As filed with the Securities and Exchange Commission on October 24, 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.)
200 9th Avenue North, Suite 210
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.
200 9th Avenue North, Suite 210
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 Amount to be Proposed maximum Proposed Amount of
of securities to be registered* offering price per maximum registration
registered unit aggregate fee**
offering
price
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Common stock 432,000 (1) $1.50 648,000
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Common stock(a) 3,436,364 (2) $1.50 5,154,546
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Common stock(b) 220,000 (3) $1.50 330,000
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Common stock(c) 343,636 (4) $1.50 515,454
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Common stock(d) 600,000 (1)(5) $1.50 900,000
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Totals 5,032,000 7,548,000
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*Note: Subsequent to the filing of the SB-2 registration statement the issuer
shares split 1:5. The Amounts stated in this schedule reflect this reverse
split.
**Note: The registration fee was paid in full with the filing of the SB-2
Registration Statement. Title of each class of securities to be registered:
(a) Swartz Investment Agreement purchase over three years.
(b) Shares of Common Stock issuable upon exercise by Swartz "Commitment
warrants" and "additional warrants".
(c) Shares of Common Stock issuable upon exercise by Swartz "Purchase
warrants".
(d) Shares of Common Stock issued upon conversion.
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Proposed maximum offering price per unit:
(1) Based upon the average of the bid and asked prices of New Millennium Media
International, Inc. common stock as reported on the OTC Bulletin Board on
October 23, 2001 (within 5 business days of the SB-2 Post Effective
Amendment filing), pursuant to Rules 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 3,436,364 (post split number of shares) shares at a
price of the lesser of the market price minus $0.10 or 92% of the market
price for 20 days following each put date. There is no assurance that the
$25,000,000 maximum will ever be reached.
(3) Swartz has already received a "commitment warrant" ((b) above) to purchase
200,000 (post split number of shares) shares at signing the letter of
intent for an initial price of $1.50 (calculated to reflect post split
amount) per share and may thereafter be reset every 6 months. At the
earlier of March 15, 2001 or the date of the first put notice delivered to
Swartz, Swartz shall receive "additional warrants" (included in (b) above)
for additional shares and on the date of any reverse stock split and on
each one-year anniversary thereafter Swartz shall receive "additional
warrants" so that the sum of "commitment warrants" and "additional
warrants" may equal up to 4% of the number of fully diluted common
outstanding shares. The price shall be the same as that calculated for
"commitment warrants".
(4) Issuable to Swartz Private Equity, LLC upon the exercise of common stock
purchase warrants. The warrants are issuable to Swartz from time to time
when NMMI exercises its put right to sell shares of common stock to Swartz.
The exercise price of a warrant will initially be equal to 110% of the
market price for that put and thereafter may be reset every six months.
Each warrant initially will be immediately exercisable and have a term
beginning on the date of issuance and ending five years thereafter.
(5) Issued upon conversion of Series A Convertible Preferred stock issued to
Investment Management of America, Inc. The conversion ratio was 1:1.
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PROSPECTUS
New Millennium Media International, Inc.
200 9th Avenue North, Suite 210
Safety Harbor, Florida 34695
(727) 797-6664
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 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 over a three year period 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 600,000 post-split 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 consideration from the transfer 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. There is no assurance that this $25,000,000 maximum will
ever be reached.
Our common stock is quoted on the over-the-counter Electronic Bulletin Board
under the symbol NMMG; prior to the stock split the symbol was NMMI. On October
23, 2001, the average of the bid and asked prices of the common stock on the
Bulletin Board was $1.50 per share.
Investing in the common stock involves a high degree of risk. You should invest
in the common stock only if you can afford to lose your entire investment See
"Risk Factors" beginning on page 11 of this prospectus.
4
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities nor determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October 24, 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.
5
Table of Contents
Page Page
Prospectus Summary................ 7 Where You Can Find More
Summary Financial Data............10 Information....................31
Risk Factors......................11 Description of Business..........31
Use of Proceeds...................21 Management's Discussion and
Price Range of Common Stock.......21 Analysis or Plan of Operation..35
Dilution..........................22 Description of Property..........39
Selling Security Holders..........23 Plan of Certain Relationships and
Distribution......................24 Related Transactions...........39
Swartz Investment Agreement.......24 Market for Common Equity and
Additional Securities Being Related Stockholder Matters 40
Registered......................26 Executive Compensation...........40
Legal Proceedings.................28 Index to Financial Statements....41
Directors and Officers............28 Indemnification of Directors
Security Ownership of Certain and Officers...................57
Beneficial Owners and Expenses of Issuance and
Management......................29 Distribution...................57
Description of Securities.........29 Recent Sales of Unregistered
Interest of Named Experts Securities.....................57
and Counsel.....................30 Exhibits Index...................59
Disclosure of Commission Undertakings.....................60
Position of Indemnification Signatures.......................62
For Securities Act
Liabilities.....................31
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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.
Our principal offices were located at 101 Philippe Parkway, Suite 300, Safety
Harbor, Florida 34695 until August 24, 2001 at which time the offices were
relocated to 200 9th Avenue North, Suite 210, Safety Harbor, Florida 34695,
(727) 797-6664, fax (727) 797-7770.
Some of the statements contained in this prospectus are forward-looking and may
involve a number of risks and uncertainties. Actual results and future events
may differ significantly based upon a number of factors, including:
o our significant historical losses and the expectation of continuing
losses;
o rapid technological change in the motion billboard industry;
o our reliance on key strategic relationships and accounts;
o the impact of competitive products, services and pricing;
o uncertain protection of our intellectual property rights and
o uncertainty of our exclusivity in the United States regarding our
purchase of "EyeCatcher" display boards.
In this prospectus, we refer to New Millennium Media International, Inc. as
"NMMI" or "we" or "Company". We refer to Swartz Private Equity, LLC as "Swartz".
Light emitting diode is abbreviated as "LED".
New Millennium Media International, Inc. was originally incorporated April 21,
1998 in Colorado under the name New Millennium Media International, Inc. On
April 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.
In July 1999 NASD enacted an eligibility rule that requires any public company
to be in full compliance with all of the financial reporting requirements of the
Securities Act. On January 25, 2000 NMMI received a thirty-day eligibility
symbol because of its failure to timely file the required certified financial
reports. On February 24, 2000 NMMI was "delisted" and placed on the "pink
sheets" National Quotation System. In order to obtain consulting services of
Scovel's corporate officer and in lieu of filing form 10 and bring current the
needed certified financial statements of NMMI by certified audit, the Company
elected to merge with a compliant shell corporation, Scovel Corporation. All the
outstanding shares of common stock of Scovel were exchanged for 500,000 shares
of common stock of NMMI. By virtue of the merger, NMMI acquired 100% of the
issued and outstanding common stock of Scovel. After the acquisition, Scovel was
liquidated. Thus, the Company completed the process of a merger with Scovel
Corporation wherein New Millennium Media International, Inc. was the surviving
entity; however, the intended OTC Bulletin Board trading listing was
7
not achieved until NASD Form 211 was filed by NMMI. This transaction was not
significant to the financial statements of NMMI. NMMI was relisted OTC BB on
September 6, 2000.
OUR BUSINESS
According to an article written by Diane Cimine, Executive V. P. Marketing of
Outdoor Advertising Association of America, Inc., in 1999 $4.8 billion dollars
were spent in outdoor advertising, up 9.4% over 1998. This continued growth
reflects the popularity and effectiveness of outdoor and indoor advertising from
both existing and new advertisers. This reported growth might not necessarily
continue. NMMI does not currently have significant revenues from its display and
advertising business and there is no assurance that NMMI will participate in any
such growth. NMMI plans to install LED (light emitting diode) outdoor displays
in high traffic areas and form joint ventures with strategic partners to place a
large number of indoor "IllumiSign-Eyecatcher" patented motion display boards.
NMMI intends to secure highly visible sites throughout the United States and
Canada and provide superior service within the industry. The new millennium will
demand the highest digital quality and the most cost efficient LED advertising
boards available. We believe NMMI already has the product available and subject
to available financing, we are ready to introduce the product to the consumer.
NMMI has the exclusive United States and Canada rights to an indoor frontlit
advertising board called the Illumisign-EyeCatcher Display. This is a patented
product that 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. From the sale of advertisements to be
displayed on the display boards, IllumiSign-EyeCatcher displays can generate
revenues up to $5,000 per month per display board. This revenue is predicated on
a maximum of at least 20 advertising posters sold at no less than $250 each per
month. Additionally, NMMI has the exclusive United States and Canada rights to
an indoor backlit advertising board designed and manufactured by AMS Controls,
Inc. There are a few minor exceptions to this exclusivity, namely, seventeen
accounts existing in the inventory of AMS Controls, Inc. at the time of
contracting with NMMI. We are marketing this new product as "EyeCatcher Powered
by Insight". This is a patented product, that ranges in size from 18" X 24" to
40" X 60" poster size. These signs can display up to 20 scrolling advertising
images. Each rotation can be set to run from three seconds to one hour. Like the
IllumiSign-EyeCatcher, this product has the potential to generate revenues from
the sale of advertisements up to $5,000 per month per display board. This
revenue is predicated on a maximum of 20 advertising posters sold at no less
than $250 each per month.
NMMI has a strategic partnership with E-Vision LED, Inc., a U.S. based company
whose affiliates manufacture LED displays. E-Vision will sell NMMI the LED
boards at manufacturer's cost and will be a strategic partner in the revenues
that the LED boards produce. This LED board alliance allows NMMI to purchase the
highest quality product at a greatly reduced cost.
E-Vision's supplier has the capability to manufacture any size LED board
including boards for sporting events. These LED boards can operate any
commercial format on any size board. Management believes
8
this gives NMMI a strong competitive advantage over other display boards for
which the advertisement must be reformatted that often takes weeks. E-Vision LED
displays will run any format on any size board with consistent color quality and
clarity. Color quality and clarity are very important to national advertisers
who 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 strategic 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. There is no assurance that this
$25,000,000 maximum will ever be reached.
SHARES IN ADDITION TO SWARTZ 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
432,000 post-split shares of common stock to certain qualified private
investors. This number includes options, see section entitled 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 7,116,863 as of June 30, 2001
to the offering, post split
Shares being offered for resale 4,000,000 (maximum)
to the public, post split
Total shares outstanding after 11,116,863
this offering, post split
Price per share to the public Market price at time of resale
9
Total proceeds raised by offering We have received proceeds from the sale of
shares that are presently outstanding, we
may receive up to $25 million from the
sale to Swartz of shares issuable upon the
exercise of any warrants issued to Swartz
pursuant to the Investment Agreement.
There is no assurance that this
$25,000,000 maximum will ever be reached.
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
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 Six Months Ended
December 31 June 30
----------- -------
1999 2000 2000 2001
---- ---- ---- ----
(Unaudited) (Unaudited)
Revenues 49,176 149,400 1,044 218,741
Operating Expenses 495,161 1,158,213 402,655 659,704
Net Loss (445,985) (1,008,813) (401,611) (440,963)
Loss per share (0.14) (0.19) (0.085) (0.069)
Weighted average number
Of common shares
outstanding (post split 3,111,988 5,255,050 4,717,934 6,403,493
number of shares)
June 30, 2001
-------------
(Unaudited)
Balance Sheet Data:
Total assets................................ 1,639,074
Total liabilities........................... 1,190,144
Shareholders' equity........................ 448,930
10
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.
THE COMPANY HAS LIMITED OPERATING HISTORY AND FUTURE REVENUES ARE UNPREDICTABLE
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. Such risks
and uncertainties include:
o the Company's ability to attract and retain advertising customers at a
steady rate for our brand display board to stimulate the sale of
advertisements to be displayed on the display boards;
o the Company's ability to locate, develop and lease suitable site
locations, indoor and outside, for placement of the display boards and
the generation of innovative spots within the site locations that are
best suited for effective marketing and other promotional activities;
o maintaining customer satisfaction by providing customers, both
advertisers and location owners, with a quality trouble-free product
of various sizes, models and quality courteous service, i. e.,
minimizing technical difficulties and downtime;
o the continuing development and enhancement of our existing display
boards and development of innovative display boards and service to
stay ahead of competitors in this market;
o increasing the level of response and consumer awareness and
recognition for our advertisers for the purchase of consumer products
and services;
o economic conditions both general and specific to the advertising
industry;
o infrastructure management of an expanding business in a rapidly
changing market and the ability to attract and retain suitable
talented personnel who are able to recognize potential customers,
advertisers, locations and improvements of the display boards;
o the amount and timing of operating costs and capital expenditures
relating to expansion of the Company's business, operations and
infrastructure;
o attaining acceptable profit margins notwithstanding competition;
o development of strategic relationships and alliances;
o many cities and states have regulations that prohibit LED signs on the
basis that the signs may be a distraction to passing drivers and may
lead to an increase in the number of traffic accidents;
o risks associated with unanticipated events or liabilities;
11
o the Company has incurred losses and expects to incur substantial net
losses for the foreseeable future;
o going concern uncertainty;
o purchasers of the common stock in this transaction will experience
substantial dilution;
o our common stock is subject to penny stock regulation;
o trading in our common stock on the OTC Bulletin Board may be limited.
ABILITY TO ATTRACT AND RETAIN CUSTOMERS
The revenues derived through the display boards and LED screens are advertising
fees paid by the advertisers to NMMI for placing and displaying the
advertisements on the NMMI display boards and LED screens. In most instances
additional revenue is produced by the Company designing and/or printing the
advertisements that are to be displayed. This is the case in both the backlit
scrolling and the front-lit rotating display boards as well as the LED screens.
The display boards and the LED screens are designed to display up to
approximately twenty alternating advertisements. The success of the Company is
totally dependent on the Company's ability to attract and retain advertising
customers at a steady rate and to stimulate the sale of advertisements to be
displayed on the display boards and LED screen.
ABILITY TO LOCATE, DEVELOP AND LEASE LOCATIONS
The Company's success is dependent on selecting the proper display boards in the
most suitable locations with the most dynamic advertising material for the
particular needs of the advertisers in order to offer its customers the quality
results that are necessary for a continuing lasting business relationship.
Certainly, some specific locations are better suited than others for a
particular market. For example, advertising popcorn would logically be more
suited in a movie theater rather than in an automobile dealership. Of equal
importance are the demographics and volume of traffic that will be exposed to
the advertising media. This entails not only the host site location, but also
the specific location within the specific site. No matter how much foot traffic
passes by the front of a store, unless the advertising media can be seen by the
traffic, it is of little use and consequence to the advertiser. 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 site locations. Unless the Company can locate, develop and
procure suitable advertising locations, there will be little hope to attract
advertising customers to generate sufficient revenues.
There can be no assurance that advertisers will chose to deal through an agency
or distributor with whom the Company has a relationship or the advertisers may
deal directly with the owner of the site location for the placement of static
visual poster type advertisements or through a competitor of the Company rather
than through the Company's products. Accordingly, this could significantly
decrease the amount of our business, operating results and financial condition.
Substantially all of the Company's sales are dependent on the commissions
customarily paid by advertisers for ad placements. Consistent with industry
practices, these advertising sales people are not obligated to direct their
advertising customers to any particular agency or media of
12
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.
CUSTOMER SATISFACTION
In all instances the host venue location owner has a vested interest in the
success of the display boards and the LED screens because the space that our
media occupies is some of the retailers' stock in trade. Unless the space can be
put to productive use, the location of the media is of no economic value to the
location owners as well as the advertisers. In addition to the most suitable
location, it is imperative that the media equipment be of a size suitable for
the particular location. Over-kill as well as under-kill can produce an adverse
effect with the ultimate consequence of lost revenue.
Because the Company's products are electronic and electromechanical, the LED and
the rotating display boards, have a potential for breakdown. The Company limits
the exposure to this problem by having a periodic maintenance procedure;
however, there will eventually be downtime. The impact of such downtime will be
problematic to the Company because the advertiser pays the Company a monthly fee
to have its advertisements seen by the public; a portion of the fee is paid to
the host venue and a portion to the sales distributor. When downtime occurs,
unless such downtime is immediately minimized, the advertisers' monthly
advertising fees will need to be adjusted accordingly. A sincere apology for
nonproductive downtime is never going to cure the problem. When advertisers are
paying for a specific number of advertising exposures per minute, a
non-functioning media machine will not fill the expectations of the advertising
customers. Ultimately, a succession of breakdowns will result in loss of the
advertising customers and loss of the site locations as well. Any vandalism or
intentional destruction or theft of the display boards will be another cause for
concern because such acts will most assuredly be an additional cause for
downtime with the same ultimate economic consequence to the Company. NMMI has
attempted to distribute a high quality product; however, because NMMI does not
manufacture the display board and LED screen equipment, the quality cannot be
assured. Ultimately, all of these matters have an affect on the cash flow and
will have an affect on the Company's plan for growth, as well.
CONTINUING DEVELOPMENT AND ENHANCEMENT OF DISPLAY BOARDS
Management feels that as a part of the service provided by NMMI to its customers
it is necessary to service and maintain the existing boards as well as
continuing to improve and innovate its products. NMMI trains each of its
distributor representatives regarding upkeep and maintenance of the advertising
machines. There is no assurance as to how much the routine servicing of the
machines will lengthen the longevity of the machines. As part of the innovation
plan, NMMI developed a kiosk housing for placement of several display boards
within a single fabricated self-contained kiosk housing. Although NMMI does not
have a research and development department, each distributor and sales
representative is in periodic contact with advertisers and site location owners
all of whom have an interest in promoting the most reasonably visible and
appealing advertising media. Ideas are exchanged, many of which are implemented
by NMMI in one manner or another. There is,
13
however, no assurance that competitors will not be more aggressive in their
innovative progression than is NMMI.
CONSUMER AWARENESS AND RECOGNITION
The advertisers expect results. Unless it can reasonably be established that the
advertisers' sales increase to the extent economically anticipated by the
advertisers, there will be no renewal of the advertisement contracts.
Advertising is a competitive business, as too is the advertisers' businesses.
The answer lies with the consumers and the consumers' willingness to accept
NMMI's advertising media by responding by purchase of the advertisers' products.
The Company believes that establishing, maintaining and enhancing its brand
(NMMI brand) are critical aspects of its efforts to attract and expand its
advertising customer base. The number of visual billboard advertisers that offer
competing services, many of which already have well-established brands,
generally increase the importance of establishing and maintaining brand name
recognition. 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 the Company's own
brand name. Each display board displays the Company's brand name, address and
phone number. If the Company is unable to provide high-quality advertisers,
displays, locations and customer support, or otherwise fails to promote and
maintain high quality advertising, or if it incurs excessive expenses in an
attempt to promote and maintain high quality, its business, operating results
and financial condition would be materially adversely affected.
ECONOMIC CONDITIONS
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. In a down
economy merchants and service providers advertise more than in a more affluent
economy. Notwithstanding this philosophy of economics, the economy fluctuates
both in time and geographical location depending on the type of product and the
region where the advertising is to take place. In either event, because of the
periodic change in the economy, the advertising industry will change. It is a
matter of advertising the right product to the right consumer at the right
location at the right time in the right economy. Each of these variables has a
reaction on the potential revenues to be earned by NMMI. There is no assurance
that any or all of these variables will exist to the advantage of NMMI.
14
INFRASTRUCTURE MANAGEMENT
As the Company continues to grow there is a continuing risk of misdirection of
management's attention from operational issues to more subtle, but
time-consuming, less cash flow productive, issues such as personnel matters. The
success of NMMI will rise or fall depending on the talent of the NMMI personnel
to recognize potential customers, advertisers, locations and improvements of the
display boards. Notwithstanding contractual efforts to retain key personnel,
there is always the reality that key personnel could leave the Company.
Management is charged with the responsibility of recruiting competent personnel
able to fulfill the required talent requirement. It is not only the current
ability of the personnel, but the individuals must be able to adapt to an
ever-changing market. A change in the market is reflected in a change of
products, consumer interests, consumer demographics, economics, advertising
media, as well as many additional variables. Because a change in personnel
entails a transition and transitions require time and expense, it is
management's position to employ personnel who have a genuine interest and
ability in progressing along with the changing times and conditions. Replacing
any single key personnel could, and generally does, take several months. During
this term it is necessary for other key personnel to "fill-in" by assuming job
related responsibilities for which such "fill-in's" are not necessarily properly
skilled or efficiently qualified; in addition to taking away such "fill-in's"
attention from otherwise customary daily prescribed duties. This would cause
overall temporary operational inefficiency that certainly would have an ultimate
negative effect on the Company's proposed growth. Management cannot assure that
any particular individual will remain with the Company or that, in the future,
the personnel will continue to be the most suitable for the particular position.
TIMING OF OPERATING COSTS AND CAPITAL
Now that the Company has evolved beyond the initial start-up period and is fully
operational, the Company expects to grow in relation to its growth of sales.
There is, however, no certainty that the Company will achieve these growth
results. The amount and timing of operating costs and capital expenditures
relating to expansion of the Company's business, operations and infrastructure
are key elements to the success of NMMI. Because NMMI is undercapitalized,
timing is important. Although there is a definite distinction between operating
costs and capital expenditures, without both, failure is destined. It is
imperative that the Company has sufficient capital to operate the daily ongoing
business, but by the same token, it is just as important to the ultimate success
of the Company that there be sufficient capital for company expansion. There is
no assurance that there will ever be sufficient capital or revenue to fully fund
both of these vital elements. The Company may need to raise additional funds in
order to fund more rapid expansion, to develop new or enhanced equipment
(display boards, both indoor and outdoor and LED screens), services, site
locations and to respond to competitive pressures. If the Company raises
additional funds by issuing equity or convertible debt securities, the
percentage ownership of its stockholders will be diluted. Further, any new
securities could have rights, preferences and privileges senior to those of the
preferred stock and common stock. Other than as already mentioned above, the
Company currently does not have any commitments for additional financing. It
cannot be certain that additional financing will be available in the future to
the extent
15
required or that, if available, it will be on terms acceptable to the Company.
If adequate funds are not available on acceptable terms, the Company may not be
able to fund its expansion, consummate acquisitions, develop or enhance its
products and services and respond to competitive pressures.
COMPETITION
The motion display industry is rapidly evolving and intensely competitive. We
expect competition to continue to intensify in the future. Many of our
competitors have significantly greater financial, technical, marketing and other
resources than we do. Some of our competitors also offer a wider range of
services than we offer and have greater name recognition and a larger customer
base. These competitors may be able to respond more quickly to new or changing
opportunities, technologies and customer requirements and may be able to
undertake more extensive promotional activities, offer more attractive terms to
customers and adopt more aggressive pricing policies. We cannot assure that we
will be able to compete effectively with current or future competitors or that
the competitive pressures faced by us will not harm our business. Intense
competition from existing and new entities may adversely affect our revenues and
profitability.
Many businesses compete with NMMI in some aspects of the motion display
industry. This competition includes traditional static print advertising, LED
and video advertising as well as billboard advertising. Many of NMMI's
competitors are national companies with existing track records that offer
products and services similar to those of NMMI. A few of these major competitors
are Eller Media owned by publicly traded Clear Channel Communications (CCU),
Infinity Group owned by publicly traded Viacom, Inc. (VIA) and JC Decaux. These
companies currently have name recognition in the billboard advertising industry.
NMMI is slightly different from most of its competition in that it operates in a
capacity that includes being the supplier of product, in some instances the
seller of product, the seller of all graphics for the product and the seller of
all advertisements for the product.
The Company needs to keep abreast with its competitors regarding 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 ultimate customer response. Indoor and
outdoor billboard advertising are characterized by:
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 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;
16
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 motion display product business entails
significant business risks. The Company might not successfully use new
technologies effectively or adapt its existing capabilities, high technology
equipment and transaction producing efforts to customer requirements or emerging
industry standards. If it is unable, for technical, legal, financial or other
reasons, to adapt in a timely manner, in response to changing market conditions
or customer requirements, its business, financial condition and results of
operations could be adversely affected.
STRATEGIC RELATIONSHIPS
The patent holder of the "IllumiSign-Eyecatcher" indoor front-lit display
boards, a resident of Great Britain, granted to the Company an exclusive license
to manufacture, operate, distribute and market the "IllumiSign-Eyecatcher"
indoor front-lit display boards in the United States and Canada. Presently,
Ardian Sheet Metal Limited, a Great Britain based company, manufactures the
"IllumiSign-Eyecatcher" indoor front-lit 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 "EyeCatcher Powered by
Insight" motion display boards in the United States. The minor exceptions to
this exclusivity relate to accounts with which AMS had an existing business
relationship at the time of contracting with NMMI. Should either of these
contracts be terminated, it could cause a material adverse affect to the Company
and its operations.
It is a philosophy of Management that strategic relationships are an important
element in the success of the Company. It is felt that strategic relationships
provide an inexpensive, least amount of capital up front, manner of acquiring
some products as well as locating display boards and LED screens. The strategic
relationship that NMMI has with E-Vision LED, Inc. (See section entitled
Business Overview) provides NMMI with the opportunity to furnish expensive LED
panels at dealer cost. This provides NMMI a competitive edge over other LED
advertisers. In the majority of motion display host venue sites the venue site
owner participates in the advertising revenue paid by the advertiser. This too
is a strategic relationship that allows for the placement of the display boards
in prime location at no up-front cost to NMMI. Many of our competitors follow a
similar business plan and there is no assurance that NMMI will continue to
profit from these relationships.
LED SIGN REGULATIONS
Many cities and states have regulations that prohibit LED signs on the basis
that the signs may be a distraction to passing drivers and may lead to an
increase in the number of traffic accidents. Such regulations together with
zoning and other government permit regulations are cause for additional expenses
and time delays. Such additional expense and delays could be cause for
customer/advertiser dissatisfaction. Management's business model many times
requires that
17
at least some LED screen advertisements be pre-sold, i. e., sold prior to
erection of the LED screen. There is no assurance that the LED screen panels,
erection costs, advertising revenues will remain as quoted in the event of a
lengthy government zoning, permit or other regulatory proceeding; or that
appropriate zoning and/or permits will be granted for erection of the LED
screens.
If the Company does not successfully manage these risks, its business, operating
results and financial condition will be materially adversely affected. The
Company cannot assure you that it will successfully address these risks or that
its business strategy will be successful. If the Company does not become
profitable, you may lose your entire investment.
RISKS ASSOCIATED WITH UNANTICIPATED EVENTS OR LIABILITIES
Although management has put a great deal of effort into protecting the Company
from potential harmful events that could arise, there is always the distinct
possibility that such events could occur. The Company is insured against all
such events for which insurance is logically and economically available;
however, there exists the reality of potential catastrophes for which there is
no "cash flow" protection such as loss because of hurricane, electrical
lightning, other natural hostile elements that could cause damage to the office
facility, motion displays or LED billboards. Management has determined that it
is not economically feasible for the Company to insure against loss of cash flow
resulting from such calamity. These potential disasters along with other matters
that could cause a disruption of the Company's business most certainly would
have a disastrous effect on the Company's cash flow and ultimately on the
Company's profit.
THE COMPANY HAS INCURRED LOSSES AND EXPECTS TO INCUR SUBSTANTIAL NET LOSSES FOR
THE FORESEEABLE FUTURE
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. 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 that the Company will be innovative in its choice of
sites and the locations within the sites.
The Company's future profitability depends on generating and sustaining high
revenue growth while maintaining reasonable expense levels. Slower revenue
growth than the Company anticipates or operating expenses that exceed its
expectations would adversely affect its business, operating results and
financial condition. The Company cannot be certain when or if it will achieve
sufficient revenues in relation to expenses to become
18
profitable. If the Company is unable to become profitable, you will lose your
entire investment.
GOING CONCERN UNCERTAINTY
The Company has incurred recurring operating losses and negative cash flows and
has negative working capital. The Company has financed itself primarily through
the sale of its stock and related party borrowings. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
There can be no assurance that the Company will be successful in implementing
its plans, or if such plans are implemented, that the Company will be
successful.
PURCHASERS OF THE COMMON STOCK IN THIS TRANSACTION WILL EXPERIENCE SUBSTANTIAL
DILUTION
Based upon the terms of the Swartz Investment Agreement, purchasers of the
common stock 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 Swartz Investment Agreement. The Company cannot
presently ascertain the number of shares to be issued pursuant to the Swartz
Investment Agreement. Under the Swartz Investment Agreement this number may be
up to 4,000,000 (post split number of shares) shares, plus additional shares as
may be registered in the future. Consequently, purchasers of the Company's stock
may experience substantial dilution in the future up to the number of shares
registered.
OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION
The Company's common stock may be deemed a penny stock. Penny stocks generally
are equity securities with a price of less than $5.00 per share other than
securities registered on certain national securities exchanges or quoted on the
NASDAQ Stock Market, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system. The Company's securities may be subject to "penny stock rules" that
impose additional 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
19
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 attain such a level.
TRADING IN OUR COMMON STOCK ON THE OTC BULLETIN BOARD MAY BE LIMITED
The Company's common stock trades on the OTC Bulletin Board. The OTC Bulletin
Board is not an exchange and because trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on an
exchange or NASDAQ, you may have difficulty reselling any of the shares that you
purchase from the selling shareholder.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the selling
security holders. However, we have received proceeds from the sale of shares
that are presently outstanding, we could receive up to $25 million from Swartz
upon Swartz's purchase of the shares from us and we may receive additional
proceeds from the sale to Swartz of shares issuable upon the exercise of
warrants issued or to be issued to Swartz pursuant to the Investment Agreement.
There is no assurance that this $25,000,000 maximum will ever be reached.
We intend to use the proceeds from the sale of the shares to Swartz and the
exercise of warrants by Swartz for working capital and general corporate
purposes, including acquisitions, funding anticipated operating losses, sales
and marketing expenses, purchase of additional equipment, working capital and to
fund payment obligations for contemplated acquisitions and corporate partnering
arrangements. We reserve the right to vary the use of proceeds among the
categories listed above because our ability to use the proceeds is dependent on
a number of factors, including the extent of market acceptance of our variety of
display boards, unexpected expenditures for further technical development, sales
and marketing efforts and the effects of competition.
To the extent we deem appropriate, we may acquire fully developed products or
businesses that, in our opinion, facilitate our growth and/or enhance the market
penetration or reputation of our products and services. To the extent that we
identify any such opportunities, an acquisition may involve the expenditure of
significant cash and/or the issuance of our capital stock. We currently have no
commitments, understandings or arrangements with respect to any such
acquisition.
Until we use the net proceeds of the offering, we will invest the funds in
investment grade, interest-bearing securities.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the OTC BB. The following table sets forth the
high and low bid prices of our common stock on the last day of each quarter
beginning with the first quarter of 1999 through the third 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.
20
Year High Bid Low Bid
---- -------- -------
1999
----
First Quarter .313 .313
Second Quarter .406 .406
Third Quarter .125 .125
Fourth Quarter .120 .120
2000
----
First Quarter .875 .875
Second Quarter 1.000 1.000
Third Quarter .650 .430
Fourth Quarter .350 .220
2001
----
First Quarter .080 .080
Second Quarter* 1.700 1.350
Third Quarter 1.170 1.110
*Note: On May 18,2001 the issuer shares split 5:1. The second quarter prices
reflect the post split prices.
DILUTION
At June 30, 2001, we had a net tangible book value of ($138,775) or
approximately ($0.019) per share of common stock. Net tangible book value per
share represents the amount of our total tangible assets less our total
liabilities, divided by the number of shares of common stock outstanding. After
giving effect to the receipt of the estimated net proceeds from our sale of the
offering price of $1.38 per unit (after deducting underwriting discounts and
estimated offering expenses payable by us) the net tangible book value as of
June 30, 2001, would have been approximately $5,381,225 or $.48 per share of
common stock. This would represent an immediate increase in the net tangible
book value per share of common stock of $.499 to existing shareholders and an
immediate dilution of $1.02 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 $1.50
Net tangible book value per share of common stock
before the offering ($0.019)
Increase attributable to new investors $4.999
Proforma net tangible book value after the offering $0.48
Dilution to new investors $1.02
Percentage of dilution to new investors 68%
The following table summarizes the number of shares of common stock newly issued
under this Registration Statement. The table reflects 200,000 commitment
warrants at $1.50 a share and 3,800,000 shares at $1.50.
21
The table, with respect to new investors, gives effect to 4,000,000 shares as if
issued June 30, 2001.
Share Purchased Consideration Paid Average Price
Number Percentage Amount Percentage Per Share
------ ---------- ------ --------------------
Existing Shareholders 7,116,863 64.02 $3,789,820 .53
New Investors 4,000,000 35.98 $6,000,000 2.00
--------- ----------
Total 11,116,863 100.00% $9,789,820 .88
There can be no assurance that $1.50 will be the consideration amount from new
investors, but is based on current market conditions of the stock.
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 (post-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.
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 200,000 4,000,000(1) -0-(2) -0-
Investment Management
of America, Inc. 1,326,416(3) 600,000 1,326,416 21%
Raymond D. Benedict 4,000 4,000 4,000
Thomas H. Breiter 4,000 4,000 4,000
Alan D. Bridges 2,000 2,000 2,000
Thomas Daley 4,000 4,000 4,000
William L. Gaskins 800 800 800
Kirtinai Jeerapaet 6,000 6,000 6,000
Michael McEnany 6,000 6,000 6,000
John T. Puls 40,000 40,000 40,000
Richard Puls 1,600 1,600 1,600
Barry Rusche 1,000 1,000 1,000
Charles Saulino 20,000 20,000 20,000
Paul Skversky 2,000 2,000 2,000
Bonnie Sonnenfield 2,000 2,000 2,000
Rosalie Stall 1,000 1,000 1,000
HNC Associates, LLC 20,000 20,000 20,000
Gerry Ghini 100,000 100,000 100,000
Russell Wahl 80,000 80,000 80,000
Eric Kennedy 20,000 20,000 20,000
William H. Simon 100,000 100,000 100,000
William Acquaviva 2,000 2,000 2,000
22
Robert Colvin 2,000 2,000 2,000
William Long 2,000 2,000 2,000
Timothy Meenan 2,000 2,000 2,000
Randall Willis 600 600 600
Jack Wynn 1,000 1,000 1,000
Peter Jensen 8,000 8,000 8,000
*Note: On May 18,2001 the issuer shares split 5:1. This schedule and the notes
associated with it reflect 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) 600,000 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.
PLAN OF DISTRIBUTION
SWARTZ INVESTMENT AGREEMENT
On May 19, 2000, we entered into an Investment Agreement with Swartz. The
Investment Agreement entitles us to issue and sell our common stock to Swartz
for up to an aggregate of $25 million from time to time during the three-year
period following the date of effectiveness of a registration statement covering
the resale of the shares to be put to Swartz. There is no assurance that this
$25,000,000 maximum will ever be reached. Each election by us to sell stock to
Swartz is referred to as a "put right".
Put rights. In order to invoke a put right, we must have an effective
registration statement on file with the SEC registering the resale of the shares
of common stock that may be issued as a consequence of the exercise of that put
right. We must also give at least 10, but not more than 20 business days advance
notice to Swartz of the date on which we intend to exercise a particular put
right and we must indicate the maximum number of shares of common stock that we
intend to sell to Swartz. At our option, we may also designate a maximum dollar
amount of common stock (not to exceed $2 million) that we will sell under the
put and/or a minimum purchase price per common share at which Swartz may
purchase shares under the put. The number of shares of common stock sold to
Swartz in a put may not exceed the lesser of: (i) 15% of the aggregate daily
reported trading volume of our common shares, excluding certain block trades of
our common stock during the twenty 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
23
stock outstanding (as calculated under Section 13(d) of the Securities Exchange
Act of 1934).
For each share of common stock purchased by Swartz, Swartz will pay us the
lesser of:
o The market price for such share, minus $.10 or
o 92% of the market price for the share; provided, however, that Swartz
may not pay us less than the designated minimum per share price, if
any, that we indicate in our notice.
Market price is defined as the lowest closing bid price for the common stock on
its principal market during the pricing period. The pricing period is defined as
the 20 business days immediately following the day we exercise the put right.
Warrants. Within five business days after the end of each pricing period, we are
required to issue and deliver to Swartz a warrant to purchase a number of shares
of common stock equal to 10% of the common shares issued to Swartz in the
applicable put. Each warrant will be exercisable at a price that will initially
equal 110% of the market price for that put and thereafter may be reset every
six months. Each warrant will be immediately exercisable and have a term
beginning on the date of issuance and ending five years thereafter.
Limitations and conditions precedent to our put rights. Swartz is not required
to acquire and pay for any shares of common stock with respect to any particular
put for which, between the date we give advance notice of an intended put and
the date the particular put closes:
o we have announced or implemented a stock split or combination of our
common stock;
o we have paid a common stock dividend;
o we have made a distribution of all or any portion of our assets or
evidences of indebtedness to the holders of our common stock; or
o we have consummated a major transaction, such as a sale of all or
substantially all of our assets or a merger or tender or exchange
offer that results in a change of control of NMMI.
Short sales. Swartz and its affiliates are prohibited from engaging in short
sales of our common stock unless Swartz has received a put notice and the amount
of shares involved in the short sale does not exceed the number of shares
specified in the put notice.
Cancellation of puts. We must cancel a particular put between the date of the
advance put notice and the last day of the pricing period if:
o we discover an undisclosed material fact relevant to Swartz's
investment decision;
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
24
the canceled put will be smaller than it would have been had the put not been
canceled.
Shareholder approval. Under the Investment Agreement, we may sell Swartz a
number of shares that is more than 20% of our shares outstanding on the date of
this prospectus. If we become listed on The NASDAQ Small Cap Market or NASDAQ
National Market, we may be required to obtain shareholder approval to issue some
or all of the shares to Swartz. As we are currently a Bulletin Board company, we
do not need shareholder approval.
Termination of Investment Agreement. We may terminate our right to initiate
further puts or terminate the Investment Agreement at any time by providing
Swartz with notice of such intention to terminate; however, any such termination
will not affect any other rights or obligations we have concerning the
Investment Agreement or any related agreement.
Restrictive covenants. During the term of the Investment Agreement and for a
period of 6 months after the Investment Agreement is terminated, we are
prohibited from engaging in certain transactions. These include the issuance of
any equity securities, or debt securities convertible into equity securities,
for cash in a private transaction without obtaining the prior written approval
of Swartz. We are also prohibited from entering into any private equity line
type agreements similar to the Investment Agreement without obtaining Swartz's
prior written approval.
Right of first refusal. Swartz has a right of first refusal, subject to another
first refusal obligation for which we are contractually obligated, to
participate in any private capital raising transaction of equity securities that
closes from the date of the Investment Agreement (July 9, 1999) through 6 months
after the Investment Agreement is terminated.
Swartz's right of indemnification. We have agreed to indemnify Swartz (including
its stockholders, officers, directors, employees, investors and agents) from all
liability and losses resulting from any misrepresentations or breaches we make
in connection with the Investment Agreement, our registration rights agreement,
other related agreements, or the registration statement.
ADDITIONAL SECURITIES BEING REGISTERED
NMMI needed 3,000,000 shares of registered 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 10,000,000 shares of Preferred Stock. The NMMI Board of Directors
passed a resolution creating a Series A Convertible Preferred Stock as to
5,000,000 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 3,000,000 shares of its registered Common
Stock for 3,000,000 shares of NMMI's Series A Convertible Preferred Stock with
the contractual requirement that NMMI will authorize at least 3,000,000
additional shares of Common Stock and include the 3,000,000 shares of Common
Stock in the SB-2 registration statement, thus creating the shares of registered
Common Stock for which Investment
25
Management of America, Inc. can convert its Series A Convertible Preferred
Stock. This conversion was completed and the 3,000,000 shares of registered
common stock were exchanged for the 3,000,000 shares of Series A Convertible
Preferred Stock. These transactions were all pre-split and the amounts stated
above in this paragraph are all pre-split amounts.
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 432,000 shares (post-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 1:5 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 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
26
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.
LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit filed on November 5, 1999 in the Circuit
Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida,
Case Number 99-26073 CA 10. The plaintiff, Joseph Maenza, is seeking to collect
payment of a promissory note in the principal amount of $50,000 plus interest
from February 1999 and attorney fees. January 24, 2001 the parties agreed to a
settlement by making periodic payments. There is presently owed on this
settlement account a principal balance of $42,700. This settlement is recognized
as a liability of the Company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following are officers and directors of the Company.
NAME AGE POSITION
---- --- --------
John Thatch 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
Mr. Thatch, age 39 years, has served as President, Chief Executive Officer and
Director of New Millennium Media International since January 2000. During this
time he has overseen all functions of the company, including day-to-day
operations. Mr. Thatch has over 15 years of entrepreneurial business experience
that includes over 7 years as the principal in Bay Area Auto Sales, an
automotive dealership, that specialized in sales of reconditioned vehicles. He
was the founder and General Partner for Last Chance Finance, Ltd. that owned and
operated over 18 offices specializing in alternative vehicle financing. Over the
past 10 years Mr. Thatch has been President and majority
27
shareholder of Superior Management of Tampa, Inc., a privately owned company,
that owns property and commercial leases. Other than for nominal time spent on
corporate and personal real estate holdings that have no business relationship
with NMMI, Mr. Thatch dedicates his full time to his current position. He brings
leadership, marketing and strong management skills to the company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of the date of this filing by: (i) each
shareholder known by us to be the beneficial owner of 5% or more of the
outstanding common stock, (ii) each of our directors and (iii) all directors and
executive officers as a group. Except as otherwise indicated, we believe that
the beneficial owners of the common stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable. Shares of
common stock issuable upon exercise of options and warrants that are currently
exercisable or exercisable within 60 days of filing this document have been
included in the table.
Name and Address Amount and Nature Percent of Class
of Beneficial of Beneficial
Owner Ownership Before Offering(1) After Offering
---------------- ------------- --------------- --------------
John Thatch 500,000 7% 4%
President/CEO
and Director
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
traded with NMMI for 3,000,000 pre-split 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.
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
28
June 30, 2001 there are 7,116,863 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 were
issued to Investment Management of America, Inc. in exchange for 3,000,000
shares of registered 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. The preferred shares were not affected by the
reverse stock split. The 3,000,000 shares transaction mentioned herein above
occurred pre-split.
WARRANTS
There are outstanding warrants to purchase 242,274 (post split number of shares)
shares of our common stock at a price of $1.50 per share and may be reset every
6 months thereafter. These warrants were issued to Swartz on March 21, 2000
(200,000 shares), April 17, 2001 (16,796 shares) and July 17, 2001 (25,478
shares) in consideration of Swartz's commitment to enter into the Investment
Agreement. The warrants expire on May 25, 2004, April 17, 2006 and July 17,
2006, respectively. By contract, the holders of the warrants have the right to
have the common stock issuable upon exercise of the warrants included on any
registration statement we file, other than a registration statement covering an
employee stock plan or a registration statement filed in connection with a
business combination or reclassification of our securities. The shares of common
stock to support these warrants are included in the SB-2 registration statement.
INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the securities offered hereby has been passed upon by Atlas
Pearlman, P. A., Attorneys at Law, Ft. Lauderdale, Florida.
The Condensed Balance Sheet, Condensed Statement of Operations and Condensed
Statement of Cash Flows as of June 30, 2001, for the period ended June 30, 2001
in this prospectus and the Balance Sheets, Statement of Operations, Statement of
Stockholders' (deficit) Equity and Statement of Cash Flows for the period ending
December 31, 2000
29
have been included herein in reliance on the report of Richard J. Fuller,
C.P.A., P.A., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.
We have filed herewith with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the securities offered under this prospectus.
This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement,
certain items of which are omitted in accordance with the rules and regulations
of the SEC. Statements contained in this prospectus as to the contents of any
contract or other documents are not necessarily complete and in each instance
reference is made to the copy of such contract or documents filed as an exhibit
to the registration statement, each such statement being qualified in all
respects by such reference and the exhibits and schedules thereto. For further
information regarding NMMI and the securities offered under this prospectus, we
refer you to the registration statement and such exhibits and schedules which
may be obtained from the SEC at its principal office in Washington, D.C. upon
payment of the fees prescribed by the SEC.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the federal securities
laws as may be permitted to directors and controlling persons of the issuer, the
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the law
and is, therefore, unenforceable. In the event a demand for indemnification is
made, the issuer will, unless in the opinion of its counsel that the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the law and will be governed by the final adjudication of
such issue.
ORGANIZATION WITHIN LAST FIVE YEARS
None.
DESCRIPTION OF BUSINESS
BRIEF HISTORY
New Millennium Media International, Inc. is a Colorado corporation organized on
April 21, 1998. NMMI's principal place of business is located at 200 9th Avenue
North, Suite 210, Safety Harbor, Florida 34695. NMMI is the successor by merger
to Progressive Mailer Corp.
30
(hereafter "PMC"), a corporation organized in Florida on February 5, l997. In
March 1997 and April 1998, PMC conducted offerings of its common stock pursuant
to the exemption from registration afforded by Rule 504 of Regulation D under
the Securities Act of l933, as amended. On November 3, l997, PMC received
clearance from the NASD to have its common stock listed on the OTC Bulletin
Board.
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 was 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 6.4
million 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 front-lit display
machine. NMMI markets and sells 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 common shares.
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. Subsequent to the
acquisition, Unergi, Inc. was liquidated.
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 in order to
obtain consulting services of its Corporate officer and was not significant to
the financial statements of NMMI. By virtue of the merger, NMMI acquired 100% of
the issued and outstanding common stock of Scovel. After the acquisition, Scovel
was liquidated.
NMMI is a fully reporting company which common stock is traded on the OTC
Bulletin Board operated by NASDAQ under the symbol NMMG.
BUSINESS OVERVIEW
For years the billboard industry has seen several consolidations with large
corporate owners acquiring smaller (fewer than 50 billboards) independent
operators. The purpose of these consolidations is to provide a platform for the
corporate owners to attract large regional and national advertisers. Billboard
advertising has evolved from painted signs without lights, to lighted signs, to
vinyl covered signs, to prism boards (three sided boards which rotate three
ads), to LED (light emitting diode) signs. Presently the plasma signs are used
indoors and generally do not have a screen size larger than 48 inches.
Advertisers soon learned that rotating signs attract the attention of
31
viewers more effectively than static signs. The most prominent LED display sign
is in Times Square in New York City. Despite the effectiveness of LED outdoor
advertising, the billboard industry is moving slowly to the LED display sign
because most large companies have a substantial investment in static signs. The
cost to change a traditional static board to an LED display is approximately
$1,000.000 to $2,000.000 depending on the size of the LED sign. In many
instances, because of the additional weight of the LED sign, it is necessary to
erect an entire new foundation along with accompanying supports. Another reason
is that LED signs may only be installed in certain traffic areas because many
cities and states have regulations that prohibit LED and prism signs on the
basis that the signs may be distracting to passing drivers and may lead to an
increase in the number of traffic accidents. NMMI has targeted markets where
this may not be an issue.
There are two reasons for the changes in outdoor advertising. First,
technological improvements have made the prism and LED boards affordable.
Second, moving ads have a much greater impact on viewers than static ads. In a
digital society there must be an effective way for advertisers to display their
product in its true form. The competition in indoor advertising is limited. Most
indoor companies sell single poster board advertisements of different sizes and
place them in theaters, malls, airports and other similar venue locations.
NMMI provides several types of visual advertising: The Illumisign-Eyecatcher
front-lit movable display boards, the "EyeCatcher Powered by Insight" back-lit
scrolling movable display boards, plasma screens and LED display boards. We
retain ownership of all types of the machines and sell the advertising space on
a monthly basis.
NMMI has 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 encased, front lighted, and
displays poster type ads. These mechanical devises come in various sizes ranging
from 11 inches by 17 inches to 4 feet by 6 feet. Each machine is capable of
rotating up to 24 posters at preprogrammed intervals ranging from 3 seconds to
one hour.
Additionally, NMMI has the exclusive U.S. rights to an indoor backlit
advertising board designed and manufactured by AMS Controls, Inc. called the
"EyeCatcher Powered by Insight". There are a few minor exceptions to this
exclusivity that relate to accounts with which the manufacturer had an existing
business relationship at the time of contracting with NMMI. We are marketing
this new product as "EyeCatcher Powered by Insight". This is a patented product,
which ranges in 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. 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
32
electric sign products in the United States Department of Commerce, Patent and
Trademark Office.
The LED display boards are generally placed out doors either freestanding or
affixed onto the sides of buildings or located in athletic stadiums. The LED
boards range in size from 8 feet by 10 feet to 20 feet by 30 feet and even
larger in customized designs. They are capable of displaying a near infinite
number of stationary or full motion images. Because the images need to be
programmed into the LED boards, it is necessary that our graphic arts department
be involved in both the design and set up of the intended displays.
NMMI has a strategic relationship with E-Vision LED, Inc., a U.S. based company
whose affiliates manufacture these high quality LED units (See above heading
Risk Factors, subheading Strategic Relationships). E-Vision will sell the LED
boards to NMMI for a less than retail price and will share in the revenues that
the LED boards produce. This allows NMMI to procure the highest quality LED
display boards at a greatly reduced cost. Because these LED boards can run any
commercial format on any sized board, we feel that NMMI has a strong competitive
advantage over other similar display boards for which the visual display must be
reformatted. Formatting often takes weeks. E-Vision LED displays will run 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 strategic
partner, E-Vision and its affiliates will supply NMMI, free of charge, software
upgrades as they become available.
In relation to these various types of display media, NMMI is capable of
providing advertisers with visual communications and media services in both
indoor and outdoor environments. We offer a comprehensive range of visual
movable board solutions designed to improve clients' advertising needs and
processes including professional services such as strategic site location,
consulting and analysis as well as poster design and development. This enables
us to locate boards and sell advertising on a national level that will benefit
NMMI in placing boards throughout the United States.
NMMI signed a one-year with option for eight additional one-year terms marketing
agreement with Carson-Jensen-Anderson Enterprises, Inc. d/b/a EyeCatcher
Marketing Company through which agreement the Illumisign-Eyecatcher display
boards were to be marketed throughout the 50 United States. Effective May 10,
2001 NMMI and EyeCatcher Marketing Company reached an agreement whereby their
contractual relationship was terminated and NMMI received nearly all of the
assets of EyeCatcher Marketing Company. The major advantage to NMMI of this
settlement was the cancellation of the marketing agreement that now allows NMMI
to do all marketing in-house. All marketing is now under the direct supervision
and control of the Company which is now equipped to oversee the marketing
function.
33
EMPLOYEES
NMMI has twelve full time employees. None of our employees is represented by a
labor union. We consider our relations with our employees to be good. Because a
major portion of our business involves nationwide site location and procurement
as well as sales and marketing of advertising space, it is advantageous for us
to outsource this segment of our business through strategic partnering and
subcontracting distributors. We intend to utilize in-house employees and plan to
add additional staff as needed to handle all other phases of our business
including graphic arts, warehousing, distribution, purchasing, distribution,
shipping, accounting and bookkeeping.
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Management's discussion and analysis contains various "forward looking
statements." Such statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate," or "continue" or use of
negative or other variations or comparable terminology.
We caution that these statements are further qualified by important factors that
could cause actual results to differ materially from those contained in the
forward-looking statements, that these forward-looking statements are
necessarily speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred to
in such forward-looking statements.
OVERVIEW
The Company is no longer a development stage company as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises." We have generated our cash needs through equity financings
and loans from officers and stockholders. As an operational 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. 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 the 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.
34
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations and investments in equipment
through cash from operations, equity financings and borrowing from related
parties.
Our cash and cash equivalents were $129,544 at the six months ending June 30,
2000 compared to $18,288 for the same period in 2001, a decrease of $111,256.
Generally, the Company has been funded by proceeds from common stock
transactions that are not necessarily isolated transactions; however, there is
no assurance that there will be proceeds from common stock transfers in the
future.
On May 19, 2000 the Company entered into an investment agreement with Swartz
Private Equity, LLC to raise up to $25 million through a series of sales of
common stock. The dollar amount of each sale is limited by the trading volume
and a minimum period of time must occur between sales. In order to sell shares
to Swartz, there must be an effective registration statement on file with the
SEC covering the resale of the shares by Swartz and we must meet certain other
conditions. The agreement is for a three-year period ending May 2003. See the
section above entitled "Swartz Investment Agreement".
Our net loss has not changed dramatically from the first six months of 2000
($401,611) to the same period of 2001 ($440,963), an increase of 9.8%. These
same two comparative terms show a 3.36% decrease in Net Cash Used in Operating
Activities, from $342,436 to $330,945. Management feels that this is the result
of an increase in net operating loss with an increase in accounts receivable of
$114,939 net of an increase in payables of $78,040 in 2001. It is further felt
that these two contributing factors are a direct consequence of a steady
increase in business activity, i. e., as the business increases so do the
receivables and payables. The increased business activity are the result of a
steady increase in the number of events for which the mobile LED display unit is
being booked as well as the increase in the number of display boards being
placed which, in turn, increases the amount of artwork being produced by the
Company graphic arts department. These three units of the Company, display
boards, LED screens and graphic arts, are the revenue producing elements.
Although this is an apparent positive trend, there is uncertainty as to the
longevity of this trend. Maintaining this trend is necessary for the Company's
short-term as well as long-term internal liquidity. Management feels that the
receivables are collectable, it is anticipated that the receivables will
"roll-over" monthly or bi-monthly. Some leniency has been afforded new
advertising accounts to boost the initial advertising sales. By the same token,
management feels that the increase in accounts payable are too the direct result
of additional business and that the payables will continue to "roll-over"
monthly or bi-monthly.
We have incurred recurring operating losses and negative cash flows from
operating activities and have little working capital. Presently, there is no
outstanding material commitment for capital expenditures. We believe that our
available equity financing arrangement with Swartz will be sufficient to meet
our working capital and capital expenditure liquidity requirements for at least
the next two years. However, there can be no assurance that we will receive
financing from Swartz, that we will not require additional financing within this
time frame or that such additional financing, if needed, will be available on
terms
35
acceptable to us, if at all. See section entitled "Swartz Investment Agreement",
above, for further detail on this equity transaction.
RESULTS OF OPERATIONS
Income - The comparative revenue for the first six months of 2001 compared to
the same period for 2000 shows an increase of $217,697. This increase is due
primarily to receipt of additional revenues from the mobile LED truck unit that
has been booked throughout these first six months nearly every weekend. Also, as
the Company installs additional EyeCatcher display boards, additional
advertisements are sold. Generally, this is cumulative, i. e., as the display
boards are placed, the advertisements are sold for a term of several months or a
yearly. Even though the advertisement contracts expire, many are renewed with a
minimal amount of sales effort and the display board continues to produce
revenue with no additional effort necessary to place the display board because
it remains in place at the host venue so long as it continues to produce revenue
for the host venue.
GENERAL AND ADMINISTRATIVE COSTS AND EXPENSES
There was an increase in the General and Administrative Costs and Expenses of
$52,379 for the second quarter comparison of 2000 and 2001 and an increase of
$204,140 for the first six months of these two years. This increase is due
primarily to the Company being operational.
INTEREST EXPENSE
Interest Expense decreased by $5,257 for the first six months of 2001 compared
to the same period of 2000. This interest expense decreased primarily as a
result of the Company negotiating equity financing for debt transactions.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $58,166 primarily as a result of
advertising boards being available for lease. Previously, these boards were to
be sold and not leased and included in inventory.
TOTAL COSTS AND EXPENSES
The Total Costs and Expenses have increased by $80,986, an increase of 29.2% in
the second quarter of 2001 when compared to the second quarter of 2000 and for
the first six months of the two years compared, the increase was $257,049, a
63.8% increase. This is the effect of the Company depreciation and amortization
increasing $29,048 and $58,166 primarily as a result of the boards and general
and administrative expenses increasing $52,379 and $204,140 primarily because of
being operational in comparative quarters and the six months ended,
respectively.
LOSS FROM OPERATIONS AND NET LOSS
The $39,352 increase in Loss from Operations for the first six months term of
2001 compared to 2000 is the effect of an increase in the total costs and
expenses and the income. The total costs and expenses increased as did the
income, only to a lesser extent (63.8%).
BASIC AND FULLY DILUTED LOSS PER COMMON SHARE
The Basic Loss Per Common Share for the same comparative two quarters has
decreased from $(0.060) to $(0.043), a comparative Basic Loss Per Common Share
decrease of 28.3%. This loss per common share is a
36
function of the Costs and Expenses versus Income. As stated above, a major
portion of the Costs and Expenses are non-reoccurring start-up costs. 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.
TRENDS AND EVENTS
In May of 2001 we changed our operations model primarily in that we have
regained the marketing role in-house. Management feels that this is a positive
change in that the Company now has total control of all marketing activities.
The Company continues to allocate geographical areas to distributors who, in
turn, focus on their respective areas.
The Company out grew its leased office and warehouse space and moved to new
quarters that has sufficient space for growth. The new expanded warehouse area
now has sufficient space to handily store the various type and size display
boards as well as a work area for refurbishing and repairing. When the mobile
LED screen truck is not in use, it is placed in a specially built truck bay
within the new warehouse area.
In the opinion of management, the cumulative effect of these events is a
positive trend. Although there is no real assurance that this positive trend
will continue; this trend is further reinforced by the 21% decrease in the Basic
and Fully Diluted Loss Per Common Share.
DESCRIPTION OF PROPERTY
NMMI owns no real estate. On March 29, 2001 the Company signed a lease with
Safety Harbor Centre for five years with an option for five additional years.
The lease became effective August 27, 2001, the date that the Company began
occupancy of the new facility. This leased facility is slightly larger than the
prior leased premises and will support a more efficient use of the floor space
as well as additional space for expansion. Many of the machines will continue to
be shipped directly to the site location and for those machines that require
more detailed installation such as the LED boards, the machines will be shipped
directly to the installer. Machines that are in need of repair will be repaired
on-site whenever possible. Those machines that are not repairable on-site will
be repaired in-house at the Safety Harbor, Florida facility.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was originally incorporated April 21, 1998 in Colorado under the
name New Millennium Media International, Inc. April 30, 1998 Progressive Mailer
Corp., a Florida corporation, merged into NMMI. August 31, 1999 NMMI acquired
Unergi, Inc., a Nevada corporation, ("Unergi") The Unergi acquisition was to
obtain certain goodwill at which time Unergi was liquidated. The valuation was
determined by, in part, NMMI stock and certain debt. This was a forward
acquisition with the surviving company being NMMI. Unergy shareholders received
70% of NMMI shares. As a part of this merger, two founders and major
shareholders of Unergi, Mark Western and Cole Leary, were to receive a total of
3,000,000 shares of NMMI registered common stock. In anticipation a buy-back of
these shares from the two individuals, NMMI
37
conveyed the shares intended for these two individuals to another individual.
NMMI failed to consummate the buy-back of these shares from the two individuals
and consequently found it necessary to acquire 3,000,000 shares of 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 registered common stock which common stock are included
in this registration. The re-exchange of these shares has occurred and NMMI
replaced the 3,000,000 IMA Series A Preferred shares with 3,000,000 shares of
restricted common stock that are included in this registration. These
transactions occurred pre-split and the 3,000,000 shares of common stock are
pre-split. The post-split amount is 600,000 shares of 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.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NMMI is a fully reporting company which common stock is traded on the OTC
Bulletin Board operated by NASDAQ under the symbol NMMG. The table above, PRICE
RANGE OF COMMON STOCK, sets forth the high and low bid prices of our common
stock for each quarter for the four quarters of 1999, four quarters of 2000 and
the first three quarters of 2001. As of June 30, 2001 there are in excess of 500
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.
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 $100,000 or more
in 1999, 2000 and 2001.
38
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
------------------------------ ------------------------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
-----------------------------------------------------------------------------------------------------
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principle Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
-----------------------------------------------------------------------------------------------------
John 2001 120,000 10,000 10% of all Stock option Per month:
Thatch, expenses issued to be 500 medical
Pres./CEO common determined 500 car
stock by Board 250 celphone
-----------------------------------------------------------------------------------------------------
DIRECTOR COMPENSATION
The NMMI directors receive no compensation.
EMPLOYMENT AGREEMENTS
NMMI has one written employment agreement, John Thatch, President and CEO, see
section entitled Certain Relationships and Related Transactions, above.
FINANCIAL STATEMENTS
Index to Financial Statements
Reviewed Financial Statements
Condensed Balance Sheet for June 30, 2001 and
December 31, 2000 F-41
Condensed Statements of Operations for quarter and six
months ended June 30, 2001 and for quarter and
six months ended June 30, 2000 F-42
Condensed Statements of Cash Flows for quarter and
six months ended June 30,2001 and for quarter
and six months ended June 30, 2000 F-43
Notes to the Condensed Financial Statements,
for quarter ended June 30, 2001 F-44
Audited Financial Statements
Report of Richard J. Fuller, C.P.A., P.A. F-45
Balance Sheet for December 31, 1999 and December
31,2000 F-46
Statements of Operations for year ended December
31, 1999 and year ended December 31, 2000 F-47
Statement of Stockholders' Deficit for period from
January 1, 1999 through December 31, 2000 F-48
Statements of Cash Flows for year ended December
31, 1999, year ended December 31, 2000 F-49
Notes to Financial Statements, December 31, 1999
and 2000 F-50
39
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED BALANCE SHEET
June 30, December 31,
2001 2000
(Unaudited) (Audited)
(Restated) (Restated)
------------ ------------
ASSETS
Current Assets
Cash $ 18,288 $ --
Accounts Receivable 131,575 16,636
Inventories 3,255 3,255
Prepaid Assets 10,972 9,096
------------ ------------
Total Current Assets 164,090 28,987
------------ ------------
Furniture and Equipment-Net 887,279 924,148
------------ ------------
Other Assets
Other Assets -- --
Goodwill, net of accumulated amortization
of $90,389 and $67,793, respectively, 2001 and 2000 587,705 610,301
------------ ------------
Total Other Assets 587,705 610,301
------------ ------------
$ 1,639,074 $ 1,563,436
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 186,148 $ 155,118
Notes payable 250,000 --
Related payables 753,996 658,110
------------ ------------
Total Current Liabilities 1,190,144 813,228
------------ ------------
Long-term Liabilities -- --
Stockholders' Equity
Common stock, par value $.001; 15,000,000 (restated - see note 3)
shares authorized; 7,116,863 and 5,688,123 (restated - see note 3)
shares issued and outstanding, respectively, 2001 and 2000 7,117 5,690
Common stock warrants (200,000 issued and outstanding; exercisable
at $1.50 expiring March 21, 2005) (restated - see note 3) 57,200 57,200
Preferred stock, par value $.001; shares authorized, 10,000,000
no shares issued and outstanding -- --
Additional paid in capital 3,782,703 2,769,445
Accumulated Deficit (2,523,090) (2,082,127)
------------ ------------
1,323,930 750,208
Less common stock subscribed (875,000) --
------------ ------------
Total Stockholders' Equity 448,930 750,208
------------ ------------
$ 1,639,074 $ 1,563,436
============ ============
40
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
For the For the For the For the
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
6/30/01 6/30/00 6/30/01 6/30/00
(Restated) (Restated) (Restated) (Restated)
------------ ------------ ------------ ------------
Income $ 74,991 $ 1,044 $ 218,741 $ 1,044
Costs and Expenses:
General and administrative $ 309,091 $ 256,712 $ 562,729 $ 358,589
Interest expense 15,559 16,000 26,743 32,000
Depreciation and amortization 35,116 6,068 70,232 12,066
------------ ------------ ------------ ------------
Total costs and expenses 359,766 278,780 659,704 402,655
------------ ------------ ------------ ------------
Loss from Operations (284,775) (277,736) (440,963) (401,611)
------------ ------------ ------------ ------------
Net Loss $ (284,775) $ (277,736) $ (440,963) $ (401,611)
============ ============ ============ ============
Basic and Fully Diluted Loss Per Common Share $ (0.043) $ (0.060) $ (0.069) $ (0.085)
============ ============ ============ ============
Weighted Average Number of Shares Outstanding 6,556,863 4,615,892 6,403,493 4,717,934
============ ============ ============ ============
41
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the For the For the For the
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
6/30/01 6/30/00 6/30/01 6/30/00
(Restated) (Restated) (Restated) (Restated)
---------- ---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (284,775) $ (277,736) $ (440,963) $ (401,611)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 35,116 6,068 70,232 12,066
Fair value of shares issued for services 25,000 -- 76,685 2,500
Fair value of warrants issued to investment bankers -- 57,200 -- 57,200
(Increase) decrease in accounts receivable (38,706) -- (114,939) --
(Increase) decrease in inventories -- -- -- (18,750)
(Increase) decrease in prepaid expenses (1,876) (1,215) (1,876) (6,215)
Increase (decrease) in accounts payable
and accrued expenses 36,464 42,772 79,916 12,374
Increase (decrease) in related party payables
---------- ---------- ---------- ----------
Net cash provided by (used in) operating activities (228,777) (172,911) (330,945) (342,436)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (6,062) (1,626) (10,767) (5,083)
---------- ---------- ---------- ----------
Net provided by (used in) investing activities (6,062) (1,626) (10,767) (5,083)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - Related 250,000 -- 310,000 15,000
Proceeds from common stock transactions -- 19,000 50,000 460,000
---------- ---------- ---------- ----------
Net cash provided by (used in) financing activities 250,000 19,000 360,000 475,000
---------- ---------- ---------- ----------
Increase (Decrease) in cash and cash equivalents $ 15,161 $ (155,537) $ 18,288 $ 127,481
Cash and cash equivalents at beginning of period 3,127 285,081 -- 2,063
---------- ---------- ---------- ----------
Cash and cash equivalents at end of period $ 18,288 $ 129,544 $ 18,288 $ 129,544
========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest -- -- -- --
Cash paid during the year for income taxes -- -- -- --
Supplemental schedule of noncash investing
and financing activities:
Fair value of shares issued (500,000 shares)
for goodwill of Scovel Management, Inc. $ -- $ -- $ -- $ 500
Fair value of shares issued (20,000 shares)
for amounts previously owed to secretary/treasurer 13,000 -- 13,000 --
42
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. The results of operations for the six
months ended June 30, 2001 are not necessarily indicative of the operating
results for the full fiscal year or any future period.
2. Going Concern Uncertainty
-------------------------
The financial statements are presented assuming the Company will continue
as a going concern. The Company has incurred recurring operating losses and
negative cash flows and has negative working capital. The Company has
financed itself primarily through the sale of its stock and related party
borrowings. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
There can be no assurance that the Company will be successful in
implementing its plans, or if such plans are implemented, that the Company
will achieve its goals.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments
to reflect the possible future effect on the recoverability and
classification of assets or the amount and classification of liabilities
that might result from the outcome of this uncertainty.
3. Equity Transactions
-------------------
As approved at a Special Meeting of Stockholders on May 7, 2001, the
Company reverse split its common stock on a basis of 1 for 5 with a
resulting decrease in the number of common stock authorized to 15,000,000
shares. The Company has restated its financial statements to reflect this
common stock reverse split.
On June 4, 2001, the Company issued and held stock for consulting services
to be rendered to the Company (500,000 shares at $1.00 and 500,000 shares
at $.75).
43
4. Restatement information
-----------------------
Fair value of shares issued as indicated in accordance with FASB No. 123 as
restated consists of:
AMOUNT - RESTATED
--------------------------------------------
QUARTER ENDED SIX MONTHS ENDED
NO. OF -------------------- --------------------
DESCRIPTION SHARES 6/30/01 6/30/00 6/30/01 6/30/00
-------------------------------------------- -------- -------- -------- -------- --------
Shares issued to John D. Thatch for $.005
per share in consideration of accepting
officer/stockholder employment - net
of rescission 500,000 $ -- $ -- $ -- $ 2,500
Shares issued to San Rafael Consulting Group
for $.25 per share for consulting services 600 -- -- 150 --
Shares issued to E-Vision LED Inc. for $.25
per share for consulting services 6,140 -- -- 1,535 --
Shares issued to Tim Daley for $.25
per share for consulting services 200,000 -- -- 50,000 --
Shares issued to Ray Oliver for $.25
per share for consulting services 100,000 25,000 -- 25,000 --
-------- -------- -------- -------- --------
806,740 $ 25,000 $ -- $ 76,685 $ 2,500
======== ======== ======== ======== ========
44
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
45
NEW MILLENNIUM MEDIA INTERNATIONAL, INC
BALANCE SHEETS
December 31, 1999 and December 31, 2000
2000
1999 (RESTATED)
------------ ------------
ASSETS
Current Assets
Cash $ 2,063 $ --
Accounts receivable -- 16,636
Inventories 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 28,451
Common stock warrants (1,000,000 issued and
outstanding; exercisable at $.30 expiring
March 21, 2005) -- 57,200
Preferred stock, par value $.001; shares
authorized, 10,000,000 no shares issued
and outstanding -- --
Additional paid in capital 448,991 2,746,684
Deficit (1,073,314) (2,082,127)
------------ ------------
Total Stockholders' (Deficit) Equity (600,223) 750,208
------------ ------------
$ 1,210,313 $ 1,563,436
============ ============
46
NEW MILLENNIUM MEDIA INTERNATIONAL, INC
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
2000
1999 (Restated)
------------ ------------
Income $ 49,176 $ 149,400
Costs and Expenses:
General and administrative $ 141,847 $ 798,732
General and administrative -related 234,860 155,000
Interest expense - related 95,382 63,587
Depreciation and amortization 23,072 140,894
------------ ------------
Total costs and expenses 495,161 1,158,213
------------ ------------
Loss from Operations (445,985) (1,008,813)
------------ ------------
Net Loss $ (445,985) $ (1,008,813)
============ ============
Basic and Diluted Loss Per Common Share $ (0.03) $ (0.04)
============ ============
Weighted average common shares outstanding 15,559,940 26,275,250
============ ============
47
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH DECEMBER 31, 2000
COMMON STOCK COMMON ADDITIONAL TOTAL
------------------------ STOCK PAID - IN STOCKHOLDERS'
SHARES AMOUNT WARRANTS CAPITAL DEFICIT EQUITY
---------- ---------- ---------- ---------- ------------ ----------
Balance, January 1, 1999 7,020,000 $ 7,020 $ 0 $ 403,115 $ (627,329) $ (217,194)
---------- ---------- ---------- ---------- ------------ ----------
Fair value of shares issued to Unergi 16,566,667 16,567 -- -- 16,567
Shares issued for cash 513,214 513 45,876 -- 46,389
Net loss for the period ended
December 31, 1999 -- -- -- -- (445,985) (445,985)
---------- ---------- ---------- ---------- ------------ ----------
Balance, December 31, 1999 24,099,881 $ 24,100 $ 0 $ 448,991 $ (1,073,314) $ (600,223)
Fair value of shares issued for services
to officers - net of rescission (1,020,419) (1020) 3,520 -- 2,500
Fair value of 1,000,000 warrants
issued to investment bankers -- -- 57,200 -- -- 57,200
Shares issued:
Fair value of stock issued in settlement
of debt to stockholders/officers
in accordance with FASB 123 3,641,152 3,641 1,487,403 -- 1,491,044
Fair value of equipment (LED truck
$450,000) net of debt ($107,000) 200,000 200 342,800 -- 343,000
Fair value of stock issued for goodwill
of Scovel Management, Inc. 500,000 500 -- 500
Proceeds of stock issued for cash 1,030,000 1,030 463,970 -- 465,000
Net loss for the period ended
December 31, 2000 -- -- -- -- (1,008,813) (1,008,813)
---------- ---------- ---------- ---------- ------------ ----------
Balance, December 31, 2000 - (Restated) 28,450,614 $ 28,451 $ 57,200 $2,746,684 $ (2,082,127) $ 750,208
========== ========== ========== ========== ============ ==========
48
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
2000
1999 (RESTATED)
------------ ------------
Cash Flows from Operating Activities:
Net income (loss) $ (445,985) $ (1,008,813)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 23,072 140,894
Fair value of shares issued for services of officers - net of recission -- 2,500
Fair value of warrants issued to investment bankers -- 57,200
Loss on disposition of fixed assets 5,891 --
(Increase) decrease in accounts receivable -- (16,636)
(Increase) decrease in inventories (66,946) (124)
(Increase) decrease in prepaid expenses -- (9,096)
Increase (decrease) in accounts payable and accrued expenses 139,337 (41,934)
Increase (decrease) in related parties payable 296,033 428,918
------------ ------------
Net cash provided by (used in) operating activities (48,598) (447,091)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (2,539) (19,972)
------------ ------------
Net provided by (used in) investing activities (2,539) (19,972)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock transactions 46,389 465,000
------------ ------------
Net cash provided by (used in) financing activities 46,389 465,000
------------ ------------
Increase (Decrease) in cash and cash equivalents $ (4,748) $ (2,063)
Cash and cash equivalents at beginning of period 6,811 2,063
------------ ------------
Cash and cash equivalents at end of period $ 2,063 $ --
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest -- --
Cash paid during the year for income taxes -- --
Supplemental schedule of noncash investing and financing activities:
Fair value of common stock (500,000 shares) issued for
goodwill of Scovel Management, Inc. $ -- $ 500
Fair value of common stock (16,566,667 shares) issued for goodwill
of Unergi, Inc. ($677,594 net of debt assumed of $661,027) 16,567 --
Fair value of equipment (LED truck, $450,000 net of debt
assumed of $107,000; 200,000 common stock shares issued) -- 343,000
Fair value of common stock (3,641,152 shares )issued in settlement
of related party debt based upon debt of $1,491,044 -- 1,491,044
49
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
1. Organization and summary of significant accounting policies
-----------------------------------------------------------
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows.
Nature of Business
------------------
The Company is in the business of developing and marketing advertising space in
special movable advertising display machines and LED display boards. The Company
provides two types of visual advertising including movable display boards and
LED display boards. NMMI sells advertising space while retaining ownership of
the boards.
The Company is no longer considered to be in the development stage for 2000. In
prior years, the Company had been in the development stage.
Basis of presentation
---------------------
The financial statements have been prepared using the accrual method of
accounting. Revenues are recognized when earned and expenses when incurred.
Revenues are earned when services have been performed and advertising equipment
has been leased to customers during a period of time in which services have been
rendered, the price for services is fixed and determinable and collectibility is
reasonably assured.
Use of estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Going Concern Uncertainty
-------------------------
The Company has incurred recurring operating losses and negative cash flows and
has negative working capital. The Company has financed itself primarily through
the sale of its stock and related party borrowings. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
There can be no assurance that the Company will be successful in implementing
its plans, or if such plans are implemented, that the Company will achieve its
goals.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments to
reflect the possible future effect on the recoverability and classification of
assets or the amount and classification of liabilities that might result from
the outcome of this uncertainty.
50
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Comprehensive Income
--------------------
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company does not have any items requiring disclosure
of comprehensive income.
Segments of Business Reporting
------------------------------
Statement of Financial Accounting Standards (SFAS) No. 131 establishes standards
for the way that public companies report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customer. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. The Company has
evaluated this SFAS and does not believe it is applicable at this time.
Intangible assets
-----------------
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 Company classifies the excess of the purchase price, including
estimated fees and expenses related to the merger, over the net assets acquired
as goodwill. The estimated fair values and useful lives of assets acquired and
liabilities assumed are based on a preliminary valuation and are subject to
final valuation adjustments which may cause some of the intangibles to be
amortized over a shorter life than the goodwill amortization period of 15 years.
51
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Inventories
-----------
Inventories consist primarily of supplies related to advertising machines and
are carried at the lower of cost (first-in, first-out) or market. Once the
advertising machines are available for rental and placed in service,
depreciation is recognized. During the year, the advertising machines of
$545,483 included in inventory for 1999 were removed from inventory and made
available for lease. When placed in boards available for lease, they are no
longer included in inventories. Starting in 2000, the Company's policy is to
lease all boards and they are included in furniture, fixtures and equipment.
Furniture and equipment
-----------------------
Furniture and equipment is stated at cost and depreciated using the
straight-line method, over the estimated useful lives of five to seven years.
Income Taxes
------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS No. 109). Under SFAS No. 109, deferred income tax assets
and liabilities are determined based upon differences between financial
reporting and tax basis of assets and liabilities and are measured using
currently enacted tax rates. SFAS No. 109 requires a valuation allowance to
reduce the deferred tax assets reported if, based on the weight of the evidence,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.
Basic and Diluted Loss Per Common Share
---------------------------------------
Basic loss per common share is based on the weighted average number of shares
outstanding during the period. The computation of diluted loss per common share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued. Diluted
loss per common share is not presented since the result is antidilutive.
Fair Value of Financial Instruments
-----------------------------------
All financial instruments are held for purposes other than trading. The
following methods and assumptions were used to estimate the fair value of each
financial instrument for which it is practicable to estimate that value:
For cash, cash equivalents and notes payable, the carrying amount is assumed to
approximate fair value due to the short-term maturities of these instruments.
Cash Equivalents
----------------
The Company considers all highly liquid debt instruments purchased with maturity
of three months or less to be cash equivalents.
52
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
Concentrations of Credit Risk
-----------------------------
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash. The Company places its cash with high
quality financial institutions. At times during the year, the balance at any one
financial institution may exceed FDIC limits.
During the year, the Company negotiated the ability to manufacture the
advertising machines previously supplied principally by one foreign vendor.
2. Furniture, fixtures and equipment
---------------------------------
Furniture, fixtures and equipment is summarized as follows:
1999 2000
------------ ------------
Boards available for lease $ -- $ 545,483
Equipment -- 468,730
Furniture & fixtures 4,249 5,490
------------ ------------
4,249 1,019,703
Less accumulated depreciation (285) (95,555)
------------ ------------
Net $ 3,964 $ 924,148
============ ============
During the year 2000, the advertising boards became available for lease. In
1999, the boards available for lease had been included in inventory.
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 and the assumption of debt in the amount of $661,027. Because the assets
acquired consisted of certain intangible contracts, management assigned an
amount to the intangibles as goodwill based upon the debt assumed and the fair
value of common stock at $16,567 based upon par value. The purchase price
exceeded the fair value of the net assets acquired by $677,594 that has been
recorded as goodwill in accordance with FASB No. 123.
53
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
Organization and summary of significant accounting policies - Cont'd.
---------------------------------------------------------------------
On March 9, 2000, the Company acquired 100% of the issued and outstanding common
stock of Scovel Management, Inc. in exchange for 500,000 shares of the Company
in order to obtain services of an officer valued at $500 in accordance with FASB
No. 123 being the fair value of services received equivalent to par value of
stock.
Goodwill consists of the following:
1999 2000
---------- ----------
Goodwill in connection with acquisition of
Fair value of stock in exchange for Unergi,
Inc. accounted for as a purchase with
16,566,667 common shares issued at $.001
par value given limited trading and
marketability of approximately 70% of stock
($16,667) and the assumption of debt of
$660,927 $ 677,594 $ 677,594
Fair value of stock in exchange for Scovel
Management, Inc. accounted for as a
purchase with 500,000 common shares
issued at $.001 par value given limited
trading value of stock and agreed upon
value of shell company (Scovel) whose
Intangible value included listing on OTC BB -- 500
---------- ----------
677,594 678,094
Less accumulated amortization (22,587) (67,793)
---------- ----------
Net $ 655,007 $ 610,301
========== ==========
All assets were intangible with goodwill providing value in accordance with APB
No. 16 amortized over 15 years.
54
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
4. Related party transactions
--------------------------
Related party payables consists of the following:
1999 2000
---------- ----------
Note due stockholder/former officer at 10% $ 641,152 $ --
Accounts payable to stockholders,
non-interest bearing 954,860 249,860
$100,000 convertible note payable, with
interest accrued @10%, (convertible $1.00
of debt into common stock) -- 102,500
$125,000 convertible note payable, with
interest accrued @ 15%, secured by
equipment (convertible $1.00 of debt into
common stock) -- 143,750
$162,000 convertible note payable, with
interest accrued @ 8%, to officer/stockholder
(convertible $.10 of debt into preferred
stock) -- 162,000
---------- ----------
$1,596,012 $ 658,110
========== ==========
During the year, the Company issued common stock at fair value in settlement of
certain debt to stockholders and former officer. Fair value of stock issued was
valued at book value of the debt relieved plus accrued interest. The settlement
of certain debt to stockholder/officer was 641,152 shares in the amount of
$795,356 including accrued interest of $92,573 and fair value of 670,000 shares
to stockholders in the amount of $695,688 including settlement charges
subsequent to 1999 of $25,688 for a total of $1,491,044. Currently, the Company
disputes a payable to a prior officer but has recognized the debt for financial
statement purposes in the amount of $249,860. Also, during the year, the Company
was successful in a lawsuit against prior officers of the Company to rescind
3,520,419 shares. No gain or loss was recognized on this rescission and the
Company issued 2,500,000 shares to its present officer/director. Fair value of
the common stock issued has been reported net of rescission under FASB 123.
55
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
5. Income Taxes
------------
The Company has available net operating loss carryforwards of $1,950,000 that
expire through 2020.
After consideration of all the evidence, both positive and negative, management
has determined that a full valuation allowance is necessary to reduce the
deferred tax assets to the amount that will more likely than not be realized.
Accordingly, components of the Company's net deferred income taxes are as
follows:
1999 2000
---------- ----------
Deferred tax assets:
Net operating loss carryforwards $ 870,000 $1,950,000
Valuation allowance for deferred tax asset (870,000) (1,950,000)
---------- ----------
$ -- $ --
========== ==========
6. Equity Transactions
-------------------
On August 31, 1999, pursuant to an Agreement and Plan of merger, the Company
acquired all the issued and outstanding stock of Unergi, Inc. (a Nevada company)
in exchange for fair value of 16,566,667 shares of the Company's $.001 par value
common stock. Unergi was liquidated and the goodwill of $677,594 was capitalized
and amortized over 15 years.
On March 9, 2000, the Company acquired 100% of the issued and outstanding common
stock of Scovel Management, Inc. (a Delaware company) office in the amount of
$500 in exchange for fair value of 500,000 shares of the Company.
On May 19, 2000, the Company entered into an agreement with Swartz Private
Equity (Swartz) to provide an equity line of up to $25,000,000 during the
three-year period following the effective date of September 28, 2000 of the
registration statement covering the Swartz Agreement. The Company may sell stock
to Swartz under a "put right". The Company is required to issue and deliver to
Swartz "additional warrants" to purchase a number of shares of common stock
equal to 10% of the common shares issued to Swartz in each applicable put. Each
"additional warrant" will be exercisable at a price that will initially equal
110% of the market price for that put and thereafter may be reset every six
months. The warrants are immediately exercisable and have a term expiring 5
years thereafter. Certain provisions of the Agreement provide that Swartz shall
receive the "additional" warrants so that the sum of "commitment warrants" and
"additional warrants" may equal up to 4.0% of the fully diluted shares of the
Company's common stock. As part of this agreement, the Company has issued
1,000,000 initial "commitment warrants", expiring March 21, 2005 to purchase
1,000,000 shares of the Company's common stock. The initial exercise price of
these "commitment warrants" is $.30. Utilizing the Black Scholes formula,
assuming a 5-year life, no expected dividends, volatility of 35% and interest
rate of 6%, the Company determined that the fair value
56
NEW MILLENNIUM MEDIA INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999 and 2000
Equity Transactions - Cont'd
----------------------------
of commitment warrants issued to be $57,200 that is charged to expense in 2000.
7. Stock options and warrants
--------------------------
On June 26, 2000, the Company's Board of Directors adopted the New Millennium
Media International, Inc. 2000 Stock Option Plan (the "Plan"). The Plan provides
for the issuance of incentive stock options (ISO's) to any individual who has
been employed by the Company for a continuous period of at least six months. The
Plan also provides for the issuance of Non Statutory Options (NSO's) to any
employee who has been employed by the Company for a continuous period of at
least six months, any director or consultant to the Company. The total number of
shares of common stock authorized and reserved for issuance under the Plan is
3,000,000 shares. The Board shall determine the exercise price per share in the
case of an ISO at the time an option is granted and shall be not less than the
fair market value or 110% of fair market value in the case of a ten percent or
greater stockholder. In the case of an NSO, the exercise price shall not be less
than the fair market value of one share of stock on the date the option is
granted. Unless otherwise determined by the Board, ISO's and NSO's granted under
the Plan have a maximum duration of 10 years. As of December 31, 2000, no
options have been granted under the Plan.
Also, in February 2000, the Company issued options to purchase 500,000 shares at
$1.00 expiring in two years and in March 2000, the Company issued options to
purchase 100,000 shares at $2.25 expiring in two years. Utilizing the Black
Scholes formula, the Company has determined that the fair value of these options
granted has no effect on loss or loss per share.
8. Restatement Information
-----------------------
Information concerning restatement of net loss:
2000
----------
Fair value of common stock warrants
(1,000,000 issued and outstanding;
exercisable at $.30 expiring
March 21, 2005 $ 57,200
Common stock, 10,000 shares subscribed
at $.50 per share not previously reported 5,000
----------
Net Increase in loss previously reported $ 62,200
==========
57
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 7-109-101 et seq. of the Colorado Business Corporation Act, as amended
from time to time provides that a corporation may indemnify directors, officers,
employees or agents of the corporation against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement in connection with
threatened, pending or completed actions, suits or proceedings brought against
them by reason of their service in such capacity, including, under certain
circumstances, actions brought by or in the right of the corporation, and may
purchase insurance or make other financial arrangements on behalf of any such
persons for any such liability.
The Company's By-laws are silent regarding the issue of corporate
indemnification of NMMI officers, directors, agents and employees.
Article VIII of the Company's Articles of Incorporation provides for
indemnification and advance expenses to a director or officer in connection with
a proceeding to the fullest extent permitted or required by and in accordance
with the Colorado Business Corporation Act. This Article permits the
Corporation, as determined by the Board of Directors, in a specific instance or
by resolution of general application to indemnify and advance expenses to an
employee, fiduciary or agent in connection with a proceeding to the extent
permitted or required by and in accordance with the Colorado Business
Corporation Act.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated amounts of all expenses
payable by the registrant in connection with the Post Effective Amendment to the
SB-2 Registration Statement The expenses relating to the filing of the SB-2
Registration Statement are stated in the appropriate schedule in the SB-2
Registration Statement that was filed.
SEC filing fee........................................ $ paid
Legal fees............................................ 3,000.00
Accounting fees and expenses.......................... 5,000.00
Miscellaneous......................................... 3,066.00
-----------
Total........................................ $ 11,066.00
===========
58
RECENT SALES OF UNREGISTERED SECURITIES
In December 1998 the company sold to HNC Associates (an accredited investor)
100,000 shares of common stock at a price of $0.40 per share. The company relied
on Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transaction did not involve a public offering.
In February 2000 the company issued an option to purchase 500,000 shares of
common stock, exercisable for two years at a price of $1.00 per share to William
H. Simon in connection with consulting services and negotiations involving
E-Vision LED, Inc. The company relied on Section 4 (2) of the Securities Act of
1933 as the basis for an exemption from registration because the transaction did
not involve a public offering.
In February 2000 the Company sold 400,000 shares of common stock at a price of
$.50 per share to one individual who is an accredited investor. The Company
relied on Rule 506 of Regulation D and Section 4(2) of the Securities Act of
1933 as the basis for an exemption from registration because the transactions
did not involve any public offering.
In March 2000 the company issued 500,000 shares of common stock to Gerry Ghini
in connection with the merger of Scovel Corporation. The company relied on
Section 4 (2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transaction did not involve a public offering.
In March 2000 the company issued an option to purchase 100,000 shares of common
stock, exercisable for two years at a price of $2.25 per share to Eric Kennedy
in connection with consulting services provided to the company. The company
relied on Section 4 (2) of the Securities Act of 1933 as the basis for an
exemption from registration because the transaction did not involve a public
offering.
In March 2000 the Company issued warrants to purchase 1,000,000 shares of common
stock, exercisable for five years at a per share price equal to the lowest
closing bid price for the five trading days immediately preceding March 6, 2000
with reset adjustments to Swartz Private Equity, LLC in consideration for
Swartz's commitment to enter into an investment agreement for the purchase of up
to $25,000,000 of common stock of the Company. There is no assurance that this
$25,000,000 maximum will ever be reached.
In March, April and May 2000 the Company sold an aggregate of 520,000 shares of
common stock at a price of $.50 per share to twenty individuals, all of whom
were accredited investors. The Company relied on Rule 506 of Regulation D and
Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration because the transactions did not involve any public offering.
59
EXHIBITS INDEX
Note: Please note that the asterisk designates that the document has been
previously filed.
3.1 Articles of Incorporation of NMMI as amended.*
3.1(a) Designation of Preferred Stock.*
3.2 Bylaws of NMMI.*
4.1 Investment Agreement dated May 19, 2000 by and between the Registrant
and Swartz Private Equity, LLC.*
4.2 Form of "Commitment Warrant" to Swartz Private Equity, LLC for the
purchase of 1,000,000 shares common stock in connection with the
offering of securities.*
4.3 Form of "Purchase Warrant" to purchase common stock issued to Swartz
Private Equity, LLC from time to time in connection with the offering
of securities.*
4.4 Warrant Side-Agreement by and between the Registrant and Swartz
Private Equity, LLC.*
4.5 Registration Rights Agreement between NMMI and Swartz Private Equity,
LLC related to the registration of the common stock to be sold
pursuant to the Swartz Investment Agreement.*
4.6 Letter Agreement between NMMI and Swartz Institutional Finance
relating to the private placement of up to two million dollars of
common stock.*
4.7 Employees Stock Option Plan adopted by board of Directors resolution
dated June 26, 2000.*
5.1 Legal Opinion of Atlas Pearlman, P.A., Suite 1700, 350 East Las Olas
Boulevard, Ft. Lauderdale, Florida 33301; 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.*
60
10.6 Exclusive Distribution Contract with Multiadd.*
10.7 Agreement with E-Vision Technologies, LLC.
10.9 Marketing Agreement dated May 10, 2000 wherein NMMI grants to
Carson-Jensen-Anderson Enterprises, Inc. marketing rights for the
Illumisign-Eyecatcher display boards.*
10.9(a) Compromise and Settlement Agreement between Carson-Jensen-Anderson,
Inc. terminating the marketing rights agreement for the Illumisign-
Eyecatcher display boards.
10.10 Office Lease Agreement between St. James Properties, Inc. and NMMI.*
10.11 Office Lease Agreement between Abdi Boozar-Jomehri d/b/a Safety Harbor
Centre and NMMI.
21.1 List of Subsidiaries.*
23.1 Consent of Legal Counsel (included in Exhibit 5.1).*
23.2 Consent of Independent Auditors.*
27.1 Financial Data Schedule.*
99.1 Trademark "registration pending" documentation by the United States
Department of Commerce, Patent and Trademark Office for the name
"Illumisign-EyeCatcher" for electric sign products.*
99.2 Employment Agreement between Registrant and John Thatch,
President/CEO.*
UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
61
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.
(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.
62
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Post Effective
Registration Statement to be signed on its behalf by the undersigned in the City
of Safety Harbor, Florida on October 24, 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 October 24, 2001
------------------ Executive Officer
John Thatch (Principal Executive Officer)
63