As filed with the Securities and Exchange Commission on July 30, 2001
Registration No. 333-45722
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT
to
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
Colorado (7310) 84-1463284
--------------------------------------------------------------------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
101 Philippe Parkway, Suite 300
Safety Harbor, Florida 34695
(727) 797-6664
--------------
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
John D. Thatch, President
New Millennium Media International, Inc.
101 Philippe Parkway Suite 300
Safety Harbor, Florida 34695
----------------------------
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |X|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed maximum Proposed Amount of
securities to be registered* offering price per unit maximum registration fee
registered aggregate
offering price
-----------------------------------------------------------------------------------------------------------
Common stock 2,160,000 (1) $0.70 1,512,000 399.17
-----------------------------------------------------------------------------------------------------------
Common stock(a) 17,181,818 (2) $0.70 12,027,273 3,175.20
-----------------------------------------------------------------------------------------------------------
Common stock(b) 1,100,000 (3) $0.70 770,000 203.28
-----------------------------------------------------------------------------------------------------------
Common stock(c) 1,718,182 (4) $0.70 1,202,727 317.52
-----------------------------------------------------------------------------------------------------------
Common stock(d) 3,000,000 (1)(5) $0.70 2,100,000 554.40
-----------------------------------------------------------------------------------------------------------
Totals 25,160,000 17,612,000 4,649.57
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*Note: Subsequent to the filing of the SB-2 registration statement the issuer
shares split 5:1. The Amount stated in this schedule does not reflect this
reverse split. Title of each class of securities to be registered:
(a) Swartz Investment Agreement purchase over three years.
(b) Shares of Common Stock issuable upon exercise by Swartz "Commitment
warrants" and "additional warrants".
(c) Shares of Common Stock issuable upon exercise by Swartz "Purchase
warrants".
(d) Shares of Common Stock issuable upon conversion.
Proposed maximum offering price per unit:
(1) Based upon the average of the bid and asked prices of New Millennium Media
International, Inc. common stock as reported on the OTC Bulletin Board on
August 28, 2000 (within 5 business days
2
of the SB-2 filing), pursuant to Rules 457(c) and (g) of the Securities Act
of 1933.
(2) Issuable periodically over a 36 months term pursuant to the Swartz
Investment Agreement. Swartz Private Equity, LLC will purchase under
Regulation D up to $25,000,000 (post split number of shares) of shares AT A
PRICE OF THE LESSER OF THE MARKET PRICE MINUS $0.10 OR 92% OF THE MARKET
PRICE for 20 days following each put date.
(3) Swartz has already received a "commitment warrant" ((c) above) to purchase
500,000 (post split number of shares) shares at signing the letter of
intent at an initial price of $1.50 (calculated to reflect post split
amount) per share and may thereafter be reset every 6 months. At the
earlier of March 15, 2001 or the date of the first put notice delivered to
Swartz, Swartz shall receive "additional warrants" (included in (c) above)
for additional shares and on the date of any reverse stock split and on
each one-year anniversary thereafter Swartz shall receive "additional
warrants" so that the sum of "commitment warrants" and "additional
warrants" may equal up to 4% of the number of fully diluted common
outstanding shares. The price shall be the same as that calculated for
"commitment warrants".
(4) Issuable to Swartz Private Equity, LLC upon the exercise of common stock
purchase warrants. The warrants are issuable to Swartz from time to time
when NMMI exercises its put right to sell shares of common stock to Swartz.
The exercise price of a warrant will initially be equal to 110% of the
market price for that put and thereafter may be reset every six months.
Each warrant initially will be immediately exercisable and have a term
beginning on the date of issuance and ending five years thereafter.
(5) Issuable upon conversion of Series A Convertible Preferred stock issued to
Investment Management of America, Inc. The conversion ratio is 1:1.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
3
PROSPECTUS
New Millennium Media International, Inc.
101 Philippe Parkway Suite 300
Safety Harbor, Florida 34695
(727) 797-6664
The Resale of 5,032,000 (post split number of shares) Shares of Common Stock
The selling price of the shares will be determined by market factors at the time
of their resale.
This prospectus relates to the resale by the selling shareholders of up to
5,032,000 (post split number of shares) shares of common stock. The selling
shareholders may sell the stock from time to time in the over-the-counter market
at the prevailing market price or in negotiated transactions. Of the shares
offered,
o 432,000 (post split number of shares) shares are presently outstanding to
accredited investors, o up to 3,436,364 (post split number of shares)
shares are issuable to Swartz Private Equity, LLC based on an Investment
Agreement dated as of May 19, 2000,
o up to 220,000 (post split number of shares) shares are issuable to Swartz
Private Equity, LLC upon the exercise of warrants issued to Swartz under
the Investment Agreement as Commitment Warrants and Additional Warrants,
o up to 343,636 (post split number of shares) shares are issuable to Swartz
Private Equity, LLC upon the exercise of warrants issued to Swartz under
the Investment Agreement as "Purchase Warrants",
o 600,000 (post split number of shares) shares were issued to Investment
Management of America, Inc. to convert 3,000,000 shares of Series A
Convertible Preferred Stock.
We will receive no proceeds from the sale of the shares by the selling
shareholders. However, we have received proceeds from the sale of the Series A
Preferred shares that have been converted to common shares that are presently
outstanding and we may receive up to $25 million of proceeds from the sale of
shares to Swartz and we may receive additional proceeds from the sale to Swartz
of shares issuable upon the exercise of any warrants that may be exercised by
Swartz.
Our common stock is quoted on the over-the-counter Electronic Bulletin Board
under the symbol NMMG; prior to the stock split the symbol was NMMI. On July 27,
2001, the average of the bid and asked prices of the common stock on the
Bulletin Board was $2.45 per share.
Investing in the common stock involves a high degree of risk. You should invest
in the common stock only if you can afford to lose your entire investment See
"Risk Factors" beginning on page 12 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities nor determined
4
if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The date of this prospectus is July 30, 2001.
Please read this prospectus carefully. It describes our company, finances,
products and services. Federal and state securities laws require that we include
in this prospectus all the important information that you will need to make an
investment decision.
You should rely only on the information contained or incorporated by reference
in this prospectus to make your investment decision. We have not authorized
anyone to provide you with different information. The selling shareholders are
not offering these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front page of this prospectus.
The following table of contents has been designed to help you find important
information contained in this prospectus. We encourage you to read the entire
prospectus.
Table of Contents
Page Page
Prospectus Summary................ 7 Where You Can Find More
Summary Financial Data............11 Information....................29
Risk Factors......................12 Description of Business..........30
Use of Proceeds...................19 Management's Discussion and
Price Range of Common Stock.......19 Analysis or Plan of Operation..33
Dilution..........................20 Description of Property..........34
Selling Security Holders..........20 Certain Relationships and
Plan of Distribution..............22 Related Transactions...........34
Swartz Investment Agreement.......22 Market for Common Equity and
Additional Securities Being Related Stockholder Matters 35
Registered......................24 Executive Compensation...........36
Legal Proceedings.................26 Index to Financial Statements....37
Directors and Officers............26 Indemnification of Directors
Security Ownership of Certain and Officers...................58
Beneficial Owners and Expenses of Issuance and
Management......................27 Distribution...................58
Description of Securities.........28 Recent Sales of Unregistered
Interest of Named Experts Securities.....................59
and Counsel.....................29 Exhibits Index...................60
Disclosure of Commission Undertakings.....................61
Position of Indemnification Signatures.......................63
For Securities Act
Liabilities.....................30
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ITEM 3. SUMMARY INFORMATION AND RISK FACTORS
This summary highlights information contained elsewhere in this prospectus. This
summary is not complete and does not contain all of the information you should
consider before investing in the common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section.
New Millennium Media International, Inc. was originally incorporated April 21,
1998 in Colorado under the name New Millennium Media International, Inc. On
April 30, 1998 Progressive Mailer Corp., a Florida corporation, merged into
NMMI. August 31, 1999 NMMI acquired Unergi, Inc., a Nevada corporation, by
merging Unergi into New Millennium Media, Inc., a Colorado corporation, a wholly
owned subsidiary of NMMI by way of a tax free reorganization.
Our principal executive offices are located at 101 Philippe Parkway, Suite 300,
Safety Harbor, Florida 34695, (727) 797-6664, fax (727) 797-7770.
Some of the statements contained in this prospectus, including statements under
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition" and "Results of Operation" and "Business," are
forward-looking and may involve a number of risks and uncertainties. Actual
results and future events may differ significantly based upon a number of
factors, including:
o our significant historical losses and the expectation of continuing
losses;
o rapid technological change in the motion billboard industry;
o our reliance on key strategic relationships and accounts;
o the impact of competitive products, services and pricing;
o uncertain protection of our intellectual property rights; and
o uncertainty of our exclusivity in the United States regarding our
purchase of "Eye Catcher" display boards.
In this prospectus, we refer to New Millennium Media International, Inc. as
"NMMI" or "we" or "Company". We refer to Swartz Private Equity, LLC as "Swartz".
OUR BUSINESS
According to the Outdoor Advertising Association of America, Inc. the outdoor
display advertising business reported earnings of 2.330 billion in 1998, an
increase of 9.1% over the previous year and the first quarter of 1999 revenues
were up 7.5% over the same period in 1998. This continued growth reflects the
popularity and effectiveness of outdoor and indoor advertising from both
existing and new advertisers. NMMI intends to capitalize on the demand for
display advertising in two ways. NMMI plans to install LED outdoor displays in
high traffic areas and form joint ventures with strategic partners to place a
large number of indoor "Illumisign-Eyecatcher" patented eye catcher boards. NMMI
intends to secure highly visible sites throughout the United States and provide
superior service within the industry. The new millennium will demand the highest
digital quality and the most cost efficient LED
6
advertising boards available. We believe NMMI already has the product available
and subject to available financing we are ready to introduce the product to the
consumer. NMMI has an opportunity to become an industry leader in the indoor and
outdoor advertising industry.
NMMI has the exclusive U.S. rights to an indoor frontlit advertising board
called the Illumisign-EyeCatcher Display. This is a patented product, which
ranges in size from 11" x 17" to 48" x 72" poster size. These signs can display
up to 24 advertisements on a rotating basis. Each rotation can be set to run
from three seconds to one hour. Illumisigns can generate revenues up to $5,000 a
month per display. Additionally, NMMI has the exclusive U.S. rights (There are a
few minor exceptions to this exclusivity.) to an indoor backlit advertising
board designed and manufactured by AMS Controls, Inc. We are marketing this new
product as "EyeCatcher Powered by Insight". This is a patented product, which
ranges in size from 18" X 24" to 40" X 60" poster size. These signs can display
from 10 to 20 scrolling advertising images. Each rotation can be set to run from
three seconds to one hour. Like the IllumiSign, this product has the potential
to generate revenues up to $5,000 a month per display.
NMMI has partnered with E-Vision LED, Inc., a U.S. based company whose
affiliates manufacture LED displays. E-Vision will sell us the LED boards at
manufacturer's cost and will be a limited partner in the revenues that the
boards produce. This allows NMMI to purchase the highest quality product at a
greatly reduced cost. This business arrangement should also enable us to deploy
approximately 2 1/2 times the number of boards that we would otherwise have been
able to. We also have teamed up with several advertising companies throughout
the country. This enables us to sell advertisements on a national level that
will benefit us in placing boards throughout the U.S.
E-Vision's supplier has the capability to manufacture any size board including
boards for sporting events. These LED boards can operate any commercial format
on any size board. Management believes this gives NMMI a strong competitive
advantage over other display boards for which the commercial must be reformatted
which often takes weeks. E-Vision LED displays will run any format on any size
board with consistent color quality and clarity. Color quality and clarity are
very important to a national advertiser who wants their colors and logos the
same on all boards. E-Vision will assist NMMI with training and support from the
first board and will provide NMMI with ongoing assistance in all aspects of
programming, technical and software support. As a manufacturing partner,
E-Vision and its affiliates will supply NMMI, free of charge software upgrades
as they become available.
OUR INVESTMENT AGREEMENT
We have entered into an Investment Agreement with Swartz Private Equity, LLC
("Swartz") to raise up to $25 million over a term ending 36 months after the
effective date of the registration statement through a series of sales of our
common stock to Swartz. The dollar amount of each sale is limited by our common
stock's trading volume. A minimum period of time must occur between sales. In
turn, Swartz will either sell our stock in the open market, sell our stock to
other investors through negotiated transactions or hold our stock in its own
portfolio. This prospectus covers the resale of our stock by Swartz either in
the open market or to other investors.
7
ADDITIONAL SHARES WE ARE REGISTERING
On April 12, 2000 we designated 5,000,000 of the 10,000,000 authorized Preferred
shares as Series A Convertible Preferred Stock, par value $0.001, and issued
3,000,000 shares as Series A Convertible Preferred Stock to Investment
Management of America, Inc. A fund of 3,000,000 shares of Common Stock from
which to convert the 3,000,000 shares of Series A Convertible Preferred Stock is
included in the registration statement. Subsequent to the filing of the
registration statement these 3,000,000 Series A Convertible Preferred Stock were
converted to 600,000 post split Common shares.
Prior to the filing of the registration statement, we conveyed an aggregate of
2,160,000 shares of common stock to certain qualified private investors, this
post split amount is 432,000. This number includes options, see Item 26, Recent
Sales of Unregistered Securities. The resale of these shares of common stock by
the private investors is included in this registration statement.
Key Facts
Total shares outstanding prior 4,819,892(1) as of August 28, 2000
to the offering, post split
Shares being offered for resale 5,032,000(2) (maximum)
to the public, post split
Total shares outstanding after 10,051,892
this offering, post split
Price per share to the public Market price at time of resale
Total proceeds raised by offering None; however, we have received proceeds
from the sale of shares that are
presently outstanding, we may receive up
to $25 million from the sale to Swartz
of shares issuable upon the exercise of
any warrants issued to Swartz pursuant
to the Investment Agreement.
Use of proceeds from the sale We plan to use the proceeds for
of the shares to Swartz working capital and general corporate
purposes.
OTC Bulletin Board Symbol NMMG
(1) Does not include 600,000 (post split number of shares) shares of common
stock intended to be exchanged for Series A Convertible Preferred Stock
issued to Investment Management of America, Inc.
(2) Includes (i) 432,000(post split number of shares) shares that are presently
outstanding to qualified investors, (ii) up to 3,436,367 (post split number
of shares) shares that may be issued to Swartz pursuant to the Investment
Agreement, (iii) 220,000 (post split number of shares) shares underlying
warrants issued and issuable to Swartz in connection with the Investment
Agreement, (iv) 600,000 (post split number of shares) shares as a
8
pool from which to issue the ESOP shares as required from time to time, (v)
600,000 (post split number of shares) shares of Common Stock from which to
convert the 600,000 (post split number of shares) shares of Class A
Convertible Preferred Stock issued to Investment Management of America,
Inc.
SUMMARY FINANCIAL DATA
The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
prospectus.
Year Ended Three Months Ended
December 31 March 31
----------- --------
1999 2000 2000 2001
---- ---- ---- ----
(Unaudited) (Unaudited)
Revenues 49,176 154,400 nil 143,750
Operating Expenses 495,161 1,101,013 123,875 248,253
Net Loss 445,985 946,613 123,875 104,503
Loss per share 0.03 0.04 0.005 0.003
Weighted average number of
common shares outstanding 3,111,988 5,254,050 4,717,934
(post split number of shares)
March 31, 2001
(Unaudited)
Balance Sheet Data:
Total assets................................ 1,612,385
Total liabilities........................... 916,680
Shareholders' equity........................ 695,705
RISK FACTORS
An investment in the shares of Common Stock of New Millennium Media
International, Inc. offered hereby involves a high degree of risk. The
prospective investor should consider carefully the following risk factors, in
addition to the other information obtained by the investor in evaluating an
investment in shares of Common Stock offered hereby. The materials provided to
the investor contain forward-looking statements that involve risks and
uncertainties and address, among other things, the Company's acquisition and
expansion strategy, use of proceeds, capital expenditures, liquidity,
third-party contractual arrangements, cost-reduction strategy, integration of
acquired companies, and product demand. Actual results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including those set forth below.
THE COMPANY HAS LIMITED OPERATING HISTORY AND FUTURE REVENUES ARE UNPREDICTABLE.
In July 1999 NASD enacted an eligibility rule that requires any public company
to be in full compliance with all of the financial reporting requirements of the
Securities Act. On January 25, 2000 NMMI received a thirty-day eligibility
symbol because of its failure to timely file the required certified financial
reports. On February 24, 2000 NMMI was "delisted" and placed on the "pink
sheets" National Quotation
9
System. In lieu of filing form 10 and bring current the needed certified
financial statements by certified audit, the Company elected to reverse merge
with a compliant shell corporation. Thus, the Company completed the process of a
reverse merger with Scovel Corporation wherein New Millennium Media
International, Inc. was the surviving entity with the ultimate result of the
Company's Common Stock being traded OTC Bulletin Board. There can be no
assurance that the intended result will be achieved. It is not certain that the
Company has the technical capability to support the potential that the motion
display boards and LED boards could attract. The Company has just begun to
actively sell its advertising product and it has very limited operating history
available to evaluate its business and prospects. Potential investors should
consider the Company's prospects in light of the following risks, expenses and
uncertainties that may be encountered by development stage companies, which
risks and uncertainties include:
o an evolving and unproven business model;
o management of an expanding business in a rapidly changing market;
o attracting new advertising customers and maintaining customer
satisfaction;
o locating and leasing suitable site locations, indoor and outside, for
the display boards;
o introducing new and enhanced innovative display services, products and
alliances;
o attaining acceptable profit margins notwithstanding competition and
rising wholesale prices; and
o minimizing technical difficulties, display board downtime and the
effect of competition from other media.
As a result of the Company's limited operating history and the emerging nature
of the media in which it competes, it is unable to accurately forecast its
revenues. The Company's current and future expense levels are based
predominantly on its operating plans and estimates of future revenues. The
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. Accordingly, any significant shortfall in
revenues would likely have an immediate material adverse effect on its business,
operating results and financial condition. Further, the Company currently
intends to substantially increase its operating expenses to purchase additional
display boards, indoor and outdoor, as well as develop additional site
locations. It is intended the Company will be innovative in its choice of sites
and the location within the sites.
The Company expects to experience significant fluctuations in its future
operating results due to numerous factors, many of which are outside the
Company's control. Factors that may adversely affect the Company's operating
results include, but are not limited to:
o the Company's ability to attract and retain advertising customers at a
steady rate and maintain customer satisfaction,
o the continued availability of the various size and model display
board,
o the Company's ability to locate and lease suitable site locations for
placement of the display boards,
o the sale of advertisements to be displayed in the display boards,
10
o the announcement or introduction of new sites, services and enhanced
products by competitors,
o general economic conditions and economic conditions specific to the
advertising industry,
o the level of response and consumer acceptance of the display boards
for the purchase of consumer products and services,
o the Company's ability to upgrade and develop its display systems and
infrastructure and to attract and retain personnel in a timely and
effective manner,
o many cities and states have regulations that prohibit LED signs on the
basis that the signs may be distracting to passing drivers and may
lead to an increase in the number of traffic accidents,
o the amount and timing of operating costs and capital expenditures
relating to expansion of the Company's business, operations and
infrastructure.
If the Company does not successfully manage these risks, its business, operating
results and financial condition would be materially adversely affected. The
Company cannot assure you that it will successfully address these risks or that
its business strategy will be successful. If the Company does not become
profitable, you may lose your entire investment.
THE COMPANY HAS INCURRED LOSSES AND EXPECTS TO INCUR SUBSTANTIAL NET LOSSES FOR
THE FORESEEABLE FUTURE.
Since inception, the Company has been operating at a loss and expects that
operating losses and negative cash flow will continue for the foreseeable future
as it invests in marketing and promotional activities, technology and equipment
systems. The Company believes that increasing its revenues will depend in large
part on its ability to:
o develop and lease suitable site locations;
o generate innovative spots within the site locations that are best
suited for effective marketing and other promotional activities;
o sell advertisements to be displayed on the display boards;
o develop consumer awareness and recognition for our advertisers;
o generate interest in advertisers for our brand display board product;
o continued development of enhancing our existing display boards and
development of newer innovative display boards to stay ahead of
competitors in this market;
o attract suitable talented personnel who are able to recognize
potential customers, advertisers, locations and improvements of the
display boards;
o provide its customers, both advertisers and location owners, with a
quality trouble-free product and quality courteous service;
o develop strategic relationships.
The Company's future profitability depends on generating and sustaining high
revenue growth while maintaining reasonable expense levels. Slower revenue
growth than the Company anticipated or operating expenses that exceed its
expectations would adversely affect its business, operating results and
financial condition. The Company cannot be certain when or if it will achieve
sufficient revenues in relation to expenses to become profitable. If the Company
is unable to become profitable, you will lose your entire investment.
11
GOING CONCERN UNCERTAINTY
The Company has incurred recurring operating losses and negative cash flows and
has negative working capital. The Company has financed itself primarily through
the sale of its stock and related party borrowings. These conditions raise
substantial doubt about the Company's ability to continue as a going concern. As
noted in our financial statement, the Company has initiated several actions to
generate working capital for expected advertising growth.
There can be no assurance that the Company will be successful in implementing
its plans, or if such plans are implemented, that the Company will be
successful.
THE COMPANY WILL NEED ADDITIONAL CAPITAL TO FUND ITS BUSINESS.
The Company requires substantial working capital to fund its business and may
need more in the future to:
o fund negative cash flow from operations for the foreseeable future,
o complete additional acquisitions to expand the distribution system,
o acquire additional equipment and to improve and enhance the
functionality, capacity and performance of its display boards.
Based on the its current operating plan, it anticipates that the net proceeds
from this transaction with Swartz Private Equity, LLC, together with Company
available funds, will be sufficient to satisfy its anticipated needs for working
capital, capital expenditures and business expansion for the foreseeable future.
Alternatively, it may need to raise additional funds sooner in order to fund
more rapid expansion, to develop new or enhanced equipment (display boards, both
indoor and outdoor), services, site locations or to respond to competitive
pressures. If the Company raises additional funds by issuing equity or
convertible debt securities, the percentage ownership of its stockholders will
be diluted. Further, any new securities could have rights, preferences and
privileges senior to those of the preferred stock and common stock.
Other than as already mentioned above, the Company currently does not have any
commitments for additional financing. It cannot be certain that additional
financing will be available in the future to the extent required or that, if
available, it will be on acceptable terms. If adequate funds are not available
on acceptable terms, the Company may not be able to fund its expansion,
consummate acquisitions, develop or enhance its products or services or respond
to competitive pressures.
RELIANCE ON ADVERTISING SALES AND LOCATION LEASES; POTENTIAL ADVERSE CHANGES IN
COMMISSION PAYMENTS.
The Company is dependent on selecting the proper display boards in the most
suitable location with the most dynamic advertising material for the particular
needs of the advertiser in order to offer its customers the quality results that
are necessary for a continuing lasting business relationship. The Company
currently has agreements with its display board suppliers that obligate the
Company to purchase display boards and products over an extended period of time.
In addition, the Company currently has agreements with its distributors,
advertisers and locations. Accordingly, advertisers could elect to display
visual ads
12
with the site locations directly or through other sales and distribution
channels which could significantly decrease the amount of its business,
operating results and financial condition.
In addition, substantially all of the Company's sales are dependent on the
commissions customarily paid by advertisers for ad placements. Consistent with
industry practices, these advertising sales people are not obligated to direct
their advertising customers to any particular agency or media of advertising.
Accordingly, advertisers can reduce current industry commission rates or
eliminate such commissions entirely and deal directly with the locations, which
would have a material adverse effect on Company business, operating results and
financial condition. For example, there can be no assurance that advertisers
will chose to deal through an agency or distributor with whom the Company has a
relationship or deal directly with the owner of the site location for the
placement of a static visual poster type ad.
CURRENT CONTRACTS OF SIGNIFICANCE.
The patent holder of the "IllumiSign-Eyecatcher" indoor display boards, a
resident of Great Britain, granted to the Company an exclusive license to
manufacture, operate, distribute and market the "IllumiSign-Eyecatcher" indoor
display boards in the United States and Canada. Presently, Ardian Sheet Metal
Limited, a Great Britain based company, manufactures the "IllumiSign-Eyecatcher"
indoor display boards. AMS Controls, Inc. holds the patent for the "EyeCatcher
Powered by Insight", which is a scrolling backlit motion display board. AMS
granted the Company the exclusive (with minor exceptions) right to operate,
distribute and market the Insight motion display boards in the United States.
Should either of these contracts be terminated, it could cause a material
adverse affect to the Company and its operations.
THE COMPANY'S BRAND MAY NOT ATTAIN SUFFICIENT RECOGNITION.
The Company believes that establishing, maintaining and enhancing its brand
(NMMI brand) is a critical aspect of its efforts to attract and expand its
advertising customer base. The number of visual billboard advertisers that offer
competing services, many of which already have well-established brands
generally, increase the importance of establishing and maintaining brand name
recognition. Promotion of the Company's NMMI brand name will depend largely on
its success in providing a high quality advertising experience supported by a
high level of customer service, which cannot be assured. To attract and retain
advertiser customers and to promote and maintain its quality site locations, the
Company may find it necessary to increase substantially its financial commitment
to creating and maintaining a strong brand loyalty among customers. This will
require significant expenditures on advertising and marketing its own brand
name. Each display board will display the Company's own brand name, address and
phone number. If the Company is unable to provide high-quality advertisers,
displays and locations and customer support, or otherwise fails to promote and
maintain high quality advertising, or if it incurs excessive expenses in an
attempt to promote and maintain high quality, its business, operating results
and financial condition would be materially adversely affected.
13
THE ADVERTISING INDUSTRY IS SUBJECT TO ECONOMIC CONDITIONS AND OTHER UNFORESEEN
EVENTS.
The advertising industry, especially visual display media, is dependent on
personal spending levels and habits of the consuming public. It is also
sensitive to changes in economic conditions and tends to increase during general
economic downturns and recessions. The advertising industry is also highly
susceptible to unforeseen events, such as new trend products, regional
necessities, discretionary spending, price fluctuation, weather patterns and
innovative advertising media. Any event that results in economic decline
generally would likely have an ultimate material adverse effect on the
advertising business, its operating results and financial condition.
COMPETITION.
For years the billboard industry has seen several consolidations with large
corporate owners acquiring smaller (fewer than 50 billboards) independent
operators. The purpose of these consolidations is to provide a platform for the
corporate owners to attract large regional and national advertisers. Billboard
advertising has evolved from painted signs without lights, to lighted signs, to
vinyl covered signs to prism boards (three sided boards which rotate three ads),
to LED signs. Presently the plasma signs are used indoors and generally do not
have a screen size larger than 48 inches. Advertisers soon learned that rotating
signs attract the attention of viewers much more effectively than static signs.
The most prominent LED display sign is in Times Square in New York City. Despite
the effectiveness of LED outdoor advertising, the billboard industry is slowly
moving to the LED display sign because most large companies have a substantial
investment in static signs. The cost to change a traditional static board to an
LED display is approximately $1,000.000 to $2,000.000. Another reason is that
LED signs may only be installed in certain traffic areas is because many cities
and states have regulations that prohibit LED and prism signs on the basis that
the signs may be distracting to passing drivers and may lead to an increase in
the number of traffic accidents. NMMI has targeted markets where this may not be
an issue.
There are two reasons for the changes in outdoor advertising. First,
technological improvements have made the prism and LED boards affordable.
Second, moving ads have a much greater impact on viewers than static ads. In a
digital society there must be an effective way for advertisers to display their
product in its true form. The competition in indoor advertising is limited. Most
indoor companies sell single poster board advertisements, ranging from all
different sizes and place them in theaters, malls, airports, etc. One competitor
has a board similar to the Illumisign-Eyecatcher board, but it rolls paper ads
form one end to the other. These boards are expensive to maintain and cost much
more for ad production than the "Illumisign-Eyecatcher" board.
The Company needs to keep up with rapid technological changes that affect
movable visual billboard advertising. To remain competitive, the Company must
continue to enhance and improve the customer service, responsiveness, quality of
spot and site locations, visual functionality of the boards and the display ad
and ultimate customer response. Indoor and outdoor billboard advertising are
characterized by:
14
o Rapid technological change;
o Changes in advertiser requirements and preferences;
o Changes in consumer requirements and preferences
o Frequent new product and service introductions embodying new
technologies;
o The emergence of new industry standards and practices.
The evolving nature of the Internet already has a major effect on the presently
existing methods of advertising. This trend is destined to continue to affect
not only visual advertising in general, but also proprietary technology and
systems. The Company's success will depend, in part, on its ability to:
o Stay abreast of leading technologies useful in the Company's business;
o Enhance its existing services;
o Develop new services and technology that address the increasingly
sophisticated and varied needs of its customers; and
o Respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of the Company's visual display board business entails
significant business risks. The Company might not successfully use new
technologies effectively or adapt its existing capabilities, high technology
equipment and transaction producing efforts to customer requirements or emerging
industry standards. If it is unable, for technical, legal, financial or other
reasons to adapt in a timely manner, in response to changing market conditions
or customer requirements, its business, financial condition and results of
operations could be adversely affected.
THE COMPANY'S PROPOSED GROWTH MAY ADVERSELY AFFECT ITS OPERATING RESULTS. The
Company's proposed growth plan involves a number of special risks including:
o failure of the Company to achieve the results it expects,
o diversion of its management's attention from operational matters,
o its inability to retain key personnel,
o risks associated with unanticipated events or liabilities,
o potential disruption of its business,
o customer dissatisfaction or performance problems at the site
locations,
o vandalism or intentional destruction or theft of the display boards.
PURCHASERS OF THE COMMON STOCK IN THIS TRANSACTION WILL EXPERIENCE SUBSTANTIAL
DILUTION.
Based upon the terms of the Investment Agreement, purchasers of the common stock
could experience a substantial dilution in net tangible book value of the
Company's Common Stock purchased. The stock issued in connection with this
transaction will be valued at the closing based upon the price per share as
required in the fully executed Investment Agreement. The Company cannot
presently ascertain the number of shares to be issued after the closing. Under
the Investment Agreement this number may be up to 3,436,367 (post split number
of shares) shares,
15
plus any additional shares as may be registered in the future. Consequently,
purchasers of the Company's stock may experience substantial dilution in the
future up to the number of shares registered.
NO PUBLIC MARKET FOR STOCK.
The Company's common stock may be deemed a penny stock. Penny stocks generally
are equity securities with a price of less than $5.00 per share other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq Stock Market, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system. The Company's securities may be subject to "penny stock rules" that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and 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 "penny stock rules"
require the delivery, prior to the transaction, of a disclosure schedule
prescribed by the Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. Consequently, the "penny
stock rules" may restrict the ability of broker-dealers to sell the Company's
securities. The foregoing required penny stock restrictions will not apply to
the Company's securities if such securities maintain a market price of $5.00 or
greater. As of the date of this report, the trading price of New Millennium's
common stock is not in excess of $5.00 per share and there can be no assurance
that the price of the Company's securities will maintain such a level.
ITEM 4. USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock of New Millennium
Media International, Inc. to Swartz Private Equity, LLC at a total gross
aggregate price of up to twenty five million dollars ($25,000,000) is intended
to be used for the following purposes:
o to fund anticipated operating losses, including sales and marketing
expenses;
o to purchase additional equipment and LED Display Boards and indoor
Illumisign-Eyecatcher display boards;
o for working capital and other general corporate purposes; and
o and to fund payment obligations for contemplated acquisitions and
corporate partnering arrangements.
We reserve the right to vary the use of proceeds among the categories listed
above because our ability to use the proceeds is dependent on a number of
factors, including the extent of market acceptance of our variety of display
boards, unexpected expenditures for further technical development, sales and
marketing efforts and the effects of competition.
16
From time to time we also expect to evaluate possible acquisitions of, or
investment in, businesses and technologies that are complementary to our
business and technologies and may use net proceeds from the sale for such
purposes. While we consider potential investments or acquisitions from time to
time, we have no firm plans, commitments or agreements with respect to any such
investment or acquisitions.
Until we use the net proceeds of the offering, we will invest the funds in
investment grade, interest-bearing securities.
ITEM 5. PRICE RANGE OF COMMON STOCK
Our common stock is traded on the OTC BB. The following table sets forth the
high and low bid prices of our common stock on the last day of each quarter
beginning with the second quarter of 1998 when the company was incorporated,
through the second quarter of 2001.
The quotations set forth below reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not represent actual transactions.
Year High Bid Low Bid
---- -------- -------
1998
----
Second Quarter .875 .875
Third Quarter 1.000 1.000
Fourth Quarter .437 .406
1999
----
First Quarter .313 .313
Second Quarter .406 .406
Third Quarter .125 .125
Fourth Quarter .120 .120
2000
----
First Quarter .875 .875
Second Quarter 1.000 1.000
Third Quarter .650 .430
Fourth Quarter .350 .220
2001
----
First Quarter .080 .080
Second Quarter* 1.700 1.350
*Note: On May 18,2001 the issuer shares split 5:1. The second quarter prices
reflect the post split prices.
ITEM 6. DILUTION
At March 31, 2001, we had a net tangible book value of $96,702 or approximately
$0.003 per share of common stock. Net tangible book value per share represents
the amount of our total tangible assets less our total liabilities, divided by
the number of shares of common stock outstanding. After giving effect to the
receipt of the estimated net proceeds from our sale of the offering price of
$.90 per unit (after deducting underwriting discounts and estimated offering
expenses payable by us) the net tangible book value as of March 31, 2001, would
have been approximately $17,466,702 or $.34 per share of common stock.
17
This would represent an immediate increase in the net tangible book value per
share of common stock of $.337 to existing shareholders and an immediate
dilution of $.66 per share to new investors purchasing our units in the
offering. Dilution is determined by subtracting net tangible book value per
share after the offering from the offering price to investors.
The following table illustrates this per share dilution:
Assumed offering price per share of common
stock contained in our unit $1.00
Net tangible book value per share of common stock
before the offering $0.003
Increase attributable to new investors $0.337
Proforma net tangible book value after the offering $0.34
Dilution to new investors $0.66
Percentage of dilution to new investors 66%
The following table summarizes the number of shares of common stock newly issued
under this Registration Statement. The table reflects 1,000,000 commitment
warrants at $.30 a share and 19,000,000 shares at $1.00.
The table, with respect to new investors, gives effect to 20,000,000 shares as
if issued June 30, 2000.
Share Purchased Consideration Paid Average Price
Number Percentage Amount Percentage Per Share
------ ---------- ------ --------------------
Existing Shareholders 30,284,314 60.23 $ 2,820,135 .09
New Investors 20,000,000 39.77 $20,000,000 1.00
---------- -----------
Total 50,284,314 100.00% $22,820,135 .45
ITEM 7. SELLING SECURITY HOLDERS
The following table provides certain information with respect to the selling
shareholders' beneficial ownership of our common stock as of the date of filing
the registration statement (pre split number of shares) and as adjusted to give
effect to the sale of all of the shares offered hereby. Other than Investment
Management of America, Inc., none of the selling shareholders currently is an
affiliate of ours and none of them has had a material relationship with us
during the past three years. None of the selling shareholders are or were
affiliated with registered broker-dealers. See "Plan of Distribution." The
selling shareholders possess sole voting and investment power with respect to
the securities shown.
18
Shares Beneficially
Owned
After Offering
Number of Shares --------------
Beneficially Owned Number of Number
Name Before Offering* Shares Offered* of Shares* Percentage
---- ---------------- --------------- ---------- ----------
Swartz Private
Equity, LLC 1,000,000 20,000,000(1) -0-(2) -0-
Investment Management
of America, Inc. 6,632,080(3) 3,000,000 6,632,080 21%
Raymond D. Benedict 20,000 20,000 20,000
Thomas H. Breiter 20,000 20,000 20,000
Alan D. Bridges 10,000 10,000 10,000
Thomas Daley 20,000 20,000 20,000
William L. Gaskins 4,000 4,000 4,000
Kirtinai Jeerapaet 30,000 30,000 30,000
Michael McEnany 30,000 30,000 30,000
John T. Puls 200,000 200,000 200,000
Richard Puls 8,000 8,000 8,000
Barry Rusche 5,000 5,000 5,000
Charles Saulino 100,000 100,000 100,000
Paul Skversky 10,000 10,000 10,000
Bonnie Sonnenfield 10,000 10,000 10,000
Rosalie Stall 5,000 5,000 5,000
HNC Associates, LLC 100,000 100,000 100,000
Gerry Ghini 500,000 500,000 500,000
Russell Wahl 400,000 400,000 400,000
Eric Kennedy 100,000 100,000 100,000
William H. Simon 500,000 500,000 500,000
William Acquaviva 10,000 10,000 10,000
Robert Colvin 10,000 10,000 10,000
William Long 10,000 10,000 10,000
Timothy Meenan 10,000 10,000 10,000
Randall Willis 3,000 3,000 3,000
Jack Wynn 5,000 5,000 5,000
Peter Jensen 40,000 40,000 40,000
*Note: On May 18,2001 the issuer shares split 5:1. This schedule and the notes
associated with it do not reflect the this split.
(1) Represents the maximum number of shares of common stock that we may sell to
Swartz pursuant to the Investment Agreement Puts and upon the exercise by Swartz
of Warrants issued or issuable in connection with the Investment Agreement. It
is expected that Swartz will not own beneficially more than 9.9% of our
outstanding common stock at any time.
(2) Assumes that Swartz shares will eventually be resold by Swartz and none will
be held for its own account. (3) 3,000,000 shares of Series A Convertible
Preferred that were converted to Common stock on a 1:1 ratio. Three of the
officers and directors of Investment Management of America, Inc. were formerly
on the board of directors of NMMI.
19
ITEM 8 PLAN OF DISTRIBUTION
SWARTZ INVESTMENT AGREEMENT
On May 19, 2000, we entered into an Investment Agreement with Swartz. The
Investment Agreement entitles us to issue and sell our common stock to Swartz
for up to an aggregate of $25 million from time to time during the three-year
period following the date of effectiveness of a registration statement covering
the resale of the shares to be put to Swartz. Each election by us to sell stock
to Swartz is referred to as a "put right".
Put rights. In order to invoke a put right, we must have an effective
registration statement on file with the SEC registering the resale of the shares
of common stock that may be issued as a consequence of the exercise of that put
right. We must also give at least 10, but not more than 20 business days'
advance notice to Swartz of the date on which we intend to exercise a particular
put right and we must indicate the maximum number of shares of common stock that
we intend to sell to Swartz. At our option, we may also designate a maximum
dollar amount of common stock (not to exceed $2 million) that we will sell under
the put and/or a minimum purchase price per common share at which Swartz may
purchase shares under the put. The number of shares of common stock sold to
Swartz in a put may not exceed the lesser of: (i) 15% of the aggregate daily
reported trading volume of our common shares, excluding certain block trades of
our common stock during the twenty business days after the date of our put
notice, excluding trading days in which the common stock trades below a minimum
price, if any, that we specify in our put notice: (ii) 15% of the aggregate
daily reported trading volume of our common shares during the twenty business
days before the put date, excluding certain block trades; or (iii) a number of
shares that, when added to the number of shares acquired by Swartz under the
Investment Agreement during the thirty one days preceding the put date, would
exceed 9.99% of our total number of shares of common stock outstanding (as
calculated under Section 13(d) of the Securities Exchange Act of 1934).
For each share of common stock, Swartz will pay us the lesser of:
o The market price for such share, minus $.10 or
o 92% of the market price for the share;
provided, however, that Swartz may not pay us less than the designated minimum
per share price, if any, that we indicate in our notice.
Market price is defined as the lowest closing bid price for the common stock on
its principal market during the pricing period. The pricing period is defined as
the 20 business days immediately following the day we exercise the put right.
Warrants. Within five business days after the end of each pricing period, we are
required to issue and deliver to Swartz a warrant to purchase a number of shares
of common stock equal to 10% of the common shares issued to Swartz in the
applicable put. Each warrant will be exercisable at a price that will initially
equal 110% of the market price for that put and thereafter may be reset every
six months. Each
20
warrant will be immediately exercisable and have a term beginning on the date of
issuance and ending five years thereafter.
Limitations and conditions precedent to our put rights. Swartz is not required
to acquire and pay for any shares of common stock with respect to any particular
put for which, between the date we give advance notice of an intended put and
the date the particular put closes:
o we have announced or implemented a stock split or combination of our
common stock;
o we have paid a common stock dividend;
o we have made a distribution of all or any portion of our assets or
evidences of indebtedness to the holders of our common stock; or
o we have consummated a major transaction, such as a sale of all or
substantially all of our assets or a merger or tender or exchange
offer that results in a change of control of NMMI.
Short sales. Swartz and its affiliates are prohibited from engaging in short
sales of our common stock unless Swartz has received a put notice and the amount
of shares involved in the short sale does not exceed the number of shares
specified in the put notice.
Cancellation of puts. We must cancel a particular put between the date of the
advance put notice and the last day of the pricing period if:
o we discover an undisclosed material fact relevant to Swartz's
investment decision;
o the registration statement registering resales of the common shares
becomes ineffective; or
o our shares are delisted from the then primary exchange.
If a put is canceled, it will continue to be effective, but the pricing period
for the put will terminate on the date notice of cancellation of the put is
given to Swartz. Because the pricing period will be shortened, the number of
shares Swartz will be required to purchase in the canceled put will be smaller
than it would have been had the put not been canceled.
Shareholder approval. Under the Investment Agreement, we may sell Swartz a
number of shares that is more than 20% of our shares outstanding on the date of
this prospectus. If we become listed on The NASDAQ Small Cap Market or Nasdaq
National Market, we may be required to obtain shareholder approval to issue some
or all of the shares to Swartz. As we are currently a Bulletin Board company, we
do not need shareholder approval.
Termination of Investment Agreement. We may terminate our right to initiate
further puts or terminate the Investment Agreement at any time by providing
Swartz with notice of such intention to terminate; however, any such termination
will not affect any other rights or obligations we have concerning the
Investment Agreement or any related agreement.
Restrictive covenants. During the term of the Investment Agreement and for a
period of 6 months after the Investment Agreement is terminated, we are
prohibited from engaging in certain transactions. These include
21
the issuance of any equity securities, or debt securities convertible into
equity securities, for cash in a private transaction without obtaining the prior
written approval of Swartz. We are also prohibited from entering into any
private equity line type agreements similar to the Investment Agreement without
obtaining Swartz's prior written approval.
Right of first refusal. Swartz has a right of first refusal, subject to another
first refusal obligation for which we are contractually obligated, to
participate in any private capital raising transaction of equity securities that
closes from the date of the Investment Agreement (July 9, 1999) through 6 months
after the Investment Agreement is terminated.
Swartz's right of indemnification. We have agreed to indemnify Swartz (including
its stockholders, officers, directors, employees, investors and agents) from all
liability and losses resulting from any misrepresentations or breaches we make
in connection with the Investment Agreement, our registration rights agreement,
other related agreements, or the registration statement.
ADDITIONAL SECURITIES BEING REGISTERED
NMMI needed three million shares of restricted common stock to satisfy overdue
contractual obligations of two individuals. NMMI did not have sufficient shares
of restricted common stock available to satisfy this requirement, but had
available ten million shares of Preferred Stock. The NMMI Board of Directors
passed a resolution creating a Series A Convertible Preferred Stock as to five
million shares of the Preferred Stock. On April 12, 2000 NMMI entered into an
agreement with Investment Management of America, Inc. wherein Investment
Management of America, Inc. traded three million shares of its restricted Common
Stock for three million shares of NMMI's Series A Convertible Preferred Stock
with the contractual requirement that NMMI will authorize at least three million
additional shares of Common Stock and include the three million shares of Common
Stock in the SB-2 registration statement, thus creating the shares of restricted
Common Stock for which Investment Management of America, Inc. can convert its
Series A Convertible Preferred Stock. This conversion was completed and the
three million shares of restricted common stock were exchanged for the three
million shares of Series A Convertible Preferred Stock.
On July 17, 2000 the shareholders voted to amend the Articles of Incorporation
to increase the number of authorized shares of common stock from 25,000,000 to
75,000,000 to fulfill the requirements of the Swartz Investment Agreement and to
permit conversion of the preferred stock.
The Company is obligated to register, along with the registration of the shares
contemplated by this registration 2,160,000 shares (pre split number of shares)
that were sold to accredited investors.
May 7, 2001 the shareholders voted to amend the Articles of Incorporation to
decrease the number of authorized shares of common stock from 75,000,000 to
15,000,000, the 5:1 split. This amendment to the Articles of Incorporation
became effective May 18, 2001 and the Company trading symbol was changed from
NMMI to NMMG. See the
22
Definitive Proxy Statement filed April 18, 2001 for additional information.
Each selling shareholder is free to offer and sell his or her common shares at
such times, in such manner and at such prices as he or she may determine. The
types of transactions in which the common shares are sold may include
transactions in the over-the-counter market (including block transactions),
negotiated transactions, the settlement of short sales of common shares or a
combination of such methods of sale. The sales will be at market prices
prevailing at the time of sale or at negotiated prices. Such transactions may or
may not involve brokers or dealers. The selling shareholders have advised us
that they have not entered into agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their shares. The
selling shareholders do not have an underwriter or coordinating broker acting in
connection with the proposed sale of the common shares.
The selling shareholders may sell their shares directly to purchasers or to or
through broker-dealers, which may act as agents or principals. These
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling shareholders. They may also receive compensation
from the purchasers of common shares for whom such broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). Swartz
is, and each remaining selling shareholder and any broker-dealer that assists in
the sale of the common stock may be deemed to be, an underwriter within the
meaning of Section 2(a)(11) of the Securities Act. Any commissions received by
such broker-dealers and any profit on the resale of the common shares sold by
them while acting as principals might be deemed to be underwriting discounts or
commissions.
Because Swartz is and the remaining selling shareholders may be deemed to be
"underwriters" within the meaning of Section 2(a)(11) of the Securities Act, the
selling shareholders will be subject to prospectus delivery requirements.
We have informed the selling shareholders that the anti-manipulation rules of
the SEC, including Regulation M promulgated under the Securities and Exchange
Act, may apply to their sales in the market and has provided the selling
shareholders with a copy of such rules and regulations.
Selling shareholders also may resell all or a portion of the common shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
We are responsible for all costs, expenses and fees incurred in registering the
shares offered hereby. The selling shareholders are responsible for brokerage
commissions, if any, attributable to the sale of such securities.
23
ITEM 9. LEGAL PROCEEDINGS
The Company was a defendant in a lawsuit filed on November 5, 1999 in the
Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County,
Florida, Case Number 99-26073 CA 10. January 24, 2001 the parties agreed to a
settlement.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following are officers and directors of the Company.
NAME AGE POSITION
---- --- --------
John Thatch 39 Chief Executive Officer, President and Director
Jennifer Freeman 28 Corporate Secretary
All directors hold office until the next annual meeting of shareholders of the
Company and until their successors are elected and qualified. Officers hold
office until the first meeting of directors following the annual meeting of
shareholders and until their successors are elected and qualified, subject to
earlier removal by the Board of Directors.
JOHN "JT" THATCH, PRESIDENT/CEO AND DIRECTOR
John "JT" Thatch serves as Director, CEO and President of New Millennium Media
International, Inc. He brings to the company over 15 years of entrepreneurial
experience. He has successfully founded, operated and managed his own businesses
and limited partnerships. He brings experience in the areas of management,
retail sales and financing. J.T. has ties in the business community and brings
solid leadership and integrity to the company. His experience and enthusiasm
will provide us with the ability to expand our growth within the outdoor/indoor
advertising arena.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of the date of this filing by: (i) each
shareholder known by us to be the beneficial owner of 5% or more of the
outstanding common stock, (ii) each of our directors and (iii) all directors and
executive officers as a group. Except as otherwise indicated, we believe that
the beneficial owners of the common stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable. Shares of
common stock issuable upon exercise of options and warrants that are currently
exercisable or exercisable within 60 days of August 28, 2000 have been included
in the table.
Name and Address Amount and Nature Percent of Class
of Beneficial of Beneficial
Owner Ownership Before Offering(1) After Offering
---------------- --------- --------------- --------------
John Thatch 500,000 7% 4%
President/CEO
and Director
24
Investment Management 1,576,416 22% 13%
of America, Inc.(2)(3)
Troy Lowrie 450,000 6% 4%
(Resigned)(4)
Less than 5%
Officers and Directors 500,000 7% 4%
(John "JT" Thatch)
(1) Based upon June 30, 2001 shareholder list, 7,016,861 outstanding shares of
common stock.
(2) Parker, Badolato and Gomes are officers, directors and majority
shareholders in Investment Management of America, Inc. and were officers
and directors of NMMI.
(3) Does not include 3,000,000 shares of Series A Preferred stock that were be
traded with NMMI for 3,000,000 shares of common stock immediately after the
SB-2 registration.
(4) Mr. Troy Lowrie was the past president and director of PMC which was merged
into New Millennium.
ITEM 12. DESCRIPTION OF SECURITIES
COMMON STOCK
Our articles of incorporation authorize us to issue up to 15,000,000 (post split
number of shares) shares of common stock, par value $.001 per share. Of the
15,000,000 shares of common stock authorized, as of June 30, 2001 there are
7,016,861 shares (post split number of shares) issued and outstanding.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors from funds legally available for such
dividends. We may not pay any dividends on the common stock until cumulative
dividends on the preferred stock have been paid in full. Currently there are no
preferred shares issued and outstanding. Upon liquidation, holders of shares of
common stock are entitled to a pro rata share in any distribution available to
holders of common stock. The holders of common stock have one vote per share on
each matter to be voted on by stockholders, but are not entitled to vote
cumulatively. Holders of common stock have no preemptive rights. All of the
outstanding shares of common stock are, and all of the shares of common stock
offered for resale in connection with the SB-2 registration statement will be,
validly issued, fully paid and non-assessable.
PREFERRED STOCK
Our articles of incorporation authorize us to issue up to 10,000,000 shares of
Preferred stock, par value $.001 per share. Of these authorized 10,000,000
preferred shares, 5,000,000 have been classified as Series A Convertible
Preferred Stock with voting and liquidation privileges of which 3,000,000 have
been issued to Investment Management of America, Inc. in exchange for 3,000,000
shares of restricted Common Stock owned by Investment Management of America,
Inc. These 3,000,000 shares of preferred were subsequently re-exchanged for
3,000,000 shares of common stock. Currently there are no shares of preferred
stock issued and outstanding.
25
WARRANTS
There are outstanding warrants to purchase 216,796 (post split number of shares)
shares of our common stock at a price of $0.30 per share and may be reset every
6 months thereafter. These warrants were issued to Swartz on May 25, 1999
(200,000 shares) and April 17, 2001 (16,796 shares) in consideration of Swartz's
commitment to enter into the Investment Agreement. The warrants expire on May
25, 2004 and April 17, 2006, respectively. By contract, the holders of the
warrants have the right to have the common stock issuable upon exercise of the
warrants included on any registration statement we file, other than a
registration statement covering an employee stock plan or a registration
statement filed in connection with a business combination or reclassification of
our securities. The shares of common stock to support these warrants are
included in the SB-2 registration statement.
ITEM 13. INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the securities offered hereby has been passed upon by Atlas
Pearlman, P. A., Attorneys at Law, Ft. Lauderdale, Florida.
The Condensed Balance Sheet, Condensed Statement of Operations and Condensed
Statement of Cash Flows as of March 31, 2001, for the period ended March 31,
2001 in this prospectus and the Balance Sheets, Statement of Operations,
Statement of Stockholders' (deficit) Equity and Statement of Cash Flows for the
period ending December 31, 2000 have been included herein in reliance on the
report of Richard J. Fuller, C.P.A., P.A., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
An opinion on the validity of the securities being registered was be given by
Atlas Pearlman, Attorneys at Law, Ft. Lauderdale, Florida.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.
We have filed herewith with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the securities offered under this prospectus.
This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement,
certain items of which are omitted in accordance with the rules and regulations
of the SEC. Statements contained in this prospectus as to the contents of any
contract or other documents are not necessarily complete and in each instance
reference is made to the copy of such contract or documents filed as an exhibit
to the registration statement, each such statement being qualified in all
respects by such reference and the exhibits and schedules thereto. For further
information regarding NMMI and the securities offered under this prospectus, we
refer you to the registration statement and such exhibits and schedules which
may be
26
obtained from the SEC at its principal office in Washington, D.C. upon payment
of the fees prescribed by the SEC.
ITEM 14. DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Insofar as indemnification for liabilities arising under the federal securities
laws as may be permitted to directors and controlling persons of the issuer, the
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the law
and is, therefore, unenforceable. In the event a demand for indemnification is
made, the issuer will, unless in the opinion of its counsel that the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the law and will be governed by the final adjudication of
such issue.
ITEM 15. ORGANIZATION WITHIN LAST FIVE YEARS
None.
ITEM 16. DESCRIPTION OF BUSINESS
BRIEF HISTORY
New Millennium Media International, Inc. is a Colorado corporation organized on
April 21, 1998. NMMI's principal place of business is located at 101 Philippe
Parkway, Suite 300, Safety Harbor, Florida 34695. NMMI is the successor to
Progressive Mailer Corp., a corporation organized in Florida on February 5,
l997. In March 1997 and April 1998, PMC conducted offerings of its common stock
pursuant to the exemption from registration afforded by Rule 504 of Regulation D
under the Securities Act of l933, as amended. As a result of these offerings,
there are presently a total of 955,000 (post split number of shares)
unrestricted shares of common stock of NMMI issued and outstanding. On November
3, l997, PMC received clearance from the NASD to have its common stock listed on
the OTC Bulletin Board. The trading symbol on the OTC Bulletin Board for NMMI's
common stock was NMMI.
In February, l998, PMC's sole officer and director resigned and sold all of her
share ownership in PMC, which represented 95% of the issued and outstanding
shares of PMC, to Troy Lowrie who as elected President and Director of PMC. In
connection with the transaction, the principal offices of PMC were relocated to
Denver, Colorado.
Effective, April 8, l998 PMC entered into an Asset Purchase Agreement with LuFam
Technologies, Inc, a California corporation, in exchange for the issuance of
shares of PMC's common stock to LuFam. Pursuant to the terms of the Asset
Purchase Agreement, PMC acquired the exclusive rights to the
IllumiSign-EyeCatcher display system, a special advertising display machine.
NMMI intends to market and sell advertising space on these machines.
Effective April 30, l998, PMC was merged into NMMI and the separate existence of
PMC terminated pursuant to the merger agreement. In connection with the merger,
each share of PMC outstanding on April 30, l998 was exchanged for a like number
of shares of New Millennium.
27
August 31, 1999 NMMI entered into an Amended and Restated Agreement and Plan of
Merger among NMMI, New Millennium Media, Inc., a wholly owned subsidiary of NMMI
and Unergi, Inc. NMMI acquired all of the issued shares of stock of Unergi in
exchange for 16,566,667 shares of NMMI common stock.
Pursuant to an Agreement and Plan of Merger dated March 9, 2000 between Scovel
Corporation, a Delaware corporation, all the outstanding shares of common stock
of Scovel were exchanged for 500,000 shares of common stock of NMMI. By virtue
of the merger, NMMI acquired 100% of the issued and outstanding common stock of
Scovel.
NMMI is a fully reporting company which common stock is traded on the OTC
Bulletin Board operated by NASDAQ under the symbol NMMG.
BUSINESS OVERVIEW
NMMI provides several types of visual advertising: The Illumisign-Eyecatcher
front-lit movable display boards, the "EyeCatcher Powered by Insight" back-lit
scrolling movable display boards, plasma screens and LED display boards. We
retain ownership of all types of the machines and sell the advertising space on
a monthly basis.
NMMI has the exclusive United States distribution and manufacturing rights from
the patent owner of the IllumiSign-Eyecatcher front-lit movable display boards,
a resident of Great Britain. This board is steel incased, front lighted, and
displays poster type ads. These mechanical devises come in various sizes ranging
from 11 inches by 17 inches to 4 feet by 6 feet. Each machine is capable of
rotating up to 24 posters at preprogrammed intervals from 3 seconds to one hour.
Additionally, NMMI has the exclusive U.S. rights (There are a few minor
exceptions to this exclusivity.) to an indoor backlit advertising board designed
and manufactured by AMS Controls, Inc. called the "EyeCatcher Powered by
Insight". We are marketing this new product as "EyeCatcher Powered by Insight".
This is a patented product, which ranges in size from 18" X 24" to 40" X 60"
poster size. These signs can display from 10 to 20 scrolling advertising images.
Each rotation can be set to run from three seconds to one hour. Like the
IllumiSign, this product has the potential to generate revenues up to $5,000 a
month per display. Because the poster material in both of these machines is
critical to the functionality as well as the longevity of the poster, it is
necessary for the advertisers to rely on our graphic arts department to develop
and supply the necessary posters. These motion displays are then placed in
various sites in stores, shopping malls, movie theaters and anywhere else where
indoor poster type advertising is feasible. NMMI is the owner of the
registration of the trademark, "IllumiSign-Eyecatcher" for electric sign
products in the United States Department of Commerce, Patent and Trademark
Office.
The LED display boards are generally placed out doors either freestanding or
affixed onto the sides of buildings or located in athletic stadiums. The LED
boards range in size from 8 feet by 10 feet to 20 feet by 30 feet and even
larger in customized designs. They are capable of displaying a near infinite
number of either stationary or motion images. Because the images need to be
programmed into the LED boards, it is necessary that our graphic arts department
be involved in both the design and set up of the intended displays.
28
NMMI has a strategic relationship with E-Vision LED, Inc., a U.S. based company
whose affiliates manufacture these high quality LED units. E-Vision will sell
the LED boards to NMMI and will share in the revenues that the LED boards
produce. This allows NMMI to procure the highest quality LED display boards at a
greatly reduced cost. This business arrangement is designed to enable NMMI to
deploy approximately 2 1/2 times the number of boards in the shortest period of
time. Because these LED boards can run any commercial format on any sized board,
we feel that NMMI has a strong competitive advantage over other display boards
for which the visual display must be reformatted. Formatting often takes weeks.
E-Vision LED displays will run any format on any size board with consistent
color quality and clarity. These LED boards have the potential to display
countless images in full color both static and full motion. Color quality and
clarity are very important to national advertisers who want consistency of
colors on all boards. E-Vision will assist NMMI with training and support from
the first board and with ongoing assistance in all aspects of programming,
technical and software support. As a manufacturing partner, E-Vision and its
affiliates will supply NMMI, free of charge, software upgrades as they become
available.
In relation to these two types of display media, NMMI is capable of providing
advertisers with visual communications and media services in both indoor and
outdoor environments. We offer a comprehensive range of visual movable board
solutions designed to improve clients' advertising needs and processes including
professional services such as strategic site location, consulting and analysis
as well as poster design and development.
This enables us to locate boards and sell advertising on a national level that
will benefit NMMI in placing boards throughout the U.S.
NMMI signed a one-year with option for eight additional one-year terms marketing
agreement with Carson-Jensen-Anderson Enterprises, Inc. d/b/a EyeCatcher
Marketing Company through which agreement the Illumisign-Eyecatcher display
boards were to be marketed throughout the 50 United States. Effective May 10,
2001 NMMI and EyeCatcher Marketing Company reached an agreement whereby their
contractual relationship was terminated and NMMI received nearly all of the
assets of EyeCatcher Marketing Company.
EMPLOYEES
NMMI has nine full time employees. None of our employees is represented by a
labor union. We consider our relations with our employees to be good. Because a
major portion of our business involves nationwide site location and procurement
as well as sales and marketing of advertising space, it is advantageous for us
to outsource this segment of our business through strategic partnering and
subcontracting distributors. We intend to utilize in-house employees and plan to
add additional staff as needed to handle all other phases of our business
including graphic arts, warehousing, distribution, purchasing, distribution,
shipping, accounting and bookkeeping.
29
ITEM 17. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Management's discussion and analysis contains various "forward looking
statements." Such statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate," or "continue" or use of
negative or other variations or comparable terminology.
We caution that these statements are further qualified by important factors that
could cause actual results to differ materially from those contained in the
forward-looking statements, that these forward-looking statements are
necessarily speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred to
in such forward-looking statements.
OVERVIEW
The Company is no longer a development stage company as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises." We have generated our cash needs through equity financings
and loans from officers and stockholders. As an operational stage company, we
have devoted substantially all of our efforts in securing and establishing new
businesses. We have engaged in limited activities in the advertising business,
but no significant revenues have been generated to date. The primary activity of
the Company currently involves several types of visual advertising: The
Illumisign-Eyecatcher front-lit movable display board, "EyeCatcher Powered by
Insight" back-lit movable display boards, plasma screens and LED display boards.
We retain ownership of all types of the machines and sell the advertising space
on a monthly basis.
PLAN OF OPERATIONS
The Company is continuing to devote substantially all of its present efforts to
implementing its operational and marketing plans designed to establish new
business accounts for its mobile LED boards and the motion display boards.
Through much of this first quarter the Company has been negotiating with Carson
Jensen Anderson Enterprises, Inc. d/b/a EyeCatcherPlus, the Company's marketing
affiliate, to take over in-house all future marketing activity. This effort came
to fruition very recently. As a result, the Company will presently conduct all
marketing in-house, but will continue to use the EyeCatcherPlus logo, marketing
material and website. We feel that this decision will have the net effect of
"cutting out the middle man" and increasing Company revenues.
LIQUIDITY AND CAPITAL RESOURCES
As in the past, our liquidity has been principally supplied by equity financing
and loans from related parties. Accounts Receivable have risen considerably;
however, management feels that most, if not all, of these receivable are
collectable.
RESULTS OF OPERATIONS
Although the Total Costs and Expenses have doubled in the first quarter of 2001
when compared to the first quarter of 2000, the comparative Net Loss for these
two quarters has decreased by 15.6% and the Basic Loss
30
Per Common Share for the same comparative two quarters has decreased from
$(0.005) to $(0.003), a comparative Basic Loss Per Common Share decrease of 40%.
Compared to a year ago, we are now fully staffed and beginning to produce
income. We are continuing to concentrate on establishing new business and
increasing sales relating to the IllumiSign Eyecatcher, the "EyeCatcher Powered
by Insight" backlit display board and the LED display sign truck.
NET LOSS
Net Loss from Operating Activities has decreased $19,372 for the first quarter
of 2001 compared to the first quarter of 2000, this equates to 15.6%. The same
comparison shows a decrease of $68,924 in Net Cash Used In Operating Activities,
a percentage decrease of 40%. This is due in large part to increase in sales.
The Net Cash Provided by Financing Activities has decreased considerably for the
first quarter of 2001 compared to the first quarter of 2000. Management feels
that this is a good time to limit financing activities and focus on growth
through increasing cash flow through operations.
ITEM 18. DESCRIPTION OF PROPERTY
NMMI owns no real estate. It has a one-year lease plus a two-year renewal option
with St. James Properties, Inc. for property located in Safety Harbor, Florida
that expires May 2, 2003 through which it leases office space in a building that
contains sufficient storage space to warehouse, test and repair the machines
prior to their site placement. NMMI is intending to relocate both its corporate
offices and its warehouse into new premises a few blocks from its present
location in Safety Harbor, Florida. The construction of this new facility is
several months behind schedule, but occupancy is expected before the end of
August 2001. This five year leased facility with an option for five additional
years is slightly larger than the existing leased premises and will support a
more efficient use of the floor space. The machines will continue to be shipped
directly to the site location and for those machines that require more detailed
installation such as the LED boards, the machines will be shipped directly to
the installer. Machines that are in need of repair will be repaired on-site
whenever possible. Those machines that are not repairable on-site will be
repaired in-house at the Safety Harbor, Florida facility.
ITEM 19. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was originally incorporated April 21, 1998 in Colorado under the
name New Millennium Media International, Inc. April 30, 1998 Progressive Mailer
Corp., a Florida corporation, merged into NMMI. August 31, 1999 NMMI acquired
Unergi, Inc., a Nevada corporation, ("Unergi") by merging Unergi into New
Millennium Media, Inc., a Florida corporation, ("Media") a wholly owned
subsidiary of NMMI by way of a tax free reorganization. As part of this merger
16,566,667 shares of NMMI common stock were to be distributed prorata among all
of the shareholders of Unergi in exchange for all of the shares of stock of
Unergi. As a part of this merger, two founders and major shareholders of Unergi,
Mark Western and Cole Leary, were each to receive 1,656,672 shares of NMMI
restricted common stock. In anticipation of purchasing these shares from the two
individuals, NMMI conveyed the shares intended for these two individuals to
another individual. NMMI failed to consummate the purchase of these shares from
the two individuals and
31
consequently found it necessary to acquire 3,000,000 shares of restricted common
stock to satisfy the obligation to the two individuals. Toward this objective
NMMI exchanged with Investment Management of America, Inc. (hereafter "IMA")
3,000,000 shares of NMMI's Series A Preferred stock for 3,000,000 shares of
common stock owned by IMA with the understanding that the 3,000,000 shares of
Series A Preferred stock will be granted voting rights and be convertible on a
1:1 ratio for shares of restricted common stock which common stock are included
in this registration. The re-exchange of these shares has occurred and NMMI
replaced the 3,000,000 IMA Series A Preferred shares with 3,000,000 shares of
restricted common stock that are included in this registration.
On November 2, 1999 NMMI signed an executive employment contract with John
Thatch employing that individual as President and Chief Executive Officer for
three years with a salary of $140,000 for the first year and $120,000 for the
second and third years. As an inducement to encourage the executive to become
employed with NMMI, it was in the best interest of NMMI to include in the
employment package a provision in the executive employment contract giving John
Thatch the option to purchase, at a price of par value, 10% of any and all
additionally authorized and issued shares of stock. To date John Thatch has not
exercised any rights under this option.
ITEM 20. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NMMI is a fully reporting company which common stock is traded on the OTC
Bulletin Board operated by NASDAQ under the symbol NMMG. The table in ITEM 5.,
PRICE RANGE OF COMMON STOCK sets forth the high and low bid prices of our common
stock for each quarter for the second, third and fourth quarters of 1998, four
quarters of 1999, four quarters of 2000 and the first and second quarters of
2001. As of June 30, 2001 there are approximately 100 beneficial holders of
record of our common stock.
DIVIDEND POLICY
We have not paid any dividends on our common stock since inception. We expect to
continue to retain all earnings generated by our operations for the development
and growth of our business and do not anticipate paying any cash dividends to
our shareholders in the foreseeable future. The payment of future dividends on
the common stock and the rate of such dividends, if any, will be determined by
our Board of Directors in light of our earnings, financial condition, capital
requirements and other factors.
ITEM 21. EXECUTIVE COMPENSATION
The following table lists the cash remuneration paid or accrued during 1999,
2000 and 2001 to John Thatch, president and CEO. Except for John Thatch, none of
our executive officers and directors received compensation of $100,000 or more
in 1999, 2000 and 2001.
32
SUMMARY COMPENSATION TABLE
========================================================================================================================
Long Term Compensation
------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
------------------------------------------------------------------------------------------------------------------------
Securities
Name and Other Annual Restricted Underlying LTIP All Other
Principle Salary Bonus Compensation Stock Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
========================================================================================================================
John Thatch,
Pres./CEO 2001 120,000 10,000 expenses 10% of all Stock option Per month:
issued common to be 500 medical
stock determined by 500 car
Board 250 celphone
========================================================================================================================
DIRECTOR COMPENSATION
The NMMI directors receive no compensation.
EMPLOYMENT AGREEMENTS
NMMI has one written employment agreement, John Thatch, President and CEO, see
Item 19, above.
ITEM 22. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
REVIEWED FINANCIAL STATEMENTS
Condensed Balance Sheet for March 31, 2001 and
December 31, 2000 F-37
Condensed Statements of Operations for quarter ended
March 31, 2001 and for quarter ended
March 31, 2000 F-38
Condensed Statements of Cash Flows for quarter ended
March 31, 2001 and for quarter ended
March 31, 2000 F-39
Notes to the Condensed Financial Statements,
for quarter ended March 31, 2001 F-40
AUDITED FINANCIAL STATEMENTS
Report of Richard J. Fuller, C.P.A., P.A. F-41
Balance Sheet for December 31, 1999 and December
31,2000 F-42
Statements of Operations for year ended December
31, 1999 and year ended December 31, 2000 F-43
Statement of Stockholders' Deficit for period from
January 1, 1999 through December 31, 2000 F-44
Statements of Cash Flows for year ended December
31, 1999, year ended December 31, 2000 F-45
Notes to Financial Statements, December 31, 1999
and 2000 F-46
33
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED BALANCE SHEET
March 31, December 31,
2001 2000
(UNAUDITED) (AUDITED)
------------ ------------
ASSETS
Current Assets:
Cash $ 3,127 $ --
Accounts Receivable 92,868 16,636
Inventories 3,255 3,255
Prepaid Assets 9,096 9,096
------------ ------------
Total Current Assets 108,346 28,987
------------ ------------
Furniture and Equipment-Net 905,036 924,148
------------ ------------
Other Assets
Other Assets -- --
Goodwill, net of accumulated amortization
of $79,091and $67,793, respectively 599,003 610,301
------------ ------------
Total Other Assets 599,003 610,301
------------ ------------
$ 1,612,385 $ 1,563,436
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 66,870 $ 81,556
Accrued expenses payable 130,766 73,562
Related payables 719,044 658,110
------------ ------------
Total Current Liabilities 916,680 813,228
------------ ------------
Long-term Liabilities -- --
Stockholders' Equity
Common stock, par value $.001; 75,000,000 shares authorized,
30,284,314 and 28,440,614 shares issued and outstanding,
respectively, 2001 and 2000 30,284 28,441
Preferred stock, par value $.001; shares authorized, 10,000,000
no shares issued and outstanding --
Additional paid in capital 2,789,851 2,741,694
Deficit accumulated during the development stage (2,124,430) (2,019,927)
------------ ------------
Total Stockholders' Equity 695,705 750,208
------------ ------------
$ 1,612,385 $ 1,563,436
============ ============
34
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
FOR THE FOR THE
QUARTER ENDED QUARTER ENDED
3/31/01 3/31/00
------------ ------------
Income $ 143,750 $ --
Costs and Expenses:
General and administrative $ 201,953 $ 101,877
Interest expense 11,184 16,000
Depreciation and amortization 35,116 5,998
------------ ------------
Total costs and expenses 248,253 123,875
------------ ------------
Loss from Operations (104,503) (123,875)
Net Loss $ (104,503) $ (123,875)
============ ============
Basic Loss Per Common Share $ (0.003) $ (0.005)
============ ============
35
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
FOR THE FOR THE
QUARTER ENDED QUARTER ENDED
3/31/01 3/31/00
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (104,503) $ (123,875)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 35,116 5,998
(Increase) decrease in accounts receivable (76,232) --
(Increase) decrease in inventories -- (18,750)
(Increase) decrease in prepaid expenses -- (5,000)
Increase (decrease) in accounts payable
and accrued expenses 42,517 (30,398)
------------ ------------
Net cash provided by (used in) operating activities (103,102) (172,025)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of goodwill -- (500)
Purchase of fixed assets (4,705) (3,457)
------------ ------------
Net provided by (used in) investing activities (4,705) (3,957)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - Related 60,934 15,000
Proceeds from common stock transactions 50,000 444,000
------------ ------------
Net cash provided by (used in) financing activities 110,934 459,000
------------ ------------
Increase in cash and cash equivalents $ 3,127 $ 283,018
Cash and cash equivalents at beginning of period $ -- $ 2,063
------------ ------------
Cash and cash equivalents at end of period $ 3,127 $ 285,081
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest -- --
Cash paid during the year for income taxes -- --
36
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Basis of Presentation
---------------------------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information in accordance with rules and regulations of
the Securities and Exchange Commission, including Rule 301(b) of Regulation
SB and instructions to Form 10-Q. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the Company's Annual Report (Form 10-KSB) for the year
ended December 31, 2000. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the quarter ended
March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. The results of operations
for the three months ended March 31, 2001 are not necessarily indicative of
the operating results for the full fiscal year or any future period.
2. Going Concern Uncertainty
-------------------------
The Company has incurred recurring operating losses and negative cash flows
and has negative working capital. The Company has financed itself primarily
through the sale of its stock and related party borrowings. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern.
There can be no assurance that the Company will be success in implementing
its plans, or if such plans are implemented, that the Company will be
successful.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments
to reflect the possible future effect on the recoverability and
classification of assets or the amount and classification of liabilities
that might result from the outcome of this uncertainty.
3. Subsequent Events
-----------------
The Company approved a 1 for 5 reverse stock split with a resulting
decrease in the number of Common Stock authorized to 15,000,000 shares at a
special Meeting of Stockholders on May 7, 2001.
37
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
New Millennium Media International, Inc.
Safety Harbor, Florida
We have audited the balance sheets of New Millennium Media International, Inc.
as of December 31, 1999 and 2000, and the related statements of operations,
stockholders' (deficit) equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Millennium Media
International, Inc. at December 31, 1999 and 2000 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses for the years ended
December 31, 1999 and 2000. This condition raises substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Richard J. Fuller, CPA, PA
Clearwater, Florida
March 20, 2001
38
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
BALANCE SHEETS
December 31, 1999 and December 31, 2000
1999 2000
------------ ------------
ASSETS
Current Assets:
Cash $ 2,063 $ --
Accounts receivable -- 16,636
Inventories 548,862 3,255
Prepaid expenses -- 9,096
------------ ------------
Total Current Assets 550,925 28,987
------------ ------------
Furniture and Equipment:
Furniture, fixtures and equipment,net 3,964 924,148
------------ ------------
Other Asssets:
Goodwill, net 655,007 610,301
Other intangibles 417 --
------------ ------------
Total Other Assets 655,424 610,301
------------ ------------
$ 1,210,313 $ 1,563,436
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 85,235 $ 81,556
Accrued expenses payable 129,289 73,562
Related payables 1,596,012 658,110
------------ ------------
Total Current Liabilities 1,810,536 813,228
------------ ------------
Long-term Liabilities -- --
Stockholders' (Deficit) Equity
Common stock, par value $.001; 25,000,000 and 75,000,000
shares authorized, 24,099,881 and 28,440,614 shares issued
and outstanding, respectively, 1999 and 2000 24,100 28,441
Preferred stock, par value $.001; shares authorized, 10,000,000
no shares issued and outstanding -- --
Additional paid in capital 448,991 2,741,694
Deficit (1,073,314) (2,019,927)
------------ ------------
Total Stockholders' (Deficit) Equity (600,223) 750,208
------------ ------------
$ 1,210,313 $ 1,563,436
============ ============
39
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
1999 2000
------------ ------------
Income $ 49,176 $ 154,400
Costs and Expenses:
General and administrative $ 141,847 $ 741,532
General and administrative -related 234,860 155,000
Interest expense - related 95,382 63,587
Depreciation and amortization 23,072 140,894
------------ ------------
Total costs and expenses 495,161 1,101,013
------------ ------------
Loss from Operations (445,985) (946,613)
Net Loss $ (445,985) $ (946,613)
============ ============
Basic and Diluted Loss Per Common Share $ (0.03) $ (0.04)
============ ============
Weighted average common shares outstanding 15,559,940 26,270,250
============ ============
40
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH DECEMBER 31, 2000
Common Stock Additional Total
--------------------------- Paid - in stockholders'
Shares Amount Capital Deficit equity
----------- ----------- ----------- ----------- -----------
Balance, January 1, 1999 7,020,000 $ 7,020 $ 403,115 $ (627,329) $ (217,194)
----------- ----------- ----------- ----------- -----------
Shares issued to purchase Unergi, Inc. 16,566,667 16,567 -- -- 16,567
Shares issued for cash 513,214 513 45,876 -- 46,389
Net loss for the period ended
December 31, 1999 -- -- -- (445,985) (445,985)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 24,099,881 $ 24,100 $ 448,991 $(1,073,314) $ (600,223)
Shares issued for services to officers -
net of recission (1,020,419) (1,020) 3,520 -- 2,500
Shares issued:
in settlement of debt to related parties 3,641,152 3,641 1,487,403 -- 1,491,044
in connection with acquisition of equipment 200,000 200 342,800 -- 343,000
for Scovel Corporation 500,000 500 -- 500
for cash 1,020,000 1,020 458,980 -- 460,000
Net loss for the period ended
December 31, 2000 -- -- -- (946,613) (946,613)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 28,440,614 $ 28,441 $ 2,741,694 $(2,019,927) $ 750,208
=========== =========== =========== =========== ===========
41
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
1999 2000
------------ ------------
Cash Flows from Operating Activities:
Net loss $ (445,985) $ (946,613)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 23,072 140,894
(Decrease) in accounts receivable -- (16,636)
(Decrease) in inventories (66,946) (124)
(Decrease) in prepaid expenses -- (9,096)
Increase (decrease) in accounts payable 49,007 (3,679)
Increase (decrease) in accrued expenses 96,221 (55,727)
------------ ------------
Total adjustments 101,354 55,632
------------ ------------
Net Cash Used in Operating Activities (344,631) (890,981)
------------ ------------
Cash Flows from Investing Activities
Purchase of goodwill -- --
Purchase of fixed assets (2,539) --
------------ ------------
Net Cash Used in Investing Activities (2,539) --
------------ ------------
Cash Flows from Financing Activities
Related payables refinancings 296,033 428,918
Proceeds from common stock issued 46,389 460,000
------------ ------------
Net Cash provided by Financing Activities 342,422 888,918
------------ ------------
Increase in cash and cash equivalents $ (4,748) $ (2,063)
Cash and cash equivalents at beginning of period $ 6,811 $ 2,063
------------ ------------
Cash and cash equivalents at end of period $ 2,063 $ --
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest -- --
Cash paid during the year for income taxes -- --
Supplemental schedule of noncash investing
and financing activities:
Issuance of common stock for purchase of
equipment, furniture and goodwill $ 677,594 $ 450,500
Less debts assumed (661,027) (107,000)
------------ ------------
Common stock issued $ 16,567 $ 343,500
============ ============
Issuance of common stock in settlement
of related party debt
Common stock issued -- 1,491,044
Less related party debt -- (1,491,044)
------------ ------------
$ -- $ --
============ ============
42
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
1. Organization and summary of significant accounting policies
-----------------------------------------------------------
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows.
NATURE OF BUSINESS
New Millennium Media International, Inc. (formerly Progressive Mailer Corp.)
(NMMI or the Company) was incorporated under the laws of the State of Florida on
February 5, 1997. On April 30, 1998, as part of a plan or reorganization, the
Company became New Millennium Media International, Inc., a Colorado company. On
April 14, 1998, all the assets of Lufam Technologies, Inc. were acquired in
exchange for 1,710,000 shares of the Company's $.001 par value common stock. On
August 31, 1999, pursuant to an Agreement and Plan of merger, the Company
acquired all the issued and outstanding stock of Unergi, Inc. in exchange for
16,566,667 shares of the Company's $.001 par value common stock. Further, on
March 9, 2000, the Company acquired 100% of the issued and outstanding common
stock of Scovel Corporation in exchange for 500,000 shares of the Company
The Company is in the business of developing and marketing advertising space in
special movable advertising display machines and LED display boards. The Company
provides two types of visual advertising including movable display boards and
LED display boards. NMMI sells advertising space while retaining ownership of
the boards.
The Company is no longer considered to be in the development stage for 2000. In
prior years, the Company had been in the development stage.
Basis of presentation
---------------------
The financial statements have been prepared using the accrual method of
accounting. Revenues are recognized when earned and expenses when incurred.
Use of estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
43
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Going Concern Uncertainty
-------------------------
The Company has incurred recurring operating losses and negative cash flows and
has negative working capital. The Company has financed itself primarily through
the sale of its stock and related party borrowings. These conditions raise
substantial doubt about the Company's ability to continue as a going concern. As
noted in Note 5, the Company has initiated several actions to generate working
capital for expected advertising growth.
There can be no assurance that the Company will be successful in implementing
its plans, or if such plans are implemented, that the Company will succeed.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments to
reflect the possible future effect on the recoverability and classification of
assets or the amount and classification of liabilities that might result from
the outcome of this uncertainty.
Comprehensive Income
--------------------
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company does not have any items requiring disclosure
of comprehensive income.
Segments of Business Reporting
------------------------------
Statement of Financial Accounting Standards (SFAS) No. 131, establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products and
services, geographic areas and major customer. SFAS 131 defines operating
segments as components of a company about which separate financial information
is available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. The Company
has evaluated this SFAS and does not believe it is applicable at this time.
44
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Intangible assets
-----------------
Organization costs are amortized using the straight-line method over their
estimated useful lives of five years and are stated at cost less accumulated
amortization. The Company reviews for the impairment of long-lived assets and
certain identifiable intangibles annually. No such impairment losses have been
identified by the Company for the years presented.
Under the purchase method of accounting, tangible and identifiable intangible
assets acquired and liabilities assumed are recorded at their estimated fair
values. The excess of the purchase price, including estimated fees and expenses
related to the merger, over the net assets acquired is classified as goodwill by
the Company. The estimated fair values and useful lives of assets acquired and
liabilities assumed are based on a preliminary valuation and are subject to
final valuation adjustments which may cause some of the intangibles to be
amortized over a shorter life than the goodwill amortization period of 15 years
Inventories
-----------
Inventories consist primarily of supplies related to advertising machines and
are carried at the lower of cost (first-in, first-out) or market. Once the
advertising machines are available for rental and placed in service,
depreciation is recognized. During the year, the advertising machines were made
available for rental. Depreciation is recognized for the year ended 2000 because
rental activity commenced during the year.
Furniture and equipment
-----------------------
Furniture and equipment is stated at cost and depreciated using the
straight-line method, over the estimated useful lives of five to seven years.
Income Taxes
------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS No. 109). Under SFAS No. 109, deferred income tax assets
and liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured using
currently enacted tax rates. SFAS No. 109 requires a valuation allowance to
reduce the deferred tax assets reported if, based on the weight of the evidence,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.
Basic and Diluted Loss Per Common Share
---------------------------------------
Basic loss per common share is based on the weighted average number of shares
outstanding during the period. The computation of diluted loss per common share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued. Diluted
loss per common share is not presented since the result is antidilutive.
45
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Cash Equivalents
----------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
-----------------------------------
All financial instruments are held for purposes other than trading. The
following methods and assumptions were used to estimate the fair value of each
financial instrument for which it is practicable to estimate that value:
For cash, cash equivalents and notes payable, the carrying amount is assumed to
approximate fair value due to the short-term maturities of these instruments.
Concentrations of Credit Risk
-----------------------------
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash. The Company places its cash with high
quality financial institutions. At times during the year, the balance at any one
financial institution may exceed FDIC limits.
During the year, the Company negotiated the ability to manufacture the
advertising machines previously supplied principally by one foreign vendor.
2. Furniture, fixtures and equipment
---------------------------------
Furniture, fixtures and equipment is summarized as follows:
1999 2000
----------- -----------
Boards available for lease $ -- $ 545,483
Equipment -- 468,731
Furniture & fixtures 4,249 5,490
----------- -----------
4,249 1,019,704
Less accumulated depreciation (285) (95,555)
----------- -----------
Net $ 3,964 $ 924,149
=========== ===========
During the year 2000, the advertising boards became available for lease.
3. Goodwill
---------
On August 31, 1999 the Company acquired all the outstanding stock of Unergi,
Inc. The acquisition was accounted for as a purchase. Consideration for the
purchase was the issuance of 16,566,667 shares of $.001 par value stock of the
Company. The purchase price exceeded the fair value of the net assets acquired
by $677,594, which has been recorded as goodwill. On March 9, 2000, the Company
acquired 100% of the issued and outstanding common stock of Scovel Corporation
in exchange for 500,000 shares of the Company.
46
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
Goodwill - cont'd.
------------------
Goodwill consists of the following:
1999 2000
---------- ----------
Goodwill in connection with acquisition of
Unergi, Inc. accounted for as a purchase
with 16,566,667 common shares issued $ 677,594 $ 677,594
Scovel Corporation accounted for as a purchase
With 500,000 common shares issued -- 500
---------- ----------
677,594 678,094
Less accumulated amortization (22,587) (67,793)
---------- ----------
Net $ 655,007 $ 610,301
========== ==========
4. Related party payables
----------------------
Related party payables consists of the following: 1999 2000
---------- ----------
Note due stockholder/former officer at 10% $ 641,152 $ --
Accounts payable to stockholders,
non-interest bearing 954,860 249,860
$100,000 convertible note payable, with interest
accrued @ 10%, (convertible $1.00 of debt
into common stock) -- 102,500
$125,000 convertible note payable, with interest
accrued @15%, secured by equipment(convertible
$1.00 of debt into common stock) -- 143,750
$162,000 convertible note payable, interest @8%
to officer/stockholder(convertible $.10 of debt
into preferred stock) 162,000
---------- ----------
$1,596,012 $ 658,110
========== ==========
During the year, the Company issued common stock in settlement of certain debt
to stockholders and former officers. Currently, the Company disputes a note to a
prior officer but has recognized the debt for financial statement purposes.
5. Income Taxes
------------
The Company has available net operating loss carryforwards of $1,950,000 which
expire through 2020.
After consideration of all the evidence, both positive and negative, management
has determined that a full valuation allowance is necessary to reduce the
deferred tax assets to the amount that will more likely than not be realized.
Accordingly, components of the Company's net deferred income taxes are as
follows:
1999 2000
---------- ----------
Deferred tax assets:
Net operating loss carryforwards $ 870,000 $1,950,000
Valuation allowance for deferred tax asset (870,000) (1,950,000)
---------- ----------
$ -- $ --
========== ==========
47
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 2000
6. Equity Transactions
-------------------
On May 2, 2000, the Company entered into an agreement with Swartz Private Equity
to provide an equity line of $25,000,000 based upon the Company issuing warrants
convertible into 1,000,000 shares of the Company's Common Stock. Certain
provisions of the Agreement provide for the issuance of additional warrants
equal to 4.0% of the fully diluted shares of the Company's Common Stock. The
exercise price of the warrants is based in part upon the closing bid price for 5
trading days prior to March 6, 2000 or $.30. Management has entered into these
agreements, in part, to provide the necessary capital needed for the expected
growth in outdoor advertising business. As part of this agreement, the Company
has issued 1,000,000 warrants.
48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 7-109-101 et seq. of the Colorado Business Corporation Act, as amended
from time to time provides that a corporation may indemnify directors, officers,
employees or agents of the corporation against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement in connection with
threatened, pending or completed actions, suits or proceedings brought against
them by reason of their service in such capacity, including, under certain
circumstances, actions brought by or in the right of the corporation, and may
purchase insurance or make other financial arrangements on behalf of any such
persons for any such liability.
The Company's By-laws are silent regarding the issue of corporate
indemnification of NMMI officers, directors, agents and employees.
Article VIII of the Company's Articles of Incorporation provides for
indemnification and advance expenses to a director or officer in connection with
a proceeding to the fullest extent permitted or required by and in accordance
with the Colorado Business Corporation Act. This Article permits the
Corporation, as determined by the Board of Directors, in a specific instance or
by resolution of general application to indemnify and advance expenses to an
employee, fiduciary or agent in connection with a proceeding to the extent
permitted or required by and in accordance with the Colorado Business
Corporation Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated amounts of all expenses
payable by the registrant in connection with the registration of the common
stock offered hereby:
SEC filing fee........................................ $ 4,649.57
Legal fees............................................ 50,000.00
Accounting fees and expenses.......................... 20,000.00
Miscellaneous......................................... 3,866.00
----------
Total........................................... $78,515.57
==========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In December 1998 the company sold to HNC Associates (an accredited investor)
100,000 shares of common stock at a price of $0.40 per share. The company relied
on Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transaction did not involve a public offering.
49
In February 2000 the company issued an option to purchase 500,000 shares of
common stock, exercisable for two years at a price of $1.00 per share to William
H. Simon in connection with consulting services and negotiations involving
E-Vision LED, Inc. The company relied on Section 4 (2) of the Securities Act of
1933 as the basis for an exemption from registration because the transaction did
not involve a public offering.
In February 2000 the Company sold 400,000 shares of common stock at a price of
$.50 per share to one individual who is an accredited investor. The Company
relied on Rule 506 of Regulation D and Section 4(2) of the Securities Act of
1933 as the basis for an exemption from registration because the transactions
did not involve any public offering.
In March 2000 the company issued 500,000 shares of common stock to Gerry Ghini
in connection with the merger of Scovel Corporation. The company relied on
Section 4 (2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transaction did not involve a public offering.
In March 2000 the company issued an option to purchase 100,000 shares of common
stock, exercisable for two years at a price of $2.25 per share to Eric Kennedy
in connection with consulting services provided to the company. The company
relied on Section 4 (2) of the Securities Act of 1933 as the basis for an
exemption from registration because the transaction did not involve a public
offering.
In March 2000 the Company issued warrants to purchase 1,000,000 shares of common
stock, exercisable for five years at a per share price equal to the lowest
closing bid price for the five trading days immediately preceding March 6, 2000
with reset adjustments to Swartz Private Equity, LLC in consideration for
Swartz's commitment to enter into an investment agreement for the purchase of up
to $25,000,000 of common stock of the Company.
In March, April and May 2000 the Company sold an aggregate of 560,000 shares of
common stock at a price of $.50 per share to twenty individuals, all of whom
were accredited investors. The Company relied on Rule 506 of Regulation D and
Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transactions did not involve any public offering.
50
ITEM 27. EXHIBITS INDEX
3.1 Articles of Incorporation of NMMI as amended.
3.1(a) Designation of Preferred Stock.
3.2 Bylaws of NMMI.
4.1 Investment Agreement dated May 19, 2000 by and between the Registrant
and Swartz Private Equity, LLC.
4.2 Form of "Commitment Warrant" to Swartz Private Equity, LLC for the
purchase of 1,000,000 shares common stock in connection with the
offering of securities.
4.3 Form of "Purchase Warrant" to purchase common stock issued to Swartz
Private Equity, LLC from time to time in connection with the offering
of securities.
4.4 Warrant Side-Agreement by and between the Registrant and Swartz
Private Equity, LLC.
4.5 Registration Rights Agreement between NMMI and Swartz Private Equity,
LLC related to the registration of the common stock to be sold
pursuant to the Swartz Investment Agreement.
4.6 Letter Agreement between NMMI and Swartz Institutional Finance
relating to the private placement of up to two million dollars of
common stock.
4.7 Employees Stock Option Plan adopted by board of Directors resolution
dated June 26, 2000.
5.1 Legal Opinion of Atlas Pearlman, P.A., Suite 1700, 350 East Las Olas
Boulevard, Ft. Lauderdale, Florida 33301; to be filed with amendment.
10.1 Investment Management of America, Inc. contract with NMMI regarding
the 3,000,000 shares of Preferred stock.
10.2 Agreement of Merger effective April 30, 1998 between Progressive
Mailer Corporation and NMMI in which NMMI was the survivor
corporation.
10.3 Asset Purchase Agreement dated April 8, 1998 whereby PMC acquired the
assets of LuFam Technologies, Inc.
10.4 Amended and Restated Agreement and Plan of Merger dated August 31,
1999 between NMMI and Unergi, Inc. in which NMMI was the survivor
corporation.
10.5 Agreement and Plan of Merger dated March 9, 2000 between NMMI and
Scovel Corporation wherein NMMI acquired all of the shares of stock of
Scovel.
10.6 Exclusive Distribution Contract with Multiadd.
51
10.7 Marketing Agreement dated May 10, 2000 wherein NMMI grants to
Carson-Jensen-Anderson Enterprises, Inc. marketing rights for the
Illumisign-Eyecatcher display boards.
10.8 Office Lease Agreement between St. James Properties, Inc. and NMMI.
21.1 List of Subsidiaries.
23.1 Consent of Legal Counsel (included in Exhibit 5.1).
23.2 Consent of Independent Auditors.
27.1 Financial Data Schedule.
99.1 Trademark "registration pending" documentation by the United States
Department of Commerce, Patent and Trademark Office for the name
"Illumisign-EyeCatcher" for electric sign products.
99.2 Employment Agreement between Registrant and John Thatch,
President/CEO.
ITEM 28. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii)To include any additional or changed material information on the
plan of distribution;
(2) For determining liability under the Securities Act of 1933, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
52
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the
offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b) (1) or (4) or 497 (h) under the
Securities Act as part of this registration statement as of the
time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at
that time as the initial bona fide offering of those securities.
53
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in the City of Safety
Harbor, Florida on July 30, 2001.
New Millennium Media International, Inc.
By: /s/ John Thatch
----------------------
John Thatch, President/CEO
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and as of
the dates indicated.
Signature Title Date
--------- ----- ----
/s/ John Thatch President and Chief July 30, 2001
------------------ Executive Officer
John Thatch (Principal Executive Officer)
54