breach of contract in an amount of no less than Forty-Five Thousand Dollars ($45,000) plus an amount of no less than Seventeen Thousand ($17,000) for prejudgment interest.
In the
Circuit Court of Fairfax County, in Civil Action No: GV09008667, United
Marketing Solutions, Inc. sued Best Coupon Corporation and Esta Margolis for
breach of contract. Judgment was rendered in the amount of Ten
Thousand Four Hundred Ninety-Seven and Ninety-Three Cents
($10,497.93).
In the
Circuit Court of Fairfax County, United Marketing Solutions, Inc. sued Paul and
Evaline Hatjistilianos for breach of contract and was awarded a judgment in the
amount of Two Hundred and Seventy-One Thousand and Sixty-One Dollars and
Twenty-Two Cents ($271,061.22).
In the
Circuit Court of Fairfax County Virginia, filed on August 1, 2008 (Case No. CL
2008-9914), United Marketing Solutions, Inc. sued Geoffrey and Francine Blair
for breach of contract arising out of an alleged failure to pay the principal
sum of $11,041.82 due pursuant to the Franchise Agreement between the
parties. The complaint also seeks a recovery of $75,000 in punitive
damages for alleged fraud in the inducement. The case was scheduled for
trial in June 2009, however since Geoffrey Blair filed Chapter 7 Bankruptcy
Petition (Case No. 08-12294-MWV), the case has been stayed. Francine Blair
had previously filed a Chapter 7 Bankruptcy Petition and, although the present
lawsuit has been stayed as to her as well, United intends to move the Fairfax
court to vacate that stay and set a new trial date since the specific
contractual obligation and the default alleged thereunder arose well after her
bankruptcy case was concluded.
5
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Other
than as reported in Form 8-K there were no matters submitted to security
holders.
PART
II.
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market
Information
The
Company's Common Stock has been and is currently traded on the over-the-counter
market and quotations are published on the OTC Bulletin Board under the symbol
"NGMC” and began trading on June 11, 2001.
The
following table sets forth the range of high and low bid prices of the Common
Stock for each fiscal quarterly period. Prices reported represent prices between
dealers, do not include retail markups, markdowns or commissions and do not
represent actual transactions.
Per Share
Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31,
2009
|
||||
High
|
Low
|
|||
Quarter
Ended December 31, 2009
|
0.005
|
0.028
|
||
Quarter
Ended September 30, 2009
|
0.005
|
0.01
|
||
Quarter
Ended June 30, 2009
|
0.005
|
0.005
|
||
Quarter
Ended March 31, 2009
|
0.003
|
0.03
|
For the Fiscal Year Ended on December 31,
2008
|
||||
High
|
Low
|
|||
Quarter
Ended December 31, 2008
|
0.03
|
0.002
|
||
Quarter
Ended September 30, 2008
|
0.03
|
0.021
|
||
Quarter
Ended June 30, 2008
|
0.03
|
0.03
|
||
Quarter
Ended March 31, 2008
|
0.09
|
0.035
|
6
The
ability of individual stockholders to trade their shares in a particular state
may be subject to various rules and regulations of that state. A number of
states require that an issuer's securities be registered in their state or
appropriately exempted from registration before the securities are permitted to
trade in that state. Presently, the Company has no plans to register its
securities in any particular state. Further, most likely the Company's shares
will be subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange
Act.
The
Commission generally defines penny stock to be any equity security that has a
market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets (at least $2 million); or exempted from the
definition by the Commission. If the Company's shares are deemed to be a penny
stock, trading in the shares will be subject to additional sales practice
requirements of broker-dealers who sell penny stocks to persons other than
established customers and accredited investors.
For
transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in the Company's Common Stock and may affect the
ability of stockholders to sell their shares.
Holders
of Common Equity
As of
December 31, 2009, the Company's transfer agent shows 572 shareholders of record
of the Company's common stock.
Dividend
Information
The
Company has not declared or paid cash dividends on its Common Stock or made
distributions in the past, and the Company does not anticipate that it will pay
cash dividends or make cash distributions in the foreseeable future, other than
non cash dividends described below. The Company currently intends to retain and
invest future earnings, if any, to finance its operations.
7
Transfer
Agent
The
Company has designated OTR Transfer Agency as its transfer agent for the common
stock.
ITEM 6.
SELECTED FINANCIAL DATA.
Financial
Data included in the attached audited financials.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
When used
in this Form 10-K and in our future filings with the Securities and Exchange
Commission, the words or phrases will likely result, management expects, or we
expect, will continue, is anticipated, estimated or similar expressions are
intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Readers are cautioned not to
place undue reliance on any such forward-looking statements, each of that speak
only as of the date made. These statements are subject to risks and
uncertainties, some of which are described below. Actual results may differ
materially from historical earnings and those presently anticipated or
projected. We have no obligation to publicly release the result of any revisions
that may be made to any forward-looking statements to reflect anticipated events
or circumstances occurring after the date of such statements.
General
Overview
The
Company acquired United on April 1, 1999. Originally founded in 1981
as United Coupon Corporation, United has operated within the cooperative direct
mail industry for twenty years. United has diversified and expanded
its product lines and markets to evolve from a coupon company to a full-service
marketing provider specializing in two communication mediums: direct mail and
direct marketing. United offers advertising and marketing products
and services through a network of franchisees in more 7 states, with the largest
concentration being in the northeast United States. United provides full-service
design, layout, printing, packaging and distribution of marketing products and
promotional coupons sold by the franchise network to local market businesses,
services providers and professionals as resources to help them generate "trial
and repeat" customers.
Results
of Operations
The
Company's revenues are difficult to forecast and may vary significantly from
quarter to quarter and year to year due to the attrition of franchisees. In
addition, the Company's expense levels for each quarter are, to a significant
extent, fixed in advance based upon the Company's expectation as to the net
revenues to be generated during that quarter. The Company therefore is generally
unable to adjust spending in a timely manner to compensate for any unexpected
shortfall in net revenues. Further as a result of these factors any
delay in product introductions, whether due to internal delays or delays caused
by third party difficulties, or any significant shortfall in demand in relation
to the Company's expectations, would have an almost immediate adverse impact on
the Company's operating results and on its ability to maintain profitability in
a quarter.
8
Comparison
of the Year Ended December 31, 2009 with the Year Ended December 31,
2008
During
the twelve months ended December 31, 2009 the Company experienced a decrease in
total revenues with sales $2,380,927 compared to $5,156,086 for the same period
in 2008. This decrease is a direct result of both the loss of advertisers due to
the sluggish economy and franchisees leaving the system. The company
has continued its commitment to offer incentives to the franchise network to
grow their businesses and, in turn, increase company production levels. Despite
providing incentives consistent with those of prior years, production and
revenue expectations from the core product client base have fallen significantly
short of expectations from beginning of year production forecasts as scheduled
production has been reduced or cancelled in addition to various factors which
have caused a number of franchisees to disband their operations. In many cases
franchisees have wrongfully terminated their agreements and are now competing in
the same markets. We have and will continue to aggressively pursue
these individuals to recover some or all of our losses.
Total
costs of goods sold for the twelve-month period ended December 31, 2009 were
down from the same period in 2008, $1,800,621 compared to $4,083,042. Cost of
goods as a percentage of sales decreased from 79.2% for the twelve-month period
ended December 31, 2008 to 75.6 % for the twelve-month period ended December 31,
2009. Cost of goods will fluctuate from quarter to quarter and year to year
based on production workflow and market conditions. The company
realized a net gain in gross margin due to the successful implementation of
parting with a third party printer.
The
decrease in total operating expenses from $1,968,752 for the twelve months ended
December 31, 2008 to $1,680,528 in 2009 is due, in part, to the rent income and
expense being passed through subsidiaries and a reduction in administrative
payroll expense. The company continues to place a strong emphasis on
franchise and infrastructure development and the operations, training &
support of its network. Funding for franchise development and network training
& support resources was 5% of comparable revenue in 2009 versus 6.1% for the
twelve months ended December 31, 2008.
Total
assets decreased from $5,114,164 at December 31, 2008 compared to $3,857,711 at
December 31, 2009 as result, in large part to the write-off of equipment and
software. Total current liabilities increased from $1,921,838 at December 31,
2008 to $2,533,271 at December 31, 2009.
The
Company incurred a net loss of $1,867,886 for the twelve months ended December
31, 2009, compared to a loss of $1,865,063 for the twelve months ended December
31, 2008. Subsidiary activity resulted in a net loss of $1,931,205
for the twelve months ended December 31, 2009, compared to a loss of $1,851,163
for the twelve months ended December 31, 2008.
9
While the
Company has raised capital to meet its working capital and financing needs in
the past, additional financing may be required in order to meet the Company’s
current and projected cash flow requirements. As previously mentioned, the
Company has obtained financing in the forms of equity as well as commercial
financing to provide the necessary working capital. The company currently has no
other commitments for financing. There are no assurances the Company will be
successful in acquiring additional financing.
The
Company has issued shares of its common stock from time to time in the past to
satisfy certain obligations, and expects in the future to also acquire certain
services, satisfy indebtedness, and/or make acquisitions utilizing authorized
shares of the capital stock of the Company.
New Accounting
Pronouncements
In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable
Interest Entities." Interpretation 46 changes the criteria by which one company
includes another entity in its consolidated financial statements. Previously,
the criteria were based on control through voting interest. Interpretation 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's residual
returns or both. A company that consolidates a variable interest entity is
called the primary beneficiary of that entity. The consolidation requirements of
Interpretation 46 apply immediately to variable interest entities created after
January 31, 2003. The consolidation requirements apply to older entities in the
first fiscal year or interim period beginning after June 15, 2003. Certain of
the disclosure requirements apply in all financial statements issued after
January 31, 2003, regardless of when the variable interest entity was
established. The Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.
In April
2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No.
149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS 149 amends SFAS No. 133 to provide clarification on the
financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 will not
have a material impact on the Company’s results of operations or financial
position.
In May
2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS
WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS 150 establishes
standards on the classification and measurement of certain financial instruments
with characteristics of both liabilities and equity. The provisions of SFAS 150
are effective for financial instruments entered into or modified after May 31,
2003 and to all other instruments that exist as of the beginning of the first
interim financial reporting period beginning after June 15, 2003. The adoption
of SFAS 150 will not have a material impact on the Company’s results of
operations or financial position.
Number of
Employees
As of
December 31, 2009, the Company, through United, had approximately 3
employees. The Company does not have any collective bargaining
agreements covering any of its employees, has not experienced any material labor
disruption and is unaware of any efforts or plans to organize its employees. The
Company considers relations with its employees to be good.
10
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Forward
Looking Statements.
The
foregoing Managements Discussion and Analysis of Financial Condition and Results
of Operations "forward looking statements" within the meaning of Rule 175 under
the Securities Act of 1933, as amended, and Rule 3b-6 under the Securities Act
of 1934, as amended, including statements regarding, among other items, the
Company's business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the industry
in which it operates. The words "believe," "expect," "anticipate," "intends,"
"forecast," "project," and similar expressions identify forward-looking
statements. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, including
but not limited to, those risks associated with economic conditions generally
and the economy in those areas where the Company has or expects to have assets
and operations; competitive and other factors affecting the Company's
operations, markets, products and services; those risks associated with the
Company's ability to successfully negotiate with certain customers, risks
relating to estimated contract costs, estimated losses on uncompleted contracts
and estimates regarding the percentage of completion of contracts, associated
costs arising out of the Company's activities and the matters discussed in this
report; risks relating to changes in interest rates and in the availability,
cost and terms of financing; risks related to the performance of financial
markets; risks related to changes in domestic laws, regulations and taxes; risks
related to changes in business strategy or development plans; risks associated
with future profitability; and other factors discussed elsewhere in this report
and in documents filed by the Company with the Securities and Exchange
Commission. Many of these factors are beyond the Company's control. Actual
results could differ materially from these forward-looking statements. In light
of these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this Form 10-KSB will, in fact, occur.
The Company does not undertake any obligation to revise these forward-looking
statements to reflect future events or circumstances and other factors discussed
elsewhere in this report and the documents filed or to be filed by the Company
with the Securities and Exchange Commission.
Inflation
In the
opinion of management, inflation has not had a material effect on the operations
of the Company.
Cautionary
Factors that may Affect Future Results
We
provide the following cautionary discussion of risks, uncertainties and possible
inaccurate assumptions relevant to our business and our products. These are
factors that we think could cause our actual results to differ materially from
expected results. Other factors besides those listed here could adversely affect
us.
11
Trends,
Risks and Uncertainties
The
Company has sought to identify what it believes to be the most significant risks
to its business as discussed in "Risk Factors" above, but cannot predict whether
or to what extent any of such risks may be realized nor can there be any
assurances that the Company has identified all possible risks that might arise.
Investors should carefully consider all of such risk factors before making an
investment decision with respect to the Company's stock.
Management
of Growth
The
Company does not expect to experience growth in the number of employees relative
to its current levels of employment and the scope of its
operations. Additionally, acquisitions could result in an increase in
employee headcount and business activity. Such activities could
result in increased responsibilities for management. The Company
believes that its ability to attract, train, and retain qualified technical,
sales, marketing, and management personnel, will be a critical factor to its
future success. During strong business cycles, the Company may
experience difficulty in filling its needs for qualified personnel.
The
Company's future success will be highly dependent upon its ability to
successfully manage the expansion of its operations. The Company's
ability to manage and support its growth effectively will be substantially
dependent on its ability to implement adequate financial and management
controls, reporting systems, and other procedures and hire sufficient numbers of
financial, accounting, administrative, and management personnel. The Company is
in the process of establishing and upgrading its financial accounting and
procedures. There can be no assurance that the Company will be able
to identify, attract, and retain experienced accounting and financial personnel.
The Company's future operating results will depend on the ability of its
management and other key employees to implement and improve its systems for
operations, financial control, and information management, and to recruit,
train, and manage its employee base. There can be no assurance that
the Company will be able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse effect on
the Company's business, results of operations, and financial
condition.
The
Company's future success depends upon its ability to address potential market
opportunities while managing its expenses to match its ability to finance its
operations. This need to manage its expenses will place a significant
strain on the Company's management and operational resources. If the
Company is unable to manage its expenses effectively, the Company's business,
results of operations, and financial condition may be materially adversely
affected.
Risks
associated with acquisitions
Any
acquisitions by the Company would involve risks commonly encountered in
acquisitions of companies. These risks would include, among other
things, the following: the Company could be exposed to unknown
liabilities of the acquired companies; the Company could incur acquisition costs
and expenses higher than it anticipated; fluctuations in the Company's quarterly
and annual operating results could occur due to the costs and expenses of
acquiring and integrating new businesses or technologies; the Company could
experience difficulties and expenses in assimilating the operations and
personnel of the acquired businesses; the Company's ongoing business could be
disrupted and its management's time and attention diverted; the Company could be
unable to integrate successfully.
12
Liquidity
and Working Capital Risks; Need for Additional Capital to Finance
Growth and Capital Requirements
We have
had limited working capital and we may rely upon notes (borrowed funds) to
operate. We may seek to raise capital from public or private equity or debt
sources to provide working capital to meet our general and administrative costs
until net revenues make the business self-sustaining. We cannot
guarantee that we will be able to raise any such capital on terms acceptable to
us or at all. Such financing may be upon terms that are dilutive or potentially
dilutive to our stockholders. If alternative sources of financing are required,
but are insufficient or unavailable, we will be required to modify our growth
and operating plans in accordance with the extent of available
funding.
Potential
fluctuations in quarterly operating results
Our
quarterly operating results may fluctuate significantly in the future as a
result of a variety of factors, most of which are outside our control,
including: the demand for our products; seasonal trends in purchasing, the
amount and timing of capital expenditures and other costs relating to the
development of our products; price competition or pricing changes in the
industry; technical difficulties or system downtime; general economic
conditions, and economic conditions specific to the healthcare industry. Our
quarterly results may also be significantly impacted by the impact of the
accounting treatment of acquisitions, financing transactions or other matters.
Particularly at our early stage of development, such accounting treatment can
have a material impact on the results for any quarter. Due to the foregoing
factors, among others, it is likely that our operating results will fall below
our expectations or those of investors in some future quarter.
Dependence
Upon Management
Our
future performance and success are dependant upon the efforts and abilities of
our Management. To a significant degree, we are dependent upon the continued
services of our management team. If we lost the services of of our management or
other key employees before we could get a qualified replacement, that loss could
materially adversely affect our business.
Lack of
Independent Directors
We cannot
guarantee that our Board of Directors will have a majority of independent
directors in the future. In the absence of a majority of independent directors,
our executive officers, who are also principal stockholders and directors, could
establish policies and enter into transactions without independent review and
approval thereof. This could present the potential for a conflict of interest
between the Company and its stockholders generally and the controlling officers,
stockholders or directors.
Limitation
of Liability and Indemnification of Officers and Directors
Our
officers and directors are required to exercise good faith and high integrity in
our Management affairs. Our Articles of Incorporation provide, however, that our
officers and directors shall have no liability to our shareholders for losses
sustained or liabilities incurred which arise from any transaction in their
respective managerial capacities unless they violated their duty of loyalty, did
not act in good faith, engaged in intentional misconduct or knowingly violated
the law, approved an improper dividend or stock repurchase, or derived an
improper benefit from the transaction. Our Articles and By-Laws also provide for
the indemnification by us of the officers and directors against any losses or
liabilities they may incur as a result of the manner in which they operate our
business or conduct the internal affairs, provided that in connection with these
activities they act in good faith and in a manner that they reasonably believe
to be in, or not opposed to, the best interests of the Company, and their
conduct does not constitute gross negligence, misconduct or breach of fiduciary
obligations. To further implement the permitted indemnification, we have entered
into Indemnity Agreements with our officers and directors.
13
Continued
Control by Current Officers and Directors
As of
April 14, 2010, the present officers and directors own approximately 25% of the
outstanding shares of Common Stock, and therefore are in a position to elect all
of our Directors and otherwise control the Company, including, without
limitation, authorizing the sale of equity or debt securities of the Company,
the appointment of officers, and the determination of officers' salaries.
Shareholders have no cumulative voting rights. (See Security Ownership of
Certain Beneficial Owners and Management) Audit's Opinion Expresses Doubt About
The Company's Ability To Continue As a "Going Concern".
Delays in
the Introduction of Our Products or Services
The
Company may be subject to regulation by numerous governmental
authorities. Failure to obtain regulatory approvals or delays in
obtaining regulatory approvals by the Company, its collaborators or licensees
would adversely affect the marketing of products or services developed by the
Company, as well as hinder the Company's ability to generate product
revenues. Further, there can be no assurance that the Company, its
collaborators or licensees will be able to obtain the necessary regulatory
approvals. Although the Company does not anticipate problems satisfying any of
the regulations involved, the Company cannot foresee the possibility of new
regulations that could adversely affect the business of the
Company.
Government
Regulation and Legal Uncertainties
The
Company is not currently subject to many direct government regulations, other
than the securities laws, the regulations thereunder applicable to all publicly
owned companies, and the laws and regulations applicable to businesses
generally. It is possible that certain laws and regulations may be adopted at
the local, state, national and international level that could effect the
Company's operations. Changes to such laws could create uncertainty in the
marketplace which could reduce demand for the Company's products or increase the
cost of doing business as a result of costs of litigation or a variety of other
such costs, or could in some other manner have a material adverse effect on the
Company's business, financial condition, results of operations and prospects. If
any such law or regulation is adopted it could limit the Company's ability to
operate and could force the business operations to cease, which would have a
significantly negative effect on the shareholder's investment. The integrated
disclosure system for small business issuers adopted by the Securities and
Exchange Commission in Release No. 34-30968 and effective as of August 13, 1992,
substantially modified the information and financial requirements of a "Small
Business Issuer," defined to be an issuer that has revenues of less than
$25,000,000; is a U.S. or Canadian issuer; is not an investment company; and if
a majority-owned subsidiary, the parent is also a small business issuer;
provided, however, an entity is not a small business issuer if it has a public
float (the aggregate market value of the issuer's outstanding securities held by
non-affiliates) of $25,000,000 or more. The Company is deemed to be a "small
business issuer." The Securities and Exchange Commission, state securities
commissions and the North American Securities Administrators Association, Inc.
("NASAA") have expressed an interest in adopting policies that will streamline
the registration process and make it easier for a small business issuer to have
access to the public capital markets. The Company can make no assurances that
any of these agencies will adopt any such policies. Also, an agency could adopt
such policy that may have a detrimental effect to the Company's operations and
it could have a significantly negative effect on the value of the Company's
equity.
14
Limited
Market Due To Penny Stock
The
Company's stock differs from many stocks, in that it is a "penny stock." The
Securities and Exchange Commission has adopted a number of rules to regulate
"penny stocks." These rules include, but are not limited to, Rules 3a5l-l,
15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and
Exchange Act of 1934, as amended. Because our securities probably constitute
"penny stock" within the meaning of the rules, the rules would apply to us and
our securities. The rules may further affect the ability of owners of our stock
to sell their securities in any market that may develop for them. There may be a
limited market for penny stocks, due to the regulatory burdens on
broker-dealers. The market among dealers may not be active. Investors in penny
stock often are unable to sell stock back to the dealer that sold them the
stock. The mark-ups or commissions charged by the broker-dealers may be greater
than any profit a seller may make. Because of large dealer spreads, investors
may be unable to sell the stock immediately back to the dealer at the same price
the dealer sold the stock to the investor. In some cases, the stock may fall
quickly in value. Investors may be unable to reap any profit from any sale of
the stock, if they can sell it at all. Stockholders should be aware that,
according to the Securities and Exchange Commission Release No. 34- 29093, the
market for penny stocks has suffered in recent years from patterns of fraud and
abuse. These patterns include:- - Control of the market for the security by one
or a few broker-dealers that are often related to the promoter or issuer;
-Manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; - "Boiler room" practices involving high
pressure sales tactics and unrealistic price projections by inexperienced sales
persons; - Excessive and undisclosed bid-ask differentials and markups by
selling broker- dealers; and - The wholesale dumping of the same securities by
promoters and broker- dealers after prices have been manipulated to a desired
level, along with the inevitable collapse of those prices with consequent
investor losses. Furthermore, the "penny stock" designation may adversely affect
the development of any public market for the Company's shares of common stock
or, if such a market develops, its continuation. Broker-dealers are required to
personally determine whether an investment in "penny stock" is suitable for
customers. Penny stocks are securities (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national exchange;
(iii) whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an
issuer with net tangible assets less than $2,000,000 (if the issuer has been in
continuous operation for at least three years) or $5,000,000 (if in continuous
operation for less than three years), or with average annual revenues of less
than $6,000,000 for the last three years. Section 15(g) of the Exchange Act, and
Rule 15g-2 of the Commission require broker-dealers dealing in penny stocks to
provide potential investors with a document disclosing the risks of penny stocks
and to obtain a manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor's account. Potential
investors in the Company's common stock are urged to obtain and read such
disclosure carefully before purchasing any shares that are deemed to be "penny
stock." Rule 15g-9 of the Commission requires broker- dealers in penny stocks to
approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or her
financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the
investor, confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives. Compliance with
these requirements may make it more difficult for the Company's stockholders to
resell their shares to third parties or to otherwise dispose of
them.
15
ITEM 8.
FINANCIAL STATEMENTS.
Financial
statements as of and for the year ended December 31, 2009, and for the year
ended December 31, 2008 are presented in a separate section of this report
following Part IV.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURE.
There
were no disagreements with auditors for the period ended December 31,
2009.
ITEM
9A(T). CONTROLS AND PROCEDURES.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange
Act is accumulated and communicated to our management, including our principal
executive and financial officers, as appropriate to allow timely decisions
regarding required disclosure.
16
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act. Internal control over financial
reporting is a process designed by, or under the supervision of, our principal
executive and principal financial officers, or persons performing similar
functions, and effected by our board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Internal
control over financial reporting includes those policies and procedures
that:
·
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect transactions and dispositions of
assets;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures are being made
only in accordance with authorizations of management and the board of
directors; and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of assets that could have a
material effect on the financial
statements.
|
Because
of their inherent limitations, any system of internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
Our
management, including the chief executive officer and chief financial officer,
evaluated the effectiveness of our internal control over financial reporting as
of December 31, 2008 based on the framework defined in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
Management’s
assessment of the control environment included all significant locations and
subsidiaries.
Material
Weaknesses
Based on
our evaluation under COSO, management concluded that our internal control over
financial reporting was not effective as of December 31, 2008, due to
control deficiencies in three areas that we believe should be considered
material weaknesses. A material weakness is defined within the Public Company
Accounting Oversight Board's Auditing Standard No. 5 as a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the
company's annual or interim financial statements will not be prevented or
detected on a timely basis.
1.
|
The
company did not sufficiently segregate duties over incompatible functions
at the corporate headquarters.
|
The
company’s inability to sufficiently segregate duties is due to a staff vacancy
at the corporate headquarters, which management expects to fill during the
current year. Further, management has increased the frequency of independent
reconciliations of significant accounts, which will mitigate the lack of
segregation of duties until the accounting department at the corporate
headquarters is fully staffed
17
2.
|
In
conjunction with the lack of segregation of duties, the company did not
institute specific anti-fraud
controls.
|
While
management found no evidence of fraudulent activity, the chief accounting
officer has access to both accounting records and corporate assets, principally
the operating bank account. Management believes this exposure to fraudulent
activity is not material either to the operations of the company or to the
financial reporting; however, management has instituted Key Controls
specifically designed to prevent and detect—on a timely basis—any potential loss
due to fraudulent activity.
In
addition, management is in the process of instituting whistle-blower policies
and procedures, see material weakness 3, following. This policy and
procedure will further strengthen the anti-fraud controls at the corporate
headquarters.
3.
|
The
company did not institute, as of December 31, 2009, a whistle-blower
policy and procedure as required by Section 301 of the Sarbanes-Oxley
Act.
|
Management
has drafted a whistle-blower policy, and will communicate the policy as soon as
it is approved by the Board of Directors. In addition, management is
compiling specific procedures for the Chairman of the Audit Committee to
independently investigate and resolve any issues or concerns
raised.
Limitations
on Effectiveness of Controls and Procedures
Our
management, including our chief executive officer and chief financial officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include, but are not limited to, the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate.
18
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual
report.
ITEM 9B.
OTHER INFORMATION
Other
than set forth herein, there in no other information required to be
disclosed.
On April
13, 2010, Leon Zajdel, Melissa Held and Fernando Mathov resigned as
Directors. They did not have any issues or disagreements with the
Company. On April 13, 2010, Olin Greene resigned as an Officer of the
Company. He did not have any issues or disagreements with the
Company.
PART
III.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE
Officers
and Directors.
The names
and respective positions of the directors, executive officers, and key employees
of the Company are set forth below; there are no other promoters or control
persons of the Company. The directors named below will serve until the next
annual meeting of the Company's stockholders or until their successors are duly
elected and have qualified. Directors are elected for a one-year term at the
annual stockholders' meeting. Officers will hold their positions at the will of
the board of directors, absent any employment agreement. There are no
arrangements, agreements or understandings between non-management shareholders
and management under which non-management shareholders may directly or
indirectly participate in or influence the management of the Company's affairs.
The directors and executive officers of the Company are not a party to any
material pending legal proceedings.
Darryl Reed,
President/CEO/CFO/Director
Mr.
Darryl Reed is the current President of the Company. His background
includes seven years in the financial services industry. Mr. Reed formerly was
with New York Life Insurance Company, a major insurance company, and certain of
its subsidiaries since October 1995. Such subsidiaries included #1A
Eagle Strategies Corp., a registered investment adviser, where Mr. Reed worked
from April 1997 until May 2000. Mr. Reed held several licenses in the
financial services industry, including Series 7, 63 and 65. He has a
BS in Finance from the University of Florida and an MS from the American
College, Philadelphia, PA.
(b) Compliance with Section
16(a) of the Exchange Act.
Section
16(a) of the Securities Exchange Act of 1934 requires the Company's directors,
certain officers and persons holding 10% or more of the Company's common stock
to file reports regarding their ownership and regarding their acquisitions and
dispositions of the Company's common stock with the Securities and Exchange
Commission. Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
19
Based
solely on a review of the fiscal year ended December 31, 2007 and subsequently,
the Company is unaware that any required reports were not timely
filed.
ITEM 11.
EXECUTIVE COMPENSATION.
The following table sets forth certain
information relating to the compensation paid by the Company during the last
three fiscal years to the Company's President. No other executive officer of the
Company received total salary and bonus in excess of $100,000 during the fiscal
year ended December 31, 2009 and prior.
Summary Compensation
Table
Name
and
|
||||||||
principal
|
||||||||
position
|
||||||||
(a)
|
Annual
compensation
|
Long-term
compensation
|
||||||
All
other
|
||||||||
compen-
|
||||||||
Year
|
Other
|
Awards
|
Payouts
|
sation($)(i)
|
||||
annual
|
Restricted
|
Securities
|
||||||
Salary
|
Bonus
|
compen-
|
stock
|
under-
|
LTIP
|
|||
($)
|
($)
|
sation($)
|
award(s)
|
lying
|
payouts
|
|||
($)
|
options/
|
($)
|
||||||
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
SAR
(#)(g)
|
(h)
|
||
President
|
2009
|
114,833
|
0
|
0
|
$
0
|
0
|
0
|
0
|
2008
|
102,000
|
0
|
0
|
$
0
|
0
|
0
|
0
|
|
|
2007
|
197,210
|
0
|
0
|
$10,000
|
1,000,000
|
0
|
0
|
Executive
Compensation Philosophy
The
Company’s board of directors is committed to establishing and maintaining
executive compensation practices designed to support the development of the
company’s capabilities and business objectives, enhance our profitability and
enhance long-term shareholder value.
Compensation
Committee - Membership
It is
planned that the committee be comprised of three independent members of the
Board. Director independence is, at a minimum, consistent with
applicable rules for NASDAQ-traded issuers, Rule 16b-3 of the Exchange Act, and
Section 162(m) of the Internal Revenue Code.
Process
and procedures for considering and determining executive and director
compensation.
20
Among
other things, the committee has the authority and responsibility under its
charter to:
·
|
Approve
our compensation philosophy.
|
·
|
Formulate,
evaluate, and approve compensation for our officers, as defined in Section
16 of the Securities and Exchange Act of 1934 and rules and regulations
promulgated therein.
|
·
|
Formulate,
approve, and administer cash incentives and deferred compensation plans
for executives. Cash incentive plans are based on specific
performance objectives defined in advance of approving and administering
the plan.
|
·
|
Oversee
and approve all compensation programs involving the issuance of our stock
and other equity securities.
|
·
|
Review
executive supplementary benefits, as well as our retirement, benefit, and
special compensation programs involving significant cost to us, as
necessary and appropriate.
|
·
|
Review
compensation for terminated
executives.
|
·
|
Oversee
funding for all executive compensation
programs.
|
·
|
Review
compensation practices and trends of other companies to assess the
adequacy of our executive compensation programs and
policies.
|
·
|
Secure
the services of external compensation consultants or other experts, as
necessary and appropriate. These services, as required, will be
paid from funds provided by the company. This system is
designed to ensure the independence of such external
advisors.
|
·
|
Approve
employment contracts, severance agreements, change in control provisions,
and other compensatory arrangements with our
executives.
|
Role of
Chief Executive Officer in Recommending Executive Compensation.
The
committee makes all compensation decisions related to our named executive
officers. However, our Chief Executive Officer regularly provides information
and recommendations to the committee on the performance of the executive
officers, appropriate levels and components of compensation, including equity
grants as well as other information as the committee may request.
Compensation
Goals
Our
compensation policies are intended to achieve the following
objectives:
·
|
reward
executives and employees for their contributions to our growth and
profitability, recognize individual initiative, leadership, achievement,
and other valuable contributions to our
company;
|
·
|
to
link a portion of the compensation of officers and employees with the
achievement of our achievement of our overall performance goals, to ensure
alignment with the our strategic direction and values, and to ensure that
individual performance is directed towards the achievement of our
collective goals;
|
·
|
to
enhance alignment of individual performance and contribution with
long-term stockholder value and business objectives by providing equity
awards;
|
·
|
to
motivate and provide incentives to our named executive officers and
employees to continually contribute superior job performance throughout
the year; and
|
·
|
to
obtain and retain the services of skilled employees and executives so that
they will continue to contribute to and be a part of our long-term
success.
|
21
Compensation
programs and policies are reviewed and approved annually but could be adjusted
more frequently if determined by the committee. Included in this
process is establishing the goals and objectives by which employee and executive
compensation is determined. Executive officers’ performance is
evaluated in light of these performance goals and objectives. The
committee consults the Chief Executive Officer on the performance of other
company executives.
Compensation
Surveys and Compensation Consultants
In
determining compensation levels, we review compensation levels of companies that
we deem to be similar to our company regardless of their location, competitive
factors to enable us to attract executives from other companies, and
compensation levels that we deem appropriate to retain and motivate our
executives. From time to time, we retain the services of independent
compensation consultants to review a wide variety of factors relevant to
executive compensation, trends in executive compensation, and the identification
of relevant peer companies. The committee makes all determinations regarding the
engagement, fees, and services of our compensation consultants, and our
compensation consultants report directly to our committee.
Elements
of Compensation
Compensation
for our executives is generally comprised of:
·
|
base
salary which is targeted at a competitive level and used to reward
superior individual job performance of each named executive officer and to
encourage continued superior job
performance;
|
·
|
Cash
bonuses which are tied to specific, quantifiable and objective performance
measures based on a combination of corporate and individual goals, and
discretionary bonuses;
|
·
|
equity
compensation which is based on corporate and individual performance, and
discretionary equity awards.
|
·
|
severance
and change of control agreements;
and
|
·
|
Other
benefits plan and programs.
|
The
principles which serve as the basis for executive compensation practices apply
to the compensation structures for all employees. Namely, corporate and
individual performance are the key factors which determine incentive
compensation.
The
committee considers each component of executive compensation in light of total
compensation. In considering adjustments to the total compensation of each named
executive officer, the committee also considers the value of previous
compensation, including outstanding equity grants and equity
ownership.
Compensation
paid to executive officers must be approved by our board of directors or by the
committee. The committee conducts several meetings in person or
telephonically to review and consider our compensation program and policies, as
well as specific elements of executive compensation.
22
Compensation
Considerations
In
setting compensation levels for a particular executive, the committee takes into
consideration:
·
|
the
proposed compensation package as a
whole
|
·
|
each
element of compensation
individually
|
·
|
the
executive’s past and expected future contributions to our
business
|
·
|
our
overall company performance;
|
·
|
our
financial conditions and prospects;
|
·
|
the
need to retain key employees; and
|
·
|
general
economic conditions.
|
In order
to enable the company to hire and retain talented executives, the committee may
determine that it is in the best interests of the company to negotiate packages
that may deviate from the company's standard practices in setting the
compensation for certain of its executive officers when such deviation is
required by competitive or other market forces.
Base
Salary
Base
salaries for the named executive officers and other executives are determined
based on market data analysis of comparable positions in the identified
compensation peer group. A competitive base salary is provided to each executive
officer to recognize the skills and experience each individual brings to the
company and the performance contributions they make. When determining the base
salary for an executive, we reference a target of the base salaries of similar
positions in the identified compensation peer group. Other factors are also
taken into account such as internal comparisons, individual skills and
experience, length of time with the company, performance contributions and
competitiveness of the marketplace. Salaries are reviewed on an annual basis,
taking into account the factors described above, and are made in connection with
annual performance reviews. The amounts of such adjustments are calculated using
merit increase guidelines based on the employee's position within the relevant
compensation range and the results of his or her performance review. The
recommended percentage increases are established annually and reflect the
committee's assessment of appropriate salary adjustments based on competitive
surveys and general economic conditions.
Cash
Bonus
Our
practice is to periodically consider awarding cash bonuses based upon, among
other things, accomplishment of key objectives and overall performance. In
addition, from time-to-time the committee may approve payment of bonuses to
executives or key contributors for special accomplishment or other reasons.
These goals may include progress made in technical programs and technology and
product development, improved utilization of company resources and progress in
relationships with key customers and strategic alliances and financing
activities and the financial results of the company. Generally, the company does
not disclose specific targets relating to these goals, because doing so may
disclose confidential business information.
Insurance
Plans
The
Company makes available to all full-time employees medical and dental plan
benefits. Employees are eligible to participate in company insurance
plans when they complete 90 days of service with the Company.
23
Other
Benefit Plans
401(k)
Plan. The Company makes available a 401(k) Savings Plan (the "401(k) Plan"), a
federally-qualified, tax-deferred plan administered by a third party. The 401(k)
Plan provides participants with savings or retirement benefits based on employee
deferrals of compensation, as well as any matching and other discretionary
contributions made by the Company. Employees are eligible to participate in the
401(k) Plan when they complete one month of service with the Company and have
attained the age of 18. The employee can defer up to 15% of the compensation
amount earned within a calendar year, not to exceed the ceiling set forth
annually by the Internal Revenue Service. The Company matches the employee's
contribution to the 401(k) Plan dollar-for-dollar up to 3% of the employee's
annual salary. Participants become vested in any employer contributions to the
401(k) Plan after two years of service at a rate of 20% for each completed year
of service. A participant is always 100% vested in his or her salary reduction
contributions to the 401(k) Plan.
Stock
Option Plan.
The
Company has also filed a Stock Option Plan for Employees on Form S-8 in December
2001. The Company had not issued any Stock Options pursuant to the
Plan included therein to any employees as of December 31, 2008.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The
following table sets forth information regarding the beneficial ownership of
shares of the Company's common stock as of April 14, 2010 (issued and
outstanding) by (i) all stockholders known to the Company to be beneficial
owners of more than ten percent of the outstanding common stock; and (ii) all
directors and executive officers of the Company as a
group:
Title
of Class
|
Name
and Address of
Beneficial
Owner(1)
|
Amount
of Beneficial
Ownership
|
Percent
of Class
|
Common
Stock
|
Darryl
Reed
|
3,008,945
|
24.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
3,008,945
|
24.3%
|
(1)
|
The
address for all persons listed is 7516
G Fullerton Road, Springfield, VA, 22153. Each person
has sole voting power and sole right to dispose as to all of the shares
shown as beneficially owned by them except as
footnoted.
|
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.
During
the past two years, and not as otherwise disclosed of in any other filing, there
have not been any transactions that have occurred between the Company and its
officers, directors, and five percent or greater shareholders, unless listed
below.
24
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
following table sets forth fees billed to us by our auditors during the years
ended December 31, 2009 and 2008 for: (i) services rendered for the audit of our
annual financial statements and the review of our quarterly financial
statements, (ii) services by our auditor that are reasonably related to the
performance of the audit or review of our financial statements and that are not
reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered.
December
31,
2009
|
December
31,
2008
|
||||||||
(i)
|
Audit
Fees
|
$
|
41,540
|
$
|
45,000
|
||||
(ii)
|
Audit
Related Fees
|
$
|
0
|
$
|
0
|
||||
(iii)
|
Tax
Fees
|
$
|
0
|
$
|
0
|
||||
(iv)
|
All
Other Fees
|
$
|
0
|
$
|
0
|
||||
Total
fees
|
$
|
41,540
|
$
|
45,000
|
AUDIT FEES. The Audit Fees
consist of fees billed for professional services rendered for the audit of the
Company’s consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by our auditors in connection with statutory and
regulatory filings or engagements.
AUDIT-RELATED FEES. Audit
Related Fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the Company’s
consolidated financial statements and are not reported under "Audit Fees." There
were no Audit-Related services provided in fiscal 2009 or 2008.
TAX FEES. Tax Fees consist of
fees billed for professional services for tax compliance, tax advice and tax
planning. There were no charges for tax services provided in fiscal 2009 or
2008.
ALL OTHER FEES. All Other Fees
consist of fees for products and services other than the services reported
above. There were no management consulting services provided in fiscal 2009 or
2008.
POLICY
ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS
The
Company currently does not have a designated Audit Committee, and accordingly,
the Company's Board of Directors' policy is to pre-approve all audit and
permissible non-audit services provided by the independent auditors. These
services may include audit services, audit-related services, tax services and
other services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specific budget. The Board of Directors may also
pre-approve particular services on a case-by-case basis.
25
PART
IV.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits.
Exhibits
included or incorporated by reference in this document are set forth in the
Exhibit Index.
Index
to Financial Statements and Schedules.
|
Page
|
Audit
Report of Independent Certified Public Accountants
|
F-2 |
Consolidated
Balance Sheets
|
F-3 |
Consolidated
Statements of Income
|
F-5 |
Consolidated
Statements of Stockholders' Equity
|
F-6 |
Consolidated
Statements of Cash Flows
|
F-7 |
Notes
to Financial Statements
|
F-9 |
Reports
on Form 8-K.
|
F-17 |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the date indicated:
Signature
|
Title
|
Date
|
|||
/s/
Darryl Reed
|
CEO/CFO/Secretary/Director
|
April
14, 2010
|
|||
Darryl
Reed
|
|||||
26
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FINANCIAL
STATEMENTS AND SCHEDULES
DECEMBER
31, 2009 AND 2008
FORMING A
PART OF ANNUAL REPORT
PURSUANT
TO THE SECURITIES EXCHANGE ACT OF 1934
NEXT
GENERATION MEDIA CORPORATION
Next
Generation Media Corporation
and
Subsidiaries
Consolidated
Financial Statements
For The
Years Ended December 31, 2009 and 2008
With
Audit Report of Independent
Registered
Public Accounting Firm
TURNER, JONES AND ASSOCIATES, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
Table of
Contents
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Financial
Statements
|
||
Consolidated
Balance Sheet
|
F-3
|
|
Consolidated
Statements of Operations
|
F-5
|
|
Consolidated
Statements of Stockholders’ Equity
|
F-6
|
|
Consolidated
Statements of Cash Flows
|
F-7
|
|
Notes
to Financial Statements
|
F-9
|
Turner,
Jones & Associates, P.L.L.C.
Certified
Public Accountants
108
Center Street, North, 2nd
Floor
Vienna,
Virginia 22180-5712
(703)
242-6500
FAX (703)
242-1600
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
Next
Generation Media Corporation
7516G
Fullerton Road
Springfield,
VA 22153
We have
audited the accompanying consolidated balance sheet of Next Generation Media
Corporation and its subsidiaries (a Nevada Incorporation) as of December 31,
2009, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the two years in the period ended December 31,
2009. These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
We conducted
our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Next Generation Media
Corporation and subsidiaries as of December 31, 2009, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 2009, in conformity with accounting principles generally accepted
in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in the footnotes,
conditions exist that raise substantial doubt about the Company’s ability to
continue as a going concern. The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty
/s/ Turner, Jones &
Associates, PLLC
Vienna,
Virginia
April 2,
2010
F-2
Next
Generation Media Corporation
|
|||
Consolidated
Balance Sheet
|
|||
As
of December 31, 2009
|
|||
ASSETS
|
|||
CURRENT
ASSETS:
|
|||
Cash
and cash equivalents
|
$ | 281,152 | |
Accounts
receivable, net of
|
|||
uncollectible
accounts of $433,674
|
12,252 | ||
Prepaid
expenses and other current assets
|
87,495 | ||
Total
current assets
|
380,899 | ||
PROPERTY,
PLANT AND EQUIPMENT:
|
|||
Land
|
565,270 | ||
Building
|
3,108,989 | ||
Equipment
|
4,086 | ||
Total
property, plant and equipment
|
3,678,345 | ||
Less:
accumulated depreciation
|
(201,533 | ) | |
Net
property, plant and equipment
|
3,476,812 | ||
TOTAL
ASSETS
|
$ | 3,857,711 | |
See
accompanying notes and accountant's audit report
|
F-3
Next
Generation Media Corporation
|
|||
Consolidated
Balance Sheet
|
|||
As
of December 31, 2009
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||
CURRENT
LIABILITIES:
|
|||
Obligation
under capital leases, current portion
|
$ | 214,027 | |
Security
deposit
|
24,000 | ||
Line
of credit
|
650,000 | ||
Accounts
payable
|
1,106,128 | ||
Accrued
expenses
|
539,116 | ||
Total
current liabilities
|
2,533,271 | ||
LONG
TERM LIABILITIES:
|
|||
Notes
payable
|
3,700,000 | ||
Total
long term liabilities
|
3,700,000 | ||
Total
liabilities
|
6,233,271 | ||
STOCKHOLDERS'
EQUITY:
|
|||
Common
stock, $.01 par value, 50,000,000 shares
|
|||
authorized,
12,373,397 issued and outstanding
|
123,734 | ||
Additional
paid in capital
|
7,379,744 | ||
Accumulated
deficit
|
(9,879,038 | ) | |
Total
stockholders' equity
|
(2,375,560 | ) | |
TOTAL
LIABILITIES AND STOCKHOLDERS'
|
|||
EQUITY
|
$ | 3,857,711 | |
See
accompanying notes and accountant's audit report
|
F-4
Next
Generation Media Corporation
|
||||||||
Consolidated
Statements of Operations
|
||||||||
For
The Years Ended December 31, 2009 and 2008
|
||||||||
REVENUES:
|
2009
|
2008
|
||||||
Coupon
and postage sales, net of discounts
|
$ | 2,308,927 | $ | 5,091,586 | ||||
Rental
income
|
72,000 | - | ||||||
Franchise
fees
|
- | 64,500 | ||||||
Total
revenues
|
2,380,927 | 5,156,086 | ||||||
COST
OF GOODS SOLD
|
1,800,621 | 4,083,242 | ||||||
GROSS
MARGIN
|
580,306 | 1,072,844 | ||||||
OPERATING
EXPENSES:
|
||||||||
General
and administrative
|
954,078 | 1,564,655 | ||||||
Bad
debt expense
|
451,900 | 96,418 | ||||||
Impairment
of assets
|
157,700 | - | ||||||
Impairment
of Goodwill
|
- | 951,133 | ||||||
Depreciation
and amortization
|
274,550 | 307,679 | ||||||
Total
operating expense:
|
1,838,228 | 2,919,885 | ||||||
Loss
from operations
|
(1,257,922 | ) | (1,847,041 | ) | ||||
OTHER
INCOME AND EXPENSES:
|
||||||||
Other
income
|
18,821 | 12,930 | ||||||
Interest
expense, net
|
(297,193 | ) | (298,680 | ) | ||||
Disposal
of assets
|
(89,085 | ) | - | |||||
Gain/(loss)
on sale of equipment
|
(242,507 | ) | 267,728 | |||||
Total
other expenses
|
(609,964 | ) | (18,022 | ) | ||||
Loss
before provision for income tax
|
(1,867,886 | ) | (1,865,063 | ) | ||||
Provision
for income tax
|
- | - | ||||||
Net
loss before minority interest
|
$ | (1,867,886 | ) | $ | (1,865,063 | ) | ||
Minority
interest
|
$ | (63,319 | ) | $ | 13,900 | |||
Loss
applicable to common shareholders
|
$ | (1,931,205 | ) | $ | (1,851,163 | ) | ||
Basic
loss per common share
|
$ | (0.16 | ) | $ | (0.15 | ) | ||
Weighted
average common shares outstanding
|
12,373,397 | 12,373,397 | ||||||
Diluted
loss per common share
|
N/A | N/A | ||||||
Fully
diluted common shares outstanding
|
12,853,397 | 12,982,796 | ||||||
See
accompanying notes and accountant's audit report
|
F-5
Next
Generation Media Corporation
|
||||||||||||||||||||
Consolidated
Statements of Stockholders' Equity
|
||||||||||||||||||||
Additional
|
||||||||||||||||||||
Common
Stock
|
Paid
In
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||
December
31, 2007
|
$ | 12,373,397 | $ | 123,734 | $ | 7,379,744 | $ | (6,167,783 | ) | $ | 1,335,695 | |||||||||
Net
Loss
|
- | - | - | (1,851,163 | ) | (1,851,163 | ) | |||||||||||||
Minority
Interest
|
- | - | - | 7,794 | 7,794 | |||||||||||||||
Balance
December 31, 2008
|
12,373,397 | 123,734 | 7,379,744 | (8,011,152 | ) | (507,674 | ) | |||||||||||||
Net
Loss
|
- | - | - | (1,931,205 | ) | (1,931,205 | ) | |||||||||||||
Minority
Interest
|
- | - | - | 63,319 | 63,319 | |||||||||||||||
Balance
December 31, 2009
|
$ | 12,373,397 | $ | 123,734 | $ | 7,379,744 | $ | (9,879,038 | ) | $ | (2,375,560 | ) | ||||||||
See
accompanying notes and accountant's audit report
|
F-6
Next
Generation Media Corporation
|
||||||||
Statements
of Cash Flows
|
||||||||
For
The Years Ended December 31, 2009 and 2008
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss)
|
$ | (1,931,205 | ) | $ | (1,851,163 | ) | ||
Adjustments
to reconcile net income to net cash
|
||||||||
provided
by operating activities:
|
||||||||
Impairment
of Goodwill
|
- | 951,133 | ||||||
Minority
interest
|
63,319 | 7,794 | ||||||
Disposal
of equipment
|
89,085 | - | ||||||
Impairment
of equipment
|
157,700 | - | ||||||
Depreciation
and amortization
|
274,550 | 307,679 | ||||||
(Increase)/decrease
in assets
|
||||||||
Receivables
|
294,043 | (142,699 | ) | |||||
Inventories
|
- | 79,489 | ||||||
Prepaids
and other current assets
|
7,614 | (46,335 | ) | |||||
Increase/(decrease)
in liabilities
|
||||||||
Accounts
payable
|
396,677 | 417,898 | ||||||
Accrued
expenses
|
294,262 | 142,693 | ||||||
Security
deposit
|
24,000 | - | ||||||
Pension
payable
|
(106,046 | ) | 71,418 | |||||
Sales
tax payable
|
(3,522 | ) | 1,008 | |||||
Net
cash flows (used) by
|
||||||||
operating
activities
|
(439,523 | ) | (61,085 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Sale
of equipment
|
248,507 | 74,051 | ||||||
Net
cash provided by investing activities
|
248,507 | 74,051 | ||||||
See
accompanying notes and accountant's audit report
|
F-7
Next
Generation Media Corporation
|
||||||||
Statements
of Cash Flows (continued)
|
||||||||
For
The Years Ended December 31, 2009 and 2008
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Borrowing
under line of credit
|
- | 440,000 | ||||||
Repayment
of notes payable and capital lease
|
6,062 | (119,769 | ) | |||||
Net
cash provided/(used) by financing activities
|
6,062 | 320,231 | ||||||
NET
INCREASE (DECREASE) IN CASH
|
(184,954 | ) | 333,197 | |||||
CASH,
BEGINNING OF PERIOD
|
466,106 | 132,909 | ||||||
CASH,
END OF PERIOD
|
$ | 281,152 | $ | 466,106 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
CASH
PAID DURING THE YEAR FOR:
|
||||||||
Income
taxes
|
$ | - | $ | - | ||||
Interest
|
$ | 299,439 | $ | 298,680 | ||||
See
accompanying notes and accountant's audit report
|
F-8
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business:
Next
Generation Media Corporation was incorporated in the State of Nevada in November
of 1980 as Micro Tech Industries, with an official name change to Next
Generation Media Corporation in April of 1997. The Company, through
its wholly owned subsidiary, United Marketing Solutions, Inc., provides direct
marketing products, which involves the designing, printing, packaging, and
mailing of public relations and marketing materials and coupons for retailers
who provide services. Sales are conducted through a network of
franchises that the Company supports on a wholesale basis. At
December 31, 2009, the Company had no active area franchise
license.
Property and
Equipment:
Property
and equipment are stated at cost. The company uses the straight line
method in computing depreciation for financial statement purposes.
Expenditures
for repairs and maintenance are charged to income, and renewals and replacements
are capitalized. When assets are retired or otherwise disposed of,
the cost of the assets and the related accumulated depreciation are removed from
the accounts.
Estimated
useful lives are as follows:
Furniture,
Fixtures and Equipment
|
7-10
years
|
|
Leasehold
Improvements
|
10
years
|
|
Vehicles
|
5
years
|
|
Computers
& Software
|
5
years
|
|
Software
Development
|
5
years
|
|
Buildings
|
39
years
|
Depreciation expense for the years ended December 31, 2009 and 2008 amounted to $274,550 and $307,679 respectively.
Internal-Use Software
Costs:
The
Company expenses costs incurred in the preliminary project stage of developing
or acquiring internal use software, such as research and feasibility studies, as
well as costs incurred in the post-implementation/operational stage, such as
maintenance and training. Capitalization of software development
costs occurs only after the preliminary-project stage is complete, management
authorizes the project, and it is probable that the project will be completed
and the software will be used for the function intended. During 2009,
capitalized software costs totaled $0. The capitalized costs are
amortized on a straight-line basis over the estimated useful life of the
software. The Company has determined an impairment of the total value
of the internal software costs was required, and has accordingly posted an
impairment charge of $246,785 for the period ending December 31,
2009.
Intangibles:
The
Company has recorded goodwill based on the difference between the cost and the
fair value of certain purchased assets. The Company annually evaluates the
goodwill for possible impairment. The Company performed an assessment
of the fair value of its sole reporting unit as defined by ASC 820 and compared
it to the carrying value of its reporting unit. The Company’s market
capitalization was less than the Company’s book value indicating possible
impairment under the test established by ASC 820. The Company
determined the fair value of its assets on a class-by-class
basis. The fair values of the Company’s assets were based upon the
expected cash flow from the Company’s business, assuming a discount rate that
reflects the degree of risk involved with this type of business. The
Company has determined that an impairment of the goodwill in its sole reporting
unit was required, and has accordingly posted an impairment charge of $951,133
for the period ending December 31, 2008.
Advertising
Expense:
The
Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations for the years ended
December 31, 2009 and 2008 were $6,934 and $56,832 respectively.
F-9
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Cont.
Revenue
Recognition:
The
Company recognizes revenue in accordance with Accounting Standards Codification
subtopic 605-10, Revenue Recognition (“ASC 605-10”). ASC 605-10 requires that
four basic criteria must be met before revenue can be recognized:
(1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and
(4) collectability is reasonably assured. Determination of criteria
(3) and (4) are based on management’s judgments regarding the fixed
nature of the selling prices of the products delivered and the collectability of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time that
the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
ASC
605-10 incorporates Accounting Standards Codification subtopic 605-25,
Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting
for arrangements that may involve the delivery or performance of multiple
products, services and/or rights to use assets. The effect of implementing ASC
605-25 on the Company’s financial position and results of operations was not
significant.
Impairment of Long-Lived
Assets:
The
Company has adopted Accounting Standards Codification subtopic 360-10, Property,
plant and equipment (“ASC 360-10”). The Statement requires that long-lived
assets and certain identifiable intangibles held and used by the Company be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undiscounted cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be adjusted, based on estimates of future discounted cash flows
resulting from the use and ultimate disposition of the asset. ASC 360-10 also
requires assets to be disposed of be reported at the lower of the carrying
amount or the fair value less costs to sell.
Comprehensive
Income:
The
Company adopted Accounting Standards Codification subtopic 220-10, Comprehensive
Income (“ASC 220-10”) which establishes standards for the reporting and
displaying of comprehensive income and its components. Comprehensive income is
defined as the change in equity of a business during a period from transactions
and other events and circumstances from non-owners sources. It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners. ASC 220-10 requires other comprehensive
income (loss) to include foreign currency translation adjustments and unrealized
gains and losses on available for sale securities. The Company does not have any
items of comprehensive income in any of the periods presented.
Segment
Information:
The
Company adopted Accounting Standards Codification subtopic 280-10, Segment
Reporting - Overall - Disclosure ("ASC 280-10") which establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. ASC 280-10 also
establishes standards for related disclosures about products and services and
geographic areas. Operating segments are identified as components of an
enterprise about which separate discrete financial information is available for
evaluation by the chief operating decision maker, or decision making group, in
making decisions on how to allocate resources and assess
performance.
Stock Based
Compensation:
Effective
for the year beginning January 1, 2006, the Company has adopted Accounting
Standards Codification subtopic 718-10, Compensation (“ASC 718-10”). The Company
made no employee stock-based compensation grants before December 31, 2005 and
therefore has no unrecognized stock compensation related liabilities or expense
unvested or vested prior to 2006. Stock-based compensation expense recognized
under ASC 718-10 for the years ended December 31, 2009 and 2008 was $0 and $0,
respectively.
F-10
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Cont.
Liquidity:
As shown
in the accompanying financial statements, the Company recorded a net (loss) of
($1,931,205) and ($1,851,163) during the years ended December 31, 2009 and 2008,
respectively. The Company's total liabilities exceeded its total assets by
$2,105,104 as of December 31, 2009.
Concentration of Credit
Risk:
Financial
instruments and related items, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash
investments with high credit quality institutions. At times, such
investments may be in excess of the FDIC insurance limit.
New Accounting
Pronouncements:
Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted
Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB
Accounting Standards Codification (the “Codification”) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in
their own right. ASUs will serve only to update the Codification, provide
background information about the guidance and provide the bases for conclusions
on the change(s) in the Codification. References made to FASB guidance
throughout this document have been updated for the Codification.
Effective
January 1, 2008, the Company adopted FASB ASC 820-10, Fair Value
Measurements and Disclosures – Overall (“ASC 820-10”) with respect to its
financial assets and liabilities. In February 2008, the FASB issued updated
guidance related to fair value measurements, which is included in the
Codification in ASC 820-10-55, Fair Value Measurements and Disclosures – Overall
– Implementation Guidance and Illustrations. The updated guidance provided a one
year deferral of the effective date of ASC 820-10 for non-financial assets and
non-financial liabilities, except those that are recognized or disclosed in the
financial statements at fair value at least annually. Therefore, the Company
adopted the provisions of ASC 820-10 for non-financial assets and non-financial
liabilities effective January 1, 2009, and such adoption did not have a
material impact on the Company’s consolidated results of operations or financial
condition.
Effective
April 1, 2009, the Company adopted FASB ASC 820-10-65, Fair Value
Measurements and Disclosures – Overall – Transition and Open Effective Date
Information (“ASC 820-10-65”). ASC 820-10-65 provides additional guidance for
estimating fair value in accordance with ASC 820-10 when the volume and level of
activity for an asset or liability have significantly decreased. ASC 820-10-65
also includes guidance on identifying circumstances that indicate a transaction
is not orderly. The adoption of ASC 820-10-65 did not have an impact on the
Company’s consolidated results of operations or financial
condition.
Effective
April 1, 2009, the Company adopted FASB ASC 825-10-65, Financial
Instruments – Overall – Transition and Open Effective Date Information (“ASC
825-10-65”). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair
value of financial instruments in interim financial statements as well as in
annual financial statements and also amends ASC 270-10 to require those
disclosures in all interim financial statements. The adoption of ASC 825-10-65
did not have a material impact on the Company’s consolidated results of
operations or financial condition.
F-11
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Cont.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”, which is included in
ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and
requirements for evaluating and reporting subsequent events and distinguishes
which subsequent events should be recognized in the financial statements versus
which subsequent events should be disclosed in the financial statements. ASC
Topic 855 also required disclosure of the date through which subsequent events
are evaluated by management. ASC Topic 855 was effective for interim
periods ending after June 15, 2009 and applies
prospectively. Because ASC Topic 855 impacted the disclosure
requirements, and not the accounting treatment for subsequent events, the
adoption of ASC Topic 855 did not impact our results of operations or financial
condition. See Note 14 for disclosures regarding our subsequent
events.
Effective
July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value
Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided
amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for
the fair value measurement of liabilities. ASU 2009-05 provides clarification
that in circumstances in which a quoted price in an active market for the
identical liability is not available, a reporting entity is required to measure
fair value using certain techniques. ASU 2009-05 also clarifies that when
estimating the fair value of a liability, a reporting entity is not required to
include a separate input or adjustment to other inputs relating to the existence
of a restriction that prevents the transfer of a liability. ASU 2009-05 also
clarifies that both a quoted price in an active market for the identical
liability at the measurement date and the quoted price for the identical
liability when traded as an asset in an active market when no adjustments to the
quoted price of the asset are required are Level 1 fair value measurements.
Adoption of ASU 2009-05 did not have a material impact on the Company’s
consolidated results of operations or financial condition.
In
October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue
Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) (“ASU
2009-13”) and ASU 2009-14, Certain Arrangements That Include Software Elements,
(amendments to FASB ASC Topic 985, Software) (“ASU 2009-14”). ASU 2009-13
requires entities to allocate revenue in an arrangement using estimated selling
prices of the delivered goods and services based on a selling price hierarchy.
The amendments eliminate the residual method of revenue allocation and require
revenue to be allocated using the relative selling price method. ASU
2009-14 removes tangible products from the scope of software revenue guidance
and provides guidance on determining whether software deliverables in an
arrangement that includes a tangible product are covered by the scope of the
software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on
a prospective basis for revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010, with early adoption
permitted. The Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to
have a material impact on the Company’s consolidated results of operations or
financial condition.
Use of
Estimates:
The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Income
Taxes:
The
Company follows Accounting Standards Codification subtopic 740-10, Income Taxes
(“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets
and liabilities are computed based upon the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to
be realized or settled. Deferred income tax expenses or benefits are based on
the changes in the asset or liability during each period. If available evidence
suggests that it is more likely than not that some portion or all of the
deferred tax assets will not be realized, a valuation allowance is required to
reduce the deferred tax assets to the amount that is more likely than not to be
realized. Future changes in such valuation allowance are included in the
provision for deferred income taxes in the period of change. Deferred income
taxes may arise from temporary differences resulting from income and expense
items reported for financial accounting and tax purposes in different periods.
Deferred taxes are classified as current or non-current, depending on the
classification of assets and liabilities to which they relate. Deferred taxes
arising from temporary differences that are not related to an asset or liability
are classified as current or non-current depending on the periods in which the
temporary differences are expected to reverse.
F-12
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Cont.
Risks and
Uncertainties:
The
Company operates in an environment where intense competition exists from other
companies. This competition, along with increases in the price of
paper, can impact the pricing and profitability of the Company.
The
Company at times may have cash deposits in excess of federally insured
limits.
Accounts
Receivable:
The
Corporation grants credit to its customers, which includes the retail sector and
their own franchisees. The Company establishes an allowance for
doubtful accounts based upon on a percentage of accounts receivable plus those
balances the Company believes will be uncollectible. Allowance for
uncollectible accounts as of December 31, 2009 was $433,674.
Cash and Cash
Equivalents:
The
Company considers all highly liquid investments with maturities of three months
or less to be cash equivalents.
Earnings
Per Common Share:
The
Company calculates its earnings per share pursuant to Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). Under SFAS No. 128, basic earnings per share are computed by
dividing reported earnings available to common stockholders by weighted average
shares outstanding. Diluted earnings per share reflects the potential
dilution assuming the issuance of common shares for all potential dilative
common shares outstanding during the period. The Company had 480,500
options issued and outstanding as of December 31, 2009 to purchase stock at a
weighted average exercise price of $0.26.
Principles of
Consolidation:
The
accompanying consolidated financial statements include the accounts of the
parent company, Next Generation Media Corporation and its subsidiaries United
Marketing Solutions, Inc. and Dynatech, LLC for the years ended December 31,
2009 and 2008. All inter-company balances and transactions have been
eliminated in consolidation.
Revised
Interpretation No. 46 (“FIN 46R”), Consolidation of Variable Interest
Entities requires the primary beneficiary of a variable interest entity
to consolidate that entity on its financial statements. The primary
beneficiary of a variable interest entity is the party that absorbs a majority
of the variable interest entity’s expected losses, receives a majority of the
entity’s expected residual returns, or both, as a result of ownership,
contractual, or other financial interests in the entity. Expected
losses are the expected negative variability in the fair value of an entity’s
net assets, exclusive of its variable interests, and expected residual returns
are the expected positive variability in the fair value of an entity’s net
assets, exclusive of its variable interests.
Minority
Interest:
The
minority interest represents the minority or non-controlling shareholders’ or
members’ proportionate share of the equity of the Company’s subsidiaries and are
adjusted for the minority’s shares of the profits and losses incurred by these
subsidiaries. No value is recognized on the balance sheet as all
minority interest holders lacked capital investment in the related
subsidiaries. The Company owns 35% of Dynatech, LLC.
NOTE 2 – NOTES
PAYABLE
Notes
payable at December 31, 2009 consists of:
Obligation
to Virginia Commerce Bank, bearing interest at 6.625% per annum, the loan is
payable in three hundred monthly installments with a minimum payment consisting
of the accrued interest amount for the first three years and amortized
thereafter, collateralized by the property located at 7644 Dynatech
Court. Balance outstanding at December 31, 2009 was
$3,700,000.
F-13
The 5
year schedule of maturities is as follows:
2010
|
$ | 24,496 | ||
2011
|
61,616 | |||
2012
|
65,824 | |||
2013
|
70,320 | |||
Thereafter
|
3,477,744 | |||
$ | 3,700,000 |
NOTE 3 – LINE OF
CREDIT
The
Company has two lines of credit in the amounts of $500,000 and $150,000 secured
by the Company’s accounts receivable. The first line of credit for
$500,000 matures on March 31, 2010 calls for interest of 7.25% per
annum. The balance outstanding at December 31, 2009 was
$500,000.
The
second line of credit of $150,000 matured on October 1, 2009 and calls for
interest of 8.25% per annum. This line of credit is currently in
default. The balance outstanding at December 31, 2009 was
$150,000.
NOTE 4 – COMMITMENTS AND
CONTINGENCIES
Future
minimum annual lease payments for as of December 31, 2009 are:
2010
|
$ | 32,000 | ||
2011
|
0 | |||
2012
|
0 | |||
2013
|
0 | |||
Thereafter
|
0 | |||
Total
|
$ | 32,000 |
Rent
expense for the years ended December 31, 2009 and 2008 was $12,000 and $0,
respectively.
The
Company has entered into various employment contracts. The contracts
provided for the award of present and/or future shares of common stock and/or
options to purchase common stock at fair market value of the underlying options
at date of grant or vesting. The contracts can be terminated without cause upon
written notice within thirty to ninety days. The Company is party to
various legal matters encountered in the normal course of
business. In the opinion of management and legal counsel, the
resolution of these matters will not have a material adverse effect on the
Company’s financial position or the future results of operations.
NOTE 5 – INCOME
TAXES
Deferred
tax assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax basis.
Management
has provided a valuation allowance for the total net deferred tax assets as of
December 31, 2009 and 2008, as they believe that it is more likely than not that
the entire amount of deferred tax assets will not be realized.
The
company filed a consolidated return, with a tax liability of $0 for the year
2009. At December 31, 2009, the Company had net operating loss carry
forwards for federal income tax purposes of approximately $5,764,573 which are
available to offset future taxable income, if any, on a scheduled basis through
2029.
F-14
NOTE 6 – OBLIGATION UNDER
CAPITAL LEASE
The
Company acquired machinery under the provisions of long-term
leases. For financial reporting purposes, minimum lease payments
relating to the machinery have been capitalized. The leases are
currently in default and in litigation.
NOTE 7 – INTANGIBLE
ASSETS
Intangible
assets consist of the following items:
Goodwill
|
$ | 1,341,850 | ||
Less
accumulated amortization (Pre January 1, 2002)
|
(390,717 | ) | ||
Less
impairment
|
(951,133 | ) | ||
Intangible
assets, net
|
$ | 0 |
NOTE 8 - PUBLIC STOCK
LISTING
Next
Generation Media Corporation common stock began trading on the OTC Bulletin
Board on June 11, 2001, under the symbol NGMC.
NOTE 9 – SEGMENT
INFORMATION
The
Company has two reportable segments for the twelve-month periods ended December
31, 2009 and 2008.
United
Marketing Solutions was acquired on April 1, 1999. The entity is a
wholly owned subsidiary. United operates a direct mail marketing
business and is the Company’s primary line of business.
Dynatech,
LLC. Dynatech, LLC began operations on June 22, 2007. The
entity is a variable interest entity. Dynatech, LLC owns and operates
a commercial building that was formerly the corporate headquarters.
The
accounting policies of the reportable segments are the same as those set forth
in the Summary of Accounting Policies. Summarized financial
information concerning the Company's reporting segments for the periods ending
December 31, 2009 and 2008 are presented below:
Year
Ended
December 31,
2009
United
|
Dynatech
|
Parent
|
Eliminations
|
Total
|
||||||||||||||||
Revenue
|
2,239,871 | 405,693 | 180,000 | (444,637 | ) | 2,380,927 | ||||||||||||||
Segment
profit/(loss)
|
(1,860,020 | ) | 97,414 | (75,280 | ) | (93,319 | ) | (1,931,205 | ) | |||||||||||
Total
Assets
|
1,836,229 | 3,768,519 | 382,757 | (2,129,794 | ) | 3,857,711 |
Year Ended
December
31, 2008
United
|
Dynatech
|
Parent
|
Eliminations
|
Total
|
||||||||||||||||
Revenue | 5,121,946 | 307,021 | 142,500 | (415,381 | ) | 5,156,086 | ||||||||||||||
Segment profit/(loss) | (928,350 | ) | (21,384 | ) | (1,003,964 | ) | 102,535 | (1,851,163 | ) |
Total Assets | 2,290,758 | 3,691,290 | 394,773 | (1,262,657 | ) | 5,114,164 |
F-15
NOTE 10 –
RECLASSIFICATIONS
Certain
amounts on the 2009 financial statements have been reclassified to conform with
the 2008 presentation.
NOTE 11 – EMPLOYEE STOCK
INCENTIVE PLAN
One
December 26, 2001, the Company adopted the Employee Stock Incentive Plan
authorizing 3,000,000 shares at a maximum offering price of $0.10 per share for
the purpose of providing employees equity-based compensation
incentives. During 2009 and 2008, no shares were issued under the
plan.
NOTE 12 – RELATED PARTY
TRANSACTIONS
The
Company reports a commercial leasing property that is owned 65% by the Company
President and 35% by the Company’s wholly owned subsidiary United Marketing
Solutions, Inc.
The
Company has accrued compensation expense for the employment contract of the
Company President. As of December 31, 2009, the accrued amount was
$447,242.
NOTE 13 – ACCRUED
EXPENSES
Accrued
expenses consists of the following items:
Accrued
property taxes
|
$ | 13,690 | ||
Accrued
wages
|
447,242 | |||
Accrued
legal fees
|
37,500 | |||
Accrued
consulting fees
|
4,000 | |||
Other
miscellaneous accruals
|
36,684 | |||
|
$ | 539,116 |
NOTE 14 – GOING CONCERN
MATTERS
The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. As shown in the accompanying financial
statements for the year ended December 31, 2009 and 2008, the Company has
incurred operating losses of $1,931,205 and $1,851,163, respectively. In
addition, the Company has a deficiency in stockholder’s equity of $9,879,038 and
$8,011,152 at December 31, 2009 and 2008, respectively. These factors among
others may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.
The
Company’s existence is dependent upon management’s ability to develop profitable
operations. Management is devoting substantially all of its efforts to
establishing its business and there can be no assurance that the Company’s
efforts will be successful. However, the planned principal operations have not
fully commenced and no assurance can be given that management’s actions will
result in profitable operations or the resolution of its liquidity problems. The
accompanying statements do not include any adjustments that might result should
the Company be unable to continue as a going concern.
In order
to improve the Company’s liquidity, the Company is actively pursuing additional
equity financing through discussions with investment bankers and private
investors. There can be no assurance that the Company will be successful in its
efforts to secure additional equity financing.
NOTE 15 – SUBSEQUENT
EVENTS
There
were no material subsequent events.
F-16
EXHIBIT
INDEX
Exhibit
No.
|
Description
|
|
3.1
|
Articles
of Incorporation, under the name Micro Tech Industries, Inc. (incorporated
by reference in the filing of the Company’s annual report on Form 10KSB
filed on April 15, 1998).
|
|
3.2
|
||
Amendment
to the Articles of Incorporation (incorporated by reference in the
Company’s quarterly report filed on Form 10 Q filed on May 15,
1997).
|
||
3.3
|
Amended
and Restated Bylaws (incorporated by reference in the filing of the
Company’s annual report on Form 10KSB filed on November 12,
1999).
|
|
16.1
|
Letter
on change in certifying accountant (incorporated by reference in the
filing of the Company’s current report on Form 8-K filed on January 5,
2001).
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Darryl Reed (filed
herewith).
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Darryl Reed (filed
herewith).
|
|
32.
|
Section
1350 Certification of Darryl Reed (filed
herewith).
|
F-17