U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-28083
NEXT GENERATION MEDIA CORP.
(Exact name of Company as specified in its charter)
Nevada 88-0169543
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
7644 Dynatech Court, Springfield, Virginia 22153
(Address of principal executive offices) (Zip Code)
Company's telephone number: (703) 644-0200
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___
As of September 30, 2005, the Company had 12,373,397 shares of common
stock issued and outstanding.
EXPLANATORY NOTE
This Amendment is being filed to include a Statement of Cash Flows
representing the period from December 31, 2004 through September 30,
2005. In the Company's 10-QSB for the three-month period ending
September 30, 2005, the Company inadvertently included a Statement of
Cash Flows only for the three-month period ending September 30, 2005.
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1
Review Report of Independent Registered Public Accounting Firm
Condensed Consolidated Interim Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion And
Analysis Of Financial Condition And Results Of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes In Securities And
Use Of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission Of Matters To A Vote Of Security Holders
Item 5. Other Information
Item 6. Exhibits And Reports On Form 8-K
Signature
Turner, Jones &Associates, P.L.L.C.
Certified Public Accountants
108 Center Street, North, 2ndFloor
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
7644 Dynatech Court
Springfield, VA 22153
We have reviewed the condensed consolidated balance sheet of Next
Generation Media Corporation and subsidiary as of September 30, 2005,
and the related condensed consolidated statements of income and cash
flows for the nine-month periods ended September 30, 2005 and 2004.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A review
of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the condensed financial statements, referred
to above, for them to be in conformity with accounting principles
generally accepted in the United States of America.
We have previously audited in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of Next Generation Media Corporation and
subsidiary as of December 31, 2004, and the related consolidated
statements of income, retained earnings, and cash flows for the year
then ended (not presented herein); and in our report dated March 23,
2005, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of
December 31, 2004, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
Turner, Jones & Associates, P.L.L.C
Vienna, Virginia
November 2, 2005
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Next Generation Media Corporation
Condensed Consolidated
Interim Financial Statements
For The Nine Months Ended September 30, 2005
With Review Report of Independent
Registered Public Accounting Firm
TURNER, JONES AND ASSOCIATES, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
Table of Contents Page
Review Report of Independent Registered Public Accounting Firm
Condensed Consolidated Interim Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Financial Statements
Next Generation Media Corporation
Consolidated Statements of Financial Position
ASSETS
(Unaudited) (Audited)
September 30, December 31,
2005 2004
CURRENT ASSETS:
Cash and cash equivalents $ 663,848 $ 395,575
Accounts receivable, net of allowance
for uncollectible accounts 529,598 325,698
Notes receivable, net of allowance
for uncollectible accounts 21,450 85,833
Trade notes receivable 76,644 46,587
Inventories 86,951 103,380
Employee loans and advances - 2,074
Deposits - 41,200
Prepaid expenses & other current assets 75,154 24,437
Total current assets 1,453,645 1,024,784
PROPERTY, PLANT AND EQUIPMENT:
Equipment 1,414,685 1,443,587
Furniture and fixtures 67,604 65,093
Leasehold improvements 81,390 76,363
Computer equipment/software 175,638 53,887
Vehicles 9,200 9,200
Total property, plant and equipment 1,748,517 1,648,130
Less accumulated depreciation (1,402,635) (1,320,701)
Net property, plant and equipment 345,882 327,429
Intangibles, net of accumulated amortization 951,133 951,133
Trade notes receivable - 21,630
Total other assets 951,133 972,763
TOTAL ASSETS 2,750,660 2,324,976
See accompanying notes and accountant's review report
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Obligation under capital leases, current portion 25,427 18,595
Notes payable, current portion 25,145 13,998
Accounts, accrued expenses and other payables 502,580 375,111
Customer deposits 146,592 29,000
Sales tax payable 5,988 4,299
Pension payable 7,054 6,558
Total current liabilities 712,786 447,561
LONG TERM LIABILITIES:
Obligation under capital lease 41,138 61,851
Notes payable, less current portion 70,167 -
Total long term liabilities 111,305 61,851
Total liabilities 824,091 509,412
STOCKHOLDERS' EQUITY :
Common stock, $.01 par value, 50,000,000 shares
authorized 12,373,397 and 10,523,397 123,734 105,234
issued and outstanding, respectively
Additional paid in capital 7,379,744 7,379,744
Accumulated deficit (5,576,909) (5,669,414)
Total stockholders' equity 1,926,569 1,815,564
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,750,660 2,324,976
See accompanying notes and accountant's review report
Next Generation Media Corporation
Condensed Consolidated Statements of Earnings (Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
REVENUES:
Coupon sales, net of discounts $ 2,128,298 $ 1,969,597 $ 6,317,474 $ 5,748,813
Franchise fees 66,000 122,500 193,000 358,000
Total revenues 2,194,298 2,092,097 6,510,474 6,106,813
COST OF GOODS SOLD 1,501,507 1,340,164 4,431,584 3,934,833
Gross margin 692,791 751,933 2,078,890 2,171,980
OPERATING EXPENSES:
General and administrative expenses 647,074 569,911 1,871,789 1,852,993
Depreciation & amortization 37,500 40,155 112,500 111,177
Total operating expenses 684,574 610,066 1,984,289 1,964,170
Gain/(Loss) from operations 8,217 141,867 94,601 207,810
OTHER INCOME AND EXPENSES:
Interest income - -
Interest income 496
Other income (expense) (3) (14,519) 1,485 (88,095)
Gain/(Loss) on legal settlement - 290 2,405 176,954
Interest expense (3,696) (8,671) (7,486) (25,339)
Gain/(loss) on disposal - - 1,500 -
Total other income (expense) (3,203) (22,900) (2,096) 63,520
Net Income/(Loss) 5,014 118,967 92,505 271,330
Gain/(Loss) applicable to common shareholders 5,014 118,967 92,505 271,330
Basic gain/(loss) per common share - 0.011 0.007 0.026
Weighted average common shares outstanding 12,373,397 10,523,397 12,373,397 10,523,397
Diluted gain per common share - 0.008 0.007 0.019
Fully diluted common shares outstanding 13,504,897 14,213,397 13,504,897 14,213,397
See accompanying notes and accountant's review report
Next Generation Media Corporation
Consolidated Statements of Stockholders' Equity-Unaudited
Additional
Common Stock Paid In Accumulated
Shares Amount Capital Deficit Total
Balance: January 1, 2003 9,523,397 95,234 7,343,744 (6,147,665) 1,291,313
Common stock issued in
exchange for services 1,000,000 10,000 36,000 - 46,000
Net Income - Year to Date - - - 294,791 294,791
Balance: December 31, 2003 10,523,397 105,234 7,379,744 (5,852,874) 1,632,104
Net Income - Year to Date - - - 183,460 183,460
Balance: December 30, 2004 10,523,397 105,234 7,379,744 (5,669,414) 1,815,564
Shares issued 1,850,000 18,500 - - 18,500
Net Income 92,505 92,505
Balance: September 30, 2005 12,373,397 123,734 7,379,744 (5,576,909) 1,926,569
2
Next Generation Media Corporation
Statement of Cash Flows - Unaudited
For the Nine Months Ended
September 30, September 30,
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 92,505 $ 115,971
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on disposal (1,500) -
Depreciation and amortization 112,500 30,867
(Increase) decrease in assets
Accounts & notes receivable (147,944) (107,630)
Inventories 16,429 8,083
Prepaids and other current assets (7,443) (3,085)
Increase (decrease) in liabilities
Accounts payable, accrued expenses and other payables 246,750 62,213
Pension payable 496 (2,351)
Net cash flows (used) by operating activities 311,793 104,068
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (130,954) (17,409)
Disposal of property and equipment 1,500 -
Net cash provided/(used) by investing activities (129,454) (17,409)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing under notes payable 100,990 -
Repayment of notes payable and capital leases (33,556) (10,939)
Shares issued for services 18,500 -
Net cash provided/(used) by financing activities 85,934 (10,939)
NET INCREASE/(DECREASE) IN CASH 268,273 100,027
CASH, BEGINNING OF PERIOD 395,575 123,013
CASH, END OF PERIOD 663,848 223,040
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Income taxes - -
Interest 7,486 1,818
Shares issued for services 18,500 -
See accompanying notes and accountant's review report
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
included herein have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (SEC). The
interim condensed consolidated accounts of Next Generation Media
Corporation and its subsidiary (collectively, the Company). In the
opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair statement of the
financial position, results of operations and cash flows for the
interim periods presented have been made. The preparation of the
financial statements includes estimates that are used when accounting
for revenues, allowance for uncollectible receivables,
telecommunications expense, depreciation and amortization and certain
accruals. Actual results could differ from those estimates. The
results of operations for the three and nine month periods ended
September 30, 2005, are not necessarily indicative of the results to
be expected for the full year. Some information and footnote
disclosures normally included in financial statements or notes
thereto prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules and
regulations. The Company believes, however, that its disclosures are
adequate to make the information provided not misleading. You should
read these interim consolidated financial statements in conjunction
with the consolidated financial statements and notes thereto included
in the Company's 2004 Annual Report on Form 10-KSB40.
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 Inc., 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
September 30, 2005, the Company had approximately 48 active area
franchise licenses located throughout the United States.
Property and Equipment:
Property and equipment are stated at cost. The company uses the
straight-line method in computing depreciation for financial
statement purposes.
Expenditures for repairs and maintenance are charged to income, and
renewals and replacements are capitalized. When assets are retired
or otherwise disposed of, the cost of the assets and the related
accumulated depreciation are removed from the accounts.
Estimated useful lives are as follows:
Computers and software 3-5 years
Furniture, fixtures and equipment 10 years
Leasehold improvements are amortized over the lesser of the lease
term or the useful life of the property.
Depreciation expense for the three months ended September 30, 2005 and
2004 was $37,500 and $40,155, respectively.
Intangibles:
The Company has recorded goodwill based on the difference between the
cost and the fair value of certain purchased assets. The Company
periodically evaluates the goodwill for possible impairment. The
analysis consists of a comparison of the Company's market
capitalization under SFAS No. 142 to the net fair market value of all
identifiable assets plus goodwill.
Intangibles:
Any excess over market capitalization would be written off due to impairment.
Advertising Expense:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations for the three
months ended September 30, 2005 and 2004 was $16,055 and $14,707
respectively.
Revenue Recognition:
The Company recognizes revenue from the design production and
printing of coupons upon delivery. Revenue from initial franchise
fees is recognized when substantially all services or conditions
relating to the sale have been substantially performed.
Substantially all services or conditions are performed prior to
receipt of payment from the franchise. Franchise support fees of
$150 per quarter and other charges are recognized when billed to the
franchisee. Amounts billed or collected in advance of final delivery
or shipment are reported as deferred revenue.
Impairment of Long-Lived Assets:
The Company reviews the carrying values of its long-lived assets for
possible impairment on a annual basis and whenever events or changes
in circumstances indicate that the carrying amount of the assets
should be addressed. The Company believes that no permanent
impairment in the carrying value of long-lived assets exists as of
September 30, 2005.
Comprehensive Income:
The Company has adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income". Comprehensive income as
defined includes all changes to equity except that resulting from
investments by owners and distributions to owners. The company has
no item of comprehensive income to report.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the
current year presentation.
New Accounting Pronouncements:
In November of 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others", an
interpretation of FASB Statements No. 5, 57, and 107 and rescission
of FASB Interpretation No. 34. This interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees
that is has issued. It also claries that a guarantor is requested to
recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The
initial recognition and initial measurement provisions are applicable
on a prospective basis to guarantees issued or modified issued or
modified after December 31, 2002 and the disclosure provisions were
effective for the year ended December 31, 2002. The adoption of this
interpretation did not have a material effect on the Company's
consolidated results of operations, financial condition or cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." This statement establishes standards for the classification
and measurement of certain financial instruments with characteristics
of both liabilities and equity. With the exception of certain
measurement criteria deferred indefinitely by the FASB, SFAS No. 150
is effective for financial instruments entered into or modified after
May 31, 2003 and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The implementation of
SFAS No. 150 did not have a material impact on the Company's
consolidated results of operations, financial condition, or cash flows.
Use of Estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Income Taxes:
The Corporation uses Statement of Financial Standards No. 109
"Accounting for Income Taxes" (SFAS No. 109) in reporting deferred
income taxes. SFAS No. 109 requires a company to recognize deferred
tax liabilities and assets for expected future income tax
consequences of events that have been recognized in the company's
financial statements. Under this method, deferred tax assets and
liabilities are determined based on temporary differences in
financial carrying amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which
temporary differences are expected to reverse.
Risks and Uncertainties:
The Company operates in an environment where intense competition
exists from other companies. This competition, along with increases
in the price of paper, can impact the pricing and profitability of
the Company.
Credit Risk:
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 feels will be
uncollectible. Allowance for uncollectible accounts as of September
30, 2005 and 2004 was $52,913 and $211,940 respectively.
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 is
computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding. Diluted
earnings per share reflect the potential dilution assuming the
issuance of common shares for all potential dilutive common shares
outstanding during the period.
As of September 30, 2005, the Company had financial obligations that
could create future dilution to the Company's common shareholders and
are not currently classified as common shares of the company. The
following table details such instruments and obligations and the
common stock comparative for each. The common stock number is based
on specific conversion or issuance assumptions pursuant to the
corresponding terms of each individual instrument or obligation.
Instrument or Obligation Common Stock
Stock options outstanding as of September 30, 2005
with a weighted average exercise price per share
of $0.65 1,131,500
Inventories:
Inventories consist primarily of paper, envelopes, and printing
materials and are stated at the lower of cost or market, with cost
determined on the first-in, first-out method.
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the parent company, Next Generation Media Corporation and
its subsidiaries as of September 30, 2005.
NOTE 2 - RETIREMENT PLAN
The company maintains a 401(k) defined contribution plan covering
substantially all employees. The Corporation may elect to contribute
up to 3% of each eligible employee's gross wages. Employees can
elect up to 15% of their salary to be contributed before income
taxes, up to the annual limit set by the Internal Revenue Code. The
Corporation accrued $15,000 and $12,000 in the three months ended
September 30, 2005 and 2004 respectively.
NOTE 3 - NOTES PAYABLE
Notes payable consists of the following:
September 30, 2005 Amount
Note payable to CIT Group, interest of 10% per annum,
collateralized by the equipment of United Marketing Solutions, Inc. $ 1,998
Note payable to Bank of America, interest at 6.4% per annum,
payable in 48 monthly installments. The loan is secured by
computer hardware and software $93,314
$95,312
Less: Current portion $25,145
Long-term portion $70,167
NOTE 4 - NOTES RECEIVABLE
On June 30, 2000, the Company executed a promissory note with UNICO,
Inc. for $200,000 in conjunction with the sale of Independent News,
Inc. The note is outstanding and currently in default, the Company's
management considers a portion of the note collectible. Accordingly,
the Company recognized additional bad debt expense during the quarter
ended September 30, 2005.
NOTE 5 - COMMON STOCK
During the nine months ended September 30, 2005, the Company issued
$1,850,000 shares of common stock, to various officers and directors.
As a result the Company recognized $18,500 of expense.
NOTE 6 - 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.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has entered into various employment contracts. The
contracts provided for the award of present and/or future options to
purchase common stock at then fair market value of the underlying
shares 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.
Future minimum annual lease payments for capital and operating leases
as of September 30, 2005 are:
Operating Capital
2005 72,926 6,450
2006 295,421 25,800
2007 23,409 25,800
2008 0 12,612
Thereafter 0 0
Total 391,756 70,662
Rent expense for the quarters ended September 30, 2005 and 2004 were
$67,526 and $64,096, respectively.
NOTE 8 - OBLIGATION UNDER CAPITAL LEASE
The Company acquired machinery under the provisions of two long-term
leases. For financial reporting purposes, minimum lease payments
relating to the machinery have been capitalized.
The future minimum lease payments under capital leases and net
present value of the future minimum lease payments as of September
30, 2005 are as follows:
Total minimum lease payments $70,662
Amount representing interest 4,097
Present value of net minimum lease payments 66,565
Current portion 25,427
Long-term capital lease obligation 41,138
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following Management Discussion and Analysis should be read in
conjunction with the financial statements and accompanying notes
included in this Form 10-QSB.
Total revenues in the quarter ended September 30, 2005 and the nine
months ended September 30, 2005, respectively $2,194,298 and
$6,510,474, increased from $2,092,097 in the quarter ended September
30, 2004 and $6,106,813 in the nine months ended September 30, 2004, a
three month increase of four percent (4%) and a nine month increase of
six percent (6%).
Total cost of goods sold in the quarter ended September 30, 2005 and
the nine months ended September 30, 2005, respectively, $1,501,507 and
$4,431,584, increased from $1,340,164 in the quarter ended September
30, 2004 and $3,934,833 in the nine months ended September 30, 2004, a
three month increase of twelve percent (12%) and a nine month increase
of twelve percent (12%). This increase is due primarily to the
production cost associated with the increase in revenue that includes
labor and material expense. The gross margin in the quarter ended
September 30, 2005 and the nine months ended September 30, 2005,
respectively, $692,791 and $2,078,890 decreased from $751,933 in the
quarter ended September 30, 2004 and $2,171,980 in the nine months
ended September 30, 2004.
Total operating expenses in the quarter ended September 30, 2005 and
the nine months ended September 30, 2005, respectively, $684,574 and
$1,984,289, increased from $610,066 in the quarter ended September 30,
2004 and $1,964,170 in the nine months ended September 30, 2004 as
management worked to control costs and eliminate unnecessary expenditures.
Total assets grew increased from $2,324,976 at December 31, 2004 to
$2,750,660 at September 30, 2005. Total current liabilities increased
from $509,412 at December 31, 2004 to $824,091 at June 30, 2005 due in
part to short term financing of current liabilities. The company uses
credit to manage cash flow and build cash reserves. Finance charges
are avoided by paying outstanding balances in full by due dates.
Net cash flows by operating activities was $311,793 for the nine
month period ended September 30, 2005 as compared to $104,068 at
December 31, 2004.
Net cash used by investing activities was $129,454 for the nine month
period ended September 30, 2005, as compared to net cash used by
investing activities of $17,409 at December 31, 2004.
Net cash provided by financing activities was $85,934 for the nine
month period ended September 30, 2005 as compared to net cash of
$36,081 used by financing activities at December 31, 2004.
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 deficits
from operations. As previously mentioned, the Company has obtained
financing in the form of equity in order 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
raising the funds required.
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.
Quantitative And Qualitative Disclosures About Market Risk
In the normal course of business, operations of the Company may be
exposed to fluctuations in interest rates. These fluctuations can
vary the cost of financing, investing, and operating transactions.
Because the Company has only fixed rate short-term debt, there are no
material impacts on earnings due to fluctuations in interest rates.
New Accounting Pronouncements:
In March 2004, the FASB issued EITF No. 03-1, The Meaning of Other-
Than-Temporary Impairment and its Application to Certain Investments
which provides additional guidance on how companies, carrying debt
and equity securities at amounts higher than the securities fair
values, evaluate whether to record a loss on impairment. In
addition, EITF No. 03-1 provides guidance on additional disclosures
required about unrealized losses. The impairment accounting guidance
is effective for reporting periods beginning after June 15, 2004 and
the disclosure requirements are effective for annual reporting
periods ending after June 15, 2004. On September 30, 2004, the FASB
approved the issuance of FASB Staff Position EITF No. 03-1-1, which
delays the effective date for the application of the recognition and
measurement provisions of EITF No. 03-1 to investments in securities
that are impaired. Certain disclosure provisions in EITF No. 03-1
were effective for fiscal years ended after December 15, 2003 and
other disclosure provisions are effective for annual reporting
periods after June 15, 2004. The adoption of this statement is not
expected to have a material effect on the Company's consolidated
financial statements.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-
Based Payment ("SFAS 123 r"). This statement is a revision of SFAS
No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees, and its related implementation guidance. SFAS
123r requires that compensation cost relating to share-based payment
transactions be recognized in financial statements. That cost will
be measured based on the fair value of the equity or liability
instruments issued. This statement is effective beginning with the
Company's third quarter of fiscal year 2005. The Company is
currently evaluating the requirements of SDAF 123r and has not yet
fully determined the impact on its consolidated financial statements.
The adoption of this statement is not expected to have a material
effect on the Company's consolidated financial statements.
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-QSB will, in fact, occur. The
Company does not undertake any obligation to revise these forward-
looking statements to reflect future events or circumstances and
other factors discussed elsewhere in this report and the documents
filed or to be filed by the Company with the Securities and Exchange
Commission.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Trends, Risks and Uncertainties
The Company has sought to identify what it believes to be the most
significant risks to its business as discussed in "Risk Factors"
above, but cannot predict whether or to what extent any of such risks
may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an
investment decision with respect to the Company's stock.
Limited operating history; anticipated losses; uncertainly of future results
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The
Company's prospects must be evaluated with a view to the risks
encountered by a company in an early stage of development,
particularly in light of the uncertainties relating to the business
model that the Company intends to market and the potential acceptance
of the Company's business model. The Company will be incurring costs
to develop, introduce and enhance its products, to establish
marketing relationships, to acquire and develop products that will
complement each other, and to build an administrative organization.
To the extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations
and financial condition will be materially adversely affected. There
can be no assurance that the Company will be able to generate
sufficient revenues from the sale of its products and services. The
Company expects that negative cash flow from operations may exist for
the next 12 months as it continues to develop and market its products
and services. If cash generated by operations is insufficient to
satisfy the Company's liquidity requirements, the Company may be
required to sell additional equity or debt securities. The sale of
additional equity or convertible debt securities would result in
additional dilution to the Company's shareholders.
Potential fluctuations in quarterly operating results may fluctuate
Significantly in the future as a result of a variety of factors, most
of which Are outside the Company's control including: the demand for
the Company's products and services; seasonal trends in demand and
pricing of products and services; the amount and timing of capital
expenditures and other costs relating to the expansion of the
Company's operations; the introduction of new services and products
by the Company or its competitors; price competition or pricing
changes in the industry; political risks and uncertainties involving
the world's markets; technical difficulties and general economic
conditions. The Company's quarterly results may also be significantly
affected by the impact of the accounting treatment of acquisitions,
financing transactions or other matters. Particularly the Company's
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 the Company's operating
results will fall below the expectations of the Company or investors
in some future quarter.
Management of Growth
The Company may experience growth in the number of employees relative
to its current levels of employment and the scope of its operations.
In particular, the Company may need to hire sales, marketing and
administrative personnel. Additionally, acquisitions could result in
an increase in employee headcount and business activity. Such
activities could result in increased responsibilities for management.
The Company believes that its ability to increase its customer
support capability and to attract, train, and retain qualified
technical, sales, marketing, and management personnel, will be a
critical factor to its future success. In particular, the
availability of qualified sales and management personnel is quite
limited, and competition among companies to attract and retain such
personnel is intense. During strong business cycles, the Company may
experience difficulty in filling its needs for qualified sales, and
other personnel.
The Company's future success will be highly dependent upon its
ability to successfully manage the expansion of its operations. The
Company's ability to manage and support its growth effectively will
be substantially dependent on its ability to implement adequate
financial and management controls, reporting systems, and other
procedures and hire sufficient numbers of financial, accounting,
administrative, and management personnel. The Company is in the
process of establishing and upgrading its financial accounting and
procedures. There can be no assurance that the Company will be able
to identify, attract, and retain experienced accounting and financial
personnel. The Company's future operating results will depend on the
ability of its management and other key employees to implement and
improve its systems for operations, financial control, and
information management, and to recruit, train, and manage its
employee base. There can be no assurance that the Company will be
able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse
effect on the Company's business, results of operations, and
financial condition.
The Company's future success depends upon its ability to address
potential market opportunities while managing its expenses to match
its ability to finance its operations. This need to manage its
expenses will place a significant strain on the Company's management
and operational resources. If the Company is unable to manage its
expenses effectively, the Company's business, results of operations,
and financial condition will be materially adversely affected.
Risks associated with acquisitions
Although the Company does not presently intend to do so, as part of
its business strategy in the future, the Company could acquire assets
and businesses relating to or complementary to its operations. Any
acquisitions by the Company would involve risks commonly encountered
in acquisitions of companies. These risks would include, among other
things, the following: the Company could be exposed to unknown
liabilities of the acquired companies; the Company could incur
acquisition costs and expenses higher than it anticipated;
fluctuations in the Company's quarterly and annual operating results
could occur due to the costs and expenses of acquiring and
integrating new businesses or technologies; the Company could
experience difficulties and expenses in assimilating the operations
and personnel of the acquired businesses; the Company's ongoing
business could be disrupted and its management's time and attention
diverted; the Company could be unable to integrate successfully.
PART II.
ITEM 1. LEGAL PROCEEDINGS.
Other than as set forth below, the Registrant is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against the Registrant has been threatened.
The Company is subject to other legal proceedings and claims that
arise in the ordinary course of its business. Although occasional
adverse decisions or settlements may occur, the Company believes that
the final disposition of such matters will not have material adverse
effect on its financial position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Sales of Unregistered Securities.
The Company had sales of unregistered securities during the three-
month period ending September 30, 2005. The Company acted to
physically issue the shares to the Board of Directors that had been
approved and reported in 2004. This caused an increase in number of
shares outstanding from 10,523,397 to 12,373,397.
Use of Proceeds.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were not any matters submitted requiring a vote of security
holders during the three-month period ending September 30, 2005.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. No reports on Form 8-K were filed
during the three-month period covered in this Form 10-QSB.
(b) Exhibits. Exhibits included or incorporated by reference
herein: See Exhibit Index.
EXHIBIT INDEX
Exhibit 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 Certification of Principal Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Next Generation Media Corp.
Dated: December 15, 2005 By:/s/ Darryl Reed
Darryl Reed, CEO